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Cormarkthere you go: Investment Thesis: Mart Resources provides unique exposure to an established light oil field onshore Nigeria expected to drive low-risk production, cash flow and reserves growth near term. Highlights: • Event Yesterday, Mart Resources reported 2014 year-end results and reserves. • Details Fourth quarter production averaged 9,004 B/d, ahead of our 7,490 B/d estimate due to a higher than expected allocation of field volumes. Cash flow came in at $0.07 per share compared to our $0.07 per share estimate as the production beat was offset by the lower than expected realized pricing. The company currently has $201.1 MM drawn on its $232.5 MM bank line and is close to finalizing a deal with its lender to postpone its 2015 principal payments into 2016. Production losses for 2014 averaged 16.5% (13.5% in Q4/14) representing a significant improvement over the 25.6% in 2013. Gross reserves at Umusadege were 11.0 MMBOE (14% decrease), 15.3 MMBOE (17% decrease) and 22.0 MMBOE (13% decrease) on a 1P, 2P and 3P basis, respectively. The decrease in reserves stems from negative technical revisions from the UMU-13 well which after positive results from three initial sands zones tested wet from three additional sands horizons. • Recommendation Given the definitive agreement in place and material break-fee ($5.8 MM to Mart should the deal not close), we remain confident in the likelihood of Midwestern acquiring the necessary financing for the acquisition of Mart. We reiterate our $0.80 target and Buy (S) rating on Mart. |
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