Cadogan Petroleum Plc - Annual Financial Report

Cadogan Petroleum Plc - Annual Financial Report

PR Newswire

London, May 5

Cadogan Petroleum plc

Annual Results for year ended 31 December 2020

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 2020.

Key Financial Highlights of 2020:

• Loss for the year: $1.0 million (2019: loss of $2.1 million)
• Average realized price: $32.9/boe (2019: $47.2/boe)
• Gross revenues^[1]: $5.1 million (2019: $5.9 million)
• G&A^[2]: $3.8 million (2019: $5.7 million)
• Loss per share: 0.4 cents (2019: loss of 0.9 cents)
• Cash at year end: $13.3 million (2019: $12.8 million)

Key Operational Highlights of 2020:

• Production: 106,398 bbl (2019: 104,816 boe), a 1.5% increase year-on-year
• Gas trading profit of $0.6 million (2019: loss of $2.0 million)
• Services business loss of $0.05 million (2019: loss of $0.01 million), net of services provided to the group^[3]
• No LTI/TRIs'^[4]
• ISO 14001 and ISO 45001 certifications validated by annual audit
• Extension of the Blazhiv-3 and Blazhiv-Monastyrets-3 wells lease agreements for a new 3-year term
• Introduction of a claim before the Kyiv Administrative Court against the State Service of Geology and Subsoil of Ukraine due to the non-granting of the Bitlyanska license

Other

During 2020, Cadogan managed a difficult relationship with Proger Managers & Partners Srl ("PMP")_ a privately owned Italian company whose only interest is a 72.92% participation in Proger Ingegneria Srl ("Proger Ingegneria"), a privately owned company which has a 75.95% participating interest in Proger Spa ("Proger")_ to get recognized and implemented its rights for nomination of representatives and access to information deriving from the 2-year Loan Agreement and the Call Option Agreement. The Call Option was not exercised and the Company notified PMP for the Loan reimbursement at the Maturity Date, 25 February 2021. According to the Loan Agreement, PMP is in default for the non-reimbursement of EUR 14,857,350 being the principal and the accumulated interest. End of March 2021, PMP requested an arbitration to have the Loan Agreement recognised as an equity investment contract, which is rejected by Cadogan as the terms of the agreement are clear and include the right to repayment at maturity if the Call Option is not exercised.

Group Overview

The Group has continued to maintain exploration and production assets, to conduct gas trading operations and to operate an oil services business in Ukraine. Cadogan's assets are concentrated in the West of the country, far away from the zone of military confrontation with Russia. Gas trading includes the import of gas from Slovakia, Hungary and Poland and local purchase and sales with physical delivery of natural gas. The oil services business focuses on workover operations, civil works services and other services provided to Exploration and Production ("E&P") companies in Ukraine.

Our business model

We aim to increase value through:

• Maintaining a robust balance sheet, monetizing the remaining value of our Ukrainian assets and supplementing E&P cash flow with revenues from gas trading and oil services
• Pursuing farm-out to progress investments in Ukrainian licenses
• Sourcing additional assets to diversify Cadogan's portfolio, both geographically and operationally

The gas trading and the services business optimize the use of existing available resources, such as cash as working capital for trading and equipment and competences for the services business and continue to contribute to the Group's goal of being cash neutral, while actively searching for value accretive opportunities.

Ukraine

West Ukraine
The Group continued to produce oil from its 20-year production Blazhiv license located in the West Ukraine. The average net production in 2020 was 291 bbl, a 1.5% increase over the production of the previous year. This production result was achieved despite the heavy impact of covid-19 pandemic and 5.5 months shut-down of Blazhiv-3 and Blazhiv-Monasterets-3 wells due to the expiry of the lease contracts with PJSC Ukrnafta. Production from the wells was resumed after the agreements have been extended for a 3-year term on 19 June 2020.

In March 2020, after a deep and complete analysis performed with external legal advisors, Usenco Nadra filed a claim with the Kyiv Administrative Court to acknowledge inaction of the State Service of Geology (SGS) as unlawful, particularly their refusal to issue the Bitlyanska 20-year exploration and development license. In May 2020, the Company was informed by SGS of the rejection of its application on the basis of the new regulatory framework that took effect on 25 February 2020. This decision was taken by the subsoil controlling authority notwithstanding that Cadogan has fulfilled all license obligations, obtained all regulatory approvals and timely submitted on 19 August 2019 well ahead the license expiry date of 23 December 2019 and the new regulatory framework.

In August 2020, the Company filed a second claim to expand the scope of the first claim and requested the Court to grant the right to carry out commercial activities on Bitlyanska field effective from 20 December 2019.

East Ukraine
The Pirkovska exploration license expired in October 2015. Astrogaz filed in due time an application for a new exploration and production license, but the Licensing Authority returned it 6 times for different reasons, the legal ground of which appeared to be doubtful. Despite the efforts of the Company and its reply in due time to each of the comments, the license was not awarded, and the 3-year period for conversion, given to the applicant by law, expired in October 2018. In 2019, Astrogaz launched a litigation before the Administrative Court against the Licensing Authority for non-granting of the license. The Court of First Instance, in its decision of October 2020, has partly satisfied the claim and confirmed inaction of the Licensing Authority and obliged it to review the application. Astrogaz introduced a claim before the Court of Appeal proposing license award approval. In February 2021, the Court of Appeal rejected Astrogaz claim. In March 2021, the Company filed an appeal with the Supreme Court. In April 2021, the Supreme Court opened cassation proceeding. The Company has not received details of the date of the hearing as yet.

In 2020, LLC AstroInvest-Energy, a fully owned subsidiary of Cadogan, introduced a claim against the State fiscal authority regarding additional tax assessment and penalties. The Company won in the Court of First Instance and in the Court of Appeal. The State fiscal authority filed an appeal with the Supreme Court.

Subsidiary businesses
Notwithstanding extreme volatility in the gas market caused by the impact of Covid-19 pandemic, consequent reduced gas consumption and excess of gas storage in EU and Ukraine at historical levels as well as an extraordinary drop of prices, Cadogan has successfully sold 9.575 million m3 of gas during the price peaking in 2020. The remaining 7.5 million m3 of gas was kept and sold in the beginning of 2021.

Finally, the Group continued providing oil services through its wholly owned subsidiary Astroservice LLC. Substantial resources of the company have been engaged to support Blazhiv license wells' operations.

Italy

The Group owns a 90% interest in Exploenergy s.r.l., an Italian company, which has filed applications for two exploration licenses (Reno Centese and Corzano), located in the Po Valley region (Northern Italy). The leads identified on these licenses have combined unrisked prospective resources estimated to be in excess of 60 bcf of gas.

Activity through the year was focused on maintaining the liaison with the central and regional authorities and on updating the Environmental Impact studies by implementing the suggestions received from the authorities.

In February 2019, the Italian Parliament approved a moratorium of 18 months in the award of new licenses and a 25-fold increase of license fees. Exploenergy has subsequently reduced its activity to the minimum required to fulfil its statutory obligations. It has also identified areas which can be voluntarily released in order to mitigate the impact of higher fees, when licenses are awarded, with a minimum impact on their exploration potential.

In 2020, the moratorium has been extended. In 2021, no changes are expected in the government's position regarding the possible resumption of exploration and production activities on land and at sea. No exploration and evaluation assets are held on the Group balance sheet in respect of the licences.

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 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.

In February 2021, Cadogan notified PMP that according to the Loan Agreement, the Maturity Date occurred on 25 February 2021. As the Call Option was not exercised, PMP must fulfill the payment of EUR 14,857,350, being the reimbursement of the Loan in terms of principal and the accumulated interest. PMP is in default since 25 February 2021. End of March 2021, PMP requested an arbitration to have the Loan Agreement recognised as an equity investment contract, which is rejected by Cadogan as the terms of the agreement are clear and include the right to repayment at maturity if the Call Option is not exercised.

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 33 and 34 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. Its principal activity is oil and gas exploration, development and production; the Company also conducts gas trading and provides services to other E&P operators.

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.

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 2020 against these KPI's is set out in the table below, together with the prior year performance data.

	Unit	2020	2019	2020vs 2019
Average production (working interest basis) 1	boepd	291	288	3
Overhead (G&A)	$ million	3.8	5.7	(1.9)
Basic loss per share 2	cents	(0.4)	(0.9)	0.5
Lost time incidents 3	incidents	-	-	-
Geographic diversification 4	new assets	-	1	(1)

1. Average production is calculated as the average daily production during the year
2. Basic (loss)/profit per ordinary share is calculated by dividing the net (loss)/profit 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)
4. Loan to Proger Managers & Partners with an option to convert it into a 33 % equity interest in Proger Ingegneria.

Chairman's Statement

2020 will remain as a high challenging year above any expectation. The pandemic Covid-19, that has been affecting all, has led to uncertain times. The measures that were quickly implemented have allowed to protect our staff and keep the Company's activities on-going. The effectiveness of these measures and the dedication of everyone have been essential to achieve this result.

Cadogan continue to be committed to the territory and the communities where we operate. The Company provided sanitary material to local medical institution to sustain the local efforts and medical responses to the pandemic Covid-19.

During 2020, the oil and gas markets volatility had a severe impact on our activities. The quick response of the Company and the measures that were put in place have allowed the Company to mitigate the operational and the economic challenges. The negative impacts were contained and improvements were brought to our activities despite the year loss.

For Ukraine, 2020 was a difficult year beyond the Covid-19 pandemic. The Country remains embroiled in its military confrontation with Russia and this situation will have a continuous effect, in 2021, on the investments in the Country.

2020 witnessed also the continued difficult relationship with Proger and confirmed that it could not be a successful strategy for Cadogan. The inability to obtain access to appropriate and complete information on time relating to financial performance, financial forecasts, the business model and the governance in Proger, led to the conclusion that there was no interest for Cadogan to exercise the Call Option. Thus, the Company asked for the reimbursement of the loan at the maturity date.

Despite all these challenges, the Company was able to improve its fundamentals. This was possible thanks to the commitment of all with a competent and strong management. The Board remain focused on maximizing value from our assets.

Michel Meeùs
Non-Independent non-executive Chairman
5 May 2021

Chief Executive's Review

2020 was highly impacted by the global Covid-19 pandemic, extreme price volatility in oil and gas markets, with a severe drop down of prices in general. In this context, 2020 has been a very challenging year.

With the Covid-19 pandemic, Ukraine, as with other countries, has been facing a severe impact on its economy as well as to the oil & gas markets.

To keep safe its personnel, the Company has put in place special measures such as administrative personnel remote working, strict sanitary and hygienic procedures and personal protection, rotation of field personnel by company cars, constant medical supervision during the work shift, regular sanitation of cars, offices and facilities.

In March 2020, Cadogan has also provided medical materials to the District hospital of Blazhiv area to support the local efforts to face the Covid-19 pandemic. Up to now, 20 employees of the company have been infected by Covid-19. All of them have fully recovered.

This turmoil affected Cadogan's strategy in 2020 and constrained the Group causing management to review and postpone its investment strategy.

Therefore, the Company had to overcome the negative environment to achieve the recorded results:

• gas prices volatility and its impact on Cadogan trading business results;
• oil average realized price decreasing by 30% in 2020, in line with international markets decrease;
• Blazhiv-3 and Blazhiv-Monastyrets-3 wells' shut down for 5.5 months due to the expiry of the lease contracts.

2020 also witnessed two important events for Cadogan, namely:

• Extension of Blazhiv-3 and Blazhiv-Monastyrets-3 wells lease contracts for a new 3-year period;
• Winning, in the Court of First Instance and in the Court of Appeal, of the litigation against the State fiscal authority regarding additional tax assessment and penalties. The final issue remains subject to the decision of the Supreme Court.

For Ukraine, 2020 was another difficult year. The Country has also been severely impacted by the Covid-19 pandemic and further sanitary and economic crisis. Besides, after the last presidential and parliament elections, the new empowered officials have not yet been successful in resolving the military confrontation with Russia in the East of Ukraine as well as in improving the economic situation in the Country. In March 2020, and just after 6 months of work, the Cabinet of Ministers headed by the Prime Minister Oleksiy Goncharuk has been replaced by the one of Denys Shmygal.

The new government continued making some progress towards modernization of its oil & gas legislative framework as well as anti-corruption. However, this has not yet been sufficient to create a favourable environment for the significant investments needed to increase the Country's domestic production especially in the time of instability all over the world. In this uncertain context, Cadogan remained one of the few truly foreign investors operating in Ukraine's E&P sector.

Against this challenging background, Cadogan's operational activities performed as following:

• a 1.5% increase in production, from 104,816 boe in 2019 to 106,398 bbl in 2020;
• a 33.3 % decrease of overhead (G&A), from $5.7 million in 2019 to $3.8 million in 2020;
• a challenging year for trading which generated a positive result;
• a robust balance sheet, with $13.3 million of net cash, kept mostly in the UK banks;
• another year without LTIs' and reduction of emissions level to the atmosphere by 12%.

Core operations

Cadogan has continued to safely produce from its Blazhiv field in the West of Ukraine. Oil production has increased by 1.5% over the previous year.

Regarding the Bitlyanska 20-year exploration and development license, given the delay to award the license by the State Geological Service (SGS) beyond the regular timeline provided by legislation and the further rejection of the application on the basis of the new regulatory framework that took effect on 25 February 2020, Cadogan filed two claims with the Administrative Court to acknowledge inaction of SGS as unlawful and to grant the right to carry out commercial activities on the Bitlyanska field.

The rental agreements with Ukrnafta for the Blazhiv-3 and Blazhiv-Monasterets-3 wells ended in November 2019 and the operations were stopped. Cadogan fulfilled all its duties for the renewal of the contracts but due to internal process within Ukrnafta and the Covid-19 lock down, these contracts were only signed in June 2020.

In the Pirke litigation introduced by Astrogaz in 2019, the Court of First Instance, in October 2020, partly satisfied the claim and confirmed inaction of the Licensing Authority. In February 2021, the Court of Appeal rejected the Company's claim. In March 2021, Astrogaz filed an appeal with the Supreme Court.

The activity in Italy has been limited to routine housekeeping as no changes have yet occurred in the government's position regarding the resumption of exploration and production activities.

Non E&P operations

Trading had a complicated year due to extreme price volatilities and extraordinary drop in prices on the EU and Ukrainian markets driven by a mild winter, covid-19 pandemic, subsequent low demand, and excess of gas in storage. Cadogan was able to catch the price peaks in 2020 and sold 9.6 million m3 of stored gas.

The oil services activities were used primarily to serve the Group's wells' operations.

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, with a Call Option to convert it, subject to shareholders' approval into a 33 % equity interest in Proger Ingegneria which in turn held, as at 31 December 2020, a 75.95% equity interest in Proger. According to IFRS standards, the instrument must be represented in our accounts at fair value.

The Group's original investment decision involved assessment of Proger business plan and analysis with professional advisers including valuations performed using the income method (discounted cash flows of Proger) and market approach using both the precedent transactions and trading multiples methods.

During the first half of 2020, Cadogan monitored the protection of its interests in Proger through the Loan Agreement and the Call Option. Proger has been refusing for several months to give access to the necessary information, to negate and then delay the right to nominate Group's representatives. This led at the end of July 2020 to the effective nomination of a new representative of the Group as Director of the Boards of Proger Ingegneria and Proger, and the effective nomination of another Group's representative as member of the Statutory Board of Proger Ingegneria. Prior to this date, the Company has had no representation on the Board of Proger Ingegneria and Proger since November 2019.

The legal and financial information communicated by Proger in July 2020, related to 2019 and no subsequent management information on performance during 2020 or sufficient information on effective future business plans and prospects have been obtained. Additionally, there has been an absence of responses to the specific questions we have raised for clarification on different issues related to the Proger accounts and balance sheet for 2019, and more over a lack of information.

As at 25 February 2021, being the Maturity Date, the Call Option was not exercised and accordingly to its previous notification Cadogan demanded repayment of the Loan together with the accumulated interest which in total amounted Euro 14,857,350($18,102,195). After five business days, PMP was in default and asked for an additional term that ended on 19 March 2021. The terms of the Loan Agreement provide for an additional default interest of 2%. End of March 2021, PMP contested the default situation and the obligation to reimburse and asked for an Arbitration according to the said Loan Agreement to get the Loan Agreement recognised as an equity investment contract. Cadogan consider PMP's arguments as groundless and consider that they are intended to delay PMP reimbursement obligations.

These circumstances, together with the Covid-19 pandemic impact on the engineering business, have led us to assess the fair value of the instrument based on the terms of the agreement, including the pledge over shares, together with financial information in respect of prior periods and determined that $16.8 million represented the best estimate of fair value based on estimates of future receipts discounted at an estimated market rate of interest of 7.8% with no value attributed to the Call Option. However, the absence of information regarding Proger's financial performance in 2020 and prospects represent a significant limitation on the fair value exercise and, had such information been available, the fair value of the instrument as a whole may be materially higher or lower at 31 December 2020.

Outlook

Looking forward, we still have a lot of challenges ahead, but I am confident Cadogan can meet them. Due to the Covid-19 pandemic and the difficult relationship with Proger, the Company delayed its development strategy but Cadogan is determined to develop a more value accretive and comprehensive diversification of its activities. In this respect, the Company intends to invest in new activities with a lower impact on environment, to continue to monitor and contain the environmental impact of its existing oil and gas activities, and to diversify geographically its presence.

The Company will continue to carefully monitor the reimbursement of the Proger (PMP) Loan amount with the corresponding accrued interest.

It will also continue to streamline its complex corporate architecture by liquidating companies which represent a legacy of its past with no benefit.

With the other Board directors, I would like to thank all Cadogan's women and men for their efforts and their continuous commitment to the Company.

Fady Khallouf
Chief Executive Officer
5 May 2021

Operations Review

Overview

At 31 December 2020, in the west of Ukraine, the Group held working interests in one conventional gas, condensate and oil exploration and production license and was expecting the award through Court decision of the new license for another one. All these assets are operated by the Group and are located in the Carpathian basin in close proximity to the Ukrainian gas distribution infrastructures.

Summary of the Group's licenses (as at 31 December 2020)
Working interest (%)	License	Expiry	License type(1)
99.8	Blazhiv	November 2039	Production
99.8	Bitlyanska(2)	December 2019	E&D

1. E&D = Exploration and Development
2. The Bitlyanska license expired on December 23, 2019 and its renewal is in the process of litigation.

East Ukraine

The Pirkivska production license expired in 2015. Astrogaz applied for a new license. After several years and the end of the 3-year period allowed for conversion of the previous license, the Company initiated court proceedings to defend its rights and to challenge the Licensing Authority's actions. As the result, the Court of First Instance has partly satisfied the claim and confirmed inaction of the Licensing Authority and obliged it to review the application. Astrogaz introduced a claim with the Court of Appeal proposing license award approval. In its decision of February 2021, the Court of Appeal rejected the Astrogaz claim. In March 2021, the Company filed an appeal with the Supreme Court.

West Ukraine

The Bitlyanska license covers an area of 390 square kilometers. Bitlyanska, Borynya and Vovchenska are three hydrocarbon discoveries in this license area. The Borynya and Bitlya fields hold 3P reserves, contingent recoverable resources and prospective resources. Vovchenska field holds contingent recoverable resources.

Borynya 3 and Vovche-2 wells are suspended and routinely monitored. All activities in the area are temporarily on hold until the license award is granted. However, the State Geological Service failed to meet the timeline for responding to the application provided for under legislation and, subsequently rejected the application.

The company filed to the State Geological Service an application for a 20-year production license 5 months ahead the license expiry date of 23 December 2019. The Company secured approval of the Environmental Impact Assessment study by the Ministry of Ecology, the approval of the Reserves Report by the State Commission of Reserves and the approval of the license award by the Lviv Regional Council. Given the delay to award the new license beyond the regular timeline provided by legislation, Cadogan filed two claims with the Administrative Court to challenge the non-granting of the 20-year production license by the Licensing Authority. Cadogan expects decision on the claim during 2021.

At Blazhiv license area the Company has been working to safely produce from four existing wells. The production of the Blazhiv-3 and Blazhiv- Monastyrets-3 wells was suspended till 19 June 2020 due to rental agreements expiry. New lease agreements have been signed with Ukrnafta for a 3-year term. The average production rate of 291 bpd (2019: 284 bpd) was achieved notwithstanding the 5.5 months shut down of the rented wells.

The company has also commissioned additional crude oil storage facilities on the Blazhiv field by increasing the cumulative volume up to 800m3. This should allow to manage favourably the short-term oil price volatility.

Gas trading

Cadogan thoroughly monitored EU and Ukraine gas markets evolution to define best momentum for trading in the challenging environment of 2020. In 2020, the Company sold 9.57 million m3 at the most favorable market conditions, notwithstanding extreme market volatility. The remaining 7.5 million m3 of gas was kept in storage and was sold in the beginning of 2021.

Service

The Group continued to provide services through its wholly owned subsidiary Astroservice LLC. The provided services were primarily focused on serving intra-group operational needs in wells' work-over/ re-entry operations as well as field on-site activities.

Other events

After an inspection conducted by Ukraine's tax authorities in September 2019, Astroinvest Energy LLC was notified of a tax claim related to the historic costs for the liquidation of wells on the Zagoryanska license. The tax authorities notified Astroinvest Energy LLC that they consider recoverable VAT totalling $3.6 million, that has subsequently been used to offset output VAT, to be non-deductible. They additionally consider that the subsidiary's tax losses carry forward of $15.3 million should be reduced (note 21). Astroinvest Energy LLC has launched a claim against the tax authority's decision based on the current tax legislation and related court decisions. The Company has won litigation in the Court of First Instance and in the Court of Appeal. The Court's decision has come into legal force. The tax authorities filed an appeal with the Supreme Court.

Financial Review

Overview

In 2020, the Group slightly increased production despite the 5.5 months shutdown of two wells due to the negotiation process with UkrNafta for the rental agreements' extension. The severe drop of the oil prices in 2020 led to a significant decrease of the E&E revenue for the year. The Group's operating divisions delivered a profit of $0.5 million (2019: loss of $1.7 million) (note 5) and the Group recorded a loss of $1 million (2019: loss of $2.1 million).

The E&P business negatively contributed to the financial results of the Group, due to the decrease in oil price. The average realized oil price decreased by 30% from $47.2 to $32.9 per barrel. The services business focused on providing workover services to the subsidiaries of the Group. The trading business recovered its activities after the rapid decline of gas prices in the first half and made a positive contribution to the Group's performance.

Net cash increased to $13.3 million as at 31 December 2020 compared to $12.8 million as at 31 December 2019. This was mostly due to the sales of 9.5 mcm of natural gas which was held in inventory at the beginning of the year and the significant reduction of general and administrative expenses.

Income statement

Revenues from production decreased from $4.9 million in 2019 to $3.5 million in 2020, reflecting a combination of an increase of the production volume from 104,816 boe in 2019 to 106,398 boe in 2020 offset by a decrease in average realized prices by 30 %. E&P costs of sales decreased from $3.8 million in 2019 to $3.0 million in 2020. These 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 2020, E&P made a positive contribution of $0.4 million (2019: $1.1 million) to gross profit, representing a negative^[5]$0.1 million (2019: profit of $0.4 million) business segment result.

The oil services business in 2020 focused on internal activities providing its services, including drilling and workover, to the Group's subsidiaries.

The gas trading business revenues increased from $0.9 million in 2019 to $1.6 million in 2020, cost of sales also increased, from $1.0 million in 2019 to $1.4 million in 2020, resulting in an overall gross margin of $0.2 million (2019: loss $0.1 million). Release of VAT provision of $0.6 million supported the gas trading business in providing a positive result of $0.6 million for the year 2020 (2019: loss $2.0 million).

Administrative expenses ("G&A") were significantly decreased due to a significant reduction in professional costs. Ukrainian G&A remained flat and the overall G&A decreased by 33.3 % from $5.7 million in 2019 to $3.8 million in 2020 as shown in note 7.

The reversal of impairment of other assets of $0.7 million primarily includes offsets of VAT recoverable against trading margin earned. In 2019, the reversal of impairment of other assets of $0.3 million primarily includes the reversal of impairment of two gas treatment plants to the level of consideration received on the sale of these assets.

Impairment of other assets totalled $53 thousand which primarily includes impairment of other inventories (2019: $2.1 million includes $1.9 million of natural gas impairment) and impairment of other receivables.

The Group recorded a decrease in the fair value of the Proger loan of $0.3 million, which is held at fair value through profit and loss under IFRS. Refer to note 4(d) and 26 for details.

Other costs of $0.07 million represent other operating costs. In 2019, the other income included $4.0 million realized from the exit of the WGI joint venture.

Net finance income of $40 thousand (2019: net finance income of $25 thousand includes interest income on receivables $45 thousand and other finance cost $9 thousand) reflects interest income on cash deposits used for trading of $25 thousand (2019: $49 thousand); ii) investment revenue of $37 thousand (2019: $104 thousand); less iii)) Unwinding of discount on decommissioning provision of $22 thousand (2019: $164 thousand).

Balance sheet

Intangible Exploration and Evaluation ("E&E") assets of $2.4 million (2019: $2.9 million) represent the carrying value of the Bitlyanska license. The Property Plant & Equipment (PP&E) balance was $9.9 million at 31 December 2020 (2019: $12.3 million). It primarily represents the carrying value of the assets invested and engaged in Blazhiv license. The E&E and PP&E are held by Ukrainian subsidiaries with functional currency Ukrainian Hryvna. Ukrainian Hryvna significantly depreciated as at 31 December 2020 compared to 31 December 2019 generating a significant movement in the E&E and PP&E value presented in the US Dollar.

Trade and other receivables of $1.6 million (2019: $2.6 million) include $1.5 million of recoverable VAT (2019: $2.4 million), which is expected to be recovered through production, trading and services activities, and $0.1 million (2019: $0.2 million) of other receivables.

Inventories reduced from $4.5 million to $2.2 million principally due to the sale of gas volumes held in storage at 2019 due to unfavourable pricing conditions.

The Proger loan instrument is held at fair value through profit and loss at $16.8 million (2019: $15.7 million) with the movements reflecting a reduction in fair value of $0.3 million and foreign exchange translation differences. The loan has been reclassified as current based on the maturity in 2021 and anticipated receipt. Refer to the Chief Executives Report for further details together with note 4(d) and 26.

The $1.3 million of trade and other payables as of 31 December 2020 (2019: $1.3 million) consist of $0.5 million (2019: $0.6 million) of accrued expenses and $0.8 million (2019: $0.7 million) of other creditors.

Provisions include $0.2 million (2019: $0.3 million) of long-term provision for decommissioning costs which represents the present value of costs that are expected to be incurred in 2039 for producing assets, when the licenses will expire.

Net cash increased to $13.3 million at 31 December 2020 compared to $12.8 million at 31 December 2019. This was mostly due to the sale of 9.5 mcm of natural gas which has been at stock at the beginning of the year and a significant decrease of the general and administrative expenses.

Cash flow statement

The Consolidated Cash Flow Statement on page 79 shows operating cash outflow before movements in working capital of $2.5 million (2019: outflow of $4.4 million), which represents mostly cash used by the E&P and Trading business segment net of corporate expenses.

Positive operating cash flow from movements in working capital is represented mostly by movements in inventory and VAT recoverable positions due to natural gas sales during 2020.

Cash outflows from investing activities represents investments in Blazhiv field during the year 2020.

Related party transactions

Related party transactions are set out in note 28 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. Production revenues from the sale of hydrocarbons are received in the local currency in Ukraine, however, the hydrocarbon prices are linked to the USD denominated gas and oil prices. To date, funds from such revenues have been used in Ukraine in operations rather than being remitted to the UK.

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, above $5 million, medium impact, above $1 million but below $5 million, and low impact, 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
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.
Covid-19
The Group's operations are in Ukraine with a Parent Company located in the United Kingdom. These locations are suffering from increasing levels of Covid-19 infection and in due course there may be increasing disruption. This may include potential impacts through illness amongst our workforce, supply chain and sales channel disruption and the wider impact of economic disruption on commodity prices. The national and local governments in each of our operating locations are recommending or implementing increasingly severe restrictions in order to manage the situation.	To manage and where possible mitigate the risk of personnel infection with the virus for our employees, special measures have been applied. These include administrative personnel remote working, strict sanitary and hygienic procedures and personal protection, rotation of field personnel by company cars, constant medical supervision during the work shift, regular sanitation of cars, offices and facilities. The covid-19 treatment package has been included into the staff medical insurance coverage. We continue to monitor the situation closely and will respond accordingly as the position develops.
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, but the Company's exposure there is limited. Management strives to reduce emissions in everything the Company does and has started implementing alternatives to offset and/or mitigate emissions. In 2021, the Company will review its administrative and operational process to identify the areas of further improvement in the limitation of its environmental impact. For the future, Cadogan is going to diversify its activities by investing in new 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.
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 Bitlyanska licence 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 from a third party or a Competent Person's Report ("CPR") from an independent qualified contractor 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. Cadogan entered into a 2-year loan agreement (Euros 13.385 million) with Proger Management & Partners with a call option to convert it into a 33 % equity interest in Proger Ingegneria which represented a key transaction and element of the Group balance sheet. As at 25 February 2021, being the Maturity Date, Cadogan did not exercise its Call Option and PMP must reimburse EUR 14,857,350. End of March 2021, PMP did not reimburse and asked for an arbitration to get the Loan Agreement recognized as an equity investment contract.	Revenues in Ukraine are received in UAH and expenditure is made in UAH, however the prices for hydrocarbons are implicitly linked to USD prices. The Group continues to hold most of its cash reserves in the UK mostly in USD and Euro. Cash reserves are placed with leading financial institutions, which are approved by the Audit Committee. Foreign exchange risk is considered a normal and acceptable business exposure and the Group does not hedge against this risk for its E&P operations. For trading operations, the Group matches the revenues and the source of financing. The terms of the agreement are clear and include the right to repayment at maturity if the Call Option is not exercised. As security for the reimbursement of the loan, Cadogan benefits from a pledge over the shares held by Proger Managers & Partners in Proger Ingegneria. In addition to that, Cadogan is engaging all the necessary actions in the Arbitration process and more generally the adequate legal actions to protect the interests of the Company and all of its stakeholders. Refer to note 26 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 minimize the risk. In all cases, deployment of capital in Ukraine is limited and investments are kept at the level required to fulfil license obligations.
Ukraine has not progressed as far as expected towards integration with Europe, the economic challenges in the country are not yet over and the confrontation with Russia has remained open. This can impact the political agenda, negatively impacts the creation of a transparent market and introduces an element of unpredictability in the development of the legislative framework.	The Group minimizes this risk by maintaining funds in international banks outside Ukraine, by limiting the deployment of capital in the Country and by continuously maintaining a working dialogue with the regulatory authorities. Commitments are fulfilled and routinely verified by the relevant Authorities, supported by competent and qualified legal contractors. The assets of the Group are located far from the area of confrontation with Russia.
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 countries.	The Group applies rigorous screening criteria in order 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 the course of 2019.

Statement of Reserves and Resources

In 2019, the company successfully drilled Blazhiv-10 well and conducted routine rig-less production support activities at the Blazhiv-1, Blazhiv-3 and Blazhiv-Monastyrets-3 to maintain sustainable production.

Summary of Reserves¹

at 31 December 2020

			Mmboe
Proved, Probable and Possible Reserves at 1 January 2020			7.49
Production			0.11
Proved, Probable and Possible Reserves at 31 December 2020			7.38

^{1 The study was conducted in 2016 by Brend Vik.}

Reserves are assigned to the Bitlyanska and Blazhiv fields as following:

• Blazhiv: 4.18 Mmboe;
• Bitlyanska: 3.2 Mmboe.

In addition to the tabled reserves, Cadogan has 15.4 million boe of contingent resources associated with the Bitlyanska and Blazhiv licences.

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 recognize that this is a key element to be competitive and to maintain our license to operate.

The Board recognizes that the protection of the health and safety of its employees, 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 Petroleum, 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 recognized 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, the 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 on-shore 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.

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 37 to 38.

The General Director of Cadogan Ukraine is 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

2020 was challenging with COVID-19 pandemic. Cadogan applied special measures to mitigate the risk of personnel infection with the virus. All personnel have been instructed on the situation, remote access to the working environment has been settled for all office personnel to restrict contacts to minimum, field personnel are provided with transfer to the oil field, all personnel are provided with respirators and antiseptics, temperature control is performed before the start of each working day for all personnel who does not work remotely.

The HSE management monitors health status of the personnel daily. Up to now, 20 employees of the company have been infected by Covid-19. All of them have fully recovered.

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 July 2020.

A proactive approach based on a detailed induction process and near miss reporting has been in place throughout 2020 to prevent incidents. Staff training on HSE matters and discussions on near miss reporting are recognized 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 2020, the Group recorded over 163,000 man-hours worked with no incidents and around 1,260,000 hours have been worked since the last injury in February 2016.

During 2020 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 entirely 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 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 their skills are adequate to support the Group's operations, and to help them to develop.

Diversity

The Board recognizes 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 will review the existing policies and intends to develop a diversity policy.

Gender diversity

The Board of Directors of the Company comprised of five Directors as of 31 December 2020. The appointment of any new Director is made based on merit. See pages 23 and 24 for more information on the composition of the Board.

As at 31 December 2020, the Company comprised a total of 80 persons, as follows:

	Male	Female
Non-executive directors	3	1
Executive directors	1	-
Management, other than Executive directors	7	2
Other employees	45	21
Total	56	24

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 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. In 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 the 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 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 recognized competence of its people and advisors as well as on the good communication and relations established with local communities.

In 2020, the Group's operating locations were suffering from levels of COVID-19 infection and normal working patterns have been disrupted. The national and local governments in all regions are recommending and implementing restrictions to manage the situation. The Group is following all the recommendations and provides comprehensive measures inside the Group to restrict COVID-19 infection and spread.

As part of its commitment to the local communities in which it operates, the Group provided sanitary material to local medical institution to sustain the efforts to contain the Covid-19 pandemic on the territorry.

Approval

The Strategic Report was approved by the Board of Directors on 4 May 2021 and signed by order of the Board by:

Ben Harber
Company Secretary
5 May 2021

Board of Directors

Michel Meeùs, 68, Belgian

Non-Independent non-executive Chairman

Mr Meeùs was appointed as a Non-executive Director on 23 June 2014. Mr. Meeùs 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 Meeùs carved out a career in the financial sector, at Chase Manhattan Bank in Brussels and London, then at Security Pacific Bank in London, then finally at Electra Kingsway Private Equity in London.

Mr Meeus is currently Chairman of the Remuneration and Nomination Committees.

Fady Khallouf, 60, French

Chief Executive Officer

Fady Khallouf was appointed as Director and CEO on 15 November 2019. He has a 35-year experience in the energy, the environment, the engineering and the infrastructure sectors. He has previously held the position of CEO and CFO 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).

Lilia Jolibois, 56, American

Independent non-Executive Director

Lilia Jolibois was appointed as Director on 15 November 2019. She is currently a member of three Boards: Cadogan Petroleum Plc, INSEAD Foundation, and CARA (UK and Wales). 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.

Lilia is currently Chairman of the Company's Audit Committee and a member of the Remuneration and Nomination Committees.

Jacques Mahaux, 69, Belgian

Non-Executive Director

Jacques Mahaux was appointed as Director on 15 November 2019. He has held various executive and directorship positions in Group Crédit Agricole in Luxembourg, CA Indosuez, Indosuez Bank and various Luxembourg and Swiss Holding companies active in industrial sectors. Previously he acted as an Attorney at Law at the Brussels Bar. He is currently a Supervisory Board member of ETAM SCA.

Mr Mahaux is currently a member of the Audit, Remuneration and Nomination Committees.

Gilbert Lehmann, 75, French

Senior Independent Non-Executive Director

Mr 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.

Report of the Directors

Directors

The Directors in office during the year and to the date of this report are as shown below:

Non-Executive Directors Michel Meeùs (Chairman) Gilbert Lehmann Lilia Jolibois Jacques Mahaux

Executive Director Fady Khallouf

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 25 June 2021.

The biographies of the Directors in office at the date of this report are shown on pages 23 and 24.

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 2020 and their connected persons in the Ordinary shares of the Company at 31 December 2020 are set out below.

Director			Number of Shares
Michel Meeùs			26,000,000
Fady Khallouf			8,337,031
Gilbert Lehmann			-
Lilia Jolibois			-
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 2020 Annual General Meeting, remains unused.

Dividends

The Directors do not recommend payment of a dividend for the year ended 31 December 2020 (2019: 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

Refer to note 29 in the financial statements.

Structure of share capital

The authorized 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 2020 was 244,128,487 Ordinary shares (each with one vote) with a nominal value of £7,323,853. 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.

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 2020 and 12 April 2021, 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 2020		12 April 2021
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	27.57
Mr Michel Meeùs	26,000,000	10.65	26,000,000	10.65
Ms Veronique Salik	17,959,000	7.36	17,959,000	7.36
Ms Jessica Friedender	17,409,000	7.13	17,409,000	7.13
Kellet Overseas Inc.	14,002,696	5.74	14,002,696	5.74
CA Indosuez Wealth Management	9,789,305	4.01	10,094,620	4.13
Mr Fady Khallouf	8,337,031	3.42	8,337,031	3.42
Mr Pierre Salik	7,950,000	3.26	7,950,000	3.26
Cynderella International SA	7,657,886	3.14	7,657,886	3.14
Bank Julius Baer	7,270,000	2.98	7,270,000	2.98

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 4 May 2021 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 in order 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 15 to 18.

Having considered the Company's financial position and its principal risks and uncertainties, including the assessment of potential risks associated with Covid-19 including a) restrictions applied by governments, illness amongst our workforce and disruption to supply chain and sales channels; and b) market volatility in respect of commodity prices associated with Covid-19 in addition to geopolitical factors, 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 2020 to 31 December 2020.

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 are described on page 105 to 107 in note 26 to the Consolidated Financial Statements.

Outlook

Future developments in the business of the Company are presented on page 7 to 12.

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 to a payment of salary and benefits for a period of six months.

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 (2018 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 2020 decreased compared to the previous year (7,720 tons in 2020 vs 8,799 tons in 2019).

Conversely, Scope 2 emissions also decreased in 2020 (143t tons in 2020 vs 184 tons in 2019), as a result of the processes started in 2016 to improve the efficiency of the structure, logistic and facilities. Total emissions in 2020 were 7,863 tons versus the 8,983 tons of 2019.

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) decreased by 14%, from 85,7 tons CO2e/Kboe in 2019 to 73,9 tons CO2e/Kboe in 2020.

Total greenhouse gas emissions data for the year from 1 January to 31 December

Greenhouse gas emissions source	E&P
	2020	2019
Scope 1
Direct emissions, including combustion of fuel and operation of facilities (tonnes of CO2 equivalent)	7,720	8,799
Scope 2
Indirect emissions from energy consumption, such as electricity and heating purchased for own use (tonnes of CO2 equivalent)	143	184
Total (Scope 1 & 2)	7,863	8,983
Normalisation factor
Barrels of oil equivalent, net	106,398	104,816
Intensity ratio
Emissions reported above normalised to tonnes of CO2e per total wellhead production of crude oil, condensates and natural gas, in thousands of Barrels of Oil Equivalent, net	73,9	85.7

Energy consumption

The Company started in 2020 to monitor energy consumption in KwH. This is a new indicator which will be continuously monitored in the future.

	2020	2019	% change
	KwH	KwH	2020 - 2019
Ukraine	547,545	570,898	-4%

Energy consumption in the UK is immaterial.

2021 Annual General Meeting

The 2021 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 2020 and any other announcements will be published on our website - www.cadoganpetroleum.com.

This Report of Directors comprising pages 25 to 30 has been approved by the Board and signed by the order of the Board by:

Ben Harber
Company Secretary
5 May 2021

Board Committee Reports

As a Company 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.

Board

The Board provides leadership and oversight. The Board comprises a Non-Independent non-executive Chairman, Chief Executive Officer, two Independent Non-Executive Directors and a non-executive Director. The Board has appointed Mr Lehmann as the Senior Independent Director.

The biographical details for each of the Directors and their membership of Committees are incorporated into this report by reference and appear on page 23 and 24.

As at the date of this report, the Chairman had no significant commitments that would affect his ability to allocate sufficient time to the Company to discharge his responsibilities effectively.

Board independence

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 are challenged appropriately. Two Non-Executive Directors, Ms Lilia Jolibois, and Mr Gilbert Lehmann are considered by the Board to be independent. Mr Michel Meeùs, who is a significant shareholder and Mr Jacques Mahaux are not considered independent as defined within the UK Corporate Governance Code 2018, however the Board believes they are independent in character and judgement and free from relationships or circumstances that could affect their judgement. 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 suf?ciently to enable them to ful?l their duties appropriately.

As at the date of this report, the Chairman had no significant commitments that would affect his ability to allocate sufficient time to the Company to discharge his responsibilities effectively.

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 2021 Annual General Meeting due to be held on 25 June 2021.

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. Other responsibilities are delegated to its Committees.

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.

Five Board meetings took place during 2020. 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	5	2	-	1
No. Attended:	5			1
M Meeùs	5	n/a	-	1
F Khallouf	5	n/a	-	1
L Jolibois	5	2	-	1
G Lehmann	5	n/a	-	1
J Mahaux	5	2	-	1

Given the size and composition of the Board there was no requirement to hold a nomination committee during the year.

A procedure exists for the Directors, in the furtherance of their duties, to take independent professional advice if necessary, under the guidance of the Company Secretary and at the Company's expense. All Directors have access to the advice and services of the Company Secretary, who is responsible to the Chairman for ensuring that Board procedures are complied with and that applicable rules and regulations are followed.

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.cadoganpetroleum.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 31 to 41.

Internal control

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 2020 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 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 the course of its review the Board did not identify nor were advised of any failings or weaknesses which it has deemed to be significant.

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.cadoganpetroleum.com, as soon as they are announced. The Notice of the Annual General Meeting is also contained on the Company's website, www.cadoganpetroleum.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.cadoganpetroleum.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. This new reporting requirement is made in accordance with the new corporate governance requirements identified in The Companies (Miscellaneous Reporting) Regulations 2018.

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.

Directors' section 172 statement (continued)

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 pages 21 (which outlines how the Company engages with its stakeholders), pages 20 to 22 (which contains Cadogan's corporate responsibility statement) pages 28 to 29 (which contains the Company's report on greenhouse gas emissions) and page 33 (which outlines the ways in which the Company engages with its shareholders).

In particular, during 2020 the Directors reviewed the impact of Covid-19 pandemic on the processes of the Company and specifically its employees and the communities in which it operates. Specific decisions and measures have been taken to ensure the health and security and to provide assistance where needed (pages 27 to 28).

Also, as a consequence of the continuous Covid-19 and the volatility of the oil and gas prices, and their potential impact on the operational activities and financial situation of the Group, the Directors carefully analysed the going concern and any consequence on the future activities (pages 13 to 18).

The Group has implemented an integrated HSE management system aiming to ensure a safe and environmentally friendly culture in the organization (pages 20 to 21). 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 10, pages 28 to 29).

When assessing the Proger instrument (Loan and Call Option), the Directors carefully considered the issues and decisions with their impact on the Group and all of its stakeholders (pages 8, 9, 17, 91, 92).

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.

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 annually 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.cadoganpetroleum.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 and Mr Mahaux are both members of the Audit Committee. 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 2020 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 15 to 19, 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 assessment of the impact of Covid-19 and 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 105 to 107 and in note 26 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.

There is an agreed policy on the engagement of the external auditor for non-audit services to ensure that its independence and objectivity are safeguarded. Audit related services can be awarded to the external auditor by the executive Directors provided the work does not exceed £50,000 in fees per item. Work exceeding £50,000 requires approval by the Audit Committee. All other non-audit work either requires Audit Committee approval or forms part of a list of prohibited services, where it is felt the external auditor's independence or objectivity may be compromised.

A breakdown of the non-audit fees is disclosed in note 10 to the Consolidated Financial Statements. The Audit Committee has reviewed the nature, level and timing of these services in the course of the year and is confident that the objectivity and independence of the auditor are not impaired by the reason of such non-audit work.

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
Chairman of the Audit Committee
5 May 2021

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.cadoganpetroleum.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 2020, the HSE Committee held six 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 Company's activities with the aim of reducing the global risk of the Company 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 authorized 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.
• 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 annually 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.cadoganpetroleum.com, and are available from the Company Secretary at the Registered Office. Two members constitute a quorum.

Governance

Mr. Michel Meeùs (Remuneration and Nomination Committee Chairman), Ms. Lilia Jolibois, Mr. Jacques Mahaux and Mr. Gilbert Lehmann (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.

Activities of the Nomination Committee

During the financial year under review, the Committee reviewed and considered the following:

• The size, structure and composition of the Board in the light of the current business environment, the Company's anticipated future activities and particularly the independence of the Non-Executive Directors;
• Its internal governance documents and the Policy;

The Committee recommends the re-election of the five incumbent Directors at the AGM.

Overview

As a result of its work during the year, the Committee has concluded that it has acted in accordance with its terms of reference. The Chairman of the Nomination Committee will be available at the Annual General Meeting to answer any questions about the work of the Committee.

Michel Meeùs
Nomination Committee Chairman
5 May 2021

Remuneration Committee

Statement from the Chairman

I am pleased to present the Annual Report on Remuneration for the year ended 31 December 2020.

Cadogan's Remuneration Policy was approved as proposed by the shareholders at the Annual General Meeting of June 19, 2018 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.

In 2020 the Remuneration Committee enrolled again the CEO in a performance-related, bonus scheme built around a scorecard with a set of challenging KPI's aligned with the company strategy. However, given the impact of Covid-19 and the volatility in oil and gas prices the Remuneration Committee, along with agreement from the CEO, have decided to postpone a variable performance related bonus for year-ended 2020.

Michel Meeùs
Chairman of the Remuneration Committee
5 May 2021

ANNUAL REPORT ON REMUNERATION 2020

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.cadoganpetroleum.com, and are also available from the Company Secretary at the Registered Office.

The Remuneration Committee consists of Mr. Michel Meeùs, Ms. Lilia Jolibois, Mr. Jacques Mahaux and Mr. Gilbert Lehmann. 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. Alternatively, Mr. Lehmann, as the Senior Independent Director, is available to shareholders who have concerns that they feel would be inappropriate to raise via the Chairman or Executive Directors.

Remuneration consultants

The Remuneration Committee did not take any advice from external remuneration consultants, with the exception of the review undertaken of the Remuneration Report.

Single total figure of remuneration for executive and non-executive directors (audited)

	Salary and fees		Taxable benefit[6]		Contributions to pension schemes		Annual bonus		Total
	$		$		$		$		$
Executive Director
	2020	2019	2020	2019	2020	2019	2020	2019	2020		2019
F Khallouf	517,389	61,496	59,294[7]	-	58,300	-	-	382,969[8]	634,983		444,465
G Michelotti	-	431,085[9]	-	45,453	-	-	-	112,140	-		588,678
Non-executive Directors
M Meeùs	89,000	49,608	-	-	-	-	-	-	89,000		49,608
L Jolibois	48,000	5,918	-	-	-	-	-	-	48,000		5,918
J Mahaux	43,000	5,301	-	-	-	-	-	-	43,000		5,301
G Lehmann	38,000	54,707	-	-	-	-	-	-	38,000		54,707
Z Furst	-	103,699	-	-	-	-	-	-	-		103,699
E Testa	-	39,146	-	-	-	-	-	-	-		39,146
A Schenato	-	138,351	-	-	-	-	-	-	-		138,351

	Total Fixed Remuneration			Total Variable Remuneration
	$			$
	2020	2019	2020		2019
Executive Director	634,983	538,034[10]	-		495,1093
Non-executive Directors	218,000	396,730	-		-

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. As part of Mr Khallouf's employment agreement, a welcome bonus equivalent in value to 5,500,000 ordinary shares (using the market value of the shares on the business day prior to the date of issue) is payable to Mr Khallouf and a holding period of two years is applicable to the shares acquired. Pursuant to the terms of the bonus, the amount must be subscribed for ordinary shares in the Company at such time as the executive agrees. The welcome bonus was provided to Mr Khallouf in May 2020.

Mr Guido Michelotti
Mr Michelotti was Chief Executive Officer until his resignation on 15 November 2019. Mr Michelotti's salary was €440,000 per annum. In 2019, Mr Michelotti received the Performance Bonus of €100,000 awarded to him by Remuneration Committee.

KPIs
In 2020 the CEO was subject to a performance-related, bonus scheme built around a scorecard with a set of challenging KPI's aligned with the company strategy. The Remuneration Committee, after consultation with the CEO, have decided to postpone any variable performance related bonus for year ended 2020 given the impact of Covid-19 and volatility in oil and gas prices.

Benefits
Benefits may be provided to the executive directors, 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 percent on 15^thJanuary 2020 with effect from 15^thNovember 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.

Scheme interests awarded during the financial year (audited)

There were no scheme interests awarded during the year.

Payments to past directors (audited)

In 2020 there were no payments to past directors.

In 2020, the Company provided the previous CEO, Mr Guido Michelotti with newly issued 2,270,549 Ordinary shares of £0.03 each in the capital of the Company. The payment for the issued shares in the Company was satisfied in full, by using the entire amount of the 2018 and 2019 bonuses due to Mr Guido Michelotti totalling €75,900 ($83,125).

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 2020 and their connected persons in the Ordinary shares of the Company at 31 December 2020 are set out below.

Shares as at 31 December		2020	2019
Michel Meeùs		26,000,000	26,000,000
Fady Khallouf		8,337,031	-
Gilbert Lehmann		-	-
Lilia Jolibois		-	-
Jacques Mahaux		-	-

There were changes in the Directors shareholding at 31 December 2020 compared to 31 December 2019 (Fady Khallouf).

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 twelve 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[11]	15,987	243,132	-	-	-	691,528
2016	487,080	15,353	210,504[12]	-	-	-	712,937
2017	497,288	27,273	126,992	-	-	-	651,553
2018	521,664	39,838	201,872	-	-	-	763,374
2019	492,581	45,453	495,109[13]	-	-	-	1,033,143
2020	517,389	59,294	-	-	58,300	-	634,983

In 2020, the Remuneration Committee, after consultation with the CEO, have decided to postpone any variable performance related bonus for year ended 2020 given the impact of Covid-19 and volatility in oil and gas prices.

(2019: 10% of the maximum bonus as per the approved Remuneration Policy^[14]).

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 %
2020	Mr. Khallouf	634,983	-
2019	Mr. Khallouf[15]	444,465	-
	Mr. Michelotti	588,678	10
2018	Mr. Michelotti	763,374	32
2017	Mr. Michelotti	651,553	12
2016	Mr. Michelotti	712,937	22[16]
2015	Mr. Michelotti	502,021	273,[17]
	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[18]	-
2011	Mr. des Pallieres[19]	273,201	-
	Mr. Barron	395,984	-
2010	Mr. Barron	547,067	-
2009	Mr. Barron[20]	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 2020 and 2019 compared to that of all employees within the Group.

					2020	2019	Average
					$'000	$'000	change, %
Base salary			CEO[21]		517	493	5%
			All employees[22]		1,906	2,237	-15%
Taxable benefits			CEO		118[23]	45	162%
			All employees		139	60	114%
Annual Bonus			CEO[24]		-	495	-100%
			All employees		131	495	-74%
Total			CEO		635	1,033	-39%
			All employees		2,176	2,797	-22%

In 2020 none of the directors participated in long-term incentives.

In 2020 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

	MichelMeeùs			All employees
	2020 $'000	2019 $'000	% change 2020 - 2019	% change 2020 - 2019
Base salary/fees	89,000	49,608	79%	-15%
Taxable benefits (including pensions)	-	-	-	114%
Annual bonus	-	-	-	-74%
Total	89,000	49,608	79%	-22%

The 79% increase is due to the fact that Michel Meeus stepped-in into the position of Chairman in 15 November 2019.

	Lilia Jolibois			All employees
	2020 $'000	2019 $'000	% change 2020 - 2019	% change 2020 - 2019
Base salary/fees	48,000	5,918	711%	-15%
Taxable benefits (including pensions)	-	-	-	114%
Annual bonus	-	-	-	-74%
Total	48,000	5,918	711%	-22%

	Jacques Mahaux			All employees
	2020 $'000	2019 $'000	% change 2020 - 2019	% change 2020 - 2019
Base salary/fees	43,000	5,301	711%	-15%
Taxable benefits (including pensions)	-	-	-	114%
Annual bonus	-	-	-	-74%
Total	43,000	5,301	711%	-22%

Lilia Jolibois and Jacques Mahaux were appointed as non-executive directors in 15 November 2019.

	Gilbert Lehmann			All employees
	2020 $'000	2019 $'000	% change 2020 - 2019	% change 2020 - 2019
Base salary/fees	38,000	54,707	-31%	-15%
Taxable benefits (including pensions)	-	-	-	114%
Annual bonus	-	-	-	-74%
Total	38,000	54,707	31%	-22%

Remuneration of Gilbert Lehman has been revised starting from 15 November 2019.

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 2019 and 31 December 2020.

	2020 $'000	2019 $'000	Year-on-year change, %
All-employee remuneration	2,176	2,797	-22%
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 20 June 2018 and remains unchanged. The Remuneration Policy can be found on the Group's website and at pages 50 to 63 of this Annual Report on Remuneration. The votes cast by proxy were as follows:

Directors' Remuneration Policy	Number of votes		% of votes cast
For	62,011,302		99.74
Against	164,370		0.26
Total votes cast	62,175,672		100.00
Number of votes withheld	17,071

The Directors' Annual Report on Remuneration is approved by shareholders at each Annual General Meeting. A summary of the votes cast by proxy in 2019 and 2020 were as follows:

	2020		2019
Director'sAnnual Report on Remuneration	Number of votes	% of votes cast	Number of votes		% of votes cast
For	92,185,286	99.78	61,111,463		99.99
Against	202,370	0.22	14,370		0.01
Total votes cast	92,387,656		61,125,833		100.00
Number of votes withheld	80,071		0

Implementation of Remuneration Policy in 2020

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 50 to 63 of this Annual Report on Remuneration.

Approval

The Directors' Annual Report on Remuneration was approved by the Board on 4 May 2021 and signed on its behalf by:

Michel Meeùs
Chairman
5 May 2021

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 initially approved by shareholders at the 2018 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[25]. 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.

2020Annual bonus scorecard measures for executive directors

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 executives

The 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 and at Zhylyanska street 48/50, 01033 Kyiv, Ukraine.

Non-executive Director	Current agreement start date	Term
Michel Meeùs	31 July 2018	Three years
Lilia Jolibois	15 November 2019	Three years
Jacques Mahaux	15 November 2019	Three years
Gilbert Lehmann	31 July 2018	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 2020.

• 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.

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 regulations. Company law requires the Directors to prepare financial statements for each financial year. The Directors are required by law to prepare the Group financial statements in accordance with International Financial Reporting Standards ("IFRSs") adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union and International Accounting Standards in conformity with the requirements of the Companies Act 2006 and Article 4 of the International Accounting Standards ("IAS") regulation and have also elected to prepare the Parent Company financial statements under IFRSs in conformity with the requirements of the Companies Act 2006 and as applied in accordance with the provisions of the Companies Act 2006. Under Company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and Group and of the profit or loss for that period. 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 they have been prepared in accordance with IFRSs in conformity with the requirements of the Companies Act 2006, 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, Directors' Report, 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.cadoganpetroleum.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 International Accounting Standards in conformity with the requirements of the Companies Act 2006, and in accordance with International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union 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 Meeùs
Chairman
5 May 2021

Independent auditor's report to the members of Cadogan Petroleum plc

Qualified Opinion on the financial statements

In our opinion, except for the effects 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 2020 and of the Group's loss for the year then ended;
• the Group financial statements have been properly prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006;
• the Group financial statements have been properly prepared in accordance with international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union;
• the Parent Company financial statements have been properly prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 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; and, as regards the Group financial statements, Article 4 of the IAS Regulation.

We have audited the financial statements of Cadogan Petroleum Plc (the 'Parent Company') and its subsidiaries (the 'Group') for the year ended 31 December 2020 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 a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and international accounting standards in conformity with the requirements of the Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union, and as regards the Parent Company financial statements, as applied in accordance with the provisions of the Companies Act 2006.

Basis for qualified opinion

The Group advanced a loan through a subsidiary which is recorded at fair value through profit and loss in accordance with the Group's accounting policy set out in note 3(n), with the fair value at 31 December 2020 determined to be $16.8 million and a fair value loss recorded in the period of $0.3 million. As discussed in note 4(d) and note 26 to the financial statements, management has been unable to obtain relevant information in respect of the investee which the Directors consider is necessary to enable the fair value to be assessed applying recognised valuation methods for an instrument of this nature. As discussed in note 4(d) and 26, if and when such information is made available the Directors consider that the fair value may be materially higher or lower than these values. We were unable to satisfy ourselves by alternative means concerning the fair value of this loan by using other audit procedures. Consequently we were unable to determine whether any adjustment to this amount was necessary.

We considered the valuation of the loan note instrument to be a key audit matter, and in respect of this matter we:

• made inquiries of management and the Audit Committee regarding the structure of the transaction and reviewed the accounting entries.
• reviewed the valuation analysis performed on origination of the loan by third party advisors. We met with management to obtain an understanding of the requests made to Proger for the provision of information to support an assessment of fair value at 31 December 2020 and obtained confirmation from management that relevant information was unavailable. We considered, in conjunction with our internal specialists, whether recognised valuation methods could reasonably be applied by management that had not been considered. We considered whether sufficient and appropriate audit evidence could be obtained in respect of the fair value of the instrument given the information available.
• considered the accounting treatment and valuation adopted by management, given the absence of information considered necessary to perform a valuation using a recognised valuation method.
• reviewed the disclosures in relation to financial instruments including the accounting policy, critical judgments and estimates and financial instrument disclosures.

As noted above we have not been able to obtain sufficient, appropriate audit evidence, and accordingly are not able to conclude whether the fair value of the loan note instrument is materially accurate.

In 2019 we were similarly not able to obtain sufficient, appropriate audit evidence to conclude whether the fair value of the loan note instrument was materially accurate. As a result, our audit opinion for the year ended 31 December 2019 was also qualified in respect of this limitation on the scope of the audit.

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 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.

Independence

Following the recommendation of the audit committee, we were appointed by the Board of directors on 27 April 2017 to audit the financial statements for the year ending 31 December 2017 and subsequent financial periods. The period of total uninterrupted engagement including retenders and reappointments is 4 years, covering the years ending 31 December 2017 to 31 December 2020. We remain independent of the Group and the Parent Company 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. The non-audit services prohibited by that standard were not provided to the Group or the Parent Company.

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 and the Parent Company's ability to continue to adopt the going concern basis of accounting included:

• Reviewing management's cash flow forecasts for the period to June 2022 and evaluating the level of headroom available and the assumptions including oil production, oil prices, operating expenditure and capital expenditure. In doing so 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 compared forecast costs with historical expenditure.

• Reviewing licences for commitments to check these have been reflected in the cash flow forecasts.

• Considering the impact on liquidity should the outcome of contingent liabilities related to taxation disputes disclosed in note 27 result in payments being required in the forecast period; and assessing management's has conclusion that such a scenario is less than probable by inspecting the favourable court rulings in the period and obtaining written assessment of the claims from internal counsel, albeit the claim remains subject to ongoing appeal.

• Reviewing the disclosures in the financial statements in respect of going concern against the requirements of the 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.

Overview

Coverage

98% (2019: 92%) of Group loss before tax
100% (2019: 98%) of Group revenue
95% (2019: 95%) of Group total assets

Key audit matters

	2020	2019
Carrying value of oil and gas exploration and production assets Valuation of Proger loan note instrument	X X	X X

Materiality

Group financial statements as a whole

$0.7m (2019: $0.8m) based on 1.5% (2019: 1.5%) of total assets

An overview of the scope of our audit

Our Group audit was scoped by obtaining an understanding of the Group and 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.

Whilst Cadogan Petroleum Plc is a company listed on the Standard Segment of the London Stock Exchange, the Group's operations principally comprise an exploration & development of oil and gas assets located in Ukraine, together with gas trading and oil services activities. We assessed there to be five significant components within the Ukrainian sub-group, comprising components holding exploration & development assets and gas trading activities which were subject to a full scope audit. Together with the Parent Company, Cadogan Petroleum Holdings Ltd, Cadogan Petroleum Holdings B.V. and the Group consolidation, which was also subject to a full scope audit, these represent the significant components of the Group. The audits of each of the Ukrainian components were principally performed in the Ukraine by a BDO member firm under the supervision and direction of the Group audit team. The audits of the parent company, Cadogan Petroleum Holdings Ltd, Cadogan Petroleum Holdings B.V. and the Group consolidation were performed in the United Kingdom by the Group audit team. The remaining components of the Group were considered non-significant and these components were principally subject to analytical review procedures by the Group audit team or BDO member firm in Ukraine.

Our involvement with component auditors

For the work performed by component auditors, we determined the level of involvement needed in order to be able to conclude whether sufficient appropriate audit evidence has been obtained as a basis for our opinion on the Group financial statements as a whole. Our involvement with component auditors included the following:

• Detailed Group reporting instructions were sent 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.

• As a result of travel restrictions resulting from the Covid-19 pandemic, the Group audit partner and senior members of the Group audit team were unable to visit the Ukraine to meet with component management and the component auditors during the audit as we have done historically. Accordingly, we performed a remote review of the component audit files in the Ukraine using our online audit software platform, held regular calls and videoconferences with the component audit team during the audit.

• The Group audit team was actively involved in the direction of the audits performed by the component auditors for Group reporting purposes, along with the consideration of findings and determination of conclusions drawn. We performed our own additional procedures in respect of the significant risk areas that represented Key Audit Matters in addition to the procedures performed by the component auditor.

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) that 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 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 matter

How the scope of our audit addressed the key audit matter

Carrying value of oil and gas exploration and production assets At 31 December 2020 the Group held exploration and evaluation assets of $2.4m and $10.0m of development and production assets as detailed in note 4(a), 4(b),15 and 16. Management is required to assess these assets for indicators of impairment at each reporting date and perform an impairment test when indicators of impairment are identified. Management has performed an impairment review which included assessment of the Bitlyanska and Blazhivska licences' recoverable value based on the underlying discounted cash flow forecasts and concluded that no impairment is necessary. The impairment reviews require judgment and estimate in determining whether indicators of impairment exist and, in respect of the discounted cash flow models significant estimates in selecting inputs. In addition, as detailed in note 4 and 15 significant judgment was required regarding the likelihood of the Bitlyanska licence being renewed / converted to a production licence following its expiry in December 2019 and delays in the licence being awarded and the subsequent rejection of the application in 2020 which is being contested through the courts. Management's conclusion that no impairment is applicable on the Bitlyanska licence is critically dependent on the ultimate renewal of the licence. As a result of these factors this represented a key focus area for our audit and a key audit matter.

We evaluated management's impairment indicator review paper, together with the underlying discounted cash flow forecasts which formed part of their impairment review. We critically challenged the key judgments and assumptions made by management, including forecast oil and gas prices, production levels, royalties and costs. This included assessment compared to empirical data, the independent Competent Person's Report on the oil and gas reserves and resources and external evidence where available. We recalculated the discount rates in conjunction with our valuation specialists and compared the rate to management's discount rate. We performed sensitivity analysis on the impairment models to establish the impact of reasonably possible changes in key variables such as pricing, production and the discount rates. We met with operational management to evaluate the basis for forecast increases in production associated with well stimulation activities, considered the historical impact of such activities and evaluated the extent to which appropriate costs were included in the forecasts. We reviewed budgets, forecasts and strategic plans to consider the extent to which management's judgment regarding future planned exploration activity is supported by those plans. We reviewed the licence agreements and confirmed that the Group holds a valid licence for Blazhivska which was renewed / converted to a production licence in December 2019. We gained an understanding of the licence conditions and remaining term. In respect of the rental well agreements, we obtained and reviewed the renewed agreements for key terms and conditions. In respect of the Bitlyanska licence, we considered the appropriateness of management's judgment that the Bitlyanska licence would be extended or converted to production licences following its expiry in December 2019, particularly noting the delays and the subsequent rejection of the application in 2020. In doing so we obtained documents demonstrating the submissions for the licence conversions, confirmations from the relevant authorities that the Group is in compliance with licence obligations and considered factors such as the exploration results to date. Additionally, we inspected claims submitted to the Ukrainian Courts to challenge the delay in granting a renewal and its further rejection, together with associated legal advice regarding the Group's right of renewal. We met with internal and external counsel to discuss their assessment of the merits of the Group's legal position. Key observations: We consider the judgements made by management in respect of the carrying value of the exploration and production assets at Bitlyanska and Blazhivska to be reasonable. The disclosures in the notes, including the critical judgments regarding renewal of the Bitlyanska licence are in line with accounting standards.

Our application of materiality

We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the basis of the financial statements.

In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level, performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole.

Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as follows:

	Group financial statements		Parent company financial statements
	2020	2019	2020	2019
Materiality	$700,000	$800,000	$500,000	$600,000
Basis for determining materiality	1.5% of total assets		75% of Group materiality
Rationale for the benchmark applied	We determined that an asset based measure is appropriate as the Group holds significant cash and loan balances and its principal activity is the exploration & development of oil and gas assets, such that the asset base is considered to be a key financial metric for users of the financial statements.		Calculated as a percentage of group materiality for group reporting purposes.
Performance materiality	$460,000	$520,000	$320,000	$390,000
Basis for determining performance materiality	65% of materiality considering the nature of activities and historical audit adjustments

Component materiality

We set materiality for each component of the Group based on a percentage of between 25% and 75% of Group materiality dependent on the size and our assessment of the risk of material misstatement of that component. Component materiality ranged from $175,000 to $500,000 (2019: ranging from $160,000 to $600,000). In the audit of each component, we further applied performance materiality levels of 65% of the component materiality to our testing to ensure that the risk of errors exceeding component materiality was appropriately mitigated.

Reporting threshold

We agreed with the Audit Committee that we would report to them all individual audit differences in excess of $35,000 (2019: $40,000). We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds.

Other information

The directors are responsible for the other information. The other information comprises the information included in the annual financial report other than the financial statements and our auditor's report thereon. 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. 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 this gives rise to 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, we were unable to satisfy ourselves concerning the fair value of the loan receivable shown at $16.8 million as at 31 December 2020. We have concluded that where the other information refers to the loan balance or related balances such as the fair value loss, it may be materially misstated for the same reason.

Other Companies Act 2006 reporting

Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below.

Strategic report and Directors' report	Except for the possible effect of the matter described in the basis for 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. Except for any amendments that we may have considered necessary had we been able to obtain sufficient appropriate audit evidence in relation to the fair value of the loan receivable as described in the basis for qualified opinion section of our report, in the light of the knowledge and understanding of the Group and 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.
Directors' remuneration	In our opinion, the part of the Directors' remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006.
Matters on which we are required to report by exception	Arising solely from the limitation on our work relating to the loan receivable described above: - We have not obtained all the information and explanations that we considered necessary for the purpose of our audit. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: - adequate accounting records have not been kept by the Parent Company, or 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.

Responsibilities of Directors

As explained more fully in the Statement of directors' responsibilities, 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 the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Extent to which the audit was capable of detecting irregularities, includingfraud

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:

• Holding discussions with management and the audit committee to consider any known or suspected instances of non-compliance with laws and regulations or fraud identified by them;
• Communicating any known or suspected instances of non-compliance with laws and regulations or fraud within the Group audit team and the component audit team through the engagement team discussion and through the course of the audit;
• Gaining an understanding of the legal and regulatory framework applicable to the Group and the industry in which it operates, through discussion with management and the audit committee and our knowledge of the industry;
• Considering the significant laws and regulations of Ukraine and the UK to be those relating to the industry, financial reporting framework, tax legislation and the listing rules.
• Assessing the susceptibility of the Group's financial statements to material misstatement, including how fraud might occur;
• Testing the appropriateness of journal entries made through the year by applying specific criteria to detect possible irregularities and fraud;
• Obtaining an understanding of management's procedures to evaluate the validity of supplier arrangements and identify and assess any unusual items;
• Performing a review of supplier contract arrangements across the Group, making inquiries regarding the nature and purpose of the arrangement and reviewing contracts for certain supplier arrangements;
• Performing a detailed review of the Group's year-end adjusting entries and investigating any that appear unusual as to nature or amount and agreeing to supporting documentation;
• Reviewing legal correspondence, obtaining confirmations from in house legal counsel and meeting with internal and external counsel in respect of certain legal disputes;
• Assessing the judgements made by management when making key accounting estimates were indicative of a potential bias (refer to key audit matter and basis for qualified audit opinion above);
• Extending inquiries to individuals outside of management and the accounting department to corroborate management's ability and intent to carry out plans that are relevant to developing the estimates set out in the key audit matters section above;
• Reviewing minutes from board meetings of those charges with governance to identify any instances of non-compliance with laws and regulations;
• Communicating relevant identified laws and regulations and potential fraud risks to all audit team members and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit; and
• Directing the auditors of the significant components to ensure an assessment is performed on the extent of the components compliance with the relevant local and regulatory framework. Reviewing this work and holding meetings with relevant internal management and external third parties to form our own opinion on the extent of Group wide compliance.

Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that 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, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it.

A further description of our responsibilities is available on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Use of our report

This report is made solely to the Parent 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 so that we might state to the Parent Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Parent Company and the Parent Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Ryan Ferguson (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London,
United Kingdom
5 May 2021

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

Consolidated Income Statement for the year ended 31 December 2020
	Notes	2020 $'000	2019 $'000
CONTINUING OPERATIONS
Revenue	6	5,105	5,876
Cost of sales		(4,500)	(4,872)
Provision against unsold gas inventory	8	-	(1,946)
Gross profit/(loss)		605	(942)
Administrative expenses	7	(3,771)	(5,652)
Reversal of impairment of other assets	8	644	345
Impairment of other assets	8	(53)	(162)
Fair value (loss)/gain on loan and call option	8, 26	(334)	697
Other operating (loss)/income, net	9	(71)	3,972
Net foreign exchange gain/(losses)		1,938	(385)
Operating loss		(1,042)	(2,127)
Finance income, net	12	40	25
Loss before tax		(1,002)	(2,102)
Taxation	13	-	-
Loss for the year		(1,002)	(2,102)
Attributable to:
Owners of the Company		(996)	(2,103)
Non-controlling interest		(6)	1
		(1,002)	(2,102)
Loss per Ordinary share		Cents	cents
Basic and diluted	14	(0.4)	(0.9)

Consolidated Statement of Comprehensive Income for the year ended 31 December 2020
			2020 $'000	2019 $'000
Loss for the year			(1,002)	(2,102)
Other comprehensive profit
Items that may be reclassified subsequently to profit or loss:
Unrealised currency translation differences			(3,880)	3,541
Other comprehensive (loss)/profit			(3,880)	3,541
Total comprehensive (loss)/profit for the year			(4,882)	1,439
Attributable to:
Owners of the Company			(4,876)	1,438
Non-controlling interest			(6)	1
			(4,882)	1,439

Consolidated Balance Sheet As at 31 December 2020
	Notes	2020 $'000	2019 $'000
ASSETS
Non-current assets
Intangible exploration and evaluation assets	15	2,381	2,971
Property, plant and equipment	16	9,963	12,338
Loan classified at fair value through profit and loss	26	-	15,707
Right-of-use assets	22	292	-
Deferred tax asset	21	419	501
		13,055	31,517
Current assets
Inventories	18	2,156	4,453
Trade and other receivables	19	1,632	2,639
Loan classified at fair value through profit and loss	26	16,812	-
Cash	20	13,253	12,834
		33,853	19,926
Total assets		46,908	51,443
LIABILITIES
Non-current liabilities
Long-term lease liability	22	(195)	-
Provisions	24	(223)	(289)
		(418)	(289)
Current liabilities
Trade and other payables	23	(1,387)	(1,266)
Short-term lease liability	22	(97)	-
		(1,484)	(1,266)
Total liabilities		(1,902)	(1,555)
NET ASSETS		45,006	49,888
EQUITY
Share capital	25	13,832	13,525
Share premium		514	329
Retained earnings		190,963	191,959
Cumulative translation reserves		(162,155)	(158,275)
Other reserves		1,589	2,081
Equity attributable to owners of the Company		44,743	49,619
Non-controlling interest		263	269
TOTAL EQUITY		45,006	49,888

The consolidated financial statements of Cadogan Petroleum plc, registered in England and Wales no. 05718406, were approved by the Board of Directors and authorised for issue on 5 May 2021. They were signed on its behalf by:

Fady Khallouf
Chief Executive Officer
5 May 2021
The notes on pages 79 to 109 form an integral part of these financial statements.

Consolidated Cash Flow Statement for the year ended 31 December 2020
		Note		2020 $'000		2019 $'000
Operating profit / (loss)				(1,042)		(2,127)
Adjustments for:
Depreciation of property, plant and equipment		16		734		653
Movement in fair value of loan and call option		26		334		(697)
Impairment of inventories		8		50		1,946
Impairment of receivables		8		3		-
Gain on disposal of subsidiaries		17		-		(4,000)
Interest received				-		(431)
Reversal of impairment of other assets				-		(345)
(Reversal of impairment)/Impairment of VAT recoverable		8		(644)		162
Effect of foreign exchange rate changes				(1,938)		385
Operating cash flows before movements in working capital				(2,503)		(4,454)
Decrease/(Increase) in inventories				1,624		(971)
Decrease in receivables				930		664
Decrease in payables and provisions				34		78
Cash generated by / (used in) operations				85		(4,683)
Interest received				25		480
Net cash inflow/(outflow) from operating activities				110		(4,203)
Investing activities
Proceeds from disposal of subsidiaries		17		-		4,000
Purchases of property, plant and equipment				(279)		(6,952)
Purchases of intangible exploration and evaluation assets				(32)		(241)
Proceeds from sale of property, plant and equipment				-		345
Loan provided				-		(15,246)
Interest received				38		140
Net cash used in investing activities				(273)		(17,954)
Net decrease in cash				(163)		(22,157)
Effect of foreign exchange rate changes				582		(145)
Cash at beginning of year				12,834		35,136
Cash at end of year.			13,253		12,834

Consolidated Statement of Changes in Equity for the year ended 31 December 2020
	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 2019	13,525	329	194,062	(161,816)	1,668	47,768	268	48,036
Net (loss)/profit for the year	-	-	(2,103)	-	-	(2,103)	1	(2,102)
Other comprehensive profit	-	-	-	3,541	-	3,541	-	3,541
Total comprehensive profit for the year	-	-	(2,103)	3,541	-	1,438	1	1,439
Director bonus share award	-	-		-	413	413	-	413
As at 1 January 2020	13,525	329	191,959	(158,275)	2,081	49,619	269	49,888
Net loss for the year	-	-	(996)	-	-	(996)	(6)	(1,002)
Other comprehensive loss	-	-	-	(3,880)	-	(3,880)	-	(3,880)
Total comprehensive loss for the year	-	-	(996)	(3,880)	-	(4,876)	(6)	(4,882)
Issue of ordinary shares for director bonus share awards	307	185	-	-	(492)	-	-	-
As at 31 December 2020	13,832	514	190,963	(162,155)	1,589	44,743	263	45,006

Notes to the Consolidated Financial Statements

for the year ended 31 December 2020

1. General information

Cadogan Petroleum 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 nature of the Group's operations and its principal activities are set out in the Operations Review on pages 11 to 12 and the Financial Review on pages 13 to 14.

2. Adoption of new and revised Standards

New IFRS accounting standards, amendments and interpretations effective from 1 January 2020

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 2019, except for the following:

(a) Definition of Material - Amendments to IAS 1 and IAS 8;

(b) Definition of a Business - Amendments to IFRS 3;

(c) Interest Rate Benchmark Reform - Amendments to IFRS 7, IFRS 9 and IAS 39;

(d) Revised Conceptual Framework for Financial Reporting;

(e) COVID-19-related Rent Concessions - Amendments to IFRS 16.

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 ending 31 December 2020 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
Property, Plant and Equipment: Proceeds before intended use - Amendments to IAS 16	01 January 2022
Reference to the Conceptual Framework - Amendments to IFRS 3	01 January 2022
Onerous Contracts - Cost of Fulfilling a Contract Amendments to IAS 37	01 January 2022
Annual Improvements to IFRS Standards 2018-2020	01 January 2022
Classification of Liabilities as Current or Non-current - Amendments to IAS 1	01 January 2023
IFRS 17, 'Insurance contracts'	01 January 2023

3. Significant accounting policies

(a) Basis of accounting

The financial statements have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and in accordance with international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.

The financial statements have been prepared on the historical cost convention basis.

The principal accounting policies adopted are set out below:

(b) Going concern

The Group's cash balance at 31 December 2020 was $13.3 million (2019: $12.8 million). The Directors believe 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.

The directors' have carried out a robust assessment of the principal risks facing the Group, including those that could potentially threaten its business model, future performance, solvency or liquidity is on pages 27 to 28.

The Group's forecasts and projections, taking into account reasonably possible changes in trading activities, operational performance, flow rates for commercial production and the price of hydrocarbons sold to Ukrainian customers, show that there are reasonable expectations that the Group will be able to operate on funds currently held and those generated internally, for the foreseeable future.

Notwithstanding the Group's current financial performance and position, the Board are cognisant of the actual impacts of COVID-19 on the Group. 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 Covid-19 are unknown the Board has considered operational disruption that may be caused by the factors such as a) restrictions applied by governments, illness amongst our workforce and disruption to supply chain and sales channels; b) market volatility in respect of commodity prices associated with Covid-19 in addition to 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 COVID-19. The Group's forecasts demonstrate that owing to its cash resources the Group is able to meet its operating cash flow requirements and commitments whilst maintaining significant liquidity for a period of at least the next 12 months allowing for sustained reductions in commodity prices and extended and severe disruption to operations should such a scenario occur.

After making enquiries and considering the uncertainties described above, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future and consider the going concern basis of accounting to be appropriate and, thus, they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

(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 acquired or 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) Business combinations

The acquisition of subsidiaries is accounted for using the acquisition method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred. The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 Business Combinations are recognized at their fair value at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for resale in accordance with IFRS 5 Non-Current Assets held for sale and Discontinued Operations. These are recognised and measured at fair value less costs to sell.

(e) Investments in joint ventures

A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. A joint venture firm recognises its interest in a joint venture as an investment and shall account for that investment using the equity method in accordance with IAS 28 Investments in Associates and Joint Ventures.

Under the equity method, the investment is carried on the balance sheet at cost plus changes in the Group's share of net assets of the entity, less distributions received and less any impairment in value of the investment. The Group Consolidated Income Statement reflects the Group's share of the results after tax of the equity-accounted entity, adjusted to account for depreciation, amortization and any impairment of the equity accounted entity's assets. The Group Statement of Comprehensive Income includes the Group's share of the equity-accounted entity's other comprehensive income.

3. Significant accounting policies (continued)

(e) Investments in joint ventures (continued)

Financial statements of equity-accounted entities are prepared for the same reporting year as the Group. The Group assesses investments in equity-accounted entities for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. In doing so, the Group applies the criteria of IFRS 6 'Exploration for and evaluation of mineral resources' as the joint venture holds exploration phase assets. If any such indication of impairment exists, the carrying amount of the investment is compared with its recoverable amount, being the higher of its fair value less costs of disposal and value in use. If the carrying amount exceeds the recoverable amount, the investment is written down to its recoverable amount.

The Group ceases to use the equity method of accounting from the date on which it no longer has joint control over the joint venture or significant influence over the associate, or when the interest becomes classified as an asset held for sale.

(f) Revenue recognition

Revenue from contracts with customers is recognized 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.

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.

Services business segment

Revenue from services is recognized in the accounting period in which services are rendered. The main types of services provided by the Group are drilling and civil works services. Revenue is recorded as the service is provided over time such as through day rates for supply of drill rigs, civil works and manpower.

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.

(g) 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.

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.

3. Significant accounting policies (continued)

(g) Foreign currencies (continued)

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:

i. assets and liabilities of the Group's foreign operations are translated at the closing rate on the balance sheet date;

ii. 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

iii. all resulting exchange differences arising, if any, are recognized 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 recognized 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 2020			Year ended 31 December 2019
	GBP/USD	EURO/USD	USD/UAH	GBP/USD	EURO/USD	USD/UAH
Closing rate	1.3678	1.2217	28.3700	1.3263	1.1214	23.7100
Average rate	1.2843	1.1420	27.0034	1.2773	1.1197	25.9003

(h) 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.

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 recognized 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 recognized 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.

3. Significant accounting policies (continued)

(h) Taxation (continued)

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 realized. 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 assess, 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.

(i) 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 amortization 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 recognized in income.

(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 capitalized 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 capitalized 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.

3. Significant accounting policies (continued)

(j) Intangible exploration and evaluation assets (continued)

E&E assets are not amortized 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 capitalized 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 exist to indicate that carrying amount of E&E asset is unlikely to be recovered in full from successful development or sale.

Where there are indications of impairment, the E&E assets concerned are tested for impairment. Where the E&E assets concerned fall within the scope of an established full cost pool, which are not larger than an operating segment, they are tested for impairment together with all development and production assets associated with that cost pool, as a single cash generating unit.

The aggregate carrying value of the relevant assets is compared against the expected recoverable amount of the pool, generally by reference to the present value of the future net cash flows expected to be derived from production of commercial reserves from that pool. Where the assets fall into an area that does not have an established pool or if there are no producing assets to cover the unsuccessful exploration and evaluation costs, those assets would fail the impairment test and be written off to the income statement in full.

Impairment losses are recognized in the income statement and are separately disclosed.

(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 capitalized, and the cost of recognizing 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.

3. Significant accounting policies (continued)

(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.

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 recognized in the consolidated statement of financial position when the Group becomes party to the contractual provisions of the instrument.

Loan classified at fair value through profit and loss

Loan instruments which include options to convert the instrument into equity are classified as fair value through profit and loss instruments because they do not meet the criteria for amortized cost measurement as they are not held for the collection of contractual cash flows representing solely payments of principal and interest. Such loan instruments are initially recorded at fair value which is typically the cash advanced under the instrument and subsequently recorded at fair value with changes in fair value recorded in the income statement. Transaction costs for loans classified at fair value through profit or loss are expensed 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.

3. Significant accounting policies (continued)

(n) Financial instruments (continued)

Trade and other receivables

Trade and other receivables are recognized 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 recognized 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.

(o) Provisions

Provisions are recognized 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 recognized 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.

(p) 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 recognizing 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.

(q) 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.

3. Significant accounting policies (continued)

(q) Leases (continued)

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.

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 recognize 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 recognized as an expense on a straight-line basis over the lease term.

4. 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 recognized 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 recognized in the financial statements.

Critical judgements and estimates

(a) Impairment indicator assessment for E&E assets

The outcome of ongoing exploration, and therefore the recoverability of the carrying value of intangible exploration and evaluation assets, is inherently uncertain. Management assesses its E&E assets for impairment indicators and if indicators of impairment are identified performs an impairment test. In assessing potential indicators of impairment judgment was required and management considered factors such as the anticipated conversion to a production licence, reserves reports and the net present value of economic models, the results of drilling and exploration in the year and the future plans including farm out proposals. In respect of the renewal and conversion of the license which remains outstanding having been rejected by the licencing authority in 2020 management carefully considered the likelihood of the licence being ultimately awarded once the current legal process to challenge the decision of the licencing authorities is completed. In doing so, consideration was given to external legal advice regarding the validity of its application, compliance with relevant license commitments, completeness of the application and political and judicial environment of Ukraine (note 15).

4. Critical accounting judgements and key sources of estimation uncertainty (continued)

(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 16).

(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.

(d) Loan classified at fair value through profit and loss

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 interest is a 72.92% participation in Proger Ingegneria Srl ("Proger Ingegneria"), a privately owned company which held a 75.95% participating interest in Proger Spa ("Proger") at 31 December 2020. 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 (February 2019) and assuming that the call option described below is 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.

As part of the instrument, the Group was granted a call option to acquire, at its sole discretion, 33% of participating interest in Proger Ingegneria; the exercise of the option would give Cadogan, through CPHBV, an indirect 25% interest in Proger at 31 December 2020. The call option was granted at no additional cost and could be exercised at any time between the 6th (sixth) and 24th (twenty-fourth) months following the execution date of the loan agreement and subject to Cadogan shareholders having approved the exercise of the call option as explained further below. Should CPHBV exercise the call option, the price for the purchase of the 33% participating interest in Proger Ingegneria shall be paid by setting off the corresponding amount due by PMP to CPHBV, by way of reimbursement of the principal, pursuant to the loan agreement. If the call option is exercised, then the obligation on PMP to pay interest is extinguished.

Management considered the extent to which the option and rights to representation on the Board of Proger Ingegneria and Proger meant significant influence existed. The requirement to obtain shareholder approval for any exercise of the option was considered to represent a substantive condition such that the option was not 'currently exercisable' under IFRS at 31 December 2020. In consequence, the potential voting rights associated with any subsequent exercise of the option were not considered to contribute to significant influence over the investee.

Under the Group's accounting policies, the instrument is held at fair value through profit and loss and determination of fair value requires assessment of both key investee specific information regarding financial performance and prospects and market information. The determination of fair value is made at 31 December 2020 based on facts and circumstances at that date, notwithstanding that the borrower failed to repay the loan at maturity in 2021.

The Group's original investment decision involved assessment of Proger Spa business plans and analysis with professional advisers including valuations performed using the income method (discounted cash flows) and market approach using both the precedent transactions and trading multiples methods.

Unfortunately, Proger has refused to provide Cadogan information regarding its 2020 financial performance or updated forecasts to undertake a detailed fair value assessment using the income method or market approach at 31 December 2020. As a consequence, management assessed the fair value of the instrument based on the

4.Critical accounting judgements and key sources of estimation uncertainty (continued)

(d) Loan classified at fair value through profit and loss (continued)

terms of the agreement, including the pledge over shares, together with financial information in respect of prior periods and determined that $16.8 million represented the best estimate of fair value, being equal to anticipated receipts and timing thereof discounted at an estimated market rate of interest of 7.8%. In forming its assessment at 31 December 2020, management particularly considered the impact of any claim under the pledge and further litigation options on the underlying investee business and shareholders and resulting incentive that created for the borrower to ultimately meet the contractual payment obligation. Management further considered information relevant to Proger business and PMP's ability to pay, noting the absence of 2020 financial information. However, the absence of information regarding Proger's 2020 financial performance and prospects represents a significant limitation on the fair value exercise and, as a result, if received, the fair value could be materially higher or lower than this value. (Note 26)

(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) Contingent liabilities

Judgment has been applied in assessing the likelihood of financial loss in respect of the ongoing litigation in respect of VAT and tax losses detailed in note 27. In forming the conclusion no provision is required management considered the findings of the first and second instance courts, although the matter remains subject to appeal.

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.

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.

Service

• Drilling services to exploration and production companies; and
• Civil works services to exploration and production companies.

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

5. Segment information (continued)

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 of 31 December 2020 and for the year then ended the Group's segmental information was as follows:

	Exploration and Production	Services(2)	Trading	Consolidated
	$'000	$'000	$'000	$'000
Sales of hydrocarbons	3,457	-	1,643	5,100
Other revenue	-	5	-	5
Sales between segments	-	-	-	-
Total revenue	3,457	5	1,643	5,105
Cost of sales	(3,033)	(7)	(1,460)	(4,500)
Administrative expenses	(509)	(53)	(135)	(697)
Other operating costs	(55)	-	-	(55)
(Impairment)/reverse of impairment	(53)	-	-	(53)
Reversal of impairment of VAT recoverable	74	-	570	644
Finance income (1)	-	-	25	25
Segment results	(119)	(55)	643	469
Unallocated administrative expenses	-	-	-	(3,074)
Other costs, net (3)	-	-	-	(335)
Net foreign exchange gain	-	-	-	1,938
Loss before tax	-	-	-	(1,002)

1. Net finance income includes $25 thousand of interest on cash deposits used for trading.
2. The services business segment in 2020 primarily provided well workovers and other works to other Group companies.
3. Includes decrease in FVPL of $334 thousand.

As of 31 December 2019 and for the year then ended the Group's segmental information was as follows:

	Exploration and Production	Service	Trading	Consolidated
	$'000	$'000	$'000	$'000
Sales of hydrocarbons	4,861	-	956	5,817
Other revenue	-	59	-	59
Sales between segments	-	-	-	-
Total revenue	4,861	59	956	5,876
Cost of sales	(3,807)	(30)	(1,035)	(4,872)
Administrative expenses	(633)	(42)	(128)	(803)
Impairment	(30)	-	(1,916)	(1,946)
Finance income, net 4	-	-	85	85
Segment results	391	(13)	(2,038)	(1,660)
Unallocated administrative expenses				(4,849)
Other income, net				4,954
Impairment				(162)
Net foreign exchange loss				(385)
Profit before tax				(2,102)

1. Net finance income includes $49 thousand of interest on short-term borrowings and $36 thousand of interest on cash deposits used for trading.

6. Revenue

	2020 $'000	2019 $'000
Sale of hydrocarbons (exploration and production) - point in time	3,457	4,861
Sale of hydrocarbons (trading) - point in time	1,643	956
Service revenues - over time	5	59
	5,105	5,876

Revenue is generated in the Ukraine. Refer to note 3 (f) for details of the performance obligations. Service revenue and associated contract assets and liabilities are immaterial.

Information about major customers

Included in revenues arising from the Trading segment for the year ended 31 December 2020 are revenues of $1.6 million, which arose from sales to the Group's four customers.

65% of exploration and production business segment revenue arose from sales to four largest customers. Each of them contributed for more than 10% of the total revenue of the exploration and production business segment revenue for the year ended 31 December 2020.

In 2019, Trading segment revenue for the year ended 31 December 2019 of $0.9 million arose from sales to the Group's three customers. No other single customers contributed 10 per cent or more to the Group's Exploration and Production revenue in 2019.

7. Administrative expenses

			2020 $'000	2019 $'000
Staff			1,982	2,797
Professional fees			895	1,776
Insurance			183	103
Office costs including utilities and maintenance			170	204
IT and communication			81	134
Bank charges			40	81
Travel			25	144
Other			395	413
			3,771	5,652

8. Reversal of impairment/(impairment) of other assets

			2020 $'000	2019 $'000
VAT recoverable			644	-
Other Property, Plant and Equipment			-	345
Reversal of impairment of other assets			644	345

In 2020, $0.6 million of provision against VAT has been released in respect of input VAT historically impaired that has been offset against output VAT.

$1.5 million (2019: $2.4 million) of historical VAT receivables remain impaired. Refer to Note 4.

			2020 $'000	2019 $'000
Inventories			(50)	(1,946)
Other receivables			(3)	-
VAT recoverable			-	(162)
Impairment of other assets			(53)	(2,108)

Impairment of other assets totalled $53 thousand (2019: $2.1 million) includes impairment of inventories and other receivables. In 2019, impairment of inventories includes $1.9 million natural gas value impairment due to revaluation to market price at the year end.

9. Other operating income, net

			2020 $'000	2019 $'000
Profit on disposal of subsidiaries			-	4,000
Other expenses			(71)	(28)
			(71)	3,972

For the details on disposal of subsidiaries please refer to Note 17.

10. Auditor's remuneration

The analysis of auditor's remuneration is as follows:

	2020 $'000	2019 $'000
Audit fees
Fees payable to the Company's auditor and their associates for the audit of the Company's annual accounts	157	143
Fees payable to the Company's auditor and their associates for other services to the Group:
The audit of the Company's subsidiaries	8	13
Total audit fees	165	156
Non-audit fees
Review of regulatory communications	5	-
Non-audit fees	5	-

Audit fees for 2020 refer to BDO LLP of $165 thousand for the audit of group accounts and subsidiaries as of and for the year ended 31 December 2020.

11. Staff costs

The average monthly number of employees (including Executive Directors) was:

	2020 Number	2019 Number
Executive Director	1	1
Other employees	79	79
	80	80
Total number of employees at 31 December	80	80
	$'000	$'000
Their aggregate remuneration comprised:
Wages and salaries	1,689	1,901
Social security costs	356	401
Annual bonus	131	82
Charge for bonus granted in shares	-	413
	2,176	2,797

12. Finance income/(costs), net

	2020 $'000	2019 $'000
Investment revenue	37	104
Interest income on cash deposits in Ukraine	25	49
Interest income on receivables	-	36
Total interest income on financial assets	62	189
Unwinding of discount on decommissioning provision (note 24)	(22)	(164)
	40	25

13. Tax

	2020 $'000	2019 $'000
Current tax	-	-
Deferred tax	-	-
	-	-

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 % (2019: 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.

13. Tax (continued)

The taxation charge for the year can be reconciled to the profit/(loss) per the income statement as follows:

	2020 $'000	2020 %	2019 $'000	2019 %
(Loss)/profit before tax	(1,002)	100	(2,102)	100
Tax credit at Ukraine corporation tax rate of 18% (2018: 18%)	(180)	18	(378)	18
Permanent differences	(829)	83	(944)	45
Unrecognized tax losses generated in the year	1,125	(112)	1,448	(69)
Effect of different tax rates	(116)	11	(126)	6
	-	-	-	-
Adjustments recognized in the current year in relation with the current tax of prior years	-	-	-	-
Income tax (benefit)/expense recognized in profit or loss	-	-	-	-

Permanent differences mostly represent items, including provisions, accruals and impairments related to taxation in Ukraine, these are items not deductible in tax computations.

14. Loss per Ordinary share

Loss attributable to owners of the Company	2020 $'000	2019 $'000
Loss for the purposes of basic loss per share being net loss attributable to owners of the Company	(996)	(2,103)
Number of shares	Number '000	Number '000
Weighted average number of Ordinary shares used in calculation of earnings per share:
Basic	240,628	235,729
Diluted	244,128	235,729
	Cent	cent
Loss per Ordinary share
Basic and diluted	(0.4)	(0.9)

Basic loss per Ordinary share is calculated by dividing the net loss for the year attributable to owners of the Company by the weighted average number of Ordinary shares outstanding during the year. The calculation of the basic loss per share is based on the following data:

In 2020 and 2019 the Group generated a loss and therefore there is no difference between basic and diluted EPS.

15. Intangible exploration and evaluation assets

Cost		$'000
At 1 January 2019		22,184
Additions		241
Disposals		(6,062)
Change in estimate of decommissioning assets (note 24)		(63)
Exchange differences		3,218
At 1 January 2020		19,518
Additions		32
Disposals		(127)
Change in estimate of decommissioning assets (note 24)		(12)
Exchange differences		(3,200)
At 31 December 2020		16,211
Impairment
At 1 January 2019		19,798
Disposals		(6,062)
Exchange differences		2,811
At 1 January 2020		16,547
Disposals		-
Exchange differences		(2,717)
At 31 December 2020		13,830
Carrying amount
At 31 December 2020		2,381
At 31 December 2019		2,971

The carrying amount of E&E assets at 31 December 2020 of $2.4 million (2019: $2.9 million) relates to the Bitlyanska license.

Management has performed an impairment indicator review. Refer to note 4 (a). As part of the impairment indicator assessment management considered the Bitlyanska license's economic model of underlying discounted cash flow forecasts which demonstrated significant headroom over carrying value. Accordingly, disclosure of estimation uncertainty for individual inputs is not included.

A critical judgment in the impairment indicator assessment was the likelihood of the Bitlyanska license being renewed following the rejection of the application in 2020 and subsequent legal process that remains underway. Cadogan 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 to granting of the new license beyond the regular timeline provided by legislation in the Ukraine, Cadogan has launched a claim before the Administrative Court to challenge the non-granting of the 20-year production license by the Licensing Authority. Given the compliance with license commitments and renewal process and having considered legal advice received, management have a reasonable expectation of the license being awarded. However, in the event the Group is ultimately unsuccessful the exploration licence would hold no value and give rise to impairment.

16. Property, plant and equipment

Cost	Development and production assets $'000	Other $'000	Total $'000
At 1 January 2019	8,532	2,721	11,253
Additions	8,213	57	8,270
Change in estimate of decommissioning assets (note 24)	135	-	135
Disposals	(2,372)	-	(2,372)
Exchange differences	2,004	468	2,472
At 1 January 2020	16,512	3,246	19,758
Additions	259	147	406
Change in estimate of decommissioning assets (note 24)	(30)	-	(30)
Exchange differences	(2,723)	(540)	(3,263)
At 31 December 2020	14,018	2,853	16,871
Accumulated depreciation and impairment
At 1 January 2019	5,772	2,185	7,957
Charge for the year	495	158	653
Disposals	(2,372)	-	(2,372)
Exchange differences	810	372	1,182
At 1 January 2020	4,705	2,715	7,420
Charge for the year	595	139	734
Exchange differences	(801)	(445)	(1,246)
At 31 December 2020	4,499	2,409	6,908
Carrying amount
At 31 December 2020	9,519	444	9,963
At 31 December 2019	11,807	531	12,338

Other property, plant and equipment include fixtures and fittings for the development and production activities.

The carrying amount of development and production assets at 31 December 2020 of $9,5 million relates to the Blazhiv license. Depreciation includes $0.6 million for the Blazhiv license.

Management has performed an impairment review of Development and production assets. As part of the information considered management carried out the assessment of the Blazhivska license's recoverable amount 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 $297 (2019: $308), real per tonne; a production forecast with a natural decline; estimated reserves and a discount rate of 15%, nominal.

Sensitivity analysis for the Blazhiv license

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	(14%)
Oil production volumes	(20%)
Discount rate	22%

17. Subsidiaries

The Company had investments in the following subsidiary undertakings at 31 December 2020:

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
Ramet Holdings Ltd	Cyprus	100	Holding company	48 Inomenon Ethnon, Guricon House, Floor 2 & 3, 6042, Larnaca, Cyprus
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 Astro Gas	Ukraine	100	Exploration	5a, Pogrebnyak Street, ap. 2, Zinkiv, Poltava region, Ukraine, 38100
LLC Astroinvest-Energy	Ukraine	100	Trading	5a, Pogrebnyak Street, ap. 2, Zinkiv, Poltava region, Ukraine, 38100
DP USENCO Ukraine	Ukraine	100	Production	8, Mitskevycha sq.,Lviv, Ukraine,79000
LLC USENCO Nadra	Ukraine	95	Production	9a, Karpenka-Karoho str., Sambir, Lviv region, Ukraine
LLC Astro-Service	Ukraine	100	Service Company	3 Petro Kozlaniuk str, Kolomyia, Ukraine
OJSC AgroNaftoGasTechService	Ukraine	79.9	Construction services	Ivan Franko str, Hvizdets, Kolomyia district, Ivano-Frankivsk Region, Ukraine
Exploenergy s.r.l.	Italy	90	Exploration	Via Triulziana 16c, San Donato Milanese Milano, CAP 20097, Italy

During the year ended 31 December 2020, the Group structure continued to be rationalised both to reduce the number of legal entities and also to replace the structure of multiple jurisdictions with one based on a series of sub-holding companies incorporated in the Netherlands for each licence area. In February 2020, the Group liquidated Rentoul Ltd. In September 2020, the Group liquidated Momentum Enterprises (Europe) Ltd. In November 2020, the Group liquidated Cadogan Ukraine Holdings Limited (Cyprus). In December 2020, Zagoryanska Petroleum BV merged Cadogan Astro Enegy BV, Cadogan Pirkovskoe BV, Cadogan Pokrovska BV, Cadogan Zagoryanske Production BV and Cadogan Delta BV.

In 2019, the Group disposed its subsidiaries LLC Astroinvest Ukraine and LLC Gazvydobuvannya for the consideration of $4 million. At the date of disposal, the subsidiaries had $1.8 million of VAT recoverable balance which was previously impaired in the Group's accounts and $136 million accumulated tax losses which were not recognised historically due to the lack of sufficient certainty regarding future profits to utilize the losses.

18. Inventories

		2020 $'000	2019 $'000
Natural gas		1,825	4,949
Other inventories		1,607	1,984
Impairment provision		(1,276)	(2,480)
Carrying amount		2,156	4,453

The impairment provision at 31 December 2020 and 2019 is made so as to reduce the carrying value of the inventories to the net realizable value. The reduction of the provision included c$1.0 million related to the sales of natural gas during the year 2020.

19. Trade and other receivables

		2020 $'000	2019 $'000
VAT recoverable		1,500	2,402
Other receivables		132	237
		1,632	2,639

The Group considers that the carrying amount of receivables approximates their fair value.

VAT recoverable is presented net of the cumulative provision of $1.5 million (2019: $2.4 million) against Ukrainian VAT receivable that has been recognized as at 31 December 2020. VAT recoverable relates to the oil production and gas trading operations and is expected to be recovered through the gas and oil sales VAT.

20. Notes supporting statement of cash flows

Cash at 31 December 2020 of $13.3 million (2019: $12.8 million) comprise cash held by the Group. The Directors consider that the carrying amount of these assets approximates to their fair value. There were no cash transactions from financing activities for the year 2020.

21. 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 2019	501
Deferred tax benefit	-
Exchange differences	-
Asset at 1 January 2020	501
Deferred tax benefit	-
Exchange differences	(82)
Asset at 31 December 2020	419

At 31 December 2020, the Group had the following unused tax losses available for offset against future taxable profits:

			2020 $'000	2019 $'000
UK			56,437	30,756
Ukraine			49,364	50,257
			105,801	81,013

21. Deferred tax (continued)

Deferred tax assets have been recognized in respect of those tax losses where there is sufficient certainty that profit will be available in future periods against which they can be utilized. The Group's unused tax losses of $56.4 million (2019: $30.8 million) relating to losses incurred in the UK are available to shelter future non-trading profits arising within the Company. 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 $49.4 million (2019: $50.3 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. The deferred tax asset recorded is expected to be utilized based on forecasts and relates to oil production subsidiaries which are generating taxable profits.

22. Lease liabilities

The Group recognized right-of-use assets and lease liabilities based on rental contract for a rent of Kyiv office with maturity date end of February 2024 which was entered into in the period.

The following table sets out a maturity analysis of lease liability, showing the undiscounted lease payments to be paid after the reporting date.

	2020 $'000	2019 $'000
Year 1	106	-
Year 2	110	-
Year 3	118	-
Year 4	20	-
Less: unearned interest	(62)	-
Lease liabilities	292	-

	2020 $'000	2019 $'000
Analysed as:
Current	97	-
Non-current	195	-
Lease liabilities	292	-

23. Trade and other payables

	2020 $'000	2019 $'000
Accruals	213	604
Trade creditors	605	253
Other payables	569	409
	1,387	1,266

Trade creditors and accruals principally comprise amounts outstanding for ongoing costs. The average credit period taken for trade purchases is 30 days (2019: 29 days). The Group has financial risk management policies to ensure that all payables are paid within the credit timeframe.

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.

24. Provisions

The provisions at 31 December 2020 comprise of $0.2 million (2019: $0.3 million) of decommissioning provision.

Decommissioning

	$'000
At 1 January 2019	315
Change in estimate (note 15 and 16)	(63)
Additional provisions recognized in the period	135
Utilization of provision on impaired oil and gas assets	(335)
Unwinding of discount on decommissioning provision (note 12)	164
Exchange differences	73
At 1 January 2020	289
Change in estimate (note 15 and 16)	(42)
Additional provisions recognized in the period	-
Utilization of provision on impaired oil and gas assets	-
Unwinding of discount on decommissioning provision (note 12)	22
Exchange differences	(46)
At 31 December 2020	223
	$'000
At 1 January 2019	315
Non-current	289
Current	-
At 1 January 2020	289
Non-current	223
Current	-
At 31 December 2020	223

In accordance with the Group's environmental policy and applicable legal requirements as of 31^stDecember 2020, the Group intends to restore the sites it is working on after completing exploration or development activities.

A long-term provision of $0.2 million (2019: $0.3 million) has been made for decommissioning costs, which are expected to be incurred at the end of the licenses period as a result of the demobilization of gas and oil facilities and respective site restoration.

25. Share capital

Authorised and issued equity share capital

	2020		2019
	Number ('000)	$'000	Number ('000)	$'000
Authorized Ordinary shares of £0.03 each	1,000,000	57,713	1,000,000	57,713
Issued Ordinary shares of £0.03 each	244,128	13,832	235,729	13,525

Authorized but unissued share capital of £30 million has been translated into US dollars at the historic exchange rate of the issued share capital. The Company has one class of Ordinary shares, which carry no right to fixed income.

Issued equity share capital

			Ordinary shares of £0.03
At 31 December 2017			235,729,322
Issued during year			-
At 31 December 2018			235,729,322
Issued during year			-
At 31 December 2019			235,729,322
Issued during year			8,399,165
At 31 December 2020			244,128,487

Mr. Khallouf was appointed as Chief Executive Officer on 15 November 2019. As part of Mr. Khallouf's employment agreement, a welcome bonus equivalent in value to 5,500,000 ordinary shares (using the market value of the shares on the business day prior to the date of issue) is payable to Mr. Khallouf and a holding period of two years is applicable to the shares acquired. Pursuant to the terms of the bonus, the amount must be subscribed for ordinary shares in the Company at such time as the executive agrees. The welcome bonus was provided to Mr. Khallouf in May 2020.

Following shareholders' approval of the new Remuneration Policy, Mr. Michelotti received in 2019 the Performance Bonus of €100,000 awarded to him based on the achievement versus his 2019 scorecard and without a discretionary element. The Remuneration Committee decided to award in shares 50% of the awarded bonus less taxes and social contribution and therefore the €100,000 bonus was split in €72,500 cash (inclusive of income tax and social contributions to be paid by Mr. Michelotti on the entire awarded amount) and €27,500 in shares priced at their market value at closing on the Business Day prior to the Subscription Date. The shares element was paid in May 2020.

26. 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.

Categories of financial instruments

		2020 $'000	2019 $'000
Financial assets (includes cash)
Financial assets at fair value through profit and loss		16,812	15,707
Cash - amortised cost		13,253	12,834
Other receivables- amortized cost		132	237
		30,197	28,778
Financial liabilities - measured at amortized cost
Trade creditors		605	253
Lease liabilities		292	-
Accruals		213	604
Other payables		569	409
		1,679	1,266

Refer to note 4(d) for details of the terms of the Proger loan recorded as a financial asset at fair value through profit and loss. The instrument is recorded at management's best estimate of fair value as set out in note 4(d) although management have not been able to undertake a valuation exercise under the income method based on Proger's underlying cash flows or market-based method which would incorporate relevant recent financial information on the investee or its prospects.

Financial assets at fair value through profit and loss $'000
As at 1 January 2019	-
Long-term loans provided	15,246
Movement in FVPL	697
Exchange differences	(236)
As at 1 January 2020	15,707
Movement in FVPL	(334)
Exchange differences	1,439
As at 31 December 2020	16,812

The Group has applied a level 3 valuation under IFRS as inputs to the valuation have included assessment of the cash repayments anticipated under the loan terms at maturity, delayed by the arbitration process requested by PMP (the Borrower), historical financial information for the periods prior to 2020 and assessment of the security provided by the pledge over shares together with the impact of the Covid-19 on the activity of Proger. As a result, $ 16.8 million was determined as the best estimate of fair value, being equal to anticipated receipts and timing thereof discounted at an estimated market rate of interest of 7.8%. However, there is significant estimation uncertainty given the limitations on information provided by Proger and the ongoing process to recover the loan principal and interest. The estimate of fair value is based on key assumptions in respect of the period to receipt and market rate of interest for an equivalent instrument at 31 December 2020. A 3 month 26. Financial instruments (continued)

change in the timing of receipt would increase/(decrease) the fair value by $0.3 million / $0.3 million or a 1% change to the market rate of interest would increase/(decrease) the fair value by $0.14 million / $0.14 million.

If the Group had been provided with information to complete a valuation under the income method or market method the key assumptions would have included: a) In terms of the income method: forecast revenues, EBITDA and unlevered free cash flows of the investee including assessment of performance against its original business plan at the time the loan was advanced, growth rates and terminal values, determination of an appropriate discount rate, adjustments to the enterprise value for debt and working capital adjustments; b) In terms of the market method: 2020 EBITDA and information to assess the quality of such earnings, enterprise value multiples based on a basket of comparable transactions and companies, adjustments to the enterprise value for debt and working capital adjustments and other risk adjustment factors.

The Group considers that the carrying amount of financial instruments approximates their fair value.

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.

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.

These fluctuations may have a significant effect on the Group's revenues and operating profits going forward. In 2020 the price for Ukrainian gas significantly decreased and was mainly based on the current price of the European gas imports. Management continues to expect that the Group's principal market for gas will be the Ukrainian domestic market.

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 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.

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.

26. Financial instruments (continued)

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 and advances 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 recorded in the financial statements represents the Group'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 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 2019
Trade and other payables	1,266	-	-	1,266
At 31 December 2020
Trade and other payables	1,387	-	-	1,387
Lease liability	-	106	248	354

27. Commitments and contingencies

The Group has working interests in four licences to conduct its exploration and development activities in Ukraine. Each license is held with the obligation to fulfil a minimum set of exploration activities within its term and is summarised on an annual basis, including the agreed minimum amount forecasted expenditure to fulfil those obligations. The activities and proposed expenditure levels are agreed with the government licensing authority.

The required future financing of exploration and development work on fields under the license obligations are as follows:

	2020 $'000	2019 $'000
Within one year	-	-
Between two and five years	2,058	2,573
	2,058	2,573

27. Commitments and contingencies (continued)

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.

After an inspection conducted by Ukraine's tax authorities in September 2019, Astroinvest Energy LLC was notified of a tax claim related to the historic costs for the liquidation of wells on the Zagoryanska license. The tax authorities notified Astroinvest Energy LLC that they consider recoverable VAT ($3.6 million) that has subsequently been used to offset output VAT to be non-deductible and additionally that the subsidiary's tax losses carry forward should be reduced by $15.3 million (Note 21). Astroinvest Energy LLC has launched a claim against the tax authority's decision on the basis of the current tax legislation and related court decisions and considers the potential for a liability to be less than probable.

If unsuccessful Astroinvest Energy LLC would offset the amount of notified tax losses with part of the historical accumulated tax losses. The disputed amount of VAT would be partially covered with recoverable VAT not recognized as of 31 December 2020 (note 19) such that the eventual impact would be $2.1 million.

28. 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. The application of IFRS 11 resulted in the joint venture LLC Westgasinvest being accounted for under the equity method and disclosed as a related party.

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.

During the period, Group companies entered into the following transactions with joint ventures who are considered as related parties of the Group:

				2020 $'000	2019 $'000
Revenues from services provided and sales of goods				-	-
Amounts owed by related parties				-	-

28. Related party transactions (continued)

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 2020 on page 43.

	Purchase of services		Amounts owing
	2020 $'000	2019 $'000	2020 $'000	2019 $'000
Directors' remuneration	853	1,454	-	594
Social contribution on Directors' remuneration	81	76	-	-

The total remuneration of the highest paid Director was $0.6 million in the year (2019: $0.6 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.

29. Events after the balance sheet date

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 33% equity interest in Proger Ingegneria Srl which in turn held at 31 December 2020 a 75.95% equity interest in Proger Spa.

The Borrower subsequently defaulted in payment. The Call Option was not exercised and the Company notified PMP for the Loan reimbursement at the Maturity Date, 25 February 2021. According to the Loan Agreement, PMP is in default for the non-reimbursement of EUR 14,857,350 being the principal and the accumulated interest.

End of March 2021, PMP contested the default situation and the obligation to reimburse and asked for an Arbitration according to the said Loan Agreement to get the Loan Agreement recognised as an investment contract. Cadogan consider PMP's arguments as groundless and consider that they are intended to delay PMP reimbursement obligations.

The Group determined $16.8 million as the best estimate of fair value, being equal to anticipated receipts and timing thereof discounted at an estimated market rate of interest of 7.8%.

Company Balance Sheet as at 31 December 2020
	Notes	2020 $'000	2019 $'000
ASSETS
Non-current assets
Receivables from subsidiaries	33	38,598	37,324
		38,598	37,324
Current assets
Trade and other receivables	33	3	-
Cash	33	5,759	6,971
		5,762	6,971
Total assets		44,360	44,295
LIABILITIES
Current liabilities
Trade and other payables	34	(240)	(350)
		(240)	(350)
Total liabilities		(240)	(350)
Net assets		44,120	43,945
EQUITY
Share capital	35	13,832	13,525
Share premium		514	329
Retained earnings[26]		138,493	138,318
Other reserve		-	492
Cumulative translation reserves	36	(108,719)	(108,719)
Total equity		44,120	43,945

The financial statements of Cadogan Petroleum plc, registered in England and Wales no. 05718406, were approved by the Board of Directors and authorized for issue on 5 May 2021.

They were signed on its behalf by:


Fady Khallouf
Chief Executive Officer
5 May 2021

The notes on pages 113 to 116 form part of these financial statements.

Company Cash Flow Statement for the year ended 31 December 2020
	2020 $'000		2019 $'000
Operating activities Profit/(loss) for the year	175		(1,788)
Adjustments for: Interest received Effect of foreign exchange rate changes Other payables to subsidiaries written off Movement in provisions	(24) (1,617) - (32)		(50) 143 (382) -
Operating cash flows before movements in working capital	(1,498)		(2,077)
Increase in receivables	(77)		(2,699)
(Decrease)/Increase in payables	(80)		530
Cash used in operations	(1,655)		(4,246)
Income taxes paid	-		-
Net cash outflow from operating activities	(1,655)	(4,246)
Investing activities
Interest received	24	50
Loans to subsidiary companies	-	(6,237)
Net cash used in investing activities	24	(6,187)
Net decrease in cash	(1,631)	(10,433)
Effect of foreign exchange rate changes	419	(73)
Cash at beginning of year	6,971	17,477
Cash at end of year	5,759	6,971

Company Statement of Changes in Equity for the year ended 31 December 2020
	Share capital $'000	Share premium account $'000	Retained earnings $'000	Other Reserve $'000	Cumulative translation reserves $'000	Total $'000
As at 1January2019	13,525	329	140,106	79	(108,719)	45,320
Net loss for the year	-	-	(1,788)	-	-	(1,788)
Total comprehensive loss for the year	-	-	(1,788)	-	-	(1,788)
Share based award	-	-	-	413	-	413
As at 1January2020	13,525	329	138,318	492	(108,719)	43,945
Net income for the year	-	-	175	-	-	175
Total comprehensive income for the year	-	-	175	-	-	175
Issue of ordinary shares	307	185	-	(492)	-	-
As at 31 December 2020	13,832	514	138,493	-	(108,719)	44,120

Notes to the Company Financial Statements

for the year ended 31 December 2020

30. 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 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.

As permitted by section 408 of the Act, the Company has elected not to present its profit and loss account for the year. Cadogan Petroleum plc reports a profit for the financial year ended 31 December 2020 of $0.2 million (2019: Loss $1.8 million).

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 new 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 33). 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.

31. Auditor's remuneration

The auditor's remuneration for audit and other services is disclosed in note 10 to the Consolidated Financial Statements.

32. Investments

The Company's subsidiaries are disclosed in note 17 to the Consolidated Financial Statements. The investments in subsidiaries are all stated at cost less any provision for impairment.

33. 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.

33. Financial assets (continued)

Receivables from subsidiaries

At the balance sheet date gross amounts receivable from the fellow Group companies were $351 million (2019: $349.9 million). The Company recognized no additional expected credit loss provisions in relation to receivables from subsidiaries in 2020 (2019: nil). The accumulated provision on receivables at 31 December 2020 was $312.4 million (2019: $312.6 million). Changes in accumulated provision on receivables of $0.2 million occurred due to the liquidation of the subsidiary during 2020 (Note 17). The carrying value of the receivables from the fellow Group companies at 31 December 2020 was $38.6 million (2019: $37.3 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.

34. Financial liabilities

Trade and other payables

		2020 $'000	2019 $'000
Accruals		139	211
Trade creditors		101	139
		240	350

Trade payables principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period taken for trade purchases is 30 days (2019: 34 days).

The Directors consider that the carrying amount of trade and other payables approximates to their fair value. No interest is charged on balances outstanding.

35. Share capital

The Company's share capital is disclosed in note 25 to the Consolidated Financial Statements.

36. 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.

37. 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 26 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

	2020 $'000	2019 $'000
Financial assets - loans and receivables (includes cash)
Cash	5,759	6,971
Amounts due from subsidiaries	38,598	37,324
	44,357	44,295
Financial liabilities - measured at amortized cost
Trade creditors	(101)	(139)
	(101)	(139)

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 not significant 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 26 to the Consolidated Financial Statements.

38. 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:

	2020 $'000	2019 $'000
Cadogan Petroleum Holdings Limited	38,598	37,324
	38,598	37,324

Refer to note 32 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 2020 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 2020 on pages 42 to 49.

	Purchase of services		Amounts owing
	2020 $'000	2019 $'000	2020 $'000	2019 $'000
Directors' remuneration	853	1,454	-	594
Social contribution on Directors' remuneration	81	76	-	-

The total remuneration of the highest paid Director was $0.6 million in the year (2019: $0.6 million).

39. Events after the balance sheet date

Events after the balance sheet date are disclosed in note 29 to the Consolidated Financial Statements.

Glossary

IFRSs International Financial Reporting Standards

JAA Joint activity agreement

UAH Ukrainian hryvnia

GBPGreat 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: Link Group, 10th Floor, Central Square, 29 Wellington Street, Leeds LS1 4DL.

Telephone: [phone]. 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: [phone]. Website: www.mpsonline.org.uk.

Financial calendar 2020/2021
Annual General MeetingJune 2021
Half Yearly results announcedSeptember 2020
Annual results announcedMay 2021

Investor relations
Enquiries to: [e-mail]

Registered office
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
Email: [e-mail]
Tel: [phone]
Fax: [phone]

www.cadoganpetroleum.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 2020

[1] Gross revenues of $5.1 million (2019: $5.9 million) included $1.6 million (2019: $0.9 million) from trading of natural gas, $3.5 million (2019: $4.9 million) from exploration and production

[2] Administrative expenses ("G&A")

[3] Astroservice LLC used its rig for the workover campaign on the Blazhiv license

[4] LTI: Lost Time Incidents; TRI: Total Recordable Incidents

[5] Segment result being the gross profit net of administrative expenses of the segment.

[6] Taxable benefits include life and medical insurance provided to the executive and leased car.

[7] Amount includes catchup payment for two months 2019.

[8] 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 thousand was recognised through share premium account in 2020.

[9] The salary for the period from 1 January 2019 till 15 November 2019.

[10] Total amount of fixed remuneration for Mr Michelotti and Mr Khallouf for the year 2019

[11] 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.

[12] 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.

[13] 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 thousand was recognised through share premium account in 2020.

[14] The new Remuneration Policy approved in June 2018, reduces the maximum allowable bonus from 200% to 125% of the base salary.

[15] Includes a welcome bonus for Mr Khallouf equivalent in value of 5,500,000 ordinary shares based on share's price of £0.0525.

[16] Mr Michelotti undertook to use the entire bonus to buy company's share at market price in order to leave the Company cash neutral.

[17] Year-end performance-based bonus was an alternative to an up-front sign-on bonus. Mr Michelotti use the entire bonus to buy company's share at market price on 22 September 2017.

[18] $280,298 paid as fees, pension and loss of office.

[19] From 1 August, 2011.

[20] From 19 March 2009.

[21] Included salary of Mr Michelotti and Mr Khallouf.

[22] All employees mean all employees of the Group, including CEO and other Directors (note 11, page 96).

[23] Includes taxable benefits for 2019.

[24] 2019 Annual bonus is a sum of Mr Michelotti's bonus of $112,140 and welcome bonus provision for Mr Khallouf of $382,969 to be granted in shares during 2020.

[25] Please note that the salary of the CEO for 2020 remain at €440,000.

[26] ^{Included in retained earnings, profit for the financial year ended 31 December 2020 was $0.2 million (2019: loss $1.8 million).}