REG - Petro Matad Ltd - Operational Update

Petro MatadAnnouncement

05/12/2022 07:00

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RNS Number : 5207I  Petro Matad Limited  05 December 2022

 

5 December 2022

Petro Matad Limited

('Petro Matad' or the 'Company')

Operational Update

 

LONDON, 5 December 2022: Petro Matad Limited ("Petro Matad" or "the Company"),
the AIM quoted Mongolian oil company, provides the following operational
update.

Key Company Updates

·    Progress being made to register the Block XX Exploitation Area as
special purpose land

·    Mongolia announces 14 blocks available in a new Exploration Tender.
Petro Matad plans to participate and exploit its competitive advantage as the
country's leading explorer

·    Negotiations with DQE Drilling in their final stages for a multi-well
development drilling contract

·    More time secured on Block V Exploration PSC and plans for drilling
Velociraptor 1 being progressed

Block XX Exploitation Licence

The Mongolian government's process to certify Petro Matad's Block XX
Exploitation Licence area as special purpose land is progressing. Meetings
held at the Matad district and Dornod provincial levels of citizens'
committees resulted in voting that did not to support the central government's
certification proposal. The Mineral Resources and Petroleum Authority of
Mongolia ("MRPAM") has however written to the Ministry of Mining and Heavy
Industry ("MMHI") recommending certification of the Block XX Exploitation
Licence despite the local committees' views. The Company's focus is now to
support MMHI in progressing the matter through to a cabinet resolution as
quickly as possible. Given the delays, Petro Matad is unlikely to be in a
position to operate on the Heron development until the spring of 2023, once
its land access rights have been re-established.

Production Readiness

The Company continues to target having everything in place to get the Heron 1
well onstream as soon as the land issue is resolved by the government.
Pumping, downhole completion and power generation equipment is now all in
country. Production tanks and other related surface equipment have been
sourced from Petro China, offering a cost effective solution to achieve rapid
production start up. Discussions with Petro China on oil processing, export
and sales have also begun with the facilitation and participation of MRPAM.

Negotiations with DQE Drilling ("DQE"), the main provider of drilling services
in Mongolia, have continued and a contract for a multi-well development
drilling programme is in the final stages of discussion. The contract
envisages a reduction in drilling costs and deferral of some costs to allow a
portion of the drilling expenditure to be settled from future production
revenue. The contract still needs to be finalised and agreed with DQE and then
with MRPAM, but the cost reductions and payment phasing could significantly
improve project cash flows and overall asset value since the largest portion
of the Heron development costs are drilling related.

Block V Exploration

On the Block V Exploration PSC area, local government approvals for land
access have been secured. This area does not have the same history with the
oil industry that Dornod Province has and as such, just as in previous years,
thanks to its continued focus on positively engaging with local communities,
Petro Matad has been able to secure all necessary permits to work on the land
covering the highly prospective Raptor Trend and the Velociraptor prospect.
The Company is now looking at its options and the availability of equipment to
drill Velociraptor 1 on Block V in 2023.

A cost effective drilling solution for Velociraptor has been found, most
equipment needed has been sourced and is already in country and MRPAM has
given the necessary contractual approvals. The approval of the Company's
application to secure a moratorium for 2022 on Block V has also been received
from MMHI. This extends the Block V exploration period until July 2024 and
ensures that there will be sufficient time after Velociraptor 1 is drilled to
gather enough data and submit the necessary documentation to secure a Block V
Exploitation Licence in the event of success.

2022/23 Exploration Licencing Round

MRPAM has announced an Exploration Licencing round covering 14 blocks in the
prospective fairways of the southern half of the country. These areas share
the same stratigraphy and geological history as proven prolific oil basins of
northern China. With its extensive data base, technical expertise and
operational experience Petro Matad has a significant competitive advantage as
the country's leading explorer and intends to participate in the licencing
round with a view to signing some new production sharing contracts.

Renewable Energy Opportunities in Mongolia

Petro Matad continues to explore opportunities in the renewables space
following Board approval to do so in 2021. Work has continued this year to
investigate the technical and commercial drivers of solar, wind and battery
storage opportunities. A potential partner, highly experienced and well
connected in the renewable energy sector in Mongolia, has been identified and
negotiations for a collaborative association are at an advanced stage. The
Company will update shareholders on the progress of this opportunity in due
course.

Social impact 2022

In 2022, the Company undertook a significant exercise to re-evaluate its
Environment, Social and Governance ("ESG") commitments. In the process, Petro
Matad established a newly formulated ESG Statement published on its website
and in the annual report that better describes and demonstrates its commitment
to environment, social well-being and governance.

At the local level, Petro Matad continued its close engagement with the
communities in which it operates. To support local development, Petro Matad
worked with local governor's offices to identify projects in Block V and
sponsored a local volleyball team to participate in a national tournament,
funded the renovation of 4 local administrational buildings, participated in a
programme of livestock restocking and the construction of a water well for
irrigation of trees. The Company contributed to tree planting programmes in
Block V. In Block XX, discussions have been held concerning the multi-year
local development programme. Whilst this programme is yet to be initiated,
pending resolution of the land issue, as a goodwill gesture, Petro Matad
together with its subcontractor DQE, funded the restoration of the Matad Soum
landfill project.

London South East Webinar, December 2022

The Company will participate in the London South East webinar on 6 December to
provide shareholders with an update on Company activity and the progress made
in 2022. For those interested in joining the event, the registration link is:
https://us02web.zoom.us/webinar/register/9716691130893/WN_sIXgMNagT9-wPQnBAsGhOQ
(https://us02web.zoom.us/webinar/register/9716691130893/WN_sIXgMNagT9-wPQnBAsGhOQ)

Mike Buck, CEO of Petro Matad, said:

"It has been a frustrating year for Petro Matad and our shareholders given the
lack of progress on the land access issue in Block XX. We are hopeful that we
are now reaching a new phase in the process with central government
recognising that it needs to bring this access issue to an end through direct
action.

Meanwhile, we are pleased with our progress on negotiations with DQE drilling
and with the cost reductions that can make a real difference to project cash
flows and asset value. Similar positive progress has been made on the Block V
Exploration PSC area and we are excited about the potential to drill a high
impact exploration well on the Raptor Trend in 2023.

I would like to thank our shareholders for sticking with Petro Matad this year
and look forward to sharing further updates."

- Ends -

Further information please contact:

 Petro Matad Limited
 Mike Buck, CEO                                                            +976 7014 1099 / +976 7575 1099
 Shore Capital (Nominated Adviser and Joint Broker)
 Toby Gibbs                                                                +44 (0) 20 7408 4090

 John More
 Arden Partners (Joint Broker)

 Simon Johnson                                                             +44 (0) 20 7614 5900
 FTI Consulting (Communications Advisory Firm)
 Ben Brewerton                                                             +44 (0) 20 3727 1000

 Christopher Laing

 

About Petro Matad

Petro Matad is the parent company of a group focussed on oil exploration, as
well as future development and production in Mongolia. At the current time,
Petro Matad holds 100% working interest and the operatorship of two Production
Sharing Contracts with the Government of Mongolia. Block XX has an area of 218
square kilometres in the far eastern part of the country and Block V has an
area of 7,937 square kilometres in the central western part of the country.

Petro Matad Limited is incorporated in the Isle of Man under company number
1483V. Its registered office is at Victory House, Prospect Hill, Douglas, Isle
of Man, IM1 1EQ.

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