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 3 months 3 months 12 months
(except oil produced and sold, oil ended ended ended
sales prices, per share amounts, March 31, March 31, December 31,
and shares outstanding) 2014 2013 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 3 months 3 months 12 months
to income from continuing ended ended ended
operations before finance income March 31, March 31, December 31,
and expenses 2014 2013 2013
-------------------------------------------------------------------------
Petroleum sales 68,597 25,455 161,487
Less: Royalties, content
development levy and community 11,022 5,633 25,447
development costs
-------------------------------------------------------------------------
Net petroleum sales 57,575 19,822 136,040
Less: Production costs 9,170 5,644 34,764
-------------------------------------------------------------------------
Funds flow from continuing 48,405 14,178 101,276
production operations
-------------------------------------------------------------------------
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 - 11 66
investment
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 21,932 6,163 56,000
expenses
-------------------------------------------------------------------------
-------------------------------------------------------------------------
USD $ 000's
Reconciliation of cash provided by
operating activities to cash 3 months 3 months 12 months
provided by operating activities ended ended ended
excluding non-cash working March 31, March 31, December 31,
capital 2014 2013 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
--------------------------------------------------------------------------
--------------------------------------------------------------------------
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
$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.
FOR FURTHER INFORMATION PLEASE CONTACT:
Mart Resources, Inc. - London, England office
Wade Cherwayko
+44 207 351 7937
Wade@martresources.com
Mart Resources, Inc. - London, England office
Dmitri Tsvetkov
+44 207 351 7937
dmitri.tsvetkov@martresources.com
Mart Resources, Inc. - Canada
Sam Grier
403-270-1841
sam.grier@martresources.com
www.martresources.com
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