Growth through exploration
Max Petroleum is executing a strategy to grow reserves significantly through exploration. The combination of the size of the Group’s acreage position - some 12,455 km2 in one of the most prolific petroleum basins in the world, as well as the existing transportation and production infrastructure, make Blocks A&E an exciting place to apply this exploration strategy. While the Group has existing production and cash flow from its Zhana Makat Field, the principal driver of value for Max Petroleum’s shareholders lies in the Group’s post-salt and pre-salt exploration portfolios. In the post-salt, the prospects are smaller in size, but much less expensive to drill. They offer excellent potential economic returns due to the low development and production costs, in combination with the existing infrastructure and the speed with which a project can move from discovery to production in a matter of months. The pre-salt prospects, by comparison, carry more geologic risk than the post-salt prospects but, similarly, are proven plays in the Basin. These deeper prospects are part of the same system that has produced some of the largest onshore oil fields in the world and are an order of magnitude larger than the post-salt prospects. Drilling and development costs are also much higher, but given the potential field size, the potential economics of developing a pre-salt discovery are very attractive.
Basin analysis – key to developing a world class portfolio of exploration prospects
Max Petroleum’s Houston and Almaty based geoscientists have worked together to develop a regional understanding of the petroleum systems of the Pre-Caspian Basin. This includes detailed analysis of where the oil is first generated and when and how it moves from the “source rocks” to the reservoirs from which it is produced. The Group’s Houston based staff brings specific expertise in this area and has produced regional studies for both the deep, pre-salt and shallow, post-salt petroleum systems and play types. The technical team in Kazakhstan has decades of knowledge and experience operating in the Pre-Caspian Basin and has worked closely with the Houston team through the seismic acquisition and evaluation programme. Combining local knowledge with global experience to enhance the value of the seismic data that has been acquired and interpreted has been key to Max Petroleum’s development of new prospects based on play types that are known to work in the Basin and in other similar basins around the world. This approach has also enabled the Group to better understand the risks and potential value of its prospect inventory.
Seismic database – key to understanding the subsurface
Max Petroleum has acquired, processed and interpreted a large amount of seismic data on Blocks A&E – including 5,000 km2 of regional exploratory 3D data. This has allowed the Group to develop an extensive inventory of prospects in both the pre and post-salt sections. As of January 2012, the exploration portfolio contains six post-salt Triassic rim prospects, with unrisked mean resources totalling 59 mmbo and ten prospects and five leads in the pre-salt with unrisked mean resource potential in excess of four bboe. The post-salt prospect inventory includes a further three leads which may mature into additional post-salt prospects to be drilled in calendar year 2012.
Right people – key to unlocking asset value
In order to execute its growth strategy successfully, the Group must combine its assets and extensive inventory of 3D seismic data with the appropriate team of people capable of unlocking their value. Over the last few years, the Group has assembled a highly motivated and experienced staff of approximately 160 employees with expertise across all the relevant disciplines necessary to run an exploration and production company, including geology/geophysics, drilling, production, facilities, marketing, legal/regulatory, and finance/accounting. Over 90% of the Group’s employees are based in Kazakhstan, consisting of approximately 145 local staff and seven expatriates, providing the Group with the capability to operate as effectively and efficiently as possible in the Republic of Kazakhstan.
Executing the strategy
Max Petroleum is executing a strategy to substantially increase reserves, production, and cash flow through the discovery and development of new fields in its Blocks A&E Licence area, capitalising on its operational capability and acreage position in Kazakhstan.
While the Group has meaningful and increasing production and cash flow from its existing fields, the principal value driver for Max Petroleum is in the Group’s post-salt and pre-salt exploration portfolios. The post-salt prospects, while smaller in size, ranging from 7 to 12 million barrels of unrisked mean resources, are less expensive to drill and thus offer excellent potential economic returns. The pre-salt prospects, although much more expensive to drill, are larger in potential size. The Group intends to test approximately 1.2 bboe of unrisked mean resources, with the potential to expand this number substantially if the Group’s initial pre-salt well, NUR-1, is successful.
