REPORTFORTHENINEMONTHSENDEDMARCH31,2010

Whereveryougo,we’retheretoo

WEAVINGTHENETWORKOFOURNATION

Takealookaroundyou,andchancesareyou'llfindus there; somewhere near you, and everywhere inPakistan, from the airport in your city, to theindustrialsectortoquitepossibly,thecarrightnexttoyoursontheroad.

That'sbecausemostpeoplechoosePSO’sproductsoveranyotherinthecountry,aswefuelairandseaports, government entities, armed forces, railways,theagriculturesector, IPPsand industrialunitswithmaximumefficiency.Sowhereveryougo,you'llfindusthere-engineeringinnovationswithaportfolioofproductsand solutions that no other companycanoffer. With more than 3,600 retail outlets servingapproximately 2.8 million retail customers dailyalongwith2,000industrialunitsandbusinesshousesand a fleetof 6,000 tank lorries, tankwagons andpipelines,PSOhasthelargestdistributionnetworkinthecountry.We take great pride in maintaining our tradition ofexcellence with our commitment to meet the energyneedsoftodayandtherisingchallengesoftomorrowbyanticipatingfutureneedsbeforetheyarise,withthebenefitofourconsumersandinvestorsinmind.Becausethinkingaheadistheonlywayofstayingahead.

CompanyInformation

BOARDOFMANAGEMENT

MalikNaseemHussainLawbarChairman

Mr.IrfanK.QureshiManagingDirector

Mr.SabarHussainMember

Mr.MahmoodAkhtarMember

Mr.OsmanSaifullahKhanMember

Mr.PervaizA.KhanMember

Mr.HammayunJogezaiMember

Dr.AbidQ.SuleriMember

Mr.NazimF.HajiMember

COMPANYSECRETARYMirShahzadK.Talpur

AUDITORSKPMGTaseerHadi&Co.M.YousufAdilSaleem&Co.

SOLICITORSOrrDignam&Co.

REGISTEREDOFFICEPakistanStateOilCo.Ltd.PSO House - Khayaban-e-Iqbal,Clifton,Karachi75600,PakistanTel:(92-21)111-111-PSO(776)Fax:(92-21)9920-3721Helpline:0800-03000Website:www.psopk.com

BANKERSAlliedBankLimitedAskariBankLimitedBankAl-FalahLimitedBankAl-HabibLimitedBankIslamiPakistanLimitedCitibankN.ADeutscheBankAGFaysalBankLimitedHabibBankLimitedHabibMetropolitanBankLimitedJSBankLimitedMCBBankLimitedMeezanBankLimitedNationalBankofPakistanNIBBankLimitedSambaBankLimitedStandardCharteredBank(Pakistan)LimitedTheHSBCBankMiddleEastLimitedTheRoyalBankofScotlandLimitedUnitedBankLimited

ReporttoShareholders

The Board of Management of Pakistan State Oil (PSO) has reviewed theperformanceoftheCompanyfortheninemonthsperiodendedMarch31,2010andispleasedtopresentyourCompany’sthirdquarterperformancereport.

Internationaloilpricescontinuedtoshowarelativelystableupwardtrendduringtheninemonthperiodrangingbetween$60/bbl-$80/bbl.

Despitestiffchallenges,thethirdquarterperformanceofyourCompanyshowsapositivepicture.Intheperiodunderreview,PSO’ssalesrevenuetouchedRs.627billionascomparedtoRs.540billionduringthecorrespondingperiodlastyear.YourCompanymanagedtoreportearningsaftertaxforthethirdquarterofRs.2.5billion,accumulatingtoRs.7.5billionforthenine-monthperiodversusalossofRs9.3billionduringthecorrespondingperiodlastyear.

Duringthereviewperiod,industryPOLvolumesimprovedby9.4%whereasPSO’svolumesincreasedby8.1%.ThisincreaseisprimarilyonaccountofhighvolumesofFurnaceOilandMotorGasoline(Mogas).Duringtheperiod,yourCompany’s FO volumes grewby 15.2%, well over the industry average of12.5%.Moreover,intheWhiteOilsegment,PSO’sMogasandJP1volumesgrewby 27.5%and 8.9% respectively. Here it is pertinent to mention that yourCompanypostedarecordmonthlyMogassaleofapproximately93,000MTsinMarch2010.ThethirdquarteralsowitnessedtheresumptioninsalesofE-10inSindhaftercompletionofcertainproceduralformalities.E-10,theenvironmentalfriendlyandcostefficientfuelhasbeenacceptedverywellamongstthemassessinceitsre-launch.YourCompany’smarketshareintheBlackOilandWhiteOilsegmentsstoodat 88.3%and55.6%,respectively therebycontributing to anoverallmarketshareof70.8%attheendoftheperiod.

Inspiteofsuchrobustperformance,thecirculardebtcrisiscontinuestoremainagraveconcern.AsonMarch31,2010,PSO’sreceivablesstoodatanalarmingRs.108billion.ThishasresultedinresortingtoheavyborrowingsresultinginyourCompanyincurringhighfinancialcharges.YourCompanyisworkingcloselywiththeGovernmentofPakistanandIPP’sforrecoveryofthesereceivables.KeepinginviewtheextraordinarysurgeinreceivablesandtheadverseliquiditypositionoftheCompany,theBoardhasdecidedtodeferdividendsatthisstage.

During the quarter, a Memorandum of Understanding (MoU) was signedbetweenyourCompanyandKarachiPortTrust(KPT)tojointlyundertakeastudytoconnectKeamariwithPortQasimthroughawhiteoilpipeline.

YourCompanyhasalsosignedaMemorandumofUnderstanding(MoU)withTransparency International Pakistan. In addition to strengthening yourCompany’scommitmenttowardsbestpractices,thisinitiativewillalsofacilitateinfurtherimprovingitsprocurementprocedures.

TheBoardexpressesitsgratitudetotheGovernmentofPakistanforitscontinuedeffortstoresolvethecirculardebtissue.Moreover,theBoardisconfidentthat,givenitsinherentstrengthsandsupportoftheGOP,yourCompanywillcontinuetoovercomeallthechallengesimposedbyglobalandlocalmarketdynamicsandshallcontinuetomaintainitsleadershippositionwithintheenergysector.

Karachi,April22,2010

MalikNaseemHussainLawbarChairman

CondensedInterimBalanceSheet(Un-audited)asatMarch31,2010

MalikNaseemHussainLawbarChairman

ASSETS

Non-CurrentAssets

Property,plantandequipmentIntangiblesLongterminvestmentsLongtermloans,advancesandreceivablesLongtermdepositsandprepaymentsDeferredtax

CurrentAssets

Stores,sparepartsandloosetoolsStock-in-tradeTradedebtsLoansandadvancesDepositsandshorttermprepaymentsOtherreceivablesTaxation-netCashandbankbalances

NetAssetsinBangladesh

EQUITYANDLIABILITIES

ShareCapitalReserves

Non-CurrentLiabilities

LongtermdepositsRetirementandotherservicebenefits

CurrentLiabilities

TradeandotherpayablesProvisionsAccruedinterest/mark-upShorttermborrowingsTaxespayable

ContingenciesandCommitments

Theannexednotes1to16formanintegralpartofthesefinancialstatements.

Note

45

6

7

8

9

10

Un-auditedMarch31,2010

AuditedJune30,2009

6,312,77840,324

2,390,408289,97990,721

3,819,539

12,943,749

109,18243,182,366

108,277,693756,822320,341

13,630,913-

3,263,488

169,540,805

-182,484,554

1,715,19026,288,793

28,003,983

931,8372,002,363

2,934,200

136,532,117688,512391,404

12,918,7241,015,614

151,546,371

182,484,554

-

(Rupeesin’000)

6,987,02568,872

2,153,514405,78083,655

5,033,273

14,732,119

112,14340,698,20980,509,830

418,015551,803

12,806,779709,627

2,883,118

138,689,524

-153,421,643

1,715,19019,155,595

20,870,785

854,7181,673,020

2,527,738

110,123,702688,512556,380

18,654,526-

130,023,120

153,421,643-

-

MalikNaseemHussainLawbarChairman

CondensedInterimProfitAndLossAccount(Un-audited)

fortheninemonthsperiodendedMarch31,2010

Sales - net of trade discounts and allowances amounting to Rs. 723,941 thousand (July 2008 - March 2009: Rs. 46,217 thousand)

Less:- Sales tax- Inland freight equalization margin

Net sales

Cost of products sold

Gross profit / (loss)

Other operating income

Operating costs

Transportation costsDistribution and marketing expensesAdministrative expensesDepreciation and amortisationOther operating expenses

Other income

Profit / (Loss) from operations

Finance costs

Share of profit of associates

Profit / (Loss) before taxation

Taxation

Profit / (Loss) after taxation

Earnings (Loss) per share

March 31, 2010

March 31, 2009

March 31, 2010

March 31, 2009

627,318,717 540,243,829 213,383,365 148,695,951

(84,644,262) (72,993,830) (28,678,474) (20,329,708) (11,517,193) (6,010,683) (3,758,638) (1,789,506) (96,161,455) (79,004,513) (32,437,112) (22,119,214)

531,157,262 461,239,316 180,946,253 126,576,737

(511,354,350) (464,713,601) (174,662,720) (122,326,552)

19,802,912 (3,474,285) 6,283,533 4,250,185

1,091,297 1,056,696 348,540 355,874 20,894,209 (2,417,589) 6,632,073 4,606,059

(439,180) (389,332) (152,972) (103,474) (2,888,529) (2,591,428) (965,564) (769,854)

(914,607) (892,159) (360,944) (346,806) (887,830) (888,594) (295,509) (300,580)

(1,674,893) (4,054,878) 26,130 (493,147) - -

(6,805,039) (8,816,391) (1,748,859) (2,013,861) 4,629,680 691,894 2,339,896 195,963

18,718,850 (10,542,086) 7,223,110 2,788,161

(7,617,951) (4,679,554) (3,741,419) (1,753,932)

11,100,899 (15,221,640) 3,481,691 1,034,229 404,840 392,902 141,291 171,272

11,505,739 (14,828,738) 3,622,982 1,205,501

(3,971,585) 5,559,531 (1,172,563) (425,541)

7,534,154 (9,269,207) 2,450,419 779,960

43.93 (54.04) 14.29 4.55

Nine months period ended Quarter ended

(Rupeesin’000)

Rupees

Theannexednotes1to16formanintegralpartofthiscondensedinterimfinancialinformation.

CondensedInterimStatementofComprehensiveIncome(Un-audited)fortheninemonthsperiodendedMarch31,2010

MalikNaseemHussainLawbarChairman

Profit/(loss)fortheperiod

OtherComprehensiveIncome

Unrealisedgain/(loss)duetochangeinfairvaluesofotherlong-term

investments

Unrealisedgain/(loss)duetochangeinfairvaluesofinvestmentsin

associates

Totalcomprehensiveincomefortheperiod

Theannexednotes1to16formanintegralpartofthiscondensedinterimfinancialinformation.

March31,2010 March31,2009 March31,2010 March31,2009------------------------------(Rupeesin’000)------------------------------

7,534,154 (9,269,207) 2,450,419 779,960

111,072

(522,600)

(83,604)

(188,817)

2,529 (6,194) 685 982113,601 (528,794) (82,919) (187,835)

7,647,755 (9,798,001) 2,367,500 592,125

Ninemonthsperiodended Quarterended

CondensedInterimCashFlowStatement(Un-audited)fortheninemonthsperiodendedMarch31,2010

MalikNaseemHussainLawbarChairman

CASHFLOWSFROMOPERATINGACTIVITIES

Cashgeneratedfrom/(utilisedin)operatingactivities

Decreaseinlong-termloansandreceivables

(Increase)/Decreaseinlong-termdepositsandprepayments

Taxespaid

Financecostspaid

Retirementbenefitspaid

Netcashinflow/(outflo w)fromoper atingactivities

CASHFLOWSFROMINVESTINGACTIVITIES

Acquisitionofproperty,plantandequipment

Purchasesofintangibles-computersoftware

Proceedsfromdisposalofproperty,plantandequipment

Dividendsreceived

Netcashinflowfrominvestingactivities

CASHFLOWSFROMFINANCINGACTIVITIES

Proceedsfromlong-termdeposits

Proceedsfromshort-termborrowings

Dividendspaid

Netcashinflow/(outflo w)fromfinancingacti vities

Netincrease/(decrease)incashandcashequivalents

Cashandcashequivalentsatbeginningoftheperiod

Cashandcashequivalentsatendoftheperiod

Theannexednotes1to16formanintegralpartofthesefinancialstatements.

NoteMarch31,

2010March31,

2009

(Rupeesin’000)

Ninemonthsperiodended

12 9,366,610 (924,641)

115,801 91,241

(7,066) 301

(1,032,610) (1,331,438)

(1,789,027) (4,209,233)

(221,652) (262,499)

6,432,056 (6,636,269)

(195,907) (227,235)

(10,056) -

5,386 15,553

341,488 438,750

140,911 227,068

77,119 31,549

5,326,195 9,416

(533,914) (2,022,059)

4,869,400 (1,981,094)

11,442,367 (8,390,295)

(11,510,325) (7,190,672)

(67,958) (15,580,967)

fortheninemonthsperiodendedMarch31,2010CondensedInterimStatementofChangesinEquity(Un-audited)

MalikNaseemHussainLawbarChairman

BalanceasatJune30,2008Totalcomprehensiveincomefortheninemonthsper iod

Lossfortheninemonthsper iodendedMarch31,2009

Unrealisedlossduetochangeinfairvaluesofotherlong- terminvestments

Unrealisedlossduetochangeinfairvaluesofinvestmentsin associates

Finaldividendfortheyear endedJune30,2008@Rs.12.5pershare

Interimdividendfortheyear endingJune30,2009@Rs.5pershare

Transferto generalreserve

BalanceasatMarch31,2009

Totalcomprehensiveincomeforthethreemonthsper iod

ProfitforthequarterendedJune30,2010

Unrealisedgainduetochangeinfairvaluesofotherlong- terminvestments

Unrealisedgainduetochangeinfairvaluesofinvestmentsin associates

Transferfromgeneralreserve

BalanceasatJune30,2009

Totalcomprehensiveincomefortheninemonthsperiod

ProfitfortheninemonthsperiodendedMarch31,2010Unrealisedgainduetochangeinfairvaluesofotherlong- terminvestments

Unrealisedgainduetochangeinfairvaluesofinvestmentsin associates

Interimdividendfortheyear endingJune30,2010@Rs.3pershare

BalanceasatMarch31,2010

Theannexednotes1to 16formanintegralpartofth iscondensedinterimfinancialinformation.

Share Capital Unrealised Shareof General Unappropriated Totalcapital reserv e gain/(loss) unrealisedgain/ reserv e profit/

onother (loss)of (accumulatedlong-term investmentsin loss)

investments associates

- ------- ------- -------- ------- -------- ------- ------- ----(Rupeesin’000)-- -------- ------- ------- -------- ------- -------- ------

1,715,190 3,373 938,623 (2,248) 16,139,968 12,170,148 30,965,054

- - - - - (9,269,207) (9,269,207)

- - (522,600) - - - (522,600)

- - - (6,194) - - (6,194)- - (522,600) (6,194) - (9,269,207) (9,798,001)

- - - - - (2,143,986) (2,143,986)

(857,595) (857,595)

- - - - 10,000,000 (10,000,000) -

1,715,190 3,373 416,023 (8,442) 26,139,968 (10,100,640) 18,165,472

- - - - - 2,570,672 2,570,672

- - 134,635 - - - 134,635

- - - 6 - - 6- - 134,635 6 - 2,570,672 2,705,313

- - - - (857,595) 857,595 -

1,715,190 3,373 550,658 (8,436) 25,282,373 (6,672,373) 20,870,785

- - - - - 7,534,154 7,534,154

- - 111,072 - - - 111,072

- - - 2,529 - - 2,529- - 111,072 2,529 - 7,534,154 7,647,755

- - - - - (514,557) (514,557)

1,715,190 3,373 661,730 (5,907) 25,282,373 347,224 28,003,983

FortheninemonthsperiodendedMarch31,2010NotestotheCondensedInterimFinancialInformation(Un-audited)

1. LegalStatusandNatureofBusiness

PakistanStateOilCompanyLimited('theCompany')isapubliccompany incorporatedinPakistanundertheCompaniesAct,1913(nowCompanies Ordinance,1984)andlistedontheKarachi,LahoreandIslamabadstock exchanges. The address of its registered office is PSO House, Khayaban-e-Iqbal,Clifton,Karachi.TheprincipalactivitiesoftheCompany areprocurement,storageandmarketingofpetroleumandrelatedproducts. Italsoblendsandmarketsvariouskindsoflubricatingoils.

TheBoardofManagement-Oil('theBoard'),nominatedbytheFederal Government underSection 7of theMarketingof PetroleumProducts (Federal Control) Act, 1974 ('the Act'), manages the affairs of the Company.TheprovisionsoftheActshallhaveeffectnotwithstanding anything contained in the Companies Act, 1913 (now Companies Ordinance,1984)ortheCompanies(ManagingAgencyandElectionof Directors)Order,1972(P.O.No.2of1972),oranyotherlawforthe timebeinginforceoranyagreement,contract,MemorandumorArticles ofAssociationoftheCompany.

2. BasisofPreparation

Thiscondensedinterimfinancialinformationisun-auditedandhasbeen preparedandisbeingsubmittedtotheshareholdersinaccordancewith section 245 of the Companies Ordinance, 1984 and International AccountingStandard34‘InterimFinancialReporting’.Thiscondensed interim financial information does not include all the information requiredforannualfinancialstatementsandshouldbereadinconjunction withtheannualfinancialstatementsfortheyearendedJune30,2009.

3. AccountingPolicies,JudgementsandEstimates

3.1 The accounting policies adopted in the preparation of this condensed interim financial information are the same as those appliedinthepreparationoftheauditedannualpublishedfinancial statementsoftheCompanyfortheyearendedJune30,2009except amendments in International Accounting Standard 1 (Revised) ‘PresentationofFinancialStatements’whichbecameeffectivefor financial periods beginning on or after January 1, 2009. The application of this standard has resulted in certain increased disclosures including the condensed interim statement of comprehensiveincomewhichhasbeenreflectedinthiscondensed interimfinancialinformation.

IFRS 8 ‘Operating segments’ also became effective from January1,2009whichrequiresanentitytodetermineandpresent operating segments based on the information that is provided internally to the Company's Chief Operating Decision Maker (CODM)thatis,theCompany'sfunctionwhichallocatesresources toandassessesperformanceofitsoperatingsegments.Currently, themanagement hasdeterminedthattheCompanyhas asingle reportablesegmentandthereforetheadoptionofthesaidIFRShas onlyresultedinsomeentitywidedisclosuresasgiveninnote13to thiscondensedinterimfinancialinformation.

3.2 Thepreparationofthiscondensedinterimfinancialinformationin conformitywith the approved accountingstandards requires the use of certain critical accounting estimates. It also requires managementtoexerciseits judgementintheprocessofapplying theCompany’saccountingpolicies.Estimatesandjudgementsare continuallyevaluatedandarebasedonhistoricalexperienceand other factors, including expectations of future events that are believedtobereasonableunderthecircumstances.

In preparing this condensed interim financial information, the significant judgements made by management in applying the Company’saccountingpoliciesandthekeysourcesofestimation anduncertaintywerethesameasthosethatappliedtofinancial statementsasatandfortheyearendedJune30,2009.

4. Property,PlantandEquipment

4.1 Capitalizationofoperatingfixedassetsduringtheperiod/yearwere asfollows:

5. Intangibles

AdditionsmadeduringtheperiodamountedtoRs.10,056thousand (June30,2009:Rs.15,985thousand).

6. DeferredTax

As atMarch31, 2010, theCompanyhas recognised deferred tax asset amounting to Rs. 3,819,539 thousand (June 30, 2009: Rs.5,033,273thousand).Thisdeferredtaxassethasbeenrecognised onthebasisthatadequatefuturetaxableprofitswillbeavailableto utilisetheseunusedtaxlosses.

The deferred tax asset recognised on provision for retirement benefits, doubtful receivables / debts and carried forward taxable losses etc. as at March 31, 2010 amounted to Rs. 2,033,300 thousand(June30,2009:Rs.5,905,217thousand)whereasdeferred tax liability recognised on accelerated tax depreciation etc. as at March31,2010amountedtoRs.781,236thousand(June30,2009: Rs.871,944thousand).

During the period, assets costingRs. 18,152 thousandhaving netbookvalue of Rs. 2,549thousandweredisposedoffor Rs. 5,386thousand.

Un-audited AuditedMarch31, June30,

2010 2009(Rupeesin’000)

BuildingsonfreeholdlandBuildingsonleaseholdlandTanksandpipelinesPlantandmachineryServiceandfillingstationsVehiclesandotherrollingstockFurnitureandfittingsOfficeequipment

1,926 7,76326,724 47,38729,105 60,40196,511 149,205

172,655 380,51616,895 97,304

4,775 6,94728,664 42,159

377,255 791,682

7.1 ThereceivablefromHubPowerCompanyLimited(HUBCO)and KotAdduPowerCompanyLimited(KAPCO)asatMarch31,2010 aggregated to Rs. 60,419,461 thousand (June 30, 2009: Rs.50,506,628thousand),whichincludesanaggregatedamount of Rs. 10,656,587 thousand (net of recoveries of Rs. 8,076,414 thousandsubsequenttoperiodend)thatisoverdueandsubjectto provision as per the Company's credit policy. However, the Companydoesnotconsiderthisbalanceasdoubtful,asthishas beenlargely accumulatedduetoexistingcirculardebt situation. The Company, based on measures being undertaken by the Government of Pakistan (GoP) in this regard is confident of realizing the entire aforementioned receivables in due course. Accordingly, the Company while estimating the provision for impairmentonthebasisofoverdueanalysishasnotconsideredthe aforementioned receivable balance of HUBCO and KAPCO, which would have increased the provision by Rs. 1,065,659 thousandasatMarch31,2010.

8. OtherReceivables

IncludedinotherreceivablesisanaggregateamountofRs.12,235,963 thousand(June30,2009:Rs.10,741,971thousand)duefromGoPon accountofthefollowing:

8.1 Import price differential aggregating Rs. 1,465,406 thousand (June30,2009:Rs.1,465,406thousand)

7. TradeDebts Un-audited AuditedMarch31, June30,

2010 2009(Rupeesin’000)

Consideredgood

-DuefromGovernmentagencies

-Duefromothercustomers-note7.1

andautonomousbodies

Considereddoubtful

Less:Provisionforimpairment

41,220,868

23,511,803

67,056,825 56,998,027108,277,693 80,509,830

2,836,647 2,388,823111,114,340 82,898,653

(2,836,647) (2,388,823)108,277,693 80,509,830

In2002,underanarrangementwiththeMinistryofPetroleumand NaturalResources(MoP&NR),GoP,theCompanycarriedoutan independent verification and reconciliation of price differential claimsduefromtheGoPandoutstandingsince1991.Basedonthe exercise,theCompanyrecognizedtheresultingnetdifferenceinits financial statements. Through its letter No. 3(386)/2002 dated August7,2002theGoPconfirmedthatthereportonindependent verification will provide reasonable level of comfort to the authenticity and accuracy of outstanding import price differential claims and accordingly, against balance claimed, commenced repaymentthrough a pricingmechanism forwhicha notification wasissued.SuchrepaymentsamountedtoRs.2,805,000thousand uptoDecember31,2003.Sincethennofurtheramountshavebeen received and the notification for the pricing mechanism also expiredonDecember31,2004.

However, through its letter No. F.1(21)-CF.III/2005-386 dated March3, 2007 theGoP - FinanceDivision intimated that it has beendecidedthatthesePriceDifferentialClaimswillbepaidafter confirmation of the reconciled claim by the MoP & NR and requestedMoP&NRtoconfirmtheagreedamountpayableatthe earliest. The Company is actively pursuing the matter with the MoP&NRandMinistryofFinance(MoF),GoPfortherecoveryof thebalanceamountofRs.1,465,406thousandandconsidersthat thebalancewillberecoveredinduecourse.TheCompanycarries aprovisionofRs.501,730thousand(June30,2009:Rs.501,730 thousand) against the balance due as at March 31, 2010. On March22,2010,theMoFvideits letterNo.F.No.2(3)2004/BR-I/312 directedMoP&NRtosubmititsbudgetestimatesforFY2010-11. In response to the same, the MoP & NR via its letter No.PL-7(4)/2009datedMarch26,2010,requestedMoFtocreate aprovisionequivalenttothesaiddifferential,netofprovision,inits budgetestimatesforFY2010-11.

8.2 Import price differential on motor gasoline aggregating Rs.2,537,018thousand(June30,2009:Rs.1,043,967thousand).

These represent price differential claims on account of import of motorgasolinebytheCompany,beingthedifferencebetweentheir landedcostsandtheex-refinerypricesannouncedbyOilandGas Regulatory Authority (OGRA). In 2007, the Company aswell as otheroilmarketingcompanieswereaskedinthemeetingchaired

byDirectorGeneral–Oiltoimportmotorgasolinetomeet the increasing local demand.Accordingly, oilmarketing companies approachedtheMoP&NRwithaproposalforpricingmechanism wherebyendconsumerpriceofmotorgasolinewasproposedtobe fixedatweightedaverageofex-refinery(importparity)priceand landed cost of imported product. Although no response was receivedfrom theMoP&NR, theCompanyalongwithotheroil marketing companies continued to import motor gasoline on behalf of the industry being confident that price differential on motorgasoline,willbesettledasperpreviouspracticei.e.basedon thedifferentialbetweenex-refineryandimportcostatthetimeof filling of cargo with Customs, as imports were being made on MoP&NRinstruction.increasinglocaldemand.Accordingly,oil marketingcompanies.

Duringtheperiod,theCompany alongwith other oilmarketing companies have approached theMoP&NR andwrote a letter dated July 23, 2009 requesting for an early settlement of these claims. Upon instructions by the GoP through letter No.PL-3(458)/2009-Pt dated October 02, 2009; the Company carried out an independent audit of such PDC Claims and submittedareporttoDirectorGeneral–Oil.OnMarch22,2010, the MoF vide its letter No. F.No.2(3)2004/BR-I/312 directed MoP & NR to submit its budget estimates for FY 2010-11. Inresponsetothesame,theMoP & NR via its letter No.PL-7(4)/2009datedMarch26,2010,requestedMoFtocreate aprovisionequivalenttothesaiddifferentialinitsbudgetestimates for FY2010-11. PendingrelatednotificationbyMoP&NR and settlement thereof, theCompany alongwith otheroilmarketing companies andOCAC continues to follow up this matter with MoP&NRandisconfidenttorecover this amount infull.

8.3 PriceDifferentialClaims (PDC) relating tocertain POLproducts aggregatingRs.1,117,252thousand(June30,2009:Rs.4,825,241 thousand).

ThisrepresentsthebalanceofPriceDifferentialClaims(PDC)due fromtheGoP,netofrecoveryofRs.3,710,000thousandduringthe period (June 30, 2009:Rs. 39,108,000 thousand). These claims have arisen on the instructions of MoP & NR for keeping the consumer prices of certain POLproducts stable. TheCompany togetherwithotheroilmarketingcompaniesisactivelypursuing thematterwiththeGoPfortherecoveryofthebalanceamountand isconfidenttorecoverthisamountinfull.

8.4 Price differential between the products LowSulphur FurnaceOil (LSFO) and High Sulphur Furnace Oil (HSFO) aggregating Rs.3,407,357thousand(June30,2009:Rs.3,407,357thousand).

In1996,throughadecisiontakenatameetingofthePrivatisation Commission, and Finance Division, GoP the Company wasadvised to supply LSFO to Kot Addu Power Project at the HSFO price and WAPDA was advised to absorb the price differential between the two products. In accordance withthedecisionofEconomicCoordinationCommittee (ECC) datedNovember4,2003,theCompanywasallowedtorecover this amount through a pricing mechanism after recovery of the amount outstanding against its claims for import price differential aggregating to Rs. 1,465,406 thousand, referred in note8.1,thenotificationforwhichexpiredonDecember31,2004. Although no recovery has been made on this account, the Company continues to follow up the matter with MoP & NR. In 2005, the Company submitted an independent report on the verificationoftheaboveclaimtoMoP&NR,upontheirrequest. In 2006, a joint reconciliation exercise was carried out with WAPDA as per the decision taken in a meeting held on May 19, 2006 under the Chairmanship of Additional Finance Secretary (GoP)and thefinal reconciliationstatements were submitted to MoF and WAPDA. Subsequently, on February 3, 2007 the Company and WAPDA agreed uponthefinal receivable balance of Rs. 3,407,357 thousand. Further, the GOP – Finance Division through its letter No. F.1(21)-CF.111/2005-385 dated March 3, 2007 intimated that the amount of Rs. 3,407,357 thousand will be paid to the Company during financial year 2007-2008 and necessary provision in this respect will be made by GoP in the budget for financial year 2007-2008. The Company through its letter dated May 20, 2008 requested the GoP to arrange the paymentoftheagreedamountbeforetheendofthebudgetyear 2007-2008,towhichtheGoPdidnotrespond.TheCompanyagain requestedGoPthroughits letterdatedSeptember29,2008foran earlysettlement.Further,duringtheperiod,theMoFthroughletter No.F.5CF.I/1997-98-607datedAugust4,2009acknowledgedand agreedtopaythisamounttotheCompany.OnMarch22,2010, the MoF vide its letter No. F.No.2(3)2004/BR-I/312 directed MoP & NR to submit its budget estimates for FY 2010-11. In responsetothesame,theMoP&NRviaitsletterNo.PL-7(4)/2009 dated March 26, 2010, requested MoF to create a provision equivalent to the said differential in its budget estimates for FY 2010-11. Therefore, the Company considers that the above amountwillberecoveredinfullinduecourse.

8.5 Duringthecurrentperiod,anarrangementwasmadebytheGoPto settlethecirculardebtsituationinwhichTermFinanceCertificates (TFC)wereissuedbyPowerHolding(Pvt.)Limited(PHL)andthe proceeds were used to make respective payments. Following receipt of amount under this arrangement, the Company gave standing instructions to the concerned bank to make payments to various refineries. However, an amount of Rs.7,481,000 thousandwasdisbursedbytheconcernedbanktoPHLasperthe instructions of the GoP. Subsequently, Rs. 6,181,000 thousand were returned by PHL to the Company. The Company in its letter T-134 dated November 17, 2009 has requested the concernedbanktotakeupthematterwithGoPandtoarrangefor returnofRs.1,300,000thousandtotheCompany.Subsequently,in ameetingheldwithMoFonMarch25,2010,theCompanywas advisedtotakeupthematterdirectlywithPHL.Accordingly,the Company in its letter T-231-Rec dated March 30, 2010 had requested PHL to release the payment of the said amount immediately.Asafollow-uptothesaidletter,MoP&NRinitsletter No.DOM-3(9)/2010-PdatedApril6,2010advisedPHLtomake necessaryarrangementsforpaymentofthesaidamountonpriority basis. The Company continues to follow up this matter and is confidenttorecoverthisamountinfull.

8.6 Pricedifferentialbetweenfurnaceoilandnaturalgasaggregating Rs.2,408,930thousand(June30,2009:NIL).

During the period, the Company received a directive from MoP & NR through letter NG(I)-7(58)09-LS (Vol – I) dated November 26, 2009 subsequent to the decision of Economic CoordinationCommittee(ECC)inwhich,under theNaturalGas Load Management Programme for Winter 2009-2010, the Companywas directedto supply furnaceoil toKarachiElectric SupplyCorporation (KESC) at the cost equivalent to the cost of naturalgasplusapplicabledutiesandtaxes.Thedifferentialcost betweenfurnaceoilandnaturalgaswouldbebornebytheGoP andreimburseddirectly to theCompanybyMinistryof Finance throughthemechanismofanESCROWaccount.Subsequently,the matter was taken up by the Finance Division in a meeting convenedbytheSpecialSecretary,MoP&NRonFebruary22,2010 in which it was concluded that since the Natural Gas Load Management Programmehadexpired onFebruary 28,2010, as such there would be no need to open an ESCROW account. Accordingly,theMoP&NRvideletterNo.DOM-3(17)/2010dated March18,2010informedtheCompanythatpaymentwouldbe made through the budgetary process. The Company is actively pursuingthematterwithMoFforrecoveryofthisamount.

9. NetAssetsInBangladesh

TheCompanyhasnocontrolovernetassetsamountingtoRs.28,589 thousand(June30,2009:Rs.28,589thousand)andhasmaintainedinits recordthepositionasitwasin1971.Fullprovisionforimpairmenthas beenmadeagainstthesenetassets.

10. ContingenciesandCommitments

10.1 Contingencies

10.1.1 Claims against the Company not acknowledged as debts amount to Rs. 5,297,550 thousand (June 30, 2009: Rs. 5,303,257 thousand), including claims by refineries for delayed payment charges. These claims have arisen due to circulardebtsituationandthemanagementbelievesthatthey wouldbepayableonlywhentheCompanywillreceivesimilar claims fromits customersincluding state owned enterprises.

10.1.2 In the assessment years 1996-97 and1997-98, the taxation authorities applied presumptive tax on the Company to the value of petroleumproducts imported by the Company on behalfoftheGoPbytreatingtheCompanyastheimporterof such products. The Income Tax Appellate Tribunal (ITAT) cancelled the order of the assessing officer, and as a consequence of the order of the ITAT, an amount of Rs. 958,152 thousand became refundable to the Company, whichwasadjustedagainstthetaxliabilityofthesubsequent years.ThedepartmenthadfiledanappealwiththeHighCourt ofSindhagainsttheaforesaiddecisionoftheITAT,whichwas adjudicatedagainsttheCompany.TheCompanyfiledpetition forleavetoappealwiththeSupremeCourtofPakistanagainst the aforementioned decision, which was granted by the Supreme Court of Pakistan through its order dated March 7, 2007 has also suspended the operation of the impugnedjudgmentoftheHighCourtofSindh.

The management maintains that the Company was merely actingasahandlingagentonbehalfofGoP,whichwasinfact the importer ofthe products.Hence,the ultimateliability, if any,isrecoverablefromtheGoP,forwhichthemanagementis incommunicationwiththeMoP&NR.

Based on the merits of the above case, the Company's managementbelievesthattheultimatedecisionwillbeinits favour and therefore, no provision has been made for the liability in this condensed interim financial information.

10.1.3 In the year2005,a demandwasraised bytheCollector of Customs, Sales Tax and Central Excise (Adjudication) in respect of sales tax, central excise duty and petroleum developmentlevyaggregatingRs.165,781thousandinclusive ofadditionalsalestaxandcentralexcisedutyonexportsof POLproductstoAfghanistanduringtheperiodAugust2002to November2003.Thedemandwasraisedonthegroundsthat the export consignmentswere not verified by the Pakistan Embassy/ConsulateinAfghanistanasrequiredunderExport PolicyandProcedures,2000.ItistheCompany’scontention that this requirementwas in suspension as in the aforesaid period the Pakistan Embassy / Consulate was not fully functional.Thisconditionofsuspensionwasremovedonlyon July22, 2004 throughExportPolicyOrder,2004when the Pakistan Embassy / Consulate became fully functional in Afghanistan. Besides the issue of verification, it is also the Company’s contention that export of POL products to Afghanistancanbeverifiedfromtherelevantdocumentsand therefore,thedemandisunwarranted.

TheCompanyhasfiledanappealagainsttheaforementioned demand before the Appellate Tribunal and also referred thematterforresolutionintheAlternateDisputeResolution Committee (ADRC) under section 47-A of the Sales Tax Act, 1990. Through its recommendation dated December26,2006,theADRCrejectedtheapplicationfiled bytheCompany.Subsequently,theCentralBoardofRevenue (CBR) through its order dated June 16, 2007 accepted the recommendation of the ADRC. The Company is now contestingthematterbeforetheAppellateTribunal.Basedon the merits of the case, the Company is confident that the ultimate outcomeof thematterwould be in its favour and thereforenoprovisionhasbeenmade in thisrespectinthis condensedinterimfinancialinformation.

10.1.4 TheCompanyreceiveddemandsfromthetaxationauthorities aggregating to Rs. 823,227 thousand in respect of tax not withheldonincentivespaidtodealersoperatingretailoutlets, fromtaxyears2004to2008.Asperthetaxationauthorities, suchpaymentswereinthenatureofprizesonsalespromotion to dealers andhence subject towithholding of tax@20% undersection156oftheIncomeTaxOrdinance(ITO),2001. TheCompanybasedontheadviceofits taxconsultant,has paidanamountofRs.321,993thousandthereagainstunder the‘TaxArrearsSettlementIncentiveScheme,2008’(TASIS)

while treating the same as recoverable from dealers, on the contentionthatincentivestodealersattracttax@10%under section156Aof the ITO, 2001.Therefore, theCompanyhas filedanappealagainstthedemandsbeingundersection156 oftheITO,2001,withtheCommissionerofIncomeTax (CIT)(Appeals)and alsoa petitionin theHighCourtofSindh forthestaythereof.TheHighCourtofSindh,initsorderdated January 13, 2009, granted the stay to the Company with directions to deposit Rs. 200,000 thousand in addition to payment of Rs. 321,993 thousand earlier made by the Company,withthetaxationauthoritiesagainstsuchdemands. Further,theHighCourtofSindhdirectedCIT(Appeals)tohear the appeal on January 20, 2009 and pass an order within 20daysofhearingoftheappeal.TheCIT(Appeals)passedan orderonFebruary13,2009againsttheCompany.TheITATon an appeal filed against theCIT (Appeals) order, had set aside and referred the case to the taxation officer for fresh consideration which has been subsequently adjudicated againsttheCompanybythetaxationofficer.TheCompanywill now file anappealbeforeCommissioner (Appeals) againstthe aforesaiddecisionofthe taxationofficer.TheCompanybased onthemeritsofthecaseandonadviceofitstaxconsultantsis confident that the matter will ultimately be decided in its favour and therefore no provision has been made for the differentialamount.

Further, the Company intends to recover the entire aforementioned tax of Rs. 321,993 thousand from the dealers,whichisincludedinotherreceivables,andassuch hasnotbeenchargedoff inthiscondensedinterimfinancial information.

10.1.5 The Government of Sindh through Sindh Finance Act, 1994 provided for imposition of an infrastructure fee for development andmaintenanceof infrastructure on the goods entering or leaving the Province through air or sea at prescribed rates. The levy was challenged by the Company alongwithothercompaniesintheHighCourtofSindhthrough civilsuitswhichweredismissedbythesinglejudgeoftheHigh Court of Sindh through its decision in October 2003. On appeal filed thereagainst, the High Court of Sindh has held through anorder passed in September 2008 that the levy as imposed throughSindhFinanceAct, 1994and amendedtime to time was not valid till December 28, 2006, however, thereafteronaccountofanamendmentintheSindhFinance

(Amendment)Ordinance,2006,ithadbecome valid andis payable by the Appellants. The Company, alongwith other companies,filedanappealintheSupremeCourtofPakistan againsttheaforementionedorderoftheHighCourtofSindh.

The SupremeCourt passedan interimorderon January 23, 2009andfurtherhearingsstandadjourned.Basedontheview ofitslegaladvisors,themanagementbelievesthatthematter willultimatelybedecidedintheCompany’sfavour.Further, the amount of possible obligation, if any, cannot be determinedwithsufficientreliability.

11. TransactionsWithRelatedParties

Relatedpartiescompriseofassociates,othercompanieswithcommon directors, retirement benefit funds, directors and key management personnelandprofitorientedstatecontrolledentities.

11.1 Detailsoftransactionswithrelatedpartiesduringtheperiod, areasfollows:

10.2 Commitments

10.2.1 Commitmentsinrespectofcapitalexpenditurecontractedforbutnotasyetincurredisasfollows:

-Property,plantandequipment-Intangibles

Un-audited AuditedMarch31, June30,

2010 2009(Rupeesin’000)

10.2.2

475,597 384,74151,677 49,887

527,274 434,628

Letters of credit and bank guarantees outstanding as at March 31, 2010 amounted to Rs. 6,063,651 thousand (June30,2009:Rs.3,731,075thousand).

NameoftherelatedpartyandrelationshipwiththeCompany

Associates-PakGreaseManufacturing

Company(Private)Limited

-AsiaPetroleumLimited

Retirementbenefitfunds-Gratuityfund

-Providentfund-Pensionfunds

Otherrelatedparties-PakistanRefineryLimited

-PakArabPipelineCompanyLimited

Keymanagementpersonnel

Profitorientedstatecontrolledentities-various

Natureoftransaction

PurchasesDividendreceived

Income(facilitycharges)RentalincomeOtherservicesDividendreceivedPipelinecharges

BenefitspaidonbehalfoffundContributionContributionContribution

PurchasesDividendreceived

PipelinechargesDividendreceived

RemunerationContributiontoretirementbenefitsOtherbenefits

PurchasesSalesTransportationchargesUtilitychargesRentalchargesInsurancepremiumpaid

March31, March31,2010 2009(Rupeesin’000)

98,652 108,9765,146 4,460

132,718 138,6334,266 3,5311,512 -

276,351 368,4691,369,439 1,302,454

95,217 42,84015,000 80,00039,964 39,002

104,554 89,210

22,277,700 26,253,920- 8,999

3,153,426 2,735,70659,990 56,822

118,346 104,4454,495 4,303

36,316 29,562

62,341,356 83,250,747125,760,246 75,039,689

2,038,638 1,643,16643,171 65,401

3,645 6,832276,164 497,886

Ninemonthsperiodended

13. OperatingSegments

TheCondensedinterimfinancialinformationhasbeenpreparedonthe basisofasinglereportablesegment.

Sales from fuel products and others represents 98.8% and 1.2% (March31,2009:98.5%and1.5%)oftotalrevenueoftheCompany respectively.

97.7%(March31,2009:97.3%)oftotalsalesoftheCompanyrelatesto customersinPakistan.

12. CashGeneratedFromOperations

Profit/(loss)beforetaxation

Adjustmentfornon-cashchargesanditems

DepreciationAmortizationProvisionagainstdoubtfultradedebtsProperty,plantandequipmentwritten-offRetirementandotherservicesbenefitsaccruedProfitsondisposalofoperatingassetsShareofprofitofassociatesDividendincomeFinancecosts

Workingcapitalchanges

(Increase)/decreaseincurrentassets:-Stores,sparesandloosetools-Stockintrade-Tradedebts-Loansandadvances-Depositsandshort-termprepayments-Otherreceivables

Increase/(decrease)incurrentliabilities:-Tradeandotherpayables

Cashgeneratedfromoperations

March31, March31,2010 2009(Rupeesin’000)

11,505,739 (14,828,738)

849,226 849,20638,604 39,388

447,824 678,00018,380 -

550,995 412,159(2,837) (13,718)

(404,840) (392,902)(59,990) (65,821)

7,617,951 4,679,554

2,961 (12,403)(2,484,157) 25,518,279

(28,215,687) (22,893,981)(338,807) (1,078)231,462 (6,804)

(824,134) 4,138,652

20,433,920 975,5669,366,610 (924,641)

Ninemonthsperiodended

Allnon-currentassetsoftheCompanyasatMarch31,2010arelocated inPakistan.

Sales to three major customers of the Company is around 37.04% duringtheninemonthsperiodendedMarch31,2010(March31,2009: 30.87%).

14. FinancialRiskManagement

TheCompany'sfinancialriskmanagementobjectivesandpoliciesare consistentwiththatdisclosedinthefinancialstatementsasatandforthe yearendedJune30,2009.

15. DateofAuthorisationForIssue

Thecondensedinterimfinancialinformationwasauthorisedforissueon April22, 2010by theBoard ofManagement-Oilof theCompany.

16. CorrespondingFigures

Corresponding figures in the condensed interim balance sheet and condensedinterimstatementofchangesinequitycompriseofbalances aspertheannualauditedfinancialstatementsfortheyearendedJune 30,2009.Correspondingfiguresinthecondensedinterimprofitandloss account,condensedinterimstatementofcomprehensiveincomeand condensed interim cash flow statement comprise of balances of comparableperiodasperthecondensedinterimfinancialinformation fortheninemonthsperiodendedMarch31,2009.

MalikNaseemHussainLawbarChairman

PakistanStateOilCo.Ltd.PSOHouse,Khayaban-e-Iqbal,Clifton,P.O.Box3983,Karachi75600,Pakistan

Tel:(92-21)111-111-PSO(776)Fax:(92-21)9920-3721Website:www.psopk.com