REG - Petro Matad Ltd - Operational Update

Petro MatadAnnouncement

30/07/2025 07:00

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RNS Number : 0586T  Petro Matad Limited  30 July 2025

Petro Matad Limited

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

Operational Update

LONDON, 30 July 2025: Petro Matad Limited, the AIM quoted Mongolian oil
company is pleased to provide the following update.

 

Key updates

·    Heron-1 production stable in the range of 150 to 160 barrels of oil
per day (bopd) with less than 3% water cut - c. 46,000 barrels produced to
date.

·    Next oil sales payments expected in August. Discussions on tax
treatment progressing.

·    Busy 2025 work programme about to commence focusing on operating cost
reduction and production enhancement.

·    Farm out discussions ongoing.

·    Renewable energy projects progressing offering significant value
potential when ready-to-build status is achieved.

 

Production Operations

The Heron 1 well continues to produce at a stable rate in the range of 150 to
160 bopd with less than 3% water cut. To date, c. 46,000 barrels of Block XX
crude have been transported to the neighbouring Block XIX facilities for
processing storage and export under the oil sales agreement with PetroChina.

Oil sales

As previously reported, PetroChina made payment in June for production to end
April and withheld 30% of the invoiced amount pending confirmation from the
tax authorities that there would be no customs duties, VAT or other taxes
levied on them under the oil sales agreement. PetroChina has asked Petro Matad
to get this confirmation. The Company's tax experts have engaged with the tax
authorities and submitted draft documentation for their review and are
awaiting their feedback. We remain confident that customs duties and VAT are
not applicable on oil sales as the law and precedent are clear on both. We are
discussing with PetroChina a revision to the agreement that could remove the
possibility that a small amount of VAT and tax may be levied on the handling
fees. Our efforts are currently directed at removing the withholding as soon
as possible.

Petro Matad has submitted invoices for May and June production as per the oil
sales agreement but payment has not yet been received. PetroChina has said it
will pay in August citing teething problems with a newly introduced online
payment approval system that is delaying all their payments. We are aware that
payments to other suppliers in Mongolia are also delayed but knowing it is not
just Petro Matad that is affected does not make it any less frustrating.

 

Preparations for 2025 operational activities

With oil sales revenue sufficient to cover the running costs of the Company,
the recently announced capital raise has given Petro Matad the funding needed
to embark on a number of low-cost, low risk activities to reduce operating
cost, increase production and so maximise revenue.

Heron-1 grid connection. A contractor has been chosen to install the equipment
to connect Heron-1 to the national grid through the neighbouring Block XIX
infrastructure and so reduce the need to burn diesel for power generation at
the well site. PetroChina has provided the necessary support letter to the
authorities to allow this work to go ahead. This work will realise a 15%
reduction in operating cost. The contractor is ready to mobilise as soon as
the province's power station issues the final approval and we are following up
to expedite this.

Heron-2 acidisation and re-test. Studies on cuttings from the Heron-2
reservoir section have determined that a carbonate cement is present in
greater amounts than seen in the Heron-1 reservoir so impacting the
permeability and so producibility at Heron-2. Plans are in hand to mobilise a
small workover rig to site in August to treat the perforated interval with
acid to remove any debris and breakdown the cementation to improve near well
bore permeability. The well will then be re-tested to see if it can sustain a
commercial flow rate. Arrangements are being made for rapid hook up in the
event of success.

Gazelle-1 perforation and test. The workover rig will then move the 5km from
Heron-2 to the 2019 Gazelle-1 oil discovery well to perforate and test the pay
zone identified in this well. The reservoir quality in the pay zone looks good
on logs suggesting that permeability and so deliverability may be better than
average for the basin. If successful in establishing commercial flow
potential, Gazelle-1 will be put on stream during the 2025 operation season.
Testing at Gazelle-1 will not only provide the opportunity to add to Block XX
production in 2025 it will also provide useful information about the potential
reserves upside in the Gazelle structure and how best to target these through
future side-tracking or appraisal drilling operations.

Gobi Bear-1 perforation and test. It is also planned that the workover rig
will move the 9km from Gazelle 1 to the 2024 Gobi Bear-1 exploration well to
perforate and flow test the zone of interest identified on logs. The potential
for oil pay being present in the well has been enhanced by the identification
of migrated oil in cuttings samples but to be definitive a well test is
required. A successful oil test at Gobi Bear-1 would be a significant result
as the structure has substantial resource potential.

Block VII. Work on this 2025 addition to the portfolio continues to progress.
The tapes of the 2D seismic survey acquired in 2015 have been found and are
being evaluated for the potential to reprocess. Reports of the whereabouts of
the cuttings from the well drilled by the previous operator are being followed
up. Meanwhile all the necessary environmental studies including sign off by
the governors of the districts within the block have been completed allowing
the application for the formal Exploration Licence to be submitted to the
Ministry of Industry and Mineral Resources.

Farm out

As previously reported, the Company has stepped up its efforts to find
partners to join it in Block XX development and Block VII exploration. On
Block XX one counterparty has reported that it is in the final stages of its
evaluation and asked for a draft farmout agreement which has been provided.
Petro Matad has focused its most recent efforts on potential Chinese partners
including companies active in the producing basins in northern China that
extend into Block VII. The Company's goal is to have partners fund a work
programme in return for a working interest and in the case of Block XX is
looking for an injection of capital to fund enough wells to allow production
to reach a level that will sustain the ongoing development of the reserves.

Renewable Energy

As part of the recent fund raise, it was important to secure development
funding for the two latest and largest additions to the Sunsteppe Joint
Venture's portfolio, namely the 200MW Hybrid project and the 1.5GW Export to
China project. With a power purchase agreement already in place and only
requiring amendment to reflect the change from a coal fired to a renewable
source, the 200MW solar and wind project has the potential to reach
ready-to-build status rapidly. Sunsteppe needs to start gathering wind data to
determine the best site for the wind farm. Interest from well funded potential
investors has been expressed in this project. Meanwhile, the Mongolian
government is keen to move forward on export to China projects. Sunsteppe,
through its cooperation with leading Chinese utility the State Power
Investment Company (SPIC), wants to increase its land bank with areas close to
the border and to start gathering wind data.

In Mongolia, developers such as Sunsteppe have been able to attract
development premia in the range of $50,000 to $100,000 per MW for
ready-to-build projects that have good commercial potential. Sunsteppe's
portfolio has three, near-term projects comprising a total of 274MW plus the
longer term 1.5GW project with SPIC. This demonstrates the significant value
proposition that these renewable energy projects offer to the company. Whilst
Sunsteppe is looking to originate more projects and has been approached by
many would-be partners, it is focusing efforts on getting projects to
ready-to-build status in order to crystallise value.

Cost control

Recognising that cash is a precious resource, through 2025 Petro Matad has
been carefully reviewing its cost base and seeking to make sure it is running
as efficiently as it can. To this end cost saving measures have been
introduced and will be maintained. Steps taken include a reduction of salary
costs achieved thanks to the three expatriate staff members, including the
CEO, agreeing to salary reductions of 70%. Opportunities to trim costs whilst
maintaining the Company's operation capability and competitive advantage
continue to be evaluated.

 

Mike Buck, CEO of Petro Matad, said:

"Stable production from Heron-1 is pleasing to see and resolving the remaining
payment issues is a priority. Meanwhile we are putting our newly raised funds
to good use on activities targeting opex reduction and revenue increases.

Our farm out efforts continue and we believe are enhanced by the ongoing
production operations and our pursuit of low cost add-ons.

We look forward to advancing development operations on our two large renewable
energy projects as they have the potential to add significant value to our
portfolio."

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.

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