RPT.L Regulatory News (RPT)

29 Jul 2005 07:01

Regal Petroleum PLC29 July 2005 Immediate Release 29 July 2005 REGAL PETROLEUM PLC ("Regal" or the "Company") Corporate and Operational Update The Directors announce the following update on corporate and operationalmatters: Greece Operational Update (working interest 95%): the Company is pleased toannounce that John Clinton has been appointed as Managing Director of Kavala OilS.A. ("Kavala"). Mr Clinton is an experienced management professional with asuccessful track record at director level in the international oil industry,particularly in eastern Europe. Previous appointments include Director of INDECO(1998-2005), Managing Director of McDermott Europe (1994-1998), CommercialDirector of Amerada Hess Trading Ltd (1988-1994) and Director of BeatriceResources Ltd (1985-1988). Current stabilised daily production in Greece is approximately 2,300bopd.Following an internal asset and operational review, the Company has adopted aproduction enhancement programme for the Prinos field with the followingtargets: • 3,500bopd by the end of 2005 by performing 3 work-overs/sidetracks; and • 5,000bopd by mid-2006 by performing 4 additional work-overs/sidetracks. In accordance with the recent operational review, the Company has implemented acost reduction programme which has already achieved monthly operational costreductions of approximately $500,000 per month. With current oil prices andrecent cost reductions, operations at Kavala are now cash-flow positive. Ukraine Operational Update (working interest 100%): current pilot production isapproximately 4.4MMscfd and 100bbls of condensate per day. With low operationalcosts, the Ukraine operations continue to be profitable and generate positivecash-flow for Regal. The Company is continuing to work-over existing wells in order to increase pilotproduction in the near term. In 2004 the Company successfully converted its pilot production licences intotwo 20 year full exploitation and production licences: licence 3334 for the MEX/GOL field and licence 3335 for the SV field. Accordingly, the Company iscurrently formulating the full development plan in order to bring the two fieldsinto full production. The combined area of the two licence areas is approximately 269km2, which makesit one of the largest fields in Europe by area. Romania Operational Update (working interest 100%): Suceava Block Following the successful completion of the first exploration well on the4,103km2 Suceava Block in April 2005, a further seismic survey was completedwhich is being interpreted in order to determine the overall prospectivity ofthe Suceava licence area. In conjunction with this seismic analysis, a drillingprogramme is being finalised and it is expected that an exploration well will bedrilled in late 2005. The results of this exploration well will then be analysedto formulate the next stage of the drilling programme. Barlad Block Reprocessing of 800km of existing seismic data has been completed and theacquisition and processing of 500km of new seismic data is continuing on the6,285km2 Barlad Block in order to determine the depositional history. This willimprove lead structure identification and refine mapping of prospects to allowwell locations to be selected. Egypt Operational Update (working interest 100%): a well location has beenapproved by the Egyptian Petroleum Corporation, long lead items have beenpurchased and the Company is currently assessing the availability of drillingrigs. It is expected that drilling will commence in late 2005. The dry hole costof the well is expected to be less than $4 million. In accordance with the Company's asset rationalisation policy, the Company isconsidering its options to reduce its working interest in Egypt. Liberia Operational Update (working interest 25%): the Production SharingContracts for Blocks 8 and 9 were finalised and signed by The National OilCompany of Liberia in June 2005. The Production Sharing Contracts are nowawaiting ratification by the Liberian Government. Audit of Reserves: as announced by the Company on 1 July 2005, work on thereserves reports being prepared by independent auditors on the Company's Ukraineand Greece proven and probable reserves is continuing and it is expected thatthe reports will be finalised in late August 2005. A further announcement willbe made once the final reports have been received. Peak Resources Call Option: the Company announced on 20 June 2005 that it hadbeen notified by solicitors acting for Peak Resources Limited of Hong Kong("Peak Resources") of the existence of a call option ("Call Option") purportingto acquire the entire issued capital of Regal Petroleum (Jersey) Limited, awholly owned subsidiary of the Company and the holder of the Company's Ukraineassets. The Company has sought legal advice and believes that the Call Option isinvalid and unenforceable. The Call Option states that the valuation of the Company's Ukraine assets willbe calculated by applying a price of $1.50 to total proven (P1), probable (P2)and possible (P3) reserves in Ukraine as certified by Ryder Scott Company, L.P.("Ryder Scott"). Ryder Scott are independent reserve auditors which the Companyhas engaged to estimate the remaining reserves of its Ukraine licence areas. As stated by the Company on 1 July 2005, Ryder Scott have not finalised theirreport. However, a preliminary report has been issued on the B reservoirs whichstates proven and probable reserves of 174MMboe. Ryder Scott is currently completing its work to include the proven and probablereserves for the T reservoir sections. Ryder Scott have not been instructed toproduce a certified figure for possible reserves as yet but informal indicationsfrom them suggest that the relatively modest amount of data available at presentfrom the pilot drilling and production phase so far completed on theseconcessions, is quite insufficient for any reasonably meaningful "certified"possible reserve figure to be arrived at under formal SPE/WPC certificationrules. Furthermore, the proven and probable reserve figures are similarlyrestricted by the certification rules. In order to understand the potential value of the field, the Company engagedpetroleum consultants Petro Solutions Ltd to report on potential technicalreserves in the field. Petro Solutions Ltd have indicated technical reserves inthe field are as follows: MMboe Proven producing 11 Proven undeveloped 668 Probable 328 Total technical reserves 1,007 The Directors wish to emphasise that the above technical reserves are NOTaudited reserve numbers and are merely indicative in nature. Should the Company accept the terms of the Call Option, irrespective of itsvalidity, and proceed with any transaction then the consideration payable byPeak Resources would be calculated on certified reserves and is estimated to bein the region of $300 million. The Company believes that this amount issignificantly less than the potential value of the field and, accordingly, doesnot consider a sale on these terms to be in the best interests of theshareholders. Irrespective of the enforceability of the Call Option, if Peak Resourcespersists in this process then the Company would place any outcome that itbelieves not to be in the interests of the shareholders before the shareholdersat an Extraordinary General Meeting for a vote and recommend its rejection. The Company remains interested in selling all or part of the Ukraine assets on afair value basis and accordingly has entered into discussions with PeakResources. Financial Update: as at 30 June 2005 the Group had cash reserves ofapproximately $54 million and the Directors believe that the Company isadequately funded to fulfil its commitments and to implement its approvedprogrammes for its various assets. For further information, please contact: Regal Tel: 020 7408 9500Roger Phillips, Finance Director Buchanan Communications Tel: 020 7466 5000Bobby Morse / Ben Willey Definitions:bbls barrelsbopd barrels of oil per daykm kilometreskm2 square kilometresMMboe millions of barrels of oil equivalentMMscfd millions of cubic feet per daySPE Society of Petroleum EngineersWPC World Petroleum Congress This information is provided by RNS The company news service from the London Stock Exchange