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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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Sunday, 10 September 23
CHINA AUGUST COAL IMPORTS OF 44.3 MLN T HIT RECORD - REUTERS
China, the world’s top coal consumer, imported 44.3 million metric tons of the fuel last month, customs data showed, the highest amount in an ...
Tuesday, 22 August 23
CHINA'S COAL PRODUCTION LOGS STEADY GROWTH IN JANUARY-JULY: XINHUA
China’s output of raw coal went up 3.6 percent year on year in the first seven months of this year, official data showed.
The ...
Sunday, 13 August 23
THE COMMODITIES FEED: LNG SUPPLY RISKS LINGER - ING
Energy – OPEC sees deficit over remainder of 2023
Oil prices came under some pressure yesterday with ICE Brent settling a litt ...
Wednesday, 09 August 23
COAL TRADE TO RETURN TO 2019 LEVELS - BALTIC EXCHANGE
The International Energy Agency’s mid-year Coal Market Update for 2023 brings both positive and concerning news for the global coal industry. ...
Sunday, 23 July 23
ANALYSIS-INDIA'S COAL MINING BET STUMBLES AS WARY BANKS WEIGH RISING RISKS - REUTERS
India’s drive to ramp up coal output to meet growing energy demand is faltering due to banks’ reluctance to finance newly auctioned min ...
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- Thiess Contractors Indonesia
- Xindia Steels Limited - India
- Power Finance Corporation Ltd., India
- Oldendorff Carriers - Singapore
- Attock Cement Pakistan Limited
- Chettinad Cement Corporation Ltd - India
- Aboitiz Power Corporation - Philippines
- Kepco SPC Power Corporation, Philippines
- Directorate Of Revenue Intelligence - India
- Holcim Trading Pte Ltd - Singapore
- Bank of Tokyo Mitsubishi UFJ Ltd
- Gujarat Sidhee Cement - India
- Therma Luzon, Inc, Philippines
- Intertek Mineral Services - Indonesia
- Africa Commodities Group - South Africa
- SMC Global Power, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Sakthi Sugars Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Posco Energy - South Korea
- Global Business Power Corporation, Philippines
- Bharathi Cement Corporation - India
- New Zealand Coal & Carbon
- Bukit Asam (Persero) Tbk - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Offshore Bulk Terminal Pte Ltd, Singapore
- Essar Steel Hazira Ltd - India
- Indonesian Coal Mining Association
- Bangladesh Power Developement Board
- Bhushan Steel Limited - India
- Price Waterhouse Coopers - Russia
- Carbofer General Trading SA - India
- Central Java Power - Indonesia
- Marubeni Corporation - India
- Malabar Cements Ltd - India
- Indian Oil Corporation Limited
- Coal and Oil Company - UAE
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- GAC Shipping (India) Pvt Ltd
- Medco Energi Mining Internasional
- Bukit Makmur.PT - Indonesia
- Bhatia International Limited - India
- London Commodity Brokers - England
- Gujarat Electricity Regulatory Commission - India
- Electricity Authority, New Zealand
- Kartika Selabumi Mining - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Global Green Power PLC Corporation, Philippines
- Madhucon Powers Ltd - India
- Mercuria Energy - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Bulk Trading Sa - Switzerland
- Sindya Power Generating Company Private Ltd
- Samtan Co., Ltd - South Korea
- Jindal Steel & Power Ltd - India
- Borneo Indobara - Indonesia
- LBH Netherlands Bv - Netherlands
- Independent Power Producers Association of India
- Wilmar Investment Holdings
- Metalloyd Limited - United Kingdom
- Globalindo Alam Lestari - Indonesia
- The University of Queensland
- PTC India Limited - India
- Timah Investasi Mineral - Indoneisa
- Jaiprakash Power Ventures ltd
- Sarangani Energy Corporation, Philippines
- Orica Mining Services - Indonesia
- Indika Energy - Indonesia
- Bukit Baiduri Energy - Indonesia
- Energy Development Corp, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Latin American Coal - Colombia
- White Energy Company Limited
- Savvy Resources Ltd - HongKong
- Vizag Seaport Private Limited - India
- Kaltim Prima Coal - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Goldman Sachs - Singapore
- Toyota Tsusho Corporation, Japan
- Deloitte Consulting - India
- VISA Power Limited - India
- Rashtriya Ispat Nigam Limited - India
- SN Aboitiz Power Inc, Philippines
- Vedanta Resources Plc - India
- Tamil Nadu electricity Board
- CNBM International Corporation - China
- Merrill Lynch Commodities Europe
- Straits Asia Resources Limited - Singapore
- Edison Trading Spa - Italy
- Trasteel International SA, Italy
- Kalimantan Lumbung Energi - Indonesia
- CIMB Investment Bank - Malaysia
- Maheswari Brothers Coal Limited - India
- GMR Energy Limited - India
- Indian Energy Exchange, India
- Maharashtra Electricity Regulatory Commission - India
- Bayan Resources Tbk. - Indonesia
- ICICI Bank Limited - India
- Star Paper Mills Limited - India
- Banpu Public Company Limited - Thailand
- Karaikal Port Pvt Ltd - India
- PNOC Exploration Corporation - Philippines
- Formosa Plastics Group - Taiwan
- Ministry of Mines - Canada
- Wood Mackenzie - Singapore
- Riau Bara Harum - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Meenaskhi Energy Private Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Antam Resourcindo - Indonesia
- McConnell Dowell - Australia
- Binh Thuan Hamico - Vietnam
- Uttam Galva Steels Limited - India
- European Bulk Services B.V. - Netherlands
- Makarim & Taira - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Port Waratah Coal Services - Australia
- Videocon Industries ltd - India
- Eastern Coal Council - USA
- Asia Pacific Energy Resources Ventures Inc, Philippines
- The Treasury - Australian Government
- Manunggal Multi Energi - Indonesia
- Bhoruka Overseas - Indonesia
- Larsen & Toubro Limited - India
- Pendopo Energi Batubara - Indonesia
- Georgia Ports Authority, United States
- Barasentosa Lestari - Indonesia
- Romanian Commodities Exchange
- Mercator Lines Limited - India
- Kideco Jaya Agung - Indonesia
- Commonwealth Bank - Australia
- Parliament of New Zealand
- Vijayanagar Sugar Pvt Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Ambuja Cements Ltd - India
- Simpson Spence & Young - Indonesia
- Agrawal Coal Company - India
- Tata Chemicals Ltd - India
- Siam City Cement - Thailand
- Leighton Contractors Pty Ltd - Australia
- Krishnapatnam Port Company Ltd. - India
- Kumho Petrochemical, South Korea
- Baramulti Group, Indonesia
- Australian Coal Association
- Jorong Barutama Greston.PT - Indonesia
- Ceylon Electricity Board - Sri Lanka
- IHS Mccloskey Coal Group - USA
- International Coal Ventures Pvt Ltd - India
- Aditya Birla Group - India
- Alfred C Toepfer International GmbH - Germany
- Sical Logistics Limited - India
- Indogreen Group - Indonesia
- Interocean Group of Companies - India
- Singapore Mercantile Exchange
- Mintek Dendrill Indonesia
- GVK Power & Infra Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Ministry of Finance - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Sojitz Corporation - Japan
- Central Electricity Authority - India
- PowerSource Philippines DevCo
- Anglo American - United Kingdom
- Orica Australia Pty. Ltd.
- Rio Tinto Coal - Australia
- Coastal Gujarat Power Limited - India
- Altura Mining Limited, Indonesia
- Chamber of Mines of South Africa
- Kohat Cement Company Ltd. - Pakistan
- OPG Power Generation Pvt Ltd - India
- Thai Mozambique Logistica
- Cement Manufacturers Association - India
- Ministry of Transport, Egypt
- GN Power Mariveles Coal Plant, Philippines
- Heidelberg Cement - Germany
- Grasim Industreis Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Iligan Light & Power Inc, Philippines
- Dalmia Cement Bharat India
- Neyveli Lignite Corporation Ltd, - India
- Sinarmas Energy and Mining - Indonesia
- South Luzon Thermal Energy Corporation
- Lanco Infratech Ltd - India
- Planning Commission, India
- Sree Jayajothi Cements Limited - India
- TeaM Sual Corporation - Philippines
- Meralco Power Generation, Philippines
- Renaissance Capital - South Africa
- Mjunction Services Limited - India
- Australian Commodity Traders Exchange
- Kobexindo Tractors - Indoneisa
- Semirara Mining Corp, Philippines
- AsiaOL BioFuels Corp., Philippines
- Petron Corporation, Philippines
- SMG Consultants - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Parry Sugars Refinery, India
- ASAPP Information Group - India
- The State Trading Corporation of India Ltd
- Indo Tambangraya Megah - Indonesia
- San Jose City I Power Corp, Philippines
- Standard Chartered Bank - UAE
- Siam City Cement PLC, Thailand
- Economic Council, Georgia
- Energy Link Ltd, New Zealand
- Semirara Mining and Power Corporation, Philippines
- MS Steel International - UAE
- IEA Clean Coal Centre - UK
- Global Coal Blending Company Limited - Australia
- Salva Resources Pvt Ltd - India
- Coalindo Energy - Indonesia
- Ind-Barath Power Infra Limited - India
- India Bulls Power Limited - India
- Minerals Council of Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Eastern Energy - Thailand
- Electricity Generating Authority of Thailand
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