Cadogan Petroleum Operational Update
24 January 2018 - 8:58PM
UK Regulatory
TIDMCAD
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")
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
Guido Michelotti Chief Executive Officer +380 (44) 594 5870
Ben Harber Company Secretary +44 0207 264 4366
Cantor Fitzgerald Europe
David Porter +44 (0) 20 7894 7000
END
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