Cadogan falls despite denying Ukraine licence report
Friday, 25 July 2008
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The British oil company Cadogan Petroleum yesterday denied reports that a court had nullified two of its licences in Ukraine, but the company's shares still fell more than 30 per cent when they resumed trading after a two-day suspension.
The company said rulings by Ukraine's Poltava Regional Commercial Court related to earlier licences held by its joint-venture partner, NJSC Nadra Ukraine.
The court ruled on 17 June that licence rights over the Pirkovskoe and Zagoryanska fields belonged to Poltavanaftogazgeologyto (PNG), a subsidiary of Nadra, Cadogan said. PNG gained the licences in 2002, but the rights were re-registered to Nadra in the second quarter of last year and were then re-registered into Cadogan-Nadra joint ventures.
The re-registering to Nadra was invalid and the earlier licences awarded to PNG stood, the court ruled. But Cadogan said it was not a party to the legal proceedings and the annulment of a licence would need the approval of Ukraine's environmental protection ministry. The ministry has taken no action against Cadogan, and new legal proceedings against the company would have to succeed to affect the licences, it added.
Cadogan said it would appeal against the court rulings to protect its interests.
Doubts about Cadogan's licences came just over a month after the company listed its shares in London. The stock fell by up to 59 per cent yesterday before closing down 31 per cent at 102.25p. Cadogan had asked the Financial Services Authority to suspend the shares on Tuesday after reports in the Ukrainian press said it had lost the licences.
Mark Tolley, Cadogan's chief executive, said: "The results of our initial inquiries support the confidence of Cadogan's board in the validity of our licences and, as today's announcement illustrates, we are working towards resolving this matter.
"Cadogan has spent several years building our business in Ukraine, investing significant sums in our portfolio of assets and a Ukraine employee base of over 350 people. Throughout our time operating in the country, we've enjoyed strong support and partnership in Ukraine."
The Ukrainian government is reconsidering the terms and circumstances under which licences have been given to private oil and gas explorers. Commercial production at Zagoryanska is scheduled to begin in the first half of 2009. Production at Pirkovskoe, next to Zagoryanska, is expected to start in the second half of this year.
Cadogan was set up in 2004 and holds interests in 11 licences covering 14 fields in Ukraine. It made its debut on the London stock market on 17 June at 230p a share, raising £139m.
