Mari Gas begins additional supply to SNGPL – Alfalah Securities Limited

Karachi: Mari Gas Company Limited (Mari) has started supplying 44 mmcfd gas from its Mari Field (Mari Deep Reservoir) since March 10, 2012 to the Sui Northern Gas Pipelines (for Wapda).

According to Alfalah Securities Limited, Mari supplies gas to Engro, FFC, WAPDA, SSGC and Fatima Fertilizer and its major shareholders includes Fauji Foundation (40%), OGDCL (20%), GoP (18%). Moreover, Mari has also commenced production from its oil well Halini X‐1 in Karak Block, producing 650‐660 barrels per day. Mari has a 60% share in the joint venture with remaining 40% interest of MOL Pakistan. Alfalah Securities Limited believes the additional gas supply to SNGPL would ease off the demand‐supply gap to a certain extent, which may also result in the continuity of gas supply to Engro’s Enven plant.

Mari is engaged in drilling, exploration, production and sale of natural gas. The gas price mechanism is governed by Mari Gas Well Head price agreement. As per the agreement, the well head gas price will be at the minimum level to ensure revenue from gas and other income are sufficient to provide shareholders a minimum return of 30% net of taxes and deductibles. The return is escalated by 1% if gas production is additional 20 mmcfd above 425mmcfd up to a maximum of 45%. This means that the DPS can rise to a maximum of PKR 4.5 where the remaining profit would go to un‐distributable reserve. After supplying additional 44 mmscf/d gas, Mari Gas has achieved production of more than 600 mmcfd of gas from Mari field. After which the dividend yield is likely to improve to 4.4%.

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