Cadogan Regulatory News (CAD)

Cadogan Petroleum PLCANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2012 The Directors present the Annual Financial Report for the year ended 31 December2012. The full Annual Report and Accounts will shortly be available via the Company'swebsite at www.cadoganpetroleum.com

KEY POINTS

Cadogan Petroleum plc is an independent oil and gas exploration,development

and production company with onshore gas, condensate and oil assets in Ukraine.

Key developments during 2012:

- The completion of a major transaction between Eni S.p.A("Eni"), NAK Nadra

and Cadogan Petroleum plc ("Cadogan" or "the Company")resulting in establishmentof LLC Westgasinvest ("WGI"), which holds a portfolio of 10 licences forunconventional gas covering a total area of 3,795square kilometres, and subsequentfarm-out to Eni of 50.01%. Cadogan retains 15% interest in WGI

- Sale of two gas plants for $29.5 million and settlement of all associatedlitigation with Global Process Systems ("GPS") completed in April 2013

- Total impairment of $86.3 million mainly related to the Zagoryanskalicense

- Total capital expenditure of $22.3 million (2011: $21.3 million) during theyear of which $4.1 million was funded by the deferred consideration from thedisposal of 30% of Cadogan's interest in the Pokrovskoe licence to Eni in 2011 - Net cash and cash equivalents at year-end of $42.4 million(2011: $65.0 million). Cash and cash equivalents at 24 April of $67.2 million Cadogan Petroleum plc +380 44 584 4979Bertrand des PallieresChief Executive Officer Cantor Fitzgerald Europe +44 (0) 20 7894 7000David Porter Richard RedmayneBankside Consultants +44 (0) 207 367 8888Simon Rothschild CHAIRMAN'S STATEMENT 2012 proved a challenging year for Cadogan. Revenue, largely reflecting productionfrom the Group's Cheremkhivska and Debeslavetska fields decreased to $5.7 million from$7.0m in 2011. The loss before tax was $92.9 million, after a $83.6 million impairmenttaken largely as a result of the unsuccessful drilling and work over programme atZagoryanska licence. At 31 December 2012 the Company had cash of $42.4m. Since the year end this hassignificantly improved due to the recently reported settlementwith GPS, leavingthe Company in a strong financial position, with $67.2 million cash and cashequivalents at 24 April 2013, to achieve the ambitious targets it has set foritself in 2013. Operations As reported in the half year report, in the first half of 2012 the Group finaliseda completeoverhaul of its technical operations and sub-surface explorations teams,bringing in over 120 years combined experience in major Independent Oil Companies.Under their supervision, the Group has undertaken a thorough re-evaluation of allits assets, enabling the Group to revise its list of targets for its short - mediumterm plan of activity. Whilst a principal focus for 2013 remains the reduction ofrisk and maximization of existing production potential, we have identified new andeconomically viable exploration and production potential in most of our existinglicences. Shale Gas Within the framework of the Cooperation Agreement with Eni, signed in October 2011,Cadogan completed its Share Purchase Agreement in October 2012 with Nak Nadra Ukrayny("Nadra") and Eni, for the exploration and development of unconventional gas in Ukraine,whereby Eni has acquired a stake in the joint venture company established by Nadraand Cadogan, Ukrainian company LLC Westgasinvest. Under the transaction, Eni acquires50.01% of LLC Westgasinvest from the joint venture parties and will fund an initialexploration program. The Board In January 2012, Adelmo Schenato joined the Board as Chief Operating Officer aftera 35 year career at Eni, the Italian integrated energy business, where he servedin senior global and regional positions. His global roles at Eni included WellOperations Research and Development ("R&D") and Technical Management, and VicePresident Health Safety, Environment and Sustainability. His regional roles includedGeneral Manager for Tunisia, Gabon and Angola as well as CEO of Eni's Italian gasstorage company. Since joining Cadogan, Adelmo has been responsible for recruitinga new technical team. The Chief Executive covers this in more detail in his review. During the year both Alessandro Benedetti and Ian Baron resigned from the Board,although Mr Benedetti continues to advise the Company in a consulting capacity.I thank them both for their contribution to the Company.

Litigation

As previously announced, Cadogan has reached a settlement with Global ProcessSystems ("GPS") by way of an Agreement with GPS for the purchase of two gas

processing plants for the sum of $29.5 million. The completed sale representsa full and final settlement of all claims and liabilities between the two parties,and marks to the final part in a long running litigation around the Company thathad proved a substantial distraction for management.

Annual General Meeting

I look forward to meeting shareholders at the Company's Annual General Meeting tobe held at 10.30am on Thursday 27 June 2013 at Chandos House, 2 Queen Anne Street,London W1G 9LQ. Strategy and Prospects Currently all Cadogan's assets are based in Ukraine. The programme approved for thecurrent year concentrates on increasing production from existing licenses withoutthe capital intensity necessitated by the drilling of the major wells have beenidentified in Pokrovskoe. Furthermore, potential operations on the shale gas licensesthat form our Joint Venture with Nadra Ukrayny and Eni S.p.A are under evaluationand whilst the Board continues to assess opportunities both in Ukraine,where our existing license base continues to prove attractive to companies wishingto get involved in the sector in Ukraine, and overseas in regions where the Companyhas existing relationships and can offer significant, existing expertise. Zev FurstNon-executive Chairman24 April 2013 CHIEF EXECUTIVE'S REVIEW Since the recruitment of Adelmo Schenato in January 2012, much effort has beengiven to the recruitment and indeed overhaul of the Group's technical operationsand sub-surface explorations teams. A review of the Group's past exploration anddrilling campaigns suggests that results would be improved by a deeper understandingof the geology of our license areas and amore thorough technical preparation by wayof seismic acquisition and interpretation. Taken together this will limit the riskof futuredisappointing results of the type seen in our most recent drilling activity. As part of the refocusing of the Group's technical capabilities, Emidio Valmori hasbeen recruited as Business Development Technical Adviser and Luciano Kovacic as Geologyand Geophysics ("G&G") manager, heading technical teams that will assess future operations.Emidio headed Eni's geology team in Italy after stints in China, Senegal, Angola and Egypt.Luciano also comes from Eni with a strong technical background, having worked in Libya,Algeria and the UK and as part of that Group's R&D activities, introducing 4D technologiesto that company. In addition, Giovanni Ferraro has been recruited as Production andDevelopment ("P&D") Technical Consultant Advisor. His past experience has included thestart-up of the Beniboye oil field (Nigerian Agip Oil Company Limited ("NAOC")) andmanagement of 2 large oil fields (one onshore, one offshore) in Libya, with total productionof over 300,000 bopd. Together this represents formidable technical capability at Cadogan asit seeks to put past frustrations behind it. Operations at Pokrovskoe are currently suspended following disappointing results onPokrovskoe 1 and 2a, the latter afflicted by mechanical problems. However the reassessment ofthe area by our new technical teams has identified residual hydrocarbon potential within thelicense area and operations might be resumed upon finalisation of a positive re-evaluation.The Group's Zagoryanska 1, 2 and 3 and 11 wells have all been suspended, with only Zagoryanska 3having the potential for commercial production. At the Zagoryanska 11 well, a data acquisitionprogramme is underway, the results of which will be used to re-focus operations on the license.However, in order to reflect the disappointing outcome of the 2012 activity, the Board hasdecided to impair the carrying value of the assets related to the Zagoryanska license to nil. On the Monastyretska license in Western Ukraine, operations at the Blazhiv 1 well areshowing positiveresults and the re-entry of another two, existing wells is under evaluation.In the meantime work with our joint venture partner Eni on assessing the Zagoryanska,Pirkovskoe and Pokrovskoe licences continues.

More generally, Ukrainian operations in 2013 are expected to focus on shallow prospectsin our western assets that do not require the capital intensity of our eastern, deep prospects.

Extremely promising gas shows are evident from logging and drilling data at Borynya 3.It is our intention to re-enter the well in June 2013 using the Group's AstroService rig. Other new and promising areas for investment are already under scrutiny and the Groupwill report on these in due course. The Group continues to assess opportunities in Ukrainianacreage in the Black Sea. Shale Gas LLC Westgasinvest, in which Cadogan holds a 15% shareholding, currentlyholds subsoil rights to nine unconventional (shale) gas license areas in theLviv Basin of Ukraine, totalling approximately 3,800 square kilometres of acreage.The Lviv Basin is considered to be one of the most attractive basins in Europe for theexploration of unconventional gas,being a continuation of the Lublin Basin in Poland whichhas already attracted substantial interest from the hydrocarbon industry. Studies are ongoingwith the aim to defining the best area where to start the operations for the firstexploration well. The potential Shell and the Ukrainian government on acreage in the country.

Service Business

The Ukrainian oil & gas sector currently lacks adequate investment in technical services.Partly in order to remedy this, Cadogan has invested limited amounts in oilfield servicesin Ukraine, in particular in agreementswith Medes in Ukraine on the provision of mud treatmentservices and an Exclusive Cooperation agreement with AVA (Newpark Group) on drilling fluidsservices. This initiative is already generating so far limited, but positive,financial benefitsand we expect this trend to continue and even increase over time.

Financial Position

Cadogan remains in a strong financial position, despite recent disappointing drilling resultsand the impairment taken on our Zagoryanska license, with no debt and with substantial cashresources, particularly following the recent finalisation of the litigation with GPS.One feature of the Financial Review is the continuing cutting of costs, with cost of salesdecreasing to $4.2 million in 2012 from $6.3 million in 2011 and other administrativeexpenses decreasing to $10.8 million in 2012 from $11.6 million in 2011. This is a continuingprocess as the Board seeks to reshape the Group.

Strategy

In my last Chief Executive's Review in the 2011 Annual Report I underlined the potentialthat Ukraine holds for oil & gas exploration and production, a factor that is beingincreasingly recognised by the entry of major oil companies to the Country.Not only Eni, with whom Cadogan shares joint ventures, but also Exxon, Chevron,Shell, OMV, Vitol have all entered Ukraine since last year's report. As predicted,it should contribute to a significant re-rating of Ukraine's oil and gas sector andvaluations over the next quarters and years. Against this background Cadogan, which islongestablished and highly regarded in Ukraine, is positioned to take advantage alsoon new ventures both on-shore and off-shore. Bertrand des PallieresChief Executive Officer24 April 2013 OPERATIONS REVIEW In 2012 the Group held working interests in nine conventional (2011: nine) gas, condensateand oil exploration and production licences in the East and West of Ukraine. All theseassets are operated by the Group and are located in either the Carpathian basin or theDnieper-Donets basin, in close proximity to the Ukrainian gas distribution infrastructures.The Group's primary focus during 2012 was on the four most promising licences in which themain reserve and resource potential is located: Zagoryanska, Pokrovskoe, and Pirkovskoe inthe Dnieper-Donets basin of East Ukraine and Bitlyanska, in the Carpathian Basin of WestUkraine.

Summary of the Group's licences (as of 31 December 2012)

Working Licence interest (%) Licence Expiry type (1)Major licences 40.0 Zagoryanska April 2014 E&D 70.0 Pokrovskoe August 2016 E&D 100.0 Pirkovskoe October 2015 E&D 99.8 Bitlyanska December 2014 E&DMinor licences 99.2 Debeslavetska (2) November 2026 Production 99.2 Debeslavetska (2) September 2016 E&D 53.4 Cheremkhivska (2) May 2018 Production 100.0 Slobodo-Rungerska April 2016 E&D 99.2 Monastyretska November 2014 E&D

(1) E&D = Exploration and Development.

(2) Debeslavetska and Cheremkhivska licences are held by WGI, in which the Grouphas a 15% interest. The Group has 99.2% and 53.4% of economic benefit inconventional activities in Debeslavetska and Cheremkhivska licences respectivelythrough Joint Activity Agreements ("JAA"). In addition to above licences the Group has a 15% interest in WGI, which holds theReklynetska, Zhuzhelianska, Cheremkhivsko-Strupkivska, Debeslavetska Exploration,Debeslavetska Production, Baulinska, Filimonivska,Kurinna, Sandugeyivska andYakovlivska licences for unconventional activities.

Zagoryanska licence

The Group has a 40 per cent working interest in the Zagoryanska licence area.The Zagoryanska licence previously reported 96.4 mmboe of Contingent Resources.In light of the results during 2012 campaign, a thoroughre-evaluation is ongoing. The exploration and development licence covers 49.6 square kilometres and in2009 the licence was extended until April 2014. The work obligations have beenfulfilled. Following the joint venture ("JV") formed with Eni in July 2011, under which Eniacquired a 60 per cent interest in the Zagoryanska licence, a work-over and drillingplan was implemented to verify and exploit the potentially productive intervals. - The Zagoryanska 1 well work-over opened and tested the V19 and V18 intervals; the firstproduced no commercial gas and the second was found to be water bearing; the well issuspended.

- The Zagoryanska 2 well work-over tested the V25, V24 and V23 intervals with no commercialgas produced; the well is suspended.

- The Zagoryanska 8 well work-over, which was intended to test the V20, V18, V17and V16 intervals, was unable to recover the previous fish-in-hole due to the verypoor casing conditions; the well is suspended. - Production from Zagoryanska 3 well is tied into the Group's Zagoryanska gastreatment plant. Average monthly production rates during 2012 were 28 mcm/day gasand 4.3 t/day condensate. At the end of 2012, the well was worked-over to retrievethe parted tubing, in order to open the V19 interval and the bottom of the producingV18 interval. V19 showed some gas but due to poor petro-physical properties productionwas not economically sustainable.The well is currently under monitoring to assess thepossibility to recover production from V18. - The Zagoryanska 11 well was spud-in on 7 March 2012. In spite of severe hole instabilityproblems and multiple equipment failures, the well operations were successfully completedin 166 days versus 142 in AuthorisationFor Expenditure ("AFE"). The V24, V23, V19, andV18 intervals were tested with no commercial gas; the well is suspended. As at 31 December 2012 the Group assessed the recoverability of the carrying value of thedevelopment and production assets related to the Zagoryanska licence. This has resulted inthe impairment of the mentioned assets to nil (for details refer to Note 4(b) of theConsolidated Financial Statements). An extensive revision and reinterpretation of the 3D seismic and Geological and Geophysical("G&G") studies to value and price all the possible reserves potential is ongoing. Studiesare in an early stage and not yet sufficiently mature to enable the Company to define futureactions. Pokrovskoe licence The Group holds a 70 per cent working interest in the Pokrovskoe licence which holds 51.1mmboe of Prospective Resources (2011: 51.1 mmboe). The exploration licence covers 49.5 squarekilometres and the initial licence was extended until August 2016. The interpretation of the 3D seismic, completed early in 2010 confirmed the presence of aprospect with four-way closure at the Lower Visean and the deeper Tournasian levels, beneathboth the Pokrovskoe 1 and Pokrovskoe2 suspended well locations; both wells encountered strongindications of gas during drilling and logging. After the JV with Eni that acquired 30 per cent of the Group's Pokrovskoe licence, thedrilling of the Pokrovskoe 2a well indicated the presence of hydrocarbons but due tomechanical problems the well was suspended with a future option of re-entry. On 9 March 2012 the Group was advised by Eni that, following their analysis of the resultsfor the Pokrovskoe 1 and Pokrovskoe 2a wells, they did not intend to exercise the optionto acquire the additional 30 per cent. Notwithstanding Eni's decision not to exercise theoption, Eni continues to hold a 30 per cent share in the Pokrovskoe licence. On the basis of the results and the clear indication of the presence of a positivehydrocarbons generation and migration system, it was decided to continue the investigationof the area. The preliminary 3D seismic re-interpretation has been successfully concluded.The Pokrovskoe licence shows several interesting objects and encouraging signs for apossible programme of activity that can be defined and eventually proposed for theBoard's approval in the final quarter of 2013.

Pirkovskoe licence

The Group has a 100 per cent working interest in the Pirkovskoe licence which holds 2.5mmboe of Proven and Probable Reserves (2011: 2.4 mmboe). This exploration and appraisallicence covers 71.6 square kilometres and has been renewed until October 2015. Theremaining work programme includes: (a) the testing of Pirkovskoe 1; (b) deepening to5,450 metres and testing of the suspended Pirkovskoe 2 well; (c) the drilling of anew well; and (d) calculation of the potential hydrocarbon reserves. The Pirkovskoe 1 and Pirkovskoe 2 wells are currently suspended. An extensive revisionand reinterpretation of the 3D seismic and G&G studies is ongoing to value and price allthe possible reserves potential. Studies are in the early stage and not yet sufficientlymature to define future actions. The Group owns the Krasnozayarska gas treatment plant located in the Pirkovskoe licencearea, which is connected to the UkrTransGas system and is temporarily servicing a nearbylocal operator. Bitlyanska licence area The Bitlyanska exploration and development licence covers an area of 390 square kilometreswith the Group's interest at 99.8 per cent. There are three hydrocarbon discoveries inthis licence area, namely Bitlyanska, Borynya and Vovchenska. The Borynya and Bitlyanskafields hold 219.2 mmboe (gross) (2011: 219.2 mmboe) and 117.3 mmboe (gross) (2011: 117.3mmboe) of Contingent Resources respectively, while no Reserves and Resources have beenattributedto the depleted Vovchenska field. In the 1970s drilling of the Borynya 1 resulted in a blow out and Borynya 2 reportedlytested gas at very high rates. In 2009 Cadogan drilled the Borynya 3 well, proximalto these two Soviet era wells. Several intervals showed very interesting evidence ofgas during drilling which was confirmed by logging. Due to the difficult holeconditions and the increasingly high pore pressure gradient, three very limitedopen hole drill stem tests were run. Inparticular, from one of the secondary reservoirtargets at around 3,600 metres gas was tested at a maximum flow rate of 128,000 cubicmetres per day. At a drilled depth of 5,325 metres the well Borynya 3 was suspended forfutureevaluation having encounte red several high-pressure gas bearing intervals thatcould not be tested with the equipment available at that time. In 1994 the Bitlya 1 well tested non-commercial gas from several zones down to3,200 metres. Although, at that time, the presence of an active hydrocarbonsystem was established, the recent 2D seismic data interpretationdemonstrates thatthe well was poorly located in relation to any structural closure. In 2010 a 2D survey was completed in the southern part of thelicence area to complementthe Soviet era 2D seismic data that had been reprocessed by Cadogan. This integrateddata set has been interpreted with the benefit of recent surface geological mappingand balanced section generation, and a series of prospects for future explorationdrilling have been identified.

Based on the new prospect structures model, an internal re-evaluation and estimate ofthe resources in Bitlyanska and Borynya areas was concluded.

Since the year end, the re-entry and testing of Borynya 3 well has been approved by theBoard which also approved the purchase of existing seismic data on the Vovchenska areaand the acquisition of 50 linear kilometres of 2D seismic lines to better access andre-estimate the existing potential. The remaining work obligation for this licence was recently re-negotiated.

Minor fields

The Group has a number of minor licence areas located in Western Ukraine.These include the following:

- Debeslavetska Production licence area

A production licence, containing 0.2 mmboe of Proved, Probable and Possible

(`3P') Reserves (2011: 0.2 mmboe). The field is currently producing 95.0 boepd(2011: 84.0 boepd). The new compressor unit and dehydration facilities for productionoptimisation have been delivered as per the programme.

- Debeslavetska Exploration licence area

An exploration licence surrounding the Debeslavetska Production licence area whichis considered quite promising in shallow gas production potential. Following thepositive preliminary results (Amplitude Versus Offset ("AVO") and Inversion Analysis),the purchase of existing seismic data and the acquisition of 80 linear kilometres of2D seismic lines to assess and estimate the reserves is forecast in 2013; in addition,one shallow well could be drilled by the year end. The satellite radar waves "InSar"technology will be applied to understand and predict the gas reservoirs' behaviour.

- Cheremkhivska Production licence area

A production licence containing 0.1 mmboe of 3P Reserves (2011: 0.1 mmboe). Thislicence is currently producing 23.9 boepd (2011: 32.8 boepd).

Potential gas production from shallow intervals seems to be challenging from thislicence. Preliminary studies have not yet been conclusive but a contingent programmeto purchase existing seismic data and the acquisition of 30 linear kilometres of2D seismic lines to assess and estimate the reserves will be considered in 2013.

- Slobodo-Rungerska licence area

An exploration and development licence, with no booked Reserves and Resources(2011: nil). Seismic data for this area was reprocessed in 2010 and the resultsindicate a deeper structure underlying the depleted and abandoned Slobodo-RungerskaField. Ongoing re-evaluation is in its preliminary stage.

- Monastyretska licence area

An exploration and development licence, with no booked Reserves or Resources (2011: nil).The Blazhiv 1 well was re-entered and a sucker rod pump was installed;the well is currently producing at a rate of 20-25 boepd and is being monitoredto ensure that production is optimised.

FINANCIAL REVIEW

Overview

In 2012 the Group focused on concluding drilling and testing of the Pokrovskoe 2a well onthe Pokrovskoe field and, together with its joint venture partner Eni, the work-overcampaign at the Zagoryanska field. In addition to the ground work on the JV fields(Zagoryanska and Pokrovskoe), an extensive re-assessment of the Group's assets hasbeen carried out by the sub-surface team which continues into 2013. Revenue has decreased from $7.0 million in 2011 to $5.7 million in 2012. The unsuccessfulprogramme on the Zagoryanska licence has resulted in a $83.6 million (2011: $nil) impairmentof Property, Plant and Equipment ("PP&E") assets and a receivable from Eni that was treatedas contingent consideration, which contributed to the loss for the year of $93.1 million(2011: $153.1 million profit). This loss was reflected by a corresponding decrease in the netasset position as at 31 December 2012 to $194.3 million from $283.0 million as at 31 December 2011.The cash position of $42.4 millionat 31 December 2012 has decreased from $65.0 million at31 December 2011 mainly as the result of capital expenditure on the Zagoryanska licence andongoing costs. Income statement Loss before tax was $92.9 million (2011: profit of $152.6 million). Revenues of $5.7 million(2011: $7.0 million) comprised sales of gas from the Debeslavetska and Cheremkivska fields,the Zagoryanska 3 well and other revenue from the service business. Of the $1.3 milliondecrease in revenues $2.4 million relates to a decrease from the Zagoryanska licencemainly due to the fact that the Group proportionately consolidated 40% of Zagoryanskarevenues throughout whole of 2012 while revenues were fully consolidated into the Group'sincome statement during the first half of 2011. Revenues from sales of hydrocarbons fromother licences have increased by $0.3 million, largely due to the gas price increase in 2012.In addition, $0.8 million from oil field services provided to third parties by the Groupcontributed to 2012 revenue. Cost of sales, which represents production royalties and taxes,depreciation and depletion of producing wells and direct staff costs decreased to $4.2 millionin 2012 from $6.3 million in 2011 to give a gross profit of $1.5 million (2011: $0.7 million). - Other administrative expenses of $10.8 million (2011: $11.6 million) comprise other staff costs,professional fees, Directors' remuneration and depreciation charges on non-producing property,plant and equipment. In addition to recurring administrative expenses, $0.5 million (2011: $1.2million) of professional costs were incurred in relation to litigation, $0.1 million of professionalfees were incurred in relation to the transaction with Eni on WGI (2011: $0.9 million in relationto the transaction with Eni on the Pokrovskoe and Zagoryanska licences). - Impairment charges amounting to a total of $86.3 million (2011: $2.8 million) comprised:$58.9 million (2011: $nil) impairment of PP&E assets of which $47.1 million was recorded in respectof the fair value uplift of the Group's 40% non-controlling interest in Zagoryanskoe recorded afterthe disposal of 60% in 2011; $24.7 million (2011: $nil)impairment of contingent consideration fromEni recorded in 2011 in respect of obtaining the Zagoryanska production licence; and $2.7 million(2011: $2.8 million) net impairment charges comprised of $2.4 million impairment (2011: $3.2 million)of Ukrainian VAT and $0.3 million provision for inventory (2011: $0.3 million release of provision). - Other gains of $5.4 million represents the profit the on contributions of licences, being thedifference between the fair value of the licences contributed in return for the 15% interest in WGIand nil net book value of the licences in the Group's books at the date of contribution. - Other operating expenses of $2.9 million (2011: $4.6 million income) includes $0.6 millionincome (2011: $2.1 million) related to recoveries from former management and suppliers and$3.6 million of net foreign exchange losses (2011: $2.4 million gain) related to revaluationof USD denominated monetary assets of the Group's UK entities which have a GBP as the functional currency.

Cash flow statement

The Consolidated Cash Flow Statement below shows expenditure of $6.2 million (2011: $16.9 million)on intangible Exploration and Evaluation ("E&E") assets and $15.7 million (2011: $4.4 million)on PP&E. In addition, the Group received $4.1 million (2011: $58.0 million) deferred considerationthat had been outstanding as at 31 December 2011 in connection with the disposal of interest inPokrovskoe BV to Eni in 2011. Balance sheet As at 31 December 2012, the Group had net cash and cash equivalents of $42.4 million(2011: $65.0 million). Intangible E&E assets of $78.2 million (2011: $66.0 million) represent thecarrying value of the Group's investment in exploration and appraisal assets as at 31 December 2012,including $40.3 million of fair value uplift on the valuation of the 70% jointly-controlled interestin the former subsidiary which holds the Pokrovskoe licence, and $5.4 million of the associated fairvalue of the licences contributed in return for the 15% interest in WGI. The PP&E balance of $46.6million at 31 December 2012 (2011: $99.4 million, including $40.0 million of the fair value uplifton the valuation of the 40% jointly-controlled interest in the former subsidiarywhich holdsZagoryanska licence), reflects the cost of developing fields with commercial reserves andbringing them into production. Trade and other receivables of $35.5 million (2011: $66.3 million)includes $30.0 million (2011: $30 million) receivables in respect of the settlement with GPS(refer to note 4(a) to the Consolidated Financial Statements), $3.1 million (2011: $1.7 million)as the non-consolidated portion of receivables from jointly controlled entities, and $0.9 million(2011: $4.3 million) in prepayments.

Key performance indicators

The Group monitors its performance in implementing its strategy with reference to clear targetsset out for four key financial and one key non-financial performance indicators (`KPIs'):

- to increase oil, gas and condensate production measured onnumber of barrels of oil equivalent produced per day (`boepd');

- to increase the Group's oil and gas reserves by de-risking possible resources andcontingent reserves into 2P Reserves. This is measured in million barrels of oil equivalent(`mmboe');

- to increase the realised price per 1,000 cubic metres;

- to increase the Group's basic and diluted earnings per share;and

- to reduce the number of lost time incidents.

The Group's performance in 2012 against these targets is set out in the table below, togetherwith the prior year performance data. No changes have been made to the source of data orcalculation used in the year. Unit 2012 2011

Financial KPIsAverage production (working interest basis (1) boepd 181 2972P reserves (2)

mmboe 2.6 2.6

Realised price per 1,000 cubic metres (3) $ 486.0 395.1Basic and diluted earnings per share (4) cents (40.3) 65.6Non-financial KPIsLost time incidents (5)

Incidents 0 2

(1) Average production is calculated as the average daily production during the year.

(2) Quantities of 2P reserves as at 31 December 2011 and 2012 are based on Gaffney,Cline & Associates' independent reserves report on 2P Reserves as at 31 December 2009,dated 16 March 2010, as adjusted for the actual production during 2011 and 2012 respectively.

(3) This represents the average price received for gas sold during the year (including VAT).

(4) Basic and diluted profit per Ordinary share is calculated by dividing the net profitfor the year attributable to equity holders of the parent company by the weighted average

number of Ordinary shares during the year.

(5) Lost time incidents relate to injuries where an employee/contractor is injured and hastime off work.

Related party transactions

Related party transactions are set out in note 31 to the Consolidated Financial Statements.

Treasury

The Group continually monitors its exposure to currency risk. It maintains a portfolio ofcash and cash equivalent balances mainly in US dollars (`USD') held primarily in the UKand holds these mostly in term deposits depending on the Group's operational requirements.Production revenues from the sale of hydrocarbons are received in the local currency in Ukraine (`UAH')and to date funds from such revenues have been held in Ukraine for further use in operationsrather than being remitted to the UK. Funds are transferred to the Company's subsidiaries inUSD to fund operations at which time the funds are converted to UAH. Some payments are made onbehalf of the subsidiaries from the UK.

RISKS AND UNCERTAINTIES

There are a number of potential risks and uncertainties, which could have a material impact onthe Group's long-term performance and could cause the actual results to differ materially fromexpected and historical results. Executive management review the potential risks and thenclassify them as having a high impact, above $5 million, medium impact above $1 million butbelow $5 million, and low impact below $1 million. They also assess the likelihood of theserisks occurring. Risk mitigation factors are reviewed and documented based on the level andlikelihood of occurrence. The Audit Committee reviews the risk register and monitors theimplementation of improved risk mitigation procedures via Executive management.

The Group has analysed the following categories as key risks:

Risk Mitigation

Operational risks

Health, Safety and Environment("HSE")

The oil and gas industry by its The Group ensures that therenature conducts activities which is a proper HSE system incan be seriously impacted by place and demands thathealth, safety & environmental management, staff andincidents. Serious incidents can contractors adhere to it.have not only a financial impact The system ensures that thebut can also damage the Group's Group meets Ukrainereputation and the opportunity to legislative standards inundertake further projects. full and achieves

international standards to the maximum extent possible. Drilling operations

The technical difficulty of The incorporation ofdrilling wells in the Group's detailed sub-surfacelocations and equipment

analysis into a robustlimitations can result in the engineered well design andunsuccessful completion of the work programme, withwell. appropriate procurement procedures and on site management competence aims to minimise risk. Production and maintenance Some of the Group's facilities All plants are operated athave been inherited, and although standards above the Ukrainefully checked were not installed minimum legal requirements.under our supervision and there Operative staff is chosenis a risk of plant failure. for its experience and receives supplemental training to ensure that facilities are operated and maintained at a high standard. There is a risk that production Service providers areor transportation facilities can rigorously reviewes at the tender stagefail due to poor performance of and are monitored during the contract period.the Group's suppliers and controlof some facilities being withother governmental or commercialorganisations.

Work over and abandonment

Certain of the Group's wells were Work programmes are designeddrilled by the State and other to assess the status of theprivate companies and will be wells and any work that isworked over. There is a risk that not safe or is notCadogan's activities fail because technically feasible will beof problems inherited with these abandoned. Qualifiedsites. professionals will be used to design a step-by-step approach to re-entering old wells. Any well stock that is not All sites that are abandoned will be restoredconsidered satisfactory for and re-cultivated to meet or exceed standardspurpose or poses an environmental required by the relevant environmental controlhazard will need to be abandoned. and control authorities and in compliance with recognised international standards. Sub-surface risks The success of the business All externally provided and historic data isrelies on accurate and detailed rigorously examined and discarded when appropriate.analysis of the sub-surface. This New data acquisition is considered and appropriatecan be impacted by poor quality programmes implemented, but historic data can be revieweddata, either historic or recently and reprocessed to improve overall knowledge base.gathered and limited coverage.Certain information provided byexternal sources may not beaccurate. Some local contractors may not Detailed supervision of local contractors by Cadoganacquire data accurately, and management is followed. Plans are discussed well inchoice of locally available advance with both local and international contractors in anequipment or contractors of a effort to ensure that appropriate equipment is available.desirable standard. Data can be misinterpreted All analytical outcomes areleading to the construction of challenged internally andinaccurate models and subsequent peer reviewed.plans. Interpretations are carried out on modern geological software. A staff training programme has been put in place. Financial risks

The Group may not be successful The Group performs a reviewin achieving commercial

of its O&G assets forproduction from an asset and impairment on annual basis.consequently the carrying values The Group considers on anof the Group's oil and gas assets annual basis whether tomay not be recovered through commission a Competentfuture revenues. Person's Report (`CPR') from an independent reservoir engineer. The CPR provides an estimate of the Group's reserves and resources by field/licence area. As no new production has been achieved during 2012, Management has decided not to commission new CPR during 2012. As part of the annual budget approval process the Board considers and evaluates projects for the forthcoming year and considers the appropriate level of risk. The Board has approved a work programme for 2013. Further attempts to bring in partners and mitigate the Group's risk exposure are underway. There is a risk that insufficient The Group manages the riskfunds are available to meet by maintaining adequate cashdevelopment obligations to reserves and by closelycommercialise the Group's major monitoring forecast andlicences. actual cash flow, as well as short and longer funding requirements. Management reviews these forecasts regularly and updates are made where applicable and submitted to the Board for consideration. The farm-out campaign to conserve cash and mitigate risk will continue through 2013.

The Group could be impacted by These risks are mitigated byfailing to meet regulatory employing suitably qualifiedreporting requirements in the UK, professionals who, workingand statutory tax and filing with advisers when needed,requirements in both Ukraine and are monitoring regulatorythe UK.

reporting requirements, and who ensure that timely submissions are made.

The Group operates primarily in Clear authority levels andUkraine, an emerging market, robust approval processeswhere certain inappropriate are in place, with stringentbusiness practices may from time controls over cashto time occur. This includes management and the tenderingbribery, theft of Group property and procurement process.and fraud, all of which can lead Adequate office and siteto financial loss.

protection is in place to protect assets. Anti-bribery policies are in place. The Group is at risk from changes Revenues are received in UAHin the economic environment both and expenditure is made inin Ukraine and globally which can UAH, but funds arecause foreign exchange movements, transferred in US dollars tochanges in the rate of inflation Ukraine. The Group continuesand interest rates and lead to to hold most of its cashcredit risk in relation to the reserves in the UK in USGroup's key counterparties. dollars with some GBP deposits. Cash reserves are placed with leading financial institutions which are approved by the Audit Committee. The Group is predominantly a US dollar denominated business. Foreign exchange risk is considered a normal and acceptable business exposure and the Group does not hedge against this risk. Refer to note 29 to the Consolidated Financial Statements for detail on financial risks. Corporate risks Should the Group fail to comply The Group designs a workwith licence obligations there is programme and budget toa risk that its entitlement to ensure that all licencethe licence will be lost. obligations are met. The Group engages proactively with government to re-negotiate terms and ensure that they are not onerous. Ukraine is an emerging market and The Group minimises thisas such the Group is exposed to risk by maintaining thegreater regulatory, economic and funds in international bankspolitical risks than other outside Ukraine and byjurisdictions. Emerging economies continuously maintaining aare generally subject to a working dialogue with thevolatile political environment regulatory authorities.which could adversely impact onCadogan's ability to operate inthe market. The Group's success depends upon The Group periodicallyskilled management, technical and reviews compensation andadministrative staff. The loss of contract terms of its staff.service of critical members fromthe Group's team could have anadverse effect on the business.

STATEMENT OF RESERVES AND RESOURCES

The Group did not commission an independent Reserves and Resources Evaluation of theGroup's oil and gas assets in Ukraine as at 31 December 2012, due to insufficient newinformation arising from operational activity before the year end. The summary of theReserves and Resources below are based on the Independent Reserves and ResourcesEvaluation performed by Gaffney Cline and Associates as at 31 December 2009, adjustedfor subsequent actual production. Summary of Reserves As of 31 December 2012 Working interest basis Gas Condensate Oil bcf mmbbl mmbbl

Proved and Probable Reserves at 1 January 2012 11.1 0.6 -Production

(0.2)* - -Change in working interest 0.4 - -

Proved and Probable Reserves at 31 December 2012 11.3 0.6 -Possible Reserves at 1 January 2012 and 31 19.5 1.5 -December 2012

*During 2012 the Group produced an additional 0.1bcf (2011: 0.6bcf) of natural gas and0.01mmbl (2011: 0.02 mmbl) of condensate from the Zagoryanska field which were notincluded by Gaffney Cline and Associates in the Reserves balances at 31 December 2009provided in the Reserves and Resources Evaluation Report as at that date.

Summary of Contingent Resources

As of 31 December 2012 Working interest basis Gas Condensate Oil Total bcf mmbbl mmbbl mmboeContingent Resources at 1January 2012 2,252.0 92.8 - 498.1Change in working interest 105.3 5.1 - 24.1Contingent Resources at 31December 2012 2,357.3 97.9 - 522.2

Reserves are assigned only to the Pirkovskoe, Debeslavetska and Cheremkhivska fields.

Although commercial production has been achieved at the Zagoryanska field no 2P Reserveshave been booked as at 31 December 2012 (2011: nil) as the Group did not receive an updatedCompetent Person's Report ("CPR") to independently confirm the Reserves quantities.

Contingent Resources are assigned to the Zagoryanska, Pirkovskoe, Borynya and Bitlya fields,where development is contingent on further appraisal.

Prospective Resources of 165.9 bcf (2011: 165.9 bcf) of gas and 5.9 mmbl (2011: 5.9 mmbl) ofcondensate are attributed to the Pokrovskoe field (reflecting Cadogan's working interest),where there has not yet been a production test.

CORPORATE RESPONSIBILITY

The Group considers the sustainability of its business as a key and competitive element of itsstrategy. Meeting the expectations of our stakeholders is the way in which we secure our licenceto operate, and to be recognised in the values we declare is the best added value we can bring inorder to profitably prolong our business. The Board recognises that the health and safety of itsemployees and of the communities and protecting the environment it impacts are the key drivers forthe sustainable development of the Company's activity. Our Code of Ethics and the adoption ofinternationally recognised best practices and standards are our and our employees' references forconducting our operations. Our activities are carried out in accordance with a policy manual, endorsed by the Board, whichhas been disseminated to all staff. The manual includes policies on business conduct and ethics,anti-bribery, the acceptance of gifts and hospitality, and whistleblowing. The Group's Health, Safety and Environment Manager reports directly to the Chief OperationsOfficer. His role is to ensure that the Group has developed suitable procedures and thatoperational management have incorporated them into daily operations, and he has the necessarylevel of autonomy and authority to discharge his duties effectively and efficiently. The Board believes that health and safety procedures and training across the Group should be tothe standard expected in any company operating in the oil and gas sector. Accordingly, it has setup a Committee to review and agree health and safety initiatives and report back on progress.The monthly management report to the Board contains a full report on both health and safety,and environmental issues, and key safety and environmental issues are discussed by the ExecutiveManagement. The Health, Safety and Environment Committee report can be found in the Company's fullAnnual Report and Accounts.

Health, safety and environment

The Group has developed an integrated Health, Safety and Environmental ("HSE") management system.The system aims, by a continuous improvement programme, to ensure that a safety and environmentalprotection culture is embedded in the organisation. The HSE management system ensures that bothUkrainian and international standards can be met with the Ukrainian HSE legislation requirementstaken as an absolute minimum although the international requirements are in the main met or exceeded.All the Group's local operating companies in East and West Ukraine have all the necessary documentationand systems in place to ensure compliance with Ukrainian legislation. A proactive approach to the prevention of incidents has been in place throughout 2012, which relieson an observation cards system and reliable near-miss reporting. Staff training on HSE mattersis recognised as the key factor to generate continuous improvement. In-house training is providedto help staff meet international standards and follow best practice. At present, special attentionis being given to training on risk assessments, incident reporting and investigation, as well ashazard and operational (`HAZOP') studies to ensure that international standards are maintained evenif they exceed those required by Ukrainian legislation. The Board monitors lost time incidents as a key performance indicator of the business, to reasonablyverify that the procedures in place are robust. The Board has benchmarked safety performance againstthe HSE performance index measured and published annually by the International Association ofOil & Gas Producers. In 2012, the Group recorded a total of 708,918 man hours worked. There were noLost Time Incidents (`LTIs') recorded in 2012 and a total of over one million man hours have beenworked without an LTI since the previous incident was recorded in July 2011. Vehicle safety and driving conduct remain among the Company's priorities in controlling hazardsand preventing injuries. As of the end of 2012, the Company has a recorded almost 7.5 millionkilometres driven without an LTI. The European Bank for Reconstruction and Development ("EBRD") was, until February 2013, asubstantial shareholder in the Company and closely monitored the environmental and communityaspects of the Group's activities. An environmental report was submitted to the EBRD each yearsummarising the Group's compliance with local HSE regulation and standards. The EBRD requiredand reviewed the results of audits undertaken by external consultants which were used to generatean environmental action plan. The Group remains highly conscious of the need to optimise itsactivities in order to reduce their environmental impact of its operations. In 2012, a numberof steps were taken in this direction, such as replacing the old compressor unit at theDebeslavetske Gas Treatment Facility, which benefitted the environment by decreasing fuel consumptionand air emissions while improving the overall efficiency of the plant. Starting from 2013, the Company is committed to prepare a baseline to assess and monitor itsenvironmental performance, namely, the consumption of electricity and industrial water andfuel consumption by cars, plants and other work sites. At the same time, development ofprocedures necessary for improving the Group's environmental performance will begin,taking into account the requirements of any applicable policies, such as forthcoming UKregulations on mandatory reporting of greenhouse gas emissions.

Employees

Certain of the Group's operations are undertaken by sub-contractors' specialistshaving the technical knowledge required for complex wells' drilling operations.Local interest is part of the Company's sustainable development policy and whereverpossible local staff is recruited and procedures are in place to ensure that allrecruitments are undertaken on a transparent and fair basis with no discriminationbetween applicants. Each operating company has its own Human Resources staff toensure that the Group's employment policies are properly implemented and followed.As required by Ukrainian legislation, Collective Agreements are in place with theGroup's Ukrainian subsidiary companies which provide an agreed level of staff benefitsand other safeguards for employees. The Group's Human Resources policy covers key areassuch as equal opportunities, wages, overtime and non-discrimination. All staff are awareof the Group's grievance procedures. Sufficient levels of health insurance are providedby the Group to employees to ensure they haveaccess to good medical facilities. Eachemployee's training needs are assessed on an individual basis to ensure that theirskills are adequate to support the Group's operations, and to help them to develop.

Community

The Group's activities are carried out in rural areas of Ukraine and the Board isaware of its responsibilities to the local communities in which the Group operatesand from which some of the employees are recruited. At current operational sites,management works with the local councils to ensure that the impact of operations isas low as practicable by putting in place measures to mitigate their effect. Keyprojects undertaken include improvement of the road infrastructure in the area,which provides easier access to the operational sites while at the same time minimisinginconvenience for the local population and allowing improved road communicationsin the local communities. Specific charitable activities are undertaken for thedirect benefit of local kindergartens, schools, sporting facilities and medicalservices, as well as other community-focused facilities. All activities are followedand supervised by managers who are given specific responsibility for such tasks.In 2012 the Group spent $37,000 (2011: $153,882) predominantly in contributionsfor road repairs, purchasing equipment and furniture for schools, local hospitals,housing and public utilities. The Group's local companies see themselves as part of the community and are involvednot only with financial assistance, but also with practical help and support. Therecruitment of local staff generates additional income for areas that otherwise arepredominantly dependent on the agricultural sector.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The full Annual Report contains the following statements regarding responsibility forthe financial statements and business review included therein.

The Directors are responsible for preparing the Annual Report and the financialstatements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year.The Directors are required under that law to prepare the Group financial statements inaccordance with International Financial Reporting Standards (`IFRSs') as adopted by theEuropean Union and Article 4of the IAS regulation and have also elected to prepare theParent Company financial statements under IFRSs as adopted by the European Union. Undercompany law, the Directors must not approve the accounts unless they are satisfied thatthey give a true and fair view of the state of affairs of the Company and Group and ofthe profit or loss for that period. In preparing the Company and Group's financial statements,International Accounting Standards(`IAS') Regulation requires that Directors:

- properly select and apply accounting policies;

- present information, including accounting policies, in a manner that provides relevant,reliable, comparable and understandable information;

- provide additional disclosures when compliance with the specific requirements in IFRSsare insufficient to enable users to understand the impact of particular transactions,other events and conditions on the entity's financial position and financial performance;and

- make an assessment of the Company's and Group's ability to continue as a going concern.

The Directors are responsible for keeping proper accounting records that are sufficientto show and explain the Company and Group's transactions and disclose with reasonableaccuracy at any time the financial position of the Company and Group and enable them toensure that the financial statements comply with the Companies Act 2006. They are alsoresponsible for taking such steps as are reasonably open to them to safeguard the assetsof the Company and Group and to prevent and detect fraud and other irregularities. Under applicable law and regulations, the Directors are also responsible for preparing aDirectors' Report (including Business Review), Directors' Remuneration Report and CorporateGovernance Statement that comply with that law and those regulations. The Directors are responsible for the maintenance and integrity of the corporate andfinancial information included on the Company's website, www.cadoganpetroleum.com.Legislation in the United Kingdom governing the preparation and dissemination of thefinancial statements may differ from legislation in other jurisdictions.

Responsibility Statement of the Directors in respect of the Annual Report

We confirm to the best of our knowledge:

(1) the financial statements, prepared in accordance with International FinancialReporting Standards as adopted by the European Union, give a true and fair view of the assets,liabilities, financial position and profit or loss of the Company and the undertakingsincluded in the consolidation as a whole; and (2) the management report, which is incorporated into the Directors' Report, includesa fair review of the development and performance of the business and the position ofthe Company and the undertakings included in the consolidation taken as a whole, togetherwith a description of the principal risks and uncertainties that they face. On behalf of the Board Zev FurstChairman24 April 2013 NON-STATUTORY ACCOUNTS The financial information set out below does not constitute the Company's statutoryaccounts for the years ended 31 December 2012 and 2011 but is derived from those accounts.Statutory accounts for 2011 have been delivered to the Registrar of Companies, and thosefor 2012 will be delivered in due course. The Auditors have reported on the accounts for 2012; their report was (i) unqualified,(ii) did not include a reference to any matters to which the Auditors drew attention byway of emphasis without qualifying their report and (ii) did not contain a statement underSection 498 (2) or (3) of the Companies Act 2006. The text of the Auditor's report can befound in the Company's full Annual Report and Accounts on the Company's websitewww.cadoganpetroleum.com CONSOLIDATED INCOME STATEMENTFor the year ended 31 December 2012 2012 2011 Notes $'000 $'000CONTINUING OPERATIONSRevenue 5 5,653 6,981Cost of sales (4,158) (6,264)Gross profit 1,495 717 Administrative expenses:Other administrative expenses (10,783) (11,634)

Impairment of oil and gas assets 8 (83,584) -Impairment of other assets

8 (2,684) (2,818) (97,051) (14,452) Gain on acquisition of jointlycontrolled entity/disposal ofsubsidiaries 28 5,417 164,945Other losses 28 (3,299)Other operating (expenses)/income 6 (2,940) 4,552Operating (loss)/profit (93,079) 152,463 Investment revenue 12 128 155Finance income/(costs) 13 67 (11)(Loss)/Profit before tax (92,884) 152,607 Tax (charge)/credit 14 (252) 473(Loss)/Profit for the year 9 (93,136) 153,080 Attributable to:Owners of the Company (93,106) 151,549Non-controlling interest (30) 1,531 (93,136) 153,080 (Loss)/Profit per Ordinary share cents centsBasic and diluted 15 (40.3) 65.6 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFor the year ended 31 December 2012 2012 2011 $'000 $'000 (Loss)/Profit for the year (93,136) 153,080

Unrealised currency translation differences 4,384 (2,067)

Total comprehensive (loss)/profit for the (88,752) 151,013year Attributable to:Owners of the Company (88,722) 149,482Non-controlling interest (30) 1,531 (88,752) 151,013 CONSOLIDATED BALANCE SHEETAs at 31 December 2012 2012 2011 Notes $'000 $'000ASSETSNon-current assetsIntangible exploration andevaluation assets 16 78,231 65,972Property, plant and equipment 17 46,627 99,373 124,858 165,345 Current AssetsInventories 20 5,177 6,556Trade and other receivables 21 35,537 66,251Cash and cash equivalents 21 42,404 65,039 83,118 137,846Total assets 207,976 303,191 LIABILITIESNon-current liabilitiesDeferred tax liabilities 22 (4,553) (11,538)Long-term provisions 24 (414) (548) (4,967) (12,086) Current liabilitiesTrade and other payables 23 (7,793) (7,552)Current provisions 24 (939) (524) (8,732) (8,076)Total liabilities (13,699) (20,162) NET ASSETS 194,277 283,029 EQUITYShare capital 25 13,337 13,337Retained earnings 298,290 389,734Cumulative translation reserves (119,400)(123,784)Other reserves 1,682 3,344Equity attributable to owners of the 193,909 282,631Company Non-controlling interest 368 398TOTAL EQUITY 194,277 283,029 The consolidated financial statements of Cadogan Petroleum plc, registered in England and Walesno. 5718406, were approved by the Board of Directors and authorised for issue on 24 April 2013.They were signed on its behalf by: Bertrand Des PallieresChief Executive Officer24 April 2013

The notes form an integral part of these financial statements.

CONSOLIDATED CASH FLOW STATEMENTFor the year ended 31 December 2012 2012 2011 Note $'000 $'000

Net cash outflow from operating activities 27 (5,609) (7,885)

Investing activitiesDisposal of subsidiaries (note 28) 4,142 57,954

Purchases of property, plant and equipment (15,749) (4,402)Purchases of intangible exploration and

(6,239) (16,893)evaluation assetsProceeds from sale of property, plant and 688 87

equipment

Interest received 128 155

Net cash (used in)/from investing activities (17,030) 36,901

Financing activitiesProceeds from short-term borrowings - (371)Net cash used in financing activities - (371) Net (decrease)/increase in cash and cash (22,639) 28,645

equivalents

Effect of foreign exchange rate changes 4 (25)Cash and cash equivalents at beginning of 65,039 36,419

year

Cash and cash equivalents at end of year 42,404 65,039 CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the year ended 31 December 2012 Other reserves Cumulative Share- Non- Share Retained translation based Reorga- controlling capital earnings reserves payment nisation interest Total $'000 $'000 $'000 $'000 $'000 $'000 $'000 As at 1 January 2011 13,337 237,963 (121,717) 1,131 1,589 (1,133) 131,170Share-based payments (note 26) - 222 - 624 - - 846Net income for the year - 151,549 - - - 1,531 153,080Exchange translation differences onforeign operations - - (2,067) - - - (2,067)As at 1 January 2012 13,337 389,734 (123,784) 1,755 1,589 398 283,029Share-based payments (note 26) - 1,662 - (1,662) - - -Net loss for the year - (93,106) - - - (30) (93,136)Exchange translation differences onforeign operations - - 4,384 - - - 4,384As at 31 December 2012 13,337 298,290 (119,400) 93

1,589 368 194,277

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 31 December 2012

1. General information

Cadogan Petroleum plc (the `Company', together with its subsidiaries the `Group'), isregistered in England and Wales under the Companies Act. The address of the registeredoffice is Ibex House 42-47 Minories, London EC3N 1DX. The nature of the Group's operationsand its principal activities are set out in the Operations Review and the Financial Review above.

2. Adoption of new and revised Standards

In the current year, the following new and revised Standards and Interpretations areeffective but have not had any significant impact on the financial statements:

IFRS 3 (amended) Business Combinations

IAS 24 (amended) Related Party Disclosures

IAS 32 (amended) Classification of Rights Issues

IFRIC 19 Extinguishing Financial Liabilities with EquityInstruments

IFRIC 14 (amended) Prepayments of a Minimum Funding Requirement

At the date of authorisation of the financial statements, the following Standards andInterpretations which have not been applied in the financial statements were in issuebut not yet effective (and in some cases had not yet been adopted by the EU):

IFRS 1 (amended) Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters

IFRS 7 (amended) Disclosures - Transfers of Financial Assets and offsetting of FinancialAssets and Financial Liabilities

IFRS 9 Financial Instruments

IFRS 10 Consolidated Financial Statements

IFRS 11 Joint Arrangements

IFRS 12 Disclosure of Interests in Other Entities

IFRS 13 Fair Value Measurement

IAS 1 (amended) Presentation of Items of Other Comprehensive Income

IAS 12 (amended) Deferred Tax: Recovery of Underlying Assets

IAS 19 (revised) Employee Benefits

IAS 27 (revised) Separate Financial Statements

IAS 28 (revised) Investments in Associates and Joint Ventures

IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine

The Directors do not expect that the adoption of the standards listed above will have amaterial impact on the financial statements of the Group in future periods, except as follows:

- IFRS 9 will impact both the measurement and disclosures of financial instruments;

- IFRS 10 may impact the amounts reported in the consolidated financial statements as itprovides a single basis for consolidation with a new definition of control;

- IFRS 11 may result in changes in the accounting of the Group's jointly-controlledentities that are currently accounted for using proportionate consolidation. Under IFRS 11,a joint arrangement is classified as either a joint operation or a joint venture, and theoption to proportionately consolidate joint ventures has been removed. Interests in jointventures must be equity accounted;

- IFRS 12 will impact the disclosure of interests Cadogan Petroleum plc has in other entitiessuch as subsidiaries, joint arrangements, associates and/or unconsolidated structured entities;

- IFRS 13 will impact the measurement of fair value for certain assets and liabilities aswell as the associated disclosures; and

- IAS 1 (amendment) requires to be grouped in other comprehensive income based on whetherthose items are subsequently reclassified to profit or loss.

Beyond the information above, it is not practicable to provide a reasonable estimate ofthe effect of these standards until a detailed review has been completed.

3. Significant accounting policies

(a) Basis of accounting

The financial statements have been prepared in accordance with International FinancialReporting Standards (`IFRS') as issued by theInternational Accounting Standards Board(`IASB') and as adopted by the European Union (`EU'), and therefore the Group financialstatements comply with Article 4 of the EU IAS Regulation. The financial statements have been prepared on the historical cost convention basis,except for share-based payments, accounting for the WGI transaction, and other financialassets and liabilities, which have been measured at fair values, and using accountingpolicies consistent with IFRS. The principal accounting policies adopted are set out below:

(b) Going concern

The Group's business activities, together with the factors likely to affect futuredevelopment, performance and position are set out in the Business Review above.The financial position of the Group, its cash flow and liquidity position aredescribed in the Financial Review above. The Group's cash balance at 31 December 2012 was $42.4 million (2011: $65.0 million)with no external debt (2011: $nil) and the Directors believe that the funds availableat the date of the issue of these financial statements is sufficient for the Group tomanage its business risks successfully. The Group's forecasts and projections, taking into account reasonably possible changesin operational performance, start dates and flow rates for commercial production andthe price of hydrocarbons sold to Ukrainian customers, show that there are reasonableexpectations that the Group will be able to operate on funds currently held and thosegenerated internally, for the foreseeable future, without taking into account receivablesfrom litigation and without the requirement to seek external financing. As the Group engages in oil and gas exploration and development activities, the mostsignificant risk faced by the Group is delays encountered in achieving commercialproduction from the Group's major fields. The Group also continues to pursue its farm-outcampaign, which, if successful, will enable it to farm-out a portion of its interests inits oil and gas licences to spread the risks associated with further exploration anddevelopment. After making enquiries and considering the uncertainties described above, the Directorshave a reasonable expectation that the Company and the Group have adequate resources tocontinue in operational existence for the foreseeable future and consider the goingconcern basis of accounting to be appropriate. Thus they continue to adopt the goingconcern basis of accounting in preparing the annual financial statements.

(c) Basis of consolidation

The consolidated financial statements incorporate the financial statements of theCompany and entities controlled by the Company (its subsidiaries) made up to 31December each year. Control is achieved where the Company has the power to govern thefinancial and operating policies of an investee entity so as to obtain benefits fromits activities. The results of subsidiaries acquired of or disposed of during the year are included inthe consolidated income statement from the effective date of acquisition or up to theeffective date of disposal, as appropriate. Where necessary, adjustments are made to thefinancial statements of subsidiaries to bring accounting policies used into line withthose used by the Group. All intra-group transactions, balances, income and expensesare eliminated onconsolidation. Non-controlling interests in subsidiaries are identified separately from the Group'sequity therein. Those interests of non-controlling shareholders that are presentownership interests entitling their holders to a proportionate share of net assetsupon liquidation may be initially measured at fair value or at the non-controllinginterests' proportionate share of the fair value of the acquiree's identifiable netassets. The choice of measurement is made on an acquisition-by-acquisition basis.Other non-controlling interests are initially measured at fair value. Subsequent to acquisition, the carrying amount of non-controlling interests is theamount of those interests at initial recognition plus the non-controlling interests'share of subsequent changes in equity. Total comprehensive income is attributed tonon-controlling interests even if this results in the non-controlling interestshaving a deficit balance. Changes in the Group's interests in subsidiaries that do not result in a loss ofcontrol are accounted for as equity transactions. The carrying amount of the Group'sinterests and the non-controlling interests are adjusted to reflect the changes intheir relative interests in the subsidiaries. Any difference between the amount bywhich the non-controlling interests are adjusted and the fair value of the considerationpaid or received is recognised directly in equity and attributed to the owners ofthe Company. When the Group loses control of a subsidiary, the profit or loss on disposal iscalculated as the difference between (i) the aggregate of the fair value of theconsideration received and the fair value of any retained interest and (ii) theprevious carrying amount of the assets (including goodwill), less liabilities ofthe subsidiary and any non-controlling interests. Amounts previously recognisedin other comprehensive income in relation to the subsidiary are accounted for(i.e. reclassified to profit or loss or transferred directly to retained earnings)in the same manner as would be required if the relevant assets or liabilities aredisposed of. The fair value of any investment retained in the former subsidiary atthe date when control is lost is regarded as the fair value on initial recognitionfor subsequent accounting under IAS 39 Financial Instruments: Recognition and Measurementor, when applicable, the costs on initial recognition of an investment in an associateor jointly controlled entity.

(d) Business combinations

The acquisition of subsidiaries is accounted for using the acquisition method.The cost of the acquisition is measured at the aggregate of the fair values,at the date of exchange, of assets given, liabilities incurred or assumed,and equity instruments issued in exchange for control of the acquiree.Acquisition-related costs are recognised in profit or loss as incurred.The acquiree's identifiable assets, liabilities and contingent liabilitiesthat meet the conditions for recognition under IFRS 3 Business Combinationsare recognised at their fair value at the acquisition date, except for non-currentassets (or disposal groups) that are classified as held for resale in accordancewith IFRS 5 Non-Current Assets held for sale and Discontinued Operations, whichare recognised and measured at fair value less costs to sell.

(e) Investments in jointly-controlled entities

A jointly-controlled entity is an entity in which the Group holds a long-terminterest and shares joint control over the operating and financial decisionswith one or more other venturers under a contractual arrangement. Jointly-controlledentities are accounted for using proportionate consolidation, which combines the Group'sshare of the results of the jointly-controlled entity on a line-by-line basis withsimilar items in the Group's financial statements. When a Group entity transacts with its jointly-controlled entity, profits and lossesresulting from the transactions with the jointly-controlled entity are recognised inthe Group's consolidated financial statements only to the extent of interests in thejointly-controlled entity that are not related to the Group.

(f) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivableand represents amounts receivable for hydrocarbon products and services providedin the normal course of business, net of discounts, value added tax (`VAT') andother sales-related taxes.

Sales of hydrocarbons are recognised when the title has passed.

Interest income is accrued on a time basis, by reference to the principaloutstanding and at the effective interest rate applicable, which is therate that exactly discounts estimated future cash receipts through theexpected life of the financial asset to that asset's net carrying amounton initial recognition.

To the extent that revenue arises from test production during an evaluation

programme, an amount is charged from evaluation costs to cost of sales,so as to reflect a zero net margin.

(g) Foreign currencies

The individual financial statements of each Group company are presented inthe currency of the primary economic environment in which it operates (itsfunctional currency). The functional currency of the Company is pounds sterling.For the purpose of the consolidated financial statements, the results and financialposition of each Group company are expressed in US dollars, which is the presentationcurrency for the consolidated financial statements. In preparing the financial statements of the individual companies, transactions incurrencies other than the functional currency of each Group company (`foreigncurrencies') are recorded in the functional currency at the rates of exchangeprevailing on the dates of the transactions. At each balance sheet date, monetaryassets and liabilities that are denominated in foreign currencies are retranslatedinto the functional currency at the rates prevailing on the balance sheet date.Non-monetary assets and liabilities carried at fair value that are denominatedin foreign currencies are translated at the rates prevailing at the date when the fairvalue was determined. Non-monetary items that are measured in terms of historicalcost in a foreign currency are not retranslated. Exchange differences are recognised in the profit or loss in the period inwhich they arise except for exchange differences on monetary items receivablefrom or payable to a foreign operation for which settlement is neither plannednor likely to occur, which form part of the net investment in a foreign operation,and which are recognised in the foreign currency translation reserve and recognisedin profit or loss on disposal of the net investment. For the purpose of presenting consolidated financial statements, the results andfinancial position of each entity of the Group are translated into US dollars asfollows:

i. assets and liabilities of the Group's foreign operations are translated at theclosing rate on the balance sheet date;

ii. income and expenses are translated at the average exchange rates for the period,unless exchange rates fluctuate significantly during that period, in which case theexchange rates at the date of the transactions are used; and iii. all resulting exchange differences arising, if any, are recognised in othercomprehensive income and accumulated equity (attributed to non-controlling interestsas appropriate), transferred to the Group's translation reserve. Such translationdifferences are recognised as income or as expenses in the period in which theoperation is disposed of.

Goodwill and fair value adjustments arising on the acquisition of a foreign entityare treated as assets and liabilities of the foreign entity and translated at the closing rate.

The relevant exchange rates used were as follows:

Year ended 31 Dec 2012 1US$ = £Closing rate 0.6185Average rate 0.6597 (h) Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year.Taxable profit differs from net profit as reported in the income statementbecause it excludes items of income or expense that are taxable or deductiblein other years and it further excludes items that are never taxable or deductible.The Group's liability for current tax is calculated using tax rates that have beenenacted or substantively enacted by the balance sheet date. Deferred tax is the tax expected to be payable or recoverable on differencesbetween the carrying amounts of assets and liabilities in the financial statementsand the corresponding tax bases used in the computation of taxable profit, and isaccounted for using the balance sheet liability method. Deferred tax liabilitiesare generally recognised for all taxable temporary differences and deferred taxassets are recognised to the extent that it is probable that taxable profits willbe available against which deductible temporary differences can be utilised.Such assets and liabilitiesare not recognised if the temporary difference arisesfrom the initial recognition of goodwill or from the initial recognition (otherthan in a business combination) of other assets and liabilities in a transactionthat affects neither the taxable profit nor the accounting profit. Deferred taxliabilities are recognised for taxable temporary differences arising on investmentsin subsidiaries and associates, and interests in joint ventures, except where theGroup is able to control the reversal of the temporary difference and it is probablethat the temporary difference will not reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheet dateand reduced to the extent that it is no longer probable that sufficient taxableprofits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the periodwhen the liability is settled or the asset is realised. Deferred tax is charged orcredited in the income statement, except when it relates to items charged or creditedin other comprehensive income, in which case the deferred tax is also dealt within other comprehensive income. Deferred tax assets and liabilities are offset when there is a legally enforceableright to set off current tax assets against current tax liabilities and when theyrelate to income taxes levied by the same taxation authority and the Group intendsto settle its current tax assets and liabilities on a net basis.

(i) Property, plant and equipment and other intangible assets

Property, plant and equipment (`PP&E') and other intangible assets are carriedat cost less accumulated depreciation and any recognised impairment loss.

Depreciation and amortisation is charged so as to write off the cost or valuationof assets, other than land, over their estimated useful lives, using the straight-linemethod, on the following bases: Buildings 4%

Fixtures and equipment 10% to 30%

The gain or loss arising on the disposal or retirement of an asset is determined asthe difference between the sales proceeds and the carrying amount of the asset andis recognised in income.

(j) Impairment of tangible assets excluding goodwill

At each balance sheet date, the Group reviews the carrying amounts of its tangible assetsto determine whether there is any indication that those assets have suffered an impairmentloss. If any such indication exists, the recoverable amount of the asset is estimated inorder to determine the extent of the impairment loss (if any). Where the asset does notgenerate cash flows that are independent from other assets, the Group estimates therecoverable amount of the cash-generating unit to which the asset belongs. The recoverableamount is the higher of fair value less costs to sell and value in use. In assessing valuein use, the estimated future cash flows are discounted to their present value using a pre-taxdiscount rate that reflects current market assessments of the time value of money and the risksspecific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be lessthan its carrying amount, the carrying amount of the asset (cash-generating unit) isreduced to its recoverable amount. An impairment loss is recognised as an expense immediately. Where an impairment loss subsequently reverses, the carrying amount of the asset(cash-generating unit) is increased to the revised estimate of its recoverable amount,but so that the increased carrying amount does not exceed the carrying amount that wouldhave been determined had no impairment loss been recognised for the asset (cash-generating unit)in prior years. A reversal of an impairment loss is recognised as income immediately.

(k) Intangible exploration and evaluation assets

The Group applies the full cost method of accounting for intangible exploration andevaluation (`E&E') expenditure as set out in IFRS 6 Exploration for and Evaluation ofMineral Resources. Under the full cost method of accounting, expenditure made onexploring for and evaluating oil and gas properties is accumulated and initiallycapitalised as an intangible asset, by reference to appropriate cost centres beingthe appropriate oil or gas property. E&E assets are then assessed for impairmenton a cost pool basis as described below. E&E assets comprise costs of (i) E&E activities which are in progress at thebalance sheet date, but where the existence of commercial Reserves has yet tobe determined (ii) E&E expenditure which, whilst representing part of the E&Eactivities associated with adding to the commercial Reserves of an establishedcost pool, did not result in thediscovery of commercial Reserves. Costs incurred prior to having obtained the legal rights to explore an area

are expensed directly to the income statement as incurred.

Exploration and Evaluation costs

E&E expenditure is initially capitalised as an E&E asset. Payments to acquirethe legal right to explore, costs of technical services and studies, seismicacquisition, exploratory drilling and testing are also capitalised as intangibleE&E assets. Tangible assets used in E&E activities (such as the Group's vehicles, drillingrigs, seismic equipment and other property, plant and equipment) are normallyclassified as PP&E. However, to the extent that such assets are consumed indeveloping an intangible E&E asset, the amount reflecting that consumption isrecorded as part of the cost of the intangible asset. Such intangible costs includedirectly attributable overheads, including the depreciation of PP&E items utilisedin E&E activities, together with the cost of other materials consumed during theexploration and evaluation phases.

E&E assets are not amortised prior to the conclusion of appraisal activities.

Treatment of E&E assets at conclusion of appraisal activities

Intangible E&E assets related to each exploration property are carried forward,until the existence (or otherwise) of commercial Reserves has been determined.If commercial Reserves have been discovered, the related E&E assets are assessedfor impairment on a cost pool basis as set out below and any impairment loss isrecognised in the income statement. The carrying value, after any impairment loss,of the relevant E&E assets is then reclassified tothe development and production assets within PP&E.

Intangible E&E assets that relate to E&E activities that are determined not tohave resulted in the discovery of commercial Reserves remain capitalised as

intangible E&E assets at cost less accumulated amortisation, subject to meetinga pool-wide impairment test in accordance with the accounting policy forimpairment of E&E assets set out below. Such E&E assets are amortised on aunit-of-production basis over the life of the commercial Reserves of the poolto which they relate. Impairment of E&E assets

E&E assets are assessed for impairment when facts and circumstances suggest

that the carrying amount may exceed its recoverable amount. Such indicators

include, but are not limited to, those situations outlined in paragraph 20 ofIFRS 6 Exploration for and Evaluation of Mineral Resources and include the pointat which a determination is made as to whether or not commercial Reserves exist. Where there are indications of impairment, the E&E assets concerned are tested for impairment.Where the E&E assets concerned fall within the scope of an established full cost pool,they are tested for impairment together with all development and production assetsassociated with that cost pool, as a single cash generating unit. The aggregate carrying value of the relevant assets is compared against theexpected recoverable amount of the pool, generally by reference to the presentvalue of the future net cash flows expected to be derived from production ofcommercial Reserves from that pool. Where the E&E assets to be tested falloutside the scope of any established cost pool, there will generally be nocommercial Reserves and the E&E assets concerned will generally be impaired in full.

Impairment losses are recognised in the income statement as additional depreciationand amortisation and are separately disclosed.

The Group considers the whole of Ukraine to be one cost pool and therefore aggregatesall Ukrainian assets for the purposes of determining whether impairment of E&E assetshas occurred.

(l) Development and production assets

Development and production assets are accumulated on a field-by-field basis andrepresent the cost of developing the commercial Reserves discovered and bringingthem into production, together with E&E expenditures incurred in finding commercialReserves transferred from intangible E&E assets. The cost of development and production assets comprises the cost of acquisitions andpurchases of such assets, directly attributable overheads, finance costs capitalised,and the cost of recognising provisions for future restoration and decommissioning.

Depreciation of producing assets

Depreciation is calculated on the net book values of producing assets on afield-by-field basis using the unit of production method. The unit ofproduction method refers to the ratio of production in the reporting year as a proportionof the proved and probable Reserves of the relevant field, taking into account futuredevelopment expenditures necessary to bring those Reserves into production. Producing assets are generally grouped with other assets that are dedicated toserving the same Reserves for depreciation purposes, but are depreciated separatelyfrom producing assets that serve other Reserves.

Impairment of development and production assets

Development and production assets are assessed for impairment whenever events andcircumstances arising during both the development and production phase indicate thatthe carrying value of a development or production asset may exceed its recoverable amount. The carrying value of the asset is compared with its expected recoverable amount of theasset, by reference to the present value of the future cash flows expected to be derivedfrom production of commercial Reserves from it. The cash-generating unit applied forimpairment test purpose is normally the field or group of fields if the cash flow ofthe relevant fields is interdependent.

(m) Inventories

Inventories are stated at the lower of cost and net realisable value. Costs comprisedirect materials and, where applicable, direct labour costs and those overheads that havebeen incurred in bringing the inventoriesto their present location and condition. Cost is allocated using the weighted average method.Net realisable value represents the estimated selling price less all estimated costs ofcompletion and costs to be incurred in marketing,selling and distribution.

(n) Financial instruments

Recognition of financial assets and financial liabilities

Financial assets and financial liabilities are recognised on the Group's balance sheet whenthe Group becomes a party to the contractual provisions of the instrument.

Derecognition of financial assets and financial liabilities

The Group derecognises a financial asset only when the contractual rights to cash flowsfrom the asset expire; or it transfers the financial asset and substantially all the risksand rewards of ownership of the asset to another entity. If the Group neither transfers norretains substantially all the risks and rewards of ownership and continues to control thetransferred asset, the Group recognises its retained interest in the asset and an associatedliability for the amount it may have to pay. If the Group retains substantially all therisks and rewards of ownership of a transferred financial asset, the Group continues torecognise the financial asset and also recognises a collateralised borrowing for theproceeds received.

The Group derecognises financial liabilities when the Group's obligations aredischarged, cancelled or expired.

Financial assets

The Group classifies its financial assets in the following categories: loans andreceivables; available-for-sale financial assets; held to maturity investments;and financial assets at fair value through profit or loss ("FVTPL"). The classificationdepends on the purpose for which the financial assets were acquired. Management determinesthe classification of its financial assets at initial recognition and re-evaluates thisdesignation at every reporting date. Loans and receivables are non-derivative financial assets with fixed or determinablepayments that are not quoted in an active market. They are included in current assets,except for those with maturities greater than twelve months after the balance sheetdate which will then be classified as non-current assets. Loans and receivables areclassified as "other receivables" and "cash and cash equivalents" in the balance sheet.

Trade and other receivables

Trade and other receivables are measured at initial recognition at fair value,and are subsequently measured at amortised cost using the effective interestrate method. Cash and cash equivalents Cash and cash equivalents comprise cash on hand, on-demand deposits, and othershort-term highly liquid investments that are readily convertible to a knownamount of cash with three months or less remaining to maturity and are subjectto an insignificant risk of changes in value.

Financial assets at FVTPL

Financial assets at FVTPL are stated at fair value, with any gains or lossesarising on remeasurement recognised in proï¬t or loss which is included in the`Other gains and losses' line item in the consolidated income statement.Fair value is determined in the manner described in note 28.

Impairment of financial assets

Financial assets, other than those at FVTPL, are assessed for indicators of impairmentat each balance sheet date. Appropriate allowances for estimated irrecoverable amountsare recognised in profit or loss when there is objective evidence that the asset is impaired.The allowance recognised is measured as the difference between the asset's carrying amountof the financial asset and the present value of estimated future cash flows discountedat the effective interest rate computed at initial recognition.

Evidence of impairment could include:

- significant financial difficulty of the issuer or counterparty;

- default or delinquency in interest or principal payments; or

- it becoming probable that the borrower will enter bankruptcy orfinancial re-organisation.

For certain categories of financial assets, such as trade receivables,assets that are assessed not to be impaired individually are, in addition,assessed for impairment on a collective basis.

The carrying amount of the financial assets is reduced by the impairment lossdirectly for all financial assets with the exception of trade receivables, wherethe carrying amount is reduced through the use of an allowance account. Subsequentrecoveries of amounts previously written off are credited against the allowance account.Changes in the carrying amount of the allowance account are recognised in profit or loss. If, in a subsequent period, the amount of the impairment loss decreases and the decreasecan be related objectively to an event occurring after the impairment was recognised,the previously recognised impairment loss is reversed through profit or loss to theextent that the carrying amount of the investment at the date the impairment isreversed does not exceed what the amortised cost would have been had the impairmentnot been recognised. Financial liabilities

Financial liabilities are classiï¬ed as either ï¬nancial liabilities `at FVTPL' or`other ï¬nancial liabilities'.

Financial liabilities at FVTPL

Financial liabilities at FVTPL are stated at fair value, with any resultant gainor loss recognised in profit or loss and is included in the `Other gains and losses'line item in the income statement. Fair value is determined in the manner describedin note 28.

Trade payables and short-term borrowings

Trade payables and short-term borrowings are initially measured at fair value, andare subsequently measured at amortised cost, using the effective interest rate method.

(o) Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive)as a result of a past event, it is probable that the Group will be required to settle thatobligation and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required tosettle the present obligation at the balance sheet date, taking into account the risks anduncertainties surrounding the obligation. When a provision is measured using the cash flowsestimated to settle the present obligation, its carrying amount is the present value ofthose cash flows. (p) Decommissioning A provision for decommissioning is recognised in full when the related facilitiesare installed. The decommissioning provision is calculated as the net present valueof the Group's share of the expenditure expected to be incurred at the end of theproducing life of each field in the removal and decommissioning of the production,storage and transportation facilities currently in place. The cost of recognisingthe decommissioning provision is included as part of the cost of the relevant assetand is thus charged to the income statement on a unit of production basis in accordancewith the Group's policy for depletion and depreciation of tangible non-current assets.Period charges for changes in the net present value of the decommissioning provisionarising from discounting are included within finance costs.

(q) Leases

Leases are classified as finance leases whenever the terms of the lease transfersubstantially all the risks and rewards of ownership to the lessee. All otherleases are classified as operating leases.

Rentals payable under operating leases are charged to income on a straight-linebasis over the term of the relevant lease.

(r) Share-based payments

The Group issues equity-settled share-based payments to certain parties inreturn for services or goods. The goods or services received and the correspondingincrease in equity are measured directly at the fair value of the goods or servicesreceived at the grant date. The fair value of the services or goods received is recognisedas an expense except in so far as they relate to the cost of issuing or acquiring its ownequity instruments. The costs of an equity transaction are accounted for as a deductionfrom equity to the extent they are incremental costs directly attributable to the equitytransaction that would otherwise have been avoided. The Group also issues equity-settled share-based payments to certain Directors and employees.Equity settled share-based payments are measured at fair value (excluding the effect ofnon market-based vesting conditions) at the date of grant. The fair value determined atthe grant date for each tranche of the equity-settled share-based payments is expensedon a straight-line basis over the vesting period, based on the Group's estimate of sharesthat will eventually vest and adjusted for the effect of non market-based vesting conditions.At each balance sheet date, the Group revises its estimate of the number of equityinstruments expected to vest as a result of the effect of non market-based vesting conditions. The impact of the revision of the original estimates, if any, is recognised in profit or losssuch that the cumulative expense reflects the revised estimate, with a correspondingadjustment to the equity-settled employee benefits reserve. For those equity-settled share-based payments with market-based performance conditions,fair value is measured by use of the Stochastic model. For those which are not subjectto any market based performance conditions, fair value is measured by use of theBlack-Scholes model. The expected life used in the models has been adjusted,based on management's best estimate, for the effects of non-transferability, exerciserestrictions, and behavioural considerations. 4. Critical accounting judgements and key sources of estimation uncertainty In the application of the Group's accounting policies, which are described innote 3, the Directors are required to make judgements, estimates and assumptionsabout the carrying amounts of the assets and liabilities that are not readilyapparent from other sources. The estimates and associated assumptions are basedon historical experience and other factors that are considered to be relevant.Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis.Revisions to accounting estimates are recognised in the period in which the

estimate is revised if the revision affects only that period or in the period of therevision and future periods if the revision affects both the current and future periods.

The following are the critical judgements and estimates that the Directors have madein the process of applying the Group's accounting policies and that have the mostsignificant effect on the amounts recognised in the financial statements:

(a) Other receivable recognised in relation to settlement with GlobalProcess Systems LLC (`GPS')

An amount of $30.0 million has been recognised in current other receivables

as at 31 December 2012, representing receivables from a settlement agreementreached with GPS (2011: $30.0 million).

During October 2009, a settlement was reached with GPS resolving previousdisputes which existed between the Group and GPS concerning the manufacture

and delivery of two gas treatment plants for a total purchase price of $54.5 million.

The key commercial terms of the settlement provided for GPS exclusively tomarket the two gas plants for a 10 month period and, if a sale was achieved,for the Group to receive in stage payments an aggregate cash consideration of$38.5 million. If the plants were not sold within this period, then GPS agreedto take the plants to stock and the Group would receive stage payments for anaggregate cash consideration of $37.5 million.

The settlement also provided for the release by GPS of a potential $10.9million contractual claim against the Group for the unpaid balance of theconsideration for the plants. The amounts of $43.5 million paid to GPS inrespect of the gas plants had previously been recognised as prepayments,as title to the gas plants was to pass on delivery. As a result of thesettlement, these prepayments were then reclassified as receivablesincluded within other receivables at 31 December 2009. An impairment charge

of $6.0 million was provided in the year ended to 31 December 2009 to reduce thecarrying value of the original prepayments to their fair value, being theexpected proceeds from the settlement.

GPS were not able to sell the plants within the stipulated period, and so thestage payments' terms apply. During the years to 31 December 2011 and 2012,

$3.0 million each year were received from GPS respectively.

The first payment of $10.0 million of the remaining $30.0 million was dueto be paid to the Group on 14 February 2011 but was not received. A cureperiod subsequently expired on 18 April 2011 and on 19 July 2011 the Grouprescinded the exclusive right of sale of GPS and as such are able to market

the gas plants themselves.

During February 2013 the High Court in London awarded judgment in favour of theGroup in the sum of just over US$21,000,000 inclusive of interest (the "Judgment Debt"),to be paid by 4 March 2013. GPS' counterclaim for the sum of approximately US$7,500,000million was dismissed. At the request of the Group, a decision by the Court on furtherdamages estimated at approximately up to US$10,500,000 was adjourned pending sale of theplants. In the meantime the Company continued to retain legal title to the plants. GPSdid not pay by 4 March 2013however on 12 April the Group reached an agreement concerningthe purchase of two gas processing plants by GPS for the sum of $29.5 million. The sale completedon 18 April 2013 following receipt in full by Cadogan of the agreed consideration. In accordancewith the terms of the settlement documentation, the parties are now taking appropriate stepsto dismiss the legal proceedings commenced in England against GPS and all other claims andliabilities have been released.

(b) Impairment of E&E, PP&E and contingent consideration

IAS 36 Impairment of Assets and IFRS 6 Exploration for and Evaluation of MineralResources require that a review for impairment be carried out if events or changesin circumstances indicate that the carrying amount of an asset may not be recoverable.As a result of the negative results of the drilling and work over programme at Zagoryanskalicence, the Directors believed it appropriate to assess the carrying value of the Group'sPP&E assets for impairment as at 31 December 2012. The Group assessed the present valueof the future cash flows attributable to the Group's PP&E assets as at 31 December 2012using discounted cash flows method. For PP&E assets the aggregate carrying value of each cash generating unit (`CGU') wascompared against the expected recoverable amount of the related asset, by reference tothe net present value of the future cash flows expected to be derived from the productionof commercial Reserves (2P Reserves) of that unit. On this basis, an impairment of PP&Erelated to the Zagoryanska license of $66.0 million (2011: $nil) of which $47.1 millionrelates to the fair value uplift recognised in 2011 as the result of revaluation ofnon-controlling interest, with the respective decrease in the deferred tax liability of$7.1 million has been provided as at 31 December 2012 resulting in the impairment chargeto profit and loss of $58.9 million. In addition $24.7 million ($35.0 million unrisked andundiscounted) of impairment has been charged to the profit and loss which represents thebonus from Eni on obtaining the production licence on Zagoryanska licence which formed partof the consideration on disposal of 60% in the Zagoryanska licence to Eni in 2011 (note 28). The Group considers the whole of Ukraine to be one cost pool and therefore aggregates allUkrainian assets for the purposes of determining whether impairment of E&E assets has occurred.E&E assets are assessed for impairment when facts and circumstances suggest that the carryingamount may exceed its recoverable amount. Such indicators include, but are not limited to,those situations outlined in paragraph 20 of IFRS 6 Exploration for and Evaluation ofMineral Resources and include the point at which a determination is made as to whetheror not commercial Reserves exist. In 2012, the Group has performed significant volumeof work which it continues in 2013, including the re-interpretation of the existing 3D seismic,in order to evaluate the remaining potential of the full Pokrovskoe licence. The recoverable amounts are determined with reference to value-in-use calculations.The key assumptions for the value in use calculations are those regarding the productionflow rates, discount rates, relevant elements of Ukraine fiscal regime for petroleumoperators, and expected changes to selling prices and direct cost during the year. Theseassumptions reflect management's best estimates and have been revised in the year in lightof the current economic environment which has resulted in more conservative estimates aboutthe future. Management estimates discount rates that reflect the current market assessmentsof the time value of money and the risks specific to the CGUs. Changes in selling pricesand direct costs are based on past practices and expectations of future changes in the market.

The key assumptions used to forecast cash flows from Ukraine operations are as follows:

- production flow rates confirmed by experienced in-house geologists and engineers,supported by report produced in 2009 by an independent reservoir engineer,Gaffney, Cline & Associates Ltd;

- pre-tax discount rate of 17.86% (post-tax of 15%);

- inclusion of relevant elements of Ukraine fiscal regime for petroleum operators(such as production and royalty tax relevant to each licence and future expectedcorporate income tax of 16%);

- expected future selling prices based on current and anticipated market conditionsfor oil, condensate and gas;

-costs based on best estimates with consideration to previous experience and inflation; and

- cash flows projected up to 2033 depending on the field to which they relate and anassumption has been made that the relevant licences will be extended.

(c) Reserves

Commercial Reserves are proven and probable (`2P') oil and gas reserves, which aredefined as the estimated quantities of crude oil, natural gas and natural gas liquidswhich geological, geophysical and engineering data demonstrate with a specified degreeof certainty to be recoverable in future years from known reservoirs and which are consideredcommercially producible. There should be a 50 per cent statistical probability that the actualquantity of recoverable Reserves will be more than the amount estimated as proven and probableReserves and a 50 per cent statistical probability that it will be less. Commercial Reserves used in the calculation of depreciation and for impairment test purposesare determined using estimates of oil and gas in place, recovery factors and future oil andgas prices. Management base their estimate of oil and gas Reserves and Resources upon theReport provided by independent advisers.

(d) Recoverability of VAT

The Group has significant receivables from the State Budget of Ukraine relating toreimbursement of VAT arising on purchases of goods and services from external serviceand product providers. Although $2.8 million of Ukrainian VAT was recovered in the yearto 31 December 2010, largely through a bond scheme initiated by the Government of Ukraine,the Directors consider that this scheme was one-off in nature. Management anticipates nosignificant cash settlements of receivables from the State Budget. The Group therefore recognises recoverable VAT only to the extent that it is probablethat VAT payable arising on the sales of gas production will be sufficient to offsetthe VAT due from the State within a reasonable period. Estimating the recoverabilityof VAT requires management to make an estimate of the future revenues in order tocalculate amounts and timing of the VAT payable available for offset. The Group willcontinue to use an approach consistent with prior years by impairing Ukrainian VAT andrecognising the recovery in the period it has been made. A cumulative provision of $20.6 million(2011: $18.2 million) against Ukrainian VAT receivable has thus been recognised as at31 December 2012.

(e) Accounting for the WGI transaction

As a consequence of the WGI transaction, outlined in note 28, 2 areas of significantjudgement were identified by the Group, being the accounting treatment of the WGItransaction and the valuation of the Group's contribution of the two licenses to WGI.After considering the requirements per IAS 31 Interest In Joint Ventures, the Directorshave deemed the criteria under this standard to have been met, and have thereforeaccounted for WGI as a joint venture, specifically a jointly controlled entity. In accounting for the contribution of the licenses, the Group have applied IAS 31and SIC Interpretation 13 - Jointly Controlled Entities - Non-Monetary Contributionsby Venturers, which states that any profit or loss arising on the contribution ofnon-monetary assets in exchange for an equity interest should be recognised to theextent they are attributable to the equity interests of the other venturers. Whilstthe licenses contributed had a nil NBV in the books of the Group at the date ofcontribution, the associated fair value of the licenses contributed in return for the15.0% interest in WGI has been estimated at $6.4 million. The resultant profit recognisedin the income statement is $5.4 million which represents the un-eliminated 84.9% shareof the gain on contribution of these licenses. The Group has accordingly recognised anintangible asset of $5.4 million as its share of the licenses. 5. Revenue 2012 2011 $'000 $'000Sale of hydrocarbons 5,653 6,981Investment revenue (note 12) 128 155 5,781 7,136

Information about major customers

Included in revenues for the year ended 31 December 2012 are revenues of $3.8 million(2011 - $5.0 million) which arose from sales to the Group's largest customer, which isthe only customer that individually accounts for more than 10% of the Group's revenues.

6. Other operating (expenses)/income

2012 2011 $'000 $'000Out of court settlements 597 2,144Transactions with JV partner 81 -

Net foreign exchange (losses)/gains (3,618) 2,408

(2,940) 4,552

Out-of-court settlements in the amount of $0.6 million includes recovery of $0.5 millionfrom a supplier who had received prepayment in 2008 and not supplied the goods.

Net foreign exchange loss of $3.6 million mainly relates to the revaluation of theUSD-denominated monetary assets of the Group's UK entities which have GBP as a functionalcurrency.

7. Business and geographical segments

The Directors continue to consider there to be only one business segment, the explorationand development of oil and gas revenues and only one geographical segment, being Ukraine.

8. Impairment 2012 2011 $'000 $'000Impairment of oil and gas assets (note 17) (83,584) -Inventories (note 20) (291) 344VAT recoverable (note 4(d)) (2,393) (3,162)Impairment of other assets (2,684) (2,818) Total impairment of oil and gas assets of $83.6 million comprises of impairmentof $66.0 million of PP&E with the respective decrease in the deferred tax liabilityof $7.1 million and $24.7 million ($35 million undiscounted) impairment of the bonusto be received from Eni on obtaining the production licence on Zagoryanska licencewhich formed part of the consideration on disposal of 60% in the Zagoryanska licenceto Eni in 2011 (note 28). The carrying value of inventory as at 31 December 2012 and 2011 has been impaired toreduce it to net realisable value (see note 20). During 2012 the Group gross sales ofinventory to third parties comprised $1.6 million (2011: $0.5 million). During the year a net impairment of $2.4 million (2011: $3.2 million) in respect ofUkrainian VAT was provided which comprised VAT impairment on new program capital expenditureand VAT recovery of historical balances through offset of VAT liabilities arising on sales.

9. (Loss)/Profit for the year

The (loss)/profit for the year has been arrived at after charging/(crediting):

2012 2011 $'000 $'000

Depreciation of property, plant and equipment (1,967) (2,411)Loss on disposal of property, plant and equipment (52) (13)Impairment of other assets (note 8)

(2,684) (2,818)

Impairment of oil and gas assets (note 8) (83,584) -Staff costs

(4,304) (4,587)Net foreign exchange (losses)/gains (3,618) 2,408 In addition to the depreciation of PP&E of $2.0 million (2011: $2.4 million) in the yearended 31 December 2012, depreciation of $0.5 million (2011: $0.7 million) was capitalisedto E&E assets being depreciation of tangible assets used in E&E activities.

10. Auditor's remuneration

The analysis of auditor's remuneration is as follows:

2012 2011 $'000 $'000Audit feesFees payable to the Company's auditor and their 232 186associates for the audit of the Company's annualaccountsFees payable to the Company's auditor and theirassociates for other services to the Group:- The audit of the Company's subsidiaries 27 32Total Audit fees 259 218 Non-audit fees- Audit-related assurance services 21 53- Taxation compliance services 101 72- Other taxation advisory services - 197Non-audit fees 122 322

11. Staff costs

The average monthly number of employees (including Executive Directors) was: 2012 2011 Number NumberExecutive Directors 2 2Other employees 162 128 164 130

Total number of employees at 31 December 164 148

$'000 $'000Their aggregate remuneration comprised:Wages and salaries 5,893 3,196Loss of office - 144Other pension costs 36 123Social security costs 857 749Share-based payments - 846 6,786 5,058

Within wages and salaries $0.8 million (2011: $0.9 million) relates to amounts paidand accrued to executive Directors for services rendered.

Included within wages and salaries, is $0.4 million (2011: $0.4 million) capitalisedto intangible E&E assets and $0.4 million (2011: $0.4 million) capitalised to developmentand production assets. 12. Investment revenue 2012 2011 $'000 $'000Interest on bank deposits 128 155

No additional investment revenue earned from loan and receivables (including cash andbank balances) have been recognised other than interest on bank deposits.

13. Finance income/(costs) 2012 2011 $'000 $'000Unwinding of discount ondecommissioning provision 67 (11)(note 24) No additional gains or losses have been recognised on financial liabilities measured atamortised cost. In 2012 inflation rate in Ukraine has decreased. That has positivelyinfluenced the discounting of decommissioning provision resulting in finance income of $67 thousand. 14. Tax 2012 2011 $'000 $'000Current tax 122 132Deferred tax (note 22) 130 (605) 252 (473) The Group's operations are conducted primarily outside the UK. The most appropriatetax rate for the Group is therefore considered to be 21 per cent (2011: 23 per cent),the rate of profit tax in Ukraine which is the primary source of revenue for the Group.Taxation for other jurisdictions is calculated at the rates prevailing in therespective jurisdictions.

The taxation charge/(credit) for the year can be reconciled to the (loss)/profit perthe income statement as follows:

2012 2012 2011 2011 $'000 % $'000 %(Loss)/Profit before taxContinuing operations (92,883) 100% 152,607 100Tax (credit)/charge at Ukrainecorporation tax rate of 21%(2011: 23%) (19,505) 21 35,100 23.0Permanent differences 18,499 (20) (34,987) (22.9)Foreign exchange on operatingactivities 733 (0.8) (387) (0.3)Tax losses generated in theyear not yet recognised 798 (0.8) 128 0.2Other temporary differences 57 (0.2) (566) (0.4)Utilisation of deferred taxasset not previously recognisedon losses 6 - 136 0.1

Effect of different tax rates (336) 0.4 103 0.1Tax credit and effective taxrate for the year

252 (0.4) (473) (0.3)

15. (Loss)/Profit per Ordinary share

Basic profit per Ordinary share is calculated by dividing the net (loss)/profit forthe year attributable to owners of the Company by the weighted average number ofOrdinary shares outstanding during the year. The calculation of the basic and dilutedprofit per share is based on the following data: 2012 2011(Loss)/Profit attributable to owners of the $'000 $'000

Company

(Loss)/Profit for the purposes of basic profit pershare being net (loss)/profit attributable toowners of the Company (93,106) 151,549 2012 2011 Number NumberNumber of shares '000 '000

Weighted average number of Ordinary shares for thepurposes of basic profit per share

231,092 231,092 Effect of dilutive potential ordinary shares:Options and warrants outstanding 93 95

Weighted average number of Ordinary shares for thepurposes of diluted profit per share

231,185 231,187 2012 2011 Cent Cent(Loss)/Profit per Ordinary shareBasic (40.3) 65.6Diluted (40.3) 65.6

Diluted loss (profit in 2011) per Ordinary share equals basic loss per Ordinary shareas there is no dilutive effect from the outstanding share warrants.

16. Intangible exploration and evaluation assets

Cost $'000At 1 January 2011 63,288Additions 17,387Acquisition of jointly-controlled entities (note 28) 49,181Disposal of subsidiaries (note 28) (33,955)Change in estimate of decommissioning assets (note 24) 301Disposals (9)Exchange differences (280)At 1 January 2012 95,913Additions 6,745

Fair value of non-monetary assets contributed to jointly 5,454controlled entity (note 28)Change in estimate of decommissioning assets (note 24)

(92)Transfer to property, plant and equipment (note 17) (38)Disposals (1)Exchange differences 417At 31 December 2012 108,398 ImpairmentAt 1 January 2011 57,125Disposal of subsidiaries (note 28) (26,984)Exchange differences (258)At 1 January 2012 29,941Exchange differences 226At 31 December 2012 30,167 Carrying amountAt 31 December 2012 78,231At 31 December 2011 65,972 Additions during the year include $0.4 million (2011: $0.5 million) of capitaliseddepreciation of development and production assets used in exploration and evaluationactivities.

17. Property, plant and equipment

Development and production Other assets TotalCost $'000 $'000 $'000At 1 January 2011 3,524 67,435 70,959Additions 465 4,645 5,110Acquisition of jointly-controlledentities (note 28) 72 49,522 49,594

Disposal of subsidiaries (note 28) (421) (7,248) (7,669)Transfer between property, plant andequipment

(1) 1 -Change in estimate of decommissioningassets (note 24) - 107 107Disposals (439) (811) (1,250)Exchange differences (19) (331) (350)At 1 January 2012 3,181 113,320 116,501Additions 303 15,704 16,007Transfer between property, plant andequipment 34 3 37Change in estimate of decommissioningassets (note 24) - 434 434Disposals (168) (1,855) (2,023)Exchange differences 40 583 623At 31 December 2012 3,390 128,189 131,579 Accumulated depreciation and impairmentAt 1 January 2011 1,802 15,234 17,036Disposal of subsidiaries (note 28) (313) (1,955) (2,268)Charge for the year 583 2,513 3,096Disposals (365) (279) (644)Exchange differences (13) (79) (92)At 1 January 2012 1,694 15,434 17,128Impairment - 66,017 66,017Charge for the year 438 2,010 2,448Disposals (65) (1,034) (1,099)Exchange differences 32 426 458As at 31 December 2012 2,099 82,853 84,952 Carrying amountAt 31 December 2012 1,291 45,336 46,627At 31 December 2011 1,487 97,886 99,373 Total impairment of oil and gas assets of $83.6 million comprises of impairment of$66.0 million of PP&E with the respective decrease in the deferred tax liability of$7.1 million and $24.7 million ($35.0 million undiscounted) impairment of the bonusto be received from Eni on obtaining the production licence on Zagoryanska licencewhich formed part of the consideration on disposal of 60% in the Zagoryanska licenceto Eni in 2011 (note 28). 18. Subsidiaries The Company had investments in the following subsidiary undertakings as at31 December 2012, which principally affected the profits and net assets of the Group: Country of Proportion incorporation of voting and interestName operation % Activity

Directly heldCadogan Petroleum Holdings Ltd UK 100.0 Holding companyRamet Holdings Ltd

Cyprus 100.0 Holding company Indirectly heldRentoul Ltd Isle of Man 100.0 Holding company

Cadogan Petroleum Holdings BV Netherlands 100.0 Holding companyCadogan Bitlyanske BV Netherlands 100.0 Holding companyCadogan Delta BV

Netherlands 100.0 Holding companyCadogan Astro Energy BV Netherlands 100.0 Holding companyCadogan Pirkovskoe BV Netherlands 100.0 Holding companyMomentum Enterprise (Europe) Ltd Cyprus 100.0 Holding companyCadogan Ukraine Holdings Limited Cyprus 100.0 Holding companyCadogan Momentum Holdings Inc Canada 100.0 Holding companyUSENCO International Inc. USA 100.0 Holding companyRadley Investments Ltd UK 100.0 Holding companyLLC AstroInvest - Ukraine Ukraine 100.0 ExplorationLLC Astro Gas Ukraine 100.0 ExplorationDP USENCO Ukraine Ukraine 100.0 ExplorationLLC USENCO Nadra Ukraine 95 ExplorationJV Delta Ukraine 100.0 ExplorationLLC Astro-Service Ukraine 100.0 Service CompanyOJSC AgroNaftoGasTechService Ukraine 79.9 Construction servicesLLC Cadogan Ukraine Ukraine 100.0 Corporate services During the year ended 31 December 2012, the Group structure continued to be rationalisedboth so as to reduce the number of legal entities inside Ukraine and also to replace thestructure of multiple jurisdictions with one based on a series of sub-holding companiesincorporated in the Netherlands for each licence area.

19. Jointly controlled entities

The Group holds the following interests in jointly controlled entities in 2012: Country of incorporation Ownership and shareName operation % Activity LLC Westgasinvest Ukraine 15 ExplorationLLC Industrial Company Ukraine 70 ExplorationGazvydobuvannyaLLC Astroinvest-Energy Ukraine 40 ExplorationPokrovskoe Petroleum BV Netherlands 70 Holding companyZagoryanska Petroleum BV Netherlands 40 Holding company According to the shareholders' agreements, which regulate activities of jointly controlledentities, all key decisions require unanimous approval from the shareholders, thereforethese entities are jointly controlled. The following amounts are included in the Group'sconsolidated financial statements as a result of the proportionate consolidation as at31 December 2012 and 2011: 2012 2011 $'000 $'000

Intangible exploration and evaluation assets 69,532 63,788Property, plant and equipment

435 54,206Non-current assets 69,967 117,994Inventories 1,686 2,795Trade and other receivables 714 3,612Cash and cash equivalents 1,927 745Current assets 4,327 7,152 Deferred tax liabilities (4,045) (11,543)Long-term provisions (195) (155)Non-current liabilities (4,240) (11,698)Trade and other payables (3,637) (3,958)Current provisions (486) (388)Current liabilities (4,123) (4,346)Net assets 65,931 109,102 2012 2011* $'000 $'000Revenue 1,885 1,591Cost of sales (991) (1,245)Other administrative expenses (1,019) (691)Impairment of other assets (3,293) (3,250)Impairment of property, plant and equipment (note4(b)) (18,365) -Investment revenue 10 15Finance income/(costs) 62 (2)Loss for the period (21,711) (3,582)Other comprehensive loss (206) (402) (21,917) (3,984)

*2011 figures are shown for the period from 6 July to 31 December

20. Inventories 2012 2011 $'000 $'000Cost 6,309 8,476Impairment provision (1,132) (1,920)Carrying amount 5,177 6,556

The impairment provision as at 31 December 2012 and 2011 is made so as to reduce thecarrying value of the inventories to net realisable value.

21. Other financial assets Trade and other receivables 2012 2011 $'000 $'000Other receivables 34,594 61,816VAT recoverable 88 127Prepayments 855 4,308 35,537 66,251 All sales are made on a prepayment basis, so there are no trade debtors. Out of $34.6 million of other receivables $30.0 million as at 31 December 2012(2011: $30.0 million) represent receivables from the settlement agreement with GPS (note 4(a)).In 2011 the Group recognised in other receivables the bonus to be received from Eni for thereceiving production licence on Zagoryanska licence in the amount of $35 million discountedto $24.7 million. As a result of the negative results of the drilling and work over programmeat Zagoryanska licence the probability of receiving the bonus has decreased which resulted infull provision of the amount as at 31 December 2012.

VAT recoverable of $0.1 million (2011: $0.1 million) relates to the UK VAT recoverable.

$0.9 million prepayments (2011: $4.3 million) mostly relate to prepayments made to drillingcontractors in Ukraine and long lead materials for the drilling and work over campaign.

The Directors consider that the carrying amount of the remaining other receivables approximatestheir fair value and none of which are past due except for the amounts due from GPS which weresettled in April 2013 (see note 4(a)).

Cash and cash equivalents

Cash and cash equivalents as at 31 December 2012 of $42.4 million (2011: $65.0 million) comprisecash held by the Group and the Company. The Directors consider that the carrying amount of theseassets approximates to their fair value

22. Deferred tax

The following are the major deferred tax liabilities and assets recognised by the Group andmovements thereon during the current and prior reporting period:

Temporary differences $'000Liabilities as at 1 January 2011 982

Acquisition of jointly-controlled entities (note 28) 11,153Deferred tax credit

(605)Exchange differences 8Liability as at 1 January 2012 11,538

Impairment of property, plant and equipment (note 17) (7,108)Deferred tax expense

130Exchange differences (7)Liability as at 31 December 2012 4,553 At 31 December 2012, temporary differences of $6.3 million (2011: $6.0 million) existed inrespect of foreign exchange gains arising on net investments in foreign subsidiaries forwhich deferred tax liabilities have not been recognised. No deferred tax liabilities havebeen recognised in respect of these differences because the Group is in a position to controlthe timing of the reversal of the temporary differences and it is probable that such differenceswill not reverse in the foreseeable future. At 31 December 2012, the Group had the following unused tax losses available for offset againstfuture taxable profits: 2012 2011 $'000 $'000UK 9,486 5,557Ukraine 69,628 66,410 79,114 71,967

Deferred tax assets have not been recognised in respect of these tax losses owing to theuncertainty that profits will be available in future periods against which they can be utilised.

The Group's unused tax losses of $9.5 million (2011: $5.6 million) relating to losses incurredin the UK are available to shelter future non-trading profits arising within Cadogan Petroleum plc.These losses are not subject to a time restriction on expiry. Unused tax losses incurred by Ukraine subsidiaries amount to $69.6 million (2011: $66.4 million).Under general provisions, these losses may be carried forward indefinitely to be offset againstany type of taxable income arising from the same company of origination. Tax losses may not besurrendered from one Ukraine subsidiary to another. However, in the past, Ukrainian legislationhas been imposed which restricted the carry forward of tax losses. During 2011 a new tax legislationin Ukraine was implemented which resulted in the restriction to recognition of accumulatedlosses at 1 April 2011. Starting 1 January 2012 only 25% of accumulated losses as at thisdate are allowed to be utilised each year for the period from 2012 till 2015 in the calculationof taxable income of the company. Tax losses accumulated after 1 January 2012 have no restrictions. There are further temporary differences arising on assets in Ukraine for which deferred taxassets of $8.3 million (2011: $6.3 million) have not been recognised due to the uncertaintyof future recovery.

23. Other financial liabilities

Trade and other payables 2012 2011 $'000 $'000Trade creditors 5,206 3,877Other taxes and social security 31 18Other creditors and payables 171 258Accruals 2,385 3,399 7,793 7,552 Trade creditors and accruals principally comprise amounts outstanding for capital workprogram purchases and ongoing costs. The average credit period taken for trade purchasesis 55 days (2011: 62 days). The Group has financial risk management policies to ensurethat all payables are paid within the credit timeframe. The Directors consider that the carrying amount of trade and other payables approximatesto their fair value. No interest is generally charged on balances outstanding. 24. Provisions Decommissioning Other Total $'000 $'000 $'000At 1 January 2011 875 19 894

Change in estimate (note 16 and 17) 408 - 408Utilisation of provision

- (19) (19)Unwinding of discount ondecommissioning provision (note 13) 11 - 11

Disposal of subsidiaries (note 28) (588) - (588)Acquisition of jointly-controlled

entities (note 28) 367 - 367Exchange differences (1) - (1)At 1 January 2012 1,072 - 1,072

Change in estimate (note 16 and 17) 342 - 342Unwinding of discount ondecommissioning provision (note 13) (67) - (67)Exchange differences

6 - 6At 31 December 2012 1,353 - 1,353 At 1 January 2011 875 19 894Included in long-term provisions 548 - 548Included in current provisions 524 - 524At 1 January 2012 1,072 - 1,072Included in long-term provisions 414 - 414Included in current provisions 939 - 939At 31 December 2012 1,353 - 1,353 In accordance with the Group's environmental policy and applicable legal requirements,the Group intends to restore the sites it is working on after completing exploration ordevelopment activities. A short-term provision of $0.9 million (2011: $0.5 million) has been made fordecommissioning costs, which are expected to be incurred within the next year as aresult of the demobilisation of drilling equipment and respective site restoration. The long-term provision recognised in respect of decommissioning reflects management'sestimate of the net present value of the Group's share of the expenditure expected to beincurred in this respect. This amount has been recognised as a provision at its net presentvalue, using a discount rate that reflects the market assessment of time value of money atthat date, and the unwinding of the discount on the provision has been charged to the incomestatement. These expenditures are expected to be incurred at the end of the producing lifeof each field in the removal and decommissioning of the facilities currently in place(currently estimated to be between one and 17 years). The effect of discounting onprovisions would be immaterial.

25. Share capital

Authorised and issued equity share capital

2012 2011 Number Number `000 $'000 `000 $'000AuthorisedOrdinary shares of £0.03 1,000,000 57,713 1,000,000 57,713each IssuedOrdinary shares of £0.03 231,092 13,337 231,092 13,337each

Authorised but unissued share capital of £30 million has been translated into US dollarsat the average exchange rate of the issued share capital.

The Company has one class of Ordinary shares which carry no right to fixed income. Issued equity share capital Ordinary shares of £0.03 Number At 31 December 2011 and 2012 231,091,734 26. Share-based payments

Equity-settled share-based payments

Under the terms of an agreement dated 17 February 2006, which was subsequently updated on20 September 2006 and 8 May 2007, the Company's then broker and financial adviserFox-Davies Capital (`Fox-Davies') were granted 5.1 million warrant rights, to beexercisable at an average price of £0.82 and £1.23 and to be exercisable at any timewithin the five year period following completion of the placing. In 2012 $1.0 million(2011: $0.2 million) previously recognised in other reserves in respect of equity-settledshare-based payments (2012: 3.6 million, 2011: 1.0 million warrant rights) that haveexpired during the year were transferred to retained earnings from other reserves.As at 31 December 2012, there were 541,040 outstanding share warrants, exercisableat the subscription price of £1.23.

Equity-settled share option scheme

The Company has two Share Option schemes, the 2007 and 2008 Share Option Plans,under which options to subscribe for the Company's shares have been granted tocertain Executive Directors and employees of the Group. Options are exercisable atvarious prices and vest on achieving certain performance criteria. If the optionsremain unexercised after a period of five years from the date of grant, the optionsexpire. Options are forfeited if the Executive Director or employee leaves the Groupbefore the options vest. All 2007 share option plans have been restated to Ordinaryshares of £0.03. Details of the share options outstanding at the end of the year were as follows 2007 Share Option Plan 2008 Share Option Plan Total Number of Weighted Number of Weighted Number of Weighted share average share average share average options price options price options price `000 £ `000 £ `000 £Outstanding at 1 January 2011 - - - - - -Granted during the year - - 1,943 0.35 1,943 0.35Outstanding at 1 January 2012 - - 1,943 0.35 1,943 0.35Lapsed during the year - - (1,943) (0.35) (1,943) (0.35) Outstanding at 31 December 2012 - - - - - -Exercisable at - -1 January 2011 - - - - - -1 January 2012 - - 1,943 0.35 1,943 0.3531 December 2012 - - - - - -

No share options were exercised during the year (2011: nil).

Options were granted under the 2007 Share Option Plan on 11 September 2007 and 19 February 2008,and under the 2008 Share Option Plan, on 9 October 2008 and 3 February 2011.

The options were split into three tranches with each tranche subject to certain performanceconditions. Only the below tranches were outstanding either as at 31 December 2011 and 2012.

Under the 2007 Share Option Plan, options vest immediately upon grant date.

Under the 2008 Share Option Plan, granted in 2011, options vest (but do not become exercisable)if and when the share price of an ordinary share in the Company achieves a mid-marketclosing price of not less than 50 pence over a continuous period of 10 trading daysduring the period from the Grant Date of the Option and ending on 3 February 2014.Trading days means the days on which the London Stock Exchange is open forbusiness. The Option shall become exercisable, but only to the extent vested, on 3 February 2014.No options were outstanding at 31 December 2012.

The fair values of the options have been calculated using the following models:

- 2007 Share Option - not subject to any market-based performance conditions, and thereforethe Black-Scholes model has been used.

- 2008 Share Option - market-based performance conditions must be included in the calculationof fair value and therefore the Stochastic and Binomial model has been considered themost appropriate.

The inputs into the models were as follows:

2007 Share Option 2008 Share Option Plan Plan Black-Scholes BinomialYear of grant 2007 2011Weighted average share price (£) 1.23 0.35Weighted average exercise price (£) 0.82 0.35Expected volatility (%) 55 70.0Expected term (years) 2.5 10Risk free rate (%) 4.99 3.88Expected dividend yield (%) - - As the Company has listed shares, the expected volatility was determined by consideringthe historical volatility of other similar entities. Similar entities have been chosenas the FTSE AIM Oil & Exploration constituents (with a market capitalisation of greaterthan £100 million) for the 2007 Share Option Plan and the FTSE All Share Oil & Explorationsector (with a market capitalisation between £40 million and £500 million) for the2008 Share Option Plan at the grant date.

The exercise price was established in accordance with the terms included within theshare option scheme.

The aggregate of the estimated fair values of the options granted under the two shareoption plans at 31 December 2012 is $nil (2011: $0.8 million), all related to 2008 ShareOption. Due to certain employees and Directors resigning from their duties to the Companyin 2009, share options granted under Option Tranche 1 were forfeited in 2010.

27. Notes to the cash flow statement

2012 2011 $'000 $'000Operating(loss)/profit (93,078) 152,463Adjustments for:Depreciation of property, plant and equipment 1,967 2,411Impairment of oil and gas assets (note 8) 83,584 -Share-based payment charge (note 26) - 846Gain on acquisition of jointly controlled entitydisposal of subsidiaries (note 28) (5,454) (164,945)Other losses (note 28) - 3,299Impairment of inventories (note 8) 291 (344)Impairment of VAT recoverable (note 8) 2,393 3,162Loss on disposal of property, plant and equipment 52 13Effect of foreign exchange rate changes 4,014 (1,691)Operating cash flows before movements in workingcapital (6,231) (4,786)Decrease/(Increase) in inventories 1,269 (2,563)Increase in receivables (766) (3,027)Increase in payables and provisions 241 1,589Decrease in restricted cash - 1,035Cash used in operations (5,487) (7,752)Income taxes paid (122) (133)Net cash outflow from operating activities (5,609) (7,885) 28. Disposal of subsidiaries and acquisition of jointly-controlled entities

2012 transactions: LLC Westgasinvest

In February 2012 the Group set up a joint venture LLC Westgasinvest ("WGI") with aUkrainian state-owned company NAK Nadra Ukrainy. As part of the transaction the Groupcontributed two unconventional licenses, the Debeslavetske production license and theDebeslavetske exploration license to WGI, while keeping all the economic benefit fromthe existing conventional activities on these licenses. Whilst the licenses contributed had a nil NBV in the books of the Group at the date ofcontribution, the associated fair value of the licenses contributed in return for the15% interest in WGI has been estimated at $6.4 million. The resultant profit recognisedin the income statement is $5.4 million which represents the un-eliminated 85% share ofthe gain on contribution of these licenses. The Group has accordingly recognisedanintangible asset of $5.4 million.

The Group's resultant equity holding, post this transaction was 15%, with Nadra owningthe remaining 85%.

On 3 October 2012 50.01% of ownership in WGI was sold by Nadra and Cadogan to ENIcompleting the current ownership structure of WGI.

2011 transactions: Eni

On 6 July 2011 the Group completed the transaction with Eni, selling a 30% interestin the share capital of Pokrovskoe Petroleum BV (the parent company of the holder ofthe Pokrovskoe licence), and a 60% interest in the share capital of ZagoryanskaPetroleum BV (the parent company of the holder of the Zagoryanska licence). Both licencesrelate to the Group's operations in eastern Ukraine. The consideration received comprised a cash payment of $38.1 million for itsinterest in Zagoryanska Petroleum BV and $0.2 million as the working capitaladjustment for both the Zagoryanska and Pokrovskoe licences. Eni is alsocommitted to finance the Pokrovskoe appraisal work programme to an amountof up to $36 million (including VAT). Under the terms of the sale and purchase agreement and subject to successfulresults from the Pokrovskoe appraisal work programme, Eni also had the optionunder the agreement to acquire a further 30% of Pokrovskoe Petroleum BV foran additional payment of $40 million (the "Pok Option"). Eni was also committedto pay additional amounts of $15 million and $35 million (the "Contingent Consideration")should the Group successfully acquire production licences on each of the Pokrovskoe andZagoryanska fields respectively. The Pokrovskoe Contingent Consideration was onlypayable if the Pok Option is exercised.

A total gain on disposal of $165.0 million was recognised in profit and loss in 2011relating to the above transaction.

In March 2012 Eni informed the Group that they will not exercise the Pok Option.The exercise of the option was a pre-requisite for the contingent payment of$15.0 million on obtaining the Pokrovksoe production license. In addition, inlight of the results of the drilling and work over campaign on the Zagoryanskalicense in 2012 the probability of obtaining the production license on Zagoryanskafield and receiving a contingent payment of $35.0 million ($24.7 million risked anddiscounted) has significantly decreased and therefore the receivable has been impairedin full as at 31 December 2012.

29. Financial instruments

Capital risk management

The Group manages its capital to ensure that entities in the Group will be able tocontinue as a going concern, while maximising the return to shareholders. Thecapital resources of the Group consists of cash and cash equivalents arising fromequity attributable to owners of the Company, comprising issued capital, reservesand retained earnings as disclosed in the Consolidated Statement of Changes in Equity.

Externally imposed capital requirement

The Group is not subject to externally imposed capitalrequirements.

Significant accounting policies

Details of the significant accounting policies and methods adopted, including thecriteria for recognition, the basis of measurement, the basis on which income andexpenses are recognised, in respect of each class of financial asset, financialliability and equity instrument are disclosed in note 3 to the Consolidated Financial Statements.

Categories of financial instruments

2012 2011 $'000 $'000

Financial assets - loans and receivables (includescash and cash equivalents)Cash and cash equivalents

42,404 65,039

Other receivables (current and non-current) 34,594 61,816

76,998 126,855

Financial liabilities - measured at amortised costTrade creditors

5,206 3,877Other creditors and payables 171 258 5,377 4,135

Financial risk management objectives

Management provides services to the business, co-ordinates access to domestic andinternational financial markets and monitors and manages the financial risks relatingto the operations of the Group in Ukraine through internal risks reports which analyseexposures by degree and magnitude of risks. These risks include commodity price risks,foreign currency risk, credit risk, liquidity risk and cash flow interest rate risk.The Group does not enter into or trade financial instruments, including derivativefinancial instruments, for speculative purposes. As the Group has no committed borrowings, the Group is not exposed to any significantrisks associated with fluctuations in interest rates on loans. A five per centfluctuation in interest rates applied to cash balances held at the balance sheetdate would impact the Group by approximately $2.1 million (2011: $3.3 million)over a twelve month period.

The Audit Committee of the Board reviews and monitors risks faced by the Groupthrough meetings held throughout the year.

Commodity price risk

The commodity price risk related to Ukrainian gas and condensate prices and, toa lesser extent, prices for crude oil are the Group's most significant marketrisk exposures. World prices for gas and crude oil are characterised by significantfluctuations that are determined by the global balance of supply and demand andworldwide political developments, including actions taken by the Organisation ofPetroleum Exporting Countries. These fluctuations may have a significant effect on the Group's revenues andoperating profits going forward. The principal factor in the current Ukrainiangas price is bilateral negotiations with Gazprom to establish the price of gasimports from Russia. The price for Ukrainian gas is based on the current price ofthese gas imports from Russia, which are nonetheless influenced by world prices.Management continues to expect that the Group's principal market for gas will be theUkrainian domestic market.

The Group does not hedge market risk resulting from fluctuations in gas, condensateand oil prices, and holds no financial instruments which are sensitive to commodity price risk.

Foreign exchange risk and foreign currency risk management

The Group undertakes certain transactions denominated in foreign currencies.Hence, exposures to exchange rate fluctuations arise.

The Group to date has elected not to hedge its exposure to the risk of changesin foreign currency exchange rates.

The carrying amounts of the Group's foreign currency denominated monetary assetsand monetary liabilities at the reporting date are as follows:

Liabilities Assets 2012 2011 2012 2011 $'000 $'000 $'000 $'000US dollars (`$') 162 106 68,297 116,533

Foreign currency sensitivity analysis

The Group is exposed primarily to movements in currencies against the US dollar asthis is the presentation currency of the Group. In order to fund operations, US dollarfunds are converted to UAH just before being contributed to the Ukrainian subsidiaries.Sensitivity analyses have been performed to indicate how the profit or loss would havebeen affected by changes in the exchange rate between the GBP and US dollar. Theanalysis is based on a weakening of the US dollar by 10 per cent against GBP, afunctional currency in the entities of the Group which have significant monetaryassets and liabilities at the end of each respective period. A movement of 10 per centreflects a reasonably possible sensitivity when compared to historical movements over athree to five year timeframe. The sensitivity analysis includes only outstanding foreigncurrency denominated monetary items and adjusts their translation at the period end fora ten per cent change in foreign currency rates. A number below indicates a decrease in profit where US dollar strengthens 10 per centagainst the other currencies. For a 10 per cent weakening of the US dollar against theother currencies, there would be an equal and opposite impact on the profit or loss, andthe balances would be negative.

The Group is not exposed to significant foreign currency risk in other currencies.

Inflation risk management

The following table details the Group's sensitivity to a 10 per cent decrease in the USdollar against the GBP. 2012 2011 $'000 $'000Income statement (8,791) (10,987) Inflation in Ukraine and in the international market for oil and gas may affect the Group'scost for equipment and supplies. The Directors expect that the Group's practices of keepingdeposits in US dollar accounts until funds are needed and selling its production in the spotmarket, coupled with the linkage of the currency in Ukraine to the US dollar, to enable theGroup to manage the risk of inflation.

Credit risk management

The credit risk on other receivables due from GPS is mostly mitigated as the Company maintainstitle of the assets throughout the settlement period (refer to note 4(a)).

Credit risk refers to the risk that counterparty will default on its contractual obligationsresulting in financial loss to the Group. The Group does not have any significant credit riskexposure on trade receivables as the normal terms for sales of gas and condensate to the Group'scustomers require payment before delivery.

The Group makes allowances for impairment of receivables where there is an identified event which,based on previous experience, is evidence of a reduction in the recoverability of cash flows.

The credit risk on liquid funds (cash) is considered to be limited because the counterparties arefinancial institutions with high and good credit ratings, assigned by international credit-ratingagencies in the UK and Ukraine respectively.

The carrying amount of financial assets recorded in the financial statements represents the Group'smaximum exposure to credit risk.

Liquidity risk management

Ultimate responsibility for liquidity risk management rests with the Board of Directors, which hasbuilt an appropriate liquidity risk management framework for the management of the Group's short,medium and long-term funding and liquidity management requirements. The Group manages liquidity riskby maintaining adequate cash reserves and by continuouslymonitoring forecast and actual cash flows. The following tables set out details of the expected contractual maturity of financial liabilities. Within 3 months to More than 1 3 months 1 year year $'000 $'000 $'000At 31 December 2012 7,322 471 -Trade and other payables 7,322 471 -At 31 December 2011 7,552 - -Trade and other payables 7,552 - -

30. Commitments and contingencies

Joint activity agreements

The Group has working interests in nine licences for the conduct of its exploration anddevelopment activities within Ukraine. Each licence is held with the obligation to fulfila minimum set of exploration activities within its term and is summarised on an annual basis,including the agreed minimum amount forecasted expenditure to fulfil those obligations.The activities and proposed expenditure levels are agreed with the government licensingauthority. The required future financing of exploration and development work on fields under the licenceobligations are as follows 2012 2011 $'000 $'000Within one year 18,717 7,440Between two and five years 27,601 44,469 46,318 51,909 Licence obligations within one year amounting to $18.7 million include $13.4 million relatedto Pirkovskoe licence. The Group currently is in the process of negotiating decrease in thework programme activities with the licensing authorities.

31. Related party transactions

All transactions between the Company and its subsidiaries, which are related parties, havebeen eliminated on consolidation and are not disclosed in this note.

Remuneration of key management personnel

The remuneration of the Directors, who are the key management personnel of the Group, is setout below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures.Further information about the remuneration of individual Directors is provided in the auditedpart of the Directors' Remuneration Report in the full Annual Report and Accounts. Purchase of Amounts owing services 2012 2011 2012 2011 $'000 $'000 $'000 $'000

Short-term employee benefits 1,048 852 973 476Share-based payments

(695) 695 - - 353 1,547 973 476

The total remuneration of the highest paid Director was $0.4 million in the year (2011: $0.5 million).

The amounts outstanding are unsecured and will be settled in cash. No guarantees have been givenor received and no provisions have been made for doubtful debts in respect of the amounts owed by related parties.

32. Events after the balance sheet date

GPS

During February 2013 the High Court in London awarded judgment in favour of the Group inthe sum of just over US$21,000,000 inclusive of interest (the "Judgment Debt"), to be paidby 4 March 2013. GPS' counterclaim for the sum of approximately US$7,500,000 million wasdismissed. At the request of the Group, a decision by the Court on further damages estimatedat approximately up to US$10,500,000 was adjourned pending sale of the plants. In the meantimethe Company continued to retain legal title to the plants. GPS did not pay by 4 March 2013however on 12 April the Group reached an agreement concerning the purchase of the two gasprocessing plants by GPS for the sum of $29.5 million. The sale completed on 18 April 2013following receipt in full by Cadogan of the agreed consideration. In accordance with the termsof the settlement documentation, the parties are now taking appropriate steps to dismiss thelegal proceedings commenced in England against GPS and all other claims and liabilities havebeen released. ANNUAL GENERAL MEETING

The Annual General Meeting of the Company held at 10.30am on Thursday 27 June 2013 atChandos House, 2 Queen Anne Street, London W1G 9LQ.

NATIONAL STORAGE MECHANISM

A copy of the Annual Report and Financial Statements will be submitted shortly to theNational Storage Mechanism ("NSM") and will be available for inspection at the NSM,which is situated at: www.morningstar.co.uk/uk/nsm Neither the contents of the Company's website nor the contents of any website accessiblefrom hyperlinks on this announcement (or any other website) is incorporated into, orforms part of, this announcement.