Mart Resources, Inc.
TSX VENTURE : MMT

Mart Resources, Inc.

May 17, 2011 09:09 ET

Mart Announces 2010 Financial and Operating Results: $48 Million Funds Flow from Production Operations and 55% Increase in Proven Reserves

CALGARY, ALBERTA--(Marketwire - May 17, 2011) -

Mart Resources, Inc. (TSX VENTURE:MMT) ("Mart" or the "Company") is pleased to announce its 2010 financial and operating results for the year ended December 31 2010 (all amounts in Canadian dollars unless noted):

YEAR 2010 HIGHLIGHTS:

  • Mart's share of proved Umusadege gross oil reserves increased by 55% to 9.6 million barrels of oil ("bbls") compared to 6.2 million bbls of oil in 2009.
  • Mart's share of proved plus probable Umusadege gross oil reserves increased by 37% to 12.9 million bbls compared to 9.4 million bbls in 2009.
  • Net income for the year ended December 31, 2010 totaled $8.1 million, compared to a net loss of $26.3 million for the year ended December 31, 2009.
  • Funds flow from production operations after royalties were $48.2 million for the year ended December 31, 2010 compared to $55.5 million for the year ended December 31, 2009.
  • The average price received by Mart for oil in 2010 was USD $81.70 per bbl (approximately CDN $84.07 per bbl), compared to USD $64.62 per bbl (approximately CDN $72.20 per bbl) in 2009.
  • Total long-term debt including the current portion was reduced to $5.6 million at December 31, 2010, compared to $13.4 million at December 31, 2009.
  • Mart's share of Umusadege field oil production for the year ended December 31, 2010 was 732,101 bbls compared to 1,154,958 bbls for the year ended December 31, 2009. The main reason for the reduction in production was the decrease in cost oil recovery from 97.5% to an average rate of 66.6% during the year, the effects of oil export pipeline disruptions during 2010 and other operational downtime.
  • Total gross Umusadege field oil production for the year ended December 31, 2010 was 1,075,927 bbls compared to 1,184,572 bbls for the year ended December 31, 2009.
  • During 2010, the Umusadege field was shut-in for a total of 92 days due mainly to disruptions in the export pipeline and maintenance and modification of production facilities, compared to a total of 35 shut-in days in 2009.
  • Mart's average daily oil production for 2010 was 2,005 barrels oil per day ("bopd") compared to 2,996 bopd in 2009.

THREE MONTH PERIOD ENDED DECEMBER 31, 2010

  • The UMU-6 well was successfully drilled, tested and completed and was put on production in December 2010.
  • Mart's share of Umusadege field oil production for the three months ended December 31, 2010 ("Q410") was 104,255 bbls compared to 317,150 bbls for the three months ended December 31, 2009 ("Q409"). This reflects the decrease in cost oil recovery from 97.5% in Q409 to an average rate of 76.3% during the period and the effects of oil export pipeline disruptions.
  • During Q410, the Umusadege field was shut-in for a total of 65 days due mainly to disruptions in the oil export pipeline and maintenance and modification of production facilities.
  • Mart's oil revenues were $10.1 million for Q410 compared to $24.2 million for Q409.
  • Funds flow from production operations of $6.7 million for Q410 compared to $13.9 million for Q409.
  • Net income for Q410 was $9.2 million compared to a net loss of $24.6 million for Q409.
  • The average price received by Mart for oil in Q410 was USD $89.21 per bbl (approximately CDN $96.86 per bbl) compared to USD $74.54 (CDN $79.05 per bbl) for Q409.
  • Mart's daily oil production for Q410 was 1,158 bopd compared to 3,447 bopd for Q409.
  • Adopted an alternate tax status in Nigeria, resulting in an expected reduction in past and future Nigerian tax liability. The benefit of this change in tax status and the resultant change in the past and current estimated tax liability was recorded in Q410.

FINANCIAL AND OPERATING RESULTS:

The following table provides a summary of Mart's selected financial and operating results for the three and twelve month periods ended December 31, 2010 and 2009. Audited financial statements and corresponding Management's Discussion and Analysis ("MD&A") are available on SEDAR at www.sedar.com and will be available on the Company's website at www.martresources.com.

(CDN$)3 months ended
Dec. 31, 2010
3 months ended
Dec. 31, 2009
12 months ended
Dec. 31, 2010
12 months ended
Dec. 31, 2009
Mart's share of the Umusadege Field
Barrels of oil produced104,255317,150732,1011,152,989
Average sales price per barrel$96.8679.0584.1079.06
Mart's share of oil76.3%97.5%66.6%97.5%
Mart's share of oil revenue after royalties$9,027,05218,991,10556,524,79772,605,726
Funds flow from production operations (1)$6,677,19718,904,74548,235,61555,485,284

Funds flow from production
operations per share
Basic$0.0200.0460.1440.165
Diluted$0.0200.0460.1420.165
Net income (loss)$9,214,125(25,152,292)8,080,808(26,285,610)
Per share - basic$0.012(0.001)0.024(0.078)
Per share - diluted$0.012(0.001)0.024(0.078)
Total assets123,144,29482,143,164123,144,29482,143,164
Total bank debt$5,627,77813,350,1935,627,77813,350,193
Shares outstanding - end of period
Basic335,548,201335,548,201335,548,201335,548,201
Diluted340,232,766335,548,201340,232,766335,548,201

Note:
(1) Indicates non-GAAP measures. Non-GAAP measures are informative measures commonly used in the oil and gas industry. Such measures do not conform to GAAP and may not be comparable to those reported by other companies nor should they be viewed as an alternative to other measures of financial performance calculated in accordance with GAAP. For the purposes of this table, the Company defines "Funds flow from production operations" as net oil sales less royalties, community development costs and production costs. Funds flow from production operations is intended to give a comparative indication of the Company's net crude oil sales less production costs as shown in the following table:

(CDN$)3 months ended
Dec. 31, 2010
3 months ended
Dec. 31, 2009
12 months ended
Dec. 31, 2010
12 months ended
Dec. 31, 2009
Crude oil sales10,098,58520,548,39561,549,64578,956,947
Less: Royalties and community development costs(1,071,533)(1,557,290)(5,024,848)(6,351,221)
Net crude oil sales9,027,05218,991,10556,524,79772,605,726
Less: Production costs(2,349,855)(86,360)(8,289,182)(17,120,442)
Funds flow from production operations6,677,19718,904,74548,235,61555,485,284

OUTLOOK:

The Company remains focused on the development of oil reserves from the Umusadege field. As at December 31, 2010, the Umusadege field had proved and probable reserves of 23.6 million barrels of oil, of which Mart's gross share is 12.9 million barrels of oil. These reserves justify further development drilling on the Umusadege field, the cost of which is expected to be funded with Mart's share of cash flows generated from the Umusadege field and, to the extent necessary, bank debt facilities.

Mart and its co-venturers placed the UMU-7 well on long-term production on May 2, 2011 from two of the four sands tested at an aggregate initial rate of 3,352 bopd. This production rate is not necessarily indicative of future production levels as work is still ongoing to stabilize and optimize long term production rates from the well. The drilling rig has been moved to the UMU-8 location and preparations are currently underway to drill the UMU-8 well from the same drilling pad as the UMU-6 and UMU-7 wells.

The Umusadege field production is transported via export pipeline operated by Agip Petroli SpA ("Agip"). Periodic disruptions were encountered in Q310 and Q410. There is no assurance that there will not be disruptions in the future. Should there be disruptions, production from the Umusadege field may be partially or fully shut down.

During the first quarter of 2011 ("Q111"), the Umusadege field was shut down due to maintenance and modification of production facilities, ongoing adjustments to UMU-6 well production methodology, tie-in of the UMU-7 well for production testing and disruptions of the export pipeline for a total of 17.7 days or approximately 20% of Q111, with 7 of the 17.7 days shut down being required to allow rig skidding and completion operations necessary for the ongoing drilling program. Excluding these activities, shut downs in the Umusadege field have returned to normal levels. Management considers this to be a typical aggregate period of intermittent shutdown periods in a quarter. During the month of April 2011, the Umusadege field was shut down for 1.3 days for testing and production facility modifications in relation to the UMU-7 well.

Mart's daily oil production for Q111 was approximately 4,853 bopd. Based on 72 actual production days in Q111, the Umusadege field average daily production was approximately 7,551 bopd per producing day. The Umusadege wells had capacity to produce at higher rates; however, the Umusadege field production was constrained to these levels due to export capacity limitations into the export pipeline system. The export pipeline operator (Agip) has confirmed an increase in the export and production capacity from the Umusadege field. The increase in production capacity, which commenced during the first week of May 2011, will be shared amongst the existing three member production group currently delivering to the export pipeline from several fields, which includes the Umusadege field. Under existing agreements, pipeline capacity may be apportioned among the production group and therefore the Umusadege field rate of production may be subject to periodic adjustment. Mart's management anticipates that the Umusadege field will be allocated sufficient export pipeline capacity to accommodate production from the existing UMU-1, UMU-5, UMU-6 wells and the UMU-7 well. Increases in export production capacity are also anticipated to accommodate future production from the UMU-8 well, assuming the UMU-8 well is successful.

In addition, to mitigate risks relating to export pipeline capacity, Mart and its co-venturers are evaluating new export pipeline and export options to provide an alternative for future production capacity. The central production facility at the Umusadege field is being upgraded to a design capable of handling up to approximately 30,000 bopd.

Mart anticipates changing its reporting currency from Canadian dollars to United States dollars in 2011.

CHAIRMAN'S COMMENT:

Wade Cherwayko, Chairman of Mart Resources, Inc. said, "The successful execution of the initial appraisal and development drilling program on the Umusadege field in 2010 resulted in record levels of proved plus probable reserves of 12.9 million bbls, first full year of profitability and substantial reduction of debt. Mart and our co-venturers are well positioned for additional development drilling in the Umusadege field. The recently announced UMU-7 well and increased production at the Umusadege field shows the significant potential of the Umusadege field. We are also looking forward to commencing drilling activities on the UMU-8 well before the end of Q2 2011."

ABOUT MART RESOURCES:

Mart Resources Inc. is an independent, international petroleum company focused on drilling, developing and producing oil and gas from proven petroleum properties in Nigeria, West Africa. The Company is currently producing and developing the Umusadege field along with Midwestern Oil and Gas Co. Plc (the Operator of the field) and SunTrust Oil Ltd. Mart also owns two land drilling rigs, has strong local relationships and experience and is evaluating additional proven undeveloped opportunities in Nigeria.

Note: Except where expressly stated otherwise, all production figures set out in this press release, including bopd, reflect gross Umusadege field production rather than production attributable to Mart. Mart's share of total gross production before taxes and royalties from the Umusadege field fluctuates between 82.5% (before capital cost recovery) and 50% (after capital cost recovery).

Forward Looking Statements

Certain statements contained in this press release constitute "forward-looking statements" as such term is used in applicable Canadian and US securities laws. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or are not statements of historical fact and should be viewed as "forward-looking statements". These statements relate to analyses and other information that are based upon forecasts of future results, estimates of amounts not yet determinable and assumptions of management. Such forward looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

In particular, statements (express or implied)contained herein or in Mart's MD&A regarding the following should be considered forward-looking statements: the Company's goals and growth strategy, estimates of reserves and future net revenues, exploration and development activities in respect of the Umusadege field, the Company's ability to finance its drilling and development plans with cash flows from operations, the ability of the Company to successfully drill and complete future wells, the ability of the Company to commercially produce, transport and sell oil from the Umusadege field, future anticipated production rates, export pipeline capacity available to the Company, the expectation of the Company that production and export pipeline disruptions will not have a lasting impact on the Company's future production, timing of completion of the Company's upgrading of the central production facility, the construction and completion of an alternative export pipeline, the acceptance of the Company's tax filings by the Nigerian taxing authorities, treatment under government regulatory regimes including royalty and tax laws, projections of market prices and costs, supply and demand for oil, timing for receipt of government approvals, the absence of amendments to the FPSAs (as defined herein) in respect of the Umusadege field, discussions regarding the impact of the adoption of IFRS (as defined herein) on the Company's financial statements and its abilities to implement IFRS and the ability of the Company to satisfy its current and future financial obligations to its banks and other creditors.

There can be no assurance that such forward-looking statements will prove to be accurate as actual results and future events could vary or differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements contained in this news release. The forward-looking statements contained herein are expressly qualified by this cautionary statement.

Forward-looking statements are made based on management's beliefs, estimates and opinions on the date the statements are made and the Company undertakes no obligation to update forward-looking statements and if these beliefs, estimates and opinions or other circumstances should change, except as required by applicable law.

NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THE RELEASE.

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