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11 Nov 2009 07:00
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11Β November 2009
Cadogan Petroleum PLC
("Cadogan" or the "Company")
Interim Management StatementΒ
Cadogan today announces its Interim Management Statement for the period from 1 July 2009 to 10 November 2009. The CompanyΒ continuesΒ toΒ reduceΒ expenditure whilstΒ re-evaluating itsΒ oilΒ andΒ gas assets in Ukraine.Β The Board isΒ also exploring both a return of capital and alternative ways ofΒ maximisingΒ valueΒ from the Company'sΒ existingΒ assets.Β
Finance
TheΒ Company'sΒ cash balance at the date of this announcement isΒ Β£34.1Β million ($56.9Β million).Β
The Company continues to operate under a dramatically curtailed capital expenditure programme, requiring approximately Β£1.9 million ($3.0Β million) for the last quarter of 2009, all of which is required by licenceΒ conditionsΒ or environmentalΒ obligationsΒ in Ukraine.
Reorganisation of the business continuesΒ and the Company's total headcount has been progressively reduced from 463 inΒ MarchΒ 2009 toΒ 321Β inΒ OctoberΒ 2009. By the end ofΒ 2009, the Company expectsΒ total headcount toΒ beΒ reduced toΒ approximatelyΒ 130.Β G&A expenditure, excluding litigation costs, will be reduced to Β£0.5 million ($0.9 million)Β per monthΒ fromΒ January 2010.
Litigation
Cadogan has resolved the disputes that existed between the Company and Global Process Systems LLC ('GPS') concerning contracts for the fabrication and delivery of two gas treatment plants for a total purchase price of US$54.5 million. The key commercial terms of the settlement provide for GPSΒ exclusively to market the plants for a 10 month period and, if a sale is achieved, for Cadogan to receive in stage payments an aggregate cash consideration of US$38.5 million. If the plants are not sold within this period, then GPS has agreed to take the plants to stock and Cadogan will receive stage paymentsΒ forΒ an aggregate cash consideration of US$37.5 million. The settlement also provides for the release by GPS of aΒ potentialΒ US$10.9Β million contractual claim against Cadogan forΒ the balance of the consideration for the plants.Β
Cadogan continues to pursue claims against all the other parties to the litigation, commenced by Cadogan in London, which has been the subject of previous announcementsΒ madeΒ by the Company.
Operations
On the Bitlyanska licence, drilling ofΒ the Borynya 3 wellΒ was terminated at a drilled depth of 5,325 metres in October 2009 and the well is now suspendedΒ for future evaluation. The well provided valuable data and demonstrated that an active hydrocarbon system is present over an extended interval.Β Several discrete gas bearing pressureΒ intervalsΒ were penetrated and good quality logs and data were obtained. Reservoir zones exist in the 81/2Β " holeΒ andΒ oneΒ zoneΒ 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.Β Contingent onΒ theΒ evaluation of the data obtained,Β further testing may be warranted in the future.Β The Company isΒ currentlyΒ planning aΒ 2D seismicΒ programΒ overΒ part ofΒ the Bitlyanska licence.
In line with the current strategy of minimising costs while operations are being evaluated, in eastern Ukraine,Β all the Company's wellsΒ are currently suspended with the exception of PirkovskoeΒ 1, which is on extended testing. This well is currently producing about 70 barrels of light oil per day from a thin Visean sand. Current activity in relation to these licences is limited to technical analysis and planning.
Minor production of oil and gas continues from the fields held under the subsidiary Delta in western Ukraine. The other minor licences are in the process of being relinquished or allowed to expire with the exception of Malynovetska.
The BoardΒ has approved aΒ strategy forΒ farming-outΒ interestsΒ inΒ certain ofΒ Cadogan'sΒ assetsΒ to reduce capital expenditure and balance the risk profile of the portfolio.
Β
Licences
In support of Cadogan's position, on 12 October 2009,Β Cadogan received a letter from the MinistryΒ of Environmental Protection for UkraineΒ confirming the Company's rights to theΒ Pirkovskoe,Β Zagoryanska, Bitlyanska, Monastyretske and KrasnoyilskeΒ licences.Β The Ministry confirmed that there are no grounds for invalidation or annulment, or any doubts as to the validity of theseΒ licences held by Cadogan.Β The Ministry has also confirmed the exclusive rights of Cadogan for exploration, research and commercial development of these fields.
In light of this letter, the CompanyΒ will seekΒ finalΒ resolutionΒ ofΒ the previous indirect legal challenges to the Pirkovskoe and Zagoryanska special permits.Β
Value realisation
The Company has called a General Meeting following the Annual General Meeting this afternoon to seek shareholder approval for a proposal to cancel the share premium account and apply to the court to reduce theΒ Company'sΒ capital to create distributable reserves. In theΒ Board's opinionΒ thisΒ is the most straightforward way to return surplus cash to shareholders.Β
In addition to actively pursuing a programme to return cash to shareholders, the Board is also examining a number of initiativesΒ to see whether the Company can realise additional value from its investments in Ukraine.Β
Enquiries:
|
Cadogan Petroleum |
+44 20 7245 0801 |
|
Ian Baron Stefan Bort |
|
|
Pelham PR |
|
|
James Henderson |
+44 20 7337 1501 |
|
Evgeniy Chuikov |
+44 20 7337 1513 |
|
Phillip Dennis |
+44 20 7337 1516 |
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