Analysis of Financial Statements PAKISTAN PETROLEUM LIMITED INTRODUCTION Pakistan Petroleum Ltd is Pakistan's Premier E&P company, the oldest and largest Exploration and Production Company in the country was incorporated on 5th June 1950 subsequent to the promulgation of the Pakistan Petroleum Production Rules, 1949 with the main objective of conducting exploration, development and production of Pakistan's oil and natural gas resources. PPL inherited all the assets and liabilities of the Burmah Oil Company (Pakistan Concessions) Limited and commenced business on 1st July 1952. PPL and its ex-parent Burmah Oil Company have been active in the subcontinent since the early part of the 20th century. A total of 239 wells including 65 exploratory and 174 appraisal / development wells have so far been drilled which resulted in the discovery of about 19.90 Tcf gas (both operated and non-operated leases). A gas condensate/oil field at Adhi with original recoverable reserves of 1,253 MT liquefied Petroleum Gas and 39.4 MMbbl of oil/condensate was also discovered by PPL. The Company also operates a Baryte mine in Balochistan province. It produces oil well drilling grade Baryte powder from the mine, which has proven reserves of 1.25 million tones. For the year 2004-05, PPL's share of average production from its operated and non-operated fields was 953 MMcfd of gas, 1,372 bpd of oil/NGL and 26 tones per day of LPG. Production of gas from these fields meets about 25.1% of the country's indigenous production. The gas, LPG and NGL production from PPL operated and non-operated fields for the year 2004-05 in terms of oil equivalent, was about 171,205 barrels of crude oil per day. The Company has a staff of about 2520 as at 31 May, 2006 employees with about 431 qualified technical staff in the - 1 - AINI
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Analysis of Financial Statements
PAKISTAN PETROLEUM LIMITED
INTRODUCTION
Pakistan Petroleum Ltd is Pakistan's Premier E&P company, the oldest and largest Exploration and Production Company in the country was incorporated on 5th June 1950 subsequent to the promulgation of the Pakistan Petroleum Production Rules, 1949 with the main objective of conducting exploration, development and production of Pakistan's oil and natural gas resources. PPL inherited all the assets and liabilities of the Burmah Oil Company (Pakistan Concessions) Limited and commenced business on 1st July 1952.
PPL and its ex-parent Burmah Oil Company have been active in the subcontinent since the early part of the 20th century. A total of 239 wells including 65 exploratory and 174 appraisal / development wells have so far been drilled which resulted in the discovery of about 19.90 Tcf gas (both operated and non-operated leases). A gas condensate/oil field at Adhi with original recoverable reserves of 1,253 MT liquefied Petroleum Gas and 39.4 MMbbl of oil/condensate was also discovered by PPL.
The Company also operates a Baryte mine in Balochistan province. It produces oil well drilling grade Baryte powder from the mine, which has proven reserves of 1.25 million tones. For the year 2004-05, PPL's share of average production from its operated and non-operated fields was 953 MMcfd of gas, 1,372 bpd of oil/NGL and 26 tones per day of LPG. Production of gas from these fields meets about 25.1% of the country's indigenous production. The gas, LPG and NGL production from PPL operated and non-operated fields for the year 2004-05 in terms of oil equivalent, was about 171,205 barrels of crude oil per day.
The Company has a staff of about 2520 as at 31 May, 2006 employees with about 431 qualified technical staff in the fields of engineering, computer and earth sciences. PPL has well established IT department and all staff in the Head Office has access to computers and are interconnected through Local Area Network (LAN). The Wide Area Network (WAN) has also been established connecting PPL's three major producing fields and Regional Office in Islamabad with the Head Office at Karachi. The Company has implemented SAP in 2004 integrating core business processes using Costing, Finance, Human Resources, Materails Managemnet, Plant maintenance and Project Systems modules.
The Government of Pakistan (GoP) in September 1997 purchased the entire equity interest of Burmah Castrol PLC, formerly Burmah Oil Company, in the Company (comprising 21 million ordinary shares of Rs.10 each) representing 63.91 percent of the Share Capital thereby increasing its holding in the Company to 93.35 percent. Subsequent to June 2004, the GoP has disinvested a portion of its equity in the Company equivalent to 15% of the paid up share capital of (i.e. 102.873 million shares of Rs.10 each) through an Initial Public Offering (IPO). The GoP has made a policy decision to privatize PPL and IPO is a significant step towards this direction.
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Analysis of Financial Statements
A consortium led by Merrill Lynch International and KASB securities (Pvt) Limited have been appointed by the Privatization Commission (PC) as the Financial Advisor (FA) for the strategic sale of GoP's 51 % interest in the company. Five (5) parties were prequalified as potential bidders for the transaction. The Government of Pakistan continues to pursue the privatization process through sale of its majority interest in the Company to a strategic investor and remains committed to proceed with the transaction with a view to concluding the process at an early date.
PPL CAPITAL STRUCTURE
The current shareholding structure of the Company is as follows:
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S.No Shareholders Percentage
(i) Government of Pakistan 78.40%
(ii) International Finance Corporation 4.26%
(iii) Private shareholders 17.34%
100.0%
Analysis of Financial Statements
SCHLUMBERGER LIMITED
INTRODUCTION
Schlumberger is the world’s leading oilfield services company supplying technology, information solutions and integrated project management that optimize reservoir performance for customers working in the oil and gas industry. The company employs more than 70,000 people of over 140 nationalities working in approximately 80 countries. Schlumberger supplies a wide range of products and services from seismic acquisition and processing; formation evaluation; well testing and directional drilling to well cementing and stimulation; artificial lift and well completions; and consulting, software, and information management. Schlumberger also provide similar products and services for the groundwater industry.
HISTORY
Schlumberger Limited began life as the Société de Prospection Électrique (Electric Prospecting Company) founded in 1926 by Conrad and Marcel Schlumberger. Prior to founding their company, the brothers had worked conducting geophysical surveys in countries such as Romania, Canada, Serbia, South Africa, the Democratic Republic of the Congo, and the United States. The newly founded SPE (not to be confused with the Society of Petroleum Engineers) sold electrical-measurement mapping services, and quickly began expanding. The company recorded the first electrical resistivity well log in Merkwiller-Pechelbronn, France in 1927, and logged their first well in the US (in Kern County, California) in 1929.
In 1934, the Schlumberger Well Surveying Corporation was founded. This was later to become Schlumberger Well Services (and later Schlumberger Wire line & Testing). 1940 saw the company move its headquarters to the US oil capital, Houston, Texas. The next few decades brought numerous breakthroughs in Schlumberger's logging technology offerings, including the Microlog tool, Laterolog system, and Microlaterolog tool; the latter designed to measure resistivity near the borehole. The Ridgefield, Connecticut Research Center (Schlumberger-Doll Research or SDR) was inaugurated in 1948.In 1956, the company known as Schlumberger Limited was officially set up in Curacao as a holding company for all Schlumberger businesses. The American testing and production company Johnston Testers was acquired this year as well. 1960 marked the formation of the well-known Dowell Schlumberger (50% Schlumberger, 50% Dow Chemical), which specialized in pumping services for the oil industry. Two years later, Schlumberger Limited became listed on the New York Stock Exchange.
Schlumberger purchased 50% of Forex in 1964 and merged it with 50% of Languedocienne to create the Neptune Drilling Company. The first computerized reservoir analysis, SARABAND, was introduced in 1970. The remaining 50% of Forex was acquired the following year; Neptune was renamed Forex Neptune Drilling
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Analysis of Financial Statements
Company. In 1979, Fairchild Camera and Instrument (including Fairchild Semiconductor), became a subsidiary of Schlumberger Limited.The Schlumberger Cambridge Research Centre, designed by Michael Hopkins and Partners was opened in 1985.Continuing the trend of supporting high-technology solutions, Schlumberger quickly integrated e-mail into their business model, establishing the first international data links with e-mail in 1981. In 1983, Schlumberger opened their Cambridge Research Center in Cambridge, England.
The SEDCO drilling company and half of Dowell of North America were acquired in 1984, resulting in the creation of another well-known Schlumberger trademark, the Anadrill drilling segment, a combination of Dowell and The Analysts' drilling segments. Forex Neptune was merged with SEDCO to create the Sedco Forex Drilling Company the following year, when Schlumberger purchased Merlin and 50% of GECO.Schlumberger's Information Network, or SINet, launched in 1985, is the world's second largest internal corporate network and the first commercial ARPANet-based intranet.In 1987, Schlumberger completed their purchases of Neptune (North America), Bosco and Cori (Italy), and Allmess (Germany). That same year, National Semiconductor acquired Fairchild Semiconductor from Schlumberger for $122 million, and the domain name www.slb.com was registered by the company. In 1991, Schlumberger acquired PRAKLA-SEISMOS, and pioneered the use of geosteering to plan the drill path in horizontal wells.
Schlumberger acquired the software company GeoQuest Systems, Inc. in 1992. With the purchase came the conversion of SINet to TCP/IP and www capability. The remainder of the decade saw Schlumberger buy out the petroleum division, AEG meter, and ECLIPSE reservoir study team Intera Technologies Corp. A joint venture between Schlumberger and Cable & Wireless plc saw the creation of Omnes, which today handles all of Schlumberger's internal IT business. Oilphase and Camco International were also purchased. In 1999, Schlumberger and Smith International created a joint venture, M-I L.L.C., the world's largest drilling fluids (or mud) company. The company consists of 60% Smith International, and 40% Schlumberger. Since the joint venture was prohibited by a 1994 antitrust consent decree barring Smith from selling or combining their fluids business with certain other companies, including Schlumberger, the U.S. District Court in Washington, D.C. found Smith International Inc. and Schlumberger Ltd. guilty of criminal contempt and fined each company $750,000 and placed each company on five years probation. Both companies also agreed to pay a total of $13.1 million, representing a full disgorgement of all of the joint venture's profits during the time the companies were in contempt. At the turn of the 21st century, the Geco-Prakla division was merged with Western Geophysical to create the seismic contracting company WesternGeco, of which Schlumberger held a 70% stake, the remaining 30% belonging to competitor Baker Hughes. Under new business policy, the company got rid of its famous brand names in the oilfield service industry viz, Anadrill, Dowell, GeoQuest, Geco-Prakla, Wireline & Testing in order to promote and sell its oil & gas services under the single trading name of Schlumberger Oilfield Services (OFS). Also that year, Sedco Forex was spun off, and
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Analysis of Financial Statements
merged with Transocean Drilling Company. The following year, Schlumberger acquired the IT consultancy company Sema plc for $5.2 billion. The company was an Athens 2004 Summer Olympics partner, but Schlumberger's venture into IT consultancy did not pay off, and divestiture of Sema to Atos Origin was completed that year for $1.5 billion. That same year, the Cards division was divested through an IPO to form Axalto, which later merged with its competitor Gemplus to form Gemalto. In 2003 the Automated Test Equipment group, part of the 1979 Fairchild Semiconductor acquisition, was spun off to NPTest Holding, which later sold it to Credence.On January 10, 2005 Schlumberger purchased Waterloo Hydrogeologic, which was followed by several other groundwater industry related companies, such as Westbay Instruments, and Van Essen Instruments.
In late 2006, the corporate head office moved from its previous location in New York back to Houston, Texas. In 2006, a 2 for 1 stock split was announced, effective as of March 1, 2006. On April 21, 2006, Schlumberger purchased of the remaining 30% stake in WesternGeco from Baker Hughes for US$2.4 billion. In 2006, Schlumberger built a new research facility in Cambridge, Massachusetts to replace the Ridgefield, Connecticut research center. The move was completed at the end of 2006. The new facility joins the other research centers operated by the company in Cambridge, England; Moscow, Russia; Stavanger, Norway; and Dhahran, Saudi Arabia.
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Analysis of Financial Statements
COMPARISON OF PAKISTAN PETROLEUM LIMITED AND SCHLUMBERGER RATIOS
ACTIVITY ANALYSIS
RECEIVABLE TURNOVER
Pakistan Petroleum limited 35.78
Schlumberger 5.0435
0
5
1 0
1 5
2 0
2 5
3 0
3 5
4 0
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P a k is t a n P e t r o le u mlim it e d
S c h lu m b e r g e r
Receivable turnover means how quickly company’s receivable are converted into cash it
must be higher. The comparison shows that PPL ratio is 35.78 and Schlumberger ratio is
5.04 which shows that PPL receivable turnover ratio is more as compare to
Schlumberger. This shows that PPL is in better position as compare to Schlumberger
because more ratio shows the effectiveness of firm credit policy and economic operating
performance.
AVERAGE NO. OF DAYS RECEIVABLES OUTSTANDING
Pakistan Petroleum limited 10.20 days
Schlumberger 72.4 days
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Analysis of Financial Statements
It is the debt collection period. This ratio describes that how quickly a company collect
its outstanding receivable. PPL debt collection period is 10 days and Schlumberger debt
collection period is 75 days. This shows that PPL is better as compare to Schlumberger
because PPL collect cash from receivables in 10 days but Schlumberger collect in 72
days. Less the collection period better the company’s performance and this comparison
shows that PPL is in better position as compare to Schlumberger.
WORKING CAPITAL RATIO
Pakistan Petroleum limited 2.149
Schlumberger 6.572
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Working capital ratio shoes that how company utilize its capital for generating sales and
higher the ratio better the company’s performance. Working capital ratio of PPL is 2.14
and Schlumberger ratio is 6.57 its mean PPL by investing Rs.1 in capital get the sales of
Rs.2.14 and the Schlumberger by investing Rs.1 in capital generate a sales of Rs.6.57.
And this comparison shows that Schlumberger is in better position as compare to PPL.
FIXED ASSETS TURNOVER
Pakistan Petroleum limited 2.63
Schlumberger 4
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Analysis of Financial Statements
00 . 5
11 . 5
22 . 5
33 . 5
44 . 5
1
P a k is t a n P e t r o le u mlim it e d
S c h lu m b e r g e r
This ratio shows that how company is utilizing its fixed assets efficiently for generating
sales and higher the ratio better the company performance. PPL fixed assets turnover
ratio is 2.63I and Schlumberger ratio is 4 which show the efficiency of the company in
utilizing their fixed assets. And this comparison shows that Schlumberger company is in
better position as compare to PPL. Because by utilizing fixed assets of Rs.1
Schlumberger company generate a sale of Rs.4 and PPL by utilizing fixed assets of Rs.1
generate a sales of Rs.2.63 and it clearly shows that Schlumberger is better.
TOTAL ASSETS TURNOVER
Pakistan Petroleum limited 0.871
Schlumberger 0.94
0 . 8 2
0 . 8 4
0 . 8 6
0 . 8 8
0 . 9
0 . 9 2
0 . 9 4
1
P a k is t a nP e t r o le u m lim it e d
S c h lu m b e r g e r
This ratio shows that 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 0.871 and Schlumberger is 0.94 which shows that Schlumberger company is
better as compare to PPL.
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Analysis of Financial Statements
LIQUIDITY ANALYSIS
CURRENT RATIO
Pakistan Petroleum limited 3.246
Schlumberger 1.423
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S c h lu m b e r g e r
This ratio shows that how much current assets a company has against current liabilities.
And how efficiently company uses its current assets to generate more profit and higher
ratio shows better performance. Current ratio of PPL is 3.246 which show that PPL has
current assets of rs.3.246 against liabilities of Rs.1 and Schlumberger ratio is 1.423 which
shows that Schlumberger has current assets of Rs.1.423 against liabilities of Rs.1 and
PPL has more current assets to fulfill its current liabilities. This comparison shows that
PPL is in better position as compare to Schlumberger because PPL has more current
assets as compare to Schlumberger.
QUICK RATIO
Pakistan Petroleum limited 2.099
Schlumberger 1.12178
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Analysis of Financial Statements
0
0 . 5
1
1 . 5
2
2 . 5
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P a k is t a nP e t r o le u m lim it e d
S c h lu m b e r g e r
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 to 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. As such, this ratio implies a liquidation approach and does not
recognize the revolving nature of current assets and liabilities. The ratio compares a
company's cash and short-term investments to the financial liabilities the company is
expected to incur within a year's time.
Quick ratio of PPL is 2.099 and Schlumberger ratio is 1.122. PPL is better as compare to
Schlumberger.
CASH RATIO
Pakistan Petroleum limited 2.079
Schlumberger 0.46596
0
0 . 5
1
1 . 5
2
2 . 5
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P a k is t a nP e t r o le u m lim it e d
S c h lu m b e r g e r
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Analysis of Financial Statements
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. The cash ratio of PPL is 2.079 and Schlumberger ratio is 0.469. This
comparison shows that PPL performance is better as compare to Schlumberger because
PPL has more cash to pay its current liabilities.
LONG TERM DEBT AND SOLVENCY ANALYSIS
DEBT TO TOTAL CAPITAL
Pakistan Petroleum limited 0.264
Schlumberger 0.142
0
0 . 0 5
0 . 1
0 . 1 5
0 . 2
0 . 2 5
0 . 3
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P a k is t a nP e t r o le u m lim it e d
S c h lu m b e r g e r
The Debt to Capital Ratio (D/C ratio) shows the proportion of a company's debt to its
total capital, which consists of the sum of its debt and equity combined. The D/C ratio is
regularly used to measure a company's capital structure and its financial solvency. The
debt to total capital ratio of PPL is 0.264 and it shows that PPL has Rs.0.246 against
capital of Rs.1 which means PPL debt is less as compare to its capital. And Schlumberger
ratio is 0.142 its mean Schlumberger debt is also les as compare to its capital. And this
comparison shows that Schlumberger is better as compare to PPL because Schlumberger
debts are less as compare to PPL.
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Analysis of Financial Statements
DEBT TO EQUITY
Pakistan Petroleum limited 0.36
Schlumberger 0.3
0 . 2 6
0 . 2 8
0 . 3
0 . 3 2
0 . 3 4
0 . 3 6
1
P a k is t a nP e t r o le u mlim it e d
S c h lu m b e r g e r
The debt to equity ratio (D/E) is a financial ratio indicating the relative proportion of
equity and debt used to finance a company's assets. This ratio is also known as Risk,
Gearing or Leverage. PPL D/E ratio is 0.36 which means company has a debt of RS.0.36
against equity of Rs.1 it shows that company has more equity to fulfill the debts. And
D/E ratio of Schlumberger 0.3 which also shows that company has more equity to fulfill
it debts. This comparison shows that Schlumberger company is better because its debts
are less as compare to PPL.
CAPITAL EXPENDITURE RATIO
Pakistan Petroleum limited 3.94
Schlumberger 0.33
0
1
2
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4
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P a k is t a nP e t r o le u mlim it e d
S c h lu m b e r g e r
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Analysis of Financial Statements
This ratio shows a company's ability to maintain plant and equipment from cash provided
by operations, rather than by borrowing or issuing new stock. The ratio equals cash flow
from operations less dividends divided by expenditures for plant and equipment. The
capital expenditure ratio of PPL is 3.94 which shows that company has more cash from
operation to maintain its plants and equipment. And the capital expenditure ratio of
Schlumberger is 0.33 which shows that company has less cash from operation to maintain
its plants and equipment and in this case Schlumberger company borrows or issue new
stock to maintain its equipment.
PROFITABILITY ANALYSIS
OPERATING PROFIT MARGIN
Pakistan Petroleum limited 62%
Schlumberger 27%
0 %
2 0 %
4 0 %
6 0 %
8 0 %
1
P a k is t a nP e t r o le u m lim it e d
S c h lu m b e r g e r
Operating margin is a measurement of what proportion of a company's revenue is left
over after paying for variable costs of production such as wages, raw materials, etc. A
healthy operating margin is required for a company to be able to pay for its fixed costs,
such as interest on debt. Operating margin gives analysts an idea of how much a company
makes (before interest and taxes) on each dollar of sales. The operating margin of PPL is
62% which shows that company has more revenue that it easily fulfill its variable cost of
production and pay interest on debts. The Schlumberger ratio is 27% which shows that
company has enough revenues to fulfill its variable cost and pay interest on debts.
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Analysis of Financial Statements
And the comparison shows that PPL performance is better and it generate more revenues
as compare to Schlumberger Company.
NET INCOME PROFIT MARGIN
Pakistan Petroleum limited 42%
Schlumberger 19.3 %
0 %
1 0 %
2 0 %
3 0 %
4 0 %
5 0 %
1
P a k is t a nP e t r o le u mlim it e d
S c h lu m b e r g e r
Net Profit Ratio refers to a measure of profitability and shows that a company earns how
much profit after deducting all expenses. The profit margin of PPL is 42% which shows
company’s net profit is 42% after deducting all expenses and interest and Schlumberger
ratio is 19.3%. And this comparison shows that PPL profit margin is more as to
Schlumberger which shows PPL performance is better as compare to Schlumberger.
RETURN ON INVESTMENT
RETURN ON ASSETS
Pakistan Petroleum limited 36%
Schlumberger 18 %
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Analysis of Financial Statements
0 %
1 0 %
2 0 %
3 0 %
4 0 %
1
P a k is t a nP e t r o le u mlim it e d
S c h lu m b e r g e r
This ratio shows that how much return a company gets from its assets. This is an
important ratio for companies deciding whether or not to initiate a new project. The basis
of this ratio is that if a company is going to start a project they expect to earn a return on
it, ROA is the return they would receive. Simply put, if ROA is above the rate that the
company borrows at then the project should be accepted, if not then it is rejected. ROA of
PPL is 36% which shows company return on its assets and Schlumberger ratio is 18%.
The comparison shows that PPL performance is better as compare to Schlumberger
because PPL return on assets is more as compare to Schlumberger.
RETURN ON EQUITY
Pakistan Petroleum limited 48.8%
Schlumberger 39%
0 . 0 0 %
1 0 . 0 0 %
2 0 . 0 0 %
3 0 . 0 0 %
4 0 . 0 0 %
5 0 . 0 0 %
1
P a k is t a nP e t r o le u mlim it e d
S c h lu m b e r g e r
Return on equity (ROE in financial shorthand) measures how much a company earns on
each dollar that investors in its common stock have put into the company. It’s calculated
by dividing shareholders’ equity into net income for the period (after deducting preferred
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Analysis of Financial Statements
stock dividends from income but without deducting common stock dividends). The
number tells shareholders how effectively a company and its management are using their
money. It is a more global measure of management efficiency than return on assets, and
one which works across a broader selection of industries.
This ratio shows how much return a company gets on its equity. ROE of PPL is 48.8%
which shows company get 48.8% return on equity and Schlumberger ratio is 39%. And
this comparison shows that PPL is better as compare to Schlumberger because PPL return
on equity is more as compare to Schlumberger.
RETURN ON TOTAL CAPITAL
Pakistan Petroleum limited 36.8%
Schlumberger 24.1%
0 . 0 0 %
1 0 . 0 0 %
2 0 . 0 0 %
3 0 . 0 0 %
4 0 . 0 0 %
1
P a k is t a nP e t r o le u mlim it e d
S c h lu m b e r g e r
Return on capital how much return a company is realizing from its capital. Calculated as
profit before interest and tax divided by the difference between total assets and current
liabilities. The resulting ratio represents the efficiency with which capital is being utilized
to generate revenue. ROTC ratio of PPL is 36.8% which shows company return on
capital and Schlumberger ratio is 24.1%. the comparison shows that PPL is better as
compare to Schlumberger because PPL return on capital is more as compare to
Schlumberger and it clearly shows that PPL performance is better.
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Analysis of Financial Statements
COMPARISION OF COMMON SIZE STATEMENTS
TREND ANALYSIS
Trend analysis is an aspect of technical analysis that tries to predict the future movement
of a stock based on past data. Trend analysis is based on the idea that what has happened
in the past gives traders an idea of what will happen in the future.
Trend analysis tries to predict a trend like a bull market run and ride that trend until data
suggests a trend reversal (e.g. bull to bear market). Trend analysis is helpful because
moving with trends, and not against them, will lead to profit for an investor.
FIXED ASSETS
Fixed assets include property, plants and equipment and intangible assets and fixed ratio
of PPL in 2003 is 41.7%, and in 2004 the percentage is decrease to 39.01, and it is also
decreased in 2005to 35.46% and in 2006 it is decreased to 31.33%. The trend shows that
company decreased its investment in fixed assets each year.
Fixed assets of Schlumberger in 2003 is 18.96% and it is decreased in 2004 to 23.91%,
and in 2005 it is decreased to 23.24% which shows a very small change as compare to
previous year and in 2006 it is increased to 24.42%. This trend shows that company
increases its investment in fixed assets.
The comparison of trend analysis shows that PPL investment in fixed assets is more as
compare to Schlumberger Company. But PPL decreased its investment in current assets
while Schlumberger increase its investment in fixed assets.
0
10
20
30
40
50
2003 2004 2005 2006
PPL
Schlumberger
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Analysis of Financial Statements
LONG TERM ASSETS
Long term assets include long term investment, receivables, staff loans and deferred
taxation. PPL investment in long term assets in 2002 is14.6% and in next year it is
decreased to 11.1%, and in 2004 it is again decreased to 7.79% and in 2006 it is also
decreased to 2.78%. This shows a decreasing trend and its mean company decreased its
investment in long term assets.
Long term assets ratio of Schlumberger in 2003 is 27.98%, and next year it is increasing
to 30.66% but in 2005 it is decreased to 28.5% and in 2006 it was again increasing to
34.66%.This trend shows that company decreased its investment in long term assets in
2005 but in next company increased its investment.
The trend shows that PPL invest less in long term assets as compare to Schlumberger.
And PPL investment is also decreasing in long term assets while Schlumberger increased
its investment. This shows Schlumberger company is better as compare to PPL because it
invest more in long term assets.
0
5
10
15
20
25
30
35
2003 2004 2005 2006
PPL
Schlumberger
CURRENT ASSETS
Current assets include stores and spares, trade debts, cash etc. the current assets of PPL in
2003 is 43.48%, and in next year it is increased to 49.84% which shows a little higher
increase as compare to previous year, and in 2005 it is 56.74% which shows a greater
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Analysis of Financial Statements
change as compare to previous year and in 2006 it is again increased to 65.87%. This
shows an increasing trend because company invests more in current assets.
Schlumberger current assets in 2003 is 51.74%, and in next year it is decreased to 44.12%
which shows a greater decreased in current assets, and in 2005 it is increased to 47.32%
and in 2006 it is again decreased to 40.23% which also shows a greater decline in current
assets.
The trend shows that PPL is better as compare to Schlumberger because PPL investment
in current assets is more as compare to Schlumberger. And PPL increased its investment
in current assets over last four years while Schlumberger decreased its investment, in next
year increased the investment but again decreased in next year.
0
10
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30
40
50
60
70
2003 2004 2005 2006
PPL
Schlumberger
NON CURRENT LIABILITIES
Non current liabilities includes decommissioning cost, deferred taxation, long term
liabilities, minority interest etc. the non current liabilities of PPL in 2003 is 13.10%, and
in next year it is increased to 14.70% which shows a little increased as compare to
previous year, and in 2005 it is decreased to 10.47% and in 2006 it is again decreased to
6.19% which shows a greater decline.
The Schlumberger non current liabilities in 2003 is 36.78%, and in next year it is
decreased to 32.45%, and in 2005 it is again decreased to 28.19% and in 2006 it is again
decreased to 26.06%. This shows a decreasing trend its mean company’s non current
liabilities decreased.
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Analysis of Financial Statements
The comparison trend shows that PPL non current liabilities are less as compare to
Schlumberger company. And this trend shows that PPL is better as compare to
Schlumberger because its non current liabilities are less. The trend also shows that non
current liabilities of both companies are decreasing.
05
10152025303540
2003 2004 2005 2006
PPL
Schlumberger
CURRENT LIABILITIES
Current liabilities includes trade debts, proposed dividend, taxation and other liabilities.
The current liabilities of PPL in 2003 is 34.05%, and in next year it is decreased to
21.95% which shows a greater decreased in current liabilities, and in 2005 it is increased
to 22.70% which shows a little increased as compare to previous year, and in 2006 it is
again decreased to 20.28%.
The Schlumberger current liabilities in 2003 is 33.9%, and in next year it is decreased to
29.38%, and in 2005 it is increased to 30.05% and in 2006 it is again decreased to
28.97%.
The trend shows that in 2003 current liabilities of both companies are equal and in next
years it is declining. This trend also shows that PPL is better because its current liabilities
are less as compare to Schlumberger.
0
5
10
15
20
25
30
35
2003 2004 2005 2006
PPL
Schlumberger
- 20 - AINI
Analysis of Financial Statements
STAKEHOLDERS EQUITY
The stakeholder’s equity of PPL in 2003 is 52.83%, and in next year it is increased to
63.34%, and in 2005 it is also increased to 66.82% and in 2006 it is again increased to
73.51%. This shows an increasing trend in stakeholder’s equity.
The stakeholders equity of Schlumberger in 2003 is 29.34%, and in next year it is
increased to 38.227%, and in 2005 it is also increased to 42%,a and in 2006 it is again
increased to 45.64% which shows an increasing trend.
The trend shows that both companies stakeholders equity increasing in last four years but
the PPL is better because its equity is more as compare to Schlumberger. And it is good
for a company to have more equity and less debts because PPL more equity and
borrowing is less.
01020304050607080
2003 2004 2005 2006
PPL
Schlumberger
- 21 - AINI
Analysis of Financial Statements
COMPARISON OF COMMON SIZE INCOME STATEMENTS
SALES
For common size of income statement we take 2003 as a base year. In 2004 the sales of
PPL is 145, and in 2005 it is 191.2 which shows the sales is decreasing in this year and in
2006 the sales are 260.7 which shows higher increase as compare to previous year.
The sales of Schlumberger company in 2004 is 118.9, and in next year it is 148.17 which
shows sales are increasing in this year, and in 2006 it is 199.12 which also shows a higher
increase in sales. This increasing trend shows that company increase its sales in each
year.
The trend shows that both companies sales are increasing in each coming year but the
PPL is in better position as compare to Schlumberger because sales of PPL is more than
Schlumberger.
0
50
100
150
200
250
300
2004 2005 2006
PPL
Schlumberger
OPERATING PROFIT
Operating profit of PPL in 2004 is 191.4, and in next year it is 276.8 which shows a
higher increase, and in 2006 the it is 401.8 which also shows a higher increase as
compare to previous years. The trend shows that PPL operating profit is increasing and it
reflect the better performance of company.
- 22 - AINI
Analysis of Financial Statements
The operating profit of Schlumberger in 2004 is 202.7, and in next year it is increased to
453.7,and in 2006 it is again increasing. The trend shows that company’s operating profit
is increasing.
The trend shows that companies earn almost equal operating profit in 2004 and it is
increasing in next two years. But the Schlumberger is in better position because its
operating profit is more as compare to PPL.
0
100200
300400
500600
700800
2004 2005 2006
PPL
Schlumberger
NET INCOME
Net income of PPL in 2004 is 157.9, and it is increased in next year to 205.7, and in 2006
it is again increased to 319.7. This shows an increasing trend and company’s net income
is increasing in last three years.
Net income of Schlumberger in 2004 is 52.7, and in next year it is increased to 95.12, and
in 2006 it is again increased to 159.9 which show a higher increase as compare to
previous years.
The trend shows that both companies net income is increasing but the PPL ratio of net
income is more as compare to Schlumberger. And this also shows that PPL performance
is better as compare to Schlumberger.
- 23 - AINI
Analysis of Financial Statements
0
50
100
150
200
250
300
350
2004 2005 2006
PPL
Schlumberger
- 24 - AINI
Analysis of Financial Statements
COMPARISION OF REFORMULATED BALANCE SHEET AND INCOME STATEMENT
Return on assets (ROA)
PPL 0.768
Schlumberger 4.091
PPL return on assets is 0.768 and Schlumberger return on assets is 4.091. This
comparison shows that Schlumberger is better because its return on assets is more as
compare to PPL.
0
1
2
3
4
5
1
PPL
Schlumberger
Return on common equity (ROCE)
PPL 63.92%
Schlumberger 22.44%
0.00%
20.00%
40.00%
60.00%
80.00%
1
PPL
Schlumberger
- 25 - AINI
Analysis of Financial Statements
PPL return on common equity is 63.92% and Schlumberger return on common equity is
22.44% which shows that PPL is better because its return on equity is more as compare to
Schlumberger. The spread of PPL is 17% and it is negative. Negative spread decreased
the equity and company has less potential to grow. And the spread of Schlumberger is
22% which is also negative. In this case PPL is better because its spread is less negative
as compare to Schlumberger.
FREE CASH FLOW
PPL 174674796
Schlumberger 2529176
Free cash flow is cash from operation and investment. PPL generate more cash from
operation as compare to Schlumberger.
DIVIDEND
PPL 174699552
Schlumberger 5583744
PPL pay more dividend to its shareholders as compare to Schlumberger because PPL has
more cash to distribute.
GROWTH IN OPERATING ASSETS
PPL 49.6%
Schlumberger 18%
- 26 - AINI
Analysis of Financial Statements
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
1
PPL
Schlumberger
PPL operating assets growth rate is 49.6% and Schlumberger growth rate in operating
assets is 18% which shows that PPL is better because its growth rate is more as compare
to Schlumberger.
GROWTH IN CSE
PPL 42%
Schlumberger 10.97%
0%
10%
20%
30%
40%
50%
1
PPL
Schlumberger
PPL growth rate in CSE is 42% and Schlumberger growth rate is 10.97% which shows
that PPL is better because its rate is more as compare to Schlumberger.
- 27 - AINI
Analysis of Financial Statements
PAKISTAN PETROLEUM LIMITED
ACTIVITY ANALYSIS
Receivable Turnover = Sales/ Average Receivables
= 31756712 / 887546
= 35.78
Average Receivables= (Opening receivable + Closing Receivables) / 2
= (381065 + 1394028) / 2
= 1775093 / 2
= 887546
Average No. of days receivables outstanding = 365 / Receivable Turnover
= 365 / 35.78
= 10.20 days
Working Capital Ratio = Sales / Average working capital
= 31756712 / 147717605
= 2.149
Average working capital = (Opening working capital + Closing Working Capital) / 2
OPERATING ASSETS Property plant and equipment 12763021Intangible assets 106562Deferred taxation 610272Stores and spares 1273261Trade debts 6941736Currency maturity of long term receivable 706309Cash and balances 17326903Receivables from SNGPL for sui field services 2395Receivables from joint venture partners 156890Advances to suppliers and others 38843Trade deposits and prepayments 137799Sales tax refundable 6700Other receivables 9922 40080613FINANCIAL ASSETS Long term investment 308396Long term receivable 211858Long term loans staff 12691Current maturity of long term investments 341131Loans and advances to staff 16795Current maturity of ling term staff 5086Accrued financial income 89527 985484TOTAL ASSETS 41066097
OPERATING LIABILITIES Decommissioning cost 1608707Long term liability for gas development surcharge 211858Deferred liabilities 645431Current maturity of long term liability 706309Trade and others payables 4903960Taxation 2677700 10753965 FINANCIAL LIABILITIES Liabilities against assets subject to finance leases 79349Current maturity of liabilities against assets 44236 123585
- 42 - AINI
Analysis of Financial Statements
COMMON STAKEHOLDERS EQUITY Share capital 6858376Reserves 23330171 30188547TOTAL LIABILITIES 41066097
NOA = Operating assets – Operating Liabilities
= 40080613 - 10753965
= 29326648
NFA = Financial assets – Financial liabilities
= 985484 - 123585
= 861899
RNOA
1. Return on net operating assets(ROA) = Operating income / Avg. NOA
= 188404401 / 24461845
= 0.768
Avg. NOA= (NOAt - NOAt-1) /2
= (29326648 - 19597043) / 2
= 24461845
ROCE
2. ROCE = PM x ATO – [FLEV x (RNOA – RNFA)]
= 0.592 x 1.0828 – [0.0285 x (0.768 - 0.706)]
= 0.64101 – [0.0285 x 0.62]
= 0.64101 – 0.1767
= 0.6392
= 63.92%
PM = Operating income / Sales
= 184404401 / 31756712
= 0.592
- 43 - AINI
Analysis of Financial Statements
ATO = Sales / NOA
= 31756712 / 29326648
= 1.0828
FLEV = NFA /CSE
= 861899 / 30188547
= 0.0285
RNFA = NFI / Avg. Financial assets
= 886655 / 1255150
= 0.706
Avg. Financial assets = (NFA t – NFA t-1) / 2
= (861899 – 1648401) / 2
= 1255150
ROCE = Operating income / Avg. CSE
= 184404401 / 25716995
= 0.717
Free cash flow
( C-I ) = Operating income – Change in net operating assets
= 184404401 – (29326648 – 19597043)
= 184404401 – 9729605
= 174674796
Dividend
d = (C-I) – Change in net financial assets + NFI
= 174674796 – (985484 – 123585) + 886655
= 174674796 – 861899 + 886655
=174699552
- 44 - AINI
Analysis of Financial Statements
Growth in net operating assets
Growth in net operating assets = Change in net operating assets / Beginning NOA
Liabilities (000’s)Operating Liabilities 2805498Estimated Liabilities for Tax on Income 1186529Dividend Payable 148720Long Term debt 602919Dividend Payable 148720Bank and Short term Loans 718610Financing Liabilities 11007960Convertible Debentures 1424990Other Long Term Debt 8288952Post Retirement Benefits 1036169Other liabilities 257849Stock Holders Equity 15919883Common Stock 8881946Income Retained 11118479Treasury Stock At Cost (2911793)Comprehensive Loss (1168749)Total Liabilities 22882138
- 46 - AINI
Analysis of Financial Statements
NOA = Operating assets – Operating Liabilities
= 18461078 - 2805498
= 15655580
NFO = Financial assets – Financial liabilities
= 4244879-11007960
= 6763081
RNOA
Return on net operating assets(ROA) = Operating income / Avg. NOA
=4948158 / 1209491
= 4.091
Avg. NOA= (NOAt - NOAt-1) /2
= (15655580 -13236598) / 2
= 1209491
ROCE
ROCE = PM x ATO – [FLEV x (RNOA – RNFA)]
= 0.3744x0.8440– [0.2667x (0.4091- 0.254)]
=22.44%
PM = Operating income / Sales
= 4948158 / 13214048
= 0.3744
ATO = Sales / NOA
= 13214048 / 15655580
= 0.8440
- 47 - AINI
Analysis of Financial Statements
FLEV = NFA /CSE
= 4244879/ 15919883
= 0.2667
Avg. Financial assets = (NFA t – NFA t-1) / 2
= (4244879 – 3589646) / 2
= 327616
ROCE = Operating income / Avg. CSE
= 4948158 / 15397776
= 0.3213
Free cash flow
(C-I) = Operating income – Change in net operating assets
= 4948158 – 2418982
= 2529176
Dividend
d = (C-I) – Change in net financial assets + NFI
= 2529176 – 655233+ 3709801
= 5583744
Growth in net operating assets
Growth in net operating assets = Change in net operating assets / Beginning NOA
=2418982 / 13236598
=0.182
- 48 - AINI
Analysis of Financial Statements
= 18%
Growth in CSE
Growth in CSE = Change in CSE / Beginning CSE
= (15919883-7591585)/7591585
=10.97%
- 49 - AINI
Analysis of Financial Statements
Pakistan Petroleum LimitedReformulate Income Statement
for year ended 30 June, 2006
Sales 31756712Field expenditure 8171060Royalties 3744822 19840830Other operating income(expenses) Other operating income 90766Other operating expenses 1127195Operating income 18804401less: Taxes Tax as reported 6788532 Tax on financial income 477429 6311103Operating income after tax 12493298plus: Financial income(expenses) Interest income 1394180 Interest expense 30096 1364084 Tax on financial income 477429 886655Operating income after tax 13379953plus: Share of profit in Bolan Mining Enterprises 21048Comprehensive income 13401001
PROFIT MARGIN RATIOS
Financial income contribution ratio = Net financial income / Sales
= 886655 / 31756712
= 0.0279
= 2.79%
Net income profit margin ratio = Comprehensive income / Sales
= 13401001 / 31756712
= 0.421
= 42%
- 50 - AINI
Analysis of Financial Statements
Schlumberger LimitedReformulated Income Statement
For the year ended 2006
Particulars (000’s)Sales (cost of goods sold) 13214048Operating Income 19230478Interest and other Income 286716Expenses:Maturity 75704Research & Engineering 619316General & Administration 4275057Interests 234916Income Before Taxes & Interest 4948158Tax on Income 1189568Income After Tax Before Interest 3758590Interest (48789)Comprehensive Income 3709851
PROFIT MARGIN RATIOS
Financial income contribution ratio = Net financial income / Sales
=375859 / 13214048
= 0.30
= 30%
Net income profit margin ratio = Comprehensive income / Sales