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History:
The creation of Pakistan State Oil (PSO) can be traced back to the year 1974, when on January
1st; the government took over and merged Pakistan National Oil (PNO) and Dawood Petroleum
Limited (DPL) as Premiere Oil Company Limited (POCL).

Soon after that, on 3rd June 1974, Petroleum Storage Development Corporation (PSDC) came
into existence. PSDC was then renamed as State Oil Company Limited (SOCL) on August 23rd
1976. Following that, the ESSO undertakings were purchased on 15th September 1976 and
control was vested in SOCL. The end of that year (30th December 1976) saw the merger of the
Premier Oil Company Limited and State Oil Company Limited, giving way to Pakistan state Oil
(PSO).

After PSO’s inception, the corporate culture underwent a comprehensive renewal program which
was fully implemented in 2004. This program over the years included the revamping of the
organizational architecture, rationalization of staff, employee empowerment and transparency in
decision making through cross functional teams. This new corporate renewal program has
divided the company’s major operations into independent activities supported by legal, financial,
informative and other services. In order to reinforce and monitor this structural change, related
check and balances have been established by incorporating monitoring and control systems.
Human Resource Development became one of the main priorities on the company’s agenda
under this corporate reform.

It is due to this effective implementation of corporate reform and consistent application of the
best industrial practices and business development strategies, that PSO has been able to maintain
its market leadership in a highly competitive business environment.

Mission:
“Safety is our priority and it is our belief that all accidents are preventable. Our first aim is
excellence in HSE performance in all PSO businesses.” Beyond leadership in the provision of
energy to the nation, PSO's broader goals envision: A cleaner, greener, healthier Pakistan

Vision:
Our first aim is excellence in HSE performance in all PSO businesses.” Beyond leadership in the
provision of energy to the nation, PSO's broader goals envision: A cleaner, greener, healthier
Pakistan. Enabling a safer environment for the PSO family and those whom we serve.

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Our Strategic Objectives:

 Compliance with regulatory and legal requirements and assure ethical operations in all
spheres of business
 Focus on HR capital skill development and increased employee engagement for an
effective and motivated entrepreneurial team
 Optimize and ensure efficient supply chain and pursue long term supply arrangements.
 Effective HSE compliance with steps taken to encourage use of fuels that reduce carbon
footprint.
 Increase market leadership and strategize measures to improve the bottom line.
 Continue to create upstream synergy and evaluate diversification opportunities for
growth.
 Focus on responsible corporate citizenship with active CSR initiatives in health,
education, community development and support for special persons.

Departments of pso:
 Marketing
 Human resources
 Management sciences
 Accounting and finance
 Supply chain
 Computer sciences
 Law
Department of engineering:
 Mechanical
 Mechatronics
 Electrical
 Industrial electrionic
 Chemical
 Computer sciences
 Civil
Products of pso:
 Petroleum Oil Lubricants (POL)
 High Sulphur Furnace Oil (HSFO)
 Low Sulphur Furnace Oil (LSFO)
 High Speed Diesel (HSD)
 Lubricants.
 RLNG/LNG.
 Compressed Natural Gas (CNG)
 Liquid Petroleum Gas (LPG)

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Hierarchy of pso:
 Chairman
 Managing Director
 Executive Directors
 General managers
 Deputy General Managers
 SR.Executives
 Senior officer and engineering trainees
 Non-management

Senior hierarchy persons of pso:

Syed Jehangir Ali Shah
MD & CEO
Mr. Jehangir Ali Shah is a seasoned veteran of the oil industry. He has been appointed as Acting
Managing Director of PSO on September 06, 2018. This position was also held by him
previously in 2011. He joined PSO in 1984 and had worked in various management positions.
His forte however, remained sales and marketing as he has led almost all marketing departments
in PSO. Prior to his current elevation to the position of Acting Managing Director, he was
serving as Deputy Managing Director – Operations, PSO and was responsible for managing
critical supply chain function and extensive infrastructure network of the flagship oil entity of
Pakistan.

Mr. Jehangir Ali Shah holds master’s degrees from the University of Jamshoro as well as from
the McGill University, Canada.
Mr. Yacoob Suttar
DMD & CFO
Mr. Suttar is a Fellow Chartered Accountant by profession and has over 29 years of professional
work experience. He is also a Fellow Cost and Management Accountant. He remained associated
with Engro Chemical Pakistan Ltd., in various roles for 17 years before joining PSO in 2005 as
its CFO. He joined Asia Petroleum in 2013 where he is serving as the Managing Director and
CEO. He is also currently serving as the President of The Institute of Chartered Accountants of
Pakistan (ICAP). Mr. Suttar is also a member of the International Federation of Accountants
(IFAC) Professional Accountants in Business (PAIB) Committee. In addition to this he is serving
on a number of ICAP Committees. He commenced his career with A.F. Ferguson & Co. in 1981,
where he completed his four years of training in audit and finance related work. Later, he spent
few years in Saudi Arabia.

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Customers of pso:
General trade encompasses all industrial segment of Pakistan. Major customers are dealt either
through contract, tender or our long – term business relationships with them. Our major
customers include OGDC, NLC, HIT, POF Wah, Pakistan Steel Mills, CDGK, Rupali Group,
Engro Chemicals etc. General trade also includes major OMCs namely Chevron Pak Ltd, Bakri
Trading Co, Hascol, Overseas Oil trading and Askar Oil.

This business was with Pakistan Refinery Ltd on a ‘Rate-Running Contract’ for more than 40
years. We initiated a dialogue with Pakistan Railways and offered them our services to meet their
HSD/ Lubes demand. Hence, a tender was floated by PR for 206 million liters of HSD which
was won by PSO, being the most competitive participant. This contract was awarded to PSO on
08/09/2008 for three years. On 17/09/2011 another contract for the same quantity was signed and
is valid for three years until 16/09/2014.

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PSO continues to enjoy a long-standing and deep-rooted relationship with Pakistan Army. We
strive to be as equipped as possible for the current and future requirements of our armed forces
anywhere, anytime across the country, form Siachen to the Arabian Sea.

Suppliers of pso:
Pakistan imports crude oil maximum from United Arab Emirates, followed by Saudi Arabia and
Qatar. Here are trade figures of these countries recorded in the year 2016.

1. United Arab Emirates: USD 1099 million

2. Saudi Arabia: USD 869 million
3. Qatar: USD 14 million

Swot analysis of pso:

Strength:
Below is the Strengths, Weaknesses, Opportunities & Threats (SWOT) Analysis of Pakistan
State Oil :
1.Leading Public Sector Company of Pakistan, PSO has been driving the wheels of the national
economy and is the first public company to pass the 1 Trillion rupee revenue mark.
2.The Company possesses the country’s largest storage capacity representing majority of the
nation's total storage capacity.
3.PSO possesses the largest distribution network in the country comprising of 3500+ outlets
4.Financial Stability with strong reserves, paid up capital adds to the trust of shareholders
5.Relations with government is one of the greatest strengths of PSO in order to get legal
protection
6.Product line widths adds long range of products for more revenue opportunities

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Weakness:
1.Lost & Dissatisfied customers are major weakness of PSO as they are causing the perception of
inefficient PSO
2.Old retail outlets are major weakness for PSO as they are not enough capable to compete the
Shell outlets.

3.Quality assurance is not so effective to build image of “Quality and Quantity

Opportunity:
1.Exploring new product markets, expanding the lubricants product range, further expansion of
the company retail network, and reducing product movement costs.
2. Afghanistan’s Market is the biggest opportunity for OMCs in Pakistan.
3.De.regularities of Oil industry in Pakistan add the opportunity to fill the deficiency in few
sectors of petrochemicals markets
4.Export Opportunities of Black Oil Products is also adding the opportunities by exporting Black
Oil products, which is facing downfall due to the introduction Gas Oil.
5. Industrial & Trade growth in Pakistan is also the opportunity for PSO as they are adding
revenues in Power sector that is the major customer of PSO
Threats:
1.Risk of forward integration of Supplier is the key threat for PSO and other OMCs in Pakistan
2.Risk of diversification in new technology is also a key threat to PSO as new technology is
leading to decline in its products.

Cash flow statement:

Rupees in Millions (unless noted)

2018 2017 2016 2015 2014 2013

Balance Sheet

Shareholders' 110,452 102,850 91,581 82,310 78,621 60,643

Equity

Non Current Assets 24,459 22,883 68,142 65,559 58,637 57,593

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Rupees in Millions (unless noted)

2018 2017 2016 2015 2014 2013

Current Assets 378,104 368,560 274,174 275,749 313,514 224,356

Non-current 5,165 8,090 6,234 8,321 5,184 4,271

liabilities

Current liabilities 286,945 281,504 244,501 250,676 288,346 217,035

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ANALYSIS OF FINANCIAL PERFORMANCE

Rupees in Millions

2018 2017 2016 2015 2014 2013

Profit & Loss Account

Gross Sales 1,305,246 1,096,543 906,177 1,114,411 1,410,096 1,295,783

Revenue

Net Revenue 1,056,901 878,147 677,940 913,094 1,187,639 1,100,122

Gross Profit 39,636 37,136 22,525 22,921 36,824 34,161

Other Income 7,911 11,750 13,411 14,314 20,059 6,510

(including
share of
associates'
profits)

Marketing & 11,929 11,238 10,511 10,672 10,480 10,207

Administrative
Expenses

Other 3,334 2,378 1,986 3,513 3,890 3,664

Expenses

Operating 31,870 34,662 22,826 22,670 41,972 26,330

Profit

Finance Cost 5,123 5,923 7,150 11,017 9,544 7,591

Profit before 27,160 29,347 16,289 12,033 32,969 19,210

Tax

Profit after 15,461 18,226 10,273 6,936 21,818 12,638

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Rupees in Millions

2018 2017 2016 2015 2014 2013

Tax

Earning before 33,357 36,322 24,464 24,050 43,567 27,961

Interest,
taxes,
depreciation &
Amortization
(EBITDA)

Analysis of Performance Against Prior Year

Company's profit after tax went down by 15.2% primarily on account of following elements:

- One time reversal of deferred tax asset due to decline in future corporate tax rates to 25% by
FY 2023 (1% in each tax year).

- Decrease in other income by 32.7% mainly because of maturity of PIBs in July 2017 resulting
in lower interest income.

- Increase in other expenses by 40.2% due to higher exchange losses on account of significant
PKR devaluation during the year.

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The above mentioned decrease was partially offset by increase in follwing elements:

- Increase in gross profits by 6.7% despite major decline in furnace oil sales mainly due to
increase in margins of MOGAS & Jet Fuel. Moreover, higher margins were also earned on
Furnace Oil and LNG due to increase in international prices.
- Decline in finance cost by 13.5% due to decline in average borrowing levels and effective
treasury management.

ANALYSIS OF VARIATION IN RESULTS REPORTED IN INTERIM

REPORTS

Rupees in Millions (unless noted)

Q1 Q2 Q3 Q4 FY 2018

Gross Sales 324,756 324,545 276,264 379,681 1,305,246

Gross Profit 9,190 9,540 10,182 10,724 39,636

Other Income 2,213 756 2,112 2,416 7,497

Operating Cost (3,385) (3,665) (3,089) (5,124) (15,263)

Finance Cost (756) (1,023) (1,907) (1,437) (5,123)

Share of profit of associate 158 53 56 146 413

- net of tax

Profit Before Taxation 7,420 5,661 7,354 6,725 27,160

Taxation (2,390) (2,168) (2,651) (4,490) (11,699)

Profit After Taxation 5,030 3,493 4,703 2,235 15,461

Gross Sales
Gross sales fell significantly in 3rd quarter primarily due to decline in upliftment of FO by power
sector during the period.

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Gross Profit:
It remianed low in 1st and 2nd quarter primarily due to inventory losses on high speed diesel and
motor gasoline. However, gross profit grew in 3rd and 4th quarter due to inventory gains on high
speed diesel and furnace oil.

Other income:
Other income was higher in 1st, 3rd and 4th quarter primarily due to receipt of late payment
interest from power sector in these periods.

Operating Cost:
Operating cost increased significantly in last quarter due to higher exchange losses in that period
on account of rupee devaluation and certain provisions booked against government related
claims and in respect of outsourced employees.

Finance Cost:
Finance Cost went up in 3rd quarter mainly due to more proportion of local borrowing in that
period and furnace oil cargo payments. Further, it was on lower side in 1st quarter primarily due
to significant decline in borrowing in that period on account maturity of PIBs in July 2017.

Taxation:
Significant increase in taxation in 4th quarter is due to booking of super tax charge and reversal
of certain portion of deferred tax asset due to reduction in future corporate tax rates in that
period. These arose due to new Finance Act announced in 4th quarter.
SUMMARY OF CASH FLOW STATEMENT WITH ANALYSIS

Rupees in Millions

2018 2017 2016 2015 2014 2013

Cash Flow Statement

Cash & Cash (41,502) (30,274) (39,584) 9,119 3,523 (18,116)

Equivalents at
the
beginning of the
year

Net cash (2,581) (27,965) (994) (29,574) (62,367) 79,444

(outflow) /

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Rupees in Millions

2018 2017 2016 2015 2014 2013

inflow
from operating
activities

Net cash inflow / 45,226 3,925 4,098 3,489 4,281 (46,107)

(outflow)
from investing
activities

Net cash inflow / (14,229) 12,812 (6,206) (22,619) 63,682 (11,698)

(outflow)
from financing
activities

33,578 (11,228) 9,310 (48,704) 5,596 21,639

Cash & cash (7,925) (41,502) (30,274) (39,584) 9,119 3,523

equivalents
at end of the
year

Analysis:
The variation in cash flows as compared to FY 2017 is because of the following:

Operating Activities:
In FY 18 Cash flow from Operativing activities is positive as compared to negative cash flow in
last year. The cash flows have increased in FY 18 primarily due to increase in trade and other
payables.

Investing Activities:
Cash flow from investing activities has improved significantly in FY 18 vs last year due to
Maturity of PIBs in July 2017.

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Financing Activities:
Cash flow from Financing activities deteriorated consequential to repayment of Short term
borrowings. The Company was able to repay such borrowings as it had available funds due to
maturity of PIBs during the year.

Conclusion:
 PSO urgently needs to amend its policies regarding managing sales force
 They need to handle their key accounts in a different way then they handle
consumers

Introduction to Management