Petro Matad draws down first US$3 mln tranche from EBRD to fund Mongolian projects

Petro Matad Ltd (AIM: MATD) has issued 13.7 million shares to the European Bank for Reconstruction and Development (EBRD), representing the first US$3 million tranche of the EBRD’s US$6 million subscription under the agreement announced in December last year.

Under the terms of the agreement, EBRD subscribed to shares representing a 17.5% stake in the company at a price of 14 pence per share worth a total US$6 million. The proceeds, along with an earlier share issues that helped the company raise another US$12.5 million gives the company sufficient funds to cover the 2010 exploration programme.

The second tranche of US$3 million will be issued on the satisfaction of certain further conditions including the appointment of a representative of EBRD to the board, which are expected to be met by 31 March 2010.

This year’s drilling programme comprises three wells on the Davsan Tolgoi prospect on Block XX, which is estimated to have an unrisked prospective resource of 122 mmboe (million barrels) with a 37% chance of success. The initial three wells could be followed by more exploration wells on the Davsan Tolgoi prospect or one of the other 14 prospects on the current Block XX prospect inventory, which have a mean unrisked prospective resource estimate of 516 mmboe.

Other activities planned for 2010 include a 2D seismic programme over unexplored basins in Block XX together with geological review work on the recently awarded Blocks VI and V.

Last year, broker Westhouse estimated the NPV (net present value) of Davsan Tolgoi at US$971 million based on an oil price of US$65/barrel compared to the current US80/barrel, escalated at 2.5% per annum and using a 10% discount factor.

The 'buy' rating for the stock was retained, which was based on the company’s “high gearing to exploration success” on the Davsan Tolgoi prospect.

http://www.proactiveinvestors.co.uk/companies/news/13583/petro-matad-draws-down-first-us3-mln-tranche-from-ebrd-to-fund-mongolian-projects-13583.html