ssDomestic Oil Marketing Industry Overview

Pakistan’s economy has continuously registered growing energy requirements over the years. The
country’s energy mix mainly comprises oil, gas, coal and liquefied petroleum. Of these oil and gas
contribute 80% of the country’s total energy supplies. The country currently meets 16% of the crude oil
demand from the indigenous sources and is highly dependent on import of oil and petroleum products.
The transport sector is the largest consumer of petroleum products in the country (49%), followed by
power generation (42%) and industrial (5%) sectors. Pakistan is among the one of the highest gas
dependent economies of the world. The share of gas in the overall energy mix has declined lately
emanating from the scarcity of the resource in the country. Pakistan’s available gas reserves are 27.8
Trillion Cubic Feet(TCF) with a current annual consumption of 1.24 TCF. The industrial sector is the
largest consumer of natural gas in the country (45%), followed by power generation (27%) and fertilizer
(18%) sectors.

There are thirteen Oil Marketing Companies (“OMC”) operating in Pakistan including foreign and
domestic players. That said, close to 90% of the market is dominated by four oil marketing companies
with state-owned PSO having the largest market share at 63%. Among these thirteen OMCs there are
two relatively new companies, namely Total Parco Pakistan Limited and Hascol Petroleum Limited that
have emerged as active players and are rapidly gaining further market share.

Entity FY15 FY16 FY17 FY18 FY19

PSO 57.0 % 55.0 % 54.0% 50.0% 41.0%
Total Parco 5.0% 6.0% 10.0% 11.0% 10.0%
HASCOL 5.0% 6.0% 8.6% 10.0% 11.0%
Attock 10.4% 8.5% 8.2% 10.0% 11.0%
Shell 10.0% 10.0% 9.3% 6.0% 8.0%
BE Energy 3.0% 2.4% 3.0%
Others 12.6% 13.5% 4.9% 7.2% 11.0%

Pakistan's oil demand is expected to rise. The demand would touch 21 million tons against 19 to 20
million tons, on the back of closure of CNG stations and resolution of circular debt problem.

Over the last few years, POL products demand rose by an average 3%to4% per year, but if the country's
growth rate managed to remain between 5% - 6% during this year along with the closure of CNG
stations in Punjab then the subsequent increase in demand of petroleum products is likely increase
rapidly.
Brief about company selected

HPL was incorporated in 2001 under the Companies Ordinance, 1984 primarily to take advantage of the
petroleum sector deregulation and undertake a program for owning, leasing and renting oil storage
facilities as well as importing petroleum products for its own account.

In February 2005 HPL was granted a full marketing license by the Government of Pakistan and since
then, HPL has been engaged in developing a retail network and storage facilities under the Hascol brand
and by 31st December 2013. The Company had commissioned approximately 210 retail outlets across
Pakistan and this number expected to reach 291 by the end of 2016.

The Directors and sponsors of the company have decades of multinational companies experience in Oil
Trading, Retail Management, Marketing & Supply Chain Management. HPL management team
comprises of well experienced staff from each segment of the oil industry who have worked in local and
multinational oil companies for many years and have ability to do things right. Pattern of shareholding of
HPL as at 31st December 2013 is as follows:

Serial Name of Shareholder %

1 Mr. Mumtaz Hasan Khan - Chairman & CEO 52.42
2 Fossil Energy (Private) Limited 18.56
3 Marshal Gas (Private) Limited 12.96
4 Other Shareholders 16.06
Total Shares 100.00

Vision

“To become the leading energy marketing company in Pakistan through operational excellence, talent
management, business diversification and sustainable expansion.”

Hascol Petroleum Limited steps into petroleum industry in early 2000 and soon due to their exceptional
marketing, management and strategic expertise gains a good hand of market share in petroleum
industry. Hascol ensures 365/24/7 fuel product availability through their enhance supply chain
management structure. In addition, it has expanded its retail network nationwide through installation of
new oil depots throughout the country. Hascol not only unlocked their business in HSD and PMG
products but also introduce their presence in FURNACE, LUBRICANTS, CHEMICALS and AVIATION fuel
components with their competitive pricing and quality.

Mission
“To gain recognition and leadership in the hydrocarbon and energy sectors, by maximizing customer
satisfaction and shareholder value through continuous improvement, high quality human capital,
appropriate technology and by adhering to the Company’s Core Values.”

Hascol engine works on our endeavors, their road to success is lead with experience, diversified range of
their products and facilities, and expertise. The future progress for Hascol Petroleum Limited is invested
in its stakeholders. They are a company that keeps it in front the need of its people. They believe that
Their future is secured with customers trust. Hascol implement their learnings to the development of
their dreams. Hascol dreams are that of leaders not followers.

Specific Objectives

The objective of Hascol Petroleum Limited is to create a retail network to cater the fuel needs of its
customer base through out the country reaching out to remote areas for domestic consumption and to
cater the energy needs of all the industrial clients in an efficient and profitable manner.

Oil and gas will be integral to the global energy needs for economic development for many decades to
come. We plan to transact our business in a way to ensure that we fulfill the energy needs in
environmentally and socially responsible ways.

At Hascol Petroleum Limited, it aspire to attain a high standard of performance yet being profitable as
well as strengthening our position in the competitive environments in which we operate. We work
closely with our customers, partners and policy-makers to make them available to fulfill everyone's
needs.

Main Competitors

PSO, Shell and Attock Petroleum are main competitors of HASCOL. Below are the Volume Share Trend
line comparison with its competitors
Business Units

Retail Network

Hascol Chemicals

Lubricants

AutoMax LPG

Aviation Fuel Business

Retail Network

Hascol prides itself on supplying our customers with the best quality they have come to expect over the
years. We aim to make doing business with us as smooth as possible, which is why we offer a range of
best services to make your operations run more efficiently. Hascol is a fast growing oil retail business in
Pakistan.We strive to fulfill the requirements of our valued customers by providing superior quality,
energy-efficient fuels that improve the vehicle’s performance and provide a great driving experience.

Our fuel range is carefully designed and tested to help you save fuel at no extra cost and help clean your
engine thereby improving engine efficiency. We ensure that only high quality fuel reaches your engine.
As our main focus is on utmost customer satisfaction, we believe that every customer should leave our
forecourt with a ‘WOW’ feeling. We strive to understand our customer needs and relentlessly work
towards fulfilling them by adding value in fuel and non-fuel areas.

With over 500 retail outlets in all four provinces of the country Hascol has invested in their expansion
ventures. Whether it is in the heart of a city or the remotest area of our vast country, we have all got it
covered,Catering to all our customers need, this network of retail outlets hold every essential
requirement needed for a pit stop or a regular fuel-up.

Hascol Chemicals

Hascol provide chemicals in a diverse range of industry applications. With a national bulk storage
network, our focus is on high service levels, minimum lead times and reliable delivery.

Lubricants

Hascol has arrangements with FUCHS Lubricants of Germany to produce and market full range of
Automative/Industrial Lubricants and Greases. Initially Hascol gets blending under Toll Blending
Agreement and recently they have their own blening plant in Karachi. Hascol is a major supplier of
Lubricants to Pakistan Army.

AutoMax LPG
Auto Max LPG (Liquified Petroleum Gas) is an economical , safe and environmental friendly alternate to
CNG, Petrol and Diesel. Hascol commenced operation of Automax LPG at Hascol One on 7 th April 2012.
We have converted 400 vehicles to LPG to date. At present 15 AUTOMAX LPG stations across Pakistan
are in various stages of approvals with the Government of Pakistan.

Aviation Fuel Business

HASCOL has taken another leap and entered into the Aviation business in Pakistan as a Joint venture
with one of the world’s largest conglomerate VITOL BV Netherland by signing an Aviation services
agreement in Karachi, Pakistan.

BCG Matrix
Market Share

HIGH LOW

Growth Rate STAR QUESTION MARK

Retail (PMG,HSD) AutoMax LPG

HIGH

Lubricants

CASH COW DOGS

Aviation
LOW

Hascol Chemicals
External Environment Analyses

Macro

Political – What opportunities and pressures do political bodies bring and what is the degree of public
regulations’ impact on the business?

Political factors include the influence of a political entity (party, organizations or other
type of faction) on the national level, regional level or international level. Most of the
countries consider that the oil industry (upstream and downstream) is a strategic point
in political, economic and social needs of a country, because this industry has a great
influence on transport capacity, energy production, industrial production, chemical
production, agriculture and social welfare. The energy independence is a priority
objective of every country.

Globally the most influent organization in oil production is OPEC (Organization of the
Petroleum Exporting Countries) who has more than 42, 8% of world oil production,
other considerable producers of oil or of another substituent, products are United States
of America, Countries of European Union, Russia, China, Canada and Brazil.

Hascol largely depend on Middle Eastern countries to do their business .The consumers
who have a great influence on the oil markets are United States of America, China, Saudi
Arabia, Russia, Iran and western European Union countries. For mutual gain, some
countries make trade agreement for exchanging of energy resources for money,
technology other resources or even protection.

Also a powerful influence over the production of oil and the price is made by instable
situation from the Middle East, where every conflict could disturb oil production and
transport, resulting in the rising of oil price.

National politic factors represented by grade of authority of the state, political parties,
non-governmental organizations and in some cases different factions. Grade of
authority of the state represent the power that have the government upon the society,
economy, technology, laws. Political parties influence the petroleum industries by
imposing state strategy for electoral or economic gains. In Pakistan OGRA has the
authority to draft policies and guidelines to oil firms.
Economic – What economic policies, trends and structures are expected to affect the organization, what
is this influence’s degree?

Economic factors are represented by the: influences of the supply and demand on the oil price;
influences of the supply or demand of the complementary goods; influence of the supply and
demand of substitute resources; the USD exchange rate (petrol-dollar policy); the price of the oil
barrel on the important stock exchanges; economic situation on regional and global stages.

Technolgical

The technological factors could influence an organization from inside the industry, by making
the need to acquire the last technologies (by buying equipment), techniques and methods (by
hiring a trained human resource in new techniques or train the old human resource with the
new techniques and methods). Once acquired, these factors will influence the organization from
inside. In oil industry, the technologies are used exploration, in exploitation, transport( roads, oil
tanks, pipelines), in refineries, in storage, in promoting marketing strategies, in selling; in
researching and development of the brand-new products or in upgrading the old ones, in
reducing the time of production the losses from the production process.

Legal – What laws and legislation will exert influence on the style the business is carried out?

The Oil and Gas Regulatory Authority (OGRA) regulates the refining sector of the country. It announces
ex-refinery prices, based on the import parity prices of the respective products, on a monthly basis in
accordance with changes in international prices. However, the detailed price calculations are not
available publicly, which has sometimes resulted in OGRA attracting criticism for its lack of transparency
in adjusting prices. Refineries have also voiced concerns in the past about the ex-refinery prices allowed
to them being lower than the actual prices at which the respective products are imported. Meanwhile,
questions have also been raised on the regulator’s stance concerning the protective duty on High Speed
Diesel (HSD).

The GoP enjoys a say in governance matters, not only through OGRA, but through representation on the
Board of Directors as well in some cases. However, the risk of politically motivated intervention in the
sector is mitigated by the simultaneous presence of representatives of other stakeholders

The Oil Companies Advisory Committee (OCAC) represents the refineries and the OMCs at various
forums in matters of common interest, thus, allowing interaction between oil companies and the
government. It, thus, acts as a quasi-regulator and develops suggestions pertaining to the oil and gas
sector for the GoP, besides collecting production data for the sector and coordinating import activities.
The body consists of the representatives of five of the country's refineries (PARCO, NRL, ARL, PRL and
BPPL), ten OMCs and one pipeline transportation company.

Competitive Factors

Since Hascol is largely depends on Import of petroleum products and distribution of it through their
nationwide network. As hascol needs to import their largely factor is of bargaining power with big oil
firms. Also they need to take account exchange currency factor into it.
Also their competitors like Shell PSO are big giants and to match the buyer requirement with them is a
great challenge. But through their large storage capacities and continuously improving supply chain
model , they cater buyer requirement with up to the mark.

New entrants like BYCO and BE Energy are also expanding their operations and HASCOL administration is
keeping a close eye on them and making sure not to lose any market share.

Hascol lubricants faced challenges in terms of Toll Blending process when they get stuck in raw material
to process their Toll Manufacturing. To overcome this Hascol Chemicals has revamp their toll
manufacturing process so that they can make sure that their product is available to customer in given
timelines.

Analyzing Data

Trend Analyses

HASCOL PETROLEUM LIMITED

Rupees in thousand
S YEA NET REVENUE COST OF GOOD SELLING & ADMINISTRATION NET PROFIT
No. R SOLD DISTRIBUTION EXPENSES
EXPENSES

1 2010 7,947,367 7,738,362 218,671 136,278 (274,654)

2 2011 17,093,703 16,394,426 331,418 134,670 81,606
3 2012 25,992,344 24,996,331 488,777 150,209 218,283
4 2013 49,866,589 48,506,431 591,652 229,242 391,551
5 2014 84,913,812 82,877,017 768,814 329,387 640,057
6 2015 76,856,768 74,017,815 1,053,474 366,238 1,133,237
7 2016 99,707,474 94,999,669 1,763,478 528,636 1,215,626
8 2017 174,239,633 166,850,657 2,666,666 611,439 1,401,248
9 2018 234,444,131 224,167,482 3,925,143 882,969 207,143
10 2019 86,422,752 86,314,966 2,974,960 549,057 (11,168,316)
 NET REVENUE
250,000,000

200,000,000

150,000,000

100,000,000

50,000,000

-
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

COST OF GOOD SOLD

250,000,000

200,000,000

150,000,000

100,000,000

50,000,000

-
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
 SELLING & DISTRIBUTION EXPENSES
4,500,000
4,000,000
3,500,000
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
-
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

ADMINISTRATION EXPENSES
1,000,000
900,000
800,000
700,000
600,000
500,000
400,000
300,000
200,000
100,000
-
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
 NET PROFIT
4,000,...

2,000,...

(2,000,...

(4,000,...

(6,000,...

(8,000,...

(10,000,...

(12,000,...
Statistical Analyses

Correlation

0.897538318

0.999848466
Financial Analyses

  As at 31 Dec 2018 As at 31 Dec 2017 As at 31 Dec 2016 As at 31 Dec 2015 As at 31 Dec 2014
  2018 2017 2016 2015 2014

Rupees in '000 49,485,355.00 42,183,808.00 33,710,180.00 17,915,595.00 10,974,980.00

Rupees in '000 56,874,605.00 43,798,288.00 35,034,907.00 20,171,147.00 12,058,676.00

           

Times 0.87 0.96 0.96 0.89 0.91

Current Ratio
1.00

0.80

0.60

0.40

0.20

0.00
2018 2017 2016 2015 2014
 As at 31 Dec 2018 As at 31 Dec 2017 As at 31 Dec 2016 As at 31 Dec 2015 As at 31 Dec 2014
2018 2017 2016 2015 2014
Liquidity
Current Assets Rupees in '000 49,485,355 42,183,808 33,710,180 17,915,595 10,974,980
Current Liablities Rupees in '000 56,874,605 43,798,288 35,034,907 20,171,147 12,058,676
Inventory Rupees in '000 22,615,303 18,557,106 16,477,668 8,470,018 3,473,704

Quick Ratio Times 0.47 0.54 0.49 0.47 0.62

Quick Ratio
1.00

0.80

0.60

0.40

0.20

0.00
2018 2017 2016 2015 2014
 As at 31 Dec 2018 As at 31 Dec 2017 As at 31 Dec 2016 As at 31 Dec 2015 As at 31 Dec 2014
2018 2017 2016 2015 2014
Long Term
Solvency
Total Liabilities Rupees in '000 61,447,748 47,829,176 38,544,968 20,833,450 12,517,795
Total Assets Rupees in '000 73,932,738 58,095,212 44,649,986 26,619,082 15,617,158

Debt Ratio Times 0.83 0.82 0.86 0.78 0.80

Debt Ratio
1.00

0.80

0.60

0.40

0.20

0.00
2018 2017 2016 2015 2014
 As at 31 Dec 2018 As at 31 Dec 2017 As at 31 Dec 2016 As at 31 Dec 2015 As at 31 Dec 2014
2018 2017 2016 2015 2014
Sales Rupees in '000 233,607,420 173,739,173 99,508,194 76,773,937 84,856,454
Receivable Rupees in '000 13,552,235 11,518,218 7,871,281 4,263,595 4,548,823

Receivable TO Times 17.24 15.08 12.64 18.01 18.65

Receiveable TO
20.00

15.00

10.00

5.00

0.00
2018 2017 2016 2015 2014
 As at 31 Dec 2018 As at 31 Dec 2017 As at 31 Dec 2016 As at 31 Dec 2015 As at 31 Dec 2014
2018 2017 2016 2015 2014
Rupees in
Sales '000 233,607,420 173,739,173 99,508,194 76,773,937 84,856,454
Net Rupees in
Income '000 207,143 1,401,248 1,215,626 1,133,087 640,057

Profitabilit
y Percentage 0.09% 0.81% 1.22% 1.48% 0.75%

Profitibilty Ratio
1.60%

1.20%

0.80%

0.40%

0.00%
2018 2017 2016 2015 2014
Formulating Strategies

Cost Leadership

This strategy generally consists of an organisation attempting to gain a market share by appealing to
cost-conscious or cost-restricted customers or consumers. Therefore, it is the aim of the organisation to
become the lowest-cost producer in their chosen industry. Although any organisation will aim to remove
any unnecessary costs, those employing this strategy prioritise lowering all overheads.