Osbornes looks into secret agreement to sell off Regal energy assets to Peak

Osborne Clarke has been drafted in to investigate the discovery of a secret agreement to sell the Ukrainian assets of embattled oil and gas exploration group Regal Petroleum.

Corporate partner Jonathan King is advising Regal following the revelation last week that the group's former chairman Frank Timis had signed a secret deal with Peak Resources of Hong Kong to sell Regal Petroleum of Jersey, a wholly-owned subsidiary that controls all of Regal's Ukrainian oil and gas assets.

None of the current Regal board, which has been rebuilt since Timis was ousted from Regal on 7 June, were aware of the deal, which gives Peak the option to buy the Ukrainian interests at $1.50 (82p) per barrel of oil equivalent in the proved, probable and possible reserves. It is understood that the board does not want to sell the Ukrainian assets as they were the only profitable part of Regal's business last year. However, Peak is said to be interested in pushing ahead with the agreement, which was signed on 4 May and which expires on 31 August.

As first revealed on www. thelawyer.com (22 June), Peak has instructed City private client specialist Ferguson Solicitors, led by sole partner Charles Ferguson, who is understood to be a director and minor investor in Peak.

The former chief executive of Bank of Ireland Michael Soden and retired Swedish lawyer Hans Raoul Troedsson are also understood to be directors of Peak.

Ferguson explained that he had known Troedsson "for 20 years", including acting alongside Hong Kong-based law firm Johnson Stokes & Master on Peak's formation in September last year.

The Ukrainian agreement is the latest in a series of issues that have plagued Regal and kept King, a longstanding adviser to the group, in constant contact with Regal's in-house counsel Christopher Phillips.

Regal's problems began on 18 May, when disappointing drilling results forced the group to reveal that its Greek oil prospects had failed to produce commercial flows.

The announcement of the failure came just three weeks after the AIM-listed company raised £45m at 390p a share from new investors, partly on the back of hopes for the Kallirachi-2 well in the Aegean.

Partly in response to the Regal saga, AIM is now considering tightening the rules on oil, gas and mining companies joining it.

Two advisory groups have been established, made up of between eight and 12 industry representatives, including analysts, advisers and entrepreneurs, to look at how to regulate the sectors. There is no deadline for their recommendations.

Investec analyst Bruce Evers said the advisory groups were likely to suggest more rigorous rules and greater disclosure, bringing AIM's requirements closer in line with those of a full listing.