Marksmen Resources Ltd.

Marksmen Resources Ltd.

April 30, 2007 20:33 ET

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

CALGARY, ALBERTA--(CCNMatthews - April 30, 2007) - Marksmen Resources Ltd. ("the Company or Marksmen") (TSX VENTURE:MA) announces the Company's audited financial and operating results for the year ended December 31, 2006 and reports its progress on a number of corporate and operational fronts.


Year Ended (1) Quarter Ended (1)
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
Period Ended (1) 2006 2005 2006 2005
Financial ($Cdn)
Oil and Gas Revenue $ 984,983 $ 997,650 $ 256,299 $ 125,624
Funds Flow from
Operations (2) $ 497,527 $ 340,633 $ 205,607 $ 8,481
Per Share - Basic $ 0.02 $ 0.02 $ 0.01 $ 0.00
Net Income (loss) ($1,371,997) ($470,365)($1,209,310) ($310,526)
Per Share - Basic ($0.06) ($0.03) ($0.05) ($0.02)
Capital Expenditures
Oil and Gas $ 3,708,984 $ 1,273,222 $ 558,976 $ 327,195
Minerals 0 307,212 $ 0 ($4,100)
$ 3,708,984 $ 1,580,434 $ 558,976 $ 323,095
Weighted Average Shares
Basic 23,852,010 15,017,013 23,852,010 15,017,013
Fully Diluted 25,152,010 16,144,616 25,152,010 16,144,616
Average Daily Production
(boe per day) 45 43 55 35
Reserves (Forecast
Prices) (3) (4)
Total Proved Reserves (boe) 54,167 41,775 - -
Total Proved plus
Probable (boe) 132,500 134,611 - -
Net Present Value
(P+P NPV 10%) $ 2,720,000 $ 2,756,000 - -
Wells Drilled
Gross 8.00 6.00 0.00 2.00
Net 1.29 1.30 0.00 0.40

(1) In the previous fiscal year, the Company changed its year end from
October 31 to December 31. The Company is reporting a twelve month
period ended December 31, 2006. Comparative figures are provided for
the fourteen month period ended December 31, 2005.

(2) 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.

(3) Before tax reserves.

(4) Form 51-101F1, F2 and F3 "Statement of Reserves Data and Other Oil and
Gas Information" have been filed on SEDAR.

Financial and Operating Results

Delays in completing and equipping successful wells at Eastmont and Ferrier, delays in drilling follow-up wells at Eastmont and Pine Creek, and the dry holes realized at Evi, Kaybob South, and Innes West resulted in the Company missing internal production and cash flow goals. Revenue was $984,900 in the twelve months ended December 31, 2006 versus $997,700 in the fourteen months ended December 31, 2005. Funds from operations in 2006 was $497,500 or $0.02 per share versus $340,600 or $0.02 per share in 2005. Capital expenditures in 2006 were $3.7 million.

Lower than anticipated reserve additions throughout the year resulted in a depletion charge of $2,557,700 in 2006 compared to $823,000 in 2005. The depletion charge in 2006 also included an impairment loss of $1,069,700. These items resulted in a net loss of $1,372,000 or $0.06 per share versus a loss of $470,400 or $0.03 per share the previous year.

Total production for the twelve month period ended December 31, 2006 was 16,534 boe or an average of 45 boe per day compared to 18,238 boe or an average of 43 boe per day for the fourteen month period ended December 31, 2005. Crude oil production was 12,679 boe or about 77% of total production compared to 14,164 boe or about 78% of total production in 2005. The remaining 22% of production in 2006 is attributable to solution gas that was produced in conjunction with some of the Company's light oil wells in southeast Saskatchewan, and natural gas and liquids production at the Company's wells at Ferrier, Eastmont, and Namao West in Alberta.

Production in the fourth quarter averaged about 55 boe per day in 2006 compared to 35 boe per day for the same period in 2005. Oil production declined to about 59% of total production in the fourth quarter as the natural gas wells at Ferrier, Eastmont and Namao came on-stream for the entire quarter.

In fiscal 2006, the Company drilled 8.0 (1.29 net) wells in fiscal 2006 versus 6.0 (1.3 net) wells in fiscal 2005. The wells drilled in 2006 included 2 exploration (0.40 net) wells at Evi and Pine Creek. Exploration expenditures also included seismic programs at Riviere and Woodbend.

In addition, Marksmen participated in 6 development (0.89 net) wells at Eastmont, Ferrier, Kaybob South, Nottingham, Innes West, and Antler. Drilling results to December 31, 2006 include 2 successful oil (0.30 net) wells at Nottingham and Antler in southeast Saskatchewan, 3 successful natural gas (0.45 net) wells at Eastmont, Ferrier and Pine Creek, and 3 (0.54 net) dry holes at Kaybob South, Innes West, and Evi.

First Quarter Activities

During the first quarter of 2007, Marksmen:

- Drilled a successful dual leg horizontal (0.20 net) well at Nottingham in southeast Saskatchewan. This well, which targeted the Tilston formation, was brought on production in late March, just prior to break-up. Initial gross production is expected to be in the range of 100 boe per day (20 boe per day net to Marksmen).

- Drilled a successful exploratory (0.50 net) well into the Edmonton sands formation at Penhold, Alberta. Infrastructure is nearby and the well is expected to be tied-in and on-production by the end of the second quarter. There is potential to drill up to four additional wells on lands earned by Marksmen.

- Drilled and cased a vertical development (0.20 net) well at Antler in southeast Saskatchewan. This follow-up well, which targeted the Midale formation, was recently completed and is currently on test. Depending on positive test results, the Company anticipates that a horizontal development well will be drilled at Antler in the third quarter.

- Successfully participated at a crown land sale at Pine Creek, adding 640 additional gross acres (128 net acres) of land in this prospective gas prone area.

- Drilled an unsuccessful exploratory (0.22 net) well at Woodbend, Alberta. This well, which targeted the Ellerslie formation, failed to encounter economic quantities of hydrocarbons.


In addition to the follow-up wells that may be drilled at Penhold, Marksmen anticipates that the development program at Nottingham will continue with two additional wells to be drilled at the property in fiscal 2007. Also, a follow-up well is expected to be drilled at Eastmont in May.

A second well was drilled and cased at Pine Creek in the first quarter of 2007 and is currently waiting on completion. As a result of capital constraints, Marksmen did not participate in this well. However, due to extenuating circumstances, it appears that Marksmen may have the opportunity to back into this well. Also, subject to the positive completion results and adequate funding, the Company intends to participate in a third Pine Creek well that may be drilled in the second half of the year.

Although Marksmen has excellent drilling opportunities at Nottingham, Pine Creek, Penhold, Eastmont, and Antler, the Company is also aggressively seeking merger candidates with attractive prospects in order to accelerate reserve, production and cash flow growth. In a news release dated April 30, 2007 (filed on SEDAR), the Company announced that it had entered into a Letter of Intent to acquire a private oil and gas company. Under terms of the Letter of Intent, Marksmen will issue 11,731,661 common shares at a deemed price of $0.135 per share to acquire 100% of the outstanding shares of the private company. According to its independently prepared reserve reports, the private company has proved plus probable reserves of 295,400 boe and is currently producing about 42 boe per day. Including the shares to be issued and assumption of the debt of the private company, the total consideration for the acquisition is approximately $3.0 million. As a result, Marksmen is acquiring the proved plus probable reserves at a value of $10.18 per boe. Upon completion of the acquisition, Marksmen's net production will be about 100 boe per day.

By completing this acquisition, which is subject to a number of conditions including the completion of an equity financing, Marksmen will acquire two core natural gas properties in Central Alberta. One property contains both operated and non-operated conventional shallow sweet gas wells producing from the Edmonton Group while the other property is comprised of operated shallow gas and Belly River oil and gas wells. Both areas benefit from year round access and both also contain significant CBM potential. There is the potential for Marksmen to drill an additional 8 to 10 locations in the Edmonton sands and to expand its interests in the area. The Edmonton sands are shallow, low-risk, long-life reserves and located within easy reach of infrastructure and sales lines. In addition, existing Belly River wells are targeted for re-activation and re-completion after spring break-up. In addition, completion of the acquisition will allow Marksmen to make the transition from a working interest holder to an operator of oil and gas properties.

While 2007 will be challenging from a capital perspective, management anticipates that fiscal 2007 will result in improved growth in reserves, production, and cash flow. It should be noted, however, that if the Company is unable to attract adequate equity financing on a timely basis, it may be difficult for Marksmen to realize the full potential of the projects and acquisition listed above.

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