Pakistan State Oil has seen growth in recent years according to a financial analysis of the company. The company's market share increased in key product groups like HSD and lubricants. Liquidity ratios like cash to current liabilities and current ratios improved between 2013-2014, showing greater ability to pay short-term obligations. Profitability also increased as seen in higher gross profit, net profit, and return on equity ratios. While inventory turnover and fixed asset turnover ratios increased, suggesting more efficient use of assets. Overall the analysis finds Pakistan State Oil has been growing financially in recent years.

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Financial Analysis of
Pakistan State Oil Limited
Group:
Fahad Ur Rehman Khan
Mohsin Alam
Hadiqa Hanif
Rimsha Tahir
Sama Asif
Zoya Arif
Course: Financial Management
Submitted to: Sir Mirza Raza Ali

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Table of Contents
Preamble..........................................................................................3
Industry Overview ...........................................................................3
Key players/companies of the industry ........................................4
Background of the company with growth pattern........................6
Financial analysis............................................................................8
Conclusion and recommendation ...............................................16

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Preamble:
The main reason of conducting this study on Pakistan State Oil is to see it’s growth
pattern and to see its future position that where it belongs in future, whether Pakistan state
oil is in Loss or Profit.
And also giving interpretation and analyzing it’s data for the future speculations. To
make it clear for a company that as a financial manager, it is duty to see what is ahead of any
company. And giving an accurate suggestion for the future steps, and suggesting the
alternatives to doing work to eliminate the future risks and managing the financial condition
expertly.
Moreover, seeing the value of Pakistan State Oil, that where it stands in Oil industry
in Pakistan. Furthermore, seeing the growth pattern of the oil industry growth as well.
Industry Overview:
The oil industry of Pakistan is on the rise and working hard to fulfill the national
demand. Oil and gas are the two of the key components of the energy mix contributing
around 80% share to the 64 million TOE of energy requirement in the country.
Industry is growing very quickly and the drilling activities in the country are going above
the average. There were 76 well drilled in the last year and it was never ever seen in the past
years to drilled so may wells in a single year.
According to last Economic Survey 2013, Pakistan estimated that there are 27
million barrels of reserves available that are recoverable for the use and Pakistan’s
consumption is 19.21 million tones. The average oil production was 66,032 barrels per day
in 2013 and it was the growth of around 13% over the last year. There are total 7 oil
Refineries, 6772 petrol stations are operating in Pakistan and 258 oil & gas discoveries and
803 wells drilled till now.
The liquidity ratios of Pakistan oil industry is not much efficient as it should need to
be. Current ratios give us the sense about the ability of a company to turn its product into
cash. The current ratio of industry is decreasing with the passage of time which means the
ability of industry to pay its short term liabilities is getting low as compare to past few years.

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Also the cash ratio of the industry is not much stronger as the industry has to pay high debt
to its suppliers.
It means that ratio of cash and marketable securities against current liabilities is very
low but cash ratio is increasing with the passage of time and working hard to pay its
liabilities. There are several reasons behind lowness of these ratios. The main reason is the
high amount debt taken by industry from its suppliers and in order to pay those debts,
industry does not have much cash in hand. As per profit of the industry concern, it is
increasing with the passage of time.
Profit of oil industry has been increased in the ninth month or 3rd quarter of fiscal
year 14 while it was decreasing before. It is come to know that the earning of oil and gas
explorers increase by 18% in third quarter of FY14 while in the previous quarter ended in
Dec 2013, the earning of the sector declined due to the appreciation of Pak rupee against
dollar. Major oil and gas exploration and production companies working in Pakistan include
Pakistan Oilfield (POL), Gas development Company and Pakistan Petroleum.
Key players of the company:
 Mari Petroleum Company Limited:
In 1957, when MPCL was operating as Esso Eastern Inc.,[1]
the Mari Gas Field was
discovered in Daharki, Sindh, Pakistan, with an original gas in place (GIIP) estimate of
2.38 TCF. Over the years, with the phased development of the Field and subsequent
reservoir evaluations, the GIIP of the Field was enhanced to 10.751TCF, thus making
Mari one of the largest gas fields in Pakistan in terms of balance reserves.
In May 1983, the Fauji Foundation, a major Pakistani group, along with OGDCL (Oil
and Gas Development Company, Ltd.) and the Government of Pakistan acquired the
entire business operation of Esso Eastern Inc. in Pakistan, which included the Mari Gas
Field.
During December 1984, the business was reorganized and incorporated as Mari
Petroleum Company Limited, and it acquired the assets, liabilities and operational
control of the Mari Gas Field. MPCL primarily operated as a production company until

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1997, when it began the phased development of the Habib Rahi Reservoir to supply gas
for new fertilizer plants. The company also simultaneously pursued appraisal activities
within its Mari D&P Lease by drilling stepout wells to determine the boundaries of the
Habib Rahi Reservoir.
The hallmark of MPCL’s growth and expansion is also represented by its entry into
exploration activities in 2001.
 Oil and Gas Development Company
Oil and Gas Development Company Limited commonly known as OGDCL is
an Pakistani multinational oil and gascompany. It has primary listing on Karachi Stock
Exchange, and secondary listings on London, Lahore and Islamabadstock exchanges.
Established in 1961 by the Government of Pakistan, it was turned into a public listed
company on 23 October 1997. Today it is involved in exploring, drilling, refining and
selling oil and gas in Pakistan. It is the market leader in terms of reserves, production
and acreage.[5]
It is based on Jinnah Avenue, Blue Area in Islamabad, with
theGovernment of Pakistan holding 74% stake in the company. Rest are held by private
investors. In 2013, it has revenue of Rs. 223.365 billion and profit before tax soaring
at Rs. 90.777 bil
 Pakistan Oilfields
The Pakistan Oilfields Limited is a global competitive oil exploration consortium and
megacorporation, located in Rawalpindi, Punjab Province of Pakistan.[1]
The Pakistan
Oilfields is a subsidiary of the Attock Group of Companies, was incorporated on 25
November 25, 1950, with the financial capital and technical cooperation of the Soviet
Union.[2]
In 1978, Pakistan Oilfields took over the exploration and production business of Alishba
Oil Company. Since then, Pakistan Oilfields has been investing independently. Pakistan
Oilfields is a leading oil and gas exploration and production company listed on all the
three stock exchanges of Pakistan.
 Pakistan Petroleum

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Pakistan Petroleum Limited is a multinational, global competitive and one of the
largest state-owned megacorporation of Pakistan. It was incorporated on June 5, 1950,
when it inherited the assets and liabilities of the Burmah Oil Company Ltd. which
initially holds 70% of the share with the rest mostly held by the government
of Pakistan (GoP). As of June 2011, GoP held 70.66% of the shares.
The company is headquartered in Karachi. It operates major oil and gas fields, including
the Sui gas field, has non-operating interests in other fields, and has an interest in an
exploration portfolio onshore and offshore. The company is now planning international
exploration in partnership mode.
 Pakistan State Oil
Pakistan State Oil is a Karachi-based Pakistani state-owned multinational petroleum
corporation involved in marketing and distribution of petroleum products. It has a
network of 3,689 filling stations, out of which 3,500 outlets serve the retail sector and
189 outlets serve bulk customers.
Background of Company and Growth Pattern:
PSO is the market leader in Pakistan’s energy sector. The company has the largest
network of retail outlets to serve the automotive sector and is the major fuel supplier to aviation,
railways, power projects, armed forces and agriculture sector. PSO also provides Jet Fuel to
Refueling Facilities at 9 airports in Pakistan and ship fuel at 3 ports. The company takes pride in
continuing the tradition of excellence and is fully committed to meet the energy needs of today
and rising challenges of tomorrow.
Pakistan State Oil, the largest oil marketing company in the country, is currently
engaged in storage, distribution and marketing of various POL products. The company’s current
market share of 82.3% in the black oil market and 59.4% share in the white oil market, alone
speak volumes about its success.
Pakistan State Oil, the largest oil marketing company in the country is currently engaged
in the marketing and distribution of various POL products, including Motor Gasoline, High
Speed Diesel, Furnace Oil, Jet Fuel, Kerosene, LPG, CNG, Petrochemicals and Lubricants. In
addition to this we also import different products according to their demand pattern and possess
the biggest storage facilities representing 80% of the country’s total storage capacity.

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Brief overview of each business facet of PSO is stated below:
PSO Major Highlights
Sold 7 million tons of furnace oil – the highest in the last 8 years
Efficiently managed supply to the power sector despite the liquidity crisis
Imported approximately 90% of the country’s POL imports - 3.4 million tons of HSD and 5
million tons of FO Helped in the revenue collection of more than Rs. 161 billion to the GOP
(Sales Tax: 97 billion, taxes: 1.4 billion,PDL: 61 billion)
Extended support to various charitable organizations in the health & education sector
including contribution for the rehabilitation of IDPs due to the Swat operation
The company has the largest distribution network comprising of 3,620 outlets. Out of
which 3,384 serve retail customers, 53 outlets cater to agriculture sector and 183 outlets
serve our bulk customers. Out of a total number of 3620 outlets, 1,735 have been upgraded
as per the New Vision Retail Program with most modern facilities.
Moreover, there are 37 company owned and company operated (Co-Co) sites to
serve our retail customers. The idea of setting CoCo sites was to make these stations
flagships under maximum supervision and intense scrutiny to maintain the highest level of
efficiency, service and customer care.
PSO serves 2.8 million customers every day. Our leading retail brands include
environment friendly fuels - Premier-XL Green-XL. Moreover, the company also was a
pioneer in introducing an array of cards for the convenience of our customers. These cards
include corporate, fleet and pre-paid cards fpr individuals. These cards are well-established
and have received an overwhelming response from the corporate world and from the masses.
The Pakistan State Oil’s (PSO) market share in different product groups witnessed
significant growth over the past five months. According to official sources, from August
onwards, PSOs share in the HSD market rose from 50 percent to 57 percent while share in
mogas remained steady at 50 percent despite stiff competition in the market.

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The company’s share in the lubricants market also rose from 16 percent to 28 percent among
oil marketing companies across Pakistan within a period of just three months, the source
added.
Financial Analysis:
Liquidity Ratios:
Analysis:
Cash to current liabilities is rising: Due to the factor of credit sales.
Cash flow from operations to sales is decreasing: Due to the factor of credit sales, because
it’s key players got the fuel on credit, and due to the patrol crisis and raise in price, the cash
flow to operation to sales goes down which means they’re are inefficient at converting their
sales into available cash.
Current Ratios:
Total current assets 313,514,125
Total current liabilities 288,346,263
Current Ratio 1.09
If we pay 5% of total current assets and pay off our total current liability can higher the
current ratio by 1.2. The Ratio tells the ability to full fill its short term obligation
Company data shows that for every one rupees of liability there is 1.14 rupees of asset in
2012. The ratio was 1.15, 1.03, 1.09 in the year 2012, 2013 and 2014 respectively.

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Company can improve its current ratios by increasing its accounts receivables and by
decreasing the account payables.
Quick Ratio: A quick ratio lower than 1:1 may indicate that the company relies too
much on inventory or other assets to pay its short-term liabilities. Higher quick ratio is
needed when the company has difficulty borrowing on short-term notes. A quick ratio
higher than 1:1 indicates that the business can meet its current financial obligations
with the available quick funds on hand.
The Ratio tells more precisely and accurately companies the ability to full fill its short term
obligations.
Turnover Ratios:
Analysis:
Inventory turnover ratio is rising: The inventory is raising as compared to 2013. in 2014
that there is a substantial increase in turnover ratio. Which means the inventory is been
managed effectively and products are being sold all over the country.
Debt Ratio: Shows that the company has lost it’s ability to pay it’s liabilities, as compared
to 2013, they were more capable of paying off their current liabilities but in 2014, there was
a substantial decrease due to installments of new machines.
Creditor Turnover Ratio: Shows that the company has gained it’s ability to pay it’s
creditors, as compared to 2013, they weren’t more capable of paying off their credits but in
2014, there was a substantial increase due to raise in sales.

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Total Asset Turnover Ratio: Well, there is a little change in the ratios of total asset which
means they are utilizing their assets to generate their sales, but there was a little raise
between the years 2013/14.
Total Fixed Asset Turnover Ratio: Fixed turnover ratio has gained it’s value which means
that PSO is doing an effective job of generating sales with a relatively small amount of fixed
assets, Outsourcing work to avoid investing in fixed assets and Selling off excess fixed asset
capacity.
Operation Cycle: This means that on average it takes 25 days for PSO to turn purchasing
inventories into cash sales. Due to high amount of sales, their operation cycle has raised to
25 days.
Profitability Ratios:
Analysis:
Gross Profit Ratio: Low gross profit margin indicates that the business is unable to control
its production cost. Gross profit margin can be used to compare a company with its
competitors. More efficient firms will usually see a higher margin. Also, it provides clues
about company's pricing, cost structure and production efficiency. Therefore, gross profit
margin can be used to compare company's activity over time.
Net Profit Ratio: Net profit margin provides clues to the company's pricing policies, cost
structure and production efficiency. Different strategies and product mix cause the net profit
margin to vary among different companies.
EBITDA Margin: This stands for earnings before interest, taxes, depreciation, and
amortization, is a financial calculation that measures a company’s profitability. It says a
slight raise in profitability of companies.

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Return on shareholders’ equity: The return on equity ratio or ROE is a profitability ratio
that measures the ability of a firm to generate profits from its shareholders investments in
the company. This is clearly seen that, PSO, raised it’s return on shareholder’s equity which
means people are investing in PSO.
Return on Total Asset: is a profitability ratio that measures the net income produced by
total assets during a period by comparing net income to the average total assets. There is a
substantial gain in ratio which means that PSO is investing in assets which are giving them
profitability.
Return on Capital Employed: return on capital employed shows investors how many
dollars in profits each dollar of capital employed generates. Is raised since 2013, means that
shows investors are getting increasing rupees in profits each dollar of capital employed
generates.
Operating Leverage Ratio: An incredible change in leverage ratio, Operating leverage is
highest in companies that have a high proportion of fixed operating costs in relation to
variable operating costs. It means, they are making more money then PSO used to make in
2013.

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HORIZONTAL AND VERTICAL ANALYSIS - BALANCE
SHEET

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Comparative analysis:
Pakistan State oil vs Attock Oil Limited
Analysis Pakistan State Oil Attock Oil Company Limited
Earning Per Share 80.31 65.17
Stock in trade 86,297,218 6,787,904
Sales 1,409,574,264 240,567,960
Net Sales 1,187,639,316 205,162,911
Pakistan State Oil, is easily taking over the Attock Oil Company, as in boosted sales due to the broad
inventory of fuel delievery.
Auditors report:

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Conclusion and recommendation:
In the conclusion of this report, it is clear that Pakistan State Oil, is gaining its
market share, sales as well as the overall value of the company. Furthermore, after analyzing
all the ratios and statements, it is clearly seen that Pakistan State Oil has been flourishing
while they face a lot in the 2012, but they start get better results at the mid of 2013 and still
we can see its impact on 2014.
As we know that there are certain things which Pakistan State Oil needs to fix, are
the current ratio and they need also to focus on less credit sales, as their payback time is
high, but cash sales should also, be focused due to the factor of seeing converting sales into
cash. Moreover, the Gross profit needs to fixed as their payback period is so long, which
makes them do credit sales, and credit sales are making gross profit low.
Pakistan State Oil’s Future Planning:
 PSO future plan entail exploring new markets, increasing POL sales using innovative
ways, enhancing retail network, expanding lubricant product range, improved
product movement mechanism in coming years.
 Enhanced focus shall be on operational streamlining, cost reductions, cash sales,
minimizing product losses, cash sales, improved quality, quantity testing, joint
ventures.
 By establishing this refinery, PSO has taken yet another step on the road to
developing a self-reliant energy supply chain for the country.
 In addition to these benefits, this refinery will also help create job opportunities for
the local populace as well as professionals from various technical backgrounds.
 Rising international crude oil prices amid fixed absolute margins for the OMCs will
increase working capital requirements and reduce return on working capital for
them.
 PSO is expected to benefit from this deregulation with the largest distribution
network in the country. This would result in setting competitive market prices and
increase its market share in the southern region.
 PSO has a market share of 22% in CNG industry in 2013. It has shown growth of
13% in 2014 against industry growth of 11% as compared to 2012.

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 PSO’s plans to promote PSO’s lubricants range in the market to further strengthen
the company’s balance sheet.