Phoenix Petroleum halves 2020 capex

MANILA, Philippines — Phoenix Petroleum Philippines Inc. is slashing its 2020 capital expenditure (capex) by half as part of rationalizing its spending amid the coronavirus disease 2019 or COVID-19 pandemic.

“We are cutting capex to P1.5 billion and focusing on projects that are immediately revenue generating,” Phoenix Petroleum CFO Concepcion de Claro said during the company’s virtual stockholders’ meeting last week.

The revenue-generating investment would zoom in on retail and liquefied petroleum gas (LPG) related projects, de Claro said.

Originally, the capex for this year was set at P3 billion, Phoenix Petroleum company vice president for external affairs Raymond Zorrilla said in a text message.

Phoenix Petroleum’s retail and LPG businesses were the major revenue drivers in the first five months.  

Phoenix Petroleum COO Henry Albert Fadullon said the oil firm still managed to grow its retail and LPG sales volume despite the negative factors in the first quarter, such as the price volatility caused by the trade tension between the US and China, and the geopolitical tensions between the US and Iran, as well as the Taal Volcano eruption which threatened its storage facilities in the south and disrupted fuel transport and retail service operations.

“Against this backdrop, we were able to sustain volume growth in key segment, particularly in retail and LPG,” he said.

Meanwhile, Phoenix Petroleum registered record sales in the LPG business segment during the quarter, and sales growth continued well into the enhanced community quarantine period.

“Ninety five percent of our retail sites and LPG stores are open. LPG and domestic cylinder sales are at an all-time high of 39 percent growth versus same period last year,” Fadullon said.

“April, the first full month on lockdown, was brutal with sales hovering around 50 to 60 percent from pre-lockdown levels except LPG, which continued to post strong growth, the one bright spot in the portfolio during the crisis,” he said.

Apart from reducing capex, the oil firm has also taken other cost-reducing measures to preserve its resources and mitigate losses amid the pandemic.

“We’re taking about P800 million in savings mostly sourced from marketing, advertising and travel as we shift resources from traditional channels to digital. These cost actions will help keep our capex in line with the expected weaknesses in demand this year,” de Claro said.

The oil firm also immediately delayed imports for finished products to lower inventory levels. 

“As a result, our inventory levels are only 50 percent of terminal capacity,” Fadullon said.

Moving forward, the company sees demand picking up, especially once the quarantine measures are relaxed.

“Despite the near term pressures and uncertainties today, we are confident that the business plan we have, which is investing more on higher margin and higher growth businesses such as retail and LPG, and the financial discipline will not only preserve resources but also ensure that we will remain well positioned and will thrive when the industry recovers,” de Claro said.