December 8, 1998 - Major Acquisition of Regal Petroleum
Mark A. Wilson, Chief Executive Officer of Goldbelt Resources ("Goldbelt") announces that the Company has entered into an agreement with Regal Petroleum Corporation Limited ("Regal") , a private Channel Islands company, whereby Goldbelt will acquire all of the outstanding shares of Regal in exchange for shares in Goldbelt. The acquisition will result in a change of control of Goldbelt as the existing shareholders of Regal will hold a majority of the issued shares of Goldbelt. The transaction is subject to satisfactory completion of due diligence, the approval of Goldbelt's shareholders at a meeting to be held in the first quarter of 1999, and approval by the Vancouver Stock Exchange.
Regal's Assets
The following information has been provided to Goldbelt by Regal. Goldbelt has not confirmed its veracity which is subject to due diligence.
Regal has substantial oil and gas assets in the Ukraine and is currently securing additional oil and gas license holdings in Romania. The assets of the company are natural gas and condensate fields in the Dneiper-Donets basin, the major oil and gas producing region in the Ukraine. The principal assets are three fields: Golotovschinsks, Mekhedivska, and Svyrrdivske which are in close proximity to each other and may be considered as a single field for development. The reserves are in multiple pay zones in Lower Carboniferous sandstones occurring at depths from 4,900 to 5,500 meters. Reservoir structures are primarily stratigraphic with fault controls. The total proven and probable recoverable reserves are estimated to be 913,463,000 cubit feet of gas and 52,599,000 barrels of condensate for a total recoverable reserve of 143,945,000 barrels of oil equivalent. These reserve estimates were completed by McDaniel and Associates Consultants Ltd. ("McDaniel") of Calgary, Alberta.
McDaniel is experienced with Ukrainian oil and gas projects and has worked on Regal's joint venture properties preparing a reserve and valuation report since April 1998. McDaniel based its estimates upon its own recalculations of reservoir parameters using Ukrainian generated test data from extensive seismic and well data from eighteen wells in to the multiple pay zones including five wells which are currently producing gas. The area under license has operated on initial pilot production over the past four years and has produced 7.2 billion cubic feet of gas during that time.
The gas and condensate fields are held under three adjoining licenses by ChernihivNaftoGasGeology ("Chernigov") , a Ukrainian state oil and gas exploration company. Regal has completed a Heads of Agreement with Chernigov for a joint venture production sharing agreement and is expected to finalize a formal contract before the end of the year. Chernigov will contribute rights to the three licenses, all historic data and the surface facilities. Regal will have a 50% interest in the licenses and operational management and will be responsible for arranging the financing to develop the fields. Regal will receive 75% of the project cashflow until its investment is fully recovered and thereafter its 50% share.
Based on the McDaniel estimates the field can be producing natural gas at an average daily rate of 41 million cubic feet by 2000 increasing to 209 million cubic feet by 2004. The corresponding daily rate of condensate production is 2,365 barrels in 2000 and 4,400 barrels in 2004. Capital required over the first two years is estimated to be US$48,021,000 for the installation of a gas condensate plant, construction of a 30 kilometer pipeline to the main trans-Ukrainian trunk line, drilling of two new wells and the re-conditioning of ten existing wells. With these facilities in place by early 2000 the properties are projected to produce from 17 production wells nearly 15 billion cubic feet of gas and 863,000 barrels of condensate in the year 2000.
An initial capital requirement of approximately US$30,000,000 is planned to be financed by equity. Subsequent funding will be partially by debt but primarily from internal cash flow. Despite a total capital requirement of US$233,512,000 McDaniel's project valuation indicates that a maximum cash requirement of US$47,500,000 is needed through to 2000 before the gas condensate plant is operational. It is believed that subsequent capital requirements can be funded from the project's production revenue.
In addition to the three gas condensate fields, another joint venture production agreement is being finalized with Chernigov on the Selyukhirske oil field for a 50% production sharing agreement. This field has three wells in the property, two of which tested at flow rates of 2,000 and 4,0000 barrels per day. McDaniel has not completed a reserve or valuation report on this license. It is anticipated that oil production from this field may be initiated with limited capital requirements as the production can be transported by truck and good quality oil requires no special treatment.
Regal also has completed a Heads of Agreement on a license with drill well indicated proven, probable, and possible reserves of 376 million barrels of oil as estimated by Ukrainian geologists. This license is also in the Dneiper-Donets basin east of Kiev. The agreement is with Ukrnaftinvest, a privately held Ukrainian oil and gas company, for a joint venture on the Sedmevslu and Khomskaya fields where Regal will have a 60% interest. There are twelve wells within the 1,330 square kilometer license that have intercepted oil in both carbonate reef structures and clastic sandstones. The oil horizon is in Devonian age rocks at depths of 3,000 to 3,500 meters. McDaniel has not completed a reserve or valuation report on this license area.
Also included in the Regal properties are five licenses in Romania that may be acquired pursuant to an option agreement with the license holder exercisable within twelve months.
Management
Following the acquisition, Goldbelt's Board of Directors will consist of Mr. Frank Timis as Chairman, Mr. Paul Morgan as President and Chief Executive Officer, Mr. Paul Naughton and Mr. Glenn Featherby. Mr. Timis is the principal shareholder in Regal and will become so in Goldbelt. He has considerable experience in conducting business in Eastern Europe and the Ukraine. He founded and is chairman of Gabriel Resources Ltd., which is engaged in the exploration and development of mining projects in Romania. Mr. Paul Morgan worked for sixteen years with Chevron Oil Company and Bridge Oil and has been a director of Goldbelt since 1992. Mr. Paul Naughton is currently the co-chairman of Goldbelt and from 1987 to 1991 was the chairman of two oil and gas companies, National Oil N.L. and Adelaide Petroleum Company, both in Australia. Mr. Glenn Featherby is a chartered accountant with considerable experience working with KPMG in the firm's London office.
Proposed Transaction
Goldbelt will acquire all of the shares of Regal in exchange for the issuance of a sufficient number of Goldbelt shares such that after the acquisition the shareholders of Regal will hold 80% of the issued shares in Goldbelt. Prior to closing the transaction Goldbelt will implement a consolidation of its issued shares in accordance with its May 1998 shareholders' resolution or such other resolution as may be passed by Goldbelt's shareholders. The consolidation approved in May 1998 is for a one for ten reduction in the issued shares which will result in approximately 4,655,137 shares outstanding after the consolidation and before the acquisition and approximately 23,275,685 shares after the acquisition. Also in accordance with the May 1998 resolutions approved by Goldbelt's shareholders, Goldbelt will change its name and continue the company to Yukon.
Goldbelt has agreed to advance Regal a US$300,000 loan as of this date and such further sums as may be agreed between the two parties up to a maximum of US$500,000. The loan is secured by a pledge of shares in Gabriel Resources from the shareholding of a company controlled by Mr. Timis.
As mentioned above, Mr. Morgan and Mr. Naughton will remain on the board of directors of Goldbelt after the transaction, and Regal will have the right to appoint three directors of its choosing.
The transaction is subject to satisfactory completion of due diligence by both parties and the preparation and execution of a definitive Share Purchase Agreement, both of which are anticipated by January 31, 1999. The Goldbelt shareholders also must approve the transaction as a result of the change in control of the company. An Extraordinary General meeting of Goldbelt's shareholders should occur in February 1999 for this purpose. The transaction is also subject to the approval of the Vancouver Stock Exchange.
TEL: (303) 297-9987 Mark A. Wilson, CEO
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