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  • Writer's pictureMark Watson-Mitchell

Petro Matad – awaiting more news on Velociraptor-1, brokers value shares at four times price

Petro Matad – awaiting more news on Velociraptor-1, its brokers value the shares at almost four times current price

Today's announcement of the final results from Petro Matad (LON:MATD) for the year to end December 2022 contained no surprises by the Mongolian oil company.

The group's net loss after tax was $2.95m (loss $2.1m).

Operationally, the company is drilling ahead at Velociraptor-1, and making steady progress on securing the consents in order to begin its development programme on Heron.

Petro Matad holds 100% working interest and the operatorship of two Production Sharing Contracts with the government of Mongolia - Block XX which has an area of 218 sq km in the far eastern part of the country, and Block V which has an area of 7,937 sq km in the central part of the country.

The big focus is upon the Velociraptor-1 exploration well in the Taats Basin of Block V which was spudded on 13 June, targeting an inversion anticline prospect estimated to have 200m barrels of resource potential.

Encouraging results in the Velociraptor prospect would significantly de-risk two adjacent prospects on the Raptor Trend which together have Mean Prospective Recoverable Resource potential of an additional 375 MMbo.

Management Comment

CEO Mike Buck stated that:

"2022 saw an easing of Covid-19 related delays that had impacted service providers and cross-border activity. We were pleased that we were able to progress our preparations for Heron development, our negotiations with DQE Drilling and to continue our investigations on the Block V Exploration PSC.

This year we hit the ground running and set to work on a capital raise to allow Petro Matad to move ahead with testing the low-cost, high impact Velociraptor exploration prospect and evaluate new areas offered for licencing by the Mongolian government.

We have also ventured into the renewable energy sector in Mongolia through the SunSteppe Renewable Energy joint venture which we hope will generate near term opportunities for us and our partner.

We continue to push forward with our 2023 work programme which of course includes urging the government to certify Petro Matad's Block XX Exploitation Area as special purpose land.

Meanwhile we are delighted to have spudded Velociraptor-1 which we have wanted to drill for some time. Encouraging results here would significantly de-risk two adjacent prospects on the Raptor Trend which together have a resource potential of an additional 375 MMbo.”

Analyst Opinion – values range 14.5p to 17p a share

Analyst Craig Howie at Shore Capital, the group’s NOMAD and Joint Broker, states that he continues to see a very exciting time ahead for Petro Matad in news flow terms.

The Block XX arduous process to resolve the land access issue continues, with Howie looking forward to further updates regarding its resolution.

He is now expecting an initial result from Velociraptor-1 next month, believing that it could be one of the most important exploration wells to be drilled in the AIM-listed exploration and production sector this year.

Shore Capital sees considerable running room for the shares, maintaining its Risked NAV estimate of 14.5p for the shares.

Analyst Daniel Slater over at Zeus Capital, Joint Broker to the company, considers that Velociraptor is a potentially very significant catalyst for Petro Matad, with steep upside on success, and expects this to be the focus for the stock over the coming weeks.

Zeus maintains its total risked NAV on the shares at 17p, while keeping its positive outlook for the shares.

Conclusion – just ‘option money’

This morning the £45m capitalised group’s shares are holding steady at only 4.0p, which could well prove to be just ‘option money’ for the bigger bucks to be seen over the next few months.


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