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Mari Petroleum Company Limited (PSX: MARI) is the second largest producer of natural gas. It is an integrated oil and gas exploration and production company with around 70 percent exploration success rate, which is much higher than industry averages of around 30 percent national and 14 percent international. It operates the country’s largest gas reservoir at Mari Gas Field, Daharki, Sindh. Mari’s key customers include fertilizer manufacturers, power generation companies, gas distribution companies, and refineries.

Historical Performance

MARI’s earnings increased by over 58 percent year-on-year in FY19 due to high oil prices and along with currency depreciation. Growth in earnings was also due to increased finance income and somewhat controlled operating expenditure. Growth in profits, however, was cut short by an increase in royalty expenses and exploration and prospecting expenditures, which were higher due to higher drilling activity.

FY20 was a difficult year as depressed oil prices for 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.

In FY21, Mari Petroleum Company Limited announced a 4 percent increase in its earnings. Despite the weakness in prices, topline growth for Mari was supported by better hydrocarbon production during the year. 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.

FY22 witnessed rising oil prices, and MARI’s revenues were seen growing by 32 percent year on year because of higher prices and higher hydrocarbon production. Improvement in Mari’s production volumes 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 the 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 a 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 had been a year of high prices as well. Mari Petroleum Company Limited experienced a growth of around 53 percent in net sales and an increase of 70 percent year-on-year in the bottom line. Mari’s net sales clocked in at Rs145 billion for FY23, which was primarily driven by a 28 percent devaluation of domestic currency. Overall, the production of hydrocarbons remained weak due to annual turnarounds of EFERT and FFC plants that hampered the offtakes from the MARI field. Also, the leakages at FFC’s plant and the damaged SSGC pipeline in the Bolan area during the early months of FY23 were factors for lower production volumes. Besides the topline growth in FY23, MARI’s bottom line also benefited 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 FY24

Mari Petroleum Company Limited posted a record-breaking performance in FY24 with significant growth in profitability. The revenue growth for the E&P company in FY24 was primarily driven by a combination of increased hydrocarbon sales volume, higher wellhead prices, and the depreciation of the Pakistani rupee.

The company saw a 7 percent year-over-year rise in hydrocarbon sales. The wellhead price for Mari Gas Field increased by 19 percent year-on-year, significantly boosting revenues. The 12 percent year-on-year devaluation of the Pakistani rupee against the US dollar further augmented the revenue, as earnings in foreign currency translated into higher amounts in local currency. These factors collectively contributed to a 25.4 percent year-on-year increase in net sales for FY24 compared to the previous year.

On the expense side, the company’s operating expenses for FY24 reflected a 32 percent increase year-over-year. For FY24, exploration expenses decreased by 19 percent year-on-year. This reversal was mainly due to the absence of dry wells and lower costs associated with exploration activities during the period. Finance costs for MARI jumped by 61 percent year-on-year, reflecting the impact of higher interest rates. In contrast, finance income for the year was relatively stable, supported by elevated short-term investments and higher prevailing interest rates.

Revenue growth, effective cost management, stable finance income, and favorable taxation all led to an increase in the company’s profitability. MARI’s net earnings for FY24 were up 38 percent year on year. MARI secured a five-year extension of its Mari D&P lease until November 2029, with an additional payment of 15 percent wellhead value, the company documents show. The company’s subsidiary, Mari Mining Co. (Pvt) Ltd. was awarded two mineral exploration licenses in Balochistan’s Chaghi district. Furthermore, the Board of Directors approved the formation of a subsidiary focused on cloud computing and artificial intelligence.

Additionally, MARI announced an 800 percent bonus issue, meaning shareholders received eight additional shares for every share held. This generous bonus issuance underscores the E&P company’s robust financial health as the issuance of bonus shares is a strong indicator of the company’s confidence in its prospects and financial stability. Alongside the bonus shares, MARI declared a final cash dividend of Rs134 per share for 4QFY24, bringing the total FY24 payout to PKR 232 per share, a 58 percent increase from the previous year. The company was able to post its highest-ever achievements in profit, quarterly earnings, dividend payout, and bonus share issuance.

MARI in 1QFY25 and beyond

Mari Petroleum’s 1QFY25 performance remained stable, with a PAT of Rs19.2 billion reflecting flat earnings on a year-on-year basis. Net sales dropped by 6 percent year-on-year during the quarter driven by a 5 percent decrease in the wellhead price of Mari field gas; and 10 percent year-on-year reduction in oil prices; an appreciating currency; and a one percent year-on-year decline in oil production, though gas production increased by 11percent year-on-year.

Exploration expenses for MARI surged by 68 percent year-on-year due to increased prospecting activities. The company’s operating expenses rose 6 percent year-on-year, and finance income improved by 35 percent year-on-year, reflecting higher yields on cash and short-term investments.

Moving forward, Mari Petroleum’s prospects are promising due to key operational development as highlighted in its recent corporate briefing that include projects that are expected to increase production, preparation of offshore evaluations, and new exploratory activities and drilling plans. The company is also focusing on diversification into mining and advanced technologies through subsidiaries like Mari Mining Company and Mari Technologies Limited, along with investments in carbon capture and green hydrogen initiatives.

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