Oil firm makes U-turn in Ukraine

The Weekend Australian - Travel - - Resources - Robin Pag­na­menta

MOST peo­ple would shud­der at the prospect of be­ing sent to Siberia. Not David Greer. He spent four years on the bleak Rus­sian plains as di­rec­tor of a vast oil and gas project for Shell and, al­though life was tough, it was not all about hard­ship.

‘‘ Some­times you’d get up in the morn­ing and a me­tre of snow would have fallen - you couldn’t even open the door,’’ he says. But there was snow­mo­bil­ing and in sum­mer, shoot­ing, rid­ing mo­tor­cy­cles, even jet­ski­ing. ‘‘ I like to work hard and play hard ... and drive any­thing fast,’’ grins Greer, a rum­bus­tious Glaswe­gian.

Per­haps it is this un­con­ven­tional approach that per­suaded him last Novem­ber to take up the job of chief ex­ec­u­tive at Re­gal Pe­tro­leum, a com­pany that has re­ceived much pub­lic­ity over the years — not al­ways for the right rea­sons.

Formed in 1996 by Frank Timis, a colour­ful Ro­ma­nian ty­coon, and listed in 2002, Re­gal’s most promis­ing drilling prospects are now in Ukraine, al­though the com­pany is ex­plor­ing for oil in Timis’s home coun­try and in Egypt.

Re­gal is best known for a 2005 share scan­dal that erupted af­ter claims that Timis, then the com­pany’s chair­man, had over­hyped the prospects of an oilfield at Kavala in Greece. In the run-up to the de­ba­cle, Re­gal’s shares had soared to highs of 509p af­ter in­vestors were led to be­lieve that the field con­tained up to one bil­lion bar­rels of oil, mak­ing it one of the big­gest finds in Europe. At the time, the pres­sure inside the well was said to be so high that the drilling plat­form above it was at risk of be­ing de­stroyed.

The com­pany had raised 40 mil­lion pounds of new money from in­vestors in the weeks lead­ing up to the an­nounce­ment but in fact the well was vir­tu­ally dry. That prompted the Fi­nan­cial Ser­vices Author­ity and the stock ex­change to be­gin sep­a­rate in­ves­ti­ga­tions as the shares plunged to less than 50p.

Timis, who in the 1990s was con­victed on two charges of heroin pos­ses­sion, was forced to re­sign later. He re­mains on the side­lines as Re­gal’s big­gest sin­gle share­holder with a 20 per cent stake.

Al­though the com­pany re­mains the sub­ject of a dis­ci­plinary hear­ing by the Al­ter­na­tive In­vest­ment Mar­ket, Greer says that he prefers to fo­cus on the fu­ture and bats off ques­tions about the episode. ‘‘ It’s wrong to con­tinue to tar­nish the com­pany for some­thing that hap­pened in 2005,’’ he says. ‘‘ Too many peo­ple are stuck in the past.’’

He points out that there are no se­nior ex­ec­u­tives left at the com­pany from that time and that the Greek field has since been sold, along with other as­sets in Liberia. The on­go­ing dis­ci­plinary hear­ing has no bear­ing on the run­ning of the busi­ness to­day, Greer in­sists.

In­stead, he prefers to talk about Re­gal’s three fields in Ukraine, which in­de­pen­dent con­sul­tants be­lieve con­tain nearly 170 mil­lion bar­rels of proven and prob­a­ble re­serves. If han­dled cor­rectly, he be­lieves that they have the po­ten­tial to trans­form the com­pany and de­liver a sub­stan­tial boost to its $A540 mil­lion val­u­a­tion.

‘‘ The best legacy for me would be to trans­form this rag­doll of the Lon­don city press into a re­spectable, mid-tier oil and gas com­pany on the main mar­ket,’’ he says.

With this in mind, Greer — who says that he left Shell last June be­cause he was turn­ing 50 and, fed up with con­stant trav­el­ling, wanted to spend more time with his fam­ily — has been busy as­sem­bling a strat­egy to ac­cel­er­ate Re­gal’s drilling pro­gram. Last month, he com­pleted a $179.3 mil­lion fundrais­ing round that was over­sub­scribed — not bad go­ing for a road­show un­der­taken in the depths of the credit crunch. A marked in­crease in gas out­put is ex­pected this sum­mer, with full-scale pro­duc­tion due to be­gin next year.

‘‘ There is no ex­cuse for us not go­ing for­ward and mak­ing a suc­cess of it,’’ Greer says. ‘‘ Re­gal has ev­ery right to be dif­fer­en­ti­ated for all the right — not the wrong — rea­sons.’’

Nev­er­the­less, he finds it harder to fend off ques­tions about a more re­cent spate of head­lines — this time re­gard­ing the cir­cum­stances of his own ap­point­ment.

Re­gal’s prospect in Ukraine was so en­tic­ing that last au­tumn, just be­fore Greer joined the com­pany, it had at­tracted the in­ter­est of his old em­ployer, Shell.

Neil Rit­son, Greer’s pre­de­ces­sor as chief ex­ec­u­tive, who joined Re­gal in the af­ter­math of the 2005 shares scan­dal, had signed the com­pany up to a $437 mil­lion joint ven­ture with Shell to co-de­velop the fields.

When the deal was an­nounced to the mar­ket on Novem­ber 21, it was wel­comed by many as a sign that Re­gal was re­gain­ing cred­i­bil­ity. Nev­er­the­less, it proved to be an un­pop­u­lar de­ci­sion with key share­hold­ers, in­clud­ing Timis, who wanted Re­gal to go it alone in Ukraine. They be­lieved that Shell was pick­ing up qual­ity as­sets on the cheap.

In typ­i­cal Re­gal style, a re­mark­able turn of events en­sued. The fol­low­ing day, Novem­ber 22, Rit­son was ousted in a share­holder coup and re­placed by Greer. On Novem­ber 23, Shell pulled out of the part­ner­ship.

Greer bris­tles at the men­tion of all this. At the time, he says, he was work­ing as a con­sul­tant and had been granted ac­cess to data re­gard­ing Re­gal’s fields in Ukraine.

‘‘ Our view was that you could de­liver as much value by de­liv­er­ing it your­self than by sell­ing it to Shell or any­one else. We ob­tained the sup­port of 70 per cent of share­hold­ers — in­clud­ing Timis. Then on Novem­ber 22 we were ap­proached and asked if we could take on the role of chair­man and CEO. We came over the same day.’’

De­spite his ap­par­ent ad­mis­sion that Timis did, in­deed, play a role in the process, he fiercely de­nies the no­tion that the for­mer chair­man re­tains any un­due in­flu­ence over the com­pany: ‘‘ Frank Timis is not a di­rec­tor. He has no in­flu­ence over the com­pany. It’s a non­is­sue and a fig­ment of the imag­i­na­tion of a bit­ter and twisted few.’’

Some may find this hard to be­lieve, but Greer is in­sis­tent. He adds that he has learnt much since his ap­point­ment. A 28-year ca­reer at Shell took him all over the world, in­clud­ing stints as an en­gi­neer in the deserts of Oman, off­shore Nor­way, Ar­gentina, north­ern Canada and the Philip­pines. But he never felt at home in the mar­bled halls of the city.

‘‘ I came from quite a poor back­ground,’’ he re­flects, ‘‘ but over the past three months I have learnt a hell of a lot. There is a lot of mys­tique about the city.’’ But Greer, ev­ery inch the griz­zled oil­man, is not the sort to be put off by this lack of ex­pe­ri­ence. ‘‘ I have al­ways rel­ished a chal­lenge,’’ he says. The Times

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