Petro Matad announces postponed drilling campaign in Mongolia, CEO search


LONDON -- Petro Matad, the AIM quoted Mongolian oil explorer has provided an operational update:


The farmout process continues and a number of companies remain in active dialogue with management. These potential partners appear to be more willing to fund a strategy where additional seismic is acquired before a drilling campaign is undertaken. Several potential farminees have expressed a clear preference to de-risk certain prospects in the Tugrug basin using 3D seismic and better defining a number of stratigraphic ‘leads’ that have so far only been identified on 2D seismic data. They may also be better positioned to farm-in once their 2018 exploration budgets have been established, which could occur as early as fourth-quarter 2017. The Company remains optimistic with regards to bringing in a farm-in partner, as without exception, every company that has reviewed the opportunity has responded with very enthusiastic comments regarding the hydrocarbon potential of the licences.

As the Company is fully funded for its current seismic work program, it has no plans to make further drawdowns from its finance facility.

Seismic campaign

The 3D seismic campaign will be focused on the Tugrug basin, in Block V and high graded drilling targets within this basin. The 3D seismic will also, help identify stratigraphic traps which have significant potential in analogous basins, such as the Vandana discovery in the Barmer basin, India and Sea Lion field in the North Falkland basin; both having multi-Bbbl of oil in place.

Additional 2D seismic will be shot to high-grade several other basins to add more drillable prospects to the Company’s growing prospect inventory. The decision to acquire 2D seismic data over several new basins is again influenced by feedback from potential farminees, who have expressed interest in these areas as potential future exploration targets.

Drilling campaign: Irves-1 (Snow Leopard)

Snow Leopard’s target depth of 3,150 m will represent the deepest well ever drilled in Mongolia. As such, considerable time has been spent by Petro Matad to ensure that it has a rig capable of delivering the defined drilling program, conducting it safely and in full compliance with international standards. The Sinopec rig that was contracted to undertake the planned drilling program has been undergoing extensive inspection and certification at its current location in Block 97, Mongolia. Under the contract the rig was required to be fully certified, and the well spudded by Sept. 15, 2017. Whilst Sinopec are still in the process of obtaining certification, this work will not be completed before October 2017, and as a consequence there will be insufficient time to mobilize the rig and complete the drilling program before winter conditions set in. As Sinopec have been unable to fulfill their contractual obligations, Petro Matad has served a notice of default on Sinopec and has entered into discussions with Sinopec on potential remedies. Depending on the outcome of these discussions, the Company will either terminate the contract and issue a new tender for a 3-well program commencing in the first half of 2018, or continue with Sinopec as drilling contractor, in the event the rig is certified and adequate concessions are obtained.

While it was not the desired outcome, this postponement of the drilling program will, however, allow Petro Matad to enhance its drilling portfolio via the acquisition of a 2D and 3D seismic program, which is set to begin shortly. While the reason for delaying the drilling program is related to the preparedness of the rig, it does also serve to improve the position of the Company with respect to a potential farmout. These potential partners have expressed a preference to participate in a multi well drilling program next year and to provide input into target selection and the order of drilling. A back to back multi-well program in one season would also significantly reduce our drilling costs.

Management re-structuring

The board of Petro Matad is implementing a strategy to re-structure the company’s executive management to bring onboard senior executives with proven operational and commercial track record. Petro Matad has significant milestones to deliver on concluding the farm out, carrying out a multi-well drilling campaign in 2018 and executing a multi year exploration and development work program. Ridvan Karpuz, CEO, will be stepping down from his position in mid-October and continue thereafter as a technical consultant. The search for a successor has already been initiated and is progressing well.

The Company is pleased to announce the hiring of Nick Cousyn as chief communications officer, who will lead our public and investor relations effort. Cousyn brings with him 18 years of public markets experience and has spent the last five years in Mongolia as BDSec JSC's Chief Operating Officer. His focus over the last five years has been in capital markets, M&A and corporate advisory.

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