Ukrainian Court Rejects Challenge to Regal's Production Licenses

The Supreme Court of Ukraine dismissed all claims brought by Chernihivnaftogasgeologia (CNGG) against the Ministry of Environmental Protection (MEP) challenging the validity of Regal Petroleum's production licenses in the Ukraine. Consequently, the court affirmed the validity of Regal's production licenses.

The Supreme Court of the Ukraine is the final appellate court in Ukraine and its judgments are final and cannot be further appealed. Accordingly the license litigation is finally concluded.

CNGG brought the legal action against its own parent organization, the MEP, claiming that the correct procedures were not followed in the awarding of two production licenses to Regal in July 2004.

On 10 November 2005, at the initial hearing of such action, the Kiev City Commercial Court upheld CNGG's claim.

On 31 January 2006, at the appeal hearing of such action, the Kiev Court of Appeal again upheld CNGG's claim.

On 5 May 2006, at the further appeal hearing of such action, the Supreme Administrative Court of Ukraine again upheld CNGG's claim.

On 18 August 2006, the Kiev Commercial Court ordered that this action be submitted to the Kiev Commercial Court for reconsideration of the earlier orders made in this action on the basis of new circumstances.

On 27 September 2006, the Kiev Commercial Court ordered that the original decision of the Kiev City Commercial Court made on 10 November 2005 should be overturned (and thereby invalidating the decisions of the Kiev Court of Appeal made on 31 January 2006 and the Supreme Administrative Court of Ukraine made on 5 May 2006) and that Regal's production licenses were issued in accordance with the correct procedures and are valid.

At a hearing on Tuesday, the Supreme Court of Ukraine ordered the dismissal of all claims in the action brought by CNGG thereby canceling the earlier decisions made on 10 November 2005, 31 January 2006 and 5 May 2006. The Company is advised by its legal advisers in Ukraine that there is no further right of appeal in this action and that accordingly this action is finally concluded.

As a result, the Company is advised by its legal advisers in Ukraine that the effect of today's decision is that its production licenses are valid according to their terms of grant being 20 years from July 2004.

The Company will provide an update in due course with regard to the developments of its Ukrainian assets.

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