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The Wall Street Journal: Shell Abandons Deal For Ukraine Oil Sites

Regal’s Shake-Up
Of Management
Comes as Surprise
A WALL STREET JOURNAL NEWS ROUNDUP
November 26, 2007; Page A14

LONDON — Royal Dutch Shell PLC said it won’t proceed with an agreement reached days ago to acquire the Ukraine assets of United Kingdom-listed Regal Petroleum PLC, following Regal’s surprise move to appoint a new chairman and chief executive.

Shell spokeswoman Eurwen Thomas said the management change at Regal “wasn’t expected by Shell, and we see from the new management’s comments that they may have changed their thinking on this transaction.”

She said that Regal, a U.K. oil-and-gas company, “indicated that they would like to review options. Therefore we have decided not to proceed” with the memorandum of understanding.

On Wednesday, Shell signed a memorandum of understanding with the previous Regal management. The Anglo-Dutch oil company agreed to pay $50 million to Regal upfront for a 51% stake in the company’s Ukranian gas and condensate field licenses. Shell also agreed to invest $360 million to develop the fields as part of the purchase.

On Thursday, Regal said Chairman Francesco Scolaro and CEO Neil Ritson had resigned and that David Greer — until recently a senior Shell employee — would take on both roles.

Mr. Greer was most recently deputy CEO of Sakhalin Energy Investment Co., controlled by a Shell until March of this year. He resigned after one of its motivational memos was leaked to the media.

Oil analyst Tony Alves of brokerage house KBC Peel Hunt in London said Shell’s decision to walk away from the decision doesn’t bode well for Regal Petroleum. The oil-and-gas company now has “no way of financing the drilling of the fields” in Ukraine.

No one was available for comment at Regal.

Regal shares dropped sharply in London after news the memorandum of understanding had been canceled, closing down 14% to £1.40 ($2.89).

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