Big picture - Why invest in Cadogan Petroleum
Cadogan Petroleum Snapshot
Cadogan Petroleum plc is an independent oil and gas company. Cadogan operates exploration and production assets in Ukraine, conducts gas trading operations, which include the import from Slovakia and Poland and local purchases and sales, and provides services to E&P companies.
Cadogan currently has significant working interests in 11 licence areas covering 14 fields in Ukraine with a combined area of approximately 1150 km². The Headquarters in Kiev are supported by operational offices in eastern and western Ukraine together with a representative office in London.
The Group has a 97 per cent working interest in the Pirkovskoe licence which holds 2.4 mmboe (2008: 82.4 mmboe) of proved and probable reserves, 5.0 mmboe (2008: 73.0 mmboe) of possible reserves and 134.0 mmboe (2008: 190.6 mmboe) of contingent resources. The exploration and appraisal licence covers 71.6 square kilometres and runs until October 2010.
The required work programme includes work-over of the Pirkovskoe 460 well, and the drilling of Pirkovskoe 1 and Pirkovskoe 2 wells and calculation of the potential hydrocarbon reserves.
Pirkovskoe 1 was the first appraisal well drilled in the northern part of the Pirkovskoe licence. The well was terminated at a TD of 5,723 metres in the Devonian D3 and after testing the Devonian and lower Carboniferous, the well was temporarily suspended. The testing and subsequent completion of several shallower Carboniferous oil and gas bearing zones was farmed out to a local company at no cost to Cadogan, in return for a share of any future production. This interval is currently producing small volumes of oil and gas.
This Pirkovskoe 2 well was drilled to a depth of 4,580 metres, and has been suspended until the results of Pirkovskoe 1 have been reviewed.
Initial well testing of Pirkovskoe 460 was part of the Group’s field development obligations and was completed in December 2007. Test results indicated that poor well integrity was causing water influx from behind casing. As a result the well was producing at lower than anticipated gas rates and as the cost of remediation was prohibitive, the well has been plugged and abandoned.
The Group owns the Kraznozayarska gas treatment plant, on the Pirkovskoe licence area, which is connected to the UkrTransGas system. Its capacity was upgraded in July 2007 to 300,000 cubic metres per day of gas and 150 tonnes per day of condensate in anticipation of future production.
The Group has a 100 per cent working interest in the Pokrovskoe licence which holds 51.06 mmboe (2008: 58.6 mmboe) of prospective resources. The exploration licence covers 49.5 square kilometres and runs until August 2011. There is a four well drilling commitment (two of which have been drilled), 3D seismic work commitment as well as the construction of a gas treatment plant. Interpretation of the 3D seismic was completed in early 2010 and confirms the presence of a prospect with four-way closure at the Lower Visean level and potentially in the deeper Tournasian sediments beneath both the Pokrovskoe 1 and Pokrovskoe 2 well locations separated by a geological fault.
Pokrovskoe 2 was the first exploration well drilled on the Pokrovskoe structure and was spud in late 2006. Drilling of the well was terminated at a drilling depth of 5,185 metres and the well was suspended for future evaluation. During drilling and coring operations across the Visean (V17 to V22) formations, there was strong gas influx into the well bore. The main objectives of this well are to determine the productivity of the Upper and Lower Visean formations and to potentially convert prospective resources to reserves.
Pokrovskoe 1 is the second exploration well on the licence and was spud in early 2008. The well was temporarily suspended at 4,988 metres pending evaluation of data obtained from the well so far.
The processing of the previously acquired 3D seismic data over the entire field is now complete and it is planned to deepen Pokrovskoe 1 and Pokrovskoe 2 to the lower target horizons and their commitment depths.
The Group has a 90 per cent working interest in the Zagoryanksa licence area which is located immediately to the east of the Pirkovskoe licence. The Zagoryanska licences hold 96.4 mmboe of contingent resources (2008: 18.6 mmboe of contingent resources and 25.9 of prospective resources). The exploration and production licence covers 49.6 square kilometres and in January 2009 the Group received a five year extension for this licence which now expires in April 2014.
The required work programme includes a 3D seismic survey (completed); testing of well Zagoryanska 3 (underway); workover of well Zagoryanska 2; the drilling of an appraisal well, and; conducting geological and economic estimation of hydrocarbon reserves which are to be verified by the State of Reserves Commission.
The Zagoryanska 3 well has been drilled to a TD of 5,110 metres in the Lower Visean (V26) and was suspended in order to evaluate the data obtained from testing. Several potential gas bearing reservoirs were tested in the Carboniferous. In late 2009, additional testing of the well was farmed-out to a local company that is funding additional testing at their own expense in return for a share of any future production from the well. Following completion of this testing program, management will consider the workover of two previously drilled wells (Zagoryanska 2 and 8).
Bitlyanska Licence area
The Bitlyanska exploration and development licence covers an area of 390 square kilometres and the Group has a 96.5 per cent to 97.1 per cent working interest, varying with production. There are three hydrocarbon discoveries in this licence area: Bitlya, Borynya and Vovchenska. The Borynya and Bitlya fields hold 211.54 mmboe (2008: 188.6 mmboe) and 113.92 mmboe (2008: 114.0 mmboe) of contingent resources respectively, while no reserves and resources have been attributed to the Vovchenska field.
In December 2009, the Group received a five year extension for this licence until December 2014. The required work programme includes: (a) seismic surveying; (b) drilling of Bitlya 2, re-entering of Borynya 3 (testing and possible completion for production) and drilling of two additional wells; (c) commencement of a pilot commercial exploitation of Vovchenska 11 well; and (d) conducting geological and economic estimation work on the Vovchenska field.
In November 2009, drilling of the Borynya 3 well was terminated at a drilled depth of 5,325 metres and the well was suspended for future evaluation. Borynya 3 was a licence obligation well and confirmed that an active hydrocarbon system is present over an extended interval. Several discrete gas bearing pressure regimes were penetrated and good quality data were obtained from the well. In June 2009, Borynya 3 tested gas from a secondary reservoir at an estimated maximum rate of 128,000 cubic metres per day during a limited duration drill stem test.
The Borynya 3 well was designed to test the potential of the the Verchovinsky formation at a projected depth below 4,800 metres. According to Soviet era records, this interval in the Borynya 2 well tested 400,000 cubic metres of gas per day in an open-hole test before the test failed due to formation blocking the test tool. The possible extent of the Borynya structure is currently poorly defined as there is a lack of adequate seismic data due to the complex geology and the challenges of acquiring good seismic results in the terrain of the Borynya region.
Prior to changing strategy earlier in 2009, the Group had planned to drill the Bitlya 2 well following Borynya 3. This well has been postponed into the extension phase of the license, pending a decision to commence exploratory drilling. Bitlya is a 3,000 metre normally pressured gas field which has already been drilled by the Bitlya 1 well. This well established the presence of hydrocarbons in a structure identified by Soviet era 2D seismic. This has been reprocessed and reinterpreted using modern geophysical techniques, including generation of a structurally balanced section to verify the tectonic activity in the area. Although the structure is confirmed by the interpretation the geometry and extent of the closure will need to be confirmed by a targeted seismic study planned for 2010.
Zev Furst - Independent Non-executive Chairman
Appointed to the Board on 2 August 2011, Mr Furst is a leading global business and communications strategist who has advised political leaders, foreign principals and corporate executives of Fortune 100 companies. He is the Chairman and CEO of First International Resources, an international corporate and political consulting firm he founded in 1992. Mr Furst specialises in providing strategic counsel on crisis management, market entry, corporate positioning and personal reputational issues. In recent years, he has also advised and consulted with candidates running for national office in Israel, Japan, Mexico and Ukraine.
In 1986, Mr Furst was a founding partner of Meridian Resources and Development Ltd, an international commodities trading company specialising in chemicals and petroleum products.
Mr Furst currently serves as Chairman of the International Board of the Peres Center for Peace and is a member of the Advisory Board of the Kennan Institute in Washington, DC. He has written and lectured extensively on international affairs, business and political strategy and the role of media in politics and diplomacy.
Mr Furst is Chairman of the Company’s Nomination Committee and a member of the Remuneration Committee.
Guido Michelotti - Chief Executive Officer
Mr Michelotti was appointed to the Board of Directors as Chief Executive Officer on 25 June 2015. An Oil & Gas executive with over 30 years of international experience across the entire E&P cycle, he spent more than 10 years in senior executive roles with Eni, leading E&P companies as well as managing major capital projects.
Prior to joining Cadogan he was CEO of a Luxembourg-based private equity fund investing in E&P.
Mr Michelotti is a Senior Advisor to the Energy Practice of the Boston Consulting Group, a member of the Society of Petroleum Engineers (SPE) and a former member of SPE’s Industry Advisory Council.
Bertrand des Pallieres - Chief Trading Officer
Mr des Pallieres was appointed as Chief Executive Officer on 1 August 2011, having joined the Board as a Non-executive Director on 26 August 2010. Mr des Pallieres is also the CEO of SPQR Capital Holdings SA, a major shareholder of the Company. On 22 June 2015, Mr des Pallieres was appointed as Chief Trading Officer.
Previously he was the Global Head of Principal Finance and member of the Global Market Leadership Group of Deutsche Bank from 2005 to 2007. From 1992 to 2005 he held various positions at JP Morgan including Global Head of Structured Credit, European Head of Derivatives Structuring and Marketing, and Co-Head of Sales for Europe, Middle East and Africa. He is a Non-executive Director of Versatile Systems Inc. listed on the Toronto and London Stock Exchanges and Equus Total return, Inc., listed on the NYSE.
Mr des Pallieres is a member of the Nomination Committee.
Adelmo Schenato - Chief Operating Officer
Mr Schenato was appointed to the Board as Chief Operating Officer on 25 January 2012. He joined the Company after a 35 year career at Eni S.p.A (“Eni”), the Italian integrated energy business, where he served in senior global and regional positions.
His global roles at Eni included Well Operations Research and Development and Technical Management, and Vice President HSE & Sustainability. His regional roles include General Manager of Tunisia, Gabon and Angola as well as CEO of Eni’s Italian gas storage company.
Mr Schenato is a member of the Health, Safety and Environment Committee.
Gilbert Lehmann - Senior Independent non-executive Director
Mr Lehmann was appointed to the Board on 18 November 2011. He is currently acting as an adviser to the Executive Board of Areva, the French nuclear energy business, having previously been its Deputy Chief Executive Officer responsible for finance. He is also a former Chief Financial Officer and deputy CEO of Framatone, the predecessor to Areva, and was CFO of Sogee, part of the Rothschild Group. Mr Lehmann is also Deputy Chairman and Chairman of the Audit Committee of Eramet, the French minerals and alloy business. He is Deputy Chairman and Audit Committee Chairman of Assystem SA, the French engineering and innovation consultancy. He was Chairman of ST Microelectronics NV, one of the world’s largest semiconductor companies, from 2007 to 2009, and stepped down as Vice Chairman in 2011.
Mr Lehmann is currently Chairman of the Company’s Audit Committee and a member of the Remuneration and Nomination Committees.
Enrico Testa - Independent non-executive Director
Appointed to the Board on 1 October 2011, Mr Testa has a long and varied background in the energy market. He was Chairman of the Board of ACEA (the Rome electricity and water utility company) from 1996 to 2002 and Chairman of the Board of Enel S.p.A, the major Italian electricity supplier, during its privatisation. From 2005 to 2009 he was Chairman of Roma Metropolitane, the Rome Council-owned company constructing new underground lines. He was also Chairman of the Organising Committee for the 20th World Energy Congress held in Rome in November 2007, Senior Partner at the Franco Bernabè Group, which owns several investments in the IT sector. From 2002 to 2005 he was member of the Advisory Board of Carlyle Europe and has been Chairman of the Italian Nuclear Forum since 2010. In addition, between 2004 and August 2012 Mr Testa was Managing Director of Rothschild S.p.A.
He is currently Chairman of the AIM-listed telecommunications company Telit Communications Plc, Vice Chairman of Intecs S.p.A and Chairman of E.VA – Energie Valsabbia S.p.A. – a company developing hydropower and solar generating plants.
Mr Testa is Chairman of the Company’s Remuneration Committee and a member of the Audit and Nomination Committees.
Michel Meeus - Non-Independent non-executive Director
Mr Meeùs was appointed as a Non-executive Director on 23 June 2014. Mr. Meeùs is currently acting as Chairman of the Board of Directors of Theolia, an independent international developer and operator of wind energy projects, of which he is a major shareholder. Since 2007, he has been a director within the Alcogroup SA Company (which gathers the ethanol production units of the Group), as well as within some of its subsidiaries. Before joining Alcogroup, Mr Meeùs carved out a career in the financial sector, at Chase Manhattan Bank in Brussels and London, then at Security Pacific Bank in London, then finally at Electra Kingsway Private Equity in London.