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Thursday, 15 January 15
LOW CASH COSTS, GOOD LIQUIDITY HELP ASIAN OIL COMPANIES IN PRICE ROUT - FITCH
 Fitch Ratings says that rated oil and gas production companies in Asia can comfortably operate under low oil prices for some time given their generally low cash production costs and strong liquidity. Fitch expects companies to further reduce capex if oil prices remain at current levels for a longer period.
Fitch further noted that, the fall of oil prices below USD50 per barrel is hurting cash generation and affecting investment decisions of companies in the sector. However, the impact on operating cash generation varies across Fitch-rated companies. South-east Asian companies, such as PTT Public Company Limited that produce more gas (60% or more of total production), will be less affected immediately compared with their north and south Asian counterparts that are more liquids-heavy. Liquids at companies like Petrochina, CNOOC, Sinopec, Oil India Ltd and MIE Holdings Corporation account for over 70% of total production in barrels of oil equivalent (boe) terms. Companies that hedged the prices of part of their oil production benefited from the protection in 2014, but they are likely to be exposed to market prices in 2015 because these types of hedges typically do not cover long periods.
Low cash production costs and the largely conventional upstream projects of the rated Asian oil companies provide them with additional flexibility in today's low oil price environment, said Fitch. While all-in costs (cash production costs plus depreciation, depletion and amortisation, or DD&A) are important in the long run, the relatively longer production lives of conventional oil and gas wells provide additional capex flexibility during periods of low hydrocarbon prices. Lifting costs in US dollars per boe are typically in the teens for the rated companies in Asia. Lower production tax requirements stemming from low realised prices, especially in China, also reduce the net impact of the oil price rout on operating cash generation. Companies are also looking to reduce opex, which can squeeze margins of oil field services companies.
Over the longer term though, with all-in costs exceeding USD35/boe for the rated Asian names, the economic viability of projects will be impaired if there is no meaningful increase in oil prices. At current prices, we expect certain high-cost projects to be delayed. These could include ventures in the Canadian oil sands and certain enhanced oil recovery projects on mature-depleting fields in Asia. Sponsor companies could also delay final investment decisions on some large projects with long lead times, such as some green field LNG projects, to preserve cash reserves.
Capex flexibility also varies across the rated companies. CNOOC and PTT have relatively low developed reserve lives of around four years, which gives them less flexibility to curtail development capex for a long period. The state-owned companies are unlikely to cut domestic capex drastically because they are mandated by states to raise production to supply their growing economies. In addition, PTT has lagged considerably behind its Asian peers in reserve replacement, with several large acquisitions not yet adding to proved reserves. For most of the other rated oil producers, though, reserve replacement has been robust (near 100% or above) in recent years, adding further to their flexibility. We also see the prospect of reserve write-downs for some companies if oil prices do not meaningfully improve by the time reserve reports are updated over the next few months.
Rated Asian oil companies, especially the state-owned ones, have very strong balance sheets, with low financial leverage and substantial cash balances. We expect these companies to have good financial flexibility arising from their good liquidity (large cash balances and strong access to capital). In India, we expect the government to reduce the substantial discounts (USD56/barrel) the two state-controlled upstream companies, Oil India and ONGC, have to provide to refiners, improving their cash margins under low oil prices. Malaysia's PETRONAS has a very strong balance sheet. However, the high dividends required by the Malaysian government remains a challenge, although the company is pushing to lower this burden.
According to Fitch, Fitch is also expect cash-rich companies to take advantage of attractive M&A opportunities, although their approach is likely to be measured to ensure their cash balances remain strong to deal with the uncertain oil price outlook. Asian companies are likely to focus on mid-sized assets that are producing or close to production that put less stress on their balance sheets.
Smaller companies like MIE of China have less financial flexibility. While MIE's lifting costs of around USD10/boe are low, it has relatively weaker access to funding than its larger peers, especially when oil prices are low. However, MIE's cash on hand at end-September 2014 (plus expected proceeds in 4Q14 from some asset disposals) and unutilised credit lines provide adequate short-term liquidity, while its major debt maturities are several years away.
Our approach with oil and gas companies is to rate through the cycle, Fitch says in its latest analysis report. While strong production, weak demand growth and high inventory levels put significant near-term pressure on oil prices, high global marginal production costs and capex cuts leading to reduced production should over time result in a more balanced market that supports higher prices for oil. While low oil prices and high capex requirements will dent the credit metrics of Asian oil producers, ratings of many of these companies, especially the state-owned companies whose ratings benefit from state linkages, remain resilient.
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Tuesday, 23 December 14
SHIPOWNERS ARE FINALIZING MORE DEALS AS YEAR END COMES CLOSER - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS WORLDWIDE
With the 2014 year just a few days before waving goodbye, shipowners are looking to close their pending deals in both the newbuilding and S&P m ...
Monday, 22 December 14
Q2'15 CFR SOUTH CHINA COAL SWAP CLOSED $ 0.30 LOWER THAN Q1'15 CLOSING
COALspot.com: API 8 CFR South China Coal swap for Q1’ 2015 delivery has decreased by US$ 3.67 (-5.81%) month over month and US$ 0.35 (-0.58%) ...
Monday, 22 December 14
API 5 FOB NEWCASTLE COAL SWAPS ARE HEADING SOUTH
COALspot.com: API 5 FOB Newcastle Coal swap for Q1’ 2015 delivery lost US$ 1.71 per MT (-3.24%) and closed at US$ 51.02 on 19 December month ...
Sunday, 21 December 14
PANAMAX COAL FREIGHT FROM INDONESIA TO INDIA FALLS FURTHER
COALspot.com: The BDI continued its fall as cape index lost heavily week on week.
The BDI was down 6.95 percent week over week and closed at 8 ...
Friday, 19 December 14
HOW WILL LOWER BUNKER PRICES AFFECT THE SUBSTANTIAL OVERCAPACITY IN DRY BULK MARKET? - BIMCO
As bunker fuel costs have come down from USD 600 per tonnes to USD 330 per tonnes in the past 6 months, much talk about increased ship speed have s ...
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- Australian Commodity Traders Exchange
- Mjunction Services Limited - India
- Bulk Trading Sa - Switzerland
- Salva Resources Pvt Ltd - India
- Karaikal Port Pvt Ltd - India
- Orica Australia Pty. Ltd.
- South Luzon Thermal Energy Corporation
- Mercuria Energy - Indonesia
- Simpson Spence & Young - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Global Coal Blending Company Limited - Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Electricity Generating Authority of Thailand
- Tamil Nadu electricity Board
- Manunggal Multi Energi - Indonesia
- Aboitiz Power Corporation - Philippines
- Commonwealth Bank - Australia
- Savvy Resources Ltd - HongKong
- Latin American Coal - Colombia
- Indika Energy - Indonesia
- Sical Logistics Limited - India
- CNBM International Corporation - China
- Leighton Contractors Pty Ltd - Australia
- MS Steel International - UAE
- Minerals Council of Australia
- Gujarat Sidhee Cement - India
- Global Green Power PLC Corporation, Philippines
- Meralco Power Generation, Philippines
- The State Trading Corporation of India Ltd
- International Coal Ventures Pvt Ltd - India
- Binh Thuan Hamico - Vietnam
- London Commodity Brokers - England
- Jaiprakash Power Ventures ltd
- Kalimantan Lumbung Energi - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Posco Energy - South Korea
- Price Waterhouse Coopers - Russia
- McConnell Dowell - Australia
- Petron Corporation, Philippines
- PTC India Limited - India
- OPG Power Generation Pvt Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Coal and Oil Company - UAE
- Malabar Cements Ltd - India
- Australian Coal Association
- Kobexindo Tractors - Indoneisa
- European Bulk Services B.V. - Netherlands
- Global Business Power Corporation, Philippines
- Sree Jayajothi Cements Limited - India
- Port Waratah Coal Services - Australia
- Planning Commission, India
- Bangladesh Power Developement Board
- Orica Mining Services - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- San Jose City I Power Corp, Philippines
- The Treasury - Australian Government
- Petrochimia International Co. Ltd.- Taiwan
- Karbindo Abesyapradhi - Indoneisa
- Bhushan Steel Limited - India
- Medco Energi Mining Internasional
- Economic Council, Georgia
- Romanian Commodities Exchange
- Energy Development Corp, Philippines
- Sojitz Corporation - Japan
- Baramulti Group, Indonesia
- Eastern Energy - Thailand
- Larsen & Toubro Limited - India
- GMR Energy Limited - India
- PowerSource Philippines DevCo
- Tata Chemicals Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Riau Bara Harum - Indonesia
- Parry Sugars Refinery, India
- Power Finance Corporation Ltd., India
- PNOC Exploration Corporation - Philippines
- ICICI Bank Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Cement Manufacturers Association - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Indian Energy Exchange, India
- Thiess Contractors Indonesia
- Meenaskhi Energy Private Limited - India
- Attock Cement Pakistan Limited
- Coalindo Energy - Indonesia
- Kartika Selabumi Mining - Indonesia
- Indian Oil Corporation Limited
- Ministry of Mines - Canada
- Bukit Baiduri Energy - Indonesia
- Rashtriya Ispat Nigam Limited - India
- TeaM Sual Corporation - Philippines
- Singapore Mercantile Exchange
- Formosa Plastics Group - Taiwan
- Kumho Petrochemical, South Korea
- Borneo Indobara - Indonesia
- Siam City Cement PLC, Thailand
- Goldman Sachs - Singapore
- Siam City Cement - Thailand
- Pendopo Energi Batubara - Indonesia
- Rio Tinto Coal - Australia
- Central Electricity Authority - India
- Sinarmas Energy and Mining - Indonesia
- GAC Shipping (India) Pvt Ltd
- Edison Trading Spa - Italy
- Ambuja Cements Ltd - India
- Antam Resourcindo - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Central Java Power - Indonesia
- Straits Asia Resources Limited - Singapore
- Vizag Seaport Private Limited - India
- Kideco Jaya Agung - Indonesia
- Timah Investasi Mineral - Indoneisa
- Offshore Bulk Terminal Pte Ltd, Singapore
- Krishnapatnam Port Company Ltd. - India
- Bhatia International Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Anglo American - United Kingdom
- Marubeni Corporation - India
- Interocean Group of Companies - India
- Ind-Barath Power Infra Limited - India
- Globalindo Alam Lestari - Indonesia
- Ministry of Finance - Indonesia
- Samtan Co., Ltd - South Korea
- AsiaOL BioFuels Corp., Philippines
- SMC Global Power, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Agrawal Coal Company - India
- Semirara Mining and Power Corporation, Philippines
- Toyota Tsusho Corporation, Japan
- SN Aboitiz Power Inc, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Intertek Mineral Services - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Deloitte Consulting - India
- Thai Mozambique Logistica
- Ministry of Transport, Egypt
- New Zealand Coal & Carbon
- Jindal Steel & Power Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Videocon Industries ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Oldendorff Carriers - Singapore
- IHS Mccloskey Coal Group - USA
- Chamber of Mines of South Africa
- Wood Mackenzie - Singapore
- IEA Clean Coal Centre - UK
- White Energy Company Limited
- Eastern Coal Council - USA
- Bharathi Cement Corporation - India
- Mintek Dendrill Indonesia
- CIMB Investment Bank - Malaysia
- Altura Mining Limited, Indonesia
- Gujarat Electricity Regulatory Commission - India
- Coastal Gujarat Power Limited - India
- Sakthi Sugars Limited - India
- Semirara Mining Corp, Philippines
- Directorate Of Revenue Intelligence - India
- Billiton Holdings Pty Ltd - Australia
- Makarim & Taira - Indonesia
- ASAPP Information Group - India
- Grasim Industreis Ltd - India
- Bukit Makmur.PT - Indonesia
- Renaissance Capital - South Africa
- Indogreen Group - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Georgia Ports Authority, United States
- Iligan Light & Power Inc, Philippines
- Xindia Steels Limited - India
- Carbofer General Trading SA - India
- Mercator Lines Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Uttam Galva Steels Limited - India
- Madhucon Powers Ltd - India
- Therma Luzon, Inc, Philippines
- Merrill Lynch Commodities Europe
- Vedanta Resources Plc - India
- Bhoruka Overseas - Indonesia
- LBH Netherlands Bv - Netherlands
- Maheswari Brothers Coal Limited - India
- Chettinad Cement Corporation Ltd - India
- Banpu Public Company Limited - Thailand
- Africa Commodities Group - South Africa
- Holcim Trading Pte Ltd - Singapore
- Energy Link Ltd, New Zealand
- Bayan Resources Tbk. - Indonesia
- Aditya Birla Group - India
- Dalmia Cement Bharat India
- Jorong Barutama Greston.PT - Indonesia
- Parliament of New Zealand
- Essar Steel Hazira Ltd - India
- Indonesian Coal Mining Association
- Barasentosa Lestari - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- GVK Power & Infra Limited - India
- Independent Power Producers Association of India
- SMG Consultants - Indonesia
- Kaltim Prima Coal - Indonesia
- Star Paper Mills Limited - India
- India Bulls Power Limited - India
- Indo Tambangraya Megah - Indonesia
- VISA Power Limited - India
- Kepco SPC Power Corporation, Philippines
- Heidelberg Cement - Germany
- Kapuas Tunggal Persada - Indonesia
- Trasteel International SA, Italy
- Kohat Cement Company Ltd. - Pakistan
- Lanco Infratech Ltd - India
- Miang Besar Coal Terminal - Indonesia
- The University of Queensland
- Wilmar Investment Holdings
- Electricity Authority, New Zealand
- Metalloyd Limited - United Kingdom
- Sindya Power Generating Company Private Ltd
- Sarangani Energy Corporation, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Standard Chartered Bank - UAE
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