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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, 02 February 24
DRY BULK MARKET: THE DOWNWARD REVISION IN THE GROWTH OF CAPESIZE TONNE DAYS IN JANUARY WITH THE BCI DROPPING - MARIA BERTZELETOU
In the last week of January, the dry freight market sustained weakness in the Capesize segment, while the number of ballasters in the Southeast (SE ...
Friday, 02 February 24
COAL INDIA ACHIEVES NEARLY 80% OF ITS FY24 PRODUCTION TARGET IN TEN MONTHS - CNBCTV18
For the month of January, the company’s production grew by 9.1% from the same period last year to 78.4 Million Tonnes (MT), from 71.9 MT last ...
Thursday, 01 February 24
CHINA'S WIND, SOLAR CAPACITY TO OVERTAKE COAL IN 2024 - INDUSTRY BODY, REUTERS REPORTED
China’s installed wind and solar capacity is expected to overtake coal for the first time this year, according to industry forecasts.
&nb ...
Thursday, 01 February 24
ANTI-DEDUCTION CLAUSES: CAN A CHARTERER WITHHOLD HIRE WITHOUT AN OWNER'S CONSENT? - SKULD
KNOWLEDGE TO ELEVATE
Summary
In The Anna Dorothea, the Court found that where a charterparty provides that no deduction from hire may be m ...
Thursday, 01 February 24
INDIA REBUILDS COAL STOCKS TO ENSURE ELECTRIC RELIABILITY - REUTERS
India’s electricity supply is much more comfortable at the start of 2024 than in either 2023 or 2022 as coal production has ramped up and the ...
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- Merrill Lynch Commodities Europe
- Bhoruka Overseas - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Sarangani Energy Corporation, Philippines
- Mjunction Services Limited - India
- Global Green Power PLC Corporation, Philippines
- Bulk Trading Sa - Switzerland
- Bhatia International Limited - India
- VISA Power Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Ceylon Electricity Board - Sri Lanka
- The University of Queensland
- Sojitz Corporation - Japan
- Vizag Seaport Private Limited - India
- Aditya Birla Group - India
- Tata Chemicals Ltd - India
- Videocon Industries ltd - India
- Interocean Group of Companies - India
- IHS Mccloskey Coal Group - USA
- Australian Commodity Traders Exchange
- Directorate General of MIneral and Coal - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Antam Resourcindo - Indonesia
- Indo Tambangraya Megah - Indonesia
- Minerals Council of Australia
- Edison Trading Spa - Italy
- Savvy Resources Ltd - HongKong
- Coalindo Energy - Indonesia
- Directorate Of Revenue Intelligence - India
- Bayan Resources Tbk. - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- PetroVietnam Power Coal Import and Supply Company
- Metalloyd Limited - United Kingdom
- San Jose City I Power Corp, Philippines
- Star Paper Mills Limited - India
- The State Trading Corporation of India Ltd
- Economic Council, Georgia
- Binh Thuan Hamico - Vietnam
- Kartika Selabumi Mining - Indonesia
- Eastern Energy - Thailand
- Central Electricity Authority - India
- Anglo American - United Kingdom
- SMC Global Power, Philippines
- Australian Coal Association
- Riau Bara Harum - Indonesia
- Therma Luzon, Inc, Philippines
- Baramulti Group, Indonesia
- Kumho Petrochemical, South Korea
- Banpu Public Company Limited - Thailand
- Agrawal Coal Company - India
- Marubeni Corporation - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Krishnapatnam Port Company Ltd. - India
- Timah Investasi Mineral - Indoneisa
- Kapuas Tunggal Persada - Indonesia
- IEA Clean Coal Centre - UK
- Iligan Light & Power Inc, Philippines
- Borneo Indobara - Indonesia
- Meralco Power Generation, Philippines
- Jaiprakash Power Ventures ltd
- South Luzon Thermal Energy Corporation
- McConnell Dowell - Australia
- New Zealand Coal & Carbon
- Larsen & Toubro Limited - India
- Semirara Mining and Power Corporation, Philippines
- White Energy Company Limited
- Mintek Dendrill Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Trasteel International SA, Italy
- Parry Sugars Refinery, India
- Siam City Cement - Thailand
- TeaM Sual Corporation - Philippines
- Gujarat Mineral Development Corp Ltd - India
- Carbofer General Trading SA - India
- Asmin Koalindo Tuhup - Indonesia
- Ministry of Finance - Indonesia
- Siam City Cement PLC, Thailand
- TNB Fuel Sdn Bhd - Malaysia
- Meenaskhi Energy Private Limited - India
- Medco Energi Mining Internasional
- Tamil Nadu electricity Board
- PowerSource Philippines DevCo
- Maharashtra Electricity Regulatory Commission - India
- Parliament of New Zealand
- GAC Shipping (India) Pvt Ltd
- Straits Asia Resources Limited - Singapore
- Makarim & Taira - Indonesia
- Indonesian Coal Mining Association
- Altura Mining Limited, Indonesia
- PNOC Exploration Corporation - Philippines
- Gujarat Electricity Regulatory Commission - India
- Maheswari Brothers Coal Limited - India
- CNBM International Corporation - China
- Romanian Commodities Exchange
- Singapore Mercantile Exchange
- Uttam Galva Steels Limited - India
- OPG Power Generation Pvt Ltd - India
- Energy Development Corp, Philippines
- Global Coal Blending Company Limited - Australia
- Oldendorff Carriers - Singapore
- International Coal Ventures Pvt Ltd - India
- Formosa Plastics Group - Taiwan
- Billiton Holdings Pty Ltd - Australia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Ind-Barath Power Infra Limited - India
- Bharathi Cement Corporation - India
- Central Java Power - Indonesia
- Renaissance Capital - South Africa
- Deloitte Consulting - India
- Vedanta Resources Plc - India
- Lanco Infratech Ltd - India
- Salva Resources Pvt Ltd - India
- Standard Chartered Bank - UAE
- ASAPP Information Group - India
- Semirara Mining Corp, Philippines
- Kaltim Prima Coal - Indonesia
- GVK Power & Infra Limited - India
- Pendopo Energi Batubara - Indonesia
- Samtan Co., Ltd - South Korea
- Dalmia Cement Bharat India
- Coastal Gujarat Power Limited - India
- European Bulk Services B.V. - Netherlands
- Cement Manufacturers Association - India
- Power Finance Corporation Ltd., India
- Aboitiz Power Corporation - Philippines
- Sakthi Sugars Limited - India
- Mercator Lines Limited - India
- Gujarat Sidhee Cement - India
- Rio Tinto Coal - Australia
- Indian Oil Corporation Limited
- Globalindo Alam Lestari - Indonesia
- Indian Energy Exchange, India
- Sical Logistics Limited - India
- ICICI Bank Limited - India
- Malabar Cements Ltd - India
- Energy Link Ltd, New Zealand
- Bukit Makmur.PT - Indonesia
- Orica Mining Services - Indonesia
- Manunggal Multi Energi - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Petron Corporation, Philippines
- Global Business Power Corporation, Philippines
- Grasim Industreis Ltd - India
- CIMB Investment Bank - Malaysia
- Bukit Asam (Persero) Tbk - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Karaikal Port Pvt Ltd - India
- Independent Power Producers Association of India
- MS Steel International - UAE
- Toyota Tsusho Corporation, Japan
- Leighton Contractors Pty Ltd - Australia
- Planning Commission, India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Africa Commodities Group - South Africa
- Commonwealth Bank - Australia
- GN Power Mariveles Coal Plant, Philippines
- London Commodity Brokers - England
- Wilmar Investment Holdings
- Mercuria Energy - Indonesia
- Orica Australia Pty. Ltd.
- Indika Energy - Indonesia
- Electricity Generating Authority of Thailand
- AsiaOL BioFuels Corp., Philippines
- Wood Mackenzie - Singapore
- Barasentosa Lestari - Indonesia
- PTC India Limited - India
- Port Waratah Coal Services - Australia
- Attock Cement Pakistan Limited
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Heidelberg Cement - Germany
- Ministry of Mines - Canada
- Kideco Jaya Agung - Indonesia
- Sindya Power Generating Company Private Ltd
- Price Waterhouse Coopers - Russia
- Xindia Steels Limited - India
- Thai Mozambique Logistica
- Electricity Authority, New Zealand
- India Bulls Power Limited - India
- Sree Jayajothi Cements Limited - India
- SN Aboitiz Power Inc, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Intertek Mineral Services - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Coal and Oil Company - UAE
- Cigading International Bulk Terminal - Indonesia
- Latin American Coal - Colombia
- Chettinad Cement Corporation Ltd - India
- GMR Energy Limited - India
- Bangladesh Power Developement Board
- Miang Besar Coal Terminal - Indonesia
- Bhushan Steel Limited - India
- Posco Energy - South Korea
- Neyveli Lignite Corporation Ltd, - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- LBH Netherlands Bv - Netherlands
- Jorong Barutama Greston.PT - Indonesia
- Eastern Coal Council - USA
- Pipit Mutiara Jaya. PT, Indonesia
- Rashtriya Ispat Nigam Limited - India
- The Treasury - Australian Government
- Ministry of Transport, Egypt
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Simpson Spence & Young - Indonesia
- Kobexindo Tractors - Indoneisa
- Chamber of Mines of South Africa
- Essar Steel Hazira Ltd - India
- Thiess Contractors Indonesia
- Madhucon Powers Ltd - India
- Jindal Steel & Power Ltd - India
- Goldman Sachs - Singapore
- Petrochimia International Co. Ltd.- Taiwan
- Georgia Ports Authority, United States
- SMG Consultants - Indonesia
- Kepco SPC Power Corporation, Philippines
- Ambuja Cements Ltd - India
- Indogreen Group - Indonesia
- Bukit Baiduri Energy - Indonesia
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