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Petro Matad Operational Update

Source: 4/12/2018, Location: Asia

Petro Matad, the AIM quoted Mongolian oil explorer, is pleased to provide an operational update for its planned 2018 exploration drilling programme:


∑ Interpretation of high quality 3D Seismic data in the Tugrug basin ongoing
∑ High quality data has identified bright amplitude anomalies which are very encouraging for hydrocarbon prospectivity
∑ Falcon prospect shown to be smaller than initially anticipated and removed from the drilling programme whilst other more promising prospects identified in the Tugrug basin are analysed and high-graded
∑ 90 MMbo Snow Leopard prospect (Block V) to be spudded first, with well site civil works commencing in May 2018 and required permitting anticipated to be finalised by the end April 2018. Rig fully contracted and certified
∑ The 290 MMbo Wild Horse Prospect (Block IV) will be drilled following Snow Leopard, with permitting progressing as planned
∑ The tender process for a rig for Block XX drilling is near completion with drilling anticipated to commence in H2 2018

Block V - High quality 3D seismic survey being interpreted with potential direct hydrocarbon indication and bright amplitudes

The Tugrug 3D seismic volume has been under interpretation throughout the months of March and April 2018. The frequency content of the data is excellent with clear definition of both structural and stratigraphic architecture. The fault plane reflections are remarkably well-defined aiding significantly in the mapping of the complex fault pattern in the area of the Falcon prospect. Preliminary seismic attribute mapping shows good resolution of sedimentary features and potential stratigraphic play fairways.

Based on results so far, with much better resolution of the faulting, it is apparent that the fault block originally targeted for drilling at the centre of the Falcon cluster is smaller than previously mapped. The new data does confirm, however, a large and well-defined fault bounded structure to the East that is considerably larger than the original mapping of Falcon and bright basin centre channelised features are potentially lacustrine turbidites, a proven prolific play type in other lacustrine basins globally. More detailed work is needed on the acquired data to mature these prospects identified by the 3D to drillable status.

Amplitude anomalies have been observed in trapping configurations and so far the interpretation has revealed a particularly convincing flat spot in a sinuous channel feature some 2.5km southeast of the Falcon fault block and some bright channel features in the basin centre. Flat spots can be the seismic response from fluid contacts and the observed anomaly will be further investigated with some targeted special processing. Bright amplitudes are also observed near the major normal faults which may be an indication that these faults are acting as conduits for migrating hydrocarbons and, if so, further highlights the prospective nature of the Tugrug Basin which is believed to have sourced the live oil encountered in the TSC core hole on the basin edge.

Interpretation is now focused on completing the first pass prospect generation phase to identify the most prospective locations within the Tugrug Basin and to mature them to drillable status

2018 drilling - reordered drilling programme ensures exploration drilling will commence in Q2 2018

Recognising the need to fully work up the targets in the area covered by the new 3D data set, the Company has decided to defer drilling in the Tugrug Basin in Block V and to advance the drilling of the Snow Leopard prospect in to Q2 2018. Snow Leopard, in the Taats Basin in Block V, is a robust fault bounded structure, well covered by good quality 2D seismic data in an area where there is much less structural complexity when compared to the Tugrug Basin. Whilst there is excellent evidence for a working petroleum system in the Tugrug Basin, the adjacent Taats Basin, in which Snow Leopard is the primary target, has confirmed source and reservoir outcrops on the basin flanks which can be mapped on seismic to thicken into the basin centre giving a good chance for a generative petroleum system to be present. The Snow Leopard prospect itself has two primary targets with a cumulative estimate of 90MMbo of prospective recoverable resources and three secondary targets that will be penetrated by the well. One of these targets will provide data on a high potential lacustrine turbidite play fairway.

Snow Leopard was originally programmed for drilling in 2017 and has all the required permits in hand other than the land use permit which is now being renewed. The renewal is a routine matter and as such the Company expects to have the new permit within the month of April 2018. As previously reported, the contracted Sinopec Rig 4518 is in Mongolia and has been certified to international standards. Drilling consumables and long-lead items including casing and wellhead are also now in Mongolia and are ready to be mobilised to site. Plans are for site construction to commence in May 2018 with rig mobilisation commencing once the Snow Leopard location has been completed. The well is programmed to be drilled to a depth of circa 3,350 metres at a cost of approximately $7 million, of which $1 million was spent in 2017 for purchase of long lead items and consumables. It is expected that the well will take approximately 70 days to drill and log.

To optimize logistics for the 2018 drilling programme in Blocks IV and V, Snow Leopard will be drilled first followed by Wild Horse in the Baatsagaan Basin in Block IV. The permitting of Wild Horse is progressing well. The Detailed Environmental Impact Assessment, the most time consuming to prepare of the permits required, has been conditionally approved by the Ministry of Environment and formal paperwork finalising the approval is due to be issued imminently. With this approval in hand, applications to secure chemical and land use permits will be completed and submitted. The Wild Horse well is targeting a 290 MMbo prospect.

An accelerated tender process for a drilling rig for Block XX is nearing completion. Based on progress so far, the Company expects to secure a good quality contractor with a tried and trusted rig and crew for drilling as early in the second half of the year as possible.

Further announcements will be made in due course.

Mike Buck, the CEO of Petro Matad said: "The Company's decision to shoot 3D seismic over the structurally complex Tugrug Basin was a good one. The new mapping on the 3D indicates that we have some excellent targets but we do not wish to delay our exploration efforts in 2018 whilst they are matured to drillable status. Snow Leopard and Wild Horse are two large, well defined and exciting prospects with huge follow up potential. As the firm two well programme for Blocks IV and V in 2018, they will tell us a lot more about the potential of the area and we are moving ahead rapidly with preparations to start drilling during this quarter. Planning, procurement and permitting for drilling in Block XX are also advancing well."

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