Annual Financial Report

CADOGAN PETROLEUM PLC
ANNUAL FINANCIAL REPORT
2014


Key developments during 2014:

Management continued the optimisation of administrative and operational costs
in 2014. Significant cost cutting initiatives have been implemented resulting
in a decrease of administrative expenses from $8.9 million in 2013 to $7.0
million in 2014. Management have taken the decision to continue with the
structure optimisation throughout 2015.

 In 2014, the Group started trading energy products in Ukraine, such as natural
gas and diesel. Trading operations include the importing of gas from European
countries, local purchasing and sales operations with physical delivery of
natural gas and diesel.

A new exploration well at Debeslavetskoe area was drilled.

The Group has recorded significant impairment charges in 2014, including $40.2
million relating to the Group's share of $57.4 million impairment of the assets
of the Pokrovskoe joint venture and $5.1 million of Oil and Gas Assets relating to
the Pirkovskoe and Debeslavetskoe fields.

Net cash and cash equivalents at year-end total $48.9 million (2013: $56.5
million) excluding $0.5 million (2013: $0.2 million) of Cadogan's share of cash
and cash equivalents in joint ventures. Cash and cash equivalents at 30 April
2015 is $49.7 million, including $20 million of restricted cash.

Group Overview
The Group's assets are located in two of the three proven hydrocarbon basins in
Ukraine, the Dnieper-Donets basin and the Carpathian basin.

Zagoryanska field
The Zagoryanska licence covers an area of 49.6 square kilometres and is located
in the Dnieper-Donets basin. As at year-end, five wells have been drilled in
this field with gas being discovered in the Upper and Lower Visean and
Turnaisian reservoirs, at depths varying from 4,500 to 5,500 metres.

The licence expired on 24 April 2014 and, thus, the abandonment plans for the
wells have been prepared. At the same time Cadogan, via its subsidiary,
requested the 20 years production licence and the extension of the
stratigraphic exploration intervals to the Upper Carboniferous and Permian. ENI
has no interest to enter into the production phase with Cadogan. All assets on
the Group's Balance Sheet related to this licence were impaired in full in
2013.

Pokrovskoe field
The Pokrovskoe licence area covers 49.5 square kilometres and is located in the
Dnieper-Donets basin. It has prospective resources in the Permian, Upper and
Lower Carboniferous. Facilities in the Pokrovskoe area are approximately 10
kilometres away from the UkrTransGas system. The work programme obligation for
the licence has been fulfilled.

Following the 3D seismic stratigraphic interpretation of the block, new
prospects have been identified in the Upper Carboniferous and Permian
formations. Given this, a licence extension for those stratigraphic intervals
has been requested and obtained in 2014. The Group has assessed the Pokrovskoe
licence for impairment and recognised $40.2 million of impairment as at 31
December 2014.

Pirkovskoe field
Pirkovskoe is adjacent to the Group's Zagoryanska licence. The exploration and
appraisal licence covers 71.6 square kilometres and had 2.26 million barrels of
oil equivalent (mmboe) of "2P"reserves. The proved reserves in Pirk 1, tested
by a third party company, produced an inconclusive result due to damaged
formation and therefore, those reserves have been reclassified from reserves to
contingent resources together with corresponding assets. Prospective net
interest recoverable resources of 63.85 mmboe have been identified in the
Permian horizons, based on in-house assessment, following the 3D interpretation
of the area. In 2014 Cadogan received the stratigraphic exploration extension
to the Upper Carboniferous and Permian horizons.

Cadogan owns the Krasnozayarska gas treatment plant on the Pirkovska licence
area which is connected to the UkrTransGas system. The plant is presently
providing services to the third party operator and is included in the
reportable service segment.

Borynya and Bitlyanska fields
The Borynya and Bitlyanska exploration and development licence covers an area
of 390 square kilometres, tectonically belonging to the Krosno zone of the
folded Carpathians and includes the Bitlya, Borynya and Vovchenska areas. The
Borynya and Bitlyanska fields hold 276.8 mmboe of recoverable resources
including condensate (in house evaluation). No reserves and resources have been
associated to the depleted Vovchenska field.

Borynya 3 well was re-entered and tested Krosno 1 interval with promising
results in 2013. The well is monitored, routinely bled-off, fluid samples
extracted, measured and kept on hold for an eventual fracturing job and
possible re-entry to the deeper intervals.

Minor fields
Cadogan owns exploration, development and production licences either directly
or through subsidiaries and joint ventures in several minor fields, of which
two are currently in commercial production (Debeslavetska and Cheremkhivska),
one (Monastyretska)is in pilot commercial development and the other
(Slobodo-Rungurska) is idle.

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

Strategic Report

The Strategic Report has been prepared in accordance with Section 414A of the
Companies Act 2006 (the "Act"). Its purpose is to inform members of the Company
and help them assess how the Directors have performed their legal duty under
Section 172 of the Act to promote the success of the Company.


Our consistent business model

We aim to increase value through:

Our unique expertise and knowledge of both the Ukrainian market and best
Western practices;

Having a very disciplined investment process with capital used as underwriting
capital to farm-out;

Focusing our stand-alone drilling or workover activities to lower risk
initiatives with limited capital commitment  until we obtain success in
generating new or increased production; and

Obtaining a proper return on cash to achieve material impact on the Company's
profitability or cash flow focusing on yield-generating fixed income
investments, within the Company's or its management's areas of expertise.


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's shares have a standard listing on the Official List of the UK
Listing Authority and are traded on the main market of the London Stock
Exchange.


Chairman's Statement

In 2014 the Company pursued its strategy of furthering the evaluation,
de-risking and promotion of its assets in the east and the west of the country.
The unstable local situation was not supportive of pursuing business
development initiatives. Instead, decisive actions to  optimise our activities
and reduce our cost base were implemented to strengthen the Company's position
to maintain its financial resilience pending results from operations. The
activities as a Service Contractor and Gas Trading were further developed with
a very positive impact on improving the Company's financial standing.

Revenue this year has increased from $3.8 million in 2013 to $32.6 million in
2014 primarily thanks to the trading operations, which represent $29.4 million
of total revenues; revenues from production and service business have slightly
declined to $2.4 million (2013: $2.5 million) and $0.8 million (2013: $1.2
million) respectively.

The cash position at 31 December 2014 remained strong at $48.9 million, 
including restricted cash of $20 million.

Despite the new revenue generation activities and cost optimisation during the
year, the Group has recorded a significant loss in 2014 due to the impairment
of its oil and gas assets and investments in joint ventures. Loss before tax
was $59.1 million (2013: $14.4 million) reflecting $54.7 million (2013: $6.6 million) 
share of losses of joint ventures and $5.1 million (2013: $nil) impairment of oil 
and gas assets.  Share of losses in joint ventures mainly include the impairment 
of oil and gas assets in joint ventures and losses arising on translation of 
Balance Sheet items from UAH to USD, being the presentation currency of the Group.

Operations

As anticipated, the principal focus for 2014 was to reduce the risk of present
and anticipated operations while maximising the existing production potential.
Our exploration department identified new drillable prospects in Pokrovskoe and
Pirkovskoe, following the continuous refinement process of the 3D seismic
interpretation. The shallow well Debeslavetska 15 was drilled with no
commercial result. Due to surface logistic constraints the location had to be
moved few hundred metres apart and did not hit the planned target as a result.
The area's exploration potential is confirmed. The work-over activity in
Pirkovskoe 1 well run by a local contractor continues. It confirms the
hydrocarbon potential but so far has not achieved commercial results. Local
contractors confirmed their interest in the other suspended deep wells in the
eastern licences. The total production has marginally increased in the year.
Gas production in Debeslavetska and Cheremkhivska was kept constant while in
Monastyretska the Blazh 1 well production increased to 45 bopd.

The re-evaluation of the Group's assets continues and our outlook remains
positive.

The Board

The Company is committed to acting professionally, fairly and with integrity in
all of its dealings and relationships wherever it operates, and to implementing
and enforcing effective systems to counter bribery and corruption in all its
forms. All policies included into the "Working with Integrity" documents have
been disseminated to the staff and are available to view on the Company's
website. Our adherence to the principles contained in these policy documents
remains unshakeable and have been the focus in our way of conduct.

Recent Political Developments

Strategy and Prospects
The political situation in Ukraine continues to be unstable, as the fast
deterioration that followed the events at the end of 2013 made the year 2014
the most challenging and unpredictable in the country's recent history. Despite
our optimism on the continuation of the progress experienced in the last
months, we remain cautious on the challenges ahead and how much they will
continue to create a remaining level of unpredictability in the political and
economical environment. This challenge has obviously been aggravated by the
recent oil price collapse which, even though favourable for the country's
balance is unfavourable for the Exploration and Production ("E&P") industry.
The strategy reassessment by the International Oil Companies ("IOC")
present in Ukraine will also keep affecting our Ukrainian operations. The local
market instability gave to us the opportunity to quickly implement
adequate measures to increase its competitive value and readdressed its focus
to the local operators and possible partners and aggressively develop the gas
and oil trading activity, which represents a valuable contribution to the
financial integrity of the Company.

The Board continues to develop further relationships and opportunities
overseas, our established presence in Ukraine, our skilled staff both in Kiev
and also in the east and west of the country, and our adherence to the highest
standards of corporate governance gives us the opportunity to act as a beacon
for the western industry and industry standards. We believe that the Company is
uniquely placed to create value from any emerging opportunity.  

We continuously work to make 2015 an exciting and successful year for both the
Company and the people of Ukraine.

Annual General Meeting

I look forward to meeting shareholders at the Company's Annual General Meeting
to be held on 25  June 2015 at Chandos House, 2 Queen Anne Street, London W1G
9LQ.

Zev Furst
Non-executive Chairman
30 April 2015

 
Chief Executive's Review

In spite of an extremely challenging political and economic situation in the
Ukraine, with significant instability brought by fighting between Government
forces and rebels most of the year in the Eastern part of the country, as well
as continued disappointments in the exploration and appraisal activities,
Cadogan reached a major milestone in 2014 which culminates years of focus on
protecting shareholder value in the face of adverse events: For the last months
of 2014 as well as the beginning of 2015 the Company has operated at above cash
flow breakeven, primarily as a result of its successful launch of a trading
activity. Given the non-core nature of the trading business and its critical
reliance on key executives in the management, it should not be seen as a
strategic development yet but instead as a significant tactical achievement to
support the Company's turnaround at a difficult time, by turning geopolitical
adversity into an opportunity to monetise market dislocations.

Continued discipline in cost management has also played a key part in bringing
Cadogan to a situation where it has the financial flexibility to manage its
options from a position of strength, with general and administrative ("G&A")
expenses at an annual run rate below $4.5 million for 2015 after another round
of material costs reduction at the beginning of the year.

Core Operations

The Company's announced strategy to protect cash flows by rightsizing its
operation and limiting upstream activity to the strict minimum necessary in
order to facilitate farm-outs has been pursued throughout the year, without yet
delivering significant progress. The unstable environment has made it difficult
to progress on potential partnerships as the majority of operators, foreign or
domestic, have remained on the side-lines for most of the year.  The drop in
energy prices at the end of 2014 has further depressed the attractiveness of
our assets in the short term. However we believe that Ukraine is about to turn
the corner in 2015 and we are confident that the partnership opportunities will
keep on expanding.

Our limited well operations have yielded mixed results. The disappointing
drilling result of Debeslavetska 15, the first well of our program targeting
shallow horizons, does not invalidate the program in our opinion. Other
activities include a successful increase in the oil production of the Blaz-1
well as a result of our activities on the well, the stabilisation of the gas
production in the Debeslavetska and Cheremkhivska licences, as well as
continued work-over activities in Pirkoskoe via a farm-out to a local operator,
although with no result so far. 

The most promising achievement in the geological and geophysical ("G&G") area
has been the identification of new sizeable drillable prospects in Pokrovskoe
and Pirkovskoe from the extensive re-interpretation of the 3D seismic data.
These targets present attractive economics that we believe enhance the value of
our overall asset portfolio.

Non-Core Operations

As anticipated in last year's CEO statement, non-core operations are now
playing a key role in strengthening the Company's financial position. Making
Cadogan able to withstand even a temporary failure of exploration and appraisal
activities has been a key focus since I took over as CEO in 2011, this ability
being a critical advantage for an intrinsically high-risk Junior E&P company.
In fact, despite more than $70 million of unproductive capital expenditures and
more than $50 million of cumulative G&A expenses over the period, the Company
has a material increase in its cash position since I took over. Initial
achievements in asset recovery and monetisation of stale assets on the balance
sheet are progressively giving way to revenue generation from new businesses.
So far these businesses have grown under the constraint that no material
investment would be made to support them given their non-core nature. As the
Company redesigns its E&P strategy, a decision will have to be made whether to
make the investments necessary to support the growth of these activities or
whether they should be discontinued or sold.

The service activity has made a positive contribution, albeit smaller than in
2013 and below expectations for 2014, mainly as a result of the postponement of
work programs caused by the political instability. Foreign IOCs, which remain
our core customer base, have been particularly defensive with operations being
brought to a standstill. We remain optimistic on the next year's activity as
the country normalises.

Investments in fixed income have generated a little short of $1 million despite
being conservatively kept to within 10% of the Company's cash position. This
comes in addition to the benefit of our strategy of shifting the majority of
our cash to US$ which allowed Cadogan to benefit from the current US$ rise
against most currencies.

The trading activity, mostly in gas and to a limited extend in diesel, has been
able to capture opportunities arising from dislocated gas and currency markets
as well as the unpredictable political and regulatory environment and the
complex access to transport and storage infrastructure. It now represents the
large majority of our turnover and gross profit, and has been developed within
a disciplined risk management environment under my direct oversight.  The
challenge of a volatile and depreciating Hryvna, approximately 48% down against
the US$ during 2014 and 65% down as at 1 April 2015 with limited convertibility
throughout most of 2014, as well as an unpredictable series of short-term gas
supply deals between Russia and Ukraine have played to our sophistication and
conservative management of risk.

Outlook

Cadogan remains better positioned than ever to exploit Ukraine's rebound as,
helped by its upcoming IMF-led debt restructuring and the stabilisation of the
East Ukraine region, the country restarts its progress towards increased
transparency and lower energy dependency of imported gas. In support of our
ability to exploit local opportunities the Company has continued the execution
of its strategy of "Ukrainisation" of its staff by attracting, promoting and
developing outstanding local human resources. I am proud to announce the
appointment of Marta Halabala as a Company Secretary this year, in the
continuation of the appointment of Volodymyr Pogrebniak as Finance Director
in 2011.

The Company will also continue to assess opportunities outside of Ukraine in
order to balance its portfolio, keeping a very strict risk/return hurdle.

I am proud of how Cadogan's employees have risen to the challenge of the last
years, and am excited in our ability to leverage the financial flexibility we
created for ourselves to exploit the opportunities that we have ahead of us.

Bertrand des Pallieres
Chief Executive Officer
30 April 2015

 
Operations Review

In 2014 the Group held working interests in nine conventional (2013: nine) gas,
condensate and oil exploration and production licences in the east and west of
Ukraine. All these assets are operated by the Group and are located in either
the Carpathian basin or the Dnieper-Donets basin, in close proximity to the
Ukrainian gas distribution infrastructures.

 
Summary of the Group's licences (as at 31 December 2014)     
                                                                 
   Working                                                       
  interest (%)      Licence          Expiry       Licence type(1)

Major licences                                                   
                                                                 
     40.0         Zagoryanska     April 2014(4)         E&D      
                                                                 
     70.0         Pokrovskoe      August 2016(5)        E&D      
                                                                 
    100.0         Pirkovskoe     October 2015(5)        E&D      
                                                                 
     99.8         Bitlyanska     December 2014(3)       E&D      
                                                                 
Minor licences                                                   
                                                                 
     99.2      Debeslavetska(2)   November 2026     Production   
                                                                 
     99.2      Debeslavetska(2)   September 2016        E&D      
                                                                 
     53.4      Cheremkhivska(2)      May 2018       Production   
                                                                 
    100.0      Slobodo-Rungurska    April 2016          E&D      
                                                                 
     99.2        Monastyretska   November 2014(3)       E&D      
                                                                 

E&D = Exploration and Development.

Debeslavetska and Cheremkhivska licences are held by WGI, in which the Group
has a 15% interest. The Group has 99.2% and 53.4% of economic benefit in
conventional activities in Debeslavetska and Cheremkhivska licences
respectively through Joint Activity Agreements ("JAA").

Licence extension process is ongoing and is expected to be completed in Q2
2015.

Obtaining 20 years production licence is in process.

Extension to the upper Permian interval was obtained in 2014.

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

Recent developments of political and economic turmoil in Ukraine have had a low
impact on the Group licences as the Group has assets in three regions:

Western Ukraine (Lviv and Ivano-Frankivsk regions), which is not an area of conflict;;

Kiev - the capital, where there was a low level of instability throughout 2014 year; and

Central Ukraine, represented by the Poltava region, which is not under the
anti-terrorist operation.

Zagoryanska licence

The Zagoryanska licence covered 49.6 square kilometres and expired on 24 April
2014. The Group held a 40 per cent working interest in the Zagoryanska licence
area. The wells abandonment plans have been prepared in agreement with the
joint venture partner, ENI. At the same time Cadogan, via its subsidiary LLC
Zagvydobuvannya, requested the 20 years production licences and the extension
of the stratigraphic exploration intervals to the Upper Carboniferous and
Permian for the same area. ENI has no interest to enter into the production
phase with Cadogan.

To value and price all the possible remaining resources in the block, a
stratigraphic re-interpretation of the 3D seismic data is currently ongoing.

Pokrovskoe licence

The Group holds a 70 per cent working interest in the Pokrovskoe licence. The
Pokrovskoe licence area covers 49.5 square kilometres. It has prospective
resources in the Permian, Upper and Lower Carboniferous.

On the basis of the previous results and the clear indication of the presence
of a positive hydrocarbons generation and migration system, it was decided to
continue the seismic and geological investigation of the area. The thorough 3D
seismic re-interpretation has been successfully concluded for the relative
shallow horizons. One drillable prospect in the Permian formation (at about
2,200m-2400m depth) and one in the Upper Carboniferous (at about 2,200m depth)
have been identified with two other leads in the Upper Carboniferous under
evaluation. The extension to the new stratigraphic exploration intervals in the
Upper Carboniferous and Permian have been requested and granted to Cadogan
along with the change of the previous work programme.

Pirkovska licence

The Group holds a 100 per cent working interest in the Pirkovska licence which
had 2.26 mmboe of Proved and Probable Reserves of gas and condensate (2013:
2.26 mmboe). The proved reserves in Pirk 1, tested by a third party company,
produced an inconclusive result due to damaged formation; therefore those
reserves have been reclassified from reserves to contingent resources.

This exploration and appraisal licence covers 71.6 square kilometres and
expires in October 2015; the necessary steps to renew the licence have already
started.

On the basis of the previous results and the clear indication of the presence
of a positive hydrocarbons' generation and migration system, it was decided to
continue the seismic and geological investigation of the area. The thorough 3D
seismic re-interpretation has been successfully concluded for the relatively
shallow horizons. The total prospective net interest recoverable resources
after the 3D stratigraphic interpretation and attribute analysis performed
in-house on the Permian reservoir are estimated in 383.11 Bcf (63.85 mmboe).
The extension to the new stratigraphic exploration intervals in the Upper
Carboniferous and Permian have been requested and granted to Cadogan in 2014
along with the change of the previous work programme.

The Group owns the Krasnozayarska gas treatment plant, located in the Pirkovska
licence area, which is connected to the UkrTransGas system and is continuing
the service contract with a nearby local operator.

Bitlyanska licence area

The Bitlyanska exploration and development licence covers an area of 390 square
kilometres with the Group's interest at 99.8 per cent. There are three
hydrocarbon discoveries in this licence area, namely Bitlyanska, Borynya and
Vovchenska. The Borynya and Bitlyanska fields hold 276.89 mmboe (2013: 336.5
mmboe) of contingent recoverable resources including condensates. After initial
in-house evaluation, no reserves or resources have been allocated to the
depleted Vovchenska field. 

Borynya 3 well, after having been re-entered and tested in 2013, was kept on
hold, monitored and routinely bled-off for an eventual fracturing job and way
forward evaluation, which also considered the deeper horizons.

The planned vintage seismic lines in the Vovchenska area were purchased and
interpreted; a new additional seismic programme has been prepared to define
possible prospective exploration areas to investigate; the survey was
postponed. The work programme and obligations for this licence have been
changed and we are awaiting the licence renewal.

Minor fields

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

Debeslavetska Production licence area

A production licence containing 2P reserves 0.766 mmboe of Proved Reserves
(2013: 0.79 mmboe). The field is currently producing 64.8 boepd (2013: 65.73
boepd). The new compressor unit and the dehydration facilities for production
optimisation were successfully performed and contributed to the energy and
emissions saving as per the programme.  

Debeslavetska Exploration licence area

In the exploration licence, surrounding the Debeslavetska Production area, an
Amplitude Versus Offset ("AVO") and Inversion analysis was successfully carried
out with existing seismic data. In order to confirm and evaluate those findings
about 100 km of 2D seismic lines were recorded. The seismic acquisition started
on December 2013 and ended in April 2014. Following the processing and
interpretation of the old and new data, three prospects have been identified.
The location of the best promising prospect was selected on the basis of i)
nearby facilities, ii) multiple targets and iii) non-depleted areas, also by
using the InSar data. The expected well drilling spud-in was in July 2014. It
was delayed to December 2014 due to longer than forecasted procedures for land
allotment and complications with the well location, meaning that it had to be
offset from the selected coordinates. The exploration drilling result has been
negative; the Cretaceous formations did not provide the expected sealing
(missing shale on top of Cretaceous limestone) for the main producing levels
that were in truncation and over-lapping the Cretaceous formation.

Cheremkhivska Production licence area

A production licence containing 0.19 mmboe of 2P reserves (2013: 0.203 mmboe).
This licence is currently producing 17.4 boepd (2013: 20.73 boepd). Potential
gas production from shallow intervals seems to be promising for this licence.
Preliminary amplitude versus offset ("AVO")  studies on the only available line
were positive but the planned 30 km of seismic lines to be acquired in 2014
were postponed.

Slobodo-Rungurska licence area

An exploration and development licence with no booked reserves (2013: nil). The
current evaluation of the block has allowed us to identify prospective gross
oil resources in shallow reservoir levels (Old Sloboda reservoirs) of 5.75
mmboe and 27.9 mmboe in the relatively deeper reservoir levels (1600m).
Additional petrophysical and reservoir studies are currently underway.

Monastyretska licence area

A new exploration and development licence for this block has been requested to
the competent authority and we are awaiting the renewal. No booked reserves/
resources have been considered in 2014 (2013: nil). To enhance the Blazhiv 1
well production, a chemical treatment was implemented bringing about positive
results with production increasing from 25 boepd to 45 boepd. Currently the
production is on hold as we await the formal licence renewal approval.

 
Financial review

Overview

In 2014 in addition to performing the E&P work programme the Group focused on
managing the cost base by implementing a number of cost optimisation
initiatives as well as starting an energy trading business.

Trading operations include the importing of gas from Slovakia and local
purchasing and sales operations with physical delivery of natural gas and
diesel. Also, the Group continued to operate its service business which
includes drilling, construction and other services provided to E&P companies.

Revenue has increased from $3.8 million in 2013 to $32.6 million in 2014 due to
gas and diesel trading operations, which represent $29.4 million of total
revenues; revenues from production have slightly declined to $2.4 million
(2013: $2.5 million).

Revenue from the service business, which includes drilling and construction
services, decreased to $0.8 million (2013: $1.2 million) mainly due to the
postponement of service contracts by clients as a result of the situation in
Ukraine.

The cash position of $48.9 million at 31 December 2014, including restricted 
cash of $20 million, has decreased from $56.5 million at 31 December 2013.

Income statement

Loss before tax was $59.1 million (2013: $14.4 million), of which $54.7 million
(2013: $6.6 million) is a share of losses of joint ventures and $5.1 million
(2013: $nil) is an impairment of oil and gas assets.  Share of losses in Joint
Ventures mainly include the impairment of oil and gas assets in joint ventures
and losses arising on translation of Balance Sheet items from UAH to USD, being
the presentation currency of the Group.

Revenues of $32.6 million (2013: $3.8 million) are comprised of $29.4 million
in gas and diesel sales of trading reportable segment, $2.4 million gas sales
of E&P reportable segment and $0.8 million sales of service reportable segment.
Cost of sales represents $26.8 million of purchases of gas for trading
operating segment, $2.9 million of production royalties and taxes, depreciation
and depletion of producing wells and direct staff costs for exploration and
development and service segment. Gross profit has increased to $2.8 million
(2013: $0.8 million).

Other administrative expenses of $7.0 million (2013: $8.9 million) comprise
other staff costs, professional fees, Directors' remuneration and depreciation
charges on non-producing property, plant and equipment.

Impairment of oil and gas assets of $5.1million (2013: $nil) represents
impairment charge for Debeslavetske and Cheremkhivske assets as a result of an
impairment assessment of its recoverability as at 31 December 2014 and certain
obsolete property, plant and equipment ("PP&E") assets at Pirkovska licence.

Reversal of impairment of other assets of $0.9 million (2013: $0.2 million)
comprised of $0.3 million provision for inventory (2013: release $0.1 million)
and $1.1 million release in relation to an impairment of Ukrainian VAT (2013:
$0.1 million).

Share of losses in joint ventures of $54.7 million (2013: $6.6 million)
comprised of loss of: i) $40.2 million in relation to Pokrovska licence, of
which $44.2 million is non-cash impairment offset by $4.0 deferred tax liability, 
$12.7 million (2013: $nil) of translation loss which arose mainly on
translation of non-current assets of Gazvydobuvannya LLC (Pokrovskoe licence)
from UAH to USD, being the presentation currency of the Group  $0.2million profit
from operations (mainly as the result of VAT recovery which were previously
impaired), ii) $1.3 million in relation to Zagoryanska licence; and iii) loss
of $0.7 million from operations of Westgasinvest LLC.

Net foreign exchange gain of $3.0 million (2013: loss of $0.3 million) mainly
relates to the revaluation of the USD-denominated monetary assets of the
Group's UK entities which have GBP as a functional currency.

Cash flow statement

The Consolidated Cash Flow Statement on page 65 shows operating cash outflow
before movements in working capital of $3.9 million (2013: $8.7 million). Cash
outflows from movements in working capital in 2014 of $16.1 million mostly
represent an increase in trading receivables and prepayments of $13.6 million
(note 21), increase in trading inventories of $8.4 million (note 20), offset by
increase in prepayments received and trading payables of $2.8 million (note 25)
in relation to trading reportable segment and $3.1 million of change in working
capital for other reportable segments. In addition, the Group has incurred
capital expenditure of $0.5 million (2013: $3.0 million) on intangible
Exploration and Evaluation ("E&E") assets and $1.6 million (2013: $0.8 million)
on PP&E. In 2014 the Group invested $3.0 million (2013: $4.7 million) into
joint ventures, mainly to repay the operating service charges to Cadogan for
prior years.

In 2014 the Group financed its trading operations with short-term borrowings
(note 24) and as at 31 December 2014 the outstanding amount was $17.3 million
(2013: $nil), which decreased to $7.8 million as at 30 April 2015. Borrowings
are represented by credit line drawn in UAH at Ukrainian bank, 100% subsidiary
of UK bank. Credit line is secured by $20 million of cash balance placed at UK
bank.

Balance sheet

The cash position of $48.9 million at 31 December 2014, including restricted 
cash of $20 million, has decreased from $56.5 million at 31 December 2013. 

Intangible E&E assets of $18.3 million (2013: $6.0 million) represent the
carrying value of the Group's investment in E&E assets as at 31 December 2014.
The PP&E balance of $3.8 million at 31 December 2014 (2013: $43.9 million)
reflects the cost of developing fields with commercial reserves and bringing
them into production. Due to unsuccessful testing of Pirk-1 well, $14.6 million
of PP&E assets have been reclassified to E&E so as to use them in further
exploration and evaluation works. Management reassessed classification of
capital expenditures following the impairment test and the production and
development assets. As a result, $14.6 million were reclassified to E&E as the
Group expects to continue exploration at Pirkovskoe field and targets other
geological horizons. Cadogan plans to use the existing assets at Pirkovskoe
field in their exploration activities. As a result of the impairment assessment
of PP&E assets as at 31 December 2014, the Group has recognised $5.1 million
impairment including $2.9 million at Pirkovskoe field and $2.2 million of
Debeslavetska and Cheremkhivska.

Investments in joint ventures of $14.3 million (2013: $65.9 million) mainly
represent the carrying value of the Group's investments into Pokrovska licences
and Westgasinvest LLC (costs related to Zagoryanska licence have been fully
impaired as well as impairment on Pokrovska licence assets (note 19).

Trade and other receivables of $17.9 million (2013: $6.9 million) include 
$13.6 million trading prepayments and receivables, $1.9 million receivable from joint
ventures in respect of management charges (2013: $4.1 million) and VAT
recoverable of $1.8 million (2013: $0.3 million) in respect to VAT arising on
gas trading purchases.

In October 2014 the Group started to use the short-term facility in Ukraine for
its trading operations. The $17.3 million outstanding as of 31 December 2014
($7.8 million as at 30 April 2015) represents UAH 278.9 million borrowed in UAH
to purchase natural gas and diesel (UAH 174.7 million as at 30 April 2015).

The $5.1 million of trade and other payables as of 31 December 2014 (2013: $3.4
million) represent $2.5 million (2013: $nil) worth of advances received from
clients for future supplies of natural gas and $2.3 million (2013: $3.4 million)
of other creditors and accruals.

Key performance indicators

The Group monitors its performance in implementing its strategy with reference
to clear targets set out through four key financial and one key non-financial
performance indicators ("KPIs"):

to increase oil, gas and condensate production measured on number of barrels of
oil equivalent produced per day ("boepd");

to increase the Group's oil and gas reserves by de-risking possible resources
and contingent reserves into 2P reserves. This is measured in million barrels
of oil equivalent ("mmboe");

to decrease administrative expenses;

to increase the Group's basic earnings per share; and

to maintain no lost time incidents.

The Group's performance in 2014 against these targets is set out in the table
below, together with the prior year performance data. No changes have been made
to the source of data or calculation used in the year.
 

                                                     Unit  2014(3)   2013
                                                                       
Financial KPIs                                                         
                                                                       
Average production (working interest basis) (1)     boepd      99    88
                                                                       
2P reserves (2)                                     mmboe     0.6   2.6
                                                                       
Administrative expenses                         $ million     7.0   8.9
                                                                       
Basic loss per share (4)                            cents  (25.6) (6.4)
                                                                       
Non-financial KPIs                                                     
                                                                       
Lost time incidents (5)                         incidents       0     0
                                                                       

Average production is calculated as the average daily production during the
year.

Quantities of 2P reserves as at 31 December 2013 and 2014 are based on Gaffney,
Cline & Associates' ("GCA") independent reserves report on 2P reserves as at 
31 December 2009, dated 16 March 2010, as adjusted for the actual production
during 2013 and actual production and reclassification to contingent resources.

One of the KPIs in previous years was realised price per 1,000 cubic metres.
The Group decided to remove it from the list as the price is outside of
management's control. Realised price is often market-driven but capped by
Ukrainian authorities at a certain maximum level subject to periodic revisions.
Management intention is always to negotiate the selling price which will be as
close as possible to the upper limit approved by government.

Basic loss per Ordinary share is calculated by dividing the net loss for the
year attributable to equity holders of the parent company by the weighted
average number of Ordinary shares during the year.

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

The Group will continue exploration efforts in 2015, particularly at the Pirkovskaya
and Pokrovskaya fields. If successful, management plan to reassess reserves
based using independent petroleum engineer.

In 2014 the Group has made impairment assessment at all material gas and oil
fields. As a result Cadogan recognised a number of impairment losses directly
and through their share in losses of joint ventures. Management believes that
impairment losses are non-recurring and the Group will maintain healthy
financial performance in 2015.

Related party transactions

Related party transactions are set out in note 30 to the Consolidated Financial
Statements. 

Treasury

The Group continually monitors its exposure to currency risk. It maintains a
portfolio of cash and cash equivalent balances mainly in US dollars ("USD")
held primarily in the UK. Production revenues from the sale of hydrocarbons are
received in the local currency in Ukraine however the hydrocarbon prices are
linked to the USD denominated gas and oil prices. To date, funds from such
revenues have been held in Ukraine for further use in operations rather than
being remitted to the UK.

Risks and uncertainties

There are a number of potential risks and uncertainties, which could have a
material impact on the Group's long-term performance and could cause the actual
results to differ materially from expected and historical results. Executive
management review the potential risks and then classify them as having a high
impact, above $5 million, medium impact, above $1 million but below $5 million,
and low impact, below $1 million. They also assess the likelihood of these
risks occurring. Risk mitigation factors are reviewed and documented based on
the level and likelihood of occurrence. The Audit Committee reviews the risk
register and monitors the implementation of improved risk mitigation procedures
via Executive management.

The Group has analysed the following categories as key risks:

Risk                                   Mitigation                                
                                                                               
Operational risks                                                              
                                                                               
Health, Safety and Environment                                                 
("HSE")                                                                        
                                                                               
The oil and gas industry by its        The Group maintains a HSE system in place 
nature conducts activities which can   and demands that management, staff and    
be seriously impacted by health,       contractors adhere to it. The system      
safety and environmental incidents.    ensures that the Group meets Ukraine      
Serious incidents can have not only    legislative standards in full and achieves
a financial impact but can also        international standards to the maximum    
damage the Group's reputation and      extent possible.                          
the opportunity to undertake further                                           
projects.                                                                      
                                                                               
Drilling operations                                                            
                                                                               
The technical difficulty of drilling   The incorporation of detailed sub-surface 
wells in the Group's locations and     analysis into a robustly engineered well  
equipment limitations can result in    design and work programme, with           
the unsuccessful completion of the     appropriate procurement procedures and    
well.                                  competent on site management, aims to     
                                       minimise risk.                            
                                                                               
Production and maintenance                                                     
                                                                               
Some of the Group's facilities have    All plants are operated at standards above
been inherited and, although fully     the Ukraine minimum legal requirements.   
checked, were not installed under      Operative staff are  experienced and      
our supervision and there is a risk    receive supplemental training to ensure   
of plant failure.                      that facilities are operated and          
                                       maintained at a high standard.            
                                                                                
                                                                               
                                       Service providers are rigorously reviewed 
There is a risk that production or     at the tender stage and are monitored     
transportation facilities can fail     during the contract period.               
due to poor performance of the                                                 
Group's suppliers and control of                                               
some facilities being with other                                               
governmental or commercial                                                     
organisations.                                                                 
                                                                               
Work over and abandonment                                                      
                                                                               
Certain wells owned by the Group       Work programmes are designed to assess the
were drilled by the State and other    status of the wells and any work that is  
private companies and will be worked   not safe or is not technically feasible   
over. There is a risk that Cadogan's   will be abandoned. Qualified professionals
activities fail because of problems    will be used to design a step-by-step     
inherited with these sites.            approach to re-entering old wells.        
                                                                                
Any well stock that is not             All sites that are abandoned will be      
considered satisfactory for purpose    restored and re-cultivated to meet or     
or poses an environmental hazard       exceed standards required by the relevant 
will need to be abandoned.             environmental control authorities and in  
                                       compliance with recognised international  
                                       standards.                                
                                                                               
Sub-surface risks                                                              
                                                                               
The success of the business relies     All externally provided and historic data 
on accurate and detailed analysis of   is 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.                   
external sources may not be                                                    
accurate.                                                                      
                                                                               
Some local contractors may not         Detailed supervision of local contractors 
acquire data accurately, and there     by Cadogan management is followed. Plans  
is frequently limited choice of        are discussed well in advance with both   
locally available equipment or         local and international contractors in an 
contractors of a desirable standard.   effort to ensure that appropriate         
                                       equipment is available.                   
                                                                               
Data can be misinterpreted leading     All analytical outcomes are challenged    
to the construction of inaccurate      internally and peer reviewed.             
models and subsequent plans.           Interpretations are carried out on modern 
                                       geological software. A staff training     
                                       programme has been put in place.          
                                                                               
Area available for drilling            If not covered by 3D seismic or fitting   
operations is limited by logistics,    over 2D seismic lines, the eventual well's
infrastructures and moratorium. This   dislocation will not be accepted.         
increases the risk for setting                                                 
optimum well coordinates.                                                      
                                                                               
Financial risks                                                                
                                                                               
The Group may not be successful in     The Group performs a review of its oil and
achieving commercial production from   gas assets for impairment on annual basis.
an asset and consequently the          The Group considers on an annual basis    
carrying values of the Group's oil     whether to commission a Competent Person's
and gas assets may not be recovered    Report ("CPR") from an independent        
through future revenues.               reservoir engineer. The CPR provides an   
                                       estimate of the Group's reserves and      
                                       resources by field/licence area. As no new
                                       production has been achieved during 2014, 
                                       management has decided not to commission a
                                       new CPR during 2014.                      
                                                                               
                                       As part of the annual budget approval     
                                       process, the Board considers and evaluates
                                       projects for the forthcoming year and     
                                       considers the appropriate level of risk.  
                                       The Board has approved a work programme   
                                       for 2015. Further attempts to bring in    
                                       partners and mitigate the Group's risk    
                                       exposure are underway.                    
                                                                               
There is a risk that insufficient      The Group manages the risk by maintaining 
funds are available to meet            adequate cash reserves and by closely     
development obligations to             monitoring forecasted and actual cash     
commercialise the Group's major        flow, as well as short and longer funding licences.                              requirements. Management reviews these    
                                       forecasts regularly and updates are made  
                                       where applicable and submitted to the     
                                       Board for consideration.                  
                                                                               
                                       The farm-out campaign to maintain current 
                                       cash balances and mitigate risk will      
                                       continue through 2015.                    
                                                                               
                                                                               
                                                                               
The Group could be impacted by         These risks are mitigated by employing    
failing to meet regulatory reporting   suitably qualified professionals who,     
requirements in the UK, and            working with advisers when needed, are    
statutory tax and filing               monitoring regulatory reporting           
requirements in both Ukraine and the   requirements and ensuring that timely     
UK.                                    submissions are made.                     
                                                                               
The Group operates primarily in        Clear authority levels and robust approval
Ukraine, an emerging market, where     processes are in place, with stringent    
certain inappropriate business         controls over cash management and the     
practices may from time to time        tendering and procurement processes.      
occur.  This includes bribery, theft   Adequate office and site protection is in 
of Group property and fraud, all of    place to protect assets. Anti-bribery     
which can lead to financial loss.      policies are also in place.               
                                                                               
The Group is at risk from changes in   Revenues in Ukraine are received in UAH   
the economic environment both in       and expenditure is made in UAH, however   
Ukraine and globally, which can        the prices for hydrocarbons are implicitly
cause foreign exchange movements,      linked to USD prices.                     
changes in the rate of inflation and                                           
interest rates and lead to credit                                              
risk in relation to the Group's key                                            
counterparties.                        The Group continues to hold most of its   
                                       cash reserves in the UK mostly in USD.    
                                       Cash reserves are placed with leading     
                                       financial institutions which are approved 
                                       by the Audit Committee. The Group is      
                                       predominantly a USD denominated business. 
                                       Foreign exchange risk is considered a     
                                       normal and acceptable business exposure   
                                       and the Group does not hedge against this 
                                       risk for its E&P operations.              
                                                                                
                                       For trading operations, the Group matches 
                                       the revenues and the source of financing. 
                                                                               
                                       Refer to note 28 to the Consolidated      
                                       Financial Statements for detail on        
                                       financial risks.                          
                                                                               
The Group is at risk that the          We monitor the credit quality of our      
counterparty will default on its       counterparties and seek to reduce the risk
contractual obligations resulting in   of customer non-performance by limiting   
a financial loss to the Group.         the title transfer to product until the   
                                       payment is received, prepaying only to    
                                       known credible suppliers                  
                                                                               
The Group is at risk that              The Group mostly enters into back-to-back 
fluctuations in gas prices will have   transactions where the price is known at  
a negative result for the trading      the time of committing to purchase and    
operations resulting in a financial    sell the product. Sometimes the Group     
loss to the Group.                     takes exposure to open inventory positions
                                       when justified by the market conditions in
                                       Ukraine.                                  
                                                                               
Corporate risks                                                                
                                                                               
Should the Group fail to comply with   The Group designs a work programme and    
licence obligations, there is a risk   budget to ensure that all licence         
that its entitlement to the licence    obligations are met. The Group engages    
will be lost.                          proactively with government to            
                                       re-negotiate terms and ensure that they   
                                       are not onerous.                          
                                                                               
Ukraine is an emerging market and as   The Group minimises this risk by          
such the Group is exposed to greater   maintaining the funds in international    
regulatory, economic and political     banks outside Ukraine and by continuously 
risks, more than other                 maintaining a working dialogue with the   
jurisdictions. Emerging economies      regulatory authorities.                   
are generally subject to a volatile                                            
political environment which could                                              
adversely impact Cadogan's ability                                             
to operate in the market.                                                      
                                                                               
                                                                               
                                                                               
The Group's success depends upon       The Group periodically reviews the        
skilled management as well as          compensation and contract terms of its    
technical and administrative staff.    staff.                                    
The loss of service of critical                                                
members from the Group's team could                                            
have an adverse effect on the                                                  
business.                                                                      
 
Statement of Reserves and Resources

The Group did not commission an independent Reserves and Resources Evaluation
of the Group's oil and gas assets in Ukraine as at 31 December 2014 due to
insufficient new information arising from operational activity before the year
end. The summary of the Reserves and Resources below is based on the
Independent Reserves and Resources Evaluation performed by Gaffney Cline and
Associates as at 31 December 2009. These have been adjusted for
subsequent actual production and expert review and studies have been performed
with an external firm both in Kyiv and in-house.

 

Summary of Reserves
As of 31 December 2014
                                                         Working interest basis 
                                                                                
                                                            Gas Condensate   Oil
                                                            bcf      mmbbl mmbbl
                                                                                
Proved and Probable Reserves at 1 January 2014             11.1        0.6     -
                                                                                
Production                                                (0.2)          -     -
                                                                                
Reclassification                                         (10.3)      (0.6)     -
                                                                                
Proved and Probable Reserves at 31 December 2014            0.6          -     -
                                                                                
Possible Reserves at 1 January 2014 and 31 December 2014   19.5        1.5     -
                                                                                

Summary of Contingent Resources
As of 31 December 2014

                                                    Working interest basis      
                                                Gas    Condensate   Oil   Total 
                                                Bcf       mmbbl    mmbbl  mmboe 
                                                                                
Contingent Resources at 1 January 2014        2,357.3     97.9       -    522.2 
                                                                                
Change in working interest                       -          -        -      -   
                                                                                
Reclassification                                10.3       0.6       -     2.2  
                                                                                
Contingent Resources at 31 December 2014      2,367.6     98.5       -    524.4 
                                                                                

Reserves are assigned only to the Debeslavetska and Cheremkhivska fields;
adjusted to consider the dry gas production only. The proved reserves in Pirk
1, tested by a third party company, produced an inconclusive result due to
damaged formation; therefore those reserves have been reclassified from
Reserves to Contingent Resources.

Contingent Resources are assigned to the Zagoryanska, Pirkovskoe, Borynya and
Bitlya fields, where development is contingent on further appraisal.

Prospective Resources of 165.9 bcf (2013: 165.9 bcf) of gas and 5.9 mmbl (2013:
5.9 mmbl) of condensate are attributed to the Pokrovskoe field (reflecting
Cadogan's working interest), where there has not yet been a production test.

 
Corporate Responsibility

The Board recognises the requirement under Section 414C of the Companies Act
2006 (the "Act") to detail information about employees, human rights and
community issues, including information about any policies it has in relation
to these matters and the effectiveness of these policies.

The Group considers the sustainability of its business as a key and competitive
element of its strategy. Meeting the expectations of our stakeholders is the
way in which we secure our licence to operate, and to be recognised in the
values we declare is the best added value we can bring in order to profitably
prolong our business. The Board recognises that it has an obligation to protect
the health and safety of its employees and communities as well as the
environment it impacts; these are the key drivers for the sustainable
development of the Company's activity. Our Code of Ethics and the adoption of
internationally recognised best practices and standards are our, and our
employees', references for conducting our operations.

Our activities are carried out in accordance with a policy manual, endorsed by
the Board, which has been disseminated to all staff. The manual includes
policies on business conduct and ethics, anti-bribery, the acceptance of gifts
and hospitality and whistleblowing.

The Group's Health, Safety and Environment Manager reports directly to the
Chief Operations Officer. His role is to ensure that the Group has developed
suitable procedures, and that operational management have incorporated them
into daily operations and that he has the necessary level of autonomy and
authority to discharge his duties effectively and efficiently.

The Board believes that health and safety procedures and training across the
Group should be to the standard expected in any company operating in the oil
and gas sector. Accordingly, it has set up a Committee to review and agree
health and safety initiatives and report back on progress. The monthly
management report to the Board contains a full report on health and safety,
environmental and key safety and environmental issues which are discussed by
the Executive Management. The Health, Safety and Environment Committee Report
is on page 37.

Health, safety and environment

The Group has developed an integrated Health, Safety and Environmental ("HSE")
management system. The system aims, by a continuous improvement programme, to
ensure that a safety and environmental protection culture is embedded in the
organisation. The HSE management system ensures that both Ukrainian and
international standards can be met, with the Ukrainian HSE legislation
requirements taken as an absolute minimum although the international
requirements are in the main met or exceeded. All the Group's local operating
companies in east and west Ukraine have all the necessary documentation and
systems in place to ensure compliance with Ukrainian legislation.

A proactive approach to the prevention of incidents has been in place
throughout 2014, which relies on an observation cards system and reliable
near-miss reporting. Staff training on HSE matters is recognised as the key
factor to generate continuous improvement. In-house training is provided to
help staff meet international standards and follow best practice. At present,
special attention is being given to training on risk assessments, emergency
response, incident prevention, reporting and investigation, as well as hazard
and operational ("HAZOP") studies to ensure that international standards are
maintained even if they exceed those required by Ukrainian legislation.

The Board monitors lost time incidents as a key performance indicator of the
business, to reasonably verify that the procedures in place are robust. The
Board has benchmarked safety performance against the HSE performance index
measured and published annually by the International Association of Oil & Gas
Producers. In 2014, the Group recorded a total of 400,000 man hours worked.
There were no Lost Time Incidents ("LTIs") recorded in 2014 and close to two
million man hours have been worked without an LTI since the previous incident
was recorded in July 2011.

Vehicle safety and driving conduct remain among the Company's priorities in
controlling hazards and preventing injuries. As of the end of 2014, the Company
has recorded over nine million kilometres driven without an LTI.

The year 2013 was the baseline year for the Company in terms of greenhouse gas
emissions reporting, as well as Company-wide collection of statistical data
related to consumption of electricity and industrial water and fuel consumption
by cars, plants and other work sites. Comparing the baseline figures with the
data for 2014 will allow the assessment of the Company's environmental
performance and identify the areas for improvement. 

Employees

Certain of the Group's operations are undertaken by sub-contracting specialists
having the technical knowledge required for complex wells' drilling operations.
Local interest is part of the Company's sustainable development policy and
wherever possible local staff are recruited and procedures are in place to
ensure that all recruitments are undertaken on a transparent and fair basis
with no discrimination against applicants. Each operating company has its own
Human Resources staff to ensure that the Group's employment policies are
properly implemented and followed. As required by Ukrainian legislation,
Collective Agreements are in place with the Group's Ukrainian subsidiary
companies which provide an agreed level of staff benefits and other safeguards
for employees. The Group's Human Resources policy covers key areas such as
equal opportunities, wages, overtime and non-discrimination. All staff are
aware of the Group's grievance procedures.

Sufficient levels of health insurance are provided by the Group to employees to
ensure they have access to good medical facilities. Each employee's training
needs are assessed on an individual basis to ensure that their skills are
adequate to support the Group's operations, and to help them to develop.

Gender diversity

The Board of Directors of the Company comprised of six male Directors
throughout the year to 31 December 2014. The appointment of
any new Director is made on the basis of merit. See pages 21 to 23 for more
information on the composition of the Board. There were no females holding
Senior Manager(1) positions as at 31 December 2014.

As at 31 December 2014, the Company comprised a total of 96 employees, as
follows:
                          Male   Female
                                   
Non-executive directors      4        -
                                   
Executive directors          2        -
                                   
Other employees             66       24
                                   
All employees               72       24
                                   

Human rights

Cadogan's commitment to the fundamental principles of human rights is embedded
in our HSE polices and throughout our business processes. We promote the core
principles of human rights pronounced in the UN Universal Declaration of Human
Rights. Our support for these principles is embedded throughout our Code of
Conduct, our employment practices and our relationships with suppliers wherever
we do business.

Community

The Group's activities are carried out in rural areas of Ukraine and the Board
is aware of its responsibilities to the local communities in which the Group
operates and from which some of the employees are recruited. At current
operational sites, management works with the local councils to ensure that the
impact of operations is as low as practicable by putting in place measures to
mitigate their effect. Key projects undertaken include improvement of the road
infrastructure in the area, which provides easier access to the operational
sites while at the same time minimising inconvenience for the local population
and allowing improved road communications in the local communities. Specific
charitable activities are undertaken for the direct benefit of local kindergartens,
schools, sporting facilities and medical services, as well as
other community-focused facilities. All activities are followed and supervised
by managers who are given specific responsibility for such tasks.

The Group's local companies see themselves as part of the community and are
involved not only with financial assistance, but also with practical help and
support. The recruitment of local staff generates additional income for areas
that otherwise are predominantly dependent on the agricultural sector.

Approval

The Strategic Report was approved by the Board of Directors on 30 April 2015
and signed on its behalf by:

Marta Halabala
Company Secretary
30 April 2015

 
(1) Senior Managers are directors of subsidiary companies or who otherwise have
responsibility for planning, directing or controlling the activities of the
company or a strategically significant part of it.

Zev Furst
Independent Non-executive Chairman

Bertrand des Pallieres
Chief Executive Officer

Adelmo Schenato
Chief Operating Officer

Gilbert Lehmann
Senior Independent non-executive Director

Michel Meeùs
Non-Independent non-executive Director

Enrico Testa
Independent non-executive Director


Dividends

The Directors do not recommend payment of a dividend for the year to 31
December 2014 (2013: nil).

Structure of share capital

The authorised 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 2014 was 231,091,734 Ordinary shares of 3 pence each
with a nominal value of £6,932,752. The Companies (Acquisition of Own Shares)
(Treasury Shares) Regulations 2003 allow companies to hold shares in treasury
rather than cancel them. Following the consolidation of the issued capital of
the Company on 10 June 2008, there were 66 residual Ordinary shares which were
transferred to treasury. No dividends may be paid on shares whilst held in
treasury and no voting rights attach to shares held in treasury. Total voting
rights amount to 231,091,668.

Going concern

After making enquiries, the Directors have a reasonable expectation that the
Company and the Group have adequate resources to continue in operational
existence for the foreseeable future. Accordingly, they continue to adopt the
going concern basis in preparing the Consolidated and Company Financial
Statements. For further detail refer to the detailed discussion of the
assumptions outlined in note 3(b) to the Consolidated Financial Statements.

Non-Statutory Accounts

The financial information set out below does not constitute the Company's
statutory accounts for the years ended 31 December 2014 and 31 December 2013,
but is derived from those accounts. Statutory accounts for 2013 have been
delivered to the Registrar of Companies, and those for 2014 will be delivered
in due course. The Auditors have reported on those accounts; their report was
(i) unqualified, (ii) did not include a reference to any matters to which the
Auditor drew attention by way of emphasis without qualifying their report and
(iii) did not contain a statement under Section 498 (2) or (3) of the Companies
Act 2006. The text of the Auditor's report can be found in the Company's full
Annual Report and Financial Statements at www.cadoganpetroleum.com.

 
Statement of Directors' Responsibilities in respect of the Annual Report 
and the Financial Statements

The Directors are responsible for preparing the Annual Report and the 
financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. The Directors are required by law to prepare the Group
financial statements in accordance with International Financial Reporting
Standards ("IFRSs") as adopted by the European Union and Article 4 of the
International Accounting Standards ("IAS") regulation and have also elected to
prepare the Parent Company financial statements under IFRSs as adopted by the
European Union. Under Company law, the Directors must not approve the Financial
Statements unless they are satisfied that they give a true and fair view of the
state of affairs of the Company and Group and of the profit or loss for that
period. In preparing the Company and Group's financial statements, IAS
Regulation requires that Directors:

properly select and apply accounting policies;

present information, including accounting policies, in a manner that provides
relevant, reliable, comparable and understandable information;

provide additional disclosures when compliance with the specific requirements
in IFRSs are insufficient to enable users to understand the impact of
particular transactions, other events and conditions on the Company's and
Group's financial position and financial performance; and

make an assessment of the Company's and Group's ability to continue as a going
concern.

The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company and Group's transactions and
disclose with reasonable accuracy at any time the financial position of the
Company and Group and enable them to ensure that the financial statements
comply with the Companies Act 2006. They are also responsible for safeguarding
the assets of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for
preparing a Strategic Report, Directors' Report, Annual Report on Remuneration,
Directors' Remuneration Policy and Corporate Governance Statement that comply
with that law and those regulations.

The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website,
www.cadoganpetroleum.com. Legislation in the United Kingdom governing the
preparation and dissemination of the financial statements may differ from
legislation in other jurisdictions.


Responsibility Statement of the Directors in respect of the Annual Report
We confirm to the best of our knowledge:

(1) the financial statements, prepared in accordance with International
Financial Reporting Standards as adopted by the European Union, give a true and
fair view of the assets, liabilities, financial position and profit or loss of
the Company and the undertakings included in the consolidation as a whole; and

(2) the Strategic Report, includes a fair review of the development and
performance of the business and the position of the Company and the
undertakings included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that they face; and

(3) the annual report and the financial statements, taken as a whole, are fair,
balanced and understandable and provide the information necessary for the
shareholders to assess the Group's performance, business model and strategy.

On behalf of the Board
Zev Furst
Chairman
30 April 2015
 

Consolidated Income Statement
For the year ended 31 December 2014
                                                                               
                                                                2014       2013
30 April 2015                                       Notes      $'000      $'000
                                                                               
CONTINUING OPERATIONS                                                          
                                                                               
Revenue                                                 6     32,623      3,772
                                                                               
Cost of sales                                                (29,813)    (3,019)
                                                                               
Gross profit                                                   2,810        753
                                                                               
Administrative expenses:                                                       
                                                                               
Other administrative expenses                                 (7,002)    (8,919)
                                                                               
Impairment of oil and gas assets                        8     (5,134)         -
                                                                               
Reversal of impairment of other assets                  8        877        234
                                                                               
                                                             (11,259)    (8,685)
                                                                               
Share of losses in joint ventures                      19    (54,664)    (6,630)
                                                                               
Net foreign exchange gains/(losses)                            3,036       (271)
                                                                               
Other operating income, net                             7        547          5
                                                                               
Operating loss                                               (59,530)   (14,828)
                                                                               
Investment income                                      12        852        434
                                                                               
Finance costs                                          13       (468)        (6)
                                                                               
Loss before tax                                              (59,146)   (14,400)
                                                                               
Tax charge                                             14       (166)      (289)
                                                                               
Loss for the year                                       9    (59,312)   (14,689)
                                                                               
Attributable to:                                                               
                                                                               
Owners of the Company                                        (59,271)   (14,660)
                                                                               
Non-controlling interest                                         (41)       (29)
                                                                               
                                                             (59,312)   (14,689)
                                                                               

Loss per Ordinary share                                        cents      cents
                                                                               
Basic                                                  15     (25.6)      (6.3)


Consolidated Statement of Comprehensive Income
For the year ended 31 December 2014
                                                                   2014     2013
                                                                  $'000    $'000
                                                                                
Loss for the year                                               (59,312) (14,689)
                                                                                
Other comprehensive loss                                                        
                                                                                
Items that may be reclassified subsequently to profit or                        
loss:                                                                           
                                                                                
Unrealised currency translation differences                     (28,153)  (3,551)
                                                                                
Other comprehensive loss                                        (28,153)  (3,551)
                                                                                
                                                                                
Total comprehensive loss for the year                           (87,465) (18,240)
                                                                                 
Attributable to:                                                                
                                                                                
Owners of the Company                                           (87,424) (18,211)
                                                                                
Non-controlling interest                                            (41)     (29)
                                                                                
                                                                (87,465) (18,240)
                                                                                
Consolidated Balance Sheet
As at 31 December 2014
                                                                 2014       2013
                                                                                
                                                    Notes       $'000      $'000
ASSETS                                                                          
                                                                                
Non-current assets                                                              
                                                                                
Intangible exploration and evaluation assets        16         18,289      5,958
                                                                                
Property, plant and equipment                       17          3,846     43,886
                                                                                
Investments in joint ventures                       19         14,325     65,965
                                                                                
                                                               36,460    115,809
                                                                                
Current assets                                                                  
                                                                                
Inventories                                         20          9,940      2,951
                                                                                
Trade and other receivables                         21         17,891      6,879
                                                                                
Cash and cash equivalents                           22         48,927     56,484
                                                                                
                                                               76,758     66,314
                                                                                
Total assets                                                  113,218    182,123
                                                                                
                                                                                
LIABILITIES                                                                     
                                                                                
Non-current liabilities                                                         
                                                                                
Deferred tax liabilities                            23           (288)      (675)
                                                                                
Provisions                                          26            (55)      (195)
                                                                                
                                                                 (343)      (870)
Current liabilities                                                             
                                                                                
Short-term borrowings                               24        (17,327)         -
                                                                                
Trade and other payables                            25         (5,068)    (3,442)
                                                                                
Provisions                                          26           (647)      (513)
                                                                                
                                                              (23,042)    (3,955)
                                                                                
Total liabilities                                             (23,385)    (4,825)
                                                                                
NET ASSETS                                                     89,833    177,298
                                                                                
                                                                                
EQUITY                                                                          
                                                                                
Share capital                                       27         13,337     13,337
                                                                                
Retained earnings                                             223,600    282,871
                                                                                
Cumulative translation reserves                              (148,991)  (120,838)
                                                                                
Other reserves                                                  1,589      1,589
                                                                                
Equity attributable to owners of the Company                   89,535    176,959
                                                                                
Non-controlling interest                                          298        339
                                                                                
TOTAL EQUITY                                                   89,833    177,298
                                                                                

The consolidated financial statements of Cadogan Petroleum plc, registered in
England and Wales no. 5718406, were approved by the Board of Directors and
authorised for issue on 30 April 2015. They were signed on its behalf by:

Bertrand Des Pallieres
Chief Executive Officer
30 April 2015

The notes on pages 67 to 106 form an integral part of these financial
statements.


Consolidated Cash Flow Statement
For the year ended 31 December 2014
                                                                   2014     2013
                                                                  $'000    $'000
                                                                                
Operating loss                                                  (59,530) (14,828)
                                                                                
Adjustments for:                                                                
                                                                                
Depreciation of property, plant and equipment                       938    1,201
                                                                                
Impairment of oil and gas assets                                  5,134        -
                                                                                
Share of losses in joint ventures                                54,664    6,630
                                                                                
Charge/(release) of impairment of inventories (note 8)              253      (97)
                                                                                
Reversal of impairment of VAT recoverable (note 8)                 (727)    (137)
                                                                                
Loss on disposal of property, plant and equipment                   211      103
                                                                                
Effect of foreign exchange rate changes                          (4,892)  (1,571)
                                                                                
Operating cash flows before movements in working capital         (3,949)  (8,699)
                                                                                
(Increase)/decrease in inventories                               (7,242)     628
                                                                                
(Increase)/decrease in receivables                              (10,285)  32,879
                                                                                
Increase/(decrease) in payables and provisions                    1,424     (645)
                                                                                
Cash (used in)/from operations                                  (20,052)   24,163
                                                                                
Interest paid                                                      (218)       -
                                                                                
Income taxes paid                                                  (373)    (169)
                                                                                
Net cash (outflow)/inflow from operating activities             (20,643)   23,994
                                                                                
Investing activities                                                            
                                                                                
Investments in joint ventures                                    (3,024)  (4,687)
                                                                                
Purchases of property, plant and equipment                       (1,611)    (783)
                                                                                
Purchases of intangible exploration and evaluation assets          (468)  (3,069)
                                                                                
Proceeds from sale of property, plant and equipment                  84      127
                                                                                
Interest received                                                   852      434
                                                                                
Net cash used in investing activities                            (4,167)  (7,978)
                                                                                
Financing activities                                                            
                                                                                
Proceeds from short-term borrowings                              17,327        -
                                                                                
Net cash from financing activities                               17,327        -
                                                                                
Net (decrease)/increase in cash and cash equivalents             (7,483)  16,016
                                                                                
Effect of foreign exchange rate changes                             (74)      (9)
                                                                                
Cash and cash equivalents at beginning of year                   56,484   40,477
                                                                                
Cash and cash equivalents at end of year                         48,927   56,484


Consolidated Statement of Changes in Equity
For the year ended 31 December 2014
                                                                                                
                                     Cumulative                        Other reserves                                
                  Share   Retained  translation  Share-based                   Non-controlling             
                capital   earnings     reserves      payment   Reorganisation         interest     Total   
                  $'000      $'000        $'000        $'000            $'000            $'000     $'000
As at 1                                                                                         
January 2013     13,337    297,438     (117,287)          93            1,589              368   195,538
                                                                                                
Net loss for                                                                                    
the year             -     (14,660)           -            -                -              (29)  (14,689)
                                                                                                
Other                                                                                           
comprehensive                                                                                   
loss                 -           -       (3,551)           -                -                -    (3,551)
                                                                                                
Total                                                                                  
comprehensive                                                                                   
loss for the                                                                                    
year                 -     (14,660)      (3,551)           -                -              (29)  (18,240)
                                                                                                
Share-based                                                     
payments              -         93            -          (93)               -                -         -       
                                                                                                
As at 1                                                                                         
January 2014     13,337    282,871     (120,838)           -            1,589              339   177,298
                                                                                                
Net loss for                                                                                    
the year              -    (59,271)           -            -                -              (41)  (59,312)
                                                                                                
Other                                                                                           
comprehensive                                                                                   
loss                  -          -      (28,153)           -                -                -   (28,153)
                                                                                                
Total                                                                                        
comprehensive                                                                                   
loss for the                                                                                    
year                 -     (59,271)     (28,153)           -               -               (41)  (87,465)
                                                                                                
As at 31                                                                                   
December 2014   13,337     223,600     (148,991)           -           1,589               298    89,833



Notes to the Consolidated Financial Statements
For the year ended 31 December 2014

1. General information

Cadogan Petroleum plc (the "Company", together with its subsidiaries the
"Group"), is registered in England and Wales under the Companies Act 2006. The
address of the registered office is 1st Floor, 40 Dukes Place, London, EC3A
7NH. The nature of the Group's operations and its principal activities are set
out in the Operations Review on pages 8 to 10 and the Financial Review on pages
11 to 13.

2. Adoption of new and revised Standards

Adoption of new and revised International Financial Reporting Standards

The following standards have been adopted by the Group for the first time for
the financial year beginning on or after 1 January 2014 and have no impact on
the Group:

Amendments to IFRS 10, IFRS 11 and IFRS 12 - "Consolidated Financial
Statements, Joint Arrangements and Disclosure of Interests in Other Entities:
Transition Guidance"

Amendment to IAS 27 "Separate Financial Statements" (revised 2011) - Investment
entities

Amendments to IAS 32 "Financial instruments: Presentation" - Application
guidance on the offsetting of financial assets and financial liabilities

Amendments to IAS 36 "Recoverable amounts disclosures for non-financial assets"

Amendments to IAS 39 "Novation of derivatives and continuation of hedge
accounting" 

IFRIC 21 "Levies"

Consequential amendments to IFRS 12 and IAS 27 have been made to introduce new
disclosure requirements for investment entities.

In general, the amendments require retrospective application, with specific
transitional provisions.

As the reporting entity is not an investment entity (assessed based on the
criteria set out in IFRS 10 as at 1 January 2014), the application of the
amendments has had no impact on the disclosures or other amounts recognised in
the Group's consolidated financial statements.

The adoption of other new or revised standards did not have any effect on the
consolidated financial position or performance of the Group and any disclosures
in the Group's consolidated financial statements.

Standards and Interpretations in issue but not effective

At the date of authorisation of these consolidated financial statements, the
following Standards and Interpretations, as well as amendments to the Standards 
were in issue but not yet effective:

Standards and Interpretations                              Effective for annual     
                                                           period beginning on or   
                                                           after                    
                                                                                  
IFRS 9 "Financial Instruments"                             Not yet adopted in the EU
                                                                                  
IFRS 15 "Revenue from contracts with customers"            Not yet adopted in the EU
                                                                                  
IFRS 14 "Regulatory Deferral Accounts"                     Not yet adopted in the EU
                                                                                  
Amendment to IFRS 10, IFRS 12 and IAS 28: Investment       Not yet adopted in the EU
Entities: Applying the consolidation exception                                      
                                                                                  
Standards and Interpretations                              Effective for annual     
                                                           period beginning on or   
                                                           after                    
                                                                                  
Amendments to IAS 19 "Employee Benefits" - Defined         Not yet adopted in the EU
Benefit Plans: Employee Contribution                                              
                                                                                  
Amendments to IAS 1: Disclosure Initiative                 Not yet adopted in the EU
                                                                                  
Amendments to IAS 27: Equity Method in Separate            Not yet adopted in the EU
Financial Statements                                                              
                                                                                  
Amendments to IAS 16 and IAS 41: Bearer plants             Not yet adopted in the EU
                                                                                  
Amendments to IAS 16 and IAS 38: Classification of         Not yet adopted in the EU
Acceptable Methods of Depreciation and Amortisation                               
                                                                                  
Amendments to IFRS 10 and IAS 28: Sale or Contribution     Not yet adopted in the EU
of Assets between an Investor and its Associate or Joint                          
Venture                                                                           
                                                                                  
Amendments to IFRS 11: Accounting for acquisitions of      Not yet adopted in the EU
Interests in Joint Ventures                                                       
                                                                                  
Amendments to IFRSs - "Annual Improvements to IFRSs        Not yet adopted in the EU
2010-2012 Cycle"                                                                  
                                                                                  
Amendments to IFRSs - "Annual Improvements to IFRSs        Not yet adopted in the EU
2011-2013 Cycle"                                                                  
                                                                                  
Amendments to IFRS 7 "Financial instruments:               1 January 2015           
Disclosures" - Disclosures about the initial application                          
of IFRS                                                                           
                                                                                  

3. Significant accounting policies

(a) Basis of accounting

The financial statements have been prepared in accordance with International
Financial Reporting Standards ("IFRS") as issued by the International
Accounting Standards Board ("IASB") and as adopted by the European Union
("EU"), and therefore the Group financial statements comply with Article 4 of
the EU IAS Regulation.

The financial statements have been prepared on the historical cost convention
basis, except for share-based payments, accounting for the WGI transaction and
other financial assets and liabilities, which have been measured at fair values
and using accounting policies consistent with IFRS.

The principal accounting policies adopted are set out below:

(b) Going concern

The Group's business activities, together with the factors likely to affect
future development, performance and position are set out in the Strategic
Report on pages 3 to 20. The financial position of the Group, its cash flow and
liquidity position are described in the Financial Review on pages 11 to 13.

The Group's cash balance at 31 December 2014 was $48.9 million (2013: $56.5
million) excluding $0.5 million (2013: $0.2 million) of Cadogan's share of cash
and cash equivalents in joint ventures. It includes $20 million of restricted
cash held in UK bank which represent security of borrowings (note 24). The
Directors believe that the funds available at the date of the issue of these
financial statements are sufficient for the Group to manage its business risks
successfully.

The Group's forecasts and projections, taking into account reasonably possible
changes in operational performance, start dates and flow rates for commercial
production and the price of hydrocarbons sold to Ukrainian customers, show that
there are reasonable expectations that the Group will be able to operate on
funds currently held and those generated internally, for the foreseeable
future.

As the Group engages in oil and gas exploration and development activities, the
most significant financial risk faced by the Group is delays encountered in
achieving commercial production from the Group's major fields. The Group also
continues to pursue its farm-out campaign, which, if successful, will enable it
to farm-out a portion of its interests in its oil and gas licences to spread
the risks associated with further exploration and development.

After making enquiries and considering the uncertainties described above, the
Directors have a reasonable expectation that the Company and the Group have
adequate resources to continue in operational existence for the foreseeable
future and consider the going concern basis of accounting to be appropriate
and, thus, they continue to adopt the going concern basis of accounting in
preparing the annual financial statements. In making its statement the
Directors have considered the recent political and economic uncertainty in
Ukraine, as described further in the note 4 (f).

(c) Basis of consolidation

The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company (its subsidiaries) made up
to 31 December each year. IFRS 10 defines control to be investor control over
an investee when it is exposed, or has rights, to variable returns from its
involvement with the investee and has the ability to control those returns
through its power over the investee.

The results of subsidiaries acquired or disposed during the year are included
in the consolidated income statement from the effective date of acquisition or
up to the effective date of disposal, as appropriate. Where necessary,
adjustments are made to the financial statements of subsidiaries to bring
accounting policies used into line with those used by the Group. All
intra-group transactions, balances, income and expenses are eliminated on
consolidation.

Non-controlling interests in subsidiaries are identified separately from the
Group's equity therein. Those interests of non-controlling shareholders that
are present ownership interests entitling their holders to a proportionate
share of net assets upon liquidation may be initially measured at fair value or
at the non-controlling interests' proportionate share of the fair value of the
acquiree's identifiable net assets. The choice of measurement is made on an
acquisition-by-acquisition basis. Other non-controlling interests are initially
measured at fair value.

Subsequent to acquisition, the carrying amount of non-controlling interests is
the amount of those interests at initial recognition plus the non-controlling
interests' share of subsequent changes in equity. Total comprehensive income is
attributed to non-controlling interests even if this results in the
non-controlling interests having a deficit balance.

Changes in the Group's interests in subsidiaries that do not result in a loss
of control are accounted for as equity transactions. The carrying amount of the
Group's interests and the non-controlling interests are adjusted to reflect the
changes in their relative interests in the subsidiaries. Any difference between
the amount by which the non-controlling interests are adjusted and the fair
value of the consideration paid or received is recognised directly in equity
and attributed to the owners of the Company.

When the Group loses control of a subsidiary, the profit or loss on disposal is
calculated as the difference between (i) the aggregate of the fair value of the
consideration received and the fair value of any retained interest and (ii) the
previous carrying amount of the assets (including goodwill), less liabilities
of the subsidiary and any non-controlling interests. Amounts previously
recognised in other comprehensive income in relation to the subsidiary are
accounted for (i.e. reclassified to profit or loss or transferred directly to
retained earnings) in the same manner as would be required if the relevant
assets or liabilities are disposed of. The fair value of any investment
retained in the former subsidiary at the date when control is lost is regarded
as the fair value on initial recognition for subsequent accounting under IAS 39
Financial Instruments: Recognition and Measurement or, when applicable, the
costs on initial recognition of an investment in an associate or jointly
controlled entity.

(d) Business combinations

The acquisition of subsidiaries is accounted for using the acquisition method.
The cost of the acquisition is measured at the aggregate of the fair values, at
the date of exchange, of assets given, liabilities incurred or assumed, and
equity instruments issued in exchange for control of the acquiree.
Acquisition-related costs are recognised in profit or loss as incurred. The
acquiree's identifiable assets, liabilities and contingent liabilities that
meet the conditions for recognition under IFRS 3 Business Combinations are
recognised at their fair value at the acquisition date, except for non-current
assets (or disposal groups) that are classified as held for resale in
accordance with IFRS 5 Non-Current Assets held for sale and Discontinued
Operations. These are recognised and measured at fair value less costs to sell.

(e) Investments in joint ventures

A joint venture is a joint arrangement whereby the parties that have joint
control of the arrangement have rights to the net assets of the arrangement. A
joint venture firm recognises its interest in a joint venture as an investment
and shall account for that investment using the equity method in accordance
with IAS 28 Investments in Associates and Joint Ventures.  

Under the equity method, the investment is carried on the balance sheet at cost
plus changes in the Group's share of net assets of the entity, less
distributions received and less any impairment in value of the investment. The
Group Consolidated Income Statement reflects the Group's share of the results
after tax of the equity-accounted entity, adjusted to account for depreciation,
amortisation and any impairment of the equity accounted entity's assets. The
Group Statement of Comprehensive Income includes the Group's share of the
equity-accounted entity's other comprehensive income.

Financial statements of equity-accounted entities are prepared for the same
reporting year as the Group. The Group assesses investments in equity-accounted
entities for impairment whenever events or changes in circumstances indicate
that the carrying value may not be recoverable. If any such indication of
impairment exists, the carrying amount of the investment is compared with its
recoverable amount, being the higher of its fair value less costs of disposal
and value in use. If the carrying amount exceeds the recoverable amount, the
investment is written down to its recoverable amount.

The Group ceases to use the equity method of accounting from the date on which
it no longer has joint control over the joint venture or significant influence
over the associate, or when the interest becomes classified as an asset held
for sale.

(f) Revenue recognition

Revenue is measured at the fair value of the consideration received or
receivable and represents amounts receivable for hydrocarbon products and
services provided in the normal course of business, net of discounts, value
added tax ('VAT') and other sales-related taxes. Sales of hydrocarbons are
recognised when the title has passed. Revenue from services is recognised in
the accounting period in which services are rendered. The main types of
services provided by the Group are drilling and construction services.

Interest income is accrued on a time basis, by reference to the principal
outstanding and at the effective interest rate applicable, which is the rate
that exactly discounts estimated future cash receipts through the expected life
of the financial asset to that asset's net carrying amount on initial
recognition.

To the extent that revenue arises from test production during an evaluation
programme, an amount is charged from evaluation costs to cost of sales, so as
to reflect a zero net margin.

(g) Foreign currencies

The individual financial statements of each Group company are presented in the
currency of the primary economic environment in which it operates (its
functional currency). The functional currency of the Company is pounds
sterling. For the purpose of the consolidated financial statements, the results
and financial position of each Group company are expressed in US dollars, which
is the presentation currency for the consolidated financial statements.

In preparing the financial statements of the individual companies, transactions
in currencies other than the functional currency of each Group company
('foreign currencies') are recorded in the functional currency at the rates of
exchange prevailing on the dates of the transactions. At each balance sheet
date, monetary assets and liabilities that are denominated in foreign
currencies are retranslated into the functional currency at the rates
prevailing on the balance sheet date. Non-monetary assets and liabilities
carried at fair value that are denominated in foreign currencies are translated
at the rates prevailing at the date when the fair value was determined.
Non-monetary items that are measured in terms of historical cost in a foreign
currency are not retranslated.

Exchange differences are recognised in the profit or loss in the period in
which they arise except for exchange differences on monetary items receivable
from or payable to a foreign operation for which settlement is neither planned
nor likely to occur. This forms part of the net investment in a foreign
operation which is recognised in the foreign currency translation reserve and
in profit or loss on disposal of the net investment.

For the purpose of presenting consolidated financial statements, the results
and financial position of each entity of the Group are translated into US
dollars as follows:

(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, unless exchange rates fluctuate significantly during that period, in
which case the exchange rates at the date of the transactions are used; and

(iii) all resulting exchange differences arising, if any, are recognised in
other comprehensive income and accumulated equity (attributed to
non-controlling interests as appropriate), transferred to the Group's
translation reserve. Such translation differences are recognised as income or
as expenses in the period in which the operation is disposed of.

Goodwill and fair value adjustments arising on the acquisition of a foreign
entity are treated as assets and liabilities of the foreign entity and
translated at the closing rate.

The relevant exchange rates used were as follows:

         Year ended 31 December   Year ended 31 December
                           2014                     2013
                                                        
             GBP/USD    USD/UAH       GBP/USD    USD/UAH
                                                        
Closing       1.5534    16.0960        1.6491     8.3920
rate                                                    
                                                        
Average       1.6481    12.1705        1.5648     8.2545
rate                                                    
      


(h) Taxation

The tax expense represents the sum of the tax currently payable and deferred
tax.

The tax currently payable is based on taxable profit for the year. Taxable
profit differs from net profit as reported in the consolidated income statement
because it excludes items of income or expense that are taxable or deductible
in other years and it further excludes items that are never taxable or
deductible. The Group's liability for current tax is calculated using tax rates
that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit. This is accounted for using the balance sheet liability method.
Deferred tax liabilities are generally recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which deductible
temporary differences can be utilised. Such assets and liabilities are not
recognised if the temporary difference arises from the initial recognition of
goodwill or from the initial recognition (other than in a business combination)
of other assets and liabilities in a transaction that affects neither the
taxable profit nor the accounting profit. Deferred tax liabilities are
recognised for taxable temporary differences arising on investments in
subsidiaries and associates, and interests in joint ventures, except where the
Group is able to control the reversal of the temporary difference and it is
probable that the temporary difference will not reverse in the foreseeable
future.

The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered. Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset is realised.
Deferred tax is charged or credited in the income statement, except when it
relates to items charged or credited in other comprehensive income, in which
case the deferred tax is also dealt with in other comprehensive income.

Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off current tax assets against current tax liabilities
and when they relate to income taxes levied by the same taxation authority and
the Group intends to settle its current tax assets and liabilities on a net
basis.

(i) Property, plant and equipment

Property, plant and equipment ('PP&E') are carried at cost less accumulated
depreciation and any recognised impairment loss. Depreciation and amortisation
is charged so as to write-off the cost or valuation of assets, other than land,
over their estimated useful lives, using the straight-line method, on the
following bases:

Buildings                        4%        
                                 
Fixtures and equipment   10% to 30%

The gain or loss arising on the disposal or retirement of an asset is
determined as the difference between the sales proceeds and the carrying amount
of the asset and is recognised in income.

(j) Impairment of property, plant and equipment

At each balance sheet date, the Group reviews the carrying amounts of its PP&E
to determine whether there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable amount of the
asset is estimated in order to determine the extent of the impairment loss (if
any). Where the asset does not generate cash flows that are independent from
other assets, the Group estimates the recoverable amount of the cash-generating
unit to which the asset belongs. The recoverable amount is the higher of fair
value less costs to sell and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset for which the estimates of
future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to
be less than its carrying amount, the carrying amount of the asset
(cash-generating unit) is reduced to its recoverable amount. An impairment loss
is recognised as an expense immediately.

Where an impairment loss subsequently reverses, the carrying amount of the
asset (cash-generating unit) is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does not exceed
the carrying amount that would have been determined had no impairment loss been
recognised for the asset (cash-generating unit) in prior years. A reversal of
an impairment loss is recognised as income immediately.

(k) Intangible exploration and evaluation assets

The Group applies the modified full cost method of accounting for intangible
exploration and evaluation ('E&E') expenditure which complies with requirement
set out in IFRS 6 Exploration for and Evaluation of Mineral Resources. Under
the modified full cost method of accounting, expenditure made on exploring for
and evaluating oil and gas properties is accumulated and initially capitalised
as an intangible asset, by reference to appropriate cost centres being the

appropriate oil or gas property. E&E assets are then assessed for impairment
on a geographical cost pool basis.

E&E assets comprise costs of (i) E&E activities which are in progress at the
balance sheet date, but wherethe existence of commercial reserves has yet to be
determined (ii) E&E expenditure which, whilst representing part of the E&E
activities associated with adding to the commercial reserves of an established
cost pool, did not result in the discovery of commercial reserves.

Costs incurred prior to having obtained the legal rights to explore an area are
expensed directly to the income statement as incurred.

Exploration and Evaluation costs

E&E expenditure is initially capitalised as an E&E asset. Payments to acquire
the legal right to explore, costs of technical services and studies, seismic
acquisition, exploratory drilling and testing are also capitalised as
intangible E&E assets.

Tangible assets used in E&E activities (such as the Group's vehicles, drilling
rigs, seismic equipment and other property, plant and equipment) are normally
classified as PP&E. However, to the extent that such assets are consumed in
developing an intangible E&E asset, the amount reflecting that consumption is
recorded as part of the cost of the intangible asset. Such intangible costs
include directly attributable overheads, including the depreciation of PP&E
items utilised in E&E activities, together with the cost of other materials
consumed during the exploration and evaluation phases.

E&E assets are not amortised prior to the conclusion of appraisal activities.

Treatment of E&E assets at conclusion of appraisal activities

Intangible E&E assets related to each exploration property are carried forward,
until the existence (or otherwise) of commercial reserves has been determined.
If commercial reserves have been discovered, the related E&E assets are
assessed for impairment on individual assets basis as set out below and any
impairment loss is recognised in the income statement. Upon approval of a
development programme, the carrying value, after any impairment loss, of the
relevant E&E assets is reclassified to the development and production assets
within PP&E.

Intangible E&E assets that relate to E&E activities that are determined not to
have resulted in the discovery of commercial reserves remain capitalised as
intangible E&E assets at cost less accumulated amortisation, subject to meeting
a pool-wide impairment test in accordance with the accounting policy for
impairment of E&E assets set out below.

Impairment of E&E assets

E&E assets are assessed for impairment when facts and circumstances suggest
that the carrying amount may exceed its recoverable amount. Such indicators
include, but are not limited to, those situations outlined in paragraph 20 of
IFRS 6 Exploration for and Evaluation of Mineral Resources and include the
point at which a determination is made as to whether or not commercial reserves
exist.

Where there are indications of impairment, the E&E assets concerned are tested
for impairment. The aggregate carrying value of the relevant assets is compared
against the expected recoverable amount of the asset, generally by reference to
the present value of the future net cash flows expected to be derived from
production of commercial reserves from that pool. Where the assets fall into
an area that does not have an established pool or if there are no producing
assets to cover the unsuccessful exploration and evaluation costs, those assets
would fail the impairment test and be written off to the income statement in
full.

Impairment losses are recognised in the income statement as additional
depreciation and amortisation and are separately disclosed.

Reclassification from development and production assets back to exploration and
evaluation

Where development efforts are unsuccessful in the target geological formation
of the license area but the Company see a potential for oil and gas discoveries in
other geological formations of the same license area, reclassification of
recoverable amount of assets from development and production assets back to
exploration and evaluation is appropriate following the impermanent assessment.

(l) Development and production assets

Development and production assets are accumulated on a field-by-field basis and
represent the cost of developing the commercial Reserves discovered and
bringing them into production, together with E&E expenditures incurred in
finding commercial Reserves transferred from intangible E&E assets.

The cost of development and production assets comprises the cost of
acquisitions and purchases of such assets, directly attributable overheads,
finance costs capitalised, and the cost of recognising provisions for future
restoration and decommissioning.

Depreciation of producing assets

Depreciation is calculated on the net book values of producing assets on a
field-by-field basis using the unit of production method. The unit of
production method refers to the ratio of production in the reporting year as a
proportion of the proved and probable Reserves of the relevant field, taking
into account future development expenditures necessary to bring those Reserves
into production.

Producing assets are generally grouped with other assets that are dedicated to
serving the same Reserves for depreciation purposes, but are depreciated
separately from producing assets that serve other Reserves.

(m) Inventories

Raw materials and oil and gas stock are stated at the lower of cost and net
realisable value. Costs comprise direct materials and, where applicable, direct
labour costs and those overheads that have been incurred in bringing the
inventories to their present location and condition. Cost is allocated using
the weighted average method. Net realisable value represents the estimated
selling price less all estimated costs of completion and costs to be incurred
in marketing, selling and distribution.

(n) Financial instruments

Recognition of financial assets and financial liabilities

Financial assets and financial liabilities are recognised on the Group's
balance sheet when the Group becomes a party to the contractual provisions of
the instrument.

Derecognition of financial assets and financial liabilities

The Group derecognises a financial asset only when the contractual rights to
cash flows from the asset expire; or it transfers the financial asset and
substantially all the risks and rewards of ownership of the asset to another
entity. If the Group neither transfers nor retains substantially all the risks
and rewards of ownership and continues to control the transferred asset, the
Group recognises its retained interest in the asset and an associated liability
for the amount it may have to pay. If the Group retains substantially all the
risks and rewards of ownership of a transferred financial asset, the Group
continues to recognise the financial asset and also recognises a collateralised
borrowing for the proceeds received.

The Group derecognises financial liabilities when the Group's obligations are
discharged, cancelled or expired.

Financial assets

The Group classifies its financial assets in the following categories: loans
and receivables; available-for-sale financial assets; held to maturity
investments; and financial assets at fair value through profit or loss
("FVTPL"). The classification depends on the purpose for which the financial
assets were acquired. Management determines the classification of its financial
assets at initial recognition and re-evaluates this designation at every
reporting date.

Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They are
included in current assets, except for those with maturities greater than
twelve months after the balance sheet date which will then be classified as
non-current assets. Loans and receivables are classified as "other receivables"
and "cash and cash equivalents" in the balance sheet.

Trade and other receivables

Trade and other receivables are measured at initial recognition at fair value,
and are subsequently measured at amortised cost using the effective interest
rate method.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, on-demand deposits, and other
short-term highly liquid investments that are readily convertible to a known
amount of cash with three months or less remaining to maturity and are subject
to an insignificant risk of changes in value.

Restricted cash balances represent components of cash and cash equivalents that
are not available for use by the Group.

Financial assets at FVTPL

Financial assets at FVTPL are stated at fair value, with any gains or losses
arising on remeasurement recognised in profit or loss which is included
in the 'Other gains and losses' line item in the consolidated income statement.

Impairment of financial assets

Financial assets, other than those at FVTPL, are assessed for indicators of
impairment at each balance sheet date. Appropriate allowances for estimated
irrecoverable amounts are recognised in profit or loss when there is objective
evidence that the asset is impaired. The allowance recognised is measured as
the difference between the asset's carrying amount of the financial asset and
the present value of estimated future cash flows discounted at the effective
interest rate computed at initial recognition.

Evidence of impairment could include:

significant financial difficulty of the issuer or counterparty;

default or delinquency in interest or principal payments; or

it becoming probable that the borrower will enter bankruptcy or financial
re-organisation.

For certain categories of financial assets, such as trade receivables, assets
that are assessed not to be impaired individually are, in addition, assessed
for impairment on a collective basis.

The carrying amount of the financial assets is reduced by the impairment loss
directly for all financial assets with the exception of trade receivables,
where the carrying amount is reduced through the use of an allowance account.
Subsequent recoveries of amounts previously written off are credited against
the allowance account. Changes in the carrying amount of the allowance account
are recognised in profit or loss.

If, in a subsequent period, the amount of the impairment loss decreases and the
decrease can be related objectively to an event occurring after the impairment
was recognised, the previously recognised impairment loss is reversed through
profit or loss to the extent that the carrying amount of the investment at the
date the impairment is reversed does not exceed what the amortised cost would
have been had the impairment not been recognised.

Financial liabilities

Financial liabilities are classified as either financial
liabilities 'at FVTPL' or 'other financial liabilities'

Financial liabilities at FVTPL

Financial liabilities at FVTPL are stated at fair value, with any resultant
gain or loss recognised in profit or loss and is included in the 'Other gains
and losses' line item in the income statement.  Fair value is determined in the
manner described in note 28.

Trade payables and short-term borrowings

Trade payables and short-term borrowings are initially measured at fair value,
and are subsequently measured at amortised cost, using the effective interest
rate method.

(o) Provisions

Provisions are recognised when the Group has a present obligation (legal or
constructive) as a result of a past event, it is probable that the Group will
be required to settle that obligation and a reliable estimate can be made of
the amount of the obligation. The amount recognised as a provision is the best
estimate of the consideration required to settle the present obligation at the
balance sheet date, taking into account the risks and uncertainties surrounding
the obligation. When a provision is measured using the cash flows estimated to
settle the present obligation, its carrying amount is the present value of
those cash flows.

(p) Decommissioning

A provision for decommissioning is recognised in full when the related
facilities are installed. The decommissioning provision is calculated as the
net present value of the Group's share of the expenditure expected to be
incurred at the end of the producing life of each field in the removal and
decommissioning of the production, storage and transportation facilities
currently in place. The cost of recognising the decommissioning provision is
included as part of the cost of the relevant asset and is thus charged to the
income statement on a unit of production basis in accordance with the Group's
policy for depletion and depreciation of tangible non-current assets. Period
charges for changes in the net present value of the decommissioning provision
arising from discounting are included within finance costs.

(q) Share-based payments

The Group issued equity-settled share-based payments to certain parties in
return for services or goods. The goods or services received and the
corresponding increase in equity are measured directly at the fair value of the
goods or services received at the grant date. The fair value of the services or
goods received is recognised as an expense except in so far as they relate to
the cost of issuing or acquiring its own equity instruments. The costs of an
equity transaction are accounted for as a deduction from equity to the extent
they are incremental costs directly attributable to the equity transaction that
would otherwise have been avoided.

The Group also issued equity-settled share-based payments to certain Directors
and employees. Equity settled share-based payments are measured at fair value
(excluding the effect of non market-based vesting conditions) at the date of
grant. The fair value determined at the grant date for each tranche of the
equity-settled share-based payments is expensed on a straight-line basis over
the vesting period, based on the Group's estimate of shares that will
eventually vest and adjusted for the effect of non market-based vesting
conditions. At each balance sheet date, the Group revises its estimate of the
number of equity instruments expected to vest as a result of the effect of non
market-based vesting conditions.

The impact of the revision of the original estimates, if any, is recognised in
profit or loss such that the cumulative expense reflects the revised estimate,
with a corresponding adjustment to the equity-settled employee benefits
reserve.

For those equity-settled share-based payments with market-based performance
conditions, fair value is measured by use of the Stochastic model. For those
which are not subject to any market based performance conditions, fair value is
measured by use of the Black-Scholes model. The expected life used in the
models has been adjusted, based on management's best estimate, for the effects
of non-transferability, exercise restrictions, and behavioural considerations.

4. Critical accounting judgements and key sources of estimation uncertainty

In the application of the Group's accounting policies, which are described in
note 3, the Directors are required to make judgements, estimates and
assumptions about the carrying amounts of the assets and liabilities that are
not readily apparent from other sources. The estimates and associated
assumptions are based on historical experience and other factors that are
considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period or in the period
of the revision and future periods if the revision affects both the current and
future periods.

The following are the critical judgements and estimates that the Directors have
made in the process of applying the Group's accounting policies and that have
the most significant effect on the amounts recognised in the financial
statements:

(a) Impairment of E&E

The outcome of ongoing exploration, and therefore the recoverability of the
carrying value of intangible exploration and evaluation assets, is inherently
uncertain. Management makes the judgements necessary to implement the Group's
policy with respect to exploration and evaluation assets and considers these
assets for impairment at least annually with reference to indicators in IFRS 6.

(b) Impairment of PP&E

IAS 36 Impairment of Assets require that a review for impairment to be carried
out if events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable.

Management assessed whether any impairment triggers were present at 31 December
2014 and concluded that the following impairment indicators existed for the
Pirkovska licence area:

High uncertainty about the impact of political and economic turmoil in Ukraine
on Group operations;

Significant market capitalization discount to the carrying amount of the net
assets of the entity; and

Lack of production at Pirkovska licence area since 2009.

Carrying the analysis on the Pirkovska licence area management identified
assets which have been reclassified to exploration and evaluation and obsolete
assets which as of 31 December 2014 were used in production and development.
Further details are provided in note 17.

(с) Impairment of investments in joint ventures

The Group's investments in joint ventures are accounted for using the equity
method. The carrying value of the Group's investments is reviewed at each
balance sheet date. This review requires estimation of the future cash flows
expected to be received by the Group mainly from the joint ventures'
exploration and evaluation assets. As of 31 December 2014 exploration and
evaluation assets of the joint venture entity LLC Industrial Company
Gazvydobuvannya have been assessed for impairment through calculation of the
recoverable amount as a fair value less cost to sell. As a result, impairment
has been recognised in the accounts of the joint venture and the Group's share
was included in the consolidated financial statements as share of losses in
joint ventures. Further details are provided in note 19.

(d) Reserves

Commercial reserves are proven and probable ('2P') oil and gas reserves, which
are defined as the estimated quantities of crude oil, natural gas and natural
gas liquids which geological, geophysical and engineering data demonstrate with
a specified degree of certainty to be recoverable in future years from known
reservoirs and which are considered commercially producible. There should be a
50 per cent statistical probability that the actual quantity of recoverable
Reserves will be more than the amount estimated as proven and probable Reserves
and a 50 per cent statistical probability that it will be less.

Commercial Reserves used in the calculation of depreciation and for impairment
test purposes are determined using estimates of oil and gas in place, recovery
factors and future oil and gas prices. Management base their estimate of oil
and gas Reserves and Resources upon the Report provided by independent
advisers.

(e) Recoverability of VAT

The Group has significant receivables from the State Budget of Ukraine relating
to reimbursement of VAT arising on purchases of goods and services from
external service and product providers. Due to the budgetary problems of
Ukraine, the recovery of VAT has been an issue for most companies operating in
Ukraine. In the past the Group has taken a conservative view in relation to VAT
and has impaired outstanding balances as appropriate due to the uncertainty of the
recovery of these balances in cash from the State Budget of Ukraine and
uncertainty of future production, VAT on which would be offset against the VAT
recoverable amounts the Group has.

VAT receivable that has been generated through gas purchases in 2014 is
considered by the Group as recoverable through future sales of gas. For all
other VAT the Group will continue to use an approach consistent with prior
years by impairing Ukrainian VAT as appropriate and then recognising the 
recovery in the period it has been made. A cumulative provision of $4.4 million
(2013: $9.5 million) against Ukrainian VAT receivable has thus been recognised 
as at 31 December 2014, excluding VAT recoverable balances in the JV which are 
reported under equity method in these financial statements.

(f) Assessment of political and economic turmoil in Ukraine impact on Group
operations

Since November 2013, Ukraine has been in a political and economic turmoil. The
Ukrainian Hryvnia devalued against major world currencies and significant
external financing is required to maintain stability of the economy. In
February 2014, Ukraine's sovereign rating has been downgraded to CCC with a
negative outlook. This situation continued through 2014 and also in 2015.
However the Government already received in 2015 significant funding from the
international creditors, with International Monetary Fund ("IMF") being the
largest. In March 2015 IMF approved $17.5billion loan to Ukrainian government,
which is part of $40 billion package, including contributions from the U.S. and
European Union and a prospective $15 billion in savings to be negotiated with
Ukraine's bondholders.

In May 2014 Ukraine had its presidential elections and a new government has
been formed. In March 2014, Crimea, an autonomous republic of Ukraine, was
effectively annexed by the Russian Federation. Escalation of conflict continued
through 2014 up until now at the east of the country. Further political
developments are currently unpredictable and may adversely affect the Ukrainian
economy.

Management is monitoring how the political and economic situation is affecting
the Group operations, and has considered whether adjustments are required to
the carrying values of assets and the appropriateness of the going concern
assumption. As a result management have concluded that there were no
significant adverse consequences in relation to the Group's operations, cash
flows and assets that impact the 2014 financial statements, apart from
continuous uncertainty related to key assumptions used by management in
assessment of the recoverable amount of production assets as described above.
Management noted that none of the Group’s assets are located in areas of current 
conflict. Any further escalations of the political crisis may impact the Group's normal
business activities, and increase the risks relating to its business
operations, financial status and maintenance of its Ukrainian production
licences.

5. Segment information

Segment information is presented on the basis of management's perspective and
relates to the parts of the Group that are defined as operating segments.
Operating segments are identified on the basis of internal reports provided to
the Group's chief operating decision maker ("CODM"). The Group has identified
its top management team as its CODM and the internal reports used by the top
management team to oversee operations and make decisions on allocating
resources serve as the basis of information presented. These internal reports
are prepared on the same basis as these consolidated financial statements.

Segment information is analysed on the basis of the type of activity, products
sold or services provided.

The majority of the Group's operations are located within Ukraine.

Segment information is analysed on the basis of the types of goods supplied by
the Group's operating divisions. The Group's reportable segments under IFRS 8
are therefore as follows:

Exploration and Production

E&P activities on the production licences for natural gas, oil and condensate

Service

Drilling services to exploration and production companies

Construction services to exploration and production companies

Trading

Import of natural gas and diesel from European countries

Local purchase and sales of natural gas operations with physical delivery of
natural gas

The accounting policies of the reportable segments are the same as the Group's
accounting policies described in Note 3. Sales between segments are carried out
at market prices. The segment result represents operating profit under IFRS
before unallocated corporate expenses. Unallocated corporate expenses include
management remuneration, representative expenses, and expenses incurred in
respect of the maintenance of office premises. This is the measure reported to
the CODM for the purposes of resource allocation and assessment of segment
performance.

The Group does not present information on segment assets and liabilities as the
CODM does not review such information for decision-making purposes.

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

                                    Exploration and Service  Trading Consolidated
                                         Production                              
                                              $'000   $'000    $'000        $'000
                                                                                 
Sales of hydrocarbons                         1,291       -   30,253       31,544
                                                                                 
Other revenue                                     -     846      233        1,079
                                                                                 
Sales between segments                        1,077       -   (1,077)           -
                                                                                 
Total revenue                                 2,368     846   29,409       32,623
                                                                                 
Cost of sales                                (2,579)   (386) (26,848)     (29,813)
                                                                                 
Other administrative expenses                (1,347)      -    (379)       (1,726)
                                                                                 
Interest on short-term borrowings (Note 13)       -       -    (420)         (420)
                                                                                 
Segment results                              (1,558)    460   1,762           664
                                                                                 
Unallocated other                                                          (5,276)
administrative expenses                                                          
                                                                                 
Other income, net                                                           2,228
                                                                                 
Impairment(1)                                                              (5,134)
                                                                                 
Share of losses in joint                                                  (54,664)
ventures (1)                                                                     
                                                                                 
Net foreign exchange gains                                                  3,036
                                                                                 
Loss before tax                                                           (59,146)
                                                                                 

(1)Impairment loss recognised in 2014 of $5.1 million related to exploration
and production segment.

As of 31 December 2013 and for the year then ended the Group's segmental
information was as follows:

                                    Exploration and Service Trading Consolidated
                                         Production                             
                                                                                
                                              $'000   $'000   $'000        $'000
                                                                                
External sales                                2,619       -       -        2,619
                                                                                
Other revenue                                     -   1,153       -        1,153
                                                                                
Total revenue                                 2,619   1,153       -        3,772
                                                                                
Cost of sales                               (2,324)   (695)       -      (3,019)
                                                                                
Other administrative expenses               (1,404)       -       -      (1,404)
                                                                                
Segment results                             (1,109)     458       -        (651)
                                                                                
Unallocated other                                                        (7,515)
administrative expenses                                                         
                                                                                
Other income, net                                                            667
                                                                                
Share of losses in joint                                                 (6,630)
ventures                                                                        
                                                                                
Net foreign exchange losses                                                (271)
                                                                                
Loss before tax                                                         (14,400)
 

6. Revenue

                                                    2014            2013         
                                                   $'000           $'000        
                                                                                
Sale of hydrocarbons                              31,544           2,619        
                                                                                
Other revenues                                     1,079           1,153        
                                                                                
                                                  32,623           3,772        
 
Other revenues include revenues from services provided to third parties of 
$0.8 million (2013: $1.2 million).

Information about major customers

Included in revenues for the year ended 31 December 2014 are revenues of $25.3
million (2013: $2.0 million) which arose from sales to the Group's two largest
customers. None other single customers contributed 10% or more to the Group
revenue for both 2014 and 2013 years.

7. Other operating income/(expenses), net
                                                        2014       2013         
                                                       $'000      $'000        
                                                                                
Transactions with JV partner                             510        (60)         
                                                                                
Other income                                              37         65           
                                                                                
                                                         547          5            
                                                                                
8. Impairment
                                                        2014       2013
                                                       $'000      $'000
                                                                                 
Impairment of oil and gas assets (note 17)            (5,134)         -
                                                                                 
Inventories                                             (253)        97
                                                                                 
VAT recoverable (note 4(e))                            1,130        137
                                                                                 
Reversal of impairment of other assets                   877        234
                                                                                 

The carrying value of inventory as at 31 December 2014 and 2013 has been
impaired to reduce it to net realisable value (see note 20). During 2014,
the Group gross sales of inventory to third parties comprised $0.1 million 
(2013:$0.4 million).

During the year VAT impairment in the amount of $1.1 million (2013: $0.1
million) has been released as a result of receiving VAT bonds by several
subsidiaries and VAT recovery of historical balances through offset of VAT
liabilities arising on sales.

9. Loss for the year

The loss for the year has been arrived at after (charging)/crediting:

                                                              2014      2013     
                                                             $'000     $'000    
                                                                                 
Depreciation of property, plant and equipment                 (938)   (1,201)  
                                                                                 
Loss on disposal of property, plant and equipment             (211)     (227)    
                                                                                 
Reversal of impairment of other assets (note 8)                877       234      
                                                                                 
Impairment of oil and gas assets (note 17)                  (5,134)        -        
                                                                                 
Staff costs                                                 (4,039)   (4,790)  
                                                                                 
Net foreign exchange gain/(losses)                           3,036      (271)    
                                                                                 

In addition to the depreciation of PP&E of $0.9 million (2013: $1.2 million) in
the year ended 31 December 2014, depreciation of $0.04 million (2013: $0.2
million) was capitalised to E&E assets being depreciation of tangible assets
used in E&E activities. 

10. Auditor's remuneration

The analysis of auditor's remuneration is as follows:
                                                                                
                                                                         2014      2013
                                                                        $'000     $'000
Audit fees                                                                      
                                                                                
Fees payable to the Company's auditor and their associates for the        194       201
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                                    30        13
                                                                                
Total audit fees                                                          224       214
                                                                                
Non-audit fees                                                                  
                                                                                
Audit-related assurance services                                           38        20
                                                                                
Taxation compliance services                                               25        45
                                                                                
Other taxation advisory services                                            -        40
                                                                                
Non-audit fees                                                             63       105
                                                                                

11. Staff costs

The average monthly number of employees (including Executive Directors) was:

                                               2014       2013     
                                             Number     Number   
                                                                                
Executive Directors                               2          2        
                                                                                
Other employees                                  98         116      
                                                                                
                                                100         118      
                                                                                
                                                                                
Total number of employees at 31 December        100         118      
                                                                                 
                                              $'000        $'000
Their aggregate remuneration comprised:                                         
                                                                                
Wages and salaries                            4,012        5,102    
                                                                                
Social security costs                           455          725      
                                                                                
                                              4,467        5,827    
                                                                                

Within wages and salaries $0.8 million (2013: $0.7 million) relates to amounts
accrued and paid to executive Directors for services rendered.

Included within wages and salaries is $0.4 million (2013: $0.3 million)
capitalised to intangible E&E assets and $nil million (2013: $0.1 million)
capitalised to development and production assets.

12. Investment income
                                                  2014        2013       
                                                 $'000       $'000      
Interest on bank deposits                           27         283        
                                                                                
Interest on loans issued                           825         151        
                                                                                
                                                   852         434        
                                                                                
13. Finance costs
                                                                  2014   2013  
                                                                 $'000  $'000 
                                                                               
Interest on short-term borrowings                                 (420)     -     
                                                                               
Unwinding of discount on decommissioning provision (note 24)       (48)    (6)   
                                                                               
                                                                  (468)    (6)   
                                                                               

Starting October 2014 the Group used short-term borrowings in UAH (note 24) for
the financing of gas trading which resulted in $0.4 million of interest for
2014.

14. Tax
                                                              2014      2013     
                                                             $'000     $'000    
                                                                                
Current tax                                                     11       169      
                                                                                
Prior year tax                                                 362         -        
                                                                                
Deferred tax (benefit)/charge (note 23)                       (207)      120      
                                                                                
                                                               166       289      
                                                                                

The Group's operations are conducted primarily outside the UK. The most
appropriate tax rate for the Group is therefore considered to be 18 per cent
(2013: 19 per cent), the rate of profit tax in Ukraine which is the primary
source of revenue for the Group. Taxation for other jurisdictions is calculated
at the rates prevailing in the respective jurisdictions.

The taxation charge for the year can                
be reconciled to the loss per the            2014       2014         2013    2013                
income statement as follows:                $'000          %        $'000       %           
                                                                                
Loss before tax                           (59,146)       100      (14,400)    100
                                                                                
Tax credit at Ukraine corporation         (10,646)        18       (2,736)     19         
tax rate of 18% (2013: 19%)                       
                                                                                
Tax credit related to the 
Joint venture losses                        9,292      (15.7)       3,004   (21.0)      
                                                                                
Foreign exchange on operating               1,543       (2.6)         3.8    (552)                
activities                                                 
                                                                               
Tax (gains)/losses generated in the          (839)       1.4          857    (6.0)             
year not yet recognised                                   
                                                                                
Effect of different tax rates                 454       (0.8)        (284)    2.0         
                                                                               
                                             (196)       0.3          289    (2.2)       
                                                                                
Adjustments recognised in the                                                   
current year in relation                                                        
                                              362          -            -       - 
to the current tax of prior years                                     
                                                                                
Income tax expense recognised in              166          -          289       -           
profit or loss                                                                  
                                                                                

15. Loss per Ordinary share

Basic loss per Ordinary share is calculated by dividing the                     
net loss for the year attributable to owners of the Company by                  
the weighted average number of Ordinary shares outstanding                      
during the year. The calculation of the basic loss per share                    
is based on the following data:                                                 

                                                                    2014     2013       
Loss attributable to owners of the Company                         $'000    $'000
                                                                                
Loss for the purposes of basic loss per share being net loss     (59,271) (14,660)
attributable to owners of the Company                                           
                                                                                
                                                                    2014     2013
                                                                                
                                                                  Number   Number
Number of shares                                                    '000     '000
                                                                                
Weighted average number of Ordinary shares for the purposes of   231,092  231,092
basic loss per share                                                            
                                                                    2014     2013  
                                                                    cent     cent
Loss per Ordinary share                                                         
Basic                                                              (25.6)    (6.3)


The Group has no potentially dilutive instruments in issue. Therefore no diluted 
loss per share is presented above.

                                                                                
16. Intangible exploration and evaluation assets
                                                                                
Cost                                                                  $'000     
                                                                                
At 1 January 2013                                                    33,049    
                                                                                
Additions                                                             3,276     
                                                                                
Change in estimate of decommissioning assets (note 26)                   16        
                                                                                
Transfer from property, plant and equipment (note 17)                    34        
                                                                                
Disposals                                                              (118)     
                                                                                 
Exchange differences                                                 (1,362)   
                                                                                
At 1 January 2014                                                    34,895    
                                                                                
Additions                                                               468       
                                                                                
Change in estimate of decommissioning assets (note 26)                   95        
                                                                                
Transfer from property, plant and equipment (note 17)                18,467    
                                                                                
Disposals                                                                (1)       
                                                                                
Exchange differences                                                (16,743)  
                                                                                
At 31 December 2014                                                  37,181    
                                                                                
Impairment                                                                      
                                                                                
At 1 January 2013                                                    30,032    
                                                                                
Exchange differences                                                 (1,095)   
                                                                                
At 1 January 2014                                                    28,937    
                                                                                
Transfer from property, plant and equipment (note 17)                 3,826     
                                                                                
Exchange differences                                                (13,871)  
                                                                                
At 31 December 2014                                                  18,892    
                                                                                
Carrying amount                                                                 
                                                                                
At 31 December 2014                                                  18,289    
                                                                                
At 31 December 2013                                                   5,958     
                                                                                

During the year additions to the exploration and evaluation assets include 
$0.1 million (2013: $0.2 million) of capitalised depreciation of development and
production assets used in exploration and evaluation activities.

As of 31 December 2014 the Group has reclassified carrying value of assets of
$14.6 million related to the Pirkovska licence from development and production
to exploration and evaluation (note 17).The 2P reserves of the Pirkovska
licence have been reclassified to contingent resources.

17. Property, plant and equipment
                                                 Development                  
                                                         and                            
                                                  production              
                                                      assets     Other    Total
Cost                                                   $'000     $'000    $'000
                                                                              
At 1 January 2013                                     53,324     9,603   62,927
                                                                              
Additions                                                585       217      802
                                                                              
Transfer to intangible exploration and                  (34)         -      (34)
evaluation assets                                                             
                                                                              
Transfer between property, plant and equipment          (80)        80        -
                                                                              
Change in estimate of decommissioning assets             42          -       42
(note 26)                                                                     
                                                                              
Disposals                                              (416)      (138)    (554)
                                                                              
Exchange differences                                 (2,479)      (112)  (2,591)
                                                                              
At 1 January 2014                                    50,942      9,650   60,592
                                                                              
Additions                                             1,235        376    1,611
                                                                              
Transfer to intangible exploration and              (18,467)         -  (18,467)
evaluation assets                                                             
                                                                              
Transfer between property, plant and equipment          (54)        54        -
                                                                              
Change in estimate of decommissioning assets            201          -      201
(note 26)                                                                                                                                                   
Disposals                                              (587)       (89)    (676)
Exchange differences                                (24,492)    (4,801) (29,293)
                                                                              
At 31 December 2014                                   8,778      5,190   13,968
                                                                              
                                                                              
Accumulated depreciation and impairment                                       
                                                                              
At 1 January 2013                                    13,511      3,038   16,549
                                                                              
Charge for the year                                   1,062        326    1,388
                                                                              
Disposals                                              (360)       (82)    (442)
                                                                              
Exchange differences                                   (724)       (65)    (789)
                                                                              
At 1 January 2014                                    13,489      3,217   16,706
                                                                              
Impairment                                            5,134          -    5,134
                                                                              
Charge for the year                                     614        359      973
                                                                              
Transfer to intangible exploration and               (3,826)         -   (3,826)
evaluation assets                                                             
                                                                              
Disposals                                              (188)       (76)    (264)
                                                                              
Exchange differences                                 (6,787)    (1,814)  (8,601)
                                                                              
At 31 December 2014                                   8,436      1,686   10,122
                                                                              
                                                                              
Carrying amount                                                               
                                                                              
At 31 December 2014                                     342      3,504    3,846
                                                                              
At 31 December 2013                                  39,122      4,764   43,886
 

As a result of the latest geological works and the 3D seismic assessments
performed during 2014 on the Pirkovska licence the Group did not identify
viable 2P reserves in the geological levels indicated by the GCA report.
However, the results of the 3D seismic assessment indicated that gas reserves
are located on other geological levels and require additional exploration and
evaluation work to be performed.  Due to the above findings management
performed the impairment assessment of the development and production assets of
the Pirkovska licence.

Management identified that the cost of the licence and the carrying value of
the existing wells of $14.6 million are to be used in further exploration and
evaluation works. Management identified that as of 31 December 2014 the assets
previously used in production and development of the Pirkovska licence with
carrying value of $2.9 million were obsolete and therefore were written off. 
As a result of the production and development assets value assessment the Group 
has reclassified the carrying value of assets in amount of $14.6 million to 
exploration and evaluation (note 16) and written off certain obsolete assets 
of $2.9 million for the year ended 31 December 2014 (note 9).

As of 31 December 2014 management of the Group carried out the assessment of the
Debeslavetska and Cheremkhivska licences value in use and recognised an
additional impairment of these oil and gas assets of $2.2 million (note 9)
Recoverable amount was assessed at $0.4 million as at 31 December 2014. Key
assumptions used in impairment assessment were as follows:

Future gas price was assumed to be flat $300 real per m3;

The pre-tax discount rate used was 15% real; and

The growth rate used for the future costs projections was estimated based on
inflation level in Ukraine for 2014 of 30%  with a steady decline over the next 
10 years. Foreign exchange effects were assumed to be flat. 

During the year ended 31 December 2014 the depreciation charge of $0.1 million
(2013: $0.2 million) of development and production assets used in exploration
and evaluation activities has been capitalised and accounted as additions to
the exploration and evaluation assets (note 16).

18. Subsidiaries

The Company had investments in the following subsidiary undertakings as at 31
December 2014, which principally affected the profits and net assets of the
Group:

                             Country of            Proportion                   
                             incorporation         of voting                             
Name                         and operation         interest %   Activity          
                                                                                
Directly held                                                                   
                                                                                
Cadogan Petroleum Holdings   UK                    100          Holding company   
Ltd                                                                             
                                                                                
Ramet Holdings Ltd           Cyprus                100          Holding company   
                                                                                
                                                                                
                                                                                
Indirectly held                                                                 
                                                                                
Rentoul Ltd                  Isle of Man           100          Holding company   
                                                                                
Cadogan Petroleum Holdings   Netherlands           100          Holding company   
BV                                                                              
                                                                                
Cadogan Bitlyanske BV        Netherlands           100          Holding company   
                                                                                
Cadogan Delta BV             Netherlands           100          Holding company   
                                                                                
Cadogan Astro Energy BV      Netherlands           100          Holding company   
                                                                                
Cadogan Pirkovskoe BV        Netherlands           100          Holding company   
                                                                                
Cadogan Zagoryanske          Netherlands           100          Holding company   
Production BV                                                                   
                                                                                
Momentum Enterprise (Europe) Cyprus                100          Holding company   
Ltd                                                                             
                                                                                
Cadogan Ukraine Holdings     Cyprus                100          Holding company   
Limited                                                                         
                                                                                
Cadogan Momentum Holdings    Canada                100          Holding company   
Inc                                                                             
                                                                                
Radley Investments Ltd       UK                    100          Holding company   
                                                                                
Cadogan Petroleum Trading    Switzerland           100          Trading company   
SAGL                                                                            
                                                                                
LLC AstroInvest-Ukraine      Ukraine               100          Exploration       
                                                                                
LLC Zagvydobuvannya          Ukraine               100          Exploration       
                                                                                
LLC Astro Gas                Ukraine               100          Exploration       
                                                                                
DP USENCO Ukraine            Ukraine               100          Exploration       
                                                                                
LLC USENCO Nadra             Ukraine               95           Exploration       
                                                                                
JV Delta                     Ukraine               100          Exploration       
                                                                                
LLC WestGasInvest            Ukraine               100          Exploration       
                                                                                
LLC Astro-Service            Ukraine               100          Service Company   
                                                                                
OJSC AgroNaftoGasTechService Ukraine               79.9         Construction      
                                                                services          
                                                                                
LLC Cadogan Ukraine          Ukraine               100          Corporate services
 
During the year ended 31 December 2014, the Group structure continued to be
rationalised both so as to reduce the number of legal entities inside Ukraine
and also to replace the structure of multiple jurisdictions with one based on a
series of sub-holding companies incorporated in the Netherlands for each
licence area.

19. Joint ventures

Details of each Group's joint ventures at the end of the 2014 and 2013
reporting periods are as follows:

                                                   Country of         
                                                incorporation    Ownership                    
Company name         Licenses held              and operation     share %        Activity     
                                                                                 
LLC                  Zagoryanska exploration          Ukraine           40    Exploration
Astroinvest-Energy   licence                                                       
                                                                                 
LLC Industrial       Pokrovska exploration            Ukraine           70    Exploration
Company              licence                                                       
Gazvydobuvannya                                                                  
                                                                                 
LLC Westgasinvest    Reklynetska,                     Ukraine           15    Exploration
                     Zhuzhelianska,                                                
                     Cheremkhivsko-Strupkivska,                                    
                     Baulinska, Filimonivska,                                      
                     Kurinna, Sandugeyivska,                                       
                     Yakovlivska, and                                              
                     Debeslavetska Exploration,                                    
                     Debeslavetska Production                                      
                     licence                                                       
                                                                                 

All of the above joint ventures are accounted for using the equity method in
these consolidated financial statements. According to the shareholders'
agreements, which regulate the activities of the jointly controlled entities,
all key decisions require unanimous approval from the shareholders, therefore
these entities are jointly controlled.

Summarised financial information in respect of each of the Group's material
joint ventures is set out below. The summarised financial information below
represents amounts shown in the joint venture's financial statements prepared
in accordance with IFRSs.

LLC Astroinvest-Energy

                                                              2014         2013
                                                             $'000        $'000
                                                                               
Non-current assets                                             886           34
                                                                               
Current assets                                               1,234        3,001
                                                                               
Non-current liabilities                                       (598)      (1,194)
                                                                               
Current liabilities                                         (4,742)      (4,288)
                                                                               
Revenue                                                          -            -
                                                                               
Loss for the period                                         (3,058)      (6,997)
                                                                               
Other comprehensive (loss)/income                              (73)         111
                                                                               
Total comprehensive loss                                    (3,131)      (6,886)
                                                                               
Net deficit of the joint venture                            (3,220)      (2,447)
                                                                               

LLC Industrial Company Gazvydobuvannya
                                                               2014        2013
                                                              $'000       $'000
                                                                               
Non-current assets                                           26,047     101,041
                                                                               
Current assets                                                2,106       1,041
                                                                               
Non-current liabilities                                      (6,086)     (8,484)
                                                                               
Current liabilities                                          (2,821)     (2,617)
                                                                               
Revenue                                                           -           -
                                                                               
Loss for the period                                         (56,559)     (4,899)
                                                                               
Other comprehensive income/(loss)                           (18,727)         71
                                                                               
Total comprehensive loss                                    (75,286)     (4,828)
                                                                               
Net assets of the joint venture                              19,246      90,981


As of 31 December 2014 joint venture LLC Industrial Company Gazvydobuvannya
conducted an impairment assessment of its exploration and evaluation assets.
The impairment charge of $57.4 million recognised as the result of exploration
and evaluation assets value recoverability assessment was included in the loss
for the period.

LLC Westgasinvest
                                                               2014         2013
                                                              $'000        $'000
                                                                                
Non-current assets                                               73          164
                                                                                
Current assets                                                  123          662
                                                                                
Non-current liabilities                                           -            -
                                                                                
Current liabilities                                          (2,893)      (2,672)
                                                                                
Revenue                                                           -            -
                                                                                
Loss for the period                                          (3,717)      (3,364)
                                                                                
Other comprehensive income                                   (1,024)          55
                                                                                
Total comprehensive loss                                     (4,741)      (3,309)
                                                                                
Net assets of the joint venture                              (2,697)      (1,846)


The carrying amounts of the Group's interest in joint ventures recognized in
the financial statements of the Group using the equity method are set out in
the tables below:



                  LLC                    LLC Industrial             LLC     Total
                  Astroinvest-Energy            company    Westgasinvest         
                                       Gazvydo-buvannya                       
                               $'000              $'000            $'000    $'000 
                                                                                             
(Deficit)/net
assets recognised             (1,240)            62,283            4,922   65,965       
as at 31 December                                                             
2013                                                                          
                                                                              
Investments                      224              2,800                -    3,024
during the year                                                               
                                                                              
Loss for the year             (1,253)           (52,700)            (711) (54,664)
                                                                              
Carrying amount                                                               
of Group's                                                                    
interest                      (2,269)            12,383            4,211   14,325
                                                                              
as at 31 December                                                             
2014                                                                          

The Group's share of loss for the year includes the amount of impairment of $40.2
million recognised as the result of exploration and evaluation assets value
recoverability assessment; $12.7 million (2013: nil) of translation loss which
arose mainly on translation of non-current assets from UAH to USD being the
presentation currency of the Group and $0.2million profit from operations
(mainly as the result of VAT recovery which were impaired in the prior period).

Key assumptions used in the impairment assessment were as follows:

Future gas price was assumed to be flat $300, real per m3;

The pre-tax discount rate used was 15%, real; and

The growth rate used for the future costs projections was estimated based on 
inflation level in Ukraine for 2014 of 30% with a steady decline over the next 
10 years. Foreign exchange effects were assumed to be flat.  

The Group is committed together with ENI to fund LLC Astroinvest-Energy
subsequently to the year end with the necessary amount of $2.3 million in order
to close current liabilities of the joint venture. Most of the funds will be
used to repay the costs charged by the partners.

20. Inventories
                                                               2014    2013   
                                                              $'000   $'000  
                                                                              
Natural gas                                                   8,124       -
                                                                              
Diesel                                                          258       -
                                                                              
Other inventories                                             1,751   3,846
                                                                              
Impairment provision for obsolete inventory                    (193)   (895)
                                                                              
Carrying amount                                               9,940   2,951

The impairment provision as at 31 December 2014 and 2013 is made so as to
reduce the carrying value of the obsolete inventories to net realisable value.
During 2014 impairment charge $0.3 million (2013: $0.1 million release) has
been recognised in respect of other inventories.

21. Trade and other receivables
                                                         2014      2013     
                                                        $'000     $'000
                                                                              
Trading prepayments                                     8,584         -
                                                                              
Trading receivables                                     5,060         -
                                                                              
Receivable from joint venture                           1,938     4,077
                                                                              
VAT recoverable                                         1,674       251
                                                                              
Prepayments                                               166       401
                                                                              
Loans issued                                                -     1,559
                                                                              
Other receivables                                         469       591
                                                                              
                                                       17,891     6,879  
                                                                              

Trading prepayments represent actual payments made by the Group to suppliers
for the January 2015 gas supply.

Trading receivables represent current receivables from customers that have been
paid in January 2015. As of 31 December 2014 there were no past due
receivables  and no related impairment provision. The Group considers that the 
carrying amount of receivablesapproximates their fair value.

VAT Receivable is presented net of the cumulative provision of $4.4 million 
(2013: $9.5 million) against Ukrainian VAT receivable has been recognised as 
at 31 December 2014. Ageing of VAT receivable varies from 2 months to 2 years.

Receivable from joint ventures comprise $1.2 million from Astroinvest-Energy
LLC (2013: $1.6 million) and $0.7 million from Gazvydobuvannya LLC (2013: $2.5
million).

Loans issued of $1.6 million as at 31 December 2013 represent loan issued in
June 2013 to Oil and Gas Management Services Group Limited ("OAGSG") as part of
$3 million Loan Facility on a fully secured basis against receivables due to
OAGSG with the term of loan of 24 months and annual interest of 15%. It was
fully repaid on 9 July 2014. In July 2014 the agreement was cancelled and the
loan was settled by the counterparty in full amount.

22. Cash and cash equivalents

Cash and cash equivalents as at 31 December 2014 of $48.9 million (2013: $56.5
million) comprise cash held by the Group. The Directors consider that the
carrying amount of these assets approximates to their fair value.

As of 31 December 2014 part of the cash and cash equivalents in amount of $20
million related to security of borrowings and held at UK bank is considered to
be restricted cash balance (note 24).

23. Deferred tax

The following are the major deferred tax liabilities and assets recognised by
the Group and movements thereon during the current and prior reporting period:

                                                        Temporary differences
                                                                             
                                                                        $'000
                                                                             
Liability as at 1 January 2013                                            586
                                                                             
   Deferred tax expense                                                   120
                                                                             
   Exchange differences                                                   (31)
                                                                             
Liability as at 1 January 2014                                            675
                                                                             
   Deferred tax benefit                                                  (207)
                                                                             
Exchange differences                                                     (180)
                                                                             
Liability as at 31 December 2014                                          288
                                                                             


At 31 December 2014, the Group had the following unused tax losses available
for offset against future taxable profits: 
                                                                            
                                         2014              2013             
                                        $'000             $'000            
                                                                            
UK                                     10,274            13,623
                                                                            
Netherlands                                 -               938
                                                                            
Ukraine                                69,010            46,719
                                                                            
                                       79,284            61,280
                                                                            

Deferred tax assets have not been recognised in respect of these tax losses
owing to the uncertainty that profits will be available in future periods
against which they can be utilised.

The Group's unused tax losses of $10.3 million (2013: $13.6 million) relating
to losses incurred in the UK are available to shelter future non-trading
profits arising within the Company. These losses are not subject to a time
restriction on expiry.

Unused tax losses incurred by Ukraine subsidiaries amount to $69.0 million
(2013: $46.7 million). Under general provisions, these losses may be carried
forward indefinitely to be offset against any type of taxable income arising
from the same company of origination. Tax losses may not be surrendered from
one Ukraine subsidiary to another. However, in the past, Ukrainian legislation
has been imposed which restricted the carry forward of tax losses. During 2011
a new tax legislation in Ukraine was implemented which resulted in the
restriction to recognition of accumulated losses at 1 April 2011. Starting 1
January 2012 only 25% of accumulated losses as at this date are allowed to be
utilised each year for the period from 2012 till 2015 in the calculation of
taxable income of the company. Tax losses accumulated after 1 January 2012 have
no restrictions. 

24. Short-term borrowings

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

Outstanding amount as at 31 December 2014 was $17.3 million with average
effective interest rate 16% p.a. Interest is paid monthly and as at 31 December
2014 accrued interest amounted to $0.2million.

25. Trade and other payables
                                                        2014            2013
                                                       $'000           $'000
                                                                            
Prepayments received                                   2,470               -
                                                                            
Trade creditors                                          723           1,125
                                                                            
Accruals                                                 631           1,148
                                                                            
Taxes and social security                                425              21
                                                                            
Trading payables                                         312               -
                                                                            
Payables to joint ventures                               159             801
                                                                            
Other payables                                           348             347
                                                                            
                                                       5,068           3,442
                                                                            

Prepayments received represent payments from the customers for the natural gas
to be supplied in January 2015.

Trading payables represent liability to suppliers for the natural gas supply in
December 2014.

Trade creditors and accruals principally comprise amounts outstanding for
capital work programme purchases and ongoing costs. The average credit period
taken for trade purchases is 91 days (2013: 70 days). The Group has financial
risk management policies to ensure that all payables are paid within the credit
timeframe.

The Directors consider that the carrying amount of trade and other payables
approximates to their fair value. No interest is generally charged on
outstanding balances.

26. Provisions
                                                             $'000
At 1 January 2013                                              671  
                                                                  
Change in estimate (note 16 and 17)                             58   
                                                                  
Unwinding of discount on decommissioning provision (note 13)     6    
                                                                  
Exchange differences                                           (27) 
                                                                  
At 1 January 2014                                              708  
                                                                  
Change in estimate (note 16 and 17)                            296  
                                                                  
Unwinding of discount on decommissioning provision (note 13)    48   
                                                                  
Exchange differences                                          (350)
                                                                  
At 31 December 2014                                            702  
                                                                  
At 1 January 2013                                              671  
                                                                  
 Non-current                                                   195  
                                                                  
 Current                                                       513  
                                                                  
At 1 January 2014                                              708  
                                                                  
 Non-current                                                    55   
                                                                  
 Current                                                       647  
                                                                  
At 31 December 2014                                            702  
                                                                  

In accordance with the Group's environmental policy and applicable legal
requirements, the Group intends to restore the sites it is working on after
completing exploration or development activities. 

A short-term provision of $0.6 million (2013: $0.5 million) has been made for
decommissioning costs, which are expected to be incurred within the next year
as a result of the demobilisation of drilling equipment and respective site
restoration.

The long-term provision recognised in respect of decommissioning reflects
management's estimate of the net present value of the Group's share of the
expenditure expected to be incurred in this respect. This amount has been
recognised as a provision at its net present value, using a discount rate that
reflects the market assessment of time value of money at that date, and the
unwinding of the discount on the provision has been charged to the income
statement. These expenditures are expected to be incurred at the end of the
producing life of each field in the removal and decommissioning of the
facilities currently in place (currently estimated to be between 1 and 17
years).

27. Share capital

Authorised and issued equity share capital

                                             2014                 2013        
                                             '000    $'000        '000    $'000
Authorised                                                                    
                                                                              
Ordinary shares of £0.03 each           1,000,000   57,713   1,000,000   57,713
                                                                              
Issued                                                                        
                                                                              
Ordinary shares of £0.03 each             231,092   13,337     231,092   13,337
                                                                              

Authorised 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 2013 and 2014                                        231,091,734
                                                                               

28. Financial instruments

Capital risk management

The Group manages its capital to ensure that entities in the Group will be able
to continue as a going concern, while maximising the return to shareholders.

The capital resources of the Group consists of cash and cash equivalents
arising from equity attributable to owners of the Company, comprising issued
capital, reserves and retained earnings as disclosed in the Consolidated
Statement of Changes in Equity. 

Externally imposed capital requirement

The Group is not subject to externally imposed capital requirements.

 
Categories of financial instruments
                                                                   2014    2013  
                                                                  $'000   $'000 
                                                                               
Financial assets - loans and receivables (includes cash and cash               
equivalents)                                                                   
                                                                               
Cash and cash equivalents                                        48,927  56,484
                                                                               
Trading receivable                                                5,060       -
                                                                               
Receivable from joint venture                                     1,938   4,077
                                                                               
Loans issued                                                          -   1,559
                                                                               
Other receivables                                                   469     590
                                                                               
                                                                  56,394 62,710
                                                                               
Financial liabilities - measured at amortised cost                             
                                                                               
Short-term borrowings                                             17,327      -
                                                                               
Trade creditors                                                      723  1,125
                                                                               
Accruals                                                             631  1,148
                                                                               
Other payables                                                       348    347
                                                                               
Trading payables                                                     312      -
                                                                               
Payables to joint ventures                                           159    801
                                                                               
Taxes and social security                                            425     21
                                                                               
                                                                  19,925  3,442
 
Financial risk management objectives

Management provides services to the business, co-ordinates access to domestic
and international financial markets and monitors and manages the financial
risks relating to the operations of the Group in Ukraine through internal risks
reports which analyse exposures by degree and magnitude of risks. These risks
include commodity price risks, foreign currency risk, credit risk, liquidity
risk and cash flow interest rate risk. The Group does not enter into or trade
financial instruments, including derivative financial instruments, for
speculative purposes.

The Audit Committee of the Board reviews and monitors risks faced by the Group
through meetings held throughout the year.

Financial instruments

Interest rate risk

Interest rate risk arises from the possibility that changes in interest rates
will affect the value of the financial instruments. 

The Group is not exposed to interest rate risk because entities of the Group
borrow funds at fixed interest rates.

Commodity price risk

The commodity price risk related to Ukrainian gas and condensate prices and, to
a lesser extent, prices for crude oil are the Group's most significant market
risk exposures. World prices for gas and crude oil are characterised by
significant fluctuations that are determined by the global balance of supply
and demand and worldwide political developments, including actions taken by the
Organisation of Petroleum Exporting Countries.

These fluctuations may have a significant effect on the Group's revenues and
operating profits going forward. The principal factor in the current Ukrainian
gas price is bilateral negotiations with Gazprom to establish the price of gas
imports from Russia. The price for Ukrainian gas is based on the current price
of these gas imports from Russia, which are nonetheless influenced by world
prices. Management continues to expect that the Group's principal market for
gas will be the Ukrainian domestic market.

The Group does not hedge market risk resulting from fluctuations in gas,
condensate and oil prices, and holds no financial instruments which are
sensitive to commodity price risk.

Foreign exchange risk and foreign currency risk management

The Group undertakes certain transactions denominated in foreign currencies.
Hence, exposures to exchange rate fluctuations arise.  The Group to date has
elected not to hedge its exposure to the risk of changes in foreign currency
exchange rates.

The carrying amounts of the Group's foreign currency denominated monetary
assets and monetary liabilities at the reporting date are as follows:

                                  Liabilities                 Assets    
                             2014         2013          2014      2013  
                            $'000        $'000         $'000     $'000  
                                                                        
GBP ('£')                     105          106             -         -  
                                                                        

Foreign currency sensitivity analysis

The Group is exposed primarily to movements in currencies against the US dollar
as this is the presentation currency of the Group.  In order to fund
operations, US dollar funds are converted to UAH just before being contributed
to the Ukrainian subsidiaries. Sensitivity analyses have been performed to
indicate how the profit or loss would have been affected by changes in the
exchange rate between the GBP and US dollar. The analysis is based on a
weakening of the US dollar by 10 per cent against GBP, a functional currency in
the entities of the Group which have significant monetary assets and
liabilities at the end of each respective period. A movement of 10 per cent
reflects a reasonably possible sensitivity when compared to historical
movements over a three to five year timeframe. The sensitivity analysis
includes only outstanding foreign currency denominated monetary items and
adjusts their translation at the period end for a 10 per cent change in foreign
currency rates.

A number below indicates a decrease in profit where US dollar strengthens 10
per cent against the other currencies. For a 10 per cent weakening of the US
dollar against the other currencies, there would be an equal and opposite
impact on the profit or loss, and the balances would be negative.

The Group is not exposed to significant foreign currency risk in other
currencies.

The following table details the Group's sensitivity to a 10 per cent decrease
in the US dollar against the GBP.

                                                       2014              2013
                                                      $'000             $'000
                                                                             
Income statement                                    (4,473)           (4,587)
                                                                             

Inflation risk management

Inflation in Ukraine and in the international market for oil and gas may affect
the Group's cost for equipment and supplies. The Directors will proceed with
the Group's practices of keeping deposits in US dollar accounts until funds are
needed and selling its production in the spot market to enable the Group to
manage the risk of inflation.

Credit risk management

Credit risk refers to the risk that counterparty will default on its
contractual obligations resulting in financial loss to the Group. The Group's
credit management process includes the assessment, monitoring and reporting of
counterparty exposure on a regular basis. Credit risk with respect to
receivables and advances is mitigated by active and continuous monitoring the
credit quality of its counterparties through internal reviews and assessment.
Trading receivables as at 31 December 2014 have been paid in January 2015.

The Group makes allowances for impairment of receivables where there is an
identified event which, based on previous experience, is evidence of a
reduction in the recoverability of cash flows.

The credit risk on liquid funds (cash) is considered to be limited because the
counterparties are financial institutions with high and good credit ratings,
assigned by international credit-rating agencies in the UK and Ukraine
respectively.

The carrying amount of financial assets recorded in the financial statements
represents the Group's maximum exposure to credit risk.

Liquidity risk management

Ultimate responsibility for liquidity risk management rests with the Board of
Directors, which has built an appropriate liquidity risk management framework
for the management of the Group's short, medium and long-term funding and
liquidity management requirements. The Group manages liquidity risk by
maintaining adequate cash reserves and by continuously monitoring forecast and
actual cash flows.

The following tables sets out details of the expected contractual maturity of
financial liabilities.
                                                                                
                               Within                                               
                             3 months   3 months to 1 year    More than 1 year   Total    
                                $'000                $'000               $'000   $'000
At 31 December 2014                                                             
                                                                                
Short-term borrowings          17,327                   -                    -  17,327
                                                                                
Trade and other payables        1,683                 915                    -   2,598
                                                                                  
At 31 December 2013                                                             
                                                                                
Trade and other payables        1,192               2,250                    -   3,442
                                                                                

29. Commitments and contingencies

Joint activity agreements

The Group has working interests in nine licences to conduct its exploration and
development activities in Ukraine. Each licence is held with the obligation to
fulfil a minimum set of exploration activities within its term and is
summarised on an annual basis, including the agreed minimum amount forecasted
expenditure to fulfil those obligations. The activities and proposed
expenditure levels are agreed with the government licensing authority.

The required future financing of exploration and development work on fields
under the licence obligations are as follow:
                                                              2014       2013
                                                             $'000      $'000
                                                                             
Within one year                                                580      1,258
                                                                             
Between two and five years                                     520      1,863
                                                                             
                                                             1,100      3,121
                                                                             

The Group has revised its minimum working programmes and resubmitted the
required documentation to the government authorities; updated commitments have
decreased for all licences from $3.1 million to $1.1 million. Licence
obligations of the joint ventures as at 31 December 2014 amounted to $0.5
million (2013: $0.4 million) of obligations within one year and $0.4 million
(2013: $0.1 million) of obligations between two and five years.

In addition to licence commitments, the Group is committed together with ENI to
fund LLC Astroinvest-Energy subsequently to year end with the necessary amount
of $2.3 million in order to close current liabilities of the joint venture.

Tax contingent liabilities

The Group assesses its liabilities and contingencies for all tax years open for
audit by UK tax authority based upon the latest information available. For
those matters where it is probable that an adjustment will be made, the Group
records its best estimate of these tax liabilities, including related interest
charges. Inherent uncertainties exist in estimates of tax contingencies due to
complexities of interpretation and changes in tax laws.

Whilst the Group believes it has adequately provided for the outcome of these
matters, certain periods are under audit by the UK tax authority, and therefore
future results may include favourable or unfavourable adjustments to these
estimated tax liabilities in the period the assessments are made, or resolved.
The final outcome of tax examinations may result in a materially different
outcome than assumed in the tax liabilities.

30. Related party transactions

All transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note. The application of IFRS 11 has resulted in the existing joint ventures
LLC Astroinvest-Energy, LLC Gazvydobuvannya and LLC Westgasinvest being
accounted for under the equity method and disclosed as related parties.

During the period, Group companies entered into the following transactions with
joint ventures who are considered as related parties of the Group:

                                                           2014    2013
                                                          $'000   $'000
                                                                     
Revenues from services provided and sales of goods          597   1,892
                                                                     
Purchases of goods                                           87      22
                                                                     
Amounts owed by related parties                           1,938   4,077
                                                                     
Amounts owed to related parties                             159     801
                                                                     

Remuneration of key management personnel

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 2014 on pages 39 and 53.

                                 Purchase of services    Amounts owing  
                                   2014          2013     2014     2013
                                  $'000         $'000    $'000    $'000
                                                                        
Short-term employee benefits      1,148           911      137       69
                                                                        

The total remuneration of the highest paid Director was $0.4 million in the
year (2013: $0.4 million).

The amounts outstanding are unsecured and will be settled in cash. No
guarantees have been given or received and no provisions have been made for
doubtful debts in respect of the amounts owed by related parties.

31. Events after the balance sheet date

Political and economic turmoil in Ukraine

We are monitoring the current political situation in Ukraine carefully and
there have been no disruptions to the Company's operations in either of our
operating locations.

As a result of the recent political and economic turmoil in Ukraine, there has
been a further significant devaluation of the Ukrainian Hryvnia against the US
Dollar which is likely to affect the carrying value of the Group's assets in
the future. Since 1 January 2015, the Ukrainian Hryvnia has devalued against
the US Dollar by approximately 45%.

We have reassessed the key judgements and critical accounting estimates as at
the date of this report and, based on the current status of operations, no
adjustments have been made.
 

Company Balance Sheet
As at 31 December 2014
                                                      2014          2013        
                                             Notes   $'000         $'000       
ASSETS                                                                         
                                                                               
Non-current assets                                                             
                                                                               
Investments                                  34          -             -           
                                                                               
Receivables from subsidiaries                35     73,750        77,506      
                                                                               
                                                    73,750        77,506      
                                                                               
Current assets                                                                 
                                                                               
Trade and other receivables                  35     3,333          1,763       
                                                                               
Cash and cash equivalents                    35    46,634         50,280      
                                                                               
                                                   49,967         52,043      
                                                                               
Total assets                                      123,717        129,549     
                                                                               
LIABILITIES                                                                    
                                                                               
Current liabilities                                                            
                                                                               
Trade and other payables                     36     (370)         (1,211)     
                                                                               
                                                    (370)         (1,211)     
                                                                               
Total liabilities                                   (370)         (1,211)     
                                                                               
Net assets                                       123,347         128,338     
                                                                               
EQUITY                                                                         
                                                                               
Share capital                                37   13,337          13,337      
                                                                               
Retained earnings                                212,902         210,297     
                                                                               
Cumulative translation reserves              38 (102,892)        (95,296)    
                                                                               
Share-based payment reserve                            -               -           
                                                                               
Total equity                                     123,347         128,338     
                                                                               

The financial statements of Cadogan Petroleum plc, registered in England and
Wales no. 5718406, were approved by the Board of Directors and authorised for
issue on 30 April 2015.


They were signed on its behalf by:
Bertrand Des Pallieres
Chief Executive Officer
30 April 2015


The notes on pages 67 to 106 form part of these financial statements.

Company Cash Flow Statement
For the year ended 31 December 2014
                                                                   2014     2013
                                                          Note    $'000    $'000
                                                                                
Net cash inflow/(outflow) from operating activities         39      194   (4,034)
                                                                                
Investing activities                                                            
                                                                                
Interest received                                                   827      258
                                                                                
Repayment of loans to subsidiary companies                            -   19,783
                                                                                
Net cash from investing activities                                  827   20,041
                                                                                
                                                                                
Net increase in cash and cash equivalents                         1,021   16,007
                                                                                
Effect of foreign exchange rate changes                          (4,667)    2,181
                                                                                
Cash and cash equivalents at beginning of year                   50,280   32,092
                                                                                
Cash and cash equivalents at end of year                         46,634   50,280
                                                                                

Company Statement of Changes in Equity
For the year ended 31 December 2014
                                                                               
                                                   Cumulative                        
                        Share      Retained       translation         Share-based       
                       capital     earnings          reserves     payment reserve          Total
                         $'000        $'000             $'000               $'000          $'000                    
                                                                               
As at 1 January 2013     13,337      212,497           (97,734)                 93        128,193
                                                                               
Share-based                  -           93                 -                 (93)             -      
payment                                                                        
                                                                               
Net loss for the             -       (2,293)                -                   -         (2,293)            
year                                                                    
                                                                               
Exchange                     -            -             2,438                    -         2,438           
translation                                                                    
differences                                                               
                                                                               
As at 1 January 2014    13,337      210,297           (95,296)                   -       128,338
                                                                               
Net income for the           -        2,605                 -                    -         2,605
year                                
                                                                               
Exchange                     -       (7,596)                -                    -        (7,596)
translation                                                               
differences                     
                                                                               
As at 31 December                                                   
2014                     13,337     212,902          (102,892)                   -       123,347
                                                                               
 
32. Significant accounting policies

The separate financial statements of the Company are presented as required by
the Companies Act 2006 (the "Act"). As permitted by the Act, the separate
financial statements have been prepared in accordance with International
Financial Reporting Standards.

The financial statements have been prepared on the historical cost basis. The
principal accounting policies adopted are the same as those set out in note 3
to the Consolidated Financial Statements except as noted below.


As permitted by section 408 of the Act, the Company has elected not to present
its profit and loss account for the year. Cadogan Petroleum plc reports a
profit for the financial year ended 31 December 2014 of $2.6 million (2013:
loss $2.3 million). 

Investments

Investments in subsidiaries are stated at cost less, where appropriate,
provisions for impairment.

Critical accounting judgements and key sources of estimation uncertainty

The Company's financial statements, and in particular its investments in and
receivables from subsidiaries, are affected by certain of the critical
accounting judgements and key sources of estimation uncertainty described in
note 4 to the Consolidated Financial Statements.

33. Auditor's remuneration

The auditor's remuneration for audit and other services is disclosed in note 10
to the Consolidated Financial Statements.

34. Investments

The Company's subsidiaries are disclosed in note 18 to the Consolidated
Financial Statements. The investments in subsidiaries are all stated at cost
less any provision for impairment.

35. Financial assets   

The Company's principal financial assets are bank balances and cash and cash
equivalents, prepayments and receivables from related parties none of which are
past due. The Directors consider that the carrying amount of receivables from
related parties approximates to their fair value.

Receivables from subsidiaries

At the balance sheet date gross amounts receivable from the fellow Group
companies were $329.0 million (2013: $348.5 million). No impairment was
recognised in 2014 or 2013. The carrying value of the receivables from the
fellow Group companies as at 31 December 2014 was $73.8 million (2013: $77.5
million). There are no past due receivables. 

Trade and other receivables

                                                    2014          2013         
                                                   $'000         $'000        
                                                                              
Prepayments                                        3,272            51           
                                                                              
VAT recoverable                                       37           138          
                                                                              
Loans issued                                           -         1,559        
                                                                              
Other receivables                                     24            15           
                                                                              
                                                   3,333         1,763        
                                                                              

In December 2014 the Company has made a prepayment for the natural gas on
behalf of its Ukrainian subsidiary due to difficulties of currency purchase in
Ukraine. In 2015 this prepayment has been settled in full to the Company.

Cash and cash equivalents

Cash and cash equivalents comprise cash held by the Company and short-term bank
deposits with an original maturity of three months or less. The carrying value
of these assets approximates to their fair value.

As of 31 December 2014, cash and cash equivalents in amount of $20 million,
related to security of the loan provided to the Ukrainian subsidiary and held
at UK bank, was restricted (note 24).

36. Financial liabilities

Trade and other payables
                                                           2014      2013     
                                                          $'000     $'000    
                                                                             
Trade creditors                                             179       317      
                                                                             
Other creditors and payables                                  -       238      
                                                                             
Accruals                                                    191       656      
                                                                             
                                                            370     1,211    
  

Trade payables principally comprise amounts outstanding for trade purchases and
ongoing costs. The average credit period taken for trade purchases is 82 days
(2013: 45 days). 

The Directors consider that the carrying amount of trade and other payables
approximates to their fair value. No interest is charged on balances
outstanding.

37. Share capital

The Company's share capital is disclosed in note 27 to the Consolidated
Financial Statements.

38. Cumulative translation reserve

The functional currency of the Company is pounds sterling. The financial
statements of the Company are expressed in US dollars, which is its
presentation currency. Cumulative translation reserve represents the effect of
translating the results and financial position of the Company into US dollars.

39. Notes to the cash flow statement
                                                                   2014     2013
                                                                  $'000    $'000
                                                                                
Operating loss from continuing operations                         2,605   (2,293)
                                                                                
Operating cash flows before movements in working capital          2,605   (2,293)
                                                                                
Increase in receivables                                          (1,570)  (1,662)
                                                                                
Decrease in payables                                               (841)     (79)
                                                                                
Cash used in operations                                             194   (4,034)
                                                                                
Income taxes paid                                                     -        -
                                                                                
Net cash outflow from continuing operations                         194   (4,034)
                                                                                

40. Financial instruments

The Company manages its capital to ensure that it is able to continue as a
going concern while maximising the return to shareholders. Refer to note 28 for
the Group's overall strategy and financial risk management objectives.

The capital resources of the Group consist of cash and cash equivalents arising
from equity, comprising issued capital, reserves and retained earnings.

Categories of financial instruments                             
                                                                2014    2013   
                                                               $'000   $'000  
                                                                              
Financial assets - loans and receivables (includes cash and                   
cash equivalents)                                                             
                                                                              
Cash and cash equivalents                                     46,634  50,280 
                                                                              
Amounts due from subsidiaries                                 73,750  77,506 
                                                                              
                                                             120,384 127,786
                                                                              
Financial liabilities - measured at amortised cost                            
                                                                              
Trade creditors                                                 (179)    (317)  
                                                                              
                                                                (179)    (317)  
                                                                              

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 a counterparty will default on its
contractual obligations resulting in financial loss to the Company. For cash
and cash equivalents, the Company only transacts with entities that are rated
equivalent to investment grade and above. Other financial assets consist of
amounts receivable from related parties.

The Company's credit risk on liquid funds is limited because the counterparties
are banks with high credit-ratings assigned by international credit-rating
agencies.

The carrying amount of financial assets recorded in the Company financial
statements, which is net of any impairment losses, represents the Company's
maximum exposure to credit risk.

Liquidity risk management

Ultimate responsibility for liquidity risk management rests with the Board of
Directors, which has built an appropriate liquidity risk management framework
for the management of the Company's short, medium and long-term funding and
liquidity management requirements. The Company maintains adequate reserves, by
continuously monitoring forecast and actual cash flows.

The Company's financial liabilities are not significant and therefore no
maturity analysis has been presented.

Foreign exchange risk and foreign currency risk management

The Company undertakes certain transactions denominated in foreign currencies.
Hence, exposures to exchange rate fluctuations arise.  The Company holds a
large portion of its foreign currency denominated monetary assets and monetary
liabilities in US dollars. More information on the foreign exchange risk and
foreign currency risk management is disclosed in note 28 to the Consolidated
Financial Statements.

41. Related parties

Amounts due from subsidiaries

The Company has entered into a number of unsecured related party transactions
with its subsidiary undertakings. The most significant transactions carried out
between the Company and its subsidiary undertakings are mainly for short and
long-term financing. Amounts owed from these entities are detailed below:

                                                         2014       2013      
                                                        $'000      $'000     
                                                                             
Cadogan Petroleum Holdings Limited                     73,750     77,506    
                                                                             
                                                       73,750     77,506    
                                                                             

Refer to note 35 for details on the Company's receivables due from
subsidiaries.

The remuneration of the Directors, who are the key management personnel of the
Group, is set out below in aggregate for each of the categories specified in
IAS 24 Related Party Disclosures. Further information about the remuneration of
individual Directors is provided in the audited part of the Annual Report on
Remuneration 2014 on pages 39 to 53.

                                            Remuneration       Amounts owing   
                                             2014      2013    2014     2013    
                                            $'000     $'000   $'000    $'000    
                                                                               
Short-term employee benefits                  334       326      54        -    
                                                                               

The total remuneration of the highest paid Director was $0.4 million in the
year (2013: $0.4 million).

42. Events after the balance sheet date

Events after the balance sheet date are disclosed in note 31 to the
Consolidated Financial Statements.

Glossary

IPO             Initial public offering                                          
                                                                               
IFRSs           International Financial Reporting Standards                      
                                                                               
JAA             Joint activity agreement                                         
                                                                               
UAH             Ukrainian hryvnia                                                
                                                                               
GBP             Great Britain pounds                                             
                                                                               
$               United States dollars                                            
                                                                               
bbl             Barrel                                                           
                                                                               
boe             Barrel of oil equivalent                                         
                                                                               
mmboe           Million barrels of oil equivalent                                
                                                                               
mboe            Thousand barrels of oil equivalent                               
                                                                               
mboepd          Thousand barrels of oil equivalent per day                       
                                                                               
boepd           Barrels of oil equivalent per day                                
                                                                               
bcf             Billion cubic feet                                               
                                                                               
mmcm            Million cubic metres                                             
                                                                               
mcm             Thousand cubic metres                                            
                                                                               
Reserves        Those quantities of petroleum anticipated to be commercially     
                recoverable by application of development projects to known      
                accumulations from a given date forward under defined conditions.
                Reserves include proved, probable and possible reserve           
                categories.                                                      
                                                                               
Proved          Those additional Reserves which analysis of geoscience and       
Reserves        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        Those additional Reserves which analysis of geoscience and       
Reserves        engineering data indicate are less likely to be recovered than   
                proved Resources but more certain to be recovered than possible  
                Reserves.                                                        
                                                                               
Possible        Those additional Reserves which analysis of geoscience and       
Reserves        engineering data indicate are less likely to be recoverable than 
                probable Reserves.                                               
                                                                               
Contingent      Those quantities of petroleum estimated, as of a given date, to  
Resources       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     Those quantities of petroleum which are estimated as of a given  
Resources       date to be potentially recoverable from undiscovered             
                accumulations.                                                   
                                                                               
1P              Proved Reserves                                                  
                                                                               
2P              Proved plus probable Reserves                                    
                                                                               
3P              Proved plus probable plus possible Reserves                      
                                                                               
Carboniferous   A geological period 295 million to 354 million years before      
                present                                                          
                                                                               
Devonian        A geological period between 417 million and 354 million years    
                before present                                                   
                                                                               
Visean          Geological period within the early to middle Carboniferous       
                                                                               
Spud            To commence drilling, once the cement cellar and conductor pipe  
                at the well-head have been constructed                           
                                                                               
TD              Target depth                                                     
                                                                               
Workover        The process of performing major maintenance or remedial treatment
                of an existing oil or gas well                                   
                                                                               
LWD             Logging while drilling                                           
                                                                               

Shareholder Information

Financial calendar 2015/2016

Annual General Meeting          25 June 2015  
Half Yearly results announced   August 2015
Annual results announced        April 2016 
                                         

Investor relations

Enquiries to: [e-mail]

Registered office

1st Floor, 40 Dukes Place, London EC3A 7NH

Registered in England and Wales no. 5718406

27A Taras Shevchenko Boulevard
01032 Kyiv
Ukraine

Email:    [e-mail]
Tel:      [phone]
Fax:      [phone]

www.cadoganpetroleum.com

All references to page numbers in the announcement are to the page numbers in
the full Annual Report and Financial Statements which can be found on the
Company's website www.cadoganpetroleum.com.