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Fundamental View
AS OF 05 Sep 2025Petron’s 1H25 results was weaker YoY; we expect Petron’s credit metrics to remain flat YoY in FY25 owing to higher capex and flat-to-slight decline % YoY EBITDA growth amid a low double-digit YoY decline in sales volume growth though partially supported by lower crude oil input costs
About two-third of its total revenues are derived from the Philippines and are indexed to Dubai crude prices, which allows for smooth cost pass-throughs and good insulation from crude price volatility.
Free cash flows are typically negative due to inventory fluctuations that outweigh low capex.
Business Description
AS OF 05 Sep 2025- Petron is the largest oil refining and retailing company in the Philippines, and the third largest player in Malaysia. It maintains a 24% market share in the Philippines (followed by Shell and Caltex) and a 20% market share in Malaysia (largest being Petronas), based on total fuel sales volumes.
- Petron has a total refining capacity of 268k barrels/day (bpd) and accounts for about 30% of the Philippines' fuel needs. Its petroleum refining facilities include the Limay Refinery in Bataan, Philippines (capacity of 180k bpd; 67% of total) and the Port Dickson Refinery in Negeri Sembilan, Malaysia (capacity of 88k bpd; remaining 33% of total).
- Petron's refineries process crude oil into a full range of petroleum products including gasoline, diesel, LPG, jet fuel, kerosene and petrochemicals.
- It further markets and retails these fuel products through its fuel service stations located across the Philippines (~1,800 outlets) and Malaysia (>800 outlets).
- Petron sources its crude oil supplies from third-party suppliers, namely Saudi Aramco, Kuwait Petroleum Corporation and Exxon Mobil, which are bought on the basis of term contracts and in the spot market.
- Petron mainly supplies its petroleum and fuel products to customers in Malaysia and the Philippines (~95% of annual revenue).
- Petron is 68% owned by San Miguel Corporation (SMC), one of the largest and most diversified conglomerates in the Philippines based on total revenues and assets. SMC's CEO, Mr. Ramon Ang, is also Petron's CEO.
Risk & Catalysts
AS OF 05 Sep 2025Petron cannot fully pass on higher crude oil input costs to customers in Malaysia.
Petron operates in low-margin business (EBITDA margins ~5%) and maintains elevated credit metrics.
Petron is highly dependent on its Limay petroleum refining complex that makes up two-thirds of its total refining capacity (67%). Any events that disrupt the refinery’s operations could adversely affect Petron’s total revenues.
Key Metric
AS OF 05 Sep 2025| PHP bn | FY22 | FY23 | FY24 | 1H24 | 1H25 |
|---|---|---|---|---|---|
| Debt to Book Cap | 74.0% | 75.1% | 74.5% | 74.1% | 72.2% |
| Net Debt to Book Cap | 65.5% | 68.2% | 67.1% | 66.5% | 62.6% |
| Debt/Total Equity | 284.2% | 301.4% | 292.0% | 285.8% | 259.3% |
| Debt/Total Assets | 70.2% | 67.6% | 64.9% | 65.1% | 61.7% |
| Gross Leverage | 10.9x | 7.1x | 7.4x | 6.8x | 6.9x |
| Net Leverage | 9.7x | 6.4x | 6.7x | 6.1x | 6.0x |
| Interest Coverage | 2.2x | 2.2x | 1.9x | 2.1x | 2.0x |
| EBITDA Margin | 3.4% | 5.3% | 4.7% | 5.1% | 5.6% |
CreditSight View Comment
AS OF 16 Sep 2025We assign an Outperform recommendation on Petron’s new $475 mn 7.35% c.Sep-2028 perp since we like its high on-market coupon, and our expectation for some yield tightening in early secondary market trading. Overall, we think Petron is a stable credit with an improving credit outlook. We like its full cost passthroughs for its operations in retail O&G in the Philippines, low capex, consistently improving net leverage metric (LTM 1H25: 6x), manageable debt maturity profile, proven willingness/ability to call back its perps by their first call date, strong parental support from the domestically well-reputed San Miguel Group and a 3-year tenor to first call that limits duration risk.
Recommendation Reviewed: September 16, 2025
Recommendation Changed: September 16, 2025
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