Max Petroleum Plc, an oil and gas exploration and development company focused on Kazakhstan, today provides an operational update on its drilling, production, and export sales activities.
Key operational highlights include the following:
• Drilling of the East Alibek #1 well commenced at the end of December 2006;
• Total of six shallow exploration wells drilled to date in Zhana Makat, four of which are commercial producers;
• Group is preparing an initial field development plan for Zhana Makat for submission to Kazakhstan government authorities;
• Currently drilling a shallow exploration well on the Zharbas A prospect in Block E;
• Plan to drill an additional shallow exploration well on the Zharzhik C prospect in Block E during the 1st quarter of 2007;
• Group received approval for initial export sales lifting in January 2007;
• The Group is analysing 445km of 2D seismic shot over the Astrakhanskiy block during the 4th quarter of 2006 and is 25% complete shooting an additional 300km of 2D seismic over two of the deep prospects on Block E; and
• McDaniel & Associates Consultants Ltd. (“McDaniel”) confirms the initial estimate of reserves for the Zhana Makat discovery at 10 million barrels of proved plus probable (“P2”) reserves and 22 million barrels of proved plus probable plus possible (“P3”) reserves.
Drilling Activities
Intermediate and Deep Drilling Programmes
Max Petroleum began drilling its initial deep well in the East Alibek block in December 2006 using a newly contracted intermediate drilling rig. The Group intends to drill to approximately 1,200 metres, at which time the rig will be relocated to Block E in order to commence the Group’s intermediate drilling programme and potentially to assist in development drilling in the Zhana Makat field. Max Petroleum will then complete the East Alibek well using a larger rig scheduled to be on location during the latter part of the 2nd quarter of 2007. The Group is currently evaluating options to accelerate its deep well programme.
Shallow Drilling Programme
Max Petroleum has drilled six wells to date on the Zhana Makat discovery, four of which are commercially productive. The Group’s sixth exploration well, the ZME-1X, encountered hydrocarbon shows in the secondary target sands but was temporarily suspended for further evaluation as the primary target sand was below the oil-water contact. The well did not impair the Company’s assessment of the southeast portion of the Zhana Makat area and has assisted in the technical understanding of McDaniel and the Group regarding how to map the channel sands in the field. While Max Petroleum is currently performing a more comprehensive geological analysis of Zhana Makat, it is also preparing an initial field development plan for submission to Kazakhstan government authorities based on the sufficient quantity and quality of existing technical data. Once approved, the Group will begin a three year test production phase in the field, during which the Group plans to drill up to an additional 20 appraisal wells beginning in March 2007. McDaniel has also indicated that Max Petroleum could drill between 26 and 40 total production wells as part of the long-term commercial development of Zhana Makat, the Group’s first shallow discovery on Block E.
While waiting for approval of the initial development plan for Zhana Makat, Max Petroleum has mobilised the shallow rig to the southwest of E Block to drill a minimum of two wells, including one well in the Zharbas A Prospect and one well in the Zharzhik C Prospect. The Group has spudded its initial exploration well in Zharbas, the ZHA-A1X, which is expected to evaluate upper and middle Jurassic sands between 1,000 and 1,200 metres.
Production and Export Sales
The Group is currently producing approximately 575 barrels of oil per day (“bopd”) from two producing wells, with an additional 200 bopd temporarily shut-in, in accordance with Kazakh legislation, pending approval of the initial development plan for its Zhana Makat discovery. Max Petroleum has been marketing its crude oil locally for approximately $27 per barrel, inclusive of VAT and adjusted for base, sediment and water. The Group has received approval for an initial export sales lifting in January 2007 for a netback price to the wellhead of approximately Brent less $15 per barrel.
Geological and Geophysical Programme
The Group is analysing 445km of processed 2D seismic shot over the Astrakhanskiy block during the 4th quarter of 2006 and is shooting an additional 300km of 2D seismic over two of the deep prospects on Block E. The Group currently has in excess of 9 drillable shallow prospects, 39 shallow leads, 3 intermediate prospects, 25 intermediate leads, 2 deep prospects and 9 deep leads in Blocks A&E alone.
CPR Update
McDaniel’s initial assessment of the Zhana Makat discovery as of December 31, 2006 has estimated total proved reserves of approximately 4.3 million barrels, total P2 reserves of 10.0 million barrels, and total P3 reserves of approximately 22 million barrels. The reserve estimates were calculated in accordance with the Society of Petroleum Engineers’ standards and relate to Jurassic and Neocomian sandstone formations at various depths ranging from 650 to 850 metres. McDaniel is in the process of updating the Group’s CPR for its various licenses in Kazakhstan and their review of Block E, East Alibek, and Astrakhanskiy is ongoing. The Group will announce CPR updates on all three of its license areas when they become available.
Jim Jeffs, Executive Chairman, commented:
”The initial reserve estimates for Zhana Makat are very encouraging, as they are based on our first four producing wells drilled on a limited portion of the structure, and the southern boundary of the field has yet to be defined. We believe there will be ample opportunity to increase the recoverable reserves in Zhana Makat as we drill more wells that not only target the fluvial channels but also further delineate the size of the field. We intend to develop Zhana Makat as we continue to pursue our comprehensive exploration programme targeting the extensive number of shallow, intermediate and deep leads and prospects. We are looking forward to turning our wide breadth of opportunities into real value for our stockholders as we move forward through 2007.”