Strategic Business Plan

Strategic Business Plan serves as a blueprint of the Company’s future activities. The Plan aims at:

  1. Providing a framework for setting strategic direction of the Company;
  2. providing a basis for more detailed planning (setting high level corporate objectives and targets);
  3. aligning corporate resources and energies towards common objectives;
  4. assisting benchmarking and corporate performance monitoring;
  5. explaining the business objectives to all levels of management for informing, motivating and involving them; and
  6. stimulating desired change and building on the past successes.

In view of changing internal and external business environment, the Plan is periodically reviewed and monitored to keep it relevant, strategically active and capable of channeling the corporate resources towards achievement of the set corporate objectives. The Plan is operationalised through successive annual Corporate Objectives and Targets (COTs). The allocation of resources for various activities is guided by the priority given in the Plan.

Strategic Planning Process

The strategic planning process is systematic, rational and is based on the guiding principle that “planning process is as important as the plan itself”. All possible efforts are made to keep the process open, iterative and flexible so that it is dynamically evolving over the time. While the overall direction is provided by the Managing Director, the strategies and COTs are evolved at the departmental level to ensure ownership and commitment of those responsible for implementing the plan.

Overall Strategic/ Corporate Objectives

To ensure balanced growth of the Company, MPCL Business Plan focuses on the following strategic areas while setting Company’s annual corporate objectives and targets:

  1. Core Business/E&P: The focus in this area is on seismic activities, drilling of wells, production addition, expansion of exploration acreage and reserves enhancement.
  2. Diversification: This area focuses on diversification of the Company’s operations by entering into related businesses such as power generation and carbon dioxide separation and purification projects.
  3. Financial: The targets in this area include increasing return to the shareholders, increasing gross and net sales through production enhancement, cost cutting/ budgetary control measures, reduction in outstanding receivables, and achieving financial self-sufficiency for Mari Services Division.
  4. Internal Processes: The focus is on refining of internal processes, use of modern technology and innovative techniques to increase efficiency in the Company’s operational activities.
  5. Stakeholders: The emphasis is on meeting the expectations of the Company’s stakeholders including shareholders, JV partners, customers, employees and more importantly the local communities in the areas of Company’s operations. Measurable targets are set for safety of operations (TRCF) and CSR spending.
Short, Medium and Long Term Strategic Objectives

The objectives and targets in each focus area are classified into short, medium and long term:

  1. Short-Term (0-2 Years): The Company aims to re-capitalize the business by the gains achieved through enhanced production during low price period and to re-focus on growth by revenue enhancement by acquiring producing assets, with an upside exploration potential, around the world to augment its cash flows in the short and medium term.
  2. Medium-Term (3-5 Years): The Company plans to focus on investments aimed at adding high potential block in its portfolio to achieve positive reserves replacement ratio and sustainable production growth, besides revenue, diversification by extending its reach into power sector. This would be done by financial capacity achieved through revenue diversification and cash flow maximization in the short term.
  3. Long-Term (6-8 Years): The Company places strategic focus on diversifying investments for adding value to its existing business and on securing sources of income other than core upstream business to ensure growth expansion on sustainable basis in varying oil price regimes. The Company shall not only be looking to transform into an international E&P Company but also aim to become an energy conglomerate in the future.
Management Strategies to Meet the Objectives

Actual plans and strategies implemented by the Management to achieve the objectives and targets for FY 2017-18 are detailed in Risks and Opportunities Report. For effective monitoring, following measures are adopted by the Management:

  • To ensure achievement of corporate goals within the stipulated time period a Management Control System (MCS) has been instituted for close monitoring and reporting of the progress and for mid-course corrections in case of slippages from the planned course.
  • Monthly review meetings of the senior management are held to make adjustments or alterations in course of actions to achieve the targets within the specified time.
  • Besides monitoring corporate performance under each COT, a set of Key Performance Indicators (KPIs) covering a larger spectrum of performance indices are calculated bi-annually to monitor and compare the overall performance of the Company.
Key Performance Indicators

MPCL’s business planning system is based on key performance indicators. The Company has implemented specialized management control systems for reviewing its past performance vis-à-vis a set of ‘lookbehind’ key performance indicators (KPIs). The formulation of following year’s business plan draws input from the preceding year’s performance on the ‘look-behind’ KPIs listed in the following:

  1. Finding and Development Cost per BOE of new reserves added
  2. Reserves Replacement Ratio (%)
  3. Exploration success rate
  4. Drilling cost per meter
  5. Production cost per BOE produced
  6. Production growth (%)
  7. EBITDA per BOE production
  8. EBITDA per employee
  9. Petro-technical professionals per MMBOE production
  10. Reserve growth rate (%)
  11. Reserve to production rate

Since there has been no change in the core objectives and targets, the KPIs identified above will continue to be relevant in the future.

Significant Changes in Objectives and Strategies from the Previous Year

There has been no change in the Company’s focus areas from those reported in the previous year. However, actual measureable targets are revised each year taking into consideration different internal and external factors. The size of MPCL’s proposed power plant has been reduced from 280 MW to 180 MW in view of the availability of gas from Goru-B reservoirs.

Significant Changes in Objectives and Strategies from the Previous Year

There has been no change in the Company’s focus areas from those reported in the previous year. However, actual measureable targets are revised each year taking into consideration different internal and external factors. The size of MPCL’s proposed power plant has been reduced from 280 MW to 180 MW in view of the availability of gas from Goru-B reservoirs.

Relationship Between the Company’s Results and Management’s Objectives

Actual financial and operational results during the year are directly linked with the Management’s objectives for the year. The actions defined in Business Plan 2017-18 have resulted in corporate efficiency, prudent investment choices and stricter financial discipline leading to improved growth in the Company’s core business and creation of strong fundamentals for a robust recovery of profitability even in a globally challenging business environment.

Major Plans and Decisions
  1. Corporate Restructuring
    The Company’s operational and financial performance has been outstanding during the year. The Company is supported by a robust statement of financial position and strong operational cash flows. Hence, there are no plans for financial or organizational restructuring. The Government had initiated the process for divestment of its residual shareholding in MPCL, but the process is now on hold. Hence, the ownership structure of the Company is expected to remain unchanged in foreseeable future. The Company has made some internal re-alignments. Mari Seismic Processing Unit has been brought under Exploration Department while control of Skytop Brewster Rig has been handed over to Operations Department for smooth operations.
  2. Business Expansion
    Core Operations: The Company has been substantially enhancing its exploration budget. The budget for FY 2018-19 has been enhanced to US$ 371 million (firm and contingent) from US$ 249 million kept for 2017-18. As a result of an aggressive exploration strategy, yearly drilling of wells has increased from 2-3 wells in the past to 8-10 wells in recent years. Seismic data acquisition is in progress in Bannu West Block while seismic data acquisition projects in Sukkur, Block-28 and Ghauri Block are planned in the coming year. The Company has been pursuing expansion of exploration acreage within the Country and abroad. During the year the Company has acquired additional and new working interests in several blocks within the country and it plans to continue acquisition of working interests from other E&P companies within the country and abroad.

    Diversification: The Management is fully cognizant that despite bringing in operational efficiencies and cutting of costs, long-term sustainability and growth is not possible without securing income from non-core activities. Hence, the management is pursuing several opportunities to diversify business to complement core operations as well as secure other sources of revenues. The details can be found in Risk and Opportunities Report.

  3. Discontinuation of Operations
    The Company has no plans to discontinue any of its major operations. However, the Management has reluctantly decided to relinquish Peshawar East Block because the Ministry of Defense has not approved the NOC to enter and work in the area. The JV Partner M/s KPOGCL has been taken on board regarding the relinquishment. Process will start after completion of the internal working.
Company’s Most Significant Resources

The Company’s most significant resources include the following:

Human Capital: MPCL’s most valuable resource is its workforce. The Company has an appropriate mix of highly knowledgeable and talented young as well as experienced professionals providing simultaneously the right amount of energy and business acumen for the growth and development of the Company. In view of the Company’s growing operations, its workforce has been gradually expanding in recent years.

Hydrocarbon Reserves: The Company has substantial level of recoverable hydrocarbon reserves to cater to its current client pool and meet its long term supply commitments. The recoverable reserves were 613.4 MMBOE on June 30, 2018. Concerted efforts are being made to enhance the reserves replenishment ratio to at least 100% in the coming years.

Financial Resources: The Company had Rs. 40.19 billion in shareholders’ reserves as of June 30, 2018.

E&P Allied Capabilities: In-house seismic data acquisition, processing and drilling capabilities at par with international standards provide the Company with greater flexibility and surety of required services especially in security sensitive areas. These capabilities have been pivotal in carrying out seismic data acquisition projects in Mari and Sukkur in the past and Bannu West at the present.

Resource Allocation & Capital Structure

Resource allocation is an important management activity that allows for effective execution of corporate strategies. The primary tool for making resource allocations is the budgeting process. At MPCL, strategic planning and budgeting are interlinked and integrated.

For instance, since the Company is pursuing a reserves-led growth strategy marked by an aggressive exploration and drilling programme and expansion of exploration acreage, sufficient resources have been allocated for exploration activities. Exploration budget for FY 2018-19 has been enhanced to US$ 371 million from US$ 249 million of last year.

Production from HRL Reservoir of Mari Field is pivotal to MPCL’s plans for enhancement of revenues (both conventional and incremental) and meeting financial and production related targets of the business plan. Therefore, a budget of US$ 45 million has been allocated for HRL Phase-X Development Programme which envisages drilling of 19 development wells, 30 km spur flow lines, debottlenecking of existing 22 km transmission pipelines and upgradation of existing central manifolds. Similarly, sufficient budgets have been earmarked for development activities at existing as well as upcoming fields, feasibility study of Mari Power Plant and installation of Carbon Capture Plant.

Apart from financial capital, other resources, in particular human resource, are also allocated in line with corporate objectives and targets for short, medium and long term. Most of the expansion in the Company’s human capital has been in Exploration, Operations, Business Development and Mari Services Departments in line with growth of the Company’s core operations, with proportionate increase in human capital in Finance, Procurement and Administration departments to provide expedient support to the core functions.

Inadequacy in the Capital Structure and plans to address such inadequacies: Total equity on June 30, 2018 was Rs. 40.19 billion, an increase of 57% over Rs. 25.54 billion at the end of the last year. The equity comprised of issued, subscribed and paid up capital, undistributed percentage return reserve, Profit & Loss account and other reserves. Enabled by strong operational cash flows, the Company paid all of its long term loans (around Rs. 5 billion) during the year. Resultantly, the Company’s capital structure was 100% equity based on June 30, 2018.

The financial projections indicate adequacy of the capital structure for the foreseeable future. The Company plans to meet all of its financing requirements during the next year through available reserves. Borrowing from banks will only be used as a fallback option.

THE COMPANY

Being one of the largest petroleum exploration and production companies in Pakistan, we visualize the earth as something beautiful and mysterious, for it has so many secrets to reveal.

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CONTACT US

21, Mauve Area, 3rd Road,
G-10/4, Islamabad, Pakistan
+92 51 111-410-410
+92 51 2352859


Website last updated: 17th December, 2018