Last checked at 17 May 2010 17:27
Cadogan Petroleum PLC
("Cadogan" or "the Group")
Interim Management Statement
Cadogan today announces its Interim Management Statement for the period from 1 January 2010 to 17 May 2010.
FINANCE
The Company's cash balance at the date of this announcement is £29.5million ($42.7 million).
The Group reorganisation of the business has resulted in significant cost reductions and increased efficiency. The Group's total headcount has been progressively reduced to approximately 120 and is appropriate for the ongoing level of activity. In 2010 the average monthly cash outflow from operating and investing activities has been reduced to £0.45 million ($0.7 million). This amount does not include litigation costs of £1.4 million ($2.1 million) or income from litigation during the period.
OPERATIONS
The Group continues to operate safely and efficiently with no Lost Time Incidents during the period of this Statement.
As advised during 2009, the Board commissioned an independent Reserves and Resources Evaluation of the Group's assets in Ukraine, as at 31 December 2009 (the "Report"). The review of the assets resulted in a downward reclassification of a large part of the Group's reserves to the resource category. Notwithstanding this downgrade, the Report still recognises the merits of the assets and lists the Group's reserves and contingent resources as 110 million barrels of oil/condensate and 2.5 trillion cubic feet of gas. However, it remains to be demonstrated that the Group can economically develop the oil and gas believed to be present.
On the Bitlyanska Licence, seismic interpretation is nearing completion and local seismic contractors have been contacted to assess interest in conducting a seismic acquisition program later this year.
Operations teams have been focusing on preparation for the Debeslavetske field drilling program that calls for three production wells to be completed in Q3 of 2010 which are expected to result in the doubling of commercial production. As part of this production enhancement plan for this field, a study for an optimum set-up and the timely installation of compression facilities is also being conducted. In addition, planning for the decommissioning of wells in Slobodo Rungurske field is currently underway.
A number of seismic processing companies have been approached to assess interest in reprocessing the Pokrovskoe 3D data. In addition, following favourable results from volumetric analysis and commercial review of the 4 way closure identified on the 3D seismic data, deepening of the Pokrovskoe 1 well to test this prospect is currently under consideration by the Board.
Progress has also been made on the in-house interpretation of the Pirkovskoe and Zagoranska 3D seismic data. Deep Carbonate potential has also been identified in Pirkovskoe and these may represent attractive future drilling targets. Emphasis is being placed in evaluating the Zag-3 well location and on the potential for re-testing existing wells. In the meanwhile a testing program at Zag-3 is providing promising results and, subject to final analysis, plans are in place to start commercial production.
The farm out campaign has proceeded smoothly to date with a significant number of companies expressing interest and reviewing the Company's seismic and well data. Detailed meetings have been held with a selected number of interested parties. The opportunities have been well received by the technical staff from the prospective partners, a number of which have indicated that they will make positive reccomendations on the farm-ot to their respective management.
LITIGATION
In February 2010, the Group reached an agreement with one of the Defendants in the litigation, Smith Eurasia Limited ('Smith Eurasia'), and various related parties with respect to potentially improper payments made by Smith Eurasia to former executives of the Company prior to March 2009. In accordance with the agreement, Smith Eurasia does not accept fault or liability in relation to the allegedly improper payments and the Group received $4.5 million. In addition, other outstanding commercial issues between Smith Eurasia and the Group, which were taken up in the balance sheet as at 31 December 2009, were resolved at the amounts stated in that balance sheet.
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 announcements made by the Company. The Board has been advised that it has a strong case against all the remaining parties to the litigation including, the former Chief Executive Officer and Chief Operating Officer and certain other individuals.
Ends
Enquiries
Cadogan Petroleum plc
Ian Baron, Chief Executive Officer +44 (0)20 7245 0801
Stefan Bort, Company Secretary
Bankside
Simon Rothschild +44 (0)20 7367 8888
Rose Oddy