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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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Wednesday, 21 June 23
CHINA'S MAY COAL IMPORTS FROM AUSTRALIA RECOVER TO PRE-BAN LEVELS - REUTERS
Australian coal sales to China increased in May, as trade resumed between them even as overall coal demand weakened against an uncertain macroecono ...
Monday, 19 June 23
DROUGHT-DEPLETED HYDROPOWER DRIVES CHINA TO TURN TO COAL - REUTERS
China has leant hard on coal-fired power plants as well as wind and solar generators to make up for a shortfall in hydroelectric generation as a re ...
Monday, 19 June 23
CHINA COAL OUTPUT UP 4.2 PCT IN MAY - XINHUA
China’s raw coal output posted steady growth in May, official data showed.
The country produced 390 million tonnes of raw coal ...
Wednesday, 24 May 23
AMMONIA-FUELLED BULK CARRIERS WITHIN FIVE YEARS - BALTIC EXCHANGE
Within five years, ships powered by clean ammonia could be a feature on the iron ore trade routes between West Australia and East Asia.
A study ...
Tuesday, 23 May 23
CHINA'S APRIL COAL OUTPUT LEAPS 11% ON YEAR, BUT DEMAND DOWNTURN LOOMS - REUTERS
China’s daily coal output in April jumped 11% from the same month a year earlier, boosted by Beijing’s order to increase supply to ensu ...
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- Global Green Power PLC Corporation, Philippines
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- Latin American Coal - Colombia
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- Energy Link Ltd, New Zealand
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- Thiess Contractors Indonesia
- Timah Investasi Mineral - Indoneisa
- Indian Energy Exchange, India
- The State Trading Corporation of India Ltd
- Dalmia Cement Bharat India
- Central Electricity Authority - India
- Cement Manufacturers Association - India
- Australian Coal Association
- OPG Power Generation Pvt Ltd - India
- Commonwealth Bank - Australia
- TNB Fuel Sdn Bhd - Malaysia
- New Zealand Coal & Carbon
- European Bulk Services B.V. - Netherlands
- Siam City Cement - Thailand
- Africa Commodities Group - South Africa
- Xindia Steels Limited - India
- SN Aboitiz Power Inc, Philippines
- Indika Energy - Indonesia
- PTC India Limited - India
- Globalindo Alam Lestari - Indonesia
- Indo Tambangraya Megah - Indonesia
- Bhatia International Limited - India
- Eastern Coal Council - USA
- LBH Netherlands Bv - Netherlands
- Bahari Cakrawala Sebuku - Indonesia
- Chamber of Mines of South Africa
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- Economic Council, Georgia
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- Semirara Mining and Power Corporation, Philippines
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- Interocean Group of Companies - India
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- Mercuria Energy - Indonesia
- Tata Chemicals Ltd - India
- Parliament of New Zealand
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- Thai Mozambique Logistica
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- The University of Queensland
- Petrochimia International Co. Ltd.- Taiwan
- Mercator Lines Limited - India
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- White Energy Company Limited
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- India Bulls Power Limited - India
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- Madhucon Powers Ltd - India
- South Luzon Thermal Energy Corporation
- IHS Mccloskey Coal Group - USA
- Merrill Lynch Commodities Europe
- Global Coal Blending Company Limited - Australia
- Gujarat Mineral Development Corp Ltd - India
- London Commodity Brokers - England
- Ceylon Electricity Board - Sri Lanka
- Straits Asia Resources Limited - Singapore
- Port Waratah Coal Services - Australia
- Bharathi Cement Corporation - India
- Karaikal Port Pvt Ltd - India
- Riau Bara Harum - Indonesia
- GAC Shipping (India) Pvt Ltd
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- Ministry of Finance - Indonesia
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- International Coal Ventures Pvt Ltd - India
- Bulk Trading Sa - Switzerland
- Kartika Selabumi Mining - Indonesia
- SMC Global Power, Philippines
- Vedanta Resources Plc - India
- Global Business Power Corporation, Philippines
- Goldman Sachs - Singapore
- PNOC Exploration Corporation - Philippines
- Parry Sugars Refinery, India
- Malabar Cements Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Edison Trading Spa - Italy
- Deloitte Consulting - India
- Gujarat Electricity Regulatory Commission - India
- Offshore Bulk Terminal Pte Ltd, Singapore
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- Electricity Generating Authority of Thailand
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- Bayan Resources Tbk. - Indonesia
- Chettinad Cement Corporation Ltd - India
- Banpu Public Company Limited - Thailand
- Standard Chartered Bank - UAE
- Orica Australia Pty. Ltd.
- Directorate Of Revenue Intelligence - India
- Leighton Contractors Pty Ltd - Australia
- The Treasury - Australian Government
- Minerals Council of Australia
- Ministry of Mines - Canada
- Maheswari Brothers Coal Limited - India
- Planning Commission, India
- Trasteel International SA, Italy
- Holcim Trading Pte Ltd - Singapore
- ICICI Bank Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Tamil Nadu electricity Board
- Salva Resources Pvt Ltd - India
- Aditya Birla Group - India
- Oldendorff Carriers - Singapore
- Bangladesh Power Developement Board
- MS Steel International - UAE
- Bank of Tokyo Mitsubishi UFJ Ltd
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- GMR Energy Limited - India
- Coal and Oil Company - UAE
- Indonesian Coal Mining Association
- Sree Jayajothi Cements Limited - India
- Price Waterhouse Coopers - Russia
- Jindal Steel & Power Ltd - India
- Binh Thuan Hamico - Vietnam
- Iligan Light & Power Inc, Philippines
- SMG Consultants - Indonesia
- PowerSource Philippines DevCo
- Formosa Plastics Group - Taiwan
- Meenaskhi Energy Private Limited - India
- Ind-Barath Power Infra Limited - India
- Altura Mining Limited, Indonesia
- Agrawal Coal Company - India
- Neyveli Lignite Corporation Ltd, - India
- Toyota Tsusho Corporation, Japan
- PetroVietnam Power Coal Import and Supply Company
- Cigading International Bulk Terminal - Indonesia
- Borneo Indobara - Indonesia
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- Dong Bac Coal Mineral Investment Coporation - Vietnam
- TeaM Sual Corporation - Philippines
- Kaltim Prima Coal - Indonesia
- Wood Mackenzie - Singapore
- Grasim Industreis Ltd - India
- Medco Energi Mining Internasional
- Gujarat Sidhee Cement - India
- Georgia Ports Authority, United States
- Bukit Makmur.PT - Indonesia
- Australian Commodity Traders Exchange
- Maharashtra Electricity Regulatory Commission - India
- Kideco Jaya Agung - Indonesia
- Bhushan Steel Limited - India
- Kepco SPC Power Corporation, Philippines
- Eastern Energy - Thailand
- Directorate General of MIneral and Coal - Indonesia
- Orica Mining Services - Indonesia
- Marubeni Corporation - India
- Billiton Holdings Pty Ltd - Australia
- Ministry of Transport, Egypt
- Indogreen Group - Indonesia
- Makarim & Taira - Indonesia
- Lanco Infratech Ltd - India
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- Sakthi Sugars Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Power Finance Corporation Ltd., India
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- Antam Resourcindo - Indonesia
- Wilmar Investment Holdings
- San Jose City I Power Corp, Philippines
- Samtan Co., Ltd - South Korea
- GVK Power & Infra Limited - India
- Baramulti Group, Indonesia
- Krishnapatnam Port Company Ltd. - India
- Attock Cement Pakistan Limited
- IEA Clean Coal Centre - UK
- Pipit Mutiara Jaya. PT, Indonesia
- Sojitz Corporation - Japan
- Romanian Commodities Exchange
- Therma Luzon, Inc, Philippines
- Anglo American - United Kingdom
- Coalindo Energy - Indonesia
- Siam City Cement PLC, Thailand
- Asmin Koalindo Tuhup - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Kapuas Tunggal Persada - Indonesia
- Metalloyd Limited - United Kingdom
- Central Java Power - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Singapore Mercantile Exchange
- Kalimantan Lumbung Energi - Indonesia
- Mintek Dendrill Indonesia
- VISA Power Limited - India
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- Intertek Mineral Services - Indonesia
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