MARI’s profitability to soar by over 40% in FY23

June 17, 2022 (MLN): Despite the bleak performance of the E&P sector owing to subdued discoveries, less prospect for growth opportunities, and rising circular debt, the bottom line of Mari Petroleum Company Limited (PSX: MARI) will likely expand by over 40% in the fiscal year 2023, as per estimates provided by Insight Securities on Friday.

The expected growth is mainly attributable to the strong fundamentals including the company’s less exposure to debt, strong balance sheet, incremental production from the MARI field and lucrative dividend yield have made the scrip more attractive.

Meanwhile, PKR devaluation, revision in oil price assumption, and incorporation of incremental flows will also accelerate the profitability of the company.

At the same time, there are certain risks that may be faced by the company including lower than expected gas production, the decline in crude oil prices, lower than the estimated devaluation of PKR, and an additional 2% poverty tax on profit.

The report further highlighted, “Unlike other players in listed space, MARI seems to be the safest bet as its receivables are not stuck in circular debt because of its field dedication towards fertilizer sector.”

MARI’s total receivables stand at Rs35.3bn out of which, 14.3bn (i.e. 40%) is pertaining to CPPA. Moreover, the cash-rich balance sheet distinguishes MARI from its peers, as per Mar’22 accounts, total cash and cash equivalents stand at Rs31.2bn (PKR235/share), representing around 14.5% of market capitalization.

During 9MFY22, the company’s gas production increased by 4% YoY, thanks to the export of undrawn volumes towards the SNGPL network. The company’s GTH gas processing facility was commissioned in the said qtr and the first gas from TIPU well compartment i.e. Goru-B also injected into the SNGPL network.

In order to further enhance swing gas capability, the company has the plan to install two gas compressors which will enhance swing volumes by 30 MMCFD, and said the facility is expected to come online by end of fiscal year FY22.

In a recent development, MARI made a gas/condensate discovery resulting from its exploratory efforts at Bannu West-1 ST-1 Exploration Well drilled in Bannu West Block, located in North Waziristan, KP. As per estimates, a discovery has an annualized EPS impact of Rs21.2 per share.

At present, the scrip is valued at Rs1,685, up by 36.88 rupees or 2.24% DoD. 

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