TIDMRPT
RNS Number : 2119D
Regal Petroleum PLC
05 July 2016
5 July 2016
Regal Petroleum plc
("Regal" or the "Company")
Related Party Acquisition
and Termination of Bank Security Arrangements
Regal Petroleum plc (AIM: RPT), the AIM-quoted oil and gas
exploration and production group, announces the acquisition of LLC
Prom-Enerho Produkt ("PEP") and the proposed termination of its
security arrangements relating to its banking facilities with PJSC
Unex Bank ("Unex") in Ukraine.
As announced on 26 May 2015, the Company and its subsidiaries
(the "Group") hold a number of bank accounts with Unex, which is a
Ukrainian bank and is part of the PJSC Smart-Holding Group
("Smart"), which is ultimately controlled by Mr Vadim Novinskiy,
who also controls an indirect 54% majority shareholding in the
Company. As such, both Unex and a number of Smart group companies
are considered to be related parties of Regal pursuant to the AIM
Rules for Companies ("AIM Rules").
On that date, the Company entered into an agreement with Smart
(the "May Agreement") for, inter alia, the provision of a guarantee
and security over certain assets of Smart in respect of the Group's
cash deposits in Unex. These comprise (i) a guarantee from Pelidona
Services Limited ("Pelidona") to Regal under which the Group's cash
deposits in Unex are guaranteed (the "Guarantee"); and (ii) a share
pledge agreement between Energees Management Limited ("Energees")
and Regal under which Energees pledges its 100% shareholding
interest in PEP as security for the Group's cash deposits in Unex
(the "Pledge"). As announced on 29 February 2016, the May Agreement
was extended until 31 May 2016 and the Guarantee and Pledge were
extended until 31 August 2016.
When the May Agreement was entered into, it was envisaged that
there would be a material reduction in the funds held with Unex by
the end of 2015 and therefore the security, comprising the
Guarantee and Pledge, was set to expire at the end of March 2016
(subsequently extended as described above). However, this reduction
had not occurred by the end of 2015, and as set out in the Group's
Interim Results announced on 28 September 2015, the Group's cash
deposits held in Unex were reclassified as short-term investments,
rather than cash or cash equivalents, as certain requests to reduce
the cash deposits at Unex had not been acted upon.
As at 4 July 2016, the aggregate funds deposited by the Group
with Unex were UAH 307.6 million (approximately US$12.4
million).
As a result of ongoing discussions between the Group and Smart
regarding the funds deposited with Unex, the Group has acquired a
100% shareholding interest in PEP for a cash consideration of UAH
305 million (approximately US$12.3 million) (the "Acquisition"), to
be paid as to (a) UAH 165 million (approximately US$6.7 million) by
way of initial consideration and as to (b) UAH 140 million
(approximately US$5.6 million) by way of deferred consideration to
be paid on satisfaction of certain conditions subsequent relating
to, inter alia, discharge of certain guarantees and sureties given
by PEP and discharge of certain debts owing by and/or to PEP (the
"Conditions Subsequent"), with all such consideration to be paid
entirely from the Group's cash balances in Unex. As a result of the
Acquisition, the Pledge has been discharged. The Guarantee will be
discharged following satisfaction of the Conditions Subsequent
referred to above. To the extent that any of the Conditions
Subsequent have not been satisfied by 31 July 2016, then certain
adjustments will be made to the amount of deferred consideration
payable.
Immediately prior to the acquisition of PEP by the Group, there
was a restructuring of the ownership of PEP, whereby Energees sold
its 100% shareholding interest in PEP to another Smart group
company named LLC Interregional Pellet Company ("IPC"), and the
Pledge was amended to substitute IPC for Energees.
On 4 July 2016, an acquisition agreement was entered into
between, inter alia, IPC and LLC Regal Petroleum Corporation
(Ukraine) Limited, a Ukrainian incorporated Group company, to
acquire a 100% shareholding interest in PEP (the "Acquisition
Agreement"). The Acquisition Agreement contains representations,
indemnities and warranties which are customary for this type of
transaction.
PEP is a Ukrainian incorporated company, which holds a
production licence over the Vasyschevskoye gas and condensate
field, which also includes the Vvdenska prospect, located in the
Dnieper-Donets basin in the north-east of Ukraine. The production
licence was granted in August 2012 with a duration of 20 years, and
is in respect of a 100% interest in the licence.
PEP's audited financial statements for the year ended 31
December 2014 show that PEP's net assets as at 31 December 2014
were UAH 78.9 million and net profits after tax for the year ended
31 December 2014 were UAH 22.3 million. PEP's draft financial
statements for the year ended 31 December 2015 show that PEP's net
assets as at 31 December 2015 were UAH 113.2 million and net
profits after tax for the year ended 31 December 2015 were UAH 34.6
million. As at 30 June 2016, PEP had cash of approximately UAH 15.9
million and debt of approximately UAH 27.8 million owed to a Smart
group company, which the Group assumes and has agreed to pay down
by the end of December 2016.
Regal commissioned an independent assessment of the
Vasyschevskoye gas and condensate field and the Vvdenska prospect
by Synergy (GB) Limited, which assessed the remaining Reserves and
Contingent Resources at the Vasyschevskoye field and the
Prospective Resources at the Vvdenska prospect as at 1 January 2016
(the "Report") as set out below. The Report accords with the March
2007 SPE/WPC/AAPG/SPEE Petroleum Resources Management System
standard for classification and reporting.
The Report estimates the remaining Reserves as at 1 January 2016
in the Vasyschevskoye field as follows:-
Proved Proved + Probable Proved + Probable
(1P) (2P) + Possible (3P)
------------- ------------ ------------------ ------------------
Gas 91.5 MMm(3) 251.5 MMm(3) 448.6 MMm(3)
------------- ------------ ------------------ ------------------
Condensate 6.90 Mtonne 19.0 Mtonne 33.82 Mtonne
------------- ------------ ------------------ ------------------
Total 0.66 MMboe 1.80 MMboe 3.21 MMboe
------------- ------------ ------------------ ------------------
The Report estimates the Contingent Resources as at 1 January
2016 in the Vasyschevskoye field as follows:-
Contingent Resources Contingent Resources Contingent Resources
(1C) (2C) (3C)
------------- --------------------- --------------------- ---------------------
Gas 153.0 MMm(3) 280.3 MMm(3) 515.4 MMm(3)
------------- --------------------- --------------------- ---------------------
Condensate 6.3 Mm(3) 11.4 Mm(3) 20.7 Mm(3)
------------- --------------------- --------------------- ---------------------
Total 158.6 MMm(3) 294.5 MMm(3) 538.0 MMm(3)
------------- --------------------- --------------------- ---------------------
The Report estimates the Prospective Resources as at 1 January
2016 in the Vvdenska field as follows:-
Low Best High Mean
-------------- ------------- --------------- --------------- ---------------
Gas and
Condensate 441.8 MMm(3) 1,078.9 MMm(3) 2,582.6 MMm(3) 1,234.7 MMm(3)
-------------- ------------- --------------- --------------- ---------------
The NPV of the 2P Reserves for the Vasyschevskoye field is
estimated in the Report at UAH 343.9 million. The Report is
consistent with the proposed field development plans for the
Vasyschevskoye field, which comprise continued production from the
existing three wells and the drilling of one additional well to
recover the 2P and 3P Reserves. The additional well is estimated to
cost US$5.9 million. The estimates of Contingent Resources in the
Report are based on the drilling of one further additional
well.
Production from the three existing wells on the Vasyschevskoye
field is currently approximately 87,000 m(3) /d of gas and 5
tonnes/d of condensate (615 boepd in aggregate), which is treated
through PEP's gas processing facility.
Given that Unex, and Smart and its group companies, IPC,
Pelidona and Energees, are related parties to the Company pursuant
to the AIM Rules, the acquisition of PEP, the amendment to the
Pledge and the termination of the Pledge and proposed termination
of the Guarantee are deemed related party transactions pursuant to
the AIM Rules. Accordingly, the independent directors of the
Company, being Keith Henry, Alastair Graham and Adrian Coates,
having consulted with the Company's Nominated Adviser, Strand
Hanson Limited, consider that the terms of (i) the Acquisition,
(ii) the amendment to the Pledge and (iii) the termination of the
Pledge and proposed termination of the Guarantee are fair and
reasonable insofar as shareholders are concerned.
This announcement contains inside information.
For further information, please contact:
Regal Petroleum plc Tel: 020 3427 3550
Keith Henry, Chairman
Sergei Glazunov, Financial Director
Strand Hanson Limited Tel: 020 7409 3494
Rory Murphy / Richard Tulloch
Citigate Dewe Rogerson Tel: 020 7638 9571
Martin Jackson / Shabnam Bashir
Philip Frank, PhD Geology, Chartered Geologist, FGS, PESGB,
consultant to the Company, has reviewed and approved the technical
information contained within this press release in his capacity as
a qualified person, as required under the AIM Rules.
Definitions
AAPG American Association of Petroleum Geologists
boepd barrels of oil equivalent
m(3) /d cubic metres per day
Mm(3) thousands of cubic metres
MMboe millions of barrels of oil equivalent
MMm(3) millions of cubic metres
Mtonne thousands of tonnes
NPV net present value of cash flows discounted
at 15.38%
% per cent
tonnes/d tonnes per day
SPE Society of Petroleum Engineers
SPEE Society of Petroleum Evaluation Engineers
US$ United States Dollar
UAH Ukrainian Hryvnia
WPC World Petroleum Council
The SPE/WPC/AAPG/SPEE Petroleum Resources Management System
document, which includes definitions of Reserves and Contingent
Resources categorisations, can be viewed at:-
www.spe.org/spe-app/spe/industry/reserves/prms.htm
This information is provided by RNS
The company news service from the London Stock Exchange
END
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