Margins improving at MARI

The result announcement of Mari Petroleum Company Limited (MARI) yesterday drew curtains on FY13 for the listed oil and gas E&P sector. And while eyes shift to what FY14 holds for the sector, the year concluded positively for Mari Petroleum.
On the comparative scale, Mari Petroleum Company Limited was the only oil and gas producers out of the four listed E&P companies (OGDC, PPL, POL, MARI) that registered a growth in net margins in FY13 over FY12.
The acceleration in the gross revenues of the Company came from better gas well head prices and better crude oil production. It is worth mentioning that gas is the largest source of revenue for MARI representing a 97-98 percent share in its total gross sales, and that the Company has a share of around 13 percent in the total gas production in the country.
Around 80 percent of the gross revenues of MARI during FY13 were chopped off via government levies, duties and taxes. And a major battering came from the Gas Infrastructure Development Cess whose share in gross sales has been significant.
The imposition of GIDC during FY12 chargeable from the gas consumers, other than the domestic sector consumers, accounted for almost 30 percent of MARI’s gross sales in FY13 compared to 17 percent in FY12. Besides MGCL, other companies included in the schedule for GIDC are Sui Southern Gas Company, Sui Northern Gas Pipeline Limited, Tullow Pakistan Development Limited and Pakistan Petroleum Limited.
That said, the net sales of the Company portrayed a colossal increase of 58 percent year on year in FY13, and the trickledown effect of the same can be seen in the bottom line growth. While some restriction in the profits came from 52 percent year-on-year increase in exploration and prospecting expenditure, the earnings the E&P player doubled during FY13 versus FY12.
Also, the Company enjoys the benefit of cost plus formula which does not affect the profitability of the Company or guaranteed rate of return to the shareholders. Under this pricing mechanism, well head gas price for subsequent year is determined in accordance with the principles of gas price formula set out in Mari Gas Well Head Price Agreement.

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MARI PETROLEUM COMPANY LIMITED

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Rs (mn)                                   FY12      FY13       chg

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Gross Sales                             47,425    63,270       33%

Net Sales                                7,556    11,778       56%

Royalty                                    969     1,531       58%

Operating Expenditure                    3,456     4,516       31%

Exploration & Prospecting Expenditure    1,639     2,496       52%

Operating Profit                         1,726     3,855      123%

Profit after Tax                         1,115     2,421      117%

EPS                                      12.14     26.35      117%

Operating margin                         22.8%     32.7%

Net margin                               14.8%     20.6%

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Other corporate results

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UNITED BRANDS LIMITED

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Rs (mn)                                   FY13      FY13       chg

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Sales                                    1,199     1,069       12%

Cost of sales                            1,050       942       11%

Gross profit                               148       127       17%

Operating Profit                            37        28       31%

Profit before Tax                           24         4      530%

Profit after Tax                            16         7      111%

EPS (Rs)                                  1.70      6.16

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