Trans-Asia Oil and Energy Development Corporation (PSE: TA)


Figures in BOLD are author’s estimate.

Business Profile

Trans-Asia Oil and Energy Development Corporation (the “Company”) was   established   by   the   Philippine   Investment Management (PHINMA), Inc. on September 8, 1969 in line with PHINMA’s vision to create a vehicle for building the nation’s economy through self-reliance in energy. PHINMA is a publicly listed company under the stock symbol PHN in the PSE.

The Company is primarily engaged in power generation and oil and gas explorations. The Company’s subsidiaries and affiliates and its percentage of ownership are as follows:

Trans-Asia Renewable Energy Corporation (TAREC)
A wholly owned subsidiary and was incorporated in 2003 with the primary purpose of developing and utilizing renewable sources of energy and pursuing clean and energy efficient projects. Through TAREC, the Company has 20 wind energy service contracts with a total potential wind capacity of 350 MW. As of this date, no progress was made on the wind energy projects due to the absence of approved feed-in tariff rules by the Energy Regulatory Commission (ERC).[1] The feed-in tariff rules contains the rate and incentives given to renewable energy providers such as wind, solar and biomass energy. Without the feed in tariff rules, some renewable energy projects (including wind energy) will not be feasible due to high costs in operating such.

Trans-Asia (Karang Besar) Petroleum Coproration
Engaged in oil exploration and development and has not yet started commercial operations.

CIP II Power Corporation (CIPP)
On April 11, 2009, CIPP transferred to MERALCO its exclusive rights and obligation to sell electricity to the locators of CIP II Ecozone located in Calamba, Laguna pursuant to the Memorandum of Agreement entered into between MERALCO and Carmelray-JTCI Corporaiton (CJC). CIPP sold its distribution assets to MERALCO for P62 million and recognized a gain on sale of 7.28 million.

In December 2010, CIPP’s board of directors approved the physical relocation of CIPP’s 21 MW bunker C-fired power plant from Laguna to La Union where the plant will supply energy requirements of HOLCIM’s La Union plant and sell electricity to WESM during peak hours. HOLCIM is a subsidiary of PHINMA.

Trans-Asia Gold and Minerals Development (TA Gold)
TA Gold was incorporated and registered with the SEC on July 2, 2007. TA Gold is primarily engaged in the business of mining and mineral exploration within the Philippines and other countries.
Effective March 2009, TA Gold suspended its exploration activities.

Trans-Asia Power Generation Corporation (TA Power)
TA power is a joint venture between TA and HOLCIM and was incorporated on March 14, 1996. TA Power is involved in the operation and maintenance of a power generation plant with a capacity of 52MW, in Norzagaray, Bulacan. TA power is the sole supplier of Holcim’s electricity requirements for its cement plant in Norzagaray, Bulacan based on an Electricity Supply Agreement (ESA) entered into by and between TA Power and Holcim. The excess power capacity is traded in the Wholesale Electricity Spot Market (WESM.)

Asia Coal Corporation (Asia Coal)
On March 19, 2009, the directors and stockholders of Asia Coal approved the shortening of the corporate life of the Company to October 31, 2009. The Company shall be dissolved and liquidated, the date of which is subject to the approval of the SEC. As of September 30, 2011, Asia Coal is still in the process of securing a tax clearance with the BIR in connection with the filing with the SEC of its application for dissolution. [2]

Maibarara Geothermal, Inc. (MGI)
A joint venture agreement with Petroenergy Resources, Inc through its subsidiary PetroGreen Energy Corp. (65%) and PNOC Renewable Corporation (10%), MGI was incorporated and registered with the SEC on August 11, 2010. The 20 MW Maibarara Geothermal Power Project is intended to put in commercial operations by the 3rd quarter of 2011.[3]

Department of Energy (DOE) Secretary Jose Rene Almendras approved on November 11, 2011 the “Confirmation of Commerciality” for the 20 MW Maibarara integrated geothermal steamfield and power plant project in Sto Tomas, Batangas of service contractor Maibarara Geothermal, Inc. (MGI). [4]

South Luzon Thermal Corporation (SLTEC)
SLTEC is a joint venture company with Ayala Corporation through its wholly owned subsidiary AC energy holdings with 50% interest. SLTEC is formed for the construction and operation of a 135 MW power plant in Calaca, Batangas. The power plant will employ an environmentally friendly Circulating Fluidized Bed technology. Total project cost may reach P12.6 billion and will be financed by a combination of debt and equity. [5] On October 28, 2011, SLTEC signed a 9 billion loan facility with lenders Banco de Oro Unibank, Inc., Security Bank Corporation and Rizal Commercial Banking Corporation. [6] 

The Company’s oil and gas exploration operations remains conservative by participating as a minority interest usually below 30%. The Company acquires selected petroleum service contracts covering areas usually in the exploration phase. A service contract grants the contractor the exclusive right to explore, develop, and produce petroleum resources within the contract area. The contractor assumes all exploration risks. In the event of commercial production, the Government and the contractor normally share in the profit. Service contracts allow the contractor a certain exploration period of several years, with an option to extend for a limited number of years, and if the exploration area is deemed feasible, the service contract allows a production period of a certain number of years, with an option to extend.

The Company recorded a revenue of P279,611 for the nine months ended September 30,2011 for their oil production operations. Among the service contracts under the exploration stage, SC 55 is the largest and the most promising. SC 55 covers 900,000 ha. in offshore West Palawan and the block includes the Cinco prospect with 500 million barrels mean resource potential.

On May 11, 2011, BHP Billiton exercised their option to farm-in and earned a 60% participating interest and assumed the operatorship of SC 55.[7]
On July 5, 2011, the SC 55 consortium committed to drill a deepwater well no later than August 5, 2012. However on January 18, 2012, BHP Billiton issued a termination notice for Transocean’s Deepwater Expedition (Ultra Deep Water drillship) due to the rig not passing key acceptance standards [8] which might cause delay on the scheduled drilling.  A rig is a structure with facilities for drilling wells.

Comments:
The Company has well diversified the risks of their oil exploration operations by investing in utilities and strategically forming joint ventures with financially capable companies. The Company had also limited their financial commitments on their oil exploration by assigning their interests to third parties.

Since 2005, the Company has consistently declared dividends of at least P.04 annually exhibiting a dividend yield of 3.54%, 3.82%, and 3.76% for the years 2011, 2010, and 2009. A speculative element in this Company is the possibility that the Cinco prospect will hit oil this 2012.

In my opinion, TA is a great company for investors that are willing to hold for five years. The Company will enjoy a substantial growth in revenue in the next two years as its two power generation project will start its operation in 2013 and a full-year operation in 2014.

Sources:

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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7 thoughts on “Trans-Asia Oil and Energy Development Corporation (PSE: TA)

  1. TA has some great oil and gas prospects. SC51 and SC55 may result in some enormous oil producers. I am participating in the upcoming rights offering.
    disclaimer: substantial investor in TA. Retired U.S. oil and gas president. Active trader in U.S. mining and oil and gas stocks.

    Reply
  2. Mr. Tom,
    This is regarding Abra Mining, I might interest you with my conversation with Mr. James Hamilton, VP Investor Relations of Olympus, last Nov. 14, 2011:

    1. With the JV agreement signed, how much would be the required CAPEX spending for the Capcapo Gold Field?
    James: It’s hard to forecast capex at this time as we just completed the new agreement with Abra Mining and the project is early stage ( only completed a small number of due diligence drill holes in 2007).

    Would AMIC have a share on the CAPEX?
    James: Abra do not have to ante any share of the capex requirements

    2. Would AMIC share on the operating costs in operating the Capcapo Gold field?
    James: no

    3. When will the Capcapo Gold Field be in commercial operation?
    James: almost impossible to forecast as it’s an early stage exploration project with no feasibility planned for some time

    4. Would your company, in the near future, exercise its right to acquire the 60% of the JV interest?
    James: yes, subject to Philippine foreign ownership laws

    5. The indigenous people of Abra had been opposing the operation of the Capcapo Gold Field, is this matter already resolved?
    James: there is still work to be done in this area and we will be working closely with Abra Mining to fulfil these obligations

    Reply
    • I agree. AR is in the early stages. AR has made a substantial move up since we last discussed the potential of this company. I believe AR will be the next Lepanto in terms of price movement.

      Reply
  3. The investment community has failed to factor in the value of SC51, SC55 and Nissiping re-entry oil projects in TA,s stock price. TA has other high potential oil projects. My substantial investment is a keeper for me. I believe TA should be priced higher than PXP. I don,t own that stock.
    Can you do a feature on PetroEnergy (PERC)?

    Reply

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