Another Blow For Regal As It Loses Appeal Over Ukraine Licences

KIEV, Ukraine -- The Court of Appeal in Kiev has delivered the latest hammer blow to Regal Petroleum by refusing to rule in its favour over disputed production licences in the Ukraine.

Regal Petroleum Board of Directors

The decision, which is likely to mean the handing over of Regal's biggest gas producing assets, comes days after former executive chairman Frank Timis increased his holding in the firm. Shares in the trouble-prone group nosedived 60% to 43p after the court upheld an earlier judgment against Regal in favour of state-owned Chernihivaftogasgeologia (CNGG).

Regal was awarded two production licences in July 2004 by the Ministry of Environmental Protection but CNGG, a subsidiary of that ministry, challenged this saying the correct procedures were not followed. The two licences allow it to produce the equivalent of 2,000 barrels of oil per day while its only other output - 1,600 barrels - comes from a field in Greece.

The London-listed exploration and production group has appealed to the Supreme Administrative Court of Ukraine arguing Regal was awarded its licences "in accordance with applicable rules, standards and legislation".

A spokesman said last night that Regal had become "caught in the cross-fire" of political events in the Ukraine with an election looming and a gas row with Russia. "CNGG is a subsidiary of the ministry so this was an internal battle which Regal has become the victim of," said the spokesman.

The company has been through a torrid nine months after admitting a much-hyped well off the coast of Greece was "non-commercial" just three weeks after raising £45m in a share placing.

The news not only knocked 60% off the shares on that day, it also took 12% off the share price of its broker Evolution and led to questions about the valuation on many other small mining stocks.

Mr Timis was eventually forced to stand down from the company following the setback, but he remained as an important investor.

Only last week he appeared to have increased his holding in Regal with the company notifying the London stock exchange that the Timis Trust held 11.3m of the firm's ordinary shares, giving him 8.85% of the issued share capital. The trust had bought more shares last November.

Regal has claimed that the Kallirachi well, discovered this time two years ago, could contain a billion barrels of oil. In the event there was mainly water but Regal emphasised it also had decent producing assets in the Ukraine.

In an attempt to rebuild its damaged reputation, Regal appointed a former Shell geophysicist to be its new exploration director but within six days Christopher Green had quit.

By June it was revealed that Mr Timis had effectively sold off the main assets of the firm without the knowledge of fellow directors or shareholders.

Mr Timis, a 42-year-old Romanian who started off as chief executive and chairman, always cut an unusual figure even in the rough and tumble of the oil world, given he had a conviction for heroin possession.

Regal has exploration rights in Romania and Egypt.

Source: The Guardian


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