Recent discovery in the much-hyped Waziristan block (Bannu
West) is likely to commence production by the end of FY25. While the market has
high hopes from the block, the brokerage house has assumed initial production
of 70mmcfd which could rise to 250mmcfd by FY28.
Following the rally of 91% over the past two months, the
stock seems overvalued. MARI has more than priced in the positives while the
market has disregarded that near-term earnings will decline due to additional
royalty on Mari D&P.
The updated earnings estimates for FY25and FY26 stand at
PKR57.00 and PKR62.07, respectively. The Sell stance reflects the view that the
recent rally appears to have overestimated the positives, in particular the
potential of its recent discoveries.
The recent rally seems to have been partly driven by
speculation surrounding potential heavy mineral resource discoveries and the
company’s rebranding to "MARI Energy," though no concrete
developments have yet materialized. Furthermore, high expectations around Bannu
West remain unrealized, adding to the downside risk.
MARI, in partnership with OGDC and another E&P (OPL),
has made a significant discovery in the Waziristan block (Bannu West),
reporting a cumulative find of 70mmcfd from two exploratory wells, Shewa-1 and
Shewa-2. A third exploratory-cum-appraisal well is currently in the drilling
phase.
While market expectations for the block remain elevated, the
brokerage house estimates production to commence by the end of FY25 with
initial flows of 70mmcfd, gradually peaking at 250mmcfd by FY28. However, the
market’s exuberance appears overdone: the present stock price of PKR729/ share
would be justified by production of 600mmcfd from Bannu West—almost similar to
the Mari field. This disconnect between expectations and realistic production
forecasts underpins the Sell call on the stock.
