Half-year Report
CADOGAN PETROLEUM PLC
Half Yearly Report for the Six Months ended 30 June 2022
(Unaudited and unreviewed)
Highlights
Cadogan Petroleum plc (“Cadogan” or the “Company”), an independent, diversified oil & gas company listed on the main market of the London Stock Exchange, is pleased to announce its unaudited results for the six months ended 30 June 2022.
H1 2022 witnessed severe challenges due to the invasion of Ukraine by Russia on 24 February 2022. Cadogan stopped its production activities for 3 weeks, at the beginning of March 2022, and was able to resume them after having secured the safety of its employees, its assets, the transactions with its customers and the deliveries.
H1 2022 has been another semester without LTI and TRI with strict execution of the anti-covid measures implemented by the company since the beginning of the pandemic.
In H1 2022, the average production was 336 bpd in (331 bpd in H1 2021), a 1.5% increase versus H1 2021. This result was achieved notwithstanding the war in the country and the shutdown of all Blazhiv wells for 3 weeks. The production revenues increased by 40% versus the same period in 2021, due to a 38.5% increase in the average realised oil price and a 1.5% increase of the production volumes. Overall revenues increased by 2.6% versus the same period in 2021 due to the absence of sales of gas for the first half 2022.
The Company continued defending its position for the Bitlyanska licence award at the Court of Appeal. In August 2022, the Court of Appeal denied the satisfaction of its claims. The Company considers that this decision is based on incorrect application of law and has filed an appeal to the Supreme Court.
In the context of the prevailing situation in Ukraine, the services segment was dedicated totally to supporting the Group’s production activities. Starting from 2022, production entities activities and service entity activities will be presented solely as Exploration and Production segment result.
In August 2022, Cadogan was informed of the arbitral proceeding award which:
- rejected Proger’s principal claim and declared that the Loan Agreement is valid and effective;
- deemed to qualify the Call Option as a preliminary contract under condition, but
- rejected Proger’s claim ex art.2932 Italian Civil Code, stating that it is impossible to give an award producing the same effects of a final contract ex art.2932 Italian Civil Code,
- this because of the duties established by the rules of the London Regulatory Authority and because of the need, possibly by both parties, to comply with the due proceedings before the formalization of the entry of Cadogan into the capital of Proger Ingegneria,
- subordinated the stipulation of the final contract to the precedent completion of the proceeding and bureaucratic process as per the British rules, stating that, otherwise,
- there is the obligation on Proger Ingegneria to return the payment received under the Loan Agreement,
- compensated all the expenses of the proceeding.
The cash position at the period end was $14.5 million (30 June 2021: $14.7 million). This level of cash is sufficient to sustain on-going operations.
Overall, Cadogan continued operating in an extremely unstable environment caused by the ongoing war in Ukraine, with the subsequent destruction of the infrastructures and fatalities, the economic and financial turmoil in the local and European economy and the volatility of currencies. The Company continued improving performances of its oil production operations and controlling costs.
Key performance indicators
During H1 2022, the Group has monitored its performance in conducting its business with reference to a number of key performance indicators (‘KPIs’):
to increase oil production measured on the barrels of oil produced per day (‘bpd’);
to decrease administrative expenses;
to increase the Group’s basic earnings per share;
to maintain no lost time incident; and
to grow and geographically diversify the portfolio.
The Group’s performance during the first six months of 2022, measured against these targets, is set out in the table below, together with the prior year performance data. No changes have been made to the sources of data or calculations used in the period/year. The positive trend in the HSE performances continues with zero incidents.
| Unit | 30 June 2022 | 30 June 2021 | 31 December 2021 | |
| Average production (working interest basis) (a) | Boepd | 336 | 331 | 350 |
| Administrative expenses | $million | 1.6 | 1.7 | 3.7 |
| Basic loss per share (b) | Cent | (0.5) | (0.1) | (2.1) |
| Lost time incident (c) | Incidents | - | - | - |
| Geographical diversification | New assets | - | - | - |
- Average production is calculated as the average daily production during the period/year
- Basic loss per ordinary share is calculated by dividing the net loss for the year attributable to equity holders of the parent company by the weighted average number of ordinary shares during the period
- Lost time incidents relate to injuries where an employee/contractor is injured and has time off work (IOGP classification)
Enquiries:
| Cadogan Petroleum Plc | ||
| Fady Khallouf Ben Harber |
Chief Executive Officer Company Secretary |
fady.khallouf@cadoganpetroleum.com +44 (0) 207 264 4366 |
Operations Review
Introduction
In addition to the constraints brought by the post-Covid-19 volatile reality, H1 2022 witnessed the invasion of Ukraine by Russia on 24 February 2022. The ongoing war has led to the current – occupation of nearly 20% of the Ukrainian territory, the destruction of substantial parts of the urban and industrial infrastructure of the Country.
This situation has affected Cadogan’s activities in Ukraine and impacted Blazhiv production, even though located at the west of Ukraine, with a shutdown for 3 weeks in March 2022, and consequent changes of the Company’s portfolio of crude oil buyers.
The parliament and the government of Ukraine have introduced a martial law and several legislative changes to face the new situation. In particular, royalties for natural gas production were increased to 65% vs 29%/ 12% (differentiated depending on the cost of gas).
As of February 24, 2022, all Cadogan employees in Ukraine have been transferred to remote mode. To date, none of the workers have been injured. In this context, the Group has continued to focus on safely and efficiently operating the existing wells, on controlling its costs and on cash preservation while continuing to look at opportunities to grow and diversify its portfolio.
In H1 2022, three employees of the Group have been mobilized to serve in the armed forces of Ukraine.
Operations
E&P activity remained focused on maintaining and securing its activities for the new term and safely and efficiently producing from the existing wells within the Blazhiv oil field. During H1 2022, the average gross production rated at 336 bpd, which is 1.5% higher than in H1 2021 (331 bpd), notwithstanding the 3 weeks stoppage of all Blazhiv wells in March due to the war events in the country. For the purpose of geological construction precision of Blazhiv oil field and Monastyretska fold and also identification of new perspective structures within the licence area boundary, in Q4 2021, Cadogan launched analyses for data reprocessing and reinterpretation of old 2D seismic data. In H1 2022 the Company received required data for field skeleton structural and tectonic modeling.
Regarding the Bitlyanska 20-year exploration and development licence, Usenco Nadra filed an appeal against the decision of the Kyiv Administrative Court. In August 2022, the Court of Appeal rejected the Company's claim. Usenco Nadra considers that this decision is based on incorrect application of law and will file an appeal to the Supreme Court.
All activities were executed without LTI or TRI[1], with a total of 1,480,000 manhours since the last incident, which occurred to a sub-contractor, in February 2016. CO2 emissions level in H1 2022 increased to 124,99 tons of CO2,e/boe produced compared to 82.47 tons of CO2,e/boe for the same reporting period of the last year driven by the increase of associated gas volume recovered during oil production. Another factor impacted emissions level. During the last hydrodynamic surveys of Blazhiv wells, there was detected an increase of methane and CO2 levels in the gas composition within bottomhole sampling oil analyses. The Company is considering the possibility to repeat survey and sampling to reconcile the data, besides studying different technological scenario for reducing emissions to the atmosphere.
In Italy, in February 2022, the Plan for the Sustainable Energy Transition of Suitable Areas (“PITESAI”) was approved by the Ministry for Environmental Transition. It delivers a new framework for the possible resumption of exploration and production activities on land and at sea. Exploenergy is analysing the impact of this new regulation framework on its activities and monitoring the possible future applications for the approval of new licences.
Trading
The Company had no operations for the first half of 2022.
Cadogan continues to monitor the gas markets in Europe and Ukraine.
Proger
In February 2021, Cadogan notified Proger Managers & Partners Srl (“PMP”) that according to the Loan Agreement, the Maturity Date occurred on 25 February 2021. As the Call Option was not exercised, the amount to be paid by PMP is EUR 16,430,992, being the reimbursement of the Loan in terms of principal and the accumulated interest. PMP is in default since 25 February 2021. End of March 2021, PMP requested an arbitration to have the Loan Agreement recognised as an equity investment contract, which is rejected by Cadogan as the terms of the Agreement are clear and include the right to repayment at maturity if the Call Option is not exercised. As at 30 June 2022, Proger Ingegneria holds 96.49 % of Proger Spa after the exit of SIMEST and the purchase by Proger Ingegneria of its stake in Proger Spa. In August 2022, Cadogan was informed of the award in the arbitration proceeding which:
- rejected Proger’s principal claim and declared that the Loan Agreement is valid and effective,
- deemed to qualify the Call Option as a preliminary contract under condition, but
- rejected Proger's claim ex art.2932 Italian Civil Code, stating that it is impossible to give an award producing the same effects of a final contract ex art.2932 Italian Civil Code,
- this because of the duties established by the rules of the London Regulatory Authority and because of the need, possibly by both parties, to comply with the due proceedings before the formalization of the entry of Cadogan into the capital of Proger Ingegneria,
- subordinated the stipulation of the final contract to the precedent completion of the proceeding and bureaucratic process as per the British rules, stating that, otherwise,
- there is the obligation on Proger Ingegneria to return the payment received under the Loan Agreement,
- compensated all the expenses of the proceeding.
Financial position
Cash at 30 June 2022 was $14.5 million ($14.7 million at 30 June 2021). The Group continually monitors its exposure to currency risk. It maintains a portfolio of cash mainly in US Dollars (“USD”) and EURO held primarily in the UK.
In H1 2022, the Group held working interests in a conventional gas-condensate and an oil exploration and production licence in the West of Ukraine. These assets are operated by the Group and are located in the prolific Carpathian basin, close to the Ukrainian oil & gas distribution infrastructure.
The Group’s primary focus during the period continued to be on cost optimisation and enhancement of current production, through the existing well stock and new drilling.
| Summary of the Group’s licences (as of 30 June 2022) | |||
|
Working
interest (%) |
Licence | Expiry | Licence type |
| 99.8 | Blazhiv | November 2039 | Production |
| 99.8 | Bitlyanska(1) | December 2019 | Exploration and Development |
(1) The Bitlyanska licence expired on 23 December 2019 and its renewal is in the process of litigation. Usenco filed a claim at the Court of Appeal. This claim was rejected in August 2022.
Below we provide an update to the full Operations Review contained in 2021 Annual Report published on 28 April 2022.
Bitlyanska licence
Cadogan’s application to obtain Biltyanska licence is a testimony of the uncertainties that still impact the E&P industry in Ukraine due to legislative uncertainties in the Country. Usenco Nadra filed to the State Geological Service an application for a 20-year production licence 5 months ahead the licence expiry date of 23 December 2019. The Company secured the approval of the Environmental Impact Assessment study by the Ministry of Ecology, the approval of the Reserves Report by the State Commission of Reserves and the approval of the licence award by the Lviv Regional Council. Given the delay to award the new licence beyond the regular timeline provided by legislation, Cadogan filed two claims with the Kyiv Administrative Court to challenge the non-granting of the 20-year production licence by the Licencing Authority. In February 2022, the Company received information from public register that its claims were rejected by the Court. Despite the restrictions imposed by the martial law in Ukraine, Usenco Nadra submitted an appeal. In August 2022, the claim was rejected by the Court of Appeal. The Company considers that this decision is based on incorrect application of the law and will file an appeal to the Supreme Court.
Blazhiv licence
Through the reporting period the Company has been working to safely and efficiently producing from the existing wells located in the Blazhiv licence area. At the end of the reporting period, the average gross production rated at 336 bpd vs 331 bpd in H1 2021, notwithstanding the 3 weeks of shutdown of all wells in March 2022. Such result was achieved due to the adjustment and the selection of optimum production regimes.
For the purpose of geological construction precision of Blazhiv oil field and Monastyretska fold and also identification of new perspective structures within the licence area boundary, Cadogan launched, in Q4 2021, analyses for data reprocessing and reinterpretation of old 2D seismic data. The Company received in H1 2022, the required data for field skeleton structural and tectonic modeling.
The structural tectonic and petrophysical modeling of the area, hydrocarbons reserves & resources reassessment as well as hydrodynamic model refining is planned to be conducted afterwards.
Service Company activities
In H1 2022, Astro Service LLC, focused its activities on serving intra-group operational needs in wells’ work-over/ re-entry operations, wells’ survey as well as field on-site activities. Starting from 2022, production and service activities will be presented solely as Exploration and Production segment result.
Financial Review
Overview
Income statement
In H1 2022, revenues increased to $4.6 million (H1 2021: $4.5 million) due to raise in E&P segment. Revenues from production increased to $4.6 million (H1 2021: $2.8 million) due to the increase of the realised price by 38.5% and the increase in the produced volumes of oil by 1.5%.
Trading business had no activities during the first half of 2022.
The cost of sales of the production segment consists of $1.9 million of production royalties ($1.2 million), $0.7 million of operating costs ($0.4 million), $0.4 million of depreciation and depletion of producing wells ($0.4 million), and $0.15 million of direct staff costs for production ($0.1 million).
Half year gross profit from production activities increased to $1.5 million (30 June 2021: $0.6 million), driven by increase in production and higher oil prices.
The Group recorded a $0.6 million interest on Proger Loan. Due to expected delay and additional costs in the loan reimbursement, the Company recognized additional provision of $600 thousand. Please refer to note 11 for details.
Other administrative expenses were kept under control at $1.6 million (30 June 2021: $1.7 million). They comprise other staff costs, professional fees and expenses, Directors’ remuneration and depreciation charges on non-producing property.
Balance sheet
At 30 June 2022, the cash position of $14.5 million (30 June 2021: $14.7 million) decreased compared to the $15.0 million as at 31 December 2021, mainly because of the depreciation of the EURO and the Hryvna against the US Dollar during the first half of 2022.
Intangible Exploration and Evaluation (“E&E”) assets have been impaired to $nil in 2021 due to the legal dispute on the Bitlyanska licence award and the uncertainty on the legal timeframe due to the ongoing war. The Property, Plant and Equipment (“PP&E”) balance of $8.6 million at 30 June 2022 (30 June 2021: $10 million, 31 December 2021: $9.6 million) includes $8.4 million of development and production assets on the Blazhyvska licence and other PP&E of the Group.
Trade and other receivables of $0.4 million (30 June 2021: $0.9 million, 31 December 2021: $0.3 million) include recoverable VAT of $0.1 million (30 June 2021: $0.8 million, 31 December 2021: $0.1 million), $0.3 million of other receivables and prepayments (30 June 2021: $0.1 million, 31 December 2021: $0.2 million).
The $1.3 million of trade and other payables as of 30 June 2022 (30 June 2021: $1.3 million, 31 December 2021: $1.5 million) represent $0.9 million (30 June 2021: $0.9 million, 31 December 2021: $0.9 million) of other creditors and $0.4 million of accruals (30 June 2021: $0.4 million, 31 December 2021: $0.6 million).
Cash flow statement
The Consolidated Cash Flow Statement shows neutral cash-flow from operating activities (30 June 2021: $1.5 million, 31 December 2021: $2.1 million). Cashflow, before movements in working capital, shows an inflow of $0.3 thousand (30 June 2021: outflow $44 thousand, 31 December 2021: outflow $0.4 million).
Group capital expenditure was $0.1 million on Property, Plant and Equipment which related to the Blazhyvska licence.
Commitments
There has been no material change in the commitments and contingencies reported as at 31 December 2021 (refer to page 110 of the Annual Report).
Treasury
The Group continually monitors its exposure to currency risk. It maintains a portfolio of cash mainly in US dollars (“USD”) and Euro held primarily in the UK. Production revenues from the sale of hydrocarbons are received in the local currency in Ukraine, however, the hydrocarbon prices are linked to the USD denominated gas and oil prices.
Going concern
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 Interim Financial Statements. For further details refer to the detailed discussion of the assumptions outlined in note 2(a) to the Interim Financial Statements.
Cautionary Statement
The business review and certain other sections of this Half Yearly Report contain forward looking statements that have been made by the Directors in good faith based on the information available to them up to the time of their approval of this report. However, they should be treated with caution due to inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information and no statement should be construed as a profit forecast.
Risks and uncertainties
There are several potential risks and uncertainties inherent in the oil and gas sector which could have a material impact on the long-term performance of the Group and which could cause the actual results to differ materially from expected and historical results. The Company has taken reasonable steps to mitigate these where possible. Full details are disclosed on pages 14 to 17 of the 2021 Annual Financial Report. There have been no changes to the risk profile during the first half of the year. The risks and uncertainties are summarised below.
War risk
Operational risks
- Health, safety, and environment
- COVID-19
- Climate change
- Drilling and work-over operations
- Production and maintenance
Subsurface risks
Financial risks
- Changes in economic environment
- Counterparty
- Default on the Proger loan repayment
- Commodity price
Country risk
- Regulatory and licence issues
- Emerging market
Other risks
- Risk of losing key staff members
- Risk of entry into new countries
- Risk of delays in projects related to dialogue with local communities
Director’s Responsibility Statement
We confirm that to the best of our knowledge:
(a) the Interim Financial Statements have been prepared in accordance with the UK-adopted IAS 34 ‘Interim Financial Reporting’;
(b) the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year);
(c) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties’ transactions and changes therein); and
(d) the condensed set of financial statements, which has been prepared in accordance with the applicable set of accounting standards, gives a true and fair view of the assets, liabilities, financial position and profit or loss of the issuer, or the undertakings included in the consolidation as a whole as required by DTR 4.2.4R.
This Half Yearly Report consisting of pages 1 to 23 has been approved by the Board and signed on its behalf by:
Fady Khallouf
Chief Executive Officer
7 September 2022
Consolidated Income Statement
Six months ended 30 June 2022
| Six months ended 30 June |
Year ended
31 December |
|||
|
2022
$’000 |
2021
$ ’000 |
2021
$ ’000 |
||
| Notes | (Unaudited) | (Unaudited) | (Audited) | |
| CONTINUING OPERATIONS | ||||
| Revenue | 3 | 4,635 | 4,517 | 8,793 |
| Cost of sales | 3 | (3,142) | (3,222) | (6,372) |
| Gross profit | 1,493 | 1,295 | 2,421 | |
| Administrative expenses | (1,587) | (1,703) | (3,712) | |
| Reversal of impairment of other assets | - | - | 20 | |
| Impairment of gas and oil assets | - | - | (2,474) | |
| Impairment of other assets | - | (2) | (994) | |
| Change in provision for loan provided | (600) | - | - | |
| Net foreign exchange (losses)/gains | (1,633) | (276) | (1,591) | |
| Other operating (losses)/income, net | (26) | (36) | (18) | |
| Operating (loss)/profit | (2,353) | ( 722 ) | ( 6 ,348) | |
| Finance income | 4 | 607 | 592 | 1,250 |
| (Loss)/profit before tax | (1,746) | (130) | (5,098) | |
| Tax (expense)/benefit | - | - | - | |
| (Loss)/profit for the period/year | (1,746) | (130) | (5,098) | |
| Attributable to: | ||||
| Owners of the Company | 5 | (1,747) | (134) | (5,070) |
| Non-controlling interest | 1 | 4 | (28) | |
| (1,746) | (130) | (5,098) | ||
| (Loss)/profit per Ordinary share | Cents | Cents | Cents | |
| Basic and diluted | 5 | (0.7) | (0.1) | (2.1) |
Consolidated Statement of Comprehensive Income
Six months ended 30 June 2022
| Six months ended 30 June |
Year ended
31 December |
|||
|
2022
$ ’000 |
2021
$ ’000 |
2021
$ ’000 |
||
| (Unaudited) | (Unaudited) | (Audited) | ||
| (Loss)/profit for the period/year | (1,746) | (130) | (5,098) | |
| Other comprehensive (loss)/profit | ||||
| Items that may be reclassified subsequently to profit or loss | ||||
| Unrealised currency translation differences | (986) | 111 | 466 | |
| Other comprehensive (loss)/profit | (986) | 111 | 466 | |
| Total comprehensive profit/(loss) for the period/year | (2,732) | (19) | (4,632) | |
| Attributable to: | ||||
| Owners of the Company | (2,733) | (23) | (4,604) | |
| Non-controlling interest | 1 | 4 | (28) | |
| (2,732) | (19) | (4,632) | ||
Consolidated Statement of Financial Position
Six months ended 30 June 2022
| Six months ended 30 June |
Year ended
31 December |
|||
|
2022
$ ’000 |
2021
$ ’000 |
2021
$ ’000 |
||
| Notes | (Unaudited) | (Unaudited) | (Audited) | |
| ASSETS | ||||
| Non-current assets | ||||
| Intangible exploration and evaluation assets | - | 2,483 | - | |
| Property, plant and equipment | 6 | 8,616 | 10,000 | 9,598 |
| Right-of-use assets | 139 | 246 | 200 | |
| Deferred tax asset | 409 | 432 | 431 | |
| 9,164 | 13,161 | 1 0 ,229 | ||
| Current assets | ||||
| Inventories | 7 | 165 | 1,182 | 177 |
| Trade and other receivables | 8 | 373 | 929 | 218 |
| Loan provided | 11 | 15,327 | 16,902 | 16,724 |
| Cash | 14,518 | 14,651 | 15,011 | |
| 30, 3 83 | 33,664 | 32,130 | ||
| Total assets | 39 , 5 47 | 46,825 | 42,359 | |
| LIABILITIES | ||||
| Non-current liabilities | ||||
| Long-term lease liability | (59) | (149) | (104) | |
| Provisions | (380) | (297) | (300) | |
| (439) | (446) | (404) | ||
| Current liabilities | ||||
| Trade and other payables | 9 | (1,352) | (1,316) | (1,479) |
| Short-term lease liability | (114) | (76) | (102) | |
| (1,466) | (1,392) | (1,581) | ||
| Total liabilities | (1,905) | ( 1,838 ) | (1,985) | |
| Net assets | 3 7 , 6 42 | 44,987 | 40,374 | |
| EQUITY | ||||
| Share capital | 12 | 13,832 | 13,832 | 13,832 |
| Share premium | 514 | 514 | 514 | |
| Retained earnings | 184,146 | 190,829 | 185,893 | |
| Cumulative translation reserves | (162,675) | (162,044) | (161,689) | |
| Other reserves | 1,589 | 1,589 | 1,589 | |
| Equity attributable to equity holders of the parent | 3 7 , 4 06 | 44,720 | 40,139 | |
| Non-controlling interest | 236 | 267 | 235 | |
| Total equity | 3 7 , 6 42 | 44,987 | 40,374 | |
Consolidated Statement of Cash Flows
Six months ended 30 June 2022
| Six months ended 30 June |
Year ended
31 December |
|||||
|
2022
$ ’000 |
2021
$ ’000 |
2021
$ ’000 |
||||
| (Unaudited) | (Unaudited) | (Audited) | ||||
| Operating loss | (2,353) | (722) | (6,348) | |||
| Adjustments for: | ||||||
| Depreciation of property, plant and equipment | 434 | 398 | 889 | |||
| Change in provision for loan provided | 600 | - | - | |||
| Impairment of inventories | - | 2 | 994 | |||
| Impairment/(Reversal of impairment) of VAT recoverable | - | 2 | - | |||
| Impairment of oil and gas assets | - | - | 2,474 | |||
| Reversal of impairment | - | - | (21) | |||
| Effect of foreign exchange rate changes | 1,633 | 276 | 1,591 | |||
| Operating cash flows before movements in working capital | 314 | (44) | (421) | |||
| Decrease/(Increase) in inventories | (1) | 1,022 | 1,049 | |||
| Decrease /(Increase) in receivables | (166) | 716 | 1,526 | |||
| (Decrease)/Increase in payables and provisions | (176) | (154) | (28) | |||
| Cash from operations | (29) | 1,540 | 2,126 | |||
| Interest received | 28 | 22 | 68 | |||
| Net cash inflow/(outflow) from operating activities | (1) | 1,562 | 2,194 | |||
| Investing activities | ||||||
| Purchases of property, plant and equipment | (75) | (50) | (150) | |||
| Purchases of intangible exploration and evaluation assets | - | - | (9) | |||
| Interest received | - | 8 | 8 | |||
| Net cash used in investing activities | (75) | (42) | (151) | |||
| Financing activities | ||||||
| Net cash from financing activities | - | - | - | |||
| Net increase (decrease) in cash | (76) | 1,520 | 2,043 | |||
| Effect of foreign exchange rate changes | (417) | (122) | (285) | |||
| Cash at beginning of period/year | 15,011 | 13,253 | 13,253 | |||
| Cash at end of period/year | 14,518 | 14,651 | 15,011 | |||
Consolidated Statement of Changes in Equity
Six months ended 30 June 2022
| Share capital | Share premium account | Retained earnings | Cumulative translation reserves | Other reserves | Equity attributable to owners of the Company | Non-controlling interest | Total | |
| $’000 | $’000 | $’000 | $’000 | $’000 | $’000 | $’000 | $’000 | |
| As at 1 January 2021 | 13,832 | 514 | 19 0 , 963 | (1 62,155 ) | 1,589 | 44,743 | 2 63 | 45,006 |
| Net loss for the period | - | - | (134) | - | - | (134) | 4 | (130) |
| Other comprehensive loss | - | - | - | 111 | - | 111 | - | 111 |
| Total comprehensive profit for the year | - | - | (134) | 111 | - | (23) | 4 | (19) |
| As at 30 June 2021 | 13,832 | 514 | 190,829 | (162,044) | 1,589 | 44,720 | 267 | 44,987 |
| Net profit for the period | - | - | (4,936) | - | - | (4,936) | (32) | (4,968) |
| Other comprehensive profit | - | - | - | 355 | - | 355 | - | 355 |
| Total comprehensive profit for the year | - | - | (4,936) | 355 | - | (4,581) | (32) | (4,613) |
| As at 31 December 2021 | 13,832 | 514 | 185,893 | (161,689) | 1,589 | 40,139 | 235 | 40,374 |
| Net loss for the period | - | - | (1,747) | - | - | (1,747) | 1 | (1,746) |
| Other comprehensive profit | - | - | - | (986) | - | (986) | - | (986) |
| Total comprehensive profit for the year | - | - | (1,747) | (986) | - | (2,733) | 1 | (2,732) |
| As at 30 June 2022 | 13,832 | 514 | 184,146 | (162,675) | 1,589 | 37,406 | 236 | 37,642 |
Notes to the Condensed Financial Statements
Six months ended 30 June 2022
1. General information
Cadogan Petroleum plc (the ‘Company’, together with its subsidiaries the ‘Group’), is incorporated in England and Wales under the Companies Act. The address of the registered office is 6th Floor, 60 Gracechurch Street, London EC3V 0HR. The nature of the Group’s operations and its principal activities are set out in the Operations Review on pages 3 to 5 and the Financial Review on pages 6 to 7.
This Half Yearly Report has not been audited or reviewed in accordance with the Auditing Practices Board guidance on ‘Review of Interim Financial Information’.
A copy of this Half Yearly Report has been published and may be found on the Company’s website at www.cadoganpetroleum.com.
2. Basis of preparation
The annual financial statements of the Group are prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and in accordance with international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. On 31 December 2020, IFRS as adopted by the European Union at that date was brought into UK law and became UK-adopted international accounting standards, with future changes being subject to endorsement by the UK Endorsement Board. The Group transitioned to UK-adopted international accounting standards in its consolidated financial statements on 1 January 2021. There was no impact or changes in accounting policies from the transition. These Condensed Financial Statements have been prepared in accordance with the UK-adopted IAS 34 Interim Financial Reporting.
The same accounting policies and methods of computation are followed in the condensed financial statements as were followed in the most recent annual financial statements of the Group except as noted, which were included in the Annual Report issued on 28 April 2022.
The Group has not early adopted any amendment, standard or interpretation that has been issued but is not yet effective. It is expected that where applicable, these standards and amendments will be adopted on each respective effective date.
This consolidated interim financial information does not constitute accounts within the meaning of section 434 and of the Companies Act 2006. Statutory accounts for the year ended 31 December 2021 were approved by the Board of Directors on 28 April 2022 and delivered to the Registrar of Companies. The report of the auditors on those accounts was qualified as the auditors were unable to obtain sufficient and appropriate evidence to conclude as to whether the fair value of the Proger loan instrument of $16.7 million was materially accurate.
(a) Going concern
The Directors have continued to use the going concern basis in preparing these condensed financial statements. The Group's business activities, together with the factors likely to affect future development, performance and position are set out in the Operations Review. The financial position of the Group, its cash flow and liquidity position are described in the Financial Review.
The Group’s cash balance at 30 June 2022 was $14.5 million (31 December 2021: $15 million).
The Directors have carried out a robust assessment of the principal risks facing the Group.
The Group’s forecasts and projections, taking into account reasonably possible changes in trading activities, operational performance, flow rates for commercial production and the price of hydrocarbons sold to Ukrainian customers, show that there are reasonable expectations that the Group will be able to operate on funds currently held and those generated internally, for the foreseeable future.
Notwithstanding the Group’s current financial performance and position, the Board are cognisant of the actual impacts on the Group of COVID-19 and the war situation in Ukraine. The Board has considered possible reverse stress case scenarios for the impact on the Group’s operations, financial position and forecasts. Whilst the potential future impacts of Covid-19 and the invasion of Ukraine by Russia are unknown, the Board has considered operational disruption that may be caused by the factors such as a) restrictions applied by governments, illness amongst our workforce and disruption to supply chain and sales channels; b) market volatility in respect of commodity prices associated with Covid-19 in addition to military and geopolitical factors.
In addition to sensitivities that reflect future expectations regarding country, commodity price and currency risks that the Group may encounter reverse stress tests have been run to reflect possible negative effects of Covid-19 and war in Ukraine. The Group’s forecasts demonstrate that owing to its cash resources the Group is able to meet its operating cash flow requirements and commitments whilst maintaining significant liquidity for a period of at least the next 12 months allowing for sustained reductions in commodity prices and extended and severe disruption to operations should such a scenario occur.
After making enquiries and considering the uncertainties described above, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future and consider the going concern basis of accounting to be appropriate and, thus, they continue to adopt the going concern basis of accounting in preparing the annual financial statements.
(b) 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 US dollar. For the purpose of the consolidated financial statements, the results and financial position of each Group company are expressed in US dollars, which is the presentation currency for the consolidated financial statements.
The relevant exchange rates used were as follows:
| 1 £ = xUS$ | Six months ended 30 June |
Year ended
31 Dec 2021 |
|||
| 2022 | 2021 | ||||
| Closing rate | 1.2160 | 1.3837 | 1.3514 | ||
| Average rate | 1.2877 | 1.3891 | 1.3761 | ||
| 1 US$ = xUAH | Six months ended 30 June |
Year ended
31 Dec 2021 |
|||
| 2022 | 2021 | ||||
| Closing rate | 29.87219 | 27.5214 | 27.5776 | ||
| Average rate | 29.45866 | 27.9902 | 27.5112 | ||
| 1 Euro = xUS$ | Six months ended 30 June | Year ended | |||
| 2022 | 2021 | 31 Dec 2021 | |||
| Closing rate | 1.0451 | 1.1879 | 1.1344 | ||
| Average rate | 1.0857 | 1.2088 | 1.1847 | ||
(c) Dividend
The Directors do not recommend the payment of a dividend for the period (30 June 2021: $nil; 31 December 2021: $nil).
(d) Critical accounting judgments and estimates
Impairment indicator assessment for E&E assets
Cadogan has fully complied with legislative requirements and submitted its application for a 20-year exploration and production license 5 months before its expiry on 23 December 2019. A decision on the award was expected to be provided by State Geological Service of Ukraine before 19 January 2020, since all other intermediary approvals had been secured in line with the applicable legislation requirements. Given the delay to granting of the new license beyond the regular timeline provided by legislation in the Ukraine, Cadogan has launched a claim before the Administrative Court to challenge the non-granting of the 20-year production license by the Licensing Authority.
In February 2022 the company received information from public register that its claim was rejected by the Court. Despite the restrictions imposed by the martial law in Ukraine, Usenco Nadra exercised its right for appeal.
The current geopolitical and military situation in Ukraine do not allow to make any grounded expectation on the legal process time frame and the Court of appeal decision. Considering this fact, Cadogan has fully impaired the Bitlyanska license as of the end of 2021.
Impairment of PP&E
Management assesses the development and production assets for impairment indicators and performs an impairment test if indicators of impairment are identified. Management performed an impairment assessment using a value in use discounted cash flow model which required estimates including forecast oil prices, reserves and production, costs and discount rates.
Recoverability and measurement of VAT
Judgment is required in assessing the recoverability of VAT assets and the extent to which historical impairment provisions remain appropriate, particularly noting the recent recoveries against historically impaired VAT. In forming this assessment, the Group consider the nature and age of the VAT, the likelihood of eligible future supplies to VAT, the pattern of recoveries and risks and uncertainties associated with the operating environment.
Loan provided
In February 2019, the Group advanced a Euro 13,385,000 loan to Proger Managers & Partners Srl (“PMP”), a privately owned Italian company whose only interest is a 72.92% participation in Proger Ingegneria Srl (“Proger Ingegneria”), a privately owned company which held a 75.95% participating interest in Proger Spa (“Proger”) at 31 December 2020. 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 (February 2019) and assuming that the call option described below is not exercised). The principal of the loan is secured by a pledge over PMP’s current participating interest in Proger Ingegneria Srl, up to a maximum guaranteed amount of Euro 13,385,000.
Through the Call Option Agreement, the Group was granted a call option to acquire, at its sole discretion, 33% of participating interest in Proger Ingegneria; the exercise of the option would have given Cadogan, through CPHBV, an indirect 25% interest in Proger at 31 December 2020. The call option was granted at no additional cost and could be exercised at any time between the 6th (sixth) and 24th (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.
Management considered the extent to which the Option and rights to representation on the Board of Proger Ingegneria and Proger meant significant influence existed. The requirement to obtain shareholders’ approval for any exercise of the option was considered to represent a substantive condition such that the option was not ‘currently exercisable’ under IFRS at 31 December 2020. In consequence, the potential voting rights associated with any subsequent exercise of the Option were not considered to contribute to significant influence over the investee.
In 2019 and 2020, under the Group’s accounting policies, the instrument was held at fair value through profit and loss and determination of fair value required assessment of both key investee specific information regarding financial performance and prospects and market information. The determination of fair value was made at 31 December 2020 based on facts and circumstances at that date, notwithstanding that the borrower failed to repay the loan at maturity in 2021.
The Group’s original investment decision involved assessment of Proger Spa business plans and analysis with professional advisers including valuations performed using the income method (discounted cash flows) and market approach using both the precedent transactions and trading multiples methods.
Unfortunately, Proger refused to provide Cadogan information regarding its 2020 financial performance or updated forecasts to undertake a detailed fair value assessment using the income method or market approach at 31 December 2020. As a consequence, management assessed the fair value of the instrument based on the
terms of the agreement, including the pledge over shares, together with financial information in respect of prior periods and determined that $16.8 million represented the best estimate of fair value, being equal to anticipated receipts and timing thereof discounted at an estimated market rate of interest of 7.8%. In forming its assessment at 31 December 2020, management particularly considered the impact of any claim under the pledge and further litigation options on the underlying investee business and shareholders and resulting incentive that created for the borrower to ultimately meet the contractual payment obligation. Management further considered information relevant to Proger business and PMP’s ability to pay, noting the absence of 2020 financial information. However, the absence of information regarding Proger’s 2020 financial performance and prospects represented a significant limitation on the fair value exercise and, as a result, if received, the fair value could be materially higher or lower than this value.
Since the Call Option was not exercised before the Maturity Date and the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows, the Loan provided was reclassified from ‘Financial assets at fair value through profit and loss’ to ‘Financial assets at amortized cost’ at the value carried at the Company balance at the date of the Call Option expiry (Note 11).
In August 2022, the Company was informed of the award of the arbitral proceeding between Cadogan Petroleum Holdings BV and Proger Managers & Partners srl. Based on this award, management assessed the recoverability of the Investment in Cadogan Petroleum Holdings BV to still be appropriate as the loan agreement was confirmed as valid and effective.
In forming its assessment at 30 June 2022, management considered the impact of additional costs and delay in the reimbursement of the Proger Loan.
3. Segment information
Segment information is presented on the basis of management’s perspective and relates to the parts of the Group that are defined as operating segments. Operating segments are identified on the basis of internal assessment provided to the Group’s chief operating decision maker (“CODM”). The Group has identified its executive management team as its CODM and the internal assessment used by the top management team to oversee operations and make decisions on allocating resources serve as the basis of information presented.
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 from European countries
· Local purchase and sales of natural gas operations with physical delivery of natural gas
The accounting policies of the reportable segments are the same as the Group’s accounting policies. Sales between segments are carried out at market prices. The segment result represents profit under IFRS before unallocated corporate expenses. Unallocated corporate expenses include management and Board remuneration and expenses incurred in respect of the maintenance of Kiev office premises. This is the measure reported to the CODM for the purposes of resource allocation and assessment of segment performance.
The Group does not present information on segment assets and liabilities as the CODM does not review such information for decision-making purposes.
As at 30 June 2022 and for the six months then ended the Group’s segmental information was as follows:
| Exploration and Production | Trading | Consolidated | |
| $’000 | $’000 | $’000 | |
| Sales of hydrocarbons | 4,632 | - | 4,632 |
| Other revenue | 3 | - | 3 |
| Total revenue | 4,635 | 4,635 | |
| Other cost of sales | (3,142) | - | (3,142) |
| Other administrative expenses | (226) | (28) | (254) |
| Other operating costs | (26) | - | (26) |
| Finance income/costs, net | - | 28 | 28 |
| Segment results | 1,241 | - | 1,241 |
| Unallocated other administrative expenses | (1,333) | ||
| Net foreign exchange gains | (1,633) | ||
| Other income/loss, net | (21) | ||
| Loss before tax | (1,746) |
As at 30 June 2021 and for the six months then ended the Group’s segmental information was as follows:
| Exploration and Production | Trading | Consolidated | |
| $’000 | $’000 | $’000 | |
| Sales of hydrocarbons | 2,777 | 1,738 | 4,515 |
| Other revenue | 2- | - | 2 |
| Total revenue | 2,777 | 1,738 | 4,517 |
| Other cost of sales | (2,138) | (1,084) | (3,222) |
| Other administrative expenses | (527) | (25) | (552) |
| Finance income/costs, net | - | 22 | 22 |
| Segment results | 114 | 651 | 765 |
| Unallocated other administrative expenses | - | - | (1,151) |
| Impairment | - | - | (2) |
| Net foreign exchange gains | - | - | (276) |
| Other income/loss, net | - | - | 534 |
| Loss before tax | - | - | (130) |
4. Finance income/(costs), net
| Six months ended 30 June |
Year ended
31 December |
||
| 2022 | 2021 | 2021 | |
| $’000 | $’000 | $’000 | |
| Interest expense on lease | (9) | (14) | (28) |
| Total interest expenses on financial liabilities | (9) | (14) | (28) |
| Investment revenue | - | 8 | 8 |
| Interest income on cash deposit in Ukraine | 28 | 22 | 68 |
| Total interest income on financial assets | 28 | 30 | 48 |
| Interest on loan | 614 | 587 | 1,225 |
| Unwinding of discount on decommissioning provision | (26) | (11) | (23) |
| 607 | 5 | 1,250 | |
5. (Loss)/profit per ordinary share
(Loss)/profit per ordinary share is calculated by dividing the net (loss)/profit for the period/year attributable to Ordinary equity holders of the parent by the weighted average number of Ordinary shares outstanding during the period/year. The calculation of the basic (loss)/profit per share is based on the following data:
|
Six months ended 30 June |
Year ended
31 December |
||
| (Loss)/profit attributable to owners of the Company |
2022
$ ’000 |
2021
$ ’000 |
2020
$ ’000 |
| (Loss)/profit for the purposes of basic (loss)/profit per share being net (loss)/profit attributable to owners of the Company |
(1,747) | (134) | (5,070) |
| Number | Number | Number | |
| Number of shares | ‘000 | ‘000 | ‘000 |
| Weighted average number of Ordinary shares for the purposes of basic (loss)/profit per share |
244,128 | 240,628 | 244,128 |
| Cent | Cent | Cent | |
| (Loss)/profit per Ordinary share | |||
| Basic | (0.7) | (0.1) | (2.1) |
6. Proved properties
As at 30 June 2022, the development and production assets balance which forms part of PP&E has decreased in comparison to 31 December 2021 due to the Hryvnya devaluation against the US Dollar by 8% at the end of the period.
7. Inventories
No substantial changes in inventories have occurred since the beginning of the period.
The impairment provision as at 30 June 2022 of $1 million is held to reduce the carrying value of the inventories to net realizable value. No additional provision on inventories has been recognised for the first half 2022.
8. Trade and other receivables
| Six months ended 30 June |
Year ended
31 December |
|||||
|
2022
$ ’000 |
2021
$ ’000 |
2021
$ ’000 |
||||
| VAT recoverable | 135 | 755 | 64 | |||
| Prepayments | 66 | 92 | - | |||
| Other receivables | 172 | 82 | 154 | |||
| 373 | 929 | 218 | ||||
VAT recoverable asset was realized through natural gas and crude oil sales during the first half of 2021. The Directors consider that the carrying amount of the other receivables approximates their fair value. Management expects to realise VAT recoverable through the activities of the business segments.
9. Trade and other payables
The $1,3 million of trade and other payables as of 30 June 2022 (30 June 2021: $1.3 million, 31 December 2021: $1.5 million) represent $0.9 million (30 June 2021: $0.9 million, 31 December 2021: $0.9 million) of other payables and $0.4 million of accruals (30 June 2021: $0.4 million, 31 December 2021: $0.6 million).
10. Commitments and contingencies
There have been no significant changes to the commitments and contingencies reported on page 110 of the Annual Report.
11. Loan provided
In February 2019, Cadogan used part of its cash (Euro 13.385 million) to enter into a 2-year Loan Agreement with Proger Managers & Partners, with an option to convert it into a direct 33% equity interest in Proger Ingegneria, equivalent to an indirect 25 % equity interest in Proger. According to IFRS, the instrument has to be represented in our balance sheet at fair value.
In February 2021, Cadogan notified PMP that according to the Loan Agreement, the Maturity Date occurred on 25 February 2021. As the Call Option was not exercised, PMP must fulfil the payment of EUR 14,857,350, being the reimbursement of the Loan in terms of principal and the accumulated interest. PMP is in default since 25 February 2021. In case of default payment, the terms of the agreement provide for the application of an increased interest rate on the amount of the debt.
Since the Call Option was not exercised before the Maturity Date and the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows, the Loan provided was reclassified from ‘Financial assets at fair value through profit and loss’ to ‘Financial assets at amortized cost’.
| Financial assets at fair value through profit and loss | Financial assets at amortised cost | |
| $’000 | $’000 | |
| As at 1 January 2021 | 16,812 | - |
| Transfer from FVPL | (16,812) | - |
| Transfer to loan provided | - | 16,812 |
| Interest | - | 587 |
| Exchange differences | - | (497) |
| As at 30 June 2021 | - | 16,902 |
| Interest | - | 638 |
| Exchange differences | - | (816) |
| As at 1 January 2022 | - | 16,724 |
| Interest | - | 614 |
| Change in provision | (600) | |
| Exchange differences | - | (1,411) |
| As at 30 June 2022 | - | 15,327 |
To represent the option at fair value, the Group has applied a level 3 valuation under IFRS as inputs to the valuation have included assessment of the cash repayments anticipated under the loan terms at maturity, delayed by the arbitration process requested by PMP (the Borrower), historical financial information for the periods prior to 2020 and assessment of the security provided by the pledge over shares together with the impact of the Covid-19 on the activity of Proger. As a result, $ 16.8 million was determined as the best estimate of fair value as at 31 December 2020, being equal to anticipated receipts and timing thereof discounted at an estimated market rate of interest of 7.8%.
Proger Managers & Partners srl has failed to reimburse the Loan with the accumulated interests in full at the Maturity Date,25 February 2021. In case of non-reimbursement, the Loan carries an entitlement to an interest at a rate of 7.5% per year to be accrued on principle amount and accumulated interests at the Maturity Date until the total amount is paid. Starting from March 2021, Cadogan treats the Loan provided to PMP at historical cost, plus accrued interests and less provision. The recoverability of the Loan has been assessed in April 2022 for the purpose of Cadogan Annual Report 2021, and in August 2022 for the purpose of the Cadogan Half-year Report 2022. In August 2022, the Company was informed of the award of the arbitral proceeding which:
- rejected Proger’s principal claim and declared that the Loan Agreement is valid and effective,
- deemed to qualify the Call Option as a preliminary contract under condition, but
- rejected Proger's claim ex art.2932 Italian Civil Code, stating that it is impossible to give an award producing the same effects of a final contract ex art.2932 Italian Civil Code,
- this because of the duties established by the rules of the London Regulatory Authority and because of the need, possibly by both parties, to comply with the due proceedings before the formalization of the entry of Cadogan into the capital of Proger Ingegneria,
- subordinated the stipulation of the final contract to the precedent completion of the proceeding and bureaucratic process as per the British rules, stating that, otherwise,
- there is the obligation on Proger Ingegneria to return the payment received under the Loan Agreement,
- compensated all the expenses of the proceeding.
Based on this award, management assessed the recoverability of the Investment in Cadogan Petroleum Holdings BV to still be appropriate as the loan agreement was confirmed as valid and effective.
Due to expected additional costs and delay in the loan reimbursement, the Company recognized additional provision of $600 thousand.
12. Share capital
Authorized and issued equity share capital
| 30/06/2022 | 31/12/2021 | |||
| Number | $’000 | Number | $’000 | |
| Authorized Ordinary shares of £0.03 each |
1,000,000 | 57,713 | 1,000,000 | 57,713 |
| Issued Ordinary shares of £0.03 each |
244,128 | 13,832 | 244,128 | 13,832 |
Authorized but unissued share capital of £30 million has been translated into US dollars at the historic exchange rate of the issued share capital. The Company has one class of Ordinary shares, which carry no right to fixed income.
Issued equity share capital
|
Ordinary shares
of £0.03 |
|||
| At 31 December 2019 | 235,729,322 | ||
| Issued during year | 8,399,165 | ||
| At 31 December 2020 | 244,128,487 | ||
| Issued during year | - | ||
| At 31 December 2021 | 244,128,487 | ||
| Issued during first-half year | - | ||
| At 30 June 2022 | 244,128,487 | ||
On 26 May 2020 the Company issued 8,399,165 ordinary shares of £0.03 each in the capital of the Company for cash on the basis of £0.03 per share:
- 2,270,549 ordinary shares were issued to the previous CEO, Mr Guido Michelotti and satisfied in full using the entire amount of the 2018 and 2019 bonuses due (but which had not yet been paid), totalling €75,900,
- 628,616 ordinary shares were issued to Mr Andriy Bilyy (General Director of Cadogan Ukraine) and satisfied in full using the entire amount of the 2019 bonus due (but which had not yet been paid), totalling $23,040,
- 5,500,000 ordinary shares were issued to the CEO, Mr Fady Khallouf and satisfied in full using the entire amount of the welcome bonus due.
13. Events subsequent to the reporting date
In August 2022, the claim of Usenco Nadra for the Bitlyanska licence award was rejected by the Court of Appeal. The Company considers that this decision is based on incorrect application of the law, and will file an appeal to the Supreme Court.
In August 2022, Cadogan was informed of the award of the arbitral proceeding between Cadogan Petroleum Holdings BV and Proger Managers & Partners srl, which:
- rejected Proger’s principal claim and declared that the Loan Agreement is valid and effective;
- deemed to qualify the Call Option as a preliminary contract under condition, but
- rejected Proger's claim ex art.2932 Italian Civil Code, stating that it is impossible to give an award producing the same effects of a final contract ex art.2932 Italian Civil Code,
- this because of the duties established by the rules of the London Regulatory Authority and because of the need, possibly by both parties, to comply with the due proceedings before the formalization of the entry of Cadogan into the capital of Proger Ingegneria,
- subordinated the stipulation of the final contract to the precedent completion of the proceeding and bureaucratic process as per the British rules, stating that, otherwise,
- there is the obligation on Proger Ingegneria to return the payment received under the Loan Agreement,
- compensated all the expenses of the proceeding.
[1] Lost Time Incident, Total Recordable Incident
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