AI
Thursday, June 27, 2013 11:10:26 PM
My notes from Mart's AGM today:
Wade's Totally Excellent AGM Adventure
Did not attend, but I listened to the AGM via phone and was verrrrry impressed with Wade's mastery of the story, maybe because he's been saying much the same thing for the last year. My sarcasm aside, I thought Wade did a masterful job of explaining plans for increasing Mart's value, and I do not intend to sell a single share until we are significantly higher.
Pipeline capacity constraints from the Umusadege field have continued to be the greatest limiting factor for Mart's growth. Wade would like to partner on multiple fields, not just Umusadege, to diversify production and get away from the severe dependence on Agip. Pipeline losses were about 13-14% for Agip pipeline to Brass terminal in 2012 vs. about 8-9% for Shell pipeline to Forcados line. If UMU partners get switched over to using Shell, that will actually increase their reserve computations because reserves must deduct for expected/experienced pipeline losses.
New pipeline progressing and should be done later this year. Crude Sales Agreement with Shell was signed long ago. Crude Handling Agreement needs to be agreed by NPDC (government) and Heritage Oil; he sees no problem, just waiting for the bureaucracy to do its magic.
Pioneer status ends this year but they have tax pools (due field development expenses) accrued that will reduce taxes into 2014. My comment: Although the tax pools help, Mart still missed the opportunity to ramp production in 2013 while Pioneer status taxes were verrrry low.
Regarding stock price, Wade mentioned rightly that all oil stocks have been whacked, most more than Mart. The Agip pipeline problems did significant damage to the stock price. Mart is working on Toronto listing, to be followed by London listing. They are currently in process of filing an AIF, whatever the heck that is, which should facilitate the Toronto listing.
He and the CFO are continuing to try to get the story out to analysts, and he expects rerating (improvement) of Mart's stock value as the plans for the future unfold.
Catalysts for improving the stock price would include:
1. the new pipeline comes online this year. My comment: cough, cough,
2. UMU-11 and UMU-10 completion should increase production capability to 22-23,000 bopd,
3. new rig (contract to be awarded soon) for drilling up to three horizontals this year to increase total production to the 35,000bopd capacity of their central processing facility (inspection due 7 July, so that capacity will be there as new production comes online). Three horizontal wells will include reentry of UMU-3 and UMU-4 and one totally new horizontal well. My comment: With completion of UMU-10, UMU-11, and the 3 horizontals, we should see Umusadege producing up to the 35,000 bopd.
4. exploration wells should add significantly to total Umusadege field reserves (expects to drill exploratory wells in eastern extension immediately following UMU-11 and completion of UMU-10). Exploration program will eventually include probably 4-5 wells on eastern extension and 4-5 wells on western extension with the drilling pace being driven by production successes and further increases in pipeline capacity. Expectation is that UMU partners will continue to deliver to market thru Agip and Shell as production increases over time. My comment: This will probably take all of 2014 and 2015, but the result could be a great increase to production and reserves over these next two years.
5. partnering with additional indigenous companies on new marginal fields and additional properties divested by major oils.
6. large 2014 and 2015 cashflow increases become apparent.
My comment: Catalyst has been much-used over the last year to describe the above items. We stockholders want to see these catalysts turned into ACCMPLISHMENTS.
Asked about buyouts and mergers, Wade says he and the board will consider all offers, but there are currently no offers to consider. Asked about benefits of merging to become an indigenous company vs. remaining standalone and partnering with multiple indigenous companies, Wade indicated that the big advantages are with indigenous companies (Only indigenous companies can bid on new marginal field round, can buy other properties as large majors divest some of their land holdings). My comments: I interpret his comments to mean that he still wants to merge with an indigenous company, most probably Midwestern. It will certainly be interesting to see whether Mart really does partner with indigenous companies (in addition to Midwestern) on Marginal Field bids and on bids for other properties that large majors (Shell, Conoco, etc.) are divesting.
Wade again described the importance of working closely with the local communities to maintain good relations all around, including plans to provide power to local communities as they generate power for local communities (rather than flaring gas) from their processing facilities. My comment: It's hard to really understand what goes on in Nigeria, but one gets the sense that Wade is genuinely interested in Mart's being a positive influence in the areas that they operate. It sounds like he doesn't want to harm the environment or the local communities. He likes that they hire local contractors and support the local communities. I find that commendable.
He was positive about govt efforts to reduce bunkering (and therefore, pipeline losses), but mentioned that it must be accomplished in a balanced way, that is, you cannot just send in thousands of troops without the local communities responding very negatively. Govt has been dismantling some illegal refineries and is looking at things like putting tracers in the oil to track stolen oil and also looking at ways to monitor the pipelines more closely. My comment: Who knows, maybe pipeline losses can be reduced over the next few years rather than continuing to increase.
Asked about dividend vs. stock buybacks, he reiterated that the dividends have been well received, and as cashflow improves in future, increasing the dividend seems like a better approach than stock buybacks.
My last comment: I was very impressed with Wade's presentation, and I am hopeful that progress will come faster in the next year than it did in the last year. I mean, since last year's AGM they accomplished at least 3 months worth of work in less than a year.
Be well!
'peeker
Wade's Totally Excellent AGM Adventure
Did not attend, but I listened to the AGM via phone and was verrrrry impressed with Wade's mastery of the story, maybe because he's been saying much the same thing for the last year. My sarcasm aside, I thought Wade did a masterful job of explaining plans for increasing Mart's value, and I do not intend to sell a single share until we are significantly higher.
Pipeline capacity constraints from the Umusadege field have continued to be the greatest limiting factor for Mart's growth. Wade would like to partner on multiple fields, not just Umusadege, to diversify production and get away from the severe dependence on Agip. Pipeline losses were about 13-14% for Agip pipeline to Brass terminal in 2012 vs. about 8-9% for Shell pipeline to Forcados line. If UMU partners get switched over to using Shell, that will actually increase their reserve computations because reserves must deduct for expected/experienced pipeline losses.
New pipeline progressing and should be done later this year. Crude Sales Agreement with Shell was signed long ago. Crude Handling Agreement needs to be agreed by NPDC (government) and Heritage Oil; he sees no problem, just waiting for the bureaucracy to do its magic.
Pioneer status ends this year but they have tax pools (due field development expenses) accrued that will reduce taxes into 2014. My comment: Although the tax pools help, Mart still missed the opportunity to ramp production in 2013 while Pioneer status taxes were verrrry low.
Regarding stock price, Wade mentioned rightly that all oil stocks have been whacked, most more than Mart. The Agip pipeline problems did significant damage to the stock price. Mart is working on Toronto listing, to be followed by London listing. They are currently in process of filing an AIF, whatever the heck that is, which should facilitate the Toronto listing.
He and the CFO are continuing to try to get the story out to analysts, and he expects rerating (improvement) of Mart's stock value as the plans for the future unfold.
Catalysts for improving the stock price would include:
1. the new pipeline comes online this year. My comment: cough, cough,
2. UMU-11 and UMU-10 completion should increase production capability to 22-23,000 bopd,
3. new rig (contract to be awarded soon) for drilling up to three horizontals this year to increase total production to the 35,000bopd capacity of their central processing facility (inspection due 7 July, so that capacity will be there as new production comes online). Three horizontal wells will include reentry of UMU-3 and UMU-4 and one totally new horizontal well. My comment: With completion of UMU-10, UMU-11, and the 3 horizontals, we should see Umusadege producing up to the 35,000 bopd.
4. exploration wells should add significantly to total Umusadege field reserves (expects to drill exploratory wells in eastern extension immediately following UMU-11 and completion of UMU-10). Exploration program will eventually include probably 4-5 wells on eastern extension and 4-5 wells on western extension with the drilling pace being driven by production successes and further increases in pipeline capacity. Expectation is that UMU partners will continue to deliver to market thru Agip and Shell as production increases over time. My comment: This will probably take all of 2014 and 2015, but the result could be a great increase to production and reserves over these next two years.
5. partnering with additional indigenous companies on new marginal fields and additional properties divested by major oils.
6. large 2014 and 2015 cashflow increases become apparent.
My comment: Catalyst has been much-used over the last year to describe the above items. We stockholders want to see these catalysts turned into ACCMPLISHMENTS.
Asked about buyouts and mergers, Wade says he and the board will consider all offers, but there are currently no offers to consider. Asked about benefits of merging to become an indigenous company vs. remaining standalone and partnering with multiple indigenous companies, Wade indicated that the big advantages are with indigenous companies (Only indigenous companies can bid on new marginal field round, can buy other properties as large majors divest some of their land holdings). My comments: I interpret his comments to mean that he still wants to merge with an indigenous company, most probably Midwestern. It will certainly be interesting to see whether Mart really does partner with indigenous companies (in addition to Midwestern) on Marginal Field bids and on bids for other properties that large majors (Shell, Conoco, etc.) are divesting.
Wade again described the importance of working closely with the local communities to maintain good relations all around, including plans to provide power to local communities as they generate power for local communities (rather than flaring gas) from their processing facilities. My comment: It's hard to really understand what goes on in Nigeria, but one gets the sense that Wade is genuinely interested in Mart's being a positive influence in the areas that they operate. It sounds like he doesn't want to harm the environment or the local communities. He likes that they hire local contractors and support the local communities. I find that commendable.
He was positive about govt efforts to reduce bunkering (and therefore, pipeline losses), but mentioned that it must be accomplished in a balanced way, that is, you cannot just send in thousands of troops without the local communities responding very negatively. Govt has been dismantling some illegal refineries and is looking at things like putting tracers in the oil to track stolen oil and also looking at ways to monitor the pipelines more closely. My comment: Who knows, maybe pipeline losses can be reduced over the next few years rather than continuing to increase.
Asked about dividend vs. stock buybacks, he reiterated that the dividends have been well received, and as cashflow improves in future, increasing the dividend seems like a better approach than stock buybacks.
My last comment: I was very impressed with Wade's presentation, and I am hopeful that progress will come faster in the next year than it did in the last year. I mean, since last year's AGM they accomplished at least 3 months worth of work in less than a year.
Be well!
'peeker
Focus Focus Focus Focus !!!!
Join the InvestorsHub Community
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
