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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, 16 April 23
CHINA JUGGLES FOUR MAJOR ECONOMIC CHANGES IN 2023 - WOOD MACKENZIE
Change is afoot in China. Economic growth is slowing, while rising political tensions between China and the US, coupled with global supply chain re ...
Sunday, 16 April 23
CHINA'S MARCH COAL IMPORTS JUMP TO 3-YEAR HIGH - REUTERS
China’s coal imports surged in March to their highest in any month over the past three years as utilities increased purchases on expectations ...
Sunday, 16 April 23
OPEC KEEPS WORLD OIL DEMAND GROWTH OUTLOOK UNCHANGED
The OPEC Reference Basket (ORB) declined in March by $3.43, or 4.2%, m-o-m to average $78.45/b. The ICE Brent first-month contract fell by $4.33, o ...
Sunday, 16 April 23
CHEAPER SPOT LNG PRICES TEMPT SOME ASIAN BUYERS AMID SUPPLY GAINS - REUTERS
Cheaper spot prices for liquefied natural gas (LNG) are luring price-sensitive buyers back in Asia, with China and India recording rising imports i ...
Tuesday, 11 April 23
COAL USE CLIMBS WORLDWIDE DESPITE PROMISES TO SLASH IT - AAP
The burning of coal for electricity, cement, steel and other uses went up in 2022 despite global promises to phase down the fuel that is the bigges ...
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- IEA Clean Coal Centre - UK
- Semirara Mining and Power Corporation, Philippines
- LBH Netherlands Bv - Netherlands
- Deloitte Consulting - India
- Manunggal Multi Energi - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Bhatia International Limited - India
- Aditya Birla Group - India
- PetroVietnam Power Coal Import and Supply Company
- Singapore Mercantile Exchange
- Altura Mining Limited, Indonesia
- Heidelberg Cement - Germany
- Port Waratah Coal Services - Australia
- Baramulti Group, Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Cement Manufacturers Association - India
- Metalloyd Limited - United Kingdom
- VISA Power Limited - India
- GMR Energy Limited - India
- Sical Logistics Limited - India
- Sindya Power Generating Company Private Ltd
- Toyota Tsusho Corporation, Japan
- Kideco Jaya Agung - Indonesia
- Kepco SPC Power Corporation, Philippines
- Thai Mozambique Logistica
- Pipit Mutiara Jaya. PT, Indonesia
- Wilmar Investment Holdings
- Gujarat Electricity Regulatory Commission - India
- Videocon Industries ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Intertek Mineral Services - Indonesia
- Trasteel International SA, Italy
- Barasentosa Lestari - Indonesia
- Ceylon Electricity Board - Sri Lanka
- London Commodity Brokers - England
- Rashtriya Ispat Nigam Limited - India
- Ambuja Cements Ltd - India
- South Luzon Thermal Energy Corporation
- Planning Commission, India
- GVK Power & Infra Limited - India
- Ministry of Mines - Canada
- Commonwealth Bank - Australia
- Siam City Cement PLC, Thailand
- SN Aboitiz Power Inc, Philippines
- Goldman Sachs - Singapore
- Leighton Contractors Pty Ltd - Australia
- Latin American Coal - Colombia
- Therma Luzon, Inc, Philippines
- Uttam Galva Steels Limited - India
- SMG Consultants - Indonesia
- International Coal Ventures Pvt Ltd - India
- Energy Development Corp, Philippines
- Indogreen Group - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Petron Corporation, Philippines
- Eastern Energy - Thailand
- Bhoruka Overseas - Indonesia
- Medco Energi Mining Internasional
- Interocean Group of Companies - India
- Price Waterhouse Coopers - Russia
- Vijayanagar Sugar Pvt Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Bukit Baiduri Energy - Indonesia
- Coal and Oil Company - UAE
- Eastern Coal Council - USA
- Kohat Cement Company Ltd. - Pakistan
- Lanco Infratech Ltd - India
- Kaltim Prima Coal - Indonesia
- Renaissance Capital - South Africa
- Directorate General of MIneral and Coal - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Minerals Council of Australia
- Riau Bara Harum - Indonesia
- Bayan Resources Tbk. - Indonesia
- Grasim Industreis Ltd - India
- ASAPP Information Group - India
- Sarangani Energy Corporation, Philippines
- Wood Mackenzie - Singapore
- Electricity Authority, New Zealand
- OPG Power Generation Pvt Ltd - India
- Aboitiz Power Corporation - Philippines
- Iligan Light & Power Inc, Philippines
- Malabar Cements Ltd - India
- Tata Chemicals Ltd - India
- Kobexindo Tractors - Indoneisa
- Madhucon Powers Ltd - India
- Mintek Dendrill Indonesia
- Oldendorff Carriers - Singapore
- The State Trading Corporation of India Ltd
- Asmin Koalindo Tuhup - Indonesia
- Parliament of New Zealand
- Anglo American - United Kingdom
- Semirara Mining Corp, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Energy Link Ltd, New Zealand
- Economic Council, Georgia
- Indonesian Coal Mining Association
- Miang Besar Coal Terminal - Indonesia
- Pendopo Energi Batubara - Indonesia
- Xindia Steels Limited - India
- TeaM Sual Corporation - Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Karaikal Port Pvt Ltd - India
- Borneo Indobara - Indonesia
- Electricity Generating Authority of Thailand
- Africa Commodities Group - South Africa
- Indian Oil Corporation Limited
- San Jose City I Power Corp, Philippines
- Chettinad Cement Corporation Ltd - India
- Coastal Gujarat Power Limited - India
- Meenaskhi Energy Private Limited - India
- Neyveli Lignite Corporation Ltd, - India
- CNBM International Corporation - China
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Merrill Lynch Commodities Europe
- Petrochimia International Co. Ltd.- Taiwan
- Independent Power Producers Association of India
- Coalindo Energy - Indonesia
- Agrawal Coal Company - India
- Savvy Resources Ltd - HongKong
- PTC India Limited - India
- Bhushan Steel Limited - India
- Indian Energy Exchange, India
- Kartika Selabumi Mining - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Edison Trading Spa - Italy
- Billiton Holdings Pty Ltd - Australia
- Kumho Petrochemical, South Korea
- Jorong Barutama Greston.PT - Indonesia
- Power Finance Corporation Ltd., India
- CIMB Investment Bank - Malaysia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Global Business Power Corporation, Philippines
- Vedanta Resources Plc - India
- Thiess Contractors Indonesia
- Bharathi Cement Corporation - India
- Larsen & Toubro Limited - India
- Australian Coal Association
- Marubeni Corporation - India
- European Bulk Services B.V. - Netherlands
- Sree Jayajothi Cements Limited - India
- Sakthi Sugars Limited - India
- Star Paper Mills Limited - India
- The University of Queensland
- Formosa Plastics Group - Taiwan
- Krishnapatnam Port Company Ltd. - India
- IHS Mccloskey Coal Group - USA
- Mjunction Services Limited - India
- Tamil Nadu electricity Board
- Ministry of Transport, Egypt
- Australian Commodity Traders Exchange
- Bangladesh Power Developement Board
- SMC Global Power, Philippines
- Dalmia Cement Bharat India
- Globalindo Alam Lestari - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Bukit Makmur.PT - Indonesia
- Georgia Ports Authority, United States
- Orica Australia Pty. Ltd.
- Gujarat Sidhee Cement - India
- India Bulls Power Limited - India
- Sojitz Corporation - Japan
- GAC Shipping (India) Pvt Ltd
- Salva Resources Pvt Ltd - India
- Central Java Power - Indonesia
- Maheswari Brothers Coal Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- New Zealand Coal & Carbon
- Mercator Lines Limited - India
- White Energy Company Limited
- Standard Chartered Bank - UAE
- Mercuria Energy - Indonesia
- Global Coal Blending Company Limited - Australia
- PowerSource Philippines DevCo
- Timah Investasi Mineral - Indoneisa
- Romanian Commodities Exchange
- Posco Energy - South Korea
- Ministry of Finance - Indonesia
- Orica Mining Services - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Jindal Steel & Power Ltd - India
- Indo Tambangraya Megah - Indonesia
- Samtan Co., Ltd - South Korea
- Jaiprakash Power Ventures ltd
- Rio Tinto Coal - Australia
- Alfred C Toepfer International GmbH - Germany
- Central Electricity Authority - India
- Siam City Cement - Thailand
- The Treasury - Australian Government
- Vizag Seaport Private Limited - India
- Cigading International Bulk Terminal - Indonesia
- Carbofer General Trading SA - India
- Parry Sugars Refinery, India
- Banpu Public Company Limited - Thailand
- ICICI Bank Limited - India
- Antam Resourcindo - Indonesia
- Essar Steel Hazira Ltd - India
- Global Green Power PLC Corporation, Philippines
- Chamber of Mines of South Africa
- Holcim Trading Pte Ltd - Singapore
- Simpson Spence & Young - Indonesia
- Directorate Of Revenue Intelligence - India
- Kapuas Tunggal Persada - Indonesia
- Straits Asia Resources Limited - Singapore
- Makarim & Taira - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Ind-Barath Power Infra Limited - India
- Maharashtra Electricity Regulatory Commission - India
- MS Steel International - UAE
- Indika Energy - Indonesia
- Binh Thuan Hamico - Vietnam
- Kalimantan Lumbung Energi - Indonesia
- McConnell Dowell - Australia
- PNOC Exploration Corporation - Philippines
- Bulk Trading Sa - Switzerland
- Meralco Power Generation, Philippines
- Attock Cement Pakistan Limited
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