DEDICATION

• To our Parents, whose encouragement and prayers are

remained with me during the whole session of MBA.
• To our respected teachers, whose guidance and
• Cooperation helped me in achieving this
important milestone.
• To everyone who has participated in any manner during
preparation & compilation of this report.

INDUSTRY RELATED TO GAS

About industry
PETROLIUM (rock oil from the Latin Petra, rock or stone and
petroleum oil) occurs widely in the earth as gas, liquid, semi solid or
solid or in more then one of these states at a single place. Chemically
any petroleum is an extremely complex mixture of hydrocarbon
compound with minor amounts of nitrogen, oxygen and sulpher as
impurities.
Chester in his dictionary of mineral, defines petroleum as
“MINERAL HYDROCARBONS”

over millions of years plant and animal remains fall to the floor of shallow seas recede
the plant materials is covered by sediment layer, such as slit, sand, clay & other plant
material. Buried deep beneath layer of rock, the organic material partially
decomposes, under an absence of oxygen into petroleum that eventually seeps into the
spaces between rock layers. As the earth’s tectonic plate’s move the rock is bent or
wrapped into folds or it “breaks” along fault lines. Allowing the petroleum to collect in
pools. Early man was not unfamiliar with crude oil. In the Middle East escaping
petroleum gases burned continuously giving rise to fire worship.
 COMPANIES BEING CHOSEN FOR
ANALYSES
1. OGDCL (oil and gas development company ltd.)
2. SSGCL (sui southern gas company ltd)

ABOUT OGDCL
Overview:
PRIOR TO OGDCL
Prior to OGDCL's emergence, exploration activities in the country were carried out by
Pakistan Petroleum Ltd. (PPL) and Pakistan Oilfields Ltd. (POL). In 1952, PPL
discovered a giant gas field at Sui in Balochistan. This discovery generated immense
interest in exploration and five major foreign oil companies entered into concession
agreements with the Government.

During the 1950s, these companies carried out extensive geological and geophysical
surveys and drilled 47 exploratory wells. As a result, a few small gas fields were
discovered. Despite these gas discoveries, exploration activity after having reached its
peak in mid-1950s, declined in the late fifties. Private Companies whose main objective
was to earn profit were not interested in developing the gas discoveries especially when
infrastructure and demand for gas was non-existent. With exploration activity at its
lowest ebb several foreign exploration contracting companies terminated their operation
and either reduced or relinquished land holdings in 1961.

ESTABLISHMENT OF OGDC
To revive exploration in the energy sector the Government of Pakistan signed a long-term
loan Agreement on 04 March 1961 with the USSR, whereby Pakistan received 27 million
Rubles to finance equipment and services of Soviet experts for exploration. Pursuant to
the Agreement, OGDC was created under an Ordinance dated 20th September 1961. The
Corporation was charged with responsibility to undertake a well thought out and
systematic exploratory programme and to plan and promote Pakistan's oil and gas
prospects.

As an instrument of policy in the oil and gas sector, the Corporation followed the
Government instructions in matters of exploration and development. The day to day
management was however, vested in a five-member Board of Directors appointed by the
Government. In the initial stages the financial resources were arranged by the GOP as the
OGDC lacked the ways and means to raise the risk capital. The first 10 to 15
years were devoted to development of manpower and building of infrastructure to
undertake much larger exploration programmes.

CONVERSION INTO PUBLIC LIMITED COMPANY

Prior to 23 October 1997, OGDCL was a statutory Corporation, and was known as
OGDC (Oil & Gas Development Corporation). It has been incorporated as a Public
Limited Company w.e.f. 23 October 1997 and is now known as OGDCL (Oil & Gas
Development Company Ltd.).

INITIAL PUBLIC OFFERING

Government of Pakistan disinvested part of its shareholding in the company in 2003.
Initially 2.5% of the equity with an additional green-shoe option upto 2.5% of equity was
offered to the general public. The said Offer received an overwhelming response from the
general public and was recorded as a landmark transaction in the history of Pakistan’s
capital markets.

OGDCL VISION
To be a leading, regional Pakistani E & P Company, recognized for its people,
partnerships and performance.

OGDCL MISSION
Our mission is to become a competitive, dynamic and growing E & P Company, rapidly
enhancing our reserves through world class workforce, best management practices and
technology and maximizing returns to all stakeholders by capturing high value business
opportunities within the country and abroad, while being a responsible corporate citizen.

ABOUT SSGCL
Overview:
Sui Southern Gas Company (SSGC) is Pakistan's leading integrated gas Company. The
company is engaged in the business of transmission and distribution of natural gas
besides construction of high pressure transmission and low pressure distribution systems.
SSGCL transmission system extends from Sui in Balochistan to Karachi in Sindh
comprising over 3,200 KM of high pressure pipeline ranging from 12 - 24" in diameter.
The distribution activities covering over 1200 towns in the Sindh and Balochistan are
organized through its regional offices. An average of about 357,129 million cubic feet
(MMCFD) gas was sold in 2006-2007 to over 1.9 million industrial, commercial and
domestic consumers in these regions through a distribution network of over 29,832 Km.
The company also owns and operates the only gas meter manufacturing plant in the
country, having an annual production capacity of over 550,150 meters.
The Company has an authorized capital of Rs. 10 billion of which Rs 6.7 billion is issued
and fully paid up. The Government owns the majority of the shares which is presently
over 70%.
The Company is managed by an autonomous Board of Directors for policy guidelines
and overall control. Presently, SSGC's Board comprises of 14 members. The Managing
Director/Chief Executive is nominee of GOP and has been delegated with such powers
by the Board of Directors as are necessary to effective conduct the business of the
company.

Company Vision:

Company Mission
FINANCIAL STATEMENTS OF BOTH
THE COMPANIES
The financial data of both the companies with reference to the financial
year ended 30th of June 2007.

PROFIT AND LOSS ACCOUNTS

OGDCL

Profit and Loss Account

for the year ended 30 June 2007
2007 2006

(Rupees ‘000) (Rupees ‘000)

Sales - net 100,261,191 96,755,382

Royalty (10,877,443) (10,872,443)

Operating expenses (18,497,388) (15,045,654)

Transportation charges (1,087,931) (942,163)

(30,462,762) (26,860,260)

Gross profit 69,798,429 69,895,122

Other income 3,615,231 4,247,881

Exploration and prospecting expenditure (7,406,280) (3,680,707)

General and administration expenses (1,285,476) (1,071,979)

Finance costs (449,561) (9,973)

Workers' profit participation fund (3,213,617) (3,469,017)

PROFIT BEFORE TAXATION 61,058,726 65,911,327

Taxation (15,428,762) (19,943,604)

PROFIT FOR THE YEAR 45,629,964 45,967,723

Earnings per share - basic and diluted (Rupees) 10.61 10.69
The annexed notes 1 to 40 form an integral part of these financial
statements.
Chairman and Chief Ex ecutiv e
SSGCL
Balance sheets of companies
OGDCL
Balance Sheet
as at 30 June 2007
2007 2006
(Rupees ‘000)
SHARE CAPIT AL AND RESER VES 43,009,284 43,009,284
Share capital 2,438,228 2,219,027
Capital reserve 55,169,140 49,541,966
Unappropriated profit 100,616,652 94,770,277

NON CURRENT LIABILITIES 11,023,916 10,010,991

Deferred taxation 1,423,132 1,420,245
Deferred employee benefits 5,151,807 4,221,756
Provision for decommissioning cost 17,598,855 15,652,992

CURRENT LIABILITIES 11,122,665 7,174,483

Trade and other payables - 3,716,958
Provision for taxation 11,122,665 10,891,441
129,338,172 121,314,710
CONTINGENCIES AND COMMITMENTS

The annexed notes 1 to 40 form an integral part of these financial statements.

Chairman and Chief Ex ecutiv e
52

Note 2007 2006

(Rupees ‘000)
NON CURRENT ASSETS
Fixed assets 1,321,600,201 20,253,248
Property, plant and equipment 1,428,749,993 21,653,562
Development and production assets - intangible 156,365,706 4,348,142
Exploration and evaluation assets 56,715,900 46,254,952

Long term investments 162,945,938 2,758,912

Long term loans and receivables 171,117,755 1,391,552
Long term prepayments 39,821 58,021
60,819,414 50,463,437
CURRENT ASSETS
Stores, spare parts and loose tools 1,813,178,295 11,032,754
Stock in trade 93,788 65,608
Trade debts 1,927,873,515 24,498,986
Loans and advances 201,538,657 1,301,759
Deposits and short term prepayments 21,292,928 300,260
Interest accrued 253,222 464,982
Other receivables 221,063,389 790,122
Other financial assets 2,313,553,959 31,209,932
Advance tax 115,950,713 -
Cash and bank balances 244,720,292 1,186,870
68,518,758 70,851,273
129,338,172 121,314,710
 SSGCL
Balance Sheet
As at 30 June 2007
2007 2006
(Rupees in
«000)
EQUITY AND LIABILITIES
Share capital and reserves
Authorised share capital
1,000,000,000 ordinary shares of Rs. 10 each 10,000,000 10,000,000
Issued, subscribed and paid-up capital 6,711,743 6,711,743
Reserves 2,488,662 2,488,662
Gain on remeasurement of available-for-sale securities 223,189 243,608
Unappropriated profit
315,309 897,457
9,738,903 10,341,470
Non-current liabilities
Long-term financing 12,581,455 8,725,052
Long-term deposits Ω2,363,629 Ω2,089,427
Deferred tax Ω 3,879,261 Ω3,204,634
Employee benefits Ω999,142 Ω904,405
Deferred credit Ω2,976,905 Ω2,245,530
Ω22,800,392 Ω17,169,048
Current liabilities
Current portion of long-term financing 2,286,481 1,519,483
Trade and other payables 24,794,330 16,210,231
Interest and mark-up accrued 1,134,421 674,716
Short-term borrowings 1,000,000 1,164,753
Taxation - net 165,362 -
29,380,594 19,569,183
Contingencies and commitments
61,919,889 47,079,701
The annexed notes 1 to 52 form an integral part of these
financial statements.
TECHNOLOGY
Empowered Change

2007 2006
(Rupees in
«000)
ASSETS
Non-current assets
Property, plant and equipment 31,333,811 24,899,887
Intangible assets 62,102 56,267
Long-term investments 236,818 257,237
Long-term loans and advances 114,404 121,994
Long-term deposits 3,050 3,126
31,750,185 25,338,511
Current assets
Stores, spares and loose tools 1,022,165 1,012,057
Stock-in-trade 368,903 Ω281,362
Customers' installation work-in-progress 144,317 Ω281,363
Trade debts 16,118,951 Ω281,364
Loans and advances 95,117 Ω281,365
Trade deposits and short-term prepayments 106,464 Ω281,366
Interest accrued 6,295 Ω281,367
Other receivables Ω7,039,853 Ω281,368
Taxation - net Ω- Ω281,369
Cash and bank balances Ω5,267,639 Ω281,370
Ω30,169,704 Ω281,371
61,919,889 47,079,701
CCASH FLOWS OF THE COMPANIES
OGDCL

Cash Flow Statement

for the year ended 30 June 2007
Note 2007 2006
(Rupees ‘000)
CASH F LOWS FROM OPER ATING ACTIVITIES
Profit before taxation 61,058,726 65,911,327
Adjustments for:
Depreciation 2,978,442 2,370,871
Amortization of development and production assets 3,637,369 3,339,729
Royalty 10,877,443 10,872,443
Workers' profit participation fund 3,213,617 3,469,017
Provision for employee benefits 184,852 243,906
Unwinding of discount on provision for decommissioning cost 443,699 -
Interest income (3,064,607) (3,389,616)
Unrealized gain on investments at fair value through profit or loss (60,386) (21,523)
Dividend income (300,653) (398,970)
Gain on disposal of property, plant and equipment (32,628) (26,282)
Interest income on long term receivables (61,573) (82,752)
Provision for slow moving and obsolete stores - 47,452
Provision for doubtful advances (5,430) (1,997)
78,868,871 82,333,605
Working capital changes
(Increase)/decrease in current assets:
Stores, spare parts and loose tools (2,145,541) (3,502,052)
Stock in trade (28,180) (33,204)
Trade debts (3,374,529) (5,971,412)
Deposits and short term prepayments 7,332 (36,540)
Advances and other receivables 86,035 (58,194)
Increase/(decrease) in current liabilities:
Trade and other payables 1,207,365 1,162,437
Cash gener ated fr om oper ations 74,621,353 73,894,640
Royalty paid (9,768,793) (10,297,744)
Employee benefits paid (327,302) (1,349,931)
Payments to workers' profit participation fund - net (3,469,017) (3,380,011)
Income taxes paid (24,083,508) (14,231,431)
(37,648,620) (29,259,117)
NET CASH FROM OPERATING ACTIVITIES 36,972,733 44,635,523
Cash f lows from inv esting activities
Fixed capital expenditure (16,444,905) (11,917,891)
Interest received 3,466,000 3,119,077
Dividends received 300,653 398,970
Purchase of investments (450,000) (440,063)
Proceeds from encashment of investments 73,341 12,140
Proceeds from disposal of property, plant and equipment 35,130 31,184
Long term prepayments 18,200 (16,182)
NET CASH USED IN INVESTING ACTIVITIES (13,001,581) (8,812,765)
CASH F LOWS FROM F INANCING ACTIVITIES
Dividends paid (38,154,089) (41,444,703)
NET CASH USED IN FINANCING ACTIVITIES (38,154,089) (41,444,703)
Net decr ease in cash and cash equiv alents (14,182,937) (5,621,945)
Cash and cash equiv alents at beginning of the y ear 32,177,279 37,799,224
CASH AND CASH EQUIV ALENTS AT END OF THE Y EAR 3,417,994,342 32,177,279

SSGCL

Cash Flow Statement

For the year ended 30 June 2007 2007 2006
rupees in 000 rupees in 000
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before taxation 1,335,225 1,720,226
Adjustments for:
Depreciation 2,248,374 2,226,382
Amortization of intangible assets 39,417 43,358
Finance cost 1,778,740 1,390,460
Provision against impaired inventory 30,150 7,314
Provision against impaired debts 238,410 172,895
Provision / (reversal of provision) for compensated absences 20,250 (18,680)
Provision for post retirement medical and free gas supply
facilities 92,955 97,181
(Reversal of provision)/provision for retirement benefits (45,506) 119,314
Recognition of income against deferred credit (231,771) (184,504)
Dividend income (5,889) (5,826)
Profit / interest on bank deposits (95,158) (110,212)
Depreciation on transfers of fixed assets (1,327) (607)
Gain on sale of fixed assets (17,120) (20,524)
5,386,750 5,436,777
Working capital changes 38,902,184 1,520,371
Cash generated from operations 6,288,934 6,957,148
Retirement benefits paid (18,950) (75,895)
Tax recovered / (paid) 351,429 (555,558)
Financial charges paid (1,482,845) (1,001,707)
Service charges received from new customers 963,146 638,670
Long-term deposits received - net 274,202 282,732
Long-term loans and advances 5,717 9,507
Long-term deposits 76 1,332
Net cash generated from operating activities 6,381,709 6,256,229
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditure (8,565,797) (5,393,118)
Proceeds from sale of fixed assets 20,179 36,254
Dividend received 5,889 10,577
Profit / interest on bank deposits 97,100 109,433
Net cash used in investing activities (8,442,629) (5,236,854)
 CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from local currency loans 2,992,234 3,000,000
Proceeds raised from issue of Islamic Sukuk Bonds 2,987,686 -
Repayment of local currency loans (1,090,456) (250,000)
Repayment of redeemable capital (416,330) (749,415)
Consumer finance received 100,383 42,176
Repayment of consumer finance (28,116) (16,839)
Repayment of foreign currency loans - (445,711)
Dividend paid (866,731) (998,900)
Net cash generated from financing activities 3,678,670 581,311
Ω Ω
Net increase in cash and cash equivalents 1,617,750 1,600,686
Cash and cash equivalents at beginning of the year 2,649,889 1,049,203
Cash and cash equivalents at end of the year 394,267,639 2,649,889

Analysis on the cash flow statements of

companies
After the analysis of the cash flows of both the companies we can see that the OGDCL generate
its cash from the operating activities and using it in both the investing as well as in financing
activities and
On the other hand SSGCL is generating its major part of cash from the financing activities and
using it in the investing activities to expand the business. Although it generates the cash from

operating activities but as compared to financing activities it’s too much low. Loss Ac
 Brief analysis of OGDCL & SSGCL
LIQUDITY POSITION

CURRENT RATIO:

Current Ratio = Current Assets

Current Liabilities

OGDCL
$68,518,758 = 6.16
$11,122,66
5

SSGCl
$30,169,704 = 1.03
$29,380,584

There are 6.16 current assets against one current liability. While SSGCL has
only 1.03 current assets against one current liability. There is huge difference
between the both companies to pay their short term obligations. OGDCL has
strong ability as compared to SSGCL to meet its short term liability .
LIQUDITY RATIO

Quick Ratio = Current Assets – Inventory

Current Liabilities

OGDCL
$68,518,758 - $93,788 = 6.15
$11,122,665

SSGLC
$30,169,704 - $368,903 = 1.01
$29,380,594

Again OGDCL has great advantage to meet its short term liabilities over SSGCL.
OGDCL has 1.5 quick asset against 1 liability while SSGCL has only 1.01 quick assets
against 1 current liability.
ASSET TURN OVER POSITION
INVENTORY TUNOVER RATIO:
Inventory Turnover Ratio = Total Sales
Average Inventory

OGDCL
$100,261,19
1 = 1069.02
$93,788

SSGCL
$69,084,40
3 = 187.27
$368,903

in the inventory context ogdcl has 881.75 times more inventory turnover as
compared to ssgcl. But over all both has good inventory turnover because of their
highly desirable product in the domestic market.

TOTAL ASSET TURNOVER RATIO

Total Assets Ratio = Total Sales
Total Assets

OGDCL
$100,261,19
1 = 0.775
$129,338,17
2

SSGCL
$69,084,40
3 = 1.12
$61,919,88
9
According to the ratios calculated OGDCL has .775 and SSGCL has 1.12 total
asset turnover which shows that ssgcl utilizing its total assets more efficiently
than ogdcl.
PROFITABILITY RATIOS
RETURN ON TOTAL ASSETS:

Return on
Assets Ratio = Net Income
Average Total Assets

OGDCL
$45,629,964 = 0.35
$129,388,17
2

SSGCL
$290,379 = 0.00469
$61,919,88
9

According to above data ogdcl has 35% and ssgcl has .46% ROA. This
is again showing that ogdcl has better return on their assets.

RETURN ON ETUITY RATIO:

Return on Equity
Ratio = Net Income
Average Owners' Equity

OGDCL
$45,629,964 = 0.45
$100,616,65
2

SSGCL
$290,379 = 0.030
$9,738,90
3
In this computation ssgcl has very less ROE than ogdcl which shows
that ogdcl is earning more income on the invested money by the
owners.

NET PROFIT MARGIN RATIO:

Profit Margin
Ratio = Net Income
Total Sales

OGDCL
$45,629,964 = 0.46
$100,261,19
1

SSGCL
$290,379 = 0.00420
$69,084,40
3

Again there is huge difference between the profit margins. Which

shows that ssgcl is merely covering their cost not generating enough
money to give good return to owners.

EARNING PER SHARE RATIO:

Earnings per
Share Ratio = Net Income
Average Number of Common
Shares

OGDCL
$45,629,96
4 = 10.61
$4,300,928

SSGCL
$290,37
9 = 0.43
$671,17
 4

According to the above data ogdcl earning 10.61 per share while ssgcl
just earning .43 per share which shows the strong position and good
reputation in the market. It may be due to their non competitor
environment in oil sector in Pakistani market.
 CAPITAL STRUCTURE AND
SOLVENCY POSITION
TOTAL DEBT RATIO:

Total Debt Ratio = Total Liabilities

Total Assets

OGDCL
$28,721,520 = 0.22
$129,388,17
2

SSGCL
$52,180,98
6 = 0.84
$61,919,88
9

Ogdcl has only 22% liability of total assets while ssgcl has 84%
liabilities of their total assets which is showing the ogdcl is 78% and
ssgcl 16% equity financed.

INTEREST COVERAGE RATIO:

Interest Earnings Before Interest and

Coverage = Taxes
Ratio Interest Expense

OGDCL
$61,508,28
7 = 136.82
$449,561

SSGCL
$3,113,96 = 1.75
 5
$1,778,74
0

The above calculation showing that ogdcl are generating enough

money beyond their needs for meeting long term obligations and also
showing their strong ability to pay long term debts.

TOTAL DEBT TO EQUITY RATIO:

Debt/Equity Ratio = Total Liabilities

Owners' Equity

OGDCL
$28,721,520 = 0.29
$100,616,65
2

SSGCL
$52,180,98
6 = 5.36
$9,738,903

Ogdcl has very good capital structure because of their main portion of
the financing by equity. Overall ogdcl has strong solvency position.
 MARKET MEASURES

EARNING PER SHARE RATIO:

Earnings per
Share Ratio = Net Income
Average Number of
Common Shares

OGDCL
$45,629,96
4 = 10.61
$4,300,928

SSGCL
$290,37
9 = 0.43
$671,17
4

According to the above data ogdcl earning 10.61 per share while ssgcl
just earning .43 per share which shows the strong position and good
reputation in the market. It may be due to their non competitor
environment in oil sector in Pakistani market.

MARKET PRICE TO EARNING RATIO:

Price to Earnings
Ratio = Market Price per Share
Earnings per Share

OGDCL

$44 = 4.15
 $11

SSGCL
$13.15 = 30.58
$0.43

BOOK VALUE OF COMMON STOCK:

book value of
common stock = Common stock equity
No of outstanding C/S

OGDCL

$100,616,65 $23.3
2 = 9
4,300,928

SSGCL
$9,738,90
3 = $14.51
671,174

In the books of accounts ogdcl has 23.39 and ssgcl 14.51 value of share
again ogdcl is better here also
 CONCLUSION AND INFERENCES

The success of OGDCL depends upon the professional competence of its

work force. OGDCL has engaged top professionals in Geology, Drilling, Engineering
and petroleum.According to above Liquidity analysis it has been cleared that ogdcl has
strong ability to meet their short term obligation than ssgcl.Interest coverage ratio and
their capital structure(ogdcl 78%Equity financed N ssgcl6%Equity financed) is also
showing their very strong solvency position.Ogdcl also efficiently utilizing their assets
but not very good when it will compared to the ssgcl.if we take a look on the market
measures again ogdcl is earning a very high return on the invested money and also has
a very good book value as compared to the ssgcl.ogdcl is also earning good aswell as
more than ssgcl In short ogdcl has overall better financial condition than ssgcl
If we take look at at cash flow statement of both companies we can see that the OGDCL
generate its cash from the operating activities and using it in both the investing as well as in
financing activities and

On the other hand SSGCL is generating its major part of cash from the financing
activities and using it in the investing activities to expand the business. Although it generates
the cash from operating activities but as compared to financing activities it’s too much low.