Mart Resources, Inc. (TSX VENTURE:MMT) ("Mart" or the "Company") is pleased to
announce its financial and operating results for the three and six months ended
June 30, 2012 ("Q212") (all amounts in Canadian dollars unless noted):
THREE MONTHS ENDED JUNE 30, 2012
-- On June 28, 2012 Mart announced the declaration of a dividend of $0.10
per common share ($35,587,487) payable on August 8, 2012 to shareholders
of record at the close of business on July 23, 2012.
-- Mart's working capital position at June 30, 2012 was $36.1 million (net
of the August 8, 2012 dividend). Subsequent to June 30, 2012, Mart has
collected $41.6 million of its accounts receivable and other receivables
related to oil sales from the Umusadege field in Nigeria.
-- Net income for the three months ended June 30, 2012 ("Q212") was $2.3
million ($0.007 per share) compared to net income of $20.8 million
($0.062 per share) for the three months ended June 30, 2011 ("Q211").
The decrease in net income was due to several factors that occurred in
the second quarter, including lower realized prices for oil sold in
connection with the under lift position on March 31, 2012 (see Note 1 to
the Financial and Operating Results table below regarding Non-IFRS
measures), greater pipeline losses in Q212, the decline in Mart's share
of production in Q2 to 52% (from 82.5% in Q112 and 68% in Q211)
primarily because drilling costs had been recovered, and lower prices on
current period production. A more detailed discussion is set out below.
-- Funds flow from production operations of $19.0 million ($0.056 per
share) for Q212 compared to $41.2 million ($0.122 per share) for Q211
(see Note 2 to the Financial and Operating Results table below regarding
Non-IFRS measures). This decrease is a result of the same factors that
affected net income that are discussed below.
-- Mart's share of Umusadege field oil produced and sold in Q212 was
408,638 barrels of oil ("bbls") compared to 530,056 bbls for Q211, a
reduction primarily attributable to Mart's share of oil production
averaging only 52% in the quarter, as more particularly discussed below.
-- The average sales price in Q212 was approximately USD $103.05 per bbl
(CDN $105.04 per bbl) compared to USD $108.36 per bbl (CDN $111.98 per
bbl) for Q211.
-- Mart's average share of daily oil produced and sold for Q212 from the
Umusadege field was 4,491 barrels of oil per day ("bopd") compared to
5,825 bopd for Q211, again lower primarily because of a reduced share of
production relative to its co-venturers.
-- During Q212, the Umusadege field was shut-in for a total of 9 days (Q211
- 4 days) due to various disruptions in the export pipeline, well
testing activities, maintenance and modification of production
facilities.
SIX MONTHS ENDED JUNE 30, 2012
-- Net income for the six months ended June 30, 2012 was $40.5 million
($0.120 per share) compared to net income of $28.6 million ($0.085 per
share) for the six months ended June 30, 2011.
-- Funds flow from production operations of $74.0 million ($0.220 per
share) for the six months ended June 30, 2012 compared to $65.1 million
($0.194 per share) for the same period in 2011 (see Note 2 to the
Financial and Operating Results table below regarding Non-IFRS
measures).
-- Mart's share of Umusadege field oil produced and sold for the six months
ended June 30, 2012 was 1,039,840 bbls compared to 848,587 bbls for the
six months ended June 30, 2011.
-- The average sales price received by Mart for oil for the six months
ended June 30, 2012 was approximately USD $107.05 per bbl (CDN $107.66
per bbl) compared to USD $103.03 per bbl (CDN $105.47 per bbl) for the
comparable period in 2011.
-- Mart's average share of daily oil produced and sold from the Umusadege
field was 5,713 bopd for the six months ended June 30, 2012 compared to
4,688 bopd for the six months ended June 30, 2011.
-- During the first six months of 2012, the Umusadege field was shut-in for
a total of 27 days compared to 18 days for the comparable period in 2011
due to various disruptions in the export pipeline, well testing
activities, maintenance, and modification of production facilities.
FINANCIAL AND OPERATING RESULTS
The following table provides a summary of Mart's selected financial and
operating results for the three months and six months ended June 30, 2012 and
2011 and the twelve months ended December 31, 2011:
CDN $ 000's
(except oil produced and
sold, share, per share
amounts, and oil prices) 3 months ended 3 months ended
June 30, 2012 June 30, 2011
----------------------------------------------------------------------------
Mart's share of the Umusadege Field:
Barrels of oil produced and
sold 408,638 530,056
Average sales price per
barrel (1) $ 105.04 $ 111.98
Mart's percentage share of
total Umusadege oil
produced and sold during
the period 52% 68%
Mart's share of petroleum
sales after royalties $ 28,267 $ 47,732
Funds flow from production
operations (2) $ 19,025 $ 41,163
Per share - basic $ 0.056 $ 0.122
Net income (3) $ 2,340 $ 20,814
Per share - basic (3) $ 0.007 $ 0.062
Per share - diluted (3) $ 0.007 $ 0.060
Total assets (3) $ 250,066 $ 162,335
Total bank debt $ Nil $ 13,258
Weighted average shares outstanding for period:
Basic 337,031,536 336,048,202
Diluted 350,351,187 344,822,492
CDN $ 000's
(except oil produced and
sold, share, per share 12 months
amounts, and oil prices) 6 months ended 6 months ended ended
December 31,
June 30, 2012 June 30, 2011 2011
-------------------------------------------------------------------------
Mart's share of the
Umusadege Field:
Barrels of oil produced and
sold 1,039,840 848,587 1,803,459
Average sales price per
barrel (1) $ 107.66 $ 105.47 $ 102.08
Mart's percentage share of
total Umusadege oil
produced and sold during
the period 66% 67% 71%
Mart's share of petroleum
sales after royalties $ 90,219 $ 74,711 $ 162,431
Funds flow from production
operations (2) $74,046 $65,111 $ 144,129
Per share - basic $ 0.220 $ 0.194 $ 0.43
Net income (3) $ 40,519 $ 28,614 $ 71,801
Per share - basic (3) $ 0.120 $ 0.085 $ 0.21
Per share - diluted (3) $ 0.116 $ 0.083 $ 0.21
Total assets (3) $ 250,066 $ 162,335 $ 198,021
Total bank debt $ Nil $ 13,258 $ Nil
Weighted average shares
outstanding for period:
Basic 336,892,067 336,048,202 336,084,275
Diluted 349,636,416 344,908,344 344,318,066
Notes:
(1) Oil produced from the Umusadege field is sold pursuant to an oil
purchase agreement with ENI Trading & Shipping S.P.A. ("ENI"), a
subsidiary of ENI S.p.A. ENI S.p.A. is also the parent company of AGIP,
the operator of the export pipeline. The oil purchase agreement requires
that Umusadege field owners "nominate" in advance the volumes of oil to
be delivered to ENI. The sales price per barrel for nominated and
delivered oil is slightly higher than the average Brent price for the
month in which the delivery occurs. A situation in which produced oil
has not been nominated nor paid for but delivered to ENI is called an
"under lift". The under lift is nominated and paid for in subsequent
months. The sales price per barrel for an under lift is the month end
slightly higher than Brent spot rate in which the under lift occurred.
3 months 3 months 6 months 6 months 12 months
ended ended ended ended ended
June 30, June 30, June 30, June 30, Dec. 31,
CDN $ 000's 2012 2011 2012 2011 2011
----------------------------------------------------------------------------
Gross Petroleum sales $ 42,923 $ 55,489 $111,949 $ 85,628 $ 184,100
Effect of lower realized
oil prices on under lifts 11,524 - 7,495 - -
----------------------------------------------------------------------------
Petroleum sales $ 31,399 $ 55,489 $104,454 $ 85,628 $ 184,100
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(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 6 months 6 months 12 months
ended ended ended ended ended
June 30, June 30, June 30, June 30, Dec. 31,
CDN $ 000's 2012 2011 2012 2011 2011
----------------------------------------------------------------------------
Petroleum sales $ 31,399 $ 55,489 $104,454 $ 85,628 $ 184,100
Less: Royalties and
communitydevelopment
costs 3,132 7,757 14,235 10,917 21,669
----------------------------------------------------------------------------
Net petroleum sales 28,267 47,732 90,219 74,711 162,431
Less: Production costs 9,242 6,569 16,173 9,600 18,302
----------------------------------------------------------------------------
Funds flow from production
operations $ 19,025 $ 41,163 $ 74,046 $ 65,111 $ 144,129
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(3) For comparative purposes, net income for the 3 months ended June 30,
2011 and the 6 months ended June 30, 2011 includes adjustments for
corrections to depletion expense, depreciation expense, share-based
payments, general and administrative expenses, deferred tax expense,
earnings per share - basic, earnings per share - diluted and total
assets. Each of the first three quarters of 2011 will contain
adjustments to correct the foregoing items. The audited Consolidated
Financial Statements for the years ended December 31, 2011 and December
31, 2010 are unaffected by these adjustments and remain unchanged.
Details of these changes are set out in Note 11 of the unaudited
Condensed Consolidated Financial Statements for the three months and six
months ended June 30, 2012.
DISCUSSION ON Q212 RESULTS:
Production in the second quarter of 2012 remained steady and there were no
unusual shutdowns of the pipeline or production facilities. There were three
liftings of oil from the Umusadege field in Q212 of which two liftings for a
total of 950,000 bbls occurred in June and were for a substantially lower price
than obtained from sales in Q112. Despite normal operations, there were several
factors that reduced Mart's net income and funds flow from operations in the
second quarter, although on a six month basis both net income and funds flow
from production operations are higher in 2012 than for the comparable period in
2011. At the end of the first quarter, Mart was in an under lift position of
373,552 bbls, the receivable of which had been recorded at the oil price in
effect at March 31, 2012. Under lift oil is oil that had been produced and
delivered in the first quarter of 2012 but had not yet been nominated and paid
for. The realized sales price per bbl for the under lift oil was lower than the
amount recorded at March 31, 2012 due to lower oil prices in the second quarter.
The price of oil on March 31, 2012 was USD $124.48 per bbl, but the price at
which the under lift oil was realized was at the price of the June, 2012
liftings, which averaged USD $96.94 per bbl. This issue, related to the timing
of payment for the Q112 under lift and the significant decrease in price between
March 31, 2012 and the liftings in June, 2012, had the effect of reducing Mart's
stated net income in Q212 by approximately USD $10.3 million.
Mart's net income and funds flow from operations were lower in Q212 because
Mart's share of production in the second quarter as compared to the share of its
co-venturers, dropped to an average of 52%. Mart's share under its agreement
with its co-venturers varies from 50% to 82.5% of production. In the second
quarter Mart's share was only 52% (compared to 68% in Q211 and 82.5%% in Q112)
primarily because there was limited drilling activity in Q212 and the drilling
costs related to each well in the Umusadege field are recovered relatively
quickly. Mart and its co-venturers commenced drilling the UMU-10 well on July 4,
2012.
Finally, AGIP, as pipeline owner, estimated that losses of oil delivered through
its pipeline were, during Q212, at a level considerably higher than previous
estimates. Mart and its co-venturers bear their proportionate share of line
losses, but these line losses are determined by the pipeline operator. For oil
delivered in the second quarter, the pipeline owner attributed losses of oil
delivered through the AGIP pipeline at approximately 18%. Mart and its
co-venturers are working to obtain additional information including assessing
the accuracy of volume reconciliations, as well as the accuracy of the metering
and reporting processes. However, Mart and its co-venturers rely on the pipeline
operator to provide this information. Mart has been informed that the line
losses for July are approximately 10%, which is higher than Mart and its
co-venturers generally expect, but could indicate that losses in Q212 were
anomalous. The significance of these line losses underscore the importance to
Mart and its co-venturers continuing to advance the construction of a new
pipeline for delivery of the oil produced from Umusadege.
DECLARATION OF DIVIDEND:
Mart is pleased to announce that its Board of Directors has declared a quarterly
cash dividend of $0.05 per common share. The dividend will be payable on October
2, 2012 to shareholders of record at the close of business on September 14,
2012. The ex-dividend date is September 12, 2012.
Pursuant to the Company's dividend policy, the declaration of regular quarterly
dividends is determined quarterly based on Mart's cash flows, capital
expenditure budgets, earnings, financial condition and other factors as the
Board of Directors may consider appropriate from time to time.
OUTLOOK AND OPERATIONS UPDATE:
Although net income and funds flow from operations were lower in Q212 relative
to Q112, production remains strong to date in the third quarter and oil prices
have recovered from the second quarter lows. Mart's net income and funds flow
from operations are higher in the first six months of 2012 compared to the same
period in 2011.
Subsequent to June 30, 2012, Mart has collected $41.6 million of its accounts
receivable and other receivables related to oil sales from the Umusadege field.
The UMU-10 well commenced drilling on July 4, 2012. The well is currently at a
depth of approximately 7,688 feet. It is anticipated that the UMU-10 well will
reach its targeted total depth of approximately 9,700 feet before the middle of
September 2012. The primary objectives of the UMU-10 well will be the
oil-bearing sands identified in the 8 1/2 inch deviated hole section of the
UMU-9 well.
Umusadege field production during the month of July 2012 averaged 12,852 bopd.
Umusadege field downtime during July 2012 was less than one day. The average
field production based on producing days was 13,281 bopd. Average daily
production in July 2012 was higher than in June 2012 due to lower downtime
during July and increased export pipeline capacity allocated to the Umusadege
field. Total crude oil deliveries into the export storage tanks from the
Umusadege field for the month of July, adjusted for estimated pipeline losses,
were approximately 358,500 bbls. AGIP has reported approximately 40,000 bbls of
pipeline losses during the month of July, 2012 or approximately 10%.
The pipeline losses experienced in Q212 and to date in Q312 are higher than
previous periods. Mart and its co-venturers have initiated a plan to determine
the accuracy of the AGIP reported pipeline losses. The plan includes, but is not
limited to, assessing the accuracy of the volume reconciliations, metering
accuracy, and reporting processes. The completion of the plan is dependent upon
AGIP providing this information to Mart and its co-venturers.
Mart and its co-venturers are continuing discussions with an affiliate of Royal
Dutch Shell plc, ("Shell") on a crude handling agreement that will provide a
second independent export pipeline for Umusadege field production. Once all
agreements are completed Mart and its co-venturers will gain access to Shell's
export facilities and a 50 kilometer pipeline will be constructed. Construction
of the pipeline connecting the Umusadege field to Shell's export facilities is
expected to be completed and in service in less than one year.
CHAIRMAN'S COMMENT:
Wade Cherwayko, Chairman & CEO of Mart said, "Mart has experienced strong
financial and operating results through the first six months of 2012 with $40.6
million of net income year to date, which amounts to $0.12 per share. This
reflects the ongoing growth of the Umusadege field's production capacity, and
the Company continues to work towards maximizing production and efficiency.
Significant steps have been taken towards building an additional export pipeline
to enable us to exploit the potential of the Umusadege field. Net income for the
second quarter of 2012 was down compared to the first quarter as a result of
lower oil prices, the effects of the drop in oil prices quarter to quarter, and
a reduction in Mart's share of proceeds from oil sales at the Umusadege field.
Mart and its co-venturers continue to have strong production at the Umusadege
field with 520,000 bbls nominated and delivered thus far for Q312. We were very
pleased to have been able to pay the declared $0.10 per share dividend to
shareholders in early August, and to now declare a quarterly dividend of $0.05
per share in accordance with our dividend policy."
Mart's Condensed Consolidated Financial Statements (unaudited) for the six
months ended June 30, 2012 and 2011, and the accompanying Management's
Discussion and Analysis are available on the company's website at
www.martresources.com and under the Company's profile on SEDAR at www.sedar.com.
INVESTOR RELATIONS:
Investors are also welcome to contact one of the following investor relations
specialists for all corporate updates and investor inquiries:
FronTier Consulting Ltd.
Mart toll free # 1-888-875-7485
Attn: Sam Grier
Timea Carlsen
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, and the ability
of the Company to satisfy its current and future financial obligations to its
banks and other creditors. In addition, Mart cannot predict the extent of any
pipeline losses that may occur and be borne by Mart in the future, and the
effect these will have on net income and cash flow. There is no assurance that
future dividends will be declared or the timing or amount of any future
dividend. The payments of dividends or distributions in the future are dependent
on the Company's cash flow, capital expenditure budgets, earnings, financial
condition, the satisfaction of the applicable solvency test in the Company's
governing statute (the Business Corporations Act (Alberta)), and such other
factors as the Board of Directors may consider appropriate from time to time.
Mart's ability to continue to pay dividends is subject to many factors including
falling commodity prices, repatriation restrictions, disruptions or reductions
in production or collection of receivables following sales of production.
Dividend payments to shareholders will be subject to applicable statutory
deductions and tax withholdings prescribed by applicable law.
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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