PACRA Upgrades the Entity Ratings of Gas & Oil Pakistan Limited

Gas & Oil Pakistan Limited ('GO' or 'the Company') benefits from a strategic partnership with Aramco, which acquired a ~40% stake in the Company. Aramco, a globally significant player in the energy and chemicals sector, is expected to reshape the dynamics of Pakistan's OMC sector and the Company's operations moving forward. The sponsors are financially stable and possess extensive expertise across the energy supply chain. GO operates a vast network of retail outlets, comprising ~1,293 stations, including ~55 company-owned and company-operated (COCO) sites. Eleven of these COCO sites have been rebranded under the Aramco name. Additionally, the Company holds the second-largest storage capacity in the sector, with ~205,038 MTs, and generates income through hospitality services. GO is involved in the procurement of petroleum, oil, and lubricants (POL) from both local and international markets, as well as the storage, distribution, and marketing of these products. Standing among the top tier players in volumetric sales, GO has stabilized both its business and financial risks. The Company has seen growth in its topline and profits, and this performance is expected to remain sustainable. Although lower volumes from weak demand and regulated pricing of POL products have posed challenges, GO is focused on improving its financial performance. The Company is managing its marketing initiatives effectively and expects to generate stable cash flows. Moreover, an equity injection by Aramco, through a right issue, has strengthened the Company's overall financial footing. The Company's working capital-related challenges have also been streamlined, backed by considerable supply credit, now available from Aramco. This has reduced the Company's reliance on borrowings. These improvements have enhanced its coverage ratios, providing an additional financial cushion. The governance framework has been strengthened by the appointment of Aramco’s representatives to the Board and key managerial positions, positively impacting the Company’s operations and its ratings. Looking ahead, GO plans to further invest in the food sector in Pakistan through the Company's balance sheet, which, if managed effectively, is expected to contribute to the Company’s overall performance. Tapping into the lubricants segment, by bringing in Aramco's lubricant brand - Valvoline - will further add strength. CSR and HSE compliance as per Aramco's protocols bodes well for the Company.
The ratings are dependent on keeping the growth trajectory, as a consequence of the above mentioned association with Aramco including materialization of other governance and control related matters.

About the Entity
Gas & Oil Pakistan Limited ('GO' or 'the Company') was incorporated as a public unlisted company in 2012 under the repealed Companies Act 2017. The Company obtained the license to operate as an OMC across Pakistan from OGRA in 2019. GO is engaged in POL procurement from the local and international markets and the storage, distribution, and marketing of petroleum products and lubricants. The Company holds a market share of ~13%. Lately, Aramco has acquired a ~40% stake in the Company, while ~60% stake resides with GO. All legal and filing formalities are complete, and the BoD composition has also changed accordingly. The Company has a ten-member Board; four members represent Aramco, and the other six are nominated by GO. Mr. Tariq Kirmani chairs the Board, while Mr. Khalid Riaz heads the Company as the CEO. To enhance transparency, a few prominent management positions are appointed by Aramco. Other members of the Board and the management are also seasoned professionals.