Petro Matad

LN: MATD

£47.4m market cap

7.15p last close

Petro Matad is a pure-play Mongolian exploration company with a 100% equity interest in Blocks IV, V and XX. Management plans to drill four exploration wells in 2019, targeting low-risk prospects in Block XX and a high-impact well in Block V.

Investment summary

Petro Matad is set to kick off its 2019 exploration and appraisal campaign targeting a series of low-cost, near-field and low-risk targets. Drill sites for the three Block XX wells have been constructed and management expects drilling to begin in July 2019. Prospects Heron-1 and Gazelle-1 are analogous to producing fields to the north-east in Block XIX, while Red Deer-1 is more material at 48mmbbls and is located further away from known oil. Petro Matad is funded for 2019 from the net proceeds of equity raised in 2018. However, additional funding would be required to commit to additional exploration and to support G&A in 2020. We update our valuation based on the company’s increased estimate of Heron-1 prospective resources at 25mmbbls (gross) from 16mmbbls. Our risked valuation stands at 21.6p/share (+6%), which we expect to revisit post-drill.

Y/E Dec
Revenue (US$m)
EBITDA (US$m)
PBT (US$m)
EPS (c)
P/E (x)
P/CF (x)
2017A 0.2 (9.7) (9.9) (0.3) N/A N/A
2018A 0.6 (18.2) (18.5) (0.3) N/A N/A
2019E 0.0 (5.0) (5.0) (0.1) N/A N/A
2020E 0.0 (5.0) (5.0) (0.1) N/A N/A
Last updated on 25/07/2019
Industry outlook

Petro Matad’s prospect inventory benefits from low well costs, simple development concept and attractive fiscal terms. Despite some uncertainty around offtake options, our analysis suggests an attractive risk/reward incentivising exploration. Even small Block V oil discoveries (c 10mmbo) generate positive returns at US$70/bbl Brent.

Last updated on 25/07/2019
Sector
Oil & gas
Share price graph
Balance sheet
Forecast net cash (US$m) 6.5
Forecast gearing ratio (%) N/A
Price performance
%
1m
3m
12m
Actual 4.1 37.5 (21.0)
Relative* 2.9 36.8 (18.8)
52-week high/low 9.3p/2.0p
*% relative to local index
Key management
Mike Buck CEO
John Henriksen CFO