PXP ENERGY Corp. (PXP) shares soared last week as investors took positions following the government’s decision to lift the ban on oil and gas exploration in the West Philippine Sea and the company’s confirmation that it was in ongoing negotiations with a Chinese oil company on a joint oil and gas development in the contested waters.
A total of 76.75-million shares worth P830.44 million were exchanged from Oct. 19 to 23, data from the Philippine Stock Exchange (PSE) showed.
The Manuel V. Pangilinan-led company finished 44.6% higher week on week to P11.16 per share on Friday. Year to date, the stock has risen by 31.3%.
“PXP was among the active stocks [last] week after the suspension on oil exploration was lifted by the government in order to give way for a joint exploration with China to tap the presence of vast gas and oil resources in this area as a possible replacement of the depleting Malampaya [gas field],” Diversified Securities, Inc. Equity Trader Aniceto K. Pangan said in a text message.
“[I]n the short term as it is still under exploration, there is no operation thus [the] basis of its fundamentals are the estimated gas and oil resources available under the Service Contract (SC)… [Meanwhile,] if operations to utilize the resources will materialize, then this will create good growth opportunities for the company going forward,” he added.
President Rodrigo R. Duterte approved on Oct. 15 the Department of Energy’s (DoE) recommendation to lift the ban on exploration activities in the West Philippine Sea. The ban was imposed by the previous administration in 2014 amid escalating tension between the Philippines and China.
The department has sent work resumption notices to the developers of five petroleum prospects within the area. PXP and its subsidiary Forum Energy Ltd., through Forum (GSEC 101) Ltd., were also allowed to resume petroleum-related activities in their respective areas under SC 75 and 72. PXP later on confirmed receiving these “resume-to-work” notices early last week.
The company also confirmed ongoing talks between Forum Energy’s subsidiary Forum (GSEC 101) Ltd. and China National Offshore Oil Corp. regarding the implementation of the memorandum of understanding (MoU) between the governments of the Philippines and China on joint oil and gas development in the West Philippine Sea with the two parties having yet to finalize any disclosable agreement as of this writing.
Two years ago, Manila and Beijing signed an MoU to pursue petroleum resources in the contested waters, which the DoE estimates to bear as much as seven trillion cubic feet of gas and six billion barrels of oil.
The recent developments have sent the stock’s price climbing to as high as P11.90 per share last week on Thursday before settling at P11.16 per share on Friday. Prior to this, the stock had already gone up by 50% to P7.72 on Oct. 16, the day after Mr. Duterte approved the recommendation to lift the ban.
As of the first half, PXP reported a wider attributable net loss of P44.4 million compared with P7.6 million in the comparable six months of 2019.
“As of now, we may see a consolidation in its movement with a near term support at P10.86 while resistance is at P12,” Diversified Securities’ Mr. Pangan said.
For Unicapital Securities, Inc. Equity Trader Cristopher Adrian T. San Pedro: “[E]xpect it to consolidate between P9.87 support and P11.90 resistance in the short term,” he said in a separate e-mail.
“Though I would strongly advise investors to take profits given everything is already priced in on these levels and the West Philippine Sea oil exploration narrative remains susceptible to political risks,” Mr. San Pedro added.
PXP is a unit of Philex Mining Corp. which in turn is one of the Philippine units of Hong Kong-based First Pacific Co. Ltd, the others being Metro Pacific Investments Corp. and PLDT Inc. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has interest in BusinessWorld through the Philippine Star Group, which it controls. — Ana Olivia A. Tirona
