Petro Matad (LSE:MATD) — September Investor Presentation

0:02 Good afternoon, ladies and gentlemen, and welcome to the PETRO MATAD September Investor Presentation. Company may not be in a position to answer every question received during the meeting itself. However, the company will review all questions submitted today and publish responses where it's appropriate to do so. These will be available via your Investor Meet company dashboard, and we will send

0:32 you an e mail when they are ready for your review. I'd also like to remind you that this presentation is being recorded. Before we begin, we would like to submit the following poll. And if you'd be so kind as to give that your attention, we would be most grateful. And I'd now like to hand over, if I may, to Mike Buck, CEO from PETRO MATAD. Good morning, sir. Good morning, Mark. And hello to everybody that's dialed in for PETRO MATAD's debut on Investor Meet company. We're delighted to be on the platform and look forward to doing this a few times. What we'd like to do today is talk you through our latest investor presentation. And for the purposes of doing so, I have with me a couple of colleagues who will will present their relative their various sections of the of the presentation so you don't just have to listen to my voice yet again.

1:30 But I will be here throughout and then we'll deal with the with q and a at the end. Before we get going, just to let you know that anybody that's interested, we posted our first half twenty twenty one results, yesterday. So if you're interested and you haven't had the chance to look yet, then log on to our, to our website and, and have a look at those. So our investor presentation brings you up to date on PETRO MATAD's activities. As many of you will know, we're a Mongolia focused company, that's been doing exploration in that country for a long time. And in 2019, we were successful and found some oil. And since then, through what I call the pandemic years, we've been trying to get our exploitation license, only the third one ever to be awarded in Mongolia, and we were successful in doing so in July.

2:23 And we'd like to talk to you now about our plans, for the next phase of activity. So, here is a quick look at the, the current board and the presenters, of PETRO MATAD. I'm the CEO. I've got over forty years experience in the industry, I hate to admit, and I've been with PETRO MATAD since late twenty seventeen. And presenting with me today, have Jerry Smart.

2:51 Jerry and I have worked together a few times over the years, and Jerry is our exploration and subsurface manager. And we also have Hungersault Tool, who is our corporate manager. Hungerzult has been with the company since 2007 and has seen, all of the trials and tribulations of exploration in Mongolia and is, very, very good as our corporate, corporate memory. You see there on the bottom of the screen, there are my fellow directors, Shine on the left, Enkma, our chairperson in the middle, and Tim Bushel on the right. The two ladies are from PETROVIS, our largest shareholder. They are Mongolia's largest fuel distributor, very, very well known and very, very active in the in the country.

3:38 They were the founding shareholder of PETRO MATAD, having decided back in 2005, I think it was, that it would be nice to be involved in the full value chain of petroleum in Mongolia. They've obviously been a very, very patient, but a very, very supportive investor, and we're very thankful to them for that. And we'll be talking a little bit more about them as we go through. And, Tim has been on the board since, early twenty seventeen, well known in the in the London, the London oil industry. So with that, by way of introduction, I shall now hand over to, Hungerzol, who will talk us through the corporate and, the corporate history section of the of the presentation before Jerry does the the technical aspects. Thank you.

4:26 Mike, thank you for the introductions. PETRO MATAD is a listed company. In May 2008, we listed on the alternative investment markets of the London Stock Exchange after having successfully raised $10,000,000 on the private equity market. Now that is some thirteen years ago, but I do still quite remember it clearly as we were delighted to make PETRO MATAD the first Mongolian and Mongolia focused asset company to list on an international stock exchange. Mongolia's minerals and energy sector was quite active in those days, and we were the first mover in getting a Mongolian company listed and attracting international western investors into the petroleum sector.

5:15 Today, we are proud to say that we are the only western company with multinational investors that has remained active in the last fifteen years. And just about two months ago, as Mike has mentioned, we are awarded the third petroleum exploitation license to ever have been issued in the history of Mongolia. Now in our many years of operations, we have developed strong government relations, and we continue to work closely with the Ministry of Mining and Heavy Industry as well as the Petroleum Authority of Mongolia, the regulating agency. We have been cited as a model operating company in many aspects in terms of our reporting, our operational standards, our government, and just really the overall impact and improvement we strive to bring into the sector in Mongolia with our qualified and experienced board and management team that we have maintained since our inception.

6:18 Now we have currently a 100% working interest and apprenticeship of two production sharing contracts with the government of Mongolia. That is Block 20 in Eastern Mongolia in Donut Province. In 2019, the Heron one well that we drilled in the northern part of the block was a successful discovery that flowed commercial oil, and it is for this block that we have been awarded an exploiting like exploitation license over 218 kilometers square of an area, and we are now very excited to bring that into production. Our other area, Block 5, resides in West Central Mongolia, and we hope to have the same success there as well.

7:04 Being Mongolia focused, we are also always aggressively seeking new opportunities in the country and looking to build our portfolio, and we hope that we have more good news for you in this regards. I'm moving on to the next slide now. The upstream petroleum activities in Mongolia were resurging in the early nineteen nineties after being idle for almost about twenty years prior. Mongolian began to produce oil again in 1996 and has since produced about 72,000,000 barrels of oil to end June 2021. The graph on the top right hand corner on this slide shows the average daily crude production between 2009 and 2020.

7:56 Clearly, production in 2020 and 2021 have been impacted by COVID nineteen related restrictions and measures. Although we do note that there is a general downward trend in production, which we believe is possibly probably a sign of natural decline of the main producing fields. Now 95% of the production comes from PETRO China operated Block 19 And 21, which are immediately to the north of our block 20. In fact, Block 20 shares are bordered with Block 19. Now all of the produced oil is tracked and exported to China to the South to be refined as you can see on the second diagram on the slide.

8:51 In parallel, Mongolia imports the bulk of its required refined products largely from Russia. So for a while now, Mongolia has been keen to achieve hydrocarbon presence, independence, hydrocarbon independence. And with the a lot of initiative and push from the previous prime minister who led the previous government,

9:16 he was successful in getting a $1,000,000,000 soft loan approved from the government of India to now construct our own refinery in Southern Mongolia. The same prime minister who was focused on getting this project underway is now currently the president. And together with the current government, they have continued to actively push to commission the refinery by the scheduled date in 2024. However, due to pandemic related delays, they have noted that the commissioning will likely be de delayed by a year to 2025. The refinery is expected to have a capacity to refine 30,000 barrels of oil per day and is being designed for the type of oil that is being produced in Eastern Mongolia where the major production in Mongolia is.

10:16 Our production and development for block 20 will help meet the refinery's crude oil demand, And therefore, we believe that the government of Mongolia is highly motivated to help us get on stream at the moment. The refinery, in conjunction with the ministry, have looked at several options to transport oil from the Eastern Region to the refinery, and they have landed on pipeline being the most sensible option, which is expected to be about 600 kilometers in length. And we understand that their current plan is to have constructed the pipeline by the time the refinery is commissioned. If so, this will help with our own development and could see major operational savings compared to the cost of trucking.

11:09 So having obtained our exploitation license, it was important for us to secure ourselves financially to proceed to production. We successfully completed a fundraise in August to raise a gross proceeds of $10,500,000. The majority of the new equity was through investors in The United Kingdom. Our founding and major shareholder, PETRO MATAD, was once again supportive and followed the money to invest $2,100,000. Now to provide our other existing shareholders opportunity to participate at the raise price, we did open up the fundraise to include an open offer component and also made a retail offering via primary bid, which was really quickly oversubscribed on the day that it was announced.

12:01 With the funds we have raised, we are looking to put Heron Field on production by completing the Heron one well and the drilling and completion of two more wells. Naturally, we are looking at all the possible options to accelerate production and development activities. Unfortunately, as the field is preproduction, debt financing is not yet possible, although we do continue to export this avenue at every opportunity and hope to secure a component of debt or project financing once we have established our revenue stream. Now over the years, we have been proactively pursuing farming partners.

12:48 And now that the long term tenor of our block 20 is secured, this brings us more certainty to our discussions and negotiations with possible partners. Having raised our funds immediately after the award of the exploitation licenses is important to us in the negotiations as we can now independently transition to production while we negotiate for a deal. At the moment, we are already in talks with service providers in executing cost effective contracts, So we are ready to kick off in the 2022 operational window. So we will be the third company in Mongolia now to transition from pure exploration to production, and this will be transformational to all of our stakeholders.

13:44 I will now hand over to our exploration manager, Jerry Smart, to provide you with more details. Thanks, Anghasal, and good afternoon to everybody. Let me oh gosh. There we go. Let me move on to the start of my section. Transforming from a pure exploration to a production and exploration, basically, company. So that's with the award of the EL and our efforts now focusing on getting herring on stream to raise some revenue for that and obviously then use that to further develop the field and other things. So just a reminder of the geography. So that's Mongolia there in the middle, about two and a half times the size of France. If you want some scale on it, the scale bar is there in the bottom right hand corner, 500 kilometers. It's a huge country that has had quite a lot of activity in the East and you can see the outset there, that little lozenge shaped outtake of the map. So that's where our block twenty years and our exploration exploitation license now colored in a in pink with Petchyan's block 19 fills literally to the north of us and obviously it's the same fare, it's the same trend.

14:51 And you can see a dash line coming from block 20, that's the pipeline that Hengelsall mentioned going to basically where existing production has been close to the railway line than the crude is exported via railway to China. Lots of activity in the Eastern country, PETRO China and obviously around Block 97. Very little activity in Central and Western part of Mongolia where we move over to Block 5 and again it's now in two parts of the remaining part of the block is in two areas that's covering both the Tats and the Tugwa Basin where we have wells that we drilled core well TSC 1 and more recently Snow Level in 2018, both of which proved active petroleum systems in those two basins, meaning that the source rocks are effective the same as we see in the Eastern part of the country. And indeed we also drilled the Wildhorse well at the same time, 2018, further to the West and that also proved petroleum systems. So half of the country has basically got those three wells on it as actually proper exploration wells and is not explored at all, but we have proven with our wells that we drilled out to petroleum systems there's a huge upside in the country really yet to be uncovered.

16:08 So that's a bit of locational reminder. So moving into Block 20, so there's a map that you can see. So the exploitation license is there in white. That's two and eighteen square kilometers to the north versus Block 19 and in the green blobs there are the fields that they're currently producing on. There's a white line going from

16:30 Sen to Goroi, the Heron field that you can see there in the text, the green blob in our exportation license. That white line is going to a circle and the outtake there is the Petchikina facilities about 20 kilometers north of us. So that's where our initial production will go to, to be processed and exported from there. But that white line then continues south of the block and you can see a common excess export route. So that is where the current trucking line is to China. The red dash line at the top of the picture is the proposed pipeline that Henkelsson mentioned and that obviously then will provide a much easier and cleaner, if you will, export to the refinery near Block 97. So that's a great improvement to the logistics of exporting crude from the country.

17:17 So going back to the exploitation license, yes, we're a 100%. Love to have a partner of course and we're working on that. Now we've got the license for twenty five years plus two five year extensions. So it's secured and we've got lots of time not only to exploit Herrinfield itself but also to address those other color bumps in the block, the orange ones and yellow ones which provide the upside near field exploration potential in the block that we can hopefully drill shortly and add to the proven reserves in the exploitation license. It's all ring fenced, all comes in the same terms. So it's all a question of actually cheap added extra reserves with time to the Heron development or if they accrue big enough perhaps on their own little development themselves.

18:03 So Heron, just to remind you, discovered in 2019, the campaign, it was a really quite successful well in terms of its test, 800 barrels a day. And you've heard us say before that's one of the highest flow rates ever achieved in the country as far as we're aware. Light oil, a little bit waxy, that's just common with crudes in this part of the world, but very mobile and, you know, it's a great product to sell to the markets to the South. So that's a great great resource to have there in the ground. And of course, the expectation is all the other prospects and needs will have a similar type of fluid and perhaps a little bit heavy as we climb up structure to the South, but certainly still in the high thirties if not mid thirties. So a great product to have.

18:52 So the transformational issue, again, of course, is moving from a pure exploration company to one that's having a development that has production, has its own revenue and therefore can control its future and its destiny through the money that it generates. Heron itself, it's up to nearly 200,000,000 barrels in place. Current resource as in terms of recoverable resources, about 32,000,000 barrels. But we think that's at a modest recovery factors that we've used that is consistent with what goes on to the north of us. But they're quite low and we think an achievable target is upwards of 60,000,000 barrels by deploying not difficult or not new technology, but certainly new technology to the country and also treating the reservoir perhaps in a slightly different way than historically being done. But nevertheless, these wells are cheap. We're looking at, you know, $1.52000000 dollars for a for a development well and and the whole facilities is fairly simple. We're talking about beam pumps. We're talking about surface pipelines, you know, so it's not a complex development. So in development itself, it's it's pretty cheap and pretty simple in terms of the technology we use.

20:01 So the timeline is next. So here we are in second half of twenty twenty one. So our focus, having got the ELs now to do all the paperwork required to get the contracting in place such that we can get going straight away in the first half of twenty twenty two when the operational window opens in about April or May. Contracting, as those who've ever done it, is not an easy thing. It does take time. You have to obviously get alignment with your authority, in this case, Amar Pam and all the other the other stakeholders involved in the local government, etcetera, to make sure everybody's aligned that we

20:37 can move forward with the work program that we've put forward to the government for next year. And indeed that work program for 2021 is go back to Heron. It is suspended as an exploration well, if you will, so it needs to be completed as a development well. So it needs to be stimulated and the right kit put down the hole so we can produce it. And then we also need to get drill two perhaps more wells depending on the contract price we get to join Heron in producing the initial production phase of the field. Hopefully we'll get Heron on by mid twenty twenty two and that's simply basically being pumped next door toward a tank and the fluids will then be trucked off to PETRO MATAD the north that I showed you in the map previously. Those two additional wells again likewise developed quite simple, but the key is basically get production, get production data, get some more reservoir understanding and we're hoping to, on those wells, bring in the technology such as radial drilling, which is commonplace in The US to basically extend the drainage footprint of the wellbore and therefore get the well rates up from those that has been historically done and approved by PETRO MATAD North who as far as we're aware have not used any of those type of technologies to basically enhance the wells well performance that they've done.

21:57 And of course, after 2022 we got revenue, we got the wells on the stream, then we look forward to the following years, then we build up the production by drilling more wells. We start thinking about centralized facilities for our own, so don't not rely on PETRO China for its facilities. And then we talk a water flood and put up possibly other recovery systems such as maybe CO2 flood or the polymer flood that we know that PETROMA and others have successfully used in fields adjacent to Mongolia where recovery rates scale up to thirty, forty, if not higher. So a percent that is so. Obviously quite a lot hence our expectation that we should be able to get herring up to 60,000,000 barrels recoverable from the nearly 200,000,000 barrels in place. So that's our plan. So there's a lot of activity going on now to get ready for next year.

22:43 And again, not easy, obviously, with the with the COVID restrictions still in place, but that's our we are working hard to to deliver the program for next year and get some review from those wells.

22:56 So full full full filled forecast looks like this. This is our expectation of a 30% recovery profile as you can see in the graph. It climbs quite steadily. The wells actually should produce quite quickly, but then they will fall off without water injection and that little dip there in the graph is basically us putting in the water injection facility so then the profile climbs up to a peak roundabout in ten years time in 2031. Hopefully around about 9,000 barrels a day from all the wells that we produce and all the injection wells that we have deployed. Now, of course, things like rotary drilling, things like maybe fishbone technology that's very successfully being deployed now in Norwegian waters might help us indeed reduce the well count that we actually need to develop that that type of production profile. And even though the wells are only $2,500,000 or so, drilling less of those clearly impacts the economics of the project. So that's that's again in our aim to to deploy technology to to actually to reduce the overall spend on the development wells, which is the major cost of the project.

23:59 So again, we reckon about 60,000,000 barrels is a really achievable target. Recovery factor 30% is basically what springs to mind and sees you do any kind of exploration evaluation in reservoirs such as this. So it's achievable. And as I've said, you know, reducing costs has a huge value impact on the project. So that's exactly what we're going try to be focused on in the near term. Importantly, again, regarding commercialization, PETRO China are the player in the region for us and we have already signed an MAU. They've been very helpful and very easy to talk to about cooperation and getting stuff to their processing facility for export. And and I'm we're hoping that collaboration will go on for a number of years.

24:50 So what else do we have? So there's a little bit of hair in a little bit commercialization. So as the map alluded to earlier on, now we have a little cross section in the top picture there that goes from Herron in the North to to the end of the basin, if you like, to the south, let's say, a prime to a. And you can see basically the basement coming up and you've got a typical kind of end of basin stratigraphy or geometry working here where very often you get quite substantial stratigraphic traps developed. Buzzard in the North Sea comes to mind, this type of thing, as well as other structural traps that may develop as you climb up against these particular bounding faults. So obviously that's a bit of a cartoon about it, but that's kind of the opportunity that we're chasing.

25:37 So there's Heron itself and there's prospect just to the west of it. And then the really quite the large exciting stratigraphic trap called Gobi Bear at the end of the basin, which could be actually quite huge depending on the, you know, the actual trapping component of how it works on the stratigraphic tracks, where the sands pinch out, how thick they do, how thin they get as we climb towards the basin, that type of thing. Not forgetting Gazelle, of course, that was a discovery just to the West Of Heron itself. That is something we'll go back and have a look at. There's an upside to that that we think is is worth evaluating as a tie back to Heron. There are other discoveries made previous exploration programs ten years ago on the on the high immediate to the east of us. DT 4 is the best one of those that did recover a barrel or so of oil and test that now again with with deployment of new technology that might be enhanced.

26:30 And there are other prospects and leads that creep in or share across the block boundary with 29 where it's proven on their side, not drilled also. Again, those are other things to look at in more detail later in the years.

26:43 So again, lots of opportunities to add to that 33 to 60,000,000 barrels from Heron. It's going to be relatively cheap. We are planning a three d survey to infill the three d coverage that we currently have and that's basically in the southwestern area of the block. So once we get that, that's about a hundred and fifty two hundred a square kilometer survey. We can then tie those in those data with the data we already have and actually refined some of the locations to mature them to drilling. That the tender for that process has been completed now and we are evaluating the conversation with them. That could be something we should we could be doing next year or the year after subject to obviously COVID restriction and moving people in and out of the country.

27:34 We believe that in the exploitation license, there is an additional 500,000,000 barrels in place on those orange and yellow leads prospects that we've identified. So that's looking at towards 100 to 200,000,000 barrels recoverable with, you know, reasonable reservoir quality and all that. So a significant price there that we are that we've time to get after given the exploitation license as a twenty five year term. And again, these these prospects are quite shallow, thousand to 2,000 meter range and again, drillable with relatively small rigs and and cheap to

28:05 do initial valuation of of a million dollars or so. So so it's really something that's quite exciting to get after. Not forgetting, of course, Block 5 in the Central Western Part of Mongolia where we drilled Snow Lipperd well there in 2018. And these three pictures so that the map at the top of the slide shows you the structures at the mid Cretaceous unconformity. That's the shallowest of the targets that we've mapped. Just about see snow leopard there. That well had at least proved at least two petroleum systems. That means there were two types of oil in the well from two different source rocks in the basin. So that was a fantastic result. Sound development wasn't as good as we expected, but coming closer towards the block boundary fault to the south as on the cross section beneath the map, can see a nice inverted anticline against the bounding fault, very common structural style in these type of basins. Lots of discoveries now around the world in this type of setting.

29:06 And of course, that's the deeper part of the basin. That's where the source works going to be. And it's not unreasonable to expect good sand development against the bounding fault. So lots of perhaps alluvial fan type of systems shelling off the high into that part of the basin. So those Raptor trend prospects as we call them are clearly very exciting for us and again they're relatively shallow and inexpensive to test. Big resource potential. These are quite large features. A scale bar you can't really read them that unfortunately but that's about five kilometers. So these are 10 kilometers per kilometer. So these are quite big things. So you know, with some success it unlocks the whole play fairway and could unlock other basins that have similar structural stars as yet undrilled. So these are progressing exploration block five. It's not only about, if you like, block five, it's also about the rest of the country where similar settings, similar basins exist and it's hugely exciting. You know, we've got an acreage the size of France to play in and there's only two wells in it just yet. So huge huge potential there.

30:07 And again, large potential in in place resources as well. So so so block five is something we really want to chase as soon as we can. A little bit remote, well costed a little bit higher perhaps at $2,000,000 to punch down to about 2,000 meters but clearly not expensive in terms of global drilling costs for these type of resource prices. And with that, thank you for listening. With that, I'll hand over back to Mike.

30:36 Thank you, Jerry. Thank you, Hong Kongersong, for your presentations. I'm hoping that just about everything that needs to be said has been said. Obviously, it's been quite a long time coming for a pure exploration company to finally achieve some commercial success and move forward to the exploitation phase, and we have been a little bit frustrated over the last well well, since Heron was drilled in October 2019 or tested in '29 October 2019, it has been a bit frustrating how long it has taken us to get that exploitation license in hand. But we're delighted that we finally have, and we are very, very thankful to the Mongolian government to the way in which they have adapted to the reality of of onshore exploration.

31:23 The the previous two exploitation licenses that were issued in Mongolia, each had many many wells drilled on them before they were ever even put forward for exploitation license. And, obviously, we have the Heron well on a structure that is shared with a drill structure on the PETROCHINA side of the border, but but the Mongolian government was was very, very flexible, listened to the arguments that were made and understood that the way we start here is we start close to that discovery and we work outwards, and that's what our production profile shows. So we're very much looking forward to getting on with that. At the same time, we're we're not losing sight of where the company came from. We still have exploration potential within the portfolio as it currently exists and a very nice balance too. We've got the near field potential in Block 20.

32:16 So, obviously, in a proven basin with many, many hundreds of wells to the north with a very, very high success rate on those wells. So good chance of success, very low drilling costs, as Jerry said, by well standards, these are very, very low drilling costs, but with very, very high impact resource potential within the within the prospects.

32:39 So we have the luxury of time on block 20 now because the exploitation license lasts for twenty five years plus five plus five, So there is actually no rush to get after drilling those exploration prospects, but clearly, we'd like to do that. Not only do we like to explore, but we think these prospects have very, good chance of success. And it'd be good to know early on what kind of resource size we are actually trying to develop, and obviously, it would be good from the point of view of value creation, share price growth, etcetera, for for all our shareholders. So we would very much like to get after some of the exploration upside on Block 20 in parallel with with what we're going to be doing on on Heron. Block 5, of course, as Jerry mentioned, is in an area of of the country where very little exploration has been been done, and our two wells from 2018 were the first exploration wells to be drilled on properly defined within properly defined basins, on properly defined targets ever.

33:42 So there is a huge playground out there to find very, very large resources in basins that share their geology with the with the proven producing basins of Northern China. And we in the raptor trend on Block 5, we've identified some prospectivity that we really do not want to walk away from. On block five, we do have a little bit of a time bind in that there's not long remaining on the the expiration period of the PSC. We are in the final extension of that under the petroleum law, and the block currently will expire in July 2023. So we have a little bit more time, but not much. So we're looking at ways of trying to make sure we can explore and exploit what may be in block five because not only would it be transformational for us given the size of the resource potential, it would be transformational for for the for the country.

34:37 The refinery that's being built would be nowhere big enough if something like Velociraptor came in. So we're very, very keen to follow-up on that too. And as Hongjo's all mentioned, we are actively and aggressively looking for additional opportunities in Mongolia. We don't want to take on large work programs that we can't fund. We want to be able to fund our exploration through means other than always looking for equity raises. So So from revenue, from discretionary cash flow, that's always a good thing to be able to do, but we need to get that that development moving to to generate that. But we are looking at that. We're also looking at some renewable potential in in Mongolia. This is something a little bit new, but obviously Mongolia has a lot of land.

35:25 It it also has a lot of sunshine and and quite a lot of wind too. So looking at that as a way of potentially balancing our portfolio, and we're even looking at the potential to do something with our with our Heron development by way of renewable generation of electricity that we could actually use in the in the production operations to help balance our fossil fuel footprint as it currently stands. So it's an exciting time for for the company. I'm glad we've been able to fund ourselves for the next phase. I would very much have liked to have done a balance of debt funding, off taker funding, and some and a small amount of equity. Unfortunately, those first two are not available to us until we can demonstrate a a revenue stream.

36:11 But that said, we were able to get away an equity raise. I would have liked to have done it at a higher oil price, but the market set that price. I was adamant that we should try and make sure it was available through one means or another to our retail our retail shareholders. We now have the money. This secures the next phase of our operation to get the company to a revenue generating state. We have very good relationships with with the Mongolian government. We're working very hard to make sure all of the lessons that were learned in our previous operations are are are taken into account in making sure that we have smooth operation for the next phase. We will continue to apply the standards we have used as befitting our London listing, and we'll continue to be a champion for improvement in the sector in in Mongolia.

37:03 So with that, I think we will conclude the presentation and then we will be happy to take questions from the audience. Thank you very much. Mike, Gerry, Tiffany, thank you so much for updating investors this afternoon. Could I please ask investors not to continue to submit questions using the Q and A tab situated on the right hand corner of the screen. But just while the company take a few moments to review investor questions submitted during today's meeting, I'd 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 via your Investor Meet company dashboard, and we'll notify you by email when they're ready for your review. I'd also like to remind you that your feedback is important to the company. And immediately after this presentation has ended, you'll be redirected for the opportunity to provide feedback in order that the company can better understand your views and expectations.

37:50 Mike, Gerry, Tiffany, obviously, investors had the ability to pre submit questions, and I know that we received a couple of a similar nature. So perhaps before addressing the live Q and A, I've got five questions here that I'd like to post to you. The first one reads as follows: Would you please give us your general sense of how you felt the open offer process went, the final placing price, and whether PETROVIS or any other large shareholders have considered buying in the open market? Yes. Absolutely. During 2020 and 2021, when it was not clear when we were gonna get the exploitation license, but we were confident that we ultimately would, our share price was was pretty flat and and relatively low. And at that time, recognizing that we had told the world we were we'd used up all the money we had raised in 2018 to drill the five wells that we drilled and make the two discoveries that we did. Everybody knew we were going to be very, short of cash by the middle of twenty twenty one. PETROVIS stepped into the breach to give us a to give us a loan. That was a hard thing for them to do because, like many companies, they'd had a rough time during the certainly during '20 the year 2020.

39:01 So at that time, you know, early in in 2021, if I thought we'd be raising money at 3.5 p, I would have been delighted. But, obviously, we had a very, very nice run up in the share price in the second quarter. And so, ultimately, it was obviously disappointing to some of our retail shareholders, and we were desperate to do the raise at the highest price we possibly could. And ultimately, that's what we did. We needed the money. We needed to secure ourselves for the phase of getting this field on stream. Although we are going to be negotiating, we hope, with potential partners to allow us to increase the value of the asset by accelerating that production by a big injection of capital from somebody else, We want to be able to say, well, you're not our only option, guys, so we're not gonna take the only deal with some offer. So that's a little bit of background to to the to the to the raise itself.

39:57 The the primary bid element was very, well received and as as Hongguzil mentioned, was very, very quickly filled on the day of the raise, but that's not available to everybody. So the open offer was there, but obviously, our share price reacted quite badly to the raise and stayed resolutely under the raise price for the whole period. Some people did buy in for which we are very, grateful. Thank you very much for your for your for your confidence and put money into the company in the way that you did. I was very keen this time around, because we didn't do it in 2018, to make the raise available to retail shareholders. So even if the open offer was not exactly a short term slam dunk for people to come into, we we we were pleased that we actually were able to put it in place.

40:47 As regards, PETROVIS, as I said, they they have suffered like many other companies, but I'm sure they'll bounce back, even stronger. We were grateful that they were available to give us a line of credit, which we used a little bit of, but then we paid it back once the raise was done. They did follow their money in the raise, recognizing that when you're trying to attract new investors, which obviously we were, it it it's hard to attract them if you're a major shareholder and a company that knows the country in which you work back to front doesn't come in. So PETROVIS was aware that they that, you know, their example they they had to lead by example to encourage the others. They have done that for us every time, and and we're very grateful.

41:34 I'm a little bit reticent to ask them to do more during periods of of where we're not raising money, because I know it's been a struggle for them. They've waited a very, very long time for us to get to the stage of not just being an exploration company. I am hoping that some of the the the new institutional investors that came in will be will be interested in in increasing their their share of our of our of our capital. As things go along, I want to get some buoyancy in the share price as we run up to a very, very active 2022, and I hope that they will be they will be there for us to do so. I I would also like to say at the moment that although we we did announce and welcome blue chip investors in in one of the post to raise RNSs, I've told our advisers not to put into the mouth of the CEO a boilerplate like that when he's not gonna be able to say who they are. But I will say that we fundamentally raised money from The UK market plus PETROVIS.

42:38 We're not aware of any other investors that came in from Mongolia, so it was basically a UK plus plus PETROVIS raise. So, Mark, that was a little bit rambling, but hopefully, got across the main points. That's perfect. Thank you indeed, Mike. The next question reads as follows. Can you give us an update on PETRO MATAD's progress towards securing any partners or joint ventures as the company looks to put in place the logistics to ensure production starts in q two twenty twenty two? What commercial terms will need to be negotiated between PETRO China for PETRO MATAD to use its facilities? Okay. Very good. Well, we're working a couple of things in parallel at the moment. We are negotiating with effectively service providers to to make sure that we've got access to crew and equipment to enable us to operate during during 2022.

43:31 Those conversations have started some time ago, and they're they're going on right now. COVID restrictions that impacted 2020 greatly, 2021 to a lesser degree, we're we're hopeful and reasonably confident by the end of winter when the operational season starts again or the drilling season starts again, we should be in a good position to actually execute the program we have funded ourselves for. In terms of partnering, I've said many times, and, you know, one doesn't want to sound desperate in the in in the face of any would be partner because he'll think he'll take any deal. We we now have, our our destiny over the next eighteen months in our own hands because of money we've raised, but we are looking for a partner because we could do a very, very value accretive acceleration of the development of Heron using, money from somebody else. Somebody who comes in does work to earn an interest. We're very, keen on that. Obviously, don't want to say too much about how many we how many people we're talking to, who we're talking to.

44:32 There are some obvious candidates, and we're looking for somebody that's not only enthusiastic for Mongolia and for the kind of asset that we have, but also can bring some technical expertise, even even their own drilling arm into the equation because we think that that would that would work very well for somebody coming in at this stage. So that is that is a focus for us. We do have to negotiate the commercial terms of our entry through and our and our tolling through the PETRO China facilities. Obviously, until the Mongolian refinery is up and running, is 2024, 2025, we we don't wanna wait that long to come on stream. And certainly, the approved plan of development as approved by the Mongolian government does not have us waiting that long. It has us coming on stream in year one, which is 2022.

45:25 So we want to push ahead, and therefore, we're gonna need to use PETRO MATAD's facilities. Obviously, if you're the operator of those facilities, then you are in a good strong negotiating position. So when you want in, you're gonna pay me what I want. But we have a very, very strong ally in the Mongolian government because not only will we be putting through PETRO MATAD share of production, we'll also be putting through the Mongolian government share with lot 20 production. And the Mongolian government is very, very well aware of what the operating cost of those facilities is, and therefore will be a very, very good judge of what is a fair tariff and what is not. All that said, the conversations we've had with PETRO China about this, over the last two years has been very, very positive. We've been pushing against the Open Door when it's been talking to to PETRO China because, obviously, there's there are economic benefits for them as well to have third party business put through a facility that used to be running at, let's say, 23,000 barrels a day and is now doing only only 17.

46:28 So they're very interested in having their equipment and their manpower working at full efficiency. So we think that although the as I say, the operator has a has a strong position in terms of that negotiation, he is actually operating facilities that under the production sharing contract regime belong to the state. And we have the state on both sides of that fence, and and and we think we'll get a very good support from them to enable us to get on stream as quickly as the plan of development requires. Thanks, Mike. Next question reads as follows. Has there been any discussion to spin out block five prospects to ensure that these prospects can be expedited through new companies raising their own funding? It it is something we've we've looked at and talked about internally, but I think the the issue is that the remaining life on the expiration term of block five is only until July 2023, which is really too short for a standalone investment opportunity.

47:33 Obviously, people would say, well, extend extend that life. That requires a change to the petroleum law. It doesn't matter how much MR Pound might think we deserve one, the law would not allow it. It would not allow another extension to the to the expiration phase. So, basically, what we've got to look at is ways of doing the work we need to do to find out whether the raptor trend has any oil in it and do enough work on that to enable us to get an exploitation license. We're a lot more knowledgeable about that process now than we used to be, so we think we have a decent chance of being able to do that. It's also, worth noting that the Mongolian government has been, pretty flexible with us, over the last two years.

48:19 2020, obviously, very, very badly affected by the pandemic. We applied for a moratorium on block five to stop the PSC clock ticking, and that was granted. And we applied for another one for 2021, and that was granted. So the clock is currently stopped on, on block 5. If we can get ourselves ready to do some exploration work on block 5 in 2022, and if, pandemic impacts are are are are not standing in the way, and we we find a partner or funding available from moving around some of the money we have to enable us to do that, then we would like to do that. But the the the the spin off idea is an attractive one because the sheer size and the sheer low cost of actually doing that work is something that I think we could probably we could probably get some investors for who were looking for that kind of punt.

49:14 But unfortunately, as a standalone entity, it's a little bit too much of a one shot wonder with such a short life. So for now, we're focused on how we can do the work we need to do within the remaining period of the exploration phase to get us an exploitation license of Block five as well. That's great. Thank you. We've got two final pre submitted next question. Of I Bates, Over the last two and a half years, think PETRO MATAD's lawyer has been the busiest person in terms of trawling through the the legal documentation of the country to make sure we know exactly what it is we need, and we're aware of where there are conflicts with the law, which was one one of the problems, probably the main problem we ran into during 2019.

50:17 And even that, although there was a conflict within the law, which obviously causes the government a little bit of a problem, there was enough pragmatism within the central local government that allowed us to finish our wells. So so thank you to Mongolia for that. That that that little issue remains, but actually land access is done differently in exploitation areas, and we are now pursuing that and making sure that everything that needs to be done, which includes a survey that is ongoing at the moment, and then the registration of the land, and then our inclusion in the local land plan for 2022 and beyond. We're making sure all of that is done absolutely perfectly so that that issue, although those conflicts of law could still affect some explorers if they're not careful, it won't be an issue for the exploitation area.

51:05 We've also been very impressed with the exploitation department of MR PAM. We've this is really the first time we've dealt with them in earnest over the last, let's say, eight or nine months. They're obviously very used to receiving, proposals and needs for approvals from a, production company and that they control the two production or they supervise the two production companies in Mongolia at the moment. We've been very impressed with the speed with which they work. And, obviously, the things that we're going to be bringing to them will be things that they have seen before largely. So we're pretty confident that we won't see the delays that we experienced before.

51:50 We've done a lot of preparatory work over the last two years to make sure everything is is identified early, flagged early where we see there could be a potential problem, and those discussions have been ongoing for some time. A number of solutions have already been reached. So I think we're in in very good position to make sure that our next operational phase is done in in collaboration with central and local government with MR PAM standing right next to us. Thank you, Mike. And as I say, the final pre submitted question is as follows. With the Mongolian winter not starting for several months, what work can be done in the short term? Is it possible to start drilling earlier than your stated start date of q two twenty twenty two? Well, I don't want to bang on too much about all the bureaucracy and preparations we we we do have to do, but there is another component to to this. It it would have been with an approval in July, maybe it would have been possible to to do an operation that could just about have been finished before the winter drilling shutdown, because obviously, the things we need to do to Heron One involve rigs, and the rigs are the things that that are not winterized in Mongolia and therefore shut down in in in in mid November.

53:08 Perhaps we could have done that, but we're also facing a situation where during 2020 and early twenty twenty one, PETRO China, which is normally operating with eight or nine rigs in its own blocks to immediately to the north of us, was not able to bring in crews to operate those rigs, those rigs were idle. Some drilling activity is now going on as as restrictions have lifted, and we're in conversation with the service provider who is quite confident that 2022 is gonna be different. But, actually, they had a lot of catch up work to do. So even though they haven't got all of their rigs working again, getting a slot in them for ourselves to do operations on one one well was going to be was going to be a big ask and was very likely going to give us one well ready for production, but no facilities to put it through because the negotiations with PETRO China will likely take some while, and the Mongolian government needs to sign off on them. So I know it's been frustrating for people saying, you know, come on, you've got a well.

54:11 Well, as Jerry mentioned, it's not completed for production. It was drill stem tested, and therefore it needs all that jewelry to be put down the hole. It needs some stimulation to be to to be done on the reservoir to make sure it'll be a sustainable producer, and that we'll get a decent result out of it over a longer time than the DST was able to run for. So, on balance, rushing to try and do something before the winter came on was was not our goal. We wanted to be to make sure that during 2022, we were able to do in a batch way, in a cost effective way, operations to allow us to have a multiplicity of wells that could be in production before the onset of winter. The good news is that production operations do continue year round, that is winterized.

54:58 And one day when we can have a very, very long drilling program as we hope to be able to have in the full field development years on Heron, then perhaps we can also get the contractors to go to the trouble of winterizing their rigs and not have a winter shutdown. And that's certainly a goal for us going forward. Well, that's great, Mike. Thank you very much. And then once again, thank you to the investors that pre submitted questions. If I could ask you guys to open up the q and a tab, you'll see there's been a number of questions that have been submitted throughout the presentation. I think you might have touched on perhaps it's Chris who submitted a question about regarding partnerships and things. I think you you may have touched on that. But if I could ask you to perhaps read out a question, give a response where it's appropriate to do so. Mindful of time, but please feel free to pick up any questions here where you feel you can add any greater transparency.

55:49 Okay. I'll I'll take the one from from Elizabeth Eve, which was the first one to come in, and Jerry, maybe you could take the technical ones that that follow that. Elizabeth asks, in light of the company estimate of 33 to 60,000,000 barrels recovered from Heron, do we have an estimated net minimum and net maximum value for this asset, and at what point is the value reported in the company balance sheet? The numbers that we quote here, the 33 and the the 60, as you know, as we've said in the presentation, are based on different recovery factors, 33 being approximately a 15 to 17% recovery factor, which seems to be what PETRO China is is moving towards in their area to the north.

56:35 And 60,000,000 barrels is based on our estimate of of 30% recovery factor, which we think should be achievable with technology that is not new to the world, but has just not been applied as yet in in Mongolia. And both of these estimates are what we call our p 50. They are most likely estimates. So there is quite a wide range given the amount of drilling that's been done on Heron to date. So at the moment, we have quite a a a small proven reserve, which effectively is an area of a couple of square kilometers around around Heron Number one, which are the petroleum resource management system that we use and that Mongolia is transitioning to. That is effectively the amount of proven reserve that that we've got and it's, you know, it's single digit millions of barrels. But, obviously, our work will be initially to drill more wells into that proven area to give us the best chance of multiple production wells, and then step out from that to prove up the the resource potential of the surrounding structure, and then, hopefully, be able to demonstrate that we're heading for a recovery factor that's 3030% or or more.

57:45 At what point does this value get reported in the company's balance sheet? Well, obviously, we don't have a finance representative on here to just say exactly when that will happen. But, obviously, proven reserves are are are are bankable resources. There there are things against which one can put put debt, and, obviously, it's a thing that is gonna start generating revenue for us, and we want that to be as early as as 2022. I will get finance to comment on the on the specifically on the balance sheet question if they have anything more, and we'll add that to the to the answers when when investor meet meet company puts this all online. Jerry, you wanna take the next couple of questions? So, yes, I'll take a question from Simon c and Steve Wyeth. Simon C asks, can you talk about the new technologies you'll be using and why these are used rather than conventional means?

58:36 So we're talking about really trying to enhance the stimulation of the wells. Conventional technologies currently are perforation and fracking those perforations. This is what PETROMA generally does in their fields. We're talking about doing radial drilling and those fracking if needed, those radial holes that can go up up to fifteen, twenty meters outside the width of the sorry, the damage of the wellbore and extend your drainage area significantly around the wellbore. It's not new technology. It's sort of used in The States and elsewhere a lot, almost as a standard, but it's not being used in Mongolia. And we think it would work well in this type of reservoir. And indeed, I've talked to and we've done a little bit of research into that with the with the contractors who provide that. So we're hoping that that would enhance the existing technologies. There are other things like I mentioned before, you know, Fishbone, very successful in in Norway at the moment. That's a slightly different type of completion technology.

59:31 There are other things to do, different type of perforation guns, different that type of thing which we we will need to investigate as we learn more about the reservoir and its behavior with production as we go down as we go down the years. Steve Wise said, are you anticipating a lower production rate lower than eight twenty one barrels? It previous slowed. So we that 08/21 was a full choke flow. So you don't you don't flow your production wells open full choke. You you take them back to protect the reservoir because what you don't want to do is damage the reservoir by flowing it too high. You get fines coming into the wellbore and blocking it up. So we estimate we'd probably start these wells on, you know, up to 500 barrels a day depending what they look like when we drill them and we log them and therefore they will decline on the normal way and then the water injection system will come in and preserve their rate or stop their decline rate a little bit faster. So up to 500 barrels a day before the initial rate.

1:00:32 Alan, he asked what possible delays into producing oil. Do you envision it happen in 2022? I think Mike addressed that. It's really about getting access to equipment coming into the country given the border issues around code at the moment. So but hopefully that will disappear. So hopefully there won't be any delays in 2022, but that's the only one I think we can identify at the minute. Chris a asked a question regarding the seismic that I mentioned. I might get able to give an idea of the cost involved and confirm the size. So the size basically, gap the hole that we have between existing surveys in the exploration ice exploitation ice is about 200 square kilometers. So we're looking at acquiring a cube somewhere between a 150 and a 120 square kilometers depending on the modeling that we've done and are doing about what's the best acquisition design or the rest of it to acquire those data.

1:01:24 And we budgeted, I think, about 4,000,000 for that total survey. The I mentioned the tender. The bids that we had came in under that, I'm pleased to say so. And again, when we've actually managed to pin down the exact size and the and the design of the acquisition, I'm hoping that that that actually the final cost will be lower lower than those numbers. So but it's certainly in the in the few millions in terms of cost range. I can't see Okay. Thanks thanks, Jerry. I'll I'll take I'll take the next one which is from Chris a. Are you able to provide any further information regarding partnering and the level of interest you're seeing? Chris, I don't I don't wanna say too much in case in case they're watching.

1:02:10 But we have we have engaged with with some obvious candidates, and we have done so over the last couple of years, actually. But now we're finally in a position where we're able to talk seriously having secured long term tenure to the to the exploitation area. Because until July when that was awarded, our exploration area our exploration PSC was actually expiring in July of this year. So anybody looking from a legal point of view is gonna say, well, okay. You've got tenure until that date, after which until you've got your exploitation license, you have nothing. So a lot of people that we've spoken to said, well, okay. Once you've got it, come back and talk to us. We're doing that now, so conversations are ongoing.

1:03:01 It's fair to say that in these uncertain times, new country entry, which has always been quite a big deal for oil companies around the world, it it's probably a slightly higher hurdle to get over now than it was before. People looking at new countries always worry about, well, what don't I know about it, etcetera, etcetera. I think for some reason, the pandemic has made people even more cautious. So I I'm I'm not sure there'll be a huge rush for people wanting to come in who aren't already active. And there's not a huge stable of of of companies that are active in Mongolia already or have been in the past or have have expressed interest, but there are some. So we are certainly doing all we can to to move that forward because I think a partner would be would be a very good idea.

1:03:50 Ty s asked, what is the next news flow we can expect? I'd like to be able to be confirming whether we're actually going to be doing seismic during this coming winter because that is something that we could actually be ready for. But it's not a critical path item because the locations for 2022 drilling are not in the area of the new three d. They're in the area of the existing high quality three d. I'd like to be able to announce that we have secured contracts for the equipment we need to carry out the 2022 program, And I'd very much like to be able to say we've we've found a a partner on terms that we could all all all celebrate. But, obviously, that's something that we we we we need to get those negotiations done and dusted to be able to say.

1:04:37 And finally, also from Tyus, is there any substance speculation of the company eventually being delisted and going private? Well, that's not a conversation that we've had. We have, as you know, a large founding shareholder that's been our major shareholder throughout, has maintained their shareholding at at around about 21% and has been super supportive and happy to keep it at that. We haven't discussed taking it private from from a personal point of view. I'd see that as a bit of a failure unless I could say to shareholders, look at this great deal that somebody has offered us and and it reflects the full value of the company and and, you know, it it's good for shareholders. It's not even been discussed. And I know there's been a bit of speculation that because we weren't able to name investors that came in in the recent raise, then they're probably all Mongolian, and this is just a prelude to to delisting.

1:05:31 No. That has not even been discussed at at board level in in any way since I've been with the company. Mike, Jerry, and Tiffany, thank you so much. You've addressed actually every single question from investors that have come through the live event. So thank you to those investors that took the time to submit those questions and your engagement. I know investor feedback is important to you guys, and we'll shortly redirect investors to give you their thoughts and expectations. But perhaps before doing so, Mike, I could just ask you for a few closing comments just to wrap up with, and then I'll divert investors to give you feedback. Yes. Thank you very much. Really only to say once again, thank you everybody for your attention. As I said, this is our debut on investor meet company, but I hope we'll be able to do this on a a reasonably regular basis and also do it with members of the team so shareholders get to see who it is that's chasing every day to move this this program forward.

1:06:27 I hope we've communicated a little bit to you the excitement of of of what we're doing. At the same time, I hope you can see that we are realistic in our in our expectations, and we're serious about what it is we're we're trying to do and that you could take some comfort from that. There has been, and continues to be criticism of the company because of lackluster, if I can that's a word I'll use. I perhaps will quote some of the ones that we use, communications. And that's something that we very much are are aware of, and we would like to very much improve and and give more information as and when we're able. We are a single geography company working in a country where, I hope they won't mind me saying, the bureaucracy moves rather slowly.

1:07:19 And whilst I would love to be giving very, very regular, very, very frequent updates to our shareholders so that they are aware that we know they're interested in what's going on and they want that information. I don't want to be reporting, too frequently when there's absolutely nothing new to say. But I'm not gonna hide behind that. As I say, I'd like to be able to make this and some of the other media that we have, used up until now, a means of, communicating with shareholders. And so, judges by that, we'll we'll do another one of these in the not too distant future, and, and, hopefully, we'll we'll we'll we'll generate some better feelings about the way the company communicates. So it it's not for want of, of wanting to do it. For lack of wanting to do it, it's actually that we would we want to be able to say and report to you significant progress, but but we are certainly working on that. That's great. Mike, Tiffany, Jerry, thank you once again for updating investors this afternoon.

1:08:32 This will only take a few moments to complete, but I'm sure will be greatly valued by the company. On behalf of the management team of PETRO MATAD, we'd like to thank you for attending today's presentation. That now concludes today's session, and good afternoon to you all.