CADOGAN PETROLEUM PLC - Half-yearly Report

CADOGAN PETROLEUM PLC

         Half Yearly Report for the Six Months ended 30 June 2015

(Unaudited and unreviewed)

Highlights

Cadogan Petroleum plc (“Cadogan” or the “Company”), an independent oil and gas exploration, development and production company with onshore gas, condensate and oil assets in Ukraine, announces its unaudited results for the six months ended 30 June 2015.

• The continued efforts to preserve cash have been successful, moving the Company closer to cash neutrality, notwithstanding an unfavorable scenario
• Production has continued from Debeslavetska, Cheremkivska and Monastyretska licences and was 118 boepd (net) at the end of June. Average net production for the reporting period was 88 boepd (versus 93 boepd in H1 2014), the reduction being the result of a temporary halt to Monastyretska operations while waiting for the renewal of the licence
• Monastyretska and Bytlyanska licences have been renewed until November 2019 and December 2019, respectively, and the renewal of the expired Zagoryanska licence follows its normal due process
• The Ukrainian Hryvnia has further devalued against the USD, which is the Group's reporting currency, resulting in a significant decrease in the reported USD value of the assets in the country
• Guido Michelotti, a former eni executive with more than 30 years of Exploration and Production (“E&P”) experience, has been appointed CEO to replace Bertrand des Pallieres who has moved to lead the Cadogan’s growing gas trading business

Enquiries:

Cadogan Petroleum Plc		[phone]
Guido Michelotti Marta Halabala	Chief Executive Officer Company Secretary
Cantor Fitzgerald Europe		[phone]
David Porter Richard Redmayne

Board Statement

Introduction

The reporting period has not been easy for the oil and gas industry, in general, and for companies operating in Ukraine in particular. The negative impact of persistent low prices has been compounded in Ukraine by the devaluation of the currency and the extension into 2015 of the harsh fiscal regime introduced in 2014 as a temporary measure. After the end of our reporting period, the government announced that the harsher regime will be abolished and the relevant draft legislation submitted to parliament for vote. It, unfortunately, may not apply to Joint Ventures and Debeslavetske and Cheremkhivske gas production falls under this category.

In this challenging context the Group has continued to focus on controlling its costs in order to preserve cash. A right-sizing program to further reduce the number of staff has been started and at the same time a broader review of the administrative expenses undertaken; as part of this exercise the Company has moved its Ukrainian headquarters to a smaller office. 

On the technical side the activity has focused on maintaining the licences and efficiently producing from the existing fields within the Debeslavetska, Cheremkhivska and Monastyretska licences. Revenues from production have been negatively affected not only by the lower realised prices, but also by the delays in securing the renewal of the Monastyretska licence and by the very harsh fiscal regime imposed in 2014 and maintained throughout the reporting period.

Operations

The E&P activity has focused on maintaining the licences’ validity and on safely and efficiently producing from the existing fields within the Debeslavetska, Cheremkhivska and Monastyretska licences. At the end of the reporting period production rate was increased to 118 boepd, but this has not been enough to offset the negative impact of the delay of Monastyretska licence approval. The average production in the reported period was 88 boepd slightly below the 93 boepd of H1 2014.

In the Pirkovskoe licence, the work-over and testing activity on well PIRK-1 confirmed the presence of a hydrocarbon, but so far no commercial production has been achieved.

Results of well Deb-15 have been integrated into the subsurface model to enhance the calibration of both seismic attributes and electric logs and thus de-risk the remaining exploration potential of the licence.

Trading

The trading activity has grown in the first half of the year, bringing the volumes traded to around 125 million cubic meters of gas which is almost twice the volumes traded in 2014.  Cadogan has managed to capture the benefits of the volatile environment of the Ukrainian gas market at the beginning of the year within a disciplined risk management framework.  

Financial position

At the date of this report, the Group had cash and cash equivalents of approximately $47.5 million excluding $0.3 million of Cadogan’s share of cash and cash equivalents in the joint ventures, including $20 million of restricted cash. The Directors believe that the capital available at the date of this report is sufficient for the Company and the Group to continue operations for the foreseeable future.

Outlook                                                  

The cost reduction efforts combined with the net margins generated by trading will help the Company to preserve the cash at this difficult juncture for the country and for the oil industry, so as to be ready to capture opportunities in and outside of Ukraine as they materialise.

The Board remains confident that the democratic process in Ukraine will deliver increased transparency and that the current economic difficulties will be overcome with the support of international financial institutions. The harsher, temporary fiscal terms introduced last year are expected to be withdrawn and this will contribute to restoring the conditions for investing in the exploitation of the marginal and technically challenging fields of Ukraine. At the same time the crisis of the oil and gas industry triggered by the persistent low oil prices is creating opportunities for companies like Cadogan which have the cash, the experience and the know-how to operate in an efficient manner.

The Board is of the opinion that the recent executive appointments, new CEO and new Head of Trading, have strengthened the Company: their competencies in upstream, M&A, financing and trading complement each other and will prepare Cadogan to capture and manage the opportunities which will materialise in and outside of Ukraine.

Operations Review

In 2015 the Group held working interests in eight (2014: nine) gas, condensate and oil exploration and production licences in the East and West of Ukraine; Zagoryanska licence expired in April and was not renewed due to an absence of interest in the field development from eni. Subsequent to eni’s withdrawal Cadogan has taken all necessary actions to re-obtain the licence via one of its wholly owned subsidiaries. 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 infrastructure. The Group’s primary focus during the period continued to be on the re-evaluation of the existing assets to define the best drillable prospects and enhancement of current production results.

Summary of the Group’s licences (as of 30 June 2015)
Working interest (%)	Licence	Expiry	Licence type(1)
Major licences
70.0	Pokrovskoe	August 2016	E&D
100.0	Pirkovskoe	October 2015	E&D
99.8	Bitlyanska	December 2019	E&D
Minor licences
99.2 99.2	Debeslavetska(2) Debeslavetska(2)	November 2026 September 2016	Production E&D
53.4	Cheremkhivska(2)	May 2018	Production
100.0	Slobodo-Rungerska	April 2016	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”).

In addition to the above licences, the Group has a 15 percent interest in WGI, which holds the Reklynetska, Zhuzhelianska, Cheremkhivsko-Strupkivska, Debeslavetska Exploration, Debeslavetska Production, Baulinska, Filimonivska, Kurinna, Sandugeyivska and Yakovlivska licences for unconventional activities. 

Below we provide an update to the full Operations Review contained in the Annual Financial Report for 2014 published on 30 April 2015.

Pokrovskoe licence

The Group holds a 70 per cent working interest in the Pokrovskoe licence area, the remainder owned by Eni pursuant to a joint venture formed in July 2011 (the “JV”). The exploration and development licence covers 49.5 square kilometres and will expire in August 2016. The Group has already started the process of the  licence extension. Pokrovskoe wells’ re-entering interest was confirmed by a local operator and is planned after the licence extension is obtained.

The Pokrovskoe licence covers seven promising hydrocarbon bearing zones, two already defined as drillable prospects, 2,200m deep. The qualification and volumetric definition of five other identified leads are planned.

Pirkovskoe licence

The Group has a 100 per cent working interest in the Pirkovskoe exploration and appraisal licence that covers 71.6 square kilometres and will expire in October 2015. The licence application for 20-years production period is in progress; documents were already transferred to the State Commission of Reserves of Ukraine for approval. 

One promising hydrocarbon bearing zone has been identified and qualified as a drillable prospect at a depth of circa 2,200m. In Pirk-1 the well re-entry activity continues and presently the work-over for testing the intervals of Lower Visean and Tournaisian (around 5,100m deep) is ongoing. Regardless of the evident gas and oil shows, a commercial inflow has not been obtained so far. Operations are expected to continue until October 2015. Re-evaluation of existing wells for re-entry potential is ongoing.

Bitlyanska licence area

The Bitlyanska exploration and development licence covers an area of 390 square kilometres, and the Group’s interest approximates to 99.8 per cent, varying with production. The licence extension has been granted until December 2019.

In this licence area there are three hydrocarbon discoveries; namely Bitlyanska, Borynya and Vovchenska. The Borynya 3 well re-entry confirmed the presence of several promising gas bearing zones though no commercial production was obtained. The well monitoring and scheduled pressure bleed-off is being routinely performed.

Zagoryanska licence (licence renewal is in progress)

The Group had a 40 per cent working interest in the Zagoryanska licence area, the remainder held by Eni pursuant to the JV. The exploration and development licence covered 49.6 square kilometres and expired in April 2014.

Following disappointing results in 2012, an extensive revision and reinterpretation of the 3D seismic and Geology and Geophysics (“G&G”) studies are still on-going to assess the potential of all the possible reserves, as well as the re-entry in the existing wells. Cadogan is taking all the necessary actions to obtain a 100 percent working interest in the renewed 20 years production licence via one of its wholly owned subsidiaries. Zagoryanska wells’ re-entering interest was confirmed by a local operator and is planned after the licence extension is obtained.    

The gas production facility is under conservation condition as per Ukrainian legislation and HSE best practices.

Minor fields

The Group has a number of minor licence areas located in western Ukraine. These include the following:

• Debeslavetska Production licence area

The field is regularly producing around 11,000 scm of gas per day (68 boepd). The new compressor unit and dehydration facilities confirmed the reduction in fuel consumption and air emissions.

Existing wells production regimes and production optimisation study were conducted, resulting in a plan for re-entering six wells. Activity start-up is scheduled for August 2015.

• Debeslavetska Exploration licence area

The exploration licence surrounding the Debeslavetska Production licence area, despite the disappointing results of the well Deb-15, is considered promising in the shallow horizons for gas production potential, and two other prospects have been confirmed.

• Cheremkhivska Production licence area

The production licence is currently producing 2,500 scm of gas per day (15 boepd). This licence is considered promising with the same target opportunities as Debeslavetska and its shallow gas exploration potential is under further evaluation.

• Slobodo-Rungerska licence area

This licence includes several old shallow oil wells, now abandoned or temporarily shut-in. The Delta-1 well was re-entered and treated with a chemical formation washing that marginally improved the well performance. However, the significant water content (around 50 percent) and low formation productivity quickly made production uneconomical. The well was shut down, and a review of the field development strategy (including deeper exploration targets) is ongoing.

• Monastyretska licence area

In April 2015 the exploration and development licence was extended until November 2019. The Blazh 1 well production was resumed at the end of April and is currently producing at a rate of circa 50 boepd, among the highest rates since inception. Negotiations with a local operator for the acquisition of two further existing wells, with the aim to bring them back to production, are ongoing.

A re-evaluation of the reserves and resources for all licences based on the work-over results and on  ongoing studies has started  and is expected to be completed by year-end.

Service Company activities                                                                                          

Cadogan’s 100 percent owned subsidiary, Astro Service LLC, is proactively looking for service opportunities to be delivered to the local E&P market. In particular, Astro Service has participated in a tender for a contract for the abandonment and restoration of wells, the result of which is expected in the second part of the year.

Financial Review

Overview

In 2015 in addition to E&P activities the Group continued to focus on managing the cost base by implementing a number of cost optimisation initiatives as well as operating a relatively new energy trading business.

Trading operations included the importing of gas from the European Union countries and local purchasing and sales activities with physical delivery of natural gas and diesel. Furthermore, the Group continued to operate its service business that includes drilling, construction and other services provided to E&P companies.

Revenue has increased to $40.6 million in the first half of 2015 (30 June 2014: $1.6 million, 31 December 2014: $32.6 million) due to gas and diesel trading operations, which represent $39.6 million of total revenues; revenues from production have slightly declined to $0.8 million (30 June 2014: $1.1 million, 31 December 2014: $2.4 million) mainly due to the price decrease and the Blazhiv 1 well being temporary shut in due to the delay in the Monastyretska licence extension.

Revenue from the service business, which includes drilling and construction services, decreased to $0.2 million (30 June 2014: $0.4 million, 31 December 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 $55.1 million at 30 June 2015, including restricted cash of $20 million, has increased from $48.9 million at 31 December 2014, mainly due to to the advances paid by the gas customers. The net working capital has slightly decreased to $51.8 million at 30 June 2015 from $53.7 million at 31 December 2014.

Income statement

• Loss before tax was $4.5 million (30 June 2014: $3.7 million, 31 December 2014: $59.1 million), of which $4.2 million (30 June 2014: $0.8 million, 31 December 2014: $54.7 million) is a share of losses of joint ventures. The share of losses in Joint Ventures mainly arises on translation of Balance Sheet items from UAH to USD, being the presentation currency of the Group.
• Revenues of $40.6 million (30 June 2014: $1.6 million, 31 December 2014: $32.6 million) are comprised of $39.6 million in gas and diesel sales of trading reportable segment, $0.8 million of E&P reportable segment and $0.2 million sales of service reportable segment. Cost of sales represents $35.7 million of purchases of gas for trading operating segment, $0.9 million of production royalties and taxes, depreciation and depletion of producing wells and direct staff costs for exploration and development and $0.1 million relates to the service segment. Gross profit has increased to $3.8 million (30 June 2014: $0.4 million, 31 December 2014: $2.8 million).
• Other administrative expenses of $3.6 million (30 June 2014: $3.6 million, 31 December 2014: $7.0 million) comprise other staff costs, professional fees, Directors’ remuneration and depreciation charges on non-producing property, plant and equipment and provision for the performance payments in relation to trading.
• Reversal of impairment of other assets of $1.5 million (30 June 2014: $0.6 million, 31 December 2014: $0.9 million) represent a release in relation to an impairment of Ukrainian VAT.
• Share of losses in joint ventures of $4.2 million (30 June 2014: $0.8 million, 31 December 2014: $54.7 million) mainly represent translation loss which arose primarily on translation of non-current assets of Gazvydobuvannya LLC (Pokrovskoe licence) from UAH to USD, being the presentation currency of the Group.
• Net foreign exchange loss of $0.9 million (30 June 2014: loss $1.5 million, 31 December 2014: gain of $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.

Cash flow statement

The Consolidated Cash Flow Statement shows operating cash inflow before movements in working capital of $0.5 million (30 June 2014: $4.1 million, 31 December 2014: $3.9 million). Cash inflows from movements in working capital in 2015 of $15.9 million mostly represent a decrease in trading receivables and prepayments of $5.1 million, decrease in trading inventories of $4.7 million, and an increase in prepayments received and trading payables of $4.1 million in relation to trading reportable segment and $2.0 million of change in working capital for other reportable segments. In addition, the Group has incurred capital expenditure of $0.1 million (30 June 2014: $0.3 million, 31 December 2014: $0.5 million) on intangible Exploration and Evaluation (“E&E”) assets and $0.4 million (30 June 2014: $0.7 million, 31 December 2014: $1.6 million) on Property, Plant and Equipment (“PP&E”).

In 2015 the Group financed its trading operations with short-term borrowings and as at 30 June 2015 the outstanding amount was $5.7 million (30 June 2014: $nil, 31 December 2014: $17.3 million). Borrowings are represented by a credit line drawn in UAH at a Ukrainian bank, a 100 percent subsidiary of a UK bank. The credit line is secured by $20 million of cash balance placed at a UK bank.

Balance sheet

The cash position of $55.1 million at 30 June 2015, including restricted cash of $20 million, has increased from $48.9 million at 31 December 2014 due to the prepayments received from clients for gas supplies.

Intangible E&E assets of $14.0 million (30 June 2014: $4.6 million, 31 December 2014: $18.3 million) represent the carrying value of the Group’s investment in E&E assets as at 30 June 2015. The PP&E balance of $2.8 million at 30 June 2015 (30 June 2014: $31.2 million, 31 December 2014: $3.8 million) reflects the cost of developing fields with commercial reserves and bringing them into production.

Investments in joint ventures of $10.1 million (30 June 2014: $52.5 million, 31 December 2014: $14.3 million) mainly represent the carrying value of the Group’s investments in Pokrovska licences and Westgasinvest LLC (costs related to Zagoryanska licence have been fully impaired).

Trade and other receivables of $8.9 million (30 June 2014: $5.3 million, 31 December 2014: $17.9 million) include $5.1 million trading prepayments and receivables, $1.6 million receivable from joint ventures in respect of management charges (30 June 2014: $1.8 million, 31 December 2014: $1.9 million) and VAT recoverable of $1.4 million (30 June 2014: $0.3 million, 31 December 2014: $1.7 million) to be recovered through gas trading operations.

In October 2014 the Group started to use the short-term facility in Ukraine for its trading operations. The $5.7 million outstanding as of 30 June 2015 represents UAH 121.5 million borrowed in UAH to purchase natural gas and diesel.

The $8.4 million of trade and other payables as of 30 June 2015 (30 June 2014: $2.5 million, 31 December 2014: $5.1 million) represent $6.2 million (30 June 2014: $nil, 31 December 2014: $2.5 million) worth of advances received from clients for future supplies of natural gas and $2.2 million (30 June 2014: $2.5 million, 31 December 2014: $2.3 million) of other creditors and accruals.

Commitments

There has not been any significant change in the commitments and contingencies reported as at 31 December 2014 (refer to pages 78 and 79 of the Annual Report).

Key performance indicators

The Group monitors its performance in implementing its strategy with reference to clear targets set out for four 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 increase the Group’s oil and gas reserves by de-risking possible resources and contingent reserves into 2P reserves. This is measured in million barrels of oil equivalent (‘mmboe’);
• to decrease administrative expenses;
• to increase the Group’s basic earnings per share; and
• to maintain no lost time incidents.

The Group’s performance during the first six months of 2015 against these targets is set out in the table below, together with the prior year performance data. No changes have been made to the sources of data or calculations used in the period/year.

	Unit	30 June 2015	30 June 2014	31 December 2014
Financial KPIs
Average production (working interest basis) (1)	boepd	88	93	99
2P reserves (2)	mmboe	0.6	2.6	0.6
Administrative expenses (3)	$	3.6	3.6	7.0
Basic loss per share (4)	cent	(1.9)	(1.6)	(25.6)
Non-financial KPIs
Lost time incidents (5)	incidents	-	-	-

(1) Average production is calculated as the average daily production during the period.

(2) Quantities of 2P reserves as at 30 June 2014, 31 December 2014 and 30 June 2015 are based on Gaffney, Cline & Associates’ (“GCA”) independent reserves report on 2P reserves as at 31 December 2009, dated 16 March 2010, as adjusted for the actual production during 2015 and actual production and reclassification to contingent resources.

(3) Administrative expenses for the six months ended 30 June 2015 of $3.6 million includes $0.9 million of provision for trading costs.

(4) 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 period.

(5) Lost time incidents relate to injuries where an employee/contractor is injured and has time off work.

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 and holds these mostly in call deposits. Production revenues from the sale of hydrocarbons are received in the local currency in Ukraine (‘UAH’) and to date funds from such revenues have been held in Ukraine for further use in operations rather than being remitted to the UK. Funds are transferred to the Company’s subsidiaries in USD to fund operations, at which time the funds are converted to UAH. Some payments are made on behalf of the affiliates from the UK.

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 Condensed Consolidated and Company Financial Statements. For further detail refer to the detailed discussion of the assumptions outlined in note 2(b) to the Condensed Consolidated Financial Statements.

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 actual 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 conducts activities that can be seriously impacted by health, safety and environmental incidents. Serious incidents can have not only financial implications but can also damage the Group’s reputation and the opportunity to undertake further projects.	The Group maintains a HSE system in place and demands that management, staff and contractors adhere to it. The system ensures that the Group meets Ukrainian legislative standards in full and achieves international standards to the maximum extent possible.
Drilling operations
The technical difficulty of drilling wells in the Group’s locations and equipment limitations can result in the unsuccessful completion of the well.	The incorporation of detailed sub-surface analysis into a robustly engineered well design and work programme, with appropriate procurement procedures and competent on site management, aims to minimise risk.
Production and maintenance
Some of the Group’s facilities have been inherited and, although fully checked, were not installed under our supervision and there is a risk of plant failure. There is a risk that production or transportation facilities can fail due to the poor performance of the Group’s suppliers and control of some facilities being with other governmental or commercial organisations.	All plants are operated at standards above the Ukrainian minimum legal requirements. Operative staff are experienced and receive supplemental training to ensure that facilities are operated and maintained at a high standard. Service providers are rigorously reviewed at the tender stage and are monitored during the contract period.
Work over and abandonment
Certain wells owned by the Group were drilled by the State and other private companies and will be worked over. There is a risk that Cadogan’s activities fail because of problems inherited with these sites. Any well stock that is not considered satisfactory for purpose or poses an environmental hazard will need to be abandoned.	Work programmes are designed to assess the status of the wells and any work that is not safe or is not technically feasible will be abandoned. Qualified professionals will be used to design a step-by-step approach to re-entering old wells. All sites that are abandoned will be restored and re-cultivated to meet or exceed standards required by the relevant environmental control authorities and in compliance with recognised international standards.
Sub-surface risks
The success of the business relies on accurate and detailed analysis of the sub-surface. This can be impacted by poor quality data, either historical or recently gathered, and limited coverage. Certain information provided by external sources may not be accurate.	All externally provided and historical data is rigorously examined and discarded when appropriate. New data acquisition is considered and adequate programmes implemented, but historical data can be reviewed and reprocessed to improve the overall knowledge base.
Risk	Mitigation
Sub-surface risks (continued)
Some local contractors may not acquire data accurately, and there is frequently the limited choice of locally available equipment or contractors of a desirable standard.	Detailed supervision of local contractors by Cadogan management is followed. Plans are discussed well in advance with both local and international contractors in an effort to ensure that appropriate equipment is available.
Data can be misinterpreted leading to the construction of inaccurate models and subsequent plans.	All analytical outcomes are challenged internally and peer reviewed. Interpretations are carried out on modern geological software. A staff training programme has been put in place.
Area available for drilling operations is limited by logistics, infrastructures and moratorium. This increases the risk for setting optimum well coordinates.	If not covered by 3D seismic or fitting over 2D seismic lines, the eventual well’s dislocation will not be accepted.
Financial risks
The Group may not be successful in achieving commercial production from an asset and consequently the carrying values of the Group’s oil and gas assets may not be recovered through future revenues.	The Group performs a review of its oil and gas assets for impairment on an annual basis. The Group considers on an annual basis whether to commission a Competent Person’s Report (“CPR”) from an independent reservoir engineer. The CPR provides an estimate of the Group’s reserves and resources by field/licence area. As no new production has been achieved during 2014, management has decided not to commission a new CPR during 2014. As part of the annual budget approval process, the Board considers and evaluates projects for the forthcoming year and considers the appropriate level of risk. The Board has approved a work programme for 2015. Further attempts to bring in partners and mitigate the Group’s risk exposure are underway.
There is a risk that insufficient funds are available to meet development obligations to commercialise the Group’s major licences.	The Group manages the risk by maintaining adequate cash reserves and by closely monitoring forecasted and actual cash flow, as well as short and longer funding 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 2015.
The Group could be impacted by failing to meet regulatory reporting requirements in the UK, and statutory tax and filing requirements in both Ukraine and the UK.	These risks are mitigated by employing suitably qualified professionals who, working with advisers when needed, are monitoring regulatory reporting requirements and ensuring that timely submissions are made.
The Group operates primarily in Ukraine, an emerging market, where certain inappropriate business practices may from time to time occur. This includes bribery, theft of Group property and fraud, all of which can lead to financial loss.	Clear authority levels and robust approval processes are in place, with stringent controls over cash management and the tendering and procurement processes. Adequate office and site protection are in place to protect assets. Anti-bribery policies are also in place.

   

Risk	Mitigation
Financial risks (continued)
The Group is at risk from changes in the economic environment both in Ukraine and globally, which can cause foreign exchange movements, changes in the rate of inflation and interest rates and can lead to credit risk in relation to the Group’s key counterparties.	Revenues in Ukraine are received in UAH and expenditure is made in UAH, however, the prices for hydrocarbons are implicitly linked to USD prices. The Group continues to hold most of its cash reserves in the UK mostly in USD. Cash reserves are placed with leading financial institutions that 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.
The Group is at risk that the counterparty will default on its contractual obligations resulting in a financial loss to the Group.	We monitor the credit quality of our counterparties and seek to reduce the risk of customer non-performance by limiting the title transfer to product until the payment is received, prepaying only to known credible suppliers
The Group is at risk that fluctuations in gas prices will have a negative result for the trading operations resulting in a financial loss to the Group.	The Group mostly enters into back-to-back transactions where the price is known at the time of committing to purchase and sell the product. Sometimes the Group takes exposure to open inventory positions when justified by the market conditions in Ukraine.
Corporate risks
Should the Group fail to comply with licence obligations, there is a risk that its entitlement to the licence will be lost.	The Group designs a work programme and budget to ensure that all licence obligations are met. The Group engages proactively with the government to re-negotiate terms and ensure that they are not onerous.
Ukraine is an emerging market and as such the Group is exposed to greater regulatory, economic and political risks, more than other jurisdictions. Emerging economies are generally subject to a volatile political environment that could adversely impact Cadogan’s ability to operate in the market.	The Group minimises this risk by maintaining the funds in international banks outside Ukraine and by continuously maintaining a working dialogue with the regulatory authorities.
The Group's success depends upon skilled management as well as technical and administrative staff. The loss of service of critical members of the Group's team could have an adverse effect on the business.	The Group periodically reviews the compensation and contract terms of its staff.

We confirm that to the best of our knowledge:

(a) the Condensed set of Financial Statements has been prepared in accordance with IAS 34 ‘Interim Financial Reporting’;

(b) the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year);

(c) the interim management report includes a fair review of the information required by DTR 4.2.8R  (disclosure of related parties’ transactions and changes therein); and

(d) the condensed set of financial statements, which has been prepared in accordance with the applicable set of accounting standards, gives a true and fair view of the assets, liabilities, financial position and profit or loss of the issuer, or the undertakings included in the consolidation as a whole as required by DTR 4.2.4R.

This Half Yearly Report consisting of pages 1 to 24 has been approved by the Board and signed on its behalf by:

Marta Halabala

Company Secretary

27 August 2015

_______________________________________________________________________________________

Cautionary Statement

The business review and certain other sections of this Half Yearly Report contain forward looking statements that have been made by the directors in good faith based on the information available to them up to the time of their approval of this report. However they should be treated with caution due to inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information and no statement should be construed as a profit forecast.

Condensed Consolidated Income Statement

Six months ended 30 June 2015

		Six months ended 30 June		Year ended 31 December
		2015 $’000	2014 $’000	2014 $’000
	Notes	(Unaudited)	(Unaudited)	(Audited)
CONTINUING OPERATIONS
Revenue	3	40,603	1,573	32,623
Cost of sales	3	(36,758)	(1,215)	(29,813)
Gross profit		3,845	358	2,810
Administrative expenses:
Other administrative expenses		(3,604)	(3,585)	(7,002)
Impairment of oil and gas assets		-	-	(5,134)
Reversal of other assets impairment		1,486	609	877
		(2,118)	(2,976)	(11,259)
Share of losses in joint ventures	6	(4,243)	(834)	(54,664)
Net foreign exchange (losses)/gains		(953)	(1,457)	3,036
Other operating income		43	321	547
Operating loss		(3,426)	(4,588)	(59,530)
Investment revenue		81	179	852
Finance (costs)/income		(1,128)	667	(468)
Loss before tax		(4,473)	(3,742)	(59,146)
Tax		(28)	112	(166)
Loss for the period/year		(4,501)	(3,630)	(59,312)
Attributable to:
Owners of the Company	4	(4,495)	(3,609)	(59,271)
Non-controlling interest		(6)	(21)	(41)
Loss per Ordinary share		cent	cent	cent
Basic	4	(1.9)	(1.6)	(25.6)

Condensed Consolidated Statement of Comprehensive Income
Six months ended 30 June 2015

		Six months ended 30 June		Year ended 31 December
		2015 $’000	2014 $’000	2014 $’000
		(Unaudited)	(Unaudited)	(Audited)
Loss for the period/year		(4,501)	(3,630)	(59,312)
Other comprehensive loss
Items that may be reclassified subsequently to profit or loss
Unrealised currency translation differences		(6,647)	(29,590)	(28,153)
Other comprehensive loss		(6,647)	(29,590)	(28,153)
Total comprehensive loss for the period/year		(11,148)	(33,220)	(87,465)
Attributable to:
Owners of the Company		(11,142)	(33,199)	(87,424)
Non-controlling interest		(6)	(21)	(41)
		(11,148)	(33,220)	(87,465)

Condensed Consolidated Statement of Financial Position

Six months ended 30 June 2015

			Six months ended 30 June		Year ended 31 December
			2015 $’000	2014 $’000	2014 $’000
		Notes	(Unaudited)	(Unaudited)	(Audited)
	ASSETS
	Non-current assets
	Intangible exploration and evaluation assets	5	14,049	4,637	18,289
	Property, plant and equipment		2,791	31,169	3,846
	Investments in joint ventures	6	10,082	52,522	14,325
	Other financial assets ventures		-	3,763	-
			26,922	92,091	36,460
	Current assets
	Inventories	7	2,687	2,196	9,940
	Trade and other receivables	8	8,895	5,329	17,891
	Cash and cash equivalents		55,105	47,908	48,927
			66,687	55,433	76,758
	Total assets		93,609	147,524	113,218
	LIABILITIES
	Non-current liabilities
	Deferred tax liabilities		(307)	(447)	(288)
	Long-term provisions		(37)	(512)	(55)
			(344)	(959)	(343)
	Current liabilities
	Short-term borrowings	9	(5,664)	-	(17,327)
	Trade and other payables	10	(8,437)	(2,475)	(5,068)
	Current provisions		(479)	(12)	(647)
			(14,580)	(2,487)	(23,042)
	Total liabilities		(14,924)	(3,446)	(23,385)
	Net assets		78,685	144,078	89,833
	EQUITY
	Share capital		13,337	13,337	13,337
	Retained earnings		219,105	279,262	223,600
	Cumulative translation reserves		(155,638)	(150,428)	(148,991)
	Other reserves		1,589	1,589	1,589
	Equity attributable to equity holders of the parent		78,393	143,760	89,535
	Non-controlling interest		292	318	298
	Total equity		78,685	144,078	89,833

Condensed Consolidated Cash Flow Statement

Six months ended 30 June 2015

		Six months ended 30 June				Year ended 31 December
		2015 $’000	2014 $’000			2014 $’000
		(Unaudited)	(Unaudited)			(Audited)
	Operating loss	(3,426)		(4,588)		(59,530)
	Adjustments for:
	Depreciation of property, plant and equipment	267		394		938
	Impairment of oil and gas assets	-		-		5,134
	Share of losses in joint ventures	4,243		834		54,664
	Impairment of inventories	-		32		253
	Reversal of impairment of VAT recoverable	(1,486)		(641)		(727)
	Loss on disposal of property, plant and equipment	18		157		211
	Effect of foreign exchange rate changes	861		(243)		(4,892)
	Operating cash flows before movements in working capital	477		(4,055)		(3,949)
	Decrease/(Increase) in inventories	4,758		882		(7,242)
	Decrease/(Increase) in receivables	8,231		2,803		(10,285)
	Increase/(Decrease) in payables and provisions	2,880		(967)		1,424
	Cash from/(used in) operations	16,346		(1,337)		(20,052)
	Interest paid	(1,168)		-		(218)
	Income taxes paid	(7)		(2)		(373)
	Net cash inflow/(outflow) from operating activities	15,170		(1,339)		(20,643)
	Investing activities
	Investments in joint ventures	-			(2,800)	(3,024)
	Purchases of property, plant and equipment	(362)			(670)	(1,611)
	Purchases of intangible exploration and evaluation assets	(174)			(310)	(468)
	Proceeds from sale of property, plant and equipment	-			108	84
	Acquisition of financial assets	-			(5,000)	-
	Proceeds from financial assets	-			1,295	-
	Interest received	81			179	852
	Net cash used in investing activities	(455)			(7,198)	(4,167)
	Financing activities
	Proceeds from short-term borrowings	1,569			-	17,327
	Repayment of short-term borrowings	(9,245)			-	-
	Net cash used in financing activities	(7,676)			-	17,327
	Net increase/(decrease) in cash and cash equivalents	7,039			(8,537)	(7,483)
	Effect of foreign exchange rate changes	(861)			(39)	(74)
	Cash and cash equivalents at beginning of period/year	48,927			56,484	56,484
	Cash and cash equivalents at end of period/year	55,105			47,908	48,927

Condensed Consolidated Statement of Changes in Equity

Six months ended 30 June 2015

	Share capital $’000	Retained earnings $’000	Cumulative  translation reserves $’000	Other reserves Reorganisation $’000	Non-controlling  interest $’000	Total $’000
As at 1 January 2014	13,337	282,871	(120,838)	1,589	339	177,298
Net loss for the period	-	(3,609)	-	-	(21)	(3,630)
Exchange translation differences on foreign operations	-	-	(29,590)	-	-	(29,590)
As at 30 June 2014	13,337	279,262	(150,428)	1,589	318	144,078
Net loss for the period	-	(55,662)	-	-	(20)	(55,682)
Exchange translation differences on foreign operations	-	-	1,437	-	-	1,437
As at 1 January 2015	13,337	223,600	(148,991)	1,589	298	89,833
Net loss for the period	-	(4,495)	-	-	(6)	(4,501)
Exchange translation differences on foreign operations	-	-	(6,647)	-	-	(6,647)
As at 30 June 2015	13,337	219,105	(155,638)	1,589	292	78,685

Notes to the Condensed Financial Statements

Six months ended 30 June 2015

1. General information

Cadogan Petroleum plc (the ‘Company’, together with its subsidiaries the ‘Group’), is incorporated in England and Wales under the Companies Act. The address of the registered office is 1st Floor, 40 Dukes Place, London, EC3A 7NH. The nature of the Group’s operations and its principal activities are set out in the Operations Review on pages 4 to 6 and the Financial Review on pages 7 to 9.

The financial information for the year ended 31 December 2014 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006, but is derived from those accounts. Statutory accounts for the year ended 31 December 2014 have been delivered to the Registrar of Companies. The auditor's report on those accounts was not qualified. The auditor’s report did not contain a statement under section 498(2) (unable to determine whether adequate accounting records had been kept) or 498(3) (failure to obtain necessary information and explanations) of the Companies Act 2006.

This Half Yearly Report has not been audited or reviewed in accordance with the Auditing Practices Board guidance on ‘Review of Interim Financial Information’.  

A copy of this Half Yearly Report has been published and may be found on the Company’s website at www.cadoganpetroleum.com.

2. Basis of preparation  

The annual financial statements of the Group are 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’).  These Condensed Financial Statements have been prepared in accordance with IAS 34 Interim Financial Reporting, as issued by the IASB.

The same accounting policies and methods of computation are followed in the condensed financial statements as were followed in the most recent annual financial statements of the Group, which were included in the Annual Report issued on 30 April 2015.

The Group has not early adopted any 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.

The Group has adopted the standards, amendments and interpretations effective for annual periods beginning on or after 1 January 2015. The adoption of these standards and amendments did not have a material effect on the financial statements of the Group.

(a) Assessment of the political situation in Ukraine

Since 2014, Ukraine has been in a political and economic turmoil. Crimea, an autonomous republic of Ukraine, was effectively annexed by the Russian Federation. Political unrest and separatist movements in Eastern Ukraine evolved into armed conflict and full-scale military activities in certain parts of the Luhansk and Donetsk regions, effectively resulting in a loss of control over these territories by the Government of Ukraine. These events led to a significant deterioration of the relationship between Ukraine and the Russian Federation.

Active military conflict and inability to implement substantial and effective economic reforms have led to a significant fall in a gross domestic product, decline of international trade, deterioration of the state’s finances and significant devaluation of the Ukrainian Hryvnia against major foreign currencies. The ratings of Ukrainian sovereign debt have been downgraded by all international rating agencies with a negative outlook for the future. All these factors have had a negative effect on the Ukrainian companies and banks, hampering their ability to obtain funding from domestic and international financial markets. In addition, Ukraine has a large external debt refinancing requirement in the next few years, while its foreign reserves reached a critically low level.

The National Bank of Ukraine (“NBU”) introduced a range of measures aimed at limiting the outflow of foreign currencies from the country, inter alia, a mandatory sale of 75 percent 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, as well as limitations for individuals for foreign currency purchases and bank withdrawals. In addition, the Government of Ukraine has been making efforts in attracting significant external financing, primarily from the International Monetary Fund, as well as negotiating terms and conditions with external creditors as to the curtailing and restructuring the terms of repayment of the principal amount of external debt.

Stabilisation of the economic and political situation depends, to a large extent, upon the success of the Ukrainian Government’s and NBU’s efforts, and further economic and political developments, as well as the impact of these factors on the Group, its customers and contractors are therefore currently difficult to predict.

(b) Going concern

The Directors have continued to use the going concern basis in preparing these condensed financial statements. The Group's business activities, together with the factors likely to affect future development, performance and position are set out in the Operations Review. The financial position of the Group, its cash flow and liquidity position are described in the Financial Review.

The Group’s cash balance at 30 June 2015 of $55.1 million (31 December 2014: $48.9 million) excluding $0.4 million (31 December 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 a UK bank which represents security of borrowings. 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 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.

As the Group engages in oil and gas exploration and development activities, the most significant financial risk faced by the Group is delays encountered in achieving commercial production from the Group’s major fields. The Group also 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 financial statements. In making its statement the Directors have considered the recent political and economic uncertainty in Ukraine.

(c) 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.

The relevant exchange rates used were as follows:

1 US$ = £		Six months ended 30 June		Year ended 31 Dec 2014
		2015	2014
	Closing rate	1.5720	1.7048	1.5534
	Average rate	1.5239	1.6692	1.6481
1 US$ = UAH		Six months ended 30 June		Year ended 31 Dec 2014
		2015	2014
	Closing rate	21.4515	11.8333	16.0960
	Average rate	21.5125	10.6536	12.1705

The effect of foreign currency sensitivity on shareholders’ equity is equal to that reported in the statement of comprehensive income. During the six months ended 30 June 2015, the Ukrainian Hryvnia further depreciated against the USD and EUR by 25.0% and 17.8%, respectively. As a result, during the six months ended 30 June 2015 the Group recognised net foreign exchange loss in the amount of $0.9 million in the consolidated income statement and loss of $6.6 million in the consolidated statement of comprehensive income

(d) Dividend

The Directors do not recommend the payment of a dividend for the period (30 June 2014: $nil; 31 December 2014: $nil).

3. 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
• Construction services 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. 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 30 June 2015 and for the six months then ended the Group’s segmental information was as follows:

	Exploration and Production	Service	Trading	Consolidated
	$’000	$’000	$’000	$’000
Sales of hydrocarbons	141(1)	-	40,270	40,411
Other revenue	-	192	-	192
Sales between segments	688	-	(688)	-
Total revenue	829	192	39,582	40,603
Other cost of sales	(713)	(86)	(35,731)	(36,530)
Depreciation	(181)	(47)	-	(228)
Other administrative expenses	(470)(2)	-	(1,153)(3)	(1,623)
Interest on short-term borrowings	-	-	(1,114)	(1,114)
Segment results	(535)	59	1,584	1,108
Unallocated other administrative expenses(4)				(1,981)
Share of losses in joint ventures				(4,243)
Net foreign exchange losses				(953)
Other income, net				1,595
Loss before tax				(4,473)

(1) Sales of hydrocarbons of Exploration and Production (“E&P”) segment represent sales of oil from Monastyretska licence only in May and June 2015, as Monastyretska licence production was shut-in until May 2015

(2) Other administrative expenses of E&P segment also includes part of costs of personnel of Ukrainian head office

(3) Other administrative expenses of trading segment includes $0.9 million of provision for trading costs

(4) Unallocated other administrative expenses includes depreciation of $39 thousands

As of 31 December 2014 and for the year then ended the Group’s segmental information was as follows:

	Exploration and Production	Service	Trading	Consolidated
	$’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
Other cost of sales	(2,000)	(226)	(26,848)	(29,074)
Depreciation	(579)	(160)	-	(739)
Other administrative expenses	(1,347)	-	(379)	(1,726)
Interest on short-term borrowings	-	-	(420)	(420)
Segment results	(1,558)	460	1,762	664
Unallocated other administrative expenses(1)				(5,276)
Other income, net				2,228
Impairment				(5,134)
Share of losses in joint ventures				(54,664)
Net foreign exchange gains				3,036
Loss before tax				(59,146)

(1) Unallocated other administrative expenses includes depreciation of $199 thousands

Trading operations commenced in September 2014 hence the Group considered exploration, production and services as a single segment and did not prepare a separate disclosure as of 30 June 2014.

4. Loss per ordinary share

Loss per ordinary share is calculated by dividing the net loss for the period/year attributable to Ordinary equity holders of the parent by the weighted average number of Ordinary shares outstanding during the period/year. The calculation of the basic loss per share is based on the following data:

	Six months ended 30 June		Year ended 31 December
Loss attributable to owners of the Company	2015 $’000	2014 $’000	2014 $’000

   

Loss for the purposes of basic profit  per share being net loss attributable to owners of the Company	(4,495)	(3,609)	(59,271)
	Number	Number	Number
Number of shares	‘000	‘000	‘000
Weighted average number of Ordinary shares for the purposes of basic loss per share	231,092	231,092	231,092
	Cent	Cent	Cent
Loss per Ordinary share
Basic	(1.9)	(1.6)	(25.6)

5. Intangible exploration and evaluation assets

As of 30 June 2015 the intangible assets balance has decreased in comparison to 31 December 2014 due to depreciation of the UAH against the USD, being the presentation currency of the Group.

6. Investments in joint ventures

Share of losses in joint ventures mostly represents translation losses which arose mainly on the translation of non-current assets from UAH to USD being the presentation currency of the Group.

The Group is committed together with Eni to fund LLC Astroinvest-Energy subsequently to the period end with the necessary amount of $0.8 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.

7. Inventories

The Group had significant volumes of natural gas as at 31 December 2014 which have been sold during the six months ended 30 June 2015 that resulted in a decrease of the natural gas balance from $8.1 million to $1.5 million.

8. Trade and other receivables

			Six months ended 30 June		Year ended31 December
			2015 $’000	2014 $’000	2014 $’000
	Trading receivables		4,238	-	5,060
	VAT recoverable		1,358	342	1,674
	Receivable from joint ventures		1,558	1,798	1,938
	Trading prepayments		893	-	8,584
	Prepayments		96	322	166
	Loans issued		-	2,185	-
	Other receivables		752	682	469
			8,895	5,329	17,891

The Directors consider that the carrying amount of the remaining other receivables approximates their fair value and none of which are past due.

Management plans to realise VAT recoverable through increased gas trading activity.

9. Short-term borrowings

In October 2014 the Group started to use short-term borrowings as a financing facility for its trading activities. Borrowings are represented by a credit line drawn in UAH at a Ukrainian bank, a 100 percent subsidiary of a UK bank. The credit line is secured by $20 million of cash balance placed at a UK bank.

During the six months ended 30 June 2015 the Group repaid a significant amount of the credit line and the outstanding amount as at 30 June 2015 was $5.7 million with an average effective interest rate of 24 percent p.a. Interest is paid monthly and as at 30 June 2015 the accrued interest amounted to $0.1 million.

10. Trade and other payables

The $8.4 million of trade and other payables as of 30 June 2015 (30 June 2014: $2.5 million, 31 December 2014: $5.1 million) represent $6.2 million (30 June 2014: $nil, 31 December 2014: $2.5 million) of advances received from clients for future supplies of natural gas and $2.2 million (30 June 2014: $2.5 million, 31 December 2014: $2.3 million) of other creditors and accruals.

11. Related party transactions

Transactions between the Group 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 related parties who are not members of the Group:

			Six months ended 30 June		Year ended 31 December
			2015 $’000	2014 $’000	2014 $’000
	Revenues from services provided and sales of goods		350	460	597
	Purchases of goods		28	16	87
	Amounts owed by related parties		1,558	1,798	1,938
	Amounts owed to related parties		148	130	159

The amounts outstanding are unsecured and will be settled in cash. No provisions have been made for doubtful debts on the amounts owed by related parties.

12. Post balance sheet events

No post balance sheet events have taken place after 30 June 2015.

13. Commitments and contingencies

There have been no significant changes to the commitments and contingencies reported on pages 78 and 79 of the Annual Report.

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