Petro Matad Limited, the AIM-quoted Mongolian oil company, provides the following operational update.
Block XX Exploitation Licence
Progress has been made on the two remaining steps of the Exploitation Licence application that need to be completed prior to submitting the formal request for the Block XX Exploitation Licence to be awarded.
Plan of Development: Mongolia’s upstream industry regulator, the Mineral Resources and Petroleum Authority of Mongolia (MRPAM), convened a meeting of the Technical Committee on 16 March and provided its recommendations on Petro Matad’s Heron oilfield Plan of Development. These have been incorporated into the documentation which is now ready for final review by the Mineral Resources Professional Council (MRPC) as required under the Mongolian government’s Exploitation Licence application procedure. The MRPC has been asked to convene the meeting as soon as possible. If required, the meeting can be conducted virtually as was the MRPC review of Heron reserves.
Exploitation Area: The Company and MRPAM have agreed the area of Block XX that will be retained under the Exploitation Licence when awarded. The Exploitation Area includes the entire extension into Block XX of the proven and producing Toson Uul Basin. This basin contains an estimated 2 billion barrels of in place oil in the Petro China operated areas in Block XXI and XIX immediately to the north of Block XX. The agreed Block XX Exploitation Area contains all of the prospectivity identified within the proven basin. Petro Matad will look to undertake near field exploration drilling in this area, in parallel with the development of the Heron oilfield.
Formal application for Exploitation Licence: We have requested that MRPC reviews and approves the Plan of Development as soon as possible and once confirmed by ministerial resolution, we will have all the documents required to submit the formal application to the Minister to grant the Block XX Exploitation Licence.
Timing: Mongolia has been suffering from localised lockdowns in response to the Covid-19 pandemic in recent weeks and another two week lockdown has just been imposed in Ulaanbaatar in response to a rise in cases. We are hopeful that the lockdown will not impact the MRPC meeting. MRPC met virtually to review and approve the Heron field reserves during Mongolia’s December 2020 lockdown. We are focused on successfully completing the Exploitation Licence application procedure and submitting the application to the Minister for award of the Licence early in Q2 2021.
Short-Term Funding Considerations
As the Company reported in 2020, cash conservation initiatives were implemented to extend the life of the Company’s existing cash resources through to mid-2021, a period deemed long enough at that time to secure the Exploitation Licence and the funding necessary for the next phase of the Company’s development. Given the progress made in recent weeks, we remain hopeful that the Exploitation Licence will still be granted within this period however, in order to secure the financial standing of the Company beyond mid-2021, the Board has procured an unsecured loan facility from its major and founding shareholder, Petrovis.
Petrovis has agreed to make available to Petro Matad a line of credit of up to US$1.5 million, to be drawn when needed to maintain the Company’s operating capability, to see it through to the award of the Exploitation Licence and the establishment of funding for development operations. Interest on the loan will be paid at effectively the same rate that Petrovis secures US dollar financing from its banks (currently 10%). The loan will be repaid by one or more of the following:
· From production revenue with repayment starting no earlier than 2023;
· The amount drawn plus interest will be rolled into Petrovis’s contribution to any future equity fund raising that may be undertaken; or
· From the proceeds (payment of back-costs) of a successful farm-out.
The loan will only be drawn if required and based on current and forecast operating costs could fund the Company at its current level of staffing and activity through to Q3 2022 if necessary. With this funding mechanism available, Petro Matad will have the finances it needs to complete the Exploitation Licence application process and to secure the funding required for development operations on the Heron oilfield.
Mike Buck, CEO of Petro Matad said :
“We are very pleased to have agreed with MRPAM the Exploitation Area which contains the entirety of the Heron and Gazelle structures and the full extent into Block XX of the prolific oil producing Toson Uul basin. We are evaluating the near field potential in the area that could see reserves increase significantly through low cost, high chance of success, exploration drilling conducted in parallel with production and development activities at Heron over the next few years.
On the Plan of Development, we are appreciative of the time and dedication shown by MMHI and MRPAM in providing their expertise and recommendations to improve the plan. MMHI has also said it will expedite the MRPC review which is the final, formal meeting required in the Exploitation Licence application procedure.
Finally, we are extremely grateful to Petrovis for their continued support and their firm belief that Petro Matad can successfully move to being an exploration and production company in the near-term. Their ongoing support underlines their confidence in the potential of Petro Matad and of the country for sustained development.”
Further updates will be provided in due course.
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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