www.regalpetroleum.co.uk
Regal Petroleum's primary assets are two large gas and condensate fields in Ukraine - the Mekhediviska-Golotvschinska (MEX-GOL) field and the Svyrydivske (SV) field located in the prolific Dneipner-Donets basin in the north east of Ukraine. Regal is the operator of the assets and there are currently 5 production wells on the assets. Secondary to this, but still significant, are two large exploration blocks in Romania, the Barlad and Suceava Blocks, where Regal holds a 100% and 50% interest respectively.
Regal Petroleum also has a 25% non-operated joint venture in Egypt with Apache Khalda Corporation LDC, where an exploration well tested positively for oil in September 2007 and was tied in as a producing well in June 2008.
Regal Petroleum: New twist in Ukrainian takeover stand-off
Victor Pinchuk’s alternative proposal to acquire Regal Petroleum (LON:RPT) could create a much larger, AIM-listed, Ukrainian oil and gas firm.
This morning Regal revealed that it has been in talks with the Ukrainian oligarch, who has made alternative proposals to buy the company, instead of the 24 pence per share recommended bid from Energees Management.
Pinchuk, via Cyrus incorporated vehicles Heamoor and Geo-Alliance, is prepared to out-bid Energees. He is prepared to pay 25 pence per Regal share via two alternative proposals.
One proposal sees a reverse takeover into Geo-Alliance - which itself owns 16 oil and gas fields in Ukraine - with an option for shareholders to sell their shares at 25 pence for three months. The other would be a straight cash takeover, also priced at 25 pence.
Throughout its colourful, and sometimes tumultuous, past things have rarely been straightforward for Regal Petroleum and with Energees’ cash bid set to close next week and a potential counter-bid lingering in the background, this isn’t likely to change any time soon.
At the moment there are several possible outcomes for Regal.
Firstly, and perhaps the most straightforward, is that sufficient numbers of investors accept the recommended 24 pence takeover bid from Energees. The company would then be sold to the Ukrainian firm.
This afternoon, presenting itself as the proverbial bird-in-hand, Energees responded to the latest twist by reiterating its position.
The Ukrainian group reminded investors that it is still the only firm bidder for Regal.
In a plea to Regal’s investors on the London Stock Exchange, Energees emphasised that Pinchuks alternative proposals are complex, they are subject to ‘substantial conditionality’ and they carry significant risks.
This deal would combine the assets of both Ukrainian oil and gas firms. Geo-Alliance owns 16 gas fields in Ukraine.
In a separate statement to Regal’s investors on the London stock exchange, Geo-Alliance highlighted that it produced around 810 million cubic metres of gas per day in the fourth quarter of 2010. The firm plans to expand this further with a new well slated for February.
These assets would undoubtedly provide a boon to Regal’s current operational situation, which has come to a standstill after it experienced a number of problems.
Firstly it ran into technical gas recovery issues, with gas output from new wells failing to meet expectations. It has since carried out a full review of its operations. The review concluded that the development of its Ukrainian asset requires further technical studies and it would need to trial alternative well completion technologies - such as hydraulic fracturing.
The company has also been involved in a drawn out dispute with the Ukrainian authorities, which resulted in a suspension order being issued by the Ukrainian Ministry of Environmental Protection. Consequently the Ukrainian assets are currently shut-in and production and development work is suspended.
Pinchuk’s other proposal would see the oligarch trump Energees cash bid with a comparatively simple 25 pence per share cash takeover bid.
Another possibility would be the least attractive for Regal’s investors.
Should the Energees offer fail to receive the necessary level of support then it may choose to let the offer expire - it could extend it too – and without a firm offer from Pinchuk this may send Regal’s share much lower as the ‘bid premium’ evaporates.
Regal stressed that it is currently trying to secure a superior offer from Heamoor and Geo-Alliance, but there can be no guarantee that a firm offer will be put to shareholders. It emphasised that timing was a key factor due to the complex nature of Pinchuk’s proposals,
The company said: "the board of Regal continues to recommend the Energees Offer until such time as a superior firm offer is put forward to Regal shareholders.”
Regal's shares were this morning suspended on AIM.
