Regal Petroleum shuts down production

Regal Petroleum (LSE: RPT LI) suspended operations at its MEX-GOL and SV fields in Ukraine pending a decision on a Ministry of Environmental Protection order filed in May 2010 that identified certain matters requiring rectification in relation to Regal’s compliance with Ukrainian legislation, Regal Petroleum announced yesterday. On October 18, 2010, Regal filed an appeal of a Kyiv District Administrative Court decision in favor of the Ministry of Environmental Protection’s suspension order. The company is awaiting this hearing. Ruslan Patlavskyy: According to our calculations, the shut-down of Ukrainian operations should result in a USD 1.0-1.5 mln monthly loss for the company, and we see the issue as unlikely to be resolved by year-end given the slow progress so far in negotiations with the Ukrainian authorities. In our view, the legal dispute, coupled with the temporary production shut-down, is likely to put current shareholders into a selling mood in the short-term.