Petro Matad, the AIM quoted Mongolian oil company, announces its audited final results for the year ended 31 December 2023. All monetary values are expressed in United States dollars unless otherwise stated.

2023 Operational Highlights

• The Company continued to push the Mongolian government and authorities to register Block XX Exploitation Area as State Special Purpose land and secured Cabinet approval for the certification in July. Continued bureaucratic delays in the government's regulatory processes to complete the certification led the Company to seek local level approvals in parallel.
• The Company raised $6.6 million to finance exploration drilling in Block V and its renewable energy joint venture focused on projects in Mongolia.
• The Velociraptor-1 wildcat well was drilled in Block V in mid-2023. Although the well was plugged and abandoned as a dry hole, it penetrated good quality reservoirs and source rocks and provides an excellent data point to high-grade other exploration areas in Mongolia. The operation also demonstrated that very low-cost exploration drilling can be done in-country with truck mounted equipment and a very small environmental footprint.
• Close cooperation and community support in Block V demonstrated that the Company's community outreach is fit for purpose.
• Petro Matad was chosen as the preferred contractor for the two new Production Sharing Contracts for which it had applied in the Mongolian Exploration Licensing round.
• The company formed the Sunsteppe joint venture with an experienced developer to pursue opportunities in the Mongolian renewable energy sector.

Mid-2024 update

• Local land access approvals are now in hand allowing operations to go ahead on Block XX in 2024 whilst the State Special Purpose Certification process is completed in parallel.
• Preparations are being finalised for completion of the Heron 1 well and the contractor has indicated that it should be ready to mobilise in July.
• Progress is being made on the exclusive green energy development projects that the Sunsteppe joint venture has high-graded at Choir (50MW Battery Storage) and at the major Oyu Tolgoi mine (24MW renewable energy supply for green hydrogen production).

2023 Financial Highlights

As of 31 December 2023, the Group's cash position was $4.5 million (inclusive of Financial Assets) (31 December 2022: $5.1 million).
The Group's net loss after tax for the twelve months ended 31 December 2023 was $5.93 million (31 December 2022: loss $2.95 million).
As announced on 2 February 2023, the Company raised gross proceeds of US$6.6 million from a Capital Raise comprising of the issue of 215,121,952 new Ordinary Shares at a price of 2.5p per share.

Mike Buck, CEO of Petro Matad, said:
"2023 proved to be a frustrating year on Block XX, where the significant step of Cabinet approval of State Special Purpose Certification for the area did not translate into a rapid renewal of Petro Matad's licence to operate. Whilst that certification is still to be finalised and is having to wait until after the imminent Mongolian parliamentary elections, the fact that we were recently able to secure locally approved land use agreements for the areas in which our next operations are planned, ends a very long wait. We share our shareholders' relief and excitement that the completion operations on Heron 1 will go ahead with contractors planned to mobilise in July to prepare the well for production. Negotiations with PetroChina for oil transport, processing, export and sale are ongoing with the support of the industry regulator.

Our shareholders' patience and support are much appreciated as is the dedication and motivation of our staff. The Company will be focussing maximum effort on moving the Heron development forward through the second half of 2024 and I look forward to updating you further."

Operations

Block XX: The Company continues to ensure that operational contracts and environment permits are in place to get the Heron-1 well onstream. Beam pump unit and related equipment, downhole completion and power generation equipment and power control systems are ready to be mobilised from storage and installed at Heron-1. Production tanks, sourced from PetroChina, will be relocated to the production site where installation fabrication and electrical work will commence once the well is completed. The Company and MRPAM have continued engagement with PetroChina, the operator of the Block XIX exploitation area and facilities located immediately north of Block XX, for co-operation with production operations and contracts to process crude oil at their facilities, crude export and sales at least during the initial phase of the Heron development. All crude oil will be supplied to the Mongol Refinery via pipeline, once the refinery is commissioned. Whilst these facilities continue to be constructed, trucking of Mongolia's oil production to China for refining will continue. The construction of the refinery and pipelines progressed in 2023.

The Company was in discussion with DQE Drilling (DQE), the main provider of drilling services in Mongolia for a multi-well development drilling and completion programme and signed a Memorandum of Understanding (MOU) in 2023. The terms included some deferral of costs to allow a portion of the drilling expenditure to be settled from future production revenue. However, MRPAM insisted that current regulations do not cater for multi-year contracting and accordingly the Company has concluded a Tender inviting all potential contractors to bid on drilling on Block XX. DQE was the lowest bidder and has been chosen to do the work. Final contract negotiations are underway and the Company will seek to incorporate the terms of the previous MOU within the framework of the current regulations.

Block V: The Velociraptor-1 wildcat exploration well located in the Taats Basin of Block V located in central Mongolia was drilled in June/July 2023 and reached a total depth (TD) of 1500m as planned, having encountered more than 350 metres of good quality reservoir sections. Unfortunately, the evaluation of cuttings and wireline logs did not identify any hydrocarbons and the well was plugged and abandoned. The well encountered geological markers close to prognosis at all levels. The primary objective Late Jurassic/Early Cretaceous Undur Formation was encountered at 1170m and had good quality reservoir sands interbedded with shales over a c.200m interval. In the secondary objective Early Cretaceous Shinehudag Formation, three thick sand units were drilled with average porosity of around 18%. The well was drilled by Major Drilling and operations were carried out on time and within budget with the full support and cooperation of the local community. Post-well studies concluded that excellent source rocks were encountered in the well, similar to those encountered in the nearby Snow Leopard-1 well drilled in 2018. The wells proved the presence of both excellent quality source rocks and good quality reservoir units in the Taats Basin and provide excellent data points for the evaluation of similar basins in this part of the country.

The Block V PSC is due to expire at the end of July 2024 and the Company's efforts will now focus on completing and obtaining all required permits and agreements from local authorities and MRPAM for the acreage to be handed back to the State without issue. The Company has fulfilled all of its obligations under the PSC.

2023 Exploration Licencing Round

The Company submitted applications for two blocks offered in the MRPAM promoted Exploration licensing round. Working Groups, comprising experts from MRPAM and MMHI were established and the Company successfully completed negotiations on the terms of the PSC and work programmes for each block. The Company's has focused on blocks in Mongolia that contain extensions of basins proven productive for oil across the international border in China. The government's approval process for the award of new exploration licences continued through 2023 and MRPAM expects awards once the new government is formed after the mid-2024 parliamentary elections.

Renewable Energy Opportunities in Mongolia

The Company's renewable energy vehicle, Sunsteppe Renewable Energy (SRE), made very good progress in 2023. In consultation with the Ministry of Energy, the need for a 50MW/150MWh battery energy storage facility in central Mongolia was defined. SRE's team completed the required feasibility studies and the grid connection study for the project was approved by the National Dispatching Centre. All required documentation was submitted to and accepted by the Technology Committee of the Ministry of Energy which subsequently approved the project. The application for the License to construct is now being prepared. SRE expects that this project can be brought onstream and be generating revenue e in 2025.

A second project involving a utility scale wind farm to supply renewable energy to generate green hydrogen for use at the major Oyu Tolgoi mine operation in the South Gobi is also progressing with a forecast timescale similar to SRE's battery storage project. The project is designed to demonstrate the viability of green hydrogen as a fuel for use in the mining industry in Mongolia and SRE is very excited to be involved. This initiative has the strong support of the Mongolian Government and a memorandum of understanding has been signed with the Ministry of Energy. A Japanese government grant has also been secured to support the project with another grant to be applied for later in 2024.

SRE and Petro Matad will determine, as these two projects proceed towards construction ready status, how best to fund them. Debt funding for similar projects is already established in Mongolia, leaving open the possibility that SRE can aspire to stay involved in the construction phase and establish itself as a key renewable power producer in the country. The potential for renewable energy in Mongolia is huge with solar and wind power set to make up an increasing part of the country's energy mix in the coming decades. This has been embraced by lawmakers, with Mongolia ratifying international conventions including the Paris Agreement. SRE has made good progress so far and has identified several other projects for consideration.

KeyFacts Energy: Petro Matad Mongolia country profile