MPCL'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 operatorship 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 fertilizer 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 fertilizer production depends on gas supplied by MPCL.
The E&P company's shareholding is divided as such that Fauji Foundation owns 40 percent, while OGDC has a share of 20 percent. Another 18.4 percent is owned by the government of Pakistan, while the Mutual funds have a shareholding of around 10 percent.
Annual Financial Performance 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.
Bottom-line saw a growth of 43 percent year-on-year on account of better top line, main factors that inhibited growth are 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.
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.
FY16 was again an unimpressive year for the E&P sector in terms of production. Domestic crude oil production was down and domestic natural gas production continued to remain flat. The decline in crude oil production in FY16 was largely due to lower crude oil prices. But things were different for MPCL that emerged as the outperformer in FY16. The firm's oil and gas production increased by around seven and three percent, respectively while other key players registered declined outflows.
Despite low oil prices, MPCL's revenue in FY16 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. Increased hydrocarbon production resulted in 12 percent year-on-year increase in net revenues for MPCL. The firm's aggressive exploration and production resulted in 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.
MPCL in 9MFY17 MPCL is the rising star in the E&P sector; it is quickly becoming one of the most favoured stocks in the oil and gas exploration and production industry. The company has performed significantly well compared to its peers during the tumultuous times of low oil prices. Not only does it have a robust three-year earnings CAGR of around 58 percent and over 60 percent rise in reserves, it has had four times higher prices on new discoveries amid its quest for aggressive exploration finds.
MPCL's net revenues in 9MFY17 increased by 29 percent year-on-year, while the bottom-line was up by 62 percent, year-on-year. The increase in earnings came from increased revenues due to rising volumetric growth as well as better prices. The firm's bottom-line further expanded due to decrease in exploration and production.
Outlook In the short run, lack of dividend announcement due to increased capex can impact the short run price performance along with the possibilities of lower oil prices, and increased dry wells. However, MPCL's future seems bright in the long term. Its stock has been outperforming the benchmark index as well as its peers. It has remained in the limelight due to better earnings, revised GPA, and the government's plan to divest its shareholding in MPCL.
The firm is looking to diversify into power generation, planning a 400MW gas-fired plant in southern Punjab. The development well located in Balochistan's Bolan block has also started pumping gas into the national grid. Furthermore, the firm has an aggressive future exploration plot. It will also expand its exploration portfolio through fresh bidding for exploratory licenses and farm-in opportunities. It has also scaled up its projections for exploration capex significantly for the coming years.
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MARI PETROLEUM COMPANY LIMITED (MPCL)
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FY11 FY12 FY13 FY14 FY15 FY16
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Profitability
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OP margin % 8.85 3.64 6.09 6.62 8.87 7.15
NP margin % 5.49 2.35 3.83 5.6 6.40 6.37
ROCE % 24.67 13.08 24.11 26.43 37.37 36.78
ROA % 6.79 3.35 7.05 6.63 0.09
ROE % 16.17 9.72 17.86 23.44 49.15 35.67
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Liquidity
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Current ratio 1.33 1.26 1.34 1.08 1.06 0.93
Debt service ratio 1.28 1.21 1.28 1.06 1.02 0.87
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Turnover
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Total asset turnover 1.24 1.42 1.85 1.18 1.34 1.60
Fixed asset turnover 2.57 3.94 5.22 4.17 4.13 3.94
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Market
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Dividend payout (%) 80.68 68.22 67.33 72 77.18 81.08
EPS (Rs per share) 18.78 12.14 26.35 35.77 51.25 54.89
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Source: Company accounts.
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MPCL-PATTERN OF SHAREHOLDERS AS ON JUNE 30, 2016
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Associated Companies, undertakings and related parties %
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Fauji Foundation 40.0
OGDCL 20.0
Mutual Funds 10.0
Government of Pakistan 18.4
Local individuals 4.8
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Source: Annual Accounts FY16
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MARI PETROLEUM COMPANY LIMITED
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RS (mn) 9MFY17 9MFY16 YOY 3QFY17 3QFY16 YOY
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NetSales 19,866 15,445 29% 6,806 5,818 17%
Royalty 2,528 1,956 29% 894 727 23%
Operating Expenditure 5,129 4,146 24% 1,615 1,437 12%
Exploration and Prospecting Exp 2,565 5,143 -50% 1,667 1,799 -7%
Other charges 538 296 82% 133 129 3%
Other operating income/(expense) -422 1,006 -302 325
Operating Profit 8,684 4,911 77% 2,194 2,051 7%
Finance income 168 307 -45% 82 129 -36%
Finance Cost 637 1,205 -47% 224 425 -47%
Profit after tax 6,307 3,891 62% 1,695 1,837 -8%
EPS 57.21 35.29 62% 15.37 16.66 -8%
Operating margin 43.7% 31.8% 32.2% 35.2%
Net margin 31.7% 25.2% 24.9% 31.6%
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Source: PSX
Copyright Business Recorder, 2017