Recently, Mart increased the capacity of the Umusadege early production processing facility from approximately 20,000 bopd to an aggregate capacity of 30,000 barrels.
Further expansion to 35,000 bpd is now nearly completed.
The upgrading not only increases processing capacity, but also replaces rental storage equipment with permanent equipment that will decrease operating costs per barrel.
The central processing facility is also readily expandable for further future expansion, if required.
In light of the UMU-9 discovery, an additional expansion of the permanent central production facility is being considered.
In addition, to mitigate risks relating to export pipeline capacity and to increase that capacity, Mart and its co-venturers are expanding their current pipeline to 21,000 bpd from 11,000 bpd and that capacity will be increased by another 35,000 bpd by Q1/13 when a new pipeline will be finished that will gain acess to Royal Shells export facilities.
In other words, pipeline and central storage facilities are being increased 3-4 fold for 2013.
A major reason for this is the UMU-9 well discovery which has demonstrated substantial upside potential of the field, in particular the extension to the east. UMU-9 flowed at 11,500 bpd from just 5 of the 19 zones that were present.
UMU-10 which will spud any day now, will be a step-out from UMU-9 and should provide further confirmation of the east extension while further boosting reserves and production gains.
Mart is also considering the next logical step, in its ramp up of production.
I refer to horizontal wells.
Horizontal wells increase production by an average factor of 2.5 times, relative to vertical wells.
Put these expansionary moves into prospective, it becomes obvious that over the next year, field production is going to triple from current levels of about 12,000 bpd.
Based on $100 Brent price ( Mart gets a slight premium to Brent ), Mart will cash flow about $1.40 per share for its share of this expanded production.
With no debt, a strong balance sheet, and capable of longer=term gains in production while paying a fat dividend, Mart should be accorded a cash flow multiple of 8-10 times annual cash flows.
For these reasons, it becomes obvious that Mart is extremely under-valued at current prices and that the longer term appreication in share price has really just begun.
Indeed, if the EU proceeds along the current path of fixing the Euro and given that oil has traded lower recently due to the flight to the USD , the longer term decline in the USD should see a strong rebound in the price of oil, perhaps to levels above $150.
All good reasons to hold your investment here.