ANNUAL FINANCIAL REPORT
2016
Cadogan Petroleum plc is an independent
oil and gas exploration, development and
production company with onshore gas,
condensate and oil assets in Ukraine.
OVERVIEW
Summary of 2016
Group Overview
STRATEGIC REPORT
Chairman’s Statement
Chief Executive’s Review
Operations Review
Financial Review
Risks and Uncertainties
Statement of Reserves and Resources
Corporate Responsibility
CORPORATE GOVERNANCE
Board of Directors
Report of the Directors
Viability statement
Corporate Governance Statement
Board Committee Reports
Annual Report on Remuneration 2016
FINANCIAL STATEMENTS
Statement of Directors’ Responsibilities
Independent Auditor’s Report
Financial Statements of Cadogan Petroleum plc
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Cash Flow Statement
Consolidated Statement of Changes in Equity
Notes to the Consolidated Financial Statements
Company Balance Sheet
Company Cash Flow Statement
Company Statement of Changes in Equity
Notes to the Company Financial Statements
GLOSSARY
SHAREHOLDER INFORMATION
01
02
04
05
06
08
09
1 1
13
14
16
18
22
23
26
32
37
38
44
45
46
47
48
49
73
74
75
76
80
82
01
Summary of 2016
Key highlights of 2016:
> LTI&TRI1 : 1&1 (2015: 0&0)
> Greenhouse gases emissions2: 27.44 of CO2e/boe produced
(2015: 30.47 CO2e/boe)
> Production: 42,495 boe (2015: 39,680 boe)
> Realised price at year end: 46.5 $/boe (2015: 35.7$/boe)
> Gross revenues3: $19.7 million (2015: $75.4 million)
> Gross profit: $1.1 million (2015: $5.9 million)
> Loss for the year4: $5.9 million (2015: $23.3 million)
> Net cash5 at year end: $39.7 million (2015: $36.5 million)
1 LTI: Lost Time Incidents; TRI: Total Recordable Incidents
2 E&P operations emissions. For total greenhouse gases emissions please see page 21
3 Gross revenues of $19.7 million (2015: $75.4 million) included $15.6 million (2015: $73.3 million) from trading of natural gas, $1.6 million
(2015: $1.8 million) from exploration and production and $2.5 million (2015: $0.4 million) from services
4 In 2016 the Company decided to replace the British pound with the US dollar as functional currency. Had the functional currency been
changed from 1 January 2015, the loss for 2015 would have been $25.7 million
5 Net cash includes cash and cash equivalents less short term borrowings
GROUP OVERVIEWDIRECTORS’ REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONwww.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 02
Group Overview
The Group has continued to maintain exploration and production assets in Ukraine, to conduct trading operations,
which include the importing of gas from Slovakia and Poland and local purchasing and sales with physical delivery
of natural gas, and to operate a service business which includes work-over, civil works services and other services
provided to Exploration and Production (“E&P”) companies.
Our business model
We aim to increase value through:
>
Sourcing additional E&P assets to
diversify Cadogan’s portfolio both
geographically and operationally;
we will pursue exploration and/
or near term development assets
with significant upside as well as
producing assets to cover G&A
and provide free cash flow for
exploration activities
>
Pursuing farm-outs to contain
investments in Ukrainian licences
> Maintaining sufficient capital
base, complementing E&P
cash flow with revenues from
gas trading and oil services
businesses
The Group has continued to actively
pursue its strategy of portfolio
re-loading and geographical
diversification and at the beginning
of 2017 has implemented the first
step of this strategy, the acquisition
of a 90% participating interest
in Exploenergy s.r.l., an Italian
company.
Both gas trading and service
business started as an opportunistic
use of available resources, such
as cash for trading and equipment
and competences for the service
business, and continued to contribute
to the Group’s goal of being cash
neutral, while actively searching for
value accretive opportunities in the
E&P domain.
Ukraine
West Ukraine
The Group continued to produce
oil from the Monastyretska licence,
located in the Carpathian fold belt
(Skuba unit), and successfully re-
entered two old, suspended wells
rented from Ukrnafta under a profit
sharing agreement. Both wells are
currently producing under natural
flow and are being monitored before
proceeding with the installation
of sucker road pumps, which will
increase their rates of production.
The Group also continued to
produce gas from Debeslavetske
and Cheremkhivske gas fields and
has maintained both the Bitlyanska
licence and its 15% interest in
Westgasinvest LLC (“WGI”),
which holds the Reklynetska,
Zhuzhelianska, Cheremkhivsko-
Strupkivska, Debeslavetska
Production, Baulinska, Filimonivska,
Kurinna, Sandugeyivska
and Yakovlivska licences for
unconventional activities. Eni is the
operator of these shale gas licences
and Cadogan is carried through
exploration.
East Ukraine
Cadogan has filed applications to
convert Zagoryanska and Pirkivska
licences from exploration into
production licences, while Pokrovska
licence has been relinquished
at the end of its last exploration
period. Both applications have been
negatively impacted by a dispute
between central and local authorities
on the distribution of royalties on
gas, which has brought the award
process in the regional Council to a
complete halt.
Gas trading operations continued,
with sales in Ukraine of both
imported and locally produced gas.
Volumes, and revenues, though
have substantially decreased over
the previous two years as more
competitors entered the market.
Finally, the Group continued
providing services through its wholly-
owned subsidiary Astroservice LLC.
Services provided were primarily
related to well abandonment and
site restoration and the turnover
substantially increased over the
previous year as some of the
activities which had been put on hold
by the clients were awarded.
Italy
In January 2017, Cadogan, through
its fully owned Dutch subsidiary,
finalised the purchase of 90% of the
Exploenergy s.r.l. (“Exploenergy”),
an Italian company which has filed
applications for two exploration
licences (Reno Centese and Corzano)
located in the Po Valley region, in
close proximity to fields discovered
by the former operator; two leads
have been identified in these licences
with combined, unrisked prospective
resources estimated to be in excess
of 60 bcf of gas. Both applications
are in an advanced stage of their
approval process.
www.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 www.cadoganpetroleum.com
Cadogan Petroleum plc Annual financial report 2016
03
G
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B EL ARUS
RUSSIA
P O L AND
SLOVAKIA
Monastyretske
Bitlyanske
U KR AIN E
Pirkivske
Zagoryanske
Kiev
HUN GARY
Cheremkhivske
Debeslavetske
M
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BLACK SEA
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04
Strategic Report
The Strategic Report has been prepared in accordance with
Section 414A of the Companies Act 2006 (the “Act”) and
presented hereunder. Its purpose is to inform stakeholders and
help them assess how the Directors have performed their legal
duty under Section 172 of the Act to promote the success of
the Company.
Principal activity and status of
the Company
The Company is registered as a
public limited company (registration
number 05718406) in England and
Wales. Its principal activity is oil
and gas exploration, development
and production; the company also
conducts gas trading and provides
services to other operators.
to increase oil, gas and
condensate production measured
on number of barrels of oil
equivalent produced per day
(“boepd”);
Key performance indicators
The Group monitors its performance
through four key performance
indicators (“KPIs”):
>
The Company’s shares have a
standard listing on the Official List
of the UK Listing Authority and are
traded on the main market of the
London Stock Exchange.
>
>
>
to decrease administrative
expenses;
to increase the Group’s basic
earnings per share; and
to maintain no lost time
incidents.
The Group’s performance in 2016
against these KPI’s is set out in the
table below, together with the prior
year performance data.
Unit
2016
2015
Average production
(working interest basis)1
Overhead (G&A)
Basic loss per share2
Lost time incidents3
boepd
$ million
cents
incidents
116
5.1
(2.6)
1
109
6.1
(10.1)
0
Average production is calculated as the average daily production during the year
1
2 Basic loss per Ordinary share is calculated by dividing the net loss for the year attributable to equity holders of the parent company by the
weighted average number of Ordinary shares during the year
3 Lost time incidents relates to the number of injuries where an employee/contractor is injured and has time off work (IOGP classification)
www.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 05
Chairman’s Statement
2016 has witnessed a slow, but
continuous progress towards the
integration of Ukraine within Europe,
its market and its regulations,
notwithstanding the still open
confrontation with Russia and an
unresolved economic crisis. In this
context, the reforms to improve and
revitalise the country’s energy sector
were still timid and a real, strong
commitment for their take-off was
not evident. Besides there have been
setbacks, some of them particularly
damaging for Cadogan, which has
remained subject to a punitive
tax regime on its gas production
and has not yet been awarded the
conversion of its eastern licences
from exploration to production.
The country’s cooperation with
the leading financial institutions
improved during the year and this,
combined with political reassurances
on economic measures to stabilise
the country, led to the international
credit lines being extended. Some
of this credit was used to replace
Russian imported gas with gas
purchased in Europe and imported
into Ukraine via the reverse flow,
which had been pioneered by
Cadogan.
In this challenging context, Cadogan
has continued its transformational
journey towards becoming a much
leaner and efficient operator of
marginal fields, resilient to persistent
low prices, while preserving its cash.
G&A have been further reduced
while production has increased over
the previous year and is expected
to increase further this year
through the addition of a couple
of old suspended wells which will
be re-entered and worked-over
(thus minimising the deployment of
capital).
Though Cadogan is rooted in
Ukraine, the Board and the
Management remain strongly
committed to introduce an element
of geographic diversification in the
Group’s portfolio in order to manage
the exposure to a country which still
has an above the average level of
risk. A healthy pipeline of potential
opportunities has been maintained
through the year and I am pleased
to say that 2016 witnessed the very
first step of this diversification
process taking place (though the
acquisition was finalised in the early
days of 2017).
The acquisition of Exploenergy s.r.l.
(“Exploenergy”) is clearly not enough
and management will continue to
actively pursue other opportunities
in the E&P domain, leveraging
on the demonstrated skills and
competences of the company and
its staff, on a strong balance sheet
and on the experience and network
of contacts of the Directors. We are
all committed to support Cadogan in
pursuing its diversification objectives
in every way we can.
Finally 2016 was the last year of
Cadogan being audited by Deloitte.
Based on existing regulations, a
tender had to be launched to appoint
the new auditor: BDO won the tender
and they will be proposed as the
auditor at the next AGM. While I
welcome BDO, I wish to express my
own and the entire Board’s gratitude
to Deloitte for the services rendered
to Cadogan: their watchful eye and
rigour have helped me and the other
Directors to discharge our duties
by giving the confidence that the
company was properly managed.
Zev Furst
Non-Executive Chairman
27 April 2017
GROUP OVERVIEWDIRECTORS’ REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONwww.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 06
Strategic Report continued
Chief Executive’s Review
2016 has been an important year for
Cadogan, which has succeeded in
keeping its E&P operations at break-
even1, notwithstanding the headwind
of oil and gas prices, which have
only slightly recovered in the second
part of the year, and of a punitive
taxation on its gas production.
Brent Crude Oil, $/bbl
60
55
50
45
40
35
30
25
2016 has also been the year that has
seen the efforts to geographically
diversify the portfolio coming to
fruition with the first acquisition
outside Ukraine being finalised in
the early days of the new year; this
is a small, yet important step which
has marked the beginning of a new
business phase for Cadogan.
While 2016 has witnessed some signs
of recovery for the oil & gas industry,
it has been another difficult year
for Ukraine, which has remained
embroiled in its confrontation with
Russia and has not come out of its
economic crisis. The country has
tried to slowly progress towards
modernisation of its oil & gas
legislative framework, but the few
steps ahead have been offset by
some major steps back, in particular
a dispute between regional Councils
and central government, which has
brought the award of licences to a
nearly complete halt.
Cadogan’s application to convert
Zagoryanska and Pirkovska
exploration licences into production
licences have been amongst
the casualties of this protracted
institutional standstill. Besides,
Cadogan has remained subject to a
punitive tax regime, with royalties on
gas set at 70 %, a measure designed
to “punish” oligarchs and which has
seen Cadogan as a sort of collateral
damage. All attempts to find a
solution have failed, partly because
of the limits of the current legislation
and partly because of the opposition
of the other foreign investor in WGI2,
the entity, which formally owns
Debeslavetska and Cheremkhivska
licences.
2016 also witnessed a major change
in the Ukrainian gas market. Direct
imports from Russia came to a halt
and the demand was covered by
production and imports from Europe,
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
2016
Source: www.tradingeconomics.com | otc
which peaked at 11 billion mcm. The
market became more competitive
and having paved the way to
European import by pioneering the
reverse flow did not give Cadogan
any competitive advantage. In this
challenging context Cadogan has
protected its margin by pursuing
opportunistic deals, rather than
volume.
In short, these were the highlights
of 2016:
> A 7% increase in production,
from 39,680 boe in 2015 to
42,495 boe this year
> A 15% reduction of overhead
(G&A), from $6.1 million in 2015
to $5.1 million this year
> A good year for the services
business whose net result of
$0.6 million (2015: $0.1 million)
partially offset the reduction in
the trading result
> A difficult year for trading whose
result was a loss of $2.0 million
(see note 5 to the Consolidated
Financial Statements) compared
to a positive result of $2.8 million
last year, driven primarily by
lower volumes
>
The beginning of the geographic
diversification process with the
acquisition of an E&P company
in Italy
> A balance sheet, which has
remained very robust with
a 9% increase of net cash
from $36.5 million in 2015 to
$39.7 million this year.
Core operations
Cadogan has continued to safely and
efficiently produce from its fields in
the west of the country. Production
has increased over the value of
the previous year and operating
expenses have been further reduced
through a combination of process
and organisational streamlining. The
agreement to rent two old suspended
wells from Ukrnafta under a profit
sharing scheme has created the
premises for a significant increase
of Monastyretska’s oil production
rate3 which will materialise in 2017
once the wells are re-entered
and worked-over. The re-entry of
existing wells is part of Cadogan’s
strategy to sustain production and
promote reserves and resources to
P1 (proved) category with a minimum
deployment of capital, given the still
relatively high risk profile of Ukraine.
Regrettably one LTI (Lost Time
Incident) occurred to a contractor
acting against instructions, has
diminished the value of these
operational achievements.
The conversion of exploration and
production licences has witnessed
other setbacks. Notwithstanding
the repeated filings, the approvals
have not been granted because of
a disagreement between the local
Council and the central authorities
on the distribution of royalties for
gas. Management is reviewing all
available options to move forward.
On cash basis, net of $0.1 million of depreciation
1
2 WGI, WestGasInvest LLC, which is owned by eni (50.01%), Nadra (34,99%) and Cadogan (15%) is the licence holder
3 At the time this report was issued both wells had been successfully re-entered and were producing an aggregate amount of 30 barrels oil per day
www.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 07
Import of natural gas 2010-2016, bcm
12
9
6
3
0
2012
2013
2014
2015
2016
Source: ukrstat.gov.ua
Having secured its foundations
and with a robust balance sheet,
management will focus on value
delivery, acting on four levers:
> Re-load the licence portfolio
while pursuing geographic
diversification in order to
mitigate the exposure to a
country, which maintains a
relatively high risk profile
>
>
>
Closely monitor the performance
of Monastyretska licence with
a view of preparing a staged
development programme based
on a short-term production
acceleration via work-overs of
existing wells and a medium-term
programme of infill drilling to
be executed upon securing the
extension of the licence, once it
expires in 2019
Safeguard the value of the
Bitlyanska, Debeslavetska and
Cheremkhivska licences
Continue with gas trading and
services to supplement the
E&P revenues and remain cash
neutral, while searching for
assets with a high value upside.
Guido Michelotti
Chief Executive Officer
27 April 2017
Non E&P operation
The anticipated increase in
competition, due to a surge in the
imported volumes from Europe,
which brought key players into
Ukraine, has significantly eroded the
opportunities for an independent
trader, such as Cadogan. The impact
of this challenging context has been
compounded by the resignation of
certain Cadogan’s traders. After an
initial attempt to protect the market
share, Cadogan has switched to
pursuing opportunistic deals with
good margins.
Revenue, and most importantly net
profits, have remained subdued
compared to the past two years
and are unlikely to go back to
where they were in the early days
notwithstanding efforts to remain
competitive because of structural
changes in the market which has
become more mature and dominated
by large traders.
Services conversely have delivered
excellent results driven by the
execution of the work, which had
been contracted in 2015 and which
execution had been deferred on
clients’ request. These positive
results have partially compensated
for the lower than expected
contribution from trading. Efforts
to expand the clients’ portfolio have
continued and other contracts have
been won through tenders.
Outlook
Through the year Cadogan has
continued its transformational
journey towards becoming a leaner
and more efficient operator of
marginal fields. G&A have been
further reduced and E&P operations
have achieved break-even
notwithstanding a combination of
negative factors. This drive towards
efficiency has made Cadogan more
resilient to a context that will be
unlikely see the oil price go back
to hundred dollars per barrel for a
number of years.
GROUP OVERVIEWDIRECTORS’ REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONwww.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 08
Strategic Report continued
Operations Review
Overview
At 31 December 2016 the Group held working interests in four
conventional gas, condensate and oil exploration and production
licences in the west of Ukraine. All these assets are operated by
the Group and are located in either the Carpathian basin in close
proximity to the Ukrainian gas distribution infrastructures.
Summary of the Group’s licences (as at 31 December 2016)
Working interest (%)
Licence
99.8
99.2
54.2
99.2
Bitlyanska
Debeslavetska2
Cheremkhivska2
Monastyretska
Debeslavetska Exploration, Sloboda
and Pokrovska licences have reached
the end of the last extension of their
exploration periods and have been
relinquished, while Zagoryanska and
Pirkovska licences are in the process
of being converted from Exploration
to Production licence.
In addition to the above licences, the
Group has a 15% carried interest in
Westgasinvest LLC (“WGI”), which
holds the Reklynetska (expired in
March 2017), Zhuzhelianska (expired
in March 2017), Cheremkhivsko-
Strupkivska, Debeslavetska Production,
Baulinska, Filimonivska, Kurinna,
Sandugeyivska and Yakovlivska
licences for unconventional activities.
East Ukraine
Applications for Zagoryanska and
Pirkovska 20-year production licences
have been repeatedly resubmitted
for approval. Although the Group
has fulfilled its legal obligations and
requirements and filed the applications
before their expiration date, delays
have occurred due to legislative
changes introduced into the award
process and to an ongoing dispute
between central and local authorities.
This conflict revolves around
distribution of revenues from subsoil
use tax (royalties) and has brought to
a complete halt the award process.
Conversely, the Group has decided to
relinquish Pokrovska licence after its
last extension expired in August 2016
Expiry
December 2019
November 2026
May 2018
November 2019
Licence type1
E&D
Production
Production
E&D
as the lack of commercial discoveries
did not justify its conversion into a
production licence.
West Ukraine
The Bitlyanska licence covers an
area of 390 square kilometres.
Bitlyanska, Borynya and Vovchenska
are three hydrocarbon discoveries
in this licence area. The Borynya
field holds 3P reserves, contingent
recoverable resources and
prospective resources. Bitlyanska
and Vovchenska fields hold
contingent recoverable resources.
Borynya 3 well, has been kept on hold,
monitored and routinely bled-off for
an eventual re-entry and stimulation.
The Monastyrestska licence continued
to regularly produce oil at a rate of
46 boepd (2015: 48 boepd) through
one well. Two more producing wells
were added in December and they
were being re-entered at the end of
the reporting period3; the wells have
been rented from Ukrnafta under a
profit sharing agreement.
Debeslavetska and Cheremkhivska
continued producing with a stable
gas production rate of 70 boepd
(2015: 76 boepd).
The Slobodo-Rungurska and
Debeslavetska exploration licences
were both relinquished at the expiry of
their last extension period, in April 2016
and September 2016, respectively.
Gas trading
The Group continued to import gas
from Europe via Slovakian and Polish
borders and to sell it in Ukraine along
with some locally purchased quantities.
Volumes were lower than in previous
years as some of the largest clients
migrated to other suppliers which
had entered the market and a new
portfolio of smaller buyers had to be
built; margins were also lower owing
to increased competition and storage
requirements set by the regulator4.
Margins generated by trading were
offset by Cadogan’s administrative
expenses, that are no longer
commensurate to the current level of
trading activity.
Management has taken a decisive
action by (i) tightening the terms
and conditions of gas sales (no
transfer of title without payment);
and (ii) proposing to the Board
a streamlining of the Executive
management, which was approved
and will be implemented in 2017.
Service
The Group continued providing
services through its wholly-owned
subsidiary Astroservice LLC.
Services provided were primarily
related to well abandonment and
site restoration and the turnover
substantially increased over the
previous year as some of the
activities which had been put on hold
by the clients were awarded.
E&D = Exploration and Development
1
2 In addition, the Group has 99.2% and 54.2% of economic benefit in conventional activities in Debeslavetska and Cheremkhivska licences
respectively through Joint Activity Agreements (“JAA”)
3 Both re-entries were successful and the wells were producing some 30 barrels oil per day prior to the installation of sucker rod pumps
4 Storage requirements have been set at 50% of the volume sold to final consumers starting 1 January 2016. In November 2016 the
requirement has been decreased to 10%. Starting from January 2017 the requirements have been canceled.
www.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 09
Financial Review
Overview
In 2016 the Group continued with its
efforts to approach cash neutrality
through a number of cost reduction
initiatives, while supplementing E&P
revenues with service activities and
gas trading.
The functional currency of the UK
subsidiaries of the Group has been
changed from GBP to USD starting
1 January 2016 (Note 3(d)).
The Group has acquired the
remaining ownership of 30% of
Pokrovskoe Petroleum B.V. and
60% of Zagoryanskoe Petroleum
B.V. from eni for an immaterial
consideration, which resulted in a
profit on acquisition of $0.1 million
in 2016. As part of the assets, the
Group acquired $5.9 million of VAT
credit and $103 million of unused tax
losses of both companies, for which
the impairment has been recognised
in prior years (Note 17).
Net cash, which included cash
and cash equivalents mostly
denominated in USD net of short-
term borrowings denominated in
UAH, increased to $39.7 million
at 31 December 2016 compared to
$36.5 million at 31 December 2015.
Income statement
Revenue has decreased from
$75.4 million in 2015 to $19.7 million
in 2016 due to loss of customers
and increased competition in gas
trading operations, which represent
$15.6 million (2015: $73.3 million) of
total revenues; notwithstanding a
higher production volume, revenues
from production have slightly
declined to $1.6 million (2015:
$1.8 million) owing to lower realised
price.
Revenue from the service business,
which includes drilling and civil works
services, increased to $2.5 million
(2015: $0.4 million), as some of the
work awarded, but suspended by
the clients in 2015, was executed
this year. Cost of sales represents
$15.5 million (2015: $67.4 million)
of purchases of gas for the trading
operating segment, $3.1 million
(2015: $2.2 million) of production
royalties and taxes, depreciation
and depletion of producing wells
and direct staff costs for exploration
and development and the service
segment. Gross profit has decreased
to $1.1 million (2015: $5.9 million).
$8.5 million) trading receivables,
$0.8 million prepayments for natural
gas (2015: $3.2 million), $0.8 million
VAT recoverable (2015: nil) which is
expected to be recovered through
trading and services activities.
Administrative expenses of
$5.6 million (2015: $6.1 million)
comprise, professional fees,
brokerage fees, depreciation charges
on non-producing property, plant and
equipment, staff costs and Directors’
remuneration.
Share of loss in joint ventures
of $0.2 million (2015: $12.8
million losses) comprise of: i)
$2.3 million revenues received by
one of the Group subsidiaries for
decommissioning services provided
to the joint ventures (Note 17); ii)
$1.7 million of operating loss and
iii) $0.8 million loss recognised as
impairment of Westgasinvest LLC.
Finance costs of $1.1 million (2015:
$2.6 million) represent interest
expense to BNPP on credit line used
for trading net of the interest income
on cash deposit used for trading.
As a result, loss before tax was
$5.8 million (2015: $22.2 million1).
Balance sheet
The cash position of $43.3 million
at 31 December 2016, including
restricted cash of $10.9 million used
as a pledge for the credit line, has
decreased from $49.4 million at
31 December 2015.
Intangible Exploration and Evaluation
(“E&E”) assets of $2.4 million (2015:
$2.7 million) represent the carrying
value of the Bitlyanska licence. The
PP&E balance was $1.3 million at
31 December 2016 (2015: $1.7 million).
Investments in joint ventures of
$2.3 million (2015: $2.2 million)
mainly represent the carrying
value of the Group’s investments
in Westgasinvest LLC, for which
impairment of $0.8 million have been
recognised (note 17).
Trade and other receivables of
$4.1 million (2015: $14.4 million)
include $2.2 million (2015:
The $3.6 million outstanding short-
term borrowings as of 31 December
2016 (2015: $12.9 million) represents
a credit line to purchase natural gas,
drawn in UAH at Ukrainian bank,
which is a 100% subsidiary of a UK
bank. The credit line is secured by
$10 million of cash balance placed at
the UK bank; this has been decreased
to $5 million in March 2017 owing
to lower volumes traded and lower
gas prices. Borrowings are taken in
UAH in order to preserve the USD
amount of own cash and mitigate a
risk related to currency fluctuations
in Ukraine. A short-term credit line
provides an easy access to quick
financings to support the Group’s
trading operations.
The $1.6 million of trade and other
payables as of 31 December 2016
(2015: $3.7 million) represent
$0.9 million (2015: $0.2 million) of
accrued expenses, $0.5 million (2015:
$1.7 million) of other creditors and
$0.3 million (2015: $0.9 million) of
VAT payable for supplies of natural
gas.
Provisions include $0.7 million
of long-term provision for
decommissioning costs (2015:
$0.7 million of long-term provision)
and $1.3 million (2015: $1.5 million)
provision for corporate tax for the
dispute on the treatment of taxable
income and expenses.
Net cash, which included cash
and cash equivalents mostly
denominated in USD net of short-
term borrowings denominated in
UAH, increased to $39.7 million
at 31 December 2016 compared
to $36.5 million at 31 December
2015. Net cash mostly improved of
improved collection of receivables,
decrease of inventories in stock
and improvement of working capital
cycle.
1 Loss before tax would have been $25.7 million had the group started using last year the USD as functional currency
GROUP OVERVIEWDIRECTORS’ REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONwww.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 10
Strategic Report continued
Cash flow statement
The Consolidated Cash Flow
Statement on page 47 shows
operating cash outflow before
movements in working capital of
$4.4 million (2015: $1.1 million).
In 2016 the Group contributed
$2.3 million (2015: $0.7 million) into
joint ventures to repay its current
liabilities. Management maintained
its focus on optimising the working
capital and this focus, combined with
a reduction of the mandatory gas
storage requirements, substantially
improved the cash inflows from
operating activities from $1.2 million
in 2015 to $2.5 million in 2016.
In 2016 the Group financed its
trading operations with short-term
borrowings (Note 22) with proceeds
of $1.9 million and repayments of
$10.2 million (2015: proceeds of
$13.2 million and repayments of
$12.2 million).
Related party transactions
Related party transactions are set
out in note 28 to the Consolidated
Financial Statements.
Treasury
The Group continually monitors
its exposure to currency risk. It
maintains a portfolio of cash and
cash equivalent balances mainly in
US dollars (“USD”) held primarily
in the UK. 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. To
date, funds from such revenues have
been used in Ukraine in operations
rather than being remitted to the UK.
1
Loss before tax would have been $25.7 million had the group started using last year the USD as functional currency
www.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 11
Risks and Uncertainties
There are a number of potential risks
and uncertainties that could have
a material impact on the Group’s
long-term performance and could
cause the results to differ materially
from expected and historical results.
Executive management review the
potential risks and then classify
them as having a high impact, above
$5 million, medium impact, above
$1 million but below $5 million,
and low impact, below $1 million.
They also assess the likelihood
of these risks occurring. Risk
mitigation factors are reviewed and
documented based on the level and
likelihood of occurrence. The Audit
Committee reviews the risk register
and monitors the implementation of
improved risk mitigation procedures
via Executive management, who are
carrying out a robust assessment
of the principal risks facing the
Group, including those potentially
threatening its business model,
future performance, solvency and
liquidity.
The Group has analysed the following
categories as key risks:
Operational risks
Risk
Mitigation
Health, Safety and Environment (“HSE”)
The oil and gas industry by its nature conducts
activities, which can cause health, safety and
environmental incidents. Serious incidents
can have not only a financial impact but can
also damage the Group’s reputation and the
opportunity to undertake further projects.
Drilling and Work-Over operations
The technical difficulty of drilling or re-entering
wells in the Group’s locations and equipment
limitations can result in the unsuccessful
completion of the well.
Production and maintenance
There is a risk that production or transportation
facilities can fail due to non-adequate
maintenance, control or poor performance of the
Group’s suppliers.
The Group maintains a HSE management system in place and
demands that management, staff and contractors adhere to it.
The system ensures that the Group meets Ukraine legislative
standards in full and achieves international standards to the
maximum extent possible.
The incorporation of detailed sub-surface analysis into a
robustly engineered well design and work programme, with
appropriate procurement procedures and competent on site
management, aims to minimise risk.
All plants are operated and maintained at standards above
the Ukraine minimum legal requirements. Operative staff are
experienced and receive supplemental training to ensure that
facilities are properly operated and maintained. When not in use
the facilities are properly kept under conservation and routinely
monitored.
Service providers are rigorously reviewed at the tender stage
and are monitored during the contract period.
Sub-surface risks
Risk
Mitigation
The success of the business relies on accurate
and detailed analysis of the sub-surface. This can
be impacted by poor quality data, either historic
or recently gathered, and limited coverage.
Certain information provided by external sources
may not be accurate.
All externally provided and historic data is rigorously examined and
discarded when appropriate. New data acquisition is considered
and appropriate programmes implemented, but historic data can
be reviewed and reprocessed to improve the overall knowledge
base. Agreements with qualified local and international G&G
contractors have been entered into to supplement and broaden the
pool of expertise available to the Company.
Data can be misinterpreted leading to the
construction of inaccurate models and
subsequent plans.
All analytical outcomes are challenged internally and peer
reviewed. Analysis is performed using modern geological
software.
Area available for drilling operations is limited by
logistics, infrastructures and moratorium. This
increases the risk for setting optimum well coordinates.
The Group may not be successful in achieving
commercial production from an asset and
consequently the carrying values of the Group’s
oil and gas assets may not be recovered
through future revenues, because of reservoir
performances below the expectations.
If not covered by 3D seismic or fitting over 2D seismic lines, the
eventual well’s dislocation will not be accepted.
The Group performs a review of its oil and gas assets for
impairment on an annual basis, and considers whether to
commission a review from a third or a Competent Person’s
Report (“CPR”) from an independent qualified contractor
depending on the circumstances.
GROUP OVERVIEWDIRECTORS’ REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONwww.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 12
Strategic Report continued
Financial risks
Risk
The Group is at risk from changes in the
economic environment both in Ukraine and
globally, which can cause foreign exchange
movements, changes in the rate of inflation and
interest rates and lead to credit risk in relation to
the Group’s key counterparties.
The Group is at risk that the counterparty will
default on its contractual obligations resulting in
a financial loss to the Group.
The Group is at risk that fluctuations in gas
prices will have a negative result for the trading
operations resulting in a financial loss to the
Group.
Country risks
Risk
Legislative changes may bring unexpected risk
and be time consuming for securing the licences
obligations.
Ukraine is an emerging market and as such the
Group is exposed to greater regulatory, economic
and political risks, more than other jurisdictions.
Emerging economies are generally subject to
a volatile political environment which could
adversely impact Cadogan’s ability to operate in
the market.
Other risks
Risk
The Group's success depends upon skilled
management as well as technical and
administrative staff. The loss of service of critical
members from the Group's team could have an
adverse effect on the business.
The Group is at risk of underestimating the risk
and complexity associated with the entry into
new countries.
Mitigation
Revenues in Ukraine are received in UAH and expenditure is
made in UAH, however the prices for hydrocarbons are implicitly
linked to USD prices.
The Group continues to hold most of its cash reserves in the UK
mostly in USD. Cash reserves are placed with leading financial
institutions, which are approved by the Audit Committee. The
Group is predominantly a USD denominated business. Foreign
exchange risk is considered a normal and acceptable business
exposure and the Group does not hedge against this risk for its
E&P operations.
For trading operations, the Group matches the revenues and the
source of financing.
Refer to note 26 to the Consolidated Financial Statements for
detail on financial risks.
We monitor the credit quality of our counterparties and seek
to reduce the risk of customer non-performance by limiting the
title transfer to product until the payment is received, prepaying
only to known credible suppliers.
The Group mostly enters into back-to-back transactions where
the price is known at the time of committing to purchase and
sell the product. Sometimes the Group takes exposure to open
inventory positions when justified by the market conditions in
Ukraine.
Mitigation
Accurate monitoring and dialogue with competent authorities
are kept in place to minimise the risk.
The Group minimises this risk by maintaining the funds in
international banks outside Ukraine and by continuously
maintaining a working dialogue with the regulatory authorities.
Mitigation
The Group periodically reviews the compensation and contract
terms of its staff.
The Group applies a set of very rigorous and strict screening
criteria in order to evaluate potential investment opportunities.
It also seek for opinion of independent and qualified experts
when deemed necessary. Besides the level of required rate of
return is adjusted to the perceived level of risk.
www.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 13
Statement of Reserves and Resources
In December 2015, the Group commissioned a third party for the Reserves and Resources Evaluation of the Group’s
oil and gas assets in Ukraine. The evaluation was assigned to a qualified Ukrainian G&G consulting contractor, which
delivered its final report in March 2016. The evaluation was conducted in accordance with SPE Petroleum Resources
Management System (‘PRMS’). The summary of the Reserves and Resources as per the report is presented below.
Summary of Reserves1 at 31 December 2016
Proved, Probable and Possible Reserves at 1 January 2016
Production
Revisions
Proved, Probable and Possible Reserves at 31 December 2016
Mmboe
8.71
(0.04)
(0.80)
7.87
Reserves are assigned to the Bitlyanska, Monastyretska and Debeslavetska fields.
In addition to the tabled reserves Cadogan has 15.40 million boe of contingent resources associated with Bitlyanska
and Monastyretska licences. Reserves for Zagoryanska and Pirkovska licences have been downgraded to resources
given the uncertainty on the time to complete the award process.
1 The study has been conducted by third-party Brend Vik and since then Cadogan has entered into a Technical Service Agreement with Brend Vik.
GROUP OVERVIEWDIRECTORS’ REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONwww.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 14
Strategic Report continued
Corporate Responsibility
The Board recognises the
requirement under Section 414C
of the Companies Act 2006
(the “Act”) to detail information
about employees, human rights
and community issues, including
information about any policies it has
in relation to these matters and the
effectiveness of these policies.
The Group considers the
sustainability of its business as a
key and competitive element of its
strategy. Meeting the expectations
of our stakeholders is the way in
which we secure our licence to
operate and to be recognised in
the values we declare is the best
added value we can bring in order
to profitably prolong our business.
The Board recognises that the
protection of the health and safety
of its employees and communities
as well as of the environment which
it impacts is not just an obligation,
but it is part of the personal ethics
and beliefs of management and
staff; these are the key drivers
for the sustainable development
of the Company’s activity. Our
Code of Ethics and the adoption
of internationally recognised best
practices and standards are our,
and our employees’, references for
conducting our operations.
Our activities are carried out in
accordance with a policy manual,
endorsed by the Board, which has
been disseminated to all staff. The
manual includes policies on business
conduct and ethics, anti-bribery, the
acceptance of gifts and hospitality
and whistleblowing.
The Chief Operating Officer is the
Chairman of the HSE Committee
and is supported in his role by
Cadogan Ukraine’s HSE Manager.
Her role is to ensure that the Group
has developed suitable procedures,
and that operational management
have incorporated them into daily
operations and that she has the
necessary level of autonomy and
authority to discharge her duties
effectively and efficiently.
The Board believes that health and
safety procedures and training
across the Group should be to
the standard expected in any
company operating in the oil and
gas sector. Accordingly, it has set
up a Committee to review and
agree health and safety initiatives
and report back on progress.
Management is regularly reporting
to the Board on health, safety
and environment and key safety
and environmental issues, which
are discussed by the Executive
Management. The Health, Safety and
Environment Committee Report is on
page 29.
Health, safety and environment
The Group has developed an
integrated Health, Safety and
Environmental (“HSE”) management
system. The system aims, by
a continuous improvement
programme, to ensure that a safety
and environmental protection
culture is embedded in the
organisation and continuously
improved. The HSE management
system ensures that both Ukrainian
and international standards are met,
with the Ukrainian HSE legislation
requirements taken as an absolute
minimum although the international
requirements are in the main met
or exceeded. All the Group’s local
operating companies in east and
west Ukraine have all the necessary
documentation and systems in place
to ensure compliance with Ukrainian
legislation and Company’s standards.
A proactive approach to the
prevention of incidents has been in
place throughout 2016, which relies
on a reliable near-miss reporting.
Staff training on HSE matters is
recognised as the key factor to
generate continuous improvement.
In-house training is provided to
help staff meet international
standards and follow best practice.
At present, special attention is
being given to training on risk
assessments, emergency response,
incident prevention, reporting and
investigation, as well as emergency
drills regularly run on operations’
sites and offices, to ensure that
international best practices and
standards are maintained to comply
with or exceed those required by
Ukrainian legislation.
The Board monitors lost time
incidents as a key performance
indicator of the business, to
reasonably verify that the
procedures in place are robust.
The Board has benchmarked
safety performance against the
HSE performance index measured
and published annually by the
International Association of Oil
& Gas Producers. In 2016, the
Group recorded close to 315,000
man-hours worked. In February,
there was one incident after over
2.2 million man-hours and 4.5 years,
unfortunately caused by a contractor
acting in violation of the company’s
procedures and daily inductions.
During 2016 the Group continued
to monitor the activity’s
performances in terms of
greenhouse gas emissions as well
as to collect statistical data related
to consumption of electricity
and industrial water and fuel
consumption by cars, plants and
other work sites.
www.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 15
Employees
Wellness and professional
development is part of the
Company’s sustainable development
policy and wherever possible local
staff are recruited; the Group
operations in Ukraine are now
managed by an entirely local staff.
Procedures are in place to ensure
that all recruitments are undertaken
on a transparent and fair basis with
no discrimination against applicants.
Each operating company has its own
Human Resources staff to ensure
that the Group’s employment policies
are properly implemented and
followed. As required by Ukrainian
legislation, Collective Agreements
are in place with the Group’s
Ukrainian subsidiary companies,
which provide an agreed level of
staff benefits and other safeguards
for employees. The Group’s Human
Resources policy covers key areas
such as equal opportunities, wages,
overtime and non-discrimination.
All staff are aware of the Group’s
grievance procedures.
The uncertainty on the timing of the
award of Zagoryanska and Pirkovska
licences and the need to reduce
costs to remain profitable in the
West, notwithstanding a punitive tax
regime, forced the Group to reduce
the level of staffing; the concerned
personnel were duly informed and
all the necessary procedures were
taken. Local qualified contractors
are considered to supplement the
required expertise when and to the
extent it is necessary.
Sufficient level of health insurance is
provided by the Group to employees
to ensure they have access to good
medical facilities. Each employee’s
training needs are assessed on an
individual basis to ensure that their
skills are adequate to support the
Group’s operations, and to help them
to develop.
Gender diversity
The Board of Directors of the
Company comprised seven male
Directors throughout the year to
31 December 2016. The appointment
of any new Director is made on the
basis of merit. See pages 16 to 17 for
more information on the composition
of the Board.
As at 31 December 2016, the
Company comprised a total of 69
persons, as follows:
Male Female
Non-executive directors
Executive directors
Management, other than
Executive directors
Other employees
4
3
7
31
–
–
3
21
Total
45
24
Human rights
Cadogan’s commitment to the
fundamental principles of human
rights is embedded in our HSE
polices and throughout our
business processes. We promote
the core principles of human rights
pronounced in the UN Universal
Declaration of Human Rights. Our
support for these principles is
embedded throughout our Code of
Conduct, our employment practices
and our relationships with suppliers
and partners wherever we do
business.
Community
The Group’s activities are carried
out in rural areas of Ukraine and the
Board is aware of its responsibilities
to the local communities in which
the Group operates and from which
some of the employees are recruited.
At current operational sites,
management works with the local
councils to ensure that the impact of
operations is as low as practicable
by putting in place measures to
mitigate their effect. Projects
undertaken include improvement of
the road infrastructure in the area,
which provides easier access to the
operational sites while at the same
time minimising inconvenience for
the local population and allowing
improved road communications in
the local communities, especially
during winter season or harsh
meteorological conditions.
Specific community activities are
undertaken for the direct benefit
of local communities. All activities
are followed and supervised by
managers who are given specific
responsibility for such tasks.
The Group’s local companies see
themselves as part of the community
and are involved not only with
financial assistance, but also with
practical help and support. The
recruitment of local staff generates
additional income for areas that
otherwise are predominantly
dependent on the agricultural sector.
Approval
The Strategic Report was approved
by the Board of Directors on 27 April
2017 and signed on its behalf by:
Ben Harber
Company Secretary
27 April 2017
GROUP OVERVIEWDIRECTORS’ REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONwww.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 16
Board of Directors
Adelmo Schenato, 65, Italian
Chief Operating Officer1
Mr Schenato was appointed to the
Board as Chief Operating Officer
on 25 January 2012. He joined
the Company after a 35 year
career at eni, the Italian integrated
energy business, where he served
in senior global and regional
wpositions. His global roles at eni
included Well Operations Research
and Development and Technical
Management, and Vice President
HSE & Sustainability. His regional
roles include General Manager of
Tunisia, Gabon and Angola as well
as CEO of eni’s Italian gas storage
company.
Mr Schenato is the Chairman of the
Health, Safety and Environment
Committee.
In January 2017, Mr Schenato
stepped down as Chief Operating
Officer to take up the role of
Chairman and CEO of Exploenergy,
the Italian company recently bought
by Cadogan.
Zev Furst, 69, American
Non-executive Chairman
Appointed to the Board on 2 August
2011, Mr Furst is a leading global
business and communications
strategist who has advised political
leaders, foreign principals and
corporate executives of Fortune 100
companies. He is the Chairman and
CEO of First International Resources,
an international corporate and
political consulting firm he founded
in 1992. Mr Furst specialises in
providing strategic counsel on
crisis management, market entry,
corporate positioning and personal
reputational issues. In recent years,
he has also advised and consulted
with candidates running for national
office in Israel, Japan, Mexico and
Ukraine.
In 1986, Mr Furst was a founding
partner of Meridian Resources and
Development Ltd, an international
commodities trading company
specialising in chemicals and
petroleum products.
Mr Furst currently serves as
Chairman of the International Board
of the Peres Center for Peace and is
a member of the Advisory Board of
the Kennan Institute in Washington,
DC. He has written and lectured
extensively on international affairs,
business and political strategy and
the role of media in politics and
diplomacy.
Mr Furst is Chairman of the
Company’s Nomination Committee
and a member of the Remuneration
Committee.
Guido Michelotti, 62, Swiss
Chief Executive Officer
Mr Michelotti was appointed to the
Board of Directors as Chief Executive
Officer on 25 June 2015. An Oil &
Gas executive with over 30 years of
international experience across the
entire E&P cycle, he spent more than
10 years in senior executive roles
with eni, leading E&P companies
as well as managing major capital
projects. Prior to joining Cadogan
he was CEO of a Luxembourg based
Private Equity fund investing in E&P.
Mr Michelotti is a Senior Advisor to
the Energy Practice of the Boston
Consulting Group, a member of the
Society of Petroleum Engineers
(SPE) and a former member of SPE’s
Industry Advisory Council.
Bertrand des Pallieres, 50, French
Chief Trading Officer
Mr des Pallieres was appointed as
Chief Executive Officer on 1 August
2011, having joined the Board as a
non-executive Director on 26 August
2010. Mr des Pallieres is also the
CEO of SPQR Capital Holdings SA, a
major shareholder of the Company.
On 22 June 2015, Mr des Pallieres
resigned as CEO and was appointed
as Chief Trading Officer.
Previously he was the Global Head
of Principal Finance and member
of the Global Market Leadership
Group of Deutsche Bank from 2005
to 2007. From 1992 to 2005 he
held various positions at JPMorgan
including Global Head of Structured
Credit, European Head of Derivatives
Structuring and Marketing, and
Co-Head of sales for Europe, Middle
East and Africa. He is an executive
director of Versatile Systems Inc.
listed on the Toronto and London
Stock Exchanges and a non-
executive director of Equus Total
return, Inc., listed on the NYSE.
Mr des Pallieres is a member of the
Nomination Committee.
1
In the first quarter 2017 Mr Schenato stepped down from his COO role and became a non-Executive Director of Cadogan Petroleum plc.
www.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 17
Michel Meeùs, 64, Belgian
Non-executive Director
Mr Meeùs was appointed as a
Non-executive Director on 23 June
2014. Mr. Meeùs is currently acting
as Chairman of the Board of
Directors of Theolia, an independent
international developer and operator
of wind energy projects, of which
he is a major shareholder. Since
2007, he has been a director within
the Alcogroup SA Company (which
gathers the ethanol production units
of the homonymous group), as well
as within some of its subsidiaries.
Before joining Alcogroup, Mr Meeùs
carried out a career in the financial
sector, at Chase Manhattan Bank
in Brussels and London, then at
Security Pacific Bank in London, then
finally at Electra Kingsway Private
Equity in London.
Gilbert Lehmann, 71, French
Senior Independent non-executive
Director
Mr Lehmann was appointed to the
Board on 18 November 2011. He is
currently acting as an adviser to
the Executive Board of Areva, the
French nuclear energy business,
having previously been its Deputy
Chief Executive Officer responsible
for finance. He is also a former Chief
Financial Officer and deputy CEO
of Framatone, the predecessor to
Areva, and was CFO of Sogee, part of
the Rothschild Group. Mr Lehmann is
also Deputy Chairman and Chairman
of the Audit Committee of Eramet,
the French minerals and alloy
business. He is Deputy Chairman
and Audit Committee Chairman of
Assystem SA, the French engineering
and innovation consultancy. He was
Chairman of ST Microelectronics
NV, one of the world’s largest
semiconductor companies, from
2007 to 2009, and stepped down as
Vice Chairman in 2011.
Mr Lehmann is currently Chairman of
the Company’s Audit Committee and
a member of the Remuneration and
Nomination Committees.
Enrico Testa, 65, Italian
Independent non-executive Director
Appointed to the Board on 1 October
2011, Mr Testa has a long and varied
background in the energy market.
He was Chairman of the Board of
ACEA (the Rome electricity and
water utility company) from 1996
to 2002. He was Chairman of the
Board of Enel S.p.A, the major
Italian electricity supplier, during
its privatisation. From 2005 to
2009 he was Chairman of Roma
Metropolitane, the Rome council-
owned company constructing
new underground lines. He was
also Chairman of the Organising
Committee for the 20th World
Energy Congress held in Rome in
November 2007, Senior Partner at
the Franco Bernabè Group which
owns several investments in the
IT sector from 2002 to 2005 he
was member of the Advisory Board
of Carlyle Europe and has been
Chairman of the Italian Nuclear
Forum since 2010. In addition,
between 2004 and August 2012
Mr Testa was Managing Director of
Rothschild S.p.A.
He is currently Chairman of the
AIM listed telecommunications
company Telit Communications
Plc, Vice Chairman of Intecs S.p.A
and Chairman of E.VA – Energie
Valsabbia S.p.A. – a company
developing hydropower and solar
generating plants.
Mr Testa is Chairman of the
Company’s Remuneration Committee
and a member of the Audit and
Nomination Committees.
GROUP OVERVIEWDIRECTORS’ REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONwww.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 18
Report of the Directors
Directors
The Directors in office during the year and at the date of this report are as shown below:
Non-executive Directors
Zev Furst (Chairman)
Gilbert Lehmann
Michel Meeùs
Enrico Testa
Executive Directors
Guido Michelotti
Bertrand des Pallieres
Adelmo Schenato
In the first quarter of 2017 Mr Schenato stepped down as Chief Operating Officer of the Company but remains as a
non-executive director of Cadogan Petroleum plc and as a technical adviser to the Chief Executive.
Directors’ re-election
The Board has decided previously that all Directors must be subject to annual election by shareholders, in accordance
with the best practice guidance for FTSE 350 companies contained in the UK Corporate Governance Code that was
issued in April 2016 by the Financial Reporting Council (the ‘Code’). As such, all of the Directors will be seeking re-
election at the Annual General Meeting to be held on 22 June 2017.
The biographies of the Directors in office at the date of this report are shown on pages 16 and 17.
Appointment and replacement of Directors
The Board may appoint any individual willing to act as a Director either to fill a vacancy or act as an additional
Director. The appointee may hold office only until the next annual general meeting of the Company whereupon his or
her election will be proposed to the shareholders.
The Company’s Articles of Association prescribe that there shall be no fewer than three Directors and no more than
fifteen.
Directors’ interests in shares
The beneficial interests of the Directors in office as at 31 December 2016 and their connected persons in the Ordinary
shares of the Company at 31 December 2016 are set out below.
Director
Z Furst
G Michelotti
B des Pallieres
G Lehmann
M Meeùs
A Schenato
E Testa
Number of
Shares
–
–
200,000
–
26,000,000
–
–
Directors’ indemnities and insurance
The Company continues to maintain Directors’ and Officers’ Liability Insurance. The Company’s Articles of Association
provide, subject to the provisions of the Companies Act 2006, an indemnity for Directors in respect of any liability
incurred in connection with their duties, powers or office. Save for such indemnity provisions, there are no qualifying
third party indemnity provisions.
Powers of Directors
The Directors are responsible for the management of the business and may exercise all powers of the Company
(including powers to issue or buy back the Company’s shares), subject to UK legislation, any directions given by
special resolution and the Articles of Association. The authorities to issue and buy back shares, granted at the 2016
Annual General Meeting, remains unused.
Dividends
The Directors do not recommend payment of a dividend for the year to 31 December 2016 (2015: nil).
Principal activity and status
The Company is registered as a public limited company (registration number 05718406) in England and Wales. Its
principal activity is oil and gas exploration, development and production.
www.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016
19
Structure of share capital
The authorised share capital of the Company is currently £30,000,000 divided into 1,000,000,000 Ordinary shares of
3 pence each. The number of shares in issue as at 31 December 2016 was 231,091,734 Ordinary shares of 3 pence each
with a nominal value of £6,932,752. The Companies (Acquisition of Own Shares) (Treasury Shares) Regulations 2003
allow companies to hold shares in treasury rather than cancel them. Following the consolidation of the issued capital
of the Company on 10 June 2008, there were 66 residual Ordinary shares, which were transferred to treasury. No
dividends may be paid on shares whilst held in treasury and no voting rights attach to shares held in treasury. Total
voting rights amount to 231,091,668.
Rights and obligations of Ordinary shares
On a show of hands at a general meeting every holder of Ordinary shares present in person or by proxy and entitled
to vote shall have one vote and, on a poll, every member present in person or by proxy, shall have one vote for every
Ordinary share held. In accordance with the provisions of the Company’s Articles of Association, holders of Ordinary
shares are entitled to a dividend where declared and paid out of profits available for such purposes. On a return of
capital on a winding up, holders of Ordinary shares are entitled to participate in such a return.
Exercise of rights of shares in employee share schemes
None of the share awards under the Company’s incentive arrangements are held in trust on behalf of the
beneficiaries.
Agreements between shareholders
The Board is unaware of any agreements between shareholders, which may restrict the transfer of securities or voting
rights.
Restrictions on voting deadlines
The notice of any general meeting of the Company shall specify the deadline for exercising voting rights and
appointing a proxy or proxies to vote at a general meeting. It is the Company’s policy at present to take all resolutions
at a general meeting on a poll and the results of the poll are published on the Company’s website after the
meeting.
Substantial shareholdings
As at 31 December 2016 and 27 April 2017, the Company had been notified of the following interests in voting rights
attached to the Company’s shares:
Major shareholder
SPQR Capital Holdings SA
Mr Pierre Salik
Mr Michel Meeùs
CA Indosuez (Switzerland) SA
Kellet Overseas Inc.
Cynderella Trust
31 December 2016
27 April 2017
Number of
shares held
% of total
voting rights
Number of
shares held
% of total
voting rights
67,298,498
40,550,000
26,000,000
18,683,000
14,002,696
7,657,886
29.12
17.55
11.25
8.08
6.06
3.31
67,298,498
40,550,000
26,000,000
18,683,000
14,002,696
7,657,886
29.12
17.55
11.25
8.08
6.06
3.31
Amendment of the Company’s Articles of Association
The Company’s Articles of Association may only be amended by a special resolution of shareholders.
Disclosure of information to auditor
As required by section 418 of the Companies Act 2006, each of the Directors as at 27 April 2017 confirms that:
(a) so far as the Director is aware, there is no relevant audit information of which the Company’s auditor is unaware;
and
(b) the Director has taken all the steps that he ought to have taken as a Director in order to make himself aware of
any relevant audit information and to establish that the Company’s auditor is aware of that information.
This confirmation is given and should be interpreted in accordance with section 418 of the Companies Act 2006.
GROUP OVERVIEWDIRECTORS’ REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONwww.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 20
Report of the Directors continued
Going concern
After making enquiries, 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 Consolidated and Company Financial Statements. For further detail refer to the
detailed discussion of the assumptions outlined in note 3(b) to the Consolidated Financial Statements.
Reporting year
The reporting year coincides with the Company’s fiscal year, which is 1 January 2016 to 31 December 2016.
Change of control – significant agreements
The Company has no significant agreements containing provisions, which allow a counterparty to alter and amend the
terms of the agreement following a change of control of the Company.
Should a change in control occur then certain Executive directors are entitled to a payment of salary and benefits for
a period of six months.
Global greenhouse gas emissions
This section contains information on greenhouse gas (“GHG”) emissions required by the Companies Act 2006
(Strategic Report and Directors’ Report) Regulations 2013 (the “Regulations”).
Methodology
The principal methodology used to calculate the emissions is drawn from the ‘Environmental Reporting Guidelines:
including mandatory greenhouse gas emissions reporting guidance (June 2013)’, issued by the Department
for Environment, Food and Rural Affairs (“DEFRA”). Additionally, ‘Petroleum Industry Guidelines for Reporting
Greenhouse Gas Emissions (2nd edition, May 2011)’ were used to cover issues specific for the petroleum industry.
DEFRA GHG conversion factors for company reporting were utilised to calculate the CO2 equivalent of emissions from
various sources.
The Company has reported on all of the emission sources required under the Regulations.
The Company does not have responsibility for any emission sources that are not included in its consolidated
statement.
Consolidation approach and organisation boundary
An operational control approach was used to define the Company’s organisational boundary and responsibility
for GHG emissions. All material emission sources within this boundary have been reported upon, in line with the
requirements of the Regulations.
Scope of reported emissions
Emissions data from the sources within Scope 1 and Scope 2 of the Company’s operational boundaries is
detailed below. This includes direct emissions from assets that fall within the Company’s organisational boundaries
(Scope 1 emissions), as well as indirect emissions from energy consumption, such as purchased electricity and heating
(Scope 2 emissions).
Scope of emissions increased comparatively to 2015 results due to 10 wells plug and abandonment carried-out by
Cadogan Group service subsidiary Astro-Service LLC (results incorporated). The 2016 results of the E&P activity
(which is directly related to production) improved compared to the previous year.
Intensity ratio
In order to express the GHG emissions in relation to a quantifiable factor associated with the Company’s activities,
wellhead production of crude oil, condensates and natural gas has been chosen as the normalisation factor for
calculating the intensity ratio. This will allow comparison of the Company’s performance over time, as well as with
other companies in the Company’s peer group.
The intensity ratio for E&P operations (same reporting perimeter) decreased from 30.47 CO2e/boe in 2015 to
27.44 CO2e/boe in 2016.
www.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 21
Total greenhouse gas emissions data for the year from 1 January 2016 to 31 December 2016
Greenhouse gas emissions source
Scope 1
Direct emissions, including combustion of fuel and
operation of facilities (tonnes of CO2 equivalent)
Scope 2
Indirect emissions from energy consumption, such
as electricity and heating purchased for own use
(tonnes of CO2 equivalent)
Total (Scope 1 & 2)
Normalisation factor
Barrels of oil equivalent
Intensity ratio
Emissions reported above normalised to tonnes of
CO2e per total wellhead production of crude oil,
condensates and natural gas, in thousands of
Barrel of Oil Equivalent
E&P
2016
2015
Service
2016
2015
Total
2016
2015
514
554
444
23
958
577
754
1,268
741
1,295
–
444
–
23
754
1,712
741
1,318
46,191
42,493
–
–
46,191
42,493
27.44
30.47
n/a
n/a
n/a
n/a
2017 Annual General Meeting
The 2017 Annual General Meeting (“AGM”) of the Company will be an opportunity to communicate with shareholders
and the Board welcomes their participation. Board members constantly strive to keep in touch with shareholder
opinion and to discuss strategy and governance issues with them through direct contacts.
The Board looks forward to welcoming shareholders to the AGM and shareholder information will be enclosed as usual
with the AGM notice to facilitate voting and feedback in the usual way.
The AGM notice will be issued to shareholders well in advance of the meeting with notes to provide an explanation of
all resolutions to be put to the AGM.
Board and committee members will be available for shareholders participation at the AGM. All relevant shareholder
information including the annual report for 2016 and any other announcements will be published on our website –
www.cadoganpetroleum.com.
This Report of Directors comprising pages 18 to 21 has been approved by the Board and signed on its behalf by:
Ben Harber
Company Secretary
27 April 2017
GROUP OVERVIEWDIRECTORS’ REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONwww.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 22
Viability Statement
In accordance with provision C2.2 of the 2016 revision of the UK Corporate Governance Code, the Board has assessed
the prospect of the Group over a longer period than the twelve months required by the ‘Going Concern’ provision.
Look-out period
The Board selected a three-year period as appropriate for the assessment for the reason that the Group’s strategy
is aligned with a three-year view and that the current volatility in commodity markets makes confidence in a longer
assessment of prospects highly challenging.
Assessment
The Board has conducted a stress test in one combined scenario as well as assessment of the principal risks facing
the Group (as set out on pages 11 to 12), including those that would threaten its business model, future performance,
solvency or liquidity. The factors considered include:
>
>
>
>
consideration of potential impact of political situation and renewal of the licences that will expire during following
three years
foreign exchange movements to which the Group is exposed as a result of its operations in Ukraine
downturn in the price and demand of hydrocarbon products most impacting Group’s operations
consideration of exploration investments in Italy, if the licences been awarded and the execution permits been
granted
Key assumptions
The key assumptions underpinning the Board’s assessment include oil and gas prices, trading volumes, foreign
exchange rates, the ability to repay borrowing facilities as they fall due and the expectations for capital expenditures.
Expectations
Based on the results of the related analysis and taking account of the Group’s current position, particularly its
cash availability, and the principal risks, and the effect of the licences that expired during the year the Board has a
reasonable expectation that the Group will be able to continue its operation and meet its liabilities as they fall due
over the three-year period of the assessment.
www.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 23
Corporate Governance Statement
This Corporate Governance Statement forms part of the Directors’ Report
The Board of the Company is committed to the highest standards of corporate governance and bases its actions on
the principles set out in the UK Corporate Governance Code issued by the Financial Reporting Council (‘FRC’) in April
2016 (the ‘Code’). The Code can be found on the FRC’s website at www.frc.org.uk
This statement describes how the Group applies the principles of the Code. On 20 December 2011 the Company’s
listing category on the London Stock Exchange was transferred from ‘Premium Listing’ to ‘Standard Listing’. Although
companies with a standard listing are subject to less stringent corporate governance requirements, the Board has
decided that the Group will continue to govern itself in accordance with the principles of the Code and explain why it
has chosen not to comply with any of the provisions of the Code.
During the year under review, the Group has complied with the Code’s provisions with the following exceptions:
>
Code provision A.4.2 – During the year, the Chairman did not hold meetings with the non-executive Directors
without the executives present
>
Code provision E.1.1 – The Senior Independent Director has not attended meetings with major shareholders
The reasons for these two areas of non-compliance are as follows:
> Although the Chairman did not hold formal meetings with the non-executive Directors during the year, regular
discussions took place by telephone and email
>
The Senior Independent Director, Mr Lehmann, did not attend meetings with major shareholders as this
responsibility was undertaken by the Chairman and the Executive Directors. Mr Lehmann is available to
shareholders who have concerns that they feel would be inappropriate to raise via the Chairman or Executive
Directors
In addition to the two areas of non-compliance described above, Bertrand des Pallieres served as a non-executive
director on the board of Equus Total Return Inc. during the year ended 31 December 2016 and the Directors’
Remuneration Report does not include a statement as to whether or not Bertrand des Pallieres retained his earnings
in connection with these appointments and, if so, what the remuneration in respect of each appointment was, as
required under Code provision D.1.2. These appointments have not been considered relevant to the Company since
Mr des Pallieres held these positions prior to his appointment as an Executive Director of the Company and his
responsibilities have not prevented Mr des Pallieres from fulfilling his duties as the Company’s Chief Trading Officer
during the year ended 31 December 2016.
Board
The Board provides leadership and oversight. The Board comprises a non-executive Chairman, Chief Executive Officer,
Chief Trading Officer, Chief Operating Officer1, two independent non-executive Directors and a non-executive Director
who is not deemed independent. The membership of the Board and biographical details for each of the Directors are
incorporated into this report by reference and appear on pages 16 and 17.
As at the date of this report, the Chairman had no significant commitments that might affect his ability to allocate
sufficient time to the Company to discharge his responsibilities effectively.
Under the Company’s Articles of Association, all Directors must seek re-election by members at least once every
three years. However, the Board has agreed that all Directors will be subject to annual election by shareholders, as
recommended by the Code in respect of FTSE 350 companies. Accordingly, all members of the Board will be standing
for re-election at the 2017 Annual General Meeting due to be held on 22 June 2017.
The Board has a formal schedule of matters specifically reserved for it to decide, including approval of acquisitions
and disposals, major capital projects, financial results, Board appointments, dividend recommendations, material
contracts and Group strategy.
1
In the first quarter January 2017 Mr Schenato stepped down from his COO role and became a non-Executive Director of Cadogan Petroleum plc
GROUP OVERVIEWDIRECTORS’ REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONwww.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 24
Corporate Governance Statement continued
The Chairman, in conjunction with the Company Secretary, plans the programme for the Board during the year.
The agenda for Board and Committee meetings is considered by the relevant Chairman and issued with supporting
papers during the week preceding the meeting. For each Board meeting, the Directors receive a Board pack including
management accounts, briefing papers on commercial and operational matters and major capital projects including
acquisitions. The Board also receives briefings from key management on specific issues. Six Board meetings took
place during 2016.The attendance of those Directors in place at the year end at Board and Committee meetings during
the year was as follows:
No. Held
No. Attended:
Z Furst
G Michelotti
B des Pallieres
G Lehmann
M Meeùs
A Schenato
E Testa
Board
Audit
Committee
Nomination
Committee
Remuneration
Committee
6
6
6
4
6
5
6
5
3
N/A
N/A
N/A
3
N/A
N/A
3
1
1
N/A
1
1
N/A
N/A
1
2
2
N/A
N/A
2
N/A
N/A
2
A procedure exists for the Directors, in the furtherance of their duties, to take independent professional advice if
necessary, under the guidance of the Company Secretary and at the Company’s expense. All Directors have access
to the advice and services of the Company Secretary, who is responsible to the Chairman for ensuring that Board
procedures are complied with and that applicable rules and regulations are followed.
Board independence
The roles and responsibilities of the Chairman and Chief Executive Officer are separate. A formal division of each
individual’s responsibilities has been agreed and documented by the Board. Mr Lehmann is the Senior Independent
Director.
The non-executive Directors bring an independent view to the Board’s discussions and the development of its
strategy. Their range of experience ensures that management’s performance in achieving the business goals
is challenged appropriately. Two non-executive Directors, Lehmann and Testa are considered by the Board in
accordance with the Code, to be independent. Michel Meeùs, who is a significant shareholder, is not considered to be
independent1. The letters of appointment for the non-executive Directors are available for review at the Registered
Office and prior to the Annual General Meeting.
Responsibilities and membership of Board Committees
The Board has agreed written terms of reference for the Nomination Committee, Remuneration Committee and
Audit Committee. The terms of reference for all three Board Committees are published on the Company’s website,
www.cadoganpetroleum.com, and are also available from the Company Secretary at the Registered Office. A review
of the terms of reference, membership and activities of all Board Committees is provided on pages 26 to 31.
Board performance evaluation and effectiveness
Principle B.6 of the Code recommends that boards undertake a formal and rigorous annual evaluation of its own
performance and that of its committees and individual Directors. The Board is mindful that it needs to continually
monitor and identify ways in which it might improve its performance and recognises that board evaluation is a useful
tool for enhancing a board’s effectiveness. For the year ended 31 December 2016, the Board opted to undertake self-
evaluation by way of a questionnaire designed specifically to assess the strengths of the Board and identify any areas
for development.
The process was led by Mr Furst as Chairman and the evaluation of the Chairman’s performance was led by Mr
Lehmann as the Senior Independent Director. The Board discussed the evaluation questionnaire findings, which were
also used by the Nomination Committee in its annual assessment of the Board’s composition. There were no material
areas of improvement identified for action at the time of conducting the evaluation.
The Directors are committed to ensuring that the Board continues to represent a broad balance of skills, experience,
independence and knowledge and that there is sufficient diversity within the composition of the Board. All
appointments are made on merit against objective criteria – which include gender and diversity generally – in the
context of the requirements of the business and the overall balance of skills and backgrounds that the Board needs to
maintain in order to remain effective.
The Chairman is responsible for the induction of new Directors and ongoing development of all Directors. The
induction process typically includes an induction pack, operational site visits, meetings with key individuals and the
Company’s advisers, and briefings on key business, legal and regulatory issues facing the Company.
1
Adelmo Schenato, who has become a non-Executive Director in first quarter January 2017 is also non-Independent as he retains a role of
Advisor to the CEO, besides being Chairman and CEO of Exploenergy
www.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 25
Whilst no formal structured continuing professional development programme has been established every effort is
made to ensure that the Directors are fully briefed before Board meetings on the Company’s business. In addition,
the Non-executive Directors receive updates from time to time on specific topics affecting the Company from
the Executive Directors, and all Directors receive updates on recent developments in corporate governance and
compliance from the Company Secretary. Each of the Directors independently ensures that they update their skills
and knowledge sufficiently to enable them to fulfil their duties effectively.
Internal control
The Directors are responsible for the Group’s system of internal control and for maintaining and reviewing its
effectiveness. The Board has delegated responsibility for the monitoring and review of the Group’s internal controls to
the Audit Committee. The Group’s systems and controls are designed to safeguard the Group’s assets and to ensure
the reliability of information used both within the business and for publication.
Systems are designed to manage, rather than eliminate, the risk of failure to achieve business objectives and can
provide only reasonable, and not absolute, assurance against material misstatement or loss.
The key features of the Group’s internal control and risk management systems that ensure the accuracy and
reliability of financial reporting include clearly defined lines of accountability and delegation of authority, policies
and procedures that cover financial planning and reporting, preparing consolidated financial statements, capital
expenditure, project governance and information security.
The key features of the internal control systems, which operated during 2016 and up to the date of signing the
Financial Statements are documented in the Group’s Corporate Governance Policy Manual and Finance Manual. These
manuals and policies have been circulated and adopted throughout the Group, except the joint venture Westgasinvest
LLC (“WGI”), where eni’s policies are adopted.
Day-to-day responsibility for the management and operations of the business has been delegated to the Chief
Executive Officer and senior management. Certain specific administrative functions are controlled centrally. Taxation
and treasury functions report to the Group Director of Finance who reports directly to the Chief Executive Officer.
Trading business is managed by the Chief Trading Officer, who reports directly to Chief Executive Officer. The legal
function for Ukraine’s related assets and activities is managed by the General Counsel, who reports to the General
Director of Cadogan Ukraine. The Health, Safety and Environment functions report to the Chief Operating Officer. An
overview of the Group’s treasury policy is set out on page 10. The Group does not have an internal audit function. Due
to the small scale of the Group’s operations at present, the Board does not feel that it is appropriate or economically
viable to have this function in place. The Audit Committee will continue to consider the position annually.
The Board has reviewed the process, which has been in place from the start of the year to the date of approval of this
report and which is in accordance with the Code. During the course of its review of the risk management and internal
control systems, the Board has not identified nor been advised of any failings or weaknesses which it has deemed to
be significant. Therefore a confirmation in respect of necessary actions has not been considered appropriate.
Relations with shareholders
The Chairman and Executive Directors of the Company have a regular dialogue with analysts and substantial
shareholders. The outcome of these discussions is reported to the Board and discussed in detail. Mr Lehmann, as the
Senior Independent Director, is available to shareholders who have questions that they feel would be inappropriate to
raise via the Chairman or Executive Directors.
The Annual General Meeting is used as an opportunity to communicate with all shareholders. In addition, financial
results are posted on the Company’s website, www.cadoganpetroleum.com, as soon as they are announced. The Notice
of the Annual General Meeting is contained also on the Company’s website, www.cadoganpetroleum.com. It is intended
that the Chairmen of the Nomination, Audit and Remuneration Committees will be present at the Annual General
Meeting. The results of all resolutions will be published on the Company’s website, www.cadoganpetroleum.com.
GROUP OVERVIEWDIRECTORS’ REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONwww.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 26
Board Committee Reports
Audit Committee Report
The Audit Committee is appointed by the Board, on the recommendation of the Nomination Committee, from the non-
executive Directors of the Group. The Audit Committee’s terms of reference include all matters indicated by the Code.
They are reviewed annually by the Audit Committee and any changes are then referred to the Board for approval. The
terms of reference of the Committee are published on the Company’s website, www.cadoganpetroleum.com, and are
also available from the Company Secretary at the Registered Office. Two members constitute a quorum.
Responsibilities
>
To monitor the integrity of the annual and interim financial statements, the accompanying reports to
shareholders, and announcements regarding the Group’s results
>
>
>
>
>
To review and monitor the effectiveness and integrity of the Group’s financial reporting and internal financial
controls
To review the effectiveness of the process for identifying, assessing and reporting all significant business risks and
the management of those risks by the Group
To oversee the Group’s relations with the external auditor and to make recommendations to the Board, for
approval by shareholders, on the appointment and removal of the external auditor
To consider whether an internal audit function is appropriate to enable the Audit Committee to meet its objectives
To review the Group’s arrangements by which staff of the Group may, in confidence, raise concerns about possible
improprieties in matters of financial reporting or other matters
Assessment of the effectiveness of the external auditor
The Committee has assessed the effectiveness of the external audit process. They did this by:
> Reviewing the 2016 external audit plan;
> Discussing the results of the audit including the auditor’s views on material accounting issues and key judgements
and estimates, and their audit report;
>
Considering the robustness of the audit process;
> Reviewing the quality of the service and people provided to undertake the audit; and
>
Considering their independence and objectivity.
Governance
Mr Testa and Mr Lehmann, who are both independent non-executive Directors under provision B.1.1 of the Code, are
the members of the Audit Committee. The Audit Committee is chaired by Mr Lehmann who has recent and relevant
financial experience as a former finance director of major European companies as well as holding several non-
executive roles in major international entities.
At the invitation of the Audit Committee, the Group Director of Finance and external auditor regularly attend
meetings. The Company Secretary attends all meetings of the Audit Committee.
The Audit Committee also meets the external auditor without management being present.
Activities of the Audit Committee
During the year, the Audit Committee discharged its responsibilities as follows:
Financial statements
The Audit Committee examined the Group’s consolidated and Company’s financial statements and, prior to
recommending them to the Board, considered the appropriateness of the accounting policies adopted and reviewed
critical judgements, estimates and underlying assumptions and whether the financial statements are fair, balanced
and understandable.
Significant issues relating to the 2016 financial statements
For the year ended 31 December 2016 the Audit Committee identified the significant issues that should be considered
in relation to the financial statements, being areas which may be subject to heightened risk of material misstatement.
Reserves
Oil and gas reserves, as discussed in the Statement of Reserves and Resources, are based on the Independent
Reserves and Resources Evaluation performed by Brend Vik concluded in March 2016.
However, reserves estimates are inherently uncertain, especially under present market volatility or in the early stages
of a field’s life, and are routinely revised over the producing lives of oil and gas fields as new information becomes
available and as economic conditions evolve. The Audit Committee acknowledges that such revisions may impact the
www.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 27
Group’s future financial position and results, in particular, in relation to impairment testing of oil and gas property,
plant and equipment.
Recoverability of investments in joint ventures
Recoverability of the Group’s investments in joint ventures is based on assessment of exploration and evaluation
assets impairment, which constitute most of the investments in joint ventures cost. As of 31 December 2016
impairment assessment of the joint ventures’ exploration and evaluation assets was based on the value in use of the
assets held by joint venture company.
Impairment of E&E
The Audit Committee considered the Group’s intangible exploration and evaluation assets individually for any
indicators of impairment, including those indicators set out in IFRS 6 Exploration for and Evaluation of Mineral
Resources. The Audit Committee has discussed the Group’s exploration and evaluation assets with both management
and the auditors and concurs with the treatment adopted.
Following discussions with management and the auditor, including discussing the range of sensitivities, the Committee
is satisfied with results of the assessment of the recoverable amount of development and production assets. The
recoverability assessment involves the use of significant judgement both in the review of impairment indicators and,
in any subsequent impairment test, the consideration of estimates, which are dependent on assumptions about the
future.
Recoverability of receivables
In accordance with IAS 39 the Group makes an assessment at the end of each reporting period, as to whether there
is an objective evidence that a financial asset or group of financial assets (including trade receivables) needs to be
impaired.
Going concern
After making enquiries and considering the uncertainties described above, the Committee has 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. For further detail refer
to the detailed discussion of the assumptions outlined in note 3(b) to the Consolidated Financial Statements. The
Committee also review the Group’s viability statement presented on page 22.
Political and economic situation in Ukraine
The political situation in Ukraine has made it necessary for management to assess the extent of its impact on the
Group’s operations and assets.
The Committee reviewed reports from management, which considered whether adjustments are required to the
carrying values of assets and the appropriateness of the going concern assumption. As a result management have
concluded that, other than the impacts derived from the Subsoil use tax and the uncertainties on the timing of the
approval process, there were no significant adverse consequences in relation to the Group’s operations, cash flows
and assets that impact the 2016 financial statements.
In discussion with management, the Committee acknowledged the inherent difficulty in making any assessment as
to the eventual outcome of the present political situation and, as a consequence, the difficulty of making a reliable
judgement as to the future impact, if any, on the Group’s business. The Committee concurs with conclusions reached
by management summarised in Note 4 and in Note 29 to the financial statements.
Internal controls and risk management
The Audit Committee reviews and monitors financial and control issues throughout the Group including the Group’s
key risks and the approach for dealing with them. Further information on the risks and uncertainties facing the Group
are detailed on pages 11 to 12 and in Note 26 to the financial statements.
External auditor
The Audit Committee is responsible for recommending to the Board, for approval by the shareholders, the
appointment of the external auditor.
The Audit Committee considers the scope and materiality for the audit work, approves the audit fee, and reviews the
results of the external auditor’s work. Following the conclusion of each year’s audit, it considers the effectiveness of
the external auditor during the process. An assessment of the effectiveness of the audit process was made, giving
consideration to reports from the auditor on its internal quality procedures. The Committee reviewed and approved
the terms and scope of the audit engagement, the audit plan and the results of the audit with the external auditor,
including the scope of services associated with audit-related regulatory reporting services. Additionally, auditor
independence and objectivity were assessed, giving consideration to the auditor’s confirmation that its independence
is not impaired, the overall extent of non-audit services provided by the external auditor and the past service of the
auditor.
GROUP OVERVIEWDIRECTORS’ REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONwww.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 28
Board Committee Reports continued
There is an agreed policy on the engagement of the external auditor for non-audit services to ensure that its
independence and objectivity are safeguarded. Work closely related to the audit, such as financial reporting matters,
can be awarded to the external auditor by the executive Directors provided the work does not exceed £50,000 in
fees per item. Work exceeding £50,000 requires approval by the Audit Committee. All other non-audit work either
requires Audit Committee approval or forms part of a list of prohibited services, where it is felt the external auditor’s
independence or objectivity may be compromised.
A breakdown of the non-audit fees is disclosed in Note 9 to the Consolidated Financial Statements. The Company’s
external auditor, Deloitte LLP, has provided non-audit services (excluding audit related services), which amounted to
$55,000 (2015: $125,000). The Audit Committee has reviewed the level of these services in the course of the year
and is confident that the objectivity and independence of the auditor are not impaired by the reason of such non-audit
work.
We have also taken account of the latest recommendations of the Code in relation to the regular tendering of the
external audit appointment, and as required conducted a tender for the audit for the year end at 31 December 2017.
Group external audit tender for the audit of 2017 Annual Report
Since IPO, Deloitte have been the Group’s auditor for ten years and in accordance with the Code, the Group held in
2016 a tender for the audit of the 2017 Annual Report.
Process and selection criteria
The tender process and selection criteria adopted by the committee, in relation to the external
audit services, closely followed those detailed in the audit tender notes of best practice set out
by the FRC (focusing on quality and clarity of approach, understanding of the business and risks, appropriate
geographic breadth, appropriate team structure and experience, cultural fit and approach to independence and
conflict issues). The audit committee was provided with an assessment of the external audit service providers and
eight firms were invited to tender for the external audit.
Process summary October 2016 – April 2017
The Group issued the Request for Proposal (RFP) to the audit firms invited to tender. An introduction and information
sharing meetings were held between the audit firms and the Group in November and December 2016.
RFP vendors submitted their final written tenders by the end of December 2016, which were analysed by the Group in
January and February 2016. After extensive consideration and based on the proven track record of audit quality, the
audit committee concluded to recommend to the board that BDO be appointed as the Group’s external auditors from
2017 onwards, subject to shareholder approval at the AGM in June 2017.
Internal audit
The Audit Committee considers annually the need for an internal audit function and believes that, due to the size of
the Group and its current stage of development, an internal audit function will be of little benefit to the Group.
The Group’s whistleblowing policy encourages employees to report suspected wrongdoing and sets out the
procedures employees must follow when raising concerns. The policy, which was implemented during 2008, was
refreshed in 2013 and recirculated to staff as part of a manual that includes the Group’s policies on anti-bribery, the
acceptance of gifts and hospitality, and business conduct and ethics.
Overview
As a result of its work during the year, the Audit Committee has concluded that it has acted in accordance with its
terms of reference and has ensured the independence and objectivity of the external auditor. A formal review of the
Audit Committee’s performance was undertaken after the year end and concluded that the Committee is effective
in its scrutiny of the accounts and financial reporting process, its oversight of risk management systems and its
monitoring of internal control testing.
The Chairman of the Audit Committee will be available at the Annual General Meeting to answer any questions about
the work of the Audit Committee.
Gilbert Lehmann
Chairman of the Audit Committee
27 April 2017
www.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 29
Health, Safety and Environment Committee Report
The Health, Safety and Environment Committee (the ”HSE Committee”) is appointed by the Board, on the
recommendation of the Nomination Committee. The HSE Committee’s terms of reference are reviewed annually
by the HSE Committee and any changes are then referred to the Board for approval. The terms of reference of the
Committee are published on the Company’s website, www.cadoganpetroleum.com, and are also available from the
Company Secretary at the Registered Office. Two members constitute a quorum, one of whom must be a Director.
Responsibilities
>
To develop a framework of the policies and guidelines for the management of health, safety and environment
issues within the Group.
>
Evaluate the effectiveness of the Group’s policies and systems for identifying and managing health, safety and
environmental risks within the Group’s operation.
> Assess the policies and systems within the Group for ensuring compliance with health, safety and environmental
regulatory requirements.
> Assess the performance of the Group with regard to the impact of health, safety, environmental and community
relations decisions and actions upon employees, communities and other third parties and also assess the impact of
such decisions and actions on the reputation of the Group and make recommendations to the Board on areas for
improvement.
> On behalf of the Board, receive reports from management concerning any fatalities and serious accidents within
the Group and actions taken by management as a result of such fatalities or serious accidents.
>
Evaluate and oversee, on behalf of the Board, the quality and integrity of any reporting to external stakeholders
concerning health, safety, environmental and community relations issues.
> Where it deems it appropriate to do so, appoint an independent auditor to review performance in regard to health,
safety, environmental and community relations matters and review any strategies and action plans developed
by management in response to issues raised and, where appropriate, make recommendations to the Board
concerning the same.
Governance
The HSE Committee was in place throughout 2016. Members of the HSE Committee were Mr Adelmo Schenato (Chief
Operating Officer and HSE Committee Chairman), Ms Snizhana Buryak (HSE Manager), Mr Andriy Bilyi (Cadogan
Ukraine General Director). The CEO and the Company Secretary attend meetings of the HSE Committee. The HSE
Committee meets monthly to monitor continuously progress by management.
Activities of the Health, Safety and Environment Committee
During the year, the HSE Committee discharged its responsibilities as follows:
>
>
The existing HSE policies and procedures, as well as the development of new ones, was regularly discussed at the
Committee meetings in relation to the current activities.
Compliance with HSE regulatory requirements was ensured through discussion of the results of inspections, both
internal ones and those carried out by the Authorities.
> HSE performances, key indicators and statistics were a standing item in the agenda of every meeting, allowing the
HSE Committee to assess the Company’s performance by analysing any lost-time incidents (of which there were
none during 2013, 2014 and 2015), near misses, HSE training and other indicators.
>
Interaction with contractors, Authorities, local communities and other stakeholders was discussed among other
HSE activities.
> Updating of the legal requirements in the working sites, especially related to the production plants and rig sites.
Overview
As a result of its work during the year, the HSE Committee has concluded that it has acted in accordance with its
terms of reference.
Adelmo Schenato
HSE Committee Chairman1
27 April 2017
1
In the first quarter 2017 Mr Schenato stepped down from his COO role and became a non-Executive Director
GROUP OVERVIEWDIRECTORS’ REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONwww.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 30
Board Committee Reports continued
Nomination Committee Report
The Nomination Committee is appointed by the Board predominantly from the non-executive Directors of the Group.
The Nomination Committee’s terms of reference include all matters indicated by the Code. They are reviewed annually
by the Nomination Committee and any changes are then referred to the Board for approval. The terms of reference
of the Nomination Committee are published on the Company’s website, www.cadoganpetroleum.com, and are also
available from the Company Secretary at the Registered Office. Two members constitute a quorum.
Responsibilities
>
To regularly review the structure, size and composition (including the skills, knowledge and experience) required
of the Board compared to its current position and make recommendations to the Board with regard to any
changes.
>
>
Be responsible for identifying and nominating for the approval of the Board candidates to fill Board vacancies as
and when they arise.
Before appointment is made by the Board, evaluate the balance of skills, knowledge, experience and diversity
on the Board and, in the light of this evaluation, prepare a description of the role and capabilities required for a
particular appointment.
In identifying suitable candidates, the Nomination Committee shall use open advertising or the services of external
advisers to facilitate the search and consider candidates from a wide range of backgrounds on merit, taking care that
appointees have enough time available to devote to the position.
The Nomination Committee shall also make recommendations to the Board concerning:
>
Formulating plans for succession for both executive and non-executive Directors and in particular for the key roles
of Chairman and Chief Executive Officer.
> Membership of the Audit and Remuneration Committees, in consultation with the Chairmen of those committees.
>
>
The reappointment of any non-executive Director at the conclusion of their specified term of office, having given
due regard to their performance and ability to continue to contribute to the Board in the light of the knowledge,
skills and experience required.
The re-election by shareholders of any Director having due regard to their performance and ability to continue to
contribute to the Board in the light of the knowledge, skills and experience required.
> Any matters relating to the continuation in office of any Director at any time including the suspension or
termination of service of an executive Director as an employee of the Company subject to the provisions of the
law and their service contract.
Governance
Mr Zev Furst (Board and Nomination Committee Chairman), Mr Bertrand des Pallieres (Chief Trading Officer), and
Messrs Gilbert Lehmann and Enrico Testa (independent non-executive Directors) are the members of the Nomination
Committee. The Company Secretary attends all meetings of the Nomination Committee.
Activities of the Nomination Committee
The Nomination Committee carried out a review of the size, structure and composition of the Board in the light of the
current business environment and the Company’s anticipated future activities and approved a recommendation of the
CEO to reduce the number of Executive Directors from three to one, effective as early as possible in 2017. The Board
also mandated the CEO to implement the necessary adjustments to the organisation and roles of the management
team.
Pending the implementation of this recommendation, the Nomination Committee recommends the re-election of each
of the Directors at the AGM, with Mr Adelmo Schenato as a Non-Executive Director.
Overview
As a result of its work during the year, the Nomination Committee has concluded that it has acted in accordance with
its terms of reference. The Chairman of the Nomination Committee will be available at the Annual General Meeting to
answer any questions about the work of the Nomination Committee.
Zev Furst
Nomination Committee Chairman
27 April 2017
www.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 31
Remuneration Committee
Statement from the Chairman
I am pleased to present the Annual Report on Remuneration for the year ended 31 December 2016.
During 2016 there were no changes made to the Remuneration Policy approved by the shareholders at the Annual
General Meeting held on 25 June 2015, nor to the composition of directors’ remuneration, and there was no increase
to executive and non-executive directors’ salary and fees in base currency; notwithstanding the devaluation of the
British pound against most currencies, all directors agreed to maintain their base compensation “as is” and to review
it the following year.
In 2016 the Committee enrolled the CEO in a performance-related, bonus scheme built around a scorecard with a set
of challenging KPI’s aligned with the company strategy, preserving cash and operating safely and efficiently while
actively pursuing opportunities to re-load and geographically diversify the portfolio. Based on the results achieved,
the Committee has determined to award him a bonus of €200,000, which the CEO undertook to use in its entirety to
subscribe for newly issued ordinary shares in the Company at the prevailing market value of such shares on the date
that bonus is to be paid. Further, the CEO agreed to fund the income tax due on his bonus from his own resources (so
that there is no immediate need to sell some of the subscribed shares).
The Company’s aim is to develop a, long-term and balanced Remuneration Policy aligned to strategy and performance
and linked to shareholder value. The Committee which I chair, with the support of the Executive management and of
qualified advisors, if and to the extent which is required, will work in the second part of this year to produce a new
policy which meets our aim and which will be presented to 2018 AGM for approval.
At this year AGM we will present the 2016 Remuneration Approval to our shareholders for approval.
Enrico Testa
Chairman of the Remuneration Committee
27 April 2017
GROUP OVERVIEWDIRECTORS’ REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONwww.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 32
Annual Report on Remuneration 2016
Remuneration Committee Report
The Remuneration Committee is committed to principles of accountability and transparency to ensure that
remuneration arrangements demonstrate a clear link between reward and performance. In its work, the Remuneration
Committee considers fully the principles and provisions of the Code. In designing performance-related remuneration
schemes for executive Directors, the Remuneration Committee has considered and applied Schedule A of the Code.
Governance
The Remuneration Committee is appointed by the Board from the non-executive Directors of the Company. The
Remuneration Committee’s terms of reference include all matters indicated by the Code. They are reviewed annually
by the Remuneration Committee and any changes are then referred to the Board for approval. The terms of reference
of the Remuneration Committee are published on the Company’s website, www.cadoganpetroleum.com, and are also
available from the Company Secretary at the Registered Office.
The Remuneration Committee consists of Mr Enrico Testa, Mr Zev Furst and Mr Gilbert Lehmann. At the discretion
of the Remuneration Committee, the Chief Executive Officer is invited to attend meetings when appropriate, but is
not present when his own remuneration is being discussed. None of the directors are involved in deciding their own
remuneration. The Company Secretary attends the meetings of the Remuneration Committee.
Responsibilities
In summary, the Remuneration Committee’s responsibilities, as set out in its terms of reference, are as follows:
>
>
To determine and agree with the Board the policy for the remuneration of the executive Directors, the Company
Secretary and other members of executive management as appropriate.
To consider the design, award levels, performance measures and targets for any annual or long-term incentives
and approve any payments made and awards vesting under such schemes.
> Within the terms of the agreed remuneration policy, to determine the total individual remuneration package of
each executive Director and other senior executives including bonuses, incentive payments and share options or
other share awards.
>
To ensure that contractual terms on termination, and any payments made, are fair to the individual and the
Company, that failure is not rewarded and that the duty to mitigate loss is fully recognised.
Overview
As a result of its work during the year, the Remuneration Committee has concluded that it has acted in accordance with
its terms of reference. The chairman of the Remuneration Committee will be available at the Annual General Meeting to
answer any questions about the work of the Committee. The Chairman and Executive Directors of the Company have
a regular dialogue with analysts and substantial shareholders, which includes the subject of Directors’ Remuneration.
The outcome of these discussions are reported to the Board and discussed in detail both there and during meetings of
the Remuneration Committee. Mr Lehmann, as the Senior Independent Director, is available to shareholders who have
concerns that they feel would be inappropriate to raise via the Chairman or Executive Directors.
The Remuneration Committee unanimously recommends that shareholders vote to approve the Annual Report on
Remuneration at the 2017 Annual General Meeting.
Remuneration consultants
The Remuneration Committee did not take any advice from external remuneration consultants.
Single total figure of remuneration for executive and non-executive directors (audited)
$
Salary and fees
2016
2015
$
Taxable benefits1
2016
2015
$
Annual bonus
2016
20152
$
Long-term incentives
2015
2016
$
Pension
2016
20152
Executive Directors
G Michelotti
B des Pallieres
A Schenato
Non-executive Directors
487,080 242,9023
357,231
300,152
277,545 282,014
15,353
2,000
–
15,987 210,504
–
–
–
–
243,1324
–
–
Z Furst
G Lehmann
E Testa
M Meeùs
115,235
61,007
47,450
47,450
129,957
68,801
53,512
53,512
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
– 712,937
502,021
357,231
– 302,152
– 277,545 282,014
115,235
–
–
61,007
– 47,450
– 47,450
129,957
68,801
53,512
53,512
Taxable benefits include life and medical insurance provided to the executive. There are no contributions to pension schemes.
1
2 Restated.
3 The number represents salary for six months of Mr Michelotti, as he has been appointed as a Chief Executive Officer in June 2015.
4 For details please see page 33.
www.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016
33
Notes to the table
In 2016, there was no increase in executive and non-executive directors’ salary in base currency. The difference in
salary and fees for the directors (other than Mr Guido Michelotti) represents the change in the exchange rate between
the base currency and USD as a reporting currency. The figures for Mr Guido Michelotti for 2015 show Mr Michelotti’s
remuneration for the period after his appointment on July 1, 2015 through to the end of December 2015 (six months in
total).
Mr Guido Michelotti
Mr Guido Michelotti was Chief Executive Officer through 2016. Mr Michelotti’s salary is ¤440,000 ($487,080) per
annum.
The Remuneration Committee has determined that it would be appropriate to award Mr Guido Michelotti a bonus of
¤200,000 ($210,504), comprising a performance related element of ¤181,720 and a discretionary element of ¤18,280
for financial year 2016. In assessing the performance related element, the Committee determined that the Company
was within the parameters of production targets and had exceeded by a considerable margin net cash targets, while
missing the LTI free operations target (1 LTI of a contractor) and the profit target, this latter because of lower than
expected results from gas trading. The Committee also noted that the geographic diversification achievements
were on the lower end of the expected outcome. Under the performance scorecard considered by the Remuneration
Committee, the production target and net cash target represent respectively 20% and 30% of the weightings of
the bonus (for target level performance) with safety, profit and geographic diversification targets representing
respectively 10%, 20% and 20%. With additional points allocated for exceeding by a considerable margin net cash
targets, the Remuneration Committee determined that some 59% of the performance related element of the bonus
should become payable (see following table).
KPI
Average production, boepd
Net profit/(loss), $ million
Change in free cash, $ million
HSE, number of LTI
Geographic diversification,
number of new countries
Weighting
%
Target1
Approved budget (stretch target +20%)
Approved budget (stretch target +20%)
Approved budget(stretch target +20%)
Target: zero
Minimum 1
Maximum 2
20
20
30
10
20
100
Achievement
Target achieved
Target not met
Stretch target achieved
Target not met
Target not met
% of KPI related
bonus achieved2
20
0
39
0
03
59
Maximum annual cash bonus: 105% base salary
Maximum KPI element: 70%
Maximum discretionary component: 35%
2015 Bonus
At the time Mr Guido Michelotti was offered the position of CEO, the Board decided, and Mr Guido Michelotti accepted,
to replace an upfront, sign-on payment (art 4.1 of the Remuneration Policy) with a bonus linked to a single KPI, which
was the delivery of a strategy, and containing a discretionary element. The Remuneration Committee determined that
the KPI was achieved and considered that a bonus of ¤231,000, including the full discretionary element of ¤77,000,
should become payable. Mr Michelotti suggested to the Remuneration Committee that a cash neutral alternative for
the company should be found. An alternative was found in the form of bonus payment in cash against a commitment
to use the money to subscribe for newly issued ordinary shares at the prevailing market value (the same solution
implemented in 2016, as described below) and the Remuneration Committee approved it in June 2016, past the
publication of 2015 Annual and Remuneration Reports (April 2016).
The 2015 and 2016 bonuses have not yet been paid and new shares were not issued at the date of this report. The
CEO has undertaken to use the entire amount of his 2015 and 2016 bonuses to subscribe for newly issued ordinary
shares in the Company at the prevailing market value of such shares on the date that bonuses are to be paid. Further,
Mr Guido Michelotti has agreed to fund the income tax due on his bonuses from his own resources (so that there is
no immediate need to sell some of the shares that Mr Guido Michelotti subscribes for). The agreement by Mr Guido
Michelotti to use the entire amount of his bonuses to subscribe for shares and to use his own resources to pay any
income tax due, so that there will be no cash outflow arising from the award of the bonuses, except social security
contributions. While the approved Remuneration Policy sets the maximum Annual Bonus at 200% of the base salary,
Mr. Michelotti has agreed in his employment agreement to a ceiling to the annual bonus equal to 105% of the base
salary and this ceiling will be reflected in his 2017 scorecard.
1 The company does not disclose its budget
2 Scores for achieving respectively target and stretch target are set at 100 and 130
3 Low materiality of Exploenergy’s acquisition, formally finalized in the first days of the new year
GROUP OVERVIEWDIRECTORS’ REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONwww.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 34
Annual Report on Remuneration 2016
continued
There are no conditions on Mr Guido Michelotti’s holding of shares, save that, in respect of his bonuses, Mr Guido
Michelotti accepted, that the Committee has the discretion to reduce the bonus before payment or require him to
pay back shares or a cash amount in the event of financial misstatement of the Company or fraud or other material
misconduct on his part. The amount that may be clawed back from Mr Guido Michelotti on any such event is limited
to the value of an equivalent number of shares that Mr Guido Michelotti subscribed for using the proceeds of his
bonuses, taking the value of the shares at the time of the clawback, less any income tax that Mr Guido Michelotti paid
on his bonuses.
Mr Bertrand des Pallieres
Mr Bertrand des Pallieres was Chief Trading Officer throughout 2016. Mr des Pallieres’ salary is £221,400 ($300,152)
per annum, comprising £194,400 ($263,548) per annum under a consultancy agreement (the terms of which are
reviewed by the Remuneration Committee annually) and £27,000 ($36,604) per annum under a services agreement.
Mr des Pallieres also serves as a non-executive director of two other companies. The board is of the opinion that his
involvement with these companies does not affect the time or commitment, which he gives to the Company.
Adelmo Schenato
Adelmo Schenato was Chief Operating Officer of the Company throughout 2016. Mr Schenato’s basic salary is
$277,545 comprising ¤225,000 ($249,075) per annum under a consultancy agreement and £21,000 ($28,470) under
a services agreement.
The Chairman and Non-Executive Directors
In May 2011 the Board agreed that the Chairman’s fee be set at £85,000 ($115,235) and that the fee for acting as an
independent non-executive Director be set at £35,000 ($47,450) with an additional £10,000 ($13,557) for acting as
Chairman of the Audit Committee. There has been no increase in non-executive Directors’ fees since that time.
Benefits
Benefits may be provided to the executive directors, in the form of private medical insurance and life assurance.
Scheme interests awarded during the financial year (audited)
There were no scheme interests awarded during the year.
Payments to past directors (audited)
In 2016 there were no payments to past directors.
Payments for loss of office (audited)
No payments were made to directors for loss of office in 2016.
Directors’ interests in shares (audited)
The beneficial interests of the Directors in office as at 31 December 2016 and their connected persons in the Ordinary
shares of the Company at 31 December 2016 are set out below.
Shares as at 31 December
Z Furst
G Michelotti
B des Pallieres
G Lehmann
M Meeùs
A Schenato
E Testa
2016
2015
–
–
200,000
–
26,000,000
–
–
–
–
200,000
–
26,000,000
–
–
There were no changes in the Directors shareholding as at 31 December 2016 compared to 27 April 2017.
The Company does not currently operate formal shareholding guidelines.
www.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 35
The Company’s performance
The graph below highlights the Company’s total shareholder return (“TSR”) performance for the last eight years
compared to the FTSE All Share Oil & Gas Producers index. This index has been selected on the basis that it represents
a sector specific group, which is an appropriate group for the Company to compare itself against. TSR is the return
from a share or index based on share price movements and notional reinvestment of declared dividends.
9
0
0
2
y
r
a
u
n
a
J
1
t
a
0
0
1
o
t
d
e
s
a
b
e
R
250
200
150
100
50
0
01/01/2 0 0 9
3 0/0 6/2 0 0 9
31/12/2 0 0 9
3 0/0 6/2 010
31/12/2 010
3 0/0 6/2 012
31/12/2 012
3 0/0 6/2 013
31/12/2 013
3 0/0 6/2 014
31/12/2 014
3 0/0 6/2 015
31/12/2 015
3 0/0 6/2 016
31/12/2 016
Historic Remuneration of Chief Executive
Cadogan Petroleum plc
FTSE All Share Oil & Gas
Salary
$
422,533
547,067
669,185
511,459
384,941
405,433
432,4092
487,080
Taxable
benefits
$
–
–
–
–
–
20,734
15,987
15,353
Annual
bonus
$
284,552
–
–
–
–
–
243,1323
210,5044
Long-term
incentives
$
–
–
–
–
–
–
–
–
Pension
$
–
–
–
31,966
–
–
–
–
Loss of
office
$
–
–
–
126,808
–
–
–
–
Total
$
707,085
547,067
669,185
670,233
384,941
426,167
691,528
712,937
2009
2010
2011
2012
2013
2014
20151
2016
In 2016 the annual bonus awarded to the CEO was 22% (2015: 50%) of the maximum bonus as per the approved
Remuneration Policy.
Percentage change in the remuneration of the Chief Executive
The following table shows the percentage change in the remuneration of the Chief Executive in 2016 and 2015
compared to that of all employees within the Group.
Base salary
Taxable benefits
Annual bonus
Total
CEO
All employees
CEO
All employees
CEO
All employees
CEO
All employees
2016
$’000
487
2,618
15
35
211
211
713
2,864
20151
$’000
Average
Change %
432
3,121
16
43
243
264
691
3,428
13%
(3%)
(6%)
(6%)
(13%)
(7%)
3%
(3%)
The base salary of CEO has been paid in cash. Mr Guido Michelotti has undertaken to use the entire amount of his
2015 and 2016 bonuses (which have not yet been paid) to subscribe for newly issued ordinary shares in the Company
at the prevailing market value of such shares on the date that bonuses are to be paid. Further, Mr Guido Michelotti
has agreed to fund the income tax due on his bonuses from his own resources (so that there is no immediate need to
sell some of the shares that Mr Guido Michelotti subscribes for) so that there will be no cash outflow for the Company
arising from the award of the bonuses, except social security contributions.
1 Restated
2 2015 CEO’s salary is the sum of Mr. des Pallieres’ salary for the period January to June and of Mr. Michelotti’s salary for the period
July to December
3 Bonus awarded to CEO for 2015. Details explained on page 33
4 The CEO has undertaken to use the entire amount of the bonus to buy at market price newly issued company shares
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36
Annual Report on Remuneration 2016
continued
In 2016 none of the directors participated in long-term incentives.
In 2016 there was no increase in executive and non-executive directors’ salary in base currency. The difference in pay
represents the change in exchange rate between the base currency and USD as a reporting currency.
The $0.5 million decrease in employee remuneration is the combination of a reduction in the head count from 80 to
69 ($0.3 million decrease) and of the devaluation of the UAH ($0.2 million decrease).
Relative importance of spend on pay
The table below compares shareholder distributions (i.e. dividends and share buybacks) and total employee pay
expenditure of the Group for the financial years ended 31 December 2015 and 31 December 2016.
All-employee remuneration
Distributions to shareholders
2016
$’000
2,864
–
2015
$’000
3,428
–
Year-on-year
change, %
(16%)
N/A
Shareholder voting at the Annual General Meeting
The Directors’ Remuneration Policy was approved by shareholders at the Annual General Meeting held on 25 June
2015. The Remuneration Policy can be found on the Group’s website. The votes cast by proxy were as follows:
Directors’ Remuneration Report
Number of votes % of votes cast
For
Against
Total votes cast
Number of votes withheld
58,983,662
56,000
59,039,662
0
99.91
0.09
100.00
The Directors’ Remuneration Report for the year ended 31 December 2015 was approved by shareholders at the
Annual General Meeting held on 22 June 2016. The votes cast by proxy were as follows:
Directors’ Remuneration Policy
For
Against
Total votes cast
Number of votes withheld
Number of votes % of votes cast
58,301,210
200,203
58,501,413
0
99.66
0.34
100.00
The Directors Remuneration Policy was approved at the 2015 AGM and did not change since then. It can be found on
the Group’s website.
Implementation of Remuneration Policy in 2017
The Remuneration Committee proposes to continue to implement the Remuneration Policy approved by the
shareholders at the 2015 AGM. The Remuneration Committee is not intending to make any material changes to the
way that the remuneration policy is implemented in 2017 and envisages that the structure of the remuneration of
directors will remain the same as in 2016.
As was the case in 2016, the performance related elements of Mr Guido Michelotti will be built around a scorecard
with a set of KPI’s aligned with the Group strategy, preserving cash and operating safely and efficiently while actively
pursuing opportunities to re-load and geographically diversify the portfolio, with similar to 2016 weightings (as
described above on pages 32 to 33 in the notes to the single figure table). While Cadogan’s approved Remuneration
Policy sets the maximum Annual Bonus at 200% of the base salary, Mr. Michelotti has agreed in his employment
agreement to a ceiling to the annual bonus equal to 105% of the base salary and this ceiling will also be reflected in
his 2017 scorecard.
Approval
The Directors’ Remuneration Report was approved by the Board on 27 April 2017 and signed on its behalf by:
Zev Furst
Chairman
27 April 2017
www.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 37
Statement of Directors’ Responsibilities
Statement of Directors’ Responsibilities in respect of the Annual Report and the Financial Statements
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. The Directors are
required by law to prepare the Group financial statements in accordance with International Financial Reporting
Standards (“IFRSs”) as adopted by the European Union and Article 4 of the International Accounting Standards
(“IAS”) regulation and have also elected to prepare the Parent Company financial statements under IFRSs as adopted
by the European Union. Under Company law, the Directors must not approve the Financial Statements unless they are
satisfied that they give a true and fair view of the state of affairs of the Company and Group and of the profit or loss
for that period. In preparing the Company and Group’s financial statements, IAS Regulation requires that Directors:
>
>
>
properly select and apply accounting policies;
present information, including accounting policies, in a manner that provides relevant, reliable, comparable and
understandable information;
provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable
users to understand the impact of particular transactions, other events and conditions on the Company’s and
Group’s financial position and financial performance; and
> make an assessment of the Company’s and Group’s ability to continue as a going concern.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
Company and Group’s transactions and disclose with reasonable accuracy at any time the financial position of the
Company and Group and enable them to ensure that the financial statements comply with the Companies Act 2006.
They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors’
Report, Annual Report on Remuneration, Directors’ Remuneration Policy and Corporate Governance Statement that
comply with that law and those regulations.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included
on the Company’s website, www.cadoganpetroleum.com. Legislation in the United Kingdom governing the preparation
and dissemination of the financial statements may differ from legislation in other jurisdictions.
Responsibility Statement of the Directors in respect of the Annual Report
We confirm to the best of our knowledge:
i.
the financial statements, prepared in accordance with International Financial Reporting Standards as adopted by
the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the
Company and the undertakings included in the consolidation as a whole; and
ii. the Strategic Report, includes a fair review of the development and performance of the business and the position
of the Company and the undertakings included in the consolidation taken as a whole, together with a description
of the principal risks and uncertainties that they face; and
iii. the annual report and the financial statements, taken as a whole, are fair, balanced and understandable and
provides the information necessary for the shareholders to assess the Group’s position, performance, business
model and strategy.
On behalf of the Board
Zev Furst
Chairman
27 April 2017
GROUP OVERVIEWDIRECTORS’ REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONwww.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 38
Independent Auditor’s Report to the
Members of Cadogan Petroleum plc
Opinion on financial statements of Cadogan Petroleum plc
In our opinion:
>
>
>
>
the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as
at 31 December 2016 and of the group’s loss for the year then ended;
the group financial statements have been properly prepared in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union;
the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the
European Union and as applied in accordance with the provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006
and, as regards the group financial statements, Article 4 of the IAS Regulation.
The financial statements that we have audited comprise:
>
>
>
>
>
>
the group Income Statement;
the group Statement of Comprehensive Income;
the group and parent company Balance Sheets;
the group and parent company Cash Flow Statements;
the group and parent company Statements of Changes in Equity; and
the related notes 1 to 40.
The financial reporting framework that has been applied in their preparation is applicable law and IFRSs as adopted
by the European Union, and as regards the parent company financial statements, as applied in accordance with the
provisions of the Companies Act 2006.
Summary of our audit approach
Key risks
The key risks that we identified in the current year were:
Materiality
An overview of the
scope of our audit
> Recoverability of intangible assets and investments in joint ventures
> Recoverability of trade receivables
Within this report, any new risks are identified with
.
same as the prior year identified with
The materiality that we used in the current year was $977,000 (2015: $2,020,000),
which was determined on the basis of 2% of the expected consolidated shareholders’
equity as at 31 December 2016.
and any risks which are the
We have included in the Group audit scope the full audit of all significant entities in
Ukraine and in the UK. These businesses account for over 90% (2015: over 90%) of
the Group’s net assets, revenue and loss before tax. The Group audit team was led
by the Deloitte UK Senior Statutory Auditor and managers and included junior audit
members and senior tax specialists from Deloitte Ukraine as all assets are located
there and appropriate knowledge of local legislation and tax regulations is required.
Significant changes
in our approach
During our audit of 2016 financial statements we have identified a new risk being
recoverability of receivables.
www.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 39
Going concern and the directors’ assessment of the principal risks that would threaten the solvency or
liquidity of the group
As required by the Listing Rules we have reviewed the
directors’ statement regarding the appropriateness of
the going concern basis of accounting contained within
Note 3 to the financial statements and the directors’
statement on the longer-term viability of the group
contained on page 22.
We are required to state whether we have anything
material to add or draw attention to in relation to:
We confirm that we have nothing material to add or draw
attention to in respect of these matters.
We agreed with the directors’ adoption of the going
concern basis of accounting and we did not identify
any such material uncertainties. However, because not
all future events or conditions can be predicted, this
statement is not a guarantee as to the group’s ability to
continue as a going concern.
>
>
>
>
the directors’ confirmation on page 11 and page 22
that they have carried out a robust assessment of
the principal risks facing the group, including those
that would threaten its business model, future
performance, solvency or liquidity;
the disclosures on pages 11 to 12 that describe those
risks and explain how they are being managed or
mitigated;
the directors’ statement in Note 3 and page 18 to the
financial statements about whether they considered
it appropriate to adopt the going concern basis of
accounting in preparing them and their identification
of any material uncertainties to the group’s ability
to continue to do so over a period of at least twelve
months from the date of approval of the financial
statements; and
the directors’ explanation on page 22 as to how they
have assessed the prospects of the group, over what
period they have done so and why they consider that
period to be appropriate, and their statement as to
whether they have a reasonable expectation that
the group will be able to continue in operation and
meet its liabilities as they fall due over the period of
their assessment, including any related disclosures
drawing attention to any necessary qualifications or
assumptions.
Independence
We are required to comply with the Financial Reporting
Council’s Ethical Standards for Auditors and confirm that
we are independent of the group and we have fulfilled
our other ethical responsibilities in accordance with
those standards.
We confirm that we are independent of the group and
we have fulfilled our other ethical responsibilities in
accordance with those standards. We also confirm
we have not provided any of the prohibited non-audit
services referred to in those standards.
Our assessment of risks of material misstatement
The assessed risks of material misstatement described below are those that had the greatest effect on our audit
strategy, the allocation of resources in the audit and directing the efforts of the engagement team.
GROUP OVERVIEWDIRECTORS’ REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONwww.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 40
Independent Auditor’s Report to the
Members of Cadogan Petroleum plc continued
Recoverability of intangible assets and investments in joint ventures
Risk description
The carrying value of the Group’s intangible assets and investments in joint ventures amounted
to $4.7 million at 31 December 2016.
How the scope
of our audit
responded to the
risk
Assessment of the carrying value of these assets requires significant judgement, including
the Group’s intention and ability to proceed with a future work programme for a prospect or
licence, the likelihood of licence renewal or extension, and the expected or actual success of
drilling and geological analysis. Recoverability of non-current assets is dependent on macro-
economic assumptions and estimates about future oil and gas prices, inflation, discount and
exchange rates as well as forecast assumptions related to future production levels, reserves
and operating costs. The outcome of impairment assessments could vary significantly were
different assumptions applied.
The continued instability of the political and economic situation in Ukraine and devaluation
of the currency to which the Group is significantly exposed and the Group’s reduction in
production and exploration activities are factors which heighten the risk of impairment
associated with the Group’s non-current assets.
Impairment of intangible exploration and evaluation assets and investments in joint ventures
amounting to $1.6 million and $0.8 million, respectively, was recognised in the year ended
31 December 2016.
Refer to the significant issues considered by the Audit Committee and discussed on pages 26
to 28, Group’s policies and key estimates and assumptions within note 1 and additional notes 16,
17 and 19.
We evaluated management’s assessment of indicators of impairment and recoverability
assessment for the Group’s non-current assets, including potential difficulties with the
upcoming extension of licences.
We analysed the reasonableness of the estimates such as oil and gas resources and future
production levels, future oil and gas prices and future costs and performed benchmarking
of inflation and discount rates to estimates used by peer companies and Deloitte developed
discount rates. We also considered actual facts and circumstances of the operating
environment of the Group.
Our work included discussion of the latest status and future appraisal plans on each licence
with operational staff and Group management. We gathered evidence such as budgets, field
development plans, contracts for future drilling and geological and geophysical activities to
verify that management’s intention to continue exploration efforts is supported by funding
commitments.
We have also obtained and reviewed documentary evidence, such as budgets, field working
programmes, contracts for future geological and geophysical activities, and licence documents.
We evaluated management’s assessment of whether there were any indicators of impairment
for the Group’s interests in joint ventures under IAS 36, taking into consideration the
impairment indicators outlined in IFRS 6 for the purpose of impairment assessment of
exploration and evaluation assets within the joint ventures. We held discussions on the latest
status and future appraisal plans on each licence with operational staff and Group management
and compared these plans with approved budgets and considered the Group’s future funding
responsibilities.
We undertook a detailed analysis and challenge of the significant judgements and estimates
used in management’s impairment tests of exploration and evaluation assets held by the joint
ventures of the Group. Our analysis included comparison of gas price assumptions to publicly
available forecasts, benchmarking the discount rate applied by management to a Deloitte
developed discount rate, and the comparison of future cost estimates against actual historic
cost levels and budgets.
Key observations We are satisfied that the level of impairment recorded and the judgements applied by
management are appropriate.
We concluded that the assumptions applied in the impairment calculations were appropriate,
and no additional impairments were identified from the work performed above.
www.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 41
Recoverability of trade receivables
Risk description
How the scope
of our audit
responded to the
risk
The group had trade receivables of $2.2m at 31 December 2016. In January 2016 the Group
restructured receivables with certain counterparties within this balances and temporarily
ceased trading with them due to uncertainty of recoverability. As the recognition of
recoverable amounts requires judgement the risk around receivable balance recoverability was
identified. Refer to the significant issues considered by the Audit Committee and discussed
on pages 26 to 28, Group’s policies and key estimates and assumptions within note 1 and
additional notes 16, 17 and 19.
We reviewed the terms of restructuring arrangements made with certain counterparties and
verified the post year-end bank statements to confirm if the balances had subsequently been
paid.
In addition, we have evaluated the reasonableness of the methods and assumptions used by
management to estimate the allowances for doubtful accounts.
We requested a confirmation from counterparties for the outstanding balances with Cadogan
Petroleum plc as of 31 December 2016 to perform an independent reconciliation and
completeness
Key observations We found that management had initially recognised accrued interest of $0.8m on a debt
which did not meet the recognition criteria of IAS 18. This was subsequently corrected by
management. The results of our testing were satisfactory and we concur that the receivable
balance is appropriate.
Although separate impairment assessments have been undertaken and audited, we have aggregated our explanation
of risks and the scope for the recoverability of intangible exploration and evaluation (E&E) assets and recoverability of
investments in joint ventures.
We have not included the political risk in our report this year as it has not been an area which has had a major impact
on our audit strategy. However, we are reporting on the receivables recoverability which was one of the main areas of
focus of our audit this year.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the
economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in
planning the scope of our audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Materiality
$977,000 (2015: $2,020,000)
Basis for determining
materiality
When determining materiality, among other factors we considered the Group’s pre-tax
loss in the current period as well as in recent periods; the occurrence of any non-
recurring or fluctuating gains and losses (such as exploration and evaluation assets
impairments) and the level of consolidated shareholders’ equity.
Materiality was determined to be $977,000, which was 2% of expected consolidated
shareholders’ equity (2015: $2,020,000 which was 3.7% of consolidated shareholders’
equity). We have decreased percentage used in 2016 taking into considering our
knowledge of the business and anticipated impairment.
Rationale for the
benchmark applied
Consistent with the prior year, we used consolidated shareholders’ equity to
determine materiality as the entity has a history of operating losses.
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of $19,500
(2015: $40,000), as well as differences below that threshold that, in our view, warranted reporting on qualitative
grounds. We also report to the Audit Committee on disclosure matters that we identified when assessing the overall
presentation of the financial statements.
GROUP OVERVIEWDIRECTORS’ REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONwww.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 42
Independent Auditor’s Report to the
Members of Cadogan Petroleum plc continued
Opinion on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
>
>
>
the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the
Companies Act 2006;
the information given in the Strategic Report and the Directors’ Report for the financial year for which the
financial statements are prepared is consistent with the financial statements; and
the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal
requirements.
In the light of the knowledge and understanding of the company and its environment obtained in the course of the
audit, we have not identified any material misstatements in the Strategic Report and the Directors’ Report.
Matters on which we are required to report by exception
Adequacy of explanations received and accounting records
We have nothing to report in respect of these matters.
We have nothing to report arising from these matters.
We have nothing to report arising from our review.
We confirm that we have not identified any such
inconsistencies or misleading statements.
Under the Companies Act 2006 we are required to
report to you if, in our opinion:
> we have not received all the information and
explanations we require for our audit; or
>
>
adequate accounting records have not been kept
by the parent company, or returns adequate for our
audit have not been received from branches not
visited by us; or
the parent company financial statements are not in
agreement with the accounting records and returns.
Directors’ remuneration
Under the Companies Act 2006 we are also required to
report if in our opinion certain disclosures of directors’
remuneration have not been made or the part of the
Directors’ Remuneration Report to be audited is not in
agreement with the accounting records and returns.
Corporate Governance Statement
Under the Listing Rules we are also required to review
part of the Corporate Governance Statement relating to
the company’s compliance with certain provisions of the
UK Corporate Governance Code.
Our duty to read other information in the Annual Report
Under International Standards on Auditing (UK and
Ireland), we are required to report to you if, in our
opinion, information in the annual report is:
> materially inconsistent with the information in the
audited financial statements; or
>
apparently materially incorrect based on, or materially
inconsistent with, our knowledge of the group
acquired in the course of performing our audit; or
>
otherwise misleading.
In particular, we are required to consider whether
we have identified any inconsistencies between our
knowledge acquired during the audit and the directors’
statement that they consider the annual report is fair,
balanced and understandable and whether the annual
report appropriately discloses those matters that we
communicated to the audit committee which we consider
should have been disclosed.
www.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 43
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit
and express an opinion on the financial statements in accordance with applicable law and International Standards
on Auditing (UK and Ireland). We also comply with International Standard on Quality Control 1 (UK and Ireland). Our
audit methodology and tools aim to ensure that our quality control procedures are effective, understood and applied.
Our quality controls and systems include our dedicated professional standards review team and independent partner
reviews.
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those
matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s
members as a body, for our audit work, for this report, or for the opinions we have formed.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud
or error. This includes an assessment of: whether the accounting policies are appropriate to the group’s and the
parent company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness
of significant accounting estimates made by the directors; and the overall presentation of the financial statements.
In addition, we read all the financial and non-financial information in the annual report to identify material
inconsistencies with the audited financial statements and to identify any information that is apparently materially
incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the
audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for
our report.
Timothy Biggs FCA
(Senior statutory auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
London, United Kingdom
27 April 2017
GROUP OVERVIEWDIRECTORS’ REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONwww.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 44
Consolidated Income Statement
For the year ended 31 December 2016
CONTINUING OPERATIONS
Revenue
Cost of sales
Gross profit
Administrative expenses
Impairment of oil and gas assets
(Impairment)/reversal of impairment of other assets
Share of losses in joint ventures
Net foreign exchange gains
Other operating (loss)/income, net
Operating loss
Gain on acquisition
Finance costs, net
Loss before tax
Tax charge
Loss for the year
Attributable to:
Owners of the Company
Non-controlling interest
Loss per Ordinary share
Basic
Notes
6
7
14,15
8
17
17
11
12
13
2016
$’000
2015
$’000
19,692
(18,623)
1,069
(5,603)
(90)
(82)
(143)
38
(9)
(4,820)
99
(1,087)
(5,808)
(110)
75,440
(69,562)
5,878
(6,115)
(10,480)
1,300
(12,844)
2,494
31
(19,736)
–
(2,507)
(22,243)
(1,040)
(5,918)
(23,283)
(5,912)
(6)
(23,261)
(22)
(5,918)
(23,283)
cents
(2.6)
cents
(10.1)
The notes on pages 49 to 72 form an integral part of these financial statements.
www.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 Consolidated Statement of Comprehensive Income
For the year ended 31 December 2016
45
Loss for the year
Other comprehensive loss
Items that may be reclassified subsequently to profit or loss:
Unrealised currency translation differences
Other comprehensive loss
Total comprehensive loss for the year
Attributable to:
Owners of the Company
Non-controlling interest
2016
$’000
2015
$’000
(5,918)
(23,283)
(987)
(987)
(11,521)
(11,521)
(6,905)
(34,804)
(6,899)
(6)
(34,782)
(22)
(6,905)
(34,804)
The notes on pages 49 to 72 form an integral part of these financial statements.
GROUP OVERVIEWDIRECTORS’ REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONwww.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 46
Consolidated Balance Sheet
As at 31 December 2016
ASSETS
Non-current assets
Intangible exploration and evaluation assets
Property, plant and equipment
Investments in joint ventures
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
LIABILITIES
Non-current liabilities
Deferred tax liabilities
Provisions
Current liabilities
Short-term borrowings
Trade and other payables
Provisions
Total liabilities
NET ASSETS
EQUITY
Share capital
Retained earnings
Cumulative translation reserves
Other reserves
Equity attributable to owners of the Company
Non-controlling interest
TOTAL EQUITY
Notes
2016
$’000
2015
$’000
14
15
17
18
19
20
21
24
22
23
24
25
2,354
1,312
2,323
5,989
1,879
4,146
43,300
49,325
55,314
–
(670)
(670)
(3,574)
(1,640)
(1,306)
2,700
1,661
2,181
6,542
3,503
14,411
49,407
67,321
73,863
–
(726)
(726)
(12,903)
(3,682)
(1,523)
(6,520)
(18,108)
(7,190)
(18,834)
48,124
55,029
13,337
194,427
(161,499)
1,589
47,854
270
48,124
13,337
200,339
(160,512)
1,589
54,753
276
55,029
The consolidated financial statements of Cadogan Petroleum plc, registered in England and Wales no. 05718406, were
approved by the Board of Directors and authorised for issue on 27 April 2017. They were signed on its behalf by:
Guido Michelotti
Chief Executive Officer
27 April 2017
The notes on pages 49 to 72 form an integral part of these financial statements.
www.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 Consolidated Cash Flow Statement
For the year ended 31 December 2016
47
Operating loss
Adjustments for:
Depreciation of property, plant and equipment
Impairment of oil and gas assets
Share of losses in joint ventures
Impairment of receivables
Impairment of inventories (note 8)
Reversal of impairment of VAT recoverable (note 8)
Loss on disposal of property, plant and equipment
Effect of foreign exchange rate changes
Operating cash flows before movements in working capital
Decrease in inventories
Decrease in receivables
Decrease in payables and provisions
Cash from operations
Interest paid
Interest on receivables received
Income taxes paid
Net cash inflow from operating activities
Investing activities
Investments in joint ventures
Purchases of property, plant and equipment
Purchases of intangible exploration and evaluation assets
Proceeds from sale of property, plant and equipment
Net cash inflow from acquisition of subsidiaries
Interest received
Net cash used in investing activities
Financing activities
Proceeds from short-term borrowings
Repayments of short-term borrowings
Net cash used in financing activities
Net (decrease)/increase in cash and cash equivalents
Effect of foreign exchange rate changes
Cash and cash equivalents at beginning of year
2016
$’000
2015
$’000
(4,820)
(19,736)
138
90
143
59
92
(69)
13
(38)
(4,391)
1,047
9,321
(2,014)
3,963
(1,591)
230
(8)
2,594
(2,337)
(119)
(39)
29
2,041
156
(269)
1,908
(10,232)
(8,324)
(5,999)
(108)
49,407
434
10,480
12,844
–
90
(1,390)
24
(3,827)
(1,081)
1,258
4,871
(1,429)
3,619
(2,379)
–
–
1,240
(700)
(261)
(281)
5
–
118
(1,119)
13,187
(12,225)
962
1,083
(603)
48,927
Cash and cash equivalents at end of year
43,300
49,407
The notes on pages 49 to 72 form an integral part of these financial statements.
GROUP OVERVIEWDIRECTORS’ REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONwww.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 48
Consolidated Statement of Changes in Equity
For the year ended 31 December 2016
Share
capital
$’000
Retained
earnings
$’000
Cumulative
translation
reserves
$’000
Reorganisation
$’000
Equity
attributable to
owners of the
Company
$’000
Non-
controlling
interest
$’000
Total
$’000
As at 1 January 2015
Net loss for the year
Other comprehensive loss
13,337 223,600
(23,261)
–
–
–
(148,991)
–
(11,521)
1,589
–
–
89,535
(23,261)
(11,521)
298
(22)
–
89,833
(23,283)
(11,521)
Total comprehensive loss for the year
–
(23,261)
(11,521)
–
(34,782)
(22)
(34,804)
As at 1 January 2016
Net loss for the year
Other comprehensive loss
13,337 200,339
(5,912)
–
–
–
(160,512)
–
(987)
1,589
–
–
54,753
(5,912)
(987)
276
(6)
–
55,029
(5,918)
(987)
Total comprehensive loss for the year
–
(5,912)
(987)
–
(6,899)
(6)
(6,905)
As at 31 December 2016
13,337 194,427
(161,499)
1,589
47,854
270
48,124
The notes on pages 49 to 72 form an integral part of these financial statements.
www.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 49
Notes to the Consolidated Financial Statements
For the year ended 31 December 2016
1. General information
Cadogan Petroleum plc (the “Company”, together with its subsidiaries the “Group”), is registered in England and
Wales under the Companies Act 2006. 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 page 08 and the Financial Review on pages 09 to 10.
2. Adoption of new and revised Standards
The accounting policies applied are consistent with those adopted and disclosed in the Group financial statements
for the year ended 31 December 2015, except for changes arising from the adoption of the following new accounting
pronouncements which became effective in the current reporting period:
> Amendments to IFRS 11 Accounting for Acquisitions of Interest in Joint Operations. The amendments to IFRS 11
provide guidance on how to account for the acquisition of an interest in a joint operation in which the activities
constitute a business as defined in IFRS 3 Business
>
Combination and state that the relevant principles on accounting for business combinations in IFRS 3 and other
standards should be applied. The same requirements should be applied to the formation of a joint operation if
and only if an existing business is contributed to the joint operation by one of the parties that participate in the
joint venture. A joint operator is also required to disclose the relevant information required by IFRS 3 and other
standards for business combinations. Entities should apply the amendments prospectively to acquisitions of
interest in joint operations occurring from the beginning of annual periods beginning on or after 1 January 2016
>
The Group has determined that amendments to IFRS 11 do not impact its consolidated financial statements as it
does not have any arrangements considered joint operations
> Amendments to IAS 1 Presentation of Financial Statements: Disclosure. Initiative provides guidance on the use of
judgement in presenting financial statement information, including: the application of materiality; order of notes;
use of subtotals; accounting policy referencing and disaggregation of financial and non-financial information.
Amendments are effective for annual periods beginning on or after 1 January 2016
The Group has determined that amendments to IAS 1 do not impact its consolidated financial statements.
New IFRS accounting standards, amendments and interpretations not yet adopted
The following new IFRS accounting standards in issue but not yet effective could have a significant impact on the
Group:
IFRS 15 Revenue from Contracts with Customers
IFRS 15 will replace IAS 18 Revenue and IAS 11 Construction Contracts and establishes a unified framework for
determining the timing, measurement and recognition of revenue. The principle of the new standard is to recognise
revenue as performance obligations are met rather than based on the transfer of risks and rewards.
The effective date of the standard has been deferred to 1 January 2018 to allow companies more time to deal with
transitional issues of application.
The Group is currently reviewing the potential impact of adopting IFRS 15 with the primary focus being understanding
those sales contracts where the timing and amount of revenue recognised could differ under IFRS 15, which may occur
for example if contracts with customers incorporate performance obligations not currently recognised separately, or
where such contracts incorporate variable consideration.
As the Group’s revenue is predominantly derived from arrangements in which the transfer of risks and rewards
coincides with the fulfilment of performance obligations, the timing and amount of revenue recognised is unlikely to
be materially affected for the majority of sales.
IFRS 15 also includes disclosure requirements including qualitative and quantitative information about contracts
with customers to help users of the financial statements understand the nature, amount, timing and uncertainty of
revenue.
In addition to the potential accounting implications outlined above, the implementation of IFRS 15 is expected to
impact the Group’s systems, processes and controls. The Group will start developing a transition plan to identify and
implement the required changes during 2017.
GROUP OVERVIEWDIRECTORS’ REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONwww.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 50
Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2016
2. Adoption of new and revised Standards continued
IFRS 9 Financial Instruments
IFRS 9 will replace IAS 39 Financial Instruments: Recognition and Measurement and addresses the following three key
areas:
>
>
Classification and measurement establishes a single, principles-based approach for the classification of financial
assets, which is driven by cash flow characteristics and the business model in which an asset is held. This is
expected to have a number of presentational impacts on the Group financial statements including changes in the
presentation of gains and losses on financial assets and liabilities carried at fair value on the balance sheet
Impairment introduces a new ‘expected credit loss’ impairment model, requiring expected credit losses to be
recognised from when financial instruments are first recognised. The transition to this model is expected to result
in changes in the systems and computational methods used by the Group to assess receivables and similar assets
for impairment. However, given the profile of the Group’s counterparty exposures, this is not expected to have a
material impact on the amounts recorded in the financial statements
> Hedge Accounting aligns the accounting treatment with risk management practices of an entity, including making
a broader range of exposures eligible for hedge accounting and introducing a more principles-based approach to
assessing hedge effectiveness. The adoption of IFRS 9 will not require changes to existing hedging arrangements
but may provide scope to apply hedge accounting to a broader range of transactions in the future
IFRS 9 is effective for annual reporting periods beginning on or after 1 January 2018.
The Group’s implementation activities to date have principally focused on gaining a high level understanding of the
likely effects of IFRS 9 given the nature of financial instruments held by the Group. A more detailed impact analysis
and transition activities will be undertaken during 2017.
IFRS 16 Leases
IFRS 16 replaces the following standards and interpretations: IAS 17 Leases and IFRIC 4 Determining whether an
Arrangement contains a Lease. The new standard provides a single lessee accounting model for the recognition,
measurement, presentation and disclosure of leases. IFRS 16 applies to all leases including subleases and requires
lessees to recognise assets and liabilities for all leases, unless the lease term is 12 months or less, or the underlying
asset has a low value. Lessors continue to classify leases as operating or finance.
IFRS 16 was issued in January 2016 and applies to annual reporting periods beginning on or after 1 January 2019. The
Group will evaluate the potential impact of IFRS 16 on the financial statements and performance measures. This will
include an assessment of whether any arrangements the Group enters into will be considered a lease under IFRS 16.
Amendments to IFRS 10 Consolidated Financial Statements and IAS 28 Joint Ventures
Sale or Contribution of Assets between an Investor and its Associate or Joint Venture remove an inconsistency
between the two standards on the accounting treatment for gains and losses arising on the sale or contribution of
assets by an investor to its associate or joint venture. Following the amendment, such gains and losses may only
be recognised to the extent of the unrelated investor’s interest, except where the transaction involves assets that
constitute a business. The Group does not expect it to have a material impact on its consolidated financial statements.
Amendments to IFRS 2 Share-based payment
Classification and Measurement of Share-Based Payment transactions. On 20 June 2016, the International Accounting
Standards Board (IASB) published final amendments to IFRS 2 that clarify the classification and measurement
of share-based payment transactions. IASB has now added guidance on accounting for cash-settled share-based
payment transactions that include a performance condition, classification of share-based payment transactions with
net settlement features and accounting for modifications of share-based payment transactions from cash-settled to
equity-settled. Amendments are effective for annual periods beginning on or after 1 January 2018.
The Group does not expect it to have a material impact on its consolidated financial statements.
www.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 51
3. Significant accounting policies
(a) Basis of accounting
The financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”)
as issued by the International Accounting Standards Board (“IASB”) and as adopted by the European Union (“EU”),
and therefore the Group financial statements comply with Article 4 of the EU IAS Regulation.
The financial statements have been prepared on the historical cost convention basis, except for financial assets and
liabilities, which have been measured at fair values and using accounting policies consistent with IFRS.
The principal accounting policies adopted are set out below:
(b) Going concern
The Group’s business activities, together with the factors likely to affect future development, performance and
position are set out in the Strategic Report on pages 04 to 15. The financial position of the Group, its cash flow and
liquidity position are described in the Financial Review on pages 09 to 10.
The Group’s cash balance at 31 December 2016 was $43.3 million (2015: $49.4 million). It includes restricted cash
of $10.9 million (2015: $20 million) (Note 20). The Directors believe that the funds available at the date of the issue
of these financial statements are sufficient for the Group to manage its business risks and planned investments
successfully.
The directors’ confirmation that they have carried out a robust assessment of the principal risks facing the Group,
including those that could potentially threaten its business model, future performance, solvency or liquidity is on
page 11.
The Group’s forecasts and projections, taking into account reasonably possible changes in trading activities,
operational performance, start dates and 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.
The Group continues to pursue its farm-out campaign, which, if successful, will enable it to farm-out a portion of its
interests in its oil and gas licences to spread the risks associated with further exploration and development.
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. In making its statement the Directors have
considered the recent political and economic situation in Ukraine, as described further in the note 4 (d).
(c) Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by
the Company (its subsidiaries) made up to 31 December each year. IFRS 10 defines control to be investor control over
an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the
ability to control those returns through its power over the investee.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement
from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary,
adjustments are made to the financial statements of subsidiaries to bring accounting policies used into line with those
used by the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation.
Non-controlling interests in subsidiaries are identified separately from the Group’s equity therein. Those interests of
non-controlling shareholders that are present ownership interests entitling their holders to a proportionate share of
net assets upon liquidation may be initially measured at fair value or at the non-controlling interests’ proportionate
share of the fair value of the acquiree’s identifiable net assets. The choice of measurement is made on an acquisition-
by-acquisition basis. Other non-controlling interests are initially measured at fair value.
Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial
recognition plus the non-controlling interests’ share of subsequent changes in equity. Total comprehensive income is
attributed to non-controlling interests even if this results in the non-controlling interests having a deficit balance.
Changes in the Group’s interests in subsidiaries that do not result in a loss of control are accounted for as equity
transactions. The carrying amount of the Group’s interests and the non-controlling interests are adjusted to reflect
the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-
controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in
equity and attributed to the owners of the Company.
GROUP OVERVIEWDIRECTORS’ REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONwww.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 52
Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2016
3. Significant accounting policies continued
(d) Change in accounting policy
The functional currency of the Company and of another UK holding company, Cadogan Petroleum Holdings Limited,
which is the currency of the primary economic environment in which the entities operates, has been changed from
sterling to US dollars with effect from 1 January 2016. This has been done due to the fact that the UK is no longer
considered to be a primary economic environment for the Group and its UK holding companies.
The change of the functional currency has been accounted for prospectively from the date of the change. Assets and
liabilities were translated using the exchange rate at the date of the change. The difference between the historical
carrying values of non-monetary assets and liabilities and the new translated values were recorded to the cumulative
translation reserve.
(e) Business combinations
The acquisition of subsidiaries is accounted for using the acquisition method. The cost of the acquisition is measured
at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity
instruments issued in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as
incurred. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition
under IFRS 3 Business Combinations are recognised at their fair value at the acquisition date, except for non-current
assets (or disposal groups) that are classified as held for resale in accordance with IFRS 5 Non-Current Assets held for
sale and Discontinued Operations. These are recognised and measured at fair value less costs to sell.
(f) Investments in joint ventures
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to
the net assets of the arrangement. A joint venture firm recognises its interest in a joint venture as an investment and
shall account for that investment using the equity method in accordance with IAS 28 Investments in Associates and
Joint Ventures.
Under the equity method, the investment is carried on the balance sheet at cost plus changes in the Group’s share
of net assets of the entity, less distributions received and less any impairment in value of the investment. The Group
Consolidated Income Statement reflects the Group’s share of the results after tax of the equity-accounted entity,
adjusted to account for depreciation, amortisation and any impairment of the equity accounted entity’s assets.
The Group Statement of Comprehensive Income includes the Group’s share of the equity-accounted entity’s other
comprehensive income.
Financial statements of equity-accounted entities are prepared for the same reporting year as the Group. The Group
assesses investments in equity-accounted entities for impairment whenever events or changes in circumstances
indicate that the carrying value may not be recoverable. If any such indication of impairment exists, the carrying
amount of the investment is compared with its recoverable amount, being the higher of its fair value less costs of
disposal and value in use. If the carrying amount exceeds the recoverable amount, the investment is written down to
its recoverable amount.
The Group ceases to use the equity method of accounting from the date on which it no longer has joint control over
the joint venture or significant influence over the associate, or when the interest becomes classified as an asset held
for sale.
(g) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable
for hydrocarbon products and services provided in the normal course of business, net of discounts, value added tax
(‘VAT’) and other sales-related taxes. Sales of hydrocarbons are recognised when the title has passed. Revenue from
services is recognised in the accounting period in which services are rendered. The main types of services provided by
the Group are drilling and civil works services.
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate
applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the
financial asset to that asset’s net carrying amount on initial recognition.
To the extent that revenue arises from test production during an evaluation programme, an amount is charged from
evaluation costs to cost of sales, so as to reflect a zero net margin.
www.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 53
3. Significant accounting policies continued
(h) Foreign currencies
The vast majority of the Group’s earnings and costs are linked to US dollars or US dollar linked currencies. The
investing activity of the Company is being conducted in US dollars and the majority of the Group’s funds are currently
denominated in US dollars. The Group primary operating environment is outside UK and UK subsidiaries remain
registered in UK only due to listing.
In preparing the financial statements of the individual companies, transactions in currencies other than the functional
currency of each Group company (‘foreign currencies’) are recorded in the functional currency at the rates of
exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities
that are denominated in foreign currencies are retranslated into the functional currency at the rates prevailing on
the balance sheet date. Non-monetary assets and liabilities carried at fair value that are denominated in foreign
currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items
that are measured in terms of historical cost in a foreign currency are not retranslated. Foreign exchange differences
on cash and cash equivalents are recognised in operating profit or loss in the period in which they arise.
Exchange differences are recognised in the profit or loss in the period in which they arise except for exchange
differences on monetary items receivable from or payable to a foreign operation for which settlement is neither
planned nor likely to occur. This forms part of the net investment in a foreign operation, which is recognised in the
foreign currency translation reserve and in profit or loss on disposal of the net investment.
For the purpose of presenting consolidated financial statements, the results and financial position of each entity of
the Group, where the functional currency is not the US dollar, are translated into US dollars as follows:
i. assets and liabilities of the Group’s foreign operations are translated at the closing rate on the balance sheet date;
ii.
income and expenses are translated at the average exchange rates for the period, where it approximates to actual
rates. In other cases, if exchange rates fluctuate significantly during that period, the exchange rates at the date of
the transactions are used; and
iii. all resulting exchange differences arising, if any, are recognised in other comprehensive income and accumulated
equity (attributed to non-controlling interests as appropriate), transferred to the Group’s translation reserve. Such
translation differences are recognised as income or as expenses in the period in which the operation is disposed
of.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of
the foreign entity and translated at the closing rate.
The relevant exchange rates used were as follows:
Closing rate
Average rate
Year ended
31 December 2016
GBP/USD
USD/UAH
Year ended
31 December 2015
GBP/USD
USD/UAH
1.2346
1.3557
27.4770
25.8169
1.4805
1.5289
24.2731
22.0584
(i) Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in
the consolidated income statement because it excludes items of income or expense that are taxable or deductible in
other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is
calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets
and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit.
This is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all
taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable
profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are
not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition
(other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable
profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences arising on
investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control
the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the
foreseeable future.
GROUP OVERVIEWDIRECTORS’ REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONwww.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 54
Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2016
3. Significant accounting policies continued
(i) Taxation continued
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it
is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the
asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged
or credited in other comprehensive income, in which case the deferred tax is also dealt with in other comprehensive
income.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets
against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the
Group intends to settle its current tax assets and liabilities on a net basis.
In case of the uncertainty of the tax treatment, the Group assess, whether it is probable or not, that the tax treatment
will be accepted, and to determine the value, the Group use the most likely amount or the expected value in
determining taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates.
(j) Other property, plant and equipment
Property, plant and equipment (‘PP&E’) are carried at cost less accumulated depreciation and any recognised
impairment loss. Depreciation and amortisation is charged so as to write-off the cost or valuation of assets, other than
land, over their estimated useful lives, using the straight-line method, on the following bases:
Other PP&E
10% to 30%
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales
proceeds and the carrying amount of the asset and is recognised in income.
(k) Impairment of development and production assets and other property, plant and equipment
At each balance sheet date, the Group reviews the carrying amounts of its PP&E to determine whether there is any
indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount
of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not
generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-
generating unit to which the asset belongs. The recoverable amount is the higher of fair value less costs to sell and
value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the
asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount,
the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is
recognised as an expense immediately.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased
to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the
carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-
generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately.
(l) Intangible exploration and evaluation assets
The Group applies the modified full cost method of accounting for intangible exploration and evaluation (‘E&E’)
expenditure, which complies with requirement set out in IFRS 6 Exploration for and Evaluation of Mineral Resources.
Under the modified full cost method of accounting, expenditure made on exploring for and evaluating oil and gas
properties is accumulated and initially capitalised as an intangible asset, by reference to appropriate cost centres
being the appropriate oil or gas property. E&E assets are then assessed for impairment on a geographical cost pool
basis, which are assessed at the level of individual licences.
E&E assets comprise costs of (i) E&E activities which are in progress at the balance sheet date, but where the
existence of commercial reserves has yet to be determined (ii) E&E expenditure which, whilst representing part of
the E&E activities associated with adding to the commercial reserves of an established cost pool, did not result in the
discovery of commercial reserves.
Costs incurred prior to having obtained the legal rights to explore an area are expensed directly to the income
statement as incurred.
Exploration and Evaluation costs
E&E expenditure is initially capitalised as an E&E asset. Payments to acquire the legal right to explore, costs of
technical services and studies, seismic acquisition, exploratory drilling and testing are also capitalised as intangible
E&E assets.
www.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 55
3. Significant accounting policies continued
(l) Intangible exploration and evaluation assets continued
Tangible assets used in E&E activities (such as the Group’s vehicles, drilling rigs, seismic equipment and other
property, plant and equipment) are normally classified as PP&E. However, to the extent that such assets are
consumed in developing an intangible E&E asset, the amount reflecting that consumption is recorded as part of the
cost of the intangible asset. Such intangible costs include directly attributable overheads, including the depreciation
of PP&E items utilised in E&E activities, together with the cost of other materials consumed during the exploration and
evaluation phases.
E&E assets are not amortised prior to the conclusion of appraisal activities.
Treatment of E&E assets at conclusion of appraisal activities
Intangible E&E assets related to each exploration property are carried forward, until the existence (or otherwise)
of commercial reserves has been determined. If commercial reserves have been discovered, the related E&E assets
are assessed for impairment on individual assets basis as set out below and any impairment loss is recognised in the
income statement. Upon approval of a development programme, the carrying value, after any impairment loss, of the
relevant E&E assets is reclassified to the development and production assets within PP&E.
Intangible E&E assets that relate to E&E activities that are determined not to have resulted in the discovery of
commercial reserves remain capitalised as intangible E&E assets at cost less accumulated amortisation, subject to
meeting a pool-wide impairment test in accordance with the accounting policy for impairment of E&E assets set out
below.
Impairment of E&E assets
E&E assets are assessed for impairment when facts and circumstances suggest that the carrying amount may exceed
its recoverable amount. Such indicators include, but are not limited to, those situations outlined in paragraph 20 of
IFRS 6 Exploration for and Evaluation of Mineral Resources and include the point at which a determination is made as
to whether or not commercial reserves exist.
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 recognised in the income statement as additional depreciation and amortisation and are
separately disclosed.
Reclassification from development and production assets back to exploration and evaluation
Where development efforts are unsuccessful in the target geological formation of the licence area but the Company
see a potential for oil and gas discoveries in other geological formations of the same licence area, reclassification
of recoverable amount of assets from development and production assets back to exploration and evaluation is
appropriate following the impairment assessment.
(m) Development and production assets
Development and production assets are accumulated on a field-by-field basis and represent the cost of developing
the commercial Reserves discovered and bringing them into production, together with E&E expenditures incurred in
finding commercial Reserves transferred from intangible E&E assets.
The cost of development and production assets comprises the cost of acquisitions and purchases of such assets,
directly attributable overheads, finance costs capitalised, and the cost of recognising provisions for future restoration
and decommissioning.
Depreciation of producing assets
Depreciation is calculated on the net book values of producing assets on a field-by-field basis using the unit of
production method. The unit of production method refers to the ratio of production in the reporting year as a
proportion of the Proved and Probable Reserves of the relevant field, taking into account future development
expenditures necessary to bring those Reserves into production.
Producing assets are generally grouped with other assets that are dedicated to serving the same Reserves for
depreciation purposes, but are depreciated separately from producing assets that serve other Reserves.
GROUP OVERVIEWDIRECTORS’ REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONwww.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 56
Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2016
3. Significant accounting policies continued
(n) Inventories
Oil and gas stock and spare parts are stated at the lower of cost and net realisable value. Costs comprise direct
materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the
inventories to their present location and condition. Cost is allocated using the weighted average method. Net
realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred
in marketing, selling and distribution.
(o) Financial instruments
Recognition of financial assets and financial liabilities
Financial assets and financial liabilities are recognised on the Group’s balance sheet when the Group becomes a party
to the contractual provisions of the instrument.
Derecognition of financial assets and financial liabilities
The Group derecognises a financial asset only when the contractual rights to cash flows from the asset expire; or it
transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If
the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control
the transferred asset, the Group recognises its retained interest in the asset and an associated liability for the amount
it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial
asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the
proceeds received.
The Group derecognises financial liabilities when the Group’s obligations are discharged, cancelled or expired.
Financial assets
The Group classifies its financial assets in the following categories: loans and receivables; available-for-sale financial
assets; held to maturity investments; and financial assets at fair value through profit or loss (“FVTPL”). The
classification depends on the purpose for which the financial assets were acquired. Management determines the
classification of its financial assets at initial recognition and re-evaluates this designation at every reporting date.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in
an active market. They are included in current assets, except for those with maturities greater than twelve months
after the balance sheet date which will then be classified as non-current assets. Loans and receivables are classified
as “other receivables” and “cash and cash equivalents” in the balance sheet.
Trade and other receivables
Trade and other receivables are measured at initial recognition at fair value, and are subsequently measured at
amortised cost using the effective interest rate method.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, on-demand deposits, and other short-term highly liquid
investments that are readily convertible to a known amount of cash with three months or less remaining to maturity
and are subject to an insignificant risk of changes in value.
Restricted cash balances represent components of cash and cash equivalents that are not available for use by the
Group.
Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each balance sheet date.
Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss when there is objective
evidence that the asset is impaired. The allowance recognised is measured as the difference between the asset’s
carrying amount of the financial asset and the present value of estimated future cash flows discounted at the
effective interest rate computed at initial recognition.
Evidence of impairment could include:
>
>
>
significant financial difficulty of the issuer or counterparty;
default or delinquency in interest or principal payments; or
it becoming probable that the borrower will enter bankruptcy or financial re-organisation.
For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired
individually are, in addition, assessed for impairment on a collective basis.
The carrying amount of the financial assets is reduced by the impairment loss directly for all financial assets with
the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account.
Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the
carrying amount of the allowance account are recognised in profit or loss.
www.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 57
3. Significant accounting policies continued
(o) Financial instruments continued
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively
to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed
through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed
does not exceed what the amortised cost would have been had the impairment not been recognised.
Financial liabilities
Financial liabilities are classified as either financial liabilities ‘at FVTPL’ or ‘other financial liabilities’
Trade payables and short-term borrowings
Trade payables and short-term borrowings are initially measured at fair value, and are subsequently measured at
amortised cost, using the effective interest rate method.
(p) Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event,
it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the
amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to
settle the present obligation at the balance sheet date, taking into account the risks and uncertainties surrounding the
obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying
amount is the present value of those cash flows.
(q) Decommissioning
A provision for decommissioning is recognised in full when the related facilities are installed. The decommissioning
provision is calculated as the net present value of the Group’s share of the expenditure expected to be incurred at the
end of the producing life of each field in the removal and decommissioning of the production, storage and transportation
facilities currently in place. The cost of recognising the decommissioning provision is included as part of the cost of the
relevant asset and is thus charged to the income statement on a unit of production basis in accordance with the Group’s
policy for depletion and depreciation of tangible non-current assets. Period charges for changes in the net present value
of the decommissioning provision arising from discounting are included within finance costs.
4. Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group’s accounting policies, which are described in note 3, the Directors are required to make
judgements, estimates and assumptions about the carrying amounts of the assets and liabilities that are not readily
apparent from other sources. The estimates and associated assumptions are based on historical experience and other
factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the
revision and future periods if the revision affects both the current and future periods.
The following are the critical judgements and estimates that the Directors have made in the process of applying the Group’s
accounting policies and that have the most significant effect on the amounts recognised in the financial statements:
Critical judgements
(a) Acquisition of remaining interest in joint ventures
Note 17 describes the Group’s acquisition of eni Ukraine’s 30% and 60% of the issued share capital of Pokrovskaya
Petroleum B.V. (“Pok”) and Zagoryanskaya Petroleum B.V. (“Zag”), respectively. The Group accounted for this
transaction as an asset acquisition rather than acquisition of the business as operations of Pok and Zag do not meet
definition of a business under IFRS 3.
(b) Investment in LLC Westgasinvest
Note 17 describes that LLC Westgasinvest is a joint venture of the Group although the Group only owns a 15% in LLC
Westgasinvest. The Group has joint control over LLC Westgasinvest by virtue of its contractual right to be a party to
an arrangement where decisions about the relevant activities are made by the unanimous consent of the parties that
control the arrangement collectively.
Estimations of uncertainty
(c) Impairment of E&E assets
The outcome of ongoing exploration, and therefore the recoverability of the carrying value of intangible exploration
and evaluation assets, is inherently uncertain. Management makes the judgments necessary to implement the Group’s
policy with respect to exploration and evaluation assets and considers these assets for impairment at least annually
with reference to indicators in IFRS 6 (Note 14).
(d) Impairment of investments in joint ventures
The Group’s investments in joint ventures are accounted for using the equity method. The carrying value of the
Group’s investments is reviewed at each balance sheet date. As a result impairment has been recognised in the
financial statements of the joint venture and the Group’s share was included in the consolidated financial statements
as share of losses in joint ventures. Further details are provided in Note 17.
GROUP OVERVIEWDIRECTORS’ REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONwww.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 58
Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2016
5. 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 reports provided to
the Group’s chief operating decision maker (“CODM”). The Group has identified its top management team as its CODM
and the internal reports used by the top management team to oversee operations and make decisions on allocating
resources serve as the basis of information presented. These internal reports are prepared on the same basis as these
consolidated financial statements.
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
>
Civil works 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 described in Note
3. Sales between segments are carried out at market prices. The segment result represents operating profit under
IFRS before unallocated corporate expenses. Unallocated corporate expenses include management remuneration,
representative expenses and expenses incurred in respect of the maintenance of 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 of 31 December 2016 and for the year then ended the Group’s segmental information was as follows:
Sales of hydrocarbons
Other revenue
Sales between segments
Total revenue
Cost of sales
Administrative expenses
Finance cost, net (Note 11)2
Segment results
Unallocated administrative expenses
Other losses, net
Impairment of oil and gas assets3
Gain on acquisition of assets
Share of loss in joint ventures4
Net foreign exchange gains
Loss before tax
Exploration and
Production
$’000
598
–
981
Service
$’000
–
2,496(1)
Trading
$’000
Consolidated
$’000
16,598
–
(981)
17,196
2,496
–
1,579
2,496
15,617
19,692
(1,182)
(408)
–
(11)
(1,893)
–
–
603
(15,548)
(886)
(1,153)
(18,623)
(1,294)
(1,153)
(1,970)
(1,378)
(4,309)
(25)
(90)
99
(143)
38
(5,808)
1
Services provided were primarily related to well abandonment and site restoration and the turn-over substantially increased over the
previous year as some of the activities which had been put on hold by the clients were awarded.
2 Finance cost includes $1.4 million of interest on short-term borrowings, $0.2 million of interest income on receivables and $31 thousand of
interest on cash deposits used for trading.
3 Impairment loss recognised in 2016 of $90 thousand related to exploration and production segment.
4 Share of losses in the joint ventures includes $1.7 million of operating losses, $0.8 million of additional impairment of Westgasinvest LLC and
$2.3 million of income received by one of the Group subsidiaries for decommissioning services provided to the joint ventures (Note 17).
www.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 59
5. Segment information continued
As of 31 December 2015 and for the year then ended the Group’s segmental information was as follows:
Sales of hydrocarbons
Other revenue
Sales between segments
Total revenue
Cost of sales
Administrative expenses
Finance cost (Note 11)
Segment results
Unallocated administrative expenses
Other income, net
Impairment1
Share of loss in joint ventures
Net foreign exchange gains
Loss before tax
6. Revenue
Sale of hydrocarbons
Other revenues
Exploration and
Production
$’000
Service
$’000
Trading
$’000
Consolidated
$’000
521
–
1,314
1,835
(1,932)
(548)
–
(645)
–
354
–
354
(250)
–
–
104
74,565
–
(1,314)
75,086
354
–
73,251
75,440
(67,380)
(641)
(2,411)
(69,562)
(1,189)
(2,411)
2,819
2,278
(4,926)
1,235
(10,480)
(12,844)
2,494
(22,243)
2015
$’000
75,086
354
75,440
2016
$’000
17,196
2,496
19,692
Information about major customers
Included in revenues for the year ended 31 December 2016 are revenues of $6.3 million (2015: $35.7 million), which
arose from sales to the Group’s two largest customers.
7. Administrative expenses
Staff costs (Note 10)
Professional fees
Business trip
Office rent
Insurance
Other
2016
$’000
3,082
1,555
316
138
122
390
5,603
Professional fees of 2016 includes $0.5 million (2015: nil) of brokerage fees for services rendered in past years.
8. Impairment of other assets
Inventories
Receivables
VAT recoverable
(Impairment)/Reversal of impairment of other assets, net
2016
$’000
(92)
(59)
69
(82)
2015
$’000
3,121
1,354
591
212
228
609
6,115
2015
$’000
(90)
–
1,390
1,300
The carrying value of inventory as at 31 December 2016 and 2015 has been impaired to reduce it to net realisable
value (see note 18). During 2016, the Group gross sales of inventory to third parties comprised $52 thousand (2015:
$0.1 million).
1
Impairment loss recognised in 2014 of $5.1 million related to exploration and production segment.
GROUP OVERVIEWDIRECTORS’ REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONwww.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 60
Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2016
9. Auditor’s remuneration
The analysis of auditor’s remuneration is as follows:
Audit fees
Fees payable to the Company’s auditor and their associates for the audit of the
Company’s annual accounts
Fees payable to the Company’s auditor and their associates for other services to the Group:
– The audit of the Company’s subsidiaries
Total audit fees
Non-audit fees
– Audit-related assurance services
– Taxation compliance services
Non-audit fees
10. Staff costs
The average monthly number of employees (including Executive Directors) was:
Executive Directors
Other employees
Total number of employees at 31 December
Their aggregate remuneration comprised:
Wages and salaries
Annual bonus
Social security costs
2016
$’000
2015
$’000
146
43
189
19
36
55
180
35
215
66
59
125
2016
Number
2015
Number
3
66
69
69
3
77
80
80
$’000
$’000
2,443
475
164
3,082
2,895
–
226
3,121
Within wages and salaries $1.1 million (2015: $0.9 million) relates to amounts accrued and paid to executive Directors
for services rendered.
Included within wages and salaries is nil (2015: $0.1 million) capitalised to intangible E&E assets and $nil (2015: $0.1)
capitalised to development and production assets.
11. Finance costs, net
Interest expense on short-term borrowings
Interest expense on tax provision (note 24)
Total interest expense on financial liabilities
Interest income on receivables
Interest income on cash deposits in Ukraine
Investment revenue
Total interest income on financial assets
Unwinding of discount on decommissioning provision (note 24)
2016
$’000
(1,414)
(33)
(1,447)
230
31
125
386
(26)
2015
$’000
(2,411)
(201)
(2,612)
–
–
118
118
(13)
(1,087)
(2,507)
www.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 61
12. Tax
Current tax
Adjustment in relation to the current tax of prior years
Deferred tax benefit
2016
$’000
110
–
–
110
2015
$’000
11
1,317
(288)
1,040
The Group’s operations are conducted primarily outside the UK, namely in Ukraine. The most appropriate tax rate
for the Group is therefore considered to be 18% (2015: 18%), the rate of profit tax in Ukraine, which is the primary
source of revenue for the Group. Taxation for other jurisdictions is calculated at the rates prevailing in the respective
jurisdictions.
The taxation charge for the year can be reconciled to the loss per the income statement as follows:
Loss before tax
Tax credit at Ukraine corporation tax rate of 18% (2015: 18%)
Permanent differences
Unrecognised tax losses generated/(utilised) in the year
Tax credit related to the Joint venture losses
Effect of different tax rates
Adjustments recognised in the current year in relation to the
current tax of prior years
Income tax expense recognised in profit or loss
2016
$’000
(5,808)
(1,045)
1,060
378
26
(309)
110
–
110
2016
%
100.0
18.0
(18.2)
(6.5)
(0.4)
5.3
(1.8)
–
–
2015
$’000
(22,243)
(4,004)
1,511
(107)
2,312
11
(277)
1,317
1,040
2015
%
100.0
18.0
(6.8)
0.5
(10.4)
(0.1)
1.3
–
–
Permanent differences mostly represent differences on profit/(loss) items, including provisions, accruals,
impairments, related to taxation in Ukraine, where it is probable that such differences will not reverse in the
foreseeable future.
13. Loss per Ordinary share
Basic loss per Ordinary share is calculated by dividing the net loss for the year attributable to owners of the Company
by the weighted average number of Ordinary shares outstanding during the year. The calculation of the basic loss per
share is based on the following data:
Loss attributable to owners of the Company
2016
$’000
2015
$’000
Loss for the purposes of basic loss per share being net loss attributable to owners of the Company
(5,912)
(23,261)
Number of shares
2016
Number
‘000
2015
Number
‘000
Weighted average number of Ordinary shares for the purposes of basic loss per share
231,092
231,092
Loss per Ordinary share
Basic
2016
Cent
(2.6)
2015
Cent
(10.1)
The Group has no potentially dilutive instruments in issue. Therefore no diluted loss per share is presented above.
GROUP OVERVIEWDIRECTORS’ REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONwww.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 62
Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2016
14. Intangible exploration and evaluation assets
Cost
At 1 January 2015
Additions
Change in estimate of decommissioning assets (note 24)
Disposals
Exchange differences
At 1 January 2016
Additions
Disposals
Exchange differences
At 31 December 2016
Impairment
At 1 January 2015
Impairment charge
Exchange differences
At 1 January 2016
Exchange differences
At 31 December 2016
Carrying amount
At 31 December 2016
At 31 December 2015
$’000
37,181
281
183
(2)
(12,310)
25,333
39
(27)
(2,997)
22,348
18,892
10,105
(6,364)
22,633
(2,639)
19,994
2,354
2,700
The carrying amount of E&E assets as at 31 December 2016 of $2.4 million (2015: $2.7 million) relates to Bitlyanska
licence. Management has considered facts and circumstances that could suggest that the carrying amount of the
Bitlyanska licence can exceed its recoverable amount at 31 December 2016. As of 31 December 2016 management
of the Group carried out the assessment of the Bitlyanska licences value in use and recognised no impairment
as recoverable amount was higher than the book value of the assets. Key assumptions used in the impairment
assessment were as follows:
>
>
Future gas price was assumed to be flat $210, real per m3; and
The pre-tax discount rate used was 24%, real.
www.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 63
15. Property, plant and equipment
Cost
At 1 January 2015
Additions
Change in estimate of decommissioning assets (note 24)
Disposals
Exchange differences
At 1 January 2016
Additions
Disposals
Exchange differences
At 31 December 2016
Accumulated depreciation and impairment
At 1 January 2015
Impairment
Charge for the year
Disposals
Exchange differences
At 1 January 2016
Impairment
Charge for the year
Disposals
Exchange differences
At 31 December 2016
Carrying amount
At 31 December 2016
At 31 December 2015
Development
and production
assets
$’000
8,778
172
79
(1)
(2,934)
6,094
90
–
(711)
5,473
8,436
375
82
(1)
(2,798)
6,094
90
–
–
(711)
5,473
–
–
Other
$’000
5,190
89
–
(43)
(2,063)
3,173
29
(29)
(370)
2,803
1,686
–
352
(16)
(510)
1,512
–
138
(14)
(145)
1,491
1,312
1,661
Total
$’000
13,968
261
79
(44)
(4,997)
9,267
119
(29)
(1,081)
8,276
10,122
375
434
(17)
(3,308)
7,606
90
138
(14)
(856)
6,964
1,312
1,661
Other property, plant and equipment include fixtures and fittings for the development and production activities.
GROUP OVERVIEWDIRECTORS’ REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONwww.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 64
Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2016
16. Subsidiaries
The Company had investments in the following subsidiary undertakings as at 31 December 2016:
Name
Directly held
Cadogan Petroleum Holdings Ltd
Country of
incorporation
and operation
Proportion
of voting
interest % Activity
Registered office
UK
100
Holding company
6th Floor 60 Gracechurch Street, London,
Ramet Holdings Ltd
Cyprus
100
Holding company
Indirectly held
Rentoul Ltd
Isle of Man
100
Holding company
Netherlands
Cadogan Petroleum Holdings BV
Netherlands
Cadogan Bitlyanske BV
Netherlands
Cadogan Delta BV
Netherlands
Cadogan Astro Energy BV
Netherlands
Cadogan Pirkovskoe BV
Cadogan Zagoryanske Production BV Netherlands
Netherlands
Zagoryanska Petroleum BV
Netherlands
Pokrovskoe Petroleum BV
Netherlands
Cadogan Black Sea Holdings B.V.
Cyprus
Cadogan Ukraine Holdings Limited
100
100
100
100
100
100
100
100
100
100
Holding company
Holding company
Holding company
Holding company
Holding company
Holding company
Holding company
Holding company
Dormant
Holding company
Momentum Enterprise (Europe) Ltd
Cyprus
100
Holding company
Radley Investments Ltd
UK
100
Dormant
United Kingdom, EC3V 0HR
48 Inomenon Ethnon, Guricon House,
Floor 2 & 3, 6042, Larnaca, Cyprus
Commerce House, 1 Bowring Road,
Ramsey, Isle of Man IM8 2LQ
Hoogoorddreef 15, 1101 BA Amsterdam
Hoogoorddreef 15, 1101 BA Amsterdam
Hoogoorddreef 15, 1101 BA Amsterdam
Hoogoorddreef 15, 1101 BA Amsterdam
Hoogoorddreef 15, 1101 BA Amsterdam
Hoogoorddreef 15, 1101 BA Amsterdam
Hoogoorddreef 15, 1101 BA Amsterdam
Hoogoorddreef 15, 1101 BA Amsterdam
Hoogoorddreef 15, 1101 BA Amsterdam
48 Inomenon Ethnon, Guricon House,
Floor 2 & 3, 6042, Larnaca, Cyprus
48 Inomenon Ethnon, Guricon House,
Floor 2 & 3, 6042, Larnaca, Cyprus
Lynton House 7-12 Tavistock Square<
London WC1H 9LT
Cadogan Petroleum Trading SAGL
Switzerland
100
Dormant
Via Clemente Maraini 39, 6900 Lugano,
Global Commodities NC SAS
LLC AstroInvest-Ukraine
LLC Zagvydobuvannya
LLC Astro Gas
France
Ukraine
Ukraine
Ukraine
80
100
100
100
Dormant
Exploration
Exploration
Exploration
LLC Astroinvest-Energy
Ukraine
100
Exploration
Ukraine
100
Exploration
Switzerland
23 RUE BALZAC 75008 PARIS
5a, Pogrebnyak Street, ap. 2, Zinkiv,
Poltava region, Ukraine, 38100
3, Myru str., Poltava, Ukraine, 36022
5a, Pogrebnyak Street, ap. 2, Zinkiv,
Poltava region, Ukraine, 38100
5a, Pogrebnyak Street, ap. 2, Zinkiv,
Poltava region, Ukraine, 38100
3, Myru str., Poltava, Ukraine, 36022
LLC Industrial Company
Gazvydobuvannya
DP USENCO Ukraine
LLC USENCO Nadra
JV Delta
LLC WestGasInvest
LLC Astro-Service
OJSC AgroNaftoGasTechService
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
100
95
100
15
100
79.9
Exploration
Exploration
8, Mitskevycha sq., Lviv, Ukraine, 79000
9a, Karpenka-Karoho str., Sambir,
Lviv region, Ukraine
Exploration
Exploration
Service Company
Construction services Ivan Franko str, Hvizdets, Kolomyia
3 Petro Kozlaniuk str, Kolomyia,
14, Uhorska str., Lviv, 79034, Ukraine
3 Petro Kozlaniuk str, Kolomyia,
district, Ivano-Frankivsk Region, Ukraine
LLC Cadogan Ukraine
Ukraine
100
Corporate services
48/50A Zhylyanska Street, BC “Prime”,
8th fl. 01033 Kyiv, Ukraine
During the year ended 31 December 2016, the Group structure continued to be rationalised both so as to reduce the
number of legal entities and also to replace the structure of multiple jurisdictions with one based on a series of sub-
holding companies incorporated in the Netherlands for each licence area.
Till the date of this report the Group put into liquidation three companies: Cadogan Black Sea Holdings B.V., Radley
Investments Ltd, Cadogan Petroleum Trading SAGL. This process will continue in 2017 with the likely liquidation and/
or sale of the following companies: Rentoul Ltd, Global Commodities NC SAS and Cadogan Momentum Holdings Inc.
www.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 65
17. Joint ventures
As at the end of the 2016 reporting periods the details of the Group’s joint venture is as follows:
Company name
Licenses held
Country of
incorporation
and operation
Ownership
share %
Activity
LLC Westgasinvest Reklynetska, Zhuzhelianska, Cheremkhivsko-Strupkivska,
Ukraine
15
Exploration
Baulinska, Filimonivska, Kurinna, Sandugeyivska,
Yakovlivska and Debeslavetska Production licence
On 21 December 2016 the Group acquired 30% of the issued share capital of Pokrovskaya Petroleum B.V. (“Pok”) and
60% of the issued share capital of Zagoryanskaya Petroleum B.V. (“Zag”) for an immaterial consideration, resulting
in Pokrovskaya Petroleum B.V. and Zagoryanskaya Petroleum B.V. becoming wholly-owned companies. As a result of
the transaction, the Group acquired $2.0 million of cash and also $5.9 million of VAT credit and $103 million of unused
tax losses of both companies, for which the impairment has been recognised in prior years. The Group consolidated
entities and recognised a gain in the amount of $99 thousand.
In 2016 till the date of acquisition Zag had $1.2 million of profit and Pok incurred $2.0 million of losses mainly related
to the impairment of E&E assets due to licence expiration in August 2016.
As at 31 December 2016 Westgasinvest LLC is accounted for using the equity method in these consolidated financial
statements. According to the shareholders’ agreements, which regulate the activities of the jointly controlled entities,
all key decisions require unanimous approval from the shareholders, therefore these entities are jointly controlled.
Summarised financial information in respect of each of the Group’s material joint ventures is set out below. The
summarised financial information below represents amounts shown in the joint venture’s financial statements
prepared in accordance with IFRSs.
LLC Westgasinvest
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Revenue
Loss for the period
Other comprehensive income
Total comprehensive loss
Net assets of the joint venture
2016
$’000
1,460
60
–
(391)
–
(3,150)
(1,686)
(4,836)
1,129
2015
$’000
83
562
–
(313)
–
(1,854)
(322)
(2,176)
332
The carrying amounts of the Group’s interest in joint venture recognized in the financial statements of the Group
using the equity method are set out in the tables below:
LLC Westgasinvest
(Deficit)/net assets recognised as at 1 January 2015
Loss for the year
(Deficit)/net assets recognised as at 1 January 2016
Profit/(Loss) for the year
Carrying amount of Group’s interest as at 31 December 2016
$’000
4,211
(330)
3,881
(1,558)
2,323
Share of losses in joint venture of $0.1 million comprised of $0.5 million profit on Zag, $1.4 million of losses on Pok,
$1.5 million of loss on WGI, which included $0.8 million loss recognized as impairment of Westgasinvest LLC and of
$2.3 million profit received by the Group for decommissioning services provided to the joint ventures.
GROUP OVERVIEWDIRECTORS’ REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONwww.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 66
Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2016
18. Inventories
Natural gas
Other inventories
Impairment provision for obsolete inventory
Carrying amount
2016
$’000
987
1,076
(184)
1,879
2015
$’000
2,525
1,186
(208)
3,503
The impairment provision as at 31 December 2016 and 2015 is made so as to reduce the carrying value of the obsolete
inventories to net realisable value. During 2016 an impairment charge of $0.2 million (2015: $0.1 million) has been
recognised in respect of other inventories. As at 31 December 2016 and 2015 the Group had no inventories carried at
fair value less costs of disposal. Cost of inventories sold during the year was $29 thousand (2015: $22 thousand).
19. Trade and other receivables
Trading receivables
VAT recoverable
Trading prepayments
Receivable from joint venture
Prepayments
Other receivables
2016
$’000
2,163
829
777
58
1
318
4,146
2015
$’000
8,514
–
3,206
1,824
64
803
14,411
Trading prepayments represent actual payments made by the Group to suppliers for the January 2017 gas supply.
Trading receivables represent current receivables from customers and are to be repaid within four months after the
year end. The Group considers that the carrying amount of receivables approximates their fair value.
VAT recoverable is presented net of the cumulative provision of $7.3 million (2015: $1.1 million) against Ukrainian VAT
receivable has been recognised as at 31 December 2016. VAT recoverable relates to the gas trading operations and
expected to be recovered through the gas sales.
20. Cash and cash equivalents
Cash and cash equivalents as at 31 December 2016 of $43.3 million (2015: $49.4 million) comprise cash held by the
Group. The Directors consider that the carrying amount of these assets approximates to their fair value.
As of 31 December 2016 total amount of restricted cash is $10.9 million (2015: $20 million). Part of the cash and
cash equivalents in amount of $10 million related to security of borrowings and held at UK bank is considered to be
restricted cash balance (note 22), this has been decreased to $5 million in March 2017. Also as at 31 December 2016
cash and cash equivalents of $0.9 million were held in the Ukrainian subsidiary of the European bank as a financial
covered guarantee in favor of PJSC Ukrtransgas to fulfill the requirement of the Ukrainian legislation on gas trading.
21. Deferred tax
The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon during
the current and prior reporting period:
Liability as at 1 January 2015
Deferred tax benefit
Exchange differences
Liability as at 1 January 2016
Deferred tax benefit
Exchange differences
Liability as at 31 December 2016
Temporary
differences
$’000
288
(287)
(1)
–
–
–
–
www.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 67
21. Deferred tax continued
At 31 December 2016, the Group had the following unused tax losses available for offset against future taxable profits:
UK
Ukraine
2016
$’000
10,652
180,475
191,127
2015
$’000
9,054
78,859
87,913
Deferred tax assets have not been recognised in respect of these tax losses owing to the uncertainty that profits will
be available in future periods against which they can be utilised.
The Group’s unused tax losses of $10.7 million (2015: $9.1 million) relating to losses incurred in the UK are available
to shelter future non-trading profits arising within the Company. These losses are not subject to a time restriction on
expiry.
Unused tax losses incurred by Ukraine subsidiaries amount to $180.5 million (2015: $78.9 million). The increase
is primarily related to acquisition of LLC Astroinvest-Energy and LLC Industrial company Gazvydo-buvannya on
21 December 2016. Under general provisions, these losses may be carried forward indefinitely to be offset against any
type of taxable income arising from the same company of origination. Tax losses may not be surrendered from one
Ukraine subsidiary to another. However, in the past, Ukrainian legislation has been imposed which restricted the carry
forward of tax losses. During 2011 a new tax legislation in Ukraine was implemented which resulted in the restriction to
recognition of accumulated losses at 1 April 2011. Starting at 1 January 2012 only 25% of accumulated losses as at this
date are allowed to be utilised each year for the period from 2012 till 2015 in the calculation of taxable income of the
company. Tax losses accumulated after 1 January 2012 have no restrictions.
22. Short-term borrowings
In October 2014 the Group started to use short-term borrowings as a financing facility for its trading activities.
Borrowings are represented by credit line drawn in short-term tranches in UAH at Ukrainian bank, 100% subsidiary of
UK bank. The credit line is secured by $10 million of cash balance placed at the European bank in the UK, which was
decreased to $5 million in March 2017.
Outstanding amount as at 31 December 2016 was $3.6 million (2015: $12.9 million) with effective interest rate 15% p.a.
(2015: 20% p.a.). Interest is paid monthly and as at 31 December 2016 accrued interest amounted to $0.04 million
(2015: $0.2 million).
23. Trade and other payables
Accruals
VAT payable
Trading payables
Other taxes and social security
Corporate tax payable
Trade creditors
Payables to joint ventures
Other payables
2016
$’000
850
335
176
115
113
40
–
11
2015
$’000
635
899
907
66
11
921
96
147
1,640
3,682
Trade creditors and accruals principally comprise amounts outstanding for ongoing costs. The average credit period
taken for trade purchases is 33 days (2015: 24 days). The Group has financial risk management policies to ensure that
all payables are paid within the credit timeframe.
The Directors consider that the carrying amount of trade and other payables approximates to their fair value. No
interest is generally charged on outstanding balances.
GROUP OVERVIEWDIRECTORS’ REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONwww.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 68
Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2016
24. Provisions
The provisions at 31 December 2016 comprise of $2.0 million of probable tax obligation and decommissioning
provision.
As at 31 December 2016 the Group recognised short-term provision in respect of possible corporate tax obligation
in respect of dispute on classification taxable income and expenses. The Group appealed to the Tribunal, however
given the uncertainty around the final position the provision of $1.3 million (£1.1 million) and up to $33 thousand
(£26 thousand) of interest for 2016 was recognised as at 31 December 2016.
Decommissioning
At 1 January 2015
Change in estimate (note 14 and 15)
Unwinding of discount on decommissioning provision (note 11)
Exchange differences
At 1 January 2016
Unwinding of discount on decommissioning provision (note 11)
Exchange differences
At 31 December 2016
At 1 January 2015
Non-current
Current
At 1 January 2016
Non-current
Current
At 31 December 2016
$’000
702
262
13
(245)
732
26
(80)
678
702
726
6
732
670
8
678
In accordance with the Group’s environmental policy and applicable legal requirements, the Group intends to restore
the sites it is working on after completing exploration or development activities.
A short-term provision of $8 thousand (2015: $6 thousand) has been made for decommissioning costs, which are
expected to be incurred within the next year as a result of the demobilisation of drilling equipment and respective site
restoration.
The long-term provision recognised in respect of decommissioning reflects management’s estimate of the net
present value of the Group’s share of the expenditure expected to be incurred in this respect. This amount has been
recognised as a provision at its net present value, using a discount rate that reflects the market assessment of time
value of money at that date, and the unwinding of the discount on the provision has been charged to the income
statement. These expenditures are expected to be incurred at the end of the producing life of each field in the
removal and decommissioning of the facilities currently in place (currently estimated to be between 1 and 17 years).
25. Share capital
Authorised and issued equity share capital
2016
Number
’000
$’000
2015
Number
’000
Authorised Ordinary shares of £0.03 each
1,000,000
57,713
1,000,000
Issued Ordinary shares of £0.03 each
231,092
13,337
231,092
$’000
57,713
13,337
Authorised 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
At 31 December 2015 and 2016
Ordinary shares
of £0.03
Number
231,091,734
www.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 69
26. Financial instruments
Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern, while
maximising the return to shareholders.
The capital resources of the Group consists of cash and cash equivalents arising from equity attributable to owners of
the Company, comprising issued capital, reserves and retained earnings as disclosed in the Consolidated Statement of
Changes in Equity.
Externally imposed capital requirement
The Group is not subject to externally imposed capital requirements.
Categories of financial instruments
Financial assets – loans and receivables (includes cash and cash equivalents)
Cash and cash equivalents
Trading receivable
Other receivables
Receivable from joint venture
Financial liabilities – measured at amortised cost
Short-term borrowings
Accruals
Trading payables
Trade creditors
Other payables
Payables to joint ventures
2016
$’000
2015
$’000
43,300
2,163
318
58
45,839
3,574
850
176
40
10
–
4,650
49,407
8,514
801
1,824
60,546
12,903
635
907
921
141
96
15,603
Financial risk management objectives
Management co-ordinates access to domestic and international financial markets and monitors and manages
the financial risks relating to the operations of the Group in Ukraine through internal risks reports, which analyse
exposures by degree and magnitude of risks. These risks include commodity price risks, foreign currency risk, credit
risk, liquidity risk and cash flow interest rate risk. The Group does not enter into or trade financial instruments,
including derivative financial instruments, for speculative purposes.
The Audit Committee of the Board reviews and monitors risks faced by the Group through meetings held throughout
the year.
Interest rate risk
Interest rate risk arises from the possibility that changes in interest rates will affect the value of the financial
instruments. The Group is not exposed to interest rate risk because entities of the Group borrow funds at fixed
interest rates.
Commodity price risk
The commodity price risk related to Ukrainian gas and condensate prices and, to a lesser extent, prices for crude
oil are the Group’s most significant market risk exposures. World prices for gas and crude oil are characterised by
significant fluctuations that are determined by the global balance of supply and demand and worldwide political
developments, including actions taken by the Organisation of Petroleum Exporting Countries.
These fluctuations may have a significant effect on the Group’s revenues and operating profits going forward. In
2016 the price for Ukrainian gas was mainly based on the current price of the European gas imports. Management
continues to expect that the Group’s principal market for gas will be the Ukrainian domestic market.
The Group does not hedge market risk resulting from fluctuations in gas, condensate and oil prices, and holds no
financial instruments, which are sensitive to commodity price risk.
GROUP OVERVIEWDIRECTORS’ REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONwww.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 70
Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2016
26. Financial instruments continued
Foreign exchange risk and foreign currency risk management
The Group undertakes certain transactions denominated in foreign currencies. Hence, exposures to exchange rate
fluctuations arise. The Group to date has elected not to hedge its exposure to the risk of changes in foreign currency
exchange rates.
The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the
reporting date are as follows:
Liabilities
Assets
2016
$’000
2015
$’000
2016
$’000
2015
$’000
Monetary balance denominated in USD where
functional currency is GBP
nil
157
nil
48,860
Foreign currency sensitivity analysis
The Group is exposed primarily to movements in currencies against the US dollar as this is the presentation currency
of the Group. In order to fund operations, US dollar funds are converted to UAH just before being contributed to the
Ukrainian subsidiaries. Sensitivity analyses have been performed to indicate how the profit or loss would have been
affected by changes in the exchange rate between the GBP and US dollar. The analysis is based on a weakening of
the US dollar by 10 per cent against GBP, a functional currency in the entities of the Group which have significant
monetary assets and liabilities at the end of each respective period. A movement of 10 per cent reflects a reasonably
possible sensitivity when compared to historical movements over a three to five year timeframe. The sensitivity
analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the
period end for a 10 per cent change in foreign currency rates.
A number below indicates a decrease in profit where US dollar strengthens 10 per cent against the other currencies.
For a 10 per cent weakening of the US dollar against the other currencies, there would be an equal and opposite
impact on the profit or loss, and the balances would be negative.
The Group is not exposed to significant foreign currency risk in other currencies.
The following table details the Group’s sensitivity to a 10 per cent decrease in the US dollar against the GBP.
Income statement
2016
$’000
n/a
2015
$’000
(4,572)
Inflation risk management
Inflation in Ukraine and in the international market for oil and gas may affect the Group’s cost for equipment and
supplies. The Directors will proceed with the Group’s practices of keeping deposits in US dollar accounts until funds
are needed and selling its production in the spot market to enable the Group to manage the risk of inflation.
Credit risk management
Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss
to the Group. The Group’s credit management process includes the assessment, monitoring and reporting of
counterparty exposure on a regular basis. Credit risk with respect to receivables and advances is mitigated by active
and continuous monitoring the credit quality of its counterparties through internal reviews and assessment. Trading
receivables as at 31 December 2016 have been paid within four months after year end.
The Group makes allowances for impairment of receivables where there is an identified event which, based on
previous experience, is evidence of a reduction in the recoverability of cash flows.
The credit risk on liquid funds (cash) is considered to be limited because the counterparties are financial institutions
with high and good credit ratings, assigned by international credit-rating agencies in the UK and Ukraine respectively.
The carrying amount of financial assets recorded in the financial statements represents the Group’s maximum
exposure to credit risk.
www.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 71
26. Financial instruments continued
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate
liquidity risk management framework for the management of the Group’s short-, medium- and long-term funding and
liquidity management requirements. The Group manages liquidity risk by maintaining adequate cash reserves and by
continuously monitoring forecast and actual cash flows.
The following tables sets out details of the expected contractual maturity of financial liabilities.
At 31 December 2016
Short-term borrowings
Trade and other payables
At 31 December 2015
Short-term borrowings
Trade and other payables
Within
3 months
$’000
3 months to
1 year
$’000
More than
1 year
$’000
3,574
1,640
12,903
3,019
–
–
–
657
–
–
–
–
Total
$’000
3,574
1,640
12,903
3,676
27. Commitments and contingencies
The Group has working interests in four licences to conduct its exploration and development activities in Ukraine.
Each licence is held with the obligation to fulfil a minimum set of exploration activities within its term and is
summarised on an annual basis, including the agreed minimum amount forecasted expenditure to fulfil those
obligations. The activities and proposed expenditure levels are agreed with the government licencing authority.
The required future financing of exploration and development work on fields under the licence obligations are as
follows:
Within one year
Between two and five years
2016
$’000
79
1,635
1,714
2015
$’000
234
1,135
1,369
The Group has revised its minimum working programmes and resubmitted the required documentation to the
government authorities; updated commitments have slightly increased for all licences from $1.4 million to $1.7 million.
Tax contingent liabilities
The Group assesses its liabilities and contingencies for all tax years open for audit by UK and Ukraine tax authorities
based upon the latest information available. For those matters where it is probable that an adjustment will be made,
the Group records its best estimate of these tax liabilities, including related interest charges. Inherent uncertainties
exist in estimates of tax contingencies due to complexities of interpretation and changes in tax laws.
Whilst the Group believes it has adequately provided for the outcome of these matters, certain periods are under
audit by the UK and Ukraine tax authorities, and therefore future results may include favourable or unfavourable
adjustments to these estimated tax liabilities in the period the assessments are made, or resolved. The final outcome
of tax examinations may result in a materially different outcome than assumed in the tax liabilities.
GROUP OVERVIEWDIRECTORS’ REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONwww.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 72
Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2016
28. Related party transactions
All transactions between the Company and its subsidiaries, which are related parties, have been eliminated on
consolidation and are not disclosed in this note. The application of IFRS 11 has resulted in the existing joint ventures
LLC Astroinvest-Energy, LLC Gazvydobuvannya and LLC Westgasinvest being accounted for under the equity method
and disclosed as related parties. LLC Astroinvest-Energy and LLC Gazvydobuvannya continued to be related parties
until the acquisition on 21 December 2016 of 100% of these companies by the Group.
During the period, Group companies entered into the following transactions with joint ventures who are considered as
related parties of the Group:
Revenues from services provided and sales of goods
Purchases of goods
Amounts owed by related parties
Amounts owed to related parties
2016
$’000
2,496
–
58
–
2015
$’000
508
9
1,824
96
Directors’ remuneration
The remuneration of the Directors, who are the key management personnel of the Group, is set out below in
aggregate for each of the categories specified in IAS 24 Related Party Disclosures. Further information about the
remuneration of individual Directors is provided in the audited part of the Annual Report on Remuneration 2016 on
pages 32 to 36.
Directors’ remuneration
Purchase of services
2015
$’000
2016
$’000
1,807
1,282
Amounts owing
2016
$’000
479
2015
$’000
169
The total remuneration of the highest paid Director was $1.0 million in the year (2015: $0.4 million).
The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received and
no provisions have been made for doubtful debts in respect of the amounts owed by related parties.
29. Events after the balance sheet date
On 31 January 2017 the Group completed 90% acquisition of Exploenergy s.r.l., Italian oil and gas company, that filed
application for two licences in the prolific area of Po Valley (North of Italy). The sellers will be carried for their 10%
until first gas in each licence and will receive a deferred cash consideration of ¤50,000 for each licence payable upon
award of the licence.
Political and economic situation in Ukraine
We are monitoring the current political situation in Ukraine carefully and there have been no disruptions to the
Company’s operations in either of our operating locations.
We have reassessed the key judgements and critical accounting estimates as at the date of this report and, based on
the current status of operations, no adjustments have been made.
www.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 Company Balance Sheet
As at 31 December 2016
73
ASSETS
Non-current assets
Investments
Receivables from subsidiaries
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Total liabilities
Net assets
EQUITY
Share capital
Retained earnings1
Cumulative translation reserves
Total equity
Note
2016
$’000
2015
$’000
30
33
33
33
34
35
36
–
39,277
39,277
17
28,380
28,397
67,674
(934)
(934)
(934)
–
26,905
26,905
778
44,882
45,660
72,565
(380)
(380)
(380)
66,740
72,185
13,337
162,122
(108,719)
13,337
167,567
(108,719)
66,740
72,185
The financial statements of Cadogan Petroleum plc, registered in England and Wales no. 05718406, were approved by
the Board of Directors and authorised for issue on 27 April 2017.
They were signed on its behalf by:
Guido Michelotti
Chief Executive Officer
27 April 2017
1
Included into retained earnings, loss for the financial year ended 31 December 2016 was $5.4 million (2015: $45.3 million).
The notes on pages 76 to 79 form part of these financial statements.
GROUP OVERVIEWDIRECTORS’ REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONwww.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 74
Company Cash Flow Statement
For the year ended 31 December 2016
Net cash inflow from operating activities
Investing activities
Interest received
Loans to subsidiary companies
Net cash used in investing activities
Net (decrease)/increase in cash and cash equivalents
Effect of foreign exchange rate changes
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Note
37
2016
$’000
(764)
131
(15,790)
(15,659)
(16,423)
(79)
44,882
28,380
2015
$’000
3,655
79
(3,633)
(3,554)
101
(1,853)
46,634
44,882
The notes on pages 76 to 79 form part of these financial statements.
www.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 75
Company Statement of Changes in Equity
For the year ended 31 December 2016
As at 1 January 2015
Net income for the year
Other comprehensive loss
Total comprehensive loss for the year
As at 1 January 2016
Net loss for the year
Total comprehensive loss for the year
Share
capital
$’000
13,337
–
–
–
13,337
–
–
Retained
earnings
$’000
212,902
(45,335)
–
(45,335)
Cumulative
translation
reserves
$’000
(102,892)
–
(5,827)
(5,827)
Total
$’000
123,347
(45,335)
(5,827)
(51,162)
167,567
(108,719)
72,185
(5,445)
(5,445)
–
–
(5,445)
(5,445)
As at 31 December 2016
13,337
162,122
(108,719)
66,740
The notes on pages 76 to 79 form part of these financial statements.
GROUP OVERVIEWDIRECTORS’ REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONwww.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 76
Notes to the Company Financial Statements
For the year ended 31 December 2016
30. Significant accounting policies
The separate financial statements of the Company are presented as required by the Companies Act 2006 (the “Act”).
As permitted by the Act, the separate financial statements have been prepared in accordance with International
Financial Reporting Standards.
The financial statements have been prepared on the historical cost basis. The principal accounting policies adopted
are the same as those set out in note 3 to the Consolidated Financial Statements except as noted below.
As permitted by section 408 of the Act, the Company has elected not to present its profit and loss account for
the year. Cadogan Petroleum plc reports a loss for the financial year ended 31 December 2016 of $5.4 million
(2015: $45.3 million) of which $3.4 million relates to the impairment of receivables from subsidiaries.
Investments
Investments in subsidiaries are stated at cost less, where appropriate, provisions for impairment.
Critical accounting judgements and key sources of estimation uncertainty
The Company’s financial statements, and in particular its investments in and receivables from subsidiaries, are
affected by certain of the critical accounting judgements and key sources of estimation uncertainty described in note
4 to the Consolidated Financial Statements.
31. Auditor’s remuneration
The auditor’s remuneration for audit and other services is disclosed in note 9 to the Consolidated Financial Statements.
32. Investments
The Company’s subsidiaries are disclosed in note 16 to the Consolidated Financial Statements. The investments in
subsidiaries are all stated at cost less any provision for impairment.
33. Financial assets
The Company’s principal financial assets are bank balances and cash and cash equivalents, prepayments and
receivables from related parties none of which are past due. The Directors consider that the carrying amount of
receivables from related parties approximates to their fair value.
Receivables from subsidiaries
At the balance sheet date gross amounts receivable from the fellow Group companies were $332.3 million
(2015: $316.7 million). The Group recognised impairment of $3.4 million in relation to receivables from subsidiaries in
2016 (2015: $46.5 million). The accumulated provision on receivable as at 31 December 2016 was $293.1 million
(2015: $289.8 million). The carrying value of the receivables from the fellow Group companies as at 31 December
2016 was $39.2 million (2015: $26.9 million). There are no past due receivables.
Trade and other receivables
Prepayments
Other receivables
2016
$’000
–
17
17
2015
$’000
752
26
778
Cash and cash equivalents
Cash and cash equivalents comprise cash held by the Company and short-term bank deposits with an original maturity
of three months or less. The carrying value of these assets approximates to their fair value.
As of 31 December 2016 cash and cash equivalents in the amount of $10 million, related to security of the loan
provided to the Ukrainian subsidiary and held at UK bank, was restricted (note 22).
www.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 34. Financial liabilities
Trade and other payables
Accruals
Trade creditors
Other creditors and payables
77
2016
$’000
554
29
351
934
2015
$’000
143
237
–
380
Trade payables principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit
period taken for trade purchases is 48 days (2015: 126 days).
The Directors consider that the carrying amount of trade and other payables approximates to their fair value. No
interest is charged on balances outstanding.
35. Share capital
The Company’s share capital is disclosed in note 25 to the Consolidated Financial Statements.
36. Cumulative translation reserve
The directors decided to change the functional currency of the Company from sterling to US dollars with effect from
1 January 2016.
The effect of a change in functional currency is accounted for prospectively. In other words, the Company translates
all items into the US dollar using the exchange rate at the date of the change. The resulting translated amounts
for non-monetary items are treated as their historical cost. Exchange differences arising from the translation of
an operation previously recognised in other comprehensive income in accordance with paragraphs 32 and 39(c)
IAS 21 Foreign Currency are not reclassified from equity to profit or loss until the disposal of the operation.
37. Notes to the cash flow statement
Loss for the year
Adjustments for:
Interest received
Effect of foreign exchange rate changes
Impairment of receivables from subsidiaries
Operating cash flows before movements in working capital
Decrease in receivables
Increase in payables
Cash (used in)/from operations
Income taxes paid
Net cash (outflow)/inflow from continuing operations
2016
$’000
2015
$’000
(5,445)
(45,335)
(131)
120
3,415
(2,041)
715
562
(764)
–
(764)
(79)
–
46,504
1,090
2,555
10
3,655
–
3,655
GROUP OVERVIEWDIRECTORS’ REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONwww.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 78
Notes to the Company
Financial Statements continued
For the year ended 31 December2016
38. Financial instruments
The Company manages its capital to ensure that it is able to continue as a going concern while maximising the return
to shareholders. Refer to note 26 for the Group’s overall strategy and financial risk management objectives.
The capital resources of the Group consist of cash and cash equivalents arising from equity, comprising issued capital,
reserves and retained earnings.
Categories of financial instruments
Financial assets – loans and receivables (includes cash and cash equivalents)
Cash and cash equivalents
Amounts due from subsidiaries
Financial liabilities – measured at amortised cost
Trade creditors
2016
$’000
2015
$’000
28,380
39,277
67,657
(29)
(380)
44,882
26,905
71,787
(237)
(237)
Interest rate risk
All financial liabilities held by the Company are non-interest bearing. As the Company has no committed borrowings,
the Company is not exposed to any significant risks associated with fluctuations in interest rates.
Credit risk
Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to
the Company. For cash and cash equivalents, the Company only transacts with entities that are rated equivalent to
investment grade and above. Other financial assets consist of amounts receivable from related parties.
The Company’s credit risk on liquid funds is limited because the counterparties are banks with high credit ratings
assigned by international credit-rating agencies.
The carrying amount of financial assets recorded in the Company financial statements, which is net of any impairment
losses, represents the Company’s maximum exposure to credit risk.
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate
liquidity risk management framework for the management of the Company’s short, medium and long-term funding
and liquidity management requirements. The Company maintains adequate reserves, by continuously monitoring
forecast and actual cash flows.
The Company’s financial liabilities are not significant and therefore no maturity analysis has been presented.
Foreign exchange risk and foreign currency risk management
The Company undertakes certain transactions denominated in foreign currencies. Hence, exposures to exchange
rate fluctuations arise. The Company holds a large portion of its foreign currency denominated monetary assets
and monetary liabilities in US dollars. More information on the foreign exchange risk and foreign currency risk
management is disclosed in note 26 to the Consolidated Financial Statements.
www.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 79
39. Related parties
Amounts due from subsidiaries
The Company has entered into a number of unsecured related party transactions with its subsidiary undertakings. The
most significant transactions carried out between the Company and its subsidiary undertakings are mainly for short
and long-term financing. Amounts owed from these entities are detailed below:
Cadogan Petroleum Holdings Limited
2016
$’000
39,277
39,277
2015
$’000
26,905
26,905
Refer to note 33 for details on the Company’s receivables due from subsidiaries.
The remuneration of the Directors, who are the key management personnel of the Group, is set out below in
aggregate for each of the categories specified in IAS 24 Related Party Disclosures. In 2016 there were no other
employees in the Company. Further information about the remuneration of individual Directors is provided in the
audited part of the Annual Report on Remuneration 2016 on pages 32 to 36.
Directors’ remuneration
Remuneration
Amounts owing
2016
$’000
1,071
2015
$’000
603
2016
$’000
454
2015
$’000
28
The total remuneration of the highest paid Director was $1.0 million in the year (2015: $0.4 million), which includes
bonus for 2015 of $0.2 million (2015: $nil) that was approved in June 2016 (page 33).
40. Events after the balance sheet date
Events after the balance sheet date are disclosed in note 29 to the Consolidated Financial Statements.
GROUP OVERVIEWDIRECTORS’ REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONwww.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 80
Glossary
IPO
IFRSs
JAA
UAH
GBP
$
bbl
boe
mmboe
mboe
mboepd
boepd
bcf
mmcm
mcm
Reserves
Proved Reserves
Initial public offering
International Financial Reporting Standards
Joint activity agreement
Ukrainian hryvnia
Great Britain pounds
United States dollars
Barrel
Barrel of oil equivalent
Million barrels of oil equivalent
Thousand barrels of oil equivalent
Thousand barrels of oil equivalent per day
Barrels of oil equivalent per day
Billion cubic feet
Million cubic metres
Thousand cubic metres
Those quantities of petroleum anticipated to be commercially recoverable by application
of development projects to known accumulations from a given date forward under
defined conditions. Reserves include proved, probable and possible reserve categories.
Those additional Reserves which analysis of geoscience and engineering data can be
estimated with reasonable certainty to be commercially recoverable, from a given date
forward, from reservoirs and under defined economic conditions, operating methods and
government regulations.
Probable Reserves
Those additional Reserves which analysis of geoscience and engineering data indicate
are less likely to be recovered than proved Resources but more certain to be recovered
than possible Reserves.
Possible Reserves
Those additional Reserves which analysis of geoscience and engineering data indicate
are less likely to be recoverable than probable Reserves.
Contingent Resources
Those quantities of petroleum estimated, as of a given date, to be potentially
recoverable from known accumulations by application of development projects, but
which are not currently considered to be commercially recoverable due to one or more
contingencies.
Prospective Resources
Those quantities of petroleum which are estimated as of a given date to be potentially
recoverable from undiscovered accumulations.
P1
P2
P3
1P
2P
3P
Proved Reserves
Probable Reserves
Possible Reserves
Proved Reserves
Proved plus probable Reserves
Proved plus probable plus possible Reserves
Carboniferous
A geological period 295 million to 354 million years before present
Devonian
Visean
Spud
A geological period between 417 million and 354 million years before present
Geological period within the early to middle Carboniferous
To commence drilling, once the cement cellar and conductor pipe at the well-head have
been constructed
www.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 81
TD
Workover
Target depth
The process of performing major maintenance or remedial treatment of an existing oil
or gas well
LWD
Logging while drilling
Contingent resources
Prospective resources
Contingent resources are those quantities of petroleum estimated, as of a given date,
to be potentially recoverable from known accumulations, but the applied project(s) are
not yet considered mature enough for commercial development due to one or more
contingencies.
Prospective resources are estimated volumes associated with undiscovered
accumulations. These represent quantities of petroleum which are estimated, as of a
given date, to be potentially recoverable from oil and gas deposits identified on the basis
of indirect evidence but which have not yet been drilled.
E&E
E&P
LTI
Exploration and Evaluation
Exploration and Production
Lost time incidents
Krosno zone
Techtonical element of Ukrainian part of the Carpathian mountains
Krosno 1
Prospective horizon in the Krosno zone
GROUP OVERVIEWDIRECTORS’ REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONwww.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 82
Shareholder Information
Enquiries relating to the following administrative matters should be addressed to the Company’s registrars:
Capita Asset Services, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU.
Telephone number:
UK: 0871 664 0300 (calls cost 10p per minute plus network extras).
International: +44 (0) 371 664 0300
Lines are open 9am – 5.30pm, Monday – Friday, excluding public holidays.
>
Loss of share certificates.
> Notification of change of address.
>
Transfers of shares to another person.
> Amalgamation of accounts: if you receive more than one copy of the Annual Financial Report, you may wish to
amalgamate your accounts on the share register.
You can access your shareholding details and a range of other services at the Capita website www.capitashareportal.com.
Information concerning the day-to-day movement of the share price of the Company can be found on the Group’s
website www.cadoganpetroleum.com or that of the London Stock exchange www.prices.londonstockexchange.com.
Unsolicited mail
As the Company’s share register is, by law, open to public inspection, shareholders may receive unsolicited mail from
organisations that use it as a mailing list. To reduce the amount of unsolicited mail you receive, contact: The Mailing
Preference Service, FREEPOST 22, London W1E 7EZ. Telephone: 0845 703 4599. Website: www.mpsonline.org.uk.
Financial calendar 2017/2018
Annual General Meeting
Half Yearly results announced
Annual results announced
22 June 2017
August 2017
April 2018
Investor relations
Enquiries to: info@cadoganpetroleum.com
Registered office
Shakespeare Martineau LLP
6th Floor, 60 Gracechurch Street, London EC3V 0HR
Company Number
Registered in England and Wales no. 05718406
Ukraine
48/50A Zhylyanska Street
Business center “Prime”, 8th floor
01033 Kyiv
Ukraine
Email: info@cadoganpetroleum.com
Tel:
+38 044 594 58 70
Fax:
+38 044 594 58 71
www.cadoganpetroleum.com
www.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016
83
www.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016Notes 84
Noteswww.cadoganpetroleum.comCadogan Petroleum plc Annual financial report 2016 Investor relations
Enquiries to: info@cadoganpetroleum.com
Registered office
Shakespeare Martineau LLP
6th Floor, 60 Gracechurch Street, London EC3V 0HR
Company number
Registered in England and Wales no. 5718406
Ukraine
48/50A Zhylyanska Street
Business Center “Prime”, 8th floor
01033 Kiev
Ukraine
Email: info@cadoganpetroleum.com
+38 044 594 58 70
Tel:
Fax:
+38 044 594 58 71
www.cadoganpetroleum.com