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This announcement is deemed to contain Inside
Information as defined under the
Market Abuse Regulations n. 596/2014 |
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Cadogan Petroleum Plc
(“Cadogan” or the “Company”)
Operational
update
Cadogan Petroleum plc (“Cadogan”), the London Stock Exchange
listed, independent, oil & gas company, is pleased to
provide the following operational update post year end.
Revenues from E&P operations combined with a further
reduction in G&A costs, strict discipline on all spending and a
rigorous management of receivables have helped the Company to
deliver another step towards overall profitability.
Oil and gas production in 2017 increased by 34% over the
corresponding period last year. The average daily production rate
through the year was 167 boepd (155 boepd net to Cadogan) and the
year-end exit rate was 190 boepd (176 net to Cadogan).
The increase in production levels is due to successful
work-overs and the implementation of production optimisation
programs. Combined, these operations increased oil production
from the Monastyretska field by 78% and kept gas production
constant, despite the high level of depletion from the two
producing fields.
The increase in oil production from the Monastyretska field was
achieved by re-entering old suspended wells, rather than drilling
new ones. This approach delivered the targeted increase in oil
production, while minimising cash outflow and as such only
marginally impacted the Company’s cash position.
Operating costs have remained under tight control and combined
with the increased production volumes have taken the Company’s
E&P operations above break-even. The management and staff are
also proud to have achieved another year of LTI free operations, as
well as a further reduction of CO2 emissions to the atmosphere (per
produced boe) during the year.
The Ukrainian government approved a reduction in the sub-soil
use tax (royalties) from 45% to 29% for oil wells, from 29% to 12%
for new gas wells shallower than 5000m and from 14% to 6% for new gas wells deeper
than 5000m. While the reduction in
royalties for oil wells has had a direct positive impact on net
revenues, the reduction for gas wells has increased the value of
the Company’s Borynya licences and is expected to make its farm-out
more attractive.
The Company’s gas trading business had a good year in 2017. This
was driven by the combination of a new team, which delivered on
expectations, and a number of opportunistic sales, which generated
a healthy margin.
The focus of Cadogan’s E&P Services business during the year
was on catering for the Company’s internal needs, including site
restorations and well abandonment in the East of Ukraine and work-overs in the West. While
these operations did not generate additional external revenue
streams, they contributed to keeping costs low by retaining the
contractors’ margin within the Company.
The acquisition of ExploeEnergy in Italy was finalized during the year and the
Company has engaged with the local authorities to expedite the
award of the licences. The search for further investment
opportunities, as part of the Company’s strategy to reload its
asset portfolio outside Ukraine,
has also continued. The Company has strict criteria for any
additional assets it acquires, based on a combination of price,
risk and potential synergies to ensure the cash resources are used
effectively in building shareholder value. The Board and
management remain committed to these criteria, with a focus on
delivering long-term value over short-term gain.
As part of the search, an extensive net has been cast across
both industry and the financial communities of the main European
financial centres, which has helped retain a healthy pipeline of
opportunities. Over the last year, more than twenty opportunities
were scrutinized, but none met the criteria needed to create value
for shareholders and as such justified an investment.
2018 Outlook
Net production to Cadogan is expected to exceed 200 boepd as the
Company continues to implement production enhancement activities.
These are aimed at continuing to support profitability and cash
generation from the Company’s existing Ukrainian assets and
preserve the Company’s cash position for further
investment.
Two wells are planned within the next 12-18 months, both of
which will support the retention of the Company’s licences. These
include a shallow well on the Borynya licence, to test the
potential of satellite prospects around an old depleted oil field,
and an appraisal well on the Monastyretska’s oil field.
The appraisal well on the Monastyretska field will be drilled
upon completing an integrated reservoir study, which will be used
to update the licence value, after the two successful re-entries of
the past year, as well as to assist in identifying the optimal
development scheme. The scheme will be included in the application
to convert the licence from an exploration to a production
licence.
The Cheremkhivsko-Strupkivska licence expires in May and the
operator, WGI, has filed an application to extend it for 10
years. The licence, located in Western
Ukraine, contains a marginal gas field in which the Company
has a 54.2% participating interest and which last year contributed
15 boepd to the Company’s net production.
The Company intends to continue to operate its gas trading
business, with trading volumes expected to increase over 2017
notwithstanding the challenges of a market which is still evolving
in a manner which is sometimes unpredictable. As E&P activity
in Ukraine picks up, Cadogan also
intends to actively explore opportunities to spin-off its E&P
services subsidiary.
The management team is currently reviewing several potential
opportunities for further investment outside Ukraine. The team intends to continue to
actively pursue these and other opportunities that arise to utilize
the preserved cash.
-ENDS-
About
Cadogan is an independent oil and gas company. Cadogan operates
exploration and production licenses in Western Ukraine, conducts gas trading
operations, and provides services to E&P companies.
For further information, please contact:
Cadogan Petroleum plc |
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Guido Michelotti |
Chief Executive Officer |
+380 (44) 594 5870 |
Ben Harber |
Company Secretary |
+44 0207 264 4366 |
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Cantor Fitzgerald Europe |
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David Porter |
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+44 (0) 20 7894 7000 |