Petrojam's most liquid assets, cash, and equivalents covered only an average 17 per cent of its current liabilities over the five-year period 2013-2018 as cash generated from core operations was inadequate, an Auditor General's Department (AGD) report has revealed. 

It effectively means that any significant event could spell trouble for the state-owned oil refinery as the company has little liquidity to keep it afloat in a scenario that would affect its production.  It also means that the company is not making sufficient revenue on its day-to-day operations to cover its expenses. 

The disclosure was made in a 113-page AGD report tabled in Parliament on Tuesday looking into the operations at Petrojam and the Petroleum Corporation of Jamaica (PCJ). 

The audit report said that in an effort to support working capital, Petrojam borrowed US$35 million from the PetroCaribe Development Fund in financial year 2014-2015, augmented by a bank overdraft facility of J$101.5 million. 

"Further, Petrojam, in financial year 2015-2016, converted dividends previously declared to its majority shareholder, the Petroleum Corporation of Jamaica, to a loan as it did not have adequate cash to meet its obligations," the report stated. 

The auditor general also said that Petrojam's total asset turnover averaged 2.6 per cent over the review period, declining to 2.3 per cent in financial year 2017-2018 from 3.0 per cent in 2013-2014.  The total asset turnover ratio measures the value of a company's revenues generated relative to the value of its assets. 

The report revealed that although Petrojam's fixed assets increased to US$164.9 million in 2017-2018, from US$117.2 million in 2013-2014, the refinery's total asset turnover ratio fell in a context of declining sales over the period. 

"This suggested a reduced efficiency by Petrojam in the utilisation of assets to generate sales despite an increase in fixed assets," the audit report said. 

In addition, the AGD noted that the completion of the planned refinery upgrades, while intended to boost production capacity, should assist in improving Petrojam's performance.