Mart Resources, Inc.
TSX VENTURE : MMT

Mart Resources, Inc.

January 19, 2011 08:48 ET

Mart Resources Inc.: Umusadege Field Operational Update

CALGARY, ALBERTA--(Marketwire - Jan. 19, 2011) - Mart Resources, Inc. (TSX VENTURE:MMT) ("Mart" or the "Company") and its co-venturers, Midwestern Oil and Gas Company Plc. (Operator of the Umusadege field) and Suntrust Oil Company Limited, are pleased to provide the following update on operational activities at the Umusadege field.

UMU-6 WELL

As previously announced, the UMU-6 well was completed and tested in the latter half of November and the first half of December 2010. The UMU-6 well flowed at a stabilized combined cumulative rate of 14,319 barrels of oil per day ("bopd") from the four sands tested on choke sizes ranging between 22/64 to 32/64 inches. The API gravity of oil produced during testing ranged from 40 to 42.5 degrees API gravity with flowing tubing pressures ranging between 410 and 610 PSI. Water production ranged between 0.1% and 1.3% and the gas/oil ratio ranged from 51 to 122 standard cubic feet per barrel. The following table summarizes the test results from each of the four sands tested:

Sand Feet Stabilized BOPD API Gravity Choke Size (inches) Tubing Pressure (PSI) Water Production Gas/Oil ratio (scf/barrel)
XVII 10 3,102 42.5 26/64 575 0.2% 51
XVI (b) 20 3,433 40.5 22/64 610 0.3% 60
XIII (b) 23 4,179 40.3 32/64 542 1.3% 122
XIII (a) 18 3,605 40.0 32/64 410 0.1% 105
Total   14,319          

Following testing, the UMU-6 well was placed on initial production from the XIII (a) sand with a single tubing string only on December 20, 2010. Since being placed on production, the UMU-6 well has averaged 2,175 bopd on a 20/64 inch choke. Aggregate production from the UMU-6 well since December 20, 2010 and for the first 13 production days of January 2011 is approximately 52,000 barrels.

The Company's independent engineers have commenced updating the Umusadege field reserves estimates. The new reserves report, to be effective as of December 31, 2010, will incorporate the results from all four new sands discovered and tested by the UMU-6 well and will also incorporate reserve updates on the XIV and XV sands which were also identified as hydrocarbon bearing in the UMU-6 well but have not yet been tested. The above six sands were not previously assigned reserves in the Company's most recent NI 51-101 reserve report.

UMU-7 WELL

Final preparations are ongoing with respect to the drilling of the UMU-7 well, which will be drilled from the same drilling pad as the UMU-6 well. Skidding of the drilling rig to the new drilling slot on the pad has now been completed. Drilling of the UMU-7 well is scheduled to commence following completion of set up activities.

UMUSADEGE PRODUCTION UPDATE

The Company currently transports crude oil from the Umusadege field through two third-party owned and operated pipelines with the crude oil being exported through the Brass River Export Terminal. As previously announced, due to pipeline disruptions commencing in October 2010 the Company experienced sporadic and temporary export restrictions. These restrictions resulted in the Umusadege field production being suspended or constrained for an aggregate of 45 days during October and November 2010. These disruptions extended into December 2010 resulting in field production being suspended for an aggregate of 20 days during December. Aggregate Umusadege field production during Q4 2010 was approximately 135,000 barrels.

Commencing in the fourth week of December 2010, normal pipeline operations were restored and resulted in the Umusadege field being on full regular production for 16.15 of the first 17 production days of January. Through January 17, 2011, production from the Umusadege field from all wells has averaged 5,700 bopd with aggregate gross Umusadege field production of approximately 92,044 barrels. Mart and its co-venturers are currently in discussions with the existing pipeline owners and crude oil export company and have been informed that additional equipment is currently being installed that will allow for an increase in the export capacity from the Umusadege field from current production levels to approximately 10,000 bopd.

Although production was constrained, a total of 380,000 barrels of crude oil was nominated by Mart and its co-venturers and purchased by Ente Nazionale Idrocaburi ("ENI") during Q4 2010. Payment for the oil nominated in October and November has been paid for by ENI. Payment for oil nominated in December is expected by the end of January 2011. Due to the disruptions and production shutdowns in Q4 2010, deficit oil, which is the shortfall between the volume of crude oil nominated for delivery and the actual volume of crude oil delivered, amounted to approximately 320,000 barrels as at December 31, 2010. Mart and its co-venturers anticipate repayment of deficit oil obligations during the first half of 2011.

Chairman's Comment:

Wade Cherwayko, CEO of Mart Resources, Inc. said "The success of UMU-6 is a significant event for Midwestern, Suntrust and Mart and brings us closer to reaching our goal of realizing the full potential of the Umusadege field. Production from the Umusadege field in January has returned to anticipated levels. To minimize the impact of future pipeline disruptions and to ensure there is adequate capacity to meet full Umusadege field development, Midwestern, Suntrust and Mart are currently evaluating pipeline and export alternatives to increase future capacity. Upgrading of the permanent central production facility located at the Umusadege field to process up to 30,000 bopd is also underway. 

Mart, in conjunction with its joint co-venturers, is committed to developing the Umusadege field in an efficient, timely and cost-effective manner, and looks forward to continuing development drilling with the UMU-7 well."

ABOUT MART RESOURCES:

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

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 fluctuates depending on whether the Umusadege field is at a "before payout" or "after payout" stage.

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 concerning the timing of the spudding of the UMU-7 well, the future results or success of drilling operations, the ability of the Company to successfully complete and commercially produce, transport and sell oil from the Umusadege field, the ability of the Company to successfully drill other wells on the Umusadege field and the ability to of the Company to fund future drilling operations should all be viewed as forward-looking statements. Flow rates established during initial tests of the UMU-6 well are preliminary only, are not necessarily indicative of future production rates and may change materially as the UMU-6 well stabilizes. The flow rates in zones tested is not necessarily indicative that other zones will be productive, including zones where preliminary results indicate that the sands were hydrocarbon bearing. 

In addition to the foregoing, certain factors can affect the ability of the Company to deliver oil that may be produced and can cause production shutdowns. These can include planned maintenance programs or unpredictable and unplanned external factors such as accidental or deliberate damage to pipelines and other facilities upon which the Company is reliant. When such disruptions occur, it may not possible to predict how long such disruptions may last or how long a production shutdown may occur. In the fourth quarter of 2010, there was an increase in pipeline disruptions. There is no assurance that disruptions will not occur in the future. If pipeline disruptions occur, future production shutdowns may occur. There is also no assurance that the Company and its co-venturers will be able to produce sufficient quantities of oil to make up the current deficit oil that resulted from production shutdowns, particularly if there are significant future disruptions or shutdowns. There is also no assurance that ENI will not accelerate the obligation to satisfy delivery of deficit oil. There is no assurance that Mart and its co-venturers will increase existing pipeline or export capacity to 10,000 bopd nor is there any no assurance that Mart and its co-venturers will be able to finance or complete alternative pipeline facilities. Although the Company and its co-venturers have commenced upgrading of its permanent central production facility to process up to 25,000 bopd, there is no certainty as to actual future production and delivery capacity from the Umusadege field. 

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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