Big Picture – A Deep Dive Examination of Cadogan Petroleum PLC
Cadogan Petroleum PLC Snapshot
Cadogan’s strategy is to leverage the strength of its existing balance sheet and revenues to make select asset acquisitions that will support its long term financial position and create upside opportunity to drive additional shareholder value, while diversifying the portfolio and overall risk profile.
The focus of the Company’s asset acquisition strategy is to create a geographically diversified portfolio of assets, with the following objectives:
- Increase production to support the Company’s long term financial position
- Create exposure to additional upside potential by pursuing select exploration assets
The Group’s aim is to acquire distressed assets and assets disposed of as part of other companies portfolio optimization programs, with the following characteristics:
- On-shore and conventional assets, as the Company has the competence and the resources to operate them.
- Located in Africa, Eastern Europe, Middle East and Central Asia, countries which are well known to the Company’s management.
In pursuit of its strategy, the Company will lever its existing strengths, which include:
- a strong balance sheet
- a lean organization
- a proven record of being a low cost, efficient operator of marginal fields with strong HSE credentials
- a Board and management with proven industry and finance experience
While redeveloping the E&P asset portfolio, the Group will continue to operate its subsidiary businesses, which are gas trading and oil services, to supplement E&P revenue streams and cash generation.
The Group holds working interests in four conventional gas, condensate and oil exploration and production licenses located in Western Ukraine and a 90% interest in Exploenergy, an Italian company, which has filed applications for two exploration licences in the Po Valley, in Northern Italy.
In Ukraine, the Group’s assets are located in the prolific Carpathian basin in close proximity to gas distribution infrastructure. The four licences (Monastryetska, Bytlyanska, Debeslavetska and Cheremkivsko-Strupkivska) are all operated by the Group. The licences produce oil and gas and hold upside potential.
The Po Valley is a proven oil & gas basin in Northern Italy. The exploration licences are in close proximity to existing field discoveries, with two leads having been identified with combined, un-risked prospective resources estimated to be in excess of 60 BCF.
Reserves and resources associated with the Group’s licenses were evaluated and delivered in a final report dated March 2016. The evaluation was conducted in accordance with SPE Petroleum Resources Management System (‘PRMS’). A summary of the report is presented below in a final report dated March 2016.
Monastyretska License area
The core Monastyretska License combines existing oil production with significant upside potential. It is located in the Lviv region in West Ukraine.
The 25.9Km2 exploration license is part of the Carpathian fold belt (Skuba unit). It is surrounded by long standing oil producing fields, including Starosambirske, one of the largest oil fields in the region with cumulative production exceeding 22 million barrels.
The Monastyreskaya license has tested and produced oil from several wells in the Paleocene Jamna Formation. One of these wells, Blazhiv 1, was re-entered and is constantly producing 47 bopd. Two further wells have been successfully re-entered, adding a combined 30 bopd under natural flow. Workover plans are in place to further enhance production by installing sucker rod pumps.
The produced oil has a negligible gas and water content and so is treated locally and trucked by the buyer to the final destination.
The Group holds a 100 per cent working interest in the license, with the State company NAK Nadra holding a 0.17% beneficial interest and the right to receive dividends. The license validity was recently extended to November 2019, after which an application for a 20 years’ production licence will be filed.
The licence has been attributed 2P reserves of 1.4 Million bbl, 3P reserves are 4.5Million bbl and contingent resources 2C 0.6 Million bbl.
Bitlyanska Licence area
Located in West Ukraine, Bitlyanska is an exploration licence in a proven and mature hydrocarbon system (outcrop and wells) within the Carpathian Krosno tectonic fold. It is surrounded by oil and gas producing fields (see figure). and close to existing infrastructure.
The license, which covers an area of 390Km2, contains the Bitlya, Borynya and Vovchenska hydrocarbon discoveries. During testing, hydrocarbons were found in low permeability / high pressure formations. The Borenya 3 well, which was re-entered in 2013, tested a significant influx of gas, oil and condensate but was not stable enough for production. The well is suspended pending fracturing and possible re-entry to the deeper layers.
The licence has been attributed 2P and 3 P reserves of 0.8 Mboe and 3.2 Mboe respectively, with significant upside 2C potential of 14.8 Mboe. The Borynya licence is estimated to hold 4.5 Mboe P50 prospective resources. The licence is valid till December 2019.
Debeslavetska Field License
Debeslavetska is a gas production licence located in Western Ukraine. It is a marginal gas field, with production of 9,200 scm/day (c. 57 Boepd). Gas is piped to a gas treatment plant from where it is delivered to the Magistral Pipeline via a boost compressor.The licence covers an area of 27 Km2. Cadogan operates the field and holds a 99.2% working interest. The licence is valid till 2026.
Cheremkivsko-Strupkivska is a marginal gas field in Western Ukraine. The field is producing 4,500 scm/day, (c. 28 Boepd) which is delivered locally. Cadogan operates the field and has a 54.2% participating interest.
In addition to its conventional licences, Cadogan has a 15% interest in Westgasinvest LLC, which holds 7 licences for unconventional activities in Western Ukraine, near the Polish boarder. The licenses are operated by eni and Cadogan is carried through the exploration phase.
The 7 licences include: Cheremkhivsko-Strupkivska, Debeslavetska Production, Baulinska, Filimonivska, Kurinna, Sandugeyivska and Yakovlivska.
Cadogan holds a 90% interest in Exploenergy s.r.l. (“Exploenergy”), an Italian Company which has filed applications for two exploration licenses located in the Po Valley region, a proven hydrocarbon basin. The licences are near to existing field discoveries. Two leads have been identified on the licenses, with combined, un-risked prospective resources estimated to be in excess of 60 bcf of gas. Both applications are in an advanced stage of their approval process.
Cadogan utilises its balance sheet position to support revenue and cash generation by trading gas. The Group imports gas from Poland and Slovakia, acquires it from local producers and sells it to Ukrainian clients.
The Group entered gas trading in 2014, pioneering the reverse flow, (the import of gas via Europe using pipelines designed to deliver Russian gas to Europe) and captured the benefits of being an early entrant in a developing market.
The market has subsequently matured, with an increasing number of entrants. Nonetheless, there remains an opportunity for the Group to continue to benefit from trading operations, with revenues contributing to achieving cash neutrality and the commercial competences acquired helping maximise the value of its own production.
The cash used to back-up credit lines in Ukraine remains in UK banks and can be released at very short notice if required to support the Company’s core strategy of acquiring select E&P assets.
Utilising existing equipment, skills and established partnerships with internationally recognized service providers, Cadogan provides services to oil and gas producers in Ukraine. The provision of these services supplements the Group’s other revenue streams and supports additional cash generation.
The services are offered via the Group’s wholly owned subsidiary, Astro-Service LLC, a fully licensed entity, which is networked with local engineering-design bureaus, state hygienic/ecological institutes and materials suppliers. A distinctive feature of this Company is its ability to conjugate western standard and processes, including HSE, with a deep knowledge of the local context.
Services provided involve innovative technological solutions, international experience and highly-skilled in-house personnel and include:
- Well Permitting & Land Allotment
- Well-Pad and Roads Design & Construction
- Wells’ Drilling, Work-over and Servicing
- Wastes Management & Cuttings/ Fluids Disposal
- Warehouse, Logistics & Customs Support
Refer to the list of major shareholders for details:
|Major Shareholder||Number of shares held||% of total voting rights|
|SPQR Capital Holdings SA||67 298 498||28,55|
|Mr Michel Mees||26 000 000||11,03|
|CA Indosuez (Switzerland) SA||18 683 000||7,93|
|Veronique Salik||17 959 000||7,62|
|Brigitte Salik||17 409 000||7,39|
|Kellet Overseas Inc.||14 002 696||5,94|
|Mr Pierre Salik||7 950 000||3,37|
|7 657 886||3,25|
48/50A Zhylyanska Street
BC “Prime”, 8th floor
01033 Kyiv, Ukraine
Email us at [email protected]
Tel: +38 (044) 594-58-70
Fax: +38 (044) 594-58- 71
Cantor Fitzgerald Europe
One Churchill Place
London E14 5RB
Lawyers to the Company
Baker & McKenzie LLP
100 New Bridge Street
London EC4V 6JA
Antika Law Firm
12, Khreschatyk Str., 2nd floor
Kyiv 01001, Ukraine
Auditors and Reporting Accountants
55 Baker Street
London, W1U 7EU
Office phone number 020 7486 5888
Fax 020 7487 3686
GM & P Gas Mediterraneo & Petrolio S.r.l.
Via Triulziana 10,
20097, San Donato Milanese (MI)
LLC "BREND-VIK LTD"
Postal Address: 4/8 Kurenivskiy lane,
Kyiv, 04073, Ukraine
Shakespeare & Martineau
+44 0207 264 4366