Mari Petroleum Company Limited (MARI) conducted its corporate briefing to discuss the results of the first nine months of FY23 and the company’s future outlook.

To recall, MARI’s Revenue increased by 46%YoY to PKR 99Bn in 9MFY2023. Moreover, Net Profit grew 47%YoY to PKR 40Bn and EPS for 9MFY2023 stood at PKR 302. Also, dividend of PKR 89/share was paid during the period. MARI had book value of assets of PKR 217Bn and market cap of PKR 202Bn which is the 3rd highest in Pakistan listed exchange.

MARI has acquired 15 new exploration blocks in the past two years, bringing the total count to 33 blocks. The company now has an acreage of 65,865 sq. km. MARI has also signed a contract for an early production facility in Waziristan. The management expects the first gas from Shewa-1 (Bannu West) to be available within seven months, subject to mobilization and a conducive security environment in the region. Additionally, MARI is collaborating with Sui Northern Gas Pipelines (SNGP) to ensure the timely completion of the gas pipeline.

Phase II of the Sachal Gas Processing Complex (SGPC) has been completed by MARI, resulting in the supply of 100 mmcfd of gas to SNGP. MARI has planned to drill horizontals in its fields to sustain the production plateau, which will help reduce exploration costs in the future.

The HRL field currently has a production of approximately 640 mmcfd, and volumes exceeding 525 mmcfd are priced at PP12.
For Ghazij-1, an expected production of 5.1 mmcfd is anticipated, and multiple wells are planned to further evaluate the reservoir.
The company is actively collaborating with various stakeholders to ensure a safe and secure working environment in its fields located at Waziristan, KPK, and Balochistan. Notably, MARI has invested over Rs2 billion in the past 2-3 years to provide a safe environment for its personnel.
MARI has achieved a record production of 117,010 Barrels of oil equivalent per day (BOE/day), with gas production reaching 876 mmcfd. This performance was achieved despite unplanned shutdowns announced by the fertilizer sector in March 2023 and higher RLNG supply in the system, which reduced SNGP’s demand from MARI.

Key Concerns for the Company

MARI faces several key challenges which somehow clouds its outlook to some extent. This includes the growing issue of circular debt, fluctuations in foreign exchange rates, and disruptions in the supply chain. Continued import restrictions may also start impacting operations. The company plans to allocate the necessary resources to safeguard its assets and personnel in areas with deteriorating security conditions in Khyber Pakhtunkhwa (KP) and Balochistan.

On the balance sheet front, receivables increased to Rs45bn, out of which 44% of receivables pertain to SNGP. Receivables from SNGP amount to PKR151/share. Increasing contribution of receivables from SNGP is a risk we flag as the same was only 12% at FY22-end (PKR30/share). Sector exposure to circular debt is also one of the challenges the management has highlighted.

MARI’s focus lies on the Mari Field Sustainability Plan, which aims to ensure a consistent supply of gas from the field to support the country’s food security, as a significant portion of the gas is supplied to fertilizer manufacturing plants.
The turnover of the Sachal Gas Processing Complex (SGPC) is anticipated to begin earlier than planned due to an expected decrease in customer requirements.

Any capital expenditure (CAPEX) for the gas compression project will be covered by the fertilizer companies, and Mari Petroleum will provide support to its partners in the project.

The Reko Diq project, which involves high capital expenditure, does not align with the company’s strategy. However, a subsidiary has been formed to engage in precious metal mining in the country, aiming to diversify the portfolio and sustain earnings growth.

Resolving the circular debt issue involves improving recovery from gas end consumers. As part of its strategy, the company has reduced gas supply to GENCOs (Generation Companies), which will enhance liquidity for the company.
The company is focusing on exploration and development activities in Bannu West, Block-28, Ziarat, and Wali Blocks, as well as expanding its E&P services business for seismic acquisitions. It continuously seeks opportunities for both organic and inorganic growth.

Pertinent to note is that MARI is one of the top holdings in most of the Stock Funds in the country as Earnings growth and high dividend yield entice investors.

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