Shell IPO may happen earlier than November 10

MANILA, Philippines - Pilipinas Shell Petroleum Corp.’s initial public offering (IPO), which is slated on Nov. 10 according to its registration statement, may happen earlier depending on market conditions, its underwriter said.

BPI Capital Corp. managing director Eric Luchangco said the schedule is being finalized.

“We’re fine tuning the schedule. That’s not 100 percent final yet. Early November is generally the schedule we were targeting but due to where we see the market is moving, there is the possibility that we may make some adjustments,” he said.

“If ever, we might move it earlier but it’s not decided yet,” Luchangco added.

As it is now, he said market valuations are still very decent even as he noted a US Federal Reserve rate hike looming this year, which he believes may happen in December instead of the September policy meeting.

“I think more people still think the Fed is going to happen later on and that is better for the issuers because rates will remain low,” he said.

 BPI Capital and JP Morgan are the underwriters of Shell. The company also tapped Rothschild as financial advisor.

Company sources said Shell hopes to do it earlier than the November schedule, before its country chairman Ed Chua steps down in October for his retirement.

But Shell is still seeking regulatory approval for the much awaited P29.7 billion IPO.

Chua earlier said it doesn’t have to be completed before he steps down as long as the groundwork has been laid down for his successor.

Shell will offer 330 million shares including an over allotment of up to 30 million for up to P90 per share, according to documents filed with the Securities and Exchange Commission (SEC).

Justino Calaycay, analyst at A&A Securities, said the market has been waiting for Shell’s IPO.

“This will be welcomed as it is a long awaited listing of one of the Big Three. Just top off the mind, at P90 per share, the numbers of Shell should really be very impressive given that its listed competition is still struggling to pass the P12 mark. In terms of the Philippine business, Petron, I think leads Shell in market share...But of course Shell has added services and businesses markets – international as well as exploration so this should put more premium on the price,” Calaycay said.

The Oil Deregulation Act of 1998 mandates oil companies including Shell to list at least 10 percent of their common stock within a period of three years since the effectivity of the law.

But Shell has managed to delay the mandatory public offering, citing various reasons primary of which is the 1997 Asian financial crisis.

In several letters to the Department of Energy in the past, Shell was consistent with its primary reason, which was the 1997 crisis.

It said that as a result of the 1997 debt problem that hit the Philippines and the rest of Asia, the economic landscape was not good for Shell and that this was the case for six years until 2003.

As such, Shell shut down its refinery in October 2003. In the years that followed, there were other issues which Shell deemed were enough to delay the IPO.

For instance, in 2013, it had to re-assess its options for its 110,000 barrel per day refinery in Batangas and its presence in the Philippines in general.

In 2014, a slump in oil prices resulted in a huge P8.5 net loss for Shell, another reason for a delay in the mandatory offering.

However, in 2015, Shell was able to turn this around, posting a net income of P3.6 billion, mainly driven by the growth in sales volume, improvement in refining margins and lower inventory losses.

In the first quarter of this year, Shell posted a net income of P2.274 billion or higher than the P1.171 billion posted a year ago.

In its IPO registration statement filed with the SEC, Shell said proceeds from the sale of primary offer shares will be P2.7 billion which will be used by the company to fund capital expenditures and other requirements.