Petro Matad Limited Annual General Meeting: Investor Report on Production, Farm-Out Progress and Renewable Energy Strategy

Petro Matad’s latest annual general meeting offered a detailed update on three areas that matter most to shareholders: the outlook for Mongolia’s oil industry, the company’s operational progress on Block XX, and the emerging role of its renewable energy venture, SunStep Energy.

The overall message was constructive. Petro Matad has established stable oil production from its Heron and Gazelle wells, reduced operating costs through electrification, and continues to pursue a farm-out to accelerate development. At the same time, Mongolia’s push for both energy security and renewable energy deployment may be creating a more favourable backdrop for the company’s oil and power ambitions.

That said, several important issues remain unresolved. The 2026 oil sales agreement has taken longer than expected to finalise, the farm-out has not yet been concluded, and future growth still depends on capital discipline, operational execution and timely regulatory approvals.

This investor report summarises the key takeaways and what they may mean for shareholders.

Table of Contents

• Mongolia’s energy gap remains central to the investment case
• Block XX production: Heron remains stable, Gazelle exceeds forecast
• 2026 priorities on Block XX
• Farm-out remains the key strategic objective
• Oil sales agreement: operational success, contractual delay
• Block VII: early-stage upside with growing interest
• SunStep Energy gives Petro Matad a second growth engine
• Financial position and capital discipline
• Governance outcomes from the AGM
• What investors should watch next
• FAQ

Mongolia’s energy gap remains central to the investment case

A major theme of the meeting was the widening mismatch between Mongolia’s domestic crude production and its growing demand for refined products.

Current national oil production is now below 10,000 barrels per day, while demand for refined products has risen to around 75,000 barrels per day or more. At the same time, Mongolia is building a domestic refinery that is expected to be completed in February 2028. That refinery is designed for capacity of about 30,000 barrels per day.

This matters because existing domestic output is not sufficient to supply the refinery. National production has been declining since 2015, and current levels are well below the refinery’s intended throughput. Petro Matad’s position is straightforward: if it can bring more production online, it wants to help fill that gap.

The infrastructure picture is also improving. A pipeline is being built from near Petro Matad’s discovery area and the main producing region in eastern Mongolia, and management indicated that this could be completed before the refinery itself. If so, that would improve future crude evacuation options and could lower transport costs compared with trucking.

The Mongolian government also appears to be taking a more active role in supporting the sector. Management highlighted:

• Improved coordination between central and local government
• A decline in the local issues that have historically slowed projects
• Work to update the petroleum law, with operators being consulted on proposed changes
• Recognition at state level that new domestic discoveries are important for energy independence

For investors, this is an important strategic backdrop. Petro Matad is not simply developing isolated wells. It is operating in a market where Mongolia needs more oil, wants to reduce dependency on imports, and is trying to create a more supportive environment for exploration and production.

Block XX production: Heron remains stable, Gazelle exceeds forecast

Operationally, the most tangible progress came from Block XX, where Petro Matad now has two producing wells.

Heron-1: strong uptime and lower costs

Production at Heron continued through 2025 without major incident. Oil rates were in line with forecast, water cut remained low, and uptime exceeded 99 per cent. That level of uptime is noteworthy for a small independent operator working in a frontier basin.

The well is in steady decline, which management described as typical for the basin as reservoir pressure falls naturally over time. To support future performance, water injection is planned.

One of the most useful operational achievements at Heron was the completion of the electrification project. Petro Matad installed a one kilometre, 10kV power line from the nearest Block XIX connection. This was completed in December 2025.

The impact is twofold:

• Lower operating costs, mainly through reduced diesel consumption
• Lower emissions, which improves the field’s environmental footprint

Management estimated that reduced diesel use has lowered operating costs by roughly 15 per cent. The cable also has spare capacity, which means additional wells could potentially be tied in later.

By the end of 2025, Heron had produced more than 71,000 barrels of fluid. Of this, around 67,000 barrels of sales oil had been processed and stored at the nearby TA1 facility for export. Exit production at year end was about 127 barrels per day.

Gazelle: better than expected, but with water management required

Gazelle was re-entered, tested and completed as a production well in 2025. Initial test results were encouraging. After perforating an eight metre interval across two reservoir units, the well delivered more than 400 barrels per day on test.

That result justified rapid completion and installation of production facilities by the end of October. The well initially flowed naturally before a beam pump was installed.

The key complication has been water. Produced fluid initially showed water cut of up to 30 per cent, higher than at Heron. Petro Matad responded by optimising pumping hours and managing casing back pressure to stabilise the well. According to management, water cut has now reduced to around 20 per cent and is holding there.

Despite this, Gazelle has performed above forecast. Management stated that the cost of re-entry, testing and completion had already paid back by February, moving the well into profit. By the end of 2025, Gazelle had produced around 9,000 barrels of fluid and roughly 7,000 barrels of sales oil, with average daily production of about 120 barrels.

One reason for the early water is geological positioning. The revised structural interpretation suggests the current well sits relatively close to the field’s closure limit and therefore nearer the water contact. Importantly, this implies upside to the south, where a future well could target a structurally higher position with thicker reservoir sands above the water contact.

That is where the Gazelle story could become more interesting. Management highlighted a thicker lower sandstone interval, around 45 metres in gross thickness, that may be better developed further south. If confirmed, a future southern well could improve both production rates and reserves.

2026 priorities on Block XX

Petro Matad’s immediate focus is to maximise production from existing wells while evaluating low-cost ways to enhance output and improve future drilling decisions.

Heron-2 and radial drilling

Heron-2 remains under review. During winter shut-in, fluid levels in the well increased, though only slowly. Management is now assessing the commercial and technical case for radial drilling, a stimulation technique that involves drilling several very small lateral holes out from the wellbore.

This approach is often used in tight reservoirs to improve connectivity and increase flow rates. Contractors active in neighbouring Block XIX have already used the technique, so Petro Matad is discussing availability and pricing.

Management did not provide a final cost, but suggested the potential uplift in productivity could be material if the technique works in this reservoir. That makes Heron-2 a possible value lever, although it remains unproven.

3D seismic could reshape development planning

Perhaps the most strategically important 2026 initiative is the proposed acquisition of new 3D seismic across around 150 square kilometres of Block XX.

Management described the commercial terms as highly attractive, with a structure akin to shoot now, pay later. If completed during the summer, fast-track data could be available in the third quarter, with processed interpretation potentially ready in time to support year-end drilling decisions.

The value of this survey would go beyond simple mapping. Petro Matad believes it could:

• Improve structural understanding of Heron and Gazelle
• Optimise future well locations
• Possibly support direct reservoir characterisation using modern data
• Unlock near-field drilling opportunities
• Enhance the attractiveness of the acreage to farm-in partners

If the company can secure the necessary permits in time, this survey could become one of the most important near-term catalysts in the portfolio.

Farm-out remains the key strategic objective

Petro Matad was clear that its preferred path is to bring in a farm-in partner to fund accelerated field development, exploration and production growth across its Mongolian assets.

The rationale is simple. A farm-out would inject capital without relying solely on equity issuance and would allow the company to move faster across Block XX and Block VII. Management also acknowledged a point that many shareholders will agree with: a sensible farm-out is generally preferable to broad corporate dilution through heavily discounted placings.

There has been frustration over the time taken. A front-running counterparty that made a proposal in late 2025 has been carrying out seismic reprocessing and due diligence, but no deal has yet been concluded. Management said this delay has been disappointing, though interest in the portfolio has now increased materially due to stronger oil prices and broader shifts in the global oil market.

Several groups are reportedly now engaged in discussions, with particular interest coming from China. Petro Matad hopes that broader engagement will create competitive tension and improve both pace and terms.

The proposed 3D seismic on Block XX is also being positioned as a value-enhancing element in the farm-out process. In effect, it could sharpen the geological case, reduce uncertainty and support a stronger negotiation position.

For investors, the critical unanswered question is timing. Management would like to move quickly, but the pace is inevitably influenced by counterparties. Until a transaction is signed, the farm-out remains a strategic objective rather than a delivered outcome.

Oil sales agreement: operational success, contractual delay

Another major issue discussed at length was the 2026 oil sales agreement for Block XX.

Petro Matad currently exports its crude through a cooperative arrangement with PetroChina Mongolia, operator of neighbouring Block XIX. Under this structure, Petro Matad delivers oil into PetroChina’s facilities, which then process, store and export the crude along with their own volumes to refineries in China.

The arrangement gives Petro Matad access to infrastructure it would be difficult to replicate independently, and management said it achieves a sales price of Daqing minus US$1 per barrel. Given current volumes, that is likely to be a better commercial outcome than attempting direct standalone sales.

Operationally, the relationship appears to be working well. Contractually, however, the process has been slow.

The 2025 agreement took until late April to approve because it was the first arrangement of its kind in Mongolia. The 2026 agreement has taken even longer, despite revisions to contract wording and discussions with Mongolian tax authorities to resolve concerns around tax exposure.

Management said final approval is now expected shortly. If completed, Petro Matad should receive payment for around 35,000 barrels currently in storage in one lump sum. There may even be a modest benefit from the delay because oil prices have risen during the period, meaning volumes could be sold at higher realised prices than if they had been sold progressively through the year.

Importantly, Petro Matad has also explored alternatives. The company engaged with Chinese oil traders as a potential plan B and came away encouraged that an actionable independent route to market exists if required.

That contingency is useful, but it does not remove the obvious investor concern: why has the process been so cumbersome, and what confidence should shareholders have that 2027 will be smoother? Management’s answer was that the current contract structure should make future approvals easier, though the same was once expected for 2026. This remains an area that deserves close scrutiny.

Block VII: early-stage upside with growing interest

Block VII remains a longer-dated exploration opportunity, but one with potentially substantial scale.

The investment case here rests on the extension of proven petroleum systems from adjacent Chinese basins into Petro Matad’s acreage. Management highlighted not only Mesozoic plays, already proven in Mongolia, but also older Palaeozoic oil and gas plays that are productive across the border in China.

Current work is focused on regional integration and data interpretation. A land gravity survey is planned later in the year to infill existing information and better define basin geometry. This is intended to support future 2D seismic planning.

Two counterparties have expressed particular interest in the block, and the company would like to secure a farm-in before the January 2027 decision point on entering the next phase. That next phase is not prohibitively expensive, but management has made clear that it would prefer to commit additional capital with a partner in place.

Existing leads on Block VII have been mapped from previous seismic, with management citing potential recoverable resources ranging from around 40 million barrels up to 200 million barrels on some leads, plus at least one larger unconfirmed structure. These figures are highly preliminary, but they illustrate why the block continues to attract attention.

SunStep Energy gives Petro Matad a second growth engine

While Petro Matad remains primarily an oil and gas company, the AGM also underlined the growing strategic significance of SunStep Energy, its renewable energy venture.

Mongolia is pushing hard to expand renewable generation, particularly solar and wind, supported by battery storage. This is driven by two parallel needs: the country’s long-term ambition to exploit its renewable resource base and the near-term need to stabilise domestic power supply, especially in and around Ulaanbaatar.

SunStep currently has four projects under development. The lead project is a 200MW hybrid development in Tuv Province combining wind, solar and batteries adjacent to a new thermal power plant. The feasibility study has been completed and submitted to the Ministry of Energy for approval.

Progress has been slowed by political upheaval earlier in the year, but management suggested momentum has improved under a new minister and more assertive government action.

Beyond the flagship hybrid project, SunStep is also involved in:

• A bid, through a shortlisted consortium, for a 90MW solar and battery project for Ulaanbaatar city
• An expression of interest for a 100MW wind and battery project marketed by IFC
• A fast-track opportunity for 100MW of solar and urgently needed battery storage to support the capital during winter power shortages
• Assessment of newly announced auctions for projects between 20MW and 50MW

The business model remains that of a traditional developer. SunStep aims to advance projects to a ready-to-build stage, crystallise value through a development premium and retain carried participation where possible. Longer term, the goal is to reach a scale where SunStep can fund construction and operate revenue-generating assets in its own right.

For Petro Matad shareholders, this creates optionality. If SunStep succeeds, value could emerge from a different sector with different capital dynamics from upstream oil development.

Financial position and capital discipline

Management stated that cash on hand was a little over US$3 million, excluding receipt of any 2026 oil revenue. In the context of a small AIM-listed exploration and production company, that is not excessive, but it does appear manageable given current production and spending plans.

The company emphasised that it is no longer in the position of needing to raise equity merely to keep operating. Existing production allows it to cover core activity, and higher oil prices improve flexibility.

Still, Petro Matad was candid about its funding constraints. Bank debt is unlikely to be meaningful at this stage because proved reserves are modest, the production history is short, and the producing well stock is only two wells. The previously mentioned Petrovis soft loan facility is also relatively small.

That reinforces the importance of three things:

1. Finalising the oil sales agreement and collecting revenue promptly
2. Maintaining stable operations at Heron and Gazelle
3. Securing a farm-out on sensible terms

On shareholder dilution, management acknowledged frustration over historic discounted placings. The board’s defence is that such raises were undertaken to fund specific work programmes rather than simply sustain overheads. Even so, the message from shareholders is clear: future funding should be as value-accretive and as narrowly targeted as possible.

Governance outcomes from the AGM

All six resolutions were passed, including adoption of the annual report and accounts, auditor appointment, the re-election of Mike Buck, authority to allot shares, disapplication of certain pre-emption rights and authority to make market purchases.

Although the formal voting outcomes did not contain surprises, shareholders will pay closer attention to how the board uses those authorities in practice, especially around equity issuance.

What investors should watch next

Petro Matad has moved beyond pure exploration speculation. It now has production, revenue potential, infrastructure access and a meaningful renewable energy platform. That is progress. But the company still sits at a transitional stage where execution matters more than ambition.

The next milestones to watch are clear:

• Final approval and payment under the 2026 oil sales agreement
• Continued stable production from Heron and Gazelle
• A decision on summer 3D seismic acquisition on Block XX
• Any sign of a farm-out progressing to binding terms
• Clarity on Heron-2 stimulation and Gobi Bear testing
• Movement towards monetisation of SunStep projects

There is also a broader strategic question the company should keep answering more clearly for the market: how quickly can Petro Matad turn its current foothold into a scaled Mongolian energy business, and what mix of oil, exploration and renewables will define that future?

For now, the investment case rests on patient execution. Mongolia needs domestic energy supply. Petro Matad has producing wells, development upside, exploration acreage and a renewable growth option. The opportunity is evident. The challenge is converting that opportunity into repeatable cash generation and delivered shareholder value.

FAQ

What is the current status of Petro Matad’s 2026 oil sales agreement?

The company said final approval is expected shortly. Around 35,000 barrels of oil had accumulated in storage, and payment is expected in a single lump sum once the agreement is fully approved.

How are the Heron and Gazelle wells performing?

Heron has shown stable production, low water cut and uptime above 99 per cent. Gazelle has performed above forecast, although it required active water management to stabilise production.

Why is the proposed 3D seismic survey important?

The survey could improve structural mapping, optimise drilling targets, support reserve growth and strengthen the company’s negotiating position in farm-out discussions. It may also help identify additional near-field opportunities.

Has the farm-out been completed?

No. Discussions are ongoing with several parties, including groups with interest from China. Management said interest has increased, but no transaction has yet been signed.

What is happening on Block VII?

Block VII remains in the evaluation stage. Petro Matad is integrating data, planning a land gravity survey and seeking farm-in interest ahead of the decision on the next licence phase in January 2027.

What role does SunStep Energy play in the group?

SunStep is Petro Matad’s renewable energy platform. It is developing several solar, wind and battery projects in Mongolia, with the aim of taking them to ready-to-build status and monetising them through development premiums or carried participation.

Does Petro Matad have enough cash to continue operating?

Management reported cash of just over US$3 million, excluding 2026 oil revenue. It said the company can currently operate within its means, though larger growth activity would still benefit significantly from a farm-in partner.

How can shareholders stay informed about Petro Matad updates?

Shareholders can register for company updates to receive notice of future presentations and communications.