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Shell walks away from Regal deal



By Upstream staff 

Anglo-Dutch supermajor Shell has pulled out of a deal - unveiled just last week - to take a 51% stake in the Ukrainian gas assets of UK explorer Regal Petroleum, following Regal's surprise appointment of a new chief executive.

"Our memorandum of understanding with Regal was agreed with the previous management team. The management change of yesterday at Regal was not expected by Shell," the Anglo-Dutch oil major said in a statement.

On Thursday last week, Regal said chairman Francesco Scolaro and chief executive Neil Ritson had resigned and that David Greer - until recently a senior Shell employee - would take on both roles.

Since October 2004, Regal has had four chief executives and an executive chairman resign from its board.

A Shell spokeswoman told Reuters the sueprmajor had taken note of an interview Greer gave to the Financial Times, in which he suggested Regal was no longer keen on the sale.

"We see from the new management's comments that they may have changed their thinking on this transaction. Regal have indicated that they would like to review options. Therefore we have decided not to proceed with the MOU with Regal," Shell said in a statement.

Greer told the Financial Times in an interview that the Shell deal had to be compared against other ways of funding the development of the Ukrainian fields.

Analysts have questioned whether Regal has enough cash to work at the fields itself. Greer told the newspaper one solution could be for Regal to issue new shares.

No one was available for comment at Regal, Reuters said.

Regal's Ukrainian assets have been the centre of legal disputes for over two years.

The licences were awarded in 2004. In June 2005, the company was informed by a previously unknown Hong Kong-based company called Peak Resources that Peak had an option to buy the assets.

The option was agreed by former executive chairman Frank Timis without the board's knowledge.

Timis, who remains Regal's largest shareholder, was forced out of Regal's management in 2005 after a Greek oilfield Regal said contained up to 1 billion barrels turned out to be dry.

In May 2006 Regal said the option had been terminated.

However, by this stage the company was in litigation with a former partner over ownership of the fields.

In 2005 a Kiev court ruled Regal's licence was not valid.

Regal lost two appeals against this ruling before entering into an agreement with British Virgin Islands-registered company Alberry to help have the licences upheld.

In return for this service, Alberry was invited to buy 15% of the company which held Regal's Ukrainian assets for £100,000 ($206,000). Regal agreed to buy the stake back for $51 million if Alberry's efforts proved successful.

In December 2006, Regal announced all actions had been dismissed by the Ukrainian supreme court.

In June this year, Regal said it paid Alberry 13,910,623 Regal shares - worth £30 million at the time - to buy back the stake.

Monday, 26 November, 2007, 06:20 GMT  | last updated: Monday, 26 November, 2007, 06:20 GMT

Rethink: at Shell
 

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