MoIT values PV Oil at $456 million

With its initial public offering (IPO) to be held later this month, the Ministry of Industry and Trade has valued Vietnam’s sole crude oil exporter and second-largest oil products retailer, the PetroVietnam Oil Corp. (PV Oil), at VND10.34 trillion ($456 million) as at January 1, 2016.

Fixed assets amounted to 15.7 per cent, long-term financial investments 44 per cent, and goodwill (the established reputation of PV Oil as a quantifiable asset) 1.6 per cent.

PV Oil earlier said it is in talks to sell as much as 40 per cent to strategic investors, expecting to raise at least $270 million from one or two investors, and plans to offer as much as 15 per cent in the IPO.

Some ten potential strategic investors, including “major oil companies” from Japan, South Korea, Thailand, Vietnam, and the Middle East, have applied to buy the shares, PV Oil’s President and CEO Mr. Cao Hoai Duong was quoted as telling foreign media in March.

One matter of note is that PV Oil “still has room to move”, Mr. Duong said, referring to the government’s market share cap of 50 per cent on petroleum distributors. According to Mr. Duong, the company is planning a massive $280 million worth of acquisitions over the next five years, including $170 million funded by its cash holdings and the remainder from bank borrowings.

Among the 29 domestic companies licensed as wholesale distributors in Vietnam, the Vietnam National Petroleum Group (Petrolimex) has about half of the retail market share, followed by PV Oil with 22 per cent, according to Saigon Securities Inc. estimates.

But there may be a shift in the market and the competitive situation shortly, however.

Roughly 30 per cent of Petrolimex’s input materials are currently supplied by the 130,000 barrels-per-day Vietnam Oil and Gas Group (PetroVietnam)’s Dung Quat Oil Refinery, while the remainder is imported. While the share of imports will most likely decline in the next five years when three domestic oil refineries - Long Son, Nghi Son and Nam Van Phong - come into operation, what is most troubling for Petrolimex is that apart from Nam Van Phong, in which it contributed investment of $8 billion and which has a capacity of 10 million tons per year, the remainder are PetroVietnam projects.

PV Oil, as a subsidiary of PetroVietnam and also Petrolimex’s biggest competitor, will then hold more advantages in terms of material resources.

PV Oil earned VND34 trillion ($1.5 billion) revenue and VND730 billion ($32.2 million) in pre-tax profit in 2016, according to its audited consolidated financial statement. After these planned transactions are finalized, PetroVietnam will continue to reduce its stake in PV Oil, eventually bringing it down to less than 50 per cent by 2020, as per a recent government resolution.