Operational and Financial Update (9233F)

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RNS Number : 9233F

Max Petroleum PLC

22 June 2012

Max Petroleum Plc

("Max Petroleum" or the "Company")

Operational and Financial Update

22 June 2012

Max Petroleum Plc, an oil and gas exploration and production company focused on Kazakhstan, announces an operational and financial update.

The Company has experienced further delays drilling its NUR-1 well and as a result does not expect to reach total depth of 7,250 metres before August 2012. The delays largely result from the drill string becoming stuck in the top of salt in April 2012 at a depth of 5,718 metres. After side-tracking the well and setting casing at 5,681 metres, the Company drilled ahead. However, progress was slow as the Company drilled alongside the stuck drilling tools. After clearing the old wellbore, the well reached the Kungarian Salt on 19 June 2012. Due to encountering anomalously high pressures, the drill pipe has become stuck again at 5,722 metres, despite using the higher density mud specified for penetrating this section. Operations are now ongoing to increase the mud density further, free the stuck pipe by dissolving the salt with fresh water, and continue drilling through the salt to the next casing point at 5,900 metres.

Assuming near-term success in freeing the stuck pipe and normal operations going forward, the total costs for the NUR-1 well are now expected to be approximately US$43 million, with expected forward cost of approximately US$10 million. The Company will announce when it has resumed drilling ahead through the salt and, subsequently, after setting its next string of casing below the salt above the prospective pre-salt section.

In order to allow completion of its exploration drilling programme ahead of the expiry of the exploration phase of its Blocks A&E Licence in March 2013, the Company is working with its senior lender, Macquarie Bank Limited, and has initiated discussions with a number of providers of debt and equity financing, regarding the provision of additional capital. These discussions to date have been impacted by market conditions, as well as recent regulatory changes in Kazakhstan that currently prevent the Company from completing a conventional equity offering. The current outstanding balance on the Senior Credit Facility is US$54.2 million out of a total borrowing capacity of US$58 million through to 30 June 2012. The Company and Macquarie Bank Limited will review the borrowing threshold as part of their semi-annual budget review under the Credit Facility, as well as monthly amortization payments beginning in July 2012. In the absence of additional funding the Company may have to significantly curtail its intended exploration activities.

Enquiries:

 
 Max Petroleum       Michael Young           Tel: +44 (0)207 
  Plc                 President and Chief     355 9590 
                      Financial Officer 
                     Tom Randell 
                      Director of Investor 
                      Relations 
 Merlin PR           David Simonson/ Anca    Tel: +44 (0)207 
                      Spiridon                726 8400 
 WH Ireland          Daniel Bate / Robin     Tel: +44 (0)161 
  Ltd                 Gwyn                    832 2174 
 Macquarie Capital   Paul Connolly / Steve   Tel: +44 (0)203 
                      Baldwin                 037 2000 
 Oriel Securities    Michael Shaw / Ashton   Tel: +44 (0)207 
                      Clanfield               710 7600 
 

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.

This information is provided by RNS

The company news service from the London Stock Exchange

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