Company Web site : http://www.petromatadgroup.com/

Twitter : https://twitter.com/Petro_Matad/

Petro Matad is a group focused on oil exploration, as well as potential future development and production in Mongolia. The Group’s assets consist of Production Sharing Contracts (PSCs) over the following exploration blocks:

Matad Block XX, with an area of 10,340km2 in the far eastern part of Mongolia near the Chinese border

Bogd Block IV and Ongi Block V, adjacent to each other in west central Mongolia totalling approximately 50,000km2


Edison Research Note July 2018 : https://nofile.io/f/j90GYESdoet/MATD.pdf

March 2018 video presentation : HTTPS://www.youtube.com/watch?v=oL9rbvLAjn4

Interview with CEO July 2018 : HTTPS://www.youtube.com/watch?v=ra79wR0_jS0





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To put things into perspective.

Cormorant-1 (announced today as a duster) which was the big talked about well for TLW, PCL, ONGC was targeting only 124 million barrels recoverable, with follow on prospects for 790 million barrels. This of course being split between the 4 parties involved with the most going to Tullow who had 35%.

Now, Wild Horse-1 is 100% owned by Petro Matad.

It is targeting 480 million barrels recoverable (100% owned by MATD) with follow on prospects of 750 million barrels (100% owned by MATD)

Its way bigger than Cormorant-1..........

That is the reason why Royal Dutch Shell having been talking with MATD and are keenly waiting for the result of Wild Horse-1 - because if it strikes oil then its pretty bolted on that Shell will be looking to farm in to Block IV and Block V given the potential of over 20 billion barrels recoverable in the 2 blocks. Thats why MATD is exciting.

I believe Wild Horse-1 is going to be spudded asap. They want it done before winter. They want the winter to be able to go to Shell and others and see who is willing to pay the most to farm in, in the event of an oil strike at Wild Horse-1.

Shell are in lead position (we know they cut Mongolia after they purchased BG, simply as they are not interested in Wild Cat wells in a new country, they are very interested in Oil discoveries in a new country - hence they told MATD they want to see Wild Horse 1 drilled and are willing to farm in and pay a lot more money AFTER a discovery). I say they are in lead position as they left in the contract that MATD have to pay Shell 5m US$ if they farm out Blocks IV/V to anyone other than Shell in future.

If, and its an big if, but if they strike oil at Wild Horse-1 then they have the winter to do a farm in deal with Shell or another.

Interestingly, if you look at the confidence levels "internally"......... Snow Leopard was never planned in advance for appraisal. Wild Horse-2, an appraisal well for Wild Horse, is already planned and permitted. So why are they planning ahead already to appraise Wild Horse...........they must have high confidence. I imagine the internal CoS for Wild Horse-1 is much higher than the advertised CoS.

Also the rig will be winterised and left over winter at Wild Horse location......... this means if they strike oil at WH-1 they can in effect, if they want, delay Block XX drilling even more and do a straight appraisal with Wild Horse-2 in April......as its already permitted. They can then move to Fox-1 to drill that after WH-2.

And if Wild Horse-1 strikes oil I imagine that is what they will tell Shell and others........... Do you want to farm in now for XXX million, or you want us to appraise Wild Horse and drill Fox-1 and you farm in for XXXX million later.

This is what makes MATD so very interesting over the winter if they strike at Wild Horse-1. A strike at Wild Horse-1 is going to rocket the price for sure..... 480MMBO recoverable and then other prospects derisked for 750MMBO recoverable - all 100% owned. But those who then sell the initial stike will perhaps miss the potential bigger rise, which will be when/if a Super Major farms in over winter.......... A farm in over winter and new funds and free carries could see a number of wells sunk into Blocks IV and V, so the farm in potential company will not want to wait for MATD to appraise and discover more oil and also will not want to waste time in the 2019 drilling season, so the potential for a winter period farm in is high.............IF they strike oil at Wild Horse-1.

All very interesting.

My estimated locations of SL-1 and WH-1 and the distance (bird flies and by road). Bayansair (Bayansayr) is the nearest town. Company has confirmed that the intend to spud Wild Horse-1 this year, the move and rig up is ongoing now.

First shows my guesstimated approx locations of SL-1 and WH-1.

Second shows the distance (300km as the bird flies or 450km by actual road)

Bayansair (Bayansayr) is the nearest town. Daytime temperatures (they only drill daytime) are forecast to be above zero until mid-November.

https://www.accuweather.com/en/mn/bayansayr/241957/october-weather/241957?monyr=10/1/2018

October quite warm daytime.

November slipping to a negative daytime temperature from the 19th November onwards. Cold snap starting 18th November evening. Working back 30 days from then........... the latest date spud should be (for completion and logging in 2018) should be around 20th October. So as we stand now.

Prep work on WH-1 location began in August. Everything possible done in advance for seamless move.
SL-1 finished P&A on Friday 21st Sept.
Move and rig up has been ongoing to 8 days as of today.
22 days remain to get spud done by latest 20th October
Hopefully spud between 8th and 15th October.

Internal CoS for WH-1 is actually 20%. So the Elephant discovery of 2018 boils down to two last chances, CHAR with Prospect S and MATD with Wild Horse-1.

Success case upside is greater on MATD as the prospect is 100% owned and the PSC terms are superb.

A mere 150 million barrel recoverable size find on Block IV for MATD would have an NPV10 of 1.27 billion US$ thanks to low cost of development wells, easy trucking and very good PSC terms ** (that value will be higher now due to rising oil prices)

NPV10 based on Economics run at Dec ‘17 Forward Curve prices: 2018 $63.67/bbl, 2019 $60.58, 2020 $58.56, 2021 $57.62, 2022 $57.25, 2023 $57.22, 2024+ 2% Esc



Well Name: Wild Horse-1 Block IV

Targeting 480 million barrels recoverable (mid case) 100% owned

Additional follow on prospects of 750 million barrels rec. (900 million rec. high case) derkisked in the Wild Horse area if Wild Horse-1 is a success.

Internal company estimates give 20% chance of success for Wild Horse-1

Wild Horse-2 appraisal well already permitted for, in the event of success.

Wild Horse-2 would drill into the other side of the WH lead in the event of a WH-1 discovery.

Due to analogous basin geology across the border in China there is a higher than frontier chance of success for frontier levels of potential

Notable Chinese productive basins include: Junggar Basin 10 Billion barrels recoverable, Songliao Basin 20 Billion barrels recoverable and Bohai-S. North China Basin with 40 Billion barrels recoverable.

Well defined 4-way dip structure and amplitude anomalies that are indicative of hydrocarbons. (Soft amplitude anomalies which conform to structure)

CEO Mike Buck comments that it is “A must drill well”. Royal Dutch Shell have told MATD they want to see Wild Horse-1 drilled.

Endorsed by Wood Mackenzie by their inclusion of Wild Horse-1 on their “one to watch wells in 2018” placing Petro Matad on a list alongside super majors like ENI and Repsol. The only onshore well to make it into the WoodMac list.



** PSC terms (the important bit to value any discovery with)

0% Corporation Tax

Royalty: Block IV 8%

Costs of Exploration, Development, Operations and Transport can be recovered in the success case. The implication for this is that on any success, when coming to arrange finance, this puts the company in a very strong position as it can demonstrate it can repay debt out of Gross revenue rather than profits. Yes, that is remarkably excellent, even transportation costs to sell the oil are recoverable. Pretty much WOW.......... The whole lot, explo, dev, op, transport...all recoverable.

Contractor Profit oil split: Block IV 50% to 57%

You cannot really value an oil discovery unless you also know clearly the PSC terms, then you are able to get a real good read on the NPV10. Given the present oil prices and forward curve the NPV10 value stated above is actually low and should be considerably higher now. The economics and IRR get better the bigger the find, so that is based on 150 MMBO, in the event after any discovery and appraisal that Wild Horse lives up to is Pmean of 480 MMBO recoverable, the figures are mind blowing, thats why its a "well to watch".

Operations Update.

They are behind where I expected them to be, however, they are confident they can spud and complete Wild Horse-1 this year, with spud now being later this month.

https://www.investegate.co.uk/petro-matad-ltd--matd-/rns/operational-update/201810010700054310C/

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Looks like they have joined Twitter too, finally.

https://twitter.com/Petro_Matad

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Wild Horse is spudded.

https://www.investegate.co.uk/petro-matad-ltd--matd-/rns/spud-of-the-wild-horse-1-exploration-well/201810230708078606E/

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Excellent timing for the rise yesterday..........as we know from Snow Leopard-1, on day 39 just as they entered the upper secondary target and got C1 to C5 gas shows.......big volume day.

And now, just as they should be entering the upper of the 3 targets (largest at the bottom), we get some good buying coming in.

So, looking good......nothing is certain, but looking good. Need to see sustained buying and a rising price, with lots of fall backs as people sell for a quick profit, followed by more buying.........repeat and repeat.

Weather has been excellent really.

https://www.accuweather.com/en/mn/bayansayr/241957/november-weather/241957?monyr=11/1/2018


This coming week they should enter the Main Target Zone, if not already. Fingers crossed something good happens, but as always, be prepared for the duster, its the most likely outcome.

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Wild Horse-1 is a duster as per todays RNS.

Got to wait for the drills in 2019 now (all of which are fully funded based on the current plans for 4 drills.


If you take the content of the RNS it looks like :

Next up will be the three low cost Block XX drills. These are all in effect appraisal and have very high chance of success. Each and every one of them is worth more than the current share price.

Drill these three first seems to be the plan, then I think a fund raising at a much higher price.

Fund raising will be for drilling in Block V where they now have (based on the SL-1 drill and latest seismic) three very large 4 way dip prospects. The fund raising will therefore pave the way for a 2 or 3 well drill campaign in Block 5. This is when the rig will drill Fox-1 and then one or two other new prospects they are working on.

So thats how I see it panning out.

1st Drill Block XX (already funded - no need for fund raise)
2nd Drill Block XX (already funded - no need for fund raise)
Fund raising based on success in Block XX and new leads.
3rd Drill Block XX (already funded - no need for fund raise)
1st Drill Block V (Fox-1) (already funded - no need for fund raise)
2nd Drill Block V (new prospect in the south of the license) Fund raise required.
3rd Drill Block V (new prospect in the south of the license) Fund raise required.