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Exploration Corporation
Beyond
Exploration 2008
a n n u a l
r e p o r t
Concept & Design by: MODE MATRIX MANILA INC.
Building 1, Energy Center, Merritt Rd., Fort Bonifacio, 1634 Taguig City •
[email protected] • www.pnoc-ec.com.ph
Exploration Corporation
PNOC EC | 2008 Annual Report
PNOC Exploration Corporation remains faithful to its unyielding quest of seeking new energy resources to fuel the country’s need for energy independence. More than a binding task, PNOC EC takes its business beyond exploration, thus passing on the positive energy to everything that it touches – proper use of raw energy resources, progress of the community, improvement in the lives of the Filipino people and continuous preservation of the environment. The forward-looking theme highlights the company’s bold and great strides in pursuit of greater energy independence, proving that PNOC EC braves even the most challenging energy hindrance because behind these arduous exploration tasks is a commitment to the betterment of the country and in the lives of the people. The visuals used in the cover design speak for itself. Upstream production of various energy sources such as petroleum and coal exploration and energy supply depict the outer images. While the inner photos depict the end-users of the company’s energy exploration activities. These images are all interconnected by a blue graphic line which symbolizes energy, which PNOC EC explores, harnesses and develops.
Exploration Corporation
OUR VALUES.
OUR VISION. We are the leading oil, gas and coal company of choice in the Philippines with global reach in exploration and production, contributing to the country’s growth and development.
OUR MISSION. We are an enterprise, whose core business is petroleum and coal, committed to the delivery of superior economic benefits to our stakeholders through top performance in all our undertakings.
Teamwork • We value teamwork. Our employees and stakeholders work together harmoniously toward common goals.
Innovativeness • We encourage creativity and continuous improvement in the conduct of our business.
Integrity • We strictly adhere to ethical and moral standards of fairness and honesty in all our undertakings.
Customer-Driven • We perform with a high level of efficiency geared towards customer satisfaction.
People Orientation • We value the welfare and growth of our employees as well as the interest of our host communities. We actively seek social acceptance of our projects.
Concern for the Environment • We properly manage the impacts of our operations to the environment. We adhere to the principles of sustainable development; balancing ecological, social and economic sustainability of our projects.
Professionalism • We operate our business with consistent competence, dependability, responsibility and accountability.
Safety and Well Being • We conduct our business in a safe manner, thereby protecting the well-being of our employees and stakeholders.
PNOC EC | 2008 Annual Report
Profile
PNOC Exploration Corporation (PNOC EC) is the upstream oil, gas and coal subsidiary of the stateowned Philippine National Oil Company (PNOC). Initially starting out as the Exploration Department of PNOC in April 1975, PNOC EC was eventually incorporated as a PNOC subsidiary and registered with the Philippine Securities and Exchange Commission on April 20, 1976. PNOC EC’s shares of stock are 99.78% owned by the Philippine government through PNOC, with the remaining 0.22% held by public shareholders. PNOC EC currently holds interests in eight petroleum Service Contracts (SC), namely SC 37 (San Antonio Gas Power Plant), SC 38 (Malampaya), SC 43 (Ragay Gulf), SC 47 (Offshore Mindoro), SC 57 (Calamian), SC 58 (West Calamian), SC 59 (West Balabac) and SC 63 (East Sabina). SC 37 and 38 are acreages in the production phase, while the rest are exploration blocks. PNOC EC also holds the rights for the development of the Camago Malampaya Oil Leg (CMOL) Project in offshore Northwest Palawan under the Terms of Service entered into with the DOE in March 2006. The Company is also taking the lead in the implementation of downstream natural gas infrastructure projects such as the Batangas to Manila Natural Gas Pipeline, and the Integrated Bataan Liquefied Natural Gas (LNG) Terminal, Power plant and Natural Gas Pipeline Projects. Aside from petroleum, PNOC EC is also engaged in their coal business. The company holds Coal Operating Contracts in various parts of the country, namely COC 41 and COC 152 (Siay) in Zamboanga Sibugay, COC 122 and 141 in Isabela and COC 140 in Surigao del Sur. PNOC EC also operates coal terminals in Zamboanga Sibugay, Cebu, Batangas, and North Harbor, which serve as its handling facility for local as well as imported coal that the Company supplies to power plants and cement factories in the Philippines. PNOC EC also owns a private commercial port – the Energy Supply Base (ESB) located in Mabini, Batangas which offers berthing, cargo handling, storage and warehousing facilities to energy companies and other commercial clients.
Contents IFC Our Cover Values Vision & Mission 1 • one Company Profile 2 • two Chairman & President’s Report 7 • seven Areas of Interest
8 • eight Operational Highlights 16 • sixteen Corporate Social Responsibility 17 • seventeen Health, Safety and Environment 18 • eighteen Financial Highlights 20 • twenty Financial Statements
25 • twenty-five Notes to Financial Statements 40 • forty Board of Directors 42 • forty-two Management Team 44 • forty-four Heads of Other Units & Field Offices IBC • Directory
PNOC EC | 2008 Annual Report
Report
Transcending Boundaries The year 2008 proved to be a challenging year
EC’s 2008 performance can be attributed to several
for many countries including the Philippines. Oil
factors. First, revenues from the Malampaya
prices surpassed $100 per barrel for the first time
Project reflected a 34% increase in 2008 due to
in January 2008, and peaked at $147.30 a barrel in
the increased gas offtake from 125,048.43 million
July 2008. By the latter part of the year, a majority
standard cubic feet (MMscf) in 2007 to 132,006.20
of the industrialized world entered into a deep
MMscf in 2008. Gas and condensate prices also
recession sparked by a financial crisis that had its
increased in 2008 as compared to the prices in
origins in reckless lending practices involving the
2007. Next, coal trading and integrated services
origination and distribution of mortgage debt
posted a 37% revenue increase due to higher
in the United States. While the aforementioned
coal volume sold in 2008: from 754.31 thousand
scenarios are admittedly bleak, the Philippines’
metric tons in 2007 to 869.98 thousand metric
economy continued to expand at a rapid pace.
tons in 2008. At the same time, coal prices also
Boosted by the three-decade high of 7.3% GDP
increased during the year. And lastly, the boost
growth rate last 2007, the country has posted a
in net income can also be attributed to lower
decent 4.6% GDP growth for 2008.
financing costs as a consequence of the company’s full payment of the remaining $47 million balance
While 2008 may be a very bad year for many
of the original $175 million loan to fund our
businesses, it was the best year for PNOC EC
investment in the Malampaya Project in 2000.
financially. We are pleased to report that in 2008, your company’s net income posted a 73% increase
On the other hand, PNOC EC’s operating expenses
from PhP 1.77 billion in 2007, to PhP 3.05 billion in
also increased by 24% from PhP329 million in
2008, brought about by higher natural gas offtake
2007 to PhP409 million in 2008. The increase
and coal volume, as well as very high oil and coal
can be attributed largely to expenses relating to
prices in the world market. PNOC EC’s net sales
the Company’s exploration activities in various
went up to PhP 8.65 billion in 2008 from PhP 6.44
petroleum service contracts.
billion in 2007. The significant increase in PNOC
PNOC EC | 2008 Annual Report
Aggressive Petroleum Exploration PNOC EC continued to implement an aggressive petroleum exploration program around the country. To date, PNOC EC holds interests in seven (7) Service Contracts (SC), namely: SC 38 (Malampaya) SC 43 (Ragay Gulf), SC 47 (Offshore Mindoro), SC 57 (Calamian), SC 58 (West Calamian), SC 59 (West Balabac) and SC 63 (East Sabina). In June 2008, PNOC EC together with partners PearlOil (Ragay) Limited (operator) and Premier Oil Philippines BV drilled the Monte Cristo 1 well to a depth of 2,000 meters to test a seismically-defined reef feature. The well encountered the reef, but did not intercept any hydrocarbons. The exploration focus is now on the deeper limestone horizon, which was identified in the seismic data as having a similar geology to the Malampaya reservoir. Also in 2008, PNOC EC continued to conduct seismic interpretation, and detailed geological and geophysical studies in SC 47, SC 57 and SC 59 with the objective of mapping new leads to develop them into drillable prospects. Your company has also commenced its search for prospective joint venture partners for SC 47 and SC 59, subject to the provisions of EO 556.
Jacinto V. Paras Chairman of the Board
PNOC EC, along with partner Nido
Rafael E. Del Pilar
Petroleum, has also implemented the
President & Chief Executive Officer
seismic program in SC 58 wherein a total of 661 kilometers of reconnaissance 3D data and 1,859 kilometers of 2D seismic data were acquired. Through the activity, earlier mapped leads were better defined and new
PNOC EC | 2008 Annual Report
Exploration Corporation
leads were identified. Data processing of the new data
to the various gas users in Luzon. Two projects have
was completed in July 2008, while data interpretation
already been initiated, namely: the Batangas to Manila
is currently ongoing. These will enable the Consortium
or the BATMAN 1 project, which covers the provinces
to select a target which is set to be drilled sometime
of Batangas, Laguna, Cavite and Metro Manila, and
in 2010. At the same time, your company has also
the Bataan to Manila or BATMAN 2, which targets the
processed 3,254 line kilometers of 2D seismic data and
areas of Bataan, Pampanga, Zambales. The BATMAN
started reprocessing 1,024 line kilometers of old 2D
2 gas pipeline is also envisioned to be interconnected
seismic data for SC63.
to BATMAN 1 through an offshore line from Bataan to Cavite or the BATCAVE. The setting up of these vital
Meanwhile, PNOC EC continues to spearhead the
energy infrastructures will expand the use of natural gas
development of the Camago-Malampaya Oil Leg
beyond the power sector, making the environment-
(CMOL) Project to produce the crude oil found beneath
friendly and efficient fuel available to the industrial,
the Malampaya gas field in offshore northwest Palawan.
commercial and transport sectors, and eventually to the
Pursuant to the directive of President Gloria Macapagal-
households as well.
Arroyo as mandated in EO 473, the DOE through PNOC or its subsidiary is directed to immediately pursue the
Intensified Coal Business
development and production of the CMOL Project, in close coordination with the SC 38 Consortium. In July 2,
PNOC EC is also strengthening its position in the coal
2008, PNOC EC and Burgundy Exploration Corporation
industry by stepping up and expanding its coal business
signed a Participating Agreement, with Burgundy as the
by maximizing the development and utilization of
operator with 84.9% participating interest and PNOC EC
indigenous coal resources, thereby reducing the
holding the remaining 15.1%. The agreement was later
country’s need to import coal.
approved by the DOE on September 18, 2008. In November 2008, the DOE awarded to PNOC EC and At the same time, in June 2008, PNOC and PNOC EC
partner Agusan Petroleum COC 152 covering an area
have decided to revive the Downstream Natural Gas
of 6,000 hectares in Siay, Zamboanga Sibugay, wherein
Infrastructure Development. The mother company,
pre-exploration activities were completed during the
PNOC, is spearheading the development of natural gas
year. Along with COC 152, PNOC EC also has four other
infrastructure thru PNOC EC. This includes the setting
Coal Operating Contracts, namely: COC 41 in Malangas,
up of Liquefied Natural Gas (LNG) receiving terminal for
COC 122 and 141 in Isabela, and COC 140 in Surigao
gas supply and the construction of gas transmission and
del Sur. COC 41, located within the Malangas Coal
distribution facilities to deliver and supply natural gas
Reservation in the province of Zamboanga Sibugay,
PNOC EC | 2008 Annual Report
PNOC EC is set to venture into a coal mining business in Indonesia, and in 2008, has signed a Memorandum of Agreement for due diligence with Putra Asyano Mutiara Timur. PNOC EC also operates coal terminals in Zamboanga Sibugay, Cebu, Batangas and North Harbor in Manila. The coal terminals serve as PNOC EC’s handling facility for the local and imported coal that the company supplies to the various power plants, cement factories continued to produce high quality coal with calorific value reaching 12,000 BTU. The acreage also hosts the biggest underground coal mine in the country. PNOC EC is also gearing up for the implementation of its Isabela Coal and Power Plant Project within the COC 122 area. The project involves the development of a coal mine and the construction of a circulating fluidized bed power plant that will utilize the low-rank coal in the area. Once implemented, the project will be first of its kind in the country which will utilize a progressive strip mining and rehabilitation method to extract coal. The project is expected to augment the energy requirements of Isabela while providing a stream of benefits to the host communities in the form of coal royalties, taxes and employment opportunities. Aside from utilizing the country’s coal resources, PNOC EC has taken further steps to ensure a stable and competitive supply of coal for the Philippine market.
and other coal users in the country. Beyond Energy Exploration Along with its goal of contributing to the country’s growth and development through energy exploration and production, PNOC EC values the development of its stakeholders – taking further steps to improve the lives of the communities wherein it operates. For the past several years, the company has implemented Corporate Social Responsibility (CSR) Programs under the title of Kaagapay – which includes medical mission activities conducted yearly in the company’s project sites such as Batangas, Palawan, Cebu, Zamboanga Sibugay and Isabela. And in 2008, your company has decided to take these social initiatives further by formulating and adopting its own CSR policy and forming a section dedicated solely to the implementation of these
PNOC EC | 2008 Annual Report
Nevertheless, we must still prepare ourselves for more challenging times ahead. The 2008 recession has added further pressure to the already volatile energy industry – aside from every country’s quest for oil to sustain the growth of its economy; each must also accomplish it on a tighter budget. It is expected that the spending of energy exploration and production companies will contract by
Exploration Corporation
initiatives. Under the umbrella title of Kaagapay – which means hand-in-hand, PNOC EC’s CSR programs aim to alleviate the host communities’ health, education and livelihood conditions. These programs are undertaken in partnership and with the support of our project proponents and the host communities’ local government units. During the year, PNOC EC’s Kaagapay Programs has benefited a total of 2,849 people for the Kaagapay sa Kalusugan (Health), 503 people for the Kaagapay sa Karunungan (Education) and 45 people for the Kaagapay sa Kabuhayan (Livelihood). Future Plans 2009 will be a very busy and challenging year for PNOC EC. For the year, your company has earmarked a total of PhP 816.76 million for oil exploration and development, another PhP 243.66 million for natural gas development and production projects, and PhP 555.35 million for coal
as much as 12% in response to the significant decline in commodity prices, constrained cash flow and the tight credit markets. It is on this note that as we venture into our 33rd year in energy exploration and production, your company, PNOC EC, once again reaffirms its commitment to its mandate of exploring and developing petroleum and coal resources for the country. To sustain the growing economy of the Philippines, our search for indigenous petroleum and coal resources must be intensified further and firmly reinforced with the support of our government, the industry and local communities. Truly, the energy industry has proven to be challenging at best. But with a line of successes and 33 years worth of experience tucked under its belt, PNOC EC has also proven to be resilient and ready to face these challenges. And together, with the brave men and women who make up PNOC EC, its partners and stakeholders, PNOC EC is ready to take on any challenge and transcend all boundaries as it embarks on an even bolder and more aggressive oil, gas and coal exploration in order to provide a brighter future for the Philippines.
exploration and development projects. Another PhP 1,884.26 million is budgeted for our participation in the Malampaya Gas Project.
Jacinto V. Paras Chairman of the Board
Rafael E. Del Pilar President & Chief Executive Officer
1 http://seekingalpha.com/article/111725-energy-exploration-and-production-spending-will-contract-in-2009
PNOC EC | 2008 Annual Report
North Harbor Coal Terminal
COC 152 Siay
PNOC EC | 2008 Annual Report
Highlights Natural Gas Production Service Contract No. 38 – Malampaya Gas Project PNOC EC owns 10% stake in the upstream
During the year, the SC 38 Consortium has
component of the Malampaya Deepwater Gas-
also successfully conducted maintenance
to-Power Project, together with Shell Philippines
activities on the Malampaya facilities, such as
Exploration B.V., the Operator (20%), Shell Philippines
the Gas Export Pipeline pigging in February
LLC (25%) and Chevron (45%).
2008 and the flaretip replacement in July 2008. The Consortium also commenced the bidding
In 2008, the Malampaya project continued to
process for New Gas Sales in October 2008 and
provide the gas fuel requirements of its three power
pre-qualified potential bidders in December
plant customers in Batangas, namely Santa Rita
2008. At the same time, an extension of the
(1,000 MW), San Lorenzo (500 MW), and Ilijan (1,200
Gas Sales Purchase Agreement (GSPA) with
MW). Total natural gas offtake for the year was
Pilipinas Shell Petroleum Corporation (PSPC)
approximately 130.85 billion standard cubic feet
was successfully negotiated in October 2008.
(BCF), higher than the 126.03 BCF offtake in 2007. Total condensate production from the Malampaya decreased to 5.57 million barrels, from the 5.75 million barrels in 2007 due to the declining reservoir condensate-to-gas ratio (CGR). The condensate produced was shipped to buyers in Singapore, Thailand and China.
Exploration Corporation
In 2008, the Malampaya project continued to provide the gas fuel requirements of its three power plant customers in Batangas, namely Santa Rita (1,000 MW), San Lorenzo (500 MW), and Ilijan (1,200 MW). Total natural gas offtake for the year was approximately 130.85 billion standard cubic feet (BCF), higher than the 126.03 BCF offtake in 2007.
PNOC EC | 2008 Annual Report
Petroleum Exploration and Development Service Contract No. 37 – San Antonio Gas Power Plant
Service Contract No. 43 – Ragay Gulf
PNOC EC’s 3-MW San Antonio Gas Power Plant (SAGPP)
The SC-43 acreage, awarded on January 14, 2004,
located in Echague, Isabela supplied electricity to about
covers a total of 10,880 square kilometers located
10,000 households in the municipalities of Echague,
mainly in offshore Ragay Gulf and partly in onshore
Jones, San Agustin and Santiago City for the past 14
Bondoc Peninsula. PNOC EC holds 15% participating
years. Due to the decline in reservoir pressure, gas
interest in the SC, while partners PearlOil (Ragay)
production from SC 37 dropped to 186.71 million
Limited, the operator, and Premier Oil Philippines BV
standard cubic feet (MMscf) from the 324.8 MMscf
holds 64% and 21% participating interests respectively.
produced in 2007. Consequently, the plant’s electricity generation also dropped to 6.24 GW-hr from 14.71 GW-
The Consortium drilled the Monte Cristo-1 well to a
hr generated in 2007.
measured depth of 2,000 meters in June 2008 to test a seismically-defined reef. The well did not contain hydrocarbons but encountered the reef, which may be a potential target elsewhere in the block. The exploration focus is now on the deeper limestone horizon, which was identified in the seismic data. This limestone horizon is geologically similar to the Malampaya reservoir. Service Contract No. 47 – Offshore Mindoro SC 47, covering an area of 14,667 square kilometers in offshore Mindoro, was awarded on January 10, 2005 by the Department of Energy (DOE) to PNOC EC and Petronas Carigali. On January 10, 2008, PNOC EC assumed operatorship of the block after Petronas relinquished its interest in the block due to unfavorable results of the Kamia 1 well drilled in 2007. PNOC EC
Operations of the SAGPP was officially shut down last July 31, 2008, as the gas pressure dropped below the required inlet pressure of the power plant’s gas turbine engine on the said date due to the declining well head pressure of the SA-1A well. PNOC EC is currently working with interested parties to produce and utilize the residual gas.
now holds 97% interest, while partners Petro Energy Resources Corporation and Basic Energy Corporation hold 2% and 1% participating interests respectively. The results of the Kamia 1 well necessitated PNOC EC to do further studies on the petroleum potential of the basin. The seismic interpretation continued and several new leads were mapped. A 1000-km 2D seismic survey was designed over these leads to develop them as possible drilling targets. With the price of oil rising in early 2008, producing the marginal Maniguin oil field (discovered in 1994) was also studied. However, the size of the field was too small to make it feasible to produce.
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PNOC EC | 2008 Annual Report
Highlights
PNOC EC is looking for strategic partner in this block.
adjacent to the Malampaya gas field. PNOC EC and
In compliance with E.O. 556, it did this through public
Nido Petroleum Limited of Australia currently holds
bidding.
50% participating interests each, with the latter as the operator of the block.
Service Contract No. 57 – Calamian A large seismic program was conducted between Covering an area of 7,200 square kilometers, SC 57 is
November 2007 to January 2008, with the acquisition
located in offshore northwest Palawan, west of the
of around 661 square kilometers of reconnaissance 3D
Calamian islands. It was awarded on September 15,
data and 1,859 kilometers of 2D seismic data. Earlier
2005 by the DOE to PNOC EC. It later farmed out
mapped prospects were better defined and new
portions of its interest to China National Offshore Oil
leads were identified. Processing of the new data was
Corporation (CNOOC) and Mitra Energy Limited (MEL ).
completed in July 2008 and interpretation is on-going.
Currently, the company holds 28% interest with CNOOC
This will enable the Consortium to select a target set to
and MEL holding 51% and 21%.
be drilled sometime in 2011.
In 2008, detailed geological and geophysical studies
Service Contract No. 59 – West Balabac
were conducted to enhance the block’s prospectivity. A detailed seismic program is being planned to cover the
SC 59 is located off the southwesternmost tip of
most prospective leads, most of which are in deepwater
Palawan just north of the Malaysian border covering
locations to mature them into drillable status. However,
an area of 14,760 square kilometers. The DOE awarded
the seismic program is contingent on the DOE’s
SC 59 on January 13, 2006 to PNOC EC, which currently
approval of our partners’ participation – which was filed
holds 100% interest.
in April 2006. PNOC EC continued the seismic interpretation and basin Service Contract No. 58 – West Calamian
evaluation of the area. Several prospects have been mapped and a detailed seismic program was designed
SC 58, referred to as the West Calamian block, is a
over them to upgrade them into drillable targets.
deepwater acreage covering an area of 13,440 square
Recent hydrocarbon discoveries on the Malaysian
kilometers. It was awarded to PNOC EC by the DOE
side, such as the Murphy Oil gas discovery around 40
on January 12, 2006 and farmed out half of its interest
kilometers southwest, have made this block attractive to
to Nido Petroleum. The block lies west of SC 57 and
oil companies.
PNOC EC | 2008 Annual Report
Joint Marine Seismic Undertaking (JMSU) The JMSU Project, which involves the national companies of China, Vietnam and the Philippines, covers an area of 142,886 square kilometers located in South China Sea, west of Palawan. With the encouraging results of the 1st phase of the project, it was decided to continue the 2nd phase of the seismic activity. This involved a total of 11,704 line kilometers 2D seismic data, which was acquired from October 2007 to April 2008. Around 7,127 line kilometers of this was acquired in 2008. Processing of Being a deepwater block where exploration costs are expensive, PNOC EC sought a strategic partner through public bidding (pursuant to E.O. 556). Discussions are currently on-going with a prospective party, who has qualified as a possible joint venture partner. Service Contract No. 63 – East Sabina SC 63, or the East Sabina block, covers an area of 10,560 square kilometers located in offshore southwest Palawan. It was awarded by the DOE on November 24, 2006 to the joint venture of PNOC EC and Nido Petroleum. Each company holds 50% with PNOC EC as the operator. The processing of 3,254 line kilometers of 2D seismic data acquired in 2007 by CGG Veritas was completed. Reprocessing of 1,042 line kilometers of old 2D seismic data also started during the year. The ongoing seismic interpretation identified several prospects and leads that were successful in both offshore northwest Palawan and Sabah. PNOC EC and the DOE started specialized geological studies of the wells drilled in the block to better understand the petroleum reservoirs of the area. Being mostly a deepwater acreage, PNOC EC is looking for a strategic partner. This was done through public bidding (under E.O. 556).
the data was completed by last September 2008, and was received by PNOC EC in November 2008. Geologic fieldwork was also accomplished in Vietnam in April 2008. The JMSU Agreement lapsed on June 30, 2008. The interpretation is now being done separately by the parties. Camago-Malampaya Oil Leg On July 2, 2008, PNOC EC and Burgundy Global Exploration Corporation (BGEC) signed a Participation Agreement, making Burgundy the CMOL operator with 84.9% CMOL interest and PNOC EC holding the remaining 15.1%. The Agreement was later approved by the DOE on September 18, 2008.
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PNOC EC | 2008 Annual Report
Highlights province of Batangas to transport and supply natural gas to the various industries in the economic zones of Batangas, Laguna and Cavite. In June 2008, PNOC and PNOC EC, have revived the project and immediately resumed pre-development activities such as the pipeline route and market surveys. Information and education campaigns, and coordination with local government units, tollway operators and other right of way owners were also An Oversight Coordinating Committee (OCC) was established on December 10, 2008, to provide a venue for an effective coordination in the implementation of the CMOL Project in relation to the Malampaya Gas-to-Power Project. BGEC has already commenced negotiations with potential contractors and vendors who will provide the technology, equipment and services for the project. Field operation for CMOL is targeted to commence in 2009. Downstream Natural Gas Development Projects The Downstream Natural Gas Development Projects involves the setting up of vital energy infrastructures to expand the use of natural gas in the Philippines, making the environment-friendly, efficient and competitivelypriced fuel available to the industrial, commercial and transport sectors, and eventually to the households. These projects are part of the Downstream Natural Gas Development Master Plan of the DOE for the country. As mandated by the Philippine government, PNOC is spearheading the development of these natural gas infrastructure development projects, and are in turn being implemented by PNOC EC. Batangas to Manila Natural Gas Pipeline Project (BATMAN 1) The Batangas to Manila Natural Gas Pipeline Project (BATMAN 1) involves the construction of natural gas transmission and distribution pipeline facilities from the
initiated. Further discussions to secure gas supply and commitments from gas offtakers will be conducted in 2009. Integrated Bataan Liquefied Natural Gas Terminal, Power Plants and Bataan to Manila Gas Pipeline Project (BATMAN 2) The Integrated Bataan Liquefied Natural Gas (LNG) Terminal, Power Plant and Natural Gas Pipeline Project (BATMAN 2) involves (1) the development of an LNG terminal in Limay, Bataan, (2) the conversion to gasfiring of the Limay Power Plant and/or development of greenfield gas-fired power plants as anchor loads and (3) the construction and operation of the associated pipelines to transport the gas to the target markets. The LNG Terminal will serve as the receiving, storage and regasification facilities for imported LNG. A pipeline coming from the Terminal will transport natural gas to the Limay and greenfield power plants.
PNOC EC | 2008 Annual Report
Aside from supplying fuel for the power plants, the regasified gas can also be made available in Central Luzon, to the various industries in the economic zones of Bataan, Zambales and Pampanga provinces. Via the Bataan to Cavite offshore pipeline (BAT-CAVE) traversing Manila Bay, the LNG Terminal will secure and sustain the gas supply in the country, including BATMAN-1 and its future demand, beyond the life of the Malampaya Gas Field. Coal Exploration and Production Coal Operating Contract No. 41 – Malangas PNOC EC operates Coal Operating Contract (COC) 41 within the Malangas Coal Reservation in Zamboanga Sibugay, straddling portions of the municipalities of Malangas, Diplahan and Imelda. PNOC EC operates a large-scale coal mine known as the Integrated Little Baguio (ILB) colliery, which is currently the largest semimechanized underground coal mine in the country. As holder of the COC, the company also supervises the mining operations of various small-scale coal miners. For 2008, total coal production in COC 41 amounted to 110.54 thousand metric tons (MT). The decrease in coal production from the 2007 output can be attributed to the major repair and rehabilitation activities that were undertaken at the ILB colliery.
Also in 2008, the Phase 1 exploration drilling contract was awarded and a Certificate of Non Coverage was obtained for the Lumbog area. Equipment mobilization, site preparation, drilling and core logging, as well as sampling and laboratory analysis were also completed. Studies on mine feasibility and detailed engineering and design were also started during the year. PNOC EC also conducted geological investigation, drilling and reserve evaluation in the Shaft 3 area. For the Malongon area, the Company completed reconnaissance mapping, map preparation and preliminary assessment. Data on geology and coal resources were updated, and preliminary exploration activities were started. Coal Operating Contract No. 122 & 141 – Isabela PNOC EC is the holder of COC 122 which straddles portions of the city of Cauayan and the municipalities of Naguilian and Benito Soliven in Isabela. The project involves putting up either a 30MW, 50MW or 100MW power plant simultaneous with coal mining operations from where the lignite (low rank) coal will be sourced. Meanwhile, COC 141 is projected to augment the production of COC 122 in the long term. In 2008, PNOC EC commenced the technical and economic reassessment of the project. The environmental compliance process was also
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PNOC EC | 2008 Annual Report
Highlights
started in the same year with the bidding out of the
PNOC EC and Agusan Petroleum. PNOC EC, which was
Environmental Impact Assessment (EIA) consultancy.
designated as the operator of the joint venture project,
PNOC EC has also revived its coordination work with the
holds 49% participating interest in the project, while
local government units of Isabela through information
Agusan Petroleum holds the remaining 51%.
education communication (IEC) campaigns and social development programs implementation (outreach
Representatives from PNOC EC and Agusan Petroleum
programs, trainings and seminars).
also started the negotiations on mutually acceptable terms for the Joint Operating Agreement which will be
Coal Operating Contract No. 140 – Surigao del Sur
submitted to the DOE for approval.
COC 140 was awarded to PNOC EC by the DOE on July
Indonesia Coal Project
5, 2005. The contract area measures 3,000 hectares and is located within the municipalities of Cagwait and
PNOC EC is venturing into the coal mining business
Tago in Surigao del Sur. The COC will allow PNOC EC to
in Indonesia in order to ensure a stable and price-
conduct exploration activities within the area that has
competitive supply of coal for the Philippine market.
an estimated 2.8 million tons of in-situ proven reserves (BED, 1984).
In 2008, PNOC EC signed a Memorandum of Agreement with Putra Asyano Mutiara Timur (PAMT)
In 2008, PNOC EC obtained the Precondition Certificate
for the conduct of technical, legal and economic due
from the National Commission on Indigenous Peoples
diligence to determine the viability and commerciality
(NCIP) and the Environmental Management Bureau’s
of operating a coal mine project in the company’s
(EMB) Certificate of Non-Coverage for the project.
concession area in Central Kalimantan, Indonesia. The
By December, PNOC EC had completed the block
technical due diligence started in September 2008
boundary survey of the area, and the process for the
with reconnaissance work that mapped several coal
competitive bidding for the exploration drilling in the
outcrop locations and identified a number of alternative
area has commenced.
transport and shipment routes that PNOC EC could use once the company decides to produce coal from
Coal Operating Contract No. 152 – Siay
the project area. Likewise, the legal due diligence commenced in October 2008 with the engagement of
Covering an area of around 6,000 hectares located in the municipality of Siay, Zamboanga Sibugay, COC 152 was awarded in November 2008 by the DOE to
the consultancy services of an Indonesian law firm.
PNOC EC | 2008 Annual Report
Coal Marketing and Trading Coal Sales
Total actual volume handled for 2008 is 139 thousand metric tons, a slight fall from 2007’s 149.19 thousand
PNOC EC’s coal marketing and trading business
metric tons. The decrease in volume handled can be
continued to serve the coal requirements of its industrial
attributed to the decrease in coal imports by PNOC EC’s
and power plant customers with the coal production
Batangas based client.
from COC 41 and other local coal mine sources. Energy Supply Base In 2008, direct coal sales were 870 thousand metric tons, an improvement from 2007’s 776.83 thousand metric
PNOC EC also owns a private commercial port – the
tons. The improvement can be attributed to increase
Energy Supply Base (ESB) located in Mabini, Batangas,
in demand for domestic coal by PNOC EC’s clients.
which offers berthing, cargo handling, storage and
PNOC EC was also able to trade 112,536 metric tons of
warehousing facilities to its clients.
Indonesia coal to China during the year. In 2008, PNOC EC accommodated a total of 232 local Integrated Services
and foreign vessels and handled 219 thousand metric tons of local cargoes and 155 thousand metric tons of
Aside from coal sales, PNOC EC also offers integrated
foreign cargoes. The base was also able to provide a
services such as discharging foreign and local coal
total of 6.4 million liters of fuel to its clients. ESB was
shipments, stockpiling, screening, blending and hauling
also able to lease out a total of 57,618 square meters of
of coal to power plants and cement factories in the
warehouse, office space, pipe rack and open yard space
Philippines.
to its customers. These values translate to a total of PhP 316 million in gross revenues for ESB, a significant increase from its revenue of PhP 225 million in 2007. Marketing efforts are being intensified to increase the number of clients from both the energy-related industry and the commercial sector.
15
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PNOC EC | 2008 Annual Report
Exploration Corporation
Corporate Social Responsibility Beyond Energy Exploration
Kaagapay
PNOC EC continuously establishes its identity as a corporate
In choosing and implementing CSR projects for our
citizen by strengthening its Corporate Social Responsibility
communities, we collaborate with both our Project
(CSR) Program and values. In July 2008, your company
Proponent in identifying the needs of the project relative to
created an External and Community Relations Section
the community, and the communities themselves to hear
reflecting its commitment to expand its CSR projects, which
what CSR projects are most needed which will have the
are designed to maximize our impact on the communities
most positive impact in their community.
and foster strategic partnerships with local government units in the communities where we operate and plan to
We feel that the term “Kaagapay,” which means hand in
operate.
hand, best describes PNOC EC’s CSR Program. We work hand in hand with both our Project Proponent and host
Also in 2008, a CSR and Community Relations Policy has
communities in order to provide opportunities that will
been formulated and approved by PNOC EC, which serves as
address three areas in the communities’ lives, namely: in
a basis and guide in the formulation and implementation of
health, education and livelihood.
the CSR activities. It states: From July to December 2008, we have conducted 19 CSR “In the conduct of our business, we at PNOC EC are
projects benefiting a total of 3,397 beneficiaries:
committed to promoting the development of the communities by providing relevant Corporate Social
Kaagapay sa Kalusugan (Health): 2,849
Responsibility (CSR) initiatives in the areas where we operate
Kaagapay sa Karunungan (Education):
503
or plan to operate.
Kaagapay sa Kabuhayan (Livelihood):
45
We regard this as our corporate responsibility and a key
Of course, these programs’ successes can be contributed to
element in the attainment of our vision and mission as a
the partnerships and hard work of:
Company.” Number of volunteer and partner organizations: 15 Through the policy, PNOC EC declares its commitment to
Number of volunteers:
300
conduct its operations in a socially and environmentally
PNOC EC employee volunteers:
32
responsible manner, seeking sustainability and social acceptance of all its projects.
In 2009, we aim to take the first journey towards developing and implementing sustainable CSR projects aimed at producing a positive impact on the lives of the people in our communities, even after PNOC EC leaves these areas.
PNOC EC | 2008 Annual Report
We at PNOC EC are committed to conduct our business in a responsible and safe manner, thereby protecting the environment and the health, safety and well being of our employees, partners, stakeholders and the general public in the communities where we operate. In 2008, PNOC EC spent PhP 3.10 million for its Corporate Health, Safety and Environment (HSE), and PhP 2.06 million for its HSE in COC 41 – Malangas.
Health, Safety & Environment The following are PNOC EC’s achievements in health, safety and environment: •
PNOC EC received awards from the Safety and
•
Conducted a Safety Appreciation Course for
Health Association of the Philippine Energy Sector
Miners, Mine Rescue Training, Tree Planting
(SHAPES) for Malangas Coal Project for obtaining
Activity and Mine Evacuation Drill in COC 41
more than Two Million Man-Hours without Lost
– Malangas. At the same time, a Firefighting and
Time Accident (LTA); and the San Antonio Gas
Fire Prevention Seminar and First Aid Training
Power Plant for achieving two (2) years without
were also conducted for the employees.
Lost Time Accident (LTA) as of year 2008. •
Provided personal protective equipment (PPE) for
•
PNOC EC’s HSE Section completed & submitted
all field personnel and Head Office employees
to DENR the Memorandum of Agreement (MOA)
who are performing field works. Also, field offices
for the formation of the Multi-Partite Monitoring
were issued Hard Hats for guests and visitors.
Team (MMT) for COC 41 – Malangas, which
is one of the ECC conditions. The MMT is a
•
Acquired firefighting equipment (FFE), safety
multi-sectoral organization composed of
equipment and supplies for COC 41 – Malangas.
representatives from the stakeholders. The main
function of the MMT is to monitor project
•
Installation of safety signages and posters
compliance with the conditions stipulated in the
at strategic places in the head office.
ECC and the Environmental Management Plan
(EMP).
•
Conducted periodic air and water quality
monitoring at field offices as required by DENR
•
Secured Environmental Compliance Certificate
and other environmental regulatory agencies.
(ECC) for our North Harbor Coal Terminal. Also,
secured Certificate of Non-Coverage (CNC) for
•
Reviewed and started revision on the existing
Surigao Exploration Project (COC 140) and Isabela
Emergency Preparedness Program.
Exploration Project (COC 141). •
Provided support to all field units and projects
•
Provided assistance in securing an Environmental
in the application and renewal of pertinent
Compliance Certificate (ECC) for the COC 122
environmental permits and clearances.
– Isabela Coal Mine and Power Plant Project.
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PNOC EC | 2008 Annual Report
Highlights
Profitability PNOC EC has posted a net income of P3.05 billion for the year 2008, so far the highest net income attained since inception in 1976. Net earnings for 2008 is 73% higher than the previous year’s P1.77 billion. Earnings were derived from the Company’s 10% equity in the Malampaya Deepwater Gas-to-Power Project, coal mining and trading operations, pier services and power plant operations. The boost can be attributed to the increase in revenues from the Malampaya Project and Coal Operations brought about by higher gas and coal prices in the world market and lower financing costs due to the Company’s full payment of the SC 38 related loan. The rise in revenues and drop in financing costs were moderated by the increase in operating expenses by 24% from P0.33 billion in 2007 to P0.41 billion in 2008 due to exploration activities for various petroleum service contracts.
Net income for 2008 represented 35% of total revenues
2007 to 132,006.20 MMscf in 2008. Gas and condensate
compared to 27% of total revenue in 2007. Earnings per
prices soared in 2008 as compared to prices in 2007.
share increased to P1.52 in 2008 from P0.88 in 2007.
Moreover, coal trading and integrated services posted a 37% increase due to higher volume of coal sold in 2008
Sales Revenue Performance
from 754.31 thousand metric tons in 2007 to 869.98
PNOC EC’s total sales revenue went up to P8.65 billion
thousand metric tons in 2008 and increase in coal prices
in 2008 from P6.44 billion in 2007.
in the world market.
The significant
improvement in 2008 performance vis-à-vis 2007 can be attributed to the growth in revenues from the Company’s
Total Equity
business units. Revenues from the Malampaya Project
PNOC EC still maintains a contributed capital of P2.02
reflected a 34% rise in 2008 due to the higher gas offtake
billion as of December 31, 2008, 99.78% of which was
from 125,048.43 million standard cubic feet (MMscf) in
owned by the Philippine National Oil Company and the
Net Income
(In Million Pesos )
Sales Revenue (In Million Pesos )
3,054
8,647
6,442
1,769 2,603
6,217
2008
2008
2007 2006
2007 2006
PNOC EC | 2008 Annual Report
remaining 0.22% was owned by the public stockholders.
in cash and cash equivalents due to the full payment of
The Company’s total equity escalated by 45% to P9.80
the SC 38 related loan while the decline in non-current
billion in 2008 from P6.75 billion in 2007 brought about
assets was mainly due to reduction in property, plant
by the 2008 net income of P3.05 billion. Consequently,
and equipment on account of the period’s recognition
the book value per share went up to P4.90 in 2008 from
of depreciation, depletion and amortization
P3.37 in 2007. Total Liabilities Retained earnings increased to P7.69 billion in 2008 from
Total liabilities went down from P6.16 billion in 2007 to
P4.63 billion in 2007 as a result of the P3.05 billion net
P3.60 billion in 2008. In December 2008, the Company
income for the year. Of the P7.69 billion retained earnings,
has fully paid the remaining balance of US$47.00 million
P5.80 billion was appropriated for capital expenditures
from the original US$175.00 million loan. Proceeds from
and various oil, gas and coal exploration projects.
the loan were used to acquire PNOC EC’s 10% stake in Service Contract 38. Full settlement of the loan brought
Total Assets
about a significant reduction of 83% in interest charges
Total assets as of December 31, 2008 is P13.40 billion,
and financing costs in 2008.
higher by P0.49 billion from December 2007 level of P12.91 billion as a result of the increase in current assets
Full settlement of the SC 38-related loan resulted to the
amounting to P0.99 billion tempered by the decline in
improvement of the Company’s Debt-to-Equity ratio
non-current assets amounting to P0.50 billion. Growth
from the 2007 level of 0.91:1 to this year’s level of 0.37:1.
in current assets was primarily attributed to the increase
Total Equity
(In Million Pesos )
Total Assets
9,802
(In Million Pesos )
13,403
12,907
6,748
13,205
5,280
2008
2008
2007 2006
2007 2006
19
20
PNOC EC | 2008 Annual Report
Report
Republic of the Philippines COMMISSION ON AUDIT Commonwealth Avenue, Quezon City, Philippines The Board of Directors PNOC Exploration Corporation Energy Center Fort Bonifacio, Taguig City, Metro Manila We have audited the accompanying financial statements of PNOC Exploration Corporation (a subsidiary of the Philippine National Oil Company), which comprise the balance sheet as of December 31, 2008 and the income statement, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Philippine Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Philippine Standards on Auditing. These standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. Our audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making these risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of the PNOC Exploration Corporation as of December 31, 2008 and its financial performance and its cash flows for the year then ended in accordance with Philippine Financial Reporting Standards. COMMISSION ON AUDIT JOSE DENNIS G. ISIP State Auditor V April 8, 2009
PNOC EC | 2008 Annual Report PNOC EXPLORATION CORPORATION (A Subsidiary of the Philippine National Oil Company)
Sheet
December 31, 2008 (With comparative figures for 2007) (In Philippine Peso)
Notes
2008
2007 (as restated)
ASSETS Current Assets Cash and cash equivalents Short-term investment Trade and other receivables - net Due from affiliates - net Inventories Prepaid expenses Total Current Assets
5 6 7 40 8 9
2,204,299,424 1,040,283 1,030,794,597 65,754,570 264,395,064 475,243,976 4,041,527,914
705,998,987 684,390,547 1,047,522,749 125,720,742 490,299,660 3,053,932,685
Assets Held for Sale - net
10
3,695,211
4,482,709
Non-Current Assets Property, plant and equipment - net Investments in joint ventures Investment in PNOC Malampaya Production Corporation Non-current trade accounts receivable - net Exploration and development costs Deferred tax asset Other assets Total Non-current Assets
11 12 13 14 15 16 17
8,697,060,383 130,833,843 625,000 95,735,941 347,978,051 59,374,887 26,082,128 9,357,690,233
9,191,299,766 34,593,842 625,000 157,526,134 307,315,650 143,181,995 14,364,579 9,848,906,966
13,402,913,358
12,907,322,360
TOTAL ASSETS LIABILITIES AND EQUITY LIABILITIES Current Liabilities Trade and other payables Dividends payable Due to affiliates Total Current Liabilities
18 25 40
536,860,218 536,860,218
650,770,426 200,000,000 166,257,823 1,017,028,249
Long-term Liabilities Due to affiliates Deferred credits Liability for future abandonment costs Deferred tax liabilities Other long-term liabilities Total Long-term Liabilities
40 19 20 21 22
19,941,958 2,979,570,852 64,020,654 284,454 3,063,817,918
1,946,316,999 3,137,695,243 57,672,418 347,435 64,097 5,142,096,192
TOTAL LIABILITIES
3,600,678,136
6,159,124,441
EQUITY
9,802,235,222
6,748,197,919
13,402,913,358
12,907,322,360
TOTAL LIABILITIES AND EQUITY See accompanying Notes to Financial Statements.
21
22
PNOC EC | 2008 Annual Report PNOC EXPLORATION CORPORATION (A Subsidiary of the Philippine National Oil Company)
Statement For the year ended December 31, 2008 (With comparative figures for 2007 and 2006) (In Philippine Peso)
Notes
2007
2008
2006
REVENUES
26
8,647,384,772
6,442,367,903
6,217,063,663
COST OF SALES
27
3,622,508,973
2,930,682,658
2,059,331,234
5,024,875,799
3,511,685,245
4,157,732,429
GROSS PROFIT OTHER INCOME
28
149,451,338
248,108,090
185,760,200
OPERATING EXPENSES
29
(408,524,044)
(329,068,628)
(200,006,364)
FINANCE COSTS
30
(73,383,313)
(430,353,679)
(725,445,966)
FOREIGN EXCHANGE GAIN - NET
31
157,498,792
204,313,395
257,783,864
ROYALTY FEE DUE GOVERNMENT
32
(11,902,595)
(5,443,191)
(3,206,317)
OTHER CHARGES
33
(2,086,170)
(179,154,382)
(229,946,863)
4,835,929,807
3,020,086,850
3,442,670,983
(1,699,800,600)
(1,171,241,718)
(867,067,902)
(82,091,904)
(80,234,593)
27,704,581
3,054,037,303
1,768,610,539
2,603,307,662
1.52
0.88
1.30
INCOME BEFORE INCOME TAX PROVISION FOR INCOME TAX Current Deferred NET INCOME
34
See accompanying Notes to Financial Statements
Earnings per Share
PNOC EC | 2008 Annual Report PNOC EXPLORATION CORPORATION (A Subsidiary of the Philippine National Oil Company)
Changes in Equity
For the year ended December 31, 2008 (With comparative figures for 2007 and 2006) (In Philippine Peso)
Share Capital (Note 23) Balance, January 1, 2006
2,002,253,065
Share Premium (Note 23) 22,424,950
Treasury Shares (at cost) (Note 23) (734,924)
Prior period adjustment Balance, January 1, 2006 as restated
Donated Capital (Note 24) 95,720,890
Appropriated Retained Earnings (Note 25) -
(6,412,484) 2,002,253,065
22,424,950
(734,924)
89,308,406
576,615,737 6,412,484
-
Net Income Dividends Appropriation for investment projects and capital expenditures
Unappropriated Retained Earnings (Note 25)
Total Equity 2,696,279,718 -
583,028,221
2,696,279,718
2,603,307,662
2,603,307,662
(20,000,000)
(20,000,000)
1,580,000,000
(1,580,000,000)
-
Balance, December 31, 2006
2,002,253,065
22,424,950
(734,924)
89,308,406
1,580,000,000
1,586,335,883
5,279,587,380
Balance, January 1, 2007
2,002,253,065
22,424,950
(734,924)
95,720,890
1,580,000,000
1,579,923,399
5,279,587,380
Prior period adjustment Balance, January 1, 2007 as restated
(6,412,484) 2,002,253,065
22,424,950
(734,924)
89,308,406
6,412,484 1,580,000,000
Net Income Dividends Appropriation for investment projects and capital expenditures
-
1,586,335,883
5,279,587,380
1,768,610,539
1,768,610,539
(300,000,000)
(300,000,000)
1,420,000,000
(1,420,000,000)
-
Balance, December 31, 2007
2,002,253,065
22,424,950
(734,924)
89,308,406
3,000,000,000
1,634,946,422
6,748,197,919
Balance, January 1, 2008
2,002,253,065
22,424,950
(734,924)
89,308,406
3,000,000,000
1,634,946,422
6,748,197,919
3,054,037,303
3,054,037,303
Net Income Appropriation for investment projects and capital expenditures Balance, December 31, 2008
See accompanying Notes to Financial Statements.
2,002,253,065
22,424,950
(734,924)
89,308,406
2,800,000,000
(2,800,000,000)
5,800,000,000
1,888,983,725
9,802,235,222
23
24
PNOC EC | 2008 Annual Report PNOC EXPLORATION CORPORATION (A Subsidiary of the Philippine National Oil Company)
Statement For the year ended December 31, 2008 (With comparative figures for 2007 and 2006) (In Philippine Peso)
Note
2007
2008
2006
CASH FLOWS FROM OPERATING ACTIVITIES Cash receipts from customers Interest income Cash paid to suppliers, affiliates and employees Cash Generated from Operations Interest paid
16,721,136,594
6,071,337,153
6,847,974,101
58,228,695
100,866,015
139,292,100
(12,025,500,698)
(1,640,071,649)
(1,332,660,044)
4,753,864,591
4,532,131,519
5,654,606,157 (843,608,176)
(80,517,387)
(310,324,027)
(1,638,118,683)
(1,132,688,968)
(831,404,433)
3,035,228,521
3,089,118,524
3,979,593,548
Exploration and development costs
(40,662,401)
(21,876,007)
(27,695,067)
Capital expenditures
(88,312,413)
(110,058,967)
(70,170,277)
Investment in joint ventures
(96,240,001)
(2,724,601)
(121,176,647)
(225,214,815)
(134,659,575)
(219,041,991)
Income taxes paid Net cash from operating activities CASH FLOWS FROM INVESTING ACTIVITIES
Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Payment of loan from PNOC - Non-SC No. 38 Related
-
Payment of loan from PNOC - SC No. 38 Related Payment of cash dividends Net cash used in financing activities EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR CASH AND CASH EQUIVALENTS AT END OF YEAR See accompanying Notes to Financial Statements.
5
-
(350,000,000)
(1,092,941,815)
(2,755,569,130)
(3,355,833,865)
(200,000,000)
(100,000,000)
(20,000,000)
(1,292,941,815)
(2,855,569,130)
(3,725,833,865)
(18,771,454)
(14,663,520)
(22,316,911)
1,498,300,437
84,226,299
12,400,781
705,998,987
621,772,688
609,371,907
2,204,299,424
705,998,987
621,772,688
PNOC EC | 2008 Annual Report PNOC EXPLORATION CORPORATION (A Subsidiary of the Philippine National Oil Company)
Statements
(In Philippine Peso)
1.
CORPORATE INFORMATION
Other Pre-operating Projects
PNOC Exploration Corporation (PNOC EC or the Company) was incorporated under Philippine laws and registered with the Securities and Exchange Commission under Registration Certificate Number 67111 on April 20, 1976. The Company’s common shares are listed in the Philippine Stock Exchange (PSE).
Natural Gas Infrastructure Projects
In 2008, PNOC EC revived the Batangas to Manila Natural Gas Pipeline Project (BATMAN-1) and conducted pre-development activities such as route and initial market surveys and information campaign. For the gas supply, the company submitted the pre-qualification documents, and was eventually pre-qualified, for the bidding of the new volume of gas from the Malampaya Service Contract 38. Parallel to this, PNOC EC started initial discussions with the NPC, PSALM and the DOE for the acquisition of the Ilijan Power Plant Banked Gas.
Also in 2008, PNOC EC continued its efforts in the development of the Integrated LNG Terminal and Bataan to Manila Natural Gas Pipeline Project (BATMAN 2). This involved meetings with interested parties and stakeholders such as PTT of Thailand, NPC, PSALM and the DOE.
Ragay Gulf (SC 43)
The Company has a 15% participating interest in SC-43 which was granted by the DOE on January 14, 2004, in the Ragay Gulf between Bicol, and the Bondoc Peninsula. Its partners in SC 43 are Pearl Energy Philippines (“Pearl”) and Premier Oil Philippines BV (“Premier”) which has 64% and 21% participating interests, respectively. Pearl replaced Premier Oil as operator of SC-43 when it acquired 21.5% from the latter’s original 42.5% participating interest.
The Monte Cristo prospect was drilled in June 2008. Although the target objective of the Monte Cristo 1 had been reached, it failed to flow hydrocarbons. The Consortium has therefore decided to explore the deeper horizons, which is now the focus of the exploration program.
Offshore Mindoro (SC 47)
With the withdrawal of Petronas Carigali Overseas Sdn Bhd (“Petronas Carigali”), on January 10, 2008, the Company now has 97% participating interest. Its other partners are PetroEnergy Resources Corporation and Basic Energy Corporation with 2% and 1% participating interest, respectively. Since the last well drilled (Kamia-1 well in 2007) had only minor hydrocarbon shows, additional basin evaluation was done to further understand the area’s petroleum system. The Company is now preparing to acquire additional seismic data in 2009 to develop the other prospects as drillable targets.
Calamian (SC 57)
The Company has a 100% participating interest in SC 57 when the DOE granted it on September 15, 2005. The Company subsequently entered into joint venture arrangements for the exploration of SC 57 in 2006 with China National Offshore Oil Corporation (CNOOC) acquiring 51% participating interests and operatorship of the block and Mitra Energy Inc. (“Mitra Energy”) getting 21%, leaving the Company with the remaining 28%. However, the DOE has yet to approve their entry and transfer of participating interests of the Company to CNOOC and Mitra Energy.
Approximately 2,268 km. of new 2D seismic data has already been acquired in August-September 2006. The results of the interpretation showed several prospects that need to be fully evaluated before they are tested. However, future exploration plans in SC 57 will hinge on the DOE’s approval of the Company’s joint venture partners.
PNOC EC is a subsidiary of the Philippine National Oil Company (PNOC) which was created under Presidential Decree No. 334 on November 9, 1973. PNOC owns 99.78% of the company’s outstanding shares of stock while 0.22% is owned by the public.
In line with PNOC’s mandate to provide and maintain an adequate supply of energy, the Company takes the lead in energy exploration and development. It has entered into service contracts with Department of Energy on oil, gas, and coal exploration projects where the Company has either 100% ownership or is in joint venture with other partners.
The registered office address of PNOC EC is Building 1, Energy Center, Merritt Road, Global City, Taguig City, Philippines.
The Board of Directors approved and authorized for issue the Company’s financial statements on March 6, 2009 per Board Resolution No. 30 series of 2009.
2.
STATUS OF OPERATIONS
OIL AND GAS EXPLORATION AND PRODUCTION
The Malampaya Project
PNOC EC owns 10% stake in the upstream component of the Malampaya Deepwater Gas-to-Power Project, together with Shell Philippines Exploration B.V., the Operator (20%), Shell Philippines LLC (25%), and Chevron (45%). Commercial gas production from Malampaya commenced on January 1, 2002. The Malampaya Project provides the gas fuel requirements of its three power plant customers in Batangas, namely Sta. Rita (1,000 MW), San Lorenzo (500 MW) and Ilijan (1,200 MW), as well as the gas requirements of Pilipinas Shell Petroleum Corporation (PSPC) in Tabangao. In 2008, the Project produced 3.87 million cubic meters (136.90 billion cubic feet) of gas and 5.60 million barrels (0.89 million cubic meters) of condensate.
San Antonio Gas Project
In July 31, 2008, the San Antonio Gas power Plant was shutdown permanently after gas pressure dropped below the required inlet pressure of the Gas Turbine Engine of 250 psia.
Since inception, the SA-1A well has produced a total of 3.543 Bscf of gas and the power plant has delivered a total of 187.482 GWH of electricity. The SA-1A well is now set to be plugged and abandoned in 2009. However, Management is still conducting studies on reviving the well for other possible projects.
The Company owns and operates the San Antonio Gas Project which consists of a Gas Field and 3 MW Gas Power Plant located in the province of Isabela. The power plant was fueled by the natural gas produced from the SA-1A well providing electricity to the municipalities of Echague, Jones, San Agustin and Santiago City through the Isabela-I Electric Cooperative, Inc. (ISELCO-I). In 2008, the SA-1A well produced 186.71 million standard cubic feet (mmscf) of gas which enabled the power plant to generate a total of 6.24 megawatt hours (MWHr) of electricity.
25
26
PNOC EC | 2008 Annual Report
West Calamian (SC 58)
SC 58 was awarded to the Company by the DOE on January 12, 2006. The Company later entered into a joint venture arrangement for exploration with Nido Petroleum Philippines Pty. Ltd. (“Nido Petroleum”) in July 2006 to acquire 50% participating interest. Under the agreement, Nido Petroleum will be the operator and will fund the work program that includes 2D and 3D seismic surveys and the drilling of the first well. Results of the seismic interpretation are encouraging and the first well is expected to be drilled in 2010.
West Balabac (SC 59)
SC 59 was awarded by the DOE on January 13, 2006. It is located in Southwest Palawan along the trend of the offshore oil and gas fields in Malaysia and interpreted to share a common petroleum system. The Company currently has a 100% participating interest in SC 59 and sought of a joint venture partner through public bidding in compliance with E.O. 556. Discussions are underway with a possible joint venture partner to operate the block. The Company hopes to sign the joint venture agreement in early 2009.
East Sabina (SC 63)
The Company and Nido Petroleum jointly entered into SC 63 with the former as Operator on November 24, 2006. Each of the company has 50% participating interests in SC 63 and equally share the exploration costs. The block is located south of the oil and gas fields in offshore Palawan including Malampaya. Results of the seismic data acquired in late 2007 are encouraging and the acquisition of additional seismic data is being planned in 2009.
A joint venture partner was sought through public bidding and discussions are now underway to enter into the block. Their participation in the block is expected to be finalized in early 2009.
Joint Marine Seismic Undertaking (JMSU)
The Company has signed a tripartite agreement with CNOOC and PetroVietnam on March 14, 2005 to jointly evaluate the petroleum potential of certain areas in the South China Sea, west of Palawan. This project, commonly referred to as JMSU, took effect on July 1, 2005 with a 3-year term. The expenses are equally shared by the three national oil companies and to-date over 22,000 km of 2D seismic data has been acquired.
The agreement lapsed on June 30, 2008 and has not been renewed. The interpretation is still on-going and done separately by the participants.
Domestic
The Company evaluated the areas offered by the DOE particularly the blocks in the Visayan and Agusan-Davao Basins. It also evaluated farm-out offers from other operators in SC 52 (Northern Cagayan), SC 53 (Onshore Mindoro) and SC 54 (Northwest Palawan).
The Company also intends to join the DOE’s next contracting round scheduled in 2009.
Overseas
The Company has evaluated overseas opportunities in Indonesia, Cyprus and Colombia. However, only the Colombian was found to be attractive. A Joint Application and Participation Agreement was signed with Pitkin Petroleum in 2008 to jointly file for an acreage in offshore Colombia. The exploration permit is expected to be signed by the Colombian Government in 2009.
The Company will continue to look for overseas exploration opportunities to ensure the country’s energy needs.
COAL OPERATIONS
The Company holds five coal operating contracts (COCs) with the DOE under which it conducts activities for coal exploration or development and production of coal resources. While currently mining coal reserves in the contract area of COC-41 (known as the Malangas Coal Project) within the Malangas Coal Reservation located in Zamboanga Sibugay, PNOC EC is preparing to develop the coal reserves located in two other coal areas in Isabela (covered by COC-141 and COC-122) in connection with the objective of establishing a mine-mouth power plant project.
Coal Operating Contract (COC) No. 41 – Malangas Coal Project
PNOC EC operates Coal Operating Contract (COC) 41 within the Malangas Coal Reservation in Zamboanga Sibugay straddling portions of the municipalities of Malangas, Diplahan and Imelda. As holder of the COC, PNOC EC oversees the operations of a large-scale coal mine within the contract area known as the Integrated Little Baguio (ILB) colliery, in joint venture with Taiwan Overseas Mining Co., Phils., Inc. (TOMC). The ILB Colliery is the largest semi-mechanized underground coal mine in the country. An amended joint venture agreement was signed with Filsystems Inc. (FSI) in February 2008 for the joint development of PNOC EC’s coal block 41-H-397 and FSI’s block 41-H-396 in Lalat. PNOC EC also supervises mining operations of various small-scale coal miners.
Coal Exploration
Coal Operating Contract (COC) No. 140 – Surigao Coal Exploration
COC No. 140 was awarded to PNOC EC by the DOE on July 5, 2005. The coal contract area with a total of 3,000 hectares is located in the Municipality of Tago, Surigao del Sur. The COC will allow PNOC EC two years to conduct exploration activities within the coal concession.
The DOE approved two applications for contract moratorium since 2006 due to the heightened insurgency and subsequent military alert in the area since 2006. The first moratorium covered the period from October 12, 2006 until July 5, 2007; and the second was for a one-year term from June 19, 2007 to July 5, 2008. Subsequently, the DOE approved the twoyear extension of the COC to enable the company to conduct exploration activities until July 5, 2009.
PNOC EC applied for a Certificate of Non-Coverage (CNC) from the Environmental Management Bureau (EMB) covering its exploration activities at the COC No. 140 project area and received approval in July 2008.
Despite the prevailing threat of insurgency in the area, PNOC EC conducted and completed the block boundary survey for the project area in December 2008. The objective of the survey was to delineate on the ground the actual location of the boundaries of the 3,000 hectares project area. PNOC EC intends to pursue exploration drilling activities at the project area during the first half of next year.
Coal Operating Contract (COC) No. 122 – Isabela Coal Mine-mouth Power Plant Project
PNOC EC is the holder of COC-122 which straddles portions of Cauayan City and the municipalities of Naguilian and Benito Soliven in Isabela. The estimated PhP5.0 Billion project involves putting up a power plant with a generating capacity of 30-100 MW that will utilize the low-rank coal in the province. The project was shelved in July 2006.
PNOC EC | 2008 Annual Report
Efforts to renew the project were started in 2007. While the technical and economic studies on the project are continuing, attention was also given for Social Development Projects (SDP) in June 2008 after consultations with the concerned LGUs early in the year. SDPs include a medical mission, a supplemental feeding program, several health related seminars and other activities that targets the youth.
The Environmental Impact Assessment (EIA) study, necessary for the application of the Environmental Compliance Certificate (ECC) for the project was formally awarded to Geosphere Technologies, Inc. (GTI) in December 2008.
Coal Operating Contract (COC) No. 141 – Isabela Coal Project
On July 5, 2005, the DOE awarded the COC No. 141 to PNOC EC for the two-year exploration of Coal Blocks 14-G-77, 78 and 79 covering an area of approximately 3,000 hectares in the Municipality of Benito Soliven, Province of Isabela, in the Cagayan Valley of Northern Luzon. The DOE subsequently approved the two-year extension of the COC, which is now valid until July 2009.
The three coal blocks under COC No. 141 are located north and adjacent to the coal blocks of PNOC EC’s COC No. 122. The preliminary geologic assessments indicate that the mineable coal seams at the adjacent COC No. 122 blocks may extend northward into the COC No. 141 project area.
In December 2008, PNOC EC initiated the application for a Certificate of Non-Coverage (CNC) from the Environmental Management Bureau (EMB) covering its exploration activities at the COC No. 141 project area. PNOC EC also conducted the public bidding process for the block boundary survey for the contract area. The block boundary survey and the subsequent exploration drilling will commence next year. The additional coal reserves that will be delineated from these activities are intended to increase the already established economic viability of the Isabela Integrated Coal Mine Mouth Power Plant Project (COC No. 122).
Coal Operating Contract (COC) No. 152 – Siay Coal Exploration Project
In November 2008, COC No. 152 was awarded to both PNOC EC and Agusan Petroleum and Minerals Corporation (APMC), the winning bidders for six coal blocks located in Siay, Zamboanga Sibugay that were offered during the 2006 Philippine Energy Contracting Round (PECR 2006). The new contract, which designates PNOC EC as the Operator, grants the two companies a minimum of two years to conduct joint exploration activities in Coal Blocks 41-H-315, 316, 355, 356, 357 and 395.
Indonesian Coal Projects
PNOC EC intends to establish strategic alliance and venture into coal mining business in Indonesia in order to ensure a stable and competitive supply of coal for the Philippine market.
Definitive agreements between PNOC EC and Putra Asyano Mutiara Timur (PT PAMT) were pursued initially in 2007. Following PT PAMT’s acquisition of the requisite KP for Exploration in July 2008, PNOC EC commenced the conduct of legal and technical due diligence in Indonesia.
Coal Trading
Aside from coal exploration and production, the Company also engages in coal trading activities. To support its trading activities, the Company operates three coal terminals where coal shipments, which are either sourced from its own coal mines or from third parties, may be received and stored before delivery to customers.
ENERGY SUPPLY BASE
Energy Supply Base (ESB) is located in Mabini, Batangas, with excellent berthing, cargo handling, storage and warehousing facilities that continues to serve the needs of various oil and energy-related companies. Although initially set up to cater to logistical support needs of the energy industry, ESB’s services now extends to other commercial clients with the granting by the Philippine Ports Authority (PPA) of a permit to operate as a private commercial port under Certificate of Registration No. 291 on October 8, 1996. The permit is co-terminus with the 25-year foreshore lease agreement of ESB with the Department of Environment and Natural Resources (DENR) effective May 3, 1996, which will expire on May 3, 2021. ESB is also a Customs Bonded Warehouse which helps companies to expedite the unloading and loading of cargoes at ESB ports.
The Company has entered into a 25-year long term lease with Zamboanga Development and Management Corporation (ZDMC) for a one-hectare land area and 61,100 square meters foreshore area for the latter to put up a grains bulkhandling, storage and jetty facilities (the first in Southern Luzon area) to achieve a sustainable logistics development program for the country as part of the ten-point agenda of the National Government. ESB also has long term lease contracts with a variety of companies including importers, logistics companies and a telecoms company. The Company has also negotiated for a one-hectare land area with a Singapore-based logistics company for the storage of casings/tubulars for the consumption of oil and gas exploration service contractors. ESB, as the only energy base in the Philippines, aims to contribute to the exploration industry by providing prompt and efficient service to the increasing needs of oil, gas and other energy related companies as well as commercial clients.
3.
BASIS OF FINANCIAL STATEMENT PREPARATION
The accompanying financial statements have been prepared in accordance with the accounting principles generally accepted in the Philippines as set forth in Philippine Financial Reporting Standards (PFRSs) and the applicable practices of the oil and gas industry not covered by the existing PFRS/PAS. PFRS include statements named PFRS and Philippine Accounting Standards (PAS) and interpretations issued by the Philippine Accounting Standards Council.
The financial statements of the Company have been prepared using the historical cost basis and are presented in Philippine pesos, which is the Company’s presentation currency. All values are rounded to the nearest peso.
4.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have been applied consistently to all periods presented in these financial statements.
a. Revenue Recognition
Revenue is measured at the fair value of the consideration received or receivable. Revenue is recognized when there is persuasive evidence that an arrangement exists, delivery has occurred, title has transferred, selling price is fixed or determinable and collectibility of the selling price is reasonably assured.
Revenue from sale of gas, condensate and oil of the Malampaya Project is recognized upon delivery in accordance with the provisions of Gas Sales and Purchase Agreement (GSPA) with customers and the Joint Operating Agreement entered into by and among the SC 38 partners.
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Delivery of natural gas is recognized when the gas arrives at the designated delivery points at the power plants and meets the required quality specifications set out in the relevant GSPA.
Billings for undelivered gas are credited to deferred income and recognized as revenue upon delivery. Under the “take-or-pay” provision of the GSPA, buyers shall pay the full contracted volume or quantity even if there is no delivery of the produced gas during the period. Annual reconciliation of volume actually taken and contracted volume is made to determine the deficiency or shortfall. The SC 38 consortium is bound to deliver the deficiency volumes in the future. Interest revenue is accrued on a time-proportion basis, by reference to the principal outstanding and at the effective interest rate applicable.
b. 10% Interest in Service Contract 38
The Company records its 10% participating interest in the Malampaya Gas Project under the criteria “jointly controlled assets”. Under this criteria, the Company recognizes in its separate financial statements its share of the jointly controlled assets, classified according to the nature of the assets rather than as investment; any liabilities that it has incurred; its share of any liabilities incurred jointly with other venturers in relation to the joint venture; any income from sale or use of its share of the output of the joint venture, together with its share of any expenses incurred by the joint venture; and any expenses that it has incurred in respect of its interest in the joint venture. Estimated abandonment and site restoration cost is provided using the accrued liability method and computed based on units of production and estimated proved reserves.
f. Inventories
g. Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated depreciation, depletion and amortization and any impairment in value.
The initial cost of property and equipment consists of its purchase price and costs directly attributable to bringing the asset to its working condition and location for its intended use. Subsequent expenditures relating to an item of property, plant and equipment that have already been recognized are added to the carrying amount of the asset when it is probable that future economic benefits, in excess of the originally assessed standard of performance of the existing asset, will flow to the Company. All other expenses relating to an item of property, plant and equipment that is described as ‘repairs and maintenance’ are charged to profit or loss in the period these are incurred.
Depreciation for non-SC 38 assets is computed on a straight-line method over the estimated useful lives of the assets ranging from 5 to 20 years.
The cost of SC 38 project-related wells, platform and other facilities includes acquisition costs and capitalized exploration and development costs. The carrying values are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets or cash-generating units are written down to their estimated recoverable amount.
Depreciation, depletion and amortization (DD&A) of wells, platform and other facilities are computed using the unit-of-production method based on the estimated proved reserves. Depreciation of other SC 38 Project-related facilities and equipment are computed using the straight-line method based on the estimated useful life of 21 years.
Gain or loss arising from the disposal or retirement of an asset is determined by computing the difference between the sales proceeds and the carrying amount of the asset and is recognized as income or expense for the period.
Construction in progress is stated at cost and is not depreciated until such time that the assets are completed and/or put into operational use.
c. Cash and Cash Equivalents
Cash includes cash on hand and in banks. Cash equivalents are shortterm money market placements that are readily convertible to known amounts of cash with original maturities of three months or less from dates of acquisition and that are subject to insignificant risk of change in value.
d. Trade and Other Receivables
Trade and other receivables are stated at face value, net of allowance for doubtful accounts. The allowance is established by charges to income.
e. Provision for Doubtful Accounts
Allowances for doubtful accounts, estimated by the Company’s management based on prior experience and their assessment of current economic environment, are provided at the following approved rates applied to the period the receivable is outstanding: Over 120 days Over 1-2 years Over 2-3 years Over 3 years
15% 35% 75% 100%
The receivable of the SC 38 Malampaya Project are not provided with allowance for doubtful accounts. This is in view of the Project being in operation as a specialized industry where both the SC 38 Project Consortium and its customers strictly adhere to their reciprocal obligations. Moreover, the Project’s GSPA, as well as the related contracts, provides reasonable assurance to the SC 38 Project Consortium for the appropriate collection of its accounts receivable.
Parts and supplies as well as coal inventories are stated at the lower of cost or net realizable value. Cost includes invoice amount, net of trade and cash discounts. Cost is calculated using the moving average method. Net realizable value represents the estimated selling price less all estimated costs to sell. The condensate inventory is valued at prevailing market price.
h. Exploration and Development Costs
PNOC EC adopts the successful efforts method of accounting for its oil and gas operations. All exploration costs, except the cost of exploratory wells, are charged to expense as incurred. Costs of exploratory wells (including stratigraphic test wells) are initially capitalized and deferred pending the outcome of the drilling operation. If proved reserves are discovered, the associated costs are capitalized and amortized as the related proved developed reserves are produced. However, if the exploratory well or stratigraphic test well proves to be dry, the accumulated drilling costs are charged to expense.
Development costs, which include the costs of drilling development wells, are capitalized regardless of whether or not proved reserves are found while production costs are expensed as incurred.
PNOC EC | 2008 Annual Report
Capitalized cost is amortized using the “unit-of-production method” whereby property acquisition costs (net of accumulated DD&A) are amortized over the estimated proved reserves.
For coal exploration and other projects, the Company uses the full-cost method of accounting. Under this method, all costs directly incurred in the acquisition, exploration and development of a project area, including directly-related overhead costs, are capitalized. All exploration cost, likewise, are tentatively deferred pending determination on whether the area contains coal reserves of commercial quantity. When coal reserves of commercial quantity is proved, cost is amortized over proved reserves using the unit-of-production method.
successful-efforts method of accounting, non-drilling costs and other pre-operating expenses such as corporate overhead, except those expenses which are directly related to exploratory drilling activities, are expensed as incurred.
k. Non-Current Assets Held for Sale
Non-current assets classified as held for sale are measured at the lower of the carrying amount and the fair value less costs to sell.
Non-current assets are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is probable and the asset is available for immediate sale in its present condition. Management must be committed to the sale that should be expected to qualify for recognition as a completed sale within one year from the date of classification.
i. Impairment of Assets
The carrying values of long-lived assets are reviewed for impairment when events or changes in circumstances indicate that the carrying values may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amounts, the assets or cash-generating units are written down to their recoverable amounts. Recoverable amount is the greater of net selling price and value in use. The net selling price is the amount obtainable from the sale of an asset in an arm’s-length transaction. In assessing value in use, the estimated future cash flows are discounted to their present value using pre-tax discount rate that reflects current market assessment of the time value of money and the risks specific to the asset. For an asset that does not generate independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Impairment losses are recognized in the statements of income. If at balance sheet date there is an indication that an impairment loss may have decreased, reversal of an impairment loss is recognized as income in the income statement. The increased carrying amount due to reversal should not be more than what the depreciated historical cost would have been if the impairment had not been recognized.
l. Trade and Other Payables
m. Foreign Currency Transactions
j. Investment in Joint Ventures
A joint venture is a contractual arrangement whereby the group and other parties undertake an economic activity that is subject to joint control.
Where a group of companies undertakes its activities under joint venture arrangements directly, the group’s share of jointly-controlled assets and any liabilities incurred jointly with other venturers are recognized in the financial statements of the venturers and classified according to their nature.
Liabilities and expenses incurred directly in respect of interests in jointlycontrolled assets are accounted for on an accrual basis. Income from the sale or use of the group’s share of the output of jointly-controlled assets, and its share of joint venture expenses, are recognized when it is probable that the economic benefits associated with the transactions will flow to/from the group and their amount can be measured reliably.
The Company reports its 10% interest in SC 38 using joint venture proportionate consolidation. The Company’s share of the assets, liabilities, income and expenses are combined with the equivalent items in the Company’s financial statements on a line-by-line basis.
Investments in joint venture include accumulated intangible costs directly attributable to exploration and development activities such as the expenses incurred to acquire the legal right to explore, and the costs of exploratory drilling and testing. In accordance with the
Trade and other payables are stated at their nominal values.
The Company converts into local currency its foreign currencydenominated transactions using, whenever appropriately applicable, the average and actual foreign exchange rate prevailing during the month and date of transaction, respectively. Monetary assets and liabilities that are denominated in foreign currencies are restated using the closing exchange rate at balance sheet date. The Company’s foreign currency denominated assets and liabilities were restated based on prevailing exchange of US$1.00:P47.655 and Y1.00:P0.5221 in 2008; US$1.00: P41.411 and Y1.00:P0.3642 in 2007. Non-monetary assets and liabilities are translated at historical exchange rates. Foreign exchange gains and losses arising from foreign currency fluctuations are recognized in profit or loss for the period.
n. Income Taxes
The tax expense represents the sum of the tax currently payable and deferred.
The tax currently payable is based on the taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and items that are neither taxable nor deductible. The Company’s liability for current tax is calculated using the applicable tax rate.
Deferred income tax is accounted for using the balance sheet liability method on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to: (a) temporary differences between the financial reporting bases of assets and liabilities and their related tax bases; (b) net operating loss carryover, or NOLCO; and (c) the carryforward benefit of the excess of the minimum corporate income tax, or MCIT, over the regular corporate income tax. Deferred tax assets and liabilities are measured using the tax rates applicable to taxable income in the years in which those temporary differences are expected to be recovered or settled and NOLCO and MCIT are expected to be applied.
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The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
7.
TRADE AND OTHER RECEIVABLES
This account consists of the following:
o. Contingencies
Trade Coal Project SC 38 Malampaya Project Energy Supply Base Head Office San Antonio Gas Project
Contingent liabilities are not recognized in the financial statements. They are disclosed unless the possibility of an outflow of resources embodying economic benefit is remote. Contingent assets are not recognized in the financial statements but disclosed when an inflow of economic benefits is probable.
Allowance for doubtful accounts
p. Subsequent Events
Post-year-end events that provide further evidence of existing conditions affecting Company’s financial position at the balance sheet date (adjusting events) are reflected in the financial statements. Post-yearend events that are indicative of conditions that arose subsequent to balance sheet date are disclosed in the notes to the financial statements when material.
q. Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make judgments, estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The estimates and assumptions used in the accompanying financial statements are based upon management’s evaluation of relevant facts and circumstances as of the date of the financial statements. Actual results could differ from such estimates.
Non-trade Allowance for doubtful accounts
Earnings per share is computed based on the net income for the year divided by the weighted average number of outstanding shares during the year. There are no dilutive potential common shares outstanding that would require disclosure of diluted earnings per share in the income statement.
5.
CASH AND CASH EQUIVALENTS
This account consists of the following:
Cash on hand and in banks Cash equivalents
527,626,668 431,841,597 32,738,238 2,719,312 994,925,815 (11,789,243) 983,136,572
331,149,553 197,034,175 89,049,535 4,748,649 6,248,434 628,230,346 (3,607,669) 624,622,677
50,731,635 (3,073,610) 47,658,025 1,030,794,597
67,116,486 (7,348,617) 59,767,869 684,390,546
Trade receivables on SC 38 Malampaya Project consists mainly of the Company’s 10% share in the SC 38 Consortium’s receivables on gas and condensate sales in the amount of P429.99 million and share in aggregate other receivables in the amount of P1.85 million.
Non-trade accounts receivables consist of the Company’s 10% share in the non-trade receivables of the SC 38 Consortium and claims from employees, officers and others.
The net increase in allowance for doubtful accounts on trade receivables in the amount of P8.18 million was due to the significant defaults in payment of Coal and ESB customers, changes in customer payment terms and high probability that the amount due will not be received in full.
8.
INVENTORIES
This account consists of the following: 2008
2008 730,979,305 1,473,320,119 2,204,299,424
Condensate Coal Fuel and Lubricants Parts and supplies: Landed In-transit
2007 311,353,201 394,645,786 705,998,987
Cash in banks earn interest at the respective bank deposit rates. Cash equivalents consist of money market placements or short-term time deposits, which are made for varying periods of up to three months depending on the immediate cash requirements of the Company and earn interest at the prevailing short-term deposit rates.
6.
SHORT-TERM INVESTMENT
This account pertains to the placement in high-yield savings account with Land Bank of the Philippines with a term of 340 days to mature on September 1, 2009 at an interest rate of 3.40%.
2007
r. Earnings per share
2008
Allowance for obsolescence
14,484,210 196,392,045 3,046,728 55,273,428 55,273,428 (4,801,347) 50,472,081 264,395,064
2007 36,736,749 23,772,303 3,104,219 63,705,986 3,202,832 66,908,818 (4,801,347) 62,107,471 125,720,742
Condensate inventory pertains to the Company’s 10% share in the undelivered stock of SC 38 Malampaya Project stored in its offshore Concrete Gravity Structure in offshore Palawan with a volume of 10,882.17 bbls. On the other hand, coal inventory represents the undelivered stock of the Company in its various Coal Terminals with a total volume of 77,348.265 metric tons.
Landed inventories pertains substantially to the 10% share of the Company in the aggregate parts and supplies inventory of SC 38 Consortium valued at P55.26 million in 2008 and P63.71 million in 2007.
PNOC EC | 2008 Annual Report
In-transit inventories include items not yet delivered or received by the warehouse but for which ownership or title to the goods has already passed to the Company.
9.
PREPAID EXPENSES
This account consists of the following:
Prepaid income tax Taxes withheld by customers Other prepaid expenses
2008 241,670,539 121,868,328 111,705,109 475,243,976
10.
Other prepaid expenses consist mainly of the excess funds of the retirement plan as determined by the recent actuarial valuation as of October 1, 2007, input VAT, the Company share in the aggregate prepaid assets of the SC 38 consortium, and the excess cash call payments to Shell Philippines Exploration B.V. for the Company’s share in the operational expenditures of SC 38.
This account consists of the following:
2007
2008
Materials and supplies inventory for disposal Allowance for obsolescence
2007 240,368,099 97,422,440 152,509,121 490,299,660
Prepaid income tax pertains to the Company’s 10% share in the tax component of the unearned revenue on the undelivered gas of the “take or pay” deficiency per GSPA with customers of the SC 38 Malampaya Project.
ASSETS HELD FOR SALE
Surplus property available for sale Accumulated depreciation
3,761,631 (66,420) 3,695,211
2,124,996 (1,487,498) 637,498 3,911,631 (66,420) 3,845,211
3,695,211
4,482,709
Materials and supplies inventory for disposal pertain to excess drilling supplies and chemicals left unused at the end of various drilling activities on several exploration projects.
Surplus property available for sale pertains to the cost of levied properties for unpaid and delinquent rentals, including interest, on the use of the ESB open yard.
11.
PROPERTY, PLANT AND EQUIPMENT
This account consists of the following:
General plant facilities
Wells and related facilities
Drilling equipment
COST January 1, 2008 Additions Disposals December 31, 2008
183,302,909 8,308,255 (129,695) 191,481,469
89,250,000 89,250,000
ACCUMULATED DEPRECIATION January 1, 2008 Provision Disposals December 31, 2008
(134,440,143) (6,265,877) 129,693 (140,576,327)
(89,249,999) (89,249,999)
NET CARRYING AMOUNT December 31, 2008
50,905,142
General plant facilities
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180,165,020 10,270,117 (7,132,228) 183,302,909
89,250,000 89,250,000
ACCUMULATED DEPRECIATION January 1, 2007 Provision Reclassifications Disposals December 31, 2007
(133,200,638) (6,272,091) 5,032,586 (134,440,143)
(89,249,999) (89,249,999)
48,862,767
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Transportation equipment
Scientific equipment
21,900,259 9,480,254 (1,564,000) 29,816,513
(92,505,261) (5,144,139) (97,649,400)
(26,776,346) (783,822) (27,560,168)
(29,945,808) (13,980,406) 2,461,746 (41,464,468)
(14,368,432) (3,315,099) 1,563,998 (16,119,533)
(9,266,604) (667,236) (9,933,840)
(2,352,046,668) (548,118,874) (2,900,165,542)
(5,557,376) (1,814,436) (7,371,812)
23,567,160
15,369,285
57,322,889
13,696,980
8,988,730
8,488,965,029
30,731,357
121,216,560 121,216,560
Transportation equipment
Scientific equipment
10,306,936 273,197 1,891,643 12,471,776
11,339,170,344 49,960,227 11,389,130,571
Other property and equipment
60,154,549 41,207,818 (2,575,011) 98,787,357
Marine Furniture, equipment fixtures and and facilities equipment
12,471,776 6,450,794 18,922,570
Wells, platform and other facilities
31,750,558 11,178,895 42,929,453
Wells and related facilities
Drilling equipment
COST January 1, 2007 Additions Reclassifications Disposals December 31, 2007
NET CARRYING AMOUNT December 31, 2007
121,216,560 121,216,560
Marine Furniture, equipment fixtures and and facilities equipment
Wells, platform and other facilities
11,273,723,928 65,446,416 11,339,170,344
38,103,169 38,103,169
Other property and equipment
22,756,268 8,994,290 31,750,558
50,049,969 13,363,062 (3,258,482) 60,154,549
15,149,354 7,246,128 (495,224) 21,900,259
38,103,169 38,103,169
(83,556,536) (8,948,725) (92,505,261)
(21,385,657) (321,010) (5,069,680) (26,776,346)
(23,249,291) (6,739,152) 42,635 (29,945,808)
(12,538,948) (1,870,168) 40,684 (14,368,432)
(8,848,303) (372,076) (46,225) (9,266,604)
(1,805,395,735) (546,650,933) (2,352,046,668)
(3,742,939) (1,814,437) (5,557,376)
28,711,299
4,974,212
30,208,741
7,531,827
3,205,172
8,987,123,676
32,545,793
Construction In Progress
48,136,279 (40,622,469) 7,513,810
-
7,513,810
Construction In Progress
34,676,233 13,460,046 48,136,279
-
48,136,279
Total
11,945,456,403 85,963,774 (4,268,706) 12,027,151,472
(2,754,156,637) (580,089,889) 4,155,437 (3,330,091,089)
8,697,060,383
Total
11,835,397,437 110,058,966 11,945,456,403
(2,181,168,046) (572,988,591) (2,754,156,637)
9,191,299,766
31
32
PNOC EC | 2008 Annual Report
12.
Wells and related facilities refer to the capitalized exploration and development costs of the San Antonio Gas Project amounting to P23.57 million. Since the San Antonio Gas Power Plant was shut down permanently on July 2008, these assets remain idle as of balance sheet date.
15.
Wells, platforms & other facilities and other property & equipment pertain to the Company’s 10% share in the aggregate assets of the SC 38 Malampaya Project.
Cauayan Coal Project Natural Gas Study BATMAN Natural Gas Study Project Isabela Coal Mine Mouth Power Plant Indonesia Coal Project Surigao COC Application Project Lumbog Coal Project Isabela Coal Exploration Project Malampaya Oil Rim Exploration Malongan & Alegria Coal Project Siay Coal Project Natural Gas Vehicle Program Camago Malampaya Oil Leg DOST-PCIERD
INVESTMENTS IN JOINT VENTURES This account consists of the following oil, gas and coal exploration projects in partnership with other oil companies:
Coal Mine Development (Lalat & ILB Areas) 10% Share in Investment of SC 38 Consortium Ragay Gulf
2008
2007
COC 41
33,321,719
33,321,719
SC 38
1,463,936
1,272,123
SC 43
96,048,188 130,833,843
34,593,842
16.
13.
14.
The deferred exploration and development costs pertain to the following projects:
DEFERRED TAX ASSET The significant components of deferred income tax assets are as follows:
Tax effect on temporary differences Carryforward of unused tax losses Minimum Corporate Income Tax
The Company recognized deferred tax asset on temporary difference between the reported amount of net receivables and its related tax bases amounting to P0.62 million in 2008 and P2.27 million in 2007 in compliance with PAS No. 12.
Deferred tax assets on the carryforward of unused tax losses were utilized in 2008 to offset the current year’s taxable income of P244.08 million.
As of 2008, accumulated Net Operating Loss Carryover (NOLCO), in which, for the purpose of determining the Company’s income tax obligation, can be allowed as deduction from gross income for three consecutive years immediately following the year of such loss, amounted to P89.41 million broken down as follows:
This account consists of the Company’s share in receivables, including interests, from the “take or pay” deficiency or the undelivered gas of the Malampaya Project for the years 2003 to 2006. These are receivables from:
YEAR OF
2007 111,484,095 31,784,780 14,257,259 157,526,134
The decrease in non-current trade accounts receivable is mainly due to the scheduled quarterly payments under the Payment Deferral Agreement for First Gas Power Corporation and FGP Corporation’s take-or-pay (TOP) obligations. Total payments for 2008 amounted to US$1,787,244.
NPC’s non-current trade accounts receivable balance increased due to realignment at year-end. No significant payment has been made pending reconciliation of accounts in view of the Deferred Payment Facility’s expiration in 2009.
3,834,700 116,721,660 22,625,635 143,181,995
4,458,856 26,822,196 28,093,835 59,374,887
NON-CURRENT TRADE ACCOUNTS RECEIVABLE
First Gas Power Corporation FGP Corporation National Power Corporation
2007
2008
INVESTMENT IN PNOC MALAMPAYA PRODUCTION CORPORATION
2008 62,015,525 17,684,479 16,035,937 95,735,941
97,819,519 60,701,149 57,196,546 34,766,163 17,780,064 8,969,081 17,274,187 10,114,403 1,164,042 1,320,035 122,807 87,654 307315,650
97,819,519 60,722,258 59,904,066 41,469,503 26,068,297 19,776,322 14,400,751 11,799,605 10,114,403 2,635,798 1,737,033 1,320,035 122,807 87,654 347,978,051
In compliance with successful efforts method of accounting for oil and gas projects, P96.05 million drilling expenses were capitalized.
This account consists of investments in the PNOC Malampaya Production Corporation (PMPC), a wholly-owned subsidiary of the Company, whose primary purpose is to prospect, explore, dig, and drill for, exploit, extract, produce or purchase or otherwise dispose of, import, export, and handle trade and generally deal in, refine, treat, reduce, distill, manufacture and smelt, any and all kinds of petroleum and petroleum products, oil, gas and other volatile substances. As originally envisioned, PMPC was to serve as the corporate vehicle for the privatization of PNOC EC’s 10% participating interest in Service Contract 38.
2007
2008
Management believes that, based on the assessments performed, there are no impaired assets.
Permit No.
EXPLORATION AND DEVELOPMENT COSTS
YEAR INCURRED
APPLICATION
AMOUNT
APPLIED
Year 2005
2006 – 2008
208,317,463
208,317,463
Year 2006
2007 – 2009
95,607,015
35,765,672
Year 2007
2008 – 2010
29,565,977 333,490,455
244,083,135
UNAPPLIED 59,841,343 29,565,977 89,407,320
The Company has fully utilized NOLCO incurred in 2005, applicable for Taxable Years 2006 to 2008. Moreover, it has also partially utilized NOLCO incurred in 2006 in the amount of P35.77 million. In effect, the Company has only P26.82 million remaining tax benefit from the carryforward of unused tax losses for the current year using the new income tax rate of 30% per Republic Act 9337 effective January 1, 2009:
PNOC EC | 2008 Annual Report
YEAR OF YEAR INCURRED
APPLICATION
AMOUNT
Tax Rate
Year 2006
2007 – 2008
59,691,459
30%
Year 2007
2008 – 2010
29,565,977
30%
YEAR OF APPLICATION
Year 2006
2007 – 2009
AMOUNT
2008 – 2010
9,901,855
Year 2008
2009 – 2011
12,758,171 28,093,834
2008 21,101,552 2,792,041 1,071,250 1,028,076 72,550 16,659 26,082,128
2007 10,000,000 2,792,041 1,071,250 414,262 72,550 14,476 14,364,579
Cash – restricted pertains to the balance of the trust fund placed in savings deposit with the Land Bank of the Philippines which is intended to cover indemnity benefits of directors and officers who are involved in any action or suit filed against the Company.
Claims receivable consist mainly of the remaining estimated claim from the Government Service Insurance System on the reported loss of various properties damaged by typhoon “Caloy” at the Energy Supply Base at Batangas and typhoon “Paeng” at the San Antonio Gas Plant at Isabela amounting to P2.49 million and P 0.19 million respectively.
Investments in shares of stock represent the cost of investments in proprietary club membership shares.
Land, leases and easement refer to a piece of land in Cotabato that was transferred to PNOC EC by a Deed of Absolute Sale dated April 27, 1999. The property was used in previous exploration project which was written off in 2004.
Liability for annuity pertains to liabilities for accumulated sick leave credits of employees expected to retire in 2009.
19.
DEFERRED CREDITS This account consists of the following:
Unearned Revenue Other deferred credits
2008 2,979,428,894 141,958 2,979,570,852
2007 3,137,416,247 278,996 3,137,695,243
Unearned revenue pertains to the net entitlements of the Company from the undelivered gas of the “take-or-pay” transactions of the SC 38 Malampaya Project where customers are obliged to pay the contracted volume or quantity even if there is no delivery or consumption of the produced gas during the period.
Other deferred credits consist of deferred interest on car loans of officers.
20. LIABILITY FOR FUTURE ABANDONMENT COSTS
This account pertains to the accumulated amount out of the estimated US$3.00 million Company share in the future abandonment costs of SC 38 Malampaya Project. Using the accrued liability method in accounting for this transaction, the liability for future abandonment costs expensed amounted to P6.35 million in 2008 and P6.38 million in 2007.
21. DEFERRED TAX LIABILITIES
This account consists of the following:
Accounts payable and accrued expenses Taxes Payable Other current liabilities Liability for annuity
Other current liabilities include unclaimed payments, salaries payable, contract retention and other miscellaneous liabilities.
Deferred tax liabilities were recognized for the tax liabilities arising from the company’s advance payment of ESB’s lot rental to PNOC for January 1 to December 31, 2009.
22. OTHER LONG TERM LIABILITIES
18. TRADE AND OTHER PAYABLES
17. OTHER ASSETS
Taxes payable include withholding taxes of P6.12 million in 2008 and P27.32 million in 2007 and output vat of P22.70 million in 2008 and P40.01 million in 2007.
5,433,808
Year 2007
Cash - restricted Claims receivable Investments in shares of stock Special deposits Land, leases and easement Cash collateral (PCIR Bond)
8,869,793
Minimum Corporate Income Tax on the other hand, which is computed as two percent (2%) of gross taxable income and which can also be carried over and credited against normal income tax for the next three immediately succeeding taxable years, are broken down as follows: YEAR INCURRED
Accounts payable and accrued expenses are inclusive of the Company’s 10% share in the aggregate obligation of SC 38 Consortium in the amount of P134.47 million in 2008 and P123.42 million in 2007.
17,952,403 26,822,196
TAX BENEFIT
2008 475,785,218 32,704,744 27,630,713 739,543 536,860,218
2007 532,885,879 86,520,740 30,358,394 1,005,413 650,770,426
This account consists of the syndicated Japanese yen loan, which is guaranteed by the National Government that was fully paid in December 2008.
23. SHARE CAPITAL
The capital stock of the Company are common shares with P1.00 par value, all with same rights and privileges, except that Class “A” common shares shall be issued solely to the citizens of the Republic of the Philippines while Class “B” common shares may be issued to the citizens of the Republic of the Philippines or to aliens.
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PNOC EC | 2008 Annual Report
The capital structure of PNOC EC is as follows:
Class A: Authorized Issued, subscribed and paid-up (PNOC) Unsubscribed Share premium Class B: Authorized Issued, subscribed and paid-up PNOC Public Treasury shares Unsubscribed Share premium
No. of Shares
Amount
2,100,000,000 1,522,253,065 577,746,935
1,522,253,065
26. REVENUES
21,326,554
475,532,415 4,467,585 (734,924) 1,098,396 2,023,943,091
There were no changes in the capital structure of the Company during the year.
2008 89,250,000 58,406 89,308,406
2007 89,250,000 58,406 89,308,406
The Kremco 750 Drilling Rig and the Drilling Rig Simulator were donated to the Company by Petro Canada under the Program Management Agreement between PNOC EC, Petro Canada and Office of Energy Affairs (OEA) in 1992. The equipments were received by PNOC EC in 1993 and were turned over to PNOC Energy Development Corporation (PNOC EDC) and were utilized for PNOC EDC’s geothermal drilling operations and training of personnel respectively.
The assets were returned to PNOC EC in 1998 as a result of the separation of PNOC EC from PNOC EDC Management. The Drilling Rig was eventually used by the Company for the drilling operations in Mindanao in 1999. It is being leased by Energy Development Corporation (EDC) for their drilling project in Lihir Island, Papua New Guinea under a Lease Agreement ending March 31, 2009.
25.
2008
2007
2006
1,966,334,863 666,413,158
1,425,453,773 583,901,151
999,461,242 489,971,141
563,684,538 253,422,608 142,093,890 7,874,431 7,807,978 6,243,228 3,309,932 3,277,284 1,456,658 469,187 108,698 12,520 3,622,508,973
566,640,638 166,329,478 141,613,466 12,776,899 6,625,904 6,001,486 3,196,219 1,630,453 15,809,382 562,248 126,165 15,396 2,930,682,658
402,543,898 67,876,697 62,118,080 14,792,965 7,065,223 5,522,303 3,197,292 1,226,559 4,805,601 348,733 42,131 359,369 2,059,331,234
28. OTHER INCOME
This account consists mainly of non-operating income as follows:
Interest income Miscellaneous income Equipment rental Guarantee fee Gain due to catastrophe
In 2005, the Drilling Rig Simulator, together with its housing facilities, was transferred back to PNOC EDC through a Deed of Donation between the two companies. The adjustment in the total amount of P6,412,484 was effected in 2007. RETAINED EARNINGS
2006 4,806,059,530 1,216,459,848 114,702,535 79,841,750 6,217,063,663
This account consists of the following:
Coal purchases and landed cost Production costs Depreciation, depletion and amortization Fuel, oil, and TBA Coal marketing and selling Shipping and delivery Purchased services Employee cost Taxes and licenses Rental Maintenance and repairs Materials and supplies Business expense Miscellaneous expense
This account consists of the following:
Drilling Rig (Kremco Model Trailer) Others
2007 4,303,087,324 1,846,883,815 226,339,742 66,057,022 6,442,367,903
2008 5,770,598,115 2,531,198,062 320,441,577 25,147,018 8,647,384,772
27. COST OF SALES
24. DONATED CAPITAL
This account consists of revenues generated from the Company’s four (4) major business units as follows:
Oil and Gas Production Coal Operations Energy Supply Base San Antonio Gas Project
1,400,000,000 475,532,415 4,467,585 (248,800) 920,000,000
Cash dividends in the amount of P200 million and P100 million were paid in 2008 and 2007, respectively. No dividend was declared from 2008 net income for payment in 2009.
2008 58,228,695 53,507,964 25,052,027 12,662,652 149,451,338
2007 100,866,015 71,005,232 14,586,393 23,862,466 37,787,984 248,108,090
2006 140,015,895 19,688,132 13,622,883 12,433,290 185,760,200
Interest income includes the Company’s 10% share in the interest charged to SC 38 customers on their unpaid invoices for undelivered gas in the amount of P10.88 million in 2008, P40.47 million in 2007 and P90.06 million in 2006. While interest income from bank, mainly from placements and sinking fund amounted to P46.46 million in 2008, P57.27 million in 2007 and P46.82 million in 2006. The decrease in interest income was primarily due to the full payment of the SC 38-related loan in 2008 wherein a sinking fund was maintained.
Gain on catastrophe pertains to net proceeds from insurance claim on damages on ESB’s properties caused by typhoon Caloy in 2007.
The Board of Directors approved on November 11, 2008 per Board Resolution No. 78, series of 2008 the appropriation of P 5,800 million retained earnings as of December 31, 2008 to meet the Company’s cash requirements for capital expenditures and exploration projects in the next three (3) years.
PNOC EC | 2008 Annual Report
Other Income from Guarantee Fee results from the difference between the contracted/guaranteed volume of production per Coal Contracts and actual volume of coal delivered.
A large portion of the net foreign exchange gain for 2008 is attributable to the realized gain on dollar placements amounting to P120.99 million and on joint venture transactions/remittances amounting to P79.25 million. While a large portion of 2007 and 2006 foreign exchange transaction was from the realignment of the SC-38 related loan in the amount of P358.80 million and P361.53 million, respectively. The SC-38 related loan was partially paid every quarter and was fully paid in December 2008.
Other foreign exchange transactions include foreign exchange adjustments on dollar accounts and realignments on SC 38’s trade accounts receivables balances, among others.
29. OPERATING EXPENSES
Professional/technical services Employee cost Purchased services Business expense Depreciation, depletion and amortization Maintenance and repairs Taxes and licenses Fuel, oil, and TBA Rental Insurance Miscellaneous expenses Materials and supplies Capitalized cost
2008 147,137,094 143,572,628 35,252,358 28,135,554
2007 100,619,939 121,459,573 37,143,473 25,853,610
2006 13,725,139 128,324,675 28,548,748 16,874,409
22,753,588 12,786,131 11,139,455 8,264,603 7,811,095 6,389,619 5,412,995 5,008,674 433,663,794 (25,139,750) 408,524,044
13,124,422 9,055,333 6,708,310 7,763,697 8,068,875 3,386,430 8,880,155 9,332,776 351,396,593 (22,327,965) 329,068,628
9,616,119 7,092,913 6,509,476 6,810,948 3,499,958 3,049,524 1,592,331 5,507,683 231,151,923 (31,145,559) 200,006,364
Increase in operating expenses, particularly the professional/technical services was attributed largely to the exploration activities, particularly of seismic surveys and data interpretation under the Joint Marine Seismic Undertaking (JMSU), the tripartite agreement of which lapsed in June 30, 2008 (Note 2).
32. ROYALTY FEE DUE GOVERNMENT
33. OTHER CHARGES
2008
This account consists of the following:
Interest expense on long-term liabilities Guarantee fee on loan Thru-put fees on refinancing of loan
2008
2007
2006
64,884,738 8,498,575 73,383,313
291,898,908 61,865,909 76,588,862 430,353,679
617,918,892 107,526,984 725,445,966
Interest on long-term liabilities pertains to the SC 38 related loan with Citibank, full payment of which was made in December 2008.
In connection with the loan, the Company pays guarantee fee to the Department of Finance and PNOC for the SC 38-related loan.
31.
On placements On joint venture transactions On loan related transactions Others
2008 120,989,352 79,254,290 (44,167,976) 1,423,126 157,498,792
2006 60,751,384 (3,050,608) 288,690,097 (88,607,009) 257,783,864
2007 48,229,203 120,496,339 10,428,840 179,154,382
2006 165,356,407 42,519,186 22,071,270 229,946,863
Other charges of 2008 mainly pertain to bank charges from the trading of imported coal. Prior period adjustments in 2007 pertains to P120.50 million adjustments on costs incurred for various exploration projects capitalized in prior years, while for 2006, P42.52 relates to the write-off of prior period interest receivable with SC 38 customers.
Income taxes are due from the operations of the following major business units:
Oil and gas production Coal operations Energy Supply Base San Antonio Gas Project Current portion Deferred portion
2007 (85,639,207) (126,453,522) 395,480,585 20,925,539 204,313,395
2,086,170 2,086,170
34. INCOME TAXES
Thru-put fees include arrangement fee, documentary stamp, agency fee and other out-of-pocket costs related to the refinancing of the Citibank loan. FOREIGN EXCHANGE GAIN (LOSS) - NET
This account consists of the following:
Impairment loss Prior period adjustments Other miscellaneous expenses TOTAL
30. FINANCE COSTS
The Company is required to share the net proceeds with the government for all service contracts and coal operating contracts entered into with the Department of Energy on the exploration, development and utilization of the country’s natural resources in consideration for the right granted. The government’s share comprises of income taxes and royalty fees. The royalty fees are shared by the government through DOE and the local government units.
2008 1,688,713,735 9,449,588 1,141,043 496,234 1,699,800,600 82,091,904 1,781,892,504
2007 1,161,769,384 6,517,639 1,792,949 1,161,746 1,171,241,718 80,234,593 1,251,476,311
2006 861,371,345 3,375,483 779,902 1,541,172 867,067,902 (27,704,581) 839,363,321
Income taxes for oil and gas production pertain to the Malampaya Project, which was computed and settled consistent with the pertinent provisions of SC 38. On the other hand, income tax on the operations of coal projects, SAGP and ESB was based on the Minimum Corporate Income Tax (MCIT) of two percent (2%) of the gross income.
35
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PNOC EC | 2008 Annual Report
Under RA No. 8424 entitled “An Act Amending the National Internal Revenue Code, As Amended and For Other Purposes,” the MCIT shall be imposed whenever a domestic corporation has zero taxable income or whenever the amount of MCIT is greater than the normal income tax due from such corporation. Taxable income for the year 2008 for Coal Operations, ESB and San Antonio Power Plant was determined to be positive. However, since the Company still has a NOLCO balance for the previous years, this was utilized to fully offset the current year’s taxable income, hence, MCIT was still used (see Note 16).
38.
In February 2007, the Boards of Directors of PNOC EC and PNOC approved a plan to privatize PNOC EC through an Additional Public Offering of its authorized capital stock. In this connection, the PNOC EC Privatization Committee (PRIVACOM) was also formed and authorized by the Boards of Directors of PNOC and PNOC EC to coordinate the process of selecting the Financial Advisor/Lead Arranger/Underwriters/Global Coordinator to advise, guide and assist in the design, planning, preparation and implementation of the program for the privatization of PNOC EC.
35.
EARNINGS PER SHARE (EPS)
The earnings per share amount was computed as follows:
The mandate for the financial advisory/underwriting/global coordinating services was awarded by the PRIVACOM in September 2007 to Citigroup Global Markets Ltd. and ATR KimEng Capital Partners, Incorporated.
However, due to the effects of the global financial crisis and the current volatility in the global market, the planned privatization was postponed pending the uncertainties in the market.
Net income Weighted average number of shares
36.
2008 3,054,037,303
2007 1,768,610,538
2006 2,603,307,662
2,002,253,065 1.52
2,002,253,065 0.88
2,002,253,065 1.30
39.
EMPLOYEE COSTS
Salaries and other benefits Separation pay on MRP participants Social security costs
2008 147,634,046 2,181,809 149,815,855
2007 125,469,565 1,991,494 127,461,059
2006 120,012,766 11,885,063 1,949,149 133,846,978
The expansion of the Company’s operations particularly on exploration activities (gas, oil and coal) led to the continuous hiring of new employees for the year 2008. As of end 2008, the Company has 182 employees as compared to 170 employees in 2007, and 139 in 2006.
A Manpower Reduction Program (MRP) was implemented in 2005 and 2006, in compliance with Administrative Order 103 and Executive Order 366 which directed the implementation of cost-cutting and rationalization measures in the government. Part of the Company’s rationalization program included the implementation of its new organizational structure that is responsive to its new vision, mission and corporate objectives. Five (5) employees availed the said program in 2006.
PRIVATIZATION
CONTINGENCIES As Petitioner
Case No.
02-47516
Particulars PNOC-EC vs. Rafael G. Mangubat
Venue: Quezon City Regional Trial Court (RTC) Branch 218 Nature of Case/Claim: For collection of sum of money (P665,294.70) plus interest. The case was filed because of non-payment by Mr. Mangubat of his remaining loan obligation to PNOC EC, which he was able to secure pursuant to a Vehicle Acquisition Plan (VAP) duly approved by the President of the Philippines.
Status: A writ of execution for the sum of P665,294.70, plus attorney’s fees of P66,529,47, has been issued against Mr. Mangubat and in favor of PNOC EC. The court sheriff is looking for properties and bank accounts of Mr. Mangubat to attach and/or garnish.
The Company has funded a non-contributory retirement plan covering all regular employees under the trust management of the Bank of the Philippine Islands Asset Management and Trust Group (BPI-AMTG).
PNOC-EC vs. Jose M. Asistio
Venue: Pasig City Regional Trial Court (RTC) Branch 67
The most recent actuarial valuations were carried out by EM Zalamea Actuarial Services, Inc. The present value of the defined benefit obligation and the related current service cost was measured using the projected unit credit method.
The present value of the defined benefit obligation is P47,533,549 and the fair value of plan assets is P80,617,887.
Nature of Case/Claim: For collection of sum of money (P719,333.30) plus interest. The case was filed because of non-payment by Mr. Asistio of his remaining loan obligation to PNOC EC, which we was able to secure pursuant to a Vehicle Acquisition Plan (VAP) duly approved by the President of the Philippines.
Status: PNOC EC’s Motion to Declare Mr. Asistio in default was granted by the Court. The Company will present evidence ex-parte at the soonest time possible.
37.
RETIREMENT PLAN 69263
PNOC EC | 2008 Annual Report
02-48508
PNOC-EC vs. Bernardo F. Ople
Venue: Quezon City Regional Trial Court (RTC) Branch 98
Nature of Case/Claim: For collection of sum of money (P805,555.54) plus interest. The case was filed because of non-payment by Mr. Ople of his remaining loan obligation to PNOC EC, which we was able to secure pursuant to a Vehicle Acquisition Plan (VAP) duly approved by the President of the Philippines.
Status: The next hearing for continuation of the presentation of Mr. Ople’s evidence will be held on February 2009. Mr. Ople intends to present a witness, Mr. Rafael G. Mangubat, at the said hearing.
PNOC-EC vs. Pedro T. Santos
CN 69262
15070/JEM
SC 38 Consortium vs. First Gas Power Corporation and FGP Corporation
Venue: Hong Kong International Arbitration Court
Nature of Case/Claim: The SC 38 Consortium is party to Gas Sale and Purchase Agreements (GSPA) with First Gas Power Corporation (FGPC) and FGP Corporation (FGP). In July 2007 the SC38 Consortium commenced arbitration against FGPC and FGP to resolve disputes arising under the GSPAs regarding Force Majeure (FM) claims made by FGP and FGPC and unused scheduled maintenance days. FGPC and FGP are claiming that, by reason of various outages said to have occurred in the transmission lines which transmit electrical power from the FGPC’s and FGP Corp.’s power plants to Meralco, the electrical output from the said plants was restricted and such outages fall under the definition of FM under the GSPAs. The second issue pertains to periods of Scheduled Maintenance allowed under the GSPAs, and how unused Scheduled Maintenance Days are accounted for at the end of each Contract Year. The amount being claimed by the SC38 Consortium in this arbitration is US$5.4 Million for FGPC and US$3.9 Million for FGP (PNOC EC’s share in the claim is 10%, commensurate to its 10% participating interest in SC38). SC 38 Consortium has also sought clarity on the language of the FM provision considering that the issue on Force Majeure is a recurrent issue as FGPC and FGP continue to make similar claims.
Status: The parties have exchanged witness statements and arbitration hearing has been set on April 2009.
Venue: Pasig City Regional Trial Court (RTC) Branch 67 Nature of Case/Claim: For collection of sum of money (P697,666.60) plus interest. The case was filed because of non-payment by Mr. Santos of his remaining loan obligation to PNOC EC, which he was able to secure pursuant to a Vehicle Acquisition Plan (VAP) duly approved by the President of the Philippines.
Status: Mr. Santos filed a Petition for Review in the Supreme Court from the Court of Appeals’ decision denying his petition for certiorari, which, in turn, questioned the RTC’s Order declaring him in default. The Supreme Court denied Mr. Santos’ petition in a decision promulgated on September 23, 2008. To date, Mr. Santos has not filed any motion for reconsideration from the Supreme Court’s decision. The high court is thus expected to issue a finality in judgment and order remanding the case to the Regional trial Court.
1901-1907
PNOC-EC vs. Felimon Joson
Venue: 1st Municipal Circuit Trial Court (MCTC) of Mabini & Tingloy, Batangas
Nature of Case/Claim:
Criminal cases for bouncing checks in the total amount of P1.52 million. Mr. Joson issued the checks in payment of United Planters Products’ (customer of ESB) outstanding obligation to PNOC EC.
Status: Mr. Joson was acquitted by the trial court of the charges against him in a decision dated February 28, 2007. PNOC EC intends to file a civil action against United Planters Products for payment of its outstanding obligations.
As Defendant
Case No.
Particulars
CCN 4108 Province of Palawan vs. SC 38 Joint Venture Partners Venue: Palawan Regional Trial Court (RTC)
Nature of Case/Claim: As a member of the SC 38 Consortium, PNOC EC is involved as a party defendant in a case filed by the Province of Palawan in a Regional Trial Court in Puerto Princesa City against the SC 38 Consortium for the collection of alleged delinquent real property taxes for the years 2002 to 2005 totaling P265,259,194.28, 10% of which shall be paid by PNOC EC if the Consortium will lose the case. For its defense, the Consortium relies mainly on the provision of SC 38 granting exemption to the SC 38 Consortium from local and national taxes, except income tax.
Status: The case is at the trial proper stage, with the Province of Palawan set to present a witness from the provincial treasurer’s office in February 2009.
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PNOC EC | 2008 Annual Report
06-450
06-450
Burgundy Global Exploration Corp. vs. PNOC-EC and Mitra Energy Ltd.
RELATED PARTY TRANSACTIONS Due from Affiliates - net:
Venue: Makati City Regional Trial Court (RTC) Branch 59
Status: The case was dismissed because of Burgundy’s failure to prosecute the same. Burgundy filed a Motion for Reconsideration on December 18, 2007, which motion was granted by the trial court on December 21, 2007. On January 21, 2008, the trial court issued a decision in favor of Burgundy granting it the right to develop the CMOL Project. PNOC EC’s motion for reconsideration was denied by the court on April of 2008. A notice of appeal was filed by PNOC EC; consequently, the trial court will elevate the records of the case to the Court of Appeals. With the parties signing a Participation Agreement for the development of the CMOL Project, a compromise agreement will soon be filed in court.
Due from Joint Venture Partners Nido Petroleum Philippines China National Offshore Oil Corporation Petro-Vietnam Investment and Development Corp. Shell Philippines Exploration BV Pearl Oil (Ragay) Limited
Nature of Case/Claim: For Declaratory Relief. TOMC prays that the Court rule on the respective rights and obligations of the parties under the Joint Venture Agreement signed between TOMC and PNOC Coal Corp., the predecessor-in-interest of PNOC EC. Status: The court issued an Order on September 13, 2007 admitting PNOC EC’s counterclaim and converted TOMC’s petition for declaratory relief but converted said petition into an ordinary civil case for specific performance, i.e. for PNOC EC to collect from TOMC the latter’s unpaid guarantee fees. The court has issued an Order setting the case for Judicial Dispute Resolution on February of 2009.
78,606,864
967,417,289
1,545,301
1,525,487
80,152,165 -
37,586 3,945 968,984,307 75,275,299
432,880
1,183,677
432,880
1,168,244
(15,263,355) (14,397,595)
470,195 441,027 78,538,442
65,754,570
1,047,522,749
Due to Affiliates: Philippine National Oil Company (PNOC) Nido Petroleum PNOC Coal Corporation
Taiwan Overseas Mining Co., Phils., Inc. vs. PNOC and PNOC EC Venue: Makati City Regional Trial Court (RTC) Branch 59
2007
2008 Philippine National Oil Company (PNOC) PNOC Malampaya Production Corporation PNOC Management & Development Corporation PNOC Alternative Fuel Corporation
Nature of Case/Claim: For prohibition and mandamus. This case was file by Burgundy Global to stop PNOC EC from awarding the CMOL project to Mitra Energy Ltd and to require PNOC EC to award the same project to Burgundy Global allegedly as the most qualified Filipino corporation pursuant to the “Filipino First” policy of the Constitution.
40.
Current portion
4,177,088
1,959,552,658
15,764,870 19,941,958 -
145,123,200 7,898,964 2,112,574,822 (166,257,823)
19,941,958
1,946,316,999
Due from affiliates account represents charges and credits from affiliated companies which are payable within a year or the following month upon presentation of debit/credit notes. Due from joint venture partners, on the other hand, are expenses incurred in connection with joint explorations which were paid for and advanced by the Company.
Due to PNOC balance of P4.18 million pertains to miscellaneous intercompany charges. The interest-bearing SC 38-related loan of PNOC from Citibank in the amount of US$47 million in 2007 was fully paid in December 2008.
Due to Nido Petroleum represents security deposit for the second subphase acquisition of 3D seismic data for SC 58 West Calamian Project.
PNOC EC | 2008 Annual Report
41. FINANCIAL RISK MANAGEMENT
Foreign Currency Risk
The Company’s financial instruments consist mainly of cash and cash equivalents. The main sources of which are proceeds from sales of gas, coal, fuel and other services. The Company has various financial assets and liabilities such as trade receivables, trade payables and other liabilities which arise directly from its operations.
The main risks arising from the Company’s financial instruments are credit risk, foreign currency risk, interest rate risk and liquidity risk. The Company’s Risk Management Committee is currently in the process of identifying the risks that affect PNOC EC and evaluating the ways on how to mitigate or minimize these risks.
The Company’s exposure to foreign currency risk resulted from the financial assets and liabilities that are dollar denominated. The Company’s exposure to foreign currency risk to some degree is mitigated by some provisions in the Company’s service contracts and gas sales and purchase agreements. The sales agreements include billing adjustments covering the movements in Philippine Peso and the US Dollar rates.
Interest Rate Risk
The company is not exposed to interest rate risk since the Company does not have any long term debt obligations with floating interest rates and AFS investments.
Liquidity Risk
The Company’s objective is to maintain balance between continuity of funding and sourcing flexibility through the use of financial instruments. The Company manages its liquidity profile to meet its working capital and capital expenditure requirements and service debt obligations. The Company is not exposed to liquidity risk since the Company is involved in the sale of oil, gas and coal which are readily marketable. The Company also maintains enough funding sources to meet its debt obligations.
Credit Risk
The Company’s major customers are the SC 38 power plant customers and coal trading customers. SC 38 customers include the National Power Corporation (NPC), First Gas Power Corp., Shell International Eastern Trading and Chevron Malampaya Llc. SC 38 customers are covered by Gas Sales and Purchase Agreements (GSPAs) which are long term contracts with provisions for interests on payment default and take-or-pay commitments, and NPC being a Government Owned and Controlled Corporation (GOCC) is guaranteed by the Government. Coal trading customers include Holcim Philippines Inc., National Power Corporation, Saturn Cement Marketing Corp., Republic Cement Corporation, Rock Energy International Corp., Iligan Cement Corp. and Pacific Cement Corporation among others. Coal trading customers are covered by coal sales agreements also with provisions for interests on payment default and inflationary adjustments.
Receivable balances are monitored on an ongoing basis to ensure that the Company’s exposure to bad debts is not significant. The maximum exposure of trade receivable is equal to the carrying amount. The Company trades only with recognized, creditworthy third parties and/or transacts only with institutions and/or banks which have demonstrated financial soundness and which have passed the financial evaluation and accreditation of the Company.
Transfer Agent: Philippine National Bank Trust Banking Group 3/F PNB Financial Center, Pres. Diosdado Macapagal Blvd. Pasay City 1305 Tel. No. (632) 832-2615, 526-3688 Fax No. (632) 526-3379
42.
EVENTS AFTER BALANCE SHEET DATE On February 10, 2009, PNOC EC entered into a Heads of Agreement (HOA) with Taiwan Overseas Mining Co., Phils., Inc. (TOMC) to buy-out TOMC’s rights and interests in the Project, Joint Venture Agreement and Operating Agreement in the amount of P108,500,000.00. Nothing in the HOA or in the Buy-out Agreement shall be construed as PNOC EC acquiring, merging with or buying an interest in TOMC. TOMC remains a separate and distinct corporation.
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PNOC EC | 2008 Annual Report
Directors
Jacinto V. Paras Chairman of the Board
1
Rafael E. Del Pilar President & Chief Executive Officer
5
PNOC EC | 2008 Annual Report
2
6
3
4
7
1
Carlos L. De Leon Director
2
William D. Dichoso Director
3
Eduardo F. Hernandez Director
4
Leonides Theresa B. Plaza Director
5
Jaime K. Recio Director
6
Renato S. Velasco Director
7
Crismel F. Verano Director
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PNOC EC | 2008 Annual Report
1
Rafael E. del Pilar President and Chief Executive Officer
2
Leocadio M. Ostrea Vice President and General Manager, Petroleum Division
3
Lourdes S. Gelacio Acting Vice President and General Manager Finance, Corporate Services and Information and Communications Technology Division
Team
Concurrent Manager Corporate Planning Department
4
Jose Anthony T. Villanueva General Manager, Coal Division
5
Raymundo B. Savella Manager, Exploration Department
6
Candido M. Magsombol Manager, Business Development Department
7
Jose M. Eijansantos Compliance Officer
8
George S. Briones Corporate Secretary
9
Clarisa T. Mirano Manager, Human Resources and Administration Department
10
Belmonte H. Macalincag Manager, Energy Supply Base
11
Jose C. Sta. Ana Manager, Legal Department
12
Irvin A. Sarsoza Manager, Community Relations
13
Lucila Q. Maralit Manager, Internal Audit Department
14
Jose Edilbert S. Corsame Manager (OIC) - Production and Natural Gas Department
15
Ferdinand G. Reyes Manager (OIC) - Coal Trading Department
16
Dancelo G. Gacutan Project Manager (OIC) - Malangas
1
4
8
12
13
PNOC EC | 2008 Annual Report
2
3
5
6
7
9
10
11
14
15
16
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PNOC EC | 2008 Annual Report
Units and Field Offices
1
2
3
1
Jose Allan R. Caringal Superintendent ( OIC) Terminal Operations Section
2
Leonardo M. Macias Supervisor - Naga Coal Terminal
3
Herbert E. Funelas Supervisor (OIC) Health, Safety and Environment Section
PNOC EC | 2008 Annual Report
Directory San Antonio Gas Power Plant PNOC Exploration Corporation San Antonio, Echague 3309 Isabela, Philippines Tel.: 63 (917) 817-9684 Fax: 63 (917) 875-6559 Energy Supply Base PNOC Exploration Corporation Barrio Mainaga, Mabini 4202 Batangas, Philippines Tel.: 63 (43) 723-7519 / 487-0325 / 487-0552 63 (02) 479-9431 Fax: 63 (43) 487-0386 Email:
[email protected]
Head Office PNOC Exploration Corporation Building 1, Energy Center, Merritt Rd. Fort Bonifacio, Taguig 1634 Metro Manila, Philippines Tel.: 63 (2) 479-9400 Fax: 63 (2) 840-2055 / 840-1471 http://www.pnoc-ec.com.ph Email:
[email protected]
Malangas Coal Project PNOC Exploration Corporation Km. 9, Diplahan 7039 Zamboanga Sibugay, Philippines Tel.: 63 (919) 540-2154 63 (02) 479-9490 Fax: 63 (919) 547-0630 Email:
[email protected] Batangas Coal Terminal PNOC Exploration Corporation San Miguel, Bauan 4201 Batangas, Philippines Tel.: 63 (43) 727-1133 63 (02) 479-9407 Fax: 63 (43) 980-6157 Email:
[email protected]
Naga Coal Terminal PNOC Exploration Corporation 6037 Cebu, Philippines Tel.: 63 (917) 893-7409 Fax: 63 (32) 489-9899 Email:
[email protected] North Harbor Coal Terminal PNOC Exploration Corporation Lot 2-A Vitas Industrial Estate, R-10 Vitas, Tondo Manila Tel.: 63 (919) 652-9745
Working Together Towards an Energy Self-Sufficient Philippines
Transfer Agent: Philippine National Bank Trust Banking Group 3/F PNB Financial Center Pres. Diosdado Macapagal Blvd. Pasay City 1305 Tel.: (632) 832-2615, 526-3688 Fax: (632) 526-3379
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Exploration Corporation
Beyond
Exploration 2008
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Building 1, Energy Center, Merritt Rd., Fort Bonifacio, 1634 Taguig City •
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Exploration Corporation
