Department
Circular No. 2003-05-006
AMENDING
CERTAIN PROVISIONS OF
PETROLEUM BOARD
CIRCULAR NOS. 15 AND 2, SERIES OF 1975 AND 1976, RESPECTIVELY, PROVIDING
GUIDELINES TO THE FINANCIAL AND TECHNICAL CAPABILITIES OF A VIABLE PETROLEUM
EXPLORATION AND PRODUCTION COMPANY
WHEREAS,
the former
Petroleum Board now
Department of Energy issued Circular Nos. 15
and 2, Series of 1975 and 1976, respectively, providing guidelines related
primarily to the financial and technical capabilities of a viable petroleum
exploration and production company.
WHEREAS, it is necessary to amend certain provisions of the said Circular to
make it attuned to the conditions under which it is being implemented and
considering that petroleum exploration and production is highly capital intensive.
NOW, THEREFORE, the
Department hereby
adopts and promulgates the following amendments to certain provisions of
Petroleum Board Circular Nos. 15 and 2,
Series of 1975 and 1976, respectively:
SECTION 1. The 3rd and 5th Paragraphs of Circular No. 15 is hereby amended
to read as follows:
“Considering that establishing the
capitalized value of a company differs in different countries, a company who
will engage in onshore exploration and offshore exploration ventures may be considered as a viable exploration company if the
Department is satisfied in the adequacy of
its financial resources.
“Likewise, the exploration company should show that it has sufficient resources to meet future requirements.”
SEC. 2. Paragraph
(a) of Circular No. 2 on the Financial Qualification is
hereby amended to read as follows:
“(a) Financial Qualification
“A company to be financially qualified to enter into a service contract must
have a minimum working capital equivalent to one hundred percent (100%) of the
cost of the firm Work Obligation on the area being applied
for. In case of consortium, to qualify,
each member’s working capital shall be pro-rata based on its participating
interest in the service contract. “Working
Capital,” in the concept of the guidelines, refers to the company’s net liquid
assets (Liquid Assets less Current Liabilities) consisting primarily of cash,
temporary investments, (marketable securities), short-term receivables and
deposits, which are free for investment in petroleum operation.
“It is understood that the available working capital
should be net of the financial commitment from other existing service contracts. In addition, each consortium member should
have an acid-test ratio of 1.5:1 and a debt/equity ratio of 3:1.”
SEC. 3. Additional
Provisions are hereby inserted between paragraph (c)
and the Penultimate paragraph of
Petroleum Board
Circular No. 2, series of 1976, to read as follows:
“(a) In case of a newly organized
subsidiary company which is willing to engage in petroleum operations but its
capital is not sufficient to meet the minimum requirement, its parent company
shall be required to submit its financial statements and provide support to a
subsidiary through a parent guarantee.
“(b) Past exploration expenditures incurred by a
contractor shall be included in the new service contract as an operating
expense and cost recoverable in case of production subject to the validation of
the
Department. Such expense however, shall be limited to the
past expense relative to the same area subject of the application and
participating interest of the contractor.
In the event, that the area covered by prior service contract is bigger
than the area applied for, such expense shall be pro-rated to effect the actual
expenses to be carried in the new service contract.”
SEC. 4. Repealing
Clause
All other circulars, rules and regulations
inconsistent with this Department Circular are hereby modified, amended and
repealed accordingly.
SEC. 5. Effectivity
This Circular shall take effect fifteen (15) days following its publication in
a newspaper of general circulation.
Issued this 19th day of May 2003 in
VINCENT S. PEREZ
Secretary
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