Mart Announces Financial and Operating Results, Results of Independent Reserve Evaluations for the Year Ended December 31, 2014
(firmenpresse) - CALGARY, ALBERTA -- (Marketwired) -- 03/31/15 -- 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), and results of independent reserve evaluations in accordance with Canadian National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities ("NI 51-101") for the year ended December 31, 2014:
YEAR ENDED DECEMBER 31, 2014
THREE MONTHS ENDED DECEMBER 31, 2014
FINANCIAL AND OPERATING RESULTS
The following table provides a summary of Mart's selected financial and operating results for the three month periods ended and the years ended December 31, 2014 and 2013:
Notes:
OUTLOOK AND OPERATIONS UPDATE
Completion of OML 18 Acquisition
In October 2014, Mart confirmed its participation as a member of the Eroton Consortium established to acquire a 45% participating interest in OML 18 and all associated assets, wells, pipelines and infrastructure. In March 2015, the acquisition was completed pursuant to an assignment agreement between The Shell Petroleum Development Company of Nigeria Limited, Total E&P Nigeria Limited and Nigerian AGIP Oil Company Limited and Eroton, a special purpose company owned directly or indirectly by the Eroton Consortium members. The total purchase price was $1.1 billion excluding the acquisition costs. All approvals required for the completion of the acquisition of OML 18 have been received from the relevant authorities of the Federal Government of Nigeria. Mart will hold an indirect working interest in OML 18 of approximately 10% through its share ownership of Martwestern Energy Limited that in turn owns 50% of the shares of Eroton. Eroton was appointed as an operator of OML 18.
OML 18 covers an area of 1,035 square kilometers and includes the Alakiri, Awoba, Cawthorne Channel, Krakama, and Buguma Creek fields and related facilities. The Awoba field straddles into Oil Mining Lease 24. The acquired infrastructure includes flow stations together with associated gas infrastructure plus oil and gas pipelines within the OML 18 license area. According to SPDC, the assigned fields produced an average of approximately 14,000 gross barrels of oil equivalent per day of oil, condensate and gas during 2014.
Crude oil production from OML 18 is exported through the Bonny Crude Oil Terminal via the Nembe Creek Trunkline. Gas production from OML 18 is delivered to various power, industrial and commercial customers via the Nigeria Gas Company's pipeline. The independent reserves report for OML 18 has not been prepared to date. Eroton relied on internal estimates of OML 18 reserves and resources during the bidding process. Eroton will engage third party reservoir engineers to estimate OML 18 reserves and resources. Eroton is doing assessment of acquired properties and possible work program.
Financing
At the beginning of January 2015, Mart drew down $12.5 million under Facility B with GTB. Subsequent to year end, GTB informed Mart that the amount of Facility D is restricted to the amount already drawn down (i.e. $59.0 million)
As of February 28, 2015, the total outstanding loan balance due to GTB is approximately $201.1 million of which approximately $119.1 million relates to the OML 18 acquisition and $82 million to Umusadege field development and working capital funding. Approximately $68.2 million is payable during the period from March 1, 2015 to December 31, 2015 of which approximately $8.5 million net is payable during March 2015. On March 4, 2015 Mart and GTB signed a term sheet that provides for a deferral of principal payments for a period of 12 months from that date, which will enable Mart to fund its obligations as they fall due. This arrangement is subject to the finalization of the amended loan facility agreement but the deferral of principal payments is effective as of March 4, 2015.
Mart enters definitive Arrangement Agreement with Midwestern
In March 2015 Mart entered into a definitive arrangement agreement (the "Arrangement Agreement") with Midwestern, the operator of and one of Mart's co-venturers in the Umusadege field in Nigeria. Pursuant to the Arrangement Agreement, a wholly-owned subsidiary of Midwestern will acquire all of the issued and outstanding common shares of Mart by way of a plan of arrangement under the Business Corporations Act (Alberta) (the "Arrangement"), including the assumption of all outstanding bank debt of Mart (currently, approximately US$200 million), and each Mart shareholder will receive CDN$0.80 in exchange for each Mart common share held (the "Cash Consideration").
The Arrangement Agreement includes customary non-solicitation covenants by Mart and provides Mart with the ability to respond to unsolicited proposals considered superior to the Arrangement in accordance with the terms of the Arrangement Agreement. In the event Mart accepts a superior proposal, Mart will be required to pay a break fee of CDN$5.8 million to Midwestern. Midwestern has the customary right to match.
The Arrangement is subject to customary conditions for a transaction of this nature, which include court approvals, applicable regulatory and stock exchange approvals, including Investment Canada Act approval if required, the approval of 66 2/3% of Mart shareholders and 66 2/3% of Mart shareholders and optionholders (voting together as a single class) represented in person or by proxy at a special meeting of Mart shareholders and optionholders to be called to consider the Arrangement. The Arrangement includes customary non-solicitation covenants and is also subject to a financing condition ("Financing Condition") as further described in Mart's March 2, 2015 news release. Break fees are payable in prescribed circumstances.
Umusadege drilling update and UMU-13 initial well flow test results
The UMU-13 well encountered approximately 220 feet of gross oil pay in 11 sands. The UMU-13 well is a vertical well drilled to appraise a separate seismically defined structure located east of the existing and producing Umusadege field. The sands selected for completion in the UMU-13 well were the XVIIb, XIX, and XXb sands, which have combined gross oil pay of 87 feet.
During initial flow testing, each of the three sands was tested at multiple choke settings ranging from 16/64 inch up to 40/64 inch. In all tests, no sand production or water production was observed. The initial flow testing of the XIX sand was conducted over an 8.5 hour period and yielded a stabilized oil rate of 5,120 bopd of 50 API crude oil on a 40/64 inch choke setting and flowing tubing head pressure of 1,183 psig. BS&W was less than 0.5%, and GOR was 577 scf/bbl. The initial flow testing of the XXb sand was conducted over an 8 hour period and yielded a stabilized oil rate of 3,742 bopd of 44.8 API crude oil on a 40/64 inch choke setting and flowing tubing head pressure of 1,268 psig. BS&W was less than 0.5%, and GOR was 1,268 scf/bbl.
After completion of drilling and testing of the UMU-13 well in January 2015, the drill rig has been on standby while reviewing the 2015 capital expenditure program and working with the lender to defer principal loan payments for a period of 12 months.
The Umusadege Joint Venture has budgeted to spend approximately $113 million during 2015 for the planned drilling program and miscellaneous Umusadege field capital expenditures. However, the work program and capital expenditure budget are expected to be revised and may be reduced during 2015.
Umugini pipeline capital expenditure
Following the completion of the Umugini pipeline construction in Q4 2014, capital expenditures for 2015 are expected to be minimal, mainly relating to completion of remaining civics works, pumps and LACT units expenditure. Mart expects to spend $2.0 million as capital expenditure for 2015 in respect of the Umugini pipeline.
Establishment of a Special Committee and Independent Investigation; Appointment of Interim CEO
On February 20, 2015, Mart established a Special Committee of the Board of directors to (i) identify, examine and consider strategic and financial alternatives available to the Company with the ultimate view of enhancing shareholder value; (ii) to investigate whether certain actions of Wade G. Cherwayko (the "on-leave CEO") complied with the Company's Code of Conduct and internal policies (the "Independent Investigation"); and (iii) to report and provide recommendations to the Board regarding the actions of the on-leave CEO.
Concurrent with the appointment of the Special Committee and the commencement of the Independent Investigation, the on-leave CEO resigned as Chairman of the Board however, due to the on-leave CEO's unique position within the Company, he did not resign as chief executive officer of the Company. Derrick Armstrong, an independent member of the Board was appointed as Chairman of the Board on February 20, 2015 and also as the Chairman of the Special Committee.
The on-leave CEO's executive authorities as chief executive officer were limited to dealing only with the Company's Nigerian co-venturers on matters involving the Company's business affairs in Nigeria and negotiations with Midwestern on the Company's recently announced Letter of Intent and Arrangement Agreement. These activities were subject to Board oversight through the Chairman of the Board who participated directly in the negotiations with Midwestern. All signing authorities for the on-leave CEO on all bank accounts were suspended and the Company secured an indemnity from the on-leave CEO in respect of any losses that may be incurred by the Company as a result of the activities of the on-leave CEO. A forensic audit of the on-leave CEO's company emails has also been commenced and is ongoing.
Effective March 30, 2015, the on-leave CEO took a voluntary leave of absence from the Company and Dmitri Tsvetkov, the Company's current chief financial officer was appointed as interim chief executive officer (the "Interim CEO"). Mr. Tsvetkov continues to act as the Company's CFO during the interim period.
The findings to date of the Independent Investigation being conducted by the Special Committee have found that the on-leave CEO (i) failed to disclose a financial interest in a drilling company (the "Drilling Company") that provided drilling services to the operator of the Umusadege field; (ii) without disclosure or due authorization from the Board of Directors, signed and delivered an agreement to Mart's banking institution which could impose financial liability upon the Company and which agreement was for the benefit of the Drilling Company; (iii) attempted to authorize the payment of a cash call, the proceeds of which were intended be directed to the Drilling Company; and (iv) condoned and/or participated in an arrangement that resulted in the unauthorized use of certain company assets for the benefit of certain employees located in Nigeria who report directly to the on-leave CEO. The Independent Investigation is expected to be completed following receipt of the results of the forensic audit.
January Production Update
Umusadege field production during January 2015 averaged approximately 17,050 bopd resulting in total production of approximately 528,560 bbls for the month. Aggregate calculated Umusadege field downtime during January 2015 was approximately 1.8 days (based upon days with production of more than 10,000 bopd being considered to have no downtime). Although shutdowns of both the NAOC and Trans Forcados export pipelines were experienced during January 2015 due to operational interruptions for general pipeline repairs and maintenance and due to vandalism, ongoing production from the Umusadege field was minimally affected due of the ability of the field operator to alternate production between the two pipelines. There were no full down days during January. The average field production based on producing days was approximately 18,070 bopd in January 2015.
The combined net delivery of oil from the Umusadege field through the new Umugini pipeline and NAOC export pipeline totaled approximately 525,920 bbls in January 2015 before estimated pipeline and export facility losses, and approximately 450,430 bbls after deduction of combined pipeline and export facility losses estimated for January 2015 by Mart. Combined delivery of oil from the Umusadege field through the Umugini pipeline and NAOC export pipeline reached a record one-day volume of approximately 29,000 bopd in late January 2015.
NAOC Export Pipeline Update
Total net crude oil deliveries into the NAOC export pipeline from the Umusadege field for January 2015 were approximately 306,960 bbls before pipeline losses. Based upon the 12-month rolling average rate of pipeline and export facility losses from December 2013 to November 2014 of 17.46%, Mart estimates NAOC pipeline and Brass River export facility losses for January 2015 will be approximately 53,590 bbls. Accordingly, Mart estimates that the total net crude deliveries into the NAOC export pipeline from the Umusadege field for January 2015 less estimated pipeline losses will be approximately 253,370 bbls.
As previously announced, total net crude oil deliveries into the NAOC export pipeline from the Umusadege field for December 2014 were approximately 295,392 bbls. Actual NAOC pipeline and export facility losses have not been allocated for December 2014 because allocation was suspended by the Department of Petroleum Resources pending an approved loss computation formula. Mart previously estimated pipeline and export facility losses for December 2014 to be approximately 51,568 bbls, based upon the 12-month rolling average rate of pipeline and export facility losses of 17.46% between December 2013 and November 2014.
Umugini Pipeline Update
Mart and its co-venturers have not yet received official reports from the operators of the Trans Forcados export pipeline or the Forcados oil export terminal stating actual oil injection volumes or pipeline and export facility losses for the Trans Forcados export system. Based upon Mart's internal production and facility data, the Company estimates that Umusadege field deliveries into the Trans Forcados export pipeline connected to the Forcados oil export terminal were approximately 218,960 bbls in January 2015. Based upon historic pipeline losses encountered by other exploration and production companies utilizing the Trans Forcados export system, Mart estimates pipeline and export facility losses of 10% of crude oil deliveries, resulting in estimated Umusadege field deliveries of approximately 197,060 bbls for January 2015 after deduction of estimated pipeline and export facility losses.
RESULTS OF INDEPENDENT RESERVE EVALUATIONS
2014 Summary: December 31, 2014 Reserve Highlights of Mart's Interest:
- Mart's total gross proved ("1P") oil reserves in the Umusadege field decreased 14.3% to approximately 11.0 million barrels of oil ("bbls") compared to 12.8 million bbls at December 31, 2013. Mart's total proved oil reserves net of royalties as at December 31, 2014 are 10.2 million bbls.
- Mart's total gross proved plus probable ("2P") oil reserves in the Umusadege field decreased 17.2% to approximately 15.3 million bbls compared to 18.5 million bbls at December 31, 2013. Mart's total proved plus probable oil reserves net of royalties as at December 31, 2014 were 14.1 million bbls.
- Mart's total gross proved plus probable plus possible ("3P") oil reserves in the Umusadege field decreased 12.8% to approximately 22.0 million bbls compared to 25.2 million bbls at December 31, 2013. Mart's total proved plus probable plus possible oil reserves net of royalties as at December 31, 2014 were 20.1 million bbls.
- Mart's net present value of future net revenue before tax, discounted at 10%, from the 2P Umusadege field reserves as at December 31, 2014 was $428 million (compared to $693 million as at December 31, 2013).
The 1P, 2P, and 3P reserves figures and net present value of future net revenue contained in the 2014 Highlights provided above, have been calculated in compliance with NI 51-101 and the Canadian Oil and Gas Evaluation Handbook ("COGEH") and have been derived from the data contained in the Company's Form NI 51-101F1 - Statement of Reserves Data and Other Oil and Gas Information (effective December 31, 2014) included in Mart's 2014 Annual Information Form filed on SEDAR () and on Mart's website, .
The December 31, 2014 year-end reserves evaluation report (the "2013 RPS Report") for the Umusadege field was prepared by RPS and includes an evaluation UMU3STH, UMU4STH, UMU-12H, and UMU13 wells.
The following table summarizes Mart's 2014 year-end gross and net (after royalty) reserves and is derived from the Company's NI 51-101 F1 report. Also shown in the following table, for comparative purposes, are Mart's 2013 year-end gross and net (after royalty) reserves for the Umusadege field. Reserves are shown in thousand barrels ("Mbbl").
Summary of Oil and Gas Reserves
Using Forecast Prices and Costs
The following table summarizes the net present value of Mart's reserves as at December 31, 2014 before taxes and is derived from the Company's NI 51-101 F1 report:
Notes:
ANNUAL INFORMATION FORM
The Company announces that it filed its Annual Information Form for the year ended December 31, 2014 on SEDAR () and posted the document on Mart's website.
Mart will hold a conference call to discuss the operational and financial results for the year and quarter ended December 31, 2014. The conference call is scheduled for April 1, 2015 at 9:30 AM Mountain Daylight Time (11:30 AM Eastern Daylight Time). Derrick Armstrong, Director and Chairman of Mart, and Dmitri Tsvetkov, Director, Interim CEO & CFO of Mart, will host the call and be available during the question-and-answer session. To access the conference call, please dial 416-340-2220 / 866-225-2055. An instant replay of the call will be available until April 8, 2015 by dialing 905-694-9451 / 800-408-3053 and entering pass code 3036336.
Additional information regarding Mart is available on the Company's website at and under the Company's profile on SEDAR at .
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).
This news release provides information regarding the Company's possible reserves. Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. There is a 10% probability that the quantities actually recovered will be equal or exceed the sum of the proved plus probable plus possible reserves.
Information Regarding Reserves and Net Present Value of Future Net Revenues
All information contained in this press release regarding reserves and the net present value of future net revenue has been derived from the Company's Form 51-101 F1-Statement of Reserves Data and Other Oil and Gas Information for the year ended December 31, 2013 ("Statement of Reserves Data") which report, along with the Form 51-101F2 - Report on Reserves Data and Form 51-101F3 - Report of Management and Directors on Reserves Data and Other Information are available for review in Mart's Annual Information Form for the year ended December 31, 2013 at and on the Company's website at .
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 extent of future production and export pipeline disruptions and pipeline losses, 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, completion, commissioning and tie-in of the Umugini 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.
In addition, information regarding the reserve and resource estimates attributable to Mart's oil and gas properties should be considered forward looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves and resources described exist in the quantities predicted or estimated and that the reserves and resources can be profitably produced in the future. Readers are referred to the heading "Forward Looking Statements" in the Company's Statement of Reserves Data for a more detailed discussion of risks associated with forward looking statements regarding reserves. In addition, past production performance, sales volumes and prices from the Umusadege field are not necessarily indicative of future performance, sales volumes and prices.
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.
Contacts:
Mart Resources, Inc. - London, England
Dmitri Tsvetkov
+44 207 351 7937
Mart Resources, Inc. - Canada
Sam Grier
403-270-1841
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Datum: 31.03.2015 - 13:00 Uhr
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