Drop in global oil prices pulls Petron’s 2014 profit down

MANILA, Philippines–Petron Corp. said the weakening of oil prices in the last six months of 2014 dragged down its profitability for the year.

The company posted a 41-percent drop in profit to P3 billion in 2014 from P5.1 billion in the previous year, amid the drop in oil prices in the second half of the year.

Income would have been much higher if not for the net inventory loss of P6.5 billion, the company said. This was incurred by selling higher priced inventory at lower prices.

Petron said the 9-percent increase in Philippine sales volume, the completion of strategic projects, and the pro-active risk-management system of the company cushioned the impact on its financial performance of the said inventory losses.

The price of benchmark Dubai crude fell by 44 percent from an average of $108 per barrel in June to an average of only $60 per barrel in December. This extraordinary development had a negative effect on oil companies around the world, Petron said.

The same situation happened in 2008 when global oil prices collapsed resulting in a P3.9-billion loss for Petron.

Petron said that combined sales from both its Philippine and Malaysian operations increased by 6 percent to 86.5 million barrels in 2014 versus 81.7 million barrels the previous year.

As a result, sales revenue grew by 4 percent to P482.5 billion in 2014 from P463.6 billion in 2013.

In the Philippines, sales volumes surged to 51.5 million barrels as Petron made headway in major market segments namely retail, LPG, and lubricants.

In terms of retail volume, an extensive network of 2,200 stations in the Philippines helped Petron increase retail volume by 6 percent—the highest growth in the past five years.
LPG volumes likewise grew by 5 percent supported by higher retail and industrial sales, Petron said.

“Despite a difficult environment, we rose to the challenge and delivered strong results. We focused on completing major projects to unleash the full potential of our strategic assets and further cement our leadership in the industry,” Petron president and CEO Ramon S. Ang said.

Petron is commissioning its $2-billion Refinery Master Plan Phase 2 (RMP-2) at its 180,000 barrel-per-day Bataan refinery. RMP-2 is expected to change the rules of the domestic oil industry.

The company said it was the only local fuel firm that can locally produce Euro-4 compliant fuels and provide extra volumes to other oil players. This also gives Petron a competitive edge since it raises the bar in fuels technology and quality, the company said.

This project will help improve the supply security of the country at a time the Philippines is experiencing unprecedented economic growth.

Barely three years since entering the highly competitive Malaysian market, nearly 550 stations now carry Petron’s distinct red and blue colors, have upgraded facilities, and more importantly, offer premium fuels and innovative services.

The company completed 10 new service stations in 2014 and about 20 more sites are in various stages of construction and commissioning.

“The completion of our rebranding and upgrading program is a significant milestone since it lays the foundation for our further expansion in the Malaysian market. We are pleased to note that we are gaining the trust and confidence of consumers there,” Ang said.