Cost and Managerial Accounting

Assignment
Cost and Managerial Accounting
“An Evaluation of how the introduction of a new technology
can assist an organization in achieving its business objectives”

Sir Taimoor Mushtaq

Submitted by:
1. Khaula Shaykh 20171-21988
2. Syed Hassan Ahmed Naqvi 20121-14135

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Assistance of New Technology in Achieving Business Objectives
Cost and Managerial Accounting
Contents
EXECUTIVE SUMMARY............................................................................................................................................. 3
INTRODUCTION........................................................................................................................................................... 3
BODY ............................................................................................................................................................................... 3
INFORMATION TECHNOLOGY ...................................................................................................................................... 4
Business Systems ..................................................................................................................................................... 4
IT Infrastructure ..................................................................................................................................................... 4
Microsoft Private Cloud Technology ........................................................................................................................ 5
New Technologies ........................................................................................................................................................ 6
Major IT Projects ....................................................................................................................................................... 6
Financial Highlights (in Millions) .............................................................................................................................. 7
Graphs: Sales and Profit after Tax ........................................................................................................................... 8
Production ................................................................................................................................................................... 9
RECOMMENDATION ................................................................................................................................................ 10
CONCLUSION ............................................................................................................................................................. 10
REFERENCE ................................................................................................................................................................ 11

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Assistance of New Technology in Achieving Business Objectives
Cost and Managerial Accounting
EXECUTIVE SUMMARY

The purpose of this paper was to analyze how the introduction and use of innovative technology can
assist an organization in achieving its business objectives. The organization that was analyzed in this
regard was Pakistan Petroleum Limited (PPL). The company plays an important role and is considered
as a main supplier of oil and natural gas in Pakistan. The company is undertaking its operation solely
and on joint ventures not only in Pakistan but in Yemen and Iraq as well. PPL has brought in
innovative technology and has transformed its operations via automation and has also adapted to
digitalization in 2019. This not only helped in increasing the pace of its operations but has also
supported in the reduction of man power, expenditures, production cost and human errors. It has got
a separate IT department with extremely trained professionals who have not only introduced new IT
projects but has also effectively executed them around various plants and warehouses of the company.
Since 2016, PPL has rapidly increased its profits and a significant credit lies with the effective use of
changing technology.

INTRODUCTION

Pakistan Petroleum Limited (PPL) has been a discoverer for the natural gas and oil within Pakistan.
It is one of the important companies when it comes to the energy sector and has been operating since
the beginning of 1950s. As a lead supplier of natural gas, PPL enjoys the position of producing and
supplying around 20 percent of the country’s total natural gas. Furthermore, it is producing crude oil,
Natural Gas Liquid and Liquefied Petroleum Gas. PPL’s current exploration and production portfolio
is wide spread across Pakistan having its international existence in the countries like Iraq and Yemen.
PPL also have the mineral rights in Baluchistan through Bolan Mining Enterprise (BME), its 50%
joint operation between PPL and Government of Baluchistan.
According to the annual financial report 2019 of PPL, the organization was able to make 11 new
discoveries in its various exploration sites. PPL was able to achieve its highest ever profit which was
around Rs.61.6 billion in the year 2018-19. Furthermore, PPL brought various digital transformation
within its organization. Various initiatives were taken place at Sui Hospital, Warehouse Management
System, Automation of budgeting &planning system.

BODY
It has been noted that after the introduction and adaption of automation, employees spend less time
on tasks that once required hours to complete. This is important not just because the automation can
carry out basic tasks in a fraction of the time, but it also reduces the chances of the errors made by
humans.
Two of the essential points of value creation in PPL was to pursue technology innovations in order to
enhance the production of tight gas having a proper market rate and to discover technologies to
develop shale gas potential in Pakistan. PPL attempts to play a leading role in meeting the country’s
energy requirements by focusing on production enhancement from its current assets and early
monetization of new discoveries through use of advanced technology and management skills.
Pakistan Petroleum has got a separate department that deals for bringing and implementing innovative
technology.
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Assistance of New Technology in Achieving Business Objectives
Cost and Managerial Accounting
INFORMATION TECHNOLOGY
The Company is constantly pushing to add business value through industry-leading long term
initiatives and improved services delivery to maximize process automation, organizational
performance, agility, enhanced information security, governance, risk management and compliance.
All these measures were taken to reduce the cost of the organization and maximize its profit.
According to the PPL’s financial report, the key highlights in IT for the year 2019 are presented
below:
PILLARS OF IT STRATEGY
Service Delivery Resilient and Secure Infrastructure
Business Process Automation Information Security
Technical Advantage Unified Communication

Business Systems

SAP ERP and Business Applications have been strengthened through several business process
integrations, this provided various advantages in terms of online reporting, governance of information
and less-paper initiatives. Key Software and system processes that was initiated and implemented as
per 2019 included:
 Audit & Inspection QHSE Software Module
 Enhancements in SAP Employee Self Service Portal
 Enterprise Content/Document Management System
 Cloud-based Budgeting & Planning System
 Position-based SAP Authorization System
IT Infrastructure

Infrastructure team plans and makes sure of the positioning of latest technology in information
security, database, mobility and maintenance of a resilient environment.
 In-house SAP HANA platform migration project has been completed. Implementation is planned
for next year.
 A state of the art Disaster Recovery Site has been established in Islamabad to enhance resilience.
 Roll-out of Rights Management System (RMS) to protect business data as per individual needs of
end users.
 Expansion of wireless networks at different warehouses to provide connectivity for bar code based
inventory management system.
 SAP Fiori roll-out for management staff for user friendly solution.
 Storage upgrade for Seismic Data Processing facility.
 Customized solution for direct transmission of proper site reporting to Head Office.

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Assistance of New Technology in Achieving Business Objectives
Cost and Managerial Accounting
Outlook of Technology Plan
PPL lays great emphasis on the technological advancement while performing its operations. The
company believes that technology not only helps in reducing the cost of the organization but it also
helps in reducing the risk in operations and lowers the human error rate. Therefore, the future plan
and projects includes the following:
 Compliance of Head Office datacenter operations to EPI’s Datacenter Operation Standard
Maturity level III
 Setting up of Security Operations Center at Head Office • Implementation of SAP S/4 HANA •
Robotic Process Automation
 SAP Success Factors Performance & Goals Management System
 Microsoft Teams roll-out for all users to improve collaboration and synergy
 Deployment of modern Zero Day Attack protection solution to safeguard company’s Information
Assets from unknown and evolving threats.

Microsoft Private Cloud Technology

As per the official website of the company, the organization completed a milestone by becoming the
first company in public and private organizations, to deploy multi-web page Microsoft non-public
cloud in the country which is a good way to monitor, manipulate and manage its number one and
disaster recovery statistics centers.
Since the company’s discovery and production activities runs around 24 hours and team of workers
placed at geographically different inaccessible fields and plants, the company needed to have its IT
services remain available at all times without disturbance so that an improved verbal communication
between staff can help in quick decisions and will help in problem solving in order to permit
uninterrupted deliver of hydrocarbons.
The introduction and implementation of this Microsoft cloud era has supported the company in adding
consolidating bodily servers, automating IT procedures, lessening catastrophe recovery duration/
tactics and rushing up provider delivery. With the facility actively performing, the server need has
notably dropped from over 45 to most effective 14 bodily servers with proportionately decreased
hardware preservation costs. This resulted in the reduction of about 50 percent in the whole
expenditure for the maintenance of the server.
The company started these systems in location is order to do recovery and manage catastrophe which
now takes most effective 20 minutes whereas previously it took at least the requirement of 9 hours in
advance. New structure of the server requires simply 25 to 30 minutes compared with between three
to seven days in advance at some stage in which enterprise activities were interrupted. Accordingly,
the IT team and its professionals have reduced its protection and operations efforts through 70 percent
and has greater time to invest and work on new projects. Similarly, the consumption of power has
also been decreased by 60 percent, saving sizable quantity steady with month.

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Assistance of New Technology in Achieving Business Objectives
Cost and Managerial Accounting
New Technologies
According to the financial report of 2016, PPL intends to bring and go along with the rapid pace of
technology advancement in drilling and discovering geosciences, the company is constantly using
new and growing technologies for discovery of oil and gas in areas, some of which having the most
difficult sites for drilling in the world. The development of Wide Azimuth 3D seismic surveys is part
of the daily job. The execution of Wide Line survey by using the survey design developed through
the new means of 3D Ray Tracing and Wave Equation Modeling, and the use of low frequency
vibrators have been introduced in seismic acquisition to carry out deeper solutions. In the ever
progressing field of seismic data processing, this organization has utilized unique methods in Fracture
Modeling, Depth Imaging, Inversion and Pore Pressure Prediction. The company is also slowly
expanding its capability of in-house seismic data processing in limited areas to support a unique
exploration environment within the Company and for better management of contractor interface.

Major IT Projects
As per the financial report, some of the major IT projects carried out PPL in order to enhance their
production levels and output are as follows:
 Enhancement of Business Continuity Management including the Centralization of Data and the
technical application of E&P which enables multiple access to multidisciplinary teams.
 2D and 3D processing of 360 Cores Scalable Seismic Depth Processing Clustered System.
 Acquirement of exact data of an exact time from various fields.
 Development of Data Centre for the betterment of IT resources.
 Economic modelling & Reserves Management for a better future details about production.
 Introduction of Microsoft Office 365 for emails, managing documents and other corporate
services.
 Introduction of IP Telephones at drilling location for better communication network in distant
areas.
 Evaluation and exploration of areas where open source technology can be used.

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Assistance of New Technology in Achieving Business Objectives
Cost and Managerial Accounting
Financial Highlights (in Millions)
2014-15 2015-16 2016-17 2017-18 2018-19

Sales - Gross 131,68 105,63 153,46 157,13 206,69

Sales - Net 104,83 80,15 116,98 126,21 163,89

Profit-before -tax 53,31 26,70 48,12 63,43 79,93

Profit-after-tax 38,39 17,24 35,67 45,68 61,63

Share Capital 19,71 19,71 19,71 19,71 22,67

Reserves 168,55 172,93 196,35 220,67 275,93

Current Assets 98,60 91,60 155,45 174,40 252,55

Current Liabilities 23,02 31,79 53,78 64,09 94,93

Long-term Investments 49,04 50,97 27,66 37,69 45,28

Trade Debts 58,77 57,83 99,28 142,63 227,38

Short-term Investments 22,29 19,01 36,49 14,07 8,24

Cash and Bank Balances 1,27 3,27 6,081 7,71 8,02

Cash Dividend Yield (%) 5.17 3.71 6.08 2.56 1.38

Cash Dividend Per Share (Rs.) 8.50 5.75 9.00 5.50 2.00

Bonus Issue (percent) - - - 15 20

Current Ratio 4.28 2.88 2.89 2.72 2.66

Return on Equity (%) 20 9 17 19 21

Breakup Value per Share 95.49 97.71 109.58 121.92 131.69

Earnings Per Share 19.47 8.74 18.10 23.17 27.18

Price Earnings Ratio 8.44 17.74 8.18 9.27 5.31

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Assistance of New Technology in Achieving Business Objectives
Cost and Managerial Accounting

Graphs: Sales and Profit after Tax

Sales (in Millions)

250000

200000

150000

100000

50000

0
2014-15 2015-16 2016-17 2017-18 2018-19

Sales (in Millions)

Profit After Tax (in Millions)

70000

60000

50000

40000

30000

20000

10000

0
2014-15 2015-16 2016-17 2017-18 2018-19

Profit After Tax (in Millions)

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Assistance of New Technology in Achieving Business Objectives
Cost and Managerial Accounting
Production

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Assistance of New Technology in Achieving Business Objectives
Cost and Managerial Accounting
RECOMMENDATION

Pakistan Petroleum Limited is rapidly and swiftly bringing in new technologies and is transforming itself
accordingly as the world is shifting towards digitalization. Here are some recommendations:
1. PPL should adapt and adopt technology policies as per the change of the world regarding automation and
digitalization.
2. PPL should bring technological innovations in its management work activities apart from its operation
activities such as upgraded software in order to manage and monitor the financial and other business
activities.
This will also help the company to reduce its cost, maximize its profit, less manpower and will also help in
dramatically decreasing the chance of human error.

CONCLUSION

According to the case study by Microsoft on PPL, it was hi1ghly noted that after bringing in the
technological innovations such as Windows Server 2012 Datacenter, the company had access to
limitless number of digital machines, which helped in the reduction of costs. Moreover, technically
the company also increased its power of CPUs, it’s capacity for memory to store large data, and non-
interrupted availability, which is a key factor in operation to use the applications such as SAP and
Microsoft Exchange. The company uses Dell PowerEdge M610 and M620 servers, each having 192
gigabytes of RAM.
Although bringing a decrease in cost was not the major goal of bringing in technology but it was noted
that after adapting the services of Microsoft, PPL merged its servers and the count from 50 went down
to 14, which brought reduction of around 52% in cost that was carried out for maintenance.
Pakistan Petroleum Limited is making an effective use of innovative technology in its daily
operations. In 2016, PPL introduced new IT project as explained in the report for more effective and
efficient production that will also reduce the certain expenditures and will also reduce the production
cost. Since adapting technology on a large scale from 2016, it was noted that the sales and EAT
increased effectively. PPL made its highest profit in the year 2019 and technological innovations in
its operational activities helped in the reduction of expenditures over the years and it certainly played
a significant part in achieving that milestone and goal.

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Assistance of New Technology in Achieving Business Objectives
Cost and Managerial Accounting
REFERENCE

1. Pakistan Petroleum Limited (2016), Annual Report, Pakistan.

2. Pakistan Petroleum Limited (2017), Annual Report, Pakistan.
3. Pakistan Petroleum Limited (2018), Annual Report, Pakistan.
4. Pakistan Petroleum Limited (2019), Annual Report, Pakistan.
5. Mirza Anwar Hussain, 2014, Pakistan Petroleum Limited, January 2014,
<http://www.microsoft.com/casestudies/Case_Study_Detail.aspx?CaseStudyID=710000003774>
6. Pakistan Petroleum Limited (January,2019), PROGRESS MAGZINE, Pakistan.
7. www.ppl.com.pk

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Assistance of New Technology in Achieving Business Objectives