MAX PETROLEUM 2007 A giant in the making

Investor75,

Thanks for the post. Particularly like this bit:

'2007 really will be Max's defining year. With finite financial and human resources and a wealth of opportunity, management just needs to prioritise efficiently. We remain with our OUTPERFORM recommendation'

A bit biased perhaps, because I've been saying the same thing for some time now!

I believe the 'prioritise efficiently' bit is already in place. Think about it...

The first shallow field is a success. Indeed, the company are seeking to establish that the ZM structure is a single field. If they do that, they blow the 2005 McDaniel report out of the water. You might recall it stating that shallow fields are expected to fall into the range of 1-20mbo each, and field sizes discovered across Blocks A and E to date average 17mbo each. ZM as a single structure will be at least 30mbo IMO.

Get that out of the way, move to other structures, prove them up, build cashflow, achieve or better the 75% well success rate across the Pre-Caspian basin and we are away and at the races. Remember, rigs for these wells are mobilised, wells are drilled and off to the next one all in the space of around 2 weeks. Easy to build on that basis, particularly if a 200-250bopd/well target is achieved.

That strategy provides the cashflow to fund the exploration programme. WH Ireland post an expected end of 2007 production of 7,500bopd. Visor Capital are a little more conservative at 5,000bopd. BOTH HOWEVER, completely discount success at intermediate and shallow levels.

Intermediate wells could possibly run at 1500bopd per well. That makes a big difference to year end production.

To my mind, you have to assume at least a 1 in 2 POS% for the intermediates. All fully funded, and all production from these wells completely discounted from production targets set by the analysts.

Build the production, build the platform.

The intermediate wells will run at an average of $2-2.5m each. East Alibek will cost $10m. Kuzbak Deep and Soltustik Teniz more in the order of $17-20m each.

From a 900bopd platform, the intermediates are costly. From a 7,500bopd platform, the story is very different.

The big stuff is another story. Funding is already in place to drill East Alibek which commences shortly. The first giant well spuds when the Nabors 40 rig is released from East Alibek. KD is 6bn bbls. ST is 1.25bn bbls. I fancy the company will take a pop at Kuzbak. That's funded too.

If the company then announce a farm-out (speculation on my part!) at say Astrakhanskiy, life become very interesting indeed. The farm-out will provide the funding. MXP take a more than proportional share of the action.

I'm really bullish about MXP. 2007 is the year of the MAX!

Tone