Mari Petroleum Company Limited

Mari Petroleum Company Limited (PSX: 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, 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).

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.

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 for 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.

Financial performance FY16

FY16 was an unimpressive year for the E&P sector in terms of production. Domestic crude oil production was down by around 8.5 percent year-on-year to around 86,000 barrels per day, and domestic natural gas production continued to remain flat at four billion cubic feet per day in FY16. The decline in crude oil production in FY16 was largely due to lower crude oil prices.
However, Mari Petroleum Company Limited (PSX: MPCL) emerged as the out-performer in FY16. The E&P player's oil and gas production increased by around seven and three percent, respectively while other key players registered declined outflows.

Though other listed E&P companies are yet to announce their financial performance for FY16. It is likely that MPCL will also outperform the sector in terms of earnings due to better quarterly performance. MPCL's financial performance for FY16 was driven largely by its aggressive exploration; there were around three discoveries in FY16 and Halini Deep was the key one.

Despite price plunge, MPCL's revenue during the year under review increased to Rs 96 billion from Rs 88 billion in the last year due to sale of 60 mmcfd additional gas under incentive price provided to Guddu Power Station during the latter half of the year. Much larger increase is expected in the coming years. Increased hydrocarbon production resulted in 12 percent year-on-year increase in net revenues for MPCL. The firm's aggressive exploration and production activity can be seen from two times increase in exploration and production expenses. However, its operating profits dropped by 13 percent in FY16 due to higher exploration and prospecting expenses. Overall, MPCL's earnings saw a seven percent year-on-year increase in FY16.

Outlook

The firm is working on enhancing its production from Mari gas field, which will increase gas production by at least 10 percent. Besides that, the most serious challenge that MPCL faced during the year as per the company's annual report was the acute shortage of exploration blocks for the envisaged vigorous exploration program, which was caused by ongoing delay by the government in offering the next bidding-round for new blocks. MPCL continued concentrating on the Mari lease area and by taking working interest in selected blocks of other companies. So far MPCL has acquired 32 percent working interest in Shah Bandar Block operated by PPL and 20 percent working interest with operator-ship in Bannu West Block in joint venture partnership with Tullow Pakistan. Acquisition of five percent working interest in Bannu West Block from OGDCL is also in process. These two blocks were selected after reviewing 52 blocks available for farming-in.