TIDMMATD
RNS Number : 1659H
Petro Matad Limited
23 March 2020
THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED BY
PETRO MATAD LIMITED TO CONSTITUTE INSIDE INFORMATION AS STIPULATED
UNDER THE MARKET ABUSE REGULATION (EU) NO. 596/2014 ("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.
23 March 2020
Petro Matad Limited
('Petro Matad' or the 'Company')
Operational Update
Petro Matad Limited, the AIM quoted Mongolian oil explorer, is
pleased to provide an operational update on its activities in
Mongolia.
Highlights
Block XX Update
-- Progressing Block XX Exploitation Licence Application
-- Competent Persons' Report increases total mean unrisked
in-place oil resource potential of the Heron structure by 20% to
194 million barrels
-- Reservoir stimulation studies indicate significant
improvements in recovery factor are possible
-- Heron development base case increased to 33 million barrels recoverable
Portfolio Review
-- Portfolio review underway seeking to balance a production
focus with near field exploration opportunities as well as some
additional potentially high impact opportunities
Covid-19
-- Managing the impacts of the coronavirus pandemic on the Company's business
-- 10 cases have been confirmed in-country with the first reported on 10 March
-- Mongolian Government is taking a very proactive approach
Block XX Update
Following the success of the 2019 Block XX drilling campaign
which resulted in the discovery of oil in the Gazelle 1 and Heron 1
wells, as well as Heron 1 delivering one of the highest flow rates
ever recorded in Mongolia, Petro Matad is now focused on securing
the Exploitation Licence, required under the Production Sharing
Contract (PSC), to enter into the development phase on Block
XX.
Block XX Exploitation Licence
Petro Matad has been advised by the Mongolian authorities that
there is support at the highest levels of Government to grant the
Exploitation Licence for Block XX to Petro Matad. The Government
recognises that the Company has been the country's most active oil
explorer over recent years and that the success of its 2019
exploration efforts is very well timed in light of the Government's
commitment to the construction of the new domestic oil
refinery.
The Government has recently adopted the internationally
recognised Petroleum Resource Management System for assessing
mineral and petroleum resources, which it is applying for the first
time to the review procedure for Petro Matad's Exploitation Licence
application. At the same time, the authorities also want to follow
the steps used the last time an Exploitation Licence was granted in
Mongolia (to Petro China in 2011). This process involves the
preparation of detailed Appraisal and Reserves Reports. These have
been completed and submitted and are now being reviewed by MRPAM,
the industry regulator, and by the Ministry of Mining and Heavy
Industry (MMHI). Once they are approved, a Plan of Development and
Detailed Environmental Impact Assessment (DEIA) must then be
submitted. The preparation of these documents is already
well-advanced, and we are pushing hard to expedite the approval
process and to secure the Exploitation Licence, although we expect
it will take a number of months for the Government to go through
its review procedures. The Company's Exploitation Licence
application covers an area that includes both the Heron and Gazelle
discoveries and the surrounding near-field exploration potential
identified by the Company.
Competent Persons' Report (CPR) and reservoir stimulation
studies
As part of the Reserves Reporting preparations, the Company
commissioned Leap Energy to prepare a CPR for the northern part of
Block XX where the Company's discoveries are located. The CPR
concluded that the Heron structure has mean, unrisked in-place oil
resource potential of 194 million barrels. This is 20% higher than
the Company's initial internal assessment and offers the potential
for substantial commercial value given the low-cost, onshore
operating environment and the favourable Mongolian fiscal
regime.
Fenix Consulting Delft, a specialist in reservoir stimulation,
has modelled the Heron 1 well test data to assess the production
and recovery potential of the Tsagaantsav oil sands found in the
well. They concluded that modern stimulation techniques and
reservoir pressure support through produced water re-injection can
improve oil recovery significantly from the levels achieved to date
in neighbouring blocks. Further enhancement by slanted or
horizontal drilling to increase reservoir contact and radial
drilling to enhance wellbore drainage are additional technologies
under consideration to increase well productivity. These techniques
have not been widely used in Mongolia to date.
The work conducted by Fenix combined with the resource numbers
from the CPR support the base case submitted to the Mongolian
Government of an appraisal/development programme on the Heron
discovery targeting a mean recoverable reserve of 33 million
barrels using a recovery factor of only 17%. This is in line with
what has been achieved to date in Mongolia and there is
considerable upside potential that could be realised through the
application of the improved oil recovery techniques as detailed
above.
Portfolio Review
Blocks IV and V
Following post well studies on Wild Horse 1 and recognising the
short time remaining on the Block IV PSC without any clearly
defined, high-graded drillable targets, the Company has proposed to
the Government to relinquish the Block with a view to potential
partnering and relicencing of its more prospective areas in the
future.
Petro Matad has a significant competitive advantage in that it
has deep technical and operational knowledge of the basins of
western Mongolia, more so than any other operator. This presents an
opportunity for other industry players to leverage these insights
by partnering with Petro Matad under an appropriate
arrangement.
On Block V, Velociraptor, Fox and Phoenix are high impact
prospects that the Company has matured to drillable status in the
Taats and Tugrug Basins where it has proved that active petroleum
systems are present. The Company would like to drill these
prospects. To this end, Petro Matad has proposed to the Government
a moratorium on the Block V PSC to give more time for the Company
to secure partners and/or funding for the next phase of Block V
exploration. The moratorium application is currently under
discussion and we will update the market on these discussions in
due course.
Portfolio Development
The Company has submitted a request to the Government to review
data on specific areas not currently licenced in Mongolia with a
view to signing new PSCs and re-loading the portfolio to provide a
balance of production, development, appraisal, near field and high
impact exploration.
Covid-19
The Mongolian Government has taken a very proactive approach
from the start of the coronavirus outbreak. Public gatherings are
banned until the end of April at the earliest and Mongolia's land
border with China has been closed to everything but cargo, which
has also periodically been the case for its border with Russia.
After the identification of the first case of the virus reported in
the country on 10 March, when a visitor from Europe arrived and
subsequently tested positive, all international flights were
suspended until at least 30 April. Currently there are 10 confirmed
cases in the country, all but the first being Mongolians
repatriated from abroad, quarantined on arrival and who
subsequently tested positive. The country has closed its borders to
all foreigners entering for the time being. These measures, if
prolonged, will impact the oil sector in Mongolia, which relies
heavily on Chinese equipment and workers in its production and
development operations.
Currently there is no significant impact on Petro Matad's
operations as we remain focused on working with the Mongolian
authorities to secure approvals and permits. The Government
ministries are open and functioning as normal. Petro Matad's senior
Mongolian managers are in country and operating normally. Some
international members of the team are working from their home
locations. The Company is liaising with the authorities and taking
all precautions to ensure the safety of its staff and
contractors.
Mike Buck, the CEO of Petro Matad said :
"Our staff and contractors are working exceptionally hard in the
highly unusual circumstances that the ongoing coronavirus pandemic
has generated and the Company is very appreciative of their
commitment and diligence. We are monitoring the situation closely
and are pleased to advise that there has been no significant impact
on Petro Matad's operations, whilst we focus our efforts towards
securing approvals and permits for the Company's near-term work
programme.
Progressing the Block XX Exploitation Licence is taking longer
than we had hoped but we are encouraged by the level of support we
are seeing from the relevant authorities and the highest levels of
Government as we go through the process.
The recently commissioned CPR has concluded that the Heron
discovery has the potential to contain mean, unrisked, in-place oil
resources of 194 million barrels. This is 20% higher than our
initial internal assessment and highlights the significant resource
potential of this proven play.
As we work towards securing the Exploitation Licence for Block
XX, we are actively managing our cash resources and evaluating our
partnering and funding options to ensure that we are well placed to
rapidly develop the Heron discovery and start generating revenue as
soon as possible after the Exploitation Licence is in hand. We are
also looking at refreshing the portfolio to incorporate a balance
of risk and reward as we plan for the Company's future as an oil
producer and explorer in Mongolia."
Further updates will be provided in due course.
-Ends -
For further information please contact:
Petro Matad Limited
Mike Buck, CEO +976 7014 1099 / +976 7575 1099
Shore Capital (Nominated Adviser and Broker)
Toby Gibbs
Jerry Keen +44 (0) 20 7408 4090
Stifel Nicolaus Europe Limited
(Broker)
Callum Stewart
Ashton Clanfield +44 (0) 20 7710 7600
FTI Consulting (Communications Advisory Firm)
Sara Powell
Ben Brewerton +44 (0) 20 3727 1000
All Reserves and Resources definitions and estimates shown in
this report are based on the 2018 SPE/AAPG/WPC/SPEE Petroleum
Resource Management System ("PRMS"). The in-place resource
potential for the Heron discovery quoted in this release is taken
from LEAP Energy's Competent Persons' Report. Recoverable resource
assessments are based on the Company's assessments.
Technical information in this news release has been reviewed by
the Company's Exploration Manager, Mr. Jerry Smart. He has 37 years
of industry experience in oil and gas exploration and production
with LASMO, Eni, Salamander Energy and Ophir Energy. He holds a
B.Sc. in Geology from King's College, London.
Glossary
Mean : The arithmetic average of the low, mid and best case estimates.
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 three Production Sharing Contracts
with the Government of Mongolia. Block XX has an area of 10,367
square kilometres in the far eastern part of the country, and
Blocks IV and V have an area of 29,062 square kilometres and 21,143
square kilometres, respectively, 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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END
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