Oil and Gas

July 21, 2011

Regal Petroleum’s recent acquisition by Smart Holding bodes well for a favorable resolution of the E&P company’s conflict with the Ukrainian government that forced a shutdown of its gas fields last November. Although Regal still owns 2P oil&gas reserves of 151 MMboe, the market has thus far failed to react to a recent court ruling in Kyiv which should pave the way for the company to resume gas extraction by the end of 2011. We forecast that Regal will produce about 5,200 boepd and post EBITDA of USD 75mn in 2014. We place a BUY rating on the RPT stock with a target price of USD 1.52 per share (GBp 94.0), implying a potential upside of 115%.