By Rebecca Bream
Published: September 15 2007 03:00 | Last updated: September 15 2007 03:00
Regal Petroleum, the Aim-listed oil and gas group founded by Frank Timis, yesterday unveiled a long-awaited deal to develop its Ukrainian gas fields.
Regal said it had signed a memorandum of understanding with MND Exploration and Production, a private Czech oil company, that would involve MND receiving a 50 per cent stake of Regal’s Ukrainian gas assets in return for a commitment to spend $330m (£163m) on their development.
Regal’s shares rose to 250p over the summer as market speculation suggested that Royal Dutch Shell or JKX Oil & Gas were keen to take on the Mekhediviska-Golotvschinska and Svyrydivskegas fields, Regal’s main assets. But following news of the agreement with MND yesterday the stock closed down 14p at 217p.
Frank Scolaro, Regal’s chairman, said the market had not fully appreciated the merits of the agreement with MND. “The development of these assets is now fully funded, Regal not only doesn’t have to put a penny into the assets, but it can take money out.” He said MND had agreed to pay Regal about $25m cash on top of the pledge to spend $330m on developing the two gas fields, which would boost Regal’s cash balance to $35m.
Mr Scolaro said there had been five companies interested in developing the fields, including Shell, but that talks with Shell had broken down because it wanted a much bigger equity stake in the projects.
Regal hopes to produce 40,000 barrels of oil equivalent per day (boepd) from the two Ukrainian gas fields by early next decade, up from the current 1,200 boepd.
Last year, Regal’s Ukrainian assets were at the centre of a court battle with its former joint venture partner CNGG, a Ukrainian government agency.
CNGG challenged the legality of Regal’s gas production licences and last year Mr Scolaro hired Dmytro Gelfendbeyn, a Ukrainian consultant, to help win the case. Mr Scolaro agreed to convert an investment of $100,000 from Alberry Limited, a BVI-registered company run by Mr Gelfendbeyn, into $50.9m of Regal shares if the case was settled in Regal’s favour.
In December the Ukrainian Supreme Court dismissed CNGG’s claims. Earlier it had emerged that Alberry Limited was in fact largely owned by CNGG, along with NAK Nadra, a Ukrainian state oil company. Mr Scolaro said yesterday that Alberry Limited was “happy” with the MND deal.
Copyright The Financial Times Limited 2007