Astrakhansky Exploration Contract
The Contract is held by AlgaCaspiyGas, which has been acquired by Kazgas. Max is to pay a consideration for the acquisition of Kazgas of US$43.5m plus the issue of 3.5m new ordinary shares in the Company and an option to subscribe 50m new ordinary shares in the Company at a price of 100 pence per share to be exercised within 3 years.
The Geological permit for this area was issued in September 2004 and, upon registration, the Contract will be for a 4 year duration and a potential 2 year extension.
The Astrakhansky Exploration Contract area ("the Contract area") is located in the Pre-Caspian Basin, one of the richest hydrocarbon basins in the world. It is located in the Atyrau oblast of Western Kazakhstan on the edge of the Kazakhstan-Russian border. The Contract area is serviced by good infrastructure systems, being close to the CPC oil pipeline and the Atyrau–Caucasus gas pipeline. A regional railroad crosses the northern area of the contract acreage. The southern area of the contract acreage has some access issues due to its location in the Volga river delta, with less infrastructure in place.
The Contract area, which totals 1272.6 square kilometers, is south-east of the giant Astrakhan gas-condensate field, discovered by Gazprom in 1976 with original natural gas reserves reported to be 85 tcf and condensate reserves of 3.4 billion barrels. It is adjacent to the Imashevsky field, which is being developed jointly by KazMunaiGaz and Gazprom.
A preliminary report prepared for Max by McDaniel & Associates Consultants Ltd. indicates that the Contract area appears to constitute a structural geological extension to Astrakhan and Imashevsky, and that the combined probable reserves of Astrakhansky could potentially be analogous to Imashevsky with reported C1 and C2 reserves of 6.1 tcf of gas and 235 million barrels of condensate (1.25 billion barrels of oil equivalent). The preliminary report estimates that the Contract area could possibly contain fields with reservoir quality comparable to the Imashevsky field and higher quality than the Astrakhan field.
There are a number of prospects on the acreage and Max will initially target three exploration prospects, namely: Imashevsky South, Imashevsky South-West and Imashevsky East, which offer the possibility to find hydrocarbon traps in the sub-salt carboniferous carbonates. All have been partially covered by Soviet era 2D seismic, which shows three anticlinal structures. A well was drilled in 1986 on Imashevsky South, indicating hydrocarbon shows. However, the well was not drilled to an optimum depth for its primary target due to the technical limitations at the time it was drilled. Imashevsky East has some limited seismic coverage which indicates a structure under the salt deposition.
It is envisaged to carry out a new seismic program to better image the prospects provided by this acreage. Interpretation of this seismic will be undertaken to target the best prospects for drilling in the shortest possible time. In addition, the existing Imashevsky South well may provide an opportunity to explore this structure prior to finalizing seismic interpretation by re-entering and deepening the well at a lower cost than by drilling a new well. Subject to availability of seismic crews, it is envisaged that interpretation of the seismic can be finalized by the end of 2006 and one or more exploratory wells can be drilled in 2007.
Max now has four different exploration acreages, under 3 contracts, in Kazakhstan and is pleased to announce the appointment of Tim Whittaker as Drilling Manager. Mr. Whittaker has more than 30 years of extensive international exploration and development operations both on- and off-shore and has worked for major oil companies (Shell, Mobil, Maersk) and for independents (Ranger Oil, Dragon Oil) all over the world. From 2002 to 2004 he was Drilling Manager at Maersk Oil in Kazakhstan, responsible for all drilling and work-over operations in the Temir and Dunga PSC's. He ensured timely approval of programs with relevant local authorities and drilled two horizontal wells, one vertical well and two vertical exploration wells. He was also responsible for four work-overs to bring old wells back on production.
Mr. Whittaker will be a valuable addition to the managerial team and the operational personnel establishing a local office in Kazakhstan and will oversee and carry out the comprehensive exploration and appraisal drilling programs which Max plans to implement across its assets in the country. The managerial team has previously worked together and has extensive sector experience and knowledge of Kazakhstan's geological, social and political structures.
Jim Jeffs, Chief Executive Officer, commented:
"The acquisition of the Astrakhansky Exploration Contract, which offers tremendous potential exploration upside, represents another important step towards establishing Max as a leading international oil and gas company as we build a strong foundation in our initial focus country of Kazakhstan.
"I am also delighted to be able to announce the appointment of Tim Whittaker to the Operations Team. Tim will contribute valuable drilling management experience and he will play an important role in the extensive exploration and development programs we have planned for the coming months and years."
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