MARI: Growth to gain momentum in FY19
â–ª We initiate our coverage on MARI with a Jun-19 price target (PT) of PKR 2,062/share. Out PT provides a potential upside of 53% along with 0.5% dividend yield. The stock is currently trading at FY19 PER of 5.6x. We have assumed oil prices at USD 60/bbl for FY19 and USD 60/bbl for the long term, whereas, our Jun-19 end PKR/USD assumption stands at 145.
â–ª MARI HRL reservoir is estimated to maintain a plateau of 650mmcfd till Jul-23, against previous estimates of 640mmcfd plateau which was projected to end in Feb-19. This eliminates concerns over subdued earnings due to low production volumes. Addition of production from Bolan East-1 expected to start in 3QFY19 will augment earnings further.
â–ª With 70% exploration success rate the company is likely to add further discoveries, which shall reduce reliance on Mari field’s production and hedge it against depletion in Mari reserves.
â–ª MARI’s management is currently evaluating two projects for investment: a 180MW power plant at Goru-B reservoir in Mari field and carbon dioxide production plant. We have not incorporated the projects in our estimates.
â–ª Key risks to our investment thesis are: 1) decrease in oil prices, 2) lower than expected production from Mari HRL field, 3) appreciation in PKR against USD and 4) higher number of dry wells.
Mari Petroleum Company Limited is a Pakistan-based exploration and production company. The Company is engaged in managing and operating Pakistan's gas reservoir at Mari Field, District Ghotki, Sindh. Its segments include Exploration and Production; Mari Seismic Unit, and Mari Drilling Unit. The Exploration and Production segment includes various upstream business activities. The Mari Seismic Unit segment includes two-dimensional (2D)/three-dimensional (3D) seismic data acquisition. The Mari Drilling Unit segment includes onshore drilling services. In addition to Mari Gas Field, it holds development and production leases over Zarghun South and Sujawal Gas Fields, and has operatorship of eight exploration blocks (Ziarat, Harnai, Sukkur, Sujawal, Karak, Ghauri, Peshawar East and Khetwaro). Its other products include crude oil, condensate and liquefied petroleum gas (LPG). Its exploration and production assets are spread across Pakistan in all four provinces.
Akseer is a Research & Analytics firm based out of Pakistan that specializes in Equity Research and Corporate Finance. Our team has exposure to a wide range of sectors including Economy, Banking, Telecommunications, Retail, Real Estate, Construction and Materials, Pharmaceuticals, Food, Energy, Chemicals and Petrochemicals. We have experience of covering companies in Middle East, Americas, Far East and South Asia.
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