Petro Matad has provided an update on the company”s
drilling operations. The first 2D seismic survey has commenced on the Blocks IV
and V in central Mongolia. Mongolian geophysical contracting company Khet LLC
is undertaking the 360-km survey, covering 7 seismic lines, under Petro Matad”s
management and supervision. In addition, an in-fill gravity survey over the
entire two blocks is currently being performed by Mongolian geophysical
consultants, Geosan LLC.

Seismic acquisition during 2010, rather than during 2011
as originally planned, is the result of rapid advancement of the company”s
geological knowledge of the central Mongolian basins. The company”s in-house
exploration team recently completed field expeditions with the assistance of
international and Mongolian experts that identified prospective structures and
confirmed principal elements of Mesozoic hydrocarbon systems across the Blocks.
These recent advances have streamlined the exploration program with the goal of
defining drillable targets in a much shorter time frame than originally envisaged.

The Petroleum Authority of Mongolia recently approved the
Company”s revised exploration program and budget. The revisions and extra work
have resulted in an 18% increase in exploration expenditure for both Blocks.