Mart Resources, Inc.

TSX VENTURE : MMT


Mart Resources, Inc.

May 14, 2014 08:30 ET

Mart Announces Financial and Operating Results for the Three Months Ended March 31, 2014

CALGARY, ALBERTA--(Marketwired - May 14, 2014) - Mart Resources, Inc. (TSX:MMT) ("Mart" or the "Company") is pleased to announce its financial and operating results (all amounts in United States dollars unless noted) for the three months ended March 31, 2014 ("Q1 2014"):

THREE MONTHS ENDED MARCH 31, 2014

  • Mart's share of average daily oil produced and sold for the three months ended March 31, 2014 ("Q1 2014") from the Umusadege field per calendar day was 6,891 barrels of oil per day ("bopd") compared to 2,571 bopd for the three months ended March 31, 2013 ("Q1 2013"). Mart's share of average daily oil produced and sold for Q1 2014 from the Umusadege field per production day was 8,555 bopd compared to 5,259 bopd for Q1 2013. During Q1 2014, the Umusadege field was shut down for a total of 17.5 days (Q1 2013: 46 days) due primarily to various disruptions, repairs and maintenance to the export pipeline and export facility.
  • On March 24, 2014, Mart announced the declaration of a quarterly cash dividend of CAD $0.05 per common share that was paid to shareholders on April 8, 2014 for an aggregate amount of $16.1 million.
  • Net income for Q1 2014 was $14.5 million ($0.041 per share) compared to $1.9 million ($0.005 per share) for Q1 2013. Cash flows from operating activities were an inflow of $12.0 million in Q1 2014 compared to an inflow of $13.1 million in Q1 2013. Excluding the changes in non-cash working capital, the cash flows from operating activities in Q1 2014 were an inflow of $31.3 million (Q1 2013: $7.5 million), which represents an increase of $23.8 million in Q1 2014 compared to Q1 2013 (see Note 1 to the Financial and Operating Results table on pages 3 and 4 hereof regarding Non-IFRS measures). The higher net income and cash flows from operating activities during the period were primarily due to lower pipeline and export facility losses and fewer days of export pipeline and export facility shutdowns, offset by increased production costs during Q1 2014 compared to Q1 2013.
  • Funds flow from production operations was $48.4 million ($0.136 per share) for Q1 2014 compared to $14.2 million ($0.040 per share) for Q1 2013 (see Note 1 to the Financial and Operating Results table on pages 3 and 4 hereof regarding Non-IFRS measures).
  • Mart's share of Umusadege field oil produced and sold in Q1 2014 was 620,224 barrels of oil ("bbls") compared to 231,384 bbls for Q1 2013.
  • The average price received by Mart for oil sales during Q1 2014 was $110.60 per bbl compared to $110.01 per bbl for Q1 2013.
  • Mart's share of Umusadege field pipeline and export facility losses ("pipeline losses") for Q1 2014 was 76,606 bbls (Q1 2013: 51,152 bbls), or approximately 11.0% (Q1 2013: 17.6%) of Mart's share of total crude deliveries from the Umusadege field.
  • Mart's subsidiary NRG Drilling Nigeria Limited ("NRG") provides drilling services in Nigeria. NRG's drilling services have historically mainly been provided for Umusadege field development activities. Management plans to dispose of NRG as its business is no longer considered a core activity of Mart. An active program to locate a buyer has been commenced and it is expected that disposal of NRG will be completed during 2014.
  • In Q1 2014 Mart, through its wholly owned Nigerian subsidiary, increased its existing secured term loan credit facility with Guaranty Trust Bank plc from US$100 million to US$175 million. The increased facility is available to fund field development activities on the Umusadege field and the Umugini pipeline, to fund Mart's ongoing working capital requirements, and to provide funds for future Nigerian oil and gas opportunities. During Q1 2014, the Company utilized a portion of the credit facility to partially fund deposits of $55.6 million in respect of Mart's participation in new potential business opportunities in Nigeria. The deposits are refundable if Mart elects not to pursue such business opportunities in the near term.

FINANCIAL AND OPERATING RESULTS

The following table provides a summary of Mart's selected financial and operating results for the three month periods ended March 31, 2014 and 2013 and the twelve months ended December 31, 2013:

USD $ 000's
(except oil produced and sold, oil sales prices, per share amounts, and shares outstanding)
3 months
ended
March 31,
2014
3 months
ended
March 31,
2013
12 months
ended
December 31,
2013
Mart's share of the Umusadege Field:
Barrels of oil produced and sold 620,224 231,384 1,459,823
Average sales price per barrel $110.60 $110.01 $110.62
Mart's percentage share of total Umusadege oil produced and sold during the period 77.3% 54.0% 66.3%
Funds flow from continuing production operations (1) $48,405 $14,178 $101,276
Per share - basic (continuing operations) $0.136 $0.040 $0.284
Net income from continuing operations $17,135 $4,763 $47,068
Loss from discontinued operations ($2,675 ) ($2,854 ) ($11,607 )
Net income for the period $14,460 $1,909 $35,461
Earnings per share from continuing operations
Per share - basic $0.049 $0.013 $0.132
Per share - diluted $0.048 $0.013 $0.131
Loss per share from discontinued operations
Per share - basic ($0.008 ) ($0.008 ) ($0.033 )
Per share - diluted ($0.008 ) ($0.008 ) ($0.032 )
Earnings per share from all activities
Per share - basic $0.041 $0.005 $0.099
Per share - diluted $0.040 $0.005 $0.099
Petroleum property interests capital expenditure (2) $16,299 $7,578 $65,483
Total assets $338,079 $241,453 $280,378
Dividends paid $16,700 $17,966 $69,600
Cash provided by operating activities $12,036 $13,108 $66,743
Total borrowings (3) $128,725 Nil $56,694
Weighted average shares outstanding for periods ended:
Basic 356,574,869 356,296,165 356,506,147
Diluted 359,164,844 359,825,372 358,647,416

Notes:

  1. Indicates non-IFRS measures. Non-IFRS measures are informative measures commonly used in the oil and gas industry. Such measures do not conform to IFRS 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 IFRS. For the purposes of this table, the Company defines "Funds flow from production operations" as petroleum sales less royalties, content development levy, community development costs and production costs. Funds flow from production operations is intended to give a comparative indication of the Company's net petroleum sales less production costs. Cash provided by operating activities excluding non-cash working capital is intended to give a comparative indication of the Company's cash inflows from operations. The reconciliation of funds flows from continuing production operations to income from continuing operations before finance income and reconciliation of cash provided by operating activities to cash provided by operating activities excluding non-cash working capital are shown in the following table:
USD $ 000's
Reconciliation of funds flow from continuing production operations to income from continuing operations before finance income and expenses
3 months
ended
March 31,
2014
3 months
ended
March 31,
2013
12 months
ended
December 31,
2013
Petroleum sales 68,597 25,455 161,487
Less: Royalties, content development levy and community development costs
11,022

5,633

25,447
Net petroleum sales 57,575 19,822 136,040
Less: Production costs 9,170 5,644 34,764
Funds flow from continuing production operations 48,405 14,178 101,276
Foreign exchange loss/(gain) 106 242 (132 )
General and administrative 4,375 3,104 13,687
Tax benefit contributions - 598 3,389
Taxes on venture production 6,228 - -
Impairment of available-for-sale investment - 11 66
Share-based compensation 938 283 1,891
Depreciation 69 86 311
Depletion 14,757 3,691 26,064
Income from continuing operations before finance income and expenses
21,932

6,163

56,000
USD $ 000's
Reconciliation of cash provided by operating activities to cash provided by operating activities excluding non-cash working capital
3 months
ended
March 31,
2014
3 months
ended
March 31,
2013
12 months
ended
December 31,
2013
Cash provided by operating activities 12,036 13,108 66,743
Add/(deduct) changes in non-cash working capital 19,231 (5,597 ) 6,386
Cash provided by operating activities excluding non-cash working capital 31,267 7,511
73,129
  1. Petroleum property interests capital expenditure relates to additions to petroleum property interests excluding the capitalized decommissioning obligations.
  1. The total gross amount of loan drawdowns net of loan repayments is $129.3 million and $128.7 million net of unamortized borrowing costs. After taking account of unamortized borrowing costs, the total loan amount due within one year is $43.8 million and has been reported under current liabilities in the statement of financial position. The amount due after one year is $84.9 million and is included within non-current liabilities in the statement of financial position.

OUTLOOK AND OPERATIONS UPDATE:

Dividend

On March 24, 2014, Mart announced the declaration of a quarterly cash dividend of CAD $0.05 per common share that was paid to shareholders on April 8, 2014 for an aggregate amount of $16.1 million (CAD $17.8 million).

Drilling program

A second drilling rig has been contracted to drill a water disposal well. This well is expected to be completed in May 2014.

It is planned to drill a re-entry horizontal development well in May 2014 followed by deepening of the UMU-8 well in June 2014.

The Company expects to spend approximately $56 million during 2014 for the planned drilling program including the amounts expected to be spent on the above-mentioned wells and miscellaneous Umusadege field capital expenditures.

Umugini pipeline capital expenditure

The Company will continue funding its 15% share of the Umugini pipeline project costs in 2014. Mart's share of the total Umugini pipeline construction budget was $11 million of which $7.2 million had been incurred by March 31, 2014, and the Company has budgeted to spend $6 million during 2014 towards the construction of the pipeline. Additional costs are expected to be incurred in connection with the tie-in and commissioning of the Umugini pipeline.

Cash flows from operating activities

The Company expects the Umugini pipeline to be completed in Q2 2014, which is expected to facilitate an increase in production and revenues from the Umusadege field and therefore lead to an increase in the Company's cash flows from operating activities.

Umugini Pipeline Update

Surveying and clearing of the right of way for the Umugini pipeline has been completed and pipeline construction is ongoing. The first 35 kilometres ("km") of the pipeline have been completed and backfilled. Stringing of approximately another 16 km of pipe has been completed, and welding, coating, radiograph testing has been completed on 14 km of this 16 km section. Trenching and lowering is currently being finished on approximately 8 km of this length, and the installation of fiber optic cable that is part of the leak detection system has been completed on the first 3 km. Procurement of materials and equipment required to complete the pipeline pumping, monitoring and control facilities is ongoing. The group managing construction of the Umugini pipeline continues to estimate that pipeline construction will be completed by the end of the first half of 2014. Pipeline commissioning will occur following completion of pipeline construction and installation of pipeline pumping, monitoring and control facilities.

Production Update

Umusadege field production during April 2014 averaged 8,593 bopd. Aggregate Umusadege field downtime during April 2014 was approximately 9.5 days due to repairs and maintenance to the export pipeline, with two full down days during the month. The average field production based on producing days was 12,539 bopd in April 2014.

Total net crude oil deliveries into the Nigerian Agip Oil Company Limited ("NAOC") export pipeline from the Umusadege field for April 2014 were approximately 249,056 bbls before pipeline losses. Based upon the 12-month rolling average rate of pipeline and export facility losses of 22.14%, Mart estimates pipeline and export facility losses for April 2014 to be approximately 55,153 bbls. Using this estimated pipeline and export facility loss volume, the total net crude deliveries into the NAOC export pipeline from the Umusadege field for April 2014 less estimated pipeline losses is 193,903 bbls.

Pipeline and export facility losses reported by NAOC and allocated to Mart and its co-venturers for March 2014 were 45,959 bbls, or 13.1% of total crude oil deliveries into the export pipeline for that month. As previously announced, total net crude oil deliveries into the export pipeline from the Umusadege field for March 2014 were approximately 350,750 bbls, so after deducting the actual pipeline and export facility losses allocated for March 2014, the total net crude oil deliveries less losses for March 2014 were 304,791 bbls. April 2014 pipeline and export facility losses have not yet been reported by NAOC.

CHAIRMAN'S COMMENT:

Wade Cherwayko, Chairman & CEO of Mart said, "Mart's Q1 2014 financial results significantly improved in comparison with Q1 2013 primarily due to lower pipeline and export facility losses and fewer days of export pipeline and export facility shutdowns. Mart's share of pipeline losses for Q1 2014 was approximately 11.0% in comparison with 17.6% in Q1 2013. Mart continued to pay quarterly dividends amounting to CAD $0.05 per common share on a quarterly basis, amounting to USD $16.1 million in Q1 2014. The Umugini pipeline construction project progressed during Q1 2014 and construction of the pipeline is expected to be completed in the second quarter of 2014, with commissioning of the pipeline and related facilities to follow. The Umugini pipeline will provide sufficient pipeline capacity to fully realize the current production potential of Umusadege field. Mart and its co-venturers have plans to drill additional wells in the Umusadege field in 2014 to continue to develop the field and enhance the efficiency and productivity of the field. Mart is also pursuing a number of potential opportunities that could diversify and expand the Company's holdings and operations."

Mart will hold a conference call to discuss the operational and financial results for the quarter ended March 31, 2014. The conference call is scheduled for May 16, 2014 at 9:00 AM Mountain Daylight Time (11:00 Eastern Daylight Time). Wade Cherwayko, Chairman & CEO of Mart, and Dmitri Tsvetkov, Chief Financial Officer of Mart, will host the call and be available during the question-and-answer session. To access the conference call, please dial 1-866-223-7781 or 416-340-2216. An instant replay of the call will be available until May 23, 2014 by dialing 1-800-408-3053 or 905-694-9451 and entering pass code 1261364.

Additional information regarding Mart is available on the Company's website at www.martresources.com and under the Company's profile on SEDAR at www.sedar.com.

Notes: 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 Management's Discussion and Analysis ("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, 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. This cautionary statement expressly qualifies the forward-looking statements contained herein.

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 NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THE RELEASE.

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