Oil and Gas Exploration Companies - MARI: PKR depreciation and higher well head gas price for Mari field to lift 2QFY20 EPS by +8%YoY
We estimate incline in earnings on the back a) 16%YoY depreciation of PKR against greenback despite 5%YoY drop in oil prices, b) higher wellhead gas price for Mari field and, c) higher other income on account of increased income on bank deposit and short term investments,
On quarterly basis, earnings are expected to drop by 15%QoQ on the back of 21%QoQ drop in revenues led by 11%QoQ drop in Mari gas field production,
We recommend a 'BUY" stance on MARI with our Dec-20 target price of
Earnings to clock in at
Mari gas field production down substantially during 2QFY20
Total gas production for the Company fell down by 13%YoY on the back of nearly 13%YoY drop in flows from Mari gas field. This was primarily on the back of planned shut-down of FFC plant, lower offtake from FPDCL and reduced requirement from WAPDA. Although during planned shutdown of customer plant, Mari field benchmark production for Petroleum Policy 2012 (PP12) pricing is lower, but substantial drop in production is likely to reduce incremental production entitled for PP12 by 41%YoY (44%QoQ).
Lower gas production to drag earnings down on quarterly basis
On a quarterly basis, earnings are expected to drop by 15%QoQ on the back of 21%QoQ drop in revenues led by 11%QoQ drop in Mari gas field production. Oil production declined by 2%QoQ on the back of lower flows from Mari, Sujal and Dharian.
Recommendation
We recommend a 'BUY' stance on MARI with our Dec-20 target price of
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