Petro Matad Regulatory News (MATD)

7 April 2015

Petro Matad Limited

("Petro Matad" or the "Company")

Farm-out agreement for Block IV and Block V, central Mongolia

Highlights:

· Petro Matad enters into a farm-out agreement with BG Group for a 78% interest in Block IV and Block V, central Mongolia.

· Agreement will fund Petro Matad's share of a mutually agreed US$28 million work programme which will fulfil the minimum work obligations for both blocks within the current licence period to July 2017. To accelerate the exploration evaluation process the majority of the work will be undertaken in 2015 and 2016.

· Petro Matad will receive additional cash consideration to the Company of US$4.55m to fund ongoing operations and obligations.

The Board of Directors of Petro Matad is pleased to announce that it has entered into a farm-out agreement with BG Group whereby BG Group will acquire a 78% interest in Block IV and Block V in central Mongolia, with an effective date of 1 January 2015 (the "Farm-out").

Under the terms of the agreement, BG Group has committed to cover Petro Matad's portion of the agreed US$28m work programme, which is expected to include Airborne FTG Gravity and magnetics, 2D seismic, core holes and exploration wells, as well as providing additional cash consideration to the Company of US$4.55m, which will be used by Petro Matad as working capital to fund ongoing operations and obligations.

The transaction remains subject to the receipt of Mongolian Government approval and other Mongolian regulatory formalities. A further announcement, in relation to these conditions, will be made in due course.

Transaction Details

· BG Group to fund Petro Matad's share of an agreed US$28m Block IV and Block V accelerated exploration work programme in primarily unexplored areas of the blocks, which is expected to comprise:

─ Airborne Full Tensor Gradiometer and High Resolution Aeromagnetics programme in 2015;

─ 2,000 km 2D seismic acquisition programme in 2015;

─ Two 1,500m core holes in 2015; and

─ Two 3,500m stratigraphic wells, of which one is expected to be drilled in 2015, and the second is expected to be drilled in 2016.

· In addition, US$2.75m will be payable to the Company immediately upon completion and a further US$1.80m via payments of US$50,000 per month over 36 months. These proceeds will be used as working capital to fund ongoing operations and obligations.

· Petro Matad to retain operatorship in Block IV and Block V until such a time as there is an extension to the Block IV or Block V contract term, at which point BG Group will assume operatorship.

· BG Group will provide technical support, including a secondee to Petro Matad, whilst Petro Matad remains as operator, which will be particularly relevant for well planning and drilling operations.

· Following the transaction Petro Matad will continue to hold a 100% interest in Block XX and will hold a 22% interest in Blocks IV and V.

Commenting, Dr Oyungerel Janchiv, Petro Matad Acting Chairperson, said:

"I am very pleased to announce this agreement which will enable Petro Matad to move our exploration work on Blocks IV & V to the next stage. BG Group's decision to enter Mongolia is an endorsement of the potential within the acreage and Petro Matad's technical work to date. As a result of this transaction Petro Matad will be fully funded in relation to the remaining licence commitments on Blocks IV & V. We look forward to building a lasting relationship with BG Group".

Further information on Block IV

Through its subsidiary Central Asian Petroleum Corporation Limited ("Capcorp"), Petro Matad was awarded a Production Sharing Contract on Block IV on 29 July 2009 (as approved by a Mongolian Government Resolution on that date). Block IV lies in the southwest part of Mongolia, approximately 500 km southwest of the capital Ulaanbaatar. On 31 October 2011, a protocol was issued confirming the relinquishment of non-prospective parts of Block IV. The current area of Block IV, held by Petro Matad, is 28,900 km2.

Block IV consists of frontier acreage with four major sub-basins covering c.10,000 km2 and no exploration drilling to date. The basin definitions are based on full ~2 km by 2 km surface gravity coverage, final infill surveys conducted by Petro Matad in 2010, and more than 1,100 km of 2D seismic, which was acquired in three phases, in 2010, 2011 and 2013.

Further information on Block V

Through its subsidiary Capcorp, Petro Matad was awarded a Production Sharing Contract on Block V on 29 July 2009 (as approved by a Mongolian Government Resolution on that date). On 31 October 2011, a protocol was issued confirming the relinquishment of non-prospective parts of Block V. The current area of Block V, held by Petro Matad, is 21,100 km2.

Block V consists of frontier acreage with three major sub-basins covering c.5,000 km2 and no exploration drilling to date. The basin definitions are based on full ~2 km by 2km surface gravity coverage, final infill surveys conducted by Petro Matad in 2010, and more than 1,300 km of 2D seismic, which was also acquired in three phases, in 2010, 2011 and 2013.

Additional information can be found on the company's website. The Company's most recent operational update, dated 7 May 2014, is located at:  

 http://www.petromatad.com/wp-content/uploads/2014/05/07052014-Operational-Update.pdf

There are no profits attributable to either Block IV or Block V and no carrying value is ascribed to the blocks in the Company's accounts.

About Petro Matad Limited

Petro Matad is the parent company of a group focussed on oil exploration, as well as future development and production in Mongolia. At the current time, Petro Matad holds the sole operatorship of three Production Sharing Contracts with the Government of Mongolia. Block XX has an area of 10,340 km² in the far eastern part of the country, and Blocks IV and V have an area of 28,900 km2 and 21,100 km2, respectively, in the southwest part of the country.

Petro Matad Limited is incorporated in the Isle of Man under company number 1483V. Its registered office is at Victory House, Prospect Hill, Douglas, Isle of Man, IM1 1EQ.

Petro Matad was advised by Macquarie Capital (Europe) Limited in relation to this transaction.

Further Information:

Petro Matad Limited

John Henriksen, CFO

+976 11 331099

NOMAD and Broker

Westhouse Securities Limited

Alastair Stratton / Martin Davison

+44 (0)20 7601 6100

Financial Advisor in relation to the transaction

Macquarie Capital (Europe) Limited

Jon Fitzpatrick / Luke Kanczes

+44 (0)20 3037 2000