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(Sharecast News) - Shares in Petro Matad were sliding on Thursday, after the company updated the market on operations on its Heron-1 production and Heron-2 well testing in eastern Mongolia's Block XX.
The AIM-traded firm said Heron-1 was producing oil at an initial rate of 200 to 300 barrels per day, with production choked back due to high surface pressures resulting from an unexpectedly high amount of associated gas, which improves flow potential but requires careful monitoring to maintain safety standards.
Tests indicated that the well could sustain higher flow rates, potentially exceeding the 821 daily barrels achieved in 2019, subject to adjustments to surface infrastructure.
Oil from Heron-1 was being transported to the neighbouring Block XIX TA-1 facility for storage while the final details of a cooperation agreement with Block XIX's operator were completed.
Once finalised and approved by Mongolia's Mineral Resources and Petroleum Authority (MRPAM), the export paperwork would allow for the sale of Block XX crude to buyers in China.
Meanwhile, Heron-2 testing faced setbacks, including a seven-day delay due to test rig engine repairs.
After stimulation, the well produced a mix of oil and stimulation fluids at a low rate of around 30 barrels per day, considerably lower than Heron-1's flow rate.
The well had now been suspended, and the data from stimulation and pressure readings would be analysed to assess whether the low flow rate was due to reservoir permeability or another issue.
Based on that evaluation, Petro Matad said it would determine the next steps for Heron-2.
"We are very pleased with the performance of the Heron-1 well so far and we are encouraged that higher than expected stabilised flow rates may be achievable," said chief executive officer Mike Buck.
"We are looking into this as a matter of some urgency, although if surface modifications are needed, these will likely have to wait until after the winter operational shut down.
"The transfer of production to Block XIX is settling into a routine and we are pushing to be able to export and sell Block XX crude as soon as possible."
Buck said the Heron-2 well testing had not achieved the flow rates hoped for, given the enthusiasm with which Heron-1 produces, but added that the presence and recovery of oil was "encouraging", with "some work ahead" to understand the outcome so far and determine a forward programme for the well.
"This work will be done over the next few months as we finalise our operational programme for 2025."
At 1555 GMT, shares in Petro Matad were down 33.76% at 1.66p.
Reporting by Josh White for Sharecast.com.
