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MARI - 3QFY23 Result Review - Earnings up 47%QoQ, (AKD Off the Analyst's Desk Apr 28, 2023)

Mari Petroleum Company Limited (MARI) reported its 3QFY23 earnings earlier today, wherein the company posted Profit After Tax (PAT) of PkR 16.43bn (EPS: PkR123.2) for the quarter, higher by 47%/51% QoQ/YoY — in-line with our estimates of EPS: PkR122.1/sh.

• Net sales for the quarter stood at PkR37.8bn for the 3QFY23 (up by 30%QoQ), the highest quarterly topline in the company’s history. The said increase is majorly due i) higher offtakes from the MARI field (up 19%QoQ/11%YoY), ii) surge in well-head gas prices amid higher avg. oil prices (up 28%YoY) alongside sharp PkR deprecation (17%QoQ) during the period
• To note, MARI field’s offtakes recovered significantly during the period, averaging at 794mmcfd during the period (vs. 669/714 during last-quarter/SPLY) while also peaking in at 867mmcfd during the 3rd week in Mar’23 as major fertilizer customers (EFERT/FFC) returned from their ATA’s during the period. On the crude front, production also rose by 31%/24% QoQ/YoY during the period amid significant recoveries from the Bolan East area as opposed to muted production during 1HFY23 due to torrential rainfall/flood damages (as per PPIS data).
• On the non-operating front, MARI gained PkR4.64bn from Finance Income/Other income, majorly due to exchange gains amidst sharp currency depreciation during the quarter (period-end PkR/USD: ~285, up 26%QoQ).
• According to the latest PPIS reserves data, MARI’s 2P reserves stood at 580MMBOE as of Jun’22 data. Reserves of its largest asset—Mari field—are estimated to stand at 4.84TCF of gas. Assuming throughput from the field at ~750MMCFD going forward, the field could continue production for another ~18 years, despite 58% depletion
• Furthermore, projects such as i) Sachal gas processing facility (potentially +90/+200 mmcfd gas starting from FY24/25, towards SNGPL) , ii) Mari-122H (horizontal well) in HRL Reservoir of Mari Field (+21mmcfd of low pressure gas), iii) signing of a framework agreement with fertilizer customers for installation of pressure enhancement facilities at Mari field, and iv) drilling of Banu West-1 well, production to commence in FY24 (+50mmcfd gas, 300bpd oil), are expected to enhance the company’s hydrocarbon resource and provide impetus to operational sustainability going forward
• MARI remains our top pick from the sector, with a Dec’23 target price of PkR3,100/sh on the stock, offering upside potential of 90% over the last close. In addition to this, the stock provides a dividend yield of 14.5% (FY24). MARI is currently trading at a FY23/FY24 P/E of 3.81/2.07x, compared to the 5-year average of 10.50x