SECTION 1.  Transfer or assignment of rights and obligations.  – The rights and obligations under a petroleum service contract executed under PD 87, as amended, shall not be assigned or transferred without the prior approval of the DOE:  Provided, That the transfer or assignment of contractual rights and obligations in service contracts to an affiliate of the transferor or assignor shall be automatic, if the transferee or assignee is as qualified as the transferor or assignor to enter into such contract with the government:  Provided, further, That the affiliate relationships between the original transferor/assignor or a company which holds at least fifty percent of the contractor’s outstanding shares entitled to vote, and each transferee/assignee shall be maintained during the existence of the service contract.

SEC. 2.  Procedure for transfer or assignment of rights and Obligations Under Service Contracts.  – All requests for approval of transfer or assignment of rights and obligations under a petroleum service contract shall be in writing, signed by an authorized officer or representative of the service contractor and addressed to and filed with the Office of the DOE Undersecretary in charge of the Energy Resource Development Bureau (“EBRD”), together with the following documents and/or information:

a.                  History of Service Contract

                             i.           Effective date of service contract;

                            ii.           Original parties involved and extent of participating interest;

                           iii.           Subsequent changes or variation in the service contract, if any; and

                           iv.           Work accomplishments/updates on on-going activities.

b.                  Proposal for Transfer or Assignment

                             i.            Extent of interest that is the subject of the assignment or transfer;

                            ii.            Reasons for the assignment to establish basis, reasonableness and urgency of the matter (e.g., financial constraints, logistics issues, etc.);

                           iii.            Approval of the respective Board of Directors of the transferor/assignor and transferee/assignee;

c.                   Technical Justification of the Transfer or Assignment;

                                i.            Implications of the proposed transfer and assignment

                             ii.            On current Work Program, if any;

                           iii.            Revised detailed Work Program and budget with specific timetable for each phase of the Work Program, if any; and

                           iv.            Benefits and technical advantages in fulfilling work commitments under the service contract.

d.                  Duly executed Deed of Assignment or Transfer

e.                  Documents evidencing financial, legal and technical qualification of the prospective transferee or assignee

1.      Financial Qualification

                                i.            Audited financial statements and annual reports for the last three (3) years; and

                             ii.            Particulars of financial resources available to the prospective transferee or assignee including capital, credit facilities and guarantees to undertake its obligations under the service contract.

2.      Legal Qualification

                                i.            Certified copy of Articles of Incorporation;

                             ii.            Certified copy of the corporate by-laws;

                           iii.            SEC Registration Certificate; and

                           iv.            Certified copy of the latest general information sheet submitted to the Securities and Exchange Commission.

3.      Technical Documentation

                                i.            Technical and industrial qualifications, eligibilities and work related experiences of the prospective assignee/transferee and its officers and employees; and

                             ii.            Technical and industrial resources available to the prospective assignee/transferee for the exploration, development and production of petroleum resources, if applicable, depending on the participation of the prospective assignee/transferee in the service contract.

The DOE may require submission of additional information/documents.  Furthermore, any prospective assignee/transferee organized in a foreign country shall submit documents equivalent to the above, issued by the appropriate governing body and duly authorized by the Philippine consulate, in the area where it is organized or holds principal office.

SEC. 3.  Within ten (10) working days from the DOE’s official receipt of the formal request for approval of the transfer or assignment, together with the complete set of documents, unless such period is extended by requiring further evaluation/information, the Contracts Division, Petroleum Resource Development Divisions and Compliance Division shall complete their legal, technical and financial evaluations on the qualification of the prospective assignee/transferee and issue a memorandum to the ERDB Director on the result of the evaluations.

SEC. 4.  Within three (3) working days from receipt of the memorandum on the legal, technical and financial evaluation, unless such period is extended by requiring further evaluation/information, the ERDB Director shall issue a memorandum to the Undersecretary in charge of the ERDB, through the Assistant Secretary, on the result of the evaluation, including among others the following:

a.                  Background of the Service Contract;

b.                  Proposal and justification for the transfer of rights and obligations;

c.                   Result of the legal, technical and financial evaluation; and

d.                  Recommendation for approval or denial of the request.