As it continues to traverse rough financial terrain on its operations, Uy-led Phoenix Petroleum Philippines Inc. indicated that it will be pursuing a sale-and-lease back arrangement for its assets with Sy-controlled BDO, which has been its long term go-to bank for credit line.

According to Phoenix Petroleum President Henry Albert R. Fadullon, the ‘sale deal’ cemented with BDO will also have a re-purchase option that the company may exercise within 3 to 5-year timeframe.

He expounded “the said assets will be under an exclusive leaseback arrangement which also got the company the right to repurchase them within 3-5 years from the time of the sale.”

To overcome debt quagmire, Fadullon noted that “the company is looking to utilize certain core and non-core assets such as real estate, terminals, depots, in order to settle its obligations via sale and leaseback agreement.”

Beyond that monumental shift in business strategy, Phoenix Petroleum specified that there are some parallel operational approaches they have been employing to regain foothold in the market – including the need to offer its terminal facilities to third party customers.

“The shift of our terminalling business to a profit-center servicing third party customers is in full swing with a total storage capacity of 355 billion liters. The aim of our terminals and depots located in strategic locations in Luzon, Visayas, and Mindanao is to deliver 44% of capacity lease out by the fourth quarter of this year to maximize the utilization of these assets,” Fadullon stressed.

On the whole, he admitted that “our fuel business has been experiencing challenges due to working capital limitations. The sustained impact of geopolitical tensions in  the global market have derailed our intentions to restore the business.”

Amid continuing distress through its top and bottom lines, the company executive emphasized that another strategy they have been resorting to is significantly trimming down operating costs.

“This 2023, we have been aggressively cutting costs, resulting in a reduction of our first half OPEX (operating expenses) by more than 60% — aligned with our efficiency goals,” he stated.

The saving grace for the oil firm, Fadullon qualified, is that “our capital light supply model has been essential in keeping operations sustainable.”

Onward, he pointed out that “the downstream oil sector continues to be a fundamental component of the economy and we believe that once we obtain the working capital support to revitalize this part of our portfolio, we will be in a better position to address  the demands of our customers.”

Despite prevailing setbacks, the company sees glimmer of hope on some components in the chain of its operations – including its liquefied petroleum gas (LPG) business and its non-fuel offers to customers.

“Our LPG business continues to be the bright spot in the portfolio. Its volume grew by 7% resulting in a 25% jump in EBITDA (earnings before interest, taxes, depreciation and amortization) for the first half of 2023 compared to the same period last year driven by a 10% improvement in margin,” Fadullon said.

The oil firm executive primarily cited that “domestic LPG continues to focus on canisters and branded cylinders, paving the way for more volume growth and margin growth.”

On non-fuels component of its retail segment, he conveyed that “our lifestyle rewards app LIMITLESS continues to thrive with over 60 merchant partners,” noting that the app has already processed more than 5.5 billion worth of transactions and “still serves its purpose of being a consolidating platform for Phoenix and other brands.”

He further asserted “we have taken deliberate steps to repurpose the business to combat such hurdles and to achieve long-term sustainability which has been our desire ever since,” adding that “instead of waiting the world to go back to normal, we have been creating ways to adapt according to the evolving business landscape and  shifting customer demands.”