Regal Petroleum, the AIM-listed (RPT) oil and gas exploration and production group operating in Ukraine, Romania and Egypt, provides the following operational update and details of new incentivisation arrangements for the Company’s directors and key senior employees.
Company Update
The drilling of MEX-106 and SV-58 in Ukraine, the first in the Company’s series of “new generation” development wells intended to establish additional production from the proven Visean formation reservoirs (“B-sands”) and to appraise and develop the deeper Tournasian formation reservoirs (“T-sands”), remains on schedule with their respective target depths of 5,900 metres and 6,200 metres expected to be reached at the end of July and early September respectively. As at 14 July 2009, MEX-106 had reached a depth of 5,775 metres and SV-58 had reached a depth of 5,153 metres. It is currently anticipated that following completion of drilling, wireline logs will be obtained and initial production testing will be undertaken on both wells during the course of September/October 2009. As a result, the Board of directors (the “Board”) anticipates being able to release preliminary production test results for both wells during the course of September and October.
As previously announced, the Company has for some time been evaluating a number of financing and strategic options with potential lenders and commercial or joint venture partners aimed at strengthening its financial position.
Further to the announcement of 12 June 2009 and the subsequent successful completion of the placing to raise approximately £63.4 million (gross) on 1 July 2009, the Company has now terminated discussions with such potential lenders and strategic partners in relation to possible financing options and joint ventures in respect of its gas and condensate fields in Ukraine or the acquisition of shares in the Company or its subsidiary, Regal Petroleum (Jersey) Limited. As a result, the Company is no longer in a close period for the first time since last year.
In light of current economic and market conditions, the directors believe it is in the best interests of shareholders for the Company to continue with its existing phased development plan, utilising the proceeds of the recent placing and existing cash resources, with a view to achieving a significant increase in production from current drilling activities.
Furthermore, the Board anticipates that as new wells are brought on stream, the resulting increase in operational cash flow should assist the Company in accessing debt and/or similar markets to further increase the pace of development and production by increasing the number of wells in the phased development plan, should the Company wish to pursue this route.
The Company’s unaudited interim results for the six months ended 30 June 2009 are expected to be released on or about 18 September 2009.
Surrender of Share Options and Grant of New LTIP Awards
On 13 July 2009, the Board agreed, following a review of the Company’s existing incentive and reward scheme and a recommendation from the Company’s Remuneration Committee, to move away from the use of options. These recommendations have since been discussed with, and endorsed by, a number of the Company’s shareholders. As a result, it was agreed to afford certain directors and senior employees holding options under the Company’s existing Share Option Scheme the opportunity to surrender their existing options, in full, in exchange for the grant of awards under a new Long-Term Incentive Plan (the “LTIP”) and to grant additional awards in respect of 2009 under the LTIP.