After more than 16 years of snubbing the Oil Deregulation Law, is Pilipinas Shell Petroleum Corp. (PSPC) finally ready to conduct an Initial Public Offering (IPO)?
This seems to be the case, as confirmed by Pilipinas Shell country chairman Edgar Chua, during last week’s forum in Makati, that the company is “preparing for an IPO”.
In 2013, the Department of Energy (DOE) asked the company to explain why, for more than a decade, it still has not complied with the Oil Deregulation Act of 1998, which requires refiners operating in the Philippines to undertake an IPO.
Oil Deregulation Law IPO requirement
The Oil Deregulation Law was passed in 1998 and required local oil refiners to list at least 10% of their stocks in the Philippine Stock Exchange (PSE) within three years after the passage of the law. Oil refiners then had until 2001 to comply with the requirements.
During that time, Petron Corp. (PCOR) was the only refinery in compliance, having gone public in 1994 prior to the passage of the bill.
Pilipinas Shell and Caltex Philippines were supposed to conduct an IPO by February 2001, but they successfully lobbied for an open-ended extension with the government.
Postponed due to financial crises
In 2002, Shell was reported to be planning a P5.2 billion IPO but the plan was ultimately shelved, citing remaining volatility in the global markets in the aftermath of the 1997 Asian financial crisis.
Oscar Reyes, then outgoing chairman of Pilipinas Shell, said the the company during that time needs “to arrive at a general consensus that the local and the global financial markets have stabilized before we could proceed with the IPO.”
In 2007, the DOE followed up with Pilipinas Shell again but the company cited market instability due to the subprime mortgage financial crisis as reason for deferring the IPO once more.
In response to the latest DOE follow-up in 2013, the company has requested that they be given until the end of 2014 to firm up plans for the IPO.
The company is said to be studying how much money it will raise from the IPO, proceeds of which will be used to finance the $150-million upgrade of Pilipinas Shell’s refinery in Tabangao, Batangas which produces 110,000 barrels a day.
Refineries that had IPO
As of 2013, only two local refineries are publicly traded in the PSE.
Petron Corp. (PCOR) has been listed since 1994, while Phoenix Petroleum Philippines Inc. (PNX) conducted an IPO in July 2007, offering 25% of its shares to the public.
Caltex Philippines (Chevron) is not anymore required to go public after closing down its refinery in Batangas in 2003. The company has since converted the facility into a finished product import terminal with a storage capacity of more than 2.7 million barrels.
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