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Petro Matad shares rise as funding amendment eases equity dilution

Published: 08:23 15 Aug 2017 BST

Onshore oil drilling
A funding deal with Bergen in May funded new exploration in Mongolia

Shares in Petro Matad Limited (LON:MATD) advanced as much as 10% in Tuesday’s early deals as new amendments to a funding deal were announced, revealing that shareholder dilution will be reduced.

A funding arrangement with Bergen Global Opportunity Fund was announced back in May, and now that deal has been amended by mutual consent – it means that a monthly schedule of equity tranches will be postponed until October 15.

In lieu of the equity that would have been issued in the intervening months, the company will receive US$1.5mln by issuing a 24-month interest-free convertible instrument (it will have the same terms as the convertible announced as a part of May’s arrangement, and the company clarified that this instrument is in addition to the previously described convertible).

READ: Petro Matad soars as Sinopec signs up for Mongolia exploration drilling

Funded for an ambitious exploration programme

Petro Matad in May landed an agreement for up to US$45.2mln of new funds to pay for what it described as an ‘ambitious’ work programme in Mongolia in 2017 and 2018.

Bergen Asset Management agreed to provide the cash through a staged private placing, in up to 15 separate tranches, as well as a US$2mln convertible loan note (over 24 months and interest free).

The cash is earmarked for the drilling of at least two new exploration wells, described as ‘basin opener wildcats’. Petro Matad also plans to shoot new 3D seismic.

Drilling was slated to start in Mongolia later this year. Further drill plans for 2018 will depend on the results of this year’s campaign.

“This funding secures our firm work programme for 2017 and 2018 comprising 4 exploration wells and up to 300 km2 of 3D seismic acquisition,” Ridvan Karpuz, Petro Matad chief executive, said back in May.

“The Bergen facility is extremely flexible and allows us to effectively manage our cash resources over the next 18 months during a very active operational period for the company.”

Exploration plans advancing

More recently, in July, the Mongolia-focussed explorer announced it had signed up the services arm of Chinese oil giant Sinopec for a rig contract.

Petro Matad is planning to start exploration drilling in September, with the first well targeting the Snow Leopard (or Irves) prospect in the Taats Basin, hosted in the company’s wholly-owned Block V asset.

The Snow Leopard prospect has an estimated 160mln barrels of oil-in-place, though the ‘upside’ case estimating some 350mln barrels. September’s well is planned to be drilled down to a total depth of 3,150 metres, and the programme is due to last 50 days.

It is described by Petro Matad as an “important basin and play opening well”, and it highlighted that success would unlock further exploration potential in the basin, estimated in excess of 1.8bn barrels.

"I am very pleased to have executed the rig contract which is a significant milestone as we head toward exploratory drilling later in 2017,” said Ridvan Karpuz, Petro Matad chief executive.

“With the signature of the agreement with Sinopec, the Company is now poised to deliver on its commitment to undertake a high impact exploration drilling programme in 2017."

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