Marksmen Resources Ltd.

Marksmen Resources Ltd.

November 28, 2008 14:46 ET

Marksmen Resources Ltd.: Third Quarter Financial and Operating Results and Update of Activities

CALGARY, ALBERTA--(Marketwire - Nov. 28, 2008) - Marksmen Resources Ltd. ("the Company or Marksmen") (TSX VENTURE:MA) announces the Company's financial and operating results for the quarter ended September 30, 2008.


Quarter Ended Nine Months Ended
Period Ended 30-Sep-08 30-Sep-07 30-Sep-08 30-Sep-07
Financial ($Cdn)
Oil and Gas Revenue $ 507,046 $ 333,761 $ 1,618,303 $ 793,341
Funds Flow from
Operations $ 38,463 $ (58,851) $ 385,654 $ 26,550
Per Share - Basic $ 0.00 $ (0.00) $ 0.01 $ 0.00
Net Income (Loss) $ 0 $ (154,383) $ 0 $ (448,767)
Per Share - Basic $ 0.00 $ (0.00) $ 0.00 $ (0.01)
Capital Expenditures
and Disposals
Oil and Gas Operations $ 174,825 $ 272,558 $ 651,916 $ 1,126,110
Acquisition of RXO
Energy Inc. $ 0 $ 0 $ 0 $ 1,438,525
Producing Property $ 0 $1,700,000 $ 0 $ 1,700,000
Sale of Properties $ 0 $ 0 $(1,025,189) $ 0
$ 174,825 $1,972,558 $ (373,273) $ 4,264,635
Weighted Average Shares
Basic 53,689,301 33,359,709 53,689,301 33,359,709
Fully Diluted 57,439,301 36,059,709 57,439,301 36,059,709

Average Daily
Production (boe per day) 105 79 103 57
Wells Drilled
Gross 0.00 2.00 1.00 7.00
Net 0.00 0.40 0.11 1.52

Funds from operations and funds from operations per share are not recognized measures under Canadian generally accepted accounting principles ("GAAP"). Funds from operations is calculated by taking net income and adding back non-cash balances such as depletion, depreciation and accretion, stock compensation expense, future income taxes and unrealized financial derivative costs. Management believes that in addition to net income, funds from operations is a useful supplemental measure to analyze operating performance and provide an indication of the results generated by the Company's principal business activities.

Operating Results

Total production for the quarter ended September 30, 2008 was 9,629 boe or an average of 105 boe per day. This compares to an average of 79 boe per day in the quarter ended September 30, 2007. Total production for the nine months ended September 2008 was 28,089 boe or an average of 103 boe per day. This compares to an average of 57 boe per day and a total of 15,570 boe for the same period in 2007.

In the quarter ended September 30, 2008 a partner operated well at Namao was shut down for about half the time due to a major work-over. This resulted in a loss of production of 3 to 4 boe per day for the quarter. The well is now back in operation.

Natural gas production represented 88% of total production and crude oil was 12% in the three months ended September 30, 2008. This is compared to 64% crude oil and 36% of natural gas in the same period of 2007. The weighting change from crude oil production to natural gas is the result of the acquisition of the Penhold natural gas property and the sale of the Nottingham oil property in early 2008.

Oil and gas revenue increased 49% to $507,046 or $52.66 per boe in the quarter ended September 30, 2008 from $333,761 or $46.17 per boe in the quarter ended September 30, 2007.

Operating expenses were $ 14.21 per boe including transportation expense in the three months ended September 30, 2008 compared to $14.10 per boe for the same period in 2007. Operating costs for the nine months ended September 30, 2008 were $12.83. Operating cost increased during the quarter due to a one time accrual of processing fees that were not provided by a joint interest partner.

Operating netbacks were $30.76 per boe for the three months ended September 30, 2008 compared to $29.25 per boe in the three months ended September 30, 2007. On a nine month basis, the net back is $37.81 per boe.

Cash-flows from operations were $38,463 in the quarter ended September 30, 2008 and $385,654 for the nine months ending September 30, 2008. This compares to a negative cash flow of $58,851 in the third quarter of 2007 and $26,550 in the same periods in 2007.

Update of Activities

As stated previously, in June of 2008 Marksmen obtained a privately placed loan facility in the aggregate principal amount of $3,604,000 with a total of nine participating creditors. The loan facility has a term of 12 months, an interest rate of 12% per annum, payable monthly, and the principal amount includes a financing fee of 6% on the funds advanced of $3,400,000. As security for the loan facility Marksmen granted each of the creditors a general security agreement and a fixed and floating charge debenture over its assets. The loan facility was used to pay off the existing operating facility with the Company's bank totaling $2,225,000. The remaining proceeds of the loan facility were used to fund the 2008 development drilling program which occurred in the fourth quarter.

Marksmen drilled four wells in October of 2008. One Edmonton Sand well was drilled and completed at Alder Flats. Three wells were drilled at Penhold. One well is a Horseshoe Canyon CBM (coalbed methane) control well and two wells are Edmonton Sand wells. By drilling the CBM control well it will give the Company the opportunity to complete the CBM zones in four adjacent, producing Edmonton Sand wells. Prior to the drilling of the CBM well the Company did not recognize any reserves attributable to CBM. This CBM well will now allow an addition to the Company's reserves.

Two wells at Penhold remain to be completed and the Company anticipates completing this activity by the end of December. In addition, up to ten new drilling locations can now be drilled and completed as co-mingled Edmonton Sand and Horseshoe Canyon Coal wells, thereby increasing production, reserves and reserve life.

Marksmen is in the final stages of discussions with Atco Pipelines that will result in a firm service agreement for delivery of gas from our Penhold project. The Company anticipates the agreement will be in place prior to year end. Atco will construct a natural gas receipt station that is expected to take approximately six months to complete. In conjunction with the meter station Marksmen will require additional capital to add a small booster compressor. Once in place, this facility will enable Marksmen to deliver its gas production directly to Atco's pipeline, thereby bypassing third party processing facilities and eliminating third party gas processing fees and production constraints. This agreement will allow the Company to maximize production and allow for the full development of the Penhold property.

Currently there is approximately 90 boe behind pipe, awaiting tie-in at Penhold and approximately 20 boe awaiting tie-in at Alderflats.


The Company anticipates completing its 2008 capital expenditures in the fourth quarter. Cash flow from operations will not be sufficient to satisfy future capital investment programs. The current uncertainty in credit markets will impact the Company's ability to raise additional financing or equity investment. The ability of the Company to undertake its capital investment and to re-finance existing debt at more favourable terms is dependent on its ability to obtain additional capital. The Company considers it prudent to review its financing alternatives with its lenders and other financial advisors and to aggressively pursue new capital through a variety of sources. Marksmen will continue to seek merger and divestiture opportunities.

On behalf of the Board of Directors

Peter Malenica, President & CEO

This News Release may contain "forward-looking information" within the meaning of applicable Canadian securities legislation. All statements, other than statements of historical fact, included herein may be forward-looking information. Generally, forward-looking information may be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "proposed", "is expected", "budgets", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases, or by the use of words or phrases which state that certain actions, events or results may, could, would, or might occur or be achieved. This forward-looking information reflects the Company's current beliefs and is based on information currently available to the Corporation and on assumptions the Company believes are reasonable. These assumptions include, but are not limited to, the actual results of drilling and exploration being equivalent to or better than anticipated or historical results and future costs and expenses being based on historical costs and expenses, adjusted for inflation. Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Corporation to be materially different from those expressed or implied by such forward-looking information. Such risks and other factors may include, but are not limited to: the early stage development of the Corporation and its projects; general business, economic, competitive, political and social uncertainties; commodity prices; the actual results of current exploration and development or operational activities; competition; changes in project parameters as plans continue to be refined; accidents and other risks inherent in the natural resources industry; lack of insurance; delay or failure to receive board or regulatory approvals; changes in legislation, including environmental legislation, affecting the Corporation; timing and availability of external financing on acceptable terms; conclusions of economic evaluations; and lack of qualified, skilled labour or loss of key individuals. Although the Corporation has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. Accordingly, readers should not place undue reliance on forward-looking information. The Corporation does not undertake to update any forward-looking information, except in accordance with applicable securities laws.

References herein to "boe" mean barrels of oil equivalent derived by converting gas to oil in the ratio of six thousand cubic feet (Mcf) of gas to one barrel (bbl) of oil. Boe may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf: 1 bbl is based on an energy conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

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