Petro Matad is now drilling Gazelle-1, the final well of its 2019 three-well exploration and appraisal campaign in Block XX, in Mongolia. Results are expected during October, alongside test results from the successful Heron-1 well. In the south-west of the block, the riskiest well in the programme, Red Deer-1, did not encounter hydrocarbons. We update our valuation on the back of results from the two first wells of the campaign. Red Deer, previously valued at 2.8p/share has been removed from our sum of the parts. We have de-risked Heron to a 68% chance of commercial success vs 45% in our last note. We now value the asset at 4.9p/share and will update the probability of success once the well test results are announced. Our risked valuation, post assumed farm-out value dilution, is updated to 20.1p/share (down 7%) at $70/bbl long-term Brent, which we expect to revisit after drilling Gazelle-1 and well testing Heron-1.
