Monday, July 28, 2014

Reloading with Mart Resources

I owned Mart Resources (MMT.V) a little over two years ago and the stock was a little more than a double for me. I sold the stock for two reasons; the first being that the company has its operations in Nigeria. At the time and since that time the company has experienced pipeline thefts of its oil of up to 20% per month. This was very disconcerting and I believed it would weigh on the stock which it did. The other reason is that the same pipeline was capacity constrained. The company could not fully develop its field due to the lack of pipeline takeaway capacity. The company made a commitment to build a new pipeline that would tie into an existing Shell pipeline and lead to substantially more capacity and massively cut down on pipeline thefts. However these construction projects take time and my experience is that my time and capital would be better served in other situations that were less opaque and that had lower risk. As Keynes said, when my information changes my view changes. The company completed the pipeline and is ready for a new chapter in its history so it is time for me to take another look. The new pipeline is essentially completed and is in the process of being tied in and tested.

The other catalyst to my mind is that the company has typically drilled vertical wells that flowed in the 2000 boe per day range. It has recently completed a horizontal sidetrack of an existing vertical well that flow tested at approximately 4800 boe per day.  So the speculative play here is continued horizontal drilling leading to material increases in oil production that can then be transported via Shells pipeline via Marts new 50km pipeline. This leads to substantially higher cashflow and a revaluation of the stock higher. At least that is how it is supposed  to work. I think this is a decent speculation and the potential for double is here if everything falls into place.

1 comment:

Vitality said...

I agree. Stock should start to strengthen in next couple of weeks. UMU4 - another horizontal - could also be completed in the next several weeks and add another 3-4000 bbl/d of production.

Related Posts Plugin for WordPress, Blogger...