Max Petroleum - Mixed Results in Drilling Update

PUBLISHED: 02 Nov 2011 @ 15:39 | Comments (0) |

Max Petroleum (LSE:MXP) told investors in a public release today that it will plug the ZLGS-1 exploration well on the Zhalgyz South prospect in Block A of their operations in Kazakhstan.

The results announced today are contrary to the positive report on the prospect posted in early October. In an update made public on the 11th of last month, Max Petroleum was “pleased to announce that it has begun the ZLGS-1 exploration well…which has estimated unrisked mean resource potential of 18 million barrels of oil in a four-way, Triassic rim structure.” Investors responded to the news today, as the stock tumbled down 5.4% by mid-day trading.

Technicians ceased excavation at the site after drilling to a depth of 1,435 metres and are in the process of moving operations to the next site, KZIE-2 on the recently found East KyzylzharI Field in Block E of their exploration. This recent failure serves as a reminder about the uncertainty of shallow drilling in the region.

Despite this setback, it is only one loss in a series of successful drills for the UK incorporated company. Their licensed area covers 12,455 km² of the Pre-Caspian Basin in Western Kazakhstan, a region which has produced some of the world’s largest oil & gas discoveries. Their drilling success rate stands at around 50%, a positive number considering their previous estimates of 25-33% when drilling was initiated. 22 wells have been drilled in the past two years and their previous 12 drilling prospects have been successful.

In the same November 2 report, Max Petroleum announced that its ZMA-A19 appraisal has been spudded in their Zhana Makat Field at a depth of approximately 950 metres and their drilling rig is due to spud in the next few days on the highly anticipated NUR-1 well in Block E. With a strategy based on growth in reserves through exploration, Max Petroleum hopes to continue its high success rate through the use of their inventory of 3D data and built up infrastructure in the region. Though the company is confident about the future, this setback has given investors a reminder that success in drilling is never a sure thing and the MXP share price has responded accordingly.

References
↑ October 11 Drilling Update
↑ November 2 Drilling Update
↑ Max Petroleum

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