Mart Resources, Inc.
TSX VENTURE : MMT

Mart Resources, Inc.

November 29, 2011 08:30 ET

Mart Announces Record Financial and Operating Results for the Three and Nine Month Periods Ended September 30, 2011

CALGARY, ALBERTA--(Marketwire - Nov. 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 nine month periods ended September 30, 2011 ("Q311") (all amounts in Canadian dollars unless noted):

THREE MONTH PERIOD ENDED SEPTEMBER 30, 2011

  • Net income for the three months ended September 30, 2011 was $21.0 million ($0.06 per share basic), compared to $1.2 million ($0.004 per share basic) for the three months ended September 30, 2010.
  • 237% increase in total revenue to $46.8 million in Q311 compared to $13.9 million in the third quarter of 2010 ("Q310").
  • 917% increase in cash flow from operating activities to $64.1 million ($0.19 per share basic) in Q311 compared to $6.3 million ($0.02 per share basic) in Q310.
  • Funds flow from production operations of $42.1 million in Q311 compared to $9.4 million in Q310 (see note regarding non-IFRS measures under Financial and Operating Results).
  • Mart's share of Umusadege field petroleum produced and sold for Q311 was 446,981 barrels ("bbls").
  • The average price received for Umusadege production in Q311 was US $112.54 per barrel (approximately CDN $114.79 per barrel) compared to US $79.04 per barrel (CDN $75.83) for Q310.
  • In Q311 the UMU-8 well was completed and tested at a total combined rate of 7,661 barrels of oil per day ("bopd").
  • During Q311, the Umusadege field was shut-in for a total of approximately 11 days, due to injection restrictions, pipeline space constraints, export pipeline vandalism and operational issues including time required to allow rig skidding and completion operations necessary for the ongoing drilling program.

NINE MONTH PERIOD ENDED SEPTEMBER 30, 2011

  • The Company reported $50.7 million of net income ($0.15 per share basic) for the nine months ended September 30, 2011 compared to $6.6 million ($0.02 per share basic) for the nine months ended September 30, 2010.
  • 150% increase in total revenue to $121.7 million for the nine months period ended September 30, 201 compared to $48.6 million for the same period in 2010.
  • 630% increase in cash flow from operating activities to $102.9 million ($0.31 per share basic) for the nine months period ended September 30, 2011 compared to $14.1 million ($0.04 per share basic) for the nine months period ended September 30, 2010.
  • Funds flow from production operations of $107.2 million for the nine months period ended September 30, 2011 compared to $37.6 million for the same period in 2010 (see note regarding non-IFRS measures under Financial and Operating Results).
  • Mart's share of Umusadege field petroleum produced and sold for the nine months ended September 30, 2011 was 1,344,611 bbls.
  • The average price received for Umusadege production for the nine months ended September 30, 2011 was US $100.05 per barrel (approximately CDN $102.05 per barrel) compared to US $81.05 per barrel (CDN $78.21) for the same period in 2010.
  • For the nine months ended September 30, 2011, the Umusadege field was shut-in for a total of approximately 33 days due to injection restrictions, pipeline space constraints, export pipeline vandalism and operational issues including time 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 nine month periods ended September 30, 2011 and 2010, and the twelve months ended December 31, 2010:

(CDN$) 3 months ended
Sept 30, 2011
3 months ended
Sept 30,
2010
9 months ended
Sept 30,
2011
9 months ended
Sept 30,
2010
12 months ended
Dec 31,
2010
Mart's share of the Umusadege Field:
Barrels of oil produced and sold (1) 446,981 197,356 1,344,611 657,903 764,673
Average sales price per barrel $114.791 $75.873 $102.049 $78.205 $80.491
Mart's percentage share of total Umusadege oil produced and sold during the period (1) 63 % 59 % 67 % 73 % 65 %
Mart's share of petroleum sales after royalties $46,775,443 $13,831,361 $121,486,326 $47,497,745 $56,524,797
Funds flow from production operations (2) $42,090,881 $9,394,286 $107,201,711 $37,644,365 $46,674,341
Funds flow from production operations per share (2):
Basic $0.125 $0.028 $0.319 0.112 0.139
Net income $20,957,249 $1,229,201 $50,677,352 6,571,281 12,350,628
Per share - basic $0.062 $0.004 $0.151 0.020 0.037
Per share - diluted $0.062 $0.004 $0.149 0.019 0.036
Total assets $196,041,590 86,359,565 196,041,590 86,359,565 128,849,113
Total bank debt $6,371,553 5,044,320 $6,371,553 5,044,320 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 340,325,747 342,351,534 340,325,747 342,351,534 340,232,766

Notes:

(1) Barrels of oil produced and sold represents the volumes of petroleum delivered to the purchaser and excludes oil volumes that represent deficit oil.

(2) 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
Sept 30, 2011
3 months ended
Sept 30, 2010
9 months ended
Sept 30, 2011
9 months ended
Sept 30, 2010
12 months ended
Dec 31, 2010
Petroleum sales 51,309,293 14,973,921 137,216,871 51,451,060 61,549,645
Less: Royalties and community
development costs
4,533,850 1,142,560 15,730,545 3,953,315 5,024,848
Net petroleum sales 46,775,443 13,831,361 121,486,326 47,497,745 56,524,797
Less: Production costs 4,684,462 4,437,075 14,284,615 9,853,380 9,850,456
Funds flow from production operations 42,090,981 9,394,286 107,201,711 37,644,365 46,674,341

OUTLOOK AND OPERATIONS UPDATE:

Development drilling is continuing at the Umusadege field with the commencement of drilling UMU-9 on November 19, 2011. To date, 13 3/8 inch casing has successfully been cemented at a depth of approximately 4,000 feet. Drilling in the intermediate 12 1/4 inch hole section has commenced and is anticipated to be drilled to approximately 8,300 feet, followed by running 9 5/8 inch casing. The bottom hole deviated section is then scheduled to be drilled with a 8 1/2 inch hole to total measured depth of approximately 11,000 feet.

The main objectives for the UMU-9 well are:

  1. To appraise the extension of the shallower reservoirs discovered and producing in the main culmination of the UMU-1, UMU-5, UMU-6, UMU-7 and UMU-8 wells. These sands will be intersected in the drilling of the vertical section of the well, which will then be cased prior to drilling ahead to the deeper targets.
  1. To deviate and explore the deeper untested targets while running a measurement while drilling tool followed by a logging while drilling tool to evaluate the potential hydrocarbon bearing zones.

The UMU-8 well was drilled to a depth of approximately 8,600 feet and completed with a dual tubing string configuration allowing for multiple zones to be produced from the same well bore. Five identified oil zones were tested on the UMU-8 well, with three of the oil zones (the XIIa, XIIb, and XV sands) flowing at a combined test rate of 7.661 bopd. The well has been tied into the production facilities.

Negotiations are ongoing with Agip, the Nigerian operator of the export pipeline, to increase export capacity for the Umusadege field. Mart's management anticipates that once an agreement is reached 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 other exporters into the pipeline 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.

Crude oil deliveries into the export pipeline from the Umusadege field for the month of October 2011 averaged 7,209 barrels of oil per day (bopd). Umusadege field downtime for October 2011 was approximately 4 days due mainly to export pipeline operational shutdowns and export facility capacity curtailments. The Umusadege field delivered an average of 9,053 bopd for the period November 1 - 15, 2011. During this period in November 2011, the Umusadege field export pipeline experienced no production downtime. Production at the Umusadege field continues to be curtailed while Mart and its co-venturers finalize negotiations 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 63% for Q311 compared to an average of 59% in Q310. Mart's share of revenue for the nine month period ended September 30, 2011 was an average of 67% compared to an average of 73% for the same period in 2010.

Subsequent to September 30, 2011, the Company entered into agreements with its Umusadege co-venturers which affirmed the relationship and the responsibilities of the Company as service provider and Midwestern as field operator and clarified tax obligations of co-venturers effective April 26, 2007. The contractual relationships established pursuant to these agreements are now collectively referred to as the Risk Service Agreements.

CHAIRMAN'S COMMENT:

Wade Cherwayko, Chairman & CEO of Mart said, "We are very pleased to report another period of record financial and operating results for the third quarter of 2011 with $42.1 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. Negotiations to increase export pipeline deliveries are nearing completion. Once an agreement is reached, management anticipates the Umusadege field will have increases in production and cash flow. Development is continuing on the Umusadege field with the recent commencement of drilling on UMU-9."

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 a land drilling rig, has strong local relationships and experience and is evaluating additional proven undeveloped opportunities in Nigeria.

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 or 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 Risk Service Agreements in respect of the Umusadege field, the success, express or implied, of the UMU-9 well drilling program or that the UMU-9 well will be able to successfully appraise the extensions of the shallower reservoirs as contemplated or successfully deviate and explore deeper untested targets, 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.

Contact Information