PETRO MATAD LIMITED 
By The vast majority of field season exploration operations have been completed on Petro Matad's Block IV and V Production Sharing Contract (PSC) areas in central Mongolia. The Company is pleased to provide a progress report on those operations.
Summary
The Company's 2011 exploration programme in Blocks IV and V
consisted of stratigraphic core drilling, 2D seismic
acquisition and field geology operations. Results of those
activities have provided the first documentation of live oil
and active oil migration in central Mongolia, and permit
extrapolation of a viable hydrocarbon system along the 550km
length of the "Valley of the Lakes" basins in Blocks IV & V.
When combined with the 24,000 stations of gravity data
acquired in 2010, the expanded seismic network has delineated
a robust inventory of fold, fault and unconformity traps
which will focus the Company's delineation of future drill
targets.
Blocks IV and V consist of a linked system of Jurassic
through Cretaceous rift basins that contain the same
lacustrine and deltaic source, seal, and reservoir sequences
that produce oil in similar basins throughout Central and
Northeast Asia. The Block IV and V rift basins are located
beneath the modern "Valley of the Lakes", where Cenozoic
strike-slip faulting and local contractional folding have
enhanced the trap potential compared with the producing
basins of eastern Mongolia.
Highlights from the exploration programme include:
• Confirmation of oil generation and migration in the Tugrug Basin of Block V
• Documentation of thick, rich oil shale source rock throughout Blocks IV & V
• Identification of favourable reservoir characteristics in core and outcrop
• Acquisition of 1,842 km of 2D seismic data for the two Blocks in 2011
• Delineation of approximately circa 6,700km2 of potential oil generation kitchen areas within the two Blocks
• Preliminary identification of multiple anticline, fault, and unconformity trap leads within and adjacent to kitchens
Ongoing activities include:
• A second, 1,600m deep stratigraphic core hole is being drilled by Major Drilling in the Biger
Basin (Block IV)
• Ongoing interpretation of seismic and other work will continue over winter
• Further 2-D seismic planned in 2012
• Possibility of exploration drilling in 2012, subject to the results of the seismic studies and budget approval
A copy of this announcement augmented by the inclusion of maps, photographs and diagrammatic illustrations is available in the Investors' section of the Company's website www.petromatad.com.
DetailsOil in 5-4-1900 Stratigraphic Core
The 5-4-1900 stratigraphic drill hole was drilled to provide
the first age and geochemical constraints for deep basin
strata within Blocks IV & V. 5-4-1900 was also sited to
provide depth control and stratigraphic identification of
reflections along seismic line 5-4, which was acquired in
2010 as the first reflection seismic profile ever acquired in
central Mongolia.
Coring and logging operations were completed for SC-1 in May
2011 at a total depth of 1,603m. The drill location was
situated on the northern edge of the Tugrug sub-basin, the
most easterly basin in Block V which is located 400 km west
of Ulaanbaatar. It recovered core of a complete Mesozoic-aged
sedimentary succession before entering volcanic rocks at
1,523m. Seismic data confirm that the 1.5 km sedimentary
interval expands southward to approximately 4.5 km thickness
in the centre of the Tugrug basin, 12 km south of the drill
hole.
Detailed descriptions of lithology, sedimentary structures
and interpreted geologic environment were completed in June,
with systematic sampling for source rock geochemistry,
hydrocarbon presence and reservoir characterisation.
Analytical results have been received from international
laboratories.
The most significant of the analytical results is from a
study of fluid inclusions in reservoir sandstone samples.
Three populations of oil fluid inclusions were identified in
the samples: upper- low to moderate gravity oil, moderate
gravity oil, and upper-moderate gravity oil inclusions. These
three oil phases indicate that the sandstones acted as
carrier beds for multiple periods of oil migration. The oil
is presumed to have migrated through the borehole location
from the deeper basin centre to the south.
Approximately one third of the Mesozoic rocks in the drill
core consist of grey and dark grey mudstone and shale of
varying organic content. Oil shale samples between 1,385m and
1,481m average over 3% Total Organic Carbon and are
characterised as good to excellent oil-prone source rocks,
with a secondary good source rock interval between 1,015m and
1,075m. Pyrolysis data from the deeper zone gave average
thermal maturation values that are indicative of the earliest
stage of oil generation. These maturation levels, along with
occurrence of the oil inclusions, imply that basin areas
deeper than 1.5 km constituted oil generation "kitchens" in
the geologic past. Zones of brown staining between 1,240 and
1,260m correlate to oil inclusion concentrations and are the
focus of ongoing petrographic study to delineate the age of
oil migration.
Preliminary analysis of sandstones in the core demonstrates
deposition in a variety of delta and lake environments.
Importantly, good visible porosity and reservoir quality are
preserved throughout the core. Cementation by clay and
volcanic-derived cements is minor compared to Mesozoic
reservoirs from eastern Mongolia, where such cements can
limit reservoir productivity and necessitate fracture
stimulation for commercial oil production. Sandstone samples
from outcrops throughout Blocks IV & V show similarly
favourable porosity, which likely reflects the greater
distance of Blocks IV & V from the volcanic provinces of
eastern Mongolia during Mesozoic time.
Block V Seismic Acquisition & Interpretation.
Petro Matad's 2010 and 2011 2D seismic programmes delineated 1,800km2 of Mesozoic basin areas within Block V that are deeper than the 1.5 km depth that is considered to be the top of the paleo-oil window in the SC-1 core. The Company acquired, processed, and interpreted four 2D seismic lines totalling 176 km in Block V during 2010 and this was followed by the acquisition of an additional 946 km of 2D data in 2011 which is currently being processed. The 2010 and 2011 data define possible hydrocarbon kitchens in the most easterly basin of central Block V (Tugrug) and the Taatsiin Tsagaan basin of western Block V. These sub-basins were the focus of the 2011 2D program that delineated several dozen fold, fault, and unconformity traps within and adjacent to the sub-basins.
Block IV Seismic Acquisition & Interpretation.
Petro Matad acquired, processed and interpreted 173 km of 2D
seismic data in Block IV during
2010 and these results guided the placement of 896 km of 2D
data in 2011. This data indicates that a vast 4,900
km2 area of the Block IV consists of Mesozoic
sedimentary basins in excess of
1.5 km depth. These potential kitchen areas are concentrated
in the Baatsagaan trough of central
Block IV and the Biger basin in the westernmost part of the
Block. A stratigraphic core hole is being drilled in the
Biger basin to confirm the level of hydrocarbon generation in
western Block IV. As in Block V, an inventory of fold, fault
and unconformity traps within and adjacent to the Block IV
sub-basins has been identified.
Block IV & V Geologic Expeditions
The 2010 and 2011 field geology expeditions provided the
first comprehensive re-examination of the hydrocarbon
potential of the Gobi Altai region since the reconnaissance
Soviet and Mongolian mapping expeditions of the 1980s. Petro
Matad's field efforts included collaboration with academics
from the Mongolian Academy of Sciences, University of
Leicester, University of Utah, Stanford University,
University of Texas and the University of Arizona. These
expeditions recovered over 1,000 surface samples tied to nine
logged reference stratigraphic sections, which average 750m
in thickness and form a correlation network for Cretaceous
source and reservoir rocks along the 550 km trend. The
geologic surveys also discovered the presence of significant
surface exposures of oil shale. Separate analysis of these
occurrences is on-going.
Together with the seismic and Tugrug Basin 5-4-1900
stratigraphic core results, these studies provide the first
documentation of viable source, reservoir, seal, and trap
components within and surrounding the newly identified and
extensive hydrocarbon kitchens. These studies have also
substantially revised the geologic understanding of the
history of faulting, folding and associated basin
sedimentation in central Mongolia.
The sizable lead inventory in Blocks IV & V will be evaluated
for prospective drilling locations as part of the seismic
processing and seismic and gravity interpretation workflow.
Volumetric and risk assessment will be conducted on the
better defined features. With the possible exception of
closely spaced seismic grids that were acquired in the Tugrug
and Taatsiin Tsagaan basins, most leads and prospects are
expected to require additional 2D seismic delineation during
the first half of 2012.
Petro Matad CEO Doug McGay said "This year's exploration
programme in Blocks IV and V was designed to progress the
Company's knowledge towards identifying drillable prospects.
The programme has achieved this objective and also confirmed
the presence of a working petroleum system in the Tugrug
basin, in Block V, which bodes well for the rest of the
sub-basins in these two Blocks.
"The identification of multiple phases of live hydrocarbons
in Block V is a highly significant development for
hydrocarbon exploration in central Mongolia. Petro Matad has
pioneered the previously unexplored basins in the eastern
two-thirds of Mongolia and provided the first documentation
of a viable hydrocarbon system in this vast unexplored area.
Additionally, the source rock quality, thickness, and
maturity compare very favourably with the producing fields of
eastern Mongolia (Tolson, Tsagaan Els and Zuunbayan). The
potential for higher quality reservoir rocks in central
Mongolia is also a most encouraging development.
"We look forward to the finalisation of stratigraphic drill
hole in the Biger Basin on Block IV. Further analysis and
interpretation will be undertaken during the winter. As well
as providing us with even better understanding of these
exciting areas, the studies will help our 2012 exploration
programmes, including investigating the potential for
exploration drilling."
Technical information in this news release has been reviewed
by the Company's Exploration Manager, Dr James Coogan.
Dr Coogan is a petroleum geologist with 30 years of
experience in North American and international exploration
and development. He is a member of the American Association
of Petroleum Geologists and the Geological Society of
America.
About Petro Matad Limited
Petro Matad is the parent company of a group focussed on oil
exploration, as well as future development and production in
Mongolia. The Group holds the sole operatorship of three
Production Sharing Contracts with the Government of Mongolia.
The principal asset is the PSC for Block XX, a petroleum
block of 10,340 km² in the far eastern part of the country.
The two other Blocks, IV and V are located in central
Mongolia. Block IV covers approximately 29,000 km² and Block
V covers 21,150 km².
Petro Matad Limited is incorporated in the Isle of Man under
company number 1483V. Its registered office is at Victory
House, Prospect Hill, Douglas, Isle of Man, IM1 1EQ.
Further information: Petro Matad Limited
Douglas J. McGay - CEO
+976 11 331099
Westhouse Securities Limited
Richard Baty/Petre Norton
+44 (0)20 7601 6100
