Earlier this month the Petro
Matad Davsan
Tolgoi-1 (DT-1) exploration well reached a final measured depth of 1,220
meters. The well passed through the Tsagaantsav formation from 1,075 m to
1,146 m, then entered metamorphic basement.  The entire 71-m section of
the Tsagaantsav formation contained oil shows and elevated mud gas, with
indications of live oil through six sandstone and conglomerate units totaling
about 35m in aggregate. Several of these intervals included very good shows
that included cut, fluorescence, oil staining and a strong petroliferous odor.
 Good reservoir quality is indicated by fast drilling breaks through all
sandstone and conglomerate intervals.

Wireline logging will be carried out on the DT-1 well and following completion
of that process the drill will move to DT-2. Subject to Board
consideration and approval, DT-2 is to be a 2,000m test of the lower
Tsagaantsav that is located 4 km west of DT-1 within an independent structural
closure, and adjacent to the Tamsag Basin generative area.

CEO Douglas McGay said, “To have achieved success on the first well has
been both a significant achievement for our company and Mongolia, and also a
tribute to our technical teams.  Although the scientific testing and
analysis of the discovery is only just commencing, DT-1 has gone a long way
towards proving that the Davsan Tolgoi Prospect is, in total, as viable a
target as first hypothesized.  Not only have we encountered significant
hydrocarbons, the increase in our scientific knowledge will lessen the risks
associated with further wells. It also adds confidence to our assessment of the
other leads and prospects on Block XX, and the other 6 sub-basins in Block XX
that are still to be explored and tested.”