The Philippines has proved to be an attractive destination for international oil and gas companies eager to tap into an emerging market which has been liberalised relatively recently. With a government eager to provide the necessary infrastructure to spur on economic growth, many firms feel that there are plenty of opportunities to develop the industry. President Benigno Aquino III has pushed through a series of reforms that have attracted such interest from overseas.

One firm, Phoenix Petroleum Philippines, has been successful in developing its business since the industry was liberalised in 1998. Launched in 2002, Phoenix is now the largest independent oil company in the country, and has now set its sights on challenging the large multinationals that dominate the industry. World Finance spoke to President and CEO Dennis Uy about how Phoenix got to where it is today, and what plans it has for the future.

What services does Phoenix offer?
We are an oil company engaged in the trading of refined petroleum products and lubricants, operation of oil depots, and storage and transport services. Being an independent in an industry that was regulated for so long – the Philippine oil industry was deregulated only in 1998 – has its own advantages. Our entrepreneurial-based business practices, structures and culture differentiate us from our competitors. We believe that the ‘last mile’ of delivery of petroleum will be won by speed, flexibility, creativity, courage and financial capability. This has become an even more powerful competitive advantage, as we have grown beyond competing just with other independents, and now compete in retail and commercial markets with both domestic and multinational major market participants.

Will the company have achieved its aim of being the country’s market leader by the end of 2012?
As of the first half of 2012, we have already achieved our goal of being the number one independent in the country. This makes us number four in the overall market, after the big three multinational oil companies. We achieved this 10 years after we started the company, and five years after we were listed on the Philippine Stock Exchange.

Our balance sheet has become stronger. From 2007 to 2011, revenue has grown at a compound annual rate of 85 percent to PHP27.4bn ($647m), net income 47 percent to PHP511m ($12m), total assets 72 percent to PHP10.5bn ($248m), and total equity 50 percent to PHP2.86bn ($67m), respectively. Our market capitalisation grew from PHP383m ($9m) in 2007 to PHP6bn ($143m) as of August 31, 2012.

rom 32 retail stations in 2007, we now have 270 Phoenix stations nationwide, making us the independent with the highest market share. Our commercial fuels business continues to expand, too, with accounts in critical growth industries such as transportation, energy and construction.

We have not only grown quantitatively, but we are equally proud of the quality of our growth in both external and internal brand visibility and reputation, as well as our growth in human resource development, strategic insight and corporate social responsibility.

What opportunities do you see for the domestic oil industry?
The growth in the Philippine economy and industries will certainly result in increased demand for petroleum. The government is investing in road construction, and the culture of transportation is strong. Individual ownership of cars is a highly aspirational symbol of success.

The previous history of a highly regulated downstream industry left the Philippines with a large deficit of gas stations relative to population. While the Thailand market of 63 million people supports in excess of 20,000 gas stations, the Philippine market of 90 million people currently has less than 7,000. The market opportunities created by this history are obvious.

As an archipelago, we in the Philippines deal with special challenges in terms of logistics and market geographic diversity. We believe that insight into these challenges represents significant growth opportunities. Accordingly, we are strongly committed to comprehensive customer relationship management (CRM), business information systems, and market research and intelligence.

How can Phoenix remain profitable in a climate of falling oil prices?
The movement and volatility of oil prices in the world market is an inevitable part of the industry, and we have integrated this volatility and movement into both our short- and long-term corporate strategy. In the second quarter of this year, the price of petroleum products declined sharply. We remain profitable with the continuous expansion of our retail network and increase in sales from retail and commercial accounts. Sales volume of refined petroleum products continues to increase, and revenues from fuels, service and storage remain high. Revenues in the first half of 2012 reached PHP17bn, an increase of 21 percent from PHP14bn in the same period last year.

We also have an integrated logistics network, from inter-island transport to storage and hauling. We directly import fuel, which contributes to higher gross profit margins. Among independents, we have the largest storage capacity, with strategic depot and terminal locations nationwide. We look to further expand our capacity to support the growth of our retail and commercial network. As indicated earlier, we are invested heavily in CRM, business information systems and market research and intelligence. This gives us a ‘knowledge advantage’ in manoeuvring through price volatility.

What challenges does the industry face?
Among the challenges that the Philippine oil industry faces is a more competitive environment, which means we have to be fast in establishing presence in new markets. Fluctuations in oil prices in the global market affect the industry’s financial performance. Supply is also a challenge. With expansion in global industries, petroleum demand will increase, resulting in tightness of supply.

Given the strategic geo-political position of the Philippines we are always mindful of geo-political and geo-economic risk factors. We believe that regional governments are committed to a stable and mutually beneficial resolution of these issues, but energy is an inseparable part of these factors and the stable resolution of these issues will remain an industry challenge.

What plans for expansion does Phoenix currently have?
In the near term we’re looking to roll out more retail stations and give the best customer experience we can. More Phoenix stations, particularly the big ones, provide clean and air-conditioned restrooms, service bays, ATMs, money transfer, and retail shops like convenience stores and restaurants. In the longer term we will continue the vertical integration of profit and value-creating integrated businesses.

We recently redefined our corporate vision: to be an indispensable partner in the journey of everyone whose life we touch. Making current and future Phoenix stations, facilities and services an essential part of the Philippine market and the Filipino community is in line with this vision. Our growing commercial fuels business has accounts in vital, essential growth industries from transportation to energy to construction. I see Phoenix Petroleum as a solid company with solid fundamentals, and a platform with the knowledge, agility, resources and abilities to take advantage of opportunities for growth.

Other than the recent deal with Maybank, do you have any other partnerships lined up?
Aside from Maybank, we recently signed with BDO Unibank, the country’s largest bank, a PHP500m, SEC registration-exempt Convertible Corporate Note with Warrant Offering amounting to PHP180m. The issuance is part of our plan to raise long-term capital, finance capital expenditures for 2012, and refinance short-term debt.

We also acquired Chelsea Shipping Corporation, an affiliate company. The purchase will ensure control of product supply and minimise and eliminate potential risk of supply disruptions due to scarcity of tanker vessels. With a total fleet size of 19,561, Chelsea Shipping is among the top five major petroleum tanker owners in the country. It serves Phoenix Petroleum, Cebu Pacific Air, National Power Corporation, and the logistics and transportation industry.

Do you think the Philippines represents an attractive investment option?
Under the leadership of President Aquino, and with the country’s solid economic fundamentals, we are bullish on the growth prospects of the country and of our industry. Macro-economic metrics and our own growth support this conclusion. Like many Filipinos of my generation, I am optimistic about the future. I am sure we will create more opportunities and not only make a difference in the industry where we are present, but help to lead a real economic boom in the country. We are of course gratified that so many of the world’s economic analysts now see that same bright future for the Filipino economy.

As I said earlier, our company was built for the future of the downstream petroleum industry. Just as I believe that the Philippines can be faster, smarter and better than our competition, I believe that Phoenix can as well. We have to prove that every day, but we believe the future is one of unlimited opportunity for both.