(Alliance News) - Regal Petroleum PLC has signed an early agreement to buy two production licences in Ukraine, it said on Tuesday.
A memorandum of understanding has been signed with Lidiia Chernysh and Bolaso Investments Ltd, who each own half of PJSC Science & Production Concern Ukrnaftinvest, or UNI, which holds the Belolisky and Alibeysk-Trapivska licences.
The MoU is non-binding, Regal said, and outlines a plan for the company to buy the licences for up to USD40 million. This would be USD9 million on completing, USD1 million on meeting "certain conditions", and then 25% of the net present value of the proven reserves of the licences, capped at USD30 million.
London-based Regal will pay a USD500,000 deposit as part of the agreement, which will be deducted from the consideration if the deal goes ahead. It did not say how it planned to fund the acquisition.
The two licences are located in the Odessa region of south-western Ukraine. They were granted in 2004 for 20 years, and it will be possible to apply for an extensive.
"The licences are prospective for oil, as well as gas, and have been the subject of exploration since the 1980s, with 24 wells having been drilled on the licences since then. The company has undertaken a detailed review of the available data on the licences, and has estimated there is a substantial oil initially in place volume of approximately 675 million barrels of oil equivalent," said Regal.
"The company and the sellers are to agree a work programme to appraise the licences, which will include the drilling of up to three wells, subject to satisfactory results of each well."
Regal already operates three gas and condensate fields in the country: Vasyschevskoye, Mekhediviska-Golotovschinska, and Svyrydivske. All three are in the development stage.
Regal shares were 0.8% lower on Tuesday morning in London at a price of 24.80 pence each.
By George Collard; georgecollard@alliancenews.com
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