ANNUAL FINANCIAL REPORT
2023
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 2023
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
Corporate Governance Statement
Board Committee Reports
Annual Report on Remuneration 2023
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
1
2
4
4
5
7
8
9
12
13
15
16
22
26
32
47
48
55
56
57
58
59
60
85
86
87
88
91
92
01
Summary of 2023
Key Financial Highlights of 2023:
> Profit for the year: $1.3 million (2022: loss of $1.6 million)
> Average realised price1: $59.3/boe (2022: $73.4/boe)
> Gross revenues2: $7.6 million (2022: $8.5 million)
> G&A3: $3.6 million (2022: $3.4 million)
> Profit per share: 0.5 cents (2022: loss of 0.6 cents)
> Cash at year end: $14.2 million (2022: $13.9 million)
Key Operational Highlights of 2023:
> Production: 119,057 bbl (2022: 117,793 bbl), a 1% increase
year-on-year
> No LTI/TRI4
> ISO 14001 and 45001 certifications were re-validated by respective
authority for one year
> Extension of Blazhiv-3 and Blazhiv-Monastyrets-3 wells’ lease
contracts for a 5-year period
> Qualification of Exploenergy as gas operator in Italy by the Ministry of
Environment and Energy Transition
> Launch of the gas-to-power investment in Ukraine with the aim of
being an electricity producer in 2025
1 Average realised price is calculated as total revenue from oil sales for the period divided by total volume of sold oil for the period
2 Gross revenues of $7.6 million (2022: $8.5 million) included $0.4 million (2022: $nil million) from trading of natural gas, $7.2 million
(2022: $8.5 million) from exploration and production
3 Administrative expenses (“G&A”)
4 LTI: Lost Time Incidents; TRI: Total Recordable Incidents
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONwww.cadoganenergysolutions.comCadogan Energy Solutions plc Annual financial report 2023 02
Group Overview
In 2023, the Group continued to maintain exploration and production assets, and to operate an oil services business in
Ukraine. Cadogan’s assets are concentrated in the West of the country. The oil services business focuses on workover
operations, civil works services and other services to satisfy Cadogan intra-group operational needs.
Our business model
We aim to increase value through:
> Maintaining a robust balance
sheet, monetising the remaining
value of our Ukrainian assets and
supplementing E&P cash flow with
revenues from gas trading and oil
services
> Developing new activities along
the energy value chain with a
lower impact on environment
> Diversifying Cadogan’s portfolio,
both geographically and
operationally
Ukraine
2023 remained a highly challenging
year for Cadogan due to the ongoing
invasion of Ukraine by Russia and
its consequences on the operational
activities of the Group.
West Ukraine
The Group continued to produce oil
from its production Blazhiv license
located in the west of Ukraine. The
Group could not avoid temporary
shutdowns of its production during
in the Q1 2023 due to the severe
constraints arisen in the country.
Notwithstanding this, production
increased by 1% above the production
of 2022. Net oil production was 119,057
bbl corresponding to an average of
326 bpd.
Cadogan has signed with PJSC
Ukrnafta the extension of the
wells Blazhiv-3 and Blazhiv-
Monastyrets-3 lease contracts for a
five-year period (previous contracts
were for a three-year period) ahead
the expiry period which allowed to
avoid production stoppage and secure
cash flows.
In 2023, the Company continued
focusing on the subsoil study of
Blazhiv field. Cadogan conducted
and completed full hydrodynamic
surveys of Blazhiv-1, Blazhiv-3,
Blazhiv-Monastyrets-3 and Blazhiv-10
wells. The hydrodynamic model
as well as the production forecast
were updated. In the second half
2023, the Company launched a new
assessment of hydrocarbon reserves,
by an independent expert, according
to PRMS standards. The assessment
was completed at the end of
February 2024.
Cadogan is expanding into the
electricity generation business by
using the gas emissions related
to oil production. This will allow to
significantly reduce atmospheric
emissions and ensure additional
cash-flow. The Company launched the
project to capture non-commercial
associated gas during oil production at
the Blazhiv field, which will then be
used to generate electricity for sale
on the grid. This project is anticipated
to result in a substantial decrease in
Cadogan's annual gas emissions, with
the intensity ratio estimated to drop
from 126 to approximately 33 tons of
CO2e/Kboe. The project is scheduled to
be operational in Q1 2025.
The Company completed the
acquisition of the 5% of the share
interest in Usenco Nadra LLC and now
holds 100% of Usenco Nadra LLC.
Subsidiary businesses
Due to high market volatility caused by
military escalation in Ukraine, Cadogan
has kept its trading activity low.
Despite this, the Company managed
to execute few deals, and kept in
storage 0.7 million m3 of gas to secure
resources.
Astroservice LLC, the oil services
subsidiary, continued to support
Blazhiv license well operations.
B EL ARUS
RUSSI A
P O L AND
SLOVAKIA
Blazhiv
Bitlyanske
HUN GARY
Kyiv
U KR AIN E
M
O
L
D
O
V
A
RO MANIA
BLACK SEA
www.cadoganenergysolutions.comCadogan Energy Solutions plc Annual financial report 2023
03
Italy
The Group owns a 90% interest in
Exploenergy s.r.l., an Italian company,
which controls two exploration areas
(Reno Centese and Corzano), located in
the Po Valley region (Northern Italy).
In February 2022, the Plan for
the Sustainable Energy Transition
of Suitable Areas (“PITESAI”)
was approved by the Ministry for
Environment and Energy Transition.
It delivers a new framework for the
possible resumption of exploration
and production activities on land and
at sea. Exploenergy was notified in
2022 that its projects were located
in compatible areas identified by
the PITESAI. In November 2023,
Exploenergy was notified by the
Ministry for Environment and Energy
Transition, that the procedure
for verification of the technical,
organizational and economic capacity
of Exploenergy as a qualified gas
operator resulted in a successful
decision. In February 2024, the
Regional Administrative Court rejected
the PITESAI. Exploenergy is awaiting
the decision of the Ministry for
Environment and Energy Transition to
indicate the way forward. The Italian
national interest in the development of
gas fields remains confirmed.
In February 2019, the Group entered
in a two-year loan agreement with
Proger Management & Partners Srl
(“PMP”) with an option which Cadogan
could exercise, with no obligation, to
get a 33% equity interest in Proger
Ingegneria Srl which in turn held at
31 December 2020 a 75.95% equity
interest in Proger Spa. Proger is an
Italian engineering company providing
services in Italy and in different
international areas.
Cadogan did not exercise the Call
Option. In February 2021, Cadogan
notified PMP that according to the
Loan Agreement, the Maturity Date
occurred on 25 February 2021, and
as the Call Option was not exercised,
PMP must fulfill the payment of EUR
14,857,350, being the reimbursement
of the Loan in terms of principal
and the accumulated interest at this
Maturity Date. PMP is in default since
25 February 2021. End of March 2021,
PMP requested an arbitration to have
the Loan Agreement recognised as
an equity investment contract, which
is rejected by Cadogan as the terms
of the Loan Agreement are clear
and include the right to repayment
at maturity if the Call Option is not
exercised.
The Arbitration proceeding ended in
July 2022.
The Arbitral Committee:
> Rejected Proger’s principal claim,
and declared that the Loan
Agreement is valid and effective,
> Deemed to qualify the Call Option
as a preliminary contract under
condition, but
> Rejected Proger’s claim ex art.
2932 Italian Civil Code, stating
that it is impossible to give an
award producing the same effects
of a final contract ex art. 2932
Italian Civil Code,
Corzano
Reno Centese
I T A L Y
>
>
>
This is because of the duties
established by the rules of the
London Regulatory Authority and
because of the need, possibly
by both parties, to comply with
the due proceedings before the
formalization of the entry of
Cadogan into the capital of Proger
Ingegneria,
Subordinated the stipulation of
the final contract to the precedent
completion of the proceeding
and bureaucratic process as per
the British rules, stating that,
otherwise,
There is the obligation on
Proger Ingegneria to return the
money received under the Loan
Agreement.
Cadogan introduced an appeal,
still pending with a next hearing on
September 2025, on the qualification
of the Call Option as a preliminary
contract. Meanwhile, having taken
note of the content of the Award of
July 2022, Cadogan repeatedly invited
Proger to implement the provisions
of the Award. When the invitation
remained unsuccessful, Cadogan with
a formal notice contested Proger’s
refusal, arguing that it was in direct
contrast with the clear and unequivocal
provision of the Award, which expressly
subordinates the possible transfer of
shareholdings to the prior fulfilment of
the formalities required by English law
and procedures related to Cadogan as
a listed company on the London Stock
Exchange; and also opposing Proger
for having behaved and continuing to
behave in a manner that has made it
definitely impossible to the occurrence
of the condition precedent referred to
in the above-mentioned Award.
According to the provisions of the
aforementioned Award, the right to
reimbursement of the amount covered
by the Loan Agreement has arisen
in favour of Cadogan, plus interest
accrued, and of which Cadogan then
demanded immediate payment.
Last November 2023, Cadogan had
to initiate a second arbitration to
assert its right to restitution and
obtain Proger’s condemnation of the
consequent payment.
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONwww.cadoganenergysolutions.comCadogan Energy Solutions plc Annual financial report 2023 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.
Section 172 Statement
The Company’s section 172 statement
is presented on pages 24 and 25 and
forms part of this strategic report.
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. In November 2022, the
shareholders approved the change
of name and the strategy to expand
its activities along the energy value
chain to new forms of energy with a
reduced impact on the environment.
In December 2023, the Company
stepped in the electricity generation
sector by launching the investment
in the gas-to-power project on the
Blazhiv field in Ukraine.
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.
Key performance indicators
The Group monitors its performance through five key performance indicators
(“KPIs”):
>
>
>
>
>
to increase oil, gas and condensate production measured on the number
of barrels of oil equivalent produced per day (“boepd”);
to decrease administrative expenses;
to increase the Group’s basic earnings per share;
to maintain no lost time incidents; and
to grow geographically and operationally diversify the portfolio.
The Group’s performance in 2023 against these KPIs is set out in the table
below, together with the prior year performance data.
Average production (working interest basis)1
Overhead (G&A)
Basic profit/(loss) per share2
Lost time incidents3
Geographic diversification
Unit
2023
2022
boepd
$ million
cents
incidents
new assets
326
(3.6)
0.5
–
–
323
(3.4)
(0.6)
–
–
2023
vs 2022
+1%
+6%
+183%
–
–
1. Average production is calculated as the average daily production during the year
2.
Basic profit/(loss) per ordinary share is calculated by dividing the net profit/(loss) for the
year attributable to equity holders of the Parent Company by the weighted average number
of ordinary shares during the year
Lost time incidents relate to the number of injuries where an employee/contractor is
injured and has time off work (IOGP classification)
3.
Chairman’s Statement
2023 was another year of
unprecedented challenges for
Ukraine, as the invasion of Ukraine
by Russia continued to cause
damages in the country and
impact the European stability. The
continuous escalation of hostilities
and the geopolitical uncertainties still
presented significant obstacles for our
operations and were threats to the
assets of the Group in Ukraine.
Despite these challenges, Cadogan
remained steadfast in its commitment
to operational excellence, safety,
and sustainability. We continued
implementing rigorous risk
management to safeguard our
operations and ensure the well-being
of our workforce. The safety of our
people is our highest priority. The
Group is taking all possible actions to
preserve the safety of its employees
and meet their needs.
As for existing operations in Ukraine,
Cadogan has demonstrated robust
performance in oil production
maintaining steady output levels
exceeding 2022 results. Moreover, the
Group has launched an investment in
the power generation, showcasing its
resilience and commitment to growth
and diversification despite stormy
weathers adversity in the country.
In 2023, despite the volatility in the
oil and gas markets, Cadogan has
adapted its strategies to manage
these uncertainties. By implementing
agile measures, the Group has
effectively mitigated the impact of
market volatilities, ensuring continuity
of its oil production and sales which
allowed to minimise the temporary
shutdowns of its production activities.
Looking ahead, we recognise that
the geopolitical uncertainties and
security risks will continue to be
high challenges. However, we remain
committed to advance through these
challenges with resilience, integrity,
and determination. This is possible
thanks to the commitment of all with
a competent and strong management.
The Board remains focused on
maximizing value from our assets
and on our strategy based on the
future diversification of our activities
towards sectors providing lower
impacts on environment along the
energy value chain.
Michel Meeùs
Non-Independent Non-Executive
Chairman
7 May 2024
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 05
standards. This assessment was
successfully completed in February
2024, enhancing the Company's
understanding of hydrocarbon
reserves and informing strategic
decision-making.
Cadogan is expanding its operations
into electricity generation activities.
The Company has initiated a
project focused on capturing
non-commercial associated gas
during oil production at the Blazhiv
field and converting it into electricity
for sale on the grid. Expected to be
operational in Q1 2025, this project is
anticipated to significantly decrease
Cadogan's annual gas emissions,
with the intensity ratio projected
to drop from 126 to approximately
33 tons of CO2e/Kboe. This project
holds significant importance for
Ukraine, particularly due to country’s
shortage of balancing electricity
generating facilities caused by the
destruction of infrastructure during
the war. Cadogan's initiative to
convert non-commercial associated
gas into electricity will make its
contribution to mitigate the gap in
generating capacity.
High operational standards of the
Group have been confirmed again
by zero LTI or TRI, with a total over
1,720,000 manhours since the last
incident, and re-validation off ISO
14001 & 45001 certifications by
respective authority for the one year.
Exploenergy srl was notified, in
November 2023, by the Ministry for
Environment and Energy Transition,
that the procedure for verification
of the technical, organisational, and
economic capacity of Exploenergy
as a qualified gas operator resulted
in a successful decision. This is a
significant move for Cadogan. It will
allow a geographical diversification
of its assets and a significant value
creation. In February 2024, the
Regional Administrative Court
rejected the PITESAI. Exploenergy
is awaiting the decision of the
Ministry for Environment and Energy
Transition to indicate the way
forward. The Italian national interest
in the development of gas fields
remains confirmed.
>
Chief Executive’s Review
With the ongoing war resulting
from the Russian invasion of
Ukraine in 2022, the Group was
compelled to adapt to a drastically
altered operating and economic
environment. We swiftly implemented
measures to mitigate risks, ensuring
the safety of personnel and assets
while facing the operational,
economic, and financial challenges
posed. Following these events, in
2023, Cadogan had to operate
in a highly complex environment
characterised by air shelling of oil
and gas and energy infrastructures,
oil and gas prices volatilities, martial
law restrictions on the financial
transactions as well as other
associated risks.
>
>
>
Against this challenging background,
Cadogan’s operational activities
performed as following:
a 1% increase in production, from
117,793 bbl in 2022 to 119,057 bbl
in 2023;
a robust balance sheet, with
$14.2 million of net cash;
a significant diversification in
electricity generation business
by developing a new project in
Ukraine;
the extension of Blazhiv-3 and
Blazhiv-Monastyrets-3 wells’
lease contracts for a five-year
period; and
The ongoing war and the
unpredictable air strikes continue
to impact the sector of oil and
gas in Ukraine, with uncertainties
surrounding production, distribution,
and market dynamics. The bombing
naturally affected the oil and
gas production in the country.
Oil refineries as well as energy
infrastructure suffer constant
air attacks and remain severely
damaged.
Cadogan employees in Ukraine have
been operating in a combined remote
and office work mode, prioritising
both safety and productivity. We
are pleased to report that all our
employees remain safe and uninjured
since the beginning of the invasion in
February 2022.
The imposition of legislative
restrictions on oil and gas exports
due to war time has significantly
impacted the operations of the
industry. This restriction has created
challenges for companies operating
in the country, limiting their ability to
access international markets.
The government pursued the efforts
for the modernization of its oil
and gas regulatory framework, in
particular, by enforcing law #4187
which deregulates the subsoil sector,
introduces a free market of licenses
and simplifies access to the land.
>
another year without LTIs’.
Core operations
Cadogan has continued to safely
produce from its Blazhiv field in the
West of Ukraine. Oil production has
increased by 1% compared to the
previous year despite the temporary
production shutdowns caused by
severe constraints in the country.
This was largely due to our focus on
operational efficiency and effective
planning and timely implementation
of production support measures.
In 2023 Cadogan extended lease
contracts with PJSC Ukrnafta
for the Blazhiv-3 and Blazhiv-
Monastyrets-3 wells, prolonging the
agreement from 3 to 5 years ahead
of the expiry period. This important
move ensured uninterrupted
production and allowed securing
cash flows. By proactively extending
these contracts, the company
demonstrates its commitment to
stability and long-term sustainability
in operations.
In 2023, the company maintained
its focus on studying the subsoil of
the Blazhiv field. Full hydrodynamic
surveys of Blazhiv-1, Blazhiv-3,
Blazhiv-Monastyrets-3, and
Blazhiv-10 wells were conducted
and completed, leading to updates
of the hydrodynamic model and
production indicators. Additionally, in
the latter half of 2023, the company
initiated a new reserves assessment
conducted by an independent
expert, in accordance with PRMS
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONCadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 06
Strategic Report continued
>
>
>
Non E&P operations
Due to the high market volatility
resulting from military escalation in
Ukraine, Cadogan has maintained
its trading activity at a low level.
The Company has cautiously
executed few deals in the market
while strategically positioning
itself for future trading seasons. In
preparation for the upcoming 2024
trading season, Cadogan purchased
0.7 million m3 of gas at the end of
2023, The oil services activities were
used primarily to serve the Group’s
wells’ operations.
Proger
In February 2019, Cadogan used
part of its cash (€13.385 million)
to enter into a two-year Loan
Agreement with Proger Managers
& Partners, together with a Call
Option Agreement which could
be exercised by Cadogan, with no
obligation, between September 2019
and February 2021, and subject to
shareholders’ approval, into a 33%
equity interest in Proger Ingegneria
which in turn held, a 75.95% equity
interest in Proger as at 31 December
2020, and a 96.48% equity interest
in Proger as of 31 December 2021.
As at 25 February 2021, being the
Maturity Date, the Call Option
was not exercised by Cadogan
and accordingly to its previous
notification Cadogan demanded
repayment of the Loan together with
the accumulated interest which in
total amounted €14,857,350. After
five business days, PMP was in
default and asked for an additional
term that ended on 19 March 2021.
The terms of the Loan Agreement
provide for an additional default
interest of 2%. End of March 2021,
PMP contested the default situation
and the obligation to reimburse and
asked for an Arbitration according
to the said Loan Agreement to get
the Loan Agreement recognised
as an equity investment contract.
Cadogan consider PMP’s arguments
as groundless and consider that
they are intended to delay PMP
reimbursement obligations. The
Arbitration proceeding ended in
July 2022.
The Arbitral Committee:
> Rejected Proger’s principal claim,
and declared that the Loan
Agreement is valid and effective,
> Deemed to qualify the Call Option
as a preliminary contract under
condition, but
> Rejected Proger’s claim ex art.
2932 Italian Civil Code, stating
that it is impossible to give an
award producing the same effects
of a final contract ex art. 2932
Italian Civil Code,
According to the provisions of the
aforementioned Award, the right
to reimbursement of the amount
covered by the Loan Agreement
has arisen in favour of Cadogan,
plus interest accrued, and of which
Cadogan then demanded immediate
payment.
Last November 2023, Cadogan had
to initiate a second arbitration, with
a first audience fixed for the 3 May
2024, to assert its right to restitution
and obtain Proger’s condemnation of
the consequent payment.
This because of the duties
established by the rules of the
London Regulatory Authority and
because of the need, possibly
by both parties, to comply with
the due proceedings before
the formalization of the entry
of Cadogan into the capital of
Proger Ingegneria,
Outlook
Despite the continuous difficulties
and tremendous challenges imposed
by the war in Ukraine, the Group
has demonstrated its ability to
have profitable activities, develop
sustainable new activities and
diversify in more environmentally
friendly activities.
Regarding the Loan provided to
Proger in February 2019, Cadogan
will continue to engage all necessary
legal actions to protect its interests
and recover the cumulated amount
due by Proger.
The Group is expecting another
challenging year and is seeking to
mitigate these constraints through
several options and solutions. The
diversification along the energy value
chain will be pursued and accelerated
in 2024 with new sustainable
initiatives.
This strategy is totally aligned with
the Climate Change requirements for
sustainability of Cadogan’s activities.
Fady Khallouf
Chief Executive Officer
7 May 2024
Subordinated the stipulation
of the final contract to the
precedent completion of the
proceeding and bureaucratic
process as per the British rules,
stating that, otherwise,
There is the obligation on
Proger Ingegneria to return the
money received under the Loan
Agreement.
Cadogan introduced an appeal,
still pending with a next hearing on
September 2025, on the qualification
of the Call Option as a preliminary
contract.
Meanwhile, having taken note of
the content of the Award of July
2022, Cadogan repeatedly invited
Proger to implement the provisions
of the Award. When the invitation
remained unsuccessful, Cadogan
with a formal notice contested
Proger’s refusal. This refusal was in
direct contrast with the clear and
unequivocal provision of the Award,
which expressly subordinates the
possible transfer of shareholdings
to the prior fulfilment of the
formalities required by English law
and procedures related to Cadogan
as a listed company on the London
Stock Exchange. Furthermore, Proger
behaved and continue to behave in
a manner that has made it definitely
impossible to the occurrence of the
condition precedent referred to in
the above-mentioned Award.
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com
07
Operations Review
Overview
At 31 December 2023, the Group held working interests in one
conventional gas, condensate and oil exploration and production
license in the west of Ukraine.
Summary of the Group’s licenses (as at 31 December 2023)
Working interest (%)
License
100
Blazhiv
Expiry
November 2039
License type1
Production
West Ukraine
E&P activity remained focused
on maintaining its license and
safely and efficiently producing
from the existing wells as well
as implementing non-invasive
production enhancement scenarios
within the Blazhiv oil field.
Blazhivska license
In 2023, the daily average net oil
production reached 326 barrels
per day, indicating a 1% increase
compared to 2022's production
of 323 barrels per day. Due to the
ongoing war and its impacts on
the energy infrastructures and
market the company could not avoid
temporary production shutdowns.
In 2023, the Company maintained
its focus on the subsoil study of the
Blazhiv field, building upon the laid
in 2022 with the processing and
reinterpretation of old 2D seismic
data. In 2023, Cadogan completed
comprehensive hydrodynamic
surveys of Blazhiv-1, Blazhiv-3,
Blazhiv-Monastyrets-3, and
Blazhiv-10, leading to updates of the
hydrodynamic model and production
indicators. Furthermore, the
Company initiated a new assessment
of hydrocarbon reserves conducted
by an independent expert, as per to
PRMS standards. This assessment
was calculated as at 31 December
2023.
Cadogan has signed agreements
with PJSC Ukrnafta to extend
the lease for wells Blazhiv-3 and
Blazhiv-Monastyrets-3, extending the
duration from three to five years.
These extensions were secured
before the contracts expired,
ensuring uninterrupted production
and steady cash flows for the
company. Additionally, the extended
lease period, five years instead of
three previously, will facilitate more
secure planning and assessment for
potential interventions on the wells.
Gas trading
Due to the significant market
volatility resulting from the ongoing
in Ukraine, Cadogan has maintained
its trading activity at a low level.
Despite this cautious approach,
Cadogan executed few deals and
secured 0.7 million m3, as resource
reserve for future trading activities.
Service
The Group continued to provide
services through its wholly owned
subsidiary Astroservice LLC. The
provided services were primarily
focused on serving intra-group
operational needs in wells’ re-entry/
repairs and stimulation operations,
well surveys and field on-site
activities. In the context of the
prevailing situation in Ukraine, the
services segment was dedicated
totally to supporting the Group’s
production activities.
Other events
The Company completed the
acquisition of the 5% of the share
interest in Usenco Nadra LLC and
now holds 100% of Usenco Nadra
LLC. Such consolidation has allowed
to re-engineer the corporate
structure in Ukraine and become
more efficient.
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONCadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 08
Strategic Report continued
Cash flow statement
The Consolidated Cash Flow
Statement on page 58 shows
operating cash outflow before
movements in working capital
of $0.6 million (2022: inflow of
$0.2 million), which represents
mostly cash generated by the E&P
net of corporate expenses.
Related party transactions
Related party transactions are set
out in note 30 to the Consolidated
Financial Statements.
Treasury
The Group continually monitors
its exposure to currency risk.
It maintains a portfolio of cash
mainly in US dollars (“USD”) and
Euro held primarily in the UK.
Production revenues from the sale
of hydrocarbons are received in
Hryvna, the local currency in Ukraine.
Since the martial law established in
February 2022 in Ukraine, the cash
generated in Ukraine must be kept in
Hryvna in Ukraine.
Financial Review
Overview
In 2023, the Group had few trading
operations and its oil production
increased by 1%. The Group’s
operating divisions delivered a
positive contribution of $2.2 million
(2022: positive contribution of
$2.9 million excluding the impairment
of oil and gas assets).
The average realised oil price
decreased by 19% from $73.4 to
$59.3 per barrel.
The cash position increased to
$14.2 million as at 31 December
2023 compared to $13.9 million as at
31 December 2022.
The trading business company
bought and sold gas throughout the
year, resulting in a negative $61,000
outcome for the year. However, at
the end of the year, the company
had a gas surplus worth $213,000 in
monetary equivalent.
Income statement
The Revenues from production
decreased from $8.5 million in 2022
to $7.6 million in 2023. This result
is integrating mainly a decrease in
oil average realised prices by 19%,
and E&P costs of sales almost at the
same level: $5.39 million in 2023
and $5.55 million in 2022. These
costs include production royalties
and taxes, fees paid for the rented
wells, depreciations, depletion of
producing wells, direct staff costs
and other costs for exploration and
development. Overall, in 2023, E&P
made a positive contribution of
$2.2 million (2022: $2.9 million) to
gross profit.
The gas trading business contributed
with a slightly gross margin of
$3,000 in 2023 (2022: $nil).
Administrative expenses (“G&A”)
remained contained with an increase
of 6% compared to year 2022,
note 8.
Balance sheet
The Property Plant & Equipment
(PP&E) balance was $5.8 million
at 31 December 2023 (2022:
$6.6 million). It primarily represents
the carrying value of the assets
invested and engaged in Blazhiv
license. The E&E and PP&E are
held by Ukrainian subsidiaries
with functional currency Ukrainian
Hryvna. The Ukrainian Hryvna was
devaluated by 3% as at 31 December
2023 compared to 31 December 2022,
generating a movement in the E&E
and PP&E value presented in the
US Dollar.
Trade and other receivables of
$0.3 million (2022: $0.3 million)
include $0.2 million of recoverable
VAT (2022: $0.1 million), which is
expected to be recovered through
production activities, and $0.1 million
(2022: $0.2 million) of other
receivables.
Inventories slightly increased from
$0.3 million to $0.4million principally
due to the increase of gas in the
stock.
The Proger loan was held at
amortised cost at $17.1 million (2022:
$15.8 million). Refer to the Chief
Executive’s Report for further details
together with note 4(d) and 28.
The $1.4 million of trade and other
payables as at 31 December 2023
(2022: $1.4 million) consist of
$0.8 million (2022: $0.6 million) of
accrued expenses and $0.6 million
(2022: $0.8 million) of other payables.
Provisions include $0.2 million (2022:
$0.4 million) of long-term and current
provisions for decommissioning costs
which represents the present value of
these costs that are expected to be
incurred in 2039 for producing assets,
when the existing Blazhiv license
will expire, and current provision for
the decommissioning costs of the
Bitlyanska license.
Net cash slightly increased to
$14.2 million at 31 December
2023 compared to $13.9 million at
31 December 2022.
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 09
Risks and Uncertainties
There are several 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 if above
$5 million, medium impact if above
$1 million but below $5 million, and
low impact if 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 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:
War risks
Risk
Since Spring 2021, Russia has gradually increased
the concentration of military equipment, weapons
and troops near the Ukrainian borders. On
24 February 2022, the Russian troops attacked
Ukraine and invaded its territory. Severe fights
have been engaged in Kyiv, and several other
main cities like Kharkiv, Mariupol, Kherson, Sumy
and Chernihiv.
Missile attacks and bombing are used by the
Russian troops to destroy infrastructures
and facilities even in the western cities, like
Lviv. Cyber-attacks have increased. Given
the unpredictability of the issue of this war, a
full-scale invasion of Ukraine or a much longer
duration of this war could have material impacts
on the Group’s operations and on its human,
industrial and financial resources. In 2023,
the situation remained highly challenging and
complicated with the possibility for further
escalation.
Mitigation
Anticipating the beginning of the war, the Group put in place,
since the beginning of February 2022, emergency procedures
communicated to all employees on the different sites in Ukraine
with an Emergency Committee communicating every day.
Safety measures have been dispatched with a remote working
organization. Specific measures have been put in place for
the operations on site. In case of need, specific measures
were put in place to suspend the operations of the Blazhiv
field wells, with technical measures for decommissioning and
temporary conservation of the wells. The transmission and
internet connection systems have been secured with a satellite
connection. IT security has been reinforced. The Group is
monitoring the situation daily and taking appropriate action to
ensure the safety and the essential needs of its employees. In
2023, Cadogan employees in Ukraine continued operating in the
combined (remote/office) work mode with the key focus on the
safety measures.
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.
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 Ukrainian legislative
standards and for the CO2 emissions the British standards
and achieves international standards to the maximum extent
possible.
Management systems and processes have been certified as ISO
14001 and ISO 45001 compliant.
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONCadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 10
Strategic Report continued
Climate change
After the Paris Agreement (COP 21) the
international community is committed to reduce
greenhouse gas emissions to slow down the
climate change and contain its effects. Countries
may impose moratorium on E&P activities or
enact tight limits to emissions level, which may
curtail production. Shareholders may also request
that the Company adopt stringent targets in
terms of emissions reduction.
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 could fail due to non-adequate
maintenance, control or poor performance of the
Group’s suppliers.
A moratorium on domestic production is deemed highly unlikely
in Ukraine given the country’s need for affordable energy. Such
risks exist in Italy, but the Group’s exposure there is limited.
Management strives to reduce emissions in everything the
Group does and has started implementing alternatives to offset
and/or mitigate emissions. In 2023, the Group has reviewed its
administrative and operational process to identify the areas
of further improvement in the limitation of its environmental
impact. The Group has launched its gas-to-power project on
its Blazhiv oil field in Ukraine. The aim of this project is to
capture the gas emissions during oil production and use them
to generate electricity to be sold on the grid. This project will
allow to decrease significantly Cadogan’s annual emissions with
the intensity ratio emission to drop from 126 to 32 tons of CO2
e/Kboe. The project will be operational in Q1 2025.
For the future, Cadogan will continue to diversify its activities by
investing in new activities with a lower impact on environment.
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. Only certified personnel are hired to
operate on the rig floor. Contractor’s access to the operational
sites is allowed only after control of staff qualification and
check-up of appropriate technical condition of the equipment
and machinery.
All plants are operated and maintained at standards above the
Ukrainian 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 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.
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 11
The area available for drilling operations is limited
due to logistics, infrastructures and moratorium.
This increases the risk for setting optimum
well coordinates.
The Group may not be successful in proving
commercial production from its licenses and
consequently the carrying values of the Group’s
oil and gas assets may have to be impaired.
Bottom hole locations are always checked for their operational
feasibility, well trajectory, rig type, and verified on updated
sub-surface models. They are rejected if deemed to be too risky.
The Group performs, on an annual basis, a review of its oil
and gas assets, impairs if necessary, and considers whether to
commission a review from a third party or a Competent Person’s
Report (“CPR”) from an independent qualified contractor
depending on the circumstances.
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 martial law in Ukraine forbids the transfer of
cash outside of Ukraine. The cash held in Ukraine
must be held in the local currency (Hryvna).
The decrease of the value of the Hryvna is a
major risk on the cash held by the Group in
Ukraine. Since the martial law in Ukraine, there is
an obligation to keep the cash held by Cadogan
in Ukraine in Hryvna with period restrictions for
transfers out of the Country.
In February 2019, Cadogan entered into
a two-year Loan Agreement (Euros 13.385 million)
with Proger Management & Partners with a Call
Option that could be exercised by Cadogan,
between September 2019 and February 2021,
with no obligation, allowing a 33% equity interest
in Proger Ingegneria. This represented a key
transaction and element of the Group balance
sheet. At 25 February 2021, being the Maturity
Date, Cadogan did not exercise its Call Option and
PMP must reimburse €14,857,350. End of March
2021, PMP did not reimburse and asked for an
arbitration to get the Loan Agreement recognised
as an equity investment contract.
The Group is at risk that counterparties will
default on their 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.
Mitigation
Revenues in Ukraine are received in hryvnia and expenditure is
made in Hryvnia.
The Group continues to hold most of its cash reserves in the
UK mostly in USD and Euro. Cash reserves are placed with
leading financial institutions, which are approved by the Audit
Committee. Before the war in Ukraine, foreign exchange risk was
considered a normal and acceptable business exposure, and the
Group did not hedge against this risk for its E&P operations. The
Group is currently analysing different options.
The terms of the agreement are clear and include the right to
repayment at maturity if the Call Option is not exercised. As
security for the reimbursement of the loan, Cadogan benefits
from a pledge over the shares held by Proger Managers &
Partners in Proger Ingegneria. In addition to that, Cadogan is
engaging all the necessary actions in the Arbitration process
and more generally the adequate legal actions to protect
the interests of the Company and all of its stakeholders. The
investigation is closed. On 28 July 2022, the Arbitration
Committee delivered an award rejecting Proger’s request,
established that the Loan Agreement was valid and effective,
and indicated the conditions precedent for the completion of any
transaction with Proger Ingegneria. In case of non-completion,
Proger must reimburse Cadogan according to the Loan
Agreement.
Refer to note 28 to the Consolidated Financial Statements for
detail on financial risks.
Procedures are in place to scrutinise new counterparties via
a Know Your Customer (“KYC”) process, which covers their
solvency. In addition, when trading gas, the Group seeks 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 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,
which is supported by analysis of the specific transactions,
market trends and models of the gas prices and foreign
exchange rate trends.
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONCadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 12
Strategic Report continued
Country risks
Risk
Mitigation
Legislative changes may bring unexpected
risk and create delays in securing licenses or
ultimately prevent licenses and license renewals/
conversions from being secured.
Compliance procedures, monitoring and appropriate dialogue
with the relevant authorities are maintained to minimise
the risk. In all cases, deployment of capital in Ukraine is
limited and investments are kept at the level required to fulfil
license obligations.
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.
Local communities and stakeholders may
cause delays to the project execution and
postpone activities.
Mitigation
The Group periodically reviews the compensation and contract
terms of its staff in order to remain a competitive employer in
the markets where it operates.
The Group applies rigorous screening criteria in order to
evaluate potential investment opportunities. It also seeks
input from independent and qualified experts when deemed
necessary. Additionally, the required rate of return is adjusted to
the perceived level of risk.
The Group maintains a transparent and open dialogue with
authorities and stakeholders (i) to identify their needs and
propose solutions which address them as well as (ii) to illustrate
the activities which it intends to conduct and the measures
to mitigate their impact. Local needs and protection of the
environment are always taken into consideration when designing
mitigation measures, which may go beyond the legislative
minimum requirement.
The Group devotes the highest level of attention and engage
qualified consultants to prepare the Environmental Impact
Assessment studies and to attend public hearings, both
introduced in Ukraine in 2019.
Statement of Reserves and Resources
In 2023, the company conducted routine rig-less production support activities at the Blazhiv-1, Blazhiv-3 and Blazhiv-
Monastyrets-3 and Blazhiv-10 wells to maintain sustainable production using sucker rod pumping systems.
Summary of Reserves1 at 31 December 2023
Proved, Probable and Possible Reserves at 1 January 2023
Production
Revisions
Proved, Probable and Possible Reserves at 31 December 2023
Mmboe
3.94
0.12
0.77
3.051
In addition to the tabled reserves, Cadogan has 0.64 million boe of 2C contingent resources associated with the
Blazhiv license.
1 The new study was completed end of February 2024 by Brend-Vik LTD LLC. The last independent valuation of the Company’s oil and gas reserves
was carried out by Brend-Vik LTD LLC in 2016.
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 13
culture is embedded in the
organization with a focus on the
local community involvement. The
HSE management system ensures
that both Ukrainian and international
standards are met, with the Ukrainian
HSE legislation requirements taken
as an absolute minimum. All the
Group’s local operating companies
actively participate in the process.
ISO 14001 and ISO 45001 certification
were re-validated by the respective
authority in August 2023 for a new
term.
A proactive approach based on
a detailed induction process and
near miss reporting has been in
place throughout 2023 to prevent
incidents. Staff training on HSE
matters and discussions on near
miss reporting are recognised as the
key factors to continuously improve.
In-house training is provided to help
staff meet international standards
and follow best practice. The
process enacted by the certification,
enhances attention to training
on risk assessments, emergency
response, incident prevention,
reporting and investigation, as well
as emergency drills regularly run-on
operations’ sites and offices. This
process is essential to ensure that
international best practices and
standards are maintained to comply
with, or exceed, those required by
Ukrainian legislation, and to promote
continuous improvement.
The Board monitors the main
Key Performance Indicators (lost
time incidents, mileage driven,
training received, CO2 emissions) as
business parameters. The Board has
benchmarked safety performance
against the HSE performance index
measured and published annually
by the International Association
of Oil and Gas Producers. In 2023,
the Group recorded over 149,000
man-hours worked with no incidents
and over 1,720,000 hours have
been worked since the last injury in
February 2016.
During 2023 the Group continued
to monitor its greenhouse gas
emissions and collect statistical
data relating to the consumption
of electricity, industrial water and
fuel consumption by cars, plants,
and other work sites, recording a
continuous improvement in the
efficient use of resources.
Corporate Responsibility
Under Section 414C of the
Companies Act 2006 (the “Act”),
the Board is required to disclose
information about environmental
matters, employees, human rights
and community issues, including
information about any policies it has
in relation to these matters and the
effectiveness of these policies.
Being sustainable in our activities
means conducting our business with
respect for the environment and for
the communities hosting us, with
the aim of increasing the benefit
and value to our stakeholders. We
recognise that this is a key element
to be competitive and to maintain
our license to operate.
The Board recognises that the
protection of the health and safety of
its employees, the communities, and
the environment in which it operates
is not just an obligation but is part
of the personal ethics and beliefs of
management and staff. These are
the key drivers for a sustainable
development of the Company’s
activity. Cadogan Petroleum, its
management and employees are
committed to continuously improve
Health, Safety and Environment
(HSE) performance; follow our Code
of Ethics and apply, in conducting
our operations, internationally
recognised best practices and
standards.
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 a Working with
Integrity policy and policies on
business conduct and ethics, anti-
bribery, the acceptance of gifts and
hospitality and whistleblowing. Such
policies are subject to regular review.
In August 2018, Cadogan Ukraine
LLC obtained ISO 14001 and ISO
45001 certifications for the following
scope: “Supervision, coordination,
management support, control in
the field of oil and gas onshore
exploration and production.” This
provides formal recognition of the
process embedded in the Company
and demonstrates the commitment
and efforts delivered by our
employees and management. It is
considered a baseline to continue
with the efforts to improve the way
we conduct the business.
The Board believes that health and
safety procedures, and training
across the Group should be in line
with best practice in the oil and gas
sector. Accordingly, it has set up a
committee to review and agree on
the health and safety initiatives for
the Company and to report back to
the Board on the progress of these
initiatives. Management regularly
reports to the Board on HSE and key
safety and environmental issues,
which are discussed at the Executive
Management level. The report of
the Health, Safety and Environment
Committee can be found on pages 28
and 29.
The General Director of Cadogan
Ukraine is the acting Chairman of the
HSE Committee and is supported in
his role by Cadogan Ukraine’s HSE
Manager. In accordance with the ISO
14001 and ISO 45001, his role is to
ensure that the Group continuously
develops suitable procedures,
that operational management and
their teams incorporate them into
daily operations and that the HSE
management has the necessary
level of autonomy and authority to
discharge their duties effectively and
efficiently.
Health, safety and environment
2023 remained extremely challenging
due to the Russian invasion of
Ukraine and the resulting subsequent
war. Cadogan applied measures to
mitigate the risk personnel injuries
and loss of well control. Kiev office
personnel have been working in
the combined office-remote work
regime with precise execution of
air alert safety requirements, on-
field staff as well as all offices have
been equipped with satellite means
of communication, established
internal emergency committee that
coordinated the work and liaising
with company management of the
daily basis. One employee has been
demobilised from army during 2023,
two remained serving.
Also, the HSE management daily
monitors health status of the
personnel in terms of covid-19.
The Group has implemented an
integrated HSE management
system in accordance with the
ISO requirements. The system
aims to ensure that a safe and
environmentally friendly/protection
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONCadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 14
Strategic Report continued
Employees
Wellness and professional
development are part of the
Company’s sustainable development
policy and wherever possible, local
staff are recruited. The Group’s
activity in Ukraine is entirely
managed by local staff. Qualified
local contractors are engaged to
supplement the required expertise
when and to the extent it is
necessary.
Procedures are in place to ensure
that recruitment is undertaken on an
open, transparent, and fair basis with
no discrimination against applicants.
Each operating company has its
own Human Resources function to
ensure that the Group’s employment
policies are properly implemented
and followed. The Group’s Human
Resources policy covers key areas
such as equal opportunities, wages,
overtime and non-discrimination.
As required by Ukrainian legislation,
Collective Agreements are in place
with the Group’s Ukrainian subsidiary
companies, which outline agreed
level of staff benefits and other
safeguards for employees.
All staff are aware of the Group’s
grievance procedures. All employees
have access to health insurance
provided by the Group to ensure
that all employees have access to
adequate 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.
Diversity
The Board recognises the benefits
and importance of diversity
(gender, ethnic, age, sex, disability,
educational and professional
backgrounds, etc.) and strives to
apply diversity values across the
business. We endeavour to employ
a skilled workforce that reflects the
demographic of the jurisdictions in
which we operate. The Board will
review the existing policies and
intends to develop a diversity policy.
The Board of Directors acknowledges
the significance of diversity in
decision-making and the overall
success of the company. As such, the
company actively collects data on
the various dimensions of diversity
mentioned, including but not
limited to gender, ethnicity, age, and
professional backgrounds. This data
is gathered through internal surveys,
recruitment processes, and employee
feedback mechanisms to ensure a
diverse and inclusive workplace.
Board diversity
The Board consisted of four male and
one female director of three different
nationalities and resident in four
different jurisdictions.
The Board recognises that gender
is only one aspect of diversity, and
there are many other attributes
and experiences that can improve
the Board’s ability to act effectively.
Our policy is to search for the
highest quality people with the
most appropriate experience for the
requirements of the business, be
they men or women.
Gender diversity
The Board of Directors of the
Company comprised of five Directors
as of 31 December 2022. The
appointment of any new Director is
made based on merit. See page 15 for
more information on the composition
of the Board.
As at 31 December 2023, the
Company comprised a total of 74
persons, as follows:
Non-Executive Directors
Executive Directors
Management, other than
Executive Directors
Other employees
Total
Male Female
3
1
6
43
53
1
–
3
17
21
Human rights
Cadogan’s commitment to the
fundamental principles of human
rights is embedded in our HSE
policies and throughout our business
processes. We promote the core
principles of human rights pronounced
in the UN Universal Declaration
of Human Rights and 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 it operates and
from which some of the employees
are recruited. In our operational sites,
management work 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 minimizing inconvenience for the
local population and allowing improved
road communications in the local
communities, especially during winter
season or harsh weather 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 companies in the
Ukraine see themselves as part of the
community and are involved and offer
practical help and support. All these
activities are run in accordance with
our “Working with Integrity” policy
and procedures. The recruitment
of local staff generates additional
income for areas that otherwise are
predominantly dependent on the
agricultural sector.
The enactment in 2018 of a new
legislation which introduces
Environmental Impact Assessment
studies and public hearings as part of
the license’s award/renewal processes
was anticipated effectively by the
Group. The Group is complying with
these requirements, building on
the recognised competence of its
people and advisors as well as on the
good communication and relations
established with local communities.
Cadogan is committed to the territory
and the communities where it operates
and has fully financed social programs
commitment for 2023 as per signed
Memorandum between the Company,
Lviv Regional Administration and local
communities in 2019.
Approval
The Strategic Report was approved by
the Board of Directors on 7 May 2024
and signed by order of the Board by:
Ben Harber
Company Secretary
7 May 2024
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 15
Board of Directors
Current Directors
Fady Khallouf, 63, French
Chief Executive Officer
Fady Khallouf was appointed as
Director and CEO on 15 November
2019. He has a 35-year experience
in the energy, the environment, the
engineering, and the infrastructure
sectors. He has previously held
the position of CEO and CFO of
FUTUREN (Renewable Energy,
listed on Euronext Paris) where he
achieved the restructuring and the
turnaround of the group. Prior to
that, he was the CEO of Tecnimont
group (Petrochemicals and Oil and
gas), the Vice-President Strategy
and Development of EDISON group
(Electricity and Gas, E&P), the Head
of M&A of EDF group (Energy).
Fady Khallouf had beforehand held
various management positions at
ENGIE (Energy), Suez (Environmental
Services), and DUMEZ (Construction
and Infrastructures).
Lilia Jolibois, 59, American
Independent Non-Executive Director
Lilia Jolibois was appointed as
Director on 15 November 2019. She
is currently a member of three
Boards: Cadogan Energy Solutions
Plc, INSEAD Foundation, and Tremau
SA. She is also a Venture and CEO
Advisor at Loyal Venture Capital,
a global VC fund. Her career spans
Merrill Lynch Investment Banking,
Sara Lee, and Lafarge in the USA
and Europe. At Lafarge Group,
Ms. Jolibois served in numerous
positions in finance, strategy,
business development, CEO and
Chair of the Board for Lafarge
Cement and Gypsum in Ukraine,
and SVP and Chief Marketing-Sales-
Supply Chain Officer for Lafarge
Aggregates, Asphalt & Paving.
Lilia is currently Chairman of the
Company’s Audit Committee and a
member of the Remuneration and
Nomination Committees.
Michel Meeùs, 71, Belgian
Non-Independent
Non-Executive Chairman
Non-Independent Non-Executive
Interim Chairman
Michel Meeùs was appointed
as a Non-Executive Director on
23 June 2014. Mr. Meeùs was
former Chairman of the Board of
Directors of Theolia, an independent
international developer and operator
of wind energy projects. Since 2007,
he has been a director within the
Alcogroup SA Company (which
gathers the ethanol production units
of the Group), as well as within some
of its subsidiaries. Before joining
Alcogroup, Mr Meeùs carved 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.
Mr Meeùs is currently Chairman of
the Remuneration and Nomination
Committees.
Gilbert Lehmann, 78, French
Senior Independent
Non-Executive Director
Gilbert Lehmann was appointed
to the Board on 18 November 2011.
He was 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 was 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 a member
of the Remuneration and Nomination
Committees.
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONCadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 16
Report of the Directors
Directors
The Directors in office during the year and to the date of this report are as shown below:
Non-Executive Directors
Michel Meeùs (Chairman)
Gilbert Lehmann
Lilia Jolibois
Jacques Mahaux (resigned 19 April 2024)
Executive Director
Fady Khallouf
Directors’ re-election
The Board has decided previously that all Directors are subject to annual election by shareholders, in accordance with
industry best practice and as such, all Directors will be seeking re-election at the Annual General Meeting to be held on
21 June 2024.
The biographies of the Directors in office at the date of this report are shown on page 15.
Appointment and replacement of Directors
The Company’s Articles of Association allow the Board to 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 at 31 December 2023 and their connected persons in the Ordinary
shares of the Company at 31 December 2023 are set out below.
Director
Michel Meeùs
Fady Khallouf
Gilbert Lehmann
Lilia Jolibois
Jacques Mahaux
Number of
Shares
10,200,000
10,875,455
–
–
–
Conflicts of Interest
The Company has procedures in place for managing conflicts of interest. Should a director become aware that they,
or any of their connected parties, have an interest in an existing or proposed transaction with the Company, its
subsidiaries or any matters to be discussed at meetings, they are required to formally notify the Board in writing or
at the next Board meeting. In accordance with the Companies Act 2006 and the Company’s Articles of Association,
the Board may authorise any potential or actual conflict of interest that may otherwise involve any of the Directors
breaching his or her duty to avoid conflicts of interest. All potential and actual conflicts approved by the Board are
recorded in register of conflicts, which is reviewed by the Board at each Board meeting.
Directors’ indemnities and insurance
The Company’s Articles of Association provide that, subject to the provisions of the Companies Act 2006, all Directors
of the Company are indemnified by the Company 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. In
addition, the Company continues to maintain Directors’ and Officers’ Liability Insurance for all Directors who served
during the year.
Powers of Directors
The Directors are responsible for the management of the business and may exercise all powers of the Company subject
to UK legislation and the Company’s Articles of Association, which includes powers to issue or buy back the Company’s
shares given by special resolution. The authorities to issue and buy back shares, granted at the 2023 Annual General
Meeting, remains unused.
Dividends
The Directors do not recommend payment of a dividend for the year ended 31 December 2023 (2022: nil).
Principal activity and status
The Company is registered as a public limited company (registration number 05718406) in England and Wales. The
principal activity and business of the Company is oil and gas exploration, development and production.
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 17
Subsequent events
In 2023 Cadogan initiated a new reserves assessment conducted by an independent expert, in accordance with
PRMS standards. This assessment was successfully completed at end of February 2024, enhancing the Company's
understanding of hydrocarbon reserves and informing strategic decision-making.
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 2023 was 244,128,487 Ordinary shares (each with
one vote) with a nominal value of £7,323,854.61. The total number of voting rights in the Company is 244,128,421. 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 attached to shares held in treasury.
Rights and obligations of Ordinary shares
In accordance with applicable laws and the Company’s Articles of Association, holders of Ordinary shares are entitled to:
>
>
>
receive shareholder documentation including the notice of any general meeting;
attend, speak and exercise voting rights at general meetings, either in person or by proxy; and
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. To accurately reflect the views of shareholders, where
applicable it is the Company’s policy at present to take all resolutions at any general meeting on a poll. Following
the meeting, the results of the poll are released to the market via a regulatory news service and published on the
Company’s website.
Substantial shareholdings
As at 31 December 2023 and 19 April 2024, being the last practicable date, the Company had been notified of the
following interests in voting rights attached to the Company’s shares:
Major shareholder
SPQR Capital Holdings SA
Mrs Veronique Salik
CA Indosuez Wealth Management
Kellet Overseas Inc.
Mr Fady Khallouf
Mr Michel Meeùs
Mr Pierre Salik
Cynderella International SA
31 December 2023
19 April 2024
Number of
shares held
% of total
voting rights
Number of
shares held
% of total
voting rights
67,298,498
51,368,000
15,966,620
14,002,696
10,875,000
10,200,000
8,120,000
7,657,886
27.57
21.04
6.54
5.74
4.45
4.18
3.32
3.14
67,298,498
51,368,000
15,433,651
14,002,696
17,454,105
10,200,000
8,120,000
7,657,886
27.57
21.04
6.32
5.74
7.15
4.18
3.32
3.14
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONCadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 18
Report of the Directors continued
Amendment of the Company’s Articles of Association
The Company’s Articles of Association may only be amended by way of 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 6 May 2024 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.
Going concern
The Group’s business activities, together with the factors likely to affect its future development, performance, and
position, are set out on pages 9 to 12.
Having considered the Group’s financial position and its principal risks and uncertainties, including uncertainties
regarding the war in Ukraine. 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 please
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 2023 to 31 December 2023.
Financial risk management objectives and policies
The Company’s financial risk management objectives and policies including its policy for managing its exposure of the
Company to price risk, credit risk, liquidity risk and cash flow risk.
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.
Outlook
Future developments in the business of the Company are presented on page 6.
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, within a period of six months following
the change of control, to a payment of salary and benefits equal to 24 months’ base salary plus benefits plus
bonus (if any).
Streamlined energy and carbon reporting
This section contains information on greenhouse gas (“GHG”) emissions required by the Companies Act 2006
(Strategic Report and Directors' Report).
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”) and DEFRA GHG conversion factors for company reporting were
utilised to calculate the CO2 equivalent of emissions from various sources (2018 update). Also, the used methodology
was also updated based on methods proposed by DNV GL and in of GHG emissions Inventory referring to the following
guidelines and international standards.
The Company has reported on all 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.
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 19
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 1 emissions in 2023 has insignificantly increased compared to the previous year (14,933 tons in 2023 vs 14,631 tons
in 2022). This was caused by the increase of the annual oil production.
Conversely, Scope 2 emissions decreased in 2023 (111 tons in 2023 vs 124 tons in 2022), as a result of the processes
started in 2016 to improve the efficiency of the structure, logistic and facilities. Total emissions in 2023 were 15,044 tons
versus the 14,755 tons of 2022.
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 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) has insignificantly increased to 126,36tons
CO2e/Kboe in 2023 vs 125,26 tons CO2e/Kboe in 2022.
Total greenhouse gas emissions data for the year from 1 January to 31 December
The company conducted a planned repetition of bottomhole oil sampling and analyses during 2023 hydrodynamic
surveys of Blazhiv wells to reconcile the associated gas composition data. The repetitive analyses confirmed an
increase in methane levels in the gas composition causing an increase in the reported emissions level last year. As
previously mentioned in the report, the implementation of the electricity generation project utilising associated gas
will lead to a substantial reduction in the CO2 emissions into the atmosphere starting from 2025.
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, net
Intensity ratio
Emissions reported above normalised to tonnes of CO2e per total wellhead production of crude oil,
condensates and natural gas, in thousands of Barrels of Oil Equivalent, net
Energy consumption
The Company started in 2020 to monitor energy consumption in KwH.
E&P
2023
2022
14,933
14,631
111
124
15,044
14,755
119,057
117,793
126,36
125,26
Ukraine
Energy consumption in the UK is immaterial.
2023
KwH
2022
KwH
% change
2022 – 2021
557,631
575,876
(3%)
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONCadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 20
Report of the Directors continued
Task force on climate-related financial disclosures (‘TCFD’)
Climate change remains one of the Group’s principal risks with governance over climate-related transition and physical
risks provided at the Board and operational levels. The Board has ultimate accountability for ensuring Cadogan
maintains sound climate risk management and internal control systems. The Board is ultimately accountable for
Cadogan’s strategic response to climate change and the energy transition. Directors are responsible for ensuring they
remain sufficiently informed of climate related risks to Cadogan and the broader energy sector. In 2023, the Group has
reviewed its administrative and operational process to identify the areas of further improvement in the limitation of its
environmental impact. The Group has launched its gas-to-power project on its Blazhiv oil field in Ukraine. The aim of
this project is to capture the gas emissions during oil production and use them to generate electricity to be sold on the
grid. This project will allow to decrease significantly Cadogan’s annual emissions with the intensity ratio emission to
drop from 126 to 32 tons of CO2e/Kboe. The project will be operational in Q1 2025.
TCFD-related disclosures
Governance
Describe the Board’s oversight of climate-related risks and opportunities.
pages 9 – 12
Describe Management’s role in assessing and managing climate-related risks
and opportunities.
Strategy
Describe the climate-related risks and opportunities the organisation has
identified over the short, medium and long term.
pages 4 – 6
Describe the impact of climate-related risks and opportunities on the
organisation’s businesses, strategy and financial planning.
Risk management
Describe the organisation’s processes for identifying and assessing climate-
related risks.
pages 9 – 12
Describe the organisation’s processes for managing climate-related risks.
Describe how processes for identifying, assessing and managing climate-
related risks are integrated into the organisation’s overall risk management.
Metrics and targets Disclose the metrics used by the organisation to assess climate-related risks
page 19
and opportunities, in line with its strategy and risk management process.
Disclose Scope 1 and Scope 2 greenhouse gas (GHG) emissions.
pages 19 – 20
Describe the targets used by the organisation to manage climate-related
risks, opportunities, and performances against targets.
As a company, we acknowledge the increasing significance of comprehending the effects of climate change on our
operating environment and its potential implications for our business.
We view this as a chance to expand upon our existing efforts in this area, enhance the quality of our disclosures, and
offer clear transparency, while continuing our TCFD reporting roadmap.
The company is actively considering projects to reduce emissions into the atmosphere. In the short term, the company
plans to implement a project for electricity generation.
2024 Annual General Meeting
The 2024 Annual General Meeting (“AGM”) of the Company provides an opportunity to communicate with shareholders
and the Board welcomes their participation. Board members constantly strive to engage with shareholders on strategy,
governance, and a number of other issues.
The Board looks forward to welcoming shareholders to the AGM. 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.
In addition, shareholder information will be enclosed as usual with the AGM notice to facilitate voting and feedback in
the usual way.
The Chairman of the Board and the members of its committees will be available to answer shareholder questions at the
AGM. All relevant shareholder information including the annual report for 2023 and any other announcements will be
published on our website – www.cadoganenergysolutions.com.
This Report of Directors comprising pages 16 to 20 has been approved by the Board and signed by the order of the Board by:
Ben Harber
Company Secretary
7 May 2024
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 21
Corporate Governance Statement
This Corporate Governance Statement forms part of the Report of Directors
As a Company listed on the standard segment of the London Stock Exchange it is not required to apply a specific
corporate governance code and, given its size, has elected not to do so. However, the Board of the Company is
committed to the highest standards of corporate governance and believe that the 2018 UK Corporate Governance
Code (“the Code”) issued by the Financial Reporting Council (“FRC”) provides a suitable benchmark for the Company’s
corporate governance framework.
This Statement outlines how Cadogan Energy Solutions plc (“Cadogan” or the “Company”) has applied the relevant
principles of the Code and complied with its provisions.
During the year under review, the Company complied with all the provisions of the Code, other than the exceptions
noted below or elsewhere in this statement:
>
>
>
>
>
Provision 5 (Workforce Engagement): Given the size of the business, the Board does not consider it appropriate
to adopt the suggested methods outlined within the UK Corporate Governance Code 2018 to engage with
its employees given the size of the Company. Employee engagement continues to be undertaken by senior
management and any issues are escalated to the Board through the Chief Executive Officer. The Board believes
that the arrangements in place are effective but will continue to keep this under review.
Provision 9 (regarding the independence criteria of the Chair on appointment): Under the 2018 Corporate
Governance Code, the Company’s Chair during the year, Mr Michel Meeùs, was not considered to be independent
given the size of his shareholding in the Company. Despite this, the Board considered Mr Meeùs to be independent
in character, mindset and judgement.
Provision 21 (Board Evaluation): Given the size of the Board it was felt that a board evaluation would not provide
added value however the Board will continue to assess this provision periodically.
Provision 24 (Audit Committee Composition): Given the size and composition of the Board, the Audit Committee
does not totally consist of independent Non-Executive Directors. Ms Lilia Jolibois, Independent Non-Executive
director, chaired the Audit Committee whilst Mr Jacques Mahaux, non-independent Non-Executive director, was a
member of the Audit Committee during the year.
Provision 32 (Remuneration Committee Composition): Given the size and composition of the Board, the
Remuneration Committee does not totally consist of independent Non-Executive Directors. The Remuneration
Committee consisted of Mr Michel Meeùs, Ms. Lilia Jolibois, Mr Jacques Mahaux and Mr Gilbert Lehmann during
the year.
Board leadership and Company purpose
The Board provides leadership and oversight, and its role is to ensure the long-term success of the Company by
implementing the Company’s strategy and business plan, overseeing its affairs, and providing constructive challenge
to management as they do this. In addition to this, the Board oversees financial matters, governance, internal controls,
and risk management.
The purpose of the Board is to:
> monitor Group activities to see that sustainable value is being created;
>
evaluate business strategies and monitor their implementation;
> monitor and review the performance of management;
>
>
provide accountability to shareholders through appropriate reporting and regulatory compliance;
understand and ensure the management of operational business and financial risks to which the Group is exposed;
and
>
ensure that the financial controls and systems of risk management are robust and defensible.
The Board comprises a Non-Independent Non-Executive Chairman, Chief Executive Officer, one Independent
Non-Executive Director and one Non-Executive Director. The Board has appointed Mr Lehmann as the Senior
Independent Director. The Nomination Committee during 2024 will continue to review the size and composition of the
Board and its committees with regard to finding a balance of independent Non-Executive Directors.
The biographical details for each of the Directors and their membership of Committees are incorporated into this
report by reference and appear on page 15.
The formal schedule of matters reserved for the Board’s decision is available on the Company’s website.
The Board recognises the importance of building strong relationships with stakeholders and understanding their views
in order to help the Company deliver its strategy and promote the development of the business over the long-term.
The Board is committed to having effective engagement with its stakeholders. Our section 172 statement can be found
on pages 24 and 25 which summarises the Board’s engagement with the Company’s main stakeholders and some
examples of how their views have been taken into account in the Board’s decision-making.
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONCadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 22
Corporate Governance Statement continued
This Corporate Governance Statement forms part of the Report of Directors
The Company seeks to ensure that it always acts lawfully, ethically and with integrity. The Company has in place the
following policies which the Board reviews periodically:
>
Code of Business Conduct and Ethics
> Anti-Bribery Policy
>
Share Dealing Code
> Disclosure Policy
> Health, Safety and Environmental policies.
The Company has procedures in place for managing conflicts of interest. Should a director become aware that they,
or any of their connected parties, have an interest in an existing or proposed transaction with the Company, its
subsidiaries or any matters to be discussed at meetings, they are required to formally notify the Board in writing or
at the next Board meeting. In accordance with the Companies Act 2006 and the Company’s Articles of Association,
the Board may authorise any potential or actual conflict of interest that may otherwise involve any of the Directors
breaching his or her duty to avoid conflicts of interest. All potential and actual conflicts approved by the Board are
recorded in register of conflicts, which is reviewed by the Board at each Board meeting.
Directors’ declarations of interests is a regular Board agenda item. A register of Directors’ interests (including any
actual or potential conflicts of interest) is maintained and reviewed regularly to ensure all details are kept up to date.
Authorisation is sought prior to a director taking on a new appointment or if any new conflicts or potential conflicts
arise. New Directors are required to declare any conflicts, or potential conflicts, of interest to the Board at the first
Board meeting after his or her appointment. The Board believes that the procedures established to deal with conflicts
of interest are operating effectively.
Division of responsibilities
The Directors possess a wide range of skills, knowledge and experience relevant to the strategy of the Company,
including financial, legal, governance, regulatory and industry experience as well as the ability to provide constructive
challenge to the views and actions of executive management in meeting agreed strategic goals and objectives.
The roles and responsibilities of the Chairman and Chief Executive Officer are separate with a clear and formal division
of each individual’s responsibilities, which has been agreed and documented by the Board.
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. Ms Lilia Jolibois is considered by the Board to be fully independent.
Mr Gilbert Lehmann, Senior Independent Non-Executive Director, has served on the Board for longer than 9 years since
his appointment, however, the board is of the view that he retains his independent judgement and continues to make a
valuable contribution to the Board.
Mr Michel Meeùs, who is a significant shareholder is not considered independent as defined within the UK Corporate
Governance Code 2018, however the Board believes that Mr Michel Meeùs is independent in character and judgement
and free from relationships or circumstances that could affect his judgement.
The Board has access to the advice of the company secretary.
Composition, succession and evaluation
The Company has established a nomination committee which leads the process for Board appointments by identifying
and nominating candidates for the approval of the Board to fill Board vacancies and making recommendations to the
Board on Board’s composition and balance. The Company’s Nomination Committee Report can be found on page 30.
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 in line with
Corporate Governance best practice. Accordingly, all members of the Board will be standing for re-election at the 2023
Annual General Meeting due to be held on 21 June 2024.
All Directors continue to be effective and have sufficient time available to perform their duties. The letters of
appointment for the Non-Executive Directors are available for review at the Registered Office and prior to the
Annual General Meeting. Each of the Non-Executive Directors independently ensures that they update their skills and
knowledge sufficiently to enable them to fulfil their duties appropriately.
The Chairman, in conjunction with the Company Secretary, plans the programme for the Board during the year. While
no formal structured continuing professional development program has been established for the Non-Executive
Directors, every effort is made to ensure that they are fully briefed before Board meetings on the Company’s business.
The agenda for Board and Committee meetings are 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.
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 23
Audit, risk and internal control
The Board has delegated certain responsibilities to its committees including its Audit Committee. The Company’s Audit
Committee Report can be found on pages 26 and 27.
The role of the Audit Committee is to monitor the integrity of the Company’s financial reporting, to review the
Company’s internal control and risk management systems and to oversee the relationship with the Group’s external
auditors. The Audit Committee focuses particularly on compliance with legal requirements, accounting standards and
the rules of the Financial Services Authority. The Audit Committee will meet at least three times a year with further
meetings that are determined by the committee. Any member of the committee or the external auditors may request
any additional meetings they consider necessary.
The Directors are responsible for the Group’s system of internal control and for maintaining and reviewing its
effectiveness. 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. The Board has delegated responsibility for
the monitoring and review of the Group’s internal controls to the Audit Committee.
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 2023 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 throughout the period.
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.
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 Chairman of the HSE
Committee, the HSE Committee Report can be found on pages 28 and 29. 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 an internal audit function in place, however this will be kept under review by the Audit
Committee on an annual basis.
The Board has reviewed internal controls and risk management processes, in place from the start of the year to
the date of approval of this report. During its review the Board did not identify nor were advised of any failings or
weaknesses which it has deemed to be significant.
A summary of the principal risks facing the Company and the mitigating actions in place are contained on pages 9 to 12
of the annual report.
The Company’s going concern is contained on page 18 of the annual report.
Further information on the work undertaken by the Committee during the year can be found on pages 26 and 27 of the
annual report.
Remuneration
The Board has established a Remuneration Committee and the Company’s Remuneration Committee Report can be
found on pages 32 to 46 of the annual report.
The role of the Remuneration Committee is to determine and agree with the Board the broad policy for the
remuneration of executives and Senior Managers as designated, as well as for setting the specific remuneration
packages, including pension rights and any compensation payments of all executive Directors and the Chairman. The
Company’s remuneration policies and practices are designed to support its long-term strategy and promote the long-
term sustainable success of the Company.
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONCadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 24
Corporate Governance Statement continued
This Corporate Governance Statement forms part of the Report of Directors
Attendance at meetings
Six Board meetings took place during 2023. 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:
M Meeùs
F Khallouf
L Jolibois
G Lehmann
J Mahaux
Board
Audit
Committee
Nomination
Committee
Remuneration
Committee
6
6
6
5
6
6
2
N/A
N/A
2
N/A
2
–*
–
N/A
–
–
–
1
1
N/A
1
1
1
* There was no meeting of the Nomination Committee held during 2023.
Responsibilities and membership of Board Committees
The Board has agreed written terms of reference for the Nomination Committee, Remuneration Committee, Audit
Committee and HSE Committee. The terms of reference for the Board Committees are published on the Company’s
website, www.cadoganenergysolutions.com, and are also available from the Company Secretary at the Registered
Office. A review of the Committees including their membership and activities of all Board Committees is provided on
pages 26 to 31.
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 at quarterly meetings and discussed in detail.
Mr Lehmann, as the Senior Independent Director, is available to meet with 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.cadoganenergysolutions.com, as soon as they are announced. The
Notice of the Annual General Meeting is also contained on the Company’s website, www.cadoganenergysolutions.
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.cadoganenergysolutions.com.
Directors’ section 172 statement
The disclosure describes how the Directors have regard to the matters set out in section 172(1)(a) to (f) and forms the
Directors’ statement required under section 414CZA of The Companies Act 2006.
The matters set out in section 172(1) (a) to (f) are that a Director must act in the way they consider, in good faith, would
be most likely to promote the success of the Company for the benefit of its members as a whole, and in doing so have
regard (amongst other matters) to:
(a) the likely consequences of any decision in the long term;
(b) the interests of the Company’s employees;
(c) the need to foster the Company’s business relationships with suppliers, customers and others;
(d) the impact of the Company’s operations on the community and the environment;
(e) the desirability of the Company maintaining a reputation for high standards of business conduct; and
(f) the need to act fairly between members of the Company.
Being sustainable in our activities means conducting our business with respect for the environment and for the
communities hosting us, with the aim of increasing the benefit and value to our stakeholders. We recognise that this is
a key element to be competitive and to maintain our licence to operate.
Further details of how the Directors have regard to the issues, factors and stakeholders considered relevant in
complying with S 172 (1) (a)-(f), the methods used to engage with stakeholders and the effect on the Group’s decision
making can be found throughout the annual report and in particular page 24 (which outlines how the Company
engages with its stakeholders), pages 13 and 14 (which contains Cadogan’s corporate responsibility statement) pages 19
and 20 (which contains the Company’s report on greenhouse gas emissions) and page 24 (which outlines the ways in
which the Company engages with its shareholders).
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 25
The Group has implemented an integrated HSE management system aiming to ensure a safe and environmentally
friendly culture in the organization (pages 13 and 14). However, regarding the environmental sustainability of the
Group’s activities, the Directors are fully aware of the need to direct future development in new activities with a lower
impact on environment (CEO outlook page 6 and 18).
When assessing the Proger Loan, the Directors carefully considered the issues and decisions with their impact on the
Group and all its stakeholders (pages 6, 9 to 12).
The Board has a formal schedule of matters specifically reserved for its decision, including approval of acquisitions and
disposals, major capital projects, financial results, Board appointments, dividend recommendations, material contracts
and Group strategy. 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.
In particular, as a consequence of the invasion of Ukraine by Russia in February 2022, and the war situation prevailing
in Ukraine the Board discussed the current situation and its consequences on the security of the employees, the
organisation of the operations in Ukraine and the potential impacts on its human, financial and operational assets.
The Group has been able to implement immediately emergency procedures with safety and protection measures
communicated to all employees and put in place for every location. Specific measures have been put in place for the
operations on site to ensure the human, the industrial and the environmental safety. The Group is monitoring the
situation daily and taking appropriate action to ensure the safety and essential needs of employees.
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONCadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 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 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.cadoganenergysolutions.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;
and
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.
Governance
Ms Jolibois and Mr Mahaux were both members of the Audit Committee during the period. The Audit Committee is
chaired by Ms Jolibois who had relevant financial experience within a major European company 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:
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 2023 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.
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;
reviewed critical judgments, estimates and underlying assumptions; and
assessed whether the financial statements are fair, balanced and understandable.
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 27
Going concern
After making enquiries and considering the uncertainties described on pages 9 to 12, the Committee has a reasonable
expectation that the Company and the Group has 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 including
the basis for the conclusion, please refer to the detailed discussion of the assumptions outlined in note 3 (b) to the
Consolidated 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 9 to 12 and in note 28 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, considering
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, considering 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.
A breakdown of the non-audit fees is disclosed in note 11 to the Consolidated Financial Statements. The Audit
Committee has reviewed the nature, level and timing 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.
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.
Whistleblowing
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 is reviewed
periodically. The Group’s policies on anti-bribery, the acceptance of gifts and hospitality, and business conduct and
ethics are circulated to staff as part of a combined manual on induction with changes regularly communicated.
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.
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.
Lilia Jolibois
Chairman of the Audit Committee
7 May 2024
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONCadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 28
Board Committee Reports continued
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 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.cadoganenergysolutions.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.
Governance
The Committee is chaired by Mr Andrey Bilyi (Cadogan Ukraine General Director) as acting Head of the HSE Committee
and its other member is Ms Snizhana Buryak (HSE Manager). The CEO attends meetings of the HSE Committee as
necessary. During 2023, the HSE Committee held four meetings to monitor the HSE risks and activities across the
business, following which actions were identified for the continuous improvement of the various processes and the
mitigation of risk.
Responsibilities
>
To regularly maintain and implement the continuous improvement of the HSE Management System with the aim of
improving the Company’s performances;
>
To manage and mitigate the risks of personnel infection with Covid-19 virus. Work-out respective administrative and
healthcare measures to provide safe working conditions for the employees. Prevent the spread of Covid-19 as well
as ensuring staff reasonable vaccination level;
> Assessments of the risks to employees, contractors, customers, partners, and any other people who could be
affected by the Company’s activities with the aim of reducing the global risk of the Company and increasing its
level of acceptability;
>
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; and
> Where it deems it appropriate to do so, appoint an independent auditor to review performance with 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.
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 29
Activities of the Health, Safety and Environment Committee
The HSE Committee in discharging its duties reviewed and considered the following:
>
Company activities execution and control over contractors services execution in line with company policies and
HSE procedures;
> Monthly statistics and reports on the activity were regularly distributed to the CEO, Management and to the
members of the committee;
>
>
Ensured that the implementation of new legislation and requirements were punctually followed-up and promptly
updated;
Compliance with HSE regulatory requirements was ensured through discussion of the results of inspections,
both internal inspections and those carried out by the Authorities. The results of the inspections and drills were
analysed and commented to assess the need for corrective actions and/or training initiatives;
> A standing item was included on the agenda at every meeting to monitor monthly HSE performance, key indicators
and statistics allowing the HSE Committee to assess the Company’s performance by analysing any lost-time
incidents, near misses, HSE training and other indicators;
>
>
Interaction with contractors, Authorities, local communities and other stakeholders were discussed among other
HSE activities;
Compliance to ISO 14001 and ISO 45001 has been proved by the authorised third party auditor. Also, the Company
had its entire data calculation process as well as emissions measurement system re-validated by a different
independent third party; and
>
Ensuring all the Observation and Actions requested by the Certification Body have been implemented.
Overview
The Company’s HSE Management System and the Guidelines and Procedures have been updated to fit with the ISO
requirements and are adequate for the proper execution of the Company’s operations.
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.
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONCadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 30
Board Committee Reports continued
Nomination Committee Report
The Board delegates some of its duties to the Nomination Committee and appoints the members of the Nomination
Committee which are Non-Executive Directors of the Group. The membership of the Committee is reviewed from
time to time and any changes to its composition are referred to the Board for approval. The terms of reference of the
Nomination Committee are published on the Company’s website, www.cadoganenergysolutions.com, and are available
from the Company Secretary at the Registered Office. Two members constitute a quorum.
Governance
Mr. Michel Meeùs (Remuneration and Nomination Committee Chairman), Ms. Lilia Jolibois, and Mr. Gilbert Lehmann
(Non-Executive Directors) are the members of the Nomination Committee. The Company Secretary attends all
meetings of the Nomination Committee.
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 candidates to fill Board vacancies as and when they arise, for the
Board’s approval;
Before appointments are made by the Board, evaluate the balance of skills, knowledge, experience and diversity
(gender, ethnic, age, sex, disability, educational and professional backgrounds, etc.) on the Board and, in the light of
this evaluation, prepare a description of the role and capabilities required for a particular appointment; and
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, ensuring 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; and
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.
Michel Meeùs
Nomination Committee Chairman
7 May 2024
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 31
Remuneration Committee
Statement from the Chairman
I am pleased to present the Annual Report on Remuneration for the year ended 31 December 2023.
Cadogan’s Remuneration Policy was approved as proposed by the shareholders at the Annual General Meeting of
25 June 2021 and is attached at the end of the Annual Report on Remuneration. The Remuneration Committee is not
proposing to make any changes to the existing Policy however in line with industry best practice and the three-year
Policy cycle the Company will be seeking shareholder approval at this year’s AGM.
The key elements of the Remuneration Policy are:
> A better long-term alignment of the executives’ remuneration with the interests of the shareholders;
> A material reduction in the maximum remuneration level for the Executive Directors, both in terms of annual bonus
and of long-term incentive (performance share plan);
>
>
>
The payment of at least 50% of the Annual Bonus in shares with the remaining 50% to be paid in cash or shares at
the discretion of the Remuneration Committee. Shares will be priced for this award based on their market value at
closing on the Business Day prior to the Subscription Date;
The introduction of claw-back and malus provisions on both bonuses and share awards; and
The expectation that the Executive Directors build a substantial shareholding position in the Company through
their mandate.
Michel Meeùs
Chairman of the Remuneration Committee
7 May 2024
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONCadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 32
Annual Report on Remuneration 2023
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.
Governance
The Remuneration Committee is appointed by the Board from the Non-Executive Directors of the Company. The
Remuneration Committee’s terms of reference 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.cadoganenergysolutions.com, and are also available from the Company
Secretary at the Registered Office.
The Remuneration Committee consists of Mr. Michel Meeùs, Ms. Lilia Jolibois 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; and
>
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
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 is reported to
the Board and discussed in detail both there and during meetings of the Remuneration Committee.
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.
Remuneration consultants
The Remuneration Committee did not take any advice from external remuneration consultants.
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 33
Single total figure of remuneration for Executive and Non-Executive Directors (audited)
Executive Director
$
Salary and fees
2023
2022
$
Taxable benefit1
2023
2022
Contributions to
pension schemes
2023
2022
$
Annual bonus
2023
2022
$
Total
2023
2022
$
F Khallouf
493,136 479,720
27,037 29,486 78,258
75,035
Non-Executive Directors
M Meeùs
L Jolibois
J Mahaux
G Lehmann
89,000
89,000
48,000 48,000
43,000
43,000
38,000
38,000
–
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
–
-
-
-
-
– 598,431
584,241
- 89,000
89,000
- 48,000 48,000
43,000
- 43,000
38,000
- 38,000
$
Executive Director
Non-Executive Directors
Notes to the table
Total Fixed Remuneration
Total Variable Remuneration
2023
2022
2023
2022
598,431
218,000
584,241
218,000
–
–
–
–
Mr Fady Khallouf
Mr Khallouf was appointed as Chief Executive Officer on 15 November 2019. Mr Khallouf’s salary is €440,000 per annum.
KPIs
The CEO is subject to a performance-related, bonus scheme built around a scorecard with a set of challenging KPI’s
aligned with the company strategy. Given the current situation in Ukraine and any potential future difficulties for the
Company, Mr Fady Khallouf had requested that any annual performance related bonus to be considered and paid by
the Remuneration Committee during 2024, in respect of the financial year ended 31 December 2023, be waived.
Benefits
Benefits may be provided to the Executive Directors, in the form of private medical insurance and life assurance.
The Chairman and Non-Executive Directors
As mentioned above, fees for Non-Executive Directors were reduced by 20% on 15 January 2020 with effect from
15 November 2019. The fees are as follows: the Chairman’s fee at $89,000 and the fee for acting as a Non-Executive
Director at $38,000 with an additional $10,000 for acting as Chairman of the Audit Committee and an additional
$5,000 for a committee membership.
Scheme interests awarded during the financial year (audited)
There were no scheme interests awarded during the year.
Payments to past Directors (audited)
In 2023 there were no payments to past Directors.
Payments for loss of office (audited)
No notice period was either worked or paid.
1 Taxable benefits include insurance provided to the executive and leased car.
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONCadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 34
Annual Report on Remuneration 2023
continued
Directors’ interests in shares (audited)
The beneficial interests of the Directors in office as at 31 December 2023 and their connected persons in the Ordinary
shares of the Company at 31 December 2023 are set out below:
Shares as at 31 December
Michel Meeùs
Fady Khallouf
Gilbert Lehmann
Lilia Jolibois
Jacques Mahaux
2023
2022
10,200,000
10,875,455
–
–
–
26,000,000
10,425,455
–
–
–
Mr Khallouf bought 450,000 shares in June 2023. In December 2023 Mr Meeùs decided to terminate a financial
agreement with a collateral over 15,800,000 shares.
The Company does not currently operate formal shareholding guidelines. Whilst there is no specified level, the
Company expects that under the new Remuneration Policy, the Executive Director will continue to build up a significant
shareholding position in the Company during his mandate.
The Company’s performance
The graph below highlights the Company’s total shareholder return (“TSR”) performance for the last fourteen
years compared to the FTSE All Share Oil and 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, and has
been retained ever since, primarily for continuity purposes TSR is the return from a share or index based on share
price movements and notional reinvestment of declared dividends.
250
200
150
100
50
0
3 0/0 6/2 018
31/12/2 018
3 0/0 6/2 0 22
3 0/0 6/2 019
31/12/2 019
3 0/0 6/2 0 2 0
31/12/2 0 2 0
3 0/0 6/2 0 21
3 0/0 6/2 014
31/12/2 013
3 0/0 6/2 013
31/12/2 011
31/12/2 0 0 9
31/12/2 012
3 0/0 6/2 012
31/12/2 010
3 0/0 6/2 010
3 0/0 6/2 0 0 9
3 0/0 6/2 015
3 0/0 6/2 011
3 0/0 6/2 017
3 0/0 6/2 016
01/01/2 0 0 9
31/12/2 017
31/12/2 016
31/12/2 015
31/12/2 014
31/12/2 0 22
3 0/0 6/2 0 23
31/12/2 0 21
31/12/2 0 23
Cadogan Petroleum plc
FTSE All Share Oil & Gas
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 35
Historic Remuneration of Chief Executive
Salary
$
422,533
547,067
669,185
511,459
384,941
405,433
432,4091
487,080
497,288
521,664
492,581
517,389
535,999
479,720
493,136
Taxable
benefits
$
–
–
–
–
–
20,734
15,987
15,353
27,273
39,838
45,453
59,294
30,173
29,486
27,037
Annual
bonus
$
284,552
–
–
–
–
–
243,132
210,5042
126,992
201,872
495,1093
–
–
–
–
Long-term
incentives
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Pension
$
–
–
–
31,966
–
–
–
–
–
–
–
58,300
78,619
75,035
78,258
Loss of
office
$
–
–
–
126,808
–
–
–
–
–
–
–
–
–
–
–
Total
$
707,085
547,067
669,185
670,233
384,941
426,167
691,528
712,937
651,553
763,374
1,033,143
634,983
644,791
584,241
598,431
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
1
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.
2 In relation to performance in 2016 and 2015, the CEO used the entire amount of the bonus to buy at market price newly issued company
shares on 22 September 2017.
3 2019 Annual bonus is a sum of Mr Michelotti’s bonus of $112,140 and welcome bonus for Mr Khallouf equivalent in value of 5,500,000 ordinary
shares based on share’s price of £0.0525. Welcome bonus for Mr Khallouf was provided in May 2020 based on share’s price of £0.03.
Respective correction of the bonus reserve equivalent to $185,000 was recognised through share premium account in 2020.
In 2023, the Remuneration Committee, after consultation with the CEO, have decided to postpone any variable
performance related bonus for the year ended 31 December 2023.
The annual bonus received by the CEO as a percentage of the maximum opportunity is presented in the following table:
Year
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
CEO
Mr. Khallouf
Mr Khallouf
Mr Khallouf
Mr Khallouf
Mr Khallouf1
Mr Michelotti
Mr Michelotti
Mr Michelotti
Mr Michelotti
Mr Michelotti
Mr des Pallieres
Mr des Pallieres
Mr des Pallieres
Mr des Pallieres
Mr Barron
Mr Michelotti5
Mr Barron
Mr Barron
Mr Barron6
CEO single
figure of total
remuneration $
Annual bonus
payout against
maximum
opportunity %
598,431
584,241
628,717
634,983
444,465
588,678
763,374
651,553
712,937
502,021
189,507
426,167
384,941
389,935
280,2984
273,201
395,984
547,067
707,085
–
–
–
–
–
10
32
12
222
273
–
–
–
–
–
–
–
–
67
Includes a welcome bonus for Mr Khallouf equivalent in value of 5,500,000 ordinary shares based on share’s price of £0.0525.
1
2 Mr Michelotti undertook to use the entire bonus to buy company’s share at market price in order to leave the Company cash neutral.
3 Year-end performance-based bonus was an alternative to an up-front sign-on bonus. Mr Michelotti use the entire bonus to buy Company’s
share at market price on 22 September 2017.
4 $280,298 paid as fees, pension and loss of office.
5 From 1 August 2011.
6 From 19 March 2009.
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONCadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com
36
Annual Report on Remuneration 2023
continued
Percentage change in the remuneration of the Chief Executive
The following table shows the percentage change in the remuneration of the Chief Executive in 2023 and 2022
compared to that of all employees within the Group:
Base salary
Taxable benefits
Annual Bonus
Total
CEO
All employees7
CEO
All employees
CEO
All employees
CEO
All employees
2023
$’000
493
1,897
105
119
–
–
598
1,924
2022
$’000
480
1,897
104
125
–
–
584
2,022
Average
Change %
3%
(5%)
1%
(5%)
–
–
2%
(5%)
In 2023 none of the Directors participated in long-term incentive schemes.
In 2023 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.
Percentage change in Non-Executive Director remuneration
Base salary/fees
Taxable benefits (including pensions)
Annual bonus
Total
Base salary/fees
Taxable benefits (including pensions)
Annual bonus
Total
Base salary/fees
Taxable benefits (including pensions)
Annual bonus
Total
Base salary/fees
Taxable benefits (including pensions)
Annual bonus
Total
Michel Meeùs
All employees
2023
$’000
89,000
–
–
2022
$’000
89,000
–
–
89,000
89,000
% change
2023 – 2022
% change
2023 – 2022
–
–
–
–
(5%)
(5%)
–
(4.8%)
Lilia Jolibois
All employees
2023
$’000
2022
$’000
% change
2023 – 2022
% change
2023 – 2022
48,000
48,000
–
–
–
–
48,000
48,000
–
–
–
–
(5%)
(5%)
–
(4.8%)
Jacques Mahaux
All employees
2023
$’000
43,000
–
–
2022
$’000
43,000
–
–
43,000
43,000
% change
2023 – 2022
% change
2023 – 2022
–
–
–
–
(5%)
(5%)
–
(4.8%)
Gilbert Lehmann
All employees
2023
$’000
2022
$’000
% change
2023 – 2022
% change
2023 – 2022
38,000
38,000
–
–
–
–
38,000
38,000
–
–
–
–
(5%)
(5%)
–
(4.8%)
7 All employees mean all employees of the Group, including CEO and other Directors (note 12, page 71).
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 37
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 2022 and 31 December 2023..
All-employee remuneration
Distributions to shareholders
2023
$’000
1,924
–
2022
$’000
2,022
–
Year-on-year
change, %
(5%)
–
Shareholder voting at the Annual General Meeting
The Directors’ Remuneration Policy was approved by shareholders at the Annual General Meeting held on 25 June
2021 and remains unchanged. The Remuneration Policy can be found on the Group’s website and at pages 38 to 46 of
this Annual Report on Remuneration. 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
100,135,172
21,693,116
121,828,288
0
82.19
17.81
100.00
The Directors’ Annual Report on Remuneration is approved by shareholders at each Annual General Meeting. A
summary of the votes cast by proxy in 2023 and 2022 were as follows:
Director’s Annual Report on Remuneration
Number of votes % of votes cast Number of votes % of votes cast
2023
2022
For
Against
Total votes cast
Number of votes withheld
105,995,725
26,984
106,022,709
–
99.97
0.03
83,255,878
7,348,465
90,604,343
5,234
91.89
8.11
100.00
Implementation of Remuneration Policy in 2023
The performance related elements of remuneration remain unchanged and will be built around a scorecard with a set
of KPI’s aligned with the Group strategy. The Remuneration Policy can be found on the Group’s website and at pages
38 to 46 of this Annual Report on Remuneration.
Approval
The Directors’ Annual Report on Remuneration was approved by the Board on 7 May 2024 and signed on its behalf by:
Michel Meeùs
Chairman
7 May 2024
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Annual Report on Remuneration 2023
continued
Directors’ Remuneration Policy
Introduction
This Directors’ Remuneration Policy (the “Policy”) contains the information required to be set out as the Directors’
remuneration policy for the purposes of The Large and Medium-sized Companies and Groups (Accounts and Reports)
(Amendment) Regulations 2013.
The Policy was approved by shareholders at the 2021 AGM of the Company. The Remuneration Committee is not
proposing to make any changes to the existing Policy however in line with industry best practice and the three-year
Policy cycle the Company will be seeking shareholder approval at this year’s AGM. The effective date of this Policy is
the date on which the Policy is approved by shareholders.
The Policy applies in respect of all executive officers appointed to the Board of Directors (“executive Directors”) and
Non-Executive Directors. Other senior executives may be subject to the Policy, including in relation to annual bonus
and shares incentive arrangements in particular if and to the extent that the Remuneration Committee determines it is
appropriate.
The Remuneration Committee will keep the Policy under review to ensure that it continues to promote the long-term
success of the Company by giving the Company its best opportunity of delivering on the business strategy. It is the
Remuneration Committee’s intention that the Policy be put to shareholders for approval every three years unless there
is a need for the Policy to be approved at an earlier date.
The Company aims to provide sufficient flexibility in the Policy for unanticipated changes in compensation practices
and business conditions to ensure the Remuneration Committee has appropriate discretion to retain its top executives
who perform. The Remuneration Committee reserves the right to approve any payments that may be outside the
terms of this Policy, where the terms of that payment were agreed before the Policy came into effect, or before the
individual became a director of the Company.
Maximum caps are provided to comply with the required legislation and should not be taken to indicate an intent to
make payments at that level. The maximum caps are valid at the time that the relevant employment agreement or
appointment letter is entered into and the caps may be adjusted to take into account fluctuations in exchange rates.
Remuneration policy table: Executive Directors
Component
Salary and
Fees
Purpose and
link to strategy
Maximum
opportunity
To provide fixed
remuneration at
an appropriate
level, to attract
and retain
Directors as part
of the overall
compensation
package.
The maximum
annual base
combined salary
and fees for
Executive Directors
is €440,0001.
The Remuneration
Committee will
consider the factors
set out under the
"Operation" column
when determining
the appropriate
level of base salary
within the formal
Policy maximum.
Operation and performance measures
Salary is paid on a monthly basis.
The Remuneration Committee takes into account a number of
factors when setting salaries including:
>
>
>
>
scope and difficulty of the role;
skills and experience of the individual;
salary levels for similar roles within the international
industry; and
pay and conditions elsewhere in the Group. Salaries are
reviewed on an annual basis, but are not necessarily
increased at each review.
No performance measures.
1
Please note that the salary of the CEO for 2023 remain at €440,000.
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com Component
Annual Bonus
Purpose and
link to strategy
Maximum
opportunity
The maximum award
is 125% of combined
base salary and
fees.
To incentivise
and reward the
achievement
of individual
and business
objectives which
are key to the
delivery of the
Company's
business
strategy.
39
Operation and performance measures
The payment of any bonus is at the discretion of the Board
with reference to the performance year.
>
>
>
>
>
>
>
>
The Remuneration Committee sets, in advance, a scorecard
with a set of Key Performance Indicators ("KPIs") aligned
with the Company's strategy. The measures and the relative
weightings are substantiated by the Remuneration Committee
and aim to be stretching and to support the Company's
business strategy. Measures are related to Company financial
performance, operational performance and the Company’s
health and safety record. In general, relative weightings of
each KPI are expected not to exceed 50% and not to be less
than 10%.
The Remuneration Committee retains the flexibility to
determine and, if it considers appropriate, change the KPIs
and weightings of the KPIs based on the outcome of its
annual review. The Remuneration Committee may also adjust
KPIs during the year to take account of material events, such
as (without limitation) material corporate events, changes in
responsibilities of an individual and/ or currency exchange
rates. Any such changes will be within the overall target and
maximum payouts approved in the policy.
The KPI targets and specific weightings in the scorecard
are defined annually early in the year, once the budget has
been approved. A summary of the KPI targets, weightings
for the KPIs and how far the KPIs are met will be included
retrospectively each year in the Implementation Report for
the year.
All bonuses that may become payable are subject to
malus and clawback provisions in the event of material
financial misstatement of the Company or fraud or material
misconduct on the part of the executive, as explained further
below.
50% of the bonuses that may become payable must be
applied to subscribe for or acquire shares in the Company
(after the deduction of any income tax and/ or employee
social security contributions payable). The Company is
proposing to adopt and operate a Deferred Bonus Plan as a
framework plan for the delivery of shares to executives, which
may be satisfied by the issue of new shares or transfer of
existing or treasury shares.
The Remuneration Committee will determine whether
the remainder of the bonus shall be paid in cash or must
be applied to subscribe for or acquire shares (after the
deduction of any income tax and/ or employee social security
contributions payable). In making its determination as to how
the remainder of the bonus shall be paid, the Remuneration
Committee may take into account: profitability of the
Company; the executive's shareholding as measured against
any Company shareholding guidelines; potential liabilities of
the recipients to income tax and social security contributions,
among other things. Additional shares representing the value
of dividends payable on the deferred shares may be paid.
The Remuneration Committee may impose holding periods of
up to three years on any of the shares delivered pursuant to
the annual bonus plan.
There are no prescribed minimum levels of performance in
the annual bonus structure and so it is possible that no bonus
award would be made.
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONCadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 40
Annual Report on Remuneration 2023
continued
Component
Share Incentive
Arrangements
Purpose and
link to strategy
Maximum
opportunity
To incentivise,
retain and
reward eligible
employees
and align their
interests with
those of the
shareholders of
the Company.
Awards can be
made under the
PSP with a value of
up to a maximum
of 200% of base
salary and fees or
300% in exceptional
circumstances.
Operation and performance measures
The Company has adopted and operates the 2018
Performance Share Plan ("PSP") to replace the 2008
Performance Share Plan. The PSP offers the opportunity to
earn shares in the Company subject to the achievement of
stretching but realistic performance conditions. Performance
conditions will be a main feature of the PSP.
The PSP will be administered by the Remuneration Committee.
>
>
>
>
>
>
>
>
>
>
Awards can be made under the PSP at the direction of the
Remuneration Committee within the policy maximum in the
form of contingent share awards.
PSP awards will have a minimum vesting period of 3 years
and, for Directors, the PSP awards have a further holding
period of 2 years following the end of the vesting period
(subject to any number of shares that may need to be
sold to meet any income tax and employee social security
contributions due on vesting).
The Remuneration Committee will develop clear KPIs that
aim to align Directors with Company strategy over time
periods in excess of one financial year. Any performance
measures and targets used for share incentive awards during
2019 will be relevant and stretching in line with the overall
strategy of the Company.
The Remuneration Committee may adjust or change the PSP
measures, targets and weightings for new awards under the
PSP to ensure continued alignment with Company strategy.
PSP awards are subject to malus and clawback in the event
of material financial misstatement of the Company or fraud
or material misconduct on the part of the executive.
Upon vesting of an award, the award holder must pay the
nominal value in respect of each share that vests.
PSP Awards will normally lapse where the award holder
ceases employment with the Company before vesting. PSP
Awards will not lapse and will vest immediately if the award
holder is considered to be a Good Leaver (leaves due to
death or disability) subject to the Remuneration Committee
being satisfied that performance conditions have been
satisfied or are likely to be satisfied as at the end of the
relevant performance period. In other circumstances, the
Remuneration Committee may determine that awards will
not lapse and will continue to vest at their normal vesting
date, subject to pro-ration to reflect the period of service
during the performance period and performance conditions.
The Remuneration Committee has residuary discretions to
disapply pro ration and bring forward the date of vesting.
In the event of a change of control of the Company, if the
acquiring company agrees, awards will be exchanged for
equivalent awards over shares in the acquiring company and
continue to vest according to the original vesting schedule.
If the acquiring company does not agree to exchange the
awards, the awards will vest at the Committee's absolute
discretion. Awards that vest will be subject to time pro-ration
and performance conditions.
Benefits under the PSP will not be pensionable.
The PSP Plan Limits are set out at Note 2.4 below.
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 41
Component
Pension
Benefits
Purpose and
link to strategy
Maximum
opportunity
To provide a
retirement
benefit that will
foster loyalty
and retain
experienced
Executive
Directors.
To provide
a market
competitive
level of benefits
to Executive
Directors.
Any pension
benefits will be set
at an appropriate
level in line with
market practice, and
in no event will the
contributions paid
by the Company
exceed 15% of
combined base
salary and fees.
Any benefits
will be set at an
appropriate level
in line with market
practice, and in no
event will the value
of the benefits
exceed 15% of
combined base
salary and fees.
Operation and performance measures
No performance measures.
>
>
The Executive Directors are entitled to private medical
insurance and life assurance cover (of four times the
combined salary and fee) and Directors’ and Officers’
Liability Insurance.
The Remuneration Committee may decide to provide other
benefits commensurate with the market. Such benefits may
include (for instance) company car or allowance, physical
examinations and medical support, professional advice,
assistance with filling out tax returns and occasional minor
benefits. A tax equalisation payment may be paid to an
Executive Director if any part of the remuneration of the
Executive Director becomes subject to double taxation. Tax
gross ups may be paid, where appropriate. The Company
does not, at present, provide other taxable benefits to the
Executive Directors.
>
Executive Directors are reimbursed for reasonable business
expenses incurred in the course of carrying out their duties.
>
No performance measures.
Notes to the Executive Directors' remuneration policy table
The Remuneration Committee's philosophy is that remuneration arrangements should be appropriately positioned to
support the Group's business strategy over the longer term and the creation of value for shareholders. In this context
the following key principles are considered to be important:
>
>
>
remuneration arrangements should align executive and employee interests with those of shareholders;
remuneration arrangements should help retain key executives and employees; and
remuneration arrangements should incentivise executives to achieve short, medium and long-term business
targets which represent value creation for shareholders. Targets should relate to the Group's performance in terms
of overall revenue and profit and the executive's own performance. Exceptional rewards should only be delivered if
there are exceptional returns.
The Remuneration Committee reserves the right to make any remuneration payments (including satisfying awards of
variable remuneration) and payments for loss of office notwithstanding that they are not in line with the Policy set
out above, where the terms of that payment were agreed before the Policy came into effect, or before the individual
became a director of the Company (provided the payment was not in consideration for the individual becoming a
director).
Performance measures and targets
(a) Annual Bonus
The performance measures for executive Directors comprise of financial measures and business goals linked to the
Company's strategy, which could include financial and non-financial measures. The business goals are tailored to
reflect each executive director's role and responsibilities during the year. The performance measures are chosen to
enable the Remuneration Committee to review the Company's and the individual's performance against the Company's
business strategy and appropriately incentivise and reward the executive Directors.
Annual bonus targets are set by the Remuneration Committee each year. They are stretching but realistic targets
which reflect the most important areas of strategic focus for the Company. The factors taken into consideration
when setting targets include the Company's Key Performance Indicators (which are determined annually by the
Remuneration Committee), and the extent to which they are under the control or influence of the executive whose
remuneration is being determined.
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONCadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 42
Annual Report on Remuneration 2023
continued
Performance is measured over the financial year against the measures and targets set according to the scorecard. The
Remuneration Committee retains the right to exercise its judgement to adjust the bonus outcome for an individual
to ensure the outcome reflects any other aspects of the Company's performance that become relevant during the
financial year.
The Remuneration Committee used Company operational and financial performances and safety as performance
measures for the 2020 scorecard. For years following 2020, the structure of the annual bonus scorecard will be
reviewed by the Remuneration Committee.
2023 Annual bonus scorecard measures for Executive Director
40% weighting
50% weighting
Operational performance, such as production, sales,
geographical diversification, and starting new projects.
Company financial performance, including cash targets and
profit targets.
10% weighting
Indicators of health and safety to promote the effective risk
management of the Company.
(b) Share Plans
The Remuneration Committee will make the vesting of a Plan award conditional upon the satisfaction of stretching
but realistic performance conditions. These conditions are meant to achieve a long-term alignment of the executives’
remuneration with the interest of the shareholders.
EBITDA growth, increase of P1 reserves (in millions boe), and changes to the free cash-flow are the key KPIs to be used
by the Remuneration Committee and will be measured over time periods of three financial years. The performance
measures are chosen to align the performance of participants with the attainment of financial performance
targets over the vesting period of the award. The targets are set by the Remuneration Committee by reference to
the Company's strategy and business plan and the results achieved at the time of the vest are determined by the
Remuneration Committee.
Under the PSP plan rules, the Board may vary a performance target where it considers that any performance target to
which an award is subject is no longer a true or fair measure of the participant's performance, provided that the Board
must act fairly and reasonably and that the new performance target is materially no more difficult and no less difficult
to satisfy than the original performance target.
Malus and clawback (applicable to bonuses and share awards)
The Remuneration Committee has the discretion to reduce the bonus before payment or require the executive director
to pay back shares or a cash amount in the event of material financial misstatement of the Company or fraud or material
misconduct on the part of the executive. The amount that may be clawed back on any such event is limited to the value of
the bonus, taking into account the cash paid and the shares delivered to the executive, taking the value of the shares at
the time of the clawback, less any income tax or employee social security contributions paid on the bonuses.
Share ownership guidelines for executives
The Remuneration Committee is planning to implement share ownership guidelines for executive Directors to further
align the interests of the executive Directors with those of shareholders. The share ownership guidelines will include
an expectation that executive Directors build up their shareholding to 200% of base salary over a period of five years
from the later of: the date of adoption of this policy and the date of appointment.
Once the shareholding guideline is reached, executive Directors would be expected to maintain it. The intention
would be for the shareholding guideline to be reached through the retention of vested shares from share plans
(e.g. the deferred share element of the annual bonus and shares vested under the PSP). As such, the Remuneration
Committee's discretion may be used to increase the proportion of an annual bonus to be delivered in shares to assist
the executive director in meeting this guideline. The deferred share mechanism in the annual bonus and the design
of the PSP will assist executive Directors in reaching the guidelines. Executive Directors will not be expected to top up
their shareholding with personal acquisitions of Company shares outside the usual share plans described in the Policy.
The Remuneration Committee will monitor the executive Directors' shareholdings and may adjust the guideline in
special individual and Company circumstances, for example in the case of a share price fall.
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 43
PSP Plan Limits
The PSP may operate over new issue shares, treasury shares or shares purchased in the market. In any ten-calendar
year period, the Company may not issue (or grant rights to issue) more than:
(a) 10% of the issued ordinary share capital of the Company under the Plan and any other employee share plan
adopted by the Company; and
(b) 5% of the issued ordinary share capital of the Company under the Plan and any other executive share plan adopted
by the Company.
Treasury shares will count as new issue shares for the purposes of these limits unless institutional investors decide
that they need not count. These limits do not include rights to shares which have been renounced, released, lapsed
or otherwise become incapable of vesting, awards that the Remuneration Committee determines after grant to be
satisfied by the transfer of existing shares and shares allocated to satisfy bonuses (including pursuant to the Deferred
Bonus Plan).
Remuneration throughout the Group
Differences in the Company's pay policy for Executive Directors from that applying to employees within the Group
generally reflect the appropriate market rate for the individual executive roles.
Remuneration policy table: Non-Executive Directors
Component
Fees
Purpose and
link to strategy
Maximum
opportunity
To provide an
appropriate
reward to attract
and retain
high-calibre
individuals with
the relevant
skills, knowledge
and experience
to progress
the Company
strategy.
The maximum
annual fees paid
to Non-Executive
Directors is £50,000
for a Non-Executive
director role, and
£100,000 for the
role of Chairman. An
additional £10,000
will be paid to the
individual acting
as Chairman of the
Audit Committee.
Operation and performance measures
Non-Executive Directors receive a standard annual fee, which is
paid on a quarterly basis in arrears.
Additional fees may also be paid to recognise the additional
work performed by members of any committees set up by the
Board, and for the role of chair of a committee.
Fees are reviewed on an annual basis, but are not necessarily
increased at each review. Fees are set at a rate that takes into
account:
> market practice for comparative roles;
>
>
>
the financial results of the Company;
the time commitment and duties involved; and
the requirement to attract and retain the quality of
individuals required by the Company.
The remuneration of the Non-Executive Directors is a matter for
the Board to consider and decide upon.
There are no performance measures related to Non-Executive
Directors’ fees.
Notes to the Policy table
The payment policy for Non-Executive Directors is to pay a rate which will secure persons of a suitable calibre. The
remuneration of the Non-Executive Directors is determined by the Board. External benchmarking data and specialist
advisers are used when setting fees, which will be reviewed at appropriate intervals. The maximum caps are valid
at the time that the relevant appointment letter is entered into and the caps may be adjusted to take into account
fluctuations in exchange rates.
Expenses reasonably and wholly incurred in the performance of the role of Non-Executive director of the Company
may be reimbursed or paid for directly by the Company, as appropriate, and may include any tax due on the expense.
The Non-Executive Directors' fees are non-pensionable. The Non-Executive Directors have not to date been eligible
to participate in any incentive plans (such as bonuses or share plans); however, the Board considers that it may be
appropriate in the future to enable such participation, subject to suitably stretching performance thresholds.
Non-Executive Directors may receive professional advice in respect of their duties with the Company which will be paid
for by the Company. They will be covered by the Company's insurance policy for Directors.
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONCadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com
44
Annual Report on Remuneration 2023
continued
Recruitment
The Company's policy on the recruitment of Directors is to pay a fair remuneration package for the role being
undertaken and the experience of the individual being recruited. The Remuneration Committee will consider all
relevant factors, which include the abilities of the individual, their existing remuneration package, market practice, and
the existing arrangements for the Company's current Directors.
The Remuneration Committee will determine that any arrangements offered are in the best interests of the Company
and shareholders and will endeavour to pay no more than is necessary.
The Remuneration Committee intends that the components of remuneration set out in the policy tables, and the
approach to the components as set out in the policy tables, will be equally applicable to new recruits, i.e. salary, annual
bonus, share plan awards, pension and benefits for executive Directors, and fees for Non-Executive Directors. However,
the Company acknowledges that additional flexibility may be required to ensure the Company is in the best position to
recruit the best candidate for any vacant roles and, as such, a buy-out arrangement may be required.
Flexibility
The salary and compensation package designed for a new recruit may be higher or lower than that applying for
existing Directors. The Remuneration Committee may decide to appoint a new executive director to the Board at a
lower than typical salary, such that larger and more frequent salary increases may then be awarded over a period of
time to reflect the individual's growth in experience within the role.
Remuneration will normally not exceed those set out in the policy table above. However, to ensure that the Company
can sufficiently compete with its competitors, the Remuneration Committee considers it important that the
recruitment policy has sufficient flexibility in order to attract and appropriately remunerate the high-performing
individuals that the Company requires to achieve its strategy. As such, the Remuneration Committee reserves
discretion to provide a buy-out arrangement and benefits (such as a sign-on bonus and additional share awards)
in addition to those set out in the policy table (or mentioned in this section) where the Remuneration Committee
considers it reasonable and necessary to do so in order to secure an external appointment (see below for more detail
in relation to buy-out arrangements).
Buy-out arrangements
The Remuneration Committee retains the discretion to enter into buy-out arrangements to compensate new hires for
incentive awards forfeited in joining the Company. The Remuneration Committee will use its discretion in awarding and
setting any such compensation, which will be decided on a case-by-case basis and likely on an estimated like-for-like
basis. In deciding the appropriate type and quantum of compensation to replace existing awards, the Remuneration
Committee will take into account all relevant factors, including the type of award being forfeited, the likelihood of
any performance measures attached to the forfeited award being met, and the proportion of the vesting period
remaining. The Remuneration Committee will appropriately discount the compensation payable to take account of any
uncertainties over the likely vesting of the forfeited award to ensure that the Company does not, in the view of the
Remuneration Committee, pay in excess of what is reasonable or necessary.
Compensation for awards forfeited may take the form of a bonus payment or a share award. For the avoidance
of doubt, the maximum amounts of compensation contained in the policy table will not apply to such buy-out
arrangements. The Company has not placed a maximum value on the compensation that can be paid under this
section, as it does not believe it would be in shareholders' interests to set any expectations for prospective candidates
regarding such awards.
Payments for loss of office
Any compensation payable in the event that the employment of an Executive Director is terminated will be determined
in accordance the terms of the employment contract between the Company and the executive, as well as the relevant
rules of any share plan and this Policy, and in accordance with the prevailing best practice.
The Remuneration Committee will consider a variety of factors when considering leaving arrangements for an Executive
Director and exercising any discretions it has in this regard, including (but not limited to) individual and business
performance during office, the reason for leaving, and any other relevant circumstances (for example, ill health).
In addition to any payment that the Remuneration Committee may decide to make, the Remuneration Committee
reserves discretion as it considers appropriate to:
(a) pay an annual bonus for the year of departure;
(b) continue providing any benefits for a period of time; and
(c) provide outplacement services.
Non-Executive Directors are subject to one-month notice periods prior to termination of service and are not entitled
to any compensation on termination save for accrued fees as at the date of termination and reimbursement of any
expenses properly incurred prior to that date.
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 45
Share plan awards
The treatment of any share award on termination will be governed by the PSP rules.
Under the PSP, outstanding share awards held by an individual who ceases to be a director or employee of the
Company will lapse, unless the cessation is due to death, illness, injury or disability, redundancy, retirement, the
Company ceasing to be a member of the Group or the transfer of an undertaking or part of an undertaking to a person
who is not a member of the Group, or the Board exercises its discretion otherwise.
Under the PSP, the Board has discretion to decide the period of time for which the award will continue, and whether
any unvested award shall be treated as vesting on the date of cessation of employment or in accordance with the
original vesting schedule, in both cases have regard to the extent to which the performance targets have been satisfied
prior to the date of cessation.
For executive Directors, the vesting period will be set by the Remuneration Committee with a minimum three-year
period. The Remuneration Committee will (unless the vesting period is set as a period equal to or longer than five
years) impose a holding period on shares (or awards) so that the executive is not able to sell the shares that the
executive director acquires through the PSP until the fifth anniversary of the date of the award. The holding period
will not apply to the number of shares equivalent in value to the amount required by the Company or the executive
director to fund any income tax and employee social security contributions due on the vesting of the awards or
otherwise in connection with the awards.
Executive Director employment agreements
This section contains the key employment terms and conditions of the executive Directors that could impact on their
remuneration or loss of office payments.
The Company's policy on employment agreements is that executive Directors' agreements should be terminable
by either the Company or the director on not more than six months' notice. The employment agreements contain
provision for early termination, among other things, in the event of a breach by the executive but make no provision
for any termination benefits except in the event of a change of control of the Company, where the executive becomes
entitled to a lump sum equal to 24 months' base salary plus benefits plus (if any), bonus received on termination by the
Company. The employment agreements contain restrictive covenants for a period of 12 months following termination
of the agreement. Details of employment agreements in place as at the date of this report are set out below:
Director
F Khallouf
Current agreement start date
Notice period
15 November 2019
Six months
Directors' employment agreements are available for inspection at the Company's registered office in London.
Non-Executive Directors' letters of appointment
This section contains the key terms of the appointments of Non-Executive Directors that could impact on their
remuneration.
Typically, the Non-Executive Directors are appointed by letter of appointment for an initial term of three years which
may be extended. All Non-Executive Directors are subject to annual re-election by the Company's shareholders and
their appointments may be terminated earlier with one month's prior written notice (or with immediate effect, in the
case of specific serious circumstances such as fraud or dishonesty. On termination of appointment, Non-Executive
Directors are usually only entitled to accrued fees as at the date of termination together with reimbursement of
any expenses properly incurred prior to that date and the company has no obligation to pay further compensation
when the appointment terminates. Non-Executive Directors' letters of appointment are available for inspection at the
Company's registered office in London.
Non-Executive Director
Current agreement start date
Term
Michel Meeùs
Lilia Jolibois
Gilbert Lehmann
23 June 2023
23 June 2023
23 June 2023
Two years
Two years
Two years
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONCadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 46
Annual Report on Remuneration 2023
continued
Illustration of the Remuneration Policy
The bar chart below show the levels of remuneration that the CEO could earn over the coming year under the Policy.
CEO: minimum and maximum remuneration
1,000 EUR
Current policy
New policy
3,500
3,000
2,500
2,000
1,500
1,000
500
0
Share
incentive
plan
Annual
bonus
Base
salary
Minimum
remuneration
“On-target”
remuneration
Maximum
remuneration
Notes:
I. The remuneration for an “on-target” scenario is purely illustrative as actual remuneration will depend on how challenging the target is for the
relevant year as well as on the financial conditions of the Company.
II. The maximum award under the share incentive plan is 200% which can increase up to 300% (400% in the old policy) in exceptional
circumstances.
The bar chart shows future possible maximum remuneration.
Pension entitlements were provided in 2032.
Consideration of shareholder views
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 is reported to
the Board and discussed in detail both there and during meetings of the Remuneration Committee.
The Remuneration Committee will take into account the results of the shareholder vote on remuneration matters when
making future remuneration decisions. The Remuneration Committee remains mindful of shareholder views when
evaluating and setting ongoing remuneration strategy.
Consideration of employment conditions within the Group
When determining remuneration levels for its executive Directors, the Board considers the pay and employment
conditions of employees across the Group. The Remuneration Committee will be mindful of average salary increases
awarded across the Group when reviewing the remuneration packages of the executive Directors.
Minor changes
The Remuneration Committee may make, without the need for shareholder approval, minor amendments to the Policy
for regulatory, exchange control, tax or administrative purposes or to take account of changes in legislation.
Michel Meeùs
Chairman
7 May 2024
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 47
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 regulation.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the
Directors have prepared the group and company financial statements in accordance with UK-adopted International
Accounting Standards. In preparing the Company and Group’s financial statements, IAS Regulation requires that
Directors:
>
properly select and apply accounting policies;
> make judgements and accounting estimates that are reasonable and prudent;
>
>
>
present information, including accounting policies, in a manner that provides relevant, reliable, comparable and
understandable information;
state whether applicable UK-adopted International Accounting Standards have been followed, subject to any
material departures disclosed and explained in the financial statements;
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, prepare the financial
statements on the going concern basis unless it is inappropriate to presume that the Company and Group will
continue in business.
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, Report of the Directors, 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 and statements
included on the Company’s website, www.cadoganenergysolutions.com. Legislation in the United Kingdom governing
the preparation and dissemination of the financial statements may differ from legislation in other jurisdictions. The
Directors' responsibility also extends to the ongoing integrity of the financial statements contained therein.
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 in conformity
with the requirements of the Companies Act 2006, 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 Annual 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
provide the information necessary for the shareholders to assess the Group’s position, performance, business
model and strategy.
On behalf of the Board
Michel Meeùs
Chairman
7 May 2024
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONCadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 48
Independent Auditor’s Report to the Members
of Cadogan Energy Solutions plc
Qualified opinion
We have audited the financial statements of Cadogan Energy Solutions Plc (the ‘Parent Company’) and its subsidiaries
(the Group) for the year ended 31 December 2023 which comprise the Consolidated Income Statement, the Consolidated
Statement of Comprehensive Income, the Consolidated Balance Sheet, the Consolidated Cash Flow Statement, the
Consolidated Statement of Changes in Equity, the Company Balance Sheet, the Company Cash Flow Statement, the
Company Statement of Changes in Equity, the Notes to the Consolidated Financial Statements and the Notes to the
Company Financial Statements, including significant accounting policies. The financial reporting framework that has been
applied in their preparation is applicable law and UK adopted international accounting standards and, as regards the Parent
company financial statements, as applied in accordance with the provisions of the Companies Act 2006.
In our opinion, except for the effect of the matter described in the Basis for qualified opinion paragraph below:
>
>
>
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 2023 and of the group’s profit for the year then ended;
the Group financial statements have been properly prepared in accordance with UK adopted international accounting
standards;
the Parent Company financial statements have been properly prepared in accordance with UK adopted international
accounting standards 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.
Basis for qualified opinion
In February 2019, the Group advanced a €13,385,000 loan to Proger Managers & Partners Srl (“PMP”), a privately owned
Italian company whose only asset is a 72.92% interest in Proger Ingegneria Srl (“Proger Ingegneria”), a privately owned
company which itself held a 67.91% participating interest in Proger S.P.A (“Proger”) at the date of the loan was advanced.
The loan carries an entitlement to interest at a rate of 5.5% per year, payable at maturity (which is 24 months after the
execution date of February 2019 and assuming that the call option described below was not exercised). The principal of the
loan is secured by a pledge over PMP’s current participating interest in Proger Ingegneria Srl, up to a maximum guaranteed
amount of €13,385,000.
Through the Agreement, the Group was granted a call option to acquire, at its sole discretion, a 33% participating interest
in Proger Ingegneria; the exercise of the option would have given Cadogan, through Cadogan Petroleum Holdings BV,
an indirect 25% interest in Proger. The call option was granted at no additional cost and could be exercised at any time
between the 6th and 24th months following the execution date of the loan agreement.
The call option was not exercised within the relevant timeframe (February 2021) and consequently in accordance with the
loan agreement the principal amount and any accrued interest became repayable in full. At that date the Group reclassified
the asset from a financial asset held at fair value through profit and loss to a financial asset held at amortised cost.
In March 2021, PMP requested arbitration to have the loan agreement recognised as an equity investment contract. In July
2022, the Arbitra Camera in Rome decided to reject the main claim of PMP to recognise the loan as an equity investment.
In November 2023, the Group initiated a second arbitration to assert its right to restitution and obtain PMP’s condemnation
of the consequent payment.
As part of our risk assessment we considered the recoverability of the loan note instrument to be a key audit matter, and in
respect of this matter we:
> made enquiries of management and the Audit Committee regarding the structure of the transaction and the latest
status of legal proceedings;
>
>
obtained and reviewed the original loan documents including the call option agreement;
obtained loan workings papers and reviewed the accounting entries;
> met with management to obtain an understanding of their assessment of the recoverable amount of the loan and why
management believes no impairment of the carrying value of the loan note is required;
>
>
>
>
discussed with management their understanding of the process of assessing recoverability of the loan note;
requested and received information from Cadogan legal advisors on the current legal status and legal proceedings;
based on available information to us we critically assessed the ability of the counterparty to repay the amounts due;
and
reviewed the disclosures in relation to financial instruments including the accounting policy, critical judgments and
estimates and financial instrument disclosures.
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 49
Based on the procedures performed above we were unable to obtain sufficient, appropriate audit evidence regarding
the recoverability of the loan note, and accordingly we were also unable to obtain sufficient appropriate audit evidence
to enable us to conclude whether the carrying value of the loan note is materially accurate.
In 2022, we were not able to obtain sufficient, appropriate audit evidence as to whether the carrying value of the
loan note was materially recoverable as at 31 December 2022 and as a result the audit opinion for the year ended
31 December 2022 was also qualified in respect of this issue. Consequently, we were unable to determine what impact
this may have on the profit of the Group for the year ended 31 December 2023.
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the audit
of the financial statements section of our report. We are independent of the Group in accordance with the ethical
requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard
as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with
these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our qualified opinion. Our audit opinion is consistent with the additional report to the audit committee.
Our approach to the audit
We tailored the scope of our audit to ensure we performed sufficient work to be able to express an opinion on the
financial statements as a whole, taking into account the structure of the Group and the Company, its environment,
including the group’s system of internal control, and assessing the risks of material misstatement in the financial
statements. We also addressed the risk of management override of internal controls, including assessing whether there
was evidence of bias by the Directors that may have represented a risk of material misstatement.
The significant majority of the Group’s operations are located in the Ukraine and account for 100% of the Group’s
revenue. We instructed a component audit team in the Ukraine to perform a full scope audit of the Ukrainian
sub-group. In our assessment the group comprises four significant components together with the Ukrainian
sub-group. The audit of the Ukrainian sub-group was performed by Crowe Erfolg in the Ukraine under the supervision
and direction of the Group audit engagement team, as described in more detail below. The remaining significant
components of the Group namely Cadogan Energy Solutions Plc (the Parent Company), Cadogan Petroleum Holdings
Limited and Cadogan Petroleum Holdings B.V. were audited by the Group audit engagement team.
Our involvement with the component auditors
As part of our supervision and direction of the component audit team, we determined the level of involvement needed
in order to be able to conclude whether sufficient appropriate audit evidence has been obtained in respect of the
Ukraine sub-group as a basis for our opinion on the Group financial statements as a whole. Our involvement with the
component auditors included the following:
> We issued detailed Group reporting instructions to the component auditor, which included the significant areas to be
covered by the audit (including areas that were considered to be key audit matters as detailed below) and set out the
information required to be reported to the Group audit team.
> Due to the travel restrictions resulting from the ongoing war in the Ukraine, the Group audit engagement partner
and senior members of the Group audit engagement team were unable to visit the Ukraine to meet with component
management and the component audit team during the audit. Accordingly, we performed a remote review of the
component audit files in the Ukraine using appropriate technologies and held regular calls and videoconferences with
component management and component audit team during the audit.
>
The Group audit team performed reviews of relevant working papers and undertook additional procedures where
necessary in respect of the significant risk areas that represented Key Audit Matters for the group.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy,
the allocation of resources in the audit; and directing the efforts of the engagement team. 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.
In addition to the matter described in the basis for qualified opinion section, we have determined the matters
described below to be the key audit matters to be communicated in our report.
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Independent Auditor’s Report to the Members
of Cadogan Energy Solutions plc continued
Key Audit Matters
How our scope addressed this matter
Valuation of development and production assets
Refer to page 64 (Accounting policy) and 75 (note 17
Property, plant and equipment).
> We critically assessed management’s impairment
assessment which was based on the value in use
model (ViU).
As at 31 December 2023 the Group held development and
production assets with a carrying value of $5.6m (2022:
$6.4m).
> We challenged the key judgements and estimates
made by management, including forecast oil prices
and the production output levels.
Management has performed an impairment review of
development and production assets and concluded that
no impairment is required.
The assessment of the recoverable value of the
development and production assets
required judgments and estimates by management
regarding the inputs applied in the models including
future oil and gas prices, production and reserves,
operating and development costs and discount rates.
The carrying value of the Group’s development and
production assets were therefore considered to be a key
audit matter.
> We critically assessed management’s assumptions in
estimating the discount rate used.
> We compared the forecast production included in
the model to the most recent reserves geological
and economic evaluation report produced by the
management’s external expert.
> We held calls with the management’s external expert
to discuss the reserves report and assessed their
independence and competence.
> We held discussions with operational management
to evaluate the basis production forecasts associated
with wells, considered the historical impact of
such activities and evaluated the extent to which
appropriate costs were included in the forecasts.
> We performed sensitivity analysis on the impairment
model to establish the impact of possible changes of
the key assumptions.
> We reviewed the adequacy of the disclosures in the
financial statements.
Based on our work performed we consider there is no
material difference between the carrying value of these
assets and their recoverable amounts.
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 51
Our application of materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for
materiality. These, together with qualitative considerations, helped us to determine the scope of our audit, the nature,
timing and extent of our audit procedures, both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as follows:
The Group
The Parent Company
Overall group materiality
$570,000 (2022: $725,000)
$350,000 (2022: $400,000)
Basis for determining
materiality
1.5% of total assets (2022: 2% of total
assets)
1.5% of total assets restricted to
$350,000 (2022: 2% of total assets
restricted to $400,000)
Rationale for the
benchmark applied
When determining materiality, we determine an appropriate percentage of our chosen
benchmark, with the choice of an appropriate benchmark as our starting point. We
determined that an asset based measure of materiality is appropriate as the Group and
the Company holds significant cash and loan balances and its principal activity is the
exploration and development of oil and gas assets. As a result we concluded that the
asset base is a key financial metric for users of financial statements.
Performance materiality
$285,000 (2022: $362,500)
$175,000 (2022: $200,000)
Basis for determining
performance materiality
We use performance materiality to reduce to an appropriately low level the probability
that the aggregate of uncorrected and undetected misstatements exceeds overall
materiality. Specifically, we use performance materiality in determining the scope
of our audit and the nature and extent of our testing of account balances, classes of
transactions and disclosures, for example in determining sample sizes.
Our performance materiality was 50% of overall materiality, amounting to £285,000
for the Group financial statements and $175,000 for the Company financial statements.
When considering the level at which to set performance materiality, we considered
a number of factors, including the risk assessment and aggregation risk, the
effectiveness of controls and our knowledge of the business.
We agreed with the Board and Audit Committee that we would report to them misstatements identified during the
audit greater than 5% of overall materiality. We also agreed to report differences below this threshold that, in our view,
warranted reporting on qualitative grounds.
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONCadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 52
Independent Auditor’s Report to the Members
of Cadogan Energy Solutions plc continued
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting
in the preparation of the financial statements is appropriate.
Our evaluation of the Directors’ assessment of the Group’s and the Parent Company’s ability to continue to adopt the
going concern basis of accounting included:
> Review of management’s going concern assessment paper and the cash flow forecast prepared by management
and approved by the Board.
> We critically assessed the going concern paper and the forecast taking into account key assumptions and various
scenarios prepared by management and the impact they would have on the Group’s ability to continue operating on
going concern basis.
> We performed sensitivity assessments over the key assumptions in the forecast including the impact of severe but
plausible scenario and severe but unlikely downside scenario, and extending these beyond the 12 months from the
date of approval these financial statements to assess the Group’s ability to continue as a going concern.
> As part of our sensitivity assessment of these forecast and scenarios we critically assessed the level of headroom
available and the assumptions including, including mitigating actions available to management, potential
geopolitical impacts, oil production, oil prices, operating expenditure and capital expenditure.
> We compared production forecasts to historical trends and considered the oil price assumptions against consensus
market prices and historical discount levels between Brent oil prices and the local market. We compared forecast
costs with historical expenditure.
> We reviewed the adequacy of the disclosures in the financial statements in respect of going concern against the
requirements of UK-adopted international accounting standards.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions
that, individually or collectively, may cast significant doubt on the Group’s and Parent company's ability to continue as a
going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant
sections of this report.
Emphasis of Matter
We draw attention to Note 3 (b) on page 61 to the financial statements which describes the uncertainty related to the
outcome of the ongoing war in Ukraine. The Group have included various scenarios that take into account the ongoing war
in its cash flow projections. However, due to the unpredictable outcome, length, scale and extent of the conflict its impact on
the Group and the Company cannot be predicted with any certainty. Our opinion is not modified in respect of this matter.
Other information
The other information comprises all of the information in the Annual Report, other than the financial statements and our
auditors’ report thereon. The Directors are responsible for the other information, which includes reporting based on the
Task Force on Climate-related Financial Disclosures (‘TCFD’) recommendations. Our opinion on the financial statements
does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent
otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained
in the course of the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or
apparent material misstatements, we are required to determine whether there is a material misstatement in the financial
statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. As described in the basis for qualified opinion section of our report,
our audit opinion is qualified because we were unable to obtain sufficient appropriate audit evidence in respect of certain
loan receivables. We have concluded that where the other information refers to these receivables or to related balances or
classes of transactions it may also be materially misstated for the same reason.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with
the Companies Act 2006.
Except for the possible effect of the matter described in the basis for the qualified opinion section of our report, in our
opinion, based on the work undertaken in the course of the audit:
>
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.
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 53
Matters on which we are required to report by exception
Except for the possible effect of the matter described in the basis for the qualified opinion section of our report, in the
light of the knowledge and understanding of the Group and the Parent Company and its environment obtained in the
course of the audit, we have not identified material misstatements in the Strategic report or the Directors’ report.
In respect solely of the limitation on our work relating to certain loan receivables, described above:
> we have not received all the information and explanations we require for our audit; and
> we were unable to determine whether adequate accounting records have been kept by the Parent Company.
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you
if, in our opinion:
>
>
>
>
returns adequate for our audit have not been received from branches not visited by us; or
the Parent Company financial statements and the part of the Directors’ remuneration report to be audited are not
in agreement with the accounting records and returns; or
certain disclosures of Directors’ remuneration specified by law are not made; or
a corporate governance statement has not been prepared by the Parent Company.
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement set out on page 47, the Directors are responsible
for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such
internal control as the Directors determine is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the group’s and the Parent company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the Directors either intend to liquidate the Group or the Parent Company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
A further description of our responsibilities is available on the FRC’s website at wwww.frc.org.uk/auditors/auditor-
assurance/auditor-s-responsibilities-for-the-audit-of-the-fi/description-of-the-auditor's-responsibilities-for
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line
with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The
extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.
The objectives of our audit in respect of fraud, are; to identify and assess the risks of material misstatement of the
financial statements due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of material
misstatement due to fraud, through designing and implementing appropriate responses to those assessed risks; and
to respond appropriately to instances of fraud or suspected fraud identified during the audit. However, the primary
responsibility for the prevention and detection of fraud rests with both management and those charged with governance
of the company.
Based on our understanding of the Group and its operations, we identified the principal risks of non-compliance with
laws and regulations related to the UK and Ukrainian tax legislation, employment and health and safety regulations,
licensing regulations and we considered the extent to which non-compliance might have a material effect on the financial
statements. We also considered those laws and regulations that have a direct impact on the financial statements such as
the Companies Act 2006 and Listing Rules.
> We obtained an understanding of how the Group and Company complies with these requirements by discussions with
management and those charged with governance;
>
Based on this understanding, we designed specific appropriate audit procedures to identify instances of
non-compliance with laws and regulations. This included making enquiries of management and those charged with
governance and obtaining additional corroborative evidence as required;
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONCadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 54
Independent Auditor’s Report to the Members
of Cadogan Energy Solutions plc continued
> We inquired of management and those charged with governance as to any known instances of non-compliance or
suspected non-compliance with laws and regulations.
> We communicated with external legal advisers representing the Group and held calls with management to enquire
about known non-compliance with laws and regulations;
> We performed a review of external press releases;
> We assessed the risk of material misstatement of the financial statements, including the risk of material
misstatement due to fraud and how it might occur, by holding discussions with management and those charged
with governance;
> We challenged assumptions and judgements made by management in relation to the estimates made in respect of
development and production assets; and
>
Identifying and testing journal entries, in particular any journal entries posted with unusual account combinations,
and unusual users.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances
of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the
financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not
detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional
misrepresentations, or through collusion.
Other matters which we are required to address
We were appointed by the Board of Directors on 17 February 2023 to audit the financial statements for the period ended
31 December 2022. Our total uninterrupted period of engagement is two years, covering the period ended 31 December
2022 and 31 December 2023.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the Parent Company
and we remain independent of the Group and the Parent Company in conducting our audit.
Our audit opinion is consistent with the additional report to the Audit Committee.
Use of our report
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 for no purpose other than to draw to the attention of the
company’s members those matters which we are required to include in an auditor’s report addressed to them. To the
fullest extent permitted by law, we do not accept or assume responsibility to any party other than the company and
company’s members as a body, for our work, for this report, or for the opinions we have formed.
Matthew Banton
(Senior Statutory Auditor)
For and on behalf of
Moore Kingston Smith LLP
Statutory Auditor
6th Floor
9 Appold Street
London
EC2A 2AP
7 May 2024
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com
Consolidated Income Statement
For the year ended 31 December 2023
55
CONTINUING OPERATIONS
Revenue
Cost of sales
Gross profit
Administrative expenses
Adjustments of end of concession obligations for E&E assets
Reversal of impairment of other assets
Impairment of other assets
Other operating income/(expenses), net
Net foreign exchange gain/(losses)
Operating loss
Finance income, net
Profit/(loss) before tax
Taxation
Profit/(loss) for the year
Attributable to:
Owners of the Company
Non-controlling interest
Earnings/(loss) per Ordinary share
Basic and diluted
Notes
2023
$’000
2022
$’000
6
7
8
16
9
9
10
13
14
15
7,550
(5,391)
2,159
(3,574)
218
56
(49)
25
538
(627)
1,885
1,258
–
1,258
1,259
(1)
1,258
cents
0.5
8,472
(5,553)
2,919
(3,441)
(269)
20
(27)
(3)
(1,131)
(1,932)
372
(1,560)
–
(1,560)
(1,562)
2
(1,560)
cents
(0.6)
The notes on pages 60 to 84 form an integral part of these financial statements.
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONCadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 56
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2023
Profit/(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 profit/(loss) for the year
Attributable to:
Owners of the Company
Non-controlling interest
2023
$’000
1,258
(321)
(321)
937
938
(1)
937
2022
$’000
(1,560)
(3,287)
(3,287)
(4,847)
(4,849)
2
(4,847)
The notes on pages 60 to 84 form an integral part of these financial statements.
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com Consolidated Balance Sheet
As at 31 December 2023
57
ASSETS
Non-current assets
Intangible exploration and evaluation assets
Property, plant and equipment
Right-of-use assets
Deferred tax asset
Current assets
Inventories
Trade and other receivables
Loan receivable at amortised cost
Cash
Total assets
LIABILITIES
Non-current liabilities
Long-term lease liability
Provisions
Current liabilities
Trade and other payables
Short-term lease liability
Current provisions
Total liabilities
NET ASSETS
EQUITY
Share capital
Share premium
Retained earnings
Cumulative translation reserves
Other reserves
Equity attributable to owners of the Company
Non-controlling interest
TOTAL EQUITY
Notes
2023
$’000
2022
$’000
16
17
23
22
19
20
27
21
23
25
24
23
25
26
27
–
5,768
246
370
6,384
364
310
17,074
14,155
31,903
38,287
(148)
(114)
(262)
(1,366)
(87)
(131)
(1,584)
(1,846)
–
6,633
108
319
7,060
295
318
15,825
13,934
30,372
37,432
(28)
(261)
(289)
(1,401)
(79)
(136)
(1,616)
(1,905)
36,441
35,527
13,832
514
185,803
(165,297)
1,589
36,441
–
36,441
13,832
514
184,331
(164,976)
1,589
35,290
237
35,527
The consolidated financial statements of Cadogan Energy Solutions plc, registered in England and Wales no. 05718406,
were approved by the Board of Directors and authorised for issue on 7 May 2024. They were signed on its behalf by:
Fady Khallouf
Chief Executive Officer
7 May 2024
The notes on pages 60 to 84 form an integral part of these financial statements.
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONCadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 58
Consolidated Cash Flow Statement
For the year ended 31 December 2023
Operating loss
Adjustments for:
Depreciation and depletion of property, plant and equipment, and
right-of-use assets
Changes in provision of oil and gas assets
Loss on disposal of property, plant and equipment
Impairment/(reversal of impairment) of inventories
Impairment of receivables
Reversal of impairment/(impairment) of VAT recoverable
Effect of foreign exchange rate changes
Operating cash outflow/(inflow) before movements in working capital
Increase in inventories
Increase in receivables
Decrease/(increase) in payables
Cash used by operations
Interest received
Net cash outflow from operating activities
Investing activities
Purchases of property, plant and equipment
Purchases of intangible exploration and evaluation assets
Interest received
Net cash used in investing activities
Net increase/(decrease) in cash
Effect of foreign exchange rate changes
Cash at beginning of year
Cash at end of year
Notes
17,23
16
17
9
9
9,20
2023
$’000
(627)
821
(218)
19
44
3
(54)
(538)
(550)
(131)
(127)
238
(570)
–
(570)
(58)
–
796
738
168
53
13,934
14,155
2022
$’000
(1,932)
764
269
–
(20)
16
11
1,131
239
(155)
(946)
(197)
(1,059)
185
(874)
(93)
–
97
4
(870)
(207)
15,011
13,934
The notes on pages 60 to 84 form an integral part of these financial statements.
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 59
Consolidated Statement of Changes in Equity
For the year ended 31 December 2023
Share
capital
$’000
Share
premium
account
$’000
Retained
earnings
$’000
Cumulative
translation
reserves
$’000
Other
reserves
$’000
Equity
attributable to
owners of the
Company
$’000
Non-
controlling
interest
$’000
Total
$’000
As at 1 January 2022
13,832
514
185,893
(161,689)
1,589
40,139
235
40,374
Net loss for the year
Other comprehensive
profit/(loss)
Total comprehensive
profit/(loss) for the year
As at 1 January 2023
Net income for the year
Other comprehensive
profit/(loss)
Total comprehensive
profit/(loss) for the year
Acquisition of non-controlling
interests
–
–
–
–
–
–
(1,562)
–
–
(3,287)
(1,562)
(3,287)
–
–
-
13,832
–
514
–
184,331
1,259
(164,976)
–
1,589
–
–
–
–
–
–
–
–
(321)
1,259
(321)
213
–
–
–
–
(1,562)
(3,287)
(4,849)
35,290
1,259
(321)
(938)
2
–
2
(1,560)
(3,287)
(4,847)
237
(1)
35,527
1,258
–
(1)
(321)
937
213
(236)
(23)
As at 31 December 2023
13,832
514
185,803
(165,297)
1,589
36,441
–
36,441
The notes on pages 60 to 84 form an integral part of these financial statements.
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONCadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 60
Notes to the Consolidated Financial Statements
For the year ended 31 December 2023
1. General information
Cadogan Energy Solutions 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 Group principal activity has been up to now oil and gas exploration, development and production; the Group
also conducts gas trading and provides services to other E&P operators. The strategy of the Group is to expand its
activities along the energy value chain, beyond current activities to new forms of energy with a reduced impact on the
environment.
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.
2. Adoption of new and revised standards
New IFRS accounting standards, amendments and interpretations effective from 1 January 2023
The disclosed policies have been applied consistently by the Group for both the current and previous financial year
with the exception of the new standards adopted.
The IFRS financial information has been drawn up on the basis of accounting policies consistent with those applied in
the financial statements for the year to 31 December 2022, except for the following:
(a) IFRS 17 Insurance Contracts;
(b) Amendments to IFRS 17 Insurance contracts: Initial Application of IFRS 17 and IFRS 9 – Comparative Information;
(c) Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of
Accounting Policies;
(d) Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates and Errors: Definition of Accounting
Estimates;
(e) Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and Liabilities arising from a Single
Transaction; and
(f) Amendments to IAS 12 Income taxes: International Tax Reform – Pillar Two Model Rules (effective immediately–
disclosures are required for annual periods beginning on or after 1 January 2023).
The application of the above standards has had no impact on the disclosures or the amounts recognised in the Group's
consolidated financial statements.
New IFRS accounting standards, amendments and interpretations not yet effective
Below is a list of new and revised IFRSs that are not yet mandatorily effective (but allow early application) for the year
ended 31 December 2023 and have not been early adopted by the Group. These standards are not expected to have a
material impact on the Group in the future reporting periods and on foreseeable future transactions.
IFRS accounting standards
Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as
Current or Non-current and Non-current Liabilities with Covenants
Amendments to IFRS 16 Leases: Lease Liability in a Sale and Leaseback
Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments:
Disclosures: Supplier Finance Arrangements
Amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates: Lack of
Exchangeability
Effective periods
beginning on or after
1 January 2024
1 January 2024
1 January 2024
1 January 2025
3. Significant accounting policies
(a) Basis of accounting
The financial statements have been prepared in accordance with UK-adopted International Accounting Standards in
conformity with the requirements of the Companies Act 2006, applicable to companies reporting under IFRS.
The financial statements have been prepared on the historical cost convention basis.
The principal accounting policies adopted are set out below:
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 61
3. Significant accounting policies continued
(b) Going concern
The Group’s cash balance at 31 December 2023 was $14.2million (2022: $13.9 million). The Directors consider 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 and meet its ongoing liabilities as they full due for at least twelve
months from the date of signing of these financial statements.
The Directors’ have carried out a robust assessment of the principal risks facing the Group.
The Group’s forecasts and projections, taking into account reasonably possible changes in trading activities,
operational performance, flow rates for commercial production and the price of hydrocarbons sold to Ukrainian
customers, show that there are reasonable expectations that the Group will be able to operate on funds currently held
and those generated internally, for the foreseeable future.
Notwithstanding the Group’s current financial performance and position, the Board are cognisant of the actual risks
related to the war situation in Ukraine. The Board has considered possible reverse stress case scenarios for the impact
on the Group’s operations, financial position and forecasts. Whilst the potential future impacts of the invasion of
Ukraine by Russia are unknown, the Board has considered operational disruption that may be caused by the factors
such as a) restrictions applied by governments, illness amongst our workforce and disruption to supply chain and sales
channels; b) market volatility in respect of commodity prices associated in addition to military and geopolitical factors.
In addition to sensitivities that reflect future expectations regarding country, commodity price and currency risks that
the Group may encounter reverse stress tests have been run to reflect possible negative effects of the war in Ukraine.
The Group’s forecasts demonstrate that owing to its cash resources the Group is able to meet its operating cash flow
requirements and commitments whilst maintaining significant liquidity for a period of at least the next 12 months from
the date of signing of these financial statements allowing for sustained reductions in commodity prices and extended
and severe disruption to operations should such a scenario occur.
After making enquiries and considering the uncertainties described above, the Directors have a reasonable expectation
that the Company and the Group have adequate resources to continue in operational existence for the foreseeable
future and consider the going concern basis of accounting to be appropriate and, thus, they continue to adopt the
going concern basis of accounting in preparing the annual financial statements.
(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 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.
(d) Investments in joint ventures
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. In doing so, the Group applies the criteria of IFRS 6
‘Exploration for and evaluation of mineral resources’ as the joint venture holds exploration phase assets. 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.
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONCadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 62
Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2023
3. Significant accounting policies continued
(e) Revenue recognition
Revenue from contracts with customers is recognised when or as the Group satisfies a performance obligation by
transferring a promised good or service to a customer. A good or service is transferred when the customer obtains
control of that good or service. Revenue is measured based on measurement principles of IFRS 15 and represents
amounts receivable for hydrocarbon products and services provided in the normal course of business, net of value
added tax (‘VAT’) and other sales-related taxes, excluding royalties on production. Royalties on production are recorded
within cost of sales.
The crude oil produced by the upstream operations is sold to external customers. Revenue from the sale of crude
oil is recognised at the point in time when control of the product is transferred to the customer, which is typically
when goods are despatched, and title has passed. The Group despatches oil at the production point (EXW incoterms)
therefore the Group has no transportation and shipping costs associated with the transfer of the product to the
customer.
The Group’s sales of crude oil are priced based on the consideration specified in contracts with customers based on a
conducted tender result on the opened tender platform. Invoices are typically paid at the day of product despatch.
E&P and Trading business segments
The transfer of control of hydrocarbons usually coincides with title passing to the customer and the customer taking
physical possession as the product passes a physical point such as a designated point in the pipeline for the sale of gas
or loading point in the case of oil. The Group principally satisfies its performance obligations at a point in time.
To the extent that revenue arises from test production during an evaluation programme, an amount is credited to
evaluation costs and charged to cost of sales, to reflect a zero-net margin.
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.
(f) Foreign currencies
The functional currency of the Group’s Ukrainian operations is Ukrainian Hryvnia. The functional currency of the
Group’s UK subsidiaries and the parent company is US Dollar. The Group’s presentational currency is US Dollar
accordingly.
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
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.
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 63
3. Significant accounting policies continued
(f) Foreign currencies continued
The relevant exchange rates used were as follows:
Year ended
31 December 2023
Year ended
31 December 2022
GBP/USD
EURO/USD
USD/UAH
GBP/USD
EURO/USD
USD/UAH
Closing rate
Average rate
1.2732
1.2440
1.1038
1.0817
38.3480
37.0867
1.2104
1.2372
1.0708
1.0539
37.0663
32.4569
(g) 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.
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.
(h) 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.
(i) Right-of-use assets
The Group leases various offices, equipment, wells, and land. Contracts may contain both lease and non-lease
components. The Group allocates the consideration in the contract to the lease and non-lease components based on their
relative stand-alone prices.
Assets arising from a lease are initially measured on a present value basis.
Right-of-use assets are measured at cost comprising the following:
>
>
>
>
the amount of the initial measurement of lease liability,
any lease payments made at or before the commencement date less any lease incentives received,
any initial direct costs, and
costs to restore the asset to the conditions required by lease agreements.
Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a
straight-line basis.
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONCadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 64
Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2023
3. Significant accounting policies continued
(j) 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 requirements 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.
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 which 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 amortization, 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 such as, a) license expiry during year or in the near future and
will not likely to be renewed; b) expenditure on E&E activity neither budgeted nor planned; c) commercial quantities of
mineral resources have been discovered; and d) sufficient data exist to indicate that carrying amount of E&E asset is
unlikely to be recovered in full from successful development or sale.
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 and are separately disclosed.
(k) 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.
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 65
3. Significant accounting policies continued
(k) Development and production assets continued
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 based on assessments of internal geologists
utilising the most recent Competent Person Report and subsequent drilling and exploration, 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.
(l) 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. In determining fair value less cost to sell, the estimated future cash flows are
discounted to their present value using a post-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.
Such cash flows include relevant development expenditure that a market participant would reasonably be expected to
undertake.
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.
(m) 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.
(n) Financial instruments
Financial assets and financial liabilities are recognised in the consolidated statement of financial position when the
Group becomes party to the contractual provisions of the instrument.
Loan classified at amortised cost
Loan is measured at the amount recognised at initial recognition minus principal repayments, plus or minus the
cumulative amortisation of any difference between that initial amount and the maturity amount, and any loss
allowance. Interest income is calculated using the effective interest method and is recognised in profit and loss.
Changes in fair value are recognised in profit and loss when the asset is derecognised or reclassified. In accordance
with IFRS 9, the loan is measured at amortised cost. The Group applies the simplified approach to providing for
expected credit losses (ECL) prescribed by IFRS 9, which permits the use of the lifetime expected loss provision for
the loan. Expected credit losses are assessed on a forward-looking basis. The loss allowance is measured at initial
recognition and throughout its life at an amount equal to lifetime ECL. Any impairment is recognised in the income
statement.
Trade and other payables
Payables are initially measured at fair value, net of transaction costs and are subsequently measured at amortised cost
using the effective interest method.
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONCadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 66
Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2023
3. Significant accounting policies continued
(n) Financial instruments continued
Trade and other receivables
Trade and other receivables are recognised initially at their transaction price in accordance with IFRS 9 and are
subsequently measured at amortised cost. The Group applies the simplified approach to providing for expected
credit losses (ECL) prescribed by IFRS 9, which permits the use of the lifetime expected loss provision for all trade
receivables. Expected credit losses are assessed on a forward-looking basis. The loss allowance is measured at initial
recognition and throughout its life at an amount equal to lifetime ECL. Any impairment is recognised in the income
statement.
Cash
Cash comprise cash on hand and on-demand deposits. Deposits are recorded as cash and cash equivalents when they
have a maturity of less than 90 days at inception.
(o) Equity instruments
Ordinary shares are classified as equity. Equity instruments issued by the Company and the Group are recorded at the
proceeds received, net of direct issue costs. Any excess of the fair value of consideration received over the par value of
shares issued is recorded as share premium in equity.
(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.
(r) Leases
At inception of a contract, the Group assesses whether a contract is, or contains, a lease based on whether the contract
conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Service
agreements for equipment on the working sites are not considered leases as, based upon an assessment of the terms and
nature of their contractual arrangements, the contracts do not convey the right to control the use of an identified asset.
The right-of-use asset is initially measured based on the initial amount of the lease liability adjusted for any lease payments
made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and
remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives
received.
The asset is depreciated to the earlier of the end of the useful life of the right-of-use asset or the lease term using the
straight-line method as this most closely reflects the expected pattern of consumption of the future economic benefits.
The lease term includes periods covered by an option to extend if the Group is reasonably certain to exercise that option. In
addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements
of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement
date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the incremental
borrowing rate. The lease liability is measured at amortised cost using the effective interest method. It is remeasured when
there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group’s
estimate of the amount expected to be payable under a residual value guarantee, or if the Group changes its assessment
of whether it will exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, a
corresponding adjustment is made to the carrying amount of the right-of-use asset, or the effect is recorded in profit or loss
if the carrying amount of the right-of-use asset has been reduced to zero.
The Group elected to apply the practical expedient not to recognise right-of-use assets and lease liabilities for short-term
leases that have a lease term of 12 months or less and leases of low-value assets. The Group also made use of the practical
expedient to not recognise a right-of-use asset or a lease liability for leases for which the lease term ends within 12 months
of the date of initial application.
The lease payments associated with these leases are recognised as an expense on a straight-line basis over the lease term.
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 67
4. Critical accounting judgments 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 judgments and estimates
(a) Impairment indicator assessment for E&E assets
Cadogan had fully complied with legislative requirements and submitted its application for a twenty-year exploration and
production license five months before its expiry on 23 December 2019. A decision on the award was expected to be provided
by State Geological Service of Ukraine before 19 January 2020, since all other intermediary approvals had been secured in
line with the applicable legislation requirements. Given the delay in granting of the new license beyond the regular timeline
provided by legislation in Ukraine, Cadogan has launched a claim before the Administrative Court to challenge the non-
granting of the twenty-year production license by the Licensing Authority.
In 2022, the claims of Usenco Nadra have been rejected by the Court of 1st Instance, the Court of Appeal and the Supreme Court.
Considering the current circumstances, the Bitlyanska license were fully impaired in 2021.
(b) Impairment of PP&E
Management assesses its development and production assets for impairment indicators and if indicators of impairment are
identified performs an impairment test. Management performed an impairment assessment using a discounted cash flow
model which required estimates including forecast oil prices, reserves and production, costs and discount rates (note 17).
This test compares the carrying value of the assets at the reporting date with the expected discounted cash flows from
each project prepared under the fair value less cost of disposal approach. For the discounted cash flows to be calculated,
management has used a production profile based on its best estimate of proven and probable reserves of the assets and
a range of assumptions, including an internal oil and gas price profile benchmarked to mean analysts’ consensus and third
party estimates and a discount rate which, taking into account other assumptions used in the calculation, management
considers to be reflective of the risks.
This assessment involves judgement as to (i) the likely commerciality of the asset, (ii) proven (‘1P’) reserves which are
estimated using standard recognised evaluation techniques (iii) future revenues and estimated development costs pertaining
to the asset, (iv) the discount rate to be applied for the purposes of deriving a recoverable value including estimates of the
relevant levels of risk premiums applied to the assets.
The carrying amount of PP&E assets at 31 December 2023 was $6.1 million. The impairment assessment was identified at the
level of $8.8 million, Thus, no other impairment was identified.
(c) Recoverability and measurement of VAT
Judgment is required in assessing the recoverability of VAT assets and the extent to which historical impairment provisions
remain appropriate, particularly noting the recent recoveries against historically impaired VAT. In forming this assessment,
the Group considers the nature and age of the VAT, the likelihood of eligible future supplies to VAT, the pattern of recoveries
and risks and uncertainties associated with the operating environment (note 9).
Historically, the general volume of accumulated VAT credit was fully reserved as there were no permanent sources of its
utilisation yet (at 31 December 2023: $0.9 million). However, over the course of the year, the Group managed to realise
$0.1 million, and the reserve was accordingly reversed (note 9).
(d) Proger loan recoverability
The recoverability of the carrying value of the loan to PMP represents a significant accounting judgment. In making their
assessment over estimated recoverability of the loan, management considered the projected outcome of arbitration,
assessment of the security provided by the pledge over shares, and the delay in the recovery of the expected amount. As a
result, management concluded that $17.1 million represents its best estimate of recoverable amount as at 31 December 2023
(2022: $15.8 million). For further detail please refer to note 28.
(e) Well services and rental agreements
The Group’s well rental arrangements in Ukraine for oil and gas extraction activities are outside of the scope of IFRS
16. Judgment was required in forming this assessment, based on analysis of the scope of IFRS 16 and the nature of
the well rental arrangements. This assessment focused on the extent to which the rental agreements provided access
to sub-surface well structures to extract hydrocarbons versus surface level infrastructure for the transport and
processing of extracted hydrocarbons.
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONCadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 68
Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2023
(f) Deferred tax assets
Deferred tax assets and liabilities require management judgement in determining the amounts to be recognised. In
particular, significant judgement is used when assessing the extent to which deferred tax assets should be recognised,
with consideration given to the timing and level of future taxable income in the relevant tax jurisdiction.
Deferred tax assets are recognised only to the extent it is considered probable that those assets will be recoverable.
This involves an assessment of when those deferred tax assets are likely to reverse, and a judgement as to whether
or not there will be sufficient taxable profits available to offset the tax assets when they do reverse. This requires
assumptions regarding future profitability and is therefore inherently uncertain. To the extent assumptions regarding
future profitability change, there can be an increase or decrease in the level of deferred tax assets recognised that can
result in a charge or credit in the period in which the change occurs.
(g) Determination of oil and gas reserves
Proven oil and gas reserves is the expected quantity of crude oil, natural gas and gas condensate liquids, the geological
and engineering features of which reliably indicate that such reserves can be produced from known deposits within
future years under existing economic and operating conditions. Proven developed reserves are reserves that are
expected to be produced through the use of existing wells using existing equipment and operating methods. The
determination of the level of oil and gas reserves is inherently characterised by uncertainty and requires the use of
professional judgment and periodic revisions in the future. All proven reserves are subject to revision in accordance
with new information regarding exploration drilling, production activity or changes in economic factors, including
commodity prices, contract terms and exploration plans. Accordingly, financial and accounting estimates based on
proven reserves are also subject to changes.
Changes in the level of proven developed reserves, affect the depreciation charges recognised in the financial
statements in the property, plant and equipment item related to development and production assets. Such changes, for
example, can be both the result of production and revision of estimates. A reduction in proven developed reserves will
increase depreciation charges (provided constant production) and will also increase costs.
The last independent valuation of the Group's oil and gas reserves was carried out as at 31 December 2023.
(h) Depreciation of wells related to hydrocarbon production
Wells related to the production of hydrocarbons (hereinafter referred to as "Wells") are depreciated using the unit
of production method. The cost of Wells is depreciated based on the available reserves of the relevant hydrocarbons
categories (proven developed produced), estimated in accordance with the standards of the Petroleum Resources
Management System (PRMS), prepared by the Oil and Gas Reserves Committee of the Society of Petroleum Engineers
(SPE).
(i) Depreciation of special subsoil use permits related to hydrocarbon extraction
Special permits for the subsoil use, which grant the right to extract hydrocarbons (hereinafter referred to as the
"Permit"), are depreciated using the unit of production method. The cost of the Permit is depreciated based on the
volumes of available reserves of the relevant hydrocarbons of the proved, probable and possible categories assessed in
accordance with SPE-PRMS.
(j) Decommissioning costs
The provision for asset decommissioning represents the present value of costs of decommissioning oil and gas facilities
that are expected to be incurred in the future (Note 25). These provisions were recognised based on the Company's
internal estimates. The underlying estimates include future market prices for the required decommissioning costs and
are based on market conditions and factors, as well as a discount rate. An additional uncertainty relates to the deadline
of decommissioning costs, which depend on the field depletion, future oil and gas prices and, as a result, the expected
point in time when future economic benefits from production are not expected to be realised. Changes in these
estimates may result in changes in the provisions recognised in the Statement of financial position.
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 senior management team as its CODM
and the internal reports used by the senior 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 and all Group’s revenues 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 exploration and production licences for natural gas, oil and condensate.
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 69
5. Segment information continued
Trading
>
Import of natural gas from European countries; and
>
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 rates considered to approximate 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 at 31 December 2023 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
Impairment of other assets
Adjustments of end of concession obligations for E&E assets
Other operating income, net
Reversal of impairment of other assets
Finance income1
Segment results
Unallocated administrative expenses
Finance income/costs, net
Net foreign exchange gain
Profit before tax
Exploration and
Production
$’000
Trading
$’000
Consolidated
$’000
7,141
6
–
7,147
(4,991)
(497)
(49)
218
25
2
431
2,386
–
–
–
–
403
–
–
403
(400)
(118)
–
–
–
54
–
(61)
–
–
–
–
7,544
6
–
7,550
(5,391)
(615)
(49)
218
25
56
431
2,225
(2,959)
1,454
538
1,258
1 Net finance income includes $431,000 of interest on cash deposits in Ukraine.
As at 31 December 2022 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
Impairment of oil and gas assets
Other operating expenses, net
Impairment of other assets
Reversal of impairment of other assets
Finance income2
Segment results
Unallocated administrative expenses
Other income, net
Net foreign exchange loss
Loss before tax
Exploration and
Production
$’000
Trading
$’000
Consolidated
$’000
8,465
7
–
8,472
(5,553)
(450)
(269)
(3)
(16)
20
185
2,386
–
–
–
–
–
–
–
–
–
(125)
–
(11)
–
–
8,465
7
–
8,472
(5,553)
(575)
(269)
(3)
(27)
20
185
(136)
2,250
–
–
–
–
(2,866)
187
(1,131)
(1,560)
2 Net finance income includes $185,000 of interest on cash deposits used for operations.
Fixed assets related to Exploration and Production segment are disclosed in the note 17.
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONCadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 70
Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2023
6. Revenue
Sale of oil (production) – point in time
Sale of gas (trading) – point in time
2023
$’000
7,147
403
7,550
2022
$’000
8,472
-
8,472
Revenue is generated in Ukraine. Refer to note 3(e) for details of the performance obligations. Service revenue and
associated contract assets and liabilities are immaterial.
Information about major customers
81% of production business segment revenue arose from sales to five largest customers. Three of them contributed
for more than 10% of the total revenue of the production business segment revenue for the year ended 31 December
2023.
80% of prior year production business segment revenue arose from sales to five largest customers. Each of them
contributed for more than 10% of the total revenue of the production business segment revenue for the year ended
31 December 2022.
Trading segment revenue for the year ended 31 December 2023 of $0.4 million arose from sales transactions with one
customer (2022: no activities).
7. Cost of sales
Subsoil tax
Natural gas cost
Well rent
Depreciation
Staff cost
Insurance
Materials Cost
Machinery services
Electricity
Security services
Other expenses
Total
8. Administrative expenses
Staff
Professional fees
Insurance
Depreciation
Office costs including utilities and maintenance
IT and communication
Cars and travel
Bank charges
Travelling
Other
Total
9. Reversal of impairment/(impairment) of other assets
Inventory
VAT recoverable
Other receivables
Reversal of impairment of other assets
2023
$’000
2,668
400
699
713
237
204
126
115
80
68
81
5,391
2023
$’000
1,805
1,051
188
169
57
43
43
23
23
172
3,574
2022
$’000
3,522
-
789
536
245
34
143
111
67
65
75
5,553
2022
$’000
1,774
872
215
217
51
62
61
34
9
146
3,441
2023
$’000
20221
$’000
–
54
2
56
20
–
–
20
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com
71
9. Reversal of impairment/(impairment) of other assets continued
$0.9 million (2022: $1.0 million) of historical VAT receivables remain impaired. Refer to Note 4 and 20.
Inventories
Other receivables
VAT recoverable
Impairment of other assets
10. Other operating expenses, net
Other expenses
Total
11. 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
12. Staff costs
The average monthly number of employees (including Executive Directors) was:
Executive Directors
Other employees
Total
Total number of employees at 31 December
Their aggregate remuneration comprised:
Wages and salaries
Social security costs
Pension costs
Total
2023
$’000
(44)
(5)
-
(49)
2023
$’000
25
25
2022
$’000
-
(16)
(11)
(27)
2021
$’000
(3)
(3)
2023
$’000
2022
$’000
192
8
200
192
8
200
2023
Number
2022
Number
1
73
74
74
1
74
75
75
$’000
$’000
1,520
207
78
1,805
1,596
227
74
1,897
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONCadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 72
Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2023
13. Finance income/(costs), net
Interest on loan (note 28)
Reversal of liability accrual
Interest income on cash deposits in United Kingdom
Interest income on cash deposits in Ukraine
Change in provision (note 25)
Total interest income on financial assets
Interest on lease
Unwinding of discount on decommissioning provision (note 25)
Total
14. Tax
Current tax
Deferred tax
Total
2023
$’000
757
395
367
431
–
1,950
(10)
(55)
1,885
2022
$’000
38
–
97
185
93
413
(18)
(23)
372
2023
$’000
2022
$’000
–
–
–
–
–
–
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 % (2022: 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 profit/(loss) per the income statement as follows:
Profit/(loss) before tax
Tax charge/(credit) at Ukraine corporation tax rate of 18% (2022: 18%)
Permanent differences
Unrecognised tax losses generated in the year
Recognition of previously unrecognised deferred tax assets
Effect of different tax rates
Adjustments recognised in the current year in relation with the current tax of prior years
Income tax benefit/(expense) recognised in profit or loss
2023
$’000
1,258
226
(583)
47
318
(8)
–
–
2022
$’000
(1,560)
(281)
(1,361)
1,682
–
(40)
–
–
Permanent differences mostly represent items, including provisions, accruals and impairments related to taxation in
Ukraine, these are items not deductible in tax computations.
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 73
15. Earnings/(loss) per Ordinary share
Basic earnings/(loss) per Ordinary share is calculated by dividing the net profit/(loss) for the year attributable to
owners of the Company by the weighted average number of Ordinary shares outstanding during the year. In 2022 the
Group generated a loss and therefore there is no difference between basic and diluted EPS.
Earnings/(loss) attributable to owners of the Company
Earnings/(loss) for the purposes of basic loss per share being net loss attributable to owners of the
Company
Number of shares
Weighted average number of Ordinary shares used in calculation of earnings per share:
Basic
Diluted
2023
$’000
2022
$’000
1,259
(1,562)
Number
‘000
Number
‘000
244,128
244,128
244,128
244,128
Earnings/(loss) per Ordinary share
Basic and diluted
16. Intangible exploration and evaluation assets
Cost
At 1 January 2022
Additions
Disposals
Change in estimate of decommissioning assets (note 25)
Exchange differences
At 1 January 2023
Additions
Disposals
Change in estimate of decommissioning assets (note 25)
Exchange differences
At 31 December 2023
Impairment
At 1 January 2022
Disposals
Change in estimate of decommissioning assets (note 25)
Exchange differences
At 1 January 2023
Addition
Disposals
Change in estimate of decommissioning assets (note 25)
Exchange differences
At 31 December 2023
Carrying amount
At 31 December 2023
At 31 December 2022
Cent
0.5
Cent
(0.6)
$’000
16,701
–
(5,878)
269
(3,577)
7,515
1
(615)
(218)
(224)
6,459
16,701
(5,878)
269
(3,577)
7,515
1
(615)
(218)
(224)
6,459
–
–
Disposals of $0.6 million relates to E&E assets impaired in previous years. The Company analysed the possibilities to
realise any benefit from those assets. In 2023, based on the conducted analysis, management decided to write-off of
those assets.
The carrying amount of E&E assets at 31 December 2023 relates to the Bitlyanska license.
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONCadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 74
Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2023
16. Intangible exploration and evaluation assets continued
Usenco Nadra has fully complied with legislative requirements and submitted its application for a twenty-year
exploration and production license five months before its expiry on 23 December 2019. A decision on the award was
expected to be provided by State Geological Service of Ukraine before 19 January 2020, since all other intermediary
approvals had been secured in line with the applicable legislation requirements. Given the delay to granting of the
new license beyond the regular timeline provided by legislation in the Ukraine, Cadogan filed a claim before the
Administrative Court to challenge the non-granting of the twenty-year production license by the Licensing Authority.
After the rejection of its claims, in February 2022, the Company exercised its right for appeal. The Appeal Court and
further on the Supreme Court rejected all the Company’s claims.
The Company fully impaired the Bitlyanska license in 2022.
17. Property, plant and equipment
Cost
At 1 January 2022
Additions
Disposal
Exchange differences
At 1 January 2023
Additions
Change in estimate of decommissioning assets (note 25)
Disposal
Exchange differences
Development
and production
assets
$’000
14,567
71
(701)
(3,651)
10,286
43
20
(1,734)
(288)
Other
$’000
2,930
30
(7)
(753)
2,200
15
–
(1,160)
(35)
Total
$’000
17,497
101
(708)
(4,404)
12,486
58
20
(2,894)
(323)
At 31 December 2023
8,327
1,020
9,347
Accumulated depreciation and impairment
At 1 January 2022
Charge for the year
Disposals
Exchange differences
At 1 January 2023
Charge for the year
Disposals
Exchange differences
At 31 December 2023
Carrying amount
At 31 December 2023
At 31 December 2022
5,273
604
(693)
(1,338)
3,846
692
(1,711)
(95)
2,732
5,595
6,440
2,626
68
(7)
(680)
2,007
37
(1,167)
(30)
7,899
672
(700)
(2,018)
5,853
729
(2,878)
(125)
847
3,579
173
193
5,768
6,633
Other property, plant and equipment include fixtures and fittings for the development and production activities.
Disposals of $1.2 million relate to Other PP&E assets impaired in previous years. Company analysed the possibility to
realise any benefit from those assets. In 2023, based on the conducted analysis management decided to dispose of
those assets.
The carrying amount of development and production assets at 31 December 2023 of $5.6 million relates to the Blazhiv
license. Depreciation includes $0.7 million for the Blazhiv license.
Disposals of $1.7 million relate to D&P assets impaired in previous years. The Company was analysing the possibility to
realise any benefits from those assets. In 2023, based on the conducted analysis management decided to dispose of
those assets.
Management has performed an impairment review of Development and production assets based on the underlying
discounted cash flow forecasts. The impairment review supported the conclusion that no impairment was applicable. Key
assumptions used in the impairment assessment were: future oil prices which were assumed at a constant $467 (2022:
$408), real per tonne; a production forecast with a natural decline; estimated reserves and a discount rate of 25%.
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 75
17. Property, plant and equipment continued
Sensitivity analysis for the development and production assets
Any impairment is dependent on judgement used in determining the most appropriate basis for the assumptions and
estimates made by management, particularly in relation to the key assumptions described above. Sensitivity analysis
to potential changes in key assumptions to reach break-even has been provided below:
Change in the assumptions to be break-even
Change in the assumptions to be break-even
Oil price
Oil production volumes
Discount rate
(28%)
(23%)
56%
18. Subsidiaries
Company had investments in the following subsidiary undertakings at 31 December 2023:
Name
Country of
incorporation
and operation
Proportion
of voting
interest % Activity
Registered office
Directly held
Cadogan Petroleum Holdings Ltd
UK
Indirectly held
Cadogan Petroleum Holdings BV
Cadogan Bitlyanske BV
Zagoryanska Petroleum BV
LLC Cadogan Ukraine
LLC Astroinvest-Energy
SE USENCO Ukraine
LLC USENCO Nadra
LLC Astro-Service
Exploenergy s.r.l.
Netherlands
Netherlands
Netherlands
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Italy
100 Holding company
6th Floor 60 Gracechurch Street, London,
EC3V 0HR, United Kingdom
100 Holding company
100 Holding company
100 Holding company
100 Holding company
100 Trading
100 Production
100 Production
Hoogoorddreef 15, 1101 BA Amsterdam
Hoogoorddreef 15, 1101 BA Amsterdam
Hoogoorddreef 15, 1101 BA Amsterdam
48/50a, Zhylyanska Street, Kyiv, Ukraine
5a, Pogrebnyak Street, ap. 2, Zinkiv,
Poltava region, Ukraine, 38100
8, Mitskevycha sq., Lviv, Ukraine,79000
9a, Karpenka-Karoho str., Sambir, Lviv
region, Ukraine
100 Service Company
90 Exploration
3 Petro Kozlaniuk str, Kolomyia, Ukraine
Via Adige 17, San Donato Milanese
Milano, CAP 20097, Italy
In April 2023, SE Usenco Ukraine (a Cadogan subsidiary in Ukraine) completed the acquisition of the 5% minority
interest of Usenco Nadra LLC. As a result, SE Usenco Ukraine consolidates now 100% of Usenco Nadra LLC in its
ownership.
In 2023, the liquidation procedure of the company LLC Asto Gas was fully completed.
There were no other changes to the Group structure during 2023.
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONCadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 76
Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2023
19. Inventories
Natural gas
Crude oil
Other inventories
Impairment provision
Carrying amount
A part of other inventories was sold to the third parties of $68,000.
At 1 January
Accrual of provision
Reversal of provision
Exchange differences
At 31 December
2023
$’000
265
105
1,116
(1,122)
364
2023
$’000
1,116
52
(8)
(38)
1,122
2022
$’000
45
182
1,184
(1,116)
295
2022
$’000
1,523
–
(20)
(387)
1,116
The impairment provision at 31 December 2023 and 2022 is made so as to reduce the carrying value of the inventories
to the net realizable value and includes $1,070,000 provision for other inventories, and $52,000 provision for natural
gas (2022: $1,116,000 provision for other inventories).
20. Trade and other receivables
Trade receivables
Impairment provision for bad debts
VAT recoverable
Impairment provision for VAT
Prepayments
Other receivables
At 1 January
Accrual of provision
Reversal of provision
Exchange differences
At 31 December
2023
$’000
68
(49)
1,097
(918)
81
31
310
2022
$’000
192
(52)
1,080
(1,003)
60
41
318
2023
Trade and
Other
Receivables
$’000
VAT
recoverable
$’000
2022
Trade and
Other
Receivables
$’000
VAT
recoverable
$’000
1,003
–
(54)
(31)
918
52
–
(2)
(1)
49
1,335
11
–
(343)
1,003
53
16
–
(17)
52
The Group considers that the carrying value of receivables approximates their fair value.
VAT recoverable is presented net of the cumulative provision of $0.9million (2022: $1.0 million) against Ukrainian VAT
receivable that has been recognised as at 31 December 2023. VAT recoverable relates to the oil production and gas
trading operations and is expected to be recovered through the gas and oil sales VAT.
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 77
21. Notes supporting statement of cash flows
Cash at 31 December 2023 of $14.2 million (2022: $13.9 million) comprise cash held by the Group. Ukrainian subsidiaries
of the Group hold $5.4million as at 31 December 2023 (2022: $3.6 million).
With the start of the Russian invasion into Ukraine on 24 February 2022, the Ukrainian government introduced Martial
Law affecting, among others, aspects relating to lending agreements, foreign exchange and currency controls and
banking activities. As a result of the introduced Martial Law, the National Bank of Ukraine (“NBU”) has introduced
significant currency and capital control restrictions in Ukraine. These measures are affecting the Group in terms of its
cross-border payments to be made, which are restricted and may be carried out only in exceptional cases specified in
the amendments to the resolution No. 18. Based on the regulations, Ukrainian subsidiaries of the Group are not able to
pay dividends to the parent Company but are able to use the cash in normal course of business.
The Directors consider that the carrying amount of these assets approximates to their fair value. There were no cash
transactions from financing activities for the year 2023.
22. 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:
Asset at 1 January 2022
Deferred tax benefit
Exchange differences
Asset at 1 January 2023
Deferred tax benefit
Exchange differences
Asset at 31 December 2023
Temporary
differences
$’000
431
–
(112)
319
–
51
370
At 31 December 2023, the Group had the following unused tax losses available for offset against future taxable profits:
UK
Ukraine
2023
$’000
18,197
42,113
2022
$’000
17,541
43,138
60,310
60,679
Deferred tax assets have been recognised in respect of those tax losses where there is sufficient certainty that profit
will be available in future periods against which they can be utilised. The Group’s unused tax losses of $18.2 million
(2022: $17.5 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. No deferred tax asset is recorded.
Unused tax losses incurred by Ukraine subsidiaries amount to $42.1 million (2022: $43.1 million). Under general tax
law provisions, these losses may be carried forward indefinitely to be offset against any type of taxable income arising
from the same company. Tax losses may not be surrendered from one Ukraine subsidiary to another. The deferred
tax asset recorded is expected to be utilised based on forecasts and relates to oil production subsidiaries which are
generating taxable profits in the foreseeable future.
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONCadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 78
Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2023
23. Lease liabilities
The Group continued to recognise right-of-use assets and lease liabilities based on a rental contract for the rent of a Kyiv
office with maturity date end of February 2024. Additionally, in December 2023 the new rental contract for the rent of a
Kyiv office was signed with the maturity date end of January 2027. Right-of-use assets are depreciated over the useful life
of the underlying asset. Depreciation represented as a part of administrative expenses. Total carrying value of right-of-use
assets is $246,000 as of 31 December 2023.
Cost
Accumulated depreciation
As at 1 January 2022
Depreciation charge for the year
As at 1 January 2023
Cost
Accumulated depreciation
As at 1 January 2023
Additions
Depreciation charge for the year
At 31 December 2023
Cost
Accumulated depreciation
At 31 December 2023
Right-of-use assets
$’000
292
(92)
200
(92)
108
292
(184)
108
230
(92)
246
522
(276)
246
The following table sets out a maturity analysis of lease liability, showing the undiscounted lease payments to be paid
after the reporting date.
2023
2024
2025
2026
2027
Less: unearned interest
Lease liabilities
Analysed as:
Current
Non-current
Lease liabilities
2023
$’000
2022
$’000
–
95
88
92
8
(48)
235
99
20
–
–
–
142)
107
2023
$’000
2022
$’000
87
148
235
79
28
107
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 24. Trade and other payables
Accruals
Trade creditors
Prepayments received
Other payables
79
2023
$’000
430
140
54
742
1,366
2022
$’000
281
569
32
519
1,401
Trade payables and accruals principally comprise amounts outstanding for ongoing costs. The average credit period
taken for trade purchases is 29 days (2022: 30 days). The Group has financial risk management policies to ensure that
all payables are paid within the credit timeframe.
Other payables include unused vacation reserve provision of $0.39 million (2022: $0.37 million), subsoil tax payables of
$0.22 million (2022: $0.13) and other payables of $0.13 million (2022: $0.02).
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.
25. Provisions
The provisions at 31 December 2023 comprise $0.2 million (2022: $0.4 million) of decommissioning provision.
Decommissioning
At 1 January 2022
Change in estimate: exploration and evaluation assets (note 16)
Change in estimate: development and production assets
Unwinding of discount on decommissioning provision (note 13)
Exchange differences
At 1 January 2023
Change in estimate: exploration and evaluation assets (note 16)
Change in estimate: development and production assets
Unwinding of discount on decommissioning provision (note 13)
Exchange differences
At 31 December 2023
Non-current
Current
At 31 December 2022
Non-current
Current
At 31 December 2023
$’000
300
269
(93)
23
(102)
397
(218)
20
55
(9)
245
$’000
261
136
397
141
131
245
In accordance with the Group’s environmental policy and applicable legal requirements as of 31 December 2023 the
Group intends to restore the sites it is working on after completing the development activities.
Provision for the decommissioning and site restoration used by development and production assets has been increased
by $20,000 due to change in discounting rate used for the provision calculation (2023: 17%; 2022: 21%). The change in
the provision has been recognised as other financial income/(loss) for the year together with unwinding of discount on
decommissioning provision.
A long-term provision of $0.11 million (2022: $0.26 million) has been made for decommissioning costs for Borynya-3
well, which is expected to be incurred in 2039, and Blazhiv-10 well, which is to be incurred at the end of Blazhiv licenses
period as a result of the demobilisation of oil and gas facilities and respective site restoration. Current provision of
$0.13 million (2022: $0.14 million) has been made for decommissioning costs, which are expected to be incurred in 2024
as a result of the demobilisation of oil and gas facilities and respective site restoration on Bitlyanska license.
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONCadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 80
Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2023
26. Share capital
Authorised and issued equity share capital
Authorised
Ordinary shares of £0.03 each
Issued
Ordinary shares of £0.03 each
2023
2022
Number
(’000)
$’000
Number
(‘000)
$’000
1,000,000
57,713
1,000,000
57,713
244,128
13,832
244,128
13,832
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 2021
Issued during year
At 31 December 2022
Issued during year
At 31 December 2023
27. Other reserves
At 1 January 2023
Charge for the year
At 31 December 2023
Ordinary shares
of £0.03
244,128,487
–
244,128,487
–
244,128,487
Reorganisation
$’000
1,589
–
1,589
The accumulated amount of reserves at 31 December 2023 is made as accounting entry relating to the acquisition of
CPHL by PLC by means of share exchange in 2006. This was not deemed to be a business combination as there was no
change in control.
28. 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 consist of cash 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 (includes cash)
Loan provided at amortised cost
Cash
Other receivables – amortised cost
Financial liabilities – measured at amortised cost
Trade creditors
Lease liabilities
Accruals
Other payables
2023
$’000
17,074
14,155
50
2022
$’000
15,825
13,934
181
31,279
29,940
140
235
430
742
1,547
569
107
281
519
1,476
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 81
28. Financial instruments continued
The Proger loan is recorded at management’s best estimate of recoverable amount as set out in note 4(d) although
management have not been able to undertake a valuation exercise under the income method based on Proger’s
underlying cash flows or market-based method which would incorporate relevant recent financial information on the
investee or its prospects.
As at 1 January 2021
Reclassification from FVPL to AC
Addition
Exchange differences
As at 31 December 2021
Financial assets at fair value
through profit and loss
$’000
Financial assets at
amortised cost
$’000
16,812
(16,812)
–
–
–
–
16,812
1,225
(1,313)
16,724
The Group has previously applied a level 3 valuation under IFRS as inputs to the valuation have included assessment
of the cash repayments anticipated under the loan terms at maturity, delayed by the arbitration process requested
by PMP (the Borrower), historical financial information for the periods prior to 2020 and assessment of the security
provided by the pledge over shares together with the impact of the Covid-19 on the activity of Proger. As a result,
$ 16.8 million was determined as the best estimate of fair value as at 31 December 2020, being equal to anticipated
receipts and timing thereof discounted at an estimated market rate of interest of 7.8%.
In February 2021, Cadogan notified PMP that according to the Loan Agreement, the Maturity Date occurred on
25 February 2021. As the Call Option was not exercised, PMP must fulfil the payment of EUR 14,857,350, being the
reimbursement of the Loan in terms of principal and the accumulated interest. PMP is in default since 25 February
2021. In case of default payment, the terms of the agreement provide for the application of an increased interest rate
on the amount of the debt.
Since the Call Option was not exercised before the Maturity Date and the asset is held within a business model whose
objective is to hold assets in order to collect contractual cash flows, the Loan provided was reclassified from ‘Financial
assets at fair value through profit and loss’ to ‘Financial assets at amortised cost’.
As at 1 January 2022
Movement in accrued interest
Movement in accrued provision
Exchange differences
As at 1 January 2023
Movement in accrued interest
Movement in accrued provision
Exchange differences
As at 31 December 2023
$’000
16,724
1,338
(1,300)
(937)
15,825
1,457
(700)
492
17,074
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONCadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 82
Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2023
28. Financial instruments continued
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 at 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 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 Organization of Petroleum Exporting Countries.
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.
Foreign exchange risk and foreign currency risk management
The Group holds a large portion of its monetary assets in the US Dollars and Euro, mitigating the exchange risk
between the US Dollars and Euro and monetary liability in the US Dollars.s.
Sensitivity analysis is represented below based on 10% exchange rate deviation:
Cash position
Loan receivable at amortised cost
Net assets
As at 31 December 2023
Change in EURO/USD
exchange rate
$’000
14,155
17,074
36,411
+10%
178
1,707
1,885
(10%)
(178)
(1,707)
(1,885)
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 is mitigated by active and continuous monitoring
the credit quality of its counterparties through internal reviews and assessment. There was no material past due
receivables as at year end.
The Group makes allowances for expected credit losses on receivables in accordance with its accounting policy.
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.
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 83
28. Financial instruments continued
The carrying amount of financial assets as at 31 December 2023 of $31.3 million (2022: $29.9 million) recorded in the
financial statements represents the Group’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 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 2022
Trade and other payables
Lease liability
At 31 December 2023
Trade and other payables
Lease liability
Within
3 months
$’000
3 months to
1 year
$’000
More than
1 year
$’000
1,369
–
1,312
5
–
99
–
90
–
20
–
188
Total
$’000
1,369
119
1,312
283
The carrying amount of financial liabilities as at 31 December 2023 of $1.6 million (2022: $1.5 million) recorded in the
financial statements demonstrates the stable financial condition of the Group.
29. Commitments and contingencies
Licence contingent liability
The Group has working interests in Blazhiv license to conduct its exploration and development activities in Ukraine.
The license is not held any obligation on a settlement of exploration activities within its term.
Tax contingent liabilities
The Group assesses its liabilities and contingencies for all tax years open for audit by UK, Netherlands and Ukraine tax
authorities based upon the latest information available.
Where management concludes that it is not probable that a particular tax treatment is accepted, a provision is
recorded based on the most likely amount or the expected value of the tax treatment when determining taxable
profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates. The decision should be based on which
method provides better predictions of the resolution of the uncertainty. 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, Netherlands 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.
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONCadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 84
Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2023
30. 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.
In February 2019, the Group entered in a 2-year loan agreement with Proger Management & Partners Srl with an option
to convert it into a direct 33% equity interest in Proger Ingegneria. At that time, Mr Michelotti was a Non-Executive
Director of Proger Ingegneria Srl and Proger Spa, and CEO of Cadogan Petroleum PLC. Mr Michelotti did not
participate to the voting for the approval of the loan agreement at the Board of Cadogan.
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 2023 on page 33.
Directors’ remuneration
Social contribution on Directors’ remuneration
Purchase of services
Amounts owing
2023
$’000
712
72
2022
$’000
693
72
2023
$’000
54
-
2022
$’000
83
–
The total remuneration of the highest paid Director was $0.5 million in the year (2022: $0.5 million).
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.
31. Events after the balance sheet date
In April 2024, LLC AstroInvest Energy signed the agreement to purchase a power generation unit with KTS Engineering
s.r.o., the official dealer of equipment of Jenbacher GmbH & Co OG (Austria). The delivery of the equipment is expected by
the end of the year.
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com Company Balance Sheet
As at 31 December 2023
85
ASSETS
Non-current assets
Receivables from subsidiaries
Current assets
Trade and other receivables
Cash
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Total liabilities
Net assets
EQUITY
Share capital
Share premium
Retained earnings1
Cumulative translation reserves
Total equity
Notes
2023
$’000
2022
$’000
35
35
35
36
37
38
35,659
35,659
2
1,796
1,798
35,918
35,918
–
2,391
2,391
37,457
38,309
(350)
(350)
(350)
(337)
(337)
(337)
37,107
37,972
13,832
514
131,480
(108,719)
13,832
514
132,345
(108,719)
37,107
37,972
As permitted by section 408 of the Act, the Company has elected not to present its profit and loss account for the year.
The loss for the financial year ended 31 December 2023 was $0.9 million (2022: loss $2.4 million).
The financial statements of Cadogan Energy Solution plc, registered in England and Wales no. 05718406, were
approved by the Board of Directors and authorised for issue on 7 May 2024.
They were signed on its behalf by:
Fady Khallouf
Chief Executive Officer
7 May 2024
The notes on pages 88 to 90 form part of these financial statements.
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONCadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 86
Company Cash Flow Statement
For the year ended 31 December 2023
Operating activities
Loss for the year
Adjustments for:
Interest received
Impairment of receivables from subsidiaries
Effect of foreign exchange rate changes
Movement in provisions
Operating cash outflows before movements in working capital
Decrease/(increase) in receivables
Increase/(decrease) in payables
Cash used in operations
Income taxes paid
Net cash outflow from operating activities
Investing activities
Interest received
Net cash generated from investing activities
Net decrease in cash
Effect of foreign exchange rate changes
Cash at beginning of year
Cash at end of year
2023
$’000
2022
$’000
(865)
(2,402)
(26)
–
(491)
45
(1,337)
698
(37)
(676)
–
(676)
26
26
(650)
55
2,391
1,796
(4)
–
1,053
(11)
(1,364)
2
99
(1,263)
–
(1,263)
4
4
(1,259)
(207)
3,857
2,391
The notes on pages 88 to 90 form part of these financial statements.
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 87
Company Statement of Changes in Equity
For the year ended 31 December 2023
As at 1 January 2022
Net loss for the year
Total comprehensive loss for
the year
Issue of ordinary shares
Share
capital
$’000
13,832
–
–
–
Share
premium
account
$’000
514
–
–
–
Retained
earnings
$’000
134,747
(2,402)
(2,402)
–
As at 1 January 2023
13,832
514
132,345
Net loss for the year
Total comprehensive loss for
the year
–
–
–
–
(865)
(865)
As at 31 December 2023
13,832
514
131,480
Other
reserve
$’000
–
–
–
–
–
–
–
–
Cumulative
translation
reserves
$’000
(108,719)
–
–
–
Total
$’000
40,374
(2,402)
(2,402)
–
(108,719)
37,972
–
–
(865)
(865)
(108,719)
37,107
The notes on pages 88 to 90 form part of these financial statements.
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONCadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 88
Notes to the Company Financial Statements
For the year ended 31 December 2023
32. 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 UK-adopted
International Accounting 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 Energy Solutions plc reported a loss for the financial year ended 31 December 2023 of $0.9 million (2022: loss
$2.4 million).
Investments
Investments in subsidiaries are stated at cost less, where appropriate, provisions for impairment.
Receivables from subsidiaries
Loans to subsidiary undertakings are subject to IFRS 9’s new expected credit loss model. As all intercompany loans
are repayable on demand, the loan is considered to be in stage 3 of the IFRS 9 ECL model on the basis the subsidiary
does not have enough liquid assets in order to repay the loans if demanded. Lifetime ECLs are determined using all
relevant, reasonable and supportable historical, current and forward-looking information that provides evidence about
the risk that the subsidiaries will default on the loan and the amount of losses that would arise as a result of that
default. Analysis indicated that the Company will fully recover the carrying value of the loans (net of historic credit loss
provisions) so no additional ECL has been recognised in the current period.
Critical accounting judgment 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.
The critical estimates and judgments referred to application of the expected credit loss model to intercompany
receivables (note 34). Management determined that the interest free on demand loans were required to be assessed
on the lifetime expected credit loss approach and assessed scenarios considering risks of loss events and the
amounts which could be realised on the loans. In doing so, consideration was given to factors such as the cash held
by subsidiaries and the underlying forecasts of the Group’s divisions and their incorporation of prospective risks and
uncertainties.
33. Auditor’s remuneration
The auditor’s remuneration for audit and other services is disclosed in note 11 to the Consolidated Financial Statements.
34. Investments
The Company’s subsidiaries are disclosed in note 18 to the Consolidated Financial Statements. The investments in
subsidiaries are all stated at cost less any provision for impairment.
35. Financial assets
The Company’s principal financial assets are bank balances and cash 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 $348.7 million (2022:
$349.1 million). The Company did not recognise additional expected credit loss provisions in relation to receivables
from subsidiaries in 2023 (2022: nil). The accumulated provision on receivables at 31 December 2023 was $313 million
(2022: $313.2 million). The carrying value of the receivables from the fellow Group companies at 31 December 2023 was
$35.7 million (2022: $35.9 million). Receivables from subsidiaries are interest free and repayable on demand. There
are no past due receivables. The receivables are classified as non-current based on the expected timing of receipt
notwithstanding their terms.
Cash
Cash comprises 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.
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 36. Financial liabilities
Trade and other payables
Accruals
Unused vacation provision
Amounts owing to Directors
Trade creditors
89
2023
$’000
166
105
54
25
350
2022
$’000
141
85
82
29
337
Trade payables principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit
period taken for trade purchases is 30 days (2022: 29 days).
Unused vacation provision of $105,000 accrued for CEO of the Company (2022: $85,000).
The Directors consider that the carrying amount of trade and other payables approximates to their fair value. No
interest is charged on balances outstanding.
37. Share capital
The Company’s share capital is disclosed in note 26 to the Consolidated Financial Statements.
38. 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.
39. 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 28 for the Group’s overall strategy and financial risk management objectives.
The capital resources of the Company consist of cash arising from equity, comprising issued capital, reserves and
retained earnings.
Categories of financial instruments
Financial assets – measured at amortised cost
Cash
Amounts due from subsidiaries
Financial liabilities – measured at amortised cost
Trade creditors
2023
$’000
2022
$’000
1,796
35,659
37,445
(184)
(184)
2,391
35,918
38,309
(196)
(196)
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, 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.
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONCadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 90
Notes to the Company
Financial Statements continued
For the year ended 31 December 2023
39. 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 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 immaterial and therefore no maturity analysis has been presented.
Foreign exchange risk and foreign currency risk management
The Company holds a large portion of its monetary assets in the US Dollars and Euro, mitigating the exchange risk
between the US Dollars and Euro and monetary liability in the US Dollars. More information on the foreign exchange
risk and foreign currency risk management is disclosed in note 28 to the Consolidated Financial Statements.
40. 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
2023
$’000
35,659
35,659
2022
$’000
35,918
35,918
Refer to note 34 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 2023 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 2023 on pages 32 to 37.
Directors’ remuneration
Social contribution on Directors’ remuneration
Purchase of services
Amounts owing
2023
$’000
712
72
2022
$’000
693
72
2023
$’000
54
–
2022
$’000
83
–
The total remuneration of the highest paid Director was $0.5 million in the year (2022: $0.5 million).
41. Events after the balance sheet date
Events after the balance sheet date are disclosed in note 31 to the Consolidated Financial Statements.
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 91
Glossary
IFRSs
JAA
UAH
GBP
$
bbl
boe
mmboe
mboe
mboepd
boepd
bcf
mmcm
mcm
Reserves
Proved Reserves
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
Workover
E&E/E&P
LTI
Proved Reserves
Probable Reserves
Possible Reserves
Proved Reserves
Proved plus Probable Reserves
Proved plus Probable plus Possible Reserves
The process of performing major maintenance or remedial treatment of an existing oil or
gas well
Exploration and Evaluation/Exploration and Production
Lost time incidents
OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEREMUNERATION REPORTFINANCIAL STATEMENTSGLOSSARYSHAREHOLDER INFORMATIONCadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com 92
Shareholder Information
Enquiries relating to the following administrative matters should be addressed to the Company’s registrars: Link Group,
10th Floor, Central Square, 29 Wellington Street, Leeds LS1 4DL.
Telephone: 0371 664 0300. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the
United Kingdom will be charged at the applicable international rate. Lines are open between 09:00 – 17:30, Monday to
Friday excluding public holidays in England and Wales.
>
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 Shareholder Portal www.signalshares.com.
Information concerning the day-to-day movement of the share price of the Company can be found on the Group’s website
www.cadoganenergysolutions.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 2023/2024
Annual General Meeting
Half Yearly results announced
Annual results announced
June 2024
September 2023
May 2024
Investor relations
Enquiries to: info@cadoganpetroleum.com
Registered office
Shakespeare Martineau LLP, 6th Floor, 60 Gracechurch Street, London EC3V 0HR
Registered in England and Wales no. 05718406
Ukraine
48/50A Zhylyanska Street
Business center “Prime”, 8th Floor
01033 Kyiv
Ukraine
Email:
Telephone:
Fax:
info@cadoganpetroleum.com
+38 044 594 58 70
+38 044 594 58 71
www.cadoganenergysolutions.com
Cadogan Energy Solutions plc Annual financial report 2023www.cadoganenergysolutions.com
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 Kyiv
Ukraine
Email: info@cadoganpetroleum.com
+38 044 594 58 70
Tel:
+38 044 594 58 71
Fax:
www.cadoganenergysolutions.com