MXP.L Regulatory News (MXP)

18 Jan 2007 07:01

Max Petroleum PLC18 January 2007 MAX PETROLEUM PLC (AIM: MXP) OPERATIONS UPDATE Max Petroleum Plc ("Max Petroleum" or "the Group"), an oil and gas explorationand development company focused on Kazakhstan, today provides an operationalupdate on its drilling, production, and export sales activities, as well as asummary of its Competent Persons Report ("CPR") results for the Group's ZhanaMakat discovery in Block E. Key operational highlights include the following: • Drilling of the East Alibek #1 well commenced at the end of December 2006; • Total of six shallow exploration wells drilled to date in Zhana Makat, four of which are commercial producers; • Group is preparing an initial field development plan for Zhana Makat for submission to Kazakhstan government authorities; • Currently drilling a shallow exploration well on the Zharbas A prospect in Block E; • Plan to drill an additional shallow exploration well on the Zharzhik C prospect in Block E during the 1st quarter of 2007; • Group received approval for initial export sales lifting in January 2007; • The Group is analysing 445km of 2D seismic shot over the Astrakhanskiy block during the 4th quarter of 2006 and is 25% complete shooting an additional 300km of 2D seismic over two of the deep prospects on Block E; and • McDaniel & Associates Consultants Ltd. ("McDaniel") confirms the initial estimate of reserves for the Zhana Makat discovery at 10 million barrels of proved plus probable ("P2") reserves and 22 million barrels of proved plus probable plus possible ("P3") reserves. Drilling Activities Intermediate and Deep Drilling Programmes Max Petroleum began drilling its initial deep well in the East Alibek block inDecember 2006 using a newly contracted intermediate drilling rig. The Groupintends to drill to approximately 1,200 metres, at which time the rig will berelocated to Block E in order to commence the Group's intermediate drillingprogramme and potentially to assist in development drilling in the Zhana Makatfield. Max Petroleum will then complete the East Alibek well using a larger rigscheduled to be on location during the latter part of the 2nd quarter of 2007.The Group is currently evaluating options to accelerate its deep well programme. Shallow Drilling Programme Max Petroleum has drilled six wells to date on the Zhana Makat discovery, fourof which are commercially productive. The Group's sixth exploration well, theZME-1X, encountered hydrocarbon shows in the secondary target sands but wastemporarily suspended for further evaluation as the primary target sand wasbelow the oil-water contact. The well did not impair the Company's assessment ofthe southeast portion of the Zhana Makat area and has assisted in the technicalunderstanding of McDaniel and the Group regarding how to map the channel sandsin the field. While Max Petroleum is currently performing a more comprehensivegeological analysis of Zhana Makat, it is also preparing an initial fielddevelopment plan for submission to Kazakhstan government authorities based onthe sufficient quantity and quality of existing technical data. Once approved,the Group will begin a three year test production phase in the field, duringwhich the Group plans to drill up to an additional 20 appraisal wells beginningin March 2007. McDaniel has also indicated that Max Petroleum could drillbetween 26 and 40 total production wells as part of the long-term commercialdevelopment of Zhana Makat, the Group's first shallow discovery on Block E. While waiting for approval of the initial development plan for Zhana Makat, MaxPetroleum has mobilised the shallow rig to the southwest of E Block to drill aminimum of two wells, including one well in the Zharbas A Prospect and one wellin the Zharzhik C Prospect. The Group has spudded its initial exploration wellin Zharbas, the ZHA-A1X, which is expected to evaluate upper and middle Jurassicsands between 1,000 and 1,200 metres. Production and Export Sales The Group is currently producing approximately 575 barrels of oil per day ("bopd") from two producing wells, with an additional 200 bopd temporarily shut-in, in accordance with Kazakh legislation, pending approval of the initialdevelopment plan for its Zhana Makat discovery. Max Petroleum has been marketingits crude oil locally for approximately $27 per barrel, inclusive of VAT andadjusted for base, sediment and water. The Group has received approval for aninitial export sales lifting in January 2007 for a netback price to the wellheadof approximately Brent less $15 per barrel. Geological and Geophysical Programme The Group is analysing 445km of processed 2D seismic shot over the Astrakhanskiyblock during the 4th quarter of 2006 and is shooting an additional 300km of 2Dseismic over two of the deep prospects on Block E. The Group currently has inexcess of 9 drillable shallow prospects, 39 shallow leads, 3 intermediateprospects, 25 intermediate leads, 2 deep prospects and 9 deep leads in Blocks A&E alone. CPR Update McDaniel's initial assessment of the Zhana Makat discovery as of December 31,2006 has estimated total proved reserves of approximately 4.3 million barrels,total P2 reserves of 10.0 million barrels, and total P3 reserves ofapproximately 22 million barrels. The reserve estimates were calculated inaccordance with the Society of Petroleum Engineers' standards and relate toJurassic and Neocomian sandstone formations at various depths ranging from 650to 850 metres. McDaniel is in the process of updating the Group's CPR for itsvarious licenses in Kazakhstan and their review of Block E, East Alibek, andAstrakhanskiy is ongoing. The Group will announce CPR updates on all three ofits license areas when they become available. Jim Jeffs, Executive Chairman, commented: "The initial reserve estimates for Zhana Makat are very encouraging, as they arebased on our first four producing wells drilled on a limited portion of thestructure, and the southern boundary of the field has yet to be defined. Webelieve there will be ample opportunity to increase the recoverable reserves inZhana Makat as we drill more wells that not only target the fluvial channels butalso further delineate the size of the field. We intend to develop Zhana Makatas we continue to pursue our comprehensive exploration programme targeting theextensive number of shallow, intermediate and deep leads and prospects. We arelooking forward to turning our wide breadth of opportunities into real value forour stockholders as we move forward through 2007." 18 January 2007 Enquiries: Max Petroleum PLC Michael B. Young T: +44 (0)20 7355 9590 Chief Financial Officer Peter Moss T: +44 (0)7834 572837 Investor Relations Manager Pelham Public Relations Charles Vivian T: +44 (0)20 7743 6672 E : Charles.vivian@pelhampr.com Alisdair Haythornthwaite T : +44 (0) 20 7743 6676 E: Alisdair.haythornthwaite@pelhampr.com WH Ireland Ltd Paul Dudley T : +44 (0) 20 7220 1666 E : paul.dudley@wh-ireland.co.uk Henrik Busk, Petroleum Engineering and Geology Manager of Max Petroleum, aPetroleum Geologist, is the qualified person that has reviewed and approved thetechnical information contained in this announcement and Bryan Emslie, PetroleumEngineer and Senior Vice President of McDaniel & Associates, is the qualifiedperson that has reviewed and approved the technical information relating to theCPR. This information is provided by RNS The company news service from the London Stock Exchange