PAKISTAN PETROLEUM LTD

COMPANY ANALYSIS, INDUSTRIAL ANALYSIS,

ECONOMIC ANALYSIS, ANALYSIS OF FINANCIAL
STATEMENTS, PROJECTIONS AND CALCULATION OF
THE EXPECTED RETURN, MARKET RISK OF THE
SECURITY AND CAPM.
Submitted to: PROF. HAFIZ TAUSEEF
Submitted By: ZEESHAN KAUSAR (L1R06MBBF2024)

M. RAMZAN (L1F07MBBF2010)

SYED AHSAN ASHFAQ (L1S07MBBF2012)

AJMAL AFTAB (L1S08MBBF2034)

DATE: 29/01/2010
 CONTENTS

PREFACE

ACKNOWLEDGEMENT

EXECUTIVE SUMMARY

INTRODUCTION

ECONOMIC ANALYSIS

PAKISTAN’S ECONOMIC ANALYSIS

INDUSTRY ANALYSIS

COMPANY ANALYSIS

o DEBT MANAGEMENT

o ASSET MANAGEMENT

o LIQUIDITY

o FUTURE OUTLOOK

RATIO ANALYSIS

o LIQUIDITY RATIOS

o SOLVENCY RATIOS

o PROFITABILITY MEASURES

PROJECTIONS 2010-2012

RECOMMENDATIONS

BIBLIOGRAPHY
PREFACE

We are students of Banking & Finance and this was the first time we have got a chance to explore our financial
knowledge and skills that we have learnt so far in our University. Although this was a practical work, so we
faced many difficulties and confusions at many stages of this project. We worked with cooperation and we were
keen to make this project the best in term of material and quality. Although we are not professionals but we
have given our best efforts to present this project as much professional as we can. We have learnt a lot from this
effort, we have got a chance to work on MS Excel and we have learnt a lot using Excel. We explored Excel
deeply and got many new things to learn. Thanks to the Almighty Allah who enabled us to complete this project
successfully.

This project is a complete guideline for financial analysis. This includes company’s income, expenses, future
projections, future values, investment decisions and budgeting. This project is done by applying the best
financial manner using our financial skills and knowledge.

In this project, we have deeply analyzed Pakistan Petroleum Ltd and projected its future income and expenses.
We have also calculated the company’s Beta, Alpha, Expected Return and CAPM. We also analyzed the
financial statements of Pakistan Petroleum Ltd e-g Ratios. We have deeply analyzed the Company, the Industry
and the market in this project. We have also discussed the situation of Petroleum industry in the Economy and
its contribution in GDP and GNP.
ACKNOWLEDGEMENT
We thank to the Almighty Allah who provided us with this opportunity and gave us the courage and ability to
accomplish this task successfully. We have used our best efforts and abilities. We would like to express
profound gratitude to our advisor, PROF. HAFIZ TAUSEEF, for his invaluable support, encouragement,
supervision and useful suggestions throughout this research work. His moral support and continuous guidance
enabled us to complete our task successfully. We are thankful to our parents for financially assisting us in this
Project. This project has been challenging for us but it provided us knowledge and better techniques for the
future projects.
EXECUTIVE SUMMARY

The project assigned to us was on Pakistan Petroleum Ltd. in which we had to discuss the industry and company
condition as affected by the country’s political and economic conditions. At the beginning of our project we
started the content of project with writing preface containing experience we have been through in making of the
project and the expectations of performance of this project. It also contains our actual doings in this project
along with difficulties faced. It is then followed by the acknowledgment after which there is introduction
congaing history of firm and there is little about the industry and social-economic environment relevant to
automobile industry. The main idea was that whether the investment in company’s stocks was feasible or not.
Since we have work-out on this project and we have had done analysis of Petroleum industry and company
analysis through different dimensions. This project on Pakistan Petroleum contains various aspects and position
of company from production to market conditions. We analyzed our economic conditions in relation with
investment in Indus motor company’s stocks and consider some of the Macro economic indicators to determine
the future course of our economy. Other than that we have done the comprehensive economic analysis
containing GDP, GNP, Employment growth rate, inflation rate and some of the governmental policies. Than
majorly brief but adequate industry and company analysis for financial statements were important parts of our
project. In this we have done horizontal, vertical and ratio analysis along with Beta, Alpha and CAPM
calculation. Importantly three year projections of company’s financials were significant part of our project. Last
but not the least this project is concluded with recommendations about whether the investment in company’s
stocks is advisable or not. The project of Pakistan Petroleum Ltd Also contains the contents in ordinal format
and the bibliography having links concerned to this project.

Introduction
The pioneer of the natural gas industry in the country, Pakistan Petroleum Limited (PPL) has been a key player
in the energy sector since the 1950s.The company has managed to sustain its positioning due to its robust
business programme and persistent efforts to optimize production from existing fields and new discoveries,
currently contributing about 25 percent of the country’s total natural gas supplies in addition to crude oil,
Natural Gas Liquid and Liquefied Petroleum Gas.

PPL’s history can be traced back to the establishment of a public limited company in June 1950, the majority
shares of which were held by Burmah Oil Company (BOC) of the United Kingdom. In September 1997, BOC
disinvested from the E&P sector worldwide and sold its equity in PPL to the Government of Pakistan. In July
2004, the government, in turn, sold 15 percent of its holding in PPL to the general public through an Initial
Public Offer, reducing its share to 78.4 percent. The remaining equity is divided between International Finance
Corporation and private investors, holding 1.3 percent and 20.3 percent respectively.

The company operates five producing fields across the country at Sui (Pakistan’s largest gas field), Adhi,
Kandkhot, Chachar and Mazarani and holds working interest in seven partner-operated producing fields. These
are Qadirpur, the second largest gas field, Miano, Sawan, Block 22 (Hasan, Sadiq and Khanpur) and Tal Block
(Manzalai).

As a major stakeholder in securing a safe energy future for the country, PPL pursues a dynamic exploration
agenda aimed at enhancing hydrocarbon reserves. In Pakistan, the company’s exploration portfolio comprises
22 exploration blocks. Of these, PPL operates seven through joint ventures with other Exploration and
Production (E&P) companies and has working interest in 15 more exploration areas, including three off-shore
blocks, as non-operating partner. PPL is also among the first local E&P companies to extend its operations
beyond national borders and has an interest in an exploration licence in Yemen in a joint venture with OMV.

Over the years, PPL has developed a reliable foundation and infrastructure for providing clean, safe energy
through sustainable exploitation of indigenous natural resources while adhering to the highest standards of
health and safety and constraining the ecological footprint of its operations. As a result, Monitoring and
Inspection and Design & Construction departments, Mazarani and Kandhkot gas fields, Adhi field, Sui Field
Gas Compressor Station, Sui Production, Sui Field Engineering and Purification Plant were certified for ISO
9001:2000 Quality Management System.

As such, the company believes in value addition for all its stakeholders and remains committed to a transparent
financial and corporate regime. This factor has been recognized by the prestigious Management Association of
Pakistan that selected PPL as the recipient of its 25th and 26th Corporate Excellence Awards.

At PPL, the health and safety of employees and sustainable use of natural resources are key requirements of
operational excellence. Every effort is made to enhance Health, Safety and Environment awareness among staff
and other stakeholders. This commitment is evident from the landmark certification of Mazarani Gas Field, Sui
Production, Sui Field Gas Compressor Station and Adhi Field for ISO 14001 and OHSAS 18001 certification.
Besides, PPL was also awarded the Annual Environmental Excellence Award in 2006, 2008 and 2009 by the
National Forum for Environment and Health.
PPL has played a significant role as a responsible corporate citizen since the inception of its commercial
activities in Sui by establishing Model School Sui in 1957 for children of workers and local communities. Over
time, the outreach of PPL’s Corporate Social Responsibility (CSR) portfolio has gone well beyond obligatory
requirements. In 2001, PPL Welfare Trust was founded to provide geographical and thematic diversity within
its CSR initiatives, which include education, health, infrastructure development and socio-economic uplift of
disadvantaged communities, particularly those living in and around its operating areas. In recognition of these
efforts, PPL has won the Corporate Philanthropy Award for four consecutive years from 2004 to 2007 for its
commitment to social development.

ECONOMIC ANALYSIS

Economy of Pakistan

Currency 1 Pakistani Rupee (PKR) Rs. = 100 Paisa

Fiscal year July 1–June 30

Trade ECO, SAFTA, ASEAN, WIPO and WTO

organizations

Statistics

GDP $431.2 billion (PPP) (2008)

GDP growth 2.0% (2009 est.)

GDP per $9,600 (PPP) (2008)

capita

GDP by agriculture: 19.6%, industry: 26.8%, services: 53.7% (2007)

sector

Inflation (CPI) 11.17% (2009-2010)

Population 23% ((2007))

below
poverty line

Labor force 99.18 million (2006 est.)

Unemployme 7.5% (2007 est.)

nt

Main textiles, chemicals, food processing, steel, transport equipment, automotives,

industries machinery, beverages, construction, materials, clothing, paper products

External

Exports $17.78 billion (2008 est.)

Export goods textile goods (garments, bed linen, cotton cloths, and yarn), rice, leather goods,
sports goods, chemicals manufactures, carpets and rugs

Main export United States 22.4%, UAE 8.3%,UK 6%, China 15.4%, Germany 4.7% (2006 est.)
partners

Imports $30.99 billion f.o.b. (2007 est.)

Import goods Petroleum, Petroleum products, Machinery, Plastics, Transportation equipment,

Edible oils, Paper and paperboard, Iron and steel, Tea

Main import China 14.7%, Saudi Arabia 10.1%, UAE 8.7%, Japan 6.5%, United States 5.3%,
 partners Germany 5%, Kuwait 4.9% (2006 est.)

Public finances

Public debt $45 billion (2007)

Revenues $127.5 billion (2006 est.)

Expenses $135 billion (2006 est.)

The economy of Pakistan is the 27th largest economy in the world in terms of purchasing power, and the 48th
largest in absolute dollar terms. Pakistan has a semi-industrialized economy, which mainly encompasses
textiles, chemicals, food processing, agriculture and other industries. Growth poles of Pakistan's economy are
situated along the Indus River, diversified economies of Karachi and Punjab's urban centers; coexist with lesser
developed areas in other parts of the country. The economy has suffered in the past from decades of internal
political disputes, a fast growing population, mixed levels of foreign investment, and a costly, ongoing
confrontation with neighboring India. However, IMF-approved government policies, bolstered by foreign
investment and renewed access to global markets, have generated solid macroeconomic recovery the last
decade. Substantial macroeconomic reforms since 2000, most notably at privatizing the banking sector have
helped the economy.

GDP growth, spurred by gains in the industrial and service sectors, remained in the 6-8% range in 2004-06. Due
to economic reforms in the year 2000 by the Musharraf government. In 2005, the World Bank named Pakistan
the top reformer in its region and in the top 10 reformers globally. Islamabad has steadily raised development
spending in recent years, including a 52% real increase in the budget allocation for development in FY07, a
necessary step toward reversing the broad underdevelopment of its social sector. The fiscal deficit - the result of
chronically low tax collection and increased spending, including reconstruction costs from the devastating
Kashmir earthquake in 2005 was manageable.

Inflation remains the biggest threat to the economy, jumping to more than 9% in 2005 before easing to 7.9% in
2006. In 2008, following the surge in global petrol prices inflation in Pakistan has reached as high as 25.0%.
The central bank is pursuing tighter monetary policy while trying to preserve growth. Foreign exchange
reserves are bolstered by steady worker remittances, but a growing current account deficit - driven by a
widening trade gap as import growth outstrips export expansion - could draw down reserves and dampen GDP
growth in the medium term.
In the period of these 8 (2001-2008) years the poverty levels decreased and unemployment levels faced a
decline as well inflation remained between 6-8% ranges. The services sector grew at a rapid pace. Specially the
banking and telecommunication sectors saw rapid success and increased interest of investors to invest in these
sectors. During this period of great macro-economic activity, Pakistan economy faced growth of about 5.8%
constantly in the GDP.

Budget deficit and raising inflation rates have always been a concern for Pakistan’s economy. Pakistan’s
imports are of huge values mainly due to its ever increasing oil imports. This also effects on the prices of
petroleum in Pakistan.

The above mentioned period also saw an increase in the spending of people. Rupee was a bit stable up till
November 2007 against Dollar but it has deteriorated dramatically now due to the political instability in the
country and due to increased capital flight.

The stock market in the country also performed well during this period of increased economic activity. Through
the markets were extremely volatile and responded rapidly and adversely to political situations in country at
times, and KSE 100 index came to marks of above 15000 points in 2008 and became one of the best performing
and fastest growing markets in ASIA. But after the occurrence of these incidents the KSE 100 index declines to
5000 points in the mid of 2008 these factors are such as

 Law in Order Situation October-2008

 Karachi Incident 12-May-2007
 Benazir Assassination
 Elections 2008
 Musharraf Resignation
 Long March
 Bomb Blasting

The chart given below shows some of the sectors that grew during these 8 years or experienced enhanced
activity.

 Banking
 Automobile Manufacturing
 Telecommunication
 Electronic Media/ news Channels
 Oil Marketing Companies
  Investment & Market Funds
 Real Estate

In 2008, the political instability and in-competency of the Government to take measures to regain the trust of
foreign investors and controlling inflation. Pakistani economy is at an all time low level and is expected to go
further down-road. Despite the fact that prices of commodities such as oil and gold are falling internationally.

Pakistan is not benefiting from the situation properly mainly due to the constant depreciation of Pak-Rupee in
comparison with U.S. Dollar. Pak Rupee which traded in the range of 60-70 rupees against a single dollar
during the last couple of years depreciated heavily during the year 2009 to Rs. 80 against U.S. Dollar. Currently
it is trading at Rs.83 against Dollar. As imports are rapidly increase in Pakistan economy it increased to the
level of $ 3.54 billion alone for the month of July 2008. Our exports have decreased constantly during 2008
mainly because of low output of Textile sector that contributed heavily to our exports. Our export bill for July
2008 was $ 1.9 billion which resulted in a trade deficit of $ 1.64 billion in July 2008.

The Average Consumer Price Index reached 26% during the financial year 2008-09 as compared to almost 12%
during June 08. This increase is mainly due to increased commodity prices both locally and globally. The
increased commodity prices and decreasing foreign reserves have caused the inflation. The foreign Direct
Investment in Pakistan has fallen by almost 11% during the financial year 2008-09. The total direct foreign
investment in Pakistan is $ 4.6 billion in 2009.

Some facts and figures related to Pakistan economy are as follows

Economic Comparison of Pakistan 1999-

2009
1999 2007 2008 2009
GDP $ 75 billion $ 160 billion $ 170 billion $ 185 billion
GDP Purchasing Power $ 270 billion $ 475.5 billion $ 504.3 billion $ 580.6
Parity (PPP) billion
GDP per Capita Income $450 $925 $1,085 $1,250
Revenue collection Rs. 305 billion Rs. 708 billion Rs. 990 billion Rs. 1.05
trillion
Foreign reserves $ 700 million $ 16.4 billion $ 10 billion $ 14 billion
Exports $ 7.5 billion $ 18.5 billion $ 19.22 billion $ 18.45
billion
Textile Exports $ 5.5 billion $ 11.2 billion - -
KHI stock exchange (100- $ 5 billion at 700 $ 75 billion at $ 56 billion at
Index) points 14,000 points 9,000 points
Foreign Direct Investment $ 1 billion $ 8.4 billion $ 5.19 billion $ 4.6 billion
Debt servicing 65% of GDP 26% of GDP - -
Poverty level 34% 24% - -
Literacy rate 45% 53% - -
Development programs Rs. 80 billion Rs. 520 billion Rs. 549.7 billion Rs. 880
billion

Pakistan's industrial sector accounts for about 24% of GDP. Cotton textile production and apparel
manufacturing are Pakistan's largest industries, accounting for about 66% of the merchandise exports and
almost 40% of the employed labour force. Other major industries include cement, fertilizer, edible oil, sugar,
steel, tobacco, chemicals, machinery, and food processing.

The government is privatizing large-scale parastatal units, and the public sector accounts for a shrinking
proportion of industrial output, while growth in overall industrial output (including the private sector) has
accelerated. Government policies aim to diversify the country's industrial base and bolster export industries.
 • Industries: Automobile, textiles (8.5% of the GDP), fertilizer, cement, oil refineries, products, food
processing, beverages, construction materials, clothing, paper products, shrimp
• Industrial production growth rate: 6% (2005)
• Large-scale manufacturing growth rate: 19.9% (2005)

Pakistan is an emerging market for automobiles and automotive parts offers immense business and investment
opportunities. The total contribution of Auto industry to GDP in 2007 is 2.8% which is likely to increase up to
5.6% in the next 5 years. Auto sector presently, contributes 16% to the manufacturing sector which also is
expected to increase 25% in the next 7 years.

The new Government is working quite efficiently but so far it hasn’t been successful in solving and finding
solutions to the various economic and defense related issues faced by the country. As soon as the political
situation of the country becomes stable the confidence of local and foreign investors will be regained and can be
further strengthened if the Government introduces measures & policies to facilitate sectors of economy that
have suffered in the recent bad phase of economic instability.

INDUSTRY ANALYSIS
Historically the demand of petroleum products has been increasing at an average rate of 7.5 percent per year
(last 4 years 4.25 %). The long term growth estimates have been forecast to range between at 4.5 to 5%. The
maximum growth of 9% has been forecast in oil and gas consumption in the transport sector.

The consumption of furnace oil however, is expected to double itself mainly in power generation. There are
several refinery projects in different stages of development which when reach maturity shall considerable
increase the country’s refining capacity. The recent overhauling of Pakistan Refinery Limited (PRL) and Park-
Arab Refinery Limited (PARCO) production units have enhanced production of HSD & FO during Jul-Oct
2007, which was up by 21 percent and 26 percent as against corresponding months of last year respectively.
But, these are deficit products as their local production meets only 47 percent and 45 percent of the local
demand for HSD and FO, respectively. Hence, in the meantime the growing needs for petroleum products will
have to be met from additional imports of refined products as well as increase crude imports for the new
refineries.

The existing infrastructure in the country is not adequate to bear the burden of the large volumes which are
envisaged at the term of this millennium. For storage, transportation and distribution of the additional quantities
of oil, additional facilities on the continuing basis need to be introduced before the existing facilities become so
incapable that the consumers bear the cost of Shortages & non-availability in the market. In addition to the
injection of adequate and modern facilities, the consumer will look for innovative marketing techniques and
safe and friendly products to satisfy their sophisticated demands & concern about pollution and ecological
imbalance. The petroleum industry must prepare itself to meet the challenges of free market and discerning
consumers of the new era.

Based on the various factors, such as GDP growth, sustainable agricultural activities, increase in the vehicle
population leading to increased petroleum trade activity, and thermal power generation etc., the POL
requirement of the country are on constant increase. As per OCAC’s long term demand estimates the POL
demands, in the next 5 years i.e. up to 2005-10 is expected to increase by about 33% to a volume of 22,345
million tons as compared to 1998-99 actual of 16,805 million tons.

Currently the demand is met by importing refined products mainly HSD and HSFO to the tune of 63% and the
balance 37% demand is met by processing imported and as well as the indigenous crude.

In developing counties the demand for middle distillates and furnace oil grows at a fast rate. At present the
demand for gas oil & furnace oil constitutes about 84% of the fuel. The four domestic refineries cannot meet
such demand and since the refining capacity has been left far behind these two products are being and shall
continue to be imported in large quantities in future. In 1998-99 nearly 5026 million tons of gas oil and 5.32
million tons of furnace oil was imported. At the time kerosene, gasoline and JP-1 were also imported to meet
the small shortfalls in the supply from the local refineries.

The cost of current and next year’s petroleum imports are expected to be close to $7billion, which is higher than
previous years import and about $1.2billion higher than current year’s revised estimates of $ 6.6billion. The oil
import bill for the year 2007-2008 has been reported as approximately $9.00 billion.

The anticipated total consumption of crude oil for the next year has been estimated at 73.3million tons out of
which the consumption of HSD High Speed Diesel and furnace oil, which recorded at 7.4 million tons and 7.3
million tons in the previous fiscal year, have been increasing substantially during the current year and it is being
estimated that their demand will increase to 9.1 million tons and 8.1 million this year. The cumulative cost of
Diesel and Furnace Oil has been projected at $2.25billion for the next year against $2.7billion during the current
year.

For the current year, an amount of $6.4billion had been estimated for the import of about 64.75million tons of
crude, 4.6million tons of diesel, 2million tons of furnace oil.

COMPANY ANALYSIS
Pakistan Petroleum Limited is one of the oldest and largest E&P companies in the country. The primary
activities of the company involve exploration, development and production of Pakistan's natural reserves of oil
and gas. It was incorporated on 5th June 1950 after the promulgation of the Pakistan Petroleum Production
Rules in 1949. PPL inherited all the assets and liabilities of its parent company, the Burmah Oil Company
(Pakistan Concessions) Limited and commenced business on 1st July 1952.

The company remained under the management control of Burmah Castrol, UK till 1997. After that the
government purchased the entire equity interest of Burmah Castrol PLC, formerly Burmah Oil Company. After
June 2004, the Government of Pakistan disinvested around 15% of its equity in the company through an Initial
Public Offering (IPO). The Government of Pakistan intends to privatize PPL and IPO was a significant step
towards achieving this objective. As at June 2008, the government of Pakistan owned 78.4% stake of PPL, the
International Finance Corporation (IFC) had 3.43% of shareholding and the rest 18.17% is free-float.

PPL is the second largest Exploration and Production (E&P) companies, both, in terms of production and
reserves. PPL has been playing a crucial role in augmenting hydrocarbon resources since 1955. Presently PPL
contributes around 25% of the country's total natural gas production. It is also one of the market leaders in terms
of its holdings of exploration area. Out of 242,714 sq.kms area under exploration in Pakistan, PPL holds the
second largest share, more than 22% in joint venture with partners. PPL is aggressive in exploration but at the
same time conservative in selecting drilling sites.

It has discovered eight gas and three oil fields. PPL has working interest in 24 exploration blocks, of which
eight are PPL operated and the other 14, including 4 off-shore are partner operated. Sui and Kandhkot gas fields
are two of the major PPL operated fields where PPL has 100% ownership. In 1952 the company discovered the
largest gas reserves at Sui. Within three years (1955) the supply of natural gas to Karachi for industrial and
domestic use began through pipelines. Sui caters to about one-fifth of the total gas demand in the country. In
1959, vital discoveries at Kandhkot gas field and Mazarani field were made. Crude oil was discovered at Adhi
field in 1978 and in 1980 commercial production started at Adhi.

In 1990, the Liquefied Petroleum Gas (LPG) and Natural Gas Liquid (NGL) Plan was installed and the
production of LPG, NGL and gas from Adhi commenced. In the year 2007, PPL made oil and gas discovery at
Mela-1 well (Nashpa Block) and two gas discoveries at Latif-1 (Latif Block) and Tajjal-1 (Gambat Block). In
the same year, the first exploratory well Mela-1 at Nashpa Block was completed as oil and gas producer and the
Extended Well Test production commenced. Bolan Mining Enterprises (BME) is a joint venture between PPL
and the Government of Baluchistan for the development, mining, grinding and marketing of barites mineral
deposits found near Khuzdar and other minerals in the province of Baluchistan. The Company operates a Baryte
mine in the Baluchistan province.

Profits for the 9 months ending March 2009 were Rs 20.970Billion which is 40% higher than same period last
year. This translated into earnings of Rs 25.27 per share (9M 2008: Rs 18.04per share). This profit started from
37% higher sales this year of Rs 45.337Billion (9M 2008: Rs 33.126Billion). Main contributors to high profits
this year are rupee depreciation against US dollar and delayed effect of the high international Oil prices. Other
operating income has been high contributor in total profits, 3.344Billion, which comes directly from deposits in
bank accounts, Musharika certificates, Pakistan Investment Bonds and TFCs.

On a closer look we get to see that along with high profits Finance cost has also went up by 38%. Similarly,
other operating expenses have also increased by 46%. During the year on the operating front, Gas production
from Sui and Sawan fields declined while production started from Gambat and Latif along with increases in
production from Kandhkot and Nashpa. New business acquisitions included 75% working interest in Tullow
Pakistan (Development) Limited in Chachar Development and Production lease, along with operatorship of the
area in March 2009. The current production of the field is around 10 MMcfd of natural gas.
The exploration activities are done on local and international horizons. On local front, company has 22 operated
exploration fields out of which 7 are exclusively PPL owned while others are partnered. Internationally, deals
are going with Yemen and in future PPL is legible to participate in bidding of exploration and development of
areas in Iraq. Besides this other working interests are in North, West and East Africa as well as Middle East
And central Asian State countries.

The Exploration and Production (E&P) companies would be offered $4.08 per mmbtu in as per 2009 petroleum
policy, which was $3.65 per mmbtu in 2007 and $2.99 per mmbtu in 2001. The increase in the gas rates would
bode positively for the E&P companies, and the sector is expected to show better results in the coming times.

RESERVES: The total oil & gas reserves of Pakistan fell by 3.6% during the first half of
FY'08. The country's oil and gas reserves declined from 5.95b barrels of oil equivalent at the end of Jun'07 to
5.74b barrels of oil equivalent (boe) by end of Dec'07. Overall oil reserves stood at 340m barrels at December
FY'08, as against 353m bbl at Jun'07, showing a decline of 3.8%. The only increase in oil reserves were noted
in Naspha block (increase of 7.15m bbl) and in Tando Allah North (oil reserves revised up by 0.20m bbl to
0.37m bbl).

The total gas reserves of Pakistan decreased by 3.4% (from 32.38tcf in Jun'07 to 31.27tcf in Dec'07). Mela and
Uch were the two fields that showed significant upward revision in gas reserves. The gas reserves of Mela field
were revised upward by 32.47bcf to 78.86bcf at the end of Dec'07 from 46.40bcf earlier at the end of Jun'07.
The reserves of Uch field were up by 54.75bcf to 4.49tcf at the end of Dec'07. Thus the total reserve life of the
country fell to 22.2 years during the first half of FY'08 from 23.1 years at the end of Jun'07. PPL has around
19% of total oil and gas reserves in Pakistan and it is second to OGDC in this regard.

There has been a net addition of 1.36m barrels in PPL's oil reserves while the reserves of other major companies
such as OGDCL and POL declined by 6.9 m barrels and 1.02 m barrels respectively. However, PPL's gas
reserves fell by 0.01 TCF. The gas reserves of OGDC and POL also declined by 0.36 TCF and 0.24 TCF
respectively.

DRILLING: E&P sector missed drilling target in FY'08 as the companies could spud in 72 oil
and gas drills as against the target of 87 oil drills. The sector missed its target mainly due to deteriorating law
and order situation in Balochistan and NWFP. Also the target was burdensome because the drilling target for
FY'08 included the target of outgoing fiscal year. Pakistan Petroleum Limited (PPL) announced only one gas
discovery during last fiscal year at Adam-X well in Hala Block. In addition, the company is also a JV partner in
oil and gas discovery at Mamikhel in Tal Block. PPL has set its target 10 wells average drilling target for a year.

Overall the E&P sector of Pakistan made 11 oil, gas well discoveries, and 23 exploratory and drilled 49
development wells. The new oil and gas discoveries have resulted in a success ratio of 1: 2.1 wells (47 percent),
significantly higher than country's historical average of 1: 3.4 wells (29 percent).

PRODUCTION: Pakistan's oil and gas production during FY'08 stood at 703,000 boepd
(barrels of oil equivalent per day) depicting a growth of 2% as compared to FY'07. Oil production alone stood
at 698,000 bpd (thousand barrels per day) versus 674,000 bpd depicting a growth of 4%. Similarly, gas
production also increased by 1.9 percent to 3.9bcfd (billion cubic feet per day). Pakistan Petroleum Limited
(PPL) is primarily a gas producing company, however with increased production of crude from Tal block and
Adhi fields as well as additional production from Mela field, the production of crude oil increased during
FY'08. This was in line with the sector trend.

The total production of crude oil and gas in the E&P sector improved during the first 11 months of FY'08.
Crude oil production grew 4.0% to 69,565bpd during 11mths'08 as against 66,900bpd in the corresponding
period of FY'07. Natural gas production during the same period stood at 3,910mmcfd as compared to
3,841mmcfd in 11mths'07, showing a nominal rise of 1.8%. PPL showed considerable increase in crude
production supported by additional production from Mela 1 during the period Jun'07 to May'08. Crude oil
production by the company stood at 4,031bpd in 11mths FY'08 as against 2,726bpd in the same period in
FY'08. Along with this, the production from Tal block also showed an impressive growth of 37.4% and
contributed 17.1% of total oil production of the company.

Gas production declined nominally to 989mmcfd during 11mths'08 as compared to 993mmcfd in 11mths'07.
Sui and Kandhkot field are the main contributors to the company's gas production. The Sui Sui gas field still
remains an important source of gas supply meeting a substantial part of gas demand of the country. The volume
of gas sales during FY'08 from the field was 202,771 million cubic feet as against 207,746 million cubic feet in
FY'07. The volume of gas sales from Kandhkot field during FY'08 was 52,594 million cubic feet as against
48,370 million cubic feet in FY'07.

PPL registered a growth of 1% in total oil and gas production in FY'08. Oil production of PPL registered a
growth of 50% and stood at 43, 000 bpd, while in contrast, gas production remained stagnant at 982mmcfd.
This was due to decline in gas production from Sui field, which offset the impact of increased production from
newer fields. As shown by the field wise contribution of gas and oil, PPL holds the most attractive exploration
portfolio and its growth profile is therefore more impressive than other companies in the sector.

REVENUE The net sales revenue of PPL increased by around 19% during FY'08 as the total
:
revenue increased from Rs 38.4 billion earned in FY'07 to Rs 45.7 billion in FY'08. This increase in revenue
was mainly helped by higher production from Kandhkot, Adhi, Qadirpur, Sawan and Tal fields which more
than offset the decline in production of gas from Sui, Mazarani and Miano fields and commencement of
production of gas and crude oil from Mela-1 and Mela-2 wells in Nashpa Block.

Also, higher sales volume of all of PPL's product categories and better well head gas prices caused the rise in
revenue in FY'08. The well head gas prices improved due to phased increase in pricing under 2002 pricing
agreement. The last such increase in pricing became effective from January 2007.

The company is less vulnerable to oil price movements because of a greater share of natural gas in the total
production. The table shows that natural gas has made a higher contribution to total revenue over the years and
in FY'08 natural gas contributed to 81.57% of revenue.
PROFITABILITY
Pakistan Petroleum Limited posted a profit after taxation of Rs 19.7 billion for the period FY'08 as compared to
Rs 16.77 billion earned during FY'07, showing an increase of almost 18%. The company's operating profit
increased from Rs 24.5 billion in FY'07 to Rs 29.5 billion. This 20% increase in the company's operating profit
resulted despite 15% increase in field expenditure mainly due to extensive exploration activities carried out and
20.5% increase in royalties during the period. The reason for increased operating profit in FY'08 was the rise in
sales revenue earned.

The company registered an increase of 19% in the sales revenue in FY'08. The sales revenue increased from Rs
38.4 billion in FY'07 to Rs 45.7 billion in FY'08. This improved sales performance was largely due to the
growth in the overall production and increase in sales volume across all product categories.

The increase in gas production was mainly on the back of rise in production from Kandhkot, Sawan and Adhi
fields. Total oil production by the company rose impressively by 82.3% during the first half of FY'08 due to
addition by Mela and increase in production from Adhi field and Tal block. During the 3Q FY'08, there was
increased gas production from Kandhkot, Adhi, Qadirpur, Sawan and Tal fields and additional production from
Nashpa. Also, high international prices resulted in higher profits for FY'08.

Arab light prices grew almost by 40% during 3Q FY'08 as compared to same period in FY'07. The change in
pricing of Sui and Kandhkot field also .boosted the profits for FY'08. The well head gas prices especially that of
Sui and Kandhkot improved due to phased increase in pricing under 2002 pricing agreement with last such
increase becoming effective from Jan'07. The gross profit margin of the company has had a declining trend over
the past years because the gross profit earned has fallen during all the previous fiscal years.

In FY'06 the gross profit margin had increased by 36% while in FY'07 the increase in gross profit was only by
21%. During FY'08 the gross profit grew by 19% as compared to FY'07. This has been because over the years
the royalties have grown more in proportion to the sales revenue of the company. During FY'08 the sales
revenue increases by 19% while the royalties payment increased by 21%. The company was able to almost
maintain its profit margin during FY'08. Over the past years the company has had an increasing trend in its
profit margin because profit after taxation grew more in proportion to sales.

PPL's profits were boosted by other sources apart from sales revenue. The share of profit in Bolan Enterprises
increased by 17% to reach Rs 55.8 million in FY'08. Other operating income rose to an impressive Rs 3.0
billion, an increase of 26% over FY'07, mainly due to effective fund management policy followed by the
company. Income on loans bank deposits and term deposits increased. There were substantial increases in the
income on long term held to maturity investments and rental income on assets increased from Rs 2 million in
FY'07 to Rs 45 million in FY'08. Similarly the exchange gain on foreign currency amounted to Rs 246 million
during FY'08 as against Rs 2.77 million in FY'07.
LIQUIDITY: The liquidity management of PPL had been improved greatly since FY03 as
illustrated in the figure. The liquid funds generated from operating activities contributed to the improvement in
the ratio. In FY07, the company managed to catch up with and supersede the industry, thus breaking the trend of
lower than average current ratio. PPL had increased its investments in short term instruments, contributing to
the improvement in current ratio during FY'07. Also, the company has maintained a lower level of inventory
than the other major players in the sector.

This reflects company's strength in asset management as well as the liquidity of its asset portfolio. The large
amount of cash balances and short term investments maintained by the company will also help PPL in financing
future exploration activities. The liquidity position of the company deteriorated during FY'08 after a better
liquidity position in FY'07. This has been due to a 76% increase in the current liabilities of the company while
current assets increased only by 12.7%. The company's trade payables and other payables increased during
FY'08. Taxation liability also showed an increase.

However, the claims to have a comfortable liquidity position since an amount of Rs 21.6 billion was generated
from operating activities of the company. This amount was used to meet the expenditures on capital projects,
operational requirements, payment of dividends to the shareholders and investments (short and long-term). At
the end of FY'08, the company had cash / bank balances and short-term investments amounting to Rs 22.1
billion. Thus, the company is comfortably placed to meet its existing short-term and long-term commitments
and financing requirements of future exploration and development expansion plans.

ASSET MANAGEMENT: PPL has performed well in terms of asset

management, exhibiting a positive trend for inventory turnover and DSO over the years since FY'03. The
company's efficiency in inventory management has resulted in its operating cycle being shorter than the
industry average. FY08 saw a further increase in the collection period of receivables for PPL and the trade
debts continued to mount. Although high DSO is an industry wide trend in the E&P sector but a reduction in
the period will improve the company's efficiency and have a positive impact on the company's financial
strength.

The turnover of all the company's assets improved during FY'08 due to a 21% increase in assets relative to a
19% increase in sales. This shows that the total asset turnover ratio has increase in FY'08 due to increase in
the increase in investment and production capacity. Although less sales were generated relative to the
increase in total asset investment, the company can be expected to improve sales and asset management in the
future. The sales to equity ratio increased indicating that the company's asset management has been
satisfactory.
DEBT MANAGEMENT: PPL has the lowest level of leverage among the major
players in the E&P sector. This is evident in the lower debt ratios of the company compared to the other
companies. The debt ratios are low and have been steadily declining over the last few years, indicating that the
company is largely equity financed. PPL has not undertaken any long term loans during the past few years. This
shows that the company does not rely on loans or other such instruments to finance its growing exploration
activities. This trend reflects upon the financial strength of PPL compared to its peers.

Despite the equity financed nature of the company, the financial charges have been mounting and the TIE ratio
of PPL has shown a negative trend since the FY06. This may be attributed partly to the increase in assets
subject to financial lease in the last one and a half years. However despite the decline, the TIE remains
substantially strong. In the FY07, a large portion of the finance cost accrued to the unwinding of discount on
decommissioning cost.

FUTURE OUTLOOK: The E&P sector of Pakistan seems to have a positive future
outlook as the sector's profit after taxation soared by 55% during the first quarter of FY'09. This shows that the
sector has had a promising start of the present fiscal year FY'09. The profitability of the sector is expected to
increase despite falling oil prices in the international market. Higher wellhead prices under the new pricing
policy will help increase the sales revenue and future profitability of the sector. The depreciation of the
Pakistani rupee will also helped the sector achieve higher profits as the sector's revenues are priced on an
international parity basis.

Along with rising sales revenue, the increase in other income played a major role in boosting the profits during
1Q FY'09. Other income contributed around 8.5% to PBT in 1Q FY'09 as compared to 6.7% in the same period
of FY'08. PPL's other income grew substantially by113% to Rs 1.23 billion as the company has over Rs 23
billion in cash and short-term investments which are principally held in term deposits with banks and mutual
funds investments along with long-term investments of over Rs 1.8bn mainly parked in PIBs and TFCs.

However, the production for the sector went down during the first quarter of FY'09. Production of oil and gas of
the sector fell by 8.7 percent and one percent respectively during 1Q FY'09. Pakistan Petroleum Limited's (PPL)
oil and gas production also fell modestly by 2.6 percent and 0.6 percent respectively. Pakistan Petroleum
Limited can be expected to increase production in the future because it is present in major geographical zones of
the country. Production from Nashpa, Adhi and Tal block will be major contributors and will help in offsetting
expected decline from Sui field.

The oil production of the sector declined due to many factors. Firstly, there were slow down in production,
especially at sites such as Pindori and Adhi. Pindori field's production remains a concern as its average
production in the first quarter FY09 fell by a massive 63 percent, averaging just less than 1,400bpd. Secondly
water cuts were experienced in Dhodak and Kal fields. Along with this issues such as annual turn around jobs,
delay in completion of development work (at Chanda-3 well) and mechanical problems (at Mela-1 well) slowed
down the sector's oil production.

Although the falling oil prices present a downside risk to the sector's earnings, the weak Pak rupee against the
US Dollar is expected to make up for it as the sector's revenues are priced on an international parity basis.
However, the sector's unabated rise in trade debts is a point of concern as they have risen by 33 percent to Rs 77
billion (June to Sept-08) mainly due to pending payments from refineries, Wapda and gas distribution
companies. OVERVIEW (July 29 2008): Recent results 3Q'08PPL posted a sales revenue of Rs 33,126 million
for 9M'07 compared to Rs 28,034 million in the same period last year, depicting an increase of 18.2%. Profit
after tax of the company grew to Rs 14,971 million during the nine months ended March 31, 2008 compared to
Rs 13,105 million during the corresponding period of previous year, representing an increase of 14.2%.

The increase in PAT is due to rising world oil prices, which offset the decline in production from Sui gas fields.
Also contributing to increase in profitability was an increase in gas production from Kandhkot, Adhi, Qadirpur,
Sawan and Tal fields which more than offset the decline in production from Sui and Miano fields,
commencement of gas/crude oil production from Nashpa field and phased increase in Sui and Kandhkot gas
prices under the 2002 Gas Price Agreement, with the last such increase becoming effective from January 01,
2007. As can be observed above, the E&P sector has shown an increase in its profits, due to rising international
oil prices and an increase in gas wellhead prices.

The productivity of both crude and gas has been higher compared to the corresponding period of FY07.
Pakistan's GDP has grown at an average of 5.8% for the last five years. The rapid growth in the industrial sector
has triggered a surge in demand for energy products. The country's gas consumption has been rising at a rapid
rate, a five-year CAGR of 5.4%. The cumulative profitability of the listed E&P companies grown phenomenally
over the last few years. The top line of these companies grew at a five-year CAGR of 24.8% mainly due to
significant growth in the volumetric sales and significant surge in crude oil prices. Moreover, for the same
period, the bottom line increased at a 5-year CAGR of 28.42%. For FY07, the profitability of E&P sector
increased by a 4.9%.

Oil production, however, grew only by 2.8% during the year to 67,415 bpd in FY07 compared to 65,577 bpd in
FY06 and gas production increased negligibly by 0.9% to 3,872 mmcfd from 3,836 mmcfd in FY06. PPL is one
of the oldest and largest E&P Company in the country. It was incorporated in 1950 subsequent to the
promulgation of the Pakistan Petroleum Production Rules, 1949. The primary activities of the company involve
exploration, development and production of Pakistan's natural reserves of oil and gas. PPL inherited all the
assets and liabilities of its parent, the Burmah Oil Company (Pakistan Concessions) Limited and commenced
business on 1st July 1952.

The company remained under the management control of its parent, Burmah Castrol, UK until 1997 when the
government purchased the entire equity interest of Burmah Castrol PLC, formerly Burmah Oil Company. The
government owns 78.4% stake of PPL, the International Finance Corporation (IFC) owns 6.1% and the rest
15% are free-float available in the equity markets of the country. PPL is the second largest Exploration and
Production (E&P) companies both, in terms of production and reserves. The company's contribution to oil and
gas production in the country is illustrated in the chart. PPL accounts for 26.8% of country's total oil and gas
production and 23.9% of total oil and gas reserves.

It is also one of the market leaders in terms of its holdings of exploration area. Out of 242,714 sq.kms area
under exploration in Pakistan, PPL holds the second largest share, more than 22% in joint venture with partners.
PPL has working interest in 24 exploration blocks, of which eight are PPL operated and the other 14, including
4 off-shore are partner operated. Sui and Kandhkot gas fields are two of the major PPL operated fields where
PPL has 100% ownership. Sui caters to about one-fifth of the total gas demand in the country.

In FY06, Sui contributed 67% of total gas sales of the company, higher than FY05. This increase however was
due to less than 100% capacity utilization in FY05. Later, the production from this field has declined due to its
gradual depletion. As a result, the contribution of the field is likely to decline in the future. In first nine months
of FY07, Kandhkot and Sui fields contributed about 80% of the company's total sales. This was due to the
unique pricing formula for the two fields. Both, the Sui and Kandhkot are the backbone of PPL. Mazarani and
Adhi are other major fields operated by PPL where the company has 87.5% and 39% stakes respectively.
Among the partner-operated fields, Miano, Sawan, Tal and Qadirpur are more prominent. The figure above
shows the contribution of each field to the total gas production of PPL.

In order to meet the growing energy demands of the country, PPL has enhanced its exploration efforts. This
includes the acquisition of new areas and working interests. As various agreements are finalized, the working
interests of the company will increase to 24 areas, 19 onshore and 5 offshore. PPL has the second largest
exploration programme in the industry. One of the major oil and gas discoveries since FY02 has been in the
Nashpa block. The Tal block is another major find. Among the activities undertaken during FY07, the Sarang
X-1 well in Kot Sarang block was abandoned in the third quarter of FY07 as the dry hole. However, the seismic
survey in Hala and Tajpur blocks has been completed.

Besides this, activities also took place in PPL non-operated areas. Moreover, initial phase of drilling of the Adhi
well was completed in FY06 and development of Sawan-6 and Sawan-10 was also completed. The exploration
efforts during FY07 reaped benefits in the form of three discoveries of oil and gas out of 10 exploratory wells
drilled during the year. First, an oil discovery of 20.4 mmcfd was made in Tajjal 1 of Gambat block in second
half of the current fiscal year. PPL holds 23.68% shares in this joint venture. Besides this, one oil and gas
discovery was made at Mela-1 (Nashpa Block) and a gas discovery was made at Latif-1 (Latif Block).

Lastly, PPL has recently made a gas condensate discovery in Hala Block at Adam X-1 well in Sindh. A
successful drill test system was carried out which flowed at a rate of 1,301 bpd of condensate and 27.4 mmcfd
of gas. PPL has 65% stake in this discovery. The testing for other prospective zones has been completed in this
area and encouraging results have been produced. Moreover, testing of one exploratory well drilled in PPL
operated Hala Block (Adam X-1) has been completed and the results are encouraging. Another exploratory well
in partner operated Tal Block (MamiKhel-1) has also shown encouraging results and is being tested for
potential reservoir zones.

In addition, two more exploratory wells ie Qadirpur Deep and Kahi Deep-X1 in Tal Block were suspended for
further evaluation. The remaining three exploratory wells in S.W. Miano II, Tal (Sumari Deep-X1) and Kot
Sarang blocks were plugged and abandoned due to discouraging results. In addition to oil and gas discoveries,
PPL has completed three major expansion projects during FY07. These include commissioning of the second
LPG/NGL Plant at Adhi. Following commissioning, the performance test was carried out which has confirmed
the design capacity of the plant.

The completion of this project has more than doubled the field production capacity. Phase II of the SUL
Compression at Sui and the revamping of Sui power supply system were the other two major projects
completed during the year. At the same time, the Kandhkot Wellhead Gas Compression Project has been
initiated to maintain the contractual delivery pressure of gas sales while maximizing the reserves recovery. PPL
is also evaluating international business opportunities, both for venture exploration as well as acquisition of
developed and undeveloped reserves. The company's efforts in International Exploration have paid off with its
successful bid for a block in Yemen in a 50:50 joint venture with OMV as operator.

Currently, Product Sharing Agreement (PSA) negotiations are underway with the Government of Yemen for the
Block. In addition, a three-member technical/commercial team has visited Morocco, Tunisia and Mauritania for
evaluation of exploration opportunities in these countries. Evaluation of exploration investment opportunities in
other North African and Central Asian countries has also started. During FY07 the average oil production grew
significantly by 58.2% to 2,830bpd from 1,789bpd in FY06. This growth can be attributed mainly to an
improvement in production from Adhi field, Tal Block and additional production of 213.2bd from Mela field.
The production from Adhi field increased especially after the commissioning of Adhi LPG/NGL Plant II.

The FY07 saw a 301.2mmcfd reduction in average gas production from the Sui field, thus depressing gas
production of the company. However, increase in production from Sawan in Nashpa Block, Tal Block and Adhi
field, managed to partially offset the decline from Sui. As a result, the total gas production declined by 1.8% to
991 mmcfd in FY07, as compared to 1,009mmcfd in FY06. The sales revenue grew by 21% in FY07 to 38.4
billion. A number of factors contributed to this growth in sales. The higher international crude oil prices during
FY07, together with the phased price increase under the Sui and Kandhkot Gas Price Agreement 2002
contributed to the growth in sales.

Moreover, the increase in production, especially from the Adhi field, Tal Sawan and commencement of
Extended Well Test Production from Mela-1 discovery at Nashpa Block, also contributed significantly to the
sales growth. The growth in sales and production generated an all time high profit figure for PPL in FY07. The
profit after tax for FY07 stood at Rs 16.8 billion, depicting a 25% growth over FY06, the highest among the
three market leaders in the E&P sector. Sales revenue increased by 36% in FY06 as compared to FY05. The
phased increase in prices under the Sui and Kandhkot Gas Price Agreement 2002 was prominent factor behind
the rising sales and profits.

The higher international oil prices backed the trend. The rising gas supplies particularly from the Qadirpur, Tal
and Kandhkot fields contributed to higher sales revenue. As a result, profit after taxation increased by a massive
55% in FY06 compared to FY05. The profit margin for PPL continued with its positive trend in the FY06 and
FY07. The company soars above the industry with respect to the profit margins. The ROA has shown
improvement during FY07 but the ROE has declined nominally. The company has benefited from a 63%
growth in other income, one of the highest in the industry. This mainly came from higher financial income from
deposits and other sources.

Field expenditure increased by 18% in FY06 and 13.4% in FY07 largely due to heightened exploration
activities since the company had working interest in 19 blocks in the FY07. The revision in wellhead gas prices
of Sui and Kandhkot fields also contributed positively to the company's profitability. PPL has performed well in
terms of asset management, exhibiting a positive trend for inventory turnover and DSO. The company's
efficiency in inventory management has resulted in its operating cycle being shorter than the industry average.
FY07 saw a further increase in the collection period of receivables for PPL and the trade debts continued to
mount.

Although high DSO is an industry wide trend in the E&P sector but a reduction in the period will improve the
company's efficiency and have a positive impact on the company's financial strength. The total assets turnover
and sales/equity have also fared better than the average industry for all years, once again depicting the
company's strength in asset management. The total assets turnover rose slightly in FY06 whereas the sales to
equity ratio fell marginally during the same year. This indicates a better utilization of the company's assets than
the industry.

The liquidity management of PPL has improved greatly since the FY03 as illustrated in the figure. The liquid
funds generated from operating activities contributed to the improvement in the ratio. In FY07, the company
managed to catch up with and supersede the industry, thus breaking the trend of lower than average current
ratio. During FY07, PPL has increased its investments in short term instruments, contributing to the
improvement in current ratio.

Additionally, the company as maintained a lower level of inventory than the other major players in the sector.
This reflects company's strength in asset management as well as the liquidity of its asset portfolio. The large
amount of cash balances and short term investments maintained by the company will also help PPL in financing
future exploration activities. EPS has shown a positive trend for the last few years and the high net profit during
FY07 translated into a 25% growth in EPS, bringing it to Rs 24.5 per share. The DPS has shown similar growth
as EPS. The company declared a dividend of Rs 11 per share for FY07.

PPL has shown impressive performance in the third quarter of FY08, both in terms of profitability as well as
production. The Sui and Kandhkot Gas Price Agreement provide the company with an edge over the other
players, and will continue to add to the profitability of the company. The life of its reserves is around 20 years,
thus promising a smooth flow of oil and gas for the next couple of decades. Even though the production from
one of the backbone fields, Sui, is expected to decline in the future due to its depletion but the company has still
been able to maintain a 100% reserve replacement ratio. However, the company is making efforts to extend the
reservoir life and optimize gas recovery of the Sui Upper Limestone (SUL) reservoir.

Moreover, the increased production from Tal Block, Adhi, Sawan and Qadirpur blocks is expected to cover up
for the decreased production from Sui. The commissioning of the Additional Processing Facilities, Phase II at
Adhi has increased the production capacity of the field. This is likely to enhance production of the company in
the coming years. PPL has the advantage of holding a good resource base in terms of existing resources.
Moreover, the company also enjoys additional reserves potential in some of its existing producing areas like
Adhi, Qadirpur etc. This bodes well for the future production potential of the company.

In addition, the success rate of PPL exploration activities stands around 25% which is remarkable compared to
the 10% international rate. Thus even though, the exploration involves a very high risk of drilling the dry holes,
the company's success rate had partially reduced this risk. Furthermore, to revamp its exploration activities, the
company has employed modern technology, including computer applications, remote sensing and
communications techniques and other devices. This will further improve the success rate for the company.

The approval of the Petroleum Policy 2007 by the ECC (Economic Coordination Committee) bodes well for the
E&P companies, especially those focusing on exploration activities. Being the largest and oldest gas exploration
company, PPL therefore, will be one of the major beneficiaries of the policy. Under the petroleum policy 2007,
oil and gas process are now indexed with the reference crude oil price, equal to C&F price of the
Arabian/Persian Gulf crude oils, with proper adjustments for the quality differential for calculation of crude oil
prices (providing 100% linkage with the international prices). The $36 per barrel cap has also been removed.

As a result of this, formula, the gas price per unit will grow by a significant 38.5%. Hence the new policy will
provide a positive change, especially to PPL and OGDC, the two companies more aggressive in their
exploration activities. An oil discovery of 20.4 mmcfd was made in the Tajjal-1 of Gambat block in second half
of the current fiscal year. PPL holds 23.68% shares in this joint venture. The discovery is expected to increase
PPL's EPS by 0.18 in the coming fiscal year. Besides this, the discovery in the Hala Block where PPL holds
65% share will also augment production in future.
The new gas pricing formula will enable the company to benefit from the international oil and gas pricing tends
unlike the former policy whereby they were offered a 30% ROE in addition to costs. Under the new Agreement,
the pricing from both fields was to improve semi annually to reach, by 2007, 50% of international oil prices less
applicable discounts under the Petroleum Policy 2001. The phased price increases from the Kandhkot and Sui
fields, it is believed, will continue to accentuate profits for the company, especially in the face of the rising
international crude oil prices.

In addition, the government in July 2007 announced new five-year energy policy. The new policy provides a 6-
8% increase in oil and gas production prices on new discoveries the petroleum exploration and development
companies would make in future. Secondly, under this policy, gas producers are required to pay 50% of the
difference to the government in case the gas is sold to a third party. Previously, the companies could only sell
their produce to the government or its entities. However, the existing oil and gas producers will continue to
follow the existing policy, hence their rates will remain unchanged.

On the other hand, the companies currently under exploration phase or those which have applied for the
concession license under the old policy will be allowed to switch to the new policy but would have to offer a
price at 0.2 GPG. Lastly, the producers will also have to pay a marine research fee and coastal area development
fee of $50,000 per year until the first discovery and the amount would double thereafter, until the declaration of
commerciality. The fees would go up during the development phase and reach $500,000 during the production
phase. These developments in the policy will also have significant impact on PPL which is the second largest
company in the sector.
CALCULATION OF MARKET
RISK (BETA)
 CALCULATION OF BETA FOR PAKISTAN PETROLEUM LTD.
JAN 2009 TO DECEMBER 2009
DA
MONTH STOCK PRICE KSE 100 INDEX STOCK RETURN (Y) MARKET RETURN (X) (X)*(Y) X² Y²
Y
JANUARY 1 105.65 5751
6 122.29 6078 15.75 5.69 89.55 32.33 248.07
12 134.82 6038 10.25 -0.66 -6.74 0.43 104.98
22 139.96 5018 3.81 -16.89 -64.40 285.37 14.54
30 149.37 5367 6.72 6.95 46.76 48.37 45.20

FEB 2 142.36 5336 -4.69 -0.58 2.71 0.33 22.02

16 160 5764 12.39 8.02 99.39 64.34 153.54
20 148.34 5961 -7.29 3.42 -24.91 11.68 53.11
27 145.48 5727 -1.93 -3.93 7.57 15.41 3.72

MAR 3 141.91 5606 -2.45 -2.11 5.18 4.46 6.02

13 148.92 5750 4.94 2.57 12.69 6.60 24.40
19 168.22 6441 12.96 12.02 155.75 144.42 167.96
31 173.27 6860 3.00 6.51 19.53 42.32 9.01

APR 1 171.05 6948 -1.28 1.28 -1.64 1.65 1.64

10 178.82 7620 4.54 9.67 43.93 93.54 20.63
20 202.68 7902 13.34 3.70 49.38 13.70 178.04
30 171.54 7196 -15.36 -8.93 137.27 79.82 236.06

MAY 4 167.47 7061 -2.37 -1.88 4.45 3.52 5.63

12 173.7 7297 3.72 3.34 12.43 11.17 13.84
21 169.22 6969 -2.58 -4.49 11.59 20.21 6.65
29 178.93 7276 5.74 4.41 25.28 19.41 32.93

JUNE 1 178.67 7198 -0.15 -1.07 0.16 1.15 0.02

10 187.16 7043 4.75 -2.15 -10.23 4.64 22.58
19 186.18 7039 -0.52 -0.06 0.03 0.00 0.27
30 189.54 7169 1.80 1.85 3.33 3.41 3.26

JULY 1 191.46 7270 1.01 1.41 1.43 1.98 1.03

13 195.22 7684 1.96 5.69 11.18 32.43 3.86
20 194.25 7703 -0.50 0.25 -0.12 0.06 0.25
31 186.03 7726 -4.23 0.30 -1.26 0.09 17.91

AUG 3 186.86 7716 0.45 -0.13 -0.06 0.02 0.20

11 191.77 8056 2.63 4.41 11.58 19.42 6.90
21 191.46 8116 -0.16 0.74 -0.12 0.55 0.03
31 213.07 8675 11.29 6.89 77.74 47.44 127.40

SEP 1 209.7 8769 -1.58 1.08 -1.71 1.17 2.50

11 226.72 9053 8.12 3.24 26.29 10.49 65.88
18 194 9436 -14.43 4.23 -61.06 17.90 208.28
30 188.99 9349 -2.58 -0.92 2.38 0.85 6.67

OCT 1 187.22 9301 -0.94 -0.51 0.48 0.26 0.88

12 190.26 9642 1.62 3.67 5.95 13.44 2.64
20 184.85 9573 -2.84 -0.72 2.03 0.51 8.09
30 174.56 9151 -5.57 -4.41 24.54 19.43 30.99

NOV 2 165.84 8848 -5.00 -3.31 16.54 10.96 24.95

11 172.39 8928 3.95 0.90 3.57 0.82 15.60
20 181.02 9306 5.01 4.23 21.20 17.93 25.06
26 182.36 9206 0.74 -1.07 -0.80 1.15 0.55

DEC 1 177.8 9019 -2.50 -2.03 5.08 4.13 6.25

10 177.7 8999 -0.06 -0.22 0.01 0.05 0.00
21 182.51 9237 2.71 2.64 7.16 6.99 7.33
 Expected Return
Rs=ᾳ + β(Rm) where Rs= Required Return
= (0.67 + 0.66(20.30) ᾳ = 0.67
= 14.07% β= 0.66
Rm is assumed to be 20.30

CALCULATION OF CAPM
Rs = Rf + Bs (Rm - Rf)

Where;
Rs= Required Return on Pakistan Petroleum Ltd
Rf= Risk Free rate of Return which is assumed to be 12.25%
Bs= Beta of Pakistan Petroleum stock which was calculated to be 0.66
Rm= Market Rate of Return is assumed to be 20.30

Rs = Rf + Bs (Rm – Rf)
Rs = 12.25 + 0.66(20.30 – 12.25)
= 17.60 %

RATIO ANALYSIS
 RATIO ANALYSIS OF PAKISTAN PETROLEUM LTD.
LIQUIDITY RATIOS 2007 2008 2009
Current Assets
Current Ratio 4.35 2.79 3.10
Current Liabilities

Quick Assets
Quick Ratio 4.16 2.67 2.96
Current Liabilities

Cash
Cash Ratio 0.10 0.08 0.09
Current Liabilities

Fixed Asset Turn Over Sales

2.72 2.48 2.19
Ratio Avg. Net Fixed Assets

Net Working Capital to Net Working Capital

0.56 0.44 0.43
Total Assets Avg. Total Assets
LONG TERM SOLVENCY
MEASURES
Total assets - Total
Total Debt Ratio equity 0.22 0.31 0.28
Avg. Total Assets

Earnings before Interest

Times interest earned & Tax 494 458 448
ratio Times Times Times
Interest
ASSET MANAGEMENT, OR TUROVER,
MEASURES
Cost of Goods sold
Inventory Turnover 10.07 10.53 11.87
Avg. Inventory

365 days
Days sales in inventory 36 35 31
inventory turnover

Receivables Turnover Sales 4.8 4.11 3

 Avg. Accounts
receivable

365 days
Days' sales in receivables 76 89 122
Receivables turnover
ASSET TURNOVER RATIOS
Sales
Fixed Asset Turn Over Ratio 2.72 2.49 2.19
Avg. Net Fixed Assets

Sales
Total Assets Turnover 0.84 0.82 0.86
Avg Total Assets
PROFITABILITY MEASURES
Net Income
Profit Margin 43.68% 43.10% 45%
Sales

Net Income
Return on Assets 36.67% 35.38% 38.49%
Avg Total assets

Net income
Return on equity 41.82% 45.14% 44%
Total Equity

Earnings before Interest

Basic Earning Power & Tax 0.53 0.54 0.58
Ratio
Avg Total Assets
The interpretation of these calculated
Ratios is as follows:
Liquidity Ratios:
Current Ratio:

Current
Assets
Current
Liabilities

2007: = 4.35

2008: = 2.79

2009: = 3.10

This ratio shows that how much current assets a company as against current liabilities. And how efficiently company uses
its current assets to generate more profit and higher ratio shows better performance. The latest current ratio of PPL is
3.10 which shows that PPL has current assets of Rs. 3.10 against liabilities of Rs.1. Current Ratio more than 1 is
considered good, it means PPL is doing very good.

Quick Ratio:

Quick Assets
Current
Liabilities

2007: = 4.16

2008: = 2.67

2009: = 2.96

Quick ratio or liquid ratio measures the ability of a company to use its near cash or quick assets to immediately extinguish
its current liabilities. Quick assets include those current assets that presumably can be quickly converted into cash at
close to their book values. Such items are cash, marketable securities and some accounts receivable. This ratio indicates
a firm’s capacity to maintain operations as usual with current cash or near cash reserves in bad periods. Quick ratio of
PPL was 4.16 in 2007 then it dropped to 2.67 and now 2.96. Still it is very good and showing good performance of the
Company.
Cash Ratio:

Cash
Current
Liabilities

2007: = 0.10

2008: = .08

2009: = .09

The cash ratio measures the extent to which a corporation or other entity can quickly liquidate assets and cover short-
term liabilities, and therefore is of interest to short-term creditors. Cash ratio was 0.10 in 2007,.08 in 2008 and .09 in year
2009. It means PPL has Rs .09 against short term liability of Rs 1

Asset Management:
Inventory Turn over Ratio:

Cost Of Goods
sold
Average
inventory

2007: = 10.07

2008: = 10.53

2009: = 11.87

Inventory turnover mean, the number of times the company will completes its operating cycle. Its mean greater the
inventory turnover ratio, more will be the operating cycles. Which is favorable for the company’s position and as well as
the inventory turn ratio is also increased in the past three years.
Fixed Asset Turn Over Ratio:

Sales
Net Fixed
Assets

2007: = 2.72

2008: = 2.48

2009: = 2.19

This ratio shows that how company is utilizing its fixed assets efficiently for generating sales and higher the ratio better the
company performance. PPL’s latest fixed assets turnover ratio is 2.19 which means PPL is utilizing fixed assets of Rs 1 to
generate sales of Rs 2.19

Total Asset Turnover Ratio:

Sales
Avg. Total
Assets

2007: = 0.84

2008: = 0.82

2009: = 0.86

This ratio shows how company is utilizing its total assets efficiently for generating sales and more the ratio better the
company’s performance. Total assets turnover ratio of PPL is 0.86 in 2009 which is quite good, means PPL is utilizing Rs
1 Total assets to generate sales of Rs 0.86

Day Sales Outstanding:

Receivable turnover
Sales
A/C
Receivable
2007: = 4.8

2008: = 4.11

2009: =3

Receivable turnover means how quickly company’s receivable is converted into cash. It must be higher. The PPL
receivable turnover is 3 in 2009 which means it collects its debts 3 times in a year.

No. of Days = 365/4.8 = 76 days (2007)

= 365/4.11 = 89 days (2008)

= 365/3 = 122 days (2009)

It is the debt collection period. This ratio describes that how quickly a company collect its outstanding receivable. PPL
debt collection period is 122 days in 2009 which means PPL is collecting cash from receivables in 122 days. This ratio is
high and PPL should collect its debts earlier in order to maintain performance.

Debt Management:
Debt to Total Assets:

Total Debt
Total Assets

2007: = 0.20

2008: = 0.28

2009: = 0.24

In the debt to total asset ratio, which shows the comparison of the debt and total assets of the company. In the past few
years, it is observed that the debt of the company is decreasing from the previous year in relation to the total assets of the
company. This is favorable for company

Times Interest Earned:

EBIT
Interest

2007: =494 times

2008: = 458 times

2009: = 448 times

Times interest earned ratio means how many number of times the company is earning its profit over its interest expenses.
PPL’s Times interest earned ratio is very high which means it can pay its interest 448 times. Shows that the debt is low
compared to the equity.

Profitability Ratios:
Profit margin on sale:

Net Profit
* 100
Sales

2007: = 43.68 %

2008: = 43.10 %

2009: = 45 %

Net profit ratio refers to a measure of profitability and shows that a company earns how much profit after deducting all
expenses. The profit of PPL is 45 % is 2009 and increasing from the previous year. PPL is getting 45% profit on sales
after deducting all expenses.

Basic Earning Power Ratio:

EBIT
Total Assets 10
* 0

2007: = 0.53

2008: = 0.54

2009: = 0.58

The basic earning power ratio shows that how the total assets of the company affect the profit of the company and it also
shows how the earnings are affected by the total assets of the company.

Return on Equity:

2007: = 42 %

2008: = 45 %

2009: = 44 %
It is the ratio of net income to total equity. It means PPL has got a return of 44% in 2009 on its total equity. The return on
equity in the previous year is averaged 44% which is very good and showing good performance of the company.

Price Earnings Ratio:

2007: = 12.99

2008: = 10.36

2009: = 5.68

The P/E ratio (price-to-earnings ratio) of a stock (also called its "P/E", "PER", "earnings multiple," or simply
"multiple") is a measure of the price paid for a share relative to the annual net income or profit earned by the
firm per share. It is a financial ratio used for valuation: a higher P/E ratio means that investors are paying more
for each unit of net income, so the stock is more expensive compared to one with lower P/E ratio. PPL’s P/E
ratio as reduced highly compared to the previous year’s which means now investors are paying less for each
unit of net income, showing a healthy sign of the company’s performance.

Dividend Yield:

2007: = 4.19 %

2008: = 6.30 %

2009: = 6.86 %

The dividend yield or the dividend-price ratio on a company stock is the company's annual dividend
payments divided by its market cap, or the dividend per share divided by the price per share. It is often
expressed as a percentage. Its reciprocal is the Price/Dividend ratio.PPL has given 6.86% yield per unit in the
year 2009.

Return on Capital Employed:

2007: = 57 &

2008: = 64%

2009: = 62 %
Return on Capital Employed (ROCE) is used as a measure of the returns that a company is realizing from its
capital employed. It is commonly used as a measure for comparing the performance between businesses and for
assessing whether a business generates enough returns to pay for its cost of capital.
PROJECTED FINANCIAL STATEMENTS OF

PAKISTAN PETROLEUM LTD.

(FROM 2010-2012)
 PROFIT AND LOSS ACCOUNT

PROJECTIONS BEFORE ADJUSTMENT

2007 2008 2009 2010 2011 2012

(Rs (Rs (Rs
(Rs 000) (Rs 000) (Rs 000) 000) 000) 000)

38,38 45,71 61,58 76,975, 96,2 120,27

Net sales 2,645 6,789 0,072 090 18,863 3,578
13,841,3 16,210,3 20,624,4 25,780, 32,2 40,28
Cost of sales 67 85 86 608 25,759 2,199
24,54 29,50 40,95 51,194 63,993 79,991
Gross profit 1,278 6,404 5,586 ,483 ,103 ,379
2,465,0 3,092,1 4,149,7 5,187,1 6,4 8,1
Other operating Income 22 42 32 65 83,956 04,945
2,600,1 2,085,3 3,103,2 3,879,0 4,8 6,0
Other operating expenses 06 67 70 88 48,859 61,074
Profit before Interest & 24,40 30,51 41,90 52,502 65,6 82,035
taxation 6,194 3,179 8,420 ,560 28,200 ,250
49,4 66,6 93,6 93,6 93,62 93,62
Finance costs 24 24 28 28 8 8
24,35 30,44 41,90 52,408 65,534 81,941
Profit before taxation 6,770 6,555 8,420 ,932 ,572 ,622

7,588,9 10,739,1 14,205,6 18,343, 22,937, 28,679,

Taxation 96 57 29 126 100 568
16,76 19,70 27,70 34,06 42,5 53,2
Profit after taxation 7,774 7,398 2,791 5,806 97,472 62,054
 PROFIT AND LOSS ACCOUNT

PROJECTIONS

AFTER ADJUSTMENT
2007 2008 2009 2010 2011 2012
(Rs (Rs (Rs
(Rs 000) (Rs 000) (Rs 000) 000) 000) 000)

38,382,6 45,716,7 61,580,0 76,975,0 96,218, 120,273,

Net sales 45 89 72 90 863 578
25,780,6 32,225,7 40,282,19
13,841,367 16,210,385 20,624,486
Cost of sales 08 59 9
24,541,2 29,506,4 40,955,5 51,194,4 63,993,1 79,991,37
Gross profit 78 04 86 83 03 9
5,187,16 6,483,95
2,465,022 3,092,142 4,149,732 8,104,945
Other operating Income 5 6
3,879,08 4,848,85
2,600,106 2,085,367 3,103,270 6,061,074
Other operating expenses 8 9
24,406,1 30,513,1 41,908,4 52,502,5 65,628, 82,035,25
Profit before Interest & taxation 94 79 20 60 200 0
Finance costs 49,424 66,624 93,628 337,748 759,934 1,287,667
24,356,7 30,446,5 41,908,4 52,164,8 64,868,2 80,747,58
Profit before taxation 70 55 20 12 66 3

18,257,6 22,703,8 28,261,65

7,588,996 10,739,157 14,205,629
Taxation 84 93 4
16,767,7 19,707,3 27,702,7 33,907, 42,164, 52,485,9
Profit after taxation 74 98 91 128 373 29
 BALANCE SEET PROJECTIONS BEFORE ADJUSTMENT
2007 2008 2009 2010 2011 2012
(Rs 000) (Rs 000) (Rs 000) (Rs 000) (Rs 000) (Rs 000)
ASSETS
Non-current assets
34,970,71 43,713,396 54,641,745. 68,302,181.6
15,377,148 21,368,020
Fixed assets 7 .25 31 4
Long-term loans 10,853 11,752 9,897 12,371.25 15,464.06 19,330.08
Long-term deposits 615,000 768,750.00 960,937.50 1,201,171.88
2,317,916.2 2,897,395.3
677,384 1,781,469 1,854,333 3,621,744.14
Long term investment 5 1
Long-term receivables - 27,531 34,413.75 43,017.19 53,771.48

Deferred Tax Asset 711,337 - -

46,846,847. 58,558,559. 73,198,199.2
16,776,722 23,161,241 37,477,478
50 38 2
Current assets -
2,339,555.0 2,924,443.7
1,474,655 1,604,385 1,871,644 3,655,554.69
Stores and spares 0 5
34,724,830. 43,406,037. 54,257,546.8
9,002,094 13,228,456 27,779,864
Trade debts 00 50 8
Loans and advances 34,001 46,506 414,760 518,450.00 648,062.50 810,078.13
Short-term prepayments 408,658 698,029 319,967 399,958.75 499,948.44 624,935.55
Accrued financial income 116,755 212,877 308,003 385,003.75 481,254.69 601,568.36
current maturity of long-term
24,980 31,225.00 39,031.25 48,789.06
investments
current maturity of long-term
231,289 19,029 23,786.25 29,732.81 37,166.02
receivables
Other Receivables 21,669 8,858 99,347 124,183.75 155,229.69 194,037.11
16,520,882. 20,651,103. 25,813,878.9
21,515,496 20,968,017 13,216,706
Short Term Investments 50 13 1
1,730,441.2 2,163,051.5
787,786 1,094,892 1,384,353 2,703,814.45
Cash and Bank Balances 5 6
37,862,02 45,438,65 56,798,316 70,997,895 88,747,369.
33,592,403
Total current Assets 0 3 .25 .31 14
TOTAL ASSETS 50,369,125 61,023,261 82,916,131 103,645,164 129,556,455 161,945,568

SHARE CAPITAL AND

RESERVES
Share capital 6,858,376 7,544,200 8,298,606 8,298,606 8,298,606 8,298,606

Reserves 33,239,675 36,110,071 54,759,951 54,759,951 54,759,951 54,759,951

40,098,051 43,654,271 63,058,557 63,058,557 63,058,557 63,058,557
NON CURRENT
LIABILITIES
Provision for
1,744,823 2,813,374 3,974,307 3,974,307 3,974,307 3,974,307
decommissioning obligation
Liabilities against assets
69,152 77,564 100,105 100,105 100,105 100,105
subject to finance lease
Deferred Liabilities 742,059 859,779 990,685 990,685 990,685 990,685
Deferred Income 5,830 5,830 5,830 5,830

Deferred taxation 39,157 138,563 138,563 138,563 138,563

2,556,034 3,789,874 5,209,490 5,209,490 5,209,490 5,209,490
CURRENT LIABILITIES
16,843,042. 21,053,803. 26,317,253.9
7,220,468 12,241,943 13,474,434
Trade and other payables 50 13 1
current maturity of long term
liability for gas development 231,289 -
surcharge
Current maturity of liabilities
against assets subject to 50,696 44,795 45,946 45,946 45,946 45,946
finance lease
Current maturity of deferred
971 971 971 971
income
1,408,466.2 1,760,582.8
212,587 1,292,378 1,126,773 2,200,728.52
Taxation 5 1
13,579,11 14,648,08 18,298,425 22,861,302 28,564,899.
7,715,040
6 4 .75 .94 42
CONTINGENCIES AND
COMMITMENTS
AFN 17,078,691 38,427,105 65,112,622
TOTAL EQUITY AND
50,369,125 61,023,261 82,916,131 103,645,164 129,556,455 161,945,568
LIABILITIES
 BALANCE SHEET

PROJECTIONS AFTER ADJUSTMENT

2007 2008 2009 2010 2011 2012
(Rs 000) (Rs 000) (Rs 000) (Rs 000) (Rs 000) (Rs 000)
ASSETS
Non-current assets
21,368,0 34,970,7 43,713,39 54,641,74 68,302,18
15,377,148
Fixed assets 20 17 6.25 5.31 1.64
Long-term loans 10,853 11,752 9,897 12,371.25 15,464.06 19,330.08
768,750.0 960,937.5 1,201,171.
615,000
Long-term deposits 0 0 88
2,317,916. 2,897,395. 3,621,744.
677,384 1,781,469 1,854,333
Long term investment 25 31 14
Long-term receivables - 27,531 34,413.75 43,017.19 53,771.48

Deferred Tax Asset 711,337 - -

23,161,2 37,477,4 46,846,84 58,558,55 73,198,19
16,776,722
41 78 7.50 9.38 9.22
Current assets -
1,604,38 1,871,64 2,339,555. 2,924,443. 3,655,554.
1,474,655
Stores and spares 5 4 00 75 69
13,228,4 27,779,8 34,724,83 43,406,03 54,257,54
9,002,094
Trade debts 56 64 0.00 7.50 6.88
518,450.0 648,062.5 810,078.1
34,001 46,506 414,760
Loans and advances 0 0 3
399,958.7 499,948.4 624,935.5
408,658 698,029 319,967
Short-term prepayments 5 4 5
385,003.7 481,254.6 601,568.3
116,755 212,877 308,003
Accrued financial income 5 9 6
current maturity of long-term investments 24,980 31,225.00 39,031.25 48,789.06
current maturity of long-term receivables 231,289 19,029 23,786.25 29,732.81 37,166.02
124,183.7 155,229.6 194,037.1
21,669 8,858 99,347
Other Receivables 5 9 1
20,968,0 13,216,7 16,520,88 20,651,10 25,813,87
21,515,496
Short Term Investments 17 06 2.50 3.13 8.91
1,094,89 1,384,35 1,730,441. 2,163,051. 2,703,814.
787,786
Cash and Bank Balances 2 3 25 56 45
33,592,40 37,862, 45,438, 56,798,31 70,997,89 88,747,36
Total current Assets 3 020 653 6.25 5.31 9.14
61,023,2 82,916,1 103,645,1 129,556,4 161,945,5
50,369,125
TOTAL ASSETS 61 31 64 55 68
SHARE CAPITAL AND RESERVES
Share capital 6,858,376 7,544,200 8,298,606 8,298,606 8,298,606 8,298,606
12,979,80 29,204,60 49,485,59
Issued new share @ 101 5 0 3
36,110,07 54,759,95 54,759,95 54,759,95 54,759,95
33,239,675
Reserves 1 1 1 1 1
43,654,27 63,058,55 76,038,36 92,263,15 112,544,1
40,098,051
1 7 2 7 50
NON CURRENT LIABILITIES
1,744,82
2,813,374 3,974,307 3,974,307 3,974,307 3,974,307
Provision for decommissioning obligation 3
Liabilities against assets subject to finance
69,152 77,564 100,105 100,105 100,105 100,105
lease
Deferred Liabilities 742,059 859,779 990,685 990,685 990,685 990,685
Deferred Income 5,830 5,830 5,830 5,830
Deferred taxation 39,157 138,563 138,563 138,563 138,563
15,627,02
4,098,886 9,222,505
Project Debt 9
14,431,99 20,836,51
2,556,034 3,789,874 5,209,490 9,308,376
5 9
CURRENT LIABILITIES
16,843,04 21,053,80 26,317,25
7,220,468 12,241,943 13,474,434
Trade and other payables 2.50 3.13 3.91
current maturity of long term liability for gas 231,289 -
development surcharge
Current maturity of liabilities against assets 50,696 44,795 45,946 45,946 45,946 45,946
subject to finance lease
Current maturity of deferred income 971 971 971 971
1,408,466. 1,760,582. 2,200,728.
212,587 1,292,378 1,126,773
Taxation 25 81 52
7,715,0 13,579,1 14,648,0 18,298,42 22,861,30 28,564,89
40 16 84 5.75 2.94 9.42
CONTINGENCIES AND COMMITMENTS
50,369,1 61,023,26 82,916,13 103,645,1 129,556,4 161,945,5
TOTAL EQUITY AND LIABILITIES 25 1 1 64 55 68
RECOMMENDATIONS
Below are some recommendations which justify our investment in
securities of the Pakistan Petroleum Ltd.
1. Pakistan Petroleum Ltd. Is the pioneer of natural gas industry in Pakistan and is the front line player in
the Industry, so we recommend investment in Pakistan Petroleum Ltd.

2. The last three years averaged growth rate of the Company is 25 % which means company’s performance
in term of profitability, growth and sales is increasing.

3. PPL’s stock is considered reliable for investor as the stock price is constantly moving upwards in the
recent time.

4. PPL had announced a dividend of Rs 15.50 per share in the year 2008, and in the year 2009, the
announced dividend per share is Rs 13.00 which is quite attractive for an investor.

5. Shares of PPL are currently trading in Stock Exchange between 190 and 205 and are continuously
moving upward which shows the sign of Investor’s confidence on the company.

6. Pakistan petroleum Ltd is the leader of the market in its industry and thus has a very high demand, so it
is worth buying their shares.

7. If we see the Capital structure of PPL, we can see that there is a very little portion of Debt as compared
to the Equity of the company, it’s another plus point of PPL.

8. The dividend on the PPL’s shares is attractive and the shares prices are going upward so an investor can
earn handsome dividend and capital gain as well.

9. The Market risk of the PPL’s Stock is below 1 i-e 0.66 which means it is less risky. It has less deviation
with the market.
Bibliography:

The following links were used to obtain all the information about the project on Pakistan Petroleum Ltd.

http://en.wikipedia.org/wiki/Economy_of_Pakistan

http://ppl.com.pk

http://www.ppl.com.pk/AboutPPL/CompanyInfo/Pages/CompanyOverview.aspx

http://www.ppl.com.pk/Repository/AnnualFinancialReport/Annual%20Financial%20Report%202007.pdf

http://www.ppl.com.pk/Repository/AnnualFinancialReport/Annual%20Financial%20Report%202008.pdf

http://www.ppl.com.pk/Repository/AnnualFinancialReport/PPL%20Annual%20Report%202009.pdf

http://www.brecorder.com/index.php?id=943778&currPageNo=1&query=&search=&term=&supDate

http://www.kse.com.pk/listing-companies/analysis_report.php?id=3&sid=3.07

http://www.zhvsec.com/kseindex-history.aspx

http://www.zhvsec.com/history-symbol-datewise.aspx

http://www.pakistaneconomist.com/database2/cover/c2000-45.asp