Petro Matad has been forced to shut in wells at its Mongolian oil project after PetroChina again delayed taking and paying for its crude, the latest setback in a long-running battle with its partner.
The company said it had enough cash to keep operations going until 2027, but investors did not take the latest delay well, and shares fell 29%.
AIM-listed Petro Matad said PetroChina had confirmed in writing in August that it had resolved the internal issues holding up their 2026 oil sales agreement and would begin exporting and selling Petro Matad’s production.
But PetroChina has now said those discussions are still ongoing at its head office, and that its Mongolian subsidiary cannot process Petro Matad’s invoices until they conclude.
With PetroChina’s storage tanks near capacity and Chinese national holidays approaching in early October, during which imports from Mongolia are suspended, the Chinese company has told Petro Matad to stop delivering, prompting it to shut in its Heron-1 and Gazelle-1 wells.
Petro Matad called the development “unexpected and unwelcome” and said it had escalated the matter through regulatory, ministerial and diplomatic channels, including to Mongolia’s deputy prime minister, who has met PetroChina’s Mongolian management.
The company said it was also in talks with other potential buyers about alternative routes to market. This probably seems like the most sensible option given the problems it’s having with its current partner.
Today’s drop seems a little overdone, given it looks like a delay rather than a lasting operational issue. Petro Matad has faced numerous setbacks like this in the past, and shares have dropped back, providing a buying opportunity.