Toronto-listed Mart Resources In sale talks with Nigerian independent And Umusadege field partner Midwestern Oil & Gas

By Martin Clark

It looks to be the end of the line for Canada’s Mart Resources, a name that has been playing in and around the West African oil and gas scene for many years.The company announced this week that it is in talks to be acquired by an indigenous Nigerian firm, Midwestern Oil and Gas, the operator and one of Mart’s co-venturers in the Umusadege field.

Umusadege, in the Niger Delta, is Mart’s flagship oil project and has recorded steady production increases during recent times generating good cashflow.The Nigerian field produced an average 18,505 barrels of oil per day (bopd) in December 2014, with a cumulative monthly total of 573,663 bopd.

The Calgary-based company announced on March 2 that it had entered into a letter of intent to negotiate a sale under which Midwestern would acquire all of the issued and outstanding shares of Mart for a cash consideration, valued at C$0.80 per common share.

The two sides now have an exclusivity period lasting until March 15 to thrash out a deal, which Midwestern plans to finance through a private placement.

It’s no surprise really after Mart announced in February that it was looking at a host of strategic alternatives for the business “in light of reduced commodity prices and its future capital requirements”.

A special committee was then set up with FirstEnergy Capital LLP of London appointed as a financial advisor to help with the review process.The committee was also tasked – at the same time as announcing the strategic review – with investigating “certain actions” of Mart’s chief executive, Wade G. Cherwayko, and whether they complied with the company’s code of conduct and internal policies.

No further details were provided and no further statement is expected on this matter until the investigation is complete. Cherwayko’s executive authority has been limited during the process, which is still ongoing, although he is continuing to advise the board on issues surrounding the company’s Nigerian co-venturers and Nigerian lenders.

Despite the obvious challenges faced by all companies under the new subdued oil price environment, it’s quite a swift turnaround for the Mart team, after all of the busy and successful activity of 2014 and plans for future growth.

As well as making good headway at Umusadege, the company joined a consortium for a slice of OML 118 from Shell, Total and Agip, which could have boosted growth once more.

And, in a September presentation, the company declared that it “is well positioned for potential growth through further increases in Umusadege field reserves, gaining access to proven marginal fields to be awarded by the Nigerian government, and fields available via future IOC divestments”.

Fast-forward six months and things look very different with Mart now on the verge of being acquired by its Umusadege partner. If the deal does go through successfully, then Midwestern gets its hands on a high quality producing asset and reinforces its position as one of Nigeria’s emerging indigenous oil companies.