Cadogan Regulatory News (CAD)

12 Oct 2009 07:00



12 October 2009

Cadogan Petroleum plc

("Cadogan" or the "Company")

Company Update

Operations

Drilling of the Borynya 3 well on the Bitlayanska licence area was terminated at a drilled depth of 5,325m and the well will be suspended for future evaluation. The well provided valuable data and demonstrated that an active hydrocarbon system is present over an extended interval. Several discrete gas bearing pressure regimes were penetrated and good quality logs and LWD data were obtained. Reservoir zones exist in the 8½" hole, one of which flowed gas to surface during a short duration drill stem test carried out in June 2009. The 6" hole section also encountered a succession of thin high pressure gas sands. There will be no further significant drilling expenditure required on this well. However, the Company is evaluating whether limited expenditure would be justified during 2010 to acquire 2D seismic over the Bitlayanska license. 

The Company's wells in Eastern Ukraine are currently suspended with the exception of Pirkovska 1, which is on extended testing. This well is currently producing about 70 barrels of light oil per day from a thin Visean sand.

Finance

The cash balance as of 30th September was £38 million ($60.2 million). The Company has completed an inventory audit and commenced a programme to sell excess equipment.

Reorganisation of the business has continued and the Company's total headcount has been progressively reduced from 463 in January 2009 to 337 in August 2009 and will reach 128 in December 2009. By January 2010 the monthly salary and G & A bills (excluding audit and litigation costs) will be reduced to £0.38 million ($0.6 million) and £0.57 million ($0.9 million) respectively.

Operational capex has been dramatically curtailed and for the last quarter of 2009 will be approximately £1.9 million ($3 million). 

Licences and litigation

The Company is awaiting the date for a hearing in the High Court on the Licence challenges on the Pirkovska and Zagoranska licenses. 

In the High Court in London, the litigation is ongoing against former executives and suppliers of the Company.

Value realisation

As previously announced, Cadogan will be holding its Annual General Meeting on 11 November 2009. The Company will also be calling a General Meeting on the same date and a circular (the "Circular") convening such a meeting will be distributed to shareholders on 20th October. The Circular will contain a proposal to cancel the share premium account and apply to the court to reduce the capital in order to create distributable reserves, which in the Board's opinion is the most straightforward way to return cash to shareholders.

In addition to actively pursuing a programme to return cash to shareholders, the Board is also examining a number of initiatives in Ukraine, including a potential farm-out of certain of its assets as well as other strategic relationships. The aim of these exercises is to see whether the Company can realize additional value from its investments in Ukraine.

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