Mari Energies Ltd. (MARI) has announced a third gas and condensate discovery at its highly anticipated Spinwam-1 1 1 exploratory well in the North Waziristan block (formerly Bannu West). The latest discovery in the Hangu formation resulted in flows of 23.85mmcfd of gas and 122 bpd of condensate.
§ This marks the third discovery in Spinwam-1 1 1, following earlier finds in the Kawagarh and Samunsak formations, which together are expected to produce a cumulative flow of 33mmcfd of gas and 137bpd of condensate. With the addition of the Hangu formation, the total potential output from Spinwam-1 1 1 now stands at 57mmcfd of gas and 259bpd of condensate.
§ The North Waziristan block has emerged as a high-prospect area. MARI has already made significant discoveries at its two other exploratory wells, Shewa 1 and Shewa 2. Together, they are expected to produce 70mmcfd of gas and 691bpd of condensate. As a result, the cumulative output from the block now reaches 127mmcfd of gas and 950bpd of condensate.
§ MARI serves as the block operator, holding a 55% working interest, while Oil and Gas Development Company (OGDC) has a 35% stake. The remaining 10% is owned by Orient Petroleum Inc. (OPI). The recent discovery in Spinwam-1 is expected to generate net earnings of approximately PKR5.9bn. For MARI’s proportional stake, that translates into an EPS of PKR2.72, while OGDC’s EPS would be PKR0.50.
§ That said, we note the North Waziristan block is located in a security-sensitive region of Khyber Pakhtunkhwa (KPK), posing risks to production operations. Although the first discovery in the block was made in 2022, production has not yet commenced. Nevertheless, the government has initiated discussions with local tribal groups to facilitate production from the block, and production is expected to begin within the next few months.
§ This marks the fifth discovery from the North Waziristan block, bringing the total production to 127mmcfd of gas and 950bpd of condensate, representing 15% and 30% of MARI’s total oil and gas production, respectively. While this significant discovery strengthens the block’s prospects, MARI’s current valuation is pricing in further, larger discoveries.
§ We remain more bullish on OGDC. OGDC holds a 35% stake in the North Waziristan block and also owns a 20% stake in MARI. The stock trades at a 49% discount to MARI, OGDC’s fundamentals are solid, particularly as the circular debt issue, which has previously weighed on the company, is no longer a significant concern. As a result, we maintain a Buy rating on OGDC, with a TP of PKR266/sh.
