The oil and gas Explora-tion and Production (E&P) sector has been relatively immune to the liquidity crisis when compared to the downstream sector of refining and oil marketing companies. And partly due to the same reason, the E&P companies have continued to be amongst those that make some of the healthiest profits in the country, even amid dwindling production statistics over the years.
However, last fiscal year was heavy for the E&P sector where all major companies other than Mari Petroleum Company (MPCL) registered a decline in their net margins. MPCL had an amazing FY13 and a great start to FY14. And while the firm had a rather slower second quarter year on year, the first-half financials released to the Karachi Stock Exchange yesterday are a reflection of its overall healthy performance.
The firms turnover grew by a huge 44 percent year on year in 1H FY14, which can be attributed to better gas sales as well as better gas prices during the period. Its largest source of revenue continues to be gas (approximately 97-98 percent), which accounts for 13-14 percent of the total gas production in the country.
Around 80 percent of the gross revenues of Mari during 1H FY14 were axed by government levies, duties and taxes, of which Gas Infrastructure Development Cess (GIDC) ate away around 30 percent of the sales.
Increased E&P activity during 1H FY14 is evident from 88 percent year-on-year increase in exploration and prospecting expenditure. Still, the operating margins showed marked improvement, moving up from 31 percent in 1H FY13 to 39 percent in 1H FY14. Similarly, the bottom line of the E&P firm had a two-fold increase, leading to a noticeable improvement in the net margins.
Interestingly, as mentioned earlier, the firms performance during 2Q FY14 slowed down, which can be seen from the contraction in the margin. Moreover, the 2Q FY14 earnings were almost half of what they were in 1Q FY14.
However, a relatively slower second quarter did not do much damage to the firms profitability. Also, Mari enjoys the benefit of cost-plus formula, which does not affect the profitability of the company or guaranteed rate of return to the shareholders. Along with high profits, the firm announced its first interim cash dividend of Rs2.74 per share for FY14.
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MARI PETROLEUM COMPANY LIMITED
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Rs (mn) 1HFY14 1HFY13 YoY 2QFY14 2QFY13 YoY
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Gross Sales 33,312 30,918 8% 16,495 15,631 6%
Net Sales 6,844 4,748 44% 3,021 2,637 15%
Operating Expenditure 1,969 1,780 11% 1,096 916 20%
Exploration expenditure 1,500 798 88% 990 653 52%
Other income 369 65 472% 201 47 325%
Operating Profit 2,669 1,481 80% 710 715 -1%
Operating margin 39.0% 31.2% 23.5% 27.1%
Finance Cost 583 382 53% 547 333 64%
Profit after Tax 1,661 783 112% 84 403 -79%
EPS 18.08 8.52 112% 0.91 4.39 -79%
Net margin 24.3% 16.5% 2.8% 15.3%
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Source: KSE Notice
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