Profitability Ratio Analysis of OGDCL, MPCL & PPL

For Financial Year 2012, 2013 & 2014

A REPORT
SUBMITTED TO THE DEPARTMENT OF MANAGEMENT SCIENCES,
VIRTUAL UNIVERSITY OF PAKISTAN
IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF
MASTER IN BUSINESS ADMINISTRATION
Submitted by
ADEEL AHMED
ID:

Department of Management Sciences

Virtual University of Pakistan

Acknowledgment

In the name of Allah, the most kind and most merciful

First of all I am grateful to ALLAH ALMIGHTY, who bestowed me with health, abilities and
guidance to complete the project in a successful manner, and without HIS help I was unable to
perform this task.
More than anybody else, I would like to acknowledge my course instructor Mr. Naveed-ulHassan for his never ending support. He was always there to guide me whenever I felt stuck off
and his encouragement always worked as morale booster for me. I have found him very helpful
while discussing the problems / issues in this dissertation work.
I would also like to say special thanks to Mr. Nasir Nawaz Bhutta, Consultant Final Accounts at
Oil & Gas Development Company Ltd (OGDCL) Islamabad. His critical comments on my work
have certainly made me think of new ideas and techniques.

Executive Summary
Three Companies (OGDCL, PPL and MPCL) of the petroleum industry has been
selected for project on the topic Profitability ratios. The objective to took

research on the proposed project is to carry out financial and business analysis of
OGDCL, PPL and MPCL over three years period starting from June 30, 2012 to June
30, 2014, using profitability ratios techniques.
The outcome of this project has derived the quantitative measure or guide regarding
financial position and profitability of selected companies. This project has benefited me
and will be advanced the user/reader of project an understanding about upstream oil
industry and its profit trends and contribution in overall performance of oil sector.
The topic has been analyzed in detailed with calculating profitability ratios
the results of all these ratios along with interpretations and graphical
presentation for each individual ratio.

TABLE OF CONTENTS
SECTION 1......................................................................................................... 2
CHAPTER 1) INTRODUCTION................................................................................................2
Companies Introduction:.......................................................................................................... 2
i. Oil and Gas Development Company Limited:..............................................................2
ii. Pakistan Petroleum Limited (PPL)...............................................................................3
iii. Mari Petroleum Company Limited (MPCL):.................................................................4
DESCRIPTION OF PROJECT:.................................................................................................. 4
1.1 Financial Period under consideration:......................................................................................4
1.2 OBJECTIVES OF PROJECT:............................................................................................ 5
1.3 SIGNIFICANCE:............................................................................................................ 5
CHAPTER 2) METHODOLOGIES............................................................................................. 7
2.1 Data Collection source:....................................................................................................... 7
2.2 Data Processing and analysis:.....................................................................................7
Chapter 3) Data / Ratio Analysis..........................................................................................8
Profitability Ratios:-........................................................................................................... 8
1. Gross Profit Margin..................................................................................................... 8
2. Operating Income Margin........................................................................................ 10
3. Net Profit Margin...................................................................................................... 11
4. Return on Assets...................................................................................................... 13
5. DuPont Return on Assets.......................................................................................... 14
6. Operating Assets Turnover.......................................................................................15
7. Return on Operating Assets.....................................................................................17
8. Return on Total Equity..............................................................................................18
9. Sales to Fixed Assets................................................................................................20
Over All Working of all above calculated Ratios...........................................................22
Chapter 4) Conclusion and Recommendations:.................................................................25
4.1 Conclusion................................................................................................................ 25
4.2 Recommendations.................................................................................................... 25
SECTION II....................................................................................................... 27
5.1 INTRODUCTION OF THE STUDENT.............................................................................27
5.2 BIBLIOGRAPHY.......................................................................................................... 27

SECTION 1
CHAPTER 1) INTRODUCTION
Companies Introduction:
Three Companies of the same industry selected for project are as follows:

Oil and Gas Development Company Limited (OGDCL)

Pakistan Petroleum Limited (PPL)
Mari Petroleum Company Limited (MPCL)

These Companies are listed in all three stock exchanges of Pakistan. OGDCL in addition to local
markets, listed in London stock exchange as well.
i. Oil and Gas Development Company Limited:
Oil and Gas Development Company Limited (OGDCL) is Pakistans largest listed Company
having exploration and production activities in Pakistan. OGDCL was established in 1961 as
statutory organization which later on incorporated as Public Limited Company with 100 percent
shareholding by Government of Pakistan (GoP) w.e.f. 23 October 1997. GoP offered 2.5% of its
shareholding to general public in Initial Public Offering (IPO) in local stock market and
subsequently in 2006 divested further 10% of its holding via 2 nd Public offering in global market
at London Stock Exchange. Currently Government holds 74.97 percent of shares in the
Company.
The average daily net production of major products, crude oil and gas during the year 2013-14 is
as under: (Annual report 2014, page # 36)
Crude Oil

41,330 bbls/per day

Gas

1,173 MMcf/per day

Sales revenue (FY 2014)

Rs 257 billion

Profit after tax (FY 2014)

Rs 124 billion

(Annual Report 2014, Page # 62)

OGDCL has 45 operated production fields for oil and gas production and holds 100 development
and production leases. Moreover Company also has 68 exploration licenses for exploration
activities in all over the Country.
OGDCL holds 20% shareholding in Mari Petroleum Company Limited (MPCL).
Ministry of Petroleum and Natural Resources (MPNR) is the main regulator for oil and gas
sector on behalf of Government of Pakistan. MPNR awards license for geophysical activities,
exploration and development of oil and gas in Pakistan.
ii. Pakistan Petroleum Limited (PPL)
Pakistan Petroleum Limited was incorporated in Pakistan in 1950 with the main objectives of
conducting exploration, prospecting, development and production of oil and natural gas
resources. The Company is listed on all the three Stock Exchanges of Pakistan with effect from
September 16, 2004. The registered office of the Company is located at PIDC House, Dr. Zia
Uddin Ahmed Road, Karachi. (Annual Report 2014, Page # 105)
The pioneer of the natural gas industry in the country, PPL has been a frontline player in the
energy sector since the mid-1950s. As a major supplier of natural gas, PPL today
contributes over 20 percent of the countrys total natural gas supplies besides producing crude
oil, Natural Gas Liquid and Liquefied Petroleum Gas.
Companys results for the year 2013-14 has showed net sales revenue of Rs 119.8 billion and net
profit after tax 51.4 billion. The average daily net production of major products, crude oil and gas
during the year 2013-14 is as under:- (Annual report, Page # 41)
Gas

Mcf/ per day

854

Crude oil

bbls / per day

10,749

PPL has acquired 100 percent shareholding of MND E&P Limited, a company incorporated in
England and Wales. The name of the subsidiary has been changed to PPL Europe E&P Limited.
Following are the associated Companies of PPL:

Bolan Mining Enterprises

PPL Europe E&P Limited
3

PPL Asia E&P Limited

iii. Mari Petroleum Company Limited (MPCL):

Mari Petroleum Company Limited (MPCL) is registered public listed Company and engage in
exploration and production of oil and gas in Pakistan. Fauji foundation and Government of
Pakistan and OGDCL are the major shareholders with having 40%, 18.45% and 20%
shareholding in the Company.
Companys results for the year 2013-14 has showed net sales revenue of Rs 14.8 billion and net
profit after tax 3.9 billion. The average daily net production of major products, crude oil and gas
during the year 2013-14 is as under:Gas

Mcf/ per day

595

Crude oil

bbls / per day

480

DESCRIPTION OF PROJECT:
The purpose of project is to analyze the whole industry, current perspective; future prospects
while being specific on the topic of project i.e. profitability ratios analysis, comparative analysis
of companies financials with comparative periods and counter analysis with each other.
1.1 Financial Period under consideration:
Financial period of the industry is (July to June). The financial years of most recent available
audited financial reports has been used as follows:
FY 2014
FY 2013
FY 2012
FY 2014 would be the most recent available financial period. FY 2015 has not been selected as
project is required to be finalized before the release/issuance of financial statements to the

markets. However some material subsequent information can be used in order to provide the
accurate information to readers/users of proposed project.
1.2 OBJECTIVES OF PROJECT:

The objective to took research on the proposed project is to carry out financial and business
analysis of OGDCL, PPL and MPCL over three years period starting from June 30, 2012 to
June 30, 2014, using profitability ratios techniques. A brief of objective to be achieved with this
analysis is summarized as follows:The purpose of proposed project is to assess the performance of selected Organizations by
applying profitability ratios. The profitability ratios may also help in indicating the past patterns,
variations and reasons for variances in different title of accounts.

To analyze the ability of selected companies to earn profit over a period of time
To analyze the selected companies efficiency in managing their resource for

generating profit
To find out the reasons for generating profit over the years for selected companies
To find out that how effectively selected companies are maximizing their profits
by controlling their costs/expenses

1.3 SIGNIFICANCE:

The project will be used to analyze the financial performance of these three oil exploration and
production companies (upstream oil sector) and will provide detail of their financial results in
terms of profits. I will use three years financial data to calculate different profitability ratios in
this project. This will benefit me and user/reader of project an understanding about upstream oil
industry and its profit trends and contribution in overall performance of oil sector.
The results of this project will derive the quantitative measure or guide regarding financial
position and profitability of selected companies. Result of this project will help to compare the
results of financial ratios year to years and in business planning/forecasting. This research will
assist the management to make necessary decisions about future business planning and to make
proactive action to overcome major difference in the financial results.

The comparative

profitability analysis of selected companies will be fruitful for the investors as they will be able
to identify that which company is performing better in terms of profitability, thus, helping them
in making investment decisions.
5

CHAPTER 2) METHODOLOGIES
2.1 Data Collection source:
The data / information for the analysis has been collected by the instruction, data available at
MPNR, Policies issued, articles, research reports published in magazines, journals, and websites
for searching definition and purpose of different ratios to be calculated. Especially data has been
collected from the websites i.e. published financial reports of the all three listed companies.
2.2 Data Processing and analysis:

Data extracted from different source as mentioned above has been complied in, MS Excel, MS
World: Data has been compiled and formed in organized manner while keeping in mind the
following areas:

To assess the authenticity of information, source and its weight on overall project

Sorting the data in organized way to assess the ease of references

Summarizing the data to evaluate information effectively.

Finally reporting the required data with focusing on the topic of project

Assumptions used in calculating formula and deriving results will also be explained

Chapter 3) Data / Ratio Analysis

Profitability Ratios:-

1. Gross Profit Margin

Formula: Gross profit / Net sales x 100
(Rupees in Thousand 000)
Company
OGDCL

PPL

MPCL

FY 2012
138,306,253 /

FY 2013
158,432,480 / 223,365,490

FY 2014
176,072,804 /

197,838,726 x 100 = 70%

x 100 =71%

257,014,254 x 100

57,769,003 / 96,221,728 x

59,461,402 / 102,356,656 x

=69%
72,693,716 /

100 = 60%

100 =58%

119,811,358 x 100

1,369,433 / 7,555,915 x

2,903,419 / 11,777,767 x

=61%
3,876,254 /

100 = 18%

100 =25%

14,877,969 x 100
=26%

Working: please see page # 22-24

Graphical Presentation of Ratio/Trend analyses:
80%
70%
60%
50%
OGDCL

40%

PPL
MPCL

30%
20%
10%
0%
FY 2012

FY 2013

FY 2014

Interpretation and comparison:

Interpretation:
Gross profit ratio of OGDCL has almost a constant trend over the period in term of percentage.
However in term of return in monetary term Companys gross profit increased to Rs 176 billion
in FY 2014 as compared to Rs 138 billion in the FY 2012 i.e. 27% increase. The main reason for
increase in gross profit in continues increase in sales revenue i.e. Rs 197 billion, Rs 223 billion
and Rs 257 billion in FY 2012, 2013 and 2014 respectively.
Gross profit of PPL has been showing the marginal decrease of 2% in the year 2013, which
subsequently improved to 61% in the FY 2014. Main reason for decrease in ratio in the FY 2013
is marginal increase of sales revenue i.e 6% as compare to the operating expensed which increase
at trend of 12% and caused an effective decrease of 2% in gross profit percentage. However,
sales revenue in the FY 2014 increased at the rate of 17% and elevated gross profit to 61% again.
MPCLs gross profits showing increasing trend in term of percentage with increase of 7% in the
year 2013 and further 1 percent in the FY 2014. Companys sales revenue is almost on same
increasing trend till FY 2014. However, operating expensed in the year 2014 increased at the rate
of 23% (Rs 8billion tom Rs 11 billion), this increase is the main reason for marginal increase of
1% in gross profit ratio in FY 2014.
Overall analysis shows that cost of sales/operating cost of OGDCL is very low i.e. 30 percent on
average. Secondly, PPL stands at 40 percent average direct operating cost. While, MPCL spends
77 percent on average of its sales revenue on direct cost to sales.
2. Operating Income Margin
Formula: Operating Income / Sales x 100
(Rupees in Thousand 000)
Company
OGDCL

FY 2012
123,422,371 /
197,838,726 x 100 = 62%

FY 2013
131,114,046 / 223,365,490
x 100 = 59 %

PPL

52,935,469 / 96,221,728 x
100 = 55%

55,734,295 / 102,356,656 x
100 = 54%

MPCL

599,201 / 7,555,915 x
100= 8%

2,933,729 / 11,777,767 x
100 = 25%

FY 2014
153,223,652 /
257,014,254 x 100 =
60%
68,165,439 /
119,811,358 x 100 =
57%
2,887,568 /
14,877,969 x 100 =
9

19%

Working: please see page # 22-24

Graphical Presentation of Ratio/Trend analyses:
70%
60%
50%
40%

OGDCL
PPL

30%

MPCL

20%
10%
0%
FY 2012

FY 2013

FY 2014

Interpretation and comparison:

In FY 2013, Operating income of OGDCL decreased to 59% as compare to 62% in FY 2012. The
reason for 3% decrease in operating income to sales revenue is mainly due to increase in
exploration and production expenditure by 10 billion in the FY 2013 as compare to FY 2013,
which impacted 3% decrease in operating income margin of OGDCL in FY 2013. However, In
FY 2014, again ratio improved to 60% mainly due to decrease of exploration expenditures by 6
billion in FY 2014.
PPL also shows increasing trend in operating income in FY 2013 as compare to the FY 2012.
However, in term of proportion to sales revenue it decreased by 1% in the FY 2013, mainly due
to substantial increase in field expenditures by 14% (27 billion to 31 billion) in FY 2013.
However, other expenditure decreased by 29% from (4.6 billion to 3.3 billion) in FY 2013 and
net impact of 1% decline in operating income to sales revenue is reported. In FY 2014, it reached
to 57% of sales revenue, mainly due to 12 billion increase in sales revenue and relatively less
increase in field and other expenditures.
MPCL shows 8% operating income to sales ratio in the FY 2012. In FY 2013, it improved to
25% of sales revenue, mainly due to 55% increase in sales revenue which stood to Rs11. 7
billion from Rs 7.5 billion in the FY 2012. In FY 2014, sales revenue increased to by 7 billion or
10

11%. This increase was relatively less as compare to FY 2013 and FY 2012, resulting ratio to
19% of sales revenue.
Overall comparison shows very high proportion of operating income for OGDCL and MPCL
shows on average 60% and 55% respectively. MPCL shows 17% operating income which is
relatively lower than other two companies of the same industry. Main reason again is the same
i.e. relatively high production to meet operating and overhead cost.
3. Net Profit Margin
Formula: Net Profit / Net Sales x 100
(Rupees in Thousand 000)
Company
OGDCL

FY 2012
96,905,575 / 197,838,726
x 100 = 49 %

FY 2013
91,272,619 / 223,365,490
= 41%

PPL

40,925,516 / 96,221,728 x
100 = 43 %

41,951,196 / 102,356,656 x
100 = 41%

MPCL

1,115,166 / 7,555,915
= 15 %

2,421,076 / 11,777,767 x
100 = 21%

FY 2014
123,914,550 /
257,014,254 x 100=
48%
51,417,378 /
119,811,358 x 100=
43%
3,943,303 /
14,877,969 x 100 =
27%

Working: please see page # 22-24

Graphical Presentation of Ratio/Trend analyses:

11

60%
50%
40%
OGDCL

30%

PPL
MPCL

20%
10%
0%
FY 2012

FY 2013

FY 2014

Interpretation and comparison:

Net profit ratio of OGDCL decreased to 41% in the year 2013 as compared to
49% in the year 2012, despite an increase in the sales revenue of Rs 27 billion in
the year 2013. While reviewing the financial statements, it has been observed
that Company has paid an amount of Rs 12 billion against prior year taxation as
explained in note 30 to the financial statements and increased exploration and
prospecting expenditures have also offset the companys revenues adversely. In
the year 2014, Companys profit after tax again touched to Rs 48% of the sales
revenues due to substantial increase in other income and reduced exploration
and evaluation expenditures totalling with increase in sales revenue during the
period as compared to FY 2013.
Net profit ratio of PPL reduced by 2% in FY 2013 as compared to the FY
2012.The main reason for decrease is due to 14% increase in operating
expenses and 41% decrease of other income in FY 2013 as compare to FY 2012.
In FY 2014, profits further improved and increased to Rs 51 billion (43% of sales
revenue) as compared to 42 billion in FY 2014, mainly due to increase in sales
revenue of Rs 18 billion.
Net profit ratio of MPCL increased to 21% in FY 2013 as compare to 15% in FY
2012. Reason for increase in ratio is mainly due to 55% increase in sales
revenue. Due to increase in sales revenue operating and exploration and
prospecting expenses by 30% and 52% respectively in FY 2013 as compare to
FY 2012. Moreover, other charges also increase by more than 50% in FY 2013.
Effectively, after charging of impact of increased expenditure with increase in
12

revenue net increase in profit reported by 6% in FY 2013. In FY 2014, net profit

ratio again improved to 27%, mainly due to increase in sales revenue and other
income, taxation expense has also been decreased in the FY 2014, all these
impacted substantial growth in net profit ratio in FY 2014.
Overall comparison among these Companies shows average net profit ratio of
46% for OGDCL, 42% for PPL and 21% for MPCL. Again, the OGDCL and PPL
shows relatively less gap due to increased production of oil and gas. While,
MPCL has relatively less production and sales revenue to cover operating and
overhead cost (general and administration), resulting decreased proportion of
net profit as compare to other two major industry organizations.

4. Return on Assets
Formula: PBIT / Total Assets
(Rupees in Thousand 000)
Company
OGDCL
PPL
MPCL

FY 2012
133,082,814 /338,291,118
=39%
64,554,950 / 170,153,040
=38%
1,402,495 / 33,287,590
=4%

FY 2013
146,808,506 / 413,928,864
=35%
62,627,743 / 212,901,221
=29%
3,488,491 / 34,192,438
=10%

FY 2014
17,349,905 /
496,232,680 =35%
74,546,759 /
236,343,043 =32%
4,377,637 /
59,463,027=7%

Working: please see page # 22-24

Graphical Presentation of Ratio/Trend analyses:

13

45%
40%
35%
30%
25%

OGDCL

20%

PPL
MPCL

15%
10%
5%
0%
FY 2012

FY 2013

FY 2014

Interpretation and comparison:

Return on assets of OGDCL was 39% in FY 2012, which subsequently declined in the FY 2013
as growth in sales revenue was relatively low as compare to growth in Companys assets. In the
FY 2014, ratios maintains at 35% of total assets.
PPL return on assets were 38% in FY 2012 and decline to 29% in FY 2013, mainly due
proportionately low increase in sales revenue as compare to increase in total assets. However, in
FY 2014, it further improved to 32% as revenue increased by 12 billion in FY 2014.
MPCL shows return of 4% in FY 2012 which improved to 10% in FY 2013 due to substantial
increase in sales revenue and relatively less increase in Companys assets. In FY 2014, assets
increased by Rs 25 billion while revenue increased by 4 billion which caused decline in return on
assets from 10% to 7% in FY 2014.
Overall analysis shows that assets of OGDCL and PPL gives higher return while MPCLs assets
gives lower return. The sales revenue of these Companies should be increased in equal
proportion as assets base increase to maintain the ratio of return of assets. While analyzing the
above return on assets, it shows that oil industry need high assets base to generate revenues.
However, in case of MPCL that return is very low, which can be improved with increase in sales
revenue.
5. DuPont Return on Assets

14

Formula: Profit Margin x Total Asset Turnover x Equity Multiplier

(Rupees in Thousand 000)
Company
OGDCL
PPL
MPCL

FY 2012
49% x 0.58 x 1.28 x100
=37%
43% x 0.57 x 1.36 x 100
=33%
15% x 0.23 x 2.90 x 100
=10%

FY 2013
41% x 0.54 x 1.33 x 100
=29%
41% x 0.48 x 1.43 x 100
=28%
21% x 0.34 x 2.52 x 100
=18%

FY 2014
48% x 0.52 x 1.25 x
100 =31%
43% x 0.51 x 1.30 x
100=28%
27% x 0.25 x 3.53 x
100 =23%

Working: please see page # 22-24

Graphical Presentation of Ratio/Trend analyses:

40%
35%
30%
25%
OGDCL

20%

PPL
MPCL

15%
10%
5%
0%
FY 2012

FY 2013

FY 2014

Interpretation and comparison:

DuPont return on assets is an approach that determines the impact of asset
turnover and profit margin on profits.
6. Operating Assets Turnover
Formula: Sales / Operating Assets
(Rupees in Thousand 000)
15

Company
OGDCL

FY 2012

FY 2013

197,838,726 /
330,890,438 =0.60 times

223,365,490 / 268,779,371
= 0.83 times

96,221,728 / 149,000,939
=0.65 times

102,356,656 / 154,639,937
= 0.66 times

7,555,915 / 32,780,421
=0.23 times

11,777,767 / 32,590,262
=0.36 times

PPL

MPCL

FY 2014
257,014,254 /
349,931,382 = 0.73
times
119,811,358 /
165,662,998 =
0.72 times
14,877,969 /
57,506,682 =0.26
times

Working: please see page # 22-24

Graphical Presentation of Ratio/Trend analyses:
0.90
0.80
0.70
0.60
0.50

OGDCL

0.40

PPL
MPCL

0.30
0.20
0.10
FY 2012

FY 2013

FY 2014

Interpretation and comparison:

Operating assets turnover shows turnover/sales generated as compare to operating assets
employed in the Company.
OGDCL has strong operating assets base for generating revenues. Its sales revenue to operating
assets improved to 0.83 times in FY 2013 as compare to 0.60 times in FY 2012. Ratio improves
as sales revenue increased in relatively high proportion as compare to increase in operating
assets. In FY2014, this ratio again declined to 0.73 times, which shows relatively less
proportionate increase in sales revenue as compare to the Companys assets.
PPL has operating assets turnover of 0.65 times in the year 2012 which slightly improved to 0.66
times in FY 2013 and improved to 0.72 times in FY 2014. Sales revenue of PPL is increasing in
16

all three periods in term of rupees. While comparing this increase in proportion to increase in
Operating assets, the sales revenue is slightly increased in FY 2013. In FY 2014, operating assets
turnover significantly improved to 0.72 times in FY 2014. Overall improvement is witnessed in
PPL assets turnover over the period under analysis.
MPCLs operating assets are generating revenue at the rate of 0.23 times in FY 2012 and
increased to 0.36 times in FY 2013, which shows positive trend and efficiency of operating
assets in terms of generating revenues as compare to corresponding period. In FY 2014,
operating assets turnover declined to 0.26 times which shows relatively less efficiency in
generating revenues as compare to financial year 2013. However overall performance since FY
2012 is on improving trend.
Overall comparison of these Companies shows that OGDCL and PPL are generating more
revenues with deploying operating assets into business. MPCL revenues are relatively low while
comparing with other two major Companies of the industry. MPCLs operating assets needs
some additional measures by the management to improve sales revenues in order to maintain the
turnover with industry.
7. Return on Operating Assets
Formula: Operating Income / Operating Assets
(Rupees in Thousand 000)
Company
OGDCL

FY 2012

FY 2013

123,422,371 /
330,890,438 x 100=37%

131,114,046 / 268,779,371
x 100 =49%

52,935,469 / 149,000,939
x 100 =36%
599,201/ 32,780,421 x
100=2%

55,734,295 / 154,639,937 x
100=36%
2,933,729 / 32,590,262 x
100 =9%

PPL

MPCL

FY 2014
153,223,652 /
349,931,382 x
100=44%
68,165,439 /
165,662,998 x
100=41%
2,887,568 /
57,506,682 x 100=5%

Working: please see page # 22-24

Graphical Presentation of Ratio/Trend analyses:

17

60%
50%
40%
OGDCL

30%

PPL
MPCL

20%
10%
0%
FY 2012

FY 2013

FY 2014

Interpretation and comparison:

Operating income to operating assets shows return on operating assets
OGDCL has return on operating assets 37% in FY 2012 which significantly increased to 49% in
FY 2013. This increase is mainly due to increased revenue and decreased operating assets in the
FY 2013. Operating assets are significantly decreased in FY 2013 due to decrease in trade debts
and conversion to trade debts into term finance certificates (shown under long term investments
in financial statements).
PPL has return on operating assets at the rate of 36% in FY 2012. The same return rate were
maintained in the FY 2013. Operating income increased in FY 2013 with relatively same
proportion of increase in the operating assets of the Company. This return jumped to 41% in the
FY 2014 mainly due to proportionately higher income and operating assets of the Company.
Since FY 2012, overall performance of the Company in terms of return on operating assets
shows an increasing trend.
MPCLs return on operating assets is 2% in the FY 2012 and subsequently slumped to 9% in the
FY 2013. Reason for improvement in return on operating assets is due to growth in operating
income in the FY 2013. In FY 2014, return on operating income again declined to 5% mainly due
to increased operating assets as compare to corresponding period. Operating income did not
increased as proportion to operating assets that is the reason for decline in return on operating
assets.
Overall comparison among these Companies shows reasonably stable trend of return in case of
OGDCL and PPL while MPCL has very marginal return (operating income) as compared to
18

operating assets base. Management of MPCL is required to manage its operating assets to get
maximum return on operating assets with generating more revenues and increased production.
8. Return on Total Equity
Formula: Net Profit / Total Equity
(Rupees in Thousand 000)
Company
OGDCL
PPL
MPCL

FY 2012
96,905,575 /
263,383,074=37%
40,925,516 / 124,960,496
=33%
1,115,166 / 11,476,146
=10%

FY 2013
91,272,619 / 312,266,021
=29%
41,951,196 / 149,354,340
=28%
2,421,076 / 13,556,733
=18%

FY 2014
123,914,550 /
395,671,205 =31%
51,417,378 /
181,917,358 =28%
3,943,303 /
16,822,231 =23%

Working: please see page # 22-24

Graphical Presentation of Ratio/Trend analyses:
40%
35%
30%
25%
OGDCL

20%

PPL
MPCL

15%
10%
5%
0%
FY 2012

FY 2013

FY 2014

Interpretation and comparison:

OGDCL shows return on equity @ 37% in the FY 2012, which decreased to 29% in FY 2013
mainly due to high retention of accumulated profits, growth in assets. Decrease in profit for FY
2013 also one of the main reason for decline in return on equity. The profit for the year decrease
due to significant payment of taxation in the year 2013. In FY 2014, net profits to equity ratio
increased to 31%. Profit for the year 2014 increased by Rs 35 billion and relative increase of
19

equity due to high retention of profits impacted marginal increase in return on equity ratio in the
FY 2014.
PPLs financials shows return on equity at the rate of 33% in the FY 2012 which subsequently
decline due to marginal increase in profit and high retention in accumulated profits of the
Company impacted return at 28%. The same return of 28% is maintained in FY 2014, even after
increase of Rs 10 billion in profits, mainly due to high retention in accumulated profits by the
company or less payments of dividends.
MPCL shows relatively good growth in return on equity ratio as profits are on increasing trend
over the period. In the FY 2013, ratio improved to 18% of equity as compared to 10% of equity
in the FY 2012, mainly due to increase in profits along with relative growth in
retentions/accumulated profits. The same trend goes on for the year 2014, and return stood at
23% mainly due to 62% increase in profits in that year.
Overall comparison shows high return on equity in case of OGDCL and PPL. However, in case
of MPCL return is relatively low but growth in that return shows positive trend as return goes on
consistently at the rate of 7% to 8% over the period under analysis.

9. Sales to Fixed Assets

Formula: Sales / Total Asset
(Rupees in Thousand 000)
Company
OGDCL

FY 2012

FY 2013

197,838,726 /
338,291,118 =0.58 times

223,365,490 / 413,928,864
=0.54 times

96,221,728 / 170,153,040
=0.57 times

102,356,656 / 212,901,221
=0.48 times

7,555,915 / 33,287,590
=0.23 times

11,777,767 / 34,192,438
=0.34 times

PPL

MPCL

FY 2014
257,014,254 /
496,232,680 =0.52
times
119,811,358 /
236,343,043 =0.51
times
14,877,969 /
59,463,027 =0.25
times

Working: please see page # 22-24

Graphical Presentation of Ratio/Trend analyses:

20

0.70
0.60
0.50
0.40

OGDCL
PPL

0.30

MPCL

0.20
0.10
FY 2012

FY 2013

FY 2014

Interpretation and comparison:

Sales to total assets shows relative analysis of revenue generations with total assets deployed in
the business.
OGDCL financials shows generation of revenues relative to total assets was 0.58 times in the FY
2012. In the FY 2013, the turnover declined to 0.54 times, even after increase in revenues by Rs
25 billion. The main reason for this decline is increase in fixed assets as Company has made
heavy investment in non-current assets and fixed assets. In FY 2014, the turnover declined to
0.52 times, despite increase in revenues by Rs 34 billion. The main reason for such decrease is
increase in total assets due to high retention of profits with corresponding investment in
Company resources i.e. fixed assets particularly in development and production assets.
PPL has assets turnover of 0.57 times in the FY 2012 which subsequently declined to 0.48 times
because of relatively high @ 25% in Companys assets as compare to increase in revenues at the
rate of 6.2% in the FY 2013.In FY 2014, assets turnover improved to 0.51 times due to increase
in revenues @ 17% relative to increase in total assets @ 10%.
MPCL has 0.23 times assets turnover in the FY 2012 which subsequently improved to 0.34 times
in the FY 2013, mainly due to 56% increase in revenues and relatively 3% increase in total assets
of the Company. In financial year 2014, assets turnover again declined to 0.25 times even after
25% increase in revenues. The main reason for this decrease is relatively high increase in total
assets of the Company due to retention of profits (by non-paying dividends) and investment of
capital nature increased the total assets by 74% in the FY 2014. However such improved base
might be beneficent for future generating of revenues in the Coming years.

21

Overall comparison shows a high assets turnover in case of OGDCL and PPL, relatively
maintaining trend over the period under analysis. However, MPCL has showed a decreased
turnover as compare to other Companies, but still its growth in profits and total assets is a
positive sign for future revenue generation.

22

Over All Working of all above calculated Ratios

(All rupees in thousand)
FY 2012

FY 2013

FY 2014

96,905,57
5
138,306,25
3
197,838,72
6
338,291,11
8

91,272,61
9
158,432,48
0
223,365,49
0
413,928,86
4

123,914,55
0
176,072,80
4
257,014,25
4
496,232,68
0

116,044,10
2
214,846,33
6
330,890,43
8

134,532,01
5
134,247,35
6
268,779,37
1

155,771,25
5
194,160,12
7
349,931,38
2

43,009,28
4
4,906,00
0
215,467,79
0
263,383,07
4

43,009,28
4
5,756,00
0
263,500,73
7
312,266,02
1

43,009,28
4
6,606,00
0
346,055,92
1
395,671,20
5

133,082,81
4
(9,660,44
3)
123,422,37
1

146,808,50
6
(15,694,46
0)
131,114,04
6

172,349,90
5
(19,126,25
3)
153,223,65
2

OGDCL
NP
GP
Sales
Total assets
Operating assets:
Fixed assets
Current assets
Net Operating Assets (Fixed Assets +
Current Assets)
Total Equity
Share capital
Reserves
Un appropriated
Net Total Equity (Share Capital +
Reserves + Un-appropriated Profit)
Operating Income
Profit Before Income Tax
Other income
Net Operating Income (PBIT - Other
Income)
Equity multiplier (Total Asset / Net
Total Equity)

1.2
8

1.3
3

1.2
5

23

PPL
NP
GP
Sales
Total assets

40,925,51
6
57,769,00
3
96,221,72
8
170,153,04
0

41,951,19
6
59,461,40
2
102,356,65
6
212,901,22
1

51,417,37
8
72,693,71
6
119,811,35
8
236,343,04
3

56,326,93
2
433,56
9
56,760,50
1

70,078,91
2
402,15
2
70,481,06
4

82,636,34
7
277,97
3
82,914,32
0

13,144,90
9
111,815,58
7
124,960,49
6

16,431,10
2
132,923,23
8
149,354,34
0

19,717,29
5
162,200,06
3
181,917,35
8

64,554,95
0
(11,619,48
1)
52,935,46
9

62,627,74
3
(6,893,44
8)
55,734,29
5

74,546,75
9
(6,381,32
0)
68,165,43
9

Operating assets
PPE
Intangibles
Net Operating Assets (Fixed Assets +
Current Assets)
Total equity
Share capital
Reserves
Net Total Equity (Share Capital +
Reserves + Un-appropriated Profit)
Operating Income
PBT
Other income
Net Operating Income (PBIT - Other
Income)
Equity multiplier (Total Asset / Net
Total Equity)

1.36

1.43

1.30

MPCL
NP
GP
Sales

1,115,16
6
1,369,43
3
7,555,91
5

2,421,07
6
2,903,41
9
11,777,76
7

3,943,30
3
3,876,25
4
14,877,96
9
24

33,287,59
0

34,192,43
8

59,463,02
7

Net Operating Assets (Fixed Assets +

Current Assets)

12,047,21
1
20,733,21
0
32,780,42
1

12,117,97
7
20,472,28
5
32,590,26
2

16,877,75
0
40,628,93
2
57,506,68
2

Net Total Equity (Share Capital +

Reserves + Un-appropriated Profit)

11,476,14
6

13,556,73
3

16,822,23
1

1,402,49
5
(356,36
3)
(446,93
1)
599,20
1

3,488,49
1
(295,27
8)
(259,48
4)
2,933,72
9

4,377,63
7
(835,30
8)
(654,76
1)
2,887,56
8

2.90

2.52

3.53

Total assets
Operating Assets
Fixed assets
Current assets

Operating Income
PBT
Other income
Finance income
Net Operating Income (PBIT - Other
Income-Finance Income)
Equity multiplier (Total Asset / Net
Total Equity)

25

Chapter 4) Conclusion and Recommendations:

4.1 Conclusion

Profitability ratios of all three Companies under analysis shows their comparative
analysis of profitability while comparing with different factors of the financial position.
Overall impact was positive in case of all these companies as all three Companies are
profitable for all three periods under analysis. However, MPCL shows relatively less
profitability but assets turnover and other operating assets turnover ratio shows positive
trend as growth is expected and future prospects due to investment and capitalization in
assets of the Company.

Increase in production is one of the most common factor to improve probability for all
three Companies, particularly in case of MPCL, MPCL can enhance production with
extensive exploration activities.
The result of assets turnover ratio is observed very low for all three Companies even
below than 1 times. Which is because of industry nature as capital intensive and needs
strong assets base. However, strong assets base can be used to generate more revenues
with optimal utilization of Companies resources.

In case of OGDCL and PPL, a significant amount under long term investment was stuck
which can be used as exploration and other petroleum extraction activities to increase the
production of oil and gas in order to increase profitability and to meet energy crises
prevailing due to shortfall of petroleum products in the Country.

4.2 Recommendations

All three Companies are generating sufficient revenues to offset the operating expenses
but still there is shortfall of profits in case of MPCL, which can be improved by adopting a
strategy to improve the production in order to increase sales revenues.

Optimum utilization of Company resources to generate more revenues with

diversification of operations by entering the downstream industry and providing
integrated oil field services to further enhance the profitability of all three Companies.

26

MPCL shows very low return or profits due to heavy exploration expenditures for all
three financial periods and caused profits to reduce. Strategy to improve production and
sales revenue is very important in order to survive in the industry.

Exploiting offshore hydro carbon reserves for further growth of operations and
capitalizing on a very fruitful venture.

Realization of long term investments in case of OGDCL and PPL to invest fund into
operations in order to get operational growth.

27

SECTION II
5.1 INTRODUCTION OF THE STUDENT

5.1.1 Last Degree Obtained:

5.1.2 Organizations Name Where Currently Employed

5.1.3 Designation

5.1.4 Experience (Years)

5.2 BIBLIOGRAPHY

MPCL. (n.d.). Retrieved June 11, 2015, from Mari Petroleum Company Limited:
http://mpcl.com.pk/InvestorRelations.html
MPCL - Financial Reports. (n.d.). Retrieved June 11, 2015, from Mari Petroleum Company
Limited: http://mpcl.com.pk/Financial_Reports/AR-2014.pdf
OGDCL - Financial Reports. (n.d.). Retrieved June 11, 2015, from Oil & Gas Development
Company Limited: http://www.ogdcl.com/DocumentDownload
OGDCL - OverView. (n.d.). Retrieved June 11, 2015, from Oil & Gas Development Company
Limited: http://www.ogdcl.com/ContentPage?id=%2b5PqYGaI9%2fgsbYnBjwBWAQ
%3d%3d
PPL - Associations. (n.d.). Retrieved June 11, 2015, from Pakistan Petroleum Limited:
http://www.ppl.com.pk/content/associated-company
PPL - Financial Reports. (n.d.). Retrieved June 11, 2015, from Pakistan Petroleum Limited:
http://www.ppl.com.pk/content/reports-and-accounts
PPL - Overview. (n.d.). Retrieved June 11, 2015, from Pakistan Petroleum Limited:
http://www.ppl.com.pk/content/corporate-profile-overview

28