Among the companies badly affected by the pandemic, geopolitical tensions, and the slightly volatile peso are petroleum companies, with Shell Pilipinas Corporation (SPC) being one of them.

In 2020, or the height of the pandemic, SPC incurred a net loss of P16.2 billion. While the company posted profits in 2021 (P3.9 billion), 2022 (P4.1 billion); and 2023 (P1.18 billion), these are still low compared to the pre-pandemic profit figures of P5.1 billion in 2018 and P5.6 billion in 2019. These are based on figures gathered by Statista.

At the start of 2018, the price of SPC shares listed at the Philippine Stock Exchange (PSE) was around P64. Last October 15, SPC shares closed at P9.40 apiece.

Also, over a 12-month period, the share price of SPC shares declined by 30%, or from P13.50 on October 16, 2023 to P9.40 on October 15, 2024.

However, the good news is SPC’s net income is posting improvements this year. This, as the company reported a net income of P1.7 billion in the January-June period of the current year. This is higher by P122.9 million compared to the same period last year.

The company said that high interest rates and a weak peso also affected the January-June net income figure.
“Shell Pilipinas Corporation (SPC) posted a net income of P1.7 billion for the first half of 2024, fueled by improved profitability from marketing businesses, better cash management, and inventory holding gains. This was slightly dampened by the high interest rate environment and peso depreciation as the Peso weakened to a high of P58.9/USD (US dollar) in the second quarter,” SPC said in a statement.

However, one good factor going for SPC and other petroleum firms are the somewhat stable global crude oil prices. As of October 16, Brent crude Brent crude was at $74.25 a barrel while West Texas Intermediate futures was at $70.58 a barrel, both reflecting a decrease in prices as tensions between Iran and Israel eased.

The latest global crude oil prices is also aligned with the projections of the US Energy Information Administration (EIA), which sees global crude oil prices staying below $90 per barrel until November 2025.

“We forecast average annual crude oil prices in 2024 and 2025 will remain near their 2023 average because we expect that global supply and demand for petroleum liquids will be relatively balanced over the next two years. We expect the Brent crude oil price will average $82 per barrel (b) in 2024 and $79/b in 2025, compared with its 2023 average of $82/b. We expect that the price of West Texas Intermediate (WTI) will be slightly lower but generally follow the same path,” the EIA said in its website.

To recall, in September 2023, the price of Brent crude hit $93.72 per barrel.

As for the peso-dollar exchange rate, it has been on a downtrend since July, based on figures from the Bangko Sentral ng Pilipinas (BSP): P58.4845 average in July; P57.1935 average in August; and P56.0713 in September. However, the peso-dollar rate closed at a higher P57.86 on October 15.

Almost all petroleum firms in the Philippines need to import their raw materials (crude oil) and finished products, hence the peso-dollar rate affects the pricing of their products.

However, for SPC, its management is also exercising better management of its finances, as evidenced by its generating a free cash flow of P1.1 billion in the first six months of this year compared to negative P7.5 billion of the same period in 2023.

“The company’s financial health was further strengthened as it continued its active working capital management and controlled spending, delivering free cash flow (FCF) net of interest expense of positive P1.1 billion versus the prior year’s negative P7.5 billion. In addition, capital expenditures were strategically reduced by P2 billion versus the same period last year as the Company sharpened its focus on high-yielding projects. All these initiatives reduced gearing from 57% to 54%,” the company said in a statement.

This means that the shares of SPC listed at the PSE are definitely worth monitoring.

(PHOTO FROM SHELL PILIPINAS WEBSITE)

Note: Currentph is publishing STOCK WATCHER SHORTS to compliment the STOCK WATCHER SERIES that is in video form. Also watch out for the next videos of the STOCK WATCHER SERIES.