Abstract:
This project aims to analyze the performance of the oil and
gas industry in Pakistan with respect to its capital
structure. The fo~us is on identifying the differences in
profitability/ liquidity and solvency of all the listed
firms in this sector keeping in mind the leverage these
firms enjoy. This study reveals that the two categories of
oil and gas companies in Pakistan i.e. the exploration
companies and the. marketing companies vary a lot in their
performance indicators. The marketing companies have more
debt in their capital structure r have higher revenues but
their profit margins are lowr and their asset turnover is
much better than that of exploration companies. The
exploration companies on the other hand are more equity
financed/ highly solvent/ with an exceptional ability to
pay-off their short-term liabilities and earn moderate to
high returns for their share-holders.
The target firms in this study are divided into two
categories. One category is the oil and gas exploration
companies/ which are four in number; while the other
category is of five oil and gas marketing companies
bringing the total sample size to 9 firms. This study
focuses on the domestic firms only and no foreign companies
are examined in this study. The methodology was to analyze
the performance of these firms through information provided
in the annual reports of the companies for a period of six
years i.e. July · 2003 to June 2008. Besides the annual
reports r the stock market performance of these firms has
been evaluated for the said period/ and cumulative average
returns have been calculated for each year in question.
