Petro Matad Limited Provides Update on Production Operations At the Heron-1 Well
Highlights are: Heron-1 continues to flow oil to surface without the need for pumping; Produced oil is being transported and stored in the neighbouring Block XIX TA-1 facilities and to date 15,750 barrels have been delivered; Negotiations on the Cooperation Agreement arecomplete and it is now awaiting signature; and Petro Matad has signed a new Production Sharing Contract (PSC) in Mongolia. Heron-1 production: Production of oil from Heron-1 continues with the well on natural flow without the need for pumping. Stable production of over 200 barrels of oil per day is being maintained. At higher rates, reservoir sands are produced along with the oil and the installation of sand screens offers a cheap solution to this and will be programmed for the spring if the well continues to perform in this way. Surface modifications are also being reviewed with a view to capturing and using the associated gas that is produced along with the oil. The current inventory of Block XX oil in the TA-1 facilities in Block XIX stands at 15,750 barrels. The terms of the Cooperation Agreement have been agreed by the parties involved and it is now awaiting signature by the operator of Block XIX. This is expected in February after which sales revenue will commence. Under the Cooperation Agreement and applying the very favourable fiscal terms of the Block XX Production Sharing Contract, after payment of processing costs and transportation, and after the government's royalty and production share are deducted, Petro Matad will receive a net back of more than $40 per barrel based on a sales price of $70 per barrel. Block XX crude will be sold at the same price as Block XIX crude which is Daqing 33 minus $1/barrel. Daqing 33 is usually priced at a small discount to Brent, presently a 3.3% discount. At current oil prices the Block XX crude already in storage will generate revenue net to Petro Matad of circa $600,000.