HISTORY OF OIL INDUSTRY IN PAKISTAN

1947

At the time of independence there were no more than few companies, it was the case with oil industry. There was no oil refinery in Pakistan except a very small at Rawalpindi. At that time the total requirement of Pakistan was 0.4 million tons. There were four foreign and one local company in Pakistan these were: BURMAH OIL BURMAH OIL CALTEX ESSO ATTOCK OIL Market petroleum products. Oil extracting company. Market petroleum. Marketing. Oil exploration company.

1952 Burmah discovered natural gas at Sui in Baluchistan named as Sui gas. Before partition Railways was on coal, but at the time of partition India refused to provide coal, so railways has to convert on diesel oil. 1955 The consumption of oil shot up by 3 million tons. 1960

Consumption in East and West Pakistan shot up by 4.2 million tons OGDC was established. Government asked the foreign companies to set up a refinery, they agreed with following conditions: Refinery should in Karachi Capability will be 1.5 million tons. They will provide crude to refinery only. Government also permitted a Pakistani company, Pakistan National Oil. 1962 Pakistani refinery came into being. It only produced petroleum but not lubricant. So PNO established a plant at Korangi (Karachi) for lubricating oil with a capacity of 0.5 million tons. 1964 Dawood petroleum was established. 1965 On September 1965 India attacked Pakistan so the oil reserves came to lowest and government asked the foreign companies to bring crude refined and provide the army but they refused. PNO was asked to do so, it brought the oil and the need of army was fulfilled. These companies annoyed the government and it turned against them. 1970 In 1970, when 51% of the shareholding was transferred to Pakistani invertors. The name of the company changed to Pakistan Burmah shell (PBS) limited. The shell and Burmah groups of retained the remaining 49% in equal proportions. 1971

Again the war broke between Pakistan and India. All crude oil was imported from other countries and its storage was concentrated at Kemari Terminal Karachi. The enemy blasted whole storage point. So the need to spread the storage points in the whole country was felt. The 5 foreign companies were asked to do so but they refused because of cost, then government decided to establish storage places itself. 1973 There were energy crises through the world. Almost all of the countries nationalized the oil companies. Everyone realized that petroleum products were very essential. 1974 Pakistan storage Development Corporation was established. 1976 PSO was found in December 1976 as a result of merger of here oil companies: 1. 2. 3. Pakistan National Oil. Premier Oil Company. ESSO. 1993 In February of 1993, as a result of a decision by Burmah oil to divest in Pakistan and the deregulation policy of the government, the shell petroleum company bought the shares of Burmah Oil Company and 2% shares from the market and become the major shareholder in the shell Pakistan limited (SPL).

INTRODUCTION OF SHELL PAKISTAN Ltd. HISTORY Shell is a multinational company and in Pakistan it is operating as a public limited company by the name Shell Pakistan Ltd. Shell is a superior brand name with a 100 year history in this region, infect the company is still in possession of a fuel storage tank from 1899. However, the documented history of the Royal Dutch/shell group the Indo-Pak subcontinent dates back to 1903 when a partnership was struck between the shell transport and trading company and the Royal Dutch petroleum company to supply petroleum products in Asia. In 1928 to enhance their distribution capabilities, the marketing interests of the Royal Dutch/shell group and Burmah Oil Company by limited in India were merged and the Burmah shell oil storage distribution and storage company of India was born. After the independence of Pakistan in 1947, the name was changed to the Burmah shell oil distribution company of Pakistan. In 1970, when 51% of the shareholding was transferred to Pakistani invertors. The name of the company changed to Pakistan Burmah shell (PBS) limited. The shell and Burmah groups of retained the remaining 49% in equal proportions. In February of 1993, as a result of a decision by Burmah oil to divest in Pakistan and the deregulation policy of the government, the shell petroleum company bought the shares of Burmah Oil Company and 2% shares from the market and become the major shareholder in the shell Pakistan limited (SPL). Shell launched a change programme, which will transform the company by the turn of the century, with major implications for the petroleum industry in Pakistan. More subtle, but equally uncompromising, has been the change in the companys culture to reflect the values which shell internationally believes will bring commercial success through a greater focus on the customers. COMPANYS SLOGAN/MISSION You can be sure of Shell. COMPANYS OBJECTIVE Shell is focusing on retailing, providing better facilities to customers, clean petrol pumps constructing international standard petrol filling stations, good advertising campaigns and mini markets (select). VISION OF SHELL

To Be The Top Performer Of First Choice. AIM OF SHELL Creating a secure business environment, minimizing economic losses, and business disruptions safeguarding the groups integrity and reputations. GOAL OF SHELL The goal of the company is to position itself as the preferred oil company in Pakistan, leading the field in its commitment to safety, customer service, quality and environmental protection. STRATEGIES OF SHELL A strategy of corporation forms a comprehensive master plan stating how the corporation will achieve its mission and objectives. It maximizes competitive advantage and minimizes competitive disadvantage. The strategy of Shell is to grow internally by expanding its operations through acquisition and strategic alliances. Shell focuses to differentiate its products from competitors in the area of quality and services. POLICIES A policy is a broad guideline for decision-making that links the formulation of strategy with its implementation The policy of Shell is to make sure that the employees throughout the firm make decisions and take actions that support the corporations mission, objectives, and strategies. STRATEGIC MANAGEMENT There is a strong case of linkage good management to how well managers craft and execute strategy. Some managers design shrewd strategies but fail to carry them out well. Others design mediocre strategies but execute them competently .Both performance despite unforeseeable events, potent competition, and internal problems. TASK ENVIRONMET Customer Supplier Labor component Competitors Government

CUSTOMER: -

Our customers are high class, low class and also middle class, because every class is used petrol for consumption. SUPPLIER: Our suppliers are Pakistan refinery, National refinery and Attock refinery and Dhodak refinery. LABOR COMPONENT: Labor is frequently available in Pakistan because of high unemployment rate .So skilled and unskilled persons are available at lower wages rate. COMPETITORS: Major competitors of Shell are PSO with petrol pumps and Caltex with petrol pumps. But Shell Pakistan Limited operates in the Petroleum refining sector. Shell Pakistan Limited also compete with three other petroleum refiners in Asia Chennai Petroleum Corporation Limited National Refinery Limited Mangalore Ref & Petrochemicals Limited INTERNAL ENVIRONMENT Organization Structure Organization Culture ORGANIZATION STRUCTURE: Shell is the largest multinational organization with many product lines. Employees tend to be functional specialists organized according to market/product distinction. Shell Pakistan is divided into five functional areas i.e. Retail, Commercial, Operations, Finance, and Human Resources. Management attempts to find synergy among divisional activities through the use of committees and horizontal linkages. Decision of major impact result from strategic plans made by organizational staff ORGANIZATION CULTURE: Quality is the key ingredient and commitment to quality is share by executives and workers.

The organizational Culture of the Shell is based on commitment of the top management for quality, employees, local community, innovation, and performance.

SECONDARY DATA:
Shell Pakistan Limited (SPL) is a Pakistan-based company engaged in the marketing of petroleum and compressed natural gas. It also blends and markets various kinds of lubricating oils. The Company has investments in two non-trading subsidiaries, namely Shell Pakistan Provident Trust (Private) Limited and Shell Pakistan Pensions Trust (Private) Limited. The Company introduced Shell Helix Ultra, Shell Helix CNG Super, and restored its Quick Oil Change service as Shell Helix Oil Change Plus. During the year ended December 31, 2010, 87.85% of the Company's revenue came from local sales. As of December 31, 2010, the Company was subsidiary of The Shell Petroleum Company Limited (immediate parent), which was a subsidiary of Royal Dutch Shell Plc. SHELL PAKISTAN-FINANCIAL RESULT FOR THE NINE MONTHS ENDED 30/09/2011
Company Shell Pakistan Shell Pakistan Shell Pakistan Shell Pakistan Date Time Announcement

21-Oct-11 09:50:24FINANCIAL RESULT FOR THE NINE MONTHS ENDED 30/09/2011 21-Oct-11 09:50:24"PROFIT/LOSS BEFORE TAXATION RS. IN MILLION 2,707.924" 21-Oct-11 09:50:24"PROFIT/LOSS AFTER TAXATION RS. IN MILLION 1,122.419" 21-Oct-11 09:50:24EPS = 16.39

SHELL PAKISTAN LIMITED - Analysis of Financial Statements - Financial Year 2003 - 3Q Financial Year 2010: RECENT RESULTS (3Q10) World crude oil prices have significantly decreased from $146 per barrel in July 2009 to below $75 per barrel in September 2010. However, the decrease in the world oil prices is not reflected to the decrease in the oil import bill because of the 5%devaluation of Pakistani currency. Recently the crude prices touched $100 before backing off on Egypt unrest. FINANCIAL ANALYSIS: During the period ended June 30, 2010, things were going normal in the oil and marketing sector of Pakistan.

The fuel consumption in the country has increased from 19.2 million to 20.8 million tons due to increasing Mogas and fuel oil consumption in the country, but oil consumption has decreased significantly in the period between July and September due to massive devastation brought by recent floods in the country. Sales of the industry were very badly affected due to decrease in the economic activity in the country. Distribution expenses have also increased significantly due to the loss of routes of transportation and other infrastructure facilities. During the period under review, the sales of Shell remained 157.7 billion rupees compared to 128.9 billion rupees signifying an increase of 22% over the period compared to 11.5% industry increase in sales. International oil prices have decreased to $75 per barrel in August/September 2010 from $146 per barrel in last July, despite this, the cost of goods sold of Shell have increased from 104.5 billion to 131 billion signifying an increase of 25% over the period due to significant devaluation of Pak rupee. Pak rupee has devalued by around 5% during the period. The gross profit margin of the overall industry has decreased over the period during to the rising competition among the existing market players and entry of a new MNC, Byco into the industry. Gross profit of the company still stood higher than average industry level. The gross profit of the Shell stood 5.9% compared to 4.8% industry average. Despite the higher sales and above industry gross profit margin, the company accumulated a loss of 11 million during the period, due to increased competition in the industry, distribution expenses and turnover tax rate imposed by the government. The distribution expenses of the company have increased significantly due to loss of the infrastructural facilities due to the recent flood. The distribution expenses stood 3.28 billion rupees compared to 2.22 billion rupees last year showing an increase of 47.6% during the period. The sales turn over tax rate imposed on oil and marketing sector by government has doubled from 0.5% to 1% leading to an effective tax rate of 140% of the taxable income of Shell. The debt to asset ratio of the company has remained stagnant during the period, increasing from 0.8% to 0.82%, despite this; the company faced some of the serious liquidity problem during the period. A significant amount of cash is trapped with GoP.

Government of Pakistan still owed 5 billion rupees to Shell. To avoid the liquidity problem, the company acquired many short terms loans from the financial institutions. The short-term borrowings of the company have increased from 0.75 billion to 7 billion showing an increase of 833.3% during the period. The debt to equity ratio of the company has decreased from 4.07% to 4.87% while the times earned have decrease from 3.02 to 2.17 times. Both of these fluctuations occurred due to the loss suffered by the company during the period. The beta of the Shell Pakistan remained 0.84 during the period showing that the stock price of the company has moved in the same direction as of KSE-100 index but with little smaller magnitude. Shell stock return has a significant positive correlation with the market return means any up or down in the market index level will most probably be reflected in the prices of the stock of the company.

MERGERS & ACQUISITIONS

There are no recent mergers or acquisitions for Shell Pakistan Ltd. Peer analysis Revenue (TTM) 126.95bn 127.78bn Pakistan Net income Market (TTM) cap 4.48bn 3.80bn 29.06bn 9.21bn

Company Attock Petroleum Ltd. Attock Refinery Ltd. Byco Petroleum Limited.

Employees 159 716

38.85bn

-1.60bn

6.22bn

-32768

Mari Gas Company Limited National Refinery Limited

6.33bn 152.78bn

2.29bn 6.05bn

7.81bn 18.75bn

371 913

Company Pakistan State Oil Company Limited Shell Pakistan Limited

Revenue (TTM)

Net income Market (TTM) cap

Employees

888.90bn

16.46bn

40.31bn

1952

225.44bn

2.75bn

13.18bn

587

Data as of Dec 20 2011. Currency figures normalised to Shell Pakistan Ltd's reporting currency:

STOCK PERFORMANCE:
Company Attock Petroleum Ltd. Attock Refinery Ltd. Byco Petroleum Pakistan Limited. Mari Gas Company Limited National Refinery Limited Pakistan State Oil Company Limited Shell Pakistan Limited Price/earnings (TTM) Price/book Price/cash flow value (MRQ) (TTM) Price/sales (TTM)

6.49

2.28

6.28

0.229

2.42

0.3318

6.01

0.0721

--

--

--

0.1601

3.41

0.6813

2.53

1.23

3.10

0.8001

2.96

0.1227

2.45

0.9167

2.29

0.0453

4.79

1.55

3.56

0.0585

PER SHARE DATA:

EPS (excluding extraordinary items (TTM) 40.13 95.95 75.63 24.94 -4.0762 44.61 64.80 EPS (including extraordinary items) (TTM) 40.13 95.95 75.63 24.94 -4.0762 44.61 64.80 Revenue per share (TTM) 3,291 5,183 1,911 68.85 98.89 1,498 1,837 Book value per share (MRQ) 123.74 256.37 293.08 124.77 -16.6091 325.48 184.47

Company Shell Pakistan Limited Pakistan State Oil Company Limited National Refinery Limited Mari Gas Company Limited Byco Petroleum Pakistan Limited. Attock Refinery Ltd. Attock Petroleum Ltd.

PROFITABILITY:
Gross margin (TTM) 5.89 3.97 6.03 -2.93 Gross margin (5 yr average) -3.60 6.54 99.29 -0.1289 Net profit margin Net Profit margin (TTM) (5 Yr Average) 1.22 1.85 3.96 36.22 -4.110 -1.19 3.67 33.65 -8.6831

Company Shell Pakistan Limited Pakistan State Oil Company Limited National Refinery Limited Mari Gas Company Limited Byco Petroleum Pakistan Limited.

Company Attock Refinery Ltd. Attock Petroleum Ltd.

Gross margin (TTM) 1.67 4.01

Gross margin (5 yr average) 1.17 4.71

Net profit margin Net Profit margin (TTM) (5 Yr Average) 1.12 3.53 0.8183 4.35

FINANCIAL STRENGTH:
Quick ratio (MRQ) 0.3387 0.4227 0.7062 1.13 0.7565 0.8095 1.26 Interest coverage Total debt to (TTM) capital (MRQ) -0.1969 4.49 2.86 6.24 -33.53 -3.15 0.6575 0.3485 0.1164 0.00 0.00 0.00 Payout ratio (5 yr average) --30.84 9.76 2.76 34.88 48.23

Company Byco Petroleum Pakistan Limited. Shell Pakistan Limited Pakistan State Oil Company Limited Mari Gas Company Limited Attock Refinery Ltd. National Refinery Limited Attock Petroleum Ltd.

GROWTH RATE:
Net Revenue Revenue Net income income Capital (Year-over(5 yr (Year-over(5 Yr expenditure year growth year growth (5 Yr change%) rate) change%) rate) growth rate) -7.8961 32.67 71.11 -43.45 Dividend (5 yr growth rate) --

Company Byco

Company Petroleum Pakistan Limited. Shell Pakistan Limited Pakistan State Oil Company Limited Mari Gas Company Limited Attock Refinery Ltd. National Refinery Limited Attock Petroleum Ltd.

Revenue Revenue Net income (Year-over(5 yr (Year-overyear growth year change%) rate) change%)

Net income Capital (5 Yr expenditure growth (5 Yr rate) growth rate)

Dividend (5 yr growth rate)

26.62

--

-36.9639

--

--

--

10.47

22.43

63.31

14.45

2.79

-21.7104

30.19

19.37

45.48

55.58

73.32

0.00

31.99

15.73

118.61

25.84

-16.6412

--

34.82

12.93

99.97

14.01

-5.3245

13.40

32.13

21.78

18.42

25.04

4.78

42.98