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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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Tuesday, 14 November 23
CHINA'S BELT AND ROAD INITIATIVE TURNS AWAY FROM COAL - WOOD MACKENZIE
Ambitious, contentious and big spending, China’s Belt and Road Initiative (BRI) is 10 years old. In that time, China has splashed more than U ...
Friday, 10 November 23
THE COMMODITIES FEED: OIL UNDER PRESSURE - ING
Energy – Brent plummets
The oil market came under significant pressure yesterday. ICE Brent settled 4.19% lower on the day and ...
Friday, 10 November 23
COAL USE AT U.S. POWER PLANTS CONTINUES DOWNWARD SPIRAL; FULL IMPACT ON MINES TO BE FELT IN 2024 - IEEFA
This year, the use of coal by the U.S.’s power producers has been so anemic that the fuel has not achieved a 20% market share in any month so ...
Friday, 10 November 23
INDIA: NATIONAL COAL INDEX RISES 3.83 POINTS IN SEPTEMBER AMID HIGHER DEMAND - LIVEMINT
The National Coal Index (NCI) rose 3.83 points to 143.91 in September amid growing demand for coal.
The union coal ministry on Tuesd ...
Thursday, 09 November 23
WE'RE PRODUCING TOO MUCH COAL, OIL AND GAS, REPORT SAYS - WSJ
World leaders pledged in 2015 to reduce emissions in a combined effort to limit climate change.
Now they are stepping up production ...
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- Thai Mozambique Logistica
- Malabar Cements Ltd - India
- Tamil Nadu electricity Board
- Directorate Of Revenue Intelligence - India
- Global Green Power PLC Corporation, Philippines
- Mjunction Services Limited - India
- Standard Chartered Bank - UAE
- Central Electricity Authority - India
- Pipit Mutiara Jaya. PT, Indonesia
- PNOC Exploration Corporation - Philippines
- Aboitiz Power Corporation - Philippines
- Pendopo Energi Batubara - Indonesia
- Australian Commodity Traders Exchange
- SN Aboitiz Power Inc, Philippines
- GMR Energy Limited - India
- MS Steel International - UAE
- Siam City Cement PLC, Thailand
- Gujarat Sidhee Cement - India
- Kideco Jaya Agung - Indonesia
- Mercator Lines Limited - India
- Antam Resourcindo - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Bulk Trading Sa - Switzerland
- Electricity Authority, New Zealand
- Orica Mining Services - Indonesia
- Savvy Resources Ltd - HongKong
- Trasteel International SA, Italy
- Intertek Mineral Services - Indonesia
- South Luzon Thermal Energy Corporation
- SMG Consultants - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Jindal Steel & Power Ltd - India
- Marubeni Corporation - India
- TNB Fuel Sdn Bhd - Malaysia
- Edison Trading Spa - Italy
- SMC Global Power, Philippines
- Ambuja Cements Ltd - India
- Globalindo Alam Lestari - Indonesia
- Attock Cement Pakistan Limited
- Cement Manufacturers Association - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Price Waterhouse Coopers - Russia
- Sakthi Sugars Limited - India
- IEA Clean Coal Centre - UK
- Aditya Birla Group - India
- San Jose City I Power Corp, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Australian Coal Association
- Bukit Asam (Persero) Tbk - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Altura Mining Limited, Indonesia
- Kartika Selabumi Mining - Indonesia
- Mintek Dendrill Indonesia
- International Coal Ventures Pvt Ltd - India
- Indian Oil Corporation Limited
- Metalloyd Limited - United Kingdom
- Bharathi Cement Corporation - India
- Bhushan Steel Limited - India
- Ind-Barath Power Infra Limited - India
- Chettinad Cement Corporation Ltd - India
- Bangladesh Power Developement Board
- Ministry of Finance - Indonesia
- The University of Queensland
- New Zealand Coal & Carbon
- Bhatia International Limited - India
- Sical Logistics Limited - India
- Economic Council, Georgia
- Grasim Industreis Ltd - India
- Heidelberg Cement - Germany
- Rio Tinto Coal - Australia
- Romanian Commodities Exchange
- Medco Energi Mining Internasional
- Formosa Plastics Group - Taiwan
- Bukit Makmur.PT - Indonesia
- Larsen & Toubro Limited - India
- Indonesian Coal Mining Association
- Kapuas Tunggal Persada - Indonesia
- PowerSource Philippines DevCo
- Parry Sugars Refinery, India
- Toyota Tsusho Corporation, Japan
- Coalindo Energy - Indonesia
- Siam City Cement - Thailand
- McConnell Dowell - Australia
- Dalmia Cement Bharat India
- Straits Asia Resources Limited - Singapore
- ASAPP Information Group - India
- Meenaskhi Energy Private Limited - India
- Singapore Mercantile Exchange
- Offshore Bulk Terminal Pte Ltd, Singapore
- Simpson Spence & Young - Indonesia
- Riau Bara Harum - Indonesia
- Karaikal Port Pvt Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Wood Mackenzie - Singapore
- Global Business Power Corporation, Philippines
- Kumho Petrochemical, South Korea
- Billiton Holdings Pty Ltd - Australia
- Indika Energy - Indonesia
- Oldendorff Carriers - Singapore
- Kalimantan Lumbung Energi - Indonesia
- White Energy Company Limited
- Krishnapatnam Port Company Ltd. - India
- Vizag Seaport Private Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Commonwealth Bank - Australia
- IHS Mccloskey Coal Group - USA
- Central Java Power - Indonesia
- Merrill Lynch Commodities Europe
- Baramulti Group, Indonesia
- Semirara Mining Corp, Philippines
- Minerals Council of Australia
- Sojitz Corporation - Japan
- Coastal Gujarat Power Limited - India
- Anglo American - United Kingdom
- Deloitte Consulting - India
- Thiess Contractors Indonesia
- Timah Investasi Mineral - Indoneisa
- Mercuria Energy - Indonesia
- Borneo Indobara - Indonesia
- Essar Steel Hazira Ltd - India
- European Bulk Services B.V. - Netherlands
- Banpu Public Company Limited - Thailand
- Sinarmas Energy and Mining - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Gujarat Electricity Regulatory Commission - India
- GAC Shipping (India) Pvt Ltd
- Gujarat Mineral Development Corp Ltd - India
- Chamber of Mines of South Africa
- Global Coal Blending Company Limited - Australia
- Asmin Koalindo Tuhup - Indonesia
- Energy Development Corp, Philippines
- OPG Power Generation Pvt Ltd - India
- Bayan Resources Tbk. - Indonesia
- VISA Power Limited - India
- LBH Netherlands Bv - Netherlands
- Xindia Steels Limited - India
- Alfred C Toepfer International GmbH - Germany
- Eastern Coal Council - USA
- Agrawal Coal Company - India
- Bhoruka Overseas - Indonesia
- Carbofer General Trading SA - India
- Parliament of New Zealand
- Ministry of Mines - Canada
- Ceylon Electricity Board - Sri Lanka
- TeaM Sual Corporation - Philippines
- Africa Commodities Group - South Africa
- GN Power Mariveles Coal Plant, Philippines
- Salva Resources Pvt Ltd - India
- Electricity Generating Authority of Thailand
- Kepco SPC Power Corporation, Philippines
- Binh Thuan Hamico - Vietnam
- Coal and Oil Company - UAE
- Planning Commission, India
- Madhucon Powers Ltd - India
- Port Waratah Coal Services - Australia
- Barasentosa Lestari - Indonesia
- Ministry of Transport, Egypt
- Power Finance Corporation Ltd., India
- Wilmar Investment Holdings
- AsiaOL BioFuels Corp., Philippines
- Latin American Coal - Colombia
- Star Paper Mills Limited - India
- The State Trading Corporation of India Ltd
- Iligan Light & Power Inc, Philippines
- Holcim Trading Pte Ltd - Singapore
- Manunggal Multi Energi - Indonesia
- Kaltim Prima Coal - Indonesia
- Orica Australia Pty. Ltd.
- Miang Besar Coal Terminal - Indonesia
- CNBM International Corporation - China
- Bahari Cakrawala Sebuku - Indonesia
- Therma Luzon, Inc, Philippines
- Interocean Group of Companies - India
- Energy Link Ltd, New Zealand
- PetroVietnam Power Coal Import and Supply Company
- Semirara Mining and Power Corporation, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Petron Corporation, Philippines
- Sarangani Energy Corporation, Philippines
- The Treasury - Australian Government
- Sindya Power Generating Company Private Ltd
- Eastern Energy - Thailand
- Indian Energy Exchange, India
- Sree Jayajothi Cements Limited - India
- Georgia Ports Authority, United States
- Jaiprakash Power Ventures ltd
- Indogreen Group - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Videocon Industries ltd - India
- London Commodity Brokers - England
- Uttam Galva Steels Limited - India
- Samtan Co., Ltd - South Korea
- CIMB Investment Bank - Malaysia
- Vedanta Resources Plc - India
- Maharashtra Electricity Regulatory Commission - India
- Renaissance Capital - South Africa
- GVK Power & Infra Limited - India
- Meralco Power Generation, Philippines
- Maheswari Brothers Coal Limited - India
- Tata Chemicals Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Posco Energy - South Korea
- Kobexindo Tractors - Indoneisa
- Bukit Baiduri Energy - Indonesia
- Independent Power Producers Association of India
- India Bulls Power Limited - India
- Goldman Sachs - Singapore
- Makarim & Taira - Indonesia
- Lanco Infratech Ltd - India
- ICICI Bank Limited - India
- Indo Tambangraya Megah - Indonesia
- PTC India Limited - India
- Kohat Cement Company Ltd. - Pakistan
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