Mongolia-focused explorer halts production after its sole customer stalls again on a long-promised sales deal.
Petro Matad (AIM: MATD) has been forced to shut in production at its Mongolian oil project after PetroChina once more delayed taking and paying for its crude, sending shares tumbling 29% on the day.
The sell-off came after the company revealed it had shut in its Heron-1 and Gazelle-1 wells, having been told by PetroChina to stop delivering oil. PetroChina cited storage tanks nearing capacity and the approach of China's national holidays, during which imports from Mongolia are suspended, though the underlying cause was an unresolved internal wrangle over the 2026 sales agreement that PetroChina had told Petro Matad in August had been settled.
Petro Matad said PetroChina's Mongolian subsidiary cannot process its invoices until discussions conclude at PetroChina's head office, despite the earlier written assurance that export and sales arrangements were ready to proceed. The company described the latest reversal as 'unexpected and unwelcome' and said it had escalated the matter through regulatory, ministerial and diplomatic channels, including a meeting between Mongolia's deputy prime minister and PetroChina's local management.
Petro Matad said it had enough cash to sustain operations until 2027, giving it some breathing space to resolve the impasse, and confirmed it was in talks with other potential buyers about alternative routes to market for its crude, a sign it is looking to reduce its reliance on a single, increasingly unreliable partner.
The company has weathered similar setbacks with PetroChina before, and today's fall may prove an overreaction if the shut-in turns out to be a temporary delay rather than a structural break in the offtake relationship. Attention now turns to whether PetroChina's head office concludes its internal discussions before the October holiday period, and whether Petro Matad can line up an alternative buyer should the dispute drag on.
This report is based on Petro Matad’s announcement and coverage by UK Investor Magazine. Company announcements can be tracked via London Stock Exchange RNS and Investegate, and the full results calendar is worth watching for the next update.
This article is for general information only and does not constitute investment advice or a recommendation to buy or sell any security. Photo: Matthew Henry on Unsplash.
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