REG-Cadogan Energy Solutions Plc: Annual Results for the year ended 31 December 2024
Mon 07:02
CADOGAN ENERGY SOLUTIONS PLC
Annual Results for the year ended 31 December 2024
The Board of Cadogan Petroleum plc, ("Cadogan" or "the Company"), is pleased
to announce the Company's annual results for the year ended 31 December 2024.
Key Financial Highlights of 2024:
* Loss for the year: $6.2 million (2023: profit of $1.3 million)
* Average realised price 1 (#_ftn1): $71.13/boe (2023: $59.32/boe)
* Gross revenues 2 (#_ftn2): $9.2 million (2023: $7.6 million)
* G&A 3 (#_ftn3): $3.5 million (2023: $3.6 million)
* Loss per share: 2.6 cents (2023: profit of 0.5 cents)
* Cash at year end: $14.4 million (2023: $14.2 million)
Key Operational Highlights of 2024:
* Production: 129,272 bbl (2023: 119,057 bbl), a 9% increase year-on-year;
* No LTI/TRI 4 (#_ftn4). All employees and assets have been secured;
* ISO 14001 and 45001 certifications were re-validated by respective authority
for one year;
* Assessment of Blazhiv oil field hydrocarbon reserves by an independent
expert according to PRMS standards;
* Qualification of Exploenergy as gas operator in Italy by the Ministry of
Environment and Energy Transition;
* Development of the gas-to power project using the non-commercial gas of
Blazhiv field for producing electricity to be sold on the market; and
* Launch of an investment for the development of new power generation
projects in Ukraine, with a total installed capacity of 12,3 MW to enter in
operation in H2 2025.
Group overview
In 2024, while continuing to maintain exploration and production assets, and
operating an oil services business in Ukraine, Cadogan started its
diversification and development in the electricity market. Cadogan's oil
assets are concentrated in the west of the country. The oil services business
focuses on workover operations, civil works services and other services to
satisfy Cadogan intra-group operational needs and specialised machinery
services to third parties. The Cadogan's power generation assets are developed
in the center and the west of the country.
Our business model
We aim to increase value through:
* Maintaining a robust balance sheet, monetising the remaining value of our
Ukrainian assets and supplementing E&P cash flow with revenues from gas
trading and oil services
* Developing new activities along the energy value chain with a lower impact
on environment
* Diversifying Cadogan's portfolio, both geographically and operationally
Ukraine
2024 remained a highly challenging year for Cadogan due to the ongoing
invasion of Ukraine by Russia and its consequences on the operational
activities of the Group.
West Ukraine
The Group continued to produce oil from its production Blazhiv license located
in the West of Ukraine. Notwithstanding severe market volatilities caused by
war time uncertainties Cadogan was able to avoid shutdowns of its
production during 2024. As a result, production grew by 9% above the one of
2023. Net oil production was 129,272 bbl corresponding to an average of 353
bpd.
In 2024, a new assessment of hydrocarbon reserves was completed by an
independent expert, according to PRMS standards. The Blazhiv field contains
3.05 million boe of 3P reserves and additionally 0,64 million boe of 2C
contingent resources. The results of this assessment indicate a strong
reserves base, highlighting our robust position and revealing significant
potential for further development.
A substantial move has been done to ensure the sustainability of the oil
production activities by utilizing the non-commercial associated gas from oil
production activities for generating electricity. In 2024, progress has been
made in the development of the gas infrastructure and the overall construction
works. Because of a delay in releasing an authorisation from an
administration, the gas-to-power generator should be operational in July 2025.
Power Generation Business
In 2024, the Group further advanced its diversification into the electricity
sector to become an electricity producer. Cadogan initiated new investments in
power generation projects in different locations in Ukraine, with a total
installed capacity of 12.3 MW. These projects are scheduled to become
operational in H2 2025, reinforcing the Company's commitment to expanding its
presence in the energy sector.
Subsidiary businesses
Due to the current situation in Ukraine, the Company had no gas trading
operations during 2024. Cadogan continues to monitor the gas markets in
Europe and Ukraine, while keeping in storage 0.7 million m3 of gas.
Astroservice LLC, the oil services subsidiary, continued to support Blazhiv
license wells' operations and specialized machinery services to third parties.
Italy
The Group owns a 90% interest in Exploenergy s.r.l., an Italian company, which
controls two exploration areas (Reno Centese and Corzano), located in the Po
Valley region (Northern Italy).
In 2024, the Ministry for Environment and Energy Transition, confirmed again
that Exploenergy is a qualified gas operator in Italy. In September 2024, the
Ministry for Environment and Energy Transition notified this decision to the
two corresponding regions for Exploenergy projects, inviting them to release
the necessary authorisations for the preliminary exploration phase.
Exploenergy is expecting the release in June 2025 of this authorisation for
the project located in Lombardia.
In February 2019, Cadogan entered in a 2-year loan agreement with Proger
Management & Partners Srl ("PMP") with a call 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.
The interpretation of these contracts led to controversy which has been
settled by the parties in December 2024.
Strategic Report
The Strategic Report has been prepared in accordance with Section 414A of the
Companies Act 2006 (the "Act") and presented hereunder. Its purpose is to
inform stakeholders and help them assess how the Directors have performed
their legal duty under Section 172 of the Act to promote the success of the
Company.
Section 172 Statement
The Company's section 172 statement is presented on page 39 and forms part of
this strategic report.
Principal activity and status of the Company
The Company is registered as a public limited company (registration number
05718406) in England and Wales. Up to 2024, the principal activity was oil
and gas exploration, development and production; the Company also conducts gas
trading and provides services. In November 2022, the shareholders approved the
change of name and the strategy to expand its activities along the energy
value chain to new forms of energy with a reduced impact on the environment.
In December 2023, the Company stepped into the electricity generation sector
by launching the development of the gas-to-power project on the Blazhiv field
in Ukraine. Due to delays deriving from administrative authorisations, this
project will be operational in July 2025. In 2024, the Company decided to
accelerate its business diversification in the electricity market and launched
new investments to develop several projects in power generation with a total
installed capacity of 12.3 MW to be operational in H2 2025.
The Company's shares used to have a standard listing on the Official List of
the UK Listing Authority and are traded now on the "transition" Market of the
London Stock Exchange after the changes in the listing categories which
occurred in July 2024.
Key performance indicators
The Group monitors its performance through five key performance indicators
("KPIs"):
- to increase oil, gas and condensate production measured on
the number of barrels of oil equivalent produced per day ("boepd");
- to decrease administrative expenses;
- to increase the Group's basic earnings per share;
- to maintain no lost time incidents; and
- to grow geographically and operationally diversify the
portfolio.
The Group's performance in 2024 against these KPI's is set out in the table
below, together with the prior year performance data.
Unit 2024 2023 2024 vs 2023
Average production (working interest basis) 1 boepd 353 326 +8%
Overhead (G&A) $ million (3.5) (3.6) -3%
Basic (loss)/profit per share 2 cents (2.6) 0.5 -620%
Lost time incidents 3 incidents - - -
Geographic and operation diversification new assets yes - -
1. Average production is calculated as the average daily production during the
year
2. Basic profit/(loss) per ordinary share is calculated by dividing the net
profit/(loss) for the year attributable to equity holders of the parent
company by the weighted average number of ordinary shares during the year
3. Lost time incidents relate to the number of injuries where an
employee/contractor is injured and has time off work (IOGP classification)
Chairman's Statement
2024 remained a year of persistent challenges for Ukraine, as the ongoing
conflict with Russia continued to impact the country's stability and economic
environment. The geopolitical uncertainties and security risks posed
significant obstacles to our operations, yet Cadogan remained resolute in its
commitment to operational excellence, and sustainability. The safety of our
employees continues to be our highest priority, and we have taken all
necessary measures to ensure their well-being while securing the continuity of
our operations.
Despite these challenges, Cadogan strengthened its position in the market by
preserving stable oil production levels, achieving results that exceeded those
of 2023. Through proactive risk management and adaptability, we successfully
mitigated the impact of external uncertainties, ensuring uninterrupted
production and sales.
Furthermore, Cadogan intensified its focus on diversification and investment
in power generation. Despite the adverse conditions, we increased our
investments in this sector, launching a new power generation project in
Ukraine. This initiative reflects our long-term commitment to growth,
sustainability, and energy diversification.
Looking ahead, we acknowledge that geopolitical instability and economic
volatility will continue to present challenges. However, we remain committed
to overcoming these hurdles with resilience, integrity, and determination.
Thanks to our dedicated team and strong leadership, we are well-positioned to
maximize the value of our assets while furthering our strategic goals. The
Board remains focused on strengthening our position and driving future growth
through diversified investments, ensuring the continued success and
sustainability of Cadogan in these uncertain times.
Michel Meeus
Non-Independent Non-Executive Chairman
25 April 2025
Chief Executive's Review
With the persistence of the war in Ukraine, 2024 continued to present big
challenges for the energy sector in general and for Cadogan in particular. The
ongoing air strikes targeting oil, gas, and energy infrastructure, combined
with geopolitical and economic uncertainties, have added further complexities
to operations. Despite these adversities, Cadogan has remained resourceful and
forward-thinking, effectively navigating market complexities to sustain
operations, drive expansion and implement its strategy aiming at positioning
Cadogan Energy Solutions as a diversified energy group developing new
activities along the energy value chain with a lower impact on environment.
The security of our employees in Ukraine remains our first concern. We are
pleased to report that all of them have remained safe throughout the year. The
Group's local operating companies in Ukraine have been recognised critical to
the Country's economic functioning, reinforcing our essential role in the
energy sector.
In 2024, the Group successfully increased crude oil production while achieving
higher sales prices and revenues. With the aim of providing sustainability for
this activity, Cadogan has developed its gas-to-power project on the Blazhiv
field to capture the non-commercial gas and the CO2 emissions for producing
electricity to be sold on the market. Due to administrative delays for
delivering authorisations for the infrastructure and connection, this project
is expected to be operational in July 2025. Furthermore in 2024, Cadogan
launched a new development in power generation in Ukraine with a total
installed capacity of 12.3 MW to be operational in H2 2025, underscoring its
strategy to broaden its energy portfolio and reinforcing its commitment to
diversification and long-term energy sustainability.
Against this challenging background, Cadogan's existing operational activities
performed as following:
* Another year without LTIs;
* a 9% increase in oil production, from 119,057 bbl in 2023 to 129,272 bbl in
2024;
* development of the gas-to-power project and its infrastructure on Blazhiv
field;
* $14.3 million of net cash at 31 December 2024, and $24.7 million at 31
January 2025 (after the closing of the Settlement Agreement with Proger);
* further diversification in electricity generation business with the
development of projects with a total installed capacity of 12.3 MW in Ukraine
to be operational in H2 2025; and
* assessment and confirmation of Blazhiv oil field hydrocarbon reserves
according to PRMS standards.
Operations
Cadogan has continued to safely produce from its Blazhiv field in the West of
Ukraine. Oil production has increased by 9% compared to the previous year
despite ongoing severe constraints in the country.
Cadogan continued to improve its subsoil knowledge on Blazhiv field. In 2024,
the assessment of the reserves, conducted by an independent expert, confirmed
that the Blazhiv field contains 3.05 million boe of 3P reserves and
additionally 0,64 million boe of 2C contingent resources. This robust position
is reinforced by the strategy of Cadogan for developing the sustainability of
these activities. The gas-to-power project on the Blazhiv field aiming to
utilize the non-commercial associated gas from oil production, converting it
into electricity to be sold on the market, progressed tthroughout 2024. Due to
delays in the authorisations process, this project is expected to be
operational in July 2025. On a full year basis, this project will allow to
drop significantly the CO2 emissions related to our operations on Blazhiv
field. It is expected that the intensity ratio for E&P operations (for same
production volumes) will drop from 146 tons CO2e/Kboe to 32 tons CO2e/Kboe.
Furthermore, in 2024, Cadogan implemented its strategy, to be a diversified
energy company, and expanded its electricity generation business. The Group
has launched a new investment to install new power generation capacity with a
total of 12.3 MW on different locations in centre and west of Ukraine. This
strategic move strengthens Cadogan's role in the energy sector and contributes
to addressing the country's growing electricity demand. The expansion aligns
with the Company's commitment to diversification in energy production.
High operational standards of the Group have been confirmed again by zero LTI
or TRI, with a total over 1,873,000 manhours since the last incident, and
re-validation of ISO 14001 & 45001 certifications by respective authority for
one year.
Cadogan continues to integrate environmental considerations into its
operational approach. The Group has taken proactive steps to reduce greenhouse
gas emissions by purchasing green certificates, ensuring that the electricity
consumed for its operations in Ukraine is entirely sourced from renewable
energy. In 2024, the Group was able to buy green certificates to mitigate the
CO2 emissions generated by its operational activities in Q4 2024 and 2025.
In 2024, the Italian Ministry for Environment and Energy Transition, confirmed
again that Exploenergy is a qualified gas operator. In September 2024, the
Ministry for Environment and Energy Transition notified this decision to the
two corresponding regions for Exploenergy projects, inviting them to release
the necessary authorisations for the preliminary exploration phase.
Exploenergy is expecting the release in June 2025 of this authorisation for
the project located in Lombardia.
Other
Due to high market volatility caused by military escalation in Ukraine, The
Company had no trading operations during 2024. Cadogan continues to monitor
the gas markets in Europe and Ukraine, while keeping in storage 0.7 million m3
of gas to secure resources. The oil services activities were used primarily to
serve the Group's wells' operations and specialized machinery services to
third parties.
Proger
In February 2019, Cadogan used part of its cash (Euros 13.385 million) to
enter into a 2-year Loan Agreement with Proger Managers & Partners, together
with a Call Option Agreement which could have been exercised by Cadogan,
between September 2019 and February 2021, into a 33 % equity interest in
Proger Ingegneria which in turn held, a 75.95% equity interest in Proger as at
31 December 2020. The interpretation of these contracts has led to controversy
between the parties, with a refusal to deliver financial information to
Cadogan. The Call Option was not exercised. Cadogan demanded the repayment of
the Loan together with the accumulated interests. PMP contested the obligation
to reimburse and asked for arbitration. This arbitration proceeding ended in
July 2022, but the interpretation of the award led to a new controversy.
Cadogan introduced a claim at the Appeal Court of Rome and asked in November
2023 for a new arbitration. In September 2024, the parties agreed to suspend
the procedures and find an amicable settlement. This was done, and a
Settlement Agreement was signed on 12 December 2024. After receiving 10
million euros in a single instalment in January 2025, Cadogan exited from the
above-mentioned contracts, ended all the litigations procedures and dissolved
the pledge over the corresponding shares in Proger Ingegneria. Whilst
increasing the available cash in Cadogan by $10.3 million, the transaction is
impacting the balance sheet and the 2024 accounts with an impairment of $5.7
million which is not a cash item.
Outlook
2024 has been an important inflexion year for Cadogan Energy Solutions.
Despite the tremendous challenges imposed by the war in Ukraine, the Group has
been successful in shifting its business model to start its journey to become
a diversified energy group. We are bringing sustainability to the existing oil
production activities on Blazhiv field with a solution which will allow to
drop significantly the emissions of CO2 and improve the profitability for the
Group. The ongoing investments and diversification in the electricity
generation sector will create significant increase in revenues and cash-flow.
In 2025, once obtained the authorisation, the Group will start the studies for
the exploration phase on the authorised project in Lombardia (Italy),
confirming its geographical diversification. Thanks to a robust balance sheet
and available cash, the Group is ready to continue to develop its activities
along the energy value chain, increasing its shift towards activities with a
lower impact on environment.
This strategy is totally aligned with the Climate Change requirements for
sustainability of Cadogan's activities.
Fady Khallouf
Chief Executive Officer
25 April 2025
Operations Review
Overview
At 31 December 2024, the Group held working interests in one conventional gas,
condensate and oil exploration and production license in the west of Ukraine.
Summary of the Group's licenses (as at 31 December 2024)
Working interest (%) License Expiry License type
100 Blazhiv November 2039 Exploration and Production
West Ukraine
E&P activity remained focused on maintaining its license and safely and
efficiently producing from the existing wells as well as implementing
non-invasive production enhancement scenarios within the Blazhiv oil field.
Blazhivska license
In 2024, the daily average net oil production reached 353 barrels per day,
indicating a 9% increase compared to 2023's production of 326 barrels per day.
Proper planning, robust safety measures, and efficient resource management
allowed to achieve such production levels demonstrating operational stability
even in harsh war circumstances.
Cadogan continues to deepen its knowledge of Blazhiv area subsoil. In 2023,
the Company conducted full hydrodynamic surveys on the Blazhiv-1, Blazhiv-3,
Blazhiv-Monastyrets-3, and Blazhiv-10 wells. Further, in 2024, an independent
expert completed the re-assessment of reserves at the Blazhiv field,
confirming 3.05 million boe of 3P reserves and 0.64 million boe of 2C
contingent resources associated with the Blazhiv license. These results
indicate a strong reserves base.
The gas-to-power project, aiming to utilise non-commercial associated gas from
oil production on Blazhiv field converting it into electricity to be sold on
the market, progressed tthroughout 2024. Operations focusing on the
construction of the gas collecting infrastructure and laying down the
pipelines advanced steadily. A power generator from a leading European
manufacturer, along with essential equipment, was delivered on the site.
Gas trading
Due to high market volatility caused by military escalation in Ukraine, The
Company had no trading operations during 2024. Cadogan continues to monitor
the gas markets in Europe and Ukraine, while keeping in storage 0.7 million m3
of gas to secure resources.
Service
The Group continued to provide services through its wholly owned subsidiary
Astro-Service LLC. The provided services were primarily focused on serving
intra-group operational needs in wells' re-entry/repairs and stimulation
operations, well surveys and field on-site activities, but also specialized
machinery services to third parties. In the context of the prevailing
situation in Ukraine, the services segment was dedicated totally to supporting
the Group's production activities.
Electricity generation
Cadogan has further expanded its electricity generation business. The Group
has launched a new investment to install a total of 12.3 MW in different
locations in Ukraine. This strategic move strengthens Cadogan's role in the
energy sector and contributes to addressing the Country's growing electricity
demand. It is expected that the new projects will be operational in H2 2025.
Financial Review
Overview
In 2024, the Group increased its oil production by 9%. The Group's operating
divisions delivered a positive contribution of $4.1 million (2023: positive
contribution of $2.2 million excluding the impairment of oil and gas assets).
The average realised oil price increased by 20% from $59.3 to $71.13 per
barrel.
The cash position slightly increased to $14.4 million as at 31 December 2024
compared to $14.2 million as at 31 December 2023.
The trading business of the Group had no activities during the period.
Income statement
The Revenues from production increased from $7.6 million in 2023 to $9.2
million in 2024. This result is integrating mainly an increase in oil average
realised prices by 20% and an increase in crude oil production by 9%. E&P
costs of sales are almost at the same level: $5.1 million in 2024 and $5.39
million in 2023. These costs include production royalties and taxes, fees paid
for the rented wells, depreciations, depletion of producing wells, direct
staff costs and other costs for exploration and development. Overall, in 2024,
E&P made a positive contribution of $4.1 million (2023: $2.2 million) to gross
profit.
Administrative expenses ("G&A") continued to be under strict control.
Balance sheet
The Property Plant & Equipment (PP&E) balance was $5.3 million at 31 December
2024 (2023: $5.8 million). It primarily represents the carrying value of the
assets invested and engaged in relation with the Blazhiv license. The E&E and
PP&E are held by Ukrainian subsidiaries with functional currency Ukrainian
Hryvna. The Ukrainian Hryvna was devaluated by 11% as at 31 December 2024
compared to 31 December 2023, generating a movement in the E&E and PP&E value
presented in the US Dollar.
Trade and other receivables of $0.3 million (2023: $0.3 million) include $0.2
million of prepayment for gas-to-power facility construction, $0.07 million of
recoverable VAT (2023: $0.2 million), which is expected to be recovered
through production activities, and $0.03 million (2023: $0.1 million) of other
receivables.
Inventories slightly increased from $0.4 million to $0.5 million principally
due to the revaluation of the gas in the stock.
The Proger loan was held at amortised cost at $10.4 million (2023: $17.1
million). Refer to the Chief Executive's Report for further details together
with note 4(d) and 28.
The $1.7 million of trade and other payables as at 31 December 2024 (2023:
$1.4 million) consist of $0.8 million (2023: $0.4 million) of accrued
expenses, $0.2 million trade payables (2023:$0.2 million) and $0.7 million
(2023: $0.8 million) of other payables.
Provisions include $0.2 million (2023: $0.2 million) of long-term and current
provisions for decommissioning costs which represents the present value of
these costs that are expected to be incurred in 2039 for producing assets,
when the existing Blazhiv license will expire, and current provision for the
decommissioning costs of the Bitlyanska license.
Net cash slightly increased to $14.4 million at 31 December 2024 compared to
$14.2 million at 31 December 2023.
Cash flow statement
The Consolidated Cash Flow Statement on page 80 shows operating cash inflow
before movements in working capital of $1.4 million (2023: outflow of $0.6
million), which represents mostly cash generated by the E&P net of corporate
expenses.
Related party transactions
Related party transactions are set out in note 30 to the Consolidated
Financial Statements.
Treasury
The Group continually monitors its exposure to currency risk. It maintains a
portfolio of cash mainly in US dollars ("USD") and Euro held primarily in the
UK. The production revenues from the sale of hydrocarbons are received in
Hryvna, the local currency in Ukraine. Since the Martial Law established in
February 2022 in Ukraine, the cash generated in Ukraine must be kept in
Hryvna.
Risks and uncertainties
There are several potential risks and uncertainties that could have a material
impact on the Group's long-term performance and could cause the results to
differ materially from expected and historical results. Executive management
review the potential risks and then classify them as having a high impact if
above $5 million, medium impact if above $1 million but below $5 million, and
low impact if below $1 million. They also assess the likelihood of these risks
occurring. Risk mitigation factors are reviewed and documented based on the
level and likelihood of occurrence. The Audit Committee reviews the risk
register and monitors the implementation of risk mitigation procedures via
Executive management, who are carrying out a robust assessment of the
principal risks facing the Group, including those potentially threatening its
business model, future performance, solvency and liquidity.
The Group has analysed the following categories as key risks:
Risk Mitigation
War risks
Since Spring 2021, Russia has gradually increased the concentration of military equipment, weapons and troops near the Ukrainian borders. On 24 February 2022, the Russian troops attacked Ukraine and invaded its territory. Severe fights have been engaged in Kyiv, and several other main cities like Kharkiv, Mariupol, Kherson, Sumy and Chernihiv. Missile attacks and bombing are used by the Russian troops to destroy infrastructures and facilities even in the western cities, like Lviv. Cyber-attacks have increased. Given the unpredictability of the issue of this war, a full-scale invasion of Ukraine or a much longer duration of this war could have material impacts on the Group's operations and on its human, industrial and financial resources. In 2024, the situation remained highly challenging and complicated with the possibility for further escalation. Anticipating the beginning of the war, the Group put in place, since the beginning of February 2022, emergency procedures communicated to all employees on the different sites in Ukraine with an Emergency Committee communicating every day. Safety measures
have been dispatched with a remote working organization. Specific measures have been put in place for the operations on site. In case of need, specific measures were put in place to suspend the operations of the Blazhiv field wells, with technical measures
for decommissioning and temporary conservation of the wells. The transmission and internet connection systems have been secured with a satellite connection. IT security has been reinforced. The Group is monitoring the situation daily and taking appropriate
action to ensure the safety and the essential needs of its employees. In 2024, Cadogan employees in Ukraine continued operating in the combined (remote/ office) work mode with the key focus on the safety measures.
Operational risks
Health, Safety and Environment ("HSE")
The oil and gas industry by its nature conducts activities, which can cause health, safety and environmental incidents. Serious incidents can have not only a financial impact but can also damage the Group's reputation and the opportunity to undertake further projects. The Group maintains a HSE management system in place and demands that management, staff and contractors adhere to it. The system ensures that the Group meets Ukrainian legislative standards and, for the CO2 emissions the British standards and achieves
international standards to the maximum extent possible. Management systems and processes have been certified as ISO 14001 and ISO 45001 compliant.
Climate change
After the Paris Agreement (COP 21) the international community is committed to reduce greenhouse gas emissions to slow down the climate change and contain its effects. Countries may impose moratorium on E&P activities or enact tight limits to emissions level, which may curtail production. Shareholders may also request that the Company adopt stringent targets in terms of emissions reduction. A moratorium on domestic production is deemed highly unlikely in Ukraine given the country's need for affordable energy. Such risks exist in Italy. The Italian moratorium ended in 2021. Exploenergy, Cadogan's subsidiary has been obtaining, in 2023, the
status of qualified gas operator and its projects validated by the Ministry for Environment and Energy Transition in 2024. The Group has adopted a strategy allowing to provide, sustainability for its existing oil production activities and, to develop new
activities along the energy value chain with a lower impact on environment. Management strives to reduce emissions in everything the Group does and is implementing alternatives to offset and/or mitigate emissions. In 2024, the Group purchased green
certificates, ensuring that the electricity consumed for its operations and activities in Ukraine is entirely sourced from renewable energy. The Group has also developed its gas-to-power project on its Blazhiv oil field in Ukraine. The aim of this project
is to capture the gas emissions during oil production and use them to generate electricity to be sold on the market. This project will allow to decrease significantly Cadogan's annual gas emissions deriving from its oil production activities. The project
will be operational in July 2025. Furthermore, in 2024, the Group has accelerated its development in the electricity market and has launched investments for the development of several power generation projects totalling an installed capacity of 12.3 MW to
be operational in 2025. In the future, the Group will continue to diversify its activities by investing in new energy solutions activities with a lower impact on environment.
Drilling and Work-Over operations
The technical difficulty of drilling or re-entering wells in the Group's locations and equipment limitations can result in the unsuccessful completion of the well. The incorporation of detailed sub-surface analysis into a robustly engineered well design and work programme, with appropriate procurement procedures and competent on-site management, aims to minimise risk. Only certified personnel are hired to operate on
the rig floor. Contractor's access to the operational sites is allowed only after control of staff qualification and check-up of appropriate technical condition of the equipment and machinery.
Production and maintenance
There is a risk that production or transportation facilities could fail due to non-adequate maintenance, control or poor performance of the Group's suppliers. All plants are operated and maintained at standards above the Ukrainian minimum legal requirements. Operative staff are experienced and receive supplemental training to ensure that facilities are properly operated and maintained. When not in use the
facilities are properly kept under conservation and routinely monitored. Service providers are rigorously reviewed at the tender stage and are monitored during the contract period.
Sub-surface risks
The success of the business relies on accurate and detailed analysis of the sub-surface. This can be impacted by poor quality data, either historic or recently gathered, and limited coverage. Certain information provided by external sources may not be accurate. All externally provided and historic data is rigorously examined and discarded when appropriate. New data acquisition is considered, and appropriate programmes implemented, but historic data can be reviewed and reprocessed to improve the overall knowledge
base. Agreements with qualified local and international contractors have been entered into to supplement and broaden the pool of expertise available to the Company.
Data can be misinterpreted leading to the construction of inaccurate models and subsequent plans. All analytical outcomes are challenged internally and peer reviewed. Analysis is performed using modern geological software.
The area available for drilling operations is limited due to logistics, infrastructures and moratorium. This increases the risk for setting optimum well coordinates. Bottom hole locations are always checked for their operational feasibility, well trajectory, rig type, and verified on updated sub-surface models. They are rejected if deemed to be too risky.
The Group may not be successful in proving commercial production from its licenses and consequently the carrying values of the Group's oil and gas assets may have to be impaired. The Group performs, on an annual basis, a review of its oil and gas assets, impairs if necessary, and considers whether to commission a review by a third party or a Competent Person's Report ("CPR") from an independent expert depending on the
circumstances.
Financial risks
The Group is at risk from changes in the economic environment both in Ukraine and globally, which can cause foreign exchange movements, changes in the rate of inflation and interest rates and lead to credit risk in relation to the Group's key counterparties. The martial law in Ukraine forbids the transfer of cash outside of Ukraine. The cash held in Ukraine must be held in the local currency (Hryvna). The decrease of the value of the Hryvna is a major risk on the cash held by the Group in Ukraine. Since the martial law in Ukraine, there is an obligation to keep the cash held by Cadogan in Ukraine in Hryvna with period restrictions for transfers out of the country. In February 2019, Cadogan entered into a 2-year Loan Agreement (Euros 13.385 million) with Proger Management & Partners with a Call Option that could be exercised by Cadogan, between September 2019 and February 2021, with no obligation, allowing a 33 % equity interest in Proger Ingegneria. This represented a key transaction and element of the Group balance sheet. At 25 February 2021, being the Maturity Date, Cadogan did not exercise its Call Option and PMP must reimburse Euros 14,857,350. At the end of March 2021, PMP did not reimburse and asked for an arbitration to get the Loan Agreement recognised as an equity investment contract. Revenues in Ukraine are received in hryvnia and expenditure is made in Hryvnia. The Group continues to hold most of its cash reserves in the UK mostly in GBP, USD and Euro. Cash reserves are placed with leading financial institutions, which are approved
by the Audit Committee. Before the war in Ukraine, foreign exchange risk was considered a normal and acceptable business exposure, and the Group did not hedge against this risk for its E&P operations. The Group is currently analysing different options.
This Loan Agreement has led to controversy with several litigation procedures. In September 2024, the parties agreed to suspend the procedures and find an amicable settlement. This was done, and a Settlement Agreement was signed on 12 December 2024.
After receiving 10 million euros in a single instalment in January 2025, Cadogan exited from the above-mentioned contracts, ended all the litigations procedures and dissolved the pledge over the corresponding shares in Proger Ingegneria. The risks and
uncertainties deriving from the Loan Agreement no longer exist at the date of this report. In January 2025, Cadogan received the 10 million euros. Refer to note 28 to the Consolidated Financial Statements for detail on financial risks.
The Group is at risk that counterparties will default on their contractual obligations resulting in a financial loss to the Group. Procedures are in place to scrutinize new counterparties via a Know Your Customer ("KYC") process, which covers their solvency. In addition, when trading gas, the Group seeks to reduce the risk of customer non-performance by limiting the title transfer to
product until the payment is received, prepaying only to known credible suppliers.
The Group is at risk that fluctuations in gas prices will have a negative result for the trading operations resulting in a financial loss to the Group. The Group mostly enters back-to-back transactions where the price is known at the time of committing to purchase and sell the product. Sometimes the Group takes exposure to open inventory positions when justified by the market conditions in Ukraine, which
is supported by analysis of the specific transactions, market trends and models of the gas prices and foreign exchange rate trends.
Country risks
Legislative changes may bring unexpected risk and create delays in securing licenses or ultimately prevent licenses and license renewals /conversions from being secured. Compliance procedures, monitoring and appropriate dialogue with the relevant authorities are maintained to minimise the risk. In all cases, deployment of capital in Ukraine is limited and investments are kept at the level required to fulfil license
obligations.
Other risks
The Group's success depends upon skilled management as well as technical and administrative staff. The loss of service of critical members from the Group's team could have an adverse effect on the business. The Group periodically reviews the compensation and contract terms of its staff in order to remain a competitive employer in the markets where it operates.
The Group is at risk of underestimating the risk and complexity associated with the entry into new business and/or new countries. The Group applies rigorous screening criteria to evaluate potential investment opportunities. It also seeks input from independent and qualified experts when deemed necessary. Additionally, the required rate of return is adjusted to the perceived level of
risk.
Local communities and stakeholders may cause delays to the project execution and postpone activities. The Group maintains a transparent and open dialogue with authorities and stakeholders (i) to identify their needs and propose solutions which address them as well as (ii) to illustrate the activities which it intends to conduct and the measures to mitigate
their impact. Local needs and protection of the environment are always taken into consideration when designing mitigation measures, which may go beyond the legislative minimum requirement. The Group devotes the highest level of attention and engage
qualified consultants to prepare the Environmental Impact Assessment studies and to attend public hearings, both introduced in Ukraine in 2019.
Statement of Reserves and Resources
In 2024, the company conducted routine rig-less production support activities
at the Blazhiv-1, Blazhiv-3 and Blazhiv-Monastyrets-3 and Blazhiv-10 wells to
maintain sustainable production using sucker rod pumping systems.
Summary of Reserves1
at 31 December 2024
Mmboe
Proved, Probable and Possible Reserves at 1 January 2024 3.05 1
Production 0,13
Proved, Probable and Possible Reserves at 31 December 2024 2.92
1 The new study was completed end of February 2024 by Brend Vik LTD LLC.
In addition to the tabled reserves, Cadogan has 0.64 million boe of 2C
contingent resources associated with the Blazhiv license.
Corporate Responsibility
Under Section 414C of the Companies Act 2006 (the "Act"), the Board is
required to disclose information about environmental matters, employees, human
rights and community issues, including information about any policies it has
in relation to these matters and the effectiveness of these policies.
Being sustainable in our activities means conducting our business with respect
for the environment and for the communities hosting us, with the aim of
increasing the benefit and value to our stakeholders. We recognise that this
is a key element to be competitive and to maintain our license to operate.
The Board recognises that the protection of the health and safety of its
employees, the communities, and the environment in which it operates is not
just an obligation but is part of the personal ethics and beliefs of
management and staff. These are the key drivers for a sustainable development
of the Company's activity. Cadogan Energy Solutions, its management and
employees are committed to continuously improve Health, Safety and Environment
(HSE) performance; follow our Code of Ethics and apply, in conducting our
operations, internationally recognised best practices and standards.
Our activities are carried out in accordance with a policy manual, endorsed by
the Board, which has been disseminated to all staff. The manual includes a
"Working with Integrity" policy and policies on "business conduct and ethics",
"anti-bribery", "acceptance of gifts and hospitality" and "whistleblowing".
Such policies are subject to regular review.
In August 2018, Cadogan Ukraine LLC obtained ISO 14001 and ISO 45001
certifications for the following scope: "Supervision, coordination, management
support, control in the field of oil and gas onshore exploration and
production". This provides formal recognition of the process embedded in the
Company and demonstrates the commitment and efforts delivered by our employees
and management. It is considered a baseline to continue with the efforts to
improve the way we conduct the business. These certifications have been
renewed every year since then.
The Board believes that health and safety procedures, and training across the
Group should be in line with best practice in the oil and gas sector.
Accordingly, it has set up a committee to review and agree on the health and
safety initiatives for the Company and to report back to the Board on the
progress of these initiatives. Management regularly reports to the Board on
HSE and key safety and environmental issues, which are discussed at the
Executive Management level. The report of the Health, Safety and Environment
Committee can be found on page 42 to 43.
The General Director of Cadogan Ukraine is presently the acting Chairman of
the HSE Committee and is supported in his role by Cadogan Ukraine's HSE
Manager. In accordance with the ISO 14001 and ISO 45001, his role is to ensure
that the Group continuously develops suitable procedures, that operational
management and their teams incorporate them into daily operations and that the
HSE management has the necessary level of autonomy and authority to discharge
their duties effectively and efficiently.
Health, safety and environment
2024 remained extremely challenging due to the Russian invasion of Ukraine and
the resulting subsequent war. Since February 2022, Cadogan has been applying
measures to mitigate the risks of personnel injuries and loss of well control.
Kiev office personnel have been working in the combined office-remote work
regime with precise execution of air alert safety requirements, on-field staff
as well as all offices have been equipped with satellite means of
communication, established internal emergency committee that coordinated the
work and liaising with company management of the daily basis. Two employees
have been demobilized from the army during 2024, none remained serving.
The Group has implemented an integrated HSE management system in accordance
with the ISO requirements. The system aims to ensure that a safe and
environmentally friendly/protection culture is embedded in the organization
with a focus on the local community involvement. The HSE management system
ensures that both Ukrainian and international standards are met, with the
Ukrainian HSE legislation requirements taken as an absolute minimum. All the
Group's local operating companies actively participate in the process. ISO
14001 and ISO 45001 certification were re-validated by the respective
authority in August 2024 for a new term.
A proactive approach based on a detailed induction process and near miss
reporting has been in place throughout 2024 to prevent incidents. Staff
training on HSE matters and discussions on near miss reporting are recognised
as the key factors to continuously improve. In-house training is provided to
help staff meet international standards and follow best practice. The process
enacted by the certification, enhances attention to training on risk
assessments, emergency response, incident prevention, reporting and
investigation, as well as emergency drills regularly run-on operations' sites
and offices. This process is essential to ensure that international best
practices and standards are maintained to comply with, or exceed, those
required by Ukrainian legislation, and to promote continuous improvement.
The Board monitors the main Key Performance Indicators (lost time incidents,
mileage driven, training received, CO2 emissions) as business parameters. The
Board has benchmarked safety performance against the HSE performance index
measured and published annually by the International Association of Oil and
Gas Producers. In 2024, the Group recorded over 153,000 man-hours worked with
no incidents and over 1,870,000 hours have been worked since the last injury
in February 2016.
During 2024, the Group continued to monitor its greenhouse gas emissions and
collect statistical data relating to the consumption of electricity,
industrial water and fuel consumption by cars, plants, and other work sites,
recording a continuous improvement in the efficient use of resources.
Employees
Wellness and professional development are part of the Company's sustainable
development policy and wherever possible, local staff are recruited. The
Group's activity in Ukraine is managed by local staff. Qualified local
contractors are engaged to supplement the required expertise when and to the
extent it is necessary.
Procedures are in place to ensure that recruitment is undertaken on an
efficient, open, transparent, and fair basis with no discrimination against
applicants. Each operating company has its own Human Resources function to
ensure that the Group's employment policies are properly implemented and
followed. The Group's Human Resources policy covers key areas such as equal
opportunities, wages, overtime and non-discrimination. As required by
Ukrainian legislation, Collective Agreements are in place with the Group's
Ukrainian subsidiary companies, which outline agreed level of staff benefits
and other safeguards for employees.
All staff are aware of the Group's grievance procedures. All employees have
access to health insurance provided by the Group to ensure that all employees
have access to adequate medical facilities.
Each employee's training needs are assessed on an individual basis to ensure
that the skills are adequate to support the Group's operations, and to help
them to develop.
Diversity
The Board recognises the benefits and importance of diversity (gender, ethnic,
age, sex, disability, educational and professional backgrounds, etc.) and
strives to apply diversity values across the business. We endeavour to
employ a skilled workforce that reflects the demographic of the jurisdictions
in which we operate. The board review the existing policies on a regular
basis and intends to develop a diversity policy.
The Board of Directors acknowledges the significance of diversity in
decision-making and the overall success of the company. As such, the company
actively collects data on the various dimensions of diversity mentioned,
including but not limited to gender, ethnicity, age, and professional
backgrounds. This data is gathered through internal surveys, recruitment
processes, and employee feedback mechanisms to ensure a diverse and inclusive
workplace.
Board diversity
Until 21 June 2024, the Board consisted of four male and one female director
of three different nationalities and resident in four different jurisdictions.
Since then, the Board consisted of five male and one female director of four
different nationalities and resident in five different jurisdictions.
The Board recognises that gender is only one aspect of diversity, and there
are many other attributes and experiences that can improve the Board's ability
to act effectively. Our policy is to search for the highest quality people
with the most appropriate experience for the requirements of the business, be
they men or women.
Gender diversity
The Board of Directors of the Company comprised of six Directors as of 31
December 2024. As at the date of this report, the Company does not meet the
FCA's recommended target of at least 40% women on the board. The current board
comprises six directors, of whom one is a woman, representing less than 20%
female representation.
As a smaller company with a correspondingly lean governance structure, the
board has historically prioritised experience directly aligned with the
Company's market and operational requirements.
We recognise the importance of gender diversity in contributing to a broad
range of perspectives and effective decision-making. While we currently do not
meet the 40% threshold, we are committed to improving diversity across the
organisation. Gender diversity has always been included as a consideration
within our board succession planning framework and reviewed by the Nomination
Committee as and when new directors are appointed to the Board.
The appointment of any new Director is made based on merit. See pages 26 and
27 for more information on the composition of the Board.
As at 31 December 2024, the Company comprised a total of 76 persons, as
follows:
Male Female
Non-executive directors 4 1
Executive director 1 -
Management, other than Executive directors 6 3
Other employees 43 18
Total 54 22
Human rights
Cadogan's commitment to the fundamental principles of human rights is embedded
in our HSE policies and throughout our business processes. We promote the core
principles of human rights pronounced in the UN Universal Declaration of Human
Rights and our support for these principles is embedded throughout our Code of
Conduct, our employment practices and our relationships with suppliers and
partners wherever we do business.
Community
The Group's operational activities are carried out in rural areas of Ukraine
and the Board is aware of its responsibilities to the local communities in
which it operates and from which some of the employees are recruited. On our
operational sites, management work with the local councils to ensure that the
impact of operations is as low as practicable by putting in place measures to
mitigate their effect. Projects undertaken include improvement of the road
infrastructure in the area, which provides easier access to the operational
sites while at the same time minimizing inconvenience for the local population
and allowing improved road communications in the local communities, especially
during winter season or harsh weather conditions. Specific community
activities are undertaken for the direct benefit of local communities. All
activities are followed and supervised by managers who are given specific
responsibility for such tasks.
The Group's companies in Ukraine see themselves as part of the community and
are involved and offer practical help and support. All these activities are
run in accordance with our "Working with Integrity" policy and procedures. The
recruitment of local staff generates additional income for areas that
otherwise are predominantly dependent on the agricultural sector.
The enactment in 2018 of a new legislation which introduces Environmental
Impact Assessment studies and public hearings as part of the license's
award/renewal processes was anticipated effectively by the Group. The Group is
complying with these requirements, building on the recognised competence of
its people and advisors as well as on the good communication and relations
established with local communities.
Cadogan is committed to the territory and the communities where it operates
and has fully financed social programs commitment for 2024 as per signed
Memorandum between the Company, Lviv Regional Administration and local
communities in 2019.
Approval
The Strategic Report was approved by the Board of Directors on 25 April 2025
and signed by order of the Board by:
Ben Harber
Company Secretary
25 April 2025
Task force on climate-related financial disclosures (`TCFD')
Climate change remains one of the Group's principal risks with governance over
climate-related transition and physical risks provided at the Board and
operational levels. The Board of Directors recognizes the awareness of Climate
Change and the absolute need to understand its potential impacts on the oil
and gas industry through relevant disclosures as recommended by the Task Force
on Climate-related Financial Disclosures (TCFD) and those required by the
Companies Act. The Group has complied with these requirements and has
qualified and quantified the risks and the opportunities within its strategy.
The Board has ultimate accountability for ensuring Cadogan maintains sound
climate risk management and internal control systems. The Board is ultimately
accountable for Cadogan's strategic response to climate change and the energy
transition. Directors are responsible for ensuring they remain sufficiently
informed of climate related risks to Cadogan and the broader energy sector. In
November 2022, the Group has initiated this transformation to achieve
sustainability of its historic activities and adopted a new name "Cadogan
Energy Solutions" to reflect its ambition of being a more diversified energy
operator. In 2023, the Group reviewed its vision and strategy for its future
business, and subsequently its administrative and operational process to
identify the areas of further improvement in the limitation of its
environmental impact for the existing activities and the development of new
ones with a lower impact on environment. The Group decided to minimize the CO2
emissions deriving from its oil production activities by investing in
decarbonation project.
TCFD related disclosures
TCFD Disclosure Requirement Cadogan Energy Solutions Disclosure Additional information
Governance p.14-17
The Board's oversight of climate-related risks and opportunities. The Board of Directors is dedicated to achieving sustainability of historic activities in oil and gas, and diversification in new activities along the value chain with a
lower impact on environment as part of the Energy Transition framework. The Board takes full responsibility for the governance of climate-related risks and opportunities.
The Group reviews environmental and climate risk factors quarterly. A dedicated Climate Task Force monitors key climate metrics and ESG reporting.
Management's role in assessing and managing climate-related risks and opportunities. Management, led by the CEO, is responsible for executing the climate strategy and ensuring compliance with climate regulations. The CEO has wide expertise in Environment p.41-42
and Energy Transition. He has led the activities of international groups acting in the environment, the energy, and particularly the renewable energy industries. Through
a combination of executive management, operations management, HSE management, and financial reporting, the Group regularly reviews its performance and the Group's risks.
Strategy
The climate-related risks and opportunities the organisation has identified over the short, medium, and long term. Key risks include landslides, floods, infrastructure instability, additional costs related to CO2 emissions and financial non sustainability. Till 2023, the Group was p.5-10 p.26
focused on activities in the oil and gas industry. However, as climate change becomes increasingly important globally, we consider these activities alone to be
unsustainable in the long term. On the short and medium term, the existing operations in oil and gas are in Ukraine. A moratorium on domestic production is deemed highly
unlikely given the country's need for affordable energy. However, to be able to ensure the sustainability of its historic activities in the oil and gas, to allow the
continuous generation of cash-flow to finance its transformation in the Energy Transition framework, in 2023, the Group adopted the strategy based on decarbonation of
these activities. Opportunities include capturing methane and investing in technologies for an effective use of this methane. An investment has been launched for
collecting the non- commercial gas generated on Blazhiv field and using it to produce electricity. Furthermore, in 2024, the Group adopted the strategy based on
diversifying its activities by entering in the electricity generation industry. This business model will allow a smooth transition to a lower impact on environment and
provides remedies to the potential climate-related transition risks.
The impact of climate-related risks and opportunities on the organisation's businesses, strategy, and financial planning. Cadogan Energy Solutions PLC acknowledges the evolving nature of climate-related risks and opportunities and the importance of robust scenario analysis. While this p. 5-10 p.13-16 p.26
disclosure provides a preliminary assessment of potential impacts, we recognise the need for a more granular and data-driven evaluation. Accordingly, we are committed to
undertaking a more in-depth assessment of the financial implications of climate-related risks and opportunities across our operations and strategy. We aim to enhance the
level of detail and comprehensiveness in our next reporting cycle, in line with best practice and stakeholder expectations.
The resilience of the organization's strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario. Under a 1.5°C scenario, oil demand may drop 30-40% by 2040. As at 31 December 2024, the Group held working interest in one conventional gas, condensate and oil
exploration and production license in the west of Ukraine (Blazhiv field). This license will end in 2039. In 2023, Cadogan conducted full hydrodynamic surveys on the four
operated wells. In 2024, an independent expert completed the re-assessment of reserves at the Blazhiv field confirming 3.05 million boe of 3P reserves and 0.64 million
boe of 2C contingent resources. The strategy adopted by the Group for the sustainability of this activity, through investment in decarbonation, together with a
sophisticated planning, reporting and continuous monitoring of the HSE and the financial indicators allow keeping the resilience of these activities under the different
scenarios. Cadogan Energy Solutions PLC recognises the importance of testing the resilience of its business strategy under various climate scenarios, including a 2°C or
lower pathway. While this disclosure outlines preliminary qualitative scenario analysis, we are committed to developing a more detailed and quantitative assessment of
climate-related scenario resilience. In the coming reporting cycle, we aim to enhance the depth of our scenario modelling, covering both transition and physical risks,
and to refine our strategic responses accordingly.
Risk management
Company's processes for identifying and assessing climate-related risks Climate risks are embedded in the ERM framework and assessed at each operational site, especially in high-altitude areas. p.13-16
Company's processes for managing climate-related risks Emergency response plans and infrastructure reinforcements are in place to mitigate physical risks. p.41-42
Processes for identifying, assessing, and managing climate-related risks are integrated into the organisation's overall risk management. All climate risks are integrated into Cadogan's enterprise risk management system.
The principal climate-related risks and opportunities arising in connection with the company's operations, the time periods over which these are assessed, and the actual and potential impacts on the company's business model and strategy. Principal risks include physical risks such as landslides, floods, forest fire and temperature variability that may disrupt operations, and transition risks such as p.27
regulatory changes and carbon pricing. Opportunities include emissions reduction, energy efficiency, and potential access to green finance. Risks and opportunities are
assessed over short-term (1-3 years), medium-term (3-10 years), and long-term (10+ years) horizons. These factors influence Cadogan's infrastructure planning, investment
decisions, and market positioning strategy.
Metrics and targets
Metrics used by the organisation to assess climate-related risks and opportunities, in line with its strategy and risk management process Cadogan tracks GHG emissions (Scope 1, 2, and where relevant Scope 3), carbon intensity, and climate risk indicators like landslide etc. In order to express the GHG p.27-28
emissions in relation to a quantifiable factor associated with the Company's activities, wellhead production of crude oil and natural gas has been chosen as the
normalisation factor for calculating the intensity ratio. This will allow comparison of the Company's performance over time, as well as with other companies in the
Company's peer group.
Targets used by the organisation to manage climate-related risks, opportunities, and performances against targets. Cadogan has set a target to reduce Scope 1 and Scope 2 GHG emissions by 25% by 2030 compared to 2020 levels. Performance is tracked annually using key performance p.41-42
indicators (KPIs) such as: - Total tonnes of CO₂e emissions (Scopes 1 and 2) - Carbon intensity: tonnes CO₂e per barrel of oil equivalent (boe) produced - Energy
efficiency ratio: energy consumption per boe KPI calculations are based on internationally accepted methodologies. The Greenhouse Gases Inventory considers the effects of
the six types of greenhouse gases (GHG), identified by the Kyoto Protocol: carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), sulphur
hexafluoride (SF6) and perfluorocarbons (PFCs). The unit with which the result of a carbon footprint study is expressed, is the CO2 equivalent, which allows to compare
the effects of different gases, which can have different persistency in the atmosphere. The normalisation occurs through a specific index called Global Warming Potential
(GWP), which varies according to the considered time span. Data collection and calculation of GHG emissions deriving from the activities of Cadogan are performed
according to the guidelines and international standards. Progress toward targets is monitored internally and reported by HSE committee on a regular basis. In 2024,
Cadogan has developed its gas-to-power project on its Blazhiv oil field in Ukraine. The aim of this project is to capture the gas emissions during oil production and use
them to generate electricity to be sold on the market. This project, expected to be operational in July 2025, will allow to decrease significantly Cadogan's annual
emissions related to the oil production activities with the intensity ratio emission to drop from 146 to 32 tons of CO2 e/Kboe on an annual basis. Furthermore, in 2024
the Group was able to buy green certificates to mitigate the CO2 emissions generated by its operational activities.
Governance
As a company, we acknowledge the increasing significance of comprehending the
effects of climate change on our operating environment and its potential
implications for our business.
We view this as a chance to expand upon our existing efforts in this area,
enhance the quality of our disclosures, and offer clear transparency, while
continuing our TCFD reporting roadmap.
The Board recognizes the societal and investor focus on climate change and
especially the potential impacts of the oil and gas activities which
constitute the historic activities of Cadogan before the launch of its
diversification activities. The climate-related risks and opportunities are at
the center of Cadogan's strategy. In 2023, the Board adopted the current
strategy aiming to limit the impact of its oil production activities and to
mitigate the remaining ones. The Board takes full responsibility for the
governance of climate-related risks and opportunities. The CEO manages
climate-related risks and opportunities. Through a combination of management
governance and reporting, regular reviews of the Group performance and the
strategy implementation are conducted, mitigation actions are developed where
required in order to support the Group's initiatives to limit CO2 emissions
and other impacts on the environment.
Strategy
In 2024, the Group invested in the infrastructure to collect the
non-commercial gas produced on Blazhiv field, previously released in the
atmosphere and the generator to use them to produce electricity. Furthermore,
the Group bought green certificates to mitigate the impact of CO2 emissions
related to its operational activities. With the continuous improvement of
operational margin in these activities, together with the additional financial
margin which will be generated by the gas-to-power project, Cadogan will be
able to buy green certificates on a regular basis to mitigate the impact of
the CO2 emissions generated by its operational activities.
In 2024, the Group accelerated the transformation of its business model
towards activities with a lower impact on environment. Investments were
launched for the development of new electricity generation projects which will
be operational in H2 2025. Subsequently, the business model will not be
focused only on oil production as the Group will be shifting towards a
multi-energy business model.
Risk Management
The Group maintains a HSE management system in place and demands that
management, staff and contractors adhere to it. The system ensures that the
Group meets Ukrainian legislative standards and for the CO2 emissions the
British standards and achieves international standards to the maximum extent
possible. Daily parameters outcome on an operational control basis. These are
monitored, reviewed and reported to the HSE manager and to the management on a
regular basis. Corrective actions are implemented when necessary.
Detailed Breakdown of Climate-related Risks and Opportunities:
Risk description Timeframe Potential Consequences Business Response Mitigations / Actions
Physical Risk
Landslides disrupting production sites Short to Medium Term Operational downtime, safety risks, equipment damage Infrastructure resilience strategy Geotechnical monitoring, site hardening, early warning systems
Flooding due to changing precipitation patterns Medium to Long Term Asset damage, production halts, regulatory fines Flood risk modelling and preparedness planning Drainage upgrades, seasonal operations scheduling, flood insurance
Transition Risk
Regulatory changes such as new carbon pricing mechanisms Medium Term Increased operational costs, margin pressure Regulatory tracking and cost modelling Carbon efficiency projects: the gas-to-power investment implementation
Market shift towards renewables reducing oil demand Long Term Revenue decline, asset stranding Strategic diversification Investment in renewables, offsetting, portfolio transition
Opportunity
Methane capture and utilisation technologies Short Term Revenue generation, reduced GHG footprint Technology partnerships and feasibility studies The gas-to-power investment implementation
Increased demand for low-carbon energy in Europe Medium to Long Term Market expansion, new revenue streams New opportunity investment road-mapping Feasibility studies into low-carbon technologies and green technologies.
Metrics and targets
The principal methodology used to calculate the emissions is drawn from the
`Environmental Reporting Guidelines: including mandatory greenhouse gas
emissions reporting guidance (June 2013)', issued by the Department for
Environment, Food and Rural Affairs ("DEFRA") and DEFRA GHG conversion factors
for company reporting were utilised to calculate the CO2 equivalent of
emissions from various sources (2024 update). Also, the used methodology was
also updated based on methods proposed by DNV GL and in of GHG emissions
Inventory referring to the following guidelines and international standards.
The gas-to-power investment will allow a significant drop in the intensity
ratio from 146 to 32 for the existing oil production activities on a full year
basis.
Report of the Directors
Board of Directors
Fady Khallouf, 64, French
Chief Executive Officer
Fady Khallouf was appointed as Director and CEO on 15 November 2019. He has
more than 35-year experience in the energy, the environment, the engineering,
and the infrastructure sectors. He has previously held the position of CEO of
FUTUREN (Renewable Energy, listed on Euronext Paris) where he achieved the
restructuring and the turnaround of the group. Prior to that, he was the CEO
of Tecnimont group (Petrochemicals and Oil & Gas), the Vice-President Strategy
and Development of EDISON group (Electricity and Gas, E&P), the Head of M&A of
EDF group (Energy). Fady Khallouf had beforehand held various management
positions at ENGIE (Energy), Suez (Environmental Services), and DUMEZ
(Construction and Infrastructures).
Michel Meeus, 72, Belgian
Non-Independent Non-Executive Interim Chairman
Michel Meeus was appointed as a Non-executive Director on 23 June 2014. Mr.
Meeus was former Chairman of the Board of Directors of Theolia, an independent
international developer and operator of wind energy projects. Since 2007, he
has been a director within the Alcogroup SA Company (which gathers the ethanol
production units of the Group), as well as within some of its subsidiaries.
Before joining Alcogroup, Mr Meeus carved out a career in the financial
sector, at Chase Manhattan Bank in Brussels and London, then at Security
Pacific Bank in London, then finally at Electra Kingsway Private Equity in
London.
Mr Meeus is currently Chairman of the Remuneration and Nomination Committees.
Lilia Jolibois, 60, American
Independent Non-Executive Director
Lilia Jolibois was appointed as Director on 15 November 2019. She is currently
a member of three Boards: Cadogan Energy Solutions Plc, INSEAD Foundation, and
Tremau SA. She is also a Venture and CEO Advisor at Loyal Venture Capital, a
global VC fund. Her career spans Merrill Lynch Investment Banking, Sara Lee,
and Lafarge in the USA and Europe. At Lafarge Group, Ms. Jolibois served in
numerous positions in finance, strategy, business development, CEO and Chair
of the Board for Lafarge Cement and Gypsum in Ukraine, and SVP and Chief
Marketing-Sales-Supply Chain Officer for Lafarge Aggregates, Asphalt & Paving.
Mrs Jolibois is currently Chairman of the Company's Audit Committee and a
member of the Remuneration and Nomination Committees.
Gilbert Lehmann, 79, French
Senior Independent Non-Executive Director
Gilbert Lehmann was appointed to the Board on 18 November 2011. He was an
adviser to the Executive Board of Areva, the French nuclear energy business,
having previously been its Deputy Chief Executive Officer responsible for
finance. He is also a former Chief Financial Officer and deputy CEO of
Framatone, the predecessor to Areva, and was CFO of Sogee, part of the
Rothschild Group. Mr Lehmann was also Deputy Chairman and Chairman of the
Audit Committee of Eramet, the French minerals and alloy business. He is
Deputy Chairman and Audit Committee Chairman of Assystem SA, the French
engineering and innovation consultancy. He was Chairman of ST Microelectronics
NV, one of the world's largest semiconductor companies, from 2007 to 2009, and
stepped down as Vice Chairman in 2011.
Mr Lehmann is currently a member of the Remuneration and Nomination
Committees.
Charles Mack, 65, British
Independent Non-Executive Director
Charles Mack is both an advocate and a certified insolvency practitioner
focused on cross-border restructuring cases. He has been appointed as
administrator, liquidator and CRO manager in several national/international
medium size as well as large companies. He is a member of the bar in both
Munich and Padova and a Registered European Lawyer at the Bar of England &
Wales. Charles has been with Studio Legale Trabucchi since he passed his law
examinations and a partner since 2000 and has been a partner with White & Case
as well as Brinkmann Partners in Germany. He is currently a member of the
board of TMA Europe and a former president of Insol Europe.
Mr Mack is currently a member of the Audit, Remuneration and Nomination
Committees.
Thibaut de Gaudemar, 64, French
Independent Non-Executive Director
Thibaut de Gaudemar has more than 35 years of experience in investment banking
working for prominent international financial institutions in London. His last
position was Vice Chairman of Capital Markets for EMEA at Credit-Suisse. He
previously co-managed the Global Markets Solution Group, which encompassed
Equity Capital Markets, Debt Capital Markets, Leveraged Finance and
Derivatives. He was a member of the Global and the European Investment Banking
Committees. Prior to joining Credit-Suisse in 2005, he was a Managing Director
at Deutsche Bank and Bankers Trust in charge of the Strategic Equity
Derivative Business in Europe.
Mr de Gaudemar is currently a member of the Audit, Remuneration and Nomination
Committees.
Directors
The Directors in office during the year and to the date of this report are as
shown below:
Non-Executive Directors
Executive Director
Michel Meeus (Chairman)
Fady Khallouf
Gilbert Lehmann
Lilia Jolibois
Charles Mack (appointed 21 June 2024)
Thibaut de Gaudemar (appointed 21 June 2024)
Jacques Mahaux (resigned 19 April 2024)
Directors' re-election
The Board has decided previously that all Directors are subject to annual
election by shareholders, in accordance with industry best practice and as
such, all Directors will be seeking re-election at the Annual General Meeting
to be held on 20 June 2025.
The biographies of the Directors in office at the date of this report are
shown on pages 26 and 27.
Appointment and replacement of Directors
The Company's Articles of Association allow the Board to appoint any
individual willing to act as a director either to fill a vacancy or act as an
additional Director. The appointee may hold office only until the next annual
general meeting of the Company whereupon his or her election will be proposed
to the shareholders.
The Company's Articles of Association prescribe that there shall be no fewer
than three Directors and no more than fifteen.
Directors' interests in shares
The beneficial interests of the Directors in office at 31 December 2024 and
their connected persons in the Ordinary shares of the Company at 31 December
2024 are set out below.
Director Number of Shares
Michel Meeus 26,023,651
Fady Khallouf 17,454,105
Gilbert Lehmann -
Lilia Jolibois Charles Mack Thibaut de Gaudemar - - -
Jacques Mahaux -
Conflicts of Interest
The Company has procedures in place for managing conflicts of interest. Should
a director become aware that they, or any of their connected parties, have an
interest in an existing or proposed transaction with the Company, its
subsidiaries or any matters to be discussed at meetings, they are required to
formally notify the Board in writing or at the next Board meeting. In
accordance with the Companies Act 2006 and the Company's Articles of
Association, the Board may authorize any potential or actual conflict of
interest that may otherwise involve any of the directors breaching his or her
duty to avoid conflicts of interest. All potential and actual conflicts
approved by the Board are recorded in register of conflicts, which is reviewed
by the Board at each Board meeting.
Directors' indemnities and insurance
The Company's Articles of Association provide that, subject to the provisions
of the Companies Act 2006, all Directors of the Company are indemnified by the
Company in respect of any liability incurred in connection with their duties,
powers or office. Save for such indemnity provisions, there are no qualifying
third-party indemnity provisions. In addition, the Company continues to
maintain Directors' and Officers' Liability Insurance for all Directors who
served during the year.
Powers of Directors
The Directors are responsible for the management of the business and may
exercise all powers of the Company subject to UK legislation and the Company's
Articles of Association, which includes powers to issue or buy back the
Company's shares given by special resolution. The authorities to issue and buy
back shares, granted at the 2024 Annual General Meeting, remains unused.
Dividends
The Directors do not recommend payment of a dividend for the year ended 31
December 2024 (2023: nil).
Principal activity and status
The Company is registered as a public limited company (registration number
05718406) in England and Wales. The principal activity and business of the
Company is oil and gas exploration, development and production.
Subsequent events
In January 2025, Cadogan received the 10,000,000 € cash as agreed in the
Settlement Agreement signed in December 2024. Subsequently, Cadogan exited
from the Loan Agreement and engaged the necessary actions to stop all the
litigation procedures in course. Proger Management & Partners, Proger
Ingegneria, MA.LO., and TIFS Partecipazioni, did the same.
In February 2025, Cadogan Energy Solutions plc issued 7,000,000 new ordinary
shares of £0.03 each, in the capital of the Company for cash on the basis of
£0.03 per share to the CEO, Mr Fady Khallouf, to be satisfied in full using
50% of the amount of the bonus due relating to the recovery of the loan to
Proger Management & Partners srl and approved by shareholders at the Annual
General Meeting held on 25 June 2021. Following the issue of the new ordinary
shares, the total number of ordinary shares in issue is 251,128,487. As there
are 66 ordinary shares held in treasury, the total number of voting rights in
the Company is 251,128,421.
In April 2025, Astroinvest Energy, a fully owned subsidiary in Ukraine entered
in negotiations, with one of the main banks in Ukraine, for a 5-year
non-recourse credit line loan (up to € 7.0 M) aiming to finance part of the
investment for the power generation projects in 2025.
Structure of share capital
The authorised share capital of the Company is currently £30,000,000 divided
into 1,000,000,000 Ordinary shares of 3 pence each. The number of shares in
issue as at 31 December 2024 was 244,128,487 Ordinary shares (each with one
vote) with a nominal value of £7,323,854.61. The total number of voting
rights in the Company is 244,128,421. The Companies (Acquisition of Own
Shares) (Treasury Shares) Regulations 2003 allow companies to hold shares in
treasury rather than cancel them. Following the consolidation of the issued
capital of the Company on 10 June 2008, there were 66 residual Ordinary
shares, which were transferred to treasury. No dividends may be paid on shares
whilst held in treasury and no voting rights attached to shares held in
treasury. After the issue of 7,000,000 new ordinary shares in February 2025,
the number of shares is now 251,128,487 ordinary shares. The total number of
voting rights is now 251,128,421.
Rights and obligations of Ordinary shares
In accordance with applicable laws and the Company's Articles of Association,
holders of Ordinary shares are entitled to:
* receive shareholder documentation including the notice of any general
meeting;
* attend, speak and exercise voting rights at general meetings, either in
person or by proxy; and
* a dividend, where declared and paid out of profits available for such
purposes. On a return of capital on a winding up, holders of Ordinary shares
are entitled to participate in such a return.
Exercise of rights of shares in employee share schemes
None of the share awards under the Company's incentive arrangements are held
in trust on behalf of the beneficiaries.
Agreements between shareholders
The Board is unaware of any agreements between shareholders, which may
restrict the transfer of securities or voting rights.
Restrictions on voting deadlines
The notice of any general meeting of the Company shall specify the deadline
for exercising voting rights and appointing a proxy or proxies to vote at a
general meeting. To accurately reflect the views of shareholders, where
applicable it is the Company's policy at present to take all resolutions at
any general meeting on a poll. Following the meeting, the results of the poll
are released to the market via a regulatory news service and published on the
Company's website.
Substantial shareholdings
As at 31 December 2024 and 22 April 2025, being the last practicable date, the
Company had been notified of the following interests in voting rights attached
to the Company's shares:
31 December 2024 22 April 2025
Major shareholder Number of shares held % of total voting rights Number of shares held % of total voting rights
SPQR Capital Holdings SA 67,298,498 27.57 67,298,498 26.8
Mrs Veronique Salik 51,368,000 21.04 59,488,000 23.69
Mr Michel Meeus 26,023,651 10.66 26,023,651 10,36
Mr Fady Khallouf 17,454,105 7.15 24,454,105 9.74
Kellet Overseas Inc. 14,002,696 5.74 14,002,696 5.57
Mr Pierre Salik 8,120,000 3.32 - -
Cynderella International SA 7,657,886 3.14 7,657,886 3.04
Amendment of the Company's Articles of Association
The Company's Articles of Association may only be amended by way of a special
resolution of shareholders.
Disclosure of information to auditor
As required by section 418 of the Companies Act 2006, each of the Directors as
at 25 April 2025 confirms that:
(a) so far as the Director is aware, there is no relevant audit information of
which the Company's auditor is unaware; and
(b) the Director has taken all the steps that he ought to have taken as a
Director to make himself aware of any relevant audit information and to
establish that the Company's auditor is aware of that information.
Going concern
The Group's business activities, together with the factors likely to affect
its future development, performance, and position, are set out on pages 12 to
15.
Having considered the Group's financial position and its principal risks and
uncertainties, including uncertainties regarding the war in Ukraine. The
Directors have a reasonable expectation that the Company and the Group have
adequate resources to continue in operational existence for the foreseeable
future. Accordingly, they continue to adopt the going concern basis in
preparing the Consolidated and Company Financial Statements. For further
detail please refer to the detailed discussion of the assumptions outlined in
note 3(b) to the Consolidated Financial Statements.
Reporting year
The reporting year coincides with the Company's fiscal year, which is 1
January 2024 to 31 December 2024.
Financial risk management objectives and policies
The Company's financial risk management objectives and policies including its
policy for managing its exposure of the Company to price risk, credit risk,
liquidity risk and cash flow risk.
Management co-ordinates access to domestic and international financial markets
and monitors and manages the financial risks relating to the operations of the
Group in Ukraine through internal risks reports, which analyse exposures by
degree and magnitude of risks. These risks include commodity price risks,
foreign currency risk, credit risk, liquidity risk and cash flow interest rate
risk. The Group does not enter into or trade financial instruments, including
derivative financial instruments, for speculative purposes.
Outlook
Future developments in the business of the Company are presented on pages 2
and 8.
Change of control - significant agreements
The Company has no significant agreements containing provisions, which allow a
counterparty to alter and amend the terms of the agreement following a change
of control of the Company.
Should a change in control occur then certain Executive directors are
entitled, within a period of six months following the change of control, to a
payment of salary and benefits equal to 24 months' base salary plus benefits
plus bonus (if any).
Streamlined energy and carbon reporting
This section contains information on greenhouse gas ("GHG") emissions required
by the Companies Act 2006 (Strategic Report and Directors' Report).
Methodology
The principal methodology used to calculate the emissions is drawn from the
`Environmental Reporting Guidelines: including mandatory greenhouse gas
emissions reporting guidance (June 2013)', issued by the Department for
Environment, Food and Rural Affairs ("DEFRA") and DEFRA GHG conversion factors
for company reporting were utilised to calculate the CO2 equivalent of
emissions from various sources (2024 update). Also, the used methodology was
also updated based on methods proposed by DNV GL and in of GHG emissions
Inventory referring to the following guidelines and international standards.
The Company has reported on all the emission sources required under the
Regulations.
The Company does not have responsibility for any emission sources that are not
included in its consolidated statement.
Consolidation approach and organisation boundary
An operational control approach was used to define the Company's
organisational boundary and responsibility for GHG emissions. All material
emission sources within this boundary have been reported upon, in line with
the requirements of the Regulations.
Scope of reported emissions
Emissions data from the sources within Scope 1 and Scope 2 of the Company's
operational boundaries is detailed below. This includes direct emissions from
assets that fall within the Company's organisational boundaries (Scope 1
emissions), as well as indirect emissions from energy consumption, such as
purchased electricity and heating (Scope 2 emissions).
Scope 1 emissions in 2024 increased compared to the previous year (18,888 tons
in 2024 vs 14,933 tons in 2023). This was caused by the increase of the annual
oil production and associated gas production as well as increase of greenhouse
gas reporting conversion factors for Scope 1 components.
Conversely, Scope 2 emissions decreased in 2024 (76 tons in 2024 vs 111 tons
in 2023), as a result of proactive steps to reduce greenhouse gas emissions by
purchasing green certificates, ensuring that the electricity consumed for its
operations in Ukraine is entirely sourced from renewable energy. Total
emissions in 2024 were 18,964 tons versus 15,044 tons in 2023.
Intensity ratio
In order to express the GHG emissions in relation to a quantifiable factor
associated with the Company's activities, wellhead production of crude oil and
natural gas has been chosen as the normalisation factor for calculating the
intensity ratio. This will allow comparison of the Company's performance over
time, as well as with other companies in the Company's peer group.
The intensity ratio for E&P operations (same reporting perimeter) has
increased to 146 tons CO2e/Kboe in 2024 vs 126,36 tons CO2e/Kboe in 2023
mainly due to increase in CH4/CO2 conversion factor (28 in 2024 vs 25 in
2023).
Total greenhouse gas emissions data for the year from 1 January to 31
December.
As previously mentioned in the report, the implementation of the electricity
generation project utilising associated gas will lead to a substantial
reduction in the CO2 emissions into the atmosphere starting from 2025.
Greenhouse gas emissions source E&P
2024 2023
Scope 1
Direct emissions, including combustion of fuel and operation of facilities (tonnes of CO 2 equivalent) 18,888 14,933
Scope 2
Indirect emissions from energy consumption, such as electricity and heating purchased for own use (tonnes of CO 2 equivalent) 76 111
Total (Scope 1 & 2) 18,964 15,044
Normalisation factor
Barrels of oil equivalent, net 129,272 119,057
Intensity ratio
Emissions reported above normalised to tonnes of CO 2 - per total wellhead production of crude oil, condensates, and natural gas, in thousands of Barrels of Oil Equivalent, net 146.70 126.36
Energy consumption
The Company started in 2020 to monitor energy consumption in KwH.
2024 2023 % change
Ukraine KwH 607,063 557,631 9%
Energy efficiency ratio KwH/boe 4.69 4.69 -
Energy consumption in the UK is immaterial.
2025 Annual General Meeting
The 2025 Annual General Meeting ("AGM") of the Company provides an opportunity
to communicate with shareholders and the Board welcomes their participation.
Board members constantly strive to engage with shareholders on strategy,
governance, and a number of other issues.
The Board looks forward to welcoming shareholders to the AGM. The AGM notice
will be issued to shareholders well in advance of the meeting with notes to
provide an explanation of all resolutions to be put to the AGM.
In addition, shareholder information will be enclosed as usual with the AGM
notice to facilitate voting and feedback in the usual way.
The Chairman of the Board and the members of its committees will be available
to answer shareholder questions at the AGM. All relevant shareholder
information including the annual report for 2024 and any other announcements
will be published on our website - www.cadoganenergysolutions.com.
This Report of Directors comprising pages 27 to 33 has been approved by the
Board and signed by the order of the Board by:
Ben Harber
Company Secretary
25 April 2025
Corporate Governance Statement
This Corporate Government Statement forms part of the Report of Directors
On 29 July 2024, entities which had a standard listing were moved into a new
category called "transition". The rules of this category are based on the
standard listing rules the Company was used to. As a Company previously listed
on the standard segment of the London Stock Exchange, it is not required to
apply a specific corporate governance code and, given its size, has elected
not to do so. However, the Board of the Company is committed to the highest
standards of corporate governance and believe that the 2018 UK Corporate
Governance Code ("the Code") issued by the Financial Reporting Council ("FRC")
provides a suitable benchmark for the Company's corporate governance
framework.
This Statement outlines how Cadogan Energy Solutions plc ("Cadogan" or the
"Company") has applied the relevant principles of the Code and complied with
its provisions.
During the year under review, the Company complied with all the provisions of
the Code, other than the exceptions noted below or elsewhere in this
statement:
* Provision 5 (Workforce Engagement): Given the size of the business, the
Board does not consider it appropriate to adopt the suggested methods outlined
within the UK Corporate Governance Code 2018 to engage with its employees
given the size of the Company. Employee engagement continues to be undertaken
by senior management and any issues are escalated to the Board through the
Chief Executive Officer. The Board believes that the arrangements in place are
effective but will continue to keep this under review.
* Provision 9 (regarding the independence criteria of the Chair on
appointment): Under the 2018 Corporate Governance Code, the Company's Chair
during the year, Mr Michel Meeus, was not considered to be independent given
the size of his shareholding in the Company. Despite this, the Board
considered Mr Meeus to be independent in character, mindset and judgement.
* Provision 21 (Board Evaluation): Given the size of the Board it was felt
that a board evaluation would not provide added value however the Board will
continue to assess this provision periodically.
Board Leadership and Company Purpose
The Board provides leadership and oversight, and its role is to ensure the
long-term success of the Company by implementing the Company's strategy and
business plan, overseeing its affairs, and providing constructive challenge to
management as they do this. In addition to this, the Board oversees financial
matters, governance, internal controls, and risk management.
The purpose of the Board is to:
* monitor Group activities to see that sustainable value is being created;
* evaluate business strategies and monitor their implementation;
* monitor and review the performance of management;
* provide accountability to shareholders through appropriate reporting and
regulatory compliance;
* understand and ensure the management of operational business and financial
risks to which the Group is exposed; and
* ensure that the financial controls and systems of risk management are robust
and defensible.
The Board comprises a Non-Independent Non-Executive Chairman, a Chief
Executive Officer, and four Independent Non-Executive Directors. The Board has
appointed Mr Lehmann as the Senior Independent Director, given Mr Lehmann's
tenure the Board remains confident that Mr Lehmann is independent. During the
year, the Nomination Committee reviewed the size and composition of the Board
and its committees with regard to increasing the number of independent
non-executive directors and as a subsequence appointed two new independent
Non-Executive Directors to the Board.
The biographical details for each of the Directors and their membership of
Committees are incorporated into this report by reference and appear on pages
26 and 27.
The formal schedule of matters reserved for the Board's decision is available
on the Company's website.
The Board recognises the importance of building strong relationships with
stakeholders and understanding their views in order to help the Company
deliver its strategy and promote the development of the business over the
long-term. The Board is committed to having effective engagement with its
stakeholders. Our section 172 statement can be found on page 39 which
summarises the Board's engagement with the Company's main stakeholders and
some examples of how their views have been taken into account in the Board's
decision-making.
The Company seeks to ensure that it always acts lawfully, ethically and with
integrity. The Company has in place the following policies which the Board
reviews periodically:
* Code of Business Conduct and Ethics
* Anti-Bribery Policy
* Share Dealing Code
* Disclosure Policy
* Health, Safety and Environmental policies
The Company has procedures in place for managing conflicts of interest. Should
a director become aware that they, or any of their connected parties, have an
interest in an existing or proposed transaction with the Company, its
subsidiaries or any matters to be discussed at meetings, they are required to
formally notify the Board in writing or at the next Board meeting. In
accordance with the Companies Act 2006 and the Company's Articles of
Association, the Board may authorize any potential or actual conflict of
interest that may otherwise involve any of the directors breaching his or her
duty to avoid conflicts of interest. All potential and actual conflicts
approved by the Board are recorded in register of conflicts, which is reviewed
by the Board at each Board meeting.
Directors' declarations of interests is a regular Board agenda item. A
register of directors' interests (including any actual or potential conflicts
of interest) is maintained and reviewed regularly to ensure all details are
kept up to date. Authorisation is sought prior to a director taking on a new
appointment or if any new conflicts or potential conflicts arise. New
Directors are required to declare any conflicts, or potential conflicts, of
interest to the Board at the first Board meeting after his or her appointment.
The Board believes that the procedures established to deal with conflicts of
interest are operating effectively.
Division of Responsibilities
The Directors possess a wide range of skills, knowledge and experience
relevant to the strategy of the Company, including financial, legal,
governance, regulatory and industry experience as well as the ability to
provide constructive challenge to the views and actions of executive
management in meeting agreed strategic goals and objectives.
The roles and responsibilities of the Chairman and Chief Executive Officer are
separate with a clear and formal division of each individual's
responsibilities, which has been agreed and documented by the Board.
The Non-Executive Directors bring an independent view to the Board's
discussions and the development of its strategy. Their range of experience
ensures that management's performance in achieving the business goals is
challenged appropriately. Ms Lilia Jolibois, Mr Charles Mack and Mr Thibaut de
Gaudemar are considered by the Board to be fully independent.
Mr Gilbert Lehmann, Senior Independent non-executive Director, has served on
the Board for longer than 9 years since his appointment, however, the Board is
of the view that he retains his independent judgement and continues to make a
valuable contribution to the Board.
Mr Michel Meeus, who is a significant shareholder is not considered
independent as defined within the UK Corporate Governance Code 2018, however
the Board believes that Mr Michel Meeus is independent in character and
judgement and free from relationships or circumstances that could affect his
judgement.
The Board has access to the advice of the company secretary.
Composition, Succession and Evaluation
The Company has established a nomination committee which leads the process for
Board appointments by identifying and nominating candidates for the approval
of the Board to fill Board vacancies and making recommendations to the Board
on Board's composition and balance. The Company's Nomination Committee Report
can be found on pages 44 and 45.
Under the Company's Articles of Association, all Directors must seek
re-election by members at least once every three years. However, the Board has
agreed that all Directors will be subject to annual election by shareholders
in line with Corporate Governance best practice. Accordingly, all members of
the Board will be standing for re-election at the 2025 Annual General Meeting
due to be held on 20 June 2025.
All Directors continue to be effective and have sufficient time available to
perform their duties. The letters of appointment for the Non-Executive
Directors are available for review at the Registered Office and prior to the
Annual General Meeting. Each of the Non-Executive Directors independently
ensures that they update their skills and knowledge sufficiently to enable
them to fulfil their duties appropriately.
The Chairman, in conjunction with the Company Secretary, plans the programme
for the Board during the year. While no formal structured continuing
professional development program has been established for the non-executive
Directors, every effort is made to ensure that they are fully briefed before
Board meetings on the Company's business. The agenda for Board and Committee
meetings are considered by the relevant Chairman and issued with supporting
papers during the week preceding the meeting. For each Board meeting, the
Directors receive a Board pack including management accounts, briefing papers
on commercial and operational matters and major capital projects including
acquisitions. The Board also receives briefings from key management on
specific issues.
Audit, Risk and Internal Control
The Board has delegated certain responsibilities to its committees including
its Audit Committee. The Company's Audit Committee Report can be found on
pages 40 to 41.
The role of the Audit Committee is to monitor the integrity of the Company's
financial reporting, to review the Company's internal control and risk
management systems and to oversee the relationship with the Group's external
auditors. The Audit Committee focuses particularly on compliance with legal
requirements, accounting standards and the rules of the Financial Services
Authority. The Audit Committee will meet at least three times a year with
further meetings that are determined by the committee. Any member of the
committee or the external auditors may request any additional meetings they
consider necessary.
The Directors are responsible for the Group's system of internal control and
for maintaining and reviewing its effectiveness. The Group's systems and
controls are designed to safeguard the Group's assets and to ensure the
reliability of information used both within the business and for publication.
The Board has delegated responsibility for the monitoring and review of the
Group's internal controls to the Audit Committee.
Systems are designed to manage, rather than eliminate the risk of failure to
achieve business objectives and can provide only reasonable, and not absolute
assurance against material misstatement or loss.
The key features of the Group's internal control and risk management systems
that ensure the accuracy and reliability of financial reporting include
clearly defined lines of accountability and delegation of authority, policies
and procedures that cover financial planning and reporting, preparing
consolidated financial statements, capital expenditure, project governance and
information security.
The key features of the internal control systems, which operated during 2024
and up to the date of signing the Financial Statements are documented in the
Group's Corporate Governance Policy Manual and Finance Manual. These manuals
and policies have been circulated and adopted throughout the Group throughout
the period.
Day-to-day responsibility for the management and operations of the business
has been delegated to the Chief Executive Officer and senior management.
Certain specific administrative functions are controlled centrally. Taxation
and treasury functions report to the Group Director of Finance who reports
directly to the Chief Executive Officer.
The legal function for Ukraine's related assets and activities is managed by
the General Counsel, who reports to the General Director of Cadogan Ukraine.
The Health, Safety and Environment functions report to the Chairman of the HSE
Committee, the HSE Committee Report can be found on pages 42 to 43. The Group
does not have an internal audit function. Due to the small scale of the
Group's operations at present, the Board does not feel that it is appropriate
or economically viable to have an internal audit function in place, however
this will be kept under review by the Audit Committee on an annual basis.
The Board has reviewed internal controls and risk management processes, in
place from the start of the year to the date of approval of this report.
During its review the Board did not identify nor were advised of any failings
or weaknesses which it has deemed to be significant.
A summary of the principal risks facing the Company and the mitigating actions
in place are contained on pages 12 to 15 of the annual report.
The Company's going concern assessment is contained on page 30 of the annual
report.
Further information on the work undertaken by the Committee during the year
can be found on pages 40 to 41 of the annual report.
Remuneration
The Board has established a Remuneration Committee and the Company's
Remuneration Committee Report can be found on pages 44 to 67 of the annual
report.
The role of the Remuneration Committee is to determine and agree with the
Board the broad policy for the remuneration of executives and Senior Managers
as designated, as well as for setting the specific remuneration packages,
including pension rights and any compensation payments of all executive
Directors and the Chairman. The Company's remuneration policies and practices
are designed to support its long-term strategy and promote the long-term
sustainable success of the Company.
Attendance at Meetings
Ten Board meetings took place during 2024. The attendance of those Directors
in place at the year end at Board and Committee meetings during the year was
as follows:
Board Audit Committee Nomination Committee Remuneration Committee
No. Held 10 3 1 1
No. Attended:
M Meeus*** 10 2 1 1
F Khallouf 10 n/a n/a n/a
L Jolibois 10 3 1 1
G Lehmann 10 n/a 1 1
C Mack* 5 1 - -
T de Gaudemar* 5 1 - -
J Mahaux ** 1 - - -
*Appointed on 21 June 2024
** Resigned 19 April 2024
*** M Meeus was temporarily appointed to the Audit Committee upon the
resignation of J Mahaux.
Responsibilities and membership of Board Committees
The Board has agreed written terms of reference for the Nomination Committee,
Remuneration Committee, Audit Committee and HSE Committee. The terms of
reference for the Board Committees are published on the Company's website,
www.cadoganenergysolutions.com, and are also available from the Company
Secretary at the Registered Office. A review of the Committees including their
membership and activities of all Board Committees is provided on pages 40 to
45.
Relations with shareholders
The Chairman and Executive Directors of the Company have a regular dialogue
with analysts and substantial shareholders. The outcome of these discussions
is reported to the Board at quarterly meetings and discussed in detail. Mr
Lehmann, as the Senior Independent Director, is available to meet with
shareholders who have questions that they feel would be inappropriate to raise
via the Chairman or Executive Directors.
The Annual General Meeting is used as an opportunity to communicate with all
shareholders. In addition, financial results are posted on the Company's
website, www.cadoganenergysolutions.com, as soon as they are announced. The
Notice of the Annual General Meeting is also contained on the Company's
website, www.cadoganenergysolutions.com. It is intended that the Chairmen of
the Nomination, Audit and Remuneration Committees will be present at the
Annual General Meeting. The results of all resolutions will be published on
the Company's website, www.cadoganenergysolutions.com.
Directors' section 172 statement
The disclosure describes how the Directors have regard to the matters set out
in section 172(1)(a) to (f) and forms the Directors' statement required under
section 414CZA of the Companies Act 2006.
The matters set out in section 172(1) (a) to (f) are that a Director must act
in the way they consider, in good faith, would be most likely to promote the
success of the Company for the benefit of its members as a whole, and in doing
so have regard (amongst other matters) to:
(a) the likely consequences of any decision in the long term;
(b) the interests of the Company's employees;
(c) the need to foster the Company's business relationships with suppliers,
customers and others;
(d) the impact of the Company's operations on the community and the
environment;
(e) the desirability of the Company maintaining a reputation for high
standards of business conduct; and
(f) the need to act fairly between members of the Company.
Being sustainable in our activities means conducting our business with respect
for the environment and for the communities hosting us, with the aim of
increasing the benefit and value to our stakeholders. We recognize that this
is a key element to be competitive and to maintain our licence to operate.
Further details of how the Directors have regard to the issues, factors and
stakeholders considered relevant in complying with S 172 (1) (a)-(f), the
methods used to engage with stakeholders and the effect on the Group's
decision making can be found throughout the annual report and in particular
page 38 (which outlines how the Company engages with its stakeholders), pages
17 to 20 (which contains Cadogan's corporate responsibility statement), and
pages 31 to 32 (which contains the Company's report on greenhouse gas
emissions).
The Group has implemented an integrated HSE management system aiming to ensure
a safe and environmentally friendly culture in the organization (pages 17 to
18). However, regarding the environmental sustainability of the Group's
activities, the Directors are fully aware of the need to direct future
development in new activities with a lower impact on environment (CEO outlook
page 8, 31).
When assessing the Proger Loan, the Directors carefully considered the issues
and decisions with their impact on the Group and all its stakeholders (pages
7, 8, 18, 19).
The Board has a formal schedule of matters specifically reserved for its
decision, including approval of acquisitions and disposals, major capital
projects, financial results, Board appointments, dividend recommendations,
material contracts and Group strategy. For each Board meeting, the Directors
receive a Board pack including management accounts, briefing papers on
commercial and operational matters and major capital projects including
acquisitions. The Board also receives briefings from key management on
specific issues.
In particular, as a consequence of the invasion of Ukraine by Russia in
February 2022, and the war situation prevailing in Ukraine, the Board
discussed the current situation and its consequences on the security of the
employees, the organisation of the operations in Ukraine and the potential
impacts on its human, financial and operational assets. The Group has been
able to implement immediately emergency procedures with safety and protection
measures communicated to all employees and put in place for every location.
Specific measures have been put in place for the operations on site to ensure
the human, the industrial and the environmental safety. The Group is
monitoring the situation daily and taking appropriate action to ensure the
safety and essential needs of employees.
Board Committee Reports
Audit Committee Report
The Audit Committee is appointed by the Board, on the recommendation of the
Nomination Committee, from the Non-Executive Directors of the Group. The Audit
Committee's terms of reference are reviewed from time to time by the Audit
Committee and any changes are then referred to the Board for approval. The
terms of reference of the Committee are published on the Company's website
www.cadoganenergysolutions.com, and are also available from the Company
Secretary at the Registered Office. Two members constitute a quorum.
Responsibilities
* To monitor the integrity of the annual and interim financial statements, the
accompanying reports to shareholders, and announcements regarding the Group's
results;
* To review and monitor the effectiveness and integrity of the Group's
financial reporting and internal financial controls;
* To review the effectiveness of the process for identifying, assessing and
reporting all significant business risks and the management of those risks by
the Group;
* To oversee the Group's relations with the external auditor and to make
recommendations to the Board, for approval by shareholders, on the appointment
and removal of the external auditor;
* To consider whether an internal audit function is appropriate to enable the
Audit Committee to meet its objectives; and
* To review the Group's arrangements by which staff of the Group may, in
confidence, raise concerns about possible improprieties in matters of
financial reporting or other matters.
Governance
Ms Jolibois, Mr Meeus (partly), Mr Mack and Mr de Gaudemar (from 21 June till
31 December 2024) were members of the Audit Committee during the period. The
Audit Committee is chaired by Ms Jolibois who had relevant financial
experience within a major European company as well as holding several
non-executive roles in major international entities.
At the invitation of the Audit Committee, the Group Director of Finance and
external auditor regularly attend meetings. The Company Secretary attends all
meetings of the Audit Committee.
The Audit Committee also meets the external auditor without management being
present.
Activities of the Audit Committee
During the year, the Audit Committee discharged its responsibilities as
follows:
Assessment of the effectiveness of the external auditor
The Committee has assessed the effectiveness of the external audit process.
They did this by:
* Reviewing the 2024 external audit plan;
* Discussing the results of the audit including the auditor's views on
material accounting issues and key judgements and estimates, and their audit
report;
* Considering the robustness of the audit process;
* Reviewing the quality of the service and people provided to undertake the
audit; and
* Considering their independence and objectivity.
Financial statements
The Audit Committee examined the Group's consolidated and Company's financial
statements and, prior to recommending them to the Board, considered:
* the appropriateness of the accounting policies adopted;
* reviewed critical judgements, estimates and underlying assumptions; and
* assessed whether the financial statements are fair, balanced and
understandable.
Going concern
After making enquiries and considering the uncertainties described on pages 12
to 15, the Committee has a reasonable expectation that the Company and the
Group has adequate resources to continue in operational existence for the
foreseeable future and consider the going concern basis of accounting to be
appropriate. For further detail including the basis for the conclusion, please
refer to the detailed discussion of the assumptions outlined in note 3 (b) to
the Consolidated Financial Statements.
Internal controls and risk management
The Audit Committee reviews and monitors financial and control issues
throughout the Group including the Group's key risks and the approach for
dealing with them. Further information on the risks and uncertainties facing
the Group are detailed on pages 106 to 109 and in note 28 to the financial
statements.
External auditor
The Audit Committee is responsible for recommending to the Board, for approval
by the shareholders, the appointment of the external auditor.
The Audit Committee considers the scope and materiality for the audit work,
approves the audit fee, and reviews the results of the external auditor's
work. Following the conclusion of each year's audit, it considers the
effectiveness of the external auditor during the process. An assessment of the
effectiveness of the audit process was made, considering reports from the
auditor on its internal quality procedures. The Committee reviewed and
approved the terms and scope of the audit engagement, the audit plan and the
results of the audit with the external auditor, including the scope of
services associated with audit-related regulatory reporting services.
Additionally, auditor independence and objectivity were assessed, considering
the auditor's confirmation that its independence is not impaired, the overall
extent of non-audit services provided by the external auditor and the past
service of the auditor.
Internal audit
The Audit Committee considers annually the need for an internal audit function
and believes that, due to the size of the Group and its current stage of
development, an internal audit function will be of little benefit to the
Group.
Whistleblowing
The Group's whistleblowing policy encourages employees to report suspected
wrongdoing and sets out the procedures employees must follow when raising
concerns. The policy, which was implemented during 2008 is reviewed
periodically. The Group's policies on anti-bribery, the acceptance of gifts
and hospitality, and business conduct and ethics are circulated to staff as
part of a combined manual on induction with changes regularly communicated.
Overview
As a result of its work during the year, the Audit Committee has concluded
that it has acted in accordance with its terms of reference and has ensured
the independence and objectivity of the external auditor.
The Chairman of the Audit Committee will be available at the Annual General
Meeting to answer any questions about the work of the Audit Committee.
Lilia Jolibois
Chair of the Audit Committee
25 April 2025
Health, Safety and Environment Committee Report
The Health, Safety and Environment Committee (the "HSE Committee") is
appointed by the Board, on the recommendation of the Nomination Committee. The
HSE Committee's terms of reference are reviewed annually by the Committee and
any changes are then referred to the Board for approval. The terms of
reference of the Committee are published on the Company's website
www.cadoganenergysolutions.com, and are also available from the Company
Secretary at the Registered Office. Two members constitute a quorum, one of
whom must be a Director.
Governance
The Committee is chaired by Mr Andrey Bilyi (Cadogan Ukraine General
Director) as acting Head of the HSE Committee and its other member is Ms
Snizhana Buryak (HSE Manager). The CEO attends meetings of the HSE Committee
as necessary. During 2024, the HSE Committee held four meetings to monitor the
HSE risks and activities across the business, following which actions were
identified for the continuous improvement of the various processes and the
mitigation of risk.
Responsibilities
* To regularly maintain and implement the continuous improvement of the HSE
Management System with the aim of improving the Company's performances;
* Assessments of the risks to employees, contractors, customers, partners, and
any other people who could be affected by the Group's activities with the aim
of reducing the global risk of the Group and increasing its level of
acceptability;
* Evaluate the effectiveness of the Group's policies and systems for
identifying and managing health, safety and environmental risks within the
Group's operation;
* Assess the policies and systems within the Group for ensuring compliance
with health, safety and environmental regulatory requirements;
* Assess the performance of the Group with regard to the impact of health,
safety, environmental and community relations decisions and actions upon
employees, communities and other third parties and also assess the impact of
such decisions and actions on the reputation of the Group and make
recommendations to the Board on areas for improvement;
* On behalf of the Board, receive reports from management concerning any
fatalities and serious accidents within the Group and actions taken by
management as a result of such fatalities or serious accidents;
* Evaluate and oversee, on behalf of the Board, the quality and integrity of
any reporting to external stakeholders concerning health, safety,
environmental and community relations issues; and
* Where it deems it appropriate to do so, appoint an independent auditor to
review performance with regard to health, safety, environmental and community
relations matters and review any strategies and action plans developed by
management in response to issues raised and, where appropriate, make
recommendations to the Board concerning the same.
Activities of the Health, Safety and Environment Committee
The HSE Committee in discharging its duties reviewed and considered the
following:
* Company activities execution and control over contractors services execution
in line with Company policies and HSE procedures;
* Monthly statistics and reports on the activity were regularly distributed to
the CEO, Management and to the members of the committee;
* Ensured that the implementation of new legislation and requirements were
punctually followed-up and promptly updated;
* Compliance with HSE regulatory requirements was ensured through discussion
of the results of inspections, both internal inspections and those carried out
by the Authorities. The results of the inspections and drills were analysed
and commented to assess the need for corrective actions and/or training
initiatives;
* A standing item was included on the agenda at every meeting to monitor
monthly HSE performance, key indicators and statistics allowing the HSE
Committee to assess the Company's performance by analysing any lost-time
incidents, near misses, HSE training and other indicators;
* Interaction with contractors, Authorities, local communities and other
stakeholders were discussed among other HSE activities;
* Compliance to ISO 14001 and ISO 45001 has been proved by the authorised
third party auditor. Also, the Company had its entire data calculation
process as well as emissions measurement system re-validated by a different
independent third party; and
* Ensuring all the Observation and Actions requested by the Certification Body
have been implemented.
Overview
The Company's HSE Management System and the Guidelines and Procedures have
been updated to fit with the ISO requirements and are adequate for the proper
execution of the Company's operations.
As a result of its work during the year, the HSE Committee has concluded that
it has acted in accordance with its terms of reference.
Nomination Committee Report
The Board delegates some of its duties to the Nomination Committee and
appoints the members of the Nomination Committee which are non-executive
Directors of the Group. The membership of the Committee is reviewed from time
to time and any changes to its composition are referred to the Board for
approval. The terms of reference of the Nomination Committee are published on
the Company's website, www.cadoganenergysolutions.com, and are available from
the Company Secretary at the Registered Office. Two members constitute a
quorum.
Governance
Mr. Michel Meeus (Remuneration and Nomination Committee Chairman), Ms. Lilia
Jolibois, and Mr. Gilbert Lehmann, Mr, Charles Mack and Mr Thibaut de Gaudemar
(Non-Executive Directors) are the members of the Nomination Committee. The
Company Secretary attends all meetings of the Nomination Committee.
Responsibilities
* To regularly review the structure, size and composition (including the
skills, knowledge and experience) required of the Board compared to its
current position and make recommendations to the Board with regard to any
changes;
* Be responsible for identifying and nominating candidates to fill Board
vacancies as and when they arise, for the Board's approval;
* Before appointments are made by the Board, evaluate the balance of skills,
knowledge, experience and diversity (gender, ethnic, age, sex, disability,
educational and professional backgrounds, etc.) on the Board and, in the light
of this evaluation, prepare a description of the role and capabilities
required for a particular appointment; and
* In identifying suitable candidates, the Nomination Committee shall use open
advertising or the services of external advisers to facilitate the search and
consider candidates from a wide range of backgrounds on merit, ensuring that
appointees have enough time available to devote to the position.
The Nomination Committee shall also make recommendations to the Board
concerning:
* Formulating plans for succession for both executive and non-executive
Directors and in particular for the key roles of Chairman and Chief Executive
Officer;
* Membership of the Audit and Remuneration Committees, in consultation with
the Chairmen of those committees;
* The reappointment of any non-executive Director at the conclusion of their
specified term of office, having given due regard to their performance and
ability to continue to contribute to the Board in the light of the knowledge,
skills and experience required; and
* The re-election by shareholders of any Director having due regard to their
performance and ability to continue to contribute to the Board in the light of
the knowledge, skills and experience required.
Any matters relating to the continuation in office of any Director at any time
including the suspension or termination of service of an executive Director as
an employee of the Company subject to the provisions of the law and their
service contract.
Michel Meeus
Nomination Committee Chairman
25 April 2025
Remuneration Committee
Statement from the Chairman
I am pleased to present the Annual Report on Remuneration for the year ended
31 December 2024.
Cadogan's Remuneration Policy was approved as proposed by the shareholders at
the Annual General Meeting on 21 June 2024 and is attached at the end of the
Annual Report on Remuneration. The Remuneration Committee is not proposing to
make any changes to the existing Policy however in line with industry best
practice and the three-year Policy cycle the Company will be seeking
shareholder approval at this year's AGM.
The key elements of the Remuneration Policy are:
* A better long-term alignment of the executives' remuneration with the
interests of the shareholders;
* A material reduction in the maximum remuneration level for the Executive
Directors, both in terms of annual bonus and of long-term incentive
(performance share plan);
* The payment of at least 50% of the Annual Bonus in shares with the remaining
50% to be paid in cash or shares at the discretion of the Remuneration
Committee. Shares will be priced for this award based on their market value at
closing on the Business Day prior to the Subscription Date;
* The introduction of claw-back and malus provisions on both bonuses and share
awards; and
* The expectation that the Executive Directors build a substantial
shareholding position in the Company through their mandate.
Michel Meeus
Chairman of the Remuneration Committee
25 April 2025
ANNUAL REPORT ON REMUNERATION
Remuneration Committee Report
The Remuneration Committee is committed to principles of accountability and
transparency to ensure that remuneration arrangements demonstrate a clear link
between reward and performance.
Governance
The Remuneration Committee is appointed by the Board from the non-executive
Directors of the Company. The Remuneration Committee's terms of reference are
reviewed annually by the Remuneration Committee and any changes are then
referred to the Board for approval. The terms of reference of the Remuneration
Committee are published on the Company's website,
www.cadoganenergysolutions.com, and are also available from the Company
Secretary at the Registered Office.
The Remuneration Committee consists of Mr. Michel Meeus, Ms. Lilia Jolibois,
Mr. Gilbert Lehmann, Mr Charles Mack and Mr Thibaut de Gaudemar. At the
discretion of the Remuneration Committee, the Chief Executive Officer is
invited to attend meetings when appropriate but is not present when his own
remuneration is being discussed. None of the directors are involved in
deciding their own remuneration. The Company Secretary attends the meetings of
the Remuneration Committee.
Responsibilities
In summary, the Remuneration Committee's responsibilities, as set out in its
terms of reference, are as follows:
* To determine and agree with the Board the policy for the remuneration of the
executive Directors, the Company Secretary and other members of executive
management as appropriate;
* To consider the design, award levels, performance measures and targets for
any annual or long-term incentives and approve any payments made and awards
vesting under such schemes;
* Within the terms of the agreed remuneration policy, to determine the total
individual remuneration package of each executive Director and other senior
executives including bonuses, incentive payments and share options or other
share awards; and
* To ensure that contractual terms on termination, and any payments made, are
fair to the individual and the Company, that failure is not rewarded and that
the duty to mitigate loss is fully recognised.
Overview
The Chairman and Executive Directors of the Company have a regular dialogue
with analysts and substantial shareholders, which includes the subject of
Directors' Remuneration. The outcome of these discussions is reported to the
Board and discussed in detail both there and during meetings of the
Remuneration Committee.
As a result of its work during the year, the Remuneration Committee has
concluded that it has acted in accordance with its terms of reference. The
chairman of the Remuneration Committee will be available at the Annual General
Meeting to answer any questions about the work of the Committee.
Remuneration consultants
The Remuneration Committee did not take any advice from external remuneration
consultants in the year.
Single total figure of remuneration for executive and non-executive directors
(audited)
Salary and fees Taxable benefit 5 (#_ftn5) Contributions to pension schemes Annual bonus Total
$ $ $ $ $
Executive Director
2024 2023 2024 2023 2024 2023 2024 2023 2024 2023
F Khallouf 467,282 493,136 20,957 27,037 80,263 78,258 - - 568,502 598,431
Non-executive Directors
M Meeus 62,041 89,000 - - - - - - 62,041 89,000
L Jolibois 48,000 48,000 - - - - - - 48,000 48,000
J Mahaux 26,505 43,000 - - - - - - 26,505 43,000
G Lehmann 38,000 38,000 - - - - - - 38,000 38,000
C Mack 22,516 - - - - - - - 22,516 -
T de Gaudemar 22,516 - - - - - - - 22,516 -
Total Fixed Remuneration Total Variable Remuneration
$ $
2024 2023 2024 2023
Executive Director 568,502 598,431 - -
Non-executive Directors 219,578 218,000 - -
Notes to the table
Mr Fady Khallouf
Mr Khallouf was appointed as Chief Executive Officer on 15 November 2019. Mr
Khallouf's salary is €440,000 per annum.
KPIs
The CEO is subject to a performance-related, bonus scheme built around a
scorecard with a set of challenging KPI's aligned with the Company strategy.
Given the current situation in Ukraine and any potential future difficulties
for the Company, Mr Fady Khallouf had requested that any annual performance
related bonus to be considered and paid by the Remuneration Committee during
2024, in respect of the financial year ended 31 December 2024, be waived.
Whilst the bonus of Euros 500,000 has been accrued at 31 December 2024, it was
still conditional on receiving the funds from the Proger loan, according to
the Settlement Agreement, which occurred in January 2025. Therefore, on that
basis the bonus has been excluded from the 2024 directors' remuneration and
will be included in 2025 when it became due and payable.
Benefits
Benefits may be provided to the executive director, in the form of private
medical insurance and life assurance.
The Chairman and Non-Executive Directors
As mentioned above, fees for non-Executive Directors were reduced by 20% on 15
January 2020 with effect from 15 November 2019. The fees are as follows: the
Chairman's fee at $89,000 and the fee for acting as a non-executive Director
at $38,000 with an additional $10,000 for acting as Chairman of the Audit
Committee and an additional $5,000 for a committee membership. Since July
2024, the Chairman's fee is $65,000.
Scheme interests awarded during the financial year (audited)
There were no scheme interests awarded during the year.
Payments to past directors (audited)
In 2024 there were no payments to past directors.
Payments for loss of office (audited)
No notice period was either worked or paid.
Directors' interests in shares (audited)
The beneficial interests of the Directors in office as at 31 December 2024 and
their connected persons in the Ordinary shares of the Company at 31 December
2024 are set out below.
Shares as at 31 December 2024 2023
Michel Meeus 26,023,651 10,200,000
Fady Khallouf 17,454,105 10,875,455
Gilbert Lehmann - -
Lilia Jolibois - -
Charles Mack - -
Thibaut de Gaudemar - -
Jacques Mahaux - -
The Company does not currently operate formal shareholding guidelines. Whilst
there is no specified level, the Company expects that under the new
Remuneration Policy, the Executive Director will continue to build up a
significant shareholding position in the Company during his mandate.
The Company's performance
The graph below highlights the Company's total shareholder return ("TSR")
performance for the last fourteen years compared to the FTSE All Share Oil &
Gas Producers index. This index has been selected on the basis that it
represents a sector specific group, which is an appropriate group for the
Company to compare itself against, and has been retained ever since, primarily
for continuity purposes TSR is the return from a share or index based on share
price movements and notional reinvestment of declared dividends.
Historic Remuneration of Chief Executive
Salary Taxable benefits Annual bonus Long-term incentives Pension Loss of office Total
$ $ $ $ $ $ $
2009 422,533 - 284,552 - - - 707,085
2010 547,067 - - - - - 547,067
2011 669,185 - - - - - 669,185
2012 511,459 - - - 31,966 126,808 670,233
2013 384,941 - - - - - 384,941
2014 405,433 20,734 - - - - 426,167
2015 432,409 6 (#_ftn6) 15,987 243,132 - - - 691,528
2016 487,080 15,353 210,504 7 (#_ftn7) - - - 712,937
2017 497,288 27,273 81,392 8 (#_ftn8) - - - 605,953
2018 521,664 39,838 201,872 - - - 763,374
2019 492,581 45,453 495, 109 9 (#_ftn9) - - - 1,033,143
2020 517,389 59,294 - - 58,300 - 634,983
2021 535,999 30,173 - - 78,619 - 644,791
2022 479,720 29,486 - - 75,035 - 584,241
2023 493,136 27,037 - - 78,258 - 598,431
2024 467,282 20,957 - - 80,263 - 568,502
In 2024, the Remuneration Committee, after consultation with the CEO, have
decided to postpone any variable performance related bonus for the year ended
31 December 2024.
The annual bonus received by the CEO as a percentage of the maximum
opportunity is presented in the following table.
Year CEO CEO single figure of total remuneration $ Annual bonus pay-out against maximum opportunity %
2024 Mr. Khallouf 568,502 -
2023 Mr. Khallouf 598,431 -
2022 Mr. Khallouf 584,241 -
2021 Mr. Khallouf 644,791 -
2020 Mr. Khallouf 634,983 -
2019 Mr. Khallouf 10 (#_ftn10) 444,465 -
Mr. Michelotti 588,678 10
2018 Mr. Michelotti 763,374 32
2017 Mr. Michelotti 605,953 -
2016 Mr. Michelotti 712,937 22 11 (#_ftn11)
2015 Mr. Michelotti 502,021 27 12 (#_ftn12)
Mr. des Pallieres 189,507 -
2014 Mr. des Pallieres 426,167 -
2013 Mr. des Pallieres 384,941 -
2012 Mr. des Pallieres 389,935 -
Mr. Barron 280,298 13 (#_ftn13) -
2011 Mr. des Pallieres 14 (#_ftn14) 273,201 -
Mr. Barron 395,984 -
2010 Mr. Barron 547,067 -
2009 Mr. Barron 15 (#_ftn15) 707,085 67
Percentage change in the remuneration of the Chief Executive
The following table shows the percentage change in the remuneration of the
Chief Executive in 2024 and 2023 compared to that of all employees within the
Group.
2024 2023 Average
$'000 $'000 change, %
Base salary CEO 467 493 -5%
All employees 16 (#_ftn16) 1,750 2,042 -14%
Taxable benefits CEO 101 105 -4%
All employees 121 119 2%
Annual Bonus CEO - - n/a
All employees 40 - n/a
Total CEO 568 598 -5%
All employees 1,911 2,161 -12%
In 2024 none of the directors participated in long-term incentive schemes.
In 2024 there was no increase in executive and non-executive directors' salary
in base currency. The difference in pay represents the change in exchange rate
between the base currency and USD as a reporting currency.
Percentage change in non-executive director remuneration
Michel Meeus All employees
2024 $'000 2023 $'000 % change 2024 - 2023 % change 2024 - 2023
Base salary/fees 62,041 89,000 -30% -14%
Taxable benefits (including pensions) - - - 2%
Annual bonus - - - 0%
Total 62,041 89,000 -30% -11.6%
The 1 January 2024, Michel Meeus stepped down as Chairman of the Company,
remained as a non-executive director and became a member of the Audit
Committee. Starting from 22 April 2024, Mr. Meeus has been appointed by the
Board as Interim Chairman of the Company (Note: previous remuneration level
has been reinstated).
Lilia Jolibois All employees
2024 $'000 2023 $'000 % change 2024 - 2023 % change 2024 - 2023
Base salary/fees 48,000 48,000 - -14%
Taxable benefits (including pensions) - - - 2%
Annual bonus - - - 0%
Total 48,000 48,000 - -11.6%
Jacques Mahaux All employees
2024 $'000 2023 $'000 % change 2024 - 2023 % change 2024 - 2023
Base salary/fees 26,505 43,000 -38% -14%
Taxable benefits (including pensions) - - - 2%
Annual bonus - - - 0%
Total 26,505 43,000 -38% -11.6%
Gilbert Lehmann All employees
2024 $'000 2023 $'000 % change 2024 - 2023 % change 2024 - 2023
Base salary/fees 38,000 38,000 - -14%
Taxable benefits (including pensions) - - - 2%
Annual bonus - - - 0%
Total 38,000 38,000 - -11.6%
Charles Mack All employees
2024 $'000 2023 $'000 % change 2024 - 2023 % change 2024 - 2023
Base salary/fees 22,516 - n/a -14%
Taxable benefits (including pensions) - - n/a 2%
Annual bonus - - n/a 0%
Total 22,516 - n/a -11.6%
Thibaut de Gaudemar All employees
2024 $'000 2023 $'000 % change 2024 - 2023 % change 2024 - 2023
Base salary/fees 22,516 - n/a -14%
Taxable benefits (including pensions) - - n/a 2%
Annual bonus - - n/a 0%
Total 22,516 - n/a -11.6%
Relative importance of spend on pay
The table below compares shareholder distributions (i.e. dividends and share
buybacks) and total employee pay expenditure of the Group for the financial
years ended 31 December 2023 and 31 December 2024.
2024 $'000 2023 $'000 Year-on-year change, %
All-employee remuneration 1,911 2,161 -12%
Distributions to shareholders - - -
Shareholder voting at the Annual General Meeting
The Directors' Remuneration Policy was approved by shareholders at the Annual
General Meeting held on 21 June 2024 and remains unchanged. The Remuneration
Policy can be found on the Group's website and at pages 54 to 67 of this
Annual Report on Remuneration. The votes cast by proxy were as follows:
Directors' Remuneration Policy Number of votes % of votes cast
For 120,854,549 63.29
Against 70,110,197 36.71
Total votes cast 190,964,746 100.00
Number of votes withheld 6,908,137
The Directors' Annual Report on Remuneration is approved by shareholders at
each Annual General Meeting. A summary of the votes cast by proxy in 2024 and
2023 were as follows:
2024 2023
Director's Annual Report on Remuneration Number of votes % of votes cast Number of votes % of votes cast
For 120,854,549 63.29 105,995,725 99.97
Against 70,110,197 36.71 26,984 0.03
Total votes cast 190,964,746 100.00 106,022,709 100.00
Number of votes withheld 6,908,137
Implementation of Remuneration Policy in 2025
The performance related elements of remuneration remain unchanged and will be
built around a scorecard with a set of KPI's aligned with the Group strategy.
The Remuneration Policy can be found on the Group's website and at pages 54 to
67 of this Annual Report on Remuneration.
Approval
The Directors' Annual Report on Remuneration was approved by the Board on 25
April 2025 and signed on its behalf by:
Michel Meeus
Chairman
25 April 2025
Directors' Remuneration Policy Introduction
This Directors' Remuneration Policy (the "Policy") contains the information
required to be set out as the directors' remuneration policy for the purposes
of The Large and Medium-sized Companies and Groups (Accounts and Reports)
(Amendment) Regulations 2013.
The Policy was approved by shareholders at the 2024 AGM of the Company. The
Remuneration Committee is not proposing to make any changes to the existing
Policy however in line with industry best practice and the three-year Policy
cycle the Company will be seeking shareholder approval at this year's AGM. The
effective date of this Policy is the date on which the Policy is approved by
shareholders.
The Policy applies in respect of all executive officers appointed to the Board
of Directors ("executive directors") and non-executive directors. Other senior
executives may be subject to the Policy, including in relation to annual bonus
and shares incentive arrangements in particular if and to the extent that the
Remuneration Committee determines it is appropriate.
The Remuneration Committee will keep the Policy under review to ensure that it
continues to promote the long-term success of the Company by giving the
Company its best opportunity of delivering on the business strategy. It is the
Remuneration Committee's intention that the Policy be put to shareholders for
approval every three years unless there is a need for the Policy to be
approved at an earlier date.
The Company aims to provide sufficient flexibility in the Policy for
unanticipated changes in compensation practices and business conditions to
ensure the Remuneration Committee has appropriate discretion to retain its top
executives who perform. The Remuneration Committee reserves the right to
approve any payments that may be outside the terms of this Policy, where the
terms of that payment were agreed before the Policy came into effect, or
before the individual became a director of the Company.
Maximum caps are provided to comply with the required legislation and should
not be taken to indicate an intent to make payments at that level. The maximum
caps are valid at the time that the relevant employment agreement or
appointment letter is entered into and the caps may be adjusted to take into
account fluctuations in exchange rates.
Remuneration policy table: executive directors
Component Purpose and link to strategy Maximum opportunity Operation and performance measures
Salary and Fees To provide fixed remuneration at an appropriate level, to attract and retain directors as part of the overall compensation package. The maximum annual base combined salary and fees for executive directors is €440,000 17 (#_ftn17). The Remuneration Committee will consider the factors set out under the "Operation" column when determining the appropriate level of base salary within the formal Policy maximum. Salary is paid on a monthly basis. The Remuneration Committee takes into account a number of factors when setting salaries
including: * scope and difficulty of the role;
* skills and experience of the individual;
* salary levels for similar roles within the international industry; and
* pay and conditions elsewhere in the Group. Salaries are reviewed on an annual basis, but are not necessarily increased at each
review.
No performance measures.
Annual Bonus To incentivise and reward the achievement of individual and business objectives which are key to the delivery of the Company's business strategy. The maximum award is 125% of combined base salary and fees. The payment of any bonus is at the discretion of the Board with reference to the performance year. * The Remuneration Committee
sets, in advance, a scorecard with a set of Key Performance Indicators ("KPIs") aligned with the Company's strategy. The
measures and the relative weightings are substantiated by the Remuneration Committee and aim to be stretching and to support the
Company's business strategy. Measures are related to Company financial performance, operational performance and the Company's
health and safety record. In general, relative weightings of each KPI are expected not to exceed 50% and not to be less than
10%.
* The Remuneration Committee retains the flexibility to determine and, if it considers appropriate, change the KPIs and
weightings of the KPIs based on the outcome of its annual review. The Remuneration Committee may also adjust KPIs during the
year to take account of material events, such as (without limitation) material corporate events, changes in responsibilities of
an individual and/ or currency exchange rates. Any such changes will be within the overall target and maximum payouts approved
in the policy.
* The KPI targets and specific weightings in the scorecard are defined annually early in the year, once the budget has been
approved. A summary of the KPI targets, weightings for the KPIs and how far the KPIs are met will be included retrospectively
each year in the Implementation Report for the year.
* All bonuses that may become payable are subject to malus and clawback provisions in the event of material financial
misstatement of the Company or fraud or material misconduct on the part of the executive, as explained further below.
* 50% of the bonuses that may become payable must be applied to subscribe for or acquire shares in the Company (after the
deduction of any income tax and/ or employee social security contributions payable). The Company is proposing to adopt and
operate a Deferred Bonus Plan as a framework plan for the delivery of shares to executives, which may be satisfied by the issue
of new shares or transfer of existing or treasury shares.
* The Remuneration Committee will determine whether the remainder of the bonus shall be paid in cash or must be applied to
subscribe for or acquire shares (after the deduction of any income tax and/ or employee social security contributions payable).
In making its determination as to how the remainder of the bonus shall be paid, the Remuneration Committee may take into
account: profitability of the Company; the executive's shareholding as measured against any Company shareholding guidelines;
potential liabilities of the recipients to income tax and social security contributions, among other things. Additional shares
representing the value of dividends payable on the deferred shares may be paid.
* The Remuneration Committee may impose holding periods of up to three years on any of the shares delivered pursuant to the
annual bonus plan.
* There are no prescribed minimum levels of performance in the annual bonus structure and so it is possible that no bonus award
would be made.
Share Incentive Arrangements To incentivise, retain and reward eligible employees and align their interests with those of the shareholders of the Company. Awards can be made under the PSP with a value of up to a maximum of 200% of base salary and fees or 300% in exceptional circumstances. The Company has adopted and operates the 2018 Performance Share Plan ("PSP") to replace the 2008 Performance Share Plan. The PSP
offers the opportunity to earn shares in the Company subject to the achievement of stretching but realistic performance
conditions. Performance conditions will be a main feature of the PSP. The PSP will be administered by the Remuneration
Committee. * Awards can be made under the PSP at the direction of the Remuneration Committee within the policy maximum in the
form of contingent share awards.
* PSP awards will have a minimum vesting period of 3 years and, for directors, the PSP awards have a further holding period of 2
years following the end of the vesting period (subject to any number of shares that may need to be sold to meet any income tax
and employee social security contributions due on vesting).
* The Remuneration Committee will develop clear KPIs that aim to align directors with Company strategy over time periods in
excess of one financial year. Any performance measures and targets used for share incentive awards during 2019 will be relevant
and stretching in line with the overall strategy of the Company.
* The Remuneration Committee may adjust or change the PSP measures, targets and weightings for new awards under the PSP to
ensure continued alignment with Company strategy.
* PSP awards are subject to malus and clawback in the event of material financial misstatement of the Company or fraud or
material misconduct on the part of the executive.
* Upon vesting of an award, the award holder must pay the nominal value in respect of each share that vests.
* PSP Awards will normally lapse where the award holder ceases employment with the Company before vesting. PSP Awards will not
lapse and will vest immediately if the award holder is considered to be a Good Leaver (leaves due to death or disability)
subject to the Remuneration Committee being satisfied that performance conditions have been satisfied or are likely to be
satisfied as at the end of the relevant performance period. In other circumstances, the Remuneration Committee may determine
that awards will not lapse and will continue to vest at their normal vesting date, subject to pro-ration to reflect the period
of service during the performance period and performance conditions. The Remuneration Committee has residuary discretions to
disapply pro ration and bring forward the date of vesting.
* In the event of a change of control of the Company, if the acquiring company agrees, awards will be exchanged for equivalent
awards over shares in the acquiring company and continue to vest according to the original vesting schedule. If the acquiring
company does not agree to exchange the awards, the awards will vest at the Committee's absolute discretion. Awards that vest
will be subject to time pro-ration and performance conditions.
* Benefits under the PSP will not be pensionable.
* The PSP Plan Limits are set out at Note 2.4 below.
Pension To provide a retirement benefit that will foster loyalty and retain experienced executive directors. Any pension benefits will be set at an appropriate level in line with market practice, and in no event will the contributions paid by the Company exceed 15% of combined base salary and fees. No performance measures.
Benefits To provide a market competitive level of benefits to executive directors. Any benefits will be set at an appropriate level in line with market practice, and in no event will the value of the benefits exceed 15% of combined base salary and fees. * The executive directors are entitled to private medical insurance and life assurance cover (of four times the combined salary
and fee) and directors' and officers' liability insurance.
* The Remuneration Committee may decide to provide other benefits commensurate with the market. Such benefits may include (for
instance) company car or allowance, physical examinations and medical support, professional advice, assistance with filling out
tax returns and occasional minor benefits. A tax equalisation payment may be paid to an executive director if any part of the
remuneration of the executive director becomes subject to double taxation. Tax gross ups may be paid, where appropriate. The
Company does not, at present, provide other taxable benefits to the executive directors.
* Executive directors are reimbursed for reasonable business expenses incurred in the course of carrying out their duties.
* No performance measures.
Notes to the executive directors' remuneration policy table
The Remuneration Committee's philosophy is that remuneration arrangements
should be appropriately positioned to support the Group's business strategy
over the longer term and the creation of value for shareholders. In this
context the following key principles are considered to be important:
- remuneration arrangements should align executive and
employee interests with those of shareholders;
- remuneration arrangements should help retain key
executives and employees; and
- remuneration arrangements should incentivise
executives to achieve short, medium and long-term business targets which
represent value creation for shareholders. Targets should relate to the
Group's performance in terms of overall revenue and profit and the executive's
own performance. Exceptional rewards should only be delivered if there are
exceptional returns.
The Remuneration Committee reserves the right to make any remuneration
payments (including satisfying awards of variable remuneration) and payments
for loss of office notwithstanding that they are not in line with the Policy
set out above, where the terms of that payment were agreed before the Policy
came into effect, or before the individual became a director of the Company
(provided the payment was not in consideration for the individual becoming a
director).
Performance measures and
targets(a) Annual Bonus
The performance measures for executive directors comprise of financial
measures and business goals linked to the Company's strategy, which could
include financial and non-financial measures. The business goals are tailored
to reflect each executive director's role and responsibilities during the
year. The performance measures are chosen to enable the Remuneration Committee
to review the Company's and the individual's performance against the Company's
business strategy and appropriately incentivise and reward the executive
directors.
Annual bonus targets are set by the Remuneration Committee each year. They are
stretching but realistic targets which reflect the most important areas of
strategic focus for the Company. The factors taken into consideration when
setting targets include the Company's Key Performance Indicators (which are
determined annually by the Remuneration Committee), and the extent to which
they are under the control or influence of the executive whose remuneration is
being determined.
Performance is measured over the financial year against the measures and
targets set according to the scorecard. The Remuneration Committee retains the
right to exercise its judgement to adjust the bonus outcome for an individual
to ensure the outcome reflects any other aspects of the Company's performance
that become relevant during the financial year.
The Remuneration Committee used Company operational and financial performances
and safety as performance measures for the 2020 scorecard. For years following
2020, the structure of the annual bonus scorecard will be reviewed by the
Remuneration Committee.
2024 Annual bonus scorecard measures for executive director
40% weighting 50% weighting
Operational performance, such as production, sales, geographical diversification, and starting new projects. Company financial performance, including cash targets and profit targets.
10% weighting
Indicators of health and safety to promote the effective risk management of the Company.
(b) Share Plans
The Remuneration Committee will make the vesting of a Plan award conditional
upon the satisfaction of stretching but realistic performance conditions.
These conditions are meant to achieve a long-term alignment of the executives'
remuneration with the interest of the shareholders.
EBITDA growth, increase of P1 reserves (in millions boe), and changes to the
free cash-flow are the key KPIs to be used by the Remuneration Committee and
will be measured over time periods of three financial years. The performance
measures are chosen to align the performance of participants with the
attainment of financial performance targets over the vesting period of the
award. The targets are set by the Remuneration Committee by reference to the
Company's strategy and business plan and the results achieved at the time of
the vest are determined by the Remuneration Committee.
Under the PSP plan rules, the Board may vary a performance target where it
considers that any performance target to which an award is subject is no
longer a true or fair measure of the participant's performance, provided that
the Board must act fairly and reasonably and that the new performance target
is materially no more difficult and no less difficult to satisfy than the
original performance target.
Malus and clawback (applicable to bonuses and share
awards)
The Remuneration Committee has the discretion to reduce the bonus before
payment or require the executive director to pay back shares or a cash amount
in the event of material financial misstatement of the Company or fraud or
material misconduct on the part of the executive. The amount that may be
clawed back on any such event is limited to the value of the bonus, taking
into account the cash paid and the shares delivered to the executive, taking
the value of the shares at the time of the clawback, less any income tax or
employee social security contributions paid on the bonuses.
Share ownership guidelines for executivesThe Remuneration
Committee is planning to implement share ownership guidelines for executive
directors to further align the interests of the executive directors with those
of shareholders. The share ownership guidelines will include an expectation
that executive directors build up their shareholding to 200% of base salary
over a period of five years from the later of: the date of adoption of this
policy and the date of appointment. Once the shareholding guideline is
reached, executive directors would be expected to maintain it. The intention
would be for the shareholding guideline to be reached through the retention of
vested shares from share plans (e.g. the deferred share element of the annual
bonus and shares vested under the PSP). As such, the Remuneration Committee's
discretion may be used to increase the proportion of an annual bonus to be
delivered in shares to assist the executive director in meeting this
guideline. The deferred share mechanism in the annual bonus and the design of
the PSP will assist executive directors in reaching the guidelines. Executive
directors will not be expected to top up their shareholding with personal
acquisitions of Company shares outside the usual share plans described in the
Policy. The Remuneration Committee will monitor the executive directors'
shareholdings and may adjust the guideline in special individual and Company
circumstances, for example in the case of a share price
fall. PSP Plan Limits
The PSP may operate over new issue shares, treasury shares or shares purchased
in the market. In any ten-calendar year period, the Company may not issue (or
grant rights to issue) more than:
(a) 10% of the issued ordinary share capital of
the Company under the Plan and any other employee share plan adopted by the
Company; and
(b) 5% of the issued ordinary share capital of
the Company under the Plan and any other executive share plan adopted by the
Company.
Treasury shares will count as new issue shares for the purposes of these
limits unless institutional investors decide that they need not count. These
limits do not include rights to shares which have been renounced, released,
lapsed or otherwise become incapable of vesting, awards that the Remuneration
Committee determines after grant to be satisfied by the transfer of existing
shares and shares allocated to satisfy bonuses (including pursuant to the
Deferred Bonus Plan). Remuneration throughout the Group
Differences in the Company's pay policy for executive directors from that
applying to employees within the Group generally reflect the appropriate
market rate for the individual executive roles.
Remuneration policy table: non-executive directors
Component Purpose and link to strategy Maximum opportunity Operation and performance measures
Fees To provide an appropriate reward to attract and retain high-calibre individuals with the relevant skills, knowledge and experience to progress the Company strategy. * The maximum annual fees paid to non-executive directors is £50,000 for a non-executive director role, and £100,000 for the role of Chairman. An additional £10,000 will be paid to the individual acting as Chairman of the Audit Committee. Non-executive directors receive a standard annual fee, which is paid on a quarterly basis in arrears. Additional fees may also
be paid to recognise the additional work performed by members of any committees set up by the Board, and for the role of chair
of a committee. Fees are reviewed on an annual basis, but are not necessarily increased at each review. Fees are set at a rate
that takes into account: * market practice for comparative roles;
* the financial results of the Company;
* the time commitment and duties involved; and
* the requirement to attract and retain the quality of individuals required by the Company.
The remuneration of the non-executive directors is a matter for the Board to consider and decide upon. There are no performance
measures related to non-executive directors' fees.
Notes to the Policy Table
The payment policy for non-executive directors is to pay a rate which will
secure persons of a suitable calibre. The remuneration of the non-executive
directors is determined by the Board. External benchmarking data and
specialist advisers are used when setting fees, which will be reviewed at
appropriate intervals. The maximum caps are valid at the time that the
relevant appointment letter is entered into and the caps may be adjusted to
take into account fluctuations in exchange rates.
Expenses reasonably and wholly incurred in the performance of the role of
non-executive director of the Company may be reimbursed or paid for directly
by the Company, as appropriate, and may include any tax due on the expense.
The non-executive directors' fees are non-pensionable. The non-executive
directors have not to date been eligible to participate in any incentive plans
(such as bonuses or share plans); however, the Board considers that it may be
appropriate in the future to enable such participation, subject to suitably
stretching performance thresholds.
Non-executive directors may receive professional advice in respect of their
duties with the Company which will be paid for by the Company. They will be
covered by the Company's insurance policy for directors.
Recruitment
The Company's policy on the recruitment of directors is to pay a fair
remuneration package for the role being undertaken and the experience of the
individual being recruited. The Remuneration Committee will consider all
relevant factors, which include the abilities of the individual, their
existing remuneration package, market practice, and the existing arrangements
for the Company's current directors.
The Remuneration Committee will determine that any arrangements offered are in
the best interests of the Company and shareholders and will endeavour to pay
no more than is necessary.
The Remuneration Committee intends that the components of remuneration set out
in the policy tables, and the approach to the components as set out in the
policy tables, will be equally applicable to new recruits, i.e. salary, annual
bonus, share plan awards, pension and benefits for executive directors, and
fees for non-executive directors. However, the Company acknowledges that
additional flexibility may be required to ensure the Company is in the best
position to recruit the best candidate for any vacant roles and, as such, a
buy-out arrangement may be required.
Flexibility
The salary and compensation package designed for a new recruit may be higher
or lower than that applying for existing directors. The Remuneration Committee
may decide to appoint a new executive director to the Board at a lower than
typical salary, such that larger and more frequent salary increases may then
be awarded over a period of time to reflect the individual's growth in
experience within the role.
Remuneration will normally not exceed those set out in the policy table above.
However, to ensure that the Company can sufficiently compete with its
competitors, the Remuneration Committee considers it important that the
recruitment policy has sufficient flexibility in order to attract and
appropriately remunerate the high-performing individuals that the Company
requires to achieve its strategy. As such, the Remuneration Committee reserves
discretion to provide a buy-out arrangement and benefits (such as a sign-on
bonus and additional share awards) in addition to those set out in the policy
table (or mentioned in this section) where the Remuneration Committee
considers it reasonable and necessary to do so in order to secure an external
appointment (see below for more detail in relation to buy-out arrangements).
Buy-out arrangements
The Remuneration Committee retains the discretion to enter into buy-out
arrangements to compensate new hires for incentive awards forfeited in joining
the Company. The Remuneration Committee will use its discretion in awarding
and setting any such compensation, which will be decided on a case-by-case
basis and likely on an estimated like-for-like basis. In deciding the
appropriate type and quantum of compensation to replace existing awards, the
Remuneration Committee will take into account all relevant factors, including
the type of award being forfeited, the likelihood of any performance measures
attached to the forfeited award being met, and the proportion of the vesting
period remaining. The Remuneration Committee will appropriately discount the
compensation payable to take account of any uncertainties over the likely
vesting of the forfeited award to ensure that the Company does not, in the
view of the Remuneration Committee, pay in excess of what is reasonable or
necessary.
Compensation for awards forfeited may take the form of a bonus payment or a
share award. For the avoidance of doubt, the maximum amounts of compensation
contained in the policy table will not apply to such buy-out arrangements. The
Company has not placed a maximum value on the compensation that can be paid
under this section, as it does not believe it would be in shareholders'
interests to set any expectations for prospective candidates regarding such
awards.
Payments for loss of office
Any compensation payable in the event that the employment of an executive
director is terminated will be determined in accordance the terms of the
employment contract between the Company and the executive, as well as the
relevant rules of any share plan and this Policy, and in accordance with the
prevailing best practice.
The Remuneration Committee will consider a variety of factors when considering
leaving arrangements for an executive director and exercising any discretions
it has in this regard, including (but not limited to) individual and business
performance during office, the reason for leaving, and any other relevant
circumstances (for example, ill health).
In addition to any payment that the Remuneration Committee may decide to make,
the Remuneration Committee reserves discretion as it considers appropriate to:
(a) pay an annual bonus for the year of
departure;(b) continue providing any benefits
for a period of time; and (c) provide
outplacement services.
Non-executive directors are subject to one month notice periods prior to
termination of service and are not entitled to any compensation on termination
save for accrued fees as at the date of termination and reimbursement of any
expenses properly incurred prior to that date.
Share plan awards
The treatment of any share award on termination will be governed by the PSP
rules.
Under the PSP, outstanding share awards held by an individual who ceases to be
a director or employee of the Company will lapse, unless the cessation is due
to death, illness, injury or disability, redundancy, retirement, the Company
ceasing to be a member of the Group or the transfer of an undertaking or part
of an undertaking to a person who is not a member of the Group, or the Board
exercises its discretion otherwise.
Under the PSP, the Board has discretion to decide the period of time for which
the award will continue, and whether any unvested award shall be treated as
vesting on the date of cessation of employment or in accordance with the
original vesting schedule, in both cases have regard to the extent to which
the performance targets have been satisfied prior to the date of cessation.
For executive directors, the vesting period will be set by the Remuneration
Committee with a minimum three-year period. The Remuneration Committee will
(unless the vesting period is set as a period equal to or longer than five
years) impose a holding period on shares (or awards) so that the executive is
not able to sell the shares that the executive director acquires through the
PSP until the fifth anniversary of the date of the award. The holding
period will not apply to the number of shares equivalent in value to the
amount required by the Company or the executive director to fund any income
tax and employee social security contributions due on the vesting of the
awards or otherwise in connection with the awards.
Executive director employment agreements
This section contains the key employment terms and conditions of the executive
directors that could impact on their remuneration or loss of office payments.
The Company's policy on employment agreements is that executive directors'
agreements should be terminable by either the Company or the director on not
more than six months' notice. The employment agreements contain provision for
early termination, among other things, in the event of a breach by the
executive but make no provision for any termination benefits except in the
event of a change of control of the Company, where the executive becomes
entitled to a lump sum equal to 24 months' base salary plus benefits plus (if
any), bonus received on termination by the Company. The employment agreements
contain restrictive covenants for a period of 12 months following termination
of the agreement. Details of employment agreements in place as at the date of
this report are set out below:
Director Current agreement start date Notice period
F Khallouf 15 November 2019 Six months
Directors' employment agreements are available for inspection at the Company's
registered office in London.
Non-executive directors' letters of appointment
This section contains the key terms of the appointments of non-executive
directors that could impact on their remuneration.
Typically, the non-executive directors are appointed by letter of appointment
for an initial term of three years which may be extended. All non-executive
directors are subject to annual re-election by the Company's shareholders and
their appointments may be terminated earlier with one month's prior written
notice (or with immediate effect, in the case of specific serious
circumstances such as fraud or dishonesty). On termination of appointment,
non-executive directors are usually only entitled to accrued fees as at the
date of termination together with reimbursement of any expenses properly
incurred prior to that date and the company has no obligation to pay further
compensation when the appointment terminates. Non-executive directors' letters
of appointment are available for inspection at the Company's registered office
in London.
Non-executive Director Current agreement start date Term
Michel Meeus 23 June 2023 Two years
Lilia Jolibois 21 June 2024 Two years
Gilbert Lehmann 23 June 2023 Two years
Charles Mack 21 June 2024 Three years
Thibaut de Gaudemar 21 June 2024 Three years
Illustration of the Remuneration Policy
The bar charts below show the levels of remuneration that the CEO could earn
over the coming year under the Policy.
CEO: minimum and maximum remuneration
The bar chart shows future possible maximum remuneration.
Pension entitlements were provided in 2023.
Consideration of shareholder views
The Chairman and executive directors of the Company have a regular dialogue
with analysts and substantial shareholders, which includes the subject of
directors' remuneration. The outcome of these discussions is reported to the
Board and discussed in detail both there and during meetings of the
Remuneration Committee.
The Remuneration Committee will take into account the results of the
shareholder vote on remuneration matters when making future remuneration
decisions. The Remuneration Committee remains mindful of shareholder views
when evaluating and setting ongoing remuneration strategy.
Consideration of employment conditions within the Group
When determining remuneration levels for its executive directors, the Board
considers the pay and employment conditions of employees across the Group. The
Remuneration Committee will be mindful of average salary increases awarded
across the Group when reviewing the remuneration packages of the executive
directors.
Minor changes
The Remuneration Committee may make, without the need for shareholder
approval, minor amendments to the Policy for regulatory, exchange control, tax
or administrative purposes or to take account of changes in legislation.
Michel Meeus
Chairman
25 April 2025
Statement of Directors' Responsibilities in respect of the Annual Report and
the Financial Statements
The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulation.
Company law requires the directors to prepare financial statements for each
financial year. Under that law the directors have prepared the group and
company financial statements in accordance with UK-adopted International
Accounting Standards. In preparing the Company and Group's financial
statements, IAS Regulation requires that Directors:
* properly select and apply accounting policies;
* make judgements and accounting estimates that are reasonable and prudent;
* present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information;
* state whether applicable UK-adopted International Accounting Standards have
been followed, subject to any material departures disclosed and explained in
the financial statements;
* provide additional disclosures when compliance with the specific
requirements in IFRSs are insufficient to enable users to understand the
impact of particular transactions, other events and conditions on the
Company's and Group's financial position and financial performance; and
* make an assessment of the Company's and Group's ability to continue as a
going concern, prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company and Group will continue
in business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company and Group's transactions and
disclose with reasonable accuracy at any time the financial position of the
Company and Group and enable them to ensure that the financial statements
comply with the Companies Act 2006. They are also responsible for safeguarding
the assets of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities. Under applicable
law and regulations, the Directors are also responsible for preparing a
Strategic Report, Report of the Directors, Annual Report on Remuneration,
Directors' Remuneration Policy and Corporate Governance Statement that comply
with that law and those regulations. The Directors are responsible for the
maintenance and integrity of the corporate and financial information and
statements included on the Company's website, www.cadoganenergysolutions.com.
Legislation in the United Kingdom governing the preparation and dissemination
of the financial statements may differ from legislation in other
jurisdictions. The directors' responsibility also extends to the ongoing
integrity of the financial statements contained therein.
Responsibility Statement of the Directors in respect of the Annual Report
We confirm to the best of our knowledge:
(1) the financial statements, prepared in accordance with UK-adopted
International Accounting Standards in conformity with the requirements of the
Companies Act 2006, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company and the undertakings
included in the consolidation as a whole; and
(2) the Annual Report, includes a fair review of the development and
performance of the business and the position of the Company and the
undertakings included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that they face; and
(3) the annual report and the financial statements, taken as a whole, are
fair, balanced and understandable, and provide the information necessary for
the shareholders to assess the Group's position, performance, business model
and strategy.
On behalf of the Board
Michel Meeus
Chairman
25 April 2025
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF CADOGAN ENERGY SOLUTIONS PLC
Qualified Opinion
We have audited the financial statements of Cadogan Energy Solutions Plc (the
`Parent Company') and its subsidiaries (the Group) for the year ended 31
December 2024 which comprise the Consolidated Income Statement, the
Consolidated Statement of Comprehensive Income, the Consolidated Balance
Sheet, the Consolidated Cash Flow Statement, the Consolidated Statement of
Changes in Equity, the Company Balance Sheet, the Company Cash Flow Statement,
the Company Statement of Changes in Equity, and Notes to the Financial
Statements, including significant accounting policies. The financial reporting
framework that has been applied in their preparation is applicable law and UK
adopted International Accounting Standards and as regards the Parent company
financial statements, as applied in accordance with the provisions of the
Companies Act 2006.
In our opinion, except for the effect of the matter described in the Basis for
qualified opinion paragraph below:
* the financial statements give a true and fair view of the state of the
Group's and of the Parent company's affairs as at 31 December 2024 and of the
Group's loss for the year then ended;
* the Group financial statements have been properly prepared in accordance
with UK adopted International Accounting Standards;
* the Parent Company financial statements have been properly prepared in
accordance with UK adopted International Accounting Standards and as applied
in accordance with the provisions of the Companies Act 2006; and
* the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006.
Basis for qualified opinion
In February 2019, the Group advanced a Euro 13,385,000 loan to Proger Managers
& Partners Srl ("PMP"), a privately owned Italian company whose only asset is
a 72.92% interest in Proger Ingegneria Srl ("Proger Ingegneria"), a privately
owned company which itself held a 67.91% participating interest in Proger
S.P.A ("Proger") at the date of the loan was advanced.
The loan carries an entitlement to interest at a rate of 5.5% per year,
payable at maturity (which is 24 months after the execution date of February
2019 and assuming that the call option described below was not exercised). The
principal of the loan is secured by a pledge over PMP's current participating
interest in Proger Ingegneria Srl, up to a maximum guaranteed amount of Euro
13,385,000.
Through the Agreement, the Group was granted a call option to acquire, at its
sole discretion, a 33% participating interest in Proger Ingegneria; the
exercise of the option would have given Cadogan, through Cadogan Petroleum
Holdings BV, an indirect 25% interest in Proger. The call option was granted
at no additional cost and could be exercised at any time between the 6th and
24th months following the execution date of the loan agreement.
The call option was not exercised within the relevant timeframe (February
2021) and consequently in accordance with the loan agreement the principal
amount and any accrued interest became repayable in full. At that date the
Group reclassified the asset from a financial asset held at fair value through
profit and loss to a financial asset held at amortised cost.
In March 2021, PMP requested arbitration to have the loan agreement recognised
as an equity investment contract. In July 2022, the Arbitral panel in Rome
decided to reject the main claim of PMP to recognise the loan as an equity
investment.
In November 2023, the Group initiated a second arbitration to assert its right
to restitution and obtain PMP's condemnation of the consequent payment.
As discussed in note 4(d) and note 28 to the financial statements, the Group
and PMP entered into a settlement agreement in December 2024 to conclude their
litigation in respect of the loan agreement with PMP entered into in February
2019. Consequently, management recorded the carrying value of Proger loan at
USD $10,388,000, which was management's best estimate of its recoverable
amount in accordance with the settlement agreement signed with PMP.
Subsequently the Group received an amount of Euro 10,001,000 (USD $10,388,000)
in January 2025 in accordance with the settlement agreement. As a result an
impairment charge of USD $5,657,000 was recorded for the year ended 31
December 2024, as shown in note 13 to the financial statements.
Due to the litigation, which was ongoing at 31 December 2023, we were unable
to obtain sufficient appropriate audit evidence as to whether the carrying
value of the loan note recorded at $17,074,000 in the consolidated balance
sheet represented its recoverable amount as at 31 December 2023 and as a
result the audit opinion for the year ended 31 December 2023 was qualified.
Consequently, we were unable to determine whether the impairment charge
recognised for the year ended 31 December 2024 was materially correct and we
were therefore unable to obtain sufficient appropriate audit evidence in
respect of the loss of the Group for the year.
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor's Responsibilities for the
audit of the financial statements section of our report. We are independent of
the Group in accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the FRC's Ethical
Standard as applied to listed public interest entities, and we have fulfilled
our other ethical responsibilities in accordance with these requirements. We
believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our qualified opinion. Our audit opinion is consistent
with the additional report to the audit committee.
Our approach to the audit
We tailored the scope of our audit to ensure we performed sufficient work to
be able to express an opinion on the financial statements as a whole, taking
into account the structure of the Group and the Company, its environment,
including the group's system of internal control, and assessing the risks of
material misstatement in the financial statements. We also addressed the
risk of management override of internal controls, including assessing whether
there was evidence of bias by the directors that may have represented a risk
of material misstatement.
The significant majority of the Group's operations are located in the Ukraine
and account for 100% of the Group's revenue. We instructed a component audit
team in the Ukraine to perform a full scope audit of the Ukrainian sub-group.
In our assessment the Group comprises three full scope components together
with the Ukrainian sub-group and one limited scope component. The audit of the
Ukrainian sub-group was performed by Crowe Erfolg in the Ukraine under the
supervision and direction of the Group audit engagement team, as described in
more detail below. The remaining full scope components of the Group namely
Cadogan Energy Solutions Plc (the Parent Company), Cadogan Petroleum Holdings
Limited and the limited scope component Cadogan Petroleum Holdings B.V. were
audited by the Group audit engagement team.
Our involvement with the component auditors
As part of our supervision and direction of the component audit team, we
determined the level of involvement needed in order to be able to conclude
whether sufficient appropriate audit evidence has been obtained in respect of
the Ukraine sub-group as a basis for our opinion on the Group financial
statements as a whole. Our involvement with the component auditors included
the following:
* We issued detailed Group reporting instructions to the component auditor,
which included the significant areas to be covered by the audit (including
areas that were considered to be key audit matters as detailed below) and set
out the information required to be reported to the Group audit team.
* Due to the travel restrictions resulting from the ongoing war in the
Ukraine, the Group audit engagement partner and senior members of the Group
audit engagement team were unable to visit the Ukraine to meet with component
management and the component audit team during the audit. Accordingly, we
performed a remote review of the component audit files in the Ukraine using
appropriate technologies and held regular calls and video conferences with
component management and component audit team during the audit.
* The Group audit team performed reviews of relevant working papers and
undertook additional procedures where necessary in respect of the significant
risk areas that represented Key Audit Matters for the Group.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those
which had the greatest effect on: the overall audit strategy, the allocation
of resources in the audit; and directing the efforts of the audit engagement
team. These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters.
In addition to the matter described in the basis for qualified opinion
section, we have determined the matters described below to be the key audit
matters to be communicated in our report.
Key Audit Matters How our scope addressed this matter
Valuation of development and production assets Refer to page 88 (Accounting policy) and 100 (note 17 Property, plant and equipment). As at 31 December 2024 the Group held development and production assets with a carrying value of $4.5m (2023: $5.6m). Management has performed an impairment review of development and production assets and concluded that no impairment is required. The assessment of the recoverable amount of the development and production assets required judgments and estimates by management regarding the inputs applied in the models including future oil prices, production forecasts, estimates of reserves, operating and development costs and discount rates. The carrying value of the Group's development and production assets was therefore considered to be a key audit matter . · We critically assessed management's impairment assessment which was based on the value in use model (ViU). · We challenged the key judgements and estimates made by management, including forecast oil prices and the production output levels. · We
critically assessed management's assumptions in estimating the discount rate used. · We compared forecast production included in the model to the most recent geological and economic evaluation report produced by the management's external expert. · We
assessed the independence and competence of management's external expert. · We held discussions with operational management to evaluate the basis of production forecasts associated with wells, considered the historical impact of such activities and
evaluated the extent to which appropriate costs were included in the forecasts. · We performed sensitivity analysis on the impairment model to establish the impact of possible changes of the key assumptions and estimates. · We reviewed the adequacy of the
disclosures in the financial statements in accordance with IAS 36. Based on our work performed we were satisfied that there was no impairment of development and production assets and that the associated disclosures included in the financial statements were
appropriate.
Our application of materiality
The scope of our audit was influenced by our application of materiality. We
set certain quantitative thresholds for materiality. These, together with
qualitative considerations, helped us to determine the scope of our audit, the
nature, timing and extent of our audit procedures, both individually and in
aggregate on the financial statements as a whole. Based on our professional
judgement, we determined materiality for the financial statements as follows:
The Group The Parent Company
Overall group materiality $470,000 (2023: $570,000) $300,000 (2023: $350,000)
Basis of determining materiality 1.5% of total assets (2023: 1.5% of total assets) 1.5% of total assets restricted to $300,000 (2023: 1.5% of total assets restricted to $350,000)
Rationale for the benchmark applied When determining materiality, we determine an appropriate percentage of our chosen benchmark, with the choice of an appropriate benchmark as our starting point. We determined that an asset based measure of materiality is appropriate as the Group and the Company holds significant cash and loan balances and its principal activity is the exploration and development of oil and gas assets. As a result we concluded that the asset base is a key financial metric for the users of the financial statements.
Performance materiality $235,000 (2023: $285,000) $150,000 (2023: $175,000)
Basis for performance materiality We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our performance materiality was 50% of overall materiality, amounting to £235,000 for the Group financial statements and $150,000 for the
Company financial statements. When considering the level at which to set performance materiality, we considered a number of factors, including the risk assessment and aggregation risk, the effectiveness of controls and our knowledge of the business.
We agreed with the Board and Audit Committee that we would report to them
misstatements identified during the audit greater than 5% of overall
materiality. We also agreed to report differences below this threshold that,
in our view, warranted reporting on qualitative grounds.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors'
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate. Our evaluation of the directors'
assessment of the Group's and the Parent Company's ability to continue to
adopt the going concern basis of accounting included:
* We reviewed management's going concern assessment paper and the cash flow
forecast prepared by management and approved by the Board.
* We critically assessed the going concern paper and the forecast taking into
account key assumptions and various scenarios prepared by management and the
impact they would have on the Group's ability to continue operating as a going
concern.
* We performed sensitivity assessments over the key assumptions in the
forecast including the impact of severe but plausible scenarios and severe but
unlikely downside scenarios, and extended these beyond the 12 months from the
date of approval of these financial statements to assess the Group's ability
to continue as a going concern.
* As part of our sensitivity assessment of these forecasts and scenarios we
critically assessed the level of headroom available and the assumptions used
including, mitigating actions available to management, potential geopolitical
impacts, oil production, oil prices, operating expenditure and capital
expenditure.
* We compared production forecasts to historical trends and considered the oil
price assumptions against consensus market prices and historical discount
levels between Brent oil prices and the local market. We also compared
forecast costs with historical expenditure.
* We reviewed the adequacy of the disclosures in the financial statements in
respect of going concern against the requirements of UK-adopted international
accounting standards.
Based on the work we have performed, we have not identified any material
uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the Group's and Parent company's
ability to continue as a going concern for a period of at least twelve months
from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to
going concern are described in the relevant sections of this report.
Emphasis of Matter
We draw attention to Note 3 (b) on page 83 to the financial statements which
describes the uncertainty related to the outcome of the ongoing war in
Ukraine. The Group has included various scenarios that take into account the
ongoing war in the Ukraine in its cash flow projections. However, due to the
unpredictable outcome, length, scale and extent of the conflict its impact on
the Group and the Company cannot be predicted with any certainty. Our opinion
is not modified in respect of this matter.
Other information
The other information comprises the information included in the annual report,
other than the financial statements and our auditor's report thereon. The
directors are responsible for the other information contained within the
annual report. Our opinion on the financial statements does not cover the
other information and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility
is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our
knowledge obtained in the course of the audit or otherwise appears to be
materially misstated. If we identify such material inconsistencies or apparent
material misstatements, we are required to determine whether there is a
material misstatement in the financial statements themselves. If, based on the
work we have performed, we conclude that there is a material misstatement of
this other information, we are required to report that fact.
As described in the basis for qualified opinion section of our report, our
audit opinion is qualified because we were unable to obtain sufficient
appropriate audit evidence in respect of the loss of the Group for the year
ended 31 December 2024, as a consequence of our qualified opinion in respect
of certain loan receivables for the year ended 31 December 2023. We have
concluded that where the other information refers to the loss for the year,
the prior year loan receivables or to related balances or classes of
transactions it may also be materially misstated for the same reason.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the directors' remuneration report to be audited
has been properly prepared in accordance with the Companies Act 2006.
Except for the possible effect of the matter described in the basis for the
qualified opinion section of our report, in our opinion, based on the work
undertaken in the course of the audit:
* the information given in the Strategic report and the Directors' report for
the financial year for which the financial statements are prepared is
consistent with the financial statements; and
* the Strategic report and the Directors' report have been prepared in
accordance with applicable legal requirements;
Matters on which we are required to report by exception
Except for the possible effect of the matter described in the basis for the
qualified opinion section of our report, in the light of the knowledge and
understanding of the Group and the Parent Company and its environment obtained
in the course of the audit, we have not identified material misstatements in
the Strategic report or the Directors' report.
We have nothing to report in respect of the following matters where the
Companies Act 2006 requires us to report to you if, in our opinion:
* returns adequate for our audit have not been received from branches not
visited by us; or
* the Parent Company financial statements and the part of the Directors'
remuneration report to be audited are not in agreement with the accounting
records and returns; or
* certain disclosures of Directors' remuneration specified by law are not
made; or
* a corporate governance statement has not been prepared by the Parent
Company.
Responsibilities of directors
As explained more fully in the directors' responsibilities statement set out
on page 68, the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and
for such internal control as the directors determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for
assessing the Group's and the Parent company's ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either intend to
liquidate the Group or the Parent Company or to cease operations, or have no
realistic alternative but to do so.
Auditor's Responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
A further description of our responsibilities is available on the FRC's
website at
https://wwww.frc.org.uk/auditors/auditor-assurance/auditor-s-responsibilities-for-the-audit-of-the-fi/description-of-the-auditor's-responsibilities-for
Explanation as to what extent the audit was considered capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and
regulations. We design procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of irregularities,
including fraud. The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below.
The objectives of our audit in respect of fraud, are; to identify and assess
the risks of material misstatement of the financial statements due to fraud;
to obtain sufficient appropriate audit evidence regarding the assessed risks
of material misstatement due to fraud, through designing and implementing
appropriate responses to those assessed risks; and to respond appropriately to
instances of fraud or suspected fraud identified during the audit. However,
the primary responsibility for the prevention and detection of fraud rests
with both management and those charged with governance of the company.
Based on our understanding of the Group and its operations, we identified the
principal risks of non-compliance with laws and regulations related to UK and
Ukrainian tax legislation, employment and health and safety regulations, and
licensing regulations and we considered the extent to which non-compliance
might have a material effect on the financial statements. We also considered
those laws and regulations that have a direct impact on the financial
statements such as UK adopted International Accounting Standards, the
Companies Act 2006, the Listing Rules and the Disclosure and Transparency
Rules.
* We obtained an understanding of how the Group and the Parent Company
complies with these requirements by discussions with management and those
charged with governance;
* Based on this understanding, we designed specific appropriate audit
procedures to identify instances of non-compliance with laws and regulations.
This included making enquiries of management and those charged with governance
and obtaining additional corroborative evidence as required.
* We inquired of management and those charged with governance as to any known
instances of non-compliance or suspected non-compliance with laws and
regulations.
* We performed a review of external press releases;
* We assessed the risk of material misstatement of the financial statements,
including the risk of material misstatement due to fraud and how it might
occur, by holding discussions with management and those charged with
governance.
* We challenged assumptions and judgements made by management in relation to
the estimates made in respect of development and production assets.
* Identifying and testing journal entries, in particular any journal entries
posted with unusual account combinations, and unusual users.
There are inherent limitations in the audit procedures described above. We are
less likely to become aware of instances of non-compliance with laws and
regulations that are not closely related to events and transactions reflected
in the financial statements. Also, the risk of not detecting a material
misstatement due to fraud is higher than the risk of not detecting one
resulting from error, as fraud may involve deliberate concealment by, for
example, forgery or intentional misrepresentations, or through collusion.
Other matters which we are required to address
We were appointed by the Board of Directors on 17 February 2023 to audit the
financial statements for the year ended 31 December 2022. Our total
uninterrupted period of engagement is three years, covering the year ended 31
December 2022 to the year ended 31 December 2024.
The non-audit services prohibited by the FRC's Ethical Standard were not
provided to the Group or the Parent Company and we remain independent of the
Group and the Parent Company in conducting our audit.
Our audit opinion is consistent with the additional report to the Audit
Committee.
Use of our report
This report is made solely to the company's members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken for no purpose other than to draw to the attention of the company's
members those matters which we are required to include in an auditor's report
addressed to them. To the fullest extent permitted by law, we do not accept or
assume responsibility to any party other than the company and company's
members as a body, for our work, for this report, or for the opinions we have
formed.
Matthew Banton (Senior Statutory Auditor)
for and on behalf of Moore Kingston Smith LLP, Statutory Auditor
9 Appold Street
London
EC2A 2AP
Consolidated Income Statement For the year ended 31 December 2024
Notes 2024 $'000 2023 $'000
CONTINUING OPERATIONS
Revenues 6 9,152 7,550
Cost of sales 7 (5,047) (5,391)
Gross profit 4,105 2,159
Administrative expenses 8 (3,522) (3,574)
Adjustments to end of concession obligations for E&E assets 16 (6) 218
Reversal of impairment of other assets 9 39 56
Impairment of other assets 9 (39) (49)
Other operating (expenses)/income, net 10 (19) 25
Net foreign exchange (losses)/gain (1,123) 538
Operating loss (565) (627)
Loss on Proger loan, net 13 (5,657) 757
Finance income, net 13 759 1,128
(Loss)/Profit before tax (5,463) 1,258
Taxation 14 (769) -
(Loss)/Profit for the year (6,232) 1,258
Attributable to:
Owners of the Company (6,232) 1,259
Non-controlling interest - (1)
(6,232) 1,258
(Loss)/Earnings per Ordinary share Cents Cents
Basic and diluted 15 (2.6) 0.5
Consolidated Statement of Comprehensive Income For the year ended 31 December 2024
2024 $'000 2023 $'000
(Loss)/Profit for the year (6,232) 1,258
Other comprehensive loss
Items that may be reclassified subsequently to profit or loss:
Unrealised currency translation differences (1,141) (321)
Other comprehensive loss (1,141) (321)
Total comprehensive (loss)/gain for the year (7,373) 937
Attributable to:
Owners of the Company (7,373) 938
Non-controlling interest - (1)
(7,373) 937
Consolidated Balance Sheet As at 31 December 2024
Notes 2024 $'000 2023 $'000
ASSETS
Non-current assets
Intangible exploration and evaluation assets 16 - -
Property, plant and equipment 17 5,329 5,768
Right-of-use assets 23 165 246
Deferred tax asset 22 - 370
5,494 6,384
Current assets
Inventories 19 515 364
Trade and other receivables 20 354 310
Loan receivable at amortised cost 28 10,388 17,074
Cash 21 14,381 14,155
25,638 31,903
Total assets 31,132 38,287
LIABILITIES
Non-current liabilities
Long-term lease liability 23 (75) (148)
Provisions 25 (110) (114)
(185) (262)
Current liabilities
Trade and other payables 24 (1,652)
(1,366)
Short-term lease liability 23 (98) (87)
Current provisions 25 (129) (131)
(1,879)
(1,584)
Total liabilities (2,064)
(1,846)
NET ASSETS 29,068 36,441
EQUITY
Share capital 26 13,832 13,832
Share premium 514 514
Retained earnings 179,571 185,803
Cumulative translation reserves (166,438) (165,297)
Other reserves 27 1,589 1,589
Equity attributable to owners of the Company 29,068
36,441
Non-controlling interest - -
TOTAL EQUITY 29,068 36,441
The consolidated financial statements of Cadogan Energy Solutions plc,
registered in England and Wales no. 05718406, were approved by the Board of
Directors and authorised for issue on 25 April 2025. They were signed on its
behalf by:
Fady Khallouf
Chief Executive Officer
25 April 2025
The notes on pages 82 to 110 form an integral part of these financial
statements.
Consolidated Cash Flow Statement For the year ended 31 December 2024
Note 2024 $'000 2023 $'000
Operating loss (565) (627)
Adjustments for:
Depreciation and depletion of property, plant and equipment, and right-of-use assets 17,23 813 821
Changes in provision of oil and gas assets 16 6 (218)
Loss on disposal of property, plant and equipment 17 - 19
Impairment of inventories 9 28 44
Impairment of receivables 9 11 3
Impairment of VAT recoverable 9,20 (39) (54)
Effect of foreign exchange rate changes 1,122 (538)
Operating cash inflow/(outflow) before movements in working capital 1,376 (550)
Increase in inventories (219) (131)
Increase in receivables (663) (127)
Increase in payables 644 370
Cash used by operations 1,138 (438)
Income tax paid (447) -
Net cash inflow/(outflow) from operating activities 691 (438)
Investing activities
Purchases of property, plant and equipment (1,048) (58)
Interest received 800 796
Net cash (used by)/generated in investing activities (248) 738
Financing activities
Repayment of lease liability (118) (132)
Net cash from financing activities (118) (132)
Net increase in cash 326 168
Effect of foreign exchange rate changes (100) 53
Cash at beginning of year 14,155 13,934
Cash at end of year 14,381 14,155
As at 31 January 2025, following the conclusion of the Settlement Agreement
with Proger, the Group's cash balance stood at $24.7 million.
Consolidated Statement of Changes in Equity For the year ended 31 December 2024
Share capital $'000 Retained earnings $'000 Cumulative translation reserves $'000 Non-controlling interest $'000 Total $'000
Share premium account $'000 Other reserves $'000 Equity attributable to owners of the Company
As at 1 January 2023 13,832 514 184,331 (164,976) 1,589 35,290 237 35,527
Net loss for the year - - 1,259 - - 1,259 (1) 1,258
Other comprehensive profit/loss - - -
(321) -
(321) -
(321)
Total comprehensive profit/loss for the year - - 1,259
(321) - 938 (1) 937
Acquisition of non-controlling interests - - 213 - - 213 (236) (23)
As at 1 January 2024 13,832 514 185,803
(165,297) 1,589 36,441 - 36,441
Net income for the year - - (6,232) - - (6,232) - (6,232)
Other comprehensive profit/loss - - - (1,141) - (1,141) - (1,141)
Total comprehensive loss for the year - - (6,232) (1,141) - (7,373) - (7,373)
As at 31 December 2024 13,832 514 179,571 (166,438) 1,589 29,068 - 29,068
Notes to the Consolidated Financial Statements For the year ended 31 December
2024
1. General information
Cadogan Energy Solutions plc (the "Company", together with its subsidiaries
the "Group"), is registered in England and Wales under the Companies Act 2006.
The address of the registered office is 6th Floor, 60 Gracechurch Street,
London EC3V 0HR.
The Group principal activity has been up to 2024 oil and gas exploration,
development and production; the Group also conducts gas trading and provides
services to other E&P operators. The strategy of the Group is to expand its
activities along the energy value chain, beyond current activities to new
forms of energy with a reduced impact on the environment. The Group is
developing several projects for electricity generation, operational in 2025.
Starting from 2025, this activity will become also a main one.
The Company's shares have a standard listing on the Official List of the UK
Listing Authority and are traded on the Main Market of the London Stock
Exchange.
2. Adoption of new and revised Standards
New IFRS accounting standards, amendments and interpretations effective from
1 January 2024
The disclosed policies have been applied consistently by the Group for both
the current and previous financial year with the exception of the new
standards adopted.
The IFRS financial information has been drawn up on the basis of accounting
policies consistent with those applied in the financial statements for the
year to 31 December 2024, except for the following:
(a) Amendments to IAS 1 Presentation of Financial Statements:
Classification of Liabilities as Current or Non-current and Non-current
Liabilities with Covenants;
(b) Amendments to IFRS 16 Leases: Lease Liability in a Sale and Leaseback;
(c) Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial
Instruments: Disclosures: Supplier Finance Arrangements;
(d) Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates
and Errors: Definition of Accounting Estimates; and
(e) Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and
Liabilities arising from a Single Transaction.
The application of the above standards has had no impact on the disclosures or
the amounts recognised in the Group's consolidated financial statements.
New IFRS accounting standards, amendments and interpretations not yet
effective
Below is a list of new and revised IFRSs that are not yet mandatorily
effective (but allow early application) for the year ended 31 December 2024
and have not been early adopted by the Group. These standards are not expected
to have a material impact on the Group in the future reporting periods and on
foreseeable future transactions.
IFRS accounting standards Effective periods beginning on or after
Amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates: Lack of Exchangeability 1 January 2025
Amendments to IFRS 9, Financial Instruments and IFRS 7, Financial Instruments: Disclosures: Classification and Measurement of Financial Instruments 1 January 2026
Amendments to IFRS 9 and IFRS 7: Power Purchase Agreements (PPAs), Contracts Referencing Nature-dependent Electricity 1 January 2026
IFRS 18, Presentation and Disclosure in Financial Statements 1 January 2027
IFRS 19, Subsidiaries without Public Accountability: Disclosures 1 January 2027
3. Significant accounting policies
(a) Basis of accounting
The financial statements have been prepared in accordance with UK-adopted
International Accounting Standards in conformity with the requirements of the
Companies Act 2006, applicable to companies reporting under IFRS.
The financial statements have been prepared on the historical cost convention
basis.
The financial statements are prepared to nearest thousand.
The principal accounting policies adopted are set out below:
(b) Going concern
The Group's cash balance at 31 December 2024 was $14.4 million (2023: $14.2
million). Following the closing of the Settlement Agreement with Proger in
January 2025, the Group's cash balance was $24.7 million as at 31 January
2025. The Directors consider that the funds available at the date of the issue
of these financial statements are sufficient for the Group to manage its
business risks and planned investments successfully and meet its ongoing
liabilities as they full due for at least twelve months from the date of
signing of these financial statements.
The Directors' have carried out a robust assessment of the principal risks
facing the Group.
The Group's forecasts and projections, taking into account reasonably possible
changes in trading activities, operational performance, flow rates for
commercial production and the price of hydrocarbons sold to Ukrainian
customers, show that there are reasonable expectations that the Group will be
able to operate on funds currently held and those generated internally, for
the foreseeable future.
Notwithstanding the Group's current financial performance and position, the
Board are cognisant of the actual risks related to the war situation in
Ukraine. The Board has considered possible reverse stress case scenarios for
the impact on the Group's operations, financial position and forecasts.
Whilst the potential future impacts of the invasion of Ukraine by Russia are
unknown, the Board has considered operational disruption that may be caused by
the factors such as a) restrictions applied by governments, illness amongst
our workforce and disruption to supply chain and sales channels; b) market
volatility in respect of commodity prices associated in addition to military
and geopolitical factors.
In addition to sensitivities that reflect future expectations regarding
country, commodity price and currency risks that the Group may encounter
reverse stress tests have been run to reflect possible negative effects of the
war in Ukraine. The Group's forecasts demonstrate that owing to its cash
resources the Group is able to meet its operating cash flow requirements and
commitments whilst maintaining significant liquidity for a period of at least
the next 12 months from the date of signing of these financial statements
allowing for sustained reductions in commodity prices and extended and severe
disruption to operations should such a scenario occur.
After making enquiries and considering the uncertainties described above, the
Directors have a reasonable expectation that the Company and the Group have
adequate resources to continue in operational existence for the foreseeable
future and consider the going concern basis of accounting to be appropriate
and, thus, they continue to adopt the going concern basis of accounting in
preparing the annual financial statements.
(c) Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company (its subsidiaries) made up
to 31 December each year. IFRS 10 defines control to be investor control over
an investee when it is exposed, or has rights, to variable returns from its
involvement with the investee and has the ability to control those returns
through its power over the investee. The results of subsidiaries disposed of
during the year are included in the consolidated income statement from the
effective date of acquisition or up to the effective date of disposal, as
appropriate. Where necessary, adjustments are made to the financial statements
of subsidiaries to bring accounting policies used into line with those used by
the Group. All intra-group transactions, balances, income and expenses are
eliminated on consolidation.
3. Significant accounting policies (continued)
(c) Basis of consolidation (continued)
Non-controlling interests in subsidiaries are identified separately from the
Group's equity therein. Those interests of non-controlling shareholders that
are present ownership interests entitling their holders to a proportionate
share of net assets upon liquidation may be initially measured at fair value
or at the non-controlling interests' proportionate share of the fair value of
the acquiree's identifiable net assets. The choice of measurement is made on
an acquisition-by-acquisition basis. Other non-controlling interests are
initially measured at fair value.
Subsequent to acquisition, the carrying amount of non-controlling interests is
the amount of those interests at initial recognition plus the non-controlling
interests' share of subsequent changes in equity. Total comprehensive income
is attributed to non-controlling interests even if this results in the
non-controlling interests having a deficit balance.
Changes in the Group's interests in subsidiaries that do not result in a loss
of control are accounted for as equity transactions. The carrying amount of
the Group's interests and the non-controlling interests are adjusted to
reflect the changes in their relative interests in the subsidiaries. Any
difference between the amount by which the non-controlling interests are
adjusted and the fair value of the consideration paid or received is
recognised directly in equity and attributed to the owners of the Company.
(d) Revenue recognition
Revenue from contracts with customers is recognised when or as the Group
satisfies a performance obligation by transferring a promised good or service
to a customer. A good or service is transferred when the customer obtains
control of that good or service. Revenue is measured based on measurement
principles of IFRS 15 and represents amounts receivable for hydrocarbon
products and services provided in the normal course of business, net of value
added tax (`VAT') and other sales-related taxes, excluding royalties on
production. Royalties on production are recorded within cost of sales.
The crude oil produced by the upstream operations is sold to external
customers. Revenue from the sale of crude oil is recognised at the point in
time when control of the product is transferred to the customer, which is
typically when goods are despatched, and title has passed. The Group
despatches oil at the production point (EXW incoterms) therefore the Group has
no transportation and shipping costs associated with the transfer of the
product to the customer.
The Group's sales of crude oil are priced based on the consideration specified
in contracts with customers based on a conducted tender result on the opened
tender platform. Invoices are typically paid at the day of product despatch.
E&P and Trading business segments
The transfer of control of hydrocarbons usually coincides with title passing
to the customer and the customer taking physical possession as the product
passes a physical point such as a designated point in the pipeline for the
sale of gas or loading point in the case of oil. The Group principally
satisfies its performance obligations at a point in time.
To the extent that revenue arises from test production during an evaluation
programme, an amount is credited to evaluation costs and charged to cost of
sales, to reflect a zero-net margin.
Interest income is accrued on a time basis, by reference to the principal
outstanding and at the effective interest rate applicable, which is the rate
that exactly discounts estimated future cash receipts through the expected
life of the financial asset to that asset's net carrying amount on initial
recognition.
3. Significant accounting policies (continued)
(e) Foreign currencies
The functional currency of the Group's Ukrainian operations is Ukrainian
Hryvnia. The functional currency of the Group's UK subsidiaries and the
parent company is US Dollar. The Group's presentational currency is US Dollar
accordingly.
In preparing the financial statements of the individual companies,
transactions in currencies other than the functional currency of each Group
company (`foreign currencies') are recorded in the functional currency at the
rates of exchange prevailing on the dates of the transactions. At each balance
sheet date, monetary assets and liabilities that are denominated in foreign
currencies are retranslated into the functional currency at the rates
prevailing on the balance sheet date. Non-monetary assets and liabilities
carried at fair value that are denominated in foreign currencies are
translated at the rates prevailing at the date when the fair value was
determined. Non-monetary items that are measured in terms of historical cost
in a foreign currency are not retranslated. Foreign exchange differences on
cash are recognized in operating profit or loss in the period in which they
arise.
Exchange differences are recognized in the profit or loss in the period in
which they arise except for exchange differences on monetary items receivable
from or payable to a foreign operation for which settlement is neither planned
nor likely to occur. This forms part of the net investment in a foreign
operation, which is recognized in the foreign currency translation reserve and
in profit or loss on disposal of the net investment.
For the purpose of presenting consolidated financial statements, the results
and financial position of each entity of the Group, where the functional
currency is not the US dollar, are translated into US dollars as follows:
1. assets and liabilities of the Group's foreign operations are translated at
the closing rate on the balance sheet date;
2. income and expenses are translated at the average exchange rates for the
period, where it approximates to actual rates. In other cases, if exchange
rates fluctuate significantly during that period, the exchange rates at the
date of the transactions are used; and
3. all resulting exchange differences arising, if any, are recognised in other
comprehensive income and accumulated equity (attributed to non-controlling
interests as appropriate), transferred to the Group's translation reserve.
Such translation differences are recognised as income or as expenses in the
period in which the operation is disposed of.
Goodwill and fair value adjustments arising on the acquisition of a foreign
entity are treated as assets and liabilities of the foreign entity and
translated at the closing rate.
The relevant exchange rates used were as follows:
Year ended 31 December 2024 Year ended 31 December 2023
GBP/USD EURO/USD USD/UAH GBP/USD EURO/USD USD/UAH
Closing rate 1.25369 1.0388 42.3997 1.2732 1.1038 38.3480
Average rate 1.2782 1.0821 40.4528 1.2440 1.0817 37.0867
(g) Taxation
The tax expense represents the sum of the tax currently payable and deferred
tax.
The tax currently payable is based on taxable profit for the year. Taxable
profit differs from net profit as reported in the consolidated income
statement because it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are never taxable
or deductible. The Group's liability for current tax is calculated using tax
rates that have been enacted or substantively enacted by the balance sheet
date.
3. Significant accounting policies (continued)
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit. This is accounted for using the balance sheet liability method.
Deferred tax liabilities are generally recognized for all taxable temporary
differences and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which deductible
temporary differences can be utilised. Such assets and liabilities are not
recognised if the temporary difference arises from the initial recognition of
goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that affects
neither the taxable profit nor the accounting profit. Deferred tax liabilities
are recognised for taxable temporary differences arising on investments in
subsidiaries and associates, and interests in joint ventures, except where the
Group is able to control the reversal of the temporary difference, and it is
probable that the temporary difference will not reverse in the foreseeable
future.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered. Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset is realised.
Deferred tax is charged or credited in the income statement, except when it
relates to items charged or credited in other comprehensive income, in which
case the deferred tax is also dealt with in other comprehensive income.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same taxation
authority and the Group intends to settle its current tax assets and
liabilities on a net basis.
In case of the uncertainty of the tax treatment, the Group assesses, whether
it is probable or not, that the tax treatment will be accepted, and to
determine the value, the Group use the most likely amount or the expected
value in determining taxable profit (tax loss), tax bases, unused tax losses,
unused tax credits and tax rates.
(h) Other property, plant and equipment
Property, plant and equipment (`PP&E') are carried at cost less accumulated
depreciation and any recognized impairment loss. Depreciation and amortisation
is charged so as to write-off the cost or valuation of assets, other than
land, over their estimated useful lives, using the straight-line method, on
the following bases:
Other PP&E 10% to 30%
The gain or loss arising on the disposal or retirement of an asset is
determined as the difference between the sales proceeds and the carrying
amount of the asset and is recognised in income.
(i) Right-of-use assets
The Group leases various offices, equipment, wells, and land. Contracts may
contain both lease and non-lease components. The Group allocates the
consideration in the contract to the lease and non-lease components based on
their relative stand-alone prices.
Assets arising from a lease are initially measured on a present value basis.
Right-of-use assets are measured at cost comprising the following:
· the amount of the initial measurement of the lease liability;
· any lease payments made at or before the commencement date less any lease
incentives received;
· any initial direct costs; and
· costs to restore the asset to the conditions required by lease agreements.
Right-of-use assets are generally depreciated over the shorter of the asset's
useful life and the lease term on a straight-line basis.
3. Significant accounting policies (continued)
(j) Intangible exploration and evaluation assets
The Group applies the modified full cost method of accounting for intangible
exploration and evaluation (`E&E') expenditure, which complies with
requirements set out in IFRS 6 Exploration for and Evaluation of Mineral
Resources. Under the modified full cost method of accounting, expenditure made
on exploring for and evaluating oil and gas properties is accumulated and
initially capitalized as an intangible asset, by reference to appropriate cost
centres being the appropriate oil or gas property. E&E assets are then
assessed for impairment on a geographical cost pool basis, which are assessed
at the level of individual licences.
E&E assets comprise costs of (i) E&E activities which are in progress at the
balance sheet date, but where the existence of commercial reserves has yet to
be determined (ii) E&E expenditure which, whilst representing part of the E&E
activities associated with adding to the commercial reserves of an established
cost pool, did not result in the discovery of commercial reserves.
Costs incurred prior to having obtained the legal rights to explore an area
are expensed directly to the income statement as incurred.
Exploration and Evaluation costs
E&E expenditure is initially capitalised as an E&E asset. Payments to acquire
the legal right to explore, costs of technical services and studies, seismic
acquisition, exploratory drilling, and testing are also capitalised as
intangible E&E assets.
Tangible assets used in E&E activities (such as the Group's vehicles, drilling
rigs, seismic equipment and other property, plant and equipment) are normally
classified as PP&E. However, to the extent that such assets are consumed in
developing an intangible E&E asset, the amount reflecting that consumption is
recorded as part of the cost of the intangible asset. Such intangible costs
include directly attributable overheads, including the depreciation of PP&E
items utilised in E&E activities, together with the cost of other materials
consumed during the exploration and evaluation phases.
E&E assets are not amortised prior to the conclusion of appraisal activities.
Treatment of E&E assets at conclusion of appraisal activities
Intangible E&E assets related to each exploration property are carried
forward, until the existence (or otherwise) of commercial reserves has been
determined. If commercial reserves have been discovered, the related E&E
assets are assessed for impairment on individual assets basis as set out below
and any impairment loss is recognized in the income statement. Upon approval
of a development programme, the carrying value, after any impairment loss, of
the relevant E&E assets is reclassified to the development and production
assets within PP&E.
Intangible E&E assets which relate to E&E activities that are determined not
to have resulted in the discovery of commercial reserves remain capitalised as
intangible E&E assets at cost less accumulated amortization, subject to
meeting a pool-wide impairment test in accordance with the accounting policy
for impairment of E&E assets set out below.
Impairment of E&E assets
E&E assets are assessed for impairment when facts and circumstances suggest
that the carrying amount may exceed its recoverable amount. Such indicators
include, but are not limited to those situations outlined in paragraph 20 of
IFRS 6 Exploration for and Evaluation of Mineral Resources such as, a) license
expiry during year or in the near future and will not likely to be renewed; b)
expenditure on E&E activity neither budgeted nor planned; c) commercial
quantities of mineral resources have been discovered; and d) sufficient data
exists to indicate that carrying amount of E&E asset is unlikely to be
recovered in full from successful development or sale.
3. Significant accounting policies (continued)
Where there are indications of impairment, the E&E assets concerned are tested
for impairment. Where the E&E assets concerned fall within the scope of an
established full cost pool, which are not larger than an operating segment,
they are tested for impairment together with all development and production
assets associated with that cost pool, as a single cash generating unit.
The aggregate carrying value of the relevant assets is compared against the
expected recoverable amount of the pool, generally by reference to the present
value of the future net cash flows expected to be derived from production of
commercial reserves from that pool. Where the assets fall into an area that
does not have an established pool or if there are no producing assets to cover
the unsuccessful exploration and evaluation costs, those assets would fail the
impairment test and be written off to the income statement in full.
Impairment losses are recognised in the income statement and are separately
disclosed.
(k) Development and production assets
Development and production assets are accumulated on a field-by-field basis
and represent the cost of developing the commercial Reserves discovered and
bringing them into production, together with E&E expenditures incurred in
finding commercial Reserves transferred from intangible E&E assets.
The cost of development and production assets comprises the cost of
acquisitions and purchases of such assets, directly attributable overheads,
finance costs capitalised, and the cost of recognising provisions for future
restoration and decommissioning.
Depreciation of producing assets
Depreciation is calculated on the net book values of producing assets on a
field-by-field basis using the unit of production method. The unit of
production method refers to the ratio of production in the reporting year as a
proportion of the Proved and Probable Reserves of the relevant field based on
assessments of internal geologists utilising the most recent Competent Person
Report and subsequent drilling and exploration, taking into account future
development expenditures necessary to bring those Reserves into production.
Producing assets are generally grouped with other assets that are dedicated to
serving the same Reserves for depreciation purposes, but are depreciated
separately from producing assets that serve other Reserves.
(l) Impairment of development and production assets and other property, plant
and equipment
At each balance sheet date, the Group reviews the carrying amounts of its PP&E
to determine whether there is any indication that those assets have suffered
an impairment loss. If any such indication exists, the recoverable amount of
the asset is estimated in order to determine the extent of the impairment loss
(if any). Where the asset does not generate cash flows that are independent
from other assets, the Group estimates the recoverable amount of the
cash-generating unit to which the asset belongs.
The recoverable amount is the higher of fair value less costs to sell and
value in use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific
to the asset for which the estimates of future cash flows have not been
adjusted. In determining fair value less cost to sell, the estimated future
cash flows are discounted to their present value using a post-tax discount
rate that reflects current market assessments of the time value of money and
the risks specific to the asset for which the estimates of future cash flows
have not been adjusted. Such cash flows include relevant development
expenditure that a market participant would reasonably be expected to
undertake.
If the recoverable amount of an asset (or cash-generating unit) is estimated
to be less than its carrying amount, the carrying amount of the asset
(cash-generating unit) is reduced to its recoverable amount. An impairment
loss is recognised as an expense immediately.
3. Significant accounting policies (continued)
Where an impairment loss subsequently reverses, the carrying amount of the
asset (cash-generating unit) is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does not exceed
the carrying amount that would have been determined had no impairment loss
been recognised for the asset (cash-generating unit) in prior years. A
reversal of an impairment loss is recognized as income immediately.
(m) Inventories
Oil and gas stock and spare parts are stated at the lower of cost and net
realisable value. Costs comprise direct materials and, where applicable,
direct labour costs and those overheads that have been incurred in bringing
the inventories to their present location and condition. Cost is allocated
using the weighted average method. Net realisable value represents the
estimated selling price less all estimated costs of completion and costs to be
incurred in marketing, selling and distribution.
(n) Financial instruments
Financial assets and financial liabilities are recognised in the consolidated
statement of financial position when the Group becomes party to the
contractual provisions of the instrument.
Loan classified at amortised cost
Loan is measured at the amount recognised at initial recognition minus
principal repayments, plus or minus the cumulative amortisation of any
difference between that initial amount and the maturity amount, and any loss
allowance. Interest income is calculated using the effective interest method
and is recognised in profit and loss. Changes in fair value are recognised in
profit and loss when the asset is derecognised or reclassified. In accordance
with IFRS 9, the loan is measured at amortised cost. The Group applies the
simplified approach to providing for expected credit losses (ECL) prescribed
by IFRS 9, which permits the use of the lifetime expected loss provision for
the loan. Expected credit losses are assessed on a forward-looking basis. The
loss allowance is measured at initial recognition and throughout its life at
an amount equal to lifetime ECL. Any impairment is recognized in the income
statement.
Trade and other payables
Payables are initially measured at fair value, net of transaction costs and
are subsequently measured at amortized cost using the effective interest
method.
Trade and other receivables
Trade and other receivables are recognised initially at their transaction
price in accordance with IFRS 9 and are subsequently measured at amortised
cost. The Group applies the simplified approach to providing for expected
credit losses (ECL) prescribed by IFRS 9, which permits the use of the
lifetime expected loss provision for all trade receivables. Expected credit
losses are assessed on a forward-looking basis. The loss allowance is measured
at initial recognition and throughout its life at an amount equal to lifetime
ECL. Any impairment is recognised in the income statement.
Cash
Cash comprise cash on hand and on-demand deposits. Deposits are recorded as
cash and cash equivalents when they have a maturity of less than 90 days at
inception.
3. Significant accounting policies (continued)
(o) Equity instruments
Ordinary shares are classified as equity. Equity instruments issued by the
Company and the Group are recorded at the proceeds received, net of direct
issue costs. Any excess of the fair value of consideration received over the
par value of shares issued is recorded as share premium in equity.
(p) Provisions
Provisions are recognised when the Group has a present obligation (legal or
constructive) as a result of a past event, it is probable that the Group will
be required to settle that obligation, and a reliable estimate can be made of
the amount of the obligation. The amount recognised as a provision is the best
estimate of the consideration required to settle the present obligation at the
balance sheet date, taking into account the risks and uncertainties
surrounding the obligation. When a provision is measured using the cash flows
estimated to settle the present obligation, its carrying amount is the present
value of those cash flows.
(q) Decommissioning
A provision for decommissioning is recognized in full when the related
facilities are installed. The decommissioning provision is calculated as the
net present value of the Group's share of the expenditure expected to be
incurred at the end of the producing life of each field in the removal and
decommissioning of the production, storage and transportation facilities
currently in place. The cost of recognising the decommissioning provision is
included as part of the cost of the relevant asset and is thus charged to the
income statement on a unit of production basis in accordance with the Group's
policy for depletion and depreciation of tangible non-current assets. Period
charges for changes in the net present value of the decommissioning provision
arising from discounting are included within finance costs.
(r) Leases
At inception of a contract, the Group assesses whether a contract is, or
contains, a lease based on whether the contract conveys the right to control
the use of an identified asset for a period of time in exchange for
consideration. Service agreements for equipment on the working sites are not
considered leases as, based upon an assessment of the terms and nature of
their contractual arrangements, the contracts do not convey the right to
control the use of an identified asset.
The right-of-use asset is initially measured based on the initial amount of
the lease liability adjusted for any lease payments made at or before the
commencement date, plus any initial direct costs incurred and an estimate of
costs to dismantle and remove the underlying asset or to restore the
underlying asset or the site on which it is located, less any lease incentives
received.
The asset is depreciated to the earlier of the end of the useful life of the
right-of-use asset or the lease term using the straight-line method as this
most closely reflects the expected pattern of consumption of the future
economic benefits. The lease term includes periods covered by an option to
extend if the Group is reasonably certain to exercise that option. In
addition, the right-of-use asset is periodically reduced by impairment losses,
if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease
payments that are not paid at the commencement date, discounted using the
interest rate implicit in the lease or, if that rate cannot be readily
determined, the incremental borrowing rate. The lease liability is measured at
amortized cost using the effective interest method. It is remeasured when
there is a change in future lease payments arising from a change in an index
or rate, if there is a change in the Group's estimate of the amount expected
to be payable under a residual value guarantee, or if the Group changes its
assessment of whether it will exercise a purchase, extension or termination
option. When the lease liability is remeasured in this way, a corresponding
adjustment is made to the carrying amount of the right-of-use asset, or the
effect is recorded in profit or loss if the carrying amount of the
right-of-use asset has been reduced to zero.
3. Significant accounting policies (continued)
The Group elected to apply the practical expedient not to recognise
right-of-use assets and lease liabilities for short-term leases that have a
lease term of 12 months or less and leases of low-value assets. The Group also
made use of the practical expedient to not recognise a right-of-use asset or a
lease liability for leases for which the lease term ends within 12 months of
the date of initial application.
The lease payments associated with these leases are recognised as an expense
on a straight-line basis over the lease term.
1. Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group's accounting policies, which are described in
note 3, the Directors are required to make judgements, estimates and
assumptions about the carrying amounts of the assets and liabilities that are
not readily apparent from other sources. The estimates and associated
assumptions are based on historical experience and other factors that are
considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period or in the period
of the revision and future periods if the revision affects both the current
and future periods.
The following are the critical judgements and estimates that the Directors
have made in the process of applying the Group's accounting policies and that
have the most significant effect on the amounts recognised in the financial
statements.
Critical judgements and estimates
(a) Impairment indicator assessment for E&E assets
Cadogan had fully complied with legislative requirements and submitted its
application for a 20-year exploration and production license 5 months before
its expiry on 23 December 2019. A decision on the award was expected to be
provided by State Geological Service of Ukraine before 19 January 2020, since
all other intermediary approvals had been secured in line with the applicable
legislation requirements. Given the delay in granting of the new license
beyond the regular timeline provided by legislation in Ukraine, Cadogan
launched a claim before the Administrative Court to challenge the non-granting
of the 20-year production license by the Licensing Authority.
In 2022, the claims of Usenco Nadra have been rejected by the Court of 1st
Instance, the Court of Appeal and the Supreme Court.
Considering the circumstances, the Bitlyanska license was fully impaired in
2021.
(b) Impairment of PP&E
Management assesses its development and production assets for impairment
indicators and if indicators of impairment are identified performs an
impairment test. Management performed an impairment assessment using a
discounted cash flow model which required estimates including forecast oil
prices, reserves and production, costs and discount rates (note 17).
This test compares the carrying value of the assets at the reporting date with
the expected discounted cash flows from each project prepared under the fair
value less cost of disposal approach. For the discounted cash flows to be
calculated, management has used a production profile based on its best
estimate of proven reserves of the assets and a range of assumptions,
including an internal oil and gas price profile benchmarked to mean analysts'
consensus and third party estimates and a discount rate which, taking into
account other assumptions used in the calculation, management considers to be
reflective of the risks.
4. Critical accounting judgements and key sources of estimation uncertainty
(continued)
This assessment involves judgement as to (i) the likely commerciality of the
asset, (ii) proven (`1P') reserves which are estimated using standard
recognised evaluation techniques (iii) future revenues and estimated
development costs pertaining to the asset, (iv) the discount rate to be
applied for the purposes of deriving a recoverable value including estimates
of the relevant levels of risk premiums applied to the assets.
The carrying value of PP&E assets at 31 December 2024 was $5.3 million. The
impairment assessment was identified at the level of $13.97 million. Thus,
no other impairment was identified.
(c) Recoverability and measurement of VAT
Judgment is required in assessing the recoverability of VAT assets and the
extent to which historical impairment provisions remain appropriate,
particularly noting the recent recoveries against historically impaired VAT.
In forming this assessment, the Group considers the nature and age of the VAT,
the likelihood of eligible future supplies to VAT, the pattern of recoveries
and risks and uncertainties associated with the operating environment (note
9).
Historically, the general volume of accumulated VAT credit was fully reserved
as there were no permanent sources of its utilisation yet (at 31 December
2024: $0.8 million). However, over the course of the year, the Group managed
to realise $39,000, and the reserve was accordingly reversed (note 9).
Starting in 2025, the new electricity generation initiative is set to provide
a dynamic solution for utilising the accumulated VAT credit, enabling its
realisation within the first year of the project's operation.
(d) Proger Loan recoverability
The recoverability of the carrying value of the loan to PMP represents a
significant accounting judgment. In making their assessment over estimated
recoverability of the loan, management considered the Settlement Agreement
signed with Proger in December 2024. As a result, management concluded that
$10.4 million represents its best estimate of recoverable amount as at 31
December 2024 (2023: $17.1 million). For further details please refer to note
28.
(e) Well services and rental agreements
The Group's well rental arrangements in Ukraine for oil and gas extraction
activities are outside of the scope of IFRS 16. Judgment was required in
forming this assessment, based on analysis of the scope of IFRS 16 and the
nature of the well rental arrangements. This assessment focused on the extent
to which the rental agreements provided access to sub-surface well structures
to extract hydrocarbons versus surface level infrastructure for the transport
and processing of extracted hydrocarbons.
(f) Deferred tax assets
Deferred tax assets and liabilities require management judgement in
determining the amounts to be recognised. In particular, significant judgement
is used when assessing the extent to which deferred tax assets should be
recognised, with consideration given to the timing and level of future taxable
income in the relevant tax jurisdiction.
Deferred tax assets are recognised only to the extent it is considered
probable that those assets will be recoverable. This involves an assessment of
when those deferred tax assets are likely to reverse, and a judgement as to
whether or not there will be sufficient taxable profits available to offset
the tax assets when they do reverse. This requires assumptions regarding
future profitability and is therefore inherently uncertain. To the extent
assumptions regarding future profitability change, there can be an increase or
decrease in the level of deferred tax assets recognised that can result in a
charge or credit in the period in which the change occurs.
4. Critical accounting judgements and key sources of estimation uncertainty
(continued)
(g) Determination of oil and gas reserves
Proven oil and gas reserves is the expected quantity of crude oil, natural gas
and gas condensate liquids, the geological and engineering features of which
reliably indicate that such reserves can be produced from known deposits
within future years under existing economic and operating conditions. Proven
developed reserves are reserves that are expected to be produced through the
use of existing wells using existing equipment and operating methods. The
determination of the level of oil and gas reserves is inherently characterised
by uncertainty and requires the use of professional judgment and periodic
revisions in the future. All proven reserves are subject to revision in
accordance with new information regarding exploration drilling, production
activity or changes in economic factors, including commodity prices, contract
terms and exploration plans. Accordingly, financial and accounting estimates
based on proven reserves are also subject to changes.
Changes in the level of proven developed reserves, affect the depreciation
charges recognised in the financial statements in the property, plant and
equipment item related to development and production assets. Such changes, for
example, can be both the result of production and revision of estimates. A
reduction in proven developed reserves will increase depreciation charges
(provided constant production) and will also increase costs.
The last independent valuation of the Group's oil and gas reserves was carried
out as at 31 December 2023.
(h) Depreciation of wells related to hydrocarbon production
Wells related to the production of hydrocarbons (hereinafter referred to as
"Wells") are depreciated using the unit of production method. The cost of
Wells is depreciated based on the available reserves of the relevant
hydrocarbons categories (proven developed produced), estimated in accordance
with the standards of the Petroleum Resources Management System (PRMS),
prepared by the Oil and Gas Reserves Committee of the Society of Petroleum
Engineers (SPE).
(i) Depreciation of special subsoil use permits related to
hydrocarbon extraction
Special permits for the subsoil use, which grant the right to extract
hydrocarbons (hereinafter referred to as the "Permit"), are depreciated using
the unit of production method. The cost of the Permit is depreciated based on
the volumes of available reserves of the relevant hydrocarbons of the proved,
probable and possible categories assessed in accordance with SPE-PRMS.
(j) Decommissioning costs
The provision for asset decommissioning represents the present value of costs
of decommissioning oil and gas facilities that are expected to be incurred in
the future (Note 25). These provisions were recognised based on the Company's
internal estimates. The underlying estimates include future market prices for
the required decommissioning costs and are based on market conditions and
factors, as well as a discount rate. An additional uncertainty relates to the
deadline of decommissioning costs, which depend on the field depletion, future
oil and gas prices and, as a result, the expected point in time when future
economic benefits from production are not expected to be realised. Changes in
these estimates may result in changes in the provisions recognised in the
Statement of financial position.
5. Segment information
Segment information is presented on the basis of management's perspective and
relates to the parts of the Group that are defined as operating segments.
Operating segments are identified on the basis of internal reports provided to
the Group's chief operating decision maker ("CODM"). The Group has identified
its senior management team as its CODM and the internal reports used by the
senior management team to oversee operations and make decisions on allocating
resources serve as the basis of information presented. These internal reports
are prepared on the same basis as these consolidated financial statements.
5.Segment information (continued)
Segment information is analysed on the basis of the type of activity, products
sold, or services provided. The majority of the Group's operations and all
Group's revenues are located within Ukraine. Segment information is analysed
on the basis of the types of goods supplied by the Group's operating
divisions. The Group's reportable segments under IFRS 8 are therefore as
follows:
Exploration and Production
* E&P activities on the exploration and production licences for natural gas,
oil and condensate.
Trading
* Import of natural gas from European countries; and
* Local purchase and sales of natural gas operations with physical delivery of
natural gas.
The accounting policies of the reportable segments are the same as the Group's
accounting policies described in note 3. Sales between segments are carried
out at rates considered to approximate market prices. The segment result
represents operating profit under IFRS before unallocated corporate expenses.
Unallocated corporate expenses include management remuneration, representative
expenses and expenses incurred in respect of the maintenance of office
premises. This is the measure reported to the CODM for the purposes of
resource allocation and assessment of segment performance. The Group does not
present information on segment assets and liabilities as the CODM does not
review such information for decision-making purposes.
As at 31 December 2024 and for the year then ended the Group's segmental
information was as follows:
Exploration and Production Trading Consolidated
$'000 $'000 $'000
Sales of hydrocarbons 9,119 - 9,119
Other revenue 33 - 33
Sales between segments - - -
Total revenue 9,152 - 9,152
Cost of sales (5,047) - (5,047)
Administrative expenses (378) - (378)
Impairment of other assets (39) - (39)
Adjustments of end of concession obligations for E&E assets (6) - (6)
Other operating income, net (19) - (19)
Reversal of impairment of other assets 39 - 39
Finance income (1) 507 - 507
Segment results 4,209 - 4,209
Unallocated administrative expenses (3,144)
Finance income/costs, net (5,405)
Net foreign exchange loss (1,123)
Loss before tax (5,463)
(1) Net finance income includes $507 thousand of interest on cash
deposits in Ukraine.
5.Segment information (continued)
As at 31 December 2023 and for the year then ended the Group's segmental
information was as follows:
Exploration and Production Trading Consolidated
$'000 $'000 $'000
Sales of hydrocarbons 7,141 403 7,544
Other revenue 6 - 6
Sales between segments - - -
Total revenue 7,147 403 7,550
Cost of sales (4,991) (400) (5,391)
Administrative expenses (497) (118) (615)
Impairment of oil and gas assets (49) - (49)
Other operating expenses, net 218 - 218
Impairment of other assets 25 - 25
Reversal of impairment of other assets 2 54 56
Finance income (2) 431 - 431
Segment results 2,286 (61) 2,225
Unallocated administrative expenses (2,959)
Other income, net 1,454
Net foreign exchange loss 538
Profit before tax 1,258
(2) Net finance income includes $431 thousand of interest on
cash deposits used for operations.
.
Fixed assets related to Exploration and Production segment are disclosed in
the note 17.
1. Revenue
2024 $'000 2023 $'000
Sale of oil (production) - point in time 9,152 7,147
Sale of gas (trading) - point in time - 403
Total 9,152 7,550
Revenue is generated in Ukraine. Refer to note 3(e) for details of the
performance obligations. Service revenue and associated contract assets and
liabilities are immaterial.
Information about major customers
79% of production business segment revenue arose from sales to five largest
customers. Three of them contributed more than 10% of the total revenue of the
production business segment revenue for the year ended 31 December 2024.
81% of prior year production business segment revenue arose from sales to five
largest customers. Each of them contributed more than 10% of the total revenue
of the production business segment revenue for the year ended 31 December
2023.
1. Cost of sales
2024 2023
$'000 $'000
Subsoil tax 2,804 2,668
Well rent 870 699
Depreciation 718 713
Staff cost 232 237
Machinery services 110 115
Materials cost 102 126
Electricity 100 80
Security services 69 68
Other expenses 67 81
Insurance 22 204
Natural Gas cost (47) 400
Total 5,047 5,391
1. Administrative expenses
2024 $'000 2023 $'000
Staff 2,126 1,805
Professional fees 746 1,051
Insurance 170 188
Depreciation 124 169
Office costs including utilities and maintenance 57 57
IT and communication 53 43
Cars and travel 28 43
Bank charges 26 23
Travelling 37 23
Other 155 172
Total 3,522 3,574
1. Reversal of impairment of other assets
2024 $'000 2023 $'000
VAT recoverable 39 54
Other receivables - 2
Reversal of impairment of other assets 39 56
$0.8 million (2023: $0.9 million) of historical VAT receivables remain
impaired. Refer to Note 4 and 20.
2024 $'000 2023 $'000
Inventories (28) (44)
Other receivables (11) -
Other assets - (5)
Impairment of other assets (39) (49)
1. Other operating (expenses)/income, net
2024 $'000 2023 $'000
Other (expenses)/income (19) 25
Total (19) 25
1. Auditor's remuneration
The analysis of auditor's remuneration is as follows: 2024 $'000 2023 $'000
Audit fees
Fees payable to the Company's auditor and the component auditor for the audit of the Company's annual accounts 255 192
Fees payable to the Company's auditor and the component auditor for other services to the Group:
- The audit of the Company's subsidiaries 8 8
Total audit fees 263 200
12. Staff costs
The average monthly number of employees (including Executive Directors) was:
2024 Number 2023 Number
Executive Director 1 1
Other employees 75 73
Total 76 74
$'000 $'000
Their aggregate remuneration comprised:
Wages and salaries 1,566 1,757
Provision for bonus 260 -
Provision for bonus granted in shares 260 -
Social security costs 193 207
Pension costs 79 78
Total 2,358 2,042
13. Finance income/(costs), net
2024 $'000 2023 $'000
Reversal of liability accrual - 395
Interest income on cash deposits in United Kingdom 292 367
Interest income on cash deposits in Ukraine 507 431
Total interest income on financial assets 799 1,193
Interest on lease (22) (10)
Unwinding of discount on decommissioning provision (note 25) (18) (55)
Total 759 1,128
13. Finance income/(costs), net (continued)
Loss on Proger loan, net
2024 2023
$'000 $'000
Interest on loan (note 28) 1,515 1,457
Total interest income on financial assets 1,515 1,457
Impairment of loan (7,172) (700)
Total (5,657) 757
14. Tax
2024 $'000 2023 $'000
Current tax 434 -
Deferred tax 335 -
Total 769 -
The Group's operations are conducted primarily outside the UK, namely in
Ukraine. The most appropriate tax rate for the Group is therefore considered
to be 18% (2023: 18%), the rate of profit tax in Ukraine, which is the primary
source of revenue for the Group. Taxation for other jurisdictions is
calculated at the rates prevailing in the respective jurisdictions.
The taxation charge for the year can be reconciled to the (loss) / profit
per the income statement as follows:
2024 $'000 2023 $'000
(Loss)/Profit before tax (5,463) 1,258
Tax (credit) / charge at Ukraine corporation tax rate of 18% (2023: 18%) (1,031) 226
Permanent differences 1,353 (583)
Unrecognised tax losses generated in the year 835 47
Recognition of previously unrecognised deferred tax assets - 318
Reversal of deferred tax assets (335) -
Effect of different tax rates (101) (8)
721 -
Adjustments recognised in the current year in relation with the current tax of prior years 48 -
Income tax expense recognised in profit or loss 769 -
Permanent differences mostly represent items, including provisions, accruals
and impairments related to taxation in Ukraine, these are items not deductible
in tax computations.
15. (Loss) / Earnings per Ordinary share
(Loss)/earnings attributable to owners of the Company 2024 $'000 2023 $'000
(Loss)/earnings for the purposes of basic loss per share being net loss attributable to owners of the Company (6,232) 1,259
Number of shares Number `000 Number `000
Weighted average number of Ordinary shares used in calculation of earnings per share:
Basic 244,128 244,128
Diluted 244,128 244,128
Cent Cent
(Loss)/earnings per Ordinary share
Basic and diluted (2.55) 0.5
Basic earnings/(loss) per Ordinary share is calculated by dividing the net
profit/(loss) for the year attributable to owners of the Company by the
weighted average number of Ordinary shares outstanding during the year. In
2024 the Group generated a loss and therefore there is no difference between
basic and diluted EPS.
16. Intangible exploration and evaluation assets
Cost $'000
At 1 January 2023 7,515
Additions 1
Disposals (615)
Change in estimate of decommissioning assets (note 25) (218)
Exchange differences (224)
At 1 January 2024 6,459
Additions -
Disposals -
Change in estimate of decommissioning assets (note 25) 6
Exchange differences (617)
At 31 December 2024 5,848
Impairment
At 1 January 2023 7,515
Disposals 1
Addition (615)
Change in estimate of decommissioning assets (note 25) (218)
Exchange differences (224)
At 1 January 2024 6,459
Addition -
Disposals -
Change in estimate of decommissioning assets (note 25) 6
Exchange differences (617)
At 31 December 2024 5,848
Carrying amount
At 31 December 2024 -
At 31 December 2023 -
The carrying amount of E&E assets at 31 December 2024 relates to the
Bitlyanska license.
16. Intangible exploration and evaluation assets (continued)
Usenco Nadra has fully complied with legislative requirements and submitted
its application for a 20-year exploration and production license 5 months
before its expiry on 23 December 2019. A decision on the award was expected to
be provided by State Geological Service of Ukraine before 19 January 2020,
since all other intermediary approvals had been secured in line with the
applicable legislation requirements. Given the delay for granting of the new
license beyond the regular timeline provided by legislation in the Ukraine,
Cadogan filed a claim before the Administrative Court to challenge the
non-granting of the 20-year production license by the Licensing Authority.
After the rejection of its claims, in February 2022, the Company exercised its
right for appeal. The Appeal Court and further on the Supreme Court rejected
all the Company's claims.
The Company fully impaired the Bitlyanska license in 2022.
17. Property, plant and equipment
Cost Development and production assets $'000 Construction in progress $'000 Other $'000 Total $'000
At 1 January 2023 10,286 - 2,200 12,486
Additions 43 - 15 58
Change in estimate of decommissioning assets (note 25) 20 - - 20
Disposal (1,734) - (1,160) (2,894)
Exchange differences (288) - (35) (323)
At 1 January 2024 8,327 - 1,020 9,347
Additions 120 709 26 855
Change in estimate of decommissioning assets (note 25) (6) - - (6)
Reclassification to inventory - - (40) (40)
Disposal (5) - (137) (142)
Exchange differences (800) (33) (90) (923)
At 31 December 2024 7,636 676 779 9,091
Accumulated depreciation and impairment
At 1 January 2023 3,846 - 2,007 5,853
Charge for the year 692 - 37 729
Disposals (1,711) - (1,167) (2,878)
Exchange differences (95) - (30) (125)
At 1 January 2024 2,732 - 847 3,579
Charge for the year 702 - 30 732
Reversal of impairment - - (37) (37)
Disposals (7) - (139) (146)
Exchange differences (293) - (73) (366)
At 31 December 2024 3,134 - 628 3,762
Carrying amount
At 31 December 2024 4,502 676 151 5,329
At 31 December 2023 5,595 - 173 5,768
Other property, plant and equipment include fixtures and fittings for the
development and production activities.
Construction in progress represents new assets acquired by the Group for its
emerging business segment, the gas-to-power project. As at 31 December 2024,
the assets' value includes an electricity generator Janbacher delivered in
December, which is expected for starting operations in June 2025.
1. Property, plant and equipment (continued)
The carrying amount of development and production assets at 31 December 2024
of $4.5 million relates to the Blazhiv license. Depreciation includes $0.7
million for the Blazhiv license.
Management has performed an impairment review of Development and production
assets based on the underlying discounted cash flow forecasts. The impairment
review supported the conclusion that no impairment was applicable. Key
assumptions, used in the impairment assessment, were: future oil prices which
were assumed at a constant $445 (2023: $467), real per tonne; a production
forecast with a natural decline; estimated reserves and a discount rate of 25%
for first four years then declining by 1.5% each year to 8.5% in 2039.
Sensitivity analysis for the Development and production assets
Any impairment is dependent on judgement used in determining the most
appropriate basis for the assumptions and estimates made by management,
particularly in relation to the key assumptions described above. Sensitivity
analysis to potential changes in key assumptions to reach break-even has been
provided below:
Change in the assumptions to be break-even
Oil price (25 %)
Oil production volumes (17 %)
Discount rate 56 %
18. Subsidiaries
The Company had investments in the following subsidiary undertakings at 31
December 2024:
Name Country of incorporation and operation Proportion of voting interest % Activity Registered office
Directly held
Cadogan Petroleum Holdings Ltd UK 100 Holding company 6th Floor 60 Gracechurch Street, London, United Kingdom, EC3V 0HR
Indirectly held
Cadogan Petroleum Holdings BV Netherlands 100 Holding company Hoogoorddreef 15, 1101 BA Amsterdam
Cadogan Bitlyanske BV Netherlands 100 Holding company Hoogoorddreef 15, 1101 BA Amsterdam
Zagoryanska Petroleum BV Netherlands 100 Holding company Hoogoorddreef 15, 1101 BA Amsterdam
LLC Cadogan Ukraine Ukraine 100 Management company 48/50a, Zhylyanska Street, Kyiv, Ukraine
LLC Astroinvest-Energy Ukraine 100 Trading 5a, Pogrebnyak Street, ap. 2, Zinkiv, Poltava region, Ukraine, 38100
SE USENCO Ukraine Ukraine 100 Production 8, Mitskevycha sq.,Lviv, Ukraine,79000
LLC USENCO Nadra Ukraine 100 Production 9a, Karpenka-Karoho str., Sambir, Lviv region, Ukraine
LLC Astro-Service Ukraine 100 Service Company 3 Petro Kozlaniuk str, Kolomyia, Ukraine
Exploenergy s.r.l. Italy 90 Exploration Via Adige 17, San Donato Milanese_ Milano, CAP 20097, Italy
19. Inventories
2024 $'000 2023 $'000
Natural gas 239 265
Crude oil 126 105
Other inventories 1,178 1,116
Impairment provision (1,028) (1,122)
Carrying amount 515 364
2024 2023
$'000 $'000
At 1 January 1,122 1,116
Accrual of provision 61 52
Reversal of provision (47) (8)
Exchange differences (108) (38)
At 31 December 1,028 1,122
The impairment provision at 31 December 2024 is made so as to reduce the
carrying value of the inventories to the net realisable value and includes
$1.03 million provision for other inventories (2023: $1.07million provision
for other inventories, and $52,000 provision for natural gas).
20. Trade and other receivables
2024 $'000 2023 $'000
Trade receivables 32 68
Impairment provision for bad debts (38) (49)
VAT recoverable 862 1,097
Impairment provision for VAT (793) (918)
Prepayments 256 81
Other receivables 35 31
354 310
This table represents the movements in the impairment provision.
2024 2023
VAT recoverable Trade and Other Receivables VAT recoverable Trade and Other Receivables
$'000 $'000 $'000 $'000
At 1 January 918 49 1,003 52
Accrual of provision - 11 - -
Reversal of provision (39) - (54) (2)
Exchange differences (85) (22) (31) (1)
At 31 December 793 38 918 49
The Group considers that the carrying value of receivables approximates their
fair value.
VAT recoverable is presented net of the cumulative provision of $0.8 million
(2023: $0.9 million) against Ukrainian VAT receivable that has been recognised
as at 31 December 2024. VAT recoverable relates to the oil production and gas
trading operations and is expected to be recovered through the gas and oil
sales VAT.
21. Notes supporting statement of cash flows
Cash at 31 December 2024 of $14.4 million (2023: $14.2 million) comprise cash
held by the Group. Ukrainian subsidiaries of the Group hold $7.3 million as at
31 December 2024 (2023: $5.4 million).
With the start of the Russian invasion into Ukraine on 24 February 2022, the
Ukrainian government introduced Martial Law affecting, among others, aspects
relating to lending agreements, foreign exchange and currency controls and
banking activities. As a result of the introduced Martial Law, the National
Bank of Ukraine ("NBU") has introduced significant currency and capital
control restrictions in Ukraine. These measures are affecting the Group in
terms of its cross-border payments to be made, which are restricted and may be
carried out only in exceptional cases specified in the amendments to the
resolution No. 18.
Based on the regulations, Ukrainian subsidiaries of the Group are not able to
pay dividends to the parent Company but are able to use the cash in normal
course of business.
The Directors consider that the carrying amount of these assets approximates
to their fair value.
In addition, lease liability payments have been included as part of the
financing activities for the year 2024.
22. Deferred tax
The following are the major deferred tax liabilities and assets recognised by
the Group and movements thereon during the current and prior reporting period:
Temporary differences $'000
Asset at 1 January 2023 319
Deferred tax benefit -
Exchange differences 51
Asset at 1 January 2024 370
Deferred tax disposal (335)
Exchange differences (35)
Asset at 31 December 2024 -
At 31 December, the Group had the following unused tax losses available for
offset against future taxable profits:
2024 $'000 2023 $'000
UK 18,685 18,197
Ukraine 39,367 42,113
Netherlands 1,957 1,902
60,009 62,212
Deferred tax assets have been disposed due to reorganisation and new projects
implementation. After launching new projects, the Group is going to
recalculate potential deferred tax assets in respect of those tax losses where
there will be sufficient certainty that profit will be available in future
periods against which they can be utilised. The Group's unused tax losses of
$18.7 million (2023: $18.2 million) relating to losses incurred in the UK are
available to shelter future non-trading profits arising within the Company.
Unused tax losses incurred by Netherlands subsidiaries amount to $1.96 million
(2023: $1.9 million). These losses are not subject to a time restriction on
expiry. No deferred tax asset is recorded.
Unused tax losses incurred by Ukraine subsidiaries amount to $39.4 million
(2023: $42.1 million). Under general tax law provisions, these losses may be
carried forward indefinitely to be offset against any type of taxable income
arising from the same company. Tax losses may not be surrendered from one
Ukraine subsidiary to another.
23. Lease liabilities
The Group continued to recognise right-of-use assets and lease liabilities
based on a rental contract for the rent of a Kyiv office with maturity date
end of February 2024. Additionally, in December 2023 a new rental contract for
the rent of a Kyiv office was signed with the maturity date at the end of
January 2027. Right-of-use assets are depreciated over the useful life of the
underlying asset. Depreciation represented as a part of administrative
expenses. Total carrying value of right-of-use assets is $165,000 as of 31
December 2024.
Right of use assets
Cost $'000 Accumulated depreciation $'000 Net book value $'000
Right-of-use asset 292 - -
Accumulated charge - (184) -
At 1 January 2023 292 (184) 108
Additions for the new agreement 230 - -
Charge for the year - (92) -
At 1 January 2024 522 (276) 246
Disposal for the prior agreement (292) - -
Charge for the prior agreement - (16) -
Disposal of accumulated charge for the prior agreement - 292 -
Charge for the year - (65) -
At 31 December 2024 230 (65) 165
The following table sets out a maturity analysis of lease liabilities, showing
the undiscounted lease payments to be paid after the reporting date.
2024 $'000 2023 $'000
2024 - 95
2025 87 88
2026 92 92
2027 8 8
Less: unearned interest (14) (48)
Lease liabilities 173 235
2024 $'000 2023 $'000
Analysed as:
Current 98 87
Non-current 75 148
Lease liabilities 173 235
24. Trade and other payables
2024 $'000 2023 $'000
Accruals 826 430
Trade payables 89 140
Prepayments received 49 54
Other payables 688 742
1,652 1,366
24. Trade and other payables (continued)
Trade payables and accruals principally comprise amounts outstanding for
ongoing costs. The average credit period taken for trade purchases is 31 days
(2023: 29 days). The Group has financial risk management policies to ensure
that all payables are paid within the credit timeframe.
Other payables include unused vacation reserve provision of $0.4 million
(2023: $0.39 million), subsoil tax payables of $0.22 million (2023: $0.22) and
other payables of $0.07 million (2023: $0.13 million).
The Directors consider that the carrying amount of trade and other payables
approximates to their fair value. No interest is generally charged on
outstanding balances.
25. Provisions
The provisions at 31 December 2024 comprise $0.2 million (2023: $0.2 million)
of decommissioning provision.
Decommissioning
$'000
At 1 January 2023 397
Change in estimate: exploration and evaluation assets (note 16) (218)
Change in estimate: development and production assets 20
Unwinding of discount on decommissioning provision (note 13) 55
Exchange differences (9)
At 1 January 2024 245
Change in estimate: exploration and evaluation assets (note 16) 6
Change in estimate: development and production assets (6)
Unwinding of discount on decommissioning provision (note 13) 18
Exchange differences (24)
At 31 December 2024 239
$'000
Non-current 114
Current 131
At 31 December 2023 245
Non-current 110
Current 129
At 31 December 2024 239
In accordance with the Group's environmental policy and applicable legal
requirements as of 31 December 2024 the Group intends to restore the sites it
is working on after completing the development activities.
Provision for the decommissioning and site restoration used by development and
production assets has been decreased by $6 thousand due to change in
discounting rate used for the provision calculation (2024: 15%; 2023: 17%).
The change in the provision has been recognised as development and production
assets charge for the year together with unwinding of discount on
decommissioning provision. The change in the provision of E&E assets has been
recognised as impairment.
A long-term provision of $0.11 million (2023: $0.11 million) has been made for
decommissioning costs for Borynya-3 well, which is expected to be incurred in
2039, and Blazhiv-10 well, which is to be incurred at the end of Blazhiv
license period as a result of the demobilisation of oil and gas facilities and
respective site restoration. Current provision of $0.13 million (2023: $0.13
million) has been made for decommissioning costs, which are expected to be
incurred in 2025 as a result of the demobilisation of oil and gas facilities
and respective site restoration on Bitlyanska license.
26. Share capital
Authorised and issued equity share capital
2024 2023
Number (`000) $'000 Number (`000) $'000
Authorised 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
Authorised but unissued share capital of £30 million has been translated into
US dollars at the historic exchange rate of the issued share capital. The
Company has one class of Ordinary shares, which carry no right to fixed
income.
Issued equity share capital
Ordinary shares of £0.03
At 31 December 2022 244,128,487
Issued during year -
At 31 December 2023 244,128,487
Issued during year -
At 31 December 2024 244,128,487
27. Other reserves
Reorganisation
$'000
At 1 January 2024 1,589
Charge for the year -
At 31 December 2024 1,589
The accumulated amount of reserves at 31 December 2024 is made as accounting
entry relating to the acquisition of CPHL by PLC by means of share exchange in
2006. This was not deemed to be a business combination as there was no change
in control.
28. Financial instruments Capital risk management
The Group manages its capital to ensure that entities in the Group will be
able to continue as a going concern, while maximising the return to
shareholders.
The capital resources of the Group consist of cash arising from equity
attributable to owners of the Company, comprising issued capital, reserves and
retained earnings as disclosed in the Consolidated Statement of Changes in
Equity.
Externally imposed capital requirement
The Group is not subject to externally imposed capital requirements.
28. Financial instruments (continued)
Categories of financial instruments
2024 $'000 2023 $'000
Financial assets (includes cash)
Loan provided at amortised cost 10,388 17,074
Cash 14,381 14,155
Trade and other receivables - amortised cost 29 50
24,798 31,279
Financial liabilities - measured at amortised cost
Trade payables 89 140
Lease liabilities 173 235
Accruals 826 430
Other payables 688 742
1,776 1,547
The Proger loan is recorded at management's best estimate of recoverable
amount according to the Settlement Agreement signed with Proger in December
2024.
Since the Call Option was not exercised before the Maturity Date and the asset
is held within a business model whose objective is to hold assets in order to
collect contractual cash flows, the Loan provided was reclassified from
`Financial assets at fair value through profit and loss' to `Financial assets
at amortised cost'.
$'000
As at 1 January 2023 15,825
Movement in accrued interest 1,457
Movement in accrued provision (700)
Exchange differences 492
As at 1 January 2024 17,074
Movement in accrued interest 1,515
Movement in accrued provision (7,172)
Exchange differences (1,029)
As at 31 December 2024 10,388
The year-end loan balance of $10.4 million, the €10 million equivalent,
which aligns with the amount stipulated in the Settlement Agreement. The
payment of this amount was made to the Group in January 2025.
Financial risk management objectives
Management co-ordinates access to domestic and international financial markets
and monitors and manages the financial risks relating to the operations of the
Group in Ukraine through internal risks reports, which analyse exposures by
degree and magnitude of risks. These risks include commodity price risks,
foreign currency risk, credit risk, liquidity risk and cash flow interest rate
risk. The Group does not enter into or trade financial instruments, including
derivative financial instruments, for speculative purposes.
The Audit Committee of the Board reviews and monitors risks faced by the Group
at meetings held throughout the year.
28. Financial instruments (continued)
Interest rate risk
Interest rate risk arises from the possibility that changes in interest rates
will affect the value of the financial instruments. The Group is not exposed
to interest rate risk because entities of the Group borrow funds at fixed
interest rates.
Commodity price risk
The commodity price risk related to Ukrainian gas and condensate prices and
prices for crude oil are the Group's most significant market risk exposures.
World prices for gas and crude oil are characterised by significant
fluctuations that are determined by the global balance of supply and demand
and worldwide political developments, including actions taken by the
Organization of Petroleum Exporting Countries.
The Group does not hedge market risk resulting from fluctuations in gas,
condensate and oil prices, and holds no financial instruments, which are
sensitive to commodity price risk.
Foreign exchange risk and foreign currency risk management
The Group holds a large portion of its monetary assets in the US Dollars and
Euro, mitigating the exchange risk between the US Dollars and Euro and
monetary liability in the US Dollars. Besides, The Group has accumulated cash
position in hryvnia in Ukraine for new projects, so the hryvnias was added to
sensitivity analysis.
Sensitivity analysis is represented below based on 10% exchange rate
deviation:
As at 31 December 2024 Change in EURO/USD exchange rate Change in UAH/USD exchange rate
$'000 10% -10% 10% -10%
Cash positions 14,381 139 (139) 723 (723)
Loan receivable at amortised cost 10,388 1,039 (1,039) - -
Net assets 29,068 1,178 (1,178) 723 (723)
Inflation risk management
Inflation in Ukraine and in the international market for oil and gas may
affect the Group's cost for equipment and supplies. The Directors will proceed
with the Group's practices of keeping deposits in US dollar accounts until
funds are needed and selling its production in the spot market to enable the
Group to manage the risk of inflation.
Credit risk management
Credit risk refers to the risk that counterparty will default on its
contractual obligations resulting in financial loss to the Group. The Group's
credit management process includes the assessment, monitoring and reporting of
counterparty exposure on a regular basis. Credit risk with respect to
receivables is mitigated by active and continuous monitoring the credit
quality of its counterparties through internal reviews and assessment. There
was no material past due receivables as at year end.
The Group makes allowances for expected credit losses on receivables in
accordance with its accounting policy.
The credit risk on liquid funds (cash) is considered to be limited because the
counterparties are financial institutions with high and good credit ratings,
assigned by international credit-rating agencies in the UK and Ukraine
respectively.
The carrying amount of financial assets as at 31 December 2024 of $24.8
million (2023: $31.3 million) recorded in the financial statements represents
the Group's maximum exposure to credit risk.
28. Financial instruments (continued)
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of
Directors, which has built an appropriate liquidity risk management framework
for the management of the Group's short, medium and long-term funding and
liquidity management requirements. The Group manages liquidity risk by
maintaining adequate cash reserves and by continuously monitoring forecast and
actual cash flows.
The following tables sets out details of the expected contractual maturity of
financial liabilities.
Within 3 months 3 months to 1 year More than 1 year Total
$'000 $'000 $'000 $'000
At 31 December 2023
Trade and other payables Lease liability 1,312 5 - 90 - 188 1,312 283
At 31 December 2024
Trade and other payables 1,603 - - 1,603
Lease liability 22 65 86 173
The carrying amount of financial liabilities as at 31 December 2024 of $1.8
million (2023: $1.6 million) recorded in the financial statements demonstrates
the stable financial condition of the Group.
29. Commitments and contingencies
License contingent liability
The Group has working interests in Blazhiv license to conduct its exploration
and development activities in Ukraine. The license held does not include any
obligation on a settlement of exploration activities within its term.
Tax contingent liabilities
The Group assesses its liabilities and contingencies for all tax years open
for audit by UK, Netherlands and Ukraine tax authorities based upon the latest
information available.
Where management concludes that it is not probable that a particular tax
treatment is accepted, a provision is recorded based on the most likely amount
or the expected value of the tax treatment when determining taxable profit
(tax loss), tax bases, unused tax losses, unused tax credits and tax rates.
The decision should be based on which method provides better predictions of
the resolution of the uncertainty.
Inherent uncertainties exist in estimates of tax contingencies due to
complexities of interpretation and changes in tax laws.
Whilst the Group believes it has adequately provided for the outcome of these
matters, certain periods are under audit by the UK, Netherlands and Ukraine
tax authorities, and therefore future results may include favourable or
unfavourable adjustments to these estimated tax liabilities in the period the
assessments are made or resolved. The final outcome of tax examinations may
result in a materially different outcome than assumed in the tax liabilities.
Electricity Generation Commitments
As part of Group's strategic objectives and approved budget for 2025, the
Group is embarking on a new line of business "electricity generation". To
ensure timely implementation and the launch of the project by year-end,
several agreements were signed with contractors in late 2024 for the provision
of essential services. The total value of these commitments amounts to about
$451,000 including VAT.
1. Related party transactions
All transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note.
In February 2019, the Group entered in a 2-year loan agreement with Proger
Management & Partners Srl with an option to convert it into a direct 33%
equity interest in Proger Ingegneria. At that time, Mr Michelotti was a
non-executive Director of Proger Ingegneria Srl and Proger Spa, and CEO of
Cadogan Petroleum PLC. Mr Michelotti did not participate to the voting for the
approval of the loan agreement at the Board of Cadogan.
Directors' remuneration
The remuneration of the Directors, who are the key management personnel of the
Group, is set out below in aggregate for each of the categories specified in
IAS 24 Related Party Disclosures. Further information about the remuneration
of individual Directors is provided in the audited part of the Annual Report
on Remuneration 2024 on page 47.
Purchase of services Amounts owing
2024 $'000 2023 $'000 2024 $'000 2023 $'000
Directors' remuneration 687 712 23 54
Social contribution on Directors' remuneration 75 72 - -
The total remuneration of the highest paid Director was $0.5 million in the
year (2023: $0.5 million).
No guarantees have been given or received, and no provisions have been made
for doubtful debts in respect of the amounts owed by related parties.
31. Events after the balance sheet date
In January 2025, Cadogan received 10 million euros as provided in the
Settlement Agreement signed with Proger in December 2024. Subsequently,
Cadogan exited from the Loan Agreement, ended all the litigations procedures
and dissolved the pledge over the corresponding shares in Proger Ingegneria.
At the AGM in June 2021, the shareholders approved the resolution 11 for an
exceptional bonus of 5% of the monies recovered from Proger to be paid to Mr
Khallouf upon the successful resolution of the reimbursement of the Proger
Loan. After receiving the €10 million in January 2025, the exceptional bonus
of Euros 500,000 was due.
In February 2025, AstroInvest Energy signed a €6.2million purchase agreement
for several generators totalling 12,3 MW of installed capacity to be
delivered, installed and be operational in H2 2025.
Exploenergy is expecting the release in June 2025 of the authorisation for the
preliminary exploration phase for its project located in Lombardia (Italy).
Company Balance Sheet As at 31 December 2024
Notes 2024 $'000 2023 $'000
ASSETS
Non-current assets
Receivables from subsidiaries 35 33,874 35,659
33,874 35,659
Current assets
Trade and other receivables 35 - 2
Cash 35 1,211 1,796
1,211 1,798
Total assets 35,085 37,457
LIABILITIES
Current liabilities
Trade and other payables 36 (915) (350)
(915) (350)
Total liabilities (915) (350)
Net assets 34,170 37,107
EQUITY
Share capital 37 13,832 13,832
Share premium 514 514
Retained earnings 128,543 131,480
Cumulative translation reserves 38 (108,719) (108,719)
Total equity 34,170 37,107
As permitted by section 408 of the Companies Act 2006, the Company has elected
not to present its profit and loss account for the year. The loss for the
financial year ended 31 December 2024 was $2.9 million (2023: loss $0.9
million).
The financial statements of Cadogan Energy Solution plc, registered in England
and Wales no. 05718406, were approved by the Board of Directors and authorised
for issue on 25 April 2025.
They were signed on its behalf by:
Fady Khallouf
Chief Executive Officer
25 April 2025
The notes on pages 114 to 117 form part of these financial statements.
Company Cash Flow Statement For the year ended 31 December 2024
2024 $'000 2023 $'000
Operating activities (Loss) for the year (2,937) (865)
Adjustments for: Interest received Effect of foreign exchange rate changes Movement in provisions (25) 953 570 (26) (491) 45
Operating cash outflows before movements in working capital (1,439) (1,337)
Decrease in receivables 912 698
Decrease in payables (6) (37)
Cash used in operations (533) (676)
Income taxes paid - -
Net cash outflow from operating activities (533) (676)
Investing activities
Interest received 25 26
Net cash generated from investing activities 25 26
Net decrease in cash (508) (650)
Effect of foreign exchange rate changes (77) 55
Cash at beginning of year 1,796 2,391
Cash at end of year 1,211 1,796
Company Statement of Changes in Equity For the year ended 31 December 2024
Share capital $'000 Share premium account $'000 Retained earnings $'000 Other Reserve $'000 Cumulative translation reserves $'000 Total $'000
As at 1 January 2023 13,832 514 132,345 - (108,719) 37,972
Net loss for the year - - (865) - - (865)
Total comprehensive loss for the year - - (865) - - (865)
Issue of ordinary shares - - - - - -
As at 1 January 2024 13,832 514 131,480 - (108,719) 37,107
Net loss for the year - - (2,937) - - (2,937)
Total comprehensive loss for the year - - (2,937) - - (2,937)
As at 31 December 2024 13,832 514 128,543 - (108,719) 34,170
Notes to the Company Financial Statements
For the year ended 31 December 2024
1. Significant accounting policies
The separate financial statements of the Company are presented as required by
the Companies Act 2006 (the "Act"). As permitted by the Act, the separate
financial statements have been prepared in accordance with UK-adopted
International Accounting Standards.
The financial statements have been prepared on the historical cost basis. The
principal accounting policies adopted are the same as those set out in note 3
to the Consolidated Financial Statements except as noted below.
Investments
Investments in subsidiaries are stated at cost less, where appropriate,
provisions for impairment.
Receivables from subsidiaries
Loans to subsidiary undertakings are subject to IFRS 9's expected credit loss
model. As all intercompany loans are repayable on demand, the loan is
considered to be in stage 3 of the IFRS 9 ECL model on the basis the
subsidiary does not have enough liquid assets in order to repay the loans if
demanded. Lifetime ECLs are determined using all relevant, reasonable and
supportable historical, current and forward-looking information that provides
evidence about the risk that the subsidiaries will default on the loan and the
amount of losses that would arise as a result of that default. Analysis
indicated that the Company will fully recover the carrying value of the loans
(net of historic credit loss provisions) so no additional ECL has been
recognised in the current period.
Critical accounting judgements and key sources of estimation uncertainty
The Company's financial statements, and in particular its investments in and
receivables from subsidiaries, are affected by certain of the critical
accounting judgements and key sources of estimation uncertainty.
The critical estimates and judgments referred to application of the expected
credit loss model to intercompany receivables (note 34). Management determined
that the interest free on demand loans were required to be assessed on the
lifetime expected credit loss approach and assessed scenarios considering
risks of loss events and the amounts which could be realised on the loans.
In doing so, consideration was given to factors such as the cash held by
subsidiaries and the underlying forecasts of the Group's divisions and their
incorporation of prospective risks and uncertainties.
1. Auditor's remuneration
The auditor's remuneration for audit and other services is disclosed in note
11 to the Consolidated Financial Statements.
1. Investments
The Company's subsidiaries are disclosed in note 18 to the Consolidated
Financial Statements. The investments in subsidiaries are all stated at cost
less any provision for impairment.
1. Financial assets
The Company's principal financial assets are bank balances and cash and
receivables from related parties none of which are past due. The Directors
consider that the carrying amount of receivables from related parties
approximates to their fair value.
35. Financial assets (continued)
Receivables from subsidiaries
At the balance sheet date gross amounts receivable from the fellow Group
companies were $346.9 million (2023: $348.7 million). The Company did not
recognise additional expected credit loss provisions in relation to
receivables from subsidiaries in 2024 (2023: nil). The accumulated provision
on receivables at 31 December 2024 was $313 million (2023: $313 million). The
carrying value of the receivables from the fellow Group companies at 31
December 2024 was $33.9 million (2023: $35.7 million). Receivables from
subsidiaries are interest free and repayable on demand. There are no past due
receivables. The receivables are classified as non-current based on the
expected timing of receipt notwithstanding their terms.
Cash
Cash comprises cash held by the Company and short-term bank deposits with an
original maturity of three months or less. The carrying value of these assets
approximates to their fair value.
1. Financial liabilities
Trade and other payables
2024 $'000 2023 $'000
Accruals 211 166
Unused vacation provision 111 105
Amounts owing to Directors 542 54
Trade payables 51 25
915 350
Trade payables principally comprise amounts outstanding for trade purchases
and ongoing costs. The average credit period taken for trade purchases is 30
days (2023: 30 days).
Unused vacation provision of $111,450 accrued for CEO of the Company (2023:
$105,000).
The Directors consider that the carrying amount of trade and other payables
approximates to their fair value. No interest is charged on balances
outstanding.
1. Share capital
The Company's share capital is disclosed in note 26 to the Consolidated
Financial Statements.
1. Cumulative translation reserve
The directors decided to change the functional currency of the Company from
sterling to US dollars with effect from 1 January 2016. The effect of a change
in functional currency is accounted for prospectively. In other words, the
Company translates all items into the US dollar using the exchange rate at the
date of the change. The resulting translated amounts for non-monetary items
are treated as their historical cost. Exchange differences arising from the
translation of an operation previously recognised in other comprehensive
income in accordance with paragraphs 32 and 39(c) IAS 21 "Foreign Currency"
are not reclassified from equity to profit or loss until the disposal of the
operation.
39. Financial instruments
The Company manages its capital to ensure that it is able to continue as a
going concern while maximising the return to shareholders. Refer to note 28
for the Group's overall strategy and financial risk management objectives.
The capital resources of the Company consist of cash arising from equity,
comprising issued capital, reserves and retained earnings.
Categories of financial instruments
2024 $'000 2023 $'000
Financial assets - measured at amortised cost
Cash 1,211 1,796
Amounts due from subsidiaries 33,874 35,659
35,085 37,455
Financial liabilities - measured at fair value
Trade creditors (185) (184)
(185) (184)
Interest rate risk
All financial liabilities held by the Company are non-interest bearing. As the
Company has no committed borrowings, the Company is not exposed to any
significant risks associated with fluctuations in interest rates.
Credit risk
Credit risk refers to the risk that counterparty will default on its
contractual obligations resulting in financial loss to the Company. For cash,
the Company only transacts with entities that are rated equivalent to
investment grade and above. Other financial assets consist of amounts
receivable from related parties.
The Company's credit risk on liquid funds is limited because the
counterparties are banks with high credit ratings assigned by international
credit-rating agencies.
The carrying amount of financial assets recorded in the Company financial
statements, which is net of any impairment losses, represents the Company's
maximum exposure to credit risk.
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of
Directors, which has built an appropriate liquidity risk management framework
for the management of the Company's short, medium and long-term funding and
liquidity management requirements. The Company maintains adequate reserves, by
continuously monitoring forecast and actual cash flows.
The Company's financial liabilities are immaterial and therefore no maturity
analysis has been presented.
Foreign exchange risk and foreign currency risk management
The Company holds a large portion of its monetary assets in the US Dollars and
Euro, mitigating the exchange risk between the US Dollars and Euro and
monetary liability in the US Dollars. More information on the foreign exchange
risk and foreign currency risk management is disclosed in note 28 to the
Consolidated Financial Statements.
40. Related parties
Amounts due from subsidiaries
The Company has entered into a number of unsecured related party transactions
with its subsidiary undertakings. The most significant transactions carried
out between the Company and its subsidiary undertakings are mainly for short
and long-term financing. Amounts owed from these entities are detailed below:
2024 $'000 2023 $'000
Cadogan Petroleum Holdings Limited 33,874 35,659
33,874 35,659
Refer to note 34 for details on the Company's receivables due from
subsidiaries.
The remuneration of the Directors, who are the key management personnel of the
Group, is set out below in aggregate for each of the categories specified in
IAS 24 Related Party Disclosures. In 2024 there were no other employees in the
Company. Further information about the remuneration of individual Directors is
provided in the audited part of the Annual Report on Remuneration 2024 on
pages 44 to 48.
Purchase of services Amounts owing
2024 $'000 2023 $'000 2024 $'000 2022 $'000
Directors' remuneration 687 712 23 54
Social contribution on Directors' remuneration 75 72 - -
The total remuneration of the highest paid Director was $0.47 million in the
year (2023: $0.5 million).
41. Events after the balance sheet date
Events after the balance sheet date are disclosed in note 31 to the
Consolidated Financial Statements.
Glossary
IFRSs International Financial Reporting Standards
JAA Joint activity agreement
UAH Ukrainian hryvnia
GBP Great Britain pounds
$ United States dollars
bbl Barrel
boe Barrel of oil equivalent
mmboe Million barrels of oil equivalent
mboe Thousand barrels of oil equivalent
mboepd Thousand barrels of oil equivalent per day
boepd Barrels of oil equivalent per day
bcf Billion cubic feet
mmcm Million cubic metres
mcm Thousand cubic metres
Reserves Those quantities of petroleum anticipated to be commercially
recoverable by application of development projects to known accumulations from
a given date forward under defined conditions. Reserves include proved,
probable and possible reserve categories.
Proved Reserves Those additional Reserves which analysis of geoscience and
engineering data can be estimated with reasonable certainty to be commercially
recoverable, from a given date forward, from reservoirs and under defined
economic conditions, operating methods and government regulations.
Probable Reserves Those additional Reserves which analysis of geoscience and
engineering data indicate are less likely to be recovered than proved
Resources but more certain to be recovered than possible Reserves.
Possible Reserves Those additional Reserves which analysis of geoscience and
engineering data indicate are less likely to be recoverable than probable
Reserves.
Contingent Resources Those quantities of petroleum estimated, as of a given
date, to be potentially recoverable from known accumulations by application of
development projects, but which are not currently considered to be
commercially recoverable due to one or more contingencies.
Prospective Resources Those quantities of petroleum which are estimated as of
a given date to be potentially recoverable from undiscovered accumulations.
P1 Proved Reserves
P2 Probable Reserves
P3 Possible Reserves
1P Proved Reserves
2P Proved plus Probable Reserves
3P Proved plus Probable plus Possible Reserves
Workover The process of performing major maintenance or remedial treatment of
an existing oil or gas well
E&E / E&P Exploration and Evaluation / Exploration and
Production
LTI Lost time incidents
Shareholder Information
Enquiries relating to the following administrative matters should be addressed
to the Company's registrars: MUFG Corporate Markets, 10th Floor, Central
Square, 29 Wellington Street, Leeds LS1 4DL.
Telephone: 0371 664 0300. Calls are charged at the standard geographic rate
and will vary by provider. Calls outside the United Kingdom will be charged at
the applicable international rate. Lines are open between 09:00 - 17:30,
Monday to Friday excluding public holidays in England and Wales.
* Loss of share certificates.
* Notification of change of address.
* Transfers of shares to another person.
* Amalgamation of accounts: if you receive more than one copy of the Annual
Financial Report, you may wish to amalgamate your accounts on the share
register.
You can access your shareholding details and a range of other services at the
Shareholder Portal www.signalshares.com.
Information concerning the day-to-day movement of the share price of the
Company can be found on the Group's website www.cadoganpetroleum.com or that
of the London Stock exchange www.prices.londonstockexchange.com.
Unsolicited mail
As the Company's share register is, by law, open to public inspection,
shareholders may receive unsolicited mail from organisations that use it as a
mailing list. To reduce the amount of unsolicited mail you receive, contact:
The Mailing Preference Service, FREEPOST 22, London W1E 7EZ. Telephone: 0845
703 4599. Website: www.mpsonline.org.uk.
www.cadoganenergysolutions.com
Financial calendar 2024/2025
Annual General Meeting 20 June 2025
Half Yearly results announced September 2024
Annual results announced 25 April 2025
Investor relations
Enquiries to: info@cadogan-es.com , info@cadoganpetroleum.com
Registered office, United Kingdom
Shakespeare Martineau LLP,
6th Floor, 60 Gracechurch Street, London EC3V 0HR
Registered in England and Wales no. 05718406
Ukraine
48/50A Zhylyanska Street
Business center "Prime", 8th floor
01033 Kyiv
Ukraine
www.cadoganenergysolutions.com
References to page numbers throughout this announcement relates to the page
numbers within the Annual Report of the Company for the year ended 31st
December 2023. In addition all graphs and graphics have been removed for the
purposes of the announcement.
1 (#_ftnref1) Average realised price is calculated as total revenue from oil
sales for the period divided by total volume of sold oil for the period
2 (#_ftnref2) Gross revenues of $9.2million (2023: $7.6 million) included
nil (2023: $0.4 million) from trading of natural gas, $9.2 million (2023:
$7.2 million) from production
3 (#_ftnref3) Administrative expenses ("G&A")
4 (#_ftnref4) LTI: Lost Time Incidents; TRI: Total Recordable Incidents
5 (#_ftnref5) Taxable benefits include insurance provided to the executive
and leased car.
6 (#_ftnref6) 2015 CEO's salary is the sum of Mr. des Pallieres' salary for
the period January to June and of Mr. Michelotti's salary for the period July
to December.
7 (#_ftnref7) In relation to performance in 2016 and 2015, the CEO used the
entire amount of the bonus to buy at market price newly issued company shares
on 22 September 2017.
8 (#_ftnref8) According to the 2017 performance results, the CEO was awarded
a bonus that partially comprised shares; However, Mr. Michelotti never
exercised his right to claim those shares.
9 (#_ftnref9) 2019 Annual bonus is a sum of Mr Michelotti's bonus of
$112,140 and welcome bonus for Mr Khallouf equivalent in value of 5,500,000
ordinary shares based on share's price of £0.0525. Welcome bonus for Mr
Khallouf was provided in May 2020 based on share's price of £0.03. Respective
correction of the bonus reserve equivalent to $185,000 was recognised through
share premium account in 2020.
10 (#_ftnref10) Includes a welcome bonus for Mr Khallouf equivalent in value
of 5,500,000 ordinary shares based on share's price of £0.0525.
11 (#_ftnref11) Mr Michelotti undertook to use the entire bonus to buy
company's share at market price in order to leave the Company cash neutral.
12 (#_ftnref12) Year-end performance-based bonus was an alternative to an
up-front sign-on bonus. Mr Michelotti used the entire bonus to buy company's
share at market price on 22 September 2017.
13 (#_ftnref13) $280,298 paid as fees, pension, and loss of office.
14 (#_ftnref14) From 1 August 2011.
15 (#_ftnref15) From 19 March 2009.
16 (#_ftnref16) All employees mean all employees of the Group, including CEO
and other Directors (note 12, page 94).
17 (#_ftnref17) Please note that the salary of the CEO for 2023 remains at
€440,000.
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