Regal reports a further decline in output in 3Q12

Regal Petroleum (RPT LN) released its 1H12 operating and financial update today: gas and condensate output totaled 1,636 boepd in 1H12, while in 1H11 the company did not produce hydrocarbons due to its license suspension. Revenue in 1H12 amounted to USD 22.0 mln (vs. USD 19.1 mln for full-year 2011), EBITDA totaled USD 13.4 mln, and net income was USD 6.7 mln. In its operating update, the company said it produced 1,418 boepd of hydrocarbons from July to September 23, and noted that it suspended work at its MEX-3 well to treat water ingress (in process), and spudded two new wells in 1Q12.

Roman Dmytrenko: The company’s 1H12 production numbers suggest Regal decreased output 15% qoq in 2Q12 (to 1,503 boepd from 1,769 boepd in 1Q12), and by another 6% in 3Q12 (with one week to go). With these results in hand, it looks like our output forecast for Regal of 592 Mboe (1,620 boepd) in 2012 will be underperformed by at least 8%. We also note that the lack of progress on shutting off the water ingress at the MEX-3 well, work on which was announced back on June 18, creates the risk that the company will fall short of its promise to double gas production in mid-2013 compared to levels seen in early 2012 (refer to our news of January 19).