Alberry, Regal Agree to Subscription and Sales Deal

Regal Petroleum plc announced that it has entered into a conditional agreement (the "Subscription and Services Agreement") with Alberry Limited, a company registered in the British Virgin Islands, in which Alberry has agreed to subscribe for new ordinary shares in Regal Petroleum Corp. Limited (RPC), representing 15 percent of the enlarged share capital of RPC for a cash consideration of 100,000. In addition, Alberry has agreed to provide certain services to Regal in relation to its Ukrainian assets.

RPC is a wholly owned indirect subsidiary of Regal Petroleum plc incorporated in Jersey and is the holding company for Regal's Ukrainian operations. Following this proposed transaction, Regal would retain an 85% interest in RPC.

Further to the announcement made to shareholders on July 4, 2006, Regal's board is still in early stage discussions that may lead to an offer being made for the company. Consequently, under the requirements of the City Code on Takeovers and Mergers, completion of the Subscription and Services Agreement and implementation of the transaction, is subject, inter alia, to shareholder approval.

Regal will soon post a circular and notice of Extraordinary General Meeting (EGM) to shareholders. A detailed summary of the terms of the Subscription and Services Agreement will appear in the circular.

The terms of the Subscription and Services Agreement, inter alia, provide that:

  • Alberry shall use its best endeavors to procure that the Company has and shall continue to have the benefit of the production licenses in relation to the GOL/MEX and SV fields, that the licenses are and remain recognized as valid by all relevant authorities in the Ukraine, and that the company is able and continues to be able to exploit the licenses without interference.
  • Alberry will be responsible for liaising with all relevant Ukrainian authorities on behalf of the company in order to establish the validity of the licenses.
  • On or within 90 days of the first anniversary of completion of the Subscription and Services Agreement, Alberry is required to demonstrate that the licenses are and shall remain valid by delivering evidence that a valid, effective and final judgment has been entered in favor of the company by the Ukrainian courts confirming that the licenses are valid and a legal opinion from the company's Ukrainian lawyers confirming, inter alia, that the licenses are valid and that the judgment referred to above is valid, effective, and final.
  • If, on or within 90 days of the first anniversary of completion of the Subscription and Services Agreement, the licenses are demonstrated to be valid, then the company shall purchase the ordinary shares in RPC allotted to Alberry under the Subscription and Services Agreement for a consideration of $50,901,300 that may be satisfied in cash, by the issue of new ordinary shares in the company, or a mixture of the two, at the absolute discretion of the company.
  • Notwithstanding the foregoing in no event shall the number of new ordinary shares in the company to be allotted and issued to Alberry pursuant to the Subscription and Services Agreement exceed a number that would result in Alberry and any person acting in concert with Alberry (as defined in the City Code on Takeovers and Mergers) being interested in, in excess of 29.99 percent. of the issued ordinary share capital of the company immediately following such allotment and issue.
  • If however, Alberry fails to demonstrate that the licenses are valid, the company shall purchase the ordinary shares in RPC allotted to Alberry for a consideration of 50,000, payable in cash.

Ukrainian update

Regal re-commenced production from its operations on the GOL/MEX and SV fields in Ukraine on August 1, 2006. The company is continuing its legal action to establish the legality of its licenses to operate the fields.

General

The group, through its operating subsidiaries, is engaged in the development and exploitation of the GOL/MEX and SV fields and the extraction of natural gas and condensate. As published in the Audited Annual Report and Accounts 2005 of Regal Petroleum plc, the profits attributable to the group's Ukraine operations in the financial year ended December 31, 2005, were $2,036,000 and the net asset value of the group's Ukrainian operations as at December 31. 2005, was $30,979,000.

None of the company, its directors, officers, and employees has or has had any interest in the shares in the capital of Alberry.

Responsibility

The directors of the company accept responsibility for the information contained in this statement. To the best of their knowledge and belief (having taken all reasonable care to ensure that such is the case), the information contained in this statement is in accordance with the facts and does not omit anything likely to affect the import of such information.

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