Marksmen Resources Ltd.

Marksmen Resources Ltd.

April 29, 2008 19:57 ET

Marksmen Resources Ltd.: Year End Audited Financial and Operating Results

CALGARY, ALBERTA--(Marketwire - April 29, 2008) - Marksmen Resources Ltd. (TSX VENTURE:MA) ("the Company or Marksmen") announces the Company's audited financial and operating results for the year ended December 31, 2007.


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Year Ended Quarter Ended
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Dec. 31, Dec. 31, % Dec. 31, Dec. 31,
Period Ended 2007 2006 Change 2007 2006
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Financial ($Cdn)
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Oil and Gas
Revenue $1,287,430 $984,983 31% $494,089 $256,299
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Funds Flow from
Operations (1) $24,330 $497,527 -95% ($2,220) $205,607
Per Share - Basic $0.00 $0.02 ($0.00) $0.01
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Net Loss ($703,479) ($1,371,997) 49% ($254,712) ($1,209,310)
Per Share - Basic ($0.02) ($0.06) ($0.01) ($0.05)
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Capital Expenditures
Operations $1,791,045 $3,708,984 $495,487 $558,976
Acquistion 1,700,000 - - -
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Acquisition of
RXO (share issue) 1,438,525 - - -
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$4,929,570 $3,708,984 $495,487 $558,976
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Weighted Average
Shares Outstanding
Basic 37,557,210 23,852,010 37,557,210 23,852,010
Fully Diluted 40,107,210 25,152,010 40,107,210 25,152,010
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Total Shares
(Basic) 49,689,301 24,027,194
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Average Daily
(boe per day) 71 45 59% 107 55
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Reserves (Forecast
Prices) (2)
Total Proved
Reserves (boe) 245,700 54,167 354% - -
Total Proved plus
Probable (boe) 670,567 132,500 406% - -
Net Present Value
(P+P NPV 10%) $8,745,000 $2,720,000 222% - -
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Wells Drilled
Gross 9.00 8.00 2.00 -
Net 2.61 1.29 1.11 -
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(1) 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.

(2) Before tax reserves.

Management Comments

In 2007, Marksmen experienced its most active year since the Company's inception in 1997. In addition to participating in the most wells drilled (9) in any one year, Marksmen made two strategic acquisitions at Penhold which contributed to a significant growth in reserves and production as compared to prior years. These acquisitions made a significant contribution to a 400% increase in reserve bookings at year end compared to 2006. The Penhold acquisitions were key to moving Marksmen from a non-operating company to an operator, adding up to 16 gas development drilling locations to our inventory and shifting the Company's focus from oil to natural gas.

The decision to grow the Company by focusing on growth through natural gas occurred in late 2006 when gas prices were in the range of $6.00 per mcf as compared to Q1/06 when prices were in the range of $10.00 to $12.00 per mcf. Management felt the sharp drop in gas prices would be short lived as well as valuations for natural gas properties were down significantly. Since acquiring the Penhold property gas prices have climbed back to the $10.00 to $11.00 per mcf range. Marksmen is now well positioned with its large inventory of low risk natural gas development drilling locations to grow its production and cash flow.

Financial and Operating Results

The performance of Marksmen in fiscal 2007 was mixed. Revenue was up 31% to $1,287,430 in 2007 versus $984,900 in 2006. Funds from operations in 2007 were $24,330 or $0.00 per share versus $497,527 or $0.02 per share in 2006. Significant one time charges to operations and administration as a result of the Penhold acquisitions amounting to $225,000 contributed to the drop in funds from operations. Also the financial statements include RXO from June 22, 2007 and the additional working interest in Penhold effective August 1, 2007. Management has taken steps to improve production practices in the properties that we now operate. This should have a positive impact on operations going forward. Net loss for the year decreased to $703,500 or $0.02 per share compared to a loss of $1,372,000 or $0.06 per share the previous year. Capital expenditures in 2007, not including the RXO corporate acquisition, were $3.5 million in 2007 as compared to $3.7 million in 2006.

Production for the twelve month period ended December 31, 2007 averaged 71 boe per day compared to an average of 45 boe per day for the prior year. Natural gas production represented about 58% of total production in 2007. Production in the fourth quarter averaged about 107 boe per day in 2007 compared to 55 boe per day for the same period in 2006, an increase of 94% from last year. Natural gas production increased to about 67% of total production in the fourth quarter as the natural gas wells at Penhold were added to the existing production from other fields.

Subsequent to year end Marksmen sold its interest in the Nottingham property for $1,000,000 which at the time was producing approximately 20 boe per day. These funds were used to reduce the bank operating line, significantly reduce current liabilities and to complete the tie in of one well at Penhold. The Company is currently producing approximately 125 boe per day (90% natural gas). In addition to the new production brought on stream in the first quarter of 2008 there is another 20 boe per day awaiting tie-in.

First Quarter Activities

During the first quarter of 2008, Marksmen:

- Completed the tie in of a gas well into the Edmonton sands formation at Penhold in Alberta. This well is currently producing 180 mcf per day or 30 boe per day.

- Closed the sale of a non-core property at Nottingham in Southeast Saskatchewan for $1,000,000.

- Continued with field optimization at Penhold.


Fiscal 2008 could prove to be another significant growth year for the Company. As a result of last year's acquisition of RXO Energy Inc. and the controlling interest in the Penhold property, Marksmen has increased reserves, production, and future cash flow. In addition, these acquisitions have added up to 22 low risk development drilling locations in inventory. With the recent sale of certain non-core assets in Saskatchewan, Marksmen has improved its balance sheet and is better positioned to pursue its growth strategy.

Current plans are to drill up to 5 high working interest development wells at our core operated properties in addition to undertaking certain facility optimization at the Penhold property. The facility optimization has the potential to significantly increase cash flow by lowering operating costs. Management will also continue to seek out opportunities to increase its land holdings near the Company's core producing properties. Marksmen expects to fund its 2008 capital program from cash flow, potential non-core asset sales, bank line and equity financing.

From a financing perspective, last year's environment saw several challenges, including much lower natural gas prices and uncertainty with respect to Alberta's royalty regime. Under these conditions, the Company successfully closed $2.3 million of equity financing. We expect that 2008 will pose other challenges given present equity market conditions, but we also expect that the successful acquisitions strategy of 2007 meets those challenges by shifting focus to new lower risk, quick to cash-flow projects in a concentrated core area. However, if the Company is unable to attract an adequate level of equity financing on a timely basis, it may be difficult for Marksmen to complete its entire 2008 planned capital program.

Also, the Company continues to seek additional merger and acquisition opportunities which are accretive and will result in improved growth in reserves, production and cash flow.

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.

Contact Information

  • Marksmen Resources Ltd.
    Peter Malenica
    President & CEO
    (403) 265-7270