Mari Petroleum Company Limited

By operating the country’s largest gas reservoir at Mari Gas Field, Daharki, Sindh, Mari Petroleum Company Limited (PSX: MARI) is the second largest producer of natural gas. Mari Petroleum is an integrated oil and gas exploration and production company and around 70 percent exploration success rate, which is much higher than industry averages of around 33 percent national and 14 percent international.

Mari’s key customers include fertilizer manufacturers, power generation companies, gas distribution companies; and refineries. In addition to Mari Gas Field, it holds development and production leases as well as operatorship of exploration blocks, and is also a non-operating joint venture partner with leading national and international E&P companies D&P leases and exploration blocks.

Shareholding Pattern

Mari has two key shareholders: Fauji Foundation with 40 percent shareholding; and OGDCL with a share of 20 percent. The government of Pakistan has a shareholding of over 18 percent in Mari Petroleum, with divestment plans on the cards since a long time that have recently been shelved now.

Financial performance

Mari Petroleum Company Limited has witnessed rising crude oil production and relatively stable gas production flows over the past 7 years when the entire industry had been facing a slump. The company’s revenues and earnings have been on an upward route too.

The revenues for MARI in FY16 grew by 12 percent year-on-year due to sale of additional gas under incentive price provided to Guddu Power Station along with overall increased hydrocarbon production. At the same time, the exploration and prospecting expenditure doubled on a year-on-year basis.

Revenues continued to increase by 30 percent in FY17 along with 50 percent, year-on-year increase in earnings. Operating expenses continued to decline while Mari Petroleum witnessed 18 billion cubic feet of incremental gas production during the year as its production strategy has been to increase flows of oil and gas to take maximum benefit of the incentive offered in the 2012 Petroleum Policy.

In FY18, the company witnessed highest ever production rates. At the same time profits were also record high at that time. During the year, total production was up by 5 percent year-on-year in FY18 along with incremental production. The company’s gross sales exceeded Rs100 billion for the first time, and its net profit jumped by 68 percent year-on-year where other income also supported to the bottomline.

FY19 was a year of high oil prices and along with currency depreciation, MARI’s earnings benefitted with an increase of over 58 percent year-on-year. Growth in earnings was also due to increase finance income, and somewhat controlled operating expenditure. Growth in profits however, was cut short by increase in royalty expenses and exploration and prospecting expenditure, which were higher due to higher drilling activity.

FY20 was a difficult year as depressed oil prices for the oil and gas and the pandemic impacted exploration and production activities due to fall in demand. However, Mari Petroleum’s gross sales increased by around 8 percent, while the net revenue of the company was up by almost 21 percent year-on-year. Growth in the company’s revenues was solely due to the increase of around 20 percent in gas wellhead prices and currency depreciation. Oil and gas production were down by 8 and 2 percent year-on-year respectively during the year. Its profits grew by over 24 percent year-on-year. Higher exploration and production expenses by 2.5 times during the year contained the growth.

Mari Petroleum Company Limited announced a 4 percent increase in its earnings for FY21. Despite the weakness in prices, topline growth for Mari was supported by better hydrocarbon production flows in FY21. Mari’s oil production in FY21 stood higher by 17 percent year-on-year, while natural gas production was up by 8 percent year-on-year. The growth in earnings was powered by weaker exploration and production expenses. However, drop in other income and rise in finance cost impacted adversely/

In 9MFY22 and beyond

MARI’s performance in 9MFY22 improved further as higher oil prices and increased production lifted overall net sales. Revenues were up by 22 percent, while earnings were up by 18 percent year-on-year.

In general, the company has been facing low gas off take by the power sector as well as by fertilizer sector due to emergency shutdowns and unplanned turnarounds. However, the company has been able to keep up with production oil production 13 percent year-on-year. During 9MFY22, the company’s gas production also increased by 4 percent year-on-year due to the export of volumes towards the SNGPL network.

The fate of the E&P sector’s earning largely rests with higher international crude oil prices and currency depreciation and also higher domestic oil and gas production. However, with reserves depleting and discoveries turning in smaller, the E&P sector is facing a challenge on the production front. However, the year is likely to end on a better note due to company’s less exposure to circular debt, incremental production, currency depreciation, and oil prices.