Regal Petroleum expands resource base with Arkona purchase

Ukrainian oil and gas company Regal Petroleum (RPT LN)
reported on Mar. 24 that it acquired smaller peer Arkona for a total
consideration of up to USD 8.63 mln, of which USD 4.32 mln is a first tranche
and the rest is contingent on certain conditions. Arkona possesses a 20-year
exploration license for the Svystunivsko-Chervonolutskyi (SC) field, located 15
km from Regal’s existing SV field. The SC license has hydrocarbon reserves of
38 mln boe (C1 and C2 under the Ukrainian classification).

Arkona purchased the SC license for UAH 3.8 mln (USD
0.15 mln) in May 2017, according to a report by Radio Free Europe/Radio
Liberty, published on Mar. 25. Arkona was controlled at the time by people from
the inner circle of then-president Petro Poroshenko, the report alleged.

Alexander Paraschiy: With the acquisition of its SC license, Regal is going to
significantly expand its resource base in Ukraine from the current 50 mln boe
of 2P reserves. It is likely that most of the declared C1+C2 reserves under
Ukrainian classification, controlled by Arkona, will be confirmed as 2P
reserves under international classification. The acquisition will also improve
the usage efficiency of Regal’s assets. As of end-1H19, 49% of its total
assets, or USD 67.8 mln, was cash.