Finance Report On Oil Industry of Pakistan

The Petroleum Industry of Pakistan
Institute Of Business Management

Submitted to: Sabera Sulaiman
Course: Introduction to Business Finance
Course Code: FIN 201-F
Section: F
Prepared by:
Aiman Shah
16074
Bakht Awar Tariq
15546
Heera Tariq Farooque 14248
Sadia Shahid
16009
Institute of Business Management | Confidential
Acknowledgement
. You need to be aware of what others are doing, applaud their efforts,
acknowledgment their successes, and encourage them in their pursuits. When
we all help one another, everybody wins.
---JIM STOVALL
Keeping this in view, it would be unfair on our part if we do not thank a
mentioned few. First, we would like to thank Allah Almighty for making this
assignment to complete on high note.
We owe our profound gratitude to Madam Sabera Sulaiman, to help us, guide
us, and provide us with all the necessary information needed to complete this
report.
As the leader of this group I want to thank my group members for their
continuous support, hard work, and efforts in gathering, analyzing, and
compiling this report.
The work division is as follows:
Aiman Shah was assigned to work on Individual Analysis of PPL and
Comparative Index Analysis of the three companies.
Bakht Awar Tariq was assigned to work on Individual Analysis of BYCO,
Comparative Ratio Analysis of the three companies, and the overall
compiling and formatting of the final report.
Heera Tariq Farooqui was assigned to work on the Executive Summary,
Introduction of all companies, and Individual Analysis of PSO for 2013.
Sadia Shahid was assigned to work on Individual Analysis of PSO for 2014
and Comparative Common Size Analysis of the three companies.
Table of Contents
EXECUTIVE SUMMARY
INTRODUCTION
BYCO Petroleum Private Limited
Pakistan State Oil (PSO)
Pakistan Petroleum Limited (PPL)
INDUVISUAL AND COMPARATVE ANALYSIS

Ratio Analysis
Comparative Ratio Analysis
Common Size Analysis
Comparative Common Size Analysis
Index Analysis
Comparative Index Analysis
CONCLUSION
APPENDEX
References
Annual Accounts
Executive Summary
The oil and gas sector of Pakistan is on the rise and working hard to fulfill the national demand.
Oil and gas are the two of the key components of the energy mix contributing around 80% share
to the 64 million TOE of energy requirement in the country.
Industry is growing very quickly and the drilling activities in the country are going above the
average. There were 76 well drilled in the last year and it was never ever seen in the past years to
drilled so may wells in a single year.
According to last Economic Survey 2013, Pakistan estimated that there are 27 million barrels of
reserves available that are recoverable for the use and Pakistans consumption is 19.21 million
tones. The average oil production was 66,032 barrels per day in 2013 and it was the growth of
around 13% over the last year. There are total 7 oil Refineries, 6772 petrol stations are operating
in Pakistan and 258 oil & gas discoveries and 803 wells drilled till now.
The liquidity ratios of Pakistan oil industry is not much efficient as it should need to be. Current
ratios give us the sense about the ability of a company to turn its product into cash. The current
ratio of industry is decreasing with the passage of time which means the ability of industry to pay
its short term liabilities is getting low as compare to past few years. Also the cash ratio of the
industry is not much stronger as the industry has to pay high debt to its suppliers.
It means that ratio of cash and marketable securities against current liabilities is very low but
cash ratio is increasing with the passage of time and working hard to pay its liabilities. There are
several reasons behind lowness of these ratios. The main reason is the high amount debt taken by
industry from its suppliers and in order to pay those debts, industry does not have much cash in
hand. As per profit of the industry concern, it is increasing with the passage of time.
Profit of oil industry has been increased in the ninth month or 3rd quarter of fiscal year 14 while
it was decreasing before. It is come to know that the earning of oil and gas explorers increase by
18% in third quarter of FY14 while in the previous quarter ended in Dec 2013, the earning of the
sector declined due to the appreciation of Pak rupee against dollar. Major oil and gas exploration
and production companies working in Pakistan include Pakistan Oilfield (POL), Gas
development Company and Pakistan Petroleum.
BYCO in comparison to its competitors PPL and PSO is at an alarming situation with a low profitability
and liquidity. Even though there has been a little improvement in the FY14 because of the
tremendous amount of Sales earned in this financial year, the accumulating losses, finance and
exchange losses have adversely affected the overall financial position of the firm. PSO on the
other hand has earned tremendous profits in the FY14 and is leading the market at the moment.
Profits earned by PPL are not as huge as PSO but PPL is still at a better position when compared
to BYCO as it can sufficiently cover its operational and fixed costs by the profits earned.
Introduction
BYCO PETROLEUM PRIVATE LIMITED
BYCO carries out businesses like oil refining, chemical manufacturing, petroleum marketing,
and petroleum logistics. Pakistans emerging energy companies are headquartered in Karachi
working to fulfill the energy demand within and beyond Pakistan.
Marketing and Distribution

BYCO's operational refinery is capable of refining 35,000 barrels a day of crude oil into useful
products like Liquefied Petroleum Gas, Light Naphtha, Heavy Naphtha, High Octane Blending
Component, Motor Gasoline etc. BYCOs refining complex further expanded by the start of
another refinery that possesses a capacity of 120,000 barrels per day.
BYCO is the company with the largest capacity crude oil storage tanks in the country and its
petroleum distribution network allows efficient movement of petroleum products and provides
greater economies of scale. BYCO has retail outlets in more than 80 cities all over Pakistan and
is an emerging leader in oil marketing sector.
Business Environment
Environmental Health and Safety
BYCO adopts best practices with a diverse and skilled workforce of 800 dedicated employees
that protect the environment, including reducing the quantity of emissions, developing
opportunities for recycling, pollution prevention, and efficient use recyclable materials.
Corporate Social Responsibility
BYCO is working to improve the quality of the communities around which it operates by
carrying out actions like:
Drinking water to the locals living in villages near the MouzaKund site
Medical relief camps.
Timely and generous response to flood victims of Balochistan in 2010.
Evacuation of local residents during cyclone PHET, which hit parts of Balochistan.
Future Plans
BYCO Petroleum along with its wholly owned subsidiary BYCO Terminals Pakistan Limited is
considering a merger with its holding company, BYCO Oil Pakistan Limited to help raise
efficiency of the refining plants, bring economies of scale, and restructure debt.
PAKISTAN PETROLEUM LIMITED (PPL)

PPL has been facilitating the energy sector 1950s and is forerunner of the natural gas industry in
the country contributing today over 20 percent of Pakistans total natural gas supplies. It is also
producing Natural Gas Liquid, Liquefied Petroleum Gas and crude oil.
Marketing and Distribution

PPL Europe E&P Limited has come to being as PPL has acquired
100% shareholding of MND E&P Limited, a company incorporated in England and Wales. The
company has also established a wholly-owned subsidiary, PPL Asia E&P B.V. with corporate
seat in Amsterdam, Kingdom of Netherlands.
PPL has eight producing fields across the country which include Sui that is Pakistans largest gas
field, Adhi, Kandhkot,Chachar, Mazarani, Adam, Adam West and Kinza. Moreover it also
operates in fifteen partner-operated producing fields, including Qadirpur the countrys second
largest gas field.
PPL follows an exploration agenda to enhance the recovery of hydrocarbon and restock
reserves. PPL and its subsidiaries have 47 exploration assets out of which company operates 27,
including one contract in Iraq, and 20 being operated by joint venture partners.
Health, Safety and Environment
PPL adheres to best practices of corporate governance, employee health and environment safety
while carrying out its operations. As a result, Monitoring and Inspection, Drilling and Well
Engineering, Joint Operations, Mazarani, Adhi and Kandhkot fields, Sui Field Gas Compressor
Station, Sui Production, and Sui Purification stand certified for ISO 9001 Quality Management
System.
PPL plays a significant role as a responsible corporate citizen through its Sui Model School that
was established in 1957 for children of workers and local communities. The PPL Welfare Trust
started in 2001 and currently caters infrastructure development, education, health and socioeconomic improvement of disadvantaged communities near the companys operating areas.
New Business Ventures

Due to the issues of depleting reserves, macro-economic factors and fluctuating oil prices, the
Exploration and Production sector has become highly competitive. In order to face these
challenges, Pakistan Petroleum Limited has established a Business team of skilled professionals
that helps management in the acquisition of reserves and discover related opportunities in the
business value chain.
New ventures are to enhance the companys exploration program by identifying, evaluating and
acquiring exploration and production assets and establishing strategic partnerships with other
Exploration and Production companies to increase opportunities.
PAKISTAN STATE OIL (PSO)

Pakistan State Oil (PSO) being the countrys largest energy company is involved in the
marketing and distribution of Petroleum, oil and lubricant products such as Motor Gasoline,
High Speed Diesel, Furnace Oil, Jet Fuel, Kerosene, CNG, LPG, and Petrochemicals. PSO has
been working to fulfill its commitment to the energy security of Pakistan through these products
and a recent diversification into a power generation fuel, Liquefied Natural Gas (LNG).
Marketing & Distribution

PSOs large distribution network consists of 3,754 outlets,26 company-owned and companyoperated sites that serve the Retail sector and bulk customers. The company-operated sites are
flagship stations that maintain top quality products and close supervision in order to increase
efficiency, service and customer care. PSO is fueling more than 2,000 industrial units, business
houses, power plants and airlines today.
Health Safety & Environment
PSOs HSE Management System focuses on protecting peoples health, ensuring minimum
injuries and reducing environmental impact of any products and processes. HSE compliance is
being monitored in relation with the relevant laws and regulations. Thus PSO strongly strives for
continual improvement.
PSO focuses on undertaking social, philanthropic or community development that will benefit
the broader interests of the community in the following areas:
Health Sector
Community Building
Children Welfare
Women Empowerment
Sports Development
Heritage Preservation
Relief Activities
Acquisition of Products
The Motor Gasoline and High Speed Diesel is mainly consumed by the automotive sector
whereas Furnace Oil is for power plant usage.
PSO imported Motor Gasoline, High Speed Diesel and other black and white oil products to
meet the traditional fuel supply deficit in the country. These imports arrive in Pakistan at the
FOTCO and Keamari where oil vessels are berthed and the product is offloaded and moved to
storage facilities at ZOT and Keamari via pipelines. During FY15, PSO sourced a total of 12.627
Million Metric Tons (MMT) of refined oil products with 9.8 MMT being imported while 2.83
MMT was uplifted from refineries.
PSO is steadily progressing in the field of lubricants. It is catering to a number of sectors
including automotive, Hi-street and industrial consumers through the provision of various
products.
10
Individual & Comparative Analysis

RATIO ANALYSIS

2014
2013
%
%
%
%
%
%
0.45%
-6.83%
-6.42%
-1.83%
-117.52%
-10.02%
0.12%
-3.15%
-3.41%
2.67%
66.23%
-5.15%
Times
Times
1.02
0.79
0.70
0.50
Days
Days
Days
Times
Times
Times
Times
Times
Days
Days
28.69
44.11
95.40
12.72
8.27
3.83
1.56
6.20
72.80
-22.60
23.90
60.30
111.00
11.60
5.46
3.29
1.51
3.76
84.20
-26.80
Protability Ratios
Gross profit margins
Profit before tax margins
Net profit margins
EBITDA margin to sales
Return on equity
Return on assets
Liquidity Ratios
Current ratio
Quick / Acid test ratio
Activity / Turnover Ratios
Inventory turnover
Account receivables turnover
Account payables turnover
Inventory turnover
Account receivables turnover
Account payables turnover
Total assets turnover ratio
Fixed assets turnover ratio
Operating cycle
Cash conversion cycle
11
Financial Leverage Ratios

Interest coverage ratio
Debt to equity ratio
Debt to assets ratio
Equity Ratio
Times
0.70
1.77
0.915
0.085
0.47
3.03
1.079
0.778
Rs.
(6.07)
(2.31)
Market Value Ratios

Earnings per share
Other Ratios
Du-Pond Ratio Analysis
RoA = Net profit after Tax/ Total Sales x Total Sales/Total Asssets
= Net Profit Margin x Total Assets Turnover
2014 = -6.42 x 1.56
2013 = -3.41 x 1.51
= -10.02
= -5.15
RoE = RoA x Equity Multiplier

2014 = -10.02 x (1/0.085)
= -117.52
2013 = 5.15 x (1/0.0778)

= 66.23
12
ANALYSIS
PROFITABILITY RATIOS
PROFIT MARGINS
The increase in Sales is enough to cover the Cost of sales and selling and admin expense, as
illustrated by a positive and increased Gross profit margin in 2014.
The major contributors behind the negative values of Net Profit margin and EBITDA margin to
Sales are many: financial charges (the 16 percent year-on-year increase due to mark-up incurred
on long term loans currently due or payable), Exchange charges, and liquidity and cash flow
crises.
ROA AND ROE
ROA and ROE in 2014 are -10.02 and -117.52 respectively. Because BYCO financed its
operations mainly through borrowing, ROA gained a boost against ROE and rose above it.
However, with debt, the ROE shrank to -117.52% compared to 66.23% in 2013 hence indicating
BYCOs inefficiency to generate good returns for their investors.
LIQUIDITY RATIOS
CURRENT AND QUICK RATIO
There has been slight improvement in liquidity position of BYCO in 2014 compared to 2013 but
the overall liquidity remains low and; therefore, the company remains under liquidity crises.
Even though the Current ratio displays remarkable recovery of 1.02 from 0.70 (2014 and 2013
respectively) the Acid test ratio only increased to 0.79 in 2014, showing that major contribution
came mainly from increase in inventory
TURNOVER RATIOS
INVENTORY TURNOVER RATIOS
As illustrates above, there has been cash tied up in inventory thus becoming one of the reason for
BYCO to suffer liquidity problems. Another indicator to explain this increase is the rise in the
days of Inventory turnover to 28.69 days in 2014 from 23.60 days in 2013.
Inventory Turnover was 12.72 times in 2014 because the company experienced a the sharp
increase in COGs the same year.
ACCOUNT RECEIVABLE TURNOVER RATIOS
13
An improvement is seen in this ratio as Account Rec. are paying more quickly (within 44.11 day
in 2014) at a higher turnover rate of 8.27 time in 2014 compared to the previous year (60.30 days
and 5.46 times in 2013 respectively). This could be due to an increase in sales in the year as well
as relaxation in the credit policy of BYCO in order to receive cash payments quickly (and
improve its liquidity standing)
ACCOUNT PAYABLE TURNOVER RATIOS
An increase in sales by 40% (in 2-14), Accounts Payable have also increased simultaneously
(spontaneous liability) and with this its turnover has reached up to 3.83 times from 3.29 times in
2013. Regardless of its illiquidity problem, BYCO was able to pay them off in 95.40 days in
2014 compared to its Account Payable turnover of 111 days in 2013
TOTAL ASSETS & FIXED ASSETS TURNOVER RATIOS
There was only a slight increase in Total Assets turnover to 1.56 in 2014 from 1.51 in 2013 that
were finance by borrowings (ROA). Much of which came from financing in fixed assets (fixed
assets turnover increase to 6.20 in 2014 from 3.76 in 2013). No short-term investment took place
in 2014 apart from purchase of inventory.
OPERATING & CASH CONVERSION CYCLE
Inventory and Account Rec. Turnover has experienced improvement in 2014, as per the
operational cycle indicates, the overall cash from these assets is received within 72.80 days (11.2
days earlier than 2013). However, ever after improving its Account Payable turnover, the firm
still lags behind 23 days in its Cash Conversion Cycle because it takes more days to pay off its
Account Payable than it receives cash from using its inventory and receiving cash payments from
Account rec.
FINANCIAL LEVERAGES
INTEREST COVER RATIO
The Interest cover ratio in 2014 increased to 0.70 from 0.47 in 2013 indicating that BYCO was
successful in decreasing its loss earnings (before tax and interest expense deductions).
DEBT TO EQUITY & EQUITY RATIO
The Debt to Equity ratio improved for the company was successful to pay off 50% of its debts.
However, its equity position fell due to low investments and BYCOs inability to raise funds
internally as illustrated by its Equity ratio position at 0.085 in 2014 from 0.778 in 2013.
14
DEBT TO ASSET RATIO

BYCO is comparatively less in risk in 2014 than in the previous year, as now its Debt ratio is
less than 1 that is at 0.915 compared to 1.079 in 2013. This was mainly because the company
was successful in paying off 50% of its debts and reducing the risk of unable to pay it back ( the
amount used to purchase assets).
MARKET VALUES
EARNINGS PER SHARE
The share prices further reduced to RS-6.07 in FY14 from RS-2.31 for the company was unable
to announce dividends with a statement that the company cntinues to incur losses. Operating
losses and Exchange losses used up all the Retained Earnings on the cost of payment of
dividends, strengthening the market share price of BYCO, and raise funds through issuance of
shares. This became the main reason why BYCO equity ratio crumbled.
OTHER RATIOS
DU-POND ANALYSIS
The Du-pond Analysis gives a clearer insight of BYCOs situation. The losses are illustrated by a
negative Profit margin in both financial years; however, FY14 showed improvement as the
Assets Turnover slightly increased. But because the overall ROA is negative and BYCO is highly
geared (debt to equity ratio 3.03 and 1.77 in FY13 and FY14 respectively) the overall ROE is
negative (-117.02) indicating that BYCO has faced losses for long and ultimately has affected its
equity capital as it decreased with every loss incurred.
PAKISTAN PETROLEUM LIMITES (PPL)
15
16
ANALYSIS
LIQUIDITY RATIOS
CURRENT RATIO
A 38.68% decline in current liabilities and a 5% increase in current assets in 2014 result in a
72.34% increase in the current ratio of PPL. This means that there has been an increase in the
companys ability to meet its short term obligations.
QUICK RATIO
Inventory is the least liquid of all current assets so in Quick Ratio it is deducted. Because there
has been a 24.98% increase in inventories during 2014, the companys quick ratio is slightly
lower than its current ratio. However, the huge decline in current liabilities cancels the effect of
the increase in inventories. Hence, the companys true ability to meet its short term debts has
increased 71.05%.
FINANCE LEVERAGE RATIOS

DEBT TO EQUITY RATIO
Because there has been a 21.06% increase in the common equity and only a 10.35% increase in
total liabilities, PPL has experienced a 2.22% decline in its debt to equity ratio. This shows that
the company has been able to improve its equity in 2014 as compared to 2013. In 2014, the debt
to equity ratio is 0.44:1. It means that for every Rs.1 invested, the company has raised a debt of
Rs.0.44.This shows that the company is less risker as compared to 2013.
DEBT TO TOTAL ASSETS RATIO
As there was a 13.39% decline in total liabilities and only a 10.35% increase in total assets, PPL
experienced a 21.55% decline in Debt to Total Assets ratio. This means that fewer assets are now
financed by debt and more through equity.
LONG TERM LIABILITY TO TOTAL CAPITALIZATION
Long term liability to total capitalization has declined 2.4%. This is because long term debt has
increased 17.55% in 2014 but long term financing has increased 20.4% from 2013 to 2014. This
means that PPL has a lower long term debt in 2014 which gives it a better financial standing.
17
COVERAGE RATIOS
INTEREST COVERAGE RATIO
In 2014, the companys ability to cover its interest has improved by 7.8%. This is because
interest has only increased 9.04% while EBIT has increased 16.8% in 2014. This gives PPL a
better financial standing when creditors will evaluate it.
ACTIVITY RATIOS
INVENTORY TURNOVER RATIO
The companys ability to sell its inventory has decreased by7.53% in 2014. COGS has increased
by 15.5% and inventory has increased 24.98% due to which the companys cash is tied up in its
inventory. This is why the company is able to sell inventory in 2 additional days. PPL has a poor
asset management.
ACCOUNTS RECEIVABLE TURNOVER RATIO
The companys account receivable turnover rate has decreased by 4.75%. This is because sales
have increased 18% however, 23.6% increase has been reported in accounts receivables. This
means that the companys cash is tied up in its accounts receivable. The days in which the
company converts its account receivable to cash has increased 8 days. Therefore, the company
has a poor asset management.
OPERTING CYCLE
In 2014, it takes PPL 26 days to convert inventory into sales and 152 days to convert accounts
receivable into cash. Means the operating cycle is 178 days long. However, due to 2 days
increase in inventory turnover and 8 days increase in accounts receivable turnover. Thus, as
compared to 2013, in 2014 the operating cycle has increased 10 days.
TOTAL ASSETS TURNOVER RATIO
In 2014, the company recorded an 18% increase in Net sales and 10.35% increase in total assets.
Total assets turnover in 2014 is 0.5:1. Since there is a higher increase in net sales, total assets
turnover rate has increased 6.38%. This means that each assets ability to generate revenue has
increased 6.38%.
18
GROSS PROFIT MARGIN
The companys gross profit margin is 58% in 2014. It has increased only 1.75% because the
increase in gross profit (19.883%) and net sales (18%) is almost the same. This means that the
company can charge a price that is 1.75% higher as compared to 2013.
NET PROFIT MARGIN
Net profit margin has only increased 2.44%. This is because net sales has increased 18% while
increase in net profit after tax is 2.75% more than net sales, that is 20.75%. This means that for
each Rs.1 of sales, the company is able to generate 2.44% more revenue.
RETURN ON ASSETS AND RETURN ON EQUITY
Only 5% increases has been reported in 2014. Net profit after tax has increased 20.75% while
total assets have increased only 10.35%. This means that the assets are able to generate 5% more
revenue in 2014 as compared to 2013.There is no increase in ROE because the increase in
common equity and net profit after tax is same.
MARKET RATIOS
EARNINGS PER SHARE
EPS increase from 21.36 in 2013 to 25.79 in 2014. PPL gave preferred dividends of PKR 42000
in both 2013 and 2014. Because the Net profit after tax increased in 2014, EPS increased.
BOOK VALUE PER SHARE

Book Value per Share increased in 2014 from 0.0912 to 0.0921. This is because common equity
of PPL increased in 2014. So, it is beneficial for investors, although slightly, that on liquidation
they will receive an amount higher than that of 2013.
19
MARKET/BOOK RATIO
In 2014, Market/Book Ratio increased from 2297.58 to 2366.34. This means that for each Rupee
the investor is willing to pay 2366.34. The value of the shares is undervalued in the books of the
firm because the Market price is higher than the book value per share.
Note:
The date of Market Price in 2014 is 28th June, 2014.
The date for Market Price in 2013 is 28th June 2013
OTHER RATIOS
DU PONT ANALYSIS
Increase in ROA has been reported because there has been a higher increase in Total assets
turnover rate (i.e. 6.4%) as compared to net profit margin (i.e. 2.4%). While no increase has been
reported in ROE because increase in NPM is only 1%, increase in TATO is only 0.05% and
increase in Equity Multiplier is 0.14. Thus, no significant effective is observed.
20
21
ANALYSIS
LIQUIDITY RATIOS
CURRENT RATIO
There is a very slight increase of 6% in the current ratio for 2014 when compared to that for
2013. The current ratio for 2014 is 1.09:1 which means for every rupee of current liability, 1.09
rupees of current assets is required. This shows that PSO can easily cover its current liabilities
with its current assets.
QUICK RATIO
The quick ratio in 2014 has increased to 0.79 from 0.54 in 2013 due to the circular debt situation
resulting in an increase in receivables from power sector.
LEVERAGE RATIOS
DEBT TO EQUITY RATIO
There is no significant change in the debt to equity ratio for both the years 2013 and 2014. This
is because the 32.6 % increase in the total debt is covered by a similar increase of 29.7% in the
shareholders equity. A high ratio of 3.65 in 2014 means that PSO is greatly financed by debt as
for every 1 rupee being provided by shareholders, creditors are providing 365 rupees. So PSO is
going to experience difficulty with creditors because of this excessive debt ratio.
DEBT TO TOTAL ASSETS RATIO
The debt to assets ratio for 2014 is 0.79 whereas that for 2013 is 0.78. This shows that there is no
significant change between the two years because there is a 32 % increase in the total assets in
2014 which is covered by a 32.6 % increase in the total debt in the same year. The ratio of 0.79
shows that a 79% of PSOs assets are financed with debt so there is a greater financial risk.
LONG-TERM LIABILITY TO TOTAL CAPITALIZATION
There is an increase in the long-term liability to total capitalization ratio from 0.06 in 2013to
0.07 in 2014. This is because the long term debt has increased by 21.4 % but the long term
financing has increased by 29.1 %.
COVERAGE RATIOS
INTEREST COVERAGE RATIO
The Interest cover ratio in 2014 is 4.45 which is greater than 3.53 of 2013. The increase is due to
an increase in EBIT by 59%.
22
ACTIVITY RATIOS
INVENTORY TURNOVER RATE
The inventory turnover rate has increased from 12.20 in 2013 to 16.33 in 2014. A high ratio of
16.33 suggests that PSO has an efficient inventory management. The 33.85 % increase is due to
an increase of 7.96 % in the costs of goods sold.
INVENTORY TURNOVER IN DAYS
The number of days before inventory is turned into accounts receivable through sales are 22 for
the year 2014 whereas that for 2013 are 30. The decrease in the number of days shows that in
2014 the inventory was sold faster.
ACCOUNTS RECEIVABLE TURNOVER RATE
The accounts receivable turnover rate has decreased by 52.4%.This is because sales have
increased by 9%. The turnover rate in 2014 is 8.04 which is less than 16.90 in 2013 which means
cash is tied up in the accounts receivable as it takes more time between a typical sale and cash
collection.
ACCOUNTS RECEIVABLE TURNOVER IN DAYS
The number of days in 2014 for which receivables were outstanding before being collected were
45 whereas the accounts receivable turnover in days for the year 2013 was 22. This means in
2014 the cash is tied up in receivable for a greater time period.
OPERATING CYCLE
The operating cycle has increased by 4 times because of an increase in receivables from the
power sector in account of circular debt situation.
TOTAL ASSETS TURNOVER RATE
The turnover rate has increased by 5% due to an increase in the sales by 9% and an increase of
32% in the total assets. The 5% increase in the turnover rate indicates that PSO has become more
efficient in utilizing its total assets in generating sales in 2014.
23
GROSS PROFIT MARGIN
There is no change in the gross profit margin for both the years because there is an equal increase
of 8% in the gross profit and the net sales.
NET PROFIT MARGIN
There is a 60 % increase in the net profit margin as shown by the figures of net profit margin that
have increased from 1.15% in 2013 to 1.84% in 2014. This is because of an increase in other
income by 229% which includes amount received in respect of interest income from IPPs.
RETURN ON ASSETS
There is a 31 % increase in ROA due to a 32% increase in the total assets and 73% increase in
the net profit after tax. This means that PSO employs more assets to generate 31% more revenue
in 2014 than 2013.
RETURN ON EQUITY
There is a 33% increase in the ROE because there is an increase of 30% in the equity and an
increase of 73% in the net profit after tax. A greater increase in the net profit after tax than the
increase in equity results in a higher ROE. A higher ROE in 2014 reflects PSOs acceptance of
strong investment opportunities and effective expense management.
MARKET/INVESTMENT RATIOS
EARNINGSPER SHARE (BASIC)
The earning per share has increased by 60% due to an increase of 73% in the net profit after tax.
MARKET VALUE PER SHARE (YEAR END)
There is a 17.6% increase in the market value per share. This shows that PSOs worth in the
market place has increased which is why it owns a good position in the market.
DIVIDEND PER SHARE
The dividend per share has increased from Rs 5 in 2013 to Rs 8 in 2014. There is more security
for the shareholders as PSO decides to give more dividends because of a larger increase in its net
profit after tax.
PRICE/EARNINGS RATIO
Price earnings ratio has decreased by 23% due to an increase in the earnings per share caused by
a 73% increase in the net profit after tax, which is not reflected in the prevailing market value at
year end.
24
COMPARATIVE RATIO ANALYSIS

PROFITABILITY RATIO
The Profitability standing of BYCO compared to its competitors is very poor. Out of the three,
PPL has the best profitability position and BYCO has the worst among the three companies.
Although the three companies have a positive Gross Profit margin, BYCO lags behind by a very
large gap of only 0.45% even after increasing its sales to 40% in 2014. PPL and PPL have a
Gross Profit margin of 3.10% and leading them is PSO at 58%.
BYCO has been incurring losses for consecutive years and do has negative Net Profit margin of
-6.42%. As a result BYCOs ROA and ROE are dangerously lower. The other two companies are
performing very well that is reflected it their ROE and ROA (5.86% and 27.75% respectively of
PPL and 21% and 28% respectively of PSO)
This illustrates that BYCOs profitability standing is lower that its competitors in the oil industry.
LIQUIDITY RATIO
BYCO and PSO have almost similar liquidity standing as their quick ratio is less than 1 (0.79
respectively), hence illustrating that both these companies are facing liquidity problems. PPLs
Liquidity seems very impressive as its Quick ratio is at 3.9 and Current ratio at 4.05.
This illustrates that PPL is has a good current asset management for not much of its cash is ties
up in inventory, unlike BYCO and PSO having a Current ratio of 1.77 and 3.73 respectively.
ACTIVITY RATIO
As per the ratios, PSO has the finest position in managing its business operations, with the
quickest operating cycle of 25 days, highest inventory, account rec., and total assets turnover
rates at 16.33, 8.04, and 3.19 respectively. BYCO was slightly behind but was able to secure a
good standing here. However, its overall operating cycle took about 73 days, which is 48 days
later than PSO. The activity ratios of PPL illustrate poor inventory and account rec. management
as its operating cycle takes 178 days in total to receive cash. This is because PPL is unable to
make its account rec. pay on time (Account Rec. turnover rate 2.41 and 152 days)
25
FINANCE LEVERAGE & COVERAGE RATIO

The overall position of BYCO in terms of Finance Leverage ratios is not up to the mark. They
are financing most of their assets and other business operations through debt and have a high
financing risk. However, comparing the other companies, PPL and PSO are also facing similar
crises. Although PPL was able to maintain its Debt to Equity ratio less than 1, but it failed to
control its gearing (Debt to Asset and Long-term Capitalization Ratio) as it financed much of its
assets with borrowings hence putting itself at greater risk than the rest of the two companies.
MARKET VALUE
BYCO has been earning losses for consecutive years now and so has exhausted all its reserves to
pay any dividends to its shareholders. Due to this, over the years its share praises have fallen and
ultimately let to an EPS of RS-6.07/-when its competitor, PSO was able to maintain its EPS at
RS 80.31/- in 2014 and 25.4% of PPL in 2014.
DU-POND ANALYSIS
Du Pond Analysis illustrates an overall profitability, Assets management and Debt analysis for
any company. ROE and ROA together provide a clear picture of any company managements
efficiency and effectiveness.
In comparison with PPL and PSO, BYCOs management is very ineffective and inefficient as
both the ROE and ROA are below the standards marked by its competitors. PSO and PPL have
approximately similar ROE (27.76 and 28 respectively) compared to BYCOs ROE at -117.52,
illustrating that compared to the rest, BYCOs management is not utilizing its shareholders
equity as efficiently as it should.
Similarly, BYCOs ROA also illustrates a negative value at -10.02 compared to PPL and PSO
ROA at 21 and 5.87 respectively. This further explains why BYCO has a negative ROE because
the firm is generating losses and its borrowing money in order to finance its operations.
26
COMMON SIZE ANALYSIS

PROFIT AND LOSS ACCOUNT
For the year ended 30 June

2014
2013
2014
2013
(Rupees in
000)
92,545,372
92,124,317
421,055
795,470
1,589,243
2,384,713
(1,963,658)
(1,813,543)
1,081,858
(2,695,343)
(2,793,202)
(836,051)
(6,324,596)
66,187,006
66,110,821
76,185
621,400
694,267
1,315,667
(1,239,482)
(1,590,883)
3,581,055
750,690
(2,645,271)
(190,025)
(2,084,606)
100.00%
99.55%
0.45%
0.86%
1.72%
100.00%
99.88%
0.12%
0.94%
1.05%
-2.12%
-1.96%
1.17%
-1.87%
-2.40%
5.41%
-3.02%
-0.90%
-6.83%
-4.00%
-0.29%
-3.15%
(515,784)
(350,709)
-0.56%
-0.53%
176,002
(174,707)
(2,259,313)
0.98%
0.27%
Profit/Loss after taxation
903,234
387,450
(5,937,146)
-6.42%
-3.41%
Loss per share - basic / diluted
(6.07)
(2.31)
0.00%
0.00%
Sales
Cost of sales
Gross profit
Administrative expenses
Selling and distribution expenses
Operating loss
Other charges
Other income
Financial charges
Exchange difference
Profit/Loss before taxation
Taxation
- Current
Prior year
- Deferred
BALANCE SHEET
As at 30 June
2014
2013
2014
14,928,448
5,729,258
7,314
20,665,020
17,624,944
2,957
5,729,258
13,571
23,370,730
25.19%
9.67%
40.14%
0.01%
13.05%
0.01%
0.03%
204,300
8,777,507
10,244,919
742,706
779,914
435,052
472,635
16,931,504
38,588,537
59,253,557
163,318
5,703,512
12,123,545
502,135
1,203,129
281,126
560,465
20,537,230
43,907,960
0.34%
14.81%
17.29%
1.25%
1.32%
0.73%
0.80%
28.57%
65.12%
100.00%
0.37%
12.99%
27.61%
1.14%
2.74%
0.64%
1.28%
46.77%
100.00%
9,778,587
(24,057,777)
(14,279,190)
19,330,709
9,778,587
(18,445,525)
(8,666,938)
5,256,257
16.50%
16.50%
22.27%
22.27%
32.62%
11.97%
14,528,673
4,948
87,478
1,794,638
16,415,737
15,468,815
31,913
62,707
2,284,865
17,848,300
24.52%
0.01%
0.15%
3.03%
35.23%
0.07%
0.14%
5.20%
27,981,013
416,985
6,402,108
2,470,411
515,784
37,786,301
59,253,557
20,176,268
463,709
6,800,000
1,636,118
394,246
29,470,341
43,907,960
47.22%
0.70%
10.80%
4.17%
0.87%
63.77%
100.00%
45.95%
1.06%
15.49%
3.73%
0.90%
67.12%
100.00%
27
2013
(Rupees in 000)
ASSETS
NON CURRENT ASSETS
Property, plant and equipment
Intangible asset
Long term investment - at cost
Long term loan and recievable
Long term deposits
CURRENT ASSETS
Stores and spares
Stock in trade
Trade debts - unsecured
Loans and advances - considered good
Trade deposits, prepayments and other receivables
Accrued mark-up
Cash and bank balances
Non - current asset held for sale
Total Assets
EQUITY AND LIABILITIES
SHARE CAPITAL AND RESERVES
Share capital
Accumulated losses
Surplus on revaluation of property, plant, and
equipment
NON CURRENT LIABILITIES
Long term loans and accrued mark-up
Liabilities against assets subject to finance lease
Long term deposits
Deferred liabilities
Contribution towards right issue of shares
Loan from sponsor - Unsecured
Term finance certificates - Secured
CURRENT LIABILITIES
Trade and other payables
Accrued mark-up
Short term borrowings - secured
Current portion of non current liabilities
Provision for taxation
Contingencies and commitments
28
ANALYSIS:
As per the reasons mentioned in the above section, the overall profitability and liquidity is not at
a good position of BYCO. The FY13 was a tremendous year for BYCO in terms of revenue
generation compared to previous year (FY12). However, earnings remained in the area of
concern for the company. Amid liquidity concerns, depreciating local currency versus dollar, the
turnover tax regime, the refinery and the oil marketing firm saw a 3.4 times increase in its
revenues in FY13. This was verily due to increase in refinery throughput. However, higher costs
like transportation, power and fuel pulled down the earnings in the loss area, eating away all the
gains that came from the top.
Comparing the FY13-FY14, the firm achieved its record turnover, rising by 40 percent year-onyear. The growth in top line was primarily due to improved marketing and sales and logistics
management; the improvisations and initiatives the firm took in logistics of petroleum products,
and improved business strategy for petroleum marketing business were the key reasons behind
the growth.
With increased activity comes increased expenses, the benefits of increase in revenues and
improvement in gross margins were eroded by increased level of expenses like fuel, power &
water, stores & spares consumption and repair & maintenance increased with respect to FY13.
Financial charges also played their role in eating away gains. Even though a decrease was seen
comparative to FY13, In FY14 the firm suffered a net loss of Rs 5.9 billion almost two third of
which is attributable to financial charges and exchange losses incurred during the year. As a
result, the firm has been unable to make payments for government dues due to shortage of funds.
Moreover, there was a significant devaluation of rupee against dollars in first half of the year,
which partially offset a strengthening rupee in second half of the year. However, despite the
improvement in rupee/dollar parity, BYCO had to bear significant exchange loss of around of Rs.
836 Million in the year (FY14) that further increased by more than 4 times due to the volatility in
exchange rate hampering the refinery business of the firm.
From the Balance sheet point of view, the Current Asset, holding a majority in Total Assets with
65.12%, was barely capable enough to pay its the Current Liabilities (63%) back. This is because
BYCO owes much to its trade payables, lagging in payments and ultimately questioning its
credibility to pay it off as well (approximately 47% of sales of FY14 when it was 45% of sales in
FY13).
To counter, BYCO was able to pay off much of the short term borrowings and long term debts as
these figures went down in FY14 with respect to FY13.
Overall, there seemed to be little improvement in the FY14 because of the tremendous amount of
Sales earned in this financial year. BYCO was, thus was able to pay off a certain amount its
lenders, government, and related stakeholders. The accumulating losses, finance and exchange
losses have adversely affected the overall financial position. It not only nullified the positive
effects of raised Sales revenue but also fueled the existing crises surrounding BYCO.

BALANCE SHEET
29
30
INCOME
STATEMENT
ANALYSIS
BALANCE SHEET
ASSETS
Non-current assets have slightly increased by 1.75% in 2014 mainly due to an increase in fixed
assets. This means that non-current assets in 2014 contribute more to Total Assets as compared to
2013. Fixed assets have increased by 1.11% as an investment through the increase in debt and
equity.
31
Increase in inventory and account receivable indicate that cash is tied up during 2014. Major
issues are that cash is tied up in inventory and accounts receivable and short term investment has
also reduced in 2014. Other assets such as Current maturity of long-term investments have
experienced decline during 2014 which has decreased current assets.

Share capital has slightly increased by 1.5% which has been used to increase assets. This 1.5%
increase shows that share capital contributes more to Total Equity in 2014 as compared to 2013.
Increase in share capital has decreased shareholders equity.A significant increase of 5.65% can
be noted in reserves as a result of increase in PPLs net income after tax during 2014. The
reserves have increased the common equity of PPL.
An increase in deferred taxes of 1.835% andProvision for decommissioning obligation of 0.92%
has led to an increase of 1% in total non-current liabilities.This means that in 2014, current assets
contribute 1% more to Total Liabilities as compared to 2103. Mainly, a huge decline of 7.65% in
Trade and other payables has decreased current liabilities by 7.67%. Although current liabilities
have decreased significantly, a 6.15% increase in share and reserves and a 1% increase in noncurrent liabilities resulted in an increase in Total liabilities and equity in 2014 as compared to
2013.
INCOME STATEMENT
In 2014, the net sales of PPL are higher as compared to 2013 due to net increase in oil sales
volumes, decrease in gas sales volumes and depreciation of rupee versus dollar. Although the
cost of goods sold is higher but it is lower in percentage because of the increase in sales. Due to
higher COGS, the gross profit has experienced an increase in 2014. The operating costs and
interest rate are almost the same from 2013 to 2014. But tax in 2014 is lower due to a lower EBT.
Therefore, the net income is a higher percentage of Sales in 2014 as compared to 2013.
32

INCOME STATEMENT
Sales - net of trade discounts and allowances amounting
to Rs. 521,378 thousand
Less:
Sales tax
Inland freight equalization margin
PERCENTAGES
2013
100
2014
100.00%
13.79
1.23
-14.50%
-1.25%
Net sales
Cost of products sold
Gross profit
Other income
Operating costs
Distribution and marketing expenses
Other operating expenses
84.98
82.35
2.64
0.46
84.26%
-81.64%
2.61%
1.38%
0.65
0.14
0.28
-0.60%
-0.15%
-0.28%
Profit from operation

Finance costs
2.03
0.59
2.98%
-0.68%
Share of profit of associate

Profit before taxation
Taxation
Profit for the year
0.04
1.48
0.51
0.98
0.04%
2.34%
-0.79%
1.55%
33
Balance Sheet
Intangibles
Long term investments
Long term loans, advances and receivables
Long term deposits and prepayments
Deferred tax
COMMON SIZE %
2014
2013
1.57%
1.96%
0.01%
0.01%
12.30%
17.11%
0.09%
0.13%
0.04%
0.04%
1.74%
1.17%
Total non-current assets
15.76%
20.43%
Current assets
Stores, spare parts and loose tools
Stock-in-trade
Trade debts
Loans and advances
Deposits and short term prepayments
Mark-up / interest receivable on investments
Other receivables
Taxation - net
Total receivables, net
Total inventory
Total current assets
0.05%
23.19%
47.13%
0.15%
0.66%
0.60%
5.67%
5.54%
5.54%
54.70%
23.24%
84.24%
0.05%
37.63%
27.17%
0.17%
0.85%
0.80%
9.42%
1.63%
1.85%
39.06%
37.68%
79.57%
1.39%
1.51%
52.13%
0.19%
0.36%
24.81%
0.00%
70.45%
0.24%
0.15%
6.13%
0.00%
Non-current liabilities
Retirement and other service benefits
Current liabilities
Provisions
Accrued interest / mark-up on short term borrowings
Short term borrowings
Taxes payable
Total equity and liabilities
100.00%
100.00%
34
ANALYSIS
Cash and short-term investment increased by 1.06% and inventory decreased by 2.07%
corresponding with increase in accounts receivables by 5.93% which reflects sale of inventory on
both cash and credit terms in 2014. There is a negligible decrease in long-term investment of
about 0.48%, so the main reason of an increase in total assets by 4.62% in 2014 is due to
increased sales on credit terms.
The increase in note payable and short-term debt by 5.22% in 2014 reflects the increased
borrowing of the company, so the company is more inclined toward debt financing than issuance
of shares.
Net sales in 2014 increased by 0.72% due to which the net profit after tax has also increased by
0.57% that reflects the increased profits of the firm, it is also proposed by increased dividends
paid by the company as the retained earnings are gradually increasing projecting future financial
growth and market prosperity
35
COMPARATIVE COMMON SIZE ANALYSIS

BYCO VS. PSO
INCOME STATEMENT
PROFITABILITY:
Profitability of BYCO is a huge question mark in comparison with that of PSO; PSO being the
market leader earned tremendous profits in the most recent year of 2014 whereas BYCO, who
was in the verge of betterment in 2013, again descends to incurring more loss in 2014.
COST OF PRODUCTION:
Cost of goods sold in comparison with sales are favorable in case of PSO as the costs are about
82% of the total sales leaving greater margins for gross profits. BYCO, on the other hand has a
greater percentage of cost of production about 99.55% of the total sales, which reflects
insufficient sales made throughout the year and high costs of production for the sales on hand
leaving behind a minute margin of gross profit.
OPERATIONAL COSTS:
Operational costs of BYCO exceed by 0.53% than those of PSO, which redirects ineffective
operations and production management, converting BYCOs gross profits into immediate losses.
OTHER INCOME:
BYCO also lacks in making income from other sources such as dividends, rents etc. In
comparison with the other income earned by PSO, BYCO receives lesser income by 0.21%.
INTREST EXPENSES:
Financial expenses of BYCO such as interest expense in ratio with total sales exceeds than those
of PSO.
36
BALANCE SHEET
CURRENT ASSETS:
Current assets of BYCO in ratio with its sales are of 65 % indicating reasonable liquidity while
PSO has a remarkable ratio of 2224%, which shows the incredible liquidity ability of the
company.
NON_CURRENT ASSETS:
Non-current assets of BYCO represent 35% of the total sales consisting majority of fixed assets
i.e. Plant, property and equipment displaying finance tied up with fixed assets instead of
investing activities. PSO on the other hand has a high ratio of Non-current asset to sales of about
329% with major contributions from long-term investments, which is a great source of future
income.
CURRENT LIABILITIES:
BYCO is highly indebted with 65% ratio with total sales, with majority for credit purchases,
unpaid expenses and short term loans. PSO is also in debt majorly for on credit purchases and
short term borrowing, but financial profitability of PSO places it in a far better place than BYCO
as BYCO is unable to cover its operational costs, and these current liabilities are part of regular
business for PSO.
NON-CURRENT LIABILITIES:
Long-term liabilities of BYCO primarily constitutes of long term loans secured so the major
source of financing assets is debt financing, PSO on the other hand has zero debt financing but it
Long-term debts include retirement and service benefits due on its account.
SHARE HOLDERS EQUITY:
PSO has a common stock of 19% in ratio to its sales and retained earnings of about 550%
making it attractive for investors while BYCO has a share capital of 17% with zero retained
earnings because it has been incurring losses over the years making its market status vulnerable.
37
BYCO VS. PPL:
INCOME STATEMENT
PROFITABILITY
Profitability of BYCO in comparison with profitability of PPL is again not of a match, as PPL
may not have profits as huge as those of PSO but it still sustains 42% net profit after tax easily
covering payments of all operation and financial costs. BYCO is unable to cover any of its
operational or financial cost as it has accumulated losses since 20XX.
COST OF PRODUCTION:
Cost of goods sold incurred by PPL are about 41% of the total sales leaving behind gross profit
margin of 59%, which is an excellent expression of profitability two times greater than the
amount of costs, associated with production. BYCO, on the other hand has a cost of production
of about 99.55% leaving behind only 0.45% of gross profit margin poorly insufficient to cover
overheads and financial cost resulting in net losses for the company.
OPERATIONAL COSTS:
PPL displays its effective management of resources through the percentage of operational costs
in ratio with total sales of about 3.24 %, whereas operational costs of BYCO in ratio with its
sales is exceeding PPLs costs by 0.72%, which shows that BYCO is experiencing more costs as
compared to its production and sales.
OTHER INCOME:
Income from other resources such as investments in profitable securities and in case of PPL,
equity accounted investment in joint venture, helps alleviating risk of losses of the company by
5.25% and thus increases the profitability, BYCO on the other hand have made very little income
producing investments resulting in income of only 1.17%.
FINANCIAL COSTS:
Interest expenses of BYCO in ratio with its sales exceeds PPLs interest expenses by 2.72%,
therefore BYCO has more interest expense due on its hand.
38
BALANCE SHEET
CURRENT ASSETS
Liquidity of BYCO is seemingly higher than that of PPL, as BYCO current assets amount to be
65% in ratio with its sales whereas PPLs current assets are about 39% of its sales.
NON-CURRENT ASSETS
BYCOs non-current assets are worth 35% of its total sales majorly occupied with assets of fixed
nature worth 25% and followed by minor worth 10% of long-term investments, PPLs noncurrent assets also majorly constitutes of fixed assets by 40% and long-term investments are of
about 19% accumulating to a total of 61% that also includes long-term receivables and
investment in joint ventures.
CURRENT LIABILITIES
Current liability of PPL is about 9.44% of the total sales, including 8% of trade and account
payables which may reflect purchase on credit terms or unpaid expenses. BYCO, on the other
hand has 67% of current liabilities majorly constituted by unpaid overhead, financial and other
expenses as the company is unable to make any profits.
NON-CURRENT LIABILITIES
BYCOs long-term liabilities are of about 28% of total sales including 25% long-term loans, so
the company is majorly being operated through debt financing which makes it riskier and
susceptible for investors. PPLs non-current liabilities amount to 15% of total sales, constituted
majorly by deferred taxation and decommissioning obligations.
SHARE HOLDERS EQUITY
PPL has impressive shareholders equity with share capital of about 8% and reserve work 67% of
total sales, which shows that PPL is reserving funds more than disseminating dividends out of its
profit which may be in favor of company but odds are out for investors. BYCO equity section
reflects a share capital of 17% but accumulated losses are also 17% making BYCO unable to
maintain any reserves.
39
INDEX ANALYSIS

PROFIT AND LOSS
ACCOUNT
For the year ended 30 June
Index Analysis
2014
2013
2014-2013
(Rupees in 000)
92,545,372
92,124,317
421,055
795,470
1,589,243
2,384,713
(1,963,658)
(1,813,543)
1,081,858
(2,695,343)
(2,793,202)
(836,051)
(6,324,596)
66,187,006
66,110,821
76,185
621,400
694,267
1,315,667
(1,239,482)
(1,590,883)
3,581,055
750,690
(2,645,271)
(190,025)
(2,084,606)
39.82%
39.35%
452.67%
28.01%
128.91%
81.26%
58.43%
14.00%
-69.79%
-459.05%
5.59%
339.97%
203.40%
(515,784)
(350,709)
47.07%
Profit/Loss after taxation
903,234
387,450
(5,937,146)
176,002
(174,707)
(2,259,313)
413.20%
-321.77%
162.79%
Loss per share - basic / diluted
(6.07)
(2.31)
162.77%
Sales
Cost of sales
Gross profit
Selling and distribution expenses
Total expense
Operating loss
Other charges
Other income
Financial charges
Exchange difference
Profit/Loss before taxation
Taxation
- Current
Prior year
- Deferred
40
BALANCE SHEET
As at 30 June
ASSETS
NON CURRENT ASSETS
Intangible asset
Long term investment - at cost
Long term loan and receivable
Long term deposits
CURRENT ASSETS
Stores and spares
Stock in trade
Trade debts unsecured
Loans and advances - considered good
Trade deposits, prepayments and other
receivables
Accrued mark-up
Non - current asset held for sale
Total Assets
SHARE CAPITAL AND RESERVES
Share capital
Accumulated losses
Surplus on revaluation of property, plant and
equipment
NON CURRENT LIABILITIES
Long term loans and accrued mark-up
Liabilities against assets subject to finance lease
Long term deposits
Deferred liabilities
CURRENT LIABILITIES
Accrued mark-up
Short term borrowings - secured
Current portion of non current liabilities
Provision for taxation
Contingencies and commitments
2014
(Rupees in 000)
2013
Index Analysis
2014-2013
14,928,448
5,729,258
7,314
20,665,020
17,624,944
2,957
5,729,258
13,571
23,370,730
-15.30%
0.00%
-46.11%
-11.58%
204,300
8,777,507
10,244,919
742,706
779,914
163,318
5,703,512
12,123,545
502,135
1,203,129
25.09%
53.90%
-15.50%
47.91%
-35.18%
435,052
472,635
16,931,504
38,588,537
59,253,557
281,126
560,465
20,537,230
43,907,960
54.75%
-15.67%
87.90%
34.95%
9,778,587
(24,057,777)
(14,279,190)
19,330,709
9,778,587
(18,445,525)
(8,666,938)
5,256,257
0.00%
30.43%
64.75%
267.77%
14,528,673
4,948
87,478
1,794,638
16,415,737
15,468,815
31,913
62,707
2,284,865
17,848,300
-6.08%
-84.50%
39.50%
-21.46%
-8.03%
27,981,013
20,176,268
416,985
463,709
6,402,108
6,800,000
2,470,411
1,636,118
515,784
394,246
37,786,301
29,470,341
59,253,557
43,907,960
38.68%
-10.08%
-5.85%
50.99%
30.83%
28.22%
34.95%
41
ANALYSIS:
The trend Analysis illustrates an overall illustrates an improved performance of BYCO in terms
of Sales Revenue and gross profits to be at 39.82% and452.67% respectively illustrating that
BYCO is effective enough to finance its direct operational expenses. However, on the other
hands, net losses, operational, finance and exchange expenses have raised far above the bar. Cost
of Goods Sold has also increased by the same percentage as sales by 39.39%.
Net loss in FY13-FY14 was 203.40% regardless of the record breaking Sales revenue increase of
39.82% (FY13- FY14). However, with increase in sales, spontaneous expenses and liabilities
such as Selling and Admin expenses, Account Payables, and relates operational expenses and
liabilities also rose approximately 82% thus making the company incur an Operating loss
58.43% greater than previous year.
The major crises came from the sudden rise in finance expense and exchange charges. Finance
expense, specifically interest expense, rose by 5.59% in FY13-FY14. The Exchange differences
rose to 14% in FY13-FY14. The reasons are exhaustively discusses in the above two sections.
The index comparison displayed that FY13 for BYCO had been a tragic year as the gap is
Accumulated losses widened by 34.43% .Failure for BYCO, as it was unable to recover all its
losses completely even after paying off almost half of its debts and generating record-breaking
sales in the current year.
Total Fixed Assets have reduced, as BYC was unable to make any effective long-term
investments, as the company was busy with overcoming the problem continuous incurring losses.
The lost its income generated from intangible assets and long-term loan and receivables. The
company also experienced a decline in its long-term deposit by 46.11%.
However, the company experienced an overall increase in its Total Assets by 34.95% due to an
overall increase in its Current Assets by 87.9%. Inventory increased by 25.09% and 53.9% of
stock in spare and stock in trade respectively, Account rec. by 53.9% supported by a decrease in
Bad debts by 15.5%, short-term loans by 47.91%, and accrual mark up by 54.75%.
The company may be experiencing insolvency as hard cash (cash in bank) declined by 15.67% as
the main contributors in increasing the Current Assets of the company are illiquid compared to
cash at bank.
The company experienced a decline in its long-term liabilities by 8.09%% as the company paid
off more than half of its loan on assets financing (reduced by 84.5%).
The current liabilities, on the other hand experiences an increase by 28.22% due to increase in
spontaneous liabilities that occur with an increase with sales revenue.
In addition to this, BYCO experienced 0% change in its shareholders equity and as a result lost
its credibility to afford to pay its shareholders in the market. The investors are reluctant to make

future investments in a loss making organization, even though it is one of the biggest oil
refineries of Pakistan.

BALANCE SHEET
INCOME STATEMENT
42
43
The base year for Index Analysis is 2013.
BALANCE SHEET
NON-CURRENT ASSETS
In 2014, total non-current assets have increased by 13.58%. This is mainly because of a
significant increase in Equity-accounted investment in joint venture, Long-term loans staff and
Long-term receivables. Property, plant and equipment have decline by 4.27%.
CURRENT ASSETS
In 2014, there has been a significant decrease in cash (58.86%), interest accrued (10.32%),
current maturity of long-term investment (75.01%) and short-term investment (3.85%). Due to
these declines, significant increase in other current assets such as Trade deposits and short-term
prepayments (41.73%), Current maturity of long-term receivables (88.40%), could only result in
5.58% increase in total current assets. Cash is tied up in inventories and account receivable. Also,
cash has been used to pay off PPLs liabilities during 2014.
Since current assets have only increased by a small percentage and non-current assets have
increased by 13.58%, total assets have only increased by 10.35%.
SHARE AND RESERVES
Increase in both shares and reserves have resulted in a 21.06% increase in share and reserves.
20.75% increase in net profit after tax has led to a 21.19% increase in reserves during 2014.
44
Shares increase by 19.99% due to which has been used to finance the increase in Assets during
2014.
NON-CURRENT AND CURRENT LIABILITIES
The major areas of concern are Deferred Taxation and Deferred Liabilities. In 2014, Deferred
Taxation increase by 45.08% and Deferred Liabilities increase by 13.28%. An increase of 6.78%
in Liabilities against asset subject to financial lease has been utilized to increase fixed assets of
PPL. Increase in non-current liabilities have resulted in an increase in interest rate by 9.13%.
Current liabilities have decreased due to a significant decline in trade and other payables
(43.98%) and Current maturity of liabilities against assets subject to finance lease (5.99%). Cash
has been used to pay off liabilities. Due to this significant decrease in current liabilities, Total
Liabilities have declined by 13.39%. Due to a significant decline in Total Liabilities and a
17.55% increase in share and reserves, Total Liabilities and Equity have only increased by
10.35%.
INCOME STATEMENT
In 2014, net increase in oil sales volumes, decrease in gas sales volumes and depreciation of
rupee versus dollar increased net sales by 18%. There has been an increase in the cost of goods
sold in 2014 (14.9% increase in field expenditure and 17.21% increase in royalties)due to
seismic activity in PPL blocks. Because the increase in total COGS is lower than the increase in
sales, PPL has reported a 19.83% increase in its gross profit. Share of profit in equity-accounted
investment in joint venture has increased while other income has decreased in comparison to
2014.
The companys operating expenses have increased by 22.01% which show that the company is
unable to control its costs. The interest has increased by 9.04% due to increase in PPLs liabilities
during 2014. Therefore, PPLs EBT has reported an increase by 16.9%. Because EBT has
increased, the tax amount rose by 9.13%. The net profit after tax of PPL in 2014 has increased by
20.75% which in return increased PPL reserves.
45

INCOME STATEMENT
Sales
Sales Tax
IFEM/Levies
2014 Index
109%
114%
111%
Net sales
Cost of products sold

Gross Profit
Other Income
Operating Costs
Marketing Expense
Administrative Expense
Other operating expenses
Total Operating Costs
Profit from operation
Finance cost
Share of Profitt of Associate
Profit before taxtion
Taxation
2013 BASE
100%
100%
100%
108%
108%
108%
329%
100%
100%
100%
100%
100%
115%
106%
104%
160%
126%
95%
172%
170%
100%
100%
100%
100%
100%
100%
100%
100%
100%

Profit after taxation
BALANCE SHEET
Intangibles
Long term investments
Long term loans, advances and receivables
long term deposits and prepayments
Deferred tax
Total Non-Current Assets
Stores, spare parts and loose tools
Stock-in-trade
Trade debts
Loans and advances
Deposits and short term prepayments
Mark-up / interest receivable on investments
Other receivables
Taxation - net
Total Current Assets
Total Assets
Share Capital
Reserves
Total Shareholders Equity
Total Long term Liabilities
173%
2014 INDEX
106%
161%
95%
90%
123%
196%
102%
136%
81%
229%
111%
102%
100%
79%
102%
394%
140%
132%
110%
130%
130%
121%
46
100%
2013 BASE
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%

Provisions
Accrued interest / mark-up on short term borrowings
Short term borrowings
Total Current Liabilities
Total Equity & Liabilities
98%
100%
307%
535%
133%
132%
47
100%
100%
100%
100%
100%
100%
ANALYSIS
INCOME STATEMENT
Sales revenue for the FY14 have increased from those of FY13 by 9%, but after subtracting sales
tax and duties the net sales revenue has increased by 8% in FY14 from the FY13. Assuming that
the increase in sales revenue is due to the increase in quantity of sales, the cost of production has
also increased subsequently by 8%. Keeping in account the increased quantity sold, the cost of
production have also increased as the administrative and other operational costs along with
marketing expenses have indicated an increase by 4%, which is not a very huge figure
postulating operational efficiency of the firm. PSO has received huge incomes in FY14, as other
income increases by 229% and profit from operations increased by 60%. However share from
profit associates have experienced demise by 5%.
Financial costs such as interest expense increased by 26%, and the taxation on income earned has
correspondingly increased by 70% with the increase in net income by 72%
BALANCE SHEET
Non-current assets of PSO mainly comprise of the highly valued intangibles increased by 61%,
other than that prepayments and deferred taxation also increased by 123% and 196%
respectively. Long-term investments in securities and loans have been shrinked by 5% and 10%
respectively, showing the firms major emphasis on reducing the risk by paying the expenses
prepaid.
48
Total current assets are increased by 40% in FY14 including major increases in cash balances by
294%, trade debts by 129%, spare parts and tools by 36% and loan advances by 11%, showing
companys major emphasis on short-term investments. The high increase in cash is mainly due to
increased sales and maintained cost associated with productions.
Share capital increased by 10% which means company has received additional finance through
equity financing, whereas the reserves increased by 30% in the FY14 but the company has not
maintained higher reserve in proportion with the increase in sales.
Total long term liabilities increased by 21%, while 1 33% increase in current liabilities is faced
by the company in FY14 mainly due to the increase in short-term borrowing by 435%.
COMPARATIVE INDEX ANALYSIS

BALANCE SHEET
NON- CURRENT ASSETS
As compared to its competitors, BYCO recorded decreases in its Total Non-Current Assets.
During 2014, BYCO recorded a decrease of 11.58% in its Total Non-Current Assets as compared
to a 13.58% increase at PPL and a 2% increase at PSO. All Non-Current Assets of BYCO
declined during 2014 while majority Non-Current Assets of PPL and PSO significantly increased
during 2014.
CURRENT ASSETS
On the other hand, BYCO was able to do better with respect to its current assets during 2014 as
compared to PPL and PSO. Total Current Assets of BYCO increased in 2014 by 87.9% due to a
25.09% increase in its stores and spares, 53.9% increase in its stock in trade, 47.91% increase in
its loans and advances and a 54.75% increase in its Accrued markup. PPL reported an increase of
5.58% in its Total Current Assets mainly due to a 41.73% increase in Trade deposits and shortterm prepayments and a 88.40% increase in Current maturity of long-term receivables.
While PSO experienced a 40% increase in its Total Current Assets. This was due to a significant
increase of 294% in its cash and bank balances, 129% increase in trade debts and 36% increase
in stores, spare parts and loose tools. Both BYCO and PPL have lower cash as compared to PSO.
49
This means that more of their cash is tied up in inventories and accounts receivables as compared
to PSO.
Also, PPL and BYCO have used cash to pay off their liabilities while PSO has increased its cash
through raising debts. Because BYCO recorded significantly higher increase in its current
liabilities as compared to PPL and PSO, Total assets of BYCO increased by 34.95% while Total
Assets increased by 10.35% at PPL and by 32% at PSO.
EQUITY
Share capital of BYCO remained the same from 2013 to 2014 while in order to increase assets,
PPL increased its share capital by 19.99% and PSO increased it by 10%. During 2014, BYCO
experienced 30.43% and 64.75% increase in its Accumulated losses due to increase Net loss. On
the other hand, PPL recorded an increase of 21.19% in its reserves due to 20.75% increase in Net
profit after tax and PSO reported an increase of 30% in its reserves due to 73% increase in its
Net profit after tax.
LIABILITIES
Increases in Non-current Liabilities are reported by PPL (17.55%) and PSO (21%) while BYCO
experiences a decline of 8.03% in its Non-current liabilities due to decrease in Long term loans
and accrued mark-up, Liabilities against assets subject to finance lease and Deferred liabilities.
On the other hand, increases in Current liabilities were reported by BYCO of 28.22% and by
PSO of 33% while PPL recorded a decline in its current liabilities by 38.68%.
Although BYCO has experienced high losses and decreases in its Non-current liabilities, the
increase in its current liabilities led to an increase of 34.95% in its Total Liabilities and Equity
while increases reported by PPL were 10.35% and by PSO were 32%.
INCOME STATEMENT
BYCO performed better in 2014 in terms of its Sales as compared to PPL and PSO. Net Sales of
BYCO increased by 39.82% while increases at PPL were 18% and at PSO were 8%. However,
the cost of goods sold of BYCO was immensely high as compared to PPL and PSO. In 2014,
COGS of BYCO increased by 39.35% while increases in COGS at PPL were 15.56% and at PSO
were 8%. However, BYCO was still able to perform well in its gross profit which increased by
452.67% while increase in gross profit recorded by PPL was 19.83% and by PSO was 8%.
50
However, the increase in operating cost at BYCO is 58% while it has increased by 22.01% at
PPL and 4% at PSO. Finance costs also increase by 5.59% at BYCO, 9.04% at PPL and 26% at
PSO. Due to high costs, BYCO experienced an increase of 203.40% in its Net loss while PPL
and PSO enjoyed increases in Net Profit after tax of 20.75% and 73% respectively.
Conclusion
The oil industry in Pakistan is not performing up to the standards marked by the leading world
oil industries. After analyzing the three industries, it was revealed that the reason behind low
performance, inefficiency, and ineffectiveness of the companies is mainly to due external factors.
The Rupees has depreciated against Dollars hence making oil imports very expensive for these
companies to purchase, as oil is their main raw material. The fluctuating oil prices in the
international market further adds million of Dollars to be paid as import bills.
BYCO, one of the biggest oil companies is Pakistan, is adversely affected by the abovementioned factors. Regardless of its earning record-breaking sales in 2014, BYCO was unable to
recover all its losses that it has been incurring since 2009. The other two companies are also
facing the same difficulty are able to generate profits. BYCO; however, is unable to do so and
has been relying on borrowing to fund its operations.
To conclude BYCO is performing below the benchmark of the oil industry of Pakistan. It not
only needs to come up with plans to recover all its losses but also improve its managements
efficiency to be able to quickly solve its problems.
51
Appendix
REFERENCE
BYCO ANNUAL REPORT 2013
BYCO ANNUAL REPORT 2014
PSO ANNUAL REPORT 2013
PSO ANNUAL REPORT 2014
PPL ANNUAL REPORT 2013
PPL ANNUAL REPORT 2014
http://www.brecorder.com/brief-recordings/0:/1194593:BYCO-petroleum-limited-pakistan/
http://www.brecorder.com/company-news/235/1150604/
http://pakobserver.net/detailnews.asp?id=213460
http://tribune.com.pk/story/982421/corporate-results-BYCO-posts-rs692m-loss/
52
ANNUAL ACCOUNTS
*Annual accounts of BYCO are included in the report (Comparative and Index analysis)
BALANCE SHEET
53

INCOME STATEMENT
54

Pakistan State Oil (PSO)
55
56
57
58

Finance Report On Oil Industry of Pakistan

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Institute Of Business Management

Institute of Business Management | Confidential

The Petroleum Industry of Pakistan

Institute of Business Management | Confidential

The Petroleum Industry of Pakistan

INDUVISUAL AND COMPARATVE ANALYSIS

Institute of Business Management | Confidential

The Petroleum Industry of Pakistan

Institute of Business Management | Confidential

The Petroleum Industry of Pakistan

Marketing and Distribution

The Petroleum Industry of Pakistan

PAKISTAN PETROLEUM LIMITED (PPL)

Marketing and Distribution

New Business Ventures

The Petroleum Industry of Pakistan

PAKISTAN STATE OIL (PSO)

Marketing & Distribution

The Petroleum Industry of Pakistan

Institute of Business Management | Confidential

The Petroleum Industry of Pakistan

Individual & Comparative Analysis

BYCO PETROLEUM PRIVATE LIMITED

Institute of Business Management | Confidential

The Petroleum Industry of Pakistan

Financial Leverage Ratios

Market Value Ratios

2013 = -3.41 x 1.51

RoE = RoA x Equity Multiplier

2013 = 5.15 x (1/0.0778)

Institute of Business Management | Confidential

The Petroleum Industry of Pakistan

The Petroleum Industry of Pakistan

Institute of Business Management | Confidential

The Petroleum Industry of Pakistan

DEBT TO ASSET RATIO

Institute of Business Management | Confidential

The Petroleum Industry of Pakistan

PAKISTAN PETROLEUM LIMITES (PPL)

Institute of Business Management | Confidential

The Petroleum Industry of Pakistan

FINANCE LEVERAGE RATIOS

Institute of Business Management | Confidential

The Petroleum Industry of Pakistan

Institute of Business Management | Confidential

The Petroleum Industry of Pakistan

BOOK VALUE PER SHARE

Institute of Business Management | Confidential

The Petroleum Industry of Pakistan

Institute of Business Management | Confidential

The Petroleum Industry of Pakistan

PAKISTAN STATE OIL (PSO)

Institute of Business Management | Confidential

The Petroleum Industry of Pakistan

Institute of Business Management | Confidential

The Petroleum Industry of Pakistan

Institute of Business Management | Confidential

The Petroleum Industry of Pakistan

The Petroleum Industry of Pakistan

COMPARATIVE RATIO ANALYSIS

Institute of Business Management | Confidential

The Petroleum Industry of Pakistan