Marksmen Resources Ltd.

Marksmen Resources Ltd.

November 29, 2007 15:36 ET

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

CALGARY, ALBERTA--(Marketwire - Nov. 29, 2007) - Marksmen Resources Ltd. (TSX VENTURE:MA) ("the Company or Marksmen") announces the Company's financial and operating results for the quarter ended September 30, 2007.


Quarter Ended 9 Months Ended
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Period Ended 30-Sep-07 30-Sep-06 30-Sep-07 30-Sep-06
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Financial ($Cdn)
Oil and Gas Revenue $ 333,761 $ 270,537 $ 793,341 $ 728,684
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Funds Flow from
Operations (1) ($58,851) $ 78,557 $ 26,550 $ 291,920
Per Share - Basic ($0.00) $ 0.00 $ 0.00 $ 0.01
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Net Loss ($154,383) ($122,626) ($448,767) ($162,687)
Per Share - Basic ($0.00) ($0.01) ($0.01) ($0.01)
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Capital Expenditures
Oil and Gas
Operations $ 272,558 $ 1,139,941 $1,126,110 $ 2,646,479
Acquisition of RXO
Energy Inc. $ 0 $ 0 $1,438,525 $ 0
Producing Property
Acquisition $ 1,700,000 $ 0 $1,700,000 $ 0
Total $ 1,972,558 $ 1,139,941 $4,264,635 $ 2,646,479
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Weighted Average
Shares Outstanding
Basic 33,359,709 23,787,235 33,359,709 23,787,235
Fully Diluted 36,059,709 25,712,235 36,059,709 25,712,235
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Average Daily
(boe per day) 79 47 57 42
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Wells Drilled
Gross 2.00 5.00 7.00 7.00
Net 0.30 0.84 1.52 1.09
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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.

Operating Results

Total production for the nine months ended September 30, 2007 was 15,570 boe or an average of 57 boe per day. This compares to an average of 42 boe per day in the nine months ended September 30, 2006. Production for the quarter ended September 30, 2007 averaged 79 boe per day. Current production is approximately 120 boe per day, with an estimated 30 boe per day behind pipe waiting on tie-in. Approximately half of the behind pipe production estimate is due to come on-stream by mid-December.

Natural gas represented about 56% of Marksmen's total production in the three months ended September 30, 2007, with crude oil and NGL production representing the remaining 44% of total production. The increase in natural gas production is primarily attributable to the closing of the RXO Energy Inc. ("RXO") acquisition on June 21, 2007 and the natural gas property acquisition at Penhold that closed on September 15, 2007 with an effective date of August 1, 2007.

Oil and gas revenue increased by 23.4% from $270,500 in the quarter ended September 30, 2006 to $333,800 in the quarter ended September 30, 2007. In the nine months ended September 30, 2007, oil and gas revenue increased by $64,700 or 8.9% from $728,700 to $793,300. The increase in natural gas production as a percentage of total production in conjunction with a year over year decline in natural gas prices of 25% has resulted in a significant decline in netbacks. Operating netbacks fell by 44.1% from $52.33 in the three months ended September 30, 2006 to $29.25 in the three months ended September 30, 2007. For the nine months ended September 30, 2007, operating netbacks fell from $53.22 per boe in 2006 to $33.66 per boe in 2007, a decrease of 36.8%. Canadian producers have not realized the benefit attributable to the recovering natural gas price and the significant oil price increase due to the strong Canadian dollar. This is also a factor in the Company's declining netbacks.

Update of Activities

During the quarter ended September 30, 2007, the Company incurred oil and gas capital expenditures of $1,972,600. This compares to capital expenditures of $1,139,900 incurred in the previous year. For the nine months ended September 30, 2007, Marksmen incurred oil and gas expenditures of $4,264,600 compared to $2,646,500 the previous year. In the nine month period, $1,126,100 was expended on drilling operations while the remaining $3,138,500 was expended on the two major transactions completed by Marksmen during the year. These expenditures include $1,438,500 on the RXO transaction that was completed in the second quarter and $1,700,000 spent on the producing property acquisition at Penhold in the third quarter.

During the third quarter of 2007, Marksmen drilled a second location (0.11 net) at Eastmont and the third vertical (0.20 net) well at Antler in southeast Saskatchewan. The success at both locations sets up further drilling activity. At Eastmont, a third well, which will target the Glauconite and Sunburst formations, is due to spud the first week of December 2007. If successful, the two Eastmont wells are expected to be tied in and on production prior to or just after year end adding an estimated 25 boe per day net to Marksmen. At Antler, the latest vertical well drilled in the third quarter is currently producing approximately 50 boe per day (gross); this successful well has further defined up to five additional locations including three horizontal wells and two additional vertical wells. A horizontal well is expected to be drilled in the first quarter of 2008. The Antler wells target light oil in the Midale formation.

With completion of the RXO acquisition, Marksmen acquired two core natural gas properties at Penhold and Alder Flats. Penhold contains both operated and non-operated conventional shallow sweet gas wells producing from the Edmonton Group while Alder Flats is comprised of operated shallow gas and Belly River oil and gas wells. Both areas contain significant CBM potential and benefit from year round access. Based on mapping and offsetting production, there is the potential to drill up to 11 locations at Penhold and a further five locations at Alder Flats.

As previously announced, Marksmen completed the acquisition of certain lands and production in the Penhold area of Alberta on September 15, 2007. Under terms of the Agreement, Marksmen acquired 2,321 net acres of land and approximately 42 boe per day of production. The purchase price of the acquisition was $1,700,000 with an effective date of the transaction of August 1, 2007. In addition to the development locations that came with the RXO transaction, of the lands acquired in the second Penhold deal added 5 further development locations.

By closing the Penhold land and production deal, Marksmen increased its working interest at Penhold from an average of 38% to over 95%. The Company gained operatorship and a strategic foothold in a new core development project. Upon getting control of operatorship at Penhold, Marksmen began production optimization work. In mid-October, several of the Penhold wells were cleaned out and the production response was immediate and fairly dramatic. Production at the field increased by over 60% after the cleanout operations. While production gains have since fallen off, volumes are still higher than when Marksmen completed both the RXO and property acquisition.

Looking forward, the Penhold property will be a priority focus for Marksmen. This core property provides Marksmen with shallow, low risk development drilling opportunities. The Penhold property is near infrastructure and has long life reserves. Additional production optimization work at Penhold is planned and the Company is evaluating other opportunities to expand its interests in the Penhold area.

In the first quarter of 2008, two horizontal (net 0.20) wells are anticipated to be drilled at Nottingham targeting light oil in the Tilston formation. In addition, the first Antler horizontal (net 0.20) well is also expected to be drilled in the first quarter.

Management continues to seek additional merger and acquisition opportunities to complement the production growth that is being pursued through the low risk development drilling that is outlined above. While the current low natural gas price environment has created significant opportunities for Marksmen at Penhold and in other areas, the Company will need capital in order to take full advantage of these opportunities. With the challenging capital markets that currently exist for energy companies, it may be difficult for Marksmen to fully capitalize on the deals and drilling opportunities being presented.

On behalf of the Board of Directors

Peter Malenica, President & CEO

Statements in this press release may contain forward-looking statements. Except for statements of historical fact, all statements in this press release - including, without limitation, statements regarding future plans and objectives of the Company - are forward-looking statements that involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements.

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