Regal counts the cost of Ukrainian dispute

28th Sep 2011 12:16

Regal Petroleum has restarted operations in Ukraine following a period of severe uncertainty over the fate of the company.In November 2010 Regal was forced to stop drilling for gas at its sites in eastern Ukraine following a defeat in the courts at the hands of the local authorities for breaching regulations.That forced the company to consider selling its interests in the country. The final deal saw the sale of 54% of the firm's issued capital to Energees - a Ukrainian firm.The newly formed partnership restarted the legal process and successfully had the Ministry of Environmental Protection order revoked on the 8th of July. Within two weeks production had restarted and the latest figures suggest a flow rate of 1,618 barrels of oil equivalent per day.Revenue of $0.2 million for the six months ending 30 June 2011 was entirely derived from Regal's share of gas sales from the company's Suceava licence (Climauti field) in Romania, which came into production in March 2011, as there were no production revenues from Ukraine as a result of the suspension of production.In the first half of 2010, the group had enjoyed revenue of $15.94m.With the profits from its discontinued operations in Romania excluded, Regal saw interim losses before tax widen significantly to $10.2m from $0.9m the year before, as its rigs in the UKraine lay idle. Over the same period, the discontinued operations made a pre-tax profit of $10.8m, versus a loss of $0.5m at the half-year stage last year, largely reflecting the gain of $10.4m made on the disposal of its Bariad concession to US integrated oil giant Chevron.Shareholders, however, will be encouraged by the price Regal is getting since production restarted in July. Currently gas prices within Ukraine are 48% up on 2010 - a significant boost to the firmThe company noted that since the recommencement of production in Ukraine, both operating cash and operating profit have been positive.It now says it will continue to increase production by working over its current wells and by the process known as gas compression.Shares in Regal were down 2.8% in mid-morning trading.BS/JH