CASE 5: PENINSULA GASOLINE CORPORATION (PGC)

Summary / Abstract

In 1975, Peninsula Gasoline Corporation was registered in the

Philippines for the purpose of operating gas stations along the South
Super Highway situated between the boundaries of Muntinlupa City and
San Pedro Laguna. By the year 1980, the company was chosen by the
Caltron Philippines as the gas dealer of its oil products. PGC started with
one gas stations and opened 10 more stations in 1981. Then, it acquired
20 units of tanker trucks and engaged in the wholesale of petroleum
products in different areas in Cavite and nearby provinces.

In the year 1996, the passage of Oil Deregulation Act opened the gate
of expansion for PGC. They were able to open 30 more outlets in Luzon
through the means of debt financing. During the first ten months of their
operations, the company incurred losses for about P150,000.00 per day
because of its inability to recover costs amid rising crude oil prices and
peso depreciation. The company’s rate of return in 1997 dropped to
negative 7.25% way lower than the government’s limit of 12%.in the
following year, however, market share figures from the Department of
Energy showed that the newcomers have cornered 4% of the market for
the first six months, a big jump from the measly 0.7% market share in
1997. Recent developments showed, albeit deregulated, the industry is
still dominated by the few and very large oil firms where competition is
on the basis of price. This is an industry that requires intensive high
investment and is also highly sensitive to interest rates and inflation.
However, regardless of its size, profits remain to be attractive.
Time Context / Period: 2007

Viewpoint: Joan Sorevinas, Chairman and President of

Peninsula Gas Corporation

Statement of the Problem

The Peninsula Gas Corporation incurred losses amounting to

for about 150,000. 00 pesos per day.

As the time passes by, competition rises in the means of emergence of

new market competitors and dominance of large oil firms competing
though the use of prices. Business is not business without having
adversities to face. In the case of PGC, the company is facing how will
they going to resolve the problem of how to pay maturing debts and tax
liability, and how are they going to continue operations given that they
are engage in a market that is full of competition. This case study aims
to help the PGC as a whole by understanding areas of consideration,
taking alternative courses of action, and having contingency plans to
prepare for any unexpected events that may hinder the success of the
company.

I.STATEMENT OF THE OBJECTIVE

To safeguard the development property from abrupt deterioration

and to gather sufficient resources needed in preserving the assets and
materializing the project.

II.CENTRAL PROBLEM

The problem centers on how the proponents will gather sufficient

funds that will aid them in the materialization of safeguarding assets and
fulfillment of the project.

III.AREAS OF CONSIDERATION

STRENGTHS

1.Proximity of location to target markets. One good example is the

branch in South Super Highway

2.Dealer of oil products of Caltron Philippines3.Being engaged in the

wholesale business of petroleum products4.Expansion during 1996
which resulted to 30 more outlets.