PXP Energy Corporation and Subsidiaries
Consolidated Financial Statements December 31, 2024 and 2023
and Years Ended December 31, 2024, 2023, and 2022
and
Independent Auditor's Report
SyCip Gorres Velayo & Co. | Tel: (632) 8891 0307 |
6760 Ayala Avenue | Fax: (632) 8819 0872 |
1226 Makati City | sgv.ph |
Philippines |
INDEPENDENT AUDITOR'S REPORT
The Stockholders and the Board of Directors
PXP Energy Corporation
Opinion
We have audited the consolidated financial statements of PXP Energy Corporation and its subsidiaries (the Group), which comprise the consolidated statements of financial position as at December 31, 2024 and 2023, and the consolidated statements of income, consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows for each of the three years in the period ended December 31, 2024, and notes to the consolidated financial statements, including material accounting policy information.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2024 and 2023, and its consolidated financial performance and its consolidated cash flows for each of the three years in the period ended December 31, 2024 in accordance with Philippine Financial Reporting Standards (PFRS) Accounting Standards.
Basis for Opinion
We conducted our audits in accordance with Philippine Standards on Auditing (PSAs). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the Code of Ethics for Professional Accountants in the Philippines (Code of Ethics) together with the ethical requirements that are relevant to our audit of the consolidated financial statements in the Philippines, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.
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A member firm of Ernst & Young Global Limited
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We have fulfilled the responsibilities described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the consolidated financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying consolidated financial statements.
Recoverability of Deferred Oil and Gas Exploration Costs, and Goodwill
As at December 31, 2024, the carrying value of the Group's deferred oil and gas exploration costs, and goodwill amounted to =2,799P million and =254P million, respectively. These deferred oil and gas exploration costs pertain to the expenditures incurred by the Group for various projects, while the Group's goodwill is attributable to Service Contract 72 Recto Bank.
Under PFRS 6, Exploration for and Evaluation of Mineral Resources, these deferred oil and gas exploration costs shall be assessed for impairment when facts and circumstances suggest that the carrying amounts exceed the recoverable amounts. The ability of the Group to recover its deferred oil and gas exploration costs would depend on the commercial viability of the project. The Group is also required to annually test the amount of goodwill for impairment under PAS 36, Impairment of Assets.
We considered this as a key audit matter because of the materiality of the amount involved. In addition, management's assessment process requires significant judgment and is based on assumptions which are subject to higher level of estimation uncertainty, specifically inflation rates, forecasted oil and gas prices, estimated volume of resources, capital expenditures, production and operating costs and discount rate.
The Group's disclosures about goodwill and deferred oil and gas exploration costs are included in Notes 4 and 11 to the consolidated financial statements, respectively.
Audit response
We obtained management's assessment on whether there is any indication that deferred oil and gas exploration costs may be impaired. We inspected the summary of the status of each exploration project as of December 31, 2024, as certified by the Group's Technical Group Head , the type of expenses incurred, and assessed whether ongoing exploration activities exist to support the continued capitalization of these assets under the Group's accounting policies, and compared it with the disclosures submitted to regulatory agencies. We inspected contracts and agreements, inquired with management whether such exploration is continuing, made reference with existing drilling results and inspected the approved work program and budget for continuing the exploration costs. We inspected the service contracts and relevant joint operations agreements of each exploration project to determine that the period for which the Group has the right to explore in the specific area has not expired, will not expire in the near future, and will be renewed accordingly, and the Group has rights and obligations under the contracts through participating interests. We also inquired about any existing service contract areas that are expected to be abandoned or any exploration activities that are planned to be discontinued in those areas. We also reviewed the adequacy of the Group's disclosure, including those that have the most significant effect on the determination of the recoverable amount of deferred oil and gas exploration costs.
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A member firm of Ernst & Young Global Limited
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We obtained an understanding of the management's process for evaluating the impairment of goodwill. We involved our internal specialist in evaluating the methodology and the discount rate used. We compared the key assumptions used, such as inflation rates, forecasted oil and gas prices, estimated volume of resources, capital expenditures, production and operating costs, discount rate against industry/market outlook and other relevant external data. We tested the parameters used in the determination of the discount rate against market data. We also reviewed the Group's disclosures about those assumptions to which the outcome of the impairment test is most sensitive, specifically those that have the most significant effect on the determination of the recoverable amount of goodwill.
Other Information
Management is responsible for the other information. The other information comprises the information included in the SEC Form 20-IS (Definitive Information Statement), SEC Form 17-A and Annual Report for the year ended December 31, 2024, but does not include the consolidated financial statements and our auditor's report thereon. The SEC Form 20-IS (Definitive Information Statement), SEC Form 17-A and Annual Report for the year ended December 31, 2024 are expected to be made available to us after the date of this auditor's report.
Our opinion on the consolidated financial statements does not cover the other information and we will not express any form of assurance conclusion thereon.
In connection with our audits of the consolidated financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audits, or otherwise appears to be materially misstated.
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with PFRS Accounting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group's financial reporting process.
*SGVFS195423*
A member firm of Ernst & Young Global Limited
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Auditor's Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with PSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with PSAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
- Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
- Obtain an understanding of internal control relevant to the audit 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 Group's internal control.
- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
-
Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern. - Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
- Plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group as a basis for forming an opinion on the consolidated financial statements. We are responsible for the direction, supervision and review of the audit work performed for purposes of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
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A member firm of Ernst & Young Global Limited
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We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor's report is Marco Rene A. Barredo.
SYCIP GORRES VELAYO & CO.
Marco Rene A. Barredo Partner
CPA Certificate No. 116783
Tax Identification No. 214-999-478
BOA/PRC Reg. No. 0001, April 16, 2024, valid until August 23, 2026
BIR Accreditation No. 08-001998-160-2025, January 8, 2025, valid until January 7, 2028 PTR No. 10465269, January 2, 2025, Makati City
February 26, 2025
*SGVFS195423*
A member firm of Ernst & Young Global Limited
PXP ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Amounts in Thousands, Except Par Value per Share and Number of Equity Holders)
December 31 | ||
2024 | 2023 | |
ASSETS | ||
Current Assets | P=91,414 | |
Cash and cash equivalents (Note 5) | P=145,149 | |
Trade and other receivables (Note 6) | 17,206 | 8,826 |
Inventories (Note 7) | 7,077 | 11,999 |
Other current assets (Note 8) | 8,994 | 8,615 |
Total Current Assets | 124,691 | 174,589 |
Noncurrent Assets | 2,799,390 | |
Deferred oil and gas exploration costs (Note 11) | 2,642,442 | |
Goodwill (Note 4) | 254,397 | 254,397 |
Property and equipment (Note 9) | 1,367 | 1,217 |
Right-of-use (ROU) asset (Note 10) | 2,895 | 3,246 |
Other noncurrent assets (Note 12) | 7,819 | 6,696 |
Total Noncurrent Assets | 3,065,868 | 2,907,998 |
TOTAL ASSETS | =3,190,559P | =3,082,587P |
LIABILITIES AND EQUITY | ||
Current Liabilities | P=19,768 | |
Trade and other payables (Note 13) | P=22,044 | |
Notes payable (Note 17) | 69,414 | 66,444 |
Current portion of lease liability (Note 10) | 810 | 736 |
Income tax payable | 96 | 289 |
Total Current Liabilities | 90,088 | 89,513 |
Noncurrent Liabilities | 3,338 | |
Lease liability - net of current portion (Note 10) | 3,803 | |
Deferred tax liabilities - net (Note 16) | 92,783 | 91,862 |
Retirement benefits liability (Note 23) | 12,746 | 17,415 |
Other noncurrent liabilities (Notes 9 and 24) | 287,123 | 245,807 |
Total Noncurrent Liabilities | 395,990 | 358,887 |
Total Liabilities | 486,078 | 448,400 |
Equity | ||
Capital stock - =1P par value per share (Note 15) | ||
Authorized - 6,800,000,000 common shares | 1,960,000 | |
Issued and subscribed - 1,960,000,000 common shares | 1,960,000 | |
Additional paid-in capital | 2,816,545 | 2,816,545 |
Equity reserves (Note 15) | 411,549 | 411,549 |
Deficit | (3,578,653) | (3,547,773) |
Cumulative translation adjustment on foreign subsidiaries | 574,634 | 497,597 |
Total equity attributable to equity holders of the Parent Company | 2,184,075 | 2,137,918 |
Non-controlling interests (Note 15) | 520,406 | 496,269 |
Total Equity | 2,704,481 | 2,634,187 |
TOTAL LIABILITIES AND EQUITY | =3,190,559P | =3,082,587P |
See accompanying Notes to Consolidated Financial Statements
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PXP ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in Thousands, Except Loss per Share)
Years Ended December 31
2024 | 2023 | 2022 | |
PETROLEUM REVENUES (Note 22) | P=66,982 | P=63,192 | =74,100P |
COSTS AND EXPENSES | 37,471 | ||
Petroleum production costs (Note 7) | 39,893 | 40,466 | |
General and administrative expenses (Note 14) | 54,359 | 62,677 | 59,106 |
91,830 | 102,570 | 99,572 | |
OTHER INCOME (CHARGES) | 7,327 | ||
Reversal of plug and abandonment costs (Note 9) | 92,440 | 6,186 | |
Interest income (Note 5) | 3,612 | 1,951 | 201 |
Foreign exchange gains (losses) - net | 734 | 2,108 | (4,048) |
Provision for impairment of: | (4,033) | ||
Input VAT (Note 8) | − | (13,882) | |
Deferred oil and gas exploration costs (Note 11) | − | (128,771) | − |
Interest expense (Notes 9, 10 and 17) | (10,243) | (7,958) | (3,592) |
Others | − | − | 9,192 |
(2,603) | (40,230) | (5,943) | |
LOSS BEFORE INCOME TAX | (27,451) | (79,608) | (31,415) |
PROVISION FOR (BENEFIT FROM) | |||
INCOME TAX (Note 16) | 211 | ||
Current | 537 | 183 | |
Deferred | 921 | (2,968) | 750 |
1,132 | (2,431) | 933 | |
NET LOSS | (P=28,583) | (P=77,177) | (P=32,348) |
NET INCOME (LOSS) ATTRIBUTABLE TO: | (P=30,880) | ||
Equity holders of the Parent Company | (P=97,403) | (P=36,107) | |
Non-controlling interests | 2,297 | 20,226 | 3,759 |
(P=28,583) | (P=77,177) | (P=32,348) | |
BASIC/DILUTED LOSS PER SHARE (Note 21) | (P=0.016) | (P=0.050) | (P=0.018) |
See accompanying Notes to Consolidated Financial Statements |
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PXP ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in Thousands)
Years Ended December 31
2024 | 2023 | 2022 | |
NET LOSS | (P=28,583) | (P=77,177) | (P=32,348) |
OTHER COMPREHENSIVE INCOME (LOSS) | |||
Items to be reclassified to profit or loss | |||
in subsequent periods: | 98,877 | ||
Gain (loss) on translation of foreign subsidiaries | (22,121) | 315,114 | |
TOTAL COMPREHENSIVE INCOME (LOSS) | P=70,294 | (P=99,298) | =282,766P |
TOTAL COMPREHENSIVE INCOME (LOSS) | |||
ATTRIBUTABLE TO | P=46,157 | ||
Equity holders of the Parent Company | (P=116,698) | P=202,657 | |
Non-controlling interests | 24,137 | 17,400 | 80,109 |
P=70,294 | (P=99,298) | P=282,766 | |
See accompanying Notes to Consolidated Financial Statements
*SGVFS195423*
PXP ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2024, 2023 AND 2022 (Amounts in Thousands)
Attributable to Equity Holders of the Parent Company | ||||||||
Cumulative | ||||||||
Translation on | Non-controlling | |||||||
Capital Stock | Additional | Equity | Foreign | Interests | ||||
(Note 15) | paid-in capital | Reserves | Deficit | Subsidiaries | Subtotal | (Note 15) | Total | |
BALANCES AT DECEMBER 31, 2021 | =1,960,000P | =2,816,545P | P=139,319 | (P=3,414,263) | P=183,293 | =1,684,894P | =931,693P | =2,616,587P |
Net income (loss) for the year | − | − | − | (36,107) | − | (36,107) | 3,759 | (32,348) |
Other comprehensive income: | ||||||||
Gain on translation of foreign subsidiaries | − | − | − | − | 238,764 | 238,764 | 76,350 | 315,114 |
Total comprehensive income (loss) for the year | − | − | − | (36,107) | 238,764 | 202,657 | 80,109 | 282,766 |
Effect of transactions with owners (Note 15) | − | − | 275,888 | − | 94,835 | 370,723 | (570,311) | (199,588) |
BALANCES AT DECEMBER 31, 2022 | 1,960,000 | 2,816,545 | 415,207 | (3,450,370) | 516,892 | 2,258,274 | 441,491 | 2,699,765 |
Net income (loss) for the year | − | − | − | (97,403) | − | (97,403) | 20,226 | (77,177) |
Other comprehensive loss: | ||||||||
Loss on translation of foreign subsidiaries | − | − | − | − | (19,295) | (19,295) | (2,826) | (22,121) |
Total comprehensive income (loss) for the year | − | − | − | (97,403) | (19,295) | (116,698) | 17,400 | (99,298) |
Effect of transactions with owners (Note 15) | − | − | (3,658) | − | − | (3,658) | 37,378 | 33,720 |
BALANCES AT DECEMBER 31, 2023 | 1,960,000 | 2,816,545 | 411,549 | (3,547,773) | 497,597 | 2,137,918 | 496,269 | 2,634,187 |
Net income (loss) for the year | − | − | − | (30,880) | − | (30,880) | 2,297 | (28,583) |
Other comprehensive income: | ||||||||
Gain on translation of foreign subsidiaries | − | − | − | − | 77,037 | 77,037 | 21,840 | 98,877 |
Total comprehensive income (loss) for the year | − | − | − | (30,880) | 77,037 | 46,157 | 24,137 | 70,294 |
BALANCES AT DECEMBER 31, 2024 | =1,960,000P | =2,816,545P | =411,549P | (P=3,578,653) | =574,634P | =2,184,075P | =520,406P | =2,704,481P |
See accompanying Notes to Consolidated Financial Statements
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