Interim Results

MAX PETROLEUM PLC

("MAX PETROLEUM", THE "COMPANY" AND TOGETHER WITH ITS SUBSIDIARIES, THE "GROUP")

[AIM: MXP]

2012 INTERIM RESULTS ANNOUNCEMENT

18 December 2012

Max Petroleum, an oil and gas exploration and production company focused on Kazakhstan, today announces its interim results for the six months ended 30 September 2012.

A summary of the Group's financial and operational highlights are as follows:

Financial Highlights

·; Revenue of US$49.2 million during the six months ended 30 September 2012, up 102% compared to US$24.4 million during the six months ended 30 September 2011.

·; Total sales volumes of 664,000 barrels of crude oil ("bbls"), up 58% from 421,000 bbls sold in the comparative period in 2011.

·; Average realised price of US$74.07 per bbl, up 28% from US$57.93 per bbl during the six months ended 30 September 2011, due to increased export volumes relative to domestic sales.

·; Cash generated from operations of US$31.1 million, up 291% from US$7.9 million in the comparative period.

·; Loss before tax for the period of US$0.5 million, compared to a loss before tax of US$0.3 million during the six months ended 30 September 2011.

·; EBITDA for the current period of US$17.9 million, up 67% from US$10.7 million during the six months ended 30 September 2011.

·; Entered into a US$7 million equity for services agreement with Zhanros Drilling LLP to drill up to four post-salt exploration wells.

·; As announced on 27 November 2012, entered into a US$90 million loan agreement with SB Sberbank JSC to refinance the Macquarie Bank credit facility, redeem all of the Company's convertible bonds for a combination of cash and ordinary shares, and provide up to US$30 million for drilling future development and exploration wells and associated expenses. The restructuring is expected to close before 31 December 2012, subject to shareholder and bondholder approval, and will reduce the Group's total debt from approximately US$140 million to approximately US$90 million.

Operational Highlights

·; Average daily production of 3,770 barrels of oil per day ("bopd") during the six months ended 30 September 2012, compared to 2,365 bopd during the six months ended 30 September 2011 and 3,250 bopd during the six months ended 31 March 2012.

·; Recommenced export sales from the Zhana Makat Field following full field development approval, which provided the Group with the right to export up to 80% of the field's production.

·; Since 31 March 2012, drilled five post-salt wells, including three exploration wells generating a commercial discovery at Baichonas West, and two successful appraisal and development wells at the Asanketken field.

·; Initial testing results indicate the Baichonas West discovery with oil in place of 16 million barrels of oil ("mmbo") with expected recovery factors between 20% and 40%.

·; Current post-salt exploration portfolio consists of four Triassic Rim prospects with unrisked mean resource potential of 40 mmbo.

·; Temporarily suspended drilling of the NUR-1 pre-salt well and released the rig in July 2012, pending additional capital and regulatory approvals to complete the well.

Key Performance Indicators (KPIs)

The Group's key financial and performance indicators during the interim period were as follows:

1 Operating cost equals cost of sales less depreciation, depletion and amortisation (see note 6 to the accompanying financial information).

2 EBITDA is defined as operating profit/(loss) before depreciation, depletion and amortisation, share-based payment expense, exploration and appraisal costs and impairment losses. EBITDA is a non-IFRS performance measure with no standard meaning under IFRS, and is reconciled to the income statement in note 23 to the accompanying financial information.

Analyst and Investor Conference Call

There will be a conference call today to discuss this results announcement at 3pm London Time (3pm GMT). If you wish to participate in the call and have the opportunity to ask questions then please dial in early to register your details and to allow a prompt start to the call. Dial-in details are as follows:

Enquiries:

Richard Hook, Chief Operating Officer of Max Petroleum, is the qualified person that has reviewed and approved the technical information contained in this announcement. Mr. Hook is a member of the Houston Geological Society and holds both Masters and Bachelors of Science degrees in geology.

JOINT CHAIRMEN'S STATEMENT

Dear Shareholder,

This half year period has been extremely challenging for the Company and our shareholders. We experienced a major setback with our deep, pre-salt well at NUR-1, leading us to suspend the well in July 2012 as we sought additional capital to refinance, in whole or in part, our senior debt facility with Macquarie Bank Limited ("Macquarie") and fund our ongoing exploration and production activities. With approximately US$140 million of senior and convertible debt maturing in 2013, the need to comprehensively restructure our balance sheet became a critical priority to ensure the future viability of the Company.

In November, we were pleased to announce the execution of a US$90 million senior debt facility with SB Sberbank JSC ("Sberbank") as part of a broader restructuring proposal that will reduce the Group's overall debt burden by approximately 36% to US$90 million (the "Restructuring"). The Restructuring will refinance the Group's existing credit facility with Macquarie, redeem all of the Company's outstanding convertible bonds for a combination of cash and shares, and provide up to US$30 million in additional liquidity to fund the Group's post-salt exploration and development programme. The Restructuring is subject to Shareholder and Bondholder approval, with extraordinary general meetings for both scheduled on 20 December 2012.

We believe the Restructuring will provide a stable long-term financial platform that will enable the Group to focus on the exploration, appraisal and development of its valuable post-salt assets, while continuing to seek the regulatory approvals and additional financing necessary to finish drilling operations in the pre-salt. The Restructuring will also bring in a new senior lender familiar with, and heavily invested in, the region. The five-year term of the Sberbank facility will correspond well with the future production and development profile of the Group's post-salt portfolio, as well as provide significant new funding for shallow drilling and related costs.

The Sberbank facility will be made available in two tranches, with the first US$60 million expected to be available in December 2012 and an additional US$30 million in March 2013. Macquarie will receive a total of US$50 million out of the proceeds of the Sberbank facility, with US$47 million being funded out of the first tranche and an additional US$3 million from the second. Bondholders will receive up to US$8.6 million out of the Sberbank facility, funded out of the second tranche. At least 80% of the Company's convertible bonds are expected to convert into ordinary shares at 5p per share, with the remainder being redeemed for cash at a 50% discount.

While working through these complex financial and operational challenges, the Group was able to progress with its shallow programme, drilling a total of five post-salt wells and setting records for both production and revenue during the period.

During the six months ended 30 September 2012, the Group drilled two successful shallow appraisal wells, ASK-J1 and ASK-J2, in the Asanketken field and made a commercial post-salt discovery at Baichonas West. In August, the Group entered into a drilling services for equity agreement with Zhanros Drilling LLP ("Zhanros") under which Zhanros would drill four wells in exchange for shares priced at 5p per share, rather than for cash payment. The Baichonas West discovery well was completed by Zhanros under this arrangement, as well as two other dry exploration wells drilled at Dossor North-West and Besbolek North-East.

The Group increased average daily production by 59% to a record 3,770 barrels of oil per day ("bopd") during the period generating US$49 million in revenue compared to 2,365 bopd generating US$24 million in revenue during the comparable period in 2011. The Group expects average daily production for the full fiscal year to range from 3,200 to 3,600 bopd, depending on the level of production from any new discoveries and the timing of the transition of fields through the regulatory process from test into trial production ("TPP").

Subject to completion of the Restructuring, the Group anticipates significant growth in reserves and resources as it continues to appraise and develop its existing seven post-salt discoveries, as well as any further discoveries resulting from its remaining shallow exploration portfolio. The Group expects to evaluate at least three of its remaining four shallow exploration prospects in the portfolio given the March 2013 expiry of the exploration period of the Blocks A&E licence (the "Licence"), with drilling operations currently ongoing at the Eskene North Prospect on Block E using the Zhanros ZJ-20 rig. Subject to closing the Restructuring, we expect to utilise up to two additional shallow rigs during 2013 for planned appraisal and development drilling activities at Zhana Makat, Sagiz West, Uytas, Baichonas West, Borkyldakty, and possibly East Kyzylzhar I. The Group is also planning to acquire small 3D seismic surveys over the Sagiz West and Asanketken fields.

In the summer, the Group experienced delays in its pre-salt exploration programme as the NUR-1 well ran behind schedule and encountered mechanical problems due to anomalously high pressures while drilling through the salt section at approximately 5,700 metres. The well was suspended in July 2012 pending additional financing. Max Petroleum is currently seeking regulatory approval to complete the drilling of NUR-1 beyond the end of the exploration period of the Licence in March 2013, and possibly to evaluate further pre-salt prospects if NUR-1 is successful. It is anticipated that between US$12 and 20 million in additional capital will be required in order to finish drilling NUR-1, which will not be financed using proceeds from the Sberbank facility. The NUR-1 well will test the Emba B prospect which is estimated to have 467 mmboe of unrisked mean resource potential. If successful, it could open up an onshore trend of similar pre-salt structures that would be both significant for Max Petroleum and strategic for the Republic of Kazakhstan.

The Group is generating significant cash flow from operations, with proceeds from the sale of crude oil production averaging approximately US$8 million per month for the eight months ended 30 November 2012. The Group's daily production from wells on test production is variable and has been reduced in recent months at several fields as the number of wells eligible for test production has declined due to completion of the available testing period. These wells will be turned back onto production when the underlying field moves into TPP. The Group expects a substantial increase in average daily production during fiscal year 2014 as Asanketken moves into TPP and additional appraisal and development wells are drilled across the Group's portfolio of existing post-salt discoveries.

Following completion of the Restructuring, the Group's total debt will be reduced from approximately US$140 million to approximately US$90 million with net cash of approximately US$30 million to be made available for drilling future production and exploration wells and associated expenses. The Group intends to fund its near-term post-salt drilling programme using a combination of its drilling for services agreement with Zhanros, cash flow from operations, cash on hand and borrowings under the Sberbank facility. While the proceeds from the Sberbank facility along with anticipated future cash flow from operations are expected to support the Group's ongoing post-salt exploration, appraisal and development activities, future capital requirements are difficult to predict accurately and can be materially impacted by the results of the Group's ongoing exploration programme, as well as the ongoing evaluation of current post-salt discoveries. The Group also estimates that the completion of the NUR-1 well will require between US$12 to US$20 million in additional capital, which will not be funded out of the Sberbank facility or the Group's existing capital resources.

The past half-year has presented the Board, management and employees of Max Petroleum with a series of complex challenges, many of which will be addressed through the Restructuring. We have a strong organisation that has shown a resilience and ability to overcome adversity. We intend to utilise these strengths in combination with the resources and support provided by Sberbank and our other stakeholders, to increase shareholder value through the continued exploration and development of our post-salt and pre-salt portfolios. Thank you for your patience and support.

Robert B Holland III James A Jeffs

Executive Co-Chairman Executive Co-Chairman

 Independent Review Report to Max Petroleum Plc

Introduction

We have been engaged by the Company to review the condensed consolidated financial information in the interim financial report for the six months ended 30 September 2012, which comprises the condensed consolidated income statement, condensed consolidated statement of comprehensive income, condensed consolidated balance sheet, condensed consolidated statement of changes in equity, condensed consolidated cash flow statement and related notes. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed interim financial statements.

Directors' responsibilities

The interim financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim financial report in accordance with the AIM Rules for Companies which require that the financial information must be presented and prepared in a form consistent with that which will be adopted in the company's annual financial statements.

As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed consolidated financial information included in this interim financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed consolidated financial information in the interim financial report based on our review. This report, including the conclusion, has been prepared for and only for the Company for the purpose of the AIM Rules for Companies and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated financial information in the interim financial report for the six months ended 30 September 2012 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the AIM Rules for Companies.

Emphasis of matter

Without modifying our conclusion on the condensed consolidated financial information, we have considered the adequacy of the disclosure made in Note 2 to the condensed consolidatedfinancial information concerning the Group's ability to continue as a going concern. While the Group has been involved in ongoing efforts to resolve the Group's outstanding liquidity shortfall, there is an uncertainty that the Group will be able to continue to borrow funds under the Credit Facility and that the restructuring will be successful. These circumstances, along with the other matters explained in Note 2 to the condensed interim financial statements indicate the existence of a material uncertainty that may cast significant doubt about the Group's ability to continue as a going concern. The condensed consolidated financial information does not include the adjustments that would result if the Group was unable to continue as a going concern.

PricewaterhouseCoopers LLPChartered Accountants17 December 2012London

Notes:

The maintenance and integrity of the Group's website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

MAX PETROLEUM PLC

CONDENSED CONSOLIDATED INCOME STATEMENT

For the six months ended 30 September 2012

(in thousands of US$)

The notes form an integral part of this condensed consolidated financial information.

MAX PETROLEUM PLC

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 September 2012

(in thousands of US$)

The notes form an integral part of this condensed consolidated financial information.

MAX PETROLEUM PLC

CONDENSED CONSOLIDATED BALANCE SHEET

At 30 September 2012

(in thousands of US$)

The notes form an integral part of this condensed consolidated financial information.

MAX PETROLEUM PLC

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 September 2012

(in thousands of US$)

The notes form an integral part of this condensed consolidated financial information.

MAX PETROLEUM PLC

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

For the six months ended 30 September 2012

(in thousands of US$)

The notes form an integral part of this condensed consolidated financial information.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION

For the six months ended 30 September 2012

1. General information

Max Petroleum Plc ("Max Petroleum" or the "Company") and its subsidiaries (together the "Group") is in the business of exploration, development and production of oil and gas assets within the Republic of Kazakhstan. The Group owns the exploration and production rights to the Blocks A&E Licence (the "Licence"), which comprises two onshore blocks extending over 12,455 km2 in the Pre-Caspian Basin in Western Kazakhstan.

Max Petroleum is a public limited company incorporated and domiciled in the United Kingdom and quoted on AIM. The address of its registered office is Second Floor, 81 Piccadilly, London, W1J 8HY, United Kingdom.

The interim financial report for the six months ended 30 September 2012 was approved by the Board of Directors on 17 December 2012.

2. Basis of preparation and accounting policies

The annual financial statements of Max Petroleum are prepared in accordance with International Financial Reporting Standards as adopted by the European Union. The unaudited condensed consolidated financial information for the six months ended 30 September 2012 included in this interim financial report (the "interim financial report") has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting", as adopted by the European Union.

The interim financial report does not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the consolidated financial statements in the Max Petroleum Annual Report and Accounts for the year ended 31 March 2012. The accounting policies adopted in the preparation of the interim financial report, the significant judgements made by management in applying the Group's accounting policies, and the key sources of estimation uncertainty are consistent with those followed in the preparation of the Group's financial statements for the year ended 31 March 2012, except for the adoption of the following standards and amendments:

The adoption of the above new and revised standards has had no effect on the reported financial results or the disclosures in this interim financial report.

The Group's interim financial report does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 March 2012 were approved by the Board of Directors on 23 August 2012 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified and did not contain a statement under Section 498(2) or (3) of the Companies Act 2006. The auditors' report on the 2012 accounts, while unqualified, contained an emphasis of matter which drew attention to the existence of a material uncertainty which may cast significant doubt about the Company's ability to continue as a going concern.

Principal risks and uncertainties

The Group is subject to various risks relating to political, economic, legal, social, industry, business and financial conditions. The Directors do not consider that the principal risks and uncertainties of the Group have changed since the publication of the Annual Report and Accounts for the year ended 31 March 2012. The principal risks and uncertainties are detailed on pages 22 to 25 of the 2012 Annual Report and Accounts. The principal risks and uncertainties are more fully disclosed in note 25 of this interim financial report.

In addition, the Group's activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The interim financial report does not include all financial risk management information and disclosures required in the annual financial statements; they should be read in conjunction with the Group's Annual Report and Accounts for the year ended 31 March 2012 and there have been no changes in these risks or in any risk management policies.Going concern

The Group finances its exploration and development activities using a combination of cash on hand, operating cash flow generated from the sale of crude oil production, borrowings under its existing senior credit facility (the "Macquarie Credit Facility") with Macquarie Bank Limited ("Macquarie"), and additional debt or equity financing as required. The Group is in the last year of the exploration period of its Licence and requires approximately US$10 million in additional exploration and appraisal capital for its shallow programme through March 2013, as well as additional capital for the future appraisal and development of its current and expected post-salt discoveries beyond fiscal year 2013.

As of the date of this report, the Group has borrowed a total of US$52.2 million under the Macquarie Credit Facility, which matures on 31 March 2013. The Macquarie Credit Facility requires that the Group begin making amortisation payments of US$2 million per month in July 2012. The Group has not made any amortisation payments on the Macquarie Credit Facility apart from the release of a US$3 million letter of credit after full settlement of payables owed to the Group's drilling contractor for the NUR-1 well, and has been actively seeking other sources of capital to refinance the Macquarie Credit Facility.

The Group also has US$85.6 million in convertible bonds (the "Bonds") that mature on 8 September 2013 and require semi-annual interest payments of US$2.9 million on 8 September and 8 March. The Group did not pay the US$2.9 million semi-annual coupon interest due 8 September 2012, having previously obtained written assurances from holders representing greater than 75% of the Bonds to defer the coupon payment due 8 September 2012, pending a broader restructuring of the Group's outstanding debt.

In August 2012, the Group entered into a US$7 million equity for services agreement with Zhanros Drilling LLP ("Zhanros"), whereby Zhanros will drill up to four post-salt wells and fund related ancillary services in exchange for up to 90,322,581 ordinary shares at a price of 5p per share. While the Zhanros agreement does not inject any direct liquidity into the Group, it has allowed for a portion of the Group's exploration portfolio to be drilled while it has sought other sources of debt or equity capital. The Group has drilled three exploration wells using the Zhanros facility, generating one commercial discovery.

The Group's efforts to raise traditional equity capital in the near term have been hampered by recent regulatory changes in the Republic of Kazakhstan that require the Company to list on the Kazakhstan Stock Exchange ("KASE") in order to obtain the regulatory consents necessary to conduct a traditional equity placement or rights offering. Unfortunately, the Company, like many other foreign natural resources companies operating in Kazakhstan, did not meet the relevant listing requirements.The Group understands that the KASE eligibility criteria were recently amended, however, and the Company expects to be eligible to list on KASE in 2013.

On 27 November 2012, the Group announced its intention to implement a refinancing and comprehensive restructuring of its outstanding debt facilities (the "Restructuring"). Under the terms of the Restructuring, the Group entered into a new secured US$90 million five-year credit line agreement with SB Sberbank JSC (the "Sberbank Facility"). The first tranche of up to US$60 million will be made available to draw down in December 2012, conditional among other things, upon the approval of the terms of the Restructuring by the Company's shareholders and Bondholders. In accordance with the terms of the Restructuring, the proceeds from the Sberbank Facility will be used to repay the Macquarie Credit Facility.

The key terms of the Restructuring are more fully disclosed in note 22.

Under the terms of the Restructuring, the Group will pay Macquarie a total of US$50 million plus accrued interest to fully settle the Macquarie Credit Facility, as well as pay up to US$8.6 million to the Bondholders in exchange for cancelling up to US$17.1 million in principal of Bonds outstanding, with the remaining Bonds, plus accrued interest converting into the Company's ordinary shares at 5p per share. The Restructuring is conditional, among other things, upon the approval of the Restructuring by the Company's shareholders and Bondholders.

Following completion of the Restructuring, the Group's total debt will be reduced from approximately US$140 million to approximately US$90 million with net cash of approximately US$30 million to be made available for drilling future development and exploration wells and associated expenses.

The Directors believe that the Restructuring removes the serious solvency and liquidity risks presently facing the Company due to the significant level of debt currently scheduled to mature in 2013, while enabling the Company to continue to pursue its post-salt exploration and development programme.

Access to the Sberbank Facility is conditional upon the completion of the Restructuring, including approval by at least 75% of the Company's shareholders in attendance (in person or by proxy) at an Extraordinary General Meeting ("EGM") and approval of Bondholders representing at least 75% of the Company's total Bonds outstanding. The Group has received written assurances to vote in favour of the Restructuring from Bondholders representing greater than 90% of the outstanding Bonds and the Company's major shareholders, including Macquarie, representing approximately 30% of the Company's outstanding ordinary shares.

In the event that the necessary approvals are not obtained and the relevant resolutions are not passed, however, the Sberbank Facility would not be made available. If the Shareholders or Bondholders do not approve the Restructuring, Macquarie may call the Macquarie Credit Facility immediately due and payable, in which case the Directors would be forced to declare the Company insolvent and initiate administration proceedings. Pursuant to the Restructuring, Macquarie has waived this right until 28 December 2012, subject to the necessary shareholder and Bondholder approvals of the Restructuring and an initial payment of principal of US$47 million plus accrued interest. Thereafter, a final payment of US$3 million is to be paid to Macquarie in full and final settlement of the Macquarie Credit Facility, which is expected to take place on or before 31 March 2013.

The Board has concluded that the conditions relating to the Restructuring, including the need for the requisite Bondholder and shareholder approvals, represent material uncertainties which may cast a significant doubt about the Group's ability to continue as a going concern. However, after considering these uncertainties the Board has a reasonable expectation that the Group will be successful in finalising the Restructuring, and for this reason and in light of the recent forecasts of the Group based on its current production and net cash flow from operations, considers it to be appropriate to continue to adopt the going concern basis in preparing the financial statements. The financial statements do not include adjustments that would result if the Group was unable to continue as a going concern.

3. Loss per share

The calculation of basic and diluted earnings per share is based on the following data:

The Company's potentially dilutive securities, being the outstanding convertible debt and outstanding share options and warrants in issue, were anti-dilutive for the six month periods ended 30 September 2012 and 2011, respectively.

4. Dividends paid and proposed

No dividend was paid or is proposed for the six month periods ended 30 September 2012 and 2011, respectively.

5. Operating segments

Management has determined its operating segments based on the reports reviewed by the directors for the purposes of making decisions about allocating resources and assessing performance. In the opinion of the directors, the operations of the Group comprise one operating segment: oil and gas exploration and development and related activities. All of the Group's assets and liabilities, income and expense relate to this segment.

The Group's production and sale of hydrocarbons is not materially affected by seasonal factors or fluctuations.

Geographical information

The Group conducts business within three geographical regions. The Group's operational activities are wholly focused in the Republic of Kazakhstan, supported by a technical team in Houston, USA. The Group's head office is in London, United Kingdom.

6. Cost of sales

7. Operating profit

The following items of an unusual or significant nature have been charged to operating profit during the interim period:

Exploration and appraisal costs relate mainly to the cost of dry holes, including costs for plugging and abandonment. During the current period, exploration and appraisal cost include a loss of US$0.4 million which arose on the disposal of inventories of drilling supplies and a charge of US$0.5 million to reduce the carrying amount of remaining inventories to their net realisable value.

8. Finance costs

9. Income tax expense

The Group's principal business activities are in the Republic of Kazakhstan, where corporate income tax applies at a rate of 20% of taxable income. Taxes on the production and sale of hydrocarbons are accounted for as cost of sales (see note 6).

Where the realisation of deferred tax assets is dependent on future profits, the Group recognises losses carried forward and other deferred tax assets only to the extent that the realisation of the related tax benefit through future taxable profits is probable.

The following are the major deferred tax liabilities and assets recognised by the Group and the movement thereon during the current reporting period.

Deferred tax assets and liabilities are offset where the Group has a legally enforceable right to do so. Deferred tax balances after offset are as follows:

10. Capital expenditure

During the six months ended 30 September 2012, the Group encountered difficulties drilling the NUR-1 pre-salt well and, due to financial constraints, has suspended the well and released the rig. Direct costs capitalised to NUR-1, included within exploration and appraisal assets, had a net carrying value of US$40.6 million at 30 September 2012 (31 March 2012: US$27.0 million).

The Group continues to seek funding and a licence extension necessary to finish drilling the NUR-1 well to its target depth of 7,250 metres after the expiration of the licence exploration period in March 2013. The US$183.7 million carrying value of the intangible exploration and appraisal asset at 30 September 2012 is predicated on the Group obtaining additional time under its Licence to complete its pre-salt exploration past March 2013. If it is unsuccessful, the Group would have to reassess the carrying value of the whole of the intangible exploration and appraisal asset.

11. Trade and other receivables

Trade and other receivables include US$7.7 million of Kazakh VAT (31 March 2012: US$7.2 million), of which US$5.8 million is recoverable after more than one year (31 March 2012: US$5.5 million).

12. Cash and cash equivalents

Cash and cash equivalents include:

·; US$2.2 million (31 March 2012: US$2.0 million) required to be deposited in an environmental restoration and rehabilitation fund under the terms of the Group's Blocks A&E Licence.

·; US$1.2 million (31 March 2012: US$0.9 million) required to be deposited in a debt service reserve account, representing the expected interest for the next three months under the Group's Credit Facility with Macquarie Bank Limited.

13. Trade and other payables

Trade and other payables include:

·; US$19.3 million (31 March 2012: US$13.0 million) of prepayments from domestic customers in Kazakhstan for crude oil sales.

·; US$11.0 million of trade payables (31 March 2012: US$15.0 million).

·; US$3.3 million (31 March 2012: US$0.4 million) of accrued Convertible Bond interest, including US$2.9 million due 8 September 2012 (see note 14). Under the terms of the Restructuring, the accrued Convertible Bond interest is treated as payment in kind and added to principal of the Bonds (note 22).

The Group's trade payables at 30 September 2012 include US$5.1 million of costs associated with drilling the NUR-1 well on Blocks A&E. As of the date of this report, the Group has fully settled its outstanding payables owed to the drilling contractor on NUR-1 and has obtained a release of a related US$3 million letter of credit issued by Macquarie for the benefit of such drilling contractor.

14. Borrowings

Bank borrowings

In June 2007, the Group entered into a US$100 million Credit Facility (the "Credit Facility") with Macquarie Bank Limited ("Macquarie"). The material provisions of the Credit Facility are as follows:

- Interest payable monthly at LIBOR plus 6.5%.

- Supplemental interest of 2% applies when there has been an event of default, payable monthly.

- Principal repayments due from 31 July 2012, comprising seven monthly payments of US$2.0 million until 31 January 2013, US$4.0 million on 28 February 2013 and the remaining balance on 31 March 2013.

- Secured by pledges in favour of Macquarie over substantially all of the Group's assets.

A reconciliation of the amounts outstanding on the Credit Facility is as follows:

At 30 September 2012 no further amounts were available under the Credit Facility, with US$52.2 million borrowed and a further US$3.0 million reserved for outstanding letters of credit.

At 30 September 2012, the Group was not in compliance with the terms of the Credit Facility, as the principal repayments of US$2.0 million due on 31 July 2012, 31 August 2012 and 30 September 2012 were not paid. Additionally the Group was in breach of its banking covenants relating to certain financial ratios.

Subsequent to 30 September 2012, the Group entered into the new secured US$90 million Sberbank Facility with SB Sberbank JSC as part of a comprehensive restructuring of its outstanding debt facilities. The first tranche of up to US$60 million will be made available to draw down in December 2012, conditional among other things, upon the approval of the terms of the Restructuring by the Company's shareholders and Bondholders. In accordance with the terms of the Restructuring, the proceeds from the Sberbank Facility will be used to repay the existing Credit Facility with Macquarie. The key terms of the Restructuring are more fully disclosed in note 22.

Convertible bonds

Max Petroleum completed an offering of Bonds on 8 September 2006, raising a total of US$75 million before issuance costs. Following deferral of interest payments due on 8 March 2009, 8 September 2009, and 8 September 2010 the principal of the Bonds at 30 September 2012 is US$85.6 million. The Bonds bear interest at 6.75% per annum, payable semi-annually, and are convertible at a price of 32p per ordinary share, with a fixed exchange rate of US$1.49 to £1. The maturity date of the Bonds is 8 September 2013.

Full details of the Bonds are outlined on pages 66 and 67 of the Group's Annual Report and Accounts for the year ended 31 March 2012.There have been no changes to the terms of the Bonds during the six months ended 30 September 2012.

Movements in the carrying value of the Bonds during the period are analysed as follows:

The fair value of the Bonds, determined by reference to the published closing price quotation from the Channel Islands Stock Exchange, has decreased from US$48.3 million at 31 March 2012 to US$35.6 million at 30 September 2012.

The Group did not pay the US$2.9 million semi-annual coupon interest due 8 September 2012, having previously obtained written assurances from holders representing greater than 75% of the Bonds to defer the coupon payment due 8 September 2012, pending a broader restructuring of the Group's outstanding debt.

Subsequent to 30 September 2012, the Group announced its intention to restructure the terms of the Bonds as part of the Restructuring. Under the terms of the Restructuring, the Bondholders would exchange the principal amount outstanding on the Bonds, plus accrued interest from 8 March 2012 to the date of the Restructuring, for a combination of cash and shares. The restructuring of the Bonds is conditional, among other things, upon the approval of the Restructuring by the Company's shareholders and Bondholders.The key terms of the Restructuring are more fully disclosed in note 22.

15. Provisions for liabilities and other charges

16. Share capital

During the six months ended 30 September 2012, the Company issued 8,035,708 ordinary shares at 5 pence per share to Zhanros. The shares were issued in settlement of US$0.6 million of drilling services received from Zhanros, in accordance with the Zhanros Agreement (see note 17).

At 30 September 2012, the Company had in issue 1,026,524,566 allotted and fully paid ordinary shares of 0.01 pence each (31 March 2012: 1,018,488,858 allotted and fully paid ordinary shares).

17. Other reserves

On 8 August 2012, Max Petroleum Plc entered into an agreement with Zhanros, one of its drilling contractors, whereby Zhanros will fund up to US$7.0 million of drilling and workover services in exchange for ordinary shares in the Company (the "Zhanros Agreement"). Under the terms of the Zhanros Agreement, Zhanros will drill up to four shallow, post-salt wells and fund related ancillary services in exchange for up to 90,322,581 ordinary shares in the Company at a price of 5 pence per share in lieu of cash payment.

During the 6 months ended 30 September 2012, the Group received US$3.3 million of services under the Zhanros Agreement, of which US$0.6 million were settled by the issue of shares prior to 30 September 2012 (note 16), and a further US$1.8 million were settled in shares after the reporting period (note 22).

18. Share-based payment

Full details of the Group's share option schemes are outlined on pages 78 to 79 of the Group's Annual Report and Accounts for the year ended 31 March 2012.

During the six months ended 30 September 2012, Max Petroleum granted 1,200,000 options to various officers and employees of the Group with exercise prices ranging from 5p to 11.75pper share. The options all have a term of seven years. 1,314,250 options were forfeited by leavers, 263,568 expired and none were exercised. The total number of options outstanding at 30 September 2012 was 109,360,245. The Grouprecorded a share-based payment charge of US$1.2 million for the six months ended 30 September 2012.

During the six months ended 30 September 2011, Max Petroleum granted 2,355,750 options to various officers and employees of the Group with exercise prices ranging from 13.75p to 15.00pper share. The options all have a term of seven years. 901,697 options were forfeited by leavers, 117,484 expired and 341,667 options were exercised during the period. The total number of options outstanding at 30 September 2011 was 111,966,180. The Group recorded a share-based payment charge of US$2.5 million for the six months ended 30 September 2011, net of US$0.1 million capitalised to intangible exploration and appraisal expenditure.

19. Notes to the cash flow statement

Cash generated from operations

Income tax paid

1 In total US$9.9 million of income taxes were settled under a tax claim during the six months ended 30 September 2011, comprising US$9.6 million paid in cash and US$0.3 million offset against VAT receivables. See page 56 of the Annual Report and Accounts for the year ended 31 March 2012.

Interest paid

Summary of non-cash items

1 Including drilling and ancillary services under the Zhanros Agreement (note 17).

20. Related party transactions

Transactions between the Group and its subsidiaries, which are related parties, have been eliminated on consolidation and therefore are not disclosed in this note.

21. Commitments and contingencies

The Group is committed under its Licence to certain future expenditures including a minimum work programme and reimbursement of historical costs incurred by the Government of the Republic of Kazakhstan. The Group's commitments under its Licence are as follows:

The minimum work programme is agreed with the Ministry of Oil and Gas of the Republic of Kazakhstan (the "MOG") and covers exploration and production activities in Blocks A&E. It also includes social infrastructure contributions and commitments for the training of local personnel. Qualifying exploration, development and operating expenditure incurred by the licence holder are deductable from these future commitments. During the year-ended 31 March 2012, the Group and the MOG signed an amendment to the Licence to transfer the Zhana Makat Field to full field development ("FFD") and extend the minimum work programme to 2020. The Group expects that the future revenues generated from operating the Field will significantly exceed its obligations under the minimum work programme.

The total commitment at 30 September 2012 includes US$24.2 million of historical costs incurred by the Republic of Kazakhstan for the exploration of Blocks A&E prior to the Group's acquisition of the Licence (31 March 2012: US$24.2 million). Historical costs become payable from the date when a certain field is transferred to the production stage under FFD and the amount payable for the field is determined by the Government of the Republic of Kazakhstan in a separate agreement. The amount of historical costs allocated to each discovery is determined based on a mining allotment agreed with the Government of the Republic of Kazakhstan once a commercial discovery has been made and FFD has started.

22. Post balance sheet events

Debt restructuring

On 27 November 2012, the Group announced its intention to implement a refinancing and comprehensive restructuring of its outstanding debt facilities comprising the refinancing of its Credit Facility with Macquarie Bank (note 14) and the restructuring of its Bonds (note 14), (together, the "Restructuring").

The Restructuring is conditional on Bondholder and shareholder approval, with Bondholder and shareholder meetings called for 20 December 2012. The Company has received written assurances from Bondholders representing greater than 90% of the outstanding Bonds and shareholders representing approximately 30% of the Company's outstanding ordinary shares ("Shares"), including Macquarie, to vote in favour of the Restructuring.

The key terms of the Restructuring are as follows:

·; The Group entered into the Sberbank Facility, a new senior secured US$90 million credit line agreement with SB Sberbank JSC.

·; Up to US$60 million will be available to draw down from the Sberbank Facility by the end of December 2012, conditional, among other things, upon the approval of the Company's shareholders and Bondholders.

·; Up to a further US$30 million will be available to draw down from the Sberbank Facility ("Tranche 2") as soon as certain conditions precedent are met, including the registering of security and obtaining requisite government regulatory approvals, which are expected to be completed in March 2013.

·; The Sberbank Facility bears interest at 11% and matures in November 2017 with quarterly amortisation beginning in March 2014.

·; The Company's existing Credit Facility with Macquarie will be cancelled, with Macquarie receiving US$47 million plus all accrued but unpaid interest in December 2012 and a further US$3 million in March 2013 from the proceeds of Tranche 2, in full settlement of all monies owed by the Group.

·; Bondholders have been invited to participate in a tender offer pursuant to which they may tender Bonds to the Company with an aggregate principal amount of up to US$17.1 million. The Company will pay to tendering Bondholders a cash amount representing 50% of the principal amount tendered (up to a maximum of US$8.6 million). The Bonds accepted into the tender offer will be cancelled and replaced by promissory notes that accrue interest at the rate of 6.75% per annum and will be settled from the proceeds of Tranche 2.

·; The balance of the principal amount of the Bonds (including capitalised interest) will be converted into Shares at a price of 5p per Share in two tranches.

·; The first tranche of up to US$56.7 million of Bonds and accrued interest will be converted into 709 million Shares in December 2012, with the remaining outstanding Bonds to be mandatorily converted following the receipt of requisite Kazakh regulatory approvals (expected in the first half of 2013).

·; Until conversion, the terms of the remaining outstanding Bonds will be modified such that the coupon will be 10% per annum (with interest payable in kind) and the maturity date will be extended to 8 March 2018 (though it is expected that these remaining Bonds will convert into Shares during 2013).

·; Conditional upon the implementation of the Restructuring, the Company has agreed to appoint to the Board of Directors a Non-executive director nominated by the Bondholders.

·; As part of the Restructuring, the Company intends to reprice its outstanding options with exercise prices above 5p down to 5p per Share, as well as issue additional grants at 5p per Share to bring the aggregate number of options outstanding up to 10% of the Company's pro-forma fully diluted Shares outstanding post-Restructuring. Any new grants will vest over a three-year period with no vesting of new grants, or reprice options, to occur prior to the full conversion of the Bonds into Shares.

Exploration and appraisal expense

Subsequent to 30 September 2012, the Group determined that the Besbolek North-East exploration well did not contain commercial quantities of hydrocarbons and will be plugged and abandoned. The total exploration and appraisal costs recognised as an expense for this well was US$1.9million, of which US$0.8 million was capitalised at 30 September 2012.

Issue of ordinary shares

Subsequent to 30 September 2012, the Company issued 23,327,652 ordinary shares at 5 pence per share to Zhanros under the Equity for Services Agreement (note 17). The shares were issued in settlement of US$1.8 million of drilling services received under the terms of the Company's agreement with Zhanros.

23. Non-IFRS measures

The Group presents EBITDA as a non-IFRS earnings measure to provide additional information to investors in order to allow an alternative method for assessing the Group's financial results. EBITDA is defined as operating profit/(loss) before depreciation, depletion and amortisation, share-based payment expense and exploration and appraisal costs. EBITDA is a key performance indicator used by the Board to measure underlying operating profitability.

A reconciliation of operating profit to EBITDA is shown below:

24. Publication of the interim financial report

Copies of the interim financial report are available on the Company's website, www.maxpetroleum.com.

25. Risk factors

The Group is subject to various risks relating to political, economic, legal, social, industry, business and financial conditions. The following risk factors, which are not exhaustive, are particularly relevant to the Group's business activities:

Volatility of prices for oil and gas

The supply, demand and prices for oil and gas are volatile and are influenced by factors beyond the Group's control. These factors include global demand and supply, exchange rates, interest and inflation rates and political events. A significant prolonged decline in oil and gas prices could impact the viability of some of the Group's exploration activities. Additionally, production from geographically isolated countries may be sold at a discount to current market prices.

Substantially all of the Group's revenues and cash flows will come from the sale of oil and gas. If oil and gas prices should fall below and remain below the Group's cost of production for any sustained period, the Group may experience losses and may be forced to curtail or suspend some or all of its production, at the time such conditions exist. In addition, the Group would also have to assess the economic impact of low oil and gas prices on its ability to recover any losses it may incur during that period and on its ability to maintain adequate reserves.

While the Group does not currently hedge its crude oil production to reduce its exposure to oil price volatility, management expects that it may do so in the future as it increases its daily production sold into the export market. The Group would enter into price hedging contracts in order to achieve more predictable cash flows from its future crude oil production and to comply with the terms of its Credit Facility, if applicable.

Exploration risk

The exploration for, and the development of, hydrocarbons is speculative and involves a high degree of risk. These risks include the uncertainty that the Group will discover sufficient oil or gas resources to exploit economically or that the Group will be able to exploit the discovered resource as intended. Drilling may not result in the discovery of economically viable hydrocarbon resources either due to insufficient resources being discovered, the resources not being of sufficient quality to be developed economically or the cost of any development being in excess of that required for an economic project. Furthermore, there is a risk the Group may be unable to complete the drilling of its remaining exploration portfolio prior to the expiry of the exploration period of its Licence in March 2013 or that it will be successful in obtaining additional time under its Licence to complete its pre-salt exploration past March 2013.

Environmental risk

The oil and gas industry is subject to environmental hazards, such as oil spills, gas leaks, ruptures and discharges of petroleum products and hazardous substances. These environmental hazards could expose the Group to material liabilities for property damages, personal injuries, or other environmental harm, including costs of investigating and remediating contaminated properties. The Group is subject to stringent environmental laws in the Republic of Kazakhstan with regard to its oil and gas operations. Failure to comply with such laws and regulations could subject the Group to material administrative, civil, or criminal penalties or other liabilities. Additionally, compliance with these laws may, from time to time, result in increased costs to the Group's operations, impact production, or increase the costs of potential acquisitions. The Group was compliant with all material environmental and health and safety laws during the period.

Risk of operating oil and gas properties

The oil and gas business involves certain operating hazards, such as well blowouts, cratering, explosions, uncontrollable flows of oil, gas or well fluids, fires, pollution, and releases of toxic substances. Any of these operating hazards could cause serious injuries, fatalities, or property damage, which could expose the Group to liabilities. The settlement of these liabilities could materially impact the funds available for the exploration and development of the Group's oil and gas properties. The Group maintains insurance against many potential losses and liabilities arising from its operations in accordance with customary industry practices, but the Group's insurance coverage cannot protect it against all operational risks.

Foreign currency risk

The Group's operating costs, export revenues, and debt financing facilities are principally denominated in US dollars. The Group's UK Plc office costs and share consideration are in British pounds. Also, some costs are incurred and settled in tenge, the local currency of the Republic of Kazakhstan. Any changes in the relative exchange rates among US dollars, tenge and British pounds could positively or negatively affect the Group's results.

Business in Kazakhstan

Amongst the risks that face the Group in conducting business and operations in Kazakhstan are:

·; Economic instability, including in other countries or the global economy that could lead to consequences such as hyperinflation, currency fluctuations and a decline in per capita income in the Kazakh economy.

·; Insufficient or underdeveloped physical infrastructure.

·; Governmental and political instability that could disrupt, delay or curtail economic and regulatory reform, increase centralised authority or result in nationalisation.

·; Social instability from any ethnic, religious, historical or other divisions that could lead to a rise in nationalism, social disturbances or conflict.

·; Uncertainties in the developing legal and regulatory environment, including, but not limited to, conflicting laws, decrees and regulations applicable to the oil and gas industry and foreign investment.

·; Unlawful or arbitrary action against the Group and its interests by the regulatory authorities, including the suspension or revocation of its Licence or failure to approve extensions or other permits necessary for the Group to continue operating its assets.

·; Lack of independence and experience of the judiciary, difficulty in enforcing court or arbitration decisions and governmental discretion in enforcing claims.

·; Laws restricting foreign investment in the oil and gas industry.

·; Regulations which include pre-approval from the National Bank of Kazakhstan for the issuance of equity, as well as obtaining a pre-emption waiver from the Ministry of Oil and Gas.

Taxation

The tax environment in Kazakhstan is subject to regular change and varying interpretations. As the tax law evolves, instances of inconsistent opinions between local, regional and national tax authorities are not unusual. Non-compliance with laws and regulations in Kazakhstan, as interpreted by the Kazakh authorities, may lead to severe penalties and interest which can amount to multiples of any assessed taxes. The uncertainty of interpretation and application of tax laws, which are subject to regular change, creates a risk that the ultimate amount of taxes, penalties and interest, if any, may be in excess of the amounts recognised to date, which could have a material adverse impact on the Group's cash flows, results and financial position. Management believes that it is in compliance with the relevant legislation affecting its operations, and that its tax affairs are appropriately accounted for in these financial statements.

Legal systems

Kazakhstan, and other countries in which the Group may transact business in the future, have or may have legal systems that are less well developed than in the United Kingdom. This could result in risks such as:

·; Potential difficulties in obtaining effective legal redress in the courts of such jurisdictions, whether in respect of a breach of contract, law or regulation, including an ownership dispute.

·; A higher degree of discretion on the part of government authorities.

·; The lack of judicial or administrative guidance on interpreting applicable rules and regulations.

·; Inconsistencies or conflicts between and within various laws, regulations, decrees, orders and resolutions.

·; Relative inexperience of the judiciary and courts in such matters.

In certain jurisdictions, the commitment of local business people, government officials and agencies and the judicial system to abide by legal requirements and negotiated agreements may be more uncertain, creating particular concerns with respect to licences and agreements for business. These may be susceptible to revision or cancellation and legal redress may be uncertain or delayed. There can be no assurance that joint ventures, licences, licence applications or other legal arrangements will not be adversely affected by the jurisdictions in which the Group operates.

Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group's approach to managing its liquidity is to ensure, as far as possible, that it will always have sufficient liquid funds and available debt and equity capital to meet its liabilities when due, without incurring unacceptable losses or risking damage to the Group's reputation.

The Group carefully monitors and manages its liquidity with regular cash forecasting. Further details of the Group's liquidity position are set out in the liquidity and capital resources section of the Joint Chairmen's Statement.