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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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Monday, 17 July 23
APPROVED AMMONIA-FUELED CONTAINERSHIP - BENEFITS AND RISKS: REED SMITH
Following the news in Offshore Energy that Korea Maritime Consultants has secured approval in principle from the American Bureau of Shipping for it ...
Friday, 14 July 23
CLEAN COAL USE KEY TO DEEP CUTS IN EMISSIONS, STABLE ELECTRICITY SUPPLY - CHINA DAILY
China must push for the clean use of coal and step up integration of the dirty fuel with carbon capture, utilization and storage to achieve sustain ...
Thursday, 13 July 23
VIETNAM'S COAL EMISSIONS PRIMED FOR SURGE AFTER IMPORTS JUMP - REUTERS
Vietnam’s thermal power emissions are primed for a steep climb this summer after the country’s imports of thermal coal soared to their ...
Monday, 26 June 23
COAL PRODUCTION AND CONSUMPTION UP IN 2022 - EUROSTAT
In 2022, EU coal production and consumption continued to increase, reaching 349 million tonnes (+5% compared with the previous year) and 454 millio ...
Wednesday, 21 June 23
QATAR STRIKES SECOND BIG LNG SUPPLY DEAL WITH CHINA - REUTERS
Qatar on Tuesday secured its second large gas supply deal with a Chinese state-controlled company in less than a year, putting Asia clearly ahead i ...
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- VISA Power Limited - India
- London Commodity Brokers - England
- Petrochimia International Co. Ltd.- Taiwan
- Parliament of New Zealand
- Xindia Steels Limited - India
- Marubeni Corporation - India
- Altura Mining Limited, Indonesia
- Sarangani Energy Corporation, Philippines
- Carbofer General Trading SA - India
- PNOC Exploration Corporation - Philippines
- Meenaskhi Energy Private Limited - India
- Baramulti Group, Indonesia
- Australian Commodity Traders Exchange
- Kaltim Prima Coal - Indonesia
- New Zealand Coal & Carbon
- Wood Mackenzie - Singapore
- Energy Link Ltd, New Zealand
- Timah Investasi Mineral - Indoneisa
- Gujarat Sidhee Cement - India
- Chamber of Mines of South Africa
- Kartika Selabumi Mining - Indonesia
- Price Waterhouse Coopers - Russia
- Electricity Generating Authority of Thailand
- Thai Mozambique Logistica
- Miang Besar Coal Terminal - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Independent Power Producers Association of India
- Uttam Galva Steels Limited - India
- Vedanta Resources Plc - India
- Merrill Lynch Commodities Europe
- PTC India Limited - India
- Power Finance Corporation Ltd., India
- Directorate General of MIneral and Coal - Indonesia
- Vizag Seaport Private Limited - India
- Ministry of Mines - Canada
- Pendopo Energi Batubara - Indonesia
- Ambuja Cements Ltd - India
- Mercuria Energy - Indonesia
- Simpson Spence & Young - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Electricity Authority, New Zealand
- Commonwealth Bank - Australia
- SMC Global Power, Philippines
- Semirara Mining and Power Corporation, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Maheswari Brothers Coal Limited - India
- Rashtriya Ispat Nigam Limited - India
- Rio Tinto Coal - Australia
- Romanian Commodities Exchange
- Bukit Asam (Persero) Tbk - Indonesia
- Indogreen Group - Indonesia
- CNBM International Corporation - China
- Coal and Oil Company - UAE
- Chettinad Cement Corporation Ltd - India
- Indian Energy Exchange, India
- SN Aboitiz Power Inc, Philippines
- Latin American Coal - Colombia
- IEA Clean Coal Centre - UK
- Medco Energi Mining Internasional
- Videocon Industries ltd - India
- Therma Luzon, Inc, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- MS Steel International - UAE
- Bhatia International Limited - India
- Malabar Cements Ltd - India
- Kepco SPC Power Corporation, Philippines
- Samtan Co., Ltd - South Korea
- Singapore Mercantile Exchange
- Kalimantan Lumbung Energi - Indonesia
- Cement Manufacturers Association - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bayan Resources Tbk. - Indonesia
- Standard Chartered Bank - UAE
- Jaiprakash Power Ventures ltd
- PetroVietnam Power Coal Import and Supply Company
- Coastal Gujarat Power Limited - India
- Economic Council, Georgia
- Ceylon Electricity Board - Sri Lanka
- ICICI Bank Limited - India
- Kapuas Tunggal Persada - Indonesia
- Africa Commodities Group - South Africa
- Pipit Mutiara Jaya. PT, Indonesia
- India Bulls Power Limited - India
- Global Business Power Corporation, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Siam City Cement PLC, Thailand
- Kumho Petrochemical, South Korea
- Borneo Indobara - Indonesia
- Minerals Council of Australia
- Trasteel International SA, Italy
- The Treasury - Australian Government
- Sical Logistics Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Parry Sugars Refinery, India
- Port Waratah Coal Services - Australia
- Grasim Industreis Ltd - India
- Dalmia Cement Bharat India
- IHS Mccloskey Coal Group - USA
- Bank of Tokyo Mitsubishi UFJ Ltd
- Toyota Tsusho Corporation, Japan
- Banpu Public Company Limited - Thailand
- Madhucon Powers Ltd - India
- Planning Commission, India
- Tata Chemicals Ltd - India
- Ministry of Finance - Indonesia
- Kideco Jaya Agung - Indonesia
- Global Coal Blending Company Limited - Australia
- Bhushan Steel Limited - India
- Bharathi Cement Corporation - India
- Tamil Nadu electricity Board
- Cigading International Bulk Terminal - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Directorate Of Revenue Intelligence - India
- Indo Tambangraya Megah - Indonesia
- Bukit Makmur.PT - Indonesia
- Metalloyd Limited - United Kingdom
- Barasentosa Lestari - Indonesia
- Formosa Plastics Group - Taiwan
- Iligan Light & Power Inc, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Thiess Contractors Indonesia
- Binh Thuan Hamico - Vietnam
- Billiton Holdings Pty Ltd - Australia
- Vijayanagar Sugar Pvt Ltd - India
- Petron Corporation, Philippines
- Lanco Infratech Ltd - India
- Mercator Lines Limited - India
- Indonesian Coal Mining Association
- Globalindo Alam Lestari - Indonesia
- White Energy Company Limited
- Meralco Power Generation, Philippines
- Salva Resources Pvt Ltd - India
- Aboitiz Power Corporation - Philippines
- Interocean Group of Companies - India
- Gujarat Electricity Regulatory Commission - India
- Eastern Coal Council - USA
- SMG Consultants - Indonesia
- Intertek Mineral Services - Indonesia
- LBH Netherlands Bv - Netherlands
- Antam Resourcindo - Indonesia
- Sojitz Corporation - Japan
- Wilmar Investment Holdings
- Agrawal Coal Company - India
- Sakthi Sugars Limited - India
- Siam City Cement - Thailand
- Karaikal Port Pvt Ltd - India
- Central Java Power - Indonesia
- Savvy Resources Ltd - HongKong
- OPG Power Generation Pvt Ltd - India
- McConnell Dowell - Australia
- Gujarat Mineral Development Corp Ltd - India
- Larsen & Toubro Limited - India
- Orica Mining Services - Indonesia
- TeaM Sual Corporation - Philippines
- Orica Australia Pty. Ltd.
- Ministry of Transport, Egypt
- South Luzon Thermal Energy Corporation
- Riau Bara Harum - Indonesia
- Bulk Trading Sa - Switzerland
- Bangladesh Power Developement Board
- TNB Fuel Sdn Bhd - Malaysia
- Ind-Barath Power Infra Limited - India
- Manunggal Multi Energi - Indonesia
- Aditya Birla Group - India
- GN Power Mariveles Coal Plant, Philippines
- Eastern Energy - Thailand
- Sinarmas Energy and Mining - Indonesia
- Indika Energy - Indonesia
- Mintek Dendrill Indonesia
- Central Electricity Authority - India
- Mjunction Services Limited - India
- Makarim & Taira - Indonesia
- Anglo American - United Kingdom
- Attock Cement Pakistan Limited
- AsiaOL BioFuels Corp., Philippines
- Star Paper Mills Limited - India
- Renaissance Capital - South Africa
- Deloitte Consulting - India
- International Coal Ventures Pvt Ltd - India
- Georgia Ports Authority, United States
- GVK Power & Infra Limited - India
- Kobexindo Tractors - Indoneisa
- Energy Development Corp, Philippines
- San Jose City I Power Corp, Philippines
- The University of Queensland
- Essar Steel Hazira Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Goldman Sachs - Singapore
- Australian Coal Association
- Jindal Steel & Power Ltd - India
- Posco Energy - South Korea
- Holcim Trading Pte Ltd - Singapore
- ASAPP Information Group - India
- Sree Jayajothi Cements Limited - India
- Global Green Power PLC Corporation, Philippines
- Edison Trading Spa - Italy
- Coalindo Energy - Indonesia
- Bhoruka Overseas - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bukit Baiduri Energy - Indonesia
- Heidelberg Cement - Germany
- Oldendorff Carriers - Singapore
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Semirara Mining Corp, Philippines
- CIMB Investment Bank - Malaysia
- The State Trading Corporation of India Ltd
- Alfred C Toepfer International GmbH - Germany
- Bahari Cakrawala Sebuku - Indonesia
- GAC Shipping (India) Pvt Ltd
- GMR Energy Limited - India
- Indian Oil Corporation Limited
- Sindya Power Generating Company Private Ltd
- European Bulk Services B.V. - Netherlands
- PowerSource Philippines DevCo
- Asmin Koalindo Tuhup - Indonesia
- Straits Asia Resources Limited - Singapore
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