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Financial Times: Shell abandons $410m Regal deal

By Dino Mahtani
Published: November 24 2007 03:49 | Last updated: November 24 2007 03:49

Royal Dutch Shell has called off a $410m (£199m) deal to farm into Ukrainian gas fields held by Regal Petroleum just one day after the controversial Aim-listed oil company announced a sudden change in management.

Europe’s biggest oil company this week agreed a memorandum of understanding with Regal for a 51 percent stake in the two fields. Analysts said the proposition was a good deal for Regal because Shell would have carried all the capital investment costs to develop the assets

But a day later, on Thursday, Regal surprised City analysts when it announced it had replaced its chairman and chief executive and appointed David Greer, an experienced former Shell executive, as chairman and chief executive.

Shell called off the agreement barely 24 hours later, saying it had done so because Regal’s new management had indicated it was reviewing the deal that was agreed with the outgoing management.

“The management change … at Regal was not expected by Shell, and we see from the new management’s comments that they may have changed their thinking on this transaction,” Shell said.

On Thursday Mr Greer told the Financial Times that he wanted to evaluate Shell’s offer and compare it with other funding mechanisms ahead of a “dramatic” drilling campaign he hopes to pull off for the Ukrainian assets. One possibility he mentioned was a share issue, which, shareholders who backed his appointment would support.

Regal’s shares fell on news of the deal on Wednesday, losing 8p on the day, and on Friday fell 23p, or more than 14 per cent, to close at 140p.

Frank Timis, the Romania-born entrepreneur, who holds 20 per cent of Regal said the agreement with Shell was probably not in Regal’s long-term interest.

Copyright The Financial Times Limited 2007

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