Each year the small cap minnows take to the stage hoping to strike big. Funding is the first big barrier and with farm outs even eluding the likes of Hurricane Energy after making a number of huge discoveries, it’s not easy getting exploration (let alone development) underway in a market that to date has not needed to take much risk to make alot of money. But signs are there now that after 2 years of OPEC Oil glut management, and 6 years of free QE bluechip injected fluff, institutional investors are begining to look at riskier plays to kick start their high growth plans. PetroMatad’s RNS this morning reveals a fully funded 100% interest owned exploration plan for 2018 which offers investors a front seat at one of the most attractive high impact drilling campaigns on AIM this year. This is not a one drill wonder. There are 4 drills planned. Each one different and offering greater or lower risk/CoS (chance of success).
Investors have had to wait a few years for this campaign and it’s been far from straightforward. BG had initially agreed a farm out deal with MATD but later was forced to pull out after a root and branch cull of exploration by their new owner Shell. This is not uncommon and the likes of Ophir Energy are also feeling the brunt of Shell’s often slow and deliberate progress in Tanzania. BG and Ophir were going great guns until Shell came along. For MATD, it was now all about going it alone. Brave and not without dilution, the company raised $16.8m at 6.5p in January 2018. Funding now secured, it’s full steam ahead on 4 x exploration targets.
Today’s RNS hints that the earliest time any spud will occur on the first prospect ‘Wild Horse 1’ will be mid April 2018 and the latest possible would be circa June 2018. The drilling season closes down in Mongolia around end of November, so MATD will be keen to get on and drill the 4 targets swiftly. A second rig is being sourced for the 2 x drills planned for H2 on Block XX so it’s possible that they could have 2 drills underway at the same time subject to the timelines/drilling durations with the Sinopec Rig 4518.
Key catalysts near term are clearly the Seismics data which is due shortly and the environmental permits with the latter being the last barrier to spudding the first well.
In 2017, TheShareHub picked Providence Resources as a potential summer “heads up’ blockbuster after it revealed 2 x drills back to back in the Celtic basin. The share price was circa 9p and moved up to pre-TD levels of 20p notably some 4 months ahead of the planned Spud date. Unfortunately for PVR, the Seismics were off and nothing of significance was discovered. And that’s exploration for you. Mother nature has never made it easy for explorers. That said, with 4 x drill opportunities in 2018, MATD have essentially given share holders 4 lucky attempts to strike black gold. At today’s price of 7.125p, it might be worth getting the ‘early doors sleeping bag’ and ‘tent’ out if you want to secure a good seat – centre stage. Look out for upcoming Seismics and environmental permit news. Not for the faint hearted and clearly a punt, but at today’s share price levels, one or 2 drills look priced in for free.
The ShareHub initiates coverage on MATD (part of the ShareHub ‘Heads up’ calls for 2018) with a pre-TD share price target of 19p.
Current price 7.125p
RNS Number : 6423E
Petro Matad Limited
13 February 2018
Petro Matad, the AIM quoted Mongolian oil explorer, is pleased to provide an operational update for its planned 2018 work programme:
- Completed a US$16.8 million fundraising to execute a four well drilling programme on the Company’s acreage in 2018, with the first well, Wild Horse-1, planned to spud in Q2 2018 using the previously contracted and fully certified Sinopec Rig 4518
- Making progress to source a rig to drill the two well programme in Block XX in H2 2018
- Processing of the 2D and 3D seismic surveys acquired in Blocks IV and V respectively is ongoing. Data quality is very good and the work is progressing on schedule with final processed products expected by the end of Q1 2018
Blocks IV and V
The Company’s planned two well, back to back, exploration drilling programme will commence with the spudding of a well on the Wild Horse prospect in Block IV in the Baatsagaan Basin. The Wild Horse prospect is a prominent structural high well positioned to receive oil charge from two of the largest and deepest potential source kitchen areas in the Company’s western Mongolian acreage. The planned total depth (“TD”) of the well is 1,850 metres, penetrating a significant thickness of stratigraphy within closure. The Company’s mid-case estimate of prospective resources in the Wild Horse structure is 290MMbo recoverable, with significant upside potential (c.750MMbo recoverable) identified in 13 further prospects and leads in the same basin that would be partially de-risked by success in Wild Horse-1. The well is expected to take approximately 30-45 days to drill and log at a cost of approximately US$4 million.
Following Wild Horse-1, the rig will move to Block V and drill the Falcon prospect in the Tugrug Basin. The primary objective of the recently acquired 3D survey was to accurately delineate the cluster of prospects in the Falcon area to ensure the well is optimally located to penetrate the primary reservoir targets. Falcon-1 is planned to be drilled to a TD of circa 3,000 metres and it is expected that the well will take approximately 60 days to drill and log at a cost of approximately US$7 million. The Company’s mid-case prospective resource estimate for the Falcon prospect is 100MMbo recoverable with 180MMbo of follow up potential identified nearby.
The Falcon area has been high graded for early drilling as there is very good evidence, including live oil staining in reservoirs penetrated in a nearby deep core hole, that the petroleum system is working in the Tugrug Basin. As a result of this high grading, Falcon has moved ahead of the Snow Leopard prospect in the Company’s preferred drilling order. The Snow Leopard prospect remains an attractive target for exploration in the Taats Basin of Block V and the Company looks forward to drilling the feature with the results from the 2018 drilling campaign in hand.
Efforts are now focused on securing the necessary environmental, chemical and land use permits that are required prior to the commencement of drilling. The Company is targeting the spud of the Wild Horse-1 well as early in the Mongolian drilling season (mid-April to mid-November) as possible to provide sufficient time to fully complete operations and evaluate the results of the 2018 drilling programme. The exact timing of the first well spud is dependent upon securing the necessary permits. As a result of the ongoing engagement with the Ministry of Mining, the Ministry of Environment and the industry regulator MRPAM, the Company expects that Wild Horse-1 will spud in Q2 2018.
Sinopec Rig 4518, contracted for the 2018 drilling campaign in Blocks IV and V, has been stored for the winter in a Sinopec facility in southern Mongolia. Mobilisation will commence once the Company has secured the necessary drilling permits from the Mongolian authorities.
The Company is in active discussions with drilling contractors operating in Mongolia to secure a rig for its 2018 work programme in Block XX, and the Company is confident that a suitable rig will be contracted to enable drilling in 2018, as planned. The Company’s current intention is to spud the Gazelle prospect in Q3 2018, with a second well to follow on immediately afterwards at a location still to be determined, based on ongoing technical work.
The prospectivity in the northern part of Block XX, neighbouring the producing fields in Block XIX, offers a good chance of success with the potential to put commercial discoveries on-stream quickly, utilising spare capacity in nearby facilities. The recently approved two-year extension to the exploration term of Block XX allows the Company sufficient time to explore these near field opportunities, with the 2018 two well programme being the first step in that campaign.
Mike Buck, CEO of Petro Matad said:
“This is a very exciting time for Petro Matad as we head into one of the highest impact drilling campaigns any independent has undertaken in Mongolia. We are now deep into the preparation phase to spud our first well at Wild Horse-1 in Q2 2018. We are pleased to see that rig availability for our planned drilling in Block XX looks good. I look forward to updating the market on our progress as our preparations for this highly active year continue”.