Mart Resources, Inc. (TSX VENTURE:MMT) ("Mart" or the "Company") is pleased to
announce its interim financial and operating results for the three and nine
month periods ended September 30, 2011 ("Q311") (all amounts in Canadian dollars
unless noted):
THREE MONTH PERIOD ENDED SEPTEMBER 30, 2011
-- Net income for the three months ended September 30, 2011 was $21.0
million ($0.06 per share basic), compared to $1.2 million ($0.004 per
share basic) for the three months ended September 30, 2010.
-- 237% increase in total revenue to $46.8 million in Q311 compared to
$13.9 million in the third quarter of 2010 ("Q310").
-- 917% increase in cash flow from operating activities to $64.1 million
($0.19 per share basic) in Q311 compared to $6.3 million ($0.02 per
share basic) in Q310.
-- Funds flow from production operations of $42.1 million in Q311 compared
to $9.4 million in Q310 (see note regarding non-IFRS measures under
Financial and Operating Results).
-- Mart's share of Umusadege field petroleum produced and sold for Q311 was
446,981 barrels ("bbls").
-- The average price received for Umusadege production in Q311 was US
$112.54 per barrel (approximately CDN $114.79 per barrel) compared to US
$79.04 per barrel (CDN $75.83) for Q310.
-- In Q311 the UMU-8 well was completed and tested at a total combined rate
of 7,661 barrels of oil per day ("bopd").
-- During Q311, the Umusadege field was shut-in for a total of
approximately 11 days, due to injection restrictions, pipeline space
constraints, export pipeline vandalism and operational issues including
time required to allow rig skidding and completion operations necessary
for the ongoing drilling program.
NINE MONTH PERIOD ENDED SEPTEMBER 30, 2011
-- The Company reported $50.7 million of net income ($0.15 per share basic)
for the nine months ended September 30, 2011 compared to $6.6 million
($0.02 per share basic) for the nine months ended September 30, 2010.
-- 150% increase in total revenue to $121.7 million for the nine months
period ended September 30, 201 compared to $48.6 million for the same
period in 2010.
-- 630% increase in cash flow from operating activities to $102.9 million
($0.31 per share basic) for the nine months period ended September 30,
2011 compared to $14.1 million ($0.04 per share basic) for the nine
months period ended September 30, 2010.
-- Funds flow from production operations of $107.2 million for the nine
months period ended September 30, 2011 compared to $37.6 million for the
same period in 2010 (see note regarding non-IFRS measures under
Financial and Operating Results).
-- Mart's share of Umusadege field petroleum produced and sold for the nine
months ended September 30, 2011 was 1,344,611 bbls.
-- The average price received for Umusadege production for the nine months
ended September 30, 2011 was US $100.05 per barrel (approximately CDN
$102.05 per barrel) compared to US $81.05 per barrel (CDN $78.21) for
the same period in 2010.
-- For the nine months ended September 30, 2011, the Umusadege field was
shut-in for a total of approximately 33 days due to injection
restrictions, pipeline space constraints, export pipeline vandalism and
operational issues including time required to allow rig skidding and
completion operations necessary for the ongoing drilling program.
FINANCIAL AND OPERATING RESULTS:
The following table provides a summary of Mart's selected financial and
operating results for the three and nine month periods ended September 30, 2011
and 2010, and the twelve months ended December 31, 2010:
3 months 9 months 9 months
ended ended ended
3 months ended Sept 30, Sept 30, Sept 30,
(CDN$) Sept 30, 2011 2010 2011 2010
--------------------------------------------------------
Mart's share of the Umusadege
Field:
Barrels of oil
produced and sold
(1) 446,981 197,356 1,344,611 657,903
Average sales price
per barrel $114.791 $75.873 $102.049 $78.205
Mart's percentage
share of total
Umusadege oil
produced and sold
during the period
(1) 63% 59% 67% 73
Mart's share of
petroleum sales
after royalties $46,775,443 $13,831,361 $121,486,326 $47,497,745
Funds flow from
production
operations (2) $42,090,881 $9,394,286 $107,201,711 $37,644,365
Funds flow from
production operations
per share (2):
Basic $0.125 $0.028 $0.319 0.112
Net income $20,957,249 $1,229,201 $50,677,352 6,571,281
Per share - basic $0.062 $0.004 $0.151 0.020
Per share - diluted $0.062 $0.004 $0.149 0.019
Total assets $196,041,590 86,359,565 196,041,590 86,359,565
Total bank debt $6,371,553 5,044,320 $6,371,553 5,044,320
Shares outstanding - end of
period:
Basic 336,048,202 335,548,201 336,048,202 335,548,201
Diluted 340,325,747 342,351,534 340,325,747 342,351,534
12 months
ended
Dec 31,
(CDN$) 2010
---------------
Mart's share of the
Umusadege Field:
Barrels of oil
produced and sold
(1) 764,673
Average sales price
per barrel $80.491
Mart's percentage
share of total
Umusadege oil
produced and sold
during the period
(1) 65%
Mart's share of
petroleum sales
after royalties $56,524,797
Funds flow from
production
operations (2) $46,674,341
Funds flow from production
operations per share (2):
Basic 0.139
Net income 12,350,628
Per share - basic 0.037
Per share - diluted 0.036
Total assets 128,849,113
Total bank debt 5,627,778
Shares outstanding
- end of period:
Basic 335,548,201
Diluted 340,232,766
Notes:
(1) Barrels of oil produced and sold represents the volumes of petroleum
delivered to the purchaser and excludes oil volumes that represent deficit oil.
(2) Indicates non-IFRS measures. Non-IFRS measures are informative measures
commonly used in the oil and gas industry. Such measures do not conform to IFRS
and may not be comparable to those reported by other companies nor should they
be viewed as an alternative to other measures of financial performance
calculated in accordance with IFRS. For the purposes of this table, the Company
defines "Funds flow from production operations" as net petroleum sales less
royalties, community development costs and production costs. Funds flow from
production operations is intended to give a comparative indication of the
Company's net petroleum sales less production costs as shown in the following
table:
3 months 3 months 9 months 9 months
(CDN$) ended ended ended ended
Sept 30, 2011 Sept 30, 2010 Sept 30, 2011 Sept 30, 2010
----------------------------------------------------------------------------
Petroleum sales 51,309,293 14,973,921 137,216,871 51,451,060
Less: Royalties and
community
development costs 4,533,850 1,142,560 15,730,545 3,953,315
----------------------------------------------------------------------------
Net petroleum sales 46,775,443 13,831,361 121,486,326 47,497,745
Less: Production
costs 4,684,462 4,437,075 14,284,615 9,853,380
----------------------------------------------------------------------------
Funds flow from
production
operations 42,090,981 9,394,286 107,201,711 37,644,365
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(CDN$) 12 months
ended
Dec 31, 2010
----------------------------------
Petroleum sales 61,549,645
Less: Royalties and
community
development costs 5,024,848
----------------------------------
Net petroleum sales 56,524,797
Less: Production
costs 9,850,456
----------------------------------
Funds flow from
production
operations 46,674,341
----------------------------------
----------------------------------
OUTLOOK AND OPERATIONS UPDATE:
Development drilling is continuing at the Umusadege field with the commencement
of drilling UMU-9 on November 19, 2011. To date, 13 3/8 inch casing has
successfully been cemented at a depth of approximately 4,000 feet. Drilling in
the intermediate 12 1/4 inch hole section has commenced and is anticipated to be
drilled to approximately 8,300 feet, followed by running 9 5/8 inch casing. The
bottom hole deviated section is then scheduled to be drilled with a 8 1/2 inch
hole to total measured depth of approximately 11,000 feet.
The main objectives for the UMU-9 well are:
i. To appraise the extension of the shallower reservoirs discovered and
producing in the main culmination of the UMU-1, UMU-5, UMU-6, UMU-7 and
UMU-8 wells. These sands will be intersected in the drilling of the
vertical section of the well, which will then be cased prior to drilling
ahead to the deeper targets.
ii. To deviate and explore the deeper untested targets while running a
measurement while drilling tool followed by a logging while drilling
tool to evaluate the potential hydrocarbon bearing zones.
The UMU-8 well was drilled to a depth of approximately 8,600 feet and completed
with a dual tubing string configuration allowing for multiple zones to be
produced from the same well bore. Five identified oil zones were tested on the
UMU-8 well, with three of the oil zones (the XIIa, XIIb, and XV sands) flowing
at a combined test rate of 7.661 bopd. The well has been tied into the
production facilities.
Negotiations are ongoing with Agip, the Nigerian operator of the export
pipeline, to increase export capacity for the Umusadege field. Mart's management
anticipates that once an agreement is reached the Umusadege field will be
allocated sufficient export pipeline capacity to accommodate production from the
existing UMU-1, UMU-5, UMU-6, UMU-7 and UMU-8 wells. Increases in export
production capacity are also anticipated to accommodate future production from
the UMU-9 well. Pipeline capacity may be apportioned among other exporters into
the pipeline and therefore the Umusadege field production rate may be subject to
periodic adjustment.
To mitigate risks relating to export pipeline capacity, Mart and its
co-venturers are evaluating new export pipeline options to provide an
alternative for future production capacity. The upgrade of the central
production facility at the Umusadege field to a design capacity of approximately
30,000 bopd is approximately 60% completed.
Crude oil deliveries into the export pipeline from the Umusadege field for the
month of October 2011 averaged 7,209 barrels of oil per day (bopd). Umusadege
field downtime for October 2011 was approximately 4 days due mainly to export
pipeline operational shutdowns and export facility capacity curtailments. The
Umusadege field delivered an average of 9,053 bopd for the period November 1 -
15, 2011. During this period in November 2011, the Umusadege field export
pipeline experienced no production downtime. Production at the Umusadege field
continues to be curtailed while Mart and its co-venturers finalize negotiations
with the third party pipeline operator to increase export pipeline capacity.
Mart's share of petroleum production varies from time to time depending upon
whether Mart is in a cost recovery period or a post-cost recovery period. Mart
moves in and out of cost recovery periods depending upon the level of activity
underway at any given time. During a cost recovery period, Mart is restricted to
a maximum of 82.5% of production revenues consisting of 65% allocated for cost
recovery and 17.5% allocated as profit oil and, once Mart has recovered all of
its capital costs, all production revenues remaining after deduction of
royalties, income taxes, community development contributions, operating costs
and abandonment obligations are shared 50% to Mart and 50% to its co-venturers.
As a result of the Company moving in and out of capital cost recovery during the
quarter, Mart's share of revenue was an average of 63% for Q311 compared to an
average of 59% in Q310. Mart's share of revenue for the nine month period ended
September 30, 2011 was an average of 67% compared to an average of 73% for the
same period in 2010.
Subsequent to September 30, 2011, the Company entered into agreements with its
Umusadege co-venturers which affirmed the relationship and the responsibilities
of the Company as service provider and Midwestern as field operator and
clarified tax obligations of co-venturers effective April 26, 2007. The
contractual relationships established pursuant to these agreements are now
collectively referred to as the Risk Service Agreements.
CHAIRMAN'S COMMENT:
Wade Cherwayko, Chairman & CEO of Mart said, "We are very pleased to report
another period of record financial and operating results for the third quarter
of 2011 with $42.1 million of funds flow from production operations, which
amounts to $0.12 per share. This continues to demonstrate the significance of
the Umusadege field's production capacity. Negotiations to increase export
pipeline deliveries are nearing completion. Once an agreement is reached,
management anticipates the Umusadege field will have increases in production and
cash flow. Development is continuing on the Umusadege field with the recent
commencement of drilling on UMU-9."
ABOUT MART RESOURCES:
Mart Resources, Inc. is an independent, international petroleum company focused
on drilling, developing and producing oil and gas from proven petroleum
properties in Nigeria, West Africa. The Company is currently producing and
developing the Umusadege field along with Midwestern Oil and Gas Co. Plc (the
Operator of the field) and SunTrust Oil Ltd. Mart also owns a land drilling rig,
has strong local relationships and experience and is evaluating additional
proven undeveloped opportunities in Nigeria.
INVESTOR RELATIONS:
Investors are also welcome to contact one of the following investor relation's
specialists for all corporate updates and investor inquiries:
FronTier Consulting Ltd.
Mart toll free # 1-888-875-7485
Attn: Sam Grier or Caleb Gilani
Email: inquiries@martresources.com
Note: Except where expressly stated otherwise, all production figures set out in
this press release, including bopd, reflect gross Umusadege field production
rather than production attributable to Mart. Mart's share of total gross
production before taxes and royalties from the Umusadege field fluctuates
between 82.5% (before capital cost recovery) and 50% (after capital cost
recovery).
Forward Looking Statements
Certain statements contained in this press release constitute "forward-looking
statements" as such term is used in applicable Canadian and US securities laws.
Any statements that express or involve discussions with respect to predictions,
expectations, beliefs, plans, projections, objectives, assumptions or future
events or are not statements of historical fact and should be viewed as
"forward-looking statements". These statements relate to analyses and other
information that are based upon forecasts of future results, estimates of
amounts not yet determinable and assumptions of management. Such forward looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of the Company
to be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements.
In particular, statements (express or implied) contained herein or in Mart's
MD&A regarding the following should be considered forward-looking statements:
the Company's goals and growth strategy, estimates of reserves and future net
revenues, exploration and development activities in respect of the Umusadege
field, the Company's ability to finance its drilling and development plans with
cash flows from operations, the ability of the Company to successfully drill and
complete future wells, the ability of the Company to commercially produce,
transport and sell oil from the Umusadege field, future anticipated production
rates, export pipeline capacity available to the Company, the expectation of the
Company that production and export pipeline disruptions will not have a lasting
impact on the Company's future production, timing of completion of the Company's
upgrading of the central production facility, the construction and completion of
an alternative export pipeline, the acceptance of the Company's tax filings by
the Nigerian taxing authorities, treatment under government regulatory regimes
including royalty and tax laws, projections of market prices and costs, supply
and demand for oil, timing for receipt of government approvals, the absence of
amendments to the Risk Service Agreements in respect of the Umusadege field, the
success, express or implied, of the UMU-9 well drilling program or that the
UMU-9 well will be able to successfully appraise the extensions of the shallower
reservoirs as contemplated or successfully deviate and explore deeper untested
targets, discussions regarding the impact of the adoption of IFRS (as defined
herein) on the Company's financial statements and its abilities to implement
IFRS and the ability of the Company to satisfy its current and future financial
obligations to its banks and other creditors.
There can be no assurance that such forward-looking statements will prove to be
accurate as actual results and future events could vary or differ materially
from those anticipated in such statements. Accordingly, readers should not place
undue reliance on forward-looking statements contained in this news release.
This cautionary statement expressly qualifies the forward-looking statements
contained herein.
Forward-looking statements are made based on management's beliefs, estimates and
opinions on the date the statements are made and the Company undertakes no
obligation to update forward-looking statements and if these beliefs, estimates
and opinions or other circumstances should change, except as required by
applicable law.
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