REG - Petro Matad Ltd - Operational Update

Petro MatadAnnouncement

13/03/2025 07:15

For best results when printing this announcement, please click on link below:
https://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20250313:nRSM5314Aa&default-theme=true

RNS Number : 5314A  Petro Matad Limited  13 March 2025

THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED BY PETRO MATAD
LIMITED TO CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER THE UK VERSION OF
THE MARKET ABUSE REGULATION (EU) NO. 596/2014 AS IT FORMS PART OF UNITED
KINGDOM DOMESTIC LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018
("UK MAR"). ON THE PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY
INFORMATION SERVICE ("RIS"), THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE
IN THE PUBLIC DOMAIN.

Petro Matad Limited

('Petro Matad' or the 'Company' or the 'Group')

Operational Update

LONDON, 13 March 2025: Petro Matad Limited, the AIM quoted Mongolian oil
company is pleased to provide the following operational update.

Key Company Updates

·    Heron 1 production continues with c. 25,000 barrels now in storage in
Block XIX.

·    The Block XIX operating committee has today confirmed acceptance of
the oil sales agreement and execution copies are being uploaded to their
online system for sign off.

·    Evaluations are underway to support a set of low-cost activities for
2025 in Block XX focused on operating cost reduction and production increases
at Heron 1 and the potential to conduct workovers/well tests at Heron 2,
Gazelle 1 and Gobi Bear 1.

·    With oil now flowing from Block XX and the investment environment
improving under the current government, Petro Matad is stepping up efforts to
secure a partner to accelerate its oil development activities. Discussions
with three entities are ongoing.

·    Sunsteppe Renewable Energy is progressing four exclusively held
projects with strong government support for the sector.

Operational Update

Block XX

The Heron 1 well continues to produce steadily at c. 200 barrels of oil per
day. Pressure data is being acquired to facilitate production analyses to
determine what modifications can be performed to increase the sustainable
production capacity of the well. To date the well has produced over 25,000
barrels of oil with a water cut of c. 4% and pressure data shows no signs of
boundaries encountered within the reservoir as yet. With a recent upgrade to
the eastern Mongolian power grid, a short (4 km) tie-in of Heron 1 to the
electricity grid can reduce power generation costs significantly, offering a
saving in operating expense of c. 25%. The Company is going out to tender for
this work.

Oil continues to be shipped to Block XIX. The operating company has today
confirmed acceptance of the oil sales agreement and that execution copies are
now being uploaded to their in-house online system for sign off. Petro Matad
has been chasing for progress on this as the start of revenue is already long
overdue. It now appears we are in the final stretch. Even though Block XIX has
tank capacity available to store many more months of Block XX production,
Petro Matad has been investigating arranging its own shipments and sale of
Block XX crude in case of further delay. The current inventory of Block XX oil
in the Block XIX facilities constitutes a suitable cargo size to offer for
sale. However, the cooperation with Block XIX remains the most cost effective
and the preferred solution.

Block XX - Heron 2

Analyses of the Heron 2 well continue in order to evaluate the potential for
remedial work that may help deliver a commercial flow rate. That the nearby
Heron 1 well has yet to see any pressure impact of a boundary, that might
reflect a degradation in reservoir quality (that is suspected as the reason
for low production in Heron 2), gives reason to believe that a workover and
further stimulation of Heron 2 may be worthwhile. A workover at Heron 2 could
be combined in a cost-effective manner with well testing of the nearby Gazelle
1 oil discovery. Gazelle 1 is now considered to be a candidate for test
production as it can share the nearby Heron 1 production operation and
infrastructure. A well test at Gazelle, if successful in achieving a similar
production rate to Heron 1, would pay back within a couple of months. A well
test of Gobi Bear 1 is also being considered. Geochemical analysis of rock
samples has given an indication of migrated hydrocarbons in the well. More
samples are being sent to the contractor to confirm this finding which would
give support to the log interpretation of potential oil pay in the well.

In light of the fact that the current Mongolian government acted quickly in
2024 to overcome previous delays and so facilitated operations on Block XX and
in 2025 is striving to improve the overall investment climate, Petro Matad is
stepping up its efforts to secure a partner to join it in developing the Heron
oil field and the rest of Block XX. The Company is targeting financially and
technically competent companies with a view to secure an injection of capital
investment to drill new wells to accelerate production ramp up and so enhance
value. Discussions are ongoing with three entities at this time. The
Integrated Service Agreement signed with Mongolia's main provider of well
services, DQE Drilling, for a multi-well development drilling and completion
programme remains in force and the Company has the option to utilise this
arrangement as may be appropriate and with minor adjustments to facilitate
regulatory approval.

Sunsteppe Renewable Energy (SRE)

Mongolia's coalition government, which came into power in June 2024, has given
very strong support for renewable energy and has prioritized reform of the
domestic energy sector including the acceleration of tariff increases for
end-users, in order to improve the investment environment and to attract local
and international investors. In parallel, the Ministry of Energy has announced
that Mongolia's domestic energy demand will double by 2030, increasing by c.
1.6 gigawatts. This highlights the need for new power generation capacity in
Mongolia and SRE is well-positioned to capitalise on the opportunities this
new government focus is generating.

Additionally, Mongolia is in advanced discussions with Gulf countries
including the United Arab Emirates and Saudi Arabia and their respective major
renewable energy investors, to accelerate the development of large renewable
energy export projects from Mongolia to China. Interactions between the
Mongolian and Chinese governments have intensified with China officially
agreeing to begin collaboration on Mongolia's energy export projects. China
has announced its need for over 450 gigawatts of clean energy to meet its
increasing domestic demand and sees renewable energy imports from Mongolia as
a component to meet this need.

Recognising SRE's international experience and its active involvement in
renewable projects in Mongolia, the government invited SRE's CEO to
participate in recent visits to the Gulf and to China and this has given SRE
some excellent exposure and insight. In parallel with this, SRE has signed
confidentiality agreements with a number of potential investors and has shared
with them details of its ever-increasing portfolio of projects in Mongolia.

SRE's portfolio currently includes four exclusively held projects:

1.    Oyu Tolgoi (OT) mine Green Hydrogen: The completed feasibility study
has confirmed the commercial viability of this c. 30MW project comprising a
solar and wind plant to generate Green Hydrogen for OT and it offers an
attractive internal rate of return of c. 15%. Intensive discussion with OT
continues and meanwhile SRE is preparing for the construction of the first
4.8MW phase of the project and has engaged with leading Chinese and
international contractors with proven expertise in Green Hydrogen facilities
for the execution of phase 1 and of the entire project. In line with the
Japanese government grant timing, project construction is set to commence
within 2025. Discussions with OT on an offtake agreement to include Hydrogen
and power are set to start and once this agreement is finalised, SRE will look
to introduce investors and debt providers. Interest for equity and debt
participation has already been expressed by potential partners.

2.    Choir 50MW Battery Energy Storage System: The original timescale for
this project has slipped pending land allocation for the facilities but
suitable land within 3 km of the substation tie-in point is expected to be
offered by the authorities shortly following last week's Cabinet approval of
Mongolia's countrywide 2025 land plan. Once land is secured, this will allow
completion of environmental permitting and the application for the license to
construct. This will be followed by negotiation of the Power Purchase and Sale
Agreement. SRE plans to bring in investors on equity and debt once this
agreement is in place.

3.    1,500MW export to China: SRE has an exclusive cooperation agreement
with leading Chinese utility, State Power Investment Corporation (SPIC), for a
large export to China project. It is hoped that the vigorous
government-to-government discussions now underway to get such export projects
moving will allow SRE's project to advance more quickly than was originally
envisaged. SRE is keen to retain up to a 30% interest in this mega-project in
the construction phase, in order to attract interest from some of the major
international investors with whom SRE is in discussion. SPIC so far seems open
to SRE's aspiration.

4.    200MW Hybrid project: SRE has signed an exclusive agreement with
Mongolia's Bodi Group which is developing a 600MW energy project. So far one
150MW coal fired power station has been commissioned with another 150MW phase
under construction. Bodi and SRE are partnering to develop renewable energy
capacity alongside the power plant. This project is particularly attractive as
it has an approved Power Purchase Agreement (PPA) with the Mongolian
government at a very attractive sales price of 8.9 US cents per kWh for 600MW
and the parties are keen to replace at least 200MW of this with renewable
power supplied from a hybrid solar, wind and battery storage plant. SRE is
responsible for feasibility studies and securing regulatory approvals. SRE has
already identified a suitable solar project site within 30 km of the tie-in
point. Bodi will assist in securing land approvals. This renewable
energy/decarbonisation project has attracted early interest from multilateral
financial institutions and international investors.

Mike Buck, CEO of Petro Matad, said:

"As we prepare for the 2025 operational season, our priority is securing
revenue from the sale of Block XX oil. We were pleased to be informed today
that the oil sales agreement negotiated with our neighbouring operator in
Block XIX is approved and being prepared for sign off. We are looking at the
potential to sell cargoes ourselves in case of further delay but the oil sales
agreement remains our preference.

When the operating season starts in Q2, we have plans to conduct some
relatively low-cost activities to reduce the Heron 1 operating expense as well
as to enhance production and so increase revenue. With the completion of
ongoing evaluations, these activities will focus on some or all of the Heron,
Gazelle and Gobi Bear wells.

Our efforts at Heron coupled with the new government's efforts to improve the
investment climate, create good conditions for us to step up efforts to find a
partner for Block XX that can inject capital, and possibly expertise, to
accelerate production ramp up and increase project and shareholder value.

We are very encouraged by the performance of SRE. The portfolio continues to
grow with additional opportunities currently under evaluation for inclusion.
Exclusive agreements are in place on four sizeable projects offering double
digit rates of return which are already attracting interest from well-financed
prospective partners. We are targeting the finalisation of PPAs on these
projects which is the point at which commercial details of partnerships can be
negotiated."

Further operational updates will be provided in due course.

- Ends -

Further information please contact:

 Petro Matad Limited
 Mike Buck, CEO                                 +976 7014 1099 / +976 7575 1099

 Shore Capital (Nominated Adviser and Broker)
 Toby Gibbs                                     +44 (0) 20 7408 4090

 Harry Davies-Ball

 Zeus (Joint Broker)                            +44 (0) 20 3829 5000

 Simon Johnson

 Louisa Waddell

 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 focused on oil exploration,
development and production in Mongolia. Currently, Petro Matad holds a 100%
working interest and the operatorship of the Matad Block XX Production Sharing
Contract with the government of Mongolia. Block XX has an area of 214 square
kilometres in the far eastern part of the country. The Company also holds a
100% working interest and operatorship of the Borzon Block VII Production
Sharing Contract with an area of 41,141 square kilometres in southern central
Mongolia.

 

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.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  UPDFIFLRVIIVLIE