In particular, the key to Maxim’s high octane growth formula is a focus on participating as a minority partner in select “company maker” projects. To date, the more senior partners in such ambitious drilling ventures are made up of well-capitalized companies with impressive track records for bringing big discoveries on-stream.

However, in order to play in the big leagues, the Company (http://www.maximresources.com/) takes a highly disciplined and cautious approach to how it spends its exploration dollars, according to Maxim’s president Arthur (Art) Brown. A savvy veteran of the oil & gas business, as well as the world of venture capital, Brown understands the imperative of safeguarding the interests of Maxim’s shareholders by not over-extending the Company’s exploration budget. At the same time, he realizes that the present climate of historically high energy prices is an ideal time to offer investors the fast track to exponential revenue growth. In other words, he is committed to carefully selecting drill programs that clearly offer “blue sky” potential and at an affordable price.

Again, this involves partnering with companies that boast an enviable wealth of technological expertise and the management of some of the best minds in the oil & gas business. These are also companies that will only spend millions of dollars on drilling projects that are supported by proven exploration techniques which significantly enhance the likelihood of striking “pay dirt.”  To date, Maxim has committed to earn-in on two major projects this summer, both of which are situated in well-established oil & gas fields in the oil-rich state of Texas.

The first of these two projects to get underway — with spudding starting as early as mid June — is the Cooke Ranch No. 3 Well in La Salle County, which is about 13 miles southeast of the town of Cotulla in southern Texas. Maxim owns a 6.25% working interest in this test well in return for a U.S. $731,250 farm-in expenditure towards the drilling costs. Maxim must also contribute a further U.S. $250,000 in completion costs if the well is successful. Maxim is in good company as the other joint venture partners are Bayshore Exploration L.L.C. (the operator), NYSE-listed Devon Energy, and Dynamic Resources.

By way of background, the prolific Cooke Ranch Field currently boasts nearly two dozen producing oil & gas wells from three shallow horizons above the 11,000 feet level. All three of these formations represent prospective low-risk pay zones for the Cooke No. 3 Well drill program. To date, these shallower pay zones have yielded over 18 BCF (billion cubic feet) of natural gas and one million barrels of oil & gas concentrate since the field was first discovered in 1959.

Bayshore’s President Jamin Swantner refers to these low risk prospects as “bail out zones” that “offer an excellent fall-back position in the Cooke No. 3 Well for economic recovery.”  Including the deeper targets, there are a total of six potential pay zones at the Cooke No. 3 Well location. They represent projected “best case scenario” annual gross production revenue of about U.S. $49 million, translating into potential revenues for Maxim, alone, of about U.S. $3 million. 

Active in the area since 1980, Bayshore is intimately knowledgeable about the regional geology, as illustrated by the fact that it has discovered no less than three oil & gas fields. In fact, Bayshore has been involved in the discovery and development of quite a few wells in the region, including several in the immediate vicinity of the Cooke No. 3 Well. They include two gas wells that were drilled and completed as recently as 2004.

All of these wells have been found using 2-D seismic data that was shot by Shell Oil Company in 1982. Similarly, the seismic data used to identify this latest drill target is the same that has proven so instrumental to these earlier discoveries. After having been reprocessed to focus on deep targets, this seismic data has revealed what Swantner refers to as a “huge structure” (the Smackover Pinnacle Reef target) and several smaller deep to mid-depth formations. 

More recent 3-D seismic has also been shot, which corroborates the findings of the earlier 2-D seismic data. Accordingly, Maxim and its joint venture partners intend to drill to 21,000 feet to test the potentially world-class Smackover reef structure. All told, the well is targeting a collective projected reserve base of upwards of 200 BCF of gas and six million barrels of oil from the six separate potential pay zones. This translates into a projected production estimate of 20-40 MMCF (million cubic feet) per day (about U.S. $140,000-$280,000) and 600-1,200 barrels of oil per day (approximately U.S. $32,000-$64,000).

The prospect of drilling a number of contiguous offset wells is also excellent as the consortium holds 8,884 acres of leases in this area (with the option to increase the lease holdings to in excess of 15,400 acres). Also, the close proximity of two interstate gas pipelines makes the economics of the drill project all the more robust.

So confident of success is Bayshore’s president that he is investing U.S. $1.5 million of his own personal money in this venture, says Maxim’s president, Brown. “Swantner’s essentially putting his money where his mouth is and that’s a pretty strong endorsement that you don’t see every day,” he adds.

Meanwhile, Maxim’s second shot at a world-class discovery this summer involves the Warhawk No. 1 Well drill program, which is situated in Leon County in east central Texas some 13 miles southwest of the town of Centreville. Maxim has a 6.25% working interest in this joint ventured project in return for committing U.S. $375,000 towards the drilling costs. Notably, the well sits on a 1,025-acre property that offers the opportunity for a number of contingent step-out wells.

Under the direction of the project operator, Petrox Energy Corporation, the drilling will target several pinnacle reefs and other formations that collectively host estimated reserves of at least 300-350 BCF. This represents a potential “best case scenario” gross monthly revenue projection for this well of about U.S. $2.87 million of which Maxim’s portion would be about $179,000. A more modest mid range projection translates into about U.S. $1.72 million, providing Maxim with about $107,000 each month. From another perspective, the well’s payback could easily translate into a potential of between 20 MMCF and 50 MMCF of gas per day, or up to U.S. $35,000 per day.

These targets are located in a prolific gas field where multiple gas-bearing formations have already been found. Significantly, the well is situated in close proximity to a past mismanaged well that briefly revealed the tantalizing economic viability of the Cotton Valley Pinnacle Reef. Drilled ten years ago by the major oil company, Amoco, the Morris Unit No. 1 Well test well flared over 35 MMCF (about U.S. $24,000) per day from 288 feet of pay zone before it was shut-in due to engineering mistakes that damaged the well. In fact, the Morris Unit No. 1 well was only drilled to around 12,700 feet and therefore only tested the upper portions of the reef and not the middle of the reef where the seismic data suggests there is substantial gas. Most importantly, the seismic data suggests that the reef is 100 acres wide at its crest and broadens out to 200-300 acres in size at its mid point.  

An assessment report written by Kevin Smith, a geological consultant to Petrox, arrived at an equally compelling conclusion:  “The Morris well appears to have found the reef and had significant gas shows in the upper portion of the reef….The prospect is very well defined both geologically and geophysically….Substantial gas is indicated in the middle of the reef.”

“The entire reef may be in the order of 2,500 feet….The entire footprint of the feature covers in excess of 200 acres….A well in this location seems to have a relatively low risk of establishing “new discovery” gas reserves, possibly exceeding 300 BCF from the Cotton Valley age portion of the feature and has the potential for even larger reserves from the lower portion of the reef.” 

By comparison, other analogous successful wells in the region, located as close as four miles to the northwest of the Morris Unit No. 1 Well include the Poth No. 1 and Poth No. 2 wells. Together they have produced 80 BCF to date from the 100-acre Poth Pinnacle Reef which is only about one-third of the apparent size of the Cotton Valley Pinnacle Reef target. Similarly, the Marathon Marshall No. 1A well historically produced as much as one billion cubic feet of gas per month from a formation that is only half the size of the Cotton Valley Pinnacle Reef target.

Needless to say, the significance of the Morris Unit No. 1 well’s potential was not lost on Amoco at the time of its drilling. The industry heavyweight deemed the Cotton Valley Pinnacle Reef an important discovery. Hence, Amoco followed-up with a 160-square-kilometre 3-D seismic shoot over the whole area in order to identify the best locations to drill other off-set wells into this prolific formation. As a result of this sub-surface scan of the regional geology, Amoco was sufficiently impressed with the results to lease in excess of 50,000 acres with a view to drilling a number of additional wells.

However, fate intervened with the takeover of Amoco by British Petroleum. The British energy industry powerhouse had a strategic aim to divest itself of all of Amoco’s continental U.S. assets, regardless of their merit. And that included the Leon County properties. In due course, Petrox acquired the most prospective leases in the area. Armed with Amoco’s millions of dollars worth of geological data, Petrox invited several joint venture partners, including Maxim, to participate in the drilling of a re-entry test well into the Cotton Valley Pinnacle Reef.

This drill program also gives Maxim exposure to several other hydrocarbon formations that overly the deepest prospect — all of which are located at different strata between 11,000 feet and 16,560 feet. In other words, if the drilling into the biggest and deepest target fails to produce the desired results, then there is a strong likelihood that the well may produce from one or more of these other formations or pay zones. Indeed, Petrox’s geologists  suggest that collectively the multiple gas zones exhibit the potential for at least a decade’s worth of production and as many as 20 years or more. And these estimates are based solely on the prospect of stimulating production from the upper porosity cycle in the Cotton Valley Pinnacle Reef. Interestingly, seismic data and past drilling logs also suggest that there is a good probability of encountering a lower porosity cycle that could even double the well’s projected collective gas reserves far beyond the base reserves target of 300 BCF.

Additionally, the syndicate’s large lease holdings have the potential to host at least five more contingent Cotton Valley Pinnacle Reef drill locations, assuming that the initial re-entry test hole comes up trumps. In fact, Petrox’s President, William Buck, estimates that each individual offset well could host reserves of between 60 to 100 BCF of gas.

Furthermore, there is an added sweetener in the form of the Smackover Pinnacle Reef that is some 2,000 feet deeper at around 19,500 feet. Seismic data suggests that it may offer the ultimate payday as it is believed to be at least three to four times the size of the Cotton Valley Pinnacle Reef, according to Petrox’s president, William Buck. If all goes according to plan, this target would likely be the focus of the syndicate’s next big drill play. It therefore would present Maxim’s shareholders with another stellar opportunity. 

In terms of infrastructure in the area, a major logistical advantage presents itself in the form of two gas pipelines that both pass within a mere 7,000 feet of the Warhawk No. 1 Well location.

Summing up the overall opportunity for Maxim and its partners, Brown assumes the tone of a man who knows how to play the odds: “We’re confident that we’re likely to end up producing from a couple of major pay zones at the very least,” he says.

“But a success with the deeper target could really put us on the map and provide Maxim with the opportunity to become a mid-tier oil & gas company on an expedited timeline.”

The prospect of generating serious cash flow from Maxim’s stake in these Texas projects should offer the Company a financial springboard to embark upon other high-impact drill projects elsewhere in the world. One them is the offshore B7/38 Project in the Chumphon Basin in the Gulf of Thailand. The property is 100% owned and operated by Black Swan Petroleum Ltd. — an oil & gas junior in which Maxim owns a 20% interest. The 9,238-square-kilometre petroleum concession offers three well-defined drill prospects within a proven hydrocarbon-rich field. Notably, other companies have already made several impressive oil & gas discoveries in this largely unexplored region off the coast of eastern Thailand.

From a technical standpoint, Maxim Resources has a tight share structure with about 6.2 million shares outstanding (approximately 31.8 million fully diluted). Such a situation, matched with good news flow, typically acts as a catalyst to higher share price multiples. 

Maxim’s stock is presently “treading water” in the low end of its trading range largely as a result of a lack of compelling news in recent months. However, SmallCapMedia believes that the advent of two exciting drill programs this summer should revitalize the Company’s languishing share price while also offering investors two unprecedented opportunities for “home run” successes. Accordingly, SmallCapMedia believes that Maxim is primed to be a strong performer during the balance of 2005 and beyond.