Petron in aggressive expansion mode

MANILA, Philippines - Oil refining giant Petron Corp. is targeting a record P10 billion in profits this year as the company enters an aggressive expansion phase with 1,000 new outlets.

Revenues will further be boosted by the consolidation of a new subsidiary, Esso Malaysia Berhad (EMB), which Petron wants to hike its stake to 100 percent, its top executive said.

Petron aims to hit P10 billion in earnings this year from P8.5 billion last year, Petron chairman and chief executive Ramon S. Ang said after the company’s stockholders meeting yesterday.

“If world oil prices are stable then the results should be better in the next three quarters,” Ang said.

Ang said the company will be able to reach its target if crude oil prices do not drop below $100 per barrel.Sudden price declines will prompt the company to sell its existing inventory at lower prices.

“The problem with Petron is when world oil prices are going down and you have a lot of inventory, you will incur losses,” Ang said.

Prices of the benchmark Dubai crude oil already eased to around $109 per barrel last week from an average of $116 per barrel in the first quarter.

Growth will be supported by rapid branch expansion locally.

“We have about 2,000 as of end-December and we hope to reach close to 3,000 stations before the end of the year,” Ang said.

The expansion will be a combination of franchise and company-owned branches. Ang said average cost per station is P15 million.

Meanwhile, Petron said it wants to secure full ownership of EMB, which it plans to expand further.

Petron Oil & Gas International Sdn Bhd, the Malaysian unit of Petron, said it yesterday acquired an additional 22.47 million shares or 8.32 percent of EMB during its voluntary tender offer.

Petron Oil now owns 73.32 percent of EMB. The development formalized Petron’s goal of increasing its presence in Malaysia and Asia in general.

In August, Petron announced its acquisition from ExxonMobil International of 175.5 million ordinary shares or 65 percent stake in EMB, which is listed in the Malaysian stock exchange. It also signed a deal to buy unlisted subsidiaries ExxonMobil Borneo Sdn Bhd and ExxonMobil Malaysia for $404 million, bringing the total transaction cost to $610 million.

The deal resulted in a voluntary tender offer for the remaining 94.5 million shares held by the public at an offer price of 3.59 Malaysian ringgit or a total of 339.26 million Malaysian ringgit.

Ang said the company will check with corporate regulators in Malaysia as a part of its plan to conduct a second round of tender offer.

“We will do another round, hopefully one of these days because there are lots of request from the public that was not able to take advantage during our last tender offer,” Ang said.

He said consolidation will occur in the second half of the year, futher boosting Petron’s revenues. EMB will also be renamed Petron Malaysia.

EMB’s operations in that country include a refinery located in Port Dickson on the west coast with a capacity of 88,000 barrels per day, seven fuel distribution terminals and a network of about 560 retail stations, of which 420 are company-owned.

The Port Dickson refinery currently produces a range of products including gasoline, diesel, liquefied petroleum gas, jet fuel, kerosene and low-sulfur waxy residue. Petron’s plans to invest up to $1.2 billion to upgrade the refinery.

In the first quarter, Petron’s net income. slipped 28 percent to P2.5 billion due to lower exports and higher expenses.

Petron has set aside $2 billion for the upgrade of its refinery in Bataan that began last year. The upgrade, which is expected to be completed in the end of 2014, will also increase volumes and convert fuel into higher-value products.

Conglomerate San Miguel Corp. (SMC) owns 68 percent of Petron, the Philippines’ largest oil refining and marketing company with crude distillation capacity of 180,000 barrels per day.

SMC, in the last few years, has diversified its core portfolio of food, beverage and packing by expanding its participation in heavy industries such as petroleum, power generation and distribution, mining and infrastructure.