Last checked at 14 May 2009 07:00
Cadogan Petroleum PLC
("Cadogan" or "the Group")
Interim Management Statement
Cadogan (LSE: CAD), an independent oil and gas exploration, development and production company with onshore oil and gas assets in Ukraine, today provides its Interim Management Statement for the period from 1 January to 14 May 2009.
OVERVIEW
OPERATIONS
Following the appointment of Ian Baron as Interim Chief Executive in March 2009 and the completion of a well testing programme on the Pokrovskoe, Pirkovskoe and Zagoryanska licences, the Group has reduced its drilling operations from five rigs to one. Four wells on the Pokrovskoe, Pirkovskoe and Zagoryanska licences have been suspended while management undertake analysis of the data obtained to date.
Drilling operations on the Borynya #3 well continue towards its target depth of 5,200 metres. The well has currently reached a depth of 4,045 metres. Encouraging test results were obtained in a secondary target above the main objective. Drill stem testing at a depth of 3,653 metres in this secondary target (a seven metre sand interval in the Golovetsky formation), resulted in a maximum flow rate of 128,000 cubic metres of gas per day during a limited duration test.
The Group remains on track to complete its strategic and operational review. This review will allow Cadogan to evaluate its operations to date and strategic options available to the Group going forward. The review is expected to be complete by the end of the second quarter or early in the third quarter.
During the period, oil and gas was produced from the Group's minor fields in western Ukraine. Although modest, these fields produce economic volumes and provide limited cash flows to the Group.
LICENCE ISSUES
As previously announced, a number of successful court hearings have supported the Group's exclusive rights to the Pirkovskoe and Zagoryanska licences. However in February 2009 the High Administrative Court of Ukraine ruled in favour of Poltavanaftogazgeologiya in an appeal hearing in relation to the transfer of the Pirkovskoe licence to Nadra Ukryainy.
The Group has lodged an appeal in the Supreme Court of Ukraine, the highest judicial body in the Country, and has received confirmation that the appeal will be heard, with the date to be finalised.
On 30 March 2009, the General Prosecutor's Office of Ukraine submitted a case to the Supreme Court of Ukraine in support of Cadogan, arguing that the High Administrative Court had been mistaken in reaching its decision and that the ruling should be declared invalid.
Despite the recent High Administrative Court decision, the Group's licences remain valid and the Directors believe that this will be finally confirmed by the Supreme Court.
On 15 January 2009, following positive discussions with the Ministry for Environmental Protection of Ukraine, the Group successfully extended its licence for the Zagoryanska area by five years to April 2014.
CORPORATE AND FINANCIAL
In March 2009, the Board appointed Ian Baron as Interim Chief Executive with a view to carrying out the aforementioned operational and strategic review. Given the pause in operations, the Group's rate of expenditure has also substantially decreased and is mainly focused on certain drilling, testing and evaluation activities. Consistent with this, the Group also recently announced a reduction in staffing levels. The Group's capital expenditure during the reporting period of £23.5 million therefore reflects the higher level of drilling activities in the first quarter of 2009.
14 May 2009
Enquiries
| Cadogan Petroleum plc | +44 20 7245 0801 |
| Ian Baron, Interim Chief Executive Officer | |
| Alex Sawka, Chief Financial Officer |
| Pelham PR | |
| James Henderson | +44 20 7337 1501 |
| Evgeniy Chuikov | +44 20 7337 1513 |
| Philip Dennis | +44 20 7337 1516 |