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Weather conditions in Kazakhstan vary considerably between regions as the majority of the landscape is desert like and referred to as Steppe as is very flat and the majority without forestation. BNG is in fact closer to Atyrau and Aktau and so the workers will generally fly into Atyrau and then travel to the site by bus to get to the camp. Weather there is often bleak as the wind factor takes the temperature during the winter months, between December and February to between -25 to -30 degrees, whereas in Almaty the comparative will be -5 to -10 degrees at the same time of year. Astana will be more comparable to the BNG site as it is situated in the centre of Kazakhstan and also on the steppe, although a long way from the Caspian region. Kazakhstan is the ninth biggest land area in the world when compared with other countries, similar in size to Western Europe and the BNG license area similar in size to the inside of the M25 surrounding London. What differentiates the BNG licence area is the period March/April time frame when temperatures rise and the transition occurs to the spring and snow and ice melts which brings flooding to large parts of the BNG license area as the Caspian Sea territory and neighbouring shores floods as the snow melts. This makes access for the workers and transportation difficult, until the land has dried out. Then of course in the summer temperatures will rise to as much as 40+ degrees and the land becomes more desert like doing the hottest periods in July and August. These weather patterns will often disrupt work plans as workers have to deal with the challenging conditions, particularly in the next 2-3 months.

So the future does look bright for Caspian as in the event that we get a third dividend declaration on 5th January 2023, then this will confirm that the company's policy of paying a monthly dividend of either £1m or 35% of free cashflows is something that we can look forward to throughout 2023 and hopefully beyond. This policy has been established based on current production levels of 2,400 bopd, from the MJF wells alone, with more to come from South Yelemes shallow wells and from well 142 when they get this flowing again, after being temporarily shut in during Q3 2022. This will take production back up closer to 4,000 bopd and even with the selling of oil back into the domestic market to the mini refineries and the improvement in margins from cutting out the selling agents, we can take from this that the free cashflows will increase considerably in Q1 and Q2 2023, with a likely proportional increase in the dividend payment as we move from the min £1m a month dividend payment towards 35% of the free cashflows generated with the increased production. If the war crisis dissipates in 2023 then a return to the international market place could add further dosh to the pot. The only question thereafter is how quickly does the Company want to develop the MJF structure, using the new horizontal drilling approach. Based on recent feedback by RNSs and the AGM they are looking at taking it upto 5,000 bopd as an initial step and then presumable look at developing infrastructure and storage capacity thereafter, presumably when more certainty in the region improves with respect to sanctions and restrictions etc....

As a separate, but not necessarily detached strategy, the company will try to get one of its deep wells into production, all self financed through revenues generated from its shallow well production from the MJF and SY fields. The deep wells drilled so far have all discovered oil at various levels, except A8 which was P&G in 2022. All other wells have been drilled at various locations within the structures identified from the interpretation of the 3D seismic surveys conducted to try to confirm whether discoveries made from the initial deep wells extends to the extremities of the structure and at common depths. Each time they have drilled a new exploratory deep well they have tried to test production flow rates. the Company must now have a firm idea of the possible extent of the reserves existing at post salt levels, however, until they produce from one or more of them from each of the two deep structures, these reserves can not be independently quantified by reserve engineers, which is what is needed to be reflected in the share price and valuation of the company. Any production that comes from 802 or A5 will have a dramatic impact to the revenues of the company, share price, free cashflows and accordingly the dividend. Also additionally the Company will become a potential target to be bought out by a major. So all looking good from here.

Caspian, or Roxi, first came across the salt layers after it drilled its first deep well A5. Upto that point all wells drilled were in South Yelemes upto around 1500 - 2,000 meters. The salt layer exists on horizons drilled beyond 3,800 + meters and each time they have drilled through it they have encountered significant pressure and heat from oil saturated horizons. They have encountered many issues with dealing with the sub salt discoveries, trying various techniques to try to control the pressure at the same time as completing the casing and testing of the flow rates. They had to use heavy mud to try to contain the pressure whilst trying to get the wells ready for the test production. Many attempts has resulted in them adjusting the density of the mud as sometimes it get stuck and blocks the well, as well as then dropping drill bits down the well while trying to recover the well from the stuck mud. Each well has to go through a 90 day continuous test production before it can be brought into full production. They have never achieved this from beneath the salt layer to date. They managed to flow A5 at 3,800 bopd for several days before shutting it in and then at 1,000 bopd before complications arose and are now planning on using the horizontal drilling technique to try to re-open the well once again in 2023.

The majority of the MJF wells are drilled to around 2,500 meters and therefore do not have to encounter the salt layer and hence pressure and complications are much less and therefore all of the current productions and revenues comes from the shallower wells from the MJF structure.

The extent of oil reserves existing under the salt layers from the Aryshagyl structure and Yelemes Deep are where the extensive reserves exist and why the company keeps trying to successfully complete one of its deep wells, as this is where the Company believes there is massive potential from column of oil 90+ meters deep and kilometres in length. They just need to find a way to get one of these wells onto a 90 continuous test production to get it to a commercial discovery and production.

Well 802 will be the next deep well to reveal its potential and then shortly after A5, but there are several other deep wells they can use horizontal drilling techniques to tap into the oil they have already found down at these depths.

So much potential exists with the Caspian deeps horizons and in the meantime, we just enjoy the revenues and free cashflows generated from the existing production from the multiple shallow wells existing within the MJF structure.

of 12% and the share price increase proportionately.

Interesting dynamic as share price has stayed now within specific tight range, since the dividend announcement. There are various theories over share price valuations, those who are fundamentalists and believe that the share price always reflects the intrinsic value of the net future cashflows from the businesses continuing operations, essentially the existing production, saleable value of asset base and or potential from further upside, based on publicly available information in the marketplace. This has rarely been the case for Caspian as the share price has generally traded at a discount to the company's net worth.

Then there is the chartist perspective, that the share price generally exists between a given range until such time when it breaks out of that range and trading takes place by players in the market, catching the highs and lows, making a margin wherever possible, generally within this range but also when it breaks out. This has not been possible for the past 2 months, since the dividend announcement, as the share price has not moved and the range is not there to trade successfully.

So if we look at the current valuation, it is assumed that the market determines the price, of which one of the factors is the market perception of risk as well as the known income stream, that the Company offers. In the past this income stream was only potential based on actual and projected production levels. However, now the market has a definitive income stream in the form of the dividend, supposedly guaranteed at a minimum of £1m per month. This equates to an approximate 12% return on investment. If we believe in a perfect market, then this is the valuation that the market attributes to the company. The risk free rate currently offered by gilts in the UK is approximately 3.3%, therefore the market attributes a 9% premium on the Caspian business, for all of the obvious reasons and history that we all know.

The interesting question therefore, is if production increases or we get a large cash increase due to improved oil prices or the sale of the boat, and that this results in either the dividend increasing from the minimum of £1m to 35%+ of free cashflow at that time, then presumably the return on investment will still remain at 12%, because of the perceived market risk of Caspian, which should then result in the share price increasing proportionately to the increase in dividend payment/rate.

This is a simplistic view and many other factors will impact the share price as the dividend yield increases. The fundamentalists will argue that the share price increases as more oil is being produced or discovered or sold on the international markets. neither are wrong, however, given the current stability in the the share price and its link to the current dividend rate, I will be interested to see what happens when we get a change in the dividend rate due to improved cashflows in the business. Will the share price maintain the same market risk rate

Have to read a lot between the lines from the Interim Accounts to try to understand what has been happening since they last reported anything back at the AGM. Production seems to be still be coming from 4 wells from the MJF structure based on previously announced production levels for those wells:

Well 154 - 600 bopd
Well 153 - 1000 bopd
Well 150 - 500 bopd
Well 144 - 184 bopd
Total 2,284 bopd

So we can summize from this that South Yelemes has no further production during the six months from existing wells that were shut in pending getting approval for their production license and their commitment to work over these wells using the horizontal drilling approach. Appears to be no work at all at SY. There was a report in March 2022 that a further well was to be drilled on South Yelemes using the horizontal drilling approach, but no news on the status of this plan either.

Going back to MJF, apart from the above wells which are producing, the following other wells are now temporarily suspended pending reparation work to restore production:

Wells 141/142 - previously producing over 1400 bopd, now awaiting bits to be extracted from the well
Well 151 - this was planned to be horizontal drilled in 2H 2022, but no further update on this as at Sept 2022 ?
Well 146 - reported in Oct 2021 that this was to be re-drilled using horizontal drilling approach - but no news on status on this 1 year later by Sept 2022
Well 145 - had some issues with water cut, but no further update - has it been abandoned ?

So am not sure whether the absence of news represents absence of work undertaken or just these planned works just have not yet happened or going to happen?

Nothing much reported or happening on the Airshagyl Structure, namely A5 as this evidently has been pushed back and probably waiting for well 802 to be completed and tested. All other deep wells there are on hold or in A8 case abandoned.

Yelemes deeps obviously we are below the salt layer with Well 802, with the "significant" oil shows and high pressure, so all depends on the testing of these horizons in 4Q 2022. This well has been drilled in the vicinity of the old soviet well that experienced a blow out many years ago and so is the most likely to result in finding oil and the experience they now have on trying to control the pressure from these depths may come through for Caspian and result in something significant. Only time will tell with this one.

So we are looking at approximately $85000 per day from selling existing MJF production to the mini refineries or $2.6 million per month. This is less than we the circa 4,000 bopd through a mixture of export and domestic at an average mix of $61 per barrel from 1H22. Less transportation costs though.

So many turns and changes to plans previously announced. Can only make guesses of what is happening to all that has not been commented on through sparse operational updates.

Interesting to look back to 2019 when 3A Best was originally acquired under a similar arrangement, a large acreage of 1347km2 with limited 3D and 2D seismic work undertaken when at the time of acquisition their was a work commitment obligation of one well at an estimated cost of $3m to be drilled. This asset acquisition also being a related party transaction. The carrying value of this asset and all costs associated with 3AB were written off in 2021, amounting to $12m, as the license had expired and is now subject to managements best efforts to get it renewed. I am not sure if they ever drilled that well for $3m and suspect not and so lost their license ? But correct me if I a wrong as I am not aware of what work has been carried out on 3AB since they acquired it for an exchange of shares worth $13.5m at the time. We now have a similar transaction with Block 8, except this time two wells have been drilled, and modest production similar to South Yelemes structure of c100 bopd are being produced. A minnow in the context of strategic focus for Caspian, given expected production horizons of c 4-5k bopd fromMJF, once they decide to get all their apples flowing at the same time. This latter acquisition comes at no cost, just a drain on cashflows and resources to complete supposedly a work obligation approximating $5m. The consideration payable this time reported as a maximum amount of $60m, approximately 4 times the value of 3AB, that had no wells drilled and no production. The royalty arrangement will be there to pay off this debt out of any production from Block 8 for the foreseeable future, no real consequence to Caspian. However, it is difficult to envisage this as a strategic acquisition rather than an easy way to package common assets together perhaps to be sold on when that moment arises and in the meantime providing cashflows to complete the license obligations to avoid a similar situation to 3AB. This must have been a difficult one for the Board to stomach, as given the potential we have from MJF alone, why waste additional resources going back and starting over with an undeveloped asset. Isn't this just a distraction of management time and the Company's valuable resources. Can anyone recall the circumstances on why the 3AB license was not renewed/expired ?

This appears to be history repeating itself, another asset being taken over, be it all from the family, on similar terms that have been negotiated in the past on other deals. This represents a royalty deal for acquiring the interest in Block 8. Block 8 is being sold to Caspian in return for them financing further work commitments under the block 8 license, as long as Caspian pay a 5% royalty out of all future production from block 8. Yes no consideration paid for the acquisition cost, but we will need to understand what the work commitments and obligations are under the Block 8 license. This will be the new work obligation for Caspian to pay for. Apart from this, many positives from the update. Delays and issues with the wells, I agree could well be to do with the taxes and discount on exports, so they are looking to delay further production until sanctions and restrictions on exports are lifted. Certainly lots to look forward to as all of this unfolds and this period is our new starting point, profitable and a cash generating company, which is very different to the past 15 years. But also much more that we need to understand and yet to be disclosed about newly acquired ongoing license obligations ?

Investors are holding their positions. The Company has achieved its new status as a producing profitable company, based on existing production levels with the prospect of providing its investors with an immediate return on investment via dividends, whenever that maybe in 2022 or 2023. We need greater clarification of what the short and medium terms strategy going forward is now they have reached this new level of profitability, whether it be selling the asset, getting one of the deeps flowing, diversifying into wind power or buying other producing assets. Not sure they plan imminently on drilling further shallow wells, nor am I sure how many further horizontal drills they will undertake on existing shallow wells going forward ? Until we know the answers to these questions, investors are probably just going to sit tight and hold leading to further gradual slippage in the share price.

Tic tock .... 9 days before the ultimate deadline, 30 Sept, before the interim financials have to be released. Unprecedented lull in news releases, something must be brewing behind the scenes.

Sometimes we need to sit back and look at the big picture and accomplishments to date. Since listing the company in 2007, the company started the process of exploring the huge acreage of over its 1500 square kilometres license area. Initial listing proceeds were spent on undertaking 1376 square Km of seismic coverage and subsequently drilling some initial exploratory wells in potential structures identified from the 3D seismic work. The company raised additional funds from a couple of farm-outs selling down interests in the license area, which although found oil from some of the wells drilled resulted in the % interests sold being returned to Caspian, so that ultimately they still retain 99% interest in the license area. After further drilling into the MJF structure and South Yelemes structure, both deep wells and shallow wells, the company has most success from the MJF shallow structure, which since adopting some horizontal drilling techniques has resulted in current day production levels approaching 4,000 bopd. The company still has some historical work commitment obligations associated with the license, but are essentially a company free of any third party debt, which is in the extraordinary position of still owning 99% of the principal license having discovered oil and now producing circa 4,000 bopd. This is by far the biggest achievement, as exploration companies often have to farm out their interest in their license to raise sufficient funds to explore and develop the asset, resulting in a diluted interest in a producing company rather than 100% interest prior to exploration and development. Caspian are now potentially generating significant profits, which will be revealed/confirmed this week when the half year 2022 results will be published, with a commitment to pay dividends going forward. All of this without carrying any debt on its balance sheet and still owning 99% of its license area. Production licenses are in place on two of its structures, allowing it to export its oil and achieve greater prices than can be achieved domestically. Not great at communicating their success stories and it has been a bumpy ride over the 15 years since the IPO, so the market is still hesitant and waiting to see the final outcome of the story to date. However, the story is good and the company has never been in better shape. Undervalued yet turning a corner into a bright future. Lets see what this next week brings in terms of an update when the half year financials are published.

Work commenced in June 2022 on MJF wells 141 and 151 using the new drilling horizontal approach. This approach has already successfully resulted on increasing production from wells 154, 153 and 142 to initial flow rates of approx 600 bopd, 1000 bopd and 1400 bopd, respectively. Wells 141 & 151 had been previously drilled in 2019 and 2020, resulting in very small levels of production so the expectation is that this current work, will further boost production levels for Caspian. The Company also planned to use this approach on some of the South Yelemes existing wells, quite apart from what they are doing on drilling 802, their next deep well. We will receive an update in the next 2-3 weeks on all work carried out on these wells, since our last update in June 2022. Ongoing work on some of these shallow wells should therefore be nearing completion. A lot to report on after such a long period of silence, should be an interesting few weeks ahead.

JD, valuations have been done by WH Ireland in the past, however, these have to be updated as does the last CPR reserves report done by Gaffney Cline over 10 years ago. This was done before the much of the MJF drilling has been completed and does not take account of the success from the horizontal drilling technique. Your estimate may well be right, however, I don't think a new CPR is very high on the agenda as management know how much oil is down there and probably see no point in getting someone else to tell them what they already know. Would imagine an external buyer would be interested in some independent assessment of reserves, so if they were to get it updated they would have to first to update the market before they could release it to a third party buyer. Anyone wanting to do a discounted NPV calculation based on current production levels and some modest drilling activity plan over the next 10-15 years, I am sure it will come up with a big number, even when applying modest/prudent assumptions.

The company has already taken the decision to re-shift its focus to developing the shallow structures with the BNG license area. In the past the deeps were the big prize and drilling to 4-5 kilometers, below the salt layer, was the potential jewel in the crown, but difficulties with heat and pressure at those depths and the difficulties trying to contain the flow rates have proved to be a step too far to date and so a shift in strategy to relatively easy 2-3 kilometer drills, above the salt layer, where oil saturated structures exist and flow without these complications seems to be the logical and sensible way to commercialise the license area. At the time A5 was being drilled the discussion on here was that A5 could flow at 2-3 thousand bopd and this was incentive enough for the share price to bump along at 10-15p. We now have 4000 bopd from MJF and SY, with still more easily accessible oil just by re-investing own funds into horizontal drilling existing wells and drilling further development wells into the same shallow structures. It is a no brainer that this is the way to go. Within a 3-5 year timeframe with a concerted effort on the drilling front and an appetite to develop the infrastructure, the company has the ability to transform itself. Yes they have to complete the work program obligation of 2 more deeps, but seriously, after all that has passed do you really think they have the expertise to get the oil out even if they find further down there after so many attempts with the other deeps. May as well develop the shallow structures at this stage and take production number upto 10-15k bopd and look for other opportunities through acquisitions and develop the business this way. Investor perspectives are still very short term when in fact we are just at the start of a company that has the potential for exponential growth, if management choose to continue to develop the asset this way. They of course may decide to sell it before reaching these levels, however, with existing production at circa 4,000 bopd and now profitable, valuations and ultimately the potential sale price should mean that the share price will have to also increase to more realistic valuation levels. After all, the business owners are not going to sell the company off cheaply, after creating a cash cow and profitable organisation from 15 years of effort.

Think it is more to do with the logistical difficulties in finalising the financial statement close and the auditors having to fulfil their responsibilities within a 3 month timeline. I imagine the financial records are kept in Kazakhstan, whereas the auditors are based in the UK. Logistically challenging.

McQ, correct. They usually publish in the 3rd week of Sept every year.

KK, yes good point, the results won't show the benefit of the 4000 bopd throughout the whole 6 month period, however, this is a timing issue at the end of June 2022. There was also an equivalent timing issue with Well 153 at the end of December 2021, which will result in the 1H 2022 results and overall production being higher than the 2H 2021 results. The 2021 annual results showed average annual production of 2,130 bopd with little impact from the success of well 153, so although we only will see one months benefit of the 1400 bopd from 141 in !H 2022, we will see the full benefit of well 153 coming through for the 6 month period. So profitability should be significantly (a multiple factor) improved from past periods profits (before impairment), assuming the auditors don't find any further reasons to impair asset values in 2022 ?. What that new level of profitability will be I am not sure, as there are too may unknown variables, but it will show a favourable increase period on period, even without the impact of KEGCO/Urals discount. I am obviously focusing on what "it is" and not what it "could have been", as these factors only distract from what will be a positive reported result for the period.

Will be out of the blue. Last year interim results announced on 21 Sept, so we have approximately 3 weeks to wait for a full update on 2022 1st half year results. The important thing with these results will be the first time in 15 years of reporting that the company will show significant profits, as the 4,000 bopd production and high oil prices throughout the reporting period will be the big news. Normally we are hanging on to hear news of a new well being drilled, this time the news will be an indication of what sort of profit levels will be generated in the future and how this impacts on the valuation of the business. So 2-3 weeks and we will know......

and of course, importantly, the first indication of what the company's performance is likely to look like going forward

Finally heading into the 1st week of September, so can look forward to full disclosure of new level of profits being generated from production at historic highs of approx 4,000 bopd and higher oil prices since the start of the year. Been a long wait since the AGM and investor presentation, but will be the first time we see the impact of the current market conditions on the Caspian performance in "black and white", via the half year financial statements, which have to be published. All other majors have been disclosing record profitability for the 1st and 2nd quarters for 2022. The same will be the case for Caspian, just on a smaller scale, but the dynamics will be the same given the favourable circumstances that Caspian Sunrise finds itself in, this year. Fundamentals justify higher prices for this investment and as a chartist, you will see the return of investor interest as we lead up to the release of the financials in either 3 or 4 weeks time. As to what further information will be released as part of the required financial disclosure, who knows, however, at least we know we will finally understand how much profitability has been achieved during this period.