Petro Matad (LSE:MATD) — AGM

0:00 Good morning, ladies and gentlemen, and welcome to the PETRO MATAD Annual General Meeting Call. Throughout today's presentation, investors may submit questions at any time just using the Q and A tab situated on the right hand corner of the screen, and the company will look to address those questions at the end of the meeting. I'd now like to hand over to Mike Buck, CEO. Good morning.

0:20 Thank you very much and good day ladies and gentlemen. Thank you for your attention and attendance. My name is Mike Buck, Chief Executive Officer of PETRO MATAD LIMITED, and in accordance with the Articles of Association of the company, I've been nominated by the Board to preside as Chairperson of this meeting. I'd like to start by welcoming everyone to this Annual General Meeting of the company, which comprises an actual meeting in Ulan Bataar and online access to shareholders and other attendees via the Investor Meet company platform. May I start by asking everyone here in the room to ensure that their mobile phone and other electronic devices are switched off? All those in attendance in Ulaanbaatar have been briefed on the emergency evacuation procedures prior to the start of the meeting. There are no fire drills planned for today, so if the fire alarm does go off, evacuate the building as quickly as possible.

1:11 It's just after 4PM local time. Under Article 53 of the Articles of Association of the Company, company's meeting meeting. Is two members and the required quorum is present. I formally declare the meeting open. Before moving to the formal business of the meeting, I'd like to take this opportunity to provide a brief summary of the company's activities during 2024 and to update you on the status of those activities and our plans for 2025. To help me in this and to ensure that you do not spend the whole call listening only to me, Gerry Smart, our Technical Manager, will kick off with some details of our operational activities. Gerry, over to you. Thanks, Mike. Good afternoon to those in the room here in Ulan Baton, and good afternoon or good morning to those listening online.

2:01 I am PETRO MATAD's Technical and Subsurface Manager, overseeing a small team of Mongolian geoscientists and production engineers based in our Ulan Mittal head office or in the field. Mike, if you can put the operations timeline up on the slide. The 2024 operation plan was extremely challenging given the scale of the planned activity comprising of reentering, stimulating, installing downhole production string and surface facilities at Heron 1, drilling and completing as a production well Heron 2, and drilling and potentially testing Gobi Bear 1. And uncertain timing was also an issue with the continued delay receiving land access approval, eating into the eight month window well operation window that closes at the end of November latest due to weather.

2:55 Having contracted and procured as many services and as much equipment as possible given the uncertainty in the timing of the start of the operations, we were able to commence our planned work promptly once land access was granted on May 27 by immediately issuing mobilization notices for the activity on our 2019 oil discovery, Heron-one. Reentry operations on the well commenced on July 22, followed by a successful stimulation program that was completed by August 7, followed by running the production string and installing the wellhead with the well ready for production operations just a week later. During the post stimulation flowback period, fluid was recovered at encouraging rates with an increasing percentage of oil indicating that the reservoir had maintained its good potential for flow rates despite the four point five year shut in.

3:52 A hiatus in activity occurred whilst a construction permit for the installation of the surface production facility was pursued. Regulations for this process required a land certificate to accompany the application such that the application for the permit could only be made from late May. The company had previously made representations to the Ministry of Construction that such a permit for oil production facilities was not appropriate given these were, in essence, temporary facilities in remote locations. Our efforts proved successful, resulting in a change to the regulations, exempting projection pads from own from the own risk construction permitting process. So we were able to commence with the installation of facilities in October.

4:38 Despite the cooling weather conditions, work was completed in under three weeks and first oil achieved on October 24. It is worth noting that the total operation time from start of the well reentry to the first oil was only forty five days. And Mike, do you want to slip the slide next to show the production site? It's on already? Perfect. So becoming a production sorry, once the well had cleaned up, it was very pleasing to observe that the well was performing in a similar fashion as it had during the original test with light oil, 40 degree API, and associated gas flowing to surface without the need for pumping, and it rates up to 300 barrels of fluid per day of mostly oil.

5:31 To both ensure surface equipment were made within operational specifications and to prevent sand production downhole, well rates were restricted to under two fifty barrels of fluid per day until such time that the pressure stabilized. Becoming a production company necessitates additional staff and with relevant experience to work in the field, and we are very pleased that the majority of our field of production staff have been hired from the local area. We continue to build the capacities of these staff, providing on-site training, such as fire control, working at height, first aid and so on, so as to be ready for additional operational activities in the future. By the end of December twenty twenty four, a total of 13,400 barrels of crude oil had been offloaded at the Block 19 TA1 processing facility, some 20 kilometers north of Heron.

6:25 The daily average production at year end was two twenty eight barrels of fluid per day requiring at least one export of crude by a 40 tonne tanker truck every day to the TA facility. Crude production rates have continued into the New Year and now over 25,000 barrels of crude offloaded have been offloaded with an average water cut of only 4%, and this appears to be decreasing with time. Rig mobilization for Heron two commenced in August. This well is located 800 meters south and structurally up dip of Heron 1 and the plan was to stimulate, test and complete this well as the second production well in the field.

7:10 The well reached a total depth of 2,908 meters in late September. Good reservoir development and oil and gas shows well reserves and cuttings and mud losses occurred upon entering the reservoir just as they had at Heron 1 and suggesting reasonable permeability had developed here too. Subsequent wireline logging indicated a 16 meter thicker section than Heron one and sixteen meter shallower. Heron two was then stimulated and tested. The stimulation was successfully executed, but fluid flowback rates were lower than at Heron 1, and the well did not flow to surface on its own as Heron One had done. Well test swabbing was performed and oil was recovered, but at what was considered to be on commercial flow rates.

8:02 The well was suspended, and a detailed evaluation started to determine if the result was due to operational issues or an indication that the reservoir, productive at nearby Heron 1, is not as well developed at Heron 2. We know from Block 19 wells that there is a lateral heterogeneity of the reservoir, and this is one of the main uncertainties prior to drilling the well. Our evaluation continues. Mobilization of a smaller rig to drill the Gobi Bear exploration well located in the southwestern part of the block commenced in mid September. The well is testing a large shallow combination stratigraphic trap and targeting the same low Zagnof reservoir formation that is all on oil bearing at Heron.

8:50 The total depth of eighteen oh five meters was reached in eleven days, with a top reservoir encountered at fourteen twenty five meters, and good drilling gas shows were observed in what appeared to be early mature source rocks. A gross 300 meter section of sandstone infill was encountered. Oil shows in this interval were poor, but nonetheless present. Wireline logging identified a centimeter thick reservoir zone and a possible oil pay zone within it where petrophysical evaluation computed an average porosity of 13%. Given the ambiguity of the well results, with only poor shows but indications of potential pay on lots, the well was suspended in late October pending further evaluation of well cuttings, which is ongoing with a view to determine if a well test is warranted.

9:40 Note that geochemical analysis of four hotshot samples concluded that migrated ore may be present, which is very encouraging, and additional work has been done to confirm this before the forward program is determined. So 2024 was a very busy operational period. And since the end of operational season in late November, PETRO MATAD's production crew has continued to work well throughout the winter. 2025 will see continued production activities at Heron 1 and conclusions of the post well evaluations of Heron two and Gobi Bear one with a view to determine the merits of future work programs on these wells. At Home Run, additional production data supplemented with Echomuta downhole fluid level readings will be used to determine what intervention strategies, such as the installation of sandscreens and or installation of a three phase separator, are technically and commercially merited.

10:35 We have started work on connecting to the nearby electricity grid to power our beam pump, which when completed will reduce diesel power generation and so reduce operation costs significantly. Results of the reservoir analysis work on Heron II samples are designed to determine the likely cause of the low permeability here and what additional activities may help to generate commercial flow rates from the well. In the meantime, we are assessing the economics of periodically swapping the well to recover oil. Detailed geochemical work on the cutting samples from Gobi Bear one should provide determination of the presence of migrated oil in the well. With such data, the petrophysical log analysis will be reexamined to facilitate a more informed decision on the forward program.

11:22 Maybe we go to slide off the block.

11:29 We are also revisiting the suspended Gazelle well in regard to the two pay zones identified this well for a possible well test operation. Drilled after Heron one in 2019, good wet gas shows and oil shows were observed in lower sagittal site formation and petrophysical evaluation identified three meters of pay with an average porosity of 14% and good oil saturations at the top of the section. Below this zone, there was a 30 meter thick sandstone interval with very good average porosities of 17%, and although not oil bearing in Gazelle 1, a well test could reveal whether this excellent sand is in pressure communication with the oil pay sand above it, and this could in turn justify an updip appraisal drilling.

12:16 Just one final word on our newly signed exploration Block 7 in Southern Mongolia. Work is ongoing to complete the signing formalities and secure the legally required license to operate. The first couple of years of work program comprised low cost desktop studies and field work. Finally, I would like to take this opportunity to congratulate the PETRO MATAD technical team for the considerable effort and achievement in completing the 2024 work program in budget and without any lost time events or environmental incidents. As I expressed to our minister during his visit to Heron 1, such executing such a program from a standing start with our small Mongolian team demonstrates the dedication, motivation and competence of our national staff.

13:04 Thank you. Thank you, Gerry. We'll have time for questions on operational activities at the end of the formal business of the meeting. I would like to pick up on a couple of important operational matters though, not least of which is the matter of the oil sales. As you may be aware, we've been talking to our neighboring operator in Block 19 for years about sharing facilities, and indeed, we signed an MoU back in 2021 as the first step in that cooperation. Fair to say though that with Block 19 being a very busy production operation, we were only able to get their undivided attention and to progress the details of our oil sales cooperation once we were on the point of starting production from Block 20. We've received great assistance from Block 19 and the operator there, and we are satisfied with the operational and commercial details of the agreement reached.

13:55 We are also pleased to have received the support of the Mongolian regulator for this. Less pleasing has been the time it's taken to get the agreement signed and so start the payment of revenue for the oil produced. We were told the agreement would be signed in February after the Chinese New Year holiday, but that slipped. However, today we are advised that the Block nineteen operating committee has approved the agreement for execution and execution copies are now being loaded onto their online system for sign off. Whilst the delay has been frustrating, we believe the agreement is now on course for signature. This cooperation remains our preferred mechanism for commercializing our production. But in case delays continued, we have been investigating the possibility of trucking and selling cargoes ourselves.

14:40 With the volume of oil now accumulated in storage, such a volume is marketable. Going it alone would require a lot more work from our staff, so this is plan b only in case of need. The good news is that Block 19 has very large storage capacity available, and the operator has confirmed they have no problem continuing to receive our oil. The delay in receiving payment is frustrating, but obviously this is our prime financial priority at the moment. We're very happy to be on production, but production revenue is the required end result. Gerry has talked you through some of our work plans for 2025. And as you can see, we're focusing efforts this year on OpEx reduction and production optimization rather than new well drilling.

15:28 That is because we see a good opportunity now with oil flowing and with the government striving to improve the investment environment to market Block 20 to technically competent and financially strong would be partners. We want to explore as a priority the potential to bring in a partner to inject capital into a sizable drilling program to accelerate production and increase project value. I cannot say much about how our partnering initiative is going due to confidentiality undertakings and also to maintain a good negotiating position, but we are in conversation with three companies presently, and we are planning to approach some more. Moving now to our renewable energy initiative and our Sunstep Renewable Energy joint venture. We're very pleased with how the company has developed in the two years since we set it up.

16:20 Has established a good standing in Mongolia, and this has generated a lot of opportunities, some originated by Sunstep, others brought to us by project owners who see us as the exciting new kid on the block. The timing of formation of our JV was opportune as Mongolia's new government is really pushing the renewables energy sector more so than ever before, and there is a momentum in the sector that we are positioning ourselves to be able to capitalize upon. Of course, our renewables team already had a project execution track record in Mongolia, so the individuals are well known locally. But the rapidity with which our JV has become a player is very pleasing. Sunset's CEO has participated in a number of trips with Mongolian government officials, including to China and to The Gulf, and this international exposure has expanded our contacts to the extent that we are now discussing under confidentiality agreements the details of our portfolio with some highly experienced and well funded investors.

17:24 Sunstep now holds four projects on an exclusive basis, and I will provide a short summary of each. Firstly, the Oyu Tolgoi or OT mine green hydrogen project. This is now planned to be a circa 30 megawatt project comprising a solar and wind plant to generate green hydrogen for the OT mine, and it offers an attractive internal rate of return of around about 15%. Intensive discussion with OT continues, and we're targeting construction to start in 2025 of the first 4.8 megawatt phase. Discussions with OT on an offtake agreement to include hydrogen and power are set to start. And once this agreement is finalized, we will look to introduce investors and debt providers.

18:11 Interest for equity and debt participation has already been expressed by potential partners. Our second project is the Chu 50 megawatt battery energy storage system or BESS. This is a priority for Mongolia as it needs to stabilize its grid so as to avoid import of high priced power from Russia and China at peak hours and low priced export of power during off peak hours. Our Chua project is located adjacent to the largest substation on the Mongolian grid where the Ministry of Energy has identified 100 megawatts of BESS need. So we can potentially double the size of this project in due course. The original time scale has slipped due to that old Chestnut land allocation, But following last week's cabinet approval of Mongolia's countrywide 2025 land plan, we believe that progress can now be made and once land is secured, this will allow completion of environmental permitting and the application for the license to construct.

19:13 That will be followed with the negotiation of the power purchase and sale agreement, and then we plan to bring in investors once that agreement is in place. The third project we have is a 1.5 gigawatt export to China project. Sunstep has an exclusive cooperation agreement with a leading Chinese utility, the State Power Investment Corporation, for a large export to China project. The new Mongolian government is very keen on renewable energy export to China potential and vigorous government to government discussions are underway. We're hopeful that this will allow the project to advance more quickly than when we originally envisaged, and we are keen to retain an up to 30% interest in this mega project in the construction phase in order to attract interest from some of the major international investors with whom we are in discussion.

20:09 SPIC so far seems to be open to our aspiration. The fourth project is a 200 megawatt hybrid project. Sunstep has signed an exclusive agreement with Mongolia's Bodhi Group, which is developing a 600 megawatt energy project. So far, one one hundred and fifty megawatt coal fired power station has been commissioned, with another 150 megawatt phase under construction. Bodhi and Sunstep are partnering to develop renewable energy capacity alongside the power plant, and the project is particularly attractive as it has an approved power purchase agreement with the Mongolian government at a very attractive sales price of US0.089 dollars per kilowatt hour for 600 megawatts.

20:56 And the parties are keen to replace at least 200 megawatts of this with the renewable power supplied from a hybrid solar wind and battery storage project. Sunstep will be responsible for the feasibility studies and for securing regulatory approvals. This renewable energy decarbonization project has already attracted early interest from multilateral financial institutions and from international investors. More projects are under review for inclusion in the portfolio, and Sunstep's long term goal is to be a major local player in the independent renewable energy business in Mongolia. However, in the short to medium term, we have to set realistic goals as the projects we now have are going to be capital intensive.

21:43 Everything we take on will be developed to an internationally bankable status and so capable of attracting debt funding. As such, equity requirements will reduce, but still, until such time as Sunstep can pay its way, we will look to fulfill the traditional developer's role and bring in co investors for the capital intensive phases, securing development premium in cash and or carried interest through to the revenue generation phase. In concluding these opening remarks, I take this opportunity on behalf of the Board of the company to thank its staff for their efforts and our shareholders for their continuing support and patience. We will now move to the formal business of this Annual General Meeting. I would like to introduce one other Director here today, our Non Executive Director, B. Sheneziah.

22:37 We have apologies from our other Directors, Dee Enkma and Timothy Bushel, who unfortunately could not be here with us today. Brief biographies and details of areas of expertise for each director are provided on the company's website. We also have in attendance our departmental managers. Before commencing with the formal business of the meeting, I will very briefly explain the procedures we shall follow. The notice convening the meeting sets out six resolutions which will be proposed. Before the first resolution is proposed, there will be an opportunity for those who are in attendance in Ulaanbaatar to ask questions about any of the resolutions. The company has given shareholders the opportunity to submit any questions they may have about the company's business prior to the meeting via email and in the Investor Meet company platform.

23:28 Those who are accessing online today can also submit questions via the platform, and I will answer these questions on any other matters relating to the company's business after the final resolution has been considered. If you do have a question, please state your name and the capacity in which you are speaking, that is whether you are a shareholder, proxy or representing a corporate shareholder. I will either answer the question myself or I will refer them to our non executive director or the management team as appropriate. I will call for a vote on a show of hands on each of the resolutions. Should any resolution not be passed on a show of hands, I intend to, in accordance with the articles of association of the company, demand a poll to be taken ten minutes after the conclusion of this meeting in respect of any such resolution.

24:17 If a resolution is passed on a show of hands, I will announce the results of the proxy votes after voting on each resolution. Results of any poll vote will be announced by the company following the conclusion of the poll. I would now like to commence the formal business of the meeting as set out in the notice of Annual General Meeting dated 02/14/2025. This notice includes six resolutions to be proposed at the meeting. With your consent, I propose to take the notice convening the meeting as read. Copies of the director's current service agreements and letters of appointment and copy of the proposed new memorandum and articles of association of the company with a copy of the existing memorandum and articles of association marked to show changes being proposed are available for inspection at the back of this room.

25:09 I would now like to invite questions from those in attendance in Ulaanbaatar on any of the resolutions that we put before meeting today. Any questions on any other matters relating to the company's business shall be answered after the final resolution has been considered. This will ensure that we proceed with the formal business of the meeting in a timely and orderly fashion. As there are no questions from the room, we will move to the agenda and the resolutions contained in the notice. Resolution number one, receive and adopt the annual report and accounts. The directors report and the audited accounts of the company for the year ended 12/31/2023, together with the auditors report on those accounts, have been in your hands for the statutory period.

25:57 With your permission, I will take them as read. I propose that the directors report and the audited accounts of the company for the year ended 12/31/2023 be duly received and adopted. Will all those in favor of the resolution please raise their hand? Will all those against the resolution please raise their hand? I declare the resolution carried by the required majority. In relation to Resolution one, the company received in total 308,320,957 proxy votes in favor, 4,085,565 proxy votes against and 804,070 votes were withheld of the resolution.

26:45 Resolution number two, appointment of the auditor and power of the directors to fix the auditor's remuneration. The next business is the appointment of the company's auditor, Hall Chadwick WA Audit PTY Ltd, to hold office until further notice and authorizing the directors to fix the auditors' remuneration. I now put Resolution two to the meeting. Will all those in favor of the meeting of the resolution please raise their hand? Will all those against the resolution please raise their hand? I declare the resolution carried by the required majority. In relation to Resolution two, the company received 307,148,763 proxy votes in favor, 4,085,565 proxy votes against and 1,976,264 votes were withheld of the resolution.

27:44 Resolution number three, the reelection of Timothy Bushel. The next business is the reelection of mister Timothy Bushel, who is our nonexecutive director, retiring pursuant to article 89 of the articles of association and offering himself a reelection. I now propose that mister Timothy Bushell, who retires pursuant to Article 89 of the Articles of Association, eligible, offering himself a reelection, be reappointed as a director of the company. Will all those in favor of the resolution please raise their hand? Will all those against the resolution please raise their hand? I declare the resolution carried by the required majority. In relation to Resolution three, the company received in total 303,623,525 proxy votes in favor, 5,107,160 proxy votes against and 4,479,907 votes were withheld of the resolution.

28:48 Resolution number four. The next item on the agenda is the power of directors to allot shares, to allot the ordinary shares in the company up to an aggregate nominal amount of $6,425,215.99. The full text of the resolution is detailed in the notice. By way of explanation, this resolution, if passed, authorizes the directors to allot shares up to the aggregate nominal value specified in the resolution and will be subject to the preemption provisions in articles as amended by Resolution five, if passed. As of today's date, there are 1,483,883,601 ordinary shares in issue.

29:35 I now put Resolution four to the meeting. Will all those in favor of the resolution please raise their hand? Will all those against the resolution please raise their hand? I declare the resolution carried by the required majority. In relation to Resolution four, the company received in total 296,089,252 proxy votes in favor, 15,966,806 proxy votes against and 1,154,534 votes were withheld of the resolution. Resolution number five, special resolution, amendments to the articles of association, disapplication of preemption rights.

30:23 The next resolution, which is to be proposed as a special resolution, would amend the company's articles of association to renew the authority to disapply preemption rights on the issuing of ordinary shares representing approximately 33% of the total issued ordinary share capital of the company and an additional follow on of the company to the company's retail shareholders of no more than 10% of the total issued ordinary share capital of the company. The full text of this resolution is detailed in the notice. The special resolution requires a 75% majority of those voting to vote in favor of the resolution in order for it to be passed. I now put Resolution five to the meeting. Will all those in favor of the resolution please raise their hand?

31:12 Will all those against the resolution please raise their hand? I declare the resolution carried by the required majority. In relation to Resolution five, the company received in total 300,772,159 proxy votes in favor, 10,505,919 proxy votes against, and 1,932,514 votes were withheld of the resolution. Resolution number six, special resolution, authority to make market purchases. The final resolution, which is to be proposed as a special resolution, would empower the directors pursuant to Article 14.1b3 of the Articles of Association until the conclusion of the next Annual General Meeting of the company to exercise all of the powers of the company to repurchase ordinary shares in the open market with an aggregate nominal value of not more than 15% of the aggregate nominal value of the share capital of the company in issue at the time of the date of the notice of this meeting.

32:22 A special resolution requires 75% majority of those voting to vote in favor of the resolution in order for it to be passed. I now put Resolution six to the meeting. Will all those in favor of the resolution please raise their hand? Will all those against the resolution please raise their hand? I declare the resolution carried by the required majority. In relation to Resolution six, the company received in total 307,323,009 proxy votes in favor, 4,845,969 proxy votes against and 1,041,614 votes were withheld of the resolution.

33:09 Any other business? Ladies and gentlemen, that brings us to the end of today's formal proceedings. And I shall now open up the Q and A session. And I will open that for those in attendance in Ulaanbaatar before questions that have been submitted in advance and questions submitted today online will be read out and hopefully answered. So I will now open up Q and A to any questions for those in attendance in Ulaanbaatar.

33:41 Thank you. There are no questions from the room. So we will now turn to the questions that have been received in advance. So we've had a number of questions submitted ahead of the AGM and we will deal with these now. I'm going to ask Gerry to read out and then answer the operationally related questions, and then I'll try and cover the rest. Over to you, Gerry. Thank you, Mike. The first set of questions are about our operations in Block 20. The first question is, in the previous RMS from 10/24/2019, you had noted that there were two separate drills, STEM tests and HERM1.

34:26 The pressure data from DST1 is now being analyzed and will be used by specialist reservoir stimulation experts that the company has retained to determine if improvements and permeability could be achieved to allow this zone to flow. Is there a possibility of HERM1 to be worked in a way to produce on both sands at the same time? Or is there any other way HERM1 could be adjusted to produce at higher rates than 200 barrels per day in a stable way? So to answer that, the modeling of the simulation and the well performance to date suggests that oil is indeed being recovered from an interval much thicker than the eight meter perforated zone, which includes all of the three zones identified as oil bearing and also possibly the low permeability matrix that surrounds these sands.

35:20 We are, however, looking at ways to that production may be enhanced in this well. The second question, what is the well drilling plan and production plan for Heron Field for twenty twenty fivetwo thousand and thirty? And how many wells are there and how many wells are we planning to drill to get into production for the next five years? Well, clearly, this is a funding dependent issue, which in turn is a revenue dependent. Partnering with somebody could certainly help us to accelerate the development. By analogy with Block 19 and applying some tried and trusted enhancement technologies, we think that Heron, at the end of the day, will require about 30 producers. Question number three.

36:09 Referring to the November 14, and S, stating high pressure fluctuations of HERM1, are these still causing issues? And if so, how will MATAD or PETRO MATAD rectify the issue? Well, now the issue of the pressure is less so now, and the water is pretty much cleaned up, and the pressures are stabilizing. So the issue has gone away, in essence. Question number four. Referring to the January 16, I and S, stating that sound production in Heron one, would the sound be considered high volume, e. G, enough to cause production issues in the future even after a sound screen is fitted? Your thoughts on increasing production after we fit a sound screen would be appreciated.

36:56 We know in Block 19 that they deploy sound screens to some of the better producers and report long term success with this. We are gathering data to analyze potential benefit for HERON1, but obviously some data needs to be acquired. We couldn't do that during the low temperatures of the winter period, but now we are. With the production site warming up nicely, and now we have first start, as I said, to require some micrometer data to assist with the production modeling and assessment of the impact of the sound screens might have going forward. So this work is ongoing. Question number five. If and when funds are available to drill H3M3, many investors think it should be drilled adjacent to Heron 1 and tap into the same reservoir rather than taking a gamble on a new area. Can you comment on this?

37:52 Despite all our high-tech technologies, the industry always falls back to this founding principle that you can draw as close to existing oil as possible to improve your chances of success. Heron 2 was located far enough away from Heron 1, not the steel oil covered by Heron 1, but close enough that the reservoir variation risk was minimized as much as possible. It appears, however, that this risk was not indeed not zero. Our drilling plans involve stepping out sequentially from existing successful wells and not drilling so close that we end up with two wells recovering oil from the same zone and interfering with each other. Question number six. Is horizontal drilling of home wells an option in Mongolia?

38:41 Are DQE rigs and crew capable of this? Well, answer to that is yes, it is. And yes, they are. Indeed, we have started drilling horizontal wells back in 2019, we believe. Once we have enough validation from Block 20 to determine where the best reservoir zones are located within the overall column, slanted and indeed horizontal wells can then be steered to follow these zones and improve recovery hopefully. Question number seven. Assuming Heron is not sold and there is no partnership JV, how many barrels per day do you expect that we will be producing by the year end of 2025? This is difficult to forecast given only short production period and the limited amount of data we have so far recovered as the weather has warmed up.

39:30 But as noted, with the acquisition of the echo meter data, we and coupled with the increasing production data, these will provide sufficient data that we need to forecast in the future. The next set of questions refer to Block seven, which is a newly signed block in Southern Mongolia. The first question is, why are the rights to Block seven held under a subsidiary, PETRO MATAD ENGIE LIMITED? And what is the benefit that that brings to investors instead of just holding the rights under PETRO MATAD? Ensuring contract jurisdictions where cost recovery is block specific, as indeed it is in Mongolia, it is common practice to hold each block in a separate company. This helps with accurate block specific cost recovery and accounting, but also makes farm out of blocks easier rather than if multiple blocks are held in the same entity and the farm lane is only interested in one.

40:28 Next question. We understand the search for suitable partner for the new blocks has been prioritized, but do we have a clear time line for this beyond the Phase one already communicated? Well, I'm sorry, right now, I'm afraid, but efforts are ongoing. Question 10. How is Boson iBloc seven going to be financed? Will the market be good to go will the market be the go to place of funds? Current sales will roughly cover the initial two year funding requirement, but would that be enough? Well, we were able to limit the financial commission through our contracting strategy on Block seven. And the first year's costs are low, comprising well desktop studies preparations and some field work, and we hope to have a partner and or self generate free cash flow before more capital intensive seismic or drilling activities are required later on in the Block seven life.

41:38 Next question. What is the expected time line for major steps in Boson Block 7? There doesn't seem to be much information available online about the field's history, the block's history, except for some coal mines and brief information about storm cut energy drills, but the results were not easily found. Well, indeed, the block was held once before, and some seismic was shot, and a well was drilled but abandoned before reaching its target depth due to operational issues, we believe. We have most of that information, and that is guiding us in our early studies this year. And as are the data from adjacent basins in China, where we believe oil and gas resources have been proven and our focus is on defining extensions of these basins into Block seven.

42:30 If we are successful at attracting a partner, we may accelerate the operations into 2026. Okay, Gerry, thanks. And now back to me for some more questions. The next questions are on the theme of Heron development and the funding thereof. What are the funding plans for the Heron field development? So we can do this ourselves, but slowly, given our restricted access to capital, or we can seek a partner to accelerate. And as I've mentioned before, we are targeting partnering right now, whilst at the same time looking to reduce OpEx and trying to increase production and therefore revenue. Next one, is the sale of Heron field to PETROCHINA an option that's been considered?

43:16 The answer to that is it has. And if the price is right, this would be an option we could support. What is the current cash position and we are working with compared to the requirement for the HERON field plan? Well, fair to say, in my tenure at PETRO MATAD, we've never been a cash rich company. 2025 is no different. We are controlling, cutting our overhead whilst we try to increase production and revenue, and we're looking at mainly low cost activities for 2025 whilst we focus on bringing in a partner. We ended 2024 with around $3,000,000 and and Heron One is currently generating about $200,000 per month net, which is a nice position to be in, assuming we can get paid. So we're in a better position than we were in terms of money coming through the door.

44:06 But yes, we're focusing on finding a partner to inject into a major drilling campaign to get the production revenue up and to be able to use that cash flow. If Block twenty is sold to PETRO MATAD Also, would assume that PETRO MATAD would would retain retain new blocks and renewable arms under the recently incorporated Isle Of Man registered PETRO MATAD Energy. Well, I'm sure shareholders would appreciate a dividend. And rest assured that the Board does recognize the patience and persistence of our shareholders. And so we would very much like to do something in the event that there were to be an asset sale.

44:53 And yes, we would look to hold the lower cost exploration activities, and certainly, we're excited by the renewable potential, as we've said. Oh, this is a good one. Please go over the special purpose land situation and reiterate what it means, what is the significance and why it was needed in the first place. Due to the time it took and the workarounds in place, new and existing investors struggle with understanding the significance of special purpose certification. Well, look, a a full explanation would take an age, and I think online, you can probably find a presentation or two from me where I went into more detail than is healthy. In brief, special purpose certification puts the onus on the government to provide land access.

45:40 So the ministry nominates the areas its production sharing contract, in this case, PETRO MATAD selects for operations, and then the district authorities have to issue those permits. Without the certification, the contractor has to get the permits itself, and this has proven difficult for many operators, not just for PETRO MATAD. So the certification, which is one of the highest classifications there is under the land law in Mongolia, makes the land access the government's responsibility and gives our ministry the whip hand. So in summary, that's why special purpose certification was very, good to get and we were pleased when we did. Next question. What is the current value of oil to be sold from storage? Please go over the figures, the deductions for storage, processing, the net figures due to PETRO MATAD.

46:31 Well, the details are confidential, unfortunately, but I'll share what I can. We will get the same price that Block nineteen sells at, which is duching minus $1 a barrel. Duching usually trades at about a 5% discount to Brent. If we assume $70 Brent, then after price adjustment, processing, handling and trucking fees, Block twenty receives around about $54 per barrel. And applying the PSC terms, PETRO MATAD nets around about $43 a barrel. That's a pretty high netback by global industry standards, which reflects the favorability of Mongolian fiscal terms. With 25,000 barrels in storage right now, that's worth about $1,100,000 net.

47:22 Is there a possibility of sale of Heron Field to PETROCHINA similar to the SOCO sale to Jiaqing Oilfield Limited Company in 2025? Well, Jiaqing Oilfield is PETRO China. If PETRO China wants to increase its footprint and its investment in Mongolia, then Block 20 would be being right next to their facilities and Block 19 would be an obvious location. So yes, there is that possibility. Your RNS of January 16 stated negotiations of the cooperation agreement are complete. It's now awaiting signature. At the time of writing this question, March 10, fifty three days have passed and still the agreement has not been signed. Why is this? In this time of immediate communication, why does it take PETRO MATAD so much time to get simple things actioned?

48:11 Well, if it was only us signing it, it would have been instant. The counterparty has procedures which we have tried daily to speed up. And as I reported earlier on, we think we are almost there. The clock continues to tick, and we continue to push, but hopefully, we're in the final stretch. Oh, another one on the RNS. On the last RNS announcement to the city, you stated you would have the signature in the month of February. If there's one thing the markets do not like, it is uncertainty. Can you see what damage this has caused to the share price? I really hope this year you turn it around for as long suffering shareholders. Thank you. Thank you for your question statement. Yeah, we recognize the risk of predicting something that we don't control, and our February forecast was based on seemingly firm advice from the counterparty.

49:01 We included it in the RNS aware of the risk that if we did not get it, we would be criticized and the share price would suffer. On balance, given what we had been told, we considered shareholders would be better served by our best guess rather than us just saying we do not know when we will get this. With hindsight, our good faith attempt at minimizing uncertainty rather fell foul of reality, but there we are. Nobody said it was gonna be easy. Now there are some questions related to Mongolia and the government. The prime minister recently held talks with the head of CNPC about partnering on Mongolian exploration blocks. The assumption is that this would be referring to PETRO MATAD's new blocks, but the market may appreciate some indication of this if indeed it was the case. And again, subject to regularly constraints and indication, if not necessary, clear naming of parties perhaps.

49:58 Okay. Well, we are pleased to see positive developments being announced, including recently on conversations between CNPC and Mongolia. The sector in Mongolia needs a company of CNPC standing, and I think Mongolia would probably be happy to have CNPC participating in any of the new PSCs it is offering or to partner with any existing operators. I don't think the references were PETRO MATAD specific, but rest assured, as a company, we are not shy of marketing ourselves as a partner of choice. Next question. The recent high level government meetings between Mongolia, Bahrain, Kuwait, Saudi Arabia, etcetera, seem to suggest significant inward investment in the oil and renewable sector.

50:44 The Bahrain deputy PM specifically mentioned the recent agreement between Mongolia and China regarding the export of energy to China. Will this impact Sunstep's operations and strategy to develop projects themselves? I think I covered this in my opening remarks, and we do see this as very positive for Sunstep. The possible investment into the hydrocarbon sector here has also piqued PETRO MATAD's interest, and we're following up on that. The Ministry of Mining recently gave a directive to PETRO CHINA to increase production and investment. How would that impact PETRO MATAD's strategy for development of their projects? Directive is perhaps a little bit a strong word, but when PETRO China is busy, equipment and services are easier to come by in Mongolia, and that helps PETRO MATAD and other operators.

51:36 Perhaps our partnering initiative is also well timed if PETRO MATAD is going to pursue an increase in its investment in the country. Next question. How would the new Mongolia China cross border railway mega project impact PETRO MATAD operations going forward, assuming success and increased oil production via the new blocks development? Yes, I guess it depends where in the country oil is found. But for now, the Mongol refinery and the pipeline mega projects, I think, have more importance for Mongolia as a whole because the country is very much focused on refining all of its domestic production wherever it's found. So the fact that the pipeline project is moving very quickly and the refinery project, although somewhat delayed, is moving forward, is actually very positive.

52:30 Next one, what are your thoughts on the reference to Mongolia as potentially being the new Saudi Arabia for energy? It has been referred to in different independent assessments. Well, for wind and solar, I think there's huge resource potential so long as export markets can be accessed. For oil and gas, the description would be a tad over the top in my opinion. Although Central And Western Mongolia have good potential if someone can kick it off with a nice discovery, and then there is plenty of acreage for the land grab that might then ensue. Please provide an update on the Mongol refinery and the significance for PETRO MATAD. Well, as I mentioned, the pipeline from Block 19 to the refinery location is progressing rapidly.

53:16 Block 20 is a very short tie in away, and trucking would then not be necessary, which is a very good thing. The refinery has suffered delays with the current online estimate being twenty twenty eight. It's good that a domestic facility is being constructed as the need to fill it is encouraging E and P activity in the country. Next set of questions relate to finance. Are PETRO MATAD considering any reserve based lending options to develop HERON? Well, we need production history that demonstrates reliability and revenues sufficient to cover the terms of such a loan. Heron One by itself is probably not enough, but once reserves increases are approved by step out drilling and production has been shown to be reliable, then an RBL could very well be available.

54:08 And these are common instruments used by companies like ours to be able to finance the next stage of their work. Specifically for me. Next Mister Buck, why did you recently purchase a $100,000 worth of shares? There's been some speculation, quite silly in my opinion, that's what the questioner says, that you were coerced into it to get the last placing off the ground. Unfortunately, that's the quality of some of the insights presented on the bulletin board and discussion forums. Again, this is not me speaking. I'll tell you when it is. Please, can you clarify the reasons for your share purchase at this particular time? This is me now answering. Thank you for giving me the chance to quell the speculation. No, I was not coerced. As an explorer of decades standing, I'm naturally an optimist, and I believe in our team.

54:58 As CEO, I also know that whilst purchase of PETRO MATAD shares by me should be viewed positively by other shareholders, if I ever sold, which I never have, I had better be able to explain myself. Of course, by regulation, all my PETRO MATAD share dealing activity has to be announced. Fair to say that whenever we do ask new investors to get involved, they ask if management is participating, and if not, why not? But that's not why I participate. I look to put at least some of my money where my mouth is, always recognizing that this can be a risky business. Some speculation the company eventually being taken out of shareholder ownership and delisted. Can you please address these concerns which are being exploited by a marginal group of private investors? Thank you.

55:50 There's been no such conversation internally. Obviously, when cash is tight, access to funding is always a concern, but delisting has not been raised. How do you intend to raise the capital needed to exploit the Heron field in 2025? Well, as I've said, we're deliberately keeping the activities low cost in 2025 whilst we prioritize a partnering initiative, so immediate capital needs are small. The recent AGM motion to increase the number of shares for a potential raise is both concerning and presents itself as further dilution, 45% of the current share float. Are you looking for other means of non dilutive finance? We are always on the lookout for non dilutive means. The increase in this provision reflects the fact that in previous raises we have done where we've always tried to make the offer open to existing retail shareholders, we found more support than the amount of shares we've been able to offer.

56:50 This increase attempts to address that for the future, but only if required. If there is a limited placement, I hope for once it can be at a premium to the share price, says this questioner, as opposed to the heavy discounts seen in the past and given land access issues are now resolved, production has now commenced. The current depressed share price is mostly due to the market being petrified of a heavily discounted placing about to hit. I would love to do a price raise at a premium to the share price, and you can be assured I certainly push for it. Raising money these days though is not easy. Will the Board consider some of the profits to reward long term shareholders and new shareholders through a small share buyback scheme and, in future, dividends to help support the share price and grow it and also to attract institutional investors?

57:45 When we have the balance sheet to be able to do so, yes. As a long term shareholder, when can we expect to see tangible revenue and what is the timeline we can expect to see dividend? If we can attract a partner on Heron, revenue growth would be enhanced. Without a partner, it will be slower. I can't be definitive or predictive in any sensible way at the moment on the time line. Apologies for that. And finally, I think, on renewables oh, no, there's a miscellaneous section. On renewables, will the company consider flipping any of the renewable projects to enable special dividend to be paid to shareholders? I covered this in my opening remarks, but yes, we see the potential for Sunstep to get development premia and special dividends will be considered as and when these events occur.

58:36 Next question. Would Sunstep consider having a more active social media presence? This goes on to suggest a fair few things. I won't read through them all. But yes, we note your suggestion. Some of the projects we're dealing with are constrained by confidentiality. And when grant funding is involved, the provider often has to agree to announcements before we can make them. But we take the point, and we will review with Sunstep. Next question, how does Sunstep's operations link with the Asian Development Bank's renewable energy project? And how is the financing option developing for the sector? Well, fair to say the development banks are quite active in Mongolia, and Sunstep is talking to all of them. Renewable energy is a priority sector for those guys.

59:24 Fossil fuels, not so much, unfortunately. Okay. And then this is the final section of pre submitted questions, and it's entitled miscellaneous. Given the interest in the company on certain discussion bulletin boards, is Mr. Buck or any of PETRO employees posting as wise owl on any of these forums? Nope, that would break a lot of rules and regulations. Might PETRO MATAD consider buying their own rig and hiring their own drilling crew rather than depending on DQE or other third party contractors? Yeah, interesting question. Oil companies used to operate in this way, but mostly they divested of their rigs and their rig operations.

1:00:09 The overhead burden to maintain and run such equipment is constant year round, and it's generally higher than the cost that a company like PETRO MATAD faces when it hires any equipment and expertise when needed. So no, we don't have any plans to bring in our own drilling capability. And this is the final pre submitted question. Why hasn't PETRO MATAD been more open with information on a more regular basis? It's difficult to ask a meaningful question for the AGM when so much information and development has been withheld from shareholders in the past few weeks. Can we have another board meet shareholders for open questions once the board has informed shareholders of the massive news and directions of the company and the funding avenues open to the company for expansion, please?

1:00:59 So I'd probably respond by saying, well, we certainly don't deliberately withhold information. When we have stuff to report, we do so. Unfortunately, the Mongolian bureaucracy and some of our counterparties move slower than our shareholders or we would like. However, given the volume of questions we have seen for today's meeting, we take note of this and we will review our reporting strategy. Okay. So that brings me to the end of the pre submitted questions. And we'll now take questions from the Investor Meet company platform. And I can see here we've had a few on the chat. First one, if a JV partner to develop Heron is not forthcoming, how will you pay for this and other commitments, for example Block seven?

1:01:49 Is it fair to say a raise could be likely, which at the current share price would be heavily dilutive? Well, as we've discussed, we are managing our costs, trying to increase our revenue and targeting some low cost activity in 2025 to make a real push to get a partner in. I'm not just trying to kick the can down the road here, but we didn't want to be drilling another I mean, they're relatively inexpensive global scale, but another well like Heron II in 2026 or 2025 and just hoping for the best. So we've adapted our strategy a little bit because we recognize that, you know, raise at the current share price would be dilutive and would be unpopular.

1:02:37 So we are doing our best to manage our resources while still moving the company forward. Next question. What is your latest understanding of when the Mongolian oil refinery will come online? The last time they quoted in a publication was 2028. It has been a bit of a moving target. It seems to be delayed by a year every year, but we know they're working hard on it, seem confident. And on our trips down to the field, there's now a new road that we can go along, which shortens the journey to Block 20 considerably, and it runs along the route of the pipeline. And the work on that has been absolutely phenomenal. So this work is going ahead.

1:03:25 On the refinery, 2028 seems to be the latest forecast. Next one. Is a JV expected to be completed in time to drill more wells during 2025 drilling season? That would be great. I doubt that that's the most likely outcome. But hey, if somebody is keen, we would not stand in their way. When next question. When can we realistically expect meaningful revenue income from the Sunstep projects? We're hoping that Phase one of OT will be online in 2026, but Phase one is relatively small. So the revenue contribution, depending on how much of that project we can afford to hang on to ourselves, won't be hugely significant.

1:04:16 But actually being able to say it's happening could well have significance for the company. The battery storage project, potentially, if the land issue does get resolved as we think it's going to, that could also come into production in 2026. The hybrid project, the 200 megawatt hybrid project, certainly the body group is moving very, very fast with their own facilities and they want to do so as well with the renewables. So we've assumed that that's 2027, but might be earlier. On the export to China projects, we assumed when we signed our cooperation agreement with SPIC that we were talking about, you know, three or five years to get that going. But the current government is really moving hard on that, and you've seen some of you will have seen in the press comments about investment from Gulf countries in that.

1:05:10 Some of those investors have invested in some other countries to the West of us and have made absolute major inroads in converting those countries into renewable energy exporters. So if they're keen to do the same thing for Mongolia, that would be just great. Next one, which one am I on TIFF? That one. You mentioned you have approached three entities with a view to JV and are approaching others. Have any entities other than PC approached yourselves to discuss potential JV? The short answer to that is yes, but I can't say anymore at the moment. Then the next question is, might there be a further loan from PETROVIS?

1:06:00 We as you may recall, we have a loan agreement in place with PETROVIS that we drew on during the dark days of the pandemic and then we paid back immediately after we've raised a bit more cash. That loan agreement remains in place if we ever wanted to draw on it again. We haven't thought of asking PETROVIS for more money. PETROVIS has been extremely good to us. As you will have noticed, when we have raised money, PETROVIS has always been there to follow its investment. We're super appreciative of that and not always keen to put them under any more pressure. But we're in constant contact with PETROVIS and were they to show interest, then we could certainly discuss it. This is the last question.

1:06:47 What are the monthly operating costs running at for full operation of the company? Well, that's a good one. I don't actually have that to hand, but it's less than the money that's going to be coming in when we get paid for our oil in storage. And we are taking steps, given that the cash position of the company is relatively tight, we are taking steps to reduce our overhead whilst maintaining our operating capacity. So I think that's it. Where's the rest of my script? So there are now no further questions, and I'm going to close this Q and A session and the meeting overall. I thank you all for your attendance.

1:07:37 And if you're still online or sitting here in the room and awake for your perseverance, Thank you very much. I will now pass this back to the operator to end the call. That's great, Mike. Thank you very much indeed for your time and for updating investors. If I could please ask investors online not to close this session as we'll now automatically redirect you the opportunity for you to provide your feedback in order the management team could better understand your views and expectations. This will only take a few moments to complete, but I'm sure it will be greatly valued by the company. On behalf of the management team of PETRO MATAD LIMITED, we'd like to thank you for attending today's meeting and wish you all a good rest of your day. Thank you.