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 encouraged by additional work phase at Petro Matad’s oil block
Westhouse was encouraged by yesterday’s news from Petro Matad (LON:MATD) which secured a winterised rig to overcome the severe conditions of the Mongolian winter and drill an extra well this year.
According to the broker, the news confirmed that Petro Matad has been successful in its efforts to extend 2010 drilling activities, which was made possible by a recent fundraising as well as the availability of a winterised rig.
The contract is for the drilling of up to two exploration wells on oil Block XX in Mongolia.
The first, Davsan Tolgoi-4, will target a fault block prospect named Davsan Tolgoi West. The well is scheduled to be completed before mid-December.
Even though there is potential for the drilling of the fifth well, Westhouse said that DT-4 would likely be the last well of the year given the onset of winter and the timing related to its drilling.
Under normal Mongolian winter conditions the specialised rig can operate until mid-December. However Petro Matad said that conditions are unpredictable and can be severe.
The Davsan Tolgoi West prospect is separate from the Greater Davsan Tolgoi prospect, where DT-1, DT-2 and DT-3 were drilled earlier this year.
DT-4 is expected to enable the company to further understand Block XX before seismic reinterpretation and resource volume updates come to the fore over winter.
The well will also potentially continue the de-risking process of source and migration in Block XX, said Westhouse.
The broker looks to the drilling campaign with confidence, maintaining its 'buy' recommendation and the 250 pence target for the company, whose shares last traded at 125 pence.
“We are encouraged by this additional phase of work within Block XX where the group was already pressing ahead with seismic re-processing and remapping activity, potential acquisition of additional 2D and 3D seismic and revising volume estimates,” said Westhouse in the note.
Last week Petro Matad called a close to the successful three-hole campaign, which propelled the company’s shares to a massive rally from 45 pence at the start of drilling to a new high at 199 pence back in October.
Each of the previous wells discovered oil in Block XX’s Greater Davsan Tolgoi prospect.
Davsan Tolgoi West has an estimated 21 million barrels of oil and it is separate from the Greater Davsan Tolgoi prospect.
The company highlighted that once DT-4 has been drilled, it will have tested a combined 142.5 million barrels from the pre-drill inventory – which has a pre-drill recoverable resource estimate of 882 million barrels
Away from Block XX, a gravity in-fill survey is to be integrated with the recently completed 345 kilometre (km) 2D seismic survey on Blocks IV and V, which is undergoing processing.
