2019 Drilling :
1/ Heron-1 due to spud early to mid July 2019 - 30 to 40 days to drill - Block 20
2/ Gazelle-1 due to spud late August 2019 - 25 to 35 days to drill - Block 20
3/ Red Deer 1 due to spud mid to late July 2019 - 25 to 35 days to drill- Block 20
4th well - To Be Decided Either in Block 5 (Raptors) or another in Block 20
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Broker Note : https://nofile.io/f/j90GYESdoet/MATD.pdf
Video Interview with CEO : https://www.youtube.com/watch?v=ra79wR0_jS0
Conference Call Audio from 10th July 2018 : http://s000.tinyupload.com/download.php?file_id=89956165754865029086
Snow Leopard-1 well is now nearing the latter stages of drilling and results expected in the next couple of weeks.
After that Wild Horse-1 well spud - one of the biggest wells to be drilled in 2018 and on the WoodMac list of the top 20 exploration wells worldwide in 2018 - the only onshore well to make it into the list of 20.
Half year results out.
HTTPS://www.investegate.co.uk/petro-matad-ltd--matd-/rns/half-year-report/201809070700020584A/
All good, SL-1 ongoing.
I suspected that the Technical Permit (you need a drilling permit and a technical permit) was the problem for Block XX and they say regulatory problem caused the delay. Anyway, more time to assess seismic and then 3 wells back to back April onwards.
WH-1, the big one, on track after SL-1 completes.
For me I have intimated elsewhere that delays to Block XX could be a positive thing.
As said before, if they have an oil strike at SL-1 or later at WH-1, they will be in a stronger farm out position with more cash in the bank.
They could, if they strike, say to a potential farm in partner, ok, we will appraise the discovery at SL-1 or WH-1 and therefore reduce your risk (and increase the selling price). Block XX money can be used for appraising a big oil strike at Block IV or V.
If they drill Block XX this year - no help.
If they drill Block XX after both Blocks IV and V (WH-1 and SL-1) are drilled, its much more beneficial to their negotiation position to farm out a discovery - as in use the cash to appraise and not for Block XX.
So, I am looking forward to Mike Buck's SL-1 update, as he is as well it seems. At least he appears to be looking forward to updating us,
Malcy said in his audio on the 10th September that he expected results anytime in the next 2 to 3 weeks - so prior to end September.
The audio is from 22 minutes and 55 seconds in, near the end. Link below.
https://tinyurl.com/ybd2uscb
AGM is tomorrow, so an update should be coming, could well still be drilling at the moment. We will know more tomorrow.
News out today............SL-1 is a duster, oil shows but thats all.
Off we go to Wild Horse-1.
480 Million barrels recoverable potential. Worth up to 320p a share.
Spud in the next 3 weeks.
The excitement builds again, and all those looking to buy in for Wild Horse-1 - now will be buying in.
Given the failure result on Snow Leopard-1 this week........
If you put your hindsight goggles on and go backwards now based on what is now known :
The plan was to drill Wild Horse-1 first, then Falcon-1 (as of early 2018 presentations).
Wild Horse-1 (Block IV) has only just(during SL-1 drilling it seems) received its final permits (chemical use) and so could not have been drilled until now anyway.
Falcon-1 (Block V) the 2nd planned well earlier this year was downgraded based on new 3D and removed.
Snow Leopard-1 (Block V) was the only drill ready prospect and which was the first to get all permits in place. MATD are also short of the required spend level of the license of Block V. It was rushed in as the replacement for Falcon-1
I would imagine Mike and his team were between a rock and a hard place here. Fox-1 the new exciting prospect from the new 3D is not drill ready and not permitted, permitting ongoing. Wild Horse-1 which was always your first drill, is not ready as final permits (chemical use etc..) are not in place. Falcon-1 which was your 2nd drill in the schedule is suddenly not worth drilling (too small) compared for Fox-1 so cannot be moved to be 1st.
You either cancel your 2018 drilling schedule (going down like a lead balloon)to allow Wild Horse-1 and Fox-1 back to back in 2019 or you put Snow Leopard-1 into play and drill that while you try to get the final permits for Wild Horse-1 to allow a seamless move from SL-1 to WH-1 in 2018 and go to the local temple to pray you get the Wild Horse-1 final permits before SL-1 finishes drilling.
If I go back now - with knowledge today - you really can see why the 2nd fund raise happened and why it was at 10p (compared to the earlier one at 6.5p - thats all down to Fox-1).
Looking at the prospects - Wild Horse-1 has simple faulting, its a 4 way dip (dome) and has soft amplitude anomalies. Pretty good target. Always was the 1st one they wanted to drill.
Snow Leopard-1 has complex faulting and therefore high sealing risk. In all the presentations after removing Falcon-1 there is nothing much exciting said about SL-1. Look yourselves....its as if someone writes the slide saying, yeah, we got this one too.
Fox-1 - extremely exciting, they spend 4 pages of their latest presentation detailing Fox-1. 3 way dip, normal faulting, bright spot on 3D, live oil shows in coring etc.. etc.. etc...
I feel the only reason they drilled SL-1 was to actually put the 2018 drilling into play and to bide time to get the WH-1 permits complete so they could drill WH-1, whilst also ensuring the spend on Block V was up to the level needed so as not to have any issues with Fox-1 which is also in Block V. And yes, in hindsight now I would say SL-1 was a strati-graphic test well in effect, one which also raised the spend level on Block V to the level required for compliance with the license. It had a (very limited) chance to strike oil and didn't and no surprise there.
Had I known prior that WH-1 was still waiting for final permits I might have put two and two together prior to events, but I didnt, and anyway, its far easier in hindsight, everyone is an expert after the event, as always :)
I dont blame Mike and his team for doing it this way if that is what happened, it makes sense in hindsight, just you started drilling with perhaps what was "off record internally" your worst prospect.
So in summary, my view, SL-1 was just a license spend compliance, waiting for WH-1 final permits, mobilize the rig and get in in the area ready for WH-1, fill in for the downgraded Falcon-1, in effect strati-graphic test well. And in view of that - I really cannot see them not spudding Wild Horse-1 asap, its a must and IMO, it WILL happen very soon.
All IMO, just my thoughts.
My estimated locations of SL-1 and WH-1 and the distance (bird flies and by road). Bayansair (Bayansayr) is the nearest town. Company has confirmed that the intend to spud Wild Horse-1 this year, the move and rig up is ongoing now.
First link shows my guesstimated approx locations of SL-1 and WH-1.
Second link shows the distance (300km as the bird flies or 450km by actual road)
Bayansair (Bayansayr) is the nearest town. Daytime temperatures (they only drill daytime) are forecast to be above zero until mid-November.
https://www.accuweather.com/en/mn/bayansayr/241957/october-weather/241957?monyr=10/1/2018
October quite warm daytime.
November slipping to a negative daytime temperature from the 19th November onwards. Cold snap starting 18th November evening. Working back 30 days from then........... the latest date spud should be (for completion and logging in 2018) should be around 20th October. So as we stand now.
Prep work on WH-1 location began in August. Everything possible done in advance for seamless move.
SL-1 finished P&A on Friday 21st Sept.
Move and rig up has been ongoing to 8 days as of today.
22 days remain to get spud done by latest 20th October
Hopefully spud between 8th and 15th October.
Internal CoS for WH-1 is actually 20%. So the Elephant discovery of 2018 boils down to two last chances, CHAR with Prospect S and MATD with Wild Horse-1.
Success case upside is greater on MATD as the prospect is 100% owned and the PSC terms are superb.
A mere 150 million barrel recoverable size find on Block IV for MATD would have an NPV10 of 1.27 billion US$ thanks to low cost of development wells, easy trucking and very good PSC terms ** (that value will be higher now due to rising oil prices)
NPV10 based on Economics run at Dec ‘17 Forward Curve prices: 2018 $63.67/bbl, 2019 $60.58, 2020 $58.56, 2021 $57.62, 2022 $57.25, 2023 $57.22, 2024+ 2% Esc
Well Name: Wild Horse-1 Block IV
Targeting 480 million barrels recoverable (mid case) 100% owned
Additional follow on prospects of 750 million barrels rec. (900 million rec. high case) derkisked in the Wild Horse area if Wild Horse-1 is a success.
Internal company estimates give 20% chance of success for Wild Horse-1
Wild Horse-2 appraisal well already permitted for, in the event of success.
Wild Horse-2 would drill into the other side of the WH lead in the event of a WH-1 discovery.
Due to analogous basin geology across the border in China there is a higher than frontier chance of success for frontier levels of potential
Notable Chinese productive basins include: Junggar Basin 10 Billion barrels recoverable, Songliao Basin 20 Billion barrels recoverable and Bohai-S. North China Basin with 40 Billion barrels recoverable.
Well defined 4-way dip structure and amplitude anomalies that are indicative of hydrocarbons. (Soft amplitude anomalies which conform to structure)
CEO Mike Buck comments that it is “A must drill well”. Royal Dutch Shell have told MATD they want to see Wild Horse-1 drilled.
Endorsed by Wood Mackenzie by their inclusion of Wild Horse-1 on their “one to watch wells in 2018” placing Petro Matad on a list alongside super majors like ENI and Repsol. The only onshore well to make it into the WoodMac list.
** PSC terms (the important bit to value any discovery with)
0% Corporation Tax
Royalty: Block IV 8%
Costs of Exploration, Development, Operations and Transport can be recovered in the success case. The implication for this is that on any success, when coming to arrange finance, this puts the company in a very strong position as it can demonstrate it can repay debt out of Gross revenue rather than profits. Yes, that is remarkably excellent, even transportation costs to sell the oil are recoverable. Pretty much WOW.......... The whole lot, explo, dev, op, transport...all recoverable.
Contractor Profit oil split: Block IV 50% to 57%
You cannot really value an oil discovery unless you also know clearly the PSC terms, then you are able to get a real good read on the NPV10. Given the present oil prices and forward curve the NPV10 value stated above is actually low and should be considerably higher now. The economics and IRR get better the bigger the find, so that is based on 150 MMBO, in the event after any discovery and appraisal that Wild Horse lives up to is Pmean of 480 MMBO recoverable, the figures are mind blowing, thats why its a "well to watch".
Operations Update.
They are behind where I expected them to be, however, they are confident they can spud and complete Wild Horse-1 this year, with spud now being later this month.
https://www.investegate.co.uk/petro-matad-ltd--matd-/rns/operational-update/201810010700054310C/
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Looking at the RNS history you can see clearly the change from when the new CEO Mike Buck was brought in.
5th July 2017 Ridvan Karpus (RK) CEO
Plan to drill Snow Leopard-1 (50 day drill) and then Wild Horse-1 (20 day drill).
(The regime of RK wants to drill SL-1 and then WH-1. We know from presentations that SL-1 has no amplitude anomalies and is supposed to be self generating. WH-1 has amplitude anomalies and is based on migration from nearby massive kitchens).
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19th Sept 2017 Ridvan Karpus (RK) CEO
Plan for restructure of the management team with experience being bought in (RK will step down).
Rig for proposed SL-1 and WH-1 still not certified and not likely to be until at least October (maybe later) and so, with mobilization from East to West then drilling cancelled until 2018. Both ongoing permitting.
New 3D seismic over Tugrug basin. New 2D based on comments from potential farm in partners.
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21st November 2017 Mike Buck (MB) CEO
Drilling rig is now certified, finally. Contract amended.
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19th January 2018 Mike Buck CEO
MB drops Snow Leopard-1.
New drilling program will be Wild Horse-1 (always drill your best first) and then Falcon-1. WH-1 has bright amplitude anomalies. Falcon-1 has live oil in nearby core hole.
At this time both wells are in the process of permitting, only SL-1 is nearly completely permitted but now dropped like a lead balloon.
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13th February 2018 Mike Buck CEO
Plan is to drill WH-1 and Falcon-1, permitting is in progress for both. Wild Horse-1 is now a 30 day to 45 day drill.
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12th April 201b MB CEO
Bugger..........the new 3D has revealed the Falcon-1 prospect is very much smaller due to faulting now apparent with the new 3D. In view of this Falcon-1 is dropped and while they work on the 3D for a new prospect now seen (later will be known as Fox-1) they will now put Snow Leopard-1 back into the drill program.
Its the only well nigh on permitted for and Wild Horse-1 is still waiting for a few final permits.
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My comments/opinions = At this stage Mike Buck is feeling stressed.
His drill program is now a well he wanted to drop (SL-1), then the big prospect Wild Horse-1 he wants to drill, then 2 small wells on Block XX. Not very awe inspiring at all. He knows there are good other targets from the new 3D and 2D.
Drill program now :
1 Potential duffer SL-1 he dropped.
2 Great Propsect WH-1
3 Small low risk Block XX drill
4 Small low risk Block XX drill
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14th May 2018
SL-1 is fully permitted for. WH-1 still does not have all permits in place.
New exciting Fox-1 prospect from the new 3D which replaces Falcon-1, but which has to start the long permitting process.
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13th June 2018
Placing to raise money to add 2 more drills. Directors buy in to the placing at 10p a share price.
New drill program :
1 Potential duffer SL-1 he dropped.
2 Great Prospect WH-1
3 Excellent Prospect Fox-1
4 Significant Prospect Red Deer 1
5 Small low risk Block XX drill
6 Small low risk Block XX drill
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My comments/opinions = At this stage Mike Buck is feeling much happier. Even though he still has to drill the SL-1 well he dropped initially (has to drill as its the only well fully permitted for) he now has 5 excellent prospects to drill after it. Wells 2 and 3 being high impact, well 4 being excellent size and then wells 5 and 6 being good in that they both individually are worth more than the current share price on success and are relatively low risk.
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The rest is then very much near term knowledge. WH-1 finally got the chemical permit during SL-1 drilling last month and so can go ahead. SL-1 drilling was a duster but a good stratigraphic test well in effect, lots of data obtained.
So, MATD have drilled the well that Mike Buck dropped initially, and the next three wells are the ones that he really wants to drill. Wild Horse-1 then Fox-1 and then Red Deer-1.
Thats the hindsight after the event read of the operations RNS's and what happened in terms of the operations program. You can see why MB is pushing to get WH-1 done this year, its the well he really wanted to drill first, with both Fox and Red Deer being new prospects and wont complete permitting until Q1 2019.
Whilst some people may bemoan the 2nd placing - my view is that Mike Buck turned the company around at that point. Going from (ignoring SL-1) one prospective big drill and 2 small ones, to then three prospective big drills and 2 small ones. That second placing at 10p in which directors purchased lots of shares, is what has left MATD so exciting now with lots of back up. If they had not done it then things would not be so much lower risk now.
Excellent timing for the rise yesterday..........as we know from Snow Leopard-1, on day 39 just as they entered the upper secondary target and got C1 to C5 gas shows.......big volume day.
And now, just as they should be entering the upper of the 3 targets (largest at the bottom), we get some good buying coming in.
So, looking good......nothing is certain, but looking good. Need to see sustained buying and a rising price, with lots of fall backs as people sell for a quick profit, followed by more buying.........repeat and repeat.
Weather has been excellent really.
https://www.accuweather.com/en/mn/bayansayr/241957/november-weather/241957?monyr=11/1/2018
This coming week they should enter the Main Target Zone, if not already. Fingers crossed something good happens, but as always, be prepared for the duster, its the most likely outcome.
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Wild Horse-1 is a duster as per todays RNS.
Got to wait for the drills in 2019 now (all of which are fully funded based on the current plans for 4 drills.
If you take the content of the RNS it looks like :
Next up will be the three low cost Block XX drills. These are all in effect appraisal and have very high chance of success. Each and every one of them is worth more than the current share price.
Drill these three first seems to be the plan, then I think a fund raising at a much higher price.
Fund raising will be for drilling in Block V where they now have (based on the SL-1 drill and latest seismic) three very large 4 way dip prospects. The fund raising will therefore pave the way for a 2 or 3 well drill campaign in Block 5. This is when the rig will drill Fox-1 and then one or two other new prospects they are working on.
So thats how I see it panning out.
1st Drill Block XX (already funded - no need for fund raise)
2nd Drill Block XX (already funded - no need for fund raise)
Fund raising based on success in Block XX and new leads.
3rd Drill Block XX (already funded - no need for fund raise)
1st Drill Block V (Fox-1) (already funded - no need for fund raise)
2nd Drill Block V (new prospect in the south of the license) Fund raise required.
3rd Drill Block V (new prospect in the south of the license) Fund raise required.
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