Petro Matad Regulatory News (MATD)

THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED BY PETRO MATAD LIMITED TO CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER THE MARKET ABUSE REGULATION (EU) NO. 596/2014 ("MAR"). ON THE PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE ("RIS"), THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

23 March 2020

Petro Matad Limited

('Petro Matad' or the 'Company')

Operational Update

Petro Matad Limited, the AIM quoted Mongolian oil explorer, is pleased to provide an operational update on its activities in Mongolia.

Highlights

Block XX Update

· Progressing Block XX Exploitation Licence Application

· Competent Persons' Report increases total mean unrisked in-place oil resource potential of the Heron structure by 20% to 194 million barrels

· Reservoir stimulation studies indicate significant improvements in recovery factor are possible

· Heron development base case increased to 33 million barrels recoverable

Portfolio Review

· Portfolio review underway seeking to balance a production focus with near field exploration opportunities as well as some additional potentially high impact opportunities

Covid-19

· Managing the impacts of the coronavirus pandemic on the Company's business

· 10 cases have been confirmed in-country with the first reported on 10 March

· Mongolian Government is taking a very proactive approach

Block XX Update

Following the success of the 2019 Block XX drilling campaign which resulted in the discovery of oil in the Gazelle 1 and Heron 1 wells, as well as Heron 1 delivering one of the highest flow rates ever recorded in Mongolia, Petro Matad is now focused on securing the Exploitation Licence, required under the Production Sharing Contract (PSC), to enter into the development phase on Block XX.

Block XX Exploitation Licence

Petro Matad has been advised by the Mongolian authorities that there is support at the highest levels of Government to grant the Exploitation Licence for Block XX to Petro Matad. The Government recognises that the Company has been the country's most active oil explorer over recent years and that the success of its 2019 exploration efforts is very well timed in light of the Government's commitment to the construction of the new domestic oil refinery.

The Government has recently adopted the internationally recognised Petroleum Resource Management System for assessing mineral and petroleum resources, which it is applying for the first time to the review procedure for Petro Matad's Exploitation Licence application. At the same time, the authorities also want to follow the steps used the last time an Exploitation Licence was granted in Mongolia (to Petro China in 2011). This process involves the preparation of detailed Appraisal and Reserves Reports. These have been completed and submitted and are now being reviewed by MRPAM, the industry regulator, and by the Ministry of Mining and Heavy Industry (MMHI). Once they are approved, a Plan of Development and Detailed Environmental Impact Assessment (DEIA) must then be submitted. The preparation of these documents is already well-advanced, and we are pushing hard to expedite the approval process and to secure the Exploitation Licence, although we expect it will take a number of months for the Government to go through its review procedures. The Company's Exploitation Licence application covers an area that includes both the Heron and Gazelle discoveries and the surrounding near-field exploration potential identified by the Company.

Competent Persons' Report (CPR) and reservoir stimulation studies

As part of the Reserves Reporting preparations, the Company commissioned Leap Energy to prepare a CPR for the northern part of Block XX where the Company's discoveries are located. The CPR concluded that the Heron structure has mean, unrisked in-place oil resource potential of 194 million barrels. This is 20% higher than the Company's initial internal assessment and offers the potential for substantial commercial value given the low-cost, onshore operating environment and the favourable Mongolian fiscal regime.

Fenix Consulting Delft, a specialist in reservoir stimulation, has modelled the Heron 1 well test data to assess the production and recovery potential of the Tsagaantsav oil sands found in the well. They concluded that modern stimulation techniques and reservoir pressure support through produced water re-injection can improve oil recovery significantly from the levels achieved to date in neighbouring blocks. Further enhancement by slanted or horizontal drilling to increase reservoir contact and radial drilling to enhance wellbore drainage are additional technologies under consideration to increase well productivity. These techniques have not been widely used in Mongolia to date.

The work conducted by Fenix combined with the resource numbers from the CPR support the base case submitted to the Mongolian Government of an appraisal/development programme on the Heron discovery targeting a mean recoverable reserve of 33 million barrels using a recovery factor of only 17%. This is in line with what has been achieved to date in Mongolia and there is considerable upside potential that could be realised through the application of the improved oil recovery techniques as detailed above.

Portfolio Review

Blocks IV and V

Following post well studies on Wild Horse 1 and recognising the short time remaining on the Block IV PSC without any clearly defined, high-graded drillable targets, the Company has proposed to the Government to relinquish the Block with a view to potential partnering and relicencing of its more prospective areas in the future.

Petro Matad has a significant competitive advantage in that it has deep technical and operational knowledge of the basins of western Mongolia, more so than any other operator. This presents an opportunity for other industry players to leverage these insights by partnering with Petro Matad under an appropriate arrangement.

On Block V, Velociraptor, Fox and Phoenix are high impact prospects that the Company has matured to drillable status in the Taats and Tugrug Basins where it has proved that active petroleum systems are present. The Company would like to drill these prospects. To this end, Petro Matad has proposed to the Government a moratorium on the Block V PSC to give more time for the Company to secure partners and/or funding for the next phase of Block V exploration. The moratorium application is currently under discussion and we will update the market on these discussions in due course.

Portfolio Development

The Company has submitted a request to the Government to review data on specific areas not currently licenced in Mongolia with a view to signing new PSCs and re-loading the portfolio to provide a balance of production, development, appraisal, near field and high impact exploration.

Covid-19

The Mongolian Government has taken a very proactive approach from the start of the coronavirus outbreak. Public gatherings are banned until the end of April at the earliest and Mongolia's land border with China has been closed to everything but cargo, which has also periodically been the case for its border with Russia. After the identification of the first case of the virus reported in the country on 10 March, when a visitor from Europe arrived and subsequently tested positive, all international flights were suspended until at least 30 April. Currently there are 10 confirmed cases in the country, all but the first being Mongolians repatriated from abroad, quarantined on arrival and who subsequently tested positive. The country has closed its borders to all foreigners entering for the time being. These measures, if prolonged, will impact the oil sector in Mongolia, which relies heavily on Chinese equipment and workers in its production and development operations.

Currently there is no significant impact on Petro Matad's operations as we remain focused on working with the Mongolian authorities to secure approvals and permits. The Government ministries are open and functioning as normal. Petro Matad's senior Mongolian managers are in country and operating normally. Some international members of the team are working from their home locations. The Company is liaising with the authorities and taking all precautions to ensure the safety of its staff and contractors.

Mike Buck, the CEO of Petro Matad said:

"Our staff and contractors are working exceptionally hard in the highly unusual circumstances that the ongoing coronavirus pandemic has generated and the Company is very appreciative of their commitment and diligence. We are monitoring the situation closely and are pleased to advise that there has been no significant impact on Petro Matad's operations, whilst we focus our efforts towards securing approvals and permits for the Company's near-term work programme.

Progressing the Block XX Exploitation Licence is taking longer than we had hoped but we are encouraged by the level of support we are seeing from the relevant authorities and the highest levels of Government as we go through the process.

The recently commissioned CPR has concluded that the Heron discovery has the potential to contain mean, unrisked, in-place oil resources of 194 million barrels. This is 20% higher than our initial internal assessment and highlights the significant resource potential of this proven play.

As we work towards securing the Exploitation Licence for Block XX, we are actively managing our cash resources and evaluating our partnering and funding options to ensure that we are well placed to rapidly develop the Heron discovery and start generating revenue as soon as possible after the Exploitation Licence is in hand. We are also looking at refreshing the portfolio to incorporate a balance of risk and reward as we plan for the Company's future as an oil producer and explorer in Mongolia."

Further updates will be provided in due course.

-Ends -

For further information please contact:

All Reserves and Resources definitions and estimates shown in this report are based on the 2018 SPE/AAPG/WPC/SPEE Petroleum Resource Management System ("PRMS"). The in-place resource potential for the Heron discovery quoted in this release is taken from LEAP Energy's Competent Persons' Report. Recoverable resource assessments are based on the Company's assessments.

Technical information in this news release has been reviewed by the Company's Exploration Manager, Mr. Jerry Smart. He has 37 years of industry experience in oil and gas exploration and production with LASMO, Eni, Salamander Energy and Ophir Energy. He holds a B.Sc. in Geology from King's College, London.

Glossary

About Petro Matad

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 100% working interest and the operatorship of three Production Sharing Contracts with the Government of Mongolia. Block XX has an area of 10,367 square kilometres in the far eastern part of the country, and Blocks IV and V have an area of 29,062 square kilometres and 21,143 square kilometres, respectively, in the central western 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.