report for the quarter ended march 31, 2009

Pakistan State Oil Co. Ltd.PSO House, Khayaban-e-Iqbal, Clifton

Karachi-75600, Pakistan.Tel: (92-21) 111-111-PSO (776) Fax: (92-21) 920-3721

Website: www.psopk.com

Report for the quarterended March 31, 2009

As the largest oil company in Pakistan, the role of PSO in thenation’s economy extends well beyond our services as Pakistan’sleading fuel retailer.

While our market leadership in terms of retail fuel sales is wellrecognized, our services extend to the agriculture, aviation,railway, power generation, transport and industrial consumersamongst others. Our extensive distribution network, coupledwith our oil storage capabilities, allow us to excel in all areasof operations and delivering optimum performance. With theresponsibility to the national economy comes the responsibilityto the people of Pakistan. Our human resource policies allowfor extensive training and development of those associatedwith PSO while our health and safety systems ensure totalsafety and security in all areas of operations. In addition tothis, our services as a socially responsible organization benefitour under-privileged and needy countrymen.

The many Faces of PSO are seldom seen but are always atwork, ensuring that the wheels of progress keep turning.

Faces of PSO

Corporate Information

Board of Management

Sardar Muhammad Yasin MalikChairman BOM

Irfan K. QureshiManaging Director

Mr. Muhammad Ejaz ChaudhryMember

Mr. Mahmood AkhtarMember Mr. Iskander Mohammed KhanMember

Mr. Istaqbal MehdiMember Mr. Arshad SaidMember Mr. Haji Amin PardessiMember

Mr. Muhammad Yousaf Qamar Hussain SiddiquiMember

Company SecretaryAmjad Parvez Janjua

AuditorsA.F.Ferguson & Co.KPMG Taseer Hadi & Co.

SolicitorsOrr Dignam & Co.

BankersAllied Bank LimitedAskari Bank LimitedBank Al-Falah LimitedBank Al-Habib LimitedCitibank N.ADeutsche Bank AGFaysal Bank LimitedHabib Metropolitan Bank LimitedHabib Bank LimitedHSBC Bank Middle East LimitedJS Bank LimitedMCB Bank LimitedMeezan Bank LimitedNational Bank of PakistanStandard Chartered Bank (Pakistan) LimitedThe Royal Bank of Scotland LimitedUnited Bank Limited

Registered OfficePakistan State Oil Company LimitedPSO House, Khayaban-e-Iqbal, Clifton, Karachi 75600, PakistanTel: (92-21) 111-111- PSO (776) Fax: (92-21) 920-3721Helpline: 0800-03000 Website: www.psopk.com


Report to Shareholders

The Board of Management of Pakistan State Oil reviewed theunaudited financial information for the nine months ended March31, 2009 and is pleased to present its report.

To resolve the circular debt issue pertaining to the power sector,the National Transmission and Despatch Company, an entity ofGovernment of Pakistan issued Term Finance Certificates of Rs80.15 billion at the quarter end; your company was extended anamount of Rs 44.4 billion to settle its liabilities to the refineries. Asa result the company’s power sector receivables dropped to Rs54.4 billion that had reached over Rs 100 billion towards the endof the last quarter.

The board is pleased to report that the third quarter performanceof your company shows a positive picture primarily due to stabilizedoil prices at the level of $ 50 per barrel, which once saw a peak of$ 141 per barrel of the OPEC basket of crude during July 2008.As a result of stable oil prices, the company was able to postimproved quarterly after tax earnings of Rs 780 million as comparedto the losses incurred during the past two quarters due to theinventory losses. However, the loss for the nine months period stoodat Rs 9.3 billion versus profit of Rs 8.5 billion earned in thecomparative period of last year. The low quarterly profit is mainlydue to the impact of high financial cost on bank borrowings obtainedto finance the circular debt.

In the period under review, the country went through a recessionaryphase during which consumption of white oil products experienceda decline of 8% as compared to the same period of last year.However, industry consumption of black oil, which is primarily usedby power sector increased by 2%. Your company sold 9.5 milliontons of POL products, translating into a sales turnover of Rs. 540billion – an increase of 37%. This enabled the company to improveits market share to 71.7% as compared to 70.1% during the sameperiod last year. PSO also enhanced its fuel oil supplies to the powersector and consequently improved its market share from 82.9% to86.7% in this product segment which is playing a pivotal role ingeneration of electricity for the country.


Your company was recognized among the top business enterprisesof the Muslim world with its 29th ranking in the “5th Annual DinarStandard List of Top 100 Companies”. The DS 100 rankingbenchmarks the corporate environment of organizations in the 57OIC (Organization of Islamic Conference) member countries. Thisranking for PSO is an improvement from last year when it was ranked32nd.

In the period under review, PSO also received the “Karachi StockExchange Top Companies Award”.

The Board would like to take this opportunity to express its gratitudetowards Government of Pakistan for its efforts in solving the circulardebt issue and expect that through the support of Ministry ofPetroleum & Natural Resources and Ministry of Finance, the companywill overcome all the challenges imposed by different domestic andinternational factors.

Irfan K. Qureshi Sardar M. Yasin MalikManaging Director Chairman

Karachi: April 22, 2009

Condensed Interim Balance SheetAs at March 31, 2009

ASSETSNon-Current AssetsProperty, plant and equipment 4 6,830,410 7,460,549Intangibles 5 72,447 105,502Long term investments 2,192,276 2,701,097Long term loans, advances and receivables 386,504 477,745Long term deposits and prepayments 78,797 79,098Deferred tax 6 5,872,690 407,337

15,433,124 11,231,328Current AssetsStores, spare parts and loose tools 128,217 115,814Stock-in-trade 36,841,788 62,360,067Trade debts 7 56,120,709 33,904,728Loans and advances 397,298 396,220Deposits and short term prepayments 408,237 401,433Other receivables 8 11,549,137 15,687,789Taxation - net 698,913 -Cash and bank balances 1,709,482 3,018,640

107,853,781 115,884,691

Net Assets in Bangladesh 9 - - 123,286,905 127,116,019

EQUITY AND LIABILITIESShare Capital 1,715,190 1,715,190Reserves 16,450,282 29,249,864

18,165,472 30,965,054

Non-Current LiabilitiesLong term deposits 866,147 834,598Retirement and other service benefits 1,723,808 1,574,148

2,589,955 2,408,746Current LiabilitiesTrade and other payables 83,028,652 81,073,564Provisions 726,116 726,116Accrued interest / mark-up 688,249 217,928Short term borrowings 18,088,461 10,997,908Taxation - net - 726,703

102,531,478 93,742,219Contingencies and Commitments 10

123,286,905 127,116,019

The annexed notes 1 to 13 form an integral part of this condensed interim financial information.

Un-audited AuditedNote March 31, June 30,

2009 2008 ........ (Rupees in ‘000) ........


Condensed Interim Profit and Loss Account (Un-audited)

For the quarter and nine months ended March 31, 2009


Sales - net of trade discounts and allowancesamounting to Rs. 46,217 thousand(2008: Rs. 76,342 thousand) 540,243,829 394,492,038 148,695,951 146,100,926

Less:- Sales tax (72,993,830) (50,132,159) (20,329,708) (18,589,508)- Inland freight equalization margin (6,010,683) (9,414,641) (1,789,506) (3,906,746)

(79,004,513) (59,546,800) (22,119,214) (22,496,254)

Net sales 461,239,316 334,945,238 126,576,737 123,604,672

Cost of products sold (464,713,601) (317,236,688) (122,326,552) (116,808,528)

Gross (loss) / profit (3,474,285) 17,708,550 4,250,185 6,796,144Other operating income 1,056,696 974,827 355,874 325,997

(2,417,589) 18,683,377 4,606,059 7,122,141

Operating costsTransportation costs (389,332) (267,177) (103,474) (90,327)Distribution and marketing expenses (2,591,428) (2,240,230) (769,854) (733,777)Administrative expenses (892,159) (750,594) (346,806) (284,125)Depreciation and amortisation (888,594) (871,744) (300,580) (296,290)Other operating expenses (4,054,878) (1,419,262) (493,147) (913,242)

(8,816,391) (5,549,007) (2,013,861) (2,317,761)

Other income 691,894 172,192 195,963 25,051

(Loss) / Profit from operations (10,542,086) 13,306,562 2,788,161 4,829,431

Finance costs (4,679,554) (629,142) (1,753,932) (209,492)

(15,221,640) 12,677,420 1,034,229 4,619,939

Share of profit of associates 392,902 251,588 171,272 93,842

(Loss) / Profit before taxation (14,828,738) 12,929,008 1,205,501 4,713,781

Taxation 5,559,531 (4,473,507) (425,541) (1,746,242)

(Loss) / Profit after taxation (9,269,207) 8,455,501 779,960 2,967,539

--------------------------------------------------------------- Rupees ---------------------------------------------------------

(Loss) / Earnings per share (54.04) 49.30 4.55 17.30


For the Nine Months For the QuarterJul - Mar Jul - Mar Jan - Mar Jan - Mar

2009 2008 2009 2008 ------------------------------------------------ (Rupees in '000) ------------------------------------------------


Condensed Interim Cash Flow Statement (Un-audited)

For the nine months ended March 31, 2009

CASH FLOWS FROM OPERATING ACTIVITIES

(Loss) / Profit before taxation (14,828,738) 12,929,008

Adjustments for non cash charges and other items:Depreciation and amortization 888,594 871,744Provision for:

-trade debts 678,000 144,546-others - 19,357

Retirement benefits accrued 412,159 373,533Profit on sale of fixed assets (13,718) (25,461)Share of profit of associates (392,902) (251,588)Dividend income (65,821) (60,906)Finance cost 4,679,554 629,142

(8,642,872) 14,629,375

Working capital changes(Increase) / Decrease in stores, spare parts and loose tools (12,403) 4,769Decrease / (Increase) in stock-in-trade 25,518,279 (9,866,444)(Increase) in trade debts (22,893,981) (6,190,183)(Increase) in loans and advances (1,078) (10,102)(Increase) / Decrease in trade deposits and short term prepayments (6,804) 1,200,544Decrease / (Increase) in other receivables 4,138,652 (21,827,374)Increase in trade and other payables 975,566 29,025,454

7,718,231 (7,663,336)

Cash (outflow) / inflow from operating activities (924,641) 6,966,039

Decrease in long-term loans, advances and receivables 91,241 26,273Decrease / (Increase) in long-term deposits and prepayments 301 (17,205)Taxes paid (1,331,438) (2,883,639)Finance cost paid (4,209,233) (614,414)Retirement benefits paid (262,499) (176,811)

Net cash (outflow) / inflow from operating activities (6,636,269) 3,300,243

CASH FLOW FROM INVESTING ACTIVITIES

Purchase of property, plant and equipment (227,235) (197,714)Proceeds from disposal of operating assets 15,553 36,633Dividends received 438,750 326,871

Net cash inflow from investing activities 227,068 165,790

CASH FLOW FROM FINANCING ACTIVITIES

Proceeds from long term deposits 31,549 101,317Proceeds from / (Repayment of) short term borrowings 9,416 (5,339,568)Dividends paid (2,022,059) (2,762,326)

Net cash (outflow) from financing activities (1,981,094) (8,000,577)

Net (decrease) in cash and cash equivalents (8,390,295) (4,534,544)

Cash and cash equivalents at the beginning of the period (7,190,672) (1,418,031)

Cash and cash equivalents at the end of the period (15,580,967) (5,952,575)

The annexed notes 1 to 13 form an integral part of this condensed interim financial information

Jul -Mar Jul -Mar2009 2008

........ (Rupees in ‘000) ........



Condensed Interim Statement of Changes in Equity (Un-audited)

For the nine months ended March 31, 2009

......................................................... (Rupees in ‘000) ........................................................

Balance as on June 30, 2007 1,715,190 3,373 1,183,432 7,483 15,039,968 2,989,771 20,939,217

Final dividend for the year ended June 30, 2007@ Rs. 11 per share - - - - - (1,886,708) (1,886,708)

Transfer to general reserve - - - - 1,100,000 (1,100,000) -

Profit for the nine months ended March 31, 2008 - - - - - 8,455,501 8,455,501 - - - - - -

Unrealised gain due to change in fair values of long-term investments - - 306,898 - - - 306,898

Unrealised loss due to change in fair values of investments of associates - - - (7,132) - - (7,132)

Dividend for the year ending June 30, 2008- 1st Interim dividend @ Rs. 5 per share - - - - - (857,595) (857,595)

- 2nd Interim dividend @ Rs. 5 per share - - - - - (1,029,114) (1,029,114)

Balance as on March 31, 2008 1,715,190 3,373 1,490,330 351 16,139,968 6,571,856 25,921068

Profit for the quarter ended June 30, 2008 - - - - - 5,598,292 5,598,292

Unrealised loss due to change in fair values of long-term investments - - (551,707) - - - (551,707)

Unrealised loss due to change in fair values of investments of associates - - - (2,599) - - (2,599)

Balance as on June 30, 2008 1,715,190 3,373 938,623 (2,248) 16,139,968 12,170,148 30,965,054

Final dividend for the year ended June 30, 2008 @ Rs. 12.5 per share - - - - - (2,143,986) (2,143,986)

Transfer to general reserve - - - - 10,000,000 (10,000,000) -

Loss for the nine months ended March 31, 2009 - - - - - (9,269,207) (9,269,207)

Unrealised loss due to change in fair values of long-term investments - - (522,600) - - - (522,600)

Unrealised loss due to change in fair values of investments in associates - - - (6,194) - - (6,194)

Dividends for the year ending June 30, 20091st interim dividend for the year ending June 30, 2009@ Rs. 5 per share - - - - - (857,595) (857,595)

Balance as on March 31, 2009 1,715,190 3,373 416,023 (8,442) 26,139,968 (10,100,640) 18,165,472


Share Capital Unrealised Company's General Unappropriated TotalCapital Reserve gain share of Reserve Profit/

on long term unrealised Investments gain/(loss)

of investmentsof associates


Notes to the Condensed Interim Financial Infromation (Un-audited)

for the quarter and nine months ended March 31, 2009

1. Pakistan State Oil Company Limited is a public companyincorporated in Pakistan under the Companies Act, 1913 (nowCompanies Ordinance, 1984) and is listed on Karachi, Lahoreand Islamabad stock exchanges. The address of its registeredoffice is PSO House, Khayaban-e-Iqbal, Clifton, Karachi. Theprincipal activities of the Company are procurement, storageand marketing of petroleum and related products. It also blendsand markets various kinds of lubricating oils.

The Board of Management nominated by the Federal Governmentunder Section 7 of the Marketing of Petroleum Products(Federal Control ) Act, 1974 (the Act) is managing the affairsof the Company. The provisions of the Act shall have effectnotwithstanding anything contained in the Companies Act,1913 (now Companies Ordinance, 1984) or the Companies(Managing Agency and Election of Directors) Order, 1972 (P.O. No. 2 of 1972), or any other law for the time being in forceor any agreement, contract, Memorandum or Articles ofAssociation of the Company.

2. This condensed interim financial information is un-audited andhave been prepared and is being submitted to the shareholdersin accordance with section 245 of the Companies Ordinance,1984 and International Accounting Standard 34 - 'InterimFinancial Reporting'.

3. ACCOUNTING POLICIES, JUDGEMENTS AND ESTIMATES

3.1 The accounting policies adopted in the preparation of thiscondensed interim financial information are the same as thoseapplied in the preparation of the audited annual publishedfinancial statements of the Company for the year ended June30, 2008.

3.2 The preparation of this condensed interim financial informationin conformity with the approved accounting standards requiresthe use of certain critical accounting estimates. It also requiresmanagement to exercise its judgement in the process ofapplying the Company's accounting policies. Estimates andjudgements are continually evaluated and are based on historicalexperience and other factors, including expectations of futureevents that are believed to be reasonable under thecircumstances.

Except as described below, in preparing this condensed interimfinancial information, the significant judgements made by

management in applying the Company's accounting policiesand the key sources of estimation and uncertainty were thesame as those that applied to financial statements as at andfor the year ended June 30, 2008.

The Company has been estimating the impairment of tradedebts on the basis of age analysis of the outstanding tradedebts. However, during the period ended March 31, 2009,the management has reassessed its estimation process inrespect of certain category of trade debts, which are overduedue to circular debt situation, which will be assessed forimpairment, on specific identification basis as more fully explainedin note 7.1.

4. PROPERTY, PLANT AND EQUIPMENT

4.1 Capitalization of operating assets during the period/ year wereas follows:

Un-audited AuditedMarch 31, June 30,

2009 2008 -----Rupees in 000-----

Freehold land - 84,193Buildings on freehold land 7,763 -Buildings on leasehold land 42,806 110,793Tanks and pipelines 42,209 85,782Plant and machinery 113,579 476,032Service and filling stations 240,755 311,139Vehicles and other rolling stock 43,096 38,863Furniture and fittings 3,271 18,763Railway sidings - 201Gas cylinders / regulators - 8,346Office equipment 29,310 40,083

522,789 1,174,195

4.2 During the period, assets costing Rs. 45,500 thousand havingnet book value of Rs. 2,214 thousand were disposed off forRs. 15,553 thousand.


5. INTANGIBLES

Additions made during the period amounted to Rs. 6,333thousand (June 30, 2008: Rs. 26,979 thousand).

6. DEFERRED TAX

During the current period, the Company in view of the availabilityof future taxable profits, based on financial projections, toutilise unused tax loss as at March 31, 2009 has recogniseddeferred tax asset amounting to Rs. 5,465,317 thousand.

The deferred tax asset recognised on provision for retirementbenefits, doubtful receivables/debts etc as at March 31,2009 amounted to Rs. 1,587,107 thousand (June 30, 2008:Rs. 1,355,445 thousand) whereas deferred tax liabilityrecognised on accelerated tax depreciation etc as at March31, 2009 amounted to Rs. 962,563 thousand (June 30,2008: Rs. 948,108 thousand).

7. TRADE DEBTSUn-audited AuditedMarch 31, June 30,

2009 2008 ----Rupees in 000-----

Considered good- Due from Government agenciesand autonomous bodies 17,193,321 17,266,746- Due from othercustomers - note 7.1 38,927,388 16,637,982

56,120,709 33,904,728Considered doubtful 2,589,099 1,911,478

58,709,808 35,816,206

Less: Provision for impairment (2,589,099) (1,911,478)

56,120,709 33,904,728

7.1 The receivable from Hub Power Company Limited (HUBCO)and KotAddu Power Company Limited (KAPCO) as at March31, 2009 aggregated to Rs. 33,628,924 thousand (June30, 2008: Rs. 11,013,920 thousand), which includes overdue

amounts of Rs. 6,382,446 thousand (June 30, 2008: Nil).The Company does not consider the aforementioned receivableas doubtful, as these have been largely accumulated due toexisting circular debt situation. The Company, based onmeasures being undertaken by the Government of Pakistan(GoP) in this regard, is confident of realizing the entireaforementioned receivable in due course. Accordingly, theCompany while estimating the provisions for impairment onthe basis of overdue analysis, has not considered theaforementioned overdue balances of HUBCO and KAPCO, whichwould have increased the provision by Rs. 638,245 thousandas at March 31, 2009.

8. OTHER RECEIVABLES

Included in other receivables is an aggregate amount ofRs. 9,966,986 thousand.

(June 30, 2008: Rs. 13,298,089 thousand) due from GoPon account of the following:

8.1 Import price differential aggregating to Rs. 1,465,406 thousand(June 30, 2008: Rs. 1,465,406 thousand).

In 2002, under an arrangement with the Ministry of Petroleumand Natural Resources (MoP & NR), GoP, the Company carriedout an independent verification and reconciliation of pricedifferential claims due from the GoP and outstanding since1991. Based on the exercise, the Company recognised theresulting net difference in its financial statements. Through itsletter No. 3(386)/2002 dated August 7, 2002 the GoPconfirmed that the report on independent verification will providereasonable level of comfort to the authenticity and accuracyof outstanding import price differential claims and accordingly,against balance claimed, commenced repayment through apricing mechanism for which a notification was issued. Suchrepayments amounted to Rs. 2,805,000 thousand uptoDecember 31, 2003. Since then no further amounts havebeen received and the notification for the pricing mechanismalso expired on December 31, 2004.

However, through its letter No. F.1(21)-CF.III/2005-386 datedMarch 3, 2007 the GoP-Finance Division intimated that it hasbeen decided that these Price Differential Claims will be paidafter confirmation of the reconciled claim by the MoP & NRand requested MoP & NR to confirm the agreed amount


payable at the earliest. The Company is actively pursuing thematter with the MoP & NR and Ministry of Finance (MoF), GoPfor the recovery of the balance amount of Rs. 1,465,406thousand and considers that the balance will be recovered indue course. Pending recovery, confirmation of the MoP & NRand agreement of the amount due from GoP, the Company,carries a provision of

Rs. 501,730 thousand (June 30, 2008: Rs. 501,730thousand) against the balance due as at March 31, 2009.

8.2 Price differential claims aggregating Rs. 5,094,223 thousand(June 30, 2008: Rs. 8,425,326 thousand).

This represents the balance of Price Differential Cliams (PDC)due from GoP, net of recovery of Rs. 39,108,000 thousandduring the period (June 30, 2008: 106,012,448 thousand).These claims have arisen on the instructions of MoP & NR,GoP for keeping the consumer prices of certain POL productsstable. The Company together with other Oil MarketingCompanies is actively pursuing the matter with GoP for therecovery of the balance amount, expected in due course oftime.

8.3 Price differential between the products Low Sulphur FurnaceOil (LSFO) and High Sulphur Furnace Oil (HSFO) aggregatingRs. 3,407,357 thousand (June 30, 2008: Rs. 3,407,357thousand).

In 1996, through a decision taken at a meeting of thePrivatisation Commission, and Finance Division, GoP theCompany was advised to supply LSFO to Kot Addu PowerProject at the HSFO price and WAPDA was advised to absorbthe price differential between the two products. In accordancewith the decision of ECC dated November 4, 2003, the Companywas allowed to recover this amount through a pricing mechanismafter recovery of the amount outstanding against its claimsfor Import Price Differential aggregating to Rs. 1,465,406thousand, referred in note 7.1, the notification for which expiredon December 31, 2004. Although no recovery has beenmade on this account, the Company continues to follow up thematter with MoP & NR. In 2005, the Company submitted anindependent report on the verification of the above claim toMoP & NR, upon their request. In 2006, a joint reconciliationexercise was carried out with WAPDA as per the decisiontaken in a meeting held on May 19, 2006 under the

Chairmanship of Additional Finance Secretary (GoP) and thefinal reconciliation statements were submitted to MoF andWAPDA. Subsequently, on February 3, 2007 the Companyand WAPDA agreed upon the final receivable balance of Rs.3,407,357 thousand. Further, the GOP - Finance Divisionthrough its letter No. F.1(21)-CF.111/2005-385 dated March3, 2007 intimated that the amount of Rs. 3,407,357 thousandwill be paid to the Company during financial year 2007-2008and necessary provision in this respect will be made by GoPin the budget for financial year 2007-2008. The Companythrough its letter dated May 20, 2008 requested the GoP toarrange the payment of the agreed amount before the end ofthe budget year 2007-2008, to which GoP did not respond.The Company has again requested GoP through its letter datedSeptember 29, 2008 for an early settlement. The Company,however, considers that the above amount will be recoveredin full in due course of time.

9. NET ASSETS IN BANGLADESH

The Company has no control over these assets and hasmaintained in its record the position as it was in 1971. Fullprovision for impairment has been made against these netassets.

10. CONTINGENCIES AND COMMITMENTS

10.1 Contingencies

The Company has contingent liabilities in respect of legal claimsin the ordinary course of business.

10.1.1 Claims against the Company not acknowledged as debts amountto Rs. 2,283,240 thousand (June 30, 2008: Rs. 1,596,700thousand), including claims by refineries for delayed paymentcharges.

10.1.2 In the assessment years 1996-97 and 1997-98, the taxationauthorities applied presumptive tax on the Company to thevalue of petroleum products imported by the Company on behalfof GoP by treating the Company as the importer of suchproducts. The Income Tax Appellate Tribunal (ITAT) cancelledthe order of the assessing officer, and as a consequence ofthe order of the ITAT, an amount of Rs. 958,152 thousandbecame refundable to the Company, which was adjusted againstthe tax liability of the subsequent years. The department hadfiled an appeal with the High Court of Sindh against the aforesaid


decision of the ITAT, which was adjudicated against the Company.The Company filed petition for leave to appeal with the SupremeCourt of Pakistan against the aforementioned decision, whichwas granted by the Supreme Court of Pakistan through itsorder dated March 7, 2007 also suspending the operation ofthe impugned judgment of the High Court of Sindh.

The management of the Company maintains that the Companywas merely acting as a handling agent on behalf of GoP, whichwas in fact the importer of the products. Hence, the ultimateliability, if any, is recoverable from GoP, for which themanagement is in communication with the MoP & NR.

Based on the merits of the case above, the managementbelieves that the ultimate decision will be in its favour andtherefore, no provision has been made for the liability in thesecondensed interim financial information.

10.1.3 In the year 2005, a demand was raised by the Collector ofCustoms, Sales Tax and Central Excise (Adjudication) in respectof sales tax, central excise duty and petroleum developmentlevy aggregating Rs. 165,781 thousand inclusive of additionalsales tax and central excise duty on exports of POL productsto Afghanistan during the period August 2002 to November2003. The demand was raised on the grounds that the exportconsignments were not verified by the Pakistan Embassy /Consulate in Afghanistan as required under Export Policy andProcedures 2000. It is the Company's contention that thisrequirement was in suspension as in the aforesaid period thePakistan Embassy / Consulate was not fully functional. Thiscondition of suspension was removed only on July 22, 2004through Export Policy Order 2004 when the Pakistan Embassy/ Consulate became fully functional in Afghanistan. Besidesthe issue of verification, it is also the Company's contentionthat export of POL products to Afghanistan can be verifiedfrom the relevant documents and therefore, the demand isunwarranted.

The Company has filed an appeal against the aforementioneddemand before the Appellate Tribunal and also referred thematter for resolution in the Alternate Dispute ResolutionCommittee (ADRC) under section 47-A of the Sales Tax Act,1990. Through its recommendation dated December 26,2006, the ADRC rejected the application filed by the Companyand the CBR through its order dated June 16, 2007 accepted

the recommendation of the ADRC. The Company is nowcontesting the matter before the Appellate Tribunal. Based onthe merits of the case, the Company is confident that theultimate outcome of the matter would be in its favour andtherefore no provision has been made in this respect in thesecondensed interim financial information.

10.1.4 During the current period, the Company received demandsfrom the taxation authorities aggregating to Rs. 823,227thousand in respect of tax not withheld on incentives paid todealers operating retail outlets, from tax years 2004 to 2008.As per the taxation authorities such payments were in thenature of prizes on sales promotion to dealers and hencesubject to withholding of tax at the rate of 20% under section156 of the Income Tax Ordinance (ITO), 2001. The Companybased on the advice of its tax consultant, has paid an amountof Rs. 321,993 thousand there against under the “Tax ArrearsSettlement Incentive Scheme (TASIS) 2008” while treating thesame as recoverable from its dealers, on the contention thatsuch incentives attract tax at the rate of 10% under section156 A of the ITO, 2001. Accordingly, the Company has filedan appeal against the demands being under section 156 withthe Commissioner of Income Tax (CIT), Appeals and also apetition in the High Court of Sindh for the stay thereof. TheHigh Court of Sindh in its order has granted stay to the Companywith direction to deposit Rs. 200,000 thousand in addition tothe payment of Rs. 321,993 thousand earlier made by theCompany, with the taxation authorities against such demands.Further, the High Court of Sindh in its order has given directionsto CIT (Appeals) and Income Tax Appellate Tribunal (ITAT) tothe effect that entire process up to Tribunal level is finalizedbefore the first week of June 2009. The CIT (Appeals) hasaccordingly passed an order on February 13, 2009 againstthe Company. The company has now filed an appeal againstsuch order in the ITAT. The Company based on the merits ofthe case on the advice of its tax consultant is confident thatthe matter will ultimately be decided in its favour and thereforeno provision has been made for the differential amount of Rs.501,234 thousand.

Further, the Company intends to recover the entireaforementioned tax of Rs. 321,993 thousand from its customersand as such it has not been charged off in these condensedinterim financial information.


10.1.5The Government of Sindh through Sindh Finance Act, 1994provided for imposition of an infrastructure fee for developmentand maintenance of infrastructure on the goods entering orleaving the Province through air or sea at prescribed rates.The levy was challenged by the Company alongwith othercompanies in the High Court of Sindh through civil suits whichwere dismissed by the single judge of the High Court of Sindhthrough its decision in October 2003. On appeal filedthereagainst, the High Court of Sindh has held through anorder passed in September 2008 that the levy as imposedthrough Sindh Finance Act, 1994 and amended time to timewas not valid till December 28, 2006, however, thereafter onaccount of an amendment in the Sindh Finance (Amendment)Ordinance, 2006, it had become valid and is payable by theAppellants. The Company, alongwith other companies, hasnow filed an appeal in the Supreme Court of Pakistan againstthe aforementioned order of the High Court of Sindh. Themanagement believes that the matter will ultimately be decidedin the Company's favour. Further, the amount of possibleobligation, if any, cannot be determined with sufficient reliability.

10.1.6The Company, under directives of MoF and MoP & NR, havearranged borrowings from certain banks aggregating US Dollars100,000 thousand (June 30, 2008: US Dollars 100,000thousand). Repayment of principal amount, financing and allother related costs, directly to these banks, are the responsibilityof MoF - GoP.

10.2 Commitments

10.2.1Commitments in respect of capital expenditure contracted forbut not as yet incurred pertaining to property, plant & equipmentand intangibles amounted to Rs. 472,296 thousand (June30, 2008: Rs. 476,246 thousand) and Rs. 12,619 thousand(June 30, 2008: Rs. 7,043 thousand) respectively.

10.2.2Letters of credit and bank guarantees outstanding amountedto Rs. 2,285,065 thousand (June 30, 2008: Rs. 17,650,873thousand).

Associates- Pak Grease Manufacturing Purchases 108,976 72,720

Company (Pvt) Ltd. Dividend received 4,460 4,460

- Asia Petroleum Limited Income (facility charges) 138,633 89,985 Rental income 3,531 3,403 Dividend received 368,469 322,410 Pipeline charges 1,302,454 875,504

Retirement benefit funds- Pension Funds Contribution - 74,172- Gratuity Fund Benefits paid on

behalf of fund 72,841 70,495Contribution 80,000 -

- Provident Funds Contribution 39,002 26,763Other related parties - Pakistan Refinery Limted Purchases 26,253,920 23,816,172

Dividend received 8,999 17,982

- Pak Arab Pipeline Company Ltd. Pipeline charges 2,735,706 2,328,418

Dividend received 56,822 42,924

Key management personnel Remuneration 104,445 83,471Contribution to retirement benefits 4,303 3,172 Other benefits 29,562 21,092

Profit oriented state controlled entities - various Purchases 83,250,747 73,208,011

Sales 127,230,292 73,776,986 Handling income - 18,472 Transportation charges 1,643,166 1,160,254Utility charges 65,401 41,183 Rental charges 6,832 34,367 Insurance premium paid 497,886 310,951

Name of the related party Nature of Jul - Mar Jul - Marand relationship with transactions 2009 2008the Company ------- Rupees in 000 -------

11. TRANSACTIONS WITH RELATED PARTIES

11.1 Details of transactions with related parties during the period,are as follows:


12. DATE OF AUTHORISATION FOR ISSUE

The condensed interim financial information was authorisedfor issue on April 22, 2009 by the Board of Management-Oilof the Company.

13. CORRESPONDING FIGURES

Corresponding figures in the condensed interim balance sheetand condensed interim statement of changes in equity compriseof balances as per the annual audited financial statements forthe year ended June 30, 2008. Corresponding figures in thecondensed interim profit and loss account and condensedinterim cash flow statement comprise of balances of comparableperiod as per the condensed interim financial information forthe nine months ended March 31, 2008.


report for the quarter ended march 31, 2009

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