The following assessment provides (1) an overview of oil and gas reserves in the Philippines; (2) a thesis for investing in the upstream, Philippine oil and gas industry; (3) an overview of the four oil and gas companies listed on the Philippine Stock Exchange (PSE); and (4) a relative valuation of these companies. This analysis does not consider global factors associated with the upstream oil and gas sector, such as the price of oil.
This assessment is based on press articles and third-party data and research, as well as financial statements, annual reports, and press releases of relevant companies. Readers should not make any investment decisions based on the following report and should understand it is a byproduct of our interpretation of the information as well as our analysis, assumptions, and valuation approach, all of which could be flawed, possibly significantly.
We do not hold any individual positions in these or any other companies that trade on the PSE, but we do hold a position in the iShares MSCI Philippines ETF (EPHE), which we intend to hold for more than one year.
Figure 1.1: Map of the Philippines
Source: Google My Maps
OVERVIEW
Background on Oil and Gas Reserves in the Philippines
Sedimentary basins in the Philippines, which potentially contain oil and gas reserves, are underexplored, suggesting further exploration could uncover unknown energy deposits. There are 16 sedimentary basins in the Philippines covering more than 700,000 square kilometers, according to the Philippine government, of which approximately 164,000 square kilometers have been or are currently being explored, based on a review of the Philippine Department of Energy’s (DOE) service contract issuances.
- Proven oil and gas reserves in the Philippines are fewer than those located in other Southeast Asia countries, such as Indonesia, Malaysia, Thailand, and Vietnam. As of December 2016, the Philippines had 0.1 billion barrels of proven oil reserves and 3.5 trillion cubic feet of proven natural gas reserves, according to the United States Energy Information Administration.
[wpdatatable id=174]
Source: United States Energy Information Administration (US EIA)
*(S) indicates the value is too small for the number of decimal places shown, per the US EIA.
- The Malampaya natural gas field in offshore Palawan—an archipelagic province west of the central Philippines that bifurcates the Sulu and South China seas—is the country’s leading indigenous energy source, but with approximately 1.7 trillion cubic feet of remaining proven reserves it is expected to be depleted within the next decade, according to Reuters and the Philippine DOE. Shell Philippines Exploration and Chevron Malampaya each own 45% of the field, with the Philippine National Oil Company Exploration Corporation (PNOC-EC) controlling the remaining 10%, according to the PNOC-EC.
- The Galoc oil field also is located in offshore Palawan and is the country’s largest producing oil reservoir, but it also is nearing depletion with only 8.36 million stock tank barrels of net oil reserves as of December 2016,[1] according to Nido Petroleum, an Australian firm with interests in Galoc. Philippine upstream firms Oriental Petroleum and Minerals Corporation, Philodrill Corporation, and PXP Energy, among others, have a stake in the Galoc oil field, according to The Philippine Star.
- The Nido, Matinloc, and North Matinloc oil fields, also in offshore Palawan, contain significantly fewer reserves than those remaining in the Galoc field. These fields are in late-life production and require operators to drill only intermittently to allow time for oil deposits to accumulate near the top of the reservoir, according to PXP Energy.
[wpdatatable id=178]
*Unknown
**[2]
Source: Philippine Department of Energy, Nido Petroleum, Philodrill Corporation, and Oxford Business Group
THESIS FOR INVESTMENT
Manila Revising Policies To Spur Exploration Activities
Manila is accelerating the approval process for oil and gas projects and considering the renewal of joint exploration and development activities in the disputed waters of the South China Sea as part of an effort to increase exploration of its sedimentary basins. Manila’s Oil Exploration and Development Act of 1972 largely has guided the country’s approach toward its indigenous petroleum sources.
- In August, the Department of Energy announced the Philippine Conventional Energy Contracting Program (PCECP), which will allow private companies to submit unsolicited bids at any time to develop coal and petroleum projects of their choice, according to The Philippine Star. The PCECP is a departure from the DOE’s rigid Philippine Energy Contracting Round policy—there have been five rounds since Manila codified this law in 1972—that required companies bid only during contracting rounds and only on those projects identified by the government.
- In late June, Philippine President Rodrigo Duterte signed Executive Order (EO) 30 to establish a council tasked to expedite and streamline the implementation of “energy projects of national significance” (EPNS), according to the Philippine government. If the DOE identifies a project as an EPNS—to qualify for this designation, a project must invest at least PHP 3.5 billion, or approximately USD 70 million, among other factors—the EO requires pertinent government agencies respond to the project proposal within 30 days.
- Pressure from state-owned PNOC-EC for Manila to revise its laws governing “farm-out” contracts—a process by which a company can maintain its interests in an exploration or production field but reduce its risks by contracting out services to a third party—might also lead to changes that facilitate investment. The PNOC-EC president stated in late 2016 that Manila’s ban on farm-out contracts has been a “major stumbling block” to petroleum exploration in the Philippines, according to The Manila Standard.
Manila also is willing to renew energy exploration in the disputed waters of the South China Sea in a joint effort with China as it seeks to develop additional energy sources. In late September, the Chinese Ambassador to the Philippines stated Beijing and Manila were in initial discussions on the possibility of joint development of these areas, according to ABS CBN News, and in July, President Duterte said the two countries were discussing the potential for joint exploration in the disputed waters, according to The Philippine Star.
- Manila suspended exploration activity in these waters in 2014 after it filed a case with the Permanent Court of Arbitration in The Hague in 2013 contesting Beijing’s claims. In July 2016, the court affirmed Manila’s rights to these waters as part of the country’s 200-nautical mile Exclusive Economic Zone, but the court has no enforcement ability and, heretofore, President Duterte generally has ignored the ruling as part of an effort to rebuild ties with China—probably to increase Chinese investment in the Philippines—which strongly criticized The Hague’s decision.
- The primary energy deposits in this area of the South China Sea, which the Philippine government refers to as the West Philippine Sea, are thought to be in the Spratly Islands, particularly Reed Bank. In 2013, the United States Energy Information Administration estimated this area to have between 0.8 and 5.4 billion barrels of oil and between 7.6 and 55.1 trillion cubic feet of natural gas in undiscovered reserves, which would exceed the reserves at the Malampaya natural gas and Galoc oil fields.
- Despite Manila’s openness to joint exploration with China in the disputed waters of the South China Sea, there could be legal hurdles that impede this effort. In August, a Philippine Supreme Court Senior Associate Justice stated joint exploration would be illegal as long as China also claimed sovereignty over the territory, according to The Philippine Inquirer, and in late October, a Philippine maritime law expert assessed that joint development with Beijing could attenuate Manila’s claims over the disputed waters, according to a GMA News.
Manila Unlikely To Pursue Unilateral Exploration in Contested Waters
Manila probably will not permit any independent oil and gas exploration activities in the disputed waters of the South China Sea because such action almost certainly would inflame Beijing and threaten relations between the two countries. In May, Chinese President Xi Jinping warned Philippine President Rodrigo Duterte that Beijing, if pushed, would “go to war” over matters in the South China Sea, according to Reuters, and in mid-2016, Duterte commented that the Philippines could not defeat the Chinese military, according to ABS-CBN News.
- In November, Duterte halted the construction of fishermen huts on a newly formed sandbar in the disputed South China Sea after a protest from Beijing, according to The Bangkok Post. The sandbar is near the Philippine island of Thitu, which is located in the Spratly Islands, and is within the Philippines’ exclusive economic zone, according to The Japan Times.
Growing Energy Needs Fuel Manila’s Shift in Policies
Manila is attempting to increase exploration of its sedimentary basins as part of its efforts to address the country’s increasing energy demands and fuel its fast-growing economy, which grew 6.8% in 2016 and most recently expanded 6.9% in the third quarter of 2017, according to the Philippine Statistics Authority. In late September, the energy secretary indicated Manila was agnostic over the source of its energy and would not apply any cap or quota to a particular source, according to The Philippine Star.
- In 2016, imports fueled almost 44% of the country’s energy demand of approximately 17,000 megawatts, and by 2040, the country will need 43,765 megawatts of additional energy capacity, according to the DOE undersecretary in early October. In 2015, approximately 40% of Philippine firms experienced power outages, and in 2016, approximately 10% of the Philippine population lacked access to electricity, according to the International Energy Association.
- Over the next five years, the Philippine government expects to spend over PHP 8 trillion, or approximately USD 160 billion, on various infrastructure projects throughout the country according to the Philippine Daily Inquirer, which should lead to increased growth and increased demand for energy.
Philippines Aspiring To Become Liquefied Natural Gas Hub in Southeast Asia
The Philippines is seeking to become a leading liquefied natural gas (LNG) hub in Southeast Asia as part of its effort to establish energy stability. The Philippines and other Southeast Asian countries are creating LNG terminals because there is limited intra-regional pipeline infrastructure, according to the International Energy Association.
- The Philippine Department of Energy has tasked state-owned Philippine National Oil Company with building an LNG terminal in Batangas, which is approximately 100 kilometers south of Manila on the Batangas Bay, that can handle an annual capacity of five million metric tons, according to Bloomberg. The project is expected to cost USD two billion and be completed around 2020, which would be before the anticipated depletion of the Malampaya gas field, according to Reuters.
- As of August, Hong Kong-based company Energy World Corporation was approximately 45% complete with its construction of a 650 megawatt LNG plant and terminal in Pagbilao, Philippines, according to The Manila Standard, which would be the country’s first LNG terminal, according to the Energy Policy and Development Program. In January, a 289 meter-long tanker acting as a floating storage for the Pagbilao plant and terminal arrived in the Philippines, according to Business Mirror.
Numerous Risks Confront Upstream Oil and Gas Operators in the Philippines
Upstream oil and gas operators in the Philippines are susceptible to numerous political, security, and environmental risks that could undermine investment opportunities. Philippine political risks include unclear tax policy, potential political instability, and disruptive policies towards the natural resource industry.
- A Philippine petroleum association stated that an ongoing tax dispute between the Philippine unit of Royal Dutch Shell and the Philippine government could undermine investor confidence and reduce already low petroleum exploration in the Philippines, according to The Manila Standard and Malaya, a Philippine news source. The government contends that Shell and its partners in the Malampaya gas field owe approximately USD 1.1 billion in taxes in addition to royalty payments, according to Reuters.
- In October, President Duterte warned he would declare a revolutionary government if opposition forces did not cease their alleged destabilization efforts, according to The Manila Times, although he later dismissed this idea. A Philippine senator stated a revolutionary government would position Duterte to have unchecked power, according to The Philippine Star, and in late November, supporters and protestors of a revolutionary government staged rallies throughout the country, according to The Manila Times.
- In April, then-environmental secretary Regina Lopez unilaterally banned prospective open-pit mining throughout the country because of its impact on the environment, according to the Department of Environment and Natural Resources (DENR), suggesting the government could take similar action against oil and gas companies. The DENR’s order closed 23 of the country’s 41 mines and led to the cancellation of 75 mining projects in their exploration phase, according to The South China Morning Post.
Terrorists also operate in the Philippines and its surrounding waters, which could threaten upstream exploration and development activities. From February 2016-February 2017, militants abducted 57 crew members in the Sulu and Celebes seas that border the Philippines, Malaysia, and Indonesia, according to the shipping publication Fairplay.
- In early July, the Philippine and US navies conducted a joint patrol in the Sulu Sea to combat maritime threats, according to the US Embassy in the Philippines. In June, the defense ministries from the Philippines, Malaysia, and Indonesia launched a trilateral maritime patrol to fight terrorism and transnational crimes in the Sulu Sea, according to The Straits Times.
- In mid-December, the Philippine government voted to extend martial law through 2018 for the island of Mindanao to counter militants linked to the Islamic State terrorist group, according to The Manila Times. Manila first instituted martial law on Mindanao in May and previously extended it in July, according to The Manila Times.
The Philippines is susceptible to numerous natural disasters, including earthquakes, tsunamis, volcanic eruptions, and typhoons, and often these events cause significant damage and human casualties. From 2010-2015, tropical cyclones resulted in approximately USD 800 million[3] in damaged infrastructure and caused the deaths of almost 50,000 people, according to Rappler.
- In 2013, Typhoon Haiyan, known locally as Yolanda, damaged electricity grids and other energy infrastructure, and caused an oil spill, according to the International Energy Association. The typhoon was one of the world’s worst storms, with wind gusts reaching 235 miles per hour, according to The Guardian.
OVERVIEW OF RELEVANT COMPANIES
Background on Upstream Oil and Gas Companies Listed on Philippine Stock Exchange
The four Philippine upstream oil and gas companies that trade on the Philippine Stock Exchange—Oriental Petroleum and Mineral, Philodrill, PXP Energy, and Phinma Petroleum and Geothermal—could benefit from Manila’s efforts to further explore its sedimentary basins. The Philippine Foreign Investment Negative List (FINL) requires domestic companies maintain at least 60% equity in companies that explore, develop, and utilize natural resources, according to the Philippine government.
Oriental Petroleum and Minerals Corporation
Oriental Petroleum and Minerals Corporation (OPM) is a Philippine company that explores, develops, and produces petroleum and mineral resources in the Philippines, and it has positions directly and through subsidiaries in seven Philippine service contracts. In the first nine months of 2017, we estimate OPM’s 7.785% stake in the Galoc oil field produced approximately 83% of the company’s petroleum revenues, while its positions in the Nido, Matinloc, and North Matinloc oil fields generated approximately 17% of its petroleum revenue, based on a review of the company’s quarterly reports and Philodrill’s quarterly sales figures for the oil fields.[4]
[wpdatatable id=179]
Source: OPM’s 2016 Annual Report
The Philodrill Corporation
The Philodrill Corporation (OV) primary explores and develops petroleum resources in the Philippines and, secondarily, serves as a holding company for various business interests. The company maintains positions in eleven service contracts in the Philippines, with the Galoc oil field serving as its primary revenue source, according to OV’s 2016 Annual Report. In the first nine months of 2017, we estimate OV’s 7.21495% stake in the Galoc oil field produced approximately 74% of the company’s petroleum revenues, while its positions in the Nido, Matinloc, and North Matinloc oil fields generated approximately 26% of its petroleum revenue, based on a review of the company’s quarterly reports and quarterly sales figures for the oil fields.
[wpdatatable id=180]
*Pending
Source: OV’s 2016 Annual Report
PXP Energy Corporation
PXP Energy Corporation (PXP) has interests in fourteen petroleum service contracts in the Philippines and one in Peru, which are held directly or through subsidiaries. In the first nine months of 2017, we estimate PXP’s 2.27575% stake in the Galoc oil field produced approximately 85% of the company’s petroleum revenues, while its positions in the Nido, Matinloc, and North Matinloc oil fields generated approximately 15% of its petroleum revenue, based on a review of the company’s quarterly reports and Philodrill’s quarterly sales figures for the oil fields.
[wpdatatable id=181]
Source: PXP’s 2016 Annual Report
Under service contract 72, PXP has claims to contingent and prospective resources in the Reed Bank of the South China Sea. In December 2014, the Philippine Department of Energy suspended the exploration activities of PXP subsidiary Forum Energy in this area because of its territorial dispute with China, according to Business World and The Philippine Star.
[wpdatatable id=182]
*Estimate of Asset’s and PXP’s reserves are as of 2012.
Source: PXP’s 2016 Annual Report
Phinma Petroleum and Geothermal, Incorporated
Phinma Petroleum and Geothermal (PPG), formerly Trans-Asia Petroleum Corporation,[5] has interests in six petroleum service contracts in the Philippines that are in the exploratory phase—it does not have any projects in commercial production—according to PPG’s 2016 Annual Report. The company uses available cash and investments held for trading to defray its expenses.
[wpdatatable id=183]
*Pending
Source: PPG’s 2016 Annual Report
Share Performance
From January through end-November, PXP has significantly outperformed the other publicly traded upstream Philippine oil and gas companies, as well as the Philippine Stock Exchange index (PSEi), possibly because of the potential for renewed exploration in the South China Sea. PXP shares generally traded in-line with OPM, OV, PPG, and the PSEi through mid-August, at which point it began to surge, appreciating more than 225% as of end-November.
- In early August, PXP’s chairman expressed eagerness to resume exploration in the South China Sea’s Reed Bank—the company has claims in service contract 72, which is located in the Reed Bank—possibly in partnership with the China National Offshore Oil Company (CNOOC), according to Reuters. PXP and CNOOC previously discussed joint exploration of this area in 2013, according to GMA News.
[wpdatachart id=67]
*[6]
RELATIVE VALUATION
We conduct a relative valuation of Oriental Petroleum and Minerals, Philodrill, and PXP Energy[7] using multiples derived from enterprise value to earnings before interest, tax, depreciation, depletion, and amortization (EV/EBITDA), enterprise value to operating cash flow (EV/OCF), and price to book value of equity (P/B). We use the trailing twelve months (9M2017 and 4Q2016) in our analysis because we have not forecasted one or two-year forward earnings for these companies. Finally, we provide each company’s “netback,” which we calculate by subtracting each company’s average production cost per barrel from the average selling price it receives per barrel. This figure provides insight into which company generates the most revenue per barrel sold but is not used to impute a share price.*[8]
Notes on financial statements
Oriental Petroleum and Minerals (OPM), Philodrill (OV), PXP Energy (PXP), and Phinma Petroleum and Geothermal (PPG) all apply the full-cost method to exploration costs. The full-cost method allows exploration results—both successful and unsuccessful—to be capitalized on the balance sheet and amortized on the income statement over the estimated life of the property. This results in a larger property, plant, and equipment value on the balance sheet and greater net income.
OPM, OV, PXP, and PPG do not have debt on their balance sheets and they do not have operating leases. PXP, however, has almost a PHP 3 billion liability due to advances from related parties, which we assign as debt when calculating its enterprise value. PXP does not incur interest expense from this liability.
In 2016, PXP and OV created an asset retirement obligation account for the eventual depletion of the Galoc, Nido, Matinloc, and North Matinloc oil fields; OPM has yet to do so. We have included PXP’s and OV’s accretion expense when calculating their respective earnings before interest, tax, depreciation, depletion, and amortization.
Finally, OPM provides its financial statements in US Dollars, whereas PXP and OV provide their statements in Philippine Pesos (PHP). When necessary, we convert OPM’s figures to PHP, such as when calculating its enterprise value.
We find that OPM and OV have very similar EV/OCF and P/B multiples, as well as proximate netback values, which suggests their shares are fairly valued. PXP, however, has EV/OCF and P/B multiples significantly greater than those of OPM and OV; investors probably are ascribing value to PXP’s service contracts in the Reed Bank. When determining average multiples and imputing an implied share price, we exclude PXP because of its markedly different values.
[wpdatatable id=185]
Note: PXP has negative EBITDA over this period.
[wpdatatable id=186]
Note: The 13 December exchange rate of PHP 50.50 to 1 USD is used when converting OPM’s values from USD to PHP.
[wpdatatable id=187]
[wpdatatable id=193]
APPENDIX – Calculations for multiples
ENTERPRISE VALUE
Oriental Petroleum and Minerals (OPM)
| Shares outstanding |
200,000,000,000 |
| Price per share (at close 13 December) |
PHP 0.012 |
| Market capitalization |
PHP 2,400,000,000 |
| PHP/USD at 13 December |
PHP 50.500 |
| Market capitalization in USD |
$47,524,752 |
| Debt (at 3Q2017) |
PHP 0 |
| Cash (at 3Q2017) |
$13,292,857 |
| Net debt |
($13,292,857) |
|
Enterprise Value |
$34,231,895 |
Philodrill (OV)
| Shares outstanding |
191,868,805,358 |
| Price per share (at close 13 December) |
PHP 0.011 |
| Market capitalization |
PHP 2,110,556,859 |
| Debt (at 3Q2017) |
PHP 0 |
| Cash (at 3Q2017) |
PHP 645,254,449 |
| Net debt |
(PHP 645,254,449) |
|
Enterprise Value |
PHP 1,465,302,410 |
PXP Energy (PXP)
| Shares outstanding |
1,700,000,000 |
| Price per share (at close 13 December) |
PHP 8.31 |
| Market capitalization |
PHP 14,127,000,000 |
| Noncontrolling interest |
PHP 2,431,926,000 |
| Debt (at 3Q2017) |
PHP 2,906,505,000 |
| Cash (at 3Q2017) |
PHP 470,385,000 |
| Net debt |
PHP 2,436,120,000 |
|
Enterprise Value |
PHP 18,995,046,000 |
EARNINGS BEFORE INTEREST, TAX, DEPRECIATION, DEPLETION, AND AMORTIZATION, TRAILING TWELVE MONTHS
Oriental Petroleum and Minerals (OPM)
|
3Q2017 |
2Q2017 |
1Q2017 |
Implied 4Q2016 |
|
| EBIT |
$47,887 |
($266,815) |
$116,641 |
$1,112,425 |
| DDA |
$369,298 |
$433,515 |
$370,010 |
$507,519 |
| EBITDA |
$417,185 |
$166,700 |
$486,651 |
$1,619,944 |
|
TTM EBITDA |
$2,690,480 |
Philodrill (OV)
|
3Q2017 |
2Q2017 |
1Q2017 |
Implied 4Q2016 |
|
| Operating (loss) |
(PHP 11,814,526) |
(PHP 35,198,583) |
(PHP 12,901,019) |
(PHP 6,639,472) |
| Accretion expense |
PHP 0 |
PHP 0 |
PHP 0 |
(PHP 363,025) |
| EBIT |
(PHP 11,814,526) |
(PHP 35,198,583) |
(PHP 12,901,019) |
(PHP 7,002,497) |
| DDA |
PHP 26,087,051 |
PHP 28,653,590 |
PHP 27,495,126 |
PHP 25,799,110 |
| Accretion expense |
PHP 0 |
PHP 0 |
PHP 0 |
PHP 363,025 |
| EBITDA |
PHP 14,272,525 |
(PHP 6,544,993) |
PHP 14,594,107 |
PHP 19,159,638 |
|
TTM EBITDA |
PHP 41,481,277 |
PXP Energy (PXP)
|
3Q2017 |
2Q2017 |
1Q2017 |
Implied 4Q2016 |
|
| Operating (loss) |
(PHP 19,041,000) |
(PHP 14,113,000) |
(PHP 11,072,000) |
(PHP 25,367,000) |
| Accretion expense |
PHP 0 |
PHP 0 |
PHP 0 |
(PHP 120,000) |
| EBIT |
(PHP 19,041,000) |
(PHP 14,113,000) |
(PHP 11,072,000) |
(PHP 25,487,000) |
| DDA |
PHP 11,036,000 |
PHP 6,648,000 |
PHP 10,300,000 |
PHP 18,489,000 |
| Accretion expense |
PHP 0 |
PHP 0 |
PHP 0 |
PHP 120,000 |
| EBITDA |
(PHP 8,005,000) |
(PHP 7,465,000) |
(PHP 772,000) |
(PHP 6,878,000) |
|
TTM EBITDA |
(PHP 23,120,000) |
PRICE TO BOOK
Oriental Petroleum and Minerals (OPM)
| Market capitalization |
$47,524,752 |
| Book value of equity |
$87,924,490 |
|
Price to book |
0.54x |
Philodrill (OV)
| Market capitalization |
PHP 2,110,556,859 |
| Book value of equity |
PHP 3,563,376,350 |
|
Price to book |
0.59x |
PXP Energy (PXP)
| Market capitalization |
PHP 14,127,000,000 |
| Equity |
PHP 3,076,944,000 |
| Noncontrolling interest |
PHP 2,431,926,000 |
| Book value of equity |
PHP 645,018,000 |
|
Price to book |
21.90x |
NETBACK
Oriental Petroleum and Minerals (OPM)
| OPM average selling price per barrel |
$54.50 |
|||
| OPM total petroleum revenue |
$5,394,500 |
|||
| OPM total petroleum costs, net DDA |
$3,862,244 |
|||
| Gross barrel sales by oil field |
3Q2017 |
2Q2017 |
1Q2017 |
Total |
| Nido/Matinloc/North Matinloc |
26,130 |
38,592 |
32,636 |
97,358 |
| Galoc |
352,828 |
353,475 |
350,056 |
1,056,359 |
|
Total |
378,958 |
392,067 |
382,692 |
1,153,717 |
| Netback calculation | ||||
| OPM stake at Galoc |
7.785% |
7.785% |
7.785% |
7.785% |
| Implied OPM Galoc barrels sold |
27,468 |
27,518 |
27,252 |
82,238 |
| Implied OPM Galoc petroleum revenue in USD |
$1,496,987 |
$1,499,733 |
$1,485,226 |
$4,481,946 |
| Implied OPM non-Galoc petroleum revenue in USD |
$912,554 |
|||
| Implied OPM non-Galoc barrels sold |
16,744 |
|||
| Implied OPM total barrels sold |
98,982 |
|||
| Implied OPM average revenue per barrel |
$54.50 |
|||
| Implied OPM average cost per barrel |
$39.02 |
|||
|
OPM netback |
$15.48 |
Notes on OPM’s netback calculation:
OPM’s average selling price per barrel reflects average selling price for 9M2017, according to OPM’s third quarter 2017 report. OPM, OV, and PXP each provided a different average selling price for this time period.
Gross barrel sales by oil field is amalgamated from Philodrill’s first, second, and third quarter 2017 reports. This figure reflects the total number of barrels produced at these fields.
OPM Galoc barrels sold are derived by multiplying OPM’s stake in Galoc by the number of Galoc barrels sold each quarter. This figure may not represent the actual number of barrels OPM sold that were produced from Galoc. Similarly, non-Galoc petroleum revenues and barrels sold reflect our estimates.
Philodrill (OV)
| OV average selling price per barrel |
$54.01 |
|||
| OV total petroleum revenue |
PHP 281,271,870 |
|||
| OV total petroleum costs |
PHP 296,661,700 |
|||
| DDA |
PHP 82,235,767 |
|||
| OV total petroleum costs, net DDA |
PHP 214,425,933 |
|||
| Gross barrel sales by oil field |
3Q2017 |
2Q2017 |
1Q2017 |
Total |
| Nido/Matinloc/North Matinloc |
26,130 |
38,592 |
32,636 |
97,358 |
| Galoc |
352,828 |
353,475 |
350,056 |
1,056,359 |
|
Total |
378,958 |
392,067 |
382,692 |
1,153,717 |
| Netback calculation | ||||
| OV stake at Galoc |
7.21% |
7.21% |
7.21% |
7.21% |
| Implied OV Galoc barrels sold |
25,456 |
25,503 |
25,256 |
76,216 |
| Implied OV Galoc petroleum revenue in USD |
$1,374,898 |
$1,377,419 |
$1,364,096 |
$4,116,414 |
| PHP/USD |
PHP 50.859 |
PHP 49.859 |
PHP 50.008 |
PHP 50.24 |
| Implied OV Galoc petroleum revenue in PHP |
PHP 69,925,948 |
PHP 68,676,756 |
PHP 68,215,727 |
PHP 206,818,431 |
| Implied OV non-Galoc Petroleum revenue in PHP |
PHP 74,453,439 |
|||
| Implied OV non-Galoc petroleum revenue in USD |
$1,481,885 |
|||
| Implied OV non-Galoc barrels sold |
27,437 |
|||
| Implied OV total barrels sold |
103,653 |
|||
| Implied OV average revenue per barrel |
$54.01 |
|||
| Implied OV average cost per barrel |
$38.30 |
|||
|
OV netback |
$15.71 |
Notes on OV’s netback calculation:
OV’s average selling price per barrel reflects average selling price for 9M2017, according to OV’s third quarter 2017 report. OV, OPM, and PXP each provided a different average selling price for this time period.
OV’s depreciation, depletion, and amortization probably includes depreciation for selling, general, and administrative expenses. OV, similar to PXP, does not break out these costs in its quarterly reports.
Gross barrel sales by oil field is amalgamated from OV’s first, second, and third quarter 2017 reports. This figure reflects the total number of barrels produced at these fields.
OV Galoc barrels sold are derived by multiplying OV’s stake in Galoc by the number of Galoc barrels sold each quarter. This figure may not represent the actual number of barrels OV sold that were produced from Galoc. Similarly, non-Galoc petroleum revenues and barrels sold reflect our estimates.
The PHP to USD conversion rate for the first, second, and third quarters is the exchange rate at the end-date of each quarter. The conversion rate used for the total period reflects a weighted average of the conversion rates at each quarter and the number of barrels sold.
PXP Energy (PXP)
| PXP average selling price per barrel |
$53.79 |
|||
| PXP total petroleum revenue |
PHP 76,727,000 |
|||
| PXP total petroleum costs |
PHP 87,545,000 |
|||
| DDA |
PHP 27,984,000 |
|||
| PXP total petroleum costs, net DDA |
PHP 59,561,000 |
|||
| Gross barrel sales by oil field |
3Q2017 |
2Q2017 |
1Q2017 |
Total |
| Nido/Matinloc/North Matinloc |
26,130 |
38,592 |
32,636 |
97,358 |
| Galoc |
352,828 |
353,475 |
350,056 |
1,056,359 |
|
Total |
378,958 |
392,067 |
382,692 |
1,153,717 |
| Netback calculation | ||||
| PXP stake at Galoc |
2.28% |
2.28% |
2.28% |
2.28% |
| Implied PXP Galoc barrels sold |
8,029 |
8,044 |
7,966 |
24,040 |
| Implied PXP Galoc petroleum revenue in USD |
$431,906 |
$432,698 |
$428,513 |
$1,293,116 |
| PHP/USD |
PHP 50.859 |
PHP 49.859 |
PHP 50.008 |
PHP 50.24 |
| Implied PXP Galoc petroleum revenue in PHP |
PHP 21,966,302 |
PHP 21,573,885 |
PHP 21,429,059 |
PHP 64,969,247 |
| Implied PXP non-Galoc petroleum revenue in PHP |
PHP 11,757,753 |
|||
| Implied PXP non-Galoc petroleum revenue in USD |
$234,021 |
|||
| Implied PXP non-Galoc barrels sold |
4,351 |
|||
| Implied PXP total barrels sold |
28,391 |
|||
| Implied PXP average revenue per barrel |
$53.79 |
|||
| Implied PXP average cost per barrel |
$39.00 |
|||
|
PXP netback |
$14.79 |
Notes on PXP’s netback calculation:
PXP’s average selling price per barrel reflects average selling price for 9M2017, according to PXP’s third quarter 2017 report. PXP, OV, and OPM each provided a different average selling price for this time period.
PXP’s depreciation, depletion, and amortization probably includes depreciation for selling, general, and administrative expenses. PXP, similar to OV, does not break out these costs in its quarterly reports.
Gross barrel sales by oil field is amalgamated from PXP’s first, second, and third quarter 2017 reports. This figure reflects the total number of barrels produced at these fields.
PXP Galoc barrels sold are derived by multiplying PXP’s stake in Galoc by the number of Galoc barrels sold each quarter. This figure may not represent the actual number of barrels PXP sold that were produced from Galoc. Similarly, non-Galoc petroleum revenues and barrels sold reflect our estimates.
The PHP to USD conversion rate for the first, second, and third quarters is the exchange rate at the end-date of each quarter. The conversion rate used for the total period reflects a weighted average of the conversion rates at each quarter and the number of barrels sold.
[1] This figure represents Proved (1P), Proved plus Probable (2P), and Proved plus Probable plus Possible (3P) reserves. 1P net reserves at 31 December 2016 total 1.54 million stock tank barrels (MMstb); 2P reserves total 2.60 MMstb; and 3P reserves total 4.22 MMstb, according to Nido Petroleum’s 2016 Annual Report.
[2] This assumes one barrel of oil equivalent is equal to 6,000 cubic feet of typical natural gas.
[3] This implies a conversion rate of 50 PHP to 1 USD.
[4] Please see the “Netback” calculation in the Appendix for detail on how we derive these estimates.
[5] The Philippine Securities and Exchange Commission approved the company’s name change from Trans-Asia Petroleum to Phinma Petroleum and Geothermal on 31 May 2017, according to the Philippine Stock Exchange.
[6] OPM has class A and B shares, with both classes having the same privileges and rights. Class A shares, however, only can be issued to Filipino citizens; Class B shares can be issued to Filipinos or foreigners.
[7] We do not include Phinma Petroleum and Geothermal in this analysis because the company does not have any producing oil or gas assets as of September 2017, according to its third quarter report.
[8] Please see the Appendix to see our calculations for these values.