Petro Matad Ltd (MATD.L) Operational Update

LONDON, 7 December 2021: Petro Matad Limited (“Petro Matad” or “the Company”), the AIM-quoted Mongolian oil company, provides the following operational update.

Block XX Exploitation Area

The Mineral Resources and Petroleum Authority of Mongolia (MRPAM) and Petro Matad held the first Exploitation Meeting at which it was agreed that the technical details of the benchmarking and pricing of Heron crude should be finalised between the Company and MRPAM by year-end. This will then allow for contract negotiations with potential buyers to begin. Mongolian crudes have been priced benchmarked to both Brent and Daqing crudes over the years. The Heron 1 assay is Brent-like in its chemistry and so Petro Matad is pushing for benchmarking to Brent in discussions with MRPAM and, once agreed, plans to do so in the follow up negotiations with potential crude oil buyers early in the New Year.

Contracting negotiations with drilling, well completion and infrastructure services providers are at an advanced stage with contract awards anticipated in good time for the start of the operational season in Q2 2022. Operations will focus on the completion of the Heron-1 discovery as a production well and the drilling of additional production wells within the current 3D seismic footprint.

The Company received a good response to its invitation to tender for 3D seismic and favourable terms were negotiated with the winning contractor. However, current Covid-19 restrictions ruled out being able to mobilise quickly for a winter 21/22 shoot. The winning bidder’s tender is valid through 2022 and as such, depending on progress with the drilling programme, Petro Matad will review the timing of 3D seismic operations in the second half of the coming year. All development well locations short listed for Heron phase 1 development drilling are within the area covered by existing 3D seismic so the timing of the acquisition of the new survey is not critical.

A number of administrational requirements to register the new Exploitation Area have been completed with the cooperation of various government ministries. Petro Matad has also led an industry effort in cooperation with other operators in country to submit proposed changes to the laws and regulations governing the petroleum sector with a view to improving the investment climate. In addition, Petro Matad is working with Mongolia’s Professional Inspection Agency to revise the check lists used for signing off on any new upstream oil and gas installations. Petro Matad has also made firm proposals to central government on how best to resolve the conflicts within Mongolian law on land access and usage. Whilst it is hoped these will generate workable changes to the legislation, in parallel Petro Matad is working with local government to guarantee access to all the sites that could possibly be used by the Company in 2022.

Block V Exploration PSC

The Block V exploration PSC in central Mongolia remains a keen focus of the Company with a number of very attractive, low cost, high impact prospects identified. Petro Matad is in discussion with drilling contractors to determine the potential timing and costs of drilling operations on the Velociraptor trend. The Company is also progressing the final stage of its environmental impact assessment in order to be able to operate on Block V in 2022 and beyond. This work had been held up due to Mongolia’s restrictions on meetings being held during the pandemic, but a pragmatic work around has been agreed by all parties and the Company hopes to submit its documentation to the Ministry of Environment before year end with the expectation of approval of the environmental impact assessment in Q1 2022.

Portfolio Management

Petro Matad’s efforts to partner with local and/or foreign companies on development and exploration activities in Mongolia continue and the Company has a virtual data room running at the moment. Whilst the Company is pushing the receiving parties to act quickly in completing their evaluations, Petro Matad continues to make 2022 operational preparations in parallel which will be executed with or without partners.

Petro Matad is also pursuing a strategy to work up and sign new exploration/appraisal areas in Mongolia and has high graded two areas of interest to date for which the Company plans to submit acreage applications.

Covid-19

The covid pandemic continues to be a significant challenge globally. At Petro Matad, several members of staff and their families have contracted the virus but thankfully all have recovered and appear not to be suffering from any severe side-effects. Whilst vaccination rates in Mongolia are high and infection rates have fallen to the lowest levels in 8 months, the government remains vigilant and the recent emergence of the omicron variant has resulted in travel restrictions being imposed on arrivals from countries where the strain has been identified. Border restrictions imposed by China have impacted the activities of other operators in Mongolia during 2021 and the exact timing and execution of Petro Matad’s planned 2022 operations will be subject to restrictions which may remain in place. However, in negotiations with service providers, there is confidence that with the right preparations, operations in the 2022 drilling season can be executed smoothly.

Sustainability opportunities

The Board of Petro Matad has taken the decision to seek to expand the Company’s activities in Mongolia into sustainable and renewable energy in addition to its ongoing work in the oil and gas sector.

Work has been done this year to determine the status of the renewable energy sector in country, as Mongolia has substantial potential for both wind and solar power generation. A number of projects that have government support to execute have been identified and are being evaluated for accessibility and commercial potential.

In addition, Petro Matad is looking at renewable energy possibilities to deploy in its Heron oilfield development. The area around Heron is well suited to both wind and solar power generation. Petro Matad is also studying the potential to use CO2 injection as an enhanced oil recovery mechanism for the Heron development. This technique has been widely used around the world for many years and has proven particularly successful in some of the larger oil field developments onshore in northern China. It has not been deployed in Mongolia where water injection has traditionally been used for reservoir pressure maintenance. Southern Mongolia is effectively covered by desert steppe and water is an increasingly precious resource. As such, an alternative to large scale water usage in oil production operations is considered a goal worth pursuing. Technical studies are now underway to determine the potential effectiveness of CO2 injection into the reservoirs of the Tamsag Basin.

Mike Buck, CEO of Petro Matad, said:

“We are delighted to have concluded our first Exploitation Meeting and are looking forward to beginning contract negotiations with potential buyers for Heron production. Additionally our recent decision to expand our activities into sustainable and renewable energy is an exciting new frontier for us that we look forward to updating investors on in the coming months.

The Company is on target to be ready for an active operational programme in 2022 focused on achieving the start of production from the Heron discovery. A lot of progress has been made over the last few months despite the challenges of the ongoing pandemic and the efforts of our dedicated staff are very much appreciated.”

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

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 two Production Sharing Contracts with the Government of Mongolia. Block XX has an area of 218 square kilometres in the far eastern part of the country and Block V has an area of 7,937 square kilometres 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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