Mart Resources, Inc.
TSX VENTURE : MMT

Mart Resources, Inc.

August 29, 2011 08:30 ET

Mart Announces Record Financial and Operating Results for The Three and Six Month Periods Ended June 30, 2011

CALGARY, ALBERTA--(Marketwire - Aug. 29, 2011) - Mart Resources, Inc. (TSX VENTURE:MMT) ("Mart" or the "Company") is pleased to announce its interim financial and operating results for the three and six month periods ended June 30, 2011 ("Q211") (all amounts in Canadian dollars unless noted):

HIGHLIGHTS: QUARTER ENDED JUNE 30, 2011

  • The Company reported $29.7 million of net income ($0.09 per share basic) for the six months ended June 30, 2011 compared to $5.3 million for the six months ended June 30, 2010.
  • 256% increase in total revenue to $47.7 million in Q211 compared to $13.4 million in the second quarter of 2010 ("Q210").
  • 397% increase in cash flow from operating activities to $38.8 million ($0.12 per share basic) through the end of Q211 compared to $7.8 million ($0.02 per share basic) to Q210.
  • Funds flow from production operations of $41.1 million in Q211 compared to $23.9 million in Q111 and $11.0 million in Q210 (see note regarding non-IFRS measures under Financial and Operating Results).
  • Total bank indebtedness increased to $13.3 million on June 30, 2011 compared to $7.3 million at June 30, 2010.
  • Mart's share of Umusadege field petroleum production for Q211 was 530,056 barrels ("bbls") compared to 332,890 bbls in Q111.
  • The average price received for Umusadege production in Q211 was USD $116.84 per barrel (approximately CDN $111.98 per barrel) compared to USD $76.50 per barrel (CDN $79.06) for Q210.
  • Mart and its co-venturers commenced drilling operations on the UMU-8 well in June 2011, reached total depth in July 2011, and are in the process of testing the well.
  • During Q211, the Umusadege field was shut-in for a total of 4.3 days, all being required to allow rig skidding and completion operations necessary for the ongoing drilling program.

FINANCIAL AND OPERATING RESULTS:

The following table provides a summary of Mart's selected financial and operating results for the three and six month periods ended June 30, 2011 and 2010, and the twelve months ended December 31, 2010:

(CDN$) 3 months
ended
Jun. 30,
2011
3 months
ended
Jun. 30,
2010
6 months
ended
Jun. 30,
2011
6 months
ended
Jun. 30,
2010
12 months
ended
Dec. 31,
2010
Mart's share of the
Umusadege Field:
Barrels of oil produced 530,056 176,928 848,587 453,980 732,101
Average sales price per barrel $111.98 $80.92 $105.47 $80.26 $84.10
Mart's percentage share of total Umusadege oil produced during the period 68% 64% 67% 67% 66%
Mart's share of petroleum sales after royalties $47,731,863 $13,416,154 $74,710,883 $33,666,384 $56,524,797
Funds flow from
production
operations (1)
$41,162,412 $11,032,400 $65,110,730 $28,250,079 $46,674,341
Funds flow
from production
operations
per share
Basic $0.122 $0.033 $0.194 0.084 0.139
Diluted $0.120 $0.033 $0.189 0.083 0.137
Total comprehensive
income
$17,277,787 $3,140,755 $27,083,338 $7,317,570 $12,385,629
Per share - basic $0.051 $0.009 $0.081 0.022 0.037
Per share - diluted $0.050 $0.009 $0.079 0.022 0.036
Total assets $180,081,496 83,495,205 180,081,496 83,495,205 128,849,113
Total bank debt $13,258,227 7,341,462 13,258,227 7,341,462 5,627,778
Shares
outstanding
- end of
period
Basic 336,048,202 335,548,201 336,048,202 335,548,201 335,548,201
Diluted 344,111,826 339,385,106 344,111,826 339,385,106 340,232,766
Note:
(1) Indicates non-IFRS measures. Non-IFRS measures are informative measures commonly used in the oil and gas industry. Such measures do not conform to IFRS and may not be comparable to those reported by other companies nor should they be viewed as an alternative to other measures of financial performance calculated in accordance with IFRS. For the purposes of this table, the Company defines "Funds flow from production operations" as net petroleum sales less royalties, community development costs and production costs. Funds flow from production operations is intended to give a comparative indication of the Company's net petroleum sales less production costs as shown in the following table:
(CDN$) 3 months
ended
Jun. 30,
2011
3 months
ended
Jun. 30,
2010
6 months
ended
Jun. 30,
2011
6 months
ended
Jun. 30,
2010
12 months
ended
Dec. 31,
2010
Petroleum sales 55,531,242 14,574,001 85,627,756 36,477,139 61,549,645
Less: Royalties and community
development costs
7,799,379 1,157,847 10,916,873 2,810,755 5,024,848
Net petroleum sales 47,731,863 13,416,154 74,710,883 33,666,384 56,524,797
Less: Production costs 6,569,451 2,383,754 9,600,153 5,416,305 9,850,456
Funds flow from production operations 41,162,412 11,032,400 65,110,730 28,250,079 46,674,341

OUTLOOK AND OPERATIONS UPDATE:

Development drilling is continuing at the Umusadege field.

The UMU-8 well has been drilled and completed and production testing is underway. Preparations are being made to drill the UMU-9 well. A second three-slot drilling pad was constructed and is located south east of the UMU-6, 7, 8 drilling pad. It is anticipated that the NRG Rig 201 will move to this second pad after testing of the UMU-8 well is completed and drilling operations will commence on the UMU-9 well. Two additional wells may be drilled from the UMU-9 pad.

Negotiations are continuing with the third party operator of the export pipeline to increase export capacity for the Umusadege field. Mart's management anticipates that once the contractual terms for transportation of increased production are finalized, the Umusadege field will be allocated sufficient export pipeline capacity to accommodate production from the existing UMU-1, UMU-5, UMU-6, UMU-7 and UMU-8 wells. Increases in export production capacity are also anticipated to accommodate future production from the UMU-9 well. Pipeline capacity may be apportioned among the shippers and therefore the Umusadege field production rate may be subject to periodic adjustment.

To mitigate risks relating to export pipeline capacity, Mart and its co-venturers are evaluating new export pipeline options to provide an alternative for future production capacity. The upgrade of the central production facility at the Umusadege field to a design capacity of approximately 30,000 bopd is approximately 60% completed.

The Umusadege field delivered an average of 7,206 bopd for the period August 1 - 25, 2011. During this period in August 2011, the Umusadege field experienced a total of 3.2 days of production shutdown due mainly to third party export pipeline operational issues. Production at the Umusadege field continues to be curtailed while Mart and its co-venturers negotiate with the third party pipeline operator to increase export pipeline capacity.

Mart's share of petroleum production varies from time to time depending upon whether Mart is in a cost recovery period or a post-cost recovery period. Mart moves in and out of cost recovery periods depending upon the level of activity underway at any given time. During a cost recovery period, Mart is restricted to a maximum of 82.5% of production revenues consisting of 65% allocated for cost recovery and 17.5% allocated as profit oil and, once Mart has recovered all of its capital costs, all production revenues remaining after deduction of royalties, income taxes, community development contributions, operating costs and abandonment obligations are shared 50% to Mart and 50% to its co-venturers. As a result of the Company moving in and out of capital cost recovery during the quarter, Mart's share of revenue was an average of 68% for Q211 compared to an average of 64% in Q210 and 61.2% in Q111.

CHAIRMAN'S COMMENT:

Wade Cherwayko, Chairman & CEO of Mart Resources, Inc. said, "We are very pleased to report record financial and operating results for the second quarter of 2011 with $41.2 million of funds flow from production operations, which amounts to $0.12 per share. This continues to demonstrate the significance of the Umusadege field's production capacity, even with the current curtailment of production while increases in available pipeline capacity are negotiated with the third party pipeline operator. Once these negotiations are completed, it is anticipated that Mart will see further increases in production and in cash flow in the near term."

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.

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

INVESTOR RELATIONS:

Investors are also welcome to contact one of the following investor relation's specialists for all corporate updates and investor inquiries:

FronTier Consulting Ltd.
Mart toll free # 1-888-875-7485
Attn: Sam Grier
Caleb Gilani
Email: inquiries@martresources.com

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. 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 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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