MXP.L Regulatory News (MXP)

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION

FOR IMMEDIATE RELEASE

14 August 2015

Max Petroleum Plc

("Max Petroleum" or the "Company" and

together with its subsidiaries, the "Group")

Posting of Circular in Relation to US$13.8 million Strategic Investment by AGR Energy

Max Petroleum Plc announces that it has posted to Shareholders and published on its website a circular (the "Circular") containing further details of the US$13.8 million (before expenses) investment to be made by AGR Energy, subject to the fulfillment of certain conditions described below, and a notice of General Meeting, at which resolutions will be proposed to approve this investment.

Highlights

· On 13 July 2015, Max Petroleum announced that it had conditionally raised US$13.8 million (approximately £8.98 million) by way of a cash subscription by AGR Energy.

· The Subscription is for 3,834,590,973 new Ordinary Shares, at a price of 0.2341 pence per Ordinary Share, a 46.3 per cent. premium to the closing middle market price of an Ordinary Share of 0.16 pence on 27 February 2015, the date immediately prior to the suspension of the Company's Ordinary Shares from trading on AIM. Immediately following completion of the Subscription, AGR Energy will hold 63.8 per cent. of the Enlarged Issued Share Capital of the Company.

· The Subscription will provide working capital to the Company to alleviate its severe immediate financial stress. Further significant financing will be required in the mid and longer term to re-establish going concern status and viability of the business. AGR Energy intends to work with the existing shareholders of the Company progressively to strengthen Max Petroleum's financial position and evaluate exploration and production upside.

· The Company and AGR Energy have entered into a Relationship Agreement to ensure that (i) the Company will at all times be capable of carrying on its business with the assistance of a minimum of two Directors who are independent of the AGR Energy Group; (ii) the Group and its activities will be managed for the benefit of Shareholders as a whole; and (iii) all material transactions, agreements and arrangements between: (a) any member of the Group; and (b) any member of the AGR Energy Group, will be at arm's length and on normal commercial terms.

EXPECTED TIMETABLE

Each of the times and dates in the above timetable are London times and, other than the Long Stop Date which may only be extended with the agreement of AGR Energy and the Company, are subject to change at the absolute discretion of the Company and Stifel Nicolaus Europe Limited ("Stifel"). Any such change will be notified by an announcement on a Regulatory Information Service.

ENQUIRIES:

The above summary section should be read in conjunction with the full text of this announcement set out below.

Introduction

As announced on 13 July 2015, Max Petroleum has conditionally raised approximately US$13.8 million (approximately £8.98 million) before expenses by way of a cash subscription by AGR Energy for 3,834,590,973 new Ordinary Shares, at a price of 0.2341 pence per Ordinary Share, such that AGR Energy would hold 63.8 per cent. of the Enlarged Issued Share Capital immediately following completion of the Subscription.

The Subscription Shares will rank pari passu in all respects with Ordinary Shares in issue prior to completion of the Subscription, including the right to receive all dividends and other distributions declared following Admission.

The Subscription Price represented a premium of 46.3 per cent. to the closing middle market price of an Ordinary Share of 0.16 pence on 27 February 2015, the date immediately prior to the suspension of the Company's Ordinary Shares from trading on AIM.

The Subscription is conditional, inter alia, upon each of the following Conditions being satisfied on or before the Long Stop Date, being 1 October 2015:

(i) the posting of the Shareholder Circular to Shareholders by no later than 21 August 2015;

(ii) the Panel having waived the obligation that would otherwise arise under Rule 9 of the Takeover Code for AGR Energy to make a general offer to all other Shareholders to acquire their Ordinary Shares in the Company;

(iii) Shareholders passing the Resolutions at the General Meeting;

(iv) the appointment of the Investor Managers and/or Investor Directors not having been terminated;

(v) letters of appointment for each Investor Director being executed;

(vi) certain Kazakh Governmental Approvals being obtained;

(vii) no Insolvency Event having occurred;

(viii) Admission becoming effective on or before the Long Stop Date; and

(ix) satisfaction or waiver by AGR Energy of all conditions to drawdown under the Bridging Loan within the applicable time frame or as otherwise agreed to between the Company and AGR Energy.

Conditions (i), (iv), (v), (vii) and (viii) are capable of being waived by AGR Energy in its absolute discretion and on such terms as it considers appropriate. Condition (vi) is capable of being waived by mutual consent of the Company and AGR Energy. The Conditions set out in (ii), (iii) and (ix) are not capable of being waived. On 25 July 2015, the conditions to draw down of the Bridging Loan were satisfied, and therefore the Condition set out in (ix) has been satisfied.

1. Bridging Loan

As part of the Subscription, the Company has entered into a Bridging Loan Agreement with AGR Energy pursuant to which AGR Energy will provide an unsecured convertible loan of US$2.0 million (approximately £1.3 million) to the Company comprising: (i) a first tranche of US$250,000 (approximately £162,623) ("Tranche 1"); and (ii) a second tranche of US$1.75 million (approximately £1.1 million) ("Tranche 2). Under the terms of the Bridging Loan Agreement, AGR Energy may at its discretion provide a further tranche of up to US$11.8 million (approximately £8.03 million) under the Bridging Loan Agreement ("Tranche 3"). The Bridging Loan has a stated maturity date of 31 December 2015 and is convertible (including in respect of any interest that may have accrued) into Ordinary Shares subject to Shareholder approval and certain regulatory approvals at a conversion price equal to the Subscription Price.

The Bridging Loan is conditional upon, inter alia, each of the following conditions being satisfied on or before the Long Stop Date:

(a) for each of Tranche 1, Tranche 2 and, if required, Tranche 3:

(i) the following appointments being made in each case by no later than 14 July 2015: (i) Mr. Kanat Assaubayev to the Company's Board as an executive director (Co-Chairman); (ii) Mr. Aidar Assaubayev as a chief executive officer of the Company (but not a member of the Company's Board) and as the general director of Samek; and (iii) Mr. Alastair Murray as a deputy general director of Samek, and each such appointment outlined in (i) to (iii) not having been terminated. The appointments in (i) and (ii) above were made on 13 July 2015 in satisfaction of the terms of the Bridging Loan. However, due to unforeseen circumstances, Mr. Alastair Murray can no longer take up the position outlined in (iii) above. As such, AGR Energy and the Company have agreed that Aidar Assaubayev may nominate a candidate to be proposed to be appointed as deputy general director of Samek before the Long Stop Date. It was determined by AGR Energy and the Company that the delay in relation to the appointment outlined at (iii) above should not affect the satisfaction of this condition for the purposes of the Bridging Loan; and

(ii) no Insolvency Event or Change of Control having occurred in respect of the Company; and

(b) for Tranche 2 only:

(i) the Panel not having objected to the potential granting of the Rule 9 Waiver by 24 July 2015 and if any such objection is raised (whether before or after 24 July 2015) AGR Energy shall have a right to terminate the Bridging Loan Agreement.

The conditions for the drawdown of Tranche 1 were satisfied on 13 July 2015. As such, the Company submitted a drawdown request to AGR Energy on 23 July 2015 for the entirety of Tranche 1 and drew down US$250,000 (approximately £162,623) on 24 July 2015.

The conditions for the drawdown of Tranche 2 were satisfied on 25 July 2015. The Company and AGR Energy further agreed to split Tranche 2 into two or more sub-tranches, the timing of drawdown of each sub-tranche to be determined by the Company. As such, the Company submitted an initial drawdown request to AGR Energy under Tranche 2 on 30 July 2015 for US$250,000 (approximately £162,623) and drew down US$250,000 (approximately £162,623) on 1 August 2015. The Company submitted a further drawdown request to AGR Energy for US$240,000 (approximately £156,118) as a second sub-tranche of Tranche 2 on 7 August 2015. The Company drew down US$240,000 on 11 August 2015.

Interest shall accrue on any outstanding principal amount at a rate of 0 per cent. per annum, unless the Shareholders do not approve, prior to the Long Stop Date, the Subscription or the Conversion in which case interest shall accrue at a rate of 15 per cent. per annum compounded on a quarterly basis from the date of the Bridging Loan. All outstanding liabilities under the Bridging Loan will be set-off against the subscription amount payable by AGR Energy under the Subscription Agreement.

2. Background to and reasons for the Subscription

In concluding that the Subscription is in the best interests of Shareholders and the Company as a whole, the Directors have taken into account the considerations set out below.

The November 2014 Circular contained information on the financial position and future prospects of the Group absent the Prior AGR Subscription. This included details of:

· the Company's highly geared debt position and the fact that the Group would not be able to continue servicing its interest and principal payments under the Sberbank Facility Agreement should oil prices remain below US$85/barrel Brent crude;

· the Company's unfunded capital programme absent additional financing;

· the Group's limited post-salt exploration upside from existing or new licence areas; and

· a projected US$113 million impairment to the Group's pre-salt assets absent additional financing.

In addition, a review of strategic options and formal sale process announced on 22 July 2014, the purpose of which was to elicit competing, superior proposals to the Prior AGR Subscription, resulted in no deliverable proposal being put forward to the Board at that time.

Shareholder approval for the Prior AGR Subscription was granted on 1 December 2014 and the Company and AGR Energy worked on fulfilling the remaining conditions to completion.

On 9 February 2015, Max Petroleum announced that the fall in the oil price since November 2014 had had a very severe adverse impact on its current and forecast liquidity position in 2015 and beyond. As a result, Max Petroleum's business had been rendered unviable unless further material investment was made into the Company in addition to there being a comprehensive debt restructuring agreed with Sberbank. In addition, negotiations with Sberbank regarding the terms of such debt restructuring had not been successful and, as a result, the Prior AGR Subscription would not proceed.

Negotiations in the subsequent period continued, both with Sberbank regarding an appropriate debt restructuring and with AGR Energy regarding an equity investment that, together with the debt restructuring, would render the Company viable at current oil prices.

The Company announced on 19 February 2015 that in light of upcoming creditor payments, including a material amount that became due on 25 February 2015 to the Republic of Kazakhstan tax authorities and payable by early March 2015, there was only a short period remaining to achieve the refinancing and if efforts were unsuccessful then the consequences will be negative for all stakeholders in the Company.

On 2 March 2015, the Ordinary Shares in Max Petroleum were suspended from trading on AIM as a result of increased uncertainty as to the Company's continuing solvency in light of the protracted nature of the financing discussions as well as outstanding creditor payments and other events outside the control of the Company that could require that it ceases trading. Shareholders should note that, pursuant to Rule 41 of the AIM Rules, admission to trading of a company's securities on AIM will be cancelled where such securities have been suspended from trading for six months.

On 20 March 2015, the Company announced that it had been notified that its operational bank accounts in the Republic of Kazakhstan would be suspended as a result of non-payment of sums owed to the Kazakh tax authorities. In addition, export sales were halted due to uncertainty over the Company's ability to guarantee future payment for transport and other costs necessary to ensure delivery of such sales. Further, as a result of the demobilisation of the Company's workover rig, due to non-payment of invoices, production had been impacted by the failure of one producing well at Zhana Makat, representing a loss of approximately 170 bopd. In addition, Sagiz West production had been shut-in pending regulatory permission to proceed to TPP and total production was approximately 3,100 bopd, which was being delivered on a non-cash basis as settlement towards the Company's domestic crude oil sales prepayment liability.

On 1 May 2015, Max Petroleum announced that financing discussions were continuing, that bridge financing was required to ensure the Company was viable prior to completion of any transaction and that it continued in operation, producing circa 2,900 bopd, under severe financial stress.

On 3 July 2015, the Company announced that Sberbank had unconditionally granted a six month standstill on all principal and interest payments due under the Company's c.US$80 million loan through to 14 December 2015, that it had accrued US$3.8 million of interest as of 30 June 2015 and that interest would continue to accrue during the standstill period. In addition, the Company announced that it continues in operation under severe financial stress, producing in excess of 3,500 bopd, including from the Sagiz West field after regulatory permission was granted in June to resume production from both Sagiz West and East Kyzylzhar I fields under TPP. Further, the Company announced that it had received notification from the tax authorities of the Republic of Kazakhstan alleging that, under tax legislation, payments of over US$20 million (according to the tax authorities, payable within ten years starting from 2012) were due for Soviet-era historical data costs incurred in the Blocks A&E Licence. The Company disagrees with this interpretation and application of the tax legislation and considers that to date it has met its obligations to reimburse historical costs as they fall due. The Company intends to put its case to the tax authorities.

In the weeks prior to 13 July 2015 a small number of indicative and pre-conditional alternative third party proposals were received by the Board. The proposals principally related to the acquisition of Samek and would have left little or no value for Shareholders after the discharge of the Company's liabilities to its creditors.

Subsequent to the receipt of these proposals, however, the Company updated its forecasts of solvency and financing requirements as a result of, inter alia, the recent fall in the oil price, a forecast reduction in cash flows as a result of the Sagiz West and East Kyzylzhar I wells not coming back to full production as quickly as expected, new creditor claims and limited options for mitigating actions that had previously been possible. These revised forecasts required an immediate decision of the Board either to accept the AGR Energy proposal, being the only immediately deliverable proposal available to the Board, or put the Company into administration. In these extreme circumstances the Board determined that it was in the best interests of all stakeholders immediately to commit to enter into an agreement with AGR Energy.

Use of proceeds

The net proceeds of the Subscription will provide working capital to the Company to alleviate its severe immediate financial stress. Further significant financing will be required in the mid and longer term to re-establish going concern status and viability of the business. AGR Energy intends to work with the Shareholders progressively to strengthen Max Petroleum's financial position and evaluate exploration and production upside.

Pricing of the Subscription and ongoing participation

The Subscription Price represents a premium of 46.3 per cent. to the closing middle market price of an Ordinary Share of 0.16 pence on 27 February 2015, the date immediately prior to the suspension of the Company's Ordinary Shares from trading on AIM.

The Board also believes that the Subscription offers existing shareholders in the Group the opportunity to participate in the upside potential from the Subscription and future development of the Group's business.

Rehabilitation of Samek

In order to safeguard the solvency of Samek, the Board determined on 24 July 2015 that a rehabilitation process should be initiated under the laws of the Republic of Kazakhstan (the "Rehabilitation"). The Rehabilitation has similarities to a company voluntary arrangement process under English law and the main purposes of Rehabilitation are to provide Samek with protection against creditor claims and to allow Samek to work with its creditors to reach agreement on a fixed repayment schedule.

If the Rehabilitation is approved by a competent court in the Republic of Kazakhstan, a moratorium will be placed on all creditors' claims, penalties and interest will cease to accrue on any outstanding debts and the execution of any court or arbitral judgments will be suspended. A rehabilitation plan (comprising, inter alia, a fixed timetable for repayments) will need to be agreed between Samek and its creditors, and approved by the creditors at a creditors' meeting to be held within three months from the date the court approved the Rehabilitation. The Rehabilitation will not prevent Samek from carrying on its business in the ordinary course, but most "non-ordinary" course transactions are likely to require creditor approval.

Relationship Agreement

The Company and AGR Energy have entered into the Relationship Agreement to ensure, inter alia, that, with effect from Admission:

(i) the Company will at all times have a minimum of two Directors who are independent of the AGR Energy Group;

(ii) the Group and its business will be managed for the benefit of Shareholders as a whole; and

(iii) all transactions, agreements and arrangements between: (a) any member of the Group; and (b) any member of the AGR Energy Group will be at arm's length on normal commercial terms.

3. Information on AGR Energy, the AGR Energy Group, the Assaubayev family and its intentions as regards Max Petroleum

AGR Energy is a vehicle owned by and controlled by the Assaubayev family. Neither AGR Energy, nor any other member of the AGR Energy Group currently holds any Ordinary Shares or any other securities in Max Petroleum.

The Assaubayev family, through AGR Energy, intend to utilize their local knowledge and access in the jurisdictions in which Max Petroleum operates to secure the Company's future growth and create value for Shareholders. To this end, AGR Energy's intention is to support the current operations of Max Petroleum's portfolio and exploit new opportunities that may arise as a consequence of the ongoing consolidation in the oil and gas sector in Central Asia.

AGR Energy also believes that the natural resources experience of its shareholders, their proven track record of operating oil and gas and mining assets as well as their access to significant financial resources make it a well-placed partner to support Max Petroleum's development and growth ambitions.

AGR Energy confirms that it is acting for the Assaubayev family and not for any other person.

AGR Energy is committed to Max Petroleum remaining an independent company whose shares are publicly traded. In AGR Energy's view, quoted company status not only permits Shareholders to participate in the future growth of the Company but is also optimal for the Company to realise its potential. It also facilitates the Company's access to third party capital and provides it with an acquisition currency to be used for potential further growth. A stable, transparent platform is expected to be created from which to pursue the Company's growth strategy, which will be important for Max Petroleum's success.

4. City Code on Takeovers and Mergers

Rule 9 of the Takeover Code

The issuance of the Subscription Shares to AGR Energy gives rise to certain considerations under the Takeover Code. Brief details of the aspects of the Takeover Code and the protections it affords to you as a Shareholder are described below.

The Takeover Code is issued and administered by the Panel. The Takeover Code governs, inter alia, transactions which may result in a change of control of a company to which the Takeover Code applies. Max Petroleum is a company to which the Takeover Code applies and its Shareholders are entitled to the protections afforded by its provisions.

Under Rule 9 of the Takeover Code, any person who acquires, whether by a series of transactions over a period of time or not, an interest (as defined in the Takeover Code) in shares which, taken together with shares in which he is already interested and in which persons acting in concert with him are interested, carry 30 per cent. or more of the voting rights of a company which is subject to the Takeover Code, is normally required to make a general offer to all remaining shareholders to acquire their shares.

Rule 9 of the Takeover Code further provides that where any person, together with persons acting in concert with him, is interested in shares which in aggregate carry not less than 30 per cent. of the voting rights of a company but does not hold shares carrying more than 50 per cent. of such voting rights and such person, or any such persons acting in concert with him, acquires an interest in any other shares which increases the percentage of shares carrying voting rights in which he is interested, such person or persons acting in concert with him will normally be required to make a general offer to all remaining shareholders to acquire their shares.

An offer under Rule 9 of the Takeover Code must be made in cash and at the highest price paid by the person required to make the offer, or any person acting in concert with him, for any interest in shares of the company during the 12 months prior to the announcement of the offer.

Rule 9 Waiver

The AGR Energy Concert Party does not hold any Ordinary Shares in the current issued share capital of the Company. Following the completion of the Subscription and Admission, the AGR Energy Concert Party will hold 3,834,590,973 new Ordinary Shares which is equal to 63.8 per cent. of the Enlarged Issued Share Capital by virtue of the Subscription. Without a waiver of the obligations under Rule 9 of the Takeover Code, the AGR Energy Concert Party would be required to make a general offer to all Shareholders.

The Panel has agreed, subject to Independent Shareholders' approval on a poll, to waive the requirement for the AGR Energy Concert Party to make a general offer to all Shareholders where such an obligation would otherwise arise as a result of the Subscription.

The Rule 9 Waiver granted by the Panel relates only to the allotment of the Subscription Shares. It is conditional on the passing of Resolution 1 by the Independent Shareholders of the Company on a poll.

On Admission, the AGR Energy Concert Party will be interested in Ordinary Shares carrying more than 50 per cent. of the voting rights of the Company and will, for so long as it continues to hold more than 50 per cent. of such voting rights, be able to acquire further Ordinary Shares and accordingly increase its aggregate interest in the Company's voting rights without incurring an obligation to make a general offer for the Company under Rule 9 of the Takeover Code, although individual members of the AGR Energy Concert Party will still be subject to Note 4 on Rule 9.1 of the Takeover Code. In the event that Resolution 1 is passed, the AGR Energy Concert Party will not be restricted from making an offer for the Company.

5. Sberbank Approval

The Company will be required to seek Sberbank approval for the change of control in Samek as a result of the allotment of the Subscription Shares to AGR Energy.

6. Kazakh Governmental Approvals

The Subscription is conditional upon the Company receiving the following governmental consents and approvals:

(i) consent and approval from the MOE under the Subsoil Law;

(ii) consent and approval from the National Bank; and

(iii) consent of the Kazakh antimonopoly authorities.

A condition of the National Bank granting its consent in respect of the Subscription and issuance by the Company of the Subscription Shares to AGR Energy may be that the Company has to offer not less than 20 per cent. of the Subscription Shares (the "Local Offering Shares") on the Kazakhstan Stock Exchange, each offered at the Subscription Price (the "Local Offering"). The Company therefore intends to conduct the Local Offering prior to Admission. It is contemplated that AGR Energy would participate in the Local Offering and, to the extent that any Local Offering Shares are allotted pursuant to the Local Offering, they would be allotted to AGR Energy. The issue of any Local Offering Shares will be conditional on, and will complete simultaneously with, the Subscription.

The Kazakh regulatory regime is subject to change and there can be no certainty that regulatory approvals additional to or other than those outlined in this paragraph may not be required.

7. Relationship Agreement

The Company and AGR Energy entered into the Relationship Agreement on 13 August 2015. The Relationship Agreement, which is conditional on Admission having occurred, provides that, for so long as the Subscription Shares are admitted to trading on AIM and AGR Energy individually, or together with other members of the AGR Energy Group, is interested in 30 per cent. or more of the issued Ordinary Shares in the Company, AGR Energy will, and shall procure that each member of the AGR Energy Group will exercise its voting rights (or where relevant, refrain from exercising them) to procure (to the extent that they are able to do so by the exercise or non-exercise of such rights to procure) that:

(i) the Board will at all times include at least two Directors that are independent from the AGR Energy Group (the "Independent Directors");

(ii) the Group and its business shall be managed for the benefit of the Shareholders as a whole;

(iii) all transactions, agreements and arrangements between: (a) any member of the Group; and (b) any member of the AGR Energy Group, shall be on an arm's length basis and normal commercial terms;

(iv) if an Independent Director ceases to be either an Independent Director or a Director, one or more new Independent Directors will be appointed to the Board as soon as is reasonably practicable (taking into account normal appointment and approval procedures for an AIM company) as shall be necessary to ensure compliance with (i) above;

(v) the audit committee established by the Board shall include two Independent Directors;

(vi) the quorum for any meeting of the Board or a committee of the Board to consider:

(a) any variation, amendment or novation of the Relationship Agreement; and

(b) any decision as to whether to enforce the Relationship Agreement, will be a majority of Independent Directors, unless a majority of Independent Directors otherwise consent; and

(vii) subject to any applicable laws and the provision of the Relationship Agreement, the Company shall at all times not be managed in breach of the corporate governance practices appropriate for an AIM company of its size, stage of development and the operations of the Group.

8. Current trading and solvency

The Group has seven post-salt discoveries with three fields producing under FFD (Zhana Makat, Asanketken and Borkyldakty), two fields under TPP (Sagiz West and East Kyzylzhar I), and the remainder at varying stages of appraisal. As the Group continues to appraise and develop its discoveries they progress from Test Production into TPP, where they are able to resume continuous production, and then they move from TPP to FFD, where 80 per cent. of the production is available to sell on export markets for a substantially higher price per barrel.

In June 2015, Amendment 16 to the Blocks A&E Licence was signed which extended the appraisal period for the blocks until 4 March 2017 and also permitted the Sagiz West field, East Kyzylzhar I field and Baichunas West field to resume production under TPP. The Group also formally relinquished the Eskene North field which has been determined to be non-economic. Amendment 16 also permits the Group to further appraise several Soviet-era structures that had varying indications of hydrocarbon presence during their exploration phase. The right to appraise a geological feature that could extend Zhana Makat field was granted in October 2014.

The exploration rights to complete the drilling of NUR-1 and a follow on pre-salt well expired on 4 March 2015. The Company plans to apply to the MOE for a further extension to complete NUR-1 and drill pre-salt wells in Block E in due course. Faced with the dual uncertainties of funding and the requirement for a licence extension beyond March 2015, the directors have concluded that the most prudent course of action would be to book a one-time accounting charge to impair fully the carrying value of NUR-1 and associated pre-salt exploration costs as at 31 March 2015. Accordingly, the Group will book a non-cash impairment charge of approximately US$113 million in the financial statements for the year ending 31 March 2015. Finishing the well and evaluating this high potential target remains an important objective for the Group. As the Eskene North field has been determined to be non-economic and has now been relinquished, the Group has also recorded an impairment of approximately US$5 million to fully write down the field at 31 March 2015. As a result, impairment charges related to exploration and appraisal assets for the year ended 31 March 2015 will be approximately US$118 million.

As a result of the fall in oil prices during 2014, the Group is currently reviewing the carrying value of post-salt oil and gas properties and associated property, plant and equipment ("oil and gas assets") as at 31 March 2015. Based on this review, the Group expects to revalue its oil and gas assets to between US$50 and US$60 million at 31 March 2015. Accordingly the Group expects to record a non-cash impairment charge of its oil and gas assets of between US$62 to US$72 million in its financial statements for the year ended 31 March 2015.

The Group's operating performance during the current calendar year for the six months ending 30 June 2015 is summarised in the table below:

During the six months ended 30 June 2015, the Group's average realised export selling price was US$54 per barrel, generating an average netback of US$19 per barrel after production costs, selling and transportation and taxes. The Group's average realised domestic selling price was US$22 per barrel, generating an average netback of US$9 per barrel.

The Group is currently producing approximately 3,500 bopd from its fields on continuous production with several wells temporarily shut-in due to down hole failures. The Group is working to restore the shut-in wells to production as quickly as possible, and expects to maintain a stable production of approximately 4,100 bopd through the remainder of 2015.

The Company has contractual obligations to deliver crude oil arising from prepayments received from customers for crude oil sales. The last prepayment received from domestic oil buyers was in November 2014. Domestic crude oil sales are applied against this prepayment, and hence domestic crude oil sales currently do not generate cash revenue because of the large balance outstanding. Domestic crude oil prices which the Company receives as it delivers against its domestic prepayment are variable and hence lower domestic oil prices require higher volumes to be delivered. Export sales are generally made on a one month prepayment basis, and accordingly, are currently the Company's only means of generating cash revenue.

As at 30 June 2015, prepayments from customers for the future delivery of oil totalled US$18.7 million, split as follows:

· Prepayments from domestic customers were US$15.0 million, with a minimum remaining delivery commitment of approximately 416 thousand barrels during the remainder of 2015 and into 2016.

· Prepayments from export customers were US$3.7 million for July exports.

Export sales were halted in March 2015 owing to uncertainty over the Company's ability to guarantee future payment for transport and other costs necessary to ensure delivery of such sales because of a threatened suspension of its operational bank accounts due to the inability to pay approximately US$4.5 million of export taxes and mineral extraction taxes at the end of February 2015. In March 2015, the operational bank accounts in the Republic of Kazakhstan were suspended by the Republic of Kazakhstan tax authorities as a result of the non-payment of these taxes. On 13 April 2015, the Republic of Kazakhstan tax authorities seized US$3.3 million which the Company was holding in an escrowed bank account as an environmental restoration and rehabilitation fund (the "Liquidation Fund") under the terms of the Blocks A&E Licence and applied it against the approximately US$4.5 million in taxes owed to reduce the balance of taxes outstanding to approximately US$1.2 million.

The Company was able to obtain a prepayment for May exports at the end of April, such that it was able to clear the balance of US$1.2 million of taxes owed to allow the un-suspension of its operational bank accounts by the Republic of Kazakhstan tax authorities, pay sales and marketing costs to transport its crude oil production to buyers in May, and to pay its essential operating expenses to maintain crude oil production, with continued creditor forbearance on its large trade and other payables liabilities which are in arrears and, as at 30 June 2015, amounted to US$20.7 million. The Company has continued to trade on this basis to date.

Under the terms of the Blocks A&E Licence, the Group has an obligation to replenish the Liquidation Fund with the US$3.3 million cash seized by the tax authorities. Further, an additional contribution of US$0.3 million in respect of calendar year 2014 is now overdue. As of today's date, the Group has a requirement to pay US$3.6 million into the Liquidation Fund.

As at 30 June 2015, the Group's current liabilities, excluding the principal of the Sberbank Loan, were as follows:

Trade and other payables of US$20.7 million include payables of US$11.7 million for which settlement is overdue.

Inclusive of the Sberbank Loan of US$79.6 million and the provision for decommissioning obligations of US$4.9 million but before deferred tax liabilities, total liabilities of the Group at 30 June 2015 were US$127.5 million.

As at 30 June 2015, the Group had cash balances of US$0.8 million.

Sberbank Loan

The Group is highly geared, with US$79.6 million currently outstanding under the Sberbank Facility Agreement ("Sberbank Loan"). With effect from 16 February 2015, Samek defaulted on the Sberbank Facility Agreement as it ceased making payments of interest and principal when due. As a result of these defaults, Sberbank notified Samek that the full amount of the principal plus accrued interest and penalties had been accelerated such that it was repayable in full immediately.

On 30 June 2015, Samek and Sberbank signed an addendum to the Sberbank Facility Agreement, according to which Samek has been granted a standstill on all principal and interest payments due under the Sberbank Facility Agreement through to 14 December 2015. Principal payments due from March 2015 through 14 December 2015 have been deferred to 15 December 2015. Interest that was unpaid from 16 February 2015 through 30 June 2015 will be payable 15 December 2015, along with interest accrued during the standstill period at an interest rate of 11 per cent. Penalties for the late payment of principal and interest accrued up to the date of Addendum No. 5 have been cancelled.

The Company will continue to work with AGR Energy and Sberbank regarding an appropriate debt restructuring which would render the Company viable at current oil prices.

Bridging Loan

As of 11 August 2015, the Group had received the following amounts under the Bridging Loan from AGR Energy:

● US$0.25 million in respect of the first tranche of the Bridging Loan; and

● US$0.25 million in respect of the first sub-tranche of the second tranche of the Bridging Loan.

● US$0.24 million in respect of the second sub-tranche of the second tranche of the Bridging Loan.

Short term solvency outlook

The Group forecasts a positive end-of-month cash balance until at least December 2015 and beyond into 2016 depending on the outcome of Rehabilitation and the restructuring of the Sberbank Loan. Thereafter, additional financing may be required during the course of 2016 to ensure the Group continues in operation and is funded to execute its business plan.

The above forecast assumes:

● the remaining balance of US$1.26 million relating to the second tranche of the Bridging Loan received by the end of August and the proceeds of the Subscription of US$11.8 million (net of the Bridging Loan) received prior to the end of September 2015, following the fulfilment (or where appropriate waiver) of all conditions thereto as set out in detail in this announcement;

● future revenues and expenses cash flows remain in line with expectations; in particular stable oil production of approximately 4,100 bopd and Brent crude oil prices of US$50 per barrel or above during the period;

● contracted volumes are delivered to domestic oil customers throughout the remainder of 2015 as settlement towards their outstanding prepayments with no further cash received;

● payments to certain creditors which fall under the scope of Rehabilitation, amounting to US$11.1 million, are suspended in conjunction with Rehabilitation, pending the agreement of the rehabilitation plan with the affected creditors;

● creditors which are currently overdue and immediately payable and which do not fall under the scope of Rehabilitation, amounting to approximately US$1.8 million, are paid in September following completion of the Subscription and no legal actions are initiated for immediate payment;

● no payments are made in relation to the potential historical costs claim by the tax authorities in the Republic of Kazakhstan, described below;

● no payments are made in relation to any penalties relating to shortfalls on the 2014 work programme commitment, described below;

● no payments are made to Sberbank for either principal or interest; and

● no payment of US$3.6 million is made to replenish the Liquidation Fund during the period.

Should any of the above assumptions prove inaccurate the Company would require additional financing, which, if not forthcoming from AGR Energy or any other party, would likely render the Group insolvent and require the Board to put the Company into administration.

Historical costs claim

Samek has received notification from the tax authorities of the Republic of Kazakhstan alleging that, under tax legislation, payments of over US$20 million (according to the tax authorities, payable within ten years starting from 2012) are due for Soviet-era historical data costs incurred in the Blocks A&E Licence area. The Company disagrees with this interpretation and application of the tax legislation and considers that to date it has met its obligations to reimburse historical costs as they fall due. The Company intends to put its case to the tax authorities. The timing and amounts of any payments that will be required by the tax authorities, including any potential fines and interest penalties, is uncertain.

Work programme commitments

Under the Blocks A&E Licence the Group is committed to certain expenditures, which include a work programme agreed with the MOE. The work programme covers the period through to the year 2027 and includes capital and operating expenditure, social infrastructure contributions and commitments for the training of local personnel. The Group fulfils its commitments by carrying out qualifying exploration, development and operating expenditure and by making the required contributions.

The Group's total commitment under the work programme for the calendar year ended 31 December 2014, as revised by Addendum No. 15 in October 2014, was US$98.1 million. In June 2014, the Group suspended its capital expenditure programme pending the arrangement of additional financing. As a result, the Group did not meet its work programme commitments for 2014. The shortfall was US$61.0 million. The MOE has the ability to impose a fine on the Group of up to 30 per cent. of this shortfall. The Group therefore estimates the MOE could impose a fine of up to US$18.3 million for non-compliance with the work programme.

In June 2015, the Group signed Addendum No. 16 to the Blocks A&E Licence, which deferred a portion of the shortfall to calendar year 2015. The Group is working with the MOE to put in place the necessary regulatory approvals to defer the remaining shortfall on the 2014 work programme to future years. However, there remains a possibility that the MOE could still impose a fine based on the shortfall as at 31 December 2014, prior to the work programme amendments of Addendum No. 16 and future addendums currently under discussion, or that it will not agree to future amendments.

The Group's current work programme commitments, as amended by Addendum No. 16 are as follows:

The Group requires additional funding to meet the above work programme commitments. The Group is working with the MOE to defer work programme commitments from 2015 to future years in order to avoid potential fines for non-compliance.

9. General Meeting

The Notice of General Meeting convening a General Meeting of the Company to be held at 11.00 a.m on 1 September 2015 at the offices of Akin Gump LLP, Eighth Floor, Ten Bishops Square, London E1 6EG is set out at the end of this document. Set out below is a summary of the Resolutions which are to be proposed at the General Meeting. Resolutions 1, 2, 3 and 4 will be proposed as ordinary resolutions, and Resolutions 5, 6 and 7 will be proposed as special resolutions.

Resolution 1 - Rule 9 Waiver

Resolution 1 is being proposed as an ordinary resolution to approve the Rule 9 Waiver. In accordance with the requirements of the Panel for granting the Rule 9 Waiver, Resolution 1 shall be taken on a poll of Independent Shareholders.

Resolution 2 - Authority for directors to allot securities

Resolution 2 is being proposed as an ordinary resolution to authorise the Directors for the purposes of section 551 of the Act to allot shares or grant rights to subscribe for or convert any security into shares in the capital of the Company. This authority will be in addition to any other existing authorities. The Directors will limit this authority to an aggregate nominal amount of £383,459.10 (being the aggregate nominal value of the Subscription Shares). This authority shall expire (unless it is revoked, varied, renewed or extended) on the date falling 15 months from the date of the General Meeting.

Resolution 3 - Authority for directors to allot securities

Resolution 3 is being proposed as an ordinary resolution to authorise the Directors for the purposes of section 551 of the Act to allot shares or grant rights to subscribe for or convert any security into shares in the capital of the Company solely in the event that either of Resolutions 1 or 2 are not duly passed at the General Meeting. The Directors will limit this authority to an aggregate nominal amount of £93,182.99 (being 29.9 per cent. of the issued ordinary share capital of the Company immediately following the allotment contemplated by Resolution 3). This authority shall expire (unless it is revoked, varied, renewed or extended) on the date falling 15 months from the date of the General Meeting.

This Resolution 3 is only relevant in the event that Resolutions 1 and 2 are not approved by the Shareholders. If Resolutions 1 and 2 are not passed, AGR Energy will not be able to convert any of its debt into new Ordinary Shares of the Company as permitted under the terms of the Bridging Loan Agreement, unless the Shareholders pass this Resolution 3. Even if this Resolution 3 is passed, AGR Energy will only be permitted to convert debt up to an aggregate nominal amount of £93,182.99 (which would result in AGR Energy holding no more than 29.9 per cent. of the issued ordinary share capital of the Company immediately following this allotment), meaning that a Rule 9 Waiver is not required. However, if Resolutions 1 and 2 are passed, AGR Energy will be able to convert the full amount of its debt into new Ordinary Shares of the Company (if it chooses to do so), and this Resolution 3 will be redundant.

Resolution 6 is required in connection with this Resolution 3, in order to disapply the statutory pre-emption rights over the Ordinary Shares to be allotted pursuant to this Resolution 3.

Resolution 4 - Authority for directors to allot securities

Resolution 4 is being proposed as an ordinary resolution to authorise the Directors for the purposes of section 551 of the Act to allot shares or grant rights to subscribe for or convert any security into shares in the capital of the Company, notwithstanding the authorities that may be conferred upon the Directors pursuant to Resolutions 2 and 3. The Directors will limit this authority to an aggregate nominal amount of £200,309.85 (being one third of the issued ordinary share capital of the Company immediately following the allotment contemplated by Resolution 2). This authority shall expire (unless it is revoked, varied, renewed or extended) on the date falling 15 months from the date of the General Meeting.

This Resolution 4 is required to grant the Directors certain headroom for any future allotments of new Ordinary Shares to any person going forward. This right will be in addition to the allotment of the Subscription Shares. It is usual for companies admitted to trading on AIM to have such general authority in place and, as there are no existing general authorities, this Resolution 4 builds in flexibility for the future as it allows the Directors to allot additional Ordinary Shares (to the extent any are required) without being required to obtain Shareholder approval for every new allotment.

Resolution 7 is required in connection with this Resolution 3, in order to disapply the statutory pre-emption rights over the Ordinary Shares to be allotted pursuant to this Resolution 4.

Resolution 5 - Authority to allot securities on a non-pre-emptive basis

Resolution 5 is being proposed as a special resolution for the purposes of section 571 of the Act to authorise the Directors to disapply the statutory pre-emption rights contained in section 561(1) of the Act in respect of the allotment of Subscription Shares. This authority will be in addition to any other existing authorities and shall expire (unless it is revoked, varied, renewed or extended) on the date falling 15 months from the date of the General Meeting.

Resolution 6 - Authority to allot securities on a non-pre-emptive basis

Resolution 6 is being proposed as a special resolution for the purposes of section 571 of the Act to authorise the Directors to disapply the statutory pre-emption rights contained in section 561(1) of the Act in respect of the allotment of an aggregate nominal amount of £93,182.99 in connection with Resolution 3. This authority will be in addition to any other existing authorities and shall expire (unless it is revoked, varied, renewed or extended) on the date falling 15 months from the date of the General Meeting. Resolution 6 is conditional upon the passing of Resolution 3.

Resolution 7 - Authority to allot securities on a non-pre-emptive basis

Resolution 7 is being proposed as a special resolution for the purposes of section 571 of the Act to authorise the Directors to disapply the statutory pre-emption rights contained in section 561(1) of the Act in respect of the allotment of an aggregate nominal amount of £60,098.96 (being 10 per cent. of the issued ordinary share capital of the Company immediately following the allotment contemplated by Resolution 2). This authority shall expire (unless it is revoked, varied, renewed or extended) on the date falling 15 months from the date of the General Meeting.

Shareholders should note that Resolutions 1, 2 and 5 are inter-conditional and, if any one is not passed, the Subscription described in this document will not proceed.

10. Undertakings

The Company has received irrevocable undertakings to vote in favour of the Resolutions from Directors holding (directly or indirectly) in aggregate 107,091 Ordinary Shares, representing 0.005 per cent. of the Existing Ordinary Shares.

11. Board Composition post- Admission and Strategic Review

Following completion of the Subscription, the Directors expect to work with AGR Energy to review the Company's business plan, Board structure and strategic and mid-term goals. The aim of the review is to enable the Board and AGR Energy to assess how costs can be reduced and operations and capital expenditure optimized, to maximise shareholder value going forward, considering the current fiscal and commodity price environment. In addition to assessing the current asset base, the review will also consider acquisitions of new assets that the Board believes are accretive and will enhance profits and value to the Company. It is AGR Energy and the Company's expectation that Kanat Assaubayev intends to remain on the Board and that Aidar Assaubayev will be appointed as a director of the Company upon completion of the Subscription Agreement. It is also the intention of AGR Energy and the Company that two Independent Directors will sit on the Board, as per, the terms of the Relationship Agreement.

12. Suspension of trading on AIM

As a result of the uncertainty surrounding the Company's financial position, the Ordinary Shares have been suspended from trading on AIM since 2 March 2015. Pursuant to Rule 41 of the AIM Rules, cancellation of admission of AIM securities will occur where these have been suspended from trading for six months. The Company is working to fulfil all relevant conditions for completion of the Subscription, and otherwise to publish information on its financial position, in order to restore trading and avoid cancellation of the Ordinary Shares from AIM. However, there can be no guarantee that the Company's Ordinary Shares will not be cancelled. In the event that admission of the Ordinary Shares to trading on AIM is required to be cancelled, further information on its effects will be provided to Shareholders.

13. Recommendation

The Directors (except for Kanat Assaubayev), who have been so advised by Stifel, believe that the Proposals are fair and reasonable and in the best interests of the Shareholders and the Company as a whole. Accordingly, the Directors (except for Kanat Assaubayev) unanimously recommend that Shareholders vote in favour of the Resolutions as they have irrevocably undertaken to do in respect of their aggregate shareholdings of 107,091 Ordinary Shares, equivalent to 0.005 per cent. of the existing voting rights of the Company. In providing advice to the Directors (except for Kanat Assaubayev), Stifel has taken into account the Directors' commercial assessments.

SUBSCRIPTION STATISTICS

*Assuming no other issuances of Ordinary Shares occur prior to Subscription and Admission

Save where the context requires otherwise, capitalised and technical terms used in this announcement shall have the same meaning as ascribed to them in the Circular.

Kenneth Hopkins, Chief Operating Officer of Max Petroleum Plc, is the qualified person that has reviewed and approved the technical information contained in this announcement. Mr. Hopkins holds a Bachelor of Science degree in Marine Sciences and a Master of Science degree in Geology from Texas A&M University and is a certified petroleum geologist with 32 years of experience in the oil and gas industry.

Reserve estimates have been compiled in accordance with the 2011 Petroleum Resources Management System produced by the Society of Petroleum Engineers.

Stifel Nicolaus Europe Limited is acting as sole financial adviser to the Company in relation to the Subscription.

Additional Information

This announcement is not intended to, and does not, constitute or form part of any offer, invitation or the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of, any securities whether pursuant to this announcement or otherwise.

The distribution of this announcement in jurisdictions outside the United Kingdom may be restricted by law and therefore persons into whose possession this announcement comes should inform themselves about, and observe, such restrictions. Any failure to comply with the restrictions may constitute a violation of the securities law of any such jurisdiction.

Stifel Nicolaus Europe Limited, which is authorised and regulated by the Financial Conduct Authority in the United Kingdom, is acting exclusively for Max Petroleum and no one else in connection with the matters referred to in this announcement, and will not be responsible to anyone other than Max Petroleum for providing the protections afforded to clients of Stifel Nicolaus Europe Limited, nor for providing advice in connection with the matters referred to in this announcement.

Forward-Looking Statements

This announcement contains certain forward-looking statements with respect to a possible subscription by AGR Energy for new Ordinary Shares in Max Petroleum. The words "believe," "expect," "anticipate," "project" and similar expressions, among others, generally identify forward-looking statements. Max Petroleum cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in the forward-looking statements. Such risks and uncertainties include, but are not limited to: the possibility that the Subscription will not be completed; failure to obtain necessary regulatory approvals or required financing or to satisfy any of the other conditions to the Subscription; adverse effects on the market price of the Ordinary Shares and on Max Petroleum's operating results because of a failure to complete the Subscription; failure to realise the expected benefits of the Subscription; negative effects relating to the announcement of the Subscription or any further announcements relating to the Subscription or the completion of the Subscription on the market price of the Ordinary Shares; significant transaction costs and/or unknown liabilities; general economic and business conditions that affect Max Petroleum following the completion of the Subscription; changes in global, political, economic, business, competitive, market and regulatory forces, future exchange and interest rates; changes in tax laws, regulations, rates and policies; future business combinations or disposals and competitive developments. These forward-looking statements are based on numerous assumptions and assessments made by Max Petroleum in light of its experience and perception of historical trends, current conditions, business strategies, operating environment, future developments and other factors it believes appropriate. By their nature, forward-looking statements involve known and unknown risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. The factors described in the context of such forward-looking statements in this announcement could cause Max Petroleum's plans with respect to the Subscription, actual results, performance or achievements, industry results and developments to differ materially from those expressed in or implied by such forward-looking statements. Although it is believed that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct and persons reading this announcement are therefore cautioned not to place undue reliance on these forward-looking statements which speak only as at the date of this announcement. Max Petroleum undertakes no obligation to release publicly any revisions to forward-looking statements as a result of subsequent events or developments, except as required by law or regulation.

Publication on Website

A copy of this announcement will be made available at www.maxpetroleum.com no later than 12:00 noon (London time) on the business day following the date of this announcement in accordance with Rule 30.4 of the Code. The content of the website referred to in this announcement is not incorporated into and does not form part of this announcement.