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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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- Petrochimia International Co. Ltd.- Taiwan
- Port Waratah Coal Services - Australia
- Jindal Steel & Power Ltd - India
- MS Steel International - UAE
- Salva Resources Pvt Ltd - India
- Sojitz Corporation - Japan
- Goldman Sachs - Singapore
- Siam City Cement PLC, Thailand
- Leighton Contractors Pty Ltd - Australia
- Central Java Power - Indonesia
- Independent Power Producers Association of India
- PNOC Exploration Corporation - Philippines
- Chamber of Mines of South Africa
- Edison Trading Spa - Italy
- Medco Energi Mining Internasional
- Bhushan Steel Limited - India
- The Treasury - Australian Government
- Savvy Resources Ltd - HongKong
- Coal and Oil Company - UAE
- Indo Tambangraya Megah - Indonesia
- Siam City Cement - Thailand
- AsiaOL BioFuels Corp., Philippines
- Rio Tinto Coal - Australia
- Ministry of Mines - Canada
- Bharathi Cement Corporation - India
- Star Paper Mills Limited - India
- Alfred C Toepfer International GmbH - Germany
- Offshore Bulk Terminal Pte Ltd, Singapore
- Ministry of Transport, Egypt
- Parry Sugars Refinery, India
- Indonesian Coal Mining Association
- Vedanta Resources Plc - India
- Orica Australia Pty. Ltd.
- Posco Energy - South Korea
- Cement Manufacturers Association - India
- Global Business Power Corporation, Philippines
- Uttam Galva Steels Limited - India
- Kobexindo Tractors - Indoneisa
- Meralco Power Generation, Philippines
- Sical Logistics Limited - India
- IHS Mccloskey Coal Group - USA
- Heidelberg Cement - Germany
- Videocon Industries ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Essar Steel Hazira Ltd - India
- GAC Shipping (India) Pvt Ltd
- Baramulti Group, Indonesia
- Iligan Light & Power Inc, Philippines
- SMC Global Power, Philippines
- European Bulk Services B.V. - Netherlands
- Wood Mackenzie - Singapore
- Eastern Coal Council - USA
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Chettinad Cement Corporation Ltd - India
- Ind-Barath Power Infra Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Bayan Resources Tbk. - Indonesia
- GMR Energy Limited - India
- Sakthi Sugars Limited - India
- Maheswari Brothers Coal Limited - India
- Straits Asia Resources Limited - Singapore
- Commonwealth Bank - Australia
- Holcim Trading Pte Ltd - Singapore
- Anglo American - United Kingdom
- Trasteel International SA, Italy
- Madhucon Powers Ltd - India
- CIMB Investment Bank - Malaysia
- Sindya Power Generating Company Private Ltd
- Gujarat Mineral Development Corp Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Vizag Seaport Private Limited - India
- Eastern Energy - Thailand
- Attock Cement Pakistan Limited
- Central Electricity Authority - India
- Antam Resourcindo - Indonesia
- Tata Chemicals Ltd - India
- Agrawal Coal Company - India
- Metalloyd Limited - United Kingdom
- Carbofer General Trading SA - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Riau Bara Harum - Indonesia
- Global Green Power PLC Corporation, Philippines
- Thiess Contractors Indonesia
- Mintek Dendrill Indonesia
- Lanco Infratech Ltd - India
- The State Trading Corporation of India Ltd
- Tamil Nadu electricity Board
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Toyota Tsusho Corporation, Japan
- Romanian Commodities Exchange
- Energy Development Corp, Philippines
- Karaikal Port Pvt Ltd - India
- Larsen & Toubro Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Rashtriya Ispat Nigam Limited - India
- Kaltim Prima Coal - Indonesia
- Wilmar Investment Holdings
- Manunggal Multi Energi - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Oldendorff Carriers - Singapore
- PowerSource Philippines DevCo
- Orica Mining Services - Indonesia
- Ambuja Cements Ltd - India
- Binh Thuan Hamico - Vietnam
- Mjunction Services Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Therma Luzon, Inc, Philippines
- Mercuria Energy - Indonesia
- Bhatia International Limited - India
- Standard Chartered Bank - UAE
- Coastal Gujarat Power Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Africa Commodities Group - South Africa
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- South Luzon Thermal Energy Corporation
- Borneo Indobara - Indonesia
- Kumho Petrochemical, South Korea
- Kalimantan Lumbung Energi - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Singapore Mercantile Exchange
- Mercator Lines Limited - India
- Planning Commission, India
- Power Finance Corporation Ltd., India
- Directorate Of Revenue Intelligence - India
- Bangladesh Power Developement Board
- Globalindo Alam Lestari - Indonesia
- Bulk Trading Sa - Switzerland
- Parliament of New Zealand
- Bank of Tokyo Mitsubishi UFJ Ltd
- Electricity Authority, New Zealand
- Bahari Cakrawala Sebuku - Indonesia
- Semirara Mining and Power Corporation, Philippines
- SMG Consultants - Indonesia
- Renaissance Capital - South Africa
- Dalmia Cement Bharat India
- VISA Power Limited - India
- Krishnapatnam Port Company Ltd. - India
- Thai Mozambique Logistica
- Meenaskhi Energy Private Limited - India
- Indian Oil Corporation Limited
- Sinarmas Energy and Mining - Indonesia
- Deloitte Consulting - India
- Global Coal Blending Company Limited - Australia
- TNB Fuel Sdn Bhd - Malaysia
- Economic Council, Georgia
- Simpson Spence & Young - Indonesia
- Ceylon Electricity Board - Sri Lanka
- The University of Queensland
- Merrill Lynch Commodities Europe
- Indian Energy Exchange, India
- Barasentosa Lestari - Indonesia
- Xindia Steels Limited - India
- Banpu Public Company Limited - Thailand
- Pipit Mutiara Jaya. PT, Indonesia
- GVK Power & Infra Limited - India
- PTC India Limited - India
- Marubeni Corporation - India
- India Bulls Power Limited - India
- Georgia Ports Authority, United States
- Asmin Koalindo Tuhup - Indonesia
- Minerals Council of Australia
- Latin American Coal - Colombia
- CNBM International Corporation - China
- Formosa Plastics Group - Taiwan
- Coalindo Energy - Indonesia
- Altura Mining Limited, Indonesia
- Bukit Makmur.PT - Indonesia
- Australian Commodity Traders Exchange
- London Commodity Brokers - England
- Samtan Co., Ltd - South Korea
- Timah Investasi Mineral - Indoneisa
- SN Aboitiz Power Inc, Philippines
- Petron Corporation, Philippines
- McConnell Dowell - Australia
- Bukit Baiduri Energy - Indonesia
- Billiton Holdings Pty Ltd - Australia
- IEA Clean Coal Centre - UK
- Indika Energy - Indonesia
- Sarangani Energy Corporation, Philippines
- ASAPP Information Group - India
- Cigading International Bulk Terminal - Indonesia
- Ministry of Finance - Indonesia
- Aboitiz Power Corporation - Philippines
- Gujarat Electricity Regulatory Commission - India
- Intertek Mineral Services - Indonesia
- TeaM Sual Corporation - Philippines
- Indogreen Group - Indonesia
- Pendopo Energi Batubara - Indonesia
- Australian Coal Association
- LBH Netherlands Bv - Netherlands
- Miang Besar Coal Terminal - Indonesia
- White Energy Company Limited
- Interocean Group of Companies - India
- OPG Power Generation Pvt Ltd - India
- New Zealand Coal & Carbon
- Kartika Selabumi Mining - Indonesia
- Sree Jayajothi Cements Limited - India
- Bhoruka Overseas - Indonesia
- Semirara Mining Corp, Philippines
- Grasim Industreis Ltd - India
- Malabar Cements Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- San Jose City I Power Corp, Philippines
- ICICI Bank Limited - India
- Kepco SPC Power Corporation, Philippines
- Jaiprakash Power Ventures ltd
- Gujarat Sidhee Cement - India
- Kideco Jaya Agung - Indonesia
- Makarim & Taira - Indonesia
- Price Waterhouse Coopers - Russia
- International Coal Ventures Pvt Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Electricity Generating Authority of Thailand
- Energy Link Ltd, New Zealand
- Aditya Birla Group - India
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