AGR Energy, a vehicle owned by the Assaubayev family, is proposing to take a 51% stake in Max by subscribing for shares at 1.64p in a deal that will raise around £37.1mln (gross) for Max.
Max announced a strategic review and effectively put itself up for sale back in July, but it said on Monday that it has not received any offers superior to the proposal from AGR.
Meanwhile, the company revealed it has been successful in getting the loan covenants reset on its banking facility with Sberbank.
The company said it is currently in compliance with its loan covenants, and has paid all interest and principal payments due under the Sberbank facility agreement, each of which has been paid in full when due.
Max is due to make a US$3.2mln payment to Sberbank in December and a further US$6.8mln principal payment in March 2015, after which quarterly principal repayments of US$6.6mln are required to be made through o November 2017.
Max said that if the subscription does not complete, and if, in the event of it not completing, no alternative source of funding is found, Max is unlikely to have sufficient cash flow to recommence its capital expenditure programme.
Furthermore, with the price of Brent crude having fallen dramatically of late, even with the capital expenditure programme suspended, cash flow is unlikely to be sufficient to continue servicing its interest and principal payments with Sberbank unless oil prices recover.
The directors intend to ask Sberbank to agree, as soon as possible, a moratorium on principal payments, including the US$3.3mln principal payment due in December 2014, and to discuss with Sberbank the restructuring of its facility agreement with the bank.
Max warned shareholders that even if Sberbank were to suspend repayments of the principal of the loan, the group’s finances would remain very tight, and unable to withstand and delays to production or underperformance on revenue.
Max’s production for the six months to 30 September averaged 4,329 barrels of oil per day (bopd), up 2% on the preceding six months’ average rate.
Since the end of September, total production has been ticking along above 4,000 bopd.
Max had some good news for shareholders, as it disclosed that the Government of the Republic of Kazakhstan has granted regulatory approval to convert the Asanketken field to full field development (FFD) status, effective immediately.
FFD approval will allow Max Petroleum to fully develop and produce the Asanketken field and sell 80% of crude oil production from Asanketken on the export market under the terms of its Blocks A&E exploration and production contract.
Asanketken is currently capable of producing about 600 barrels of oil per day from its four productive wells.
Shares in Max were down 0.07p at 1.05p in late morning trading.