Thursday, March 4, 2021

Mari’s dividend cap removed by ECC

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In the ECC meeting chaired by Federal Minister for Finance and Revenue Dr. Abdul Hafeez Shaikh on Wednesday, the federal government allowed Mari Petroleum Company Limited to fully distribute its dividend among shareholders- three years in advance- aimed at selling its remaining 18.4% stake to either existing shareholders or through the stock exchange.

The ECC acknowledged that the removal of the dividend distribution cap would ensure that the divestment transaction generated optimal sale proceeds for the government, according to the Ministry of Finance.

Read More: ECC expected to approve allocation of gas to SSGC from Mari Petroleum Wells

The Petroleum Division had moved a summary for the removal of dividend distribution cap on Mari Petroleum under the gas pricing agreement as the company was being considered for privatization.

During the meeting, it was also decided that Mari Petroleum would ensure dividend distribution in accordance with the provisions of Companies Act 2017 and Companies (Distribution of Dividends) Regulations 2017.

The government currently owns 18.39% shares in Mari Petroleum, which it wants to unload to raise money for budget deficit financing. Oil and Gas Development Company (OGDC) has 20% shares in the company, while The Fauji Foundation is the owner of 40% of the shares.

The Fauji Foundation and OGDC both have the “first right of refusal” which they exercised in 2017 when the government offered to sell the shares. However, it’s unclear whether the first right of refusal is still relevant or not.

Read More: Mari Petroleum Wins 1st Prize for Management Practices in Oil & Gas Sector

Cabinet Committee on Privatization had approved the transfer price for selling 18.3% stake at a 5% discount to the closing stock price one day prior to when the transfer notice was served to the joint-venture partners, in 2017. The stock at that particular time stood at Rs1,427 and the transfer price came in at Rs1,355 per share.

The original decision said that till 2024 the company was prohibited to pay dividends beyond a certain threshold, which had built sufficient capital for future investment, till 2024. A cap was put on the dividend after the government paid higher tariffs to the company on its exploration activities.

Mari Petroleum bags 4 new blocks

The government has provisionally awarded 15 new blocks to four local E&P out of which 4 have been awarded to Mari Petroleum Company Limited (MPCL). This is being done to encourage the E&P companies to unearth new hydrocarbon deposits within the country so that the nation’s heavy dependency on imported energy is reduced.

In the latest block bidding round, the Directorate General of Petroleum Concessions (DGPC) provisionally awarded 4 new exploration blocks to Mari Petroleum Company Limited (MPCL)

The Block Bidding Round 2020 was arranged by the government and the blocks were awarded after aggressive bidding based on work units committed by different E&P companies. MPCL has been assigned two blocks as the operator and two as the joint venture partner with other local companies.

Mari Petroleum would have 39 percent working interest as the operator with partners Spud Energy having 29 percent and Pakistan Oilfields Limited (POL) having 32 percent interest in in Nareli Block in Balochistan. Likewise, it would hold 60% working interest as the operator with partner Oil and Gas Development Company (OGDC) having a 40 percent share in Sharan Block in Balochistan.

In North Dhurnal Block in Punjab, POL would have a 60% percent working interest as the operator while MPCL would be have a 40% stake as its partner. Killa Saifullah Block in Balochistan would have OGDCL as the operator having a 60% working interest, with Mari Petroleum as its partner having a 40% stake.

An Energy crisis for Pakistan

2020 had been a tough financial year for the oil and gas exploration sector as the economic activities around the globe came to a halt owing to the lockdowns. Due to oversupply and low demand, the companies were forced to trade in the red.

In Pakistan, the exploration costs declined during the year due to the Pakistan Petroleum Limited being uninvolved in the exploratory activities as the company faced a cash crisis. One the other hand, Mari Petroleum Company Limited (MARI) has come out as a clear winner as it depicted the highest increase in its earning.

Read More: Energy Security key for Pakistan’s progress

Pakistan’s hydrocarbon potential – despite work since 1960’s – still remains untapped for various reasons of technology deficits, shortage of skilled human resources and capital investments and lack of strategic direction. Ministry of Energy, Petroleum division is therefore eager to attract foreign investment and skill sets with the aim to kickstart exploration activities to maximize indigenous production of oil and gas. Apart from MARI, Pakistan Petroleum Limited (PPL) and Oil and Gas Development Company Limited (OGDCL) are two public sector companies involved in exploration of oil and gas in Pakistan. These companies contribute to a major share of oil and gas production. Therefore, the Ministry of Energy has encouraged them to enter into joint-ventures with other foreign E&P companies.

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