Cadogan Petroleum has announced the Company’s annual results for the year ended 31 December 2019.

Key Financial Highlights:

• Loss for the year: $2.1 million (2018: profit of $1.2 million)
• Average realized price: 47.2$/boe (2018: 51.3$/boe)
• Gross revenues: $5.9 million (2018: $14.7 million)
• Loss per share: 0.9 cents (2018: profit of 0.5 cents)
• Cash at year end: $12.8 million (2018: $35.2 million)

Key Operational Highlights of 2019:

• Production: 104,816 boe (2018: 91,085 boe), a 15% increase year-on-year
• Gas trading loss of $2.0 million (2018: profit of $0.7 million)
• Blazhiv-10 successful drilling and consequent stable commercial production

Overview of operations

West Ukraine
The Group continued to produce oil and gas from its licenses in the West Ukraine. The average net production in 2019 was 288 boepd, a 15% increase over the production of the previous year. The additional oil production from the Monastyretska license more than off-set the loss of gas production from Debeslavetska and Cheremkhivska fields, which Cadogan exited in January 2019.

In January 2019, the Group finalized the transfer of its participatory interest in Debeslavetske JAA and Cheremkhivsko-Strupkivske JAA to NJSC Nadra as part of the 2018 trilateral agreement with Eni and NJSC Nadra on the exit of Eni from the shale gas project.

All regulatory approvals required to file the application for a 20-year production license, for the Monastyretska license, were received and the application was filed on 2 July 2019, well ahead of the license expiry date of 18 November 2019. The company was forced to shut-down its operations and production at the field for 30-days due to the absence of license award by the licensing authority of Ukraine post expiry date. The new Blazhiv 20-year oil production license (formerly Monastyretska exploration area) was issued on 19 December 2019. The Blazhiv-1 and Blazhiv-10 wells are currently in production. The production at Blazhiv-3 and Blazhiv-3 Monasterets is suspended waiting for the renewal of the rental agreements.

In 2019, the Bitlyanska license has been advertised for a farm-out partnership, but the preliminary discussions have not been satisfactory and were ended. The state subsoil controlling authority has confirmed, during the license audit, that the Company has fully fulfilled its license obligations. All regulatory approvals required to file the application for a 20-year exploration and production license were received and the application was filed on 29 August 2019, well ahead of the license expiry date of 23 December 2019. Required intermediary approvals including the one of Lviv’s Regional Council and Environmental Impact Assessment have been obtained. The company has been waiting the State Licensing Authority’s award of the application. The Licensing Authority has delayed the grant of the new license beyond the regular timeline provided by the regulatory laws. Accordingly, Cadogan has launched a claim before the Administrative Court to challenge the non-granting of the 20-year production license by the Licensing Authority.

East Ukraine
The Pirkovska exploration license expired in October 2015. The Company filed an application in due time, but the Licensing Authority returned it 6 times for different reasons, the legal ground of which appears to be doubtful. Despite the efforts of Cadogan and its reply in due time to each of the comments, the license was not awarded, and the 3-year period for conversion, given to the applicant by law, expired in October 2018. Cadogan launched a litigation before Administrative Court against the Licensing Authority for non-granting the production license.

Subsidiary businesses: Given the collapse in the gas price, which through the heating season had dipped below the level of the previous summer, unsold gas was kept in storage for the following heating season. The company has purchased 7.5 million m3 of gas in the declining price environment towards the end of 2019 to be sold during the upcoming 2020 trading season.

Finally, the Group continued providing oil services through its wholly owned subsidiary Astroservice LLC. Substantial resources of the company have been engaged to support Monastyretska license wells’ operations.

Italy
The Group owns a 90% interest in Exploenergy s.r.l., an Italian company, which has filed applications for two exploration licenses (Reno Centese and Corzano), located in the Po Valley region (Northern Italy). The leads identified on these licenses have combined unrisked prospective resources estimated to be in excess of 60 bcf of gas.

Activity through the year was focused on maintaining the liaison with the central and regional authorities and on updating the Environmental Impact studies by implementing the suggestions received from the authorities. Attempts to meet the relevant Minister, in order to understand what else, if anything, is required to move forward the application, were unsuccessful.

In February 2019, the Italian Parliament approved a moratorium of 18 months in the award of new licenses and a 25-fold increase of license fees. Exploenergy has subsequently reduced its activity to the minimum required to fulfil its statutory obligations. It has also identified areas which can be voluntarily released in order to mitigate the impact of higher fees, when licenses are awarded, with a minimum impact on their exploration potential.

In February 2019, the Group entered in a 2-year loan agreement with Proger Management & Partners Srl with an option to convert it into an indirect 24% equity interest in Proger Spa. Proger is an Italian engineering company providing services in Italy and in different international areas.

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