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Financial Times: Regal progress, at last

By Andrew Hill
Published: January 24 2008 19:56 | Last updated: January 24 2008 19:56

When David Greer, Regal Petroleum’s latest chairman and chief executive, refers to the company’s “somewhat chequered past”, he is understating the case. Few public companies have a more variegated recent history.

Nobody expects to get a smooth ride and predictable earnings growth from an Aim oil and gas company. But Regal has jolted even hardened investors in the sector with a succession of top executives, a failed Greek oil exploration, an impenetrable legal battle over valuable Ukrainian assets and on-off negotiations with partners, large and small. Behind it all – sometimes visible, sometimes not – was Frank Timis, Regal’s founder and largest shareholder.

The share placing announced on Thursday looks the best promise yet of putting all this behind the group. Mr Greer’s surprise enthronement as the company’s top executive last November seemed for a while to have tilted the group into crisis. It prompted Royal Dutch Shell, his former employer, to call off talks about investing in development of Regal’s gas fields in Ukraine and could have led to financial meltdown, if no alternative had emerged. But the fact that institutions have already signed up conditionally for the new shares suggests they believe Mr Greer and his new team have what it takes to develop the company without outside help. Simultaneously diluting the stake held by Mr Timis and associates and limiting their influence over the company for at least two years should also give new management breathing space.

As Mirabaud, the company’s broker, pointed out yesterday, Regal shareholders will now benefit from the whole of any increase in value in Ukraine. But the go-it-alone strategy means they would also bear the entire burden of failure. They must, then, hold Mr Greer to a tight timetable. He needs to get modern rigs into Ukraine and prove that the wells are productive within a year. For if the Regal saga has proved anything, it is that what lies underground is far more important to investors than what is happening on the surface.

Copyright The Financial Times Limited 2008

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