Barron, Patrick Henry V.

MGT 117 – D

Philex lends $10M to local unit of Forum

SUMMARY

PHILEX MINING Corp. is offering its $10-million loan to Forum Philippines Holdings
Ltd., a subsidiary unit of Forum Energy Plc., to fund its share in a work program in Palawan,
according to disclosure to the Philippine Stock Exchange. This loan will cover Forum Energy’s
70-percent share in Service Contract (SC) 72 license wherein it involves an offshore area of
8,800 square kilometers known as the Sampaguita gas field.

This work program will be available for a 3 year period and funds can be borrowed at an
interest rate of US LIBOR plus 4.5 percent. Also, the work program will enable the company to
fund its 70 percent share of a first sub-phase work programme over Service Contract 72 (SC72).
From this, Philex has approved this work program on which Forum’s share is estimated to cost
up to approximately $7.4 million. According to Andrew Mullins, the executive director of Forum
Energy, the work program will provide more comprehensive valuation of the property and
identify potential sites for appraisal well.

The work program involves 3D seismic work over 550 square kilometers around
Sampaguita gas discovery and 2,200 line kilometers of high resolution 2D over existing leads
within the 8,800-square-km contract area. The seismic data is intended to be completed within
the first half of 2011 and will further undergo to technical analysis.

SYNTHESIS

Philippines is indeed rich in natural resources especially in mineral deposits that is why
many foreign investors are willing to invests in our country. This could lead to job creation
especially in mining industry which could be beneficial for the economy. It has been said that the
Sampaguita gas field holds for about 3.4 trillion cubic feet of gas which is slightly higher than
the Malampaya gas field. Also, Sampaguita gas field has 20 trillion cubic feet potential gas
reserve. This acquisition will add significant value to Forum Energy’s oil and gas portfolio
which eventually could lead to an additional source of liquefied natural gas that could be
supplied in the entire country.

According to the news, the credit will be facilitated by LIBOR (London Interbank
Offered Rate) plus 4.5. This belongs to the Fixed Income Securities which is used as an interest
rate by banks when they transact within themselves. Also, this will be helpful to Forum Energy
to as a basis or reference rate for monetary policy.

REFERENCES
Olchondra, Riza T. (2010, November 26). Philex lends $10M to local unit of Forum. Philippine
Daily Inquirer. p. B-5.