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 routetoo.

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/

The fiscal year FY22 witnessed spiking oil prices. MARI’s revenues were seen growing by 32 percent year-on-year as a result of higher prices as well as higher hydrocarbon production. Improvement in Mari’s production volumes have been seen during FY21 that seems to have continued in FY22. The company’s gas production in FY22 was up by 5 percent year-on-year, while crude oil production remained steady. This translated into highest ever production by the E&P company. This was also accompanied by depreciating currency. The rise in topline trickled down, and the company posted growth of around 19 percent year-on-year in profits before tax for FY22. This was despite 140 percent growth in exploration and prospecting expenditure, and higher share of loss in associates. However, the ultimate bottom-line grew only by 5 percent year-on-year, which was due to the imposition of Super Tax on the companies in the latest budget.

MARI in FY23 and beyond

MARI announced an impressive growth in earnings of around 42 percent in net sales and an increase of 47 percent year-on-year n the bottomline in 9MFY23.The topline growth in the latest quarter 3QFY23 stood at 49 percent year-on-year, while the bottomline was also seen rising by 51 percent year-on-year.

MARI’s net sales clocked in at Rs110 billion for the 9MFY23, which was primarily driven by 27 percent devaluation of domestic currency. Also the revenues growth was driven by higher prices. There was a 61 percent year-on-year jump in the wellhead price of Mari Gas Field. However, overall growth in production from Mari gas field during the period remained low due to annual turnarounds of EFERT and FFC plants that hampered the offtakes from MARI field. Also, the leakages at FFC’s plant and damaged SSGC pipeline in Bolan area during the early months of FY23 were also factors for lower production volumes. On the other hand, the growth in the topline in 3QFY23 was not only driven by32 percent currency depreciation and rise in prices, but also the increase in oil and gas production of about 18 and 6 percent year-on-year.

Besides the topline growth, MARI’s bottomline also benefitted from significant growth in other income due to colossal exchange gains. On the expense side, the company witnessed hefty exploration and prospecting expenditure due three dry wells during 9MFY23 and higher seismic activity in 3QFY23. Also, the company benefitted from an overall decline in share of loss from associates.