(Proactive Investors UK) – Max Petroleum (LON:MXP) told investors it will plug and abandon the ZLGS-1 exploration well on the Zhalgyz South prospect in Block A in Kazakhstan, which turned out to be a dry hole.

Petroleum Geology and Resources of the North Caspian Basin, Kazakhstan and Russia (PDF)
The North Caspian basin is a petroleum-rich but lightly explored basin located in Kazakhstan and Russia. It occupies the shallow northern portion of the Caspian Sea and a large plain to the north of the sea between the Volga and Ural Rivers and farther east to the Mugodzhary Highland, which is the southern continuation of the Ural foldbelt. The basin is bounded by the Paleozoic carbonate platform of the Volga-Ural province to the north and west and by the Ural, South Emba, and Karpinsky Hercynian foldbelts to the east and south. The basin was originated by pre-Late Devonian rifting and subsequent spreading that opened the oceanic crust, but the precise time of these tectonic events is not known.
The sedimentary succession of the basin is more than 20 km thick in the central areas. The drilled Upper Devonian to Tertiary part of this succession includes a prominent thick Kungurian (uppermost Lower Permian) salt formation that separates strata into the subsalt and suprasalt sequences and played an important role in the formation of oil and gas fields. Shallowshelf carbonate formations that contain various reefs and alternate with clastic wedges compose the subsalt sequence on the 2 Petroleum Geology, Resources – North Caspian Basin, Kazakhstan and Russia basin margins. Basinward, these rocks grade into deep-water anoxic black shales and turbidites. The Kungurian salt formation is strongly deformed into domes and intervening depressions. The most active halokinesis occurred during Late Permian–Triassic time, but growth of salt domes continued later and some of them are exposed on the present-day surface. The suprasalt sequence is mostly composed of clastic rocks that are several kilometres thick in depressions between salt domes.

Investors were disappointed with the update as shares in Max Petroleum dropped seven percent to trade at 13 pence this morning, valuing the company at £131.5 million.

On a positive note, broker Merchant Securities said it did not ascribe any value to this well in first place, leading it to repeat its 33.7 pence price target for the stock. The broker also reminded investors that prior to ZLGS-1, Max had drilled 12 consecutive successful wells and said failure was an “inherent component of any diversified exploration campaign”.

As a result, Merchant advised investors to take advantage of the opportunity to top up if shares fall substantially on today’s news.

Before drilling, Max estimated the chance of success of this well at 29%.

The Zhanros ZJ-20 drilling rig will now move on to drill the KZIE-2 appraisal well testing Jurassic reservoirs in the recently discovered East KyzylzharI Field in Block E.

Max also told investors that the Saipem drilling rig is about to begin drilling he NUR-1 well on the Emba B prospect in Block E, which Merchant called “the big one”.