LONDON (Alliance News) - Regal Petroleum PLC Tuesday said it is spreading the risk by diversifying its banking arrangements in Ukraine, as the company has built up a large cash holding of Ukrainian hyrvnia over the last year due to banking restrictions in the country.
Regal also said it has received guarantees from its main Ukrainian bank about the company's deposits in the bank.
Regal shares closed up 5.7% at 4.49 pence on Tuesday, having reported the news prior to the market close in London. Later, the company reported a USD8.1 million pretax profit for 2014, compared with a USD162.9 million pretax loss in the prior year, when it was hurt by asset impairments in connection with the crisis in Ukraine.
The oil and gas exploration and production operating in Ukraine said major disturbances in Ukraine over the past 18 months have led to a significant deterioration of Ukraine's finances and volatility in financial markets, causing a substantial depreciation of the Ukrainian hryvnia against major foreign currencies.
"Due to the banking restrictions...the company and its subsidiaries are unable to remit funds outside Ukraine, which has resulted in the group's cash holdings of Ukrainian hryvnia increasing substantially over the past year," said the company in a statement.
As a result, Regal said it has started to diversify its banking arrangements between a number of banks in Ukraine to try to "spread the risk associated with the Ukrainian banking sector".
Regal said it has a number of current and deposit accounts with PJSC Unex Bank as part of its normal banking arrangements. On Monday, the company had USD14.3 million worth of Ukrainian hryvnia held in its accounts with PJSC Unex.
Unex is a Ukrainian bank operating in 18 regions of Ukraine and is part of the PJSC Smart-Holding Group, which is ultimately controlled by Vadim Novinskiy, who also controls an indirect 54% majority shareholding in the company.
"As a result of the company's relationship with Smart, given events within Ukraine and the impact on the banking system, the company has been able to obtain additional assurances regarding the security of its cash deposits in Unex, including a representation letter from Unex advising that it continues to fulfil all regulatory requirements of the National Bank," said Regal.
On Tuesday, Regal said it entered into an agreement with Smart for the provision of a guarantee and security over certain assets of Smart in respect of Regal's cash deposits in Unex.
"In light of the significant pressures on the Ukrainian banking sector and on the Ukrainian economy generally as outlined above, the support and security provided by Smart to the company in respect of its cash deposits in Unex is welcome," said the company.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
Updated By Samuel Agini; samagini@alliancenews.com; @samuelagini
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