At long last it looks as though Petro Matad (LON:MATD) is going to be granted access to the Block XX Exploitation Area.
That is very important news for the group and could well lead to the first oil flow from its significant Heron oil discovery, before the end of this year.
The group is involved oil exploration, as well as future development and production in Mongolia.
The company holds a 100% working interest and the operatorship of two Production Sharing Contracts with the Government of Mongolia.
Block XX has an area of 214 sq.km in the far eastern part of the country and Block V has an area of 7,937 sq.km in the central western part of the country.
Analyst Daniel Slater at Zeus Capital considers this approval as removing the main impediment for development work on the group’s key asset, and paving the way for first oil later this year – a significant moment for Petro Matad that will herald the start of production and cash flow growth.
He notes that the £69m company needs to complete the various procedures to formalise the land access consent, which could take a number of weeks.
Slater suggests that it will also need to pick up its discussions with Petro China on selling its Heron production.
PetroChina produces oil next door to Heron, and the mooted plan is to truck Heron production to the Petro China facilities, before then selling via Petro China’s established trucking offtake route into China.
Against the Zeus Capital Total Risked NAV of 17p, the shares after the announcement are up 62% at 6.20p, offering still further upside.