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Pakistan Oilfields Limited

Annual Report 1999

CONTENTS

Pakistan Oilfields Limited (Group & Company)

COMPANY INFORMATION

Directors

Ghaith R. Pharaon

Chairman

Rashid M. Chaudhry

Alternate Director

Munir Ahmad

Shuaib A. Malik

Lt. Gen. (R) Talat Masood

Mohammad Raziuddin

Arif Kemal

Chief Executive

Shahid Ahmad

Iqbal A. Khwaja

Zakauddin Malik

Laith G. Pharaon

Babar Bashir Nawaz

Alternate Director

Abdus Sattar

Company Secretary

Iqbal A. Khawaja

FCA

Legal Adviser

Jillani & Associates

Auditors & Tax Adviser

A.F. Ferguson & Co.

Chartered Accountants

Registered Office

P.O.L. House, Morgah, Rawalpindi

Notice of Annual General Meeting

Notice is hereby given that the FORTY-EIGHTH Annual General Meeting (being the Fifty-ninth

General Meeting) of the Company will be held at Hotel Pearl Continental, Rawalpindi on Wednesday,

December 08, 1999 at 11:00 A.M. to transact the following business:

1. To confirm the minutes of the Fifty-eighth General Meeting of the Company held on Wednesday,

June 23, 1999.

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

and Auditors' Reports for the year ended June 30, 1999.

3. To declare final cash dividend of 20% as recommended by the Board of Directors for the year

ended June 30, 1999.

4. To appoint auditors for the year ending June 30, 2000 and fix their remuneration. The present

auditors Messrs. A. F. Ferguson & Co., Chartered Accountants, retire and being eligible, offer

themselves for reappointment.

5. To transact any other business 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 year ended

June 30, 1999 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

November 28, 1999, in the proportion of one new share for every five 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 year ended

June 30, 1999.

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, as an ordinary resolution:

"Resolved that the Memorandum of Association of the Company be and is hereby altered by

substituting for clause 5 the following new clause namely:

The Capital of the Company is Rs 1 billion divided into 100 million ordinary shares of

Rs 10 each."

BY ORDER OF THE BOARD

Registered Office:

POL House,

Morgah, Rawalpindi

IQBAL A. KHWAJA

November 14, 1999

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 November 29, 1999 to December 08, 1999 (both days inclusive).

Transfers received in order at the Registered Office of the Company by the close of business on

November 28, 1999 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 notify any change in their addresses.

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

1. Issue of Bonus Shares

The Directors are of the view that Company's financial position and its reserves justify the

capitalisation of free reserves amounting to Rs 76,050,000 for the issue of bonus shares in the

ratio of one bonus share for every five 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. Increase in Authorised Capital

After capitalisation of free reserves of Rs 76.05 million the Company's Issued Capital will be

Rs 456.30 million. This will leave a very little margin between the Company's Issued and

Authorised Capital which at present is Rs 500 million. To enhance this margin to a comfortable

level it is proposed to increase the Authorised Capital to Rs 1 billion.

Chairman's Review

In the name of Allah, Most Gracious, Most Merciful

Assalam-o-Alaiykum

I have pleasure in presenting the review of

operations and audited financial statements of

your Company for the year ended June 30, 1999.

THE BOARD

Certain changes took place in the composition

of the Board at the election of directors in the

extraordinary general meeting held on June 23,

1999. Mr. M. Salim and Mr. Khalid A. Ghazi

retired from the Board and their places were

taken up by Mr. Mohammad Raziuddin and

Mr. Iqbal A. Khwaja. I welcome the directors

joining the Board and would like to place on record

appreciation of the services of the outgoing directors.

FINANCIAL RESULTS

During the year under review the oil industry

experienced the biggest slump in crude oil prices

which were at their lowest level for the last two

decades. Average price achieved for POL crude

oil was US $12.98 per barrel as compared to

US $15.90 per barrel for the last year. However,

the decline in crude oil prices did not adversely

affect sales revenues which went up to Rs 1.91

billion from Rs 1.85 billion in 1997-98. This is due

to timely action taken by the management in en-

hancing production of gas, LPG and solvent oil.

Your Company has earned a profit after tax of

Rs 179 million for the year ended June 30, 1999.

The Company has contributed Rs 236 million to

the national exchequer and effected exchange

saving for the country to the tune of US $ 40

million during the year.

PRODUCTION

A comparison of total production of crude oil and

other products from POL's 100% own producing

fields and its share from all joint ventures is given

below:

1998-99

1997-98

Crude oil

US barrels

1,345,686

1,433,061

Gas

Million cubic feet

9,300

6,594

LPG

Metric tonnes

30,988

25,770

Sulphur

Metric tonnes

2,167

2,096

Solvent oil

US barrels

76,715

61,167

POL's OWN PRODUCING FIELDS

POL's average daily production from its 100%

owned fields during the year was 978 barrels of

oil (BOPD), 14.13 million cubic feet (MMCFD) of

gas, 36 barrels (BPD) of solvent oil, 49 metric

tonnes of LPG and 6 metric tonnes of sulphur.

Production from own fields has reduced sharply

due to decline in reservoir pressures at Meyal.

During the year under review processing of

127 km. seismic data of Meyal mining lease was

completed and a Reservoir Simulation Study was

initiated which is nearing completion. POL is

planning a workover operation at Meyal well

# 9 where horizontal drilling will be carried out

to encounter the producing Jurassic reservoir

target.

Subsequent to our last successful workover in

Dhulian which resulted in significant increase in

production, the Government has granted us D&P

Lease renewal for a period of 3 years.

At Balkassar, re-processing of 3-D seismic data

has been completed. Initial results appear

positive for further development drilling. Your

Company plans to implement a work programme

including drilling of a horizontal well subject to

finding a suitable location and viable economics.

Efforts are also being made to find a joint

venture partner.

JOINT VENTURES (OWN OPERATED)

PRODUCING FIELDS

Soan Concession (Pindori Development &

Production Lease)

Pindori field averaged 1,505 BOPD, 5.62 MMCFD

of gas, 419 BPD of solvent oil and 26 metric

tonnes per day of LPG. POL owns 35% of this

production.

Pindori # 4 development well was drilled to a

total depth of 13,345 feet into the Sakessar

Formation of Eocene age. The well was put

on production on July 12, 1999 and is now

producing around 3,200 BOPD, 9 MMCFD of

gas, 200 BPD of solvent oil and 35 metric tonnes

per day of LPG.

It is planned to drill a development well Pindori

# 5 in the first quarter of year 2000.

Ahmadal Concession (Pariwali Development

& Production Lease)

Seismic interpretation of the re-processed data

was completed and a revised development plan

was submitted to the Government. Pariwali # 3

development well has been spudded on

October 22, 1999.

Total average production from Pariwali field was

1,007 BOPD, 9.24 MMCFD of gas, 26 BPD of

solvent oil and 24 metric tonnes per day of LPG.

POL has 82.5% working interest in this field.

Minwal Development & Production Lease

In order to achieve a better definition of

sub-surface structure 130 line km. of 2-D

seismic data is being re-processed for possible

future development purposes.

Minwal well # X-1 remained on production during

the report period at an average of 325 BOPD of

which POL's share is 82.5%.

JOINT VENTURES (NON OPERATED)

PRODUCING FIELDS

Dhurnal (North Potwar Block)

Average production from Dhurnal was 1,165

BOPD, 5.26 MMCFD of gas and 16 metric tonnes

per day of LPG. The field is on a continuous steady

decline.

POL has 5% interest in this concession which is

under the operatorship of Orient Petroleum Inc. (OPI).

Bhangali (Soan Block)

Subsequent to the workovers on Bhangali-1 and

Bhangali-2 and putting the wells on gas lift the

production has been increased from this field. At

present, average production from Bhangali field,

operated by OPI is 723 BOPD and 1.72 MMCFD

of gas. POL has 7% interest in this field.

Ratana

A coil tubing workover job at Ratana-3 was

attempted without any success. OPI, the

operator, is planning further workovers on Ratana

2 and 3 in an effort to revive the production.

Average daily production for the year was 132

barrels of condensate and 4.04 MMCF of gas.

POL has 4.54% interest in Ratana field.

Chak Naurang

Average production of 677 BOPD was achieved

during the year under review from Chak Naurang

field operated by Oil & Gas Development

Company Limited (OGDCL).

POL's share in this fields is 15%.

East Badin Ext. Block-B:

Sara Development and Production Lease

Agreement with Water & Power Development

Authority (WAPDA) for gas sales has been signed

on March 26, 1999. Meanwhile, laying of

pipeline from SARA to MARl is in progress and

installation of gas processing facilities is

underway.

Suri Discovery Area

Tullow as operator has applied for one year

renewal of the licence over Suri Discovery area

and has proposed a workover programme

to evaluate Suri-1 well. Negotiations between

operator and the Government are in progress

to obtain Government's approval for appraisal

extension in respect of Suri discovery area.

After the Government's approval, Tullow plans

to put Suri-1 on extended test production during

1999 to appraise the discovery.

POL has 22.97% interest in exploration and

14.54% interest in development and production

phase.

EXPLORATION & DEVELOPMENT

Your Company continued exploration activities

throughout the year under review, a summary of

each area is highlighted below:

Khudadad Concession

Khudadad well # 1 was re-entered on August 10,

1998. This well was drilled from 16,979 feet to

a total depth of 17,608 feet into the Sakessar

Formation. While testing the open hole section

and cleaning of hole a fish was left in the well. A

workover job using POL's own rig was done

and after unsuccessful attempts to recover the

fish a sidetrack hole was drilled to 17,573 feet.

The well was tested barefoot from the Sakessar

Formation but without any encouraging results

even after acidization. Well was suspended for

further post drill evaluation purposes.

POL has 95% working interest in this

concession and carries 5% working interest of

Government Holdings during the exploration

phase.

Central Potwar Concession

Turkwal Horizontal-1 continued to produce at an

average rate of 1,286 BOPD, 1.76 MMCFD of

gas, 9 BPD of solvent oil and 9 metric tonnes of

LPG per day. Exploration costs of Rs 101

million relating to TurkwaI-H.1 have been

capitalised in the accounts.

Your Company as operator has been successful

in obtaining approval of commerciality of Turkwal

field from the Government in August 1999.

Turkwal Deep X-1 well was drilled to a total depth

of 14,509 feet in Sakessar Formation. The well

could not be put on extended testing due to

collapsed casing. This well is temporarily

suspended and a. workover has been planned to

be carried out.

The re-processing of 119 line km. of 2-D seismic

data using Pre-Stack Depth Migration was

completed. Second exploratory well Turkwal

Deep X-2 has been spudded on August 10, 1999.

Drilling is in progress below 6,500 feet. The

well is intended to be drilled to a total depth of

14,000 feet.

Your Company has 80% working interest during

exploration phase in this block and carries 67.37%

interest in the production phase which is at present

applicable to Turkwal Horizontal-1.

Cholistan Exploration Licence

POL has fulfilled its work obligation under the

concession agreement for the first two years.

Seismic interpretation has identified a low

relief anomaly. However, in order to define this

anomaly as viable drillable prospect an in depth

evaluation requiring further study is needed.

At this stage POL is required to commit drilling

of an exploratory well or surrender the area.

Considering the potential risk, POL has given the

notice to surrender the concession.

Southern Sind Concession

The processing of newly acquired 277 km.

and re-processing of previous 500 line km.

of seismic data was completed and its

interpretation in the western part has identified

two prospects.