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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, 23 February 24
STRONG OUTLOOK FOR THE TANKER MARKET IN 2024 AND BEYOND - DNV
Several factors have aligned over the past two years to create a robust and profitable market for tanker owners, which is expected to drive newbuil ...
Friday, 23 February 24
AUSTRALIAN COAL FLOWS TO ASIA HOVER ABOVE LAST YEAR’S VOLUME TONNES - SIGNAL GROUP
In the final days of February, the dry bulk freight market appeared to maintain a relatively stable momentum, particularly evident in the large ves ...
Friday, 23 February 24
RUSSIAN COAL SHIPMENTS FALL 14% AS SANCTIONS BITE - BIMCO
During the first seven weeks of 2024, Russian coal shipments have fallen 14% y/y. Volumes have gradually declined since October 2023 when logistica ...
Thursday, 22 February 24
BIMCO PUBLISHES SHIP FINANCING FORMS TO ENSURE UNINTERRUPTED USE OF SHIPS
BIMCO has published two standard Quiet Enjoyment Letters (QELs), the first standard form QELs available to the industry, to offer a tool that can e ...
Monday, 19 February 24
METALS INVESTMENT: THE DARKEST HOUR IS JUST BEFORE THE DAWN - WOOD MACKENZIE
Things often seem at their worst just before they get better. In terms of meeting our net zero 2050 scenario, we’ve reached a watershed momen ...
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Showing 31 to 35 news of total 6871 |
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- Metalloyd Limited - United Kingdom
- Maheswari Brothers Coal Limited - India
- Lanco Infratech Ltd - India
- Medco Energi Mining Internasional
- Bulk Trading Sa - Switzerland
- Indian Oil Corporation Limited
- Chamber of Mines of South Africa
- Central Electricity Authority - India
- Bhushan Steel Limited - India
- Bangladesh Power Developement Board
- Baramulti Group, Indonesia
- Miang Besar Coal Terminal - Indonesia
- Anglo American - United Kingdom
- Semirara Mining Corp, Philippines
- Deloitte Consulting - India
- South Luzon Thermal Energy Corporation
- Sree Jayajothi Cements Limited - India
- Sojitz Corporation - Japan
- Posco Energy - South Korea
- Australian Coal Association
- GMR Energy Limited - India
- San Jose City I Power Corp, Philippines
- Iligan Light & Power Inc, Philippines
- The State Trading Corporation of India Ltd
- Sarangani Energy Corporation, Philippines
- Romanian Commodities Exchange
- SMG Consultants - Indonesia
- Riau Bara Harum - Indonesia
- The University of Queensland
- Asmin Koalindo Tuhup - Indonesia
- Chettinad Cement Corporation Ltd - India
- Altura Mining Limited, Indonesia
- SMC Global Power, Philippines
- Salva Resources Pvt Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Kumho Petrochemical, South Korea
- Cigading International Bulk Terminal - Indonesia
- ASAPP Information Group - India
- Siam City Cement PLC, Thailand
- Ministry of Finance - Indonesia
- Jindal Steel & Power Ltd - India
- Uttam Galva Steels Limited - India
- Leighton Contractors Pty Ltd - Australia
- International Coal Ventures Pvt Ltd - India
- Thai Mozambique Logistica
- Sakthi Sugars Limited - India
- Coal and Oil Company - UAE
- Attock Cement Pakistan Limited
- Kapuas Tunggal Persada - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Meralco Power Generation, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Barasentosa Lestari - Indonesia
- Binh Thuan Hamico - Vietnam
- McConnell Dowell - Australia
- Economic Council, Georgia
- White Energy Company Limited
- Tata Chemicals Ltd - India
- Kartika Selabumi Mining - Indonesia
- Electricity Authority, New Zealand
- Indonesian Coal Mining Association
- Petron Corporation, Philippines
- Therma Luzon, Inc, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Karbindo Abesyapradhi - Indoneisa
- Mercuria Energy - Indonesia
- MS Steel International - UAE
- Grasim Industreis Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Oldendorff Carriers - Singapore
- Larsen & Toubro Limited - India
- Pendopo Energi Batubara - Indonesia
- Agrawal Coal Company - India
- Mintek Dendrill Indonesia
- Bukit Makmur.PT - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Makarim & Taira - Indonesia
- IEA Clean Coal Centre - UK
- Bhatia International Limited - India
- Carbofer General Trading SA - India
- Cement Manufacturers Association - India
- CNBM International Corporation - China
- Rashtriya Ispat Nigam Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Manunggal Multi Energi - Indonesia
- Eastern Energy - Thailand
- Karaikal Port Pvt Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Coastal Gujarat Power Limited - India
- Merrill Lynch Commodities Europe
- Thiess Contractors Indonesia
- Vedanta Resources Plc - India
- CIMB Investment Bank - Malaysia
- Jaiprakash Power Ventures ltd
- ICICI Bank Limited - India
- Samtan Co., Ltd - South Korea
- Formosa Plastics Group - Taiwan
- Kobexindo Tractors - Indoneisa
- Savvy Resources Ltd - HongKong
- LBH Netherlands Bv - Netherlands
- Commonwealth Bank - Australia
- Videocon Industries ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Wood Mackenzie - Singapore
- New Zealand Coal & Carbon
- Gujarat Electricity Regulatory Commission - India
- Bayan Resources Tbk. - Indonesia
- Parry Sugars Refinery, India
- European Bulk Services B.V. - Netherlands
- PTC India Limited - India
- GVK Power & Infra Limited - India
- GAC Shipping (India) Pvt Ltd
- OPG Power Generation Pvt Ltd - India
- Minerals Council of Australia
- Orica Australia Pty. Ltd.
- Bahari Cakrawala Sebuku - Indonesia
- Simpson Spence & Young - Indonesia
- The Treasury - Australian Government
- Aboitiz Power Corporation - Philippines
- Vizag Seaport Private Limited - India
- Borneo Indobara - Indonesia
- Antam Resourcindo - Indonesia
- Global Green Power PLC Corporation, Philippines
- Intertek Mineral Services - Indonesia
- Port Waratah Coal Services - Australia
- Kaltim Prima Coal - Indonesia
- Banpu Public Company Limited - Thailand
- Indogreen Group - Indonesia
- Indika Energy - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- IHS Mccloskey Coal Group - USA
- Xindia Steels Limited - India
- Goldman Sachs - Singapore
- Petrochimia International Co. Ltd.- Taiwan
- Latin American Coal - Colombia
- Dalmia Cement Bharat India
- Ceylon Electricity Board - Sri Lanka
- PNOC Exploration Corporation - Philippines
- Malabar Cements Ltd - India
- Australian Commodity Traders Exchange
- London Commodity Brokers - England
- Central Java Power - Indonesia
- Ministry of Transport, Egypt
- Bharathi Cement Corporation - India
- Essar Steel Hazira Ltd - India
- Ambuja Cements Ltd - India
- Marubeni Corporation - India
- Africa Commodities Group - South Africa
- GN Power Mariveles Coal Plant, Philippines
- Mjunction Services Limited - India
- Singapore Mercantile Exchange
- PowerSource Philippines DevCo
- Timah Investasi Mineral - Indoneisa
- Kideco Jaya Agung - Indonesia
- Power Finance Corporation Ltd., India
- Wilmar Investment Holdings
- Mercator Lines Limited - India
- Directorate Of Revenue Intelligence - India
- Rio Tinto Coal - Australia
- Vijayanagar Sugar Pvt Ltd - India
- Heidelberg Cement - Germany
- Eastern Coal Council - USA
- Semirara Mining and Power Corporation, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Globalindo Alam Lestari - Indonesia
- Edison Trading Spa - Italy
- Indian Energy Exchange, India
- Independent Power Producers Association of India
- Georgia Ports Authority, United States
- Sical Logistics Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Siam City Cement - Thailand
- SN Aboitiz Power Inc, Philippines
- Star Paper Mills Limited - India
- India Bulls Power Limited - India
- AsiaOL BioFuels Corp., Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Price Waterhouse Coopers - Russia
- Kalimantan Lumbung Energi - Indonesia
- Bhoruka Overseas - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Parliament of New Zealand
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Toyota Tsusho Corporation, Japan
- Energy Development Corp, Philippines
- Tamil Nadu electricity Board
- Kepco SPC Power Corporation, Philippines
- Meenaskhi Energy Private Limited - India
- Ind-Barath Power Infra Limited - India
- Global Business Power Corporation, Philippines
- Holcim Trading Pte Ltd - Singapore
- Alfred C Toepfer International GmbH - Germany
- Straits Asia Resources Limited - Singapore
- Indo Tambangraya Megah - Indonesia
- Orica Mining Services - Indonesia
- Bukit Baiduri Energy - Indonesia
- Trasteel International SA, Italy
- Electricity Generating Authority of Thailand
- Madhucon Powers Ltd - India
- Energy Link Ltd, New Zealand
- Renaissance Capital - South Africa
- Interocean Group of Companies - India
- Gujarat Sidhee Cement - India
- Ministry of Mines - Canada
- VISA Power Limited - India
- Coalindo Energy - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Global Coal Blending Company Limited - Australia
- Aditya Birla Group - India
- Pipit Mutiara Jaya. PT, Indonesia
- Sindya Power Generating Company Private Ltd
- Planning Commission, India
- Standard Chartered Bank - UAE
- TeaM Sual Corporation - Philippines
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