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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 - 1 - AINI
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Page 1: analysis of pakistan petroleum limited

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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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%

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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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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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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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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

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

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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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

0

1

2

3

4

5

6

7

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

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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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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LIQUIDITY ANALYSIS

CURRENT RATIO

Pakistan Petroleum limited 3.246

Schlumberger 1.423

0

1

2

3

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 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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0

0 . 5

1

1 . 5

2

2 . 5

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

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

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

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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

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

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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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

3

4

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

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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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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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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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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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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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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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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

20

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.

- 19 - AINI

Page 20: analysis of pakistan petroleum limited

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

Page 21: analysis of pakistan petroleum limited

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

Page 22: analysis of pakistan petroleum limited

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

Page 23: analysis of pakistan petroleum limited

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

Page 24: analysis of pakistan petroleum limited

Analysis of Financial Statements

0

50

100

150

200

250

300

350

2004 2005 2006

PPL

Schlumberger

- 24 - AINI

Page 25: analysis of pakistan petroleum limited

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

Page 26: analysis of pakistan petroleum limited

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

Page 27: analysis of pakistan petroleum limited

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

Page 28: analysis of pakistan petroleum limited

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

= [ (Current assets – Current Liabilities) + ( C.A –C.L)] /2

= [(18039558 – 7217129) + (27053297- 8332205)] / 2

= 18721092 + 10822429 / 2

= 29543521 / 2

= 147717605

Fixed assets turnover = Sales / Average fixed assets

- 28 - AINI

Page 29: analysis of pakistan petroleum limited

Analysis of Financial Statements

= 31756712 / 12072173

= 2.63

Average fixed assets = (Opening fixed assets + Closing fixed assets) / 2

= (11274763 + 12869583) / 2

= 24144346 / 2

= 12072173

Total assets turnover = Sales / Average total assets

= 31756712 /36428949

= 0.871

Average total assets = (Opening total assets + Closing Total Assets) / 2

= ( 31791802 + 41066097) / 2

= 72857899 / 2

= 36428949

LIQUIDITY ANALYSIS

Current ratio = Current assets / Current liabilities

= 27053297 / 8332205

= 3.246

Quick ratio = (Cash + Marketable securities +A/c Receivables) / Current

Liabilities

= [17326903 + (2395 + 156890 + 9922)] / 8332205

= 17496110 / 8332205

= 2.099

Cash ratio = Cash + Marketable securities / Current liabilities

= 17326903 + 0 / 8332205

- 29 - AINI

Page 30: analysis of pakistan petroleum limited

Analysis of Financial Statements

= 2.079

LONG TERM DEBT AND SOLVENCY ANALYSIS

Debt to total capital = Total debt / Total capital

= 10877550 / 41066097

= 0.264

Debt to equity = Total debt / Total equity

= 10877550 / 30188547

= 0.36

Capital expenditure ratio = Cash from operation / Capital expenditure

= 13119599 / 3324595

= 3.94

PROFITABILITY ANALYSIS

Operating profit margin = Operating income / Sales

= 19840830 / 31756712

= 0.62

= 62%

Margin before interest and tax = Earning before interest and tax / Sales

= 20219629 / 31756712

= 0.63

= 63%

- 30 - AINI

Page 31: analysis of pakistan petroleum limited

Analysis of Financial Statements

Pretax margin = Earning before tax / Sales

= 20189533 / 31756712

= 0.64

= 64%

Net income profit margin = Net income / Sales

= 13401001 / 31756712

= 0.421

= 42%

RETURN ON INVESTMENT

i. Return on assets

ii. Return on equity

iii. Return on total capital

ROA

a. Return on assets (ROA) = earning before interest and tax / Average total

assets

= 20219629 / 36428949

= 0.55

= 55%

b. Return on assets = (Net income + After tax interest expense) / Avg. total

assets

= (13401001 + 195624) / 36428949

= 13420563 / 36428949

= 0.36

= 36%

- 31 - AINI

Page 32: analysis of pakistan petroleum limited

Analysis of Financial Statements

After tax interest expense = Interest expense * (1-t)

= 30096 * (1- 0.35)

= 30096 * 0.65

= 19562

ROE

c. Return on equity = ROA + debt/equity (ROA – cost of debt)

= 0.36 + 10877550/30188547 (0.36 – 0.002)

= 0.36 + 0.36*0.358

= 0.36 + 0.12888

= 0.4888

= 48.8%

Spread = ROA – Cost of debt

= 0.36 – 0.002

= 0.358

= 35.8%

ROTC

d. Return on total capital = EBIT / Avg. Total capital

= 20219629 / 36428949

= 0.555

= 55.5%

Avg. Total capital = (Opening total liabilities + Closing total liabilities) / 2

= (31791802 + 41066097) / 2

= 72857899 / 2

= 36428949

e. Return on total capital = (Net income + After tax interest expense) / Avg.

Total liabilities

= (13401001 + 19562) / 36428949

- 32 - AINI

Page 33: analysis of pakistan petroleum limited

Analysis of Financial Statements

= 13420563 / 36428949

= 0.368

= 36.8%

LIQUIDITY ANALYSIS

- 33 - AINI

2006

Inventory Turnover 11.71

Avg. No. of days inventory in Stock 31 days

Receivable Turnover 5.0435

Avg. No. of days Receivable Outstanding 72.4days

Payable Turnover 5.188

Avg. No. of days Payable outstanding 70.4days

Working Capital Turnover 6.572

Fixed Asset Turnover 4

Total Asset Turnover 0.94

2006

Current Ratio 1.423

Quick Ratio 1.12178

Cash Ratio 0.46596

CFO Ratio 0.740

Defensive Interval 181.4 days

Page 34: analysis of pakistan petroleum limited

Analysis of Financial Statements

LONG TERM AND SOLVENCY ANALYSIS

PROFITABILITY ANALYSIS

ROE=ROA + D/E (ROA-COST OF DEBT)

=0.18+12412255/10419883 (0.18-0.003)

=0.18+1.192 (0.18-0.003)

=0.18+1.192 (0.177)

=0.18+0.211

=0.391

- 34 - AINI

2006

Debt to Total Capital 0.142

Debt to Equity 0.3

Times Interest earned 22.1

Times Interest earned (cash basis) 20.45

Capital Expenditure Ratio 0.33

CFO to Debt 1.5

2006

Gross Profit Margin 31.29%

Operating Margin 27%

Profit Margin 19.3 %

Return on Assets 18 %

Return on Equity 39%

Page 35: analysis of pakistan petroleum limited

Analysis of Financial Statements

=39

Pakistan Petroleum LimitedCommon size Balance SheetAt 30 June

2003 2004 2005 2006

ASSETS

FIXED ASSETS

Property, Plant and Equipment 30.6 38.65125 35.22642 31.07

Intengible assets 11.14 0.36 0.23 0.25

41.7 39.01 35.46 31.33

Long Term Investment - 0.53 2.05 0.75

Long term receivable 10.7 5.95 2.57 0.51

Long term loans staff 0.04 0.04 0.035 0.03

Deferred taxation 3.80 4.59 3.12 1.48

CURRENT ASSETS

Stores and spares 4.85 4.45 4.06 3.10

Trade debts 12.9 15.16 14.4 16.91

Current maturity of long term receivable 2.31 1.98 2.22 1.71

Current maturity of long term investment - - 0.00006 0.83

Loans, advances, deposits, prepayments and other receivables 1.53 2.03 2.49 1.129

Cash and bank balances 21.84 26.19 33.54 42.19

43.48 49.84 56.74 65.87

TOTAL ASSETS 100 100 100 100

LIABILITIES

SHARE CAPITAL AND RESERVES

Share capital 33.53 27.06 21.57 16.70

Reserves 19.30 36.27 45.25 56.81

52.83 63.34 66.82 73.51

- 35 - AINI

Page 36: analysis of pakistan petroleum limited

Analysis of Financial Statements

NON CURRENT LIABILITIES

Decommissioning cost 10.79 6.59 5.97 3.91

Long term liability for gas development surcharge 0.17 5.95 2.57 0.51

Liabilities against assets subject to finance lease 2.12 0.25 0.19 0.19

Deferred taxation 1.89 1.72 1.57

13.10 14.70 10.47 6.19

CURRENT LIABILITIES

Current maturity of liability for gas development surcharge 0.051 1.98 2.22 1.719

Current maturity of liabilities against assets 6.11 0.10 0.11 0.10

Trade debts 18.74 17.67 12.13 11.94

Taxation 0.13 2.18 8.229 6.52

Proposed dividend 6.70 - - -

34.05 21.95 22.70 20.28

TOTAL LIABILITIES 100 100 100 100

- 36 - AINI

Page 37: analysis of pakistan petroleum limited

Analysis of Financial Statements

SCHLUMBERGER LIMITED AND SUBSIDIARY COMPANIESCONSOLIDATED BALANCE SHEETAt 31 December

2003 2004 2005 2006

ASSETS

Current Assets

Cash 1.2 1.4 1.1 0.73

Short term Investment 14.3 17.34 18.28 12.4

Receivables less allowance for doubtful a/c 12.82 16.7 18.7 18.58

Inventories 3.97 5.1 5.6 5.46

Deferred Taxes 1.57 1.49 1.29 0.713

Other Current Assets 1.71 1.72 2.38 2.34

Assets held for sale 6.16 0.41 - -

Total Current Assets 51.74 44.12 47.32 40.23

Fixed Income Investments, held to

maturity

1.11 1.27 2 0.670

Investment in Affiliated Companies 3.88 5.5 5.47 5.29

Multi cliental Seismic Data 2.5 2.17 1.23 1

Goodwill 16.9 17.4 16.17 21.9

Intangible Assets 2.01 2.17 1.8 4

Deferred Taxes 1.58 2.15 1.83 1.8

27.98 30.66 28.5 34.66

Fixed Asset less acc. Depreciation 18.96 23.51 23.24 24.42

Other Assets 1.34 1.7 1 0.76

- 37 - AINI

Page 38: analysis of pakistan petroleum limited

Analysis of Financial Statements

TOTAL ASSET 100 100 100 100

LIABILTIES&STOCKHOLDER’ EQUITY

Current Liabilities

Account payable and accrued liabilities 16.2 18.63 19.72 16.85

Estimated liability for taxes on income 4.03 5.4 5.3 4.98

Dividend payable 0.55 0.69 0.69 0.65

Long term debt-current portion 4.44 0.896 1.5 2.6

Bank & short term loans 2.6 3.6 3 3.15

Liabilities held for Sale 6.07 0.216 - -

Total Current Liabilities 33.9 29.38 30.05 28.97

Convertible Debentures - - 8 6.24

Other Long term Debt 30.42 24.7 12 14.19

Postretirement Benefits 3.1 4.2 4 4.5

Other Liabilities 1.27 0.95 1.4 1.13

Minority Interest 1.99 2.6 2.79 -

36.78 32.45 28.19 26.06

Stockholders’ Equity

Common Stock 11.27 15.34 15.25 14.8

Income retained for use in business 27.5 39.29 44.25 48.7

Treasury Stock at cost (7.5) (12.4) (11.7) (12.75)

Accumulated other Comprehensive loss (1.9) (5.9) (5.78) (5012)

29.34 38.227 42 45.64

- 38 - AINI

Page 39: analysis of pakistan petroleum limited

Analysis of Financial Statements

TOTAL LIABILITIES 100 100 100 100

- 39 - AINI

Page 40: analysis of pakistan petroleum limited

Analysis of Financial Statements

SCHLUMBERGER LIMITED AND SUBSIDIARY COMPANIESCommon size Income statementYear ended December 31,

2003 2004 2005 2006

Operating Revenue 100 118.9 148.17 199.126

Interest and other income 100 92.54 293.215 206.17

Expenses

Cost of goods sold 100 114.13 134.1 166.5

Research and engineering 100 103.5 112 149.044

Marketing 100 62 76.1 106.75

General and administration 100 103.2 110.8 134.817

Interest 100 74.01 53.6 63.84

Income from continuing operations before

taxes and minority interest

100 202.7 453.7 755.42

Taxes on income 100 110.06 271 472.74

Income from continuing operations 100 260.4 567.6 931.76

Minority interest 100 42.63 106.24 57.02

Income from continuing operations 100 207.4 450 758.9

Income from discontinued operations 100 7.46 0.28 -

Net income 100 52.7 95.12 159.9

- 40 - AINI

Page 41: analysis of pakistan petroleum limited

Analysis of Financial Statements

Pakistan Petroleum limitedCommon size Income StatementYear ended 30 June,

2003 Base Year 2004 2005 2006

Sales - net 100 145 191.2 260.7

Field expenditure 100 105.3 116.9 130.5

Royalties 100 150.5 205.9 288.5

Amortization of past prospecting expenditure 100 - - -

Operating profit 100 191.4 276.8 401.8

Share of profit in Bolan Mining Enterprise 100 89.9 95.3 68.5

Other operating income 100 55.8 180.1 489.1

Other operating expenses 100 159.4 211.3 317.1

Profit before interest and tax 100 184.7 274.5 411.3

Interest expense 100 23.9 25.2 39.5

Profit before tax 100 187.2 278.4 417.2

Taxation 100 376.9 747.6 1046.1

Net Income 100 157.9 205.7 319.7

- 41 - AINI

Page 42: analysis of pakistan petroleum limited

Analysis of Financial Statements

Pakistan Petroleum LimitedReformulated Balance sheet

As on 30 June, 2006

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

Page 43: analysis of pakistan petroleum limited

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

Page 44: analysis of pakistan petroleum limited

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

Page 45: analysis of pakistan petroleum limited

Analysis of Financial Statements

Growth in net operating assets

Growth in net operating assets = Change in net operating assets / Beginning NOA

= (29326648 – 19597043) / 19597043

= 9729605 / 19597043

= 0.496

= 49.6%

Growth in CSE

Growth in CSE = Change in CSE / Beginning CSE

= (30188547 – 21245444) / 21245444

= 8943103 / 21245444

= 0.420

= 42%

- 45 - AINI

Page 46: analysis of pakistan petroleum limited

Analysis of Financial Statements

Schlumberger LimitedReformulated Balance Sheet

As on December 2006

Assets (000’s)Operating Assets 18461078Cash 165817Receivables 4242000Inventories 1246887Deferred Taxes 162884Current Assets (other) 585018Fixed Assets less Depreciation 5576041Goodwill 4988558Intangible Assets 907874Deferred Taxes (other) 412802Other Assets 173197Financial Assets 4244879Short Term Investments 2883056Fixed Income Investments 153000Investments Affiliated Companies 1208823Total Assets 22882138

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

Page 47: analysis of pakistan petroleum limited

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

Page 48: analysis of pakistan petroleum limited

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

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Page 49: analysis of pakistan petroleum limited

Analysis of Financial Statements

= 18%

Growth in CSE

Growth in CSE = Change in CSE / Beginning CSE

= (15919883-7591585)/7591585

=10.97%

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Page 50: analysis of pakistan petroleum limited

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%

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Page 51: analysis of pakistan petroleum limited

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

= 3709851 / 13214048

= 0.280

= 28%

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