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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, 05 January 24
BANGLADESH’S 2023 COAL-FIRED POWER OUTPUT TRIPLED, EASING SHORTAGES - REUTERS
Bangladesh nearly tripled its coal-fired power output in 2023, a Reuters analysis of government data showed, helping it tide over the worst power s ...
Tuesday, 02 January 24
COAL TRADE CONTINUES TO HEAD EAST - BALTIC EXCHANGE
The global coal trade, once concentrated in the Pacific and Atlantic basins, is undergoing a significant transformation, as highlighted in the Inte ...
Tuesday, 02 January 24
COAL CARGOES: AVOIDING EXPLOSION AND SELF-HEATING - GARD
KNOWLEDGE TO ELEVATE
Despite its contribution to greenhouse gas emissions, global coal consumption climbed to an all-time high in 2022 and is ...
Tuesday, 02 January 24
SINOPEC FORECASTS CHINA’S COAL CONSUMPTION TO PEAK AROUND 2025 - REUTERS
China Petrochemical Corp, or Sinopec, expects coal consumption to peak around 2025 at 4.37 billion metric tons, the state energy group said in an o ...
Thursday, 07 December 23
CHINA TO SET UP COAL PRODUCTION RESERVE TO STABILISE PRICES - REUTERS
China will establish a back-up coal production system by 2027 to stabilise prices and secure coal supply, the state planner said on Wednesday, even ...
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- Jorong Barutama Greston.PT - Indonesia
- Minerals Council of Australia
- Parliament of New Zealand
- TeaM Sual Corporation - Philippines
- Mercator Lines Limited - India
- Directorate Of Revenue Intelligence - India
- South Luzon Thermal Energy Corporation
- Independent Power Producers Association of India
- Bulk Trading Sa - Switzerland
- MS Steel International - UAE
- Bhoruka Overseas - Indonesia
- Deloitte Consulting - India
- Trasteel International SA, Italy
- New Zealand Coal & Carbon
- Mjunction Services Limited - India
- Coal and Oil Company - UAE
- Indian Energy Exchange, India
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- Bukit Baiduri Energy - Indonesia
- Planning Commission, India
- Goldman Sachs - Singapore
- Asmin Koalindo Tuhup - Indonesia
- Chamber of Mines of South Africa
- Global Business Power Corporation, Philippines
- Jaiprakash Power Ventures ltd
- Indian Oil Corporation Limited
- Bhushan Steel Limited - India
- Binh Thuan Hamico - Vietnam
- Sical Logistics Limited - India
- Siam City Cement PLC, Thailand
- Grasim Industreis Ltd - India
- Intertek Mineral Services - Indonesia
- Gujarat Sidhee Cement - India
- SMC Global Power, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Electricity Generating Authority of Thailand
- Bayan Resources Tbk. - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Therma Luzon, Inc, Philippines
- Gujarat Electricity Regulatory Commission - India
- Price Waterhouse Coopers - Russia
- Kartika Selabumi Mining - Indonesia
- Kumho Petrochemical, South Korea
- Maharashtra Electricity Regulatory Commission - India
- GVK Power & Infra Limited - India
- Uttam Galva Steels Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Kalimantan Lumbung Energi - Indonesia
- Meenaskhi Energy Private Limited - India
- Aditya Birla Group - India
- SMG Consultants - Indonesia
- Africa Commodities Group - South Africa
- Posco Energy - South Korea
- Georgia Ports Authority, United States
- Chettinad Cement Corporation Ltd - India
- Tata Chemicals Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Coalindo Energy - Indonesia
- Anglo American - United Kingdom
- Makarim & Taira - Indonesia
- San Jose City I Power Corp, Philippines
- Renaissance Capital - South Africa
- Neyveli Lignite Corporation Ltd, - India
- Rio Tinto Coal - Australia
- Medco Energi Mining Internasional
- Directorate General of MIneral and Coal - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Thiess Contractors Indonesia
- Indogreen Group - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Attock Cement Pakistan Limited
- VISA Power Limited - India
- Sindya Power Generating Company Private Ltd
- Barasentosa Lestari - Indonesia
- Edison Trading Spa - Italy
- Leighton Contractors Pty Ltd - Australia
- Oldendorff Carriers - Singapore
- Pendopo Energi Batubara - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Eastern Coal Council - USA
- India Bulls Power Limited - India
- Iligan Light & Power Inc, Philippines
- AsiaOL BioFuels Corp., Philippines
- ASAPP Information Group - India
- Miang Besar Coal Terminal - Indonesia
- Jindal Steel & Power Ltd - India
- IHS Mccloskey Coal Group - USA
- CNBM International Corporation - China
- Larsen & Toubro Limited - India
- Lanco Infratech Ltd - India
- PNOC Exploration Corporation - Philippines
- Wood Mackenzie - Singapore
- Borneo Indobara - Indonesia
- Essar Steel Hazira Ltd - India
- Marubeni Corporation - India
- Mercuria Energy - Indonesia
- Semirara Mining and Power Corporation, Philippines
- London Commodity Brokers - England
- Sojitz Corporation - Japan
- Agrawal Coal Company - India
- Kepco SPC Power Corporation, Philippines
- Eastern Energy - Thailand
- Baramulti Group, Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Meralco Power Generation, Philippines
- Coastal Gujarat Power Limited - India
- Kideco Jaya Agung - Indonesia
- Madhucon Powers Ltd - India
- Metalloyd Limited - United Kingdom
- Global Green Power PLC Corporation, Philippines
- Sree Jayajothi Cements Limited - India
- CIMB Investment Bank - Malaysia
- Savvy Resources Ltd - HongKong
- Global Coal Blending Company Limited - Australia
- Tamil Nadu electricity Board
- Simpson Spence & Young - Indonesia
- Star Paper Mills Limited - India
- Malabar Cements Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Dalmia Cement Bharat India
- Ambuja Cements Ltd - India
- OPG Power Generation Pvt Ltd - India
- Maheswari Brothers Coal Limited - India
- Power Finance Corporation Ltd., India
- Indonesian Coal Mining Association
- Standard Chartered Bank - UAE
- Commonwealth Bank - Australia
- Economic Council, Georgia
- Bangladesh Power Developement Board
- Electricity Authority, New Zealand
- Petrochimia International Co. Ltd.- Taiwan
- Riau Bara Harum - Indonesia
- Vizag Seaport Private Limited - India
- The University of Queensland
- TNB Fuel Sdn Bhd - Malaysia
- Indika Energy - Indonesia
- Wilmar Investment Holdings
- Semirara Mining Corp, Philippines
- Ceylon Electricity Board - Sri Lanka
- Xindia Steels Limited - India
- Cigading International Bulk Terminal - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Globalindo Alam Lestari - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Port Waratah Coal Services - Australia
- Australian Coal Association
- Sinarmas Energy and Mining - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Indo Tambangraya Megah - Indonesia
- Timah Investasi Mineral - Indoneisa
- LBH Netherlands Bv - Netherlands
- Samtan Co., Ltd - South Korea
- Ind-Barath Power Infra Limited - India
- McConnell Dowell - Australia
- Siam City Cement - Thailand
- Toyota Tsusho Corporation, Japan
- Petron Corporation, Philippines
- Parry Sugars Refinery, India
- Krishnapatnam Port Company Ltd. - India
- Antam Resourcindo - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Latin American Coal - Colombia
- Energy Development Corp, Philippines
- Central Java Power - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Aboitiz Power Corporation - Philippines
- Sarangani Energy Corporation, Philippines
- Central Electricity Authority - India
- Karaikal Port Pvt Ltd - India
- Ministry of Finance - Indonesia
- Bhatia International Limited - India
- Banpu Public Company Limited - Thailand
- Energy Link Ltd, New Zealand
- European Bulk Services B.V. - Netherlands
- Singapore Mercantile Exchange
- PowerSource Philippines DevCo
- Salva Resources Pvt Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- GAC Shipping (India) Pvt Ltd
- Cement Manufacturers Association - India
- Kobexindo Tractors - Indoneisa
- The Treasury - Australian Government
- Mintek Dendrill Indonesia
- PTC India Limited - India
- Orica Australia Pty. Ltd.
- White Energy Company Limited
- Kaltim Prima Coal - Indonesia
- SN Aboitiz Power Inc, Philippines
- Bharathi Cement Corporation - India
- Straits Asia Resources Limited - Singapore
- The State Trading Corporation of India Ltd
- Sakthi Sugars Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Altura Mining Limited, Indonesia
- Thai Mozambique Logistica
- Offshore Bulk Terminal Pte Ltd, Singapore
- International Coal Ventures Pvt Ltd - India
- Ministry of Transport, Egypt
- Ministry of Mines - Canada
- Videocon Industries ltd - India
- Interocean Group of Companies - India
- Merrill Lynch Commodities Europe
- Orica Mining Services - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- ICICI Bank Limited - India
- Formosa Plastics Group - Taiwan
- Vijayanagar Sugar Pvt Ltd - India
- GMR Energy Limited - India
- Heidelberg Cement - Germany
- Romanian Commodities Exchange
- Manunggal Multi Energi - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Australian Commodity Traders Exchange
- Bukit Makmur.PT - Indonesia
- IEA Clean Coal Centre - UK
- Carbofer General Trading SA - India
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