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 meters.
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.
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 meters. 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.
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 program 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."
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