Oil and Gas Development Corporation Limited

2010

201 0

OIL AND GAS DEVELOPMENT CORPORATION LIMITED

FINANCIAL ANALYSIS

Oil and Gas Development Corporation 201 Limited 0

BUSINESS FINANCE
Mannan Zaheer SP09-BBA-071 Zain Jahangir SP09-BBA-105 Fawad Ali Minhas SP09-BBA-044 Waqas Sabir SP09-BBA-144 Umer Farooq SP09-BBA-138 Mannan Rahim SP09-BBA-089

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ACKNOWLEDGEMENT
We are very thankful to all those people who helped us in completing this report. We are thankful to our instructor Mr. Taqi Zaidi. He was always there to help us. We thank him for motivating us to write the report. We are also thankful to the staff of Lahore Stock Exchange that they gave us the financial reports of OGDCL and PPL from which we made this report. We are also thankful to all those who helped us in finding the way to Lahore Stock Exchange. We are also thankful to all those friends who helped us in analyzing the ratios. We again thank all those who have even a minor contribution in completing this report. Without their help and support this project would have never been completed.

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EXECUTIVE SUMMARY
This report comprises of a brief introduction to OGDCL, the corporations mission and vision statements, history and beginning of this corporate giant, corporations business strategy, and the major areas where it operates. The report also contains financial ratios of the corporation of the past three years and their analysis. Besides this the report also contains the analysis of financial ratios of PPL and OGDCL. Conclusion and recommendations are also given in the report.

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TABLE OF CONTENTS
ACKNOWLEDGEMENT................................................................................................. 3 EXECUTIVE SUMMARY.................................................................................................4 TABLE OF CONTENTS.................................................................................................5 Vision....................................................................................................................... 6 Mission.................................................................................................................... 6 COMPANY HISTORY:....................................................................................................6 Prior to OGDCL........................................................................................................ 6 Establishment of OGDC...........................................................................................6 Initial Successes......................................................................................................7 Transition to self financing entity............................................................................7 Conversion into Public Limited Company................................................................7 BUSINESS STRATEGY:.................................................................................................8 MAJOR OIL & GAS FIELDS:...........................................................................................8 FINANCIALS............................................................................................................... 11 Ratio Analysis:.......................................................................................................11 Liquidity Ratios:..................................................................................................11 Asset Management Ratios..................................................................................12 Debt Management..............................................................................................16 Profitability Ratios..............................................................................................17 Market Value ratios............................................................................................21 Comparison and analysis of ratios of OGDCL and PPL...........................................25 CONCLUSION:...........................................................................................................27 RECOMMENDATIONS:...............................................................................................27

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Oil and Gas Development Corporation 201 Limited 0 INTRODUCTION:

OGDCL is the national oil & Gas Company of Pakistan and the flagship of the countrys Exploration and Production sector. The Company is the local market leader in terms of reserves, production and acreage, and is listed on all three stock exchanges in Pakistan and also on the London Stock Exchange since December 2006. OGDCLs under a forward looking management foresees the organization as not only the leading E&P Company of the country, but also as a company known for its people, partnerships and performance in the region. The Company continued with its strategies of accelerating oil and gas exploration, adding to its reserves, early development of newly discovered fields and strengthening of its oil and gas production base in order to enhance indigenous production of the country and create value for its shareholders.

Vision
The corporations vision is to be a leading multinational Exploration and Production Co.

Mission
The Corporations vision is to become the leading provider of oil and gas to the country by increasing exploration and production both domestically and internationally, utilizing all options including strategic alliances.

COMPANY HISTORY:
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 Baluchistan. 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 nonexistent. 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

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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.

Initial Successes
A number of donor agencies such as the World Bank, Canadian International Development Agency (CIDA) and the Asian Development Bank provided the impetus through assistance for major development projects in the form of loans and grants. OGDC's concerted efforts were very successful as they resulted in a number of major oil and gas discoveries between 1968 and 1982. Toot oil field was discovered in 1968 which paved the way for further exploratory work in the North. During the period 1970-75, the Company reformed the strategy for updating its equipment base and undertook a very aggressive work programme. This resulted in discovery of a number of oil and gas fields in the Eighties, thus giving the Company a measure of financial independence. These include the Thora, Sono, Lashari, Bobi, Tando Alam & Dhodak oil/condensate fields and Pirkoh, Uch, Loti, Nandpur and Panjpir gas fields which are commercial discoveries that testify to the professional capabilities of the Corporation.

Transition to self financing entity

Noting the Company's success, due to major oil and gas discoveries in the eighties, the Government in July 1989, off-loaded the Company from the Federal Budget and allowed it to manage its activities with self generated funds. The financial year 1989-90, was OGDC's first year of self-financing. It was a great challenge for OGDC. The obvious initial target during the first year of self-financing was to generate sufficient resources to maintain the momentum of exploration and development at a pace envisaged in the Public Sector Development Programme (PSDP) as well as to meet its debt servicing obligations. OGDC not only generated enough internal funds to meet its debt obligations but also invested enough resources in exploration and development to increase the country's reserves and production.

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.).

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Oil and Gas Development Corporation 201 Limited 0 BUSINESS STRATEGY:

As the leading exploration and Production Company in Pakistan, OGDCLs primary objective is to enhance its reserves and production profile and ultimately maximize value for shareholders. In order to achieve this goal, the Company seeks to execute the following strategies:
Accelerate Production Growth: by continuing to accelerate production growth through

utilizing cutting edge technologies, allowing the Company to utilize its significant reserves base and capitalize on the strong economic growth and accelerating energy demand in Pakistan.
Exploit Exploration Opportunities: by building the Companys future reserves portfolio

through its large onshore exploration acreage. During the fiscal year 2008-09 target of drilling is 52 wells.
Maintain Low Cost Operations: OGDCLs operating environment, namely the

geographic concentration of its reserves base within Pakistan, will be a major factor in allowing it to control its low cost structure. Within Pakistan, the Companys leading position also enables it to access economies of scale across its significant reserves base and operations.
Pursue Selective International Expansion: while domestic expansion remains OGDCLs

core focus, the Company intends to grow and diversify its portfolio through selective international expansion in the medium to long-term.
Implementing International Best Practice: by ensuring an efficient organizational

structure and business processes that are focused on core production. As part of our restructuring plan, OGDCL has established an in-house technical services division, the Petroserv Directorate, which separates technical support services from core E&P activities.

MAJOR OIL & GAS FIELDS:

These are the major oil and gas fields of the corporation. TANDO ALAM OIL FIELD Tando Alam is located in Hyderabad Distt. of Sindh Province. Hyderabad is the nearest city, which is about 21 KM away from the location. First exploratory well (i.e. Tando Alam well No. 1 as an oil producer) was drilled and completed in May 1984. A total of 15 wells were drilled upto 1992 in Tando Alam Oil field. Tando Alam # 1 was completed and brought on regular production on 13th Oct, 1984. TOOT OIL FIELD Toot Oil Field is located at a distance of about 120 Kms in the south-west of Islamabad. The field was discovered in Jan. 1967. CHANDA OIL FIELD

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Chanda field is located in Kohat district of the North West frontier province at a distance of about 70 KMs from Kohat city. Two wells have been drilled in Chanda field, i.e. Chanda # 1 and Chanda Deep # 1. This is a joint venture field having 85.5 %, 5% & 9.5% shares of OGDCL, GOVT. Holdings & Zaver Petroleum. Field was put on regaular production in 2005. UCH GAS FIELD The field is located at a distance of 60 km from Sui gas field; district Dera Bughti in Baluchistan Province. Uch gas field was discovered in 1955. First well was drilled and abandoned due to higher percentage of CO2 (low BTU) in gas. During appraisal phase, three separate structures have been identified in Uch Gas Field namely North Western, Central and South Eastern having calorific values of 300, 400 and 700 BTU/SCF respectively. CHAK NAURANG OIL FIELD Chak Naurang Oil Field is located at a distance of about 90 Kms in the south-west of Islamabad. The field was discovered in June 1986 and came on regular production from July 1987. Chak Naurang is a joint venture with M/s. POL OGDCL & POL having shares of 85% and 15% respectively. BOBI GAS/CONDENSATED FIELD The field is located in Sanghar district of Sindh province. Bobi field is situated in the East of Mirpur khas - Nawab-shah railway section. Bobi well # 1 was the first exploratory well drilled and completed as gas / condensate producer in May 1988. Total of 8 wells were drilled upto 1991. Extended production testing was carried out on Bobi wells in order to obtain reservoir parameters and estimation of reserves. DHODAK GAS CONDENSATED FIELD The Dhodak Gas Condensate field is located in the tribal area of Dera Ghazi Khan, about 230 Kms north-west of Multan. The field was discovered in May 1976 and was brought on regular production in December 1994. DARU GAS/CIONDENSATED FIELD Daru structure is located in Thatta District of Sindh Province. First exploratory well was drilled in Dec. 1988 and was tested as gas/condensate producer. The field has been put on regular production on 25-10-99. DAKHNI GAS CONDENSATED FIELD Dakhni Gas Condensate Field is located at a distance of about 135 Kms in the south-west of Islamabad. The field was discovered in Feb. 1983 and came on regular production in December 1989. Gas contains 6-8% H2S in the well stream. FIMKASSAR OIL FIELD Fimkassar Oil Field is located at a distance of about 80 Kms in the south-west of Islamabad. The field was discovered in Sept. 1989 and came on regular production from October 1989. KUNNAR GAS/CONDENSATED FIELD. Kunnar gas/condensate field is located in Hyderabad Distt. about 26 KM away from Hyderabad city. First exploratory well (i.e. Kunnar well No. 1) was drilled and completed

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in Nov. 1987. In order to obtain reservoir data, extended production tests were conducted on Kunner wells. Kunnar # 3 was placed on regular production in Dec. 1991. KAL OIL FIELD Kal Oil Field is located at a distance of about 100 Kms in the south-east of Islamabad. The field was discovered in June 1995 and came on regular production from August 1995. LASHARI CENTER/ LASHARI SOUTH OIL FIELD Lashari structure lies in Hyderabad district of Sindh province. Hyderabad is the nearest city, which is about 25kms NWN from the location. Lashari center # 1 was drilled in April 1988 and was brought on production in November 1988. LOTI GAS FIELD The field is located at a distance of 55 km North West of Sui gas field, district Dera Bughti in Baluchistan Province. Loti gas field was discovered in March 1985. Regular production started in Nov. 1989. MISSAN OIL FIELD The field is located at a distance of 13.5 km south east of Tando Allah Yar city. The field was discovered in June 1998 and came on regular production in Aug 1998. MISSA KESWAL OIL FIELD Missa Keswal Oil Field is located at a distance of about 60 Kms in the south-east of Islamabad. The field was discovered in June 1991 and came on regular production from December 1992. NANDPUR GAS FIELD Nandpur Gas field is situated at a distance of 64 kms near Distt. Multan. The field was discovered in 1984. The regular supply of gas in the range of 50 MMSCFD to M/s. FKPCL started in May 1999 for power generation of 144 MW. PASAKHI/PASAKHI NORTH OIL FILED Pasakhi, a seismic structure is in Hyderabad Distt. of Sindh Province. Hyderabad is the nearest city, located at about 23 KM away from the location. First exploratory well (i.e. Pasakhi well No. 1 as an oil producer) was drilled and completed in Aug. 1989. The well was brought on regular production on Oct. 4, 1989. QADIRPUR GAS FIELD The field is located at a distance of 8 km from Ghotki in Sindh Province. Qadirpur gas field was discovered in March 1990. After installation of gas gathering facilities and plant, gas production was started in Sep. 1995. RAJIAN OIL FIELD Rajian Oil Field is located at a distance of about 110 Kms in the south-east of Islamabad. The field was discovered in Aug. 1994 and came on regular production from August 1994. SADQAL GAS CONDENSATE FIELD Sadqal Gas Condensate field is located at a distance of 40 Kms in the southwest of Islamabad. The field was discovered in April 1992 and regular production started on 30th June 1993. SONO OIL FIELD

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Sono oil field is situated in Hyderabad Distt. Of Sindh Province, about 04 KM away from Tando Alam oil complex. Hyderabad is the nearest city, located at about 25 KM northeast of the wells. First exploratory Well was drilled and completed in February 1988. A total of 05 wells were drilled upto 1990. Sono well # 1 was brought on regular production in May 1988. THORA OIL FIELD Thora oil field was discovered on July 24, 1987. The field lies in Hyderabad distt., of the Sindh Province. Hyderabad is the nearest city, which is about 21 KM away from the location. First exploratory well i.e. Thora # 1 was drilled and completed as an oil Producer in Aug. 1987. Well was brought on regular production on 6th Aug. 1987. A total of 06 wells were drilled upto 1993.

FINANCIALS
OGDCL is largest corporation of the country with respect to financials. Having the total assets of Rs. 228 billion [8], OGDCL is among the very few corporations of the country which are registered at London stock exchange.

Ratio Analysis:
Here is the ratio analysis of OGDCL for the fiscal years of 2007-08, 2008-09 and 2009-10.

Liquidity Ratios:
First of all we will discuss liquidity ratios. Liquidity Ratios are ratios that come off the Balance Sheet and hence measure the liquidity of the company as on a particular day i.e. the day that the Balance Sheet was prepared. These ratios are important in measuring the ability of a company to meet both its short term and long term obligations. Current Ratio For the year 2007-08 2008-09 2009-10

Current Assets Current Liabilities

79820000000 21440000000 3.722947761

85460000000 21290000000 4.014091123

1.2043E+11 34840000000 3.456659013

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The Current ratio is increased in 2009 and then decreased in 2010 which is not a good sign. It shows that liabilities are increasing. If this ratio continues to decrease then a time will come when the corporation will not be able to pay its loans and can go bankrupt.

Asset Management Ratios

Asset management, also called asset utilization, ratios tells a small business how well their assets are working to generate sales. Cash is always the best asset but it doesn't generate any revenue. The other assets on your balance do generate sales revenue. Those other assets are accounts receivable, inventory, and fixed assets. You may also have some other assets on your balance sheet but these are the main ones we use to calculate how efficiently your assets are working for you. Inventory turnover ratio For the year 2007-08 2008-09 2009-10

Sales Inventories

1.2591E+11 151782000 829.5450053

1.3083E+11 108301000 1208.022087

1.4257E+11 172084000 828.4907371

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Inventory turnover ratio of this corporate giant is more than 828 times as of July 2010. It means the corporations average daily sales are more than two times of the inventory which a very positive thing for the corporation as its cost of storing and managing the inventory is very low. Days sales outstanding For the year 2007-08 2008-09 2009-10

Receivables Annual sales/365

40626931000 344958904.1 117.7732493

56140092000 358438356.2 156.6241197

82992291000 390602739.7 212.472373

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Days sales outstanding shows the number of days in which the corporation can cover its account receivables in terms of sales or the days in which the corporation can make sales equal to its account receivables. This ratio of OGDCL is very low which shows that there are very low amount of account receivables which is a good sign Fixed Assets turnover For the year

2007-08

2008-09

2009-10

Net Sales Net Fixed Assets

1.2591E+11 67710000000 1.859548073

1.3083E+11 87690000000 1.491960315

1.4257E+11 1.0318E+11 1.381760031

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It shows that how many times sales are the amount of fixed assets. The above equation shows that yearly sales revenue is more than net fixed assets. But in the subsequent years this ratio is decreasing which shows that either the assets are increasing or the sales are decreasing. One can analyze it in either ways and it is not good for the corporation. Total Assets turnover For the year 2007-08 2008-09 2009-10

Net Sales Total assets

1.2591E+11 1.5231E+11 82.66692929

1.3083E+11 1.7799E+11 73.50412945

1.4257E+11 2.2887E+11 62.29300476

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It shows that how many times sales are the amount of total assets. The above equation shows that yearly sales revenue is less than the total assets. But in the subsequent years this ratio is further decreasing which shows that either the assets are increasing or the sales are decreasing. One can analyze it in either ways and it is not good for the corporation as assets are represented by either debt or equity and increasing both or one among these will increase the financing cost.

Debt Management
Debt Management Ratios attempt to measure the firm's use of Financial Leverage and ability to avoid financial distress in the long run. These ratios are also known as Long-Term Solvency Ratios. Debt is called Financial Leverage because the use of debt can improve returns to stockholders in good years and increase their losses in bad years. Debt generally represents a fixed cost of financing to a firm. Thus, if the firm can earn more on assets which are financed with debt than the cost of servicing the debt then these additional earnings will flow through to the stockholders. Moreover, our tax law favors debt as a source of financing since interest expense is tax deductible. Debt Ratio For the year 2007-08 2008-09 2009-10 Total Debt Total Assets 19965608000 1.5231E+11 13.10853391 30533502000 1.7799E+11 17.15461655 36634322000 2.2887E+11 16.00660724

Debt ratio shows the percentage of assets backed by the debt. Debt ratio of OGDCL is not much high but it is increasing which is not a good sign for the corporation. If this ratio continues to

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increase and exceed 50 percent then creditors will be reluctant to give more loans to the corporation. Time Interest Earned For the year 2007-08 2008-09 2009-10

EBIT Interest Charges

87828201000 531799000 165.1530014

91477530000 926027000 98.78494903

1.00623E+11 1273312000 79.02457135

Earning before interest and taxes is more than 15 times of interest charges it shows that corporation is very easily managing the interest on debt and there is no sign of bankruptcy

Profitability Ratios
Profitability ratios are used to assess a business' ability to generate earnings as compared to expenses over a specified time period. Profit margin on sales For the year 2007-08 2008-09 2009-10

Net Income available to common stockholders Sales

49613593000 1.2591E+11 39.40401318

55539641000 1.3083E+11 42.45176259

59177125000 1.4257E+11 41.50741741

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Profit margin on sales shows that in 2010 more than 41% of the sales revenue was available to be distributed in common stockholders. This percentage has increased from 2008 which is positive sign for stocks market value. Basic earning Power For the year 2007-08 2008-09 2009-10

EBIT Total Assets

87828201000 1.5231E+11 57.66410676

91477530000 1.7799E+11 51.39475813

1.00623E+11 2.2887E+11 43.96510464

Basic earning power shows that in 2010 earning before tax and interest was almost 40 percent of the total assets. It is decreased from what it was in 2008 which is not a good sign.

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Return on Assets For the year

2007-08

2008-09

2009-10

Net Income available to common stockholders Total Assets

49613593000 1.5231E+11 32.57408772

55539641000 1.7799E+11 31.20379853

59177125000 2.2887E+11 25.8562175

Percentage of Return on assets is decreased in past two years which is not good for the corporation. Return on Equity For the year 2007-08 2008-09 2009-10

Net Income available to common stockholders Total Common Stock Equity

49613593000 43009284000 115.3555428

55539641000 4.30E+10 129.1340749

59177125000 43009284000 137.591514

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Percentage of return on equity is decreased in past two years which is not good for the corporation. Either the assets have increased or the debt has decreased due to which the equity is increased. Gross profit margin For the year 2007-08 2008-09 2009-10

Gross profits Sales

87828201000 1.2591E+11 69.75474625

91477530000 1.3083E+11 69.92091263

1.00623E+11 1.4257E+11 70.57791611

Gross profit margin ratio is 70% which shows the operating expenses, cost of goods sold and transportation expenses are 30% of the sales. This is very positive for the corporation.

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Market Value ratios
Market Value Ratios relate an observable market value, the stock price, to book values obtained from the firm's financial statements. Earning Per Share For the year 2007-08 2008-09 2009-10

Net Income available to common stockholders Number of shares of common stock outstanding

49613593000 4300928400 11.53555428

55539641000 4300928400 12.91340749

59177125000 4300928400 13.7591514

Earning per share was more than Rs 11 per share in 2008. And it has increased in the subsequent years. It is very positive thing for OGDCL. It will attract more shareholders and the price of stocks will go up.

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Price/Earning Ratio For the year Market Price per share of common stock Earnings per share

2007-08 124.36 11.5 10.81391304

2008-09 78.64 12.91 6.091402014

2009-10 142 13.76 10.31976744

Price/earning ratio is more than 10 times of the dividend income per share which shows there is a demand for OGDCLs shares in market. But further increase in price/earning ratio will prove disastrous for the stockholders as it did just before the great depression when the average price/earning ratio of NYSE stocks was rose to more than 32 times. But there are no chances of such a disastrous incident now because this thing usually happens when the market is performing well and shareholders are speculating about the future. Book value per share of the common stock For the year 2007-08 2008-09 2009-10

Total Common Stock Equity Number of shares of common stock outstanding

43009284000 4300928400 10

43009284000 4300928400 10

43009284000 4300928400 10

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Book value per share is 10 rupees. Market/Book Ratio (M/B) For the year Market Price per share of common stock Book Value per share of common stock 2007-08 124.36 10 12.436 2008-09 78.64 10 7.864 2009-10 142 10 14.2

Market/Book ratio decreased in 2009 because the stock price decreased in that year..

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Cash flow per share For the year

2007-08

2008-09

2009-10

Net cash flows No. of shares of shares outstanding

16684880000 4300928400 3.879367069

8939828000 4300928400 2.078580987

18836743000 4300928400 4.379692301

Cash flow per share is increasing which is good for the corporation. It means that every year the cash balance of the corporation is increasing. Price/cash flow For the year 2007-08 2008-09 2009-10

Market Price per share of common stock Cash flow per share

124.36 3.88 32.05154639

78.64 2.07 37.99033816

142 4.38 32.42009132

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Price/cash flow ratio decreased in 2010 after increasing in 2009. The reason for that increase was that corporations cash balance was decreased in the year 2008-09 due to which its cash flow per share decreased. The market price also decreased but the change in market price was slight as compared to that in cash flow per share.

Comparison and analysis of ratios of OGDCL and PPL

Ratios Current Ratio Inventory turnover OGDCL 3.73 955.35 PPL 3.03 30.12 Comparison OGDCLs current ratio is more than that of PPL. It means PPL has more current liabilities than OGDCL. Inventory turnover shows that OGDCL has very low inventory as compared to PPL. This means OGDCLs cost of managing and storing inventory is less as compared to PPL. The average days sales outstanding of OGDCL are more than that of PPL. It means OGDCL recover it sales in 162 days which is more than that of PPL. So OGDCL need to decrease that time. Fixed assets turnover of OGDCL is less than PPL. It means PPL is more

Days sales outstanding

162.2

152.6

Fixed Assets turnover

1.577

1.77

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productive than OGDCL in terms of fixed assets. OGDCL should either decrease its number of fixed assets or increase its sales. Total assets turnover of OGDCL is more than PPL. It means OGDCL is performing better. Debt ratio of OGDCL is poor than PPL. OGDCL has more debt as compared to that of PPL. Time interest earned of OGDCL is less than PPL. It means PPL has more room to pay debts. Profit margin of OGDCL is a bit less than PPL. OGDCL has to cut its costs in order to increase its profit margin BEP of OGDCL is more than that of PPL. It means its operations are going well. Return on Assets is approximately same for both the corporations. Return on equity of OGDCL is much more than that of PPL. It means OGDCL is more efficient. Gross profit margin of OGDCL is more than that of PPL which is a sign of good performance. Earning per share of PPL is more than OGDCL. Price earning ratio per share of both the corporations is same which means market has same expectations from both the corporations. Book value per share of both the corporations is same. Market book ratio of PPL is better than that of OGDCL Cash flow per share of PPL is more than that of OGDCL. Price to cash flow of OGDCL is more than that of PPL.

Total Assets turnover Total debt / total Assets Time Interest Earned Profit margin on sales Basic earning Power Return on Assets Return on Equity Gross profit margin Earning Per Share Price/Earning Ratio

72.8% 15.4% 114.32 41.12% 51% 29.87% 127% 70% 12.73 9

68.3% 6.65% 367.95 42.32% 43.3% 29.12% 39.33% 62.92% 23.67 9

Book value per share Market/Book Ratio (M/B) Cash flow per share Price/cash flow

10 11.5 3.44 34.15

10 20.6 23 9.2

Note:- The above data is based on the average ratios & percentages of the past three years of both corporations.

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Oil and Gas Development Corporation 201 Limited 0 CONCLUSION:

The comparison between both the organizations shows that OGDCL is performing well. It has taken lead over the PPL in majority ratios. And if we look at the three year analysis of the corporation we will find that its performance is getting worse and worse every year. But basic earning power of OGDCL is still better than that of PPL. Interesting thing is that although PPL pays twice as much dividend as OGDCL but the price to earning ratio is same for both the corporations it means that market has same expectations from both the corporations.

RECOMMENDATIONS:
OGDCL is performing well but earning per share of OGDCL is almost half as compared to that of PPL. So the OGDCL has to increase its net income. Basic earning power of OGDCL is more than that of PPL which shows that operations of OGDCL are going well but the problem is with the method of financing. OGDCL has to rethink its financial strategy in order to increase its earning per share in order to give strength to the market value of share. Inventory turnover is excellent OGDCL is doing very well with the inventory management.

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