www.petromatad.com
Petro Matad is the parent company of a group focused on oil exploration, as well as future development and production in Mongolia. The Group’s principal asset is the Production Sharing Contract (PSC) over Matad Block XX, a petroleum block with an area of 14,250km2 in the far eastern part of Mongolia, near the Chinese border. Recently the company signed two more Production Sharing Contracts on Bogd Block IV and Ongi Block V, a total of approximately 71,000km² in central Mongolia. Petro Matad Limited’s shares were admitted to trading on AIM, London Stock Exchange, on May 1st, 2008. The company’s largest shareholder is Petrovis LLC, the largest importer and distributor of petroleum products in Mongolia. The company is the first substantially Mongolian owned company to have its shares admitted to trading on any major international stock exchange.
Westhouse Securities comments on Petro Matad’s DT-1 well in Mongolia
Following Petro Matad’s (LON:MATD) announced spudding of the Davsan Tolgoi 1 (DT-1) well on Block XX in SE Mongolia, London-based stockbroker Westhouse Securities said the company “offers exposure to a unique exploration opportunity with a high gearing to success”.
This morning the company told investors that it has spudded DT-1, the well first to be drilled in the 2010 campaign on the Block XX Production Sharing Contract (PSC). DT-1 is being drilled vertically to an estimated target depth of approximately 1,440 metres, and drilling is expected to take 30 days to complete.
In a note to investors, the broker highlighted that the company is fully-funded for the three wells planned for the 2010 drilling season and planned activities on Blocks IV and V.
The broker highlighted an estimate by independent consultant, Isis Petroleum, with states the mean un-risked prospective resource of the Davsan Tolgoi prospect at 122m barrels, with a 37%probability of success.
According to Westhouse, should DT-1 prove to be successful, Petro Matad could have an NPV of 481p per currently issued share. “However, we would not expect the stock to reach this level, even in the event of a complete success of the well, because: i) other parts of the structure remain undrilled; ii) there is project execution risk; and iii) there is dilution risk from the need to raise additional funds”, Westhouse stated.
The stockbroker believes the company could reach a third of its estimated NPV (160p) with the success of DT-1, otherwise it “would expect a modest fall in the share price to 40p”.
Westhouse, acknowledged that “If oil is found, any test flow rate is likely to be low, because of the nature of reservoirs within the basin, which are low energy”, however it also emphasised that “the economics of production are robust, given the inexpensive well cost and the potential for the establishment of significant reserves”.
Furthermore, the broker highlighted that there are 14 other prospects in the current Block XX inventory, with a mean un-risked prospective resource estimate of 516m barrels, and a negative drill result might lead to the two remaining wells being drilled on other structures within the block.
Petro Matad is the parent company of a group focused on oil exploration, as well as future development and production in Mongolia. The group holds the sole operatorship of three PSCs with the government of Mongolia. The principal asset is the PSC for Block XX, a petroleum block of 14,250km² in the far eastern part of the country. The two other blocks, IV and V are located in central Mongolia and jointly cover 73,498km².
