Cadogan Regulatory News (CAD)

CADOGAN PETROLEUM PLC - Operations Update

PR Newswire

London, July 8

CADOGAN PETROLEUM PLC

Operations Update

8 July 2016

Cadogan Petroleum plc (“Cadogan” or the “Company”), an independent oil and gas exploration, development and production company with onshore gas, condensate and oil assets in Ukraine, is pleased to announce an update on its operations in Ukraine. 

Oil & Gas ProductionThe Company’s producing assets in Ukraine have continued with minimal interruption. An accurate reservoir management program has kept the average production in the first six months at 115 boepd which is slightly (5.5%) higher than the average production in the year to 31 December 2015 and 24% higher than the average production in the first six months of 2015. Whilst production levels have been marginally ahead of the level of last year, revenues have dropped due to lower realised oil and gas prices.

Oilfield ServicesCadogan’s wholly owned service subsidiary, LLC Astro Service, has been working on its portfolio of orders with a focus on the plugging & abandonment of old wells and restoration of sites. Management expects a significant contribution to the Group's full year results from this business segment.

Gas TradingThe volume of gas traded has been lower than in the corresponding period of last year. The primary reason for the lower traded volumes was a loss of two large clients switching to new suppliers. Cadogan has however made progress with the recovery of receivables and optimization of pre payments from the gas trading division since 31 December 2015 (which stood at $11.7 million), which has had a net positive impact on the Company’s cash balances.

Outlook and StrategyThrough the first part of the year Cadogan has continued to actively review opportunities to expand and to geographically diversify its portfolio of oil and gas assets. In particular in Ukraine, Cadogan has looked at either buying into licences or accessing third parties' wells to be re-entered applying the same techniques which proved successful on the Monastyretska license.

Efforts to preserve cash have continued and have been successful. Net cash (cash and cash equivalents less short term borrowings) has increased from $36.5 million as of 31 December 2015 to $40.6 million as of June 30 2016 as a result of the optimization of working capital.

Guido Michelotti, Cadogan' CEO commented:

"The first half of 2016 has been another challenging period for oil and gas companies operating in Ukraine as they have been exposed to uncertainties in the outcome of the licensing processes and to a tax regime which has remained punitive. Cadogan has actively engaged the authorities at all levels to protect its expired licenses and to bring the royalties down to pre-Maidan level.

This has not distracted management and staff from the efforts to diversify and efficiently manage the existing portfolio. I am quite pleased by the increase of both production and net cash over the same period last year as we continue to focus on preserving our cash resources to pursue opportunities to add value to the portfolio."

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