Execution of a loan and related call-option agr...

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Press Release                                                                                                                                        26 February, 2019

This  announcement is deemed to contain Inside Information as defined under the Market Abuse Regulations  n. 596/2014

Cadogan Petroleum Plc

(“Cadogan” or the “Company”)

Execution of a loan and related call-option agreement

Cadogan Petroleum plc (“Cadogan”), an independent, diversified oil & gas company listed on the Main Market of the London Stock Exchange, is pleased to announce that its wholly owned subsidiary Cadogan Petroleum Holdings BV  (“CPHBV”) has entered into a Euro 13,385,000 loan agreement with Proger Managers & Partners Srl (“PMP”), a privately owned Italian company whose only interest is a 59.6% participation in Proger Ingegneria Srl (“Proger Ingegneria”), a privately owned company which has a 67.9% participating interest in Proger spa (“Proger’”. The loan carries an entitlement to interest at a rate of 5.5% per year, payable at maturity (which is 24 months after the execution date and assuming that the call option described below is not exercised). The principal of the loan is secured by a pledge on PMP’s current participating interest in Proger Ingegneria Srl, up to a maximum guaranteed amount of Euro 13,385,000.

Proger is a privately-owned international contractor, providing some of the world’s largest companies with comprehensive engineering, project management and security solutions. Its second largest shareholder, with a 27.4% participating interest, is SIMEST, the Italian government agency which supports local companies to achieve export driven growth. Proger is based in Italy, with offices in the Middle East, Africa and Europe, is involved in major projects around the world, including significant oil & gas, energy and infrastructure installations, and has more than 60 years’ experience.

In the year to 31 December 2017, Proger had revenues[1] of €110 million,  generated an EBITDA of €9.1 million and €4.0 million of net profit; for the first six months of 2018, net profit grew to €2.74 million.

PMP will use the proceeds of the loan exclusively for the purpose of subscribing to Proger Ingegneria’s capital increase, whilst Proger Ingegneria will in turn use the cash contribution received  exclusively to subscribe its 67.9% portion of Proger’s capital increase. Proger will use the capital to finance its business plan which targets a material increase of EBITDA over the next 5 years, driven by the expansion of energy projects in the Middle East as well as by the development its integrated services business. Proger’s business plan and its growth opportunities have been reviewed by PwC as part of the due diligence conducted for Cadogan.

In exchange for providing the loan, and besides the pledge on PMP’s current participating interest in Proger Ingegneria, CPHBV has secured:

1. The right to designate two out of the seven directors in each of Proger and Proger Ingegneria’s Boards of Directors. One of the two directors designated by CPHBV will be appointed as Proger’s Chairman of the Board, with a supervisory role on financial affairs.

2. The right to designate one of the three members in each of Proger and Proger Ingegneria Boards of Statutory Auditors.

3. A call option to acquire, at its sole discretion, 33% of the participating interest that PMP will be holding in Proger Ingegneria as a result of its forthcoming subscription; the exercise of the option would give Cadogan, through CPHBV, an indirect 22% interest in Proger. The call option is granted at no additional cost and can be exercised at any time between the 6^th (sixth) and 24^th (twenty-fourth) months following the execution date of the loan agreement and subject to Cadogan shareholders having approved the exercise of the call option as explained further below.  Should CPHBV exercise the call option, the price for the purchase of the 33% participating interest in Proger Ingegneria shall be paid by setting off the corresponding amount due by PMP to CPHBV, by way of reimbursement of the principal, pursuant to the loan agreement. If the call option is exercised, then the obligation on PMP to pay interest is extinguished.

An exercise of the call option would not only expose Cadogan to significant and realizable growth in Parrot’s business, but would also generate several potential operational synergies, which will support the development of both companies.  For Cadogan, these synergies could include access to additional, local specialists to assist in developing its pipeline of opportunities, given Parrot’s presence in several countries of interest, as well as operational synergies in Ukraine with its service business. In recent years and, based on its current order book, oil & gas has been a growth area for Parrot and a continuation of that trend will enhance opportunities for Cadogan.  For Proger, the benefits include leveraging Cadogan’s upstream competences to access higher-margin contracts in the oil & gas industry.

Cadogan, through CPHBV, intends to designate Chicco Testa (who is a current non-executive director of Cadogan) as Chairman of Proger’s board of directors and to confirm Guido Michelotti who is the Chief Executive Officer of Cadogan, as a director. Guido Michelotti is already a non-executive director of Parrot and therefore has excused himself from all meetings considering this transaction and has not been involved in the negotiation of the loan agreement nor in the taking of any other related decision. Guido Michelotti does not have, nor has had in the past, any economic interest in Parrot.

Commenting on the transaction, Zev Furst, Cadogan’s non-Executive Chairman said:

“This loan agreement creates for Cadogan’s shareholders an exposure to a Company with material growth potential at a balanced level of risk; it also offers both companies the benefit of potential operational synergies for the development of their respective businesses. The loan is in-line with the Company’s strategy to leverage its balance sheet position to offer such exposures, while diversifying the Company’s overall geographic and industry risk profile.”

Listing Rules considerations

As described above, on exercise of the call option, CPHBV would acquire the 33% of the participating interest that PMP will be holding in Proger Ingegneria as a result of its forthcoming subscription.  The exercise of the option will give Cadogan, through CPHBV, an indirect 22% interest in Proger. This exercise of the call option (or the enforcement of the pledge referred to above) would  be likely to constitute a reverse takeover for Cadogan under the Listing Rules.

In that instance, the exercise of the call option would be subject to and require publication of: (i) a shareholder circular and notice to convene a general meeting seeking Cadogan shareholder approval of the proposed exercise of the call option by CPHBV; and (ii) a prospectus in connection with the proposed re-admission of Cadogan's shares to the Standard segment of the Official List and to trading on the London Stock Exchange (as Cadogan’s listing would be cancelled following the consummation of a reverse takeover).

About

Cadogan is an independent, diversified oil and gas company, which operates exploration and production licenses in Western Ukraine, conducts gas trading operations, and provides services to E&P companies.

Proger is a Rome-based, international company that offers state of the art engineering and management expertise in a broad range of fields.

Proger has more than 60 years of experience and now sits at the top of Italian rankings of engineering companies[2], with a consolidated position among the top 100 international engineering companies in the world according to ENR (Engineering News Record) criteria. It is a general engineering company able to guarantee the development and completion of large scale multidisciplinary projects, offering clients a unique  point of reference [not clear what this means] during every phase.

Proger, counting on more than 1,000 professionals in 18 countries over 3 continents, develops projects in the following sectors:

-          Oil & Gas – green energy

-          Infrastructure & Transportation

-          Sustainability & Environment

-          Building

-          Security

For further information, please contact:

Cadogan Petroleum plc
Guido Michelotti	Chief Executive Officer	[phone]
Ben Harber	Company Secretary	[phone]
Cantor Fitzgerald Europe	Broker to Cadogan Petroleum plc
David Porter, Nick Tulloch		[phone]

Important Notices:

This Announcement has been issued by, and is the sole responsibility of, the Company.

Certain statements in this announcement are forward-looking statements. By their nature, forward-looking statements involve a number of risks, uncertainties and assumptions that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. These risks, uncertainties and assumptions could adversely affect the outcome and financial consequences of the plans and events described herein. No one undertakes any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Readers should not place any undue reliance on forward-looking statements which speak only as of the date of this announcement. Statements contained in this announcement regarding past trends or events should not be taken as representation that such trends or events will continue in the future.

Neither this announcement nor the information contained herein is for publication, distribution or release, in whole or in part, directly or indirectly, in or into or from the United States (including its territories and possessions, any State of the United States and the District of Columbia), Australia, Canada, Japan, South Africa or any other jurisdiction where to do so would constitute a violation of the relevant laws of such jurisdiction. The distribution of this announcement may be restricted by law in certain jurisdictions and persons who come into possession of any document or other information referred to herein should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdictions.

This announcement does not contain or constitute an offer of, or the solicitation of an offer to buy or subscribe for, the securities referred to herein to any person in any jurisdiction, including the United States, Australia, Canada, Japan, South Africa or in any jurisdiction to whom or in which such offer or solicitation is unlawful.

[1]  Italian accounting standards, which are based on European Union’s 4th directive. Reported figures are audited

[2] 2017 and 2018 ranking of the Top International Design firms issued by Engineering News-Record (https://www.enr.com/toplists/2018-Top-225-International-Design-Firms-1)