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An oil boom?

"Secretary Cusi pointed out that the lifting of the moratorium was arrived at in good faith."

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Share prices of once-dormant listed petroleum exploration companies have doubled and even more than quadrupled in recent days, from their March 2020 lows, thanks to the so-called lifting by President Duterte of the moratorium on oil and gas exploration in the West Philippine Sea (WPS).

Announcement of the lifting was not made by the presidential palace but by the Department of Energy on Oct. 15, 2020.

The price of Phoenix Petroleum Holdings rose from a low of P6.61 per share on March 13, 2020 to a 52-week high of P16.64 on Oct. 19, 2020, a spectacular jump of 152 percent, without the company doing anything significant to justify a 1.5x increase in valuation, equivalent to a gain of P15.2 billion in market value, from P9.3 billion in March 2020 to P23.41 billion by last week.

As of this writing, Phoenix Petroleum market cap was doing P18.24 billion, still a gain of 96 percent or P8.94 billion. Phoenix is the oil company of a known close ally of President Duterte. He owns more than 90 percent of Phoenix and is thus P8 billion richer.

The price of PXP Energy Corp. climbed from a low of P3.50 per share in March 2020 to a high of P13.72 before settling at P11.02 yesterday, giving the company a market cap of P21.52 billion, up from P6.86 billion in March 2020, a gain of 213 percent (triple) or P14.66 billion. PXP is controlled by the group of Manuel V. Pangilinan of PLDT and First Pacific of Hong Kong with 45 percent ownership. He is P6.6 billion richer.

The price of Atok Big Wedge jumped from a 52-week low of P6.66 per share to a high of P17.20 before it settled at P9.59 per share yesterday, a gain of 44 percent or P12.31 billion. Bobby Ongpin owns 58 percent of AB, making him P7 billion richer on paper. At the high of P17.20 share price, AB was worth P42 billion; 58 percent of that was P24.36 billion.

Contacted by the PSE’s Integrity Committee, all the concerned listed companies did not know what was going on. They all said they did not possess “undisclosed information” before the dramatic price rises. Prior knowledge of material information by a listed company is insider trading, a crime ssubject to extreme penalties.

PXP Energy Corp. President Daniel Stephen Carlos, a petroleum geologist, said the unusual price movement “could have been influenced by the press release published by DOE on Oct. 15, 2020 stating that President Duterte has approved recommendation of the DOE to lift the suspension of petroleum activities and the resumption of petroleum exploration in the West Philippine Sea.”

PXP has an operating interest in Service Contract 72 (SC 72) while its subsidiary, Forum Energy Limited, received on Oct. 16, 2020 “the resume-to-work notice from the DOE for its operating interest in SC 75.”

AB Corporate Secretary Cliburn Anthony Orbe told PSE on Oct. 16, 2020, “the unusual price movement can be attributed to the government’s announcement that President Duterte has lifted the moratorium of oil and sea exploration in the West Philippine Sea.”

For its part, Phoenix Petroleum Philippines corporate secretary Socorro Ermac Cabreros lamely explained to PSE “we were equally surprised by the sudden and unusual trading.”

In the DOE press release Oct. 15,2020, “I thank the President for approving the DOE recommendation. We need to explore so we may address the country’s energy security,” said Energy Secretary Alfonso Cusi.

Under Republic Act 7638 or the “Department of Energy Act of 1992,” the DOE has the authority to regulate the exploration of the country’s indigenous energy resources.  

“With the impending depletion of our natural gas reserve in Malampaya, it is the department’s position that there is an urgent imperative to resume exploration, development, and production activities within our EEZ to ensure continuity of supply of indigenous resources in the country,” Secretary Cusi stressed.

He said that a “Resume-to-Work” notice was issued by the DOE to the Service Contractors doing petroleum-related activities in the areas of SC 59, 72, and 75 in the West Philippine Sea. The activities there were suspended on the ground “Force Majeure” due to the WPS dispute.

SCs 59 and 72 are operated by the Philippine National Oil Company-Exploration Corp. (PNOC-EC) and Forum Ltd., respectively. Meanwhile, PXP Energy Corp. operates SC 75.

Secretary Cusi pointed out that the lifting of the suspension will infuse the economy with fresh foreign direct investments and generates high-skills jobs, both of which are need in order to boost economic recovery following the outbreak of the COVID-19 pandemic.

“The lifting of the suspension places the service contractors under legal obligation to put capital into the contract areas and hire Filipino engineers and technical workers to resume exploration,” he said.

The Energy chief said he has already informed Foreign Affairs Secretary Teodoro Locsin of the President’s approval of the DOE recommendation.

Secretary Cusi pointed out that the lifting of the moratorium was arrived at in good faith and with full regard to the ongoing negotiations between the Philippines and China, and Forum Ltd. and the China National Offshore Corp. (CNOOC).

“The oasis of peace that the Philippine Department of Foreign Affairs and the Chinese Ministry of Foreign Affairs envision must also be an oasis of prosperity. For this to happen, the Philippines must restart its economy using the engine of energy resiliency and security,” he said in a letter to Secretary Locsin.


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