Source: Proactive Investors UK               Date: 09 June, 2011

Analysts at the integrated corporate finance, broking and investor relations group Westhouse have sounded a very upbeat note on prospects for Petro Matad, thanks to its increasingly successful exploration program, strong and capable technical team and “exceptionally large” prospective exploration blocks. The analysts' highly positive stance on the company follows a visit to Mongolia to assess its operations and management at first hand.

The group’s principal asset is a production sharing contract (PSC) over Matad Block XX, a petroleum block with an area of 14,250km² in the far eastern part of Mongolia. It has also signed two other such PSCs, for Bogd Block IV and Ongi Block V, which together cover approximately 71,000km² in central Mongolia.

The most likely near-term scenario for the company's drilling operation overall is the hiring of another rig to enable it to drill around 12 wells this year, comprising mainly exploration wells within Block XX. Petro Matad has already drilled four wells successfully on Block XX and the next step is to secure decent flow rates so that risks associated with the block’s resource estimates can be reduced.

For the analysts, promising as the exploration and development work is, much depends on the quality of the technical team and management in general. They noted that the high quality of Petro's team is "striking" and "stands out immediately". Another further positive for the group is that the Blocks it operates are very large relative to, say, a typical North Sea Block. Block XX, at 14,250km2, is the smallest, while Blocks IV and V cover an impressive 71,041km2, equivalent to roughly the area of New Hampshire, Vermont and New Jersey in the USA combined.

Yet Petro Matad has fully explored only a small fraction of the total area under its control. With early-stage exploration activities already producing encouraging results, Westhouse believes the group’s huge acreage position suggests "substantial upside potential". The analysts added, “Petro Matad has set up the first self-contained, professional petroleum exploration team in a country that was more accustomed to fly-in/fly-out consultants and extremely limited local sectorial services. However, rather than resting on its laurels, the company’s ambitions remain undiminished, as demonstrated by its full work schedule involving all facets of exploration and appraisal, from field studies right through to drilling and testing.”