Phoenix Petroleum boosting capital of shipping subsidiary

Publicly listed Phoenix Petroleum Philippines Inc. is investing P242 million to increase the authorized capital stock of its wholly-owned subsidiary, Chelsea Shipping Corp.

Chelsea Shipping, through a subsidiary, will be investing $21 million (or about P861 million) for the acquisition and operation of a brand new tanker vessel, according to Phoenix Petroleum assistant vice president Raymond T. Zorrilla.

Zorrilla explained on Friday that the P242 million capital outlay would be raised through Phoenix Petroleum’s internally generated funds while the $21-million acquisition price would be funded by Chelsea Shipping’s subsidiary through project loans and equity.

In a separate disclosure to the Philippine Stock Exchange yesterday, Phoenix Petroleum explained that the acquisition of the new vessel would “strategically support and serve the importation logistics requirement of the corporation.”

It was only last year that Phoenix was able to acquire Chelsea Shipping through a share-for-share swap agreement with the stockholders of the shipping firm.

Under the agreement, Phoenix Petroleum acquired 6.3 million common shares or 100 percent of the outstanding capital stock of Chelsea Shipping in exchange for 171 million common shares of Phoenix Petroleum. In effect, Phoenix Petroleum issued 30 shares for every 1 Chelsea share. The final and total purchase price was not provided then but previous disclosures placed the value of the 171 million shares issued by Phoenix Petroleum at about P1.4 billion.

Phoenix Petroleum earlier said that as a petroleum company, the ownership of a marine petroleum transport company was strategic. The acquisition of Chelsea would ensure the control of product supply by a fleet of vessels ready to transport its products to minimize and eliminate the potential risk of supply disruptions due to scarcity of tanker vessels. Scheduling of importation of products and distribution in the Philippines would also be easily facilitated, Phoenix Petroleum earlier explained.

The acquisition would likewise protect the oil firm from freight rate fluctuations with the volatile bunker market. Any reduction in the fuel market price would improve the logistics cost. It should be noted that the company imports about 90 percent of its petroleum products from nearby areas such as Taiwan, China and Singapore.