Regal Petroleum: Ukrainian Turnaround Story Unnoticed by the London Market
Regal Petroleum has been in the news for all the wrong reasons since listing in London: starting with serious breaches of the AIM Rules in connection with its oil exploration wells in the Kallirachi Prospect, an area in the North Aegean between June 2003 and May 2005, subsequent fine of £600,000 by the AIM Disciplinary Committee , Ukrainian licence award challenges by Regal’s former partner in 2005, non compliance with certain legislation in Ukraine relating to its operations at its Mekhediviska Golotvshinska and Svyrydivske gas and condensate fields in 2010 and subsequent suspension of production.
In December 2010, Energees Management Limited (part of Smart Holding Group of Vadim Novinky, who has reportedly a strong lobby power in Ukraine) acquired 54% of Regal’s issued share capital, appointed three representatives to the Board and made certain changes to the management team.
The company stepped on the way to recovery.
- Company resumed operations and production on its Ukrainian licences
- Two wells were spudded in Ukraine in February & April 2012
- Disposed of non-core concession rights in Egypt and Romania
- In January 2012, the Company entered into drilling contracts for the drilling of two new wells
- Future CapEx is planned to be fully funded from its current cash balances and future revenue
- Three work-overs and gas processing plant upgrade are planned for 2012
But what seems to be a rather steady improvement in the company’s operations has not been transformed into the share price performance. Regal’s share price went down almost 25% year-to-date making it the worst performing stock among its closest peers.
What might be the reason for such a disastrous stock performance despite the company’s improved operations?
The answer may lie in the perception…. London Market does not generally trust Ukrainian management or the Ukrainian majority shareholder.
Multiple market studies suggest that the top factor responsible for the share price performance is the trust and confidence investors have in the management. And in case with Ukrainian management/shareholder – it is a long and bumpy road to build the trust, confidence and loyalty with the investors.
Unfortunately, London Capital Market has not seen a pro-active communications program and as a result Regal’s share price has been struggling.
Following the acquisition of the majority stake by Energees in December 2010, several London based investment bank stopped the coverage stating “given the lack of visibility on Regal’s possible evolution post deal, we are ceasing coverage of regal Petroleum”.
Private investors comment: “This company needs to do some serious PR. The SP should be at least double what it is today. Investors need a reason to invest and were not getting it. At least David Greer and Frank Timis got us noticed even if it was for the wrong reasons. Prior to Greer been shown the door a report was written about how Regal needed to grow shareholder confidence mainly after Timis had misled the market. They don't seemed to have learned anything since then in fact it’s probably worse which makes you think?!”
It is not enough to do the right thing, it is extremely important to explain the story, build the relationship and gain the trust of the City.
There is an opportunity to address these issues in the interests of all shareholders and get the Ukrainian turnaround story noticed by the London market.