Britain’s oil and gas company Regal Petroleum Plc with assets in Ukraine has acquired the acquisition of Arkona Gas-Energy LLC, which holds the Svystunivsko-Chervonolutskyi exploration license in Poltava region for $8.63 million, the company has reported on the London Stock Exchange (LSE).
The acquisition was completed on Tuesday pursuant to an acquisition agreement made between the company and Igor Mychko, Oleksandr Neschchotnyy, Dmitro Volonets and Oleg Olkhovoy to acquire a 100% shareholding interest in Arkona.
A first tranche is $4.315 million (less certain adjustments for debt liabilities) paid on completion.
A second tranche is $2.158 million payable on satisfaction of certain conditions including the favourable resolution of a third party claim against Arkona relating to the licence, the absence of any contractual, warranty or indemnity claims, and the delivery of certain documentation by the sellers.
A third tranche is $2.158 million payable in 12 months from the date of payment of the second tranche, provided that if the conditions for payment of the second tranche are not satisfied, then neither the second tranche nor the third tranche shall become payable.
According to Geoinform Ukraine, the license of Arkona is in effect until May 18, 2037.
Regal said that the license is prospective for gas and condensate, and has been the subject of exploration since the 1980s, with five wells having been drilled on the license since then, although none of these wells are currently on production. According to the recorded information on the Ukrainian State Balance of Natural Resources as at January 1, 2020, the license has hydrocarbon reserves of approximately 38.0 MMboe (4.9 billion m3 of gas and 0.86 Mtonnes of condensate). Whilst the company has undertaken a detailed review of the available technical data relating to the license, which is considered supportive of such assessment of hydrocarbon reserves, it should be noted that such hydrocarbon reserves have not been verified by an independent reserves assessor, Regal said.
The company now intends to undertake development planning for the license, and envisages that this will include the commencement of a new well within the next 12 months, with drilling and completion operations expected to take up to a further 12 months.
Regal Petroleum Plc with assets in Ukraine in the second quarter of 2019 increased its average daily production of hydrocarbons on the Mekhediviska-Golotvschinska (MEX-GOL), Svyrydivske (SV), and Vasyschevskoye (VAS) gas condensate fields by 44%, or 1,244 barrels of oil equivalent (boepd) compared to the second quarter of 2018, to 4,073 boepd. According to a report by Regal on the London Stock Exchange’s website, in particular, the average daily production of hydrocarbons in April-June of this year on MEX-GOL and SV deposits amounted to 3,113 boepd (up by 40.2% compared to Q2, 2018), on VAS some 960 boepd (57.6% more).
The total average daily production of natural gas on the three fields in April-June 2019 amounted to 521,023 cubic meters (41.5% more), condensate some 97.9 cubic meters (58.9% more), and liquefied natural gas (LPG) some 40.5 cubic meters (47.3% more).
“At the MEX-GOL field, the drilling of well No. 119 is continuing, having reached a depth of approximately 4,789 meters. The well has a target depth of 4,850 meters, with drilling, completion and testing operations planned to be completed by the end of September 2019 and, subject to successful testing, production hook-up during the fourth quarter of 2019,” the statement reads.
In 2018, Regal increased its average daily production 67% at the first two fields (to 2,717 boepd) and 11.2% at the third one (to 674 boepd).
Pelidona Services Limited (Cyprus) from Smart-Holding of Ukrainian MP and businessman Vadim Novinsky has increased its stake in Regal Petroleum Plc with assets in Ukraine from 54% to 82.65%, and companies from the EastOne Group of Ukrainian businessman Victor Pinchuk sold the shares to the Smart-Holding’s company.
“A stake in the amount of 91.868 million shares was bought out from the major shareholder of Regal Petroleum Plc – Kylestone Limited – as part of the implementation of Smart-Holding’s fossil fuel production business development strategy. Pelidona Services Limited does not intend to continue the further buyout of shares in the market,” Smart-Holding said in a press release of on Friday.
“We confirm the fact of the deal to sell Regal Petroleum’s shares. The transaction was carried out as part of the portfolio strategy of the EastOne Group. We remain in the oil and gas sector of Ukraine, continue focusing on the development of assets under the group’s mandate, and exploring new opportunities,” EastOne, which includes Geo Alliance Group, a large gas and condensate producer in Ukraine, told Interfax-Ukraine.
According to the information on the London Stock Exchange (LSE) website, on the AIM platform where Regal Petroleum shares are traded, their quotations on June 20 (closure) were 39.95 pence. At that price the transaction could be valued at GBP 36.7 million (about $46.6 million).
“The results of the transaction will not affect the corporate governance of Regal Petroleum and its status as a public company. No changes are planned for the board of directors,” Smart Holding said in the press release.
The holding said that Regal Petroleum shows good performance and will continue being the basis of gas production, and its development strategy provides for both organic business growth by increasing production at existing fields and the acquisition of new assets.
“Smart-Holding is confident that deeper integration with public platforms for placement of shares is a tool for increasing capitalization, this will give gas production businesses greater stability and will open additional opportunities for mutually beneficial cooperation with new institutional investors,” Smart-Holding said.
In a stock exchange report on Friday, the majority shareholder said that the long-term development and growth of Regal Petroleum at AIM may also include expanding the shareholder base in the future.
Regal Petroleum Plc with assets in Ukraine in Q2 2018 increased average daily production of gas, condensate and LPG at the Mekhediviska-Golotvshinska (MEX-GOL), Svyrydivske (SV) and Vasyschevskoye (VAS) gas and condensate fields by 58.6% or 1,045 boepd, to 2,829 boepd.
The company reported on the website of the London Stock Exchange (LSE) on Wednesday, average daily production of gas, condensate and LPG from the MEX-GOL and SV fields for the period from 1 April 2018 to 30 June 2018 was 281,599 m3/d of gas, 55.4 m3/d of condensate and 27.5 m3/d of LPG (2,220 boepd in aggregate).
Average daily production of gas and condensate from the VAS field for the period from April 1, 2018 to 30 June 2018 was 86,728 m3/d of gas and 6.2 m3/d of condensate (609 boepd in aggregate).
At the VAS field, the VAS-10 well has reached a depth of 3,380 metres, where drilling has been concluded. Subject to successful testing, it is intended to hook the well up for production testing by the end of the third quarter of 2018.
In addition, the company said that At the MEX-GOL and SV fields, workover operations are underway on the SV-12 well. This well is a suspended well owned by NJSC Ukrnafta. The company has entered into an agreement with NJSC Ukrnafta under which the company has agreed to workover the well, and if successful, gas and condensate produced from the well will be sold under an equal net profit sharing arrangement between the company and NJSC Ukrnafta.
At 30 June 2018, the company’s cash resources were approximately $40 million, held as $15.9 million equivalent in Ukrainian hryvnia.
Regal Petroleum Plc with assets in Ukraine in 2017 saw a net profit of $2.29 million, while in 2016 its net loss was $1.26 million. According to a report by Regal posted on the website of the London Stock Exchange, its revenue in the past year increased by 36.6%, to $35.05 million.
Of this revenue, gas accounted for $24.94 million (a year earlier $16.53 million), condensate for $7.96 million ($5.7 million), and LPG for $2.16 million ($3.43 million).
Taking into account exchange rate differences, Regal’s total profit for 2017 was $1.04 million against the cumulative loss of $7.26 million for 2016.
The company said its operating cash flow in 2017 compared to 2016 grew by 80%, to $18 million, and the average gas price rose from $213 per 1,000 cubic meters to $241 per 1,000 cubic meters, condensate from $51 per barrel to $67 per barrel, LPG from $43 per barrel to $56 per barrel.
Regal notes at the end of 2017 the average daily production of hydrocarbons stood at 2,800 barrels of oil equivalent per day (boepd), which is about 65% more than at the end of 2016.
At the same time, the company’s capital investments last year fell to $4 million from $13.9 million a year earlier.