Petro Matad (LSE:MATD) — Operational Update

0:00 Good morning, and welcome to the PETRO MATAD LIMITED Operational Update. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and they can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and publish responses what is appropriate to do so. Before we begin, I would like to submit the following poll. And I would now like to hand you over to CEO, Mike Buck. Good morning to you. Good morning, and good day to everybody that's dialing in for this presentation. Thank you very much for your attendance. We really appreciate your interest. We got four members of the team with us today, myself and and Jerry Smart, to deal with the the oil side of the business, and we've got Zula and Ngbata from Sunstep to deal with our renewable energy piece.

0:57 And, hopefully, you can all see if you're set up that way. You can see our our presentation on the on the screen. So what we'd like to do is give you a bit of an operational update for 2025 and a look ahead for 2026. I'll kick off and then I'll hand over to the various members of the team for their bit. So a little bit of an update on the Mongolian oil industry. We'll deal with oil first of all. I think as you may be aware, the new government in Mongolia which came in in the middle part of twenty twenty four has been prioritizing energy independence. It's not unique amongst countries around the world in that respect. But of course, Mongolia being landlocked between just two neighbors, Russia and China, has always had a dependency that it would really like to get away from.

1:48 And that energy independence has been focusing most recently under the new government on reinvigoration of the oil sector and on the renewable energy potential of the country. So we feel quite well placed given that we've been active in the oil sector in Mongolia for as long as we have and also the the move we took back in 2020, 2021 to get involved in renewables and and that's moving very well and we'll talk you through that as we go. So our usual production chart on the top right hand side of this slide shows you Mongolia's daily crude production and the red line at the top is what they need to fill the refinery that they're building. So as you can see, even at peak production back in 2015, they're falling short of that. And the government recognizes this and is very, very motivated to try and move things along.

2:36 Hence, PETRO MATAD having been stuck for a number of years was able under the new government to get a lot of things sorted out very quickly and come on stream, and we'll talk you through what we're up to on our producing assets now. But as you can see, there's a big gap to fill here and the government is very, very well aware of this and wants to prioritize bringing in new companies, making sure whoever's discovered oil gets it on stream. So we've got no obstacle when it comes to actually selling our crude. And once that refinery is finished, and I'll say a little bit about that in a moment, then we've got, you know, the the potential for savings on trucking costs etcetera. PETRO China operates 90% of this production. They're our neighbor and they're cooperating with us in our production operations and Mongolia's refined product consumption as a country is now in excess of 56,000 barrels a day of of refined product. And at the moment, it's having to import all of those, which is why it's gone down the route of having a domestic domestic refinery.

3:44 But as I say, it does need the crude to fill it. So it's working hard on that. The refinery status, the last the latest published schedule was to have the refinery operational by 2028. Although there have been some reports recently that that might come forward. If it does, it will be the first time that it's come forward. Usually, it slips year on year, but they are saying 2027. I even saw somewhere that said 2026, but I I I doubt that very much. So that refinery requires 30,000 barrels a day of feedstock. And as I say, there's a there's a there's a gap that that needs to be filled. And we are certainly hopeful that our block 20 production can can help fill that fill that void.

4:32 The pipeline, the picture at the bottom, it was taken during the summer of this year. The pipeline that is going to take the oil from the Block 19 And 21 fields that PETRO China operates just to the north of us to the refinery site, which is 550 kilometers away. That pipeline is now buried. I I I drove down the pipeline road the the other day. It it's basically all buried, and now they are working on the pumping stations. So the work on the pipeline has gone very, very quickly, and that should be finished, well, probably before the refinery is ready. But we are very much hoping that once that pipeline is in operation that will offer us a much more cost effective route to market than the current trucking operation which takes our oil to the PETRO China facilities where it's processed and then 300 kilometers across the border into China for refining.

5:24 Fair to say that PETRO China does do a very good job of trucking and it is quite cost effective but we are very much hopeful that the pipeline route to the refinery will be a lot more environmentally friendly and a lot cheaper. I will now hand over to Gerry to talk you through the status of our operations at Heron And Gazelle in Block 20. Gerry? Thank you, Mike, and good morning, everybody. Good afternoon, wherever you are in the world. I'm Gerry Smart. I'm the technical and subsurface manager. So just a few slides on where we are, stages of our activities in Block 20, and then a slide on our ambition for next year in 2026.

6:10 So we'll start with the Heron field. So the two pictures on the slide are the Heron production site with the nodding donkey and the two tanks and the office and the generator housing. And the one below is a more recent picture showing the installation of the electric pylons and the transformer there. And now I'm pleased to say that actually the Heron Well site is fully electric powered, so that project has now completed. And I'll talk a little bit about that in a minute. In terms of production, we've exceeded about 70,000 barrels of production since we started in October last year. Pleasingly, the water cut is very low still at less than 3%, and we've actually not seen any free water at all, in fact, to date. Currently, the well is delivering somewhere between 135 to 145 barrels a day.

7:06 Very stable production in line with some of the better wells that we know about in Block 19. So the well is actually performing pretty well, and it's actually producing to our forecast, so that's very pleasing. We think we're accessing quite a large volume of rock, the frack that we did and stimulation that we did, we think is accessing a little oil sand beneath the main upper sand that we didn't test originally, but we know from petrophysics is oil bearing. So I think the rock volume we're accessing is larger than just the sand we perforated, so that may be why the well has been stable because it's accessing quite a large amount of rock. As you know, the oil gets transported about 25 kilometers to north through the Block 19 facilities, and we've made over now three thirty loads delivered to that facility, you know, and and that's a frequent, but we do it at least every day, both now with Gazelle as well. So that's an ongoing activity.

8:09 The power line, as I said, 10 kV power line is now installed, and that's now so the generator is off, so we're not burning any more diesel at at Heron, which is good for both cost saving, but also for emissions as well. So that's a a great project the team managed to do. Not something an oil company is usually qualified or even knows how to do it, but we got it done in very good time, in fact, so we're very pleased with that. And I'm sure you're aware that all operations in the field are actually done by my Mongolian colleagues, a team of eight on rotation, and most of whom actually come from the local zoon, the local villages, if you will, so that's great, so it's a really local enterprise that the team is running there. Heron two, as you know, we got that well back into testing this year and we've been trying to encourage it to flow at commercial rates, it's not quite there yet, we have been mainly recovering some of the fluid that we originally put into the formation when we stimulated the well and then when we did that acid job earlier this year. So we're still recovering the fluid from that, but also with a bit of oil as well. So clearly there's oil in the reservoir, but I I wonder if we I think we suspect we've got some kind of fluid bank around the wellbore that we have to diminish first before we can get a 100% oil to come out, and then we might see we might see an improvement in the fluid, but we'll see. Currently, the well is shutting for the winter. We couldn't keep going,

9:40 you know, in very cool temperatures with the offtaking facility that we had there. We'll measure the fluid level in the well during the winter to see how it's performing, and then we'll go back to it in the spring and have another go at it and see if we can encourage it to get to commercial rates. Or we might even do some other technologies in the world to encourage it, but we'll think about that over the winter months. Moving on to Gazelle, so this is a very pleasing success actually. The top picture there is the Gazelle production site, just the one tank there, and you can see the truck offloading there at that time. And below the image is actually you'd be pleased to know that we have a CCT coverage both at Heron and Gazelle, in fact, to monitoring what's going on there. Gazelle is doesn't have a manned office, whereas Heron does just six clicks away, so that's why we've got CTV installed, we can make sure everything's hunky dory there during the day and night time.

10:44 So we went back to Gazelle and perforated and tested it. We started the well test sort of in early ish October, and the well did very well initially, eight meter zone across those two relatively thin sands, delivering about 400 barrels a day, maximum rate really on tests, that's about all the kit could do sort of thing. Crude is the same as Heron, quite nice, very high gravity API. It is waxy just like heron, it's very similar. Surprise there. It's the same source rock. And very quickly, by the end of October, the well was in production. So, you know, less than thirty thirty days, thirty four sorry, thirty to forty five days from the start of the mobilization of the test to actually getting the thing in production, which is a commendable job by the to get that done. You can see the bean pump there. Everything's working pretty well. We do have a little bit of water coming out now from this well, which we are which we are optimizing the production to try and mitigate that.

11:45 The well is quite quite down dip on the structure of Gizel, so we're gonna try and optimize production so we don't pull up water from the edge of the on the edge of the oil water contact, if you will. So we're we're we're still playing with that, so the rate is still being optimized. Just like Heron, the tanker goes to the facility in Block 19 and goes into the same input valves as Heron does and goes through the same process and gets exported the same way. It's a new discovery, new production, so we do need to do a field reserves report for the authorities, which is ongoing right now and by which through that mechanism that gets approved, then we'll get some proven reserves booked for Gazelle probably in the new year, in the first quarter with a bit of that. But we'll see how that goes with the authority.

12:35 And of course, it's the same team who also manage Gazelle. So there's sort of an OpEx saving by now having two wells managed by the same team. Moving on to then a sort of summary of what we did this year. There's some commentary that I've read in some of the chat rooms about why does it take so long to do stuff, why do we start so late in the year. It's probably just worth mentioning to folks, of course, like any business, you do your budget and your planning before the start of the next year. We do that and we submit it to the authority at the end of the year from the next year. But the authority takes its time, several months sometimes, to approve our budget.

13:24 Once that budget is approved, then we have to get the environmental management plan approved, without which we can't legally do any work on-site, and that can take a month or two. So by the time we do anything, when we've got the paperwork in place to allow us to do anything, we're sorted certainly into March and April as it is. Now you know that the springtime is when we can start operations safely because it's too cold before. But, nevertheless, it takes a while for the paperwork to get in place. But once we get the paperwork in place, then, of course, we then gotta talk to the contractors and get them lined up, and, of course, they're not hanging around waiting for us to to to to give them the nod. They are busy doing other stuff, so we then have to fit in with their program as well. So that can obviously cause delay as well. So, you know, we don't have control of the timeline.

14:12 We are at the destiny of other folks' timelines too. But we do our best to accelerate everything we possibly can. The top picture here is a picture of the activities that we raise the money for, and the square greens and square grays are what we the timing that we said that we would try and and do those activities by, and the green dots and the arrows are what we actually achieved. So if we start with the electrification, so we got the funds in in the end of July, and, course, you can't sign contracts if if you don't have funds to react to them. So all the contract work was put in place pretty quickly after we knew we had the funding. The electrification project was the first on our list to try and mitigate or rather decrease the OpEx, so we we got that running quickly. A little bit more bureaucracy than anticipated, again, it's nothing we've never done before, so we learned a little bit of how that process works. But nevertheless, December 12, Heron was working off electricity and saying there's something like 70% of our energy needs for that well site, so that's a good achievement by the team.

15:20 We went to Heron too and did the acid wash and testing, and completed the well, as you know, so that was achieved as well. We went to Gazelle, did the well test, it's successful, we completed it in its production, so that's completed as well. Gobi Bear, we sort of run out a little bit of time to do that, because we had to focus on making sure we got Gazelle on stream, that will defer that until next year. And of course, our other block, block seven, we are continuing our studies on block seven, but it's interesting. There's a slide on this coming later on, but we only recently got the data that's existing on the block anyway, so it's difficult to get going doing studies if you don't have the data in hand. So reading the words now, electrification project's done.

16:08 Heron two still working on it, but actually we've upset ourselves so we can encourage the world to flow. Gazelle is in production, and Gobi Bear is the only thing we deferred to next year from the work programme that we raised funds for. For the oil sales, there's another slide coming, I think, that holds all Tiffany's going to talk about, but as you know, the oil goes to Block my team. We hope that about at the end of the year, we should have generated, or expectation that we're generating in line of our advisers is around about over $2,500,000 net to us. That's after the split with the government. The tax issue that we've talked about before is nearly or largely resolved, and I think there might be some commentary on that later.

16:55 And and, clearly, everything we're doing, we learn from it, and we we try and get ourselves to be more efficient as we keep learning how to do things and and and the team learn how how things work. So we are always looking at doing efficiencies and trying to optimize things. Looking for next year then, so this is our aspiration, so above is some pictures of radial drilling, which is one of these techniques that can improve well performance, and we learned recently that PETRO MATAD to the North of us, has been deploying this technology in some of their wells, so we are talking to them about their experience of using the atomic technology and what success they've had. With a bit of luck and if it's cost effective and the contractor is available, that's the kind of technology you might try and deploy next year in either existing or perhaps new wells to get the well performance up.

17:54 The bottom bar graph is what our ambition is. So our ambition is basically, obviously, to continue production as is. We will look at de waxing Heron one, basically, as I said before, the crude is quite waxy and you can get deposits of wax down hole that can begin to block up the tubing and etc, so we'll do a hot wax wash to try and dissolve that to make sure it doesn't become a problem. We'll go back to heroin two and try and encourage it to flow better. We'll look at potential drilling locations around Heron and Gazelle for in short drilling. We'll look at three d seismic acquisition. As you know, half the block is covered by two d, which is a little bit challenged in places, so it would be great to have modern three d. The bit of three d we have is getting on for twenty years old now. It's good, but cleaning new acquisition will provide us with better fidelity data, after which you can do some of the more cleverer things now with seismic interpretation and geological interpretation of those data. So we look to do that.

18:58 We look at maybe electrifying Gazelle as well, just update on diesel costs, and we'll go back to Kobe Bear, and we'll continue our studies on block seven. Because all of that is obviously on contingent on funding things like farm out discussions that are ongoing too. But that's the kind of program that we're gonna put into our budget for the authority to get our environmental plan based on, so that we can actually do any or all of these things within the requirements of the law. So I think I've talked through the words on the slide to the left already, so I think I'll probably move on to the next one. And the next one is just a summary slide on block seven.

19:44 The top map there shows you in red outline where the block is in Southern Mongolia. And the important thing for us, and why we like the block, is that you can see on the Chinese side of the border, lots of green color in the basins, they're oil bearing basins, and more importantly for us, they have oil in place that so far do not, or have not been discovered in Mongolia today, so I'm talking about oil in older rocks in Lower Cretaceous, so in Permian or in D carboniferous, rocks that are proven to be oil bearing in China. The lower map is a gravity map, so simplistically the reds are the highs, and the greens and the blues are the base metal areas, and there's a big red dot in the middle there called JC-one Well, and that is a well very close to the block boundary, On the cross section at the bottom of the text, you can see where the JC-one Well is, and a circle joint drawn around the bottom of that well, and that's a graphic showing that in that well there was oil shows and Permian segments in that well, and that's the kind of play that we're hoping will extend into Block 7. And as you can see, the proximity is very close to our to our block. So now we've got approval to actually with the exploration license awarded to us eventually in in October that allows to physically go and do activity in the block. We'll look to see whether we can do some field work and maybe scout up possible seismic acquisition, certainly those southern basins

21:16 next door to the proven basins in China. So that's the excitement of the block. Then clearly, it's not cheap to explore in quite remote parts of Mongolia, so clearly we are seeking the partners and trying to farm this block out as well. And I think that's it for me. Alright, Jerry. Thank you very much. So here's a slide on the oil sales agreement. Actually, Hungerzal and I drew straws to see who would present this, and I lost, so I'm presenting it. Because as you probably know, if you're readers of our RNSs, this has been a long running argument with with the PETRO China about the the agreement they signed back in April and the fact that since then they've been withholding revenue that is not allowed under the under the contract, and that's been very, very frustrating.

22:07 The issue there was they were PETRO China was scared of tax implications. They still signed the agreement even though we talked to them endlessly about tax implications and then just started withholding. We've made some really good progress in the last few weeks, finally getting some traction, some momentum on the PETRO China side to move this forward. They have now accepted based on what we've had from the tax authorities, all the stuff we've told them that, yes, there is no need for them to withhold fearing that they'll get hit for tax. If tack if the tax they're worried about is actually an obligation, which it isn't, it would be an obligation on us, not them, and we would pay it, but we won't have to because it's not required by law.

22:54 Where we are now is we're we're down to the final conversation of the tax on the charges that they levy for handling our oil for us. And that's a, you know, standard industry thing. When somebody is processing and transporting your oil, it increases the amount of hassle they have, the amount of management they have to do. So we're being charged a cost for the processing and the trucking, and there's a small management fee on top of that, but, obviously, that is considered to be income. The way that they have contracted this, it makes it a little bit complicated. And so we are now trying to finalize with them exactly how to handle that. We may try and convince them to make changes to the way they contract their side of things for 2026 to actually make at least part of this problem go away and a saving for everybody.

23:44 Whether they're free to do that, we're not sure. Obviously, PETRO China is a big organization, you know, a state owned enterprise, so they they do have their rules and regulations that maybe a nimble producer like ourselves doesn't have a problem, but but may seemingly they do. Anyway, I'm I'm really hoping that we will sort this out soon. PETRO China did seem enthusiastic to try and pay us the withheld amount before the end of the year, which we were very happy about, but we pointed out to them that their record so far on paying an invoice is about six weeks weeks when the contract they signed where they they put in it that they would pay within three weeks. They've been effectively a 100% late as their best performance to date. So we're we're we're hoping to get this one resolved pretty soon to be able to announce that it's resolved and then to receive the money, but it probably won't be until January or February.

24:37 But it will be good to know that finally it it is coming. So making progress on this, we try not to get too frustrated or in in in public because at the moment, the cooperation we're getting from PETROMANA operationally is very good. They seem very happy to be receiving our oil. Most of the tankers that arrive at their facilities are tankers largely full of water with a little bit of oil because their wells are now have now been on stream for many, many years, and the water cut is going up dramatically. They like getting the dry oil from Block 20. It's quite a good advertisement for Block 20 as well. So they are keen to keep receiving, and they are offering us all manner of operational cooperation.

25:25 The financial cooperation has been a bit harder to get, but we think we're getting there. So that one is still a work in progress, but I'm pretty hopeful of a of a solution pretty soon. So what I'll do now is I'll hand over to Zula and to talk you through an update on Sunstep Renewable Energy, which is our joint venture that is looking at the massive renewable potential in Mongolia. So, Zula, over to you. Good evening, everyone. I'm pleased to update you on the status of Sunstep Renewable Energy activities for the recent for the past one year. Since from the joint venture with PETRO MATAD, SRE has worked hard to ensure alignment with Mongolia's energy policy twenty fifty and energy vision 20 countries vision twenty fifty, which is a policy road map till 2050, and various state policies and energy in the sector. So these are phased out in mainly three pathways, which is first is energy security independence, and then regional integration and climate neutrality.

26:45 So this is first, I would like to spend from '25 2025 to 2030, Mongolia's priority is to fully support the miss domestic energy independence and energy demand. So these are coming through expanded generation capacity, agreed reliability, and rapid growth in renewable energy, particularly in solar and wind. So this phase focuses on the overall energy independence for Mongolia. Right? So and then the next phase which is in Mongolia's energy strategy is from 2030 till 2040, the policy shifts towards the energy export positioning Mongolia for as a in original energy exporter.

27:44 So Mongolia has announced this, our prime minister, recently, leveraging the large renewable energy resources and cross border discussions, interconnections to be continued at g two g levels. Right? So while continuing market tariff reforms as well to attract private investment into the sector. From 2030 2040 till 2050, this is same as in global markets. Mongolia has also pledged aim to achieve net zero in the energy sector.

28:35 So transitioning largely widely from the coal dependency into the clean and low carbon energy mix supported by the technologies, energy storage, and just just energy frameworks, which is happening globally. And so just a bit about the domestic market again. Mongolia's domestic market is considered small by local standards due to the low population. However, the energy capacity is the demand is growing fast due to the mining expansion.

29:24 So currently, by twin as of 2025, the energy demand is 1.8 gigawatts. So this is expected to grow by double to 3.5 gigawatts by in the next five years. So as such, majority of this demand will need to be supplied by renewable energy. So history is well positioned to participate and join the supply for renewable energy demand domestically.

30:10 Meanwhile, as I already mentioned, the sector has huge potential for the energy export. So these are potentially targeting Mongolia's largest neighbor largest energy demand neighbor, the massive Chinese energy needs. So while it will take a bit of time to mature, this will need to in parallel the g two g discussions between the governments, Mongolia and China needs to be matured. However, we have seen that major Chinese and international investors already preparing, counting on the g two g discussions.

31:02 So a series also well positioned to participate in this larger energy export initiatives. Next slide, please. Since the series formed in first quarter of twenty twenty three, we have been working in on four major projects. So I have already explained the government policy. So I got from it. Is really yeah. It's well positioned to It's it's actually a optimal time for SRI to participate and join the this government support in the renewable energy.

31:58 In the luckily, we operate with six on ground staffs, all experienced in the energy sector over twenty years and continuously engaging with regulators of takers and financiers. Staff are all Mongolian and all in experiencing domestic and international experiences. So the GB has currently four advanced projects in our portfolio, and I will now summarize very shortly this. Then our chief technical officer, Yves Patr, will go through the most recent progress of this project.

32:51 So we have 24 megawatt renewable powered green hydrogen project with Oyu Tolgoi, Mongolia's largest copper mine. We have exclusivity with Oyu Tolgoi government in Moise and all with a very strong support from the government. Feasibility studies are done at the international standards and grant funding already in place. This will be Mongolia's first green hydrogen pilot project and to be expanded in the next phases. We also have the battery storage 50 megawatt at the chair. Feasibility studies also has been approved.

33:40 This is now being upscaled to align this government proposal for a 100 megawatt battery storage at this location. So we are now to participate for the upscaled larger bit, we have partnered with battery storage company, ZTT, a contractor who actually built Mongolia's first utility scale battery storage, which is in operation. So this is a very experienced partner we already have. So we expect the notification of the bid submission for this larger project in the new year, and the is very keen to for to have this big battery storage online to stabilize the grid as soon as possible.

34:42 We also have a large scale power export project initiative. Each 1.5 gigawatt in two locations to benefit from the energy export to China. So under this initiative, we have signed exclusive MoU with one of the largest state owned Chinese utility, China State Power Investment Corporation, which is the third largest state utility in China. So and SPIC is the investor and the Chinese in this project, and it's just a series, the local developer partner.

35:34 So currently, this energy export initiative is ongoing. We are doing studies and waiting for the progress of g two g discussions, which are ongoing. Right? And last but not least, our 200 megawatt hybrid project with system mines and energy supported by an existing PPA is our most recent and prioritized project targeting ready to build in 2026. Mister, he will now walk you through the details of this project. So we see this potentially rapid progress in 2026.

36:29 Thank you. Iqvater? Ladies and gentlemen, thank you very much. My name is Iqvater. I'm a SRA team. So I had experience to work in energy sector for twenty eight years. So I I'm happy that I was joined for the construction of the first large scale utility scale of benches or system, large scale of solar PV plant in Mongolia, and also contributed in the large largest wind power in Mongolia. So I it's my pleasure to present that we as Dolores mentioned before that we are working with mine in energy.

37:19 It's we are developing the hybrid hybrid energy system in Mongolia. It's very unique because it will be the first first big scale of the hybrid energy system, which combining of solar, wind, and battery storage system. And the the most unique is it will be operating in the Well Well Infrastructure area and adjacent to the existing power plant, which is now operating in the grid. So the power plant capacity is will be total capacity of the power plant is 600 megawatt.

38:06 For our hypersystem, we phase it into phase. First phase will be containing a 100 milliwatt of solar with the hydrogen storage system, which will be commenced in quarter three of two thousand twenty twenty seven. For the phase two, we are planning to add a 100 milliliter of wind with 40 megawatt of battery storage system to commence it in the quarter four of twenty twenty eight. As you as you can see on this page, you can see the power plant. So this is the power plant, which is operating. Just in the north side is the coal mine, which is based on this which the power plant is operating on the using the call of this.

39:01 And we are planning to deploy deploy this first phase in the in the west of the power plant, which in the the land is secured. It it will be projected in the existing land of utilize it by and energy. And, also, the wind power system will be located in adjacent to the solar PV plant. Just a moment. Please let me switch to the next. So as Mongolia just for information that Mongolia is very rich with solar and wind energy, especially as per the study of NREL, they have estimated that the the result of PV capacity is 2.2 terawatt.

40:05 For the wind, we have 1.1 terawatt of wind resources to be utilized. So we in terms of the position of the our project, it's very good in terms of the solar resources and wind resources. Very recently, we have deployed the wind mast. So we have installed it 120 meter of the wind mast for for investigation of the wind resources. So in terms of the solar PV plant, it for in in terms of salt plant, the first first part of the project will be I mean, it's secured with the study then and necessary grid study also being done.

41:15 And especially for the technical and commercial study is completed and pre study also completed. And right now, we are working on the gathering of the window source data. So based on this window source data, the full the next second phase study will be done. So as as informed before, and this would be the first big scale of utility scale of the solar wind PETRO storage project in Mongolia. K.

42:02 So that is the brief presentation of the 200 megawatt hybrid project. Okay. Thank you very much for that. I hope everybody can hear me. I've been having a little bit of trouble with my with my computer, but we'll settle down now. So that that concludes the run through of our of our slides, and I'll I'll hand back to IMC for a little bit of housekeeping before we get on with the Q and A. That's great, Mike. Thank you very much indeed all for your presentation. Ladies and gentlemen, please do continue to submit your questions using the Q and A tab situated on the top right corner of your screen. While the company take a few moments to review those questions submitted today, I would like to remind you that a recording of this presentation along with a copy of the slides and the published Q and A can be accessed by our investor dashboard.

42:53 And Mike, at this point, if I may now hand back to you to take us through the Q and A session, Read out the questions where appropriate, and I'll pick up from you at the end. Thank you. Alright. Thanks very much indeed. So we did ask people to have the chance to submit live. And we got a lot of questions, so thank you for that. Thank you very much for your for your interest. We've we've kind of prepared a top level list of questions that seem to be asked by a number of people. So, hopefully, the the the general answers to those will will will cover a lot, but there are still quite a few more questions to get through. Any that we don't get through or that, you know, it it becomes too time consuming to do right now, we will answer them online on the IMC platform after the event. We'll try and do that reasonably quickly rather than leaving it a few weeks as I think we did last time.

43:50 So, anyway, let me get on with the with the with the top level questions. First of all, in the category of financial, the question is, following the finalization of the oil sales agreement, can you confirm the timeline for receiving the withheld PETRO China revenues? Confirm, probably not. Given the way it's gone up until now, I thought this would have been solved a long time ago and the money would already be in hand. As I mentioned in the presentation, they they're not the fastest payers. We do have the ability to charge them interest for being late, and we do continually threaten them with that. We haven't done it as yet. As I said, we are hopeful that we're going to get the money, but I don't think it's going to be before the end of this year. So we are chasing for it in January.

44:36 It might be February, but we're chasing for it, and we expect to get it. The withheld amount is currently around about 850,000 US, so we'd very much like to get that through through the door. Next question. Based on the new Heron Wanninger's l one production levels, will PETRO MATAD be fully self funding for operational expenditure in 2026 without the need for further equity raises? Well, we're in the happy position finally to be a producing company with a decent amount of revenue coming through the door that pays for the company to, exist and generates a little bit of free cash flow on top of that, not as much as we'd like, not as much as we want to be able to be very, very active in 2026, which is why we're focusing on a farm out program.

45:24 As Jerry showed you, we've got aspirations to do quite a lot of work in 2026. We would prefer to do that with somebody else's money and not by going back to shareholders to get it. So we don't have any plans for an equity raise, and we are in the position where with revenue generating with revenue being generated, you know, we can we can cover the cost of the company. And and we're we're happy with that position at the moment, but we don't want to be a company that just exists. We want to be doing work. So we're pushing that farm out very hard. We've had a lot of questions about the farm out. There wasn't much in the presentation itself, but I will go through some questions in a moment and hopefully answer as many of those as as I can. Given the reported slowdown in the Heron one production and complexity seen in Heron two retest, what is the updated production guidance for 2026?

46:16 We haven't issued any production guidance yet. Heron one, as Jerry said, is pretty much in line with our forecast now and pretty much in line with what we've seen in some of the better wells in Block 19 to the north. So I think we should be able to produce a decent forecast for Heron one for 2026 that that that we can stand behind. Gazelle one is still early days. You know, the well has only been on stream for a little over a month, and we have had a few teething problems to get over. Those are hopefully now behind us. We do still have a little bit of a debate going on in the field with the unloading procedure at at PETRO China that we're hoping to resolve pretty soon. So we haven't put out guidance yet because primarily we want to get a better handle on what we think Gazelle will do long term, and we also want to make sure that we manage water so we don't get, you know, a heavy water breakthrough and that and that we maximize oil production. Production. So please be a little bit patient on on production guidance.

47:16 Next section of questions, production and progress. What is the technical plan, e g injector wells or workovers to sustain or increase current production levels in Block 20? Our plan of development for Block 20 was pretty much in line with what was done in Block 19 over the years. You do need to support the reservoir pressure as you take the oil out because there's not a a well plumbed in aquifer that will keep the reservoir pressure up. So pressure starts to decline. PETRO China has used a water flood, not not a full water flood, a partial water flood to support that. We have we we prepared our plan of development saying the same thing, so it wouldn't seem too radical. We would like to use something other than water. We might like to use c o two if we can find a nice source of c o two nearby because that kills two birds with one stone. It sequesters c o two and also keeps reservoir pressure up.

48:13 So there will be the need for injector wells. We are planning some well interventions as as Jerry said to make sure we're not blocking up the tubing with with wax, etcetera. But, yeah, in the longer term, we would get around to doing pressure support, but we want to focus on production first of all. So, you know, next drilling would be potential producers. Can you provide an update on current daily production rate, cumulative production, and the observed water cut from Heron one? I think we've more or less covered this. Heron has done 70,000 barrels or thereabouts to date. It's producing between a 135 and a 105 barrels a day. And the water cut at 3%, when we say there's no free water, when a tanker arrives at PETRO China and they open the valve at the bottom to let the water out, there is no water. It's just oil.

49:03 The 3% water cut is what you get from the lab analysis. So it's actually not water sitting not oil sitting on top of water. And we're very happy that that's still the the situation after fourteen months of of production. When is the company scheduled to publish the next competent person's report? We haven't updated our CPR since the one we did to get us the exploitation license. We thought about doing one as a result of getting Gazelle on stream. We don't want to spend money unnecessarily, though. We don't think that that will came in particularly in any way different from the forecast. And so we're looking at that at the moment. When we did do the exploitation license application, we re we we re competent person's report was required.

49:52 We're not sure that an an update will be done, but at some stage, I think we will we will look at doing that. Oh, sorry. I just ended up pressing all the way to the bottom of my document, which wasn't the most sensible thing to do. Next one, farm out and development. Can you provide a clear time frame for concluding the block 20 farm out agreement? Now as we have reported, we received a proposal from one of our counterparties. They they then wanted to do a field visit which we did. It's an unusual time of year to do it, first week of December, but we did it. That went well. We are now finalizing, I hope, the technical commercial q and a with them.

50:38 We've given them feedback on the proposal they made, and the ball is in their court. We hope that they come back quickly up until now. It's been a little bit slower moving than we wanted, but we're hoping that we've we have endeavored to answer all the questions they've had. Obviously, beauty is in the eye of the beholder, and the timing is is really up to them. But we have pointed out that at the moment, they're first in a queue of currently three, and they don't want to they shouldn't want to lose that first place position, so they need to get on with it. So we are encouraging to move forward. I can't really give too much in the way of a clear timeline for concluding. We're pushing for as soon as possible because we'd like to make sure that the 2026 operational window has lots of activity in it, and it's, you know, financed by the farming partner.

51:31 If the current party you're negotiating with declines, what alternative plans and what is the associated budget for 2026 drilling season to ensure development continues? Yeah. So we have this we have three parties involved. I think another question has been asked somewhere. Are they the same three as previously? One of the three previous dropped out but has replaced by somebody else. So we're still talking to three people. The one that have made the proposal are the furthest forward. If they were if we were not to conclude a deal with them, we would be hopeful that one of the other two or other people that we are approaching would follow in behind. We have the financial resources to do some a little bit like we did in 2025, some lower cost activity, well test activity, workover activity that could support production levels.

52:27 And we would look at that as a base case in in the first place so that we can continue the the the farm out negotiations in the background. So we're the first party to decline. We wouldn't give up on the idea at all because I think that's going to be key. Next series of questions are on Sunstep. What is the current estimated book value of the SRE portfolio? Yeah. That's a little bit of a hard one to answer. In in in this kind of business, we have, I think, created a lot of value, but we haven't crystallized it yet. We need to get things to ready to build status for there to be the chance to actually get some of that value.

53:12 We've given in the past a little bit of guidance on what commercially attractive ready to build projects have have got as development premier in Mongolia, and it's, you know, the order of 50,000 to a $100,000 per megawatt. So we can see that there are tens of millions of dollars of value tied up in our portfolio of at least three of our projects, a 200 megawatt project, a 24 megawatt project, potentially a 100 megawatts of battery storage. So there there's tens of millions of dollars in development premia tied up in that. And at the moment, that's probably what all I'd like to say about the estimated value. We think we're creating a lot of value, but we have to crystallize that value, and that's what we're focused on. With the ongoing development of scaling of the SRE portfolio, including green hydrogen and battery storage, will it require further capital contributions from PETRO MATAD?

54:07 Think the the the green hydrogen project is already fully funded through the development phase. So there, the answer would be no unless in discussion with Oyu Tolgoi that were to be increased because the mine might be interested in doing some work more work on hydrogen powered transportation, which wasn't in the original plan. That might involve some more capital contribution, but the development costs are relatively modest. And we are at the moment negotiating the extension of our agreement with our partner in the in the joint venture where funding point forward is on a on a fifty fifty basis. So I think that's a very fair thing to do. At the moment, no no additional capital contributions on the those two projects as mentioned.

54:58 The one we're currently spending money on is the hybrid project. And as you saw, that's the one we think has the best chance of getting to ready to build status ASAP. Can you clarify the day to day management structure of Sunstep including the role of the 50% partner? Okay. So, basically, Zula came came into the joint venture with her team or has with with the core of her team and has added a couple more members. We're very, very happy with this team. They are the most experienced team in Mongolia or entirely Mongolian, and they do a very good job. PETRO MATAD funds the, let's say, the running cost of that six man organization, six man woman organization. And then the development costs are handled the higher development costs are handled on a fifty fifty basis.

55:48 Effectively, that team works exclusively for the the joint venture, originating deals, interfacing with all the stakeholders, and have put us in a very, very good position in the time that they've been been running. And we now are focused on trying to crystallize the value that I that I spoke about. Some questions on Mongolia. Can you clarify the commissioning timeline of the Mongol oil refinery? No. I can't. It it it has always seemed to every time they issue a new schedule, it's always been a delay. Until recently, they've talked about bringing it a bit forward. I I know that the regulator is currently looking for the potential of importation of crude if there isn't enough crude to fill the refinery on on day one.

56:38 That's tricky. They're not gonna get that from China. They might be able to get it from Russia, but Russia is using all of its resources at the moment for other purposes. So it's a very, very high profile project, and they have committed to be on stream by 2028. And, hopefully, the this the the the reports of bringing it forward can be relied upon, but we can't really give much in the way of clarity ourselves. Can you confirm the status of Aqua Power as a likely partner in multi gigawatt export strategy for Sunstep? Yes. Aqua Power is a is a big player and you will have seen news reports that they came to Mongolia back in September, I think it was. And Sunstep through Zula and her team were very heavily involved with that visit, helped to help to set it up.

57:30 We hosted them at various things. They'd be a very, very good partner to have. Obviously, they're Saudi based, and there are some discussions we know going on between the Saudi government and the Mongolian government about renewable power. Aqua would be a great partner to have. We currently don't have anything signed with them, but we think the team has put us in a very, very good position that should they decide to follow-up on their chairman's very, very bullish statements and get involved, then we are in a very, very good position to get involved with them. And finally, on the high graded questions, we've had some about online abuse on the chat boards and potential share price manipulation. On the share price manipulation, that's been kind of a theme for over a year now.

58:21 One of the questions here says there's been a concerted effort since September of last year to massively talk down the company and its share price. Why and hence why investors have been in touch with regard to suspected manipulation and is asking for the company to report this to the FCA and to try and get the lies and abuse that's being spouted regards PETRO MATAD sorted out and cleared up, looking for us to support long term investors in this. The other question related to this, there have been ongoing complaints regarding harassment, and we've received some directly from from shareholders. And, yeah, this is this is pretty horrible, pretty toxic stuff. We are working right now with our advisers, with FTI, our our consultants, and with our Nomad and our our joint broker to look at what we can do, looking at what other companies can do because we can't just let this pass. We do want to we we would certainly like to see how this can be cleared up and and and and removed.

59:22 The conversations we've had with advisers in the past about share price manipulation, the usual answer we get to that is they they see no sign of it. But, yeah, I can I share the frustration? It seems that, you know, getting on stream didn't do our share price much good. When prior to getting on stream, we had had quite a bit of volatility, but quite a few upward spikes. And, obviously, those are the things that we like to see. And once we get an upward spike, we'd like to maintain it and and increase on it. So we're working on that. At the moment, I'm not sure what we can do, but it's not that it's not something we're ignoring. So please take that as a positive response from the company at least. I've got a number of other questions here now that I will go I'll I'll go through a few of them. I can see we're already in an hour an hour into the presentation, so I don't want to use up everybody's everybody's lives here. But just a few more questions on the farm out.

1:00:21 Okay. That one's about timing. I've already answered that one and that one about the number of interested parties. Likewise, somebody asked here what ballpark percentage split are we looking at? The proposal we've had made so far is for a nonoperated participation, so you can assume that that's less than 50%. How confident are we? And that makes sense because PETRO MATAD is the obvious operator for this project unless it was somebody that was already very active in Mongolia. How confident are we of securing a farm out partner? Well, it's nice to have received a proposal, and we're pleased with the positive responses we've seen. From from the point of view of confidence, it's always in the eye of the beholder there. So we're we're we're we're pushing hard and doing all we can to land this because I think this is going to be a an important thing if we can if we can get it sorted.

1:01:17 Are Sinepec in the picture as a potential farm in e? No. We have spoken to Sinepec over the years, but they're they're not. They're happy with what they've got seemingly. Have we received any interest in a takeover of PETROMATAD? No. We haven't. Would we consider such a thing? Well, if the price is right, maybe we would. But at the moment, there haven't been any, so that's not something we've had to have to address. Let's see. Is the Mongolian government aware of potential farming partner, and would PETRO MATAD be happy to take the oil if they are not the partner? We have made the government aware of what we're doing. Up to one third farm out, we don't actually need a government approval. Above that, in theory, we do.

1:02:03 So but we don't want to surprise the Mongolian government at all. We take the the the view that the regulator needs to know what's going on and needs to have news whether it's good or bad. So we don't like to surprise them either way. So, yes, we have made them aware of what we're doing. PETRO MATAD did actually do a farm out of its block four and five acreage back in 2014 or thereabouts. That was quite a slow process because it was the first time it had been tried. The regulator is now a lot more sophisticated than then, and they recognize that the idea of a farm in it is to accelerate a development that is in the best interest of not just the foreign partners, but also the the government. So we think they're they're they're well on board.

1:02:50 Somebody asking here, are there any intermediaries involved in the conversations we are having with the current the the the the partner that has submitted a proposal? No. There are no intermediaries involved. Would the company consider part of any possible upfront farm out payment be dispersed to shareholders on a on a time frame eligibility basis? Obviously, it's always something I think about of returning money to shareholders whenever we can, but we are never cash rich, and we do actually want to do work. So we've asked farm in East to focus their efforts on putting money up to do to do work on the block to allow us to generate news flow, to drill wells, to get oil out of the ground. So that's our focus, but, you know, never say never.

1:03:42 How advanced is this process? I think I've covered that one. And can we provide an update on the planned timeline for drilling on Block 7 next year? We we don't plan to drill on Block 7 next year. I'd like to get moving quickly. We'd like to do it with a partner, and we're focused on partners from just across the border who seem to have a good appetite for drilling in that geology, and it extends across our borders. So so we're looking forward to that. We've had a few more questions on operations. I think most of them we've already answered, but we will deal with the ones that perhaps we have not. As I say, we'll we'll post those online. And just leafing down, I think there were a couple more on overall strategy that I wanted to address.

1:04:31 What does management see as the single most important value creation milestone over the next twelve months? I think it would be a a successful farm out. If we can bring in a partner that's going to fund a decent sized work program over the next couple of years to move block 20 forward, that would be a very, very important moment. So we're really focused on that. And in parallel with that, we're developing a work program that we can afford out of existing funds to keep the news flow flowing whilst we land that farm out if it takes longer than we hope. But I think that's that's it. What is your strategic profile over the next three years? How do you see the balance evolving between exploration production and renewables? Fair to say that we're really happy with our renewables position, and we want to crystallize some value because that could put quite a lot of money into the overall business.

1:05:19 Since we started renewables, the atmosphere has changed a little bit. We we were first recommended to keep oil and renewables separate because the investment community liked it that way. Now the idea of oil companies with renewable arms is a lot more acceptable, it seems. So we're kinda glad that we didn't nail our colors to one particular must and that we have both options here. And renewable development is an order of magnitude cheaper than oil and gas activity. So that is something that we think we can move forward within the com the cash constraints of business. If we get a farm in e, we'll be very, very happy to be doing both. And if it takes a while, well, we'll do some low cost activities on the oil and gas, and we'll move the renewables ahead at speed.

1:06:12 Can you comment on whether PETRO MATAD is actively exploring a more strategic partnership role with the Mongolian government and or the Mongol refinery? For example, dedicated long term supply of block 20 crude to the refinery. Well, that the answer to that one is under the law, a domestic refinery gets first dibs on any oil produced in Mongolia. So block 20 oil gets goes to the Mongol refinery if they want it by law. And that's that's fair enough for us because we'd happily put it through that pipeline that runs within 15 kilometers of our current production site. Government or refinery backed development via low interest loan or prepayments. Fair to say here that the uncertainty on drilling results generally precludes low interest loans on early stage of any oilfield development for that matter. The lender wants to know there's sufficient cash from the business that they will get paid back irrespective of future well results.

1:07:10 Prepayments kind of likewise. And fair to say neither the Mongolian government nor the Mongol refinery are cash rich nor are they risk tolerant. So I'd I'd I'd like to, but I don't think we can. And finally, from this questionnaire was something about the fact that Mongolia has recently announced a project to build six months' worth of strategic storage capacity for petroleum products. You may have read online that Mongolia is suffering from fuel shortages at the moment, and, obviously, it's shatteringly cold there right now. They're they're suffering from fuel shortages, and the, so having a storage of product is kind of a good idea. They have not looked at doing storage for crude, though. They never have. They're actually more worried right now about not having enough crude to fill the refinery.

1:07:59 The refinery will have tankage, but it's not for a it's not for long term storage. So that hasn't really been looked into. And in short, this question says, is there an active strategy to position PETRO MATAD as a strategic domestic feedstock provider for the refinery and for Mongolia more broadly. I think we're very well positioned as a company. We have an excellent reputation. Our team is almost entirely Mongolian. We're seen as the best operator in country, and we were welcomed very much as the third producer after PETROCHINA and SINAPEC. We'll need more producing wells and more proven production history to show our ability and reliability to supply, but they're counting on us. So, you know, we're pushing against an open door there. I think I will probably call it a day there because there's a few more questions related to dividend policy, which at the moment, we can't really have because we're not super cash rich. But were we to become so, don't worry. We think about shareholders every day.

1:09:00 And then a couple of miscellaneous ones or one specifically for me here. Mister Buck, are you sure you're not the late great wise owl who used to post on the LSE chat forums? I'm sure I'm not. I think I would have probably had to declare that if I was. So, no, not me. And another one for me, do I spend an appreciable amount of time actually in Mongolia? Yes. I do. I combine the job of CEO, COO, and country manager, all for the bargain basement price. No. I do I do spend a fair amount of time there and not to my wife's liking, but but there we are. So look. I I think I'll close it there. And as I said, we will catch up with the questions that we haven't had the time to answer online on the IMC forum on the on the platform. I'll hand back to Alex now. Perfect. Thank you very much, Mike. And just to wrap up, could I just ask you for some closing comments, Mike? Yes. We really appreciate all of the input we get. We know that our shareholders have been frustrated by many, many years of lack of movement through, you know, government inactivity and then to actually get moving and and to have the problems we've had with PETRO China. We're we're we're fighting these absolutely every day.

1:10:21 We're we're happy to be on stream. We're happy to have revenue that's going to allow us to finance some decent activities designed at improving our production. We're very pleased that we've got involved in the renewables, and that is going so well. I think our renewables team is punching well above its weight in terms of everybody approaching us to do projects with them and through Zula and the team of accessing some of these global players and getting very, very good relations going. We want 2026 to be a a a transformational year. I'd like to land a farm out on the oil and gas. We'd like to crystallize some value from one of the renewables projects.

1:11:06 So please hang in there. Please have faith, and thank you very much for your time. Fantastic. Thank you all once again for updating investors today. Could I please ask investors not to close this session as you will now be automatically redirected to provide your feedback in order that the board can better understand your views and expectations? This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of PETRO MATAD LIMITED, we would like to thank you for attending today's presentation, and good morning to you all.