Max Petroleum : Posting of Circular

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION

FOR IMMEDIATE RELEASE

12 November 2014

Max Petroleum Plc

("Max Petroleum " or the "Company " and

together with its subsidiaries, the "Group ")

Posting of Circular in Relation to £37.1 million Strategic Investment by AGR Energy

Max Petroleum Plc is pleased to announce that it has today published a circular (the " Circular " ) containing further details of the £37.1 million investment to be made by AGR Energy, subject to the fulfillment of certain conditions described below, and a notice of General Meeting, at which resolutions will be proposed to approve this investment.

Highlights

·      On 4 August 2014, Max Petroleum announced that it had conditionally raised approximately £37.1 million (approximately US$59.0 million) by way of a cash subscription by AGR Energy.

·      The Subscription is for 2,264,093,462 new Ordinary Shares, at a price of 1.64 pence per Ordinary Share, a 111.6 per cent. premium to the closing middle market price of an Ordinary Share of 0.775 pence on 11 November 2014, the last business day prior to the date of this announcement.

·      Immediately following completion of the Subscription, AGR Energy will hold 51 per cent. of the enlarged issued share capital of the Company.

·      The Company and AGR Energy are intending to use the proceeds of the Subscription to reduce gearing and strengthen the Group's balance sheet; undertake a share buyback by way of a tender offer (as described below); progress the Group's development assets; fund any preliminary costs to prepare for re-entering the NUR-1 well; and consider investing in other projects in Kazakhstan and Central Asia.

·      The Board has agreed with AGR Energy that the Company intends to undertake a share buyback by way of a tender offer to all Shareholders within six months following completion of the Subscription, at a price of 1.64 pence per Ordinary Share, as described below. It is intended that £10,000,000 will be available for the Tender Offer.

·      The Company has received irrevocable undertakings (subject to certain customary exceptions) to vote in favour of the Resolutions from certain Directors and Shareholders holding (directly or indirectly) in aggregate 833,126,172 Ordinary Shares, representing 38.3 per cent. of the Existing Ordinary Shares.

·      The Company, AGR Energy and Oriel Securities (as Nominated Adviser to the Company) have entered into a relationship agreement to ensure that (i) the Company will at all times be capable of carrying on its business with the assistance of a minimum of three Directors who are independent of the AGR Energy Group; (ii) the Group and its activities will be managed for the benefit of Shareholders as a whole; and (iii) all material transactions, agreements and arrangements between: (a) any member of the Group; and (b) any member of the AGR Energy Group, will be at arm's length and on normal commercial terms and subject to approval by Directors or Shareholders who are independent of the AGR Energy Group.

The Board expects to end the review of strategic options and the formal sale process, announced on 22 July 2014, immediately following the approval by Shareholders of the Subscription Resolutions at the General Meeting.

EXPECTED TIMETABLE

Each of the times and dates in the above timetable are London times and, other than the Long Stop Date which may only be extended with the agreement of AGR Energy and the Company, are subject to change at the absolute discretion of the Company and Oriel Securities. Any such change will be notified by an announcement on a Regulatory Information Service.

ENQUIRIES:

This summary section should be read in conjunction with the full text of this announcement.

Introduction

As announced on 4 August 2014, Max Petroleum has conditionally raised approximately £37.1 million (approximately US$59.0 million) before expenses by way of a cash subscription by AGR Energy for 2,264,093,462 new Ordinary Shares, at a price of 1.64 pence per Ordinary Share, such that AGR Energy would hold 51 per cent. of the Enlarged Issued Share Capital immediately following completion of the Subscription.

The Subscription Shares will rank pari passu in all respects with Ordinary Shares in issue prior to completion of the Subscription, including the right to receive all dividends and other distributions declared following Admission.

The Subscription Price represented a premium of 33.9 per cent. to the closing middle market price of an Ordinary Share of 1.225 pence on 1 August 2014, the last business day prior to the announcement of the Subscription, and a premium of 111.6 per cent. to the closing middle market price of an Ordinary Share of 0.775 pence on 11 November 2014, the last business day prior to the date of this announcement.

The Subscription is conditional, inter alia , upon each of the following Conditions being satisfied on or before 31 March 2015, or as extended by the mutual agreement of the parties to the Subscription Agreement:

(i)            Shareholders passing the Subscription Resolutions at the General Meeting;

(ii)           the Subscription Shares being admitted to trading on AIM;

(iii)         the Sberbank Approvals being obtained;

(iv)          the Kazakh Regulatory Approvals being obtained; and

(v)           the appointment to the Board of two Directors nominated by AGR Energy.

The Conditions set out in (i) and (ii) above are not capable of being waived. Conditions (iii) and (iv) are capable of being waived by mutual consent of the Company and AGR Energy. Condition (v) is capable of being waived by AGR Energy in its absolute discretion and on such terms as it considers appropriate.

Background to and reasons for the Subscription

In concluding that the Subscription is in the best interests of Shareholders and the Company as a whole, the Directors have taken into account the considerations set out in the paragraphs A to F below. Shareholders should note that if the Subscription Resolutions are not approved by Shareholders at the General Meeting, it is the intention of James A. Jeffs and Maksut S. Narikbayev to resign their positions at the Company following the General Meeting.

A. The financial position and future prospects of the Group, absent the Subscription

(i) Debt position and liquidity

The Group is highly geared, with US$82.8 million currently outstanding under the Sberbank Facility Agreement, due to be repaid in full by 27 November 2017. As announced on 20 August 2014, the Group was in breach of certain banking covenants related to production and reserves at 31 March 2014. Subsequently, the Group filed an application with Sberbank to reset the production and reserves covenants to reflect the lowered expectations of the Group based on the RSC estimation of total 2P reserves of 9.5 million barrels of equivalent ("mmboe ") as at 31 March 2014. Sberbank has now approved the reset of the production and reserves covenants with effect from September 2014 and the Group is currently in compliance with its loan covenants. The Group has paid all interest and principal payments due under the Sberbank Facility Agreement, each of which has been paid in full when due.

The 2014 Annual Report and Accounts of the Company noted the risk that the necessary approvals to complete the Subscription may not be obtained, and the consequent uncertainty about whether the Subscription proceeds of £37.1 million will be received by the Group. In the event that the necessary approvals are not received and the Subscription (or a similar infusion) does not proceed, it is not certain that an alternate source of additional debt or equity financing will be available. Further, the Group is due to make a US$3.2 million principal payment under the Sberbank Facility Agreement in December 2014 and a further US$6.8 million principal payment in March 2015. Thereafter, quarterly principal repayments of US$6.6 million are required to be made through November 2017, such that total principal payments required to be made during calendar year 2015 amount to US$26.6 million.

In the event that the Subscription does not complete and no additional funding is procured, the Group's projected level of cash flow, after taking into account its debt servicing costs, will be insufficient to allow the Group to recommence its capital programme.

The 2014 Annual Report and Accounts of the Company also stated that: "based on the Group's cash flow forecasts and assuming the suspension of its capital programme, the Directors believe that the Group will be able to continue servicing its interest and principal payments under the Sberbank Facility Agreement as they fall due. However, these forecasts are necessarily based on the achievement of timing and targets, some of which, although believed to be reasonable by the Directors, are nevertheless outside the Group's direct control. If significant delays or underperformance of production or revenue targets were to take place, these may render the Group's cash resources insufficient."

In addition, since the date of publication of the 2014 Annual Report and Accounts of the Company in August 2014, Brent crude oil prices have fallen significantly, which has had an adverse effect on the Group's current cash flows and, if oil prices remain at or below current levels, will have an adverse effect on future cash flows. Assuming both that Brent crude oil prices remain at or below current levels and that the Group's capital programme remains suspended, the Group's current cash flow forecasts (using a nominal US$85/barrel ("bbl ") Brent crude oil price) indicate that the Group will not be able to continue servicing its interest and principal payments under the Sberbank Facility Agreement as they fall due, starting with the US$3.2 million principal payment due in December 2014. The Directors have entered into discussions with Sberbank with a view to seeking to agree, as soon as possible, a moratorium on principal payments, including the US$3.2 million principal payment due in December 2014, and the restructuring of the Sberbank Facility Agreement.

Even if Sberbank and the Company agree a moratorium on principal payments under the Sberbank Facility Agreement, any further significant delays or underperformance of production or revenue targets or timing would require the Group to obtain additional debt or equity capital to continue in operation.

(ii) Costs to develop post-salt fields and maximise reserves and production from existing discoveries

The Group intends to fund its post-salt capital programme using cash flow from operations. However, if the Group is to continue the planned discretionary post-salt capital spending programme set out below, and notwithstanding the cost cutting initiative announced on 31 January 2014 which is expected to generate recurring annual savings of approximately US$4 million, the Directors have identified an additional capital requirement of up to US$20 million during the calendar year 2015 in addition to the US$26.6 million of principal payments required under the Sberbank loan.

(iii) Cash flow from current operations

The Group has eight post-salt discoveries with three fields producing under full field development ("FFD ") (Zhana Makat, Borkyldakty and Asanketken) and the remainder at varying stages of appraisal and development. As the Group continues to appraise and develop its discoveries, they progress from Test Production into the trial production phase ("TPP "), where they are able to resume continuous production, and then they move from TPP to FFD, where 80 per cent. of the production is available to sell on export markets for a substantially higher price per barrel. The Group is currently producing approximately 3,300 barrels of oil per day ("bopd ") from fields on continuous production and generating over US$7 million per month in revenue.

(iv) Expected future cash flows and capital expenditures

The Group estimates the combined productive capacity of the wells drilled to date at the Sagiz West field to be in excess of 1,000 bopd, based on production rates achieved from these wells before they were shut-in when their Test Production periods ended earlier in 2014. The TPP project for Sagiz West is currently being prepared for submission to Ministry of Energy ("MOE "). The Company's best estimate for the granting of TPP, which will allow continuous production from the Sagiz West field to commence, is Q2 2015. Until then, the Group expects its production to average around 3,300 bopd from wells drilled to date. The Directors believe that progression of the Sagiz West field into TPP and the commencement of continuous production of that field is an important milestone for the Group and the Board is working to expedite the progress of the application through the required official approvals as quickly as possible.

After Sagiz West commences TPP, expected in Q2 2015, the Group estimates that it would need to incur approximately US$20 million in additional capital expenditure through to the end of the calendar year 2016 to develop the field, including drilling 13 additional wells and constructing ancillary facilities and infrastructure necessary to advance the field through TPP to reach FFD status. An additional US$10 million is budgeted for subsequent development of Sagiz West after FFD status is achieved, estimated for 2017. The development of Sagiz West will enable the field to become a substantial production asset. The Group estimates that it would need to incur a further US$18 million in capital expenditure to develop its other post-salt fields through 31 December 2016, including drilling a step-out appraisal well at ZMA-E8 to test the Zhana Makat South East extension. In the event that ZMA-E8 is successful, further capital expenditure would be required to develop the extension and achieve FFD status. The Directors have identified additional capital requirements within this planned discretionary spending programme of up to US$20 million through 31 December 2015.

(v) Limited post-salt exploration upside from existing or new licence areas

The Group has completed its planned post-salt exploration drilling programme resulting in 2P reserves at 31 March 2014 of 9.5 mmboe, as estimated by RSC. There remains potential for the growth of post-salt reserves from continuing appraisal of the fields discovered by the Group to date, which includes a potentially material extension of the Zhana Makat field. There are also several potential new appraisal targets on the Group's Blocks A&E Licence area in respect of which data on reserves attributed to historic wells drilled in the Soviet era are being evaluated. Progressing with drilling these wells, however, depends upon additional capital being available for this purpose.

(vi) NUR-1 well and pre-salt assets

In May 2013, the Group received regulatory approval of a two-year extension of the exploration period of its Blocks A&E Licence by MOE. This extension allowed the Group to finish drilling the pre-salt NUR-1 well on the Emba B prospect, with an option to drill the Kurzhem well on the Emba A prospect in the event the NUR-1 well is successful. The Group estimates it will cost approximately US$20 to US$25 million in additional capital to finish drilling the NUR-1 well, which will not be funded out of the Group's existing capital resources. In addition, drilling remains subject to the Group obtaining an extension of the Blocks A&E Licence for when the current permission expires in March 2015.

As previously announced, there are no active negotiations underway regarding a NUR-1 farm-in, which would be required for the Company to finish the well as a stand-alone entity. The Board believes that attracting farm-in partners on advantageous terms will be helped by a strengthened balance sheet and will be dependent upon an extension of the Blocks A&E Licence beyond March 2015. The Board continues to believe in NUR-1's substantial upside potential, targeting 467 mmboe of unrisked mean resource potential, but notes that substantial technical and geological risks remain.

In the event that the Subscription by AGR Energy does not complete, and therefore the investment of approximately £37.1 million was not made into the Group, the Directors would have to evaluate the possibility that the pre-salt assets were impaired. Faced with the dual uncertainties of funding and a contingent extension of the Blocks A&E Licence in March 2015, the Directors have concluded that the most prudent course of action would be to book a one-time accounting charge to impair fully the carrying value of NUR-1 and associated pre-salt exploration costs. Under these circumstances, the Group would most likely take an additional impairment charge amounting to US$113 million. This charge would be recognised in the financial statements for the year ending 31 March 2015. Therefore, the successful completion of the Subscription is a key assumption in continuing to recognise the US$113 million costs associated with the pre-salt in the Group's balance sheet at 31 March 2014 and thereafter.

B. Use of proceeds

The amount being raised pursuant to the Subscription is expected to be £37.1 million gross and approximately £35.3 million net of all expenses, assuming no other issuances of Ordinary Shares occur prior to Subscription and Admission.

The Board and AGR Energy expect that the net proceeds of the Subscription will be used to:

(a)           reduce gearing and strengthen the balance sheet to increase the financial resilience of the Group and facilitate a reset of covenants with Sberbank. It is expected that this will include a US$10,000,000 repayment of debt to Sberbank;

(b)           within six months following completion of the Subscription, undertake the Tender Offer;

(c)           fund the working capital requirement to develop the Group's existing post-salt fields as well as maximise reserves and production, including drilling the step-out appraisal well ZMA-E8 to test the Zhana Makat South East extension, with potential additional development drilling should that well be successful;

(d)           should the exploration period of the Company's Blocks A&E Licence in western Kazakhstan be extended beyond March 2015, which would provide the necessary time to finish drilling NUR-1, fund any preliminary costs to prepare for re-entering the NUR-1 well before drilling resumes; and

(e)           consider investing in other projects in Kazakhstan and across Central Asia that complement the Group's existing activities.

The Board believes that AGR Energy Group's in-country reputation and experience, together with the additional funds from the proceeds of the Subscription, make it more likely that the Company can successfully achieve each of these goals and attract financial or industry farm-in partners to help finish the NUR-1 pre-salt well.

C. Review of strategic options and formal sale process

On the 22 July, the Board announced a review of strategic options and a formal sale process. Its purpose remains to elicit competing, superior proposals to the Subscription. A broad process has been undertaken and, as at the date of this announcement, no such deliverable proposal has been put forward to the Board. In addition there can be no certainty that any such proposal will be made nor as to the terms on which any such proposal might be made.

The Board expects to end the review of strategic options and the formal sale process immediately following the passing of the Subscription Resolutions by Shareholders at the General Meeting.

D. AGR Energy and the Assaubayev family

The Subscription should enable the Group to fund its planned capital programme to develop its postsalt fields and maximise reserves and production. In addition, the natural resources experience of AGR Energy's shareholders, the Assaubayev family, make it a well-placed partner to assist the Company's development and growth ambitions with both operational and financial support. The Board also believes that the Assaubayev family's in-country reputation and experience will help the Company to achieve success in important matters involving the regulatory authorities in Kazakhstan such as securing a possible extension of the exploration period of its Blocks A&E Licence in western Kazakhstan to enable it to have time to finish drilling NUR-1. The Company will also, in partnership with the Assaubayev family, be able to consider investment in other projects in Kazakhstan and across Central Asia that complement its existing activities.

Under the terms of the Subscription, AGR Energy intends to continue the strategic reorganisation of the leadership and management team of Max Petroleum. In doing so, it is anticipated that Aidar Assaubayev and Kanat Assaubayev will be appointed as new Directors. With the support of AGR Energy, the Company will maintain its efforts to implement its cost cutting initiative to substantially reduce administrative costs which is already well advanced and has included downsizing its London office and closing its Houston office.

Following completion of the Subscription, the Directors expect to work with AGR Energy to review the Company's business plan, Board structure and strategic and mid-term goals. It is expected that James A. Jeffs and Malcolm Butler would, at the invitation of AGR Energy, continue as members of the Board following completion of the Subscription and that Maksut S. Narikbayev would resign from his position as a non-executive director of the Company. It is further expected that Robert B. Holland, who has formerly served as a Director, would, at the invitation of AGR Energy, be appointed as a member of the Board following completion of the Subscription.

E. Pricing of the Subscription and ongoing participation

The Subscription Price represented a premium of 33.9 per cent. to the closing middle market price of an Ordinary Share of 1.225 pence on 1 August 2014, the last business day prior to the announcement of the Subscription, and a premium of 17.8 per cent. to the volume weighted average price per Ordinary Share of 1.392 pence in the period from 1 May 2014 to 1 August 2014. The Subscription Price represents a premium of 111.6 per cent. to the closing middle market price of an Ordinary Share of 0.775 pence on 11 November 2014, the last business day prior to the date of this announcement.

Consequently, the Board believes that the Subscription Price offered is extremely attractive and, in addition, offers existing shareholders in the Group the opportunity to participate in the upside potential from the Subscription and future development of the Group's business.

F. Relationship Agreement

The Company, AGR Energy and Oriel Securities (in its capacity as Nominated Adviser to the Company) have entered into a relationship agreement to ensure that:

(i)            the Company will at all times be capable of carrying on its business with the assistance of a minimum of three Directors who are independent of the AGR Energy Group;

(ii)           the Group and its activities will be managed for the benefit of Shareholders as a whole; and

(iii)         all material transactions, agreements and arrangements between: (a) any member of the Group; and (b) AGR Energy and the AGR Energy Group will be at arm's length and on normal commercial terms and subject to approval by Directors or Shareholders who are independent of the AGR Energy Group.

Information on AGR Energy, the AGR Energy Group, the Assaubayev family and its intentions as regards Max Petroleum

AGR Energy is a vehicle owned by the Assaubayev family established for the purpose of the Subscription. Neither AGR Energy, nor any other member of the AGR Energy Group currently holds any Ordinary Shares or any other securities in Max Petroleum.

The Assaubayev family, through AGR Energy, intend to utilize their local knowledge and access in the jurisdictions in which Max Petroleum operates to secure the Company's future growth and create value for Shareholders. To this end, AGR Energy's intention is to support the current operations of Max Petroleum's portfolio and exploit new opportunities that may arise as a consequence of the ongoing consolidation in the oil and gas sector in Central Asia.

AGR Energy also believes that the natural resources experience of its shareholders, their proven track record of operating oil and gas and mining assets as well as their access to significant financial resources make it a well-placed partner to support Max Petroleum's development and growth ambitions.

AGR Energy confirms that it is acting for the Assaubayev family and not for any other person.

AGR Energy is committed to Max Petroleum remaining an independent company whose shares are publicly traded. In AGR Energy's view, quoted company status not only permits Shareholders to participate in the future growth of the Company but is also optimal for the Company to realise its potential. It also facilitates the Company's access to third party capital and provides it with an acquisition currency to be used for potential further growth. A stable, transparent platform is expected to be created from which to pursue the Company's growth strategy, which will be important for Max Petroleum's success.

Current trading, field status and future prospects

·      Current production is approximately 3,300 bopd from fields on continuous production in FFD, resulting in over 2,600 bopd being available for export.

·      The Zhana Makat, Borkyldakty and Asanketken fields have been approved for FFD and are producing continuously, with 80 per cent. of their production exported and 20 per cent. sold domestically.

·      The Group's other post-salt fields, comprising Sagiz West, East Kyzylzhar I, Uytas, Baichunas West and Eskene North, are at various stages of appraisal, during which time the Group may produce each zone in a well for up to 90 days and carry out appraisal drilling in order to gather the information necessary to apply for TPP, when wells can be produced continuously.

·      The Group expects Sagiz West to be approved for TPP and commence continuous production in the first half of 2015, which is expected to bring on stream in excess of 1,000 bopd of additional production.

Under its Blocks A&E Licence the Group is committed to certain future expenditures which include a work programme (comprising firm and contingent investments) and the reimbursement of historical costs incurred by the Government of the Republic of Kazakhstan. Contingent investments include capital expenditures for wells that would be drilled following successful results from the drilling of wells specified as firm investments. The work programme below is agreed with the MOE and covers exploration and production activities in Blocks A&E from 2014 to 2021. It also includes social infrastructure contributions and commitments for the training of local personnel. Qualifying exploration, development and operating expenditure incurred by the Group are deductible from these future commitments. Outstanding commitments at 30 September 2014 were as follows:

The total commitment at 30 September 2014 includes US$24.2 million of historical costs incurred by the Republic of Kazakhstan for the exploration of Blocks A&E prior to the Group's acquisition of the Licence (31 March 2014: US$24.2 million). Historical costs become payable from the date when a field is transferred to the production stage under FFD and the amount payable for each field is determined by the Government of the Republic of Kazakhstan.

In October 2014, the Group and the MOE signed an amendment to the Blocks A&E Licence which permitted the Asanketken field to move into FFD, enabling the Group to fully develop and produce from the field until 2027 and export up to 80% of the field's production. The amendment extended the Group's work programme from 2021 to 2027 and increased its outstanding firm investments commitment from US$71.4 million to US$105.9 million. The Group's outstanding commitments as revised by this amendment are as follows:

The Group's total commitment under the work programme for the calendar year ending 31 December 2014, as revised by the amendment in October 2014, is US$99.8 million. As of 30 September 2014, actual expenditure under the work programme by the Group amounted to US$29.6 million.  As previously disclosed, the Group has suspended its capital expenditure programme pending the closing of the Subscription or financing by alternative additional debt or equity capital. Although the Group will continue to incur qualifying operating expenditure between 30 September 2014 and 31 December 2014, given the suspension of its capital expenditure programme, the Group expects there will be a shortfall against its commitments under the current work programme for 2014. The MOE has the ability to impose a fine on the Group of up to 30% of this shortfall. The Group is working with the MOE to put in place the necessary regulatory approvals to defer the shortfall on the 2014 work programme to future years, and accordingly, the Group does not currently expect to make any provisions in this regard in its financial statements as at 30 September 2014.

Share Buyback

Following and conditional upon completion of the Subscription, the Company intends within six months following Admission to undertake a share buyback to be effected by way of a tender offer to all Shareholders on the record date ("Qualifying Shareholders "), pro rata to their holdings on the record date, at a price of 1.64 pence per Ordinary Share (the "Tender Offer "). It is intended that £10,000,000 will be committed to the Tender Offer, representing approximately 13.7 per cent. of the Enlarged Issued Share Capital of the Company, assuming no other issuances of Ordinary Shares occur prior to Subscription and Admission. The Tender Offer will provide all Qualifying Shareholders with an opportunity to tender some or all of their respective Ordinary Shares (subject to the maximum aggregate number of Ordinary Shares which may be purchased in the Tender Offer of 609,756,097 Ordinary Shares) and to receive their respective share of the cash which the Company is seeking to return to Shareholders. It is intended that the Ordinary Shares purchased under the Tender Offer will be cancelled or transferred into treasury for subsequent sale, transfer or cancellation.

The AGR Energy Group has committed not to take up its rights in the Tender Offer, provided that AGR Energy reserves the right to participate in the event that the Tender Offer is under-subscribed. The Company reserves the right not to undertake the Tender Offer if there is a material change in the Group's circumstances or if the Tender offer will cause the Group to breach any applicable laws, regulations or other obligations of the Group. Subject to completion of the Subscription and passing of the Buyback Resolution, the Company is not aware of any reason why the Tender Offer will cause the Group to breach any applicable laws, regulations or other obligations of the Group.

Anti-dilution provisions

The issue of 2,264,093,462 new Ordinary Shares pursuant to the Subscription assumes the Company does not make any other share issuances prior to completion of the Subscription. To the extent the Company does make any such issuances prior to completion of the Subscription, AGR Energy would also subscribe for such number of additional Ordinary Shares at the Subscription Price such that it would in aggregate hold 51 per cent. of the Enlarged Share Capital immediately following Admission.

Following completion of the Subscription AGR Energy will have anti-dilution rights that enable it to subscribe for further Ordinary Shares at the Subscription Price as and when warrants or options existing as at 3 August 2014, being the date of the Subscription Agreement, are exercised ("Applicable Further Issuances ") so as to enable AGR Energy to maintain its percentage shareholding at the level immediately prior to any such Applicable Further Issuance if it so elects. Such anti-dilution rights do not apply to any other issuance of securities by the Company, including, without limitation, in respect of the exercise of warrants or options granted following the date of the Subscription Agreement. AGR Energy will only have such anti-dilution rights if it holds a majority of the issued ordinary share capital of the Company prior to any such Applicable Further Issuance. As a result, AGR Energy would cease to have anti-dilution rights in respect of Applicable Further Issuances with effect from such time as AGR Energy ceases to hold a majority of the issued ordinary share capital of the Company for any reason other than an Applicable Further Issuance, including, without limitation, as a result of one or more disposals by AGR Energy of Ordinary Shares or an election by AGR Energy not to exercise its anti-dilution rights upon one or more Applicable Further Issuances.

As at 11 November 2014 (being the latest practicable date prior to the publication of this announcement) a total of 351,336,902 options and warrants were outstanding, representing 16.2 per cent. of the Existing Ordinary Shares and 7.9 per cent. of the Enlarged Issued Share Capital.

City Code on Takeovers and Mergers

Rule 9 of the Takeover Code

The issuance of the Subscription Shares to AGR Energy gives rise to certain considerations under the Takeover Code. Brief details of the aspects of the Takeover Code and the protections it affords to you as a Shareholder are described below.

The Takeover Code is issued and administered by the Panel. The Takeover Code governs, inter alia, transactions which may result in a change of control of a company to which the Takeover Code applies. Max Petroleum is a company to which the Takeover Code applies and its Shareholders are entitled to the protections afforded by its provisions.

Under Rule 9 of the Takeover Code, any person who acquires, whether by a series of transactions over a period of time or not, an interest (as defined in the Takeover Code) in shares which, taken together with shares in which he is already interested and in which persons acting in concert with him are interested, carry 30 per cent. or more of the voting rights of a company which is subject to the Takeover Code, is normally required to make a general offer to all remaining shareholders to acquire their shares.

Rule 9 of the Takeover Code further provides that where any person, together with persons acting in concert with him, is interested in shares which in aggregate carry not less than 30 per cent. of the voting rights of a company but does not hold shares carrying more than 50 per cent. of such voting rights and such person, or any such persons acting in concert with him, acquires an interest in any other shares which increases the percentage of shares carrying voting rights in which he is interested, such person or persons acting in concert with him will normally be required to make a general offer to all remaining shareholders to acquire their shares.

An offer under Rule 9 of the Takeover Code must be made in cash and at the highest price paid by the person required to make the offer, or any person acting in concert with him, for any interest in shares of the company during the 12 months prior to the announcement of the offer.

Rule 9 Waivers

The AGR Energy Concert Party does not hold any Ordinary Shares in the current issued share capital of the Company. Following the completion of the Subscription and Admission, the AGR Energy Concert Party would hold a maximum of 51 per cent. of the Enlarged Issued Share Capital by virtue of the Subscription, including pursuant to the anti-dilution provisions of the Subscription Agreement, details of which are set out in paragraph 1 of this Part I. Without waivers of the obligations under Rule 9 of the Takeover Code, the AGR Energy Concert Party would be required to make a general offer to all Shareholders.

The Panel has agreed, subject to Independent Shareholders' approval on a poll, to waive the requirement for the AGR Energy Concert Party to make a general offer to all Shareholders where such an obligation would otherwise arise as a result of the Subscription, including pursuant to the anti-dilution provisions of the Subscription Agreement.

The Rule 9 Waivers granted by the Panel relate only to the allotment of the Subscription Shares and the allotment of any Anti-dilution Shares, if applicable. They are conditional on the passing of Resolution 1 and Resolution 2 by the Independent Shareholders of the Company on a poll.

On Admission, the AGR Energy Concert Party will be interested in Ordinary Shares carrying more than 50 per cent. of the voting rights of the Company and will, for so long as it continues to hold more than 50 per cent. of such voting rights, be able to acquire further Ordinary Shares and accordingly increase its aggregate interest in the Company's voting rights without incurring an obligation to make a general offer for the Company under Rule 9 of the Takeover Code, although individual members of the AGR Energy Concert Party will still be subject to Note 4 on Rule 9.1 of the Takeover Code.

In addition, immediately following completion of the Tender Offer (details of which are set out in paragraph 9 of this Part I), the AGR Energy Group will be interested in Ordinary Shares carrying 59.1 per cent. of the issued Ordinary Share capital of the Company, assuming (i) full take-up of the Tender Offer; (ii) that the AGR Energy Group do not participate in the Tender Offer; and (iii) that no further issuances of Ordinary Shares have been made since Admission.

Rule 21.1 Approval

As the Company is currently in an offer period (as defined in the Takeover Code), pursuant to Rule 21.1 of the Takeover Code, the Board must not, without the approval of the Shareholders, take any action which may result in any offer or bona fide possible offer being frustrated or in Shareholders being denied the opportunity to decide on its merits or take certain actions, including issuing any shares. The Subscription, which includes the issue of any Anti-dilution Shares (if applicable), will therefore require Shareholder approval pursuant to Rule 21.1.

Sberbank Approvals

The Subscription is conditional, inter alia , upon the following approvals (the "Sberbank Approvals ") being obtained:

(i)            the entry by Sberbank into an amendment agreement, in a form reasonably satisfactory to AGR Energy, executed by Sberbank and Samek altering certain of the reserve and production covenants in the Sberbank Facility Agreement and related loan agreements between Samek and Sberbank;

(ii)           a waiver by Sberbank, in a form reasonably satisfactory to AGR Energy, of its unilateral uncapped right pursuant to the terms of the Sberbank Facility Agreement to increase the interest rate on a change of control, and its consent to the change of control on account of the Subscription; and

(iii)         the agreement (and  to the extent such agreement is subject to conditions or qualifications such conditions or qualifications to be in a form satisfactory to AGR Energy) by Sberbank to the proposed share buyback;

and Sberbank not imposing any conditions or qualifications that would, at the time of entry into its agreements at (i), (ii) or (iii) above, prevent the Company from undertaking the proposed Tender Offer.

Kazakh Regulatory Approvals

The Subscription is conditional, inter alia, upon the Company receiving from MOE in respect of the Subscription either:

(i)            confirmation that the provisions of Articles 12 and/or 36 of the Subsoil Law (or such other laws and regulations as may be applicable and in force from time to time) do not apply to the Subscription or to the issuance by the Company to AGR Energy of the Subscription Shares or that no action will be taken in relation to them; or

(ii)           if no such confirmation is available in relation to one or both Articles (or such other laws and regulations as may be applicable and in force from time to time), (a) a waiver of the Republic of Kazakhstan's pre-emptive rights under Article 12 of the Subsoil Law; and/or (b) the consent of MOE under Article 36 of the Subsoil Law, or a consent and/or waiver in respect of such other laws and regulations as may be applicable and in force from time to time.

The Subscription is also conditional upon the Company receiving from the National Bank in respect of the Subscription either:

(i)            confirmation that the National Bank's consent to the Subscription or to the issuance by the Company to AGR Energy of the Subscription Shares is not required or that no action will be taken in relation to them; or

(ii)           if no such confirmation is available, the National Bank's consent in respect of the Subscription and to the issuance by the Company to AGR Energy of the Subscription Shares.

A condition of the National Bank granting its consent in respect of the Subscription and issuance by the Company of the Subscription Shares to AGR Energy may be that the Company has to offer 20 per cent. of the Subscription Shares (the "Local Offering Shares ") on the Kazakhstan Stock Exchange, each offered at the Subscription Price, on a pre-emptive basis (the "Local Offering "). If required, the Company therefore intends to conduct the Local Offering prior to Admission. The Company would have discretion as to whom it allots Local Offering Shares and in what proportions. It is contemplated that AGR Energy would participate in the Local Offering and, to the extent any Local Offering Shares are allotted pursuant to the Local Offering, they would be allotted to AGR Energy. The issue of any Local Offering Shares will be conditional on, and will complete simultaneously with, the Subscription.

The Kazakh regulatory regime is subject to change and there can be no certainty that regulatory approvals additional to or other than those outlined in this paragraph 6 may not be required.

General Meeting

The General Meeting of the Company is to be held at 10:00 a.m. on 1 December 2014 at the offices of Akin Gump LLP, Eighth Floor, Ten Bishops Square, London E1 6EG. At the General Meeting certain Resolutions, to approve the AGR Energy Subscription and to allow the Company to conduct the Tender Offer, will be proposed.

Undertakings

The Company has received irrevocable undertakings to vote in favour of the Resolutions from Directors holding (directly or indirectly) in aggregate 107,091 Ordinary Shares, representing 0.005 per cent. of the Existing Ordinary Shares.

In addition, Shareholders holding 833,019,081 Ordinary Shares, representing 38.3 per cent. of the Existing Ordinary Shares, have irrevocably undertaken (subject to certain customary exceptions) to vote their Ordinary Shares in favour of the Resolutions.

Accordingly, the Company is in receipt of irrevocable undertakings to vote in favour of the Resolutions in respect of 833,126,172 Ordinary Shares, representing 38.3 per cent. of the Existing Ordinary Shares.

Recommendation

The Directors, who have been so advised by Oriel Securities, believe that the Proposals are fair and reasonable and in the best interests of the Shareholders and the Company as a whole. In concluding that the Proposals are in the best interests of Shareholders and the Company as a whole, the Directors have taken into account the considerations set out in sub-paragraphs A to F of this announcement. They recommend that Shareholders vote in favour of the Resolutions as they have irrevocably undertaken to do in respect of their aggregate shareholdings of 107,091 Ordinary Shares, equivalent to 0.005 per cent. of the existing voting rights of the Company. In providing advice to the Directors, Oriel Securities has taken into account the Directors' commercial assessments. Accordingly, the Directors unanimously recommend that Shareholders vote in favour of the Resolutions.

Shareholders should note that if the Subscription Resolutions are not approved by Shareholders at the General Meeting, it is the intention of James A. Jeffs and Maksut S. Narikbayev to resign their positions at the Company following the General Meeting.

SUBSCRIPTION STATISTICS

*Assuming no other issuances of Ordinary Shares occur prior to Subscription and Admission

Save where the context requires otherwise, capitalised and technical terms used in this announcement shall have the same meaning as ascribed to them in the Circular.

Kenneth Hopkins, Chief Operating Officer of Max Petroleum Plc, is the qualified person that has reviewed and approved the technical information contained in this announcement.  Mr. Hopkins holds a Bachelor of Science degree in Marine Sciences and a Master of Science degree in Geology from Texas A&M University and is a certified petroleum geologist with 32 years of experience in the oil and gas industry.

Reserve estimates have been compiled in accordance with the 2011 Petroleum Resources Management System produced by the Society of Petroleum Engineers.

Oriel Securities Limited is acting as sole financial adviser to the Company in relation to the Subscription.

Additional Information

This announcement is not intended to, and does not, constitute or form part of any offer, invitation or the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of, any securities whether pursuant to this announcement or otherwise.

The distribution of this announcement in jurisdictions outside the United Kingdom may be restricted by law and therefore persons into whose possession this announcement comes should inform themselves about, and observe, such restrictions. Any failure to comply with the restrictions may constitute a violation of the securities law of any such jurisdiction.

Oriel Securities Limited, which is authorised and regulated by the Financial Conduct Authority in the United Kingdom, is acting exclusively for Max Petroleum and no one else in connection with the matters referred to in this announcement, and will not be responsible to anyone other than Max Petroleum for providing the protections afforded to clients of Oriel Securities Limited nor for providing advice in connection with the matters referred to in this announcement.

The Blackstone Group International Partners LLP, which is authorised and regulated by the Financial Conduct Authority in the United Kingdom, is acting exclusively for Max Petroleum and no one else in connection with the matters referred to in this announcement. In connection with such matters, the Blackstone Group International Partners LLP, its affiliates and their respective directors, officers, employees and agents will not regard any other person as their client, nor will they be responsible to any other person other than Max Petroleum for providing the protections afforded to clients of the Blackstone Group International Partners LLP or for providing advice in connection with the matters described in this announcement or any matter referred to herein.  The Blackstone Group International Partners LLP is acting as financial adviser to Max Petroleum solely in relation to the strategic review and formal sales process announced on 22 July 2014.

Disclosure requirements of the Takeover Code (the "Code")

Under Rule 8.3(a) of the Code, any person who is interested in 1% or more of any class of relevant securities of an offeree company or of any securities exchange offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any securities exchange offeror is first identified. An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 pm (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 pm (London time) on the 10th business day following the announcement in which any securities exchange offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a securities exchange offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1% or more of any class of relevant securities of the offeree company or of any securities exchange offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any securities exchange offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror, save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London time) on the business day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a securities exchange offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. You should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.

Forward-Looking Statements

This announcement contains certain forward-looking statements with respect to a possible subscription by AGR Energy for new Ordinary Shares in Max Petroleum. The words "believe," "expect," "anticipate," "project" and similar expressions, among others, generally identify forward-looking statements. Max Petroleum cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in the forward-looking statements. Such risks and uncertainties include, but are not limited to: the possibility that the Subscription will not be completed; failure to obtain necessary regulatory approvals or required financing or to satisfy any of the other conditions to the Subscription; adverse effects on the market price of the Ordinary Shares and on Max Petroleum's operating results because of a failure to complete the Subscription; failure to realise the expected benefits of the Subscription; negative effects relating to the announcement of the Subscription or any further announcements relating to the Subscription or the completion of the Subscription on the market price of the Ordinary Shares; significant transaction costs and/or unknown liabilities; general economic and business conditions that affect Max Petroleum following the completion of the Subscription; changes in global, political, economic, business, competitive, market and regulatory forces, future exchange and interest rates; changes in tax laws, regulations, rates and policies; future business combinations or disposals and competitive developments. These forward-looking statements are based on numerous assumptions and assessments made by Max Petroleum in light of its experience and perception of historical trends, current conditions, business strategies, operating environment, future developments and other factors it believes appropriate. By their nature, forward-looking statements involve known and unknown risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. The factors described in the context of such forward-looking statements in this announcement could cause Max Petroleum's plans with respect to the Subscription, actual results, performance or achievements, industry results and developments to differ materially from those expressed in or implied by such forward-looking statements. Although it is believed that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct and persons reading this announcement are therefore cautioned not to place undue reliance on these forward-looking statements which speak only as at the date of this announcement. Max Petroleum undertakes no obligation to release publicly any revisions to forward-looking statements as a result of subsequent events or developments, except as required by law or regulation.

Publication on Website                        

A copy of this announcement will be made available at www.maxpetroleum.comno later than 12:00 noon (London time) on the business day following the date of this announcement in accordance with Rule 30.4 of the Code. The content of the website referred to in this announcement is not incorporated into and does not form part of this announcement.