Regal Petroleum...valued at $1 per boe ???

Just a few observations...

Franks post 122 now shows the amount of stock on loan dropping dramatically - is this graph "real" and if so does it "predict" an increase in the share price?

Also Franks post 134 - I agree with much of the conclusion, but does Regal really need the full $150M straight away, and if so what will it do with it? Over the years both JKX and Cardinal have struggled to find rigs to do their drilling, even if Regal raised the $150M, it probably would struggle to spend it. Regal have already (in 2003) built the necessary pipelines and gas processing facilities, although these have lain idle since completion.

It took JKX about 3 years to work upto 3 rigs, all on long term contracts, and Cardinal had to go to the expense of buying a drilling company in order to get its rigs. Regal still have about $15M in the bank and could probably do some limited drilling on their own this year in order to firm up the reserves estimate, and so extract maximum value from any long term JV. Upto early 2004 Regal seemed to be aiming to go it alone in Ukraine, and I believe they may yet do so, as Frank says they have at least 18 years to go on the licences.

On the outlook for 2007 generally, literally anything could happen, and IMHO things seem to be brewing for a major political earthquake close to the Wests main oil supply lines.

A taster of the problems to come is outlined in articles such as this,



"Next, how bad will the Middle East get? The US looks set to go for broke in Iraq early this year, with a big increase in troops in a desperate attempt to pacify the place. Optimism about its repeated efforts to secure a lasting victory has not been rewarded in the three years and nine months since Baghdad fell and few will be willing to bet that this latest push will work. Still, we shall have to see.

A decision on what to do about Iran’s nuclear ambitions will also move much closer in 2007, President George Bush’s last effective year in office. The UN’s pathetic sanctions imposed before Christmas seem unlikely to do the job. This confronts the US, sooner than it had hoped, with a crucial choice: military action, with all its horrible consequences, or acquiescence in a nuclear Iran, with all its horrible consequences.

At the back of all this is the much bigger question of whether the deepening turmoil in the Middle East will turn into a full-scale regional war. If it does, a further question is: what will be the main line of cleavage in that conflict — Shia against Sunni Muslims, Arabs against Persians, or all of them against the US and Israel?

In the second half of 2006, oil prices shrugged off all this mounting alarm and tumbled, in response to much narrower and immediate questions of demand and supply. Can that happen again in 2007? "

If Iraq fragments then Iran will support the Shia majority, and Saudi Arabia will be forced to intervene possibly militarily to support the Sunni minority and prevent them from being slaughtered wholesale.

Saudi Arabia is certainly gearing up for war, from ensuring the option of buying off the shelf nuclear weapons



to buying as many jet fighters as it can lay its hands on



and the Typhoon jet fighters destined for the RAF will instead be heading for Saudi, as they say they need them urgently.

And headlines such as this show that Iran is gearing up for confrontation



Do the markets appreciate the threat - no....



And the Wests alternative supplier to the Middle East? That nice Uncle Vladimir -



My conclusion, for what it is worth, is that by holding oil stocks, either in production or close to production, away from the more volatile areas of the world, you will not go far wrong.

Enter Regal Petroleum, stage left....

Regards,

Xena