Mart Resources drilling

Drilling at Mart Resources (Image: Mart Resources)

Investors have sent shares of Mart Resources (MMT.T) tumbling to a 2 year low of 85 cents this week. Two reasons for the sell-off are the delays on the Umugini pipeline and the recent decline in oil prices.

Mart has been operating the Umusadege field in the in Delta State, Nigeria with partners Midwestern Oil and Gas Plc and Suntrust Oil for the last years.

Oil wells at the Umusadege field are prolific, flowing between 2000-5000 barrels of oil per day. The major problem for Mart is getting this oil to market via a reliable pipeline.

Oil theft in Nigeria is common and Mart has been consistently losing upwards of 20% of all oil it sends into the current pipeline.

Even with the pipeline issues Mart remains profitable earning $6.2 million in the third quarter. After paying a 1 cent dividend in the quarter Mart has returned 6.5 cents (via dividends) in total to shareholders in 2014.

Mart has plenty of oil behind pipe and investors are eagerly waiting for the final go ahead on the Umugini pipeline which has potential to double current production.

Management has pushed back deadlines for pipeline completion several times in the last six months and investors continue to wait.  The company continues to drill with excellent results and has several prospective targets left at Umusadege. An acquisition of a new field has also been announced which will diversify the asset base.

Wade Cherwayko, Chairman & CEO of Mart said, "The Umugini pipeline is ready for oil production, and injection is expected to commence as soon as final authorization is received from the operator of the storage facilities at the Forcados oil export terminal. While the Company is disappointed with the delays in the commencement of oil shipments through the Umugini pipeline, Mart is working with the appropriate third parties to secure the final approvals necessary to allow oil to flow at the earliest possible date."

2yearchartMMT

 

Mart is certainly a high risk high reward stock. Operating in Nigeria is not easy and Mart has had it's share of challenges but the company has also been extremely successful.

I have been following Mart for several years now and been in and out of the stock (no position currently). I will continue to watch the story closely as I believe that if/when the Umugini pipeline starts flowing oil the market will respond positively.

For investors interested in hearing more the company will be issuing a third quarter conference call on November 19th.

Symbol: MMT.T
Share price: $0.89
Shares outstanding: 356.58 M
Market cap: $320.9 M

Read: Financial and Operating Results for nine months ended September 30, 2014 or A junior oil stock with potential to double production

I have no position in any of the stocks mentioned. This is not investment advice. As always please do your own due diligence.