Mari Energies Limited (MARI) FY26 Earnings Review

How Strong Was MARI’s FY26 Performance?

Mari Energies delivered a strong bottom-line performance in FY26, although the headline profit growth needs to be examined carefully because a tax reversal made a significant contribution to earnings. Consolidated net sales increased 8.2% year-on-year to PKR 191.66 billion from PKR 177.10 billion. However, operating profit was almost flat at PKR 81.48 billion compared with PKR 81.12 billion in FY25. The major difference appeared below operating profit. Profit attributable to shareholders increased 32.9% to PKR 86.88 billion from PKR 65.37 billion, while consolidated EPS increased to PKR 72.36.

PKR billion	FY26	FY25	YoY
Net Sales	191.66	177.10	+8.2%
Operating Profit	81.48	81.12	+0.5%
Profit Before Tax	83.03	88.59	-6.3%
Profit Attributable to Shareholders	86.88	65.37	+32.9%
EPS	72.36	—	—

The key takeaway is therefore that FY26 was a strong year for reported earnings, but operating-profit growth was much weaker than the 33% growth in attributable profit.

Did MARI’s Core Operations Actually Improve?

Yes, but only modestly at the operating-profit level. Net sales increased by 8.2%, but the company’s cost base also increased. Royalties rose 28.4% to PKR 45.72 billion from PKR 35.61 billion. Operating and administrative expenses increased 8.1% to PKR 44.45 billion, while exploration and prospecting expenditure rose 16.0% to PKR 17.23 billion. As a result, operating profit increased only 0.5% to PKR 81.48 billion. This is an important distinction for investors. The business generated higher revenue, but much of that improvement was absorbed by higher royalties and operating costs.

Why Did Royalty Expense Increase So Sharply?

Royalties were one of the biggest cost increases in FY26. Royalty expense increased from PKR 35.61 billion to PKR 45.72 billion, an increase of approximately PKR 10.11 billion or 28.4%. The company specifically stated that operating profit remained at PKR 82.6 billion on a standalone basis despite an incremental PKR 8.5 billion royalty charge arising from the applicability of Royalty under Rule 35 of the Pakistan Onshore Petroleum (Exploration and Production) Rules, 2013. This means the underlying operating result was achieved despite a substantial additional royalty burden. For investors, this is one of the most important abnormal elements in the FY26 numbers because it explains why revenue growth did not translate into similar operating-profit growth.

Why Did Finance Income Fall So Much?

Finance income was another significant negative factor. Consolidated finance income declined 40.6%, falling from PKR 10.67 billion in FY25 to PKR 6.34 billion in FY26. The decline was approximately PKR 4.33 billion. This is particularly important because MARI maintains substantial cash and investment balances. Lower finance income means the company’s large liquidity position generated less financial income during FY26. Despite the decline in finance income, the company still generated strong operating cash flows.

Did Finance Costs Become A Problem?

Finance costs increased substantially, although they remain relatively small compared with the company’s operating profit. Consolidated finance costs increased from PKR 3.49 billion in FY25 to PKR 4.49 billion in FY26, representing an increase of approximately 28.7%.

PKR billion	FY26	FY25	YoY
Finance Income	6.34	10.67	-40.6%
Finance Cost	4.49	3.49	+28.7%
Net Finance Income	1.85	7.18	-74.2%

This is an abnormal movement worth monitoring because MARI simultaneously experienced lower finance income and higher finance costs. However, it is not large enough to threaten the company’s overall profitability given the PKR 81.5 billion operating profit. The bigger issue is the direction: the net contribution from financing activities fell sharply.

 

Was the 34% Profit Growth Mostly Operational?

No. This is probably the most important point in the entire earnings review. Profit before taxation actually declined 6.3%, from PKR 88.59 billion to PKR 83.03 billion. Yet profit attributable to shareholders increased almost 33%. The reason was taxation. MARI recorded a PKR 3.80 billion tax reversal in FY26 compared with a PKR 23.21 billion tax provision in FY25. The company stated that the FY26 net profit included the impact of the reversal of Super Tax pursuant to the judgment of the Federal Constitutional Court of Pakistan. Therefore, the enormous year-on-year improvement in net profit should not be interpreted as a 33% improvement in underlying operating earnings. The underlying picture is much more moderate: sales increased, operating profit was broadly flat, and profit before tax actually declined.

How Much Did Exploration Spending Increase?

Exploration and prospecting expenditure increased from PKR 14.86 billion to PKR 17.23 billion, representing a 16.0% increase. This is another significant cost increase, but unlike an increase in administrative costs, exploration spending is connected to the company’s expansion of its resource base. MARI reported that it added 157 MMBOE of proved and probable reserves during FY26, resulting in a reserve replacement ratio of 375%. Total 2P+2C reserves and resources reached approximately 1,029 MMBOE. The company also increased its exploration portfolio to 72 exploration licences covering approximately 155,276 square kilometres. Therefore, the higher exploration expenditure is accompanied by substantial reserve additions and expansion of the exploration portfolio.

Did Hydrocarbon Production And Reserves Improve?

Yes, and this is one of the strongest parts of the report. MARI achieved its highest-ever hydrocarbon sales at 41.28 MMBOE, equivalent to 113.1 KBOEPD, compared with 39.13 MMBOE or 107.2 KBOEPD in FY25. This represents approximately 5.5% growth in hydrocarbon sales. The company achieved this despite curtailments caused by excess RLNG and disruption from SNGPL pipeline ruptures. The reserve position was even stronger. MARI added 157 MMBOE of 2P reserves, producing a 375% reserve replacement ratio. Its 2P reserve-to-production ratio reached an all-time high of 21 years. These numbers provide a stronger fundamental foundation for the company than the headline 34% profit growth alone.

What New Production Came Online During FY26?

MARI added several important production streams during the year. Early production from Spinwam in the Waziristan Block commenced on April 1, 2026, with an allocation of up to 50 MMSCFD. This took overall Waziristan Block production to approximately 100 MMSCFD of gas and around 800 BPD of condensate. Gas production from the Shams discovery within the Mari Field also began on June 19, 2026, with production of more than 35 MMSCFD. The company also received an allocation of 222 MMSCFD of raw gas from the Ghazij Field to three major fertilizer customers. According to the company, full implementation would result in all fertilizer plants in Pakistan being supplied with gas from the Mari Field.

Did Cash Generation Remain Strong?

Yes. Cash generation was one of the healthier aspects of the FY26 results. Consolidated cash generated from operating activities increased from PKR 77.85 billion to PKR 99.13 billion, representing growth of approximately 27.3%. However, capital expenditure also increased sharply.

PKR billion	FY26	FY25	YoY
Operating Cash Flow	99.13	77.85	+27.3%
Capital Expenditure	96.53	50.94	+89.5%
Closing Cash & Cash Equivalents	68.18	88.79	-23.2%

Capital expenditure almost doubled, increasing approximately 89.5% to PKR 96.53 billion. Consequently, despite stronger operating cash generation, cash and cash equivalents declined to PKR 68.18 billion from PKR 88.79 billion. This is not necessarily a negative development because the company is deploying substantial capital toward production, exploration and expansion. But investors should monitor whether these investments generate sufficient incremental cash flows.

Did MARI Improve Its Receivables Position?

There was some improvement. The company’s overdue trade debts declined to PKR 61.7 billion from PKR 66.9 billion, according to the company’s own FY26 highlights. The consolidated balance sheet shows total trade debts of approximately PKR 86.02 billion at June 30, 2026, compared with PKR 86.58 billion a year earlier. The reduction in overdue debts is therefore a positive development, although the absolute receivables balance remains substantial.

What Dividend Did MARI Announce?

MARI recommended a final cash dividend of PKR 18.70 per share for FY26. This comes on top of the interim dividend of PKR 8.30 per share already paid during the year, taking the total FY26 dividend to PKR 27 per share.

Dividend	PKR/share
Interim dividend	8.30
Final dividend	18.70
Total FY26 dividend	27.00

The final dividend was recommended by the board on August 7, 2026.

What Are The Most Important Abnormal Elements In The FY26 Report?

There are four that investors should not ignore. First, the tax reversal significantly boosted reported earnings. Profit before tax declined 6.3%, yet attributable profit increased 32.9%. That gap cannot be explained by operating performance alone. Second, finance income fell 40.6% while finance costs increased 28.7%. This caused the net contribution from financing activities to fall sharply. Third, royalty expense increased 28.4%, with the company specifically highlighting an additional PKR 8.5 billion charge related to the applicability of Rule 35. Fourth, capital expenditure increased almost 90%, meaning the company is deploying significantly more cash into its business. This could support future production and reserves, but it also means future returns on this capital will matter more.

What Is The Overall Verdict On MARI’s FY26 Results?

MARI‘s FY26 results are strong, but the headline 34% profit growth is misleading if viewed in isolation. The genuine positives are substantial: record hydrocarbon sales, a 375% reserve replacement ratio, 21 years of 2P reserve life, new production from Spinwam and Shams, a larger exploration portfolio, stronger operating cash flow and an improvement in overdue trade debts. The weak points are equally clear: operating profit was almost flat, profit before tax declined, royalties rose sharply, exploration costs increased, finance income fell significantly, finance costs increased and capital expenditure almost doubled. Most importantly, the tax reversal provided a major boost to reported earnings. Therefore, MARI’s FY26 result should be viewed as operationally resilient rather than as a clean 34% earnings-growth story. The underlying business appears stronger in terms of reserves, production capacity and exploration potential, but investors should judge future earnings growth primarily by operating performance rather than by the FY26 tax-driven jump in net profit.

Verdict: Positive, but with a major caveat. I support the result because the reserve replacement, production growth, cash generation and new production additions are genuine operating improvements. I would not, however, use the 34% PAT growth as evidence that MARI‘s core earnings power grew by 34%; the tax reversal makes that conclusion too aggressive.

⚠️ This post reflects the author’s personal opinion and is for informational purposes only. It does not constitute financial advice. Investing involves risk and should be done independently. Read full disclaimer →