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Energy Summary ( carswell post)2015-04-01 18:59 ET - Market Summary by Stockwatch Business Reporter West Texas Intermediate crude for May delivery added $2.49 to $50.09 on the New York Merc, while Brent for May added $1.99 to $57.10 (all figures in this para U.S.). Western Canadian Select traded at a discount of $12.40 to WTI ($37.69), up from a discount of $12.80. Natural gas for May lost 3.5 cents to $2.60. The TSX energy index added 2.35 points to close at 219.88. Wade Cherwayko's Mart Resources Inc. (MMT) lost 1.5 cents to 48.5 cents on 3.53 million shares. This is on top of the seven cents it lost yesterday after releasing a torrent of news, including its year-end financials and the results so far of its investigation into its ex-chairman and on-leave CEO, Mr. Cherwayko. The update did not make investors any less doubtful that Mart's planned 80-cent-a-share takeover by a joint venturer in Nigeria, Midwestern Oil, will go ahead. All of the above was discussed at length during a conference call this morning. It was hosted by Derrick Armstrong, who replaced Mr. Cherwayko as chairman on Feb. 20, and CFO Dmitri Tsvetkov, who replaced him as CEO (in the interim) on March 30. The investigation into Mr. Cherwayko was announced on Feb. 20, the day after he got around to filing on SEDI that he had sold five million of his 8.7 million shares in December (likely because of his divorce). It turned out that this reporting delay was not the only subject of the investigation. Mr. Cherwayko also apparently failed to disclose a financial interest in a drilling company hired to work on the Umusadege field in Nigeria. (Mart does not own an interest in the field -- the real owners are Midwestern and another local company, SunTrust -- but it provides services in exchange for a share of production that averages 65 per cent.) During the call, Mr. Armstrong said the conflict of interest is not a big deal by itself; the problem is that Mr. Cherwayko signed a deal on behalf of Mart after the drilling company borrowed money. This exposed Mart to potential liability. There were other things Mr. Cherwayko apparently did, as described in the press release, but the bottom line was that an investigation was necessary. Around this time, purely by coincidence (said Mr. Armstrong), Midwestern made its 80-cent-a-share offer. Investors were skeptical from the start. Among other things, the deal is subject to Midwestern raising money. Uncertainty arose given the state of the oil market, worries about general and election-specific Nigerian chaos (although this weekend's election turned out to be astonishingly low on blood), and the fear that Mr. Cherwayko, who has always been Mart's point man, might feel scorned and try to ruin things. Mr. Armstrong and Mr. Tsvetkov tried to quell all those fears. They said there are benefits to the Mart-Midwestern deal that financiers can clearly see, and the election should not change that. As for Mr. Cherwayko, he still has shares in Mart and is entitled to a change-of-control payment if the takeover goes through, so he is motivated and working to make that happen. Investors remain dubious. One other interesting tidbit came from Mart's financial filings on SEDAR. Net income fell to $28-million (U.S.) in 2014 from $35-million (U.S.) in 2013, with the decrease caused in part by over $14-million (U.S.) in production taxes in 2014. Mart did not have to record any such taxes in 2013 -- or at least, it has not had to yet. The Nigerian authorities want to change that. They previously granted the Umusadege joint venturers "pioneer" tax status -- a five-year tax waiver on oil earnings, designed to spur industry -- from Jan. 1, 2009, to Dec. 31, 2013. Now they say they have changed the status to three years and they want money for 2012 and 2013. The desired amount is up to $102-million (U.S.), of which Mart's share would be about half. The joint venturers are working with tax advisers on a response. This pretty well sums up why we are trading at such at premium to our 80c offer... Wade is the main cause.IMO |
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