Like the rest of the E&P players, Mari Petroleum Company Limited (PSX: MARI) enjoyed currency depreciation and higher oil prices in the latest quarter. The company reported an increase of over 60 percent year-on-year in its top line for 1HFY19
However, the increase in the company’s revenues was not only due to higher oil prices that were up by about 30 percent year-on-year in 1HFY19, but also better gas production flow. Growth in the top line was supported by around six percent year-on-year up tick in gas production along with over 50 percent hike in wellhead price of Mari gas field. On the other hand, oil price increased by 31 percent year-on-year, while production volumes for crude oil were down by 18-19 percent. This surge in the revenues supported the 62 percent year-on-year growth in MARI’s earnings for the six-month period.
On the expenses side, operating expenses were higher in 1HFY19 by 23 percent, year-on-year due to high cost of production. Also, exploration and prospecting expenditure were significantly higher in 1HFY19 versus 1HFY18 due to costs incurred on an exploratory well in 1QFY19; the exploration and prospecting expenses were down by 12.6 percent year-on-year in 2QFY19.
Its future exploration and drilling activity includes the acquisition of two new blocks in Sindh and the tribal areas with a combined financial commitment of around $45 million. These blocks have been acquired during the government’s recent bidding round for 10 exploration blocks.
As part of its strategic business planning, MARI’s medium to long term diversification plans include setting up a 180-megawatt Mari Power Plant. However, recently it has been facing resistance from the government for gas supply to the plant where the government has refused to allocate Mari field gas to the combined-cycle thermal power plant allegedly in favour of the fertiliser sector. More on this subject later.
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