COVER SHEET

SEC Registration Number

4 0 0 5 8

COMPANY NAME

O R I E N T A L P E T R O L E U M A N D M I N E R A L

S C O R P O R A T I O N A N D S U B S I D I A R I E S

PRINCIPAL OFFICE ( No. / Street / Barangay / City / Town / Province )

3 4 t h F l o o r , R o b i n s o n s E q u i t a b l

e T o w e r , A D B A v e n u e , O r t i g a s C

e n t e r , P a s i g C i t y

Ethelwoldo E. Fernandez 637-1670

(Contact Person) (Company Telephone Number)

1 2 3 1 S E C F O R M - 1 7 - A
Month Day (Form Type) Month Day
(Fiscal Year) (Annual Meeting)
Annual Report 2017

(Secondary License Type, If Applicable)

Dept. Requiring this Doc. Amended Articles Number/Section

Total Amount of Borrowings

11,706
Total No. of Stockholders Domestic Foreign

To be accomplished by SEC Personnel concerned

File Number LCU

Document ID Cashier

STAMPS
Remarks: Please use BLACK ink for scanning purposes.
 SECURITIES AND EXCHANGE COMMISSION

SEC FORM 17-A

ANNUAL REPORT PURSUANT TO SECTION 17

OF THE SECURITIES REGULATION CODE AND SECTION 141
OF THE CORPORATION CODE OF THE PHILIPPINES

1. For the fiscal year ended December 31, 2017

2. Commission identification number 40058

3. BIR Tax Identification No. 000-483-747-000

4. ORIENTAL PETROLEUM AND MINERALS CORPORATION

Exact name of issuer as specified in its charter

5. Manila, Philippines
Province, country or other jurisdiction of incorporation or organization

6. Industry Classification Code: [ ] (SEC Use Only)

7. 34th Floor, c/o JG Summit, Robinsons Equitable

Tower, ADB Avenue, Ortigas Center Pasig City 1600
Address of issuer’s principal office Postal Code

8. (632) 637-1670 locals 278 and 281

Issuer’s telephone number, including area code

9. Not Applicable
------------------------------------------------------------------------------------------------
Former name, former address and formal fiscal year, if changed since last report

10. Securities registered pursuant to Sections 8 and 12 of the Code, or Sections 4 and 8 of the
RSA

Title of each Class Number of shares of common stock outstanding

Common Stock, P0.01 par value 200 Billion

11. Are any or all of the securities listed on a Stock Exchange?

Yes [ x ] No [ ]

If yes, state the name of such Stock Exchange and the class/es of securities listed therein:

Philippine Stock Exchange Class A and B

12. Indicate by check mark whether the registrant:

(a) Has filed reports required to be filed by Section 17 of the Code and SRC Rule 17
thereunder or Sections 11 of the RSA and RSA Rule 11(a)-1 thereunder, and Sections 26
and 141 of the Corporation Code of the Philippines, during the preceding twelve (12)
months (or for such shorter period the registrant was required to file such reports)

Yes [ x ] No [ ]

(b) Has been subject to such filing requirements for the past ninety (90) days

Yes [ x ] No [ ]

13. State the aggregate market value of the voting stock held by non-affiliates of the
registrant.

The aggregate market value of the voting stock held by non-affiliates is P1.36 billion.
 TABLE OF CONTENTS
Page No.

PART I - BUSINESS AND GENERAL INFORMATION

Item 1 Business 1
Item 2 Properties 3
Item 3 Legal Proceedings 3
Item 4 Submission of Matters to a Vote of Security Holders 3

PART II - OPERATIONAL AND FINANCIAL INFORMATION

Item 5 Market for Registrants Common Equity and 4

Related Stockholder Matters
Item 6 Management’s Discussion and Analysis or 6
Plan of Operation
Item 7 Financial Statements 11
Item 8 Changes in and Disagreements with Accountants 11
and Financial Disclosure
Item 9 Independent Public Accountant and Audit Related Fees 11

PART III - CONTROL AND COMPENSATION INFORMATION

Item 10 Directors and Executive Officers of Registrant 13

Item 11 Executive Compensation 17
Item 12 Security Ownership of Certain Beneficial Owners and 19
Management
Item 13 Certain Relationships and Related Transactions 20

PART IV - EXHIBITS AND SCHEDULES 21

Item 14 Exhibits and Reports on SEC Form 17-C 21

SIGNATURES 22

INDEX TO FINANCIAL STATEMENTS AND 23

SUPPLEMENTARY SCHEDULES
 PART I - BUSINESS AND GENERAL INFORMATION

Item 1. Business

Oriental Petroleum and Minerals Corporation (OPMC) is a Philippine corporation

incorporated on December 22, 1969 with the purpose of exploring, developing and producing
petroleum and mineral resources in the Philippines. As an exploration company, OPMC's
operational activities depend principally on its Service Contracts with the government.

The Company, together with other oil exploration companies (collectively referred to as
"a or the Contractor"), entered into a Service Contract (SC) with the Philippine Government,
through the Department of Energy (DOE), for the exploration, development and exploitation of
certain contract areas situated in offshore Palawan where oil discoveries were made. The
Company's petroleum revenues and production and related expenses are derived from SC 14
Contract Area. SC 14 is composed of four Blocks, Block - A (Nido), Block - B (Matinloc), Block
- C (Galoc & West Linapacan) and Block - D. Of these areas, only West Linapacan and Block -
D are the non-producing areas; West Linapacan is currently under evaluation for re-activation
after it was shut-in in 1991 due to water intrusion. Block - D, on the other hand, is designated as
the Retention Block.

Production Data for 2017 and 2016

Average Selling Price (in
Volume (in bbls.) US$/bbl.)
Area
2017 2016 2017 2016
Nido / Matinloc 125,774 135,619 53.04 42.59
Galoc 1,408,834 1,728,647 54.97 43.35

Nido and Matinloc oilfields’ combined production were sold and delivered to Pilipinas
Shell while production from Galoc were sold and delivered to various customers. Sale is
effected through physical transfer of crude oil from offshore production site from storage and
processing ship to oil tanker of the buyer. Galoc crude oil can be sold at a higher price as
compared to Nido/Matinloc crude oil due to volume.

SCs and Geophysical Survey and Exploration Contracts (GSECs) are the principal
properties of the Company and owned by the State.

The contractors are bound to comply in the work obligations provided in the contract
with the DOE. They should provide at their own risk the financing, technology and services
needed in the performance of their obligations. Failure to comply with their work obligations
means that they should pay the government the amount they should have spent had they pushed
through with their undertaking. Operating agreement among the participating companies
governs their rights and obligations under the contract.

For the year ended December 31, 2017, the Company recorded total revenue from
petroleum operations of US$7.64 million. The main source of this revenue was from Galoc
operations which contributed a total of US$6.52 million. In 2016, the Company recorded
petroleum revenue of US$8.67 million; US$7.72 million came from its share in the Galoc
operation.

As of December 31, 2017, OPMC has fourteen (14) employees, eleven (11) executives
and three (3) rank and file personnel. The Company is not expecting any change in the number

1
of employees it presently employs. The Company has not entered into any Collective Bargaining
Agreements (CBA).

It is a common knowledge in the industry that the major risk involved in the business of
oil exploration, such as OPMC, is in the success of exploration ventures. The ratio of successful
exploration is estimated to be 1 out of every 400 wells explored. The Company together with its
partners in the various SCs, conduct technical studies and evaluation of the areas believed to
have oil reserves.

Another risk involved in the business of oil exploration and production is the risk that
accidents may occur during operations. The Company together with its partners in various SCs,
continue to take precautionary measures to mitigate accidents, like oil spill. Platform personnel
regularly attend safety trainings and seminars. Likewise, platforms are supplied with equipments
like oil spill boom, in case oil spill happens. The Consortia, in which the Company is part of,
maintain sufficient funds to cover emergencies and accidents, apart from the insurance coverage
of each operation/platform.

The Company organized three (3) wholly-owned subsidiaries:

a) ORIENTAL MAHOGANY WOODWORKS, INC. (OMWI)

The Company was incorporated and started commercial operations on May 2, 1988
with the principal objective of supplying overseas manufacturers, importers and
designers with high quality furniture.

On March 31, 1994, the Board of Directors approved the cessation of the Company's
manufacturing operations effective May 1, 1994 due to continued operating losses.
The management has no definite future plans for the Company's operations.

b) LINAPACAN OIL GAS AND POWER CORPORATION (LOGPOCOR)

The Company was incorporated on January 19, 1993 to engage in energy project and
carry on and conduct the business relative to the exploration, extraction, production,
transporting, marketing, utilization, conservation, stockpiling of any forms of energy
products and resources. OPMC continues to recognize revenues arising from the
operations of the assigned working interest. However, all related capitalizable
expenses on such working interest continue to be capitalized to the Company's
assigned costs of such working interest. On the other hand, depletion of such costs is
transferred to OPMC and shown as a reduction of the assigned costs.

c) ORIENTAL LAND CORPORATION (OLC)

The Company was incorporated on February 24, 1989 as realty arm of OPMC. It has
remained dormant since incorporation.

2
Item 2. Properties

The principal properties of the Company consist of petroleum exploration areas in the
Philippines, onshore and offshore.

Listed below are OPMC's exploration undertakings through a consortium effort with the
DOE.

CONTRACT LOCATION Expiration Date OPMC Share (%)

SC 6B (Bonita) NW Palawan February 28, 2024 14.063

SC 14A (Nido) NW Palawan December 17, 2025 42.940
SC 14B (Matinloc) NW Palawan December 17, 2025 17.703
SC 14B1 (N. Matinloc) NW Palawan December 17, 2025 27.772
SC14C (West Linapacan) NW Palawan December 17, 2025 30.288
SC14C (Galoc) NW Palawan December 17, 2025 7.785
SC 14D NW Palawan December 17, 2025 20.829

Item 3. Legal Proceedings

None.

Item 4. Submission of Matters to a Vote of Security Holders

There were no matters submitted to a vote of security holders during the fourth quarter
of the fiscal year covered by this report.

3
 PART II – OPERATIONAL AND FINANCIAL INFORMATION

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters

Market Information

The principal market for OPMC's common equity is the Philippine Stock Exchange.
Stock prices of the common stock are as follow:

STOCK PRICES CLASS A CLASS B

(in pesos) High Low High Low

2018
First Quarter 0.013 0.011 0.013 0.012

2017
First Quarter .0130 .0100 .0130 .0110
Second Quarter .0120 .0100 .0130 .0100
Third Quarter .0140 .0100 .0150 .0100
Fourth Quarter 0.013 0.012 0.014 0.012

2016
First Quarter .0110 .0090 .0100 .0090
Second Quarter .0110 .0092 .0120 .0090
Third Quarter .0130 .0100 .0140 .0100
Fourth Quarter .0120 .0100 .0130 .0100

VOLUME (in billion shares) CLASS A CLASS B

2018
First Quarter 2.048 1.328

2017
First Quarter 2.066 0.468
Second Quarter 1.304 0.286
Third Quarter 4.131 1.040
Fourth Quarter 1.069 4.041

2016
First Quarter 0.631 0.082
Second Quarter 1.367 0.177
Third Quarter 2.535 0.135
Fourth Quarter 1.569 0.326

As of December 31, 2017, there are approximately 11,706 stockholders both for Class
"A" and "B" shares.

4
 List of Top 20 Stockholders As of December 31, 2017

Percent to
Number of Total
Name of Stockholders Shares Held Outstanding

1. PCD NOMINEE CORPORATION 79,364,880,772 39.68

2. CONSOLIDATED ROBINA CAPITAL CORP. 37,051,952,896 18.53
3. R. COYIUTO SECURITIES, INC. 24,140,288,020 12.07
4. PRUDENTIAL GUARANTEE & ASSURANCE, INC. 13,341,635,799 6.67
5. PCD NOMINEE CORPORATION (NON-FILIPINO) 5,704,744,171 2.85
6. PHILIPPINE COMMERCIAL CAPITAL, INC. 4,715,444,666 2.36
7. J.G. SUMMIT HOLDINGS, INC. 1,756,248,841 0.88
8. F & J PRINCE HOLDINGS CORP. 1,260,888,642 0.63
9. PHIL. OVERSEAS TELECOMMUNICATIONS CORPORATION 1,129,545,907 0.56
10. PHIL. COMMUNICATIONS SATELLITE CORP. 1,103,946,216 0.55
11. PAULINO G. PE 935,000,000 0.47
12. GIBRALTAR INTERNATIONAL HOLDINGS, INC. 832,833,547 0.42
13. DAVID GO SECURITIES CORP. 698,258,201 0.35
14. MARGARET S. CHUA CHIACO 663,400,000 0.33
15. TIONG KENG CHING 622,512,998 0.31
16. VICTORIA DUCA 611,236,533 0.31
17. ROBERT COYIUTO, JR. 565,664,986 0.28
18. JAMES UY, INC. 471,843,600 0.24
19. ERNESSON S. CHUA CHIACO 441,600,000 0.22
20. GENEVIEVE S. CHUA CHIACO 441,600,000 0.22
175,853,525,795 87.93
OTHERS 24,146,474,205 12.07
TOTAL 200,000,000,000 100.00

Description of Registrant's Securities

Common Stock - all shares of stock of the Company enjoy the same rights and
privileges, except that Class A shares shall be issued solely to Filipino citizens, whereas Class B
shares can be issued to Filipino citizens or foreigners.

Recent Sales of Unregistered or Exempt Securities Including Recent Issuance of Securities Constituting
an Exempt Transaction

There are no recent sales of unregistered or exempt securities including recent issuance
of securities constituting an exempt transaction. All shares of the Company are listed on the
Philippine Stock Exchange.

Dividends

The Company has not declared any cash or stock dividends in the last two (2) years
(2017 and 2016).

5
Item 6. Management’s Discussion and Analysis or Plan of Operation

The combined crude oil production from the Nido, Matinloc and North Matinloc Fields
in 2017 totaled 125,774 barrels which was 7% lower than the fields’ combined output of 135,619
barrels in 2016. On the other hand, Galoc Field’s production for 2017 summed 1,408,834
barrels which was 19% lower than the total production of 1,728,647 barrels in 2016. The
decrease in production in both operations was mainly due to the normal depletion of oil.

The Company has no plans to purchase or to sell any plant and / or significant
equipment nor does it expect any significant change in the number of its employees for the next
twelve (12) months.

Results of Operations

2017 vs. 2016

Revenue from petroleum operations in 2017, which amounted to US$7.64 million,

dropped by US$1.03 million or 12% from US$8.67 million in 2016. Petroleum revenue from the
Galoc operations, which comprised 85% of the total revenue, declined by US$1.20 million or
16%. Revenue from Nido/Matinloc operations, representing the remaining 15% of the total
revenue, amounted to US$1.12 million in 2017 as compared to US$0.95 million in 2016.

Despite the increase in average crude oil prices, petroleum revenue declined brought by
the decrease in crude oil production volume. The average price per barrel increased to $54.97 in
2017 as compared to $43.35 in 2016 for Galoc operations while $54.59 in 2017 as compared to
$42.59 in 2016 for Nido/Matinloc operations. However, total crude oil production volume
decreased by 18% from 1.86 million barrels in 2016 to 1.53 million barrels in 2017.

Petroleum production costs in 2017, which totaled US$5.18 million, increased by 11% or
US$0.50 million. These costs mainly include floating, production, storage and offloading
(FPSO) charges, field/platform operation costs, management and technical fees, helicopter
services, insurance expenses, marketing fees, repairs and maintenance and other general and
administrative expenses of the consortia.

Depletion and depreciation increased by 22% mainly due to higher depletion rate caused
by lower remaining crude oil reserves of the Galoc Field as assessed by an independent audit
firm.

Interest and other income reached US$2.32 million in 2017, an increase of 5% from
US$2.22 million in 2016 which were derived mainly from the Company’s investment in preferred
shares, bonds, and short-term and long-term deposits.

2016 vs. 2015

Revenue from petroleum operations in 2016, which amounted to US$8.67 million,

dropped by US$1.24 million or 4% from US$9.91 million in 2015. Petroleum revenue from the
Galoc operations, which comprised 89% of the total revenue, declined by US$1.16 million or
13%. Revenue from Nido/Matinloc operations, representing the remaining 11% of the total
revenue, amounted to US$0.95 million in 2016 as compared to US$1.02 million in 2015.

6
 The decline in petroleum revenue was brought mainly by the decrease in average crude
oil prices and crude oil production volume. The average price per barrel decreased to $43.35 in
2016 as compared to $54.00 in 2015 for Galoc operations while $42.59 in 2016 as compared to
$47.31 in 2015 for Nido/Matinloc operations. Further, total crude oil production volume
decreased by 28% from 2.59 million barrels in 2015 to 1.86 million barrels in 2016.

Petroleum production costs in 2016, which totaled US$4.68 million, decreased by 24% or
US$1.46 million. These costs mainly include floating, production, storage and offloading
(FPSO) charges, field/platform operation costs, management and technical fees.

Depletion, depreciation and amortization increased by 10% mainly due to higher

depletion rate caused by lower remaining crude oil reserves of the Galoc Field as assessed by an
independent audit firm as of December 31, 2015.

Other income mainly consists of dividend and interest incomes. Dividend income is
derived from the Company’s investment in preferred shares. Meanwhile, interest income is
normally earned from cash in banks and short-term and long-term deposits. Increase in
dividend and interest incomes was mainly attributable to higher range of interest rates for 2016
as compared to 2015.

2015 vs. 2014

At the end of 2015, the Company recorded Petroleum Revenues of US$9.91 million,
56% lower than US$22.56 million in 2014. The main cause of this significant decrease was due to
lower crude oil prices.

The Company’s main source of Petroleum Revenues is from its share in the Galoc
operations. The price of Galoc oil went down from an average of US$101.52 per barrel in 2014
to an average of US$54.00 per barrel in 2015. This resulted to a revenue of US$8.87 million,
around 57% lower than last year’s revenue of US$20.58 million.

Likewise, revenue from Nido/Matinloc operations went down by around 47% from
2014 due to lower crude oil prices. In 2015, revenue reached US$1.04 million as against US$1.98
million in 2014.

Petroleum production costs reached US$6.15 million, slightly lower than US$6.30 million
in 2014. These costs include among others, FPSO rentals, helicopter services, insurance
expenses, marketing fees, repairs and maintenance and other general and administrative expenses
of the consortia.

Depletion and depreciation expense totaled US$1.13 million in 2015, a decrease of

around 91% from US$12.54 million in 2014. The decrease was mainly due to increased oil
reserves based on an updated third-party report.

Interest and other income (expenses)-net totaled US$2.23 million in 2015, about 58%
higher than last year’s US$1.41 million. The increase was mainly due to a one-time
reimbursement of previously expensed research and development cost.

7
Financial Position

2017
The Company’s consolidated assets at the end of 2017, which amounted to US$92.11
million, is 2% higher than last year’s US$90.75 million due to the following movements:

In 2017, cash and cash equivalents account amounted to US$5.41 million, as compared
to US$11.20 million in 2016. The decrease of 52% was mainly due to reclassification of
placements to short-term investments account, which are placements in time deposits with
maturities of more than three months but less than one year.

Receivable at the end of 2017 totaled US$1.03 million, a decrease of 23% from last year’s
US$1.33 million. This account mainly represents the Company’s share in the funds from crude
oil sale held in trust by the operators, The Philodrill Corporation and Galoc Production
Company for the SC 14A & B and SC 14C Consortia, respectively. Also, this account consists
of accrued interest and dividend receivable.

Crude oil inventory amounted to US$1.46 million, an increase of 21% from last year’s
US$1.21 million. This represents the Company’s share in the crude oil already produced and in
storage but has yet to be delivered to the customers. The increase was mainly due to higher
crude oil volume in tank and storage in 2017 as compared to 2016.

Available-for-sale investments reached US$13.31 million at the end of 2017, slightly

lower than last year’s US$13.67 million attributable to the change in market value of investments.

Investment in bonds totaled US$5.21 million at the end of 2017, higher than last year’s
US$3.22 million due to additional acquisition of bonds.

Consolidated property and equipment at the end of 2017 amounted to US$14.75 million.
The increase was mainly due to the Company’s share in Galoc-7 drilling costs partially offset by
depletion and depreciation expenses.

Accounts and other payables at the end of the year amounted to US$0.53 million, a
decrease from US$0.62 million in 2016 due to payment of accrued expenses during the year.
Income tax payable decreased by US$0.54 from 2016 due to payment of income tax and lower
income tax liability for the year.

2016

The Company’s consolidated assets at the end of 2016, which amounted to US$90.75
million, is 4% higher than last year’s US$87.04 million due to the following movements:

Cash and cash equivalents consist of cash on hand, cash in banks and money market
placements with original maturities of not more than three months. In 2016, cash and cash
equivalents account amounted to US$11.20 million, as compared to US$51.01 million in 2015.
The decrease of 78% was mainly attributable to US$40.00 million placements in a three-year U.S.
Dollar time deposit with a local bank which was classified as non-current assets under long-term
investments.

8
 Receivable at the end of 2016 totaled US$1.33 million, a decrease of 21% from last year’s
US$1.68 million. This account mainly represents the Company’s share in the funds from crude
oil sale held in trust by the operators, The Philodrill Corporation and Galoc Production
Company for the SC 14A & B and SC 14C Consortia, respectively. Also, this account consists
of accrued interest and dividend receivable.

Crude oil inventory amounted to US$1.21 million, a decrease of 24% from last year’s
US$1.59 million. This represents the Company’s share in the crude oil already produced and in
storage but has yet to be delivered to the customers. The decrease was mainly due to lower
crude oil volume in tank and storage in 2016 as compared to 2015.

In 2016, the Company’s short-term investments amounting to US$4.87 million are

placements in time deposits and other money market instruments with original maturities of
more than three months but less than one year while long-term investments amounting to
US$40.00 million are placements in three-year U.S. dollar time deposits with a local bank.

Available-for-sale investments reached US$13.67 million at the end of 2016, slightly

higher than last year’s US$13.16 million attributable to additional investments made by the
Company during the year.

Consolidated property and equipment at the end of 2016 amounted to US$14.58 million.
The decrease of about 7% is mainly due to depletion and depreciation expenses.

As of December 31, 2016, deferred exploration cost amounted to US$0.66 million. A

partial increase from last year represents the Company’s share in SC-6 Bonita expenses.

In 2016, accounts and other payables account amounted to US$0.62 million.

2015

The Total Assets of the Company at the end of 2015 reached US$87.04 million, 5%
higher than US$83.17 million in 2014.

Cash and cash equivalents totaled US$51.01 million, higher by 17% than last year’s
US$43.57 million. A short-term investment of around US$4.97 million that was previously part
of current assets as a separate account was reclassified as cash equivalents in relation to its less
than 3-months investment term.

Accounts Receivable amounted to US$1.68 million which represents the Company’s

share in the funds from crude oil sale held in trust by the operators, The Philodrill Corporation
and Galoc Production Company for the SC 14A & B and SC 14C Consortia, respectively.

Crude oil inventory at year-end totaled US$1.59 million represents the Company’s share
in crude oil produced but not yet delivered as of year-end.

Available-for-sale equity securities reached US$13.16 million at the end of 2015, slightly
lower than last year’s US$13.31 million mainly due to foreign currency translation adjustment.

Property and Equipment at the end of 2015 decreased from US$16.64 million to
US$15.69 million mainly pertain to recognized depletion and depreciation for the year.

9
 Accounts Payable and Accrued Expenses at the end of the year amounted to US$0.67
million, a slight decrease from US$0.68 million in 2014.

The causes for material changes of December 31, 2017 figures as compared to
December 31, 2016 figures of the following accounts are:

Accounts December 31, 2017 December 31, 2016 Change % Remarks

Financial Position
Cash and cash $5,412,820 $11,195,437 ($5,782,617) (52%) Decrease was mainly due to
equivalents reclassification of placements to
short-term investments account.

Receivables 1,029,764 1,329,305 (299,541) (23%) Decrease was due to the timing of
delivery of crude oil to customers.

Crude oil 1,462,654 1,206,922 255,732 21% Increase was mainly due to hiwer
inventory crude oil volume in tank and
storage in 2017 as compared to
2016.

Available-for- 13,313,921 13,674,115 (360,194) (3%) Decrease was due to decrease in

sale share price of stocks held by the
investments Company.

Held-to- 5,205,087 3,215,809 1,989,278 62% Increase was due to additional

maturity acquisition of bonds.
investments

Property and 14,751,195 14,581,103 170,092 1% Increase was mainly due to the
equipment Company’s share in Galoc-7 drilling
costs partially offset by depletion
and depreciation expenses.

Revenue from 7,644,185 8,674,346 1,030,161 (12%) Despite the increase in average
petroleum crude oil prices, petroleum revenue
operations declined brought by the decrease in
crude oil production volume.

Petroleum 5,183,177 4,682,386 500,791 11% These costs mainly include floating,
production production, storage and offloading
costs (FPSO) charges, field/platform
operation costs and other general
and administrative expenses of the
consortia.

Depletion and 1,516,656 1,246,265 (270,391) (22%) Decrease was due to higher
depreciation depletion rate caused by lower
remaining crude oil reserves of the
Galoc Field as assessed by an
independent audit firm.

Interest and 2,320,078 2,222,680 97,398 5% These income were derived mainly
other income from the Company’s investment in
preferred shares, bonds, and short-
term and long-term deposits.

10
Key Performance Indicators

2017 2016 2015

Current Ratio 27.89 14.45 80.84

Net Working Capital Ratio 0.19 0.19 0.62
Return on Assets 0.31% 2.03% 2.39%
Return on Equity 2.51% 3.22% 4.85%
Ratio of Debt-to-Equity 0.03 0.04 0.03
Figures are based on Audited Financial Statements
Current ratios are computed by dividing current assets over current liabilities. Net working capital ratios are derived at by
getting the difference of current assets and current liabilities divided by total assets. Return on assets percentage pertains to
operating income (loss) over average total assets while return on equity percentage is computed by dividing net income (loss) over
average stockholder’s equity. Percentage of debt to equity resulted from dividing total borrowings (short-term & long-term
borrowings) over stockholder’s equity.

I. The Company has no knowledge of any events that will trigger direct or contingent financial
obligation that is material to the Company, including any default or acceleration of an
obligation.

II. There are no material off-balance sheet transactions, arrangements, obligations and other
relationships of the company with unconsolidated entities or other persons created during
the reporting period.

III. There are no significant Capital expenditures during the reporting period.

IV. There are no significant elements of income or loss that did not arise from the Company’s
continuing operations.

V. There are no seasonal aspects that had a material effect on the Company’s financial
condition or results of operation.

Item 7. Financial Statements

The Audited Consolidated Financial Statements and Schedules listed in the

accompanying Index to Financial Statements and Supplementary Schedules are filed as part of
this Form 17-A.

Item 8. Changes in and Disagreements with Accountants on Accounting and Financial

Disclosure

None.

Item 9. Independent Public Accountant and Audit Related Fees

The Company’s independent public accountant is the accounting firm of Sycip Gorres
Velayo & Co. The current handling partner of SGV & Co. has been engaged by the Company in
2015 and is expected to be rotated every five (5) years.

11
External Audit Fees and Services

a. Audit and Audit-Related Fees

Our external auditor, SGV & Co. has billed the Company a total audit fee of
US$18,200 for the last two (2) fiscal years, 2017 and 2016, for the audit of the
Company’s annual financial statements in connection with statutory and
regulatory filings for the last two (2) fiscal years.

Aside from the abovementioned service by the external auditor, there had been
no other services that was requested from and performed by the external auditor.

b. Tax Fees

The Company had not contracted the external auditor for services related to tax
accounting, compliance, advice, planning and any other form of tax services for
the last two (2) fiscal years.

c. All Other Fees

The Company had not contracted the external auditor for product and services
other than the services reported under items (a) and (b) above for the last two (2)
fiscal years.

d. The audit committee’s approval policies and procedures for the above services

The stockholders of the Company elect the external auditor during the Annual
Stockholders Meeting. The audit committee evaluates and approves audit plans,
programs, scope and frequency submitted by the external auditor.

12
 PART III – CONTROL AND COMPENSATION INFORMATION

Item 10. Directors and Executive Officers of the Registrant

The names and ages of directors and executive officers of the Company are as follows:

Directors

Directors Names Age Citizenship

Director, Chairman and

Chief Executive Officer James L. Go 78 Filipino

Director, President and

Chief Operating Officer Robert Coyiuto, Jr. 66 Filipino

Director John Gokongwei, Jr. 91 Filipino

Director Lance Y. Gokongwei 51 Filipino

Director Antonio Go 78 Filipino

Director Benedicto Coyiuto 39 Filipino

Director Josephine Barcelon 58 Filipino

Director James Coyiuto 63 Filipino

Director Ricardo Balbido, Jr. 67 Filipino

Director, Assistant Corporate Secretary Perry L. Pe 56 Filipino

Executive Officers

SVP - Operations and Administration Apollo P. Madrid 77 Filipino

SVP - Legal and Corporate Secretary Ethelwoldo E. Fernandez 90 Filipino

Finance Adviser Aldrich T. Javellana 44 Filipino

CFO and Compliance Officer Ma. Riana Infante 37 Filipino

Treasurer Teresita H. Vasay 63 Filipino

The Directors of the Company are elected at the annual stockholders’ meeting to hold
office until the next succeeding annual meeting and until their respective successors have been
elected and qualified.

13
 Officers are appointed or elected annually by the Board of Directors at its first meeting
following the Annual Meeting of the Stockholders, each to hold office until the corresponding
meeting of the Board of Directors in the next year or until successor shall have been elected,
appointed or shall have qualified.

The following directors of the Corporation are expected to be nominated by

management for re-election / election this year.

The independent directors of the Company are elected according to SRC Rule 38 –
Independent Directors.

A brief discussion of the directors’ and executive officers’ business experience and other
directorships held in other reporting companies are as follows:

James L. Go, 78, is the Chairman and Chief Executive of Officer of OPMC. He is likewise the
Chairman and CEO of JG Summit Holdings, Inc. He is the Chairman of Universal Robina
Corporation, Robinsons Land Corporation (RLC), JG Summit Petrochemical Corporation, and
JG Summit Olefins Corporation. He is the Vice Chairman of Robinsons Retail Holdings, Inc.
and a director of Cebu Air, Inc., Marina Center Holdings Private Limited, United Industrial
Corporation Limited and Hotel Marina City Private Limited. He is also the President and
Trustee of the Gokongwei Brothers Foundation, Inc. He has been a director of the Philippine
Long Distance Telephone Company (PLDT) since November 3, 2011. He is a member of the
Technology Strategy Committee and Advisor of the Audit Committee of the Board of Directors
of PLDT. He was elected a director of Manila Electric Company on December 16, 2013. Mr.
Go received his Bachelor of Science Degree and Master of Science Degree in Chemical
Engineering from Massachusetts Institute of Technology, USA. Mr. James L. Go is a brother of
Mr. John L. Gokongwei, Jr.

Robert Coyiuto, Jr., 66, is a Director of the Company since 1982 and had been Chairman of
the Board and President from 1991 to 1993; and President & Chief Operating Officer of the
company since 1994. He is a Presidential Adviser of Capital market Development. He is also the
Director, Chairman and President of Calaca High Power Corporation and Pacifica 21 Holdings,
Inc. He is the Director, Chairman and Chief Executive Officer of Prudential Gurantee &
Assurance, Inc. He is also the Director and Chairman of PGA Sompo Insurance Corporation,
PGA Cars, Inc., Hyundai North EDSA. He is Vice Chairman and Director of National Grid
Corporation of the Philippines and First Life Financial Co., Inc. He is a director of Universal
Robina Corporation, Petrogen Insurance Corporation, and Canon Marketing (Philippines) Inc.
He is a member of the Philippine Stock Exchange, a Member of the Board of Trustees of San
Beda College and the Founding Principal of Porsche Training and Recruitment Center Asia.

John L. Gokongwei, Jr., 91, is a Director of the Company. He is the founder and Chairman
Emeritus of JG Summit Holdings, Inc. He is a member of the Board of Directors of JGSHI and
certain of its subsidiaries. He also continues to be a member of the Executive Committee of
JGSHI and is Chairman Emeritus of certain of its subsidiaries. He is currently the Chairman of
the Gokongwei Brothers Foundation, Inc., Deputy Chairman and Director of United Industrial
Corporation Limited and a director of Cebu Air, Inc. and Robinsons Retail Holdings, Inc. He
was elected a director of Manila Electric Company on March 31, 2014. He is also a non-
executive director of A. Soriano Corporation. Mr. Gokongwei received a Masters degree in

14
Business Administration from the De La Salle University and attended the Advanced
Management Program at Harvard Business School.

Lance Y. Gokongwei, 51, has been a Director of the Company since 1994. He is the President
and Chief Operating Officer of JGSHI. He is the Chairman and Chief Executive Officer of
Robinsons Retail Holdings, Inc. He is also the President and Chief Executive Officer of
Universal Robina Corporation and Cebu Air, Inc. He is the Vice Chairman and Chief Executive
Officer of Robinsons Land Corporation. He is the Chief Executive Officer of JG Summit
Petrochemical Corporation and JG Summit Olefins Corporation. He is the Chairman of
Robinsons Bank Corporation and a director of United Industrial Corporation Limited. He is a
director and Vice Chairman of Manila Electric Company. He is a trustee and secretary of the
Gokongwei Brothers Foundation, Inc. He received a Bachelor of Science degree in Finance and
a Bachelor of Science degree in Applied Science from the University of Pennsylvania.

Antonio L. Go, 78, was elected as an Independent Director of the Company since 2007. He
also currently serves as Director and President of Equitable Computer Services, Inc. and is
Chairman of Equicom Savings Bank and ALGO Leasing and Finance Inc. He is also a Director
of Medilink Network, Inc., Maxicare Healthcare Corporation, Equicom Manila Holdings,
Equicom Inc., Equitable Development Corporation, United Industrial Corporation Limited, T32
Dental Centre Singapore, Dental Implant and Maxillofacial Centre Hong Kong, Cebu Air Inc.,
Pin-An Holdings, Inc., Equicom Information Technology, Robinsons Retail Holdings, Inc. and
Steel Asia Manufacturing Corporation. He is also a trustee of Go Kim Pah Foundation,
Equitable Foundation, Inc., and Gokongwei Brothers Foundation, Inc. He graduated from
Youngstown University, United States with a Bachelor of Science degree in Business
Administration. He attended the International Advanced Management program at the
International Management Institute, Geneva, Switzerland as well as the Financial
Planning/Control program at the ABA National School of Bankcard Management,
Northwestern University, United States.

Benedicto Coyiuto, 39, was elected Director of the Company during the last Annual
Stockholders’ Meeting held on June 27, 2013. He is also a Director of PGA Cars, Inc. and PGA
Automobile, Inc. He is the Assistant to the Chairman of PGA Sompo Japan Insurance, Inc. He
is the son of Mr. Robert Coyiuto, Jr.

Josephine V. Barcelon, 58, was elected Director during the meeting of June_2014. She is the
President / Nominee of J.M. Barcelon & Co., Inc., Stockbroker, Member: Philippine Stock
Exchange and CEO of the Barcelon Group of Companies.

James Coyiuto, 63, was elected as Director of the Company since 2005. He is also the Director
of Prudential Guarantee and Assurance, Inc., Guarantee Development Corporation and PGA,
Sompo Japan Insurance Inc.

Ricardo Balbido, Jr., 67, has been elected as an Independent Director of the Company in 2005.
He is presently the Chairman of the Board of Trustees of Silliman University. Currently, he is
doing financial consultancy after retirement from his various banking stint as former President

15
and CEO of Philippine Veterans Bank, former President and COO of Dao Heng Bank, Inc.,
former Senior Vice President of Bank of the Philippine Islands. He was also former President of
the Philippine Clearing House Corporation, and Director of Bankers Association of the
Philippines. Mr. Balbido received his degree in Bachelor of Science in Business Administration
Major in Accounting from Silliman University and is a Certified Public Accountant. He earned
full academics in Master in Business Administration from Ateneo de Manila University.

Perry L. Pe, 56, has been the Assistant Corporate Secretary of the Company since 1994. He has
been a Director since 1995. He is also the Corporate Secretary of SIAEP and A-Plus; Senior
Partner of Romulo, Mabanta, Buenaventura, Sayoc, and Delos Angeles Law Office; Director of
Delphi Group, Ace Saatchi Saatchi, AG & P Philippines, Inc., Island Quarry and Aggregate
Corporation, Apo Land and Quarry Corporation. Honorary Consul General of Denmark to the
Philippines. Atty. Perry L. Pe is the son-in-law of Mr. John Gokongwei, Jr.

Apollo P. Madrid, 77, has been the Senior Vice President - Operations and Administration of
the Company since 1990.

Ethelwoldo E. Fernandez, 90, has been the Corporate Secretary of the Company since 1995.
He had been Senior Vice President-Legal of the Company since 1992. He had been counsel to
the Law firm of Sycip, Salazar, Hernandez and Gatmaitan until 2003. He is also the Corporate
Secretary of Prudential Guarantee and Assurance, Inc.

Aldrich T. Javellana, 44, was appointed Finance Adviser of the Company in February 16, 2016.
He is the Senior Vice President and Treasurer of JG Summit Holdings, Inc. Prior to joining
JGSHI in 2003, he worked in Corporate Finance with CLSA Exchange Capital. He graduated
from De La Salle University with a degree in BS Accountancy and is a Certified Public
Accountant.

Ma. Riana C. Infante, 37, was appointed Chief Financial Officer and Compliance Officer of
the Company effective February 16, 2016. She joined OPMC in 2004 as an Accounting
Manager. She is a Certified Public Accountant.

Teresita Vasay, 63, was appointed Treasurer of the Company effective October 1, 2014. She is
also the Treasurer of the Summit Media Group and a Director of various
condominium corporations for RLC projects. Ms. Vasay is a Certified Public Accountant and a
Licensed Real Estate Broker. She was formerly the Treasurer of Robinsons Land Corporation
and the Vice President-Controller of the Robinsons Retail Group. She had experience in
consumer financing from Filinvest Credit Corporation and practiced public accounting with
SGV & Co. prior to joining the Gokongwei group of companies.

16
The Company’s independent directors are Messrs. Ricardo Balbido, Jr. and Antonio Go. They
have possessed the qualifications of independent directors as set forth in the SRC Rule 38 –
Independent Director, since the time of their initial election.

Involvement in Certain Legal Proceedings of Directors and Executive Officers

None of the directors and officers has been involved in any bankruptcy proceeding in
the past five (5) years nor have they been convicted by final judgment in any criminal proceeding,
or been subject to any order, judgment or decree of competent jurisdiction, permanently or
temporarily enjoining, barring, suspending or otherwise limited their involvement in any type of
business, securities, commodities or banking activities, nor found in action by any court of
administrative bodies to have violated a securities or commodities law.

Significant Employees

There are no persons who are not executive officers of the Corporation who are
expected by the Corporation to make significant contribution to the business.

Item 11. Executive Compensation

The following tables list the names of the Corporation’s Chief Executive Officers and the four
(4) most highly compensated executive officers for the two (2) most recent fiscal years and the
ensuing year:

Name Position Projected - Year 2018 (in ‘000 US$)

Other
Compensation
Salary & Bonus Total
a) CEO & Four (4) most highly
compensated executive officers US$257.25 US$- US$257.25
James L. Go Chairman and CEO
Robert Coyiuto, Jr. President and COO
Aldrich T. Javellana Finance Adviser
Ma. Riana C. Infante CFO / Compliance Officer
Teresita H. Vasay Treasurer

b) All officers as a group US$367.91 US$- US$367.91

Name Position Actual - Year 2017 (in ‘000 US$)

Other
Compensation
Salary & Bonus Total
a) CEO & Four (4) most highly
compensated executive officers US$245.00 US$- US$245.00
James L. Go Chairman and CEO
Robert Coyiuto, Jr. President and COO
Aldrich T. Javellana Finance Adviser
Ma. Riana Infante CFO / Compliance Officer
Teresita H. Vasay Treasurer

b) All officers as a group US$350.39 US$- US$350.39

17
 Name Position Actual Year 2016 (in ‘000 US$)
Other
Compensation
Salary & Bonus Total
a) CEO & Four (4) most highly
compensated executive officers US$234.80 US$- US$234.80
James L. Go Chairman and CEO
Robert Coyiuto, Jr. President and COO
Apollo P. Madrid SVP - Operations & Admin.
Aldrich T. Javellana CFO
Teresita H. Vasay Treasurer

b) All officers as a group US$333.84 US$- US$333.84

Compensation of Directors

For 2017, the Company paid a total of US$17,844 to its Directors.

Standard Arrangements

There are no standard arrangements pursuant to which directors of the Company are
compensated, or are to be compensated, directly or indirectly, for any services provided as
director for the last completed fiscal year and ensuing year.

Other Arrangements

There are no other arrangements pursuant to which directors of the Company are
compensated, or are to be compensated, directly or indirectly, for any services provided as
director for the last completed fiscal year and ensuing year.

Employment Contracts and Termination of Employment and Change-in-Control Arrangement

There are no employment contracts between the registrant and any of its executive
officer.

There are no compensatory plan or arrangement, including payments to be received from

the registrant, with respect to any executive officer, if such plan or arrangement results or will
result from the resignation, retirement or any other termination of such executive officer’s
employment with the registrant and its subsidiaries or from a change in control of the registrant
or a change in any executive officer’s responsibilities following a change in control and the
amount involved, including all periodic payments or installments, which exceeds P2,500,000.

18
Item 12. Security Ownership of Certain Record and Beneficial Owners

Owners of more than 5% of the Company’s securities as of December 31, 2017 were as
follows:
Amount and Nature of
Name and Address Ownership (Record and/or % to
Class Record/ Beneficial Owner beneficial ownership) Citizenship Total

Common PCD Nominee Corporationa 79,364,880,772 Record Filipino 39.68%

Old Makati Stock Exchange Bldg.
Ayala Avenue, Makati City

Common Consolidated Robina Capital Corp.b 37,051,952,896 Record Filipino 18.53%

CFC Bldg., E. Rodriguez Avenue
Bagong Ilog, Pasig City

Common R. Coyiuto Securities, Inc.c 24,140,288,020 Record Filipino 12.07%

5th Flr., Corinthian Plaza
Paseo de Roxas, Makati City

Common Prudential Guarantee & Assurance Inc. d 13,341,635,799 Record Filipino 6.67%
119C Palanca St. Legaspi Village, Makati
City
_________________________________________________________________________________
Notes:
a. PCD Nominee Corporation, a wholly owned subsidiary of Philippine Central Depository, Inc. (“PCDI”), is the registered
owner of the shares in the books of the Company’s transfer agents in the Philippines. The beneficial owners of such
shares are PCDI’s participants, who hold the shares on their behalf, and their clients. PCDI is a private company
organized by the major institutions actively participating in the Philippine capital markets to implement an automated
book-entry system of handling securities transactions in the Philippines.
b. Consolidated Robina Capital Corporation is a 100% subsidiary of JG Summit Holdings, Inc. OPMC and JGSHI share the
following common directors: Mr. John Gokongwei, Jr., Mr. James L. Go and Mr. Lance Gokongwei.
- Any one of the following directors of the Company is authorized to vote: Messrs., John Gokongwei, Jr., James Go,
Lance Gokongwei.
- Indirect ownership of Mr. John Gokongwei, Jr. is 1 share, Mr. James Go is 2 shares and Mr. Lance Gokongwei is 3
shares.
c. R. Coyiuto Securities, Inc. is majority-owned by Mrs. Rosie Coyiuto, wife of Mr. Robert Coyiuto, Jr. Mr. Coyiuto is the
President and COO of OPMC.
- Any one of the following is authorized to vote: Ms. Rosie Coyiuto, Messrs. Philip K. Rico, Samuel Coyiuto, and James
Coyiuto.
- There are no participants in the above corporation who hold more than 5% of OPMC’s outstanding capital stock.
d. Prudential Guarantee & Assurance, Inc. is majority-owned by Coyiuto Brothers.
- Mr. Robert Coyiuto, Jr. is authorized to vote.
- Indirect ownership of Mr. Robert Coyiuto, Jr. is 1,316,729 shares and Mr. James Coyiuto is 413,012 shares.

19
Security Ownership of Management as of December 31, 2017

Amount and Nature of Beneficial

Class Name of Beneficial Owner Position % to Total Citizenship
Ownership (Direct)
Class A Class B Total
A. Named Executive Officers [1]
Common James L. Go* Chairman and CEO 1,237,200,001 − 1,237,200,001 0.6186% Filipino
Director, President and
Common Robert R. Coyiuto, Jr.* 423,977,301 141,687,685 565,664,986 0.2828% Filipino
COO
SVP for Operations
Common Apollo P. Madrid* 1,711,971 100,795 1,812,766 0.0009% Filipino
/Administration
SVP for Legal /
Common Ethelwoldo E. Fernandez* 604,787 − 604,787 0.0003% Filipino
Corporate Secretary
Sub-total 1,663,494,060 141,788,480 1,805,282,540 0.9026%

B. Other Directors and Executive Officers

Common John L. Gokongwei, Jr. Director 107,001 − 107,001 0.0001% Filipino
Common Josephine Barcelon Director 100,000 − 100,000 0.0001% Filipino
Common Antonio Go Director 1 − 1 ** Filipino
Common Benedicto Coyiuto Director 10,000 − 10,000 ** Filipino
Common Lance Y, Gokongwei Director 1 − 1 ** Filipino
Director and Asst.
Common Perry L. Pe* 513,621 − 513,621 0.0003% Filipino
Corporate Secretary
Common Ricardo Balbido, Jr. Director 100,000 − 100,000 0.0001% Filipino
Common James Coyiuto Director 1 − 1 ** Filipino
Sub-total 830,625 − 830,625 0.0006%

C. All directors and executive officers as a group unnamed 1,664,324,685 141,788,480 1,806,113,165 0.9031%
[1] Chief Executive Officer and three (3) among the four (4) most highly compensated executive officers as of December 31, 2016.
*Company’s executive officers: **less than 0.0001%

Voting Trust holders of 5% or More

There are no persons holding more than 5% or a class under a voting trust or similar
agreement.

Changes in Control

There has been no change in the control of the registrant since the beginning of its
calendar year.

Item 13. Certain Relationships and Related Transactions

There had been no material transactions during the last two years, nor is any material
transaction presently proposed, to which the Company was or is to be a party, in which any
director or executive officer of the Company or owner of more than 10% of the Company’s
voting securities, any relative or spouse of any such director or officer who shares the home of
such director or executive officer or owner or more than 10% of the Company’s voting
securities, is involved.

20
Related Party Transactions as disclosed in the Annual Audited Financial Statements as follow:

Parties are related if one party has the ability, directly or indirectly, to control the other
party or exercise significant influence over the other party in making financial and operating
decisions; and the parties are subject to common control or common significant influence.
Related parties may be individuals or corporate entities.

Affiliates are related entities of the companies by virtue of common ownership and
representation to management where significant influence is apparent.

At the end of 2017, the company had Cash and Cash equivalents maintained at various
banks including an affiliated bank. The Company likewise, leases an office space from an
affiliate that is renewable annually.

PART IV. EXHIBITS AND SCHEDULES

Item 14. Exhibits and Reports on SEC Form 17-C

(a) Exhibits

None.

(b) Reports on SEC Form 17-C

The following report on SEC Form 17-C was filed during the last six months period
covering this report:

Item 9: Other Matters

1. Disclosure on the Result of Annual Stockholders’ Meeting as of June 29, 2017 dated
June 30, 2017.

21
 SIGNATURES

Pursuant to the requirements of Section 17 of the Code and Section 141 of the Corporation
Code, the registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of ___________ April ______ 2018.

By:

_______________________________ _______________________________
James L. Go Robert Coyiuto, Jr.
Chairman and Chief Executive Officer President and Chief Operating Officer

_______________________________ _______________________________
Ma. Riana C. Infante Ethelwoldo E. Fernandez
Chief Financial Officer Corporate Secretary

Subscribed and sworn to before this ____ day of April 2018, affiants executed to me their
CTC / government issued identification cards as follows:

Name CTC / Government ID No. Date of Issue Place of Issue

James L. Go 07809719 January 16, 2018 Pasig City
Robert Coyiuto, Jr. 24524896 January 5, 2018 Makati City
Ma. Riana C. Infante N04-11-000349 April 1, 2016 LTO Quezon City
Ethelwoldo E. Fernandez PP2963881 May 10, 2017 DFA NCR East

Doc. No. ____

Page No. ____
Book No. ____
Series of 2018.

22
ORIENTAL PETROLEUM AND MINERALS CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS

FORM 17-A, ITEM 7

Page No.
Consolidated Financial Statements

Statement of Management's Responsibility 24

Report of Independent Auditors 27-30

Consolidated Statements of Financial Position as of December 31, 2017 and 2016 31

Consolidated Statements of Income for the Years Ended

December 31, 2017, 2016, and 2015 32

Consolidated Statements of Comprehensive Income for the Years Ended

December 31, 2017, 2016, and 2015 33

Consolidated Statements of Changes in Stockholders' Equity

December 31, 2017, 2016, and 2015 34

Consolidated Statements of Cash Flows for the Years Ended

December 31, 2017, 2016, and 2015 35

Notes to Consolidated Financial Statements 36-80

Report of Independent Auditors on Supplementary Schedules 82

Index to Consolidated Financial Statements and Supplementary Schedules 83

23
24
25
 COVER SHEET
for
AUDITED FINANCIAL STATEMENTS

SEC Registration Number

4 0 0 5 8

COMPANY NAME

O R I E N T A L P E T R O L E U M A N D M I N E R A L
S C O R P O R A T I O N A N D S U B S I D I A R I E S

PRINCIPAL OFFICE ( No. / Street / Barangay / City / Town / Province )

3 4 t h F l o o r , R o b i n s o n s E q u i t a b l
e T o w e r , A D B A v e n u e , O r t i g a s C
e n t e r , P a s i g C i t y

Secondary License Type, If

Form Type Department requiring the report Applicable

A A F S C R M D N / A

COMPANY INFORMATION
Company’s Email Address Company’s Telephone Number Mobile Number

N/A 633-7631 N/A

No. of Stockholders Annual Meeting (Month / Day) Fiscal Year (Month / Day)

11,706 June 30 12/31

CONTACT PERSON INFORMATION

The designated contact person MUST be an Officer of the Corporation
Name of Contact Person Email Address Telephone Number/s Mobile Number

Ma. Riana Caratay-Infante [email protected] 633-7631 N/A

CONTACT PERSON’s ADDRESS

34th Floor, Robinsons Equitable Tower, ADB Avenue, Ortigas Center, Pasig City
NOTE 1 : In case of death, resignation or cessation of office of the officer designated as contact person, such incident shall be reported to the
Commission within thirty (30) calendar days from the occurrence thereof with information and complete contact details of the new contact person
designated.
2 : All Boxes must be properly and completely filled-up. Failure to do so shall cause the delay in updating the corporation’s records with
the Commission and/or non-receipt of Notice of Deficiencies. Further, non-receipt of Notice of Deficiencies shall not excuse the corporation from
liability for its deficiencies.

*SGVFS027939*
 SyCip Gorres Velayo & Co. Tel: (632) 891 0307 BOA/PRC Reg. No. 0001,
6760 Ayala Avenue Fax: (632) 819 0872 December 14, 2015, valid until December 31, 2018
1226 Makati City ey.com/ph SEC Accreditation No. 0012-FR-4 (Group A),
Philippines November 10, 2015, valid until November 9, 2018

INDEPENDENT AUDITOR’S REPORT

The Board of Directors and Stockholders

Oriental Petroleum and Minerals Corporation
34th Floor, Robinsons Equitable Tower
ADB Avenue, Ortigas Center, Pasig City

Opinion

We have audited the consolidated financial statements of Oriental Petroleum and Minerals Corporation
and its subsidiaries (the Group), which comprise the consolidated statements of financial position as at
December 31, 2017 and 2016, 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, 2017, and notes to the consolidated
financial statements, including a summary of significant accounting policies.

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, 2017 and 2016, and its consolidated
financial performance and its consolidated cash flows for each of the three years in the period ended
December 31, 2017 in accordance with Philippine Financial Reporting Standards (PFRSs).

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 the matter below, our description
of how our audit addressed the matter is provided in that context.

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.

*SGVFS027939*
A member firm of Ernst & Young Global Limited
 -2-

Estimation of Proven Oil Reserves

Proven reserves are estimated by reference to available reservoir and well information, including
production and pressure trends for producing reservoirs and, in some cases, subject to definitional limits,
to similar data from other producing reservoirs. All proven reserve estimates are subject to revision, either
upward or downward, based on new information, such as from development drilling and production
activities or from changes in economic factors, including product prices, contract terms or development
plans.

The estimation of proven oil reserves requires significant judgment and assumptions by management and
engineers and has a material impact on the consolidated financial statements, particularly on depletion of
wells, platforms and other facilities; impairment testing; and use of the going concern assumption.
Information on the estimation of the proven oil reserves are included in Notes 5 and 10 to the
consolidated financial statements.

Audit response
Our audit procedures included, among others, understanding the process and methodology employed by
the expert engaged by the consortium on the estimation of oil reserves. We also assessed the
professional competence, objectivity, and capabilities of the expert engaged by the consortium to perform
independent assessment for the oil reserves and resources. On a sample basis, we also agreed the reserves
used in the depletion and impairment testing of Wells, Platforms and Other Facilities with the report
(Reserves Update Report) provided by the expert.

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, 2017, but does not include the 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, 2017 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 PFRSs, 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

*SGVFS027939*
A member firm of Ernst & Young Global Limited
 -3-

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.

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.

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A member firm of Ernst & Young Global Limited
 -4-

∂ Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the consolidated financial statements.
We are responsible for the direction, supervision and performance of the 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.

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 Jennifer D. Ticlao.

SYCIP GORRES VELAYO & CO.

Jennifer D. Ticlao
Partner
CPA Certificate No. 109616
SEC Accreditation No. 1507-A (Group A),
September 24, 2015, valid until September 23, 2018
Tax Identification No. 245-571-753
BIR Accreditation No. 08-001998-110-2018,
February 14, 2018, valid until February 13, 2021
PTR No. 6621335, January 9, 2018, Makati City

April 11, 2018

*SGVFS027939*
A member firm of Ernst & Young Global Limited
ORIENTAL PETROLEUM AND MINERALS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(In U.S. Dollars)

December 31
2017 2016

ASSETS
Current Assets
Cash and cash equivalents (Notes 6 and 20) $5,412,820 $11,195,437
Short-term investments (Notes 9 and 20) 10,255,240 4,872,757
Receivables (Notes 7 and 20) 1,029,764 1,329,305
Crude oil inventory (Note 8) 1,462,654 1,206,922
Other current assets 11,790 9,846
Total Current Assets 18,172,268 18,614,267
Noncurrent Assets
Available-for-sale investments (Notes 9 and 20) 13,313,921 13,674,115
Long-term investments (Notes 9 and 20) 40,000,000 40,000,000
Held-to-maturity investments (Notes 9 and 20) 5,205,087 3,215,809
Property and equipment (Notes 8 and 10) 14,751,195 14,581,103
Deferred exploration costs (Notes 8 and 11) 662,844 662,844
Total Noncurrent Assets 73,933,047 72,133,871
$92,105,315 $90,748,138

LIABILITIES AND EQUITY

Current Liabilities
Accounts and other payables (Notes 12 and 20) $528,508 $624,890
Income tax payable 123,045 663,151
Total Current Liabilities 651,553 1,288,041
Noncurrent Liabilities
Pension liability (Note 16) 388,991 422,919
Deferred tax liabilities - net (Note 17) 1,574,812 1,623,550
Total Noncurrent Liabilities 1,963,803 2,046,469
Total Liabilities 2,615,356 3,334,510
Equity
Capital stock (Note 13) 82,268,978 82,268,978
Subscriptions receivable (Note 13) (373,412) (373,417)
Capital in excess of par value (Note 13) 3,650,477 3,650,477
Retained earnings 3,592,772 1,373,572
Reserve for fluctuation in value of available-for-sale investments (Note 9) (385,693) (51,188)
Remeasurement gains on pension liability - net (Note 16) 157,577 119,657
Cumulative translation adjustment 579,260 425,549
Total Equity 89,489,959 87,413,628
$92,105,315 $90,748,138

See accompanying Notes to Consolidated Financial Statements.

*SGVFS027939*
ORIENTAL PETROLEUM AND MINERALS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In U.S. Dollars)

Years Ended December 31

2017 2016 2015

REVENUE FROM PETROLEUM OPERATIONS

(Note 8) $7,644,185 $8,674,346 $9,908,329

PETROLEUM PRODUCTION COSTS (Note 8) 5,183,177 4,682,386 6,145,641

GROSS PROFIT 2,461,008 3,991,960 3,762,688

EXPENSES (OTHER INCOME)

Depletion, depreciation and amortization expenses
(Notes 8 and 10) 1,516,656 1,246,265 1,130,834
General and administrative expenses (Note 14) 650,778 782,546 518,782
Foreign exchange losses - net 12,789 160,337 81,961
Interest income (Notes 6 and 9) (1,614,460) (1,354,639) (901,814)
Other income (Notes 9 and 15) (705,618) (868,041) (1,332,817)
(139,855) (33,532) (503,054)

INCOME BEFORE INCOME TAX 2,600,863 4,025,492 4,265,742

PROVISION FOR INCOME TAX (Note 17)

Current 293,418 911,802 133,950
Deferred 88,245 348,385 123,647
381,663 1,260,187 257,597

NET INCOME $2,219,200 $2,765,305 $4,008,145

Basic/Diluted Earnings Per Share (Note 18) $0.000011 $0.000014 $0.000020

See accompanying Notes to Consolidated Financial Statements.

*SGVFS027939*
ORIENTAL PETROLEUM AND MINERALS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In U.S. Dollars)

Years Ended December 31

2017 2016 2015

NET INCOME $2,219,200 $2,765,305 $4,008,145

OTHER COMPREHENSIVE INCOME (LOSS)

Items to be reclassified to profit or loss in
subsequent periods:
Movements in reserve for fluctuation in value of
available-for-sale investments (Note 9) (334,505) (372,842) (195,440)
Changes in cumulative translation adjustment 153,711 461,942 7,020
Item not to be reclassified to profit or loss in
subsequent periods:
Remeasurement gains (losses) on pension
liability - net of tax effect (Note 16) 37,920 (22,077) (11,036)
(142,874) 67,023 (199,456)

TOTAL COMPREHENSIVE INCOME $2,076,326 $2,832,328 $3,808,689

See accompanying Notes to Consolidated Financial Statements.

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ORIENTAL PETROLEUM AND MINERALS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In U.S. Dollars)

Reserve for
Fluctuation
in Value of Remeasurement
Capital in Available- Gains (Losses)
Capital Subscriptions Excess of for-Sale on Pension Cumulative
Stock Receivable Par Value Retained Investments Liability Translation
(Note 13) (Note 13) (Note 13) Earnings (Note 9) (Note 16) Adjustment Total
For the Year Ended December 31, 2017
Balances as at January 1, 2017 $82,268,978 ($373,417) $3,650,477 $1,373,572 ($51,188) $119,657 $425,549 $87,413,628
Net income – – – 2,219,200 – – – 2,219,200
Other comprehensive income (loss) – – – − (334,505) 37,920 153,711 (142,874)
Total comprehensive income (loss) – – – 2,219,200 (334,505) 37,920 153,711 2,076,326
Collection of subscription receivable – 5 – – – – – 5
Balances as at December 31, 2017 $82,268,978 ($373,412) $3,650,477 $3,592,772 ($385,693) $157,577 $579,260 $89,489,959
For the Year Ended December 31, 2016
Balances as at January 1, 2016 $82,268,978 ($373,417) $3,650,477 ($1,391,733) $321,654 $141,734 ($36,393) $84,581,300
Net income – – – 2,765,305 – – – 2,765,305
Other comprehensive income (loss) – – – – (372,842) (22,077) 461,942 67,023
Total comprehensive income (loss) – – – 2,765,305 (372,842) (22,077) 461,942 2,832,328
Balances as of December 31, 2016 $82,268,978 ($373,417) $3,650,477 $1,373,572 ($51,188) $119,657 $425,549 $87,413,628

For the Year Ended December 31, 2015

Balances as at January 1, 2015 $82,268,978 ($373,417) $3,650,477 ($5,399,878) $517,094 $152,770 ($43,413) $80,772,611
Net income – – – 4,008,145 – – – 4,008,145
Other comprehensive income (loss) – – – – (195,440) (11,036) 7,020 (199,456)
Total comprehensive income (loss) – – – 4,008,145 (195,440) (11,036) 7,020 3,808,689
Balances as at December 31, 2015 $82,268,978 ($373,417) $3,650,477 ($1,391,733) $321,654 $141,734 ($36,393) $84,581,300

See accompanying Notes to Consolidated Financial Statements.

*SGVFS027939*
ORIENTAL PETROLEUM AND MINERALS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In U.S. Dollars)

Years Ended December 31

2017 2016 2015
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax $2,600,863 $4,025,492 $4,265,742
Adjustments for:
Depletion, depreciation and amortization expenses 1,516,656 1,246,265 1,130,834
(Notesforeign
Unrealized 8 and 10)
exchange losses - net 178,522 160,301 81,961
Gain on sale of available-for-sale investments (2,094) – –
(Notesin9 pension
Movement and 15) liability (Note 16) (112,705) 299,120 9,633
Dividend income (Note 15) (703,524) (868,041) (787,232)
Interest income (Notes 6 and 9) (1,614,460) (1,354,639) (901,814)
hbOperating income before working capital changes 1,863,258 3,508,498 3,799,124
Changes in operating assets and liabilities
Decrease (increase) in:
Receivables 260,957 711,281 567,396
Crude oil inventory (255,732) 387,873 210,935
Other current assets (1,944) (376) (200)
Decrease in accounts and other payables (96,382) (21,464) (8,332)
Cash flows generated from operations 1,770,157 4,585,812 4,568,923
Income tax paid (833,523) – (182,450)
Net cash flows provided by operating activities 936,634 4,585,812 4,386,473
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received 1,633,098 1,024,368 921,829
Dividends received 723,470 728,269 787,232
Proceeds from sale of available-for-sale investments 27,783 – –
Decrease (increase) in short-term investments (5,382,483) (4,872,757) 4,965,913
Acquisitions of/additions to:
Held-to-maturity investments (Note 9) (2,010,374) (213,746) (3,280,696)
Property and equipment (Notes 8 and 10) (1,686,748) (141,050) (178,058)
Long-term investment (Note 9) – (40,000,000) –
Available-for-sale investments (Note 9) – (890,564) (40,713)
Deferred exploration costs (Notes 8 and 11) – (609) (62,934)
Net cash flows provided by (used in) investing activities (6,695,254) (44,366,089) 3,112,573
CASH FLOWS FROM FINANCING ACTIVITY
Receipt of subscription receivable 5 – –

EFFECTS OF CUMULATIVE TRANSLATION

ADJUSTMENT − 6,462 7,020

EFFECT OF EXCHANGE RATE CHANGES ON

CASH AND CASH EQUIVALENTS (24,002) (36,287) (66,823)

NET INCREASE (DECREASE) IN CASH AND

CASH EQUIVALENTS (5,782,617) (39,810,102) 7,439,243

CASH AND CASH EQUIVALENTS AT

BEGINNING OF YEAR 11,195,437 51,005,539 43,566,296

CASH AND CASH EQUIVALENTS AT

END OF YEAR (Note 6) $5,412,820 $11,195,437 $51,005,539

See accompanying Notes to Consolidated Financial Statements.

*SGVFS027939*
ORIENTAL PETROLEUM AND MINERALS CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In U.S. Dollars)

1. Corporate Information and Status of Operations

Oriental Petroleum and Minerals Corporation (the Parent Company) and its subsidiaries (collectively
referred to as “the Group”) were organized under the laws of the Republic of the Philippines to
engage in oil exploration and development activities. The Parent Company was incorporated on
December 22, 1969 with corporate life of 50 years.

The Parent Company’s principal office is located at 34th Floor, Robinsons Equitable Tower, ADB
Avenue, Ortigas Center, Pasig City. The Parent Company was listed in the Philippine Stock
Exchange (PSE) on October 14, 1970.

The Group is 19.4% owned by JG Summit Holdings, Inc. (JGHSI).

Service Contract (SC) 14

On December 15, 1975, pursuant to Section 7 of the Oil Exploration and Development Act of 1972
(Presidential Decree 87 dated November 21, 1972), the Group, together with other participants
(collectively referred to as the Consortium), entered into a service contract with the Philippine
Government through the Petroleum Board, now the Department of Energy (DOE) for the exploration,
exploitation and development of the contract area in offshore Northwest of Palawan Island,
Philippines, which was amended from time to time. This contract area includes the Nido, Matinloc,
West Linapacan and Galoc Field where significant hydrocarbon deposits were discovered.

The contract areas (i.e., Blocks A, B, B1, C1, C2 and D) covered by SC 14 are situated offshore
Northwest of Palawan Island, Philippines. While production activities continue in Blocks A, B, B1
and C1 of SC 14, crude oil production in the West Linapacan Oilfield in Block C2 was suspended in
1999 due to a significant decline in crude oil production caused by increasing water intrusion.
The Group continually conduct technical evaluation activities of the said area and submitted a work
program and budget to DOE. However, the Parent Company participates in the production of other
fields, including Nido, Galoc and Matinloc. Total production from these fields is modest but enough
to cover operating and overhead expenses of SC 14.

The Galoc oilfield located in Block C was declared commercial on June 22, 2009 with effectivity on
June 19, 2009. Block D remains a retained area.

In December 2010, the DOE extended the term of SC 14 for another 15 years or up to
December 17, 2025.

SC 14C1 - Galoc

Farm-in Agreement (FA)

On September 23, 2004, Team Oil (TEAM) and Cape Energy (CAPE) entered into a Farm-in-
Agreement (FA) with the SC 14C - Galoc Consortium members for the development of the Galoc
Field. The FA was concluded in a Deed of Assignment (DA) dated August 22, 2005 where TEAM
and CAPE designated Galoc Production Company (GPC) as the special purpose company to accept
the assigned participating interest and to act as the operator of the Galoc production area.

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 -2-

Under the FA and DA, GPC will pay 77.721% of the cost to develop the Galoc Field in exchange for
a 59.845% participating interest in the area. Other significant terms and conditions of the
Agreements follow:

1) That GPC, together with the other paying party, Nido Petroleum Philippines, Pty. Ltd.
(Nido Petroleum), be allowed to first recover their share of the development cost from crude oil
sales proceeds from the Galoc Field after production expenses.

2) That GPC will be assigned its pro-rata share of the $68 million historical cost recovery of the
Galoc block equivalent to $33 million to be recovered pursuant to the terms of the Block C
agreement below.

3) That GPC will reimburse the Consortium members (except GPC and Nido Petroleum) for
expenditures previously incurred in relation to the Galoc Field as follows:

a) $1.5 million payable out of 50% of GPC’s share of the Filipino Participation Incentive
Allowance (FPIA); and

b) $1.5 million payable upon reaching a cumulative production of 35 million barrels of oil from
the Galoc Field.

On July 1, 2009, GPC and the other Consortium members purchased additional interest in the field
from Petroenergy Resources Corporation (Petroenergy) and Alcorn Gold Resources Corporation
(AGRC).

As at December 31, 2017 and 2016, the Parent Company and its subsidiary, Linapacan Oil Gas and
Power Corporation (LOGPOCOR), hold a combined participating interest of 7.78505% in Galoc.

Extended Production Test (EPT) Agreement

On August 10, 2006, an EPT agreement was made and entered into by the DOE and GPC and its
partners (referred to as “contractors” under the EPT agreement). The purpose of the EPT is to obtain
dynamic performance data for the Galoc reservoir and to confirm the presence and continuity of at
least two significant channel sandbodies by undertaking an EPT of a well designed to prove each
channel.

In consideration of the risk and undertaking assumed by the contractor under the EPT agreement, the
contractor shall market crude produced and saved from the EPT and is allowed to retain the gross
proceeds for the recovery of 100% of all operating expenses incurred in the EPT. Any amount of
gross proceeds in excess of the cost of the EPT shall be subject to 60-40 sharing in favor of the
Philippine Government.

The duration of the EPT is a minimum of 90 days of actual crude flow from at least one well
excluding delays which arise from breakdowns, repairs or replacements, well conditions or other
conditions. The EPT will be terminated upon the earliest of 182 days of actual crude production or
when sufficient data has been obtained or viability of the Galoc Field has been established by the
contractors in conjunction with the DOE.

On termination, the contractors shall either declare commerciality of the field and commit to
undertake development, or declare the field to be noncommercial for further development or
production and commence abandonment and demobilization of the EPT facilities.

*SGVFS027939*
 -3-

The EPT period ended on June 18, 2009.

Joint Operating Agreement (JOA)

On September 12, 2006, the Consortium entered into a JOA, amending the existing JOA, for the
purpose of regulating the joint operations in the Galoc Block. The JOA shall continue for as long as:

1) the provisions in SC 14 in respect of the Galoc Block remain in force;

2) until all properties acquired or held for use in connection with the joint operations has been
disposed of and final settlement has been made between the parties in accordance with their
respective rights and obligations in the Galoc Block; and

3) without prejudice to the continuing obligations of any provisions of the JOA which are expressed
to or by their natures would be required to apply after such final settlement.

Block C Agreement
In 2006, Block C Agreement was entered into by the consortium members (the “Galoc Block
Owners”) to specify gross proceeds allocation as well as the rights and obligations relating to their
respective ownership interest in the Galoc Block (the “Galoc Contract Area Rights”) and their
respective ownership interest in the Remaining Block (except for GPC).

The agreement also clarifies how GPC and Philodrill, which are the designated operator of the Galoc
Block and the Remaining Block, respectively, shall work together to perform their obligations and
exercise their rights as operator.

The Allocation of Contract Area Rights under Section 3 of the Block C Agreement provides that:

1) GPC shall be entitled to the FPIA, Production Allowance, Recovery of Operating Expenses and
the Net Proceeds of the SC 14 insofar as it relates to the Galoc Block.

2) The portion of the Galoc Contract Area Rights allocable as FPIA, Production Allowance and Net
Proceeds shall be distributed as follows:

a) GPC shall be allocated an amount equal to its participating interest in the Galoc Block which
is currently 58.291%;

b) Nido Petroleum and Philodrill shall be allocated an amount equal to 17.500% and 4.375%,
respectively; and

c) The balance of 19.834% shall be allocated to the Remaining Block (except GPC) in
accordance with number 5 below.

3) The portion of the Galoc Contract Area Rights allocable to recovery of operating expenses (the
reimbursement amount) shall be distributed as follows:

a) First, an amount equal to the operating expenses incurred by the Galoc Block Owners in
respect of production costs on and from the date of the 2nd Galoc well being brought on
stream shall be allocated to each Galoc Block Owner in accordance with each Galoc Block
Owner’s participating interest;

*SGVFS027939*
 -4-

b) Second, an amount equal to the operating expenses incurred by GPC and Nido Petroleum in
respect of the Galoc Block (excluding the $68 million historical cost assigned to the Galoc
Block pursuant to the FA) shall be allocated 77.721% to GPC and the balance of 22.279% to
Nido Petroleum;

c) Third, any reimbursement amount remaining after applying the provisions of 3a and 3b above
shall be allocated 58.291% to GPC, 17.500% to Nido Petroleum, 4.375% to Philodrill and
19.834% to the Galoc Block Owners (except GPC but including Nido Petroleum and
Philodrill only in relation to its remaining 4.779% interest and its 2.022% interest in the
Galoc Block, respectively) until all the Galoc Block Owners have received in aggregate a
total of $34 million in accordance with this provision. The 19.834% allocated to the Galoc
Block Owners (except GPC) shall be distributed by GPC in accordance with number 5 below;
and

d) Fourth, any reimbursement amount remaining after applying the provisions of 3a, 3b and 3c
above shall be allocated 38.861% to GPC, 17.500% to Nido Petroleum and the balance of
43.639% to the Galoc Block Owners (except GPC but including Nido Petroleum only in
relation to its remaining 4.779% interest in the Galoc Block) until all the Galoc Block
Owners have received in aggregate a total of $34 million in accordance with this provision.
The 43.639% allocated to the Galoc Block Owners (except GPC) shall be distributed by GPC
in accordance with number 5 below.

4) After the provisions in Clause 3.3 of the Block C Agreement (as detailed in number 3 above)
have been satisfied, all the Galoc Block Owners shall share the reimbursement amount in
accordance with each Galoc Block Owner’s participating interest as follows:

a) GPC, Nido Petroleum and Philodrill shall receive 58.291%, 17.500% and 4.375%,
respectively; and

b) The balance of 19.834% shall be distributed by GPC to the Galoc Block Owners (except
Galoc but including Nido Petroleum and Philodrill only in relation to its remaining 4.779%
interest and its 2.022% interest in the Galoc Block, respectively) in accordance with Clause 5
of the Block C Agreement (see number 5 below).

5) All amounts due to the Galoc Block Owners (except GPC) pursuant to Clauses 3.2, 3.3c, 3.3d and
3.4 (see numbers 2, 3c, 3d and 4 above) (the “Outstanding Balance”), shall be distributed by GPC
in accordance with written instructions to distribute the Outstanding Balance authorized by all the
other Galoc Block Owners.

Effective July 1, 2009, the amount allocated to Petroenergy and AGRC in accordance with the Block
C agreement shall be allocated to the remaining partners in accordance with the amount of additional
interest they have purchased from Petroenergy and AGRC. The additional interest purchased are as
follows: Nido Petroleum (0.60052%), Philodrill (0.19745%), Parent Company (0.13970%) and
LOGPOCOR (0.07335%).

The Block C agreement shall terminate when SC 14 terminates.

*SGVFS027939*
 -5-

Lifting Agreement
In 2008, GPC and its partners entered into a lifting agreement which provides for the lifting
procedures to be applied by GPC to ensure that:

1) each lifter is able to lift its Lifting Entitlement on a timely basis;

2) each lifter receives its Actual Lifting Proceeds;

3) overlift and underlift position of each party are monitored and settled;

4) each lifter pays its Actual Lifting Deduction Payment to the GPC; and

5) GPC has sufficient funds in the Joint Account to pay the Philippine Government and the Filipino
Group Entitlement.

The terms of the Block C Agreement shall prevail in the event of a conflict with the terms of this
agreement.

The agreement shall terminate when SC 14 terminates unless terminated earlier by the unanimous
written agreement by the parties.

Decommissioning Agreement (DA)

On December 12, 2008, GPC and its partners entered into a DA which provides for the terms upon
which the wells, offshore installations, offshore pipelines and the Floating Production Storage and
Offloading (FPSO) facility used in connection with the joint operations in respect of the Galoc
Development shall be decommissioned and abandoned in accordance with the laws of the Philippines,
including all regulations issued pursuant to the Oil Exploration and Development Act of 1972.

In accordance with the DA, each party has a liability to fund a percentage of the decommissioning
costs (to be determined at a later date), which shall be equal to the party’s percentage interest.
The funding of the decommissioning costs shall commence on the date (“Funding Date”) GPC issues
a written notice to the DOE after completion of the EPT, specifying the date of commencement of
commercial operations of the Galoc Block. The decommissioning cost, as funded, shall be kept in
escrow with a bank of international standing and repute to be appointed by GPC.

The DA shall terminate when SC 14 terminates.

In October 2016, the Galoc Block Consortium approved the drilling of Galoc-7 to test the Mid Galoc
Prospect, which is estimated to contain oil resources of 6.2 million to 14.6 million barrels.

On November 8, 2016, the DOE approved the Galoc-7 drilling program, with an estimated budget
amounting to US$31 million. GPC drilled the Galoc-7 well and a sidetrack, Galoc-7ST, from March
to April 2017 using the drillship Deepsea Metro I. The wells encountered 7-12 meters of net sand,
which is below the prognosed thickness. In view of this, and in consideration of low fuel prices, the
Consortium decided to temporarily suspend all activities related to a possible Phase III development
and concentrate its efforts in optimizing oil production at the Galoc Field in order to sustain
profitability and prolong the field’s economic life.

*SGVFS027939*
 -6-

SC 14C2 - West Linapacan

A farm-in agreement was signed in May 2008 with Pitkin Petroleum Plc. The agreement requires the
farm-in party (“Farminee”) to carry out, at its own cost, technical studies, drill a well or wells, and
redevelop the West Linapacan-A oilfield. In return, Pitkin Petroleum Plc. will earn 75% interest out
of the share of the farming-out parties (“Farmors”). Pitkin assumed the role as operator of the block.
The farming-out parties/Farmors are carried free up to commercial “first oil” production.

Pitkin Petroleum Plc. will have earned 58.29% interest after fulfilling their work obligations.
In February 2011, Pitkin farmed-out half of the 58.29% interest to Resources Management Associates
Pty Ltd. of Australia (RMA). This transfer of interest was approved by the DOE in July 2011. The
transfer of operatorship to RMA was approved by the DOE in April 2012. The Farmors continued to
be carried free up to commercial first oil production. RMA carried technical studies that will lead to
the drilling and re-development of the West Linapacan-A structure. An independent third party
assessment was also commissioned to determine the range of recoverable reserves from the structure.

In 2014, preparations were made to drill a well with spud-in date no later than end
December 2014. However, there was difficulty in raising the necessary funding for the drilling
operations. Starting the second half of 2014, prices of crude oil world wide started to dramatically
decline. This decline continued up to the end of the year.

On January 14, 2015, the West Linapacan Block Farmors informed the DOE of the termination of the
Farm In Agreement due to the non-performance of work obligation by Pitkin Petroleum (hence
RMA) for the rehabilitation of the West Linapacan field. In a letter dated March 12, 2015, the DOE
acknowledged the termination of the FA between the Farmors and Pitkin (hence RMA) since RMA
could not provide the proof of financial capability to perform the work program. The 58.29%
participating interest previously assigned to Pitkin provided under the FA will be reassigned to the SC
14-C2 West Linapacan Block Farmors.

The joint venture partners developed a work program and budget for the year 2016 which was
submitted to and subsequently approved by the DOE.

The main activity was to carry out a technical and commercial audit of the activities carried out by the
previous Operator-RMA Hk Ltd. In addition, a contingent underwater survey, by way of a Remote
Operated Vehicle (ROV), was considered to gather information on the conditions of the subsea
equipments installed in the old West Linapacan wellheads.

Participating Interests
As at December 31, 2017 and 2016, the Parent Company and LOGPOCOR have the following
participating interests in the various SCs:

(In percentage)
SC 14 (Northwest Palawan)
Block A (Nido) 42.940
Block B (Matinloc) 17.703
Block B1 (North Matinloc) 27.772
Block C1 (Galoc) 7.785
Block C2 (West Linapacan) 30.288
Block D 20.829
SC 6 (Bonita) 14.063

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Among the other operations of the Group, the suspension of the production activities in the West
Linapacan Oilfield raises uncertainties as to the profitability of the petroleum operations for the said
oilfield. The profitability of petroleum operations related to the said oilfield is dependent upon
discoveries of oil in commercial quantities as a result of the success of redevelopment activities
thereof.

2. Basis of Preparation, Statement of Compliance and Basis of Consolidation

Basis of Preparation
The accompanying consolidated financial statements of the Parent Company and its wholly owned
subsidiaries, LOGPOCOR, Oriental Mahogany Woodworks, Inc. (OMWI) and Oriental Land
Corporation (OLC), collectively referred to as the “Group”, which include the share in the assets,
liabilities, income and expenses of the joint operations covered by the SCs as discussed in Note 1 to
the consolidated financial statements, have been prepared on a historical cost basis, except for
available-for-sale (AFS) investments that have been measured at fair value.

The consolidated financial statements are presented in U.S. Dollars, the Parent’s functional and
presentation currency. All values are rounded to the nearest dollar, except when otherwise indicated.

For consolidation purposes, the financial statements of the Subsidiaries (OMWI and OLC) whose
functional currency is Philippine Peso were translated to U.S. Dollars using the prevailing rate as of
the reporting date for statement of financial position accounts and the weighted average rate for the
reporting period for the statements of income and statements of comprehensive income
accounts. The exchange differences arising from the translation are recognized in other
comprehensive income (OCI), until disposal at which time the cumulative translation adjustment
recognized in OCI is included in the statement of income.

The consolidated financial statements provide comparative information in respect of the previous
period.

Statement of Compliance
The accompanying consolidated financial statements have been prepared in compliance with
Philippine Financial Reporting Standards (PFRS).

Basis of Consolidation
The consolidated financial statements comprise the financial statements of the Parent Company and
its subsidiaries as at December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016
and 2015. The subsidiaries are all incorporated in the Philippines.

Effective Percentage of
Ownership
Subsidiaries Principal Activity 2017 2016
LOGPOCOR Oil exploration and development 100% 100%
OMWI Furniture manufacturing and distribution 100 100
OLC Real estate 100 100

As at December 31, 2017 and 2016, OMWI and OLC subsidiaries of the Parent Company have
ceased their operations.

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The financial statements of LOGPOCOR, OMWI and OLC are prepared for the same reporting year
as the Parent Company, using consistent accounting policies.

Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement
with the investee and has the ability to affect those returns through its power over the investee.
Specifically, the Group controls a subsidiary if and only if the Group has:

a. Power over the investee (i.e. existing rights that give it the current ability to direct the relevant
activities of the investee);
b. Exposure, or rights, to variable returns from its involvement with the investee, and
c. The ability to use its power over the investee to affect its returns.

Generally, there is a presumption that a majority voting rights result in control. When the Group has
less than a majority of the voting or similar rights of an investee, the Group considers all relevant
facts and circumstances in assessing whether it has power over an investee, including:

a. The contractual arrangement with the other vote holders of the investee;
b. Rights arising from other contractual arrangements; and
c. The Group’s voting rights and potential voting rights.

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that
there are changes to one or more of the three elements of control. Consolidation of a subsidiary
begins when the Group obtains control over the subsidiary and ceases when the Group loses control
of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of
during the year are included in the consolidated financial statements from the date the Group gains
control until the date the Group ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity
holders of the Parent Company and to the non-controlling interests, even if this results in the
non-controlling interests having a deficit balance. When necessary, adjustments are made to the
financial statements of subsidiaries to bring their accounting policies into line with the Group’s
accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows
relating to transactions between members of the Group are eliminated in full on consolidation.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an
equity transaction. If the Group loses control over a subsidiary, it:

∂ Derecognizes the assets (including goodwill) and liabilities of the subsidiary;

∂ Derecognizes the carrying amount of any non-controlling interests;
∂ Derecognizes the cumulative translation differences recorded in equity;
∂ Recognizes the fair value of the consideration received;
∂ Recognizes the fair value of any investment retained;
∂ Recognizes any gain or loss in profit or loss; and
∂ Reclassifies the parent’s share of components previously recognized in OCI to profit or loss or
retained earnings, as appropriate, as would be required if the Group had directly disposed of the
related assets or liabilities.

Non-controlling interests represent the interests in the subsidiaries not held by the Parent Company,
and are presented separately in the consolidated statements of income and within equity in the
consolidated statements of financial position, separately from equity attributable to holders of the
Parent Company.

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3. Changes in Accounting Policies and Disclosures

Changes in Accounting Policies and Disclosures

The accounting policies adopted in the preparation of the Group’s consolidated financial statements
are consistent with those of the previous financial year except for the adoption of the following new
accounting pronouncements starting January 1, 2017.

∂ Amendments to PFRS 12, Disclosure of Interests in Other Entities, Clarification of the Scope of
the Standard (Part of Annual Improvements to PFRSs 2014 - 2016 Cycle)

The amendments clarify that the disclosure requirements in PFRS 12, other than those relating to
summarized financial information, apply to an entity’s interest in a subsidiary, a joint venture or
an associate (or a portion of its interest in a joint venture or an associate) that is classified
(or included in a disposal group that is classified) as held for sale.

Adoption of these amendments did not have any impact on the Group’s consolidated financial
statements.

∂ Amendments to PAS 7, Statement of Cash Flows, Disclosure Initiative

The amendments require entities to provide disclosure of changes in their liabilities arising from
financing activities, including both changes arising from cash flows and non-cash changes
(such as foreign exchange gains or losses).

Adoption of these amendments did not have any impact on the Group’s consolidated financial
position, performance or disclosures as the Group does not have liabilities arising from financing
activities.

∂ Amendments to PAS 12, Income Taxes, Recognition of Deferred Tax Assets for Unrealized
Losses

The amendments clarify that an entity needs to consider whether tax law restricts the sources of
taxable profits against which it may make deductions upon the reversal of the deductible
temporary difference related to unrealized losses. Furthermore, the amendments provide
guidance on how an entity should determine future taxable profits and explain the circumstances
in which taxable profit may include the recovery of some assets for more than their carrying
amount.

The Group applied the amendments retrospectively. However, their application has no effect on
the Group’s consolidated financial position and performance as the Group has no deductible
temporary differences or assets that are in the scope of the amendments.

Future Changes in Accounting Policies

Pronouncements issued but not yet effective are listed below. Unless otherwise indicated, the Group
does not expect that the future adoption of the said pronouncements will have a significant impact on
its consolidated financial statements. The Group intends to adopt the following pronouncements
when they become effective.

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Effective beginning on or after January 1, 2018

∂ Amendments to PFRS 2, Share-based Payment, Classification and Measurement of Share-based

Payment Transactions

The amendments to PFRS 2 address three main areas: the effects of vesting conditions on the
measurement of a cash-settled share-based payment transaction; the classification of a
share-based payment transaction with net settlement features for withholding tax obligations; and
the accounting where a modification to the terms and conditions of a share-based payment
transaction changes its classification from cash settled to equity settled.

On adoption, entities are required to apply the amendments without restating prior periods, but
retrospective application is permitted if elected for all three amendments and if other criteria are
met. Early application of the amendments is permitted.

The Group has assessed that the adoption of these amendments will not have any impact on the
2018 consolidated financial statements.

∂ Amendments to PFRS 4, Insurance Contracts, Applying PFRS 9, Financial Instruments, with

PFRS 4

The amendments address concerns arising from implementing PFRS 9, the new financial
instruments standard before implementing the new insurance contracts standard. The
amendments introduce two options for entities issuing insurance contracts: a temporary
exemption from applying PFRS 9 and an overlay approach. The temporary exemption is first
applied for reporting periods beginning on or after January 1, 2018. An entity may elect the
overlay approach when it first applies PFRS 9 and apply that approach retrospectively to financial
assets designated on transition to PFRS 9. The entity restates comparative information reflecting
the overlay approach if, and only if, the entity restates comparative information when applying
PFRS 9.

The amendments are not applicable to the Group since none of the entities within the Group have
activities that are predominantly connected with insurance or issue insurance contracts.

∂ PFRS 9, Financial Instruments

PFRS 9 reflects all phases of the financial instruments project and replaces PAS 39, Financial
Instruments: Recognition and Measurement, and all previous versions of PFRS 9. The standard
introduces new requirements for classification and measurement, impairment, and hedge
accounting. Retrospective application is required but providing comparative information is not
compulsory. For hedge accounting, the requirements are generally applied prospectively, with
some limited exceptions.

The Group is currently assessing the impact of this new standard on its financial statements and
plans to adopt it on the required effective date.

∂ PFRS 15, Revenue from Contracts with Customers

PFRS 15 establishes a new five-step model that will apply to revenue arising from contracts with
customers. Under PFRS 15, revenue is recognized at an amount that reflects the consideration to
which an entity expects to be entitled in exchange for transferring goods or services to a

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customer. The principles in PFRS 15 provide a more structured approach to measuring and
recognizing revenue.

The new revenue standard is applicable to all entities and will supersede all current revenue
recognition requirements under PFRSs. Either a full retrospective application or a modified
retrospective application is required for annual periods beginning on or after January 1, 2018.

The Group is currently assessing the impact of this new standard on its consolidated financial
statements and plans to adopt it on the required effective date.

In addition, as the presentation and disclosure requirements in PFRS 15 are more detailed than
under current PFRSs, the Group is currently assessing what necessary changes it needs to make on its
current systems, internal controls, policies and procedures to enable the Group to collect and disclose the
required information.

The recognition and measurement requirements in PFRS 15 also apply to gains or losses on
disposal of nonfinancial assets (such as items of available-for-sale investments, property and
equipment and deferred exploration costs), when that disposal is not in the ordinary course of
business. However, on transition, the effect of these changes is not expected to be material for the
Group.

∂ Amendments to PAS 28, Measuring an Associate or Joint Venture at Fair Value (Part of Annual
Improvements to PFRSs 2014 - 2016 Cycle)

The amendments clarify that an entity that is a venture capital organization, or other qualifying
entity, may elect, at initial recognition on an investment-by-investment basis, to measure its
investments in associates and joint ventures at fair value through profit or loss. They also clarify
that if an entity that is not itself an investment entity has an interest in an associate or joint
venture that is an investment entity, the entity may, when applying the equity method, elect to
retain the fair value measurement applied by that investment entity associate or joint venture to
the investment entity associate’s or joint venture’s interests in subsidiaries. This election is made
separately for each investment entity associate or joint venture, at the later of the date on which
(a) the investment entity associate or joint venture is initially recognized; (b) the associate or joint
venture becomes an investment entity; and (c) the investment entity associate or joint venture first
becomes a parent.

The amendments should be applied retrospectively, with earlier application permitted.

∂ Amendments to PAS 40, Investment Property, Transfers of Investment Property

The amendments clarify when an entity should transfer property, including property under
construction or development into, or out of investment property. The amendments state that a
change in use occurs when the property meets, or ceases to meet, the definition of investment
property and there is evidence of the change in use. A mere change in management’s intentions
for the use of a property does not provide evidence of a change in use. The amendments should
be applied prospectively to changes in use that occur on or after the beginning of the annual
reporting period in which the entity first applies the amendments. Retrospective application is
only permitted if this is possible without the use of hindsight.

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∂ Philippine Interpretation IFRIC-22, Foreign Currency Transactions and Advance Consideration

The interpretation clarifies that, in determining the spot exchange rate to use on initial recognition
of the related asset, expense or income (or part of it) on the derecognition of a non-monetary asset
or non-monetary liability relating to advance consideration, the date of the transaction is the date
on which an entity initially recognizes the nonmonetary asset or non-monetary liability arising
from the advance consideration. If there are multiple payments or receipts in advance, then the
entity must determine a date of the transactions for each payment or receipt of advance
consideration. Entities may apply the amendments on a fully retrospective basis. Alternatively,
an entity may apply the interpretation prospectively to all assets, expenses and income in its
scope that are initially recognized on or after the beginning of the reporting period in which the
entity first applies the interpretation or the beginning of a prior reporting period presented as
comparative information in the financial statements of the reporting period in which the entity
first applies the interpretation.

Effective beginning on or after January 1, 2019

∂ Amendments to PFRS 9, Prepayment Features with Negative Compensation

The amendments to PFRS 9 allow debt instruments with negative compensation prepayment
features to be measured at amortized cost or fair value through other comprehensive income. An
entity shall apply these amendments for annual reporting periods beginning on or after
January 1, 2019. Earlier application is permitted.

∂ PFRS 16, Leases

PFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of
leases and requires lessees to account for all leases under a single on-balance sheet model similar
to the accounting for finance leases under PAS 17, Leases. The standard includes two
recognition exemptions for lessees – leases of ’low-value’ assets (e.g., personal computers) and
short-term leases (i.e., leases with a lease term of 12 months or less). At the commencement date
of a lease, a lessee will recognize a liability to make lease payments (i.e., the lease liability) and
an asset representing the right to use the underlying asset during the lease term
(i.e., the right-of-use asset). Lessees will be required to separately recognize the interest expense
on the lease liability and the depreciation expense on the right-of-use asset.

Lessees will be also required to remeasure the lease liability upon the occurrence of certain events
(e.g., a change in the lease term, a change in future lease payments resulting from a change in an
index or rate used to determine those payments). The lessee will generally recognize the amount
of the remeasurement of the lease liability as an adjustment to the right-of-use asset.

Lessor accounting under PFRS 16 is substantially unchanged from today’s accounting under
PAS 17. Lessors will continue to classify all leases using the same classification principle as in
PAS 17 and distinguish between two types of leases: operating and finance leases.

PFRS 16 also requires lessees and lessors to make more extensive disclosures than under
PAS 17.

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Early application is permitted, but not before an entity applies PFRS 15. A lessee can choose to
apply the standard using either a full retrospective or a modified retrospective approach. The
standard’s transition provisions permit certain reliefs.

The Group is currently assessing the impact of adopting PFRS 16.

∂ Amendments to PAS 28, Long-term Interests in Associates and Joint Ventures

The amendments to PAS 28 clarify that entities should account for long-term interests in an
associate or joint venture to which the equity method is not applied using PFRS 9. An entity shall
apply these amendments for annual reporting periods beginning on or after January 1, 2019.
Earlier application is permitted.

∂ Philippine Interpretation IFRIC-23, Uncertainty over Income Tax Treatments

The interpretation addresses the accounting for income taxes when tax treatments involve
uncertainty that affects the application of PAS 12 and does not apply to taxes or levies outside the
scope of PAS 12, nor does it specifically include requirements relating to interest and penalties
associated with uncertain tax treatments.

The interpretation specifically addresses the following:

o Whether an entity considers uncertain tax treatments separately
o The assumptions an entity makes about the examination of tax treatments by taxation
authorities
o How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused
tax credits and tax rates
o How an entity considers changes in facts and circumstances

An entity must determine whether to consider each uncertain tax treatment separately or together
with one or more other uncertain tax treatments. The approach that better predicts the resolution
of the uncertainty should be followed.

The Group is currently assessing the impact of adopting this interpretation.

Deferred effectivity

∂ Amendments to PFRS 10 and PAS 28, Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture

The amendments address the conflict between PFRS 10 and PAS 28 in dealing with the loss of
control of a subsidiary that is sold or contributed to an associate or joint venture. The
amendments clarify that a full gain or loss is recognized when a transfer to an associate or joint
venture involves a business as defined in PFRS 3, Business Combinations. Any gain or loss
resulting from the sale or contribution of assets that does not constitute a business, however, is
recognized only to the extent of unrelated investors’ interests in the associate or joint venture.

On January 13, 2016, the Financial Reporting Standards Council deferred the original effective
date of January 1, 2016 of the said amendments until the International Accounting Standards
Board (IASB) completes its broader review of the research project on equity accounting that may
result in the simplification of accounting for such transactions and of other aspects of accounting
for associates and joint ventures.

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4. Summary of Significant Accounting Policies

Cash and Cash Equivalents

Cash includes cash on hand and in banks. Cash in banks earn interest at the prevailing bank deposit
rates. Cash equivalents include short-term, highly liquid investments that are readily convertible to
known amounts of cash with original maturities of three (3) months or less from date of placements
and that are subject to insignificant risk of change in value.

Short-term Investments
Short-term investments are placements in time deposits and other money market instruments with
original maturities of more than three months but less than one year.

Financial Instruments
Date of Recognition
The Group recognizes a financial asset or a financial liability in the consolidated statement of
financial position when it becomes a party to the contractual provisions of the instrument. Purchases
or sales of financial assets that require delivery of assets within the time frame established by
regulation or convention in the market place are recognized on the settlement date.

Initial Recognition
All financial assets are initially recognized at fair value. Except for financial assets at fair value
through profit or loss (FVPL), the initial measurement of financial assets includes transaction costs.
The Group classifies its financial assets in the following categories: financial assets at FVPL,
held-to-maturity (HTM) investments, available-for-sale (AFS) investments, and loans and
receivables. Financial liabilities are classified as either financial liabilities at FVPL or other financial
liabilities. The classification depends on the purpose for which the investments were acquired and
whether these are quoted in an active market. Management determines the classification of its
investments at initial recognition and, where allowed and appropriate, re-evaluates such designation
at every reporting date.

Financial instruments are classified as liability or equity in accordance with the substance of the
contractual arrangement. Interest, dividends, gains and losses relating to a financial instrument or a
component that is a financial liability, are reported as expense or income. Distributions to holders of
financial instruments classified as equity are charged directly to equity net of any related income tax
benefits.

As at December 31, 2017 and 2016, the Group has no financial assets and liabilities at FVPL.

‘Day 1’ Difference
Where the transaction price in a non-active market is different from the fair value based on other
observable current market transactions in the same instrument or based on a valuation technique
whose variables include only data from observable markets, the Group recognizes the difference
between the transaction price and fair value (a ‘Day 1’ difference) in the consolidated statement of
income unless it qualifies for recognition as some other type of asset or liability.

In cases an unobservable data is used, the difference between the transaction price and model value is
only recognized in the consolidated statement of income when the inputs become observable or when
the instrument is derecognized. For each transaction, the Group determines the appropriate method of
recognizing the ‘Day 1’ difference amount.

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Loans and Receivables

Loans and receivables are nonderivative financial assets with fixed or determinable payments and
fixed maturities that are not quoted in an active market. These are not entered into with the intention
of immediate or short-term resale and are not designated as AFS financial assets or financial assets at
FVPL.

After initial measurement, loans and receivables are subsequently measured at amortized cost using
the effective interest (EIR) method, less allowance for impairment losses. Amortized cost is
calculated by taking into account any discount or premium on acquisition and fees that are an integral
part of the EIR. The amortization is included in the “Interest income” in the consolidated statement
of income. The losses arising from impairment of such loans and receivables are recognized in the
consolidated statement of income.

This accounting policy relates to the Group’s cash and cash equivalents, short-term and long-term
investments and receivables.

HTM Investments
Non-derivative financial assets with fixed or determinable payments and fixed maturities are
classified as HTM when the Group has the positive intention and ability to hold them to maturity.

After initial measurement, held-to-maturity investments are measured at amortized cost using the
EIR, less impairement. Amortized cost is calculated by taking into account any discount or premium
on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included
as “Interest income” in the consolidated statement of income. The losses arising from impairment are
recognized in the consolidated statement of income.

The Group’s HTM investment refers to a quoted debt instrument.

AFS Investments
AFS investments are those non derivative financial assets that are designated as such or do not qualify
as financial assets at FVPL, HTM investments or loans and receivables. They are purchased and held
indefinitely, and may be sold in response to liquidity requirements or changes in market conditions.
They include government securities, equity investments and other debt instruments.

After initial measurement, AFS investments are measured at fair value with unrealized gains or losses
being recognized directly in the consolidated statement of comprehensive income as “Reserve for
fluctuation in value of AFS investments.” When the investment is disposed of, the cumulative gain or
loss previously recorded in equity is recognized in the consolidated statement of income. Interest
earned or paid on the investments is reported as interest income or expense using the effective interest
rate (EIR). Dividends earned on investments are recognized in the consolidated statement of income
when the right to receive has been established.

Other Financial Liabilities

Issued financial instruments or their components, which are not designated as FVPL are classified as
other financial liabilities, where the substance of the contractual arrangement results in the Group
having an obligation either to deliver cash or another financial asset to the holder, or to satisfy the
obligation other than by the exchange of a fixed amount of cash or another financial asset for a fixed
number of own equity shares. The components of issued financial instruments that contain both
liability and equity elements are accounted for separately, with the equity component being assigned
the residual amount after deducting from the instrument as a whole the amount separately determined
as the fair value of the liability component on the date of issue.

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After initial measurement, other financial liabilities are subsequently measured at amortized cost
using the EIR method. Amortized cost is calculated by taking into account any discount of premium
on the issue and fees that are an integral part of the EIR. Any effects on restatement of foreign
currency-denominated liabilities are recognized in the consolidated statement of income.

The Group’s other financial liabilities include accounts and other payables.

Impairment of Financial Assets

The Group assesses at each reporting date whether there is objective evidence that a financial asset or
group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be
impaired if, and only if, there is objective evidence of impairment as a result of one or more events
that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event
(or events) has an impact on the estimated future cash flows of the financial asset or the group of
financial assets that can be reliably estimated. Evidence of impairment may include indications that
the borrower or a group of borrowers is experiencing significant financial difficulty, default or
delinquency in interest or principal payments, the probability that they will enter bankruptcy or other
financial reorganization and where observable data indicate that there is a measurable decrease in the
estimated future cash flows, such as changes in arrears or economic conditions that correlate with
defaults.

Loans and Receivables

The Group first assesses whether objective evidence of impairment exists individually for financial
assets that are individually significant, and individually or collectively for financial assets that are not
individually significant. If it is determined that no objective evidence of impairment exists for an
individually assessed financial asset, whether significant or not, the asset is included in a group of
financial assets with similar credit risk characteristics and that group of financial assets is collectively
assessed for impairment. Assets that are individually assessed for impairment and for which an
impairment loss is or continues to be recognized are not included in a collective assessment of
impairment.

If there is objective evidence that an impairment loss on loans and receivables carried at amortized
cost has been incurred, the amount of the loss is measured as the difference between the asset’s
carrying amount and the present value of estimated future cash flows (excluding future expected
credit losses that have not been incurred) discounted at the financial assets’ original EIR (i.e., the EIR
computed at initial recognition). The carrying amount of the asset is reduced through use of an
allowance account. The amount of the loss shall be recognized in consolidated statement of income
during the period in which it arises.

If, in a subsequent period, the amount of the impairment loss decreases, and the decrease can be
related objectively to an event occurring after the impairment was recognized, the previously
recognized impairment loss is reversed. Any subsequent reversal of an impairment loss is recognized
in the consolidated statement of income, to the extent that the carrying value of the asset does not
exceed the amortized cost at the reversal date.

AFS Investments Carried at Fair Value

In the case of equity investments classified as AFS, impairment indicators would include a significant
or prolonged decline in the fair value of the investments below its cost. Where there is evidence of
impairment, the cumulative loss, measured as the difference between the acquisition cost and the
current fair value, less any impairment loss on that financial asset previously recognized in the
consolidated statement of income, is removed from other comprehensive income and recognized in
consolidated statement of income. Impairment losses on equity investments are not reversed through

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the consolidated statement of income. Increases in fair value after impairment are recognized directly
in other comprehensive income.

In the case of debt instruments classified as AFS, impairment is assessed based on the same criteria as
financial assets carried at amortized cost. Future interest income is based on the reduced carrying
amount and is accrued using the rate of interest used to discount future cash flows for the purpose of
measuring impairment loss and is recorded as part of “Other income” in the consolidated statement of
income. If, in subsequent year, the fair value of a debt instrument increased and the increase can be
objectively related to an event occurring after the impairment loss was recognized in the consolidated
statement of income, the impairment loss is reversed through the consolidated statement of income.

Derecognition of Financial Assets and Liabilities

Financial Asset
A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial
assets) is derecognized when:
∂ the rights to receive cash flows from the asset have expired;
∂ the Group retains the right to receive cash flows from the asset, but has assumed an obligation to
pay them in full without material delay to a third party under a ‘pass-through’ arrangement; or,
∂ the Group has transferred its rights to receive cash flows from the asset and either: (a) has
transferred substantially all the risks and rewards of the asset; or (b) has neither transferred nor
retained substantially all the risks and rewards of the asset, but has transferred control of the
asset.

Where the Group has transferred its right to receive cash flows from an asset and has neither
transferred nor retained substantially all the risk and rewards of the asset nor transferred control of the
asset, the asset is recognized to the extent of the Group’s continuing involvement in the asset.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at
the lower of the carrying amount of the asset and the maximum amount of consideration that the
Group could be required to repay.

Loans and Receivables

Loans and receivables, together with the associated allowance accounts, are written off when there is
no realistic prospect of future recovery.

Financial Liability
A financial liability is derecognized when the obligation under the liability is discharged, cancelled or
has expired. Where an existing financial liability is replaced by another from the same lender on
substantially different terms, or the terms of an existing liability are substantially modified, such an
exchange or modification is treated as a derecognition of the original liability and the recognition of a
new liability, and the difference in the respective carrying amounts is recognized in the consolidated
statement of income.

Offsetting of Financial Instruments

Financial assets and financial liabilities are offset and the net amount is reported in the consolidated
statement of financial position if, and only if, there is a currently enforceable legal right to set off the
recognized amounts and there is an intention to settle on a net basis, or to realize the asset and settle
the liability simultaneously. The Group assesses that it has a currently enforceable right of offset if
the right is not contingent on a future event, and is legally enforceable in the normal course of
business, event of default, and event of insolvency or bankruptcy of the Group and all of the
counterparties.

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Fair Value Measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The fair value measurement is
based on the presumption that the transaction to sell the asset or transfer the liability takes place
either:

∂ In the principal market for the asset or liability, or,

∂ In the absence of a principal market, in the most advantageous market for the asset or liability

The principal or the most advantageous market must be accessible to the Group. The fair value of an
asset or a liability is measured using the assumptions that market participants would use when pricing
the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant's ability to
generate economic benefits by using the asset in its highest and best use or by selling it to another
market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which
sufficient data are available to measure fair value, maximizing the use of relevant observable inputs
and minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are
categorized within the fair value hierarchy, described as follows, based on the lowest level input that
is significant to the fair value measurement as a whole:

∂ Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities
∂ Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value
measurement is directly or indirectly observable
∂ Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value
measurement is unobservable

For assets and liabilities that are recognized in the consolidated financial statements on a recurring
basis, the Group determines whether transfers have occurred between Levels in the hierarchy by
re-assessing categorization (based on the lowest level input that is significant to the fair value
measurement as a whole) at the end of each reporting period.

Crude Oil Inventory

Crude oil inventory is valued at the prevailing market price at the time of production.

Long-term Investments
Long-term investments are placements in time deposits and other money market instruments with
original maturities of more than one year.

Property and Equipment

Transportation equipment and office furniture and equipment are carried at cost less accumulated
depreciation and any impairment in value.

Wells, platforms and other facilities are carried at cost less accumulated depletion and any
impairment in value.

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The initial cost of property and equipment, other than wells, platforms and other facilities, comprises
its construction cost or purchase price and any directly attributable costs of bringing the property and
equipment to its working condition and location for its intended use. Subsequent costs are capitalized
as part of these assets only when it is probable that future economic benefits associated with the item
will flow to the Group and the cost of the items can be measured reliably. All other repairs and
maintenance are charged against current operations as incurred.

In situations where it can be clearly demonstrated that to be obtained from the use of an item of
property and equipment beyond its originally assessed standard of performance, the expenditures are
capitalized as additional cost of property and equipment.

When assets are retired or otherwise disposed of, the cost of the related accumulated depletion and
depreciation and amortization and provision for impairment losses, if any, are removed from the
accounts and any resulting gain or loss is credited or charged against current operations.

Depreciation of property and equipment, other than wells, platforms and other facilities, commences
once the assets are put into operational use and is computed on a straight-line basis over the estimated
useful lives (EUL) of the assets as follows:

Years
Transportation equipment 6
Office furniture and equipment 5-10

Depletion, depreciation and amortization of capitalized costs related to the contract areas under
“Wells, platforms and other facilities” in commercial operations is calculated using the
unit-of-production method based on estimates of proved reserves.

The EUL and depletion and depreciation, residual values and amortization methods are reviewed
periodically to ensure that the period and methods of depletion and depreciation and amortization are
consistent with the expected pattern of economic benefits from items of property and equipment.

Interest in Joint Arrangements

PFRS defines a joint arrangement as an arrangement over which two or more parties have joint
control over the arrangement. Joint control is the contractually agreed sharing of control of an
arrangement, which exists only when decisions about the relevant activities (being those that
significantly affect the returns of the arrangement) require unanimous consent of the parties sharing
control.

Joint Operations
A joint operation is a type of joint arrangement whereby the parties that have joint control of the
arrangement have rights to the assets and obligations for the liabilities, relating to the arrangement.

In relation to its interests in joint operations, the Group recognizes its:

∂ Assets, including its share of any assets held jointly
∂ Liabilities, including its share of any liabilities incurred jointly
∂ Revenue from the sale of its share of the output arising from the joint operation
∂ Share of the revenue from the sale of the output by the joint operation
∂ Expenses, including its share of any expenses incurred jointly.

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Deferred Exploration Costs

The Group follows the full cost method of accounting for exploration costs determined on the basis of
each SC/Geophysical Survey and Exploration Contract (GSEC) area. Under this method, all
exploration costs relating to each SC/GSEC are deferred pending determination of whether the
contract area contains oil and gas reserves in commercial quantities. The exploration costs relating to
the SC/GSEC area where oil and gas in commercial quantities are discovered are subsequently
capitalized as “Wells, platforms and other facilities” shown under the “Property and equipment”
account in the consolidated statement of financial position upon commercial production. When the
SC/GSEC is permanently abandoned or the Group has withdrawn from the consortium, the related
deferred oil exploration costs are written off. SCs and GSECs are considered permanently abandoned
if the SCs and GSECs have expired and/or there are no definite plans for further exploration and/or
development.

Impairment of Nonfinancial Assets

The Group assesses at each reporting date whether there is an indication that the Group’s property
and equipment and deferred exploration costs may be impaired. If any such indication exists, or
when an annual impairment testing for an asset is required, the Group makes an estimate of the
asset’s recoverable amount. Recoverable amount is the higher of an asset’s or cash-generating unit’s
(CGU) fair value less cost to sell and its value-in-use and is determined for an individual asset, unless
the asset does not generate cash inflows that are largely independent of those from other assets or
group of assets.

Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered
impaired and is written down to its recoverable amount. In assessing value-in-use, the estimated
future cash flows are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset.

An assessment is made at each reporting date as to whether there is any indication that previously
recognized impairment losses may no longer exist or may have decreased. If such indication exists,
the Group makes an estimate of recoverable amount. A previously recognized impairment loss is
reversed only if there has been a change in the estimates used to determine the asset’s recoverable
amount since the last impairment loss was recognized. If that is the case, the carrying amount of the
asset is increased to its recoverable amount. That increased amount cannot exceed the carrying
amount that would have been determined, net of depletion, depreciation and amortization, had no
impairment loss been recognized for the asset in prior years. Such reversal is recognized in the
consolidated statement of income unless the asset is carried at revalued amount, in which case the
reversal is treated as a revaluation increase.

Intangible assets with indefinite useful lives are tested for impairment annually either individually or
at the CGU level, as appropriate.

Equity
Capital Stock
Capital stock is measured at par value for all shares subscribed, issued and outstanding. When the
Group issues more than one class of stock, a separate account is maintained for each class of stock
and the number of shares issued. When the Group issues shares in excess of par, the excess is
recognized in the “Capital in excess of par value” account; any incremental costs incurred directly
attributable to the issuance of new shares are treated as deduction from it. If additional paid in capital
is not sufficient, the excess is charged against retained earnings.

Subscriptions Receivable
Subscriptions receivable represents the amount corresponding to shares subscribed but not fully paid.

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Retained Earnings
Retained earnings represents cumulative balance of profits or losses of the Group and with
consideration of any changes in accounting policies and errors applied retrospectively.

Other Comprehensive Income (OCI)

OCI are items of income and expense that are not recognized in profit or loss for the year in
accordance with PFRS. The Group’s OCI in 2017 and 2016 pertains to reserve for fluctuation in
value of available-for-sale investments which can be reclassified to profit or loss in subsequent period
and remeasurement gains (losses) on pension liability and changes in cumulative translation
adjustment which cannot be recycled to profit or loss in the subsequent period.

Revenue Recognition
Revenue is recognized to the extent that it is probable that the economic benefits associated with the
transaction will flow to the Group and the amount of revenue can be measured reliably. Revenue is
measured at the fair value of the consideration received, excluding discounts, rebates, and other sales
taxes or duty. The Group assesses its revenue arrangements against specific criteria in order to
determine if it is acting as principal or agent. The Group has concluded that it is acting as principal in
all its revenue agreements. The following specific recognition criteria must also be met before
revenue is recognized:

Revenue from Petroleum Operation

Revenue is derived fom sale of petroleum to third party customers. Sale of petroleum is recognized at
the time of production based on the Group’s participating interest.

Interest Income
Interest income is recognized as it accrues using the EIR method, the rate that exactly discounts
estimated future cash receipts through the expected life of the financial asset to the net carrying
amount of that financial asset.

Dividend Income
Dividend income is recognized when the Group’s right to receive the dividend is established, which is
generally when the shareholders approve the dividend.

Costs and Expenses

Cost of services and general and administrative expenses are recognized in profit or loss when
decrease in future economic benefits related to a decrease in an asset or an increase in a liability has
arisen that can be measured reliably. These are recognized:

(a) on the basis of a direct association between the costs incurred and the earning of specific items of
income;
(b) on the basis of systematic and rational allocation procedures when economic benefits are
expected to arise over several accounting periods and the association can only be broadly or
indirectly determined; or
(c) immediately when expenditure produces no future economic benefits or when, and to the extent
that, future economic benefits do not qualify or cease to qualify, for recognition in the
consolidated statement of financial position as an asset.

Petroleum Production Cost

Petroleum production cost represents costs that are directly attributable in recognizing revenue from
petroleum operations.

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General and Administrative Expenses

General and administrative expenses constitute the costs of administering the business and are
recognized when incurred.

Leases
The determination of whether an arrangement is, or contains, a lease is based on the substance of the
arrangement and requires an assessment of whether the fulfillment of the arrangement is dependent
on the use of a specific asset or assets and the arrangement conveys a right to use the asset.

A reassessment is made after inception of the lease only if one of the following applies:
(a) there is a change in contractual terms, other than a renewal or extension of the arrangement;
(b) a renewal option is exercised or extension granted, unless that term of the renewal or extension
was initially included in the lease term;
(c) there is a change in the determination of whether fulfillment is dependent on a specific asset; or
(d) there is a substantial change to the asset.

Where a reassessment is made, lease accounting shall commence or cease from the date when the
change in circumstances gave rise to the reassessment for scenarios (a), (b), or (d) and at the date of
renewal or extension period for the scenario (c).

Group as a Lessee
Lease of assets under which the lessor effectively retains all the risks and rewards of ownership is
classified as operating lease. Operating lease payments are recognized as an expense in the
consolidated statement of income on a straight-line basis over the lease term.

Income Taxes
Current Income Tax
Current income tax assets and liabilities for the current and prior periods are measured at the amount
expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to
compute the amount are those that are enacted or substantively enacted at the reporting date.

Current income tax relating to items recognized directly in equity is recognized as other
comprehensive income. Management periodically evaluates positions taken in the tax returns with
respect to situations in which applicable tax regulations are subject to interpretation and establishes
provisions where appropriate.

Deferred Income Tax

Deferred income tax is provided, using the liability method, on all temporary differences, with certain
exceptions, at reporting date between the tax bases of assets and liabilities and their carrying amounts
for financial reporting purposes.

Deferred tax liabilities are recognized for all taxable temporary differences, except:
∂ when the deferred tax liability arises from the initial recognition of goodwill or an asset or
liability in a transaction that is not a business combination and, at the time of the transaction,
affects neither the accounting profit nor taxable profit or loss; and

∂ in respect of taxable temporary differences associated with investments in subsidiaries, associates

and interests in joint arrangements, when the timing of the reversal of the temporary differences
can be controlled and it is probable that the temporary differences will not reverse in the
foreseeable future.

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Deferred tax assets are recognized for all deductible temporary differences, carryforward of unused
tax credits from excess of minimum corporate income tax (MCIT) over the regular corporate income
tax (RCIT) and net operating loss carryover (NOLCO), to the extent that it is probable that taxable
profit will be available against which the deductible temporary differences and carryforward of
unused tax credits from excess MCIT and NOLCO can be utilized, except:

∂ where the deferred tax asset relating to the deductible temporary difference arises from the initial
recognition of an asset or liability in a transaction that is not a business combination and, at the
time of the transaction, affects neither the accounting profit nor taxable profit; and

∂ in respect of deductible temporary differences associated with investments in subsidiaries,

associates and interests in joint ventures, deferred tax assets are recognized only to the extent that
it is probable that the temporary differences will reverse in the foreseeable future and taxable
profit will be available against which the temporary differences can be utilized.

The carrying amount of deferred tax assets is reviewed at each financial reporting date and reduced to
the extent that it is no longer probable that sufficient taxable profit will be available to allow all or
part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are reassessed at each
reporting date and are recognized to the extent that it has become probable that future taxable profit
will allow the deferred tax assets to be recovered.

Deferred tax assets and liabilities are measured at the tax rate that are expected to apply to the period
when the asset is realized or the liability is settled, based on tax rates and tax laws that have been
enacted or substantively enacted at the reporting date.

Deferred tax relating to items recognized directly in equity is recognized as other comprehensive
income.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off
current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity
and the same taxation authority.

Pension Expense
The net defined benefit liability or asset is the aggregate of the present value of the defined benefit
obligation at the end of the reporting period reduced by the fair value of plan assets (if any), adjusted
for any effect of limiting a net defined benefit asset to the asset ceiling. The asset ceiling is the
present value of any economic benefits available in the form of refunds from the plan or reductions in
future contributions to the plan.

The cost of providing benefits under the defined benefit plans is actuarially determined using the
projected unit credit method.

Defined benefit costs comprise the following:

• Service costs
• Net interest on the net defined benefit liability or asset
• Remeasurements of net defined benefit liability or asset

Service costs which include current service costs, past service costs and gains or losses on
non-routine settlements are recognized as expense in the consolidated statement of income. Past
service costs are recognized when plan amendment or curtailment occurs. These amounts are
calculated periodically by independent qualified actuary.

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Net interest on the net defined benefit liability or asset is the change during the period in the net
defined benefit liability or asset that arises from the passage of time which is determined by applying
the discount rate based on government bonds to the net defined benefit liability or asset.

Net interest on the net defined benefit liability or asset is recognized as expense or income in the
consolidated statement of income.

Remeasurements comprising actuarial gains and losses, return on plan assets and any change in the
effect of the asset ceiling (excluding net interest on defined benefit liability) are recognized
immediately in OCI in the period in which they arise. Remeasurements are not reclassified to
consolidated statement of income in subsequent periods. All remeasurements recognized in OCI
account “Remeasurement gains (losses) on pension liabilities” are not reclassified to another equity
account in subsequent periods.

Plan assets are assets that are held by a long-term employee benefit fund or qualifying insurance
policies. Plan assets are not available to the creditors of the Group, nor can they be paid directly to
the Group. Fair value of plan assets is based on market price information. When no market price is
available, the fair value of plan assets is estimated by discounting expected future cash flows using a
discount rate that reflects both the risk associated with the plan assets and the maturity or expected
disposal date of those assets (or, if they have no maturity, the expected period until the settlement of
the related obligations). If the fair value of the plan assets is higher than the present value of the
defined benefit obligation, the measurement of the resulting defined benefit asset is limited to the
present value of economic benefits available in the form of refunds from the plan or reductions in
future contributions to the plan.

The Group’s right to be reimbursed of some or all of the expenditure required to settle a defined
benefit obligation is recognized as a separate asset at fair value when and only when reimbursement is
virtually certain.

Foreign Currency-denominated Transactions and Translations

The consolidated financial statements are presented in U.S. Dollar, which is the Parent Company’s
functional and presentation currency. Each entity in the Group determines its own functional
currency and items included in the consolidated financial statements of each entity are measured
using that functional currency. Transactions in foreign currencies are initially recorded in the
functional currency rate ruling at the date of the transaction. However, monetary assets and liabilities
denominated in foreign currencies are retranslated at the functional currency exchange rate prevailing
at the reporting date. Exchange gains or losses arising from foreign currency translations are charged
or credited to the consolidated statement of income.

All differences are taken to the consolidated statement of income with the exception of differences on
foreign currency borrowings that provide, if any, a hedge against a net investment in a foreign entity.
These are taken directly to equity until disposal of the net investment, at which time they are
recognized in the consolidated statements of income. Non-monetary items that are measured in terms
of historical cost in foreign currency are translated using the exchange rates as at the dates of initial
transactions. Non-monetary items measured at fair value in a foreign currency are translated using
the exchange rates at the date when the fair value was determined.

The functional currency of the Parent Company’s subsidiary, OMWI, and OLC is Philippine Peso.
As at reporting date, the assets and liabilities of these subsidiaries are translated into the presentation
currency of the Group (the US Dollars) at the exchange rate at the reporting date and the consolidated
statements of income accounts are translated at weighted average exchange rates for the year. The
exchange differences arising on the translation are taken directly to “Cumulative translation

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adjustment” account in the equity section of the consolidated statements of financial position. Upon
disposal of a subsidiary, the deferred cumulative translation adjustment amount recognized in equity
relating to that particular subsidiary is recognized in the consolidated statement of income.

Operating Segments
The Group’s operating businesses are organized and managed separately according to the nature of
the products and services provided, with each segment representing a strategic business unit that
offers different products and serves different markets. The Group’s business and only operating
segment pertains to oil exploration and development. Business segments involved in furniture
manufacturing and distribution and real estate have ceased operations.

Provisions
Provisions are recognized only when the Group has: (a) a present obligation (legal or constructive) as
a result of a past event; (b) it is probable that an outflow of resources embodying economic benefits
will be required to settle the obligation; and (c) a reliable estimate can be made of the amount of the
obligation. If the effect of the time value of money is material, provisions are determined by
discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of
the time value of money and, where appropriate, the risks specific to the liability. Where discounting
is used, the increase in the provision due to the passage of time is recognized as an interest expense.
Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. If it is
no longer probable that an outflow of the resources embodying economic benefits will be required to
settle the obligation, the provision is reversed.

Contingencies
Contingent liabilities are not recognized in the consolidated financial statements. These are disclosed
unless the possibility of an outflow of resources embodying economic benefits is remote. Contingent
assets are not recognized in the consolidated financial statements but are disclosed when an inflow of
economic benefits is probable.

Earnings Per Share (EPS)

EPS is determined by dividing net income by the weighted average number of shares outstanding for
each year after retroactive adjustment for any stock dividends declared.

Events After the Reporting Date

Post year-end events up to the date of auditor’s report that provide additional information about the
Group’s position at the reporting date (adjusting events) are reflected in the consolidated financial
statements. Post year-end events that are non-adjusting events are disclosed in the notes to
consolidated financial statements when material.

5. Significant Accounting Judgments, Estimates and Assumptions

The preparation of the consolidated financial statements in compliance with PFRS requires the Group
to make judgments, estimates and assumptions that affect the amount reported in the consolidated
financial statements and accompanying notes. Future events may occur which will cause the
assumptions used in arriving at the estimates to change. The effects of any change in estimates are
reflected in the consolidated financial statements, as they become reasonably determinable.

Judgments, estimates and assumptions are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are believed to be
reasonable under the circumstances.

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Judgments
In the process of applying the Group’s accounting policies, management has made the following
judgments, apart from those involving estimations, which has the most significant effect on the
amounts recognized in the consolidated financial statements.

Determination and Classification of a Joint Arrangement

Judgment is required to determine when the Group has joint control over an arrangement, which
requires an assessment of the relevant activities and when the decisions in relation to those activities
require unanimous consent. The Group has determined that the relevant activities for its joint
arrangements are those relating to operations and capital decisions of the arrangement.

Judgment is also required to classify a joint arrangement. Classifying the arrangement requires the
Group to assess their rights and obligations arising from the arrangement. Specifically, the Group
considers:
∂ The structure of the joint arrangement - whether structured through a separate vehicle
∂ When the arrangement is structured through a separate vehicle, the Group considers the rights and
obligations arising from:
a. The legal form of the separate vehicle;
b. The terms of the contractual arrangement; and
c. Other facts and circumstances (when relevant).

This assessment often requires significant judgment, and a different conclusion on joint control and
also whether the arrangement is a joint operation or a joint venture, may materially impact the
accounting treatment for each assessment.

As at December 31, 2017 and 2016, the Group’s joint arrangement is in the form of a joint operation.

Determination of Functional Currency

The entities within the Group determine the functional currency based on economic substance of
underlying circumstances relevant to each entity within the Group. The determination of functional
currency was based on the primary economic environment in which each of the entities generates and
expends cash. The Parent Company’s and LOGPOCOR’s functional currency is the US Dollar while
the functional currency of OMWI and OLC is Philippine Peso.

As at December 31, 2017 and 2016, the Group’s cumulative translation adjustment amounted to
$0.58 million and $0.43 million, respectively.

Provisions and Contingencies

In the normal course of business, the Group is subject to certain exposure and claims by third parties.
The Group does not believe that this exposure will have a probable material effect on the Group’s
financial position. It is possible, however, that future results of operations could be materially
affected by changes in the judgement and estimates or in the effectiveness of the strategies relating to
this exposure.

Impairment and Write-off of Deferred Exploration Costs

The Group assesses impairment on deferred exploration costs when facts and circumstances suggest
that the carrying amount of the asset may exceed its recoverable amount. Until the Group has
sufficient data to determine technical feasibility and commercial viability, deferred exploration costs
need not be assessed for impairment.

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Facts and circumstances that would require an impairment assessment as set forth in
PFRS 6, Exploration for and Evaluation of Mineral Resources, are as follows:
∂ the period for which the Group has the right to explore in the specific area has expired or will
expire in the near future, and is not expected to be renewed;
∂ substantive expenditure on further exploration for and evaluation of mineral resources in the
specific area is neither budgeted nor planned;
∂ exploration for and evaluation of mineral resources in the specific area have not led to the
discovery of commercially viable quantities of mineral resources and the entity has decided to
discontinue such activities in the specific area; and
∂ sufficient data exist to indicate that, although a development in the specific area is likely to
proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered
in full from successful development or by sale.

The carrying value of deferred exploration costs amounted to $0.66 million as at December 31, 2017
and 2016. No provision for impairment loss was recognized in 2017, 2016 and 2015.

In 2016, the Group incurred additional $610 for the training assistance that DOE has required for the
15-year period extension of SC 6 (nil in 2017). The amounts were included in the “deferred
explorations costs” (see Notes 8 and 11).

Asset Retirement Obligation

Plug and abandonment costs are based on estimates made by the service contract operator. These
costs are not clearly provided for in the SCs. Management believes that there are no legal and
constructive obligations for plug and abandonment costs. As at December 31, 2017 and 2016, the
Group has not recognized any asset retirement obligation.

Estimates and Assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the
reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial year are discussed below:

Fair Values of Financial Assets and Liabilities

The Group carries certain financial assets and liabilities at fair value which requires extensive use of
accounting estimates and judgments. While components of fair value measurements were determined
using verifiable objective evidence (i.e., foreign exchange rates and interest rates), the amount of
changes in fair value would differ if the Group utilized different valuation methodology. Any
changes in fair value of these financial assets would directly affect the consolidated statements of
comprehensive income and consolidated statements of changes in equity, as appropriate
(see Note 20).

Impairment of Financial Assets Carried at Amortized Cost

The Group assesses on a regular basis if there is objective evidence of impairment of loans and
receivables and HTM investments. The amount of impairment loss is measured as the difference
between the asset’s carrying amount and the present value of the estimated future cash flows
discounted at the asset’s original EIR. The Group uses individual impairment assessment on its loans
and receivables and HTM investments. The Group did not assess its loans and receivables and HTM
investments for collective impairment due to the few counterparties which can be specifically
identified. The amount of loss is recognized in the consolidated statement of income with a
corresponding reduction in the carrying value of the loans and receivables through an allowance
account.

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As at December 31, 2017 and 2016, the total carrying value of the Group’s receivables amounted to
$1.03 million and $1.33 million, respectively, (see Note 7) while the HTM investment amounted to
$5.21 million and $3.22 million, respectively, as at December 31, 2017 and 2016 (see Note 9).
No allowance for impairment was provided in 2017 and 2016.

Impairment of AFS Investments Measured at Fair Value

An impairment loss arises with respect of AFS investments when there is objective evidence of
impairment, which involves significant judgment. In applying this judgment, the Group evaluates the
financial health of the issuer, among others. In the case of AFS equity instruments, the Group
expands its analysis to consider changes in the issuer’s industry and sector performance, legal and
regulatory framework, changes in technology and other factors that affect recoverability of the
Group’s investments.

A net decrease in market value of AFS investments amounting to $0.33 million, $0.37 million and
$0.20 million was recognized in 2017, 2016 and 2015, respectively. No impairment loss was
recognized in 2017, 2016 and 2015. AFS investments amounted to $13.31 million and
$13.67 million as of December 31, 2017 and 2016, respectively (see Note 9).

Estimation of Proven Oil Reserves

Estimation of oil reserves requires significant judgment and assumptions by management and
engineers. These estimates have a material impact on the consolidated financial statements,
particulary on the depletion and impairment testing of wells, platforms and other facilities; and use of
the going concern assumption.

Proven reserves are estimated by reference to available reservoir and well information, including
production and pressure trends for producing reservoirs and, in some cases, subject to definitional
limits, to similar data from other producing reservoirs. Proven reserve estimates are attributed to
future development projects only where there is a significant commitment to project funding and
execution and for which applicable governmental and regulatory approvals have been secured or are
reasonably certain to be secured. All proven reserve estimates are subject to revision, either upward
or downward, based on new information, such as from development drilling and production activities
or from changes in economic factors, including product prices, contract terms or development plans.

Estimates of reserves for undeveloped or partially developed fields are subject to greater uncertainty
over their future life than estimates of reserves for fields that are substantially developed and
depleted. As a field goes into production, the amount of proven reserves will be subject to future
revision once additional information becomes available. As those fields are further developed, new
information may lead to revisions.

As of December 31, 2017 and 2016, the estimated remaining proven oil reserves totaled to
3.62 million barrels and 6.28 million barrels, respectively, for Galoc oil field, and 0.32 million barrels
and 0.37 million barrels for Nido oil field, respectively.

The carrying value of wells, platforms and other facilities amounted to $14.72 million and
$14.55 million as of December 31, 2017 and 2016 (see Notes 8 and 10).

Recoverability of Wells, Platforms, and Other Facilities

In 2016, due to the continued decline in oil prices in the market, the Group performed an impairment
test for wells, platforms, and other facilities. In assessing the impairment on wells, platforms, and
other facilities, the Group determines the recoverable amount using the higher of fair value less costs
of disposal and its value in use with the entire Group as the cash generating unit (CGU).

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The value in use calculations in 2016 used cash flows projections based on financial budgets
approved by the consortium, which was provided by the operator, covering a four-year period. The
discount rate used was 10%. The above value in use calculation is sensitive to the discount rate and
cash flows inputs.

There is no impairment loss on wells, platforms, and other facilities in 2016 as a result of the above
assessments. The carrying value of well, platforms, and other facilities amounted to $14.72 million
and $14.55 million as at December 31, 2017 and 2016, respectively (see Notes 8 and 10).

Pension Expense
The cost of pension and the present value of the pension obligation are determined using actuarial
valuations. The actuarial valuation involves making various assumptions. These assumptions are
described in Note 16 and include among others, the determination of the discount rate, salary increase
rate and employee turnover rate. Due to the complexity of the valuation, the underlying assumptions
and its long-term nature, defined benefit obligations are highly sensitive to changes in these
assumptions. All assumptions are reviewed at each reporting date.

In determining the appropriate discount rate, management considers the interest rates of government
bonds that are denominated in the currency in which the benefits will be paid, with extrapolated
maturities corresponding to the expected duration of the defined benefit obligation. Salary increase
rate is based on expected future inflation rates for the specific country and other relevant factors and
employee turnover rate is based on Group’s experience on employees resigning prior to their
retirement.

Pension liability amounted to $0.39 million and $0.42 million and as at December 31, 2017 and 2016,
respectively (see Note 16).

Recognition of Deferred Tax Assets

Deferred tax assets are recognized for all deductible temporary differences to the extent that it is
probable that taxable income will be available against which the deductible temporary differences can
be utilized. Management has determined based on business forecasts of succeeding years that there is
not enough taxable income against which the deferred tax assets will be recognized.

As at December 31, 2017 and 2016, the Group has unrecognized deferred tax assets on deductible
temporary differences amounting to $0.05 million and $0.34 million, respectively (see Note 17).

6. Cash and Cash Equivalents

2017 2016
Cash on hand $200 $201
Cash in banks 63,519 63,516
Cash equivalents 5,349,101 11,131,720
$5,412,820 $11,195,437

Cash in banks earn interest at the prevailing bank deposit rates. Cash equivalents are made for
varying periods of up to three months depending on the immediate cash requirements of the Group
and earn interest at the prevailing short-term deposit rates ranging from 1.50% to 3.125% per annum
in 2017 and 1.70% to 2.25% per annum in 2016.

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Interest income earned from cash in banks and short-term deposits amounted to $0.25 million,
$0.08 million and $0.90 million in 2017, 2016 and 2015, respectively.

There are no cash restrictions on the Group’s cash balance as at December 31, 2017 and 2016.

7. Receivables

2017 2016
Due from operators (Note 8) $574,106 $758,015
Interest receivable 292,373 311,011
Dividend receivable 119,826 139,772
Trade receivables 41,401 120,507
Others 2,058 −
$1,029,764 $1,329,305

Due from operators represent the excess of proceeds from crude oil liftings over the amounts
advanced by the contract operator for the Group’s share in exploration, development and production
expenditures.

Trade receivables pertain to share of the Group on the receivables from customers for the sale of
crude oil.

Trade receivables and due from operators are noninterest-bearing and are generally on 1 to 30-day
terms. There are no past due nor impaired receivables as at December 31, 2017 and 2016.

Dividend receivable pertains to cash dividends to be received by the Group in relation to its quoted
AFS financial assets (Note 9).

8. Interest in Joint Operations

The Group’s interests in the joint operations in the various SCs and GSECs, and any liabilities
incurred jointly with the other partners, as well as the related revenue and expenses of the joint
operations, which are included in the consolidated financial statements, are as follows:

2017 2016
Current assets:
Receivables
Due from operators (Note 7) $574,106 $758,015
Crude oil inventory 1,462,654 1,206,922
2,036,760 1,964,937
Noncurrent assets:
Property and equipment (Note 10)
Wells, platforms and other facilities 88,195,602 86,509,598
Accumulated depletion, depreciation
and amortization (73,475,040) (71,964,138)
Deferred exploration costs (Note 11) 662,844 662,844
15,384,406 15,208,304
$17,421,166 $17,173,241

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2017 2016 2015

Revenue from petroleum
operations $7,644,185 $8,674,346 $9,908,329
Cost of petroleum operations:
Petroleum production costs 5,183,177 4,682,386 6,145,641
Depletion, depreciation and
amortization expenses 1,516,656 1,246,265 1,130,834
6,699,833 5,928,651 7,276,475
$944,352 $2,745,695 $2,631,854

Details of the petroleum production costs are as follow:

2017 2016 2015

Floating, production, storage and
offloading $3,412,593 $3,082,873 $3,457,328
Freight costs 369,232 333,557 406,727
Supply vessel 298,067 269,268 296,715
General and administrative -
consortium 273,315 246,908 300,227
Helicopter services 266,066 240,359 401,237
Operations management 188,103 169,929 449,172
Insurance expenses 154,022 139,141 197,643
Marketing fees and offtake costs 81,980 74,059 154,787
Repairs and maintenance 74,282 67,105 394,984
Logistics base 26,352 23,806 31,293
Others* 39,165 35,381 55,528
$5,183,177 $4,682,386 $6,145,641
* Others include miscellaneous expenses, utilities, postage and telephone charges.

9. Investments

Short-term Investments
The Group availed of various short-term money-market investments with various banks amounting to
$10.26 million as of December 31, 2017. These investments have original maturities of more than
three (3) months but less than one (1) year. These investments earn interests of 1.80% and 2.25% and
will mature on various dates from January 8, 2018 to December 14, 2018.

In 2016, the Group availed of various short-term investments with various banks amounting to
$4.87 million. These investments have original maturities of more than three (3) months but less than
one (1) year. These investments earn interests of 1.70% and 2.25% and has matured on various dates
from January 9, 2017 to December 15, 2017.

Interest income earned from short-term investments amounted to $0.01 million and $0.02 million in
2017 and 2016, respectively.

Long-term Investments
In 2016, the Group availed of various long-term time deposit investment with a local bank amounting
to $40.00 million. These investments earn interest of 2.75% and will mature starting May 10, 2019 to
October 7, 2019.

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Interest income earned from long-term investments amounted to $1.10 million both in 2017 and 2016.

AFS Investments
AFS investments represent equity instruments in quoted shares carried at fair value as at the end of
the reporting period.

As at December 31, 2017 and 2016, the total carrying value of the Group’s AFS investments
amounted to $13.31 million and $13.67 million, respectively.

Movement in the reserve for fluctuation in value of AFS investments at fair value are as follow:

2017 2016
Balances at beginning of year ($51,188) $321,654
Unrealized loss during the year (332,338) (372,842)
Reclassification to consolidated statement of income (2,167) –
Balances at end of year ($385,693) ($51,188)

The carrying values of listed shares have been determined as follows:

2017 2016
Balances at beginning of year $13,674,115 $13,082,333
Additions – 890,564
Transferred from unquoted shares – 74,060
Disposal (27,856) ‒
Reserve for fluctuation in value of AFS investments (332,338) (372,842)
Balances at end of year $13,313,921 $13,674,115

Dividend income earned and received from AFS investments amounted to $0.70 million,
$0.87 million and $0.79 million in 2017, 2016 and 2015, respectively (see Note 15).

HTM Investments
In 2017, the Group acquired fixed rate bond from a corporate bond issuer amounting to
$2.01 million (P
=100 million). The bonds pay interests at a rate of 5.1683% per annum. The bonds
will mature on May 18, 2024.

In 2016, the Group acquired fixed rate corporate bonds from a corporate bond issuer amounting to
$0.21 million (P
=9.89 million). The bonds pay interests at a rate of 4.8500% per annum. The bonds
will mature on March 23, 2026.

In 2015, the Group acquired fixed rate corporate bonds from a corporate bond issuer amounting to
$3.28 million (P
=150.00 million). The bonds pay interests on a quarterly basis at a rate of 6.0169% per
annum. The bonds will mature on August 6, 2027.

The carrying values of HTM Investments are as follows:

2017 2016
Balances at beginning of year $3,215,809 $3,190,403
Additions 2,010,374 213,746
Unrealized foreign exchange loss (21,096) (188,340)
Balances at end of year $5,205,087 $3,215,809

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Interest income earned from HTM investments amounted to $0.03 million, $0.15 million and
$0.04 million in 2017, 2016 and 2015, respectively.

10. Property and Equipment

2017
Wells, Platforms
and Other Office
Facilities Transportation Furniture
(Notes 1 and 8) Equipment and Equipment Total
Cost
Balances at beginning of year $86,509,598 $213,834 $44,550 $86,767,982
Additions 1,686,004 − 744 1,686,748
Balances at end of year 88,195,602 213,834 45,294 88,454,730
Accumulated Depletion,
Depreciation and Amortization
Balance at beginning of year 71,964,138 189,839 32,902 72,186,879
Depletion, depreciation and
amortization (Note 8) 1,510,902 5,389 365 1,516,656
Balances at end of year 73,475,040 195,228 33,267 73,703,535
Net Book Values $14,720,562 $18,606 $12,027 $14,751,195

2016
Wells, Platforms
and Other Office
Facilities Transportation Furniture
(Notes 1 and 8) Equipment and Equipment Total
Cost
Balances at beginning of year $86,368,548 $213,834 $44,550 $86,626,932
Additions 141,050 − − 141,050
Balances at end of year 86,509,598 213,834 44,550 86,767,982
Accumulated Depletion,
Depreciation and Amortization
Balance at beginning of year 70,724,928 183,062 32,624 70,940,614
Depletion, depreciation and
amortization (Note 8) 1,239,210 6,777 278 1,246,265
Balances at end of year 71,964,138 189,839 32,902 72,186,879
Net Book Values $14,545,460 $23,995 $11,648 $14,581,103

As of December 31, 2017 and 2016, the cost of fully depreciated property and equipment still used in
operations amounted to $0.18 million.

11. Deferred Exploration Costs

The full recovery of the deferred oil exploration costs incurred in connection with the Group’s
participation in the acquisition and exploration of petroleum concessions is dependent upon the
discovery of oil and gas in commercial quantities from the respective petroleum, concessions and the
success of the future development thereof. Deferred exploration costs primarily relates to SC 6.

*SGVFS027939*
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SC 6B Bonita
SC 6B Bonita Block is part of the retained area of the original SC 6 granted in 1973. The 10-year
exploration period and the subsequent 25-year production period expired last February 2009.

In 2009, a 15-year extension period for the Bonita Block was requested from and subsequently
granted by the DOE. The conditions for the grant of the 15-year extension period required the
submission and implementation of a yearly work program and budget. It includes as well the
financial assistance to the DOE for training and scholarships in geological and engineering studies.
The term of SC 6 will expire on February 28, 2024.

In 2010, a third party expressed interest to farm-in to and acquire share in the interest in SC 6B by
carrying out additional geoscientific studies with option to drill. The farm-in agreement was
approved by the DOE in February 2011. The agreement requires the farm-in party to carry out a
geological and geophysical program to evaluate the petroleum potential of SC 6B. After the study,
the farm-in party have the option to acquire share in the interest in the block. The subsequent work
program entails the drilling of a well and the production of hydrocarbons from such well.

In 2013, the farm-in agreement with a third party was not finalized and the participating interests of
the joint venture partners reverted to the original interest participation distribution.

In 2014, the Bonita Block was granted a second Extension Period of five (5) years from
March 2014 to March 2019. A work program and budget for the intial two-year extension period
from March 2014 to March 2016 has been submitted to and approved by the DOE. These include the
processing and interpretation of satellite gravity data and three-dimensional seismic data.

The joint operation continued to carry out reprocessing of three-dimensional seismic data through a
geophysical company based in Kuala Lumpur, Malaysia. The reprocessed data will then be
interpreted in-house to identify leads or prospects that could be possible targets for drilling.

In 2016, additional cost incurred for the yearly work program amounting to $610 by the Group.

12. Accounts and Other Payables

2017 2016
Accounts payable $406,534 $502,791
Dividends payable 82,166 82,513
Subscriptions payable 28,164 28,283
Others 11,644 11,303
$528,508 $624,890

Accounts payable mainly consist of unpaid legal service fees. These are noninterest-bearing and are
normally settled in 30- to 60-day terms.

Dividends payable include amounts payable to the Group’s shareholders.

*SGVFS027939*
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13. Paid-up Capital

Under the existing laws of the Republic of the Philippines, at least 60% of the Company’s issued
capital stock should be owned by citizens of the Philippines for the Company to own and hold any
mining, petroleum or renewable energy contract area. As at December 31, 2017, total issued and
subscribed capital stock of the Parent Company is 96.63% Filipino and 3.37% non-Filipino, as
compared to 96.53% Filipino and 3.47% non-Filipino as at December 31, 2016.

As at December 31, 2017 and 2016, this account consists of:

2017 2016
Class A - $0.0004 (P
=0.01) par value
Authorized - 120 billion shares
Issued and outstanding - 120 billion shares $49,361,387 $49,361,387
Class B - $0.0004 (P
=0.01) par value
Authorized - 80 billion shares
Issued and outstanding - 80 billion shares 32,907,591 32,907,591
82,268,978 82,268,978
Subscriptions receivable (373,412) (373,417)
Capital in excess of par value 3,650,477 3,650,477
$85,546,043 $85,546,038

All shares of stock of the Parent Company enjoy the same rights and privileges, except that Class A
shares shall be issued solely to Filipino citizens, whereas Class B shares can be issued either to
Filipino citizens or foreign nationals. There were no issuances of additional common shares in 2017
and 2016.

The Parent Company’s track record of capital stock follows:

Number of
Number of Date of SEC holders
shares registered Issue/offer price approval as of yearend
Listing by way of
introduction 10,000,000,000 P
=0.01 Mar. 24, 1970
Additions:
2,500,000,000 0.01 Mar. 23, 1981
37,500,000,000 0.01 Aug. 5, 1988
50,000,000,000 0.01 Nov. 14, 1989
100,000,000,000 0.01 May 31, 1995
December 31, 2015 200,000,000,000 11,859
Deduct: Movement − (32)
December 31, 2016 200,000,000,000 11,827
Deduct: Movement − (121)
December 31, 2017 200,000,000,000 11,706

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14. General and Administrative Expenses

2017 2016 2015

Staff costs (Note 16) $462,339 $709,965 $434,007
Taxes and licenses 30,290 1,226 6,607
Professional fees 18,760 20,700 21,924
Rent (Note 19) 12,879 12,333 16,745
Printing 12,428 11,069 9,377
Messengerial services 8,447 4,926 4,070
Transportation and communication 5,733 5,129 4,515
Entertainment, amusement and
recreation 3,129 2,644 2,428
Utilities 1,308 2,275 2,146
Insurance 1,217 808 418
Registration and filing fees 299 128 3,346
Advertising and publication 215 230 234
Miscellaneous 93,734 11,113 12,965
$650,778 $782,546 $518,782

Miscellaneous includes office supplies, repairs and maintenance, membership dues and bank
charges.

15. Other Income

2017 2016 2015

Dividend income (Note 9) $703,524 $868,041 $787,232
Others 2,094 – 545,585
$705,618 $868,041 $1,332,817

The dividend income is derived primarily by the Group from its investment in equity instruments.

Other income includes gain on sale of AFS investments and reimbursement of excess payment made
to a third party in prior years for research and development.

16. Retirement Plan

The Group has a funded, noncontributory defined benefit type of retirement plan covering
substantially all of its employees. The benefits are based on defined contribution formula with a
minimum lump-sum guarantee of one month for every year of service up to 20 years and 1.5 months
in excess of 20 years.

Under the existing regulatory framework, Republic Act (RA) No. 7641, the Retirement Pay Law,
requires a provision for retirement pay to qualified private sector employees in the absence of any
retirement plan in the entity, provided, however, that the employee’s retirement benefits under any
collective bargaining and other agreements shall not be less than those provided under the law. The
law does not require minimum funding of the plan. The Group’s retirement plan meets the minimum
retirement benefit specified under RA No. 7641. The Group updates the actuarial valuation every
year by hiring the services of a third party professionally qualified actuary. The latest actuarial report
is dated February 12, 2018.

*SGVFS027939*
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Components of pension expense in the consolidated statements of income included in general and
administrative expenses under ‘Staff costs’ account are as follows:

2017 2016 2015

Current service cost $30,887 $11,268 $6,323
Past service cost – 283,201 –
Interest cost on defined benefit
obligation 14,590 4,651 3,310
Total pension expense $45,477 $299,120 $9,633

The amount included in the consolidated statements of financial position arising from the Group’s
obligation in respect of its defined benefit plan is as follows:

2017 2016
Present value of defined benefit obligation $389,011 $422,919
Fair value of plan assets (20) ‒
$388,991 $422,919

Changes in the present value of defined benefit obligation follow:

2017 2016
Balances at beginning of year $422,919 $97,222
Current service cost 30,887 11,268
Past service cost − 283,201
Interest cost on defined benefit obligation 14,590 4,651
Foreign currency translation adjustment (1,727) (4,962)
Benefits paid (23,506) ‒
Remeasurement losses (gains) arising from:
Experience adjustments (47,361) 33,118
Financial assumptions (6,838) (1,579)
Demographic assumptions 27 −
Balances at end of year $388,991 $422,919

The principal actuarial assumptions used in determining the pension liability for the Group’s plan
follow:

2017 2016
Rate of salary increase 5.70% 5.70%
Discount rate 5.78% 5.38%

The sensitivity analysis below has been determined based on reasonably possible changes of each
significant assumption on the defined benefit obligation as of the end of the reporting period,
assuming all other assumptions were held constant:

Effect on defined benefit obligation

Increase
(decrease) 2017 2016
Discount rates +100 basis points ($15,456) ($18,164)
-100 basis points 18,060 21,413

Future salary increases +1.00% 20,472 23,940

-1.00% (17,973) (20,842)

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It should be noted that the changes assumed to be reasonably possible at the valuation date are open
to subjectivity, and do not consider more complex scenarios in which change other than those
assumed may be deemed to be more reasonable.

The weighted average duration of the defined benefit obligation is 14.16 years and 15.28 years as of
December 31, 2017 and 2016, respectively.

Shown below is the maturity analysis of the undiscounted benefit payments as of December 31, 2017
and 2016:

2017 2016
Less than 1 year $274,785 $296,100
More than 1 year to 5 years 11,042 11,334
More than 5 years to 10 years 134,886 25,299
More than 10 years to 15 years 34,693 155,966
More than 15 years to 20 years 226,739 320,818
More than 20 years 402,997 481,545

17. Income Tax

2017 2016 2015

Current
RCIT $128,700 $801,266 $−
Final 164,718 110,536 74,913
MCIT − − 59,037
293,418 911,802 133,950
Deferred 88,245 348,385 123,647
$381,663 $1,260,187 $257,597

The Group’s deferred tax liabilities represents the deferred income tax effects of the excess of book
base over tax base of property and equipment amounting to $1.69 million and $1.75 million, net of
recognized deferred tax asset on pension liability amounting to $0.12 million and $0.13 million as of
December 31, 2017 and 2016 respectively.

As of December 31, 2017 and 2016, the Group did not recognize deferred tax assets on unrealized
foreign exchange loss amounting to $0.05 million and $0.34 million, respectively, since management
believes that it is not probable that sufficient taxable profit will be available against which the
deductible temporary differences can be utilized.

The reconciliation of the statutory income tax rate to the effective income tax follows:

2017 2016 2015

Statutory income tax rate 30.00% 30.00% 30.00%
Tax effects of:
Nondeductible expense 53.08 7.50 25.86
Changes in unrecognized deferred tax assets
on deductible temporary differences 0.51 (0.45) (17.83)
Interest income subjected to final tax (15.12) (2.98) (3.51)

(Forward)

*SGVFS027939*
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2017 2016 2015

Dividend income (6.97) (2.08) (3.31)
Income exempt from tax (57.94) (10.42) (30.34)
Others 11.12 9.73 5.17
Effective income tax rate 14.67% 31.30% 6.04%

Republic Act (RA) No.10963 or the Tax Reform for Acceleration and Inclusion Act (TRAIN) was
signed into law on December 19, 2017 and took effect January 1, 2018, making the new tax law
enacted as of the reporting date. Although the TRAIN changes existing tax law and includes several
provisions that will generally affect businesses on a prospective basis, the management assessed that
the same will not have any significant impact on the financial statement balances as of the reporting
date.

18. Basic/Diluted Earnings Per Share

The Group’s earnings per share were computed as follows:

2017 2016 2015
Net income $2,219,200 $2,765,305 $4,008,145
Divided by weighted average number
of common shares outstanding 200,000,000,000 200,000,000,000 200,000,000,000
$0.000011 $0.000014 $0.000020

For the years ended December 31, 2017, 2016 and 2015, there were no outstanding potentially
dilutive common shares.

19. Related Party Transactions

Parties are related if one party has the ability, directly or indirectly, to control the other party or
exercise significant influence over the other party in making financial and operating decisions; and
the parties are subject to common control. Related parties may be individuals or corporate entities.

The amounts and the balances arising from the significant related party transactions are as follows:

2017
Amount/ Outstanding
Volume Balance Terms Conditions
Other related parties
a. Cash and cash equivalents $242,562 $242,562 Interest-bearing at prevailing No impairment
market rate;
1.5% to 3.125% per annum;
due and demandable
∂ Interest income 304,576 – – –
b. Rent (Note 14) 12,879 − Noninterest-bearing payable Unsecured
on demand

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2016
Amount/ Outstanding
Volume Balance Terms Conditions
Other related parties
a. Cash and cash equivalents $1,559,314 $1,559,314 Interest-bearing at prevailing No impairment
market rate;
1.70% to 2.25% per annum;
due and demandable
∂ Interest income 170,666 ‒ – –
Short-term investment 1,118,607 1,118,607 Interest-bearing at prevailing No impairment
market rate;
1.70% per annum; due and
demandable
∂ Interest income 3,305 ‒ ‒ ‒
b. Rent (Note 14) 12,333 ‒ Noninterest-bearing payable Unsecured
on demand

a. The Group has money market placements with an affiliated bank, a subsidiary of a stockholder.

b. The Group entered into a lease agreement with an affiliate, a subsidiary of a stockholder,
covering the office space it occupies, which is renewable annually.

c. Compensation of key management personnel of the Group follows:

2017 2016 2015

Short-term employee benefits $245,000 $234,803 $213,628
Post-employment benefits 32,569 289,224 6,023
$277,569 $524,027 $219,651

20. Financial Risk Management Objectives and Policies

The Group’s principal financial instruments comprise of cash and cash equivalents, receivables,
short-term and long-term investments, AFS investments, HTM investments and accounts and other
payables (excluding statutory liabilities). The main objectives of the Group’s financial risk
management are as follow:
∂ to identify and monitor such risks on an ongoing basis;
∂ to minimize and mitigate such risks; and
∂ to provide a degree of certainty about costs.

The main risks arising from the Group’s financial instruments are liquidity, credit, foreign currency
and equity price.

The Group’s risk management policies are summarized below:

a) Liquidity risk
Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated
with financial liabilities. The Group seeks to manage its liquidity profile to be able to finance its
operations, capital expenditures and service maturing debts.

The Group monitors its cash flow position and overall liquidity position in assessing its exposure
to liquidity risk. The Group maintains a level of cash and cash equivalents deemed sufficient to
finance operations and to mitigate the effects of fluctuation in cash flows.

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As of December 31, 2017 and 2016, all financial liabilities are expected to mature within one
year. All commitments up to a year are either due within the time frame or are payable on
demand.

Correspondingly, the financial assets that can be used by the Group to manage its liquidity risk as
of December 31, 2017 and 2016 consist of loans and receivables and short-term investments
which are usually on demand or collectible within three to twelve months. The long-term
investments will mature in 2019.

b) Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument
or customer contract, leading to a financial loss. The Group trades only with its dealers.
Receivable balances are monitored on an ongoing basis with the result that the Group’s exposure
to bad debts is not significant.

The investment of the Group’s cash resources is managed to minimize risk while seeking to
enhance yield. The holding of loans and receivables, AFS investments and HTM investments
exposes the Group to credit risk of the counterparty, with a maximum exposure equal to the
carrying amount of the financial assets, if the counterparty is unwilling or unable to fulfill its
obligation. Credit risk management involves entering into transactions with counterparties that
have acceptable credit standing.

The table below shows the maximum exposure to credit risk for the components of the
consolidated statements of financial position:

2017 2016
Loans and receivables
Cash in banks and cash equivalents $5,412,620 $11,195,236
Short-term investments 10,255,240 4,872,757
Due from operators 574,106 758,015
Interest receivable 292,373 311,011
Dividend receivable 119,826 139,772
Trade receivables 41,401 120,507
Other receivables 2,058 −
Long-term investments 40,000,000 40,000,000
AFS investments 13,313,921 13,674,115
HTM investments 5,205,087 3,215,809
$70,216,632 $74,287,222

The Group’s cash in banks and cash equivalents, short-term investments and long-term
investments are considered high-grade while the remaining financial assets are considered
standard grade.

The Group uses the following criteria to rate credit quality:

Class Description
High Grade Financial assets that are deposited in/or transacted with reputable banks
which have low probability of insolvency
Standard Grade Financial assets of companies that have the apparent ability to satisfy its
obligations in full

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c) Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument
will fluctuate because of changes in foreign exchange rates. The Group’s principal transactions
are carried out in Philippine Peso and its exposure to foreign currency exchange risk arises from
purchases in currencies other than the Group’s functional currency. The Group believes that its
profile of foreign currency exposure on its assets and liabilities is within conservative limits in the
type of business in which the Group is engaged.

The Group’s foreign exchange risk results primarily from movements of U.S. Dollar against other
currencies. As a result of the Group’s investments and other transactions in Philippine Peso, the
consolidated statements of income can be affected significantly by movements in the U.S. Dollar.

The following table shows the foreign currency-denominated assets and liabilities expressed in
Philippine Peso (PHP) and their U.S. Dollar (USD) equivalents as of December 31:

2017 2016
In PHP(1) In USD In PHP(1) In USD
Financial Assets
Loans and receivables
Cash and cash equivalents P
=14,907,759 $298,573 P
=40,143,229 $807,386
Other receivables 102,943 2,062 ‒ ‒
Dividend receivable 5,982,094 119,810 6,949,472 139,772
Interest receivable 966,811 19,363 652,995 13,133
AFS investments 664,760,896 13,313,921 679,876,991 13,674,115
HTM investments 259,890,000 5,205,087 159,890,000 3,215,809
946,613,683 18,958,816 887,512,687 17,850,215
Other Financial Liabilities
Accounts and other payables 26,388,404 528,508 25,424,968 511,363
Net foreign currency-
denominated assets P
=920,225,279 $18,430,308 P
=862,087,719 $17,338,852
1
The exchange rates used as of December 31, 2017 and 2016 are $0.0200 to =
P 1 and $0.0201 to =
P 1, respectively.

The following table demonstrates the sensitivity to a reasonably possible change in the Philippine
Peso exchange rate, with all other variables held constant, of the Group’s income before income
tax in 2017 and 2016. There is no other impact on the Group’s equity other than those already
affecting income.

The sensitivity is based on the historical volatility of the exchange rate of US Dollar against
Philippine Peso during the current year. The analysis is based on the assumption that the current
year’s volatility will be the same in the following year.

Effect on income
Change in PHP rate before income tax
2017 +3.43% ($610,360)
-3.43% 653,518
2016 +4.39% (728,299)
-4.39% 795,092

d) Equity price risk

Equity price risk is the risk that the fair values of investments in quoted equity securities could
decrease as a result of changes in the prices of equity indices and the value of individual stocks.
The Group is exposed to equity securities price risk because of investments held by the Parent
Company, which are classified in the consolidated statement of financial position as AFS
investments.

*SGVFS027939*
 - 43 -

The following table shows the sensitivity of the Group’s equity (through OCI) from changes in
the carrying value of the Group’s AFS investments due to reasonably possible changes in the
Philippine Stock Exchange index (PSEi), with all other variables held constant. The analysis
links PSEi changes, which proxies for general market movements, to individual stock prices
through adjusted betas of each individual stock. Betas are coefficients depicting the sensitivity of
individual stock prices to market movements.

The sensitivity is based on the historical volatility of PSEi for the current year. The analysis is
based on the assumption that current year’s PSEi volatility will be the same in the following year.

Effect on income
Percentage Change in PSEi before income tax
2017 +12% $1,597,671
-12% (1,597,671)
2016 +18% 2,461,341
-18% (2,461,341)

Capital Management
The primary objective of the Group’s capital management is to ensure that it maintains a strong credit
rating in order to support its business and maximize shareholder value.

The Group manages its capital structure and makes adjustments to it, in light of changes in economic
conditions. To maintain or adjust the capital structure, the Parent Company may adjust the dividend
payment to shareholders or issue new shares.

The Group considers its capital stock, net of any subscription receivable, capital in excess of par
value and retained earnings which amounted to $89.14 million and $86.92 million as of
December 31, 2017 and 2016, respectively, as its capital employed. No changes were made in the
objectives, policies or processes during the years ended December 31, 2017 and 2016.

Fair Values
Due to the short-term nature of the transactions, the carrying values of cash and cash equivalents,
receivables, short-term investments and accounts and other payables (excluding statutory liabilities)
approximate the fair value.

The fair value of long-term investments is based on the discounted value of expected future cash
flows using the applicable interest rate for similar types of instruments. The carrying value of the
Group’s long-term investments approximates its fair value.

The fair value of the AFS investments that are actively traded in organized financial markets is
determined by reference to quoted market bid prices at the close of business as of the reporting date.

The fair value of the HTM investments that are actively traded in organized financial markets is
determined by reference to quoted market bid prices at the close of business as of the reporting date.
Fair value and carrying value of HTM investments amounted to $5.59 million and $5.21 million,
respectively, as of December 31, 2017 and $3.56 million and $3.22 million, respectively, as of
December 31, 2016.

*SGVFS027939*
 - 44 -

Fair Value Hierarchy

The Group uses the following hierarchy for determining and disclosing the fair value of financial
instruments by valuation technique:

Level 1: Quoted (unadjusted) prices in active markets for identical assets or liabilities.

Level 2: Other techniques for which all inputs which have a significant effect on the recorded fair
value are observable, either directly or indirectly.

Level 3: Techniques which use inputs which have a significant effect on the recorded fair value that
are not based on observable market data.

As at December 31, 2017 and 2016, the fair value of AFS investments under Level 1 hierarchy
amounted to $13.31 million and $13.67 million, respectively (see Note 9).

As at December 31, 2017 and 2016, the fair value of HTM investments under Level 2 hierarchy
amounted to $5.59 million and $3.56 million, respectively (see Note 9).

As at December 31, 2017 and 2016, the fair value of long-term investments under Level 2 hierarchy
amounted to $40.00 million (see Note 9).

There has been no transfer from Level 1 to Level 2 or 3 categories in 2017, 2016 and 2015.

21. Operating Segment

Operating segments are components of an enterprise for which separate financial information is
available that is evaluated regularly by the chief operating decision-maker in deciding how to allocate
resources and in assessing performance. Generally, financial information is reported on the basis that
is used internally for evaluating segment performance and allocating resources to segments. The
Group only operates in one geographical location, thus, no information on geographical segments is
presented.

The Group derives its revenues only from the participating interests in various SCs of the Parent
Company and LOGPOCOR, with segment assets and liabilities amounting to $92.11 million and
$1.04 million, respectively, as of December 31, 2017 and $90.75 million and $1.71 million,
respectively, as of December 31, 2016. Segment’s revenue and net income amounted to
$7.64 million and $2.23 million, respectively, in 2017, $8.67 million and $2.77 million, respectively,
in 2016 and $9.91 million and $4.01 million, respectively, in 2015. Business segments involved in
furniture manufacturing and distribution and real estate have ceased operations.

Segment assets and segment liabilities exclude deferred tax assets and liabilities.

22. Approval of Financial Statements

The accompanying consolidated financial statements were authorized for issue by the BOD on
April 11, 2018.

*SGVFS027939*
 ORIENTAL PETROLEUM AND MINERALS CORPORATION AND SUBSIDIARIES
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS AND
SUPPLEMENTARY SCHEDULES

SUPPLEMENTARY SCHEDULES

Independent Auditors’ Report on Supplementary Schedules

Supplementary Information and Disclosures Required by SRC Rule 68, as Amended (2011)

Schedule of All Effective Standards and Interpretations under PFRS as of December 31, 2017

Unappropriated Retained Earnings Available for Dividend Distribution

Financial Soundness Indicators

Map of the Relationships of the Companies within the Group

 SyCip Gorres Velayo & Co. Tel: (632) 891 0307 BOA/PRC Reg. No. 0001,
6760 Ayala Avenue Fax: (632) 819 0872 December 14, 2015, valid until December 31, 2018
1226 Makati City ey.com/ph SEC Accreditation No. 0012-FR-4 (Group A),
Philippines November 10, 2015, valid until November 9, 2018

INDEPENDENT AUDITOR’S REPORT

ON SUPPLEMENTARY SCHEDULES

The Board of Directors and Stockholders

Oriental Petroleum and Minerals Corporation
34th Floor, Robinsons Equitable Tower
ADB Avenue, Ortigas Center, Pasig City

We have audited in accordance with Philippine Standards on Auditing, the consolidated financial
statements of Oriental Petroleum and Minerals Corporation and its subsidiaries (the Group) as at
December 31, 2017 and 2016 and for each of the three years in the period ended December 31, 2017,
included in this Form 17-A, and have issued our report thereon dated April 11, 2018. Our audits were
made for the purpose of forming an opinion on the basic consolidated financial statements taken as a
whole. The schedules listed in the Index to Consolidated Financial Statement and Supplementary
Schedules are the responsibility of the Group's management. These schedules are presented for the
purpose of complying with Securities Regulation Code Rule 68, As Amended (2011) and is not part of
the basic consolidated financial statements. These schedules have been subjected to the auditing
procedures applied in the audit of the basic consolidated financial statements and, in our opinion, fairly
states, in all material respects, the information required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.

SYCIP GORRES VELAYO & CO.

Jennifer D. Ticlao
Partner
CPA Certificate No. 109616
SEC Accreditation No. 1507-A (Group A),
September 24, 2015, valid until September 23, 2018
Tax Identification No. 245-571-753
BIR Accreditation No. 08-001998-110-2018,
February 14, 2018, valid until February 13, 2021
PTR No. 6621335, January 9, 2018, Makati City

April 11, 2018

*SGVFS027939*
A member firm of Ernst & Young Global Limited
ORIENTAL PETROLEUM AND MINERALS CORPORATION
AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION AND DISCLOSURES REQUIRED ON
SRC RULE 68, AS AMENDED (2011)
DECEMBER 31, 2017

Philippine Securities and Exchange Commission (SEC) issued the amended Securities Regulation Code
Rule SRC Rule 68 and 68.1 which consolidates the two separate rules and labeled in the amendment as
“Part I” and “Part II”, respectively. It also prescribed the additional information and schedule
requirements for issuers of securities to the public.

Below are the additional information and schedules required by SRC Rule 68, As Amended (2011) that
are relevant to the Group. This information is presented for purposes of filing with the SEC and is not a
required part of the basic financial statements.

Schedule A. Financial Assets

The Group’s financial assets includes investments in quoted equity securities and corporate bonds. Below
is the detailed schedule of financial assets in equity securities and corporate bonds of the Group as of
December 31, 2017:

Amount Shown
in the
Consolidated Value Based
Statement on Market Income
Name of Issuing Entity and Association of Each Number of of Financial Quotation at Received
Issue Shares Position end of year and Accrued
Short-term Investments
Union Bank $1,697,884 $1,697,884 $2,601
Security Bank 8,557,356 8,557,356 12,149
10,255,240 10,255,240 14,750
Long-term Investments
Security Bank 40,000,000 40,000,000 1,100,000
Available-for-sale Investments
Ayala Corporation - Preferred Class “B” 391,280 4,138,290 4,138,290 183,392
First Gen - Series G 1,000,000 2,343,609 2,343,609 154,897
Ayala Corporation - Preferred Class “B2” 200,000 2,107,245 2,107,245 110,877
First Philippine Holdings 200,000 2,031,128 2,031,128 110,022
First Gen Corporation - Series F 586,960 1,352,090 1,352,090 95,557
Various equity quoted securities 2,284,389 1,341,559 1,341,559 48,779
4,662,629 13,313,921 13,313,921 703,524
Held-to-maturity Investments
Aboitiz Equity Ventures 3,004,206 3,004,206 179,064
SM Prime Holdings Bonds 2,002,804 2,002,804 64,657
Ayala Land Fixed Rate Bonds 198,077 198,077 9,517
5,205,087 5,205,087 253,238
$68,774,248 $68,774,248 $2,071,512
 -2-

Schedule B. Amounts Receivable from Directors, Officers, Employees, Related Parties

and Principal Stockholders (other than related parties)

The Group has no receivable from directors, officers, employees, related parties and principal
stockholders as of December 31, 2017.

Schedule C. Amounts Receivable from Related Parties which are Eliminated During the Consolidation of
Financial Statements

Below is the schedule of receivables (payables) with related parties, which are eliminated in the
consolidated financial statements as of December 31, 2017.

Balance at
beginning of Amounts Amounts Balance at end
period Additions collected written-off Current Non-current of period
Linapacan Oil, Gas and
Power Corporation (18,204,108) (288,192) – – – (18,492,300) (18,492,300)
Oriental Land
Corporation ($8,815) – – – – (8,815) (8,815)
Oriental Mahogany
Woodworks, Inc. 92,714 – – – – 92,714 92,714
($18,120,209) ($288,192) $– $– $– ($18,408,401) ($18,408,401)

Schedule D. Intangible Asset

The Group has no intangible asset as of December 31, 2017.

Schedule E. Long-term Debt

The Group has no long-term debt as of December 31, 2017.

Schedule F. Indebtedness to Related Parties (Long-Term Loans from Related Companies)

The Group has no outstanding liabilities to related parties as of December 31, 2017.

Schedule G. Guarantees of Securities of Other Issuers

The Group does not have guarantees of securities of other issuers as of December 31, 2017.

Schedule H. Capital Stock

Number
of shares
issued and Number of
outstanding shares reserved
as shown for options, Number
Number under related warrants, of shares Directors,
of shares balance conversion held by Officers and
Title of issue authorized sheet caption and other rights related parties Employees Others
Common Shares 200,000,000,000 200,000,000,000 − 76,290,125,556 1,806,113,165 121,903,761,279
ORIENTAL PETROLEUM AND MINERALS CORPORATION
AND SUBSIDIARIES
SCHEDULE OF ALL THE EFFECTIVE STANDARDS AND
INTERPRETATIONS

List of Philippine Financial Reporting Standards (PFRSs) [which consist of PFRSs, Philippine
Accounting Standards (PASs) and Philippine Interepretations] effective as of December 31, 2017:

PHILIPPINE FINANCIAL REPORTING STANDARDS AND Adopted Not Not

INTERPRETATIONS Adopted Applicable
Effective as of December 31, 2017
Framework for the Preparation and Presentation of Financial 
Statements
Conceptual Framework Phase A: Objectives and qualitative
characteristics
PFRSs Practice Statement Management Commentary 
Philippine Financial Reporting Standards
PFRS 1 First-time Adoption of Philippine Financial Reporting 
(Revised) Standards
Amendments to PFRS 1 and PAS 27: Cost of an 
Investment in a Subsidiary, Jointly Controlled Entity or
Associate
Amendments to PFRS 1: Additional Exemptions for First- 
time Adopters
Amendment to PFRS 1: Limited Exemption from 
Comparative PFRS 7 Disclosures for First-time Adopters
Amendments to PFRS 1: Severe Hyperinflation and 
Removal of Fixed Date for First-time Adopters
Amendments to PFRS 1: Government Loans 
Amendments to PFRS 1: Borrowing costs 
Amendments to PFRS 1: Meaning of ‘Effective PFRSs’ 
PFRS 2 Share-based Payment 
Amendments to PFRS 2: Vesting Conditions and 
Cancellations
Amendments to PFRS 2: Group Cash-settled Share-based 
Payment Transactions
Amendments to PFRS 2 : Definition of Vesting Condition 
Amendments to PFRS 2: Share-based Payment,
Classification and Measurement of Share-based Payment Not early adopted
Transactions
 -2-

PHILIPPINE FINANCIAL REPORTING STANDARDS AND Adopted Not Not

INTERPRETATIONS Adopted Applicable
Effective as of December 31, 2017
PFRS 3 Business Combinations 
(Revised)
Amendments to PFRS 3: Accounting for Contingent 
Consideration in a Business Combination
Amendments to PFRS 3: Scope Exceptions for Joint 
Arrangements
PFRS 4 Insurance Contracts 
Amendments to PFRS 4: Insurance Contracts, Applying
Not early adopted
PFRS 9, Financial Instruments, with PFRS 4
Amendments to PAS 39 and PFRS 4: Financial Guarantee 
Contracts
PFRS 5 Non-current Assets Held for Sale and Discontinued 
Operations
Changes in the methods of disposal 
PFRS 6 Exploration for and Evaluation of Mineral Resources 
PFRS 7 Financial Instruments: Disclosures 
Amendments to PFRS 7: Transition 
Amendments to PAS 39 and PFRS 7: Reclassification of 
Financial Assets
Amendments to PAS 39 and PFRS 7: Reclassification of 
Financial Assets - Effective Date and Transition
Amendments to PFRS 7: Improving Disclosures about 
Financial Instruments
Amendments to PFRS 7: Disclosures - Transfers of 
Financial Assets
Amendments to PFRS 7: Disclosures - Offsetting 
Financial Assets and Financial Liabilities
Amendments to PFRS 7: Disclosures - Servicing 
Contracts
Applicability of the Amendments to PFRS 7 to 
Condensed Interim Financial Statements
PFRS 8 Operating Segments 
Amendments to PFRS 8: Aggregation of Operating 
Segments and Reconciliation of the Total of the
Reportable Segments’ Assets to the Entity’s Assets
PFRS 9 Financial Instruments Not early adopted
Amendments to PFRS 9: Prepayment features with
Not early adopted
Negative Compensation
 -3-

PHILIPPINE FINANCIAL REPORTING STANDARDS AND Adopted Not Not

INTERPRETATIONS Adopted Applicable
Effective as of December 31, 2017
PFRS 10 Consolidated Financial Statements 
Amendments to PFRS 10 and PAS 28: Investment 
Entities: Applying consolidation exceptions
Amendments to PFRS 9, Sale or Contribution of Assets 
between an Investor and its Associate or Joint Venture
PFRS 11 Joint Arrangements 
Amendments to PFRS 11: Accounting for Acquisitions of 
Interests in Joint Operations
PFRS 12 Disclosure of Interests in Other Entities 
Amendments to PFRS 10, PFRS 12 and PAS 27: 
Investment Entities
Amendments to PFRS 12: Clarification of the Scope of
the Standard (Part of Annual Improvements to PFRSs Not early adopted
2014 - 2016 Cycle)
PFRS 13 Fair Value Measurement 
Amendments to PFRS 13: Short-term receivable and

payables
Amendments to PFRS 13: Portfolio Exception 
PFRS 14 Regulatory Deferral Accounts 
PFRS 15 Revenue from Contracts with Customers Not early adopted
PFRS 16 Leases Not early adopted
Philippine Accounting Standards
PAS 1 Presentation of Financial Statements 
(Revised)
Amendment to PAS 1: Capital Disclosures 
Amendments to PAS 32 and PAS 1: Puttable Financial 
Instruments and Obligations Arising on Liquidation
Amendments to PAS 1: Clarification of the requirements 
for comparative information
Amendments to PAS 1: Presentation of Items of Other 
Comprehensive Income
Amendments to PAS 1: Presentation of financial 
statements disclosure initiative
PAS 2 Inventories 
PAS 7 Statement of Cash Flows 
Amendments to PAS 7: Statement of Cash Flows, 
Disclosure Initiative
 -4-

PHILIPPINE FINANCIAL REPORTING STANDARDS AND Adopted Not Not

INTERPRETATIONS Adopted Applicable
Effective as of December 31, 2017
PAS 8 Accounting Policies, Changes in Accounting Estimates 
and Errors
PAS 10 Events after the Reporting Period 
PAS 11 Construction Contracts 
PAS 12 Income Taxes 
Amendment to PAS 12 - Deferred Tax: Recovery of 
Underlying Assets
Amendments to PAS 12: Income Taxes, Recognition of 
Deferred Tax Assets for Unrealized Losses
PAS 16 Property, Plant and Equipment `
Amendment to PAS 16: Classification of servicing 
equipment
Amendment to PAS 16: Revaluation Method - 
Proportionate Restatement of Accumulated Depreciation
and Amortization
Amendments to PAS 16 and PAS 38: Clarification of 
Acceptable Methods of Depreciation and Amortization
Amendments to PAS 16 and PAS 41: Bearer Plants 
PAS 17 Leases 
PAS 18 Revenue 
PAS 19 Employee Benefits 
(Amended)
Amendments to PAS 19: Actuarial Gains and Losses, 
Group Plans and Disclosures
Amendments to PAS 19: Defined Benefit Plans: 
Employee Contributions
Regional Market Issue Regarding Discount rate 
PAS 20 Accounting for Government Grants and Disclosure of 
Government Assistance
PAS 21 The Effects of Changes in Foreign Exchange Rates 
Amendments to PAS 21: Net Investment in a Foreign 
Operation
PAS 23 Borrowing Costs 
(Revised)
PAS 24 Related Party Disclosures 
(Revised)
Amendments to PAS 24: Key Management Personnel 
PAS 26 Accounting and Reporting by Retirement Benefit Plans 
 -5-

PHILIPPINE FINANCIAL REPORTING STANDARDS AND Adopted Not Not

INTERPRETATIONS Adopted Applicable
Effective as of December 31, 2017
PAS 27 Separate Financial Statements 
Amendments to PFRS 10, PFRS 12 and PAS 27: 
Investment Entities
Amendments to PAS 27: Equity Method in Separate 
Financial Statements
PAS 28 Investments in Associates and Joint Ventures 
(Amended)
Amendments to PFRS 10 and PAS 28: Investment 
Entities: Applying consolidation exceptions
Amendments to PAS 28: Measuring an Associate or Joint
Venture at Fair Value (Part of Annual Improvements to Not early adopted
PFRSs 2014 - 2016 Cycle)
Amendments to PAS 28, Long-term Interest in Associates
Not early adopted
and Joint Ventures
Amendments to PAS 28, Sale or Contribution of Assets
Not early adopted
between an Investor and its Associate or Joint Venture
PAS 29 Financial Reporting in Hyperinflationary Economies 
PAS 32 Financial Instruments: Disclosure and Presentation 
Amendments to PAS 32 and PAS 1: Puttable Financial 
Instruments and Obligations Arising on Liquidation
Amendment to PAS 32: Classification of Rights Issues 
Amendments to PAS 32: Tax effect of Distribution to 
Holders of Equity Instruments
Amendments to PAS 32: Offsetting Financial Assets and 
Financial Liabilities
PAS 33 Earnings per Share 
PAS 34 Interim Financial Reporting 
PAS 36 Impairment of Assets 
Amendments to PAS 36: Recoverable Amount 
Disclosures for Non - Financial Assets
PAS 37 Provisions, Contingent Liabilities and Contingent Assets 
PAS 38 Intangible Assets 
Amendments to PAS 16 and PAS 38: Clarification of 
Acceptable Methods of Depreciation and Amortization
Amendment to PAS 38: Clarification of Acceptable 
Methods of Depreciation and Amortization
 -6-

PHILIPPINE FINANCIAL REPORTING STANDARDS AND Adopted Not Not

INTERPRETATIONS Adopted Applicable
Effective as of December 31, 2017
PAS 39 Financial Instruments: Recognition and Measurement 
Amendments to PAS 39: Transition and Initial 
Recognition of Financial Assets and Financial Liabilities
Amendments to PAS 39: Cash Flow Hedge Accounting of 
Forecast Intragroup Transactions
Amendments to PAS 39: The Fair Value Option 
Amendments to PAS 39 and PFRS 4: Financial Guarantee 
Contracts
Amendments to PAS 39 and PFRS 7: Reclassification of 
Financial Assets
Amendments to PAS 39 and PFRS 7: Reclassification of 
Financial Assets - Effective Date and Transition
Amendments to Philippine Interpretation IFRIC 9 and 
PAS 39: Embedded Derivatives
Amendment to PAS 39: Eligible Hedged Items 
Amendment to PAS 39: Novation of Derivatives and 
Continuation of Hedge Accounting
PAS 40 Investment Property 
Amendment to PAS 40: Interrelationship between PFRS 3 
and PAS 40
Amendments to PAS 40: Investment Property, Transfers Not early adopted
of Investment Property
PAS 41 Agriculture 
Amendments to PAS 16 and PAS 41: Bearer Plants 
Philippine Interpretations
IFRIC 1 Changes in Existing Decommissioning, Restoration and 
Similar Liabilities
IFRIC 2 Members' Share in Co-operative Entities and Similar 
Instruments
IFRIC 4 Determining Whether an Arrangement Contains a Lease 
IFRIC 5 Rights to Interests arising from Decommissioning, 
Restoration and Environmental Rehabilitation Funds
IFRIC 6 Liabilities arising from Participating in a Specific Market 
- Waste Electrical and Electronic Equipment
IFRIC 7 Applying the Restatement Approach under PAS 29 
Financial Reporting in Hyperinflationary Economies
IFRIC 8 Scope of PFRS 2 
 -7-

PHILIPPINE FINANCIAL REPORTING STANDARDS AND Adopted Not Not

INTERPRETATIONS Adopted Applicable
Effective as of December 31, 2017
IFRIC 9 Reassessment of Embedded Derivatives 
Amendments to Philippine Interpretation IFRIC 9 and 
PAS 39: Embedded Derivatives
IFRIC 10 Interim Financial Reporting and Impairment 
IFRIC 11 PFRS 2- Group and Treasury Share Transactions 
IFRIC 12 Service Concession Arrangements 
IFRIC 13 Customer Loyalty Programmes 
IFRIC 14 The Limit on a Defined Benefit Asset, Minimum Funding 
Requirements and their Interaction
Amendments to Philippine Interpretations IFRIC 14, 
Prepayments of a Minimum Funding Requirement
IFRIC 16 Hedges of a Net Investment in a Foreign Operation 
IFRIC 17 Distributions of Non-cash Assets to Owners 
IFRIC 18 Transfers of Assets from Customers 
IFRIC 19 Extinguishing Financial Liabilities with Equity 
Instruments
IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine 
IFRIC 21 Levies 
SIC-7 Introduction of the Euro 
SIC-10 Government Assistance - No Specific Relation to 
Operating Activities
SIC-15 Operating Leases - Incentives 
SIC-21 Income Taxes - Recovery of Revalued Non-Depreciable 
Assets
SIC-25 Income Taxes - Changes in the Tax Status of an Entity or 
its Shareholders
SIC-27 Evaluating the Substance of Transactions Involving the 
Legal Form of a Lease
SIC-29 Service Concession Arrangements: Disclosures. 
SIC-31 Revenue - Barter Transactions Involving Advertising 
Services
SIC-32 Intangible Assets - Web Site Costs 
* Effectivity has been deferred by the SEC and FRSC

Standards tagged as “Not applicable” have been adopted by the Company but have no significant covered
transactions for the year ended December 31, 2017.

Standards tagged as “Not adopted” are standards issued but not yet effective as of
December 31, 2017. The Group will adopt the Standards and Interpretations when these become
effective.
ORIENTAL PETROLEUM AND MINERALS CORPORATION
AND SUBSIDIARIES
UNAPPROPRIATED RETAINED EARNINGS AVAILABLE FOR
DIVIDEND DISTRIBUTION

Retained earnings, January 1, 2017 $1,373,572

Adjustments:
Prior year adjustments –
Deficit, as adjusted, January 1, 2017 1,373,572

Net income based on the face of audited financial statements 2,219,200

Less: Non-actual/unrealized income net of tax
Equity in net income of an associate
Unrealized foreign exchange gain –
Unrealized actuarial gain –
Fair value adjustment (MTM gains) –
Fair value adjustment of Investment Propertyresulting to gain −
Adjustment due to deviation from PFRS/GAAP gain –
Other unrealized gains or adjustments to the retained earnings as a result of
certain transactions accounted for under PFRS –
Accretion of interest –
Add: Non-actual/unrealized losses net of tax –
Realized gain on redemption of investment in unquoted debt securities –
Depreciation on revaluation increment −
Adjustment due to deviation from PFRS/GAAP loss −
Loss on fair value adjustment of Investment Property −
Movement in deferred tax assets −

Net income actual/realized 2,219,200

Dividends declared during the period −

Unappropriated Retained Earnings, available for dividend distribution $3,592,772

ORIENTAL PETROLEUM AND MINERALS CORPORATION
AND SUBSIDIARIES
FINANCIAL SOUNDNESS INDICATORS
FOR THE YEAR ENDED DECEMBER 31, 2017

Below are the financial ratios that are relevant to the Group for the year ended December 31, 2017 and
2016:

Financial ratios 2017 2016

Current ratio Current assets (CA)
Current liabilities (CL) 27.89:1 14.45:1

Net working capital ratio CA - CL

Total assets 0.19:1 0.19:1

Return on assets Operating income

Average assets 0.31% 2.03%

Return on equity Net income

Average equity 2.51% 3.22%

Debt-to-equity ratio Total liabilities

Total equity 0.03:1 1.04:1
ORIENTAL PETROLEUM AND MINERALS CORPORATION AND SUBSIDIARIES
MAP OF THE RELATIONSHIPS OF THE COMPANIES
WITHIN THE GROUP
FOR THE YEAR ENDED DECEMBER 31, 2017