Max Secures Commitment for $100M Debt Facility

Max Petroleum Plc has obtained a commitment from Macquarie Bank Limited to enter into a $100 million senior subordinated debt facility to finance the development of its oil & gas assets in Kazakhstan. Closing of the facility is subject to the completion of standard due diligence, applicable regulatory approvals, legal documentation and fulfillment of standard terms and conditions for a debt financing of this nature.

Upon closing, the debt facility will have a four-year term and bear interest at a rate ranging from LIBOR plus 4% to LIBOR plus 6.5%, depending upon the underlying value of the Group's proved oil and gas reserves. The facility will have an aggregate commitment of $100 million with an anticipated initial borrowing base of $20 million to be used to fund Max Petroleum's appraisal and development of the Zhana Makat field on Block E. The borrowing capacity under the facility will be subject to review and adjustment on a periodic basis, principally to fund additional exploration and development projects, with the total availability at any given time subject to a number of factors, including commodity prices and reserve levels.

Under the terms of the debt facility, Macquarie will receive a five-year warrant to acquire 7.5 million ordinary shares in Max Petroleum at an exercise price of 160.6p per share. The exercise price of the warrant is calculated using a 25% premium to the 30-day volume weighted average closing price of Max Petroleum's ordinary shares prior to April 6, 2006, the date the commitment letter was executed between the parties. Future increases in the borrowing base beyond $20 million will also trigger the further issuance of warrants to Macquarie to acquire up to 12.5 million additional shares in Max Petroleum at an exercise price equal to the higher of i) a 10% premium to the 30-day volume weighted average price prior to issuance or ii) the prevailing conversion price of the Group's outstanding convertible debt (approximately 1.33 per share). The additional warrants, if any, will be issued in 2.5 million share increments for each $10 million in additional borrowing capacity made available to the Group.

Jim Jeffs, Executive Chairman, commented:

"Entering into a project finance facility with Macquarie will greatly enhance our liquidity as we execute our long-term exploration and development program for our extensive asset base in the Pre-Caspian Basin. Specifically, this provides us with the financial flexibility to appraise and develop shallow and intermediate discoveries without limiting our ability to effectively finance more capital-intensive exploration projects going forward. It has also been secured on attractive terms with a partner who recognizes the value across our portfolio of assets."


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