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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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Friday, 19 December 14
U.S WEEKLY COAL PRODUCTION REACHED APPROXIMATELY 19.8 MMST; UP 1.0% WOW
COALspot.com – United States the world's one of the largest coal producers, produced approximately 19.8 million short tons (mmst) of coal ...
Friday, 19 December 14
HANDY: SOFTER TONE; PANAMAX: QUIET WEEK; CAPESIZE; PAINFUL WEEK
Handy
A softer tone for rates and volumes for the Supras, perhaps less apparent in the Pacific the last week before the season holidays and good ...
Thursday, 18 December 14
INDONESIA TO REVISE UP COAL OUTPUT TARGET TO 460 MILLION TONS IN 2015
COALspot.com: Indonesian government has revised up its next year coal output forecast to 460 million tons from its previous forecast of 421 million ...
Wednesday, 17 December 14
CAPES RATES SLIPPED BELOW $5,600/DAY, FELL 84% YOY
COALspot.com: In the very rare occurrence when the BCI stands below the BDI, words to describe market sentiment are probably poor, said Intermodal ...
Wednesday, 17 December 14
MARKET INSIGHT - INTERMODAL SHANGHAI, SNP TEAM
As the end of the fourth quarter is approaching, we are all witness to the second hand market prices softening day by day. Any new deal surfacing t ...
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- Sojitz Corporation - Japan
- Siam City Cement PLC, Thailand
- Kepco SPC Power Corporation, Philippines
- Kartika Selabumi Mining - Indonesia
- Posco Energy - South Korea
- Ministry of Transport, Egypt
- New Zealand Coal & Carbon
- International Coal Ventures Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Central Java Power - Indonesia
- TeaM Sual Corporation - Philippines
- Ministry of Mines - Canada
- Price Waterhouse Coopers - Russia
- Videocon Industries ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Binh Thuan Hamico - Vietnam
- San Jose City I Power Corp, Philippines
- Savvy Resources Ltd - HongKong
- Antam Resourcindo - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- London Commodity Brokers - England
- Carbofer General Trading SA - India
- Bukit Baiduri Energy - Indonesia
- Globalindo Alam Lestari - Indonesia
- Central Electricity Authority - India
- South Luzon Thermal Energy Corporation
- Indogreen Group - Indonesia
- Romanian Commodities Exchange
- Oldendorff Carriers - Singapore
- Timah Investasi Mineral - Indoneisa
- Kideco Jaya Agung - Indonesia
- Agrawal Coal Company - India
- Power Finance Corporation Ltd., India
- Krishnapatnam Port Company Ltd. - India
- Chettinad Cement Corporation Ltd - India
- Australian Coal Association
- Jindal Steel & Power Ltd - India
- India Bulls Power Limited - India
- CIMB Investment Bank - Malaysia
- The Treasury - Australian Government
- Merrill Lynch Commodities Europe
- Larsen & Toubro Limited - India
- Aditya Birla Group - India
- Bhoruka Overseas - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Electricity Authority, New Zealand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Indo Tambangraya Megah - Indonesia
- SMG Consultants - Indonesia
- Petron Corporation, Philippines
- Commonwealth Bank - Australia
- Electricity Generating Authority of Thailand
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Baramulti Group, Indonesia
- OPG Power Generation Pvt Ltd - India
- Mjunction Services Limited - India
- Tata Chemicals Ltd - India
- Metalloyd Limited - United Kingdom
- Standard Chartered Bank - UAE
- Bhushan Steel Limited - India
- Karaikal Port Pvt Ltd - India
- Bangladesh Power Developement Board
- Pipit Mutiara Jaya. PT, Indonesia
- Indika Energy - Indonesia
- Independent Power Producers Association of India
- IEA Clean Coal Centre - UK
- Thai Mozambique Logistica
- Pendopo Energi Batubara - Indonesia
- White Energy Company Limited
- Indian Energy Exchange, India
- Mercator Lines Limited - India
- Karbindo Abesyapradhi - Indoneisa
- SN Aboitiz Power Inc, Philippines
- PTC India Limited - India
- Simpson Spence & Young - Indonesia
- Economic Council, Georgia
- Kaltim Prima Coal - Indonesia
- ICICI Bank Limited - India
- Makarim & Taira - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Ind-Barath Power Infra Limited - India
- Sree Jayajothi Cements Limited - India
- Planning Commission, India
- Sakthi Sugars Limited - India
- Meenaskhi Energy Private Limited - India
- Goldman Sachs - Singapore
- GVK Power & Infra Limited - India
- Straits Asia Resources Limited - Singapore
- Thiess Contractors Indonesia
- Mercuria Energy - Indonesia
- Star Paper Mills Limited - India
- Borneo Indobara - Indonesia
- Dalmia Cement Bharat India
- Meralco Power Generation, Philippines
- Alfred C Toepfer International GmbH - Germany
- Uttam Galva Steels Limited - India
- Therma Luzon, Inc, Philippines
- Malabar Cements Ltd - India
- Intertek Mineral Services - Indonesia
- Semirara Mining Corp, Philippines
- Australian Commodity Traders Exchange
- Vedanta Resources Plc - India
- Gujarat Electricity Regulatory Commission - India
- Orica Mining Services - Indonesia
- Wood Mackenzie - Singapore
- Directorate General of MIneral and Coal - Indonesia
- Eastern Energy - Thailand
- Tamil Nadu electricity Board
- Trasteel International SA, Italy
- Directorate Of Revenue Intelligence - India
- Miang Besar Coal Terminal - Indonesia
- Global Green Power PLC Corporation, Philippines
- Africa Commodities Group - South Africa
- Global Coal Blending Company Limited - Australia
- McConnell Dowell - Australia
- Attock Cement Pakistan Limited
- Bharathi Cement Corporation - India
- Bhatia International Limited - India
- Holcim Trading Pte Ltd - Singapore
- Indonesian Coal Mining Association
- Samtan Co., Ltd - South Korea
- Toyota Tsusho Corporation, Japan
- Sical Logistics Limited - India
- Bayan Resources Tbk. - Indonesia
- Minerals Council of Australia
- Leighton Contractors Pty Ltd - Australia
- PetroVietnam Power Coal Import and Supply Company
- Formosa Plastics Group - Taiwan
- Rio Tinto Coal - Australia
- Kumho Petrochemical, South Korea
- Barasentosa Lestari - Indonesia
- Latin American Coal - Colombia
- Coal and Oil Company - UAE
- Sindya Power Generating Company Private Ltd
- Renaissance Capital - South Africa
- LBH Netherlands Bv - Netherlands
- Billiton Holdings Pty Ltd - Australia
- Port Waratah Coal Services - Australia
- Altura Mining Limited, Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Vijayanagar Sugar Pvt Ltd - India
- Bulk Trading Sa - Switzerland
- Jaiprakash Power Ventures ltd
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Georgia Ports Authority, United States
- Heidelberg Cement - Germany
- Kapuas Tunggal Persada - Indonesia
- Parry Sugars Refinery, India
- PNOC Exploration Corporation - Philippines
- Cigading International Bulk Terminal - Indonesia
- The State Trading Corporation of India Ltd
- Wilmar Investment Holdings
- Energy Link Ltd, New Zealand
- Sarangani Energy Corporation, Philippines
- Manunggal Multi Energi - Indonesia
- Xindia Steels Limited - India
- Madhucon Powers Ltd - India
- Gujarat Sidhee Cement - India
- SMC Global Power, Philippines
- Rashtriya Ispat Nigam Limited - India
- Coalindo Energy - Indonesia
- MS Steel International - UAE
- Jorong Barutama Greston.PT - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- GAC Shipping (India) Pvt Ltd
- Lanco Infratech Ltd - India
- Singapore Mercantile Exchange
- ASAPP Information Group - India
- Ministry of Finance - Indonesia
- GMR Energy Limited - India
- Sinarmas Energy and Mining - Indonesia
- Salva Resources Pvt Ltd - India
- Medco Energi Mining Internasional
- VISA Power Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- The University of Queensland
- Aboitiz Power Corporation - Philippines
- Chamber of Mines of South Africa
- Anglo American - United Kingdom
- Siam City Cement - Thailand
- AsiaOL BioFuels Corp., Philippines
- Banpu Public Company Limited - Thailand
- Deloitte Consulting - India
- Maheswari Brothers Coal Limited - India
- Cement Manufacturers Association - India
- Interocean Group of Companies - India
- Vizag Seaport Private Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Eastern Coal Council - USA
- Indian Oil Corporation Limited
- Parliament of New Zealand
- Grasim Industreis Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Mintek Dendrill Indonesia
- Coastal Gujarat Power Limited - India
- Marubeni Corporation - India
- Riau Bara Harum - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Global Business Power Corporation, Philippines
- Ceylon Electricity Board - Sri Lanka
- CNBM International Corporation - China
- Kobexindo Tractors - Indoneisa
- PowerSource Philippines DevCo
- Semirara Mining and Power Corporation, Philippines
- European Bulk Services B.V. - Netherlands
- Bukit Makmur.PT - Indonesia
- Energy Development Corp, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Ambuja Cements Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Iligan Light & Power Inc, Philippines
- IHS Mccloskey Coal Group - USA
- Orica Australia Pty. Ltd.
- Edison Trading Spa - Italy
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