Location map source: KeyFacts Energy

Petro Matad Limited, the AIM-quoted Mongolian oil explorer, provide an operational update. 

Block XX 2019 Drilling Programme

Mapping of reprocessed 2D seismic data in the northern part of Block XX has confirmed and enhanced the trap definition of both the Heron and Gazelle Prospects and final drilling locations have now been selected. 

Heron Prospect

Based on the latest mapping, the Heron Prospect appears to be the southerly extension of a proven oil-bearing structure drilled by the PetroChina discovery well T19-46-3 in Block XIX. The data indicates that the majority of the structure, including the mapped crest of the trap, lies in Block XX. The previously identified upside potential immediately east of the Heron Prospect has now been confirmed to be part of the same structural trap and this has increased the mean prospective recoverable resource assessment for the Heron Prospect to 25 MMbo. The Heron 1 well location that has been chosen is 1100m from the T19-46-3 discovery well and the primary reservoir targets at Heron 1 are prognosed to be at approximately 2800m, roughly the same depth as they were encountered in the discovery well. Overall, the Heron trap covers 13km2 and has approximately 800m of vertical relief. Heron 1 is planned to be the first well in Petro Matad's 2019 drilling campaign.

Gazelle Prospect

The Gazelle Prospect has been confirmed by remapping and is located on the south-western flank of the Tamsag Basin, which is the primary source kitchen charging the Block XIX discoveries. The Gazelle 1 well location has been chosen and is 5km west of Heron 1 and 4.5 km southwest of PetroChina's T19-46-1 discovery well in Block XIX.  Based on Petro Matad's mapping it is difficult to define a structural trap for the T19-46-1 discovery suggesting that in part the accumulation may be stratigraphically trapped. This high-grades the potential of the Gazelle Prospect which is located on the migration pathway for oil passing through T19-46-1 and south-westwards out of the kitchen area. There is also evidence of an improvement in reservoir quality on the western flank of the Tamsag Basin where Gazelle is located. Gazelle 1 will be drilled following the completion of operations at Heron. The mean prospective recoverable resource assessment for the Gazelle Prospect remains unchanged at 13 MMbo which is the estimate for the structural trap alone and does not include the stratigraphic upside.

Red Deer 1

The previously chosen Red Deer 1 drilling location is unchanged and the well will target a basin centre, fault bounded, structural closure in the southern part of Block XX. It is located in a so far undrilled basin, but one that is adjacent to productive basins that have the same geology and petroleum systems as Mongolia's main producing area to the northeast in Block XIX and producing basins to the east in China. The mean prospective recoverable resource assessment for the Red Deer Prospect is 48 MMbo.

Environmental Permits

Environmental permits for drilling at the Heron and Gazelle Prospects have been approved and are currently being amended to allow for appraisal wells to be drilled in the event of success. 

The environmental permit for the Red Deer Prospect has also been approved and already includes provision for an appraisal well in the event of success. The Company's Corporate Social Responsibility (CSR) team has been mobilised to the local communities near to the planned wells and the feedback received to date is that the citizens and herders are supportive of the Company's drilling plans.

2019 Rig Tender

The Company has received approval from the industry regulator, Mineral Resources and Petroleum Authority of Mongolia (MRPAM), for a two-rig strategy and we are in the process of finalising contracts with the chosen drilling contractors to secure a shallow rated rig suitable for the Red Deer and Raptor Prospects, and a deeper rated rig suitable for the Heron, Gazelle and Fox Prospects. Both rigs are currently located close to Block XX. The shallow rig is 125 km from the Red Deer location. The deeper rig is 20 km from the Heron location. Both rigs were working until the end of the 2018 drilling season and have been inspected and are suitable for the operations planned. 

While the two-rig strategy will add slightly to rig mobilisation and supervision expenditure, the cost increase is not significant. The key benefit of the strategy is that it enables simultaneous drilling which will improve the possibility that the three well Block XX drilling programme can be completed early enough in the 2019 drilling season to allow for appraisal drilling to immediately follow any success, should that be our choice. It could also facilitate an earlier move of one rig to Block V to mitigate the possibility of operations there running into the winter period. 

We are still targeting a second quarter 2019 spud in Block XX and the exact timing depends upon finalising the drilling contracts and the speed with which the drilling contractors can source key materials and mobilise. We will provide further updates on this in due course.  

Block IV and V PSC Extensions

The current exploration terms of the Blocks IV and V PSCs are due to expire in July 2019. As the Company is sufficiently encouraged by the results of the 2018 drilling programme, we are currently preparing documentation to apply for two-year extensions on both blocks. As both PSCs are in good order, with all financial commitments having been met, we do not expect issues to arise with these extension applications.

Block IV and V Post-Well Analyses

Post-well analysis of the 2018 wells continues. Snow Leopard 1 (Block V) well data has confirmed the presence in the Taats Basin of organically rich source rocks, within the oil generation window and of a similar age to the proven source rocks seen in the producing basins of eastern Mongolia and north-eastern China. These findings have significantly enhanced prospectivity in Block V, particularly the Raptor Trend of prospects located on the southern basin margin that are well placed to capture oil migrating from the source kitchen in the basin centre to the north. Work is ongoing to integrate the results of the post-well analyses into maturing prospects to drillable status. We are targeting mid-year to select the preferred target for the next well in Block V. 

Further analysis of the cuttings near the base of Wild Horse 1 (Block IV) recovered an oil extract which suggests that source rocks exist within the Baatsagaan Basin although no organically rich rocks were encountered in the well.   

Mike Buck, the CEO of Petro Matad said: 
"The Company has made good progress since the last operational update. I'm particularly pleased with the results of the northern Block XX seismic reprocessing which has significantly improved the mapping and structural definition of the Heron and Gazelle Prospects and has increased our resource estimate for Heron. As the first well in the programme, Heron 1, is an appraisal of a discovery made in Block XIX, the probability of encountering hydrocarbons is good.   

The two-rig strategy further enhances the ability to appraise any discoveries made in the Block XX 2019 programme and the Raptor trend in Block V is also showing encouraging signs of prospectivity. We are well placed to commence drilling in Q2 and look forward to providing further updates." 

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