Page 23 - Condensed Interim Financial Statements for thesix months ended December 31, 2023

Notes to and forming part of the Condensed Interim
Financial Statements (Unaudited)
For the six months ended December 31, 2023

On December 27, 2017, the Ministry of Energy (Petroleum Division) notified certain
amendments in Petroleum Policy 2012 which also included addition of following
explanation of conversion package:

“the conversion package shall include (i) price of Natural Gas for New Exploration Efforts
(ii) windfall levy on Natural Gas (iii) EWT gas production, pricing and obligations (iv)
Windfall levy on Oil & Condensate, only for PCAs converting from 1994 and 1997
Petroleum Policies and (v) Financial obligations relating to production bonus, social
welfare and training”.

Under the said Notification, the Supplemental Agreements already executed for
conversion from Petroleum policies of 1994 & 1997 shall be amended within 90 days,
failing which the working interest owners will not remain eligible for gas price incentive.
On January 3, 2018, Directorate General Petroleum Concessions (DGPC) required all
exploration and production companies to submit supplemental agreements to
incorporate the aforementioned amendments in Petroleum Concession Agreements
(PCAs) signed under 1994 and 1997 policies, for execution within the stipulated time as
specified above.

Based on legal advice, the Company is of the view that already executed Supplemental
Agreement cannot be changed unilaterally, the Supplemental Agreement was signed
under the Conversion Package where gas price was enhanced and Windfall Levy on Oil
/ Condensate (WLO) was not applicable, the impugned SRO by giving retrospective
effect amounts to taking away the vested rights already accrued in favour of the
Company. The Government has no authority to give any law or policy a retrospective
effect. The Company filed Constitutional Petition challenging the imposition of WLO on
February 19, 2018 against Federation of Pakistan through Ministry of Energy
(Petroleum Division), Islamabad. The Honorable Islamabad High Court after hearing the
petitioner on February 20, 2018, directed the parties to maintain the status quo in this
respect. After multiple hearings, last hearing was fixed on June 30, 2022, however the
same could not be heard and next date of hearing is yet to be announced.

On prudent basis additional revenue (net of sales tax) on account of enhanced gas price
incentive due to conversion from Petroleum Policy 1997 to Petroleum Policy 2012 since
inception to December 31, 2023 amounting to Rs 28,304,604 thousand will be
accounted for upon resolution of this matter (including Rs 25,265,875 thousand related
to period since inception to June 30, 2023). Additional revenue on account of enhanced
gas price incentive of Rs 25,407,174 thousand and sales tax of Rs 4,423,299 thousand
received from customer on the basis of notified prices has been shown as "Other
liabilities" under "trade and other payables". Sales tax of Rs 4,423,299 thousand (June
30, 2023: Rs 3,928,026 thousand) received from customer on the basis of notified prices
is declared in the monthly sales tax return as well as duly deposited with Federal Board
of Revenue by the Company. The amount so deposited is included in "advances,
deposits, prepayments and other receivables".

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