Oh my, I must have disturbed the hornets nest, ouch!!!


 First, I would like to make some general comments:

My experience in investing public companies thought me a few hard lessons: 

  • It is a red flag if company officials pass material info to some selected investors.
  • If an investor is privy to company info, it is a red flag.
  • It is a bad idea to invest following someone on the bulletin boards who posts info you normally would like to hear from the company officials.

-     Holding spec stocks, in the money, for dream highs may end up with empty bags.   

  • The risk factors, listed in the financial statements are what they want you to know. It is up to you to find out what other risk factors are? In case of Mart I ask the questions to myself as follows:

1. Is it a one man show?

2. Is it a one trick pony?

3. Can Mart survive without Wade?

4. What happens when no more wells left to be drilled in the Umusadege field?

5. Would the Financial and Technical Contract be terminated due to question 4?

6. Can Mart be sold?

I came to conclusion that Mart is a high risk/reward play and I put some spec money in it.

Now back to cleaning up the garbage:

not very hard to figure out that the writer has previously been involved in analyst work.”

That’s right. I do my own DD before I invest. For that, I look at prospectuses, financial statements, the management and boards make up and their past references. Don’t you? 

"I made very good money with Mart, currently do not own but might get in if conditions change

One could conclude that there is an intend to get the SP lower.  Is the writer affiliated to Salman because this is the same type of language used in Salman?”

Yes I have made good money with Mart. It was a good buy at $.20- $1.50 and it was a good sell at $2.0 and up. Look at the past oil sales volumes from 2009 through 2012: 1,154,958bbl; 732,101bbl; 1,803,459bbl and 1,844,389bbl respectively. So, what do you see there? Can you see 10%, 20%, 30% growth year over year? No! Over time the stock price may increase if and when the new pipe line is built and running, the bunkering has been stopped new wells tied and producing and new discoveries are made. Until then Mart is a show me story IMO. The name of the game is “Make Money”. You have to know when to hold it and when to fold it. It was time to sell my shares, so I did. As far as my intend to lower the stock price, as you claim, did not work. The stock price was up a penny or two after my post. Me affiliated to Salman, are you kidding me? Only Salman guy I know who had earned a fatwa from Iranian Ayatollah for his head to be removed after the book “The Satanic Versus” he wrote.

Do you really want to know who I work for? It’s for me. Occasionally I post on the bulletin boards if I have something important to say.

 “"Wade also draw attention by dating former Nigerian Beauty Queen"

 And how is that relevant to Mart's performance or is it just yellow journalism?  Wade's wife and his two kids thank you for this note!!!!”

Wade said it himself: “You have to know the key people to set up a business in Nigeria”. What is wrong with dating x Beauty Queen? That was a brilliant business strategy. You will be popular instantly and all important people would want to meet with you. That is the best advertisement you get without paying for. As far as his wife and kids get upset about my comments, no, they all know Wades past, I was too late for telling them, the news papers and gossip magazines did that many moons ago. You thing I do “yellow journalism?” No, I like orange better.

"Management and board are connected. Wade COB&CEO has a checkered past."

Being connected is not a bad thing. They work better. There are many of them that I like. Look at Michael Rose, CEO of Tourmaline. Same guys, buy prospects, grow production and sell, keep doing the same thing again and again. Nothing is wrong with that. As far as my statement; “Wade has a checkered past” is not that bad at all. I gave him credit for the good things he has done with Mart. Check this out: http://erhc.blogspot.ca/2008/02/pgs-eel-and-cherwayko-get-bad-press-on.htm

“I think only one Director previously worked with Wade.  Really!  is one criteria to be on a Board is that you have never done anything in the past with any member of management? “

Mart directors Derric R. Armstrong and Leroy Walbaum were also directors of the Centurion Energy which was found by Wade Cherwayco according to Mart’s web site. No mistake there. Just check the facts before posting.


The author got the Royalties wrong.  He is adding the farm out royalties twice.  At 20K BOPD the total royalties is 16%.  That data can be found on several company presentations.  See page 6 of the following presentation:”

When you are comparing numbers in the Annual Financials versus Company Presentations, the A.F.S. always trumps the others. Check out the MD&A 2009 Annual Financials page 5. No double counting there I am afraid. In fact the percentages I have posted are the government regulation applies to all Marginal Fields.


“New pipeline.

Where does the 20K BOPD for the field and the 10K net to Mart  come from?  We have about 23K before UMU11 and horizontal so we should have at least 30K+ available by year end.”

The difference between my 20,000bod v/s your 30,000bod is simply your optimism versus my rationalism. As I said before, the 2013 oil sales and financials will be similar to 2012 IMO, considering the pipe line shut downs and increasing bunkering losses. So I expect about 5000bod on average for Mart from all wells except Umu-10 for 2013. When, Umugini pipe line start operating, in 2014, then we may see up to 20,000bod for Umusade field including the Umu-10 well production. Umu-11 well, is not in my picture yet, because it may take a long time, like Umu-10 did, before we start counting the barrels. Also you have to base your field production estimates less then the short term test rates. That is why 20,000bod is more realistic IMO.

“If the expected cash flow is based on 10K net to Mart (50%) as indicated then it is wrong since CapEx is reimbursed in oil.  Again this is double counting with a negative view.”

Sorry, you got me lost there. I have not made any cash flow prediction based on 10,000 bod net oil sales to Mart. My statement for 2013 cash flow was based on 2012 operating results. I do not count the chickens before they are hatched.

“Earlier the author indicates:

As the capex being recovered Mart’s share of the oil goes down towards 50%"

To go down toward 50% would be a very very good thing.  It would mean that the field production is increasing so much that even so the capex increases dramatically it does not keep up with production in term of percentage.”

Wow, what a complex logic. If Mart’s oil share approaches to 50% it means the most capex is recovered (cost oil recovery is ending) and profit oil sharing will start at 50/50.

“The strange thing is that Salman made the same mistake in their report”

Here again you are insulting to poor Salman, he finally is out of the closet and free, thanks to change of heart of the new Ayatollah.

“Tax pool.

The company has $250M in a tax pool.  I missed that small thing in the summary.

I could go on about the company strategy outside of Umusadege but that will be for another time.

Yes the author spent a lot of time writing that and I wonder why since he/she does not own any Mart shares.  Of course it could not be possible that the author likes to short stocks”

Yes, I must have missed the $250mm tax pool. I am familiar with tax pools for R&D and Resource Exploration companies in North America but not with Nigerian version. I can not comprehend how financial and technical service companies, like Mart, can be eligible for tax pools since they recover 100% of the exploration costs in Cost Oil Recovery stage. Oh well this is Nigeria, if you know how things work there and if you have unique negotiations skills, anything is possible. Nothing stands still in Nigeria. The laws are subject to change without any warning. Here is a snippet from Mart’s 2012 Annual MD&A statement: 

“During 2011, it was determined that due to circumstances surrounding the tax filings of Mart’s co-venturers on the Umusadege field and other new information obtained that Mart will be subject to Nigerian corporate income tax rather than Nigerian Petroleum Profits tax. This change in Nigerian tax application was a change in estimate based on new information, and has resulted in a recalculation of Mart’s share of cumulative tax liability and expense in Nigeria. In 2012, the Company has filed tax returns based on management’s interpretation of the terms of the RSA and local laws. Such interpretations may be subject to challenge and review by local authorities. The differences between the previously calculated and provisioned tax liability and expense and the amounts calculated based upon any new information will be adjusted in the year such information becomes available and accounted for  prospectively.

Here we are, expecting the new Marginal Field Awards but the tax regime is uncertain. 

Stock Dilution, more thoughts:

- It is OK to dilute as long as the stocks issued close to market price and capital raised/used increases the cash flow, book value and NAV, otherwise it will reduce the per share values. It also will cause capital out-flow if dividends paid.

- The case of dilution due to incentive stock options is a bit different: It will have strong impact to metrics mention above. The difference between the option exercises price and market price is booked as cash out-flow (expense). Some people may think that the options do not cost anything to a company and injects cash. Not true: Take Mart for example:  Insiders had exercised about 15mm share, (about 4% of the float) in 2012. For example: if the option cost was $.20 per share (worst case) the company will have $3mm (15mm x .20) cash-in due to option exercises, just one time, and $3mm cash-out to the insiders due to dividends every year, becoming cash drain after first year. However, it becomes non issue if cash flow increases more than dividend growth. If the options are exercised at $1.00 per share (best case), one time cash flow-in will be $15mm and other things are being equal to the worst case example above. 

My excuse:

By the way, saying “I was on sabbatical” was just an excuse not to reply many questions and insults. My physical condition does not permit me to sit down and reply to every comment or question I receive. It took me many afternoon naps to type the post I made. Please excuse me if I don’t reply to follow up questions immediately.