We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Register for real-time alerts, custom portfolio, and market movers
| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Cadogan Energy Solutions Plc | AQSE:CAD.GB | Aquis Stock Exchange | Ordinary Share | GB00B12WC938 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 2.25 | 2.00 | 2.50 | 2.25 | 2.25 | 2.25 | 0.00 | 06:55:37 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
Hot Features
Premium
TIDMCAD
CADOGAN PETROLEUM PLC
ANNUAL FINANCIAL REPORT
2015
OVERVIEW
Summary of 2015
Key highlights of 2015:
* LTI/TRI1: 0/0 (2014: 0/0)
* Greenhouse gases emissions: 1,295 tonnes CO2 equiv. (2014: 1,620)
* Production: 39,680 boe (2014: 39,834 boe)
* Realised price at year end: 35.7$/boe (2014: 60.5$/boe)
* Gross revenues2: $75.4 million (2014: $32.6 million)
* Gross profit: $5.9 million (2014 : $2.8 million)
* Loss for the year: $23.3 million (2014: $59.3 million)
* Cash and cash equivalent at 31 December 2015 increased by $0.5 million to
$49.43million (2014: decreased by $7.6 million to $48.9 million)
* Net cash, which included cash and cash equivalents less short-term
borrowings, increased to $36.5 million at 31 December 2015 compared to
$31.6 million at 31 December 2014.
1LTI Lost Time Incidents; TRI: Total Recordable Incidents
2Gross revenues of $75.4 million (2014: $32.6 million) included $73.3 million
(2014: $29.4 million) from trading of natural gas, $1.8 million (2014: $2.4
million) from exploration and production and $0.4 million (2014: $0.8 million)
from service
3Excluding $0.9 million (2014: $0.5 million) of Cadogan's share of cash and
cash equivalents in joint ventures
Group Overview
The Group has continued to maintain exploration and production assets in
Ukraine, to conduct trading operations, which include the importing of gas from
Slovakia and Poland and local purchasing and sales with physical delivery of
natural gas, and to operate a service business which includes work-over, civil
works services, assistance in obtaining legal permits and other services
provided to E&P companies.
The Group's assets are located in both of the proven hydrocarbon basins in
on-shore Ukraine, the Dnieper-Donets basin and the Carpathian basin.
The Group commissioned to an independent third party the assessment of the
Reserves and Resources as of 31 December 2015. The evaluation was done
according to the SPE "Guidelines for Application of the Petroleum Resources
Management System" (PRMS).
The summary of the Group's Reserves and Resources in the nine licences is
reported in the table in page 16.
Borynya and Bitlyanska fields
The Bitlyanska exploration and development licence covers an area of 390 square
kilometres, tectonically belonging to the Krosno zone of the folded Carpathians
and includes the Borynya, Bitlyanska and Vovchenska structures. It holds
Probable and Possible reserves; as well as Contingent and Prospective
resources.
Borynya 3 well was re-entered and tested Krosno 1 interval with promising
results in 2013. The well is monitored, routinely bled-off, fluid samples
extracted, measured and kept on hold for an eventual fracturing job and
possible re-entry to the deeper intervals.
Monastyretska field
The Monastyretska licence covers an area of 25.9 square kilometres, located in
the Carpathian fold belt (Skuba unit) in Western Ukraine. It includes three
structures, one of which is regularly producing oil. It holds Proved, Probable
and Possible reserves; as well as Contingent and Prospective resources.
Pokrovskoe field
The Pokrovska licence area covers 49.5 square kilometres and is located in the
Dnieper-Donets basin. It holds contingent resources in the Visean and
prospective resources in the Permian. Facilities in the Pokrovska area are
approximately 10 kilometres away from the UkrTransGas system. The licence will
expire on 10 August 2016. The work programme obligation for the licence has
been fulfilled.
Zagoryanska field
The Zagoryanska licence expired on 24 April 2014, and covered an area of 49.6
square kilometres located in the Dnieper-Donets basin, with gas being
discovered in the Visean and Turnesian reservoirs.
Cadogan alone, as Eni had no interest, has requested via one of its
subsidiaries a 20 years production licence covering an area of 34 square
kilometres as ENI had no interest to enter into the production phase. All
assets on the Group's Balance Sheet related to this licence were impaired in
full in 2013.
Pirkovskoe field
The Pirkovska licence expired on 19 October 2015, and covered an area of 71.6
square kilometres, adjacent to the Group's Zagoryanska licence.
It holds contingent resources in the Turnesian and in the Visean; and
prospective resources in the Permian.
Cadogan owns the Krasnozayarska gas treatment plant in the Pirkovska licence
area which is connected to the UkrTransGas system. The plant is presently under
conservation. Cadogan has requested a 20 years production licence. All E&E
assets on the Group's Balance Sheet related to this licence have been impaired
in full.
Minor fields
Cadogan owns three exploration, development and production licences either
directly or through subsidiaries and joint ventures in other minor fields, of
which two are currently in commercial production (Debeslavetska and
Cheremkhivska) and one (Slobodo-Rungurska) has no activity ongoing.
Shale gas
In addition to the above licences the Group has a 15% interest in Westgasinvest
LLC ("WGI"), which holds the Reklynetska, Zhuzhelianska,
Cheremkhivsko-Strupkivska, Debeslavetska Exploration, Debeslavetska Production,
Baulinska, Filimonivska, Kurinna, Sandugeyivska and Yakovlivska licences for
unconventional activities.
STRATEGIC REPORT
The Strategic Report has been prepared in accordance with Section 414A of the
Companies Act 2006 (the "Act"). Its purpose is to inform members of the Company
and help them assess how the Directors have performed their legal duty under
Section 172 of the Act to promote the success of the Company.
Our business model
We aim to increase value through:
* Sourcing additional E&P assets to diversify Cadogan's portfolio both
geographically and operationally; we will pursue exploration and/or near
term development assets with significant upside as well as producing assets
to cover G&A and provide free cash flow for exploration activities
* Pursuing farm-out to contain investments in Ukraine
* Maintaining sufficient capital base, complementingE&P cash flow
withrevenues from gas trading and oil services businesses
Principal activity and status of the Company
The Company is registered as a public limited company (registration number
05718406) in England and Wales. Its principal activity is oil and gas
exploration, development and production and gas trading.
The Company's shares have a standard listing on the Official List of the UK
Listing Authority and are traded on the main market of the London Stock
Exchange.
Chairman's Statement
Though the events of the Euromaidan Revolution are now more than two years
behind us, the full extent of the political and economic repercussions have yet
to be felt. Ukraine has still not entered a period of real stability and its
political leadership is struggling to utilize the broad mandate it was granted
to implement the types of changes and reforms most of the citizens expect.
Within the context of corruption-related scandals and a high-profile cabinet
member resignation, implementation of the reform program put forth by the
European Community, the United States and financial institutions such as the
International Monetary Fund and the European Bank for Reconstruction and
Development has been delayed. These delays, coupled with the unresolved
tensions with Russia surrounding the annexation of Crimea and ongoing
confrontations in eastern Ukraine, have only served to add to the short-term
uncertainty plaguing the country.
This unstable environment has led to a further devaluation of the local
currency. In the oil and gas sector, delays in the renewal and approval process
for licences as well as the extension of the "temporary" punitive 70% subsoil
use tax regime for the remainder of the year, have created additional
challenges. For Cadogan, this has translated into a severe cash drain from the
E&P gross revenues derived from gas; a reduction of the USD value of its
non-current assets accounted in local currency; and the impairment of the
Pirkovska licence's book value as a result of delayed responses to the
company's application for converting this exploration licence into a 20-year
production licence.
On a more positive note, some reforms have in fact been initiated and the
unwinding of the post-Soviet regulatory system is well on its way. The country
has started the adoption of the Third European Energy Package; while its
implementation is currently in progress, some delays might be expected due to
ongoing discussions on the unbundling model for Naftogaz. Significant progress
has also been made in diversifying the supply of imported gas thanks to the
implementation of reverse flow from Europe.
Despite the challenging business climate, Cadogan has performed well.
Production has been maintained at similar levels to the previous year, CO2
emissions have been reduced, traded volumes of gas have been significantly
increased and efforts to streamline and contain costs have turned the company
into a cash neutral position, or actually, slightly cash positive. This is a
remarkable achievement given the combination of adverse factors -- including
the reduction of the oil and gas prices -- which have created havoc for many of
Cadogan's peers.
Notwithstanding the positive results achieved by Cadogan and its Management,
there remains a compelling need to diversify its portfolio geographically. This
drive to diversify is one of the cornerstones of the new strategy that was
approved by the Board in the second half of the year. Management is pursuing
opportunities to diversify while building a more robust production base. With
its solid balance sheet, low cost operations, proven resilience to a low price
environment and the international experience of its leadership team, Cadogan is
poised to leverage its strengths and take advantage of the very real
opportunities that lie ahead.
Zev Furst
Non-executive Chairman
25 April 2016
(MORE TO FOLLOW) Dow Jones Newswires
April 26, 2016 09:04 ET (13:04 GMT)
Chief Executive's Review
2015 has been another challenging year for the oil and gas industry and for
Ukraine. Cadogan has weathered the storm by continuing with its cost reduction
initiatives, by applying strict discipline to all spending and by reducing the
working capital. The result is that cash has been preserved and is available
to be used to capture the opportunities that will materialize in a distressed
market.
Key developments during the year:
* G&A have been further reduced by decreasing the head count, replacing
expatriates with Ukrainian nationals and moving Kiev office to smaller,
cheaper premises still located in the city centre. Current G&A on
annualized basis are 13% lower than what they were in 2014
* Work-over on gas wells and production optimization on the oil well allowed
Cadogan to meet the production budget notwithstanding a 4 month delay in
the renewal of the Monastyretska licence
* Applications have been filed to convert Pirkovska from exploration licence
into 20 year production licence
* Volumes of traded gas have more than tripled over the previous year as a
result of broadening both the supplier and the client base
* Gross profits, before G&A and taxes, have more than doubled, from $2.8
million in 2014 to $5.9 million this year
* Cash and cash equivalents at year-end total $49.4 million (2014: $48.9
million), excluding $0.9 million (2014: $0.5 million) of Cadogan's share of
cash and cash equivalents in joint ventures.. Net cash, which included cash
and cash equivalents mostly denominated in USD net of short-term borrowings
denominated in UAH, increased to $36.5.
Throughout 2015 Cadogan has protected shareholder value, increased its
resilience to a low price environment and has made a step towards becoming more
integrated along the business chain by further developing the gas trading
business. Its low cost basis combined with the revenues generated by the
trading and service businesses have helped preserve the cash that will be used
to fuel a strategy of growth and geographic diversification.
I consider this as a positive result given the unfavourable scenario in which
Cadogan has operated.
2015 has not been a turning point for both Ukraine and the oil industry. Whilst
military confrontation in the East of the country has receded, the country has
remained embroiled in a political and economic crisis. Besides, the subsoil
use tax has remained enforced at a punitive 70% rate throughout the year
despite the anticipation that it would be revoked. Oil and gas prices have
continued to fall and this has posed an unprecedented level of strain on all
key players, sometime challenging the very business model on which the oil and
industry has prospered over the last decade.
In such an extremely challenging context, Cadogan has focused on protecting
shareholders' value by pursing cash neutrality acting on three levers: cost
efficient production of its proved reserves, relentless pursuit of all possible
cost savings initiatives combined with strict discipline in spending, and gas
trading.
All these initiatives successfully brought Cadogan to be slightly cash
generative; they have also made Cadogan stronger than most of its peers and
well equipped to pursue its strategy of growth and asset diversification in the
current challenging context.
Core Operations
Core operations have concentrated on safely and cost efficiently managing the
producing assets while taking all necessary actions to preserve the portfolio
of licences. Applications for the conversion of Zagoryanska and Pirkovska
exploration licences into 20-year production licences have been filed and the
outcome of the applications is expected in the first half of 2016. As the award
of Pirkovska licence was not received at the time of issuing this report,
respective E&E assets were impaired.
A revision of the reserves and resources was requested to a third party to
update previous evaluation in light of the recent developments, including the
internal prospect generation work of the previous year; its results are
encouraging as they have identified volumes of 3P reserves and 2C resources
larger than anticipated.
Work-overs on Debeslavetska and production optimization on Monastyretska fields
have allowed Cadogan to meet the production budget notwithstanding a four
months' delay in the award of the licence. This remarkable achievement has been
somewhat down-played by the subsoil use tax, which has been maintained at 70%
throughout the year; higher taxes and lower prices have prevented Cadogan from
meeting its production revenue budget.
Opportunities to grow and diversify the portfolio have been pursued in the
second part of the year, but none of them has been finalized primarily because
of a value gap between market and sellers` expectations; additionally, many
potentially interesting opportunities are with companies with heavy debt
burden.
Last, but not the least, all activities have been conducted with the utmost
attention to safety and environmental protection. No accidents or spills have
occurred during 2015 and LTI stands at a remarkable zero since July 23rd 2011
(over 2.2 million worked hours). All Cadogan staff and management deserve to be
commended for this outstanding achievement.
Non-E&P Operations
The service business has been penalized by the oil and gas industry crisis in
Ukraine, with companies cancelling or deferring the execution of works. While
this has negatively impacted 2015 revenues, there are reasonable expectations
that some of the work deferred will be executed in 2016.
In 2015 trading business segment generated $73.3 million of revenues and $4.6
million of gross profit. Trading margins have remained healthy through the
year, but are expected to be eroded by new legislation, which requires sellers
to store 50% of the gas sold to final consumers and to provide financial
guarantee for 20% of the traded volumes, as well as by increased competition,
with more traders interested in entering the Ukrainian market. We intend to
balance this erosion of margins by broadening our client base and leveraging on
the competitive advantage of being one of the first companies to have used the
reverse flow opportunity to import gas in Ukraine.
Outlook
The management team is of the firm opinion that Cadogan is well positioned to
succeed in the current challenging context as it has:
* a strong balance sheet, with nearly $50 million of cash, including $20
million of restricted cashpledged for credit line used for trading1;
* a low cost operation model which can be replicated both in and outside of
Ukraine;
* non E&P activities whose net revenues nearly balance the G&A, thus allowing
Cadogan to manage this transitional period without burning cash.
1 $12.9 million of the credit line was outstanding as at 31 December 2015
(2014: $17.3 million)
While Ukraine remains the country where Cadogan is rooted, a geographic
diversification of the portfolio will be an objective while pursuing value
growth. In support of this strategy Cadogan has entered into Technical Service
Agreements with reputable consultancy firms to strengthen and broaden its pool
of competences.
Guido Michelotti
Chief Executive Officer
Operations Review
25 April 2016 In 2015 the Group held working interests in seven conventional
(2014: nine) gas, condensate and oil exploration and production licences in the
east and west of Ukraine. All these assets are operated by the Group and are
located in either the Carpathian basin or the Dnieper-Donets basin, in close
proximity to the Ukrainian gas distribution infrastructures. The Zagoryanska
and Pirkovska licences expired and the process to have the licences re-awarded
is ongoing.
Summary of the Group's licences (as at 31 December 2015)
Working Licence Expiry Licence type(1)
interest (%)
Major
licences
40.0 Zagoryanska Expired(3) (4) E&D
70.0 Pokrovska August 2016 E&D
100.0 Pirkovska Expired(3) E&D
99.8 Bitlyanska December 2019 E&D
Minor
licences
99.2 Debeslavetska(2) November 2026 Production
99.2 Debeslavetska(2) September 2016 E&D
54.2 Cheremkhivska(2) May 2018 Production
100.0 Slobodo-Rungurska April 2016(5) E&D
99.2 Monastyretska November 2019 E&D
1. E&D = Exploration and Development.
2. Debeslavetska and Cheremkhivska licences are held by WGI, in which the
Group has a 15% interest. The Group has 99.2% and 53.4% of economic benefit
in conventional activities in Debeslavetska and Cheremkhivska licences
respectively through Joint Activity Agreements ("JAA").
3. The application for the award of a 20 year production licence has been
filed. Though the Group has fulfilled the legal obligations and
requirements and applied for the licence before the expiration date delays
are expected because of recently introduced changes to the awarding
process.
4. The application for the award of a 20 year production licence has been
filed by a wholly owned Cadogan subsidiary as eni was not interested
5. The licence expired on 11 April 2016
In addition to the above licences the Group has a 15 per cent interest in
Westgasinvest LLC ("WGI"), which holds the Reklynetska, Zhuzhelianska,
Cheremkhivska, Debeslavetska Exploration, Debeslavetska Production, Baulinska,
Filimonivska, Kurinna, Sandugeyivska and Yakovlivska licences for
unconventional activities.
Late in the year Cadogan engaged Brend Vik, one of the major Ukrainian G&G
consultants, to update its reserves and resources in lights of the developments
occurred since the last evaluation of 2009. Brend Vik has recently completed
(MORE TO FOLLOW) Dow Jones Newswires
April 26, 2016 09:04 ET (13:04 GMT)
its evaluation and the results are presented on page 17.
In general, 3P reserves and 2C resources increased if compared to in-house
evaluation, while the perspective resources decreased. In particular, the
Permian and Upper Carboniferous intervals in Pokrovskoe and Pirkovskoe, well
identifiable by seismic analysis, were not considered adequately correlated
with existing log and wells' data; supplementary data collection is required
from future wells' re-entry and drilling in order to move these potential
volumes back to the prospective status.
Bitlyanska licence area
The Group holds a 99.8 per cent working interest in the Bitlyanska exploration
and development licence. The Bitlyanska licence covers an area of 390 square
kilometres. Bitlyanska, Borynya and Vovchenska are three hydrocarbon
discoveries in this licence area.
Borynya 3 well, during monitoring and routine bleed-off always flows methane
shows.
Monastyretska licence area
The Group holds a 99.2 per cent working interest in Monastyretska licence. A
new exploration and development period was granted up to November 2019. The
licence has been regularly producing oil at a rate of 48boepd. Evaluation of a
re-entry and stimulation of two existing wells is ongoing.
Pokrovska licence
The Group holds a 70 per cent working interest in the Pokrovska exploration and
development licence. The Pokrovska licence area covers 49.5 square kilometres.
The licence will expire on 10 August 2016 and Cadogan is preparing to
eventually file an application for the award of a new licence.
Zagoryanska licence (expired)
The Zagoryanska licence expired in April 2014. Cadogan, via its subsidiary LLC
Zagvydobuvannya, requested the awarding of a 20 years' production licence,
which licence area covers 34 square kilometres. The Ministry of Ecology issued
the approval and the process was at the level of the regional authorities,
before the final approval. The process has been delayed because of the recent
introduction of a new law which re-allocates the authority amongst the involved
state entities. The plug and abandonment of wells has started and the activity
is being conducted by one of Cadogan's subsidiaries (Astro-Service LLC) and
jointly funded by the former licencees (eni and Cadogan) in proportion to their
participating interests.
Pirkovska licence (expired)
The Pirkovska licence expired on 19 October 2015 and Cadogan has requested the
award of a 20 years' production licence. The licence covers an area of 88
square kilometres. Likewise for Zagoryanska licence, the approval process has
been delayed by changes introduced by a new law.
Minor fields
These fields are contained in licences located in Western Ukraine, and include
the following:
* Debeslavetska Production licence area
The field is currently producing 60 boepd (2014: 65 boepd). A work-over
activity is ongoing to mitigate the production decline.
* Debeslavetska Exploration licence area
In the exploration licence, surrounding the Debeslavetska Production area,
two prospects have been identified. The licence holds prospective resources
and will expire on 7 September 2016. Cadogan is evaluating whether to apply
for a new E&P period after the expiry of the current licence terms.
* Cheremkhivska Production licence area
This licence is currently producing 15.7 boepd (2014: 17.4 boepd).
* Slobodo-Rungurska exploration and development licence area
The licence expired on 11 April 2016. Cadogan is evaluating whether to apply
for a new E&P period after the expiry of the current licence terms.
FINANCIAL REVIEW
Overview
Together with completion of E&P programme, in 2015 the Group continued to
approach cash neutrality through a number of cost reduction initiatives, and
developing service activities and energy trading businesses.
Revenue has increased from $32.6 million in 2014 to $75.4 million in 2015 due
to gas trading operations, which represent $73.3 million (2014: $29.4 million)
of total revenues; revenues from production have slightly declined to $1.8
million (2014: $2.4 million) owing to lower realized price.
Revenue from the service business, which includes drilling and civil
works services, decreased to $0.4 million (2014: $0.8 million) mainly due to
the postponement of service contracts by clients as a result of the situation
in Ukraine.
The cash position of $49.4 million at 31 December 2015, including restricted
cash of $20 million used as a pledge for credit line, has increased from $48.9
million at 31 December 2014. Net cash, which included cash and cash equivalents
mostly denominated in USD net of short-term borrowings denominated in UAH,
increased to $36.5 million at 31 December 2015 compared to $31.6 million at 31
December 2014.
The cash position of $49.4 million at 31 December 2015, including restricted
cash of $20 million, has increased from $48.9 million at 31 December 2014.
Income statement
Loss before tax was $22.2 million (2014: $59.1 million), of which $10.5 million
(2014: $5.1 million) is impairment of oil and gas assets and $12.8 million
(2014: $54.7 million) is a share of losses of joint ventures. Share of losses
in joint ventures mainly include the impairment of oil and gas assets in joint
ventures and losses arising on translation of Balance Sheet items from UAH to
the presentation currency of the Group USD.
Revenues of $75.4 million (2014: $32.6 million) are comprised of $73.3 million
(2014: 29.4 million) in gas and diesel sales of trading reportable segment,
$1.8 million (2014: $2.4 million) gas sales of E&P reportable segment and $0.4
million (2014: $0.8 million) sales of service reportable segment. Cost of sales
represents $67.4 million (2014: $26.8 million) of purchases of gas for trading
operating segment, $2.2 million (2014: $2.9 million) of production royalties
and taxes, depreciation and depletion of producing wells and direct staff costs
for exploration and development and service segment. Gross profit has increased
to $5.9 million (2014: $2.8 million).
* Administrative expenses of $6.1 million (2014: $7.0 million) comprise staff
costs, professional fees, Directors' remuneration and depreciation charges
on non-producing property, plant and equipment.
* Reversal of impairment of other assets of $1.3 million (2014: $0.9 million)
comprised of $0.1 million provision for inventory (2014: $0.3 million) and
$1.4 million release in relation to an impairment of Ukrainian VAT (2014:
$1.1 million).
* Share of losses in joint ventures of $12.8 million (2014: $54.7 million)
comprised of loss of: i) $8.8 million in relation to non-cash impairment of
non-current assets of Pokrovska licence, $2.6 million (2014: $12.7 million)
of translation loss which arose mainly on translation of non-current assets
of Gazvydobuvannya LLC (Pokrovska licence) from UAH to USD, being the
presentation currency of the Group $0.9 million loss from operations, ii)
$0.2 million in relation to Zagoryanska licence; and iii) loss of $0.3
million (2014: $0.7 million) from operations of Westgasinvest LLC.
* Net foreign exchange gain of $2.5 million (2014: $3.0 million) mainly
relates to the revaluation of the USD-denominated monetary assets of the
Group's UK entities which have GBP as a functional currency.
* Finance costs of $2.6 million (2014: $0.5 million) represent $2.4 million
(2014: $0.4 million) of interest on credit line used for trading and $0.2
million (2014: $nil) of interest on tax provision.
Cash flow statement
The Consolidated Cash Flow Statement on page 55 shows operating cash outflow
before movements in working capital of $1.1 million (2014: $3.9 million). In
addition, the Group has incurred capital expenditure of $0.3 million (2014:
$0.5 million) on intangible Exploration and Evaluation ("E&E") assets and $0.2
million (2014: $1.6 million) on Property, Plant and Equipment ("PP&E"). In 2015
the Group contributed $0.7 million (2014: $3.0 million) into joint ventures, to
repay its current liabilities.
In 2015 the Group financed its trading operations with short-term borrowings
(note 24) with proceeds of $13.2 million and repayments of $12.2 million (2014:
proceeds of $17.3 million)
Balance sheet
The cash position of $49.4 million at 31 December 2015, including restricted
cash of $20 million used as a pledge for credit line, has increased from $48.9
million at 31 December 2014. Net cash, which included cash and cash equivalents
mostly denominated in USD net of short-term borrowings denominated in UAH,
increased to $36.5 million at 31 December 2015 compared to $31.6 million at 31
December 2014.
Intangible E&E assets of $2.7 million (2014: $18.3 million) represent the
carrying value of the Group's investment in E&E assets as at 31 December 2015.
The PP&E balance was $1.7 million at 31 December 2015 (2014: $3.8 million).
Investments in joint ventures of $2.2 million (2014: $14.3 million) mainly
represent the carrying value of the Group's investments into Pokrovska licences
and Westgasinvest LLC (costs related to Zagoryanska licence have been fully
impaired (note 19).
Trade and other receivables of $14.4 million (2014: $17.9 million) include
$11.7 million (2014: $13.6 million) trading prepayments and receivables, $1.8
million receivable from joint ventures in respect of management charges (2014:
$1.9 million).
The $12.9 million outstanding short-term borrowings as of 31 December 2015
(2014: $17.3 million) represents UAH 313.2 million borrowed in UAH to purchase
natural gas and diesel (2014: UAH 278.9 million). Borrowings are represented by
credit line drawn in UAH at Ukrainian bank, 100% subsidiary of UK bank. Credit
line is secured by $20 million of cash balance placed at UK bank. Borrowings
are taken in UAH in order to preserve the USD amount of own cash and mitigate a
risk related to currency fluctuations in Ukraine. A short-term credit line
(MORE TO FOLLOW) Dow Jones Newswires
April 26, 2016 09:04 ET (13:04 GMT)
provide an easy access to quick financings to support the Group's trading
operations.
The $3.7 million of trade and other payables as of 31 December 2015 (2014: $5.1
million) represent $0.9 million (2014: $0.3 million) worth of trading payables
for supplies of natural gas, $0.9 million of VAT payable for supplies of
natural gas, and $0.2 million (2014: $0.2 million) of interest accrued and $1.7
million (2014: $2.1 million) of other creditors and accruals.
Provisions include $0.7 million of long term provision for decommission costs
(2014: $0.1 million of long-term provision and $0.6 million of current
provision) and $1.5 million provision for corporate tax for the dispute on the
treatment of taxable income and expenses.
Key performance indicators
The Group monitors its performance with reference to clear targets set out
through three key financial and one key non-financial performance indicators
("KPIs"):
* to increase oil, gas and condensate production measured on number of
barrels of oil equivalent produced per day ("boepd");
* to decrease administrative expenses;
* to increase the Group's basic earnings per share; and
* to maintain no lost time incidents.
The Group's performance in 2015 against these targets is set out in the table
below, together with the prior year performance data.
Unit 2015 2014
Financial KPIs
Average production (working interest boepd 109 109
basis) (1)
Administrative expenses $ million 6.1 7.0
Basic loss per share (2) cents (10.1) (25.6)
Non-financial KPIs
Lost time incidents (3) incidents 0 0
1. Average production is calculated as the average daily production during the
year
2. Basic loss per Ordinary share is calculated by dividing the net loss for
the year attributable to equity holders of the parent company by the
weighted average number of Ordinary shares during the year
3. Lost time incidents in million working hours relate to injuries where an
employee/contractor is injured and has time off work (IOGP classification)
Related party transactions
Related party transactions are set out in note 30 to the Consolidated Financial
Statements.
Treasury
The Group continually monitors its exposure to currency risk. It maintains a
portfolio of cash and cash equivalent balances mainly in US dollars ("USD")
held primarily in the UK. Production revenues from the sale of hydrocarbons are
received in the local currency in Ukraine however the hydrocarbon prices are
linked to the USD denominated gas and oil prices. To date, funds from such
revenues have been held in Ukraine for further use in operations rather than
being remitted to the UK.
Risks and uncertainties
There are a number of potential risks and uncertainties, which could have a
material impact on the Group's long-term performance and could cause the
results to differ materially from expected and historical results. Executive
management review the potential risks and then classify them as having a high
impact, above $5 million, medium impact, above $1 million but below $5 million,
and low impact, below $1 million. They also assess the likelihood of these
risks occurring. Risk mitigation factors are reviewed and documented based on
the level and likelihood of occurrence. The Audit Committee reviews the risk
register and monitors the implementation of improved risk mitigation procedures
via Executive management.
The Group has analysed the following categories as key risks:
Risk Mitigation
Operational risks
Health, Safety and Environment ("HSE")
The oil and gas industry by its nature The Group maintains a HSE management
conducts activities which can cause system in place and demands that
health, safety and environmental management, staff and contractors adhere
incidents. Serious incidents can have to it. The system ensures that the Group
not only a financial impact but can meets Ukraine legislative standards in
also damage the Group's reputation and full and achieves international standards
the opportunity to undertake further to the maximum extent possible.
projects.
Drilling and Work-Over operations
The technical difficulty of drilling The incorporation of detailed sub-surface
or re-entering wells in the Group's analysis into a robustly engineered well
locations and equipment limitations design and work programme, with
can result in the unsuccessful appropriate procurement procedures and
completion of the well. competent on site management, aims to
minimise risk.
Production and maintenance
There is a risk that production or All plants are operated and maintained at
transportation facilities can fail due standards above the Ukraine minimum legal
to non-adequate maintenance, control requirements. Operative staff is
or poor performance of the Group's experienced and receive supplemental
suppliers. training to ensure that facilities are
properly operated and maintained. When not
in use the facilities are properly kept
under conservation and routine monitoring.
Service providers are rigorously reviewed
at the tender stage and are monitored
during the contract period.
Sub-surface risks
The success of the business relies on All externally provided and historic data
accurate and detailed analysis of the is rigorously examined and discarded when
sub-surface. This can be impacted by appropriate. New data acquisition is
poor quality data, either historic or considered and appropriate programmes
recently gathered, and limited implemented, but historic data can be
coverage. Certain information provided reviewed and reprocessed to improve the
by external sources may not be overall knowledge base. Agreements with
accurate. qualified local and international G&G
contractors have been entered into to
supplement and broaden the pool of
expertise available to the Company.
Some local contractors may not acquire Detailed supervision of local contractors
data accurately, and there is by Cadogan management is followed. Plans
frequently limited choice of locally are discussed well in advance with both
available equipment or contractors of local and international contractors in an
a desirable standard. effort to ensure that appropriate
equipment is available.
Data can be misinterpreted leading to All analytical outcomes are challenged
the construction of inaccurate models internally and peer reviewed.
and subsequent plans. Interpretations are carried out on modern
geological software.
Area available for drilling operations If not covered by 3D seismic or fitting
is limited by logistics, over 2D seismic lines, the eventual well's
infrastructures and moratorium. This dislocation will not be accepted.
increases the risk for setting optimum
well coordinates.
Risk Mitigation
The Group may not be successful in Group performs a review of its oil and gas
achieving commercial production from assets for impairment on annual basis, and
an asset and consequently the carrying considers whether to commission a review
values of the Group's oil and gas from a third or a Competent Person's
assets may not be recovered through Report ("CPR") from an independent
future revenues, because of reservoir qualified contractor depending on the
performances below the expectations circumstances
Financial risks
There is a risk that insufficient The Group manages the risk by maintaining
funds are available to meet adequate cash reserves and by closely
development obligations to monitoring forecasted and actual cash
commercialise the Group's major flow, as well as short and longer funding
licences. requirements. Management reviews these
forecasts regularly and updates are made
where applicable and submitted to the
Board for consideration.
The farm-out campaign to maintain current
cash balances and mitigate risk will
continue through 2016.
The Group could be impacted by failing These risks are mitigated by employing
to meet regulatory reporting suitably qualified professionals who,
requirements in the UK, and statutory working with advisers when needed, are
tax and filing requirements in both monitoring regulatory reporting
Ukraine and the UK. requirements and ensuring that timely
submissions are made.
The Group operates primarily in Clear authority levels and robust approval
Ukraine, an emerging market, where processes are in place, with stringent
certain inappropriate business controls over cash management and the
practices may from time to time tendering and procurement processes.
occur. This includes bribery, theft Adequate office and site protection is in
of Group property and fraud, all of place to protect assets. Anti-bribery
which can lead to financial loss. policies are also in place.
(MORE TO FOLLOW) Dow Jones Newswires
April 26, 2016 09:04 ET (13:04 GMT)
The Group is at risk from changes in Revenues in Ukraine are received in UAH
the economic environment both in and expenditure is made in UAH, however
Ukraine and globally, which can cause the prices for hydrocarbons are implicitly
foreign exchange movements, changes in linked to USD prices.
the rate of inflation and interest
rates and lead to credit risk in The Group continues to hold most of its
relation to the Group's key cash reserves in the UK mostly in USD.
counterparties. Cash reserves are placed with leading
financial institutions which are approved
by the Audit Committee. The Group is
predominantly a USD denominated business.
Foreign exchange risk is considered a
normal and acceptable business exposure
and the Group does not hedge against this
risk for its E&P operations.
For trading operations, the Group matches
the revenues and the source of financing.
Refer to note 28 to the Consolidated
Financial Statements for detail on
financial risks.
The Group is at risk that the We monitor the credit quality of our
counterparty will default on its counterparties and seek to reduce the risk
contractual obligations resulting in a of customer non-performance by limiting
financial loss to the Group. the title transfer to product until the
payment is received, prepaying only to
known credible suppliers
The Group is at risk that fluctuations The Group mostly enters into back-to-back
in gas prices will have a negative transactions where the price is known at
result for the trading operations the time of committing to purchase and
resulting in a financial loss to the sell the product. Sometimes the Group
Group. takes exposure to open inventory positions
when justified by the market conditions in
Ukraine.
Risk Mitigation
Corporate risks
Should the Group fail to comply with The Group designs a work programme and
licence obligations, there is a risk budget to ensure that all licence
that its entitlement to the licence obligations are met. The Group engages
will be lost. proactively with government to
re-negotiate terms and ensure that they
are not onerous.
Legislative changes may bring Accurate monitoring and dialogue with
unexpected risk and time consuming for competent authorities are kept in place to
securing the licences obligations.1 minimize the risk.
Ukraine is an emerging market and as The Group minimises this risk by
such the Group is exposed to greater maintaining the funds in international
regulatory, economic and political banks outside Ukraine and by continuously
risks, more than other jurisdictions. maintaining a working dialogue with the
Emerging economies are generally regulatory authorities.
subject to a volatile political
environment which could adversely
impact Cadogan's ability to operate in
the market.
The Group's success depends upon The Group periodically reviews the
skilled management as well as compensation and contract terms of its
technical and administrative staff. staff.
The loss of service of critical
members from the Group's team could
have an adverse effect on the
business.
Statement of Reserves and Resources
In December 2015, the Group commissioned a third party the Reserves and
Resources Evaluation of the Group's oil and gas assets in Ukraine. The
evaluation was assigned to a qualified Ukrainian G&G consulting contractor
which delivered its final report in March 2016. The evaluation was conducted in
accordance with SPE Petroleum Resources Management System ('PRMS'). The summary
of the Reserves and Resources as per the report issued in March 2016 (as at 31
December 2015) is presented below.
Summary of Reserves1 at 31 December 2015
mmboe
Proved, Probable and Possible Reserves at 1 5.58
January 2015
Production (0.04)
Revisions 3.17
Proved, Probable and Possible Reserves at 31 8.71
December 20152
Reserves for Zagoryanska and Pirkovska as at 31 14.30
December 20153
Total Proved, Probable and Possible Reserves at 23.01
31 December 2015
1 The study has been conducted by third-party Brend Vik and since then Cadogan
has entered into a Technical Service Agreement with Brend Vik.
2 Proved, Probable and Possible Reserves at 31 December includes 0.80 mmboe
assigned to Pokrovska licence in which the Group holds 70% at 31 December 2015
3 Zagoryanska and Pirkovska licence were expired as at 31 December 2015.
Reserves are assigned to the Bitlyanska, Monastyretska, Debeslavetska,
Pokrovskoe fields. The reserves for Zagoryanska and Pirkovska fields were
presented separately due to the fact that these licences were under renewal at
31 December 2015.
Brend Vik also estimated resources in its evaluation. In particular 30.1 mmboe
of contingent resources were assigned to the Bitlyanska, Monastyretska,
Pokrovska licences; 8.8 mmboe were assigned to Zagoryanska and Pirkovska
licences which were under renewal at 31 December 2015. In terms of Prospective
Resources, 9.5 mmboe were assigned to Bitlyanska, Monastyretska, Debeslavetska,
Cheremkhivska, Pokrovska and Slobodo-Rungurska licences and 5.0 mmboe to
Pirkovska licence which was under renewal at 31 December 2015.
Corporate Responsibility
The Board recognises the requirement under Section 414C of the Companies Act
2006 (the "Act") to detail information about employees, human rights and
community issues, including information about any policies it has in relation
to these matters and the effectiveness of these policies.
The Group considers the sustainability of its business as a key and competitive
element of its strategy. Meeting the expectations of our stakeholders is the
way in which we secure our licence to operate, and to be recognised in the
values we declare is the best added value we can bring in order to profitably
prolong our business. The Board recognises that it has an obligation to protect
the health and safety of its employees and communities as well as the
environment it impacts; these are the key drivers for the sustainable
development of the Company's activity. Our Code of Ethics and the adoption of
internationally recognised best practices and standards are our, and our
employees', references for conducting our operations.
Our activities are carried out in accordance with a policy manual, endorsed by
the Board, which has been disseminated to all staff. The manual includes
policies on business conduct and ethics, anti-bribery, the acceptance of gifts
and hospitality and whistleblowing.
The Group's Health, Safety and Environment Manager reports directly to the
Chief Operations Officer. His role is to ensure that the Group has developed
suitable procedures, and that operational management have incorporated them
into daily operations and that he has the necessary level of autonomy and
authority to discharge his duties effectively and efficiently.
The Board believes that health and safety procedures and training across the
Group should be to the standard expected in any company operating in the oil
and gas sector. Accordingly, it has set up a Committee to review and agree
health and safety initiatives and report back on progress. Management is
regularly reporting to the Board on health, safety and environment and key
safety and environmental issues which are discussed by the Executive
Management. The Health, Safety and Environment Committee Report is on page 34.
Health, safety and environment
The Group has developed an integrated Health, Safety and Environmental ("HSE")
management system. The system aims, by a continuous improvement programme, to
ensure that a safety and environmental protection culture is embedded in the
organisation. The HSE management system ensures that both Ukrainian and
international standards are met, with the Ukrainian HSE legislation
requirements taken as an absolute minimum although the international
requirements are in the main met or exceeded. All the Group's local operating
companies in east and west Ukraine have all the necessary documentation and
systems in place to ensure compliance with Ukrainian legislation.
A proactive approach to the prevention of incidents has been in place
throughout 2015, which relies on an observation cards system and reliable
near-miss reporting. Staff training on HSE matters is recognised as the key
factor to generate continuous improvement. In-house training is provided to
help staff meet international standards and follow best practice. At present,
special attention is being given to training on risk assessments, emergency
response, incident prevention, reporting and investigation, as well as hazard
and operational ("HAZOP") studies to ensure that international standards are
maintained even if they exceed those required by Ukrainian legislation.
The Board monitors lost time incidents as a key performance indicator of the
business, to reasonably verify that the procedures in place are robust. The
Board has benchmarked safety performance against the HSE performance index
(MORE TO FOLLOW) Dow Jones Newswires
April 26, 2016 09:04 ET (13:04 GMT)
measured and published annually by the International Association of Oil & Gas
Producers. In 2015, the Group recorded close to 324,000 man hours worked. There
were no Lost Time Incidents ("LTIs") recorded in 2015 and over two million man
hours have been worked without an LTI since the previous incident was recorded
in July 2011.
Vehicle safety and driving conduct remain among the Company's priorities in
controlling hazards and preventing injuries. As of the end of 2015, the Company
has recorded almost ten million kilometres driven without an LTI.
During the year 2015 the Company continued to monitor the activity's
performances in terms of greenhouse gas emissions reporting, as well as
Company-wide collection of statistical data related to consumption of
electricity and industrial water and fuel consumption by cars, plants and other
work sites.
Employees
Wellness and professional development is part of the Company's sustainable
development policy and wherever possible local staff is recruited; procedures
are in place to ensure that all recruitments are undertaken on a transparent
and fair basis with no discrimination against applicants. Each operating
company has its own Human Resources staff to ensure that the Group's employment
policies are properly implemented and followed. As required by Ukrainian
legislation, Collective Agreements are in place with the Group's Ukrainian
subsidiary companies which provide an agreed level of staff benefits and other
safeguards for employees. The Group's Human Resources policy covers key areas
such as equal opportunities, wages, overtime and non-discrimination. All staff
is aware of the Group's grievance procedures.
The contingent E&P industry conditions forced the Group to reduce the level of
staffing; the concerned personnel were duly informed and all the necessary
procedures for a smooth solution were applied. Local qualified contractors are
considered for supplementing the required expertise when and to the extent
which is necessary.
Sufficient levels of health insurance are provided by the Group to employees to
ensure they have access to good medical facilities. Each employee's training
needs are assessed on an individual basis to ensure that their skills are
adequate to support the Group's operations, and to help them to develop.
Gender diversity
The Board of Directors of the Company comprised of six male Directors
throughout the year to 31 December 2015. The appointment of any new Director is
made on the basis of merit. See pages 21 to 23 for more information on the
composition of the Board.
In 2015 the new nominated Company Secretary is female.
As at 31 December 2015, the Company comprised a total of 84 employees, as
follows:
Male Female
Non-executive directors 4 -
Executive directors 3 -
Management, other than Executive directors 7 3
Other employees 45 22
All employees 59 25
Human rights
Cadogan's commitment to the fundamental principles of human rights is embedded
in our HSE polices and throughout our business processes. We promote the core
principles of human rights pronounced in the UN Universal Declaration of Human
Rights. Our support for these principles is embedded throughout our Code of
Conduct, our employment practices and our relationships with suppliers and
partners wherever we do business.
Community
The Group's activities are carried out in rural areas of Ukraine and the Board
is aware of its responsibilities to the local communities in which the Group
operates and from which some of the employees are recruited. At current
operational sites, management works with the local councils to ensure that the
impact of operations is as low as practicable by putting in place measures to
mitigate their effect. Key projects undertaken include improvement of the road
infrastructure in the area, which provides easier access to the operational
sites while at the same time minimising inconvenience for the local population
and allowing improved road communications in the local communities. Specific
community activities are undertaken for the direct benefit of local
kindergartens, schools, sporting facilities and medical services, as well as
other community-focused facilities. All activities are followed and supervised
by managers who are given specific responsibility for such tasks.
The Group's local companies see themselves as part of the community and are
involved not only with financial assistance, but also with practical help and
support. The recruitment of local staff generates additional income for areas
that otherwise are predominantly dependent on the agricultural sector.
Approval
The Strategic Report was approved by the Board of Directors on 25 April 2016
and signed on its behalf by:
Marta Halabala
Company Secretary
25 April 2016
CORPORATE GOVERNANCE
Board of Directors
Zev Furst, 68, American
Independent Non-executive Chairman
Appointed to the Board on 2 August 2011, Mr Furst is a leading global business
and communications strategist who has advised political leaders, foreign
principals and corporate executives of Fortune 100 companies. He is the
Chairman and CEO of First International Resources, an international corporate
and political consulting firm he founded in 1992. Mr Furst specialises in
providing strategic counsel on crisis management, market entry, corporate
positioning and personal reputational issues. In recent years, he has also
advised and consulted with candidates running for national office in Israel,
Japan, Mexico and Ukraine.
In 1986, Mr Furst was a founding partner of Meridian Resources and Development
Ltd, an international commodities trading company specialising in chemicals and
petroleum products.
Mr Furst currently serves as Chairman of the International Board of the Peres
Center for Peace and is a member of the Advisory Board of the Kennan Institute
in Washington, DC. He has written and lectured extensively on international
affairs, business and political strategy and the role of media in politics and
diplomacy.
Mr Furst is Chairman of the Company's Nomination Committee and a member of the
Remuneration Committee.
Guido Michelotti, 61, Swiss
Chief Executive Officer
Mr Michelotti was appointed to the Board of Directors as Chief Executive
Officer on 25 June 2015. An Oil & Gas executive with over 30 years' of
international experience across the entire E&P cycle, he spent more than 10
years in senior executive roles with eni, leading E&P companies as well as
managing major capital projects.
Prior to joining Cadogan he was CEO of a Luxembourg based Private Equity fund
investing in E&P.
Mr Michelotti is a Senior Advisor to the Energy Practice of the Boston
Consulting Group, a member of the Society of Petroleum Engineers (SPE) and a
former member of SPE's Industry Advisory Council.
Bertrand des Pallieres, 49, French
Chief Trading Officer
Mr des Pallieres was appointed as Chief Executive Officer on 1 August 2011,
having joined the Board as a non-executive Director on 26 August 2010. Mr des
Pallieres is also the CEO of SPQR Capital Holdings SA, a major shareholder of
the Company. On 22 June 2015, Mr des Pallieres was appointed as Chief Trading
Officer.
Previously he was the Global Head of Principal Finance and member of the Global
Market Leadership Group of Deutsche Bank from 2005 to 2007. From 1992 to 2005
he held various positions at JPMorgan including Global Head of Structured
Credit, European Head of Derivatives Structuring and Marketing, and Co-Head of
sales for Europe, Middle East and Africa. He is a non-executive director of
Versatile Systems Inc. listed on the Toronto and London Stock Exchanges and
Equus Total return, Inc., listed on the NYSE.
Mr des Pallieres is a member of the Nomination Committee.
Adelmo Schenato, 64, Italian
Chief Operating Officer
Mr Schenato was appointed to the Board as Chief Operating Officer on 25 January
2012. He joined the Company after a 35 year career at Eni S.p.A ("Eni"), the
Italian integrated energy business, where he served in senior global and
regional positions.
His global roles at Eni included Well Operations Research and Development and
Technical Management, and Vice President HSE & Sustainability. His regional
roles include General Manager of Tunisia, Gabon and Angola as well as CEO of
Eni's Italian gas storage company.
Mr Schenato is a member of the Health, Safety and Environment Committee.
Gilbert Lehmann, 70, French
Senior Independent non-executive Director
Mr Lehmann was appointed to the Board on 18 November 2011. He is currently
acting as an adviser to the Executive Board of Areva, the French nuclear energy
business, having previously been its Deputy Chief Executive Officer responsible
for finance. He is also a former Chief Financial Officer and deputy CEO of
Framatone, the predecessor to Areva, and was CFO of Sogee, part of the
Rothschild Group. Mr Lehmann is also Deputy Chairman and Chairman of the Audit
Committee of Eramet, the French minerals and alloy business. He is Deputy
Chairman and Audit Committee Chairman of Assystem SA, the French engineering
and innovation consultancy. He was Chairman of ST Microelectronics NV, one of
the world's largest semiconductor companies, from 2007 to 2009, and stepped
down as Vice Chairman in 2011.
Mr Lehmann is currently Chairman of the Company's Audit Committee and a member
of the Remuneration and Nomination Committees.
Michel Meeùs, 63, Belgian
Non-Independent non-executive Director
Mr Meeùs was appointed as a Non-executive Director on 23 June 2014. Mr. Meeùs
is currently acting as Chairman of the Board of Directors of Theolia, an
independent international developer and operator of wind energy projects, of
which he is a major shareholder. Since 2007, he has been a director within the
(MORE TO FOLLOW) Dow Jones Newswires
April 26, 2016 09:04 ET (13:04 GMT)
Alcogroup SA Company (which gathers the ethanol production units of the
homonymous group), as well as within some of its subsidiaries. Before joining
Alcogroup, Mr Meeùs carried out a career in the financial sector, at Chase
Manhattan Bank in Brussels and London, then at Security Pacific Bank in London,
then finally at Electra Kingsway Private Equity in London.
Enrico Testa, 64, Italian
Independent non-executive Director
Appointed to the Board on 1 October 2011, Mr Testa has a long and varied
background in the energy market. He was Chairman of the Board of ACEA (the Rome
electricity and water utility company) from 1996 to 2002. He was Chairman of
the Board of Enel S.p.A, the major Italian electricity supplier, during its
privatisation. From 2005 to 2009 he was Chairman of Roma Metropolitane, the
Rome council-owned company constructing new underground lines. He was also
Chairman of the Organising Committee for the 20th World Energy Congress held in
Rome in November 2007, Senior Partner at the Franco Bernabè Group which owns
several investments in the IT sector from 2002 to 2005 he was member of the
Advisory Board of Carlyle Europe and has been Chairman of the Italian Nuclear
Forum since 2010. In addition, between 2004 and August 2012 Mr Testa was
Managing Director of Rothschild S.p.A.
He is currently Chairman of the AIM listed telecommunications company Telit
Communications Plc, Vice Chairman of Intecs S.p.A and Chairman of E.VA -
Energie Valsabbia S.p.A. - a company developing hydropower and solar generating
plants.
Mr Testa is Chairman of the Company's Remuneration Committee and a member of
the Audit and Nomination Committees.
Report of the Directors
Directors
The Directors in office during the year and at the date of this report are as
shown below:
Non-executive Directors Executive
Directors
Zev Furst (Chairman) Guido
Michelotti
Gilbert Lehmann
Bertrand des Pallieres
Michel Meeùs
Adelmo Schenato
Enrico
Testa
Directors' re-election
The Board has decided previously that all Directors must be subject to annual
election by shareholders, in accordance with the best practice guidance for
FTSE 350 companies contained in the UK Corporate Governance Code that was
issued in September 2014 by the Financial Reporting Council (the "Code"). As
such, all of the Directors will be seeking re-election at the Annual General
Meeting to be held on 22 June 2016.
The biographies of the Directors in office at the date of this report are shown
on pages 20 and 21.
Appointment and replacement of Directors
The Board may appoint any individual willing to act as a Director either to
fill a vacancy or act as an additional Director. The appointee may hold office
only until the next annual general meeting of the Company whereupon his or her
election will be proposed to the shareholders.
The Company's Articles of Association prescribe that there shall be no fewer
than three Directors and no more than fifteen.
Directors' interests in shares
The beneficial interests of the Directors in office as at 31 December 2015 and
their connected persons in the Ordinary shares of the Company at 31 December
2015 are set out below.
Director Number of Shares
Z Furst -
G Michelotti -
B des Pallieres 200,000
G Lehmann -
M Meeùs 26,000,000
A Schenato -
E Testa -
Directors' indemnities and insurance
The Company continues to maintain Directors' and Officers' Liability Insurance.
The Company's Articles of Association provide, subject to the provisions of the
Companies Act 2006, an indemnity for Directors in respect of any liability
incurred in connection with their duties, powers or office. Save for such
indemnity provisions, there are no qualifying third party indemnity provisions.
Powers of Directors
The Directors are responsible for the management of the business and may
exercise all powers of the Company (including powers to issue or buy back the
Company's shares), subject to UK legislation, any directions given by special
resolution and the Articles of Association. The authorities to issue and buy
back shares, granted at the 2015 Annual General Meeting, remains unused.
Dividends
The Directors do not recommend payment of a dividend for the year to 31
December 2015 (2014: nil).
Principal activity and status
The Company is registered as a public limited company (registration number
05718406) in England and Wales. Its principal activity is oil and gas
exploration, development and production.
Structure of share capital
The authorised share capital of the Company is currently GBP30,000,000 divided
into 1,000,000,000 Ordinary shares of 3 pence each. The number of shares in
issue as at 31 December 2015 was 231,091,734 Ordinary shares of 3 pence each
with a nominal value of GBP6,932,752. The Companies (Acquisition of Own Shares)
(Treasury Shares) Regulations 2003 allow companies to hold shares in treasury
rather than cancel them. Following the consolidation of the issued capital of
the Company on 10 June 2008, there were 66 residual Ordinary shares which were
transferred to treasury. No dividends may be paid on shares whilst held in
treasury and no voting rights attach to shares held in treasury. Total voting
rights amount to 231,091,668.
Rights and obligations of Ordinary shares
On a show of hands at a general meeting every holder of Ordinary shares present
in person or by proxy and entitled to vote shall have one vote and, on a poll,
every member present in person or by proxy, shall have one vote for every
Ordinary share held. In accordance with the provisions of the Company's
Articles of Association, holders of Ordinary shares are entitled to a dividend
where declared and paid out of profits available for such purposes. On a return
of capital on a winding up, holders of Ordinary shares are entitled to
participate in such a return.
Exercise of rights of shares in employee share schemes
None of the share awards under the Company's incentive arrangements are held in
trust on behalf of the beneficiaries.
Agreements between shareholders
The Board is unaware of any agreements between shareholders which may restrict
the transfer of securities or voting rights.
Restrictions on voting deadlines
The notice of any general meeting of the Company shall specify the deadline for
exercising voting rights and appointing a proxy or proxies to vote at a general
meeting. It is the Company's policy at present to take all resolutions at a
general meeting on a poll and the results of the poll are published on the
Company's website after the meeting.
Substantial shareholdings
As at 31 December 2015 and 25 April 2016, the Company had been notified of the
following interests in voting rights attached to the Company's shares:
31 December 2015 25 April 2016
Major shareholder Number of % of total Number of % of
shares voting shares total
held rights held voting
rights
SPQR Capital Holdings SA 67,298,498 29.12 67,298,498 29.12
Mr Pierre Salik 40,550,000 17.55 40,550,000 17.55
Mr Michel Meeùs 26,000,000 11.25 26,000,000 11.25
Credit Agricole Indosuez (Suisse) SA 14,383,000 6.22 14,383,000 6.22
Kellet Overseas Inc. 14,002,696 6.06 14,002,696 6.06
Credit Suisse Private Banking 9,629,091 4.17 9,062,091 3.92
Cynderella Trust 7,657,886 3.31 7,657,886 3.31
Amendment of the Company's Articles of Association
The Company's Articles of Association may only be amended by a special
resolution of shareholders.
Disclosure of information to auditors
As required by section 418 of the Companies Act 2006, each of the Directors as
at 25 April 2016 confirms that:
(a) so far as the Director is aware, there is no relevant audit information of
which the Company's auditor is unaware; and
(b) the Director has taken all the steps that he ought to have taken as a
Director in order to make himself aware of any relevant audit information and
to establish that the Company's auditor is aware of that information.
This confirmation is given and should be interpreted in accordance with section
418 of the Companies Act 2006.
Going concern
After making enquiries, the Directors have a reasonable expectation that the
Company and the Group have adequate resources to continue in operational
existence for the foreseeable future. Accordingly, they continue to adopt the
going concern basis in preparing the Consolidated and Company Financial
Statements. For further detail refer to the detailed discussion of the
assumptions outlined in note 3(b) to the Consolidated Financial Statements.
Change of control - significant agreements
The Company has no significant agreements containing provisions which allow a
counterparty to alter and amend the terms of the agreement following a change
of control of the Company.
Should a change in control occur then certain Executive directors are entitled
to a payment of salary and benefits for a period of six months.
Global greenhouse gas emissions
This section contains information on greenhouse gas ("GHG") emissions required
by the Companies Act 2006 (Strategic Report and Directors' Report) Regulations
2013 (the "Regulations").
Reporting year
The reporting year coincides with the Company's fiscal year, which is 1 January
2015 to 31 December 2015.
Methodology
(MORE TO FOLLOW) Dow Jones Newswires
April 26, 2016 09:04 ET (13:04 GMT)
The principal methodology used to calculate the emissions is drawn from the
'Environmental Reporting Guidelines: including mandatory greenhouse gas
emissions reporting guidance (June 2013)', issued by the Department for
Environment, Food and Rural Affairs ("DEFRA"). Additionally, 'Petroleum
Industry Guidelines for Reporting Greenhouse Gas Emissions (2nd edition, May
2011)' were used to cover issues specific for the petroleum industry. DEFRA GHG
conversion factors for company reporting were utilised to calculate the CO2
equivalent of emissions from various sources. In certain limited cases, where
information was available only for a part of the reporting period, the total
emissions were extrapolated by extending the available information to cover the
full reporting period. This occurred where it was not possible to retrieve
information on the amount of heating supplied to one of the Company's office
buildings, due to an office move.
The Company has reported on all of the emission sources required under the
Regulations.
The Company does not have responsibility for any emission sources that are not
included in its consolidated statement.
Consolidation approach and organisation boundary
An operational control approach was used to define the Company's organisational
boundary and responsibility for GHG emissions. All material emission sources
within this boundary have been reported upon, in line with the requirements of
the Regulations.
Scope of reported emissions
Emissions data from the sources within Scope 1 and Scope 2 of the Company's
operational boundaries is detailed below. This includes direct emissions from
assets that fall within the Company's organisational boundaries (Scope 1
emissions), as well as indirect emissions from energy consumption, such as
purchased electricity and heating (Scope 2 emissions).
Intensity ratio
In order to express the GHG emissions in relation to a quantifiable factor
associated with the Company's activities, wellhead production of crude oil,
condensates and natural gas has been chosen as the normalisation factor for
calculating the intensity ratio. This will allow comparison of the Company's
performance over time, as well as with other companies in the Company's peer
group.
Total greenhouse gas emissions data for period from 1 January 2015 to 31
December 2015
Greenhouse gas emissions source 2015 2014
Scope 1
Direct emissions, including combustion of fuel and 554 842
operation of facilities (tonnes of CO2 equivalent)
Scope 2
Indirect emissions from energy consumption, such 741 778
as electricity and heating purchased for own use
(tonnes of CO2 equivalent)
Total (Scope 1 & 2) 1,295 1,620
Normalisation factor
Barrels of oil equivalent 42,493 41,363
Intensity ratio
Emissions reported above normalised to tonnes of 30.47 39.15
CO2e per total wellhead production of crude oil,
condensates and natural gas, in thousands of
Barrel of Oil Equivalent
2016 Annual General Meeting
The 2016 Annual General Meeting ("AGM") of the Company will be an opportunity
to communicate with shareholders and the Board welcomes their participation.
Board members constantly strive to keep in touch with shareholder opinion and
to discuss strategy and governance issues with them through direct contacts.
The Board looks forward to welcoming shareholders to the AGM and shareholder
information will be enclosed as usual with the AGM notice to facilitate voting
and feedback in the usual way.
The AGM notice will be issued to shareholders well in advance of the meeting
with notes to provide an explanation of all of the resolutions to be put to the
AGM. The Board considers that the resolutions to be put to the AGM are in the
best interests of the Company and the shareholders as a whole. Accordingly, the
Directors unanimously recommend that the shareholders vote in favour of the
proposed resolutions at the AGM, as the Directors intend to do in respect of
their own beneficial holdings.
Board and committee members will be available for shareholders participation at
the AGM. All relevant shareholder information including the annual report for
2015 and any other announcements will be published on our website -
www.cadoganpetroleum.com
This Report of Directors comprising pages 22 to 26 has been approved by the
Board and signed on its behalf by:
Marta Halabala
Company Secretary
25 April 2016
Viability statement
In accordance with provision C2.2 of the 2014 revision of the UK Corporate
Governance Code, the Board has assessed the prospect of the Group over a longer
period than the twelve months required by the 'Going Concern' provision. The
Board selected three-year period as appropriate for the assessment for the
reason that the Group's strategy is aligned with a three-year view and that the
current volatility in commodity markets makes confidence in a longer assessment
of prospects highly challenging.
The Board has conducted a stress test in three scenarios as well as assessment
of the principal risks facing the Group (as set out on pages 13 to 15),
including those that would threaten its business model, future performance,
solvency or liquidity. These scenarios include:
* consideration of potential impact of political situation and renewal of the
licences that will expire during following three years
* foreign exchange movements to which the Group is exposed as a result of
its operations in Ukraine
* downturn in the price and demand of hydrocarbon products most impacting
Group's operations
Based on the results of the related analysis and taking account of the Group's
current position, particularly its cash availability, and the principal risks,
and the effect of the licences that expired during the year the Board has a
reasonable expectation that the Group will be able to continue its operation
and meet its liabilities as they fall due over the three-year period of the
assessment.
Corporate Governance Statement
The Board of the Company is committed to the highest standards of corporate
governance and bases its actions on the principles set out in the Code issued
by the Financial Reporting Council ('FRC') in September 2014 (the "Code"). The
Code can be found on the FRC's website at www.frc.org.uk
This statement describes how the Group applies the principles of the Code. On
20 December 2011 the Company's listing category on the London Stock Exchange
was transferred from 'Premium Listing' to 'Standard Listing'. Although
companies with a standard listing are subject to less stringent corporate
governance requirements, the Board has decided that the Group will continue to
govern itself in accordance with the principles of the Code and explain why it
has chosen not to comply with any of the provisions of the Code.
During the year under review, the Group has complied with the Code's provisions
with the following exceptions:
* Code provision A.4.2 - During the year, the Chairman did not hold meetings
with the non-executive Directors without the executives present
* Code provision E.1.1 - The Senior Independent Director has not attended
meetings with major shareholders
The reasons for these two areas of non-compliance are as follows:
* Although the Chairman did not hold formal meetings of the non-executive
Directors during the year, regular discussions took place by telephone and
email.
* The Senior Independent Director, Mr Lehmann, did not attend meetings with
major shareholders as this responsibility was undertaken by the Chairman
and the Executive Directors. Mr Lehmann is available to shareholders who
have concerns that they feel would be inappropriate to raise via the
Chairman or Executive Directors.
Board
The Board provides leadership and oversight. The Board comprises a
non-executive Chairman, Chief Executive Officer, Chief Trading Officer, Chief
Operating Officer, two independent non-executive Directors and one
non-executive Director who is not deemed independent. The membership of the
Board and biographical details for each of the Directors are incorporated into
this report by reference and appear on page 21 and 22.
As at the date of this report, the Chairman had no significant commitments that
might affect his ability to allocate sufficient time to the Company to
discharge his responsibilities effectively.
Under the Company's Articles of Association, all Directors must seek
re-election by members at least once every three years. However, the Board has
agreed that all Directors will be subject to annual election by shareholders,
as recommended by the Code in respect of FTSE 350 companies. Accordingly, all
members of the Board will be standing for re-election at the 2016 Annual
General Meeting due to be held on 22 June 2016.
The Board has a formal schedule of matters specifically reserved for it to
decide, including approval of acquisitions and disposals, major capital
projects, financial results, Board appointments, dividend recommendations,
material contracts and Group strategy.
The Chairman, in conjunction with the Company Secretary, plans the programme
for the Board during the year. The agenda for Board and Committee meetings is
considered by the relevant Chairman and issued with supporting papers during
the week preceding the meeting. For each Board meeting, the Directors receive a
Board pack including management accounts, briefing papers on commercial and
operational matters and major capital projects including acquisitions. The
Board also receives briefings from key management on specific issues. Eight
Board meetings took place during 2015.The attendance of those Directors in
place at the year end at Board and Committee meetings during the year was as
follows:
(MORE TO FOLLOW) Dow Jones Newswires
April 26, 2016 09:04 ET (13:04 GMT)
Board Audit Nomination Remuneration
Committee Committee Committee
No. Held 8 3 1 4
No. Attended:
Z Furst 7 n/a 1 4
G Michelotti 3 n/a n/a n/a
B des Pallieres 6 n/a 1 n/a
G Lehmann 7 3 1 4
M Meeùs 7 n/a n/a n/a
A Schenato 7 n/a n/a n/a
E Testa 5 3 - 4
A procedure exists for the Directors, in the furtherance of their duties, to
take independent professional advice if necessary, under the guidance of the
Company Secretary and at the Company's expense. All Directors have access to
the advice and services of the Company Secretary, who is responsible to the
Chairman for ensuring that Board procedures are complied with and that
applicable rules and regulations are followed.
Board independence
The roles and responsibilities of the Chairman and Chief Executive Officer are
separate. A formal division of each individual's responsibilities has been
agreed and documented by the Board. Mr Lehmann is the Senior Independent
Director.
The non-executive Directors bring an independent view to the Board's
discussions and the development of its strategy. Their range of experience
ensures that management's performance in achieving the business goals is
challenged appropriately. Two non-executive Directors, Lehmann and Testa are
considered by the Board in accordance with the Code, to be independent. Michel
Meeùs, who is a significant shareholder, is not considered to be independent.
The letters of appointment for the independent non-executive Directors are
available for review at the Registered Office and prior to the Annual General
Meeting.
Responsibilities and membership of Board Committees
The Board has agreed written terms of reference for the Nomination Committee,
Remuneration Committee and Audit Committee. The terms of reference for all
three Board Committees are published on the Company's website,
www.cadoganpetroleum.com, and are also available from the Company Secretary at
the Registered Office. A review of the terms of reference, membership and
activities of all Board Committees is provided on pages 30 to 37.
Board performance evaluation
Principle B.6 of the Code recommends that boards undertake a formal and
rigorous annual evaluation of its own performance and that of its committees
and individual directors. The Board is mindful that it needs to continually
monitor and identify ways in which it might improve its performance and
recognises that board evaluation is a useful tool for enhancing a board's
effectiveness. For the year ended 31 December 2015, the Board opted to
undertake self-evaluation by way of a questionnaire designed specifically to
assess the strengths of the Board and identify any areas for development.
The process was led by Mr Furst as Chairman and the evaluation of the
Chairman's performance was led by Mr Lehmann as the Senior Independent
Director. The Board discussed the evaluation questionnaire findings, which were
also used by the Nomination Committee in its annual assessment of the Board's
composition. The Directors are committed to ensuring that the Board continues
to represent a broad balance of skills, experience, independence and knowledge
and that there is sufficient diversity within the composition of the Board. All
appointments are made on merit against objective criteria - which include
gender and diversity generally - in the context of the requirements of the
business and the overall balance of skills and backgrounds that the Board needs
to maintain in order to remain effective.
Internal control
The Directors are responsible for the Group's system of internal control and
for maintaining and reviewing its effectiveness. The Board has delegated
responsibility for the monitoring and review of the Group's internal controls
to the Audit Committee. The Group's systems and controls are designed to
safeguard the Group's assets and to ensure the reliability of information used
both within the business and for publication.
Systems are designed to manage, rather than eliminate, the risk of failure to
achieve business objectives and can provide only reasonable, and not absolute,
assurance against material misstatement or loss.
The key features of the internal control systems which operated during 2015 and
up to the date of signing the Financial Statements are documented in the
Group's Corporate Governance Policy Manual and Finance Manual. These manuals
have been circulated throughout the Group. In addition, the Company's joint
venture entities adopted policies that mirror the Company's own, except
Westgasinvest LLC ("WGI"), where Eni's policies are adopted.
Day-to-day responsibility for the management and operations of the business has
been delegated to the Chief Executive Officer and senior management.
Certain specific administrative functions are controlled centrally. Taxation,
treasury and insurance functions report to the Group Director of Finance who
reports directly to the Chief Executive Officer. Trading business is managed by
the Chief Trading Officer who reports directly to Chief Executive Officer. The
legal function is managed by the General Counsel who reports to the Chief
Executive Officer. The Health, Safety and Environment functions report to the
Chief Operating Officer. An overview of the Group's treasury policy is set out
on page 13.
The Group does not have an internal audit function. Due to the small scale of
the Group's operations at present, the Board does not feel that it is
appropriate or economically viable to have this function in place. The Audit
Committee will continue to consider the position annually.
The Board has reviewed the process, which has been in place from the start of
the year to the date of approval of this report and which is in accordance with
the Code. During the course of its review of the risk management and internal
control systems, the Board has not identified nor been advised of any failings
or weaknesses which it has deemed to be significant. Therefore a confirmation
in respect of necessary actions has not been considered appropriate.
Relations with shareholders
The Chairman and Executive Directors of the Company have a regular dialogue
with analysts and substantial shareholders. The outcome of these discussions is
reported to the Board and discussed in detail. Mr Lehmann, as the Senior
Independent Director, is available to shareholders who have questions that they
feel would be inappropriate to raise via the Chairman or Executive Directors.
The Annual General Meeting is used as an opportunity to communicate with all
shareholders. In addition, financial results are posted on the Company's
website, www.cadoganpetroleum.com, as soon as they are announced. The Notice of
the Annual General Meeting is contained also on the Company's website,
www.cadoganpetroleum.com. It is intended that the Chairmen of the Nomination,
Audit and Remuneration Committees will be present at the Annual General
Meeting. The results of all resolutions will be published on the Company's
website, www.cadoganpetroleum.com
Board Committee Reports
Audit Committee Report
The Audit Committee is appointed by the Board, on the recommendation of the
Nomination Committee, from the non-executive Directors of the Group. The Audit
Committee's terms of reference include all matters indicated by the Code. They
are reviewed annually by the Audit Committee and any changes are then referred
to the Board for approval. The terms of reference of the Committee are
published on the Company's website, www.cadoganpetroleum.com, and are also
available from the Company Secretary at the Registered Office. Two members
constitute a quorum.
Responsibilities
* To monitor the integrity of the annual and interim financial statements,
the accompanying reports to shareholders, and announcements regarding the
Group's results.
* To review and monitor the effectiveness and integrity of the Group's
financial reporting and internal financial controls.
* To review the effectiveness of the process for identifying, assessing and
reporting all significant business risks and the management of those risks
by the Group.
* To oversee the Group's relations with the external auditor and to make
recommendations to the Board, for approval by shareholders, on the
appointment and removal of the external auditor.
* To consider whether an internal audit function is appropriate to enable the
Audit Committee to meet its objectives.
* To review the Group's arrangements by which staff of the Group may, in
confidence, raise concerns about possible improprieties in matters of
financial reporting or other matters.
Assessment of the effectiveness of the external auditor
The Committee has assessed the effectiveness of the external audit process.
They did this by:
* Reviewing the 2015 external audit plan;
* Discussing the results of the audit including the auditor's views on
material accounting issues and key judgements and estimates, and their
audit report;
* Considering the robustness of the audit process;
* Reviewing the quality of the service and people provided to undertake the
audit; and
* Considering their independence and objectivity.
Governance
Mr Testa and Mr Lehmann, who are both independent non-executive Directors under
provision B.1.1 of the Code, are the members of the Audit Committee. The Audit
Committee is chaired by Mr Lehmann who has recent and relevant financial
(MORE TO FOLLOW) Dow Jones Newswires
April 26, 2016 09:04 ET (13:04 GMT)
experience as a former finance director of major European companies as well as holding several non-executive roles in major international entities. At the invitation of the Audit Committee, the Group Director of Finance and external auditor regularly attend. The Company Secretary attends all meetings of the Audit Committee. The Audit Committee also meets the external auditor without management being present. Activities of the Audit Committee During the year, the Audit Committee discharged its responsibilities as follows: Financial statements The Audit Committee examined the Group's consolidated and Company's financial statements and, prior to recommending them to the Board, considered the appropriateness of the accounting policies adopted and reviewed critical judgements, estimates and underlying assumptions and whether the financial statements represented a true and fair view. Significant issues relating to the 2015 financial statements For the year ended 31 December 2015 the Audit Committee identified the significant issues that should be considered in relation to the financial statements, being areas which may be subject to heightened risk of material misstatement. Impairment of E&E and D&P The Audit Committee considered the Group's intangible exploration and evaluation assets and interests in exploration and evaluation assets held through joint ventures individually for any indicators of impairment, including those indicators set out in IFRS 6 Exploration for and Evaluation of Mineral Resources. The uncertainties on the timing and outcome of the licence renewal and award process and the persistent difficult situation faced by Ukraine have suggested a prudent approach to the treatment of E&E assets. The Audit Committee agreed to the identified indicators of impairment and recognised impairment charge of oil and gas assets of $10.1 million in the financial statements as at 31 December 2015. The Audit Committee has discussed the Group's exploration and evaluation assets with both management and the auditors and concurs with the treatment adopted. Following discussions with management and the auditor, including discussing the range of sensitivities, the Committee is satisfied with results of the assessment of the recoverable amount of development and production assets. The recoverability assessment involves the use of significant judgment both in the review of impairment indicators and, in any subsequent impairment test, the consideration of estimates which are dependent on assumptions about the future. Reserves Oil and gas reserves, as discussed in the Statement of Reserves and Resources, are based on the Independent Reserves and Resources Evaluation performed by Brend Vik, referred to 31 December 2015 and concluded in March 2016. However, reserves estimates are inherently uncertain, especially under present market volatility or in the early stages of a field's life, and are routinely revised over the producing lives of oil and gas fields as new information becomes available and as economic conditions evolve. The Audit Committee acknowledges that such revisions may impact the Group's future financial position and results, in particular, in relation to impairment testing of oil and gas property, plant and equipment. Recoverability of investments in joint ventures Recoverability of the Group's investments in joint ventures is based on assessment of exploration and evaluation assets impairment which constitute most of the investments in joint ventures cost. As of 31 December 2015 impairment assessment of the joint ventures' exploration and evaluation assets was based on the value in use of the assets held by each individual joint venture company. Going concern After making enquiries and considering the uncertainties described above, the Committee has a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future and consider the going concern basis of accounting to be appropriate. For further detail refer to the detailed discussion of the assumptions outlined in note 3(b) to the Consolidated Financial Statements. The Committee also support the Group's viability statement presented on page 27. Political and economic situation in Ukraine Recent political situation in Ukraine has made it necessary for management to assess the extent of its impact on the Group's operations and assets. The Committee reviewed reports from management which considered whether adjustments are required to the carrying values of assets and the appropriateness of the going concern assumption. As a result management have concluded that, other than the impacts derived from the Subsoil use tax and the uncertainties on the timing of the approval process, there were no significant adverse consequences in relation to the Group's operations, cash flows and assets that impact the 2015 financial statements. In discussion with management, the Committee acknowledged the inherent difficulty in making any assessment as to the eventual outcome of the present political situation and, as a consequence, the difficulty of making a reliable judgement as to the future impact, if any, on the Group's business. The Committee concurs with conclusions reached by management summarised in Note 4 and in Note 31 to the financial statements. Internal controls and risk management The Audit Committee reviews and keeps under review financial and control issues throughout the Group including the Group's key risks and the approach for dealing with them. External auditor The Audit Committee is responsible for recommending to the Board, for approval by the shareholders, the appointment of the external auditor. The Audit Committee considers the scope and materiality for the audit work, approves the audit fee, and reviews the results of the external auditor's work. Following the conclusion of each year's audit, it considers the effectiveness of the external auditor during the process. An assessment of the effectiveness of the audit process was made, giving consideration to reports from the auditor on its internal quality procedures. The Committee reviewed and approved the terms and scope of the audit engagement, the audit plan and the results of the audit with the external auditor, including the scope of services associated with audit-related regulatory reporting services. Additionally, auditor independence and objectivity were assessed, giving consideration to the auditor's confirmation that its independence is not impaired, the overall extent of non-audit services provided by the external auditor and the past service of the auditor. We have also taken account of the latest recommendations of the Code in relation to the regular tendering of the external audit appointment. Deloitte LLP was first appointed in 2005. Having satisfied itself as to their qualifications, expertise, resources and independence and the effectiveness of the audit process, the Audit Committee has recommended to the Board, for approval by shareholders, the reappointment of Deloitte LLP as the Company's external auditor. There is an agreed policy on the engagement of the external auditor for non-audit services to ensure that its independence and objectivity are safeguarded. Work closely related to the audit, such as taxation or financial reporting matters, can be awarded to the external auditor by the executive Directors provided the work does not exceed GBP50,000 in fees per item. Work exceeding GBP50,000 requires approval by the Audit Committee. All other non-audit work either requires Audit Committee approval or forms part of a list of prohibited services, where it is felt the external auditor's independence or objectivity may be compromised. A breakdown of the non-audit fees is disclosed in note 10 to the Consolidated Financial Statements. The Company's external auditor, Deloitte LLP, has provided non-audit services (excluding audit related services) which amounted to $113,000 (2014: $63,000). The Audit Committee has reviewed the level of these services in the course of the year and is confident that the objectivity and independence of the auditor are not impaired by the reason of such non-audit work. The Company is aware that, as a result of the EU Audit Directive and Regulation, companies where the auditor was appointed between 17 June 2003 and 16 June 2006 will need to conduct a tender and either reappoint the existing auditor or appoint new auditors for the audit for the year end at 31 December 2017. Accordingly, the Company intends to conduct a tender following the Annual General Meeting to be held on 22 June 2016. Internal audit The Audit Committee considers annually the need for an internal audit function and believes that, due to the size of the Group and its current stage of development, an internal audit function will be of little benefit to the Group. The Group's whistleblowing policy encourages employees to report suspected wrongdoing and sets out the procedures employees must follow when raising concerns. The policy, which was implemented during 2008, was refreshed in 2013 and recirculated to staff as part of a manual that includes the Company's policies on anti-bribery, the acceptance of gifts and hospitality, and business conduct and ethics. Overview As a result of its work during the year, the Audit Committee has concluded that it has acted in accordance with its terms of reference and has ensured the independence and objectivity of the external auditor. A formal review of the Audit Committee's performance was undertaken after the year end and concluded that the Committee is effective in its scrutiny of the accounts and financial reporting process, its oversight of risk management systems and its monitoring of internal control testing. The Chairman of the Audit Committee will be available at the Annual General Meeting to answer any questions about the work of the Audit Committee.
(MORE TO FOLLOW) Dow Jones Newswires
April 26, 2016 09:04 ET (13:04 GMT)
Gilbert Lehmann
Chairman of the Audit Committee
25 April 2016
Health, Safety and Environment Committee Report
The Health, Safety and Environment Committee (the "HSE Committee") is appointed
by the Board, on the recommendation of the Nomination Committee. The HSE
Committee's terms of reference are reviewed annually by the HSE Committee and
any changes are then referred to the Board for approval. The terms of reference
of the Committee are published on the Company's website,
www.cadoganpetroleum.com, and are also available from the Company Secretary at
the Registered Office. Two members constitute a quorum, one of whom must be a
Director.
Responsibilities
* To develop a framework of the policies and guidelines for the management of
health, safety and environment issues within the Group.
* Evaluate the effectiveness of the Group's policies and systems for
identifying and managing health, safety and environmental risks within the
Group's operation.
* Assess the policies and systems within the Group for ensuring compliance
with health, safety and environmental regulatory requirements.
* Assess the performance of the Group with regard to the impact of health,
safety, environmental and community relations decisions and actions upon
employees, communities and other third parties and also assess the impact
of such decisions and actions on the reputation of the Group and make
recommendations to the Board on areas for improvement.
* On behalf of the Board, receive reports from management concerning any
fatalities and serious accidents within the Group and actions taken by
management as a result of such fatalities or serious accidents.
* Evaluate and oversee, on behalf of the Board, the quality and integrity of
any reporting to external stakeholders concerning health, safety,
environmental and community relations issues.
* Where it deems it appropriate to do so, appoint an independent auditor to
review performance in regard to health, safety, environmental and community
relations matters and review any strategies and action plans developed by
management in response to issues raised and, where appropriate, make
recommendations to the Board concerning the same.
Governance
The HSE Committee was in place throughout 2015. Members of the HSE Committee
are Mr Adelmo Schenato (Chief Operating Officer and HSE Committee Chairman), Ms
Snizhana Buryak (HSE Manager), Mr Andriy Bilyi (Deputy Operations Manager). The
Company Secretary attends meetings of the HSE Committee. The HSE Committee
meets monthly to monitor continuously progress by management.
Activities of the Health, Safety and Environment Committee
During the year, the HSE Committee discharged its responsibilities as follows:
* The ongoing review of existing HSE policies and procedures, as well as
development of new ones, was regularly discussed at the Committee meetings
in relation to the current activities.
* Compliance with HSE regulatory requirements was ensured through discussion
of any inspections, both internal ones and those carried out by the
Authorities.
* HSE performances, key indicators and statistics were a standing item on the
agenda, allowing the HSE Committee to assess the Company's activities
performance by analysing any lost-time incidents (of which there were none
during 2013, 2014 and 2015), near misses, HSE training and other
indicators.
* Interaction with contractors, Authorities, local communities and other
stakeholders was discussed among other HSE activities.
Overview
As a result of its work during the year, the HSE Committee has concluded that
it has acted in accordance with its terms of reference.
Adelmo Schenato
Chairman of the Health, Safety and Environment Committee
25 April 2016
Nomination Committee Report
The Nomination Committee is appointed by the Board predominantly from the
non-executive Directors of the Group. The Nomination Committee's terms of
reference include all matters indicated by the Code. They are reviewed annually
by the Nomination Committee and any changes are then referred to the Board for
approval. The terms of reference of the Nomination Committee are published on
the Company's website, www.cadoganpetroleum.com, and are also available from
the Company Secretary at the Registered Office. Two members constitute a
quorum.
Responsibilities
* To regularly review the structure, size and composition (including the
skills, knowledge and experience) required of the Board compared to its
current position and make recommendations to the Board with regard to any
changes.
* Be responsible for identifying and nominating for the approval of the Board
candidates to fill Board vacancies as and when they arise.
* Before appointment is made by the Board, evaluate the balance of skills,
knowledge, experience and diversity on the Board and, in the light of this
evaluation, prepare a description of the role and capabilities required for
a particular appointment.
In identifying suitable candidates, the Nomination Committee shall use open
advertising or the services of external advisers to facilitate the search and
consider candidates from a wide range of backgrounds on merit, taking care that
appointees have enough time available to devote to the position.
The Nomination Committee shall also make recommendations to the Board
concerning:
* Formulating plans for succession for both executive and non-executive
Directors and in particular for the key roles of Chairman and Chief
Executive Officer.
* Membership of the Audit and Remuneration Committees, in consultation with
the Chairmen of those committees.
* The reappointment of any non-executive Director at the conclusion of their
specified term of office, having given due regard to their performance and
ability to continue to contribute to the Board in the light of the
knowledge, skills and experience required.
* The re-election by shareholders of any Director having due regard to their
performance and ability to continue to contribute to the Board in the light
of the knowledge, skills and experience required.
* Any matters relating to the continuation in office of any Director at any
time including the suspension or termination of service of an executive
Director as an employee of the Company subject to the provisions of the law
and their service contract.
Governance
Mr Zev Furst (Board and Nomination Committee Chairman), Mr Bertrand des
Pallieres (Chief Trading Officer), and Messrs Gilbert Lehmann and Enrico Testa
(independent non-executive Directors) are the members of the Nomination
Committee. The Company Secretary attends all meetings of the Nomination
Committee.
Activities of the Nomination Committee
The Nomination Committee carried out a review of the size, structure and
composition of the Board after the year end and concluded that it had the
appropriate balance of skills, knowledge, independence and experience. The
Nomination Committee recommends the re-election of each of the Directors at the
AGM.
Overview
As a result of its work during the year, the Nomination Committee has concluded
that it has acted in accordance with its terms of reference. The Chairman of
the Nomination Committee will be available at the Annual General Meeting to
answer any questions about the work of the Nomination Committee.
Remuneration Committee
Statement from the Chairman
I am pleased to present the Annual Report on Remuneration for the year ended 31
December 2015.
During 2015 there were no substantial changes made to the Remuneration Policy,
nor to the composition of directors' remuneration, and there was no increase to
executive and non-executive directors' salary and fees in base currency. During
2015 there were no performance payments made.
In June 2015 Mr Guido Michelotti has replaced Mr Bertrand des Pallieres as a
Chief Executive Officer. Mr des Pallieres has been appointed as Chief Trading
Officer.
The Remuneration Policy and Annual Report on Remuneration 2014 were presented
for an advisory vote and approved at the Annual General Meeting 2015 held on 25
June 2015. No major changes were made to the Remuneration Policy, which can be
found at our website. Shareholders at the Annual General Meeting will be asked
to approve the Remuneration Policy every three years, unless there is a need to
amend the Policy in the interim. The Annual Report on Remuneration 2015 will be
presented for a binding vote at the Annual General Meeting 2016 to be held on
22 June 2016.
Given the challenging political situation in Ukraine, the Company's aim to
develop a revised, long-term and balanced Remuneration Policy aligned to
strategy and performance and linked to shareholder preferences took second
precedence last year to other pressing matters. In my statement last year, I
explained that the Company would maintain its current approach to remuneration,
already long-term, balanced and aligned to strategy and performance.
Enrico Testa
Chairman of the Remuneration Committee
25 April 2016
Annual Report On Remuneration 2015
Remuneration Committee Report
The Remuneration Committee is committed to principles of accountability and
transparency to ensure that remuneration arrangements demonstrate a clear link
between reward and performance. In its work, the Remuneration Committee
considers fully the principles and provisions of the Code. In designing
performance-related remuneration schemes for executive Directors, the
Remuneration Committee has considered and applied Schedule A of the Code.
Governance
The Remuneration Committee is appointed by the Board from the non-executive
Directors of the Company. The Remuneration Committee's terms of reference
include all matters indicated by the Code. They are reviewed annually by the
(MORE TO FOLLOW) Dow Jones Newswires
April 26, 2016 09:04 ET (13:04 GMT)
Remuneration Committee and any changes are then referred to the Board for
approval. The terms of reference of the Remuneration Committee are published on
the Company's website, www.cadoganpetroleum.com, and are also available from
the Company Secretary at the Registered Office.
The Remuneration Committee consists of Mr Enrico Testa, Mr Zev Furst and Mr
Gilbert Lehmann. At the discretion of the Remuneration Committee, the Chief
Executive Officer is invited to attend meetings when appropriate, but is not
present when his own remuneration is being discussed. None of the directors are
involved in deciding their own remuneration. The Remuneration Committee is also
supported by the Company Secretary.
Responsibilities
In summary, the Remuneration Committee's responsibilities, as set out in its
terms of reference, are as follows:
* To determine and agree with the Board the policy for the remuneration of
the executive Directors, the Company Secretary and other members of
executive management as appropriate.
* To consider the design, award levels, performance measures and targets for
any annual or long-term incentives and approve any payments made and awards
vesting under such schemes.
* Within the terms of the agreed remuneration policy, to determine the total
individual remuneration package of each executive Director and other senior
executives including bonuses, incentive payments and share options or other
share awards.
* To ensure that contractual terms on termination, and any payments made, are
fair to the individual and the Company, that failure is not rewarded and
that the duty to mitigate loss is fully recognised.
Overview
As a result of its work during the year, the Remuneration Committee has
concluded that it has acted in accordance with its terms of reference. The
chairman of the Remuneration Committee will be available at the Annual General
Meeting to answer any questions about the work of the Committee. The Chairman
and Executive Directors of the Company have a regular dialogue with analysts
and substantial shareholders, which includes the subject of Directors'
Remuneration. The outcome of these discussions are reported to the Board and
discussed in detail both there and during meetings of the Remuneration
Committee. Mr Lehmann, as the Senior Independent Director, is available to
shareholders who have concerns that they feel would be inappropriate to raise
via the Chairman or Executive Directors.
The Remuneration Committee unanimously recommends that shareholders vote to
approve the Annual Report on Remuneration at the 2016 Annual General Meeting.
Remuneration consultants
The Remuneration Committee did not take any advice from external remuneration
consultants.
Single total figure of remuneration for executive and non-executive directors
(audited)
Taxable Annual Long-term
Salary and fees benefits bonus incentives Pension Total
$ $ $ $ $ $
Executive Directors
2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014
G 242,902 - 15,987 - - - - - - - 313,809 -
Michelotti
B des 357,231 405,433 - 20,734 - - - - - - 357,304 426,167
Pallieres
A Schenato 282,014 333,703 - 18,195 - - - - - - 282,014 351,898
Non-executive Directors
2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014
Z Furst 129,957 140,089 - - - - - - - - 129,957 140,089
G Lehmann 68,801 74,165 - - - - - - - - 68,801 74,165
E Testa 53,512 57,684 - - - - - - - - 53,512 57,684
M Meeùs 53,512 - - - - - - - - 53,512 -
In 2015 there was no increase in executive and non-executive directors' salary
in base currency. The difference in pay represents the change in exchange rate
between the base currency and USD as a reporting currency.
Notes to the table
In June 2015 Mr Guido Michelotti was appointed as Chief Executive Officer. Mr
Michelotti's salary is EUR440,000 ($488,708) per annum.
In June 2015, Mr Bertrand des Pallieres was appointed as Chief Trading Officer.
Mr des Pallieres' salary is GBP221,400 ($338,498) per annum, comprising GBP194,400
($297,218) per annum under a consultancy agreement (the terms of which are
reviewed by the Remuneration Committee annually) and GBP27,000 ($41,280) per
annum under a services agreement.
Adelmo Schenato continued as Chief Operating Officer of the Company throughout
2015. Mr Schenato's basic salary is GBP184,393 ($281,918) comprising EUR225,000 per
annum under a consultancy agreement and GBP21,000 under a services agreement.
In 2015 none of the directors participated in an annual bonus and long-term
incentives.
In May 2011 the Board agreed that the Chairman's fee be set at GBP85,000
($129,957) and that the fee for acting as an independent non-executive Director
be set at GBP35,000 ($53,512) with an additional GBP10,000 ($15,289) for acting as
Chairman of the Audit Committee. There has been no increase in non-executive
Directors' fees since that time.
Benefits may be provided to the executive directors, in the form of private
medical insurance and life assurance.
Scheme interests awarded during the financial year (audited)
There were no scheme interests awarded during the year.
Payments to past directors (audited)
In 2015 there were no payments to past directors.
Payments for loss of office (audited)
No payments were made to directors for loss of office in 2015.
Directors' interests in shares (audited)
The beneficial interests of the Directors in office as at 31 December 2015 and
their connected persons in the Ordinary shares of the Company at 31 December
2015 are set out below.
Shares as at 31 December 2015 2014
Z Furst - -
B des Pallieres 200,000 200,000
G Lehmann - -
M Meeùs 26,000,000 26,000,000
A Schenato - -
E Testa - -
The Company does not currently operate formal shareholding guidelines.
The Company's performance
The graph highlights the Company's total shareholder return ("TSR") performance
for the last seven years compared to the FTSE All Share Oil & Gas Producers
index. This index has been selected on the basis that it represents a sector
specific group which is an appropriate group for the Company to compare itself
against. TSR is the return from a share or index based on share price movements
and notional reinvestment of declared dividends. Full text and all diagrams
will be available in the published version of the Annual Report on the
Company's website.
Historic Remuneration of Chief Executive
Taxable Annual Long-term Loss of
Salary benefits bonus incentives Pension office Total
$ $ $ $ $ $ $
2008 469,438 43,558 - - - - 512,996
2009 422,533 - 284,552 - - - 707,085
2010 547,067 - - - - - 547,067
2011 669,185 - - - - - 669,185
2012 511,459 - - - 31,966 126,808 670,233
2013 384,941 - - - - - 384,941
2014 405,433 20,734 - - - - 426,167
2015 432,409 15,987 - - - - 448,396
In 2015 none of the directors participated in an annual bonus and long-term
incentives.
Percentage change in the remuneration of the Chief Executive
The following table shows the percentage change in the remuneration of the
Chief Executive in 2015 and 2014 compared to that of all employees within the
Group.
2015 2014 Change
$'000 $'000 %
Base salary CEO 432 405 7
All employees 3,121 4,467 (30)
2015 2014
$'000 $'000
Taxable benefits CEO 16 20 (20)
All employees 27 91 (70)
2015 2014
$'000 $'000
Total remuneration CEO 426 5
448
All employees 3,148 4,558 (31)
In 2015 none of the directors participated in an annual bonus.
In 2015 there was no increase in executive and non-executive directors' salary
in base currency. The difference in pay represents the change in exchange rate
between the base currency and USD as a reporting currency. The decrease in
(MORE TO FOLLOW) Dow Jones Newswires
April 26, 2016 09:04 ET (13:04 GMT)
employee remuneration is due to a reduction in employees as at 31 December 2015
to 80 (2014: 100).
Loss of Office
In 2015 no loss of office payments were made to the directors.
Relative importance of spend on pay
The table below compares shareholder distributions (i.e. dividends and share
buybacks) and total employee pay expenditure of the Group for the financial
years ended 31 December 2014 and 31 December 2015.
2015 2014 Year-on-year
$'000 $'000 change, %
All-employee remuneration 3,596 4,984 (28)
Distributions to shareholders - - N/A
Shareholder voting at the Annual General Meeting
The Directors' Remuneration Report for the year ended 31 December 2014 and the
Director's Remuneration Policy were approved by shareholders at the Annual
General Meeting held on 25 June 2015.
The Remuneration Policy can be found on the Group's website.
The votes cast by proxy were as follows:
Director's Remuneration Number of votes % of votes cast
Report
For 58,983,662 99.91
Against 56,000 0.09
Total votes cast 59,039,662 100.00
Number of votes withheld 0
Director's Remuneration Number of votes % of votes cast
Policy
For 58,983,662 99.91
Against 56,000 0.09
Total votes cast 59,039,662 100.00
Number of votes withheld 0
Implementation of Remuneration Policy in 2016
The Remuneration Committee proposes to continue to implement a Remuneration
Policy approved by the shareholders at the 2015 AGM.
Approval
The Directors' Remuneration Report was approved by the Board on 25 April 2016
and signed on its behalf by:
Zev Furst
Chairman
25 April 2016
FINANCIAL STATEMENTS
Statement of Directors' Responsibilities in respect of the Annual Report and
the Financial Statements
The Directors are responsible for preparing the Annual Report and the financial
statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. The Directors are required by law to prepare the Group
financial statements in accordance with International Financial Reporting
Standards ("IFRSs") as adopted by the European Union and Article 4 of the
International Accounting Standards ("IAS") regulation and have also elected to
prepare the Parent Company financial statements under IFRSs as adopted by the
European Union. Under Company law, the Directors must not approve the Financial
Statements unless they are satisfied that they give a true and fair view of the
state of affairs of the Company and Group and of the profit or loss for that
period. In preparing the Company and Group's financial statements, IAS
Regulation requires that Directors:
* properly select and apply accounting policies;
* present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information;
* provide additional disclosures when compliance with the specific
requirements in IFRSs are insufficient to enable users to understand the
impact of particular transactions, other events and conditions on the
Company's and Group's financial position and financial performance; and
* make an assessment of the Company's and Group's ability to continue as a
going concern.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company and Group's transactions and
disclose with reasonable accuracy at any time the financial position of the
Company and Group and enable them to ensure that the financial statements
comply with the Companies Act 2006. They are also responsible for safeguarding
the assets of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for
preparing a Strategic Report, Directors' Report, Annual Report on Remuneration,
Directors' Remuneration Policy and Corporate Governance Statement that comply
with that law and those regulations.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website,
www.cadoganpetroleum.com. Legislation in the United Kingdom governing the
preparation and dissemination of the financial statements may differ from
legislation in other jurisdictions.
Responsibility Statement of the Directors in respect of the Annual Report
We confirm to the best of our knowledge:
(1) the financial statements, prepared in accordance with International
Financial Reporting Standards as adopted by the European Union, give a true and
fair view of the assets, liabilities, financial position and profit or loss of
the Company and the undertakings included in the consolidation as a whole; and
(2) the Strategic Report, includes a fair review of the development and
performance of the business and the position of the Company and the
undertakings included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that they face; and
(3) the annual report and the financial statements, taken as a whole, are fair,
balanced and understandable and provide the information necessary for the
shareholders to assess the Group's position, performance, business model and
strategy.
On behalf of the Board
Zev Furst
Chairman
25 April 2016
Independant Auditor's Report To The Members Of Cadogan Petroleum Plc
Opinion on financial statements of Cadogan Petroleum Plc
In our opinion:
* the financial statements give a true and fair view of the state of the
Group's and of the Parent Company's affairs as at 31 December 2015 and of
the Group's loss for the year then ended;
* the Group financial statements have been properly prepared in accordance
with International Financial Reporting Standards (IFRSs) as adopted by the
European Union;
* the Parent Company financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union and as applied in
accordance with the provisions of the Companies Act 2006; and
* the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006 and, as regards the Group financial
statements, Article 4 of the IAS Regulation.
The financial statements comprise the Consolidated Statement of Comprehensive
Income, the Group and Company Balance Sheets, the Group and Company Statement
of Changes in Equity, the Group and Company Cash Flow Statements and the
related notes 1 - 42.
The financial reporting framework that has been applied in their preparation is
applicable law and IFRSs as adopted by the European Union and, as regards the
Parent Company financial statements, as applied in accordance with the
provisions of the Companies Act 2006.
Going concern and the directors' assessment of the principal risks that would
threaten the solvency or liquidity of the group
We have nothing material to add or draw attention to in relation to:
* the Directors' confirmation on page 27 that they have carried out a robust
assessment of the principal risks facing the Group, including those that
would threaten its business model, future performance, solvency or
liquidity;
* the disclosures on pages 13 to 15 that describe those risks and explain how
they are being managed or mitigated;
* the Directors' statement in note 3 to the financial statements about
whether they considered it appropriate to adopt the going concern basis of
accounting in preparing them and their identification of any material
uncertainties to the Group's ability to continue to do so over a period of
at least 12 months from the date of approval of the financial statements;
and
* the Director's explanation on page 27 as to how they have assessed the
prospects of the Group, over what period they have done so and why they
consider that period to be appropriate, and their statement as to whether
they have a reasonable expectation that the Group will be able to continue
in operation and meet its liabilities as they fall due over the period of
their assessment.
We agreed with the Directors' adoption of the going concern basis of accounting
and we did not identify any such material uncertainties. However, because not
all future events or conditions can be predicted, this statement is not a
guarantee as to the Group's ability to continue as a going concern.
Independence
We are required to comply with the Financial Reporting Council's Ethical
Standards for Auditors and we confirm that we are independent of the Group and
we have fulfilled our other ethical responsibilities in accordance with those
standards. We also confirm we have not provided any of the prohibited non-audit
services referred to in those standards.
Our assessment of risks of material misstatement
The assessed risks of material misstatement described below are those that had
the greatest effect on our audit strategy, the allocation of resources in the
audit and directing the efforts of the engagement team:
Risk How the scope of our audit responded
to the risk:
Political and economic turmoil in
Ukraine Using sensitivity analysis we have
(MORE TO FOLLOW) Dow Jones Newswires
April 26, 2016 09:04 ET (13:04 GMT)
Substantially all the Group's operating assessed the potential impact of
activities and assets are located in ongoing political instability in
Ukraine. The potential future impact of Ukraine on the key assumptions used by
the political and economic situation on management in the calculation of the
the business operations is highly recoverable amount of non-current
uncertain. assets and assessment of the going
Consideration is required whether the concern, including gas prices,
carrying values of non-current assets inflation assumption, the discount
of the $6.7m and receivables of the factor and currency exchange rates.
$15.1m remain recoverable, whether
assumptions including future gas We also assessed the potential impact
prices, foreign currency exchange of the ongoing political instability
rates, discount factor and inflation on the going concern assumption by
assumptions used in impairment modelling the impact of various
assessments are reasonable, whether the downside scenarios, including
going concern assumption is appropriate inflation caused by depreciation of
and whether sufficiently detailed the national currency, potential
disclosures have been made. difficulties with the upcoming
The Group has assessed its portfolio of extension of licences and changes to
the assets in the context of the oil and gas trading regulation in
political and economic situation in Ukraine.
Ukraine, including the considerations
mentioned above, and potential We considered the adequacy of the
difficulties with the current and disclosures made in the financial
upcoming extension of licences. As a statements and the annual report.
result management decided to impair the
exploration and evaluation assets
associated with the Pirkovska licence
by $10.1m down to $0m due to a
significant uncertainty in relation to
the timing of the renewal of the
Pirkovska licence that expired in
October 2015.
Details of the Group's assessment of
the operating environment in Ukraine
and uncertainties about key assumptions
made by management in assessing the
recoverable amount of oil and gas
assets are disclosed in notes 4 and 35.
Risk How the scope of our audit responded
to the risk:
Recoverability of non-current assets
The carrying value of the Group's We evaluated management's assessment
non-current assets, which includes of indicators of impairment and
intangible exploration and evaluation recoverability assessment for the
assets, property, plant and equipment Group's non-current assets, including
and investments in joint ventures, potential difficulties with the
amounted to $6.7 million at 31 December upcoming extension of licences. We
2015. analysed the reasonableness of the
estimates such as oil and gas
Assessment of the carrying value of resources and future production
non-current assets requires significant levels, future oil and gas prices,
judgement, including the Group's future costs and performed the
intention and ability to proceed with a benchmarking of inflation and discount
future work programme for a prospect or rates to estimates used by the peer
licence, the likelihood of licence companies and Deloitte developed
renewal or extension, and the expected discount rates. We also considered
or actual success of drilling and actual facts and circumstances of the
geological analysis. Recoverability of operating environment of the Group.
non-current assets is dependent on
macro-economic assumptions and Our work included discussion of the
estimates about future oil and gas latest status and future appraisal
prices, inflation, discount and plans on each licence with operational
exchange rates as well as forecast staff and Group management. We
assumptions related to future gathered evidence such as budgets,
production levels, reserves and field development plans, contracts for
operating costs. The outcome of future drilling and geological and
impairment assessments could vary geophysical activities to verify that
significantly were different management intention to continue
assumptions applied. exploration efforts is supported by
funding commitments.
The continued instability of political
and economic situation in Ukraine and We have also obtained and reviewed
devaluation of functional currency to documentary evidence, such as budgets,
which the Group is significantly field working programmes, contracts
exposed and the Group's reduction in for future geological and geophysical
production and exploration activities activities, and licence documents.
are factors which heighten the risk of
impairment associated with the Group's We evaluated management's assessment
non-current assets. of whether there were any indicators
of impairment for the Group's
In total, impairments of intangible interests in joint ventures, taking
exploration and evaluation assets, into consideration the impairment
property plant and equipment and indicators outlined in IFRS 6 for the
investments in joint ventures amounting purpose of impairment assessment of
to $10.1 million, $0.4 million and $8.8 exploration and evaluation assets
million, respectively were recognised within the joint ventures. We held
in the year ended 31 December 2015. discussions on the latest status and
future appraisal plans on each licence
Refer to Group's policies and key with operational staff and Group
estimates and assumptions within note 1 management and compared these plans
and additional notes 16,17 and 19. with approved budgets and considered
Group's future funding
responsibilities.
We undertook a detailed analysis and
challenge of the significant
judgements and estimates used in
management's impairment tests of
exploration and evaluation assets held
by the joint ventures of the Group.
Our analysis included comparison of
gas price assumptions to publicly
available forecasts, benchmarking the
discount rate applied by management to
Deloitte developed discount rate, and
the comparison of future cost
estimates against actual historic cost
levels and budgets.
Although separate impairment assessments have been undertaken and audited, we
have aggregated our explanation of risks and the scope for the recoverability
of intangible exploration and evaluation (E&E) assets, development of producing
oil and gas properties within property, plant and equipment, recoverability of
investments in joint ventures into the recoverability of non-current assets.
The description of risks above should be read in conjunction with the
significant issues considered by the Audit Committee and discussed on page
32-34.
Our audit procedures relating to these matters were designed in the context of
our audit of the financial statements as a whole, and not to express an opinion
on individual accounts or disclosures. Our opinion on the financial statements
is not modified with respect to any of the risks described above, and we do not
express an opinion on these individual matters.
Our application of materiality
We define materiality as the magnitude of misstatement in the financial
statements that makes it probable that the economic decisions of a reasonably
knowledgeable person would be changed or influenced. We use materiality both in
planning the scope of our audit work and in evaluating the results of our work.
When determining materiality, among other factors we considered the Group's
pre-tax loss in the current period as well as in recent periods; the occurrence
of any non-recurring or fluctuating gains and losses (such as exploration and
evaluation assets impairments) and the level of consolidated shareholders'
equity.
We determined our materiality based on the expected consolidated shareholders'
equity as at 31 December 2015. Consistent with the prior year, we used
consolidated shareholders' equity to determine materiality as the entity has a
history of operating losses. Materiality was determined to be $2,020,000, which
was 3% of expected consolidated shareholders' equity. Subsequently, a
non-current assets impairment of $19.3 million was recognised which impacted
consolidated shareholders' equity and thus the benchmark based on which we
determined our materiality initially. We assessed whether the scope of the
business had changed as a result of this impairment and determined that it had
not. Therefore we consider it appropriate to retain our original materiality of
$2,020,000, which is now 3.7% of consolidated shareholders' equity (2014:
$2,700,000 which was 3% of consolidated shareholders' equity).
We agreed with the Audit Committee that we would report to the Committee all
audit differences in excess of $40,000 (2014: $54,000), as well as differences
below that threshold that, in our view, warranted reporting on qualitative
grounds. We also report to the Audit Committee on disclosure matters that we
(MORE TO FOLLOW) Dow Jones Newswires
April 26, 2016 09:04 ET (13:04 GMT)
identified when assessing the overall presentation of the financial statements.
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the group and its
environment, including group-wide controls, and assessing the risks of material
misstatement at the group level. Based on that assessment, we have included in
the group audit scope the full audit of all significant entities in Ukraine and
in the UK. These businesses account for over 90% (2014: over 90%) of the
Group's net assets, revenue and loss before tax. The group audit team was led
by the Deloitte UK Senior Statutory Auditor and managers and included junior
audit members and senior tax specialists from Deloitte Ukraine as all assets
are located there and appropriate knowledge of local legislation and tax
regulations is required.
The Senior Statutory Auditor and managers from the Deloitte UK visited the
Ukraine during the planning and fieldwork stages of the audit.
At the parent entity level we also tested the consolidation process and carried
out analytical procedures to confirm our conclusion that there were no
significant risks of material misstatement of the aggregated financial
information of the remaining balances not subject to audit or audit of
specified account balances.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion:
* the part of the Directors' Remuneration Report to be audited
has been properly prepared in accordance with the Companies Act 2006; and
* the information given in the Strategic Report and the
Directors' Report for the financial year for which the financial statements are
prepared is consistent with the financial statements.
Matters on which we are required to report by exception
Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our
opinion:
* we have not received all the information and explanations we require for
our audit; or
* adequate accounting records have not been kept by the Parent Company, or
returns adequate for our audit have not been received from branches not
visited by us; or
* the Parent Company financial statements are not in agreement with the
accounting records and returns.
We have nothing to report in respect of these matters
Directors' remuneration
Under the Companies Act 2006 we are also required to report if in our opinion
certain disclosures of directors' remuneration have not been made, or the part
of the Directors' Remuneration Report to be audited is not in agreement with
the accounting records and returns. We have nothing to report arising from
these matters.
Our duty to read other information in the Annual Report
Under International Standards on Auditing (UK and Ireland), we are required to
report to you if, in our opinion, information in the annual report is:
* materially inconsistent with the information in the audited financial
statements; or
* apparently materially incorrect based on, or materially inconsistent with,
our knowledge of the Group acquired in the course of performing our audit;
or
* otherwise misleading.
In particular, we are required to consider whether we have identified any
inconsistencies between our knowledge acquired during the audit and the
Directors' statement that they consider the annual report is fair, balanced
and understandable and whether the annual report appropriately discloses
those matters that we communicated to the audit committee which we consider
should have been disclosed. We confirm that we have not identified any such
inconsistencies or misleading statements.
Other matter
Although not required to do so, the directors have voluntarily chosen to make a
corporate governance statement detailing the extent of their compliance with
the UK Corporate Governance Code. We reviewed the part of the Corporate
Governance Statement relating to the company's compliance with certain
provisions of the UK Corporate Governance Code. We have nothing to report
arising from our review.
Respective responsibilities of Directors and Auditor
As explained more fully in the Directors' Responsibilities Statement, the
Directors are responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view. Our responsibility is
to audit and express an opinion on the financial statements in accordance with
applicable law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board's Ethical
Standards for Auditors. We also comply with International Standard on Quality
Control 1 (UK and Ireland). Our audit methodology and tools aim to ensure that
our quality control procedures are effective, understood and applied. Our
quality controls and systems include our dedicated professional standards
review team and independent partner reviews.
This report is made solely to the Company's members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the Company's members those matters we are
required to state to them in an auditor's report and/or those further matters
we have expressly agreed to report to them on in our engagement letter and for
no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company and the Company's
members as a body, for our audit work, for this report, or for the opinions we
have formed.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the
financial statements sufficient to give reasonable assurance that the financial
statements are free from material misstatement, whether caused by fraud or
error. This includes an assessment of: whether the accounting policies are
appropriate to the Group's and the Parent Company's circumstances and have been
consistently applied and adequately disclosed; the reasonableness of
significant accounting estimates made by the Directors; and the overall
presentation of the financial statements. In addition, we read all the
financial and non-financial information in the annual report to identify
material inconsistencies with the audited financial statements and to identify
any information that is apparently materially incorrect based on, or materially
inconsistent with, the knowledge acquired by us in the course of performing the
audit. If we become aware of any apparent material misstatements or
inconsistencies we consider the implications for our report.
Timothy Biggs FCA (Senior statutory auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
London, United Kingdom
25 April 2016
FINANCIAL STATEMENTS OF CADOGAN PETROLEUM PLC
Consolidated Income Statement
Notes
2015 2014
$'000 $'000
CONTINUING OPERATIONS
Revenue 6 75,440 32,623
Cost of sales (69,562) (29,813)
Gross profit 5,878 2,810
Administrative expenses (6,115) (7,002)
Impairment of oil and gas assets 8 (10,480) (5,134)
Reversal of impairment of other assets 8 1,300 877
(15,295) (11,259)
Share of losses in joint ventures 19 (12,844) (54,664)
Net foreign exchange gains 2,494 3,036
Other operating income, net 7 31 547
Operating loss (19,736) (59,530)
Investment income 12 118 852
Finance costs 13 (2,625) (468)
Loss before tax (22,243) (59,146)
Tax credit/(charge) 14 (1,040) (166)
Loss for the year 9 (23,283) (59,312)
Attributable to:
Owners of the Company (23,261) (59,271)
Non-controlling interest (22) (41)
(23,283) (59,312)
Loss per Ordinary share cents cents
Basic 15 (10.1) (25.6)
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2015
2015 2014
$'000 $'000
Loss for the year (23,283) (59,312)
Other comprehensive loss
Items that may be reclassified subsequently
to profit or loss:
Unrealised currency translation differences (11,521) (28,153)
Other comprehensive loss (11,521) (28,153)
Total comprehensive loss for the year (34,804) (87,465)
Attributable to:
Owners of the Company (34,782) (87,424)
Non-controlling interest (22) (41)
(34,804) (87,465)
Consolidated Balance Sheet
As at 31 December 2015
Notes
2015 2014
$'000 $'000
(MORE TO FOLLOW) Dow Jones Newswires
April 26, 2016 09:04 ET (13:04 GMT)
ASSETS
Non-current assets
Intangible exploration and evaluation assets 16 2,700 18,289
Property, plant and equipment 17 1,661 3,846
Investments in joint ventures 19 2,181 14,325
6,542 36,460
Current assets
Inventories 20 3,503 9,940
Trade and other receivables 21 14,411 17,891
Cash and cash equivalents 22 49,407 48,927
67,321 76,758
Total assets 73,863 113,218
LIABILITIES
Non-current liabilities
Deferred tax liabilities 23 - (288)
Provisions 26 (726) (55)
(726) (343)
Current liabilities
Short-term borrowings 24 (12,903) (17,327)
Trade and other payables 25 (3,682) (5,068)
Provisions 26 (1,523) (647)
(18,108) (23,042)
Total liabilities (18,834) (23,385)
NET ASSETS 55,029 89,833
EQUITY
Share capital 27 13,337 13,337
Retained earnings 200,339 223,600
Cumulative translation reserves (160,512) (148,991)
Other reserves 1,589 1,589
Equity attributable to owners of the Company 54,753 89,535
Non-controlling interest 276 298
TOTAL EQUITY 55,029 89,833
The consolidated financial statements of Cadogan Petroleum plc, registered in
England and Wales no. 5718406, were approved by the Board of Directors and
authorised for issue on 25 April 2016. They were signed on its behalf by:
Guido Michelotti
Chief Executive Officer
25 April 2016
The notes on pages 57 to 95 form an integral part of these financial
statements.
Consolidated Cash Flow Statement
For the year ended 31 December 2015
2015 2014
$'000 $'000
Operating loss (19,736) (59,530)
Adjustments for:
Depreciation of property, plant and equipment 434 938
Impairment of oil and gas assets 10,480 5,134
Share of losses in joint ventures 12,844 54,664
Charge of impairment of inventories (note 8) 90 253
Reversal of impairment of VAT recoverable (note 8) (1,390) (727)
Loss on disposal of property, plant and equipment 24 211
Effect of foreign exchange rate changes (3,827) (4,892)
Operating cash flows before movements in working capital (1,081) (3,949)
Decrease/(increase) in inventories 1,258 (7,242)
Decrease/(increase) in receivables 4,871 (10,285)
Decrease/(increase) in payables and provisions (1,429) 1,424
Cash from/(used in) operations 3,619 (20,052)
Interest paid (2,379) (218)
Income taxes paid - (373)
Net cash inflow/(outflow) from operating activities 1,240 (20,643)
Investing activities
Investments in joint ventures (700) (3,024)
Purchases of property, plant and equipment (261) (1,611)
Purchases of intangible exploration and evaluation (281) (468)
assets
Proceeds from sale of property, plant and equipment 5 84
Interest received 118 852
Net cash used in investing activities (1,119) (4,167)
Financing activities
Proceeds from short-term borrowings 13,187 17,327
Repayments of short-term borrowings (12,225) -
Net cash from financing activities 962 17,327
Net increase/(decrease) in cash and cash 1,083 (7,483)
equivalents
Effect of foreign exchange rate changes (603) (74)
Cash and cash equivalents at beginning of year 48,927 56,484
Cash and cash equivalents at end of year 49,407 48,927
Consolidated Statement of Changes in Equity for the year ended 31 December 2015
Share Cumulative Non-controlling Total
capital Retained translation interest $'000
$'000 earnings reserves $'000
$'000 $'000
Reorgani-sation Equity
$'000 attributable
to owners of
the Company
As at 1 January 2014 13,337 282,871 (120,838) 1,589 176,959 339 177,298
Net loss for the year - (59,271) - - (59,271) (41) (59,312)
Other comprehensive loss - - (28,153) - (28,153) - (28,153)
Total comprehensive loss - (59,271) (28,153) - (87,424) (41) (87,465)
for the year
As at 1 January 2015 13,337 223,600 (148,991) 1,589 89,535 298 89,833
Net loss for the year - (23,261) - - (23,261) (22) (23,283)
Other comprehensive loss - - (11,521) - (11,521) - (11,521)
Total comprehensive loss - (23,261) (11,521) - (34,782) (22) (34,804)
for the year
As at 31 December 2015 13,337 200,339 (160,512) 1,589 54,753 276 55,029
Notes to the Consolidated Financial Statements
For the year ended 31 December 2015
1.General information
Cadogan Petroleum plc (the "Company", together with its subsidiaries the
"Group"), is registered in England and Wales under the Companies Act 2006. The
address of the registered office is c/o Bridgehouse Company Secretaries Ltd,
Unit 205, Clerkenwell Workshops, 31 Clerkenwell Close, London EC1R 0AT. The
nature of the Group's operations and its principal activities are set out in
the Operations Review on pages 8 to 9 and the Financial Review on pages 10 to
12.
2.Adoption of new and revised Standards
The accounting policies applied are consistent with those adopted and disclosed
in the Group financial statements for the year ended 31 December 2014, except
for changes arising from the adoption of the following new accounting
pronouncements which became effective in the current reporting period:
* Amendments to IAS 19 Employee Benefits: Defined Benefit Plans -Employee
Contributions.
* Annual Improvements to IFRSs 2010-2012 cycle
* Annual Improvements to IFRSs 2011-2013 cycle
The adoption of these new accounting pronouncements has not had a significant
impact on the accounting policies, methods of computation or presentation
applied by the Group. The Group has not early adopted any other amendment,
standard or interpretation that has been issued but is not yet effective. It is
expected that where applicable, these standards and amendments will be adopted
on each respective effective date.
New IFRS accounting standards, amendments and interpretations not yet adopted
The following new IFRS accounting standards in issue but not yet effective are
expected to have a significant impact on the Group:
IFRS 15 Revenue from Contracts with Customers
IFRS 15 will replace IAS 18 Revenue and IAS 11 Construction Contracts and
establishes a unified framework for determining the timing, measurement and
recognition of revenue. The principle of the new standard is to recognise
revenue as performance obligations are met rather than based on the transfer of
risks and rewards.
The effective date of the standard has been deferred to 1 January 2018 to allow
companies more time to deal with transitional issues of application.
The Group is currently reviewing the potential impact of adopting IFRS 15 with
the primary focus being understanding those sales contracts where the timing
and amount of revenue recognised could differ under IFRS 15, which may occur
for example if contracts with customers incorporate performance obligations not
currently recognised separately, or where such contracts incorporate variable
(MORE TO FOLLOW) Dow Jones Newswires
April 26, 2016 09:04 ET (13:04 GMT)
consideration. As the Group's revenue is predominantly derived from
arrangements in which the transfer of risks and rewards coincides with the
fulfilment of performance obligations, the timing and amount of revenue
recognised is unlikely to be materially affected for the majority of sales.
IFRS 15 also includes disclosure requirements including qualitative and
quantitative information about contracts with customers to help users of the
financial statements understand the nature, amount, timing and uncertainty of
revenue.
In addition to the potential accounting implications outlined above, the
implementation of IFRS 15 is expected to impact the Group's systems, processes
and controls. The Group will start developing a transition plan to identify and
implement the required changes during 2016.
IFRS 9 Financial Instruments
IFRS 9 will replace IAS 39 Financial Instruments: Recognition and Measurement
and addresses the following three key areas:
* Classification and measurement establishes a single, principles-based
approach for the classification of financial assets, which is driven by
cash flow characteristics and the business model in which an asset is held.
This is expected to have a number of presentational impacts on the Group
financial statements including changes in the presentation of gains and
losses on financial assets and liabilities carried at fair value on the
balance sheet.
* Impairment introduces a new 'expected credit loss' impairment model,
requiring expected credit losses to be recognised from when financial
instruments are first recognised. The transition to this model is expected
to result in changes in the systems and computational methods used by the
Group to assess receivables and similar assets for impairment. However,
given the profile of the Group's counterparty exposures, this is not
expected to have a material impact on the amounts recorded in the financial
statements.
* Hedge Accounting aligns the accounting treatment with risk management
practices of an entity, including making a broader range of exposures
eligible for hedge accounting and introducing a more principles-based
approach to assessing hedge effectiveness. The adoption of IFRS 9 will not
require changes to existing hedging arrangements but may provide scope to
apply hedge accounting to a broader range of transactions in the future.
IFRS 9 is effective for annual reporting periods beginning on or after 1
January 2018.
The Group's implementation activities to date have principally focused on
gaining a high level understanding of the likely effects of IFRS 9 given the
nature of financial instruments held by the Group. A more detailed impact
analysis and transition activities will be undertaken during 2016.
IFRS 16 Leases
IFRS 16 replaces the following standards and interpretations: IAS 17 Leases and
IFRIC 4 Determining whether an Arrangement contains a Lease. The new standard
provides a single lessee accounting model for the recognition, measurement,
presentation and disclosure of leases. IFRS 16 applies to all leases including
subleases and requires lessees to recognise assets and liabilities for all
leases, unless the lease term is 12 months or less, or the underlying asset has
a low value. Lessors continue to classify leases as operating or finance.
IFRS 16 was issued in January 2016 and applies to annual reporting periods
beginning on or after 1 January 2019. The Group will evaluate the potential
impact of IFRS 16 on the financial statements and performance measures. This
will include an assessment of whether any arrangements the Group enters into
will be considered a lease under IFRS 16.
Standards and Interpretations in issue but not effective
The following new amendments and interpretations in issue but not yet effective
are not expected to have a significant impact on the Group:
* Amendments to IAS 1 Presentation of Financial Statements: Disclosure
Initiative provides guidance on the use of judgement in presenting
financial statement information, including: the application of materiality;
order of notes; use of subtotals; accounting policy referencing and
disaggregation of financial and non-financial information.
* Amendments to IAS 27 Equity Method in Separate Financial Statements will
allow entities to use the equity method in their separate financial
statements to measure investments in subsidiaries, joint ventures and
associates.
* Amendments to IAS 16 Property, Plant and Equipment and IAS 38 Clarification
of Acceptable Methods of Depreciation clarify that a revenue based method
of depreciation or amortisation is generally not appropriate.
* Amendments to IFRS 10 Consolidated Financial Statements and IAS 28 Joint
Ventures: Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture remove an inconsistency between the two
standards on the accounting treatment for gains and losses arising on the
sale or contribution of assets by an investor to its associate or joint
venture. Following the amendment, such gains and losses may only be
recognised to the extent of the unrelated investor's interest, except where
the transaction involves assets that constitute a business.
* Amendments to IFRS 11 Accounting for Acquisitions of Interests in Joint
Operations and IAS 28 Investments in Associates and Joint Ventures clarify
the accounting for the acquisition of an interest in a joint operation
where the activities of the operation constitute a business.
Other issued standards and amendments that are not yet effective are not
expected to have an impact on the financial statements.
3. Significant accounting policies
a) Basis of accounting
The financial statements have been prepared in accordance with International
Financial Reporting Standards ("IFRS") as issued by the International
Accounting Standards Board ("IASB") and as adopted by the European Union
("EU"), and therefore the Group financial statements comply with Article 4 of
the EU IAS Regulation.
The financial statements have been prepared on the historical cost convention
basis, except for share-based payments, accounting for the WGI transaction and
other financial assets and liabilities, which have been measured at fair values
and using accounting policies consistent with IFRS.
The principal accounting policies adopted are set out below:
b) Going concern
The Group's business activities, together with the factors likely to affect
future development, performance and position are set out in the Strategic
Report on pages 3 to 19. The financial position of the Group, its cash flow and
liquidity position are described in the Financial Review on pages 10 to 12.
The Group's cash balance at 31 December 2015 was $49.4 million (2014: $48.9
million) excluding $0.9 million (2014: $0.5 million) of Cadogan's share of cash
and cash equivalents in joint ventures. It includes $20 million of restricted
cash held in UK bank which represent security of borrowings (note 24). The
Directors believe that the funds available at the date of the issue of these
financial statements are sufficient for the Group to manage its business risks
successfully.
The Group's forecasts and projections, taking into account reasonably possible
changes in trading activities, operational performance, start dates and flow
rates for commercial production and the price of hydrocarbons sold to Ukrainian
customers, show that there are reasonable expectations that the Group will be
able to operate on funds currently held and those generated internally, for the
foreseeable future.
The Group continues to pursue its farm-out campaign, which, if successful, will
enable it to farm-out a portion of its interests in its oil and gas licences to
spread the risks associated with further exploration and development.
After making enquiries and considering the uncertainties described above, the
Directors have a reasonable expectation that the Company and the Group have
adequate resources to continue in operational existence for the foreseeable
future and consider the going concern basis of accounting to be appropriate
and, thus, they continue to adopt the going concern basis of accounting in
preparing the annual financial statements. In making its statement the
Directors have considered the recent political and economic situation in
Ukraine, as described further in the note 4 (e).
c) Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company (its subsidiaries) made up
to 31 December each year. IFRS 10 defines control to be investor control over
an investee when it is exposed, or has rights, to variable returns from its
involvement with the investee and has the ability to control those returns
through its power over the investee.
The results of subsidiaries acquired or disposed of during the year are
included in the consolidated income statement from the effective date of
acquisition or up to the effective date of disposal, as appropriate. Where
necessary, adjustments are made to the financial statements of subsidiaries to
bring accounting policies used into line with those used by the Group. All
intra-group transactions, balances, income and expenses are eliminated on
consolidation.
Non-controlling interests in subsidiaries are identified separately from the
Group's equity therein. Those interests of non-controlling shareholders that
are present ownership interests entitling their holders to a proportionate
share of net assets upon liquidation may be initially measured at fair value or
at the non-controlling interests' proportionate share of the fair value of the
acquiree's identifiable net assets. The choice of measurement is made on an
acquisition-by-acquisition basis. Other non-controlling interests are initially
(MORE TO FOLLOW) Dow Jones Newswires
April 26, 2016 09:04 ET (13:04 GMT)
measured at fair value.
Subsequent to acquisition, the carrying amount of non-controlling interests is
the amount of those interests at initial recognition plus the non-controlling
interests' share of subsequent changes in equity. Total comprehensive income is
attributed to non-controlling interests even if this results in the
non-controlling interests having a deficit balance.
Changes in the Group's interests in subsidiaries that do not result in a loss
of control are accounted for as equity transactions. The carrying amount of the
Group's interests and the non-controlling interests are adjusted to reflect the
changes in their relative interests in the subsidiaries. Any difference between
the amount by which the non-controlling interests are adjusted and the fair
value of the consideration paid or received is recognised directly in equity
and attributed to the owners of the Company.
When the Group loses control of a subsidiary, the profit or loss on disposal is
calculated as the difference between (i) the aggregate of the fair value of the
consideration received and the fair value of any retained interest and (ii) the
previous carrying amount of the assets (including goodwill), less liabilities
of the subsidiary and any non-controlling interests. Amounts previously
recognised in other comprehensive income in relation to the subsidiary are
accounted for (i.e. reclassified to profit or loss or transferred directly to
retained earnings) in the same manner as would be required if the relevant
assets or liabilities are disposed of. The fair value of any investment
retained in the former subsidiary at the date when control is lost is regarded
as the fair value on initial recognition for subsequent accounting under IAS 39
Financial Instruments: Recognition and Measurement or, when applicable, the
costs on initial recognition of an investment in an associate or jointly
controlled entity.
d) Business combinations
The acquisition of subsidiaries is accounted for using the acquisition method.
The cost of the acquisition is measured at the aggregate of the fair values, at
the date of exchange, of assets given, liabilities incurred or assumed, and
equity instruments issued in exchange for control of the acquiree.
Acquisition-related costs are recognised in profit or loss as incurred. The
acquiree's identifiable assets, liabilities and contingent liabilities that
meet the conditions for recognition under IFRS 3 Business Combinations are
recognised at their fair value at the acquisition date, except for non-current
assets (or disposal groups) that are classified as held for resale in
accordance with IFRS 5 Non-Current Assets held for sale and Discontinued
Operations. These are recognised and measured at fair value less costs to sell.
e) Investments in joint ventures
A joint venture is a joint arrangement whereby the parties that have joint
control of the arrangement have rights to the net assets of the arrangement. A
joint venture firm recognises its interest in a joint venture as an investment
and shall account for that investment using the equity method in accordance
with IAS 28 Investments in Associates and Joint Ventures.
Under the equity method, the investment is carried on the balance sheet at cost
plus changes in the Group's share of net assets of the entity, less
distributions received and less any impairment in value of the investment. The
Group Consolidated Income Statement reflects the Group's share of the results
after tax of the equity-accounted entity, adjusted to account for depreciation,
amortisation and any impairment of the equity accounted entity's assets. The
Group Statement of Comprehensive Income includes the Group's share of the
equity-accounted entity's other comprehensive income.
Financial statements of equity-accounted entities are prepared for the same
reporting year as the Group. The Group assesses investments in equity-accounted
entities for impairment whenever events or changes in circumstances indicate
that the carrying value may not be recoverable. If any such indication of
impairment exists, the carrying amount of the investment is compared with its
recoverable amount, being the higher of its fair value less costs of disposal
and value in use. If the carrying amount exceeds the recoverable amount, the
investment is written down to its recoverable amount.
The Group ceases to use the equity method of accounting from the date on which
it no longer has joint control over the joint venture or significant influence
over the associate, or when the interest becomes classified as an asset held
for sale.
f) Revenue recognition
Revenue is measured at the fair value of the consideration received or
receivable and represents amounts receivable for hydrocarbon products and
services provided in the normal course of business, net of discounts, value
added tax ('VAT') and other sales-related taxes. Sales of hydrocarbons are
recognised when the title has passed. Revenue from services is recognised in
the accounting period in which services are rendered. The main types of
services provided by the Group are drilling and civil works services.
Interest income is accrued on a time basis, by reference to the principal
outstanding and at the effective interest rate applicable, which is the rate
that exactly discounts estimated future cash receipts through the expected life
of the financial asset to that asset's net carrying amount on initial
recognition.
To the extent that revenue arises from test production during an evaluation
programme, an amount is charged from evaluation costs to cost of sales, so as
to reflect a zero net margin.
g) Foreign currencies
The individual financial statements of each Group company are presented in the
currency of the primary economic environment in which it operates (its
functional currency). The functional currency of the Company is pounds
sterling. For the purpose of the consolidated financial statements, the results
and financial position of each Group company are expressed in US dollars, which
is the presentation currency for the consolidated financial statements.
In preparing the financial statements of the individual companies, transactions
in currencies other than the functional currency of each Group company
('foreign currencies') are recorded in the functional currency at the rates of
exchange prevailing on the dates of the transactions. At each balance sheet
date, monetary assets and liabilities that are denominated in foreign
currencies are retranslated into the functional currency at the rates
prevailing on the balance sheet date. Non-monetary assets and liabilities
carried at fair value that are denominated in foreign currencies are translated
at the rates prevailing at the date when the fair value was determined.
Non-monetary items that are measured in terms of historical cost in a foreign
currency are not retranslated. Foreign exchange differences on cash and cash
equivalents are recognised in operating profit or loss in the period in which
they arise.
Exchange differences are recognised in the profit or loss in the period in
which they arise except for exchange differences on monetary items receivable
from or payable to a foreign operation for which settlement is neither planned
nor likely to occur. This forms part of the net investment in a foreign
operation which is recognised in the foreign currency translation reserve and
in profit or loss on disposal of the net investment.
For the purpose of presenting consolidated financial statements, the results
and financial position of each entity of the Group are translated into US
dollars as follows:
* assets and liabilities of the Group's foreign operations are translated at
the closing rate on the balance sheet date;
* income and expenses are translated at the average exchange rates for the
period, unless exchange rates fluctuate significantly during that period,
in which case the exchange rates at the date of the transactions are used;
and
* all resulting exchange differences arising, if any, are recognised in other
comprehensive income and accumulated equity (attributed to non-controlling
interests as appropriate), transferred to the Group's translation reserve.
Such translation differences are recognised as income or as expenses in the
period in which the operation is disposed of.
Goodwill and fair value adjustments arising on the acquisition of a foreign
entity are treated as assets and liabilities of the foreign entity and
translated at the closing rate.
The relevant exchange rates used were as follows:
Year ended 31 December 2015 Year ended 31 December 2014
GBP/USD USD/UAH GBP/USD USD/UAH
Closing rate 1.4805 24.2731 1.5534 16.0960
Average rate 1.5289 22.0584 1.6481 12.1705
h) Taxation
The tax expense represents the sum of the tax currently payable and deferred
tax.
The tax currently payable is based on taxable profit for the year. Taxable
profit differs from net profit as reported in the consolidated income statement
because it excludes items of income or expense that are taxable or deductible
in other years and it further excludes items that are never taxable or
deductible. The Group's liability for current tax is calculated using tax rates
that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit. This is accounted for using the balance sheet liability method.
Deferred tax liabilities are generally recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent that it is
(MORE TO FOLLOW) Dow Jones Newswires
April 26, 2016 09:04 ET (13:04 GMT)
probable that taxable profits will be available against which deductible
temporary differences can be utilised. Such assets and liabilities are not
recognised if the temporary difference arises from the initial recognition of
goodwill or from the initial recognition (other than in a business combination)
of other assets and liabilities in a transaction that affects neither the
taxable profit nor the accounting profit. Deferred tax liabilities are
recognised for taxable temporary differences arising on investments in
subsidiaries and associates, and interests in joint ventures, except where the
Group is able to control the reversal of the temporary difference and it is
probable that the temporary difference will not reverse in the foreseeable
future.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered. Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset is realised.
Deferred tax is charged or credited in the income statement, except when it
relates to items charged or credited in other comprehensive income, in which
case the deferred tax is also dealt with in other comprehensive income.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off current tax assets against current tax liabilities
and when they relate to income taxes levied by the same taxation authority and
the Group intends to settle its current tax assets and liabilities on a net
basis.
i) Other property, plant and equipment
Property, plant and equipment ('PP&E') are carried at cost less accumulated
depreciation and any recognised impairment loss. Depreciation and amortisation
is charged so as to write-off the cost or valuation of assets, other than land,
over their estimated useful lives, using the straight-line method, on the
following bases:
Buildings 4%
Fixtures and equipment 10% to 30%
The gain or loss arising on the disposal or retirement of an asset is
determined as the difference between the sales proceeds and the carrying amount
of the asset and is recognised in income.
j) Impairment of development and production assets and other property, plant
and equipment
At each balance sheet date, the Group reviews the carrying amounts of its PP&E
to determine whether there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable amount of the
asset is estimated in order to determine the extent of the impairment loss (if
any). Where the asset does not generate cash flows that are independent from
other assets, the Group estimates the recoverable amount of the cash-generating
unit to which the asset belongs. The recoverable amount is the higher of fair
value less costs to sell and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset for which the estimates of
future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to
be less than its carrying amount, the carrying amount of the asset
(cash-generating unit) is reduced to its recoverable amount. An impairment loss
is recognised as an expense immediately.
Where an impairment loss subsequently reverses, the carrying amount of the
asset (cash-generating unit) is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does not exceed
the carrying amount that would have been determined had no impairment loss been
recognised for the asset (cash-generating unit) in prior years. A reversal of
an impairment loss is recognised as income immediately.
k) Intangible exploration and evaluation assets
The Group applies the modified full cost method of accounting for intangible
exploration and evaluation ('E&E') expenditure which complies with requirement
set out in IFRS 6 Exploration for and Evaluation of Mineral Resources. Under
the modified full cost method of accounting, expenditure made on exploring for
and evaluating oil and gas properties is accumulated and initially capitalised
as an intangible asset, by reference to appropriate cost centres being the
appropriate oil or gas property. E&E assets are then assessed for impairment on
a geographical cost pool basis.
E&E assets comprise costs of (i) E&E activities which are in progress at the
balance sheet date, but where the existence of commercial reserves has yet to
be determined (ii) E&E expenditure which, whilst representing part of the E&E
activities associated with adding to the commercial reserves of an established
cost pool, did not result in the discovery of commercial reserves.
Costs incurred prior to having obtained the legal rights to explore an area are
expensed directly to the income statement as incurred.
Exploration and Evaluation costs
E&E expenditure is initially capitalised as an E&E asset. Payments to acquire
the legal right to explore, costs of technical services and studies, seismic
acquisition, exploratory drilling and testing are also capitalised as
intangible E&E assets.
Tangible assets used in E&E activities (such as the Group's vehicles, drilling
rigs, seismic equipment and other property, plant and equipment) are normally
classified as PP&E. However, to the extent that such assets are consumed in
developing an intangible E&E asset, the amount reflecting that consumption is
recorded as part of the cost of the intangible asset. Such intangible costs
include directly attributable overheads, including the depreciation of PP&E
items utilised in E&E activities, together with the cost of other materials
consumed during the exploration and evaluation phases.
E&E assets are not amortised prior to the conclusion of appraisal activities.
Treatment of E&E assets at conclusion of appraisal activities
Intangible E&E assets related to each exploration property are carried forward,
until the existence (or otherwise) of commercial reserves has been determined.
If commercial reserves have been discovered, the related E&E assets are
assessed for impairment on individual assets basis as set out below and any
impairment loss is recognised in the income statement. Upon approval of a
development programme, the carrying value, after any impairment loss, of the
relevant E&E assets is reclassified to the development and production assets
within PP&E.
Intangible E&E assets that relate to E&E activities that are determined not to
have resulted in the discovery of commercial reserves remain capitalised as
intangible E&E assets at cost less accumulated amortisation, subject to meeting
a pool-wide impairment test in accordance with the accounting policy for
impairment of E&E assets set out below.
Impairment of E&E assets
E&E assets are assessed for impairment when facts and circumstances suggest
that the carrying amount may exceed its recoverable amount. Such indicators
include, but are not limited to, those situations outlined in paragraph 20 of
IFRS 6 Exploration for and Evaluation of Mineral Resources and include the
point at which a determination is made as to whether or not commercial reserves
exist.
Where there are indications of impairment, the E&E assets concerned are tested
for impairment. Where the E&E assets concerned fall within the scope of an
established full cost pool, they are tested for impairment together with all
development and production assets associated with that cost pool, as a single
cash generating unit.
The aggregate carrying value of the relevant assets is compared against the
expected recoverable amount of the pool, generally by reference to the present
value of the future net cash flows expected to be derived from production of
commercial reserves from that pool. Where the assets fall into an area that
does not have an established pool or if there are no producing assets to cover
the unsuccessful exploration and evaluation costs, those assets would fail the
impairment test and be written off to the income statement in full.
Impairment losses are recognised in the income statement as additional
depreciation and amortisation and are separately disclosed.
Reclassification from development and production assets back to exploration and
evaluation
Where development efforts are unsuccessful in the target geological formation
of the licence area but the Company see a potential for oil and gas discoveries
in other geological formations of the same licence area, reclassification of
recoverable amount of assets from development and production assets back to
exploration and evaluation is appropriate following the impermanent assessment.
l) Development and production assets
Development and production assets are accumulated on a field-by-field basis and
represent the cost of developing the commercial Reserves discovered and
bringing them into production, together with E&E expenditures incurred in
finding commercial Reserves transferred from intangible E&E assets.
The cost of development and production assets comprises the cost of
acquisitions and purchases of such assets, directly attributable overheads,
finance costs capitalised, and the cost of recognising provisions for future
restoration and decommissioning.
Depreciation of producing assets
Depreciation is calculated on the net book values of producing assets on a
field-by-field basis using the unit of production method. The unit of
production method refers to the ratio of production in the reporting year as a
proportion of the Proved and Probable Reserves of the relevant field, taking
(MORE TO FOLLOW) Dow Jones Newswires
April 26, 2016 09:04 ET (13:04 GMT)
into account future development expenditures necessary to bring those Reserves
into production.
Producing assets are generally grouped with other assets that are dedicated to
serving the same Reserves for depreciation purposes, but are depreciated
separately from producing assets that serve other Reserves.
m) Inventories
Oil and gas stock and spare parts are stated at the lower of cost and net
realisable value. Costs comprise direct materials and, where applicable, direct
labour costs and those overheads that have been incurred in bringing the
inventories to their present location and condition. Cost is allocated using
the weighted average method. Net realisable value represents the estimated
selling price less all estimated costs of completion and costs to be incurred
in marketing, selling and distribution.
n) Financial instruments
Recognition of financial assets and financial liabilities
Financial assets and financial liabilities are recognised on the Group's
balance sheet when the Group becomes a party to the contractual provisions of
the instrument.
Derecognition of financial assets and financial liabilities
The Group derecognises a financial asset only when the contractual rights to
cash flows from the asset expire; or it transfers the financial asset and
substantially all the risks and rewards of ownership of the asset to another
entity. If the Group neither transfers nor retains substantially all the risks
and rewards of ownership and continues to control the transferred asset, the
Group recognises its retained interest in the asset and an associated liability
for the amount it may have to pay. If the Group retains substantially all the
risks and rewards of ownership of a transferred financial asset, the Group
continues to recognise the financial asset and also recognises a collateralised
borrowing for the proceeds received.
The Group derecognises financial liabilities when the Group's obligations are
discharged, cancelled or expired.
Financial assets
The Group classifies its financial assets in the following categories: loans
and receivables; available-for-sale financial assets; held to maturity
investments; and financial assets at fair value through profit or loss
("FVTPL"). The classification depends on the purpose for which the financial
assets were acquired. Management determines the classification of its
financial assets at initial recognition and re-evaluates this designation at
every reporting date.
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They are
included in current assets, except for those with maturities greater than
twelve months after the balance sheet date which will then be classified as
non-current assets. Loans and receivables are classified as "other receivables"
and "cash and cash equivalents" in the balance sheet.
Trade and other receivables
Trade and other receivables are measured at initial recognition at fair value,
and are subsequently measured at amortised cost using the effective interest
rate method.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, on-demand deposits, and other
short-term highly liquid investments that are readily convertible to a known
amount of cash with three months or less remaining to maturity and are subject
to an insignificant risk of changes in value.
Restricted cash balances represent components of cash and cash equivalents that
are not available for use by the Group.
Financial assets at FVTPL
Financial assets at FVTPL are stated at fair value, with any gains or losses
arising on remeasurement recognised in pro?t or loss which is included in the
'Other gains and losses' line item in the consolidated income statement.
Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of
impairment at each balance sheet date. Appropriate allowances for estimated
irrecoverable amounts are recognised in profit or loss when there is objective
evidence that the asset is impaired. The allowance recognised is measured as
the difference between the asset's carrying amount of the financial asset and
the present value of estimated future cash flows discounted at the effective
interest rate computed at initial recognition.
Evidence of impairment could include:
* significant financial difficulty of the issuer or counterparty;
* default or delinquency in interest or principal payments; or
* it becoming probable that the borrower will enter bankruptcy or financial
re-organisation.
For certain categories of financial assets, such as trade receivables, assets
that are assessed not to be impaired individually are, in addition, assessed
for impairment on a collective basis.
The carrying amount of the financial assets is reduced by the impairment loss
directly for all financial assets with the exception of trade receivables,
where the carrying amount is reduced through the use of an allowance account.
Subsequent recoveries of amounts previously written off are credited against
the allowance account. Changes in the carrying amount of the allowance account
are recognised in profit or loss.
If, in a subsequent period, the amount of the impairment loss decreases and the
decrease can be related objectively to an event occurring after the impairment
was recognised, the previously recognised impairment loss is reversed through
profit or loss to the extent that the carrying amount of the investment at the
date the impairment is reversed does not exceed what the amortised cost would
have been had the impairment not been recognised.
Financial liabilities
Financial liabilities are classi?ed as either ?nancial liabilities 'at FVTPL'
or 'other ?nancial liabilities'
Financial liabilities at FVTPL
Financial liabilities at FVTPL are stated at fair value, with any resultant
gain or loss recognised in profit or loss and is included in the 'Other gains
and losses' line item in the income statement. Fair value is determined in the
manner described in note 28.
Trade payables and short-term borrowings
Trade payables and short-term borrowings are initially measured at fair value,
and are subsequently measured at amortised cost, using the effective interest
rate method.
o) Provision
Provisions are recognised when the Group has a present obligation (legal or
constructive) as a result of a past event, it is probable that the Group will
be required to settle that obligation and a reliable estimate can be made of
the amount of the obligation. The amount recognised as a provision is the best
estimate of the consideration required to settle the present obligation at the
balance sheet date, taking into account the risks and uncertainties surrounding
the obligation. When a provision is measured using the cash flows estimated to
settle the present obligation, its carrying amount is the present value of
those cash flows.
p) Decommissioning
A provision for decommissioning is recognised in full when the related
facilities are installed. The decommissioning provision is calculated as the
net present value of the Group's share of the expenditure expected to be
incurred at the end of the producing life of each field in the removal and
decommissioning of the production, storage and transportation facilities
currently in place. The cost of recognising the decommissioning provision is
included as part of the cost of the relevant asset and is thus charged to the
income statement on a unit of production basis in accordance with the Group's
policy for depletion and depreciation of tangible non-current assets. Period
charges for changes in the net present value of the decommissioning provision
arising from discounting are included within finance costs.
4. Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group's accounting policies, which are described in
note 3, the Directors are required to make judgements, estimates and
assumptions about the carrying amounts of the assets and liabilities that are
not readily apparent from other sources. The estimates and associated
assumptions are based on historical experience and other factors that are
considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period or in the period
of the revision and future periods if the revision affects both the current and
future periods.
The following are the critical judgements and estimates that the Directors have
made in the process of applying the Group's accounting policies and that have
the most significant effect on the amounts recognised in the financial
statements:
a) Impairment of E&E
The outcome of ongoing exploration, and therefore the recoverability of the
carrying value of intangible exploration and evaluation assets, is inherently
uncertain. Management makes the judgements necessary to implement the Group's
policy with respect to exploration and evaluation assets and considers these
assets for impairment at least annually with reference to indicators in IFRS 6.
b) Impairment of development and production assets
IAS 36 Impairment of Assets require that a review for impairment to be carried
out if events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable.
Management assessed whether any impairment triggers were present at 31 December
2015 and concluded that there were no impairment indicators for the PP&E assets
of the Group.
c) Impairment of investment in joint ventures
The Group's investments in joint ventures are accounted for using the equity
method. The carrying value of the Group's investments is reviewed at each
balance sheet date. This review requires estimation of the future cash flows
(MORE TO FOLLOW) Dow Jones Newswires
April 26, 2016 09:04 ET (13:04 GMT)
expected to be received by the Group mainly from the joint ventures'
exploration and evaluation assets. As of 31 December 2015 exploration and
evaluation assets of the joint venture entity LLC Industrial Company
Gazvydobuvannya have been assessed for impairment through calculation of the
recoverable amount as a fair value less cost to sell. As a result impairment
has been recognised in the accounts of the joint venture and the Group's share
was included in the consolidated financial statements as share of losses in
joint ventures. Further details are provided in note 19.
Assessment of political and economic situation in Ukraine impact on Group
operations
In 2015, an armed conflict with separatists continued in certain parts of
Luhansk and Donetsk regions, and a peaceful resolution of the conflict did not
occur as it was foreseen by the Minsk agreements. In 2015, the Ukrainian
economy was going through a recession, a gross domestic product has contracted
by 10% (2014: 7%), and an annual inflation rate reached 43% (2014: 25%).
Unfavourable conditions on markets where Ukraine's primary commodities where
traded were influencing further devaluation of the Ukrainian Hryvnia against
major foreign currencies. The Ukrainian companies and banks continued to
suffer from lack of funding from domestic and international financial markets.
The National Bank of Ukraine (the "NBU") extended its range of measures that
were introduced in 2014 and aimed at limiting the outflow of foreign currency
from the country, inter alia, a mandatory sale of foreign currency earnings,
certain restrictions on purchases of foreign currencies on the interbank market
and on usage of foreign currencies for settlement purposes, limitations on
remittances abroad.
In early 2015, the Government of Ukraine agreed with the IMF a four-year
program for USD 17.5 billion loan aimed at supporting the economic
stabilization of Ukraine. The program defines economic reforms that must be
undertaken by the Government of Ukraine to reinstate a sustainable economic
growth in the mid-term perspective. In 2015, political and economic
relationships between Ukraine and the Russian Federation remained strained that
led to a significant reduction in trade and economic cooperation. On 1 January
2016, a free-trade element of Ukraine's association agreement with the European
Union is coming into force. In late 2015, the Russian Federation denounced the
free trade zone agreement with Ukraine and further trade restrictions were
announced by both countries.
Stabilization of the economic and political situation depends, to a large
extent, upon the ability of the Ukrainian Government to continue reforms and
the efforts of the NBU to further stabilize the banking sector, as well as upon
the ability of the Ukrainian economy in general to respond adequately to
changing markets. Nevertheless, further economic and political developments,
as well as the impact of the above factors on the Group, its customers, and
contractors are currently difficult to predict.
Management is monitoring how the political and economic situation may affect
the Group operations, and has considered whether adjustments are required to
the carrying values of assets and the appropriateness of the going concern
assumption. As a result management have concluded that there were no
significant adverse consequences in relation to the Group's operations, cash
flows and assets that impact the 2015 financial statements, apart from
continuous uncertainty related to key assumptions used by management in
assessment of the recoverable amount of production assets as described above.
Management noted that none of the Group's assets are located in areas of
current conflict. Though not predictable and quite improbable, any further
escalations of the political crisis may impact the Group's normal business
activities, and increase the risks relating to its business operations,
financial status and maintenance of its Ukrainian production licences.
5. Segment information
Segment information is presented on the basis of management's perspective and
relates to the parts of the Group that are defined as operating segments.
Operating segments are identified on the basis of internal reports provided to
the Group's chief operating decision maker ("CODM"). The Group has identified
its top management team as its CODM and the internal reports used by the top
management team to oversee operations and make decisions on allocating
resources serve as the basis of information presented. These internal reports
are prepared on the same basis as these consolidated financial statements.
Segment information is analysed on the basis of the type of activity, products
sold or services provided.
The majority of the Group's operations are located within Ukraine.
Segment information is analysed on the basis of the types of goods supplied by
the Group's operating divisions. The Group's reportable segments under IFRS 8
are therefore as follows:
Exploration and Production
* E&P activities on the production licences for natural gas, oil and
condensate
Service
* Drilling services to exploration and production companies
* Civil works to exploration and production companies
Trading
* Import of natural gas and diesel from European countries
* Local purchase and sales of natural gas operations with physical delivery
of natural gas
The accounting policies of the reportable segments are the same as the Group's
accounting policies described in Note 3. Sales between segments are carried out
at market prices. The segment result represents operating profit under IFRS
before unallocated corporate expenses. Unallocated corporate expenses include
management remuneration, representative expenses and expenses incurred in
respect of the maintenance of office premises. This is the measure reported to
the CODM for the purposes of resource allocation and assessment of segment
performance.
The Group does not present information on segment assets and liabilities as the
CODM does not review such information for decision-making purposes.
As of 31 December 2015 and for the year then ended the Group's segmental
information was as follows:
Exploration Service Trading Consolidated
and
Production
$'000 $'000 $'000 $'000
Sales of hydrocarbons 521 - 74,565 75,086
Other revenue - 354 - 354
Sales between segments 1,314 - (1,314) -
Total revenue 1,835 354 73,251 75,440
Cost of sales (1,932) (250) (67,380) (69,562)
Administrative expenses (548) - (641) (1,189)
Interest on short-term - - (2,411) (2,411)
borrowings (Note 13)
Segment results (645) 104 2,819 2,278
Unallocated administrative - - - (4,926)
expenses
Other income, net - - - 1,235
Impairment(1) - - - (10,480)
Share of losses in joint - - - (12,844)
ventures(2)
Net foreign exchange gains - - - 2,494
Loss before tax (22,243)
(1) Impairment loss recognised in 2015 of $10.3 million related to exploration
and production segment.
(2) Share of losses in joint ventures includes $9.1 million of impairment loss
that relates to exploration and production segment.
As of 31 December 2014 and for the year then ended the Group's segmental
information was as follows:
Exploration Service Trading Consolidated
and
Production
$'000 $'000 $'000 $'000
Sales of hydrocarbons 1,291 - 30,253 31,544
Other revenue - 846 233 1,079
Sales between segments 1,077 - (1,077) -
Total revenue 2,368 846 29,409 32,623
Cost of sales (2,579) (386) (26,848) (29,813)
Administrative expenses (1,347) - (379) (1,726)
Interest on short-term - - (420) (420)
borrowings (Note 13)
Segment results (1,558) 460 1,762 664
Unallocated administrative (5,276)
expenses
Other income, net 2,228
Impairment(1) (5,134)
Share of losses in joint (54,664)
ventures
Net foreign exchange gains 3,036
Loss before tax (59,146)
(1) Impairment loss recognised in 2014 of $5.1 million related to exploration
and production segment.
6. Revenue
2015 2014
$'000 $'000
Sale of hydrocarbons 75,086 31,544
(MORE TO FOLLOW) Dow Jones Newswires
April 26, 2016 09:04 ET (13:04 GMT)
Other revenues 354 1,079
75,440 32,623
Other revenues include revenues from services provided to third parties of $0.4
million (2014: $0.8 million).
Information about major customers
Included in revenues for the year ended 31 December 2015 are revenues of $35.7
million (2014: $25.3 million) which arose from sales to the Group's two largest
customer. None other single customers contributed 10% or more to the Group
revenue for both 2015 and 2014 years.
7. Other operating income, net
2015 2014
$'000 $'000
Transactions with JV partner - 510
Other income, net 31 37
31 547
8. Impairment
2015 2014
$'000 $'000
Impairment of oil and gas assets (note (10,480) (5,134)
16, 17)
Inventories (90) (253)
VAT recoverable 1,390 1,130
Reversal of impairment of other assets 1,300 877
The carrying value of inventory as at 31 December 2015 and 2014 has been
impaired to reduce it to net realisable value (see note 20). During 2015, the
Group gross sales of inventory to third parties comprised $0.1 million (2014:
$0.1 million).
During the year VAT impairment in the amount of $1.3 million (2014: $1.1
million) has been released mainly as a result VAT recovery of historical
balances through offset of VAT liabilities arising on sales.
9. Loss for the year
The loss for the year has been arrived at after (charging)/crediting:
2015 2014
$'000 $'000
Depreciation of property, plant and equipment (434) (938)
Loss on disposal of property, plant and equipment (24) (211)
Reversal of impairment of other assets (note 8) 1,300 877
Impairment of oil and gas assets (note 17) (10,480) (5,134)
Staff costs (2,996) (4,039)
Net foreign exchange gain 2,494 3,036
In addition to the depreciation of PP&E of $nil million (2014: $0.9 million) in
the year ended 31 December 2015, depreciation of $nil million (2014: $0.04
million) was capitalised to E&E assets being depreciation of tangible assets
used in E&E activities.
10. Auditor's remuneration
The analysis of auditor's remuneration is as follows:
2015 2014
$'000 $'000
Audit fees
Fees payable to the Company's auditor and their associates for 180 194
the audit of the Company's annual accounts
Fees payable to the Company's auditor and their associates for
other services to the Group:
* The audit of the Company's subsidiaries 35 30
Total audit fees 215 224
Non-audit fees
* Audit-related assurance services 66 38
* Taxation compliance services 59 25
Non-audit fees 125 63
11. Staff costs
The average monthly number of employees (including Executive Directors) was:
2015 2014
Number Number
Executive Directors 3 2
Other employees 77 98
80 100
Total number of employees at 31 December 80 100
$'000 $'000
Their aggregate remuneration comprised:
Wages and salaries 2,895 4,012
Social security costs 226 455
3,121 4,467
Within wages and salaries $0.9 million (2014: $0.8 million) relates to amounts
accrued and paid to executive Directors for services rendered.
Included within wages and salaries is $0.1 million (2014: $0.4 million)
capitalised to intangible E&E assets and $0.1 million (2014: $nil) capitalised
to development and production assets.
12. Investment income
2015 2014
$'000 $'000
Interest on bank deposits 118 27
Interest on loans issued - 825
118 852
13. Finance costs
2015 2014
$'000 $'000
Interest on short-term borrowings (2,411) (420)
Interest on tax provision (note 26) (201) -
Unwinding of discount on decommissioning provision (note 26) (13) (48)
(2,625) (468)
14. Tax
2015 2014
$'000 $'000
Current tax 11 11
Adjustment in relation to the current tax of prior years 1,317 362
Deferred tax (benefit)/charge (note 23) (288) (207)
1,040 166
The Group's operations are conducted primarily outside the UK. The most
appropriate tax rate for the Group is therefore considered to be 18 per cent
(2014: 18 per cent), the rate of profit tax in Ukraine which is the primary
source of revenue for the Group. Taxation for other jurisdictions is calculated
at the rates prevailing in the respective jurisdictions.
As at 31 December 2015 the Group recognised short-term provision in respect of
possible corporate tax obligation in respect of dispute on classification
taxable income and expenses (note 26).
The taxation charge for the year can be reconciled to the loss per the income
statement as follows:
2015 2015 2014 2014
$'000 % $'000 %
Loss before tax (22,243) 100.0 (59,146) 100.0
Tax credit at Ukraine corporation tax rate of (4,004) 18.0 (10,646) 18.0
18% (2014: 18%)
Tax credit related to the Joint venture losses 2,312 (10.4) 9,292 (15.7)
Permanent differences 1,511 (6.8) 1,543 (2.6)
Unrecognised tax losses utilised in the year (107) 0.5 (839) 1.4
Effect of different tax rates 11 (0.1) 454 (0.8)
(277) 1.3 (196) 0.3
Adjustments recognised in the current year in - -
relation 1,317 362
to the current tax of prior years
Income tax expense recognised in profit or loss 1,040 - 166 -
15. Loss per ordinary share
Basic loss per Ordinary share is calculated by dividing the net loss for the
year attributable to owners of the Company by the weighted average number of
Ordinary shares outstanding during the year. The calculation of the basic loss
per share is based on the following data:
Loss attributable to owners of the Company 2015 2014
$'000 $'000
Loss for the purposes of basic loss per share being net loss (23,261) (59,271)
attributable to owners of the Company
2015 2014
Number Number
Number of shares '000 '000
Weighted average number of Ordinary shares for the purposes 231,092 231,092
of
basic loss per share
2015 2014
Cent cent
Loss per Ordinary share
Basic (10.1) (25.6)
The Group has no potentially dilutive instruments in issue. Therefore no
diluted loss per share is presented above.
16. Intangible exploration and evaluation assets
$'000
Cost
At 1 January 2014 34,895
Additions 468
Change in estimate of decommissioning assets (note 26) 95
Transfer from property, plant and equipment (note 17) 18,467
(MORE TO FOLLOW) Dow Jones Newswires
April 26, 2016 09:04 ET (13:04 GMT)
Disposals (1)
Exchange differences (16,743)
At 1 January 2015 37,181
Additions 281
Change in estimate of decommissioning assets (note 26) 183
Disposals (2)
Exchange differences (12,310)
At 31 December 2015 25,333
Impairment
At 1 January 2014 28,937
Transfer from property, plant and equipment (note 17) 3,826
Exchange differences (13,871)
At 1 January 2015 18,892
Impairment charge 10,105
Exchange differences (6,364)
At 31 December 2015 22,633
Carrying amount
At 31 December 2015 2,700
At 31 December 2014 18,289
During the year additions to the exploration and evaluation assets include $nil
million (2014: $0.1 million) of capitalised depreciation of development and
production assets used in exploration and evaluation activities.
As at 31 December 2015, due to the expiration of the Pirkovska licence and
uncertainty as for the timing for the licence re-awarding due to the change in
the legislative process and respective delays in responses from the government
authorities, the Group decided to impair E&E assets of Pirkovska licence in the
amount of $10.1 million.
The carrying amount of E&E assets as at 31 December 2015 of $2.7 million (2014:
$3.6 million) mainly relates to Bitlyanska licence. As of 31 December 2015
management of the Group carried out the assessment of the Bitlyanska licences
value in use and recognised no impairment as recoverable amount was higher than
the book value of the assets. Key assumptions used in the impairment assessment
were as follows:
* Future gas price was assumed to be flat $210, real per m3;
* The pre-tax discount rate used was 24%, real.
17. Property, plant and equipment
Cost Development Total
and $'000
production Other
assets $'000
$'000
At 1 January 2014 50,942 9,650 60,592
Additions 1,235 376 1,611
Transfer to intangible exploration and (18,467) - (18,467)
evaluation assets
Transfer between property, plant and (54) 54 -
equipment
Change in estimate of decommissioning 201 - 201
assets (note 26)
Disposals (587) (89) (676)
Exchange differences (24,492) (4,801) (29,293)
At 1 January 2015 8,778 5,190 13,968
Additions 172 89 261
Change in estimate of decommissioning 79 - 79
assets (note 26)
Disposals (1) (43) (44)
Exchange differences (2,934) (2,063) (4,997)
At 31 December 2015 6,094 3,173 9,267
Accumulated depreciation and impairment
At 1 January 2014 13,489 3,217 16,706
Impairment 5,134 - 5,134
Charge for the year 614 359 973
Transfer to intangible exploration and (3,826) - (3,826)
evaluation assets
Disposals (188) (76) (264)
Exchange differences (6,787) (1,814) (8,601)
At 1 January 2015 8,436 1,686 10,122
Impairment 375 - 375
Charge for the year 82 352 434
Disposals (1) (16) (17)
Exchange differences (2,798) (510) (3,308)
At 31 December 2015 6,094 1,512 7,606
Carrying amount
At 31 December 2015 - 1,661 1,661
At 31 December 2014 342 3,504 3,846
As of 31 December 2015 management of the Group carried out the assessment of
the Debeslavetska and Cheremkhivska licences value in use and recognised an
impairment of these oil and gas assets of $0.4 million. Recoverable amount was
assessed at $nil million as at 31 December 2015.
Key assumptions used in the impairment assessment were as follows:
* Future gas price was assumed to be flat $210, real per m3;
* The pre-tax discount rate used was 24%, real.
During the year ended 31 December 2015 the depreciation charge of $nil million
(2014: $0.1 million) of development and production assets used in exploration
and evaluation activities has been capitalised and accounted as additions to
the exploration and evaluation assets (note 16).
18. Subsidiaries
The Company had investments in the following subsidiary undertakings as at 31
December 2015, which principally affected the profits and net assets of the
Group:
Country of Proportion
incorporation of voting
Name and operation interest % Activity
Directly held
Cadogan Petroleum Holdings Ltd UK 100 Holding company
Ramet Holdings Ltd Cyprus 100 Holding company
Indirectly held
Rentoul Ltd Isle of Man 100 Holding company
Cadogan Petroleum Holdings BV Netherlands 100 Holding company
Cadogan Bitlyanske BV Netherlands 100 Holding company
Cadogan Delta BV Netherlands 100 Holding company
Cadogan Astro Energy BV Netherlands 100 Holding company
Cadogan Pirkovskoe BV Netherlands 100 Holding company
Cadogan Zagoryanske Production BV Netherlands 100 Holding company
Momentum Enterprise (Europe) Ltd Cyprus 100 Holding company
Cadogan Ukraine Holdings Limited Cyprus 100 Holding company
Cadogan Momentum Holdings Inc Canada 100 Holding company
Radley Investments Ltd UK 100 Holding company
Cadogan Petroleum Trading SAGL Switzerland 100 Trading company
Global Commodities NC France 80 Trading company
LLC AstroInvest-Ukraine Ukraine 100 Exploration
LLC Zagvydobuvannya Ukraine 100 Exploration
LLC Astro Gas Ukraine 100 Exploration
DP USENCO Ukraine Ukraine 100 Exploration
LLC USENCO Nadra Ukraine 95 Exploration
JV Delta Ukraine 100 Exploration
LLC WestGasInvest Ukraine 100 Exploration
LLC Astro-Service Ukraine 100 Service Company
OJSC AgroNaftoGasTechService Ukraine 79.9 Construction
services
LLC Cadogan Ukraine Ukraine 100 Corporate
services
19. Joint ventures
Company name Licences held Country of Ownership Activity
incorporation share %
and operation
LLC Zagoryanska exploration Ukraine 40 Exploration
Astroinvest-Energy licence
LLC Industrial Pokrovska exploration Ukraine 70 Exploration
Company licence
Gazvydobuvannya
LLC Westgasinvest Reklynetska, Ukraine 15 Exploration
Zhuzhelianska,
Cheremkhivsko-Strupkivska,
Baulinska, Filimonivska,
Kurinna, Sandugeyivska,
Yakovlivska, and
Debeslavetska Exploration,
Debeslavetska Production
licence
All of the above joint ventures are accounted for using the equity method in
these consolidated financial statements. According to the shareholders'
agreements, which regulate the activities of the jointly controlled entities,
all key decisions require unanimous approval from the shareholders, therefore
these entities are jointly controlled.
Summarised financial information in respect of each of the Group's material
joint ventures is set out below. The summarised financial information below
(MORE TO FOLLOW) Dow Jones Newswires
April 26, 2016 09:04 ET (13:04 GMT)
represents amounts shown in the joint venture's financial statements prepared
in accordance with IFRSs.
LLC Astroinvest-Energy
2015 2014
$'000 $'000
Non-current assets 4 886
Current assets 735 1,234
Non-current liabilities - (598)
Current liabilities (6,986) (4,742)
Revenue - -
Loss for the period (6,107) (3,058)
Other comprehensive (loss)/income (3) (73)
Total comprehensive loss (6,110) (3,131)
Net deficit of the joint venture (6,247) (3,220)
LLC Industrial Company Gazvydobuvannya
2015 2014
$'000 $'000
Non-current assets 2,113 20,273
Current assets 2,164 2,106
Non-current liabilities - (312)
Current liabilities (2,652) (2,821)
Revenue - -
Loss for the period (13,822) (56,559)
Other comprehensive income/(loss) (3,729) (18,727)
Total comprehensive loss (17,551) (75,286)
Net assets of the joint venture 1,625 19,246
As of 31 December 2015 joint venture LLC Industrial Company Gazvydobuvannya
conducted an impairment assessment of its exploration and evaluation assets.
The impairment charge of $12.6 million recognised as the result of exploration
and evaluation assets value recoverability assessment was included in the loss
for the period.
Key assumptions used in the impairment assessment were as follows:
* Future gas price was assumed to be flat $210, real per m3;
* The pre-tax discount rate used was 24%, real.
LLC Westgasinvest
2015 2014
$'000 $'000
Non-current assets 83 73
Current assets 562 123
Non-current liabilities - -
Current liabilities (313) (2,893)
Revenue - -
Loss for the period (1,854) (3,717)
Other comprehensive income (322) (1,024)
Total comprehensive loss (2,176) (4,741)
Net assets/(deficit) of the joint venture 332 (2,697)
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 December 2015
LLC LLC Industrial LLC Total
Astroinvest-Energy company Westgasinvest
Gazvydo-buvannya
$'000 $'000
$'000
$'000
(Deficit)/ net assets (1,240) 62,283 4,922 65,965
recognised
as at 1 January 2014
Investments during the year 224 2,800 - 3,024
Profit/(loss) for the year (1,253) (52,700) (711) (54,664)
(Deficit)/ net assets (2,269) 12,383 4,211 14,325
recognised
as at 1 January 2015
Investments during the year - 700 - 700
Profit/(loss) for the year (228) (12,286) (330) (12,844)
Carrying amount of Group's (2,497) 797 3,881 2,181
interest
as at 31 December 2015
The carrying amounts of the Group's interest in joint ventures recognized in
the financial statements of the Group using the equity method are set out in
the tables below:
The Group is committed together with ENI to fund LLC Astroinvest-Energy
subsequently to the year end with the necessary amount of $2.5 million in order
to close current liabilities of the joint venture. Most of the funds will be
used to repay the costs charged by the partners.
20. Inventories
2015 2014
$'000 $'000
Natural gas 2,525 8,124
Diesel 38 258
Other inventories 1,148 1,751
Impairment provision for obsolete (208) (193)
inventory
Carrying amount 3,503 9,940
The impairment provision as at 31 December 2015 and 2014 is made so as to
reduce the carrying value of the obsolete inventories to net realisable value.
During 2015 impairment charge $0.1 million (2014: $0.4 million) has been
recognised in respect of other inventories.
21. Trade and other receivables
2015 2014
$'000 $'000
Trading receivables 8,514 5,060
Trading prepayments 3,206 8,584
Receivable from joint venture 1,824 1,938
Prepayments 64 166
VAT recoverable - 1,674
Other receivables 803 469
14,411 17,891
Trading prepayments represent actual payments made by the Group to suppliers
for the January 2016 gas supply.
Trading receivables represent current receivables from customers and are to be
repaid within three months after the year end. As of 31 December 2015 there
were no past due receivables and no related impairment provision. The Group
considers that the carrying amount of receivables approximates their fair
value.
VAT recoverable is presented net of the cumulative provision of $1.1 million
(2014: $4.4 million) against Ukrainian VAT receivable has been recognised as at
31 December 2015.
Receivable from joint ventures comprise $1.0 million from Astroinvest-Energy
LLC (2014: $1.2 million) and $0.8 million from Gazvydobuvannya LLC (2014: $0.7
million).
22. Cash and cash equivalents
Cash and cash equivalents as at 31 December 2015 of $49.4 million (2014: $48.9
million) comprise cash held by the Group. The Directors consider that the
carrying amount of these assets approximates to their fair value.
As of 31 December 2015 part of the cash and cash equivalents in amount of $20
million related to security of borrowings and held at UK bank is considered to
be restricted cash balance (note 24).
23. Deferred Tax
The following are the major deferred tax liabilities and assets recognised by
the Group and movements thereon during the current and prior reporting period:
Temporary differences
$'000
Liability as at 1 January 2014 675
Deferred tax benefit (207)
Exchange differences (180)
Liability as at 1 January 2015 288
Deferred tax benefit (287)
Exchange differences (1)
Liability as at 31 December 2015 -
At 31 December 2015, the Group had the following unused tax losses available
for offset against future taxable profits:
2015 2014
$'000 $'000
UK 9,054 10,274
Ukraine 78,859 69,010
87,913 79,284
Deferred tax assets have not been recognised in respect of these tax losses
owing to the uncertainty that profits will be available in future periods
against which they can be utilised.
The Group's unused tax losses of $9.1 million (2014: $10.3 million) relating to
losses incurred in the UK are available to shelter future non-trading profits
arising within the Company. These losses are not subject to a time restriction
on expiry.
Unused tax losses incurred by Ukraine subsidiaries amount to $78.9 million
(2014: $69.0 million). Under general provisions, these losses may be carried
forward indefinitely to be offset against any type of taxable income arising
from the same company of origination. Tax losses may not be surrendered from
one Ukraine subsidiary to another. However, in the past, Ukrainian legislation
has been imposed which restricted the carry forward of tax losses. During 2011
a new tax legislation in Ukraine was implemented which resulted in the
restriction to recognition of accumulated losses at 1 April 2011. Starting 1
January 2012 only 25% of accumulated losses as at this date are allowed to be
utilised each year for the period from 2012 till 2015 in the calculation of
taxable income of the company. Tax losses accumulated after 1 January 2012 have
no restrictions.
24. Short-term borrowing
In October 2014 the Group started to use short-term borrowings as a financing
facility for its trading activities. Borrowings are represented by credit line
drawn in short-term tranches in UAH at Ukrainian bank, 100% subsidiary of UK
bank. Credit line is secured by $20 million of cash balance placed at the
European bank in the UK.
(MORE TO FOLLOW) Dow Jones Newswires
April 26, 2016 09:04 ET (13:04 GMT)
Outstanding amount as at 31 December 2015 was $12.9 million (2014: $17.3
million) with effective interest rate 20%p.a. (2014: 16%p.a.). Interest is paid
monthly and as at 31 December 2015 accrued interest amounted to $0.2 million
(2014: $0.2 million).
Outstanding amount as at 31 December 2015 was $12.9 million (2014: $17.3
million) with average effective interest rate 20%p.a. (2014: 16%p.a.). Interest
is paid monthly and as at 31 December 2015 accrued interest amounted to $0.2
million (2014: $0.2 million).
25. Trade and other payables
2015 2014
$'000 $'000
Trade creditors 921 723
Trading payables 907 312
VAT payable 899 -
Accruals 635 631
Payables to joint ventures 96 159
Taxes and social security 77 425
Payments received in advance 6 2,470
Other payables 141 348
3,682 5,068
Prepayments received represent payments from the customers for the natural gas
to be supplied in January 2016.
Trading payables represent liability to suppliers for the natural gas supply in
December 2015.
Trade creditors and accruals principally comprise amounts outstanding for
capital work programme purchases and ongoing costs. The average credit period
taken for trade purchases is 24 days (2014: 91 days). The Group has financial
risk management policies to ensure that all payables are paid within the credit
timeframe.
The Directors consider that the carrying amount of trade and other payables
approximates to their fair value. No interest is generally charged on
outstanding balances.
26. Provisions
The provisions at 31 December 2015 comprise of $2.3 million of probable tax
obligation and decommissioning provision.
As at 31 December 2015 the Group recognised short-term provision in respect of
possible corporate tax obligation in respect of dispute on classification
taxable income and expenses. The Group appealed to the Tribunal, however given
the uncertainty around the final position the provision of $1.3 million (GBP0.9
million) and up to $0.2 million (GBP0.1 million) of interest was recognised in
the financial statements.
Decommissioning
$'000
At 1 January 2014 708
Change in estimate (note 16 and 17) 296
Unwinding of discount on decommissioning 48
provision (note 13)
Exchange differences (350)
At 1 January 2015 702
Change in estimate (note 16 and 17) 262
Unwinding of discount on decommissioning 13
provision (note 13)
Exchange differences (245)
At 31 December 2015 732
At 1 January 2014 708
Non-current 55
Current 647
At 1 January 2015 702
Non-current 726
Current 6
At 31 December 2015 732
In accordance with the Group's environmental policy and applicable legal
requirements, the Group intends to restore the sites it is working on after
completing exploration or development activities.
A short-term provision of $6 thousand (2014: $0.6 million) has been made for
decommissioning costs, which are expected to be incurred within the next year
as a result of the demobilisation of drilling equipment and respective site
restoration. In addition to that there isa short-term provision for
decommissioning costs at Zagoryanska licence of $3.7 million and at Pokrovska
licence of $1.9 million in the account of joint ventures (note 19).
The long-term provision recognised in respect of decommissioning reflects
management's estimate of the net present value of the Group's share of the
expenditure expected to be incurred in this respect. This amount has been
recognised as a provision at its net present value, using a discount rate that
reflects the market assessment of time value of money at that date, and the
unwinding of the discount on the provision has been charged to the income
statement. These expenditures are expected to be incurred at the end of the
producing life of each field in the removal and decommissioning of the
facilities currently in place (currently estimated to be between 1 and 17
years).
27. Share capital
Authorised and issued equity share capital
2015 2014
Number Number
'000 $'000 '000 $'000
Authorised 1,000,000 57,713 1,000,000 57,713
Ordinary shares of GBP0.03 each
Issued 231,092 13,337 231,092 13,337
Ordinary shares of GBP0.03 each
Authorised but unissued share capital of GBP30 million has been translated into
US dollars at the historic exchange rate of the issued share capital. The
Company has one class of Ordinary shares which carry no right to fixed income.
Issued equity share capital
Ordinary shares
of GBP0.03
At 31 December 2014 and 2015 231,091,734
28. Financial instruments
Capital risk management
The Group manages its capital to ensure that entities in the Group will be able
to continue as a going concern, while maximising the return to shareholders.
The capital resources of the Group consists of cash and cash equivalents
arising from equity attributable to owners of the Company, comprising issued
capital, reserves and retained earnings as disclosed in the Consolidated
Statement of Changes in Equity.
Externally imposed capital requirement
The Group is not subject to externally imposed capital requirements.
Categories of financial instruments
2015 2014
$'000 $'000
Financial assets - loans and receivables (includes cash and
cash equivalents)
Cash and cash equivalents 49,407 48,927
Trading receivable 8,514 5,060
Receivable from joint venture 1,824 1,938
Other receivables 801 469
60,546 56,394
Financial liabilities - measured at amortised cost
Short-term borrowings 12,903 17,327
Trade creditors 921 723
Trading payables 907 312
Accruals 635 631
Other payables 141 348
Payables to joint ventures 96 159
15,603 19,500
Financial risk management objectives
Management provides services to the business, co-ordinates access to domestic
and international financial markets and monitors and manages the financial
risks relating to the operations of the Group in Ukraine through internal risks
reports which analyse exposures by degree and magnitude of risks. These risks
include commodity price risks, foreign currency risk, credit risk, liquidity
risk and cash flow interest rate risk. The Group does not enter into or trade
financial instruments, including derivative financial instruments, for
speculative purposes.
The Audit Committee of the Board reviews and monitors risks faced by the Group
through meetings held throughout the year.
Interest rate risk
Interest rate risk arises from the possibility that changes in interest rates
will affect the value of the financial instruments. The Group is not exposed to
interest rate risk because entities of the Group borrow funds at fixed interest
rates.
Commodity price risk
The commodity price risk related to Ukrainian gas and condensate prices and, to
a lesser extent, prices for crude oil are the Group's most significant market
risk exposures. World prices for gas and crude oil are characterised by
significant fluctuations that are determined by the global balance of supply
and demand and worldwide political developments, including actions taken by the
Organisation of Petroleum Exporting Countries.
These fluctuations may have a significant effect on the Group's revenues and
operating profits going forward. In 2015 the price for Ukrainian gas was mainly
based on the current price of the European gas imports. Management continues to
expect that the Group's principal market for gas will be the Ukrainian domestic
market.
The Group does not hedge market risk resulting from fluctuations in gas,
condensate and oil prices, and holds no financial instruments which are
sensitive to commodity price risk.
Foreign exchange risk and foreign currency risk management
The Group undertakes certain transactions denominated in foreign currencies.
Hence, exposures to exchange rate fluctuations arise. The Group to date has
elected not to hedge its exposure to the risk of changes in foreign currency
(MORE TO FOLLOW) Dow Jones Newswires
April 26, 2016 09:04 ET (13:04 GMT)
exchange rates.
The carrying amounts of the Group's foreign currency denominated monetary
assets and monetary liabilities at the reporting date are as follows:
Liabilities Assets
2015 2014 2015 2014
$'000 $'000 $'000 $'000
Monetary balance denominated in USD where 157 105 48,860 46,484
functional currency is GBP
Foreign currency sensitivity analysis
The Group is exposed primarily to movements in currencies against the US dollar
as this is the presentation currency of the Group. In order to fund
operations, US dollar funds are converted to UAH just before being contributed
to the Ukrainian subsidiaries. Sensitivity analyses have been performed to
indicate how the profit or loss would have been affected by changes in the
exchange rate between the GBP and US dollar. The analysis is based on a
weakening of the US dollar by 10 per cent against GBP, a functional currency in
the entities of the Group which have significant monetary assets and
liabilities at the end of each respective period. A movement of 10 per cent
reflects a reasonably possible sensitivity when compared to historical
movements over a three to five year timeframe. The sensitivity analysis
includes only outstanding foreign currency denominated monetary items and
adjusts their translation at the period end for a 10 per cent change in foreign
currency rates.
A number below indicates a decrease in profit where US dollar strengthens 10
per cent against the other currencies. For a 10 per cent weakening of the US
dollar against the other currencies, there would be an equal and opposite
impact on the profit or loss, and the balances would be negative.
The Group is not exposed to significant foreign currency risk in other
currencies.
The following table details the Group's sensitivity to a 10 per cent decrease
in the US dollar against the GBP.
2015 2014
$'000 $'000
Income statement (4,572) (4,473)
Inflation risk management
Inflation in Ukraine and in the international market for oil and gas may affect
the Group's cost for equipment and supplies. The Directors will proceed with
the Group's practices of keeping deposits in US dollar accounts until funds are
needed and selling its production in the spot market to enable the Group to
manage the risk of inflation.
Credit risk management
Credit risk refers to the risk that counterparty will default on its
contractual obligations resulting in financial loss to the Group. The Group's
credit management process includes the assessment, monitoring and reporting of
counterparty exposure on a regular basis. Credit risk with respect to
receivables and advances is mitigated by active and continuous monitoring the
credit quality of its counterparties through internal reviews and assessment.
Trading receivables as at 31 December 2015 have been paid within four months
after year end.
The Group makes allowances for impairment of receivables where there is an
identified event which, based on previous experience, is evidence of a
reduction in the recoverability of cash flows.
The credit risk on liquid funds (cash) is considered to be limited because the
counterparties are financial institutions with high and good credit ratings,
assigned by international credit-rating agencies in the UK and Ukraine
respectively.
The carrying amount of financial assets recorded in the financial statements
represents the Group's maximum exposure to credit risk.
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of
Directors, which has built an appropriate liquidity risk management framework
for the management of the Group's short-, medium- and long-term funding and
liquidity management requirements. The Group manages liquidity risk by
maintaining adequate cash reserves and by continuously monitoring forecast and
actual cash flows.
The following tables sets out details of the expected contractual maturity of
financial liabilities.
Within 3 months More
3 months to 1 than 1 Total
year year
$'000 $'000 $'000 $'000
At 31 December 2015
Short-term borrowings 12,903 - - 12,903
Trade and other payables 3,019 657 - 3,676
At 31 December 2014
Short-term borrowings 17,327 - - 17,327
Trade and other payables 1,683 915 - 2,598
29. Commitments and contingencies
Joint activity agreements
The Group has working interests in nine licences to conduct its exploration and
development activities in Ukraine. Each licence is held with the obligation to
fulfil a minimum set of exploration activities within its term and is
summarised on an annual basis, including the agreed minimum amount forecasted
expenditure to fulfil those obligations. The activities and proposed
expenditure levels are agreed with the government licensing authority.
The required future financing of exploration and development work on fields
under the licence obligations are as follow:
2015 2014
$'000 $'000
Within one year 234 580
Between two and five years 1,135 520
1,369 1,100
The Group has revised its minimum working programmes and resubmitted the
required documentation to the government authorities; updated commitments have
slightly increased for all licences from $1.1 million to $1.4 million. Licence
obligations of the joint ventures as at 31 December 2015 amounted to $0.1
million (2014: $0.5 million) of obligations within one year and $nil million
(2014: $0.4 million) of obligations between two and five years.
In addition to licence commitments, the Group is committed together with ENI to
fund LLC Astroinvest-Energy subsequently to year end with the necessary amount
of $2.2 million (2014: $2.3 million) in order to close current liabilities of
the joint venture.
Tax contingent liabilities
The Group assesses its liabilities and contingencies for all tax years open for
audit by UK and Ukraine tax authorities based upon the latest information
available. For those matters where it is probable that an adjustment will be
made, the Group records its best estimate of these tax liabilities, including
related interest charges. Inherent uncertainties exist in estimates of tax
contingencies due to complexities of interpretation and changes in tax laws.
Whilst the Group believes it has adequately provided for the outcome of these
matters, certain periods are under audit by the UK and Ukraine tax authorities,
and therefore future results may include favourable or unfavourable adjustments
to these estimated tax liabilities in the period the assessments are made, or
resolved. The final outcome of tax examinations may result in a materially
different outcome than assumed in the tax liabilities.
30. Related party transactions
All transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note. The application of IFRS 11 has resulted in the existing joint ventures
LLC Astroinvest-Energy, LLC Gazvydobuvannya and LLC Westgasinvest being
accounted for under the equity method and disclosed as related parties.
During the period, Group companies entered into the following transactions with
joint ventures who are considered as related parties of the Group:
2015 2014
$'000 $'000
Revenues from services provided and sales 508 597
of goods
Purchases of goods 9 87
Amounts owed by related parties 1,824 1,938
Amounts owed to related parties 96 159
Directors' remuneration
The remuneration of the Directors, who are the key management personnel of the
Group, is set out below in aggregate for each of the categories specified in
IAS 24 Related Party Disclosures. Further information about the remuneration of
individual Directors is provided in the audited part of the Annual Report on
Remuneration 2015 on pages 39 and 44.
Purchase of services Amounts owing
2015 2014 2015 2014
$'000 $'000 $'000 $'000
Short-term employee benefits 1,282 1,148 169 137
The total remuneration of the highest paid Director was $0.4 million in the
year (2014: $0.4 million).
The amounts outstanding are unsecured and will be settled in cash. No
guarantees have been given or received and no provisions have been made for
doubtful debts in respect of the amounts owed by related parties.
31. Events after balance sheet date
Starting 1 January 2016 the new regulations on the gas trading in Ukraine came
into force implying the additional requirement of the covered bank guarantee
for 20% of trading volumes that will effect cost of supply.
Subsequent to 31 December 2015, in April 2016 the Group has contributed,
together with eni, $1 million to LLC Astroinvest-energy as part of commitment
to fund its current liabilities.
Political and economic situation in Ukraine
(MORE TO FOLLOW) Dow Jones Newswires
April 26, 2016 09:04 ET (13:04 GMT)
We are monitoring the current political situation in Ukraine carefully and
there have been no disruptions to the Company's operations in either of our
operating locations.
We have reassessed the key judgements and critical accounting estimates as at
the date of this report and, based on the current status of operations, no
adjustments have been made.
Company Balance Sheet
As at 31 December 2015
Notes 2015 2014
$'000 $'000
ASSETS
Non-current assets
Investments 34 - -
Receivables from subsidiaries 35 26,905 73,750
26,905 73,750
Current assets
Trade and other receivables 35 778 3,333
Cash and cash equivalents 35 44,882 46,634
45,660 49,967
Total assets 72,565 123,717
LIABILITIES
Current liabilities
Trade and other payables 36 (380) (370)
(380) (370)
Total liabilities (380) (370)
Net assets 72,185 123,347
EQUITY
Share capital 37 13,337 13,337
Retained earnings 167,567 212,902
Cumulative translation reserves 38 (108,719) (102,892)
Total equity 72,185 123,347
The financial statements of Cadogan Petroleum plc, registered in England and
Wales no. 5718406, were approved by the Board of Directors and authorised for
issue on 25 April 2016.
They were signed on its behalf by:
Guido Michelotti
Chief Executive Officer
25 April 2016
The notes on pages 92 to 95 form part of these financial statements.
Company Cash Flow Statement
For the year ended 31 December 2015
Note 2015 2014
$'000 $'000
Net cash inflow from operating activities 39 3,655 (633)
Investing activities
Interest received 79 827
Loans to subsidiary companies (3,633) -
Net cash used in investing activities (3,554) 827
Net (decrease)/increase in cash and cash 101 194
equivalents
Effect of foreign exchange rate changes (1,853) (3,840)
Cash and cash equivalents at beginning of year 46,634 50,280
Cash and cash equivalents at end of year 44,882 46,634
Company Statement of Changes in Equity
For the year ended 31 December 2015
Share Cumulative
capital Retained translation
$'000 earnings reserves Total
$'000 $'000 $'000
As at 1 January 2014 13,337 210,297 (95,296) 128,338
Net income for the year - 2,605 - 2,605
Exchange translation differences - - (7,596) (7,596)
As at 1 January 2015 13,337 212,902 (102,892) 123,347
Net loss for the year - (45,335) - (45,335)
Exchange translation differences - - (5,827) (5,827)
As at 31 December 2015 13,337 167,567 (108,719) 72,185
Notes to the Company Financial Statements
For the year ended 31 December 2015
32. Significant accounting policies
The separate financial statements of the Company are presented as required by
the Companies Act 2006 (the "Act"). As permitted by the Act, the separate
financial statements have been prepared in accordance with International
Financial Reporting Standards.
The financial statements have been prepared on the historical cost basis. The
principal accounting policies adopted are the same as those set out in note 3
to the Consolidated Financial Statements except as noted below.
As permitted by section 408 of the Act, the Company has elected not to present
its profit and loss account for the year. Cadogan Petroleum plc reports a loss
for the financial year ended 31 December 2015 of $45.5 million (2014: $2.6
million) of which $46.5 million relates to the impairment of receivables from
subsidiaries.
Investments
Investments in subsidiaries are stated at cost less, where appropriate,
provisions for impairment.
Critical accounting judgements and key sources of estimation uncertainty
The Company's financial statements, and in particular its investments in and
receivables from subsidiaries, are affected by certain of the critical
accounting judgements and key sources of estimation uncertainty described in
note 4 to the Consolidated Financial Statements.
33. Auditor's remuneration
The auditor's remuneration for audit and other services is disclosed in note 10
to the Consolidated Financial Statements.
34. Investments
The Company's subsidiaries are disclosed in note 18 to the Consolidated
Financial Statements. The investments in subsidiaries are all stated at cost
less any provision for impairment.
35. Financial assets
The Company's principal financial assets are bank balances and cash and cash
equivalents, prepayments and receivables from related parties none of which are
past due. The Directors consider that the carrying amount of receivables from
related parties approximates to their fair value.
Receivables from subsidiaries
At the balance sheet date gross amounts receivable from the fellow Group
companies were $316.7 million (2014: $329.0 million). The Group recognised
impairment of $46.5 million in relation to receivables from subsidiaries in
2015 (2014: $nil). The carrying value of the receivables from the fellow Group
companies as at 31 December 2015 was $26.9 million (2014: $73.8 million). There
are no past due receivables.
Trade and other receivables
2015 2014
$'000 $'000
Prepayments 752 3,272
VAT recoverable - 37
Other receivables 26 24
778 3,333
In December 2015 the Company has made a prepayment for the natural gas on
behalf of its Ukrainian subsidiary due to difficulties of currency purchase in
Ukraine. In 2016 this prepayment has been settled in full to the Company.
Cash and cash equivalents
Cash and cash equivalents comprise cash held by the Company and short-term bank
deposits with an original maturity of three months or less. The carrying value
of these assets approximates to their fair value.
As of 31 December 2015 cash and cash equivalents in the amount of $20 million,
related to security of the loan provided to the Ukrainian subsidiary and held
at UK bank, was restricted (note 24).
36. Financial liabitlities
Trade and other payables
2015 2014
$'000 $'000
Trade creditors 237 179
Accruals 143 191
380 370
Trade payables principally comprise amounts outstanding for trade purchases and
ongoing costs. The average credit period taken for trade purchases is 126 days
(2014: 82 days).
The Directors consider that the carrying amount of trade and other payables
approximates to their fair value. No interest is charged on balances
outstanding.
37. Share capital
The Company's share capital is disclosed in note 27 to the Consolidated
Financial Statements.
38. Cumulative translation reserve
The functional currency of the Company is pounds sterling. The financial
statements of the Company are expressed in US dollars, which is its
presentation currency. Cumulative translation reserve represents the effect of
translating the results and financial position of the Company into US dollars.
39. Notes to cash flow statement
2015 2014
$'000 $'000
(Loss)/profit for the year (45,335) 2,605
Adjustments for:
Interest received (79) (827)
Impairment of receivables from subsidiaries 46,504 -
Operating cash flows before movements in working capital 1,090 1,778
Decrease/(increase) in receivables 2,555 (1,570)
Increase/(decrease) in payables 10 (841)
Cash from operations 3,655 (633)
Income taxes paid - -
Net cash inflow from continuing operations 3,655 (633)
40. Financial instruments
The Company manages its capital to ensure that it is able to continue as a
going concern while maximising the return to shareholders. Refer to note 28 for
the Group's overall strategy and financial risk management objectives.
The capital resources of the Group consist of cash and cash equivalents arising
(MORE TO FOLLOW) Dow Jones Newswires
April 26, 2016 09:04 ET (13:04 GMT)
from equity, comprising issued capital, reserves and retained earnings.
Categories of financial instruments
2015 2014
$'000 $'000
Financial assets - loans and receivables (includes cash
and cash equivalents)
Cash and cash equivalents 44,882 46,634
Amounts due from subsidiaries 26,905 73,750
71,787 120,384
Financial liabilities - measured at amortised cost
Trade creditors (237) (179)
(237) (179)
Interest rate risk
All financial liabilities held by the Company are non-interest bearing. As the
Company has no committed borrowings, the Company is not exposed to any
significant risks associated with fluctuations in interest rates.
Credit risk
Credit risk refers to the risk that counterparty will default on its
contractual obligations resulting in financial loss to the Company. For cash
and cash equivalents, the Company only transacts with entities that are rated
equivalent to investment grade and above. Other financial assets consist of
amounts receivable from related parties.
The Company's credit risk on liquid funds is limited because the counterparties
are banks with high credit-ratings assigned by international credit-rating
agencies.
The carrying amount of financial assets recorded in the Company financial
statements, which is net of any impairment losses, represents the Company's
maximum exposure to credit risk.
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of
Directors, which has built an appropriate liquidity risk management framework
for the management of the Company's short, medium and long-term funding and
liquidity management requirements. The Company maintains adequate reserves, by
continuously monitoring forecast and actual cash flows.
The Company's financial liabilities are not significant and therefore no
maturity analysis has been presented.
Foreign exchange risk and foreign currency risk management
The Company undertakes certain transactions denominated in foreign currencies.
Hence, exposures to exchange rate fluctuations arise. The Company holds a
large portion of its foreign currency denominated monetary assets and monetary
liabilities in US dollars. More information on the foreign exchange risk and
foreign currency risk management is disclosed in note 28 to the Consolidated
Financial Statements.
41. Related parties
Amounts due from subsidiaries
The Company has entered into a number of unsecured related party transactions
with its subsidiary undertakings. The most significant transactions carried out
between the Company and its subsidiary undertakings are mainly for short and
long-term financing. Amounts owed from these entities are detailed below:
2015 2014
$'000 $'000
Cadogan Petroleum Holdings Limited 26,905 73,750
26,905 73,750
Refer to note 35 for details on the Company's receivables due from
subsidiaries.
The remuneration of the Directors, who are the key management personnel of the
Group, is set out below in aggregate for each of the categories specified in
IAS 24 Related Party Disclosures. Further information about the remuneration of
individual Directors is provided in the audited part of the Annual Report on
Remuneration 2015 on pages 39 to 44.
Remuneration Amounts owing
2015 2014 2015 2014
$'000 $'000 $'000 $'000
Short-term employee benefits 603 334 28 54
The total remuneration of the highest paid Director was $0.4 million in the
year (2014: $0.4 million)
Events after the balance sheet date
Events after the balance sheet date are disclosed in note 31 to the
Consolidated Financial Statements.
GLOSSARY
IPO Initial public offering
IFRSs International Financial Reporting
Standards
JAA Joint activity agreement
UAH Ukrainian hryvnia
GBP Great Britain pounds
$ United States dollars
bbl Barrel
boe Barrel of oil equivalent
mmboe Million barrels of oil equivalent
mboe Thousand barrels of oil equivalent
mboepd Thousand barrels of oil equivalent per
day
boepd Barrels of oil equivalent per day
bcf Billion cubic feet
mmcm Million cubic metres
mcm Thousand cubic metres
Reserves Those quantities of petroleum
anticipated to be commercially recoverable by application of development
projects to known accumulations from a given date forward under defined
conditions. Reserves include proved, probable and possible reserve categories.
Proved Reserves Those additional Reserves which analysis of
geoscience and engineering data can be estimated with reasonable certainty to
be commercially recoverable, from a given date forward, from reservoirs and
under defined economic conditions, operating methods and government
regulations.
Probable Reserves Those additional Reserves which analysis of
geoscience and engineering data indicate are less likely to be recovered than
proved Resources but more certain to be recovered than possible Reserves.
Possible Reserves Those additional Reserves which analysis of
geoscience and engineering data indicate are less likely to be recoverable than
probable Reserves.
Contingent Resources Those quantities of petroleum estimated, as of a
given date, to be potentially recoverable from known accumulations by
application of development projects, but which are not currently considered to
be commercially recoverable due to one or more contingencies.
Prospective Resources Those quantities of petroleum which are estimated
as of a given date to be potentially recoverable from undiscovered
accumulations.
P1 Proved Reserves
P2 Probable Reserves
P3 Possible Reserves
1P Proved Reserves
2P Proved plus probable Reserves
3P Proved plus probable plus possible
Reserves
Carboniferous A geological period 295 million to 354
million years before present
Devonian A geological period between 417 million
and 354 million years before present
Visean Geological period within the early to
middle Carboniferous
Spud To commence drilling, once the cement
cellar and conductor pipe at the well-head have been constructed
TD Target depth
Workover The process of performing major maintenance
or remedial treatment of an existing oil or gas well
LWD Logging while drilling
SHAREHOLDER INFORMATION
Enquiries relating to the following administrative matters should be addressed
to the Company's registrars:
Capita Asset Services, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU
Telephone number:
UK: 0871 664 0300 (calls cost 10p per minute plus network extras).
International: +44 (0) 371 664 0300
Lines are open 9am - 5.30pm, Monday - Friday, excluding public holidays.
* Loss of share certificates.
* Notification of change of address.
* Transfers of shares to another person.
* Amalgamation of accounts: if you receive more than one copy of the Annual
Financial Report, you may wish to amalgamate your accounts on the share
register.
You can access your shareholding details and a range of other services at the
Capita website www.capitashareportal.com.
Information concerning the day-to-day movement of the share price of the
Company can be found on the Group's website www.cadoganpetroleum.com or that of
the London Stock exchange www.prices.londonstockexchange.com.
Unsolicited mail
As the Company's share register is, by law, open to public inspection,
shareholders may receive unsolicited mail from organisations that use it as a
mailing list. To reduce the amount of unsolicited mail you receive, contact:
The Mailing Preference Service, FREEPOST 22, London W1E 7EZ. Telephone: 0845
703 4599. Website: www.mpsonline.org.uk
Financial calendar 2016/2017
Annual General Meeting 22 June 2016
Half Yearly results announced August 2016
Annual results announced April 2017
Investor relations
Enquiries to: info@cadoganpetroleum.com
Registered office
c/o Bridgehouse Company Secretaries Ltd, Unit 205,
Clerkenwell Workshops, 31 Clerkenwell Close, London EC1R 0AT
Registered in England and Wales no. 5718406
Ukraine
48/50A Zhylyanska Street
Business center «Prime», 8th floor
(MORE TO FOLLOW) Dow Jones Newswires
April 26, 2016 09:04 ET (13:04 GMT)
01033 Kyiv Ukraine Email: info@cadoganpetroleum.com Tel: +38 044 594 58 70 Fax: +38 044 594 58 71 www.cadoganpetroleum.com All references to page numbers in the announcement are to the page numbers in the full Annual Report and Financial Statements which can be found on the Company's website www.cadoganpetroleum.com END
(END) Dow Jones Newswires
April 26, 2016 09:04 ET (13:04 GMT)
1 Year Cadogan Energy Solutions Chart |
1 Month Cadogan Energy Solutions Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions
