AGR Energy to invest in Max Petroleum

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

4 August 2014

 Max Petroleum Plc

("Max Petroleum" or the "Company")

Strategic partner AGR Energy to invest £37.1 million in Max Petroleum

Summary:

· Max Petroleum is pleased to announce that it has raised approximately £37.1 million (approximately US$62.5 million) before expenses by way of a conditional cash subscription by AGR Energy Limited No. I ("AGR Energy" or the "Investor") for 2,264,093,462 new Ordinary Shares at a price of 1.64 pence per Ordinary Share (the "Subscription"), such that the Investor will hold 51% of the Enlarged Issued Share Capital immediately following completion of the Subscription.

· The Subscription Price represents a premium of 33.9% to the closing middle market price of an Ordinary Share of 1.225 pence on 1 August 2014 and a premium of 17.8% to the volume weighted average price per Ordinary Share of 1.392 pence since 1 May 2014.

· AGR Energy is a vehicle owned by the Assaubayev family established for the purpose of the Subscription. Neither AGR Energy, nor any member of the Assaubayev family nor any of their respective associates ("AGR Energy Group") currently holds any Ordinary Shares or any other securities in Max Petroleum.

· The Subscription is conditional, inter alia, upon each of the following conditions being satisfied on or before 31 December 2014:

Background to the Subscription:

· The Subscription should enable the Group to fund its planned capital programme to develop its post-salt fields and maximise reserves and production. In addition, Max Petroleum will be in a strengthened position to attract financial or industry partners to help finish its pre-salt NUR-1 well and to secure an extension of the exploration period of its Blocks A&E Licence in western Kazakhstan to enable it to have time to finish drilling NUR-1 and, if it is successful, the Kurzhem well. The Company will also be able to consider investment in other projects in Kazakhstan and across Central Asia that complement its existing activities.

· The shareholders of the Investor, namely the Assaubayev family, are long-term investors in natural resources and metals and mining, and have a track record of effective investment and support of enterprises, particularly in Central Asia.

· AGR Energy's intention is to utilise its local knowledge of, and access to, areas in which the Company operates to support the Company's further growth, both in respect of existing operations and, more significantly, for new opportunities, including as a consequence of the ongoing consolidation in the oil and gas sector in Central Asia.

· Following completion of the Subscription, the Directors expect to work with AGR Energy to review the Company's business plan, Board structure and mid-term goals and with the support of AGR Energy, the Company will maintain its efforts to implement the cost cutting initiative which is already well advanced.

· AGR Energy is committed to Max Petroleum remaining an independent company whose shares are publicly traded for the foreseeable future in order to enable the Company's existing shareholders to participate in the future of the Company and to provide acquisition currency for potential further growth.

Strategic Review:

· The strategic review announced on 22 July 2014 will remain ongoing. Parties with a potential interest in making an offer for, merging with or proposing other forms of corporate transaction with, Max Petroleum should contact the Blackstone Group International Partners LLP (see contact details as set out below).

Shareholder Circular and Notice of General Meeting:

· The Shareholder Circular will be issued, in due course, to Shareholders containing details of the Subscription and the Notice of General Meeting at which the Resolutions will be put to Shareholders and, when issued, the Shareholder Circular will also be available on the Company's website: www.maxpetroleum.com

Robert B. Holland III, Chief Executive Officer, commented:

"This major investment and the expertise and experience of the AGR Energy Group in Kazakhstan are both very substantial positives for Max Petroleum. This partnership will support our plans for the development of our post-salt fields and our work to resume exploration of pre-salt prospects on the Blocks A&E Licence. The Max platform has demonstrated its operational capability in Kazakhstan and this investment provides us with the strong financial foundation we need to support that platform."

ENQUIRIES:

Max Petroleum Plc

Oriel Securities Limited

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.

Oriel Securities Limited is acting as sole financial adviser to the Company in relation to the Subscription.

Clermont Energy Partners LLP is acting as sole financial adviser to the AGR Energy Group in relation to the Subscription.

AGR Energy has given and not withdrawn its consent to the inclusion in this announcement of its name and that of the AGR Energy Group and references thereto in the form and context in which they appear, including, without limitation, statements concerning its intentions in respect of Max Petroleum.

Strategic partner AGR Energy to invest £37.1 million in Max Petroleum

1. Introduction

Max Petroleum is pleased to announce that it has raised approximately £37.1 million (approximately US$62.5 million) before expenses by way of a conditional cash subscription by AGR Energy for 2,264,093,462 new Ordinary Shares at a price of 1.64 pence per Ordinary Share, such that the Investor will hold 51% of the Enlarged Issued Share Capital immediately following completion of the Subscription.

The Subscription Price represents a premium of 33.9% to the closing middle market price of an Ordinary Share of 1.225 pence on 1 August 2014 and a premium of 17.8% to the volume weighted average price per Ordinary Share of 1.392 pence since 1 May 2014.

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

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

The Subscription is conditional, inter alia, upon each of the following conditions being satisfied on or before 31 December 2014:

Takeover Code:

Ordinarily, the subscription by the Investor for the Subscription Shares would trigger an obligation under Rule 9 of the Takeover Code for the Investor to make a general offer to all other Shareholders to acquire their Ordinary Shares in the Company. The Company intends to seek the Panel's agreement to waive this obligation, subject to the approval of the Rule 9 Waiver by Independent Shareholders. Accordingly, an ordinary resolution will be proposed at the General Meeting for this purpose which will be taken on a poll.

Further, given that the Company is currently in an offer period (as defined in the Takeover Code), pursuant to Rule 21.1 of the Takeover Code, the Company must not take certain actions (such as implementing the Subscription) while it remains in the offer period without the approval of Shareholders at a general meeting. The Subscription will therefore require Shareholder approval pursuant to Rule 21.1 (to the extent applicable) and an ordinary resolution will be proposed at the General Meeting for this purpose.

Further details regarding the Rule 9 Waiver and the Rule 21.1 Approval will be set out in the Shareholder Circular.

Kazakh Regulatory approvals:

The Subscription is conditional upon the Company receiving from MOG in respect of the Subscription either:

The Subscription is also conditional upon the Company receiving from the National Bank in respect of the Subscription either:

Relationship Agreement:

The Company, AGR Energy and Oriel Securities Limited (in its capacity as the nominated adviser to the Company) will enter into a relationship agreement, which will provide that, for so long as the Subscription Shares are admitted to trading on AIM and AGR Energy individually, or together with the AGR Energy Group, is interested in 30% or more of the issued Ordinary Shares in the Company:

will be a majority of Independent Directors unless a majority of the Independent Directors otherwise consent, and only the Independent Directors (the first appointed of whom will have a casting vote in cases of deadlock) will be permitted to vote on any resolution of the Board or a committee of the Board in respect of such matters unless a majority of the Independent Directors (the first appointed of whom will have a casting vote in cases of deadlock) otherwise consent;

Anti-dilution provisions:

The issue of 2,264,093,462 new Ordinary Shares pursuant to the Subscription assumes the Company does not make any other share issuances prior to completion of the Subscription. To the extent the Company does make any such issuances prior to completion of the Subscription, AGR Energy will also subscribe for such number of additional Ordinary Shares at the Subscription Price such that it will in aggregate hold 51% of the Enlarged Share Capital immediately following Admission. Further, AGR Energy will have anti-dilution rights that enable it to subscribe for further Ordinary Shares following completion of the Subscription as and when existing warrants or options are exercised ("Applicable Further Issuances") so as to enable the Investor to maintain its percentage shareholding at the level immediately prior to any such Applicable Further Issuance if it so elects.

2. Background to and reasons for the Subscription

The Group has eight post-salt discoveries with two fields producing under FFD (Zhana Makat and Borkyldakty), one field under TPP (Asanketken), and the remainder at varying stages of appraisal and development. 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% of the production is available to sell on export markets for a substantially higher price per barrel. The Group is currently producing approximately 3,400 bopd from fields on continuous production and generating over US$8 million per month in revenue. The Group estimates the combined productive capacity of the wells drilled to date at the Sagiz West field to be in excess of 1,000 bopd, based on production rates achieved from these wells before they were shut-in when their Test Production periods ended earlier in 2014. The TPP project for Sagiz West is currently being prepared for submission to MOG. The Company's best estimate for the granting of TPP, which will allow continuous production from the Sagiz West field to commence, is Q2 2015. Until then, the Group expects its production to average around 3,400 bopd from wells drilled to date. The directors believe that progression of the Sagiz West field into TPP and the commencement of continuous production of that field is an important milestone for the Group and the Board is working to expedite the progress of the application through the required official approvals as quickly as possible.

The Group is implementing a cost cutting initiative to reduce substantially administrative costs. The initiative recognises the Group's shift from exploration and development to, primarily, production with a focus on maximising cash flow and is focused on a reduction in corporate overhead, including downsizing its London office and closing its Houston office, scheduled for Q3 2014. The cost cutting measures are expected to generate recurring annual savings of approximately US$4 million in administrative costs.

The Group has US$85.9 million currently outstanding under the Sberbank Facility Agreement. As announced on 22 July 2014, the Group is in technical breach of certain banking covenants related to production and reserves and is currently working with Sberbank to reset the production and reserves covenants to reflect the lowered expectations of the Group based on the Ryder Scott Company estimation of total 2P reserves of 9.5 mmboe as at 31 March 2014. The Group is current on all interest and principal payments due under the Sberbank Facility Agreement, which have been made when due with no late payments.

After Sagiz West commences TPP, expected in Q2 2015, the Group estimates that it would need to incur approximately US$20 million in additional capital expenditure through the end of calendar year 2016 to develop the field, including drilling 13 additional wells and constructing ancillary facilities and infrastructure necessary to advance the field through TPP. An additional US$10 million is budgeted for subsequent development of Sagiz West after FFD status is achieved, estimated for 2017. The development of Sagiz West will enable the field to become a substantial production asset. The Group estimates that it would need to incur a further US$18 million in capital expenditure to develop its other post-salt fields through 31 December 2016, including drilling a step-out appraisal well at ZMA-E8 to test the Zhana Makat South East extension. In the event that ZMA-E8 is successful, further capital expenditure would be required to develop the extension and achieve FFD status.

The Group intends to fund its post-salt capital programme using cash flow from operations. However, if the Group is to continue the planned discretionary post-salt capital spending programme set out above the Directors have identified an additional capital requirement of up to US$5 million through 31 December 2014 and up to an additional US$10 million during calendar year 2015.

In May 2013, the Group received regulatory approval of a two-year extension of the exploration period of its Blocks A&E Licence by MOG. This extension allowed the Group to finish drilling the pre-salt NUR-1 well on the Emba B prospect, with an option to drill the Kurzhem well on the Emba A prospect in the event the NUR-1 well is successful. The Group estimates it will cost approximately US$20-25 million in additional capital to finish drilling the NUR-1 well, which will not be funded out of the Group's existing capital resources. In addition, drilling remains subject to the Group obtaining a licence extension for when the current permission expires in March 2015.

The Subscription should enable the Group to fund its planned capital programme to develop its post-salt fields and maximise reserves and production. In addition, Max Petroleum will be in a strengthened position to attract financial or industry partners to help finish its pre-salt NUR-1 well and to secure an extension of the exploration period of its Blocks A&E Licence in western Kazakhstan to enable it to have time to finish drilling NUR-1 and, if it is successful, the Kurzhem well. The Company will also be able to consider investment in other projects in Kazakhstan and across Central Asia that complement its existing activities.

Under the terms of the Subscription, AGR Energy intends to continue the strategic reorganisation of the leadership and management team of Max Petroleum. In doing so, it is anticipated that Aidar Assaubayev and Kanat Assaubayev shall be appointed to the Board. With the support of AGR Energy, the Company will maintain its efforts to implement the cost cutting initiative which is already well advanced.

Following completion of the Subscription, the Directors expect to work with AGR Energy to review the Company's business plan, Board structure and mid-term goals. AGR Energy believes that the Company's portfolio of oil assets present attractive growth and value opportunities. AGR Energy's intention is to utilise its local knowledge of and access to the areas in which the Company operates to support the Company's further growth, both in respect of existing operations and, more significantly, for new opportunities, including 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 that its shareholders have make it a well-placed partner to support Max Petroleum's development and growth ambitions by the provision of both operational and financial support.

AGR Energy is committed to Max Petroleum remaining an independent company whose shares are publicly traded for the foreseeable future. In AGR Energy's view, quoted company status not only permits the Company's 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.

3. Information about the AGR Energy Group

The shareholders of the Investor, namely the Assaubayev family, are long-term investors in natural resources and metals and mining, and have a track record of effective investment and support of enterprises, particularly in Central Asia.

4. Shareholder Circular and Notice of General Meeting

The Shareholder Circular will be issued, in due course, to Shareholders containing details of the Subscription and the Notice of General Meeting at which the Resolutions will be put to Shareholders and, when issued, the Shareholder Circular will also be available on the Company's website: www.maxpetroleum.com

Definitions and glossary

Unless the context otherwise requires, the following definitions apply throughout this document:

Background to Kazakhstan field development regulations

Kazakhstan regulations require each field to progress through incremental regulatory stages of appraisal and development, including Test Production, TPP, and then FFD. Test Production may last between one and three years depending upon the complexity of the field, during which time the Group may produce each zone in a well for up to 90 days in order to gather information necessary to move onto TPP. TPP typically lasts two to three years, during which time the field may be fully appraised and wells can be produced continuously. The Group only has rights to sell its production domestically during Test Production and TPP. Once the Group has enough information to prepare state reserves and a long-term full field development plan, it may obtain FFD status. FFD lasts for up to 25 years, during which time the Group may sell up to 80% of its production on the export market for prices that have historically averaged between US$10-20 per barrel higher than domestic prices on an after-tax basis.

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.

Oriel Securities 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 Oriel Securities Limited nor for providing advice in connection with the matters referred to in this announcement.

The Blackstone Group International Partners LLP, 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. In connection with such matters, the Blackstone Group International Partners LLP, its affiliates and their respective directors, officers, employees and agents will not regard any other person as their client, nor will they be responsible to any other person other than Max Petroleum for providing the protections afforded to clients of the Blackstone Group International Partners LLP or for providing advice in connection with the matters described in this announcement or any matter referred to herein. The Blackstone Group International Partners LLP is acting as financial adviser to Max Petroleum solely in relation to the strategic review announced on 22 July 2014.

Clermont Energy Partners LLP, which is authorised and regulated by the Financial Conduct Authority in the United Kingdom, is acting exclusively for AGR Energy and no one else in connection with the matters referred to in this announcement, and will not be responsible to anyone other than AGR Energy for providing the protections afforded to clients of Clermont Energy Partners LLP nor for providing advice in connection with the matters referred to in this announcement.

Disclosure requirements of the Takeover Code (the "Code")

Under Rule 8.3(a) of the Code, any person who is interested in 1% or more of any class of relevant securities of an offeree company or of any securities exchange offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any securities exchange offeror is first identified. An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 pm (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 pm (London time) on the 10th business day following the announcement in which any securities exchange offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a securities exchange offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1% or more of any class of relevant securities of the offeree company or of any securities exchange offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any securities exchange offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror, save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London time) on the business day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a securities exchange offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. You should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.

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 5 August 2014 (being 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.