ECC set to decide de-capping of dividends of Mari Petroleum Company

Aftab Ahmed
Islamabad: Privatization Division on Thursday decided to move a summary to Economic Coordination Committee (ECC) to de-cap dividends of Mari Petroleum Company before offering shares to investors.

In a meeting held in Privatization Division chaired by Federal Minister for Privatization Mohammed Mian Soomro took up the matter of de-capping of dividends of Mari Petroleum Company limited (MPCL).It was decided the matter to be placed before upcoming ECC by Petroleum Division with the all associated aspects of de-capping of dividends.

In July, 2014 Government has revised the cost plus wellhead gas pricing formula for MPCL with a crude oil price linked formula which provides a discounted wellhead gas price to be gradually achieved in five years from July 1, 2014.

The revised formula provides dividend distribution to be continued for next ten years in line with the previous cost plus formula. Accordingly, the shareholders are entitled to a minimum return of 30%, net of all taxes, on shareholders’ funds which is to be escalated in the event of increase in the Company’s gas or equivalent oil production beyond the level of 425 MMSCFD at the rate of 1%, net of all taxes, on shareholder’s funds for each additional 20 MMSCFD of gas or equivalent oil produced, prorated for part thereof on annual basis, subject to a maximum of 45%.

The revised gas price formula will provide return to shareholders at this guaranteed level for the next ten years commencing from July 01, 2014 and thereafter will be based on the discretion of the Board of Directors.

Furthermore, in 2014 Government of Pakistan ended the exploration funds available to the company. After paying dividends worked out with above mentioned formula Mari would reinvest remaining residual profits for the next ten years for exploration and development activities in Mari as well as outside Mari field.

While talking to the senior Board member of Privatization Division has said that to attract serious buyers and in order to execute the transaction in FY20 it is need of the hour to de-cap MPCL dividends. He further added that company has achieved most of the objectives of dividends de-capping and increased its exploration activity significantly, which resulted in higher gas production.

“Mari financial health is improved significantly and company has current dividend paying capacity of above Rs300 per share. Company current cash and short term investment stands at Rs42.72 billion.”

Privatization Division has also discussed matter related to divestment of upto 7% shares of Oil and Gas Development Company (OGDCL) and senior officials from OGDCL, Ministry of Petroleum and Ministry of Privatization attended the meeting. Federal Minister during the meeting discussed the share price trend of OGDCL in the capital market and also the extent to which the capital market is conducive for such divestment of shares. The option of strategic sale of up to 10% shares of OGDCL was also deliberated upon and it was decided that the better option would be the strategic offering of up to 10% shares to international reputable exploration and production (E&P) companies.

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