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 turns attention back on production after crucial six months
CORRECTION: Updated to reflect changes to 2010 financial comparatives, in accordance with the replacement RNS
Regal Petroleum (LON:RPT) is now focusing its attentions revamping production at its Ukrainian gas projects after it managed to overcome its legal and regulatory problems in the past six months.
In this morning’s interim results statement the company’s chairman Keith Henry reflected on a vitally important period in the group’s recovery.
A lot of progress has been made since Regal’s Ukrainian ‘white knight’ Energees Management Ltd – a part of Ukrainian conglomerate the Smart Group – took a 54 per cent stake in the company back in March.
Since then, with the backing of its ‘new and strong local partner’, Regal continued to challenge the legality of the ministry order, which effectively cancelled the group’s production licences for the Mekhediviska Golotvshinska (MEX-GOL) and Svyrydivske (SV) gas and condensate fields.
And by the start of August it had overturned the cancellation after the District Administrative Court of Kiev ruled that the ministry order was unlawfully issued and ordered its cancellation. Around this time production restarted at the group’s gas fields.
“With these issues apparently behind us, we have been able to resume production and focus our attention on addressing the technical issues arising from the challenging results identified during the 2009 and 2010 drilling programme,” Henry said in a stock exchange statement.
According to Henry, Regal will now be able to manage its current production activities and carry out future field operations in a more cost effective manner, with the support of Smart Group.
He explains that thanks to Smart Regal has added ‘key local staff’ with strong technical expertise and resources.
With the focus now returning to operations, Henry highlighted: “The company implemented a strategic technical review following the disappointing drilling results in 2010.
“Using the experience gained, work has already commenced with the re-starting of our existing wells, endeavouring to enhance production, particularly from those wells that failed to fulfil earlier expectations.
“This will initially be done through a combination of well work-overs and the addition of gas compression. The application of alternative perforation techniques and well stimulation, including fraccing, is also being considered.”
He also added that Regal is planning to restart drilling, but this time it will target recognised reservoirs – referred to as the B-Sands - rather than stepping out further from existing wells or targeting deeper objectives.
However Henry said that this will not exclude further appraisal of the deeper Tournasian sequences – or T-Sands - in the longer term. By drilling the shallower B-Sand wells Regal will use smaller rigs, compared to those deployed over the last three years.
Consequently the expected cost of each well will be significantly reduced and they will offer considerable savings in capital expenditure. Henry did add however that the smaller rigs will take longer to reach target depth.
Regal also plans to make additional investments to upgrade the gas treatment facility so that it can provide LPG recovery and enhance the plant's overall efficiency.
According to Henry, much of the group’s immediate capital requirements will be sourced from operational cash, but if necessary Smart may support further investment directly through shareholder loans.
"Given the short period in which production has re-commenced, and recognising the evolving nature of our operations currently being carried out to improve daily production, no firm decisions or work commitments will be made requiring major capital expenditures until we have a better understanding of the MEX-GOL and SV reservoir performance,” Henry added.
Because production resumed in the current period, financial results for the six months ended June 30 will have little relevance. Nonetheless the group reported a US$0.6 million net profit for the period, compared to a US$3.8 million profit for the same period of last year. This followed a US$10.4 million gain from the sale of the Barlad Concession. At the end of the period it had cash and cash equivalents of US$9.48 million.
Regal restarted production on July 22 2011. As a guide to current operations the group said that in the 7 days ended September 26 production averaged 207,205 cubic metres per day of gas and 52 cubic metres of condensate per day – which equates to 1,618 barrels of oil equivalent in aggregate.
The group said it is currently receiving a gas price of US$379 per thousand cubic metres in Ukraine, which is up 48 per cent on the average price from 2010.
