(1) The information contained herein for the Umusadege field has been derived from a reserve report dated April 5, 2013 (effective as of December 31, 2012) prepared by RPS.(2) The information contained herein for the Umusadege field has been derived from a reserve report dated April 10, 2012 (effective as of December 31, 2011) prepared by RPS.(3) Gross Reserves means Mart's working interest share of total field reserves after deducting reserves volumes owned by others but before deducting reserves attributable to government and third party royalties and income taxes or their equivalent. Net Reserves means Mart's working interest share of total field reserves after deducting reserves volumes owned by others and after deducting reserves attributable to government and third party royalties but before income taxes or their equivalent.(4) All reserves definitions utilized herein are as set out in the Canadian Oil and Gas Evaluation Handbook ("COGEH").(5) Due to rounding, certain columns may not add exactly.
Value of Umusadege Reserves
As evaluated by RPS as at December 31, 2012, Mart has achieved a substantial increase in all reserve categories compared to year end 2011. Compared with year end 2011, there is a 24% increase in Proved reserves, and 30% increase in Probable reserves. When comparing the discounted Net Present Value ("NPV") for the Umusadege field, however, the value has not increased proportionally to the reserves. The key factors that have impacted the value of the Umusadege cash flows in the December 31, 2012 reserves evaluation include:
-- Increase in downtime and pipeline losses in the 3rd party export pipeline to Brass River terminal-- Increase in the evaluator's operating and capital costs assumptions for field development and production-- Reduction in the forecast oil prices for Brent crude used by the reserves evaluator
Mart and the Umusadege field operator are taking action to alleviate the downtime and pipeline losses experienced in 2012 in the export pipeline operated by AGIP. The principal action taken is the construction of the new Umugini pipeline that will connect the Umusadege field to the export pipeline and ultimately the Shell Forcados Terminal. In the 2012 RPS Report, pipeline losses were assumed to be 11.5% from 2014 onwards. Mart believes pipeline losses from the new export route described above will be more favourable than currently exists in the AGIP export pipeline.
The costs for the ongoing field development and operations at Umusadege are benchmarked to past operating experience and regional costs for the Niger Delta. The surface facilities at Umusadege have previously consisted of semi-permanent and rental production equipment, which run at a comparatively high cost per barrel of oil produced. The Central Production Facility ("CPF") is currently 99% complete at the Umusadege site, and is planned to be commissioned in Q2 2013. With the new CPF active, operating costs are expected to be reduced from previous years. In addition to eliminating the high rental costs of the early production facilities, the CPF also includes gas fired generators for field power generation. Using Umusadege produced gas for power supply will also reduce operating costs compared to previous use of diesel generators.
As part of the Umusadege evaluation at year end 2012, Mart also commissioned an evaluation of the Prospective Resources within the Umusadege farmout area. There are currently three prospects identified by 3D seismic interpretation. RPS has evaluated the Prospective Resources in a separate report dated April 19, 2013, with an effective date of December 31, 2012 (the "RPS Resource Evaluation"). The Prospective Resources included in the RPS Resource Evaluation have been calculated in compliance with Canadian National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities ("NI 51- 101") and the Canadian Oil and Gas Evaluation Handbook ("COGEH").