Petro Matad Reports First Oil Revenues and Reduced Loss in H1 2025

Petro Matad’s first oil revenues land and losses narrow in H1 2025

Petro Matad has crossed an important milestone: first oil sales and cash receipts. After years of groundwork in Mongolia, the company posted its first operating income and a significantly reduced loss for the six months to 30 June 2025. There are still wrinkles to iron out with PetroChina over withheld payments, but the direction of travel is finally commercial.

Key numbers at a glance

Notes: bopd is barrels of oil per day. Water cut is the percentage of water produced with the oil.

Revenue has started flowing from Heron-1

Production at Heron-1 (Block XX, eastern Mongolia) began in October 2024. The well initially flowed naturally at over 200 bopd before being put on artificial lift, stabilising at 150-160 bopd. For H1 2025, average output was 165 bopd with a very low 3% water cut – encouraging for field performance and operating costs.

Petro Matad booked USD 1.403 million in operating income and USD 0.384 million in cost of goods sold, delivering a gross profit of USD 1.019 million. Net revenue received in the period for production up to the end of April was USD 0.81 million at an average realised price of USD 62.9/bbl. Post period end, a further USD 0.33 million net was received for May to July production, with realised prices of USD 60.7/bbl (May), USD 65.2/bbl (June) and USD 64.4/bbl (July).

PetroChina withholding set to end after contract tweak

Here’s the sticking point that has hampered cash flow: PetroChina withheld 30% of sales revenue pending confirmation of no tax impact from the oil sales agreement. Petro Matad pushed for resolution, providing feedback from Mongolian tax authorities, and now PetroChina has advised it will pay 100% of invoiced amounts once an amendment to the agreement is in place. That amendment is being prepared.

Why it matters: moving from 70% to 100% cash receipts boosts working capital and de-risks operations. It also simplifies planning for any production ramp-up on Block XX.

Costs, cash and balance sheet: steady but watch payables

The loss narrowed to USD 1.70 million from USD 2.56 million, reflecting first revenues and tighter spend. Depreciation and amortisation rose to USD 0.65 million (USD 0.11 million in H1 2024), which is common once assets move into production. Operating cash outflow improved to USD 0.70 million versus USD 2.24 million.

Cash and financial assets totalled USD 2.37 million at 30 June 2025, up from USD 1.93 million a year earlier. Trade and other payables increased to USD 1.57 million (USD 0.96 million at 31 December 2024 and USD 0.26 million at 30 June 2024), so keep an eye on that as production and payments normalise. Net assets stood at USD 17.58 million.

Equity raise in July funds near-term growth and cost cuts

After the period end, Petro Matad raised gross proceeds of GBP 3 million at 0.8 pence per share via a placing of 323,250,000 new shares, direct subscriptions of 32,169,117 shares and a retail offer of 19,497,678 shares. Proceeds are earmarked to:

• Switch Heron-1 power from diesel generators to grid electricity – targeting a 15% reduction in operating expense.
• Re-test Heron-2 (post-acidisation), test the Gazelle-1 oil discovery and test the Gobi Bear-1 exploration well.
• Advance renewable energy projects under the Sunsteppe JV.
• Work up exploration on the newly signed Block VII.

Opinion: the raise provides runway to potentially add barrels and reduce unit costs. It is dilutive, but catalytic if the tests bring on additional production.

Block XX: low-cost testing programme underway

Operations in H2 2025 are focused on quick, low-cost production opportunities. Heron-2 is being re-tested after acidising the reservoir to improve permeability. The workover rig is now moving to test oil zones interpreted from logs at Gazelle-1, followed by a test of Gobi Bear-1, which has a logged zone of interest supported by oil extracted from cuttings.

What to watch: any sustained new production could be tied into the existing route to PetroChina’s TA-1 facilities. Combined with the shift to grid power, this could sharpen margins.

Block VII PSC signed; farm-out processes active

Petro Matad signed a new Production Sharing Contract (PSC) for Block VII in January 2025. The company highlights a very low initial financial commitment and proximity to producing fields across the border in China. A farm-out process is underway to bring in a partner to share risk and funding. On Block XX, farm-in discussions progressed to detailed technical and commercial negotiations with one party.

Jargon watch: a farm-in/farm-out is where a partner funds a portion of work in exchange for a share of the asset. It’s a common way for small caps to accelerate activity without over-stretching the balance sheet.

Renewables: 200MW hybrid project and 1.5GW cooperation

Sunsteppe Renewable Energy, Petro Matad’s 50% JV, signed an exclusive agreement to develop a 200MW hybrid wind and solar project to supply Mongolia’s grid. A power purchase agreement (PPA) is already in place and only needs amendment, which could bring the project to ready-to-build status rapidly. The company also plans land acquisition and data work on a 1.5GW firm (plus 1.5GW contingent) project in cooperation with SPIC, a large Chinese utility.

Opinion: the renewables pipeline could become a meaningful value lever alongside oil, though near-term cash is still driven by Heron.

The good, the not-so-good, and the catalysts

Positives

• First oil revenues booked; loss narrowed to USD 1.70 million.
• Low water cut at Heron-1 and stable pumped rates of 150-160 bopd.
• PetroChina withholding expected to end after a straightforward contract amendment.
• Grid power switch targeting a 15% opex reduction.
• Multiple near-term well tests could add production.

Risks and watch-outs

• Production base is still modest at 165 bopd – execution on tests is key.
• Working capital sensitivity while receipts transition from 70% to 100%.
• Trade payables rose to USD 1.57 million – worth monitoring.
• Outcome and timing of Block XX/Block VII farm-outs not disclosed.
• Sunsteppe investment value fell to USD 0.483 million from USD 0.663 million at year-end – reasons not disclosed.

Bottom line

This is a turning-point set of interims for Petro Matad. Commercial production is established, cash receipts have begun, and the key constraint – PetroChina’s 30% withholding – looks close to resolution. If the low-cost testing programme delivers and the grid power switch bites into opex, the company could exit 2025 with a larger, more profitable production base.

It is not mission accomplished yet, but for the first time in a long time, Petro Matad has line of sight on self-help catalysts within its control. That is exactly what retail investors want to see.