Islamabad August 18 2023: Losses at Hascol Petroleum Limited, a partner of Vitol, have surged to PKR 89.5 billion, resulting in the company's equity value plummeting to a negative PKR 61.1 billion by December 2022, according to company financials.
The Board firmly believes that the shareholders will be able to finalize an equity solution and the Company will be able to finalize the restructuring with the banks in next few months. Post restructuring, the Company will have sufficient liquidity to continue its operations and achieve its potential.
The year 2022 was an extremely challenging year for the country in general and the oil industry in Pakistan in particular The country saw massive devaluation of Pakistan Rupee against US Dollar wherein the exchange rate increased from Rs. 176.31 in January to Rs. 224.76 in December and the banking sector saw a significant drop in the foreign exchange reserves of the country forcing the government to set priority of import payments.
Hascol Petroleum Limited (HASCOL) reported loss of PKR 14.4 billion in 2022 due to financing cost of PKR 8,406 million on overdue loans; exchange loss both realized and unrealized amounting to PKR 4,829 million; and Depreciation and amortization (other than ROU depreciation) being a non-cash cost amounting to PKR 1,950 million.
Hascol Petroleum Limited, already faced with challenges of over-due payments to banks and non-banking creditors, faced serious liquidity crisis during the year However, focused and effective management saw the Company steer out of this tough situation with an unparalleled credit support from its main supplier and the core banking partners, who, despite of being in overdue position, continued to support the Company.
The total volume sold in 2022 was 265,295 metric tons of mixed fuel compared to 455,704 metric tons of mixed fuels in 2021. Despite lower volumes, the Company managed to reflect substantial growth in gross profit mainly due to operational efficiencies and resource optimization.
Due to the devaluation of currency against US dollar, current price mechanism for foreign exchange compensation coupled with limited LC lines the Company recorded realized exchange loss amounting to PKR 2,073 million as compared to PKR 819 million in 2021 primarily on settlement of import contracts.
The Board of Directors has carried out a detailed review of the profitability and cash flow forecast of the Company under the revised distribution and dealer margins announced by the government and continue to believe that after a successful restructuring, the issues that caused these losses will be addressed and the Company will be a strong player in the market going forward.
The Restructuring in Progress
The Board of Directors at its meeting held on 23 September 2022, approved the draft Scheme of Arrangement (SoA) under section 279 to 282 and 285 of Companies Act 2017. Subsequent to this approval, the SoA was filed before Sindh High Court at Karachi with a preliminary hearing held on 24 November 2022, whereby the honorable Sindh High Court ordered that the meeting of secured creditors and shareholders to be held for seeking approval of SoA.
In-line with the direction of Sindh High Court, the creditors meeting was held on 22 December 2022 and as a result the Board held a meeting on 13 March 2023 in which the Board taking into consideration feedback from the banks, approved a revised restructured business model of the Company. The Board also agreed to certain amendments to the SoA which have been agreed in principle with most of its banks. The Company will reconvene the creditors’ meeting to present the modified Scheme to its secured creditors for the necessary approval, once an equity solution has also been agreed, which is a requirement of the banks. Thereafter it will be submitted to the High Court.
In the meantime, the Company has received a Non-Binding Offer (NBO) from Taj Gasoline (Private) Limited on 5th June 2023 along with a Public Announcement of Intent to acquire 41% stake in the Company’s revised share capital along with management control. The Board of Directors accepted the NBO and has allowed the Taj Corporation to access the Company’s data room for due diligence under a Non-Disclosure Agreement (NDA).
The Board firmly believes that the shareholders will be able to finalize an equity solution and the Company will be able to finalize the restructuring with the banks in next few months. Post restructuring, the Company will have sufficient liquidity to continue its operations and achieve its potential.
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