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