Академический Документы
Профессиональный Документы
Культура Документы
Contents
Corporate
02 Company Information
04 Notice of Annual General Meeting
06 Vision Statement
07 Mission Statement
08 Managing Director’s Message
10 Board of Directors
12 Management
14 History of the Company
17 Core Values
18 MGCL Concessions & Working Interests
21 Code of Ethics
23 Financial Highlights
26 Ten Years at a Glance
27 Pattern of Shareholding
28 Directors’ Report
54 Auditors’ Report to the Members
55 Review Report to the Members
Financials
57 Financial Statements
58 Balance Sheet
60 Profit and Loss Account
61 Statement of Comprehensive Income
62 Cash Flow Statement
63 Statement of Changes in Equity
64 Notes to the Financial Statements
101 Proxy Form
2
Company Information
Legal Advisors
Orr Dignam & Company
Legal Advisor Inc.
Ali Shah Law Associate
Auditors
M. Yousaf Adil Saleem & Company
Chartered Accountants
Bankers
Allied Bank of Pakistan Limited
Askari Bank Limited
Bank Alfalah Limited
Habib Bank Limited
National Bank of Pakistan
United Bank Limited
Hong Kong and Shanghai Banking Corporation
Registered Office
21-Mauve Area, 3rd Road,
Sector G-10/4, Islamabad,
Pakistan.
Website: www.marigas.com.pk
Email: info@marigas.com.pk
Registrar Office
Corplink (Pvt) Limited
Share Registrar & Corporate Consultants
Wings Arcade, 1-K Commercial,
Model Town, Lahore,
Pakistan.
Email: corplink786@yahoo.com
Mari Gas Company Limited
Annual Report 2010 3
While we continue to
seek opportunities
to grow our business
by acquiring new
assets, we remain
intensely focused on
optimizing those we
already own
4
Notice is herby given that the 26th Annual General 2. A member entitled to attend and vote at
Meeting of the Shareholders of Mari Gas Company the meeting is entitled to appoint a person/
Limited will be held on Tuesday, October 26, 2010 representative as Proxy to attend and vote
at 10:00 a.m, at Company’s Head Office, situated in place of the member at the Meeting. The
at 21-Mauve Area, 3rd Road, Sector G-10/4, instrument of Proxy duly executed in accordance
Islamabad to transact the following business: with Articles of Association of the Company
must be received at the Registered Office of the
1. To confirm the minutes of the 25th Annual Company at 21 -Mauve Area, 3rd Road, Sector
General Meeting held on October 30, 2009. G-10/4, Islamabad, not less than 48 hours
2. To receive, consider and adopt the Audited before the time of holding of meeting.
Accounts of the Company for the year ended 3. Those Members who have deposited their shares
June 30, 2010 together with the Directors’ and into Central Depository Company of Pakistan
Auditors’ reports thereon. (CDC) are requested to bring their Original
3. To appoint Auditors for the year 2010-11 and fix Computerized National Identity Cards alongwith
their remuneration. Participant’s ID number and their account
By order of the Board numbers in CDC to facilitate identification at the
time of Annual General Meeting.
Islamabad Assad Rabbani
October 04, 2010 Company Secretary 4. In case of corporate entity, the Board of
Directors’ resolution/power of attorney with
NOTES:
specimen signature of the nominee shall be
produced (unless provided earlier) at the time of
1. The Share Transfer Books of the Company Meeting.
will remain closed from October 17, 2010 to
October 26, 2010 (both days inclusive). Transfers 5. Members are requested to notify the change in
received at the Company’s Shares Registrar, their mailing address and submit the photocopy
M/s Corplink (Pvt) Limited, Wings Arcade, 1-K of their National Identity Cards if they have not
Commercial, Model Town, Lahore, at the close submitted the same earlier to the Company’s
of business on October 16, 2010 will be treated Shares Registrar.
as in time for the purpose to attend the meeting.
Mari Gas Company Limited
Annual Report 2010 5
No single department
is the key to delivering
efficient energy to the
nation...
6
Vision Statement
Our Vision Be the leader in the gas market in Pakistan by expanding and developing the
gas value chain including exploration, production, transmission, extraction,
processing, distribution and marketing of the gas and gas related processes,
products and services in order to bridge the increasing demand for gas with a
view to meeting the needs of the existing and potential customers.
Mission Statement
Our Mission Mari Gas Company Limited will be customer-focused and competitive with a view
to continue contributing meaningfully to the national economy, while ensuring
viability of the Company and profitable dividends to the stakeholders.
Board of Directors
Lt Gen Hamid Rab Nawaz HI(M) (Retd) Lt Gen Mushtaq Hussain HI(M) (Retd)
Managing Director, Fauji Foundation Managing Director, Mari Gas Company Ltd
Maj Gen Zahid Parvez (Retd) Muhammad Ejaz Chaudhry Muhammad Naeem Malik
Director Welfare (Education), Fauji Foundation Additional Secretary, Ministry of P & NR DG Petroleum Concessions, Ministry of
P & NR / Managing Director OGDCL
Mari Gas Company Limited
Annual Report 2010 11
Dr. Nadeem Shafiq Malik Shah Mahboob Alam Muhammad Riaz Khan
Financial Advisor, Ministry of P & NR Director, MGCL GM Incharge Production, OGDCL
Assad Rabbani
Company Secretary
12
Management
Not in Picture:
Brig Saleem Mahmood Khan (Retd) (Resident General Manager, Quetta)
Mari Gas Company Limited
Annual Report 2010 13
Key Personnel
Muhammad Ali Mughal Asif Ali Rangoonwala Muhammad Aqib Anwar Muhammad Liaquat Ali Khan Javed Iqbal Jadoon
Manager Drilling & Allied Services Manager Business Development Manager Finance Incharge Koonj Mari Field Manager
Shahid Hussain Muhammad Saleem Siddique Ali Ejaz Rasool Mirza Mahboob Habibi Tufail Ahmed Khoso
Manager Finance Joint Venture Manager Production Manager Accounts Head Internal Audit Manager Exploration - I
Major M. Iftikhar-ul-Haq (Retd) Gp Capt Shamim Ahmad (Retd) Lt Col Shah Rukh (Retd) Muhammad Shifaat Alam Col Shaukat Hassan (Retd)
Resident Manager Quetta Manager Procurement Manager Projects Manager Exploration - II Manager Administration, Daharki
Lt Col Ikram Ur Rahim Muhammad Asim Butt Sheikh Naveed Ahmed Lt Col Altaf Hussain (Retd) Muhammad Ijaz
Manager Project Manager HSE Acting Manager HR Acting Manager Administration Acting Manager Planning & Engg.
14
Mari Gas Company Limited (MGCL) is one of efficiency. This has only been possible because
the largest National Exploration & Production of MGCL’s field development, production growth
companies of Pakistan. achievements and uninterrupted gas supply to their
plants, without any breakdown, consistently for
MGCL’s Habib Rahi gas reserve base which is its more than 40 years.
mainstay was discovered by the Company when it
operated as a branch of Esso Eastern Inc. in 1957. The Company’s production facilities comprise
wells/ pipeline-network of more than 250 kilometers
MGCL primarily operated as a production company some of which is more than 30 years old. The
till 2001, developing the discovered Habib Rahi varying age of the facilities is being maintained and
Reservoir in phases for supply of gas to the managed most efficiently with the latest state of the
new fertilizer plants which were being built in the art maintenance technology, manifested not only
country for urea production. Simultaneous with by the Company’s uninterrupted gas supply to all
these development phases, the Company also of it’s customers but also by the fact that MGCL
pursued appraisal activities within its Mari D&P consistently remains the country’s lowest cost
Lease by drilling stepout wells to determine the final operator.
boundaries of Habib Rahi Reservoir, which on its
discovery by Esso was estimated at 2.38 TCF of The hallmark of MGCL’s growth and expansion
gas. However, subsequent appraisals conducted by is also represented by its entry into exploration
MGCL proved its extended potential by establishing activities in year 2001, on its initiative and with
a total gas in place of 10.751 TCF. Government’s approval.
Based on MGCL’s gas supply to the fertilizer Accordingly it embarked upon an aggressive
companies, they have now more than doubled exploration program by developing comprehensive
their production capabilities with 114% operational in-house capabilities in terms of database,
Mari Gas Company Limited
Annual Report 2010 15
acquiring latest state of the art prospect a. Average daily production increased from 179
evaluation technologies and developing effective MMSCF in 1985 to 492 MMSCF in 2009-10
manpower/ professional capabilities with a blend (capacity to produce 500 MMSCFD against the
of extensively experienced expertise as well as Government’s allocation of 494.1 MMSCFD).
by professional development of its existing and Due to the Company’s enhanced production
committed workforce. As a result, MGCL today capacity, new fertilizer plants were established
has fully developed high-end in-house professional under Fertilizer Policy 1989, to overcome the
capabilities acknowledged as one of the leading in shortfall of urea and meet the national demand.
the industry.
b. Revenues of the Company also increased
In its exploration segment, MGCL initially acquired phenomenally from Rs 0.8 billion in 1985 to Rs
non-operated joint venture interests in various 29.0 billion in 2009-10. Resultantly, contribution
exploration blocks. Simultaneously with its detailed to Government exchequer in the form of levies
in-house analysis of all the country’s sedimentary also increased from Rs 0.5 billion to Rs 24.1
basins, it carved out and acquired seven new billion representing 83% of the gross revenue.
exploration blocks as operator. Thus within a Moreover, MGCL remains the most economical
short span, it is now operating three exploration gas production Company in comparison to
blocks (Ziarat, Hanna, Harnai) and one D&P Lease other gas production companies operating in
(Zarghun South) in Balochistan, two exploration Pakistan.
blocks in Sindh (Sukkur & Sajawal), one in Khyber
Pakhtunkhwa (Karak) and one in Punjab (Ghauri). c. In addition to Habib Rahi Formation, MGCL
has successfully discovered gas in Goru-B,
The phenomenal success of MGCL can be judged Pirkoh and Sui Main Limestone Formations
from the following facts: besides increasing the number of producing
wells from 21 in 1985 to 98 in 2009-10. After
16
Core Values
WE VALUE...
1
BLOCK: KOHAT
OPERATOR: OGDCL
TULLOW 40%
OGDCL 30%
MGCL 20%
SEL 10%
2 7
BLOCK: BANNU WEST BLOCK: KOHLU
OPERATOR: TULLOW OPERATOR: OGDCL
TULLOW 40% OGDCL 40%
OGDCL 40% MGCL 30%
MGCL 10% TULLOW 30%
SEL 10%
3 8 12
BLOCK: ZARGHUN SOUTH BLOCK: SUKKUR
BLOCK: KARAK
OPERATOR: MGCL OPERATOR: MGCL
OPERATOR: MGCL
MGCL 35% MGCL 58.80%
MGCL 60%
SPUD 40% PEL 41.20%
MOL 40%
PKP 7.50%
GHPL 17.50%
4 9 13
BLOCK: HARNAI BLOCK: GHAURI BLOCK: HALA
OPERATOR: MGCL OPERATOR: MGCL OPERATOR: PPL
MGCL 40% MGCL 100% PPL 65%
MND 40% MGCL 35%
OMV 20%
5 10 14
BLOCK: ZIARAT BLOCK: KALCHAS BLOCK: SUJAWAL
OPERATOR: MGCL OPERATOR: OGDCL OPERATOR: MGCL
MGCL 60% OGDCL 50% MGCL 100%
MND 40% MGCL 20%
TULLOW 30%
6 11
BLOCK: HANNA D&P LEASE: MARI
OPERATOR: MGCL OPERATOR: MGCL
MGCL 40% MGCL 100%
MND 40%
OMV 20%
LEGENDS
AREAS AS OPERATOR
AREAS AS JOINT VENTURE PARTNER
Mari Gas Company Limited
Annual Report 2010 19
MGCL Concessions
and
working interests
1
2
9
3
4
5
6
7
8
10
11
12
13
14
20
Code of Ethics
The Code of Ethics sets out the Company’s objectives participants and government officials.
and its responsibilities to various stakeholders and
the ethical standards required from its directors • Gifts, entertainment & bribery
and employees to meet such objectives and The directors and employees shall not give
responsibilities. or accept gifts, entertainment, or any other
personal benefit or privilege that could influence
• Financial disclosure business dealings
All transactions should be accurately reflected
according to accounting principles in the books • Insider trading
of accounts. Falsification of its books, any of the Every director and employee who has
recorded bank accounts and transactions are knowledge of confidential material information
strictly prohibited. is prohibited from trading in securities of the
Company to which the information relates.
• Conflict of interest
The Directors and employees of the Company • Health, safety & environment
must recognize that in the course of performing The Company, its directors and employees will
their duties, they may be out into a position endeavor to exercise a systematic approach to
where there is a conflict in the performance health, safety and environmental management
of such duty and a personal interest they in order to achieve continuous performance
may have. It is the overriding intention of improvement.
the Company that all business transactions
conducted by it be on arms length basis. • Involvement in politics
• Compliance with laws, directives & rules The Company shall not make payments or
other contributions to political parties and
Compliance with all applicable laws, regulations, organizations. Employees must ensure that if
directives, and rules including those issued by they elect to take part in any form of political
the Board of Directors and management. activity in their spare time, such activity does
not and will not have any adverse affects on the
• Confidentiality Company and such activities must be within the
Confidentiality of the Company’s internal legally permissible limits.
confidential information must be maintained and
upheld, which includes proprietary, technical, • Equal employment opportunity
business, financial, joint venture, customer It is the policy of the Company to provide
and employee information that is not available employment opportunities without regard to
publicly. race, religion, color, age or disability subject to
suitability for the job.
• Conduct of personnel in dealings with
government officials • Compliance
The Company shall deal with the government Failure to adhere to the Company’s business
officials fairly and honestly and within the ambit practices or Code of Ethics may result in
of the applicable laws, in order to uphold the disciplinary action, which could include
corporate image of the Company. dismissal.
• Time management • Accountability
The directors and the employees of the All Company directors and employees must
Company shall ensure that they adopt efficient understand and adhere to the Company’s
and productive time management schedules. Business Practices and Code of Ethics.
They must commit to individual conduct in
• Business integrity accordance with the Company’s Business
The directors and employees will strive to Practices and Code of Ethics and observe
promote honesty, integrity and fairness in all both the spirit and the letter of the Code in their
aspects of its business and its dealings with dealings on the Company’s behalf.
vendors, contractors, customers, joint venture
22
Financial Highlights
Financial Highlights
30,000 35,000
28,979
24,144 30,000
25,000 26,864
21,853
20,024 25,000
22,648
20,000 21,944
17,993 17,772 20,018
20,000
15,000
15,000
10,000
10,000
5,000 5,000
0 0
2010 2009 2008 2007 2006 2010 2009 2008 2007 2006
180 300.0
180 269.5
160 250.0
140
200.0
120 175.0
100 172
150.0 148.8
171 171 129.4 126.5
80 170
100.0
60
40
50.0
20
0
0
2010 2009 2008 2007 2006 2010 2009 2008 2007 2006
Mari Gas Company Limited
Annual Report 2010 25
14%
15%
2%
0.1%
2% 3%
1% 0%
3%
1%
9% 1%
7%
0.4%
3%
1%
2% 3%
67%
67%
0.1% 0.2% 2%
0.3%
16% 11%
39%
28%
8%
0.02%
0.01%
1%
3% 24%
5%
48% 2%
0.05%
13%
2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02 2000-01
(Rupees in million)
FINANCIAL
Revenue 28,979.37 26,864.38 21,943.97 22,647.80 20,018.14 16,059.63 14,308.22 12,564.22 11,441.45 10,600.32
Government levies
Income tax, workers’ funds,
royalty, excise duty, sales tax
and surcharge on gas 24,144.02 21,852.69 17,993.02 20,024.00 17,771.56 14,117.36 12,195.90 10,594.20 9,905.29 9,820.34
Net Turnover 5,240.12 5,789.20 6,697.20 3,677.11 2,811.71 2,693.94 2,762.78 2,436.17 1,681.26 931.47
Operating profit 1,425.71 2,545.84 4,112.10 1,237.48 344.09 656.49 990.97 1,149.98 507.67 308.08
Net profit before tax 1,351.09 2,394.73 3,960.31 1,382.14 602.64 677.93 936.82 1,052.35 402.99 282.14
Net profit after taxation 1,185.95 2,151.92 2,560.41 683.89 189.25 361.52 519.80 646.01 394.58 191.59
Issued & paid up capital 735.00 367.50 367.50 367.50 367.50 367.50 367.50 367.50 367.50 367.50
Reserves 8,455.83 7,865.22 5,381.53 3,390.12 2,315.15 2,239.75 1,990.21 1,581.25 1,045.48 761.15
Property, plant & equipment 6,699.57 6,626.01 4,861.4 2,881.92 3,395.29 3,726.83 3,731.88 3,566.37 1,915.39 1,803.36
Net current assets 1,945.15 898.45 861.62 942.62 805.72 808.73 882.37 701.01 578.14 279.98
Long term financing, provisions
& deferred liabilities 4,257.08 3,108.47 2,143.80 1,361.60 1,528.39 1,939.45 2,265.83 2,326.72 1,087.84 964.71
INVESTOR INFORMATION
Earning per share (EPS) 4.58 3.71 6.43 5.68 5.06 4.45 4.07 3.79 3.59 2.61
Earning per share - as per GPA 16.14 29.28 69.67 18.61 5.15 9.84 14.14 17.58 10.74 5.21
Debtor turnover 85 66 33 22 20 21 22 42 63 51
Market value per share at the end of year 129.38 148.83 269.53 175.00 126.50 194.65 82.95 67.05 37.55 21.85
Price earning Ratio 28.25 20.06 41.92 30.81 25.02 43.76 20.41 17.69 10.45 8.36
Dividend 227.85 118.23 119.00 118.26 113.85 111.98 110.84 110.25 110.25 82.69
Cash dividend per share 3.10 3.22 3.24 3.22 3.10 3.05 3.02 3.00 3.00 2.25
Dividend Yield 2.40% 2.16% 1.20% 1.84% 2.45% 1.57% 3.64% 4.47% 7.99% 10.30%
Dividend payout ratio 67.69% 43.36% 50.36% 56.66% 61.29% 68.50% 74.19% 79.16% 83.52% 86.11%
Return on capital employed 13.51% 23.95% 49.72% 30.20% 15.36% 15.71% 21.09% 27.26% 23.23% 17.37%
Debt : Equity ratio 15.76 : 84.24 12.72 : 87.28 7.5 : 92.5 00 : 100 04 : 96 11 : 89 19 : 81 29 : 71 42 : 58 43 : 57
Liquidity ratio 1.20 1.08 1.16 1.19 1.16 1.19 1.29 1.21 1.12 1.06
Debt service ratio 5.07 : 1 9.55 : 1 10.40 : 1 3.17 : 1 2.32 : 1 2.96 : 1 3.7 : 1 5.9 : 1 3.0 : 1 1.7 : 1
NATURAL GAS
OIL
Production (BBL) 62,212 41,510 – – – – – – – –
LPG
Pattern of Shareholding
as at June 30, 2010
The Directors take pleasure in presenting their report together with the audited financial statements of the
Company and the Auditors’ report thereon for the year ended June 30, 2010.
FINANCIAL RESULTS
The profit and appropriations for the year are as follows:
Rs ‘ 000
Profit
Profit for the year under review after taxation 1,185,954
Un-appropriated profit brought forward 5,273,492
6,459,446
Appropriations
First interim dividend @ 21% per share declared in February 2010 154,350
Second interim dividend @ 10% per share declared in June 2010 73,500
Undistributed Percentage Return Reserve 91,249
Total appropriations for the year 319,099
6,140,347
Represented by
Exploration and evaluation reserve 848,994
Profit and loss account 5,291,353
6,140,347
The directors have decided to retain Rs 91,249 addition, 2,516 barrel of crude oil, 59,696 barrel
million representing the balance of percentage of condensate and 1,231 metric ton of LPG was
return reserve relating to the year ended June 30, produced and sold in the current period against
2010 under the provision of Mari Gas Wellhead 41,510 barrel of crude oil in the comparative
Price Agreement (The Agreement). Therefore, period. Company’s contribution to the Government
the aforesaid amount has been transferred to Exchequer amounted to Rs 24,144 million against
“Undistributed Percentage Return Reserve”. Rs 21,853 million in the last year. The operating
Pursuant to adoption of IFRS-6 which is applicable expenses were amounted to Rs 2,409 million
to Company’s financial statements with effect from against Rs 1,746 million of last year.
July 01, 2007, an amount of Rs 848,994 million has
been shown as exploration and evaluation reserve The operating results in the financial statements for
and the corresponding amount of exploration the year show profit after tax of Rs 1,186 million as
expenditure has been shown as exploration and against Rs 2,152 million of the previous year. Lower
evaluation assets. wellhead price, increase in operating expenses
along with increase in finance cost were the major
Gross sales for the year under review increased to reasons for decrease in profitability.
Rs 28,491 million from Rs 26,532 million in 2008-
09 (7.38% increase) due to increase in gas sales The rate of return to the shareholders for the year
volume from 169,705 to 179,753 MMSCF which under the revised gas price formula has increased
is as per customer’s withdrawal / requirement. In proportionately to 33.43% against last year of
32.00% due to increase in production level.
30
Earning per share (EPS) on the basis of distributable million during the year (Rs 21,853 million during
profit increased to Rs 4.58 per share from Rs 3.71 2008-09) on account of taxes, royalties, excise
per share (restated) last year. However, due to the duty, sales tax and gas development surcharge.
limitation of Gas Price Agreement, EPS for the year
on the basis of profit and loss account (including BENAZIR EMPLOYEES STOCK OPTION
undistributable balance) decreased to Rs 16.14 SCHEME (BESOS)
per share as compared to last year’s (restated) Rs On 14 August 2009, the Government of Pakistan
29.28 per share. (GoP) launched Benazir Employees Stock Option
Scheme (BESOS) whereby the GoP transferred
CASH FLOW STRATEGY 1,323,000 shares (including bonus shares issued
During the year an amount of Rs 2,302 million was subsequently) to MGCL Employees Empowerment
generated from operating activities of the Company Trust without any consideration subject to transfer
which was used mainly to undertake exploration back of these shares to the GoP as provided in the
activities, capital expenditures, payment of Trust Deed. Accordingly, the GoP’s shareholding
dividends to the shareholders and finance cost to in the Company is reduced to 18.2% from 20.0%
banks. In addition, the company also obtained long with effect from 14 August 2009. As per the Trust
term financing amounting to Rs 900 million to meet Deed such shares have been allocated through Unit
the requirements of its two development projects Certificates to eligible employees in proportion to
namely Mari Deep and Zargun Gas field. their entitlement on the basis of length of service.
The Trust is entitled to receive dividends declared
DIVIDENDS on or after 14 August 2009 and 50% of such
The Company has paid 2nd interim dividend of dividends is being distributed among employees
10.0% (2008-09: 10.0%) on ordinary shares in on the basis of units held while the balance 50% is
June, 2010 in addition to the 1st interim dividend of being transferred to the Privatization Commission,
21.00% (2008-09: 22.17%) on ordinary shares in Government of Pakistan who will monitor special
February 2010. This makes the total cash dividend fund for this purpose.
payout to the ordinary shareholders during the
year to 31.00% (2008-09: 32.17%) which is paid Under the scheme on ceasing to be an employee,
to the ordinary shareholders as provided in the an employee shall surrender the Unit Certificate(s)
Agreement. to the Trust and will receive compensation for the
surrendered units on the basis of the value of these
FOREIGN EXCHANGE SAVINGS AND Units calculated in accordance with the formula
GOVERNMENT REVENUES given in the Trust Deed.
average of 465 MMSCF for the corresponding FUTURE PROSPECTS, PLANS AND
period of last year as per the requirement/ STRATEGY
withdrawal of the customers. During the period
under review FFC-1 & 11 exercised their planned Commencement of Goru-B Gas Production
annual turnaround for a period of 12 days. MGCL has successfully completed construction
of production & process facilities of Mari Goru-B
GOP vide letter dated April 28, 2010 directed development Project in order to supply 109
to divert 60 MMSCFD gas from fertilizers after MMSCFD to two IPPs. The de-hydrated gas is
proportionate reduction from their allocation to being supplied to Foundation Power Company
Daharki Limited for testing and commissioning of
PEPCO to mitigate the need of gas for power
their plant on as and when required basis.
sector. Accordingly, 60 MMSCFD gas supply to
PEPCO w.e.f April 28, 2010 is being ensured which
The gas supply to Foundation Power from Goru-B
has been curtailed from fertilizers on prorate basis Reservoir was commenced in August 2009 and
from their GSAs allocation. 1521 MMSCF gas was sold upto June 2010
for testing/commissioning of plant as per their
Regular maintenance of gas gathering network and requirement. In addition, 2089 bbl of condensate
production facilities was carried out and production has also been produced. Currently the gas supply
optimization plans were followed as per the good to FPCDL has been suspended as FPCDL is
oil/gas field practices, to avoid any water coning investigating the reasons for the problems in
and loss in production through effective production smooth operations of their turbines.
and reservoir management.
Gas sale to Fatima Fertilizer Company Limited.
MGCL commenced the gas supply to Fatima
Fertilizer Company Limited (FFCL) by diverting
it from PEPCO on November 27, 2009. Fatima
Fertilizer complex is capable to produce
Nitrophosphate (NP), Nitro Phosphoric Potassium
(NPK), Calcium Ammonium Nitrate (CAN) and
Urea. Fatima Fertilizer successfully started the urea
production and achieved 103% efficiency level in
urea manufacturing however, remaining three plants
are in advance stages of completion. Approximately
85 MMSCFD gas is being supplied to FFCL and the
balance unutilized gas is being supplied to PEPCO
for power generation in the best interest of the
country as per advice of Ministry of Petroleum.
A workshop followed by OCM / TCM on the Technical & Commercial Evaluation of Bids
technical issues related to behavior of Dunghan has been completed for the hiring of EPCC
reservoir on Single / Dual porosity model and the (Engineering, Procurement, Construction and
implication of fault in the middle of structure on Gas Commissioning) Contractor for development of
reserves were shared with Joint Venture Partners. Zarghun Gas Field. In order to improve project
MGCL informed that the project will carry the risk economics alternate solutions are also being
of not achieving the dual porosity model viz a viz considered. In this regard, M/s Deewan has been
uncertainty in the reserves. After analyzing in detail approached to discuss the suitability of their spare
JV partners agreed to proceed with development train of Salsabil gas field capable of processing 30
of Zarghun South field by installation of surface MMSCFD of gas.
facilities and deferred drilling of the ZS-3 till
confirmation of dual porosity behavior of reservoir.
EXPLORATION ACTIVITIES
The company’s working interests in onshore exploration licenses in Pakistan and overseas are as follows:
In-addition, Sukkur Joint Venture intends to proceed with the installation of Amine Sweetening
re-process selected vintage 2D seismic data for Unit for removal of H2S. Bids were called from
Lower Goru prospectivity to explore the remaining suppliers and technical evaluation of the proposals
potential of the block. was carried out. Currently commercial aspects
of outright purchase and rental options are being
In order to obtain maximum dynamic data and discussed with JV Partner for finalization.
ascertain the well’s deliverability and the lateral
extent of reservoir, MGCL obtained approval of DGPC has granted 18 months extension in 3rd
GOP for carrying out EWT for 12 months. The license year w.e.f April 20, 2010 to fulfill the work
operation was planned to produce Koonj-1A commitment of drilling of 3rd exploratory well.
without flaring any gas with the aim to produce ± 7
MMSCFD gas having heating value of ± 860 btu/ Hanna block
scf by removal of water and injection into SNGPL Acquisition of 128 line km 2D seismic data
system. was completed on May 22, 2010. The contract
for processing of newly acquired data has
MGCL accordingly laid 13.7 KM gas transmission been awarded to M/s SAGeo, Islamabad and
line and installed/commissioned Dehydration plant its processing is in progress. Subsequently,
and commenced EWT operations from January 28, interpretation and mapping will be carried out to
2010. Total 111.70 MMSCF gas @ daily average of exercise drill or drop option by April, 2011.
4.5 MMSCF was produced till February 20, 2010.
EWT operations were stopped on February 20, DGPC has granted one year extension in 2nd
2010 due to sudden increase in H2S contents to license year w.e.f June 21, 2010 to complete
around 200 ppm which was shared with buyer M/s processing, interpretation and mapping to exercise
SNGPL who advised to stop supply of gas till its drill or drop option.
H2S concentration is restored to acceptable level.
Harnai block
Various options were discussed in coordination with
The contract for 2D seismic data acquisition has
JV Partner (M/s PEL) and technical and commercial
been awarded to M/s BGP. Seismic survey is
impacts of each option were critically reviewed.
expected to commence in 4th quarter 2010 after
After thorough deliberation, it was decided to
36
Ghauri block
Ghauri Block was granted to MGCL on February
16, 2010 with 100% working interest. MGCL is
planning to purchase selected 1600 line km 2D
seismic data after reviewing the available vintage
G&G data. Negotiations for farming-out of 35%
share to PPL are in progress.
Sujawal block
Production from Hala filed commenced on
First exploratory well Sujawal X-1 was spud-in December 12, 2009 and has produced 2,795
on February 06, 2010 to test the hydrocarbons MMSCF (MGCL Share 978 MMSCF) of Gas,
potential of Lower Goru Sands of Cretaceous 266,728 bbl (MGCL Share 93,355 bbl) of
age. The well was drilled down to a total depth Condensate and 6177 MT (MGCL Share 2,162 MT)
of 3,000 meter as per PCA commitment. Based of LPG uptill September 14, 2010.
Mari Gas Company Limited
Annual Report 2010 37
FUTURE OUTLOOK AND RISK MANAGEMENT Company’s ongoing extended well test (EWT)
operation over its gas discovery in Sukkur Block
MGCL progresses towards achieving its corporate is expected to get completed during the year; and
vision of playing a key role in the Country’s energy thereafter possible further appraisal/development
sector, focusing its achievements on a long-term of this discovery. In its Sujawal Block the Company
sustainable business strategy, the fundamental shall be conducting tests on the gas/condensate
constituents of MGCL’s strategy thus remain: discovery made in the Sujawal exploration well, to
appraise its potential for early production.
• Delivering uninterrupted gas supplies to
customers and maintaining good customer The Company’s investment plan for year 2010-
relationship. 11also includes commencement of development
• Achieving cost effectiveness through improved work on its Zarghun South (ZS) gas/condensate
operational efficiencies and optimizing resource project in Baluchistan subject to conducive security
utilization. situation. The completion of ZS development
• Building on inventory of prospects by sourcing project costing approximately US$ 58 million
new exploration opportunities in key resource would bring on stream ±20 MMSCFD gas for its
areas and new play concepts. transmission to Balochistan’s capital city Quetta.
• Ensuring alignment of financial, technical
and manpower resources with Company’s The Company remains committed to growth
work program and pace of development and through its exploration strategies; and as such,
expansion plans. we place great emphasis on early stages of the
• Maintaining High HSEQ standards. exploration process. Accordingly we make major
• Ensuring safe, reliable and healthy environment commitments in acquisition of exploration acreages,
for the workforce. seismic data, technology, people and capital. In
any petroleum system, cumulative discoveries over
Accordingly, based on the above outlook, the a period of time increase in a step-like fashion.
Company plans to enhance gas production The Company focuses on exploring for that next
volumes from its Mari D&P Lease reserves. exploration cycle, whether in a mature or frontier
basin, since this is where growth potential is
Mari Gas Company Limited
Annual Report 2010 39
HEALTH, SAFETY AND ENVIRONMENT (HSE) including contractor’s employees was arranged by
the company; which furthers reiterates the will of
Maintaining outstanding HSE performance is a core the management in caring health and safety issues
value of the Company and has been made possible of its employees and the local community.
through devoted leadership and commitment of all
employees. Our HSE responsibilities are directed We believe that all incidents are preventable and to
by our HSE policy, strategy and management be proactive to prevent incidents “hazard hunting”
system to protect the environment by adapting and incident reporting system has been introduced.
environment-friendly processes in business
operations, and take care of health & safety of Emergency drills are considered to be mandatory
our employees, contractors, local community and for Oil & Gas, exploration, and production
other stakeholders. This has been confirmed by operations. This is also a requirement under the Oil
Re- Certification of IMS in 2010 by SGS Pakistan & Gas (Safety in Drilling & Production) Regulations,
Limited. 1974 that “Fire fighting drills shall be carried out at
least once a week”. Fire fighting drills are carried
Taking care of health and safety of our employees, out regularly at all locations of MGCL to ensure
contractors and stake holders has been the emergency preparedness. Oil and Gas activities
hallmark of MGCL. Annual medical examination of being hazardous in nature need proactive measures
all employees, regular health and safety updates to handle emergency situations. These drills are
and advice on health issues keeps the comfort level carried out with different scenarios so that during a
of employees high. Considering the morbidity and real situation the employees are well aware of what
mortality of Hepatitis ‘C’ and ‘B’ screening along precautionary measures are to be undertaken.
with vaccination for Hepatitis B of all the employees
Mari Gas Company Limited
Annual Report 2010 41
The most
important thing
we provide to
our customers
doesn’t flow
through pipes
or wires. It’s the
confidence that
Mari Gas is a
company they
can count on
44
CORPORATE SOCIAL RESPONSIBILITY (CSR) Summary of CSR jobs carried out in Mari D & P
lease and JV blocks are given as under:
Corporate Social Responsibility stems out of
Company’s acceptance of its responsibility for the Mari D & P Lease area
impact of its business activities on its stakeholders In Mari Lease area the Company is not under any
including but not limited to the environment, legal obligation to undertake any CSR initiative but
consumers, employees, local communities and the as a responsible corporate entity, MGCL believes in
general society. The prime focus of CSR approach playing effective role in the sustainable development
is to carryout sustainable development programs programs to ensure maximum economic benefit to
in-and-around the operational areas to meet marginalized sector of society.
the present needs of local communities without
undermining the capacity of future generation to Details of projects carried out are as under.
meet their needs.
Health Sector
MGCL has an impressive record of implementing
CSR programs not only in its primary operational a. Operating the mobile dispensaries since 1987.
areas in Daharki but is also contributing significantly Field dispensaries are established at ten well
in other areas primarily as a social participant and locations. Annual expenditure on this account
not due to any legal obligation. is approx Rs.10 million
MGCL also played a vital role for relief of flood b. A maternity home at U.C Dad Leghari, made
affected persons in various part of Country. operational since 2003. Rs. 2.5 million is being
spent annually.
Mari Gas Company Limited
Annual Report 2010 45
c. A dispensary has been constructed at well No. Company has established a Technical Training
8 for the treatment of Tuber Closis patients. Centre at Daharki with approximate cost of Rs
180 million. MGCL contribution for this program
d. Mother & Child Healthcare Centre constructed is Rs.30 million as per commitment.
at civil hospital Mir Pur Mathhelo costing Rs.
11 million. Provision of clean water
The Company has constructed 15 water tanks
e. Hepatitis ‘B’ vaccination program being one of at different locations each having 2,000 gallons
the major initiatives in the health sector. Rs. 60 storage capacity for providing clean drinking water.
million have been spent so far in vaccination of Work is currently in progress on another 10 new
130,000 people of the area. Herbal treatment storage tanks.
of the patients is also being undertaken.
Flood Relief Activities
Education Sector
Flood relief activities are in full swing in different
a. MGCL has so far played vital role in uplifting areas of Distt Ghotki. MGCL has set up 3 x Camps
education facility by constructing a number of for flood effected persons, where cooked food is
new schools, renovation of old school buildings
being provided regularly. Our medical team is also
and providing furniture, books, ceiling fans,
visiting the Camps for providing the treatment to
computers etc.
effectees in very efficient manner.
IMS CERTIFICATION
Mari Gas Company successfully achieved
three International Standard Certifications for
its Integrated Management Certification (IMS)
comprising ISO Quality Management System
(ISO 9001), ISO Environmental System (ISO
14001) and Occupational Health and Safety
Management System (ISO 18001) through
management commitment and in-house as well as
external trainings for creating awareness amongst
employees. Being an IMS Certified company MGCL
is now known to be a more progressive entity,
which is compliant with international standards,
resultantly bringing it at par with international
companies and imparting a cutting edge benefit of
making its systems more credible and well founded.
Thus the Company has become the pioneer in E&P
local sector.
The terms of reference of the Audit Committee i. Ascertaining that the internal control system
include the following: including financial and operational controls,
accounting system and reporting structure are
a. Determination of appropriate measures to adequate and effective;
safeguard the Company’s assets;
j. Review of the Company’s statement on internal
b. Review of preliminary announcements of results control systems prior to endorsement by the
prior to publication; Board of Directors;
c. Review of quarterly, half-yearly and annual k. Instituting special projects, value for money
financial statements of the Company, prior studies or other investigations on any matter
to their approval by the Board of Directors, specified by the Board of Directors, in
focusing on: consultation with the Chief Executive and
to consider remittance of any matter to the
• major judgmental areas; external auditors or to any other external body;
• significant adjustments resulting from the
audit; l. Determination of compliance with relevant
• going-concern assumption; statutory requirements;
• any changes in accounting policies and
practices; m. Monitoring compliance with the best practices
• compliance with applicable accounting of corporate governance; and
standards; and
• compliance with listing regulations n. Consideration of any other issue or matter as
and other statutory and regulatory may be assigned by the Board of Directors from
requirements. time to time.
50
Mari Gas’s
strategy
is simple:
continue to
learn what our
stakeholders
need and value,
and run our
operations to
consistently
deliver
52
12. The directors, CEO and executives do not Audit Committee and approved by the Board of
hold any interest in the shares of the Company Directors
other than that disclosed in the pattern of
shareholding. 20. The Board arranged orientation courses for its
directors during the year to apprise them of
13. The Company has complied with all the their duties and responsibilities.
corporate and financial reporting requirements
of the Code. 21. It is also confirmed that all other material
principles contained in the Code have been
14. The Board has formed an Audit Committee. complied with.
It comprises of five members including the
President and all of them are non-executive AUDITORS
directors.
The present auditors, M/s M. Yousuf Adil Saleem &
15. The meetings of the Audit Committee were held Company, Chartered Accountants, retire and being
at least once every quarter prior to approval eligible, offer themselves for re-appointment as
of interim and final results of the Company as auditors of the Company.
required by the Code. The terms of reference of
the Committee have been formed and advised ACKNOWLEDGEMENT
to the Committee for compliance.
The Board of Directors would like to express their
16. The Board has set-up an effective internal audit appreciation for the efforts and dedication of all
function and they are involved in the internal officers and staff of the Company including those
audit function on a full time basis. in the field, which enabled the management to run
the Company efficiently during the year resulting
17. The statutory auditors of the Company have in continued production of gas to its customers.
been given a satisfactory rating under the The Board also wishes to express its appreciation
Quality Control Review Program of the Institute for continued assistance and cooperation
of Chartered Accountants of Pakistan and received from the local administration at Daharki,
that the firm and all its partners, their spouses Government of Sindh, various departments of
and minor children do not hold shares of the Federal Government particularly the Ministry
Company and that the firm and all its partners of Petroleum and Natural Resources and the
are in compliance with International Federation Ministry of Finance, Fauji Foundation and Oil & Gas
of Accountants (IFAC) guidelines on Code of Development Company Limited.
Ethics as adopted by the Institute of Chartered
Accountants of Pakistan. For and on behalf of the Board
We have audited the annexed balance sheet of policies consistently applied, except for the
Mari Gas Company Limited (“the Company”) as changes as mentioned in note 2.3 to the
at June 30, 2010 and the related profit and loss financial statements, with which we concur;
account, statement of comprehensive income, cash
flow statement and statement of changes in equity (ii) the expenditure incurred during the year
together with notes forming part thereof, for the year was for the purpose of the Company’s
then ended and we state that we have obtained all business; and
the information and explanations which, to the best
of our knowledge and belief, were necessary for the (iii) the business conducted, investments made
purposes of our audit. and the expenditure incurred during the
year were in accordance with objects of the
It is the responsibility of the Company’s Company;
management to establish and maintain a system of
internal control, and prepare and present the above (c) in our opinion and to the best of our
said statements in conformity with the approved information and according to the
accounting standards and the requirements of the explanations given to us, the balance
Companies Ordinance, 1984. Our responsibility is to sheet, profit and loss account, statement
express an opinion on these statements based on of comprehensive income, cash flow
our audit. statement and statement of changes in
equity together with the notes forming part
We conducted our audit in accordance with the thereof conform with approved accounting
auditing standards as applicable in Pakistan. These standards as applicable in Pakistan,
standards require that we plan and perform the and give the information required by the
audit to obtain reasonable assurance about whether Companies Ordinance, 1984, in the manner
the above said statements are free of any material so required and respectively give a true
misstatement. An audit includes examining on and fair view of the state of the Company’s
test basis, evidence supporting the amounts and affairs as at June 30, 2010 and of the profit,
disclosures in the above said statements. An audit its cash flows and changes in equity for the
also includes assessing the accounting policies and year then ended; and
significant estimates made by management, as well
as, evaluating the overall presentation of the above (d) in our opinion Zakat deductible at source
said statements. We believe that our audit provides under the Zakat and Ushr Ordinance,
a reasonable basis for our opinion and, after due 1980 (XVIII of 1980), was deducted by the
verification, we report that: Company and deposited in the Central
Zakat Fund established under section 7 of
(a) in our opinion, proper books of accounts have that Ordinance.
been kept by the Company as required by the
Companies Ordinance, 1984;
We have reviewed the Statement of Compliance Further, Sub-Regulation (xiii) of Listing Regulations
with the best practices contained in the Code of 37 notified by Karachi Stock Exchange (Guarantee)
Corporate Governance prepared by the Board Limited vide circular KSE/N-269 dated 19 January
of Directors of Mari Gas Company Limited (“the 2009 requires a Company to place before the
Company”) to comply with the Listing Regulations Board of Directors for their consideration and
of the Karachi, Lahore and Islamabad Stock approval related party transactions distinguishing
Exchanges where the Company is listed. between transactions carried out on terms
equivalent to those that prevail in arm’s length
The responsibility for compliance with the Code transactions and transactions which are not
of Corporate Governance is that of the Board of executed at arm’s length price recoding proper
Directors of the Company. Our responsibility is to justification for using such alternate pricing
review, to the extent where such compliance can mechanism. Further, all such transactions are
be objectively verified, whether the Statement of also required to be separately placed before the
Compliance reflects the status of the Company’s audit committee. We are only required and have
compliance with the provisions of the Code ensured compliance of requirement to the extent of
of Corporate Governance and report if it does approval of related party transactions by the Board
not. A review is limited primarily to inquiries of of Directors and placement of such transactions
the Company’s personnel and review of various before the audit committee. We have not carried
documents prepared by the Company to comply out any procedures to determine whether the
with the Code. related party transactions were undertaken at arm’s
length price or not.
As part of our audit of financial statements we
are required to obtain an understanding of the Based on our review, nothing has come to our
accounting and internal control systems sufficient attention which causes us to believe that the
to plan the audit and develop an effective audit Statement of Compliance does not appropriately
approach. We are not required to consider whether reflect the Company’s compliance, in all material
the Board’s statement on internal control covers respects, with the best practices contained in the
all risks and controls, or to form an opinion on Code of Corporate Governance.
the effectiveness of such internal controls, the
Company’s corporate governance procedures and
risks.
Islamabad
September 23, 2010
56
We build upon
our strengths, and
weaknesses gradually
take care of themselves
Mari Gas Company Limited
Annual Report 2010 57
58
Balance Sheet
as at June 30, 2010
NON-CURRENT ASSETS
Property, plant and equipment 14 4,540,056 4,879,948
Intangible
Development and production assets 15 3,075,836 2,651,385
Exploration and evaluation assets 16 2,800,268 1,951,274
5,876,104 4,602,659
Long term loans and advances 17 2,850 2,849
Long term deposits and prepayments 18 10,878 10,301
Deferred taxation 19 1,072,873 946,986
11,502,761 10,442,743
CURRENT ASSETS
Stores and spares 20 290,262 205,710
Trade debts 21 6,099,654 7,188,601
Loans and advances 22 336,388 866,217
Short term prepayments 23 27,450 28,502
Interest accrued 44,634 15,037
Other receivables 24 3,960 10,054
Cash and cash equivalents 25 3,607,305 1,694,638
10,409,653 10,008,759
21,912,414 20,451,502
Qaiser Javed
Director
60
Balance as at July 01, 2008 367,500 2,046 483,148 1,195,106 4,151,230 6,199,030
Balance as at June 30, 2009 367,500 2,046 638,410 1,951,274 5,273,492 8,232,722
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions
to accounting estimates are recognized in the period in which estimates are revised if the
revision affects only that period, or in the period of revision and future periods if the revision
affects both current and future periods.
Judgments made by the management in the application of IFRSs that have significant effect
on the financial statements and estimates with a significant risk of material adjustment in the
next year are discussed in ensuing paragraphs:
a) Estimation of natural gas reserves
Gas reserves are an important element in impairment testing for development and
production assets of the Company. Estimates of these reserves are inherently imprecise,
require the application of judgment and are subject to future revision. Proved 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 proved 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,
Mari Gas Company Limited
Annual Report 2010 65
as of and for the year ended June 30, 2010. The Company has opted for two statements
presentation.
Comparative information has been presented in conformity with the revised standard. The
change in accounting policy impacts presentation only without any impact on earnings per
share.
financial statements from the financial year starting from July 1, 2010.
The Government of Pakistan launched Benazir Employees Stock Option Scheme (“the
Scheme”) on 14 August 2009 whereby the GoP transferred 12% of its shareholding in the
Company to MGCL Employees Empowerment Trust.
Since the Scheme affected a large number of State Owned Enterprises (SOEs), the Company
along with certain other SOEs has requested the Institute of Chartered Accountants of
Pakistan(ICAP) to clarify the accounting and reporting implications for BESOS. The Company’s
management has not yet quantified the impact of this scheme on the financial statements.
However, in view of vesting conditions under the scheme, the charge for the current year is
estimated not to be material.
Effective beginning or after
– Amendment to IAS 32 Financial Instruments: Presentation
– Classification of Rights Issues January 01, 2010
– Revised IAS 24 Related Party Disclosures February 01, 2010
– IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments July 01, 2010
– Amendments to IFRIC 14, IAS 19 – The Limit on a Defined Benefit
Assets, Minimum Funding Requirements and their Interaction January 01, 2010
2.5
NEW ACCOUNTING STANDARDS, AMENDMENTS AND IFRIC INTERPRETATIONS
THAT ARE EFFECTIVE BUT NOT RELEVANT TO THE COMPANY’S OPERATIONS
Effective beginning or after
– Revised IFRS 3 Business Combinations July 01, 2009
– Amended IAS 27 Consolidated and Separate Financial Statements July 01, 2009
– Amendments to IFRS 5 – Non – current Assets Held for Sale and
Discontinued Operations July 01, 2009
– Amendments to IAS 39 Financial Instruments: Recognition
and Measurement Eligible hedged Items July 01, 2009
– IFRIC – 17 Distributions of Non – cash Assets to Owners July 01, 2009
– Amendments to IFRS 2 Share – based payments and
IFRS 3 Business Combinations July 01, 2009
– Amendments to IAS 38 Intangible Assets July 01, 2009
– Amendments to IFRIC 9 Reassessment of Embedded Derivatives July 01, 2009
– Amendments to IFRIC 16 Hedges of a Net Investment in a
Foreign Operation July 01, 2009
In terms of the Agreement, well head gas price for each ensuing year is determined in
accordance with the principles of gas price formula set out in Article II of the Agreement. The
Agreement states that the gas price will be at the minimum level to ensure that total revenues
generated from sale of gas and other income are sufficient to provide a minimum return of
30%, net of all taxes, on Shareholders’ Funds (as defined in the Agreement) after meeting
specified ratios and deductibles. The return to shareholders is to be escalated in the event of
increase in the Company’s gas production beyond the level of 425 MMSCFD at the rate of 1%,
net of all taxes, on Shareholders’ Funds for each additional 20 MMSCFD of gas or equivalent
oil produced, prorated for part thereof on annual basis, subject to a maximum of 45%.
The minimum return to shareholders for the year was 33.43% (2009 : 32.00%).
Effective July 01, 2001, the Government has authorized the Company to incur expenditure
not exceeding Rupee equivalent of US$ 20,000,000 per annum or 30% of the Company’s
annual gross sales revenue as disclosed in the last audited financial statements, whichever is
less, in connection with exploration and development in any concession area other than Mari
Field, provided that if such exploration and development results in additional gas or equivalent
oil production, the revenues generated from such additional gas or equivalent oil production
shall be credited to and treated as revenue under the Agreement.
3.3 Taxation
Provision for current taxation is based on taxable income at the applicable tax rates. The
Company accounts for deferred taxation on all timing differences, using the ‘liability method’
in respect of all major temporary differences between carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in the computation of the
taxable profit. Deferred tax liabilities are recognized for all taxable temporary differences and
deferred tax assets are recognized to the extent, it is probable that taxable profits will be
available against which deductible temporary differences, unused tax losses and tax credits
can be utilized. Deferred taxation has been calculated at the estimated effective tax rate of
35% after taking into account the availability of depletion allowance.
3.4 Provisions
Provisions are recognized when the Company has a present legal or constructive obligation
as a result of past events and, it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable estimate can be made of the
amount of obligation.
3.5 Decommissioning cost
Estimated decommissioning and restoration costs, which are primarily in respect of
abandonment and removal of wells and production facilities at Mari Field and the Company’s
proportionate share in joint venture fields, are based on current requirements, technology and
price levels and are stated at present value, and the associated asset retirement costs are
capitalized as part of property, plant and equipment and development and production assets
and amortized on unit of production basis over the total proved reserves of the relevant field.
The liability is recognized once an obligation (whether legal or constructive) crystallizes in
the period when a reasonable estimate of the fair value can be made; and a corresponding
amount is recognized in property, plant and equipment and development and production
assets.
The present value is calculated using amounts discounted over the useful economic life of
Mari Gas Company Limited
Annual Report 2010 69
the reserves. Any change in the present value of the estimated expenditure is dealt with
prospectively and reflected as an adjustment to the provision and a corresponding adjustments
to property, plant and equipment and development and production assets. The unwinding of
discount on decommissioning provision is recognized as finance cost.
3.6 Employee benefits
The Company operates:
i) Defined benefit funded pension and gratuity plans for its management employees and
defined benefit funded gratuity plan for its non-management employees. Contributions
are made to these plans on the basis of actuarial recommendations. Actuarial valuations
are conducted periodically using the Projected Unit Credit Method and the latest valuation
was carried out as at June 30, 2010. The results of the valuation are summarized in note
35 to these financial statements. Actuarial gains and losses in excess of corridor limit
(10 percent of the higher of fair value of plan assets and present value of obligations) are
recognized over the expected remaining working lives of the employees.
ii) Defined benefit unfunded pension plan for its non-management employees. Liability
related to accumulated period of service of eligible employees is recognized based
on actuarial valuation. The latest valuation was carried out as at June 30, 2010 using
discount rate of 12.75% per annum and pension increase rate of 7.75% per annum.
iii) Defined contribution provident fund for its permanent employees for which contributions
are charged to profit and loss account for the year. The contributions to the fund are
made by the Company at the rate of 10% per annum of the basic salary.
iv) The Company has accrued post retirement medical benefits of its current management
employees based on actuarial valuation as at June 30, 2010 using discount rate of
12.75% per annum and an increase in cost of medical benefits of 9.75% per annum.
v) The Company has accrued post retirement leave benefits of its management employees
based on actuarial valuation carried out as at June 30, 2010 using discount rate of
12.75% per annum and salary increase rate of 12.75% per annum.
economic benefits associated with the item will flow to the Company and the cost of the
item can be measured reliably. Carrying amount of parts so replaced, if any is derecognized.
All other repairs and maintenance are charged to income as and when incurred. Gains and
losses on disposals are credited or charged to income in the year of disposal.
Capital work in progress is stated at cost less impairment loss, if any, and transferred to
respective item of property, plant and equipment when available for intended use.
The carrying amounts of the Company’s assets are reviewed at each balance sheet date to
determine whether there is any indication of impairment loss. If any such indication exists, the
recoverable amount of such assets is estimated and impairment losses are recognized in the
profit and loss account. Where an impairment loss subsequently reverses, the carrying amount
of the asset is increased to the revised recoverable amount but limited to the extent of the
carrying amount that would have been determined (net of amortization or depreciation) had
no impairment loss been recognized for the asset in prior years. A reversal of the impairment
loss is recognized as income in the profit and loss account.
Major costs capitalized include material, chemical, fuel, well services rig costs and any other
cost directly attributable to a particular well. All other exploration costs including cost of
technical studies, seismic acquisition and processing, geological and geophysical activities
are charged currently against income as exploration and prospecting expenditure. Costs
incurred prior to having obtained the legal rights to explore an area are charged directly to the
profit and loss account as and when incurred.
Tangible assets used in E&E activities other than stores held, include the Company’s vehicles,
drilling rigs and other property, plant and equipment used by the Company’s exploration
function and are classified as property, plant and equipment. However, to the extent that such
a tangible asset is consumed in developing an intangible E & E asset, the amount reflecting
that consumption is recorded as part of the cost of the intangible E&E asset. Such intangible
costs include directly attributable overheads, including the depreciation of property, plant and
equipment utilized in E&E activities, together with the cost of other materials consumed during
the exploration and evaluation phases.
Intangible E&E assets relating to each exploration license/field are carried forward, until the
existence or otherwise of commercial reserves have been determined subject to certain
limitations including review for indications of impairment. If commercial reserves have been
discovered, the carrying value after any impairment loss of the relevant E&E assets is then
reclassified as development and production assets and if commercial reserves have not been
found, the capitalized costs are written off as dry hole costs.
Intangible E&E assets are not amortized prior to the conclusion of appraisal activities.
Intangible E&E assets are assessed for impairment when facts and circumstances indicate
Mari Gas Company Limited
Annual Report 2010 71
that carrying amounts may exceed the recoverable amounts of these assets. Such indicators
include, the point at which a determination is made as to whether or not commercial reserves
exist, the period for which the Company has right to explore has either expired or will expire
in the near future and is not expected to be renewed, substantive expenditure on further
exploration and evaluation activities is not planned or budgeted and any other event, that may
give rise to indication that such assets are impaired.
3.9 Development and production assets
Development and production assets are accumulated generally on a field by field basis
and represent the cost of developing the discovered commercial reserves and bringing
them into production, together with the capitalized E&E expenditures incurred in finding
commercial reserves transferred from intangible E&E assets as outlined in note 3.8 above.
The cost of development and production assets also includes the cost of acquisitions of such
assets, directly attributable overheads, and the cost of recognizing provisions for future site
restoration and decommissioning. Development and production assets are amortized from
the commencement of production on a unit of production basis, which is the ratio of oil and
gas production in the year to the estimated quantities of commercial reserves at the end of
the year plus the production during the year.
Changes in the estimates of commercial reserves or future field development costs are dealt
with prospectively. However amortization of drilling expenditure related to wholly owned Mari
Field is charged to income over a period of 10 years in line with the requirements of the
Agreement. Acquisition cost of leases, where commercial reserves have been discovered, are
capitalized and amortized on unit of production basis.
Impairment test of development and production assets is also performed whenever events
and circumstances arising during the development and production phase indicate that
carrying amounts of the development and production assets may exceed their recoverable
amount. Such circumstances depend on the interaction of a number of variables, such as
the recoverable quantities of hydrocarbons, the production profile of the hydrocarbons, the
cost of the development of the infrastructure necessary to recover the hydrocarbons, the
production costs, the contractual duration of the production concession and the net selling
price of the hydrocarbons produced.
The carrying amounts are compared against expected recoverable amounts of the oil and gas
assets, generally by reference to the present value of the future net cash flows expected to
be derived from such assets. The cash generating unit applied for impairment test purpose
is generally on field-by-field-basis, except that a number of fields may be grouped as a single
cash generating unit where the cash flows of each field are inter dependant.
The Company’s share of assets, liabilities and expenses in joint venture operations is
recognized on the basis of latest available audited financial statements of the joint ventures
and where applicable, the cost statements received from the operator of the joint venture, for
the intervening period up to the balance sheet date.
3.15 Financial instruments
Financial assets and liabilities are recognized when the Company becomes a party to the
contractual provisions of the instrument and assets and liabilities are stated at fair value. The
Company derecognizes the financial assets and liabilities when it ceases to be a party to such
contractual provisions of the instrument. The Company recognizes the regular way purchase
or sale of financial assets using settlement date accounting.
Financial assets mainly comprise loans, advances, deposits, trade debts, interest accrued
and cash and cash equivalents. Financial liabilities are classified according to the substance
of the contractual arrangements entered into. Significant liabilities are long term financing and
accrued and other liabilities.
Mari Gas Company Limited
Annual Report 2010 73
All financial assets and liabilities are initially measured at cost which is the fair value of the
consideration given and received respectively. These financial assets and liabilities are
subsequently measured at fair value or cost, as the case may be.
3.16 Offsetting
Financial assets and liabilities and tax assets and liabilities are offset in the balance sheet,
only when the Company has a legally enforceable right to set off the recognized amounts
and intends either to settle on a net basis or to realize the assets and settle the liabilities
simultaneously.
3.17 Trade debts and other receivables
Trade debts and other receivables are due on normal trade terms. These are carried at
original invoiced amount less provision for doubtful debts, if any. Balances considered bad
and irrecoverable are written off when identified.
3.18 Cash and cash equivalents
Cash and cash equivalents for the purposes of cash flow statement comprise cash in hand
and at bank and include short term highly liquid investments that are readily convertible to
the known amounts of cash and are subject to an insignificant risk of change in value. Cash
and cash equivalents are carried in balance sheet at cost except for foreign currency deposits
which are carried at fair value.
3.20 Dividend
Dividend is recognized as a liability in the period in which it is declared.
4.1 Government of Pakistan share holding has been reduced with effect from March 12, 2010
due to transfer of shares to MGCL Employees Empowerment Trust (MGCL EET) created for
implementation of Benazir Employees Stock Option Scheme.
2010 2009
(Rupees in thousand)
6. EXPLORATION AND EVALUATION RESERVE
Balance at the beginning of year 1,951,274 1,195,106
Additions 1,257,962 761,800
3,209,236 1,956,906
Cost of dry and abandoned wells (408,968) (5,632)
Balance at the end of year 2,800,268 1,951,274
6.1 The Company has created this reserve pursuant to adoption of disclosure requirements of
IFRS - 6 which are applicable to the Company’s financial statements with effect from July
1, 2007. The reserve consists of exploration and evaluation expenditure net of cost of dry
and abandoned wells. The corresponding effect of the reserve has been incorporated as
exploration and evaluation assets.
2010 2009
(Rupees in thousand)
7.2 Distributable balance
Undistributed guaranteed return 25,210 7,349
This represents the additional 3.34% (2009: 2%) guaranteed return to shareholders on account of
increase in gas production during the year in accordance with the Agreement as referred in note
3.2 to these financial statements.
76
8.2
In order to finance Zarghun Gas Field, the Company has arranged another Term Finance Loan of
Rs. 1,112 million from Habib Bank Limited. Out of loan amount, a sum of Rs. 200 million has been
disbursed uptil June, 2010. The mark-up is payable semi-annually in arrears on the outstanding
facility amount at the average of the six months KIBOR + 1.35% per annum. The effective
mark-up rate per annum was 13.90% (2009: 14.66%). The loan is repayable in ten equal
semi-annual installments after a grace period of 24 months from date of first disbursement. The
first installment is due on August 26, 2011.
2010 2009
(Rupees in thousand)
9. PROVISION FOR DECOMMISSIONING COST
Balance at beginning of the year 1,838,210 1,588,162
Provision made during the year 364,282 57,036
2,202,492 1,645,198
Unwinding of decommissioning cost 258,393 193,012
Balance at end of the year 2,460,885 1,838,210
The above provision is analyzed as follows:
Wells 1,611,564 1,265,940
Gathering lines 106,895 88,237
1,718,459 1,354,177
Unwinding of decommissioning cost:
Wells 714,023 471,652
Gathering lines 28,403 12,381
742,426 484,033
2,460,885 1,838,210
Significant assumptions used in computation of the provision are as follows:
2010 2009
(Per annum)
Discount rate 10.50% 10.50%
Inflation rate 8.51% 7.66%
Mari Gas Company Limited
Annual Report 2010 77
11.1
As advised by Ministry of Petroleum and Natural Resources vide letters DGO (AC)-5 (50)/94-IA
and DGO (AC)-5 (50)/95 dated March 30, 1995 and October 01, 1996 respectively, interest
on delayed payment of Gas Development Surcharge amounting to Rs. 896.480 million (2009:
Rs. 408.821 million) will be accounted for / paid by the Company after actual receipt of interest
on delayed payments from PEPCO (Note- 21). However, it does not affect the current year or
future years’ profit after taxation which includes the return available to shareholders under the
Agreement.
2010 2009
(Rupees in thousand)
11.2 Workers’ Profit Participation Fund
Balance at beginning of the year 127,865 215,095
Allocation for the year 72,445 127,865
Interest on delayed payments @ 24%
(2009 : 24.13%) per annum 10,257 14,504
82,702 142,369
210,567 357,464
Amount paid to the Fund (138,122) (229,599)
Balance at end of the year 72,445 127,865
78
2010 2009
(Rupees in thousand)
12. PROVISION FOR TAXATION
Balance at beginning of the year 715,762 1,254,514
Provision for the year 291,021 488,534
Income tax paid during the year (710,122) (1,027,286)
Balance at end of the year 296,661 715,762
Buildings on Buildings on Drilling rig Equipment Computers Decommissioning Capital
DESCRIPTION Freehold Leasehold freehold leasehold Roads and tools and and general and allied Gathering Furniture Vehicles- Vehicles- Cost-Mari field work in Total
land land land land bridges equipment plant equipment lines and fixtures heavy light Gathering progress
Lines (note 14.1)
(Rupees in thousand)
Cost
Balance as at July 01, 2008 153,637 51,362 440,587 45,519 102,204 326 391,309 62,450 788,145 45,449 146,371 98,055 80,755 2,455,194 4,861,363
Additions during the year 498,195 - 10,389 - 307 1,143,196 28,838 11,175 13,862 2,539 87,151 33,358 7,482 2,502,756 4,339,248
Disposals - - - - - - (819) - - - (1,661) (1,246) - - (3,726)
Transfers - - - - - - - - - - - - - (2,570,871) (2,570,871)
Balance as at June 30, 2009 651,832 51,362 450,976 45,519 102,511 1,143,522 419,328 73,625 802,007 47,988 231,861 130,167 88,237 2,387,079 6,626,014
for the year ended June 30, 2010
Balance as at July 01, 2009 651,832 51,362 450,976 45,519 102,511 1,143,522 419,328 73,625 802,007 47,988 231,861 130,167 88,237 2,387,079 6,626,014
Additions during the year 23,900 - 65,738 - - 1,193 314,618 12,637 1,025,121 2,582 95,272 29,122 18,659 298,497 1,887,339
Disposals - - - - - - (3,993) (4,208) - (362) - (6,640) - - (15,203)
Transfers - - - - - - - - - - - - - (1,798,576) (1,798,576)
Balance as at June 30, 2010 675,732 51,362 516,714 45,519 102,511 1,144,715 729,953 82,054 1,827,128 50,208 327,133 152,649 106,896 887,000 6,699,574
Depreciation
Balance as at July 01, 2008 - 5,004 170,744 26,754 62,399 177 247,691 51,350 600,716 29,089 124,462 69,785 15,004 - 1,403,175
Depreciation for the year - 959 21,425 2,620 5,196 180,322 29,840 6,325 39,392 3,280 47,007 7,087 2,580 - 346,033
On disposals - - - - - - (391) - - - (1,661) (1,090) - - (3,142)
Notes to the Financial Statements
Balance as at June 30, 2009 - 5,963 192,169 29,374 67,595 180,499 277,140 57,675 640,108 32,369 169,808 75,782 17,584 - 1,746,066
Balance as at July 01, 2009 - 5,963 192,169 29,374 67,595 180,499 277,140 57,675 640,108 32,369 169,808 75,782 17,584 - 1,746,066
Depreciation for the year - 959 23,016 2,620 4,646 182,727 46,724 8,847 77,655 3,106 53,920 18,177 3,453 - 425,850
On disposals - - - - - - (3,884) (4,208) - (306) - (4,000) - - (12,398)
Balance as at June 30, 2010 - 6,922 215,185 31,994 72,241 363,226 319,980 62,314 717,763 35,169 223,728 89,959 21,037 - 2,159,518
Carrying amounts - 2009 651,832 45,399 258,807 16,145 34,916 963,023 142,188 15,950 161,899 15,619 62,053 54,385 70,653 2,387,079 4,879,948
Carrying amounts - 2010 675,732 44,440 301,529 13,525 30,270 781,489 409,973 19,740 1,109,365 15,039 103,405 62,690 85,859 887,000 4,540,056
Rates of depreciation - 1-3% 5% 5% 10% 10-33.33% 10% 25% 10% 10% 30% 20% Note 3.5
Annual Report 2010
Mari Gas Company Limited
79
80
14.2 Detail of property, plant and equipment disposed off during the year
Cost Accumulated Book Sale Mode of Particulars of
DESCRIPTION depreciation value proceeds disposal purchaser
(Rupees in thousand)
Computers and allied equipment 4,208 4,208 – 106 Through auction Mr. Khurram Shahzad
Equipment and general plant 3,741 3,685 56 357 Through auction Mr. Shafqatullah Malik
Equipment and general plant 155 125 30 13 Through auction Mr. Raza Khan
Equipment and general plant 97 74 23 10 As per Company polic Various Employees
Furniture & fixture 362 306 56 27 Through auction Mr. Wazir Muhammad
Vehicle 3,271 654 2,617 3,329 Insurance Claim EFU General Insurance
Vehicle 2,433 2,410 23 2,577 Through auction Mr. Rizwan Mazhar
Vehicle 786 786 – 686 Through auction Mr. Muhammad Riaz
Vehicle 150 150 – 73 Through auction Mr. Sajjad Ali Khan
15,203 12,398 2,805 7,178
(Rupees in thousand)
Cost
Balance as at July 01, 2008 3,058,183 – – 46,465 13,911 3,118,559 1,216,385 4,334,944
Additions 3,599 – – 147,008 580,493 731,100 49,554 780,654
Transfers – – – – – – – –
Balance as at June 30, 2009 3,061,782 – – 193,473 594,404 3,849,659 1,265,939 5,115,598
Balance as at July 01, 2009 3,061,782 – – 193,473 594,404 3,849,659 1,265,939 5,115,598
Additions 954,728 – – – 954,728 345,623 1,300,351
Transfers – – – – (594,404) (594,404) – (594,404)
Balance as at June 30, 2010 4,016,510 193,473 – 4,209,983 1,611,562 5,821,545
Amortization
Balance as at July 01, 2008 1,978,317 – – – – 1,978,317 239,366 2,217,683
Charge for the year 212,288 – – – – 212,288 34,242 246,530
17.1 Reconciliation of carrying amount of loans to executives and other employees is as follows:
Balance as at Disbursments Repayments Balance as at
July 01, 2009 during the year during the year June 30, 2010
(Rupees in thousand)
Executives 4,369 10,630 10,006 4,993
Other employees 5,919 5,655 5,466 6,108
10,288 16,285 15,472 11,101
2009 8,550 13,410 11,672 10,288
17.2 The maximum amount due from executives at the end of any month during the year was
Rs: 5.257 million (2009: Rs. 5.101 million).
17.3 The loans and advances given to executives and employees represent interest free transport
loans and other advances repayable in 36 to 60 equal monthly installments.These loans and
advances have been measured at cost which equals their fair value.
Mari Gas Company Limited
Annual Report 2010 83
21.1 As advised by Ministry of Petroleum and Natural Resources vide letters DGO(AC)-5
(50)/94-IA and DGO (AC)-5(50)/95 dated March 30,1995 and October 01,1996 respectively,
interest income on delayed payments from PEPCO amounting to Rs.2,038.201 million (June
2009: Rs. 1,255.417 million) will be accounted for by the Company after it is actually received.
However, it does not affect the current year or future years’ profit after taxation which includes
the return available to shareholders under the Agreement.
21.2 The maximum aggregate amount outstanding at the end of any month during the year from
associated undertakings was Rs. 6,296.742 million (2009 : Rs. 6,511.121 million).
25.1 These include foreign currency accounts amounting to US$ 0.05 million (2009: Nil). The
effective markup rate for the period ended June 30, 2010 ranges from 1% to 12.75% (2009:
1% to 16%) per annum.
Mari Gas Company Limited
Annual Report 2010 85
2010 2009
(Rupees in thousand)
28.2 Exploration and prospecting expenditure comprises of:
Cost of dry and abandoned wells 408,968 5,632
Prospecting expenditure 335,709 768,252
744,677 773,884
32. TAXATION
Current taxation 291,021 488,534
Deferred taxation (125,887) (245,726)
165,134 242,808
2010 2009
% %
32.1 RECONCILIATION OF EFFECTIVE TAX RATE
Applicable tax rate 50.00 50.00
Effect of:
Amounts not deductible for tax purposes 44.60 7.89
Origination and reversal of temporary differences (56.78) (31.89)
Depletion allowance (25.60) (15.86)
Aggregate effective tax rate charged to income 12.22 10.14
Mari Gas Company Limited
Annual Report 2010 89
Restated
2010 2009
(Rupees in thousand)
33. EARNINGS PER SHARE - BASIC AND DILUTIVE
Profit for the year 1,185,954 2,151,917
Reserve for exploration & evaluation assets -note 6 848,994 756,168
Undistributable profit as explained -note 7 – 1,122,887
848,994 1,879,055
Balance distributable profit after tax 336,960 272,862
Number of shares outstanding (in thousand) 73,500 73,500
Earnings per share on the basis of distributable profits (in Rupees) 4.58 3.71
Earnings per share on the basis of profit and loss account (in Rupees) 16.14 29.28
There is no dilutive effect on the basic earnings per share of the Company.
2010 2009
(Rupees in thousand)
34. CASH GENERATED FROM OPERATIONS
Profit before taxation 1,351,088 2,394,725
Adjustments for:
Depreciation of property, plant and equipment 425,850 346,033
Amortization of development and production assets 281,496 246,530
Gain on disposal of property, plant and equipment (4,373) (613)
Employee benefits - unfunded 12,316 19,991
Interest income (430,073) (303,327)
Finance cost 465,539 321,064
Working capital changes 34.1 917,268 (48,083)
3,019,112 2,976,320
34.1 Working capital changes
(Increase)/decrease in current assets
Stores and spares (84,552) (21,087)
Trade debts 1,088,947 (4,814,560)
Loans and advances 529,829 (555,790)
Short term prepayments 1,052 (19,361)
Other receivables 6,094 (5,440)
1,541,370 (5,416,238)
Increase / (decrease) in accrued and other liabilities (624,101) 5,368,155
917,268 (48,083)
90
(Rupees in thousand)
Present value of defined benefit obligations – 484,148 157,689 6,568 389,319 119,678
Fair value of plan assets (36,769) (174,798) (84,861) (53,331) (160,956) (84,517)
Net actuarial gains/(losses) not recognized – (180,939) (45,298) 26,999 (139,590) (16,917)
Liability recognized in balance sheet (36,769) 128,411 27,530 (19,764) 88,773 18,244
Movement in payable to defined benefit plan
Actual return on plan assets 5,007 66,349 12,552 7,157 22,785 11,303
Mari Gas Company Limited
Annual Report 2010 91
(Rupees in thousand)
Balance at beginning of the year 35,235 20,328 14,694 23,768 19,418 12,448
Add: Cost for the year 7,562 2,118 2,636 15,287 2,459 2,245
Balance at end of the year 38,681 20,185 17,330 35,235 20,328 14,693
Costs for the year
35.3 The principal actuarial assumptions used in the actuarial valuation of the defined benefit plans
are follows:
2010 2009
- Discount rate 12.75% per annum 11% per annum
- Expected rate of return on plan assets 11.75% per annum 11% per annum
- Expected rate of salary increase 12.75% per annum 11% per annum
- Expected rate of pension increase 7.75% per annum 6% per annum
35.4 One percent change in medical cost trend rate would have the following effect:
2010
(Rupees in thousand)
1% increase 1% decrease
Present value of medical obligations 2,274 (1,930)
Current service cost and interest cost 273 (232)
92
35.5 Comparison of present value of defined benefit obligation, fair value of plan assets and surplus or
deficit of pension and gratuity for five years is as follows:
2009 2008 2007 2006 2010
(Rupees in thousand)
Management pension
Present value of defined benefit obligations – 6,568 11,169 11,441 176,155
Fair value of plan assets (36,769) (53,331) (53,494) (162,016) (129,628)
(Surplus) / deficit (36,769) (46,763) (42,325) (150,575) 46,527
Experience adjustments on obligations (1,977) 4,947 386 298 10,077
Experience adjustments on plan assets 355 1,585 17,021 6,287 2,950
Gratuity (Management and non-management)
Present value of defined benefit obligations 641,837 508,997 359,036 312,886 (31,247)
Fair value of plan assets (259,659) (245,473) (221,619) (73,709) (82,488)
(Surplus) / deficit 382,178 263,524 137,417 239,177 (113,735)
Experience adjustments on obligations (66,209) (110,268) (10,419) (3,667) (14,331)
Experience adjustments on plan assets (13,999) 9,460 9,441 (12,580) (3,118)
2010 2009
(Rupees in thousand)
Long term loan and advances 2,850 2,849
Long Term Deposits 10,498 9,833
Trade debts 6,099,654 7,188,601
Loans and advances 8,251 7,439
Interest accrued 44,634 15,037
Cash and bank balances 3,607,305 1,694,638
9,773,192 8,918,397
94
The maximum exposure to credit risk for trade debts at the reporting date by type of customer was:
2010 2009
(Rupees in thousand)
Fertilizer companies 1,285,192 674,002
Power generation company 4,356,058 6,511,121
Others 458,404 3,478
6,099,654 7,188,601
The Company’s most significant customer, a power generation company, accounts for Rs. 4.356
million of the trade debts carrying amount at June 30, 2010 (2009: Rs. 6.511 million).
The maximum exposure to credit risk for trade debts at the reporting date by type of product was:
2010 2009
(Rupees in thousand)
Natural gas 5,728,511 7,188,601
Oil 310,546 –
LPG 60,597 –
6,099,654 7,188,601
The maturity profile of the Company’s financial liabilities based on the contractual amounts is
as follows:
2010 2009
(Rupees in thousand)
Carrying Contractual Carrying Contractual
amount cash flows amount cash flows
Long term financing
Maturity upto one year 380,000 380,000 – –
Maturity after one year and upto two years 420,000 420,000 220,000 220,000
Maturity after two years and upto three years 420,000 420,000 240,000 240,000
Maturity after three years and upto four years 420,000 420,000 240,000 240,000
Maturity after four years and upto five years 420,000 420,000 240,000 240,000
Maturity after five years 40,000 40,000 260,000 260,000
21,100,00 2,100,000 1,200,000 1,200,000
The markup rate risk is the risk that the fair value or future cash flow of a financial instrument
will fluctuate due to changes in the market markup rates. Sensitivity to markup rate risk arises
from mismatches of financial assets and liabilities that mature in a given period. The Company’s
exposure to the risk of changes in market markup rates relates primarily to Company’s long
term debt obligations with floating markup rates.
The Company analyses its markup rate exposure on a dynamic basis. Various scenarios
are simulated taking into consideration refinancing, renewal of existing positions, alternative
financing. Based on these scenarios, the Company calculates the impact on profit and loss
of a defined markup rate shift. For each simulation, the same markup rate shift is used for all
currencies. The scenarios are run only for liabilities that represent the major markup-bearing
positions.
The Company adopts a policy to ensure that markup rate risk is minimized by investing in
fixed rate investments like TDRs.
Profile
At the reporting date the interest rate profile of the Company’s interest-bearing financial
instruments was:
2010 2009
(Rupees in thousand)
Financial assets
Cash and bank balances 3,607,305 1,694,638
3,607,305 1,694,638
Financial liabilities
Long Term Financing - Bank Alfalah Limited 1,900,000 1,100,000
Long Term Financing - Habib Bank Limited 200,000 100,000
2,100,000 1,200,000
The effective markup rates for the financial assets and liabilities are mentioned in respective
notes to the financial statements.
Mari Gas Company Limited
Annual Report 2010 97
2010 2009
(Rupees in thousand)
Carrying Fair Carrying Fair
amount value amount value
Financial assets
Long term loan and advances 2,850 2,850 2,849 2,849
Long Term Deposits 10,498 10,498 9,833 9,833
Trade debts 6,099,654 6,099,654 7,188,601 7,188,601
Loans and advances 8,251 8,251 7,439 7,439
Interest accrued 44,634 44,634 15,037 15,037
Cash and bank balances 3,607,305 3,607,305 1,694,638 1,694,638
9,773,192 9,773,192 8,918,397 8,918,397
Financial Liabilities
Long term financing 2,100,000 2,100,000 1,200,000 1,200,000
Trade and other payables 2,664,831 2,664,831 1,760,812 1,760,812
4,764,831 4,764,831 2,960,812 2,960,812
The fair value hierarchy has not been presented in these financial statements, as the Company
does not hold any such financial instruments in their portfolio. The investments held by the
Company are only the TDRs with fixed or determinable payments and fixed maturity.
98
2010 2009
Chief Executive Chief Executive
Executive Excutive
(Rupees in thousand)
The above were also provided with medical facilities, gratuity and post retirement leave benefits.
The Chief Executive and certain Executives were provided with free use of the Company maintained
cars, residential telephones and use of club facilities. Executives based at plant site, Daharki, are also
provided with schooling and subsidized club facilities.
38. TRANSACTIONS WITH RELATED PARTIES
Fauji Foundation holds 40% shares of the Company, therefore all subsidiaries and associated
undertakings of Fauji Foundation are related parties of the Company. Other related parties comprise
of associated companies, directors, major shareholders, key management personnel and employees’
retirement benefit funds and exclude relationship with the Government being a shareholder in the
Company. Transactions with related parties other than remuneration and benefits to directors and key
management personnel are as follows:
2010 2009
(Rupees in thousand)
Sale of gas to related parties is as follows:
Fauji Fertilizer Company Limited 12,267,755 10,990,280
Pakistan Electric Power Company 8,494,589 11,198,362
Foundation Power Company Daharki Limited 312,204 –
Sui Southern Gas Company Limited 171,001 11,061
Sui Northern Gas Company Limited 14,443 –
Foundation Gas 77,605 –
Contribution to employee benefit funds 63,389 52,226
100
2010 2009
(Rupees in thousand)
Receivable balances with related parties are as follows:
Fauji Fertilizers Company Limited 536,090 482,007
Pakistan Electric Power Company 4,052,435 6,511,121
Foundation Power Company Daharki Limited 303,623 –
Sui Southern Gas Company Limited 72,829 3,478
Sui Northern Gas Company Limited 14,432 –
Foundation Gas 60,597 –
Transactions with related parties are based on the normal commercial practices as between
independent businesses.
39. FIGURES
Corresponding figures, wherever necessary, have been rearranged and reclassified to reflect more
appropriate presentation of events and transactions.
Figures have been rounded off to the nearest Pak Rupee unless otherwise stated.
40. DATE OF AUTHORIZATION FOR ISSUE
These financial statements have been authorized for issue by the Board of Directors of the Company
on September 23, 2010.
Proxy Form
The Company Secretary
Mari Gas Company Limited
21 - Mauve Area, 3rd Road,
G-10/4, P.O. Box No. 1614.
Islamabad
I/We, the undersigned, being a member(s) of Mari Gas Company Limited and holder
of Ordinary Shares, hereby appoint
of
whom failing
of
as my/our proxy to vote and act for me/our behalf, at the 26th Annual General Meeting of the Company,
to be held on October 26, 2010 and at any adjournment thereof.
Affix
Revenue
Stamp
Folio/CDC Ref:
Note:
1. This instrument appointing a proxy, duly completed, in order to be effective, must be received at
the Registered Office of the Company at 21-Mauve Area, 3rd Road, Sector G-10/4, Islamabad not
less than 48 hours before the time of holding of Meeting.
2. A member who has deposited shares into Central Depository Company of Pakistan Limited, must
bring participant’s ID Number and Account/Sub-Account Number alongwith original Computer-
ized National Identity Card (CNIC) or original Passport at the time of attending the meeting. In case
of corporate entity, the Board of Directors’ resolution/power of attorney with specimen signature
of the nominee shall be produced at the time of the meeting for the purpose of identification.
3. Members who have not yet submitted photocopy of their Computerized National Identity Cards to
the Company are requested to send the same at the earliest.
Witnesses:
1. 2.
102
AFFIX
CORRECT
POSTAGE