Basic Petroleum to raise P2.2B for biofuel proj

Publicly-listed Basic Petroleum Corp. is seeking to raise around P2.2 billion from a stock rights issue and a follow-on offering to bankroll its expansion into the highly lucrative biofuels and other alternative and renewable energy sources in addition to its oil and gas exploration activities.

Oscar L. de Venecia Jr., executive vice-president and chief operating officer of Basic Petroleum, said the company’s entry into biofuels is “a strategic move designed to create a more balanced and sustainable business model.” 

“In view of the long gestation period of the oil and gas business, it was imperative to look for medium-term revenue streams for us to continually operate profitably and therefore, maximize shareholder value,” he said.

In preparation for the rights issue and additional public offering, Basic Petroleum is raising its authorized capital from P500 million to P2.5 billion consisting of 10 billion shares with a par value of 25 centavos.

About P1.8 billion of the total proceeds has been set aside for the the group’s ethanol projects while the balance will be used to fund its oil and gas and mining ventures.

To reflect its new thrusts, Basic Petroleum will be converted into a holding company and renamed Basic Energy Corp. with bioethanol producer Zambo Norte Bioenergy Corp. (ZNBC) as one of its subsidiaries.

Basic Petroleum last month acquired ZNBC for P120 million worth of cash and shares. The acquisition is in line with the group’s bid to take advantage of the expected strong demand for biodiesel as the country shifts to more indigenous fuels.  

ZNBC is engaged in the plantation of sugar cane for ethanol production. Its assets include a 21.7-hectare site for its proposed plant and more than 6,000 hectares of leased land in Zamboanga del Norte valued at P2.8 billion.

Basic Petroleum has also earmarked an additional 4,000 hectares of land in the province dedicated for ethanol production.

Jose R. Reyes Jr., a director at Basic Petroleum and  president of ZNBC, said the project will be the first sugar cane-based bioethanol plant in Zamboanga del Norte capable of producing 200,000 liters of ethanol per day or 40 million to 50 million liters a year.  It is expected to be fully operational by the last quarter of 2009.

Reyes said the company is considering putting up a second bioethanol plant as it seeks to become one of the leading ethanol producers in the country.

By 2009, local demand for biofuels with the mandated five percent bioethanol blend is estimated at 269 million liters.  By 2011, local demand is estimated at 594 million liters with a 10 percent local blend.  In order to meet the demand, an estimated 15 to 20 ethanol plants have to be established throughout the country.

As for its mining ventures, the group is interested in nickel, copper and gold claims throughout the country.

Basic implemented a quasi-reorganization to wipe out the accumulated deficit and in turn attract direct investments for both its oil and non-oil projects. The corporate restructuring involved the decrease in its authorized capital stock to P500 million from P2 billion and the reduction of the par value of its shares from P1 to 25 centavos per share.

The company has oil concession areas in Mindoro, and some in Palawan and the Sandakan Basin (Sulu Sea).

Basic’s entry into the biofuels industry coupled with a more focused management of its oil exploration activities will result into a positive turnaround for the corporation in the near-term and likewise prime our growth momentum in the next decade,” De Venecia said.