Oil upstart Regal has had its ups and downs of late, but new FD Robert Wilde was persuaded to take the role when he saw a wellspring of optimism inside the company to tap
Frankly, it’s something of a surprise to be sitting down in front of Robert
Wilde, FD of AIM-listed
Regal
Petroleum, conducting an interview. Regal, as its own chief executive is
fond of saying, has had a ‘chequered’ history of late and Wilde has only been in
the job officially for little more than a week.
Normally, FDs like to get their feet under the table, get to know the books
until they feel like old friends, and generally make sure there are no hidden
surprises coming their way before they start fielding awkward questions from the
press. Wilde, on the other hand, is fronting up.
In fact so surprising is his decision to go public so early on, it’s
difficult not to make it the first thing on the agenda. But as dramatic as this
part of the discussion could be, Wilde bats it away dryly.
‘The reason for this is because of the nature of the role I’ve taken on. The
company is well under way with a transformational process right now. For me it’s
an exciting opportunity to get on board…more than that, it’s talking about
some of the changes we’ve got going forward.’
Wilde talks about excitement in such a low-key way you begin to question what
kind of seismic shifts in mood really would get him going. But after he’s said
it half a dozen times, it begins to sink in that he really does mean it.
And the reason is that Regal finds itself very much at a crossroads, albeit
one on which the future direction looks very bright indeed. It’s worth recapping
the history here because Regal, according to some reports, was ‘synonymous with
turbulence’.
The company, which now has considerable oil and gas assets in the Ukraine,
careered into the headlines with a share scandal after claims that the company’s
oilfield potential in Greece had been overhyped.
This resulted in a Financial Services Authority review, which has now been
passed to the AIM disciplinary board (which Wilde won’t comment on). The company
has also had to fight an 18-month court battle to regain control of oilfields in
Ukraine and then last year Neil Ritson, the former CEO, was ousted in a
shareholder coup lead by Romanian founder Frank Timis when it looked as if
Ritson would sign a £400m joint venture deal to develop the Ukrainian interests
with Shell. Timis felt Regal should go it alone and the oil giant promptly
pulled out of the deal causing more shock horror headlines.
But now there’s a new CEO in David Greer (the Shell veteran who became
notorious for the leaked ‘motivational’ memo in which he wrote: ‘Lead me, follow
me, or get out of my way’) and Regal is back in control of its highly promising
Ukrainian assets after a Supreme Court victory. There’s been a hugely successful
capital raising project that produced $165m (£82m) for development in the
Ukraine, while Timis has signed a deal not to interfere at the company for two
years. To top things off, investment bank Merrill Lynch this month decided to
publish a research note on Regal in which it placed a very bullish buy
recommendation on the company. Regal’s share price surged on the news.
Wilde refers to all this as ‘big, big change’, which is fortunate because he
tentatively admits that when first approached about the job, ‘barge pole’ was
one of the first phrases that came to mind. A conversation with Greer soon
revealed the true picture.
And that story would have had to be convincing because Wilde clearly knows
his way around an exploration and production business having worked in oil and
gas companies for the past 18 years after qualifying with Ernst & Young. Nor
does Wilde look like the kind of man you would spin a line to either. He admits
a liking for rugby and though we don’t discuss positions he doesn’t look like a
man who played at fly-half.
Right now, though, it’s Regal’s prospects that are clearly uppermost in his
mind. ‘The capital raising was the icing on the cake. It proved that the story h
as changed dramatically and we are now acceptable to people in the current
market who are prepared to put money up to invest in development to take the
asset forward.’
Despite having been on board for just a few days, there are already key
issues piling up on his desk. He arrives at the interview after spending the day
engrossed in contract calculations for two oil rigs, costing well over $100m to
lease over five years. But he also points out that future funding is a key
issue, even with the $165m raised from shareholders.
‘Right now, there’s no debt and the balance sheet is very strong. Having said
that, we’ve launched ourselves down a path of development and that path is not
cheap. We will get through that money very fast.
‘It doesn’t keep me awake but it does make me think I can’t be complacent. If we
run at the pace that we expect to run, we’ve got sufficient funding to take us
into next year.’
Which means finding more money, possibly through debt. And, Wilde says, with
Regal’s balance sheet, ‘there must be room’ for debt. Though he adds: ‘Given the
markets at the moment, that may not be a choice that I have.’ So it’s more
likely to be equity, which is not as cheap and means dilution for shareholders.
It’s a tough conundrum for the new FD.
But problem-solving and handling the risk and unpredictability seem to be the
attraction for Wilde. When asked if he’s drawn to it, he manages a cautious,
‘yeah,’ and goes on to admit that he gets a ‘buzz’ from managing the risk. But
the risk remains in exploration and he admits that has its allure.
‘There’s still that unknown. For all the geology and all the geophysics, it’s
still an estimate. It just becomes more of a refined estimate. I find that
exciting.’
That said, he’s no thrill-seeker, and denies being a live hard, play hard oil
man. He even seems embarrassed when faced with the comment that he looks like he
can handle himself. But he is aware of people of ‘a certain ilk’ in the industry
. In fact, in 1991 he knew people who were happy to go to war-torn Algeria, then
one of the most dangerous places in the world, on oil exploration trips that
involved massive security measures. ‘They wanted to come back almost with the
battle scars of having been to Algeria’.
However, he adds: ‘But that’s not me. I’m sitting in a back office here. I’m
doing a very similar job for a large part of the time that anyone would be doing
in my position in another company…it has risk, it has highs and lows. But when
the highs are there, when you get the first well spud, I mean, as an accountant,
I still find that exciting.’
Financials
For six months to June 2007,Regal’s revenues were up to $6.4m but overall the
loss for the period was $10.4m.
Likewise, the last full year reported to December 2006 showed turnover of
$10.8m but with a loss on ordinary activities of more than $100m.
But that’s because Regal is still very much in the development phase of the
business. The recent research note from Merrill Lynch noted that while turnover
would more than double by the end of 2008 to $23.3m,the following year could see
sales of up to $140m.
Merrills’ note says: ‘Bottom line, we see Regal as combining (1) a high
quality appraisal and development asset;(2) a highly credible management team;
and (3) an exceptionally attractive absolute and relative valuation.
Merrills put a price target of 390p on Regal and on the day the note appeared
the share price jumped 39.5p to 208p.