The board of directors of Pakistan Petroleum Limited (PPL) unearthed a possible scam as the company acquired MND Exploration and Production at a price twice as much as its actual market value.
PPL reported that it acquired MND in fiscal year 2012-13 for Rs12.81 billion against its actual market value of Rs6.21 billion. Both prices did not include the working capital of Rs2.84 billion. The acquisition caused a net loss of Rs6.6 billion to PPL.
PPL acquired 100% shareholding in MND, a company incorporated in England and Wales, from MND E&P on the valuation conducted by an “internal technical team of the company (PPL),” Shahana Ahmed Ali, PPL Company Secretary, said in a notification to the Pakistan Stock Exchange on Wednesday.
In fiscal year 2015-16, PPL hired RPS Energy Consultants for carrying out an independent technical valuation of the assets of MND Exploration and Production. “The valuation was completed on June 30, 2016. Significant differences were highlighted in the valuation of the investment as a result of the consultant’s report …,” she said.
“The consultant reported that the value of the investment at the time of acquisition was Rs6.21 billion…as against the cost (Rs12.81 billion excluding working capital) paid at the time.”
Accordingly, the company corrected the amount reported in its financial statements for the year ended June 30, 2013, 2014 and 2015 retrospectively in accordance with requirements of the International Accounting Standard 8 – Accounting Policies, Changes in Accounting Estimates and Errors.
Meanwhile, PPL announced that it made a net profit of Rs16.06 billion in the year ended June 30, 2016, which was 60% lower than Rs38.20 billion earned in the preceding year.
This translated into earnings per share of Rs8.15 compared to Rs19.38 in the previous year.
Analysts attributed the massive decline in profit to lower sales value and higher field expenditures.
Net sales in rupee terms dipped approximately 24% to Rs80.80 billion from Rs105.94 billion last year.
Nabeel Khursheed, an analyst at Topline Securities, said in a note to clients that PPL’s revenues shrank on the back of lower Arab Light Crude prices, which was the benchmark for Pakistan.