The impact of COVID-19 and depressed oil prices was a challenge 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.

FY21 in comparison has seen some revival in the E&P landscape. Mari Petroleum Company Limited (PSX: MARI) announced a 4 percent increase in its earnings for FY21. Where the 1HFY21 posted growth in earnings, the company’s earnings slipped slightly in 3QFY21 due to drop in oil prices negatively impacting the gas wellhead prices. This was followed by another positive last quarter despite the drop in oil prices continuing. Overall, MARI posted a rise of around 4 percent in earnings for FY21.

However, in spite of the weakness in prices, the revenues of the exploration and production giant were supported by better hydrocarbon production flows in FY21. MARI’s overall oil production in FY21 stood up by 17 percent year-on-year, while natural gas production – the main product of the company - was up by 8 percent year-on-year during the year. The last quarter (4QFY21) witnessed noticeable growth in production flows; according to a research note by Arif Habib Limited, MARI’s oil and gas production in 4QFY21 surged by 29 and 13 percent year-on-year, respectively.

Growth in E&P’s bottomline was fueled by weaker exploration and production expenses that declined due to absence of dry well in FY21 versus one dry well the last quarter of FY20. However, drop in other income and rise in finance cost did the opposite. What could propel the E&P’s earnings is the oil prices, and with the current oil prices high and likely to remain at the same level more or less, FY22 prospects foresee improvement for MARI.