The Pakistan Credit Rating Agency Limited
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Muhammad Noor Ul Haq

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PACRA Maintains Entity Ratings of OILCO Petroleum (Pvt.) Limited

Rating Type Entity
(19-Sep-22 )
(21-Sep-21 )
Action Maintain Initial
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

Sponsors of Halmore, 225MW combined cycle power plant ( AA-, rated by PACRA) operating since 2011, have joined hands with owners of OILCO Petroleum (Pvt.) Limited (OILCO) to promote and grow the business of OILCO in Pakistan. OILCO incorporated in 2013, is engaged in the business of marketing petroleum products and lubricating oils. The Company has sizeable storage capacity available at its disposal. Under the patronage of primarily Halmore sponsors and also other shareholding groups, SEARS Energy DMCC has been established as an energy trading company in Dubai, UAE. SEARS Energy would act as a supplier of petroleum products to OILCO. Sponsors are arranging a sizeable LC ($15mln) in favor of OILCO, which is a kind of quesi equity to OILCO. The sponsors have an experience of more than two decades of energy sector. This has given them an understanding of the dynamics of the market and enabled them to establish relationships with suppliers and customers. Currently, it has 67 retail outlets and aims to penetrate the retail segment in the growing industry. As against previous plan to utilize a portion of leverage the Company now intends to finance the capex through equity. Currently, OILCO has an adequate financial risk profile. The ratings take comfort from the commitment of sponsors to inject phase-wise equity in order to fund growth plans.
The rating particularly recognizes ongoing developments including i) completion of transformation in shareholding structure, ii) planned expansion iii) equity injection and iv) adoption of a conservative financial matrix. In addition to timely implementation of these initiatives, the ratings are dependent on OILCO’s ability to achieve desired market penetration along a supportive supply chain networks and healthy margins.

About the Entity
OILCO Petroleum (Pvt.) Limited (OILCO) incorporated in 2013, was granted license to establish as Oil Marketing Company in 2017. OILCO started its operation in Punjab region. With a network of ~ 67 retail outlets (end-Jun22), OILCO has a storage infrastructure of ~ 28000MTs. The Company is a subsidiary of SEARS Energy DMCC, which holds 97.0% shares, 2.0% is being held by Mr. Zaheer Ahmed Ghanghro while 1.0% of the stake is spread among individuals. SEARS Energy is a joint venture by the Halmore Group and Mr. Ahsan Majeed with a 66.6% and 33.3% stake, respectively.

The control of the Company vests with a seven-member Board of Directors (BoD) including the CEO. Two directors are representative of SEARS Energy, whereas the remaining five directors are non-executive directors. All of the board members are experienced professionals with diversified backgrounds. The CEO is supported by an able and competent team.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.