Mari Petroleum Company Limited (KSE: MPCL), formerly known as Mari Gas Company Limited, is one of the local exploration and production companies operating in Pakistan. It manages and operates the Country's largest gas reservoir in terms of current reserves at Mari Field, District Ghotki, and Sindh. The Company was renamed Mari Petroleum Company Limited in November 2012.
Mari Petroleum Company Limited's first field was discovered in 1957 when the company operated as Esso Eastern Inc. Later in 1983, the company was acquired by Fauji Foundation, OGDC and Government of Pakistan, and in 1984, Mari Gas Company Limited was formed which overtook the entire Mari gas field with headquarters in Islamabad.
The firm's exploration and production assets are spread across the Country in all the four provinces. In addition to Mari Gas Field, MPCL currently has operator ship of Zarghun South Gas Field and nine exploration blocks (Ziarat, Hanna, Harnai, Sukkur, Sujawal, Karak, Ghauri, Peshawar East and Khetwaro). It is also a non-operating joint venture partner with leading national and international E&P companies in six exploration blocks (Kohlu, Kalchas, Kohat, Bannu West, Zindan and Hala).
Business MPCL is a major producer of natural gas currently holding around 11 percent market share. Other products of the company include crude oil, condensate and LPG. The E&P firm also looks to providing seismic data acquisition, seismic data processing, drilling rigs, slick line and allied services on commercial basis. MPCL supplies the gas it produces to fertiliser manufacturers, power generation companies and gas distribution companies while crude oil and condensate are supplied to the refineries for further processing. Around 80 percent of fertiliser production depends on gas supplied by MPCL.
Performance snapshot FY14 Gas is the largest source of revenue for the company representing a 97-98 percent share in its total gross sales. FY14 was an amazing year for Mari Petroleum Company Limited in terms of gas discoveries as well as profits. Net revenues accentuated by 26 percent year-on-year in FY14 mainly due to increase in gas and condensate production, increase in rates of Gas Infrastructure Development Cess and increase in gas prices.
Royalty, operating expenses and exploration cost increased by 25 percent year-on-year, each in FY14. As a result the operating margins slid slightly in FY14. However, this was partially offset by increase in well head value, other income and decrease in finance cost and provision for taxation. Net earnings for FY14 stood elevated by 63 percent, and the rate of return to the shareholders for FY14 also increased primarily due to increase in production levels. On the liquidity front, the firm remained stable; MPCL obtained long term financing amounting to Rs 211 million to meet the requirements of its Zarghun field development project during the year.
Operations FY15 During FY15, Mari Petroleum was able to produce 29.21 million barrels of oil equivalent energy which resulted in foreign exchange saving of around Rs 225 billion. In addition, MPCL contributed Rs 73.24 billion to the national exchequer on account of taxes, royalty, excise duty, sales tax, and gas infrastructure development cess and gas development surcharge.
The firm's Gas Pricing Agreement up till now has been based on cost plus wellhead gas pricing formula, which the Board of Directors has decided to dismantle and replace with a market related formula, which was the highlight of the year and a change in the firm's operations. Effective from July 1, 2014, the cost plus wellhead gas pricing formula has been replaced with a crude oil price linked formula which provides a discounted wellhead gas price to be gradually achieved in five years from July 1, 2014. Under the revised formula, now the Government of Pakistan will not provide exploration funds to the Company.
Another key development for FY15 was the approval of five year extension in Mari lease period; this means that the firm will now be able to enjoy the development and production rights in the Lease Area till 2019. The lease is further extendable by 10 years under the prevailing statutory regime.
The E&P firm achieved positive developments in exploration operations in FY15; MPCL made significant crude discovery and natural gas discovery at exploration well Kalabagh-1A in Karak Block. It is a joint venture between MPCL as operator with 60 percent working interest and the remaining by MOL.
Financial performance FY15 MPCL remained upbeat in FY15 as well. The firm's gross sales (prior to all the taxes and duties) increased by 25 percent year-on-year. Net sales increased by 30 percent year-on-year due to increase in wellhead gas price for Mari gas field, slight improvement in gas sales volumes and an up tick in oil volumes as well. Another reason for the rise in profitability has been the other income for FY15.
While the profitability margins remained sanguine, the liquidity in FY15 remained lower than FY14 due to decrease in cash and bank balances mainly attributable to repayment of long term financing.
Firm's bottom line saw a growth of 43 percent year-on-year on account of better top line, however the growth in earnings was trimmed by a hefty increase in finance cost, increase in operating expenses; the increase in finance cost is attributable to the issuance of preference shares with regards to the firm's new Gas Pricing Agreement.
Outlook It is anticipated that the implementation of a new Gas Pricing Formula will be a boost to the revenues of the firms that have remained capped under older regime, especially when the firm has now opted for an aggressive exploration focus. MPCL has shown strong financial and operational performance during the first year of the GPA dismantling. With the renewed focus in exploration, the management is aiming to cross Rs 100 billion in revenues in FY16.

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Mari Petroleum Company Limited (MPCL)
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                        FY11        FY12        FY13        FY14        FY15
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Profitability
OP margin %             8.85        3.64        6.09        6.62        8.87
NP margin %             5.49        2.35        3.83         5.6        6.40
ROCE %                 24.67       13.08       24.11       26.43       37.37
ROA %                   6.79        3.35        7.05        6.63        0.09
ROE %                  16.17        9.72       17.86       23.44       49.15
Liquidity
Current ratio           1.33        1.26        1.34        1.08        1.06
Debt service ratio      1.28        1.21        1.28        1.06        1.02
Turnover
Total asset turnover    1.24        1.42        1.85        1.18        1.34
Fixed asset turnover    2.57        3.94        5.22        4.17        4.13
Market
Dividend payout (%)    80.68       68.22       67.33          72       77.18
EPS (Rs per share)     18.78       12.14       26.35       35.77       51.25
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