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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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Wednesday, 31 January 24
CHINA'S INNER MONGOLIA COAL OUTPUT HIT 1.21B TONS IN 2023 - XINHUA
North China’s Inner Mongolia autonomous region churned out 1.21 billion tons of coal in 2023 as it strives to guarantee the country’s e ...
Wednesday, 31 January 24
GAS EXPORTS COST U.S. CONSUMERS MORE THAN $100 BILLION OVER 16-MONTH PERIOD - IEEFA
Limited Demand Growth Could Dampen the Dry Bulk Market in the Coming Months BIMCOStarting in late 2021—before its invasion of Ukraine—R ...
Tuesday, 30 January 24
LIMITED DEMAND GROWTH COULD DAMPEN THE DRY BULK MARKET IN THE COMING MONTHS - BIMCO
Demand
In our base scenario, we expect cargo demand to grow by 0-1% in 2024 and 0.5-1.5% in 2025. This is a 0.5 percentage point reduction for ...
Friday, 26 January 24
RED SEA DIVERSIONS ADD NEARLY A MILLION DOLLARS PER VOYAGE TO SHIPPING COSTS WHILE DOUBLING TRANSIT TIME - LSEG
The incremental costs of diverting a tanker from Asia to NW Europe via the Cape of Good Hope is accounting for an extra $932,905 USD per voyage whi ...
Friday, 26 January 24
HARD COAL GUARDIAN ANGEL OF THE ENERGY SUPPLY - GERMANY COAL IMPORTERS ASSOCIATION
- No security of supply without hard coal
- The Substitute Power Plant Provision Act (EKBG) must be extended
- Higher grid fees due to the ...
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- OPG Power Generation Pvt Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Iligan Light & Power Inc, Philippines
- VISA Power Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Indo Tambangraya Megah - Indonesia
- Borneo Indobara - Indonesia
- Economic Council, Georgia
- Renaissance Capital - South Africa
- Metalloyd Limited - United Kingdom
- Edison Trading Spa - Italy
- Toyota Tsusho Corporation, Japan
- Meralco Power Generation, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Maharashtra Electricity Regulatory Commission - India
- Africa Commodities Group - South Africa
- Kepco SPC Power Corporation, Philippines
- Tata Chemicals Ltd - India
- IEA Clean Coal Centre - UK
- Eastern Coal Council - USA
- Minerals Council of Australia
- Kalimantan Lumbung Energi - Indonesia
- SN Aboitiz Power Inc, Philippines
- Gujarat Sidhee Cement - India
- Formosa Plastics Group - Taiwan
- Bangladesh Power Developement Board
- Sojitz Corporation - Japan
- Australian Coal Association
- Manunggal Multi Energi - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Indogreen Group - Indonesia
- Ambuja Cements Ltd - India
- London Commodity Brokers - England
- Bharathi Cement Corporation - India
- Jorong Barutama Greston.PT - Indonesia
- Videocon Industries ltd - India
- Port Waratah Coal Services - Australia
- Holcim Trading Pte Ltd - Singapore
- Chamber of Mines of South Africa
- Wilmar Investment Holdings
- Leighton Contractors Pty Ltd - Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Dalmia Cement Bharat India
- Electricity Authority, New Zealand
- Semirara Mining Corp, Philippines
- Australian Commodity Traders Exchange
- Anglo American - United Kingdom
- Ind-Barath Power Infra Limited - India
- New Zealand Coal & Carbon
- South Luzon Thermal Energy Corporation
- Sinarmas Energy and Mining - Indonesia
- Carbofer General Trading SA - India
- Sindya Power Generating Company Private Ltd
- PowerSource Philippines DevCo
- Timah Investasi Mineral - Indoneisa
- Therma Luzon, Inc, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Baramulti Group, Indonesia
- Kaltim Prima Coal - Indonesia
- India Bulls Power Limited - India
- Global Green Power PLC Corporation, Philippines
- TeaM Sual Corporation - Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Samtan Co., Ltd - South Korea
- Jaiprakash Power Ventures ltd
- Karbindo Abesyapradhi - Indoneisa
- SMG Consultants - Indonesia
- Global Business Power Corporation, Philippines
- Mjunction Services Limited - India
- Attock Cement Pakistan Limited
- CNBM International Corporation - China
- Bahari Cakrawala Sebuku - Indonesia
- Trasteel International SA, Italy
- San Jose City I Power Corp, Philippines
- LBH Netherlands Bv - Netherlands
- Bhatia International Limited - India
- European Bulk Services B.V. - Netherlands
- Altura Mining Limited, Indonesia
- Uttam Galva Steels Limited - India
- Aditya Birla Group - India
- PTC India Limited - India
- Bukit Baiduri Energy - Indonesia
- Thai Mozambique Logistica
- Sarangani Energy Corporation, Philippines
- Parliament of New Zealand
- Neyveli Lignite Corporation Ltd, - India
- GAC Shipping (India) Pvt Ltd
- ASAPP Information Group - India
- Rio Tinto Coal - Australia
- Singapore Mercantile Exchange
- Independent Power Producers Association of India
- Bukit Asam (Persero) Tbk - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Medco Energi Mining Internasional
- Simpson Spence & Young - Indonesia
- PNOC Exploration Corporation - Philippines
- Merrill Lynch Commodities Europe
- Vijayanagar Sugar Pvt Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Jindal Steel & Power Ltd - India
- Madhucon Powers Ltd - India
- Essar Steel Hazira Ltd - India
- Ministry of Transport, Egypt
- Mercuria Energy - Indonesia
- Billiton Holdings Pty Ltd - Australia
- AsiaOL BioFuels Corp., Philippines
- Bulk Trading Sa - Switzerland
- Lanco Infratech Ltd - India
- SMC Global Power, Philippines
- Tamil Nadu electricity Board
- Siam City Cement PLC, Thailand
- Coalindo Energy - Indonesia
- Straits Asia Resources Limited - Singapore
- Ministry of Mines - Canada
- Eastern Energy - Thailand
- Agrawal Coal Company - India
- Cement Manufacturers Association - India
- Indian Oil Corporation Limited
- Semirara Mining and Power Corporation, Philippines
- Bhushan Steel Limited - India
- Goldman Sachs - Singapore
- McConnell Dowell - Australia
- The University of Queensland
- Makarim & Taira - Indonesia
- Kobexindo Tractors - Indoneisa
- Kumho Petrochemical, South Korea
- Global Coal Blending Company Limited - Australia
- Barasentosa Lestari - Indonesia
- The State Trading Corporation of India Ltd
- Commonwealth Bank - Australia
- Cigading International Bulk Terminal - Indonesia
- Wood Mackenzie - Singapore
- Coal and Oil Company - UAE
- Sree Jayajothi Cements Limited - India
- Heidelberg Cement - Germany
- Power Finance Corporation Ltd., India
- Grasim Industreis Ltd - India
- MS Steel International - UAE
- Orica Australia Pty. Ltd.
- Miang Besar Coal Terminal - Indonesia
- Vedanta Resources Plc - India
- ICICI Bank Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Indika Energy - Indonesia
- Maheswari Brothers Coal Limited - India
- Krishnapatnam Port Company Ltd. - India
- White Energy Company Limited
- Posco Energy - South Korea
- Indonesian Coal Mining Association
- Vizag Seaport Private Limited - India
- Banpu Public Company Limited - Thailand
- Alfred C Toepfer International GmbH - Germany
- Planning Commission, India
- Coastal Gujarat Power Limited - India
- GVK Power & Infra Limited - India
- Interocean Group of Companies - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Malabar Cements Ltd - India
- Georgia Ports Authority, United States
- PetroVietnam Power Coal Import and Supply Company
- Bayan Resources Tbk. - Indonesia
- International Coal Ventures Pvt Ltd - India
- Bukit Makmur.PT - Indonesia
- Energy Development Corp, Philippines
- Riau Bara Harum - Indonesia
- Larsen & Toubro Limited - India
- Mintek Dendrill Indonesia
- Aboitiz Power Corporation - Philippines
- Latin American Coal - Colombia
- Parry Sugars Refinery, India
- Pendopo Energi Batubara - Indonesia
- Price Waterhouse Coopers - Russia
- Directorate General of MIneral and Coal - Indonesia
- Intertek Mineral Services - Indonesia
- Ministry of Finance - Indonesia
- Rashtriya Ispat Nigam Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Star Paper Mills Limited - India
- Karaikal Port Pvt Ltd - India
- Central Java Power - Indonesia
- Directorate Of Revenue Intelligence - India
- Kideco Jaya Agung - Indonesia
- Xindia Steels Limited - India
- Antam Resourcindo - Indonesia
- Oldendorff Carriers - Singapore
- Standard Chartered Bank - UAE
- Binh Thuan Hamico - Vietnam
- Deloitte Consulting - India
- Energy Link Ltd, New Zealand
- Orica Mining Services - Indonesia
- Kartika Selabumi Mining - Indonesia
- Sakthi Sugars Limited - India
- Bhoruka Overseas - Indonesia
- Sical Logistics Limited - India
- Indian Energy Exchange, India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kapuas Tunggal Persada - Indonesia
- Salva Resources Pvt Ltd - India
- Mercator Lines Limited - India
- Romanian Commodities Exchange
- Electricity Generating Authority of Thailand
- Chettinad Cement Corporation Ltd - India
- GMR Energy Limited - India
- Petron Corporation, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- IHS Mccloskey Coal Group - USA
- Central Electricity Authority - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Marubeni Corporation - India
- Savvy Resources Ltd - HongKong
- Thiess Contractors Indonesia
- Globalindo Alam Lestari - Indonesia
- CIMB Investment Bank - Malaysia
- Siam City Cement - Thailand
- Meenaskhi Energy Private Limited - India
- The Treasury - Australian Government
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