Petro Matad Limited (LON:MATD) shares doubled in value on Friday after the Mongolia explorer announced a deal which will see Shell pay out up to US$15mln to the company.
Back in June Petro Matad reported that it was in talks with Shell’s Mongolian affiliate regarding its exit from a farm-out arrangement for the Block IV and V production sharing contracts, which span some 60,000 square kilometres of Mongolia.
The original farm-out deal was agreed with BG Group last April, and the decision to end the partnership comes after Shell reassessed its portfolio following its acquisition of BG.
It has now been agreed that Shell owned BG Mongolian Holdings Limited (BGMH) will pay an exit fee of just over US$10mln, as well as a further US$5mln (which could be refunded by Petro Matad if a new partner comes into the projects during the current exploration period).
Petro Matad will now receive back the 78% working interests in in the blocks that were previously assigned to BGMH, subject to government consent. The US$5mln payment will be payable once this reassignment has taken place.
Subsequently, Petro Matad will hold 100% of the blocks and will have received US$15mln of cash.
Enkhmaa Davaanyam, Petro Matad chairperson, said: "I am very pleased that Shell and Petro Matad were able to conclude this agreement.
“The cash to be provided by Shell will enable the company to continue its planned work program culminating in exploration drilling next year.”
After rising 2.02p, 103.85%, to trade at 3.98p which gives the exploration company a market capitalisation of just over £11mln.