Petron Corporation (PSE: PCOR)

Figures in BOLD are author’s estimate.

Business Profile
Petron Corporation (the Company), the Philippines largest oil refinery enjoys a market share of 38% as of 2011. The Company was incorporated in the Philippines in 1966 as Esso Philippines, Inc and was renamed Petrophil Corporation in 1973 when the Philippine National Oil Company (PNOC) acquired Esso. In 1985, Petrophil Corporation and Bataan Refinery Corporation (formerly the Standard Vacuum Refining Corporation) were merged with Petrophil as the surviving Corporation. Petrophil later changed its corporate name to Petron Corporation.

In July 2008, a company owned by Ashmore Group, SEA Refinery Holdings B.V. (SEA BV), acquired 40% interest in Petron. In December 2008, SEA Refinery Corporation (SRC), a domestic corporation owned by SEA BV, acquired the 40% interest of PNOC in Petron. In a related development, SEA BV sold 10.1% of the issued shares to SRC. As of December 31, 2008, the capital structure of Petron was as follows: SRC – 50.10%; SEA BV – 40.47%; and the general public – 9.43%.

On December 24, 2008, San Miguel Corporation (SMC) and SEA BV entered into an Option Agreement granting SMC the option to buy the entire ownership interest of SEA BV in its local subsidiary SRC. The option may be exercised by SMC within a period of two years from December 24, 2008.

SMC exercised its option to acquire 40% of SRC on June 15, 2010. SMC exercised its option to acquire the remaining 60% of SRC’s shares, in December 2010. With the exercise of the option, SMC beneficially owns approximately 68% of the outstanding and issued shares of stock of Petron.

At present, the Company has the following subsidiaries and affiliates and its percentage of ownership:

New Ventures Realty Corporation (NVRC)
A realty firm established on August 24, 1995 and 60% owned by Petron Retirement Fund (PRF). NVRC is authorized to acquire and develop land but does not engage in subdivision business. Land suitable for use as service station sites, bulk plants or sales office is purchase by NVRC which are then leased to Petron.

Petrogen Isurance Corporation (Petrogen)
Serves the insurance requirements of Petron and its allied business Partners such as contractors, suppliers, and dealers.

Overseas Insurance Corporation, Ltd. (Ovincor)
Ovincor was incorporated under the laws of Bermuda on November 16, 1995 for the purpose of expediting the reinsurance of Petron’s insurable interests as covered by Petrogen.

Petron Freeport Corporation (PFC)
PFC is engaged in the business of importing, transporting, trading, and retailing petroleum products and related products. As a registered Subic Bay Freeport (SBF) Enterprise, PFC is entitled to tax-free and duty-free importation of raw materials and capital equipment for use solely within SBF. PFC has retail division which handles the service station operation and manufacturing division which is engaged in refining, distilling, and manufacturing petroleum products, oil, gas and other vehicle substance.

Petron Marketing Corporation (PMC)
PMC operated sixteen (16) outlets at various locations. PMC also operated twenty three (23) quick service restaurants (QSRs) which are located in various service stations. PMC aims to convert company-owned company-operated (COCO) to company-owned dealer-operated (CODO). With this new direction, PMC will concentrate in the Franchising Business and support Petron Reseller’s network expansion program through providing manpower for the start up operations and assistance in the operations of stations with newly-appointed dealers.

Petron Singapore Trading Pte. Ltd. (PSTPL)
The subsidiary aims to optimize crude procurement and participate in Singapore’s Global Trader Program (GTP), which allows the Company access to a wider selection of crude alternatives, resulting in further optimization of Petron’s crude selection.

Petrochemical Asia (HK) Limited (PAHL)
In July 2010, the Company acquired 40% stake in PAHL with an option to raise interest to 51%. PAHL is the parent firm of the Philippine Polypropylene Inc. (PPI) which operated a polypropylene plant in Mariveles, Bataan. Propylene raw materials which is needed to produce polypropylene will be sourced from Petron’s refinery which can produce 140,000 MT of propylene yearly.[1]
Polypropylene is a raw material for making plastic. Polypropylene is resistant to heat and fatigue and is used for piping, flip-top bottles, plastic items for medical or laboratory use, clear bags, plastic ropes and packaging.[2]

Limayan Energen Corp. (LEC)
On August 3, 2010, the Company together with Two San Isidro SIAI Assets, Inc (Two San Isidro) incorporated LEC. LEC was formed to build, operate and maintain a cogeneration power plant as the Bataan refinery. The first phase will be online by early 2013 followed by the 2nd phase at the end of the same year. The cogeneration plant has four Circulating Fluidized Bed boilers that can generate a nominal capacity of 216 MW.[3] The power plant will be fuelled by petroleum coke or petcoke, an oil refinery by-product which will be sourced from the Bataan Refinery.[4]

Manila North Harbour Port, Inc.
On February 2, 2011, the Company acquired 35% equity in Manila North Harbour Port, Inc., which holds a 25-year concession from the Philippine Ports Authority to operate the Manila North Harbor. [5] Moving Petron’s depot facilities to North Harbor from the Pandacan Terminal would reduce the Company’s handling costs by as much as 80%. North Harbor has deep-water facilities which tankers can use directly which will allow bulk transportation of oil.[6]

Comments:
Petron’s attraction is the Company’s expenditures towards efficiency, cost savings, and developments to increase revenues.

The year 2013 and 2014 are years where the Company will enjoy a substantial growth in revenues as the 216 MW cogeneration power plant will go online by 2013 and the Refinery Expansion Project (RMP-2) will be in commercial operation by 2nd quarter of 2014 which will enable the Company to process a wider range of crude oil types. The 216 MW petroleum coke fired power plant will be able to generate the needed steam and power for the Bataan Refinery and sell the excess to the Wholesale Electricity Spot Market (WESM).

Source:

The author does not own any of the stock mentioned at the time of this writing. 

DISCLAIMER:
NOT A RECOMMENDATION TO BUY OR SELL

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