Regal, Cass to merge, develop Ukraine fields

Regal Petroleum Ltd., London, and M.L. Cass Petroleum Corp., Calgary, signed a letter of intent to merge and jointly undertake further development of Ukraine's Chernigiv gas and condensate fields. Regal holds a joint venture PSA for the Chernigiv area, which consists of three gas and condensate fields 200 km east of Kiev that are now producing 7 MMcfd from five wells.


Regal Petroleum Ltd., London, and M.L. Cass Petroleum Corp., Calgary signed a letter of intent to merge and jointly undertake further development of Ukraine's Chernigiv gas and condensate fields. Regal holds a production-sharing agreement for the Chernigiv area, which consists of three gas and condensate fields 200 km east of Kiev that are now producing 7 MMcfd from five wells.

The merger agreement is subject to shareholder approval but calls for the as-yet-unnamed entity to be about 84% owned by Regal shareholders. A shareholder meeting is scheduled for June 29.

Consultants McDaniel & Associates pegged proved and probable reserves of the Chernigiv fields at 905.9 bcf of gas and 52.2 million bbl of condensate. The companies plan to treat the fields as a single large development project.

If the merger proceeds as planned, work will begin on a $15 million work program soon after its completion. The combined firm will perform a limited seismic survey, work over four existing wells, and drill two new wells.

The PSA with the Ukraine government requires Regal to pay 100% of the capital costs to develop the fields, thus earning 90% interest in net cash flows before payout and 75% of net cash flows after payout. Regal has already negotiated a US-dollar gas sales contract with the national electricity company of Romania, Conel, to deliver as much as 75 MMcfd of gas, rising to 140 MMcfd in the winter months.

Cass is developing shallow oil and gas properties in the eastern part of Alberta. Regal has three exploration, development, and production licenses in Romania that it says are in an advanced exploration stage.

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