In June 2004 the exploration/pilot production licenses in which Regal had a 75 per cent. interest expired. Subsequently, Regal was awarded a 100 per cent. interest in two 20 year production licenses. Contemporaneously with the expiration of the exploration/pilot production licenses, the joint-venture arrangement Regal had with CNGG also expired.
In the course of the dissolution of the joint-venture, an action was brought before the local Poltava Court in order to distribute the assets of the joint-venture to the partners. In August 2005 the Poltava Court ruled that the physical assets of the joint-venture be distributed to Regal and that CNGG be compensated for the value of its 25 per cent interest in the joint-venture.
CNGG lodged an appeal with the Kiev Court of Appeal contesting the Poltava Court ruling, which appeal was dismissed in October 2005.
CNGG lodged a further appeal to the Supreme Commercial Court of Ukraine which was also dismissed in December 2005.
CNGG then lodged a further appeal to the Supreme Court of Ukraine, which is the final appellate court in Ukraine. The decision in this appeal was issued earlier today, when the Supreme Court dismissed this appeal, thereby finally ruling in Regal's favor in this matter.
In respect of the legal challenge brought by CNGG against the Ministry of Environmental Protection with respect to the validity of Regal's production licenses in the Ukraine, which was referred to in the Company's announcements dated 31 January and 16 February 2006, Regal is awaiting notification of a hearing date for its further appeal to the Supreme Administrative Court of Ukraine to establish the validity of its licenses.
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