2012 Annual Report - PNOC Exploration Corporation

Our Cover
The Philippines is well on its way to be the next tiger economy in Asia. PNOC EC celebrates this feat and remains steadfast
with its commitment to explore, develop and produce oil, gas and coal to sustain the country’s progress. The men and women
of PNOC EC will continue working together and journey with the rest of the country towards a brighter future for the Philippines.
Contents
2 Report of the President and
Chief Executive Officer
5 Corporate Profile
6 PNOC EC Areas of Interest
7 Operational Highlights
13 Social Performance
14 2012 Financial Highlights
16 Statement of Management’s
Responsibility for Financial
Statements
17 Independent Auditor’s Report
18 Statement of
Financial Position
19 Statement of Comprehensive
Income / Statement
of Changes in Equity
20 Statement of Cash Flows
21 Notes to Financial Statements
42 Board of Directors
44 Management Team

Vision
We are the leading oil, gas, and coal company of choice in the
Philippines with global reach in exploration and production,
contributing to the company’s growth and development.
Mission
We are an enterprise, whose core business is petroleum and coal
committed to the delivery of superior economic benefits to our
stakeholders through top performance in all our undertakings.
Values
Teamwork.
We value teamwork. Our employees and stakeholders work
together harmoniously toward common goals.
Integrity.
We strictly adhere to ethical and moral standards of fairness
and honesty in all our undertakings.
People Orientation.
We value the welfare and growth of our employees as well as
the interest of our host communities. We actively seek social
acceptance of our projects.
Innovativeness.
We encourage creativity and continuous improvement in
the conduct of our business.
Customer-driven.
We perform with a high level of efficiency geared towards
customer satisfaction.
Concern for the environment.
We properly manage the impacts of our operations to the
environment. We adhere to the principles of sustainable
development; balancing ecological, social and economic
sustainability of our projects.
Safety and Well-being.
We conduct our business in a safe manner, thereby protecting
the well-being of our employees and stakeholders.
Professionalism.
We operate our business with consistent competence,
dependability, responsibility and accountability.
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Report of the President and
Chief Executive Officer
Working Together to Fuel Asia’s Next Tiger
The year 2012 brought about good things and bad
things. The bad thing was that, financial institutions
as well as sovereign nations struggled hard to hold
themselves together. The future looked bleak and the
road to economic recovery was expectedly difficult and
steep.
The good thing though is that the Philippines, despite
the seeming financial meltdown that gripped major
economies of the world, has remained steadfast in
its journey towards progress and has successfully
weathered the worst. No less than the World Bank
Country Director, Motoo Konishi, declared during
the Philippines Development Forum in Davao City in
February 2013 that “the Philippines is no longer the sick
man of East Asia, but the rising tiger”. With the country’s
bullish growth forecast came its first investment grade
from Fitch Ratings on March 27, 2013 and also an
investment rating upgrade from Standard & Poors on
May 2, 2013. Clearly, the Philippines is well on its way to
becoming Asia’s next tiger.
However, this is no sure guarantee that we are the
next Tiger of Asia. Investment ratings upgrade does
not automatically translate to foreign investments and
a bullish stock market does not instantly create jobs.
In fact, while Indonesia, for example, ranks lower than
the Philippines in investment ratings, has almost ten
times more Foreign Direct Investments (FDI) flow into
Indonesia according to experts. This could be due to
a lot of factors but most certainly, the country’s energy
supply is a major factor considering that a stable and
affordable energy and power supply is a prerequisite
for foreign investor’s decision to put up factories and
businesses in the Philippines. In other words, while our
country is well on its way to becoming a tiger economy,
there is still a lot of things to be done, especially in the
energy front, in order for growth/gains can be translated
into tangible benefits for the masses.
PNOC EC as the Government’s
Upstream Energy Arm
This unprecedented economic progress that the country
is experiencing right now poses a challenge to our
company. How will PNOC EC position itself to help
unlock the full potential of the country? Now, more than
ever, we are called upon to contribute to the sustained
growth and economic progress of the country.
As the government’s upstream energy arm, we are
mandated to explore, develop, and produce oil, gas and
coal. It is a testament that upstream energy exploration
and production remain to be our core business. We are
proud to say that as of today, our Company holds the
largest contract area for oil, gas and coal exploration
and production with the most number of petroleum
service contracts and coal operating contracts.
Currently, we have participating interests in seven (7)
Service Contract areas and awaits government approval
of two (2) more from the last energy contracting round.
While SC 38 (Malampaya Project) remains our biggest
source of revenues, we are making short strides in the
exploration of other Service Contracts. Just recently,
SC 38 has completed the drilling of two (2) infill wells as
part of the Malampaya Phase 2 project. Our Company
shares a significant fund for the Malampaya Phase
2 and Malampaya Phase 3. These two (2) projects
are necessary to sustain reliable delivery of gas to our
existing customers and our continued financial growth.
We are determined and committed to pursue
exploration work in other service contract areas either
as operating or non-operating partner with the end in
view of finding the next Malampaya. While we focus
our efforts in highly prospective areas such as offshore
Palawan, we also continue to explore onshore areas,
particularly in SC 37 (Cagayan Basin) where it previously
produced gas from the San Antonio well in Echague,
Isabela. Another exploration well is scheduled to be
drilled in SC 37 by the last quarter of 2013.
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Meanwhile, coal continues to be an important part of
the Company’s portfolio, it being a major contributor in
the Philippine energy mix. Right now, we hold a total
of seven (7) Coal Operating Contracts (COCs) from all
over the country as far north as Isabela and far south in
Malangas in Mindanao. Three (3) of these COCs had just
been recently awarded as part of the latest contracting
round. These are COC 184 in Agusan Del Sur, COCs
185 and 186 both in Zamboanga Sibugay.
Sound Fiscal Management
In 2012, PNOC EC delivered a solid financial
performance and strong cash position. Net Income for
the year is PhP2.934 billion which resulted to increase in
retained earnings by 13% from PhP7.36 billion in 2011
to PhP8.29 billion in 2012. Likewise, the book value per
share increased from PhP4.73 to PhP5.20 year-on-year.
The Company’s liquidity likewise improved in 2012
resulting to a strong cash position of PhP3.10 billion,
an increase of 51% from 2011’s PhP2.06 billion. As a
result of this year’s solid performance and strong cash
position, the Company declared a total of PhP2.002
billion cash dividends in January 12 and December 13,
2012. Of the total dividends declared, PhP999.0 million
was paid to the Bureau of Treasury, PhP999.0 million
to PNOC, and the remaining PhP4.22 million to public
stockholders.
Our Company implemented more efficient cost cutting
measures that resulted to a reduction in operating
expenses, excluding exploration-related costs, by
34%. Capital investment for projects increased from
PhP423.90 million in 2011 to PhP937.19 million in 2012
in support of the National Government’s thrust towards
energy sufficiency.
Going Downstream
While essentially an upstream company, we have
ventured into the downstream business as early as
1996 when we started selling electricity to electric
cooperative in Isabela from our San Antonio Gas Power
Plant. We continue and will continue to venture into
the downstream energy business if there is opportunity
to do so and if the situation calls for it whereby such
downstream projects are essential to support the
government’s energy agenda.
In support to Government’s program to improve the
quality of air in the Metropolis, we are called upon to
put up CNG daughter stations under the pilot phase of
the DOE’s Natural Gas for Vehicle Program for Public
Transport (NGVPPT) and eventually bring this project
into commercial phase. We are currently working
together with other stakeholders of the project to finally
bring the CNG for vehicles project into reality before the
end of 2013.
Meanwhile, our Company’s coal marketing and
trading business continue to serve and supply the
coal requirements of our industrial and power plant
customers with coal production from COC 41 and
other local coal mine sources. We will continue with
our coal trading but only after making sure that our
margins are improved. If need be, we will try to revive
our government-to-government arrangement with
other state-owned companies to ensure that we get
preferential price of coal.
During the year, we have expanded the Company’s
international oil trading business to include Sri Lanka
and Indonesia aside from Bangladesh in partnership
with Astra Oil Company and Glencore Singapore Pte.,
Ltd. This line of business does not entail exposure of our
Company’s funds and we are always kept whole in all
these transactions.
Working Together
Our Company has seen the worst and the best in its
struggle to be where it is now. Many Presidents of this
country as well as the company have come and gone
but we remain steadfast and committed to our mandate
of exploring and producing energy to fuel the country’s
progress. The only thing missing from us is oil. We
will strive to find oil and the future for this is becoming
brighter. We hope to produce oil before 2016.
Becoming Asia’s next tiger is not an overnight’s work.
Just as the men and women of our Company journeyed
together since 1976 into what it is now, a highly
profitable government corporation, we too as a country
shall journey together into progress which only us as a
people can shape in whatever way we want to shape it.
PNOC EC is one with the country in working together for
Asia’s next tiger- the Philippines.
PEDRO A. AQUINO, Jr.
President and Chief Executive Officer
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Corporate Profile
PNOC Exploration Corporation is the upstream
oil, gas and coal subsidiary of the state-owned
Philippine National Oil Company. A government
owned and controlled corporation, the Company was
incorporated on 20 April 1976 and is mandated by
the government through the Department of Energy
(DOE) to take the lead in exploration, development
and production of the country’s oil, gas and coal
resources. The Company was listed in the Makati
Stock Exchange and the Manila Stock Exchange in
1976 and 1977, respectively.
At present, PNOC EC has seven (7) petroleum Service
Contracts (SCs), namely: SC 37 (Cagayan Basin),
SC 38 (Malampaya), SC 47 (Offshore Mindoro), SC
57 (Calamian), SC 58 (West Calamian), SC 59 (West
Balabac) and SC 63 (East Sabina). The Company is
the operator in SC 37, SC 47 and SC 63 and a nonoperating
partner in SC 38, SC 57, SC 58 and SC 59.
PNOC EC used to operate the very first natural gas
facility in the country- the San Antonio Gas Power Plant
within SC 37 before joining the Malampaya consortium
(SC 38) in 1999 with a 10% stake. Malampaya is the
country’s single biggest investment of its kind.
PNOC EC also holds seven (7) Coal Operating
Contracts (COCs), namely: COC 41 (Malangas),
COC 122 (Isabela), COC 140 (Surigao del Sur), COC
141 (Isabela), COC 184 (Agusan del Sur), COC 185
(Zamboanga Sibugay) and COC 186 (Zamboanga
Sibugay). As part of its coal business, the company
also trades coal from other sources through its four (4)
coal terminals located in Manila, Malangas, Batangas
and Cebu.
The company likewise owns and operates a private
commercial port – the Energy Supply Base (ESB) –
in Mabini, Batangas which provides berthing, cargo
handling, storage and warehousing facilities to its
clients.
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PNOC EC Areas of Interest

Operational Highlights:
Natural Gas Production
Service Contract No. 38 – Malampaya Gas
Project
PNOC EC owns 10% stake in the upstream component of the
Malampaya Deepwater Gas-to-Power Project, together with
Shell Philippines Exploration B.V., the Operator, (45%) and
Chevron Malampaya LLC (45%).
In 2012, the Malampaya project continues to provide the
gas fuel requirement of its three (3) power plant customers in
Batangas, namely Santa Rita (1,000 MW), San Lorenzo (500
MW) and Ilijan (1,200 MW) as well as that of Pilipinas Shell
Petroleum Corporation for the gas fuel requirements in its
refinery in Tabangao, Batangas and compressed natural gas
(CNG) for the pilot phase of the CNG public transport project
of the government. For the year, total natural gas sales was
approximately 130.28 billion standard cubic feet (BCF), slightly
higher than the estimated actual of 130.05 BCF; and the total
condensate sales is 4.59 mmbls (million barrels).
The Consortium has undertaken procurement of long lead
items for two (2) infill wells and subsea systems for the
Malampaya Phase 2 and procurement of CALM buoy and
hose replacement on top of the regular maintenance activities.
An eight-day maintenance shutdown was also conducted in
June 2012.
Petroleum Exploration and
Development
Service Contract No. 37 – Cagayan Basin
Service Contract 37 is an onshore block located in the
southern part of the Cagayan Basin covering an area of 360
km 2 . PNOC EC currently holds 100% stake in the block. The
San Antonio gas field, which was in production from 1994 to
2008 and was supplying the fuel requirement of the 3 MW San
Antonio Power Plant, is within said block. Although modest in
size, the 3 MW power plant was the first gas-powered plant
in the Philippines and signalled the birth of the natural gas
industry in the country.
In 2012, PNOC EC continues to assess the petroleum
potential of SC 37. Several prospects and leads were
identified. From this inventory, the Mangosteen Prospect, a
structural play with unrisked potential recoverable reserves of
71 BCF of gas, was considered as the most prospective and
was selected as a drilling candidate.
PNOC EC currently conducts the needed pre-drilling work in
preparation for drilling of the Mangosteen-1 well scheduled in
late 2013. The Company is also considering using its own rig
for this well, recently made available with the completion of
its drilling contract with the Energy Development Corporation
(EDC). Farm-out efforts were also initiated to attract potential
partners to join PNOC EC in this E&P opportunity.
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“PNOC EC owns 10% stake in the upstream component
of the Malampaya Deepwater Gas-to-Power Project”
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with PNOC EC such as payment of 100% of the cost of
exploration well in Sub-phase 3. SC 58 is located immediately
to the west of the Malampaya gas field.
Service Contract No. 47 – Offshore Mindoro
Service Contract 47 is located in Offshore Mindoro and
Northeast of the Palawan islands and covers an area of
10,480 km 2 . PNOC EC currently holds 97% participating
interest and Operatorship, with PetroEnergy Resources
Corporation and Basic Energy Corporation holding 2% and
1% participating interests, respectively. The Maniguin oil
discovery, probably the most significant discovery outside NW
Palawan, is within SC 47.
PNOC EC has done extensive subsurface work especially
in understanding the oil migration. A sizeable inventory of
prospects and leads has been prepared, which are being
offered to interested parties for possible joint venture. Potential
drilling targets include channel sands, anticlines, and thrusted
carbonates.
Service Contract No. 57 – Calamian
Service Contract 57 is located in offshore Northwest Palawan,
west of the Calamian Islands, covering an area of 7,200 km 2 .
PNOC EC acquired the area in 2005 and farmed-out to China
National Offshore Oil Corporation (CNOOC) International
Ltd. and Mitra Energy Ltd. (Mitra) in 2006 at 51% and 21%
participating interests, respectively. PNOC EC is currently
administering the license pending the Department of Energy
(DOE) approval of PNOC EC’s transfer of its participating
interests to CNOOC and Mitra Energy. SC 57 covers the
Bantac oil discovery.
In 2012, PNOC EC continues its assessment of the area
using more than 2,000 km of new 2D and more than 1,000
km old 2D seismic data earlier acquired and reprocessed,
respectively, by the joint venture. The aim of the work program
was to evaluate the most attractive drilling target to help the JV
decide on the way forward for the block.
In 2012, the Joint Venture acquired 861 line km of closelyspaced
2D seismic data over the Bikuda and Bulador leads
aimed at adequately assessing the Nido (carbonate) and Galoc
(clastic) objectives. These leads were identified from the 2011
mapping and depth conversion work that were focused on
highlighting inversion trends. The seismic data was required
to gain better velocity control, provide better confidence in
closure and possible Amplitude versus Offset (AVO) support
for hydrocarbons.
Seismic interpretation of this new data is ongoing. Once
completed, the results will be integrated into existing models.
The updated models will then be used to revise the risk
assessment and then to rank prospect portfolio and perform
commercial analysis. This subsurface work is being conducted
as part of further mitigating the remaining exploration risks
which are critical in selecting the optimum location for the first
deepwater well in SC 58.
Service Contract No. 59 – West Balabac
Service Contract 59 is located in offshore west of Balabac
Island in the Southwest Palawan Basin and covers an area
of 14,760 km 2 . PNOC EC holds 25% participating interest
after BHP Billiton Petroleum farmed-in into SC 59 acquiring
75% and Operatorship. SC 59 is located just north of the
deepwater hydrocarbon discoveries in offshore Malaysia.
In 2012, PNOC EC, as an active partner, conducted its own
subsurface work using newly-processed 3D and 2D seismic
data to complement the work being done by BHP. The large
seismic programs completed in SC 59 so far have contributed
an extensive database required for a better understanding of
the area. Inventory of prospects and leads involve carbonate
and clastic plays in both shallow and deepwater areas of the
block.
Further subsurface work is currently being done to determine
whether to conduct additional 3D seismic or select a drilling
target from the current inventory.
Also, PNOC EC continues discussions with the DOE and the
Office of the President (OP) to resolve issues on PNOC EC’s
request for approval of transfer of its participating interests to
CNOOC and Mitra Energy.
Service Contract No. 58 – West Calamian
Service Contract 58 is located in offshore Northwest Palawan,
west of the Malampaya oil and gas field, covering an area of
13,440 km 2 . PNOC EC currently holds 50% interest in SC 58.
The other 50% working interest and Operatorship are held by
Nido Petroleum Ltd. (NIDO) of Australia which is dependent
upon completion of its obligations under a farm-in agreement
Service Contract No. 63 – East Sabina
Service Contract 63 is located in offshore Southwest Palawan,
east of the Sabina shoal, covering an area of 10,560 km 2 . SC
63 was a successful joint bid application of PNOC EC and
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Nido during the DOE’s 2005 Philippine Energy Contracting
Round (PECR). PNOC EC is the operator with 50%
participating interest and Nido holds the remaining 50%. SC
63 covers the Abo-abo gas discovery.
To date, more than 3,000 km of 2D and more than 700 km 2 of
3D seismic data were acquired by the Joint Venture. Several
geological and geophysical programs were also completed.
Evaluation of these data resulted in a large inventory of
prospects and leads covering various plays such as carbonate
and clastic plays, structural (thrust), etc.
In 2012, PNOC EC conducted subsurface work along with JV
partner Nido for detailed evaluation of the prospects chosen
as mapping priorities in the 3D seismic area of SC 63. This
work resulted in the selection of the Apribada prospect, a
thrust fold play located in shallow waters with an estimated
recoverable resource of 1.8 TCF gas, as the drilling candidate.
In March 2012, PNOC EC transferred operatorship for the
drilling activity of Sub-phase 2B to Nido in recognition of its
offshore drilling experience. A drilling team, composed of
PNOC EC and Nido personnel, was formed to do the needed
pre-drilling work. The shallow gas study and geomechanics
were completed for the Apribada-1 well.
To save on drilling costs, meetings with other Service Contract
operators with shallow water drilling programs scheduled for
the year were initiated to share in common services to bring in
a jack-up rig.
The DOE has allowed the JV to drill the Sub-phase 2B
commitment well by 24 November 2013.
New Ventures
PNOC EC continues to evaluate prospective new ventures and
exploration opportunities, both here and overseas.
The Company participated in the 4th Philippine Energy
Contracting Round (PECR 4) as part of separate Consortia
that put up bids for two (2) new Service Contracts. PNOC EC
also has an option to participate in other PECR blocks which
received bids and accepted by the DOE.
In addition, PNOC EC evaluated several farm-in opportunities
that include onshore areas in Northern Luzon and Central
Philippines and offshore areas in Palawan.
The Company continues to evaluate overseas opportunities,
particularly in the Asia-Pacific region, presented in various
farm-out forums and meetings.
Coal Exploration and
Development
Coal Operating Contract No. 41 – Malangas
Project Operations
PNOC EC operates Coal Operating Contract (COC) 41 within
the Malangas Coal Reservation in Zamboanga Sibugay,
spanning the municipalities of Malangas, Diplahan and Imelda.
At present, PNOC EC is producing from two (2) large-scale
coal mines - Integrated Little Baguio (ILB) Mines 1 and 2. It is
developing another mine, the Lumbog Coal Mine, scheduled
for regular production in 2014. Aside from ILB and Lumbog,
44 small scale mining permittees are being supervised within
the concession area. PNOC EC’s operations in COC 41 is
currently the largest semi-mechanized underground coal mine
in the country.
Another project within COC 41 is the Lalat Coal Project, a
joint venture with A Blackstone Energy Corporation (ABEC)
as operator. Development is ongoing in the Lalat area. As of
end October 2012, total main shaft length is 300 meters, while
total ventilation shaft length is 291.43 m.
Further, the Company continues its exploration of nearby
areas which are also part of the COC. An extensive drilling
program has been programmed in these areas.
Drilling program for the Lower Butong and Sta. Barbara areas
commenced on 20 October 2011. The drilling contract is for a
total meterage of 8,100 m of drilling and geophysical logging.
As of end December 2012, a total of 7,962.58 m was drilled
in both areas. The confirmatory drilling of the Lower Butong
area resulted in a slight increase in coal reserves to 1.1 million
MT. Exploration drilling programmed at the Lower Butong
was completed in 1st quarter 2012 with eleven (11) holes and
aggregate depth of 2,992 meters. In Malongon/Sta. Barbara
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area, drilling of thirteen (13) holes was almost completed, and
total meterage as of end 2012 was registered at 4,970 meters.
On 22 June 2012, the DOE granted an 18-year extension of
COC 41 or until 13 August 2030.
Coal Operating Contract No. 122 – Isabela
Coal Mine and Power Plant Project
Coal Operating Contract 122, located some 300 km north
of Manila and includes portions of the City of Cauayan and
the municipalities of Naguilian and Benito Soliven within
the province of Isabela, was awarded to PNOC EC on 23
December 1997.
In cooperation with the DOE, PNOC EC is developing the
Isabela Coal Mine and Power Plant Project under COC 122.
Said project consists of a coal mine production area and a
mine-mouth power generating facility. The Isabela power plant
is intended to utilize the lignite coal within PNOC EC’s coal
concession in the area which has reserves sufficient to fuel a
100 MW power station. The project aims to promote use of
indigenous coal sources and augment the energy demand
requirement of Isabela and its nearby provinces.
In March 2012, PNOC EC Board approved the Land
Acquisition and Resettlement Plan (LARP) which includes the
entitlement package of the project and its disclosure to the
affected residents.
Thereafter, the company disclosed the LARP to the city,
municipal, and barangay councils of Cauayan City and Benito
Soliven. In June, PNOC EC started the house-to-house
disclosure of the LARP to all affected stakeholders in Cauayan
City and Benito Soliven.
For the power plant aspect of the project, the transaction
advisor, The Lantau Group, is currently evaluating various
studies related to the project, with the end goal of finding joint
venture (JV) partners for the development of the mine and
power plant.
Coal Operating Contract No. 140 –
Surigao del Sur
Coal Operating Contract 140, located within the municipalities
of Cagwait and Tago in Surigao del Sur in eastern Mindanao
and covers three (3) coal blocks or approximately 3,000
hectares, was awarded by the DOE to PNOC EC on 5 July
2005. PNOC EC is committed to conduct exploration activities
within the area.
In 27 March 2012, the PNOC EC Board approved the
composition of the JV Selection Committee for the farm-out
process for PNOC EC’s COCs. While block boundary survey
and exploratory drilling were programmed for COC 141, the
latter activity could not push through owing to the fragile peace
and order situation in the project area.
Coal Operating Contract No. 141 – Isabela
Coal Exploration Project (Other Areas)
Coal Operating Contract 141, located north and adjacent
to the coal blocks of COC 122 within the municipalities of
Naguilian and Benito Soliven, Isabela and covers three (3)
blocks with project area of 3,000 hectares, was awarded by
the DOE to PNOC EC on 5 July 2005. Geologic assessment
indicated that the coal seams encountered in COC 122 may
extend into the COC 141 area. The additional coal resource in
the area can augment the reserves of COC 122.
PNOC EC requested from the DOE an extension of the COC’s
exploration term in order to fulfil its work obligations, which
was approved on 21 November 2011 for a one-year period.
On 27 November 2012, PNOC EC submitted to the DOE an
application for a moratorium effective retroactively 26 October
2011 due to force majeure situation in COC 141 brought
about by the absence of LGU’s endorsement of exploration
activities.
New Ventures
PNOC EC continues to evaluate prospective new ventures
and exploration opportunities. PNOC EC submitted bid
proposals for three (3) areas for the PECR4: Area 29 (Buug-
Malangas, Zamboanga Sibugay), Area 30A (Imelda-Malangas,
Zamboanga Sibugay) and Area 19B (Trento, Agusan del
Sur and Lingig, Surigao del Sur). Currently, the Company is
awaiting award of new Coal Operating Contracts (COCs) by
the DOE. (Update: On 15 February 2013, three (3) COCs were
awarded to PNOC EC: COC 184 – Agusan del Sur, COC 185
and COC 186 – Zamboanga Sibugay).
Other Projects
CNG Stations Project
PNOC EC is set to put-up CNG stations under the pilot phase
of the DOE’s Natural Gas for Vehicle Program for Public
Transport (NGVPPT). The project aims to initially construct
two (2) daughter stations to cater to 200 public utility buses
and eventually to provide fuel to 1,000 CNG buses. On 5 April
2011, the PNOC EC Board of Directors approved PhP400
million budget allocation for said project.
On 11 April 2012, the following Memoranda of Agreement
were signed among SC38, Pilipinas Shell Petroleum
Corporation (PSPC), PNOC EC and DOE: (1) amended
NGVPPT Mother MOA; (2) MOA for the take-over of the
Mamplasan CNG Station; and (3) MOA for the sale of CNG.
PNOC EC is set to put-up CNG daughter stations in Batangas
City and in Biñan, Laguna using Modular CNG facilities.
Malangas Power Plant
Aside from COC 122 Isabela Coal Mine-mouth Power Plant
project, PNOC EC is keen to re-enter into the power sector
with its ongoing pre-development activities for 100 MW minemouth,
coal-fired power plant in the province of Zamboanga
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Sibugay. The power plant aims to improve power generation
capacity of Mindanao.
In 2012, PNOC EC engaged The Lantau Group to evaluate
various studies related to the project.
Coal Production & Sales
For 2012, total aggregate coal production from COC 41
registered at 179.40 thousand MT coming from the ILB Mines
1 and 2, and increased production of small-scale coal miners.
However, this accounts only to 66% of the estimated actual of
270.00 thousand MT, owing to power curtailment in the area
and delays in arrival of mine materials.
On the one hand, PNOC EC’s coal marketing and trading
business continued to serve and supply the coal requirements
of its industrial and power plant customers with the coal
production from COC 41 and other local coal mine sources.
In 2012, direct sales volume is registered at 254.60 thousand
MT which is significantly lower than the 2011 sales registered
at 540.20 thousand MT. The continued decline in coal
sales can be attributed to the following: (1) majority of large
industries are already directly dealing with Semirara Mining
Corporation and other mining companies; (2) continued price
drop of imported coals making importation more attractive to
consumers; and (3) new traders in the market.
For the year, no sale was made to export market.
Oil Trading
Aside from its coal business, PNOC EC is now delivering
petroleum products to Bangladesh which is being sourced
from a private trading agent. For 2012, PNOC EC delivered
410.47 thousand MT of petroleum products to Bangladesh
Petroleum Corporation (BPC), which is slightly lower than the
2011 sales registered at 427.99 thousand MT.
For the year, the Company received USD123.14 thousand of
marketing fee from oil trading transactions.
Energy Supply Base
PNOC EC owns a private commercial port – the Energy
Supply Base (ESB) – located in Mabini, Batangas, which offers
berthing, cargo handling, storage, and warehousing facilities to
its clients.
In 2012, ESB accommodated a total of 225 local and
foreign vessels and handled 214,480 MT of local cargoes
and 206,708 MT of foreign cargoes. ESB provided a total
of 52.76 million liters of fuel to its clients in shipping and
other industries, and leased out 47,750 square meters of
warehouse, office space, pipe rack, and open yard space
to its customers. All these activities translate to a total gross
revenue of PhP2.02 billion and net income of PhP19.40 milion.
Listed below are ESB’s energy-related customers.
• Nido Petroleum
• OTTO Energy
• Galoc Production Company
• Norasian Energy
• Pearl Oil
• Philodrill
• Schlumberger Overseas SA
• Scientific Drilling International
• Regency Steel Asia
• BJ Well Services and Supply Oilfield Services
• Supply Oilfield Services
• EDC/Thermaprime
• LOMAR
Commercial clients of ESB include Montenegro Shipping Lines
Inc., SMC Shipping and Lighterage Corp., Connell Brothers,
Manuchar Philippines Inc., Atlas Fertilizer Corporation, SI
Resources, and PLDT among others.
12
P N O C - E x p l o r a t i o n C o r p o r a t i o n

Social Performance
PNOC EC puts high value on the social component of its
projects and operations. It engages the communities in
which it operates to collaborate with the stakeholders in the
planning and implementation of various social projects. Said
projects are intended to provide sustainable benefits to the
host communities and to promote partnership between the
company and the stakeholders in addressing possible issues
with the company’s operations. PNOC EC enhances its
social performances through participative engagements and
community-based social investment projects. The company’s
KAAGAPAY program has become the platform in the
implementation of PNOC EC’s corporate social responsibility
projects with its three pillars- Kaagapay sa Kalusugan,
Kaagapay sa Kabuhayan and Kaagapay sa Karunungan.
For 2012, we conducted the Kaagapay sa Kalusugan
program – medical and dental missions in the company’s
various project sites such as Batangas, Isabela, Cebu, and
Zamboanga Sibugay. With the active participation of local
government units, medical and dental associations, the
Philippine Army, and employee volunteers, we were able to
deliver a number of free services in our host communities
which included medical and dental check-ups, circumcision
and other minor surgeries. Free medicines were also
distributed during these missions. Under the Kaagapay
sa Kalusugan program, the company also conducted a
Reproductive Health (RH) Seminar with free RH Screening in
Batangas and built 15 water-sealed-type toilets in Isabela.
Through our Kaagapay sa Kabuhayan program, PNOC
EC implemented livelihood assistance projects in our host
communities which included livestock dispersal project and
gmelina tree plantation and nursery project (a contractgrowing
project) in Malangas as well as a vegetable backyard
gardening project in Isabela.
The Kaagapay sa Karunungan is our educational assistance
program for indigent members of the community by way of
scholarships and distribution of school supplies to school
children. In 2012, PNOC EC supported 42 scholars in Isabela
under this program and provided school supplies to the
various communities hosting our projects.
In 2012, PNOC EC also
distributed relief goods to
victims of the floodings
(Habagat) in Tondo, as
well as to the victims
of typhoon Pablo in
Compostella Valley and
Davao Oriental.
A n n u a l R e p o r t 2 0 1 2 13

2012 Financial Highlights
Total Equity
PNOC EC still maintains a contributed capital of PhP2.02
billion as at 31 December 2012, 99.79% of which is owned by
the Philippine National Oil Company (PNOC) and the remaining
0.21% is owned by the public stockholders.
The Company’s total equity went up by 9.8% to PhP10.41
billion in 2012 from PhP9.47 billion in 2011 due to increase in
retained earnings. Retained earnings increased to PhP8.29
billion in 2012 from PhP7.39 billion in 2011 brought about
by the current year’s net income of PhP2.93 billion which
is reduced by the cash dividends declared amounting to
PhP2.00 billion. Of the PhP8.29 billion retained earnings,
PhP6.31 billion was appropriated for capital expenditures and
various oil, gas and coal exploration projects.
Consequently, the book value per share went up to PhP5.20
in 2012 from PhP4.73 in 2011.
Total Assets
Total assets as at 31 December 2012 is PhP13.96 billion,
higher by PhP1.02 billion from December 2011 level of
PhP12.94 billion. The increase was primarily attributed to
the net income generated during the year which resulted to
higher placements in short-term investments, cash and cash
equivalents, inventories and additional investment in treasury
notes which is set to mature on 2013 and 2016. In addition,
property, plant and equipment went up due to increase in
capital expenditures.
Total Liabilities
Total liabilities inched up to PhP3.56 billion in 2012 from
PhP3.47 billion in 2011. The increase was primarily due to the
dividends payable declared on 13 December 2012.
The Company’s Debt-to-Equity ratio improved from the 2011
level of 0.37:1 to this year’s level of 0.34:1.
12,000
10,000
8,000
Equity
Total Assets
11.479 16,000
15,179
10,407
9,475 12,943
12,000
13,963
6,000
8,000
4,000
2,000
4,000
0
0
2010 2011 2012 2010 2011 2012
14
P N O C - E x p l o r a t i o n C o r p o r a t i o n

Sales Revenue Performance
PNOC EC’s sales revenue of PhP8.88 billion for the period
ending 31 December 2012 is contributed by the Company’s
major business units, 64.0% of which came from the SC
38 Malampaya Gas-to-Power Project, 12.8% from Coal
Operations, 22.8% from the Energy Supply Base and the
remaining 0.4% from rental of Rig 1. Sales revenue decreased
by 11.5% from PhP10.04 billion in 2011 to PhP8.88 billion in
2012. The decline is primarily brought about by a significant
decrease in the volume of coal sold and lower average coal
sales price.
Profitability
PNOC EC’s net income slightly went down to PhP2.93 billion
in 2012. The 2% decline from the PhP3.00 billion net income
in 2011 is mainly attributed to the decrease in the Company’s
revenue from coal operations. Total expenses for 2012
increased by 15% to PhP0.58 billion from the PhP0.50 billion
in 2011 as a result of the relinquishment of SC 43 and COC
152 and other project-related expenses.
In 2012, the net income represented 33% of total revenue,
higher than the 30% return on revenue in 2011.
12,000
Sales Revenue
3,500
Net Income
10,000
8.000
6,000
4,000
2,000
10,042 3,003
3,000
8,823 8,885
2,500 2,477
2,000
1,500
1,000
500
2,934
0
0
2010 2011 2012 2010 2011 2012
A n n u a l R e p o r t 2 0 1 2 15

Statement of Management’s Responsibility
for Financial Statements
The management of PNOC Exploration Corporation (PNOC EC) is responsible for the preparation and fair
presentation of the financial statements for the years ended December 31, 2012 & 2011, including the additional
components attached therein, in accordance with the prescribed financial reporting framework indicated therein.
This responsibility includes designing and implementing internal controls relevant to the preparation and fair
presentation of financial statements that are free from material misstatement, whether due to fraud or error,
selecting and applying appropriate accounting policies, and making accounting estimates that are reasonable in
the circumstances.
The Board of Directors reviews and approves the financial statements and submits the same to the stockholders.
The Commission on Audit (COA) – pursuant to Section 2.1, Article IX-D of the Constitution; has examined the
financial statements of the Company in accordance with the Philippine Standards on Auditing, and in its report to the
stockholders, has expressed its opinion on the fairness of presentation upon completion of such examination.
GEMILIANO C. LOPEZ, JR.
Chairman of the Board
PEDRO A. AQUINO, JR.
President and CEO
LOURDES S. GELACIO
Vice-President for Management Services
16
P N O C - E x p l o r a t i o n C o r p o r a t i o n

Republic of the Philippines
COMMISSION ON AUDIT
Commonwealth Avenue, Quezon City
Independent Auditor’s Report
The Board of Directors
PNOC Exploration Corporation
Energy Center,Fort Bonifacio
Taguig City, Metro Manila
Report on the Financial Statements
We have audited the accompanying financial statements of PNOC Exploration Corporation (a subsidiary of the Philippine National Oil Company),
which comprise of the statement of financial position as of December 31, 2012, and the statement of comprehensive income, statement of
changes in equity and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory
information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with Philippine Financial
Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with
Philippine Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures
selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether
due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair
presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the
financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements present fairly, in all material respects, the financial position of the PNOC Exploration Corporation as at
December 31, 2012, and its financial performance and its cash flows for the year then ended in accordance with Philippine Financial Reporting
Standards.
Other Matters
We draw attention to Note 35 to the financial statements which describes uncertainties related to the outcome of civil, criminal and tax cases
pending before various courts. Our opinion is not qualified in respect of this matter.
Report on the Supplementary Information Required Under Revenue Regulations 15-2010
Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary
information required by the Bureau of Internal Revenue on taxes, duties and license fees disclosed in Note 39 to the financial statements is
presented for purposes of additional analysis and is not a required part of financial statements prepared in accordance with Philippine Financial
Reporting Standards. Such supplementary information has been subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
COMMISSION ON AUDIT
By:
EDNA D. SANTOS
Director III
Team Supervisor
February 12, 2013
A n n u a l R e p o r t - 2 0 1 2 17

PNOC EXPLORATION CORPORATION
(A Subsidiary of the Philippine National Oil Company)
Statement of Financial Position
December 31, 2012
(In Philippine Peso)
Note 2012 2011
ASSETS
Current Assets
Cash and cash equivalents 6 2,087,771,074 1,847,837,574
Short-term investment 7 729,069,729 1,123,772
Trade and other receivables - net 8 954,707,679 1,371,619,338
Due from affiliates 36 5,869,170 25,127,499
Inventories 9 455,314,802 283,864,399
Prepaid expenses 10 554,285,956 534,344,626
Total Current Assets 4,787,018,409 4,063,917,208
Non-current Assets
Property, plant and equipment - net 11 8,026,898,370 7,868,590,249
Investment in treasury notes 12 280,748,805 206,549,324
Investments in joint ventures 13 92,548,507 123,481,382
Investment in PNOC Malampaya Production Corp. 14 625,000 625,000
Exploration and development costs 15 554,788,779 496,616,916
Deferred tax asset 31 167,610,598 133,245,952
Other assets 16 53,217,702 49,743,928
Total Non-current Assets 9,176,437,761 8,878,852,751
TOTAL ASSETS 13,963,456,170 12,942,769,959
LIABILITIES AND EQUITY
Current Liabilities
Trade and other payables 17 434,700,159 804,666,860
Dividends payable 18 500,501,066 -
Total Current Liabilities 935,201,225 804,666,860
Non-current Liabilities
Due to affiliates 36 14,243,302 13,201,019
Unearned revenue 19 2,427,692,446 2,476,422,213
Liability for future abandonment costs 20 88,749,949 83,053,747
Other long-term liabilities 34 90,778,709 90,746,786
Total Non-current Liabilities 2,621,464,405 2,663,423,765
3,556,665,630 3,468,090,625
EQUITY 10,406,790,540 9,474,679,334
TOTAL LIABILITIES AND EQUITY 13,963,456,170 12,942,769,959
See accompanying Notes to Financial Statements.
18
P N O C - E x p l o r a t i o n C o r p o r a t i o n

PNOC EXPLORATION CORPORATION
(A Subsidiary of the Philippine National Oil Company)
Statement of Comprehensive Income
For the year ended December 31, 2012
(In Philippine Peso)
Note 2012 2011 2010
REVENUES 24 8,885,499,919 10,042,466,282 8,822,759,519
COST OF SALES 25 (3,941,923,431) (4,981,470,489) (4,891,672,222)
GROSS PROFIT 4,943,576,488 5,060,995,793 3,931,087,297
OTHER INCOME 26 77,858,815 121,808,336 227,487,827
ADMINISTRATIVE EXPENSES 27 (579,828,920) (499,105,625) (490,893,315)
OTHER EXPENSES 28 (141,956,128) (251,091,476) (19,819,596)
FOREIGN EXCHANGE GAIN/(LOSS) 29 (44,642,251) (7,596,937) (185,000,568)
FINANCE COSTS 30 - (5,592,597) (12,288,173)
NET PROFIT BEFORE TAX 4,255,008,004 4,419,417,494 3,450,573,472
INCOME TAX EXPENSE
Current 31 (1,355,257,179) (1,430,158,344) (980,727,752)
Deferred 34,364,646 13,290,257 7,120,790
PROFIT 2,934,115,470 3,002,549,407 2,476,966,510
OTHER COMPREHENSIVE INCOME - - -
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 2,934,115,471 3,002,549,407 2,476,966,510
Basic/Diluted Earnings Per Share 32 1.47 1.50 1.24
See accompanying Notes to Financial Statements.
Statement of Changes in Equity
For the year ended December 31, 2012
(In Philippine Peso)
Share
Capital
(Note 21)
Share
Premium
(Note 21)
Treasury
Shares
(at cost)
(Note 21)
Donated
Capital
(Note 22)
Appropriated
Retained
Earnings
(Note 23)
Unappropriated
Retained
Earnings
(Note 23)
Total
Equity
Balance, January 1, 2010 2,002,253,065 22,424,950 (734,924) 89,308,406 6,200,000,000 1,690,143,914 10,003,395,411
Total Comprehensive Income 2,476,966,510 2,476,966,510
Dividends (1,001,002,132) (1,001,002,132)
Appropriation for investment projects
and capital expenditures 1,300,000,000 (1,300,000,000) -
Balance, December 31, 2010 2,002,253,065 22,424,950 (734,924) 89,308,406 7,500,000,000 1,866,108,292 11,479,359,789
Balance, January 1, 2011 2,002,253,065 22,424,950 (734,924) 89,308,406 7,500,000,000 1,866,108,292 11,479,359,789
Total Comprehensive Income 3,002,549,407 3,002,549,407
Dividends (5,007,229,862) (5,007,229,862)
Appropriation for investment projects
and capital expenditures (2,300,000,000) 2,300,000,000 -
Balance, December 31, 2011 2,002,253,065 22,424,950 (734,924) 89,308,406 5,200,000,000 2,161,427,837 9,474,679,334
Balance, January 1, 2012 2,002,253,065 22,424,950 (734,924) 89,308,406 5,200,000,000 2,161,427,837 9,474,679,334
Total Comprehensive Income 2,934,115,471 2,934,115,471
Dividends (2,002,004,265) (2,002,004,265)
Appropriation for investment projects
and capital expenditures 1,112,000,000 (1,112,000,000) -
Balance, December 31, 2012 2,002,253,065 22,424,950 (734,924) 89,308,406 6,312,000,000 1,981,539,043 10,406,790,540
See accompanying Notes to Financial Statements.
A n n u a l R e p o r t - 2 0 1 2 19

PNOC EXPLORATION CORPORATION
(A Subsidiary of the Philippine National Oil Company)
Statement of Cash Flows
For the year ended December 31, 2012
(In Philippine Peso)
Note 2012 2011 2010
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from customers 8,377,319,371 32,809,936,796 26,868,014,213
Interest income 26 64,342,139 81,314,660 68,362,668
Cash paid to suppliers, affiliates and employees (4,408,174,114) (27,830,770,632) (22,126,218,259)
Cash Generated from Operations 4,033,487,396 5,060,480,824 4,810,158,622
Interest paid - (5,592,597) (12,288,171)
Income taxes paid (1,348,496,455) (1,373,197,276) (928,399,141)
Net cash from operating activities 2,684,990,941 3,681,690,951 3,869,471,310
CASH FLOWS FROM INVESTING ACTIVITIES
Exploration and development costs (136,006,359) (65,441,689) (60,891,226)
Capital expenditures (801,185,616) (358,460,797) (459,888,973)
Net cash used in investing activities (937,191,973) (423,902,486) (520,780,199)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loan drawdowns (US$9.0 million) - (389,133,000) 398,295,000
Payment of cash dividends 23 (1,501,503,199) (5,007,229,862) (1,001,002,132)
Net cash used in financing activities (1,501,503,199) (5,396,362,862) (602,707,132)
EFFECT OF EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS (6,362,269) 504,823 (4,881,660)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 239,933,500 (2,138,069,574) 2,741,102,319
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 1,847,837,574 3,985,907,148 1,244,804,829
CASH AND CASH EQUIVALENTS AT
END OF YEAR 6 2,087,771,074 1,847,837,574 3,985,907,148
See accompanying Notes to Financial Statements.
20
P N O C - E x p l o r a t i o n C o r p o r a t i o n

PNOC EXPLORATION CORPORATION
(A Subsidiary of the Philippine National Oil Company)
Notes to Financial Statements
(In Philippine Peso)
1. GENERAL INFORMATION
PNOC Exploration Corporation (PNOC EC or the Company) was incorporated under
Philippine laws and was registered with the Securities and Exchange Commission
under Registration Certificate Number 67111 on April 20, 1976. The Company’s
common shares are listed in the Philippine Stock Exchange (PSE).
In line with PNOC’s mandate to provide and maintain an adequate supply of energy,
the Company takes the lead in energy exploration and development. It has entered
into service contracts with the Department of Energy on oil, gas, and coal exploration
projects where the Company has either 100% ownership or is in joint venture with other
partners.
PNOC EC has a wholly-owned subsidiary, the PNOC Malampaya Production
Corporation, which, as at December 31, 2012, has not yet started its operations. The
financial statements of PNOC EC are prepared separately since the Company is itself
a subsidiary of the Philippine National Oil Company (PNOC) which owns 99.79% of the
Company’s outstanding shares of stock while 0.21% is owned by the public.
The Board of Directors approved and authorized for issue the Company’s financial
statements on February 12, 2013 per Board Resolution No. 2-2, Series of 2013.
The registered office address and principal place of business of PNOC EC is at Building
1, Energy Center, Rizal Drive, Bonifacio Global City, Taguig City, Philippines.
2. STATUS OF OPERATIONS
OIL AND GAS EXPLORATION AND PRODUCTION
The Malampaya Project
PNOC EC owns a 10% stake in the upstream component of the Malampaya
Deepwater Gas-to-Power Project (SC 38), together with Shell Philippines Exploration
B.V., the Operator (45%) and Chevron (45%). Commercial gas production from
Malampaya commenced on January 1, 2002. The Malampaya Project provides the
gas fuel requirements of its three power plant customers in Batangas, namely, Sta.
Rita (1,000 MW), San Lorenzo (500 MW) and Ilijan (1,200 MW), as well as the gas
requirements of Pilipinas Shell Petroleum Corporation (PSPC) in Tabangao.
In 2012, the Project produced 139.48 billion cubic feet (BCF) of gas and 4.6 million
barrels of condensate. The condensate produced was shipped to buyers in Singapore.
During the year, the SC 38 Consortium has undertaken the procurement of long lead
items for two (2) infill wells and subsea systems for the Malampaya Phase 2 and
procurement of CALM buoy and hose replacement on top of the regular maintenance
activities. An eight-day maintenance shutdown was already conducted in June 2012.
Other Pre-operating Projects
Cagayan (SC 37)
PNOC EC holds 100% stake in the SC 37 block. Following approval of the PNOC EC
Board to drill the Mangosteen prospect in January 2012, Management continued predrilling
works for the Mangosteen-1 drilling program.
Also during the year, PNOC EC continued its farm-out efforts to share the exploration
risk in SC 37. Following the NEDA Joint Venture Guidelines, PNOC EC conducted two
bid processes for this farm-out. However, no Letter of Intent was received for the two
Invitations for Eligibility and to Bid which ended on October 29, 2012 and December
19, 2012, respectively.
Offshore Mindoro (SC 47)
PNOC EC has 97% stake in SC 47 with partners Petro Energy Resources Corporation
and Basic Energy Corporation holding 2% and 1%, respectively.
In 2012, PNOC EC conducted preparation of a prospect-focused seismic program
to mature prospects to drilling targets. PNOC EC has also explored opportunities
for a seismic group shoot with other Service Contract Operators. To allow the Joint
Venture to conduct this seismic program prior to drilling the commitment well, PNOC
EC requested the Department of Energy (DOE) to extend the Sub-Phase 2 period of
SC 47.
PNOC EC continued its effort to farm out the SC 47 to share the exploration risk.
Calamian (SC 57)
PNOC EC has 28% stake in SC 57 with partners China National Offshore Oil
Corporation (CNOOC) and Mitra Energy Limited (“Mitra Energy”) holding 51% and 21%,
respectively.
In 2012, PNOC EC continued discussions with the DOE and the Office of the President
(OP) to resolve issues on PNOC EC’s request for approval of its request for the transfer
of the participating interests in SC 57 to CNOOC and Mitra Energy. It is expected that
once the Deed of Assignment is approved, the partners will proceed and accelerate
their exploration activities in SC 57. It is also considering possible alternative programs
for the block to further evaluate previously mapped prospects.
West Calamian (SC 58)
PNOC EC has 50% participating interest in SC 58 with partner Nido Petroleum
Philippines Pty. Ltd. (“Nido Petroleum”) as the Operator. Under the farm-in agreement,
Nido Petroleum will fund the work program that includes 2D and 3D seismic surveys
and the drilling of the first well.
From January 25 to February 5, 2012, a total of 861 line km of 2D seismic data was
acquired by Seismic Searcher over two leads, namely Bikuda and Bulador. The
seismic data was processed by Fugro from March to July 2012. The Bikuda and
Bulador were matured as prospects using the newly acquired data. Bikuda was found
as an attractive alternative drilling option but still smaller in potential volume compared
to Balyena which remains the leading drilling opportunity to fulfill the Subphase 3
commitment well.
West Balabac (SC 59)
On April 16, 2010, the DOE approved the transfer of operatorship from PNOC-EC to
BHP Billiton with 25% and 75% participating interests, respectively.
The processing of the seismic data sets acquired in the previous years was completed
in 2012. In June 2012, WesternGeco completed the seismic processing of the
3,075.85 km2 3D seismic data acquired in 2010. Also, in July 26, 2012, CGG Veritas
completed the processing of the 4,686.70 km 2D seismic data acquired in 2011.
In August 2012, BHP Billiton started the interpretation of these 2D and 3D dataset
volumes. A PNOC EC representative has been involved in the interpretation from
August 20, 2012 to October 18, 2012. The seismic interpretation will continue until
2013.
East Sabina (SC 63)
PNOC EC and Nido Petroleum jointly entered into SC 63, with the former as Operator,
on November 24, 2006. Each of the company has 50% participating interests in
SC 63 and equally share the exploration costs. Effective March 13, 2012, the Joint
Venture agreed to transfer the technical operatorship to Nido Petroleum which will
be responsible to carry out the operations and activities to fulfill the drilling of the
commitment well in Subphase 2b period of the contract.
In 2012, well planning and prospect mapping on the 3D Kawayan reprocessed
data continued. The seismic interpretation of the 3D Kawayan volume delivered a
modest, high risk prospect and lead portfolio. Among the five prospects that had been
prioritized for mapping, the Apribada was ranked as the best candidate for drilling. The
Joint Venture is currently looking for a cost competitive rig and rig sharing options to
reduce the drilling cost.
The Joint Venture is also continuing its farm out efforts to spread the exploration risk.
On August 22, 2012 the Department of Energy granted the 12 month extension of
Subphase 2b requested by the Joint Venture to provide ample time for the drilling
preparation.
New Ventures
PNOC EC continues to evaluate prospective new ventures and exploration opportunities,
both here and overseas. The Company participated in the formal launching of the 4th
Philippine Energy Contracting Round (PECR) on June 30, 2011 wherein bids for two (2)
new Service Contracts were submitted.
In addition, PNOC EC completed technical evaluation of G2G’s SC 44 Cebu, SC 55
Southwest Palawan and SC 52 Nassipping.
Compressed Natural Gas (CNG) Project
PNOC EC is set to undertake the Compressed Natural Gas (CNG) for vehicle project,
which is in line with the Department of Energy’s (DOE) existing Natural Gas for
Vehicle Program for Public Transport (NGVPPT). The project aims to construct CNG
distribution infrastructure such as one (1) mother station and two (2) daughter stations
to increase the use of CNG in public utility vehicles. This project aims to provide fuel to
1,000 buses in the long-run.
In 2011, PNOC EC prepared the Terms of Reference (TOR) for the procurement of
CNG equipment package, prime mover and hauling equipment for the development
of the Batangas City CNG Daughter Station. However, in January 2012, the planned
development was deferred due to unresolved franchising issues with the Land
Transportation Franchising and Regulatory Board (LTFRB) of the Department of
Transportation and Communication (DOTC) but proposed instead to takeover only
the operations of Pilipinas Shell Petroleum Corporation’s (PSPC) CNG Station in
Mamplasan, Laguna.
In October to November 2011, PNOC EC formed a technical working group to conduct
due diligence of the Mamplasan Daughter Station in preparation for the takeover.
After conducting meetings and presentation of the due diligence report, PNOC EC
A n n u a l R e p o r t - 2 0 1 2 21

formalized the lease proposal and to proceed with the transition plan and negotiations
for the takeover of the Mamplasan CNG Station to PSPC. The first meeting with PSPC
and DOE was held on August 29, 2012 for the negotiation process but unfortunately,
PSPC was not ready to discuss the takeover of the Mamplasan CNG Station. During
this time, PNOC EC already conducted bidding for the procurement of CNG equipment
package and tractor heads to replace the existing Mamplasan CNG equipment.
Finally, PSPC issued a counter proposal for the lease to PNOC EC for the use of
Mamplasan area. However, the lease proposal was too high and would not make the
CNG pump price economical to the bus operators participating in the pilot project, thus,
PNOC EC rejected the counter proposal. The bidding process for the procurement of
CNG equipment and tractor heads were put on hold.
Eventually, the DOE, with the NGVPPT stakeholders, finalized the closure of the
Mamplasan takeover and proceeded with the modular CNG option. A modular CNG
option was also considered for the Batangas Daughter Station and was approved by
the DOE.
In December 2012, PNOC EC started the TOR preparation and soliciting budget
estimates for the modular CNG stations to be put up in Batangas and Laguna. Possible
suppliers/contractors were invited for presentation of CNG equipment technology to
the technical working group. PNOC EC also invited possible contractors for the CNG
Infrastructure for a presentation.
In line with the NGVPPT program of the DOE, PNOC EC made a presentation to
Usec. Rene K. Limcaoco of the DOTC regarding the CNG Plan 1000 study. The
DOTC then requested PNOC EC to prepare for Plan 5000 for Metro Manila. PNOC
EC subsequently held a meeting with Atty. Gloria Bañas of the DOTC to discuss and
evaluate the gas supply and infrastructure requirement for the CNG buses for: Plan
1000 (1000 CNG buses for EDSA) and Plan 5000 (5000 CNG buses for Metro Manila
in 2016).
PNOC EC’s CNG project team is evaluating the initial report on the CNG Plan 1000 and
Plan 5000 study.
COAL OPERATIONS
The Company holds four (4) coal operating contracts (COCs) with the DOE under
which it conducts activities for coal exploration or development and production of coal
resources. While currently mining coal reserves in the contract area of COC No. 41
(known as the Malangas Project Operations) within the Malangas Coal Reservation
located in Zamboanga Sibugay, PNOC EC is preparing to develop the coal reserves
located in two other coal areas in Isabela (covered by COC-141 and COC-122) in
connection with the objective of establishing a mine-mouth power plant project.
Coal Operating Contract (COC) No. 41 – Malangas Coal Project
PNOC EC operates Coal Operating Contract (COC) No. 41 within the Malangas
Coal Reservation in Zamboanga Sibugay straddling portions of the municipalities
of Malangas, Diplahan and Imelda. PNOC EC also supervises mining operations of
various small-scale coal miners.
During the year, total aggregate coal production from COC 41 registered at 179.395
thousand metric tons (MT) coming from continued development of the Integrated
Little Baguio (ILB) Mines 1 and 2, and increased production of various small-scale
coal operators. The power curtailment in the area and delays in the procurement of
mining materials caused slowdown in shaft development activities resulting to lower
production.
For the Lumbog coal mine, the driving/construction of the 50-meter long concreted
main shaft portal and 60-meter long ventilation shaft portal is already completed.
Drainage canals, access roads, electrical posts and perimeter fences are in place.
Construction of building facilities is also underway.
Coal Exploration and Development
Coal Operating Contract (COC) No. 41 – Exploration Projects (Other Areas)
In October 20, 2011, the drilling program for the Lower Butong and Sta. Barbara areas
commenced. The drilling contract, which was awarded to Construction & Drilling
Specialists, Inc., is for a total meterage of 8,100 meters of drilling and geophysical
logging. As of December 31, 2012, a total of 7,962.58 meters was drilled, 2,991.70
meter in the Lower Butong area and 4,970.88 meters in Sta. Barbara area (covering the
barangays of Little Baguio, Malongon, and Rebocon). The confirmatory drilling of the
Lower Butong area resulted in a slight increase in coal resources to 1.1 million MT.
The Lalat Coal Project is in joint venture with A Blackstone Energy Corporation
(ABEC) as the Operator. In the Lalat area, development is still on-going. The main
shaft development driving was deferred from June 2012 to September 2012 while
the structure of the coal seam is under review. The shaft driving resumed thereafter
and the total main shaft length as of October 31, 2012 is 300 meters while the
total ventilation shaft length is 291.43 meters. Major activities in the ventilation shaft
development are floor concreting and repair, re-grading and re-lagging of unstable
portions due to heavy roof pressure and deteriorated laggings.
On June 22, 2012, the DOE granted an 18-year extension of COC 41 or until August 13,
2030.
Coal Operating Contract (COC) No. 140 – Surigao Coal Exploration
During the meeting of the Board of Directors on March 27, 2012, Management’s
request to seek a joint venture partner to operate COC 140 (Surigao del Sur) was
approved. So far, only one company has expressed intention of conducting a due
diligence for the purpose of preparing a joint venture proposal in COC 140.
In December 2012, PNOC EC submitted an application to the DOE for a moratorium
since October 26, 2012 due to force majeure situation in COC 140 brought about by
the refusal of the LGUs to endorse the Company’s exploration activities.
Coal Operating Contract (COC) No. 122 – Isabela Coal Mine-mouth Power Plant
Project
In March 2012, the PNOC EC Board approved the disclosure of the benefits and
compensation package as concluded in the Land Acquisition and Resettlement Plan
(LARP) to the affected communities by the project in Cauayan City and municipality of
Benito Soliven. The disclosure activities started in April 2012 and still on-going. Parallel
to this, an intensive “house-to-house” Information, Education, and Communication
(IEC) campaign and perception survey in the impact barangays of Benito Soliven were
conducted. The survey results showed that majority of the households were in favor to
the development of the project. Subsequently, the results of the survey were presented
to the respective Barangay Councils of New Magsaysay, Dagupan and Villaluz in
support to PNOC EC’s request for their endorsement.
The endorsement of the Cauayan City Council was successfully acquired in June
2012. PNOC EC put forth premium efforts in acquiring the same in Benito Soliven by
conducting substantial Corporate Social Responsibility (CSR) activities.
In September 2012, the Board approved the award of the Transaction Advisory (TA)
contract for the selection of joint venture partner/s for the development of the coal
mine and power plant project to The Lantau Group (HK) Ltd. (Lantau). The contract
engagement of Lantau began in December 2012.
Application for the new five year work program (2013 to 2017) from the Department
of Energy (DOE) was started in March 2012. All required documentations for the new
work program were submitted to the DOE in December 2012.
Coal Operating Contract (COC) No. 141 – Isabela Coal Project
PNOC EC, accompanied by representatives of the Energy Resource Development
Bureau of the Department of Energy (DOE), held meetings with the local government
units (LGUs) of Benito Soliven and Naguilian on July 9, 23 and October 18, 2012.
Both LGUs requested PNOC EC to present the exploration work program to all
thirteen host barangays within COC 141.
PNOC EC submitted on November 27, 2012 an application to the DOE for a moratorium
effective retroactively October 26, 2011 due to force majeure situation in COC 141
brought about by the refusal of the LGUs to endorse exploration activities.
Other Local Areas under Application
The bid proposals for Area 29 (Buug-Malangas) and Area 30A (Imelda-Malangas)
were submitted to the DOE-Philippine Energy Contracting Round (PECR) Review and
Evaluation Committee on March 29, 2012, while the bid proposal for Area 19B (Trento,
Agusan del Sur & Lingig, Surigao del Sur) was submitted to the DOE on March 30,
2012. PNOC EC submitted all the required technical and financial documents for the
three areas. The DOE has yet to award the new Coal Operating Contracts.
Sibuguey Power Plant Project
After the completion of the feasibility study in 2011, PNOC EC proceeded to conduct
procurement of consultancy services for the Grid Impact Study (GIS) and Environmental
Impact Study (EIS).
On February 6 – 9, 2012, field surveys were conducted for the acquisition of additional
information on the two options for the proposed Sibuguey Power Plant site. It was
confirmed, as recommended by the feasibility study consultant, that the best site
considering environmental, technical, security and economic issues for the power plant
is in Little Baguio, municipality of Imelda.
Exploratory meetings with Governor Jalosjos, Zamsureco 1 and 2 and Zamcelco
general managers in Zamboanga Sibugay and Zamboanga del Sur, respectively, were
conducted from March 6 – 8, 2012. Draft Memoranda of Understanding (MOUs) were
presented to these electric cooperatives as the prospective market of electricity. This
was followed by a meeting with Gov. Jalosjos at the PNOC EC Head Office on March
14, 2012 wherein further details of the project were discussed.
The Terms of Reference (TOR) for the GIS and EIS were revised to encourage more
bidders to participate in the bidding. New bid invitation for the GIS and EIS were
posted on November 23 and December 12, 2012, respectively.
The development of the Sibuguey Power Plant Project is part of the activities of the
Transaction Advisor for joint venture partnering with the private sector in compliance
with the Competitive Selection process of the 2008 NEDA JV Guidelines.
Coal Trading
Aside from coal exploration and production, the Company also engages in coal trading
and marketing activities. PNOC EC continued to cater to the coal requirements of the
Small Boiler Users (SBU), local traders, the cement industry and the Naga power plant
located in Cebu, with coal production from COC No. 41 and other coal sources, both
local and foreign. It also hopes to revive its international trading to China and other
countries in the region, which started in 2009 but temporarily suspended in 2011 and
2012 due to the volatile coal market conditions.
Aside from coal sales, PNOC EC also operates coal terminals strategically located
throughout the country (Tondo Coal Terminal in Manila, Batangas Coal Terminal in
Batangas, Naga Coal Terminal in Cebu and Malangas Coal Terminal in Zamboanga
Sibugay) and offers integrated services consisting of discharging foreign and local coal
shipments, stockpiling, screening, blending and hauling of coal to various customers in
the Philippines.
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P N O C - E x p l o r a t i o n C o r p o r a t i o n

ENERGY SUPPLY BASE
Energy Supply Base (ESB) is located in Mabini, Batangas, with excellent berthing,
cargo handling, storage and warehousing facilities that continues to serve the needs of
various oil and energy-related companies. Although initially set up to cater to logistical
support needs of the energy industry, ESB’s services now extends to other commercial
clients with the granting by the Philippine Ports Authority (PPA) of a permit to operate
as a private commercial port under Certificate of Registration No. 291 on October 8,
1996. The permit is co-terminus with the 25-year foreshore lease agreement of ESB
with the Department of Environment and Natural Resources (DENR) effective May 3,
1996, which will expire on May 3, 2021. ESB is also a Customs Bonded Warehouse
which helps companies to expedite the unloading and loading of cargoes at ESB ports.
ESB has long-term lease contracts with a variety of companies including importers,
service contract holders, logistics companies and a telecoms company. ESB, as the
only energy base in the Philippines, aims to contribute to the exploration industry by
providing prompt and efficient service to the increasing needs of oil, gas and other
energy-related companies, as well as commercial clients.
3. PLANNED ADDITIONAL PUBLIC OFFERING
Last October 28, 2010, the Philippine Stock Exchange (PSE) issued Memorandum No.
2010-0505 requiring all listed companies to have at least 10% public float. The PSE
gave until November 30, 2011 for all listed companies to comply.
In March 2011, the PNOC EC Board of Directors, in compliance with PSE Memorandum
Circular No. 2010-0505, approved the public offering of the Company’s 218 million
unsubscribed shares through a follow-on offering. After consultations made with
Philippine National Oil Company (PNOC), the Parent company, and the Department
of Finance (DOF), PNOC EC commenced the process of selecting a Financial Advisor/
Underwriter for the additional public offering of its shares. Being a GOCC, PNOC EC
had to comply with the Procurement Act, or Republic Act No. 9184; thus, the process
of selecting a Financial Advisor/Underwriter was conducted through public bidding.
The bidding process started last April 14, 2011 with the publication of the Invitation
to Apply for Eligibility and to Bid. On May 10, 2011, PNOC EC received instructions
from its Parent company to stop its additional public offering project (APO Project) until
further study had been done on the matter. Hence, the PNOC EC Board of Directors
resolved to defer the APO Project. In a letter to the PSE dated July 12, 2011, PNOC EC
requested for a deferment of its compliance with the MPO Rule, citing the instructions
of PNOC. In response, the PSE maintained that it would be enforcing the MPO Rule.
In a Cabinet economic cluster meeting held on July 27, 2011 attended by
representatives of PNOC EC and PNOC, it was agreed that PNOC EC should comply
with the MPO Rule. Further, it was also resolved that the valuation and timing of
the actual public offering of PNOC EC’s shares would have to be referred to the
Privatization Council.
With the resumption of activities for the additional public offering of PNOC EC’s shares,
the Company proceeded with the bid process for a Financial Advisor /Underwriter.
On January 1, 2012, the Amended Minimum Public Ownership (MPO) Rule took
effect. Said rule provides that companies which are non-compliant with the MPO as of
December 31, 2011 may be given a grace period of twelve (12) months (but not beyond
December 31, 2012) to comply with the said MPO Rule.
Activities in 2012 and Status of Compliance with the MPO Rule
On January 11, 2012, UBS AG and Citi/ATR, the two qualified bidders for the Contract
of Financial Advisory/Underwriting Services, made oral presentations to the Additional
Public Offering Committee (APOCOM) in the presence of then DOE Secretary Jose
Rene D. Almendras who asked questions of the bidders and emphasized that
government wanted to maximize the best value for PNOC EC’s shares.
After evaluating the technical proposals of the bidders, the APOCOM members
individually scored the technical proposals. The individual and total scores were
submitted to Secretary Almendras on January 16, 2012. On the following day, January
17, 2012, the APOCOM opened the financial proposals of both bidders.
On January 24, 2012, the PNOC EC Board approved the evaluation and selection
process conducted by the APOCOM and the ranking of bidders and on May 7, 2012,
the Contract for Financial Advisory/Underwriting Services was awarded to UBS AG.
Execution of the Contract was held on the same day by representatives of PNOC EC
and UBS AG.
Thereafter, the UBS AG team commenced its due diligence process on PNOC EC and
had several meetings with the PNOC EC team (also attended by representatives of the
Department of Finance, the Commission on Audit and the Office of the Government
Corporate Counsel) in order to draft the Company’s Offering Circular.
As part of UBS AG’s commitment, it had to secure the services of a coal expert as well
as an oil and gas expert to properly value the considerable oil, gas and coal assets of
the Company, including the Company’s 10% interest in the Malampaya Deep Water
Gas to Power Project.
For this purpose, UBS AG secured the services of Engr. Rufino B. Bomasang, who is
the sole accredited coal industry expert or “Competent Person” in the country, as its
coal expert. For its oil and gas expert, UBS AG engaged the firm of Gaffney, Cline &
Associates (“Gaffney & Cline”) who will issue the reserves certification necessary for
a proper valuation of the Company’s oil and gas assets, especially the Malampaya
asset.
During the first to second week of December 2012, representatives of Gaffney & Cline,
UBS AG and PNOC EC went to Shell offices in Miri, Sarawak, Malaysia to conduct a
technical audit of Shell’s reserves data/interpretations on the Malampaya asset. Shell
Philippines Exploration, B.V. is the Operator of Service Contract 38 or the Malampaya
Project; hence, it has in its possession all the current data/interpretations/models
necessary for Gaffney & Cline to be able to submit to UBS AG a reserves certification
necessary for a proper valuation of the asset.
Given the on-going process for valuation of PNOC EC’s assets, it was unlikely that the
Company would be able to meet the December 31, 2012 deadline provided under
PSE Memorandum 2010-0505 (as amended). Hence, in a letter dated December
6, 2012, PNOC EC requested the PSE to favorably endorse PNOC EC’s request to
the Securities and Exchange Commission (SEC) for an extension of the period for
compliance with the MPO Rule.
However, in its letter dated December 17, 2012, the PSE communicated that the
SEC resolved to deny all requests for extension of the period for compliance with the
Rule. The PSE also informed PNOC EC that it would impose a trading suspension of
the Company’s shares effective January 2, 2013. The trading suspension would be
imposed for a period of six (6) months, or until June 30, 2013. If PNOC EC remained
non-complying with the MPO Rule by the end of this 6-month period, the Company
would be delisted from the Exchange effective July 1, 2013.
The process of valuing the Company’s assets is currently on-going. PNOC EC is
targeting to complete the additional public offering process within the first half of 2013
4. BASIS OF FINANCIAL STATEMENTS PREPARATION
The accompanying financial statements of the Company have been prepared in
compliance with Philippine Financial Reporting Standards (PFRSs) and the applicable
practices of the oil and gas industry not covered by the existing PFRS/PAS. PFRS
include statements named PFRS and Philippine Accounting Standards (PAS) and
interpretations issued by the Financial Reporting Standards Council (FRSC).
The financial statements of the Company have been prepared using the measurement
bases specified by PFRS for each type of asset, liability, income and expense. These
financial statements have been prepared on the historical cost basis except for
trade and other receivables, inventories, assets held for sale and property, plant and
equipment.
The measurement bases are more fully described in the accounting policies that
follow:
• trade and other receivables – at fair value, net of allowance for probable losses (refer
to Note 5d);
• inventories – parts and supplies at lower of cost or net realizable value and coal
inventories at moving average (refer to Note 5f);
• property, plant and equipment – at cost, net of accumulated depreciation, depletion
and amortization (refer to Note 5h).
The financial statements are presented in Philippine peso, which is the Company’s
functional currency. All values are rounded to the nearest peso, except when otherwise
indicated.
The accounting policies adopted are consistent with those of the previous financial
year, except for the following new and amended PFRS and Philippine Interpretations,
which became effective beginning January 1, 2012.
New standards, amendments and interpretations issued but not effective beginning
January 1, 2012 and not early adopted
A number of new or revised standards, amendment to standards and interpretations
are effective for annual periods beginning after January 1, 2012, and have not been
applied in preparing the financial statements. The Company does not plan to early
adopt these new or revised standards, amendments to standards and interpretations
and the extent of the impact has not been determined.
PAS 12, Income Taxes (Amended) – Deferred Tax: Recovery of Underlying Assets
The amendment to PAS 12 is effective for annual periods beginning on or after January 1,
2012.
PAS 12 requires an entity to measure the deferred tax relating to an asset depending
on whether the entity expects to recover the carrying amount of the asset through use
or sale. The amendment provides a practical solution to the problem of assessing
whether recovery of an asset will be through use or sale and it introduces a presumption
that recovery of the carrying amount of an asset will, normally, be through sale.
As a result of the amendments, Standing Interpretations Committee (SIC) 21 Income
Taxes – Recovery of Revalued Non-Depreciable Assets would no longer apply to
investment properties carried at fair value. The amendments also incorporate into
PAS 12 the remaining guidance previously contained in SIC-21, which is accordingly
withdrawn.
PAS 1, Financial Statement Presentation – Presentation of Items of Other Comprehensive
Income
The amendments to PAS 1 change the grouping of items presented in Other
Comprehensive Income (OCI). Items that could be reclassified (or “recycled”) to profit
or loss at a future point in time (for example, upon derecognition or settlement) would be
presented separately from items that will never be reclassified. The amendment affects
presentation only and has therefore no impact on the Company’s financial position or
performance. The amendment becomes effective for annual periods beginning on or
after July 1, 2012.
None of the other new standards, interpretations and amendments, which are effective
for periods beginning after January 1, 2012 and which have not been adopted early,
are expected to have a material effect on the Group’s future financial statements.
A n n u a l R e p o r t - 2 0 1 2 23

Effective in 2013
PFRS 10, Consolidated Financial Statements
PFRS 10 replaces the portion of PAS 27 that addresses the accounting for consolidated
financial statements. It also includes the issues raised in Standing Interpretations
Committee (SIC) 12, Consolidation – Special Purpose Entities.
PFRS 10 is applicable to annual reporting periods beginning on or after January 1,
2013. Retrospective application is generally required in accordance with PAS 8
Accounting Policies, Changes in Accounting Estimates and Errors. However, an entity
is not required to make adjustments to the accounting for its involvement with entities
that were previously consolidated and continue to be consolidated, or entities that were
previously unconsolidated and continue not to be consolidated at the date of initial
application of the PFRS.
Furthermore, an entity is not required to present the quantitative information required
by paragraph 28(f) of PAS 8 for the annual period immediately preceding the date
of initial application of the standard (the beginning of the annual reporting period for
which PFRS 10 is first applied). However, an entity may choose to present adjusted
comparative information for earlier reporting periods, any must clearly identify any
unadjusted comparative information and explain the basis on which the comparative
information has been prepared.
IFRS 10 prescribes modified accounting on its first application in the following
circumstances:
• an entity consolidates an entity not previously consolidated
• an entity no longer consolidates an entity that was previously consolidated
• in relation to certain amendments to PAS 27 made in 2008 that have been carried
forward into PFRS 10
An entity may apply PFRS 10 to an earlier accounting period, but it must disclose the
fact that is has early adopted the standard and also apply:
• PFRS 11 Joint Arrangements
• PFRS 12 Disclosure of Interests in Other Entities
• PAS 27 Separate Financial Statements (as amended in 2011)
• PAS 28 Investments in Associates and Joint Ventures (as amended in 2011).
The amendments made by Investment Entities are applicable to annual reporting
periods beginning on or after 1 January 2014. At the date of initial application of the
amendments, an entity assesses whether it is an investment entity on the basis of the
facts and circumstances that exist at that date and additional transitional provisions
apply.
PFRS 11, Joint Arrangements
PFRS 11 replaces PAS 31, Interests in Joint Ventures and SIC-13, Jointly Controlled
Entities – Non-monetary Contributions by Venturers. PFRS 11 removes the option
to account for a jointly controlled entities (JCEs) using proportionate consolidation.
Instead, JCEs that meet the definition of a joint venture must be accounted for using
the equity method. PFRS 11 is applicable to annual reporting periods beginning on or
after January1, 2013.
When PFRS 11 is first applied, an entity need only present the quantitative information
required by paragraph 28(f) of PAS 8 for the annual period immediately preceding the
first annual period for which the standard is applied.
Special transitional provisions are included for:
• transition from proportionate consolidation to the equity method for joint ventures
• transition from the equity method to accounting for assets and liabilities for joint
operations
• transition in an entity's separate financial statements for a joint operation previously
accounted for as an investment at cost.
In general terms, the special transitional adjustments are required to be applied at the
beginning of the immediately preceding period (rather than the beginning of the earliest
period presented). However, an entity may choose to present adjusted comparative
information for earlier reporting periods, and must clearly identify any unadjusted
comparative information and explain the basis on which the comparative information
has been prepared.
PFRS 12, Disclosure of Interests with Other Entities
PFRS 12 includes all of the disclosures that were previously in PAS 27 related to
consolidated financial statements, as well as all of the disclosures that were previously
included in PAS 31 and PAS 28. These disclosures relate to an entity’s interests in
subsidiaries, joint arrangements, associates and structured entities. A number of new
disclosures are also required. This standard becomes effective for annual periods
beginning on or after January 1, 2013.
The disclosure requirements of PFRS 12 need not be applied for any period presented
that begins before the annual period immediately preceding the first annual period for
which PFRS 12 is applied.
Entities are encouraged to voluntarily provide the information required by PFRS 12
prior to its adoption. Providing some of the disclosures required by PFRS 12 does not
compel an entity to comply with all of the requirements of the PFRS.
PFRS 13, Fair Value Measurement
PFRS 13 establishes a single source of guidance under PFRS for all fair value
measurements. PFRS 13 does not change when an entity is required to use fair value,
but rather provides guidance on how to measure fair value under PFRS when fair value
is required or permitted. PFRS 13 is applicable to annual reporting periods beginning
on or after January 1, 2013. An entity may apply PFRS 13 to an earlier accounting
period, but if doing so it must disclose the fact.
Application is required prospectively as of the beginning of the annual reporting period
in which the PFRS is initially applied. Comparative information need not be disclosed
for periods before initial application.
PAS 19, Employee Benefits
The Financial Reporting Standards Council (FRSC) approved in July 2011 the
adoption of amended IAS 19, Employee Benefits issued by the International
Accounting Standards Board (IASB).
Key changes to IAS 19 include:
• Removal of corridor approach
• Immediate recognition of past service costs
• Presentation of re-measurements on defined benefit plans in other comprehensive
income
• New recognition criteria on termination benefits
• Improved disclosure requirements
The amended standard comes into effect for accounting periods beginning on or after
January 1, 2013. Earlier application is permitted.
PAS 19, Employee Benefits (Amendment)
Amendments to PAS 19 range from fundamental changes such as removing the corridor
mechanism and the concept of expected returns on plan assets to simple clarifications
and rewording. The Company is currently assessing the impact of the amendment to
PAS 19. The amendment becomes effective for annual periods beginning on or after
January 1, 2013.
PAS 27, Separate Financial Statements (as amended in 2011)
PAS 27 outlines the accounting and disclosure requirements for separate financial
statements where those investments are accounted for either at cost or in accordance
with PAS 39 Financial Instruments: Recognition and Measurement or PFRS 9 Financial
Instruments. The standard also outlines the accounting requirements for dividends and
contains numerous disclosure requirements.
PAS 27 was reissued in May 2011 and applies to annual periods beginning on or
after January 1, 2013 and supersedes PAS 27 Consolidated and Separate Financial
Statements from that date.
An entity may apply PAS 27 (as amended in 2011) to an earlier accounting period, but
if doing so it must disclose the fact that it has early adopted the standard and also
apply:
• PFRS 10 Consolidated Financial Statements
• PFRS 11 Joint Arrangements
• PFRS 12 Disclosure of Interests in Other Entities
• PAS 28 Investments in Associates and Joint Ventures (as amended in 2011).
The amendments to PAS 27 (2011) made by Investment Entities are applicable to
annual reporting periods beginning on or after January 1, 2014 and special transitional
provisions apply.
PAS 28, Investment in Associates and Joint Ventures (as revised in 2011)
As a consequence of the new PFRS 11, Joint Arrangements and PFRS 12, PAS 28 has
been renamed PAS 28, Investment in Associates and Joint Ventures, and describes
the application of the equity method to investments in joint ventures in addition to
associates. The amendment becomes effective for annual periods beginning on or
after January 1, 2013.
An investment in an associate or a joint venture shall be accounted for in the entity’s
separate financial statements in accordance with PAS 27 Separate Financial Statements
(as amended in 2011).
There are no disclosures specified in PAS 28. Instead, PFRS 12 Disclosure of Interests
in Other Entities outlines the disclosures required for entities with joint control of, or
significant influence over, an investee.
PFRS 1. First-time adoption of International Financial Reporting Standards – Government
Loans
The amendments to PAS 20 Accounting for Government Grants and Disclosure
of Government Assistance were made in 2008, requiring an entity to measure
government loans with a below-market rate of interest at fair value on initial recognition.
The proposed amendment to PFRS 1 would require that first-time adopters apply
this requirement in PAS 20 prospectively to loans entered into on or after the date of
transition to PFRSs. However, if an entity obtained the information necessary to apply
the requirements to a government loan as a result of a past transaction at the time of
initially accounting for that loan, then it may choose to apply PAS 20 retrospectively to
that loan.
PFRS 7, Financial Instruments: Disclosures – Offsetting Financial Assets and Financial
Liabilities
These amendments require an entity to disclose information about rights of set-off
and related arrangements (such as collateral agreements). The new disclosures are
required for all recognized financial instruments that are set off in accordance with PAS
32. These disclosures also apply to recognized financial instruments that are subject
to an enforceable master netting arrangement or ‘similar agreement’, irrespective of
24
P N O C - E x p l o r a t i o n C o r p o r a t i o n

whether they are set-off in accordance with PAS 32. The amendments require entities
to disclose, in a tabular format unless another format is more appropriate, the following
minimum quantitative information. This is presented separately for financial assets and
financial liabilities recognized at the end of the financial reporting period:
a. The gross amounts of those recognized financial assets and recognized financial
liabilities;
b. The amounts that are set off in accordance with the criteria in PAS 32 when
determining the net amounts presented in the statement of financial position;
c. The net amounts presented in the statement of financial position;
d. The amounts subject to an enforceable master netting arrangement or similar
agreement that are not otherwise included in (b) above, including:
• Amounts related to recognized financial instruments that do not meet some or
all of the offsetting criteria in PAS 32; and
• Amounts related to financial collateral (including cash collateral); and
e. The net amount after deducting the amounts in (d) from the amounts in (c) above.
The amendments to PFRS 7 are to be retrospectively applied for annual periods
beginning on or after January 1, 2013. The amendment affects disclosures only and
has no impact on the Company’s financial position or performance.
Philippine Interpretation IFRIC 20, Stripping Costs in the Production Phase of a Surface
Mine
This interpretation applies to waste removal costs that are incurred in surface mining
activity during the production phase of the mine (“production stripping costs”) and
provides guidance on the recognition of production stripping costs as an asset and
measurement of the stripping activity asset. This standard becomes effective for
annual periods beginning on or after January 1, 2013.
Effective in 2014
PAS 32, Financial Instruments: Presentation – Offsetting Financial Assets and Financial
Liabilities
These amendments to PAS 32 clarify the meaning of “currently has a legally enforceable
right to set-off” and also clarify the application of the PAS 32 offsetting criteria to
settlement systems (such as central clearing house systems) which apply gross
settlement mechanisms that are not simultaneous. The amendment is not expected to
have any impact on the net assets of the Company. The amendments to PAS 32 are
to be retrospectively applied for annual periods beginning on or after January 1, 2014.
Effective in 2015
PFRS 9, Financial Instruments
The Financial Reporting Standards Council (FRSC) has approved in December 2011
the adoption of Amendments to IFRS 9 and IFRS 7, Mandatory Effective Date of IFRS
9 and Transition Disclosures, issued by the International Accounting Standards Board
(IASB), as Amendments to PFRS 9, Financial Instruments and PFRS 7, Financial
Instruments: Disclosures.
Mandatory Effective Date of PFRS 9 and Transition Disclosures (Amendments to PFRS
9 and PFRS 7) amended the effective date of PFRS 9 so that PFRS 9 is required to be
applied for annual periods beginning on or after January 1, 2015. Earlier application is
permitted.
The amendments also modified the relief from restating prior periods. Further, PFRS
7 was amended to require additional disclosures on transition from PAS 39, Financial
Instruments: Recognition and Measurement to PFRS 9.
PFRS 9 addresses the classification, measurement, and recognition of financial
assets and financial liabilities. PFRS 9 replaces the parts of PAS 39 that relate to
the classification and measurement of financial instruments. PFRS 9 requires financial
assets to be classified into two measurement categories: those measured as at fair
value and those measured at amortized cost. The determination is made at initial
recognition. The classification depends on the entity’s business model for managing
its financial instruments and the contractual cash flow characteristics of the instrument.
For financial liabilities, the standard retains most of the PAS 39 requirements. The
main change is that, in cases where the fair value option is taken for financial liabilities,
the part of a fair value change due to an entity’s own credit risk is recorded in other
comprehensive income rather than the profit or loss, unless this creates an accounting
mismatch.
As of December 31, 2012, the Company did not conduct an evaluation on the possible
impact of PFRS 9 in its financial statements. The Company will assess the impact of
this standard in its financial statements upon completion of all the phases of PFRS
9. The Company does not intend to adopt PFRS 9 in its December 31, 2012 annual
financial statements.
5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have been applied consistently to all periods
presented in these financial statements.
a. Revenue Recognition
Revenue is measured at the fair value of the consideration received or receivable.
Revenue is recognized when there is persuasive evidence that an arrangement exists,
delivery has occurred, title has transferred, selling price is fixed or determinable and
collectibility of the selling price is reasonably assured.
Revenue from sale of gas, condensate and oil of the Malampaya Project is
recognized upon delivery in accordance with the provisions of Gas Sales and
Purchase Agreement (GSPA) with customers and the Joint Operating Agreement
entered into by and among the SC 38 partners. Delivery of natural gas is recognized
when the gas arrives at the designated delivery points at the power plants and
meets the required quality specifications set out in the relevant GSPA.
Billings for undelivered gas are credited to deferred income and recognized as
revenue upon delivery. Under the “take-or-pay” provision of the GSPA, buyers
shall pay the full contracted volume or quantity even if there is no delivery of the
produced gas during the period. Annual reconciliation of volume actually taken
and contracted volume is made to determine the deficiency or shortfall. The SC 38
consortium is bound to deliver the deficiency volumes in the future.
Interest revenue is accrued on a time-proportion basis, by reference to the principal
outstanding and at the effective interest rate applicable.
b. 10% Interest in Service Contract 38
The Company records its 10% participating interest in the Malampaya Gas Project
under the criteria “jointly controlled assets”. Under this criteria, the Company
recognizes in its separate financial statements its share of the jointly controlled
assets, classified according to the nature of the assets rather than as investment;
any liabilities that it has incurred; its share of any liabilities incurred jointly with
other venturers in relation to the joint venture; any income from sale or use of its
share of the output of the joint venture, together with its share of any expenses
incurred by the joint venture; and any expenses that it has incurred in respect of
its interest in the joint venture.
Estimated abandonment and site restoration cost is provided using the accrued
liability method and computed based on units of production and estimated proved
reserves.
c. Cash and Cash Equivalents
Cash includes cash on hand and in banks. Cash equivalents are short-term
money market placements that are readily convertible to known amounts of cash
with original maturities of three months or less from dates of acquisition and that
are subject to insignificant risk of change in value.
d. Trade and Other Receivables
Trade and other receivables are stated at fair value, net of allowance for probable
losses. The allowance is established by charges to income.
e. Allowance for Probable Losses
Allowances for probable losses, estimated by the Company’s management based
on prior experience and their assessment of current economic environment, are
provided at the following approved rates applied to the period the receivable is
outstanding:
Over 120 days ………………. 15%
Over 1-2 years ………………. 35%
Over 2-3 years ………………. 75%
Over 3 years ………………. 100%
The receivables of the SC 38 Malampaya Project are not provided with allowance
for probable losses. This is in view of the Project being in operation as a
specialized industry where both the SC 38 Project Consortium and its customers
strictly adhere to their reciprocal obligations. Moreover, the Project’s GSPA, as
well as the related contracts, provides reasonable assurance to the SC 38 Project
Consortium for the appropriate collection of its accounts receivable.
f. Financial Instruments
Financial instruments are recognized in the statement of financial position when
the Company becomes a party to the contractual provisions of the instrument. All
regular way purchases and sales of financial assets are recognized on the trade
date, which is the date that the Company commits to purchase or sell the asset.
Regular way purchases or sales are purchases or sales of financial assets that
require delivery of assets within the period generally established by regulation or
convention in the marketplace.
Financial instruments are recognized initially at fair value. Except for financial
instruments valued at fair value through profit or loss (FVPL), the initial measurement
includes transaction costs. The Company classifies its financial assets into the
following categories: financial assets at FVPL, held-to-maturity (HTM) investments,
available for sale (AFS) investments, and loans and receivables. For financial
liabilities, the Company classifies them into financial liabilities at FVPL and other
financial liabilities. The classification depends on the purpose for which the
investments were acquired and whether they are quoted in an active market.
Management determines the classification of its investments at initial recognition
and, where allowed and appropriate, reevaluates such designation at every
reporting date.
Financial instruments are classified as liabilities or equity in accordance with the
substance of the contractual arrangement. Interest, dividends, gains and losses
relating to a financial instrument or a component that is a financial liability, are
reported as expense or income. Distributions to holders of financial instruments
classified as equity are charged directly to equity, net of any related income tax
benefit.
Offsetting Financial Instruments
Financial assets and financial liabilities are offset with the net amount reported in
the statement of financial position if, and only if, there is a currently enforceable
legal right to offset the recognized amounts and there is an intention to settle on
a net basis, or to realize the asset and settle the liability simultaneously. This is
not generally the case with master netting agreements, and the related assets and
liabilities are presented at gross in the statement of financial position.
A n n u a l R e p o r t - 2 0 1 2 25

Fair Value of Financial Instruments
The fair value of financial instruments traded in active markets at reporting date is
based on their quoted market price or dealer price quotations (bid price for long
positions and ask price for short positions), without deduction for transaction costs.
When current bid and ask prices are not available, the price of the most recent
transaction provides evidence of the current fair value as long as there has not been
a significant change in economic circumstances since the time of the transaction.
For all other financial instruments not traded in an active market, the fair value is
determined by using appropriate valuation techniques. Valuation techniques
include net present value techniques, comparison to similar instruments for which
observable market prices exist, and other relevant valuation models.
HTM Investments
Quoted non-derivative financial assets with fixed or determinable payments and
fixed maturities are classified as HTM investment when the Company has the
positive intention and ability to hold to maturity. If the Company were to sell more
than an insignificant amount of HTM investments, the entire category would be
tainted and would have to be reclassified as AFS investments. Furthermore, the
Company would be prohibited to classify any financial assets as HTM investments
for the following two years.
After initial measurement, HTM investments are measured at amortized cost
using the effective interest method. Amortized cost is calculated by taking into
account any discount or premium on acquisition and fees that are integral parts
of the effective interest rate. Gains and losses are recognized in the profit or loss
when the HTM investments are derecognized or impaired, as well as through the
amortization process.
Loans and Receivables
Loans and receivables are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market. They arise when the Company
provides money, goods or services directly to a debtor with no intention of trading
the receivables. They are included in current assets, except for maturities greater
than 12 months after the balance sheet date which are classified as non-current
assets.
Loans and receivables are subsequently measured at amortized cost using the
effective interest method, less any impairment losses. Any change in their value
is recognized in profit or loss. Impairment loss is provided when there is objective
evidence that the Company will not be able to collect all amounts due to it in
accordance with the original terms of the receivables. The amount of the impairment
loss is determined as the difference between the assets’ carrying amount and the
present value of estimated cash flows. The Company’s loans and receivables are
presented as Trade and Other Receivables in the balance sheet.
Trade receivables are stated at net realizable value as reduced by appropriate
allowances for doubtful accounts. The allowance for doubtful accounts is
established when there is a basis to doubt the collectibility of the receivables.
The Company provided allowance for those accounts specifically identified to be
potentially uncollectible and other accounts based on aging schedule of outstanding
receivables at 60% for accounts 2, 3, and 4 years and 100% for those over 5 years.
The adequacy of the allowance for doubtful accounts is reviewed yearly.
Financial assets categorized as loans and receivables include cash and cash
equivalents, trade and other receivables, and advances to related parties. Cash and
cash equivalents are cash on hand, demand deposits and short-term, highly liquid
investments readily convertible to known amounts of cash and which are subject to
insignificant risk of changes in value.
AFS Investments
This includes non-derivative financial assets that are either designated to this
category or do not qualify for inclusion in any of the other categories of financial
assets. They are included in non-current assets under the Financial Assets account
in the balance sheet unless management intends to dispose of the investment
within 12 months from the balance sheet date. All financial assets within this
category are subsequently measured at fair value, unless otherwise disclosed,
with changes in value recognized in equity, net of any effects arising from income
taxes. Gains and losses arising from securities classified as available-for-sale are
recognized in the income statement when they are sold or when the investment
is impaired. In the case of impairment, the cumulative loss previously recognized
directly in equity is transferred to the income statement. If circumstances change,
impairment losses on available-for-sale equity instruments are not reversed through
the income statement. On the other hand, if in a subsequent period the fair value of
a debt instrument classified as available-for-sale increases and the increase can be
objectively related to an event occurring after the impairment loss was recognized
in the income statement, the impairment loss is reversed through the profit or loss.
Other Financial Liabilities
Other financial liabilities, which include loans payable, trade and other payables,
due to related parties and long-term debt are initially recognized at fair value of
the consideration received less directly attributable transaction costs. After initial
recognition, other financial liabilities are subsequently measured at amortized cost
using the effective interest method.
Amortized cost is calculated by taking into account any related issue costs, discount
or premium. Gains and losses are recognized in the profit or loss when the liabilities
are derecognized, as well as through the amortization process.
Impairment of Financial Assets
The Company assesses at each reporting date whether a financial asset or group
of financial assets is impaired. A financial asset or a group of financial assets is
deemed to be impaired, if and only if, there is objective evidence of impairment
as a result of one or more events that occurred after the initial recognition of the
asset (an incurred loss event) and that loss event has an impact on the estimated
future cash flows of the financial asset or a group of financial assets that can be
reliably estimated. Objective evidence of impairment may include indications that
the borrower or a group of borrowers is experiencing significant financial difficulty,
default or delinquency in interest or principal payments, the probability that they
will enter bankruptcy or other financial reorganization and where observable data
indicate that there is measurable decrease in the estimated future cash flows, such
as changes in arrears or economic conditions that correlate with defaults.
Assets Carried at Amortized Cost
For assets carried at amortized cost, the Company first assesses whether an
objective evidence of impairment exists individually for financial assets that are
individually significant, or collectively for financial assets that are not individually
significant. If the Company determines that no objective evidence of impairment
exists for individually assessed financial asset, whether significant or not, it includes
the asset in a group of financial assets with similar credit risk characteristics and
collectively assesses for impairment. Those characteristics are relevant to the
estimation of future cash flows for groups of such assets by being indicative of the
debtors’ ability to pay all amounts due according to the contractual terms of the
assets being evaluated. Assets that are individually assessed for impairment and
for which an impairment loss is, or continues to be, recognized are not included in
a collective assessment for impairment.
If there is an objective evidence that an impairment loss has been incurred, the
amount of loss is measured as the difference between the asset’s carrying value and
the present value of the estimated future cash flows (excluding future credit losses
that have not been incurred) discounted at the financial assets’ original effective
interest rate which is the effective interest rate computed at initial recognition. The
carrying value of the asset is reduced through the use of an allowance account
and the amount of loss is charged to profit or loss. If in case the receivable has
proven to have no realistic prospect of future recovery, any allowance provided for
such receivable is written off against the carrying value of the impaired receivable.
If, in a subsequent year, the amount of the estimated impairment loss decreases
because of an event occurring after the impairment was recognized, the previously
recognized impairment loss is reduced by adjusting the allowance account. Any
subsequent reversal of an impairment loss is recognized in profit or loss, to the
extent that the carrying value of the asset does not exceed its amortized cost at
reversal date.
AFS Investments
For AFS Investments, the Company assesses at each reporting date whether there
is objective evidence that a financial asset or group of financial assets is impaired.
In the case of equity investments classified as AFS, impairment indicators would
include a significant or prolonged decline in the fair value of the investments below
its cost. Where there is evidence of impairment, the cumulative loss, measured
as the difference between the acquisition cost and the current fair value, less any
impairment loss on that financial asset previously recognized in the profit or loss,
is removed from equity and recognized in the profit or loss. Impairment losses on
equity investments are not reversed through the profit or loss. Increases in fair
value after impairment are recognized directly in the profit or loss.
In the case of debt instruments classified as AFS, impairment is assessed based
on the same criteria as financial assets carried at amortized cost. Future interest
income is based on the reduced carrying amount and is accrued based on the
rate of interest used to discount future cash flows for the purpose of measuring
impairment loss. Such accrual is recorded as part of “Interest income” in the profit
or loss. If, in a subsequent year, the fair value of a debt instrument increases and
that increase can be objectively related to an event occurring after the impairment
loss was recognized in the profit or loss, the impairment loss is reversed through the
profit or loss.
AFS Investments Carried at Cost
If there is objective evidence that an impairment loss has been incurred on an
unquoted equity instrument that is not carried at fair value because its fair value
cannot be reliably measured, or on a derivative asset that is linked to and must be
settled by delivery of such unquoted equity instrument, the amount of the loss is
measured as the difference between the asset’s carrying amount and the present
value of estimated future cash flows discounted at the current market rate of return
for a similar financial asset. The carrying amount of the asset is reduced through
the use of an allowance account.
Derecognition of Financial Assets and Liabilities
Financial Asset
A financial asset (or where applicable, a part of a financial asset or part of a group
of similar financial assets) is derecognized when:
a. the right to receive cash flows from the asset has expired
b. the Company retains the right to receive cash flows from the asset, but has
assumed as obligation to them in full without material delay to a third party under
a “pass through” arrangement; or
c. the Company has transferred its right to receive cash flows from the asset and
either (a) has transferred substantially all the risks and rewards of the asset, or
(b) has neither transferred nor retained substantially all the risks and rewards of
the asset but has transferred the control of the asset.
26
P N O C - E x p l o r a t i o n C o r p o r a t i o n

When the Company has transferred its rights to receive cash flows from an asset
or has entered into a “pass-through” arrangement, and has neither transferred nor
retained substantially all the risks and rewards of the asset nor transferred control
of the asset, the asset is recognized to the extent of the Company’s continuing
involvement in the asset. Continuing involvement that takes the form of a guarantee
over the transferred asset is measured at the lower of original carrying amount of
the asset and the maximum amount of consideration that the Company could be
required to repay.
Financial Liabilities
A financial liability is derecognized when the obligation under the liability is
discharged, cancelled or expires. When an existing financial liability is replaced by
another from the same lender on substantially different terms, or the terms of an
existing liability are substantially modified, such exchange or modification is treated
as a derecognition of the original liability and the recognition of a new liability, and
the difference in the respective carrying amounts is recognized in the profit or loss.
g. Inventories
Parts and supplies are stated at the lower of cost or net realizable value while coal
inventories are measured using the moving average method of inventory costing.
Cost includes invoice amount, net of trade and cash discounts. Cost is calculated
using the moving average method. Net realizable value represents the estimated
selling price less all estimated costs to sell. The condensate inventory is valued at
prevailing market price.
h. Assets Held for Sale
Assets classified as held for sale are measured at the lower of the carrying amount
and the fair value less costs to sell.
Assets are classified as held for sale if their carrying amount will be recovered
through a sale transaction rather than through continuing use. This condition
is regarded as met only when the sale is probable and the asset is available for
immediate sale in its present condition. Management must be committed to the
sale that should be expected to qualify for recognition as a completed sale within
one year from the date of classification.
i. Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated depreciation,
depletion and amortization and any impairment in value.
The initial cost of property and equipment consists of its purchase price and costs
directly attributable to bringing the asset to its working condition and location for its
intended use. Subsequent expenditures relating to an item of property, plant and
equipment that have already been recognized are added to the carrying amount
of the asset when it is probable that future economic benefits in excess of the
originally assessed standard of performance of the existing asset will flow to the
Company. All other expenses relating to an item of property, plant and equipment
that is described as ‘repairs and maintenance’ are charged to profit or loss in the
period these are incurred.
Depreciation for non-SC 38 assets is computed on a straight-line method over the
estimated useful lives of the assets ranging from 5 to 20 years.
The cost of SC 38 project-related wells, platform and other facilities includes
acquisition costs and capitalized exploration and development costs. The carrying
values are reviewed for impairment when events or changes in circumstances
indicate that the carrying value may not be recoverable. If any such indication
exists and where the carrying values exceed the estimated recoverable amount,
the assets or cash-generating units are written down to their estimated recoverable
amount.
Depreciation, depletion and amortization (DD&A) of wells, platform and other facilities
are computed using the unit-of-production method based on the estimated proved
reserves. Depreciation of other SC 38 Project-related facilities and equipment are
computed using the straight-line method based on the estimated useful life of 21
years.
Gain or loss arising from the disposal or retirement of an asset is determined by
computing the difference between the sales proceeds and the carrying amount of
the asset and is recognized as income or expense for the period.
Construction in progress is stated at cost and is not depreciated until such time that
the assets are completed and/or put into operational use.
j. Exploration and Development Costs
PNOC EC adopts the successful efforts method of accounting for its oil and gas
operations. All exploration costs, except the cost of exploratory wells, are charged
to expense as incurred. Costs of exploratory wells (including stratigraphic test wells)
are initially capitalized and deferred pending the outcome of the drilling operation. If
proved reserves are discovered, the associated costs are capitalized and amortized
as the related proved developed reserves are produced. However, if the exploratory
well or stratigraphic test well proves to be dry, the accumulated drilling costs are
charged to expense.
Development costs, which include the costs of drilling development wells, are
capitalized regardless of whether or not proved reserves are found, while production
costs are expensed as incurred.
Capitalized cost is amortized using the “unit-of-production method” whereby
property acquisition costs (net of accumulated DD&A) are amortized over the
estimated proved reserves.
For coal exploration and other projects, the Company uses the full-cost method
of accounting. Under this method, all costs directly incurred in the acquisition,
exploration and development of a project area, including directly-related overhead
costs, are capitalized. All exploration cost, likewise, are tentatively deferred pending
determination on whether the area contains coal reserves of commercial quantity.
When coal reserves of commercial quantity is proved, cost is amortized over proved
reserves using the unit-of-production method.
k. Impairment of Assets
The carrying values of long-lived assets are reviewed for impairment when events or
changes in circumstances indicate that the carrying values may not be recoverable.
If any such indication exists and where the carrying values exceed the estimated
recoverable amounts, the assets or cash-generating units are written down to their
recoverable amounts. Recoverable amount is the greater of net selling price and
value in use. The net selling price is the amount obtainable from the sale of an
asset in an arm’s-length transaction. In assessing value in use, the estimated future
cash flows are discounted to their present value using pre-tax discount rate that
reflects current market assessment of the time value of money and the risks specific
to the asset. For an asset that does not generate independent cash inflows, the
recoverable amount is determined for the cash-generating unit to which the asset
belongs. Impairment losses are recognized in the profit or loss. If at reporting
date there is an indication that an impairment loss may have decreased, reversal
of an impairment loss is recognized as income in the profit or loss. The increased
carrying amount due to reversal should not be more than what the depreciated
historical cost would have been if the impairment had not been recognized.
l. Investment in Joint Ventures
A joint venture is a contractual arrangement whereby the group and other parties
undertake an economic activity that is subject to joint control.
Where a group of companies undertakes its activities under joint venture
arrangements directly, the group’s share of jointly-controlled assets and any liabilities
incurred jointly with other venturers are recognized in the financial statements of the
venturers and classified according to their nature.
Liabilities and expenses incurred directly in respect of interests in jointly-controlled
assets are accounted for on an accrual basis. Income from the sale or use of
the group’s share of the output of jointly-controlled assets, and its share of joint
venture expenses, are recognized when it is probable that the economic benefits
associated with the transactions will flow to/from the group and their amount can
be measured reliably.
The Company reports its 10% interest in SC 38 using joint venture proportionate
consolidation. The Company’s share of the assets, liabilities, income and expenses
are combined with the equivalent items in the Company’s financial statements on a
line-by-line basis.
Investments in joint venture include accumulated intangible costs directly attributable
to exploration and development activities such as the expenses incurred to acquire
the legal right to explore, and the costs of exploratory drilling and testing. In
accordance with the successful-efforts method of accounting, non-drilling costs
and other pre-operating expenses such as corporate overhead, except those
expenses which are directly related to exploratory drilling activities, are expensed as
incurred.
m. Trade and Other Payables
Trade and other payables are stated at their nominal values.
n. Retirement Benefit Plan
Retirement benefits are provided to all regular full-time employees through a defined
benefit plan.
A defined benefit plan is a retirement plan that defines an amount of retirement
benefit than an employee will receive on retirement, usually dependent on one or
more factors such as age, years of service and salary. The legal obligation for any
benefits from this kind of retirement plan remains with the Company, even if plan
assets for funding the defined benefit plan have been acquired. The retirement plan
is tax exempt, funded, noncontributory and administered by a trustee.
The cost of providing benefits under the defined benefit plan is determined using the
projected unit credit method. Actuarial gains and losses are recognized as income
or expense when the net cumulative unrecognized actuarial gains and losses at the
end of the previous reporting period exceeded 10% of the higher of the defined
benefit obligations and the fair value of plan assets at that date. These gains or
losses are recognized over the expected average remaining working lives of the
employees participating in the plan.
Past service cost is recognized as an expense on a straight-line basis over the
average period until the benefits become vested. If the benefits are already vested
immediately following the introduction of, or changes to, the retirement plan,
past service cost is recognized immediately. The defined benefit asset or liability
recognized in the statement of financial position comprises the present value of
the defined benefit obligation less past service cost not yet recognized and less
the fair value of plan assets out of which the obligations are to be settled directly.
The value of any asset is restricted to the sum of any past service cost not yet
recognized and the present value of any economic benefits available in the form
of refunds from the plan or reductions in the future contributions to the plan.
The determination of the Company’s obligation and cost of retirement and other
retirement benefits is dependent on the selection of certain assumptions used by
actuaries in calculating such amounts. Those assumptions are described in Note
37 and include, among others, discount rates, expected return on plan assets and
A n n u a l R e p o r t - 2 0 1 2 27

salary increase rate. In accordance with IAS 19, actual results that differ from the
assumptions are accumulated and amortized over future periods and, therefore,
generally affect the recognized expense and recorded obligation in such future
periods.
The Company normally makes an actuarial valuation every two (2) years to check
the recommended funding scheme and to adjust contributions due to deviations
from the actuarial assumptions arising from the investment yield, mortality gains and
losses, employee turnover, and benefit forfeitures.
o. Foreign Currency Transactions
The Company converts into local currency its foreign currency-denominated
transactions using, whenever appropriately applicable, the average and actual
foreign exchange rate prevailing during the month and date of transaction,
respectively. Monetary assets and liabilities that are denominated in foreign
currencies are restated using the closing exchange rate at reporting date. The
Company’s foreign currency denominated assets and liabilities were restated based
on prevailing exchange rate of US$1.00:P41.192 in 2012 and US$1.00:P43.928
in 2011. Non-monetary assets and liabilities are translated at historical exchange
rates. Foreign exchange gains and losses arising from foreign currency fluctuations
are recognized in profit or loss for the period.
p. Income Taxes
The income tax expense represents the sum of the tax currently payable and
deferred.
The tax currently payable is based on the taxable profit for the year. Taxable profit
differs from net profit as reported in the statement of comprehensive income
because of items of income or expense that are taxable or deductible in other years
and items that are neither taxable or deductible. The Company’s liability for current
tax is calculated using the tax rates and tax laws applicable to the periods to which
it relates.
Deferred income tax is accounted for using the balance sheet liability method on
all temporary differences at the end of the reporting period between the tax bases
of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax assets and liabilities are recognized for the future tax consequences
attributable to: (a) temporary differences between the financial reporting bases of
assets and liabilities and their related tax bases; (b) net operating loss carryover, or
NOLCO; and (c) the carryforward benefit of the excess of the minimum corporate
income tax, or MCIT, over the regular corporate income tax. Deferred tax assets
and liabilities are measured using the tax rates applicable in the years in which those
temporary differences are expected to be recovered or settled and NOLCO are
expected to be applied provided such tax rates have been enacted or substantially
enacted at the end of the reporting period.
The carrying amount of deferred tax assets is reviewed at each reporting date and
reduced to the extent that it is no longer probable that sufficient taxable profits will
be available to allow all or part of the asset to be recovered.
Deferred income tax assets and liabilities are offset when there is a legally enforceable
right to offset current tax assets against current tax liabilities and when they relate
to income taxes levied by the same taxation authority on either the taxable entity
or different taxable entities where there is an intention to settle the balances on net
basis.
Current and deferred taxes are recognized as an expense or income in profit or
loss, except to the extent that it relates to items recognized in other comprehensive
income or directly in equity. In this case the tax is also recognized in other
comprehensive income or directly in equity, respectively.
q. Contingencies
Contingent liabilities are not recognized in the financial statements. They are
disclosed unless the possibility of an outflow of resources embodying economic
benefit is remote. Contingent assets are not recognized in the financial statements
but disclosed when an inflow of economic benefits is probable.
r. Subsequent Events
Post-year-end events that provide further evidence of existing conditions affecting
Company’s financial position at reporting date (adjusting events) are reflected in
the financial statements. Post-year-end events that are indicative of conditions
that arose subsequent to reporting date are disclosed in the notes to the financial
statements when material.
s. Use of Estimates
The preparation of financial statements in conformity with Philippine Financial
Reporting Standards (PFRS) requires management to make judgments, estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. The estimates and assumptions used in the accompanying
financial statements are based upon management’s evaluation of relevant facts and
circumstances as of the date of the financial statements. Actual results could differ
from such estimates.
t. Earnings Per Share
Earnings per share is computed based on the net profit for the year divided by
the weighted average number of outstanding shares during the year. There are
no dilutive potential common shares outstanding that would require disclosure of
diluted earnings per share in the statement of comprehensive income.
t. Segment Reporting
For purposes of financial reporting, PNOC EC’s reportable segments are: SC 38
Malampaya Project, Coal Trading and Integrated Services, and all other segments.
Financial information on the Company’s reportable segments is presented in Note 38.
6. CASH AND CASH EQUIVALENTS
This account consists of the following:
2012 2011 2010
Cash on hand and in banks 724,259,626 360,234,804 768,414,579
Cash equivalents 1,363,511,448 1,487,602,770 3,217,492,569
2,087,771,074 1,847,837,574 3,985,907,148
Cash in banks earn interest at the respective bank deposit rates. PNOC EC’s
depository banks include the Land Bank of the Philippines (LBP), Development Bank
of the Philippines (DBP), United Coconut Planters Bank (UCPB) and Philippine National
Bank (PNB).
Cash equivalents consist of money market placements or short-term time deposits,
which are made for varying periods of up to three months depending on the immediate
cash requirements of the Company and earn interest at the prevailing short-term
deposit rates.
Interest income earned from cash in banks amounted to P6.76 million and P3.25
million in 2012 and 2011, respectively. On the other hand, interest income earned from
money market placements amounted to P38.95 million and P74.83 million in 2012 and
2011, respectively.
Cash amounting to P43.35 million is restricted as a trust fund to serve as a Directors’
and Officers’ Liability Insurance. The fund will be used to defray costs that may arise
in case any of the Company’s directors and officers gets involved in legal disputes as a
result of their official acts. Said trust fund is included under Note 16.
7. SHORT-TERM INVESTMENT
Short-term investment with Land Bank of the Philippines for 2012 amounting
to P729.07 million pertains to the US$3.0 million dollar placement at 1.70%
maturing on March 11, 2013 and various peso placements at varying interest rates
amounting to P606.22 million maturing up to July 2, 2013 while the 2011 balance
amounting to P1.12 million pertains to placement in Investment Management
Account (IMA) at 2.45% maturing on July 12, 2012.
8. TRADE AND OTHER RECEIVABLES
This account consists of the following:
2012 2011
Trade Receivables:
Gas and Oil Production 650,256,205 651,111,648
Coal Operation 141,233,149 394,846,623
Energy Supply Base 227,446,195 379,466,701
Head Office 12,187,557 18,395,836
1,031,123,106 1,443,820,808
Allowance for probable losses (109,550,057) (101,966,898)
921,573,049 1,341,853,910
Non-Trade Receivables: 33,618,350 30,036,383
Allowance for probable losses (483,720) (270,955)
33,134,630 29,765,428
954,707,679 1,371,619,338
Trade receivables on SC 38 Malampaya Project consist mainly of the Company’s
10% share in the SC 38 Consortium’s receivables on gas and condensate sales
in the amount of P649.29 million and share in aggregate other receivables in the
amount of P0.97 million.
Non-trade accounts receivable consist of the Company’s 10% share in the non-trade
receivables of the SC 38 Consortium and claims from employees, officers and others.
The net increase in allowance for probable losses on trade receivables in the amount
of P7.58 million was due to the significant defaults in payment of Coal and ESB
customers, changes in customer payment terms and high probability that the amount
due will not be received in full.
The allowance for probable losses for trade and non-trade receivables is established
based on a regular review of the age and status of accounts relative to historical
collections, changes in payment terms and other factors that may affect collectability.
The roll-forward analysis of allowance for probable losses for trade and non-trade
receivables is presented as follows:
28
P N O C - E x p l o r a t i o n C o r p o r a t i o n

December 31, 2012 Trade
Nontrade
Total
Balance at beginning of year 101,966,898 270,955 102,237,853
Write-off of uncollectible accounts - - -
Provision for probable losses 7,583,159 212,765 7,795,924
Recoveries - - -
Balance at end of year 109,550,057 483,720 110,033,777
December 31, 2011 Trade
Nontrade
Total
Balance at beginning of year 75,549,152 1,638,033 77,187,185
Write-off of uncollectible accounts - - -
Provision for probable losses 26,417,746 - 26,417,746
Recoveries - (1,367,078) (1,367,078)
Balance at end of year 101,966,898 270,955 102,237,853
9. INVENTORIES
This account consists of the following:
2012 2011
Coal 362,480,697 197,681,121
Condensate 8,287,731 6,985,471
Fuel and Lubricants 7,296,830 4,973,141
Parts and Supplies 82,050,891 79,026,013
460,116,148 288,665,746
Allowance for obsolescence (4,801,347) (4,801,347)
455,314,802 283,864,399
Condensate inventory pertains to the Company’s 10% share in the undelivered stock of
SC 38 Malampaya Project stored in its offshore Concrete Gravity Structure in offshore
Palawan with a volume of 1,843.57 bbls. On the other hand, coal inventory represents
the undelivered stock of the Company in its various Coal Terminals with a total volume
of 117,629.877metric tons.
Parts and supplies inventories pertain substantially to the 10% share of the Company
in the aggregate parts and supplies inventory of SC 38 Consortium valued at P82.05
million in 2012 and P79.03 million in 2011.
10. PREPAID EXPENSES
This account consists of the following:
2012 2011
Prepaid income tax 201,414,844 303,098,200
Taxes withheld by customers 167,740,335 145,264,371
Other prepaid expenses 185,130,777 85,982,055
554,285,956 534,344,626
Prepaid income tax pertains to the Company’s 10% share in the tax component of the
unearned revenue on the undelivered gas of the “take or pay” deficiency per GSPA with
customers of the SC 38 Malampaya Project.
Other prepaid expenses consist mainly of prepaid insurance, input VAT, the Company
share in the aggregate prepaid assets of the SC 38 consortium, and the excess cash
call payments to Shell Philippines Exploration B.V. for the Company’s share in the
operational expenditures of SC 38.
11. PROPERTY, PLANT AND EQUIPMENT
This account consists of the following:
General
plant
facilities
Drilling
equipment
Wells
and
related
facilities
Marine
equipment
and
facilities
Furniture,
fixtures
and
equipment
Transportation
equipment
Scientific
equipment
Wells,
platform
and other
facilities
Other
property
and
equipment
Construction
In
Progress
Total
COST
January 1, 2012 243,611,235 89,250,000 121,216,560 56,265,025 156,946,806 31,915,740 34,718,990 12,205,288,590 38,103,169 23,026,897 13,000,343,012
Additions 99,634,108 - - 13,223,607 12,262,847 4 726,249 590,030,811 - 16,216,769 732,094,394
Reclassifications -
Disposals (47,779) - - - (4,884) - (1) - - - (52,664)
December 31, 2012 343,197,564 89,250,000 121,216,560 69,488,632 169,204,769 31,915,744 35,445,238 12,795,319,401 38,103,169 39,243,665 13,732,384,742
ACCUMULATED DEPRECIATION
January 1, 2012 (157,134,399) (89,249,999) (97,649,400) (31,357,652) (93,519,050) (25,560,957) (10,481,322) (4,613,984,862) (12,815,122) - (5,131,752,763)
Provision (15,954,584) - - (1,760,563) (22,214,102) (3,551,577) (1,917,284) (526,547,704) (1,814,436) - (573,760,251)
Reclassifications -
Disposals 23,092 - - - 3,549 - - - - - 26,641
December 31, 2012 (173,065,891) (89,249,999) (97,649,400) (33,118,215) (115,729,603) (29,112,534) (12,398,606) (5,140,532,566) (14,629,558) - (5,705,486,372)
NET CARRYING AMOUNT
December 31, 2012 170,131,673 1 23,567,160 36,370,417 53,475,166 2,803,210 23,046,632 7,654,786,835 23,473,611 39,243,665 8,026,898,370
December 31, 2011 86,476,836 1 23,567,160 24,907,373 63,427,757 6,354,784 24,237,668 7,591,303,728 25,288,048 23,026,897 7,868,590,248
General
plant
facilities
Drilling
equipment
Wells
and
related
facilities
Marine
equipment
and
facilities
Furniture,
fixtures
and
equipment
Transportation
equipment
Scientific
equipment
Wells,
platform
and other
facilities
Other
property
and
equipment
Construction
In
Progress
Total
COST
January 1, 2011 226,169,228 89,250,000 121,216,560 52,235,748 136,218,908 32,514,153 27,843,449 11,917,556,657 38,103,169 26,801,461 12,667,909,333
Additions 20,282,413 - - 4,029,277 25,805,686 - 10,222,302 287,731,933 - (3,774,564) 344,297,046
Reclassifications -
Disposals (2,840,406) - - - (5,077,788) (598,413) (3,346,760) - - - (11,863,367)
December 31, 2011 243,611,235 89,250,000 121,216,560 56,265,025 156,946,806 31,915,740 34,718,990 12,205,288,590 38,103,169 23,026,897 13,000,343,012
ACCUMULATED DEPRECIATION
January 1, 2011 (147,899,059) (89,249,999) (97,649,400) (29,925,814) (75,823,963) (21,942,063) (11,955,207) (3,979,613,633) (11,000,685) - (4,465,059,822)
Provision (11,063,753) - - (1,431,838) (21,079,297) (4,217,304) (1,786,242) (634,371,230) (1,814,437) - (675,764,100)
Reclassifications -
Disposals 1,828,413 - - - 3,384,210 598,410 3,260,127 - - - 9,071,160
December 31, 2011 (157,134,399) (89,249,999) (97,649,400) (31,357,652) (93,519,050) (25,560,957) (10,481,322) (4,613,984,862) (12,815,122) - (5,131,752,764)
NET CARRYING AMOUNT
December 31, 2011 86,476,836 1 23,567,160 24,907,373 63,427,756 6,354,783 24,237,668 7,591,303,728 25,288,048 23,026,897 7,868,590,249
Wells, platforms & other facilities and other property & equipment pertain to the Company’s 10% share in the aggregate assets of the SC 38 Malampaya Project. Management believes
that, based on the assessments performed, there are no impaired assets.
A n n u a l R e p o r t - 2 0 1 2 29

12. INVESTMENT IN TREASURY NOTES
Investment in Treasury Notes pertains to a held-to-maturity placement with Land Bank
of the Philippines amounting to P201.06 million at a coupon rate of 8.75% maturing on
March 3, 2013 and P79.69 million at a coupon rate of 9.13% maturing on September
4, 2016.
13. INVESTMENTS IN JOINT VENTURES
This account consists of the following oil, gas and coal exploration projects in
partnership with other oil companies:
2012 2011
Coal Mine Development (Lalat
and ILB Areas) COC 41 22,298,562 26,200,487
East Sabina SC 63 70,249,945 1,214,608
Ragay Gulf SC 43 - 96,066,287
92,548,507 123,481,382
14. INVESTMENT IN PNOC MALAMPAYA PRODUCTION CORPORATION
This account consists of investments in the PNOC Malampaya Production Corporation
(PMPC), a wholly-owned subsidiary of the Company, whose primary purpose is to
prospect, explore, dig, and drill for, exploit, extract, produce or purchase or otherwise
dispose of, import, export, and handle trade and generally deal in, refine, treat, reduce,
distill, manufacture and smelt, any and all kinds of petroleum and petroleum products,
oil, gas and other volatile substances. As originally envisioned, PMPC was to serve as
the corporate vehicle for the privatization of PNOC EC’s 10% participating interest in
Service Contract 38.
This amount represents only the 25% paid up capital of PMPC as required by the
Securities and Exchange Commission. Having been non-operational since its
incorporation, PMPC is in capital deficiency.
15. EXPLORATION AND DEVELOPMENT COSTS
The deferred exploration and development costs pertain to the following projects:
2012 2011
Cauayan Coal Project 97,819,520 97,819,520
BATMAN Natural Gas Study Project 68,043,808 68,043,809
Natural Gas Study 60,722,257 60,722,257
Isabela Coal Mine Mouth Power Plant 78,647,043 76,170,551
Lumbog Coal Project 103,454,979 74,060,547
Isabela Coal Exploration Project 25,616,802 25,616,802
Malongan & Alegria Coal Project 68,499,711 39,070,117
Surigao Coal Exploration Project 19,417,545 19,417,544
Coal Exploration Project – COC 41 Other Areas 14,575,404 16,917,119
Malampaya Oil Rim Exploration 10,114,403 10,114,403
Siay Coal Project - 6,457,443
Natural Gas Vehicle Program 1,320,035 1,320,035
65 MW Malangas Powerplant 763,962 763,962
Camago Malampaya Oil Leg 122,807 122,807
Cagayan Basin - SC 37 5,236,648 -
Domestic Projects 433,855 -
554,788,779 496,616,916
17. TRADE AND OTHER PAYABLES
This account consists of the following:
2012 2011
Accounts payable and accrued expenses 344,257,203 570,223,439
Other current liabilities 67,221,443 140,419,036
Taxes payable 22,481,971 93,284,842
Liability for annuity 739,543 739,543
434,700,159 804,666,860
Accounts payable and accrued expenses pertain to purchases of goods and services
for the Company’s business operations. The account is inclusive of the Company’s 10%
share in the aggregate obligation of SC 38 Consortium in the amount of P237.07 million
in 2012 and P167.76 million in 2011, accounts payable to suppliers and contractors
amounting to P64.62 million in 2012 and P335.01 million in 2011 and the remaining
P42.56 million in 2012 and P67.45 million in 2011 pertains to accrued expenses.
Other current liabilities include unclaimed payments, salaries payable, contract retention
and other miscellaneous liabilities.
Taxes payable include income tax of P9.95 million in 2012 and P16.62 million in 2011,
withholding taxes of P7.83 million in 2012 and P24.74 million in 2011 and output VAT
of P4.70 million in 2012 and P51.92 million in 2011.
Liability for annuity pertains to liabilities for accumulated sick leave credits of employees
expected to retire in 2013.
18. DIVIDENDS PAYABLE
Dividends payable amounting to P500.50 million pertains to the P0.25 dividend per
share declared on December 13, 2012 to stockholders of record as of January 2, 2013
to be paid on January 15, 2013.
19. UNEARNED REVENUE
This account consists of the following:
2012 2011
Unearned revenue 2,427,476,528 2,476,014,926
Other deferred credits 215,918 407,287
2,427,692,446 2,476,422,213
Unearned revenue pertains to the net entitlements of the Company from the
undelivered gas of the “take-or-pay” transactions of the SC 38 Malampaya Project
where customers are obliged to pay the contracted volume or quantity even if there is
no delivery or consumption of the produced gas during the period.
Other deferred credits consist of deferred interest on car loans of officers.
20. LIABILITY FOR FUTURE ABANDONMENT COSTS
This account represents the ten percent share of PNOC EC in the estimated future
abandonment cost of SC 38 Malampaya project which is equivalent to US$22.4 million.
The Company recorded the liability at its present value of US$3.0 million.
Using the accrued liability method, the provision for future abandonment costs
amounted to P5.67 million and P6.22 million in 2012 and 2011, respectively.
16. OTHER ASSETS
2012 2011
Cash - restricted 43,349,786 40,926,832
Surplus Property 3,532,089 3,532,089
Claims receivable 2,235,931 2,283,526
Investment in shares of stock 1,925,185 1,925,185
Special deposits 2,102,162 1,003,746
Land, leases and easement 72,550 72,550
53,217,702 49,743,928
Cash – restricted pertains to the balance of the trust fund placed in savings deposit
with the Land Bank of the Philippines which is intended to cover indemnity benefits of
directors and officers who are involved in any action or suit filed against the Company.
Surplus property pertains to the cost of levied properties for unpaid and delinquent
rentals, including interest, on the use of the ESB open yard.
Claims receivable consist mainly of the remaining estimated claim from the Government
Service Insurance System on the reported loss of various properties damaged by
typhoon “Caloy” at the Energy Supply Base at Batangas.
Investments in shares of stock represent the cost of available-for-sale investments in
proprietary club membership shares.
Special deposits account pertains to returnable deposits.
Land, leases and easement refer to a piece of land in Cotabato that was transferred
to PNOC EC by a Deed of Absolute Sale dated April 27, 1999. The property was
used in previous exploration project which was written off in 2004.
21. PAID-UP CAPITAL
The capital stocks of the Company are common shares with P1.00 par value, all with
same rights and privileges, except that Class “A” common shares shall be issued solely
to the citizens of the Republic of the Philippines while Class “B” common shares may
be issued to the citizens of the Republic of the Philippines or to aliens.
The capital structure of PNOC EC is as follows:
No. of Shares Amount
Class A:
Authorized 2,100,000,000
Issued, subscribed and paid-up (PNOC) 1,522,253,065 1,522,253,065
Unsubscribed 577,746,935
Share premium 21,326,554
Class B:
Authorized 1,400,000,000
Issued, subscribed and paid-up
PNOC 475,532,415 475,532,415
Public 4,467,585 4,467,585
Treasury shares (248,800) (734,924)
Unsubscribed 920,000,000
Share premium 1,098,396
2,023,943,091
There were no changes in the capital structure of the Company during the year.
30
P N O C - E x p l o r a t i o n C o r p o r a t i o n

22. DONATED CAPITAL
This account consists of the following:
2012 2011
Drilling rig (Kremco Model Trailer) 89,250,000 89,250,000
Others 58,406 58,406
89,308,406 89,308,406
The Kremco 750 Drilling Rig and the Drilling Rig Simulator were donated to the Company
by Petro Canada under the Program Management Agreement between PNOC EC,
Petro Canada and Office of Energy Affairs (OEA) in 1992. The equipments were
received by PNOC EC in 1993 and were turned over to PNOC Energy Development
Corporation (PNOC EDC) and were utilized for PNOC EDC’s geothermal drilling
operations and training of personnel respectively.
The assets were returned to PNOC EC in 1998 as a result of the separation of PNOC
EC from PNOC EDC Management. The Drilling Rig was eventually used by the
Company for the drilling operations in Mindanao in 1999. It is being leased by Energy
Development Corporation (EDC) for their drilling project in Lihir Island, Papua New
Guinea under a Lease Agreement ending December 31, 2012.
In 2005, the Drilling Rig Simulator, together with its housing facilities, was transferred
back to PNOC EDC through a Deed of Donation between the two companies. The
adjustment in the total amount of P6.41 million was effected in 2007.
23. RETAINED EARNINGS
The Board of Directors approved on December 13, 2012 per Board Resolution No. 12-
3, Series of 2012 the appropriation of P6.312 billion retained earnings as at December
31, 2012 to meet the Company’s cash requirements for capital expenditures and
exploration projects in the next three (3) years.
Cash dividends in the amount of P2.002 billion, P5.007 billion and P1.001 billion were
declared in 2012, 2011 and 2010, respectively.
24. REVENUES
This account consists of revenues generated from the Company’s major business units
as follows:
2012 2011 2010
Gas and Oil Production 5,690,253,031 5,609,875,105 4,731,612,790
Coal Operation 1,140,819,039 2,372,258,103 3,579,768,530
Energy Supply Base 2,023,175,772 2,025,173,150 476,870,610
Rig 1 31,252,078 35,159,924 34,507,589
8,885,499,919 10,042,466,282 8,822,759,519
25. COST OF SALES
This account consists of the following:
2012 2011 2010
Coal purchases and
landed cost 755,748,780 1,757,436,582 3,025,974,886
Production cost 626,648,552 651,875,329 848,446,967
Depreciation, depletion
and amortization 581,419,124 604,827,289 525,206,345
Fuel, Oil and TBA 1,926,691,176 1,889,049,149 355,690,610
Coal marketing and selling 29,398,237 48,444,224 104,953,429
Rental 7,681,655 13,638,243 14,308,101
Purchased services 2,009,191 8,562,909 8,619,365
Taxes and licenses 3,622,139 3,584,059 3,575,845
Materials and supplies 129,195 981,073 2,674,758
Shipping and delivery 7,777,944 2,634,877 1,577,232
Maintenance and repairs 797,438 436,755 644,684
3,941,923,431 4,981,470,489 4,891,672,222
Production costs amounting to P0.63 billion in 2012 and P0.65 billion in 2011 pertain
mainly to the production operating expenditures of the production facility of the SC
38 Malampaya Project, i.e. wells, platform, subsea calm under buoy, and indirect
operating overhead.
Coal purchases and landed costs are broken down as follows:
2012 2011 2010
Coal purchases 656,026,991 1,585,738,375 2,903,504,586
Coal production cost:
Direct materials 18,414,776 45,567,382 12,091,468
Direct labor 44,634,675 58,031,840 48,483,281
Overhead 36,672,338 68,098,985 61,895,551
755,748,780 1,757,436,582 3,025,974,886
26. OTHER INCOME
This account consists mainly of non-operating income as follows:
2012 2011 2010
Interest income 64,342,139 81,314,660 68,362,668
Marketing fee - - 13,791,628
Signature bonus - - 13,622,000
Equipment rental 601,898 169,651 475,088
Miscelleaneous income 12,914,778 40,324,025 131,236,443
77,858,815 121,808,336 227,487,827
Interest income includes the Company’s 10% share in the interest charged to SC 38
customers on their unpaid invoices for undelivered gas in the amount of P0.001 million
in 2012, P0.056 million in 2011 and P0.719 million in 2010. On the other hand, interest
income from bank, mainly from placements, amounted to P45.70 million in 2012,
P77.71 million in 2011 and P51.47 million in 2010.
Marketing fee amounting to P13.79 million in 2010 pertains to fees charged to Semirara
Mining Corporation for local coal shipments to China.
Signature bonus amounting to P13.62 million in 2010 pertains to signature bonus
payments received from Burgundy Global Exploration Corp.
Income from equipment rental pertains to the rental of various equipment in the
Malangas Project Operations.
Miscellaneous income includes income from sale of scrapped/over-aged coal
amounting to P3.42 million in 2012, P30.00 million in 2011 and P43.49 million in
2010.
27. ADMINISTRATIVE EXPENSES
This account consists of the following:
2012 2011 2010
Employee cost 232,843,553 215,753,357 196,594,716
Professional/Technical services 25,836,573 49,089,441 101,609,286
Purchased services 169,215,551 60,847,617 46,829,749
Depreciation, depletion and
amortization 61,458,370 51,265,686 31,706,380
Taxes and licenses 22,995,890 17,821,507 30,915,948
Business expenses 25,996,028 25,116,692 29,439,300
Maintenance and repairs 31,965,781 28,445,733 26,470,123
Rental 19,622,348 22,182,096 15,586,284
Fuel, oil and TBA 16,122,671 6,489,633 13,634,381
Insurance 5,104,310 5,891,163 10,069,719
Materials and supplies 51,038,344 16,806,323 6,770,604
Miscellaneous expenses 10,209,645 29,953,819 40,536,977
672,409,063 529,663,067 550,163,467
Capitalized cost (92,580,143) (30,557,442) (59,270,152)
579,828,920 499,105,625 490,893,315
28. OTHER EXPENSES
This account consists of the following:
2012 2011 2010
Donation to the University
of the Philippines 125,000,000 125,000,000 -
Impairment loss - 94,752,967 -
Royalty fee due government 14,502,615 28,977,579 12,857,739
Other miscellaneous expenses 2,453,513 2,360,930 6,961,857
141,956,128 251,091,476 19,819,596
The P125 million donation pertains to the Company’s payment to the University of the
Philippines as Endowment Fund for purposes of scholarship grants, research grants,
and professorial chairs to the students and faculty of UP in the academic fields of
geology under the National Institute of Geological Sciences (NIGS), College of Science,
UP Diliman, and of mining and energy engineering under the College of Engineering, UP
Diliman.
Impairment loss pertains to the cost of investment in Indonesia Coal Project that was
initially capitalized.
The Company is required to share the net proceeds with the government for all service
contracts and coal operating contracts entered into with the Department of Energy
on the exploration, development and utilization of the country’s natural resources in
consideration for the right granted. The government’s share comprises of income
taxes and royalty fees. The royalty fees are shared by the government through DOE and
the local government units.
Other miscellaneous expenses in 2012, 2011 and 2010 amounting to P2.45 million,
P2.36 million and P6.96 million, respectively, mainly pertain to bank charges.
A n n u a l R e p o r t - 2 0 1 2 31

29. FOREIGN EXCHANGE (LOSS) GAIN - NET
2012 2011 2010
On placements (1,891,763) (7,516,382) (175,426,513)
On joint venture transactions (37,092,646) (17,061,609) (36,378,548)
On loan related transactions - 5,832,000 10,854,000
Others (5,657,842) 11,149,054 15,950,493
(44,642,251) (7,596,937) (185,000,568)
The prevailing exchange rates for 2012, 2011 and 2010 are US$1.00:P41.192,
US$1.00:P43.928 and US$1.00:P43.885, respectively. A large portion of the net
foreign exchange loss in 2012, 2011 and 2010 is attributable to foreign exchange
loss on dollar placements and joint venture transactions amounting to P38.98 million,
P24.58 million and P211.81 million, respectively.
Foreign exchange gain on loan related transactions amounting to P5.83 million in
2011 and P10.85 million in 2010 pertains to the realized gain on the settlement of the
US$9.00 million short-term foreign currency deposit unit (FCDU) loan with Land Bank
of the Philippines.
Other foreign exchange transactions include foreign exchange adjustments on dollar
accounts and realignments on SC 38’s trade accounts receivable balances, among
others.
30. FINANCE COSTS
This account consists of the following:
2012 2011 2010
Interest expense on short/longterm
loans - 5,592,597 12,288,173
Interests on short-term loan in 2011 and 2010 amounting to P5.59 million and P12.29
million, respectively, pertain to the interest on the SC 38 $9.0 Million FCDU loan with
Land Bank of the Philippines.
31. INCOME TAX EXPENSE
The components of income tax expense as reported in the statement of comprehensive
income are as follows:
2012 2011 2010
Current tax expense:
Special tax rate (30%) 1,345,384,456 1,414,729,284 980,727,752
Minimum corporate
income tax (MCIT) at
2% in 2011 and 2010 9,872,723 15,429,060 -
1,355,257,179 1,430,158,344 980,727,752
Deferred tax expense
(income):
Origination and reversal
of tax effect on
Temporary differences,
NOLCO & MCIT (34,364,646) (13,290,257) (7,120,790)
1,320,892,533 1,416,868,087 973,606,962
The Company’s income tax for oil and gas production which pertains to the Malampaya
Project was computed under special rate and settled consistent with the pertinent
provisions of Service Contract (SC) 38. On the other hand, income tax for Energy
Supply Base, Head Office and coal project operations was based on the Minimum
Corporate Income Tax (MCIT) computed at two percent (2%) of the gross income since
the operation of these business units resulted in a zero taxable income. No Regular
Corporate Income Tax (RCIT) was reported in 2012 and 2011 since the MCIT was
higher than RCIT in both years.
Effective January 1, 2009, in accordance with Republic Act 9337, RCIT rate was
reduced from 35% to 30% and non-allowable deductions for interest expense from
42% to 33% of interest income subjected to final tax.
On December 18, 2008, the BIR issued Revenue Regulations (RR) No. 16-2008
which implemented the provisions of Section 34(L) of the Tax Code, as amended by
Section 3 of Republic Act No. 9504, which allows individuals and corporations who
are subject to the 30% RCIT rate to adopt the Optional Standard Deduction (OSD)
in computing their taxable income. Under RR 16-2008, corporations may claim OSD
equivalent to 40% of gross income, excluding passive income subjected to final tax,
in lieu of the itemized deductions. A corporate taxpayer who elected to avail of the
OSD shall signify such in the income tax return (ITR). Otherwise, it shall be considered
as having availed of the itemized deductions allowed under Section 34 of the National
Internal Revenue Code. Pursuant to Section 3 of RR No. 02-2010 dated February 18,
2010, the election to claim the OSD or the itemized deduction for the taxable year
must be signified by checking the appropriate box in the ITR filed for the first quarter
of the taxable year adopted by the taxpayer. Once the election is made, the same
type of deduction must be consistently applied for all succeeding quarter returns and
in the final ITR for the taxable year. Any taxpayer who is required but fails to file the
quarterly ITR for the first quarter shall be considered as having availed of the itemized
deductions option for the taxable year.
A reconciliation between the profit before tax and taxable profit (loss) as presented in
the Statement of Comprehensive Income and in the Income Tax Return is presented
as follows:
Taxable Year 2012
Special Rate Regular Rate
Profit (Loss) before income tax 4,445,169,209 (190,161,204)
Non-deductible items
Cost of sales 1,208,067,676 -
Foreign exchange losses 37,215,824 13,909,807
Impairment losses on trade and
non-trade receivables - 7,795,924
Straight-lining of operating lease - 31,923
1,245,283,500 21,737,654
Non-taxable items
Cost recovery (Allowed deduction per
Service Contract for tax purposes) (1,205,639,947) -
Interest income (74,781) (45,629,082)
Reversal of unrealized foreign exchange
losses for 2011 - (10,598,231)
Special allowable additional deduction
- donation to the University of the
Philippines (RA 9500) - (62,500,000)
(1,205,714,728) (118,727,313)
Profit (Loss) per income tax return 4,484,737,981 (287,150,863)
Taxable Year 2011
Special Rate Regular Rate
Profit (Loss) before income tax 4,336,537,768 82,879,726
Non-deductible items
Cost of sales 1,256,702,618 -
Impairment losses on trade and
non-trade receivables - 25,050,668
Foreign exchange losses 17,061,610 10,598,231
Interest expense - 5,592,597
Non-deductible pension cost - 15,506,506
Straight-lining of operating lease - 1,283,810
1,273,764,228 58,031,812
Non-taxable items
Cost recovery (Allowed deduction per
Service Contract for tax purposes) (894,480,902) -
Interest income (48,227) (77,664,134)
Reversal of unrealized foreign exchange
losses for 2010 - (1,534,815)
Banked gas deliveries with taxes paid already (11,540,474) -
Other non-operating income (11,051) -
Special allowable additional deduction
- donation to the University of the
Philippines (RA 9500) - (62,500,000)
(906,080,654) (141,698,949)
Profit (Loss) per income tax return 4,704,221,342 (787,411)
Taxable Year 2010
Special Rate Regular Rate
Profit (Loss) before income tax 3,359,871,470 90,702,003
Non-deductible expenses
Cost of sales 1,373,653,312 -
TOP delay insurance proceeds 7,185,160 -
Impairment losses on trade and
non-trade receivables - 38,208,009
Deficiency taxes - 18,642,843
Interest expense - 10,297,990
Foreign exchange losses - 1,534,815
Straight-lining of operating lease - 155,162
Other charges 11,051 -
1,380,849,523 68,838,819
Non-taxable income
Cost Recovery (Allowed deduction per
Service Contract for tax purposes) (1,515,622,115) -
Interest income - (51,416,110)
Reversal of unrealized foreign exchange
losses for 2009 - (19,619,533)
Foreign exchange gain (989,639) -
Other non-operating income (49,610) -
NOLCO - (217,699,461)
(1,516,661,364) (288,735,104)
Profit (Loss) per income tax return 3,224,059,629 (129,194,282)
In 2012 and 2011, the Company computed its income tax based on itemized
deductions for its income subject to the regular income tax rate.
32
P N O C - E x p l o r a t i o n C o r p o r a t i o n

The significant components of deferred income tax assets are as follows:
2012 2011 2010
Tax effect on temporary differences 59,764,736 56,422,909 45,803,541
Carryforward of unused tax losses 67,395,259 38,758,285 38,758,285
Minimum Corporate Income Tax 40,450,603 38,064,758 35,393,869
167,610,598 133,245,952 119,955,695
The deferred tax assets on temporary differences relate to the following:
2012 2011 2010
Deferred tax assets:
Impairment losses on trade and
non trade receivables 33,010,133 30,671,356 23,156,156
Retirement benefit cost 21,824,511 21,824,511 21,824,511
Unrealized FOREX loss on foreign
currency transactions 4,172,942 3,179,469 460,444
Straight-lining of operating lease 757,150 747,573 362,430
59,764,736 56,422,909 45,803,541
As at December 31, 2012, accumulated Net Operating Loss Carryover (NOLCO),
in which, for the purpose of determining the Company’s income tax obligation, can
be allowed as deduction from gross income for three consecutive years immediately
following the year of such loss, amounted to P224.65 million details of which are as
follows:
YEAR
INCURRED
YEAR OF
APPLICATION
AMOUNT
APPLIED
(2010)
EXPIRED
(2012) UNAPPLIED
Year 2009 2010 – 2012 188,133,483 58,939,201 129,194,282 -
Year 2012 2013 – 2015 224,650,863 - - 224,650,863
412,784,346 58,939,201 129,194,282 224,650,863
The deferred tax assets recognized on the carry-forward of unused tax losses amounted
to P67.40 million.
Minimum Corporate Income Tax, on the other hand, which is computed as two percent
(2%) of gross taxable income and which can also be carried over and credited against
regular income tax for the next three immediately succeeding taxable years, are broken
down as follows:
YEAR
INCURRED
YEAR OF
APPLICATION AMOUNT APPLIED EXPIRED UNAPPLIED
Year 2009 2010 – 2012 7,486,879 - 7,486,879 -
Year 2010 2011 – 2013 15,148,819 - - 15,148,819
Year 2010 2011 – 2013 15,429,060 - - 15,429,060
Year 2011 2013 – 2015 9,872,723 - - 9,872,723
47,937,481 - 7,486,879 40,450,602
32. EARNINGS PER SHARE (EPS)
The earnings per share amount was computed as follows:
2012 2011 2010
Net profit 2,934,115,471 3,002,549,407 2,476,966,510
Weighted average number
of shares 2,002,004,265 2,002,004,265 2,002,004,265
1.47 1.50 1.24
The Company does not have any dilutive potential common shares nor other
instruments that may entitle the holder to common shares. Hence, diluted EPS is the
same as basic EPS.
33. EMPLOYEE COSTS
2012 2011 2010
Salaries and other benefits 229,231,467 211,617,291 211,585,318
Social security costs 3,612,086 3,459,973 3,236,466
232,843,553 215,077,264 214,821,784
The expansion of the Company’s operations particularly on exploration activities (gas,
oil and coal) and the takeover of the mining operations in Zamboanga Sibugay led to
the continuous hiring of new employees for the year 2012. As of December 31, 2012,
the Company has 321 employees as compared to 320 employees in 2011, and 280 in
2010.
34. RETIREMENT PLAN
The Company maintains a wholly-funded, tax exempt, noncontributory retirement
plan covering all regular employees which provides a retirement benefit equal
to the final monthly basic salary x (14/12) x 200% x number of service years. The
retirement plan is under the administration of the Bank of the Philippine Islands Asset
Management and Trust Group (BPI-AMTG).
The recent actuarial valuations of plan assets and the present value of the defined
benefit obligation were carried out as at December 31, 2011 by E.M. Zalamea Actuarial
Services, Inc. The present value of the defined benefit obligation, and the related
current service cost and past service cost, were measured using the Projected Unit
Credit Method.
The Company normally makes an actuarial valuation every two (2) years to check the
recommended funding scheme and to adjust contributions due to deviations from the
actuarial assumptions arising from the investment yield, mortality gains and losses,
employee turnover, and benefit forfeitures.
The succeeding tables and information were based on the December 31, 2011 PAS 19
actuarial valuation of the retirement benefit plan unless stated otherwise.
The principal assumptions used for the purposes of the actuarial valuations were as
follows:
2011 2010
Discount rate 6.22 % 7.99 %
Expected rate of return on plan assets 6.21 % 6.21 %
Expected rate of salary increase 5.00 % 5.00 %
The discount rate assumption is based on the PDEx (PDST-R2) benchmark rates as
of the valuation dates considering the average years of remaining working life of the
employees as the estimated term of benefit obligations.
The following tables summarize the components of net benefit expense recognized
in the statement of comprehensive income and the funded status and amounts
recognized in the statement of financial position:
2011 2010 2009
Current service cost 8,395,600 7,856,495 11,195,524
Interest cost 5,527,874 11,800,404 9,175,354
Expected return on plan assets (5,741,037) (6,994,668) (6,837,137)
Net actuarial loss (gain) recognized
in the year (4,322,278) (1,015,884) (2,480,623)
Net retirement expense 3,860,159 11,646,347 11,053,118
Actual return on plan assets 7,124,837 11,482,249 7,326,301
2011 2010
Present value of defined benefit obligations 98,159,375 69,184,908
Fair value of plan assets 98,462,940 93,558,426
Unfunded Obligation (303,565) (24,373,518)
Unrecognized actuarial gains 88,558,441 108,768,235
Retirement Liability 88,254,876 84,394,717
Movements in the present value of the defined benefit obligation were as follows:
2011 2010
Defined benefit obligation, beginning 69,184,908 129,248,678
Interest cost 5,527,874 11,800,404
Current service cost 8,395,600 7,856,495
Benefits paid – from retirement fund (2,220,323) (10,714,340)
Actuarial loss (gain) 17,271,316 (69,006,329)
Defined benefit obligation, ending 98,159,375 69,184,908
Movements in the present value of the plan assets were as follows:
2011 2010
Fair value of plan assets, beginning 93,558,426 92,790,517
Expected return on plan assets 5,741,037 6,994,668
Benefits paid – from plan assets (2,220,323) (10,714,340)
Actuarial gain (loss) 1,383,800 4,487,581
Fair value of plan assets, ending 98,462,940 93,558,426
The major categories of plan assets as a percentage of the fair value of total plan assets
are as follows:
2012 2011 2010
Fixed income – local currency 92.90 % 92.00 % 90.40 %
Fixed income – foreign currency 4.10 % 4.80 % 6.10 %
Equities 3.00 % 3.20 % 3.50 %
100.00 % 100.00 % 100.00 %
The total investment portfolio of the plan amounting to P105.20 million, P98.49 million
and 93.56 million are composed mainly of government instruments with market value
of P89.69 million, P81.08 million and P82.37 million as at December 31, 2012, 2011
and 2010, respectively.
The history of unfunded obligation (surplus) is as follows:
2011 2010 2009
Defined benefit obligation 98,159,375 69,184,908 129,248,678
Fair value of plan assets 98,462,940 93,558,426 92,790,517
Unfunded Obligation / (Surplus) (303,565) (24,373,518) 36,458,161
The history of experience adjustments on the defined benefit obligation is as follows:
2011 2010 2009
Effects of changes in actuarial
assumptions
17,405,704 (65,244,331) 31,366,108
Experience adjustments (134,388) (3,761,998) (4,047,010)
Actuarial (gain) loss 17,271,316 (69,006,329) 27,319,098
Effects of changes in assumptions
as % of DBO
17.73 (94.30) 24.27
Experience adjustments as %
of DBO
(0.14) (5.44) (3.13)
Actuarial (gain) loss as % of DBO 17.59 (99.74) 21.14
A n n u a l R e p o r t - 2 0 1 2 33

The history of experience adjustments on the plan assets is as follows:
2011 2010 2009
Experience adjustments – gain (loss) 1,383,800 4,487,581 489,164
Percentage of plan assets (%) 1.41 4.80 0.53
Based on the recent funding actuarial valuation report, the past service liability as at
December 31, 2011 is P98.274 million (actuarial liability for services rendered up to
valuation date) and the total Net Assets of the Retirement Trust Fund is P98.462 million
as at December 31, 2011. The Fund therefore has an overfunded past service liability
of P189,029 as of valuation date.
As at December 31, 2011, the estimated vested benefit is P23.56 million (benefit
payable assuming all eligible employees will avail of their benefit) compared to Fund net
assets of P98.46 million as of the same date. The Fund therefore is more than sufficient
to pay the benefits if all eligible employees will avail of their benefit during the valuation
period. It should be noted that the vested amount is based on the applicable benefit
under the Plan as of valuation date.
35. CONTINGENCIES
As Petitioner
Case No.
Particulars
02-47516 PNOC-EC vs. Rafael G. Mangubat
Venue: Quezon City Regional Trial Court (RTC) Branch 218
Nature of Case/Claim:
For collection of sum of money (P665,294.70) plus interest. The
case was filed because of non-payment by Mr. Mangubat of his
remaining loan obligation to PNOC EC, which he was able to
secure pursuant to a Vehicle Acquisition Plan (VAP) duly approved
by the President of the Philippines.
Status:
A writ of execution for the sum of P665,294.70, plus attorney’s
fees of P66,529.47, has been issued against Mr. Mangubat and
in favor of PNOC EC. The Court Sheriff is looking for assets of
Mr. Mangubat to be attached.
69263 PNOC-EC vs. Jose M. Asistio
Venue: Pasig City Regional Trial Court (RTC) Branch 67
Nature of Case/Claim:
For collection of sum of money (P719,333.30) plus interest. The
case was filed because of non-payment by Mr. Asistio of his
remaining loan obligation to PNOC EC, which he was able to
secure pursuant to a Vehicle Acquisition Plan (VAP) duly approved
by the President of the Philippines.
Status:
By the Order of the trial court dated September 3, 2009, the case
against Mr. Asistio was dismissed for failure to prosecute. The
OGCC is to recommend to PNOC EC the appropriate remedies or
actions on the case.
02-48508 PNOC-EC vs. Bernardo F. Ople
CN 69262
Venue: Quezon City Regional Trial Court (RTC) Branch 98
Nature of Case/Claim:
For collection of sum of money (P805,555.54) plus interest.
The case was filed because of non-payment by Mr. Ople of his
remaining loan obligation to PNOC EC, which he was able to
secure pursuant to a Vehicle Acquisition Plan (VAP) duly approved
by the President of the Philippines.
Status:
The Ex-Parte Motion to declare defendant Ople to have waived
his right to present/adduce further evidence is pending resolution
by the trial court. The court set hearings on February 26, 2013
and March 26, 2013 for a possible settlement of the case.
PNOC-EC vs. Pedro T. Santos
Venue: Pasig City Regional Trial Court (RTC) Branch 67
Nature of Case/Claim:
For collection of sum of money (P697,666.60) plus interest. The
case was filed because of non-payment by Mr. Santos of his
remaining loan obligation to PNOC EC, which he was able to
secure pursuant to a Vehicle Acquisition Plan (VAP) duly approved
by the President of the Philippines.
Status:
Mr. Santos filed a Petition for Review in the Supreme Court from
the Court of Appeals decision denying his petition for certiorari,
which, in turn, questioned the RTC’s Order declaring him in
default. The Supreme Court denied Mr. Santos’ petition in a
decision promulgated on September 23, 2008. Mr. Santos did
not file any motion for reconsideration from the Supreme Court’s
decision. The High Court is to remand the case records to the
court of origin for issuance of writ of execution.
2690-2692 PNOC-EC vs. Ana Liza Garcia
72893-TG
Venue: 1st Municipal Circuit Trial Court (MCTC) of Mabini &
Tingloy, Batangas
Nature of Case/Claim:
This is a criminal case filed by PNOC EC against Ms. Garcia for
violation of Batas Pambansa (BP) Blg. 22. Ms. Garcia issued
three checks in the total amount of P381,817.79 as payment for
fuel purchases made by FRMC Brokerage and Forwarders. The
checks were all dishonored upon presentation for payment with
the bank. Despite demands, Ms. Garcia failed to pay the face
value of the checks she issued.
Status:
The preliminary conference is scheduled on January 30, 2013.
PNOC-EC vs. Travellers Insurance & Surety Corp.
Venue: Branch 271, Regional Trial Court of Pasig City
Nature of Case/Claim:
This is a civil case filed by PNOC EC against Travellers Insurance
& Surety Corp. (“Travellers”) for the performance bond it issued
in favor of Asian Pyrochem Technologies, Inc. (“APTI”). Under its
performance bond, Travellers bound itself jointly and severally liable
with APTI should APTI fail to faithfully perform its obligations under
the Coal Supply Agreement between PNOC EC as coal buyer and
APTI as coal seller. Because APTI failed to timely and completely
deliver coal to PNOC EC, Travellers’ liability in the total amount
of P11,720,310.00 had attached under the performance bond it
issued. Despite demand, Travellers failed to pay the amount of
P11,720,310.00.
Status:
The continuation of the presentation of evidence ex parte by
PNOC EC is scheduled on April 11, 2013.
COA CP – PNOC-EC vs. Commission on Audit
Case No. 2012-370
Venue: Commission on Audit (Commission Proper)
As Defendant
Case No.
CCN 4108
Civil Case No.
73043
Nature of Case/Claim:
On September 24, 2012, PNOC EC, through its statutory counsel,
the Office of the Government Corporate Counsel (“OGCC”), filed
a Motion for Reconsideration to the Legal retainer Review 2012-
091, dated July 26, 2012, before the Commission on Audit (“COA”)
Commission Proper. The Motion seeks to reconsider the denial
of PNOC EC’s request for COA’s concurrence in the engagement
of a foreign law firm, Baker Botts LLP, sometime in the early part
of 2010 to handle an Arbitration Case filed by Wilson International
Trading Private Limited (“Wilson”) against PNOC EC before the
ICC International Court of Arbitration in Singapore.
Status:
The Commission Proper has yet to issue an Order on the Motion
for Reconsideration filed by PNOC EC.
Particulars
Province of Palawan vs. Shell Philippines Exploration B.V. (“SPEX”)
and Chevron Texaco (“Chevron”)
Venue: Palawan Regional Trial Court (RTC)
Nature of Case/Claim:
As a member of the SC 38 Consortium, PNOC EC is involved as
a party defendant in a case filed by the Province of Palawan in
a Regional Trial Court in Puerto Princesa City against the SC 38
Consortium for the collection of alleged delinquent real property
taxes for the years 2002 to 2005 totaling P265,259,194.28, 10%
of which shall be paid by PNOC EC if the Consortium will lose the
case. For its defense, the Consortium relies mainly on the provision
of SC 38 granting exemption to the SC 38 Consortium from local
and national taxes, except income tax.
Status:
The case is at the trial proper stage, with Shell to continue with the
presentation of evidence on September 19, 2013.
Burgundy Global Exploration Corporation vs. PNOC EC
Venue: Pasig City Regional Trial Court (RTC) Branch 70
34
P N O C - E x p l o r a t i o n C o r p o r a t i o n

Nature of Case/Claim:
Burgundy Global Exploration Corporation (“BGEC”) filed a
complaint against PNOC EC for specific performance and
damages. In the complaint, it was prayed that BGEC and
PNOC EC should enter into a Joint Operating Agreement for the
development of the Camago-Malampaya Oil Leg (“CMOL Project”)
pursuant to the Participation Agreement and Addendum to the
Participation Agreement executed by the parties. PNOC EC filed
a Motion to Dismiss the Complaint on the principal ground that
the RTC did not have jurisdiction on the subject matter of the
complaint as the Participation Agreement provided that sole and
exclusive remedy for the settlement of any dispute between them
should be through arbitration under the Rules of Arbitration of the
International Chamber of Commerce with Singapore as venue.
The RTC, in a Decision, dated June 30, 2011, directed the parties
to submit themselves to arbitration.
On July 7, 2011, PNOC EC filed a Manifestation with the RTC stating
that the Department of Energy (“DOE”) had terminated the Terms
of Service between DOE and Philippine National Oil Company
(“PNOC”) for the re-appraisal, development and production of
crude oil from the CMOL. The Terms of Service provides the
basis for the re-appraisal, development and production of crude
oil from the CMOL by PNOC or its designated subsidiary (“PNOC
EC”) as well as the “third party participant” (“BGEC”). PNOC EC
stated that with the termination of the Terms of Service for the
CMOL Project by the DOE, the Decision, dated June 30, 2011,
was rendered moot and academic.
On January 19, 2012, the RTC Taguig ordered PNOC EC to file
its Answer to BGEC’s Complaint. After PNOC EC filed its Answer
with Compulsory Counter-Claim, the Trial Court set the case for
mediation.
Status:
Considering the failure of the parties to enter into an amicable
settlement during the mediation process, PNOC EC asked the
Mediator to refer the case back to court for further proceedings.
PNOC EC has yet to receive the Mediator’s report referring the
case back to court.
On September 14, 2011, the NCIP scheduled a summary hearing
for defendants to show cause why a writ of preliminary injunction
should not be granted.
On September 17, 2011, Shell Philippines Exploration B.V.
(“SPEX”), the Operator of the SC 38, filed an Answer to the
Complaint where it was raised, among others, that (a) the
Complaint was not properly verified; (b) the NCIP and the hearing
officer did not have jurisdiction over the Complaint; (c) the NCIP
and the hearing officer may not issue an injunctive relief since
Calix failed to implead the Republic of the Philippines and/or the
Department of Energy (“DOE”) which is an indispensable party;
(d) there was no showing that the Tagbanuas would suffer grave
or irreparable injury or their social or economic activity would
be seriously affected; (e) the pipeline was outside the ancestral
domain of the Tagbanuas; (f) the Tagbanuas were consulted and
their implied consent was secured for the MGP; and (g) the free
and prior informed consent of the Tagbanuas were not required at
the time the MGP was implemented.
After the NCIP conducted hearings, the parties filed their respective
Position Papers. On March 7, 2012, SPEX received a Notice of
Ocular Inspection informing the parties that there shall be an ocular
inspection in the area subject matter of the case on March 14,
2012. After a meeting between the NCIP and the DOE, the NCIP
issued an order dated July 10, 2012 suspending the proceedings
and ordering the parties to schedule a public consultation and to
discuss the possible settlement of the case.
The parties conducted the public consultation on November
13, 2012 which led to the signing of the Kalatas ng Kasunduan
(“MOA”). On November 15, 2012, the parties filed a Joint Motion
to Dismiss dated November 13, 2012. However, the Joint Motion
was denied by the Hearing Officer in a Resolution dated November
15, 2012 stating that the MOA has to be submitted for his approval
in order for him to ensure that the interests of the indigenous
peoples are not prejudiced. He also called a hearing to personally
inquire with Calix and Malampaya Foundation, Inc. (signatories
of the MOA) on their respective understanding of the MOA. A
hearing in this regard is scheduled on January 17, 2013.
COA CP Case
No. 2011-335
042-RIV-11
Shell Philippines Exploration BV (“SPEX”), PNOC EC and Chevron
LLC (“Chevron”) vs. The Honorable Director Rizalina Q. Mutia
Venue: Commission on Audit
Nature of Case/Claim:
For fiscal years 2003 to 2009, the Commission on Audit (“COA”)
issued audit findings that the SC 38 Consortium’s income tax
liability should not be paid out from the 60% government share
representing net proceeds from petroleum operations under SC
38. According to the COA, the assumption by the Department of
Energy (“DOE”) of the income tax liability of the SC 38 Consortium
effectively exempts the SC 38 Consortium from the payment
of income taxes allegedly in violation of the pertinent terms and
conditions of SC 38. DOE has disputed these audit findings.
On October 5, 2010, COA, through Supervising Auditor Dolores
T. Barraza, issued a Notice of Charge (“NC”) dated October 5,
2010 to the DOE. The NC, among others, held liable and directed
the SC 38 Consortium to settle immediately the audit charges
amounting to PhP53,140,304,739.86. The SC 38 Consortium
filed an Appeal Memorandum with the COA Director, namely
Director Rizalina Q. Mutia. In its Appeal, the SC 38 Consortium
argued, among others, that payment of the Service Contractor’s
income tax liability from the 60% Government Share is authorized
under Presidential Decree No. 87, the enabling law of the SC 38.
Pursuant to this authority, the Government contractually agreed
with the SC 38 Consortium that the latter’s income taxes be paid
from the 60% Government Share.
In a Decision dated August 22, 2011, COA Director Mutia affirmed
the NC in Decision No. 2011-009. On October 11, 2011, the SC
38 Consortium filed a Joint Petition for Review with the Commission
proper. The DOE likewise filed its own petition for review. On April
23, 2012, the SC 38 Consortium filed its Memorandum with the
COA Commission Proper.
The case is now submitted for resolution.
Bienvenido Calix vs. Malampaya Gas Project (“MGP”)
Venue: National Commission on Indigenous Peoples, Regional
Hearing Office IV
Nature of Case/Claim:
In his Complaint, Calix alleged that the MGP and its pipelines
passed through the water covered by the ancestral domain of
the Tagbanua Indigenous Cultural Community (“TICC”), without
consultation or consent of the TICC. Calix also alleged that
considering the water where the gas pipelines are installed is the
source of the livelihood of the TICC’s members, the acts of the
MGP have caused grave or irreparable damage or injury to the
Tagbanuas.
On August 22, 2011, the NCIP issued an ex-parte Temporary
Restraining Order against MGP, among others, to refrain or cease
and desist from their present operation of the MGP.
G.R. No. 182734
Bayan Muna Party List vs. President Gloria Macapagal-Arroyo, et.
al.
Venue: Supreme Court
Nature of Case/Claim:
36. RELATED PARTY TRANSACTIONS
Due from Affiliates - net:
Bayan Muna Party List and other petitioners filed a case against
former President Gloria Macapagal-Arroyo, the Secretary of
Energy, the Secretary of Foreign Affairs, the Executive Secretary,
PNOC and PNOC EC, seeking to annul the Joint Marine Seismic
Undertaking (“JMSU”) signed by the China National Offshore Oil
Corporation (“CNOOC”), PetroVietnam and PNOC to conduct a
joint study of the potential resource in certain areas in the South
China Sea, including areas that are subject of sovereign claims of
China, Vietnam and the Philippines. Although PNOC EC was not
a signatory to the JMSU, it was impleaded as party-respondent
because PNOC designated PNOC EC as the implementing arm in
the project and assigned to it PNOC’s rights and obligations under
the JMSU.
Petitioners claim that the JMSU violates the constitutional limitations
on the right to explore, develop and utilize petroleum resources
by allowing foreign entities such as CNOOC and PetroVietnam to
undertake such activities. Respondents claim, among others, that
the activity contemplated under the JMSU was not “exploration”
but “pre-exploration” based on the old opinion of the Department
of Justice involving an Australian firm. Moreover, respondents
claim that the case was rendered moot and academic since the
JMSU expired last June 30, 2008 and no agreement was signed
to pursue drilling activities.
The Office of the Solicitor General, in behalf of the respondents,
filed a Memorandum with the Supreme Court last February 23,
2010.
The Supreme Court has yet to resolve the case.
2012 2011
PNOC Malampaya Production Corporation 1,632,811 1,606,316
Due from Joint Venture Partners
Shell Philippines Exploration BV 11,168,207 14,620,538
Nido Petroleum Philippines (8,431,186) 6,680,773
Petro-Vietnam Investment and
Development Corp. 668,484 668,484
Basic Energy Corporation 183,664 643,334
Petroenergy Resources Corporation 367,327 628,191
Agusan Petroleum and Mining Corporation 464,409 464,409
Pearl Oil (Ragay) Limited 79,754 79,754
BHP Billiton 3,778 3,778
China National Offshore Oil Corporation (268,078) (268,078)
4,236,358 23,521,183
5,869,170 25,127,499
A n n u a l R e p o r t - 2 0 1 2 35

Due to Affiliates:
2012 2011
Philippine National Oil Company (PNOC) 1,936,226 893,943
PNOC Alternative Fuels Corporation - -
PNOC Shipping and Transport Corporation - -
Nido Petroleum 12,307,076 12,307,076
14,243,302 13,201,019
Due from affiliates account represents charges and credits from affiliated companies
which are payable within a year or the following month upon presentation of debit/
credit notes. Due from joint venture partners, on the other hand, are expenses
incurred in connection with joint explorations which were paid for and advanced by the
Company.
Due to PNOC balance of P1.94 million pertains to miscellaneous intercompany
charges.
Manager, Petroleum & Coal Exploration
Department
Manager, Coal Exploration Department
Project Manager, Malangas Project
Operations
Manager, Engineering Services Department
Manager, Petroleum Production Department
Manager (OIC), Trading & Marketing Dept.
Manager, Energy Supply Base
Manager, Project Development Department
Manager, Planning and Budget Department
Manager (OIC), Finance Department
Manager (OIC), Treasury and Joint Venture
Accounting Department
Manager, Administration Department
Manager, Human Resources Department
Manager, Information & Communications
Technology Department
- Jaime A. Bacud
- Valerio Joseph M. Foronda
- Dancelo G. Gacutan
- Federico D. Galang
- Miguel A. Tordilla
- Joneil H. Magpantay
- Jose Allan R. Caringal
- Rolando V. Oliquino
- Candido M. Magsombol
- Elenita P. Tuazon
- Josephine P. Quindoza
- Maria Rita S. Dayleg
- Eleanor Ann E. Villanueva
- Julius Evan P. Zapata
Due to Nido Petroleum represents security deposit for the second sub-phase
acquisition of 3D seismic data for SC 58 West Calamian Project.
Directors
PNOC EC’s Articles of Incorporation provide for the election of nine (9) directors to
serve a term of one (1) year. The Board of Directors is responsible for the overall
management and direction of the company. It meets on a regular monthly basis to
review and monitor PNOC EC’s operations.
Members of the Governing Board are as follows:
Chairman - Gemiliano C. Lopez, Jr.
President and CEO/Director - Pedro A. Aquino, Jr.
Director - Rafael E. del Pilar
Director - Rufino B. Bomasang
Director - Luis Ma. G. Uranza
Director - Francisco T. Ignalaga, Jr.
Director - Armando P. Galimba
Director - Leopoldo E. Petilla
Director - Niel D. Tupas, Sr.
Term of Office
Pursuant to the Company’s by-laws, the directors are elected at each annual
stockholders’ meeting by stockholders entitled to vote. Each director holds office until
the next annual election and his successor is duly elected, unless he resigns, dies or is
removed prior to such election.
Independent Directors
In 2002, the Company requested the opinion of the Securities and Exchange
Commission with respect to the requirement of having independent directors of the
company. The SEC issued its opinion that the Company was not required to comply
with the requirements of independent directorship.
Significant Employees
Employees or personnel who are not executive officers are expected to make a
significant contribution to the business.
Family Relationships
There are no family relationships up to the fourth civil degree either by consanguinity
or affinity among the Company’s directors, executive officers or persons nominated or
chosen by the Company to become its directors or executive officers.
Involvement in Certain Legal Proceedings
None of the directors, nominees for election as director, executive officers, underwriters
or control persons of the Company has been involved in any legal proceeding, including
without limitation being subject of any (a) bankruptcy petition, (b) conviction by final
judgment, (c) order, judgment or decree, or (d) violation of a securities or commodities
law, for the past five (5) years up to the latest date, that is material to the evaluation of
his ability or integrity to hold the relevant position in the Company.
Executive Officers
PNOC EC’s executive officers are also regular employees of the Company and are
remunerated with a compensation package comprising of twelve (12) months base
pay plus the statutory 13th month pay. They also receive whatever gratuity the Board
extends to managerial, supervisory, technical and professional employees of the
Company.
The Company’s executive officers are as follows:
President and Chief Executive Officer
- Pedro A. Aquino, Jr.
Compliance Officer
- Jose Ivan T. Justiniano
General Counsel/Corporate Secretary
- Jose C. Sta. Ana
Vice President, Upstream Operations
- Raymundo B. Savella
Vice President, Downstream Operations - Joseph Omar A. Castillo
Vice President, Management Services - Lourdes S. Gelacio
Vice President, Corporate Services
- Manuel C. Mendoza
Manager, Internal Audit Department
- Lucila Q. Maralit
Manager, Legal Department
- Fe Concepcion G. Lucero
Manager, Health, Safety, Security and
Environment Department
- Restituto G. Taganas, Jr.
Manager, External Relations Department - Jose Edilbert S. Corsame
37. FINANCIAL RISK AND CAPITAL MANAGEMENT
The Company’s financial assets consist mainly of cash and cash equivalents,
money market placement, investment in government securities and trade and other
receivables. The main sources of which are proceeds from sales of gas, coal, fuel and
other services. The Company has various financial liabilities such as short-term loans
payable, due to related parties, trade payables and other liabilities which arise directly
from operations.
The BOD has the overall responsibility for the establishment and oversight of the
Company’s risk management framework. The BOD has established the Audit and Risk
Management Committee (ARMC) which plays a vital oversight role in the implementation
of the Company’s Program and is also an important liaison to the BOD. The ARMC
shall assist the BOD of the Company in its oversight responsibility of managing risks
involving physical, financial, operational, labor, legal, security, environmental and other
risks of the corporation.
The Company’s Audit and Risk Management Committee (ARMC) identifies and
analyzes potential events that may affect the Company, strategize and manage risks
to be within its risk appetite. In addition, ARMC provides a holistic approach to the
protection of assets, revenues, liabilities, personnel and reputation against predictable
and unpredictable losses to achieve maximum efficiency at minimum costs to provide
reasonable assurance with respect to the achievement of Company objectives.
The main financial risks arising from the Company’s financial instruments are credit
risk, foreign currency risk, equity price risk, interest rate risk and liquidity risk. The
Company’s policies for managing the aforementioned risks are summarized hereinafter
below.
Credit Risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a
financial instrument fails to meet its contractual obligations, and arises principally from
the Company’s trade and other receivables and investment securities.
The Company’s major customers are the SC 38 power plant customers and coal
trading customers. SC 38 customers include the National Power Corporation (NPC),
First Gas Power Corp., Shell International Eastern Trading and Chevron Malampaya Llc.
SC 38 customers are covered by Gas Sales and Purchase Agreements (GSPAs) which
are long-term contracts with provisions for interests on payment default and take-orpay
commitments, and NPC being a Government Owned and Controlled Corporation
(GOCC) is guaranteed by the Government. Coal trading customers include KEPCO
SPC Power Corporation, Energies Supply Chain Solutions, Inc., Chin-Ching Metal
Works Manufacturing, Maunlad Canning Corporation and Pacific Cement Corporation,
among others. Coal trading customers are covered by coal sales agreements also with
provisions for interests on payment default and inflationary adjustments.
Receivable balances are monitored on an ongoing basis to ensure that the Company’s
exposure to bad debts is not significant. The maximum exposure of trade receivable is
equal to the carrying amount.
With respect to credit risk arising from other financial assets of the Company, which
comprise cash and cash equivalents excluding cash on hand, trade and other
receivables, investment in debt and equity securities and due from related parties,
the Company’s exposure to credit risk arises from default of the counterparty, with a
maximum exposure equal to the carrying amount of these instruments before taking
into account any collateral and other credit enhancements.
2012 2011
Loans and receivables:
Cash and cash equivalents (excluding
cash on hand) 2,087,237,311 1,847,291,118
Trade receivables - net 921,573,050 1,341,853,910
Short-term investment 729,069,729 1,123,772
Loans & other employee receivables 20,796,662 14,340,708
Non-trade accounts receivables - net 12,337,967 15,424,720
Due from related party 5,869,170 25,127,499
Claims receivable 2,235,931 2,283,526
AFS investments:
Club membership shares 1,925,186 1,925,186
HTM investments:
Investment in treasury notes 280,748,805 206,549,324
Total 4,061,793,811 3,455,919,763
36
P N O C - E x p l o r a t i o n C o r p o r a t i o n

The Company trades with recognized, creditworthy third parties and/or transacts with institutions and/or banks which have demonstrated financial soundness and which have passed
the financial evaluation and accreditation of the Company.
Foreign Currency Risk
The Company’s exposure to foreign currency risk resulted from the financial assets and liabilities that are dollar denominated. The Company’s exposure to foreign currency risk to some
degree is mitigated by some provisions in the Company’s service contracts and gas sales and purchase agreements. The sales agreements include billing adjustments covering the
movements in Philippine Peso and the US Dollar rates.
The Company’s foreign currency-denominated financial monetary assets and liabilities (translated into Philippine peso) as at December 31, 2012 and 2011 are as follows:
2012 2011
US Dollar Peso Equivalent US Dollar Peso Equivalent
Financial Assets
Loans and receivables:
Cash and cash equivalents 16,140,831 664,873,119 2,202,335 96,744,160
Trade receivables - net 17,729,665 730,320,348 16,745,631 735,602,060
Short-term investment 3,000,000 123,576,000 - -
Loans & other employee receivables - - 68 3,000
Due from related party 102,844 4,236,358 535,448 23,521,183
Total Financial Assets 36,973,340 1,523,005,825 19,483,482 855,870,403
Financial Liabilities
Liabilities at amortized cost:
Short-term loans payable - - - -
Trade and accrued payables 5,914,824 243,643,419 4,448,335 195,406,454
Government & Other Liabilities 957,193 39,428,694 2,023,570 88,891,383
Due to related party 298,773 12,307,077 280,165 12,307,077
Total Financial Liabilities 7,170,790 295,379,190 6,752,070 296,604,914
Net foreign currency-denominated monetary assets (liabilities) 29,802,550 1,227,626,635 12,731,412 559,265,489
The following tables demonstrate the sensitivity to a reasonably possible change in
the US dollar exchange rates, with all other variables held constant, of the Company’s
income (loss) before income tax and equity for the years ended December 31, 2012
and 2011.
Profit or Loss
Equity
Effect in million pesos Appreciates Depreciates Appreciates Depreciates
December 31, 2012
USD(5% or P2.060 sensitivity) 61.39 (61.39) 61.39 (61.39)
December 31, 2011
USD (5% or P2.196 sensitivity) 27.96 (27.96) 27.96 (27.96)
The Company reported net foreign exchange losses amounting to P44.64 million
and P7.60 million in 2012 and 2011, respectively, with the translation of its foreign
currency-denominated assets and liabilities. These resulted mainly from the
movements of the Philippine peso against the US dollar as shown in the following
table:
Translation Date
Peso to US Dollar
December 31, 2010 43.885
December 31, 2011 43.928
December 31, 2012 41.192
The Company has enough internally generated foreign-currency denominated resources
used to settle foreign-currency denominated financial liabilities, thus reducing the
Company’s risk on foreign currency rate fluctuation as compared to funding obtained
from the active market.
Equity Price Risk
Equity price risk is the risk that the fair values of traded equity instruments decrease as
the result of the changes in the levels of equity indices and the value of the individual
stocks.
As at December 31, 2012 and 2011, the Company’s exposure to equity price risk is
minimal.
Interest Rate Risk
Interest rate risk is the risk that the future cash flows from a financial instrument (cash
flow interest rate risk) or its fair value (fair value interest rate risk) will fluctuate because
of changes in market interest rates.
Interest expense recognized for the period ending December 31, 2012 and December
31, 2011 amounted to P0 million and P5.59 million, respectively, which relate to
the short-term loan with a local bank. The Company, however, was able to reduce
or match the net interest cost through adequate yields from its investments which
generated interest income of P45.70 million and P77.71 million for the period ending
December 31, 2012 and December 31, 2011, respectively.
Liquidity Risk
The Company’s objective is to maintain balance between continuity of funding and
sourcing flexibility through the use of financial instruments. The Company manages
its liquidity profile to meet its working capital and capital expenditure requirements
and service debt obligations. The Company is not exposed to liquidity risk since the
Company is involved in the sale of oil, gas and coal which are readily marketable.
The Company monitors and manages its liquidity position on a regular basis. It has
enough internally generated funds to service maturing debts and a committed standby
credit facility from several local banks is also available to ensure availability of funds
when necessary.
Capital Management
The Company manages its capital to ensure that the entity will be able to continue as
going concern while maximizing the return to stakeholders through the optimization of
the debt and equity balance.
The Company is not subject to any externally imposed capital requirements.
The Company monitors capital using the debt ratio, which is long-term liabilities divided
by long-term liabilities plus equity.
The table below shows the Company’s debt ratio as at December 31, 2012 and
2011.
2012 2011
Long-term liabilities 2,621,464,405 2,663,423,765
Long-term liabilities & equity 13,028,254,945 12,138,103,099
Debt ratio 20.12% 21.95%
Debt ratio provides an indication of the long term solvency of the company. A lower
debt ratio indicates that the company has the ability to meet its financial obligations.
The Company regularly evaluates its interest rate risk by taking into account the cost
of qualified borrowings being charged by its creditors. Prepayment or refinancing the
risks are undertaken when deemed feasible and advantageous to the Company.
The Company’s exposure to interest rate risk is minimal since the Company does not
have any long-term debt obligations as at December 31, 2012.
A n n u a l R e p o r t - 2 0 1 2 37

Financial Assets and Financial Liabilities
Set out below is a comparison of carrying amounts and fair values of the Company’s financial instruments as at December 31, 2012 and 2011.
2012 2011
Carrying Amount Fair Value Carrying Amount Fair Value
Financial Assets
Loans and receivables:
Cash and cash equivalents (excluding cash on hand) 2,087,237,311 2,087,237,311 1,847,291,118 1,847,291,118
Trade receivables - net 921,573,050 921,573,050 1,341,853,910 1,341,853,910
Short-term investment 729,069,729 729,069,729 1,123,772 1,123,772
Loans & other employee receivables 20,796,662 20,796,662 14,340,708 14,340,708
Non-trade accounts receivable 12,337,967 12,337,967 15,424,720 15,424,720
Due from related party 5,869,170 5,869,170 25,127,499 25,127,499
Claims receivable 2,235,931 2,235,931 2,283,526 2,283,526
AFS investments:
Club membership shares 1,925,186 1,925,186 1,925,186 1,925,186
Investment in treasury bills
HTM investments:
Investment in treasury notes 280,748,805 280,748,805 206,549,324 206,549,324
4,061,793,811 4,061,793,811 3,455,919,763 3,455,919,763
Financial Liabilities
Liabilities at amortized cost:
Trade and accrued payables 845,497,812 845,497,812 570,962,982 570,962,982
Due to related parties 14,243,302 14,243,302 13,201,020 13,201,020
Government & other liabilities 89,703,413 89,703,413 233,703,840 233,703,840
949,444,527 949,444,527 817,867,842 817,867,842
The methods and assumptions used by the Company in estimating the fair value of each class of financial instruments are:
Cash and Cash Equivalents
Carrying amounts approximate fair values due to its short-term nature.
Trade and Other Receivables, Short-term Investment and Trade and Other Payables
These are instruments with relatively short maturity. Carrying amounts approximate fair values.
Short-term Loans Payable, Non-current Trade Receivables, Due from & Due to Related Party, and Other Liabilities
These are instruments that are expected to be realized within a year. Carrying amounts approximate fair values.
AFS and HTM Investments
Fair values of debt securities are based on quoted market prices. For equity investments that are not quoted, the investments are carried at cost less allowance for impairment losses
due to the unpredictable nature of future cash flows and the lack of suitable methods of arriving at a reliable fair value.
The Company classifies its financial instruments in the following categories.
2012
Liabilities at
Loans and AFS HTM Amortized
Receivables Investment Investment Cost Total
Financial Assets
Loans and receivables:
Cash and cash equivalents (excluding cash on hand) 2,087,237,311 - - - 2,087,237,311
Trade receivables - net 921,573,050 - - - 921,573,050
Short-term investment 729,069,729 - - - 729,069,729
Loans and other employee receivables 20,796,662 - - - 20,796,662
Non-trade accounts receivable 12,337,967 - - - 12,337,967
Due from related party 5,869,170 - - - 5,869,170
Claims receivable 2,235,931 - - - 2,235,931
AFS investments:
Club membership shares - 1,925,186 - - 1,925,186
HTM investments:
Investment in treasury notes - - 280,748,805 - 280,748,805
Financial Liabilities
Liabilities at amortized cost:
Trade and accrued payables - - - (845,497,812) (845,497,812)
Due to related parties - - - (14,243,302) (14,243,302)
Government & other liabilities - - - (89,703,413) (89,703,413)
3,779,119,820 1,925,186 280,748,805 (949,444,527) 3,112,349,284
38
P N O C - E x p l o r a t i o n C o r p o r a t i o n

2011
Liabilities at
Loans and AFS HTM Amortized
Receivables Investment Investment Cost Total
Financial Assets
Loans and receivables:
Cash and cash equivalents (excluding cash on hand) 1,847,291,118 - - - 1,847,291,118
Trade receivables - net 1,341,853,910 - - - 1,341,853,910
Due from related party 25,127,499 - - - 25,127,499
Non-trade accounts receivable 15,424,720 - - - 15,424,720
Loans and other employee receivables 14,340,708 - - - 14,340,708
Short-term investment 1,123,772 - - - 1,123,772
Claims receivable 2,283,526 - - - 2,283,526
AFS investments:
Club membership shares - 1,925,186 - - 1,925,186
HTM investments:
Investment in treasury notes - - 206,549,324 - 206,549,324
Financial Liabilities
Liabilities at amortized cost:
Trade and accrued payables - - - (570,962,982) (570,962,982)
Due to related parties - - - (13,201,020) (13,201,020)
Government & other liabilities - - - (233,703,878) (233,703,878)
3,247,445,253 1,925,186 206,549,324 (817,867,880) 2,638,051,883
The table below demonstrates the income (expenses) of the Company’s financial instruments for the years ended December 31, 2012 and 2011.
2012 2011
Effect in Effect in Effect in Effect in
Profit or Loss Equity Profit or Loss Equity
Increase Increase Increase Increase
(Decrease) (Decrease) (Decrease) (Decrease)
Loans and receivables:
Interest income on cash in banks 6,755,441 - 3,253,183 -
Interest income on placement & short-term investments 34,382,215 - 65,727,238 -
Interest income on trade & other receivables 18,636,929 - 3,546,159 -
Interest income on non-current receivables 1,348 - 56,140 -
HTM Investment:
Interest income on treasury notes 4,566,206 - 8,731,941 -
Liabilities at amortized cost:
Interest expense on short-term loans payable - - (5,592,597) -
64,342,139 - 75,722,064 -
38. SEGMENT INFORMATION
The Company’s business operations are identified into separate operating segments based on the nature of products and services provided to its varied customers. Management’s
strategic decisions are made on the basis of these operating segments.
The Company’s major sources of revenues are as follows:
a. 10% share in the sale of gas and condensate from the SC 38 Malampaya Gas-to Power Project, which provides for the gas fuel requirements of the Santa Rita, San Lorenzo, Ilijan
power plants in Batangas and the Tabangao refinery. The condensate it produced, on the other hand, is shipped to buyers in Singapore;
b. Coal trading and integrated services or coal operations which continues to serve the coal requirement of existing industrial and power plant customers with the coal production
from COC 41 and other local coal mine sources; and
c. Other services, namely, pier services, warehousing and sale of fuel and lubes at ESB and equipment rental.
Financial information regarding the Company’s operating segments for the years ended December 31, 2012, 2011 and 2010 are presented in the following tables:
Gas & Oil Production Coal Operations All Other Segments TOTAL
Year Ended December 31, 2012
Segment Revenues 5,690,253,031 1,140,819,038 2,054,427,850 8,885,499,918
Segment Expenses (1,208,067,677) (792,924,961) (1,940,930,793) (3,941,923,430)
Segment Results 4,482,185,354 347,894,077 113,497,057 4,943,576,488
Other Income 1,862,155 6,756,368 69,240,294 77,858,816
Administrative Expenses (38,022,573) (236,335,321) (305,471,028) (579,828,922)
Other Expenses (79,305) (15,633,162) (126,243,661) (141,956,128)
Finance Costs - - - -
Foreign Exchange Gain / (Loss) (11,959,218) 1,065,374 (33,748,406) (44,642,251)
Profit Before Tax 4,433,986,413 103,747,336 (282,725,744) 4,255,008,003
Income Tax Expense (1,345,384,456) (6,957,882) 31,449,804 (1,320,892,534)
Profit for the Period 3,088,601,957 96,789,454 (251,275,940) 2,934,115,469
Gas & Oil Production Coal Operations All Other Segments TOTAL
Year Ended December 31, 2011
Segment Revenues 5,609,875,105 2,372,258,103 2,060,333,073 10,042,466,282
Segment Expenses (1,256,702,618) (1,808,526,509) (1,916,241,362) (4,981,470,489)
Segment Results 4,353,172,487 563,731,594 144,091,711 5,060,995,793
Other Income 6,926,046 34,054,409 80,827,882 121,808,336
Administrative Expenses (44,047,766) (299,173,417) (155,884,442) (499,105,625)
Other Expenses (47,284) (29,306,534) (221,737,658) (251,091,476)
Finance Costs (5,592,597) - - (5,592,597)
Foreign Exchange Gain / (Loss) (4,673,294) (278,635) (2,645,008) (7,596,937)
Profit Before Tax 4,305,737,592 269,027,417 (155,347,516) 4,419,417,494
Income Tax Expense (1,414,729,284) (1,703,407) (435,397) (1,416,868,087)
Profit for the Period 2,891,008,307 267,324,011 (155,782,912) 3,002,549,407
A n n u a l R e p o r t - 2 0 1 2 39

Gas & Oil Production Coal Operations All Other Segments TOTAL
Year Ended December 31, 2010
Segment Revenues 4,731,612,790 3,579,768,530 511,378,199 8,822,759,519
Segment Expenses (1,373,653,312) (3,134,222,894) (383,796,016) (4,891,672,221)
Segment Results 3,357,959,478 445,545,636 127,582,184 3,931,087,298
Other Income 9,031,526 71,695,265 146,761,036 227,487,827
Administrative Expenses (44,464,447) (275,671,477) (170,757,391) (490,893,315)
Other Expenses (40,774) (19,269,006) (509,816) (19,819,596)
Finance Costs (12,288,171) - - (12,288,171)
Foreign Exchange Gain / (Loss) (60,233,939) (3,600,959) (121,165,671) (185,000,569)
Profit Before Tax 3,249,963,673 218,699,459 (18,089,658) 3,450,573,474
Income Tax Expense (973,606,962) - (973,606,962)
Profit for the Period 2,276,356,711 218,699,459 (18,089,658) 2,476,966,512
Gas & Oil Production Coal Operations All Other Segments TOTAL
As of and for the year ended December 31, 2012
Segment Assets 9,298,874,537 611,558,917 317,311,691 10,227,745,145
Unallocated Corporate Assets 3,735,711,025
Total Assets 9,298,874,537 611,558,917 317,311,691 13,963,456,170
Segment Liabilities 2,805,121,979 11,398,222 7,531,886 2,824,052,087
Unallocated Corporate Liabilities 732,613,543
Total Liabilities 2,805,121,979 11,398,222 7,531,886 3,556,665,630
Capital Expenditure 590,030,811 127,908,485 5,538,743 723,478,039
Unallocated Capital Expenditure 77,707,577
590,030,811 127,908,485 5,538,743 801,185,616
Depreciation & Amortization 581,419,124 31,263,742 4,766,399 617,449,266
Unallocated Depreciation and Amortization 25,428,228
581,419,124 31,263,742 4,766,399 642,877,494
Gas & Oil Production Coal Operations All Other Segments TOTAL
As of and for the year ended December 31, 2011
Segment Assets 8,392,994,190 701,697,443 475,418,068 9,570,109,701
Unallocated Corporate Assets 3,373,039,950
Total Assets 8,392,994,190 701,697,443 475,418,068 12,943,149,651
Segment Liabilities 2,581,176,405 113,490,706 280,036,869 2,974,703,980
Unallocated Corporate Liabilities 493,386,607
Total Liabilities 2,581,176,405 113,490,706 280,036,869 3,468,090,587
Capital Expenditure 287,731,932 31,633,662 6,923,428 326,289,022
Unallocated Capital Expenditure 32,171,774
287,731,932 31,633,662 6,923,428 358,460,796
Depreciation & Amortization 603,321,068 61,401,610 4,830,046 669,552,724
Unallocated Depreciation and Amortization 21,643,896
603,321,068 61,401,610 4,830,046 691,196,620
Gas & Oil Production Coal Operations All Other Segments TOTAL
As of and for the year ended December 31, 2010
Segment Assets 9,616,739,722 1,149,529,879 213,799,908 10,980,069,509
Unallocated Corporate Assets - - - 4,198,834,187
Total Assets 9,616,739,722 1,149,529,879 213,799,908 15,178,903,696
Segment Liabilities 3,169,915,831 221,526,000 24,760,000 3,416,201,831
Unallocated Corporate Liabilities - - - 283,342,075
Total Liabilities 3,169,915,831 221,526,000 24,760,000 3,699,543,907
Capital Expenditure 371,418,537 49,698,624 3,997,580 425,114,741
Unallocated Capital Expenditure 34,774,232
371,418,537 49,698,624 3,997,580 459,888,973
Depreciation & Amortization 525,206,345 14,951,451 5,699,849 545,857,644
Unallocated Depreciation and Amortization 17,846,281
525,206,345 14,951,451 5,699,849 563,703,926
40
P N O C - E x p l o r a t i o n C o r p o r a t i o n

Geographical Segments:
The distribution of the Company’s revenue per geographical location for the years
ended December 31, 2012, 2011 and 2010 is presented in the following table:
2012
Gas & Oil Production
Coal Operations Others Consolidation
REVENUE
Local 4,511,128,455 1,140,819,038 2,054,427,933 7,706,375,426
Export 1,179,124,493 - - 1,179,124,493
5,690,252,948 1,140,819,038 2,054,427,933 8,885,499,919
2011
Gas & Oil Production Coal Operations Others Consolidation
REVENUE
Local 4,210,006,717 2,372,258,103 2,060,333,074 8,642,597,894
Export 1,399,868,387 - - 1,399,868,387
5,609,875,104 2,372,258,103 2,060,333,074 10,042,466,281
2010
Gas & Oil Production Coal Operations Others Consolidation
REVENUE
Local 3,728,437,871 2,142,748,637 511,378,199 6,382,564,707
Export 1,003,174,919 1,437,019,893 - 2,440,194,812
4,731,612,790 3,579,768,530 511,378,199 8,822,759,519
Segment asset and capital expenditure by geographical location are not separately
disclosed since all of the Company’s operations are in the Philippines.
B. Documentary Stamp Tax (DST)
DST paid/accrued on the following transactions are:
Loan instruments -
Others 159,750
159,750
C. Withholding Taxes
Withholding taxes paid/accrued for the year amounted
to:
Tax on compensation and benefits 38,111,958
Creditable withholding taxes 35,029,282
Final withholding taxes 2,825,227
VAT and other percentage taxes 116,178,594
192,145,061
D. All other Taxes (National and Local)
Other taxes paid during the year recognized under
“Taxes and licenses” account under Cost of Sales &
Operating expenses
Business Taxes 17,318,699
Real Estate Taxes 4,567,675
Fringe Benefit Taxes 1,992,829
License and permit fees 2,598,547
Others 138,824
26,616,574
39. INFORMATION REQUIRED UNDER RR 15-2010 OF THE BUREAU OF INTERNAL
REVENUE
The Bureau of Internal Revenue (BIR) issued on November 25, 2010 Revenue
Regulation (RR) 15-2010, Amending Certain Provisions of Revenue Regulations
No. 21-2002, as amended, Implementing Section 6 (H) of the Tax Code of 1997,
authorizing the commissioner on internal revenue to prescribe additional procedural
and/or documentary requirements in connection with the preparation and submission
of financial statements accompanying income tax returns. Under the said regulation,
companies are required to provide, in addition to the disclosures mandated under
the PFRSs, and such other standards and/or conventions as may be adopted, in the
notes to the financial statements, information on taxes, duties and license fees paid or
accrued during the taxable year.
In compliance with the requirements set forth by RR 15-2010 hereunder are the
information on taxes, duties and license fees paid or accrued during the taxable year.
A. Value Added Tax (VAT)
The Company is a VAT-registered entity with VAT output tax declaration of
P317,358,260 for the year based on the amount reflected in the Revenue and Other
income accounts.
The revenue and other income accounts include sale of gas and condensate from the
Company’s oil and gas production of SC 38 Malampaya project which is exempt from
VAT pursuant to Section 12(a) of Presidential Decree (PD) No. 87, Section 6.2 of SC 38
and Section 109(k) of the Tax Code of 1997, as amended by R.A. No. 9337.
The Company also has VAT exempt/zero-rated sales from its coal and energy supply
base operations pursuant to the provisions of Section 16 of PD No. 972 and Section
106(A)(2), 108(B) and 109 of the Tax Code of 1997, as amended by R.A. No. 9337.
The amount of VAT input taxes claimed are broken down as follows:
Beginning of the year (pertains to input tax deferred
on capital goods from previous period) 11,545,412
Current year’s purchases:
I. Goods for resale/manufacture or
further processing 230,781,326
II. Goods other than for resale or
manufacture 12,536,965
III. Capital goods subject to amortization 5,423,568
IV. Capital goods not subject to amortization 50,318
V. Services lodged under cost of goods sold 11,990,008
VI. Services lodged under other accounts 13,914,980 274,697,165
Claims for tax credit/refund and other Adjustments
(net of input tax on capital goods deferred for the succeeding
period of P12,401,840) 4,884,169
Balance at the end of the year 291,126,746
E. Deficiency Tax Assessments and Tax Cases
As at December 31, 2012, the Company has not received tax assessment notice from
the BIR nor has pending tax court cases.
40. MEMORANDUM OF AGREEMENT (MOA) WITH THE UNIVERSITY OF THE
PHILIPPINES (UP)
On November 11, 2011, PNOC EC entered into a Memorandum of Agreement (MOA)
with the University of the Philippines (“University”) to allocate P500 million from the
Company’s funds as “Endowment Fund” for purposes of scholarship grants, research
grants and professorial chairs to the students and faculty of the University in the
academic fields of geology under the National Institute of Geological Sciences, College
of Science, UP Diliman and of Mining and Energy Engineering under the College of
Engineering, UP Diliman. PNOC EC shall initially set aside P125 million from its funds
starting year 2011 and P125 million each year in the next three (3) years.
41. GENDER AND DEVELOPMENT (GAD)
PNOC EC is cognizant of the various gender issues that exist both in the Company’s
project areas and in the organization. The Company has allotted P4.69 million both
for client-focused and organization-focused Gender and Development (GAD) activities
for the year 2012. Various activities wereundertaken by the Company, such as vision,
mission and values inculcation program aimed at providing employees with the right
tools and techniques to help them cope with the requirements of their jobs. Aside from
the mandatory benefits to women employees provided by law, such as maternity leave,
the Company provides improvement to these benefits. Client-focused GAD activities
of the Company include training and seminars such as integrated farming, backyard
gardening and livelihood/skills training targeted on women members of the Company’s
host communities.
A n n u a l R e p o r t - 2 0 1 2 41

Board of Directors
Gemiliano C. Lopez, Jr.
Chairman
Pedro A. Aquino, Jr.
President and CEO
Rafael E. Del Pilar
Director
Rufino B. Bomasang
Director
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P N O C - E x p l o r a t i o n C o r p o r a t i o n

Armando P. Galimba
Director
Leopoldo E. Petilla
Director
Luis Ma. G. Uranza
Director
Francisco T. Ignalaga, Jr.
Director
Niel D. Tupas, Sr.
Director
Up to September 2012
A n n u a l R e p o r t 2 0 1 2 43

Management Team
Office of the President
(L to R)
Pedro A. Aquino, Jr.
President and CEO
Jose Ivan T. Justiniano
Compliance Officer
Lucila Q. Maralit
Manager, Internal Audit
Jose Edilbert S. Corsame
Manager, External Relations
Restituto G. Taganas, Jr.
Manager, Health, Safety,
Security, and Environment
Office of the General Counsel
(L to R)
Jose C. Sta. Ana
General Counsel
Ma. Fe Concepcion G. Lucero
Manager, Legal
44
P N O C - E x p l o r a t i o n C o r p o r a t i o n

Upstream Operations
(L to R)
Raymundo B. Savella
Vice President
Jaime A. Bacud
Manager, Petroleum Exploration
Miguel A. Tordilla
Manager, Petroleum Production
Valerio Joseph M. Foronda
Manager, Coal Exploration
and Development
Federico D. Galang
Manager, Engineering Services
(L to R)
Danilo G. Gacutan
Manager, Coal Operations Group
Ingersol R. Santia, Jr.
Mine Manager, Lumbog Coal Project
Cesar B. Ramirez
Mine Manager, Integrated Little
Baguio Coal Project
Gilbert B. Belason
Manager, Engineering and Logistics
Downstream Operations
(L to R)
Joseph Omar A. Castillo
Vice President
Joneil H. Magpantay
Manager-OIC, Trading and Marketing
Jose Allan R. Caringal
Manager, Energy Supply Base
Rolando V. Oliquino, Jr.
Manager, Project Development
A n n u a l R e p o r t 2 0 1 2 45

Management Team
Management Services
(L to R)
Lourdes S. Gelacio
Vice President
Elenita P. Tuazon
Manager-OIC, Finance
Josephine P. Quindoza
Manager-OIC, Treasury and
Joint Ventures Accounting
Candido M. Magsombol
Manager, Planning and Budget
Corporate Services
(L to R)
Manuel C. Mendoza
Vice President
Ma. Rita S. Dayleg
Manager, Administration
Eleanor Ann E. Villanueva
Manager, Human Resources
Julius Evan P. Zapata
Manager, Information and
Communication Technology
46
P N O C - E x p l o r a t i o n C o r p o r a t i o n

A n n u a l R e p o r t 2 0 1 2 47

Leading the Search for
Petroleum and Coal to
Power Asia’s Next Tiger
Company & Field Offices
Head Office
PNOC Exploration Corporation
Building 5, Energy Center, Rizal Drive
Bonifacio Global City, Taguig 1634
Metro Manila, Philippines
Tel.: 63 (2) 479-9400
Fax: 63 (2) 840-2055 / 840-1471
http://www.pnoc-ec.com.ph
Email: info@pnoc-ec.com.ph
Transfer Agent:
Philippine National Bank - Trust Banking Group
3/F PNB Financial Center, Pres. Diosdado Macapagal Blvd.,
Pasay City 1305
Tel.: 832-2615, 526-3688 • Fax: 526-3379
48
P N O C - E x p l o r a t i o n C o r p o r a t i o n

Batangas Coal Terminal
PNOC Exploration Corporation
San Miguel, Bauan
4201 Batangas, Philippines
Tel.: 63 (43) 727-1133
63 (2) 479-9407
Fax: 63 (43) 980-6157
Email: bct@pnoc-ec.com.ph
Energy Supply Base
PNOC Exploration Corporation
Barrio Mainaga, Mabini
4202 Batangas, Philippines
Tel.: 63 (43) 723-7519 / 487-0325
/ 487-0552 / 479-9431
Fax: 63 (43) 723-4018
Email: esbmktg@pnoc-ec.com.ph
Malangas Project Operations
PNOC Exploration Corporation
Km. 9, Diplahan
7039 Zamboanga Sibugay, Philippines
Tel.: 63 (919) 540-2154
63 (2) 479-9490
Fax: 63 (919) 547-0630
Email: mct@pnoc-ec.com.ph
Naga Coal Terminal
PNOC Exploration Corporation
6037 Cebu, Philippines
Tel.: 63 (2) 479-9489
Tel./Fax: 63 (32) 236-7044
Email: nct@pnoc-ec.com.ph
Tondo Coal Terminal
PNOC Exploration Corporation
Lot 2-A Vitas Industrial Estate, R-10 Vitas,
Tondo Manila
Tel.: 63 (2) 479 - 9487
Concept, Design, Production and Printing: MODE MATRIX MANILA , INC.