Operational Update

THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED BY PETRO MATAD LIMITED TO CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER THE UK VERSION OF THE MARKET ABUSE REGULATION (EU) NO. 596/2014 AS IT FORMS PART OF UNITED KINGDOM DOMESTIC LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018 ("UK MAR"). ON THE PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE ("RIS"), THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

Petro Matad Limited

('Petro Matad' or the 'Company' or the 'Group')

Operational Update

LONDON, 13 March 2025: Petro Matad Limited, the AIM quoted Mongolian oil company is pleased to provide the following operational update.

Key Company Updates

· Heron 1 production continues with c. 25,000 barrels now in storage in Block XIX.

· The Block XIX operating committee has today confirmed acceptance of the oil sales agreement and execution copies are being uploaded to their online system for sign off.

· Evaluations are underway to support a set of low-cost activities for 2025 in Block XX focused on operating cost reduction and production increases at Heron 1 and the potential to conduct workovers/well tests at Heron 2, Gazelle 1 and Gobi Bear 1.

· With oil now flowing from Block XX and the investment environment improving under the current government, Petro Matad is stepping up efforts to secure a partner to accelerate its oil development activities. Discussions with three entities are ongoing.

· Sunsteppe Renewable Energy is progressing four exclusively held projects with strong government support for the sector.

Operational Update

Block XX

The Heron 1 well continues to produce steadily at c. 200 barrels of oil per day. Pressure data is being acquired to facilitate production analyses to determine what modifications can be performed to increase the sustainable production capacity of the well. To date the well has produced over 25,000 barrels of oil with a water cut of c. 4% and pressure data shows no signs of boundaries encountered within the reservoir as yet. With a recent upgrade to the eastern Mongolian power grid, a short (4 km) tie-in of Heron 1 to the electricity grid can reduce power generation costs significantly, offering a saving in operating expense of c. 25%. The Company is going out to tender for this work.

Oil continues to be shipped to Block XIX. The operating company has today confirmed acceptance of the oil sales agreement and that execution copies are now being uploaded to their in-house online system for sign off. Petro Matad has been chasing for progress on this as the start of revenue is already long overdue. It now appears we are in the final stretch. Even though Block XIX has tank capacity available to store many more months of Block XX production, Petro Matad has been investigating arranging its own shipments and sale of Block XX crude in case of further delay. The current inventory of Block XX oil in the Block XIX facilities constitutes a suitable cargo size to offer for sale. However, the cooperation with Block XIX remains the most cost effective and the preferred solution.

Block XX - Heron 2

Analyses of the Heron 2 well continue in order to evaluate the potential for remedial work that may help deliver a commercial flow rate. That the nearby Heron 1 well has yet to see any pressure impact of a boundary, that might reflect a degradation in reservoir quality (that is suspected as the reason for low production in Heron 2), gives reason to believe that a workover and further stimulation of Heron 2 may be worthwhile. A workover at Heron 2 could be combined in a cost-effective manner with well testing of the nearby Gazelle 1 oil discovery. Gazelle 1 is now considered to be a candidate for test production as it can share the nearby Heron 1 production operation and infrastructure. A well test at Gazelle, if successful in achieving a similar production rate to Heron 1, would pay back within a couple of months. A well test of Gobi Bear 1 is also being considered. Geochemical analysis of rock samples has given an indication of migrated hydrocarbons in the well. More samples are being sent to the contractor to confirm this finding which would give support to the log interpretation of potential oil pay in the well.

In light of the fact that the current Mongolian government acted quickly in 2024 to overcome previous delays and so facilitated operations on Block XX and in 2025 is striving to improve the overall investment climate, Petro Matad is stepping up its efforts to secure a partner to join it in developing the Heron oil field and the rest of Block XX. The Company is targeting financially and technically competent companies with a view to secure an injection of capital investment to drill new wells to accelerate production ramp up and so enhance value. Discussions are ongoing with three entities at this time. The Integrated Service Agreement signed with Mongolia's main provider of well services, DQE Drilling, for a multi-well development drilling and completion programme remains in force and the Company has the option to utilise this arrangement as may be appropriate and with minor adjustments to facilitate regulatory approval.

Sunsteppe Renewable Energy (SRE)

Mongolia's coalition government, which came into power in June 2024, has given very strong support for renewable energy and has prioritized reform of the domestic energy sector including the acceleration of tariff increases for end-users, in order to improve the investment environment and to attract local and international investors. In parallel, the Ministry of Energy has announced that Mongolia's domestic energy demand will double by 2030, increasing by c. 1.6 gigawatts. This highlights the need for new power generation capacity in Mongolia and SRE is well-positioned to capitalise on the opportunities this new government focus is generating.

Additionally, Mongolia is in advanced discussions with Gulf countries including the United Arab Emirates and Saudi Arabia and their respective major renewable energy investors, to accelerate the development of large renewable energy export projects from Mongolia to China. Interactions between the Mongolian and Chinese governments have intensified with China officially agreeing to begin collaboration on Mongolia's energy export projects. China has announced its need for over 450 gigawatts of clean energy to meet its increasing domestic demand and sees renewable energy imports from Mongolia as a component to meet this need.

Recognising SRE's international experience and its active involvement in renewable projects in Mongolia, the government invited SRE's CEO to participate in recent visits to the Gulf and to China and this has given SRE some excellent exposure and insight. In parallel with this, SRE has signed confidentiality agreements with a number of potential investors and has shared with them details of its ever-increasing portfolio of projects in Mongolia.

SRE's portfolio currently includes four exclusively held projects:

1. Oyu Tolgoi (OT) mine Green Hydrogen: The completed feasibility study has confirmed the commercial viability of this c. 30MW project comprising a solar and wind plant to generate Green Hydrogen for OT and it offers an attractive internal rate of return of c. 15%. Intensive discussion with OT continues and meanwhile SRE is preparing for the construction of the first 4.8MW phase of the project and has engaged with leading Chinese and international contractors with proven expertise in Green Hydrogen facilities for the execution of phase 1 and of the entire project. In line with the Japanese government grant timing, project construction is set to commence within 2025. Discussions with OT on an offtake agreement to include Hydrogen and power are set to start and once this agreement is finalised, SRE will look to introduce investors and debt providers. Interest for equity and debt participation has already been expressed by potential partners.

2. Choir 50MW Battery Energy Storage System: The original timescale for this project has slipped pending land allocation for the facilities but suitable land within 3 km of the substation tie-in point is expected to be offered by the authorities shortly following last week's Cabinet approval of Mongolia's countrywide 2025 land plan. Once land is secured, this will allow completion of environmental permitting and the application for the license to construct. This will be followed by negotiation of the Power Purchase and Sale Agreement. SRE plans to bring in investors on equity and debt once this agreement is in place.

3. 1,500MW export to China: SRE has an exclusive cooperation agreement with leading Chinese utility, State Power Investment Corporation (SPIC), for a large export to China project. It is hoped that the vigorous government-to-government discussions now underway to get such export projects moving will allow SRE's project to advance more quickly than was originally envisaged. SRE is keen to retain up to a 30% interest in this mega-project in the construction phase, in order to attract interest from some of the major international investors with whom SRE is in discussion. SPIC so far seems open to SRE's aspiration.

4. 200MW Hybrid project: SRE has signed an exclusive agreement with Mongolia's Bodi Group which is developing a 600MW energy project. So far one 150MW coal fired power station has been commissioned with another 150MW phase under construction. Bodi and SRE are partnering to develop renewable energy capacity alongside the power plant. This project is particularly attractive as it has an approved Power Purchase Agreement (PPA) with the Mongolian government at a very attractive sales price of 8.9 US cents per kWh for 600MW and the parties are keen to replace at least 200MW of this with renewable power supplied from a hybrid solar, wind and battery storage plant. SRE is responsible for feasibility studies and securing regulatory approvals. SRE has already identified a suitable solar project site within 30 km of the tie-in point. Bodi will assist in securing land approvals. This renewable energy/decarbonisation project has attracted early interest from multilateral financial institutions and international investors.

Mike Buck, CEO of Petro Matad, said:

"As we prepare for the 2025 operational season, our priority is securing revenue from the sale of Block XX oil. We were pleased to be informed today that the oil sales agreement negotiated with our neighbouring operator in Block XIX is approved and being prepared for sign off. We are looking at the potential to sell cargoes ourselves in case of further delay but the oil sales agreement remains our preference.

When the operating season starts in Q2, we have plans to conduct some relatively low-cost activities to reduce the Heron 1 operating expense as well as to enhance production and so increase revenue. With the completion of ongoing evaluations, these activities will focus on some or all of the Heron, Gazelle and Gobi Bear wells.

Our efforts at Heron coupled with the new government's efforts to improve the investment climate, create good conditions for us to step up efforts to find a partner for Block XX that can inject capital, and possibly expertise, to accelerate production ramp up and increase project and shareholder value.

We are very encouraged by the performance of SRE. The portfolio continues to grow with additional opportunities currently under evaluation for inclusion. Exclusive agreements are in place on four sizeable projects offering double digit rates of return which are already attracting interest from well-financed prospective partners. We are targeting the finalisation of PPAs on these projects which is the point at which commercial details of partnerships can be negotiated."

Further operational updates will be provided in due course.

- Ends -

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About Petro Matad

Petro Matad is the parent company of a group focused on oil exploration, development and production in Mongolia. Currently, Petro Matad holds a 100% working interest and the operatorship of the Matad Block XX Production Sharing Contract with the government of Mongolia. Block XX has an area of 214 square kilometres in the far eastern part of the country. The Company also holds a 100% working interest and operatorship of the Borzon Block VII Production Sharing Contract with an area of 41,141 square kilometres in southern central Mongolia. 

Petro Matad Limited is incorporated in the Isle of Man under company number 1483V. Its registered office is at Victory House, Prospect Hill, Douglas, Isle of Man, IM1 1EQ.