Petro Matad spuds DT2-exploration well to follow up discovery

Petro Matad (LON:MATD) told investors that it has ‘spudded’ its second exploration well on Block XX in Eastern Mongolia. The well will follow-up the Davsan Tolgoi-1 (DT1) oil discovery.

Davsan Tolgoi-2 (DT2) was spudded on the 28th August and the company expects to reach the 1,300m target depth in around 25 days. DT2 is the second of a three-well 2010 exploration campaign.

Back in July, DT-1 encountered a 71m thick section of the targeted ‘Tsagaantsav formation’.

The entire 71m section of the Tsagaantsav Formation contained oil shows and elevated mud gas, with indications of live oil through six sandstone and conglomerate units totalling about 35 metres in aggregate.

In light of the DT1 discovery, Petro Matad revised its plan for the DT2 exploration well. The well is now being drilled just 930m away from the discovery. Originally the company intended to test a separate structure - Davsan Tolgoi West - which is 4km west of DT-1.

With DT2 targeting the major Davsan Tolgoi prospect on the same structure as DT-1, Petro Matad aims to improve its understanding of the XX block’s primary prospect.

Petro Matad expects to carry-out production testing on one of 2010’s three wells.

Elsewhere in Mongolia, on Blocks IV and V, a 2D seismic survey is now two-thirds complete.

The company highlighted that preliminary interpretation of the field processed data has “demonstrated that the basins are much deeper” than it previously inferred from the gravity data. Furthermore the data has confirmed structures which “could form hydrocarbon traps”.

London-based stockbroker, Westhouse Securities said that Petro Matad’s decision to relocate DT2 was ‘sensible’, and it would give the company better understanding of the discovery’s potential. The stockbroker also emphasised that the preliminary 2D data is encouraging.

Westhouse reiterated its ‘buy’ recommendation which targets 200p.