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Pakistan Oilfields Limited

(Annual Report 1995-96)

Contents

Company Information

Notice of Meeting

Chairman's Review

Directors' Report

Statement under Section 237

Ten Years at a Glance

Auditors' Report to the Members

Profit and Loss Account

Cash Flow Statement

Notes to the Accounts

Subsidiaries of Pakistan Oilfields Limited

ATTOCK CHEMICALS (PRIVATE) LIMITED

Company Information

Directors' Report

Auditors' Report

Balance Sheet

Profit and Loss Account

Notes to the Accounts

CAPGAS (PRIVATE) LIMITED

Company Information

Directors' Report

Auditors' Report

Balance Sheet

Profit and Loss Account

Notes to the Accounts

ATTOCK INDUSTRIAL PRODUCTS LIMITED

Company Information

Directors' Report

Auditors' Report

Balance Sheet

Notes to the Accounts

Pakistan Oilfields Limited

Company Information

Directors

Ghaith R. Pharaon

Chairman

Usmam Aminuddin

Chief Executive

Munir Ahmad

Shahid Ahmad

Tanvir Ahmad

Alternate Director

M. Mubeen Ahsan

Khalid A. Ghazi

Arif Kemal

Alternate Director

Shuaib A. Malik

Lt. Gen. (R) Talat Masood

Laith G. Pharaon

M. Salim

Abdus Sattar

Company Secretary:

Iqbal A. Khwaja, F.C.A.

Legal Advisers:

Khan & Piracha

Legal Advisers Inc.

M. Afzal Siddiqui

Tax Advisor:

Naseem Zafar

Auditors:

A. F. Ferguson & Co.

Chartered Accountants

Registered Office:

P O L House, P.O. Refinery,

Morgah, Rawalpindi

Board of Directors

Ghaith R. Pharaon

Usman Aminuddin

Munir Ahmad

Shahid Ahmad

Tanvir Ahmad

M. Mubeen Ahsan

Khalid A. Ghazi

Arif Kemal

Shuaib A. Malik

Lt. Gen. (R) Talat Masood

Laith G. Pharaon

M. Salim

Abdus Sattar

Notice of Meeting

Notice is hereby given that the FORTY-FIFTH Annual General Meeting (being the Fifty-fourth General

Meeting) of the Company will be held at Hotel Pearl Continental on Thursday, December 26, 1996 at

10.00 A.M. to transact the following business:

ORDINARY BUSINESS

1. To confirm the minutes of the Fifty-third General Meeting held on June 27, 1996.

2. To receive, consider and approve the audited accounts of the Company together with Directors'

and Auditors' Reports for the eighteen months period ended June 30, 1996.

3. To declare a final cash dividend as recommended by the Board of Directors for the eighteen months

period ended June 30, 1996.

4. To appoint auditors for the next year and fix their remuneration.

5. To transact such other business as may be placed before the meeting with the permission of the

Chairman.

SPECIAL BUSINESS

6. To consider and, if thought fit, to pass the following Resolution as an ordinary resolution:

"Resolved:

a) that a sum of Rs. 76,050,000 out of free reserves of the Company for the period ended

June 30, 1996 be capitalised and applied for issue of 7,605,000 ordinary shares of

Rs. 10/- each allotted as fully paid Bonus Shares to the members of the Company whose

names appear on the register of members as at close of business on December 11, 1996, in

the proportion of one new share for every four shares held.

b) that the Bonus Shares so allotted shall rank pari passu in all respects with the existing

shares except that they shall not qualify for the dividend declared for the period ended

June 30, 1996.

c) that the members entitled to fractions of a share shall be given sale proceeds of their

fractional entitlement for which purpose the fractions shall be consolidated into whole

shares and sold in the stock market.

d) that the Secretary of the Company be authorised and empowered to give effect to this

resolution and to do or cause to do all acts, deeds and things that may be necessary or

required for issue, allotment and distribution of Bonus Shares. In the case of non-resident

shareholders the Secretary is further authorised to issue/export the Bonus Shares after

fulfilling the statutory requirements."

7. To consider and, if thought fit, to pass the following resolution, pursuant to section 208 of the

Companies Ordinance, 1984 in respect of the Company's investment.

"RESOLVED that the Company is hereby authorised to invest Rs. 1.00 million (Rupees one mil-

lion only) as a long-term investment in the equity of an associated company "Attock Petroleum

Limited".

Further resolved that Chief Executive be and is hereby authorised to sign such documents and take

such steps from time to time as and when may be necessary in acquiring the said equity interest in

"Attock Petroleum Limited."

BY ORDER OF THE BOARD

POL House, P.O. Refinery,

Morgah, Rawalpindi

IQBAL A. KHWAJA

November 28, 1996.

Company Secretary

NOTES:

PARTICIPATION IN THE ANNUAL GENERAL MEETING

A member entitled to attend and vote at this meeting is entitled to appoint another member as his/her proxy to

attend and vote. Proxies in order to be effective must be received at the Registered Office of the Company duly

stamped and signed not less than 48 hours before the meeting.

CLOSURE OF SHARE TRANSFER BOOKS

The share transfer books of the Company will remain closed and no transfer of shares will be accepted for

registration from December 12, 1996 to December 26, 1996 (both days inclusive). Transfers received in order at

the Registered Office of the Company by the close of business on December 11, 1996 will be treated in time for the

purpose of payment of the final dividend and eligibility of Bonus Shares, if declared.

CHANGE IN ADDRESS

The members are requested to promptly communicate to the Company any change in their addresses.

STATEMENT UNDER SECTION 160 (1) (b) OF THE COMPANIES ORDINANCE, 1984.

1. Issue of Bonus Shares

In view of the improved profitability and sound financial position of the Company, the Directors feel

justified in recommending capitalization of free reserve amounting to Rs. 76,050,000 for the issue of

bonus shares in the ratio of one bonus sham for every four ordinary shares held. The Directors of the

Company, directly or indirectly, are not personally interested in this issue except to the extent of their

shareholding in the Company.

2. Investment in Attock Petroleum Limited

a) The Directors recommend the Company's participation, as one of the sponsors, in an associated

company "Attock Petroleum Limited", a petroleum marketing company.

b) The Directors are of the view that the investment in the petroleum marketing company would

be viable and give a rational diversification to the Company.

c) The Directors have no vested interest in the above investment except that majority of the

Directors of the Company are also the Directors in the associated company.

Chairman's Review

It gives me pleasure to present the review of

operations and audited financial statements of your

Company for the eighteen months period ended

June 30, 1996.

BOARD OF DIRECTORS

During the last eighteen months Mr. Laith G.

Pharaon and Mr. M. Salim were appointed as

directors in place of Mr. S. Dilawar Abbas and

Mr. Tanvir Ahmad respectively who resigned from

the Board. Mr. Tanvir Ahmad was reappointed and

Mr. Arif Kemal was appointed as alternate director

to Mr. Ghaith R. Pharaon and Mr. Laith G. Pharaon.

Mr. M. Mubeen Ahsan was nominated as director

by the Government of Pakistan in place of Mr. Rifat

Askari who resigned in August, 1995. Mr. Usman

Aminuddin has been reappointed as chief

executive until September 26, 1998. In the

Extraordinary General Meeting held on June 27,

1996, re-election of directors took place and no

change occurred in the composition of the Board.

I welcome the directors joining the Board and would

like to place on record appreciation of the services

of the outgoing directors Mr. S. Dilawar Abbas and

Mr. Rifat Askari.

FINANCIAL RESULTS

International crude oil prices remained stable

during the period as compared to the previous year.

Crude oil touched the maximum price of $ 18.68

per barrel in April 1996 and thereafter stabilized

around $18. Average price of POL crude during the

period was $16.59 per barrel as compared to $15.89

per barrel in 1994. Sales revenue for the eighteen

months to June 30, 1996 was Rs. 1,540 million as

compared to Rs. 819 million for the 12 months to

December 31, 1994. Your Company has earned a

profit after taxation of Rs. 388 million (1994-12

months: Rs. 209 million). No interim dividend was

declared during the period and now a final cash

dividend of Rs. 2.5 per share (25%) is being

recommended by your Board. In addition to this,

your directors are also recommending capitalisation

of free reserves by issuing bonus shares in the ratio

of one share for every four shares held.

Your Company has contributed Rs. 210 million to

the national exchequer and effected foreign

exchange saving for the contrary to the tune of

$54 million during the period.

PRODUCTION

A comparison of total production of crude oil and

other products inclusive of POL's share from joint

ventures is given below:

18 months

12 months to

to June 30,

December 31,

1996

1994

Crude oil

US barrels

1,572,142

1,015,004

Gas

Million cubic feet

8,340

6,540

LPC

metric tonnes

39,303

26,892

Sulphur

Metric tonnes

7,107

6,517

Solvent Oil

us barrels

32,981

34,857

POL's own fields

POL's average production during the 18 months

period was 2,045 barrels of crude oil per day. The

major share of production is from Meyal field where

Enhanced Oil Recovery Programme is in operation.

POL carried out a 3-D seismic survey in its Khaur

and Balkassar fields to delineate the subsurface

structure. It was planned to acquire 81 and 30 sq.

kms of seismic data respectively and at the end of

June 96 the acquisition in Khaur was completed and

the survey was in progress at Balkassar.

Soan Concession - Pindori Development and

Production Lease

The production facilities were procured and

installed. Due to inability of SNGPL in laying

pipeline to connect Pindori gas into their system,

your Company had to procure the pipe and lay the

line for expediting commissioning of the field.

Production commenced in May 1996 from Pindori

at over 1,750 barrels of oil per day and 5.5 million

cubic feet of gas per day.

Horizontal drilling of Pindori well # 2 was started

in July 1995 and completed in October 1995.

Unfortunately the horizontal hole drilled to a

distance of 500 feet from the vertical could not

intersect any major fractures and production-could

not be significantly improved. However the

original production which had gone down to zero

was restored and the well is producing on a

stabilized rate of 55 BOPD. In July 1996 a 3D

seismic survey was carried out to acquire 30 sq.kms.

of seismic data and interpretation of it is in progress.

Your Company has a net 35% interest in this

area.

North Potwar Block

Your Company has 5% interest in this concession

which is under the operatorship of Occidental of

Pakistan Inc. (Oxy). The average daily production

achieved during the period under review was 2,213

barrels of oil, 7 million cubic feet of gas and 33

metric tonnes of LPG.

Soan Block- Bhangali

Average daily production from Bhangali field

operated by Oxy was 488 barrels of oil and 0.351

million cubic feet of gas. Your Company has a 7%

interest in the field.

Chak Naurang

Average daily production of 764 barrels of crude oil

was achieved from Chak Naurang field by Oil and

Gas Development Corporation (OGDC) during the

period under review. This Company has 15% share

in this field.

Ratana

Average daily production of 608 barrels of

condensate and 14 million cubic feet of gas was

achieved from Ratana field operated by Oxy.

As discussed in the previous report, Ratana well # 3

was drilled by Oxy to a total depth of 16,772 feet.

As results of initial tests were not encouraging, a

massive acid - frac job was carried out but the well

could only produce water with some gas. Attempts

to flow the well did not succeed, Oxy therefore,

decided to abandon the tests and go for sidetrack

laterally to a depth of 17,406 feet attaining 1,118.7

feet horizontal in patala formation. The Ratana

well # 3 was brought on production from March

1996 after laying of pipeline from this well to

Ratana well # 2. A 225 sq. kms. 3D seismic has

been planned by Oxy for the year 1996. Your Corn-

pany has a net 5.545% interest in this field.

EXPLORATION AND DEVELOPMENT

Your Company continued exploration activities

throughout the period under review. I give below

comments on each separately.

Balkassar

Balakassar Oxy 2 well was re-entered by your

Company and drilled vertically after plugging off

the horizontal section earlier drilled by Oxy.

Extensive testing of the prospective sections were

carried out but only water was produced. This

indicated that the entire area around the well bore

had been flooded with water. Your Company has

100% interest in this field.

East Badin Block B

The processing and interpretation of 659 line

kilometers was completed in July 1995. Based on

the results of seismic, Sara west, Sara B and Sara C

were proposed for drilling. Sara B was spudded in

June 1996 by Tullow Pakistan (Developments)

Limited (Tullow) and the results were not

encouraging. Drilling of other two wells will

follow. Tullow has also plans to shoot a seismic

programme of 300 line kilometers during the year

1996.

Your Company has a net 14.5451% interest in this

block.

Block 35

Pakistan Petroleum Limited (PPL) spudded the

wildcat well Kundi 1 on December 05, 1994. The

well was drilled to a depth of 6,400 meters but failed

to achieve the objective and was abandoned. Based

on the evaluation study on the remaining potential

in this block by a consultant, the working interest

owners decided to relinquish the block.

Your Company contributed Rs. 59 million towards

the well and has a net 10% interest in this block.

Ahmadal Concession

The production facilities were shipped by air and

installed in record time bringing Pariwali well # 1

on production in September 1995. Pipeline was laid

from Khaur to Meyal LPG plant and LPG

production from gas started in April 1996. Your

Company has also completed the 3-D seismic

survey over 70 sq. kms. which will help to identify

the exact location for the drilling of well # 2.

Average daily production achieved during the

period under review was 840 barrels of oil, 8

million cubic feet of gas and 23 metric tonnes of

LPG. Your Company has a net 82.5% interest in this

field.

Minwal Concession

As reported earlier, an in house interpretation of 109

line kilometers data was completed and reviewed in

order to firm up a location for a well in this

concession area. For reconfirmation of the results,

M/s. Quad Consulting Limited were contracted to

carry out the interpretation of the seismic data. Based

on their interpretation, the well location has been

marked and staked on ground. Your Company has

awarded the drilling contract to M/s. Forasol S.A.

and the well was spud in September 1996.

Your Company has net 100% interest in this area

till the commerciality is declared.

Cholistan Concession

Seismic data acquisition of 456.63 line kilometers

was completed in April 1995. The field data tapes

were despatched to Geotrace Technologies Inc. of

USA for processing. The processing of seismic data

was completed in September 1995. Based on the

results of interpretation 300 kilometers was planned

in order to delineate certain leads. M/s Venture

Seismic Limited of Canada were awarded the

acquisition contract. Todate 313 line kilometers

data was acquired by them.

Your Company has a net 100% interest in this area

till the commerciality is declared.

NEW CONCESSIONS

Central Potwar

Your Company has acquired new exploration license

for Central Potwar on December 05, 1995. A 1,500

line kilometers data was purchased from DGPC for

reprocessing. Initially the contract for reprocessing

of 500 line kilometers was awarded to M/s. CGG.

Your Company also plans to acquire 250 line

kilometers seismic in this block. Meanwhile, an

MOU has been signed with PPL, according to which

your Company will farm out 30% working interest

to PPL.

PIPELINES

The pipelines of your Company are operating

satisfactorily carrying our own crude from Meyal,

Balkassar, Dhulian, Khaur and Pariwali. In addition

to this, Oxy's crude produced from Dhurnal and

Ratana and OGDC' s crude from Toot, Dakhni,

Fimkassar, Kal and Sadqal were also transported

during the period.

The pipeline to transport Sadqal crude was laid and

commissioned in September 1995. During the

period 9 kms. of 8" line was laid from Pariwali to

Khaur for three-phase flow, 37 km of 8" line was

laid from Khaur to Meyal for Pariwali gas and 18

kms. of 6" line was laid from Pindori to Bhangali

for Pindori gas.

PLANTS

The gas purification, sulphur recovery and

liquified petroleum gas plants at Meyal operated

satisfactorily during the period. The Meyal LPG

plant is now processing gas from Ratana, Dakhni

and Pariwali in addition to Meyal gas. The

production facility at Khaur which processes

Pariwali production including gas purification,

dehydration and crude sweetening and stabilization

operated satisfactorily.

POLGAS OPERATIONS

Your Company also obtained marketing license for

the distribution rights of LPG extracted at its Meyal

LPG plant from Rataria, Dakhni and Pariwali gases.

In May, 1995 the Company started marketing of 15

kgs. LPG cylinders under the brand name of

POLGAS.

SUBSIDIARIES

Attock Chemicals (Private) Limited (ACL)

Your subsidiary Attock Chemicals (Private)

Limited earned a profit before tax of Rs. 2.3

million during the eighteen months period to

June 30, 1996 (1994:12 months loss before tax of

Rs. 0.8 million).

Production from Oleum plant started in August 1995

and after trial run the product was found

satisfactory for its purity and concentration.

Your subsidiary is endeavoring to increase its

market share through aggressive marketing

techniques and is confident of both higher sales and

better profitability in the long term.

Capgas (Private) Limited (Capgas)

Your subsidiary Capgas (Private) Limited has earned

a profit before tax of Rs. 39.45 million during the

eighteen months period to June 30, 1996 (1994:12

months Rs. 18.23 million).

During the period your subsidiary sold 8,770

metric tonnes of LPG (1994:6,264 metric tonnes).

Allocation of 5 metric tonnes/day LPG from ARL

did not continue for long, and no further supplies

are expected from this source in near future. Quota

allocation from new sources have recently been

made to new entrants. CAPGAS will endeavour to

enter into arrangement with one of the new allottees.

Other avenues of diversification are also being

looked into.

Attock Industrial Products Limited (AIPL)

Your subsidiary has put up a plant at Rawat to

manufacture 6,000 tons per annum of basic

chromium sulphate. The civil works, mechanical

and electrical installation works are now 100%

complete and instrumentation work is 95%

complete. There has been a delay of approximately

one year on the part of the Heavy Mechanical

Complex (HMC) who are the manufacturers of the

plant on a turnkey basis.

The plant is now under commissioning stage which

is expected to last until December 1996 due to

initial teething problems.

FUTURE PROSPEC