ANNUAL REPORT
2013
EXPLORE EMPOWER AND ENERGIZE
COMMITTED TO
Building 5, Energy Center, Rizal Drive, Bonifacio Global City, Taguig 1634 www.pnoc-ec.com.ph
Table of Contents 1
Vision, Mission and
16
Financial Highlights
Corporate Values
18
Statement of Management’s
2
Corporate Profile
Responsibility for Financial Statements
3
Message from the
19
Independent Auditor’s Report
Chairman of the Board
20
Statement of Financial Position
4
Report of the President and
21
Statement of Profit or Loss and
Chief Executive Officer
Other Comprehensive Income
6
2013 Operational Highlights
22
Statement of Changes in Equity
8
PNOC EC Areas of Interest
23
Statement of Cash Flows
12
Social Performance
24
Notes to Financial Statements
13
Health, Safety and Environment
44
Board of DIrectors
14
Corporate Governance
46
Management Team
Our Cover The PNOC Exploration Corporation (PNOC EC) renews its mandate to provide energy for the country by exploring untapped resources nationwide. Entitled “Committed to Explore, Empower and Energize”, the annual report features two workers passionately working to meet the demands of the rising Philippine economy. An offshore rig at the background represents the natural resources in different areas of the country where the company works with partners to ensure that the Philippine’s transition towards a Tiger Economy continues smoothly and without interruptions.
2
PNOC EC l 2013 ANNUAL REPORT
Vision We will be the leading energy exploration and production company in the Philippines by 2020 with global reach and the partner of choice in exploration and production contributing to the country’s growth and development.
Mission We are an enterprise, whose core business is energy exploration and production. Our work is performed by a corps of dynamic, highly competent and motivated personnel, and is anchored on the pillars of economic viability, environmental sustainability and social responsibility. We are committed to the furtherance of the national objective of energy self-reliance through exemplary performance in all our undertakings.
Values PROFESSIONAL EXCELLENCE
TEAMWORK
LOYALTY
We perform all our undertakings in an exemplary manner by adhering to the highest standards of competence, commitment, dependability and responsibility.
We work together harmoniously toward common goals.
We are loyal to the company and its mission, based on a system of meritocracy and fairness.
INTEGRITY
PATRIOTISM
We strictly adhere to ethical and moral standards of fairness, honesty and accountability in all our undertakings.
We place the interest of the country above all else in all our endeavors and undertakings, and are committed to the national objective of energy self-reliance.
PNOC EC l 2013 ANNUAL REPORT
1
Corporate Profile
PNOC Exploration Corporation is the upstream oil, gas and coal subsidiary of the state-owned Philippine National Oil Company. A government owned and controlled corporation, the Company was incorporated on 20 April 1976 and is mandated by the government through the Department of Energy (DOE) to take the lead in exploration, development and production of the country’s oil, gas and coal resources. At present, PNOC EC has eight (8) petroleum Service Contracts (SCs), namely: SC 37 (Cagayan Basin), SC 38 (Malampaya), SC 47 (Offshore Mindoro), SC 57 (Calamian), SC 58 (West Calamian), SC 59 (West Balabac), SC 63 (East Sabina) and SC 75 (Northwest Palawan). The Company is the operator in SC 37, SC 47 and SC 63 and an active partner in SC 38, SC 57, SC 58, SC 59 and SC 75. PNOC EC used to operate the very first natural gas facility in the country- the San Antonio Gas Power Plant within SC 37 before joining the Malampaya consortium (SC 38) in 1999 with a 10% stake. Malampaya is the country’s single biggest investment of its kind. PNOC EC also holds six (6) Coal Operating Contracts (COCs), namely: COC 41 (Malangas), COC 122 (Isabela), COC 141 (Isabela), COC 184 (Agusan del Sur), COC 185 (Buug-Malangas) and COC 186 (DIplahan-Imelda). As part of its coal business, the company also trades coal from other sources through its four (4) coal terminals located in Manila, Malangas, Batangas and Cebu. The company likewise owns and operates a private commercial port – the Energy Supply Base (ESB) – in Mabini, Batangas which provides berthing, cargo handling, storage and warehousing facilities to its clients. 2
PNOC EC l 2013 ANNUAL REPORT
Message from the Chairman of the Board
We in the Philippine National Oil Company Exploration Corporation (PNOC EC) are privileged to be in the front line of a national effort to achieve economic modernization. As pioneers in the search for and development of energy resources, we are vested with a crucial mission of helping ensure a future of prosperity and abundance for our people. Despite climatic disasters and heavy social burdens inherited from the past, our government under President Benigno S Aquino III has turned around our economy from a history of stagnation and despondency toward a future of progress and optimism. Foreign economic experts and institutions now look upon the Philippines as the “next economic miracle” of Asia. We have reached this high point because of our President’s strong leadership and his stern policy of Daang Matuwid or Straight Moral Path. By strictly following the straight path, we in the PNOC EC – the Board of Directors, Management, Officers and the Rankand-File – have achieved remarkable success during the past three years in pursuit of our primary goal of energy development and self-sufficiency. We have attained financial viability as well. In the three years of the present administration, the PNOC EC has consistently become one of the highest revenue earners for the government among its Government-Owned and Controlled Corporations (GOCCs). We congratulate and thank all members of our Management, Staff, our engineers, geologists and other technical and field personnel, as well as rank-and-file employees, for their hard work and dedication. We must not slacken but instead speed up our efforts to search for oil, gas, coal and other energy resources to realize our vision of becoming “the leading energy exploration company in the Philippines by 2020 with global reach, contributing strongly to our country’s growth and development.”
GEMILIANO C. LOPEZ, JR.
Chairman of the Board of Directors
We will continue to depend on the continued cooperation and unstinted support of our personnel and the general public. We also thank His Excellency, President Benigno S Aquino III, and the Chairman and Members of the Governance Commission for Government-Owned and Controlled Corporations for their invaluable guidance, assistance and encouragement.
PNOC EC l 2013 ANNUAL REPORT
3
Report of the President and Chief Executive Officer Committed to Explore, Empower and Energize Year 2013 was a year of positive results for PNOC Exploration Corporation (PNOC EC). Remaining focused on meeting our targets in order to create value for our stakeholders and keeping our costs low through adoption of efficient operational measures, we have increased our dividend payout to our stockholders to P3.01 billion, a remarkable 51% increase from dividends declared for 2012. Again, notwithstanding the one-month scheduled maintenance shutdown of the Malampaya facilities, we were able to achieve a Net Income of P2.93 billion, slightly higher than our 2012 net income of P2.92 billion. We were able to generate a Return on Revenue (ROR) of 45%, another remarkable improvement from last year’s ROR of 33%. A competitive Earnings Per Share of P1.47 is likewise higher than that of last year’s P1.46. The Malampaya Project continued to be the major source of funds and main driver of PNOC EC’s strong cash position. Natural gas from the Project is currently used to provide approximately 30% of the country’s power needs. PNOC EC has a 10% stake in this project together with the other consortium partners Shell Philippines Exploration BV (Spex) and Chevron Malampaya LLC (Chevron). In 2013, 83% of our Revenues and 95% of our Net Income came from the Malampaya Project. Health, Safety and the Environment (HSE) continues to be our top priority. We only tolerate zero accident within our stakeholders’ community. In 2013, four out of five of our field business units were given awards by the prestigious Safety and Health Association of the Philippine Energy Sector (SHAPES). This award has been consistently received by us since 2009. Adherence to the HSE regulatory compliance is reflected in all our oil, gas and coal contracts. As part of our commitment to increase our reserves to support the country’s agenda of providing reliable and affordable energy, we persistently strive to improve our portfolio in oil, gas and coal exploration and development. We joined the 4th Philippine Energy Contracting Round (PECR 4) held in June 2011 and was awarded one Service Contract (SC) and three Coal Operating Contracts (COCs). PNOC EC is now the holder of eight (8) SCs and six (6) COCs. Moreover, we advanced in our pre-drilling works for SC 63 and SC 37 and have started drilling SC 63’s Baragatan prospect. Drilling for SC 37 is scheduled in the last quarter of 2014. In addition, we were able to confirm over 1.53 million metric tons increase in coal resource as a result of the continued exploration of COC 41’s Malongon and Santa Barbara areas. With the inherent complexity and capital-intensive nature of the oil and gas industry, managing exposure to risks by means of joint
4
PNOC EC l 2013 ANNUAL REPORT
venture partnerships is a common practice. Along this line, we have actively sought local and foreign partners that will contribute to the capital investment and share their expertise to speed up the exploration and development of our SCs and COCs. PNOC EC’s strong financial position continues to be the source of our capital expenditures (CAPEX) which is essential to sustainable growth of the company and financial vitality of the economy. As part of the Malampaya Project Consortium, we shared in the Malampaya Phase 3 (MP3) expansion with Depletion Compression activities targeted to be on stream by 2015. Likewise, we paid our share in the drilling of two (2) infill wells for the Malampaya Phase 2 (MP2) project. These twin projects are aimed at improving supply of the gas requirement of the natural gas power plants in Batangas. PNOC EC had its share of challenges in 2013. Our Energy Supply Base (ESB) experienced collection difficulties from our bunkering customers. Also, our Coal Trading suffered a substantial reduction in sales volume due to the drop in coal prices in the world market. In addition, the imposition of government regulatory rules unfit for an oil and gas company significantly reduced our competitive advantage in getting joint venture partners for our service contracts and projects. Despite all these challenges, we continue to be financially strong and a viable business enterprise. We believe that strengthening our core business is not enough. But we need to invest in professionalizing/improving our staff’s competency and career advancement. Along this line, we sent our people for secondment to our joint venture partners as well as technical trainings here and abroad to improve their skills and expand their exposure. Improvements of our offices were undertaken in both the Head Office and the Energy Supply Base (ESB) to provide our people safer and more conducive work environment. After going through a year of opportunities and challenges, we look forward to another year with renewed hope, confidence and optimism. We will continue with our unwavering commitment to support the government with its energy agenda and be true to our mandate to explore, develop and produce affordable energy resources for our country and our people along with providing dividends to our stakeholders. With the emerging opportunities in the oil and gas industry, we will continue to invest, grow and maximize our full potentials. We remain committed to explore, empower and energize.
PEDRO A. AQUINO, JR. President and CEO
PNOC-EC PNOC EC l 2013 ANNUAL REPORT
5
2013 Operational Highlights
6
PNOC EC l 2013 ANNUAL REPORT
NATURAL GAS PRODUCTION Service Contract No. 38 – Malampaya Gas Project PNOC EC’s primary revenue driver is the Malampaya Deepwater Gas-to-Power Project, the largest single multinational investment of its kind in the country. The natural gas produced by Malampaya provide approximately 30% of the country’s power needs. PNOC EC owns 10% stake in the upstream component of Malampaya, together with Shell Philippines Exploration B.V., the Operator, (45%) and Chevron Malampaya LLC (45%). In 2013, the Malampaya project continued to provide the gas fuel requirement of its three (3) power plant customers in Batangas: Santa Rita (1,000 MW), San Lorenzo (500 MW) and Ilijan (1,200 MW) as well as that of Pilipinas Shell Petroleum Corporation (PSPC) for the gas fuel requirements in its refinery in Tabangao, Batangas and compressed natural gas for the pilot phase of the CNG public transport project of the government. For the year, total natural gas offtake was approximately 119.67 billion standard cubic feet (BCF), which is lower than the natural gas sales in 2012 of 130.28 BCF. The total condensate sale in 2013 is 3.82 million in barrels, against 2012 of 4.58 mmbls. Lower natural gas and condensate sales in 2013 can be attributed to the thirty-day maintenance shutdown conducted from November 11 up to December 10, 2013. Also in 2013, the Consortium put two expansion plans into action. First is the completion of the drilling of two (2) infill wells for the Phase 2 expansion at the original service area. Second is the Phase 3 expansion with Depletion Compression activities in the Subic Bay area, which is targetd to be on-stream by 2015. These expansion plans are intended to sustain and increase production later when needed. Malampaya is expected to continue being the primary revenue generating endeavour of PNOC EC up to another decade or so.
PETROLEUM EXPLORATION AND DEVELOPMENT Service Contract No. 37 – Cagayan Basin SC 37 is located in the southern part of the Cagayan Basin and was awarded by the Department of Energy (DOE) to PNOC EC on July 18, 1990. PNOC EC holds 100% stake in the SC. SC 37 has an area of 220,000 hectares covering Santiago City; the municipalities of Echague and Ramon in Isabela; and Diffun in Quirino. Following the PNOC EC Board approval to drill the Mangosteen prospect in 2012, well planning and preparation was initiated and continued in 2013. Pre-drilling activities include the procurement of long lead items, supply and services, permitting, preparation of HSE-related documents and preparation of staging area and drillsite office. PNOC EC also conducted discussions with operators for potential onshore group drilling to save on mobilization cost. It also took into consideration the possible use of its own drilling rig after its contract with Energy Development Corporation expired. Service Contract No. 47 – Offshore Mindoro SC 47 is located offshore, between the islands of Mindoro and North Palawan covering an area of 10,480 sq. km. It was awarded on January 10, 2005. PNOC EC holds 97% stake in SC 47 with PetroEnergy Resources Corporation and Basic Energy Corporation holding 2% and 1% participating interest respectively. PNOC EC has been farming out the block to interested parties to spread the risks and reduce costs. To make it attractive, PNOC EC did special studies on the identified prospects and leads by developing new petroleum plays and understanding better oil migration pathways. It has been in continuous discussions with the DOE to attract potential partners.
PNOC EC l 2013 ANNUAL REPORT
7
PNOC EC AREAS OF INTEREST
88
PNOC EC l 2013 ANNUAL REPORT
Service Contract No. 57 – Calamian
Service Contract No. 63 – East Sabina
SC 57 is located in Offshore Northwest Palawan, west of the Calamian Islands, covering an area of 7,200 sq. km. PNOC EC has 28% stake in SC 57 with partners China National Offshore Oil Corporation (CNOOC) and Mitra Energy Limited (“Mitra Energy”) holding 51% and 21% respectively. SC 57 was awarded to PNOC EC on September 15, 2005.
The SC 63 block is located in Offshore Southwest Palawan covering an area of 10,560 sq. km. It was awarded to PNOC EC and Nido Petroleum on November 24, 2006. PNOC EC is the operator of the service contract holding 50% participating interest while Nido Petroleum Pty. Ltd. holds the remaining 50%. In 2012, Nido Petroleum was designated as the Technical Operator of the drilling project.
In 2013, PNOC EC continued discussions with the DOE and the Office of the President to resolve issues on PNOC EC’s request for approval of the transfer of its participating interests to CNOOC and Mitra Energy. Exploration activity in SC 57 is expected to resume and accelerate once the Deed of Assignment is approved. Service Contract No. 58 – West Calamian SC 58 is a deepwater acreage which covers an area of 13,440 sq. km. in Offshore Northwest Palawan and located west of the Malampaya oil and gas field. SC 58 was awarded to PNOC EC on January 12, 2006. PNOC EC has 50% participating interest in SC 58 with partner Nido Petroleum Philippines Pty. Ltd., as Operator. Under the farm-in agreement, Nido Petroleum will carry PNOC EC up to the drilling of the first exploration well. In 2013, PNOC EC completed evaluation of the three (3) leading prospects in the block with the Balyena prospect identified as the potential drilling candidate. In November 2013, the DOE granted the approval for the extension of the Sub-Phase 3 for another year to allow the Joint Venture to conduct further subsurface review, prepare the drilling of a well and drill the original commitment well. Service Contract No. 59 – West Balabac The SC 59 block is located offshore west of Balabac Island in the Southwest Palawan Basin covering an area of 14,760 sq. kms. It was awarded to PNOC EC on January 13, 2006. PNOC EC holds 25% participating interest in SC 59 with partner BHP Billiton, holding the remaining 75% (Operator). Under the farm-in agreement, BHP Billiton will shoulder all the exploration costs up to the drilling of three (3) wells. In 2013, BHP Billiton completed the seismic interpretation of the final outboard 2D dataset (4,686.70 line km) and 3D final volume (3,075 sq. km). Permitting work was initiated for the seismic and drilling program being planned for the block. However, in November 2013, BHP Billiton advised PNOC EC of its withdrawal from SC 59 and following the provisions under the participating agreement, it will re-assign its participating interest to PNOC EC. Upon DOE’s approval of this reassignment, PNOC EC will again hold 100% stake in SC 59.
In April 2013, the Joint Venture agreed to replace the Apribada prospect with the Baragatan prospect as the drilling target for the first commitment well. Baragatan has a more defined geometric structure with potential for an oil discovery compared to the gas-prone Apribada. Following the DOE’s approval of Baragatan as the new drilling target in June 2013, Nido Petroleum commenced well planning and preparation. It includes the procurement of long lead items, tendering for jack-up rig and third party contracts, permitting and the conduct of the shallow hazard study. Drilling is expected to commence in the 2nd Quarter of 2014. In November 2013, the DOE granted the one year extension of the Sub-phase 2b to cover the period from November 24, 2013 to November 24, 2014, to provide ample time for the drilling preparation of the Baragatan -1 Well. New Ventures As part of our corporate mandate to be the leading energy exploration and production company in the Philippines, PNOC EC continued to evaluate prospective new ventures and exploration opportunities, both here and overseas. PNOC EC, together with Philex Petroleum Corporation and PetroEnergy Resources Corporation submitted a bid for Area 4 offered under the 4th Philippine Energy Contracting Round (PECR4) launched in 2011. On December 27, 2013, the DOE awarded Area 4 and is now known as Service Contract 75. The SC 75 block is located west of SC 58 and north of SC 63. It covers an area of 6,160 sq km in the offshore Northwest Palawan Basin. SC 75 has a seven-year exploration period divided into five sub-phases. The work program for the Sub-phase 1 includes the acquisition of 2,237 line-km of 2D seismic data within the first half of 2014. Processing and interpretation of the newly acquired daya is expected to be completed before the end of Sub-Phase 1 on December 27, 2015. The Consortium is composed of PNOC EC with 35%, Philex Petroleum with 50% as Operator and PetroEnergy the remaining 15%. PNOC EC is also in discussion with Philodrill Corporation for its participation in the latter’s Joint venture with Pitkin Petroleum for the Area 5 of PECR 4. PNOC EC l 2013 ANNUAL REPORT
9
COAL EXPLORATION AND DEVELOPMENT Coal Operating Contract No. 41 – Malangas Project Operations PNOC EC operates Coal Operating Contract (COC) 41 within the Malangas Coal Reservation in Zamboanga Sibugay, straddling 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 monitors and supports the mining operations of various small-scale coal miners within the COC 41. However, due to international market trends, operations in ILB were significantly scaled down beginning March 1, 2013. Another area within the block is the Lumbog area, south of the ILB mine, where PNOC EC evaluated to have mineable coal reserves of approximately 1.4 million metric tons. In 2013, PNOC EC revised the work program for Lumbog to pursue surface development only. Activities conducted during the year were focused on the procurement of surface equipment and materials Further, the Company is exploring areas in Malongon, Lower Butong, and Sta. Barbara, which are also part of the COC. For the Lower Butong area, PNOC EC completed the conceptual mine plan. While for the Sta. Barbara/Malongon area, PNOC EC continued drilling activities. As of end 2013, total aggregate meterage is 3,617 meters. Coal Operating Contract No. 122 – Isabela Coal Mine and Power Plant Project PNOC EC is the holder of COC 122 which straddles portions of the City of Cauayan and municipalities of Naguilian and Benito Soliven in the province of Isabela. The project consists of a coal mine and a mine-mouth power generating facility. Lignite coal from the identified mine areas in Cauayan City, Benito Soliven and Naguilian will supply the
10 PNOC EC l 2013 ANNUAL REPORT
fuel requirement of a power facility to be located in Cauayan City . The total mineable reserves of 25 million metric tons (MMT) is enough to fuel a 100MW power plant for 25 years. The Company already approved the disclosure of the Land Acquisition and Resettlement Plan (LARP) entitlement package in March 2012. The project is expected to augment the power demands of and bring widespread economic benefits to the province of Isabela while ensuring that stakeholders’ concerns are properly addressed. PNOC EC continued to stress the immediate and long-term benefits for all stakeholders. Thus in 2013, PNOC EC continued communication with barangay officials of impact areas of Benito Soliven, to gain the local government endorsement. Coal Operating Contract No. 141 – Isabela Coal Exploration Project (Other Areas) The DOE awarded COC 141 to PNOC EC on July 5, 2005. It is composed of three coal blocks located north and adjacent to the coal blocks of COC 122 within the municipality of Benito Soliven, Isabela. The geologic assessment indicated that the coal seams encountered in COC 122 may extend into the COC 141 area. The additional coal reserves from the area are intended to increase the economic viability of the Isabela Coal Mine and Power Plant Project in COC 122. The EMB already awarded PNOC EC a CNC for its exploration activities in the area. In 2012, PNOC EC submitted an application to the DOE for a moratorium of activities since October 26, 2012 due to a force majeure situation brought about by the refusal of the Local Government Units (LGUs) to endorse the exploration activities. Currently, PNOC EC is still awaiting DOE’s approval of the application for moratorium due to the force majeure situation in the COC.
Coal Operating Contract Nos. 184, 185, and 186
OIL TRADING
In February 2013, DOE Secretary Petilla signed the coal operating contracts in the three (3) new areas namely: COC 184 - Agusan del Sur-Surigao del Sur, COC 185- Buug-Malangas, COC 186 - Imelda-Malangas. During the year, reconnaissance geologic mapping was conducted over approximately 350 ha. and 850 ha. in COC 185 and COC 186, respectively. In July 2013, PNOC EC filed the applications for Certificate of Non-Coverage (CNC) for COCs 184, 185 and 186 at the Environmental Management Bureau. In September 2013, PNOC EC received the CNC for the three (3) COCs.
Aside from coal business, PNOC EC is also into international oil trading, supplying petroleum products to other countries.
COAL PRODUCTION & SALES In 2013, total aggregate coal production from COC 41 was registered at 59.38 thousand metric tons coming mostly from the production of small-scale coal miners. This is 21% of the targeted 280.00 thousand metric tons (MT) for the year. Unfavorable market condition and the high production cost in COC 41 made our coal difficult to compete in the market and led to management decision to slow down operations and cease production in ILB Mines 1 & 2 in 2013. Likewise direct sales volume was registered at 188.86 thousand MT.
In 2013, PNOC EC delivered 1,002.90 thousand MT of petroleum products to Bangladesh Petroleum Corporation (BPC) and PT Pertamina Energy Services in Indonesia, which is significantly higher than the sales in 2012 registered at 410.27 thousand MT.
ENERGY SUPPLY BASE PNOC EC owns a private commercial port – the Energy Supply Base (ESB) – located in Mabini, Batangas, which offers berthing, cargo handling, storage, and warehousing facilities to its clients. In 2013, ESB accommodated a total of 237 local and foreign vessels and handled 150,136 MT of local cargoes and 394,875 MT of foreign cargoes. ESB provided a total of 7.50 million liters of fuel to its clients in shipping and other industries, and leased out of 55,450 square meters (monthly average) of warehouse, office space, pipe rack, and open yard space to its customers. Client base of the ESB includes energy-related customers, mostly from the oil and gas industry, as well as commercial companies from the food, telecom, fertilizer and cement manufacturing sectors.
PNOC EC l 2013 ANNUAL REPORT 11
Social Performance
Maternal and Child Healthcare Training and Outreach in Batangas
Free Circumcision in Cebu
Recognition Day of PNOC EC Scholars in Isabela Province
Maternal and Child Healthcare Training in Zamboanga Sibugay
CORPORATE SOCIAL RESPONSIBILITY It is foremost for us that we manage our business in an environmentally sustainable way by steadfastly working hand in hand with our stakeholders to bring about lasting significant benefits for the communities we work with. More than just making sure our Company took care of business we also did our best to take care of our host communities. We launched five (5) medical / dental missions to 25 barangays, distributed school supplies to seven (7) public schools,
12 PNOC EC l 2013 ANNUAL REPORT
supported several scholars in our various host communities, and immediate material assistance to the displaced victims of the natural disasters that plagued our country and people. PNOC EC is committed to being an integral part in all of our business localities, as we continuously engage in meaningful dialogue with residents, leaders and other stakeholders in order to uphold our being one of the most socially responsible top corporations of the country.
Health, Safety and Environment
Annual Fire Safety Training, fire hose drill
Disaster Relief Operations, repacking relief goods
Fire Fighting Training, fire extinguisher drill
Annual Blood Donation Drive
HEALTH, SAFETY AND ENVIRONMENT PNOC EC also showed its commitment to the safety of our own people, as four out of our five field business units were given awards by the prestigious Safety and Health Association of the Philippine Energy Sector (SHAPES) to cap 2013 at ceremonies held in Quezon City: the Energy Supply Base, the Naga Coal Terminal, the Batangas Coal Terminal and the Tondo Coal Terminal. Your Company was among the top safety award recipients, besting even the larger energy players.
We are committed to a culture of continuing health and safety throughout our full range of operations, whether administrative or operational, holding and attending various health and safety training seminars and drills under the auspices of the Bureau of Fire Protection, the Philippine National Red Cross and other organizations tasked with ensuring health and safety.
PNOC EC l 2013 ANNUAL REPORT 13
Corporate Governance Board Committees and Their Activities COMMITTEE
Executive and Governance Committee Germiliano C. Lopez, Jr. - Chairman Rufino B. Bomasang - Member Leopoldo E. Petilla - Member Armando P. Galimba - Member Pedro A. Aquino, Jr. - Member Luis Ma. G. Uranza - Member
Project Development, New Ventures, Environment, Community Relations and Quality Control Committee Rufino B. Bomasang - Chairman Rafael E. del Pilar - Member Leopoldo E. Petilla - Member Armando P. Galimba - Member Francisco T. Ignalaga, Jr. - Member
KEY FUNCTIONS The Executive and Governance Committee shall advise and aid the Officers of the Company in all matters concerning its interests and the management of business and, in accordance with the authority granted by the Board, or during the absence thereof, shall act on such specific matters within the competence of the Board as may from time to time be delegated to the Committee in accordance with the Company’s By-Laws. In addition, said Committee shall assist the Board in fulfilling its corporate governance responsibilities.
The Project Development, New Ventures Committee, Environment, Community Relations and Quality Control Committee shall have the following key functions: (i) Recommend to and assist the Board on matters affecting current and new projects of the Company. (ii) Review, evaluate and monitor current and new projects being undertaken by the Company. (iii) Review, evaluate and monitor the Company’s projects and programs and their effects on the environment. (iv) Review, evaluate and monitor the conduct of the Company’s community/ external relations activities. (v) Review, evaluate and monitor the quality control process of the Company. (vi) Recommend measures to and assist the Board on environmental, community relations and quality control issues affecting the Company.
Legal Sub-Committee Leopoldo E. Petilla - Chairman Luis Ma. G. Uranza - Member Francisco T. Ignalaga, Jr. - Member
The Legal Sub-Committee shall have the following functions: (i) Oversee the legal aspects of projects and contracts entered into by the Company. (ii) Review the proposed suggestions concerning legal aspects of projects and contracts that will be entered into by the Company. (iii) Strategize, in coordination with the Legal Department, the terms amd conditions of contracts and ensure that they will be beneficial to the Government and the Company. This includes strategizing for legal actions taken by or against the Company.
14 PNOC EC l 2013 ANNUAL REPORT
COMMITTEE
Audit and Risk Management Committee Rafael E. del Pilar - Chairman Leopoldo E. Petilla - Member Luis Ma. G. Uranza - Member Francisco T. Ignalaga, Jr. - Member
KEY FUNCTIONS The Audit and Risk Management Committee shall have the following particular key duties and responsibilities: (i) Check all financial reports against their compliance with both the internal and financial management handbook and pertinent accounting standards, including regulatory requirements. (ii) Perform oversight financial management functions specifically in the areas of managing credit, market, liquidity, operational, legal and other risk factors of the Company, and crisis management. (iii) Pre-approve all audit plans, scope and frequency one (1) month before the conduct of external audit. (iv) Perform direct interface functions with the internal and external auditors. (v) Develop a transparent financial management system that will ensure the integrity of internal control activities throughout the company through a step-by-step procedure and policies handbook that will be used by the entire organization.
Compensation, Education, and Employee Welfare Committee Armando P. Galimba - Chairman Rufino B. Bomasang - Member Francisco T. Ignalaga, Jr. - Member Luis Ma. G. Uranza - Member
The Compensation, Education and Employee Welfare Committee shall have the following key functions. (i) Establish a formal and transparent procedure for developing a policy on executive remuneration and for fixing the remuneration packages of corporate officers and directors, and provide oversight over remuneration of senior management and other key personnel ensuring that compensation is consistent with the Company’s culture, strategy and control environment. (ii) Develop a form on Full Business Interest Disclosure as part of the preemployment requirements for all incoming officers, which among others compel all officers to declare under penalty of perjury all their existing business interests or shareholdings that may directly or indirectly conflict in their performance of duties once hired. (iii) Provide in the Company’s annual reports, information and proxy statement a clear, concise and understandable disclosure of compensation of its executive officers for the previous year and the ensuring year. (iv) Review of the existing Human Resources Development or Personnel Handbook, to strenghten provisions on conflict of interest, salaries and benefits policies, promotion and career advancement directives and compliance of personnel concerned with all statutory requuirements that must be periodically met in their respective posts. (v) Review and evaluate the education and welfare benefits of the Company. (vi) Provide policy directions on the education and welfare benefits of the Company.
PNOC EC l 2013 ANNUAL REPORT 15
2013 Financial Highlights
In Million Php except for Per Share amounts
2013
2012
Profit for the Year Profit before tax Revenues Current Assets Total Assets Curent Liabilities Total Liabilities Equity Per Share Earnings per share Book value per share Dividends per share Return on revenues Return on assets Return on equity Debt-to-total assets Debt-to-equity
2,933.18 3,877.64 6,451.52 6,575.50 16,745.09 733.79 3,387.90 13,357.18
2,925.28 4,246.18 8,885.50 4,787.02 13,958.21 935.20 3,523.67 10,434.54
0.3% -8.7% -27.4% 37.4% 20.0% -21.5% -3.9% 28.0%
1.46 5.21 1.00 33% 21% 28% 25% 34%
0.7% 28.0% 50.2%
1.47 6.67 1.502 45% 18% 22% 20% 25%
% Change
The 20% increase in Total Assets is attributed to higher CAPEX in 2013 on account of property, plant and equipment acquisitions and capitalized drilling cost for petroleum and coal projects.
Revenue Revenues for 2013 amounted to P6.45 Billion, 27.4% lower than 2012 performance of P8.89 Billion. The P2.44 Billion decline is due to lower volume of coal sold and suspension of credit for bunkering services in 2013, however, due to improved operations and efficiency, net income was maintained at P2.93 Billion level, 0.3% higher compared to 2012 performance.
*Dividends attributable to 2013 was declared on February 17, 2014 and paid on March 5,2014
Sales revenue for 2013 of P6.45 Billion is composed of revenues from the Company’s major business units, 83% of which came from the SC 38 Malampaya Gas-to-Power Project, 10% from Coal Operations and the remaining 7% from the Energy Supply Base (ESB) and Oil Trading.
Revenue
Net Income
12
6
16
10
14 12
5
8
4
10 8 6 4
In Billions
18
In Billions
In Billions
Total Assets
Total Assets
6 4
2 1
2
2
3
0
0 2009 2010 2011 2012 2013
16 PNOC EC l 2013 ANNUAL REPORT
2009 2010 2011 2012 2013
2009 2010 2011 2012 2013
Sales Revenue
P0.42
SC 38
P0.66
Coal Operations ESB/ Oil Trading
P5.37
Total Equity PNOC EC still maintains a contributed capital of P2.02 billion as at December 31, 2013, 99.79% of which is owned by the Philippine National Oil Company (PNOC) and the remaining 0.21% is owned by the public stockholders. The Company’s total equity went up by 28% to P13.36 billion in 2013 from P10.43 billion in 2012 due to income generated from operations. Retained earnings increased to P11.24 billion in 2013 from P8.32 billion in 2012 on account of current year’s net income of P2.93 billion. P6.31 billion is appropriated for capital expenditures and various oil, gas and coal exploration projects.
In Billions
Profitability Return on revenue (ROR) increased from 33% in 2012 to 45% in 2013. The 12% increase can be attributed to stricter rules on bunkering services resulting to improvement in ESB operations, resulting to lower sales volume as compared to 2012 but with higher margins.
Consequently, the book value per share went up to P6.67 in 2013 from P5.21 in 2012.
Total Equity 16
Return on assets (ROA) slightly declined by 3% for the year 2013 compared to 21% last year due to higher property, plant and equipment and cash generated from operations.
12 In Billions
Higher equity in 2013 attributed from net income during the period resulted to lower return on equity (ROE) by 6% compared to 2012.
14 10 8 6 4
Profitability
2 0
50% 45% 40% 35% 30% 25%
2009 2010 2011 2012 2013
20% 15% 10% 5% 0% 2009
2010 ROR
2011 ROA
2012
2013
ROE
PNOC EC l 2013 ANNUAL REPORT 17
Statement of Management’s Responsibility for Financial Statements
The management of PNOC Exploration Corporation (PNOC EC) is responsible for the preparation and fair presentation of the financial statements for the years ended December 31, 2013 & 2012, including the additional components attached therein, in accordance with the prescribed financial reporting framework indicated therein. This responsibility includes designing and implementing internal controls 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. The Board of Directors reviews and approves the financial statements and submits the same to the stockholders. The Commission on Audit (COA) – pursuant to Section 2.1, Article IX-D of the Constitution; has examined the financial statements of the Company in accordance with the Philippine Standards on Auditing, and in its report to the stockholders, has expressed its opinion on the fairness of presentation upon completion of such examination.
GEMILIANO C. LOPEZ, JR. Chairman of the Board
PEDRO A. AQUINO, JR. President and CEO
LOURDES S. GELACIO Vice-President for Management Services
18 PNOC EC | 2013 ANNUAL REPORT
Republic of the Philippines COMMISSION ON AUDIT Commonwealth Avenue, Quezon City
Independent Auditor’s Report 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 of the statement of financial position as of December 31, 2013, and the statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. 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 International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An 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 those 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 at December 31, 2013, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards. Other Matters We draw attention to Note 35 to the financial statements which describes uncertainties related to the outcome of civil, criminal and tax cases pending before various courts. Our opinion is not qualified in respect of this matter. COMMISSION ON AUDIT By: HILCONEDA P. ABRIL State Auditor V Supervising Auditor May 20, 2014 PNOC EC | 2013 ANNUAL REPORT 19
PNOC EXPLORATION CORPORATION (A Subsidiary of the Philippine National Oil Company)
Statement of Financial Position December 31, 2013 (In Philippine Peso)
ASSETS
Note
2013
As restated 2012
Current Assets Cash and cash equivalents Short-term investment Trade and other receivables - net Due from affiliates Inventories Prepaid expenses Total Current Assets
6 7 8 36 9 10
4,823,210,402 1,166,476 621,589,499 8,335,680 353,844,959 767,352,084 6,575,499,100
2,087,771,074 729,069,729 954,707,679 5,869,170 455,314,801 554,285,956 4,787,018,409
Non-Current Assets Property, plant and equipment - net Investments in treasury notes Investments in joint ventures Investment in PNOC Malampaya Production Corp. Exploration and development costs Deferred tax asset Other assets Total Non-current Assets
11 12 13 14 15 31 16
9,106,247,264 77,203,975 116,626,463 625,000 579,622,657 230,453,642 58,810,375 10,169,589,376
8,026,898,370 280,748,805 92,548,507 625,000 554,788,779 162,362,678 53,217,702 9,171,189,841
16,745,088,476
13,958,208,250
TOTAL ASSETS LIABILITIES AND EQUITY LIABILITIES Current Liabilities Trade and other payables Dividends payable Total Current Liabilities
17 18
733,790,742 733,790,742
434,700,159 500,501,066 935,201,225
Non-Current Liabilities Due to affiliates Deferred credits Liability for future abandonment costs Other long-term liabilities Total Non-Current Liabilities
36 19 20 34
14,476,188 2,450,464,231 94,053,219 95,119,852 2,654,113,490
14,243,302 2,427,692,446 88,749,949 57,779,137 2,588,464,834
3,387,904,232
3,523,666,059
EQUITY
13,357,184,244
10,434,542,191
TOTAL LIABILITIES AND EQUITY
16,745,088,476
13,958,208,250
See accompanying Notes to Financial Statements.
20 PNOC EC | 2013 ANNUAL REPORT
PNOC EXPLORATION CORPORATION (A Subsidiary of the Philippine National Oil Company)
Statement of Profit or Loss and Other Comprehensive Income For the year ended December 31, 2013 (In Philippine Peso)
Note
As Restated 2012
2013
2011
REVENUES
24
6,451,522,709
8,885,499,919
10,042,466,282
COST OF SALES
25
(2,185,904,391)
(3,941,923,431)
(4,981,470,489)
4,265,618,318
4,943,576,488
5,060,995,793
GROSS PROFIT OTHER INCOME
26
61,311,415
77,858,815
121,808,336
ADMINISTRATIVE EXPENSES
27
(616,418,582)
(588,659,198)
(499,105,625)
OTHER EXPENSES
28
(22,394,187)
(141,956,128)
(251,091,476)
FOREIGN EXCHANGE GAIN / (LOSS)
29
189,527,754
(44,642,251)
(7,596,937)
FINANCE COSTS
30
-
-
3,877,644,718
4,246,177,726
4,419,417,494
(1,008,042,983) 63,575,770
(1,355,257,179) 34,364,646
(1,430,158,344) 13,290,257
2,933,177,505
2,925,285,193
3,002,549,407
1.47
1.46
1.50
NET PROFIT BEFORE TAX INCOME TAX EXPENSE Current Deferred
31
PROFIT Basic/Diluted Earnings Per Share
32
(5,592,597)
OTHER COMPREHENSIVE INCOME Other comprehensive income (loss) not to be reclassified to profit or loss in subsequent periods: Re-measurement gains (losses) on defined benefit plans Income tax effect Other comprehensive income (loss) for the year, net of tax TOTAL COMPREHENSIVE INCOME FOR THE PERIOD
34
(15,050,645)
(42,944,188)
-
4,515,193
12,883,256
-
(10,535,452)
(30,060,932)
-
2,922,642,053
2,895,224,261
3,002,549,407
See accompanying Notes to Financial Statements.
PNOC EC | 2013 ANNUAL REPORT 21
PNOC EXPLORATION CORPORATION (A Subsidiary of the Philippine National Oil Company)
Statement of Changes in Equity For the year ended December 31, 2013 (In Philippine Peso)
Share Capital (Note 21) Balances, January 1, 2011, as previously reported
2,002,253,065
Share Premium (Note 21) 22,424,950
Treasury Shares (at cost) (Note 21) (734,924)
Donated Capital (Note 22) 89,308,406
Appropriated Retained Earnings (Note 23) 7,500,000,000
Unappropriated Retained Earnings (Note 23)
Total Equity
1,866,108,292
11,479,359,789
66,642,861
66,642,861
1,932,751,153
11,546,002,650
Net Income
3,002,549,406
3,002,549,406
Dividends
(5,007,229,861)
(5,007,229,861)
Effect of PAS 19, (Revised) adoption Balances as at January 1, 2011, as restated
2,002,253,065
22,424,950
(734,924)
89,308,406
Appropriation for investment projects and capital expenditures Balances, December 31, 2011 Balances, January 1, 2012, as previously reported
7,500,000,000
(2,300,000,000) 22,424,950
(734,924)
89,308,406
5,200,000,000
2,228,070,698
9,541,322,195
2,002,253,065
22,424,950
(734,924)
89,308,406
5,200,000,000
2,161,427,837
9,474,679,334
66,642,861
66,642,861
2,228,070,698
9,541,322,195
2,925,285,193
2,925,285,193
2,002,253,065
22,424,950
(734,924)
89,308,406
5,200,000,000
Net Income Other Comprehensive Income - Remeasurement of the net Defined Benefit Obligation Dividends Appropriation for investment projects and capital expenditures Balances, December 31, 2012 Balances, January 1, 2013, as previously reported
1,112,000,000
22 PNOC EC | 2013 ANNUAL REPORT
(2,002,004,265)
(2,002,004,265)
(1,112,000,000)
-
(734,924)
89,308,406
6,312,000,000
2,009,290,694
10,434,542,191
2,002,253,065
22,424,950
(734,924)
89,308,406
6,312,000,000
1,981,539,043
10,406,790,540
27,751,651
27,751,651
2,009,290,694
10,434,542,191
2,933,177,505
2,933,177,505
2,002,253,065
22,424,950
(734,924)
89,308,406
6,312,000,000
Other Comprehensive Income - Remeasurement of the net Defined Benefit Obligation Balances, December 31, 2013
(30,060,932)
22,424,950
Net Income
See accompanying Notes to Financial Statements.
(30,060,932)
2,002,253,065
Effect of PAS 19, (Revised) adoption Balances as at January 1, 2013, as restated
-
2,002,253,065
Effect of PAS 19, (Revised) adoption Balances as at January 1, 2012, as restated
2,300,000,000
(10,535,452) 2,002,253,065
22,424,950
(734,924)
89,308,406
6,312,000,000
4,931,932,747
(10,535,452) 13,357,184,244
PNOC EXPLORATION CORPORATION (A Subsidiary of the Philippine National Oil Company)
Statement of Cash Flows For the year ended December 31, 2013 (In Philippine Peso)
Note CASH FLOWS FROM OPERATING ACTIVITIES Cash receipts from customers Interest income Cash paid to suppliers, affiliates and employees Cash Generated from Operations Interest paid Income taxes paid Net cash from operating activities
26
CASH FLOWS FROM INVESTING ACTIVITIES Exploration and development costs Capital expenditures Investment in Short-term investments/Treasury Notes/ Other Assets Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Payments of Loan (US$9.0 Million) Payment of cash dividends Net cash used in financing activities
23
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
6
2012
2011
6,794,517,903 61,582,545 (1,924,821,143) 4,931,279,305 (1,013,824,950) 3,917,454,355
8,377,319,371 64,342,139 (4,408,174,114) 4,033,487,396 (1,348,496,455) 2,684,990,941
32,809,936,796 81,314,660 (27,830,770,632) 5,060,480,824 (5,592,597) (1,373,197,276) 3,681,690,951
(68,329,379) (1,732,061,344)
(136,006,358) (801,185,615)
(65,441,689) (358,460,797)
929,349,008 (871,041,715)
(937,191,973)
(423,902,486)
(500,501,066) (500,501,066)
(1,501,503,199) (1,501,503,199)
(389,133,000) (5,007,229,862) (5,396,362,862)
189,527,754
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR CASH AND CASH EQUIVALENTS, END
2013
(6,362,269)
504,823
2,735,439,328 2,087,771,074
239,933,500 1,847,837,574
(2,138,069,574) 3,985,907,148
4,823,210,402
2,087,771,074
1,847,837,574
See accompanying Notes to Financial Statements.
PNOC EC | 2013 ANNUAL REPORT 23
PNOC EXPLORATION CORPORATION (A Subsidiary of the Philippine National Oil Company)
Notes to Financial Statements (In Philippine Peso)
1.
GENERAL INFORMATION
West Calamian (SC 58)
PNOC Exploration Corporation (PNOC EC or the Company) was incorporated under Philippine laws and was registered with the Securities and Exchange Commission under Registration Certificate Number 67111 on April 20, 1976. The Company’s common shares were listed in the Philippine Stock Exchange (PSE) up to June 30, 2013.
PNOC EC has 50% participating interest in SC 58 with partner Nido Petroleum Philippines Pty. Ltd. (Nido Petroleum) as the Operator. Under the farm-in agreement, Nido Petroleum will fund the work program that includes 2D and 3D seismic surveys and the drilling of the first well.
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 the 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.
PNOC EC’s wholly-owned subsidiary, PNOC Malampaya Production Corporation (PMPC) has been dissolved as at December 31, 2013. The financial statements of PNOC EC are prepared separately since the Company is itself a subsidiary of the Philippine National Oil Company (PNOC) which owns 99.79% of the Company’s outstanding shares of stock while 0.21% is owned by the public.
From January 25 to February 5, 2012, a total of 861 line km of 2D seismic data was acquired by Seismic Searcher over two leads, namely Bikuda and Bulador. The seismic data was processed by Fugro from March to July 2012. The Bikuda and Bulador were matured as prospects using the newly acquired data. Bikuda was found as an attractive alternative drilling option but still smaller in potential volume compared to Balyena which remains the leading drilling opportunity to fulfill the Subphase 3 commitment well.
On March 19, 2013, Nido Petroleum requested DOE for the suspension of the performance of the Work Commitments and Obligations in the block. The DOE granted the SC 58 Joint Venture further extension of the Sub-Phase 3, from January 12, 2009 to July 19, 2015.
The Board of Directors approved and authorized for issue the Company’s financial statements on May 13, 2014 per Board Resolution No. 5-1, Series of 2014.
In 2013, PNOC EC completed evaluation of the three (3) leading prospects in the block and conducted basic basin modelling to support Probability of Geologic Success (POGS) analysis.
The registered office address and principal place of business of PNOC EC is at Building 1, Energy Center, Rizal Drive, Bonifacio Global City, Taguig City, Philippines.
West Balabac (SC 59)
On April 16, 2010, the DOE approved the transfer of operatorship from PNOC EC to BHP Billiton with 25% and 75% participating interests, respectively.
The processing of the seismic data sets acquired in the previous years was completed in 2012. In June 2012, WesternGeco completed the seismic processing of the 3,075.85 km2 3D seismic data acquired in 2010. Also, in July 26, 2012, CGG Veritas completed the processing of the 4,686.70 km 2D seismic data acquired in 2011.
2.
STATUS OF OPERATIONS
OIL AND GAS EXPLORATION AND PRODUCTION
The Malampaya Project
PNOC EC owns a 10% stake in the upstream component of the Malampaya Deepwater Gas-toPower Project (SC 38), together with Shell Philippines Exploration B.V., the Operator (45%) and Chevron (45%). Commercial gas production from Malampaya commenced on January 1, 2002.
In August 2012, BHP Billiton started the interpretation of these 2D and 3D dataset volumes. A PNOC EC representative has been involved in the interpretation from August 20, 2012 to October 18, 2012.
In 2013, the Malampaya Project continued to provide the gas fuel requirement of its three (3) power plant customers in Batangas, namely Santa Rita (1,000 MW), San Lorenzo (500 MW) and Ilijan (1,200 MW) as well as that of Pilipinas Shell Petroleum Corporation (PSPC) for the gas fuel requirements in its refinery in Tabangao, Batangas and compressed natural gas for the pilot phase of the CNG public transport project of the government. For the year, total natural gas sales was approximately 115.74 billion standard cubic feet (BCF), which is lower than the natural gas sales in 2012 of 130.28 BCF. The total condensate sale in 2013 amounted to 3.79 million barrels (mmbls) against 4.58 mmbls in 2012.
In 2013, PNOC EC continued the conduct of seismic interpretation of the 3D inboard (carbonate play) seismic data and the 2D outboard (clastic play trends) seismic data. BHP Billiton completed its seismic data interpretation of the final outboard 2D dataset and 3D final volume.
Later in 2013, BHP Billiton withdrew its participating interest from the Service Contract due to their strategic global decision.
PNOC EC now holds 100% of SC 59.
Lower natural gas and condensate sales in 2013 can be attributed to the thirty-day maintenance shutdown conducted from November 11 to December 10, 2013.
East Sabina (SC 63)
PNOC EC 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. Effective March 13, 2012, the Joint Venture agreed to transfer the technical operatorship to Nido Petroleum which will be responsible to carry out the operations and activities to fulfill the drilling of the commitment well in Subphase 2b period of the contract.
In 2012, well planning and prospect mapping on the 3D Kawayan reprocessed data continued. The seismic interpretation of the 3D Kawayan volume delivered a modest, high risk prospect and lead portfolio. Among the five prospects that had been prioritized for mapping, the Apribada was ranked as the best candidate for drilling. The Joint Venture is currently looking for a cost competitive rig and rig sharing options to reduce the drilling cost.
The Joint Venture is also continuing its farm out efforts to spread the exploration risk. On August 22, 2012 the DOE granted the 12 month extension of Subphase 2b requested by the Joint Venture to provide ample time for the drilling preparation.
On April 24, 2013, in a Technical Committee Meeting (TCM), the Baragatan prospect was proposed as an alternative drilling target to replace the Apribada prospect.
For the year, PNOC EC continued planning for the drilling of the Baragatan-1 Well. Progress includes the conduct of Information Education Campaign (IEC) in Palawan for site survey work, briefing for the Western Command (Wescom) and the Philippine Coast Guard (PCG), obtained permit from Maritime Industry Authority (MARINA) and signed Rig contract.
Northwest Palawan (SC 75)
In December 27, 2013, the SC 75 was granted by the DOE to PNOC EC, Philex Petroleum Corporation (Philex) and Petroenergy Resources Corporation (PERC) with participating interest of 35%, 50% and 15%, respectively. Philex is the operator of SC 75.
Compressed Natural Gas (CNG) Project
PNOC EC is set to undertake the Compressed Natural Gas (CNG) for vehicle project, which is in line with the Department of Energy’s (DOE) existing Natural Gas Vehicle Program for Public Transport (NGVPPT). The project aims to construct CNG distribution infrastructure such as one (1) mother station and two (2) daughter stations to increase the use of CNG in public utility vehicles. This project aims to provide the fuel requirements to 1,000 buses in the long-run.
In addition, the Consortium has undertaken the execution of Malampaya Phase 3 (MP3) – Depletion Compression activities which is targeted to be on-stream by 2015 and completion of the drilling of two (2) infill wells for the Malampaya Phase 2 (MP2) – Infill Wells.
Other Pre-operating Projects
Cagayan (SC 37)
PNOC EC holds 100% stake in the SC 37 block. Following approval of the PNOC EC Board to drill the Mangosteen prospect in CY 2012, Management continued pre-drilling works for the Mangosteen-1 drilling program in 2013.
Also during the year, PNOC EC continued its farm-out efforts to share the exploration risk in SC 37. Following the NEDA Joint Venture Guidelines, PNOC EC conducted two bid processes for this farm-out. However, no Letter of Intent was received for the two Invitations for Eligibility and to Bid which ended on October 29, 2012 and December 19, 2012, respectively.
On August 5, 2013, Environmental Management Bureau (EMB) Regional Office 2 issued the Company Permit to Operate, however, PNOC EC is still awaiting issuance of the Discharge Permit.
Offshore Mindoro (SC 47)
PNOC EC has 97% stake in SC 47 with partners Petro Energy Resources Corporation and Basic Energy Corporation holding 2% and 1%, respectively.
In 2012, PNOC EC conducted preparation of a prospect-focused seismic program to mature prospects to drilling targets. PNOC EC has also explored opportunities for a seismic group shoot with other Service Contract Operators. To allow the Joint Venture to conduct this seismic program prior to drilling the commitment well, PNOC EC requested for an extension of the Sub-Phase 2 to the Department of Energy (DOE).
In 2013, PNOC EC continued dialogues with the DOE with regard to the way forward for the block. PNOC EC also followed-up its request with the DOE for Service Contract extension to finalize farmin and implement work program including drilling of an exploration well.
Calamian (SC 57)
PNOC EC has 28% stake in SC 57 with partners China National Offshore Oil Corporation (CNOOC) and Mitra Energy Limited (Mitra Energy) holding 51% and 21%, respectively.
In 2013, PNOC EC continued discussions with the DOE and the Office of the President (OP) to resolve issues on PNOC EC’s request for approval for the transfer of the participating interests in SC 57 to CNOOC and Mitra Energy. It is expected that once the Deed of Assignment is approved, the partners will proceed and accelerate their exploration activities in SC 57. It is also considering possible alternative programs for the block to further evaluate previously mapped prospects.
On April 11, 2012, the following Memoranda of Agreement (MOA) among SC 38, PNOC EC and DOE were signed: (1) NGVPPT Mother MOA; (2) MOA for the take-over of Mamplasan CNG Station; and (3) MOA for the sale of CNG. However, PNOC EC’s work program for 2013 no longer includes the take-over of PSPC’s Mamplasan CNG station in Biñan, Laguna.
PNOC EC is set to develop CNG daughter Stations in Batangas City and in Biñan, Laguna with the new Modular CNG Equipment Scheme.
24 PNOC EC | 2013 ANNUAL REPORT
In 2013, procurement activities for the CNG infrastructure, CNG equipment package and tractor heads were conducted, and are currently ongoing.
COAL OPERATIONS
The Company holds six (6) 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 No. 41 (known as the Malangas Project Operations) 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 COC122) 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) No. 41 within the Malangas Coal Reservation in Zamboanga Sibugay straddling portions of the municipalities of Malangas, Diplahan and Imelda. PNOC EC also supervises mining operations of various small-scale coal miners.
However, due to unfavorable coal prices in the market, all development and production activities in Integrated Little Baguio (ILB) Mines were stopped since March 1, 2013.
Another area within the block is the Lumbog area, south of the ILB mine, where PNOC EC evaluated to have mineable coal reserves of approximately 1.4 million metric tons (MT). In 2013, PNOC EC revised the work program for Lumbog to pursue surface development only. Activities conducted during the year were still focused on the procurement of surface equipment and materials
Further, the Company is exploring areas in Malongon, Lower Butong, and Sta. Barbara, which are also part of the COC. PNOC EC completed the conceptual mine plan for the Lower Butong area while drilling activities continued for the Sta. Barbara/Malongon areas. As of end 2013, total aggregate meterage for the drilling is 3,617 meters.
Coal Exploration and Development
Coal Operating Contract (COC) No. 41 – Exploration Projects (Other Areas)
The Lalat Coal Project is in joint venture with A Blackstone Energy Corporation (ABEC) as the Operator. In the Lalat area, development is still on-going. The main shaft development driving was deferred from June 2012 to September 2012 while the structure of the coal seam is under review. The shaft driving resumed thereafter and the total main shaft length as of October 31, 2012 is 300 meters while the total ventilation shaft length is 291.43 meters. Major activities in the ventilation shaft development includes floor concreting and repair, and re-grading and re-lagging of unstable portions due to heavy roof pressure and deteriorated laggings.
On June 22, 2012, the DOE granted an 18-year extension of COC 41 or until August 13, 2030.
Coal Operating Contract (COC) No. 122 – Isabela Coal Mine-mouth Power Plant Project
In March 2012, the PNOC EC Board approved the disclosure of the benefits and compensation package as concluded in the Land Acquisition and Resettlement Plan (LARP) to the affected communities by the project in Cauayan City and municipality of Benito Soliven. The disclosure activities started in April 2012 and still on-going. Parallel to this, an intensive “house-to-house” IEC campaign and perception survey in the impact barangays of Benito Soliven were conducted. The survey results showed that majority of the households were in favor to the development of the project. Subsequently, the results of the survey were presented to the respective Barangay Councils of New Magsaysay, Dagupan and Villaluz in support to PNOC EC’s request for their endorsement.
PNOC EC filed the applications for Certificate of Non-Coverage (CNC) for COCs 184, 185 and 186 at the Environmental Management Bureau. On September 2013, PNOC EC received the CNC for the three (3) COCs.
Coal Trading
Aside from coal exploration and production, the Company also engages in coal trading and marketing activities. PNOC EC continued to cater to the coal requirements of the Small Boiler Users (SBU), local traders, the cement industry and the Naga power plant located in Cebu, with coal production from COC No. 41 and other coal sources, both local and foreign. It also hopes to revive its international trading to China and other countries in the region, which started in 2009 but temporarily suspended in 2011 to 2013 due to the volatile coal market conditions. Aside from coal sales, PNOC EC also operates coal terminals strategically located throughout the country (Tondo Coal Terminal in Manila, Batangas Coal Terminal in Batangas, Naga Coal Terminal in Cebu and Malangas Coal Terminal in Zamboanga Sibugay) and offers integrated services consisting of discharging foreign and local coal shipments, stockpiling, screening, blending and hauling of coal to various customers in the Philippines.
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. ESB has long-term lease contracts with a variety of companies including importers, service contract holders, logistics companies and a telecoms company. 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.
OIL TRADING
PNOC EC is also delivering petroleum products to Bangladesh and Indonesia which are being sourced from a private trading agent.
In 2013, PNOC EC delivered 1,002.92 thousand metric tons of petroleum products to Bangladesh Petroleum Corporation (BPC) and PT Pertamina Energy Services in Indonesia.
3.
PLANNED ADDITIONAL PUBLIC OFFERING
In March 2011, the PNOC EC Board of Directors, in compliance with PSE Memorandum Circular No. 2010-0505 requiring listed companies to have at least 10% public float, approved the public offering of the Company’s 218 million unsubscribed shares through a follow-on offering.
On January 1, 2012, the Amended Minimum Public Ownership (MPO) Rule took effect. Said rule provides that companies which are non-compliant with the MPO as of December 31, 2011 may be given a grace period of twelve (12) months (but not beyond December 31, 2012) to comply with the said MPO Rule.
On December 17, 2012, the PSE communicated to PNOC EC that the SEC resolved to deny all requests for extension of the period for compliance with the Rule. The PSE also informed PNOC EC that it would impose a trading suspension of the Company’s shares effective January 2, 2013. The trading suspension would be imposed for a period of six (6) months, or until June 30, 2013. On July 1, 2013, PNOC EC’s shares of stocks have been delisted from the Exchange due to non-compliance to the 10% MPO Rule.
The endorsement of the Cauayan City Council was successfully acquired in June 2012. PNOC EC put forth premium efforts in acquiring the same in Benito Soliven by conducting substantial Corporate Social Responsibility (CSR) activities.
In September 2012, the Board approved the award of the Transaction Advisory (TA) contract for the selection of joint venture partner/s for the development of the coal mine and power plant project to The Lantau Group (HK) Ltd. (Lantau). The contract engagement of Lantau began in December 2012.
4.
BASIS OF FINANCIAL STATEMENTS PREPARATION
The application for the new five year work program from 2013 to 2017 from the DOE was started in March 2012. All required documentations for the new work program were submitted in December 2012.
The principal accounting policies applied in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
In 2013, PNOC EC continued communication with the barangay officials of impact areas of Benito Soliven regarding the release of project endorsement. PNOC EC continued the house to house visit to each barangay officials of Villaluz, Dagupan and New Magsaysay to follow up their conformity to the resolution endorsement.
The financial statements are presented in Philippine peso, which is the Company’s functional currency. All values are rounded to the nearest peso, except when otherwise indicated.
Coal Operating Contract (COC) No. 141 – Isabela Coal Project
PNOC EC, accompanied by representatives of the Energy Resource Development Bureau (ERDB) of the Department of Energy (DOE), held meetings with the local government units (LGUs) of Benito Soliven and Naguilian on July 9, 23 and October 18, 2012. Both LGUs requested PNOC EC to present the exploration work program to all thirteen (13) host barangays within COC 141.
The accompanying financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (IFRS), International Accounting Standards (IAS) and Interpretations (collectively IFRSs) issued by the Financial Reporting Standards Council (FRSC) and the applicable practices of the oil and gas industry not covered by the existing IFRSs.
PNOC EC submitted on November 27, 2012 an application to the DOE for a moratorium effective retroactively October 26, 2011 due to force majeure situation in COC 141 brought about by the refusal of the LGUs to endorse exploration activities.
The financial statements of the Company have been prepared using the measurement bases specified by IFRS for each type of asset, liability, income and expense. These financial statements have been prepared on the historical cost basis except for trade and other receivables, inventories, assets held for sale and property, plant and equipment. The measurement bases are more fully described in the accounting policies that follow:
Currently, PNOC EC is still awaiting DOE’s approval of the application for moratorium.
Coal Operating Contract Nos. 184, 185, and 186
On February 2013, DOE Secretary Petilla signed the coal operating contracts in the three (3) new areas namely: COC 184 - Agusan del Sur-Surigao del Sur, COC 185- Buug-Malangas, COC 186 - Diplahan-Imelda. In 2013, reconnaissance geologic mapping was conducted over approximately 350 hectares (ha.) and 850 ha., in COC 185 and COC 186, respectively. On July 2013,
• trade and other receivables – at fair value, net of allowance for probable losses (refer to Note 5d and 5e); • inventories – parts and supplies at lower of cost or net realizable value and coal inventories at moving average (refer to Note 5g); • property, plant and equipment – at cost, net of accumulated depreciation, depletion and amortization (refer to Note 5i).
PNOC EC | 2013 ANNUAL REPORT 25
New standards, amendments and interpretations effective beginning January 1, 2013
IFRS 11 Joint Arrangements
A number of new standards, interpretations and amendments effective for the first time for periods beginning on January 1, 2013, have been adopted in these financial statements. The nature and effect of each new standard, interpretation and amendment is detailed below.
IFRS 11 supersedes IAS 31 Interests in Joint Ventures and PIC-13 Jointly-controlled Entities Nonmonetary Contributions by Venturers, and requires joint arrangements to be classified as either:
Amendment to IAS 1 Presentation of Items of Other Comprehensive Income
The amendments to IAS 1 introduce new terminology for the statement of comprehensive income and income statement. Under the amendment to IAS 1, a statement of comprehensive income is renamed as a statement of profit or loss and other comprehensive income and an income statement is renamed as a statement of profit or loss.
The amendments to IAS 1 introduce a grouping of items presented in OCI. Items that will be reclassified to profit or loss at a future point in time (e.g., net loss or gain on AFS financial assets) have to be presented separately from items that will not be reclassified (e.g., revaluation of land and buildings).
Joint arrangements that are structured through a separate vehicle will generally be treated as joint ventures, unless the terms of the contractual arrangement, or other facts and circumstances indicate that the parties have rights to assets and obligations for liabilities of the arrangement, rather than rights to net assets.
Joint ventures are accounted for using the equity method (proportionate consolidation is not permitted by IFRS 11).
The amendments affect presentation only and have no impact on the Company’s financial position or performance.
Parties to a joint operation account for their share of assets, liabilities, revenues and expenses in accordance with their contractual rights and obligations.
IAS 19 Employee Benefits (Revised 2011)
The Company applied IAS 19 (Revised 2011) retrospectively in the current period in accordance with the transitional provisions set out in the revised standard. The opening statement of financial position of the earliest comparative period presented (1 January 2012) and the comparative figures have been accordingly restated.
The adoption of IFRS 11 had no effect on the Company’s joint arrangements previously classified as jointly controlled assets under IAS 31 which have been reclassified as joint operations under IFRS 11 since both are accounted for using their share of assets, liabilities, revenues and expenses in accordance with their contractual rights and obligations.
IFRS 12 Disclosure of Interests in Other Entities
The main changes as a consequence of the revision of IAS 19 include:
- Actuarial gains/losses on remeasuring the defined benefit plan obligation/asset to be recognized in other comprehensive income rather than in profit or loss, and cannot be reclassified in subsequent periods
IFRS 12 sets out the disclosure requirements relating to an entity’s interests in subsidiaries, joint arrangements, associates and structured entities. The standard requires a reporting entity to disclose information that helps users to assess the nature and financial effects of the reporting entity’s relationship with other entities.
As the new standard affects only disclosure, there is no effect on the Company’s financial position or performance.
- Amendments to the timing of recognition for liabilities for termination benefits
IFRS 13 Fair Value Measurement
- Employee benefits expected to be settled (as opposed to ‘due to be settled’) wholly within 12 months after the end of the reporting period are short-term benefits, and are not discounted.
IFRS 13 sets out the framework for determining the measurement of fair value and the disclosure of information relating to fair value measurement, when fair value measurements and/or disclosures are required or permitted by other IFRSs.
IAS 19 (Revised 2011) also requires more extensive disclosures. These have been provided in Note 34.
The Company has no material amounts of other employee benefits expected to be settled beyond 12 months.
As a result, the guidance and requirements relating to fair value measurement that were previously located in other IFRSs have now been relocated to IFRS 13.
Amendment to IFRS 1 – Government Loans
The amendments provide relief to first-time adopters of IFRSs by amending IFRS 1 to allow prospective application of IAS 39 or IFRS 9 and paragraph 10A of IAS 20 Accounting for Government Grants and Disclosure of Government Assistance to government loans outstanding at the date of transition to IFRSs. The amendment has no impact on the Company’s financial position or performance.
While there has been some rewording of the previous guidance, there are few changes to the previous fair value measurement requirements. Instead, IFRS 13 is intended to clarify the measurement objective, harmonize the disclosure requirements, and improve consistency in application of fair value measurement.
IFRS 13 did not materially affect any fair value measurements of the Company’s assets or liabilities, with changes being limited to presentation and disclosure, and therefore has no effect on the Company’s financial position or performance.
Amendment to IFRS 7, Financial Instruments: Disclosures – Offsetting Financial Assets and Financial Liabilities
In addition, IFRS 13 is to be applied prospectively and therefore comparative disclosures have not been presented.
These amendments require an entity to disclose information about rights of set-off and related arrangements (such as collateral agreements). The new disclosures are required for all recognized financial instruments that are set-off in accordance with IAS 32. These disclosures also apply to recognized financial instruments that are subject to an enforceable master netting arrangement or ‘similar agreement’, irrespective of whether they are set-off in accordance with IAS 32.
IAS 27, Separate Financial Statements (as revised in 2011)
The amendment affects disclosures only and has no impact on the Company’s financial position or performance.
As a consequence of the issuance of the new IFRS 10, Consolidated Financial Statements, and IFRS 12, Disclosure of Interests in Other Entities, what remains of IAS 27 is limited to accounting for subsidiaries, jointly controlled entities, and associates in the separate financial statements. The adoption of the amended IAS 27 did not have a significant impact on the separate financial statements of the entities in the Company.
IAS 28, Investments in Associates and Joint Ventures (as revised in 2011)
Philippine Interpretation IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine
This interpretation applies to waste removal costs that are incurred in surface mining activity during the production phase of the mine (“production stripping costs”) and provides guidance on the recognition of production stripping costs as an asset and measurement of the stripping activity asset.
As a consequence of the issuance of the new IFRS 11, Joint Arrangements, and IFRS 12, Disclosure of Interests in Other Entities, IAS 28 has been renamed IAS 28, Investments in Associates and Joint Ventures, and describes the application of the equity method to investments in joint ventures in addition to associates.
Annual Improvements to IFRSs (2009-2011 cycle)
IFRS 10 Consolidated Financial Statements
IFRS 10 supersedes IAS 27 (2008) Consolidated and Separate Financial Statements and SIC-12 Consolidation – Special Purpose Entities, and introduces a single ‘control model’ for all entities, including special purpose entities (SPEs), whereby control exists when all of the following conditions are present:
The Annual Improvements to IFRSs (2009-2011 cycle) contain non-urgent but necessary amendments to IFRSs. The Company adopted these amendments for the current year.
IFRS 1, First-time Adoption of IFRS - Borrowing Costs
The amendment clarifies that, upon adoption of IFRS, an entity that capitalized borrowing costs in accordance with its previous generally accepted accounting principles, may carry forward, without any adjustment, the amount previously capitalized in its opening statement of financial position at the date of transition. Subsequent to the adoption of IFRS, borrowing costs are recognized in accordance with IAS 23, Borrowing Costs. The amendment does not apply to the Company as it is not a first-time adopter of IFRS.
IAS 1, Presentation of Financial Statements - Clarification of the requirements for comparative information
These amendments clarify the requirements for comparative information that are disclosed voluntarily and those that are mandatory due to retrospective application of an accounting policy, or retrospective restatement or reclassification of items in the financial statements. An entity must include comparative information in the related notes to the financial statements when it voluntarily provides comparative information beyond the minimum required comparative period. The additional comparative period does not need to contain a complete set of financial statements. On the other hand, supporting notes for the third balance sheet (mandatory when there is a retrospective application of an accounting policy, or retrospective restatement or reclassification of items in the financial statements) are not required. As a result, the Company has not included comparative information in respect of the opening statement of financial position as at January 1, 2012. The amendments affect disclosures only and have no impact on the Company’s financial position or performance.
- Joint operations - where parties with joint control have rights to assets and obligations for liabilities, or - Joint ventures - where parties with joint control have rights to the net assets of the investee.
- Elimination of the ‘corridor’ approach for deferring gains/losses for defined benefit plans
- Power over an investee - Exposure, or rights, to variable returns from the investee - Ability to use power over an investee to affect the entity’s returns from the investee.
Other changes introduced by IFRS 10 include: - The introduction the concept of ‘de facto’ control for entities with less than a 50% ownership interest in an entity, but which have a large shareholding compared to other shareholders - Potential voting rights are only considered when determining if there is control when they are substantive (holder has practical ability to exercise) and the rights are exercisable when decisions about the investees activities that affect the investors return will or can be made - Specific guidance for the concept of ‘silos’, where groups of assets (and liabilities) within one entity are ring-fenced, and each group is considered separately for consolidation. The financial statements of PNOC EC are prepared separately since the Company is itself a subsidiary of the Philippine National Oil Company (PNOC) which owns 99.79% of the Company’s outstanding shares of stock while 0.21% is owned by public stockholders.
26 PNOC EC | 2013 ANNUAL REPORT
IAS 16, Property, Plant and Equipment - Classification of servicing equipment
The amendment clarifies that spare parts, stand-by equipment and servicing equipment should be recognized as property, plant and equipment when they meet the definition of property, plant and equipment and should be recognized as inventory if otherwise. The amendment does not have any significant impact on the Company’s financial position or performance.
IFRS 8, Operating Segments - Aggregation of Operating Segments and Reconciliation of the Total of the Reportable Segments’ Assets to the Entity’s Assets
IAS 32, Financial Instruments: Presentation - Tax effect of distribution to holders of equity instruments
The amendment clarifies that income taxes relating to distributions to equity holders and to transaction costs of an equity transaction are accounted for in accordance with IAS 12, Income Taxes. The amendment does not have any significant impact on the Company’s financial position or performance.
The amendments require entities to disclose the judgment made by management in aggregating two or more operating segments. This disclosure should include a brief description of the operating segments that have been aggregated in this way and the economic indicators that have been assessed in determining that the aggregated operating segments share similar economic characteristics. The amendments also clarify that an entity shall provide reconciliations of the total of the reportable segments’ assets to the entity’s assets if such amounts are regularly provided to the chief operating decision maker. These amendments are effective for annual periods beginning on or after July 1, 2014 and are applied retrospectively. The amendments affect disclosures only and have no impact on the Company’s financial position or performance.
IAS 34, Interim Financial Reporting - Interim financial reporting and segment information for total assets and liabilities
IFRS 13, Fair Value Measurement - Short-term Receivables and Payables
The amendment clarifies that the total assets and liabilities for a particular reportable segment need to be disclosed only when the amounts are regularly provided to the chief operating decision maker and there has been a material change from the amount disclosed in the entity’s previous annual financial statements for that reportable segment. The amendment affects disclosures only and has no impact on the Company’s financial position or performance.
The amendment clarifies that short-term receivables and payables with no stated interest rates can be held at invoice amounts when the effect of discounting is immaterial.
IAS 16, Property, Plant and Equipment - Revaluation Method - Proportionate Restatement of Accumulated Depreciation
The amendment clarifies that, upon revaluation of an item of property, plant and equipment, the carrying amount of the asset shall be adjusted to the revalued amount, and the asset shall be treated in one of the following ways:
New standards, amendments and interpretations effective beginning on or after January 1, 2014
IAS 36, Impairment of Assets - Recoverable Amount Disclosures for Non-Financial Assets (Amendments)
These amendments remove the unintended consequences of IFRS 13 on the disclosures required under IAS 36. In addition, these amendments require disclosure of the recoverable amounts for the assets cash generating units or CGUs for which impairment loss has been recognized or reversed during the period. These amendments are effective retrospectively for annual periods beginning on or after January 1, 2014 with earlier application permitted, provided IFRS 13 is also applied. The amendments affect disclosures only and have no impact on the Company’s financial position or performance.
Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27)
These amendments are effective for annual periods beginning on or after January 1, 2014. They provide an exception to the consolidation requirement for entities that meet the definition of an investment entity under IFRS 10. The exception to consolidation requires investment entities to account for subsidiaries at fair value through profit or loss. It is not expected that this amendment would be relevant to the Company since none of the entities in the Company would qualify to be an investment entity under IFRS 10.
Philippine Interpretation IFRIC 21, Levies (IFRIC 21)
IFRIC 21 clarifies that an entity recognizes a liability for a levy when the activity that triggers payment, as identified by the relevant legislation, occurs. For a levy that is triggered upon reaching a minimum threshold, the interpretation clarifies that no liability should be anticipated before the specified minimum threshold is reached. IFRIC 21 is effective for annual periods beginning on or after January 1, 2014. The Company does not expect that IFRIC 21 will have material financial impact in future financial statements.
IAS 39, Financial Instruments: Recognition and Measurement - Novation of Derivatives and Continuation of Hedge Accounting (Amendments)
These amendments provide relief from discontinuing hedge accounting when novation of a derivative designated as a hedging instrument meets certain criteria. These amendments are effective for annual periods beginning on or after January 1, 2014.
IAS 32, Financial Instruments: Presentation - Offsetting Financial Assets and Financial Liabilities (Amendments)
The amendments clarify the meaning of “currently has a legally enforceable right to set-off” and also clarify the application of the IAS 32 offsetting criteria to settlement systems (such as central clearing house systems) which apply gross settlement mechanisms that are not simultaneous. The amendments affect presentation only and have no impact on the Company’s financial position or performance. The amendments to IAS 32 are to be retrospectively applied for annual periods beginning on or after January 1, 2014.
IAS 19, Employee Benefits - Defined Benefit Plans: Employee Contributions (Amendments)
The amendments apply to contributions from employees or third parties to defined benefit plans. Contributions that are set out in the formal terms of the plan shall be accounted for as reductions to current service costs if they are linked to service or as part of the remeasurements of the net defined benefit asset or liability if they are not linked to service. Contributions that are discretionary shall be accounted for as reductions of current service cost upon payment of these contributions to the plans. The amendments to IAS 19 are to be retrospectively applied for annual periods beginning on or after July 1, 2014.
a. The gross carrying amount is adjusted in a manner that is consistent with the revaluation of the carrying amount of the asset. The accumulated depreciation at the date of revaluation is adjusted to equal the difference between the gross carrying amount and the carrying amount of the asset after taking into account any accumulated impairment losses.
b. The accumulated depreciation is eliminated against the gross carrying amount of the asset. The amendment is effective for annual periods beginning on or after July 1, 2014. The amendment shall apply to all revaluations recognized in annual periods beginning on or after the date of initial application of this amendment and in the immediately preceding annual period. The amendment has no impact on the Company’s financial position or performance.
IAS 24, Related Party Disclosures - Key Management Personnel
The amendments clarify that an entity is a related party of the reporting entity if the said entity, or any member of a group for which it is a part of, provides key management personnel services to the reporting entity or to the parent company of the reporting entity. The amendments also clarify that a reporting entity that obtains management personnel services from another entity (also referred to as management entity) is not required to disclose the compensation paid or payable by the management entity to its employees or directors. The reporting entity is required to disclose the amounts incurred for the key management personnel services provided by a separate management entity. The amendments are effective for annual periods beginning on or after July 1, 2014 and are applied retrospectively. The amendments affect disclosures only and have no impact on the Company’s financial position or performance.
IAS 38, Intangible Assets - Revaluation Method - Proportionate Restatement of Accumulated Amortization
The amendments clarify that, upon revaluation of an intangible asset, the carrying amount of the asset shall be adjusted to the revalued amount, and the asset shall be treated in one of the following ways: a. The gross carrying amount is adjusted in a manner that is consistent with the revaluation of the carrying amount of the asset. The accumulated amortization at the date of revaluation is adjusted to equal the difference between the gross carrying amount and the carrying amount of the asset after taking into account any accumulated impairment losses. b. The accumulated amortization is eliminated against the gross carrying amount of the asset.
The amendments also clarify that the amount of the adjustment of the accumulated amortization should form part of the increase or decrease in the carrying amount accounted for in accordance with the standard.
The amendments are effective for annual periods beginning on or after July 1, 2014. The amendments shall apply to all revaluations recognized in annual periods beginning on or after the date of initial application of this amendment and in the immediately preceding annual period. The amendments have no impact on the Company’s financial position or performance.
Annual Improvements to IFRSs (2011-2013 cycle)
The Annual Improvements to IFRSs (2011-2013 cycle) contain non-urgent but necessary amendments to the following standards:
IFRS 1, First-time Adoption of International Financial Reporting Standards - Meaning of ‘Effective IFRSs’
The amendment clarifies that an entity may choose to apply either a current standard or a new standard that is not yet mandatory, but that permits early application, provided either standard is applied consistently throughout the periods presented in the entity’s first IFRS financial statements. This amendment is not applicable to the Company as it is not a first-time adopter of IFRS.
Annual Improvements to IFRSs (2010-2012 cycle)
The Annual Improvements to IFRSs (2010-2012 cycle) contain non-urgent but necessary amendments to the following standards:
IFRS 2, Share-based Payment - Definition of Vesting Condition
IFRS 3, Business Combinations - Scope Exceptions for Joint Arrangements
The amendment revised the definitions of vesting condition and market condition and added the definitions of performance condition and service condition to clarify various issues. This amendment shall be prospectively applied to share-based payment transactions for which the grant date is on or after July 1, 2014.
The amendment clarifies that IFRS 3 does not apply to the accounting for the formation of a joint arrangement in the financial statements of the joint arrangement itself. The amendment is effective for annual periods beginning on or after July 1, 2014 and is applied prospectively.
IFRS 3, Business Combinations - Accounting for Contingent Consideration in a Business Combination
IFRS 13, Fair Value Measurement - Portfolio Exception
The amendment clarifies that a contingent consideration that meets the definition of a financial instrument should be classified as a financial liability or as equity in accordance with IAS 32. Contingent consideration that is not classified as equity is subsequently measured at fair value through profit or loss whether or not it falls within the scope of IFRS 9 (or IAS 39, if IFRS 9 is not yet adopted). The amendment shall be prospectively applied to business combinations for which the acquisition date is on or after July 1, 2014. The Company shall consider this amendment for future business combinations.
The amendment clarifies that the portfolio exception in IFRS 13 can be applied to financial assets, financial liabilities and other contracts. The amendment is effective for annual periods beginning on or after July 1, 2014 and is applied prospectively. The amendment has no significant impact on the Company’s financial position or performance.
PNOC EC | 2013 ANNUAL REPORT 27
IAS 40, Investment Property
b.
10% Interest in Service Contract 38
The amendment clarifies the interrelationship between IFRS 3 and IAS 40 when classifying property as investment property or owner-occupied property. The amendment stated that judgment is needed when determining whether the acquisition of investment property is the acquisition of an asset or a group of assets or a business combination within the scope of IFRS 3. This judgment is based on the guidance of IFRS 3. This amendment is effective for annual periods beginning on or after July 1, 2014 and is applied prospectively. The amendment has no significant impact on the Company’s financial position or performance.
IFRS 9, Financial Instruments
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.
IFRS 9, as issued, reflects the first and third phases of the project to replace IAS 39 and applies to the classification and measurement of financial assets and liabilities and hedge accounting, respectively. Work on the second phase, which relate to impairment of financial instruments, and the limited amendments to the classification and measurement model is still ongoing, with a view to replace IAS 39 in its entirety. IFRS 9 requires all financial assets to be measured at fair value at initial recognition. A debt financial asset may, if the fair value option (FVO) is not invoked, be subsequently measured at amortized cost if it is held within a business model that has the objective to hold the assets to collect the contractual cash flows and its contractual terms give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal outstanding. All other debt instruments are subsequently measured at fair value through profit or loss. All equity financial assets are measured at fair value either through OCI or profit or loss. Equity financial assets held for trading must be measured at fair value through profit or loss. For liabilities designated as at FVPL using the fair value option, the amount of change in the fair value of a liability that is attributable to changes in credit risk must be presented in OCI. The remainder of the change in fair value is presented in profit or loss, unless presentation of the fair value change relating to the entity’s own credit risk in OCI would create or enlarge an accounting mismatch in profit or loss. All other IAS 39 classification and measurement requirements for financial liabilities have been carried forward to IFRS 9, including the embedded derivative bifurcation rules and the criteria for using the FVO. The adoption of the first phase of IFRS 9 will have an effect on the classification and measurement of the Company’s financial assets, but will potentially have no impact on the classification and measurement of financial liabilities.
Estimated abandonment and site restoration cost is provided using the accrued liability method and computed based on units of production and estimated proved reserves.
c.
Cash and Cash Equivalents
Cash includes cash on hand and in banks. Cash equivalents are short-term 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
On hedge accounting, IFRS 9 replaces the rules-based hedge accounting model of IAS 39 with a more principles-based approach. Changes include replacing the rules-based hedge effectiveness test with an objectives-based test that focuses on the economic relationship between the hedged item and the hedging instrument, and the effect of credit risk on that economic relationship; allowing risk components to be designated as the hedged item, not only for financial items, but also for non-financial items, provided that the risk component is separately identifiable and reliably measurable; and allowing the time value of an option, the forward element of a forward contract and any foreign currency basis spread to be excluded from the designation of a financial instrument as the hedging instrument and accounted for as costs of hedging. IFRS 9 also requires more extensive disclosures for hedge accounting.
IFRS 9 currently has no mandatory effective date. IFRS 9 may be applied before the completion of the limited amendments to the classification and measurement model and impairment methodology. The Company will not adopt the standard before the completion of the limited amendments and the second phase of the project.
As of December 31, 2013, the Company did not conduct an evaluation on the possible impact of IFRS 9 in its financial statements. The Company will assess the impact of this standard in its financial statements upon completion of all the phases of IFRS 9. The Company does not intend to adopt IFRS 9 in its December 31, 2013 annual financial statements.
Philippine Interpretation IFRIC 15, Agreements for the Construction of Real Estate
This interpretation covers accounting for revenue and associated expenses by entities that undertake the construction of real estate directly or through subcontractors. The SEC and the Financial Reporting Standards Council (FRSC) have deferred the effectivity of this interpretation until the final Revenue standard is issued by the International Accounting Standards Board (IASB) and an evaluation of the requirements of the final Revenue standard against the practices of the Philippine real estate industry is completed. Adoption of the interpretation when it becomes effective will not have any impact on the financial statements of the Company.
5.
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.
Trade and other receivables are stated at fair value, net of allowance for probable losses. The allowance is established by charges to income.
e.
Allowance for Probable Losses
Allowances for impairment, 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 ………………. 15% Over 1-2 years ………………. 35% Over 2-3 years ………………. 75% Over 3 years ………………. 100% The receivables of the SC 38 Malampaya Project are not provided with allowance for probable losses. 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. f. Financial Instruments
Financial instruments are recognized in the statement of financial position when the Company becomes a party to the contractual provisions of the instrument. All regular way purchases and sales of financial assets are recognized on the trade date, which is the date that the Company commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace.
Financial instruments are recognized initially at fair value. Except for financial instruments valued at fair value through profit or loss (FVPL), the initial measurement includes transaction costs. The Company classifies its financial assets into the following categories: financial assets at FVPL, held-to-maturity (HTM) investments, available for sale (AFS) investments, and loans and receivables. For financial liabilities, the Company classifies them into financial liabilities at FVPL and other financial liabilities. The classification depends on the purpose for which the investments were acquired and whether they are quoted in an active market. Management determines the classification of its investments at initial recognition and, where allowed and appropriate, reevaluates such designation at every reporting date.
Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual arrangement. Interest, dividends, gains and losses relating to a financial instrument or a component that is a financial liability, are reported as expense or income. Distributions to holders of financial instruments classified as equity are charged directly to equity, net of any related income tax benefit.
Offsetting Financial Instruments
Financial assets and financial liabilities are offset with the net amount reported in the statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the asset and settle the liability simultaneously. This is not generally the case with master netting agreements, and the related assets and liabilities are presented at gross in the statement of financial position.
Fair Value of Financial Instruments
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. 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.
The fair value of financial instruments traded in active markets at reporting date is based on their quoted market price or dealer price quotations (bid price for long positions and ask price for short positions), without deduction for transaction costs. When current bid and ask prices are not available, the price of the most recent transaction provides evidence of the current fair value as long as there has not been a significant change in economic circumstances since the time of the transaction.
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.
For all other financial instruments not traded in an active market, the fair value is determined by using appropriate valuation techniques. Valuation techniques include net present value techniques, comparison to similar instruments for which observable market prices exist, and other relevant valuation models.
HTM Investments
Interest revenue is accrued on a time-proportion basis, by reference to the principal outstanding and at the effective interest rate applicable.
Quoted non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as HTM investment when the Company has the positive intention and ability to hold to maturity. If the Company were to sell more than an insignificant amount of HTM investments, the entire category would be tainted and would have to be reclassified as AFS investments. Furthermore, the Company would be prohibited to classify any financial assets as HTM investments for the following two years.
28 PNOC EC | 2013 ANNUAL REPORT
After initial measurement, HTM investments are measured at amortized cost using the effective interest method. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees that are integral parts of the effective interest rate. Gains and losses are recognized in the profit or loss when the HTM investments are derecognized or impaired, as well as through the amortization process.
Loans and Receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Company provides money, goods or services directly to a debtor with no intention of trading the receivables. They are included in current assets, except for maturities greater than 12 months after the balance sheet date which are classified as non-current assets.
Loans and receivables are subsequently measured at amortized cost using the effective interest method, less any impairment losses. Any change in their value is recognized in profit or loss. Impairment loss is provided when there is objective evidence that the Company will not be able to collect all amounts due to it in accordance with the original terms of the receivables. The amount of the impairment loss is determined as the difference between the assets’ carrying amount and the present value of estimated cash flows. The Company’s loans and receivables are presented as Trade and Other Receivables in the balance sheet.
Trade receivables are stated at net realizable value as reduced by appropriate allowances for doubtful accounts. The adequacy of the allowance for doubtful accounts is reviewed yearly.
AFS Investments
For AFS Investments, the Company assesses at each reporting date whether there is objective evidence that a financial asset or group of financial assets is impaired.
In the case of equity investments classified as AFS, impairment indicators would include a significant or prolonged decline in the fair value of the investments below its cost. Where there is evidence of impairment, the cumulative loss, measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognized in the profit or loss, is removed from equity and recognized in the profit or loss. Impairment losses on equity investments are not reversed through the profit or loss. Increases in fair value after impairment are recognized directly in the profit or loss.
In the case of debt instruments classified as AFS, impairment is assessed based on the same criteria as financial assets carried at amortized cost. Future interest income is based on the reduced carrying amount and is accrued based on the rate of interest used to discount future cash flows for the purpose of measuring impairment loss. Such accrual is recorded as part of “Interest income” in the profit or loss. If, in a subsequent year, the fair value of a debt instrument increases and that increase can be objectively related to an event occurring after the impairment loss was recognized in the profit or loss, the impairment loss is reversed through the profit or loss.
AFS Investments Carried at Cost
If there is objective evidence that an impairment loss has been incurred on an unquoted equity instrument that is not carried at fair value because its fair value cannot be reliably measured, or on a derivative asset that is linked to and must be settled by delivery of such unquoted equity instrument, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. The carrying amount of the asset is reduced through the use of an allowance account.
Financial assets categorized as loans and receivables include cash and cash equivalents, trade and other receivables, and advances to related parties. Cash and cash equivalents are cash on hand, demand deposits and short-term, highly liquid investments readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value.
AFS Investments
This includes non-derivative financial assets that are either designated to this category or do not qualify for inclusion in any of the other categories of financial assets. They are included in non-current assets under the Financial Assets account in the balance sheet unless management intends to dispose of the investment within 12 months from the balance sheet date. All financial assets within this category are subsequently measured at fair value, unless otherwise disclosed, with changes in value recognized in equity, net of any effects arising from income taxes. Gains and losses arising from securities classified as available-forsale are recognized in the income statement when they are sold or when the investment is impaired. In the case of impairment, the cumulative loss previously recognized directly in equity is transferred to the income statement. If circumstances change, impairment losses on available-for-sale equity instruments are not reversed through the income statement. On the other hand, if in a subsequent period the fair value of a debt instrument classified as availablefor-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in the income statement, the impairment loss is reversed through the profit or loss.
Derecognition of Financial Assets and Liabilities
Financial Asset
A financial asset (or where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognized when:
Other Financial Liabilities
Other financial liabilities, which include loans payable, trade and other payables, due to related parties and long-term debt are initially recognized at fair value of the consideration received less directly attributable transaction costs. After initial recognition, other financial liabilities are subsequently measured at amortized cost using the effective interest method.
Amortized cost is calculated by taking into account any related issue costs, discount or premium. Gains and losses are recognized in the profit or loss when the liabilities are derecognized, as well as through the amortization process.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a “pass-through” arrangement, and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognized to the extent of the Company’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
Financial Liabilities
Impairment of Financial Assets
The Company assesses at each reporting date whether a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired, if and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (an incurred loss event) and that loss event has an impact on the estimated future cash flows of the financial asset or a group of financial assets that can be reliably estimated. Objective evidence of impairment may include indications that the borrower or a group of borrowers is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization and where observable data indicate that there is measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.
A financial liability is derecognized when the obligation under the liability is discharged, cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in the profit or loss.
g.
Inventories
Assets Carried at Amortized Cost
For assets carried at amortized cost, the Company first assesses whether an objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Company determines that no objective evidence of impairment exists for individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses for impairment. Those characteristics are relevant to the estimation of future cash flows for groups of such assets by being indicative of the debtors’ ability to pay all amounts due according to the contractual terms of the assets being evaluated. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognized are not included in a collective assessment for impairment.
If there is an objective evidence that an impairment loss has been incurred, the amount of loss is measured as the difference between the asset’s carrying value and the present value of the estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial assets’ original effective interest rate which is the effective interest rate computed at initial recognition. The carrying value of the asset is reduced through the use of an allowance account and the amount of loss is charged to profit or loss. If in case the receivable has proven to have no realistic prospect of future recovery, any allowance provided for such receivable is written off against the carrying value of the impaired receivable. If, in a subsequent year, the amount of the estimated impairment loss decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is reduced by adjusting the allowance account. Any subsequent reversal of an impairment loss is recognized in profit or loss, to the extent that the carrying value of the asset does not exceed its amortized cost at reversal date.
a. the right to receive cash flows from the asset has expired b. the Company retains the right to receive cash flows from the asset, but has assumed as obligation to them in full without material delay to a third party under a “pass through” arrangement; or c. the Company has transferred its right to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset but has transferred the control of the asset.
Parts and supplies are stated at the lower of cost or net realizable value while coal inventories are measured using the moving average method of inventory costing. 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.
Assets Held for Sale
Assets classified as held for sale are measured at the lower of the carrying amount and the fair value less costs to sell.
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.
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.
PNOC EC | 2013 ANNUAL REPORT 29
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.
A defined benefit plan is a retirement plan that defines an amount of retirement benefit than an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and salary. The legal obligation for any benefits from this kind of retirement plan remains with the Company, even if plan assets for funding the defined benefit plan have been acquired. The retirement plan is tax exempt, funded, noncontributory and administered by a trustee.
The cost of providing benefits under the defined benefit plan is determined using the projected unit credit method of actuarial valuations. The actuarial valuation involves making assumptions about discount rates, future salary increases, mortality and disability rates and employee turnover rates. Due to the complexity of the valuation, the underlying assumptions and its long-term nature, defined benefit obligations are highly sensitive to changes in these assumptions. All assumptions are reviewed at each valuation date.
The determination of the Company’s obligation and cost of retirement and other retirement benefits is dependent on the selection of certain assumptions used by actuaries in calculating such amounts. Those assumptions are described in Note 34 and include, among others, discount rates, expected return on plan assets and salary increase rate. In accordance with IAS 19, actual results that differ from the assumptions are accumulated and amortized over future periods and, therefore, generally affect the recognized expense and recorded obligation in such future periods.
j.
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.
In determining the appropriate discount rate, management considers the approximated zero-coupon yield of government bonds that are denominated in the currency in which the benefits will be paid, with remaining period to maturity approximating estimated average of benefit obligation.
The mortality rate is based on publicly available mortality tables and is modified accordingly with estimates of mortality improvements. Future salary increases are based on expected future inflation rates and company policy.
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.
Further details about the assumptions used are provided in Note 24.
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.
The Company recognizes the net defined benefit liability or asset which is the aggregate of the present value of the defined benefit obligation at the end of the reporting period reduced by the fair value of plan assets (if any), adjusted for any effect of limiting a net defined benefit asset to the asset ceiling. The asset ceiling is the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan.
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.
The cost of providing benefits under the defined benefit plans is actuarially determined using the projected unit credit method.
Defined benefit costs comprise the following: • Service cost • Net interest on the net defined benefit liability or asset • Remeasurements of net defined benefit liability or asset
Service costs which include current service costs, past service costs and gains or losses on non-routine settlements are recognized as expense in profit or loss. Past service costs are recognized when plan amendment or curtailment occurs. These amounts are calculated periodically by independent qualified actuaries.
Net interest on the net defined benefit liability or asset is the change during the period in the net defined benefit liability or asset that arises from the passage of time which is determined by applying the discount rate based on government bonds to the net defined benefit liability or asset.
Net interest on the net defined benefit liability or asset is recognized as expense or income in profit or loss.
Remeasurements comprising actuarial gains and losses, return on plan assets and any change in the effect of the asset ceiling (excluding net interest on defined benefit liability) are recognized immediately in the statement of financial position with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods.
Plan assets are assets that are held by a long-term employee benefit fund. Plan assets are not available to the creditors of the Company, nor can they be paid directly to the Company. Fair value of plan assets is based on market price information. When no market price is available, the fair value of plan assets is estimated by discounting expected future cash flows using a discount rate that reflects both the risk associated with the plan assets and the maturity or expected disposal date of those assets (or, if they have no maturity, the expected period until the settlement of the related obligations). If the fair value of the plan assets is higher than the present value of the defined benefit obligation, the measurement of the resulting defined benefit asset is limited to the present value of economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan.
The Company’s right to be reimbursed of some or all of the expenditure required to settle a defined benefit obligation is recognized as a separate asset at fair value when and only when reimbursement is virtually certain.
The detailed information with respect to the Company’s net retirement and other postemployment benefits is presented in Note 34 to the financial statements.
The Company normally makes an actuarial valuation every two (2) years to check the recommended funding scheme and to adjust contributions due to deviations from the actuarial assumptions arising from the investment yield, mortality gains and losses, employee turnover, and benefit forfeitures.
o.
Foreign Currency Transactions
The Company converts into local currency its foreign currency-denominated 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 reporting date. The Company’s foreign currency denominated assets and liabilities were restated based on prevailing exchange rate of US$1.00:P44.414 in 2013 and US$1.00: P41.192 in 2012. 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.
k.
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 pretax 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 profit or loss. If at reporting date there is an indication that an impairment loss may have decreased, reversal of an impairment loss is recognized as income in the profit or loss. 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.
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 jointly-controlled 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 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.
m. Trade and Other Payables
Trade and other payables are stated at their nominal values.
n.
Retirement Benefit Plan
Retirement benefits are provided to all regular full-time employees through a defined benefit plan.
30 PNOC EC | 2013 ANNUAL REPORT
p.
Income Taxes
The income 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 statement of comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are neither taxable or deductible. The Company’s liability for current tax is calculated using the tax rates and tax laws applicable to the periods to which it relates.
Deferred income tax is accounted for using the balance sheet liability method on all temporary differences at the end of the reporting period 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 in the years in which those temporary differences are expected to be recovered or settled and NOLCO are expected to be applied provided such tax rates have been enacted or substantially enacted at the end of the reporting period.
SHORT-TERM INVESTMENT
Short-term investment for 2013 amounting to P1.17 million pertains to peso placement at 1.25% maturing on June 24, 2014 while the 2012 balance amounting to P729.07 million pertains to the US$3.0 million dollar placement at 1.70% that matured on March 11, 2013 and various peso placements at varying interest rates amounting to P606.22 million maturing up to July 2, 2013.
8.
TRADE AND OTHER RECEIVABLES
This account consists of the following: 2013 Trade Receivables: Gas and Oil Production Coal Operation Energy Supply Base Head Office
The carrying amount of deferred tax assets is reviewed at each reporting 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.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on net basis.
Current and deferred taxes are recognized as an expense or income in profit or loss, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case the tax is also recognized in other comprehensive income or directly in equity, respectively.
q.
Contingencies
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.
r.
Subsequent Events
Post-year-end events that provide further evidence of existing conditions affecting Company’s financial position at reporting date (adjusting events) are reflected in the financial statements. Post-year-end events that are indicative of conditions that arose subsequent to reporting date are disclosed in the notes to the financial statements when material.
s.
Use of Estimates
The preparation of financial statements in conformity with International Financial Reporting Standards (IFRS) 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.
t.
Earnings Per Share
Earnings per share is computed based on the net profit 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 statement of comprehensive income.
u.
Segment Reporting
For purposes of financial reporting, PNOC EC’s reportable segments are: SC 38 Malampaya Project, Coal Trading and Integrated Services, and all other segments.
Financial information on the Company’s reportable segments is presented in Note 38.
6.
CASH AND CASH EQUIVALENTS
This account consists of the following:
Cash on hand and in banks Cash equivalents
7.
2013 105,549,110 4,717,661,292 4,823,210,402
2012 724,259,626 1,363,511,448 2,087,771,074
Cash in banks earn interest at the respective bank deposit rates.
Allowance for probable losses Non-Trade Receivables: Allowance for probable losses
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.
Interest income earned from cash in banks amounted to P3.47 million and P6.76 million in 2013 and 2012, respectively. On the other hand, interest income earned from money market placements amounted to P34.95 million and P38.95 million in 2013 and 2012, respectively.
Cash amounting to P45.45 million is restricted as a trust fund to serve as a Directors’ and Officers’ Liability Insurance. The fund will be used to defray costs that may arise in case any of the Company’s directors and officers gets involved in legal disputes as a result of their official acts. Said trust fund is included under Note 16.
650,256,205 141,233,149 227,446,195 12,187,557 1,031,123,106 (109,550,057) 921,573,049 33,618,350 (483,720) 33,134,630 954,707,679
Trade receivables on SC 38 Malampaya Project consist mainly of the Company’s 10% share in the SC 38 Consortium’s receivables on gas and condensate sales in the amount of P423.19 million and share in aggregate other receivables in the amount of P0.89 million.
Non-trade accounts receivable 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 impairment on trade receivables in the amount of P74.65 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.
The allowance for impairment for trade and non-trade receivables is established based on a regular review of the age and status of accounts relative to historical collections, changes in payment terms and other factors that may affect collectability. The roll-forward analysis of allowance for impairment for trade and non-trade receivables is presented as follows:
December 31, 2013 Balance at beginning of year Write-off of uncollectible accounts Provision of probable losses Recoveries Balance at end of year
Trade 109,550,057 90,814,534 (16,162,862) 184,201,729
Non-Trade 483,720 530,039 (12,935) 1,000,824
Total 110,073,777 91,344,573 (16,175,797) 185,242,553
December 31, 2012 Balance at beginning of year Write-off of uncollectible accounts Provision of probable losses Recoveries Balance at end of year
Trade 101,966,898 7,583,159 109,550,057
Non-Trade 270,955 212,765 483,720
Total 102,277,853 7,795,924 110,073,777
2013 204,034,197 57,555,485 6,510,065 90,546,559 358,646,306 (4,801,347) 353,844,959
2012 362,480,696 8,287,731 7,296,830 82,050,891 460,116,148 (4,801,347) 455,314,801
9.
INVENTORIES
This account consists of the following:
Coal Condensate Fuel and Lubricants Parts and Supplies
2011 360,234,804 1,487,602,770 1,847,837,574
424,079,702 191,243,335 161,959,009 8,269,325 785,551,371 (184,201,729) 601,349,642 21,240,681 (1,000,824) 20,239,857 621,589,499
2012
Allowance for obsolescence
Coal inventory represents the undelivered stock of the Company in its various Coal Terminals with a total volume of 62,809.637 metric tons. On the other hand, 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 12,336.60 bbls.
Parts and supplies inventories pertain substantially to the 10% share of the Company in the aggregate parts and supplies inventory of SC 38 Consortium valued at P90.55 million in 2013 and P82.05 million in 2012.
PNOC EC | 2013 ANNUAL REPORT 31
10. PREPAID EXPENSES
This account consists of the following: 2013 182,476,719 171,522,694 413,352,671 767,352,084
Prepaid income tax Taxes withheld by customers Other prepaid expenses
2012 201,414,844 167,740,335 185,130,777 554,285,956
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.
Other prepaid expenses consist mainly of prepaid insurance, 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.
11. PROPERTY, PLANT AND EQUIPMENT
This account consists of the following:
General plant facilities
COST January 1, 2013 Additions Reclassifications Disposals December 31, 2013
343,197,564 43,195,441 (5,179) 386,387,826
12. 13.
121,216,560 -
69,488,632 5,017,426
89,250,000 121,216,560
74,506,058
Furniture, fixtures and equipment
Transportation equipment
169,204,769 13,284,343
Scientific equipment
31,915,744 2,596,337
35,445,238 1,960,454
(2,570) 182,486,542 34,512,081
Wells, platform and other facilities
Other property and equipment
12,795,319,401 1,651,093,867
38,103,169 -
37,405,692 14,446,413,268
38,103,169
Construction In Progress
Total
39,243,665 (6,611,345) 32,632,320
13,732,384,742 1,710,536,523 (7,749) 15,442,913,516
(14,629,558) (1,814,436)
-
777 1,585 (195,363,774) (89,249,999) (97,649,400) (35,924,650) (136,862,408) (30,416,385) (14,193,004) (5,720,562,638) (16,443,994)
-
(5,705,486,372) (631,182,242) 2,362 (6,336,666,252)
NET CARRYING AMOUNT December 31, 2013
191,024,052
32,632,320
9,106,247,264
COST January 1, 2012 Additions Reclassifications Disposals December 31, 2012
89,250,000 -
Marine equipment and facilities
ACCUMULATED DEPRECIATION January 1, 2013 Provision Reclassifications Disposals December 31, 2013
(173,065,891) (22,298,660)
General plant facilities
Wells and related facilities
Drilling equipment
(89,249,999) -
1
(97,649,400) -
23,567,160 Wells and related facilities
Drilling equipment
(33,118,215) (2,806,435)
38,581,408 Marine equipment and facilities
(115,729,603) (21,134,390)
45,624,134 Furniture, fixtures and equipment
(29,112,534) (1,303,851)
(12,398,606) (1,794,398)
4,095,696 Transportation equipment
(5,140,532,566) (580,030,072)
23,212,688
8,725,850,630
Scientific equipment
Wells, platform and other facilities
21,659,175 Other property and equipment
Construction In Progress
Total
243,611,235 99,634,108
89,250,000 -
121,216,560 -
56,265,025 13,223,607
156,946,806 12,262,847
31,915,740 4
34,718,990 726,249
12,205,288,590 590,030,811
38,103,169 -
23,026,897 16,216,768
(47,779) 343,197,564
89,250,000
121,216,560
69,488,632
(4,884) 169,204,769
31,915,744
(1) 35,445,238
12,795,319,401
38,103,169
39,243,665
13,000,343,012 732,094,394 (52,664) 13,732,384,742
ACCUMULATED DEPRECIATION January 1, 2012 Provision Reclassifications Disposals December 31, 2012
(157,134,399) (15,954,584)
(89,249,999) -
(97,649,400) -
(31,357,652) (1,760,563)
(93,519,050) (22,214,102)
(25,560,957) (3,551,577)
(10,481,322) (1,917,284)
(4,613,984,862) (526,547,704)
(12,815,122) (1,814,436)
-
23,092 (173,065,891)
(89,249,999)
(97,649,400)
(33,118,215)
3,549 (115,729,603)
(29,112,534)
(12,398,606)
(5,140,532,566)
(14,629,558)
-
(5,131,752,763) (573,760,250) 26,641 (5,705,486,372)
NET CARRYING AMOUNT December 31, 2012
170,131,673
1
23,567,160
36,370,417
53,475,166
2,803,210
23,046,632
7,654,786,835
23,473,611
39,243,665
8,026,898,370
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. Management believes that, based on the assessments performed, there are no impaired assets. INVESTMENT IN TREASURY NOTES Investment in Treasury Notes pertains to a held-to-maturity placement amounting to P77.20 million at a coupon rate of 9.13% maturing on September 4, 2016. 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 and ILB Areas) East Sabina
32 PNOC EC | 2013 ANNUAL REPORT
COC 41 SC 63
2013 16,568,015 100,058,448
2012 22,298,562 70,249,945
116,626,463
92,548,507
14.
INVESTMENT IN PNOC MALAMPAYA PRODUCTION CORPORATION
17. TRADE AND OTHER PAYABLES
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.
This amount represents only the 25% paid up capital of PMPC as required by the Securities and Exchange Commission.
On July 22, 2013, PNOC EC wrote Department of Energy (DOE) Secretary Carlos Jericho L. Petilla to respectfully request for the appointment of PNOC EC’s current directors as temporary directors of PMPC for purposes of its dissolution and to approve and authorize the issuance of its financial statements. The request of PNOC EC was later approved by DOE Secretary Petilla in its reply letter dated October 4, 2013.
On November 5, 2013, through Board Resolution No. 11-3, S’2013, the PMPC Board of Directors and by an affirmative vote of the stockholders owning or representing at least two-thirds (2/3) of the outstanding capital stock at its special meeting on November 18, 2013, approved the amendment to Article IV of PMPC’s Articles of Incorporation shortening its corporate life from fifty (50) years to only until December 31, 2013 and to cause its dissolution.
15. EXPLORATION AND DEVELOPMENT COSTS
The deferred exploration and development costs pertain to the following projects:
Cauayan Coal Project BATMAN Natural Gas Study Project Natural Gas Study Isabela Coal Mine Mouth Power Plant Lumbog Coal Project Isabela Coal Exploration Project Malongan & Alegria Coal Project Surigao Coal Exploration Project Coal Exploration Project – COC 41 Other Areas Malampaya Oil Rim Exploration Natural Gas Vehicle Program 65 MW Malangas Powerplant Camago Malampaya Oil Leg Cagayan Basin - SC 37 Domestic Projects Gotas North Limb Project
2013 97,819,520 68,043,808 60,722,257 86,587,595 104,868,118 30,015,892 68,911,657 10,829,645 10,114,403 1,320,035 763,962 122,807 20,116,927 433,855 18,952,176 579,622,657
2012 97,819,520 68,043,808 60,722,257 78,647,043 103,454,979 25,616,802 68,499,711 19,417,545 14,575,404 10,114,403 1,320,035 763,962 122,807 5,236,648 433,855 554,788,779
The P19.42 million deferred exploration and development cost in 2012 for Surigao Coal Exploration Project (COC 140) was approved for relinquishment by the Department of Energy (DOE) last July 3, 2013.
16. OTHER ASSETS Cash - restricted Surplus Property Claims receivable Investment in shares of stock Special deposits Land, leases and easement
2013 45,448,861 6,039,650 2,235,931 1,925,185 3,088,197 72,550 58,810,375
2012 43,349,786 3,532,088 2,235,931 1,925,185 2,102,162 72,550 53,217,702
Surplus property pertains to the cost of fixed assets for disposal, cost of levied properties for unpaid and delinquent rentals, including interest, on the use of the ESB open yard.
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.
Investments in shares of stock represent the cost of available-for-sale investments in proprietary club membership shares.
Special deposits account pertains to returnable deposits.
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.
2013 641,209,619 71,181,041 20,660,539 739,543 733,790,742
Accounts payable and accrued expenses Other current liabilities Taxes payable Liability for annuity
2012 344,257,203 67,221,442 22,481,971 739,543 434,700,159
Accounts payable and accrued expenses pertain to purchases of goods and services for the Company’s business operations. The account is inclusive of the Company’s 10% share in the aggregate obligation of SC 38 Consortium in the amount of P401.76 million in 2013 and P237.07 million in 2012, accounts payable to suppliers and contractors amounting to P192.00 million in 2013 and P64.62 million in 2012 and the remaining P47.44 million in 2013 and P42.56 million in 2012 pertains to accrued expenses.
Other current liabilities include unclaimed payments, salaries payable, contract retention and other miscellaneous liabilities.
Taxes payable include income tax of P8.69 million in 2013 and P9.95 million in 2012, withholding taxes of P7.50 million in 2013 and P7.83 million in 2012 and output VAT of P4.47 million in 2013 and P4.70 million in 2012.
Liability for annuity pertains to liabilities for accumulated sick leave credits of employees expected to retire in 2014.
18. DIVIDENDS PAYABLE
Dividends payable amounting to P500.50 million in 2012 pertains to the P0.25 dividend per share declared on December 13, 2012 to stockholders of record as of January 2, 2013 that was paid on January 15, 2013.
19. UNEARNED REVENUE
This account consists of the following: 2013 2,450,265,311 198,920 2,450,464,231
Unearned revenue Other deferred credits
2012 2,427,476,528 215,918 2,427,692,446
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 represents the ten percent share of PNOC EC in the estimated future abandonment cost of SC 38 Malampaya project which is equivalent to US$22.4 million. The Company recorded the liability at its present value of US$3.0 million. Using the accrued liability method, the provision for future abandonment costs amounted to P5.30 million and P5.67 million in 2013 and 2012, respectively.
21. PAID-UP CAPITAL
The capital stocks 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.
The capital structure of PNOC EC is as follows:
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.
This account consists of the following:
No. of Shares 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
2,100,000,000 1,522,253,065 577,746,935
Amount
1,522,253,065 21,326,554
1,400,000,000 475,532,415 4,467,585 (248,800) 920,000,000
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.
PNOC EC | 2013 ANNUAL REPORT 33
22. DONATED CAPITAL
26. OTHER INCOME
This account consists of the following: 2013 89,250,000 58,406 89,308,406
Drilling rig (Kremco Model Trailer) Others
2012 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 December 31, 2012.
This account consists mainly of non-operating income as follows: 2013 55,305,355 607,896 5,398,164 61,311,415
Interest income Equipment rental Miscelleaneous income
2012 64,342,139 601,898 12,914,778 77,858,815
2011 81,314,660 169,651 40,324,025 121,808,336
Interest income includes interest charges from various Coal and ESB customers on overdue accounts amounting to P16.88 million in 2013, P18.64 million in 2012 and P3.55 million in 2011. On the other hand, interest income from bank, mainly from placements, amounted to P38.42 million in 2013, P45.70 million in 2012 and P77.71 million in 2011.
Income from equipment rental pertains to the rental of various equipments in the Malangas Project Operations.
Miscellaneous income includes income from sale of scrapped/over-aged coal amounting to P4.66 million in 2013, P3.42 million in 2012 and P30.00 million in 2011. It also consists of funds from bidding documents, penalties from the supplier’s late delivery on purchases and administration fees from laboratory analysis, among others.
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 P6.41 million was effected in 2007.
27. ADMINISTRATIVE EXPENSES 23. RETAINED EARNINGS
The Board of Directors approved on December 13, 2012 per Board Resolution No. 12-3, Series of 2012 the appropriation of P6.312 billion retained earnings as at December 31, 2012 to meet the Company’s cash requirements for capital expenditures and exploration projects in the next three (3) years. No dividends were declared in 2013 while cash dividends in the amount of P2.002 billion and P5.007 billion were declared in 2012 and 2011, respectively.
This account consists of revenues generated from the Company’s major business units as follows:
Gas and Oil Production Coal Operation Energy Supply Base Oil Trading Rig 1
2013 5,368,882,030 661,673,227 401,137,641 19,829,811 6,451,522,709
2012 5,690,253,030 1,140,819,039 2,023,175,772 31,252,078 8,885,499,919
2013 236,536,887 15,855,040 87,006,282 42,529,062 16,651,862 10,860,154 10,621,056 10,553,012 8,439,793 3,319,687 17,164,420 77,296,412 79,584,915 616,418,582
Employee cost Professional/Technical services Purchased services Depreciation, depletion and amortization Taxes and licenses Business expenses Maintenance and repairs Rental Fuel, oil and TBA Insurance Materials and supplies Miscellaneous expenses General Corporate Overhead
24. REVENUES
This account consists of the following:
2011 5,609,875,105 2,372,258,103 2,025,173,150 35,159,924 10,042,466,282
2012 224,013,275 14,342,596 28,519,853 23,173,340 19,142,154 11,607,506 20,169,299 9,898,721 13,772,044 4,482,280 1,729,197 7,573,558 210,235,375 588,659,198
2011 215,077,264 40,474,083 45,806,168 31,831,801 15,877,170 11,626,366 19,108,063 14,314,979 17,267,851 5,728,044 1,308,900 24,031,007 56,653,929 499,105,625
28. OTHER EXPENSES 25. COST OF SALES
This account consists of the following:
Coal purchases and landed cost Production cost Depreciation, depletion and amortization Fuel, Oil and TBA Coal marketing and selling Rental Purchased services Taxes and licenses Materials and supplies Shipping and delivery Maintenance and repairs
2013 538,419,051 704,924,801 587,147,779 283,845,640 41,907,200 21,390,646 245,144 1,907,423 930,601 4,913,677 272,429 2,185,904,391
2012 755,748,780 626,648,552 581,419,124 1,926,691,176 29,398,237 7,681,655 2,009,191 3,622,139 129,195 7,777,944 797,438 3,941,923,431
2011 1,757,436,582 651,875,329 604,827,289 1,889,049,149 48,444,224 13,638,243 8,562,909 3,584,059 981,073 2,634,877 436,755 4,981,470,489
Production costs amounting to P0.70 billion in 2013 and P0.63 billion in 2012 pertain mainly to the production operating expenditures of the production facility of the SC 38 Malampaya Project, i.e. wells, platform, subsea calm under buoy, and indirect operating overhead.
Coal purchases and landed costs are broken down as follows:
Coal purchases Coal production cost: Direct materials Direct labor Overhead
This account consists of the following:
2013 538,419,051
2012 656,026,991
2011 1,585,738,375
538,419,051
18,414,776 44,634,675 36,672,338 755,748,780
45,567,382 58,031,840 68,098,985 1,757,436,582
34 PNOC EC | 2013 ANNUAL REPORT
Donation to the University of the Philippines Impairment loss Royalty fee due government Other miscellaneous expenses
2013
2012
2011
19,417,545 1,943,014 1,033,628 22,394,187
125,000,000 14,502,615 2,453,513 141,956,128
125,000,000 94,752,967 28,977,579 2,360,930 251,091,476
The P125 million donation in 2012 and 2011 pertains to the Company’s payment to the University of the Philippines as Endowment Fund for purposes of scholarship grants, research grants, and professorial chairs to the students and faculty of UP in the academic fields of geology under the National Institute of Geological Sciences (NIGS), College of Science, UP Diliman, and of mining and energy engineering under the College of Engineering, UP Diliman.
Impairment loss in 2013 pertains to the cost of investment in Surigao Coal Exploration Project (COC 140) that was relinquished as approved by DOE last July 3, 2013 while the 2011 pertains to the cost of investment in Indonesia Coal Project that was initially capitalized.
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.
Other miscellaneous expenses in 2013, 2012 and 2011 amounting to P1.03 million, P2.45 million and P2.36 million, respectively, mainly pertain to bank charges and trustee fees on placements.
29. FOREIGN EXCHANGE (LOSS) GAIN - NET
This account consists of the following:
On placements On joint venture transactions On loan related transactions Others
2013 65,819,291 (1,935,955) 125,644,418 189,527,754
2012 (1,891,763) (37,092,646) (5,657,842) (44,642,251)
2011 (7,516,382) (17,061,609) 5,832,000 11,149,054 (7,596,937)
The prevailing exchange rates for 2013, 2012 and 2011 are US$1.00:P44.414, US$1.00:P41.192 and US$1.00:P43.928, respectively. A large portion of the net foreign exchange gain in 2013 pertains to foreign exchange gain on dollar placements and realignment of dollar denominated bank accounts. Net foreign exchange loss in 2012 and 2011 is mainly attributable to dollar placements and joint venture transactions amounting to P38.98 million and P24.58 million, respectively.
Foreign exchange gain on loan related transactions amounting to P5.83 million in 2011 pertains to the realized gain on the settlement of the US$9.00 million short-term foreign currency deposit unit (FCDU) loan with Land Bank of the Philippines.
Other foreign exchange transactions include foreign exchange adjustments on dollar accounts and realignments on SC 38’s trade accounts receivable balances, among others.
30.
FINANCE COSTS
2013 -
2012 -
Interests on short-term loan in 2011 amounting to P5.59 million pertain to the interest on the SC 38 $9.0 Million FCDU loan with Land Bank of the Philippines.
The components of income tax expense as reported in the statement of comprehensive income are as follows:
Current tax expense: Special tax rate (30%) Minimum corporate income tax (2%) Deferred tax expense (income): Original and reversal of tax effect on temporary differences, NOLCO & MCIT
2013
2012
2011
1,000,015,155 8,027,828 1,008,042,983
1,345,384,456 9,872,723 1,355,257,179
1,414,729,284 15,429,060 1,430,158,344
(34,364,646) 1,320,892,533
(13,290,257) 1,416,868,087
(63,575,770) 944,467,213
The Company’s income tax for oil and gas production which pertains to the Malampaya Project was computed under special rate and settled consistent with the pertinent provisions of Service Contract (SC) 38. On the other hand, income tax for Energy Supply Base, Head Office and coal project operations was based on the Minimum Corporate Income Tax (MCIT) computed at two percent (2%) of the gross income since the operation of these business units resulted in a zero taxable income. No Regular Corporate Income Tax (RCIT) was reported in 2013 and 2012 since the MCIT was higher than RCIT in both years.
Effective January 1, 2009, in accordance with Republic Act 9337, RCIT rate was reduced from 35% to 30% and non-allowable deductions for interest expense from 42% to 33% of interest income subjected to final tax.
On December 18, 2008, the BIR issued Revenue Regulations (RR) No. 16-2008 which implemented the provisions of Section 34(L) of the Tax Code, as amended by Section 3 of Republic Act No. 9504, which allows individuals and corporations who are subject to the 30% RCIT rate to adopt the Optional Standard Deduction (OSD) in computing their taxable income. Under RR 16-2008, corporations may claim OSD equivalent to 40% of gross income, excluding passive income subjected to final tax, in lieu of the itemized deductions. A corporate taxpayer who elected to avail of the OSD shall signify such in the income tax return (ITR). Otherwise, it shall be considered as having availed of the itemized deductions allowed under Section 34 of the National Internal Revenue Code. Pursuant to Section 3 of RR No. 02-2010 dated February 18, 2010, the election to claim the OSD or the itemized deduction for the taxable year must be signified by checking the appropriate box in the ITR filed for the first quarter of the taxable year adopted by the taxpayer. Once the election is made, the same type of deduction must be consistently applied for all succeeding quarter returns and in the final ITR for the taxable year. Any taxpayer who is required but fails to file the quarterly ITR for the first quarter shall be considered as having availed of the itemized deductions option for the taxable year.
In 2013 and 2012, the Company computed its income tax based on itemized deductions for its income subject to the regular income tax rate.
A reconciliation between the profit before tax and taxable profit (loss) as presented in the Statement of Comprehensive Income and in the Income Tax Return is presented as follows:
Taxable Year 2013 Special Rate 4,074,933,031
Regular Rate (197,288,315)
1,292,072,581 1,935,955 1,294,008,536
21,995,938 6,160,875 75,168,776 294,131 103,619,720
Non-taxable items Cost recovery (allowed deductions per Service Contract) (2,035,503,443) Interest income (54,273) Reversal of unrealized foreign exchange losses for 2012 (2,035,557,716) Taxable Profit (Loss) 3,333,383,851
(38,367,560) (13,909,807) (52,277,367) (145,945,962)
Profit (Loss) before income tax Non-deductible items Cost of Sales Non-deductible pension cost Foreign exchange losses Impairment losses on trade and non-trade receivables Straight-lining of operating lease
Special Rate 4,445,169,209
Regular Rate (190,161,204)
1,208,067,676 37,215,824 1,245,283,500
15,506,506 13,909,807 7,795,924 31,923 37,244,160
Non-taxable items Cost recovery (allowed deductions per Service Contract) (1,205,639,947) Interest income (74,781) Reversal of unrealized foreign exchange losses for 2011 Special allowable additional deduction - donation to the University of the Philippines (RA9500) (1,205,714,728) Taxable Profit (Loss) 4,484,737,981
2011 5,592,597
31. INCOME TAX EXPENSE
Taxable Year 2012
Profit (Loss) before income tax Non-deductible items Cost of Sales Non-deductible pension cost Foreign exchange losses Impairment losses on trade and non-trade receivables Straight-lining of operating lease
This account consists of the following:
Interest expense on short/long-term loans
Non-taxable items Cost recovery (allowed deductions per Service Contract) Interest income Reversal of unrealized foreign exchange losses for 2011 Banked gas deliveries with taxes paid already Other non-operating income Special allowable additional deduction - donation to the University of the Philippines (RA9500) Taxable Profit (Loss)
1,256,702,618 17,061,610 1,273,764,228
25,050,668 10,598,231 5,592,597 15,506,506 1,283,810 58,031,812
(894,480,902) (48,227) (11,540,474) (11,051)
(77,664,134) (1,534,815) -
(906,080,654) 4,704,221,342
(62,500,000) (141,698,949) (787,411)
2013 85,944,984 111,179,047 33,329,611 230,453,642
2012 54,516,816 67,395,259 40,450,603 162,362,678
2011 56,422,909 38,758,285 38,064,758 133,245,952
2013
2012
2011
55,560,766 27,690,566
33,010,133 16,576,591
30,671,356 21,824,511
1,848,263 845,389 85,944,984
4,172,942 757,150 54,516,816
3,179,469 747,573 56,422,909
As at December 31, 2013, 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 P370.60 million details of which are as follows: Year Incurred 2012 2013
Regular Rate 82,879,726
The deferred tax assets on temporary differences relate to the following:
Deferred tax assets: Impairment losses on trade and non-trade receivables Retirement benefit cost Unrealized FOREX loss on foreign currency transactions Straight-lining of operating lease
Special Rate 4,336,537,768
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
(62,500,000) (118,727,313) (271,644,357)
Taxable Year 2011
Profit (Loss) before income tax Non-deductible items Cost of Sales Impairment losses on trade and non-trade receivables Foreign exchange losses Interest expense Non-deductible pension cost Straight-lining of operating lease
(45,629,082) (10,598,231)
Year of Application 2013 to 2015 2014 to 2016
Amount 224,650,863 145,945,962 370,596,825
Applied -
Expired -
Unapplied 224,650,863 145,945,962 370,596,825
The deferred tax assets recognized on the carry-forward of unused tax losses amounted to P111.18 million.
PNOC EC | 2013 ANNUAL REPORT 35
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 regular income tax for the next three immediately succeeding taxable years, are broken down as follows: Year Incurred 2010 2011 2012 2013
Year of Application 2011 to 2013 2012 to 2014 2013 to 2015 2014 to 2016
Amount
Applied
15,148,819 15,429,060 9,872,723 8,027,828 48,478,430
-
Expired 15,148,819 15,148,819
The succeeding tables and information were based on the December 31, 2013 IAS 19 actuarial valuation of the retirement benefit plan unless stated otherwise.
The principal assumptions used for the purposes of the actuarial valuations were as follows:
Unapplied Discount Rate (BoY) Discount Rate (EoY) Salary Increase Rate (BoY) Salary Increase Rate (EoY)
15,429,060 9,872,723 8,027,828 33,329,611
Average Age (EoY) Average Years of Service (EoY) Expected Average Duration of Benefit Payments (EoY)
32. EARNINGS PER SHARE (EPS)
2013 2,933,177,505
2012 2,925,285,193
2011 3,002,549,407
2,002,004,265 1.47
2,002,004,265 1.46
2,002,004,265 1.50
The Company does not have any dilutive potential common shares nor other instruments that may entitle the holder to common shares. Hence, diluted EPS is the same as basic EPS.
Salaries and other benefits Social security costs
2013 233,003,610 3,533,277 236,536,887
2012 220,401,189 3,612,086 224,013,275
The salary increase assumption was based on company policy taking into consideration the prevailing inflation rate. Annual employee turnover was assumed based on the most recent experience study.
The mortality and the disability rates used in the valuation were the 1994 Group Annuity Table and the 1952 Disability Table, respectively.
2011 211,617,291 3,459,973 215,077,264
As at December 31, 2013, the Company has increased its employee cost to P233.00 million due to the Company’s remeasurement of the retirement plan upon adoption of the revised IAS 19 effective January 1, 2013.
In 2013, the company has 309 employees as compared to 321 employees in 2012, and 320 in 2011.
Under the existing regulatory framework, Republic Act 7641 mandates a minimum retirement benefit pay equivalent to one-half month salary per year of service, a fraction of at least six (6) months being considered as one whole year to employees who retire from service who are at least 60 years old and with at least 5 years of continuous service. The law does not require minimum funding of the plan.
The recent actuarial valuations of plan assets and the present value of the defined benefit obligation were carried out as at December 31, 2013 by Actuarial Exponents, Inc. The present value of the defined benefit obligation, and the related current service cost and past service cost, were measured using the Projected Unit Credit Method.
The Company normally makes an actuarial valuation every two (2) years to check the recommended funding scheme and to adjust contributions due to deviations from the actuarial assumptions arising from the investment yield, mortality gains and losses, employee turnover, and benefit forfeitures.
As discussed in Note 4, effective January 1, 2013, the Company adopted the revised IAS 19 in respect of accounting for its employee benefits. Accordingly, the related disclosures on retirement and other post-employment benefits for 2012 and 2011 have been revised to reflect the requirements of the revised accounting standard. The changes in accounting policies described in Note 4 have been applied retrospectively. The effects of adoption on the financial statements are as follows: Restatement of the opening financial position of the earliest comparative period presented:
Present value of the DB obligation Fair value of plan assets Net DB liability (asset) Asset Ceiling Liability recognized prior to adoption Transition Adjustment
January 1, 2012 98,159,375 98,462,940 (303,565) 88,254,876 88,558,441
Actuarial gains/losses on remeasuring the defined benefit plan obligation (asset) recognized in other comprehensive income amounted to P10.54 million and P30.06 million in 2013 and 2012, respectively, net of tax amounting to P4.52 million and P12.88 million in 2013 and 2012, respectively.
36 PNOC EC | 2013 ANNUAL REPORT
The following tables summarize the components of net benefit expense recognized in the statement of comprehensive income and the funded status and amounts recognized in the statement of financial position: 2013
Current service cost Past service cost Settlement (gain) loss Net interest Retirement benefit expense 2013 Present value of DB obligation Fair value of plan assets Unfunded Obligation (Surplus)
RETIREMENT PLAN The Company maintains a wholly-funded, tax exempt, noncontributory retirement plan covering all regular employees which provides a retirement benefit equal to the final monthly basic salary x (14/12) x 200% x number of service years. The retirement plan is under the administration of the Bank of the Philippine Islands Asset Management and Trust Group (BPI-AMTG). The defined benefit plan exposes the Company to actuarial risks, such as longevity risk, currency risk, interest rate risk and market (investment) risk.
38.42 6.69 18.00
The discount rate assumption was based on approximated zero-coupon yield of government bonds with remaining period to maturity approximating the estimated average duration of benefit payment. The average duration is estimated to be 21 years.
37.96 6.00 21.00
33. EMPLOYEE COSTS
34.
2012 6.22% 5.41% 6.00% 7.00%
The earnings per share amount was computed as follows:
Net profit Weighted average number of shares
2013 5.41% 4.93% 7.00% 7.00%
198,606,980 106,305,091 92,301,889
19,006,626 2,989,312 21,995,938
2012 (Restated) 12,633,565 (18,882) 12,614,683
2012 (Restated) 160,425,436 105,170,130 55,255,306
2011 (Restated) 98,159,375 98,462,940 (303,565)
Movements in the present value of the defined benefit obligation were as follows: 2013 Present value of DB obligation (BoY) Current service cost Interest cost Past service cost Settlement benefit payments Benefits paid (other than settlement) Settlement (gain) loss (Gain) Loss arising from: changes in demographic assumptions changes in financial assumptions deviations of experience from assumptions Present value of DB obligation (EoY)
160,425,435 19,006,626 8,679,016 (6,348,849) -
2012 (Restated) 98,159,375 12,633,565 6,105,513 -
13,807,285 3,037,466 198,606,979
(3,264,049) 48,961,858 (2,170,827) 160,425,435
2013
2012
Movements in the fair value of the plan assets were as follows:
Fair value of plan assets, BoY Interest income Employer contribution Participant contribution Benefits paid Gain (Loss) on Plan Asset Fair value of plan assets (EoY) Actual return on plan assets
105,170,130 5,689,704 (6,348,849) 1,794,106 106,305,091 7,483,810
98,462,940 6,124,395 582,795 105,170,130 6,707,190
The fair value of plan assets at the end of the reporting period are as follows:
Cash and cash equivalents Government Intruments Trust Funds Mutual Funds Deposit Instruments
2013 7,055,942 73,905,704 1,163,753 6,003,944 18,175,748 106,305,091
2012 302 89,693,428 8,460,789 3,536,577 3,479,035 105,170,131
2013 94.00% 4.40% 1.60% 100.00%
The total investment portfolio of the plan amounting to P106.31 million and P105.17 million are composed mainly of government instruments pertaining to ROP bonds and treasury notes with market value of P73.91 million and P89.69 million as at December 31, 2013 and 2012, respectively.
The sensitivity analysis below has been determined based on reasonably possible changes of each significant assumption on the defined benefit obligation, assuming if all other assumptions were held constant: Decrease in the discount rate Increase in Present Value of DB Obligation Percentage increase Increase in the salary increase rate assumption Increase in Present Value of DB Obligation Percentage increase Improvement in employee turnover Increase (Decrease) in Present Value of DB Obligation Percentage increase
1.00% 30,468,034 15.34%
As Petitioner Case No.
The table above shows the sensitivity of the present value of the defined benefit obligation to changes in the major actuarial assumptions: discount rate, salary increase rate and employee turnover rate. The results also provide a good estimate of the sensitivity of the defined benefit obligation to a 1% decrement in salary increase rate, 1% increment in the discount rate and a 10% increase in the employee turnover rate but with reverse impact.
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 assets of Mr. Mangubat to be attached. The Office of the Government Corporate Counsel (“OGCC”) is looking at appropriate actions to implement the writ of execution.
69263
Active members Pensioners
198,606,980 -
Attributable to future salary increases Not attbutable to future salary increases
109,484,678 89,122,302
The expected average duration of benefit payment is 21 years in 2013 and 18 years in 2012.
The general profile of future benefit payments of the defined benefit obligation as of December 31, 2013 is as follows: Payable in the next 5 years Payable in the next 6-10 years Payable beyond 10 years
4% 5% 91%
Based on the December 31, 2013 funding actuarial valuation report, the accrued liability as of the valuation date was determined to be P229.50 million with a fund balance of P106.31 million, the unfunded accrued liability amounts to P123.20 million. It is recommended that this amount be amortized over, at most, 21 years, the expected average duration of benefit payment, to achieve a 100% funded status over the same period. The resulting annual amortization is P8.78 million.
Venue: Pasig City Regional Trial Court (RTC) Branch 67 Nature of Case/Claim:
Status: By the Order of the trial court dated September 3, 2009, the case against Mr. Asistio was dismissed for failure to prosecute.The OGCC is considering recommending the obligation’s possible write-off.
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 he was able to secure pursuant to a Vehicle Acquisition Plan (VAP) duly approved by the President of the Philippines.
The breakdown of the present value of the defined benefit obligation at the end of the reporting period is as follows:
21,620,959 176,986,021
PNOC EC vs. Jose M. Asistio
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 he was able to secure pursuant to a Vehicle Acquisition Plan (VAP) duly approved by the President of the Philippines.
Based on the results of the sensitivity calculations, the major risk exposures of the Company relative to its retirement plan that could affect the company’s future income stream and cash flow are: (1) interest rates (discount rates) getting lower and (2) salaries increasing higher than as assumed. These risk exposures are in addition to the risk exposure associated with the investment of the plan assets.
Vested Non-vested
Particular
02-47516
1.00% 29,529,466 14.87% 10.00% 4,138,474 2.08%
2012 92.90% 4.10% 3.00% 100.00%
35. CONTINGENCIES
The major categories of plan assets as a percentage of the fair value of total plan assets are as follows:
Fixed income - local currency Fixed income - foreign currency Equities
As at December 31, 2013, the estimated vested benefit is P21.62 million (benefit payable assuming all eligible employees will avail of their benefit) compared to Fund net assets of P106.31 million as of the same date. The Fund therefore is more than sufficient to pay the benefits if all eligible employees will avail of their benefit during the valuation period. It should be noted that the vested amount is based on the applicable benefit under the Plan as of valuation date.
Status: The case had already been submitted for resolution. However, the trial court gave the parties a chance to amicably settle the case prior to its resolution. A hearing is set on May 16, 2014 at 8:30 a.m. to determine whether parties would amicably settle the case.
CN 69262
PNOC EC vs. Pedro T. Santos 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. Mr. Santos did not file any motion for reconsideration from the Supreme Court’s decision. The High Court remanded the case records to the court of origin for issuance of writ of execution. PNOC EC filed a Motion for Issuance of Writ of Execution and Mr. Santos filed an Opposition thereto. After which PNOC EC filed its Reply to the Opposition. The Motion for Issuance of Writ of Execution is pending resolution by the Court.
PNOC EC | 2013 ANNUAL REPORT 37
2690-2692
PNOC EC vs. Ana Liza Garcia
Civil Case No. 73043
Venue: 1st Municipal Circuit Trial Court (MCTC) of Mabini & Tingloy, Batangas
Nature of Case/Claim:
Burgundy Global Exploration Corporation (“BGEC”) filed a complaint against PNOC EC for specific performance and damages. In the complaint, it was prayed that BGEC and PNOC EC should enter into a Joint Operating Agreement for the development of the Camago-Malampaya Oil Leg (“CMOL Project”) pursuant to the Participation Agreement and Addendum to the Participation Agreement executed by the parties. PNOC EC filed a Motion to Dismiss the Complaint on the principal ground that the RTC did not have jurisdiction on the subject matter of the complaint as the Participation Agreement provided that sole and exclusive remedy for the settlement of any dispute between them should be through arbitration under the Rules of Arbitration of the International Chamber of Commerce with Singapore as venue. The RTC, in a Decision, dated June 30, 2011, directed the parties to submit themselves to arbitration.
Status: The continuation of preliminary conference is scheduled on March 26, 2014.
PNOC EC vs. Travellers Insurance & Surety Corp.
Venue: Branch 271, Regional Trial Court of Pasig City
On July 7, 2011, PNOC EC filed a Manifestation with the RTC stating that the Department of Energy (“DOE”) had terminated the Terms of Service between DOE and Philippine National Oil Company (“PNOC”) for the reappraisal, development and production of crude oil from the CMOL. The Terms of Service provides the basis for the re-appraisal, development and production of crude oil from the CMOL by PNOC or its designated subsidiary (“PNOC EC”) as well as the “third party participant” (“BGEC”). PNOC EC stated that with the termination of the Terms of Service for the CMOL Project by the DOE, the Decision, dated June 30, 2011, was rendered moot and academic.
Nature of Case/Claim: This is a civil case filed by PNOC EC against Travellers Insurance & Surety Corp. (“Travellers”) for the performance bond it issued in favor of Asian Pyrochem Technologies, Inc. (“APTI”). Under its performance bond, Travellers bound itself jointly and severally liable with APTI should APTI fail to faithfully perform its obligations under the Coal Supply Agreement between PNOC EC as coal buyer and APTI as coal seller. Because APTI failed to timely and completely deliver coal to PNOC EC, Travellers’ liability in the total amount of P11,720,310.00 had attached under the performance bond it issued. Despite demand, Travellers failed to pay the amount of P11,720,310.00.
On January 19, 2012, the RTC Taguig ordered PNOC EC to file its Answer to BGEC’s Complaint. After PNOC EC filed its Answer with Compulsory Counter-Claim, the Trial Court set the case for mediation.
Status:
Status:
Hearing is set on May 15, 2014 at 1:30 p.m. for the continuation of the presentation of plaintiff’s witness.
The pre-trial of the case is set on May 16, 2014.
COA CP – Case No. 2012-370
Venue: Pasig City Regional Trial Court (RTC) Branch 70 Nature of Case/Claim:
This is a criminal case filed by PNOC EC against Ms. Garcia for violation of Batas Pambansa (BP) Blg. 22. Ms. Garcia issued three checks in the total amount of P381,817.79 as payment for fuel purchases made by FRMC Brokerage and Forwarders. The checks were all dishonored upon presentation for payment with the bank. Despite demands, Ms. Garcia failed to pay the face value of the checks she issued.
72893-TG
Burgundy Global Exploration Corporation vs. PNOC EC
PNOC EC vs. Commission on Audit
COA CP Case No. 2011-335
Venue: Commission on Audit (Commission Proper)
For fiscal years 2003 to 2009, the Commission on Audit (“COA”) issued audit findings that the SC 38 Consortium’s income tax liability should not be paid out from the 60% government share representing net proceeds from petroleum operations under SC 38. According to the COA, the assumption by the Department of Energy (“DOE”) of the income tax liability of the SC 38 Consortium effectively exempts the SC 38 Consortium from the payment of income taxes allegedly in violation of the pertinent terms and conditions of SC 38. DOE has disputed these audit findings.
On September 24, 2012, PNOC EC, through its statutory counsel, the Office of the Government Corporate Counsel (“OGCC”), filed a Motion for Reconsideration to the Legal retainer Review 2012-091, dated July 26, 2012, before the Commission on Audit (“COA”) Commission Proper. The Motion seeks to reconsider the denial of PNOC EC’s request for COA’s concurrence in the engagement of a foreign law firm, Baker Botts LLP, sometime in the early part of 2010 to handle an Arbitration Case filed by Wilson International Trading Private Limited (“Wilson”) against PNOC EC before the ICC International Court of Arbitration in Singapore.
On October 5, 2010, COA, through Supervising Auditor Dolores T. Barraza, issued a Notice of Charge (“NC”) dated October 5, 2010 to the DOE. The NC, among others, held liable and directed the SC 38 Consortium to settle immediately the audit charges amounting to PhP53,140,304,739.86. The SC 38 Consortium filed an Appeal Memorandum with the COA Director, namely Director Rizalina Q. Mutia. In its Appeal, the SC 38 Consortium argued, among others, that payment of the Service Contractor’s income tax liability from the 60% Government Share is authorized under Presidential Decree No. 87, the enabling law of the SC 38. Pursuant to this authority, the Government contractually agreed with the SC 38 Consortium that the latter’s income taxes be paid from the 60% Government Share.
Status: The Commission Proper has yet to issue an Order on the Motion for Reconsideration filed by PNOC EC.
As Defendant
Case No.
Venue: Commission on Audit Nature of Case/Claim:
Nature of Case/Claim:
Shell Philippines Exploration BV (“SPEX”), PNOC EC and Chevron LLC (“Chevron”) vs. The Honorable Director Rizalina Q. Mutia
Particulars
In a Decision dated August 22, 2011, COA Director Mutia affirmed the NC in Decision No. 2011-009. On October 11, 2011, the SC 38 Consortium filed a Joint Petition for Review with the Commission proper. The DOE likewise filed its own petition for review. On April 23, 2012, the SC 38 Consortium filed its Memorandum with the COA Commission Proper.
CCN 4108 Province of Palawan vs. Shell Philippines Exploration B.V. (“SPEX”) and Chevron Texaco (“Chevron”) Venue: Palawan Regional Trial Court (RTC) Nature of Case/Claim:
Status:
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.
The case is now submitted for resolution.
Status: The case is at the trial proper stage, with Shell to continue with the presentation of evidence on April 25, 2014.
38 PNOC EC | 2013 ANNUAL REPORT
G.R. No. 182734
Bayan Muna Party List vs. President Gloria Macapagal-Arroyo, et. al. Venue: Supreme Court Nature of Case/Claim: Bayan Muna Party List and other petitioners filed a case against former President Gloria Macapagal-Arroyo, the Secretary of Energy, the Secretary of Foreign Affairs, the Executive Secretary, PNOC and PNOC EC, seeking to annul the Joint Marine Seismic Undertaking (“JMSU”) signed by the China National Offshore Oil Corporation (“CNOOC”), PetroVietnam and PNOC to conduct a joint study of the potential resource in certain areas in the South China Sea, including areas that are subject of sovereign claims of China, Vietnam and the Philippines. Although PNOC EC was not a signatory to the JMSU, it was impleaded as party-respondent because PNOC designated PNOC EC as the implementing arm in the project and assigned to it PNOC’s rights and obligations under the JMSU.
Petitioners claim that the JMSU violates the constitutional limitations on the right to explore, develop and utilize petroleum resources by allowing foreign entities such as CNOOC and PetroVietnam to undertake such activities. Respondents claim, among others, that the activity contemplated under the JMSU was not “exploration” but “pre-exploration” based on the old opinion of the Department of Justice involving an Australian firm. Moreover, respondents claim that the case was rendered moot and academic since the JMSU expired last June 30, 2008 and no agreement was signed to pursue drilling activities.
Family Relationships
There are no family relationships up to the fourth civil degree either by consanguinity or affinity among the Company’s directors, executive officers or persons nominated or chosen by the Company to become its directors or executive officers.
Involvement in Certain Legal Proceedings
None of the directors, nominees for election as director, executive officers, underwriters or control persons of the Company has been involved in any legal proceeding, including without limitation being subject of any (a) bankruptcy petition, (b) conviction by final judgment, (c) order, judgment or decree, or (d) violation of a securities or commodities law, for the past five (5) years up to the latest date, that is material to the evaluation of his ability or integrity to hold the relevant position in the Company.
Executive Officers
PNOC EC’s executive officers are also regular employees of the Company and are remunerated with a compensation package comprising of twelve (12) months base pay plus the statutory 13th month pay. They also receive whatever gratuity the Board extends to managerial, supervisory, technical and professional employees of the Company.
The Company’s executive officers are as follows:
The Office of the Solicitor General, in behalf of the respondents, filed a Memorandum with the Supreme Court last February 23, 2010. The Supreme Court has yet to resolve the case.
36. RELATED PARTY TRANSACTIONS
Due from Affiliates - net: 2013 1,659,737
PNOC Malampaya Production Corporation Due from Joint Venture Partners Shell Philippines Exploration BV Nido Petroleum Philippines Petro-Vietnam Investment and Development Corp. Basic Energy Corporation Petroenergy Resources Corporation Agusan Petroleum and Mining Corporation Pearl Oil (Ragay) Limited BHP Billiton China National Offshore Oil Corporation
1,190,033 3,918,767 668,484 206,265 412,531 464,409 79,754 3,778 (268,078) 6,675,943 8,335,680
11,168,207 (8,431,186) 668,484 183,664 367,327 464,409 79,754 3,778 (268,078) 4,236,358 5,869,170
2013 2,169,111 12,307,077 14,476,188
2012 1,936,226 12,307,076 14,243,302
President and Chief Executive Officer Corporate Secretary/Compliance Officer Vice President, Upstream Operations Vice President, Downstream Operations Vice President, Management Services Vice President, Corporate Services Manager, Internal Audit Department Manager, Legal Department Manager, Health, Safety, Security and Environment Department Manager, External Relations Department Manager, Petroleum & Coal Exploration Department Manager, Coal Exploration Department Project Manager (OIC), Malangas Project Operations Manager, Engineering Services Department Manager, Petroleum Production Department Manager (OIC), Trading & Marketing Dept. Manager, Energy Supply Base Manager, Project Development Department Manager, Planning and Budget Department Manager (OIC), Finance Department Manager (OIC), Treasury and Joint Venture Accounting Department Manager, Administration Department Manager, Human Resources Department Manager, Information & Communications Technology Department
Due to Affiliates: Philippine National Oil Company (PNOC) Nido Petroleum
2012 1,632,811
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.
- - - - - - - -
Pedro A. Aquino, Jr. Jose C. Sta. Ana Raymundo B. Savella Joseph Omar A. Castillo Lourdes S. Gelacio Manuel C. Mendoza Marietta D. Dieron Fe Concepcion G. Lucero
- -
Restituto G. Taganas, Jr. Natividad A. Villarruz
- -
Jaime A. Bacud Valerio Joseph M. Foronda
-
Cesar B. Ramirez Federico D. Galang Miguel A. Tordilla Joneil H. Magpantay Jose Allan R. Caringal Rolando V. Oliquino Candido M. Magsombol Elenita P. Tuazon
- - -
Josephine P. Quindoza Maria Rita S. Dayleg Eleanor Ann E. Villanueva
-
Julius Evan P. Zapata
Due to PNOC balance of P2.17 million pertains to miscellaneous intercompany charges.
37. FINANCIAL RISK AND CAPITAL MANAGEMENT
Due to Nido Petroleum represents security deposit for the second sub-phase acquisition of 3D seismic data for SC 58 West Calamian Project.
Directors
PNOC EC’s Articles of Incorporation provide for the election of nine (9) directors to serve a term of one (1) year. The Board of Directors is responsible for the overall management and direction of the company. It meets on a regular monthly basis to review and monitor PNOC EC’s operations.
The Company’s financial assets consist mainly of cash and cash equivalents, money market placement, investment in government securities and trade and other receivables. The main sources of which are proceeds from sales of gas, coal, fuel and other services. The Company has various financial liabilities such as due to related parties, trade payables and other liabilities which arise directly from operations.
The BOD has the overall responsibility for the establishment and oversight of the Company’s risk management framework. The BOD has established the Audit and Risk Management Committee (ARMC) which plays a vital oversight role in the implementation of the Company’s Program and is also an important liaison to the BOD. The ARMC shall assist the BOD of the Company in its oversight responsibility of managing risks involving physical, financial, operational, labor, legal, security, environmental and other risks of the corporation.
The Company’s ARMC identifies and analyzes potential events that may affect the Company, strategize and manage risks to be within its risk appetite. In addition, the ARMC provides a holistic approach to the protection of assets, revenues, liabilities, personnel and reputation against predictable and unpredictable losses to achieve maximum efficiency at minimum costs to provide reasonable assurance with respect to the achievement of Company objectives.
The main financial risks arising from the Company’s financial instruments are credit risk, foreign currency risk, interest rate risk and liquidity risk. The Company’s policies for managing the aforementioned risks are summarized below.
Credit Risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s trade and other receivables and investment securities.
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 KEPCO SPC Power Corporation, Energies Supply Chain Solutions, Inc., Chin-Ching Metal Works Manufacturing, Maunlad Canning Corporation 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.
Members of the Governing Board are as follows:
Chairman President and CEO/Director Director Director Director Director Director Director Term of Office
- - - - - - - -
Gemiliano C. Lopez, Jr. Pedro A. Aquino, Jr. Rafael E. del Pilar Rufino B. Bomasang Luis Ma. G. Uranza Francisco T. Ignalaga, Jr. Armando P. Galimba Leopoldo E. Petilla
Pursuant to the Company’s by-laws, the directors are elected at each annual stockholders’ meeting by stockholders entitled to vote. Each director holds office until the next annual election and his successor is duly elected, unless he resigns, dies or is removed prior to such election.
Independent Directors
In 2002, the Company requested the opinion of the Securities and Exchange Commission with respect to the requirement of having independent directors of the company. The SEC issued its opinion that the Company was not required to comply with the requirements of independent directorship.
Significant Employees
Employees or personnel who are not executive officers are expected to make a significant contribution to the business.
PNOC EC | 2013 ANNUAL REPORT 39
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.
With respect to credit risk arising from other financial assets of the Company, which comprise cash and cash equivalents excluding cash on hand, trade and other receivables, investment in debt and equity securities and due from related parties, the Company’s exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments before taking into account any collateral and other credit enhancements.
The following tables demonstrate the sensitivity to a reasonably possible change in the US dollar exchange rates, with all other variables held constant, of the Company’s income (loss) before income tax and equity for the years ended December 31, 2013 and 2012.
Effect in million pesos December 31, 2013 USD (5% or P2.221 sensitivity)
Profit or Loss Equity Appreciates Depreciates Appreciates Depreciates 167.65
(167.65)
167.65
(167.65)
61.39
(61.39)
61.39
(61.39)
2013
2012
4,822,505,497 601,349,642 1,166,476 14,498,080 5,741,777 8,335,680 2,235,931
2,087,237,311 921,573,050 729,069,729 20,796,662 12,337,967 5,869,170 2,235,931
1,925,186
1,925,186
77,203,975 5,534,962,244
280,748,805 4,061,793,811
The Company has enough internally generated foreign-currency denominated resources used to settle foreign-currency denominated financial liabilities, thus reducing the Company’s risk on foreign currency rate fluctuation as compared to funding obtained from the active market.
The Company trades with recognized, creditworthy third parties and/or transacts with institutions and/or banks which have demonstrated financial soundness and which have passed the financial evaluation and accreditation of the Company.
Interest Rate Risk
Foreign Currency Risk
Interest rate risk is the risk that the future cash flows from a financial instrument (cash flow interest rate risk) or its fair value (fair value interest rate risk) will fluctuate because of changes in market interest rates.
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.
The Company regularly evaluates its interest rate risk by taking into account the cost of qualified borrowings being charged by its creditors. Prepayment or refinancing the risks are undertaken when deemed feasible and advantageous to the Company.
The Company’s foreign currency-denominated financial monetary assets and liabilities (translated into Philippine peso) as at December 31, 2013 and 2012 are as follows:
The Company’s exposure to interest rate risk is minimal since the Company does not have any long-term debt obligations as at December 31, 2013.
Interest income recognized from the Company’s investments for the period ending December 31, 2013 and December 31, 2012 amounted to P38.42 million and P45.70 million, respectively.
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 monitors and manages its liquidity position on a regular basis. It has enough internally generated funds to service maturing debts and a committed stand-by credit facility from several local banks is also available to ensure availability of funds when necessary.
Capital Management
The Company manages its capital to ensure that the entity will be able to continue as going concern while maximizing the return to stakeholders through the optimization of the debt and equity balance.
The Company is not subject to any externally imposed capital requirements.
The Company monitors capital using the debt ratio, which is long-term liabilities divided by longterm liabilities plus equity.
The table below shows the Company’s debt ratio as at December 31, 2013 and 2012.
Loan and Receivables: Cash and cash equivalents (excluding cash on hand) Trade receivables - net Short-term investment Loans and other employee receivables Non-trade accounts receivables - net Due from related party Claims receivable AFS investments: Club membership shares HTM investments: Investment in treasury notes Total
US Dollar Financial Assets Loan and Receivables: Cash and cash equivalents Trade receivables - net Short-term investment Loans and other employee receivables Due from related party Total Financial Assets Financial Liabilities Liabilities at amortized cost: Short-term loans payable Trade and accrued payables Other liabilities Due to related party Total Financial Liabilities
2013
Peso Equivalent
2012 US Dollar
Peso Equivalent
77,231,671 3,430,167,427 11,298,286 501,802,070 -
16,140,831 17,729,665 3,000,000
150,311 6,675,943 88,680,268 3,938,645,440
102,844 4,236,358 36,973,340 1,523,005,825
11,777,854 1,130,416 277,099 13,185,369
523,101,597 50,206,308 12,307,077 585,614,982
Net-foreign currency-denominated monetary assets (liabilities) 75,494,899 3,353,030,458
5,914,824 957,193 298,773 7,170,790
664,873,119 730,320,348 123,576,000
243,643,419 39,428,694 12,307,077 295,379,190
The Company reported net foreign exchange gains (losses) amounting to P189.53 million and (P44.64) million in 2013 and 2012, respectively, with the translation of its foreign currencydenominated assets and liabilities. These resulted mainly from the movements of the Philippine peso against the US dollar as shown in the following table: Translation Date December 31, 2013 December 31, 2012 December 31, 2011
Long-term liabilities Long-term liabilities & equity
29,802,550 1,227,626,635
Debt Ratio
40 PNOC EC | 2013 ANNUAL REPORT
December 31, 2012 USD (5% or P2.060 sensitivity)
Peso to US Dollar 44.414 41.192 43.928
2013 2,654,113,490 16,011,297,734
2012 2,588,464,834 13,023,007,025
16.58%
19.88%
Debt ratio provides an indication of the long term solvency of the company. A lower debt ratio indicates that the company has the ability to meet its financial obligations.
Financial Assets and Financial Liabilities
Set out below is a comparison of carrying amounts and fair values of the Company’s financial instruments as at December 31, 2013 and 2012.
2012
2013 Carrying Amount Financial Assets Loan and Receivables: Cash and cash equivalents (excluding cash on hand) Trade receivables - net Short-term investment Loans and other employee receivables Non-trade accounts receivable Due from related party Claims receivable AFS investments: Club membership shares HTM investments: Investment in treasury notes
Financial Liabilities Liabilities at amortized cost: Trade and accrued payables Due to related parties Government & other liabilities
4,822,505,497 601,349,642 1,166,476
2012 Carrying Amount
Fair Value
4,822,505,497 2,087,237,311 2,087,237,311 601,349,642 921,573,050 921,573,050 1,166,476 729,069,729 729,069,729 14,498,080 5,741,777 8,335,680 2,235,931
20,796,662 12,337,967 5,869,170 2,235,931
20,796,662 12,337,967 5,869,170 2,235,931
1,925,186
1,925,186
1,925,186
1,925,186
77,203,975 5,534,962,244
77,203,975 280,748,805 280,748,805 5,534,962,244 4,061,793,811 4,061,793,811
641,949,162 14,476,188 91,841,580 748,266,930
641,949,162 14,476,188 91,841,580 748,266,930
845,497,812 14,243,302 89,703,413 949,444,527
HTM Investment
Liabilities at Amortized Cost
Total
-
-
-
2,087,237,311 921,573,050 729,069,729
-
-
-
20,796,662
-
-
-
12,337,967 5,869,170 2,235,931
1,925,186
-
-
1,925,186
-
280,748,805
-
280,748,805
-
-
(845,497,812) (14,243,302)
(845,497,812) (14,243,302)
1,925,186
280,748,805
(89,703,413) (949,444,527)
(89,703,413) 3,112,349,284
Financial Assets Loan and Receivables: Cash and cash equivalents (excluding cash on hand) 2,087,237,311 Trade receivables - net 921,573,050 Short-term investment 729,069,729 Loans and other employee receivables 20,796,662 Non-trade accounts receivable 12,337,967 Due from related party 5,869,170 Claims receivable 2,235,931 AFS investments: Club membership shares HTM investments: Investment in treasury notes Financial Liabilities Liabilities at amortized cost: Short-term loans payable Trade and accrued payables Due to related parties Government & other liabilities 3,779,119,820
Fair Value
14,498,080 5,741,777 8,335,680 2,235,931
Loans and AFS Receivables Investment
845,497,812 14,243,302 89,703,413 949,444,527
The table below demonstrates the income (expenses) of the Company’s financial instruments for the years ended December 31, 2013 an d 2012.
Effect in Profit or Loss Increase (Decrease)
The methods and assumptions used by the Company in estimating the fair value of each class of financial instruments are:
Cash and Cash Equivalents
Carrying amounts approximate fair values due to its short-term nature.
Trade and Other Receivables, Short-term Investment and Trade and Other Payables
These are instruments with relatively short maturity. Carrying amounts approximate fair values.
Non-current Trade Receivables, Due from & Due to Related Party, and Other Liabilities
These are instruments that are expected to be realized within a year. Carrying amounts approximate fair values.
AFS and HTM Investments
Fair values of debt securities are based on quoted market prices. For equity investments that are not quoted, the investments are carried at cost less allowance for impairment losses due to the unpredictable nature of future cash flows and the lack of suitable methods of arriving at a reliable fair value.
The Company classifies its financial instruments in the following categories. 2013 Loans and Receivables
Financial Assets Loan and Receivables: Cash and cash equivalents (excluding cash on hand) 4,822,505,496 Trade receivables - net 601,349,642 Short-term investment 1,166,476 Loans and other employee receivables 14,498,080 Non-trade accounts receivable 5,741,777 Due from related party 8,335,680 Claims receivable 2,235,931 AFS investments: Club membership shares HTM investments: Investment in treasury notes Financial Liabilities Liabilities at amortized cost: Short-term loans payable Trade and accrued payables Due to related parties Government & other liabilities 5,455,833,083
AFS Investment
Liabilities at Amortized Cost
HTM Investment
-
Loan and Receivables: Interest income on cash in banks Interest income on placement & short-term investments Interest income on trade & other receivables Interest income on noncurrent receivables HTM investment: Interest income on treasury notes Liabilities at amortized cost: Interest expense on shortterm loans payable
38. Total
2013
2012 Effect in Equity Increase (Decrease)
Effect in Profit or Loss Increase (Decrease)
Effect in Equity Increase (Decrease)
3,949,679
-
6,755,441
-
31,682,158
-
34,382,215
-
16,878,258
-
18,636,929
-
5,264
-
1,348
-
2,789,996
-
4,566,206
-
55,305,355
-
64,342,139
-
SEGMENT INFORMATION The Company’s business operations are identified into separate operating segments based on the nature of products and services provided to its varied customers. Management’s strategic decisions are made on the basis of these operating segments. The Company’s major sources of revenues are as follows:
-
-
- 4,822,505,496 601,349,642 1,166,476
a.
-
-
-
14,498,080
b.
-
-
-
5,741,777 8,335,680 2,235,931
1,925,186
-
-
1,925,186
-
77,203,975
-
77,203,975
-
-
(641,949,162) (641,949,162) (14,476,188) (14,476,188)
1,925,186
77,203,975
(91,841,580) (91,841,580) (748,266,930) 4,786,695,314
c.
10% share in the sale of gas and condensate from the SC 38 Malampaya Gas-to Power Project, which provides for the gas fuel requirements of the Santa Rita, San Lorenzo, Ilijan power plants in Batangas and the Tabangao refinery. The condensate it produced, on the other hand, is shipped to buyers in Singapore; Coal trading and integrated services or coal operations which continues to serve the coal requirement of existing industrial and power plant customers with the coal production from COC 41 and other local coal mine sources; and Other services, namely, pier services, warehousing and sale of fuel and lubes at ESB, equipment rental and oil trading.
-
PNOC EC | 2013 ANNUAL REPORT 41
Financial information regarding the Company’s operating segments for the years ended December 31, 2013, 2012 and 2011 are presented in the following tables:
Year Ended December 31, 2013 Segment Revenues Segment Expenses Segment Results Other Income Administrative Expenses Other Expenses Foreign Exchange Gain / (Loss) Profit Before Tax Income Tax Expense Profit for the Period
Gas & Oil Production
All Other Segments 420,967,452 (308,591,882) 112,375,570 432,663 (362,573,999) (13,580,930)
6,451,522,709 (2,185,904,391) 4,265,618,318 61,311,415 (616,418,582) (22,394,187)
172,134,278 4,288,148,108 (164,550,170) (1,000,015,155) (1,528,841) 3,288,132,953 (166,079,011)
17,393,476 (245,953,220) 57,076,783 (188,876,437)
189,527,754 3,877,644,718 (944,467,213) 2,933,177,505
All Other Segments
TOTAL
Gas & Oil Production 5,690,253,030 (1,208,067,676) 4,482,185,354 1,862,155 (38,022,573) (79,305) -
1,140,819,038 (792,924,961) 347,894,077 6,756,368 (236,335,321) (15,633,162) -
2,054,427,850 (1,940,930,794) 113,497,056 69,240,294 (314,301,304) (126,243,661) -
8,885,499,918 (1,941,923,431) 4,943,576,487 77,858,817 (588,659,198) (141,956,128) -
(11,959,218) 4,433,986,413 (1,345,384,456) 3,088,601,957
1,065,374 103,747,336 (6,957,882) 96,789,454
(33,748,407) (291,556,022) 31,449,804 (260,106,218)
(44,642,251) 4,246,177,727 (1,320,892,534) 2,925,285,193
Gas & Oil Production
Segment Revenues Segment Expenses Segment Results Other Income Administrative Expenses Other Expenses Finance Costs Foreign Exchange Gain / (Loss) Profit Before Tax Income Tax Expense Profit for the Period
Coal Operations
Coal Operations 2,372,258,103 (1,808,526,509) 563,731,594 34,054,410 (299,173,417) (29,306,534) -
2,060,333,074 (1,916,241,362) 144,091,712 81,197,078 (144,236,187) (221,729,034) -
10,042,466,282 (4,981,470,489) 5,060,995,793 122,177,533 (487,457,370) (251,082,852) (5,592,597)
(4,673,294) 4,305,737,591 (1,414,729,284) 2,891,008,307
(278,634) 269,027,419 (1,703,406) 267,324,013
(2,645,009) (143,321,440) (435,396) (143,756,836)
(7,596,937) 4,431,443,570 (1,416,868,086) 3,014,575,484
Coal Operations
All Other Segments
9,298,874,537
611,558,917
317,311,691
9,298,874,537
611,558,917
317,311,691
Segment Liabilities Unallocated Corporate Liabilities Total Liabilities
2,805,121,979
11,398,222
7,531,886
2,805,121,979
11,398,222
7,531,886
Capital Expenditure Unallocated Capital Expenditure
590,030,811
127,908,485
5,538,743
590,030,811
127,908,485
5,538,743
723,478,039 77,707,576 801,185,615
Depreciation & Amortization
581,419,124
31,263,742
4,766,399
617,449,266
581,419,124
31,263,742
4,766,399
25,428,228 642,877,494
Gas & Oil Production
Coal Operations
All Other Segments
TOTAL
8,392,994,190
701,697,443
475,418,068
As of and for the year ended December 31, 2011 Segment Assets Unallocated Corporate Assets Total Assets
8,392,994,190
701,697,443
475,418,068
Segment Liabilities Unallocated Corporate Liabilities Total Liabilities
2,581,176,405
113,490,706
280,036,869
2,581,176,405
113,490,706
280,036,869
Capital Expenditure Unallocated Capital Expenditure
287,731,932
31,633,662
6,923,428
287,731,932
31,633,662
6,923,428
603,321,068
61,401,610
4,830,046
603,321,068
61,401,610
4,830,046
Depreciation & Amortization Unallocated Depreciation and Amortization
585,720,593
199,570,585
9,618,042,431
585,720,593
199,570,585
Segment Liabilities Unallocated Corporate Liabilities Total Liabilities
3,009,257,045
8,651,626
5,610,374
3,009,257,045
8,651,626
5,610,374
Capital Expenditure Unallocated Capital Expenditure
1,651,093,867
25,510,055
19,704,010
1,651,093,867
25,510,055
19,704,010
1,696,307,932 35,753,412 1,732,061,344
587,147,779
27,260,341
4,831,745
619,239,865
587,147,779
27,260,341
4,831,745
30,965,023 650,204,888
TOTAL
10,227,745,145 3,730,463,105 13,958,208,250 2,824,052,087 699,613,972 3,523,666,059
9,570,109,701 3,373,039,950 12,943,149,651 2,974,703,980 493,386,607 3,468,090,587 326,289,022 32,171,774 358,460,796
669,552,724 21,643,896 691,196,620
Geographical Segments:
The distribution of the Company’s revenue per geographical location for the years ended December 31, 2013, 2012 and 2011 is presented in the following table:
TOTAL
9,618,042,431
Depreciation & Amortization Unallocated Depreciation and Amortization
All Other Segments
Unallocated Depreciation and Amortization
TOTAL
5,609,875,105 (1,256,702,618) 4,353,172,487 6,926,045 (44,047,766) (47,284) (5,592,597)
Gas & Oil Production As of and for the year ended December 31, 2013 Segment Assets Unallocated Corporate Assets Total Assets
All Other Segments
Coal Operations
As of and for the year ended December 31, 2012 Segment Assets Unallocated Corporate Assets Total Assets
TOTAL
5,368,882,030 661,673,227 (1,292,072,581) (585,239,928) 4,076,809,449 76,433,299 55,266,369 5,612,383 (15,076,225) (238,768,358) (985,763) (7,827,494)
Year Ended December 31, 2012 Segment Revenues Segment Expenses Segment Results Other Income Administrative Expenses Other Expenses Finance Costs Foreign Exchange Gain / (Loss) Profit Before Tax Income Tax Expense Profit for the Period
Year Ended December 31, 2011
Coal Operations
Gas & Oil Production
Gas & Oil Production REVENUE Local Export
10,403,333,609 6,341,754,867 16,745,088,476 3,023,519,045 364,385,187 3,387,904,232
4,366,025,726 1,002,856,304 5,368,882,030
2013 Coal Operations 661,673,227 661,673,227
Others
Consolidation
420,967,452 420,967,452
5,448,666,405 1,002,856,304 6,451,522,709
Others
Consolidation
2012 Gas & Oil Production REVENUE Local Export
4,511,128,537 1,179,124,493 5,690,253,030
Coal Operations 1,140,819,038 1,140,819,038
2,054,427,851 2,054,427,851
7,706,375,426 1,179,124,493 8,885,499,919
2011 Gas & Oil Production REVENUE Local Export
42 PNOC EC | 2013 ANNUAL REPORT
4,210,006,718 1,399,868,387 5,60f9,875,105
Coal Operations 2,372,258,103 2,372,258,103
Others 2,060,333,074 2,060,333,074
Consolidation 8,642,597,895 1,399,868,387 10,042,466,282
Segment asset and capital expenditure by geographical location are not separately disclosed since all of the Company’s operations are in the Philippines.
D.
39. INFORMATION REQUIRED UNDER RR 15-2010 OF THE BUREAU OF INTERNAL REVENUE
In compliance with the requirements set forth by RR 15-2010 hereunder are the information on taxes, duties and license fees paid or accrued during the taxable year. Value Added Tax (VAT)
The Company is a VAT-registered entity with VAT output tax declaration of P75,570,453 for the year based on the amount reflected in the Revenue and Other income accounts.
The revenue and other income accounts include sale of gas and condensate from the Company’s oil and gas production of SC 38 Malampaya project which is exempt from VAT pursuant to Section 12(a) of Presidential Decree (PD) No. 87, Section 6.2 of SC 38 and Section 109(k) of the Tax Code of 1997, as amended by R.A. No. 9337.
Other taxes paid during the year recognized under “Taxes and licenses” accounts under Cost of Sales & Operating expenses Business taxes Real estate taxes Fringe benefit taxes License and permit fees Others
The Bureau of Internal Revenue (BIR) issued on November 25, 2010 Revenue Regulation (RR) 15-2010, Amending Certain Provisions of Revenue Regulations No. 21-2002, as amended, Implementing Section 6 (H) of the Tax Code of 1997, authorizing the commissioner on internal revenue to prescribe additional procedural and/or documentary requirements in connection with the preparation and submission of financial statements accompanying income tax returns. Under the said regulation, companies are required to provide, in addition to the disclosures mandated under the IFRSs, and such other standards and/or conventions as may be adopted, in the notes to the financial statements, information on taxes, duties and license fees paid or accrued during the taxable year.
A.
E.
The Company also has VAT exempt/zero-rated sales from its coal and Energy Supply Base operations pursuant to the provisions of Section 16 of PD No. 972 and Section 106(A)(2), 108(B) and 109 of the Tax Code of 1997, as amended by R.A. No. 9337.
The amount of VAT input taxes claimed are broken down as follows: Beginning of the year I. Input tax deferred on capital goods from previous period II. Input tax carried over from previous period
12,401,840 1,666,398
Current year’s purchases: I. Goods for resale and own consumption II. Capital goods subject to amortization III. Capital goods not subject to amortization IV. Services lodged under cost of goods sold & other accounts
21,466,740 5,772,268 223,091 23,980,226
51,442,325
Claims for tax credit/refund and other adjustments I. Creditable VAT withheld II. Input tax deferred on capital goods to succeeding period
13,279,071
13,279,071
Balance at the end of the year B.
52,231,492
Documentary Stamp Tax (DST) DST paid/accrued on the following transactions: Loan instruments Others
C.
14,068,238
1,868 1,868
12,916,342 4,534,569 1,371,017 3,190,466 170,199 22,182,593
Deficiency Tax Assessments and Tax Cases
As at December 31, 2013, the Company has not received tax assessment notice from the BIR nor has pending tax court cases.
40. MEMORANDUM OF AGREEMENT (MOA) WITH THE UNIVERSITY OF THE PHILIPPINES (UP) On November 11, 2011, PNOC EC entered into a Memorandum of Agreement (MOA) with the University of the Philippines (UP) to allocate P500 million from the Company’s funds as “Endowment Fund” for purposes of scholarship grants, research grants and professorial chairs to the students and faculty of the University in the academic fields of geology under the National Institute of Geological Sciences, College of Science, UP Diliman and of Mining and Energy Engineering under the College of Engineering, UP Diliman. PNOC EC shall initially set aside P125 million from its funds starting year 2011 and P125 million each year in the next three (3) years.
PNOC EC have donated a total amount of P250 million for the years 2011 and 2012.
On August 8, 2013, the Governance Commission on GOCC’s (GCG) en banc directed PNOC EC to undertake steps to formally rescind the MOA with UP and remit the total amount donated to the National Government.
On September 4, 2013, the PNOC EC Board approved the rescission of the MOA with UP under Board Resolution No. 9-1, s’2013.
On February 3, 2014, UP returned the P250 million donation by PNOC EC. This amount was included in the cash dividends declared by the Company on February 17, 2014.
41. GENDER AND DEVELOPMENT (GAD) PNOC EC is cognizant of the various gender issues that exist both in the Company’s project areas and in the organization. The Company has allotted P2.43 million both for client-focused and organization-focused Gender and Development (GAD) activities for the year 2013. Aside from the mandatory benefits to women employees provided by law, such as maternity leave, the Company provides improvement to these benefits. Client-focused GAD activities of the Company include the maternal and child health care program which benefited a total of 575 pregnant women and mothers from different sites of operations by the Company. PNOC EC also provided financial aid to women who gave birth to a child who is in Neonatal Intensive Care Unit of Fabella Hospital. In addition, the Company also provided scholarship grants to 11 College scholars and 26 High School scholars for school year 2013-2014, majority of which are females.
42. EVENTS AFTER THE FINANCIAL REPORTING DATE
Withholding Taxes Withholding taxes paid/accrued for the year amounted to: Tax on compensation and benefits Creditable withholding taxes Final withholding taxes VAT and other percentage taxes
All other Taxes (National and Local)
36,726,603 13,994,054 1,392,874 27,440,336 79,553,867
Dividend Declarations
On February 17, 2014, the Company declared cash dividends of P1.502 per share or a total of P3.007 billion to its shareholders of record as of March 4, 2014, payable on March 5, 2014.
PNOC EC | 2013 ANNUAL REPORT 43
Board of Directors
GEMILIANO C. LOPEZ, JR. Chairman
PEDRO A. AQUINO, JR. President and CEO
44 PNOC EC l 2013 ANNUAL REPORT
Pho
oto
RAFAEL E. DEL PILAR Director
RUFINO B. BOMASANG Director
ARMANDO P. GALIMBA Director
LEOPOLDO E. PETILLA Director
LUIS MA. G. URANZA Director
FRANCISCO T. IGNALAGA, JR. Director
PNOC EC l 2013 ANNUAL REPORT 45
Management Team
Office of the President RESTITUTO G. TAGANAS, JR.
Manager, Health, Safety, Security, and Environment
SHARON H. NER
Assistant to the President
PEDRO A. AQUINO, JR. President and CEO
MA. NATIVIDAD A. VILLARRUZ Manager, External Relations
Office of the General Counsel ARMIN NOEL B. VILLAMONTE Manager, Legal
JOSE C. STA. ANA
General Counsel and Corporate Secretary
46 PNOC EC l 2013 ANNUAL REPORT
Upstream Operations PETROLEUM GROUP MIGUEL A. TORDILLA
Manager, Petroleum Production
RAYMUNDO B. SAVELLA
Vice President, Upstream Operations Div.
JAIME A. BACUD
Manager, Petroleum Exploration
FEDERICO D. GALANG
Manager, Engineering Services
COAL GROUP INGERSOL R. SANTIA, JR.
Mine Manager, Lumbog Coal Project
GILBERT B. BELASON
Manager, Engineering and Logistics
CESAR B. RAMIREZ
Manager, Coal Operations Group
VALERIO JOSEPH M. FORONDA
Manager, Coal Exploration and Development
Downstream Operations JONEIL H. MAGPANTAY
Manager-OIC, Trading and Marketing
CANDIDO M. MAGSOMBOL
Vice President, Downstream Operations Div.
JOSE ALLAN R. CARINGAL Manager, Energy Supply Base
ROLANDO V. OLIQUINO, JR. Manager, Project Development
PNOC EC l 2013 ANNUAL REPORT 47
Management Team
Management Services ELENITA P. TUAZON Manager, Accounting
LOURDES S. GELACIO
Vice President, Management Services Div.
JOSEPHINE P. QUINDOZA Manager, Treasury and Joint Ventures Accounting
SERGIO L. VICTORIANO
Manager-OIC, Planning and Budget
Corporate Services JULIUS EVAN P. ZAPANTA Manager, Information and Communications Technology
MANUEL C. MENDOZA
Vice President, Corporate Services Div.
MA. RITA S. DAYLEG
Manager, Administration
ELEANOR ANN E. VILLANUEVA Manager, Human Resources
48 PNOC EC l 2013 ANNUAL REPORT
Company and Field Offices
TONDO COAL TERMINAL
PNOC Exploration Corporation Lot 2-A Vitas Industrial Estate, R-10 Vitas, Tondo Manila, Philippines Tel.: 63 (2) 479-9487
BATANGAS COAL TERMINAL
HEAD OFFICE
PNOC Exploration Corporation San Miguel, Bauan 4201 Batangas, Philippines Tel.: 63 (43) 727-1133 63 (2) 479-9407 Fax: 63 (43) 980-6157 Email:
[email protected]
PNOC Exploration Corporation
Building 5, Energy Center, Rizal Drive, Bonifacio Global City, Taguig City 1634 Metro Manila, Philippines Tel.: 63 (2) 479-9400 Fax: 63 (2) 840-2055 / 840-1471 Website: http://www.pnoc-ec.com.ph Email:
[email protected]
COAL OPERATIONS GROUP
ENERGY SUPPLY BASE
PNOC Exploration Corporation Barrio Mainaga, Mabini 4202 Batangas, Philippines Tel.: 63 (43) 723-7519 / 487-0325 / 487-0552 / 479-9431 Fax: 63 (43) 723-4018 Email:
[email protected]
PNOC Exploration Corporation Km. 9, Diplahan 7039 Zamboanga Sibugay, Philippines Tel.: 63 (919) 540-2154 63 (2) 479-9490 Fax: 63 (919) 547-0630 Email:
[email protected]
NAGA COAL TERMINAL
PNOC Exploration Corporation 6037 Cebu, Philippines Tel.: 63 (2) 479-9489 Tel./Fax: 63 (32) 236-7044 Email:
[email protected]
PNOC EC l 2013 ANNUAL REPORT 49
ANNUAL REPORT
2013
EXPLORE EMPOWER AND ENERGIZE
COMMITTED TO
Building 5, Energy Center, Rizal Drive, Bonifacio Global City, Taguig 1634 www.pnoc-ec.com.ph
