Max Petroleum Holds Private Placement to Boost Kazakhstan Programs

Max Petroleum on Wednesday agreed the indicative terms for a private placement of convertible bonds due 2011 to raise at least US$65 million. The final offering size is subject to a potential increase of up to US$10 million.

The bonds will be issued at par by Max and will carry a coupon of 6.75% payable semi-annually in arrear. They will be convertible into fully paid 0.01p ordinary shares of the company, and the conversion price will be approximately 133p. The final offering size and the final conversion price will be confirmed by no later than 8 a.m. Thursday. If not converted or previously redeemed the bonds will be redeemed at par on or about Sept. 8, 2011.

Max plans to use the net proceeds of the offering for the acceleration and expansion of its drilling program targeting intermediate leads in its A&E Blocks in Western Kazakhstan. As detailed in the company's announcement on July 20, 2006, Max Petroleum is in the process of evaluating several of these intermediate structures and intends to fast-track this effort. This accelerated intermediate program will be carried out in parallel with the established shallow and deep drilling programs on the company's blocks.

Commenting on the transaction, Max's executive chairman, Jim Jeffs, said:

"We are delighted with the positive response this capital raising has received and welcome our new investors. Their investment will enable us to accelerate our intermediate drilling program and take advantage of the extraordinary opportunity which has presented itself to us. We have been strongly encouraged by the prospectivity of the intermediate targets in Blocks A&E, as borne out by the extensive new 2D and 3D seismic work we have carried out over the last nine months, alongside our re-interpretation of existing Soviet data and the information we have received through our co-operation agreement with Kazmunaigas Exploration & Production.

"With the proceeds of this issue the company expects to meet all of its shallow, intermediate, and deep drilling commitments and objectives, through 2007, and our aim is that the company should be self-funding by 2008."

JPMorgan Cazenove Ltd. ("JPMorgan Cazenove") is acting as sole bookrunner and placing agent for this offering.

Application will be made for the bonds to be admitted to trading on the Channel Islands Stock Exchange.

The offering will be subject to shareholder approval, which is proposed to be sought at an Extraordinary General Meeting of the company on August 24, 2006, and to the admission of the bonds to trading on the Channel Islands Stock Exchange. Settlement is expected to occur on or about Sept. 8, 2006.