Petro Matad tumbles following well failure

Shares in Petro Matad tumbled on Wednesday after drilling on the company's DT-5 well failed to discover hydrocarbons in the targeted horizon, despite encountering oil in the lower sandstones.

DT-5, drilled to a depth of 1,954 metres below surface earlier this month, was drilled to test a portion of the paleovalley-filling Uvgan Gol horizon, as well as the underlying Lower Tsagaantsav.

While the well confirmed the presence and configuration of the paleovalley, the Uvgan Gol horizon consisted of non-reservoir shales and tight sandstones and no oil shows were observed during drilling.

The AIM-listed explorer was nursing losses over 17% in the afternoon session.

Petrophysical results have suggested low porosity and permeability through the entire Tsagaantsav at this locality, the company said.

However, the explorer said numerous thin zones of calculated moveable hydrocarbons were identified, with a total net pay of three metres encountered at the upper contact of the Lower Tsanaantsav, at 1,707 metres, beneath the basal contact of the Uvgan Gol horizon.

Petro Matad plans to test this zone in due course.

"It is pleasing that our Davsan Tolgoi drilling programme continues to yield positive drilling results with testable zones in each of the five wells drilled to date," said chief executive Douglas McGay.

"The preliminary results from DT-5 illustrate that whilst hydrocarbons are present in the Lower Tsagaantsav formation, the Uvgan Gold paleovalley fill varies from the high porosities and permeabilities seen in DT-1 and DT-2 to the low porosity and permeability seen in DT-5."

However, McGay said that as witnessed in Block XIX, reservoirs within the Tamsag Basin are not uniform and the company always expected to see variations in well results during the exploration phase.

"It is gratifying to see the presence of hydrocarbons in the Lower Tsagaantsav formation continuing to be relatively predictable," he added.

The drill rig is now on its way to the DT-6 site, where it will test a thick section of the Uppermost Tsagaantsav (Uvgan Gol horizon) within a well-define, northeast-trending paleovalley.