Mari Petroleum Company Limited (MARI) is an integrated oil and gas exploration and production company, which is managing and operating the country's largest gas reservoir at Mari Gas Field, Daharki, Sindh. The E&P Company formerly known as Mari Gas Company Limited, is one of the key gas exploration and production players in the sector, and enjoys around 72 percent exploration success rate, which is much higher than industry averages of 33 percent national and 14 percent international, as per the company's accounts.
The firm is the second largest producer of natural gas with a market share of over 18 percent. It has a cumulative daily production equivalent to 100,000 barrels of oil. In addition to Mari Gas Field, it holds development and production leases over Zarghun South, Sujawal, and Halini X-1 and has operatorship of eight exploration blocks (Sujawal, Karak, Ghauri, Sukkur, Ziarat, Harnai, Peshawar East, and Bannu West). MARI is also a non-operating joint venture partner with leading national and international E&P companies D&P leases and exploration blocks.
The E&P firm is also a key supplier of gas to the fertilizer manufacturers, power generation companies and gas distribution companies, while its crude oil and condensate are supplied to the refineries. Around 80 percent of fertilizer production depends on gas supplied by Mari Petroleum. Its customers include Engro Fertilizer Limited, Fauji Fertilizer Company Limited, Fatima Fertilizer Company Limited, Foundation Power Company Daharki Limited, Central Power Generation Company Limited, Sui Northern Gas Pipelines Limited, Sui Southern Gas Company Limited, Attock Refinery Limited, National Refinery Limited, Pakistan Refinery Limited, Pak Arab Refinery Limited, Western Power Company (Pvt) Limited, Petrosin CNG (Private) Limited and Foundation Gas..
Shareholding pattern at MARI
The government of Pakistan has around 18.39 percent shareholding in Mari Petroleum, which has been planned to be divested as well. Apart from the GoP, Mari has two key shareholders: Fauji Foundation with 50 percent shareholding; and OGDC with a share of 20 percent. The illustration shows the detailed breakup.
The pattern of shareholding includes some bonus shares of Fauji Foundation and OGDCL respectively, which were not issued as at year end (June 30, 2017) due to the pending resolution of issue relating to deduction of withholding tax on issuance of bonus shares.
Past performance
Mari Petroleum Company Limited has remained sturdy in years of low oil prices. It has outperformed its peers during the weaker years both in terms of profitability/cost efficiency and production. Not only has the firm seen an increase in its oil flows, gas production has also taken a notch up even when overall domestic natural gas production continued to remain flat due to the oil prices.
A look at the last five years shows that the company's gross sales and net sales have been growing consistently, while profit after tax has also has seen phenomenal growth. In FY16, Mari's revenues increased to Rs 96 billion from Rs 88 billion in FY15 due to sale of 60 mmcfd additional gas under incentive price provided to Guddu Power Station. Increased hydrocarbon production resulted in 12 percent year-on-year increase in net revenues. At the same time, the company's aggressive exploration and production resulted in doubled exploration and production expenses.
FY17 and beyond
In FY17, Mari Petroleum's net sales increased by 30 percent year-on-year along with 51 percent, year-on-year increase in profits that also came from its cost cutting measures and improved efficiency. Mari Petroleum has seen its operating expenditure come down consistently, which has come down from 46 percent in FY12 to 26 percent in FY17.
During the year FY17, MARI produced about 18 billion cubic feet of incremental gas and earned the incentive revenue. According to the firm's Annual Report FY17, the company's strategy during these tough times was to increase production of oil and gas to take maximum benefit of the incentive offered in the 2012 Petroleum Policy on enhanced production of gas from the existing reservoirs, by at least 10 percent. It drilled 8 out of 9 planned wells, while only one non-operated well was deferred to next year due to land acquisition issues and not on technical grounds. These 8 wells included 5 explorations, 2 appraisals and 1 development well that resulted in the discovery of 123 BCF of new reserves addition and production enhancement, according to the company's annual report. Moreover, the firm also successfully finalised a three years' exploration programme and also developed a five years' exploration vision.
FY18 too looks good for the E&P giant. During the first nine-months of FY18, gross sales for 9MFY18 aggregated to Rs 72,368 million as against cumulative sales of Rs 74,137 million, depicting a decline of 2 percent, year-on-year due to reduction in consumer price for power sector as well as reduction in sales tax on feed gas for fertilizer industry. However, net sales for nine months increased by 44 percent, year-on-year partly due to lower gas development surcharge.
Overall, the net sales, other income, finance income increased, while exploration and prospecting expenditure decreased to left the earnings for the 9MFY18 by 71 percent, year-on-year. The firm posted an increase in its gas production from Mari Field during the period as well as gas produced from its joint venture fields. Increase was also seen in crude oil production during the nine-month period.
Mari Petroleum has been performing well in the E&P sector. The firm has plans to go global and had increased its exploration capex budget to $249mn in FY18 from $206mn in FY17. It has signed MoU with MOL Group of Hungary for increased collaboration. It has announced a strategic cooperation initiative with Kuwait Foreign Petroleum Exploration Company (KUFPEC) to explore opportunities in both local and international upstream exploration and production. It has also signed MoU recently with a Polish oil and gas exploration company on strategic cooperation.
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MPCL-Pattern of Shareholders as on June 30, 2017
Categories of Shareholders %
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Associated Companies,
undertakings and related parties
Fauji Foundation 40.0
OGDCL 20.0
Mutual Funds 10.0
Banks, Development Financial Institutions
and Non-Banking Financial
Meezan Bank Limited (CDC) 0.24
National Bank Of Pakistan (CDC) 1.83
Insurance & Takaful Companies 1.88
Modarabas 0.01
Pension Funds 0.75
Individuals
Local 3.76
Foreign 0.04
Others
Government of Pakistan 18.39
Federal Board of Revenue 0.04
Joint Stock Companies 0.58
Executives 0.01
Foreign Companies 0.5
Others 1.89
Total 100.0
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Source: Annual Accounts FY17
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Mari Petroleum Company Limited-1HFY18 Financial Performance
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Rs(mn) 9MFY18 9MFY17 YoY
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Gross Sales 72,368 74,137 -2%
Gas Development Surcharge 8,449 17,663 -52%
General Sales Tax 8,493 10,512 -19%
Excise Duty 1,418 1,344 6%
GIDC 25,417 24,753 3%
Net Sales 28,592 19,866 44%
Royalty 3,638 2,528 44%
Operating Expenditure 6,988 5,129 36%
Exploration and Prospecting Expenditure 1,637 2,565 -36%
Operating Profit 15,297 8,684 76%
PAT (RHS) 10,784 6,307 71%
EPS 97.82 57.21 71%
Operating margin 53.5% 43.7%
Net margin 37.7% 31.7%
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Source: Company Accounts