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Petro Matad (MATD) - 6 fully funded wells to drill Q4 2018 to Q2 2019

lse:matd

#1

Broker Note : https://nofile.io/f/j90GYESdoet/MATD.pdf

Video Interview with CEO : https://www.youtube.com/watch?v=ra79wR0_jS0

Conference Call Audio from 10th July 2018 : http://s000.tinyupload.com/download.php?file_id=89956165754865029086

Snow Leopard-1 well is now nearing the latter stages of drilling and results expected in the next couple of weeks.

After that Wild Horse-1 well spud - one of the biggest wells to be drilled in 2018.

Billions of barrels onshore at play, Super Majors watching for results of drilling to look into farming in, upsides of the wells is large compared to the current share price.

And to put some figures on mid-case values :

2018 Mid case oil strike - 100% owned

Snow Leopard-1 90 MMBO circa 60p a share (early Sep 2018 result)
Wild Horse-1 480 MMBO circa 320p a share (Nov 2018 result)
Gazelle 13 MMBO circa 8.5p a share (Oct 2018 result)
Drill TBC - ?? MMBO circa ?,? a share (tbc…will be in Block XX) (Nov 18 result)

2019 Mid case oil strike - 100% owned

Red Deer-1 48 MMBO circa 32p a share (May?jun 2019 result)
Fox-1 200 MMBO circa 132p a share (May/Jun 2019 result)

Of course, thats not taking into account all the other prospects being derisked if they do strike oil…which adds yet more value.


#2

Summary :

Petro Matad (MATD)

Fully funded six well high impact drilling program in Mongolia, total prospective resources targeted 850 MMBO, ranging from near field E&A to basin opener potential:

  1. Snow Leopard-1 well (Block V)
  • Spudded 9 Jul 2018, 70 days max to complete, “results end Aug, early September”.

a) 90 mmbo recoverable from two main target depths (20 mmbo + 70 mmbo) (“Snow Leopard has 2 main target sections with c.90MMbo recoverable potential [mid case])”; plus

b) There could be oil in the shallow turbidite deposits opening up an extra 200+ mmbo play even before they hit the deeper levels. (“If shallow turbidite concept is proven then a large (200+ MMbo) combination trap play opens”).

c) Additionally, there are “3 or more additional stacked pay zones identified as potential upside.”

There are also 13 or 14 prospects/leads of up to 500 - 600 mmbo recoverable within 35 km of Snow Leopard 1 on their acreage. (“Success de-risks 14 prospects/leads with resource potential of c.500MMbo”).

Slide 26: First Well 2018: Snow Leopard Prospect, Block V
hTTp://www.petromatadgroup.com/wp-content/uploads/2018/06/Company-presentation-June-2018-final.pdf.

  1. Wild Horse-1 (Block IV)
  • Spud Sep 2018, “results late Oct, early Nov”.
  • Targeting 480 MMBO.
  • Named by Wood Mackenzie as in top 20 exploration wells worldwide to watch in 2018.
  1. Block XX
  • Near field Gazelle prospect targeting 13MMbo & rapid commercialization.
  • Spud late Sep 2018, complete Oct 2018 (3 weeks).
  1. Block XX
    -TBC
    -rapid commercialization
  • Spud late Oct 2018, complete Nov 2018 (3 weeks).
  1. New Red Deer prospect, 48MMbo in a basin analogous to nearby producing basins in Mongolia + northern China, within easy reach of existing infrastructure.
  • Spud late April 2019, complete May 2019 (3 weeks).
  1. Fox-1 (Block V)
  • Spud early Q2 2019.
  • Mean prospective resource 200 MMBO. High-quality 3D seismic late 2017.
  1. Fully funded
  • Oversubscribed placing in Jun 2018 provided final tranche of funding for all six wells above and management participated in placing.

  • Country already produces 21,000 BOPD (2017) from fields close to Chinese border, including from Blocks XIX + XXI adjacent to Petro Matad’s Block XX. Very attractive fiscal terms).


#3

And to put some potential figures on mid-case values :

2018 Mid case oil strike - 100% owned

Snow Leopard-1 90 MMBO circa 60p a share (early Sep 2018 result)
Wild Horse-1 480 MMBO circa 320p a share (Nov 2018 result)
Gazelle 13 MMBO circa 8.5p a share (Oct 2018 result)
Drill TBC - ?? MMBO circa ?,? a share (tbc…will be in Block XX) (Nov 18 result)

2019 Mid case oil strike - 100% owned

Red Deer-1 48 MMBO circa 32p a share (May?jun 2019 result)
Fox-1 200 MMBO circa 132p a share (May/Jun 2019 result)

Of course, that is not taking into account all the other prospects being derisked if they do strike oil…which adds yet more value.

.


#4

With regards to Snow Leopard-1 drill, tomorrow will be day 51 of drilling. Drilling and logging was to be “up to 70 days” and so one would expect they are getting close to TD. CEO thought they could finish in under 70 days, the 70 days comes from Sinopec, who MATD are renting the rig and crew from.

AGM is on 20th September.


#5

Edit.


#6


#7

Conference Call Audio from 10th July 2018. New link :slight_smile:

http://s000.tinyupload.com/?file_id=81857652199626046116

.


#8

Half year results out.

HTTPS://www.investegate.co.uk/petro-matad-ltd--matd-/rns/half-year-report/201809070700020584A/

All good, SL-1 ongoing.

I suspected that the Technical Permit (you need a drilling permit and a technical permit) was the problem for Block XX and they say regulatory problem caused the delay. Anyway, more time to assess seismic and then 3 wells back to back April onwards.

WH-1, the big one, on track after SL-1 completes.


#9

For me I have intimated elsewhere that delays to Block XX could be a positive thing.

As said before, if they have an oil strike at SL-1 or later at WH-1, they will be in a stronger farm out position with more cash in the bank.

They could, if they strike, say to a potential farm in partner, ok, we will appraise the discovery at SL-1 or WH-1 and therefore reduce your risk (and increase the selling price). Block XX money can be used for appraising a big oil strike at Block IV or V.

If they drill Block XX this year - no help.

If they drill Block XX after both Blocks IV and V (WH-1 and SL-1) are drilled, its much more beneficial to their negotiation position to farm out a discovery - as in use the cash to appraise and not for Block XX.

So, I am looking forward to Mike Buck’s SL-1 update, as he is as well it seems. At least he appears to be looking forward to updating us,


#10

All very positive stuff but seems they still don’t have that second rig …, two drills this year then ?


#11

Yes 2 this year. New schedule should be something like below, for now.

DRILL 1) Snow Leopard-1 well (Block V)
Spudded 9 Jul 2018, 70 days max to complete, “results expected mid September”.

a) 90 mmbo recoverable (mid case) from two main target depths (20 mmbo + 70 mmbo) (“Snow Leopard has 2 main target sections with c.90MMbo recoverable potential [mid case])”; plus
b) There could be oil in the shallow turbidite deposits opening up an extra 200+ mmbo play even before they hit the deeper levels. (“If shallow turbidite concept is proven then a large (200+ MMbo) combination trap play opens”).
c) Additionally, there are “3 or more additional stacked pay zones identified as potential upside.”

There are also 13 or 14 prospects/leads of up to 500 - 600 mmbo recoverable within 35 km of Snow Leopard 1 on their acreage. (“Success de-risks 14 prospects/leads with resource potential of c.500MMbo”).

Initial production of any find would be via trucking routes in the area to China.

DRILL 2) Wild Horse-1 (Block IV)
Spud Sep 2018, “results late Oct, early Nov”.
Targeting 480 MMBO recoverable. (mid case)

Named by Wood Mackenzie as in top 20 exploration wells worldwide to watch in 2018.

Initial production of any find would be via trucking routes in the area to China.

DRILL 3) Fox-1 (Block V)
Spud early Q2 2019.
Mean prospective resource 200 MMBO mid case. High-quality 3D seismic late 2017.
Initial production of any find would be via trucking routes in the area to China.

DRILL 4) New Red Deer prospect, 48MMbo recoverable (mid case) in a basin analogous to nearby producing basins in Mongolia + northern China, within easy reach of existing infrastructure.
Spud late April 2019, complete May 2019 (3 weeks).

DRILL 5) Block XX
Near field Gazelle prospect targeting 13MMBO recoverable & rapid commercialization.
Spud late May 2019
Near to existing production infrastructure which has spare capacity.

DRILL 6) Block XX
-TBC
-rapid commercialization
Spud late June 2019
Near to existing production infrastructure which has spare capacity.


#12

And all this for an Enterprise Value of £53m. I completely agree that this seems a great asymmetric trade. If Snow Leopard comes through then the shares trade on a good few multiples of where they are now, if it fails the price falls 30% while we await the big one. I have added more today.


#13

The jan 2018 fund raise was for a 4 drill programme this year I believe … which has now proven to actually only one (so far?) Two possibly without problems … I hope so!!
6 wells next year ?? on past performance probably not!!
confirmation you have the second rig might help … you have the cash but if you want to restore some confidence you really need to start delivering … IMO


#14

Bit of a comment from Malcy at 22:55 into the audio :

.


#15

Wouldn’t follow any of “malkies” tips … simply profiting from advertising and freebies.
Anyone making money will say whatever the highest bidder offers … I would … no hesitation
Either a company has the ability and resources to succeed or it’s just blagging to keep those in tow rich.
September 20th is getting close … let’s see what the rns has to offer … eh ?


#16

News out today…SL-1 is a duster, oil shows but thats all.

Off we go to Wild Horse-1.

480 Million barrels recoverable potential. Worth up to 320p a share.

Spud in the next 3 weeks.

The excitement builds again, and all those looking to buy in for Wild Horse-1 - now will be buying in.


#17

“The excitement builds again” for those who like to gamble maybe… some sort of a result would have provided some optimism… but a complete duster … nm


#18

My strategy here is very simple. Every one of those coming 5 wells if they strike oil is worth far more than the current share price, so you have back up recovery all the way to the final drill.

Wild Horse-1 is massive but very high risk. If it comes off this is going to over 100p in a flash, if it fails and with winter this is going to say 3.5p before recovering next April when drilling season starts and Fox-1 is spudding. So hold the shares over winter and you will see 8p or more in Spring ahead of spudding.

Fox-1 is massive too, but with much reduced risk, the 3D bright spot and local live oil in coring and high correlation of the coring result to seismic gives great confidence.

The good thing here as well is the SL-1 and WH-1 and Fox-1 are all in different basins so there is no relation of any result to any other drill…completely different systems so you can have 2 dust and 1 strike or 1 dust and 2 strike or all 3 dust.

And then the 3 proposed Block XX appraisal drills are also big in terms of the current share price. So lots of back up.

Wild Horse-1 is worth about 320p a share if it strikes good and is appraised - would push MATD over 100p on the initial news.

Fox-1 is worth about 132p a share, so again initial strike pre-appraisal about 60p a share.

Red Deer-1 is worth about 32p a share and quick into production.

Gazelle-1 is worth about 8.5p a share and quick into production.

AN Other-1 drill too…is funded.

My average is now 6.9p after buying a bucket yesterday and I will continue to average down in the event of Wild Horse-1 failure on the basis that there is still big upside from Fox-1 (which has all the signs it could be oil due to excellent 3D, bright spot on 3D, a coring well done nearby which had live oils shows and also tied in excellently with the seismic), Should all 3 big ones in Blocks IV and V fail - then you are left with the Block XX drills - all worth more than the current share price and they are in effect appraisal wells with RD-1 and G-1 and the other one.

Yes, this is a puntvestment (you dont put you real investment money here)…but can you name a better one on AIM ? So much upside potential and so much back up to support the share price on failure…as there is always another drill to come and no need to raise money as all 6 wells fully funded already thanks to placings earlier this year. After yesterdays buying I now hold 850K MATD and I am very relaxed with that as a punt- but for sure its going to be very exciting on Wild Horse-1 and Fox-1 drill results for sure…

IMO MATD remains the best stock out there on AIM to put a wedge of your puntvestment money in real shares (not short term crap like spread bets) and just hold and wait through all the drills and ride the downs to get one big up in one of the remaining 5 drills - or at least a small one like G-1 coming in to get you 8.5p a share and the very final Hail Mary… if you cannot afford to lose it - don’t risk it as they say. if you can afford the punt - you have exposure to serious upside with lots of back up (5 more wells to drill).


#19

Pro_S2009 do you have an estimate for success at Wild Horse. Naively looking at the map shown in the last presentation it would appear that Wild Horse has a substantially higher chance of success than Snow Leopard because it is a natural dome trap rather than a trap caused by a fault. I note that in the blurb for the Fox prospect MATD state that “large offset on bounding faults promote sealing”. Looking at the cross-section of Snow Leopard the bounding fault offsets were much smaller than in Fox, and MATD are reporting that the well failed because “bounding fault either not sealing or having been breached”. Makes you wonder why they have chosen to drill the wells in this order with seemingly the weakest probability well going first.

Completely agree that this is a punt with attractive economics if any one of the wells pays out.


#20

Contrariwise, they had underspent on Block V and were in effect in non-compliance with the license terms. They originally planned to drill Falcon-1 but the 3D which discovered Fox-1 also found Falcon-1 to be very much smaller than originally thought. So they scrapped Falcon-1. The only other well that was drill ready on Block V was Snow Leopard-1, and so this is why it was drilled first. In the mean time they are getting permitting to allow Fox-1 to be drilled asap in 2019 drilling season (April onwards). Wild Horse-1 is a 4 way dip, and these domes are the source of some of the major oil fields around the world. Now, in the official figures Wild Horse is around 10% CoS, thats because its a Wildcat drill with no data from any previous drill anywhere near it. So I think SL-1 was drilled first to qualify the spend requirement on Block V and also to get it out of the way before Wild Horse-1 which I think internally they see as a good potential one. Not as good as Fox, but good enough to get excited about.