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NOTES TO AND FORMING
PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2020
240
PAKISTAN OILFIELDS LIMITED
The Group is exposed to currency risk arising from currency exposure with respect to the US dollar.
Currently foreign exchange risk is restricted to trade debts, bank balances, receivable from/ payable
to joint operating partners, payable to suppliers and provision for decommissioning cost.
Financial assets include Rs 48,920,065 thousand (2019: Rs 36,206,859 thousand) and financial
liabilities include Rs 226,988 thousand (2019: Rs 1,751,687 thousand) which are subject to currency
risk.
If exchange rates had been 10% lower/higher with all other variables held constant, profit after tax
for the year would have been Rs 13,451,018 thousand lower/higher (2019: Rs 1,585,050 thousand
higher/lower).
(ii) Interest rate risk
Interest rate risk represents the risk that the fair value or future cash flows of a financial instrument
will fluctuate because of changes in market interest rates.
The Group has no significant long term interest bearing financial assets and liabilities whose fair
value or future cash flows will fluctuate because of changes in market interest rates.
Financial assets include Rs 43,046,489 thousand (2019: Rs 35,756,123 thousand) which are subject
to interest rate risk. Applicable interest rates for financial assets have been indicated in respective
notes.
If interest rates had been 1% higher/ lower with all other variables held constant, profit after tax for
the year would have been Rs 275,390 thousand (2019: Rs 174,511 thousand) higher/ lower, mainly
as a result of higher/ lower interest income from these financial assets.
(iii) Price risk
Price risk represents the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in market prices (other than those arising from interest rate risk or
currency risk), whether those changes are caused by factors specific to the individual financial
instrument or its issuer, or factors affecting all similar financial instruments traded in the market.
The Group is exposed to equity securities price risk because of investments held by the Group and
classified on the consolidated statement of financial position as available for sale. Tomanage its price
risk arising from investments in equity securities, the Group diversifies its portfolio. Diversification of
the portfolio is done in accordance with the investment policy of the Group.
Investments classified as fair value through profit or loss of Rs 6,519 thousand (2019: Rs 813,478
thousand) were subject to price risk.
39.3.2 Capital risk management
The Group’s objectives when managing capital are to ensure the Group’s ability not only to continue
as a going concern but also tomeet its requirements for expansion and enhancement of its business,
maximize return of shareholders and optimize benefits for other stakeholders tomaintain an optimal
capital structure and to reduce the cost of capital.
In order to achieve the above objectives, the Group may adjust the amount of dividends paid to
shareholders, issue new shares through bonus or right issue or sell assets to reduce debts or raise
debts, if required.