Project On Pakistan Petroleum: Sir Waseem Ullah

Mba 19 (A)
(PPL)
Pakistan Petroleum Limited
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PROJECT ON PAKISTAN PETROLEUM
Submitted to:
SirWaseemUllah
Submitted by:
SheharyarAzam 3486/fms/mba/s08
UsmanWaqar 3501/fms/mba/s08
SohaibQureshi 3489/fms/mba/s08
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Graduate School of Management, International Islamic University
Islamabad
Mba 19 (A)
(PPL)
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UsmanAshraf 3500/fms/mba/s08
AbdulRehman
1784/fms/bba/f08
Table of Content:
Introduction
...................................................................................................................
1
CorporateProfile:
...........................................................................................................
2
Capital
structure..............................................................................................................3
CoreValue:
..................................................................
Error:Referencesourcenotfound
Bankers:
..........................................................................................................................
5
Auditors
..........................................................................................................................
6
LegalAdvisor
..................................................................................................................
7
FINANCIALANALYSIS:
...........................................................................................
8
1.
CurrentRatio
.........................................................................................................
2.
QuickRatio
............................................................................................................
3.
AverageCollectionPeriod
......................................................................................
4.
FixedAssetsTurnover
............................................................................................
5.
DebtRatio
.............................................................................................................
6.
DebttoEquityRatio
............................................................................................
7.
GrossProfitRatio
..................................................................................................
8.
NetProfitMargin
..................................................................................................
9.
ReturnonAssets(ROA)
.........................................................................................
10.
ReturnonEquity(ROE)
.......................................................................................
CrossSectionalAnalysis
..............................................
Error:Referencesourcenotfound
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Islamabad
Mba 19 (A)
(PPL)
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INTRODUCTION
Pakistan Petroleum Ltd is Pakistan's Premier E&P Company, the oldest and largest
Exploration and Production Company in the country was incorporated on 5th June 1950
with the main objective of conducting exploration, development and production of
Pakistan's oil and natural gas resources. PPL inherited all the assets and liabilities of the
Burmah Oil Company Limited and commenced business on 1st July 1952.
PPL and its ex-parent Burmah Oil Company have been active in the subcontinent since
the early part of the 20th century. A total of 239 wells including 65 exploratory and 174
appraisal / development wells have so far been drilled which resulted in the discovery of
about 19.90 Tcf gas.
In Baluchistan it produces oil well drilling grade Baryte powder from the mine, which
has established reserves of 1.25 million tones. The gas, LPG and NGL production from
PPL operated and non-operated fields for the year 2004-05 in terms of oil equivalent,
was about 171,205 barrels of crude oil per day.
LEADING THE WAY:

PPL contributes around 26 percent of the country's total natural gas production besides
producing crude oil/ Natural Gas Liquids (NGL) and Liquefied Petroleum Gas (LPG).
PPL operates four producing fields at Sui, Kandhkot, Adhi and Mazarani and holds
working interest in seven partner-operated producing fields. PPLs exploration portfolio
comprises 24 exploration blocks, including four that are offshore.
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Islamabad
Mba 19 (A)
(PPL)
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RECENT INITIATIVES:
PPL has stepped up efforts to increase hydrocarbon production to keep pace with
Pakistans growing energy needs. In 2006 2007, PPL discovered natural gas and
condensate from its exploratory well Adam X-1 (Hala Block) located in Sanghar
District, Sindh, where PPL is the operator with a 65 percent stake. At Kandhkot Gas
Field, PPL has started work to install a gas compression facility.
FUTURE PROSPECTS AND PLANS:

PPLs vision is to maintain its position as the countrys premier hydrocarbon producer.
The increase in the companys exploration activities can be gauged from the fact that
since 2000 2001, it acquired licenses and working interest in 24 exploration blocks.
PPL also aims to produce additional gas from Sui Pab Reservoir and commission the
Kandhkot Well Head Gas Compression Project and Dehydration Plant.
PPL plans to launch exploration activities in relatively untapped areas. PPL is also a
premier Pakistani company to appear on the international exploration map. PPLs
achievements and future plans for international exploration are reflective of its
determination to integrate, create value and strategically transit towards globalization of
its operations.
CORPORATE PRIDE:
PPL featured among the Top 25 Companies of the Karachi Stock Exchange, was
conferred Pakistans Corporate Excellence Award by Management Association of
Pakistan, bagged for the third consecutive year Pakistan Corporate Philanthropy
Award given by Pakistan Centre for Philanthropy, won the Best Corporate Report
Award judged by a joint committee of the Institute of Chartered Accountants of
Pakistan (ICAP) and Institute of Cost and Management Accountants of Pakistan
(ICMAP). Additionally, PPL was conferred the Environment Excellence Award
instituted jointly by the National Forum of Environment and Health, United Nations
Environment Programme, Ministry of Environment, Government of Pakistan and
Federation of Pakistan Chamber of Commerce and Industry, for the second year running.
These prestigious accolades are a befitting recognition of PPLs efforts and serve as a
source to scale new heights of corporate excellence, sustainable growth and prosperity.
CORPORATE PROFILE:
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Islamabad
Mba 19 (A)
(PPL)
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Name of the Company:
Industry Type:
Oil and Gas Exploration Companies
Major Investors:
Govt. of Pakistan
PPL CAPITAL STRUCTURE

The current shareholding structure of the Company is as follows:
S.No Shareholders
Percentage
(i)
Government of Pakistan
78.40%
(ii)
International Finance Corporation
3.43%
(iii)
Private shareholders
18.17%
100.0%
Our mission is to optimize hydrocarbon production and pursue an aggressive exploration

programme in the most efficient manner on the local as well as international horizons
through a team of professionals utilizing the latest developments in the exploration and
production technology and maintaining the highest standards of health, safety and
environment.
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Islamabad
Mba 19 (A)
(PPL)
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Recognize that Leadership, Empowerment and Accountability are essential for
Corporate Success.
Pursue the Highest Standards of Ethical Behavior and Integrity.
Consider Our People as the Most Important Resource.
Value Creativity and Innovation.
We are committed to Excellence in all Spheres of Performance.
Work as a Team and advocate Teamwork.
Respect the Environment and are committed to its Protection.
Bankers
Allied Bank Limited

Askari Bank Limited
Bank Al-Falah Limited
Bank Al Habib Limited
Citibank
Deutsche Bank
Faysal Bank Limited
Habib Bank Limited
Habib Metropolitan Bank Limited
MCB Bank Ltd
National Bank of Pakistan
NIB Bank Limited
Standard Chartered Bank(Pakistan) Limited
The Royal Bank of Scotland Limited
United Bank Limited
Auditors
M/s Ford Rhodes Sidat Hyder & Co.
Legal Advisor
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Islamabad
Mba 19 (A)
(PPL)
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Surridge
& Beecheno
FINANCIAL ANALYSIS
All the value from balance sheet and profit & lost account are in Rupees and in
thousands.
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Islamabad
Mba 19 (A)
(PPL)
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Trend Analysis:
Financial Ratios
2006
2007
2008
Current Ratio
3.246835
4.354145
2.788254
Quick Ratio
3.094023
4.163005
2.670103
ROA
49.23679
48.45467
50.00254
ROE
44.39
41.82
45.14
63.39848
64.54172
44%
43%
0.203916
0.284629
.17%
.17%
49.3x
48.91x
45.37x
A/R Turnover
5.511253
3.077268
4.11297
DSO
66.22813
118.1667
88.74366
Liquidity Ratios
Profitability
Ratios
Gross
Profit 62.4776
Margin
Net Profit Margin
42%
RISK
Debt Ratio
0.264879
Debt to Equity
TIE Ratio(times)
ASSERT
UTILIZATION
RATIO
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Islamabad
Mba 19 (A)
(PPL)
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Inventory
9.293172
10.07408
10.52951
Turnover
Fixed
Assets 2.48
Turnover Ratio
2.52
2.15
Explanation of Trend Analysis

Liquidity
Current Ratio:
Current Ratio
2006
2007
2008
3.246835
4.354145
2.788254
We can see that current ratio shows fluctuation over the year but it is lowest in 2008
because current assets are increased in 2008 and at the same time current liabilities also
increases twice as compare with year 2007 and 2008. It results, decrease in current ratio
but it is still under control (away from solvency risk).
Quick ratio:
Quick Ratio
2006
2007
2008
3.094023
4.163005
2.670103
By calculating quick ratio we came to know that in 2008 quick ratio decrease because
company maintain much more stock in 2008.
Profitability
ROA:
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Islamabad
Mba 19 (A)
(PPL)
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ROA
2006
2007
2008
49.23679
48.45467
50.00254
During analysis of ROA we came to know that ROA did not show high fluctuations.
Because assets of the company increases at the same time earnings also increases. It
means that company is utilizing its resources efficiently.
ROE:
Roe is lowest in 2007 because company has increased its capital and reserve as compare
with net income. In 2008 reo increases because there is increase in net income as well as
in shareholders equity. Thats why the roe increases as compare to 2007.
ROE
2006
2007
2008
44.39
41.82
45.14
Gross profit margin ratio:
Gross profit margin ratio shows increases over the year. This shows efficiency of sales
staff and good control over the cost.
Gross Profit Margin
2006
2007
2008
62.4776
63.39848
64.54172
2006
2007
2008
Net profit margin ratio:
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Islamabad
Mba 19 (A)
(PPL)
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Net Profit Margin
42%
44%
43%
Net profit margin ratio did not shows higher changes over the years but it shows
decrease in 2008. it is an alarming situation because there is increase in operating and
administrative expenses of the company in 2008.
Risk
Debt Ratio:
Debt Ratio
2006
2007
2008
0.264879
0.203916
0.284629
As govt is the major share holder of the company and company maintains very low level
of debt because fund is provided by the govt in the shape of equity. Co possesses 3.5 to 4
times more assets than its liabiluities so there is minimum risk of bankruptcy or
insolvency.
Debt to Equity Ratio:
2006
Debt to Equity
2007
2008
0.17%
0.17%
As govt is the major share holder of the company and funds are provided by the govt in
the shape of equity so that firm is holding very low level of debt and debt ratio remains
the same over the years.
*we take liabilities against assets subject to finance lease as debt.
TIE Ratio:
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Islamabad
Mba 19 (A)
(PPL)
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TIE Ratio(times)
2006
2007
2008
49.3x
48.91x
45.37x
Tie ratio decreases in 2008 because there is increase in finance cost but tie ratio is
still very good. As it is 45 times in 2008.
Asset utilization ratios
Account receivables turnover:
A/R Turnover
2006
2007
2008
5.511253
3.077268
4.11297
As in 2007 companys avg account receivable increases twice but there is no bigger
impact on sales so A/R turnover decreases. In 2008 avg A/R decreases and sales
increases that is why A/R turnover increased in 2008.
Inventory Turnover Ratio:
Inventory Turnover
2006
2007
2008
9.293172
10.07408
10.52951
Inventory turnover remains almost the same over the years, it shows no higher change.
Fixed Asset Turnover Ratio:
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Islamabad
Mba 19 (A)
(PPL)
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Fixed Assets Turnover

Ratio
2006
2007
2008
2.48
2.52
2.15
Fixed asset turnover ratio remains the same in 2007 and 2008 but it shows slight
decrease in 2008.
Z- Score Model of the Pakistan Petroleum Limited

Z = 0.012x1 + 0.014x2 + 0.033x3 + 0.006x4 + 0.999x5
X1 = working capital/total assets
1.0484
X2 = retained earnings/total assets
1.5591
X3 = EBIT/total assets
1.4075
X4 = Market value of equity/book value of total debt2.5133
X5 = sales/total assets
1.9738
Now put the values in the above Z equation
Z = 0.012(1.0484) + 0.014(1.5591) + 0.033(1.4075) + 0.006(2.5133) + 0.999(1.9738)
= 0.0126 + 0.0218 + 0.0464 + 0.0151 + 1.9718
Z = 2.0677
Explanation
DuPont Three Step Analysis

three steps
P.M
A.T/O
E.M
Ni
sales
assets
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Islamabad
Mba 19 (A)
(PPL)
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sales
2006
2007
2008
assets
s.h.e
13,401,001
31,756,712
41,066,097
31,756,712
41,066,097
30,188,547
0.4219896
0.7733073
1.3603204
16,767,774
38,382,645
50,369,125
38,382,645
50,369,125
40,098,051
0.4368582
0.7620272
1.256149
19,707,398
45,716,789
61,023,261
45,716,789
61,023,261
43,654,271
0.4310757
0.7491699
1.3978761
44.39101
41.81693
45.14426
DuPont five Step Analysis

FIVE STEPS
EBIT
Sales
Sales
Assets
I.E
Assets
Assets
Equity
1- Tax rate
2006
20,219,629
31,756,712
0.6367041
31,756,712
41,066,097
0.7733073
30,096
41,066,097
0.0007329
41,066,097
30,188,547
1.3603204
0.6637
44%
2007
24,406,194
38,382,645
0.6358654
38,382,645
50,369,125
0.7620272
49,424
50,369,125
0.0009812
50,369,125
40,098,051
1.256149
0.6884
41%
2008
30,513,179
45,716,789
0.6674392
45,716,789
61,023,261
0.7491699
66,624
61,023,261
0.0010918
61,023,261
43,654,271
1.3978761
0.6473
45%
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Islamabad
Mba 19 (A)
(PPL)
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CrossSectionalAnalysis(2008)
RATIOS
Pakistan Petroleum
ltd
OGDCL
POL
Current Ratio
2.788254
3.686
Quick Ratio
2.670103
3.679
ROA
ROE
Gross Profit Margin
50.00254%
55.72%
4.21822
7
3.43377
3
35.9309
45.14426%
64.54%
1.154
70.01%
58.00%
33.96
Net Profit Margin

Debt Ratio
43%
39.55%
47.22%
0.284629
0.27360
A/R Turnover
4.11297
3.663
DSO
88.74366
99.655
0.86233
0
8.80617
5
41.4481
9
1.62
Fixed Assets Turnover

Ratio
2.15
1.74
Current Ratio
6
4
2.78
3.68
4.21
2
0
PPL
OGDCL
POL
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Islamabad
Mba 19 (A)
(PPL)
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Current ratio of PPl is almost good. Its mean that it has sufficient current assets to
meet its current liabilities. But its ratio is less than ogdcl and pol.
Quick ratio
5
2.67 3.67 3.43
0
PPL
OGDC
POL
Quick ratio of PPl is also good but it is less than OGDCL and POL. Its mean
that ppl maintain more stock level than ogdcl and pol.
Return on Assets(ROA)
100%
50%
55.72%
50%
35.93%
0%
PPL
OGDCL
POL
PPL has sufficient return on asset but it is less than OGDCL. Ogdcl has highest
return on asset and pol has lowest return on asset. Its means that company is
efficiently utilizing its assets.
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Islamabad
Mba 19 (A)
(PPL)
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Return on Equity (ROE)

60.00%
45.14% 45.36%
40.00%
33.96%
20.00%
0.00%
PPL
OGDCL
POL
PPL and OGDCL have almost equal return on equity and POL has lowest return
on equity as compare with others. Its means that ppl is more financing its assets
with equity and very low level of debt is maintained.
GrossProfit Ratio
100.00%
64.54% 70.01% 58.00%
50.00%
0.00%
PPL
OGDCL
POL
Gross profit margin of PPL is very good but as compare with others OGDCL has
highest gross profit margin and pol has lowest.
Net Profit Margin
60%
40%
43% 33.55%47.22%
20%
0%
PPL
OGDCL
POL
Net profit margin of PPL is good but POL has highest net profit margin and
ogdcl has lowest as compare with others. Because ogdcl has more operating,
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Islamabad
Mba 19 (A)
(PPL)
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administrative expenses as compare with ppl and it has also finance cost higher
than ppl.
Debt Ratio
1
0.5
0.8623
0.2846 0.2736
0
PPL
OGDCL
POL
Debt ratio shows that PPL is less risky as compare with POL its mean that total
assets of ppl is more than its total liabilities. OGDCL has lowest risk and pol has
highest risk of default as compare with others.
A/ R Turnover
10
5
4.11 3.66
8.8
0
PPL
OGDCL
POL
A/R turnover of PPL and OGDCL is approximately 4 times in a year but POL
has app 9 times turnover in a year.
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Islamabad
Mba 19 (A)
(PPL)
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DSO
100
50
88.7499.65
41.44
0
PPL
OGDC
POL
DSO of OGDCL is highest as compare with others but POL has lowest DSO its
means that pol can convert its A/R in to cash earlier than PPL and ogdcl.
Fixed AssetsTrunover
5
2.15 1.74 1.62
0
PPL
OGDCL
POL
Fixed asset turnover of PPL is highest as compare with OGDCL and POL. Its
mean that ppl is utilizing its fixed assets more effectively as compare with ogdcl
and pol.
Explanation
With the financial analysis of Pakistan petroleum Ltd we have analyzed that companys
financial health is strong and company is using its resources efficiently and effectively.
Government is the major share holder of the company that is why Govt. is providing
funds to the company in the shape of equity and company is less leveraged, as very low
level of debt is maintained by the company. Government owns 78.40% shares of the
company.
We have also analyzed that there is very low level of risk of default. Companys
operating and administrative expenses are controlled in better way. Company has high
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Islamabad
Mba 19 (A)
(PPL)
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return on asset and it has also high return on equity on the other hand company has
finance cost very low as compare with other companies
We have also analyzed the company with z-score through which we find that its Z-score
is 2.0677 that shows it is in gray zone area.
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Islamabad

Project On Pakistan Petroleum: Sir Waseem Ullah

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Mba 19 (A)

Pakistan Petroleum Limited