Research Analyst
Feb 23 - Mar 01, 2009

Pakistan State Oil, the largest oil marketing company in the country, engages presently in storage, distribution and marketing of various petroleum products that include motor gasoline, high speed diesel, furnace oil, jet fuel, kerosene, LPG, CNG, petrochemicals and lubricants.

In addition, it also imports different petroleum products according to their demand pattern and possesses the biggest storage facilities representing 80% of the country's total storage capacity. The company's current value of Rs. 75 bn, its 82.1% share in the black oil market and 61.2% share in the white oil market, alone speaks volume of its success. PSO has the widest strategic oil distribution network. This network comprises of 29 storage depots and 9 installations, 860,000 MTs of capacity i.e. almost 81% of total national storage, numerous pipelines network and equity partnership in White Oil Pipeline Project (WOPP) from Karachi to Mehmood Kot.


(RS' 000')

Gross Sales 391,547,878 248,391,112 108,856,524 126,001,125
Net Sales 334,662,579 211,340,585 145,682,127 106,599,383
Gross (loss) Profit -7,724,470 10,912,406 -320,623 6,309,574
(Loss) / profit before tax -16,034,239 8,215,227 -3,430,919 5,006,711
(Loss) / profit after tax -10,049,167 5,487,962 -1,666,021 3,384,909
(Loss) / Earnings per share -58.59 32 -9.71 19.73
Source: PSO

The oil marketing giant PSO has posted Rs 10.049 bn losses after tax in half year (July-December 2008-09) due to huge inventory losses as well as the increased financing cost. The financial results of the company indicated that net lose ramped sharply in the period under review to Rs. 10,049 bn in July-Dec, 2008 from Rs 5.487 bn in the corresponding period of previous year. Though the company posted a significant 58 percent increase in revenues, huge inventory losses amidst sharp decline in oil prices from its peak level led to gross losses in first half of current fiscal.

The operating expenses and finance costs also increased drastically by 102 percent and 597 percent respectively amidst currency devaluation and higher short-term borrowing. The loss per share of the company also plunged heavily to Rs 58.59 against the earnings per share of Rs 32 recorded in the same period of previous year.

The finance cost increased short-term borrowings by the company to cover huge receivables from thermal power plants including WAPDA and IPPs.

PSO is in the centre of the circular debt trap as it stands with both colossal amounts of 'receivables from' and 'payable to'. PSO's liquidity position is affected with around Rs 7 bn of Price Differential Claims (PDCs) and around Rs 85 billion of receivables from the IPPs where HUBCO (Rs 45 bn) and KAPCO (Rs18bn) alone account for 75% of the amount.

On the other hand, PSO owes Rs 38 bn to PARCO, Rs 7 bn to NRL, Rs 11 bn to PRL and Rs 12 bn to ARL. The company is standing with receivables of around Rs 92 bn whereas payables Rs 68 bn.

The gross sales jumped to Rs 391.547 bn in first half of the current financial year from Rs 248.391 bn in the same period of previous year. The cost of product sold also rose sharply to Rs 334.682 bn in the period under review against Rs 200.428 bn in the previous year.

During the period under review, the industry sales were lower by 4 percent mainly due to higher retail price and a general slowdown of the economy. Despite this decline, the company improved its market share by 1.3% to 71.2 % and sold 6.03 mn tonnes of product. This translated into a turnover of Rs 392 bn versus Rs 248 bn in the corresponding period last year, an increase of 58 percent.

Alone in second quarter of current fiscal, the company posted loss of Rs 1.7 bn (loss per share Rs 9.7) versus profit of Rs 3.4 bn (EPS Rs19.7) in same period of previous year. Although, PSO recorded a staggering Rs 10 bn loss, it announced Rs 5 per share cash dividend for its shareholders.

8-Jan 88.35
8-Feb 90.64
8-Mar 99.03
8-Apr 105.16
8-May 119.39
8-Jun 128.33
8-Jul 131.22
8-Aug 112.41
8-Sep 96.85
8-Oct 69.16
8-Nov 49.76
8-Dec 38.6
9-Jan 41.52
9-Feb 42.38
Source: OPEC


PSO has the largest distribution network comprising of 3,612 outlets nationwide. Out of which 3,384 serve retail customers, 45 outlets cater to agriculture sector and 183 outlets serve our bulk customers. Out of a total number of outlets, 1,610 have been upgraded as per the New Vision Retail Program with most modern facilities. Moreover, there are 50 company owned and operated (Co-Co) sites to serve the retail customers. In addition to retail customers more than 2,000 industrial units & business houses, power plants and airlines are being catered through PSO's different department.


Due to low availability of energy from hydel and gas sources sales of furnace oil have witnessed upward trend. PSO furnace oil sales reached 6.2 million tons in FY08 compared to 5.9 mn tons last year, rendering a thumping market share of about 84% in furnace oil market. IC department of PSO maintained its dominating position in winning tenders of major government entities such as Defence, Pakistan Steel, NLC, HIT, POF WAH etc and despite increasing competition and exogenous market constraints it has manage to register positive growth in sales of MOGAS (5%), SKO (10%), and HSD (13%). Furthermore, the company is actively pursuing new businesses of upcoming IPP's and in this regard has signed FSA/MOU with IPPs.


The year 2008 saw an all time increase in oil prices i.e. $147 per barrel. However, there has been a sharp reduction in international oil prices, going down to almost $40 per barrel.