Cadogan Petroleum Interim Management Statement

 
TIDMCAD 
 
Cadogan Petroleum plc (the "Company" or the "Group") 
 
This interim management statement, issued in accordance with the UK Listing 
Authority's disclosure and transparency rules, relates to the period from 
1 July 2014 to 20 November 2014. 
 
Introduction 
 
The Company published its Half Yearly Report for the six months to 30 June 2014 
on 27 August 2014. 
 
Political situation 
 
We continue to monitor the current political situation in Ukraine carefully but 
there have been no disruptions to the Company's operations, or ability to 
operate effectively, in any of our operating locations. The Ukrainian Hryvnia 
has further devalued against the US Dollar (approximately 45% since 1 January 
2014) which, while affecting the carrying value of the Group's assets, has had 
a correspondingly positive impact on the Group's local currency running costs. 
 
Financial position 
 
As at 19 November 2014 the Group had current cash and cash equivalents of 
approximately $51.5 million (including the Company's share of cash and cash 
equivalents in joint ventures) plus approximately $1.4 million net receivables 
relating to the Group's trading activities. 
 
Executive Summary 
 
2014 has so far been broadly positive for the Group, with several new prospects 
in our license areas having been identified and properly de-risked during the 
course of 2014 and further significant reductions to the Company's cost base 
made in line with management's plan. 
 
Monastyretska is maintaining its production performance at consistent levels 
and trials to recover some marginal production from existing Sloboda wells are 
ongoing. The Deb 15 well rig move is progressing and spud-in is forecast before 
the end of November. 
 
2014 has seen the continuation of operations as planned on the Company's assets 
in the East and the West of Ukraine. The evaluation of other suitable 
opportunities in the country and overseas is continuing. Revenue largely 
reflects production from the Group's Cheremkhivska, Debeslavetska and 
Monastyretska fields as well as international and domestic gas trading. 
 
Gas trading in Ukraine, involving the supply to domestic customers of gas 
either imported from the European Union or sourced locally, has continued to 
progress well and starts to provide meaningful, additional revenues to the 
Group. We expect further growth in volumes and range of products in the short 
to medium term. 
 
The Company's subsidiary, Astro-Service LLC, recently concluded a service 
contract for civil works activity with WGI relating to the Company's shale gas 
joint venture, with operations expected to commence during 2015. 
 
Overall, the Company remains in a strong financial position, with no debt, new 
revenue streams and substantial cash resources. 
 
Operations 
 
The Group continued to operate safely and efficiently throughout the period. As 
anticipated, the principal focus for 2014 was to continue reducing the risk of 
present and anticipated operations while maximising existing production 
potential, with new prospects having been identified in Pokrovskoe and 
Pirkovskoe following 3D seismic interpretation. 
 
The de-risking and efficiency targets set for our technical operations and 
sub-surface explorations teams have largely been met. Work-over activity is 
continuing on Pirk 1, now targeting the Upper Tounesian. Visean targets are 
confirmed to be hydrocarbon-bearing with low permeability. 
 
Borynya 3 is on-hold; however, we remain confident in its potential value and 
our assessment work continues. 
 
Production was steady in Debeslavetska while potential gas production from 
Cheremkhivska appears promising at this stage. In Monastyretska, production has 
steadily reached 45 bopd and further optimisation will be eventually 
considered. 
 
The re-evaluation of the Group's assets continues and we remain very positive 
in our outlook. 
 
Pokrovskoe field 
 
The associated work obligations in the license have been fulfilled. Following 
3D seismic interpretation, new highly valuable drillable prospects have been 
identified in the shallower formations. Approval from the licensing authority 
for the license modification is positively ongoing. 
 
Zagoryanska field 
 
Following the expiry of the Zag exploration license in April 2014, the 
application for a 20-year production license in favour of a wholly-owned, newly 
established, subsidiary company ("Zagdobuvannya" or Zag Production) was filed 
and is positively ongoing. 
 
Re-evaluation of the 3D seismic volume in Zag, similarly to Pok, is ongoing. 
Re-entry of some of the existing wells to test for production is currently 
under scrutiny. 
 
Pirkovskoe field 
 
Recent analysis shows great promise in the upper intervals. Following a 
thorough study of Direct Hydrocarbon Indicators (DHI) and 3D Amplitude Versus 
Offset (AVO) reconnaissance, a drillable prospect has been identified and 
properly de-risked, showing good prospects and significant, potential size. 
 
Work-over activity on the Pirk 1 well, which commenced in October 2013, 
confirmed the Visean intervals to be hydrocarbon bearing but with low 
permeability. The work-over is now continuing to assess the Upper Tournesian 
levels beneath, deeper than 5,000m. Approval from the licensing authority for 
the license modification is positively ongoing. 
 
Borynya and Bitlya fields 
 
The Borynya 3 well is being monitored and has been temporarily put on-hold for 
future re-entry and fracturing. 
 
The Vovchenska field, north of Borynya, seems to have an interesting oil target 
at a depth of circa 600m and acquisition of new 2D seismic lines is under 
consideration. The application for a license extension has been filed and is 
positively ongoing. 
 
Minor fields 
 
Cadogan owns exploration, development and production licences either directly 
or through subsidiaries or joint ventures in several minor fields, of which 
two, Debeslavetska and Cheremkhivska, are currently in commercial production 
and one, Monastyretska, is in pilot commercial development. 
 
In Debeslavetska, all the updated DHI reconnaissance technologies have been 
applied with so far interesting results, while 2D seismic acquisition was 
completed at the end of March. At present, three new, drillable prospects have 
been identified; the locations of the two most suitable are presently under 
preparation. Deb 15 will spud-in before the end of November and, if positive, 
Deb 17 will follow. Activity for eventual well early tie-in is also ongoing. 
 
In addition, some relatively deeper (circa 600m) potential horizons now appear 
likely and if our analysis proves correct, will significantly improve potential 
resources in the area. 
 
In Monastyretska, the formation light stimulation was successfully completed 
and production increased from 20 to 45 bopd. Possible further formation 
treatment will be considered if economically sustainable. The activity work 
program and budget change was recently approved by the authorities and the 
application for the license extension is ongoing. 
 
In Sloboda Ranguska, three, existing, very shallow wells (200m) have been 
identified for eventual oil recovery. One is marginally producing and will be 
chemically treated to verify the eventual production opportunity, expected to 
be marginal but economically positive. A possible oil target has been 
identified at a depth of 1800m. 
 
Enquiries to: 
 
Cadogan Petroleum Plc [phone] 
Bertrand des Pallieres, Chief Executive Officer 
 
Cantor Fitzgerald Europe [phone] 
David Porter 
Richard Redmayne 
 
 
 
END