5th Jul 2016 10:24
LONDON (Alliance News) - Regal Petroleum PLC Tuesday said it has found a solution to its long-running issue regarding the funds that are held in a Ukrainian bank that it has been unable to access after agreeing to use the funds to acquire a producing company.
Regal has been attempting to recover or at least safeguard the funds it held in Unex, a Ukrainian bank that is ultimately controlled by Vadim Novinskiy, who also controls an indirect 54% majority shareholding in Regal.
The money was inaccessible as a result of banking restrictions that were introduced after major disturbances in Ukraine led to a significant deterioration of Ukraine's finances and volatility in financial markets, causing a substantial depreciation of the Ukrainian hryvnia against major foreign currencies.
Back in May 2015 when Regal first revealed the issue, it said it had around USD14.3 million worth of Ukrainian hryvnia held in its accounts with Unex and Regal sought to secure guarantees and provisions from the bank and associates that the funds within the bank would be safeguarded.
Unex agreed to provide those guarantees back in May 2015, with one of Unex's subsidiaries agreeing to pledge its 100% holding in LLC Prom-Enerho Produkt, a producing oil and gas company.
Regal was expecting the value of the funds held in Unex to deteriorate due to the depreciation of the Ukrainian hryvnia by the end of 2015, causing concerns about the guarantees offered by the bank and its associates - but Regal said this had not happened as anticipated.
On Monday, Regal's funds in Unex were equal to a value of USD12.4 million - just over a 13% fall in value from the original amount declared in May 2015.
Unex and Regal have now come to an agreement that should settle the long-running issue. Regal will acquire the producing oil and gas company that was offered as a guarantee and use the funds held and locked-in at Unex to fund the transaction.
Regal will purchase Prom-Enerho Produkt for a total of USD12.3 million, broken down into an initial payment equal to USD6.7 million and a USD5.6 million payment once certain conditions have been satisfied, including the discharge of certain debts at the company.
The entire consideration will be funded from the money held in Unex and, once completed, Regal will end its agreements with Unex and its associates.
Prom-Enerho Produkt holds a production licence over the Vasyschevskoye gas and condensate field, which also includes the Vvdenska prospect, located in the Dnieper-Donets basin in the north-east of Ukraine. The production licence was granted in August 2012 with a duration of 20 years, and is in respect of a 100% interest in the licence.
The company holds proven reserves of 660,000 barrels of oil equivalent, 1.8 million barrels of proven plus probable reserves. Overall reserves, including proven, probable and possible, total 3.2 million barrels.
The field also has 1C contigent resources of 158.6 million cubic metres of gas, 2C resources of 294.5 million cubic metres of gas and 3C resources of 538.0 million cubic metres of gas.
The company is currently producing around 615.0 barrels of oil equivalent per day.
Regal shares were down 4.7% to 4.10 pence per share on Tuesday morning.
By Joshua Warner; [email protected]; @JoshAlliance
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