MasterMetals: Petro Matad soars as BG Group buys into Mongolian assets

April 7, 2015

Petro Matad soars as BG Group buys into Mongolian assets

Petro Matad (LON:MATD) has entered into a farm-out agreement with BG Group (LON:BG.) for a 78% interest in blocks IV and V in central Mongolia.

The agreement with the Footsie giant will fund Petro Matad’s share of a mutually agreed US$28mln work programme that will satisfy the minimum work obligations for both blocks under the current licence terms, which apply until July 2017.

To accelerate the exploration evaluation process the majority of the work will be undertaken in 2015 and 2016.

Meanwhile, Petro Matad will receive an additional cash consideration of US$4.55mln to fund ongoing operations and obligations. BG will stump up US$2.75mln upfront when the deal completes (it is still subject to regulatory approvals) and thereafter will pay US$50,000 a month over 36 months to Petro Matad.

Following the transaction Petro Matad will continue to hold a 100% interest in block XX and will hold a 22% interest in blocks IV and V.

“BG Group's decision to enter Mongolia is an endorsement of the potential within the acreage and Petro Matad's technical work to date,” asserted Dr Oyungerel Janchiv, acting chairman of Petro Matad.

“As a result of this transaction Petro Matad will be fully funded in relation to the remaining licence commitments on Blocks IV & V,” he added.

Shares in Petro Matad shot up 65% on the news.