First of all we can all agree that it was a really bad PR, maybe one of the worst one in a long list. Over the last year we had seen a marked improvement in the communication then came this one.
I believe we are suffering from an over cautious Board run by lawyers. Of course a Board should be careful about not publishing misleading or over optimistic information and the Board has to published material events immediately. However the Board has to realize that publishing news that will obviously be interpreted as very negative, when in fact it is not, is as bad if not even worse.
Think about it this way: 11M shares were sold that day. What it means is that 11M shares were bought at a bargain price. One could think that a lawyer would be concerned that the TSX may read into it something that may or may not be there. Just imagine if some very good news is going to be reported soon ( dividend, Shell deal, others) Then what?.
I trully believe that nothing was intentional considering how surprised the Board was of the response. In any case why not just report the facts on both sides of the good news / bad news and highlight the positive. I think the Board got the message from many stockholders and will take corrective action.
Now for some of the items on the PR
210,000 barrels. (130K for Mart's share) It was unexpected and came without warning. Well almost no warning. Remember that ENI wanted 11% for lost oil. The 210K is "only" 7%. Should we feel good about that?
Why not report in the PR that it is only a demand form ENI and that they have to justify the numbers with an audit. The Nigerian government will be asking ENI a lot of hard questions. Also the previous assumption was 3% so what is the real impact?
Note this interesting fact:
We do not even know if Mart's JV was paid for the missing 210K of oil since it never got to where it is supposed to go.
Mart pays royalties at the well on the basis of each production day. Mart gets paid by ENI at the lifting on the other side of the pipeline. Could it be that the liability of Mart is just the transportation cost of $3 per barrel? I have no idea and since this is the first of its kind by ENI I do not know if the company does.
Also did ENI charge Mart for loss on the "deficit oil" repaid in the 1st quarter? It is worth checking.
UMU 9 lower zones
Talk about burying good news. The company discovered 170 ft of pay sands in addition to the 260 ft in the upper zones. In any other well just the discovery of 170ft of pay sands would be a big deal. The 6 new zones are "NEW" The word NEW means that it is not accounted for in any reserves.
About a title like:
"Mart Resources is delighted to announce that they discovered an additional 170ft of oil barring sands bringing the total for UMU9 to 430ft in 19 sands"
"Wade Cherwayko noted: Once again we proved how prolific the Umusadege field is and it represents a tremendous asset for our investors""
Instead we got " The well has now been cemented off as this hole section was never intended to be completed in the UMU9 well"
Translation for many people " the new zones are not commercially viable" We know that's not the case but it sure reads that way.
What should have been said is "UMU10 is getting ready for a Spuding in the next 2 to 4 weeks so we can exploit the new discovery"
In all of that the big news about the plan for RPS publishing reserves and an update at the same time got lost.
Production update.
Talk about not having a clue. Publishing 2 bad months of down time back to back was not a good idea. It is true but packaging is important. I mean context :-)
About saying
" December down time was 11.5 days due to XXXX despite this our total down time for the quarter was only 2.22 days above our forecasted 15 days per quarter down time. Total field production for the quarter was 649,220 barrels bringing the total year for the field to a record 2.656,102 barrels vs 1,176,420 barrels in 2010.
Doesn't that look a bit better!!
Note that the 649K may even be higher since we may get "deficit oil" for the down days.
Save January for next week Shell PR and highlight the production days average of 11,754 BOPD
In conclusion:
Mart is a tremendous asset and will keep improving. Even with the turmoil in Nigeria we have some very good days ahead.
The Board needs to do a better job communicating to the stockholders. Isn't it part of their fiduciary duties to protect our asset or are they just protecting something that starts the same?