Raising the exploration limit of Mari Gas proposed – Alfalah Securities Limited

Karachi: The Ministry of Petroleum and Natural Resources has proposed an enhancement in the exploration expenditure limit of the Mari Gas Company Limited (Mari) by 100%, increasing it to USD 40 million from USD 20 million per annum, as reported in the local newspaper.

According to Alfalah Securities Limited, the company had requested that a cap of USD 20 million may be removed and the company may be allowed an increase in the annual exploration expenditure fund to the extent of actual expenditure subject to a maximum of 30% of annual gross sales revenue. The company exceeded the allowable limit of USD 20 million by incurring USD 23.481 million expenditure in FY09, USD 20.313 million in FY10 and USD 23.506 million in FY11.Mari is involved in 15 operated/non-operated exploration blocks across the country and has made five new oil/gas discoveries in four operated and one non-operated blocks. Mari has been operating the Mari Field and also achieved successes on other fields, including Zarghun, Ziarat, Koonj, Hala and Karak blocks.

In 2001, the company was allowed by government to undertake exploration, appraisal and development activities outside the Mari Field, amounting up to USD 20 million or 30% of annual gross sales revenue, whichever was less with the condition that all revenues from new oil/gas fields will be credited to GPA (Gas 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 upto a maximum of 45%. This means that the DPS can rise to a maximum of PkR 4.5 translating in the dividend yield of 5.1% where the remaining profit would go to undistributable reserve.

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