Marksmen Energy Inc.

November 29, 2010 14:41 ET

Marksmen Energy Inc.: Third Quarter Financial and Operating Results and Update of Activities

CALGARY, ALBERTA--(Marketwire - Nov. 29, 2010) - Marksmen Energy Inc. ("Marksmen" or the "Company") (TSX VENTURE:MAH), announces the Company's financial and operating results for the quarter ended September 30, 2010.

On August 11, 2010, the Company completed a sale (the "Transaction") involving substantially all of its oil and gas assets, at their net book value, pursuant to an asset sale agreement (the "Agreement"). The Transaction was completed with a private Canadian company (the "PrivateCo") that is controlled by an officer of the Company. As consideration for the oil and gas assets, the PrivateCo acquired the Company's operating loan in the aggregate principal balance of $3,604,000 and accrued interest of $842,271, releasing the Company from any obligation to the lenders under the operating loan. Pursuant to the Agreement, the Company subsequently repurchased from PrivateCo certain oil and gas properties through the issuance to the PrivateCo of a promissory note in the amount of $366,000 and 13,333,333 units at $0.01125 per unit, on a pre-consolidated basis. A loss of $703,621 was recognized on this Transaction.

In conjunction with the Transaction, the Company changed its name from Marksmen Resources Ltd. to Marksmen Energy Inc.

To view the Highlights table associated with this release, see the following link:

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.

Income from operations is not a recognized measure under generally accepted accounting principles ('GAAP"). Income from operations is calculated by taking oil and gas revenue (net of royalties) less production and transportation costs. Management believes that in addition to net income (loss) and funds flow from operations, income (loss) from operations provides a meaningful measure of oil and gas operations.

Operating Results

Total production for the quarter ended September 30, 2010 was 1,892 boe or an average of 21 boe per day for the quarter, which production was limited to July at a rate of 61 boe per day. This compares to a total of 5,173 boe or an average of 56 boe per day in the quarter ended September 30, 2009.

The total production for the nine months ended September 30, 2010 was 14,040 boe or an average of 51 boe per day. This compares to an average of 74 boe per day and a total of 20,109 boe for the same period in 2009.

Oil and gas revenue was $ 45,637 in the quarter ended September 30, 2010 or $24.12 per boe in July, 2010 compared to $94,705 or $ 18.19 per boe in the quarter ended September 30, 2009.

Operating expenses for the third quarter of 2010 totalled $22,574 or $11.93 in the quarter ended September 30, 2010 compared to $71,450 or $12.79 per boe for the quarter ended September 30, 2009. Operating costs for the nine months ended September 30, 2010 were $172,336 or $12.27 per boe.

Operating netbacks were $12.84 per boe, for the month of July, 2010 compared to $4.81 per boe in the three months ended September 30, 2009. On a nine month basis the net back is $12.10.

Asset Sale

As per the Transaction described above, the Company sold substantially all of its oil and gas assets to PrivateCo at their book value (net of accumulated depletion) for $5,502,745. The PrivateCo also acquired the Company's operating loan in the aggregate of principal and accrued interest totalling $4,446,271, releasing the Company from any obligation to the lenders under the operating loan. The Company recognized a loss of $703,621 on this Transaction.

Asset Purchase

Additionally, the Company bought back its Alder Flat property from PrivateCo. through the issue of a promissory note and shares for a value of $516,000. The promissory note was issued for $366,000 and there were 1,333,333 units issued at $0.1125 per unit on a post-consolidated basis. Each unit issued to PrivateCo consisted of one common share of the Company and one common share purchase warrant.

Private Placement

On August 11, 2010, in conjunction with the Transaction, the Company closed a private placement issuing 59,551,750 subscription receipts (the "Subscription Receipts") of the Company for gross proceeds of $669,958 ($0.01125 per Subscription Receipt). Each Subscription Receipt was deemed to be exchanged for one tenth of a post-consolidated common share and one tenth of a post-consolidated warrant.

Shares Outstanding

As of September 30, 2010 the number of common shares outstanding after the share consolidation, private placement, and asset purchase are 12,657,438, the number of warrants issued and outstanding are 7,288,508 and the number of stock options outstanding are 1,050,000.

Subsequent Events

Subsequent to September 30, 2010, the Company has entered into a non-binding letter of intent (the "Letter of Intent") with a private US company (the "USCo") and its private Canadian parent company. Pursuant to the Letter of Intent, the USCo will grant the Company an option (the "Option") to purchase 49.5% of the common shares of USCo for consideration of $10.00 USD. To exercise the option, the Company must advance $2,000,000 USD to USCo for a two well horizontal light oil test on existing producing USCo lands, including seismic, land acquisitions and other related oil and gas activities.

The Company has also announced a proposed private placement to complete a non-brokered private placement of a minimum of 8,333,333 units (the "Units") of the Company up to a maximum of 10,000,000 Units at a price of $0.30 per Unit for aggregate gross proceeds up to $3,000,000. The Units will include one common share and one half of one common share purchase warrant (the "Warrant"). Each whole Warrant entitles the holder to purchase one common share for $0.50 expiring 12 months from the date of the closing of the offering. Completion of the offering is subject to regulatory approval including, but not limited to, the TSX Venture Exchange Inc.


At Alder Flats, Marksmen has behind pipe production that requires tie-in and field optimization capital. The Company has been unable to realize this potential due to a lack of cash-flow and working capital. Marksmen plans to optimize this area when funds are available and commodity prices for natural gas make the area more viable.

Marksmen looks forward to exploiting the opportunity available to it with USCo as outlined in the subsequent event section above.

On behalf of the Board of Directors

Erich Boechler, CEO

This News Release contains "forward-looking information" within the meaning of applicable Canadian securities legislation, including but not limited to statements regarding the Letter of Intent, the proposed private placement, and the Company's Alder Flats property. 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 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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