Cadogan Regulatory News (CAD)

Monday 13 September 2010

Cadogan Petroleum plc - Pirkovskoe and Zagoryanska licence issues

The Board of Cadogan Petroleum plc "Cadogan" is pleased to advise that it has entered into a settlement agreement with NSJC Nadra Ukraine ("Nadra"), a state owned company, and its subsidiary company Poltavanaftogazgeology ("PNGG"), whereby PNGG and Nadra will apply to the Higher Administrative Court of Ukraine to withdraw the cases between them over the previous ownership of the licences for the Pirkovskoe and Zagoryanska fields. This means that, subject to meeting the conditions of the agreement, the indirect challenge to the ownership of these licences will cease. The agreement requires court approval of settlement terms between the parties anticipated at a hearing planned for 6 October 2010. On receiving court approval, the parties have agreed to conclude all matters in the settlement agreement by mid-October.

Once the court action is withdrawn, Cadogan has agreed to withdraw its claim for damages against Nadra with regard to the initial licence challenge in July 2008. In addition, also subject to court approval of settlement terms, Cadogan has agreed terms for the purchase from Nadra five wells for US$3.2 million on the Zagoryanska licence, including the Zagoryanska 3 well which went into commercial production on 1 August 2010 and continues to produce gas and condensate at rates of approximately 50,000 and 15 cubic meters per day respectively. The Company currently rents the Zagoryanska 3 well from Nadra. It is anticipated that work-overs of the four additional wells could lead to further production from the Zagoryanska field.

Ian Baron, Chief Executive Officer, commenting on the agreement said "When all the conditions of this agreement are fulfilled it will confirm the position already advised by the Minstry of Environmental Protection of Ukraine that Cadogan has clear title to its Pirkovskoe and Zagoryanska licences in Ukraine. Our success in reaching this agreement is a clear indication of the improved operating conditions in Ukraine and we look forward to developing a cooperative relationship with Nadra and the Ministry."

Ends