Petro Matad (LSE:MATD) rose by nearly 30pc to 6.9p on Wednesday after announcing the resolution of a land-use dispute that had threatened to curb the progress of one of its critical wells.
Earlier this month, the £45.8m oil and gas firm took a hit when it announced that it had put Heron-1 on standby following a land licencing issue in its native Mongolia. The country’s provincial government had challenged Petro Matad’s legal right to use land at Heron-1 because ‘a tripartite agreement between two central government agencies and the province has not been executed’.
However, on Wednesday, the firm revealed that the government is now resolving these issues and has given it verbal approval to resume operations on Heron-1 while the necessary paperwork is completed. It is now preparing to drill the 8.4-inch hole section on the well while simultaneously working with the local governor to sign a land-use agreement.
Heron-1 spudded last month and is targeting a prospect with 25MMbo of mean prospective recoverable resources. Following completion, the rig will move around 5km to the location of another well called Gazelle-1, which has an estimated Mean Prospective Recoverable Resource of 13 MMbo
Although total standby costs relating to the Heron-1 delay are expected to come in at around $150,000, Petro Matad believes that it can make up on some lost drilling time. The firm said that, based on current forecasts, drilling operations on both Heron-1 and Gazelle-1 could be completed well within the normal operating period of the Mongolian drilling season.
Alongside Heron-1, Petro Matad is currently drilling its much-anticipated Red Deer-1 exploration well in the Asgat Sag Basin of Block XX in eastern Mongolia. The well, which the firm is drilling with the Daton Petroleum Engineering and Oilfield Service rig, is targeting a prospect with around 48MMbo of mean prospective recoverable resources.
It will reach a total depth of 2,100 over up to 35 days. Petro Matad, which remains well above the 4.8p at which it sat at the beginning of June, plans to bring a bring in a separate rig for testing if it makes a discovery. What’s more, it has signed a call-off testing contract to ensure that follow-up operations can begin as quickly as possible.