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 too has a shareholding of around 20 percent in Mari Petroleum.

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.

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 a 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.

FY23 was a year of high prices, which meant growth in oil and gas E&P sector’s earnings. And then the local currency depreciation added to earnings growth. At the same time the year has not been good in terms of hydrocarbon production. However, Mari Petroleum Company Limited (PSX: MARI) announced impressive growth of around 53 percent in net sales and an increase of 70 percent year-on-year in the bottomline. The topline growth in the latest quarter 4QFY23 stood at the highest ever quarterly revenue due to higher offtakes from Mari gas field and high wellhead gas prices and PKR/USD parity. The bottomline was up by 183 percent year-on-year. Mari’s net sales clocked in at Rs145 billion for the FY23, which was primarily driven by 28 percent devaluation of domestic currency. Also, the revenues growth was driven by higher prices. There was a 61 percent year-on-year jump in wellhead price of Mari Gas Field. While production from Mari gas field during the 4QFY23 was up, overall, the production of hydrocarbons remained weak 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 factors for lower production volumes. Besides the topline growth in FY23, MARI’s bottomline also benefitted from significant growth in finance income due to higher income on cash as well as colossal exchange gains. Also, the exploration cost grew by 47 percent year-on-year in FY23 due to three dry wells incurred during the period.

MARI in 1QFY24

MARI announced a hefty growth in earnings for 1QFY24 - highest-ever net profit of Rs19 billion, which was 50 percent higher than that of the same period last year. The rise was partly due to higher oil and gas production by the company during the period. Recall that E&P have been facing weak production of hydrocarbons over the last few years. MARI’s topline growth stood at around 52 percent year-on-year in 1QFY24 which was aided by healthy growth in gas and oil production (oil flows were up by 22 percent, while gas flows were up by 48 percent year-on-year), significant jump in wellhead price of Mari Gas Field, and currency depreciation against the USD. Not only the production volumes were up for the quarter, company witnessed the highest-ever quarterly hydrocarbon sales of 10 million barrels of oil equivalent during the quarter – up by 12 percent year-on-year, which lead to the rise in revenues.

Besides the topline growth, MARI’s bottomline also benefitted from higher finance income that came due to higher income on cash and investments. The earnings were supported by other income in 1QFY24 versus other expenses in 1QFY23. On the expense side, the company witnessed 30 percent growth in exploration and prospecting expenditure during 1QFY24 due to and higher seismic and prospecting expenditure. The company’s earnings for 1QFY24 witnessed a growth of 51 percent year-on-year despite higher exploration expenses as well as higher share of loss from associates, and this has been due to growth in the company’s revenues.

It is expected that the company’s earnings a going to continue to benefit from higher production flows as the company is expected to start production of 11MMSCFD gas from Mari Ghazij-2. Moreover, the drilling at two promising sites along with the improved utilization of Sachal Gas Processing Complex (SGPC) that started gas supply to SNGPL earlier in 2023. The company secured a license for mineral exploration in the Chagai district in Balochistan and is working to complete the requirements for the block. Further, the company has also signed an MOU with Barrick Gold for strategic collaboration on mining projects.