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Highlights

  • Oil sales from Heron 1 await final tax clearance; partial payment being discussed with PetroChina.
  • Artificial lift at Heron 1 now operational; average output of 160 bopd with low water cut.
  • Preparations continue for well tests at Gazelle 1 and Gobi Bear 1, with low-cost re-entry options under review.

Petro Matad Ltd (LSE:MATD) is a Mongolia-focused oil exploration and production company with interests in Blocks XX and VII. The company has issued an operational update covering its activities in Blocks XX and VII, with developments in production, payment processing, and planning for future drilling and testing activities.

In Block XX, the company confirmed that invoices for oil produced from the Heron 1 well between October 2024 and April 2025 have been submitted for payment. However, PetroChina, the company’s partner, has requested confirmation from Mongolian authorities that the oil sales will not incur customs, VAT, or other tax charges before proceeding with payment. Discussions with authorities are ongoing, and both companies are exploring the option of making a partial payment with a portion withheld until formal clearance is obtained. Petro Matad’s tax advisors maintain that no such charges are applicable based on existing law and precedent.

Production at Heron 1, which initially flowed naturally, has now transitioned to artificial lift using a beam pump, as reservoir pressure has declined. Current production is averaging around 160 barrels of oil per day (bopd) with minimal water cut, under 6%. The company is assessing the feasibility of converting Heron 2 into a water injector to support reservoir pressure and potentially enhance recovery, drawing on experience from nearby Block XIX.

Efforts to reduce operating costs are also underway, with a project to connect the Heron 1 wellsite to the upgraded local power grid. The tender process is in the evaluation stage, and a summer completion is expected if commercial terms are favourable.

Looking ahead, Petro Matad is advancing planning for a well test at the Gazelle 1 discovery. Should the test be successful, production could be routed through existing Heron 1 infrastructure. Separately, a geochemical study of cuttings from Gobi Bear 1 has indicated the presence of migrated oil.

The company is considering low-cost re-entry and testing operations for Heron 2, Gazelle 1, and Gobi Bear 1 using a workover rig, as all three wells are already cased and suspended, which limits additional expense.

In Block VII, Petro Matad has completed the required Environmental Baseline Study and submitted documentation to the relevant authorities in pursuit of a formal Exploration Licence. The 2025 work programme and budget have been approved by Mongolia’s Mineral Resources and Petroleum Authority. Seismic data points to a possible large structure in the northeast part of the block, which will be further assessed.

Petro Matad shares were trading 32.45% lower at GBX 1.57 per share as of 30 May 2025. On a year-to-date basis, the share price has increased by approximately 4.70%.