TRANSACTIONS (CHAPTER 10 OF MAIN MARKET LISTING REQUIREMENTS) - RELATED PARTY TRANSACTION

• Spot Sale of Crude to Petron Singapore Trading Pte Ltd.

INTRODUCTION

Pursuant to Paragraph 10.08 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad Petron Malaysia Refining & Marketing Bhd (“PMRMB”) wishes to announce that on November 11, 2024, it had concluded the sale of crude oil by PMRMB to its sister-company, Petron Singapore Trading Pte Ltd (“PSTPL”).

BACKGROUND

On October 9, 2024, PMRMB had announced the temporary closure of its Port Dickson Refinery for approximately 8 weeks to complete some repairs to its furnaces.

PMRMB purchases crude oil from various sources for processing. Such purchases are made months in advance per PMRMB’s refinery processing plan. In this regard a consignment of 300.801 kilo barrels (equivalent to approximately 48 million liters) of crude oil had been purchased for delivery to the Refinery. However due to the Refinery’s temporary shutdown, and the said crude not being able to be processed, PMRMB had to consider two (2) options; namely:

1. Selling the purchased crude oil at the best price available in the market; or
2. Storing the crude oil on board the vessel that will deliver the crude. However, such storage on vessel will incur high shipping storage costs and financing cost to PMRMB. It is necessary to note that at the moment, there is limited storage facility for crude oil at the Refinery due to the temporary shutdown and from that the inability to process crude already delivered earlier.

DETERMINATION OF ACTION AND RATIONALE

PMRMB sought sale prices from various oil traders in the region who would want the said crude oil consignment on a ‘spot’ basis (ie an unplanned purchase). However, the offers made were not attractive. In this regard, PSTPL made an offer to PMRMB to purchase the consignment of crude oil from PMRMB. The price offered by PSTPL could not be matched by any other oil trader.

Management also calculated the cost of the alternate option that is to store the crude oil on the vessel.

The cost analysis showed that compared to the high cost of storage of the crude oil on the vessel and the financing cost that will be incurred by PMRMB, the sale of the parcel of crude oil to PSTPL will provide PMRMB a net saving of RM 6.76 million.

RELATED PARTY TRANSACTION

PMRMB currently has a Recurrent Related Party Transaction Mandate in place with PSTPL (last approved by PMRMB’s shareholders at its Annual General Meeting on June 13, 2024). However, the said Mandate is for (among others) the “purchase” of crude oil by PMRMB from PSTPL. Sale of crude oil by PMRMB to PSTPL was not envisaged and so not included in the Mandate.

Thus the said sale by PMRMB to PSTPL of the 300.801 kilo barrels of crude oil is a one-off related party transaction.

SALIENT TERMS OF THE AGREEMENT

HIGHEST PERCENTAGE RATIO

Following the Materiality Tests for Related Party Transaction calculated pursuant to Paragraph 10.02(g) of the Main Market Listing Requirements, the highest percentage ratio of transaction is 4.25%, requiring a disclosure to the stock exchange.

INFORMATION ON PSTPL

PSTPL was incorporated in Singapore in 2010, with the principal business of procurement and trading of crude oil, petroleum and related products, as well as crude vessel chartering and commodity risk management services, mainly for its parent company Petron Corporation and affiliates.

RELATIONSHIP BETWEEN PMRMB AND PSTPL INCLUDING COMMON MAJOR SHAREHOLDERS AND DIRECTORS AND THEIR INTERESTS

73.4% of the share capital of PMRMB and 100% of the share capital of PSTPL are owned by parent company Petron Corporation.

Petron Corporation is a subsidiary of San Miguel Corporation. Both Petron Corporation and San Miguel Corporation are listed on the Philippines Stock Exchange.

Mr. Lubin B. Nepomuceno and Ms. Aurora T. Calderon are common Directors of both PMRMB and PSTPL.  

Mr. Nepomuceno and Ms. Calderon respectively own 5,000 share and 1,000 shares in Petron Corporation.  As such their indirect shareholding in PMRMB is therefore 0.0000389% and 0.00000778% respectively.

Apart from the above said shareholding and directorships, both Mr. Nepomuceno and Ms. Calderon have no direct or indirect interest in the said sale arrangement between PMRMB and PSTPL.

Both Mr. Nepomuceno and Ms. Calderon were also not involved in and abstained from the negotiations between the companies leading to the conclusion of the said terms of the sale that forms the related party transaction.

Apart from that disclosed above, no person connected to PMRMB’s major shareholder or the above-mentioned Directors have any direct or indirect interest in the said sale.

TRANSACTIONS WITH RELATED PARTY FOR THE PRECEDING 12 MONTHS

There has been no undisclosed one-off transaction(s) outside the Recurrent Related Party Transaction Mandate entered between PMRMB and PSTPL and/or persons connected to the related party during the twelve (12) months preceding the date of this announcement.

LIABILITIES

There are no liabilities, including contingent liabilities and guarantees, to be assumed by PMRMB pursuant to the related party transaction.

MATERIAL IMPACT ON PMRMB

The above arrangements will not have any negative financial impact on PMRMB.

MINORITY INTERESTS PROTECTION

The agreement was negotiated by the companies on an arms-length basis, following strict internal guidelines, to ensure terms and conditions, including the consideration paid, were fair and reasonable to both Companies and on normal commercial terms.

BOARD AUDIT & RISK MANAGEMENT COMMITTEE’S STATEMENT

Taking into consideration the unplanned shut-down of the Refinery for repairs and so its inability to process or store previously purchased crude oil, PMRMB, by selling the crude oil to PSTPL will ensure that PMRMB is not burdened with the high cost of storing the crude oil on board the vessel as well as the high financing cost. The said sale will provide a net cost savings of RM 6.76 million.

The above Related Party Transaction will therefore not be detrimental to the interests of the Minority Shareholders of PMRMB.

The Audit Committee members, having considered the proposals for the related party transaction, including the rationale, benefits and effects, formed the opinion that it is:

1. In the best interest of PMRMB;
2. Fair, reasonable, and on normal commercial terms; and
3. Not detrimental to the interest of the minority shareholders of PMRMB.

BOARD OF DIRECTORS’ STATEMENT

The Board of Directors of PMRMB having considered the proposals for the related party transaction, including the rationale, benefits and effects, and having considered the views of the Board Audit & Risk Management Committee, formed the view that it is:

1. In the best interest of PMRMB;
2. Fair, reasonable, and on normal commercial terms; and
3. Not detrimental to the interest of the minority shareholders of PMRMB.

This announcement is dated November 11, 2024.