8th Sep 2006 16:22
Max Petroleum PLC08 September 2006 MAX PETROLEUM PLC (AIM: MXP) 2006 RESULTS ANNOUNCEMENT Max Petroleum plc ("Max Petroleum" or "the Company"), an oil and gas explorationand development company focused on Kazakhstan, today provides its auditedresults for the period ended 31 March 2006. HIGHLIGHTS Financial • Max Petroleum successfully raised gross proceeds of US$75m through a convertible bond offering originally announced by the Company on 2 August 2006. The Company intends to use the proceeds mainly to accelerate and expand the Company's drilling programme of the intermediate targets in Blocks A & E. As planned, closing and settlement are due to occur today. • Following the convertible bond offering the Company's extensive drilling programme is fully funded going forward through 2007 and is expected to be self-funding in 2008. • Key statistics: o Cash raised from issue of shares, before costs, of $133.9 million o Capital expenditures of $195.3 million, including $187.6 million on licences, consisting of $98.5 million in cash and $96.8 million in non-cash consideration o Group operating loss of $24.2 million o Group net cash outflow from operations of $17.2 million o Cash balances of $18.7 million at 31 March 2006 Operational Max Petroleum intends initially to explore for and develop oil pools in theshallow supra-salt prospects using modern exploration techniques, including 2Dand 3D seismic, reprocessing and reinterpretation of well logs, which isexpected to bring on-stream low risk and low cost production. In order toaddress deeper hydrocarbon opportunities, the Company is acquiring, processingand reviewing new seismic, geological, well and engineering data for the larger,intermediate and deep prospects to better define the targets and explorationpotential. Our operational progress since the IPO in October last year has beendemonstrable and includes: Seismic • Over 1,780km of 2D seismic shot across the A & E and East Alibek Blocks and the commencement of the acquisition of 400km of 2D seismic on the Astrakhanskiy Block • Reprocessing of 1600km of Soviet 2D seismic completed across the A & E and East Alibek Blocks • Substantial completion of 380km2 of new 3D seismic in the A & E Blocks to complement the existing 50km2 of 3D seismic data • Substantial completion of interpretation of the shallow targets on A & E Blocks; ongoing intermediate and deep interpretation efforts progressing well. Drilling • A shallow rig has been contracted and is currently drilling the first of 30 shallow wells on the A & E Blocks. A second deep rig has also been contracted and is scheduled to drill 3 deep wells commencing in the 4th quarter of 2006. • Max Petroleum plans to drill 30 shallow wells on the A & E Blocks, 10 in 2006 and 20 in 2007. The Company has already commenced to implement this plan in the 3rd quarter of 2006. • 6 intermediate wells are planned to be drilled in the second half of 2007 on the A & E Blocks. • One deep carbonate well location in the East Alibek Block has been identified and is scheduled to spud in the 4th quarter of 2006. • One deep well is scheduled to be drilled in the A & E Blocks commencing the 2nd quarter of 2007. • One deep well is scheduled to be drilled on the Astrakhanskiy Block acreage commencing in the 4th quarter of 2007. • A co-operation agreement with KazMunaiGaz Exploration & Production (KMGEP) has been signed which allows for free processing of up to 300,000 tons annually of crude oil from 2006 to 2010 and at a nominal fee thereafter. The co-operation with KMGEP companies also extends to the transport and trade of Max Petroleum oil as well as access to Block E technical data. Jim Jeffs, Executive Chairman, commented: "Max Petroleum has made excellent progress over a short period of time, meetingall its key objectives. "In less than one year of operations the Company has appointed and expanded ahighly experienced management team, which is leading the Company to effect asizeable and coherent operations programme across the shallow, intermediate, anddeep targets in our multiple asset areas. We have in place both a board andAdvisory Committee with extensive experience, as well as a highly qualifiedoperational team across all relevant oil and gas disciplines. "Our extensive drilling programme is now fully funded going forward through 2007and we expect to be self-funded in 2008. "The beginning of drilling marks an exciting period in Max Petroleum's corporatelife. We look forward to a productive year ahead focused on maximising valuefor our shareholders. We will be updating the market on the results of our firstwell and the progress of our ongoing drilling programme in the very near future." 8 September 2006 Enquiries: Max Petroleum PLC Steve Kappelle T: +44 (0)20 7355 9590 Chief Executive Officer Peter Moss T: +44 (0)7834 572837 Investor Relations Manager Pelham Public Relations Charles Vivian T: +44 (0)20 7743 6672 E : [email protected] Alisdair Haythornthwaite T : +44 (0) 20 7743 6676 E: [email protected] Chairman's Statement Max Petroleum was admitted to trading on AIM in October 2005, raising about £26million, with three substantial, highly prospective blocks, onshore Kazakhstanand since then has acquired an additional block in the country, for whichanother highly successful fundraising was carried out. The share price hasperformed extremely well, and at the time of writing was over three times itslisting price. Whilst our strategic aim is to create an international oil and gas explorationand production company, we chose to focus on Kazakhstan for several reasons. Itshydrocarbons potential goes without saying - it is undoubtedly one of the mostexciting, resource rich regions in the world to be carrying out exploration anddevelopment activities, and the infrastructure to explore, develop, produce andmarket oil and gas is extant. It is a country that is encouraging foreigninvestment, with a stable government and an established, transparent andexpanding economic infrastructure. Kazakhstan is well situated, from a resourceand geographic perspective, to respond to increasing global demand forhydrocarbons in an environment of a rapidly maturing asset base and diminishinginventories. It is for these reasons, along with management's extensiveexperience of working in the country, that Max Petroleum chose Kazakhstan as itscornerstone. We have focused on two key areas over the last year, both based on our corporateobjective of creating shareholder value through near term development and highimpact exploration. We believe we have put together the strongest possible team, from Board to fieldlevel. Our subsidiary in Kazakhstan is now staffed with over 70 personnel,consisting of a balance of Kazakhs and expatriates. We were particularly pleasedto attract a number of highly experienced operational staff from Maersk Oil, whoform the backbone of the operations team in the country. An Advisory Committeewas formed, designed to provide financial, operational and technical oversightto the Company. It is chaired by Jim Langdon who is a Senior Executive Partnerof Akin, Gump, Strauss, Hauer & Feld, L.L.P., a prominent international law firmwith a focus on the energy industry, and was a member of President George W.Bush's Foreign Intelligence Advisory Board. Tom Fuller, a registeredProfessional Engineer and a founding Partner in Diverse Energy ManagementCompany, is also on the Advisory Committee and we will be appointing one moremember in the near future. At the Board level, our non-executive directors aremade up of a balanced mix of Kazakh nationals with understanding of the countryand its governance, culture and customs, and members with internationalpolitical and business experience, including Bob Holland who recently steppeddown as United States Executive Director of the World Bank. We have also completed the first phase of an extensive field development plan tomove our highly prospective asset base from exploration through development andinto the production stage. This has largely consisted of compiling the necessarytechnical database, effecting extensive seismic processing and interpretationprogrammes, completing the geological and geophysical evaluations for our 2006drilling activities, and entering into a co-operation agreement with Kazakhstate oil company subsidiary KazMunaiGaz Exploration and Production, whilstcarrying out the behind the scenes operational preparations. We are now in aposition to commence our operations programmes, starting with the drilling ofshallow wells on Block E before moving on to the high impact intermediate anddeep prospects on Blocks A & E, East Alibek and Astrakhanskiy. Value in an E&Pcompany is driven by growth in reserves, production and cash flow. Our drillingprogramme has already started and is designed to maximise value. In conclusion, activities this year have focused on establishing a strongfoundation; we have the organisational, operational, geological and technicalcapabilities, along with the financial discipline, to continue Max Petroleum'srapid growth. I look forward to a productive year ahead and would like to takethis opportunity to thank all of the Company's staff for their hard work andtheir tremendous contribution made over the past 12 months. We also thank ourshareholders for their continued confidence and support. James Jeffs Executive Chairman Chief Executive's Review Since Max Petroleum was formed in April 2005, our focus has been on setting thefoundations to explore and develop our outstanding portfolio of assets inKazakhstan. We believe that we now have the strongest possible management andoperations team to move these assets, containing targets, across a broadspectrum of risk to reward ratio, into production. Max Petroleum's initial focus is to develop cash flow through production in theshortest possible time frame and then utilise that cash flow to underpin thedevelopment of our other assets. We commenced a comprehensive seismic programmein July 2005 and started our operations in earnest in January 2006. We have made tremendous strides in a very short period of time and although wehave many prospects to review, we will continue to remain focused in the shortterm on defining and then ranking shallow and intermediate leads, drilling lowcost wells, commencing production and determining the most cost effective,highest netback transportation routes to the domestic and export markets. Following the processing and interpretation of 2D seismic data on Blocks A & Eand East Alibek we have successfully sourced and contracted rigs for a shallow,intermediate and deep drilling programme over the next 18 months, as well aspurchasing all the necessary long lead tangible items for the programme. Our first aim is to drill 10 shallow wells, commence production and then deliverour crude oil to the export market - all in the second half of 2006. Uponanalysis of the initial shallow programme, we will endeavour to drill another 25shallow wells in 2007. Evaluation of the deeper targets is under way, withdrilling activity on East Alibek commencing in the fourth quarter of 2006. Fromthe third quarter of 2006 we will be commencing data collection andinterpretation of the Astrakhanskiy deep exploration prospects. In addition to the compilation of our own database, we have also securedadditional data through a cooperation agreement with KazMunaiGaz Exploration andProduction ('KMGEP'). This agreement allows for the processing of up to 300,000tons annually of our crude oil from 2006 through to 2010 and at the nominal costof processing thereafter. It will also allow us to cooperate with other KMGcompanies for the processing, transportation and trading of our crude oil as MaxPetroleum develops its production. Max Petroleum is committed to work with KazMunaiGaz and other Kazakh governmentministries and organisations, and to support the community of Kazakhstan. Our aim is to grow Max Petroleum into a large, dedicated onshore producer inKazakhstan. To provide value to shareholders, we will strive to continuallyprove up our oil and gas reserves, establish and then enhance production andmaximise sales to the export and domestic markets. In the second half of 2006 weexpect that Max Petroleum will undertake the transition from a late stageexploration company to an exploration and production company. Steve Kappelle CEO Operations Review Max Petroleum's work programme can be divided into four initial focus areas: Seismic Interpretation of new and old seismic data continues. To date, Max Petroleum hasshot over 1,144 km of 2D seismic and are acquiring 380 km2 of 3D seismic on itsacreage and is currently shooting more. Management is confident that it willhave defined a series of intermediate depth prospects (1,000- 3,000m) ready todrill in the early part of 2007. Shallow Wells Max Petroleum plans to drill approximately 10 shallow (Related Shares:
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