Half-yearly Report

CADOGAN PETROLEUM PLC Half Yearly Report for the Six Months ended 30 June 2013 (Unaudited and Unreviewed) ______________________________________________________________________________ Highlights Cadogan Petroleum plc ("Cadogan" or the "Company"), an independent oil and gasexploration, development and production company with onshore gas, condensateand oil assets in Ukraine, announces its unaudited results for the six monthsended 30 June 2013. - Continued production from the Debeslavetska and Cheremkivska licences at a combined rate of about 14.5 mcm/day of gas and on Blazhiv field of the Bitlyanska licence about 20 bopd of oil. - Cadogan's shale gas joint venture Westgasinvest ("WGI") is implementing the procurement and permitting with a view to field activity in last quarter 2013/first quarter 2014. - Borynya 3 well re-entry is on-going; logs run and confirm the presence of interesting gas bearing zones. Three promising intervals have been identified for testing. - Memorandum of understanding ("MoU") with Oil and Gas Management Services Limited (OAGSG), the largest Oil Country Tubular Goods ("OCTG") business operator in Kurdistan, to assist Cadogan in developing a presence in the Kurdistan region and further develop respective, existing services businesses in Ukraine and Kurdistan. - Negotiations on-going with major International Oil Companies ("IOCs") operating in Ukraine, offering state-of-the-art technologies and services. - $29.5 million received in full and final settlement of the GPS litigation. - Net cash and cash equivalents at 30 June 2013 of $63.4 million (31 December 2012: $40.5 million) excluding $0.7 million (31 December 2012: $1.9 million) of Cadogan's share of cash and cash equivalents in joint ventures Commenting on the results, Bertrand des Pallieres Chief Executive Officersaid: "The first half of 2013 has been broadly positive for Cadogan with settlementof the GPS litigation, the MOU with OAGSG, progress with our shale gas JV andcompletion of the overhaul of the Group's technical team. The Company remainsin a strong financial position, with no debt and substantial cash resourcesalready being put to work at Borynya 3 with, so far, promising results." Enquiries: Cadogan Petroleum Plc +380(44)591 0390 Bertrand des Pallieres Chief Executive OfficerLaurence Sudwarts Company Secretary Cantor Fitzgerald Europe +44 (0) 20 7894 7000 David PorterRichard Redmayne Bankside +44 (0) 207 397 8888 Simon Rothschild BOARD STATEMENT Introduction During the first half of 2013 the Group continued to focus on developing itsassets in Ukraine. A significant re-evaluation and re-assessment of our assetsby the Group's recently overhauled technical team is developing renewedinterest in existing licences and bolstering management's focus on productioninitiatives. LLC Westgasinvest, a joint venture with Eni S.p.A. ("Eni") and NAK Nadra("Nadra") in which Cadogan has a 15% shareholding, currently holds subsoilrights to nine unconventional (shale) gas license areas in the Lviv Basin ofUkraine, totalling approximately 3,800 square kilometres of acreage. The LvivBasin is considered to be one of the most attractive basins in Europe for theexploration of unconventional gas, being a continuation of the Lublin Basin inPoland which has already attracted substantial interest from the hydrocarbonindustry. Procurement and permitting activity continues in line with theagreed program of activity and field activity start-up is expected by the endof 2013 / beginning of 2014. Cadogan remains the operator for its existing conventional activities atDebeslavetska and Cheremkhivska and will retain the economic benefit from theconventional activities on these two licences. Operations During the period to 30 June 2013 the Group continued to operate safely andefficiently. Operations at Zagoryanska, Pokrovskoe and Pirkovskoe continue to fulfil thework commitments and the monitoring of the existing wells. The Borynya 3 wellre-entry is on-going, logs have been run and correlations confirmed thepresence of interesting gas bearing zones. Three intervals have beenidentified for testing. The first one, at circa 2980m, showed evidence ofdamage caused by previous operations and will be re-considered in light oftesting on subsequent intervals. The second interval (circa 2700 m) was openedand testing is underway. The third interval (circa 2400 m) will be consideredfor testing at a later stage. In the first half of 2013 the Group continued its comprehensive re-evaluationof the potential of its existing assets. In particular, seismicre-interpretation using state-of-the-art technologies led to theidentification of new exploration targets in previously explored horizons and,most interestingly, in stratigraphic sequences never previously considered.Particular focus is now being dedicated to the definition of a target to beshortly assessed in the Pokrovskoe license. Following the purchase of somevintage seismic lines, an additional seismic campaign has been planned and isexpected to start by the end of the year. One shallow well is expected to bedrilled in Debeslavetska by the year end. On the basis of the geological andgeophysical results a new drilling campaign will be proposed in the Westernarea. Production from the Blazhiv, Debeslavetska and Cheremkivska licences continuedat a combined rate of approximately 14.5 mcm/day of gas and 20 bopd of oil. Our business in the oil and gas services sector remains very promisingnegotiations are on-going with major IOC's operating in Ukraine, which areattracted by the state-of-the-art technologies and solutions we offer. Areasof interest are at present being developed in the drilling fluids, wastetreatment, civil works, rig location engineering and construction, logisticsand transportation areas. Possible scenarios on other appealing servicespresently not delivered in the Ukraine are under evaluation. The negotiationfor shallow drilling with our existing light rig is on-going. Litigation Following an English High Court judgment in favour of Cadogan in relation toits litigation against Global Process Systems LLC ("GPS") in February 2013,including dismissal of a counterclaim against Cadogan, on 18 April 2013 theCompany announced receipt of sale proceeds of $29.5 million for the sale toGPS of the two gas plants the subject of the litigation, in full and finalsettlement of all claims and proceedings. Financial position At the date of this report, the Group had cash and cash equivalents ofapproximately $61.0 million excluding $0.6 million of Cadogan's share of cashand cash equivalents in the joint ventures. The Directors believe that thecapital available at the date of this report is sufficient for the Company andthe Group to continue operations for the foreseeable future. Outlook With entry into Ukraine of not only Eni, with whom Cadogan shares jointventures, but also Exxon, Chevron, Shell, OMV, Vitol since 2012 and theaccompanying re-rating of Ukraine's oil and gas sector and valuations theBoard reaffirms its belief that Cadogan, which is long established and highlyregarded in Ukraine, is well-positioned to take advantage both through farm-ins to its acreage, which it continues to assess, but also on new venturesboth on-shore and off-shore. The final, positive settlement of the GPSlitigation and the consequent freeing up of management time, together withfurther expansion of the nascent service business, allows Cadogan to putsignificant resources to work in further developing its core business inUkraine, as well as overseas in regions where the Company has existingrelationships. OPERATIONS REVIEW In 2013 the Group held working interests in nine (2012: nine) gas, condensateand oil exploration and production licences in the East and West of Ukraine.All these assets are operated by the Group and are located in either theCarpathian basin or the Dnieper-Donets basin, in close proximity to theUkrainian gas distribution infrastructures. The Group's primary focus duringthe period continued to be on the four most promising licences where the mainreserve and resource potential is located: Zagoryanska, Pokrovskoe, andPirkovskoe in the Dnieper-Donets basin of East Ukraine and Bitlyanska, in theCarpathian Basin of West Ukraine. Summary of the Group's licences (as of 30 June 2013) Working interest (%) Licence Expiry Licence type(1)Major licences 40.0 Zagoryanska April 2014 E&D 70.0 Pokrovskoe August 2016 E&D 100.0 Pirkovskoe October 2015 E&D 99.8 Bitlyanska December 2014 E&DMinor licences 99.2 Debeslavetska(2) November 2026 Production 99.2 Debeslavetska(2) September 2016 E&D 53.4 Cheremkhivska(2) May 2018 Production 100.0 Slobodo-Rungerska April 2016 E&D 99.2 Monastyretska November 2014 E&D (1) E&D = Exploration and Development. (2) Debeslavetska and Cheremkhivska licences are held by WGI, in which the Grouphas a 15% interest. The Group has 99.2% and 53.4% of economic benefit inconventional activities in Debeslavetska and Cheremkhivska licencesrespectively through Joint Activity Agreements ("JAA"). In addition to the above licences the Group has a 15% interest in WGI, whichholds the Reklynetska, Zhuzhelianska, Cheremkhivsko-Strupkivska, DebeslavetskaExploration, Debeslavetska Production, Baulinska, Filimonivska, Kurinna,Sandugeyivska and Yakovlivska licences for unconventional activities. The following is an update to the full Operations Review contained in theAnnual Financial Report for 2012 published on 25 April 2013. All reserves and Resources are stated herein are made with reference tothe independent report by Gaffney Cline and Associates of February 2010,adjusted for volumes produced and changes in working interest since the dateof publication. Zagoryanska licence The Group has a 40 per cent working interest in the Zagoryanska licence area,the remainder held by Eni pursuant to a joint venture formed in July 2011 (the"JV"). The exploration and development licence covers 49.6 square kilometresand the licence was extended in 2009 until April 2014. The work obligationshave been fulfilled. Following disappointing results in 2012, an extensive revision andre-interpretation of the 3D seismic and Geology and Geophysics ("G&G") studiesis on-going to assess and value all the possible reserves potential. Studiesare still in the early stage and remain insufficiently mature to preciselydefine future action, however, possible re-entry in the wells Zagoryanska 3and 11 is under evaluation. Pokrovskoe licence The Group holds a 70 per cent working interest in the Pokrovskoe licence whichholds 51.1 mmboe of 3P Total Prospective Resources (2012: 51.1 mmboe), theremainder held by Eni pursuant to the JV. The exploration licence covers 49.5square kilometres and the initial licence was extended until August 2016. Our investigation of the area has continued through the first half of 2013,including successful conclusion of the preliminary 3D seismicre-interpretation. The Pokrovskoe licence shows some interesting objects and avolumetric definition of the identified leads is currently under way. TheCompany is in the process of defining a potential program of activity for themost interesting lead, to be presented for Board approval in the final quarterof 2013. Pirkovskoe licence No new activity to report up to the date of this report. Bitlyanska licence area The Bitlyanska exploration and development licence covers an area of 390square kilometres and the Group's interest approximates to 99.8 per cent,varying with production. There are three hydrocarbon discoveries in thislicence area; namely Bitlyanska, Borynya and Vovchenska. The Borynya andBitlyanska fields hold 219.2 mmboe (100 per cent - 2012: 219.2 mmboe) and117.3 mmboe (100 per cent - 2012: 117.3 mmboe) of Contingent Resourcesrespectively, while no Reserves and Resources have been attributed to thedepleted Vovchenska field. Based on an integrated data set focused primarily on the southern part of thelicence, interpreted with the benefit of recent, surface, geological mappingand balanced section generation, a series of prospects for future explorationdrilling were identified and an internal re-evaluation and estimate of theresources in Bitlyanska and Borynya areas was concluded in the first half of2013. Rig mobilization to the Borynya 3 well site utilising the Company'slight work-over rig was completed on 4 July and spud work-over operationscommenced on 10 July. Following running in a drill-pipe string to assess wellintegrity, an updated interpretation of the original data successfullyidentified other intervals not previously evident or highlighted. Apetrophysical re-evaluation highlighted for the interval 2699m to 2745m, 25meters of net pay with an average porosity of 15% and average water saturationof 35%. Borynya 3 well re-entry is still on-going . New wire-line logs have been runand correlations confirmed the presence of several interesting gas bearingzones. Three intervals have been identified for testing in the upper section.The first and deepest interval at circa 2980 m showed evidence of damage fromprevious operations and will be re-considered in light of results from theother two intervals in the upper section. The second interval at circa 2700mwas opened and testing continues The third interval at circa 2400 m willsubsequently be considered for testing. The deeper intervals will bere-entered in the future utilising a suitable rig. The purchase of existing seismic data has been completed and the acquisitionof 50 linear km of 2D seismic lines to better access and re-estimate theexisting potential on Vovchenska area is in the tendering phase. Minor fields The Group has a number of minor licence areas located in western Ukraine.These include the following: - Debeslavetska Production licence area A production licence, containing 0.2 mmboe of Proved, Probable and Possible (`3P') Reserves (2012: 0.2 mmboe). The field is currently producing 68 boepd. The new compressor unit and dehydration facilities are reducing fuel consumption and air emissions. - Debeslavetska Exploration licence area An exploration licence surrounding the Debeslavetska Production licence area which is considered quite promising in shallow gas production potential. Following the positive preliminary results (AVO & Inversion Analysis), the purchase of vintage seismic data has been completed and the acquisition of 80 linear Km of 2D seismic lines to assess the identified prospects is in the tendering phase. The satellite radar waves "InSar" technology is currently on-going and one shallow well is planned for drilling by year end. - Cheremkhivska Production licence area A production licence, containing 0.1 mmboe of 3P Reserves (2012: 0.1 mmboe). This licence is currently producing 22boepd (2012: 23.9 boepd). A contingent program to purchase vintage seismic lines and the acquisition of 30 linear Km of 2D seismic lines to assess and estimate the reserves is planned by end 2013 early 2014. - Slobodo-Rungerska licence area No new activity to report up to the date of this report - Monastyretska licence area An exploration and development licence, with no booked Reserves or Resources (2012: nil). The Blazhiv 1 well was re-entered and a sucker rod pump was installed; currently producing at a rate of 20 boepd, it is under monitoring for production optimization. 35 linear Km of 2D seismic lines to assess and estimate the reserves is expected to be acquired by year-end. Service Company activities Proactive negotiations are successfully on-going with major IOC's operating inUkraine, offering western state-of-the-art technologies and solutions.Certification documents and procedures for western products and equipmentimportation are in the final stage. Areas of interest are at present beingdeveloped in the areas of drilling fluids; wastes treatment; civil works, riglocation engineering and construction; logistics and transportation. Possiblescenarios on other appealing services presently not delivered in the countryare under evaluation. The negotiation for shallow drilling with our existinglight rig is on-going. FINANCIAL REVIEW Overview During the six months ended 30 June 2013 the final settlement amount of $29.5million was received from GPS, which was a primary reason for the cashposition to increase to $63.4 million as at 30 June 2013 from $40.5 million asat 31 December 2012. From 1 January 2013, the Group has applied IFRS 11 Joint Arrangements ("IFRS11") and IAS 28 Investment in Associates and Joint Ventures. The applicationof IFRS11 standard has resulted in the existing joint ventures LLCAstroinvest-energy, LLC Gazvydobuvannya and LLC Westgasinvest being accountedfor under the equity method. Previously, these joint ventures wereproportionately consolidated into the Group's financial statements. The Grouphas applied IFRS 11 retrospectively in accordance with the transitionalprovisions and the 2012 results have been restated accordingly. Further detailof the impact on the Group financial statements for the six months ended 30June 2012 and the year ended 31 December 2012 is set out in note 10. Other newstandards adopted do not have material impact on the financial statements ofthe Group. Income statement Loss before tax was $2.0 million (30 June 2012: $7.1 million, 31 December2012: $92.9 million). Revenues of $1.9 million (30 June 2012: $1.6 million, 31December 2012: $3.7 million) comprised sales of gas from the Debeslavetska andCheremkhivska fields operated by the Group and the service business. Cost ofsales, which represents production royalties and taxes, depreciation anddepletion of producing wells and direct staff costs amounted to $1.3 million(30 June 2012: $0.8 million, 31 December 2012: $2.6 million) to give a grossprofit of $0.6 million (30 June 2012: $0.8 million, 31 December 2012: $1.1million). - Other administrative expenses of $4.5 million (30 June 2012: $4.1 million, 31 December 2012: $7.9 million) comprise staff costs, professional fees, Directors' remuneration, depreciation charges on non-producing property, plant and equipment. In addition to the recurring administrative expenses, $0.3 million of professional fees were incurred in relation to the litigation and subsequent settlement with GPS and $0.4 million of loss on disposal of surplus fixed assets. - Other losses of $1.9 million (30 June 2012: $3.1 million, 31 December 2012: $58.3 million) relates to the result of operations of joint ventures LLC Astroinvest-energy and LLC Gazvydobuvannya, which have been accounted using equity method in accordance with IFRS 11, previously accounted using proportionate consolidation method. - Other operating income of $3.7 million (30 June 2012: loss of $0.6 million, 31 December 2012: loss of $2.9 million) mainly relates to net foreign exchange gain on the translation of the USD denominated monetary assets of the Group's UK entities which have GBP as the functional currency. Cash flow statement The Condensed Consolidated Cash Flow Statement on page 15 shows expenditure of$0.2 million (30 June 2012: $0.9 million, 31 December 2012: $0.1 million) onintangible Exploration and evaluation assets (E&E) and $0.9 million (30 June2012: $0.9 million, 31 December 2012: $1.1 million) on Property, plant andequipment (PP&E). In addition, the Group invested $4.3 million(30 June 2012: $14.5 million, 31 December 2012: $22.5 million) into its jointventures LLC Astroinvest-energy and LLC Gazvydobuvannya. Net cash inflow from operations has increased to $30.0 million during sixmonths ended 2013 from $2.4 million in the same period of 2012 as the resultof the cash received from settlement with GPS in April 2013. Balance sheet As at 30 June 2013, the Group had net cash and cash equivalents of $63.4million (30 June 2012: $50.4 million, 31 December 2012: $40.5 million).Intangible E&E assets of $3.4 million (30 June 2012: $2.9 million, 31 December2012: $3.0 million) represent the carrying value of the Group's investment inexploration and appraisal assets, mainly for the Bitlyanska license. The PP&Ebalance of $44.3 million (30 June 2012: $47.9 million, 31 December 2012: $46.4million), comprised of the cost of developing fields with commercial reservesand bringing them into production and mainly includes the Pirkovskoe,Debeslavetskoe and Cheremkhivske licences. Investments in joint ventures of$70.7 million (30 June 2012: $115.7 million, 31 December 2012: $67.9 million)represents Group's share of net assets of joint ventures LLCAstroinvest-energy, LLC Gazvydobuvannya, LLC Westgasinvest, that Group jointlyowns with its partner Eni. Trade and other receivables of $6.8 million(30 June 2012: $59.8 million, 31 December 2012: $37.3 million) includes $3.3million receivables from the joint ventures and $1.7 million receivable fromOAGSG. $4.3 million of trade payables and other payables include tradepayables, accrued income on OAGSG loan, payables to the JV and other currentliabilities. Related party transactions Starting 1 January 2013, the Group has implemented the new IFRS 11 standard,which is prescribed to account joint ventures using equity method. Thisresulted in disclosing operations with LLC Astroinvest-energy and LLCGazvydobuvannya as transactions with related parties (for details please referto note 9 of this report). Commitments There has not been any significant change to the commitments and contingenciesreported as at 31 December 2012 (refer to page 62 of the Annual Report). Key performance indicators The Group monitors its performance in implementing its strategy with referenceto clear targets set out for four key financial and one key non-financialperformance indicators (`KPIs'): - to increase oil, gas and condensate production measured on number of barrels of oil equivalent produced per day (`boepd'); - to increase the Group's oil and gas reserves by de-risking possible resources and contingent reserves into 2P Reserves. This is measured in million barrels of oil equivalent (`mmboe'); - to increase the realised price per 1,000 cubic metres; - to increase the Group's basic and diluted earnings per share; and - to reduce the number of lost time incidents. The Group's performance during the six months 2013 against these targets isset out in the table below, together with the prior year performance data. Nochanges have been made to the source of data or calculation used in theperiod/year. Unit 30 June 30 June 31 December 2013 2012 2012Financial KPIsAverage production (workinginterest basis) (1) boepd 90 210 1812P reserves (2) mmboe 2.6 2.6 2.6Realised price per 1,000 cubicmetres (3) $ 485.4 489.9 486.0Basic and diluted loss per share cent (0.7) (3.1) (40.3)(4)Non-financial KPIsLost time incidents (5) incidents - - - (1) Average production is calculated as the average daily production during the period. (2) Quantities of 2P reserves as at 30 June 2013 and 31 December 2012 are based on Gaffney, Cline & Associates' independent reserves report on 2P Reserves as at 31 December 2009, dated 16 March 2010, as adjusted for the actual production until 30 June 2013, 30 June 2012 and 31 December 2012 respectively. (3) This represents the average price received for gas sold during the period (including VAT). (4) Basic and diluted loss per Ordinary share is calculated by dividing the net loss for the period attributable to Ordinary equity holder of the parent by the weighted average number of Ordinary shares during the period. (5) Lost time incidents relate to injuries where an employee/contractor is injured and has time off work. Treasury The Group continually monitors its exposure to currency risk. It maintains aportfolio of cash and cash equivalent balances mainly in US dollars (`USD')held primarily in the UK and holds these mostly in term deposits depending onthe Group's operational requirements. Production revenues from the sale ofhydrocarbons are received in the local currency in Ukraine (`UAH') and to datefunds from such revenues have been held in Ukraine for further use inoperations rather than being remitted to the UK. Funds are transferred to theCompany's subsidiaries in USD to fund operations at which time the funds areconverted to UAH. Some payments are made on behalf of the subsidiaries fromthe UK. Going concern After making enquiries, the Directors have a reasonable expectation that theCompany and the Group have adequate resources to continue in operationalexistence for the foreseeable future. Accordingly, they continue to adopt thegoing concern basis in preparing the Condensed Consolidated and CompanyFinancial Statements. For further detail refer to the detailed discussion ofthe assumptions outlined in note 2(a) to the Condensed Consolidated FinancialStatements. RISKS AND UNCERTAINTIES There are a number of potential risks and uncertainties inherent in the oiland gas sector which could have a material impact on the long-term performanceof the Group and which could cause the actual results to differ materiallyfrom expected and historical results. The Company has taken reasonable stepsto mitigate these where possible. Full details are disclosed on pages 12 to 13of the 2012 Annual Financial Report. There have been no changes to the riskprofile during the first half of the year. These are summarised below: Operational risks - Health, safety, and environment - Drilling operations - Production and maintenance - Work over and abandonment - Subsurface risks Financial risks - Recoverability of the Group's assets - Liquidity risk, management and going concern assumption - Regulatory and tax compliance risk - Fraud risk - Foreign exchange risk - Inflation risk - Credit risk - Commodity price risk Corporate risks - Regulatory and licence issues - Emerging market risk - Insurance risk We confirm that to the best of our knowledge: (a) the Condensed set of Financial Statements has been prepared in accordancewith IAS 34 `Interim Financial Reporting'; (b) the interim management report includes a fair review of the informationrequired by DTR 4.2.7R (indication of important events during the first sixmonths and description of principal risks and uncertainties for the remainingsix months of the year); (c) the interim management report includes a fair review of the informationrequired by DTR 4.2.8R (disclosure of related parties' transactions andchanges therein); and (d) the condensed set of financial statements, which has been prepared inaccordance with the applicable set of accounting standards, gives a true andfair view of the assets, liabilities, financial position and profit or loss ofthe issuer, or the undertakings included in the consolidation as a whole asrequired by DTR 4.2.4R. This Half Yearly Report consisting of pages 1 to 26 has been approved by theBoard and signed on its behalf by: Laurence Sudwarts Company Secretary 30 August 2013 ______________________________________________________________________________ Cautionary Statement The business review and certain other sections of this Half Yearly Reportcontain forward looking statements that have been made by the directors ingood faith based on the information available to them up to the time of theirapproval of this report. However they should be treated with caution due toinherent uncertainties, including both economic and business risk factors,underlying any such forward-looking information and no statement should beconstrued as a profit forecast. CONDENSED CONSOLIDATED INCOME STATEMENTfor the six months ended 30 June 2013 Year ended 31 Six months ended 30 June December 2013 2012 2012 $'000 $'000 $'000 (Unaudited) (Unaudited and (Audited Notes restated) and restated)CONTINUING OPERATIONSRevenue 1,919 1,558 3,761Cost of sales (1,281) (782) (2,616)Gross profit 638 776 1,145 Administrative expenses:Other administrative expenses (4,451) (4,139) (7,456)Impairment of oil and gas assets - - (25,717)(Impairment)/reversal of impairment of other assets (112) (61) 669 (4,563) (4,200) (32,504) Other losses (1,854) (3,108) (58,277)Other operating income/(expenses) 4 3,746 (629) (2,926)Operating loss (2,033) (7,161) (92,562) Investment revenue 87 85 118Finance (costs)/income (7) (5) 34Loss before tax (1,953) (7,081) (92,410) Tax (144) 2 (251)Loss for the period/year 5 (2,097) (7,079) (92,661) Attributable to:Owners of the Company (2,079) (7,079) (92,631)Non-controlling interest (18) - (30) (2,097) (7,079) (92,661) Loss per Ordinary share cent cent centBasic and diluted 6 (0.9) (3.1) (40.3) CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEfor the six months ended 30 June 2013 Year ended Six months ended 30 June 31 December 2013 2012 2012 $'000 $'000 $'000 (Unaudited) (Unaudited (Audited and and restated) restated) Items that will not be reclassified subsequentlyto profit and lossLoss for the period/year (2,097) (7,079) (92,661) Unrealised currency translation differences (7,121) 152 4,384 Total comprehensive loss for the period/year (9,218) (6,927) (88,277) Attributable to:Owners of the Company (9,200) (6,927) (88,247)Non-controlling interest (18) - (30) (9,218) (6,927) (88,277) CONDENSED CONSOLIDATED BALANCE SHEETas at 30 June 2013 Year ended Six months ended 30 June 31 December 2013 2012 2012 $'000 $'000 $'000 (Unaudited (Audited Notes (Unaudited) and restated) and restated)ASSETSNon-current assetsIntangible exploration and evaluation assets 7 3,367 2,959 3,017Property, plant and equipment 7 44,317 47,912 46,378Investments in joint ventures 70,741 115,650 67,908Other financial assets - 37 - 118,424 166,558 117,303Current assetsInventories 3,164 3,923 3,482Trade and other receivables 8 6,761 59,822 37,304Cash and cash equivalents 63,426 50,433 40,477 73,351 114,178 81,263Total assets 191,775 280,736 198,566 LIABILITIESNon-current liabilitiesDeferred tax liabilities (534) (470) (586)Long-term provisions (573) (394) (219) (1,107) (864) (805)Current liabilitiesTrade and other payables (4,308) (2,911) (1,770)Current provisions (58) (134) (453) (4,366) (3,045) (2,223)Total liabilities (5,473) (3,909) (3,028) Net assets 186,302 276,827 195,538 EQUITYShare capital 13,337 13,337 13,337Retained earnings 295,341 381,787 297,438Cumulative translation reserves (124,408) (121,519) (117,287)Other reserves 1,682 2,823 1,682Equity attributable to equity holders of the parent 185,952 276,429 195,170Non-controlling interest 350 398 368Total equity 186,302 276,827 195,538 CONDENSED CONSOLIDATED CASH FLOW STATEMENTfor the six months ended 30 June 2013 Year ended Six months ended 30 June 31 December 2013 2012 2012 $'000 $'000 $'000 (Unaudited) (Unaudited and (Audited and Note restated) restated) Net cash inflow/(outflow) from operating activities 9 29,667 2,401 (407) Investing activitiesInvestments in joint ventures (4,267) (14,542) (22,478)Purchases of property, plant and equipment (439) (868) (1,083)Purchases of intangible exploration and evaluation (349) (898) (87)assetsProceeds from sale of property, plant and equipment 15 2 227Acquisition of financial assets (1,666) - -Interest received 87 85 -Net cash used in investing activities (6,619) (16,221) (23,421) Financing activitiesNet cash used in financing activities - - - Net increase/(decrease) in cash and cash equivalents 23,048 (13,820) (23,828)Effect of foreign exchange rate changes (99) (48) 4Cash and cash equivalents at beginning of period/year 40,477 64,301 64,301Cash and cash equivalents at end of period/year 63,426 50,433 40,477 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITYfor the six months ended 30 June 2013 Other reserves Cumulative Share- Non- Share Retained translation based controlling capital earnings reserves payment Reorganisation interest Total $'000 $'000 $'000 $'000 $'000 $'000 $'000 As at 1 January 2012 13,337 389,734 (123,784) 1,755 1,589 398 283,029Adoption of new standard - (1,327) 2,113 - - - 786As at 1 January 2012 (restated) 13,337 388,407 ( 121,671) 1,755 1,589 398 283,815Share-based payments - 521 - (521) - - -Net loss for the period - (7,141) - - - - (7,141)Exchange translation differences on foreignoperations - - 152 - - - 152As at 30 June 2012 (restated) 13,337 381,787 (121,519) 1,234 1,589 398 276,826Share-based payments - 1,141 - (1,141) - - -Net loss for the period - (85,965) - - - (30) (85,995)Exchange translation differences on foreign 4,232 -operations - - - - 4,232Adoption of new standard - 475 - - 475As at 1 January 2013 (restated) 13,337 297,438 (117,287) 93 1,589 368 195,538Net loss for the period - (2,097) - - - (18) (2,115)Exchange translation differences on foreignoperations - - (7,121) - - (7,121)As at 30 June 2013 13,337 295,341 (124,408) 93 1,589 350 186,302 NOTES TO THE CONDENSED FINANCIAL STATEMENTSfor the six months ended 30 June 2013 1. General information Cadogan Petroleum plc (the `Company', together with its subsidiaries the`Group'), is incorporated in England and Wales under the Companies Act. Theaddress of the registered office is Ibex House 42-47 Minories, London EC3N1DX. The nature of the Group's operations and its principal activities are setout in the Operations Review on pages 4 to 6 and the Financial Review on pages7 to 10. The financial information for the year ended 31 December 2012 does notconstitute statutory accounts as defined in section 434 of the Companies Act2006, but is derived from those accounts. Statutory accounts for the yearended 31 December 2012 have been delivered to the Registrar of Companies. Theauditor's report on those accounts was not qualified. The auditor's report didnot contain a statement under section 498(2) (unable to determine whetheradequate accounting records had been kept) or 498(3) (failure to obtainnecessary information and explanations) of the Companies Act 2006. This Half Yearly Report has not been audited or reviewed in accordance withthe Auditing Practices Board guidance on `Review of Interim FinancialInformation'. A copy of this Half Yearly Report has been published and may be found on theCompany's website. 2. Basis of preparation The annual financial statements of the Group are prepared in accordance withInternational Financial Reporting Standards (`IFRS') as issued by theInternational Accounting Standards Board (`IASB') and as adopted by theEuropean Union (`EU'). These Condensed Financial Statements have been preparedin accordance with IAS 34 Interim Financial Reporting, as issued by the IASB. The same accounting policies and methods of computation are followed in thecondensed financial statements as were followed in the most recent annualfinancial statements of the Group, which were included in the Annual Reportissued on 24 April 2013. The following accounting amendments, standards and interpretations becameeffective in the current reporting period: - IAS 1 Presentation of Items of Other Comprehensive Income - Amendments to IAS 1 - IAS 19 (revised) Employee Benefits - IFRS 13 Fair Value Measurement - IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine The following accounting amendments, standards and interpretations were notyet effective in the current reporting period but were early adopted: - IFRS 10 Consolidated Financial Statements - IAS 27 Separate Financial Statements - IFRS 11 Joint Arrangements - IAS 28 Investment in Associates and Joint Ventures - IFRS 12 Disclosure of Interests in Other Entities The Group has not early adopted any other amendment, standard orinterpretation that has been issued but is not yet effective. It is expectedthat where applicable, these standards and amendments will be adopted on eachrespective effective date. A number of other amendments to accounting standards issued by theInternational Accounting Standards Board also apply for the first time in2013. These do not have a significant impact on the accounting policies,methods of computation or presentation applied by the Group. The nature and the impact of each new amendment, standard or interpretationare described below: IFRS 10 Consolidated Financial Statements and IAS 27 Separate FinancialStatements IFRS 10 replaces the parts of the previously existing IAS 27 that dealt withconsolidated financial statements. The new standard changes the definition ofcontrol such that an investor controls an investee when it is exposed, or hasrights, to variable returns from its involvement with the investee and has theability to control those returns through its power over the investee. Theadoption of IFRS 10 has had no impact on the consolidation of investments heldby the Group. IFRS 11 Joint Arrangements and IAS 28 Investment in Associates and JointVentures IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC-13Jointly-controlled Entities - Non-monetary Contributions by Venturers andchanges the classifications for joint arrangements. Under IFRS 11, investmentsin joint arrangements are classified as either joint ventures or jointoperations based on the rights and obligations of the parties to thearrangement. When a joint arrangement has been structured through a separatevehicle, consideration is given to the legal form of the separate vehicle, theterms of the contractual arrangement and, when relevant, other facts andcircumstances. When the activities of an arrangement are primarily designedfor the provision of output to the parties and the parties are substantiallythe only source of cash flows contributing to the continuity of the operationsof the arrangement, this indicates the parties to the arrangement have rightsto the assets and obligations for the liabilities. The Group has consideredthese facts and circumstances, among others, in assessing whether thearrangement is a joint operation or a joint venture. The standard removes theoption to account for joint ventures using proportionate consolidation andinstead joint arrangements that meet the definition of a joint venture underIFRS 11 must be accounted for using the equity method. The application of this standard has resulted in the existing joint venturesLLC Astroinvest-energy, LLC Gazvydobuvannya and LLC Westgasinvest beingaccounted for under the equity method. No other material joint arrangementswithin the Group were affected. The Group has applied IFRS 11 retrospectivelyin accordance with the transitional provisions and the 2012 results have beenrestated accordingly. Further detail of the impact on the Group financialstatements for the six months ended 30 June 2012 and the year ended 31December 2012 is set out in note 10. (a) Going concern The Directors have continued to use the going concern basis in preparing thesecondensed financial statements. The Group's business activities, together withthe factors likely to affect future development, performance and position areset out in the Operations Review on pages 4 to 6. The financial position ofthe Group, its cash flow and liquidity position are described in the FinancialReview on pages 7 to 9. The Group's cash balance as at 30 June 2013 was $63.4 million (31 December2012: $40.5 million) excluding $0.7 million (31 December 2012: $1.9 million)of Cadogan's share of cash and cash equivalents in joint ventures with noexternal debt and the Directors believe that the funds available at the dateof issue of this financial information is sufficient for the Group to manageits business risks successfully. The Group's forecasts and projections, taking into account reasonably possiblechanges in operational performance, start dates and flow rates for commercialproduction and the price of hydrocarbons sold to Ukrainian customers, showthat there are reasonable expectations that the Group will be able to operateon funds currently held and those generated internally, for the foreseeablefuture, without taking into account receivables from litigation and withoutthe requirement to seek external financing. After making enquiries and considering the uncertainties described above, theDirectors have a reasonable expectation that the Company and the Group haveadequate resources to continue in operational existence for the foreseeablefuture and consider the going concern basis of accounting to be appropriate.Thus they continue to adopt the going concern basis of accounting in preparingthe financial information. (b) Foreign currencies The individual financial statements of each Group company are presented in thecurrency of the primary economic environment in which it operates (itsfunctional currency). The functional currency of the Company is poundssterling. For the purpose of the consolidated financial statements, theresults and financial position of each Group company are expressed in USdollars, which is the presentation currency for the consolidated financialstatements. The relevant exchange rates used were as follows: Year ended 31 Dec 2012 1US$=£Closing rate 1.5216Average rate 1.5449 (c)Dividend The Directors do not recommend the payment of a dividend for the period(30 June 2012: $nil; 31 December 2012: $nil). 3. Business and geographical segments The Directors continue to consider there to be only one business segment, theexploration and development of oil and gas revenues and only one geographicalsegment, being Ukraine. 4. Other operating income/(expenses) Year ended Six months ended 30 June 31 December 2013 2012 2012 (restated) (restated) $'000 $'000 $'000Out of court settlements - - 597Transactions with JV partner (362) (223) 88Net foreign exchange gains/(losses) 4,108 (406) (3,611) 3,746 (629) (2,926)5. Profit/(Loss) for the period/year The profit/(loss) for the period/year is stated after crediting/(charging): Year ended Six months ended 30 June 31 December 2012 2012 2013 (restated) (restated) $'000 $'000 $'000Depreciation of property, plant and equipment (562) (437) (1,352)Loss on disposal of property, plant and equipment (427) (23) (282)Impairment of other assets 394 (42) 1,781Impairment of oil and gas assets - - (25,717)Staff costs (2,660) (2,379) (4,753)Net foreign exchange gain/(loss) 4,108 (406) (3,611) 6. Loss per ordinary share Loss per ordinary share is calculated by dividing the net loss for theperiod/year attributable to Ordinary equity holders of the parent by theweighted average number of Ordinary shares outstanding during the period/year.The calculation of the basic and diluted loss per share is based on thefollowing data: Year ended Six months ended 30 June 31 December 2013 2012 2012 (restated) (restated)Loss attributable to owners of the Company $'000 $'000 $'000 Loss for the purposes of basic profit per sharebeing net loss attributable to owners of theCompany (2,079) (7,079) (92,631) Number Number NumberNumber of shares `000 `000 `000Weighted average number of Ordinary shares for thepurposes of basic loss per share 231,092 231,092 231,092Effect of dilutive potential ordinary shares:Options and warrants outstanding 88 90 93Weighted average number of Ordinary shares for thepurposes of diluted profit per share 231,179 231,182 231,185 cent cent centLoss per Ordinary shareBasic (0.9) (3.1) (40.1)Diluted (0.9) (3.1) (40.1) 7. Trade and other receivables Year ended Six months ended 30 June 31 December 2012 2012 2013 (restated) (restated) $'000 $'000 $'000Other receivables 2,547 57,629 29,102Receivable from joint venture 3,667 1,193 7,284VAT recoverable 166 72 81Prepayments 381 928 837 6,761 59,822 37,304 All sales of hydrocarbons are made on a prepayment basis, so there are notrade debtors. Other receivable have been significantly decreased as a result of thejudgement in favour of the Group of the High Court in London and subsequentagreement with GPS on purchase of two gas processing plants by GPS completedon 18 April 2013 for the sum of $29.5 million, following receipt in full byCadogan of the agreed consideration. $3.3 million (30 June 2012: $1.1 million, 31 December 2012: $7.3 million) ofreceivables from joint venture relate to the recharged costs from the Group tothe joint ventures, LLC Astroinvest-energy and LLC Gazvydobuvannya. VAT recoverable relates to the UK VAT recoverable. VAT recoverable in Ukraineis impaired in full as the Board considers that such VAT is only recoverableon commencement of significant production, while cash recovery is notconsidered likely due to Ukrainian budgetary issues. The amount of theimpairment provision against Ukrainian VAT recoverable as at 30 June 2013 is$9.2 million (30 June 2012: $10.9 million, 31 December 2012: $10.1 million). $0.2 million prepayments (30 June 2012: $0.9 million, 31 December 2012: $0.8million) mostly relate to prepayments made to contractors in Ukraine for thedrilling and work over campaign. The Directors consider that the carrying amount of the remaining otherreceivables approximates their fair value and none of which are past due. 8. Notes to the condensed cash flow statement Year ended Six months ended 30 June 31 December 2013 2012 2012 $'000 $'000 $'000 (Unaudited) (Unaudited (Audited and and restated) restated)Operating loss (2,033) (7,161) (92,562)Adjustments for: Depreciation of property, plant and equipment 562 437 1,352 Other (gains) and losses 1,924 8,309 63,987 Reversal of impairment of inventories (25) (18) (787) (Reversal of impairment)/Impairment of VAT recoverable (369) 60 (994) Loss on disposal of property, plant and equipment 427 23 282 Effect of foreign exchange rate changes (5,620) 701 4,536Operating cash flows before movements in working (5,134) 2,351 (24,186) capital Decrease in inventories 343 215 1,429 Decrease in receivables 32,072 150 23,759 Increase/(Decrease) in payables and provisions 2,538 (268) (1,409)Cash from/(used in) operations 29,819 2,448 (407) Income taxes paid (152) (47) -Net cash inflow/(outflow) from operating activities 29,667 2,401 (407) 9. Related party transactions Transactions between the Group and its subsidiaries, which are relatedparties, have been eliminated on consolidation and are not disclosed in thisnote. The application of IFRS 11 has resulted in the existing joint venturesLLC Astroinvest-energy, LLC Gazvydobuvannya and LLC Westgasinvest beingaccounted for under the equity method and disclosed as related parties. Duringthe period, Group companies entered into the following transactions withrelated parties who are not members of the Group: Year ended Six months ended 30 June 31 December 2013 2012 2012 (restated) (restated) $'000 $'000 $'000Revenues from services provided andsales of goods 1,332 367 4,487Purchases of goods 75 35 51Amounts owed by related parties 3,667 1,193 7,284Amounts owed to related parties 130 38 43 The amounts outstanding are unsecured and will be settled in cash. Noprovisions have been made for doubtful debts on the amounts owed be relatedparties. 10. Accounting policy changes - adoption of IFRS 11 As discussed in note 2, the Group has restated the financial performance andposition of the Group for the six months ended 30 June 2012 and the year ended31 December 2012 to reflect the adoption of IFRS 11. The quantitative impactof adopting these standards on the prior year consolidated financialstatements is set out in the tables below: Adjustments to the Consolidated Income Statements Six months ended 30 June 2012 Year ended 31 December 2012 as as previously previously reported IFRS 11 restated reported IFRS 11 restated $'000 $'000 $'000 $'000 $'000 $'000CONTINUING OPERATIONSRevenue 2,740 (1,182) 1,558 5,653 (1,892) 3,761Cost of sales (1,917) 1,135 (782) (4,158) 1,542 (2,616)Gross profit 823 (47) 776 1,495 (350) 1,145 Administrative expenses: Other administrative expenses (4,895) 756 (4,139) (10,783) 3,327 (7,456) Impairment of oil and gas assets - - - (83,584) 57,867 (25,717) (Impairment)/reversal of impairment (2,009) 1,948 (61) (2,684) 3,353 669 of other assets (6,904) 2,704 (4,200) (97,051) 64,547 (32,504) Gain on disposal of subsidiaries - - - - - -Other losses - (3,108) (3,108) 5,417 (63,694) (58,277)Other operating income/(expenses) (1,082) 453 (629) (2,940) 14 (2,926)Operating loss (7,163) 2 (7,161) (93,079) 517 (92,562) Investment revenue 91 (6) 85 128 (10) 118Finance costs (7) 2 (5) 67 (33) 34Loss before tax (7,079) (2) (7,081) (92,884) 474 (92,410) Tax - 2 2 (252) 1 (251)Loss for the period/year (7,079) - (7,079) (93,136) 475 (92,661) Adjustments to the Consolidated Balance Sheets Six months ended 30 June 2012 Year ended 31 December 2012 as as previously IFRS 11 previously IFRS 11 reported adjustments restated reported adjustments restated $'000 $'000 $'000 $'000 $'000 $'000ASSETSNon-current assetsIntangible exploration and evaluation assets 71,706 (68,747) 2,959 78,231 (75,214) 3,017Property, plant and equipment 107,865 (59,953) 47,912 46,627 (249) 46,378Investments in joint ventures - 115,650 115,650 - 67,908 67,908Other financial assets 37 - 37 - - - 179,608 (13,050) 166,558 124,858 (7,555) 117,303Current assetsInventories 6,465 (2,542) 3,923 5,177 (1,695) 3,482Trade and other receivables 58,457 1,364 59,822 35,537 1,767 37,304Cash and cash equivalents 51,317 (884) 50,433 42,404 (1,927) 40,477 116,239 (2,062) 114,178 83,118 (1,855) 81,263Total assets 295,847 (15,112) 280,736 207,976 (9,410) 198,566 LIABILITIESNon-current liabilitiesDeferred tax liabilities (11,554) 11,084 (470) (4,553) 3,967 (586)Long-term provisions (597) 203 (394) (414) 195 (219) (12,151) 11,287 (864) (4,967) 4,162 (805)Current liabilitiesTrade and other payables (7,129) 4,218 (2,911) (7,793) 6,023 (1,770)Current provisions (527) 393 (134) (939) 486 (453) (7,656) 4,611 (3,045) (8,732) 6,509 (2,223)Total liabilities (19,807) 15,898 (3,909) (13,699) 10,671 (3,028) Net assets 276,040 786 276,827 194,277 1,261 195,538 EQUITYShare capital 13,337 - 13,337 13,337 - 13,337Retained earnings 383,114 (1,327) 381,788 298,290 (852) 297,438Cumulative translation reserves (123,632) 2,113 (121,519) (119,400) 2,113 (117,287)Other reserves 2,823 - 2,823 1,682 - 1,682Equity attributable to equity holders of the 275,642 786 276,429 193,909 1,261 195,170parentNon-controlling interest 398 - 398 368 - 368Total equity 276,040 786 276,827 194,277 1,261 195,538 Adjustments to the Consolidated Cash Flow Statements Six months ended 30 June 2012 Year ended 31 December 2012 as as previously IFRS 11 previously IFRS 11 reported adjustments restated reported adjustments restated $'000 $'000 $'000 $'000 $'000 $'000Net cash (outflow)/inflow from (2,165) 4,566 2,401 (5,609) 5,202 (407)operating activities Investing activitiesDisposal of subsidiaries 4,142 (4,142) - 4,142 (4,142) -Investments in joint ventures - (14,542) (14,542) - (22,478) (22,478)Purchases of property, plant and (10,024) 9,156 (868) (15,749) 14,666 (1,083)equipmentPurchases of intangible (6,140) 5,242 (898) (6,239) 6,152 (87) exploration and evaluation assetsProceeds from sale of property, 459 (457) 2 688 (461) 227 plant and equipmentAcquisition of financial assets (37) 37 - - - -Interest received 91 (6) 85 128 (128) -Net cash used in investing (11,509) (4,712) (16,221) (17,030) (6,391) (23,421)activities Financing activitiesProceeds from short-term - - - - - -borrowingsNet cash used in financing - - - - - -activities Net increase/(decrease) in cash (13,674) (146) (13,820) (22,639) (1,189) (23,828)and cash equivalentsEffect of foreign exchange rate (48) - (48) 4 - 4changesCash and cash equivalents at 65,039 (738) 64,301 65,039 (738) 64,301 beginning of period/yearCash and cash equivalents at end 51,317 (884) 50,433 42,404 (1,927) 40,477of period/year Adjustments to Notes to the condensed cash flow statements Six months ended 30 June 2012 Year ended 31 December 2012 as as previously IFRS 11 previously IFRS 11 reported adjustments restated reported adjustments restated $'000 $'000 $'000 $'000 $'000 $'000Operating loss (7,163) 2 (7,161) (93,079) 517 (92,562)Adjustments for: Depreciation of property, plant and 871 (434) 437 1,967 (615) 1,352 equipment Impairment of oil and gas assets - - - 83,584 (83,584) - Gain on acquisition of jointly - - - (5,454) 5,454 - controlled entity / disposal of subsidiaries Loss from investments into joint - 8,309 8,309 - 63,987 63,987 ventures Reversal of impairment of (45) 27 (18) 291 (1,078) (787) inventories (Reversal of impairment)/Impairment 2,054 (1,994) 60 2,394 (3,388) (994) of VAT recoverable (Gain)/loss on disposal of property, (41) 64 23 52 230 282 plant and equipment Effect of foreign exchange rate 684 17 701 4,014 522 4,536 changesOperating cash flows before (3,640) 5,991 2,351 (6,231) (17,955) (24,186)movements in working capital Decrease in inventories 73 142 215 1,269 160 1,429 Decrease/(increase) in receivables 1,871 (1,721) 150 (766) 24,525 23,759 (Decrease)/Increase in payables and (422) 154 (268) 241 (1,650) (1,409) provisionsCash (used in)/from operations (2,118) 4,566 2,448 (5,487) 5,080 (407) Income taxes paid (47) - (47) (122) 122 -Net cash inflow/(outflow) from (2,165) 4,566 2,401 (5,609) 5,202 (407) operating activities 11. Post balance sheet events No post balance sheet events have taken place after 30 June 2013. 12. Commitments and contingencies There have been no significant changes to the commitments and contingenciesreported on page 64 of the Annual Report.