November 27, 2012

Mart Resources Still Digging Deep At NOgeria’s Producing Umusadege Oil Field


It has been four years now since we last covered Mart Resources, a company listed on the Toronto Venture Exchange.The Canadian independent has taken a bit of a step back from the limelight in the intervening years but is still very much engaged in its old stomping ground, NOgeria.

That may not be the easiest place to work, as many multinationals will tell you, but it’s a place where there is plenty of oil, and, in the case of Mart Resources, it’s a place where management has plenty of history. In chief executive, Wade Cherwayko, the company is certainly headed by a man with huge experience of West Africa’s oil sector, though not all of it pain-free.Cherwayko used to head Equator Exploration, for instance, a promising venture that gathered a formidable pile of offshore assets in the Gulf of Guinea, but which has now been de-listed from the UK’s AIM market.

But at Mart Resources things seem to be proceeding quite nicely, with share prices responding to strong production flows, closing in on five-year highs.When we last covered the company, it was working up a number of smaller NOgerian assets, but the focus has now narrowed to the producing Umusadege oil field.

In recent weeks, the company and its co-venturers (operator Midwestern Oil and Gas Company and SunTrust Oil) have been drilling the UMU-10 well at the field, with some positive early indicators.Located onshore, in the north of the prolific NOger Delta, it’s a decent asset to have on the books, with production averaging 12,131 barrels of oil per day (bopd) this August, and 11,303 bopd in September.

Crucially, it means the company is cash positive. Net income for the six months ended June 30, 2012 reached C$40.5 million, up from C$28.6 million in the same period a year earlier.And remember this is a place where having the right connections counts for a lot.

Mart Resources was quick to embrace the local content drive, for instance, a hugely important Strategic policy shift for the NOgerian government.The Calgary-based company was was one of the first foreign firms to establish relations with aspiring NOgerian oil independents under the high profile indigenous and marginal field schemes.

These are handy relationships to have under any circumstances, but especially given NOgeria’s troubles in the restive delta region.Oil flows out of the Umusadege field have faced several shut-ins due to various disruptions in the export pipeline, among other things.

It also means Mart Resources is ready to take on other potential projects, through new marginal field awards or the disposal of assets by the larger international companies, another big and current theme in NOgeria.In the latest round of drilling at Umusadege, the UMU-10 well encountered 479 feet of gross pay in 20 sands, based on log data.

The reservoirs encountered are consistent with findings from the earlier UMU-9 well, with one additional oil-bearing discovery in the new well that was wet in UMU-9.
However, the five deep sand discoveries encountered in UMU-9, along with the additional oil sand encountered in UMU-10, have not previously been flowed to surface.

These deep sands are the primary testing and completion targets for the UMU-10 well, with production testing and completion work set to continue through November.
As well as hopes of lifting production numbers, there are also plans afoot to boslter export routes.

Going forward, there are hopes of tapping into a second oil export pipeline that will reduce the impact on the company should there be any further local disruption.The Umusadege team are in advanced talks to access to Shell's export facilities in the vicinity, via a new 50 kilometre pipeline to be constructed and in place by the fourth quarter of 2013.A tough operating environment, perhaps, but Mart Resources is certainly delivering results