Regal Recommends Cash Offer

Regal Petroleum has recommended that shareholders take up an offer from Energees Investments, the principal holding company of the Smart Holding Group, for the entire issued and to be issued share capital of the Company.

Under the terms of the Offer, Shareholders will receive 24 pence, in cash, for each Regal Share. The terms of the Offer value Regal's fully diluted share capital at approximately £77 million.

The consideration under the terms of the Offer represents a:

• 92% premium to the closing price of 12.5 pence per Regal Share on 24 November 2010, being the last business day before the commencement of the Offer Period;


• 30% premium to the closing price of 18.5 pence per Regal Share on 9 December 2010, being the last business day prior to the Announcement Date, which reflects market reaction and speculation following the announcement of a potential offer for Regal; and


• 56% premium to the average closing price of 15.4 pence per Regal Share for the one month period prior to the commencement of the Offer Period.

The Smart Holding Group is one of the largest group of companies operating in Ukraine, with investments in a wide range of industries, including steel, ferrous raw materials and construction materials.

The Smart Holding Group's long-term strategy is to become the leading diversified natural resources holding company in Ukraine with specific interest in metals & mining and oil & gas. The Group has just reached an agreement on the acquisition of upstream gas properties in Ukraine and sees potential for further consolidation of small to medium-sized gas companies.

The Smart Holding Group believes that its extensive experience, track record of excellence in operating in Ukraine's natural resources space, as well as management with substantial oil & gas expertise will allow it to efficiently develop and integrate the Regal energy businesses into the Group.

Regal's primary assets are the Mekhediviska-Golotvschinska (MEX-GOL) and Svyrydivske (SV) gas and condensate fields located in the Dnieper Donets sedimentary basin in Ukraine. Regal holds a 100 per cent. working interest in, and is operator of, the fields. As announced on 30 September 2010, the Company has entered into a conditional sale and purchase agreement with Chevron Romania Exploration and Production BV (Chevron) dated 29 September 2010 for the sale to Chevron (or a special purpose vehicle to be incorporated by Chevron) of Regal's 100% owned Barlad concession in Romania for a cash consideration of $25 million (excluding VAT and before taxes).

Regal remains subject to a suspension order issued by the Ukrainian Ministry of Environmental Protection in relation to its operations at the MEX-GOL and SV fields. As announced on 17 November 2010 and 1 December 2010, following court rulings against Regal, Regal has shut-in its operations at these fields, which has resulted in the suspension of production and the associated loss of revenue.

Commenting on the Offer, Alexey Pertin, Director of Energees Investments and CEO of the Smart Holding Group, stated that:

'This acquisition will allow us to continue to capitalise on the attractive potential in the further consolidation of small to medium-size gas companies, promoting the Smart Holding Group's specific interest in metals & mining and upstream natural gas investments. The acquisition of Regal will expand the Smart Holding Group's upstream gas properties portfolio in Ukraine and will form an important platform for further growth leading to the creation of a market leader amongst Ukraine-focussed independent E&P players.'

Keith Henry, Chairman of Regal, commented:

'Against the background of operational, legal and funding challenges faced by the Company, and following the results of our strategic review, your Board is pleased to have reached agreement with Energees Management and intends unanimously to recommend shareholders accept the proposed Offer. The Offer provides greater certainty of value to Regal shareholders during this difficult time for the Company.'

For the full offer announcement, click here.

Source: Regal Petroleum