Petro Matad, the AIM-listed Mongolian oil producer, saw its shares fall on Thursday after releasing an operational update that failed to spark investor enthusiasm.
The company said the long-awaited 2026 Oil Sales Agreement with PetroChina is now close to being signed off, clearing the way for a year’s worth of stored crude to finally hit the market.
With roughly 35,000 barrels sitting in Block XIX storage tanks and oil prices climbing throughout the year, the company has the chance to sell at a substantially better price than if the crude had been sold month by month.
Approval stalled over issues involving the refinery contract, but Petro Matad now says that the issue is resolved and sign-off should follow shortly. As a backstop, it has also been sounding out independent Chinese oil traders, though the established export route remains its clear preference.
In terms of production, Heron-1 averaged 126 barrels per day over the first quarter with a low, stable water cut of around 3%, while Gazelle-1 has settled at roughly 123 barrels per day, comfortably ahead of forecast after water breakthrough was first detected. These are steady numbers, but hardly anything to get excited about.
Encouragingly, operating costs haven’t crept up since Gazelle came on stream last November, thanks to power savings from connecting Heron-1 to the national grid. The company is now weighing whether to hook up Gazelle too. Block XX has now produced more than 110,000 barrels since start-up.
Where there may be investor frustration is developments in a farm-out agreement, or a lack thereof. Talks with the most advanced potential farm-in partner are dragging on, with the partner opting to conduct further evaluations. Petro Matad management said it was ‘disappointed’ at the lack of progress.
Investors were evidently disappointed as well, and shares were 9% lower in early trading on Thursday.