COVER LETTER 7th may 2012 TABASSUM, NAFEESA Faculty Member School of Business AIUB

Subject: Submission of report on petrobangla Dear Madam

In the following pages, I have presented the Financial statement analysis report, which you had authorized us to prepare and submit by May 2012as Financial statemnt analysis course requirement.

This report will help us to know the present financial situation of TITAS GAS Ltd., aslo where to seek the information in the financial report and how to do the analysis. We have tried to gather accurate information about this topic. We sincerely hope that this report will meet your approval. We would be glad to furnish you with any clarification if required. Sincerely Yours NAME Sadi Md. Mostofa ID 09-13956-2

Imran Faisal Al Islam Md. Mainul Imtiaz Md. Asfaq Alam Md.Abdul Muhit Mujtaba

09-13988-2 09-13919-2 09-13938-2 09-13931-2

Acknowledgement

Our project was to export an agro-based product. We chose Petrobangla as our subject.

It was really a nice experience to do the project. While were passing through all the steps that is, collecting and analyzing the relevant information and trying to make valid and reliable inferences about the different problems and opportunities in exporting and their solutions, we found us to be grateful to them who helped us a lot to make it happen.

So, first of all, our gratitude along with thanks goes to The Almighty Allah for keeping everything on the right track. Then, we would like to thank our honorable faculty TABASSUM, NAFEESA for her loyal support. Wed thank all of our fellow classmates and last of all, we should appreciate our team dedication and the spirit for making us able to finish the project just by the time. At last, special thanks, gratefully

and lovingly offered to our parents, for their overall steadfast and loyal support during the preparation of this project.

Executive Summary We have tried our best to show how the financial up down can happen and how a company can match with the needs of the Petrobangla GAS Ltd. We have analyzed Petrobangla GAS Ltds many types of ratios; those were liquidity ratio, capital structure & solvency, return on investment, operating performance, asset utilization ratio, and market measure ratio at the midterm. Then we were asked to analyze further for final term to complete the circle of the course named financial statement analysis. In the final we have calculated ROCE with 3 component and 5 component, then we were asked to go for RONA and we have also calculated the net trade cycle of Petrobangla GAS Ltd. Avg. payable days outstanding, cash flow ratio,

operating activity ratio were the other calculation we has to do for this report. At last we had to do the overall calculation of the Petrobangla GAS Ltd.

Table of Content Content Introduction Graph and Interpretation ROCE RNOA Net Trade Cycle Cash Based Ratio Avg. Payable Days Outstanding Cash Flow Ratio Operating Activity Ratio Page 1-2 3 3 4 5 6 7 8 9

Overall Statement Analysis Conclusion

10 11

Introduction Bangladesh Mineral Oil & Gas Corporation (BMOGC) was created through the Presidential order #27 on March 26, 1972. The minerals operation of the corporation was segregated and vested with a new organization, Bangladesh Mineral Development Corporation (BMEDC), on 27 September 1972, through the PO # 120. The reconstituted Bangladesh Oil & Gas Corporation (BOGC) was short named Petrobangla through the ordinance # 15 of 22 August, 1974. On 13 November 1976, through the ordinance #88, the importation, refining and marketing of crude and petroleum products and vested with newly formed Bangladesh Petroleum Corporation (BPC). BOGC and BMEDC were merged into a single entity, Bangladesh Oil, Gas & Minerals Corporation (BOGMC), by the Ordinance # 21 of 11 April 1985. In a partial modification of the Ordinance by the

Law 11 of February 1989, the corporation was short named Petrobangla and given the authority to hold the shares of the companies dealing in oil, gas & minerals exploration and development. Initial scattered exploration effort for oil and gas was undertaken by private ventures. The search of oil and gas in the area constituting Bangladesh began in the later part of the 19th century through some isolated geological mapping. The first serious attempt to find oil and gas was undertaken in Sitakund in 1908 by the Indian Petroleum Prospecting Company, 18 years after the first oil discovery in Digboi, Assam. During 1923-31 Burmah Oil Company (BOC) drilled two shallow wells in Patharia. The wells were abandoned though there was a reported occurrence of oil. A total of 6 exploratory wells were drilled, there was however no discovery and the Second World War disrupted further activity. The promulgation of Pakistan Petroleum Act in 1948 introduced formal activity and infused interest of international oil companies in oil and gas exploration. The Standard Vacuum Oil Company (STANVAC) of USA, Pakistan Petroleum Ltd. (PPL) - a Burmah Oil Company affiliate and Pakistan Shell Oil Company (PSOC) took up concessions during early fifties and carried out exploration till the end of sixties. These operations saw the drilling of 16 exploration wells including the first offshore well and resulted in the discovery of 7 gas fields. During this time Oil and Gas Development Corporation (OGDC) was established as the first public sector national organization in 1961 and the root of exploration for oil and gas were firmly set in the country. OGDC started to carriy out geological and geophysical survey including gravity, magnetic and seismic, and drilled wells which soon saw success. After the liberation of Bangladesh, exploration activities gathered pace both by the national and international companies. The part of OGDC

that was in operation in Bangladesh was reorganized as Bangladesh Mineral Oil and Gas Corporation (Petrobangla) continued its exploration efforts while the Bangladesh Petroleum Act was enacted in 1974 to facilitate international participation under PSC. The offshore area of Bangladesh was divided in to 6 blocks, which were taken up by Ashland, ARCO, BODC (Japex), Union Oil, Canadian Superior Oil and Ina Naftaplin under production sharing contract. This phase of PSC ended with relinquishments by 1978. Since 1972 the operational mandate of Petrobangla have undergone modification several times. In 1974 oil import, refining and marketing was segregated under Bangladesh Petroleum Corporation, while the mineral operation, which was separate since 1972, was merged with oil and gas operation in 1985. Presently Bangladesh Oil Gas and Minerals Corporation short named Petrobangla operates oil and gas exploration, development, transmission, distribution and conversion together with development and marketing of minerals.

The logo of Petrobangla signifies its primary business of oil and gas related operations. The blue and the red segments signifies the energy emanation from gas and oil, while the overall circle signifies the integration of the whole business. The stylized letters P and B signifies Petrobangla.

Graph & Interpretation ROCE 3 Component ROCE = Profit Margin * Assets Turnover * Leverage Here, 3 component of ROCE is high in year 1

5 Component ROCE= {(Profit Margin * Assets Turnover)-Interest Burden} *Leverage*Retention Rate

Return On Net Operating Assets To calculate the return on operating assets, divide net income by the gross valuation of all assets used to create revenue. You can also use an asset valuation that is net of depreciation, but the type of depreciation calculation used can skew the net amount significantly, since some accelerated depreciation methods can eliminate as much as 45% of an assets value in its first full year of usage. Also, if a significant proportion of net income is comprised of income or losses due to extraordinary items that have nothing to do with ongoing revenue creation, then the impact of these items should be eliminated from net income for the purposes of the calculation.

In to this analysis the RONA of Petrobangla Gas Ltd. Is not constent. In recent year the RONA goes up. Because of higher sales in very recent year 2010. in the year 2010 the company cover their net income. They increase the sales it also increase the return on net operating assets. Net Trade Cycle Indicates the days in the normal cash conversion cycle of the firm. In to this analysis the Net Trade Cycle of Petrobangla Gas Ltd. Is constent. In recent year the Net Trade Cycle goes up

Cash Based Ratio Cash flow indicators focus on the cash being generated in terms of how much is being generated and the safety net that it provides to the company. These ratios can give users another look at the financial health and performance of a company. At this point, we all know that profits are very important for a company. However, through the magic of accounting and non-cash-based transactions, companies that appear very profitable can actually be at a financial risk if they are generating little cash from these profits. For example, if a company makes a ton of sales on credit, they will look profitable but haven't actually received cash for the sales, which can hurt their financial health since they have obligations to pay.

The ratios in this section use cash flow compared to other company metrics to determine how much cash they are generating from their sales, the amount of cash they are generating free and clear, and the amount of cash they have to cover obligations.

Average Payable days outstanding Days payable outstanding (DPO), defined also as days purchase outstanding, indicates how many days on average a company pay off its accounts payables during an accounting period. Here company payble days outstanding in decreased.

The cash flow coverage ratio indicates the ability to make interest and principal payments as they become due. A cash flow coverage ratio of less than one indicates bankruptcy within two years. cash Flow Ratio=

Operating Activity Analysis An accounting measure used to quantify a firm's effectiveness in extending credit as well as collecting debts. The receivables turnover ratio is an activity ratio, measuring how efficiently a firm uses its assets. In this case the firm effectively decrees their account receivable. A ratio showing how many times a company's inventory is sold and replaced over a period. Inventory turnover the Beximco Pharmaceuticals ltd are not effectively turn their inventory into the COGS. That means the most of the cash Tide up into this inventory. The quick ratio is a batter measurement than the current ratio. It provides and shows better condition of the company. As there are some current which are not much liquide, it helps to separate those and get a whole new result. The account receivable turnover ratio is increasing which is a very good sign, it means the company is giving or selling less in creadit and it will make the company more risk free.

Overall Financial Condition Analysis Petrobangla Gas Transmission & Distribution Co. Ltd (Petrobangla Gas) closed a great year ended on June 30, 2010. Financial statements of the company reveal that the company not only grew its revenue at above average rate but also improved profitability significantly in 200910. Though national gas production remained gloomy, Titas Gas distributed 11% more gas at 9.6% higher price. The company achieved least level of system loss due to better metering of distributed gas. Profitability improved more than our expectation in 200910. Earnings grew by 35% against our estimate of 8% earning growth for the year. Petrobangla Gas Transmission & Distribution Co. Ltd (Petrobangla Gas) closed a great year ended on June 30, 2010. Financial statements of the company reveal that the company not only grew its revenue at aboveaverage rate but also improved profitability significantly in 200910. Though national gas production remained gloomy, Titas Gas distributed 11% more gas at 9.6% higher price. The company achieved least level of system loss due to better metering of distributed gas. Profitability improved more than our expectation in 200910. Earnings grew by 35% against our estimate of 8% earning growth for the year. Net cash balance continues to grow. Debt to invested capital of the company is expected to decrease over next 5 years. Moreover, companys cashflow will be increasing with lower working capital requirement. If the asset transfer transaction is settled in cash, Titas Gass cash balance will improve significantly. Net interest income (interest income less interest expenses) accounted for more than 12% of the profit before tax in FY 200910. Interest yield on financial assets was

7.1% against before tax cost of debt of 3.3%. Net interest income may contribute more to the earning of the company as general level of interest is increasing, interest bearing debts are fixed rate and level of debt is declining. But deploying the excess cash in marginally profitable ventures will remain a challenge for the company.

Conclusion Petrobangla markets gas to various customers through its marketing companies. There are now five marketing companies operating in their respective franchise areas. The companies are Titas Gas T & D Company Ltd., Bakhrabad Gas System Ltd., Jalalabad Gas T & D System Ltd., Pashchimanchal Gas Co. Ltd.,Karnafuli Gas Distribution Co.Ltd. the search of oil and gas in the area constituting Bangladesh began in the later part of the 19th century through some sporadic geological mapping. The first serious attempt to find oil and gas was undertaken in Sitakund in 1908 by the Indian Petroleum Prospecting Company. During 1923-31 Burmah Oil Company (BOC) drilled two shallow wells in Patharia. The wells were abandoned though there was a reported occurrence of oil. A total of 6 exploratory wells were drilled, the deepest being 1047 meters. There was however no discovery and the Second World War disrupted further activity.