Petro Matad (LON:MATD) told investors that it has spudded thet DT-6 exploration well in Mongolia to test a very thick section of the Tsagaantsav formation at Block XX.
Just yesterday, the company reported that drilling operations on the DT-5 well were completed with numerous thin zones of hydrocarbons identified; however, now oil shows were observed during drilling.
The company intends to test the well during 2011 but feels stimulation will be needed to induce oil flow.
Chief executive of Petro Matad Douglas McGay commented noted that each of the five wells drilled to date intersected testable zones. He assured investors that the company had 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 result had no impact on Westhouse’s analysis of the Davsan Tolgoi discovery and the prospectivity of the surrounding area of Block XX. The broker stated that despite the low amount of net pay, the well could still be a producer.
In addition to that, the log data from the well could be tied in with the seismic data to improve Petro Matad’s understanding of the reservoir.
“The find is almost certainly commercial, given that the Chinese are producing from similar accumulations in the Tolson Uul fields, north-east of the location of the Davsan Tolgoi discovery,” said Westhouse.
“We consider that the field economics are likely to be robust, especially if oil prices stay at or go above current levels.”
The broker’s “buy” recommendation for the stock and target price of 341 pence were upheld.