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Financial Times: Regal to develop Ukrainian gas

By Maggie Urry
Published: January 25 2008 02:00 | Last updated: January 25 2008 02:00

Regal Petroleum’s colourful stock market career took a further twist yesterday when it said it would raise £80m from a placing to develop its Ukrainian gas reserves.

The oil and gas company also revealed that it had been the subject of investigations by the Financial Services Authority and the London Stock Exchange over the failure of its Greek oil exploration, which in 2005 led to a sharp fall in the share price and the ousting of the group’s founder Frank Timis, who was chairman and chief executive.

David Greer, who was appointed chairman and chief executive last November, said he had been working hard to “move away from [Regal’s] somewhat chequered past” and deliver value for shareholders. He said he was unable to comment on the regulatory issues because of confidentiality agreements.

“The company doesn’t Google well,” the former Royal Dutch Shell executive said yesterday. But he has decided not to change its name.

“To change the name now would be like putting lipstick on a gorilla,” he said. The company said the investigations had closed as the LSE intended to refer the “alleged breaches” of two AIM rules between June 2003 and June 2005 to its AIM disciplinary committee. A conclusion would take at least six months.

Mr Greer joined Regal the day after the company called off a deal arranged with Shell his onetime employer.

Shell was poised to take a stake in and fund the development of Regal’s two gas fields in Ukraine.

The company believes that the Ukrainian gas assets can take advantage of rising gas prices in the area where there is an energy shortage. Mr Greer said: “We believe we could deliver more shareholder value by doing it ourselves.”

The proceeds of the placing would fund heavy investment during the next two years.

At the end of that period the business would turn cashflow positive and be able to fund itself.

Mr Greer said he had given a commitment to investors not to issue equity unless an attractive acquisition opportunity arose.

As well as funding the exploitation of the Ukrainian assets, the placing would provide working capital.

At the end of December the group had $5.6m in cash and had drawn on $9m (£4.6m) of a credit facility.

The placing is conditional on shareholder approval at a general meeting.

The company said it had been oversubscribed by institutional investors.

The placing price was set at 150p, a small premium to Wednesday’s close of 147½p. The shares rose yesterday to 149p.

Greer’s mission to change perceptions of Regal

David Greer, Regal Petroleum’s new chairman and chief executive, has made it his mission to change perceptions of the oil and gas group, writes Maggie Urry.

Regal said it had come to an agreement with Frank Timis, its founder and former chief executive and chairman, which allowed the company to carry on business “independently of Mr Timis and his associates”.

Mr Timis still holds 19.95 per cent of the shares. However, his stake will be diluted by an £80m share placing, which represents 39.5 per cent of the existing capital.

Mr Timis is known as a colourful character, whose past includes three narcotic convictions, including two for the possession of heroin with intent to supply.

As part of the effort to distance Regal from its past, Mr Greer has brought in new management and hired new advisers.

Strand Partners has replaced Evolution Securities as the company’s nominated adviser.

The group listed on Aim in 2002, raising equity at 60p a share. In April 2005 it placed shares at 390p a share, but the following month announced that its Kallirachi 2 well in the Aegean Sea had not found commercial quantities of oil.

The shares fell 60 per cent in one day and Mr Timis then left the board in June.

He appeared to regain control of the group in 2006 when his associate Paul Morgan was installed as chairman and chief executive.

However, Mr Morgan resigned his post after four months citing “personal reasons”.

Lombard, Page 18
Copyright The Financial Times Limited 2008

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