MARI - a good start to FY21

Mari Petroleum Company Limited (PSX: MARI) has started off FY21 on a high note. The exploration and production company announced one of its best quarterly performances in its history with Rs67.96 per share earnings. But Mari Petroleum Company Limited is probably the only E&P company that has started FY21 with significant growth in earnings for the quarter that continues to coincide with COVID-19 related restrictions and demand attrition in the country.

The impact of COVID-19 and depressed oil prices had been the key headwinds for the oil and gas exploration and production companies in FY20 where the overall domestic oil and gas production remained subdued with fewer discoveries amid depleting reserves as well as falling profitability in 4QFY20. Compared to the other listed E&P companies, MARI’s earnings declined by only 6 percent year-on-year in the three months when COVID-19 cases and related restrictions were peaking. This was primarily because the falling oil prices did not affect its gas pricing due to the pricing formular it follows. Gas production of the company also remained intact during the quarter.

In 1QFY21, MARI’s earnings growth of over 21 percent year-on-year was beyond what the market expected. The growth in earnings started from the top where the net sales grew by 14 percent year-on-year. Growth in the company’s revenues likely came from some growth in gas production of around 7 percent as well as gas wellhead prices and PKR depreciation. On the other hand, oil production fell by over 30 percent during the same period.

Decline of over 40 percent year-on-year in exploration and production expenses during the quarter due to absence of any dry well also helped the bottomline of the company. the company did not announce an interim dividend for the quarter ending September 30, 2020.