Mart is my biggest position. My average cost is .25 so I have almost a triple so far. Mart is a high risk junior but is at a major crossroad that could mulitply the share price.
Positives: Producing junior with two onshore wells with net 1850bpd all oil production. Profitable (.004eps/.02cashflow in Q2) and currently in a 3 well development drill program. First well is drilled, with testing and completion likely to be done and reported by 12/15 for first well. All three wells will be drilled from the same platform so second well drill will begin in 12/10. Company has mentioned going over 10,000bpd at the end of the program. Production at that level would payoff all company debt by 3/11. First report shows mulitple stacked zones with significant oil shows. Company is planning to produce from new separate zones so the production from the first two wells should be unaffected. Mart is planning dual string completion so they can produce from multiple zones. Previous two wells came in at 3,000bpd+ from single zone production. Depletion curve has been moderate so reservoir appears to be substantial. Development program appears to be low risk because they knew about the different pay zones from their initial drilling and are drilling these three wells to produce from the numerous different zones that are present in this field.
Negatives: Mart is located in Nigeria. They almost lost the company due to debt issues in 2008-9. Luckily a sale of the company for .18 fell thru and then the first two wells came online and cashflow allowed them to save the company. Company mgmt has been overoptimistic in the past about timelines. They have consistently been later than forecast. They have blamed Nigerian bureaucracy, weather and equipment failures for the various misses.
Mart has had a very low market cap due to the Nigerian location as well as the near death experience for the company. This 3 well program could eliminate the debt problem quickly with only 7 million in debt left. The company has been aggressively paying down debt and has been investigating increasing the capacity of the pipeline serving their Umusadege Field substantially. Here is the initial program update:
http://finance.yahoo.com/news/Mart-Reso ... l?x=0&.v=1
Production sharing calls for Mart to retain 97% of revenues until drill costs are recovered. After costs are recovered, Mart's share drops to 50%. That is the current situation. Drill costs are estimated at 8million for the development wells. If production moves past 10,000bpd, as forecast, Mart will be at 50% share very quickly but by then, company debt will be paid off and substantial cashflow will continue.
Recently Mart was covered by Warren Verbonac of Union Securities. He is forecasting .34 cashflow for 2011 and a share price of .75 for his initial report. I think this is very conservative but the coverage is still a positive.
Analyst report:http://www.union-securities.com/CMResea ... 202010.pdf
Latest presentation: http://webcasts.welcome2theshow.com/mart2010
Although Mart has had a big move up, I think this is a multibagger from here. These appear to be very low risk wells and the potential to produce significantly more than 10,000 bpd is real. The company is bidding on additional small fields in Nigeria like Umusadege. Nigerian location is a serious problem but Mart has been operating here for several years with no big problems. While I don't advise others have this big a positiion in theis dangerous political country, I think the risk/reward for a short term investment is high.
339,385,106 FD share count used for Q2 report. Q3 due soon. Current market cap is around C$227million.