REG-Cadogan Energy Solutions Plc: Half Yearly Report for the Six Months ended 30 June 2024
10/09/2024 07:15
CADOGAN ENERGY SOLUTIONS PLC
Half Yearly Report for the Six Months ended 30 June 2024
(Unaudited and unreviewed)
Highlights
Cadogan Energy Solutions plc ("Cadogan" or the "Company"), an independent oil
& gas company, listed on the main market of the London Stock Exchange, aiming
to be a diversified energy company, is pleased to announce its unaudited
results for the six months ended 30 June 2024.
* The first half of 2024 remained challenging for Ukraine and its energy
sector due to the ongoing Russian invasion. The conflict has led to disrupted
energy supplies, significant infrastructure damage, and numerous operational
challenges. Despite these severe conditions during reported period, the Group
successfully maintained its oil production without shutdowns.
* H1 2024 has been another semester without LTI and TRI. All employees and
assets have been secured.
* In H1 2024, the average production was 370 bpd in (298 bpd in H1 2023), a
25% increase versus H1 2023, and the highest ever for Cadogan.
* The Group completed the assessment by an independent expert of Blazhiv oil
field hydrocarbon reserves, according to PRMS standards. The expected volumes
of 1P reserves are higher than the ones shown in the previous assessment.
* The project to convert non-commercial associated gas into electricity is
ongoing and the completeness of the installation of the 0,85 MW gas-to-power
generator and the related infrastructure is expected for the end of 2024.
* The ISO 14001 and ISO 45001 certifications have been revalidated for a new
3-year term. In H1 2024, the services segment was dedicated totally to
supporting the production activities in Ukraine. Production entities
activities together with services entity activities are presented as
Exploration and Production segment results.
* The production revenues increased by 105 % versus the same period in 2023,
mainly due to a 65% increase in the average realised oil price and a 25%
increase of the production volumes.
* In November 2023, Cadogan initiated a second arbitration procedure to assert
its right to restitution of the Loan plus the accumulated interests, and
obtain Proger's condemnation of the consequent payment. The first audiences
took place in May and June 2024 and were dedicated by the Arbitrators to find
an amicable settlement to the controversy.
* The cash position at the period end was $15.1 million (30 June 2023: $14.2
million). This level of cash is sufficient to sustain on-going operations and
business development initiatives.
Overall, Cadogan continued operating in an environment with tremendous
challenges caused by the ongoing war in Ukraine. The Company is currently
developing new initiatives to continue to improve its performance.
Key performance indicators
During H1 2024, the Group has monitored its performance in conducting its
business with reference to a number of key performance indicators (`KPIs'):
* to maintain stable oil production measured on the barrels of oil produced
per day (`bpd');
* to decrease administrative expenses,
* to increase the Group's basic earnings per share,
* to maintain no lost time incident,
* to grow and geographically diversify the portfolio, and
* to secure its staff and operations.
The Group's performance during the first six months of 2024, measured against
these targets, is set out in the table below, together with the prior year
performance data. No changes have been made to the sources of data or
calculations used in the period/year. The positive trend in the HSE
performances continues with zero incidents.
Unit 30 June 2024 30 June 2023 31 December 2023
Average production (working interest basis) (a) Boepd 370 298 326
Administrative expenses $million 1.5 1.6 3.6
Basic profit/(loss) per share (b) Cent 0.1 (0.1) 0.5
Lost time incident (c) Incidents - - -
Geographical diversification New assets - - -
1. Average production is calculated as the average daily production during the
period/year
2. Basic profit/loss per ordinary share is calculated by dividing the net
profit/loss for the year attributable to equity holders of the parent company
by the weighted average number of ordinary shares during the period
3. Lost time incident relate to injuries where an employee/contractor is
injured and has time off work (IOGP classification)
Enquiries:
Cadogan Energy Solutions Plc
Fady Khallouf Chief Executive Officer f.khallouf@cadogan-es.com
Ben Harber Company Secretary +44 (0) 207 264 4366
Operations Review
Introduction
First semester 2024 was another dramatic period for Ukraine. Russia continued
focusing its efforts on industrial infrastructure destruction, in particular,
oil refineries and energy infrastructure. The ongoing missile attacks and the
destruction of power generation plants have caused a severe shortage of
electricity within Ukraine's energy system. This relentless targeting of
critical infrastructure has significantly diminished the Country's power
generation capacity, leading to frequent and prolonged electricity shortages.
Despite these challenges, the Group has managed to ensure oil production from
the Blazhiv field without shutdowns. Through proper planning, robust safety
measures, and efficient resource management, we have maintained consistent
output levels, demonstrating our resilience and commitment to operational
stability even in these circumstances.
In H1 2024, Cadogan employees in Ukraine continued to operate in the combined
(remote/ office) work mode. To date, all our employees are safe. Local
operating companies of the Group in Ukraine are qualified as of critical
importance for Ukraine's economy functioning.
In this context, the Group has continued to focus on safely and efficiently
operating the existing wells, on controlling its costs and on cash
preservation while continuing to look for opportunities to grow and diversify
its portfolio of activities.
Operations
E&P activity remained focused on maintaining and securing its activities for
the new term and safely and efficiently producing from the existing wells
within the Blazhiv oil field. During H1 2024, the average gross production
rated at 370 bpd, which is 25% higher than in H1 2023 (298 bpd). Such
significant increase in production is attributed to the fact that operations
were not halted, unlike during H1 2023.
Operational excellence of the Group has been confirmed again by zero LTI or
TRI1, with a total over 1,809,000 manhours since the last incident, and the
renewal of ISO 14001 & 45001 certifications for a new 3-year term.
CO2 emissions level in H1 2024 increased to the level of 147,26 tons of
CO2,e/boe produced compared to 125,08 tons of CO2,e/boe for the same reporting
period of the last year. The increase of the emissions level is caused by the
increase of oil production and the CH4 conversion factor increase as
established by UK government. The Company expects a significant decrease of
annual gas emissions after commissioning of its gas-to-power plant.
In Italy, Exploenergy, was approved as a qualified gas operator for its
projects (Reno Centese and Corsano) and is awaiting the go authorisation for
its projects.
Trading
The Company had no operations for the first half of 2024. Cadogan continues
to monitor the gas markets in Europe and Ukraine.
Proger
In February 2019, the Group entered in a 2-year loan agreement with Proger
Management & Partners Srl ("PMP") with an option which Cadogan could exercise,
with no obligation, to get a 33% equity interest in Proger Ingegneria Srl
which in turn held at 31 December 2020 a 75.95% equity interest in Proger Spa.
Proger is an Italian engineering company providing services in Italy and in
different international areas.
Cadogan did not exercise the Call Option. In February 2021, Cadogan notified
PMP that according to the Loan Agreement, the Maturity Date occurred on 25
February 2021, and as the Call Option was not exercised, PMP must fulfill the
payment of EUR 14,857,350, being the reimbursement of the Loan in terms of
principal and the accumulated interest at this Maturity Date. PMP is in
default since 25 February 2021. End of March 2021, PMP requested an
arbitration to have the Loan Agreement recognized as an equity investment
contract, which is rejected by Cadogan as the terms of the Loan Agreement are
clear and include the right to repayment at maturity if the Call Option is not
exercised.
The Arbitration proceeding ended in July 2022.
The Arbitral Committee:
- Rejected Proger's principal claim, and declared that the
Loan Agreement is valid and effective,
- Deemed to qualify the Call Option as a preliminary
contract under condition, but
- Rejected Proger's claim ex art. 2932 Italian Civil Code,
stating that it is impossible to give an award producing the same effects of a
final contract ex art. 2932 Italian Civil Code,
- This is because of the duties established by the rules of
the London Regulatory Authority and because of the need, possibly by both
parties, to comply with the due proceedings before the formalization of the
entry of Cadogan into the capital of Proger Ingegneria,
- Subordinated the stipulation of the final contract to the
precedent completion of the proceeding and bureaucratic process as per the
British rules, stating that, otherwise,
- There is the obligation on Proger Ingegneria to return the
money received under the Loan Agreement.
Cadogan introduced an appeal, still pending with a next hearing on September
2025, on the qualification of the Call Option as a preliminary contract.
Meanwhile, having taken note of the content of the Award of July 2022, Cadogan
repeatedly invited Proger to implement the provisions of the Award. When the
invitation remained unsuccessful, Cadogan with a formal notice contested
Proger's refusal, arguing that it was in direct contrast with the clear and
unequivocal provision of the Award, which expressly subordinates the possible
transfer of shareholdings to the prior fulfilment of the formalities required
by English law and procedures related to Cadogan as a listed company on the
London Stock Exchange; and also opposing Proger for having behaved and
continuing to behave in a manner that has made it definitely impossible to the
occurrence of the condition precedent referred to in the above-mentioned
Award.
According to the provisions of the aforementioned Award, the right to
reimbursement of the amount covered by the Loan Agreement has arisen in favour
of Cadogan, plus interest accrued, and of which Cadogan then demanded
immediate payment.
Last November 2023, Cadogan had to initiate a second arbitration to assert its
right to restitution and obtain Proger's condemnation of the consequent
payment. The first audiences took place in May and June 2024 and were
dedicated by the Arbitrators to find an amicable settlement to the
controversy.
Financial position
Cash at 30 June 2024 was $15.1 million ($14.2 million at 30 June 2023). The
Group continuously monitors its exposure to currency risk. It maintains a
portfolio of cash mainly in US Dollars ("USD") and EURO held primarily in the
UK.
The Directors believe that the capital available at the date of this report is
sufficient for the Group to continue its operations for the foreseeable
future.
In H1 2024, the Group held working interests in an oil production licence in
the West of Ukraine. It is operated by the Group and is located in the
prolific Carpathian basin, close to the Ukrainian oil & gas distribution
infrastructure.
The Group's primary focus during the period continued to be on cost
optimisation and enhancement of current production, through the existing well
stock and new drilling.
Summary of the Group's licences (as of 30 June 2024)
Working interest (%) Licence Expiry Licence type
100 Blazhiv November 2039 Production
Below we provide an update to the full Operations Review contained in the 2023
Annual Report published on 07 May 2024.
Blazhiv licence
Through the reporting period the Group has been working to safely and
efficiently producing from the existing wells located in the Blazhiv licence
area. At the end of the reporting period, the average gross production rated
at 370 bpd vs 298 bpd in H1 2023. All wells have been operational during the
reported period without unscheduled stoppages.
In H1 2024, an independent expert completed Blazhiv field reserves
re-assessment. As reported, the field contains 3.05 million boe of 3P reserves
and additionally 0,64 million boe of 2C contingent resources associated with
Blazhiv licence. The results of this assessment indicate a strong reserves
base, highlighting our robust position and revealing significant potential for
new development drilling.
In H1 2024, efforts were accelerated on the implementation of the gas-to-power
project. The Group has placed a contract for a 0.85 MW gas-driven generator
with a European producer, which is expected to be ready by the end of the
year. This initiative is a strategic step towards enhancing our energy
efficiency and sustainability, leveraging our gas resources to generate power
and support our operations more effectively.
Service Company activities
In H1 2024, Astro Service LLC, focused its activities on serving intra-group
operational needs in wells' work-over/ re-entry operations, wells' survey as
well as field on-site activities. Production and service activities will be
presented solely as Exploration and Production segment result.
Financial Review
Overview
Income statement
In H1 2024, revenues increased to $5 million (H1 2023: $2.4 million) due to
the increase of the realised price by 65% and the increase in the produced
volumes of oil by 25%.
Trading business had no activities during the first half of 2024.
The cost of sales of the production segment consists of $1.5 million of
production royalties ($1.0 million), $0.7 million of operating costs ($0.7
million), $0.4 million of depreciation and depletion of producing wells ($0.3
million), and $0.07 million of direct staff costs for production ($0.07
million).
Half year gross profit from production activities increased to $2.3 million
(30 June 2023: decreased to $0.32 million), driven by increase in production
and higher oil prices.
The Group recorded a $0.75 million interest on Proger Loan. Due to expected
delays in the loan reimbursement, the Group recognised additional provision of
$370 thousand. Please refer to note 11 for details.
Other administrative expenses were kept under control at $1.5 million (30 June
2023: $1.6 million). They comprise other staff costs, professional fees and
expenses, Directors' remuneration and depreciation charges on non-producing
property.
Balance sheet
At 30 June 2024, the cash position of $15.1 million (30 June 2023: $14.2
million) increased compared to the $14.2 million as at 31 December 2023.
The Property, Plant and Equipment ("PP&E") balance of $5.2 million at 30 June
2024 (30 June 2023: $6.4 million, 31 December 2023: $5.8 million) includes the
development and production assets on the Blazhyvska licence and other PP&E of
the Group.
Trade and other receivables of $0.4 million (30 June 2023: $0.2 million, 31
December 2023: $0.3 million) includes recoverable VAT of $5 thousand (30 June
2023: $0.2 million, 31 December 2023: $0.2 million), $0.35 million of other
receivables and prepayments (30 June 2023: $0.1 million, 31 December 2023:
$0.1 million).
The $1.5 million of trade and other payables as of 30 June 2024 (30 June 2023:
$1.9 million, 31 December 2023: $1.4 million) represent $0.8 million (30 June
2023: $1.5 million, 31 December 2023: $0.6 million) of other creditors and
$0.7 million of accruals (30 June 2023: $0.4 million, 31 December 2023: $0.8
million).
Cash flow statement
The Consolidated Cash Flow Statement shows positive cash-flow from operating
activities of $1 million (30 June 2023: positive $0.1 million, 31 December
2023: negative $0.6 thousand). Cashflow, before movements in working capital,
shows an outflow of $1.2 million (30 June 2023: inflow $0.9 million, 31
December 2023: inflow $0.6 million).
Group capital expenditure was $0.3 million of investment in electricity
generating facilities on Blazhyv field.
Commitments
There has been no material change in the commitments and contingencies
reported as at 31 December 2023 (refer to page 83 of the Annual Report).
Treasury
The Group continually monitors its exposure to currency risk. It maintains a
portfolio of cash mainly in US dollars ("USD") in the UK and in Hryvnia (local
currency) in Ukraine due to the obligations deriving from the martial law.
Production revenues from the sale of hydrocarbons are received in the local
currency in Ukraine, however, the hydrocarbon prices are linked to the USD
denominated gas and oil prices. The martial law in Ukraine significantly
limits the transfer of cash outside of Ukraine.
The cash held in Ukraine is held in the local currency (Hryvnia) and placed to
deposits in subsidiaries of reputable international banks.
Going concern
The Directors have a reasonable expectation that the Company and the Group
have adequate resources to continue in operational existence for the
foreseeable future. Accordingly, they continue to adopt the going concern
basis in preparing the Interim Financial Statements. For further details,
refer to the detailed presentation of the assumptions outlined in note 2(a) of
the Interim Financial Statements.
Cautionary Statement
The business review and certain other sections of this Half Yearly Report
contain forward looking statements that have been made by the Directors in
good faith based on the information available to them up to the time of their
approval of this report. However they should be treated with caution due to
inherent uncertainties, including both economic and business risk factors,
underlying any such forward-looking information and no statement should be
construed as a profit forecast.
Risks and Uncertainties
There are a number of potential risks and uncertainties inherent in the oil
and gas sector which could have a material impact on the long-term performance
of the Group and which could cause the actual results to differ materially
from expected and historical results. The Company has taken reasonable steps
to mitigate these where possible. Full details are disclosed on pages 9 to 12
of the 2023 Annual Financial Report. There have been no changes to the risk
profile during the first half of the year. The risks and uncertainties are
summarised below.
War risks
* Missile attacks
* Occupation of territories
* Forced evacuations
* Cyber attacks
Operational risks
* Health, safety, and environment
* Climate change
* Drilling and work-over operations
* Production and maintenance
Subsurface risks
Financial risks
* Changes in economic environment
* Counterparty
* Default on the Proger loan repayment
* Commodity price
Country risk
* Regulatory and licence issues
* Emerging market
Other risks
* Risk of losing key staff members
* Risk of entry into new countries
* Risk of delays in projects related to dialogue with local communities
Directors' Responsibility Statement
We confirm that to the best of our knowledge:
(a) the Interim Financial Statements have been prepared in accordance with
the UK-adopted IAS 34 `Interim Financial Reporting';
(b) the interim management report includes a fair review of the information
required by DTR 4.2.7R (indication of important events during the first six
months and description of principal risks and uncertainties for the remaining
six months of the year);
(c) the interim management report includes a fair review of the information
required by DTR 4.2.8R (disclosure of related parties' transactions and
changes therein); and
(d) the condensed set of financial statements, which has been prepared in
accordance with the applicable set of accounting standards, gives a true and
fair view of the assets, liabilities, financial position and profit or loss of
the issuer, or the undertakings included in the consolidation as a whole as
required by DTR 4.2.4R.
This Half Yearly Report consisting of pages 1 to 23 has been approved by the
Board and signed on its behalf by:
Fady Khallouf
Chief Executive Officer
09 September 2024
Consolidated Income Statement
Six Months ended 30 June 2024
Six months ended 30 June Year ended 31 December
2024 $'000 2023 $'000 2023 $'000
Notes (Unaudited) (Unaudited) (Audited)
CONTINUING OPERATIONS
Revenue 3 4,952 2,414 7,550
Cost of sales 3 (2,671) (2,099) (5,391)
Gross profit 2,281 315 2,159
Administrative expenses (1,508) (1,550) (3,574)
Reversal of impairment of other assets - - 56
Impairment of gas and oil assets (10) (70) 218
Impairment of other assets - - (49)
Net foreign exchange (losses)/gains (542) 290 538
Other operating (losses)/income, net (1) 63 25
Operating profit /(loss) 256 (952) (627)
Finance income 4 767 779 1,885
Profit/(loss) before tax 1,023 (173) 1,258
Tax (expense)/benefit 13 (805) - -
Profit/(loss) for the period/year 219 (173) 1,258
Attributable to:
Owners of the Company 5 219 (172) 1,259
Non-controlling interest - (1) (1)
219 (173) 1,258
Profit/(loss) per Ordinary share Cents Cents Cents
Basic and diluted 5 0.1 (0.1) 0.5
Consolidated Statement of Comprehensive Income
Six Months ended 30 June 2024
Six months ended 30 June Year ended 31 December
2024 $'000 2023 $'000 2023 $'000
(Unaudited) (Unaudited) (Audited)
Profit / (loss) for the period/year 219 (173) 1,258
Other comprehensive profit/(loss)
Items that may be reclassified subsequently to profit or loss
Unrealised currency translation differences (444) 41 (321)
Other comprehensive (loss) /profit (444) 41 (321)
Total comprehensive (loss) for the period/year (225) (132) 937
Attributable to:
Owners of the Company (225) (131) 938
Non-controlling interest - (1) (1)
(225) (132) 937
Consolidated Statement of Financial Position
Six Months ended 30 June 2024
Six months ended 30 June Year ended 31 December
2024 $'000 2023 $'000 2023 $'000
Notes (Unaudited) (Unaudited) (Audited)
ASSETS
Non-current assets
Intangible exploration and evaluation assets - - -
Property, plant and equipment 6 5,231 6,407 5,768
Right-of-use assets 191 61 246
Deferred tax asset - 318 370
5,422 6,786 6,384
Current assets
Inventories 7 365 141 364
Trade and other receivables 8 355 233 310
Loan provided 11 16,959 16,441 17,074
Cash and cash equivalents 15,141 14,195 14,155
32,820 31,010 31,903
Total assets 38,242 37,796 38,287
LIABILITIES
Non-current liabilities
Deferred tax liabilities (101) - -
Long-term lease liability (112) - (148)
Provisions (117) (286) (114)
(330) (286) (262)
Current liabilities
Trade and other payables 9 (1,487) (1,938) (1,366)
Short-term lease liability (85) (65) (87)
Current provisions (124) (135) (131)
(1,696) (2,138) (1,584)
Total liabilities (2,026) (2,424) (1,846)
Net assets 36,216 35,372 36,441
EQUITY
Share capital 12 13,832 13,832 13,832
Share premium 514 514 514
Retained earnings 186,022 184,372 185,803
Cumulative translation reserves (165,741) (164,935) (165,297)
Other reserves 1,589 1,589 1,589
Equity attributable to equity holders of the parent 36,216 35,372 36,441
Non-controlling interest - - -
Total equity 36,216 35,372 36,441
Consolidated Statement of Cash Flows Six Months ended 30 June 2024
Six months ended 30 June Year ended 31 December
2024 $'000 2023 $'000 2023 $'000
(Unaudited) (Unaudited) (Audited)
Operating profit/(loss) 256 (952) (627)
Adjustments for:
Depreciation of property, plant and equipment 449 286 821
Impairment of inventories - - 44
Loss on disposal of property, plant and equipment - - 19
Reversal of impairment of VAT recoverable (36) - (54)
Impairment of oil and gas assets 10 70 (218)
Impairment of receivables - - 3
Effect of foreign exchange rate changes 542 (290) (538)
Operating cash flows before movements in working capital 1,221 (886) (550)
Increase /(Decrease) in inventories (3) 153 (131)
Increase /(Decrease) in receivables 121 145 (127)
Increase/(Decrease) in payables and provisions (134) 496 238
Cash from operations 1,205 (92) (570)
Income taxes paid (228) - -
Interest received - 199 -
Net cash inflow/(outflow) from operating activities 977 107 (570)
Investing activities
Purchases of property, plant and equipment (334) (33) (58)
Purchase of shares in subsidiaries from minority shareholders - (24) -
Interest received 396 176 796
Net cash used in investing activities 62 119 738
Financing activities
Net cash from financing activities - - -
Net increase (decrease) in cash and cash equivalents 1,039 226 168
Effect of foreign exchange rate changes (53) 35 53
Cash and cash equivalents at beginning of period/year 14,155 13,934 13,934
Cash and cash equivalents at end of period/year 15,141 14,195 14,155
Consolidated Statement of Changes in Equity
Six Months ended 30 June 2024
Share capital Share premium account Retained earnings Cumulative translation reserves Other reserves Equity attributable to owners of the Company Non-controlling interest Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
As at 1 January 2023 13,832 514 184,331 (164,976) 1,589 35,290 237 35,527
Net loss for the period - - (172) - - (172) (1) (173)
Other comprehensive income\loss - - - 41 - 41 - 41
Total comprehensive loss for the year - - (172) 41 - (131) (1) (132)
Acquisition of non-controlling interests - - 213 - - 213 (236) (23)
As at 30 June 2023 13,832 514 184,372 (164,935) 1,589 35,372 - 35,372
Net profit for the period - - 1,431 - - - - -
Other comprehensive income\loss - - - (362) - - - -
Total comprehensive income for the year - - 1,431 (362) - - - -
As at 31 December 2023 13,832 514 185,803
(165,297) 1,589 36,441 - 36,441
Net profit for the period - - 219 - - 219 - 219
Other comprehensive loss - - - (444) - (444) - (444)
Total comprehensive income for the year - - 219 (444) - (225) - (225)
As at 30 June 2024 13,832 514 186,022 (165,741) 1,589 36,216 - 36,216
Notes to the Condensed Financial Statements
Six Months ended 30 June 2024
1. General information
Cadogan Energy Solutions plc (the `Company', together with its subsidiaries
the `Group'), is incorporated in England and Wales under the Companies Act.
The address of the registered office is 6th Floor, 60 Gracechurch Street,
London EC3V 0HR. The nature of the Group's operations and its principal
activities are set out in the Operations Review on pages 7 to 8 and the
Financial Review on pages 8 to 9.
This Half Yearly Report has not been audited or reviewed in accordance with
the Auditing Practices Board guidance on `Review of Interim Financial
Information'.
A copy of this Half Yearly Report has been published and may be found on the
Company's website at https://www.cadoganenergysolutions.com.
1. Basis of preparation
The annual financial statements of the Group are prepared in accordance with
international accounting standards in conformity with the requirements of the
Companies Act 2006 and in accordance with international financial reporting
standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in
the European Union. On 31 December 2020, IFRS as adopted by the European Union
at that date was brought into UK law and became UK-adopted international
accounting standards, with future changes being subject to endorsement by the
UK Endorsement Board. The Group transitioned to UK-adopted international
accounting standards in its consolidated financial statements on 1 January
2021. There was no impact or changes in accounting policies from the
transition. These Condensed Financial Statements have been prepared in
accordance with the UK-adopted IAS 34 Interim Financial Reporting.
The same accounting policies and methods of computation are followed in the
condensed financial statements as were followed in the most recent annual
financial statements of the Group except as noted, which were included in the
Annual Report issued on 07 May 2024.
The Group has not early adopted any amendment, standard or interpretation that
has been issued but is not yet effective. It is expected that where
applicable, these standards and amendments will be adopted on each respective
effective date.
This consolidated interim financial information does not constitute accounts
within the meaning of section 434 and of the Companies Act 2006. Statutory
accounts for the year ended 31 December 2023 were approved by the Board of
Directors on 07 May 2024 and delivered to the Registrar of Companies. The
report of the auditors on those accounts was qualified as the auditors were
unable to obtain sufficient and appropriate evidence to conclude as to whether
the fair value of the Proger loan of $17 million was materially accurate.
(a) Going concern
The Directors have continued to use the going concern basis in preparing these
condensed financial statements. The Group's business activities, together with
the factors likely to affect future development, performance and position are
set out in the Operations Review. The financial position of the Group, its
cash flow and liquidity position are described in the Financial Review.
The Group's cash balance at 30 June 2024 was $15.1million (31 December 2023:
$14.2 million).
The Directors have carried out a robust assessment of the principal risks
facing the Group.
The Group's forecasts and projections, taking into account reasonably possible
changes in trading activities, operational performance, flow rates for
commercial production and the price of hydrocarbons sold to Ukrainian
customers, show that there are reasonable expectations that the Group will be
able to operate on funds currently held and those generated internally, for
the foreseeable future.
Notwithstanding the Group's current financial performance and position, the
Board are cognisant of the actual impacts of the war situation in Ukraine. The
Board has considered possible reverse stress case scenarios for the impact on
the Group's operations, financial position and forecasts. Whilst the
potential future impacts of the invasion of Ukraine by Russia are unknown, the
Board has considered operational disruption that may be caused by the factors
such as a) restrictions applied by governments, illness amongst our workforce
and disruption to supply chain and sales channels; b) market volatility in
respect of commodity prices associated with military and geopolitical factors.
In addition to sensitivities that reflect future expectations regarding
country, commodity price and currency risks that the Group may encounter
reverse stress tests have been run to reflect possible negative effects of war
in Ukraine. The Group's forecasts demonstrate that owing to its cash resources
the Group is able to meet its operating cash flow requirements and commitments
whilst maintaining significant liquidity for a period of at least the next 12
months allowing for sustained reductions in commodity prices and extended and
severe disruption to operations should such a scenario occur.
After making enquiries and considering the uncertainties described above, the
Directors have a reasonable expectation that the Company and the Group have
adequate resources to continue in operational existence for the foreseeable
future and consider the going concern basis of accounting to be appropriate
and, thus, they continue to adopt the going concern basis of accounting in
preparing the annual financial statements.
(b) Foreign currencies
The individual financial statements of each Group company are presented in the
currency of the primary economic environment in which it operates (its
functional currency). The functional currency of the Company is US dollar. For
the purpose of the consolidated financial statements, the results and
financial position of each Group company are expressed in US dollars, which is
the presentation currency for the consolidated financial statements.
The relevant exchange rates used were as follows:
1 £ = xUS$ Six months ended 30 June Year ended 31 Dec 2023
2024 2023
Closing rate 1.26473 1.2663 1.2732
Average rate 1.2651 1.2336 1.2440
1 US$ = xUAH Six months ended 30 June Year ended 31 Dec 2023
2024 2023
Closing rate 40.7683 37.2401 38.3480
Average rate 39.2932 37.1364 37.0867
1 Euro = xUS$ Six months ended 30 June Year ended
2024 2023 31 Dec 2023
Closing rate 1.07177 1.0886 1.1038
Average rate 1.0812 1.0809 1.0817
(c) Dividend
The Directors do not recommend the payment of a dividend for the period (30
June 2024: $nil; 31 December 2023: $nil).
(d) Critical accounting judgments and estimates
Impairment indicator assessment for E&E assets
Where there are indications of impairment, the E&E assets concerned are tested
for impairment. Where the E&E assets concerned fall within the scope of an
established full cost pool, which are not larger than an operating segment,
they are tested for impairment together with all development and production
assets associated with that cost pool, as a single cash generating unit.
The aggregate carrying value of the relevant assets is compared against the
expected recoverable amount of the pool, generally by reference to the present
value of the future net cash flows expected to be derived from production of
commercial reserves from that pool. Where the assets fall into an area that
does not have an established pool or if there are no producing assets to cover
the unsuccessful exploration and evaluation costs, those assets would fail the
impairment test and be written off to the income statement in full.
Impairment losses are recognized in the income statement and are separately
disclosed.
Impairment of PP&E
Management assesses the development and production assets for impairment
indicators and performs an impairment test if indicators of impairment are
identified. Management performed an impairment assessment using a value in use
discounted cash flow model which required estimates including forecast oil
prices, reserves and production, costs and discount rates.
Recoverability and measurement of VAT
Judgment is required in assessing the recoverability of VAT assets and the
extent to which historical impairment provisions remain appropriate,
particularly noting the recent recoveries against historically impaired VAT.
In forming this assessment, the Group consider the nature and age of the VAT,
the likelihood of eligible future supplies to VAT, the pattern of recoveries
and risks and uncertainties associated with the operating environment.
Loan provided
The recoverability of the carrying value of the loan to PMP represents a
significant accounting judgment. In making their assessment over estimated
recoverability of the loan, management considered the projected outcome of
arbitration, assessment of the security provided by the pledge over shares,
and the delay in the recovery of the expected amount. As a result, management
concluded that $17 million represents its best estimate of recoverable amount
as at 30 June 2024 (2023: $17.1 million). For further detail please refer to
note 11.
1. Segment information
Segment information is presented on the basis of management's perspective and
relates to the parts of the Group that are defined as operating segments.
Operating segments are identified on the basis of internal assessment provided
to the Group's chief operating decision maker ("CODM"). The Group has
identified its executive management team as its CODM and the internal
assessment used by the top management team to oversee operations and make
decisions on allocating resources serve as the basis of information presented.
Segment information is analysed on the basis of the type of activity, products
sold, or services provided. The majority of the Group's operations are located
within Ukraine. Segment information is analysed on the basis of the types of
goods supplied by the Group's operating divisions.
The Group's reportable segments under IFRS 8 are therefore as follows:
Exploration and Production
* E&P activities on the production licences for natural gas, oil and
condensate
Service
* Drilling services to exploration and production companies
* Construction services to exploration and production companies
Trading
* Import of natural gas from European countries
* Local purchase and sales of natural gas operations with physical delivery of
natural gas
The accounting policies of the reportable segments are the same as the Group's
accounting policies. Sales between segments are carried out at market prices.
The segment result represents profit under IFRS before unallocated corporate
expenses. Unallocated corporate expenses include management and Board
remuneration and expenses incurred in respect of the maintenance of Kiev
office premises. This is the measure reported to the CODM for the purposes of
resource allocation and assessment of segment performance.
The Group does not present information on segment assets and liabilities as
the CODM does not review such information for decision-making purposes.
As at 30 June 2024 and for the six months then ended the Group's segmental
information was as follows:
Exploration and Production Trading Consolidated
$'000 $'000 $'000
Sales of hydrocarbons 4,933 - 4,933
Other revenue 19 - 19
Sales between segments - - -
Total revenue 4,952 - 4,952
Other cost of sales (2,670) (1) (2,671)
Other administrative expenses (196) (25) (221)
Impairment of oil & gas (10) - (10)
Other operating costs 35 - 35
Finance income/costs, net 226 - 226
Segment results 2,337 (26) 2,311
Unallocated other administrative expenses - - (1,287)
Other finance income, net 541
Net foreign exchange gains - - (542)
Profit before tax - - 1,023
As at 30 June 2023 and for the six months then ended the Group's segmental
information was as follows:
Exploration and Production Trading Consolidated
$'000 $'000 $'000
Sales of hydrocarbons 2,410 - 2,410
Other revenue 4 - 4
Total revenue 2,414 - 2,414
Other cost of sales (2,097) (2) (2,099)
Other administrative expenses (204) (22) (226)
Impairment of oil & gas (70) - (70)
Other operating costs 63 - 63
Finance income/costs, net 199 - 199
Segment results 305 (24) 281
Unallocated other administrative expenses - - (1,324)
Other income/loss, net - - 580
Net foreign exchange gains - - 290
Loss before tax - - (173)
1. Finance income/(costs), net
Six months ended 30 June Year ended 31 December
2024 2023 2023
$'000 $'000 $'000
Interest expense on lease (11) (5) (10)
Total interest expenses on financial liabilities (11) (5) (10)
Interest income on cash deposit 396 375 798
Reversal of liability accrual - - 395
Total interest income on financial assets 396 375 1,193
-
Interest on loan 381 354 757
Unwinding of discount on decommissioning provision 1 55 (55)
Total 767 779 1,885
1. Profit/(loss) per ordinary share
Profit/(loss) per ordinary share is calculated by dividing the net
profit/(loss) for the period/year attributable to Ordinary equity holders of
the parent by the weighted average number of Ordinary shares outstanding
during the period/year. The calculation of the basic profit/(loss) per share
is based on the following data:
Six months ended 30 June Year ended 31 December
Profit /(Loss) attributable to owners of the Company 2024 $'000 2023 $'000 2023 $'000
profit /(loss) for the purposes of basic (loss)/profit per share being net profit/(loss) attributable to owners of the Company 219 (172) 1,259
Number Number Number
Number of shares `000 `000 `000
Weighted average number of Ordinary shares for the purposes of basic profit/(loss) per share 244,128 244,128 244,128
Cent Cent Cent
Profit/(loss) per Ordinary share
Basic 0.1 (0.1) 0.5
1. Proved properties
As of 31 June 2024, the development and production assets balance which forms
part of PP&E has decreased in comparison to 31 December 2023 by 9%, mainly due
to depletion charge for the period.
1. Inventories
As of 30 June 2024 inventories are almost at the same level of $365 thousand
(30 June 2023: $154 thousand, 31 December 2023: $364 thousand).
The impairment provision as at 30 June 2024 of $1 million is held to reduce
the carrying value of the inventories to net realisable value. No additional
provision on inventories has been recognised for the first half 2024.
1. Trade and other receivables
Six months ended 30 June Year ended 31 December
2024 $'000 2023 $'000 2023 $'000
VAT recoverable 834 1,111 1,079
Impairment provision for VAT (829) (999) (918)
Prepayments 326 62 81
Trade receivables 29 66 68
Other receivables 30 45 31
Impairment provision for bad debts (35) (52) (49)
355 233 310
VAT recoverable asset was realized through natural gas and crude oil sales
during the first half of 2024. The Directors consider that the carrying amount
of the other receivables approximates their fair value. Management expects to
realise VAT recoverable through the activities of the business segments.
1. Trade and other payables
The $1.5 million of trade and other payables as at 30 June 2024 (30 June 2023:
$1.9 million, 31 December 2023: $1.4 million) represent $0.8 million (30 June
2023: $1.5 million, 31 December 2023: $0.6 million) of other creditors and
$0.7 million of accruals (30 June 2023: $0.4 million, 31 December 2023: $0.8
million).
1. Commitments and contingencies
There have been no significant changes to the commitments and contingencies
reported on page 80 of the Annual Report.
1. Loan provided
In February 2019, Cadogan used part of its cash (Euro 13.385 million) to enter
into a 2-year Loan Agreement with Proger Managers & Partners, with an option
to convert it into a direct 33% equity interest in Proger Ingegneria,
equivalent to an indirect 25 % equity interest in Proger. According to IFRS,
the instrument has to be represented in our balance sheet at fair value.
In February 2021, Cadogan notified PMP that according to the Loan Agreement,
the Maturity Date occurred on 25 February 2021. As the Call Option was not
exercised, PMP must fulfil the payment of EUR 14,857,350, being the
reimbursement of the Loan in terms of principal and the accumulated interest.
PMP is in default since 25 February 2021. In case of default payment, the
terms of the agreement provide for the application of an increased interest
rate on the amount of the debt.
Since the Call Option was not exercised before the Maturity Date and the asset
is held within a business model whose objective is to hold assets in order to
collect contractual cash flows, the Loan provided was reclassified from
`Financial assets at fair value through profit and loss' to `Financial assets
at amortized cost'.
Financial assets at amortised cost
$'000
As at 1 January 2023 15,825
Interest 704
Change in provision (350)
Exchange differences 262
As at 30 June 2023 16,441
Interest 753
Change in provision (350)
Exchange differences 230
As at 1 January 2024 17,074
Interest 751
Change in provision (370)
Exchange differences (496)
As at 30 June 2024 16,959
Proger Managers & Partners srl has failed to reimburse the Loan with the
accumulated interests in full at the Maturity Date,25 February 2021. In case
of non-reimbursement, the Loan carries an entitlement to an interest at a rate
of 7.5% per year to be accrued on principle amount and accumulated interests
at the Maturity Date until the total amount is paid. Starting from March 2021,
Cadogan treats the Loan provided to PMP at historical cost-plus accrued
interests and less provision. In August 2022, the Company was informed of the
award of the arbitral proceeding which:
- rejected Proger's principal claim and declared that
the Loan Agreement is valid and effective,
- deemed to qualify the Call Option as a preliminary
contract under condition, but
- rejected Proger's claim ex art.2932 Italian Civil
Code, stating that it is impossible to give an award producing the same
effects of a final contract ex art.2932 Italian Civil Code,
- this because of the duties established by the rules
of the London Regulatory Authority and because of the need, possibly by both
parties, to comply with the due proceedings before the formalization of the
entry of Cadogan into the capital of Proger Ingegneria,
- subordinated the stipulation of the final contract
to the precedent completion of the proceeding and bureaucratic process as per
the British rules, stating that, otherwise,
- there is the obligation on Proger Ingegneria to
return the payment received under the Loan Agreement,
- compensated all the expenses of the proceeding.
Proger refused to apply the requirements of the award and thus, Proger must
reimburse the amount covered by the Loan Agreement plus interest accrued in
the meantime. Cadogan is taking the necessary legal actions to recover these
amounts. Cadogan initiated a second arbitration in November 2023 to assert its
right to restitution and obtain Proger's condemnation of the consequent
payments.
The recoverability of the Loan had been assessed in April 2024 for the purpose
of Cadogan Annual Report 2023.
1. Share capital
Authorized and issued equity share capital (x000)
30/06/2024 31/12/2023
Number $'000 Number $'000
Authorized Ordinary shares of £0.03 each 1,000,000 57,713 1,000,000 57,713
Issued Ordinary shares of £0.03 each 244,128 13,832 244,128 13,832
Authorized but unissued share capital of £30 million has been translated into
US dollars at the historic exchange rate of the issued share capital. The
Company has one class of Ordinary shares, which carry no right to fixed
income.
Issued equity share capital
Ordinary shares of £0.03
At 31 December 2021 244,128,487
Issued during year -
At 31 December 2022 244,128,487
Issued during year -
At 31 December 2023 244,128,487
Issued during first-half year -
At 30 June 2024 244,128,487
1. Tax
Six months ended 30 June Year ended 31-Dec
2024 2023 2023
$'000 $'000 $'000
Current tax 333 - -
Deferred tax 471 - -
805 - -
The current income tax has been accrued on the profits of the oil extraction
company LLC Usenco-Nadra. The deferred tax represents the amount of tax asset
utilized during the first half of 2024.
1. Events subsequent to the reporting date
The Group decided to accelerate its business diversification in electricity
sector and to invest in new power generation opportunities in Ukraine up to an
installed capacity of around 10 MW. The Group is launching several projects
with the objective of being operational in Q4 2024.
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