PNOC-EC profit drops 63% to P189.5 million in Q1

MANILA, Philippines - State-owned Philippine National Oil Co.-Exploration Corp. (PNOC-EC) reported a 63-percent reduction in its net income in the first three months of 2010 to just P189.46 million from P506.66 million in the same period in 2009.

The company said the drop in profit was due mainly to the decline in average gas prices as well as the reduction in gas off-take from the Malampaya natural gas field, which had its maintenance shutdown during the period.

Compounding the company’s woes was the reduction in coal cost of sales and operating expenses, it added.

However, the company recorded revenues of P1.84 billion, up 15 percent from P160 billion a year ago.

Cost of sales, however, rose 64 percent to P1.37 billion from P839.17 million year-on-year due to increases in the volume of coal sold and increase in fuel and lubes sold at the company’s Energy Supply Base (ESB), a commercial port that caters to petroleum companies.

Malampaya, the country’s largest natural gas production facility, is co-owned by Shell Philippines Exploration BV (45-percent stake), Chevron Malampaya LLC (45 percent) and PNOC-EC with 10 percent.

PNOC-EC is the upstream oil and gas subsidiary of state-owned PNOC. The exploration unit’s shares of stock are 99.78 percent owned by the National Government through mother unit PNOC. The remaining 0.22 percent is held by public shareholders.

The company’s primary cash cow is its stake in Malampaya in offshore Palawan. Aside from this, PNOC-EC also generates revenues from coal trading operations and the ESB.

PNOC-EC has been the subject of privatization efforts as the National Government suffers from an extremely high deficit condition.

Just last month, it again failed to sell 60 percent of its 10-percent stake in Malampaya as the firm’s board dilly-dallied on the privatization process.

An offer was made to the San Miguel group under Ramon Ang and the Metro Pacific group under Manuel Pangilinan. The bid price was reportedly set at $450 million with incentives via the negotiated sale route.

Since the existing PNOC-EC board refused to go the route of negotiated sale, the government will have to wait for the incoming administration to appoint a new board before the entire privatization process resumes again.

It was estimated that government would raise an estimated P17 billion from the sale of a 60-percent bloc of its participating interest in Malampaya.