Cadogan Petroleum Operational Update

 
TIDMCAD 
 
This  announcement is deemed to contain Inside Information as defined under the 
Market Abuse Regulations  n. 596/2014 
 
                             Cadogan Petroleum Plc 
                         ("Cadogan" or the "Company") 
 
                              Operational update 
 
Cadogan Petroleum plc ("Cadogan"), the London Stock Exchange 
listed, independent, oil & gas company, is pleased to provide the following 
operational update post year end. 
 
Revenues from E&P operations combined with a further reduction in G&A costs, 
strict discipline on all spending and a rigorous management of receivables have 
helped the Company to deliver another step towards overall profitability. 
 
Oil and gas production in 2017 increased by 34% over the corresponding period 
last year. The average daily production rate through the year was 167 boepd 
(155 boepd net to Cadogan) and the year-end exit rate was 190 boepd (176 net to 
Cadogan). 
 
The increase in production levels is due to successful work-overs and the 
implementation of production optimisation programs. Combined, these operations 
increased oil production from the Monastyretska field by 78% and kept gas 
production constant, despite the high level of depletion from the two producing 
fields. 
 
The increase in oil production from the Monastyretska field was achieved by 
re-entering old suspended wells, rather than drilling new ones. This approach 
delivered the targeted increase in oil production, while minimising cash 
outflow and as such only marginally impacted the Company's cash position. 
 
Operating costs have remained under tight control and combined with the 
increased production volumes have taken the Company's E&P operations above 
break-even. The management and staff are also proud to have achieved another 
year of LTI free operations, as well as a further reduction of CO2 emissions to 
the atmosphere (per produced boe) during the year. 
 
The Ukrainian government approved a reduction in the sub-soil use tax 
(royalties) from 45% to 29% for oil wells, from 29% to 12% for new gas wells 
shallower than 5000m and from 14% to 6% for new gas wells deeper than 5000m. 
While the reduction in royalties for oil wells has had a direct positive impact 
on net revenues, the reduction for gas wells has increased the value of the 
Company's Borynya licences and is expected to make its farm-out more 
attractive. 
 
The Company's gas trading business had a good year in 2017. This was driven by 
the combination of a new team, which delivered on expectations, and a number of 
opportunistic sales, which generated a healthy margin. 
 
The focus of Cadogan's E&P Services business during the year was on catering 
for the Company's internal needs, including site restorations and well 
abandonment in the East of Ukraine and work-overs in the West. While these 
operations did not generate additional external revenue streams, they 
contributed to keeping costs low by retaining the contractors' margin within 
the Company. 
 
The acquisition of ExploeEnergy in Italy was finalized during the year and the 
Company has engaged with the local authorities to expedite the award of the 
licences. The search for further investment opportunities, as part of the 
Company's strategy to reload its asset portfolio outside Ukraine, has also 
continued. The Company has strict criteria for any additional assets it 
acquires, based on a combination of price, risk and potential synergies to 
ensure the cash resources are used effectively in building shareholder value. 
The Board and management remain committed to these criteria, with a focus on 
delivering long-term value over short-term gain. 
 
As part of the search, an extensive net has been cast across both industry and 
the financial communities of the main European financial centres, which has 
helped retain a healthy pipeline of opportunities. Over the last year, more 
than twenty opportunities were scrutinized, but none met the criteria needed to 
create value for shareholders and as such justified an investment. 
 
2018 Outlook 
 
Net production to Cadogan is expected to exceed 200 boepd as the Company 
continues to implement production enhancement activities. These are aimed at 
continuing to support profitability and cash generation from the Company's 
existing Ukrainian assets and preserve the Company's cash position for further 
investment. 
 
Two wells are planned within the next 12-18 months, both of which will support 
the retention of the Company's licences. These include a shallow well on the 
Borynya licence, to test the potential of satellite prospects around an old 
depleted oil field, and an appraisal well on the Monastyretska's oil field. 
 
The appraisal well on the Monastyretska field will be drilled upon completing 
an integrated reservoir study, which will be used to update the licence value, 
after the two successful re-entries of the past year, as well as to assist in 
identifying the optimal development scheme. The scheme will be included in the 
application to convert the licence from an exploration to a production licence. 
 
The Cheremkhivsko-Strupkivska licence expires in May and the operator, WGI, has 
filed an application to extend it for 10 years. The licence, located in Western 
Ukraine, contains a marginal gas field in which the Company has a 54.2% 
participating interest and which last year contributed 15 boepd to the 
Company's net production. 
 
The Company intends to continue to operate its gas trading business, with 
trading volumes expected to increase over 2017 notwithstanding the challenges 
of a market which is still evolving in a manner which is sometimes 
unpredictable. As E&P activity in Ukraine picks up, Cadogan also intends to 
actively explore opportunities to spin-off its E&P services subsidiary. 
 
The management team is currently reviewing several potential opportunities for 
further investment outside Ukraine. The team intends to continue to actively 
pursue these and other opportunities that arise to utilize the preserved cash. 
 
                                    -ENDS- 
 
About 
 
Cadogan is an independent oil and gas company. Cadogan operates exploration and 
production licenses in Western Ukraine, conducts gas trading operations, and 
provides services to E&P companies. 
 
For further information, please contact: 
 
Cadogan Petroleum plc 
 
Guido Michelotti           Chief Executive Officer    [phone] 
 
Ben Harber                 Company Secretary          [phone] 
 
Cantor Fitzgerald Europe 
 
David Porter                                          [phone] 
 
 
 
END 
 

(END) Dow Jones Newswires

January 24, 2018 04:58 ET (09:58 GMT)