Top-Down Analysis Of Oil Search Ltd Australia And Pan Pacific Petroleum Australia

Top-Down Analysis

In the modern market of dynamic economic conditions and competition, it is very difficult for any organization to maintain the optimum pace of growth without the proper analysis of market groups and implementing the marketing strategies accordingly and effectively. The report has considered Oil Search Ltd Australia and Pan Pacific petroleum Australia. Despite having foreign countries as origin, these two companies have been have given tough competition to each other over time in terms of market stability, better design of motors, meeting customers’ demands and certain other factors of performance. The report has included the top-down as well as bottom-up analysis of these companies and has compared various things about both the Energy giants and has included some statistical figures and calculations in order to support the discussion

Top-Down Analysis

“Top-Down Analysis” means the method of analyzing the performance of any organization starting from the top level of operations and calculations. According to Porter and Williams (2016, p.126), Top-down Analysis is done mostly by the investors that are looking forward to invest some of their funds in the company assets and market share of the companies.(Guenther et al. 2017, p.16). Following are the detailed analysis of the Oil Search Ltd Australia Company in terms of change in forecast in the economic fundamentals that can be highlighted by an investor to make some investment in the organization.

Brief History of Oil Search Ltd

The Oil Search in the global Energy market is one of the leading Energy Company that was established in Papua New Guinea in 1903. With its main headquarter located in Papua New Guinea, the company has been successfully able to spread its business in different parts of the world along with Australia. In the year 1925, the Oil Search Ltd administration founded Oil Search Ltd Australia in Geelong, Victoria as a subsidiary of Oil Search Ltd Company (Oilsearch.com, 2017).

Economic Environment of Oil Search Ltd Australia

The specialty of Australian based Oil Search Ltd subsidiary is that the investments have been done in a very huge amount compared to any other subsidiary in a different country. From 2010 to 2016, there has been an investment of AUD 2 billion just on the Research and Development for making new products. According to Armour et al. (2016, p.142), the efficient investment has resulted into the development some of the best products in their respective categories.

The Oil Search Ltd was one of the best oil mining when started as the only oil mining company in Australia that gave a tough competition to other companies in its categories. Even today the mining strategy is considered as one of the best strategy that gives tremendous performance in its economic value and fuel efficiency. The constant success of Oil Search Ltd was the result of constant development and enhancement in the design and performances of advanced mining technologies, and other important features in the technical machines that are preferred by company machinery experts (Salim et al. 2016, p.121).

Change of Forecast in Economic Fundamentals

Brief History of Oil Search Ltd

In order to make some correct investments in any company, it is very important to do proper forecasting so that the probability of negative impact on the investment and the risk of investment failure can be reduced. As per Ferguson et al. (2016, p.20), the term “Economic Forecasting” is all about making certain predictions and assumptions related to the performance of any company that can give a fair idea regarding the success probability of any investment in that particular firm. The investors have to study the records and data related to a company in a detailed manner including profits earned by a company along with other useful statistical data.

Gross Domestic Product of Oil Search Ltd Australia

The Gross Domestic Product or GDP of any organization or country or organization is the value of products and services that have been delivered in any particular year. According to the journal written by Zeff (2016, p.147), the GDP of Oil Search Ltd Australia has been growing at a rate of 3.1% in the year 2015-2016 and was AUD 1.1 billion by the end of the year. This growth rate can be considered as a fair progress and a safe zone for investors to invest their monetary assets in the company.

Profit and Losses in the recent years

The proper study of profits earned and losses suffered by a firm are very important to make some precise predictions about the performance that the company is likely to show in the current few years. As stated by Heller and Phillips (2017, p.18), the annual report of the firm can give a fair idea about the profits and losses. However, observing just the latest annual report is not enough as it gives just the specific figure of only one year.

According to the Annual Reports of Oil Search Ltd Australia, the revenue has been increasing every year for the company due to its investments and developments of products. In 2012, the company generated AUD 133.5 billion that kept increasing gradually till 2016, which was AUD 151.8 billion. The company faced a downfall in the revenue generation when it went down from AUD 146.9 billion in 2013 to AUD 144 billion in 2014. However, it can be said very evidently that the company jumped from AUD 144 billion in 2014 to AUD 149.5 billion in 2015, which kept growing to AUD 151.8 billion in 2016. The significant leap of profit from 2014 to 2015 helped the company to recover soon from the losses that was incurred in 2014 (Oilsearch.com, 2017).

Investments made in Research and Development

The total amount of investment made in any particular sector can be used as an important data to make necessary assumptions. As mentioned by Sippel et al. (2017, 261), the more a company spends in its research and development, the more it is likely to develop new products and ultimately attract new customers. As mentioned above, the Oil Search Ltd has spent about AUD 2 billion from 2010 to 2016 just on its Research and Development wing.

Economic Environment of Oil Search Ltd Australia

The huge investments have resulted into the design, development and ultimately, the launch of new products in the Energy market. Hence, it can be said that the investment in Oil search Ltd can lead to some good profit if the investment is made for several years. As described by Sain et al. (2016, p.102), the Oil Search Ltd company has been known for its tough selection procedure for various posts in the organization. Therefore, the presence of some great minds cannot be denied in the company.

Top-Down analysis (numerical)

	OIL SEARCH LIMITED (Consolidated)
Date	Open	High	Low	Close	Adj Close	Volume	↑ or ↓	% change
07-09-2017	11.52	11.52	11.33	11.4	11.4	30271005	11.52	100
01-09-2017	11.18	11.53	11.14	11.5	11.5	151282200	0.34	2.982456
01-08-2017	11.11	11.2	10.47	11.03	11.03	760037900	0.07	0.608696
01-07-2017	11.36	11.83	10.95	11.22	11.077735	696724300	-0.25	-2.26655
01-06-2017	11.25	11.54	10.91	11.19	11.048115	850295900	0.11	0.992983
01-05-2017	11.49	11.54	10.67	11.12	10.979002	932864000	-0.24	-2.17232
01-04-2017	11.64	11.7	11.08	11.47	11.173972	779918200	-0.15	-1.36624
01-03-2017	12.66	12.75	11.41	11.64	11.339585	952495700	-1.02	-9.12836
01-02-2017	12.45	12.77	12.22	12.53	12.206614	586173700	0.21	1.85192
01-01-2017	12.2	13.27	12.13	12.36	11.850026	879509200	0.25	2.04807
01-12-2016	12.23	13.2	12.08	12.13	11.629516	709158400	-0.03	-0.25316
01-11-2016	11.78	12.5	11.07	11.96	11.466531	736690500	0.45	3.869465
01-10-2016	12.06	12.53	11.6	11.74	11.117105	657689600	-0.28	-2.44189
01-09-2016	null	null	null	null	null	null	null	null

Brief History of Pan Pacific petroleum

Pan Pacific petroleum is an Australia based Energy Company that produces one of the most preferred products by fuel movers and transporters around the world. The company was established in 1937 in Australia and it also established its business in Australia in the same year. Headquartered in Tokyo, Australia the company operates its business from numerous parts of the world including Australia. Currently, there are almost 400,000 people that are working with Pan Pacific petroleum. The company exports its fuel in about 170 countries and is known for manufacturing some of the most efficient products in the world (Panpacpetroleum.com.au, 2017).

Economic Environment of Pan Pacific petroleum Australia

The economic condition of Pan Pacific petroleum was not very good in the initial days. However, the extensive research and development that were carried out in different plants by some very creative engineers resulted into the exponential growth of this organization all around the world. As per Masciandaro and Quintyn (2016, p.994), more than 40 countries use Pan Pacific petroleum delivered products for their country’s daily purposes. This is because the Pan Pacific petroleum produces very strong and efficient oil products and biproducts that can operate in extremely tough conditions. In addition to this, the firm is also known for mining, refining and furnishing petroleum with some very creative and unique quality.

The organization has one of its biggest manufacturing plants at Altona. Cummings and Durrani (2016, p.31) have stated about this plant in their journal saying that this plant is dedicated to manufacture Low Lead fuel and Aurion Products of Pan Pacific. Low Lead Fuel is considered one of the best productions of Pan Pacific petroleum by many vehicle experts around the globe. The number of products manufactured at and exported from Altona plant in the financial year 2015-2016 were 95,204 million gallons and 64,605 million gallons respectively (Panpacpetroleum.com.au, 2017).

Change of Forecast in Economic Fundamentals

The economic fundamentals of Pan Pacific petroleum have been facing certain fluctuations in the Australian Energy Market and production lines. Looking at the annual sustainability reports of Pan Pacific petroleum Energy Company, it can be stated very evidently that the number of products manufactured in different years from 2011 to 2016 have not been consistent including its growth. According to Rathke et al. (2016, p.379), the condition of Pan Pacific petroleum has been mentioned that there was growth as well as downfall in the quantities of products manufactured in the plants.

Gross Domestic Product of Pan Pacific petroleum Australia

Change of Forecast in Economic Fundamentals

The GDP of Pan Pacific petroleum Australia has been on a continuous progress since its inception. It has been observed that the growth rate was adversely affected in mid 1940s during the Second World War. As per Shearer et al. (2016, p.819), the emerging of new companies in different parts of the globe was the main reason for the brake in growth rate of Oil Search Ltd during Second World War. The current GDP growth rate of Oil Search Ltd Australia is 2.7% per annum and the present size of GDP is AUD 1.8 billion. Therefore, the Pan Pacific petroleum can also be considered as a preferable destination for investors.

The Profits and Losses in the recent years

Despite of fluctuation in the number of products manufactured in the different financial years, it can be said that the management of Pan Pacific petroleum Energy has been efficiently able to maintain a significant growth in the economy of the firm. As per O’Neill et al. (2016, p.387), the considerable growth in profit of the company has been due to the financial services that are provided during the purchase of any products. The prices have also been set as per the current scenarios so that the sales related operations do not impact the customers or the company.

Investment made in Research and Development

Pan Pacific Petroleum Company is a well renowned firm that produces products which can deliver the desired performance in almost every terrain like dessert as well as mountain. Sunder (2016, p.221) has stated that the positive point of Pan Pacific petroleum that is making efficient products has been further enhanced by engineers working at the Research and Development wing of Pan Pacific petroleum. According to the annual report of Pan Pacific petroleum Australia, the firm received more than AUD 19.2 million in the financial year 2015-2016 as investment from federal as well as State Governments of Australia. This certainly ensures that Pan Pacific petroleum has been able to maintain a good Corporate and a social image among its customers in Australia as well as in other parts of the world. Hence, the company can be trusted when it comes to investment of monetary assets.

Top-Down analysis (numerical)

	PAN PACIFIC PETROLEUM NL
Date	Open	High	Low	Close	Adj Close	Volume	↑ or ↓	% change
07-09-2017	56.900002	56.900002	56.900002	56.9	56.900002	242	56.9	100
01-09-2017	56.599998	56.900002	56.599998	56.9	56.900002	14000	null	null
01-08-2017	57	57.869999	55.599998	55.63	55.630001	364200	-0.4	-0.70299
01-07-2017	52.5	56.939999	52.5	56.94	56.939999	317400	4.5	7.908611
01-06-2017	53.349998	54.57	51.849998	51.99	51.990002	190500	-0.85	-1.52795
01-05-2017	54.5	54.860001	52.830002	53.28	53.279999	183900	-1.15	-2.01967
01-04-2017	54.34	55.040001	52.259998	54.8	54.799999	274100	0.16	0.307751
01-03-2017	57.080002	57.080002	54.310001	54.34	-14.531988	127100	-2.74	-5.14265
01-02-2017	56.700001	57.700001	55.709999	56.57	-15.12835	278200	0.380001	0.693432
01-01-2017	58.990002	60.849998	56.700001	56.7	-15.163116	403900	-2.29	-4.21421
01-12-2016	59.290001	61.93	58.080002	58.82	-15.730062	208400	-0.3	-0.53031
01-11-2016	57.25	59	54.23	59	-15.778198	230700	2.040001	3.597885
01-10-2016	57.529999	58.689999	57.150002	58.68	-15.692621	237700	-0.28	-0.47603
01-09-2016	61.540001	61.540001	57.380001	57.41	11.113118	760000	-4.01	-6.79661

Table 2: To-Down analysis

(Source: Created by author)

Impact of Forecast Changes in the Economic Fundamentals of both companies

As mentioned in the above portion, the forecasting of company performances depends on the current state and past performance. Moreover, the forecasting by investors is the key factor that maneuvers the investment patterns to be followed by investors in the above-mentioned Energy companies. As opined by Hemmelgarn et al. (2016, p.219), the positive forecasting about any company is likely to increase the amount of investment that can be made by outsider investors for the benefit of that particular company.

Better Corporate Image: Any organization that is likely to have a positive review or forecast from investors is likely to get its Corporate Image enhanced.

Higher Investments: The number of investments increases exponentially that allows the organization to further invest more funds for Research and development purposes

Gross Domestic Product of Oil Search Ltd Australia

Better Scopes of Business Expansion: The Business can be expanded in a better and a more reliable manner so that new scopes for profit can be opened up.

As per the above study, it can be said that both the considered companies are almost at a similar position in terms of investments and profits. However, the Oil Search Ltd Company can be considered more reliable when it comes to refining petroleum. On contrary to this, Pan Pacific petroleum seems to take the lead in terms of multi terrain products.

Bottom-Up Analysis

In the Bottom-Up approach for analysis, the analysis is commenced from the bottom end. Gurran and Ruming (2016, p.278) have mentioned that Bottom-Up analysis includes study of ground level performance at the initial level and keeps growing to the upper level that further involves management level operations, company performances at a certain regional and national as well as international level.

Oil search Ltd Australia

As per the details already mentioned above, the Oil Search Ltd had started to manufacture fuel products and fuel in the mid-1980s.

• Customer Satisfaction:The Oil Search Ltd company has been able to keep it customers satisfied belonging to every section. Oil search Ltd has launched products from economic types to sports, performances, and luxury products (Barnes, 2017, p.59).
• Strategy Execution: The strategies of Oil Search Ltd have been to deliver more economic products compared to its counterparts. Hence, the company has delivered products to people that come from every class of society.
• Management:The management has always performed efficiently in making and implementing the business-related strategies at all levels like manufacturing, human resources and investments (Prescott et al. 2016, p.435).

Bottom-Up analysis (numerical)

	OIL SEARCH LIMITED (Consolidated)
Profitability ratios
Particulars		2016 $	2015 $
Rate of return on net sales	Operating profit / net sales	381031/1235908	293369/1585728
		0.308300456	0.185005877
		0.31	0.185
Rate of return on equity	Net profit / total equity	90891/4725316	(43600) / 4709361
		0.019234904	0.009258156
		0.02	-0.0092
Earnings per share	given in the annual report	5.89 cents	2.59 cents
Liquidity ratios
Particulars		2016 $	2015 $
Current ratio	Current assets/current liabilities	1134038 / 551837	1141915 / 576599
		2.055023494	1.980431808
		2.0:1	1.98:1
Accounts receivable turnover	Net credit sales/Avg receivables	((1235908/(152712+81074)/2))	1585728/81074
		2.643246388	19.55902015
		2.64 times	19.55 times
Gearing ratios
Particulars		2016 $	2015 $
Debt ratio	Total liabilities/total assets	5400813 / 10126129	5633473 / 10342834
		0.533354157	0.544674023
		53.00%	54.00%
Debt to equity ratio	Total liabilities/total equity	5400813 / 4725316	5633473 / 4709361
		1.142952768	1.196228745
		1.14%	1.20%

Table 3: Ratio analysis

(Source: Created by author)

Pan Pacific petroleum Australia

Pan Pacific petroleum has always been at a fair position in the list of companies that produces reliable products.

• Delivery in Mass:The Company produces and delivers the products in a mass quantity to its customers. As per Lees et al. (2016, p.247), the major reason for getting mass order is its compatibility with military operations, like fuel for heavy military vehicles, etc.
• Strategy Implementation:The strategies of Pan Pacific petroleum mainly focus on making the vehicle perform in extreme climatic as well as geographic condition.
• Management:Just like Oil Search Ltd, the Pan Pacific petroleum is also known for its efficient management, especially when it comes to timely delivery of products to its foreign customers (Lokuwaduge and Heenetigala, 2017, p.447).

Bottom-Up analysis (numerical)

	PAN PACIFIC PETROLEUM NL (Consolidated)
Profitability ratios
Particulars		2016 $	2015 $
Rate of return on net sales	Operating profit / net sales	(18103)/10577	(25539)/21753
		1.711543916	1.174044959
		-1.71%	-1.17%
Rate of return on equity	Net profit / total equity	(19155)/28784	(23597) / 48166
		0.665473874	0.489909895
		-66.50%	-49.00%
Earnings per share	given in the annual report	3.31 cents	4.00 cents
Liquidity ratios
Particulars		2016 $	2015 $
Current ratio	Current assets/current liabilities	29421 / 3410	35636 / 5189
		8.627859238	6.867604548
		8.62:1	6.87:1
Accounts receivable turnover	Net credit sales/Avg receivables	((10577/(538+11134)/2))	21753/11134
		0.453092872	1.953745285
		0.45 times	1.95 times
Gearing ratios
Particulars		2016 $	2015 $
Debt ratio	Total liabilities/total assets	20866 / 49650	22172 / 70338
		0.420261833	0.315220791
		42%	54%
Debt to equity ratio	Total liabilities/total equity	20866 / 28784	22172 / 48166
		0.72491662	0.72491662
		72%	72%

Table 4: Ratio analysis

(Source: Created by author)

Recommendations

Despite having considerable growth and pace of development for both the Energy manufacturing giants, it is very important to be careful about certain things that can enhance the company performance in terms of sales, profits, and corporate image.

• Giving more options to customize the products as per the needs and demands of any individual customer at an Oil Search Ltd is a very good option to attract new customers and retain the current ones.
• Employing more staff for making the customers aware of technical details in layman’s terms during the time of purchase can make the customers understand the products in more details.
• Providing the customers with attractive discounts in purchasing and servicing charges can give any organization an edge over its competitors in the current Energy market.

The report has successfully described the different aspects and parameters of a company’s operations that are to be taken care of before making any investment in it. It has mentioned the Top-Down Analysis and the Bottom-Up Analysis of two Energy Giants named Oil Search Ltd Australia and Pan Pacific petroleum Australia. This part has described the brief history, GDP, and other investments that have been made by various sectors and organizations in Oil Search Ltd and Pan Pacific petroleum. Another important thing that has been included in the Economic environment of these tow companies.

References

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