The Market Monitor Minding the Nation's Business
Philex Petroleum Corp. reported a consolidated net loss of P118.1 million for the nine-month period ending September, which was lower than the P376.9 million in losses a year ago, to reflect the impact of low crude oil prices on Asian fuel companies.
Losses were due to the drop in crude oil prices, resulting in lower petroleum revenues of subsidiary Forum Energy Plc and a lower production from Service Contract 14C1 Galoc. In a report, Standard and Poor’s (S&P) said Asia-Pacific oil and gas companies may be called to make tough decisions if the fall in oil prices is prolonged.
“The ratings on 40 percent of the oil and gas companies in the Asia-Pacific and 60 percent of the stand-alone credit profiles will face downward pressure if oil prices fall 10 percent below $50 per barrel without any signs of recovery,” S&P credit analyst Mehul Sukkawala said.
“Overall, the ratings on Chinese state-owned enterprises and Australian companies are the most vulnerable, while the stand-alone credit profiles of the government-owned companies in countries such as Indonesia and South Korea are at the greatest risk,” it said.
Philex, meanwhile, said net loss decreased year-on-year, due to a charge in impairment to Pitkin’s SC6a-Octon during the same period last year.
Net loss attributable to equity holders of the parent amounted to P65.9 million, compared with a net loss of P188.8 million during the same period last year, Philex said.
Philex further disclosed that, during its special share-holders’ meeting in August, the pledge of Philex share-holdings in subsidiaries to Philex Mining Corp. was approved by sharehold-ers, representing at least two-thirds of the outstand-ing shares of the company.
Philex Petroleum said that in August, the Department of Energy (DOE) granted a force majeure on Service Contract 75 (“SC75”), thereby imme-diately suspending all explo-ration work at SC75 effective from the end of its first sub-phase (“SP-1”) on December 27 until the date the DOE no-tifies the company to resume petroleum-related activities. “As a result, the second sub-phase (“SP-2”) of SC75 has been put on hold until fur-ther notice. The terms of SP-2 and all subsequent sub-phases will be extended by the term of the force majeure,” Philex reported to the Philip-pines Stock Exchange (PSE).
“The company will con-tinue its efforts to reduce op-erating expenditures through the rationalization of the company’s business structure and asset portfolio, particular-ly in the current low oil-price environment,” Philex said.
S&P said oil and gas companies in the Asia-Pa-cific are still better off than those in other regions, where the energy sector has been a significant contrib-utor to higher default rates.
S&P’s current Brent crude oil price assumptions build in a gradual improvement with its forecast on oil prices at $55 in 2016, $65 in 2017, and $70 in 2018 and beyond.
“If the oil price outlook worsens, Asia-Pacific oil and gas companies will need to reassess projects, weigh re-turns, prioritize investments, and review shareholder dis-tributions,” Sukkawala said.
“Defending creditwor-thiness in a tough envi-ronment will call for some difficult decision-making, particularly at the govern-mentowned companies that dominate the sector,” he added. RIZA LOZADA