Mari Petroleum Company Limited (MARI) reported its 2QFY23 earnings recently, wherein the company posted Profit After Tax (PAT) of PkR 11.15bn (EPS: PkR83.56) for the quarter, lower by 12%QoQ and, although higher by 49%YoY—slightly higher than our estimate of PkR81/sh.

· Net sales clocked in at PkR61bn for the 1HFY23 (up by 44%YoY), the highest half yearly topline posted in the company’s history. The growth in net sales was majorly driven by a weaker PkR against the US$ (1QFY23: PkR223/US$ vs. 1HFY22: PkR169/US$).

· This offset the lower production from Mari gas field during the first half (compared to SPLY), as offtakes from MARI field remained hampered during the period due to annual turnarounds of EFERT and FFC plants during the period, alongside leakages at FFC’s plant and damaged SSGC pipeline in Bolan area during Aug’22.

· A substantial increase of 116%YoY was seen in the company’s exploration charges for first half, which clocked in at PkR5.7bn, driven by the increase of two dry wells during the period, namely Sundha Thal-1 (55% MPCL) & Shahpurabad—1 (33.% MPCL). Compared to this, the company posted a dry well cost of ~PkR2.66bn in the SPLY.

· We have a Buy rating on the stock, with a Dec’23 TP of PkR3,270/sh, along with a dividend yield of 11.5%. Our liking for the stock is driven by the company being one of the only E&P companies in the country with enhanced production prospects, and relatively lower exposure to circular debt.

Courtesy – AKD Research