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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, 01 December 23
COAL MINERS GROUP EXPECTS INDONESIA’S 2023 COAL OUTPUT TO SURPASS TARGET - REUTERS
The Indonesian Coal Mining Association (ICMA) expects the country’s 2023 coal output to surpass the official target of 695 million metric ton ...
Friday, 24 November 23
COAL IMPORTS TO INDIA IN OCTOBER 2023 REACHED HIGHEST LEVELS IN NEARLY A YEAR AND A HALF - VESSELSVALUE, VESON NAUTICAL
In October, coal imports to India reached 13.8 mt in October 2023, according to Oceanbolt, a Veson Nautical solution, the highest level since May 2 ...
Friday, 24 November 23
COAL SHIPMENTS TO ADVANCED ECONOMIES DOWN 17% SO FAR IN 2023 - BIMCO
In the first ten months of 2023, coal shipments to advanced economies fell by 17% y/y, as demand for electricity declined and the share of electric ...
Friday, 24 November 23
INTELLIGENT COAL MINES CONTRIBUTE TO IMPROVING SAFETY STANDARDS - CHINA DAILY
Mechanization, automation and intelligent upgrades have contributed to improved safety in coal mines, though the level of development of intelligen ...
Friday, 24 November 23
WHY AUSTRALIA'S COAL MINES ARE GETTING BIGGER - IEEFA
Australia’s largest coal mines are getting larger. Mines in New South Wales (NSW) are ramping up production following the state’s recov ...
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- Holcim Trading Pte Ltd - Singapore
- Salva Resources Pvt Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Maheswari Brothers Coal Limited - India
- Jindal Steel & Power Ltd - India
- Australian Coal Association
- Indian Oil Corporation Limited
- Price Waterhouse Coopers - Russia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Orica Mining Services - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Parliament of New Zealand
- Tata Chemicals Ltd - India
- Bulk Trading Sa - Switzerland
- Global Business Power Corporation, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Neyveli Lignite Corporation Ltd, - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Oldendorff Carriers - Singapore
- PTC India Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Siam City Cement - Thailand
- Therma Luzon, Inc, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Trasteel International SA, Italy
- Central Electricity Authority - India
- McConnell Dowell - Australia
- Madhucon Powers Ltd - India
- Goldman Sachs - Singapore
- Ind-Barath Power Infra Limited - India
- European Bulk Services B.V. - Netherlands
- PNOC Exploration Corporation - Philippines
- AsiaOL BioFuels Corp., Philippines
- Alfred C Toepfer International GmbH - Germany
- Power Finance Corporation Ltd., India
- Rio Tinto Coal - Australia
- Australian Commodity Traders Exchange
- Wilmar Investment Holdings
- PowerSource Philippines DevCo
- Indian Energy Exchange, India
- Ceylon Electricity Board - Sri Lanka
- Kapuas Tunggal Persada - Indonesia
- ASAPP Information Group - India
- Interocean Group of Companies - India
- Sical Logistics Limited - India
- Uttam Galva Steels Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Wood Mackenzie - Singapore
- Directorate General of MIneral and Coal - Indonesia
- Heidelberg Cement - Germany
- GMR Energy Limited - India
- The Treasury - Australian Government
- Bharathi Cement Corporation - India
- Carbofer General Trading SA - India
- ICICI Bank Limited - India
- Thiess Contractors Indonesia
- Electricity Generating Authority of Thailand
- Kobexindo Tractors - Indoneisa
- Sakthi Sugars Limited - India
- Sarangani Energy Corporation, Philippines
- Edison Trading Spa - Italy
- Indogreen Group - Indonesia
- Dalmia Cement Bharat India
- Attock Cement Pakistan Limited
- Timah Investasi Mineral - Indoneisa
- Ambuja Cements Ltd - India
- Bukit Makmur.PT - Indonesia
- Minerals Council of Australia
- Mercator Lines Limited - India
- Bukit Baiduri Energy - Indonesia
- GVK Power & Infra Limited - India
- Indonesian Coal Mining Association
- Indika Energy - Indonesia
- Economic Council, Georgia
- Meralco Power Generation, Philippines
- GAC Shipping (India) Pvt Ltd
- Vijayanagar Sugar Pvt Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Sree Jayajothi Cements Limited - India
- Energy Link Ltd, New Zealand
- Altura Mining Limited, Indonesia
- Electricity Authority, New Zealand
- SMC Global Power, Philippines
- TeaM Sual Corporation - Philippines
- Baramulti Group, Indonesia
- CIMB Investment Bank - Malaysia
- Thai Mozambique Logistica
- Kumho Petrochemical, South Korea
- Kideco Jaya Agung - Indonesia
- VISA Power Limited - India
- Manunggal Multi Energi - Indonesia
- Globalindo Alam Lestari - Indonesia
- Meenaskhi Energy Private Limited - India
- Star Paper Mills Limited - India
- SN Aboitiz Power Inc, Philippines
- Pendopo Energi Batubara - Indonesia
- Merrill Lynch Commodities Europe
- Sojitz Corporation - Japan
- Bangladesh Power Developement Board
- Karaikal Port Pvt Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Latin American Coal - Colombia
- Ministry of Finance - Indonesia
- Chettinad Cement Corporation Ltd - India
- Kaltim Prima Coal - Indonesia
- Krishnapatnam Port Company Ltd. - India
- White Energy Company Limited
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Aboitiz Power Corporation - Philippines
- Coalindo Energy - Indonesia
- Indo Tambangraya Megah - Indonesia
- LBH Netherlands Bv - Netherlands
- Semirara Mining Corp, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Billiton Holdings Pty Ltd - Australia
- Sindya Power Generating Company Private Ltd
- Central Java Power - Indonesia
- Standard Chartered Bank - UAE
- Toyota Tsusho Corporation, Japan
- GN Power Mariveles Coal Plant, Philippines
- Ministry of Transport, Egypt
- Straits Asia Resources Limited - Singapore
- Borneo Indobara - Indonesia
- SMG Consultants - Indonesia
- Global Coal Blending Company Limited - Australia
- Chamber of Mines of South Africa
- Coastal Gujarat Power Limited - India
- Rashtriya Ispat Nigam Limited - India
- CNBM International Corporation - China
- Medco Energi Mining Internasional
- Coal and Oil Company - UAE
- Marubeni Corporation - India
- Maharashtra Electricity Regulatory Commission - India
- Iligan Light & Power Inc, Philippines
- San Jose City I Power Corp, Philippines
- Antam Resourcindo - Indonesia
- Binh Thuan Hamico - Vietnam
- Ministry of Mines - Canada
- Singapore Mercantile Exchange
- Petron Corporation, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Miang Besar Coal Terminal - Indonesia
- Parry Sugars Refinery, India
- Gujarat Sidhee Cement - India
- The University of Queensland
- Port Waratah Coal Services - Australia
- Georgia Ports Authority, United States
- Metalloyd Limited - United Kingdom
- Riau Bara Harum - Indonesia
- Vizag Seaport Private Limited - India
- International Coal Ventures Pvt Ltd - India
- The State Trading Corporation of India Ltd
- Jorong Barutama Greston.PT - Indonesia
- London Commodity Brokers - England
- Lanco Infratech Ltd - India
- IEA Clean Coal Centre - UK
- Samtan Co., Ltd - South Korea
- Intertek Mineral Services - Indonesia
- Grasim Industreis Ltd - India
- Kartika Selabumi Mining - Indonesia
- Energy Development Corp, Philippines
- Tamil Nadu electricity Board
- Renaissance Capital - South Africa
- Eastern Coal Council - USA
- Global Green Power PLC Corporation, Philippines
- Malabar Cements Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Planning Commission, India
- Agrawal Coal Company - India
- Videocon Industries ltd - India
- South Luzon Thermal Energy Corporation
- Savvy Resources Ltd - HongKong
- Asmin Koalindo Tuhup - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Mintek Dendrill Indonesia
- Bhushan Steel Limited - India
- Anglo American - United Kingdom
- India Bulls Power Limited - India
- New Zealand Coal & Carbon
- Siam City Cement PLC, Thailand
- OPG Power Generation Pvt Ltd - India
- Directorate Of Revenue Intelligence - India
- Simpson Spence & Young - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Deloitte Consulting - India
- Essar Steel Hazira Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Cement Manufacturers Association - India
- Petrochimia International Co. Ltd.- Taiwan
- Vedanta Resources Plc - India
- Kepco SPC Power Corporation, Philippines
- Mercuria Energy - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Banpu Public Company Limited - Thailand
- Bayan Resources Tbk. - Indonesia
- Barasentosa Lestari - Indonesia
- Independent Power Producers Association of India
- Bhoruka Overseas - Indonesia
- Africa Commodities Group - South Africa
- Commonwealth Bank - Australia
- Eastern Energy - Thailand
- Posco Energy - South Korea
- Bhatia International Limited - India
- Larsen & Toubro Limited - India
- Xindia Steels Limited - India
- MS Steel International - UAE
- Aditya Birla Group - India
- IHS Mccloskey Coal Group - USA
- Mjunction Services Limited - India
- Orica Australia Pty. Ltd.
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Makarim & Taira - Indonesia
- Romanian Commodities Exchange
- Formosa Plastics Group - Taiwan
- Cigading International Bulk Terminal - Indonesia
- Jaiprakash Power Ventures ltd
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