Notice of EGM

CADOGAN PETROLEUM plc ("CADOGAN","THE COMPANY" OR "THE SELLER")

FARM-OUT BY WAY OF DISPOSAL OF UP TO 60% OF POKROVSKOE PETROLEUM B.V. AND 60%
OF ZAGORYANSKA PETROLEUM B.V. TO ENI UKRAINE HOLDINGS B.V. ("DISPOSAL")

 

Posting of circular

Further to the announcement dated 13 April 2011 detailing the proposed disposal
of up to 60% of Pokrovskoe Petroleum B.V. ("Pok BV") and 60% of Zagoryanska
Petroleum B.V. ("Zag BV") to Eni Ukraine Holdings B.V. ("the Buyer"), the
Company has today posted a circular to Shareholders convening a General Meeting
to approve the proposed disposal ("Circular").

The General Meeting is scheduled for 2.30 pm on 16 June 2011 at The Royal
Society of Chemistry, Burlington House, Piccadilly, London W1J OBA (or as soon
thereafter as the Annual General Meeting, convened at the same venue on that
day, concludes or is adjourned).

Capitalised terms used, but not defined, in this announcement shall have the
same meaning as set out in the Circular.


Details of the Disposal

Pursuant to the terms of the Disposal Agreement, the Buyer will initially
acquire a 30% interest in the share capital of Pok BV (the direct parent
company of Gazvydobuvannya, the holder of the Pok Licence), with the option to
acquire a further 30% interest in the future. The Buyer will also acquire a 60%
interest in the share capital of Zag BV (the direct parent of
Astroinvest-Energy, the holder of the Zag Licence). Both licences relate to the
Group's operations in Eastern Ukraine. The initial consideration will comprise
a cash payment of USD38 million and 100% of the funding of the Pok Agreed
Appraisal Work Programme in an amount of USD30 million (with the Buyer funding
the VAT on the work programme of up to USD6 million).  At Completion, CPHL will
assign to the Buyer 30% of the benefit of the Pok Loan and 60% of the benefit
of the Zag Loan. Subject to successful results from the Pok Agreed Appraisal
Work Programme and award of production licences for both the Pokrovskoe field
and the Zagoryanska field, the Buyer will pay the Group further amounts of up
to USD90 million. 

The Company's strategy is to increase value for Shareholders by establishing
commercial reserves from strategic positions in high potential oil and gas
fields in Ukraine and to realise that value at the appropriate time.
Significant progress has been made in technical analysis of the Company's
assets. Following the strategic review undertaken in 2009, the Board developed
a strategy to farm out some of its assets in order to de-risk the Company's
activities. The Board believes that the Disposal will allow the Continuing
Group to significantly de-risk its assets whilst maintaining exposure to the
ongoing operations. By retaining an equity interest in the Pok BV Group and the
Zag BV Group the Continuing Group will continue to participate and operate both
the Pok Licence and the Zag Licence.

The Board believes that the Disposal will deliver positive benefits in line
with the Company's strategic goals. The Board intends to utilise part of the
initial net proceeds to fund development of the Company's other assets and,
specifically, finance any future work programmes relating to the Pok Licence
and the Zag Licence. Any future work on the Pok Licence in excess of USD30
million provided by the Buyer will be funded in proportion to the equity
interests in Pok BV. If the Buyer subsequently increases its equity interest
there is a mechanism for the Seller to be reimbursed. Additional future cash
proceeds from the Disposal (which are dependent on successful operational
results and the award of production licences) will further strengthen the
Company's financial position, enabling it to finance its share of future
development activities and to invest in new business opportunities.

Pok BV and Zag BV were incorporated in February 2011 as indirect wholly owned
subsidiaries of the Company. On 23 March 2011, Pok BV acquired 100% of the
issued capital of Gazvydobuvannya. Gazvydobuvannya is the sole registered owner
of the Pok Licence.  On 29 March 2011, Zag BV acquired 90% of the issued
capital of Astroinvest-Energy. Astroinvest-Energy is the sole registered owner
of the Zag Licence. 

The loss before tax and gross assets of Gazvydobuvannya for the year ended 31
December 2010 were £803,000 and £5.63 million respectively and the profit
before tax and gross assets of Astroinvest-Energy for the year ended 31
December 2010 were £344,000 and £3.13 million respectively.

The initial consideration will comprise 100% of the funding of the Pok Agreed
Appraisal Work Programme in an amount of USD30 million (with the Buyer funding
the VAT on the work programme of up to USD6 million), including drilling plus a
USD38 million payment.  At Completion, CPHL will assign to the Buyer 30% of the
benefit of the Pok Loan and 60% of the benefit of the Zag Loan. Subject to
successful results from the above programmes and award of production licences,
the Buyer will pay the Group further amounts of up to USD90 million.  The table
below summarises when the Directors expect to receive the various component
parts of the aggregate consideration payable by the Buyer under the Disposal
Agreement:

                                   Pok Licence   Zag Licence  Estimated Date 
                                                                             
                                      USDm          USDm                     
                                                                             
Initial consideration                   -           38.0      On or around 30
                                                                 June 2011   
                                                                             
Pok Agreed Appraisal Work             30.0            -       Q3 and Q4 2011 
Programme - funding                                                          
                                                                             
VAT on the Pok Agreed Appraisal        6.0            -       Q3 and Q4 2011 
Work Programme (up to)                                                       
                                                                             
If the Buyer exercises its option     40.0            -         End Q1 2012  
to acquire additional 30% of                                                 
share capital of Pok BV                                                      
                                                                             
If a production licence is            15.0            -         End Q4 2012  
granted for the Pokrovskoe field                                             
(after exercise of the Pok                                                   
option)                                                                      
                                                                             
If a production licence is              -           35.0       Mid-end 2013  
granted for the Zagoryanska field                                            
                                                                             
Total                                 91.0          73.0                     
                                                                             

The USD30 million funding of the Pok Agreed Appraisal Work Programme (together
with the VAT payment of up to USD6 million) will be used to fulfil the work
obligations on the Pok Licence and to test the potential of the Upper and Lower
Visean intervals.

The initial cash proceeds of USD38 million arising from the Disposal will be
applied to finance any future work programmes on the Zag Licence and fund
development of the Group's other assets.  Additional future cash proceeds from
successful operational results and the award of production licences will
further strengthen the Group's financial position, enabling it to finance its
share of future development activities and to invest in new business
opportunities.

A copy of the Circular has been submitted to the Financial Services Authority
and will shortly be available for inspection at the National Storage Mechanism,
which is located at

http://www.hemscott.com/nsm.do

The Circular is also available on the Company's website, 
www.cadoganpetroleum.com


Enquiries

For further information please contact:

Cadogan Petroleum Plc                   + 44 20 7487 8301                      
Ian Baron, CEO                                                                 
Gordon Stein, CFO                                                              
Stefan Bort, Company Secretary                                                 
                                                                               
BDO Corporate Finance                   [phone]                       
                                        [phone]                       
John Stephan                                                                   
David Abbott                                                                   
                                                                               
Bankside Consultants                    [phone]                       
Simon Rothschild