Mari Petroleum Company Limited (PSX: MPCL) 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. It has had robust three-year earnings CAGR of around 58 percent along with over 60 percent rise in reserves. Moreover, the firm has also 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 cost even though the company witnessed one dry well during the period versus none in the same period last year.

MPCL has had a couple of good news as well; it is looking to diversify into power generation, planning a 400MW gas-fired plant in southern Punjab as per media reports. The company’s development well, located in Balochistan’s Bolan block, has also started pumping gas into the national grid. MPCL’s stock has been outperforming the benchmark index as well as its peers (Read: MPCL: Progressing or simply overvalued? Published on March 28, 2017). It has remained in the limelight due to better earnings, revised GPA, and the government’s plan to divest MPCL shareholding.

Moreover, the company has an aggressive future exploration and digging plan that will keep it interesting for the investors. MPCL has plans to drill 9 wells per annum over the next 3 years relative to 6 wells drilled in FY16; it will expand its exploration portfolio through fresh bidding for exploratory licenses and farm-in opportunities, and has scaled up its projections for exploration capex significantly for the coming three years. While these efforts will make investors happy in the long 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.

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MARI PETROLEUM COMPANY LIMITED


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RS (mn)                           9MFY17   9MFY16    YoY   3QFY17   3QFY16     YoY


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Gross Sales                       74,137   69,740     6%   24,314   24,286      0%


Gas Development Surcharge         17,663   19,308    -9%    5,286    6,637    -20%


General Sales Tax                 10,512    9,914     6%    3,435    3,482     -1%


Excise Duty                        1,344    1,252     7%      454      420      8%


GIDC                              24,753   23,620     5%    8,333    7,927      5%


Windfall Levy                          0      200  -100%        0        0   -100%


Net Sales                         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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