| Pakistan Petroleum Ltd - 2010 |
|
Balance Sheet As at June 30, 2010
===========================================================================================
Note June 30, June 30,
2010 2009
Rs '000 Rs '000
===========================================================================================
NON-CURRENT ASSETS
Fixed assets
Property, plant and equipment 4 41,695,388 34,763,453
Intangible assets 5 374,850 207,264
42,070,238 34,970,717
Long-term investments 6 1,804,498 1,854,333
Long-term deposit 7 630,000 615,000
Long-term receivables 8 8,502 27,531
Long-term loans - staff 9 9,229 9,897
44,522,467 37,477,478
CURRENT ASSETS
Stores and spares 10 2,069,408 1,871,644
Trade debts 11 30,811,189 27,779,864
Loans and advances 12 150,096 414,760
Trade deposits and
short-term prepayments 13 324,771 319,967
Accrued financial income 14 184,268 308,003
Current maturity of
long-term investments 6 224,613 24,980
Current maturity of
long-term receivables 8 19,615 19,029
Other receivables 15 102,923 99,347
Short-term investments 16 27,295,840 13,216,706
Cash and bank balances 17 1,874,393 1,384,353
63,057,116 45,438,653
107,579,583 82,916,131
SHARE CAPITAL AND RESERVES
Share capital 18 9,958,298 8,298,606
Reserves 19 69,947,933 54,759,951
79,906,231 63,058,557
NON-CURRENT LIABILITIES
Provision for decommissioning obligation 20 5,605,226 3,974,307
Liabilities against assets
subject to finance leases 21 87,881 100,105
Deferred liabilities 22 1,135,029 990,685
Deferred income 8 3,194 5,830
Deferred taxation 23 1,218,934 138,563
8,050,264 5,209,490
CURRENT LIABILITIES
Trade and other payables 24 18,210,479 13,474,434
Current maturity of
liabilities against assets
subject to finance leases 21 1,210,728 45,946
Current maturity of deferred income 8 2,636 971
Taxation 199,245 1,126,733
19,623,088 14,648,084
CONTINGENCIES AND COMMITMENTS 25
107,579,583 82,916,131
===========================================================================================Profit and Loss Account For the year ended June 30, 2010===========================================================================================
Note Year ended Year ended
June 30, 2010 June 30, 2009
Rs '000 Rs '000
===========================================================================================
Sales-net 26 59,961,616 61,580,072
Field expenditures 27 (18,273,006) (13,161,294)
Royalties (7,076,111) (7,463,192)
(25,349,117) (20,624,486)
34,612,499 40,955,586
Share of profit in Bolan
Mining Enterprises 6.1.2 59,658 69,116
Other operating income 29 2578,837 4,080,616
Finance cost 30 (154,832) (93,628)
Other operating expenses 31 (2,567,955) (3,103,270)
Profit before taxation 34,528,207 41,908,420
Taxation 32 (11,207,689) (14,205,629)
Profit after taxation 23,320,518 27,702,791
(Restated)
Basic and diluted earnings per share (Rs) 37 23.42 27.82
===========================================================================================Statement of Comprehensive Income For the year ended June 30, 2010===========================================================================================
Year ended Year ended
June 30, 2010 June 30, 2009
Rs '000 Rs '000
===========================================================================================
Profit after taxation 23,320,518 27,702,791
Other comprehensive income - -
- net of taxation
Total comprehensive income 23,320,518 27,702,791
===========================================================================================Cash Flow Statement For the year ended June 30, 2010===========================================================================================
Note Year ended Year ended
June 30, 2010 June 30, 2009
Rs '000 Rs '000
===========================================================================================
CASH FLOWS FROM
OPERATING ACTIVITIES
Cash receipts from customers 74,179,219 63,246,960
Receipts of other income 114,082 926,632
Cash paid to suppliers/service
providers and employees (14,624,320) (11,698,474)
Payment of indirect taxes and
Government levies including royalty (22,100,357) (24,893,580)
Income tax paid (11,054,806) (14,271,868)
Finance costs paid (55,732) (19,944)
Long-term loans - staff (net) 1,797 3,548
Net cash generated from
operating activities 26,459,883 13,293,274
CASH FLOWS FROM
INVESTING ACTIVITIES
Capital expenditure (7,862,534) (14,805,293)
(Purchases) / redemption of
long-term investments (net) (75,000) 184,249
(Purchases) / redemption of
short-term investments (net) (1,174,442) 3,430,304
Long-term deposit (15,000) (615,000)
Long-term receivables 18,443 (10,203)
Share of profit received from
Bolan Mining Enterprises - 25,000
Financial income received 2,457,642 2,982,609
Proceeds on sale of
property, plant and equipment 138,215 39,615
Net cash used in investing activities (6,512,676) (8,768,719)
CASH FLOWS FROM
FINANCING ACTIVITIES
Payment of liabilities against
assets subject to finance leases (139,962) (55,087)
Dividends paid (6,472,844) (8,298,505)
Net cash used in financing activities (6,612,806) (8,353,592)
Net increase / (decrease) in
cash and cash equivalents 13,334,401 (3,829,037)
Cash and cash equivalents
at beginning of the year 14,352,153 18,181,190
Cash and cash equivalents
at end of the year 35 27,686,554 14,352,153
===========================================================================================Statement of Changes in Equity For the year ended June 30, 2010=================================================================================================================================================================================================
Subscribed and pad-up share Revenue Reserves
Capital
Convertible Capita General and Insurance Assets Unappropriated Total Total reserves Total
Ordinary preference reserve contingency reserve acquisition profit
reserve reserve
Rs '000
=================================================================================================================================================================================================
Balance as at June 30, 2008 7,544,055 145 1,428 69,761 3,000,000 7,000,000 26,038,882 36,108,643 36,110,071 43,654,271
Appropriation of insurance reserve for the
year ended June 30, 2008 - - - - 1,500,000 - (1,500,000) - - -
Appropriation of assets
acquisition reserve for
the year ended June 30, 2008 - - - - - 3,000,000 (3,000,000) - - -
Issuance of bonus shares 10%
(one share for every ten 754,406 - - - - - (754,406) (754,406) (754,406) -
ordinary shares held)
Conversion of preference shares 4 (4) - - - - - - - -
into ordinary shares
Total comprehensive income for the - - - - - - 27,702,791 27,102,791 27,702,791 27,702,791
year ended June 30, 2009
First interim dividend for the
year ended June 30, 2009
- Ordinary shares - 50% - - - - - - (4,149,231) (4,149,231) (4,149,231) (4,149,231)
- Convertible preference shares -30% - - - - - - (43) (43) (43) (43)
Second interim dividend on
ordinary shares @50% for
the year ended June 30, 2009 - - - - - - (4,149,231) (4,149,231) (4,149,231) (4,149,231)
Balance as at June 30, 2009 8,298,465 141 1,428 69,761 4,500,000 10,000,000 40,188,762 54,758,523 54,759,951 63,058,557
Appropriation of insurance reserve for
the year ended June 30, 2009 - - - - 5,500,000 - (5,500,000) - - -
Appropriation of assets acquisition reserve for
the year ended June 30, 2009 - - - - - 5,000,000 (5,000,000) - - -
Issuance of bonus shares 20%
(two shares for every ten ordinary shares held 1,659,692 - - - - - (1,659,692) (1,659,692) (1,659,692) -
Conversion of preference shares 3 (3) - - - - - - - -
into ordinary shares
Final dividend on ordinary shares
@30% for the year ended June 30, 2009 - - - - - - (2,489,539) (2,439,539) (2,489,539) (2,489,539)
Transfer of cost relating to - - - (1,478,106) - 1,478,106 - - -
Well-38 (Sui) - note 27.1
Total comprehensive income for the - - - - - - 23,320,518 23,320,518 23,320,518 23,320,518
year ended June 30, 2010
Interim dividend for the
year ended June 30, 2010
- Ordinary shares - 40% - - - - - - (3,983,263) (3,983,263) (3,983,263) (3,983,263)
- Convertible preference shares - 30% - - - - - - (42) (42) (42) (42)
Balance as at June 30, 2010 9,958,160 138 1,428 69,761 8,521,894 15,000,000 46,354,850 69,946,505 69,947,933 79,906,231
=================================================================================================================================================================================================Notes to and Forming Part of the Financial Statements For the year ended June 30, 20101. LEGAL STATUS AND NATURE OF BUSINESS Pakistan Petroleum Limited (the Company) 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. Ziauddin Ahmed Road, Karachi. 2. SIGNIFICANT ACCOUNTING POLICIES 2.1. Statement of compliance These financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board (IASB) as are notified under the Companies Ordinance, 1984, provisions of and directives issued under the Companies Ordinance, 1984. In case requirements differ, the provisions or directives of the Companies Ordinance, 1984 shall prevail. 2.2. Accounting converter These financial statements have been prepared under the historical cost convention except for the measurement of 'financial assets at fair value through profit or loss' which are recorded at fair value in accordance with the requirements of IAS - 39 "Financial Instruments: Recognition and Measurement". 2.3. Changes in accounting policies and disclosures During the current year, the Company has adopted the following new and amended IFRSs as of July 01, 2009, which has resulted in extended disclosures as described below: IAS 1 - Presentation of Financial Statements (Revised) IFRS 7 - Financial Instruments: Disclosures (Amended) IFRS 8 - Operating Segments IAS 1 - "Presentation of Financial Statements" The revised IAS 1 was issued in September 2007 and became effective for financial years beginning on or after January 01, 2009. The revised standard separates owner and non-owner changes in equity. The statement of changes in equity includes only details of transactions with owners, with non-owner changes in equity presented as a single line. In addition, the standard has introduced a statement of comprehensive income, which presents all items of recognised income and expense, either as a single statement, or in two linked statements. The Company has opted to present two linked statements and accordingly has presented a separate statement of comprehensive income in these financial statements. Comparative figures have also been re-presented to bring in conformity with the revised standard. IFRS 7 - "Financial Instruments: Disclosures" (Amendments) The amended standard, which became effective for the financial years starting on or after January 01, 2009, requires additional disclosures about fair value measurement and liquidity risk. Fair value measurements related to items recorded at fair value are to be disclosed by source of inputs using a three level fair value hierarchy, by class, for all financial instruments recognised at fair value. The fair value measurement disclosures are presented in note 34 (a) to the financial statements. The liquidity risk disclosures are not significantly impacted by the amendments and are also presented in note 34 (d) to the financial statements. IFRS 8 - "Operating Segments" IFRS 8 replaced IAS 14 'Segment Reporting', effective for the financial years starting on or after January 01, 2009. This standard requires disclosure of information about the Company's operating segments and replaces the requirement to determine primary (business) and secondary (geographical) reporting segments of the Company. The Company concluded that the operating segments determined in accordance with the IFRS 8 are the same as the business segments previously identified under IAS 14. 2.4. Standards and interpretations than became effective but not relevant to the Company The following standards (revised or amended) and interpretations became effective for the current financial year but are either not relevant or do not have any material effect on the financial statements of the Company: IFRS 3 - Business Combinations (Revised) IAS 23 - Borrowing Costs (Revised) IAS 27 - Consolidated and Separate Financial Statements (Revised) IAS 32 - Financial Instruments (Amended for Puttable nstruments and obligations arising on liquidation) IAS 39 - Financial Instruments: Recognition and Measurement (Amended) IFRIC 15 - Agreements for the Construction of Real Estate IFRIC 16 - Hedges of a Net Investment in a Foreign Operation IFRIC 17 - Distributions of Non-cash Assets to Owners IFRIC 18 - Transfers of Assets from Customers 2.5. Standards and interpretations issued but not yet effective for the current financial year The following are the standards and interpretations which have been issued but are not yet effective for the current financial year: =====================================================================================
zEffective for periods
beginning on or after
=====================================================================================
IAS 24- Related Party Disclosures (Revised) January 01, 2011
IAS 32- Financial Instruments: Presentation - Amendments
relating to Classification of Rights Issues February 01, 2010
IFRS 2- Share-based Payment: Amendments relating to Group
Cash - settled Share-based Payment Transactions January 01, 2010
IFRIC 14 - IAS 19 - The Limit on a Defined Benefit Asset,
Minimum Funding Requirements and their
Interaction (Amendment) January 01, 2011
IFRIC19 - Extinguishing Financial Liabilities with Equity Instruments July 01, 2010
=====================================================================================The Company expects that the adoption of the above revisions, amendments and interpretations of the standards will not effect the Company's financial statements in the period of initial application except for the implications of IAS 24 - Related Party Disclosures (revised), which may effect certain disclosures and the implications of IFRS 2 - Share-based Payment: Amendments relating to Group Cash-settled Share-based Payment Transactions, which are being evaluated for reporting requirements, if any.The matter regarding clarification of accounting and reporting implications of Benazir Employees Stock Option Scheme (BESOS) under the applicable framework, including the implications under IFRS 2, is under consideration of the Institute of Chartered Accountants of Pakistan (ICAP). The Company is also considering to approach the Securities and Exchange Commission of Pakistan (SECP) in this respect. Details of the BESOS are given in note 18.1. 2.6. Property, plant and equipment a) Owned assets i. Property, plant and equipment, except freehold land and capital work-in-progress, are stated at cost less accumulated depreciation and impairment losses, if any. Freehold land is stated at cost. Capital work-in-progress is stated at cost less impairment losses, if any. Maintenance and normal repairs are charged to profit and loss account as and when incurred. Major renewals and improvements are capitalised and the assets so replaced, if any, are retired. Gains or losses on disposals of property, plant and equipment, if any, are included in profit and loss account. Assets residual values, useful lives and methods of depreciation are reviewed, and adjusted, if appropriate, at each financial year end. ii. Capital spares held by the Company for replacement of major items of plant and machinery are stated at cost less accumulated depreciation and impairment losses, if any. iii. Prospecting and development expenditure is accounted for under the "successful efforts" method, whereby, costs to acquire producing reserves, successful exploratory wells and development wells, including unsuccessful development wells, are capitalised. Unsuccessful exploratory wells are initially capitalised within the capital work-in-progress. However, they are transferred to profit and loss account when declared to be non-productive. All exploration costs other than those related to exploratory drilling are charged to profit and loss account, as incurred. b) Assets subject to finance leases Assets held under finance leases are initially recorded at the lower of the present value of minimum lease payments under the lease agreements and the fair value of the leased assets. The related obligations under the lease, net of financial charges allocated to future periods, are shown as a liability. The financial charges are allocated to accounting periods in a manner so as to provide a constant periodic rate of interest on the outstanding liability. 2.7. Intangible assets Intangible assets are recognised if it is probable that the future economic benefits that are attributable to the assets will flow to the enterprise and that the cost of such assets can also be measured reliably. Generally, costs associated with the development or maintenance of computer software programmes are recognised as an expense as incurred. However, costs that are directly associated with identifiable software and have probable economic benefits exceeding one year, are recognised as an intangible assets. Direct costs include the purchase cost of software and related overhead cost. Computer software costs that are directly associated with the computer and computer controlled machines which cannot operate without the related specific software, are included in the costs of the respective assets. When the software is not an integral part of the related hardware, it is classified as an intangible asset. Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses, if any. Expenditures which enhance or extend the performance of computer software beyond their original specification and useful life is recognised as a capital improvement and added to the original cost of the software. 2.8. Depreciation and amortisation a) Property, plant and equipment i. Depreciation on property, plant and equipment, except freehold land and capital work-in-progress, is charged on a straight line basis at the rates specified in note 4.1 and depreciation on capital spares is charged over the useful lives of the related items of plant and machinery to which these spares relate. Depreciation on additions is charged from the month following the one in which the asset is available for use and on disposals upto the month the asset is in use. Depreciation on leased assets is charged at the same rates as charged on the Company's own assets. ii. Capitalised prospecting and development expenditure, including cost to acquire producing reserves, in respect of proven reserves and decommissioning assets, are amortised and charged to profit and loss account on unit of production basis. b) Intangible assets Intangible assets are amortised from the month when such assets are available for use on straight-line basis over their useful economic life at the rate stated in note 5.1. 2.9. Business combination The Company uses purchase method of accounting for acquisition of assets or class of assets, whereby, the purchase consideration is allocated to the identifiable assets, liabilities and contingent liabilities based on the fair value at the date of acquisition. Goodwill is initially measured as of the acquisition date, being the excess of (a) the aggregate of the consideration transferred, the amount of any non-controlling interest in the acquiree and in a business combination achieved in stages, the acquisition date fair value of the previously held equity interest in the acquiree; and (b) the net of the acquisition date amounts of the identifiable assets acquired and the liabilities assumed. In case the fair value attributable to the Company's interest in the identifiable net assets exceeds the fair value of consideration, the Company recognises the resulting gain in the profit and loss account on the acquisition date. 2.10. Investments a) Subsidiary Investment in subsidiary is stated at cost less impairment, if any. b) Joint venture Investment in Bolan Mining Enterprises (BME), a joint venture on a 50:50 basis with the Government of Balochistan, is accounted for using the equity method, whereby, the investment is initially recorded at cost and adjusted thereafter for the post acquisition change in the Company's share of the net assets of the joint venture. The profit and loss account reflects the Company's share of the results of the operations of the joint venture. 2.11. Stores and spares Stores and spares are valued at lower of weighted average cost and net realisable value (NRV) except for stores in transit which are valued at costs incurred upto the balance sheet date. NRV is estimated based on management's experience and is also adjusted through systematic provision for obsolete and slow moving items. 2.12. Trade debts Trade debts are carried at original invoice amounts less an estimate made for doubtful receivables, if any, based on a review of all outstanding amounts at the balance sheet date. Bad debts are written off, when identified. 2.13. Financial assets The Company classifies its financial assets in the following categories: held-to-maturity, at fair value through profit or loss, available-for-sale and loans and receivables. The classification depends on the purpose for which the financial assets were acquired. The Company determines the classification of its financial assets at initial recognition and, where allowed and appropriate, re-evaluates the designation at each balance sheet date. a) Held-to-maturity These are investments with fixed maturity that the Company has the positive intent and ability to hold to maturity. Held to maturity investments are initially measured at fair value plus transaction costs and are subsequently stated at amortised cost using the effective interest rate method less impairment, if any. These are classified as current and non-current assets in accordance with criteria set out by IFRSs. b) At fair value through profit or loss Investments which are acquired principally for the purpose of selling in the near term or investments that are part of a portfolio of financial instruments exhibiting short-term profit taking are designated and classified as investments at fair value through profit or loss. These are stated at fair value with any resulting gains or losses recognised directly in the profit and loss account. c) Available-for-sale Available-for-sale financial assets include equity and debt securities. Equity investments classified as available-for-sale are those, which are neither classified as held for trading nor designated at fair value through profit or loss. Debt securities in this category are those which are intended to be held for an indefinite period of time and which may be sold in response to liquidity needs or in response to changes in the market conditions. At initial recognition, available-for-sale investments are measured at fair value plus directly attributable transaction costs. For investments traded in active market, fair value is determined by reference to quoted market price and the investments for which a quoted market price is not available, or the fair value cannot be reasonably calculated, are measured at cost, subject to impairment review at each balance sheet date. After initial measurement, available-for-sale financial investments are subsequently measured at fair value with unrealised gains or losses recognised as other comprehensive income in the available-for-sale reserve until (i) the investment is derecognised, at which time the cumulative gain or loss is recognised in the income statement, or (ii) determined to be impaired, at which time the cumulative loss is recognised in the income statement and removed from the available-for-sale reserve. d) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are initially measured at fair value plus directly attributable transaction costs. After initial measurement loans and receivables are subsequently measured at amortised cost using the effective interest rate method less impairment, if any. These are classified as current and non-current assets in accordance with criteria set out by IFRSs. 2.14. Cash and cash equivalents For the purpose of cash flow statement, cash and cash equivalents comprise of cash and cheques in hand and at banks and include short-term highly liquid investments. The cash and cash equivalents are readily convertible to known amounts of cash and are subject to insignificant risk of change in value. 2.15. Decommissioning obligation and its provision Estimated cost to abandon and remove wells and production facilities is recognised as liability and a corresponding equivalent amount is capitalised under property, plant and equipment. The amount is based on present value of the estimated future expenditure. Changes in the timing / cost of decommissioning estimates are dealt with prospectively, by recording adjustment to the provision and a corresponding adjustment to the property, plant and equipment. The unwinding of discount is included in the finance costs. 2.16. Staff retirement benefits a) Defined benefit plans i. The Company operates approved funded pension and gratuity schemes, separately, for its executive and non-executive permanent staff. Provisions are made periodically, on the basis of actuarial valuations, for these pension and gratuity schemes. Actuarial gains and losses are recognised as income or expense when the net cumulative unrecognised actuarial gains and losses for each individual plan at the end of the previous reporting period exceed 10% of the higher of the present value of the defined benefit obligation and the fair value of plan assets at that date. These gains or losses are recognised over the expected average remaining working lives of the employees. The past service costs are recognised as an expense on a straight line basis over the average period until the benefits become vested. If the benefits have already vested, following the introduction of or changes to a scheme, past service costs are recognised immediately. ii. The Company provides post retirement medical benefits to its executive and non-executive permanent staff. The cost of these benefits is accrued over the expected remaining service lives of the employees based on actuarial valuations. Actuarial gains and losses are recognised as income or expense when the net cumulative unrecognised actuarial gains and losses for the plan at the end of pervious reporting period exceed 10% of the higher of present value of the defined benefit obligation and the fair value of plan assets at that date. These gains or losses are recognised over the expected average remaining working lives of the employees. iii. The Company accrues entitlement to leave preparatory to retirement of its executive staff on the basis of actuarial valuation. Actuarial gains and losses are recognised immediately. iv. Actuarial valuations are conducted annually and the last valuations were conducted as on June 30, 2010 based on the 'projected unit credit method'. b) Defined contribution plan The Company operates recognised provident fund schemes, separately, for its executive and non-executive permanent staff. Equal monthly contributions are made by the Company and the employees to the respective funds. 2.17. Compensated absences The cost of compensated absences in respect of executive and non-executive staff is recognised on the basis of actuarial valuations. The latest valuations were conducted as on June 30, 2010. 2.18. Provisions Provisions are recognised in the balance sheet when the Company has a legal or constructive obligation as a result of past events and it is probable that outflow of economic benefits will be required to settle the obligation and a reliable estimate of the amount can be made. Provisions are reviewed at each balance sheet date and adjusted to reflect current best estimate. 2.19. Taxation a) Current taxation Provision for current taxation is based on taxable income at the current rates of taxation after taking into account tax credits and tax rebates available, if any. b) Deferred taxation Deferred tax is provided using the balance sheet liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax losses and unused tax credits, to the extent it is probable that taxable profit will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised. The carrying amount of deferred tax assets is reviewed at each balance sheet date and is reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted at the balance sheet date. 2.20. Trade and other payables Liabilities for trade and other amounts payable are carried at cost at the balance sheet date, which is the fair value of the consideration to be paid in future for goods and services received, whether or not billed to the Company. 2.21. Revenue recognition Sales are recorded on transfer of significant risks and rewards of ownership of gas and other petroleum products, when the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control, the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the Company and the costs incurred or to be incurred in respect of the transaction can be measured reliably, which occurs on actual delivery of gas and other petroleum products. Revenue from the sale is measured at the fair value of the consideration received or receivable, net of Government levies. Effect of adjustments, if any, arising from revision in sale prices is reflected as and when the prices are finalised with the customers and / or approved by the Government of Pakistan (GoP). Revenue from the sale of gas and other petroleum products in which the Company has an interest with other joint venture partners is recognised based on the Company's working interest and the terms of the relevant contracts. Income on held-to-maturity investments is recognised on time proportion basis taking into account the effective yield of such investments. Income on term deposits and saving accounts with banks is proportionately accrued upto the balance sheet date. 2.22. Operating leases / Ijarah contracts Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating lease. Payments made under operating leases (net of any incentives received from the lessor) are charged to the profit and loss account on a straight line basis over the lease term. 2.23. Joint venture operations The Company's share in transactions and balances related to joint venture operations in which the Company has a working interest are accounted for on the basis of the latest available cost statements. Estimates of expenditure are made for the intervening period upto the balance sheet date. 2.24. Foreign currency transactions and translation Foreign currency transactions are recorded at the exchange rates approximating those prevailing on the dates of transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated in Pak rupees at the exchange rates ruling at the balance sheet date. Exchange differences are recognised in the profit and loss account. 2.25. Financial instruments Financial assets and liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument. Financial assets are de-recognised at the time when the Company transfers substantially all the risks and rewards of ownership of the financial asset. If the Company neither transfers nor retains substantially all the risks and rewards of ownership of the financial asset, the financial assets are de-recognised when the Company loses control of the contractual rights that comprise the financial assets. Financial liabilities are de-recognised at the time when the obligation specified in the contract is discharged or cancelled or expired. 2.26. Off-setting of financial assets and financial liabilities Financial assets and financial liabilities are set off and the net amount is reported in the balance sheet if the Company has a legal right to set off the transaction and also intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. 2.27. Fair value. The fair value of financial instruments that are actively traded in organised financial markets is determined by reference to quoted market bid prices at the close of business on the balance sheet date. Where there is no active market, fair value is determined using valuation techniques. Such techniques include using recent arm's length market transactions; reference to the current market value of another instrument, which has substantially similar characteristics; discounted cash flow analysis or other valuation models. 2.28. Functional and presentation currency These financial statements are presented in Pak Rupees, which is the Company's functional currency. All financial information presented in Pak Rupee is rounded to the nearest thousand unless otherwise stated. 2.29. Related party transactions Related party transactions are carried out on commercial terms, as approved by the Board, substantiated in the manner given in note 39 to the financial statements. 2.30. Impairment The carrying amount of the Company's assets are reviewed at each balance sheet date to determine whether there is any indication of impairment loss. If any such indication exists, recoverable amount is estimated in order to determine the extent of the impairment loss, if any. The recoverable amount is the higher of fair value less costs to sell and value in use. In the absence of any information about the fair value, the recoverable amount is determined to be the value in use. Impairment losses are recognised as expense in the profit and loss account. 2.31. Dividends and appropriation to reserves Dividends and appropriation to reserves are recognised in the financial statements in the period in which these are approved. However, if these are approved after the reporting period but before the financial statements are authorised for issue, then they are disclosed in the notes to the accounts. 2.32. Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker. Segment results, assets and liabilities include items directly attributable to a segment. Segment capital expenditure is the total cost incurred during the year to acquire property, plant and equipment and intangible assets. 3. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGMENTS The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company's accounting policies. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under current circumstances. Revisions to accounting estimates are recognised prospectively. In the process of applying the Company's accounting policies, management has made the following estimates and judgments which are significant to the financial statements: 3.1. Estimation of proven oil and natural gas reserves Oil and gas reserves are an important element in testing for impairment of prospecting and development assets of the Company. Changes in oil and gas reserves will also affect the rate of amortisation which is charged on unit of production method, which is a ratio of oil and gas production in a year to the estimated quantities of commercial reserves at the end of the year plus the production during the year. Estimates of oil and gas reserves require the application of judgment and are subject to future revision. Proved reserves are estimated quantities of crude oil and natural gas that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under the existing conditions. Proved reserves are estimates with reference to available reservoir and well information, including production and pressure trends for producing reservoirs. All proved reserve estimates are subject to revision, either upward or downward, based on new information, such as from development drilling and production activities or from changes in economic factors. Although, the possibility exists for changes in reserves to have a critical effect on amortisation charge, however, it is expected that in the normal course of business the probability of occurrence of such an event is remote. 3.2. Provision and amortisation of decommissioning obligation Provision is recognised for the future decommissioning and restoration of oil and gas wells, production facilities and pipelines at the end of their economic lives. The estimated cost is charged to income over the life of the proved reserves on a unit of production basis. The timing of recognition requires the application of judgment to existing facts and circumstances, which can be subject to change. Estimates of the amount of provision recognised are based on current legal and constructive obligations, technology and price levels. Provision is based on the best estimates, however, the actual outflows may differ from estimated cash outflows due to changes in laws, regulations, technology, prices and conditions, and the fact that actual expenditure will take place many years in the future. The carrying amount of provision is regularly reviewed and adjusted to take account of such changes. During the year, the Company revised its estimates of outflows or resources to settle decommissioning liability, based on future projected costs adjusted to present value. This has been treated as a change in accounting estimate, applied prospectively, in accordance with IFRIC Interpretation 1 - Changes in Existing Decommissioning, Restoration and Similar Liabilities. Had there been no change in the estimates, provision for decommissioning obligation and property, plant and equipment would have been lower by Rs 902 million. 3.3. Provision for defined benefit plans and compensated absences Defined benefit plans and compensated absences are provided for permanent employees of the Company. The plans are structured as separate legal entities managed by trustees, however, for post retirement medical benefits and compensated absences liability is recognised in the Company's financial statements. These benefits are evaluated with reference to uncertain events and are based upon actuarial assumptions including inter alia, discount rates, expected rates of return on plan assets, expected rates of salary increases, medical cost rates and mortality rates. The actuarial valuations are conducted by independent actuaries on annual basis. Pension and gratuity costs primarily represent the increase in actuarial present value of the obligation for benefits earned on employee service during the year and the interest on the obligation in respect of employee service in previous years, net of the expected return on plan assets. Calculations are sensitive to changes in the underlying assumptions. 3.4. Provision for taxation The provision for taxation is accounted for by the Company after taking into account the current income tax law and decisions taken by appellate authorities. Instances, where the Company's view differs from the view taken by the income tax department at the assessment stage and where the Company considers that its view on items of material nature is in accordance with law, the amounts are shown as contingent liabilities / assets. 3.5. Contingencies The assessment of the contingencies inherently involves the exercise of significant judgment as the outcome of the future events cannot be predicted with certainty. The Company, based on the availability of the latest information, estimates the value of contingent assets and liabilities which may differ on the occurrence / non-occurrence of the uncertain future event(s). 4. PROPERTY, PLANT AND EQUIPMENT ===========================================================================================
June 30, June 30,
2010 2009
Rs '000 Rs '000
===========================================================================================
Operating assets - note 4.1 26,909,324 18,318,870
Capital work-in-progress - note 4.5 14,786,064 16,444,583
41,695,388 34,763,453
===========================================================================================4.1. Operating assets===========================================================================================================================================================================================================================================
Owned asters Assets subject to finance leases
Freehold Buildings, Plant and Tanks and Furniture, Computers Rolling Prospecting Decommiss- Sub total Plant and Computers Rolling stock* Sub total Total
Land roads and civi machinery pipelines fittings and and allied stock* and ioning cost machinery and allied
constructions equipment equipment development **equipment
expenditure
Rs. '000
===========================================================================================================================================================================================================================================
Net carrying value basis
Net book value (NBV) as on
July 01, 2009 91,804 399,185 4,895,710 1,692,941 212,791 118,760 24,290 7,782,412 2,940,823 18,158,716 - 36,300 123,854 160,154 18,318,878
Additions (at cost) - 60,827 6,460,640 339,258 22,434 20,725 37,598 2,569,202 1,100,237 11,298,921 1,210,962 8,951 35,152 1,255,065 12,553,986
Adjustments / reclassification - 25,519 (10,958) (35,249) 125,483) 5,948 4,345 (147,030) (246,105) (429,013) - (5,561) (4,331) (9,892) (430,905)
Disposals (at NBV) - (4) (381) (76,832) (750) (93) (1,569) - - (70,629) - - (7,681) (1,681) (87,310)
Depreciation / amortisation charge - (33,606) (1,181,573) (219,270) (39,563) (54,515) (11,817) (1,396,153) (391,703) (3,328,260) (60,548) (11,599) (36,910) (109,057) (3,437,317)
NBV as on June 30, 2010 91,804 451,921 10,163,438 1,700,848 169,429 98,765 52,847 8,808,431 4,883,252 25,620,735 1,150,414 28,091 10,084 1,288,589 26,909,324
Gross carrying value basis
Cost 91,804 1,146,456 22,793,767 3,016,552 446,731 335,804 234,358 11,962,171 5,332,767 45,360,410 9,210,962 41,418 109,816 1,442,196 46,802,606
Accumulated depreciation/ - (694,535) (12,630,329) (1,315,704) (277,302) (237,039) (181,511) (3,153,740) (1,249,515) (19,739,675) (60,548) (13,327) (79,732) (153,607) (19,893,282)
amortisation
NBV as on June 30, 2010 91,804 451,921 10,163,438 1,700,848 169,429 90,765 52,847 8,808,431 4,083,252 25,620,735 1,150,414 28,091 10,084 1,268,589 26,909,324
Net carrying value basis
NBV as on July 01, 2008 14,312 406,118 5,554,146 1,223,971 180,045 98,223 24,954 5,764,559 2,063,433 15,389,761 - 30,066 115,431 145,497 15,535,258
Additions (at cost) 17,492 47,453 296,561 644,501 30,574 76,490 1,799 2,930,330 1,087,249 5,130,449 - 23,174 49,217 72,391 5,210,840
Adjustments / reclassification - (22,060) (20,557) (18,186) 27,512 2,563 653 (76,062) - (106,137) - (8,202) (653) 18,855) (114,992)
Disposals (at NBV) - (145) (166) - (347) - (775) - - (1,433) - - (2,138) (2,138) (3,571)
Depreciation / amortisation charge - (32,181) (934,274) (151,345) (24,993) (58,516) (8,341) (836,415) (209,859) (2,261,924) - (8,738) (38,003) (46,741) 12,308,665)
NBV as on June 30, 2009 91,804 399,185 4,895,710 1,692,941 212,791 118,760 24,290 7,702,412 2,940,823 18,158,716 - 36,300 23,854 160,154 18,318,870
Gross carrying value basis
Cost 91,804 1,060,169 16,354,733 2,906,217 456,576 311,120 180,954 9,539,999 3,198,637 34,700,209 - 48,913 201,343 250,256 34,950,465
Accumulated depreciation/ - (660,984) (11,459,023) (1,213,276) (243,785) (192,360) (156,664) (1,757,587) (857,814) (16,541,493) - (12,613) (71,489) (90,102) (16,631,595)
amortisation
NBV as on June 30, 2009 91,804 399,185 4,895,710 1,692,941 212,791 118,760 24,290 7,182,412 2,940,823 18,158,716 - 36,300 123,854 160,154 18,318,870
Rate of depreciationmortisation (%) 5 & 10 10 & 100*** 10 10 30 20 **** **** 10 30 20
=========================================================================================================================================================================================================================================== * Represents light and heavy vehicles** Represents Company's share of Early Production Facility (EPF) at the Company operated Hala Field *** For below ground installations in fields other than Sui Gas Field. **** Amortised on unit of production basis. 4.2. Summary of significant assets The following assets have a significant operational value to the Company: ===========================================================================================
Particulars Cost NBV
Rs '000 Rs '000
===========================================================================================
Sui Field
SML / SUL Compression and
High Pressure Casing 5,587,418 539,207
Purification Plant 658,390 131,678
20" Diameter Main Water Line 160,214 144,193
IDECO Drilling Rig H-725 131,879 -
Adhi Field
LPG Plant -2 652,812 354,696
LPG Plant -1 85,333 -
Kandhkot Field
TEG Dehydration Unit 474,884 474,884
130 MMcfd Dehydration Plant 109,484 -
Hala Block
Early Production Facilities 1,210,962 1,150,414
Mazarani Field
Processing Facilities 319,545 94,589
Transmission Pipeline 249,063 72,176
Qadirpur Field
Production Facilities 205,116 -
Capacity Enhancement Project 165,598 132,479
Plant and Machinery 164,201 80,732
Sawan Field
Front End Compression 2,476,601 2,455,963
Plant and Machinery 1,811,767 543,530
Gas Processing with Amine
and Dehydration Unit 875,601 328,350
Debottlenecking of Plant 153,338 107,337
Flowline and Tie-in of Sawan-10 142,899 114,319
Tal Block
CPF Manzalai 2,958,923 2,761,661
Surface Facilities for EWT, Manzalai-1 227,439 111,719
Miano Field
Plant and Machinery 411,601 82,320
Latif Field
Tie-in of Latif-1 156,237 140,613
Gambat Block
Tie-in of Tajjal-1 136,111 122,500
===========================================================================================4.3. Operating assets disposed off during the year==================================================================================================================================================
Method of Cost Accumulated Net Book Sale
Asset description disposal Sold to Depreciation Value proceeds
Owned Rupees '000
==================================================================================================================================================
Buildings, roads and civil constructions
(Items have book value upto Rs. 50,000) Tender Various 58 (54) 4 280
Plant and machinery -
Volt Master Generator Tender M/s. Jehanzeb Contractor 275 (183) 92 3
AGS Gas Generator Tender M/s. Combine Iron & Steel 220 (152) 68 35
Power House Turbo Generator Tender M/s. Asher Impex 373 (298) 75 1,003
Items having book value upto Rs. 50,000 Tender Various 8,507 (8,359) 148 2,487
9,375 (8,992) 383 3,528
Furniture, fittings and equipment
Naushuatec Photocopier Tender M/s. Yousufzai Traders 339 (288) 51 4
Portable Moisture Analyzer Tender M/s. Yousufzai Traders 281 (229) 52 1
Minolta Photocopier Tender M/s. Khalid Brothers 450 (292) 158 6
Ricoh Photocopier Tender Mr. Mujeeb Alam 206 (146) 60 4
Items having book value upto Rs. 50,000 Tender Various 5,029 (4,599) 430 473
6,305 (5,554) 751 488
Tanks and pipelines
Gas Transmission Line (Gurguri-Kohat) Joint Venture SNGPL 156,268 (79,436) 76,832 85,036
Agreement
Items having book value upto Rs. 50,000 Tender Various 37,405 (37,405) - 34,949
193,673 (116,841) 76,832 119,985
Rolling stock
Suzuki Mehran (VX), AHF-368 Company Policy Mr. Rashid Jawed 329 (275) 54 92
Honda City A/T ATG-493 Company Policy Mr. Rizwan H. Qidwai 1,392 - 1,392 902
Items having book value upto Rs. 50,000 Auction /Tender Various 6,944 (6,819) 125 1,901
8,665 (7,094) 1,571 2,895
Computers and allied equipment
UPS 5 KVA Tender M/s Jehanzeb Contractor 180 (102) 78 5
Items having book value upto Rs. 50,000 Tender Various L 22,441 (22,425) 16 227
22,621 (22,527) 94 232
Assets subject to finance leases
Rolling stock
Suzuki Mebran VX, AHF-367 Company Policy Mr. Mohsin Raza Khan 327 (272) 55 92
Suzuki Mehran VX, AHF-371 Company Policy Mr. Tariq Mehmood 310 (258) 52 92
Suzuki Mehran VX, AHF-370 Company Policy Mr. Rahat Hussain 310 (258) 52 92
Suzuki Mehran VX, AHF-369 Company Policy Mr. Zafar Yab Ali Wasti 310 (258) 52 92
Suzuki Mehran VX, AHN-643 Company Policy Mr. Shaheen Perwaz Akhtar 310 (258) 52 92
Honda Civic VTi A/T AGW-325 Company Policy Mr. Moin Raza Khan 1,198 (1,018) 180 240
Toyota Corolla Xli, AKA-610 Company Policy Mr. Haroon Rashid Siddiqui 893 (640) 253 440
Suzuki Mehran VX, AJW-370 Company Policy Dr. Saima Sitwat Siddiqui 315 (226) 89 129
Suzuki Mehran VX, AJW-371 Company Policy Mr. Abu Rehan 315 (226) 89 129
Suzuki Mehran VX, AJW-375 Company Policy Syed Azhar Hussain Rizvi 320 (229) 91 131
Suzuki Mehran VX, AJW-372 Company Policy Dr. Murtaza Boustani 320 (229) 91 131
Suzuki Mehran VX, AJW-367 Company Policy Mr. Saleem Ahmed 320 (229) 91 131
Suzuki Mehran VX, AJW.377 Company Policy Mr. Sajjad Ahmed 320 (229) 91 131
Suzuki Mehran VX, AJW-376 Company Policy Mr. Omer Hayat Bugti 320 (229) 91 131
Honda Accord, AKF-343 Company Policy M. Anwar Moghal 2,465 (1,767) 698 942
Suzuki Cultus VXL, AKW-117 Company Policy Mrs. Bushra Mustehsan 627 (418) 209 240
Suzuki Cultus VXR, AMC-176 Company Policy Mr. Arshad Ahmed Mallick 565 (358) 207 265
Suzuki Mehran VXR, AMG-548 Company Policy Mohammad Yasin 368 (197) 171 206
Suzuki Mehran VXR, AMG-547 Company Policy Dr. Afzal Ali Shah Rizvi 368 (197) 171 206
Suzuki Mehran VXR, AMG-958 Company Policy Mohammad Noman Khan 368 (197) 171 206
Suzuki Mebran VXR, AMG-957 Company Policy Mr. Mumtaz Husain 368 (197) 171 206
Suzuki Mehran VXR, AMG-962 Company Policy Syed Ahmed Rashid 368 (197) 171 206
Suzuki Mehran VXR, AMG-954 Company Policy Syed Ghazanfar Iqbal 369 (197) 172 206
Suzuki Mehran VXR, AMG-955 Company Policy Mr. Abdul Malik Kakar 369 (197) 172 205
Suzuki Mehran VXR, AMG-956 Company Policy Mr. Kamran Aziz 368 (197) 171 205
Suzuki Mehran VXR, AMJ-071 Company Policy Syed Ali Mohtashim Zaidi 368 (197) 171 205
Suzuki Mehran VXR, AMH-524 Company Policy Mr. Ejaz-Ul-Haq 363 (194) 169 205
Suzuki Mehran VXR, ANP-197 Company Policy Mr. Imran Ahmed 371 (154) 217 231
Suzuki Mehran VXR, ANP-198 Company Policy Mr. Bilal Ahmed 371 (154) 217 231
Honda Civic Prosmatec, APL-594 Insurance Claim EFU General Insurance Ltd. 1,417 (449) 968 1,420
Suzuki Cultus VXL, ARG-480 Insurance Claim EFU General Insurance Ltd. 736 (110) 626 725
Honda Civic Prosmatec, APY-194 Insurance Claim EFU General Insurance Ltd. 1,417 (520) 897 1,420
Suzuki CultusVXL, APP-061 Company Policy Mr. Jawaid Sadiq 636 (276) 360 408
Items having book value upto Rs. 50,000 Company Policy Various 4,070 (3,833) 237 237,815
22,240 (14,565) 7,675 10,806
262,937 (175,627) 87,310 138,214
==================================================================================================================================================4.4. Cost and accumulated depreciation include===============================================================================================
Cost Accumulated depreciation
June 30, June 30, June 30, June 30,
2010 2009 2010 2009
Rs'000
===============================================================================================
Share in joint ventures operated
by the Company 2,261,584 2,048,290 1,098,726 927,080
Share in joint ventures operated
by others (assets not in possession
of the Company) 11,681,874 6,111,667 3,491,005 2,773,039
13,943,458 8,159,957 4,589,731 3,700,119
===============================================================================================4.5. Capital work-in-progress===========================================================================================
June 30, June 30,
2010 2009
Rs '000 Rs '000
===========================================================================================
Plant, machinery, fittings and pipelines 10,027,955 13,402,927
Prospecting and development wells 4,478,060 2,886,572
Land, buildings and civil constructions 184,017 69,894
Capital stores for drilling and development , 96,032 85,190
14,786,064 16,444,583
===========================================================================================4.6. Reconciliation of the carrying amount of capital work-in-progress=============================================================================================================================
Plant, Prospecting Land, Capital
machinery, and buildings and stores for
fittings and development civil drilling and Total
pipelines wells constructions development
Rs'000
=============================================================================================================================
Balance as at July 1, 2008 3,679,283 1,878,149 9,511 84,965 5,651,908
Capital expenditure incurred /
advances made during the year 10,797,297 3,862,690 101,062 225 14,761,274
Adjustments / reclassification 15,734 - 24,266 - 40,000
Transferred to operating assets (1,089,387) (2,854,267) (64,945) - (4,008,599)
Balance as at June 30, 2009 13,402,927 2,886,572 69,894 85,190 16,444,583
Capital expenditure incurred /
advances made during the year 4,671,639 4,013,661 219,570 10,842 8,915,712
Adjustments/ reclassification 51,339 - (44,621) - 6,718
Transferred to operating assets (8,097,950) (2,422,173) (60,826) - (10,580,949)
Balance as at June 30, 2010 10,027,955 4,478,060 184,017 96,032 14,786,064
=============================================================================================================================5. INTANGIBLE ASSETS===========================================================================================
June 30, June 30,
2010 2009
Rs '000 Rs '000
===========================================================================================
Computer software including
ERP system - note 5.1 178,520 177,759
Intangible assets under development 196,330 29,505
374,850 207,264
===========================================================================================5.1. Computer Software including ERP system===========================================================================================================
ERP June 30, 2010 ERP June 30, 2009
System Computer Total System Computer Total
software Rs '000 software
===========================================================================================================
Net carrying value basis
NBV as on July 01 123,593 54,166 177,759 104,104 50,375 154,479
Additions (at cost) 29,593 36,206 65,799 49,006 30,662 79,668
Amortisation charge - note 27 (33,555) (31,483) (65,038) (29,517) (26,871) (56,388)
NBV as on June 30 119,631 58,889 178,520 123,593 54,166 177,759
Gross carrying value basis
Cost 268,977 160,267 429,244 239,385 124,061 363,446
Accumulated amortisation (149,346) (101,378) (250,724) (115,792) (69,895) (185,687)
NBV as on June 30 119,631 58,889 178,520 123,593 54,166 177,759
Rate of amortisation (%) 20 33 20 33
===========================================================================================================6. LONG-TERM INVESTMENTS===========================================================================================
June 30, June 30,
2010 2009
Rs '000 Rs '000
===========================================================================================
Investments in related parties
BME - a joint venture - note 6.1 15,000 15,000
Profit receivable from BME 299,312 239,654
314,312 254,654
Fully paid shares in a subsidiary - note 6.2 1 1
Other investments
Held-to-maturity
Term Finance Certificates - note 6.3 149,910 74,910
Pakistan Investment Bonds - note 6.4 1,564,888 1,549,748
1,714,798 1,624,658
Less: Current maturities
Term Finance Certificates (725,010) (74,980)
Pakistan Investment Bonds (199,603) -
(224,613) (24,980)
1,804,498 1,854,333
===========================================================================================6.1. Bolan Mining Enterprises6.1.1. The Company's interest in assets and liabilities of the joint venture is as follows: ===========================================================================================
June 30, June 30,
2010 2009
Rs '000 Rs '000
===========================================================================================
Tangible fixed assets 42,419 11,584
Current assets 349,894 308,433
392,313 320,017
Current liabilities (41,636) (17,429)
Reserve for development and expansion (35,471) (47,157)
Provision for leave preparatory to retirement (894) (777)
(78,001) (65,363)
Net assets 314,312 254,654
===========================================================================================6.1.2. The Company's share in profit and loss of the joint venture is as follows:===========================================================================================
Year ended Year ended
June 30, 2010 June 30, 2009
Rs '000 Rs '000
===========================================================================================
Sales 118,164 130,392
Cost of goods sold (57,649) (60,064)
60,515 70,328
Operating expenses (18,626) (17,809)
Operating profit 41,889 52,519
Other income 32,521 34,117
74,410 86,636
Transfer to reserve for
development and expansion (14,752) (17,520)
59,658 69,116
===========================================================================================6.2. Subsidiary companyThe Pakistan Petroleum Provident Fund Trust Company (Private) Limited, a wholly owned subsidiary of the Company, has neither made any profits nor incurred any losses from the date of its incorporation to June 30, 2010. The latest audited financial statements of the subsidiary are annexed. The paid-up capital of the subsidiary is Rs 1,000 divided into 100 ordinary shares of Rs 10 each. SECP through its letter CLD/RD/CO.237/PPL/2004 dated July 6, 2004 has exempted the Company from preparation of consolidated financial statements under section 237 of the Companies Ordinance, 1984. Accordingly, the Company has not prepared the consolidated financial statements for the year ended June 30, 2010 in respect of its investment in the aforementioned wholly owned subsidiary. 6.3. Term Finance Certificates ===========================================================================================================================
Nominal
Number 01 value of Final Implicit June 30, June 30,
certificates each maturity date mark-up 2010 2009
certificate % Rs '000
Rs
===========================================================================================================================
(TFCs) of listed companies
Jahangir Siddiqui & Co. Ltd. 10,000 5,000 December21, 2009 8.29 - 24,960
10,000 5,000 November 21, 2011 KIBOR+ 2.5 49,930 49,950
Bank Al-Falah Limited 20,000 5,000 December 01, 2017 KIBOR+ 2.5 99,980 -
149,910 74,910
Current maturity of TFCs (25,010) (24,980)
124,900 49,930
===========================================================================================================================6.4. Pakistan Investment Bonds (PIBs) *==============================================================================
Final Implicit June 30, June 3U,
maturity date mark-up 2010 2009
%
Rs'000
==============================================================================
Issued on:
May 19, 2006 May 19, 201 9.54 199,603 199,191
August 22, 2007 August 22, 2012 10.15 49,195 48,877
August 22, 2007 August 22, 2012 10.23 98,240 97,544
August 22, 2007 August 22, 2012 10.30 98,108 97,361
August 22, 2007 August 22, 2012 10.81 97,187 96,076
August 22, 2007 August 22, 2012 10.86 97,096 95,951
May 19, 2006 May 19, 2016 10.90 47,217 46,896
August 22, 2007 August 22, 2012 10.90 97,008 95,827
August 22, 2007 August 22, 2012 10.95 96,916 95,701
August 22, 2007 August 22, 2012 11.00 48,413 47,788
May 19, 2006 May 19, 2016 11.14 93,455 92,707
August 22, 2007 August 22, 2017 11.43 91,217 90,455
August 22, 2007 August 22, 2017 11.49 90,971 90,189
August 22, 2007 August 22, 2017 11.54 90,748 89,949
August 22, 2007 August 22, 2017 11.59 90,528 89,711
August 22, 2007 August 22, 2017 11.64 90,305 89,471
August 22, 2007 August 22, 2017 11.88 44,623 44,165
August 22, 2007 August 22, 2012 16.08 44,058 41,889
1,564,888 1,549,748
Current maturity of PIBs (199,603) -
1,365,285 1,549,748
============================================================================== * PIBs are in custody of various financial institutions on behalf of the Company.7. LONG-TERM DEPOSIT The Company, as per the Production Sharing Agreement (PSA) signed with the Republic of Yemen for carrying out exploration in Block-29, was required to submit an irrevocable letter of credit, issued by a local bank of Yemen, to the Ministry of Oil and Gas, Yemen, for its share of Minimum Expenditure Obligation amounting to US$ 7.5 million for the first exploration period of 4 years. Accordingly, the Company arranged a letter of credit from International Bank of Yemen on submission of counter guarantee of US$ 7.5 million through United Bank Limited against 100% cash margin and lien on deposit of Rs 630 million (2009: Rs 615 million). 8. LONG-TERM RECEIVABLES ===========================================================================================
June 30, June 30,
2010 2009
Rs '000 Rs '000
===========================================================================================
Long-term receivables from Government
Holdings Private Limited (GHPL) 28,117 46,560
Less: Current maturity of (19,615) (19,029)
long-term receivables 8,502 27,531
===========================================================================================8.1. Long-term receivables from GHPL represents share of carrying cost, borne by the Company, in respect of Chachar and Tal Fields, which is recoverable from GHPL in accordance with the terms set out under the relevant Petroleum Concession Agreements (PCAs).Under the arrangement for acquisition of 75% working interest in Chachar Gas Field, the Company had paid an amount of Rs 10.203 million to M/s Tullow against the share of carrying cost amounting to Rs 17.004 million which is recoverable from GHPL. The income amounting to Rs 6.801 million, arising from aforesaid arrangement was classified as a deferred income. During the current year, amount of Rs 0.971 million has been transferred to profit and loss account and accordingly, the balance in the deferred income account is Rs 5.830 million. 9. LONG-TERM LOANS � STAFF ===========================================================================================
June 30, June 30,
2010 2009
Rs '000 Rs '000
===========================================================================================
Unsecured and considered good
Executive staff - note 9.2 8,416 9,142
Other employees 4,420 5,491
12,836 14,633
Current maturity of long-term loans- note 12
Executive staff (2,626) (2,816)
Other employees (981) (1,920)
(3,607) (4,736)
9,229 9,897
===========================================================================================9.1. These represent house purchase / building, household appliances, generator and car / motorcycle loans disbursed to employees under the terms of employment and are recoverable by the Company in accordance with the Company's rules over a maximum period of ten years. The loans carry interest rate ranging from 1 % to 10% (2009: 1 % to 10%) per annum.9.2. Reconciliation of the carrying amount of long-term loans to executive staff: ===========================================================================================
June 30, June 30,
2010 2009
Rs '000 Rs '000
===========================================================================================
Balance as on July 01 9,142 7,628
Disbursements 2,736 3,590
Repayments / adjustments (3,462) (2,076)
Balance as on June 30 8,416 9,142
===========================================================================================9.3. The maximum aggregate amount of loan due from the executive staff at the end of any month during the year was Rs 8.990 million (2009: Rs 9.891 million).10. STORES AND SPARES ===========================================================================================
June 30, June 30,
2010 2009
Rs '000 Rs '000
===========================================================================================
Stores and spares 2,098,913 1,885,905
Stores and spares in transit 53,414 57,779
2,152,327 1,943,684
Provision for obsolete/slow moving stores (82,919) (72,040)
2,069,408 1,871,644
===========================================================================================10.1. Reconciliation of provision for obsolete / slow moving stores:===========================================================================================
June 30, June 30,
2010 2009
Rs '000 Rs '000
===========================================================================================
Balance as on July 01 72,040 76,775
Charge / (reversal) for the year 10,879 (4,735)
Balance as on June 30 82,919 72,040
===========================================================================================11. TRADE DEBTS===========================================================================================
June 30, June 30,
2010 2009
Rs '000 Rs '000
===========================================================================================
Unsecured and considered good
Related parties
Water and Power Development 7,235,291 3,488,054
Authority (WAPDA)
Sui Northern Gas Pipelines 13,657,728 13,595,536
Limited (SNGPL)
Sui Southern Gas Company 7,617,534 8,756,616
Limited (SSGCL)
Pakistan Refinery Limited (PRL) 50,962 19,173
28,561,515 25,859,379
Others
Attock Refinery Limited (ARL) 1,522,549 1,804,364
Byco Petroleum Pakistan Limited 511,089 -
Others 216,036 116,121
2,249,674 1,920,485
30,811,189 27,779,864
===========================================================================================11.1. The ageing of trade debts at June 30 is as follows:===========================================================================================
June 30, June 30,
2010 2009
Rs '000 Rs '000
===========================================================================================
Neither past due nor impaired 12,997,012 12,130,219
Past due but not impaired
within 90 days 10,576,445 11,923,474
- 91 to 180 days 3,708,711 3,139,278
- over 180 days 3,529,021 586,893
17,814,177 15,649,645
30,811,189 27,779,864
===========================================================================================11.2. Trade debts include overdue amount of Rs 17,342 million (June 30, 2009: Rs 14,757 million) receivable from the State controlled utility companies (i.e. WAPDA, SSGCL, SNGPL and Pakistan Refinery Limited (PRL)). Based on the measures being undertaken by the Government to resolve the Inter Corporate Circular Debt issue, the Company considers this amount to be fully recoverable and therefore, no provision for doubtful debts has been created in these financial statements.12. LOANS AND ADVANCES ===========================================================================================
June 30, June 30,
2010 2009
Rs '000 Rs '000
===========================================================================================
Unsecured and considered good
Loans and advances to staff- note 12.1 12,605 6,797
Advances to suppliers and others 38,187 36,849
Advance payment of cash calls
to Joint Ventures - note 24.2 95,697 366,378
Current maturity of long-term 3,607 4,736
loans - staff - note 9
150,096 414,760
===========================================================================================12.1. Loans and advances to staff===========================================================================================
June 30, June 30,
2010 2009
Rs '000 Rs '000
===========================================================================================
Executive staff 196 17
Other employees 12,409 6,780
12,605 6,797
===========================================================================================13. TRADE DEPOSITS AND SHORT-TERM PREPAYMENTS===========================================================================================
June 30, June 30,
2010 2009
Rs '000 Rs '000
===========================================================================================
Trade deposits 31,758 31,691
Prepayments 142,969 154,779
Current accounts with Joint
Ventures - note 24.2 150,044 133,497
324,771 319,967
===========================================================================================14. ACCRUED FINANCIAL INCOME===========================================================================================
June 30, June 30,
2010 2009
Rs '000 Rs '000
===========================================================================================
Profit receivable on
bank deposits 30,415 57,080
long-term investments 48,747 47,694
term deposits with banks 101,046 191,786
long-term deposit 4,060 11,443
184,268 308,003
===========================================================================================15. OTHER RECEIVABLES===========================================================================================
June 30, June 30,
2010 2009
Rs '000 Rs '000
===========================================================================================
Receivable from SNGPL
for Sui field services 5,359 1,265
Receivable from SSGCL
for Sui field services 1,434 390
Receivable from Workers'
Profit Participation Fund - 77,836
Other receivables 96,130 19,856
102,923 99,347
===========================================================================================16. SHORT-TERM INVESTMENTS===========================================================================================
June 30, June 30,
2010 2009
Rs '000 Rs '000
===========================================================================================
Held-to-maturity
Term deposits with banks
Local currency - note 16.1 11,836,000 10,231,000
Foreign currency - note 16.2 49,695 2,736,800
15,185,695 12,967,800
Investment in Treasury Bills - note 16.3 10,626,466 -
Investment in Musharika Certificates
Standard Chartered Modarba - 50,000
At fair value through
profit or loss - note 16.4
AMZ Plus Income Fund 56,198 100,903
Dawood Money Market Fund - 98,003
Crosby Phoenix Fund 19,581 -
UBL Liquidity Plus Fund 45,744 -
MCB Cash Management Optimizer Fund 570,550 -
Meezan Cash Fund 102,595 -
NAFA Government Securities Liquid Fund 216,828 -
NIT Government Bond Fund 102,183 -
1,483,679 198,906
27,295,840 13,216,706
===========================================================================================16.1. The local currency term deposits have a maximum maturity period of six months, carrying profit ranging from 10.85% to 12.75% (2009: from 9.80% to 19.95%) per annum.16.2. The foreign currency term deposits have a maximum maturity period of six months, carrying profit ranging from 1.20% to 3.00% (2009: from 2.00% to 9.75%) per annum. 16.3. Treasury bills have a maximum maturity period of six months, carrying profit ranging from 11.64% to 12.45% (2009: nil) per annum. 16.4. Fair value of these investments is determined using their respective redemption / repurchase price. 17. CASH AND BANK BALANCES ===========================================================================================
June 30, June30,
2010 2009
Rs '000 Rs '000
===========================================================================================
At banks
Saving accounts
Local currency - note 17.1 1,699,061 1,139,572
Foreign currency - note 17.2 20,689 135,476
1,719,750 1,275,048
Current accounts (local currency) 113,826 98,532
Cash and cheques in hand 40,817 10,773
1,874,393 1,384,353
===========================================================================================17.1. These carry profit at the rate ranging from 5% to 12% (2009: from 5% to 14%) per annum.17.2. These carry profit at the rate ranging from 0.10% to 0.25% (2009: from 0.10% to 0.50%) per annum. 18. SHARE CAPITAL ===========================================================================================
June30, June30,
2010 2009
Rs '000 Rs '000
===========================================================================================
Authorised
1,500,000,000
(2009: 1,000,000,000) ordinary
shares of Rs 10 each 15,000,000 10,000,000
26,510 (2009: 26,510)
convertible preference
shares of Rs 10 each 265 265
15,000,265 10,000,265
Issued
996,005,505 (2009: 830,035,970)
ordinary shares
of Rs 10 each - note 18.1 9,960,055 8,300,360
13,850 (2009: 14,100)
convertible preference
shares of Rs 10 each - note 18.2 138 141
9,960,193 8,300,501
Subscribed and paid-up
683,073,793 (2009: 683,073,543)
ordinary shares
of Rs 10 each for cash - note 18.1 6,830,738 6,830,735
309,992,165 (2009: 144,022,880)
ordinary shares
of Rs 10 each issued as
bonus shares - note 18.3
Opening balance 1,440,230 685,824
Issued during the year 1,659,692 754,406
Closing balance 3,099,922 1,440,230
2,750,000 (2009: 2,750,000)
ordinary shares of
Rs 10 each for consideration
other than cash under
an Agreement for Sale
of assets dated March 27,
1952 with Burmah Oil Company Limited 27,500 27,500
9,958,160 8,298,465
13,850 (2009: 14,100)
convertible preference
shares of Rs 10 each for cash - note 18.2 138 141
9,958,298 8,298,606
===========================================================================================18.1. Issued, subscribed and paid-up capitalDuring June 2002, a rights issue of 653,170,040 ordinary shares of Rs 10 each was made to the existing shareholders, irrespective of the class. Out of the above, 189,547 (2009: 189,547) shares remained unsubscribed. In July 2004, the Government of Pakistan (GoP) disinvested its shareholding, equivalent to 15% of the paid-up share capital (i.e. 102,875,500 ordinary shares) of the Company through an Initial Public Offering. The Government of Pakistan introduced BESOS on August 14, 2009. Under the arrangement, 12% shares (78,070,120 shares) from Government's holding were transferred to PPL Employees Empowerment Trust established on September 14, 2009 under a Trust Deed. Under the scheme, shares were given to the permanent employees on PPL's payroll as on August 14, 2009, through unit certificates. The employees are entitled to 50% dividends and the remaining 50% dividends are transferred to the Central Revolving Fund of the Privatisation Commission (PC). However, on fulfillment of vesting conditions, the employees will be entitled to payments from the Fund, equal to average quoted value of shares of immediately preceding month at Karachi Stock Exchange and the shares will be transferred back to the President of the Islamic Republic of Pakistan upon receipt of the return value from the PC. In this connection reference should also be made to note 2.5 to the financial statement. Currently, the GoP holds 69.77% (2009: 78.40%) of the paid-up ordinary share capital. 18.2. Convertible preference shares In accordance with article 3(iv) of the Company's Articles of Association, shareholders holding convertible preference shares have the right to convert all or any of their convertible preference shares into ordinary shares on the basis of one ordinary share for each convertible preference share converted, such conversion to take place upon the expiry of six months following service of written notice upon the Company Secretary by the holders of such convertible preference shares to that effect. During the year one (2009: seven) shareholder(s) holding 250 (2009: 340) convertible preference shares exercised their option to convert those shares into ordinary shares. The convertible preference shares have right to a dividend ranking pari passu with the level of dividend payable to the holders of ordinary shares subject, however, to a maximum rate of thirty percent per annum of the value of the total number of such convertible preference shares held. The convertible preference shares issued by the Company do not carry any fixed return and are convertible into ordinary shares. The Company is of the view that their characteristics are that of an equity instrument rather than a liability instrument and accordingly, these are treated to be as such. 18.3. During the year the Company issued 20% bonus shares (165,969,285 shares) to the ordinary share holders (i.e. two ordinary shares for every ten ordinary shares held). 19. RESERVES ===========================================================================================
June 30, June 30,
2010 2009
Rs '000 Rs '000
===========================================================================================
Capital reserve - note 19.1 1,428 1,428
Revenue reserves
General and contingency
reserve - note 19.2 69,761 69,761
Insurance reserve - note 19.3 8,521,894 4,500,000
Assets acquisition reserve - note 19.4 15,000,000 10,000,000
Unappropriated profit 46,354,850 40,188,762
69,946,505 54,758,523
69,947,933 54,759,951
===========================================================================================19.1. Capital reserveThe amount of Rs 1.428 million represents consideration for the surrender of the right of the Mari North Mining Lease. In accordance with the transfer agreement with the GoP, the foregoing consideration has to be carried forward as capital reserve and cannot be distributed. 19.2. General and contingency reserve The balance in general and contingency reserve account is constant since December 31, 1981. The reserve was built through appropriation from the available profit after taxation on a yearly basis to cater for unforeseen requirements. As at December 31, 1981, the balance available in the profit and loss account after appropriation of dividend for the year was transferred to the general and contingency reserve upon the coming into effect of the Sui Gas Well-head Price Agreement, 1982 (1982 GPA) which required inclusion of this reserve as a part of the shareholders' funds for qualifying for return under the 1982 GPA (now dismantled). Since then, this balance has remained constant. 19.3. Insurance reserve Due to difficulty in obtaining insurance policy for terrorism, sabotage and civil commotion at reasonable premiums and deductibles, the Company has built-up an insurance reserve for self insurance cover against these risks and plans to build up this reserve in future years. However, during the year the Company has arranged terrorism cover from the international market upto the limit of liability of US$ 100 million (Rs 8,540 million) for single occurrence as well as annual aggregate. Due to the limited cover available, the Company will continue to build-up this reserve. During the current year, the Company has transferred cost relating to fire incident at well-38 of Sui Gas Field amounting to Rs 1,478.106 million from the insurance reserve to unappropriated profit. The Board of Directors at their meeting held on August 06, 2010 has approved to transfer Rs 5,500 million (2009: Rs 5,500 million) from unappropriated profit to the insurance reserve. 19.4. Assets acquisition reserve In view of the declining hydrocarbon reserves profile of the Company, it is intended to acquire sizeable producing reserves for which a separate assets acquisition reserve has been established and the Company plans to build up this reserve in future years. The Board of Directors at their meeting held on August 06, 2010 has approved to transfer Rs 5,000 million (2009: Rs 5,000 million) from unappropriated profit to the assets acquisition reserve. 20. PROVISION FOR DECOMMISSIONING OBLIGATION ===========================================================================================
June 30, June 30,
2010 2009
Rs '000 Rs '000
===========================================================================================
Balance brought forward 3,974,307 2,813,374
Provision / adjustment
during the year - note 4.1 1,534,132 1,087,249
Unwinding of discount - note 30 96,787 73,684
5,605,226 3,974,307
===========================================================================================The provision for decommissioning obligation includes Rs 1,500.783 million (2009: Rs 1,064.518 million), representing the Company's share of the expected decommissioning cost of partner operated fields. The provision for decommissioning cost in respect of the Company's operated fields has been estimated by its in-house technical staff, whereas, the provision for the partner operated fields is based on estimates provided by the respective operators. The provision has been discounted using a real discount rate of 2.60% per annum (2009: 2.60% per annum).21. LIABILITIES AGAINST ASSETS SUBJECT TO FINANCE LEASES ===========================================================================================
June 30, June 30,
2010 2009
Rs '000 Rs '000
===========================================================================================
Present value of minimum lease payments 1,298,609 146,051
Current maturity shown under current liabilities (1,210,728) (45,946)
87,881 100,105
===========================================================================================21.1. The liabilities against assets subject to finance leases represent the leases entered into with leasing companies / contractor for vehicles and plant and machinery. The periodic lease payments include rates of mark-up ranging from 6.13% to 21.86% (2009: 7.50% to 21.83%) per annum. The Company has the option to purchase the assets upon expiry of the respective lease terms. There are no financial restrictions in the lease agreements.The amounts of future payments for the lease and the period in which the lease payments will become due are as follows: ===================================================================================================================
Minimum lease payments Financial charges Present value of
Rs '000 minimum lease payments
June 30, 2010 June 30, 2009 June 30, 2010 June 30, 2009 June 30, 2010 June 30, 2009
===================================================================================================================
Year to June 30,
2010 - 61,670 - 15,725 - 45,945
2011 1,260,967 54,211 50,239 14,808 1,210,728 39,403
2012 47,525 37,074 12,771 8,621 34,754 28,453
2013 35,323 25,604 7,371 4,330 27,952 21,274
2014 20,964 12,473 3,529 1,497 17,435 10,976
2015 8,552 - 812 - 7,740 -
Total 1,373,331 191,032 74,722 44,981 1,298,609 146,051
===================================================================================================================22. DEFERRED LIABILITIES===========================================================================================
June 30, June 30,
2010 2009
Rs '000 Rs '000
===========================================================================================
Post retirement medical benefits - note 28.2.1 763,266 676,024
Leave preparatory to retirement - note 28.3 371,763 314,661
1,135,029 990,685
===========================================================================================23. DEFERRED TAXATION===========================================================================================
June 30, June 30,
2010 2009
Rs '000 Rs '000
===========================================================================================
Credit / (debit) balances arising on account of:
Exploration expenditure (3,174,704) (2,798,785)
Amortisation of intangible assets (551) (857)
Provision for staff retirement and other benefits (397,260) (346,740)
Provision for obsolete / slow moving stores (29,022) (25,214)
Provision for Workers' Welfare Fund (1,437,278) (1,118,655)
Provision for decommissioning obligation (416,654) -
Accelerated tax depreciation allowances 3,202,600 1,582,277
Prospecting and development expenditure 3,476,083 2,841,601
Others (4,280) 4,936
1,218,934 138,563
===========================================================================================24. TRADE AND OTHER PAYABLES===========================================================================================
June 30, June 30,
2010 2009
Rs '000 Rs '000
===========================================================================================
Creditors 101,377 748,452
Accrued liabilities 1,473,501 1,809,783
Advances from customers 169,651 39,904
Retention money 435,763 323,948
Unpaid and unclaimed dividends 98,452 86,916
Gas development surcharge 5,639,880 1,205,572
Federal excise duty 103,672 103,768
Sales tax (net) 795,210 822,024
Royalties 4,307,661 4,720,213
Surplus due to the President - note 24.1 72,539 72,539
Current accounts with Joint Venture Partners
- note 24.2 and 39.1 1,615,772 857,780
Workers' profits participation fund - note 24.3 3,228 -
Workers' welfare fund - note 25.1.4 3,362,964 2,658,307
Others 30,809 25,228
18,210,479 13,474,434
===========================================================================================24.1. According to Article 3.4 of the 1982 GPA (now dismantled), the surplus or deficit arising as a result of gas price calculation was required to be settled in cash between the Company and the President (i.e. GoP) within forty five days of the receipt of the auditors' initialed accounts for that year provided, however, that in the event of a surplus payable to the President, any tax paid in excess of the current taxation as disclosed by that year's audited accounts was to be paid to the President on recovery from the tax authorities upon finalisation of the Company's tax assessment for that year. Accordingly, these amounts of 'surplus' will be paid to the President upon finalisation of the relevant income tax assessments.24.2. Joint venture current accounts (i.e. payable or receivable) as at June 30, 2010 and 2009 have been stated net of the respective current assets and current liabilities, as providing details for each respective joint venture separately would be very exhaustive especially in view of the materiality of that information in the overall context of these financial statements. 24.3. Workers' profits participation fund (WPPF) ===========================================================================================
June 30, June 30,
2010 2009
Rs '000 Rs '000
===========================================================================================
Balance as on July 01 - 8,390
Allocation for the year - note 31 1,851,828 2,247,164
Interest on funds utilised
in the Company's
Business - note 30 135 708
1,851,363 2,256,262
Amount paid during the year
- for current year (1,848,135) (2,325,708)
- for prior year - (8,390)
(1,848,135) (2,334,098)
3,228 (77,836)
Receivable from WPPF
classified under
other receivables - note 15 - 77,836
Balance as on June 30 3,228 -
===========================================================================================25. CONTINGENCIES AND COMMITMENTS25.1. Contingencies 25.1.1. Indemnity bonds and corporate guarantees Indemnity bonds (including share of joint venture areas) issued to custom authorities, redeemable after submission of usage certificate within five years. ===========================================================================================
June 30, June 30,
2010 2009
Rs '000 Rs '000
===========================================================================================
146,985 282,387
===========================================================================================Corporate guarantees (including share of joint venture areas) issued to custom authorities, redeemable on receipt of necessary certification from regulatory authority or clarification from custom authorities.===========================================================================================
June 30, June 30,
2010 2009
Rs '000 Rs '000
===========================================================================================
129,500 129,569
===========================================================================================25.1.2. Pursuant to the directives of the Price Determining Authority, Ministry of Petroleum & Natural Resources, the Company is not taking credit for interest income receivable from WAPDA and no provision is being made for the interest payable to GoP on late payment of gas development surcharge.25.1.3.The Company had filed appeal before the Appellate Tribunal Inland Revenue (ATIR) against the order of the Large Taxpayers Unit (LTU), which required the Company to pay sales tax on LPG sales made from Adhi during the period from August, 1999 to April, 2004. However, in order to avail benefits under the amnesty scheme notified through S.R.O. 247(I)/2004 dated May 5, 2004, the Company paid and charged to profit and loss account for the year ended June 30, 2004 sales tax and additional tax amounting to Rs 77.548 million and Rs 12.426 million, respectively, on sales of LPG made during the period from August, 1999 to April, 2004. The ATIR subsequently decided the appeal in favour of the Company and directed the LTU to refund the aforesaid amount subject to verification that the customers of LPG had fully paid the amount of sales tax. Accordingly, the LTU has partially verified the payment of sales tax and has refunded an amount of Rs 8.499 million (2009: Rs 23.858 million) during the current year, which has been included in other operating income. The Company had also filed an appeal in the Sindh High Court (SHC). Pursuant to an amendment in the law, the case was transferred to the ATIR on the advice of SHC, which in its order dated February 23, 2010 declared the original show cause notice as "illegal and ab-initio void and not sustainable in the eyes of law". Accordingly, the Company is pursuing for refund of balance amount of Rs 57.617 million. 25.1.4. The Workers' Welfare Fund Ordinance (WWFO), 1971 is applicable on all the industrial establishments except for those establishments which are owned by the Government of Pakistan (GoP). The management, based on advice of its lawyer, is confident that since majority of the shareholding of the Company is held by the GoP, therefore, WWFO does not apply to the Company. Accordingly, the Company has not made the payments to Workers' Welfare Fund (WWF), effective from July 01, 2002. The Company had filed rectification application for refund of WWF paid for the years ended June 30, 1998 to June 30, 2002 on the above grounds, which were rejected by the income tax department. On the appeals filed by the Company against the tax department, the ATIR decided the issue against the Company. In view of the Order of the ATIR, the Company filed reference applications before the SHC. The SHC, vide its order dated December 19, 2008 had decided the reference applications in favour of the Company. To give effect to the SHC decision, ATIR vide order dated October 10, 2009 has directed the tax department to give effect to SHC order for the years 1998 to 2002. The taxation authorities have filed appeals before the Supreme Court of Pakistan (SCP) against the orders of the SHC. The Taxation Officer had issued amended assessment orders for tax years 2003 to 2007. The Company had filed appeals before the Commissioner Inland Revenue (Appeals) {CIR(A)} against the orders of Taxation Officer and obtained stay against the demand of WWF from the SHC. The CIR(A) vide Order dated July 17, 2008 had decided the appeals for the tax years 2003 to 2006 in favour of the Company on technical grounds. However, on the merits of the case, CIR(A) had decided the appeals against the Company. Accordingly, the Company and the tax authorities had filed appeals before the ATIR against the order of the CIR(A). ATIR has decided the case in favour of the Company vide its order dated October 28, 2009, against which the Tax Department has filed an appeal before SHC. In respect of tax year 2007, CIR(A) had upheld the decision of the Taxation Officer. The Company had filed appeal before the ATIR against the order of the CIR(A), which was decided against the Company. Accordingly, the Company had filed reference application before the SHC. The SHC vide its order dated February 03, 2009 had decided the appeal in favour of the Company. The Tax authorities have filed appeal before the SCP against the order of the SHC. During the current year, the tax department has amended the assessment orders for the tax years 2008 and 2009, and has raised the WWF demands for Rs 1,293 million. The Company has filed appeals before the CIR(A) against the amended assessment orders, which are pending for hearing. The Company had also filed appeals for the stay of demand with the SHC, which has been granted upto SHC level. The Company, as a matter of prudence, has been providing for WWF in the books of accounts. Accordingly, an amount of Rs 704.657 million (2009: Rs 856.106 million) has been provided. In case the matter is decided in favour of the Company, an amount of Rs 3,401.385 million will be credited in profit and loss account for that year. 25.1.5. The Company had revised the tax rates of certain producing fields in line with the provisions of PCAs and prevailing industry practices and filed its tax returns for the tax years 2006 to 2009 on the same basis. The Company had also revised its tax returns for the tax years 2003 to 2005 resulting in tax refundable amounting to Rs 383.146 million. The tax authorities have issued Assessment Orders for tax years 2003 to 2009, thereby, disputing the calculation of depletion allowance, allowability of provision for decommissioning cost and calculation of tax liability at lower tax rates of 50% for certain fields. The Company has filed appeals before the CIR(A) against the aforesaid orders which are pending for adjudication. The Company has obtained stay of demand from the SHC on lump sum payment of Rs 1,118 million. On the basis of the appeals filed with CIR(A) the Company has been claiming decommissioning cost against the taxable income, upto tax year 2009. However, the Finance Act 2010 has introduced an amendment in the Fifth Schedule to the Income Tax Ordinance, 2001, whereby, the decommissioning cost is an allowable expense from tax year 2010, over a period of 10 years or the remaining life of the field, whichever is less, starting from the year of commencement of commercial production. Accordingly, the Company has provided for the tax expense, relating to the decommissioning cost issue for the tax years 2003 to 2009, amounting to Rs 426 million during the current year. The Company, based on the advice of its legal counsel, is confident that it has good grounds to defend the appeals on the issues of depletion allowance and tax rates. The Company, as a matter of prudence, continues to provide tax liability at the higher tax rates in the books of accounts, however, no provision has been created in respect of tax liability for depletion allowance aggregating to Rs 1,512 million. In case the appeals are decided in favour of the Company, an amount of Rs 1,527 million will be credited in the profit and loss account for that year. However, if the appeals are decided against the Company, an amount of Rs 1,512 million will be charged in the profit and loss account for that year. 25.2. Commitments 25.2.1. Capital expenditure ===========================================================================================
June 30, June 30,
2010 2009
Rs '000 Rs '000
===========================================================================================
Owned assets 1,984,406 419,687
Share in joint ventures 6,199,149 8,372,258
Operating leases / Ijarah contracts 69,203 -
8,252,758 8,791,945
===========================================================================================Commitments for rentals under operating leases / ljarah contracts in respect of vehicles are as follows:========================================================
June 30,
2010
Rs '000
========================================================
Year ending June 30,
2011 19,286
2012 19,286
2013 13,785
2014 8,931
2015 7,915
69,203
========================================================25.2.2. Exploration expenditureThe Company's share of net exploration activities in respect of Block 2966-1 (Nushki), Block 2766-1 (Khuzdar), Block 2568-13 (Hala), Block 2866-2 (Kalat), Block 2969-8 (Barkhan), Block 2971-5 (Bahawalpur East), Block 3270-7 (Zindan), Block 2467-12(Jungshahi), Block 3170-6 (Dera Ismail Khan), Block 2468-12 (Kotri), Block 2568-21 (Kotri North), Block 3371-15 (Dhok Sultan), Block 2568-18 (Gambat South), Block 2763-3 (Kharan), Block 2764-4 (Kharan East), Block 2763-4 (Kharan West), Block 2468-10 (Sirani), Block 2667-11 (Zamzama South), Block 2668-9 (Naushahro Firoz), Block 3370-3 (Tal), Block 2668-4 (Gambat), Block 2668-5 (Southwest Miano-II), Block 3370-10 (Nashpa), Block 2669-3 (Latif), Block 2667-7 (Kirthar), Block 2366-4 (Offshore Indus 'M'), Block 2366-5 (Offshore Indus 'N'), Block 2366-7 (Offshore Indus 'C'), Block 3070-13 (Baska), Block 2568-20 (Sukhpur), Block-29 (Republic of Yemen), provision for new exploration areas and for international exploration phased for the year ending June 30, 2011 amounts to Rs 4,828 million (2010: Rs 1,799 million). 26. SALES - net (including internal consumption) ===========================================================================================
Year ended Year ended
June 30, 2010 June 30, 2009
Rs '000 Rs '000
===========================================================================================
Sales 77,210,544 77,798,368
Federal excise duty (1,223,810) (1,262,372)
Sales tax (9,273,749) (9,830,994)
Gas development surcharge (6,751,369) (5,124,930)
(17,248,928) (16,218,296)
59,961,616 61,580,072
Product wise break-up of sales is as follows:
Natural gas sales 65,312,167 69,805,448
Federal excise duty (1,212,868) (1,252,053)
Sales tax (9,044,198) (9,669,284)
Gas development surcharge (6,751,369) (5,124,930)
(17,008,435) (16,046,267)
48,303,732 53,759,181
Gas supplied to Sui villages - note 27.5 134,526 148,090
Federal excise duty (4,364) (4,105)
Sales tax (18,555) (20,426)
(22,919) (24,531)
111,607 123,559
Internal consumption of gas - note 26.1 144,486 166,381
Federal excise duty (4,695) (4,580)
Sales tax (19,929) (22,949)
(24,624) (27,529)
119,862 138,852
Condensate sales 3,303,855 1,377,424
Sales tax (361) -
3,303,494 1,377,424
NGL (condensate) sales 1,852,697 1,697,774
Crude oil sales 5,080,192 3,745,321
LPG sales 1,382,621 857,930
Federal excise duty (1,883) (1,634)
Sales tax (190,706) (118,335)
(192,589) (119,969)
1,190,032 737,961
59,961,616 61,580,072
===========================================================================================26.1. Internal consumption of gas comprises of the following:===========================================================================================
Year ended Year ended
June 30, 2010 June 30, 2009
Rs '000 Rs '000
===========================================================================================
Industrial and domestic use 100,332 113,951
Gas used for electricity generation at Sui 44,154 52,430
144,486 166,381
===========================================================================================26.2. The Company has not allowed any sales discount to the customers during the years ended June 30, 2010 and 2009.27. FIELD EXPENDITURES ===========================================================================================
Year ended Year ended
June 30, 2010 June 30, 2009
Rs '000 Rs '000
===========================================================================================
Development and drilling - note 27.1 4,222,347 2,024,175
Exploration 3,966,500 3,249,394
Depreciation - note 4.1 1,649,461 1,262,391
Amortisation of intangible 65,038 56,388
assets - note 5.1
Amortisation of decommissioning 391,703 209,859
cost - note 4.1
Amortisation of prospecting
and development
expenditure - note 4.1 1,396,153 836,415
Salaries, wages, welfare and
other benefits - note 27.2 3,868,609 3,117,151
Employees' medical 239,721 220,051
benefits - note 27.3
Man power development 37,058 22,177
Travelling and conveyance 411,047 345,420
Communication 29,906 23,414
Stores and spares consumed 879,829 748,188
Fuel and power 203,774 222,168
Rent, rates and taxes 62,797 57,125
Insurance 157,703 142,690
Repairs and maintenance 293,560 234,074
Professional services 31,631 40,943
Auditors' remuneration - note 27.4 3,801 3,308
Free supply of gas to
Sui villages - note 27.5 134,526 148,090
Donations - note 27.6 68,327 92,539
Social welfare / community development 46,957 56,215
Other expenses 133,258 73,642
18,295,706 13,185,817
Recoveries (22,700) (24,523)
18,273,006 13,161,294
===========================================================================================27.1. This includes cost of Rs 1,478.106 million incurred in respect of fire incident at well-38 of Sui Gas Field.27.2. This includes expenditure in respect of provident fund, pension fund, gratuity fund and leave preparatory to retirement amounting to Rs 89.585 million, Rs 328.658 million, Rs 153.391 million and Rs 90.374 million, respectively (2009: Rs 80.024 million, Rs 202.635 million, Rs 30.118 million and Rs 54.855 million, respectively). 27.3. This includes expenditure relating to post retirement medical benefits amounting to Rs 112.212 million (2009: Rs 110.318 million). 27.4. Auditors' remuneration is as under: ===========================================================================================
Year ended Year ended
June 30, 2010 June 30, 2009
Rs '000 Rs '000
===========================================================================================
Audit fee 1,800 1,500
Limited review, special
certifications and
various advisory services 1,828 1,596
Out of pocket expenses 173 212
3,801 3,308
===========================================================================================27.5. A corresponding amount relating to free supply of gas to Sui villages is included as part of sales in note 26.27.6. Donations include the payments to following institutions in which the directors are interested: ================================================================================================
Name of Nature of Name and Year ended Year ended
Director(s) interest in address of Donee June 30, 2010 June 30, 2009
Donee Rs '000 Rs '000
================================================================================================
Mrs. Roshan Chairperson SOS Children's 2,000 12,803
Khursheed Village of
Bharucha Balochistan.
Mrs. Roshan Chairperson Hunnar, Small - 5,000
Khursheed Industries Estate,
Bharucha Sirki Road, Quetta.
Mr. Khalid Rahman Member council ICAP, Clifton, Karachi. 500 -
Mr. Khalid Rahman Member, Lahore University of - 8,700
Board of Management Sciences
Governors LUMS Sector U,
DHA, Lahore Cantt.
2,500 26,503
================================================================================================28. STAFF RETIREMENT BENEFITS28.1. Funded post retirement pension and gratuity schemes As mentioned in note 2.16 to the financial statements, the Company operates approved funded pension and gratuity schemes for all its executive and non-executive permanent employees. 28.1.1. Fair value of plan assets and the present value of obligations The fair value of plan assets and the present value of defined benefit obligations of the pension and gratuity schemes at the valuation dates are as follows: ==========================================================================================================================
Executives Non-Executives
Pension Gratuity Pension Gratuity June 30, Total
June 30, 2010 2009
Rs '000
==========================================================================================================================
Present value of defined benefit
obligations - note 28.1.5 2,801,785 396,220 737,566 380,427 4,315,998 4,173,197
Fair value of plan assets- note 28.1.4 (1,884,135) (375,035) (658,693) (320,013) (3,237,876) (3,132,376)
Deficit 917,650 21,185 78,873 60,414 1,078,122 1,040,821
Unrecognised actuarial loss (917,650) (19,469) (78,873) (60,414) (1,076,406) (1,040,821)
Unrecognised past service cost - (1,716) - - (1,716) -
Asset / liability recognised in the
balance sheet - - - - - -
==========================================================================================================================28.1.2. Movement in amounts receivable from defined benefit plansMovement in amounts receivable from staff retirement benefit funds during the year are as follows: ===============================================================================================================
Executives Non-Executives Total
Pension Gratuity Pension Gratuity June 30,
June 30, 2010 2009
Rs '000
===============================================================================================================
Balances as on July 01 - - - - - -
Charge for the year - note 28.1.3 269,930 121,866 58,728 31,525 482,049 232,753
Payments during the year (269,930) (121,866) (58,728) (31,525) (482,049) (232,753)
Balances as on June 30 - - - - - -
===============================================================================================================28.1.3. Amounts recognised in the profit and loss accountAmounts charged to the profit and loss account during the year in respect of pension and gratuity schemes are as follows:. ===========================================================================================================================
Executives Non-Executives
Pension Gratuity Pension Gratuity June 30, Total
June 30, 2010 2009
Rs '000
===========================================================================================================================
Current service cost 152,876 24,308 31,097 14,462 222,743 168,871
Interest cost 284,036 42,357 99,974 41,095 467,462 392,893
Expected return on plan assets (210,140) (34,805) (80,409) (29,862) (355,216) (344,555)
Recognition of actuarial loss 43,158 - 8,066 5,830 57,054 15,544
Amortisation of unrecognised
past service cost - 858 - - 858 -
Recognition of past service cost - 89,148 - - 89,148 -
269,930 121,866 58,728 31,525 482,049 232,753
Actual return on plan assets (201,316) (33,917) (72,686) (31,564) (339,483) (352,549)
===========================================================================================================================28.1.4. Changes in fair value of plan assets=============================================================================================================================================
Executives Non-Executives
Pension Gratuity Pension Gratuity Total June 30,
June 30, 2010 2009
Rs '000
=============================================================================================================================================
Fair value of plan assets at
beginning of the year 1,825,403 272,354 748,917 285,702 3,132,376 2,876,956
Expected return on plan assets 210,140 34,805 80,409 29,862 355,216 344,555
Contributions by the Company 269,930 121,866 58,728 31,525 482,049 232,753
Benefits paid (414,779) (52,585) (201,321) (17,053) (685,738) (329,665)
Actuarial (loss)/gain (6,559) (1,405) (28,040) (10,023) (46,027) 7,777
Fair value of plan assets at end
of the year 1,884,135 375,035 658,693 320,013 3,237,876 3,132,376
=============================================================================================================================================28.1.5. Changes in present value of pension and gratuity obligations=============================================================================================================================================
Executives Non-Executives
Pension Gratuity Pension Gratuity June 30, Total
June 30, 2010 2009
Rs '000
=============================================================================================================================================
Present value of obligations at
beginning of the year 2,555,714 298,069 930,713 388,701 4,173,197 3,310,769
Current service cost 152,876 24,308 31,097 14,462 222,743 168,871
Interest cost 284,036 42,357. 99,974 41,095 467,462 392,893
Benefits paid (414,779) (52,585) (201,321) (17,053) (685,738) (329,665)
Actuarial loss /(gain) 223,938 (7,651) (122,897) (46,778) 46,612 630,329
Past service cost - 91,722 - - 91,722 -
Present value of obligations
At end of the year 2,801,785 396,220 737,566 380,427 4,315,998 4,173,197
=============================================================================================================================================28.1.6. Break up of plan assetsThe major categories of plan assets as a percentage of total plan assets of pension and gratuity schemes are as follows: ================================================================================================================
Rate of return Executives Non-Executives Executives Non-Executives
% Rs '000 % Rs '000 % Rs 000 % Rs 000
June 30, June 30,
2010 2009
================================================================================================================
Pension Fund
Government securities 6.22-14.47 1,717,437 91 589,408 89 828,535 46 328,298
Shares 9,432 - 1,441 - 5,235 - 800
TFCs 8.45-13.14 104,462 6 38,532 6 114,240 6 44,973
Cash and bank balances 5.00-9.00 52,804 3 29,312 5 877,393 48 374,846
Total 1,884,135 100 658,693 100 1,825,403 100 748,917
Gratuity Fund
Government securities 6.22-14.47 337,642 90 288,269 90 202,763 75 208,620
Shares 1,441 - 2,102 1 800 - 1,166
TFCs 8.45-13.14 25,598 7 20,718 6 26,614 10 27,203
Cash and bank balances 5.00-9.00 10,354 3 8,924 3 42,177 15 48,713
Total 375,035 100 320,013 100 272,354 100 285,702
================================================================================================================28.1.7. Comparison of present value of obligations, fair value of plan assets and surplus/ deficit on pension and gratuity schemes for five years=======================================================================================================
2010 2009 2008 2007 2006
=======================================================================================================
Executive Pension Fund
Present value of defined benefit
Obligations 2,801,785 2,555,714 2,065,129 1,746,009 1,514,528
Fair value of plan assets (1,884,135) 1,825,403) (1,687,631) (1,498,380) (1,338,899)
Deficit 917,650 730,311 377,498 247,629 175,629
Loss on experience adjustments
on obligations (223,938) (328,034) (170,637) (132,422) (171,124)
(Loss) / gain on experience
adjustments on plan assets (6,559) (40,323) 34,129 58,224 54,458
Executive Gratuity Fund
Present value of defined benefit
obligations 396,220 298,069 273,058 259,266 248,535
Fair value of plan assets (375,035) (272,354) (274,497) (257,721) (241,185)
Deficit/(surplus) 21,185 25,715 (1,439) 1,545 7,350
Gain / (loss) on experience
adjustments on obligations 7,651 (20,880) (4,154) (2,292) (10,982)
(Loss)/ gain on experience
adjustments on plan assets (1,405) (6,274) 7,138 7,548 6,242
Non-Executive Pension Fund
Present value of defined benefit
obligations 737,566 930,713 685,216 637,531 527,622
Fair value of plan assets (658,693) (748,917) (655,468) (590,078) (520,074)
Deficit/(surplus) 78,873 181,796 29,748 47,453 7,548
Gain / (loss) on experience
Adjustments on obligations 122,897 (194,894) (865) (78,143) (37,132)
(Loss) / gain on experience
adjustments on plan assets (28,040) 42,846 26,702 30,006 24,501
Non-Executive Gratuity Fund
Present value of defined benefit
obligations 380,427 388,701 287,366 288,507 229,309
Fair value of plan assets (320,013) (285,702) (259,360) (233,296) (224,429)
Deficit 60,414 102,999 28,006 55,211 4,880
Gain / (loss) on experience
adjustments on obligations 46,778 (86,521) 23,367 (54,691) 22,160
(Loss) / gain on experience
adjustments on plan assets (10,023) 11,528 1,442 4,360 3,651
=======================================================================================================28.2. Unfunded post retirement medical benefits28.2.1. The Company provides free medical facilities to its executive and non-executive retired employees. The latest actuarial valuation of liability for post retirement medical benefits cost was carried out as at June 30, 2010, results of which are as follows: ===========================================================================================
Year ended Year ended
June 30, 2010 June 30, 2009
Rs '000 Rs '000
===========================================================================================
Present value of defined
benefit obligations
note 28.2.4 843,535 753,865
Unrecognised actuarial loss (80,269) (77,841)
Liability recognised in the
balance sheet - note 22 763,266 676,024
===========================================================================================28.2.2. Movement in the liability recognised in the balance sheet is as follows:===========================================================================================
Year ended Year ended
June 30, 2010 June 30, 2009
Rs '000 Rs '000
===========================================================================================
Balance as on July 01 676,024 586,941
Charge for the year - note 28.2.3 112,212 110,318
Payments during the year (24,970) (21,235)
Balance as on June 30 763,266 676,024
===========================================================================================28.2.3. Amounts charged to the profit and loss account during the year for the above benefits are as follows:===========================================================================================
Year ended Year ended
June 30, 2010 June 30, 2009
Rs '000 Rs '000
===========================================================================================
Current service cost 27,150 25,735
Interest cost 82,769 82,038
Recognition of actuarial loss 2,293 2,545
112,212 110,318
===========================================================================================28.2.4. Changes in present value of post retirement medical obligations:===========================================================================================
Year ended Year ended
June 30, 2010 June 30, 2009
Rs '000 Rs '000
===========================================================================================
Opening balance 753,865 682,821
Current service cost 27,150 25,735
Interest cost 82,769 82,038
Benefits paid (24,970) (21,235)
Actuarial loss/(gain) 4,721 (15,494)
Closing balance 843,535 753,865
===========================================================================================28.2.5. A one percent change in the medical cost trend rate would have following effect:===========================================================================================
1% increase 1% decrease
Rs '000 Rs '000
===========================================================================================
Present value of medical obligation 99,301 (130,571)
Current service cost and interest cost 17,686 (24,401)
===========================================================================================28.3. Leave preparatory to retirementMovement in liability recognised in the balance sheet is as follows: ===========================================================================================
Year ended Year ended
June 30, 2010 June 30, 2009
Rs '000 Rs '000
===========================================================================================
Balance as on July 01 314,661 272,838
Charge for the year 90,374 54,855
405,035 327,693
Payments during the year (33,272) (13,032)
Balance as on June 30- note 22 371,763 314,661
===========================================================================================28.4. Principal actuarial assumptionsThe significant assumptions used in the actuarial valuations are as follows: ===========================================================================================
Per annum
June 30, June 30,
2010 2009
% %
===========================================================================================
discount rate 12.75 11.00
expected rate of return on plan assets - 12.75 11.00
expected rate of increase in salaries 12.75 11.00
expected rate of increase in pension 7.75 6.00
expected rate of escalation in medical cost 8.75 7.00
===========================================================================================29. OTHER OPERATING INCOME===========================================================================================
Year ended Year ended
June 30, 2010 June 30, 2009
Rs '000 Rs '000
===========================================================================================
Income on loans and bank deposits 272,910 210,958
Income on term deposits 1,396,815 2,681,110
Income on long-term held
-to-maturity investments 189,195 194,494
Income from investment in treasury bills 490,928 -
Profit on musharika certificates 1,512 4,488
Gain on re-measurement/
disposal of investments
at fair value through profit or loss (net) 60,330 22,156
Rental income on assets 1,430 1,881
Profit on sale of property,
plant and equipment (net) 50,904 36,044
Profit on sale of stores and spares (net) - 38,707
Foreign exchange gain 40,343 547,694
Income from joint venture
partners under farm-
out agreement - 123,916
Share of profit on LPG sales 39,645 186,987
Refund of sales tax paid
under amnesty scheme -
note 25.1.3 8,499 23,858
Reversal of provision for
obsolete / slow moving
stores - 4,735
Others 26,326 3,588
2,578,837 4,080,616
===========================================================================================30. FINANCE COST===========================================================================================
Year ended Year ended
June 30, 2010 June 30, 2009
Rs '000 Rs '000
===========================================================================================
Interest on WPPF - note 24.3 135 708
Financial charges for liabilities against
assets subject to finance leases 57,910 19,236
Unwinding of discount
on decommissioning
obligation - note 20 96,787 73,684
154,832 93,628
===========================================================================================31. OTHER OPERATING EXPENSES===========================================================================================
Year ended Year ended
June 30, 2010 June 30, 2009
Rs '000 Rs '000
===========================================================================================
Workers' profits participation fund - note 24.3 85,228 2,247,164
Workers' welfare fund
Current year 704,657 855,292
Prior year
- 814
704,657 856,106
Loss on sale of stores and spares (net) 1,191 -
Provision for obsolete/slow moving stores -
note 10.1 10,879 -
2,567,955 3,103,270
===========================================================================================32. TAXATIONProvision for taxation for the years ended June 30, 2010 and 2009 has been calculated on the basis of tax rates of 55%, 52.5% and 40% for onshore agreement areas falling under the purview of the Fifth Schedule to the Income Tax Ordinance, 2001 and for the non-agreement areas on the basis of tax rate of 35%. ===========================================================================================
Year ended Year ended
June 30, 2010 June 30, 2009
Rs '000 Rs '000
===========================================================================================
Current
for the year 9,727,779 14,082,203
for prior years (net) 399,539 24,020
10,127,318 14,106,223
Deferred
for the year 1,497,025 89,341
for prior years (416,654) 10,065
1,080,371 99,406
11,207,689 14,205,629
===========================================================================================32.1. Relationship between accounting profit and taxation===========================================================================================
Year ended Year ended
June 30, 2010 June 30, 2009
Rs '000 Rs '000
===========================================================================================
Accounting profit for the
year before taxation 34,528,207 41,908,420
Tax at applicable rate of
45.22% (2009: 43.12%) 15,613,655 18,070,856
Tax effect of amounts that
are not deductible for
tax purposes 96,653 245,940
Tax effect of depletion
allowance and royalty
allowed for tax purposes (4,485,504) (4,145,252)
Net effect of deferred tax
relating to prior years
recognised in current year (416,654) 10,065
Tax charge relating to prior years 399,539 24,020
11,207,689 14,205,629
===========================================================================================33. INTERESTS IN JOINT VENTURESThe joint venture areas in which the Company has working interest are as follows: =====================================================================
Percentage
=====================================================================
of the
Company's working
Name of joint venture Operator interest as at
June 30, 2010
=====================================================================
Producing fields
=====================================================================
Adhi PPL 39.00
Mazarani PPL 87.50
Hala EWT Phase PPL 65.00
Kandhkot East (Chachar) PPL 75.00
Qadirpur OGDCL 7.00
Miano OMV 15.16
Sawan OMV 26.18
Hasan, Sadiq &
Khanpur - D&P (Block-22) PEL 35.53
Manzalai D&P (Tal Block) MOL 27.76
Makori EWT Phase (Tal Block) MOL 27.76
Mela EWT Phase (Nashpa Block) OGDCL 26.05
Nashpa EWT Phase (Nashpa Block) OGDCL 26.05
Tajjal EWT Phase (Gambat Block) OMV 23.68
Latif EWT Phase (Latif Block) OMV 33.30
Exploration and development
blocks (within Pakistan)
Block 2568 - 13 (Hala) PPL 65.00
Block 2971 - 5 (Bahawalpur East) PPL 49.00
Block 2966 - 1 (Nushki) PPL 65.00
Block 2766 - 1 (Khuzdar) PPL 65.00
Block 2866 - 2 (Kalat) PPL 35.00
Block 2969 - 8 (Barkhan) PPL 35.00
Block 2763 - 3 (Kharan) PPL 100.00
Block 2764 - 4 (Kharan-East) PPL 100.00
BIock2763 - 4 (Kharan-West) PPL 100.00
Block 3371 - 15 (DhokSultan) PPL 100.00
BIock2467 - 12 (Jungshahi) PPL 100.00
Block 2568 - 18 (Gambat South) PPL 100.00
Block 3170 - 6 (Dera Ismail Khan) PPL 100.00
Block 2468 - 12 (Kotri) PPL 100.00
Block 2568 - 21 (Kotri North) PPL 100.00
Block 2468 - 10 (Sirani) PPL 100.00
Block 2668 - 9 (Naushahro Firoz) PPL 100.00
Block 2667 - 11 (Zamzama South) PPL 100.00
Block 3270 - 7 (Zindan) PPL 95.00
Block 2768 - 3 (Block-22) PEL 45.00
Block 2668 - 4 (Gambat) OMV 30.00
Block 2669 - 3 (Latif) OMV 33.30
Block 3370 - 10 (Nashpa) OGDCL 30.00
Block 2667 - 7 (Kirthar) POGC 30.00
Block 3070 - 13 (Baska) Zhen Hua 49.00
Block 2366 - 7
(Eastern offshore Indus 'C') Eni 40.00
Block 2366 - 4
(Eastern offshore lndus 'M') Eni 30.00
Block 2366 - 5
(Eastern offshore lndus 'N') Eni 30.00
Block 3370 - 3 (Tal) MOL 30.00
Block 2668 - 5 (South West Miano-Il) OMV 33.30
Block 2568 - 20 (Sukhpur) Eni 30.00
Outside Pakistan
Block - 29 (Yemen) OMV 50.00
=====================================================================34. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIESThe Company's activities expose it to a variety of financial risks, including the effect of market risks relating to interest rates, foreign currency and commodity price, credit risk and liquidity risk associated with various financial assets and liabilities. The carrying values of financial assets and liabilities approximate to their fair values except for held-to-maturity investments which are stated at amortised cost. a) Market risks Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in interest rate, foreign currency, commodity price and equity price that will affect the Company's income or the value of its holdings of financial instruments. Interest rate risk management The Company's income and operating cash flows are substantially independent of changes in market interest rates. The Company has no significant long term interest bearing financial assets and liabilities whose fair value or future cash flows will fluctuate because of changes in market interest rates. Fair value hierarchy Financial instruments carried at fair value are categorised as follows: Level 1: quoted market prices Level 2: Valuation techniques (market observable) Level 3: Valuation techniques (non-market observable) The Company held the following financial instruments measured at fair value: ==========================================================================================
Total Level 1 Level 2 Level 3
Financial assets (Rupees '000)
==========================================================================================
June 30, 2010
Investments at fair value through
profit or loss 1,483,679 1,483,679 - -
1,483,679 1,483,679 - -
June 30, 2009
Investments at fair value through
profit or loss 198,906 198,906 - -
198,906 198,906 - -
========================================================================================== Foreign currency risk managementFinancial assets include Rs 4,000.384 million (2009: Rs 3,487.276 million) and financial liabilities include Rs 1,439.426 million (2009: Rs 2,245.238 million) which were subject to foreign currency risk. The US dollar deposits also serve as a synthetic hedge against the Company's exposure to foreign currency risk resulting from outstanding payments for imports. A one rupee change in the exchange rate of foreign currencies would have the following effect: ===========================================================================================
One Rupee One Rupee
Increase Decrease
Rs '000 Rs '000
===========================================================================================
Foreign currency financial assets 39,466 (39,466)
Foreign currency financial liabilities 17,447 (17,447)
=========================================================================================== Commodity price risk managementThe Company is exposed to commodity price risk on sale of petroleum products, as the selling prices are determined in relation to the international prices of petroleum products which can adversely affect the profitability of the Company. However, the Company has limited exposure to the price risk, as the prices of the Company's major product i.e. natural gas are determined under various Gas Price Agreements signed with the GoP, wherein, the Company is only allowed notional increment in gas price if the international crude oil price is above US$ 36 per barrel. The Company is of the view that the price risk is within acceptable limits, therefore, the Company has not entered in any commodity derivative transactions. b) Credit risk management (i) Credit risk represents the accounting loss that would be recognised at the reporting date if counter parties failed completely to perform as contracted. The Company's credit risk is primarily attributable to its trade debts, investments in TFCs and mutual funds and balances at banks. The credit risk on investments and liquid funds is limited because the counter parties are financial institutions with reasonably high credit ratings. However, the Company monitors its investments in TFCs and mutual funds and placements with banks in order to control credit risk. The Company has maintained lines and limits with banks for effective monitoring of credit risk. The Company's major portion of sales is to WAPDA, SNGPL and SSGCL. However, it does not consider itself to be exposed to any substantial credit risk as these companies are state controlled entities. (ii) Credit quality of financial assets The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings or to historical information about counterparty default rates: ===========================================================================================
June 30, June 30,
===========================================================================================
2010 2009
Rs '000 Rs '000
===========================================================================================
Long term investments
AAA 1,564,888 1,549,748
AA 149,910 74,910
1,714,798 1,624,658
Musharika certificates
AA - 50,000
Trade debts
Customers with no defaults
in the past one year 356,786 42,506
Customers with some
defaults in past one year
which have been fully recovered 739,697 25,257
Customers with defaults
in past one year
which have not yet been recovered 11,900,529 12,062,456
12,997,012 12,130,219
Investments at fair value
through profit or loss
AA 1,407,900 -
A 19,581 98,003
Not rated 56,198 100,903
1,483,679 198,906
Cash at bank and short-term deposits
AAA 12,506,310 1,276,764
AA 15,138,952 13,064,162
A 475 454
27,645,737 14,341,380
=========================================================================================== c) Capital risk managementThe Company's objective when managing capital is to safeguard the Company's ability to remain as a going concern and continue to provide returns to shareholders and benefits to other stakeholders. d) Liquidity risk management Liquidity risk reflects an enterprise's inability in raising funds to meet commitments. The Company follows effective cash management and planning policy to ensure availability of funds and to take appropriate measures for new requirements. ==================================================================================================================
Year ended June 30, 2010 On Less than 3 to 12 1 to 5 > 5 Total
Demand 3 months months years years
Rs in '000
==================================================================================================================
Liability against assets subject to
finance lease - 115,475 1,095,253 87,881 - 1,298,609
Trade and other payables 115,017 2,713,854 895,994 - - 3,724,865
115,017 2,829,329 1,991,247 87,881 - 5,023,474
Year ended June 30, 2009 On Less than 3 to 12 1 to 5 > 5 Total
Demand 3 months months years years
Rs in '000
Liability against assets subject to
finance lease - 18,107 27,838 100,106 - 146,051
Trade and other payables 138,649 2,194,660 635,790 - - 2,969,099
138,649 2,212,767 663,628 100,106 - 3,115,150
==================================================================================================================35. CASH AND CASH EQUIVALENTS===========================================================================================
June 30, June 30,
2010 2009
Rs '000 Rs '000
===========================================================================================
Cash and bank balances - note 17 1,874,393 1,384,353
Short-term highly liquid
investments - note 16 25,812,161 12,967,800
27,686,554 14,352,153
===========================================================================================36. REMUNERATION OF CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVES======================================================================================================
Chief Executive Executives
Year ended Year ended Year ended Year ended
June 30, 2010 June 30, 2009 June 30, 2010 June 30, 2009
Rs '000 Rs '000 Rs '000 Rs '000
======================================================================================================
Managerial remuneration 15,761 14,058 1,836,014 1,401,163
Housing, conveyance and utilities - 223 13,081 9,299
Retirement benefits 4,490 2,947 471,769 245,139
Bonus 1,313 68 141,574 93,534
Medical and leave passage 103 331 107,165 269,892
21,667 17,627 2,569,603 2,019,027
Number, including those who worked
for part of the year 1 2 903 794
======================================================================================================36.1. Certain executives including the Chief Executive of the Company are also provided with free use of Company's cars and club subscriptions in accordance with their entitlements.36.2. Aggregate amount charged in these financial statements in respect of fees paid to eight directors was Rs 0.171 million (2009: Rs 0.036 million for eleven directors). 37. EARNINGS PER SHARE 37.1. Basic earnings per share ===========================================================================================
Year ended Year ended
June 30, 2010 June 30, 2009
===========================================================================================
Profit after taxation (Rs '000) 23,320,518 27,702,791
Dividend on convertible
preference shares (Rs '000) (42) (43)
Profit attributable to ordinary
shareholders (Rs '000) 23,320,476 27,702,748
(Restated)
Weighted average number of
ordinary shares in issue 995,815,958 995,815,708
Basic earnings per share (Rs) 23.42 27.82
===========================================================================================Profit after taxation has been adjusted for dividend to a maximum rate of thirty percent per annum of the value of the total number of convertible preference shares held.37.2. Diluted earnings per share ===========================================================================================
Year ended Year ended
June 30, 2010 June 30, 2009
===========================================================================================
Profit after taxation (Rs '000) 23,320,518 27,702,791
Weighted average number of
ordinary shares in issue 995,815,958 995,815,708
Adjustment for conversion of
convertible preference shares 13,850 14,100
Weighted average number
of ordinary shares for (Restated)
diluted earnings per share 995,829,808 995,829,808
Diluted earnings per share (Rs) 23.42 27.82
===========================================================================================37.3. During the year the Company has issued 20% bonus shares (i.e. two shares for every ten ordinary shares held), which has resulted in restatement of basic and diluted earnings per share for the year ended June 30, 2009.38. FINAL DIVIDEND The Board of Directors in their meeting held on August 06, 2010 have recommended 20% bonus shares (199,163,193 shares) i.e. two shares for every ten ordinary shares held (2009: 20% bonus shares (165,969,285 shares) i.e. two shares for every ten ordinary shares held) and final cash dividend @ 50% amounting to Rs 4,979.080 million (2009: @ 30% amounting to Rs 2,489.539 million) on the existing paid-up value of the ordinary share capital for approval of the shareholders in the Annual General Meeting to be held on September 29, 2010. 39. TRANSACTIONS WITH RELATED PARTIES 39.1. Transactions with related parties are as follows: ===========================================================================================
Year ended Year ended
June 30, 2010 June 30, 2009
Rs '000 Rs '000
===========================================================================================
Sales of gas / condensate
to State controlled
entities (including
Government Levies):
WAPDA 12,716,291 11,539,416
SSGCL 10,451,213 12,784,407
SNGPL 42,144,663 45,481,624
PRL 102,939 55,361
65,415,106 69,860,808
Trade debts and other
receivables from State
controlled entities: See note
Transactions with Bolan 11 & 15
Mining Enterprises:
Pur�hase of goods 356 2,137
Reimbursement of employee
cost on secondment 8,508 7,169
Receipt of profit - 25,000
Transactions with Joint Ventures:
Income from Joint
Venture Partners under
farm-out agreements - 123,916
Payments of cash calls 11,059,975 12,432,462
to Joint Ventures
Expenditures incurred
by the Joint Ventures 12,086,333 12,843,589
Amounts receivable
from / (payable to) Joint
Venture Partners See note
Income from rental of , 13 & 24.2
assets to Joint Ventures 1,430 1,881
Other related parties:
Payment of dividend to GoP 4,496,840 6,505,844
Dividend paid to Trust 519,947 -
under BESOS
Transactions with retirement See note
benefit funds 27.2 & 28
Remuneration to key
management personnel See note 36
Payment of rental to
Pakistan Industrial
Development Corporation 33,763 33,142
Payment to National Insurance
Company Limited 294,269 281,408
Payment to Pakistan State
Oil Company Limited 129,135 58,748
===========================================================================================39.2. Gas sales are made to various State controlled utility organisations, at prices notified by the GoP. Transactions with Bolan Mining Enterprises for purchase of goods are conducted at prices determined by reference to comparable goods sold in an economically comparable market to a buyer unrelated to the seller. Transactions with other parties are carried at fair value.40. INFORMATION ABOUT OPERATING SEGMENTS For management purposes, the activities of the Company are organised into one operating segment i.e. exploration, development and production of oil and gas. The company operates in the said reportable operating segment based on the nature of the products, risks and returns, organisational and management structure and internal financial reporting systems. Accordingly, the figures reported in these financial statements relate to the Company's only reportable segment. The operating interests of the Company are confined to Pakistan in terms of production areas and customers. Accordingly, the figures reported in these financial statements relate to the Company's only reportable operating segment relating to Pakistan. Following are the details of customers with whom the revenue from sales transactions amount to 10% or more of the Company's overall revenue related to exploration, development and production of oil and gas. ===========================================================================================
Year ended Year ended
June 30, 2010 June 30, 2009
Rs '000 Rs '000
===========================================================================================
WAPDA 12,716,291 11,539,416
SSGCL 10,451,213 12,784,407
SNGPL 42,144,663 45,481,624
ARL 9,266,664 6,605,237
74,578,831 76,410,684
===========================================================================================41. DATE OF AUTHORISATION FOR ISSUEThese financial statements were authorised for issue on August 06, 2010 by the Board of Directors of the Company. 42. GENERAL 42.1. Number of employees Number of permanent employees as at June 30, 2010 was 2,735 (June 30, 2009: 2,667). 42.2. Capacity and production ===========================================================================================
Installed Actual
Product Unit Capacity production for
(PPL's share) the year
(PPL's share)
===========================================================================================
Natural gas MMCF Not relevant 356,682
Crude oil BBL Not relevant 949,735
NGL/Condensate BBL Not relevant 875,903
LPG M. Ton 25,041 23,047
===========================================================================================42.3. Corresponding figuresCorresponding figures have been reclassified for the purpose of better presentation and comparison. Changes made during the year are as follows: Note Reclassification from the caption Note Reclassification to the caption Amount ========================================================================== Note Reclassification from Note Reclassification to the Amount the caption component caption component Rs '000 ========================================================================== 28 Field expenditure 27 Field expenditure Employees medical Manpower 22,177 and welfare development Employees medical Salaries, wages, welfare and and welfare other benefits 161,559 Cash Flow Statement - Cash Flow Statement Redemption / - Long-term deposit (615,000) (purchases) of long - term investments (net) ==========================================================================42.4. Figures have been rounded off to the nearest thousands unless otherwise stated. |