Profiling: APC Group, Inc. (PSE: APC)

APC Group, Inc. (PSE: APC, the Company) is currently not in an operating stage. The following is APC’s corporate structure:

APC1

 

All of the above subsidiaries are in the pre-operating stage. The Company is engaged in geothermal energy exploration (through APEC & PRC-Magma), coal resource exploration, cement manufacturing, and mining.

 

Geothermal Energy Exploration

The Company has a total of three geothermal steam fields under exploration and development namely, Kalinga Apayao Geothermal Project (APEC), Mainit-Sadanga Geothermal Project (PRC-Magma), and Buguias-Tinoc Geothermal Project (PRC-Magma). Among the three, the Company’s interest in Kalinga Apayao is at the most advanced stage.

Kalinga Apayao geothermal project is under development that has a potential to generate 100 MW of new capacity and will approximately cost $300 million. In November 2010, APEC and its partner Guidance Management Corporation (GMC) signed a Farm-out Agreement with Chevron Geothermal Philippines Holdings, Inc. (Chevron) which makes Chevron responsible for the exploration, development and operation of the steam field and power activities. Also, under the agreement APEC and GMC will have the option to take equity position of up to 40% of the geothermal project.

Chevron, a foreign company, intends to convert the service contract to Financial and Technical Service Agreement (FTAA) in order to own the majority stake of the geothermal project.

Drilling of exploratory wells will start by the third quarter of 2014 which will take six months to complete. If the exploratory wells prove to be feasible, construction of the power plant will start and will be expected to operate commercially in late 2017 or early 2018.

Other geothermal projects

Mainit-Sadanga Geothermal Project has a total area of 58,911 ha. in Benguet Province and is estimated to have a potential of 60-100 MW.

Buguias-Tinoc Geothermal Project has a total area of 35,424 ha in Ifugao Province which also has a power potential of 60-100 MW.

Coal Resource Exploration

Aragorn Coal has two Coal Operating Contracts (COCs) located in Isabela (3,000 ha.) and Masbate (2,000 ha.). Masbate was dropped since extraction is not feasible and Isabela was put on hold due to anti-mining sentiment.

Cement Manufacturing

ACC was envisioned to manufacture of 1.5 million tons of cement a year. The Company has two Mineral Production Sharing Agreement (MPSA) issued in 1997 covering 1,000 ha. land containing limestone deposits in the Municipality of Ginalitan in Southern Cebu. An area of approximately 29 ha. has a proven and probable reserves of more than 50 years.

ACC is currently seeking prospective partners for the cement plant.

Mining

APC mining currently has an exploration permit in Alubijid, Misamis Oriental for a potential source of chromite and copper.

Currently, APC Mining is seeking prospective partners to further explore and develop the tenement.

 

Other business developments

On April 17, 2013, the Board of Directors of APC approved the sale of a wholly owned subsidiary, Environmental and General Services, Inc. (EGSI) to Viridi Environment, Inc. [1] for P14.5 million. [2] EGSI has a net asset of 41.6 million as of December 31, 2012 which suggests that the sale of ESGI is at a loss.

EGSI is engaged in the business of general and janitorial services and cleaning of buildings and other premises.

 

Sources:

  1. Board approval of sale of equity interest in Environmental & General Services, Inc. to Viridi Environment, Inc., http://www.pse.com.ph/resource/disclosures/2013/pdf/dc2013-3161_APC.pdf
  2. Additional information re: Board approval of sale of equity interest in Environmental & General Services, Inc. to Viridi Environment, Inc., http://www.pse.com.ph/resource/disclosures/2013/pdf/dc2013-3238_APC.pdf
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Basic Energy Corporation (PSE: BSC)

Basic Energy Corporation (BSC) was originally incorporated as Basic Enterprises, Inc. on September 19, 1968 and became an oil and gas exploration and development company on April 26, 1971, assuming a new name, Basic Petroleum and Minerals, Inc. Over the years, BSC evolved from an operating company to a holding company under the corporate name, Basic Consolidated, Inc. In 2007, in line with the inclusion among its primary purposes the production of ethanol and other biofuels, and the development of other alternative and renewable energy sources, the Company changed its corporate name from Basic Petroleum Corporation to Basic Energy Corporation.

The Company has investments in biofuel production, oil and gas exploration, and geothermal energy.

Biofuel production

The Company bought Zambo Norte Bioenergy Corporation (ZNBC) in July 10, 2007 and changed its corporate name to Basic Biofuels Corp. (BBC).  BBC plans for an integrated ethanol production plant in Gutalac, Zamboanga del Norte. The Company later established Basic Ecomarket Farms, Inc. (BEF) to undertake cassava project as feedstock for the ethanol plant. This is the Company’s response to the Biofuels Act of 2006 and to the optimistic view on biofuels during the time.

In the September 2011 quarterly report of the Company, they suspended the operations of BEF because the cassava yields were not enough to justify a commercial operation. Since the ethanol plant depends on the development of the feedstock operations, no further investments were made to BBC.

Oil and gas exploration

The company has interests in the following service contracts:

SC 47 (Offshore Mindoro) 1% interest

SC 53 (Onshore Mindoro) 3% interest

SC 41 (Sulu sea) .4413% effective interest

On April 3, 2006, the Company entered into a sale and purchase agreement (SPA) with Forum Energy (FEP), a subsidiary of Philex petroleum (PX). In June 5, 2008 the Company declared FEP default. On May 11, 2011, FEP & BSC signed a settlement agreement where FEP will pay $650,000 cash, convey 50% interest of FEP’s participating interests in Galoc, Nido, Matinloc and North Matinloc and 50% share in the historical cost recoveries of the oil assets.[1]

On June 21, 2012, BSC signed a Compromise Agreement (Agreement) with FEP where FEP is to do the following: [2]

  1. Pay $ 2,399,392.73 for the remaining balance of $10 million
  2. Settle $1 million within six months from date of execution of Agreement
  3. Settle another $1 million within 18 months from date of execution of Agreement

Geothermal Energy Operations

On July 10,2008, geothermal energy service contract for exploration and development covering 3,481 ha in the Calumpa Peninsula in Mabini Batangas was awarded by the DOE to the Company. The Company had then committed to invest $3.15 million for initial exploration activities.

The 5-year contract has phase 1 (yr. 1 & 2) and phase 2 (yr. 3) to determine the drilling locations. Based on the company’s initial assessment, the site has a potential of 20 MW. According to the company, the site can be developed within 2 years and has the advantage of being adjacent to transmission lines and strong electricity demand in the area. As of March 24, 2011, the company commissioned Filtech Energy Drilling Corporation for the prefeasibility study. [3]

On September 21, 2011, the Company signed a memorandum of understanding with Altus Transactional Services for a joint development of business opportunities in renewable energy projects.

On September 23, 2011, the Company signed a head of agreement with Geoenergy Incorporated to jointly develop BSC’s Mabini Geothermal Energy project. After the heads of agreement, Geonergy shall have the right to acquire 70% participating interest in the farm-in agreement for funding 100% of the exploration cost up to the drilling of one exploration well. [4]

In October 11, 2011, BSC incorporated Basic Geothermal Energy Corporation.

In December 16, 2011, the company signed a Memorandum of Understanding (MOU) with Energy 2035 Ltd., an Australian company engaged in the development of renewable energy in Australia, with a primary purpose to jointly engage in business opportunities for the development of renewable energy both in the Philippines and outside of their respective territorial areas. [5]

Comments

The geothermal power plant project of the Company is the most promising to deliver substantial revenue, which I expect to be online come the last quarter of 2015. The Company had been prudent in spending stockholder’s money by signing a heads of agreement with Geoenergy, thus limiting the risk exposure of the Company albeit at the price of lesser return in the future. The geothermal project of the Company is a factor to watch for because the feasibility of the geothermal project appears to be not yet considered in BSC’s share price.

Sources:

  1. Settlement Agreement with Forum Energy Plc. Re: settlement of disputes on issues arising from Service Contracts, http://www.pse.com.ph/resource/disclosures/2011/pdf/dc2011-3516_BSC.pdf
  2. Execution of Compromise Agreement with Forum Energy Plc re: share purchase agreement, http://www.pse.com.ph/resource/disclosures/2012/pdf/dc2012-4768_BSC.pdf
  3. Engagement of services of Filtech Energy Drilling Corporation re: Pre-Feasibility Study of Mabini Geothermal Energy Project, http://www.pse.com.ph/resource/disclosures/2011/pdf/dc2011-2192_BSC.pdf
  4. Signing of Heads of Agreement with Geoenergy Incorporated re: Mabini Geothermal energy Project, http://www.pse.com.ph/resource/disclosures/2011/pdf/dc2011-6901_BSC.pdf
  5. Execution of Memorandum of Understandin with Energy 2035 Ltd., http://www.pse.com.ph/resource/disclosures/2011/pdf/dc2011-8675_BSC.pdf

Disclaimer: I do not claim to be an expert and nothing I say should be taken as a recommendation to buy or sell.

Energy Development Corporation (PSE: EDC)

Energy Development Corporation (EDC, the Company) has a portfolio of renewable energy generating assets that rely on indigenous fuels. The Company has 305 MW of geothermal (Palinpinon and Tongonan) and 132 MW hydro (Pantabangan and Masiway) installed capacity that is operating commercially which generates 6,847.4 GWh electricity sales or P24 billion revenue for 2011. The Company still has 825 MW installed geothermal capacity not yet in commercial operations. In addition to high potential geothermal portfolio, EDC is developing an 86 MW wind farm in northern Luzon. Below is the location of EDC’s power generation projects:

EDC map

Below is EDC corporate structure:

EDC3

EGC is a holding company for EDC’s geothermal operations. Below are EGC’s subsidiaries:

EDC4

GCGI was incorporated on June 22, 2009 with primary activities on power generation, transmission, distribution, and other energy related businesses. GCGI currently operates 192.5 MW Palinpinon and 112.5 MW Tongonan 1 geothermal power plants in Negros Oriental and Leyte respectively.

FG Hydro operates the 120 MW Pantabangan and 12 MW Masiway Hydroelectric Power Plants locates in Pantabangan, Nueva Ecija Province, Central Luzon.

EDC Drillco provides drilling services to Lihir gold Limited in Papua New Guinea which contributed P710 million of revenues for the Company in 2011.

 

Comments:

EDC revenue performance for 2012 had much improved due to new contract prices agreed mid 2011 and power supply agreements signed in December 2011. Revenues had increase by 21% year-on-year in September 2012 translating to an EPS of 0.38. I project EDC’s EPS to reach 0.49 by the end of 2012.

Based on EDC’s annual report in 2011, the Company expects to put in commercial operations their 130 MW Bacman geothermal power plant by 2012. This is expected to contribute P4.2 billion additional revenues for the year 2013. I project the Company’s EPS for 2013 to at 0.58.

 

Valuation:

Assuming a 13x PE ratio multiple, EDC’s value should be 6.37 [0.49 x 13] by the end of 2012 and 7.54 [0.59 x 13] by 2013.

Other data:

EDC2

EDC1

Disclaimer: I do not claim to be an expert and nothing I say should be taken as a recommendation to buy or sell.

Petroenergy Resources Corporation (PSE: PERC)

Petroenergy Resources Corporation (PERC, the “Company”) is engaged in oil and exploration development, geothermal energy, and wind power.

Oil and Exploration Development

The Company has the following interests:

The Company has minority interest in Gabon, West Africa oil fields namely, Ebouri, Etame, and Avouma. The oil fields produced 7.3 million barrels with a daily production averaged 22,100 barrels for 2011. Currently, 100% of the Company’s revenues are sourced from their interest in Gabon oil fields. There were no disclosures yet regarding the renewal of their Production Sharing Contract (PSC) in Gabon. The contract can be extended every 3 years and is already the sixth contract period with Gabonese government. Historically, the contract is extended 2 years before expiration.

Amount spent for the development activities in the Gabon oil field:

Philippine Oil Exploration Activities

 Among all the service contracts (SC) that PERC owns, SC 14C is at the advanced stage where drilling is planned to be by the end of 2012.

The most promising is their interest in SC 51. SC 51 has the following participants:

*On October 23, 2012, Frontier Oil Corporation (Frontier) entered into a Farm-in Option Agreement where Frontier can acquire 80% interest in the southern area of SC 51 through shouldering all the costs of drilling an exploratory well in the area.

SC 51 is divided into northern (on-shore) and southern areas (off-shore Cebu). The on-shore prospect, Duhat, is situated on the northern tip of Leyte.

Northern Leyte has been described by geologists as containing the most natural oil seeps in the Philippine archipelago. Duhat was drilled in 2011 but the well reached only 321 m, far from the programmed 1,000 m depth, when it had to be abandoned due to adverse pressures. Despite the shortfall, oil and gas indications were observed and a working seal and structure conductive of hydrocarbon entrapment were proven, indicating the presence of an active petroleum system. New seismic data is scheduled to be acquired in July or August of 2012 to locate a new well on the same prospect.

Geothermal Energy

The DOE awarded PERC the Maibarara geothermal service contract in February 2010. In May 2010, the company entered into a joint venture agreement through the Company’s wholly owned subsidiary, PetroGreen Energy Corp. (PGEC), with Transa-Asia Oil and Energy Development Corporation (TA) and state owned PNOC Renewables Corporation (PNOC-RC) to jointly develop and operate the 20 MW geothermal power project.

In August 2010, a joint venture company Maibarara Geothermal, Inc. (MGI) was incorporated with PGEC owning 65%, TA (25%), and PNOC-RC (10%). The Company expects MGI to be in commercial operations by the 2nd half of 2013.

 

Wind Power

The Company’s Nabas Wind Power Project shows promising results where data gathered indicated that it can sustain 40-50 MW wind farm development.

Other Data:

Disclaimer: I do not claim to be an expert and nothing I say should be taken as a recommendation to buy or sell.