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| 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% | 4.40 | 3.90 | 4.90 | 4.40 | 4.40 | 4.40 | 0.00 | 06:55:26 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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TIDMCAD
CADOGAN ENERGY SOLUTIONS PLC
Annual Results for the year ended 31 December 2022
The Board of Cadogan Petroleum plc, ("Cadogan" or "the Company"), is pleased to
announce the Company's annual results for the year ended 31 December 2022.
Key Financial Highlights of 2022:
§ Loss for the year: $1.6 million (2021: loss of $5.1 million)
§ Average realized price[1]: $73.4/boe (2021: $55.7/boe)
§ Gross revenues[2]: $8.5 million (2021: $8.8 million)
§ G&A[3]: $3.4 million (2021: $3.7 million)
§ Loss per share: 0.6 cents (2021: loss of 2.1 cents)
§ Cash at year end: $13.9 million (2021: $15.0 million)
Key Operational Highlights of 2022:
§ Production: 117,793 bbl (2021: 127,662 bbl), a 8% decrease year-on-year
§ Gas trading profit is nil million (2021: profit of $0.6 million)
§ No LTI/TRI[4]
§ ISO 14001 and 45001 certifications were re-validated by respective authority
for one year.
Group overview
In 2022, the Group continued to maintain exploration and production assets, and
to operate an oil services business in Ukraine. Cadogan's assets are
concentrated in the West of the country. The oil services business focuses on
workover operations, civil works services and other services to satisfy Cadogan
intra-group operational needs.
Our business model
We aim to increase value through:
§ Maintaining a robust balance sheet, monetising the remaining value of our
Ukrainian assets and supplementing E&P cash flow with revenues from gas trading
and oil services
§ Pursuing farm-out to progress investments in Ukrainian license
§ Diversify Cadogan's portfolio, both geographically and operationally
Ukraine
2022 has been extremely challenging for Cadogan due to the invasion of Ukraine
by Russia and its direct and derived consequences on the operational activities
in the Country.
West Ukraine
The Group continued to produce oil from its production Blazhiv license located
in the West of Ukraine. In March 2022, the production was suspended for 3 weeks
and was resumed after securing the employees, the assets, the financial
transactions, and the sales process. In the second half of 2022, there have
been several production stoppages due to the reduction of crude oil consumption
by oil refineries caused mainly by the Russian air strikes or by power outage
due to similar strikes on electricity infrastructure. As a result, the average
net daily production in 2022 was 323 bbl, which is 8% below the production of
the previous year.
In 2020, Usenco Nadra filed two claims with the Kyiv Administrative Court to
acknowledge inaction of the State Service of Geology (SGS) as unlawful, in
particular their refusal to issue the Bitlyanska 20-year exploration and
development license in the regulatory period and requested the Court to carry
out commercial activities, at the area, effective from December 2019. This
decision was taken by the subsoil controlling authority notwithstanding that
Cadogan had fulfilled all license obligations, obtained all regulatory
approvals and timely submitted the application on 19 August 2019, well ahead
the license expiry date of 23 December 2019 and the new regulatory framework.
After the rejection of its claims in February 2022, Usenco Nadra exercised its
right for appeal against this decision. In 2022, the Appeal Court and further
on the Supreme Court did not take into consideration the Company's arguments
regarding the Bitlyanska license award approval and rejected the claims.
East Ukraine
In 2020, LLC AstroInvest-Energy, a fully owned subsidiary of Cadogan,
introduced a claim against the State fiscal authority regarding additional tax
assessment and related penalties. The Company won in the Court of First
Instance and in the Court of Appeal. The State fiscal authority filed an appeal
with the Supreme Court. In September 2022, the Supreme Court cancelled all
decisions of the State fiscal authority and issued a decision in favor of the
position defended by Cadogan.
Subsidiary businesses
Due to high market volatility caused by military escalation in Ukraine, no
trading activities were conducted in 2022.
Astroservice LLC, the oil services subsidiary, continued to support Blazhiv
license wells' operations.
Italy
The Group owns a 90% interest in Exploenergy s.r.l., an Italian company, which
has filed applications for two exploration licenses (Reno Centese and Corzano),
located in the Po Valley region (Northern Italy).
In February 2019, the Italian Parliament approved a moratorium of 18 months in
the award of new licenses and a 25-fold increase of license fees. Exploenergy
subsequently reduced its activity to the minimum required to fulfil its
statutory obligations. It has also identified areas which can be voluntarily
released in order to mitigate the impact of higher fees, when licenses are
awarded, with a minimum impact on their exploration potential.
In 2020, the moratorium was extended. In February 2022, the Plan for the
Sustainable Energy Transition of Suitable Areas ("PITESAI") was approved by the
Ministry for Environmental Transition. It delivers a new framework for the
possible resumption of exploration and production activities on land and at
sea. Exploenergy was notified in 2022 that its projects (Reno Centese and
Corsano) were located in compatible areas identified by the PITESAI. The
Company is currently in the qualification process as gas operator.
In February 2019, the Group entered in a 2-year loan agreement with Proger
Management & Partners Srl ("PMP") with an option which Cadogan could exercise,
with no obligation, to get a 33% equity interest in Proger Ingegneria Srl which
in turn held at 31 December 2020 a 75.95% equity interest in Proger Spa. Proger
is an Italian engineering company providing services in Italy and in different
international areas.
Cadogan did not exercise the Call Option. In February 2021, Cadogan notified
PMP that according to the Loan Agreement, the Maturity Date occurred on 25
February 2021, and as the Call Option was not exercised, PMP must fulfill the
payment of EUR 14,857,350, being the reimbursement of the Loan in terms of
principal and the accumulated interest at this Maturity Date. PMP is in default
since 25 February 2021. End of March 2021, PMP requested an arbitration to have
the Loan Agreement recognized as an equity investment contract, which is
rejected by Cadogan as the terms of the Loan Agreement are clear and include
the right to repayment at maturity if the Call Option is not exercised.
The Arbitration proceeding ended in July 2022.
The Arbitral Committee:
- Rejected Proger's principal claim, and declared that the Loan Agreement
is valid and effective,
- Deemed to qualify the Call Option as a preliminary contract under
condition, but
- Rejected Proger's claim ex art. 2932 Italian Civil Code, stating that it
is impossible to give an award producing the same effects of a final contract
ex art. 2932 Italian Civil Code,
- This because of the duties established by the rules of the London
Regulatory Authority and because of the need, possibly by both parties, to
comply with the due proceedings before the formalization of the entry of
Cadogan into the capital of Proger Ingegneria,
- Subordinated the stipulation of the final contract to the precedent
completion of the proceeding and bureaucratic process as per the British rules,
stating that, otherwise,
- There is the obligation on Proger Ingegneria to return the money
received under the Loan Agreement.
Strategic Report
The Strategic Report has been prepared in accordance with Section 414A of the
Companies Act 2006 (the "Act") and presented hereunder. Its purpose is to
inform stakeholders 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.
Section 172 Statement
The Company's section 172 statement is presented on page 35 and 37 and forms
part of this strategic report.
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; the Company also conducts gas trading
and provides services. In November 2022, the shareholders approved the change
of name and the strategy to expand its activities along the energy value chain
to new forms of energy with a reduced impact on the environment.
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.
Key performance indicators
The Group monitors its performance through five key performance indicators
("KPIs"):
- to increase oil, gas and condensate production measured on the number of
barrels of oil equivalent produced per day ("boepd");
- to decrease administrative expenses;
- to increase the Group's basic earnings per share;
- to maintain no lost time incidents; and
- to grow geographically and operationally diversify the portfolio.
The Group's performance in 2022 against these KPI's is set out in the table
below, together with the prior year performance data.
Unit 2022 2021 2022 vs
2021
Average production (working boepd 323 350 (8)%
interest basis) 1
Overhead (G&A) $ million (3.4) (3.7) (7)%
Basic loss per share 2 cents (0.6) (2.1) (71)%
Lost time incidents 3 incidents - - -
Geographic diversification new assets - - -
1. Average production is calculated as the average daily production during
the year
2. Basic (loss)/profit per ordinary share is calculated by dividing the net
(loss)/profit 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 relate to the number of injuries where an employee/
contractor is injured and has time off work (IOGP classification)
Chairman's Statement
2022 was the most dramatic year in the independent history of Ukraine. The
full-scale invasion of the Russian army has brought severe destructions and
huge suffering. All the Board stands in solidarity with the Ukrainian
population in their fight for freedom.
The safety of our people is our highest priority. The Group is taking all
possible actions to preserve the safety of its employees and meet their needs.
2022 will remain another challenging year. From the very first days of the war
and onwards Cadogan has immediately implemented required actions that have
allowed to protect our staff and keep the Group's activities ongoing. The
effectiveness of these measures and the dedication of everyone have been
essential to mitigate the negative consequences of the war. Moreover, the Group
is proud to report zero fatalities, injuries among its staff since the
beginning of the invasion.
For the existing operations in Ukraine, Cadogan continue to be committed to the
territory and the communities where we operate and has fully financed social
programs commitment for 2022 as agreed before with the Lviv Regional
Administration and the local communities. Realizing the importance of
unstoppable oil production to satisfy increased Ukrainian's demand - Cadogan
has put maximum efforts to achieve this target. Despite all the difficulties
imposed by the war situation, Cadogan stands confidently on its feet and
continues to work.
During 2022, the oil and gas markets of Ukraine witnessed severe volatility
which was not correlated with world's trends. The oil prices have changed
unpredictably and in different directions during the year. The quick response
of the Group and the measures that were put in place have allowed the Group to
mitigate the operational and the economic challenges.
Despite all these challenges, the Group was able to improve its fundamentals
and operate at high industry standards. This was possible thanks to the
commitment of all with a competent and strong management. The Board remains
focused on maximizing value from our assets and on our strategy based on the
future diversification of our activities towards sectors providing lower
impacts on environment.
Michel Meeus
Non-Independent Non-Executive Chairman
27 April 2023
Chief Executive's Review
Due to the situation of war resulting from the Russian invasion of Ukraine,
2022 has been a highly challenging year. The Company had to adapt its
activities to operate in war reality and contingencies. After securing our
employees, our assets, our procedures and our sales transactions, Cadogan was
able to operate but under severe constraints, temporary operations shut-down,
staff relocation, supply and trade chains changes. The consequences of this war
on inflation, on consumption and on availability of the needed energy
infrastructure have led to extreme oil price volatility. The martial law
imposed by the Ukrainian government introduced additional constraints on the
financial transactions, the mobilisation of employees, the increase of taxation
on natural gas production and ended with additional risks.
This situation has led to adapt and transform all the processes of Cadogan to
align to the maximum of flexibility and efficiency given the high uncertainty
even on the short-term.
While in 2021 Ukraine had witnessed some signs of recovery for the oil & gas
industry as well as slow progress towards modernization of its oil & gas
legislative framework, the Russian aggression in 2022 has pushed down all these
efforts. The Russian invasion and bombing have naturally affected the oil and
gas production in the Country. Oil refineries as well as energy infrastructure
have been severely damaged. Despite this situation, Cadogan managed to safely
operate with zero fatalities and injuries among the staff.
In March 2022, the Company staff was relocated from Kiev to the safe areas and
continued operating remotely. On-field personnel ensured continuity of wells'
operations with the maximum of safety and efficiency. The Company also faced a
new risk with the mobilization of employees decided by the Ukrainian
government. For the time being, 4 employees have been mobilized since the
beginning of the martial law in March 2022. With this martial law, war period
restrictions have been implemented, including financial ones. At the same time,
the Parliament increased taxation on natural gas production.
These unprecedented constraints encountered with Covid-19 during 2020 and 2021
and during 2022 with the war in Ukraine, have delayed the implementation of
Cadogan's strategy. In November 2022, following the approval of the
shareholders, Cadogan Petroleum Plc became Cadogan Energy Solutions Plc, with
the intention to expand its activities along the energy value chain, beyond
current activities in the oil and gas sector, to new forms of energy with a
reduced impact on the environment. This reflects Cadogan's mission to be a
diversified group in energy with the will to make investments offering energy
solutions and alternative services with a lower environmental impact.
Against this challenging background, Cadogan's operational activities performed
as following:
· a 8% decrease in production, from 127,662 bbl in 2021 to 117,793 bbl bbl
in 2022;
· a 7% decrease of overhead (G&A), from $3.7 million in 2021 to $3.4 million
in 2022;
· a robust balance sheet, with $13.9 million of net cash, kept mostly in the
UK banks;
· another year without LTIs';
· the Supreme Court positive decision in favour of Cadogan in the tax
litigation case.
Core operations
Cadogan has continued to safely produce from its Blazhiv field in the West of
Ukraine. Oil production has decreased by 8% compared to the previous year. This
decrease was due to several production stoppages caused by the reduction of
crude oil treatment capacities in oil refineries, as a consequence of the
Russian direct air strikes and by power outage due to similar strikes of
electricity infrastructure.
Regarding the Bitlyanska 20-year exploration and development license, Usenco
Nadra filed two claims in 2020 against the absence of decision of the State
Geological Service (SGS) in the regulatory due timeframe at this moment, and
the further rejection of the application on the basis of a new regulatory
framework that took effect on 25 February 2020. In February 2022, these claims
were rejected by the Administrative Court. Further in 2022, Usenco Nadra
exercised its right for appeal against this decision. The Kyiv Appeal Court and
further on the Supreme Court did not take into consideration the Company's
arguments and rejected the claims. This decision will not have a financial
impact as Bitlyanska license had been totally impaired in the previous year.
High operational standards of the Group have been confirmed again by zero LTI
or TRI, with a total over 1,570,000 manhours since the last incident, and
re-validation off ISO 14001 & 45001 certifications by respective authority for
the one year.
In Italy, the Plan for the Sustainable Energy Transition of Suitable Areas
("PITESAI") was approved by the Ministry for Environmental Transition. It
delivers a new framework for the possible resumption of exploration and
production activities on land and at sea. Exploenergy was notified in 2022 that
its projects (Reno Centese and Corsano) were located in compatible areas
identified by the PITESAI. The Company is currently in the qualification
process as gas operator.
Non E&P operations
The Company continues to monitor the gas markets in Europe and Ukraine, but in
light of the extreme volatilities the Company followed its prudent and low risk
trading strategy and did not perform gas trading operations during 2022.
The oil services activities were used primarily to serve the Group's wells'
operations.
Proger
In February 2019, Cadogan used part of its cash (euros 13.385 million) to enter
into a 2-year Loan Agreement with Proger Managers & Partners, together with a
Call Option Agreement which could be exercised by Cadogan, with no obligation,
between September 2019 and February 2021, and subject to shareholders'
approval, into a 33 % equity interest in Proger Ingegneria which in turn held,
a 75.95% equity interest in Proger as at 31 December 2020, and a 96.48% equity
interest in Proger as at 31 December 2021.
As at 25 February 2021, being the Maturity Date, the Call Option was not
exercised by Cadogan and accordingly to its previous notification Cadogan
demanded repayment of the Loan together with the accumulated interest which in
total amounted Euro 14,857,350. After five business days, PMP was in default
and asked for an additional term that ended on 19 March 2021. The terms of the
Loan Agreement provide for an additional default interest of 2%. End of March
2021, PMP contested the default situation and the obligation to reimburse and
asked for an Arbitration according to the said Loan Agreement to get the Loan
Agreement recognised as an equity investment contract. Cadogan consider PMP's
arguments as groundless and consider that they are intended to delay PMP
reimbursement obligations. The Arbitration proceeding ended in July 2022.
The Arbitral Committee:
- Rejected Proger's principal claim, and declared that the Loan Agreement
is valid and effective,
- Deemed to qualify the Call Option as a preliminary contract under
condition, but
- Rejected Proger's claim ex art. 2932 Italian Civil Code, stating that it
is impossible to give an award producing the same effects of a final contract
ex art. 2932 Italian Civil Code,
- This because of the duties established by the rules of the London
Regulatory Authority and because of the need, possibly by both parties, to
comply with the due proceedings before the formalization of the entry of
Cadogan into the capital of Proger Ingegneria,
- Subordinated the stipulation of the final contract to the precedent
completion of the proceeding and bureaucratic process as per the British rules,
stating that, otherwise,
- There is the obligation on Proger Ingegneria to return the money
received under the Loan Agreement.
Proger refused to apply the requirements of the award and thus, Proger must
reimburse the amount covered by the Loan Agreement plus interest accrued in the
meantime.
Outlook
The current situation in Ukraine is imposing continuous difficulties and
tremendous challenges on our operating activities in 2023. The Company is
expecting another challenging year and is seeking to mitigate these constraints
through a number of options and solutions.
Cadogan will also study different options to minimize its CO2 emissions
deriving from its current operating oil and gas activities.
Regarding the Loan provided to Proger in February 2019, Cadogan will continue
to engage all necessary legal actions to protect its interests and recover the
cumulated amount due by Proger.
Despite all these constraints, Cadogan will pursue its strategy aiming to
diversify its activities and invest in sectors with a lower impact on
environment.
This strategy is totally aligned with the Climate Change requirements for
sustainability of Cadogan's activities.
Fady Khallouf
Chief Executive Officer
27 April 2023
Operations Review
Overview
At 31 December 2022, the Group held working interests in one conventional gas,
condensate and oil exploration and production license in the west of Ukraine.
Summary of the Group's licenses (as at 31 December 2022)
Working License Expiry License type
interest (%)
99.8 Blazhiv November 2039 Production
West Ukraine
E&P activity remained focused on maintaining its license and safely and
efficiently producing from the existing wells as well as implementing
non-invasive production enhancement scenarios within the Blazhiv oil field.
Blazhivska license
During 2022, the average gross oil production rated at 323bpd, which is 8%
lower than in 2021 (350bpd). In March 2022 production was suspended for 3 weeks
and was resumed after securing the employees, the assets, the financial
transactions and the sales process. In the second half of 2022, there have been
several production stoppages due to the reduction of crude oil consumption by
oil refineries caused mainly by the Russian strikes or by power outage due to
similar strikes of electricity infrastructure. For the purpose of geological
construction precision of Blazhiv oil field and Monastyretska fold and also
identification of new perspective structures within the license area boundary,
Cadogan has launched analyses for data reprocessing and reinterpretation of old
2D seismic data at the end of 2021. The Company completed studies and received
the required data for field skeleton structural and tectonic modelling.
Bitlyanska license
Usenco Nadra filed to the State Geological Service an application for a 20-year
production license 5 months ahead of the license expiry date of 23 December
2019. The Company secured approval of the Environmental Impact Assessment study
by the Ministry of Ecology, the approval of the Reserves Report by the State
Commission of Reserves and the approval of the license award by the Lviv
Regional Council. Given the delay in awarding the new license beyond the
regular timeline provided by legislation, the Company filed two claims with the
Administrative Court to challenge the non-granting of the 20-year production
license by the Licensing Authority. During 2021 the claims were not considered
by the Court due to delays caused by the Covid-19 pandemic. In February 2022,
the Company received information from the public register that its claim was
rejected by the Court of 1st instance. Despite the restrictions imposed by the
martial law in Ukraine, Usenco Nadra exercised its right for appeal against
this decision and submitted an appeal. In 2022, the Kyiv Administrative Court
and further on the Supreme Court have not taken into consideration the
Company's arguments regarding the Bitlyanska license award approval and
rejected the claims.
Gas trading
In light of these extreme volatilities during the war the Company, following
its prudent and low risk trading strategy, decided to monitor the appropriate
time for resuming trading activity.
Service
The Group continued to provide services through its wholly owned subsidiary
Astroservice LLC. The provided services were primarily focused on serving
intra-group operational needs in wells' re-entry/ repairs and stimulation
operations, well surveys and field on-site activities. In the context of the
prevailing situation in Ukraine, the services segment was dedicated totally to
supporting the Group's production activities. Starting from 2022, production
entities activities and service entity activities will be presented solely as
Exploration and Production segment result.
Other events
After an inspection conducted by Ukraine's tax authorities in September 2019,
Astroinvest Energy LLC was notified of a tax claim related to the historic
costs for the liquidation of wells on the Zagoryanska license. The tax
authorities notified Astroinvest Energy LLC that they considered non-deductible
the recoverable VAT, totalling $3.6 million, that had subsequently been used to
offset output VAT. They additionally considered that the subsidiary's tax
losses carry forward of $15.3 million should be reduced (note 22). In 2019,
Astroinvest Energy LLC filed a claim against the tax authority's decision. The
Court of First Instance and the Court of Appeal decided in favour of the
position of Cadogan, but the tax authorities filed an appeal with the Supreme
Court. In September 2022, the Supreme Court cancelled all decisions of the
fiscal authority and issued a decision in favor of the position defended by
Cadogan.
Financial Review
Overview
In 2022, the Group had no trading operations and its oil production decreased
by 8%. The average realized oil price increased by 32% and supported the Group
revenue on the same level as previous year. The Group's operating divisions
delivered a profit of $2.9 million (2021: profit of $1.8 million excluding the
impairment of oil and gas assets).
The E&P business positively contributed to the financial results of the Group,
due to the increase in oil prices. The average realized oil price increased by
32% from $55.7 to $73.4 per barrel. The trading business was not active during
2022.
Cash position decreased to $13.9 million as at 31 December 2022 compared to
$15.0 million as at 31 December 2021.
Income statement
Revenues from production increased from $7.0 million in 2021 to $8.5 million in
2022. This result has been achieved, despite the decrease in production
volumes, due to an increase in oil average realized prices by 32%. E&P costs of
sales increased from $5.3 million in 2021 to $5.6 million in 2022. These
include production royalties and taxes, fees paid for the rented wells,
depreciations, depletion of producing wells, direct staff costs and other costs
for exploration and development. Overall, in 2022, E&P made a positive
contribution of $2.9 million (2021: $1.8 million) to gross profit.
The gas trading business had no activities during 2022 (2021: Revenue of $1.8
million).
Administrative expenses ("G&A") remained contained with a decrease of 7%
compared to year 2021, note 8.
Balance sheet
The Property Plant & Equipment (PP&E) balance was $6.6 million at 31 December
2022 (2021: $9.6 million). It primarily represents the carrying value of the
assets invested and engaged in Blazhiv license. The E&E and PP&E are held by
Ukrainian subsidiaries with functional currency Ukrainian Hryvna. The Ukrainian
Hryvna was devaluated by 34% as at 31 December 2022 compared to 31 December
2021, generating a movement in the E&E and PP&E value presented in the US
Dollar.
Trade and other receivables of $0.3 million (2021: $0.2 million) include $0.1
million of recoverable VAT (2021: $0.1 million), which is expected to be
recovered through production activities, and $0.2 million (2021: $0.1 million)
of other receivables.
Inventories slightly increased from $0.2 million to $0.3 million principally
due to the increase of crude oil in the stock.
The Proger loan was held at amortised cost at $15.8 million (2021: $16.7
million). Refer to the Chief Executive's Report for further details together
with note 4(d) and 27.
The $1.4 million of trade and other payables as at 31 December 2022 (2021: $1.5
million) consist of $0.6 million (2021: $0.6 million) of accrued expenses and
$0.8 million (2021: $0.9 million) of other creditors.
Provisions include $0.4 million (2021: $0.3 million) of long-term and current
provisions for decommissioning costs which represents the present value of
costs that are expected to be incurred in 2039 for producing assets, when the
license will expire, and current provision for the decommissioning costs of
Bitlyanska license.
Net cash decreased to $13.9 million at 31 December 2022 compared to $15.0
million at 31 December 2021. This was mostly due to negative operating cashflow
and forex effect of Hryvna and EURO nominated cash accounts.
Cash flow statement
The Consolidated Cash Flow Statement on page 77 shows operating cash inflow
before movements in working capital of $0.2 million (2021: outflow of $0.4
million), which represents mostly cash generated by the E&P net of corporate
expenses.
Related party transactions
Related party transactions are set out in note 29 to the Consolidated Financial
Statements.
Treasury
The Group continually monitors its exposure to currency risk. It maintains a
portfolio of cash mainly in US dollars ("USD") and Euro held primarily in the
UK. Production revenues from the sale of hydrocarbons are received in Hryvna,
the local currency in Ukraine. Since the martial law established in February
2022 in Ukraine, the cash generated in Ukraine must be kept in Hryvna in
Ukraine.
Risks and uncertainties
There are several potential risks and uncertainties that 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 if
above $5 million, medium impact if above $1 million but below $5 million, and
low impact if 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 risk mitigation procedures via
Executive management, who are carrying out a robust assessment of the principal
risks facing the Group, including those potentially threatening its business
model, future performance, solvency and liquidity.
The Group has analysed the following categories as key risks:
Risk Mitigation
War risks
Since Spring 2021, Russia has Anticipating the beginning of the war, the
gradually increased the Group put in place, since the beginning of
concentration of military equipment, February 2022, emergency procedures
weapons and troops near the communicated to all employees on the
Ukrainian borders. On 24 February different sites in Ukraine with an Emergency
2022, the Russian troops attacked Committee communicating every day. Safety
Ukraine and invaded its territory. measures have been dispatched with a remote
Severe fights have been engaged in working organization. Specific measures have
Kyiv, and several other main cities been put in place for the operations on
like Kharkiv, Mariupol, Kherson, site. In case of need, specific measures
Sumy and Chernihiv were put in place to suspend the operations
Missile attacks and bombing are used of the Blazhiv field wells, with technical
by the Russian troops to destroy measures for decommissioning and temporary
infrastructures and facilities even conservation of the wells. The transmission
in the western cities, like Lviv. and internet connection systems have been
Cyber-attacks have increased. Given secured with a satellite connection. IT
the unpredictability of the issue of security has been reinforced. From February
this war, a full-scale invasion of 2022 till June 2022, the salaries were paid
Ukraine or a much longer duration of in anticipation to mitigate the risk of a
this war could have material impacts shutdown of the banking system. The Group is
on the Group's operations and on its monitoring the situation daily and taking
human, industrial and financial appropriate action to ensure the safety and
resources. the essential needs of its employees.
Operational risks
Health, Safety and Environment
("HSE")
The oil and gas industry by its The Group maintains a HSE management system
nature conducts activities, which in place and demands that management, staff
can cause health, safety and and contractors adhere to it. The system
environmental incidents. Serious ensures that the Group meets Ukrainian
incidents can have not only a legislative standards and for the CO2
financial impact but can also damage emissions the British standards and achieves
the Group's reputation and the international standards to the maximum
opportunity to undertake further extent possible.
projects. Management systems and processes have been
certified as ISO 14001 and ISO 45001
compliant.
Covid-19
The Group's operations are in To manage and where possible mitigate the
Ukraine with a Parent Company risk of personnel infection with the virus
located in the United Kingdom. These for our employees, special measures have
locations are suffering from been applied. These include administrative
increasing levels of Covid-19 personnel remote working, strict sanitary
infection and in due course there and hygienic procedures and personal
may be increasing disruption. This protection, rotation of field personnel by
may include potential impacts company cars, constant medical supervision
through illness amongst our during the work shift, regular sanitation of
workforce, supply chain and sales cars, offices and facilities. The covid-19
channel disruption and the wider treatment package has been included into the
impact of economic disruption on staff medical insurance coverage. We
commodity prices. The national and continue to monitor the situation closely
local governments in each of our and will respond accordingly as the position
operating locations are recommending develops. To prevent the spread of covid-19,
or implementing increasingly severe the Company continued strictly maintaining
restrictions in order to manage the administrative and healthcare measures to
situation. provide safe working conditions for its
employees as well as ensuring reasonable
vaccination level.
Climate change
After the Paris Agreement (COP 21) A moratorium on domestic production is
the international community is deemed highly unlikely in Ukraine given the
committed to reduce greenhouse gas country's need for affordable energy. Such
emissions to slow down the climate risks exist in Italy, but the Group's
change and contain its effects. exposure there is limited.
Countries may impose moratorium on E Management strives to reduce emissions in
&P activities or enact tight limits everything the Group does and has started
to emissions level, which may implementing alternatives to offset and/or
curtail production. Shareholders may mitigate emissions. In 2023, the Group will
also request that the Company adopt review its administrative and operational
stringent targets in terms of process to identify the areas of further
emissions reduction. improvement in the limitation of its
environmental impact. For the future,
Cadogan is going to diversify its activities
by investing in new activities with a lower
impact on environment.
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 appropriate
can result in the unsuccessful procurement procedures and competent on-site
completion of the well. management, aims to minimise risk. Only
certified personnel are hired to operate on
the rig floor. Contractor's access to the
operational sites is allowed only after
control of staff qualification and check-up
of appropriate technical condition of the
equipment and machinery
Production and maintenance
There is a risk that production or All plants are operated and maintained at
transportation facilities could fail standards above the Ukrainian minimum legal
due to non-adequate maintenance, requirements. Operative staff are
control or poor performance of the experienced and receive supplemental
Group's suppliers. training to ensure that facilities are
properly operated and maintained. When not
in use the facilities are properly kept
under conservation and routinely monitored.
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 All externally provided and historic data is
on accurate and detailed analysis of rigorously examined and discarded when
the sub-surface. This can be appropriate. New data acquisition is
impacted by poor quality data, considered, and appropriate programmes
either historic or recently implemented, but historic data can be
gathered, and limited coverage. reviewed and reprocessed to improve the
Certain information provided by overall knowledge base. Agreements with
external sources may not be qualified local and international
accurate. contractors have been entered into to
supplement and broaden the pool of expertise
available to the Company.
Data can be misinterpreted leading All analytical outcomes are challenged
to the construction of inaccurate internally and peer reviewed. Analysis is
models and subsequent plans. performed using modern geological software.
The area available for drilling Bottom hole locations are always checked for
operations is limited due to their operational feasibility, well
logistics, infrastructures and trajectory, rig type, and verified on
moratorium. This increases the risk updated sub-surface models. They are
for setting optimum well rejected if deemed to be too risky.
coordinates.
The Group may not be successful in The Group performs, on an annual basis, a
proving commercial production from review of its oil and gas assets, impairs if
its licenses and consequently the necessary, and considers whether to
carrying values of the Group's oil commission a review from a third party or a
and gas assets may have to be Competent Person's Report ("CPR") from an
impaired. independent qualified contractor depending
on the circumstances.
Financial risks
The Group is at risk from changes in Revenues in Ukraine are received in UAH and
the economic environment both in expenditure is made in UAH.
Ukraine and globally, which can
cause foreign exchange movements, The Group continues to hold most of its cash
changes in the rate of inflation and reserves in the UK mostly in USD and Euro.
interest rates and lead to credit Cash reserves are placed with leading
risk in relation to the Group's key financial institutions, which are approved
counterparties. by the Audit Committee. Before the war in
Ukraine, foreign exchange risk was
The martial law in Ukraine forbids considered a normal and acceptable business
the transfer of cash outside of exposure and the Group did not hedge against
Ukraine. The cash held in Ukraine this risk for its E&P operations. The Group
must be held in the local currency is currently analysing different options.
(Hryvna).
The decrease of the value of the
Hryvna is a major risk on the cash
held by the Group in Ukraine. Since
the martial law in Ukraine, there is
an obligation to keep the cash held
by Cadogan in Ukraine in Hryvna with
period restrictions for transfers The terms of the agreement are clear and
out of the Country. include the right to repayment at maturity
if the Call Option is not exercised. As
In February 2019, Cadogan entered security for the reimbursement of the loan,
into a 2-year Loan Agreement (Euros Cadogan benefits from a pledge over the
13.385 million) with Proger shares held by Proger Managers & Partners in
Management & Partners with a Call Proger Ingegneria. In addition to that,
Option that could be exercised by Cadogan is engaging all the necessary
Cadogan, between September 2019 and actions in the Arbitration process and more
February 2021, with no obligation, generally the adequate legal actions to
allowing a 33 % equity interest in protect the interests of the Company and all
Proger Ingegneria. This represented of its stakeholders. The investigation is
a key transaction and element of the closed. On July 28th, 2022, the Arbitration
Group balance sheet. At 25 February Committee delivered an award rejecting
2021, being the Maturity Date, Proger's request, established that the Loan
Cadogan did not exercise its Call Agreement was valid and effective, and
Option and PMP must reimburse EUR indicated the conditions precedent for the
14,857,350. End of March 2021, PMP completion of any transaction with Proger
did not reimburse and asked for an Ingegneria. In case of non-completion,
arbitration to get the Loan Proger must reimburse Cadogan according to
Agreement recognized as an equity the Loan Agreement.
investment contract.
Refer to note 27 to the Consolidated
Financial Statements for detail on financial
risks.
The Group is at risk that Procedures are in place to scrutinize new
counterparties will default on their counterparties via a Know Your Customer
contractual obligations resulting in ("KYC") process, which covers their
a financial loss to the Group. solvency. In addition, when trading gas, the
Group seeks 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 The Group mostly enters back-to-back
fluctuations in gas prices will have transactions where the price is known at the
a negative result for the trading time of committing to purchase and sell the
operations resulting in a financial product. Sometimes the Group takes exposure
loss to the Group. to open inventory positions when justified
by the market conditions in Ukraine, which
is supported by analysis of the specific
transactions, market trends and models of
the gas prices and foreign exchange rate
trends.
Country risks
Legislative changes may bring Compliance procedures, monitoring and
unexpected risk and create delays in appropriate dialogue with the relevant
securing licenses or ultimately authorities are maintained to minimize the
prevent licenses and license risk. In all cases, deployment of capital in
renewals /conversions from being Ukraine is limited and investments are kept
secured. at the level required to fulfil license
obligations.
Other risks
The Group's success depends upon The Group periodically reviews the
skilled management as well as compensation and contract terms of its staff
technical and administrative staff. in order to remain a competitive employer in
The loss of service of critical the markets where it operates.
members from the Group's team could
have an adverse effect on the
business.
The Group is at risk of The Group applies rigorous screening
underestimating the risk and criteria in order to evaluate potential
complexity associated with the entry investment opportunities. It also seeks
into new countries. input from independent and qualified experts
when deemed necessary. Additionally, the
required rate of return is adjusted to the
perceived level of risk.
Local communities and stakeholders The Group maintains a transparent and open
may cause delays to the project dialogue with authorities and stakeholders
execution and postpone activities. (i) to identify their needs and propose
solutions which address them as well as (ii)
to illustrate the activities which it
intends to conduct and the measures to
mitigate their impact. Local needs and
protection of the environment are always
taken into consideration when designing
mitigation measures, which may go beyond the
legislative minimum requirement.
The Group devotes the highest level of
attention and engage qualified consultants
to prepare the Environmental Impact
Assessment studies and to attend public
hearings, both introduced in Ukraine in
2019.
Statement of Reserves and Resources
In 2022, the company conducted routine rig-less production support activities
at the Blazhiv-1, Blazhiv-3 and Blazhiv-Monastyrets-3 and Blazhiv-10 wells to
maintain sustainable production using sucker rod pumping systems.
Summary of Reserves1
at 31 December 2022
Mmboe
Proved, Probable and Possible Reserves at 1 January 2022 4.06
Production 0.12
Proved, Probable and Possible Reserves at 31 December 3.94
2022
1 The study was conducted in 2016 by Brend Vik.
In addition to the tabled reserves, Cadogan has 0.6 million boe of contingent
resources associated with the Blazhiv license.
Corporate Responsibility
Under Section 414C of the Companies Act 2006 (the "Act"), the Board is required
to disclose information about environmental matters, employees, human rights
and community issues, including information about any policies it has in
relation to these matters and the effectiveness of these policies.
Being sustainable in our activities means conducting our business with respect
for the environment and for the communities hosting us, with the aim of
increasing the benefit and value to our stakeholders. We recognize that this is
a key element to be competitive and to maintain our license to operate.
The Board recognizes that the protection of the health and safety of its
employees, the communities and the environment in which it operates is not just
an obligation but is part of the personal ethics and beliefs of management and
staff. These are the key drivers for a sustainable development of the Company's
activity. Cadogan Petroleum, its management and employees are committed to
continuously improve Health, Safety and Environment (HSE) performance; follow
our Code of Ethics and apply, in conducting our operations, internationally
recognized best practices and standards.
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 a
Working with Integrity policy and policies on business conduct and ethics,
anti-bribery, the acceptance of gifts and hospitality and whistleblowing. Such
policies are subject to regular review.
In August 2018, Cadogan Ukraine LLC obtained ISO 14001 and ISO 45001
certifications for the following scope: "Supervision, coordination, management
support, control in the field of oil and gas on-shore exploration and
production." This provides formal recognition of the process embedded in the
Company and demonstrates the commitment and efforts delivered by our employees
and management. It is considered a baseline to continue with the efforts to
improve the way we conduct the business.
The Board believes that health and safety procedures, and training across the
Group should be in line with best practice in the oil and gas sector.
Accordingly, it has set up a committee to review and agree on the health and
safety initiatives for the Company and to report back to the Board on the
progress of these initiatives. Management regularly reports to the Board on HSE
and key safety and environmental issues, which are discussed at the Executive
Management level. The report of the Health, Safety and Environment Committee
can be found on page 39 to 40.
The General Director of Cadogan Ukraine is the acting Chairman of the HSE
Committee and is supported in his role by Cadogan Ukraine's HSE Manager. In
accordance with the ISO 14001 and ISO 45001, his role is to ensure that the
Group continuously develops suitable procedures, that operational management
and their teams incorporate them into daily operations and that the HSE
management has the necessary level of autonomy and authority to discharge their
duties effectively and efficiently.
Health, safety and environment
2022 was extremely challenging due to the Russian invasion of Ukraine and the
resulting subsequent war. Cadogan applied measures to mitigate the risk
personnel injuries and loss of well control. Kiev office personnel have been
relocated to the safe regions of Ukraine, on-field staff as well as all offices
have been equipped with satellite means of communication, established internal
emergency committee that coordinated the work and liaising with company
management of the daily basis. Three employees have been mobilized to the army
during 2022.
Also the HSE management daily monitors health status of the personnel in terms
of covid-19.
The Group has implemented an integrated HSE management system in accordance
with the ISO requirements. The system aims to ensure that a safe and
environmentally friendly/protection culture is embedded in the organization
with a focus on the local community involvement. The HSE management system
ensures that both Ukrainian and international standards are met, with the
Ukrainian HSE legislation requirements taken as an absolute minimum. All the
Group's local operating companies actively participate in the process. ISO
14001 and ISO 45001 certification were re-validated by the respective authority
in August 2022 for a new term.
A proactive approach based on a detailed induction process and near miss
reporting has been in place throughout 2022 to prevent incidents. Staff
training on HSE matters and discussions on near miss reporting are recognized
as the key factors to continuously improve. In-house training is provided to
help staff meet international standards and follow best practice. The process
enacted by the certification, enhances attention to training on risk
assessments, emergency response, incident prevention, reporting and
investigation, as well as emergency drills regularly run-on operations' sites
and offices. This process is essential to ensure that international best
practices and standards are maintained to comply with, or exceed, those
required by Ukrainian legislation, and to promote continuous improvement.
The Board monitors the main Key Performance Indicators (lost time incidents,
mileage driven, training received, CO2 emissions) as business parameters. The
Board has benchmarked safety performance against the HSE performance index
measured and published annually by the International Association of Oil and Gas
Producers. In 2022, the Group recorded over 154,000 man-hours worked with no
incidents and over 1,570,000 hours have been worked since the last injury in
February 2016.
During 2022 the Group continued to monitor its greenhouse gas emissions and
collect statistical data relating to the consumption of electricity, industrial
water and fuel consumption by cars, plants and other work sites, recording a
continuous improvement in the efficient use of resources.
Employees
Wellness and professional development are part of the Company's sustainable
development policy and wherever possible, local staff are recruited. The
Group's activity in Ukraine is entirely managed by local staff. Qualified local
contractors are engaged to supplement the required expertise when and to the
extent it is necessary.
Procedures are in place to ensure that recruitment is undertaken on an open,
transparent and fair basis with no discrimination against applicants. Each
operating company has its own Human Resources function to ensure that the
Group's employment policies are properly implemented and followed. The Group's
Human Resources policy covers key areas such as equal opportunities, wages,
overtime and non-discrimination. As required by Ukrainian legislation,
Collective Agreements are in place with the Group's Ukrainian subsidiary
companies, which outline agreed level of staff benefits and other safeguards
for employees.
All staff are aware of the Group's grievance procedures. All employees have
access to health insurance provided by the Group to ensure that all employees
have access to adequate 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.
Diversity
The Board recognizes the benefits and importance of diversity (gender, ethnic,
age, sex, disability, educational and professional backgrounds, etc.) and
strives to apply diversity values across the business. We endeavour to employ
a skilled workforce that reflects the demographic of the jurisdictions in which
we operate. The board will review the existing policies and intends to develop
a diversity policy.
Gender diversity
The Board of Directors of the Company comprised of five Directors as of 31
December 2022. The appointment of any new Director is made based on merit. See
pages 23 and 24 for more information on the composition of the Board.
As at 31 December 2022, the Company comprised a total of 75 persons, as
follows:
Male Female
Non-executive directors 3 1
Executive directors 1 -
Management, other than Executive directors 7 2
Other employees 41 20
Total 52 23
Human rights
Cadogan's commitment to the fundamental principles of human rights is embedded
in our HSE policies and throughout our business processes. We promote the core
principles of human rights pronounced in the UN Universal Declaration of Human
Rights and 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 it operates
and from which some of the employees are recruited. In our operational sites,
management work 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.
Projects undertaken include improvement of the road infrastructure in the area,
which provides easier access to the operational sites while at the same time
minimizing inconvenience for the local population and allowing improved road
communications in the local communities, especially during winter season or
harsh weather conditions. Specific community activities are undertaken for the
direct benefit of local communities. All activities are followed and supervised
by managers who are given specific responsibility for such tasks.
The Group's companies in the Ukraine see themselves as part of the community
and are involved and offer practical help and support. All these activities are
run in accordance with our "Working with Integrity" policy and procedures. The
recruitment of local staff generates additional income for areas that otherwise
are predominantly dependent on the agricultural sector.
The enactment in 2018 of a new legislation which introduces Environmental
Impact Assessment studies and public hearings as part of the license's award/
renewal processes was anticipated effectively by the Group. The Group is
complying with these requirements, building on the recognized competence of its
people and advisors as well as on the good communication and relations
established with local communities.
Cadogan is committed to the territory and the communities where it operates and
has fully financed social programs commitment for 2022 as per signed Memorandum
between the Company, Lviv Regional Administration and local communities in
2019.
In 2022, the Group's operating locations were subject to continuous controlling
levels of COVID-19 infection and normal working patterns have been disrupted.
The Group is following all the recommendations and provides comprehensive
measures inside the Group to restrict COVID-19 infection and spread.
Approval
The Strategic Report was approved by the Board of Directors on 27 April 2023
and signed by order of the Board by:
Ben Harber
Company Secretary
27 April 2023
Board of Directors
Current directors
Michel Meeùs, 70, Belgian
Non-Independent non-executive Chairman
Mr Meeùs was appointed as a Non-executive Director on 23 June 2014. Mr. Meeùs
was former Chairman of the Board of Directors of Theolia, an independent
international developer and operator of wind energy projects. Since 2007, he
has been a director within the Alcogroup SA Company (which gathers the ethanol
production units of the Group), as well as within some of its subsidiaries.
Before joining Alcogroup, Mr Meeùs carved 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.
Mr Meeus is currently Chairman of the Remuneration and Nomination Committees.
Fady Khallouf, 62, French
Chief Executive Officer
Fady Khallouf was appointed as Director and CEO on 15 November 2019. He has a
35-year experience in the energy, the environment, the engineering and the
infrastructure sectors. He has previously held the position of CEO and CFO of
FUTUREN (Renewable Energy, listed on Euronext Paris) where he achieved the
restructuring and the turnaround of the group. Prior to that, he was the CEO of
Tecnimont group (Petrochemicals and Oil & Gas), the Vice-President Strategy and
Development of EDISON group (Electricity and Gas, E&P), the Head of M&A of EDF
group (Energy). Fady Khallouf had beforehand held various management positions
at ENGIE (Energy), Suez (Environmental Services), and DUMEZ (Construction and
Infrastructures).
Lilia Jolibois, 58, American
Independent non-Executive Director
Lilia Jolibois was appointed as Director on 15 November 2019. She is currently
a member of three Boards: Cadogan Petroleum Plc, INSEAD Foundation, and CARA
(UK and Wales). She is also a Venture and CEO Advisor at Loyal Venture Capital,
a global VC fund. Her career spans Merrill Lynch Investment Banking, Sara Lee,
and Lafarge in the USA and Europe. At Lafarge Group, Ms. Jolibois served in
numerous positions in finance, strategy, business development, CEO and Chair of
the Board for Lafarge Cement and Gypsum in Ukraine, and SVP and Chief
Marketing-Sales-Supply Chain Officer for Lafarge Aggregates, Asphalt & Paving.
Lilia is currently Chairman of the Company's Audit Committee and a member of
the Remuneration and Nomination Committees.
Jacques Mahaux, 71, Belgian
Non-Executive Director
Jacques Mahaux was appointed as Director on 15 November 2019. He has held
various executive and directorship positions in Group Crédit Agricole in
Luxembourg, CA Indosuez, Indosuez Bank and various Luxembourg and Swiss Holding
companies active in industrial sectors. Previously he acted as an Attorney at
Law at the Brussels Bar.
Mr Mahaux is currently a member of the Audit, Remuneration and Nomination
Committees.
Gilbert Lehmann, 77, French
Senior Independent Non-Executive Director
Mr Lehmann was appointed to the Board on 18 November 2011. He was 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 was 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 a member of the Remuneration and Nomination Committees.
Report of the Directors
Directors
The Directors in office during the year and to the date of this report are as
shown below:
Non-Executive Directors
Executive Director
Michel Meeus (Chairman)
Fady Khallouf
Gilbert Lehmann
Lilia Jolibois
Jacques Mahaux
Directors' re-election
The Board has decided previously that all Directors are subject to annual
election by shareholders, in accordance with industry best practice and as
such, all Directors will be seeking re-election at the Annual General Meeting
to be held on 23rd June 2023.
The biographies of the Directors in office at the date of this report are shown
on pages 23and 24.
Appointment and replacement of Directors
The Company's Articles of Association allow the Board to 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 at 31 December 2022 and
their connected persons in the Ordinary shares of the Company at 31 December
2022 are set out below.
Director Number of
Shares
Michel Meeus 26,000,000
Fady Khallouf 10,425,455
Gilbert Lehmann -
Lilia Jolibois -
Jacques Mahaux -
Conflicts of Interest
The Company has procedures in place for managing conflicts of interest. Should
a director become aware that they, or any of their connected parties, have an
interest in an existing or proposed transaction with the Company, its
subsidiaries or any matters to be discussed at meetings, they are required to
formally notify the Board in writing or at the next Board meeting. In
accordance with the Companies Act 2006 and the Company's Articles of
Association, the Board may authorize any potential or actual conflict of
interest that may otherwise involve any of the directors breaching his or her
duty to avoid conflicts of interest. All potential and actual conflicts
approved by the Board are recorded in register of conflicts, which is reviewed
by the Board at each Board meeting.
Directors' indemnities and insurance
The Company's Articles of Association provide that, subject to the provisions
of the Companies Act 2006, all Directors of the Company are indemnified by the
Company 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. In addition, the Company continues to
maintain Directors' and Officers' Liability Insurance for all Directors who
served during the year.
Powers of Directors
The Directors are responsible for the management of the business and may
exercise all powers of the Company subject to UK legislation and the Company's
Articles of Association, which includes powers to issue or buy back the
Company's shares given by special resolution. The authorities to issue and buy
back shares, granted at the 2022 Annual General Meeting, remains unused.
Dividends
The Directors do not recommend payment of a dividend for the year ended 31
December 2022 (2021: nil).
Principal activity and status
The Company is registered as a public limited company (registration number
05718406) in England and Wales. The principal activity and business of the
Company is oil and gas exploration, development and production.
Subsequent events
In April 2023, SE Usenco Ukraine (a Cadogan subsidiary in Ukraine) completed
the acquisition of the 5% share interest of Usenco Nadra LLC that were not yet
owned by the Company. As a result, SE Usenco Ukraine consolidates now 100% of
Usenco Nadra LLC in its ownership.
This acquisition will allow the Company to further optimize its operating
structure in Ukraine and be more cost effective at Blazhiv field.
Structure of share capital
The authorized share capital of the Company is currently £30,000,000 divided
into 1,000,000,000 Ordinary shares of 3 pence each. The number of shares in
issue as at 31 December 2022 was 244,128,487 Ordinary shares (each with one
vote) with a nominal value of £7,323,854.61. The total number of voting rights
in the Company is 244,128,421. 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 attached to shares held in treasury.
Rights and obligations of Ordinary shares
In accordance with applicable laws and the Company's Articles of Association,
holders of Ordinary shares are entitled to:
· receive shareholder documentation including the notice of any general
meeting;
· attend, speak and exercise voting rights at general meetings, either in
person or by proxy; and
· 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. To accurately reflect the views of shareholders, where applicable it
is the Company's policy at present to take all resolutions at any general
meeting on a poll. Following the meeting, the results of the poll are released
to the market via a regulatory news service and published on the Company's
website.
Substantial shareholdings
As at 31 December 2022 and 19 April 2023, being the last practicable date, the
Company had been notified of the following interests in voting rights attached
to the Company's shares:
31 December 2022 19 April 2023
Major shareholder Number of % of total Number of % of
shares held voting shares total
rights held voting
rights
SPQR Capital Holdings SA 67,298,498 27.57 67,298,498 27.57
Mr Michel Meeus 26,000,000 10.65 26,000,000 10.65
Ms Veronique Salik 17,959,000 7.36 17,959,000 7.36
Devola SA 17,409,000 7.13 17,409,000 7.13
CA Indosuez Wealth Management 15,966,620 6.54 15,966,620 6.54
Kellet Overseas Inc. 14,002,696 5.74 14,002,696 5.74
Mr Fady Khallouf 10,425,455 4.27 10,425,455 4.27
Mr Pierre Salik 7,950,000 3.26 7,950,000 3.26
Cynderella International SA 7,657,886 3.14 7,657,886 3.14
Amendment of the Company's Articles of Association
The Company's Articles of Association may only be amended by way of a special
resolution of shareholders.
Disclosure of information to auditor
As required by section 418 of the Companies Act 2006, each of the Directors as
at 27 April 2023 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.
Going concern
The Group's business activities, together with the factors likely to affect its
future development, performance and position, are set out on pages 14 to 18.
Having considered the Company's financial position and its principal risks and
uncertainties, including uncertainties regarding the war in Ukraine and the
assessment of potential risks associated with Covid-19 including a)
restrictions applied by governments, illness amongst our workforce and
disruption to supply chain and sales channels; and b) market volatility in
respect of commodity prices associated with Covid-19 in addition to
geopolitical factors, 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 please refer to the detailed discussion of the
assumptions outlined in note 3(b) to the Consolidated Financial Statements.
Reporting year
The reporting year coincides with the Company's fiscal year, which is 1 January
2022 to 31 December 2022.
Financial risk management objectives and policies
The Company's financial risk management objectives and policies including its
policy for managing its exposure of the Company to price risk, credit risk,
liquidity risk and cash flow risk.
Management 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.
Outlook
Future developments in the business of the Company are presented on pages 5 to
9.
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.
Streamlined energy and carbon reporting
This section contains information on greenhouse gas ("GHG") emissions required
by the Companies Act 2006 (Strategic Report and Directors' Report).
Methodology
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") and DEFRA GHG conversion factors
for company reporting were utilised to calculate the CO2 equivalent of
emissions from various sources (2018 update). Also, the used methodology was
also updated based on methods proposed by DNV GL and in of GHG emissions
Inventory referring to the following guidelines and international standards.
The Company has reported on all 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).
Scope 1 emissions in 2022 increased compared to the previous year (14,631 tons
in 2022 vs 13,063 tons in 2021). This was caused by the increase of the gas
factor in the produced oil.
Conversely, Scope 2 emissions decreased in 2022 (124 tons in 2022 vs 137 tons
in 2021), as a result of the processes started in 2016 to improve the
efficiency of the structure, logistic and facilities. Total emissions in 2022
were 14,755 tons versus the 13,200 tons of 2021.
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 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.
The intensity ratio for E&P operations (same reporting perimeter) increased to
125,26 tons CO2e/Kboe in 2022 vs 103,4 tons CO2e/Kboe in 2021.
Total greenhouse gas emissions data for the year from 1 January to 31 December
CO2 emissions level increase was caused by the increase of associated gas
volume recovered during oil production. Another factor impacted emissions level
growing was increase of methane in CO2 level in the gas composition as detected
by bottomhole sampling oil analyses executed during the last hydrodynamic
surveys of Blazhiv wells. The Company has planned repetition survey and
sampling in 2023 to reconcile the data as well as different technological
scenario for reducing emissions to the atmosphere.
Greenhouse gas emissions source E&P
2022 2021
Scope 1
Direct emissions, including combustion of fuel and 14,631 13,063
operation of facilities
(tonnes of CO2 equivalent)
Scope 2
Indirect emissions from energy consumption, such as 124 137
electricity and heating purchased for own use (tonnes of
CO2 equivalent)
Total (Scope 1 & 2) 14,755 13,200
Normalisation factor
Barrels of oil equivalent, net 117,793 127,662
Intensity ratio
Emissions reported above normalised to tonnes of CO2e per 125,26 103,4
total wellhead production of crude oil, condensates and
natural gas, in thousands of Barrels of Oil Equivalent, net
Energy consumption
The Company started in 2020 to monitor energy consumption in KwH.
2022 2021 % change
KwH KwH 2022 - 2021
Ukraine 575,876 572,890 0,5%
Energy consumption in the UK is immaterial.
Task force on climate-related financial disclosures ('TCFD')
Climate change remains one of the Group's principal risks with governance over
climate-related transition and physical risks provided at the Board and
operational levels. The Board has ultimate accountability for ensuring Cadogan
maintains sound climate risk management and internal control systems. The Board
is ultimately accountable for Cadogan's strategic response to climate change
and the energy transition. Directors are responsible for ensuring they remain
sufficiently informed of climate related risks to Cadogan and the broader
energy sector.
TCFD related disclosures
Governance Describe the Board's oversight of climate-related risks and p.14-18
opportunities.
Describe Management's role in assessing and managing
climate-related risks and opportunities.
Strategy Describe the climate-related risks and opportunities the p.5-9
organisation has identified over the short, medium and long
term.
Describe the impact of climate-related risks and
opportunities on the organisation's businesses, strategy
and financial planning
Risk Describe the organisation's processes for identifying and p.20-21
management assessing climate-related risks.
Describe the organisation's processes for managing
climate-related risks.
Describe how processes for identifying, assessing and
managing climate-related risks are integrated into the
organisation's overall risk management.
Metrics and Disclose the metrics used by the organisation to assess p.27-28
targets climate-related risks and opportunities, in line with its
strategy and risk management process
Disclose Scope 1 and Scope 2greenhouse gas (GHG) emissions. p.28-29
Describe the targets used by the organisation to manage
climate-related risks, opportunities, and performances
against targets.
2023 Annual General Meeting
The 2023 Annual General Meeting ("AGM") of the Company provides an opportunity
to communicate with shareholders and the Board welcomes their participation.
Board members constantly strive to engage with shareholders on strategy,
governance and a number of other issues.
The Board looks forward to welcoming shareholders to the AGM. The AGM notice
will be issued to shareholders well in advance of the meeting with notes to
provide an explanation of all resolutions to be put to the AGM. In addition,
shareholder information will be enclosed as usual with the AGM notice to
facilitate voting and feedback in the usual way.
The Chairman of the Board and the members of its committees will be available
to answer shareholder questions at the AGM. All relevant shareholder
information including the annual report for 2022 and any other announcements
will be published on our website - www.cadoganenergysolutions.com.
This Report of Directors comprising pages 25 to 30 has been approved by the
Board and signed by the order of the Board by:
Ben Harber
Company Secretary
27 April 2023
Corporate Governance Statement
As a Company listed on the standard segment of the London Stock Exchange it is
not required to apply a specific corporate governance code and, given its size,
has elected not to do so. However, the Board of the Company is committed to the
highest standards of corporate governance and believe that the 2018 UK
Corporate Governance Code ("the Code") issued by the Financial Reporting
Council ("FRC") provides a suitable benchmark for the Company's corporate
governance framework. This Statement outlines how Cadogan Energy Solutions plc
("Cadogan" or the "Company") has applied the relevant principles of the Code
and complied with its provisions.
This Statement outlines how Cadogan Energy Solutions plc ("Cadogan" or the
"Company") has applied the relevant principles of the Code and complied with
its provisions.
During the year under review, the Company complied with all the provisions of
the Code, other than the exceptions noted below or elsewhere in this statement:
· Provision 5 (Workforce Engagement): Given the size of the business, the
Board does not consider it appropriate to adopt the suggested methods outlined
within the UK Corporate Governance Code 2018 to engage with its employees given
the size of the Company. Employee engagement continues to be undertaken by
senior management and any issues are escalated to the Board through the Chief
Executive Officer. The Board believes that the arrangements in place are
effective but will continue to keep this under review.
· Provision 9 (regarding the independence criteria of the Chair on
appointment): Under the 2018 Corporate Governance Code, the Company's Chair, Mr
Michel Meeùs, is not considered to be independent given the size of his
shareholding in the Company. Despite this, the Board considers Mr Meeùs to be
independent in character, mindset and judgement.
· Provision 21 (Board Evaluation): Given the size of the Board it was felt
that a board evaluation would not provide added value however the Board will
continue to assess this provision periodically.
· Provision 24 (Audit Committee Composition): Given the size of the Board,
the Audit Committee does not totally consist of independent non-executive
directors. Ms Lilia Jolibois, Independent non-executive director, chairs the
Audit Committee whilst Mr Jacques Mahaux, non-executive director, is a member
of the Audit Committee.
· Provision 32 (Remuneration Committee Composition): Given the size of the
Board, the Remuneration Committee does not totally consist of independent
non-executive directors. The Remuneration Committee consists of Mr Michel
Meeùs, Ms. Lilia Jolibois, Mr Jacques Mahaux and Mr Gilbert Lehmann.
Board Leadership and Company Purpose
The Board provides leadership and oversight, and its role is to ensure the
long-term success of the Company by implementing the Company's strategy and
business plan, overseeing its affairs, and providing constructive challenge to
management as they do this. In addition to this, the Board oversees financial
matters, governance, internal controls and risk management. The purpose of the
Board is to:
· monitor Group activities to see that sustainable value is being created;
· evaluate business strategies and monitor their implementation;
· monitor and review the performance of management;
· provide accountability to shareholders through appropriate reporting and
regulatory compliance;
· understand and ensure the management of operational business and financial
risks to which the Group is exposed; and
· ensure that the financial controls and systems of risk management are
robust and defensible
The Board comprises a Non-Independent non-executive Chairman, Chief Executive
Officer, two Independent Non-Executive Directors and a non-executive Director.
The Board has appointed Mr Lehmann as the Senior Independent Director.
The biographical details for each of the Directors and their membership of
Committees are incorporated into this report by reference and appear on pages
23 to 24.
The formal schedule of matters reserved for the Board's decision is available
on the Company's website.
The Board recognises the importance of building strong relationships with
stakeholders and understanding their views in order to help the Company deliver
its strategy and promote the development of the business over the long-term.
The Board is committed to having effective engagement with its stakeholders.
Our section 172 statement can be found on pages 35 to 36 which summarises the
Board's engagement with the Company's main stakeholders and some examples of
how their views have been taken into account in the Board's decision-making.
The Company seeks to ensure that it always acts lawfully, ethically and with
integrity. The Company has in place the following policies which the Board
reviews periodically:
· Code of Business Conduct and Ethics
· Anti-Bribery Policy
· Share Dealing Code
· Disclosure Policy
· Health, Safety and Environmental policies.
The Company has procedures in place for managing conflicts of interest. Should
a director become aware that they, or any of their connected parties, have an
interest in an existing or proposed transaction with the Company, its
subsidiaries or any matters to be discussed at meetings, they are required to
formally notify the Board in writing or at the next Board meeting. In
accordance with the Companies Act 2006 and the Company's Articles of
Association, the Board may authorize any potential or actual conflict of
interest that may otherwise involve any of the directors breaching his or her
duty to avoid conflicts of interest. All potential and actual conflicts
approved by the Board are recorded in register of conflicts, which is reviewed
by the Board at each Board meeting.
Directors' declarations of interests is a regular Board agenda item. A register
of directors' interests (including any actual or potential conflicts of
interest) is maintained and reviewed regularly to ensure all details are kept
up to date. Authorisation is sought prior to a director taking on a new
appointment or if any new conflicts or potential conflicts arise. New Directors
are required to declare any conflicts, or potential conflicts, of interest to
the Board at the first Board meeting after his or her appointment. The Board
believes that the procedures established to deal with conflicts of interest are
operating effectively.
Division of Responsibilities
The Directors possess a wide range of skills, knowledge and experience relevant
to the strategy of the Company, including financial, legal, governance,
regulatory and industry experience as well as the ability to provide
constructive challenge to the views and actions of executive management in
meeting agreed strategic goals and objectives.
The roles and responsibilities of the Chairman and Chief Executive Officer are
separate with a clear and formal division of each individual's
responsibilities, which has been agreed and documented by the Board.
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 are
challenged appropriately. Two Non-Executive Directors, Ms Lilia Jolibois, and
Mr Gilbert Lehmann are considered by the Board to be independent. Mr Gilbert
Lehmann, Senior Independent non-executive Director, has served on the Board for
longer than 9 years since his appointment, the board is of the view that he
retains his independent judgement and continues to make a valuable contribution
to the board.
Mr Michel Meeus, who is a significant shareholder and Mr Jacques Mahaux are not
considered independent as defined within the UK Corporate Governance Code 2018,
however the Board believes they are independent in character and judgement and
free from relationships or circumstances that could affect their judgement.
The Board has access to the advice of the company secretary.
Composition, Succession and Evaluation
The Company has established a nomination committee which leads the process for
Board appointments by identifying and nominating candidates for the approval of
the Board to fill Board vacancies and making recommendations to the Board on
Board's composition and balance. The Company's Nomination Committee Report can
be found on page 41.
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 in
line with Corporate Governance best practice. Accordingly, all members of the
Board will be standing for re-election at the 2023 Annual General Meeting due
to be held on 23rd June 2023.
All Directors continue to be effective and have sufficient time available to
perform their duties. The letters of appointment for the Non-Executive
Directors are available for review at the Registered Office and prior to the
Annual General Meeting. Each of the Non-Executive Directors independently
ensures that they update their skills and knowledge sufficiently to enable them
to fulfil their duties appropriately.
The Chairman, in conjunction with the Company Secretary, plans the programme
for the Board during the year. While no formal structured continuing
professional development program has been established for the non-executive
Directors, every effort is made to ensure that they are fully briefed before
Board meetings on the Company's business. The agenda for Board and Committee
meetings are 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.
Audit, Risk and Internal Control
The Board has delegated certain responsibilities to its committees including
its audit committee. The Company's Audit Committee Report can be found on pages
37 to 38.
The role of the Audit Committee is to monitor the integrity of the Company's
financial reporting, to review the Company's internal control and risk
management systems and to oversee the relationship with the Group's external
auditors. The Audit Committee focuses particularly on compliance with legal
requirements, accounting standards and the rules of the Financial Services
Authority. The Audit Committee will meet at least three times a year with
further meetings that are determined by the committee. Any member of the
committee or the external auditors may request any additional meetings they
consider necessary.
The Directors are responsible for the Group's system of internal control and
for maintaining and reviewing its effectiveness. 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.
The Board has delegated responsibility for the monitoring and review of the
Group's internal controls to the Audit Committee.
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 Group's internal control and risk management systems
that ensure the accuracy and reliability of financial reporting include clearly
defined lines of accountability and delegation of authority, policies and
procedures that cover financial planning and reporting, preparing consolidated
financial statements, capital expenditure, project governance and information
security.
The key features of the internal control systems, which operated during 2022
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
and policies have been circulated and adopted throughout the Group throughout
the period.
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 and
treasury functions report to the Group Director of Finance who reports directly
to the Chief Executive Officer.
The legal function for Ukraine's related assets and activities is managed by
the General Counsel, who reports to the General Director of Cadogan Ukraine.
The Health, Safety and Environment functions report to the Chairman of the HSE
Committee, the HSE Committee Report can be found on pages 39 to 40. 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 an internal audit function in place, however this
will be kept under review by the Audit Committee on an annual basis.
The Board has reviewed internal controls and risk management processes, in
place from the start of the year to the date of approval of this report. During
the course of its review the Board did not identify nor were advised of any
failings or weaknesses which it has deemed to be significant.
A summary of the principal risks facing the Company and the mitigating actions
in place are contained on pages 14 to 18 of the annual report.
The Company's going concern is contained on pages 27 to 28 of the annual
report.
Further information on the work undertaken by the Committee during the year can
be found on pages 37 to 38 of the annual report.
Remuneration
The Board has established a Remuneration Committee and the Company's
Remuneration Committee Report can be found on pages 43 to 63 of the annual
report.
The role of the Remuneration Committee is to determine and agree with the Board
the broad policy for the remuneration of executives and Senior Managers as
designated, as well as for setting the specific remuneration packages,
including pension rights and any compensation payments of all executive
Directors and the Chairman. The Company's remuneration policies and practices
are designed to support its long-term strategy and promote the long-term
sustainable success of the Company.
Attendance at Meetings
Six Board meetings took place during 2022. The attendance of those Directors in
place at the year end at Board and Committee meetings during the year was as
follows:
Board Audit Nomination Remuneration
Committee Committee Committee
No. Held 6 2 0 * 1
No. Attended:
M Meeus 6 n/a 0 1
F Khallouf 6 n/a n/a n/a
L Jolibois 6 2 0 1
G Lehmann 6 n/a 0 1
J Mahaux 6 2 0 1
*There was no meeting of the Nomination Committee held during 2022.
Responsibilities and membership of Board Committees
The Board has agreed written terms of reference for the Nomination Committee,
Remuneration Committee, Audit Committee and HSE committee. The terms of
reference for the Board Committees are published on the Company's website,
www.cadoganenergysolutions.com, and are also available from the Company
Secretary at the Registered Office. A review of the Committees including their
membership and activities of all Board Committees is provided on pages 37 to
42.
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 at quarterly meetings and discussed in detail. Mr
Lehmann, as the Senior Independent Director, is available to meet with
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.cadoganenergysolutions.com, as soon as they are announced. The
Notice of the Annual General Meeting is also contained on the Company's
website, www.cadoganenergysolutions.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.cadoganenergysolutions.com. Directors' section 172 statement The disclosure describes how the Directors have regard to the matters set out in section 172(1)(a) to (f) and forms the Directors' statement required under section 414CZA of The Companies Act 2006. This new reporting requirement is made in accordance with the new corporate governance requirements identified in The Companies (Miscellaneous Reporting) Regulations 2018. The matters set out in section 172(1) (a) to (f) are that a Director must act in the way they consider, in good faith, would be most likely to promote the success of the Company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to: (a) the likely consequences of any decision in the long term; (b) the interests of the Company's employees; (c) the need to foster the Company's business relationships with suppliers, customers and others; (d) the impact of the Company's operations on the community and the environment; (e) the desirability of the Company maintaining a reputation for high standards of business conduct; and (f) the need to act fairly between members of the Company. Being sustainable in our activities means conducting our business with respect for the environment and for the communities hosting us, with the aim of increasing the benefit and value to our stakeholders. We recognize that this is a key element to be competitive and to maintain our licence to operate. Further details of how the Directors have regard to the issues, factors and stakeholders considered relevant in complying with S 172 (1) (a)-(f), the methods used to engage with stakeholders and the effect on the Group's decision making can be found throughout the annual report and in particular pages 34 (which outlines how the Company engages with its stakeholders), pages 20 to 22 (which contains Cadogan's corporate responsibility statement) pages 28 to 30 (which contains the Company's report on greenhouse gas emissions) and page 35 (which outlines the ways in which the Company engages with its shareholders). The Group has implemented an integrated HSE management system aiming to ensure a safe and environmentally friendly culture in the organization (pages 20 to 22). However, regarding the environmental sustainability of the Group's activities, the Directors are fully aware of the need to direct future development in new activities with a lower impact on environment (CEO outlook page 9, 28). When assessing the Proger Loan, the Directors carefully considered the issues and decisions with their impact on the Group and all its stakeholders (pages 8, 9, 16, 17). The Board has a formal schedule of matters specifically reserved for its decision, including approval of acquisitions and disposals, major capital projects, financial results, Board appointments, dividend recommendations, material contracts and Group strategy. 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. In particular, as a consequence of the invasion of Ukraine by Russia in February 2022, and the war situation prevailing in Ukraine the Board discussed the current situation and its consequences on the security of the employees, the organization of the operations in Ukraine and the potential impacts on its human, financial and operational assets. The Group has been able to implement immediately emergency procedures with safety and protection measures communicated to all employees and put in place for every location. Specific measures have been put in place for the operations on site to ensure the human, the industrial and the environmental safety. The Group is monitoring the situation daily and taking appropriate action to ensure the safety and essential needs of its employees. 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 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.cadoganenergysolutions.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; and § 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. Governance Ms Jolibois and Mr Mahaux are both members of the Audit Committee. The Audit Committee is chaired by Ms Jolibois who had relevant financial experience within a major European company 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 meetings. 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: 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 2022 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. 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; · reviewed critical judgements, estimates and underlying assumptions; and · assessed whether the financial statements are fair, balanced and understandable. Going concern After making enquiries and considering the uncertainties described on pages 14 to 18, the Committee has a reasonable expectation that the Company and the Group has 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 including the assessment of the impact of Covid-19 and the basis for the conclusion, please refer to the detailed discussion of the assumptions outlined in note 3 (b) to the Consolidated Financial Statements. Internal controls and risk management The Audit Committee reviews and monitors financial and control issues throughout the Group including the Group's key risks and the approach for dealing with them. Further information on the risks and uncertainties facing the Group are detailed on pages 100 to 103 and in note 27 to the financial statements. 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, considering 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, considering 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. A breakdown of the non-audit fees is disclosed in note 11 to the Consolidated Financial Statements. The Audit Committee has reviewed the nature, level and timing 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. 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. Whistleblowing 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 is reviewed periodically. The Group's policies on anti-bribery, the acceptance of gifts and hospitality, and business conduct and ethics are circulated to staff as part of a combined manual on induction with changes regularly communicated. 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. 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. Lilia Jolibois Chairman of the Audit Committee 27 April 2023 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 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.cadoganenergysolutions.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. Governance The Committee is chaired by Mr Andrey Bilyi (Cadogan Ukraine General Director) as acting Head of the HSE Committee and its other member is Ms Snizhana Buryak (HSE Manager). The CEO attends meetings of the HSE Committee as necessary. During 2022, the HSE Committee held four meetings to monitor the HSE risks and activities across the business, following which actions were identified for the continuous improvement of the various processes and the mitigation of risk. Responsibilities · To regularly maintain and implement the continuous improvement of the HSE Management System with the aim of improving the Company's performances; · To manage and mitigate the risks of personnel infection with covid-19 virus. Work-out respective administrative and healthcare measures to provide safe working conditions for the employees. Prevent the spread of covid-19 as well as ensuring staff reasonable vaccination level. · Assessments of the risks to employees, contractors, customers, partners, and any other people who could be affected by the Company's activities with the aim of reducing the global risk of the Company and increasing its level of acceptability; · 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; and · Where it deems it appropriate to do so, appoint an independent auditor to review performance with 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. Activities of the Health, Safety and Environment Committee The HSE Committee in discharging its duties reviewed and considered the following: · Company activities execution and control over contractors services execution in line with company policies and HSE procedures · Monthly statistics and reports on the activity were regularly distributed to the CEO, Management and to the members of the committee; · Ensured that the implementation of new legislation and requirements were punctually followed-up and promptly updated; · Compliance with HSE regulatory requirements was ensured through discussion of the results of inspections, both internal inspections and those carried out by the Authorities. The results of the inspections and drills were analysed and commented to assess the need for corrective actions and/or training initiatives; · A standing item was included on the agenda at every meeting to monitor monthly HSE performance, key indicators and statistics allowing the HSE Committee to assess the Company's performance by analysing any lost-time incidents, near misses, HSE training and other indicators; · Interaction with contractors, Authorities, local communities and other stakeholders were discussed among other HSE activities; · Compliance to ISO 14001 and ISO 45001 has been proved by the authorized third party auditor. Also the Company had its entire data calculation process as well as emissions measurement system re-validated by a different independent third party. · Ensuring all the Observation and Actions requested by the Certification Body have been implemented Overview The Company's HSE Management System and the Guidelines and Procedures have been updated to fit with the ISO requirements and are adequate for the proper execution of the Company's operations. 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. Nomination Committee Report The Board delegates some of its duties to the Nomination Committee and appoints the members of the Nomination Committee which are non-executive Directors of the Group. The membership of the Committee is reviewed annually and any changes to its composition are referred to the Board for approval. The terms of reference of the Nomination Committee are published on the Company's website, www.cadoganenergysolutions.com, and are available from the Company Secretary at the Registered Office. Two members constitute a quorum. Governance Mr. Michel Meeus (Remuneration and Nomination Committee Chairman), Ms. Lilia Jolibois, Mr. Jacques Mahaux and Mr. Gilbert Lehmann (Non-Executive Directors) are the members of the Nomination Committee. The Company Secretary attends all meetings of the Nomination Committee. 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 candidates to fill Board vacancies as and when they arise, for the Board's approval; · Before appointments are made by the Board, evaluate the balance of skills, knowledge, experience and diversity (gender, ethnic, age, sex, disability, educational and professional backgrounds, etc.) on the Board and, in the light of this evaluation, prepare a description of the role and capabilities required for a particular appointment; and · 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, ensuring 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; and · 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. Michel Meeus Nomination Committee Chairman 27 April 2023 Remuneration Committee Statement from the Chairman I am pleased to present the Annual Report on Remuneration for the year ended 31 December 2022. Cadogan's Remuneration Policy was approved as proposed by the shareholders at the Annual General Meeting of June 25, 2021 and is attached at the end of the Annual Report on Remuneration. The Remuneration Committee is not proposing to make any changes to the existing Policy however in line with industry best practice and the three-year Policy cycle the Company will be seeking shareholder approval at this year's AGM. The key elements of the Remuneration Policy are: · A better long-term alignment of the executives' remuneration with the interests of the shareholders; · A material reduction in the maximum remuneration level for the Executive Directors, both in terms of annual bonus and of long-term incentive (performance share plan);
· The payment of at least 50% of the Annual Bonus in shares with the
remaining 50% to be paid in cash or shares at the discretion of the
Remuneration Committee. Shares will be priced for this award based on their
market value at closing on the Business Day prior to the Subscription Date;
· The introduction of claw-back and malus provisions on both bonuses and
share awards; and
· The expectation that the Executive Directors build a substantial
shareholding position in the company through their mandate.
Michel Meeus
Chairman of the Remuneration Committee
27 April 2023
ANNUAL REPORT ON REMUNERATION 2022
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.
Governance
The Remuneration Committee is appointed by the Board from the non-executive
Directors of the Company. The Remuneration Committee's terms of reference are
reviewed annually by the 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.cadoganenergysolutions.com, and are also available from the Company
Secretary at the Registered Office.
The Remuneration Committee consists of Mr. Michel Meeus, Ms. Lilia Jolibois,
Mr. Jacques Mahaux 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 Company Secretary attends the meetings of the Remuneration
Committee.
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; and
§ 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
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 is reported to the
Board and discussed in detail both there and during meetings of the
Remuneration Committee.
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.
Remuneration consultants
The Remuneration Committee did not take any advice from external remuneration
consultants, with the exception of the review undertaken of the Remuneration
Report.
Single total figure of remuneration for executive and non-executive directors
(audited)
Salary and fees Taxable benefit Contributions Annual bonus Total
[5] to pension
schemes
$ $ $ $ $
Executive Director
2022 2021 2022 2021 2022 2021 2022 2021 2022 2021
F Khallouf 479,720 519,926 29,486 30,173 75,035 78,619 - - 584,241 628,717
Non-executive Directors
M Meeus 89,000 89,000 - - - - - - 89,000 89,000
L Jolibois 48,000 48,000 - - - - - - 48,000 48,000
J Mahaux 43,000 43,000 - - - - - - 43,000 43,000
G Lehmann 38,000 38,000 - - - - - - 38,000 38,000
Total Fixed Remuneration Total Variable
Remuneration
$ $
2022 2021 2022 2021
Executive Director 584,241 628,717 - -
Non-executive 218,000 218,000 - -
Directors
Notes to the table
Mr Fady Khallouf
Mr Khallouf was appointed as Chief Executive Officer on 15 November 2019. Mr
Khallouf's salary is ?440,000 per annum.
KPIs
The CEO is subject to a performance-related, bonus scheme built around a
scorecard with a set of challenging KPI's aligned with the company strategy.
Given the current situation in Ukraine and any potential future difficulties
for the Company Mr Fady Khallouf had requested that any annual performance
related bonus to be considered and paid by the Remuneration Committee during
2023, in respect of the financial year ended 31st December 2022, be waived.
Benefits
Benefits may be provided to the executive directors, in the form of private
medical insurance and life assurance.
The Chairman and Non-Executive Directors
As mentioned above, fees for non-Executive Directors were reduced by 20 percent
on 15th January 2020 with effect from 15th November 2019. The fees are as
follows: the Chairman's fee at $89,000 and the fee for acting as a
non-executive Director at $38,000 with an additional $10,000 for acting as
Chairman of the Audit Committee and an additional $5,000 for a committee
membership.
Scheme interests awarded during the financial year (audited)
There were no scheme interests awarded during the year.
Payments to past directors (audited)
In 2022 there were no payments to past directors.
Payments for loss of office (audited)
No notice period was either worked or paid.
Directors' interests in shares (audited)
The beneficial interests of the Directors in office as at 31 December 2022 and
their connected persons in the Ordinary shares of the Company at 31 December
2022 are set out below.
Shares as at 31 December 2022 2021
Michel Meeus 26,000,000 26,000,000
Fady Khallouf 10,425,455 10,425,455
Gilbert Lehmann - -
Lilia Jolibois - -
Jacques Mahaux - -
There were no changes in the Directors shareholding at 31 December 2022
compared to 31 December 2021.
The Company does not currently operate formal shareholding guidelines. Whilst
there is no specified level, the Company expects that under the new
Remuneration Policy, the Executive Director will continue to build up a
significant shareholding position in the Company during his mandate.
The Company's performance
The graph below highlights the Company's total shareholder return ("TSR")
performance for the last twelve 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, and has been retained ever since, primarily for continuity
purposes TSR is the return from a share or index based on share price movements
and notional reinvestment of declared dividends.
Historic Remuneration of Chief Executive
Salary Taxable Annual Long-term Pension Loss of Total
benefits bonus incentives office
$ $ $ $ $ $ $
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 15,987 243,132 - - - 691,528
[6]
2016 487,080 15,353 210,504[7] - - - 712,937
2017 497,288 27,273 126,992 - - - 651,553
2018 521,664 39,838 201,872 - - - 763,374
2019 492,581 45,453 495,109[8] - - - 1,033,143
2020 517,389 59,294 - - 58,300 - 634,983
2021 535,999 30,173 - - 78,619 - 644,791
2022 479,720 29,486 - - 75,035 - 584,241
In 2022, the Remuneration Committee, after consultation with the CEO, have
decided to postpone any variable performance related bonus for year ended 2022
given the impact of Covid-19 and volatility in oil and gas prices.
The annual bonus received by the CEO as a percentage of the maximum opportunity
is presented in the following table.
Year CEO CEO single figure Annual bonus pay-out
of total against maximum
remuneration $ opportunity %
2022 Mr. Khallouf 584,241 -
2021 Mr. Khallouf 644,791 -
2020 Mr. Khallouf 634,983 -
2019 Mr. Khallouf[9] 444,465 -
Mr. Michelotti 588,678 10
2018 Mr. Michelotti 763,374 32
2017 Mr. Michelotti 651,553 12
2016 Mr. Michelotti 712,937 22[10]
2015 Mr. Michelotti 502,021 27[11]
Mr. des 189,507 -
Pallieres
2014 Mr. des 426,167 -
Pallieres
2013 Mr. des 384,941 -
Pallieres
2012 Mr. des 389,935 -
Pallieres
Mr. Barron 280,298[12] -
2011 Mr. des 273,201 -
Pallieres[13]
Mr. Barron 395,984 -
2010 Mr. Barron 547,067 -
2009 Mr. Barron[14] 707,085 67
Percentage change in the remuneration of the Chief Executive
The following table shows the percentage change in the remuneration of the
Chief Executive in 2022 and 2021 compared to that of all employees within the
Group.
2022 2021
Average
$'000 $'000 change, %
Base salary CEO 480 536 -8%
All employees[1] 1,897 1,978 -4%
Taxable benefits CEO 104 108 -3%
All employees 125 126 -1%
Annual Bonus CEO - - -
All employees - - -
Total CEO 584 628 -7%
All employees 2,022 2,104 -4%
[1] All employees mean all employees of the Group, including CEO and other
Directors (note 12, page 92).
In 2022 none of the directors participated in long-term incentives.
In 2022 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.
Percentage change in Non-Executive director remuneration
Michel Meeus All employees
2022 2021 % change % change
$'000 $'000 2022 - 2022 - 2021
2021
Base salary/fees 89,000 89,000 - -4%
Taxable benefits - - - -1%
(including pensions)
Annual bonus - - - 0%
Total 89,000 89,000 - -4%
Lilia Jolibois All employees
2022 2021 % change % change
$'000 $'000 2022 - 2022 - 2021
2021
Base salary/fees 48,000 48,000 - -4%
Taxable benefits - - - -1%
(including pensions)
Annual bonus - - - 0%
Total 48,000 48,000 - -4%
Jacques Mahaux All employees
2022 2021 % change % change
$'000 $'000 2022 - 2022 - 2021
2021
Base salary/fees 43,000 43,000 - -4%
Taxable benefits - - - -1%
(including pensions)
Annual bonus - - - 0%
Total 43,000 43,000 - -4%
Gilbert Lehmann All employees
2022 2021 % change % change
$'000 $'000 2022 - 2022 - 2021
2021
Base salary/fees 38,000 38,000 - -4%
Taxable benefits - - - -1%
(including pensions)
Annual bonus - - - 0%
Total 38,000 38,000 - -4%
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 2021and 31 December 2022.
2022 2021 Year-on-year
$'000 $'000 change, %
All-employee remuneration 2,022 2, 104 -4%
Distributions to shareholders - - -
Shareholder voting at the Annual General Meeting
The Directors' Remuneration Policy was approved by shareholders at the Annual
General Meeting held on 25 June 2021 and remains unchanged. The Remuneration
Policy can be found on the Group's website and at pages 50 to 63 of this Annual
Report on Remuneration. The votes cast by proxy were as follows:
Directors' Remuneration Number of votes % of votes cast
Policy
For 100,135,172 82.19
Against 21,693,116 17.81
Total votes cast 121,828,288 100.00
Number of votes withheld 0
The Directors' Annual Report on Remuneration is approved by shareholders at
each Annual General Meeting. A summary of the votes cast by proxy in 2022 and
2021 were as follows:
2022 2021
Director's Annual Number of votes % of votes Number of votes % of votes
Report on Remuneration cast cast
For 83,255,878 91.89 100,135,172 82.19
Against 7,348,465 8.11 21,693,116 17.81
Total votes cast 90,604,343 121,828,288 100.00
Number of votes 5,234 0
withheld
Implementation of Remuneration Policy in 2022
The performance related elements of remuneration remain unchanged and will be
built around a scorecard with a set of KPI's aligned with the Group strategy.
The Remuneration Policy can be found on the Group's website and at pages 50 to
63 of this Annual Report on Remuneration.
Approval
The Directors' Annual Report on Remuneration was approved by the Board on 27
April 2023 and signed on its behalf by:
Michel Meeus
Chairman
27 April 2023
Directors' Remuneration Policy
§ Introduction
This Directors' Remuneration Policy (the "Policy") contains the information
required to be set out as the directors' remuneration policy for the purposes
of The Large and Medium-sized Companies and Groups (Accounts and Reports)
(Amendment) Regulations 2013.
The Policy was approved by shareholders at the 2021 AGM of the Company. The
Remuneration Committee is not proposing to make any changes to the existing
Policy however in line with industry best practice and the three-year Policy
cycle the Company will be seeking shareholder approval at this year's AGM. The
effective date of this Policy is the date on which the Policy is approved by
shareholders.
The Policy applies in respect of all executive officers appointed to the Board
of Directors ("executive directors") and non-executive directors. Other senior
executives may be subject to the Policy, including in relation to annual bonus
and shares incentive arrangements in particular if and to the extent that the
Remuneration Committee determines it is appropriate.
The Remuneration Committee will keep the Policy under review to ensure that it
continues to promote the long-term success of the Company by giving the Company
its best opportunity of delivering on the business strategy. It is the
Remuneration Committee's intention that the Policy be put to shareholders for
approval every three years unless there is a need for the Policy to be approved
at an earlier date.
The Company aims to provide sufficient flexibility in the Policy for
unanticipated changes in compensation practices and business conditions to
ensure the Remuneration Committee has appropriate discretion to retain its top
executives who perform. The Remuneration Committee reserves the right to
approve any payments that may be outside the terms of this Policy, where the
terms of that payment were agreed before the Policy came into effect, or before
the individual became a director of the Company.
Maximum caps are provided to comply with the required legislation and should
not be taken to indicate an intent to make payments at that level. The maximum
caps are valid at the time that the relevant employment agreement or
appointment letter is entered into and the caps may be adjusted to take into
account fluctuations in exchange rates.
§ Remuneration policy table: executive directors
Component Purpose and link Maximum opportunity Operation and performance
to strategy measures
Salary and To provide fixed The maximum annual Salary is paid on a monthly
Fees remuneration at base combined basis.
an appropriate salary and fees for The Remuneration Committee takes
level, to executive directors into account a number of factors
attract and is ?440,000[16]. when setting salaries including:
retain directors The Remuneration § scope and difficulty of the
as part of the Committee will role;
overall consider the § skills and experience of the
compensation factors set out individual;
package. under the § salary levels for similar
"Operation" column roles within the international
when determining industry; and
the appropriate § pay and conditions elsewhere
level of base in the Group.Salaries are
salary within the reviewed on an annual basis, but
formal Policy are not necessarily increased at
maximum. each review.
No performance measures.
Annual Bonus To incentivise The maximum award The payment of any bonus is at
and reward the is 125% of combined the discretion of the Board with
achievement of base salary and reference to the performance
individual and fees. year.
business § The Remuneration Committee
objectives which sets, in advance, a scorecard
are key to the with a set of Key Performance
delivery of the Indicators ("KPIs") aligned with
Company's the Company's strategy. The
business measures and the relative
strategy. weightings are substantiated by
the Remuneration Committee and
aim to be stretching and to
support the Company's business
strategy. Measures are related
to Company financial
performance, operational
performance and the Company's
health and safety record. In
general relative weightings of
each KPI are expected not to
exceed 50% and not to be less
than 10%.
§ The Remuneration Committee
retains the flexibility to
determine and, if it considers
appropriate, change the KPIs and
weightings of the KPIs based on
the outcome of its annual
review. The Remuneration
Committee may also adjust KPIs
during the year to take account
of material events, such as
(without limitation) material
corporate events, changes in
responsibilities of an
individual and/ or currency
exchange rates. Any such changes
will be within the overall
target and maximum payouts
approved in the policy.
§ The KPI targets and specific
weightings in the scorecard are
defined annually early in the
year, once the budget has been
approved. A summary of the KPI
targets, weightings for the KPIs
and how far the KPIs are met
will be included retrospectively
each year in the Implementation
Report for the year.
§ All bonuses that may become
payable are subject to malus and
clawback provisions in the event
of material financial
misstatement of the Company or
fraud or material misconduct on
the part of the executive, as
explained further below.
§ 50% of the bonuses that may
become payable must be applied
to subscribe for or acquire
shares in the Company (after the
deduction of any income tax and/
or employee social security
contributions payable). The
Company is proposing to adopt
and operate a Deferred Bonus
Plan as a framework plan for the
delivery of shares to
executives, which may be
satisfied by the issue of new
shares or transfer of existing
or treasury shares.
§ The Remuneration Committee
will determine whether the
remainder of the bonus shall be
paid in cash or must be applied
to subscribe for or acquire
shares (after the deduction of
any income tax and/ or employee
social security contributions
payable). In making its
determination as to how the
remainder of the bonus shall be
paid, the Remuneration Committee
may take into account:
profitability of the Company;
the executive's shareholding as
measured against any Company
shareholding guidelines;
potential liabilities of the
recipients to income tax and
social security contributions,
among other things. Additional
shares representing the value of
dividends payable on the
deferred shares may be paid.
§ The Remuneration Committee may
impose holding periods of up to
three years on any of the shares
delivered pursuant to the annual
bonus plan.
§ There are no prescribed
minimum levels of performance in
the annual bonus structure and
so it is possible that no bonus
award would be made.
Share To incentivise, Awards can be made The Company has adopted and
Incentive retain and under the PSP with operates the 2018 Performance
Arrangements reward eligible a value of up to a Share Plan ("PSP") to replace
employees and maximum of 200% of the 2008 Performance Share Plan.
align their base salary and The PSP offers the opportunity
interests with fees or 300% in to earn shares in the Company
those of the exceptional subject to the achievement of
shareholders of circumstances. stretching but realistic
the Company. performance conditions.
Performance conditions will be a
main feature of the PSP.
The PSP will be administered by
the Remuneration Committee.
§ Awards can be made under the
PSP at the direction of the
Remuneration Committee within
the policy maximum in the form
of contingent share awards.
§ PSP awards will have a minimum
vesting period of 3 years and,
for directors, the PSP awards
have a further holding period of
2 years following the end of the
vesting period (subject to any
number of shares that may need
to be sold to meet any income
tax and employee social security
contributions due on vesting).
§ The Remuneration Committee
will develop clear KPIs that aim
to align directors with Company
strategy over time periods in
excess of one financial year.
Any performance measures and
targets used for share incentive
awards during 2019 will be
relevant and stretching in line
with the overall strategy of the
Company.
§ The Remuneration Committee may
adjust or change the PSP
measures, targets and weightings
for new awards under the PSP to
ensure continued alignment with
Company strategy.
§ PSP awards are subject to
malus and clawback in the event
of material financial
misstatement of the Company or
fraud or material misconduct on
the part of the executive.
§ Upon vesting of an award, the
award holder must pay the
nominal value in respect of each
share that vests.
§ PSP Awards will normally lapse
where the award holder ceases
employment with the Company
before vesting. PSP Awards will
not lapse and will vest
immediately if the award holder
is considered to be a Good
Leaver (leaves due to death or
disability) subject to the
Remuneration Committee being
satisfied that performance
conditions have been satisfied
or are likely to be satisfied as
at the end of the relevant
performance period. In other
circumstances, the Remuneration
Committee may determine that
awards will not lapse and will
continue to vest at their normal
vesting date, subject to
pro-ration to reflect the period
of service during the
performance period and
performance conditions. The
Remuneration Committee has
residuary discretions to
disapply pro ration and bring
forward the date of vesting.
§ In the event of a change of
control of the Company, if the
acquiring company agrees, awards
will be exchanged for equivalent
awards over shares in the
acquiring company and continue
to vest according to the
original vesting schedule. If
the acquiring company does not
agree to exchange the awards,
the awards will vest at the
Committee's absolute discretion.
Awards that vest will be subject
to time pro-ration and
performance conditions.
§ Benefits under the PSP will
not be pensionable.
§ The PSP Plan Limits are set
out at Note 2.4 below.
Pension To provide a Any pension No performance measures.
retirement benefits will be
benefit that set at an
will foster appropriate level
loyalty and in line with market
retain practice, and in no
experienced event will the
executive contributions paid
directors. by the Company
exceed 15% of
combined base
salary and fees.
Benefits To provide a Any benefits will § The executive directors are
market be set at an entitled to private medical
competitive appropriate level insurance and life assurance
level of in line with market cover (of four times the
benefits to practice, and in no combined salary and fee) and
executive event will the directors' and officers'
directors. value of the liability insurance.
benefits exceed 15% § The Remuneration Committee may
of combined base decide to provide other benefits
salary and fees. commensurate with the market.
Such benefits may include (for
instance) company car or
allowance, physical examinations
and medical support,
professional advice, assistance
with filling out tax returns and
occasional minor benefits. A
tax equalisation payment may be
paid to an executive director if
any part of the remuneration of
the executive director becomes
subject to double taxation. Tax
gross ups may be paid, where
appropriate. The Company does
not, at present, provide other
taxable benefits to the
executive directors.
§ Executive directors are
reimbursed for reasonable
business expenses incurred in
the course of carrying out their
duties.
§ No performance measures.
Notes to the executive directors' remuneration policy table
The Remuneration Committee's philosophy is that remuneration arrangements
should be appropriately positioned to support the Group's business strategy
over the longer term and the creation of value for shareholders. In this
context the following key principles are considered to be important:
- remuneration arrangements should align executive and employee
interests with those of shareholders;
- remuneration arrangements should help retain key executives and
employees; and
- remuneration arrangements should incentivise executives to achieve
short, medium and long-term business targets which represent value creation for
shareholders. Targets should relate to the Group's performance in terms of
overall revenue and profit and the executive's own performance. Exceptional
rewards should only be delivered if there are exceptional returns.
The Remuneration Committee reserves the right to make any remuneration payments
(including satisfying awards of variable remuneration) and payments for loss of
office notwithstanding that they are not in line with the Policy set out above,
where the terms of that payment were agreed before the Policy came into effect,
or before the individual became a director of the Company (provided the payment
was not in consideration for the individual becoming a director).
§ Performance measures and targets
(a) Annual Bonus
The performance measures for executive directors comprise of financial measures
and business goals linked to the Company's strategy, which could include
financial and non-financial measures. The business goals are tailored to
reflect each executive director's role and responsibilities during the year.
The performance measures are chosen to enable the Remuneration Committee to
review the Company's and the individual's performance against the Company's
business strategy and appropriately incentivise and reward the executive
directors.
Annual bonus targets are set by the Remuneration Committee each year. They are
stretching but realistic targets which reflect the most important areas of
strategic focus for the Company. The factors taken into consideration when
setting targets include the Company's Key Performance Indicators (which are
determined annually by the Remuneration Committee), and the extent to which
they are under the control or influence of the executive whose remuneration is
being determined.
Performance is measured over the financial year against the measures and
targets set according to the scorecard. The Remuneration Committee retains the
right to exercise its judgement to adjust the bonus outcome for an individual
to ensure the outcome reflects any other aspects of the Company's performance
that become relevant during the financial year.
The Remuneration Committee used Company operational and financial performances
and safety as performance measures for the 2020 scorecard. For years following
2020, the structure of the annual bonus scorecard will be reviewed by the
Remuneration Committee.
2022 Annual bonus scorecard measures for executive director
40% weighting 50% weighting
Company financial performance, including cash
Operational performance, such as targets and profit targets.
production, sales, geographical
diversification, and starting new
projects.
10% weighting
Indicators of health and safety
to promote the effective risk
management of the Company.
(b) Share Plans
The Remuneration Committee will make the vesting of a Plan award conditional
upon the satisfaction of stretching but realistic performance conditions. These
conditions are meant to achieve a long-term alignment of the executives'
remuneration with the interest of the shareholders.
EBITDA growth, increase of P1 reserves (in millions boe), and changes to the
free cash-flow are the key KPIs to be used by the Remuneration Committee and
will be measured over time periods of three financial years. The performance
measures are chosen to align the performance of participants with the
attainment of financial performance targets over the vesting period of the
award. The targets are set by the Remuneration Committee by reference to the
Company's strategy and business plan and the results achieved at the time of
the vest are determined by the Remuneration Committee.
Under the PSP plan rules, the Board may vary a performance target where it
considers that any performance target to which an award is subject is no longer
a true or fair measure of the participant's performance, provided that the
Board must act fairly and reasonably and that the new performance target is
materially no more difficult and no less difficult to satisfy than the original
performance target.
§ Malus and clawback (applicable to bonuses and share awards)
The Remuneration Committee has the discretion to reduce the bonus before
payment or require the executive director to pay back shares or a cash amount
in the event of material financial misstatement of the Company or fraud or
material misconduct on the part of the executive. The amount that may be clawed
back on any such event is limited to the value of the bonus, taking into
account the cash paid and the shares delivered to the executive, taking the
value of the shares at the time of the clawback, less any income tax or
employee social security contributions paid on the bonuses.
§ Share ownership guidelines for executives
The Remuneration Committee is planning to implement share ownership guidelines
for executive directors to further align the interests of the executive
directors with those of shareholders. The share ownership guidelines will
include an expectation that executive directors build up their shareholding to
200% of base salary over a period of five years from the later of: the date of
adoption of this policy and the date of appointment. Once the shareholding
guideline is reached, executive directors would be expected to maintain it. The
intention would be for the shareholding guideline to be reached through the
retention of vested shares from share plans (e.g. the deferred share element of
the annual bonus and shares vested under the PSP). As such, the Remuneration
Committee's discretion may be used to increase the proportion of an annual
bonus to be delivered in shares to assist the executive director in meeting
this guideline. The deferred share mechanism in the annual bonus and the design
of the PSP will assist executive directors in reaching the guidelines.
Executive directors will not be expected to top up their shareholding with
personal acquisitions of Company shares outside the usual share plans described
in the Policy. The Remuneration Committee will monitor the executive directors'
shareholdings and may adjust the guideline in special individual and Company
circumstances, for example in the case of a share price fall.
§ PSP Plan Limits
The PSP may operate over new issue shares, treasury shares or shares purchased
in the market. In any ten-calendar year period, the Company may not issue (or
grant rights to issue) more than:
(a) 10% of the issued ordinary share capital of the Company under the
Plan and any other employee share plan adopted by the Company; and
(b) 5% of the issued ordinary share capital of the Company under the
Plan and any other executive share plan adopted by the Company.
Treasury shares will count as new issue shares for the purposes of these limits
unless institutional investors decide that they need not count. These limits do
not include rights to shares which have been renounced, released, lapsed or
otherwise become incapable of vesting, awards that the Remuneration Committee
determines after grant to be satisfied by the transfer of existing shares and
shares allocated to satisfy bonuses (including pursuant to the Deferred Bonus
Plan).
§ Remuneration throughout the Group
Differences in the Company's pay policy for executive directors from that
applying to employees within the Group generally reflect the appropriate market
rate for the individual executive roles.
§ Remuneration policy table: non-executive directors
Component Purpose and link Maximum opportunity Operation and performance
to strategy measures
Fees To provide an § The maximum annual fees Non-executive directors receive a
appropriate paid to non-executive standard annual fee, which is
reward to directors is £50,000 for a paid on a quarterly basis in
attract and non-executive director role, arrears.
retain and £100,000 for the role of Additional fees may also be paid
high-calibre Chairman. An additional £ to recognise the additional work
individuals with 10,000 will be paid to the performed by members of any
the relevant individual acting as committees set up by the Board,
skills, Chairman of the Audit and for the role of chair of a
knowledge and Committee. committee.
experience to Fees are reviewed on an annual
progress the basis, but are not necessarily
Company increased at each review. Fees
strategy. are set at a rate that takes into
account:
§ market practice for comparative
roles;
§ the financial results of the
Company;
§ the time commitment and duties
involved; and
§ the requirement to attract and
retain the quality of individuals
required by the Company.
The remuneration of the
non-executive directors is a
matter for the Board to consider
and decide upon.
There are no performance measures
related to non-executive
directors' fees.
Notes to the Policy Table
The payment policy for non-executive directors is to pay a rate which will
secure persons of a suitable calibre. The remuneration of the non-executive
directors is determined by the Board. External benchmarking data and specialist
advisers are used when setting fees, which will be reviewed at appropriate
intervals. The maximum caps are valid at the time that the relevant appointment
letter is entered into and the caps may be adjusted to take into account
fluctuations in exchange rates.
Expenses reasonably and wholly incurred in the performance of the role of
non-executive director of the Company may be reimbursed or paid for directly by
the Company, as appropriate, and may include any tax due on the expense.
The non-executive directors' fees are non-pensionable. The non-executive
directors have not to date been eligible to participate in any incentive plans
(such as bonuses or share plans); however, the Board considers that it may be
appropriate in the future to enable such participation, subject to suitably
stretching performance thresholds.
Non-executive directors may receive professional advice in respect of their
duties with the Company which will be paid for by the Company. They will be
covered by the Company's insurance policy for directors.
§ Recruitment
The Company's policy on the recruitment of directors is to pay a fair
remuneration package for the role being undertaken and the experience of the
individual being recruited. The Remuneration Committee will consider all
relevant factors, which include the abilities of the individual, their existing
remuneration package, market practice, and the existing arrangements for the
Company's current directors.
The Remuneration Committee will determine that any arrangements offered are in
the best interests of the Company and shareholders and will endeavour to pay no
more than is necessary.
The Remuneration Committee intends that the components of remuneration set out
in the policy tables, and the approach to the components as set out in the
policy tables, will be equally applicable to new recruits, i.e. salary, annual
bonus, share plan awards, pension and benefits for executive directors, and
fees for non-executive directors. However, the Company acknowledges that
additional flexibility may be required to ensure the Company is in the best
position to recruit the best candidate for any vacant roles and, as such, a
buy-out arrangement may be required.
§ Flexibility
The salary and compensation package designed for a new recruit may be higher or
lower than that applying for existing directors. The Remuneration Committee may
decide to appoint a new executive director to the Board at a lower than typical
salary, such that larger and more frequent salary increases may then be awarded
over a period of time to reflect the individual's growth in experience within
the role.
Remuneration will normally not exceed those set out in the policy table above.
However, to ensure that the Company can sufficiently compete with its
competitors, the Remuneration Committee considers it important that the
recruitment policy has sufficient flexibility in order to attract and
appropriately remunerate the high-performing individuals that the Company
requires to achieve its strategy. As such, the Remuneration Committee reserves
discretion to provide a buy-out arrangement and benefits (such as a sign-on
bonus and additional share awards) in addition to those set out in the policy
table (or mentioned in this section) where the Remuneration Committee considers
it reasonable and necessary to do so in order to secure an external appointment
(see below for more detail in relation to buy-out arrangements).
§ Buy-out arrangements
The Remuneration Committee retains the discretion to enter into buy-out
arrangements to compensate new hires for incentive awards forfeited in joining
the Company. The Remuneration Committee will use its discretion in awarding and
setting any such compensation, which will be decided on a case-by-case basis
and likely on an estimated like-for-like basis. In deciding the appropriate
type and quantum of compensation to replace existing awards, the Remuneration
Committee will take into account all relevant factors, including the type of
award being forfeited, the likelihood of any performance measures attached to
the forfeited award being met, and the proportion of the vesting period
remaining. The Remuneration Committee will appropriately discount the
compensation payable to take account of any uncertainties over the likely
vesting of the forfeited award to ensure that the Company does not, in the view
of the Remuneration Committee, pay in excess of what is reasonable or
necessary.
Compensation for awards forfeited may take the form of a bonus payment or a
share award. For the avoidance of doubt, the maximum amounts of compensation
contained in the policy table will not apply to such buy-out arrangements. The
Company has not placed a maximum value on the compensation that can be paid
under this section, as it does not believe it would be in shareholders'
interests to set any expectations for prospective candidates regarding such
awards.
§ Payments for loss of office
Any compensation payable in the event that the employment of an executive
director is terminated will be determined in accordance the terms of the
employment contract between the Company and the executive, as well as the
relevant rules of any share plan and this Policy, and in accordance with the
prevailing best practice.
The Remuneration Committee will consider a variety of factors when considering
leaving arrangements for an executive director and exercising any discretions
it has in this regard, including (but not limited to) individual and business
performance during office, the reason for leaving, and any other relevant
circumstances (for example, ill health).
In addition to any payment that the Remuneration Committee may decide to make,
the Remuneration Committee reserves discretion as it considers appropriate to:
(a) pay an annual bonus for the year of departure;
(b) continue providing any benefits for a period of time; and
(c) provide outplacement services.
Non-executive directors are subject to one month notice periods prior to
termination of service and are not entitled to any compensation on termination
save for accrued fees as at the date of termination and reimbursement of any
expenses properly incurred prior to that date.
§ Share plan awards
The treatment of any share award on termination will be governed by the PSP
rules.
Under the PSP, outstanding share awards held by an individual who ceases to be
a director or employee of the Company will lapse, unless the cessation is due
to death, illness, injury or disability, redundancy, retirement, the Company
ceasing to be a member of the Group or the transfer of an undertaking or part
of an undertaking to a person who is not a member of the Group, or the Board
exercises its discretion otherwise.
Under the PSP, the Board has discretion to decide the period of time for which
the award will continue, and whether any unvested award shall be treated as
vesting on the date of cessation of employment or in accordance with the
original vesting schedule, in both cases have regard to the extent to which the
performance targets have been satisfied prior to the date of cessation.
For executive directors, the vesting period will be set by the Remuneration
Committee with a minimum three-year period. The Remuneration Committee will
(unless the vesting period is set as a period equal to or longer than five
years) impose a holding period on shares (or awards) so that the executive is
not able to sell the shares that the executive director acquires through the
PSP until the fifth anniversary of the date of the award. The holding period
will not apply to the number of shares equivalent in value to the amount
required by the Company or the executive director to fund any income tax and
employee social security contributions due on the vesting of the awards or
otherwise in connection with the awards.
§ Executive director employment agreements
This section contains the key employment terms and conditions of the executive
directors that could impact on their remuneration or loss of office payments.
The Company's policy on employment agreements is that executive directors'
agreements should be terminable by either the Company or the director on not
more than six months' notice. The employment agreements contain provision for
early termination, among other things, in the event of a breach by the
executive but make no provision for any termination benefits except in the
event of a change of control of the Company, where the executive becomes
entitled to a lump sum equal to 24 months' base salary plus benefits plus (if
any), bonus received on termination by the Company. The employment agreements
contain restrictive covenants for a period of 12 months following termination
of the agreement. Details of employment agreements in place as at the date of
this report are set out below:
Director Current agreement start Notice period
date
F Khallouf 15 November 2019 Six months
Directors' employment agreements are available for inspection at the Company's
registered office in London.
§ Non-executive directors' letters of appointment
This section contains the key terms of the appointments of non-executive
directors that could impact on their remuneration.
Typically, the non-executive directors are appointed by letter of appointment
for an initial term of three years which may be extended. All non-executive
directors are subject to annual re-election by the Company's shareholders and
their appointments may be terminated earlier with one month's prior written
notice (or with immediate effect, in the case of specific serious circumstances
such as fraud or dishonesty). On termination of appointment, non-executive
directors are usually only entitled to accrued fees as at the date of
termination together with reimbursement of any expenses properly incurred prior
to that date and the company has no obligation to pay further compensation when
the appointment terminates. Non-executive directors' letters of appointment are
available for inspection at the Company's registered office in London.
Non-executive Director Current agreement start Term
date
Michel Meeus 25 June 2021 Two years
Lilia Jolibois 24 June 2022 Two years
Jacques Mahaux 24 June 2022 Two years
Gilbert Lehmann 25 June 2021 Two years
§ Illustration of the Remuneration Policy
The bar charts below show the levels of remuneration that the CEO could earn
over the coming year under the Policy.
CEO: minimum and maximum remuneration
The bar chart shows future possible maximum remuneration.
Pension entitlements were provided in 2022.
§ Consideration of shareholder views
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 is reported to the
Board and discussed in detail both there and during meetings of the
Remuneration Committee.
The Remuneration Committee will take into account the results of the
shareholder vote on remuneration matters when making future remuneration
decisions. The Remuneration Committee remains mindful of shareholder views when
evaluating and setting ongoing remuneration strategy.
§ Consideration of employment conditions within the Group
When determining remuneration levels for its executive directors, the Board
considers the pay and employment conditions of employees across the Group. The
Remuneration Committee will be mindful of average salary increases awarded
across the Group when reviewing the remuneration packages of the executive
directors.
§ Minor changes
The Remuneration Committee may make, without the need for shareholder approval,
minor amendments to the Policy for regulatory, exchange control, tax or
administrative purposes or to take account of changes in legislation.
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 regulation.
Company law requires the directors to prepare financial statements for each
financial year. Under that law the directors have prepared the group and
company financial statements in accordance with UK-adopted international
accounting standards. In preparing the Company and Group's financial
statements, IAS Regulation requires that Directors:
§ properly select and apply accounting policies;
§ make judgements and accounting estimates that are reasonable and prudent;
§ present information, including accounting policies, in a manner that provides
relevant, reliable, comparable and understandable information;
§ state whether applicable UK-adopted international accounting standards have
been followed, subject to any material departures disclosed and explained in
the financial statements;
§ 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, prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company and Group will continue
in business.
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, Report of the Directors, 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 and
statements included on the Company's website, www.cadoganenergysolutions.com.
Legislation in the United Kingdom governing the preparation and dissemination
of the financial statements may differ from legislation in other jurisdictions.
The directors' responsibility also extends to the ongoing integrity of the
financial statements contained therein.
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 in conformity with the requirements of the
Companies Act 2006, 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 Annual 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
Michel Meeus
Chairman
27 April 2023
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF CADOGAN ENERGY SOLUTIONS PLC
(FORMERLY CADOGAN PETROLEUM PLC)
Qualified Opinion
We have audited the financial statements of Cadogan Energy Solutions Plc (the
Company) and its subsidiaries (the Group) for the year ended 31 December 2022
which comprise the consolidated income statement, the consolidated statement of
comprehensive income, the consolidated balance sheet, the consolidated cash
flow statement, the consolidated statement of changes in equity, the company
balance sheet, the company cash flow statement, the company statement of
changes in equity, the notes to the consolidated financial statements and the
notes to the company financial statements, including significant accounting
policies. The financial reporting framework that has been applied in their
preparation is applicable law and UK adopted international accounting standards
and, as regards the Parent company financial statements, as applied in
accordance with the provisions of the Companies Act 2006.
In our opinion, except for the effect of the matter described in the Basis for
qualified opinion paragraph below:
· 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 2022 and of the
group's loss for the year then ended;
· the Group financial statements have been properly prepared in accordance
with UK adopted international accounting standards;
· the Parent Company financial statements have been properly prepared in
accordance with UK adopted international accounting standards 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.
Basis for qualified opinion
In February 2019, the Group advanced a Euro 13,385,000 loan to Proger Managers
& Partners Srl ("PMP"), a privately owned Italian company whose only asset is a
72.92% interest in Proger Ingegneria Srl ("Proger Ingegneria"), a privately
owned company which itself held a 67.91% participating interest in Proger S.P.A
("Proger") at the date of the loan was advanced.
The loan carries an entitlement to interest at a rate of 5.5% per year, payable
at maturity (which is 24 months after the execution date of February 2019 and
assuming that the call option described below was not exercised). The principal
of the loan is secured by a pledge over PMP's current participating interest in
Proger Ingegneria Srl, up to a maximum guaranteed amount of Euro 13,385,000.
Through the Agreement, the Group was granted a call option to acquire, at its
sole discretion, a 33% participating interest in Proger Ingegneria; the
exercise of the option would have given Cadogan, through Cadogan Petroleum
Holdings BV, an indirect 25% interest in Proger. The call option was granted at
no additional cost and could be exercised at any time between the 6th and 24th
months following the execution date of the loan agreement.
The call option was not exercised within the relevant timeframe (February 2021)
and consequently in accordance with the loan agreement the principal amount and
any accrued interest became repayable in full. At that date the Group
reclassified the asset from a financial asset held at fair value through profit
and loss to a financial asset held at amortised cost.
In March 2021, PMP requested arbitration to have the loan agreement recognised
as an equity investment contract. In July 2022, the Arbitra Camera in Rome
decided to reject the main claim of PMP to recognise the loan as an equity
investment.
As part of our risk assessment we considered the recoverability of the loan
note (page 100, note 27) to be a key audit matter, and in respect of this
matter we:
· made enquiries of management and the Audit Committee regarding the
structure of the transaction and the latest status of legal proceedings;
· obtained and reviewed the original loan documents including the call
option agreement;
· obtained loan working papers and reviewed the accounting entries;
· met with management to obtain an understanding of their assessment of
the recoverable amount of the loan and why management believes no impairment of
the carrying value of the loan note is required ;
· discussed with management their understanding of the process of
assessing recoverability of the loan note;
· requested and received information from Cadogan legal advisors on the
current legal status and legal proceedings;
· based on available information to us we critically assessed the ability
of the counterparty to repay the amounts due; and
· reviewed the disclosures in relation to financial instruments including
the accounting policy, critical judgments and estimates and financial
instrument disclosures.
Based on the procedures performed above we were unable to obtain sufficient,
appropriate audit evidence regarding the recoverability of the loan note, and
accordingly we were also unable to obtain sufficient appropriate audit evidence
to enable us to conclude whether the carrying value of the loan note is
materially accurate.
In addition, the predecessor auditor was not able to obtain sufficient,
appropriate audit evidence as to whether the carrying value of the loan note
was materially accurate as at 31 December 2021 and as a result the audit
opinion for the year ended 31 December 2021 was also qualified in respect of
this issue. Consequently, we were unable to determine what impact this may have
on the loss of the group for the year ended 31 December 2022.
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards
are further described in the Auditor's Responsibilities for the audit of the
financial statements section of our report. We are independent of the Group in
accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, including the FRC's Ethical Standard as applied
to listed public interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a
basis for our qualified opinion. Our audit opinion is consistent with the
additional report to the audit committee.
Our approach to the audit
We tailored the scope of our audit to ensure we performed sufficient work to be
able to express an opinion on the financial statements as a whole, taking into
account the structure of the Group and the Company, its environment, including
the group's system of internal control, and assessing the risks of material
misstatement in the financial statements. We also addressed the risk of
management override of internal controls, including assessing whether there was
evidence of bias by the directors that may have represented a risk of material
misstatement.
The significant majority of the Group's operations are located in the Ukraine
and account for 100% of the Group's revenue. We instructed a component audit
team in the Ukraine to perform a full scope audit of the Ukrainian sub-group.
In our assessment the group comprises five significant components together with
the Ukrainian sub-group. The audit of the Ukrainian sub-group was performed by
Crowe Erfolg in the Ukraine under the supervision and direction of the Group
audit engagement team, as described in more detail below. The remaining
significant components of the Group namely Cadogan Energy Solutions Plc,
Cadogan Petroleum Holdings Limited, Cadogan Petroleum Holdings B.V., and
Zagoryanska Petroleum B.V. were audited by the Group audit engagement team.
Our involvement with the component auditors
As part of our supervision and direction of the component audit team, we
determined the level of involvement needed in order to be able to conclude
whether sufficient appropriate audit evidence has been obtained in respect of
the Ukraine sub group as a basis for our opinion on the Group financial
statements as a whole. Our involvement with the component auditors included the
following:
· We issued detailed Group reporting instructions to the component
auditor, which included the significant areas to be covered by the audit
(including areas that were considered to be key audit matters as detailed
below) and set out the information required to be reported to the Group audit
team.
· Due to the travel restrictions resulting from the ongoing war in the
Ukraine, the Group audit engagement partner and senior members of the Group
audit engagement team were unable to visit the Ukraine to meet with component
management and the component audit team during the audit. Accordingly, we
performed a remote review of the component audit files in the Ukraine using
appropriate technologies and held regular calls and video conferences with
component management during the audit.
· The Group audit team performed reviews of relevant working papers and
undertook additional procedures where necessary in respect of the significant
risk areas that represented Key Audit Matters for the group.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) we identified, including those which had the
greatest effect on: the overall audit strategy, the allocation of resources in
the audit; and directing the efforts of the engagement team. These matters were
addressed in the context of our audit of the financial statements as a whole,
and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
In addition to the matter described in the basis for qualified opinion section,
we have determined the matters described below to be the key audit matters to
be communicated in our report.
Key Audit Matters How our scope addressed this matter
Valuation of development and . We critically assessed
production assets management's impairment assessment
which was based on the value in use
Refer to page 85 (Accounting policy) model (ViU).
and 95 (note 17 Property, plant and . We challenged the key
equipment). judgements and estimates made by
management, including forecast oil
As at 31 December 2022 the Group held prices, production levels..
development and production assets . We critically assessed
with a carrying value of $6.4m (2021: management's assumptions in
$9.3m). estimating the discount rates.
. We held discussions with
Management has performed an operational management to evaluate
impairment review of development and the basis for forecast decreases in
production assets and concluded that production associated with well
no impairment is required. stimulation activities, considered
the historical impact of such
The assessment of the recoverable activities and evaluated the extent
value of the development and to which appropriate costs were
production assets included in the forecasts.
required judgments and estimates by . We performed sensitivity
management regarding the inputs analysis on the impairment models to
applied in the models including establish the impact of possible
future oil and gas prices, production changes of key assumptions.
and reserves, operating and
development costs and discount rates. Based on our work performed we
The carrying value of the Group's consider there is no material
development and production assets difference between the carrying value
were therefore considered to be a key of these assets and their recoverable
audit matter. amounts.
Our application of materiality
The scope of our audit was influenced by our application of materiality. We set
certain quantitative thresholds for materiality. These, together with
qualitative considerations, helped us to determine the scope of our audit, the
nature, timing and extent of our audit procedures, both individually and in
aggregate on the financial statements as a whole. Based on our professional
judgement, we determined materiality for the financial statements as follows:
The Group The Company
Overall $725,000 $400,000
group
materiality
Basis of 2.0% of total assets 2.0% of total assets restricted to $400,000.
determining
materiality
Rationale When determining materiality, we determine an appropriate percentage of our
for the chosen benchmark, with the choice of an appropriate benchmark as our
benchmark starting point. We determined that an asset based measure of materiality is
applied appropriate as the Group and the Company holds significant cash and loan
balances and its principal activity is the exploration and development of
oil and gas assets. As a result we concluded that the asset base is a key
financial metric for users of financial statements.
Performance $362,500 $200,000
materiality
Basis for We use performance materiality to reduce to an appropriately low level the
performance probability that the aggregate of uncorrected and undetected misstatements
materiality exceeds overall materiality. Specifically, we use performance materiality
in determining the scope of our audit and the nature and extent of our
testing of account balances, classes of transactions and disclosures, for
example in determining sample sizes.
Our performance materiality was 50% of overall materiality, amounting to £
362,500) for the Group financial statements and $200,000 for the Company
financial statements.
When considering the level at which to set performance materiality, we
considered a number of factors, including the risk assessment and
aggregation risk, and the effectiveness of controls and our knowledge of
the business.
We agreed with the Board and Audit Committee that we would report to them
misstatements identified during the audit greater than 5% of overall
materiality. We also agreed to report differences below this threshold that,
in our view, warranted reporting on qualitative grounds.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use
of the going concern basis of accounting in the preparation of the financial
statements is appropriate. Our evaluation of the directors' assessment of the
Group's and the Parent Company' ability to continue to adopt the going concern
basis of accounting included:
· Review of management's going concern assessment paper and the cash flow
forecast prepared by management and approved by the Board.
· We critically assessed the going concern paper and the forecast taking
into account key assumptions and various scenarios prepared by management and
the impact they would have on the group's ability to continue operating on
going concern basis.
· We performed sensitivity assessments over the key assumptions in the
forecast to assess the impact of severe unlikely downside scenarios, and
extending these beyond the 12 months from the date of approval these financial
statements to assess the group's ability to continue as a going concern.
· As part of our sensitivity assessment of the forecast and scenario
forecast for the period to April 2024 we critically assessed the level of
headroom available and the assumptions including, potential geopolitical
impacts, oil production, oil prices, operating expenditure and capital
expenditure. In doing so we compared production forecasts to historical trends
and considered the oil price assumptions against consensus market prices and
historical discount levels between Brent oil prices and the local market. We
compared forecast costs with historical expenditure.
· We reviewed the adequacy of the disclosures in the financial statements
in respect of going concern against the requirements of UK-adopted
international accounting standards.
Based on the work we have performed, we have not identified any material
uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the Group's and Parent company's
ability to continue as a going concern for a period of at least twelve months
from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to
going concern are described in the relevant sections of this report.
Emphasis of Matter
We draw attention to Note 3 (b) on page 80 to the financial statements which
describes the uncertainty related to the outcome of the ongoing war in Ukraine.
The Group have included various scenarios that take into account the ongoing
war in its cash flow projections. However, due to the unpredictable outcome,
length, scale and extent of the conflict its impact on the Group and the
Company cannot be predicted with any certainty. Our opinion is not modified in
respect of this matter.
Other information
The other information comprises the information included in the annual report,
other than the financial statements and our auditor's report thereon. The
directors are responsible for the other information contained within the annual
report. Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is
to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our
knowledge obtained in the course of the audit or otherwise appears to be
materially misstated. If we identify such material inconsistencies or apparent
material misstatements, we are required to determine whether there is a
material misstatement in the financial statements themselves. If, based on the
work we have performed, we conclude that there is a material misstatement of
this other information, we are required to report that fact.
As described in the basis for qualified opinion section of our report, our
audit opinion is qualified because we were unable to obtain sufficient
appropriate audit evidence in respect of certain loan receivables. We have
concluded that where the other information refers to these receivables or to
related balances or classes of transactions it may also be materially misstated
for the same reason.
Opinions on other matters 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.
Except for the possible effect of the matter described in the basis for the
qualified opinion section of our report, in our opinion, based on the work
undertaken in the course of the audit:
· 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; and
· the Strategic report and the Directors' report have been prepared in
accordance with applicable legal requirements.
Matters on which we are required to report by exception
Except for the possible effect of the matter described in the basis for the
qualified opinion section of our report, in the light of the knowledge and
understanding of the Group and the Parent Company and its environment obtained
in the course of the audit, we have not identified material misstatements in
the Strategic report or the Directors' report.
In respect solely of the limitation on our work relating to certain loan
receivables, described above:
· we have not received all the information and explanations we require for
our audit; and
· we were unable to determine whether adequate accounting records have
been kept by the Parent Company
We have nothing to report in respect of the following matters where the
Companies Act 2006 requires us to report to you if, in our opinion:
· returns adequate for our audit have not been received from branches not
visited by us; or
· the Parent Company financial statements and the part of the Directors'
remuneration report to be audited are not in agreement with the accounting
records and returns; or
· certain disclosures of Directors' remuneration specified by law are not
made; or
· a corporate governance statement has not been prepared by the Parent
Company.
Responsibilities of directors
As explained more fully in the statement of directors' responsibilities set out
on page 64, the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and for
such internal control as the directors determine is necessary to enable the
preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are responsible for
assessing the group's and the Parent company's ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either intend to
liquidate the Group or the Parent Company or to cease operations, or have no
realistic alternative but to do so.
Auditor's Responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to fraud
or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of
these financial statements.
A further description of our responsibilities is available on the FRC's website
at https://www.frc.org.uk/auditors/auditor-assurance/
auditor-s-responsibilities-for-the-audit-of-the-fi/
description-of-the-auditor's-responsibilities-for
Explanation as to what extent the audit was considered capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and
regulations. We design procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of irregularities, including
fraud. The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below.
The objectives of our audit in respect of fraud, are; to identify and assess
the risks of material misstatement of the financial statements due to fraud; to
obtain sufficient appropriate audit evidence regarding the assessed risks of
material misstatement due to fraud, through designing and implementing
appropriate responses to those assessed risks; and to respond appropriately to
instances of fraud or suspected fraud identified during the audit. However, the
primary responsibility for the prevention and detection of fraud rests with
both management and those charged with governance of the company.
Based on our understanding of the Group and its operations, we identified the
principal risks of non-compliance with laws and regulations related to the UK
and Ukrainian tax legislation, employment and health and safety regulations,
licensing regulations and we considered the extent to which non-compliance
might have a material effect on the financial statements. We also considered
those laws and regulations that have a direct impact on the financial
statements such as the Companies Act 2006 and Listing Rules.
· We obtained an understanding of how the Group and Company complies with
these requirements by discussions with management and those charged with
governance;
· Based on this understanding, we designed specific appropriate audit
procedures to identify instances of non-compliance with laws and regulations.
This included making enquiries of management and those charged with governance
and obtaining additional corroborative evidence as required;
· We inquired of management and those charged with governance as to any
known instances of non-compliance or suspected non-compliance with laws and
regulations;
· We held calls and discussions with external legal advisers representing
the Group to enquire about known non-compliance with laws and regulations;
· We performed a review of external press releases;
· We assessed the risk of material misstatement of the financial
statements, including the risk of material misstatement due to fraud and how it
might occur, by holding discussions with management and those charged with
governance.
· We challenged assumptions and judgements made by management in relation
to the estimates made in respect of development and production assets; and
· Identifying and testing journal entries, in particular any journal
entries posted with unusual account combinations, and unusual users.
There are inherent limitations in the audit procedures described above. We are
less likely to become aware of instances of non-compliance with laws and
regulations that are not closely related to events and transactions reflected
in the financial statements. Also, the risk of not detecting a material
misstatement due to fraud is higher than the risk of not detecting one
resulting from error, as fraud may involve deliberate concealment by, for
example, forgery or intentional misrepresentations, or through collusion.
Other matters which we are required to address
We were appointed by the Board of Directors on 17 February 2023 to audit the
financial statements for the period ended 31 December 2022. Our total
uninterrupted period of engagement is 1 year, covering the period ended 31
December 2022 to 28 April 2023.
The non-audit services prohibited by the FRC's Ethical Standard were not
provided to the Group or the Parent Company and we remain independent of the
Group and the Parent Company in conducting our audit.
Our audit opinion is consistent with the additional report to the audit
committee.
Use of our report
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 for no purpose other than to draw to the attention of the company's
members those matters which we are required to include in an auditor's report
addressed to them. To the fullest extent permitted by law, we do not accept or
assume responsibility to any party other than the company and company's members
as a body, for our work, for this report, or for the opinions we have formed.
Signature
27 April 2023
Matthew Banton (Senior Statutory Auditor)
for and on behalf of Moore Kingston Smith LLP, Statutory
Auditor
6th Floor
9 Appold Street
London
EC2A 2AP
Consolidated Income Statement Notes
For the year ended 31 December 2022 2022 2021
$'000 $'000
CONTINUING OPERATIONS
Revenues 6 8,472 8,793
Cost of sales 7 (5,553) (6,372)
Gross profit 2,919 2,421
Administrative expenses 8 (3,441) (3,712)
Impairment of gas and oil assets 16 (269) (2,474)
Impairment of other assets 9 (27) (994)
Reversal of impairment of other assets 9 20 20
Other operating expenses, net 10 (3) (18)
Net foreign exchange (losses)/gain (1,131) (1,591)
Operating loss (1,932) (6,348)
Finance income, net 13 372 1,250
Loss before tax (1,560) (5,098)
Taxation 14 - -
Loss for the year (1,560) (5,098)
Attributable to:
Owners of the Company (1,562) (5,070)
Non-controlling interest 2 (28)
(1,560) (5,098)
Loss per Ordinary share Cents Cents
Basic and diluted 15 (0.6) (2.1)
Consolidated Statement of Comprehensive
Income 2022 2021
For the year ended 31 December 2022 $'000 $'000
Loss for the year (1,560) (5,098)
Other comprehensive (loss)/profit
Items that may be reclassified subsequently to profit or
loss:
Unrealised currency translation differences (3,287) 466
Other comprehensive (loss)/profit (3,287) 466
Total comprehensive (loss)/profit for the (4,847) (4,632)
year
Attributable to:
Owners of the Company (4,849) (4,604)
Non-controlling interest 2 (28)
(4,847) (4,632)
Consolidated Balance Sheet Notes
As at 31 December 2022 2022 2021
$'000 $'000
ASSETS
Non-current assets
Intangible exploration and evaluation 16 - -
assets
Property, plant and equipment 17 6,633 9,598
Right-of-use assets 23 108 200
Deferred tax asset 22 319 431
7,060 10,229
Current assets
Inventories 19 295 177
Trade and other receivables 20 318 218
Loan receivable at amortised cost 27 15,825 16,724
Cash 21 13,934 15,011
30,372 32,130
Total assets 37,432 42,359
LIABILITIES
Non-current liabilities
Long-term lease liability 23 (28) (104)
Provisions 25 (261) (300)
(289) (404)
Current liabilities
Trade and other payables 24 (1,401) (1,479)
Short-term lease liability 23 (79) (102)
Current provisions 25 (136) -
(1,616) (1,581)
Total liabilities (1,905) (1,985)
NET ASSETS 35,527 40,374
EQUITY
Share capital 26 13,832 13,832
Share premium 514 514
Retained earnings 184,331 185,893
Cumulative translation reserves (164,976) (161,689)
Other reserves 1,589 1,589
Equity attributable to owners of the 35,290 40,139
Company
Non-controlling interest 237 235
TOTAL EQUITY 35,527 40,374
The consolidated financial statements of Cadogan Energy Solutions plc,
registered in England and Wales no. 05718406, were approved by the Board of
Directors and authorised for issue on 27 April 2023. They were signed on its
behalf by:
Fady Khallouf
Chief Executive Officer
27 April 2023
The notes on pages 79 to 111 form an integral part of these financial
statements.
Consolidated Statement of Changes in Equity
For the year ended 31 December 2022
Share Cumulative Non-controlling Total
capital Retained translation interest $'000
$'000 earnings reserves $'000
$'000 $'000
Share Other Equity
premium reserves attributable
account $'000 to owners of
$'000 the Company
As at 1 January 2021 13,832 514 190,963 (162,155) 1,589 44,743 263 45,006
Net loss for the - - (5,070) - - (5,070) (28) (5,098)
year
Other comprehensive - - - 466 - 466 - 466
profit
Total comprehensive - - (5,070) 466 - (4,604) (28) (4,632)
loss for the year
As at 1 January 2022 13,832 514 185,893 (161,689) 1,589 40,139 235 40,374
Net loss for the - - (1,562) - - (1,562) 2 (1,560)
year
Other comprehensive - - - (3,287) - (3,287) - (3,287)
loss
Total comprehensive - - (1,562) (3,287) - (4,849) 2 (4,847)
loss for the year
As at 31 December 13,832 514 184,331 (164,976) 1,589 35,290 237 35,527
2022
Consolidated Cash Flow Statement
For the year ended 31 December 2022 Note 2022 2021
$'000 $'000
Operating loss (1,932) (6,348)
Adjustments for:
Depreciation and depletion of property, plant and 17,23 764 889
equipment
Impairment of oil and gas assets 16 269 2,474
(Reversal of impairment)/impairment of inventories 9 (20) 994
Impairment of receivables 9 16 -
Impairment/(reversal of impairment) of VAT recoverable 9 11 (21)
Effect of foreign exchange rate changes 1,131 1,591
Operating cash inflow/(outflow) before movements in 239 (421)
working capital
(Increase)/decrease in inventories (155) 1,049
(Increase)/decrease in receivables (946) 1,526
(Increase)/decrease in payables (197) (28)
Cash generated by operations (1,059) 2,126
Interest received 185 68
Net cash (outflow) /inflow from operating activities (874) 2,194
Investing activities
Purchases of property, plant and equipment (93) (150)
Purchases of intangible exploration and evaluation - (9)
assets
Interest received 97 8
Net cash used in investing activities 4 (151)
Net (decrease)/increase in cash (870) 2,043
Effect of foreign exchange rate changes (207) (285)
Cash at beginning of year 15,011 13,253
Cash at end of year 13,934 15,011
Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
1. General information
Cadogan Energy Solutions 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 6th Floor, 60 Gracechurch Street, London
EC3V 0HR.
The Group principal activity has been up to now oil and gas exploration,
development and production; the Group also conducts gas trading and provides
services to other E&P operators. The strategy of the Group is to expand its
activities along the energy value chain, beyond current activities to new forms
of energy with a reduced impact on the environment.
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.
2. Adoption of new and revised Standards
New IFRS accounting standards, amendments and interpretations effective from 1
January 2022
The disclosed policies have been applied consistently by the Group for both the
current and previous financial year with the exception of the new standards
adopted.
The IFRS financial information has been drawn up on the basis of accounting
policies consistent with those applied in the financial statements for the year
to 31 December 2021, except for the following:
(a) COVID-19-related Rent Concessions beyond 30 June 2021 - Amendments to
IFRS 16;
(b) Amendment to IFRS 16 Leases: COVID-19-Related Rent Concessions beyond 30
June 2022
(c) Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent
Assets: Onerous Contracts - Cost of Fulfilling a Contract
(d) Amendments to IFRS 3 Business Combinations: Reference to the Conceptual
Framework
(e) Annual Improvements to IFRS Standards 2018-2020
The application of the above standards has had no impact on the disclosures or
the amounts recognised in the Group's consolidated financial statements.
New IFRS accounting standards, amendments and interpretations not yet effective
Below is a list of new and revised IFRSs that are not yet mandatorily effective
(but allow early application) for the year ending 31 December 2022 and have not
been early adopted by the Group. These standards are not expected to have a
material impact on the Group in the future reporting periods and on foreseeable
future transactions.
IFRS accounting standards Effective
periods
beginning on or
after
Amendments to IFRS 17 Insurance contracts: Initial Application of 01 January 2023
IFRS 17 and IFRS 9 - Comparative Information
Classification of Liabilities as Current or Non-current - 01 January 2023
Amendments to IAS 1
IFRS 17, 'Insurance contracts' 01 January 2023
Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS 01 January 2023
Practice Statement 2
Definition of Accounting Estimates - Amendments to IAS 8 01 January 2023
Amendments to IFRS 16 Leases: Lease Liability in a Sale and 01 January 2024
Leaseback
Deferred Tax related to Assets and Liabilities arising from a 01 January 2023
Single Transaction - Amendments to IAS 12
3. Significant accounting policies
(a) Basis of accounting
The financial statements have been prepared in accordance with international
accounting standards in conformity with the requirements of the Companies Act
2006 and in accordance with international financial reporting standards as
adopted by the UK pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union.
The financial statements have been prepared on the historical cost convention
basis.
The principal accounting policies adopted are set out below:
(b) Going concern
The Group's cash balance at 31 December 2022 was $13.9 million (2021: $15.0
million). 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 and planned investments successfully.
The Directors' have carried out a robust assessment of the principal risks
facing the Group.
The Group's forecasts and projections, taking into account reasonably possible
changes in trading activities, operational performance, 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.
Notwithstanding the Group's current financial performance and position, the
Board are cognisant of the actual risks related to the war situation in
Ukraine. The Board has considered possible reverse stress case scenarios for
the impact on the Group's operations, financial position and forecasts. Whilst
the potential future impacts of the invasion of Ukraine by Russia are unknown,
the Board has considered operational disruption that may be caused by the
factors such as a) restrictions applied by governments, illness amongst our
workforce and disruption to supply chain and sales channels; b) market
volatility in respect of commodity prices associated in addition to military
and geopolitical factors.
In addition to sensitivities that reflect future expectations regarding
country, commodity price and currency risks that the Group may encounter
reverse stress tests have been run to reflect possible negative effects of the
war in Ukraine. The Group's forecasts demonstrate that owing to its cash
resources the Group is able to meet its operating cash flow requirements and
commitments whilst maintaining significant liquidity for a period of at least
the next 12 months allowing for sustained reductions in commodity prices and
extended and severe disruption to operations should such a scenario occur.
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.
(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 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.
3. Significant accounting policies (continued)
(c) Basis of consolidation (continued)
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
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.
(d) Investments in joint ventures
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. In doing so, the Group applies
the criteria of IFRS 6 'Exploration for and evaluation of mineral resources' as
the joint venture holds exploration phase assets. 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.
(e) Revenue recognition
Revenue from contracts with customers is recognized when or as the Group
satisfies a performance obligation by transferring a promised good or service
to a customer. A good or service is transferred when the customer obtains
control of that good or service. Revenue is measured based on measurement
principles of IFRS 15 and represents amounts receivable for hydrocarbon
products and services provided in the normal course of business, net of value
added tax ('VAT') and other sales-related taxes, excluding royalties on
production. Royalties on production are recorded within cost of sales.
The crude oil produced by the upstream operations is sold to external
customers. Revenue from the sale of crude oil is recognised at the point in
time when control of the product is transferred to the customer, which is
typically when goods are despatched, and title has passed. The Group despatches
oil at the production point (EXW incoterms) therefore the Group has no
transportation and shipping costs associated with the transfer of the product
to the customer.
The Group's sales of crude oil are priced based on the consideration specified
in contracts with customers based on a conducted tender result on the opened
tender platform. Invoices are typically paid at the day of product despatch.
3. Significant accounting policies (continued)
E&P and Trading business segments
The transfer of control of hydrocarbons usually coincides with title passing to
the customer and the customer taking physical possession as the product passes
a physical point such as a designated point in the pipeline for the sale of gas
or loading point in the case of oil. The Group principally satisfies its
performance obligations at a point in time.
To the extent that revenue arises from test production during an evaluation
programme, an amount is credited to evaluation costs and charged to cost of
sales, to reflect a zero-net margin.
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.
(f) Foreign currencies
The functional currency of the Group's Ukrainian operations is Ukrainian
Hryvnia. The functional currency of the Group's UK subsidiaries and the parent
company is US Dollar.
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 are
recognized in operating profit or loss in the period in which they arise.
Exchange differences are recognized 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 recognized 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, where the functional
currency is not the US dollar, are translated into US dollars as follows:
i. assets and liabilities of the Group's foreign operations are
translated at the closing rate on the balance sheet date;
ii. income and expenses are translated at the average exchange rates
for the period, where it approximates to actual rates. In other cases, if
exchange rates fluctuate significantly during that period, the exchange rates
at the date of the transactions are used; and
iii. all resulting exchange differences arising, if any, are
recognized 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 recognized 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 2022 Year ended 31 December 2021
GBP/USD EURO/USD USD/UAH GBP/USD EURO/USD USD/UAH
Closing rate 1.2104 1.0708 37.0663 1.3514 1.1344 27.5776
Average rate 1.2372 1.0539 32.4569 1.3761 1.1847 27.5112
3. Significant accounting policies (continued)
(g) 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 recognized for all taxable temporary
differences and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which deductible
temporary differences can be utilised. Such assets and liabilities are not
recognized 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
recognized 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 realized.
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.
In case of the uncertainty of the tax treatment, the Group assess, whether it
is probable or not, that the tax treatment will be accepted, and to determine
the value, the Group use the most likely amount or the expected value in
determining taxable profit (tax loss), tax bases, unused tax losses, unused tax
credits and tax rates.
(h) Other property, plant and equipment
Property, plant and equipment ('PP&E') are carried at cost less accumulated
depreciation and any recognized impairment loss. Depreciation and amortization
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:
Other PP&E 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 recognized in income.
(i) 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
requirements 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 capitalized as an intangible asset, by reference to
3. Significant accounting policies (continued)
(i) Intangible exploration and evaluation assets (continued)
appropriate cost centres being the appropriate oil or gas property. E&E assets
are then assessed for impairment on a geographical cost pool basis, which are
assessed at the level of individual licences.
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 capitalized 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 capitalized 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 amortized 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 recognized 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 which relate to E&E activities that are determined not to
have resulted in the discovery of commercial reserves remain capitalized as
intangible E&E assets at cost less accumulated amortization, 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 such as, a) license
expiry during year or in the near future and will not likely to be renewed; b)
expenditure on E&E activity neither budgeted nor planned; c) commercial quantities of mineral resources have been discovered; and d) sufficient data exist to indicate that carrying amount of E&E asset is unlikely to be recovered in full from successful development or sale. 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, which are not larger than an operating segment, they are tested for impairment together with all development and production assets associated with that cost pool, as a single cash generating unit. 3. Significant accounting policies (continued) 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 recognized in the income statement and are separately disclosed. (j) 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 capitalized, and the cost of recognizing 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 based on assessments of internal geologists utilising the most recent Competent Person Report and subsequent drilling and exploration, taking 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. (k) 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. In determining fair value less cost to sell, the estimated future cash flows are discounted to their present value using a post-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. Such cash flows include relevant development expenditure that a market participant would reasonably be expected to undertake. 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 recognized as income immediately. (l) 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. (m) Financial instruments Financial assets and financial liabilities are recognized in the consolidated statement of financial position when the Group becomes party to the contractual provisions of the instrument. Loan classified at amortised cost Loan is measured at the amount recognised at initial recognition minus principal repayments, plus or minus the cumulative amortization of any difference between that initial amount and the maturity amount, and any loss allowance. Interest income is calculated using the effective interest method and is recognised in profit and loss. Changes in fair value are recognised in profit and loss when the asset is derecognised or reclassified. In accordance with IFRS 9, the loan is measured at amortised cost. The Group applies the simplified approach to providing for expected credit losses (ECL) prescribed by IFRS 9, which permits the use of the lifetime expected loss provision for the loan. Expected credit losses are assessed on a forward-looking basis. The loss allowance is measured at initial recognition and throughout its life at an amount equal to lifetime ECL. Any impairment is recognized in the income statement. Trade and other payables Payables are initially measured at fair value, net of transaction costs and are subsequently measured at amortized cost using the effective interest method. Trade and other receivables Trade and other receivables are recognized initially at their transaction price in accordance with IFRS 9 and are subsequently measured at amortised cost. The Group applies the simplified approach to providing for expected credit losses (ECL) prescribed by IFRS 9, which permits the use of the lifetime expected loss provision for all trade receivables. Expected credit losses are assessed on a forward-looking basis. The loss allowance is measured at initial recognition and throughout its life at an amount equal to lifetime ECL. Any impairment is recognized in the income statement. Cash Cash comprise cash on hand and on-demand deposits. Deposits are recorded as cash and cash equivalents when they have a maturity of less than 90 days at inception. (n) Provisions Provisions are recognized 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 recognized 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. (o) Decommissioning A provision for decommissioning is recognized 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 recognizing 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. (p) Leases At inception of a contract, the Group assesses whether a contract is, or contains, a lease based on whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Service agreements for equipment on the working sites are not considered leases as, based upon an assessment of the terms and nature of their contractual arrangements, the contracts do not convey the right to control the use of an identified asset. The right-of-use asset is initially measured based on the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. The asset is depreciated to the earlier of the end of the useful life of the
right-of-use asset or the lease term using the straight-line method as this
most closely reflects the expected pattern of consumption of the future
economic benefits. The lease term includes periods covered by an option to
extend if the Group is reasonably certain to exercise that option. In addition,
the right-of-use asset is periodically reduced by impairment losses, if any,
and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease
payments that are not paid at the commencement date, discounted using the
interest rate implicit in the lease or, if that rate cannot be readily
determined, the incremental borrowing rate. The lease liability is measured at
amortized cost using the effective interest method. It is remeasured when there
is a change in future lease payments arising from a change in an index or rate,
if there is a change in the Group's estimate of the amount expected to be
payable under a residual value guarantee, or if the Group changes its
assessment of whether it will exercise a purchase, extension or termination
option. When the lease liability is remeasured in this way, a corresponding
adjustment is made to the carrying amount of the right-of-use asset, or the
effect is recorded in profit or loss if the carrying amount of the right-of-use
asset has been reduced to zero.
The Group elected to apply the practical expedient not to recognise
right-of-use assets and lease liabilities for short-term leases that have a
lease term of 12 months or less and leases of low-value assets. The Group also
made use of the practical expedient to not recognize a right-of-use asset or a
lease liability for leases for which the lease term ends within 12 months of
the date of initial application.
The lease payments associated with these leases are recognized as an expense on
a straight-line basis over the lease term.
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 recognized 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 recognized in the financial
statements.
Critical judgements and estimates
(a) Impairment indicator assessment for E&E assets
Cadogan had fully complied with legislative requirements and submitted its
application for a 20-year exploration and production license 5 months before
its expiry on 23 December 2019. A decision on the award was expected to be
provided by State Geological Service of Ukraine before 19 January 2020, since
all other intermediary approvals had been secured in line with the applicable
legislation requirements. Given the delay in granting of the new license beyond
the regular timeline provided by legislation in Ukraine, Cadogan has launched a
claim before the Administrative Court to challenge the non-granting of the
20-year production license by the Licensing Authority.
In 2022, the claims of Usenco Nadra have been rejected by the Court of 1st
Instance, the Court of Appeal and the Supreme Court.
(b) Impairment of PP&E
Management assesses its development and production assets for impairment
indicators and if indicators of impairment are identified performs an
impairment test. Management performed an impairment assessment using a
discounted cash flow model which required estimates including forecast oil
prices, reserves and production, costs and discount rates (note 17).
(c) Recoverability and measurement of VAT
Judgment is required in assessing the recoverability of VAT assets and the
extent to which historical impairment provisions remain appropriate,
particularly noting the recent recoveries against historically impaired VAT. In
forming this assessment, the Group considers the nature and age of the VAT, the
likelihood of eligible future supplies to VAT, the pattern of recoveries and
risks and uncertainties associated with the operating environment (note 9).
(d) Proger Loan recoverability
The recoverability of the carrying value of loan from PMP represents a
significant accounting judgment. In making their assessment over estimated
recoverability of the loan, management considered the latest outcome of
arbitration, assessment of the security provided by the pledge over shares, and
the delay in the recovery of the expected amount. As a result, management
concluded that $15.8 million represents its best estimate of recoverable amount
as at 31 December 2022 (2021: $16,7 million). For further detail please refer
to the note 27.
(e) Well services and rental agreements
The Group's well rental arrangements in Ukraine for oil and gas extraction
activities are outside of the scope of IFRS 16. Judgment was required in
forming this assessment, based on analysis of the scope of IFRS 16 and the
nature of the well rental arrangements. This assessment focused on the extent
to which the rental agreements provided access to sub-surface well structures
to extract hydrocarbons versus surface level infrastructure for the transport
and processing of extracted hydrocarbons.
(f) Deferred tax assets
Deferred tax assets and liabilities require management judgement in determining
the amounts to be recognised. In particular, significant judgement is used when
assessing the extent to which deferred tax assets should be recognised, with
consideration given to the timing and level of future taxable income in the
relevant tax jurisdiction.
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 senior management team as its CODM and the internal reports used by the
senior 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 and all
Group's revenues 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 exploration and production licences for natural gas,
oil and condensate.
Trading
§ Import of natural gas from European countries; and
§ 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 rates considered to approximate 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 at 31 December 2022 and for the year then ended the Group's segmental
information was as follows:
Exploration Trading Consolidated
and
Production
$'000 $'000 $'000
Sales of hydrocarbons 8,465 - 8,465
Other revenue 7 - 7
Sales between segments - - -
Total revenue 8,472 - 8,472
Cost of sales (5,553) - (5,553)
Administrative expenses (450) (125) (575)
Impairment of oil and gas (269) - (269)
assets
Other operating expenses, net (3) - (3)
Impairment of other assets (16) (11) (27)
Reversal of impairment of other 20 - 20
assets
Finance income (1) 185 - 185
Segment results 2,386 (136) 2,250
Unallocated administrative (2,866)
expenses
Other finance income, net 187
Net foreign exchange loss (1,131)
Loss before tax (1,560)
(1) Net finance income includes $185 thousand of interest on cash
deposits used for operations.
As at 31 December 2021 and for the year then ended the Group's segmental
information was as follows:
Exploration Trading Consolidated
and
Production
$'000 $'000 $'000
Sales of hydrocarbons 7,017 1,769 8,786
Other revenue 7 - 7
Sales between segments - - -
Total revenue 7,024 1,769 8,793
Cost of sales (5,268) (1,104) (6,372)
Administrative expenses (487) (145) (632)
Other operating costs (35) - (35)
Impairment of other assets (974) - (974)
Impairment of oil and gas (2,474) - (2,474)
assets
Finance income (2) - 68 68
Segment results (2,214) 588 (1,626)
Unallocated administrative - - (3,080)
expenses
Other income, net(3) - - 1,199
Net foreign exchange loss - - (1,591)
Loss before tax - - (5,098)
(2) Net finance income includes $68 thousand of interest on cash
deposits used for trading.
(3) Includes interest on loan of $1,225 thousand
.
Fixed assets related to Exploration and Production segment are disclosed in the
note 17.
6. Revenue
2022 2021
$'000 $'000
Sale of hydrocarbons (exploration and production) - point in 8,472 7,024
time
Sale of hydrocarbons (trading) - point in time - 1,769
Total 8,472 8,793
Revenue is generated in Ukraine. Refer to note 3 (e) for details of the
performance obligations. Service revenue and associated contract assets and
liabilities are immaterial.
Information about major customers
80% of exploration and production business segment revenue arose from sales to
five largest customers. Three of them contributed for more than 10% of the
total revenue of the exploration and production business segment revenue for
the year ended 31 December 2022.
65% of prior year exploration and production business segment revenue arose
from sales to four largest customers. Each of them contributed for more than
10% of the total revenue of the exploration and production business segment
revenue for the year ended 31 December 2021.
Trading segment revenue for the year ended 31 December 2021 of $1.8 million
arose from sales to the Group's four customers.
7. Cost of sales
2022 2021
$'000 $'000
Subsoil tax 3,522 3,061
Natural Gas cost (Inventory) - 1,101
Well rent 789 745
Depreciation 536 751
Staff cost 245 260
Materials (Inventory) 143 129
Machinery services 111 68
Electricity 67 55
Security services 65 77
Other expenses 75 125
Total 5,553 6,372
8. Administrative expenses
2022 2021
$'000 $'000
Staff 1,774 1,897
Professional fees 872 827
Depreciation 217 251
Insurance 215 350
IT and communication 62 68
Cars and travel 61 75
Office costs including utilities 51 73
and maintenance
Bank charges 34 43
Other 155 128
Total 3,441 3,712
9. Reversal of impairment/(impairment) of other assets
2022 2021
$'000 $'000
Inventory 20 -
Other receivables - 20
Reversal of impairment of other assets 20 20
$1.0 million (2021: $1.3 million) of historical VAT receivables remain
impaired. Refer to Note 4 and 20.
2022 2021
$'000 $'000
Inventories - (994)
Other receivables (16) -
VAT recoverable (11) -
Impairment of other assets (27) (994)
10. Other operating expenses, net
2022 2021
$'000 $'000
Other expenses (3) (18)
Total (3) (18)
11. Auditor's remuneration
The analysis of auditor's remuneration is as follows:
2022 2021
$'000 $'000
Audit fees
Fees payable to the Company's auditor and their associates for 192 156
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 8 8
Total audit fees 200 164
Non-audit fees
- Review of regulatory communications - -
Non-audit fees - -
Audit fees for 2022, of $200 thousand, refer to Moore Kingstone Smith for the
audit of group accounts and subsidiaries as of and for the year ended 31
December 2022.
12. Staff costs
The average monthly number of employees (including Executive Directors) was:
2022 2021
Number Number
Executive Director 1 1
Other employees 74 77
Total 75 78
Total number of employees at 31 December 75 78
$'000 $'000
Their aggregate remuneration comprised:
Wages and salaries 1,596 1,671
Social security costs 301 307
Annual bonus - -
Charge for bonus granted in shares - -
Total 1,897 1,978
13. Finance income/(costs), net
2022 2021
$'000 $'000
Interest on loan (note 27) 38 1,225
Investment revenue 97 8
Interest income on cash deposits in Ukraine 185 68
Change in provision (note 25) 93 -
Total interest income on financial assets 413 1,301
Interest on lease (18) (28)
Unwinding of discount on decommissioning provision (note 25) (23) (23)
Total 372 1,250
14. Tax
2022 2021
$'000 $'000
Current tax - -
Deferred tax - -
Total - -
The Group's operations are conducted primarily outside the UK, namely in
Ukraine. The most appropriate tax rate for the Group is therefore considered to
be 18 % (2021: 18%), 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.
The taxation charge for the year can be reconciled to the profit/(loss) per the
income statement as follows:
2022 2022 2021 2021
$'000 % $'000 %
(Loss)/profit before tax (1,560) 100 (5,098) 100
Tax credit at Ukraine corporation tax rate of (281) 18 (918) 18
18% (2021: 18%)
Permanent differences (1,361) 87 (920) 20
Unrecognized tax losses generated in the year 1,682 (108) 1,969 (41)
Effect of different tax rates (40) 3 (131) 3
- - - -
Adjustments recognized in the current year in
relation - - - -
with the current tax of prior years
Income tax (benefit)/expense recognized in - - - -
profit or loss
Permanent differences mostly represent items, including provisions, accruals
and impairments related to taxation in Ukraine, these are items not deductible
in tax computations.
15. Loss per Ordinary share
Loss attributable to owners of the Company 2022 2021
$'000 $'000
Loss for the purposes of basic loss per share being net loss (1,562) (5,070)
attributable to owners of the Company
Number Number
Number of shares '000 '000
Weighted average number of Ordinary shares used in calculation
of earnings per share:
Basic 244,128 244,128
Diluted 244,128 244,128
Cent Cent
Loss per Ordinary share
Basic and diluted (0.6) (2.1)
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:
In 2022 and 2021 the Group generated a loss and therefore there is no
difference between basic and diluted EPS.
16. Intangible exploration and evaluation assets
$'000
Cost
At 1 January 2021 16,211
Additions -
Disposals -
Change in estimate of decommissioning assets (note 25
25)
Exchange differences 465
At 1 January 2022 16,701
Additions -
Disposals (5,878)
Change in estimate of decommissioning assets (note 269
25)
Exchange differences (3,577)
At 31 December 2022 7,515
Impairment
At 1 January 2021 13,830
Disposals 2,474
Exchange differences 397
At 1 January 2022 16,701
Addition -
Disposals (5,878)
Impairment 269
Exchange differences (3,577)
At 31 December 2022 7,515
Carrying amount
At 31 December 2022 -
At 31 December 2021 -
Disposal of $5.8 million relates to E&E assets impaired in previous years.
Company was analysing on possibility to realise any benefits from those assets.
In 2022, based on the conducted analysis management decided to dispose those
assets from the balance sheet.
The carrying amount of E&E assets at 31 December 2022 relates to the Bitlyanska
license.
Usenco Nadra has fully complied with legislative requirements and submitted its
application for a 20-year exploration and production license 5 months before
its expiry on 23 December 2019. A decision on the award was expected to be
provided by State Geological Service of Ukraine before 19 January 2020, since
all other intermediary approvals had been secured in line with the applicable
legislation requirements. Given the delay to granting of the new license beyond
the regular timeline provided by legislation in the Ukraine, Cadogan filed a
claim before the Administrative Court to challenge the non-granting of the
20-year production license by the Licensing Authority.
After the rejection of its claims, in February 2022, the Company exercised its
right for appeal. The Appeal Court and further on the Supreme Court rejected
all the Company's claims.
Cadogan has fully impaired the Bitlyanska license.
17. Property, plant and equipment
Cost Development Total
and $'000
production Other
assets $'000
$'000
At 1 January 2021 14,018 2,853 16,871
Additions 127 23 150
Change in estimate of decommissioning 22 - 22
assets (note 25)
Disposal (2) (27) (29)
Exchange differences 402 81 483
At 1 January 2022 14,567 2,930 17,497
Additions 71 30 101
Change in estimate of decommissioning - - -
assets (note 25)
Disposal (701) (7) (708)
Exchange differences (3,651) (753) (4,404)
At 31 December 2022 10,286 2,200 12,486
Accumulated depreciation and impairment
At 1 January 2021 4,499 2,409 6,908
Charge for the year 647 150 797
Disposals - (2) (2)
Exchange differences 127 69 196
At 1 January 2022 5,273 2,626 7,899
Charge for the year 604 68 672
Disposals (693) (7) (700)
Exchange differences (1,338) (680) (2,018)
At 31 December 2022 3,846 2,007 5,853
Carrying amount
At 31 December 2022 6,440 193 6,633
At 31 December 2021 9,294 304 9,598
Other property, plant and equipment include fixtures and fittings for the
development and production activities.
The carrying amount of development and production assets at 31 December 2022 of
$6.4 million relates to the Blazhiv license. Depreciation includes $0.6 million
for the Blazhiv license.
Management has performed an impairment review of Development and production
assets based on the underlying discounted cash flow forecasts. The impairment
review supported the conclusion that no impairment was applicable. Key
assumptions used in the impairment assessment were: future oil prices which
were assumed at a constant $408 (2021: $401), real per tonne; a production
forecast with a natural decline; estimated reserves and a discount rate of 25%,
nominal.
Sensitivity analysis for the Development and production assets
Any impairment is dependent on judgement used in determining the most
appropriate basis for the assumptions and estimates made by management,
particularly in relation to the key assumptions described above. Sensitivity
analysis to potential changes in key assumptions to reach break-even has been
provided below:
Change in the assumptions to be break-even
Oil price (17%)
Oil production volumes (25%)
Discount rate 36%
18. Subsidiaries
The Company had investments in the following subsidiary undertakings at 31
December 2022:
Name Country of Proportion Activity Registered office
incorporation of voting
and operation interest %
Directly held
Cadogan Petroleum UK 100 Holding 6th Floor 60 Gracechurch
Holdings Ltd company Street, London, United
Kingdom, EC3V 0HR
Indirectly held
Cadogan Petroleum Netherlands 100 Holding Hoogoorddreef 15, 1101 BA
Holdings BV company Amsterdam
Cadogan Bitlyanske BV Netherlands 100 Holding Hoogoorddreef 15, 1101 BA
company Amsterdam
Zagoryanska Petroleum Netherlands 100 Holding Hoogoorddreef 15, 1101 BA
BV company Amsterdam
LLC Cadogan Ukraine Ukraine 100 Holding 48/50a, Zhylyanska Street,
company Kyiv, Ukraine
LLC Astro Gas Ukraine 100 Dormant 5a, Pogrebnyak Street, ap. 2,
Zinkiv, Poltava region,
Ukraine, 38100
LLC Astroinvest-Energy Ukraine 100 Trading 5a, Pogrebnyak Street, ap. 2,
Zinkiv, Poltava region,
Ukraine, 38100
SE USENCO Ukraine Ukraine 100 Production 8, Mitskevycha sq.,Lviv,
Ukraine,79000
LLC USENCO Nadra Ukraine 95 Production 9a, Karpenka-Karoho str.,
Sambir, Lviv region, Ukraine
LLC Astro-Service Ukraine 100 Service 3 Petro Kozlaniuk str,
Company Kolomyia, Ukraine
Exploenergy s.r.l. Italy 90 Exploration Via Adige 17, San Donato
Milanese_ Milano, CAP 20097,
Italy
There were no changes to the Group structure during 2022.
19. Inventories
2022 2021
$'000 $'000
Natural gas 45 -
Crude oil 182 101
Other inventories 1,184 1,599
Impairment provision (1,116) (1,523)
Carrying amount 295 177
The impairment provision at 31 December 2022 and 2021 is made so as to reduce
the carrying value of the inventories to the net realizable value.
20. Trade and other receivables
2022 2021
$'000 $'000
Trade receivables 166 38
VAT recoverable 77 64
Prepayments 60 89
Other receivables 15 27
318 218
The Group considers that the carrying value of receivables approximates their
fair value.
VAT recoverable is presented net of the cumulative provision of $1.0 million
(2021: $1.3 million) against Ukrainian VAT receivable that has been recognized
as at 31 December 2022. VAT recoverable relates to the oil production and gas
trading operations and is expected to be recovered through the gas and oil
sales VAT.
21. Notes supporting statement of cash flows
Cash at 31 December 2022 of $13.9 million (2021: $15.0 million) comprise cash
held by the Group. Ukrainian subsidiaries of the Group hold $3.6 million as at
31 December 2022.
With the start of the Russian invasion into Ukraine on 24 February 2022, the
Ukrainian government introduced Martial Law affecting, among others, aspects
relating to lending agreements, foreign exchange and currency controls and
banking activities. As a result of the introduced Martial Law, the National
Bank of Ukraine ("NBU") has introduced significant currency and capital control
restrictions in Ukraine. These measures are affecting the Group in terms of its
cross-border payments to be made, which are restricted and may be carried out
only in exceptional cases specified in the amendments to the resolution No. 18.
Based on the regulations, Ukrainian subsidiaries of the Group are not able to
pay dividends to the parent Company but are able to use the cash in normal
course of business.
The Directors consider that the carrying amount of these assets approximates to
their fair value. There were no cash transactions from financing activities for
the year 2022.
22. 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
Asset at 1 January 2021 419
Deferred tax benefit -
Exchange differences 12
Asset at 1 January 2022 431
Deferred tax benefit -
Exchange differences (112)
Asset at 31 December 2022 319
At 31 December 2022, the Group had the following unused tax losses available
for offset against future taxable profits:
2022 2021
$'000 $'000
UK 17,541 19,949
Ukraine 43,138 50,782
60,679 70,731
Deferred tax assets have been recognized in respect of those tax losses where
there is sufficient certainty that profit will be available in future periods
against which they can be utilized. The Group's unused tax losses of $17.5
million (2021: $19.9 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. No deferred tax
asset is recorded.
Unused tax losses incurred by Ukraine subsidiaries amount to $43.1 million
(2021: $50.8 million). Under general tax law provisions, these losses may be
carried forward indefinitely to be offset against any type of taxable income
arising from the same company. Tax losses may not be surrendered from one
Ukraine subsidiary to another. The deferred tax asset recorded is expected to
be utilized based on forecasts and relates to oil production subsidiaries which
are generating taxable profits in the foreseeable future.
23. Lease liabilities
The Group recognized right-of-use assets and lease liabilities based on rental
contract for a rent of Kyiv office with maturity date end of February 2024
which was entered into in the period. The Group initially recognized
right-of-use assets of $292 thousand as of 31 December 2020. Right-of-use
assets are depreciated over the useful life of the underlying asset.
Depreciation of $92 thousand is recognized for the year 2022 and represented as
a part of other administrative expenses. Carrying value of right-of-use assets
is $108 thousand as of 31 December 2022.
The following table sets out a maturity analysis of lease liability, showing
the undiscounted lease payments to be paid after the reporting date.
2022 2021
$'000 $'000
2022 - 110
2023 99 118
2024 20 20
Less: unearned interest (12) (42)
Lease liabilities 107 206
2022 2021
$'000 $'000
Analysed as:
Current 79 102
Non-current 28 104
Lease liabilities 107 206
24. Trade and other payables
2022 2021
$'000 $'000
Accruals 281 194
Trade creditors 569 481
Prepayments received 32 17
Other payables 519 787
1,401 1,479
Trade creditors and accruals principally comprise amounts outstanding for
ongoing costs. The average credit period taken for trade purchases is 30 days
(2021: 29 days). The Group has financial risk management policies to ensure
that all payables are paid within the credit timeframe.
Other payables include unused vacation reserve provision of $0.37 million
(2021: $0.34 million), subsoil tax payables of $0.13 million (2021: $0.35) and
other payables of $0.02 million (2021: $0.1).
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.
25. Provisions
The provisions at 31 December 2022 comprise of $0.4 million (2021: $0.3
million) of decommissioning provision.
Decommissioning
$'000
At 1 January 2021 223
Change in estimate (note 16 and 17) 25
Additional provisions recognized in the period -
Utilization of provision on impaired oil and gas -
assets
Unwinding of discount on decommissioning 22
provision (note 13)
Exchange differences 30
At 1 January 2022 300
Change in estimate: exploration and evaluation 269
assets (note 16)
Change in estimate: development and production (93)
assets
Additional provisions recognized in the period -
Utilization of provision on impaired oil and gas -
assets
Unwinding of discount on decommissioning 23
provision (note 13)
Exchange differences (102)
At 31 December 2022 397
$'000
At 1 January 2021 223
Non-current 300
Current -
At 1 January 2022 300
Non-current 261
Current 136
At 31 December 2022 397
In accordance with the Group's environmental policy and applicable legal
requirements as of 31st December 2022, the Group intends to restore the sites
it is working on after completing the exploration or development activities.
Provision for the decommissioning and site restoration used by development and
production assets has been decreased by $93 thousand due to change in
discounting rate used for the provision calculation (2022: 21%; 2021: 9%). The
change in the provision has been recognised as other financial income/(loss)
for the year together with unwinding of discount on decommissioning provision.
A long-term provision of $0.26 million (2021: $0.3 million) has been made for
decommissioning costs for Borynya-3 well, which is expected to be incurred in
2024, and Blazhiv-10 well, which is to be incurred at the end of Blazhiv
licenses period as a result of the demobilization of gas and oil facilities and
respective site restoration. Current provision of $0.14 million (2021: nil) has
been made for decommissioning costs, which are expected to be incurred in 2023
as a result of the demobilization of gas and oil facilities and respective site
restoration on Bitlyanska license.
26. Share capital
Authorised and issued equity share capital
2022 2021
Number $'000 Number $'000
('000) ('000)
Authorized 1,000,000 57,713 1,000,000 57,713
Ordinary shares of £0.03 each
Issued
Ordinary shares of £0.03 each 244,128 13,832 244,128 13,832
Authorized but unissued share capital of £30 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 £0.03
At 31 December 2020 244,128,487
Issued during year -
At 31 December 2021 244,128,487
Issued during year -
At 31 December 2022 244,128,487
27. 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 consist of cash 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
2022 2021
$'000 $'000
Financial assets (includes cash)
Loan provided at amortised cost 15,825 16,724
Cash 13,934 15,011
Other receivables - amortized cost 181 154
29,940 31,889
Financial liabilities - measured at fair value
Trade creditors 569 498
Lease liabilities 107 206
Accruals 281 194
Other payables 519 787
1,476 1,685
Financial assets at fair Financial assets
value through profit and at amortised cost
loss $'000
$'000
As at 1 January 2021 16,812 -
Reclassification from FVPL (16,812) 16,812
to AC
Addition 1,225
Exchange differences (1,313)
As at 31 December 2021 16,724
The Proger loan is recorded at management's best estimate of recoverable amount
as set out in note 4(d) although management have not been able to undertake a
valuation exercise under the income method based on Proger's underlying cash
flows or market-based method which would incorporate relevant recent financial
information on the investee or its prospects.
The Group has applied a level 3 valuation under IFRS as inputs to the valuation
have included assessment of the cash repayments anticipated under the loan
terms at maturity, delayed by the arbitration process requested by PMP (the
Borrower), historical financial information for the periods prior to 2020 and
assessment of the security provided by the pledge over shares together with the
impact of the Covid-19 on the activity of Proger. As a result, $ 16.8 million
was determined as the best estimate of fair value as at 31 December 2020, being
equal to anticipated receipts and timing thereof discounted at an estimated
market rate of interest of 7.8%.
In February 2021, Cadogan notified PMP that according to the Loan Agreement,
the Maturity Date occurred on 25 February 2021. As the Call Option was not
exercised, PMP must fulfil the payment of EUR 14,857,350, being the
reimbursement of the Loan in terms of principal and the accumulated interest.
PMP is in default since 25 February 2021. In case of default payment, the terms
of the agreement provide for the application of an increased interest rate on
the amount of the debt.
Since the Call Option was not exercised before the Maturity Date and the asset
is held within a business model whose objective is to hold assets in order to
collect contractual cash flows, the Loan provided was reclassified from
'Financial assets at fair value through profit and loss' to 'Financial assets
at amortized cost'.
$'000
As at 1 January 2021 16,812
Movement in amortised at cost 1,225
Exchange differences (1,313)
As at 1 January 2022 16,724
Movement in amortised at cost 38
Exchange differences (937)
As at 31 December 2022 15,825
The Group considers that the carrying amount of financial instruments
approximates their fair value.
Financial risk management objectives
Management 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
at 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
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 Organization
of Petroleum Exporting Countries.
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 holds a large portion of its monetary assets in the US Dollars and
Euro, mitigating the exchange risk between the US Dollars and Euro and monetary
liability in the US Dollars.
Sensitivity analysis is represented below based on 10% exchange rate deviation:
As at 31 December 2022 Change in EURO/USD
exchange rate
$'000 +10% -10%
Cash positions 13,934 222 (222)
Loan receivable at amortised cost 15,825 1,582 (1,582)
Net assets 35,527 1,804 (1,804)
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 is mitigated by active and continuous monitoring the credit quality
of its counterparties through internal reviews and assessment. There was no
material past due receivables as at year end.
The Group makes allowances for expected credit losses on receivables in
accordance with its accounting policy.
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.
3 months More than
Within to 1 1 year Total
3 months year
$'000 $'000 $'000 $'000
At 31 December 2021
Trade and other payables 1,479 - - 1,479
Lease liability - 110 138 248
At 31 December 2022
Trade and other payables 1,401 - - 1,401
Lease liability - 99 20 119
28. Commitments and contingencies
Licence contingent liability
The Group has working interests in Blazhiv license to conduct its exploration
and development activities in Ukraine. The license is not held any obligation
on a settlement of exploration activities within its term.
Tax contingent liabilities
The Group assesses its liabilities and contingencies for all tax years open for
audit by UK, Netherlands and Ukraine tax authorities based upon the latest
information available. Where management concludes that it is not probable that
a particular tax treatment is accepted, a provision is recorded based on the
most likely amount or the expected value of the tax treatment when determining
taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and
tax rates. The decision should be based on which method provides better
predictions of the resolution of the uncertainty. 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, Netherlands 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.
29. 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.
In February 2019, the Group entered in a 2-year loan agreement with Proger
Management & Partners Srl with an option to convert it into a direct 33% equity
interest in Proger Ingegneria. At that time, Mr Michelotti was a non-executive
Director of Proger Ingegneria Srl and Proger Spa, and CEO of Cadogan Petroleum
PLC. Mr Michelotti did not participate to the voting for the approval of the
loan agreement at the Board of Cadogan.
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 2022 on page 43.
Purchase of services Amounts owing
2022 2021 2022 2021
$'000 $'000 $'000 $'000
Directors' remuneration 693 754 83 -
Social contribution on Directors' 72 126 - -
remuneration
The total remuneration of the highest paid Director was $0.5 million in the
year (2021: $0.5 million).
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.
30. Events after the balance sheet date
In April 2023, SE Usenco Ukraine (a Cadogan subsidiary in Ukraine) completed
the acquisition of the 5% minority interest of Usenco Nadra LLC. As a result,
SE Usenco Ukraine consolidates now 100% of Usenco Nadra LLC in its ownership.
This acquisition will allow the Company to further optimize its operating
structure in Ukraine and be more cost effective at Blazhiv field.
PJSC Ukrnafta, the largest oil company in Ukraine, and Cadogan have signed the
extension of Blazhiv-3 and Blazhiv-Monastyrets-3 wells' lease contracts for a
5-year period (the past term was 3 years). The signature of this lease
extension ahead the expiry period will allow to avoid a production stoppage and
secure profit inflows for both parties during this unprecedented severe and
challenging context which Ukraine is facing now.
Company Balance Sheet Notes 2022 2021
As at 31 December 2022 $'000 $'000
ASSETS
Non-current assets
Receivables from subsidiaries 34 35,918 36,769
35,918 36,769
Current assets
Trade and other receivables 34 - 3
Cash 34 2,391 3,857
2,391 3,860
Total assets 38,309 40,629
LIABILITIES
Current liabilities
Trade and other payables 35 (337) (255)
(337) (255)
Total liabilities (337) (255)
Net assets 37,972 40,374
EQUITY
Share capital 36 13,832 13,832
Share premium 514 514
Retained earnings[17] 132,345 134,747
Cumulative translation reserves 37 (108,719) (108,719)
Total equity 37,972 40,374
As permitted by section 408 of the Act, the Company has elected not to present
its profit and loss account for the year.
The financial statements of Cadogan Petroleum plc, registered in England and
Wales no. 05718406, were approved by the Board of Directors and authorized for
issue on 27 April 2023.
They were signed on its behalf by:
Fady Khallouf
Chief Executive Officer
27 April 2023
The notes on pages 108 to 111 form part of these financial statements.
Company Cash Flow Statement 2022 2021
For the year ended 31 December 2022 $'000 $'000
Operating activities
Profit/(loss) for the year (2,402) (3,746)
Adjustments for:
Interest received (4) -
Impairment of receivables from subsidiaries - 665
Effect of foreign exchange rate changes 1,053 1,451
Movement in provisions (11) 58
Operating cash outflows before movements in working (1,364) (1,572)
capital
Decrease/(Increase) in receivables 2 (4)
Increase/(Decrease) in payables 99 (38)
Cash used in operations (1,263) (1,614)
Income taxes paid - -
Net cash outflow from operating activities (1,263) (1,614)
Investing activities
Interest received 4 -
Net cash generated in investing activities 4 -
Net decrease in cash (1,259) (1,614)
Effect of foreign exchange rate changes (207) (288)
Cash at beginning of year 3,857 5,759
Cash at end of year 2,391 3,857
Share Cumulative
Company Statement of Changes Share premium Retained Other translation
in Equity capital account earnings Reserve reserves Total
For the year ended 31 $'000 $'000 $'000 $'000 $'000 $'000
December 2022
As at 1 January 2021 13,832 514 138,493 - (108,719) 44,120
Net loss for the year - - (3,746) - - (3,746)
Total comprehensive loss for - - (3,746) - - (3,746)
the year
Issue of ordinary shares - - - - - -
As at 1 January 2022 13,832 514 134,747 - (108,719) 40,374
Net income for the year - - (2,402) - - (2,402)
Total comprehensive income - - (2,402) - - (2,402)
for the year
As at 31 December 2022 13,832 514 132,345 - (108,719) 37,972
Notes to the Company Financial Statement
For the year ended 31 December 2022
31. 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 ("IFRSs") adopted by the UK.
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 Energy Solutions plc reports
a loss for the financial year ended 31 December 2022 of $2.4 million (2021:
loss $3.7 million).
Investments
Investments in subsidiaries are stated at cost less, where appropriate,
provisions for impairment.
Receivables from subsidiaries
Loans to subsidiary undertakings are subject to IFRS 9's new expected credit
loss model. As all intercompany loans are repayable on demand, the loan is
considered to be in stage 3 of the IFRS 9 ECL model on the basis the subsidiary
does not have enough liquid assets in order to repay the loans if demanded.
Lifetime ECLs are determined using all relevant, reasonable and supportable
historical, current and forward-looking information that provides evidence
about the risk that the subsidiaries will default on the loan and the amount of
losses that would arise as a result of that default. Analysis indicated that
the Company will fully recover the carrying value of the loans (net of historic
credit loss provisions) so no additional ECL has been recognised in the current
period.
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.
The critical estimates and judgments referred to application of the expected
credit loss model to intercompany receivables (note 33). Management determined
that the interest free on demand loans were required to be assessed on the
lifetime expected credit loss approach and assessed scenarios considering risks
of loss events and the amounts which could be realised on the loans. In doing
so, consideration was given to factors such as the cash held by subsidiaries
and the underlying forecasts of the Group's divisions and their incorporation
of prospective risks and uncertainties.
32. Auditor's remuneration
The auditor's remuneration for audit and other services is disclosed in note 11
to the Consolidated Financial Statements.
33. 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.
34. Financial assets
The Company's principal financial assets are bank balances and cash 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.
34. Financial assets (continued)
Receivables from subsidiaries
At the balance sheet date gross amounts receivable from the fellow Group
companies were $349.1 million (2021: $350 million). The Company did not
recognise additional expected credit loss provisions in relation to receivables
from subsidiaries in 2022 (2021: $0.7 million). The accumulated provision on
receivables at 31 December 2022 was $313.2 million (2021: $312.2 million). The
carrying value of the receivables from the fellow Group companies at 31
December 2022 was $35.9 million (2021: $36.8 million). Receivables from
subsidiaries are interest free and repayable on demand. There are no past due
receivables. The receivables are classified as non-current based on the
expected timing of receipt notwithstanding their terms.
Cash
Cash comprises 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.
35. Financial liabilities
Trade and other payables
2022 2021
$'000 $'000
Accruals 141 174
Unused vacation provision 85 63
Amounts owing to Directors 82 -
Trade creditors 29 18
337 255
Trade payables principally comprise amounts outstanding for trade purchases and
ongoing costs. The average credit period taken for trade purchases is 29 days
(2021: 30 days).
Unused vacation provision of $85 thousand accrued for CEO of the Company (2021:
$63 thousand).
The Directors consider that the carrying amount of trade and other payables
approximates to their fair value. No interest is charged on balances
outstanding.
36. Share capital
The Company's share capital is disclosed in note 26 to the Consolidated
Financial Statements.
37. Cumulative translation reserve
The directors decided to change the functional currency of the Company from
sterling to US dollars with effect from 1 January 2016. The effect of a change
in functional currency is accounted for prospectively. In other words, the
Company translates all items into the US dollar using the exchange rate at the
date of the change. The resulting translated amounts for non-monetary items are
treated as their historical cost. Exchange differences arising from the
translation of an operation previously recognised in other comprehensive income
in accordance with paragraphs 32 and 39(c) IAS 21 "Foreign Currency" are not
reclassified from equity to profit or loss until the disposal of the operation.
38. 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 27 for
the Group's overall strategy and financial risk management objectives.
The capital resources of the Company consist of cash arising from equity,
comprising issued capital, reserves and retained earnings.
Categories of financial instruments
2022 2021
$'000 $'000
Financial assets - measured at amortised cost
Cash 2,391 3,857
Amounts due from subsidiaries 35,918 36,769
38,309 40,626
Financial liabilities - measured at fair value
Trade creditors (196) (81)
(196) (81)
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,
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 holds a large portion of its monetary assets in the US Dollars and
Euro, mitigating the exchange risk between the US Dollars and Euro and monetary
liability in the US Dollars. More information on the foreign exchange risk and
foreign currency risk management is disclosed in note 27 to the Consolidated
Financial Statements.
39. 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:
2022 2021
$'000 $'000
Cadogan Petroleum Holdings Limited 35,918 36,769
35,918 36,769
Refer to note 34 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. In 2022 there were no other employees in the
Company. Further information about the remuneration of individual Directors is
provided in the audited part of the Annual Report on Remuneration 2022 on pages
43 to 49.
Purchase of services Amounts owing
2022 2021 2022 2021
$'000 $'000 $'000 $'000
Directors' remuneration 693 754 83 -
Social contribution on Directors' 72 126 - -
remuneration
The total remuneration of the highest paid Director was $0.5 million in the
year (2021: $0.6 million).
40. Events after the balance sheet date
Events after the balance sheet date are disclosed in note 30 to the
Consolidated Financial Statements.
Glossary
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
Workover The process of performing major maintenance or
remedial treatment of an existing oil or gas well
E&E / E&P Exploration and Evaluation / Exploration and
Production
LTI Lost time incidents
Shareholder Information
Enquiries relating to the following administrative matters should be addressed
to the Company's registrars: Link Group, 10th Floor, Central Square, 29
Wellington Street, Leeds LS1 4DL.
Telephone: 0371 664 0300. Calls are charged at the standard geographic rate and
will vary by provider. Calls outside the United Kingdom will be charged at the
applicable international rate. Lines are open between 09:00 - 17:30, Monday to
Friday excluding public holidays in England and Wales.
§ 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
Shareholder Portal www.signalshares.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 2022/2023
Annual General Meeting June 2023
Half Yearly results announced September 2022
Annual results announced April 2023
Investor relations
Enquiries to: info@cadoganpetroleum.com
Registered office
Shakespeare Martineau LLP,
6th Floor, 60 Gracechurch Street, London EC3V 0HR
Registered in England and Wales no. 05718406
Ukraine
48/50A Zhylyanska Street
Business center "Prime", 8th floor
01033 Kyiv
Ukraine
Email: info@cadoganpetroleum.com
Tel: +38 044 594 58 70
Fax: +38 044 594 58 71
www.cadoganenergysolutions.com
References to page numbers throughout this announcement relates to the page
numbers within the Annual Report of the Company for the year ended 31st
December 2022. In addition all graphs and graphics have been removed for the
purposes of the announcement.
[1] Average realized price is calculated as total revenue from oil sales for
the period divided by total volume of sold oil for the period
[2] Gross revenues of $8.5 million (2021: $8.8 million) included nil (2021:
$1.8 million) from trading of natural gas, $8.5 million (2021: $7.0
million) from exploration and production
[3] Administrative expenses ("G&A")
[4] LTI: Lost Time Incidents; TRI: Total Recordable Incidents
[5] Taxable benefits include insurance provided to the executive and leased
car.
[6] 2015 CEO's salary is the sum of Mr. des Pallieres' salary for the period
January to June and of Mr. Michelotti's salary for the period July to December.
[7] In relation to performance in 2016 and 2015, the CEO used the entire amount
of the bonus to buy at market price newly issued company shares on 22 September
2017.
[8] 2019 Annual bonus is a sum of Mr Michelotti's bonus of $112,140 and welcome
bonus for Mr Khallouf equivalent in value of 5,500,000 ordinary shares based on
share's price of £0.0525. Welcome bonus for Mr Khallouf was provided in May
2020 based on share's price of £0.03. Respective correction of the bonus
reserve equivalent to $185 thousand was recognised through share premium
account in 2020.
[9] Includes a welcome bonus for Mr Khallouf equivalent in value of 5,500,000
ordinary shares based on share's price of £0.0525.
[10] Mr Michelotti undertook to use the entire bonus to buy company's share at
market price in order to leave the Company cash neutral.
[11] Year-end performance-based bonus was an alternative to an up-front sign-on
bonus. Mr Michelotti use the entire bonus to buy company's share at market
price on 22 September 2017.
[12] $280,298 paid as fees, pension and loss of office.
[13] From 1 August, 2011.
[14] From 19 March 2009.
[15] All employees mean all employees of the Group, including CEO and other
Directors (note 12, page 92).
[16] Please note that the salary of the CEO for 2022 remain at ?440,000.
[17] Included in retained earnings, loss for the financial year ended 31
December 2022 was $2.4 million (2021: profit $3.7 million).
END
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April 28, 2023 03:25 ET (07:25 GMT)
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