Mart Resources, Inc.
TSX : MMT

Mart Resources, Inc.

November 14, 2014 08:17 ET

Mart Announces Financial and Operating Results for the Three and Nine Months Ended September 30, 2014

CALGARY, ALBERTA--(Marketwired - Nov. 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 nine months ended September 30, 2014 ("Q3 2014"), including the Company's outlook and operations update:

THREE MONTHS ENDED SEPTEMBER 30, 2014

  • Mart's share of average daily oil produced and sold for the three months ended September 30, 2014 ("Q3 2014") from the Umusadege field per calendar day was 4,764 barrels of oil per day ("bopd") compared to 4,291 bopd for the three months ended September 30, 2013 ("Q3 2013"). Mart's share of average daily oil produced and sold for Q3 2014 from the Umusadege field per production day was 7,968 bopd compared to 5,483 bopd for Q3 2013. During Q3 2014, the Umusadege field was shut down for a total of 37 days (Q3 2013: 20 days) due primarily to various disruptions, lack of storage capacity at the Brass River export terminal, and repairs and maintenance to the export pipeline and export facility.

  • Net income for Q3 2014 was $6.0 million ($0.017 per share) compared to net income of $6.3 million ($0.018 per share) for Q3 2013.

  • Funds flow from continuing production operations was $33.1 million ($0.093 per share) for Q3 2014 compared to $23.3 million ($0.065 per share) for Q3 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 Q3 2014 was 438,247 barrels of oil ("bbls") compared to 394,810 bbls for Q3 2013.

  • The average price received by Mart for oil sales during Q3 2014 was $108.56 per barrel of oil ("bbl") compared to $110.61 per bbl for Q3 2013.

  • Mart's share of Umusadege field pipeline and export facility losses ("pipeline losses") for Q3 2014 was 98,814 bbls (Q3 2013: 145,912 bbls), or approximately 18.4% (Q3 2013: 23.9%; excluding the additional pipeline and export facility losses incurred in Q3 2013) of Mart's share of total crude deliveries from the Umusadege field.

  • On October 21, 2014, Mart announced it is a member of a consortium that, through a special purpose company ("Consortium SPV") owned directly or indirectly by consortium members, has entered into an assignment agreement to acquire a 45% participating interest in Nigeria Oil Mining Lease 18 ("OML 18") and all associated assets, wells, pipelines and infrastructure. Mart will hold an indirect working interest in OML 18 of approximately 10% through its indirect ownership in Consortium SPV. The acquisition cost will be funded by a combination of debt and equity contribution and Mart has advanced $134 million, representing its proportionate share of initial bid deposit, the remaining closing cash consideration and transaction costs and initial working capital for the Consortium SPV.

NINE MONTHS ENDED SEPTEMBER 30, 2014

  • Mart's share of average daily oil produced and sold for the nine months ended September 30, 2014 from the Umusadege field per calendar day was 5,615 bopd compared to 3,984 bopd for the nine months ended September 30, 2013. Mart's share of average daily oil produced and sold for the nine months ended September 30, 2014 from the Umusadege field per production day was 8,004 bopd compared to 6,076 bopd for the nine months ended September 30, 2013. During the nine months ended September 30, 2014, the Umusadege field was shut down for a total of 81.5 days (2013: 94 days) due primarily to various disruptions, lack of storage capacity at the Brass River export terminal, and repairs and maintenance to the export pipeline and export facility.

  • During the nine months ended September 30, 2014 Mart has declared total dividends CAD $0.065 per common share for an aggregate amount of $21.1 million (CAD $23.2 million); (2013: $51.9 million (CAD $53.4 million)).

  • Net income for the nine months ended September 30, 2014 was $19.1 million ($0.054 per share) compared to $27.3 million ($0.077 per share) for the nine months ended September 30, 2013. Cash flows from operating activities were an inflow of $93.3 million for the nine months ended September 30, 2014 compared to an inflow of $27.2 million for the nine months ended September 30, 2013. Excluding the changes in non-cash working capital, the cash flows from operating activities for the nine months ended September 30, 2014 were an inflow of $71.5 million (2013: $52.0 million), which represents an increase of $19.5 million in the nine months ended September 30, 2014 compared to nine months ended September 30, 2013 (see Note 1 to the Financial and Operating Results table on pages 3 and 4 hereof regarding Non-IFRS measures). The higher cash flows from operating activities during the period were primarily due to increased production due to fewer days of export pipeline and export facility shutdowns, offset by costs relating to taxes on venture production and business development and corporate costs for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013.

  • Funds flow from continuing production operations was $117.5 million ($0.330 per share) for the nine months ended September 30, 2014 compared to $71.2 million ($0.200 per share) for the nine months ended September 30, 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 for the nine months ended September 30, 2014 was 1,532,813 bbls compared to 1,087,523 bbls for the nine months ended September 30, 2013.

  • The average price received by Mart for oil sales for the nine months ended September 30, 2014 was $110.20 per bbl compared to $109.93 per bbl for the nine months ended September 30, 2013.

  • Mart's share of Umusadege field pipeline losses for the nine months ended September 30, 2014 was 340,393 bbls (2013: 352,541 bbls), or approximately 18.0% (2013: 24.1%) of Mart's share of total crude deliveries from the Umusadege field.

FINANCIAL AND OPERATING RESULTS

The following table provides a summary of Mart's selected financial and operating results for the three and nine month periods ended September 30, 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
3 months
ended
9 months
ended
9 months
ended
12 months
ended
September 30, 2014 September 30, 2013 September 30, 2014 September 30, 2013 December 31, 2013
Mart's share of the Umusadege Field:
Barrels of oil produced and sold 438,247 394,810 1,532,813 1,087,523 1,459,823
Average sales price per barrel $ 108.56 $ 110.61 $ 110.20 $ 109.93 $ 110.62
Mart's percentage share of total Umusadege oil produced and sold during the period 82.5 % 67.7 % 80.3 % 65.0 % 66.3 %
Funds flow from continuing production operations (1) $ 33,114 $ 23,268 $ 117,518 $ 71,225 $ 101,276
Per share - basic (continuing operations) $ 0.093 $ 0.065 $ 0.330 $ 0.200 $ 0.284
Net income from continuing operations $ 7,362 $ 8,081 $ 28,680 $ 35,727 $ 47,068
Loss from discontinued operations $ (1,333 ) $ (1,744 ) $ (9,572 ) $ (8,393 ) $ (11,607 )
Net income for the period $ 6,029 $ 6,337 $ 19,108 $ 27,334 $ 35,461
Earnings per share from continuing operations
Per share - basic $ 0.021 $ 0.023 $ 0.080 $ 0.100 $ 0.132
Per share - diluted $ 0.021 $ 0.022 $ 0.080 $ 0.097 $ 0.131
Loss per share from discontinued operations
Per share - basic $ (0.004 ) $ (0.005 ) $ (0.026 ) $ (0.023 ) $ (0.033 )
Per share - diluted $ (0.004 ) $ (0.005 ) $ (0.027 ) $ (0.023 ) $ (0.032 )
Earnings per share from all activities
Per share - basic $ 0.017 $ 0.018 $ 0.054 $ 0.077 $ 0.099
Per share - diluted $ 0.017 $ 0.017 $ 0.053 $ 0.074 $ 0.099
Petroleum property interests capital expenditure (2) $ 34,851 $
15,557
$ 70,149 $ 36,789 $ 65,483
Total assets $ 446,879 $ 265,403 $ 446,879 $ 265,403 $ 280,378
Dividends paid $ 4,649 $ 16,965 $ 37,479 $ 52,477 $ 69,600
Cash provided/(used) by operating activities $ 50,200 $ (5,523 ) $ 93,299 $ 27,202 $ 66,743
Total borrowings (3) $ 214,243 $ 43,663 $ 214,243 $ 43,663 $ 56,694
Weighted average shares outstanding for periods ended:
Basic 356,795,736 356,574,869 356,649,300 356,482,989 356,506,147
Diluted 358,884,543 367,004,204 359,394,956 367,748,125 358,647,416
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 continuing production operations" as petroleum sales less royalties, content development levy, community development costs and production costs. Funds flow from continuing 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
September 30, 2014
3 months ended
September 30, 2013
9 months ended
September 30, 2014
9 months ended
September 30, 2013
12 months ended
December 31, 2013
Net petroleum sales 41,395 35,842 144,335 98,878 136,040
Less: Production costs 8,281 12,574 26,817 27,653 34,764
Funds flow from continuing production operations 33,114 23,268 117,518 71,225 101,276
Foreign exchange (gain)/loss (177 ) (246 ) 208 (95 ) (132 )
General and administrative 3,654 3,429 11,778 9,908 13,753
Tax benefit contributions - 1,424 - 2,468 3,389
Taxes on venture production 4,496 - 14,622 - -
Business development and corporate costs 756 - 3,252 - -
Share-based compensation 444 1,371 1,868 1,532 1,891
Depreciation 67 58 205 234 311
Depletion 9,966 6,362 35,778 17,568 26,064
Income from continuing operations before finance income and expenses
13,908

10,870

49,807

39,610

56,000
USD $ 000's
Reconciliation of cash provided by operating activities to cash provided by operating activities excluding non-cash working capital
9 months ended
September 30, 2014
9 months ended
September 30, 2013
12 months ended
December 31, 2013
Cash provided by operating activities 93,299 27,202 66,743
(Less)/add changes in non-cash working capital (21,834 ) 24,839 6,386
Cash provided by operating activities excluding non-cash working capital 71,465 52,041 73,129
(2) Petroleum property interests capital expenditure relates to additions to petroleum property interests excluding the capitalized decommissioning obligations.
(3) The total gross amount of loan drawdowns net of loan repayments is $215.7 million (December 31, 2013: $57.2 million) and $214.2 million (December 31, 2013: $56.7 million) net of unamortized borrowing costs. After taking account of unamortized borrowing costs, the total loan amount due within one year is $70.8 million (December 31, 2013: $16.5 million) and has been reported under current liabilities in the statement of financial position. The amount due after one year is $143.4 million (December 31, 2013: $40.2 million) and is included within non-current liabilities in the statement of financial position.

OUTLOOK AND OPERATIONS UPDATE

Participation in Consortium to acquire OML 18

On October 21, 2014, Mart announced it is a member of a consortium that through a special purpose company owned directly or indirectly by consortium members that has entered into an assignment agreement to acquire a 45% participating interest in Nigeria Oil Mining Lease 18 and all associated assets, wells, pipelines and infrastructure. Mart will hold an indirect working interest in OML 18 of approximately 10% through its indirect ownership in Consortium SPV. The acquisition cost will be funded by a combination of debt and equity contribution and Mart has advanced $134 million, representing its proportionate share of initial bid deposit, the remaining closing cash consideration and transaction costs and initial working capital for the Consortium SPV. Mart initially advanced a refundable initial bid deposit of $50 million into a designated escrow account. Upon the signing of the assignment agreement, the initial bid deposit was released from escrow and became non-refundable. The closing cash consideration is refundable should the transaction not be completed.

Dividend

On October 16, 2014, Mart declared a quarterly dividend of CAD $0.01 per common share. On October 30, 2014, Mart paid the quarterly dividend. As per the Company's Share Dividend Plan, shareholders had the right to elect to be paid in cash or in common shares of the Company. The cash component of the dividend was $3.2 million (CAD $3.5 million) and 70,558 common shares of the Company, amounting to $0.1 million (CAD $0.1 million), were issued to shareholders in lieu of cash.

Umusadege drilling update and UMU-12 initial well flow test results

The drilling and completion of the UMU-12 well has been completed. The well was drilled into the VIII sand, landing a 1200-foot lateral drain hole at a measured total depth of 10,010 feet. The average oil column is approximately 40 feet. The well was flowed back for clean-up and testing on various choke sizes for 80 hours, yielding a final test averaging 5,366 bopd on a 44/64 inch choke at a surface flowing pressure of 230 psi over a six hour period. The API gravity of the oil is 26.4 degrees, with no sand, bottom sediment, or water production.

The drilling rig has been moved to the UMU-13 well location and the well was spudded on October 28, 2014. UMU-13 is a vertical appraisal well with exploration prospects that has a target depth of 9,118 feet and is intended to appraise the east prospect on the Umusadege license.

The Company expects to spend approximately $40 million during Q4 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 has funded 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 $10.8 million had been incurred by September 30, 2014. The Company budgeted to spend $8.7 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.

Umugini Pipeline Update

The 51-kilometer Umugini pipeline tie-in at the Eriemu flow station and other start-up activities have been completed. The line fill process required to commence shipment of oil to the Trans Forcados crude oil export pipeline and onward to the Forcados oil export terminal and the inspection of the Umugini pipeline facilities by the Operator of the Umugini pipeline was also successfully completed by the end of September 2014. Accordingly, the Umugini pipeline is ready for injection of crude into the Trans Forcados crude pipeline and Shell Petroleum Development Co. of Nigeria's ("SPDC") pipeline system connected to the Forcados oil export terminal. The commencement of oil flow will occur following the receipt of the formal authorization of oil injection by the operator of the Trans Forcados export pipeline. The Company is disappointed at the length of time it has taken to obtain the final approvals required to commence oil flow despite the completion of the construction of the Umugini pipeline. Mart has been and will continue to work with the appropriate third parties to secure the requisite approvals as soon as possible.

October 2014 Production Update

Umusadege field production during October 2014 averaged 9,698 bopd. Aggregate Umusadege field downtime during October 2014 was approximately 8 days due to a combination of shutdowns of the Nigerian Agip Oil Company Limited ("NAOC") export pipeline resulting from a lack of storage capacity at the Brass River export terminal due to export shipment delays and other operational interruptions including general pipeline repairs and maintenance. There were two full down days during the month. The average field production based on producing days was 13,092 bopd in October 2014.

Total net crude oil deliveries into the NAOC export pipeline from the Umusadege field for October 2014 were approximately 298,185 bbls before pipeline losses. Based upon the 12-month rolling average rate of pipeline and export facility losses from October 2013 to September 2014 of 20.95%, Mart estimates pipeline and export facility losses for October 2014 will be approximately 62,481 bbls. Using this estimated pipeline and export facility loss volume, Mart estimates that the total net crude deliveries into the NAOC export pipeline from the Umusadege field for October 2014 less estimated pipeline losses will be 235,704 bbls.

Pipeline and export facility losses reported by NAOC and allocated to Mart and its co-venturers for September 2014 were 42,404 bbls, or 21.5% of total crude oil deliveries into the export pipeline for that month. Pipeline and export facility losses allocated to Mart and its co-venturers from January to September 2014 have averaged 18.0% of total crude oil deliveries into the export pipeline for 2014.

As previously announced, total net crude oil deliveries into the export pipeline from the Umusadege field for September 2014 were approximately 197,274 bbls. Accordingly, after deducting the actual pipeline and export facility losses allocated for September 2014, the total net crude oil deliveries less losses for September 2014 were 154,870 bbls. Mart previously estimated pipeline and export facility losses for September 2014 to be approximately 42,483 bbls, based upon the 12-month rolling average rate of pipeline and export facility losses of 21.54% between September 2013 and August 2014. October 2014 pipeline and export facility losses have not yet been reported by NAOC.

CHAIRMAN'S COMMENT

Wade Cherwayko, Chairman & CEO of Mart said, "During Q3 2014, Mart and its co-venturers, Midwestern (Operator of the Umusadege field) and SunTrust Oil Company Limited, continued successful development of the Umusadege field. Drilling and flow testing of the UMU-12 well were completed during the quarter and the well had an excellent flow test at a rate of 5,366 bopd from a 1,200 foot horizontal section of the VIII sand. The next well in the drilling program is the UMU-13 well, a vertical appraisal well with exploration prospects that spudded in late October and is intended to appraise the east prospect on the Umusadege field. The UMU-13 well had 9 5/8 inch casing set to a depth of 3,531 feet, and is currently drilling ahead in the 8 1/2 inch section at a depth of approximately 5,800 feet. The Umugini pipeline construction project and other technical commissioning and start-up activities have been completed and approved. The tie-in to the Trans Forcados pipeline is constructed, and the line fill process required to commence the shipment of oil to the Trans Forcados crude oil export pipeline and onward to the Forcados oil export terminal was completed in September. The Umugini pipeline is ready for oil production, and injection is expected to commence as soon as final authorization is received from the operator of the storage facilities at the Forcados oil export terminal. While the Company is disappointed with the delays in the commencement of oil shipments through the Umugini pipeline, Mart is working with the appropriate third parties to secure the final approvals necessary to allow oil to flow at the earliest possible date. Additionally, the signing of the agreement by the consortium that Mart is a part of to acquire a 45% interest in OML 18 marked an important milestone in plans to diversify Mart's asset base in Nigeria. Mart will hold an indirect working interest in OML 18 of approximately 10% through its indirect ownership in Consortium SPV. Mart was also pleased to pay a $0.01 per common share quarterly dividend at the end of October 2014."

Mart will hold a conference call to discuss the operational and financial results for the quarter ended September 30, 2014. The conference call is scheduled for November 19, 2014 at 9:30 AM Mountain Daylight Time (11:30 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. The telephone numbers and codes required to access the conference call will be provided in a separate announcement when these details are available.

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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