Solid quarter;;Increased cash Despite the fact that Mart' share of production was 52 % this quarter ( 82 % in Q1 ) and lower prices, along with increased pipeline losses, we added $8 million to our cash position which now stands above $80 million ( including restricted cash ).
Note that Marts share of Um oil production can vary dramatically according to how much of their expenditures can be capitalized ( redeemed ).
In Q1, Mart had an active drilling and development program and was granted 82 % of field production as equivalent payback for these costs.
In Q2, there was little in the way of development drilling, so it only qualified for 52 % ( 50 % is garanteed plus compensation for development drilling capital ).
In this quarter, we shall see Marts share bounce back up to 82 % due to the drilling of UMU-10 well.
Along with that, oil prices have been much higher as well and production has also increased.
So, Q3 will be better than Q1 and much better than Q2.
These are excepts from the outlook................
Outlook
On August 28, 2012 Mart declared a quarterly cash dividend of
.05 per common share. The dividend will be payable on October 2, 2012 to shareholders of record at the close of business on September 14, 2012.
The exdividend date is September 12, 2012.
Although net income and funds flow from operations were lower in Q212 relative to Q112, production remains strong and funds flow from operations are higher in the first six months of 2012 compared to the same period in 2011.
Subsequent to June 30, 2012, Mart has collected $41.6 million of its accounts receivable and other receivables related to oil sales from the Umusadege field.
The UMU-10 well commenced drilling on July 4, 2012. The well is currently at a depth of approximately 7,688 feet. It is anticipated that the UMU-10 well will reach its targeted total depth of approximately 9,700 feet before the middle of September 2012. The primary objectives of the UMU-10 well will be the oil-bearing sands identified in the 8 ½ inch deviated hole section of the UMU-9 well.
Umusadege field production during the month of July 2012 averaged 12,852 bopd. Umusadege field downtime during July 2012 was less than one day. The average field production based on producing days was 13,281 bopd.
Average daily production in July 2012 was higher than in June 2012 due to lower downtime during July and increased export pipeline capacity allocated to the Umusadege field. Total crude oil deliveries into the export storage tanks from the Umusadege field for the month of July, adjusted for estimated pipeline losses, were approximately 358,500 bbls. AGIP has reported approximately 40,000 bbls of pipeline losses during the month of July, 2012 or approximately 10%.
The pipeline losses experienced in Q212 and to date in Q312 are higher than previous periods. Mart and its coventurers have initiated a plan to determine the accuracy of the AGIP reported pipeline losses. The plan includes, but is not limited, to assessing the accuracy of the volume reconciliations, metering accuracy, and reporting processes. The completion of the plan is dependent upon AGIP providing this information to Mart and its coventurers.
Mart and its co-venturers are continuing discussions with an affiliate of Royal Dutch Shell plc, ("Shell") on a crude handling agreement which that will provide a second independent export pipeline for Umusadege field production.
Once all agreements are completed Mart and its co-venturers gain access to Shell's export facilities and a 50 kilometer pipeline will be constructed. Construction of the pipeline connecting the Umusadege field to Shell's export facilities is expected to be completed and in service in less than one year.
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So, a very solid quarter with few surprises other than larger than normal pipeline losses which seem to have returned to normal this quarter.
Very strong cash position and another dividend coming in Sept.
The UMU-10 still has about 2000 ft to go ( about 10 days ) before we get the results.
Q4 should also be a high net production quarter as well, as another well or maybe two will be drilled along with any gains from UMU-10 production flows.
In summary, a very successful first 6 months of 2012 and the remaining 6 months should be even better than that.