Interim Management Statement

RNS Number : 4583W

Cadogan Petroleum PLC

19 November 2010

 



19 November 2010

Cadogan Petroleum plc  ("Cadogan" or the "Group")

Interim Management Statement for the period from 1 July to 19 November 2010

Cadogan's new management team has continued to make substantial progress in addressing the organisational, technical, legal and financial issues that have faced the Group.  The key achievements during the period have been:

·      Resolution of the Pirkovskoe and Zagoryanska licence issues

·      Commencement of commercial production from the Zagoryanska 3 well

·      Recommencement of commercial production from the Debeslavtska field

·      Completion on budget of 2D seismic acquisition programme on the Bitlyanska licence

·      Further discussion over the farm out of the Bitlyanska licence

·      Appointment of Gordon Stein as Chief Financial Officer

·      Appointment of Alessandro Benedetti and Bertrand des Pallieres as non-executive Directors

·      Appointment of Matrix Group as sole broker and financial adviser

Operations

The Group continues to operate safely and efficiently and the HSE statistics recorded no Lost Time Incidents during the period of this statement.  In September 2010, Cadogan recorded 2 million man hours since the last Lost Time Incident.

During the period commercial production commenced from the Upper Visean V-18 zone of the Zagoryanska 3 well in eastern Ukraine.  Production continues at flow rates of approximately 50 mcm/day of gas with 10-15 cubic metres per day of condensate.

At Pokrovskoe 1 drilling continues and the well is now past the 5,200 metre point on the way to a targeted total depth of 5,800 metres.  The well is being directionally drilled to test the high point of a structural closure mapped at the Lower Visean, V26 horizon on the 3D seismic.

The programme to drill a further three wells on the shallow Debeslavtska gas field is underway, with the second well currently being drilled.  Production from all three proposed sites is not expected to occur until Q1 of 2011 following testing, completion and hook up of the wells to the existing gas processing and compression facilities.

The 2D seismic acquisition programme on the Bitlyanska licence has been concluded on budget and on schedule, and the data acquired is currently being processed.  The quality of data, which was acquired by a local contractor supervised by Cadogan staff, appears to be excellent.

Discussions over the farm-out of the Bitlyanska license continue with three interested parties and the recently acquired 2D seismic is expected to contribute significant value to this effort.  The three eastern Ukrainian licences have been withdrawn from the farm-out programme in view of the discovery and production at Zagoryanska, the deepening of the Pokrovskoe - 1 well and the plans to test the Pirkovskoe - 1 well.

Resolution of licence issues

As announced on 13 September 2010, Cadogan has entered into a settlement agreement with NSJC Nadra Ukraine ("Nadra") over the indirect licence challenge to the Group's Pirkrovskoe and Zagoryanska licences.  Both of these challenges have now been withdrawn from the court process in Ukraine. Now that all the conditions precedent have been met, the settlement agreement with Nadra is scheduled to be finalised by the end of November.  Once concluded, the Group will own the Zagoryanska 3 well, which is currently rented and producing at commercial rates, plus four additional wells on the field for a total outlay of £2.0 million ($3.2 million).  £0.8 million ($1.3 million) of this sum has already been paid to Nadra as an advance payment.  Cadogan intends to work over some of these wells in 2011 and put them into production.

Finance

Cadogan's cash balance at the date of this announcement is £24.4 million ($39.0 million).

Following the lifting of the suspension of the Debeslavtska field announced on 16 September 2010, production has recommenced and revenues from all active fields in Ukraine is now running at £0.63 million ($1.0 million) per month.

The average monthly cash outflow from operating and investing activities remains at £0.5 million ($0.8 million).  These amounts do not include: £2.2 million ($3.5 million) of VAT redeemed as bonds for net cash receipts of £1.8 million ($2.9 million); income from the litigation of £0.28 million ($0.45 million); or litigation costs incurred during the period of £0.9 million ($1.5 million).

Litigation

 The Group continues its action in the High Court of England and Wales against certain of its former officers and various related parties.   Settlement agreements have been entered into with two minor parties during the period under review and a further $450,000 has been received by Cadogan.  At the date of this statement the Group expects to receive a payment from Global Process Systems of $6.5 million, the next instalment of the remaining $36.5 million due to Cadogan under the settlement agreement previously entered into.

Ends

Enquiries

Cadogan Petroleum Plc		[phone]
Ian Baron, CEO
Gordon Stein, CFO
Stefan Bort, Company Secretary
Matrix		[phone]
Robin Henshall
James Pope
Bankside Consultants		[phone]
Simon Rothschild

 

END

 

 

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