ANNUAL FINANCIAL REPORT
2022
Cadogan Petroleum plc is an independent
oil and gas exploration, development and
production company with onshore gas,
condensate and oil assets in Ukraine.
OVERVIEW
Summary of 2022 01
Group Overview 02
STRATEGIC REPORT 04
Chairman’s Statement 04
Chief Executive’s Review 05
Operations Review 07
Financial Review 08
Risks and Uncertainties 10
Statement of Reserves and Resources 13
Corporate Responsibility 14
CORPORATE GOVERNANCE
Board of Directors 16
Report of the Directors 17
Corporate Governance Statement 22
Board Committee Reports 27
Annual Report on Remuneration 2022 33
FINANCIAL STATEMENTS
Statement of Directors’ Responsibilities 48
Independent Auditor’s Report 49
Financial Statements of Cadogan Petroleum plc
Consolidated Income Statement 55
Consolidated Statement of Comprehensive Income 56
Consolidated Balance Sheet 57
Consolidated Cash Flow Statement 58
Consolidated Statement of Changes in Equity 59
Notes to the Consolidated Financial Statements 60
Company Balance Sheet 82
Company Cash Flow Statement 83
Company Statement of Changes in Equity 84
Notes to the Company Financial Statements 85
GLOSSARY 88
SHAREHOLDER INFORMATION 89
OVERVIEW
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SHAREHOLDER
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01
Cadogan Energy Solutions plc Annual financial report 2022
Key Financial Highlights of 2022:
> Loss for the year: $1.6 million (2021: loss of $5.1 million)
> Average realised price
1
: $73.4/boe (2021: $55.7/boe)
> Gross revenues
2
: $8.5 million (2021: $8.8 million)
> G&A
3
: $3.4 million (2021: $3.7 million)
> Loss per share: 0.6 cents (2021: loss of 2.1 cents)
> Cash at year end: $13.9 million (2021: $15.0 million)
Key Operational Highlights of 2022:
> Production: 117,793 bbl (2021: 127,662 bbl), a 8% decrease
year-on-year
> Gas trading profit is nil million (2021: profit of $0.6 million)
> No LTI/TRI
4
> ISO 14001 and 45001 certifications were re-validated by respective
authority for one year.
Summary of 2022
1 Average realised price is calculated as total revenue from oil sales for the period divided by total volume of sold oil for the period
2 Gross revenues of $8.5 million (2021: $8.8 million) included nil (2021: $1.8 million) from trading of natural gas, $8.5 million (2021: $7.0 million)
from exploration and production
3 Administrative expenses (“G&A”)
4 LTI: Lost Time Incidents; TRI: Total Recordable Incidents
www.cadoganenergysolutions.com
02
Cadogan Energy Solutions plc Annual financial report 2022
Group Overview
In 2022, the Group continued to maintain exploration and production assets, and to operate an oil services business in
Ukraine. Cadogan’s assets are concentrated in the West of the country. The oil services business focuses on workover
operations, civil works services and other services to satisfy Cadogan intra-group operational needs.
Our business model
We aim to increase value through:
> Maintaining a robust balance
sheet, monetising the remaining
value of our Ukrainian assets and
supplementing E&P cash flow with
revenues from gas trading and oil
services
> Pursuing farm-out to progress
investments in Ukrainian license
> Diversifying Cadogan’s portfolio,
both geographically and
operationally
Ukraine
2022 has been extremely challenging
for Cadogan due to the invasion
of Ukraine by Russia and its direct
and derived consequences on the
operational activities in the country.
West Ukraine
The Group continued to produce oil
from its production Blazhiv license
located in the west of Ukraine. In March
2022, the production was suspended
for three weeks and was resumed
after securing the employees, the
assets, the financial transactions,
and the sales process. In the second
half of 2022, there have been several
production stoppages due to the
reduction of crude oil consumption
by oil refineries caused mainly by the
Russian air strikes or by power outage
due to similar strikes on electricity
infrastructure. As a result, the average
net daily production in 2022 was 323
bbl, which is 8% below the production
of the previous year.
In 2020, Usenco Nadra filed two claims
with the Kyiv Administrative Court
to acknowledge inaction of the State
Service of Geology (SGS) as unlawful,
in particular their refusal to issue the
Bitlyanska 20-year exploration and
development license in the regulatory
period and requested the Court to
carry out commercial activities, at the
area, effective from December 2019.
This decision was taken by the subsoil
controlling authority notwithstanding
that Cadogan had fulfilled all license
obligations, obtained all regulatory
approvals and timely submitted
the application on 19 August 2019,
well ahead the license expiry date
of 23 December 2019 and the new
regulatory framework. After the
rejection of its claims in February
2022, Usenco Nadra exercised its right
for appeal against this decision. In
2022, the Appeal Court and, further
on, the Supreme Court did not take
into consideration the Company’s
arguments regarding the Bitlyanska
license award approval and rejected
the claims.
East Ukraine
In 2020, LLC AstroInvest-Energy, a
fully owned subsidiary of Cadogan,
introduced a claim against the State
fiscal authority regarding additional
tax assessment and related 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. In
September 2022, the Supreme Court
cancelled all decisions of the State
fiscal authority and issued a decision
in favor of the position defended
by Cadogan.
Subsidiary businesses
Due to high market volatility caused
by military escalation in Ukraine, no
trading activities were conducted in
2022.
Astroservice LLC, the oil services
subsidiary, continued to support
Blazhiv license wells operations.
POL AND
HUNGARY
SLOVAKIA
BEL AR US
RUSSIA
ROMANIA
MOLDOVA
BLACK SEA
UKRAINE
Kyiv
Blazhiv
Bitlyanske
OVERVIEW
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03
Cadogan Energy Solutions plc Annual financial report 2022
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).
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
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 was
extended. In February 2022, the Plan
for the Sustainable Energy Transition
of Suitable Areas (“PITESAI”)
was approved by the Ministry for
Environmental Transition. It delivers
a new framework for the possible
resumption of exploration and
production activities on land and at
sea. Exploenergy was notified in 2022
that its projects (Reno Centese and
Corsano) were located in compatible
areas identified by the PITESAI.
The Company is currently in the
qualification process as gas operator.
In February 2019, the Group entered
in a two-year loan agreement with
Proger Management & Partners Srl
(“PMP”) with an option which Cadogan
could exercise, with no obligation, to
get a 33% equity interest in Proger
Ingegneria Srl which in turn held at
31 December 2020 a 75.95% equity
interest in Proger Spa. Proger is an
Italian engineering company providing
services in Italy and in different
international areas.
Cadogan did not exercise the Call
Option. In February 2021, Cadogan
notified PMP that according to the
Loan Agreement, the Maturity Date
occurred on 25 February 2021, and
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 at this
Maturity Date. 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 Loan Agreement are clear
and include the right to repayment
at maturity if the Call Option is not
exercised.
The Arbitration proceeding ended in
July 2022.
The Arbitral Committee:
> Rejected Proger’s principal claim,
and declared that the Loan
Agreement is valid and effective,
> Deemed to qualify the Call Option
as a preliminary contract under
condition, but
> Rejected Proger’s claim ex art.
2932 Italian Civil Code, stating
that it is impossible to give an
award producing the same effects
of a final contract ex art. 2932
Italian Civil Code,
> This is because of the duties
established by the rules of the
London Regulatory Authority and
because of the need, possibly
by both parties, to comply with
the due proceedings before
the formalisation of the entry
of Cadogan into the capital of
Proger Ingegneria,
> Subordinated the stipulation of
the final contract to the precedent
completion of the proceeding
and bureaucratic process as per
the British rules, stating that,
otherwise,
> There is the obligation on
Proger Ingegneria to return
the money received under the
Loan Agreement.
ITALY
Corzano
Reno Centese
04
Cadogan Energy Solutions plc Annual financial report 2022 www.cadoganenergysolutions.com
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 pages 25 to 26 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. In November 2022, the
shareholders approved the change
of name and the strategy to expand
its activities along the energy value
chain to new forms of energy with a
reduced impact on the environment.
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 2022 against these KPIs is set out in the table
below, together with the prior year performance data.
Unit 2022 2021
2022
vs 2021
Average production (working interest basis)
1
boepd 323 350 (8%)
Overhead (G&A) $ million (3.4) (3.7) (7%)
Basic loss per share
2
cents (0.6) (2.1) (71%)
Lost time incidents
3
incidents – – –
Geographic diversification new assets – – –
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)
Chairman’s Statement
2022 was the most dramatic year in
the independent history of Ukraine.
The full-scale invasion of the Russian
army has brought severe destructions
and huge suffering. All the Board
stands in solidarity with the Ukrainian
population in their fight for freedom.
The safety of our people is our
highest priority. The Group is taking
all possible actions to preserve the
safety of its employees and meet
their needs.
2022 will remain another challenging
year. From the very first days of
the war and onwards, Cadogan
immediately implemented required
actions that have allowed us to
protect our staff and keep the
Group’s activities ongoing. The
effectiveness of these measures and
the dedication of everyone have been
essential to mitigate the negative
consequences of the war. Moreover,
the Group is proud to report zero
fatalities and injuries among its staff
since the beginning of the invasion.
For the existing operations in
Ukraine, Cadogan continues to
be committed to the territory
and the communities where we
operate and has fully financed
social programs commitment for
2022 as agreed before with the
Lviv Regional Administration and
the local communities. Realising
the importance of unstoppable oil
production to satisfy increased
Ukrainian demand – Cadogan
has put maximum effort into
achieving this target. Despite all
the difficulties imposed by the
war situation, Cadogan stands
confidently on its feet and continues
to work.
During 2022, the oil and gas
markets of Ukraine witnessed severe
volatility which was not correlated
with world trends. The oil prices
have changed unpredictably and in
different directions during the year.
The quick response of the Group and
the measures that were put in place
have allowed the Group to mitigate
the operational and the economic
challenges.
Despite all these challenges, the
Group was able to improve its
fundamentals and operate at high
industry standards. This was possible
thanks to the commitment of all with
a competent and strong management.
The Board remains focused on
maximising value from our assets
and on our strategy based on the
future diversification of our activities
towards sectors providing lower
impacts on environment.
Michel Meeùs
Non-Independent Non-Executive
Chairman
27 April 2023
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05
Cadogan Energy Solutions plc Annual financial report 2022www.cadoganenergysolutions.com
Chief Executive’s Review
Due to the situation of war resulting
from the Russian invasion of
Ukraine, 2022 has been a highly
challenging year. The Company had
to adapt its activities to operate
in war reality and contingencies.
After securing our employees, our
assets, our procedures and our sales
transactions, Cadogan was able to
operate but under severe constraints,
temporary operations shut-down,
staff relocation, supply and trade
chains changes. The consequences of
this war on inflation, on consumption
and on availability of the needed
energy infrastructure have led to
extreme oil price volatility. The
martial law imposed by the Ukrainian
government introduced additional
constraints on the financial
transactions, the mobilisation of
employees, the increase of taxation
on natural gas production and ended
with additional risks.
This situation has led to adapt
and transform all the processes of
Cadogan to maximise flexibility and
efficiency given the high uncertainty
even in the short-term.
While in 2021 Ukraine had witnessed
some signs of recovery for the oil
and gas industry as well as slow
progress towards modernisation of
its oil and gas legislative framework,
the Russian aggression in 2022
has pushed down all these efforts.
The Russian invasion and bombing
have naturally affected the oil and
gas production in the country.
Oil refineries, as well as energy
infrastructure, have been severely
damaged. Despite this situation,
Cadogan managed to safely operate
with zero fatalities and injuries
among the staff.
In March 2022, the Company staff
were relocated from Kiev to the
safe areas and continued operating
remotely. On-field personnel ensured
continuity of wells operations
with the maximum of safety and
efficiency. The Company also faced
a new risk with the mobilisation
of employees decided by the
Ukrainian government. For the time
being, four employees have been
mobilised since the beginning of the
martial law in March 2022. With this
martial law, war period restrictions
have been implemented, including
financial ones. At the same time, the
Parliament increased taxation on
natural gas production.
These unprecedented constraints
encountered with Covid-19 during
2020 and 2021 and during 2022
with the war in Ukraine have
delayed the implementation of
Cadogan’s strategy. In November
2022, following the approval of the
shareholders, Cadogan Petroleum Plc
became Cadogan Energy Solutions
Plc, with the intention to expand its
activities along the energy value
chain, beyond current activities in
the oil and gas sector, to new forms
of energy with a reduced impact
on the environment. This reflects
Cadogan’s mission to be a diversified
group in energy with the will to
make investments offering energy
solutions and alternative services
with a lower environmental impact.
Against this challenging background,
Cadogan’s operational activities
performed as following:
> an 8% decrease in production,
from 127,662 bbl in 2021 to
117,793 bbl in 2022;
> an 7% decrease of overhead
(G&A), from $3.7 million in 2021
to $3.4 million in 2022;
> a robust balance sheet, with
$13.9 million of net cash, kept
mostly in the UK banks;
> another year without LTIs;
> the Supreme Court's positive
decision in favour of Cadogan in
the tax litigation case.
Core operations
Cadogan has continued to safely
produce from its Blazhiv field in the
west of Ukraine. Oil production has
decreased by 8% compared to the
previous year. This decrease was
due to several production stoppages
caused by the reduction of crude oil
treatment capacities in oil refineries,
as a consequence of the Russian
direct air strikes and by power
outage due to similar strikes of
electricity infrastructure.
Regarding the Bitlyanska 20-year
exploration and development license,
Usenco Nadra filed two claims in
2020 against the absence of decision
of the State Geological Service (SGS)
in the regulatory due timeframe
at this moment, and the further
rejection of the application on the
basis of a new regulatory framework
that took effect on 25 February
2020. In February 2022, these claims
were rejected by the Administrative
Court. Further in 2022, Usenco Nadra
exercised its right for appeal against
this decision. The Kyiv Appeal Court
and further on the Supreme Court
did not take into consideration the
Company’s arguments and rejected
the claims. This decision will not
have a financial impact as Bitlyanska
license had been totally impaired in
the previous year.
High operational standards of the
Group have been confirmed again
by zero LTI or TRI, with a total over
1,570,000 manhours since the last
incident, and re-validation off ISO
14001 & 45001 certifications by
respective authority for the one year.
In Italy, the Plan for the Sustainable
Energy Transition of Suitable Areas
(“PITESAI”) was approved by the
Ministry for Environmental Transition.
It delivers a new framework for the
possible resumption of exploration
and production activities on land
and at sea. Exploenergy was notified
in 2022 that its projects (Reno
Centese and Corsano) were located
in compatible areas identified by the
PITESAI. The Company is currently
in the qualification process as
gas operator.
Non E&P operations
The Company continues to monitor
the gas markets in Europe and
Ukraine, but in light of the extreme
volatilities the Company followed its
prudent and low risk trading strategy
and did not perform gas trading
operations during 2022.
The oil services activities were
used primarily to serve the Group’s
wells operations.
06
Cadogan Energy Solutions plc Annual financial report 2022 www.cadoganenergysolutions.com
Proger
In February 2019, Cadogan used part
of its cash (€13.385 million) to enter
into a two-year Loan Agreement
with Proger Managers & Partners,
together with a Call Option
Agreement which could be exercised
by Cadogan, with no obligation,
between September 2019 and
February 2021, and subject to
shareholders’ approval, into a 33%
equity interest in Proger Ingegneria
which in turn held a 75.95% equity
interest in Proger as at 31 December
2020, and a 96.48% equity interest
in Proger as at 31 December 2021.
As at 25 February 2021, being the
Maturity Date, the Call Option
was not exercised by Cadogan
and accordingly to its previous
notification Cadogan demanded
repayment of the Loan together with
the accumulated interest which in
total amounted €14,857,350. 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. The
Arbitration proceeding ended in
July 2022.
The Arbitral Committee:
> Rejected Proger’s principal claim,
and declared that the Loan
Agreement is valid and effective,
> Deemed to qualify the Call Option
as a preliminary contract under
condition, but
> Rejected Proger’s claim ex art.
2932 Italian Civil Code, stating
that it is impossible to give an
award producing the same effects
of a final contract ex art. 2932
Italian Civil Code.
> This is because of the duties
established by the rules of the
London Regulatory Authority and
because of the need, possibly
by both parties, to comply with
the due proceedings before
the formalisation of the entry
of Cadogan into the capital of
Proger Ingegneria,
> Subordinated the stipulation
of the final contract to the
precedent completion of the
proceeding and bureaucratic
process as per the British rules,
stating that, otherwise,
> There is the obligation on
Proger Ingegneria to return
the money received under the
Loan Agreement.
Proger refused to apply the
requirements of the award and thus,
Proger must reimburse the amount
covered by the Loan Agreement plus
interest accrued in the meantime.
Outlook
The current situation in Ukraine
is imposing continuous difficulties
and tremendous challenges on
our operating activities in 2023.
The Company is expecting another
challenging year and is seeking to
mitigate these constraints through a
number of options and solutions.
Cadogan will also study different
options to minimise its CO
2
emissions
deriving from its current operating
oil and gas activities.
Regarding the Loan provided to
Proger in February 2019, Cadogan
will continue to engage all necessary
legal actions to protect its interests
and recover the cumulated amount
due by Proger.
Despite all these constraints,
Cadogan will pursue its strategy
aiming to diversify its activities and
invest in sectors with a lower impact
on environment.
This strategy is totally aligned with
the Climate Change requirements for
sustainability of Cadogan’s activities.
Fady Khallouf
Chief Executive Officer
27 April 2023
Strategic Report continued
OVERVIEW
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07
Cadogan Energy Solutions plc Annual financial report 2022www.cadoganenergysolutions.com
Operations Review
Overview
At 31 December 2022, the Group held working interests in one
conventional gas, condensate and oil exploration and production
license in the west of Ukraine.
Summary of the Group’s licenses (as at 31 December 2022)
Working interest (%) License Expiry License type
1
99.8 Blazhiv November 2039 Production
West Ukraine
E&P activity remained focused
on maintaining its license and
safely and efficiently producing
from the existing wells as well
as implementing non-invasive
production enhancement scenarios
within the Blazhiv oil field.
Blazhivska license
During 2022, the average gross oil
production rated at 323bpd, which
is 8% lower than in 2021 (350bpd).
In March 2022 production was
suspended for three weeks and
was resumed after securing the
employees, the assets, the financial
transactions and the sales process. In
the second half of 2022, there have
been several production stoppages
due to the reduction of crude oil
consumption by oil refineries caused
mainly by the Russian strikes or by
power outage due to similar strikes
of electricity infrastructure. For the
purpose of geological construction
precision of Blazhiv oil field and
Monastyretska fold and also
identification of new perspective
structures within the license area
boundary, Cadogan launched
analyses for data reprocessing and
reinterpretation of old 2D seismic
data at the end of 2021. The Company
completed studies and received
the required data for field skeleton
structural and tectonic modelling.
Bitlyanska license
Usenco Nadra filed to the State
Geological Service an application
for a 20-year production license five
months ahead of 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 in awarding the new license
beyond the regular timeline provided
by legislation, the Company filed two
claims with the Administrative Court
to challenge the non-granting of the
20-year production license by the
Licensing Authority. During 2021 the
claims were not considered by the
Court due to delays caused by the
Covid-19 pandemic. In February 2022,
the Company received information
from the public register that its claim
was rejected by the Court of First
Instance. Despite the restrictions
imposed by the martial law in
Ukraine, Usenco Nadra exercised its
right for appeal against this decision
and submitted an appeal. In 2022,
the Kyiv Administrative Court and
further on the Supreme Court have
not taken into consideration the
Company’s arguments regarding the
Bitlyanska license award approval
and rejected the claims.
Gas trading
In light of these extreme volatilities
during the war the Company,
following its prudent and low risk
trading strategy, decided to monitor
the appropriate time for resuming
trading activity.
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 re-entry/
repairs and stimulation operations,
well surveys and field on-site
activities. In the context of the
prevailing situation in Ukraine, the
services segment was dedicated
totally to supporting the Group’s
production activities. Starting from
2022, production entities activities
and service entity activities will be
presented solely as Exploration and
Production segment result.
08
Cadogan Energy Solutions plc Annual financial report 2022 www.cadoganenergysolutions.com
Strategic Report continued
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 considered
non-deductible the recoverable
VAT, totalling $3.6 million, that
had subsequently been used to
offset output VAT. They additionally
considered that the subsidiary’s tax
losses carry forward of $15.3 million
should be reduced (note 22). In 2019,
Astroinvest Energy LLC filed a claim
against the tax authority’s decision.
The Court of First Instance and the
Court of Appeal decided in favour
of the position of Cadogan, but the
tax authorities filed an appeal with
the Supreme Court. In September
2022, the Supreme Court cancelled
all decisions of the fiscal authority
and issued a decision in favor of the
position defended by Cadogan.
Financial Review
Overview
In 2022, the Group had no trading
operations and its oil production
decreased by 8%. The average
realised oil price increased by 32%
and supported the Group revenue on
the same level as previous year. The
Group’s operating divisions delivered
a profit of $2.9 million (2021: profit of
$1.8 million excluding the impairment
of oil and gas assets).
The E&P business positively
contributed to the financial results
of the Group, due to the increase in
oil prices. The average realised oil
price increased by 32% from $55.7
to $73.4 per barrel. The trading
business was not active during 2022.
Cash position decreased to
$13.9 million as at 31 December 2022
compared to $15.0 million as at
31 December 2021.
Income statement
Revenues from production
increased from $7.0 million in 2021
to $8.5 million in 2022. This result
has been achieved, despite the
decrease in production volumes,
due to an increase in oil average
realised prices by 32%. E&P costs
of sales increased from $5.3 million
in 2021 to $5.6 million in 2022.
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 2022, E&P
made a positive contribution of
$2.9 million (2021: $1.8 million) to
gross profit.
The gas trading business had no
activities during 2022 (2021: revenue
of $1.8 million).
Administrative expenses (“G&A”)
remained contained with a decrease
of 7% compared to year 2021, note 8.
Balance sheet
The Property Plant & Equipment
(PP&E) balance was $6.6 million
at 31 December 2022 (2021:
$9.6 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. The Ukrainian Hryvna
was devaluated by 34% as at
31 December 2022 compared to
31 December 2021, generating a
movement in the E&E and PP&E
value presented in the US Dollar.
Trade and other receivables of
$0.3 million (2021: $0.2 million)
include $0.1 million of recoverable
VAT (2021: $0.1 million), which
is expected to be recovered
through production activities, and
$0.2 million (2021: $0.1 million) of
other receivables.
Inventories slightly increased
from $0.2 million to $0.3 million
principally due to the increase of
crude oil in the stock.
The Proger loan was held at
amortised cost at $15.8 million (2021:
$16.7 million). Refer to the Chief
Executive’s Report for further details
together with note 4(d) and 27.
The $1.4 million of trade and other
payables as at 31 December 2022
(2021: $1.5 million) consist of
$0.6 million (2021: $0.6 million) of
accrued expenses and $0.8 million
(2021: $0.9 million) of other creditors.
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Cadogan Energy Solutions plc Annual financial report 2022www.cadoganenergysolutions.com
Provisions include $0.4 million (2021:
$0.3 million) of long-term and current
provisions for decommissioning
costs which represents the present
value of costs that are expected to
be incurred in 2039 for producing
assets, when the license will
expire, and current provision for
the decommissioning costs of
Bitlyanska license.
Net cash decreased to $13.9 million
at 31 December 2022 compared to
$15.0 million at 31 December 2021.
This was mostly due to negative
operating cashflow and forex effect
of Hryvna and Euro nominated
cash accounts.
Cash flow statement
The Consolidated Cash Flow
Statement on page 58 shows
operating cash inflow before
movements in working capital
of $0.2 million (2021: outflow of
$0.4 million), which represents
mostly cash generated by the E&P
net of corporate expenses.
Related party transactions
Related party transactions are set
out in note 29 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
Hryvna, the local currency in Ukraine.
Since the martial law established in
February 2022 in Ukraine, the cash
generated in Ukraine must be kept in
Hryvna in Ukraine.
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Cadogan Energy Solutions plc Annual financial report 2022 www.cadoganenergysolutions.com
War risks
Risk Mitigation
Since Spring 2021, Russia has gradually increased
the concentration of military equipment, weapons
and troops near the Ukrainian borders. On
24 February 2022, the Russian troops attacked
Ukraine and invaded its territory. Severe fights
have been engaged in Kyiv, and several other
main cities like Kharkiv, Mariupol, Kherson, Sumy
and Chernihiv.
Missile attacks and bombing are used by the
Russian troops to destroy infrastructures
and facilities even in the western cities, like
Lviv. Cyber-attacks have increased. Given
the unpredictability of the issue of this war, a
full-scale invasion of Ukraine or a much longer
duration of this war could have material impacts
on the Group’s operations and on its human,
industrial and financial resources.
Anticipating the beginning of the war, the Group put in place,
since the beginning of February 2022, emergency procedures
communicated to all employees on the different sites in Ukraine
with an Emergency Committee communicating every day.
Safety measures have been dispatched with a remote working
organisation. Specific measures have been put in place for
the operations on site. In case of need, specific measures
were put in place to suspend the operations of the Blazhiv
field wells, with technical measures for decommissioning and
temporary conservation of the wells. The transmission and
internet connection systems have been secured with a satellite
connection. IT security has been reinforced. From February
2022 until June 2022, the salaries were paid in anticipation
to mitigate the risk of a shutdown of the banking system. The
Group is monitoring the situation daily and taking appropriate
action to ensure the safety and the essential needs of its
employees.
Operational risks
Risk Mitigation
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 CO
2
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 infection
with the virus for our employees, special measures have been
applied. These include administrative personnel remote working,
strict sanitary and hygiene 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 in the staff medical insurance coverage. We continue
to monitor the situation closely and will respond accordingly
as the position develops. To prevent the spread of Covid-19, the
Company continued strictly maintaining administrative and
healthcare measures to provide safe working conditions for its
employees as well as ensuring a reasonable vaccination level.
Risks and Uncertainties
There are several potential risks
and uncertainties that could have
a material impact on the Group’s
long-term performance and could
cause the results to differ materially
from expected and historical results.
Executive management review the
potential risks and then classify them
as having a high impact if above
$5 million, medium impact if above
$1 million but below $5 million, and
low impact if below $1 million. They
also assess the likelihood of these
risks occurring. Risk mitigation
factors are reviewed and documented
based on the level and likelihood of
occurrence. The Audit Committee
reviews the risk register and
monitors the implementation of risk
mitigation procedures via Executive
management, who are carrying out
a robust assessment of the principal
risks facing the Group, including
those potentially threatening its
business model, future performance,
solvency and liquidity.
The Group has analysed the following
categories as key risks:
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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 Group’s exposure there is limited.
Management strives to reduce emissions in everything the
Group does and has started implementing alternatives to offset
and/or mitigate emissions. In 2023, the Group 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. Contractor’s access to the operational
sites is allowed only after staff qualifications and the technical
condition of the equipment and machinery have been checked.
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
Risk Mitigation
The success of the business relies on accurate
and detailed analysis of the sub-surface. This can
be impacted by poor quality data, either historic
or recently gathered, and limited coverage.
Certain information provided by external sources
may not be accurate.
All externally provided and historic data is rigorously examined
and discarded when appropriate. New data acquisition is
considered, and appropriate programmes implemented, but
historic data can be reviewed and reprocessed to improve the
overall knowledge base. Agreements with qualified local and
international contractors have been entered into to supplement
and broaden the pool of expertise available to the Company.
Data can be misinterpreted leading to the
construction of inaccurate models and
subsequent plans.
All analytical outcomes are challenged internally and peer
reviewed. Analysis is performed using modern geological
software.
The area available for drilling operations is limited
due to logistics, infrastructures and moratorium.
This increases the risk for setting optimum
well coordinates.
Bottom hole locations are always checked for their operational
feasibility, well trajectory, rig type, and verified on updated sub-
surface models. They are rejected if deemed to be too risky.
The Group may not be successful in proving
commercial production from its licenses and
consequently the carrying values of the Group’s
oil and gas assets may have to be impaired.
The Group performs, on an annual basis, a review of its oil
and gas assets, impairs if necessary, and considers whether to
commission a review from a third party or a Competent Person’s
Report (“CPR”) from an independent qualified contractor
depending on the circumstances.
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Financial risks
Risk Mitigation
The Group is at risk from changes in the
economic environment both in Ukraine and
globally, which can cause foreign exchange
movements, changes in the rate of inflation and
interest rates and lead to credit risk in relation to
the Group’s key counterparties.
The martial law in Ukraine forbids the transfer of
cash outside of Ukraine. The cash held in Ukraine
must be held in the local currency (Hryvna).
The decrease of the value of the Hryvna is a
major risk on the cash held by the Group in
Ukraine. Since the martial law in Ukraine, there is
an obligation to keep the cash held by Cadogan
in Ukraine in Hryvna with period restrictions for
transfers out of the Country.
Revenues in Ukraine are received in UAH and expenditure is
made in UAH.
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. Before the war in Ukraine, foreign exchange risk was
considered a normal and acceptable business exposure and the
Group did not hedge against this risk for its E&P operations. The
Group is currently analysing different options.
In February 2019, Cadogan entered into a
two-year Loan Agreement (€13.385 million)
with Proger Management & Partners with a Call
Option that could be exercised by Cadogan,
between September 2019 and February 2021,
with no obligation, allowing a 33% equity interest
in Proger Ingegneria. This represented a key
transaction and element of the Group balance
sheet. At 25 February 2021, being the Maturity
Date, Cadogan did not exercise its Call Option and
PMP must reimburse €14,857,350. End of March
2021, PMP did not reimburse and asked for an
arbitration to get the Loan Agreement recognised
as an equity investment contract.
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. The
investigation is closed. On 28 July 2022, the Arbitration
Committee delivered an award rejecting Proger’s request,
established that the Loan Agreement was valid and effective,
and indicated the conditions precedent for the completion
of any transaction with Proger Ingegneria. In case of
non-completion, Proger must reimburse Cadogan according to
the Loan Agreement.
Refer to note 27 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 scrutinise 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.
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Country risks
Risk Mitigation
Legislative changes may bring unexpected
risk and create delays in securing licenses or
ultimately prevent licenses and license renewals/
conversions from being secured.
Compliance procedures, monitoring and appropriate dialogue
with the relevant authorities are maintained to minimise
the risk. In all cases, deployment of capital in Ukraine is
limited and investments are kept at the level required to fulfil
license obligations.
Other risks
Risk Mitigation
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 2019.
Statement of Reserves and Resources
In 2022, the Company conducted routine rig-less production support activities at the Blazhiv-1, Blazhiv-3 and
Blazhiv-Monastyrets-3 and Blazhiv-10 wells to maintain sustainable production using sucker rod pumping systems.
Summary of Reserves
1
at 31 December 2022 Mmboe
Proved, Probable and Possible Reserves at 1 January 2022 4.06
Production 0.12
Proved, Probable and Possible Reserves at 31 December 2022 3.94
In addition to the tabled reserves, Cadogan has 0.6 million boe of contingent resources associated with the
Blazhiv license.
1 The study was conducted in 2016 by Brend Vik.
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Corporate Responsibility
Under Section 414C of the
Companies Act 2006 (the “Act”),
the Board is required to disclose
information about environmental
matters, employees, human rights
and community issues, including
information about any policies it has
in relation to these matters and the
effectiveness of these policies.
Being sustainable in our activities
means conducting our business with
respect for the environment and for
the communities hosting us, with
the aim of increasing the benefit
and value to our stakeholders. We
recognise that this is a key element
to be competitive and to maintain
our license to operate.
The Board recognises that the
protection of the health and safety of
its employees, the communities and
the environment in which it operates
is not just an obligation but is part
of the personal ethics and beliefs of
management and staff. These are
the key drivers for a sustainable
development of the Company’s
activity. Cadogan 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 recognised
best practices and standards.
Our activities are carried out in
accordance with a policy manual,
endorsed by the Board, which has
been disseminated to all staff.
The manual includes a Working
with Integrity policy and policies
on business conduct and ethics,
anti-bribery, 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 pages 29
to 30.
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
2022 was extremely challenging due
to the Russian invasion of Ukraine
and the resulting subsequent war.
Cadogan applied measures to
mitigate the risk personnel injuries
and loss of well control. Kiev office
personnel have been relocated to
the safe regions of Ukraine; on-field
staff as well as all offices have
been equipped with satellite means
of communication; an internal
emergency committee has been
established and there is daily liaison
with company management. Three
employees have been mobilised to
the army during 2022.
Also, the HSE management daily
monitors health status of the
personnel in terms of Covid-19.
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
organisation with a focus on the
local community involvement. The
HSE management system ensures
that both Ukrainian and international
standards are met, with the Ukrainian
HSE legislation requirements taken
as an absolute minimum. All the
Group’s local operating companies
actively participate in the process.
ISO 14001 and ISO 45001 certification
were re-validated by the respective
authority in August 2022 for a
new term.
A proactive approach based on
a detailed induction process and
near miss reporting has been in
place throughout 2022 to prevent
incidents. Staff training on HSE
matters and discussions on near
miss reporting are recognised as the
key factors to continuously improve.
In-house training is provided to help
staff meet international standards
and follow best practice. The
process enacted by the certification
enhances attention to training
on risk assessments, emergency
response, incident prevention,
reporting and investigation, as well
as emergency drills regularly run on
operations’ sites and offices. This
process is essential to ensure that
international best practices and
standards are maintained to comply
with, or exceed, those required by
Ukrainian legislation, and to promote
continuous improvement.
The Board monitors the main
Key Performance Indicators (lost
time incidents, mileage driven,
training received, CO
2
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 2022,
the Group recorded over 154,000
man-hours worked with no incidents
and over 1,570,000 hours have
been worked since the last injury in
February 2016.
During 2022 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.
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Cadogan Energy Solutions plc Annual financial report 2022www.cadoganenergysolutions.com
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
levels 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 recognises the benefits
and importance of diversity (gender,
ethnicity, 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 2022. The
appointment of any new Director is
made based on merit. See page 16 for
more information on the composition
of the Board.
As at 31 December 2022, the
Company comprised a total of 75
persons, as follows:
Male Female
Non-Executive Directors 3 1
Executive Directors 1 –
Management, other than
Executive Directors 7 2
Other employees 41 20
Tot al 52 23
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 minimising 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 a new
legislation which introduces
Environmental Impact Assessment
studies and public hearings as part of
the license’s award/renewal processes
was anticipated effectively by the
Group. The Group is complying with
these requirements, building on
the recognised competence of its
people and advisors as well as on the
good communication and relations
established with local communities.
Cadogan is committed to the territory
and the communities where it operates
and has fully financed social programs
commitment for 2022 as per signed
Memorandum between the Company,
Lviv Regional Administration and local
communities in 2019.
In 2022, the Group’s operating
locations were subject to continuous
controlling levels of Covid-19 infection
and normal working patterns have
been disrupted. The Group is following
all the recommendations and provides
comprehensive measures inside the
Group to restrict Covid-19 infection and
spread.
Approval
The Strategic Report was approved by
the Board of Directors on 27 April 2023
and signed by order of the Board by:
Ben Harber
Company Secretary
27 April 2023
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Cadogan Energy Solutions plc Annual financial report 2022 www.cadoganenergysolutions.com
Board of Directors
Current directors
Michel Meeùs, 70, 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 Meeùs is currently Chairman of
the Remuneration and Nomination
Committees.
Fady Khallouf, 62, French
Chief Executive Officer
Fady Khallouf was appointed as
Director and CEO on 15 November
2019. He has a 35 years' 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, 58, 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, 71, 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.
Mr Mahaux is currently a member
of the Audit, Remuneration and
Nomination Committees.
Gilbert Lehmann, 77, 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.
OVERVIEW
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
REMUNERATION
REPORT
FINANCIAL
STATEMENTS GLOSSARY
SHAREHOLDER
INFORMATION
17
Cadogan Energy Solutions plc Annual financial report 2022www.cadoganenergysolutions.com
Directors
The Directors in office during the year and to the date of this report are as shown below:
Non-Executive Directors Executive Director
Michel Meeùs (Chairman) Fady Khallouf
Gilbert Lehmann
Lilia Jolibois
Jacques Mahaux
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
23 June 2023.
The biographies of the Directors in office at the date of this report are shown on page 16.
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 2022 and their connected persons in the Ordinary
shares of the Company at 31 December 2022 are set out below.
Director
Number of
Shares
Michel Meeùs 26,000,000
Fady Khallouf 10,425,455
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 authorise 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 2022 Annual General
Meeting, remains unused.
Dividends
The Directors do not recommend payment of a dividend for the year ended 31 December 2022 (2021: 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.
Report of the Directors
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Cadogan Energy Solutions plc Annual financial report 2022 www.cadoganenergysolutions.com
Subsequent events
In April 2023, SE Usenco Ukraine (a Cadogan subsidiary in Ukraine) completed the acquisition of the 5% share interest
of Usenco Nadra LLC that was not yet owned by the Company. As a result, SE Usenco Ukraine consolidates now 100%
of Usenco Nadra LLC in its ownership.
This acquisition will allow the Company to further optimise its operating structure in Ukraine and be more
cost-effective at Blazhiv field.
Structure of share capital
The authorised share capital of the Company is currently £30,000,000 divided into 1,000,000,000 Ordinary shares
of 3 pence each. The number of shares in issue as at 31 December 2022 was 244,128,487 Ordinary shares (each with
one vote) with a nominal value of £7,323,854.61. The total number of voting rights in the Company is 244,128,421. The
Companies (Acquisition of Own Shares) (Treasury Shares) Regulations 2003 allow companies to hold shares in treasury
rather than cancel them. Following the consolidation of the issued capital of the Company on 10 June 2008, there were
66 residual Ordinary shares, which were transferred to treasury. No dividends may be paid on shares whilst held in
treasury and no voting rights attached to shares held in treasury.
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 2022 and 19 April 2023, 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 2022 21 April 2023
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
Devola SA 17,409,000 7.13 17,409,000 7.13
CA Indosuez Wealth Management 15,966,620 6.54 15,966,620 6.54
Kellet Overseas Inc. 14,002,696 5.74 14,002,696 5.74
Mr Fady Khallouf 10,425,455 4.27 10,425,455 4.27
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
Report of the Directors continued
OVERVIEW
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
REMUNERATION
REPORT
FINANCIAL
STATEMENTS GLOSSARY
SHAREHOLDER
INFORMATION
19
Cadogan Energy Solutions plc Annual financial report 2022www.cadoganenergysolutions.com
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 27 April 2023 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 10 to 13.
Having considered the Company’s financial position and its principal risks and uncertainties, including uncertainties
regarding the war in Ukraine and 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 2022 to 31 December 2022.
Financial risk management objectives and policies
The Company’s financial risk management objectives and policies including its policy for managing its exposure of the
Company to price risk, credit risk, liquidity risk and cash flow risk.
Management co-ordinates access to domestic and international financial markets and monitors and manages the
financial risks relating to the operations of the Group in Ukraine through internal risks reports, which analyse
exposures by degree and magnitude of risks. These risks include commodity price risks, foreign currency risk, credit
risk, liquidity risk and cash flow interest rate risk. The Group does not enter into or trade financial instruments,
including derivative financial instruments, for speculative purposes.
Outlook
Future developments in the business of the Company are presented on page 6.
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 CO
2
equivalent of emissions from various sources (2018 update). Also, the used methodology
was also updated based on methods proposed by DNV GL and 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.
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Cadogan Energy Solutions plc Annual financial report 2022 www.cadoganenergysolutions.com
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 2022 increased compared to the previous year (14,631 tonnes in 2022 vs 13,063 tonnes in 2021).
This was caused by the increase of the gas factor in the produced oil.
Conversely, Scope 2 emissions decreased in 2022 (124 tonnes in 2022 vs 137 tonnes in 2021), as a result of the
processes started in 2016 to improve the efficiency of the structure, logistic and facilities. Total emissions in 2022 were
14,755 tonnes versus the 13,200 tonnes of 2021.
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) increased to 125,26 tonnes CO2e/Kboe in 2022 vs
103,4 tonnes CO2e/Kboe in 2021.
Total greenhouse gas emissions data for the year from 1 January to 31 December
CO
2
emissions level increase was caused by the increase of associated gas volume recovered during oil production.
Another factor which impacted the emissions level growing was the increase of methane in CO
2
level in the gas
composition as detected by bottomhole sampling oil analyses executed during the last hydrodynamic surveys of
Blazhiv wells. The Company has planned repetition survey and sampling in 2023 to reconcile the data as well as
different technological scenarios for reducing emissions to the atmosphere.
E&P
Greenhouse gas emissions source 2022 2021
Scope 1
Direct emissions, including combustion of fuel and operation of facilities (tonnes of CO
2
equivalent) 14,631 13,063
Scope 2
Indirect emissions from energy consumption, such as electricity and heating purchased for own use
(tonnes of CO
2
equivalent) 124 137
Total (Scope 1 & 2) 14,755 13,200
Normalisation factor
Barrels of oil equivalent, net 117,793 127,662
Intensity ratio
Emissions reported above normalised to tonnes of CO
2
e per total wellhead production of crude oil,
condensates and natural gas, in thousands of Barrels of Oil Equivalent, net 125.26 103.4
Energy consumption
The Company started in 2020 to monitor energy consumption in KwH.
2021
KwH
2020
KwH
% change
2022 – 2021
Ukraine 575,876 572,890 0.5%
Energy consumption in the UK is immaterial.
Report of the Directors continued
OVERVIEW
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
REMUNERATION
REPORT
FINANCIAL
STATEMENTS GLOSSARY
SHAREHOLDER
INFORMATION
21
Cadogan Energy Solutions plc Annual financial report 2022www.cadoganenergysolutions.com
Task force on climate-related financial disclosures (‘TCFD’)
Climate change remains one of the Group’s principal risks with governance over climate-related transition and physical
risks provided at the Board and operational levels. The Board has ultimate accountability for ensuring Cadogan
maintains sound climate risk management and internal control systems. The Board is ultimately accountable for
Cadogan’s strategic response to climate change and the energy transition. Directors are responsible for ensuring they
remain sufficiently informed of climate related risks to Cadogan and the broader energy sector.
TCFD-related disclosures
Governance Describe the Board’s oversight of climate-related risks and opportunities.
Describe Management’s role in assessing and managing climate-related risks
and opportunities.
pages 10 – 13
Strategy Describe the climate-related risks and opportunities the organisation has
identified over the short, medium and long term.
Describe the impact of climate-related risks and opportunities on the
organisation’s businesses, strategy and financial planning.
pages 4 – 6
Risk management Describe the organisation’s processes for identifying and assessing climate-
related risks.
Describe the organisation’s processes for managing climate-related risks.
Describe how processes for identifying, assessing and managing climate-
related risks are integrated into the organisation’s overall risk management.
pages 10 – 13
Metrics and targets Disclose the metrics used by the organisation to assess climate-related risks
and opportunities, in line with its strategy and risk management process.
page 28
Disclose Scope 1 and Scope 2 greenhouse gas (GHG) emissions.
Describe the targets used by the organisation to manage climate-related
risks, opportunities, and performances against targets.
pages 28 – 29
2023 Annual General Meeting
The 2023 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 2022 and any other announcements will be
published on our website – www.cadoganenergysolutions.com.
This Report of Directors comprising pages 17 to 21 has been approved by the Board and signed by the order of the Board by:
Ben Harber
Company Secretary
27 April 2023
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Cadogan Energy Solutions plc Annual financial report 2022 www.cadoganenergysolutions.com
Corporate Governance Statement
This Corporate Governance Statement forms part of the Report of Directors
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 and believe that the 2018 UK Corporate Governance
Code (“the Code”) issued by the Financial Reporting Council (“FRC”) provides a suitable benchmark for the Company’s
corporate governance framework. This Statement outlines how Cadogan Energy Solutions plc (“Cadogan” or the
“Company”) has applied the relevant principles of the Code and complied with its provisions.
During the year under review, the Company complied with all the provisions of the Code, other than the exceptions
noted below or elsewhere in this statement:
> Provision 5 (Workforce Engagement): Given the size of the business, the Board does not consider it appropriate
to adopt the suggested methods outlined within the UK Corporate Governance Code 2018 to engage with
its employees given the size of the Company. Employee engagement continues to be undertaken by senior
management and any issues are escalated to the Board through the Chief Executive Officer. The Board believes
that the arrangements in place are effective but will continue to keep this under review.
> Provision 9 (regarding the independence criteria of the Chair on appointment): Under the 2018 Corporate
Governance Code, the Company’s Chair, Mr Michel Meeùs, is not considered to be independent given the size of his
shareholding in the Company. Despite this, the Board considers Mr Meeùs to be independent in character, mindset
and judgment.
> Provision 21 (Board Evaluation): Given the size of the Board it was felt that a board evaluation would not provide
added value; however, the Board will continue to assess this provision periodically.
> Provision 24 (Audit Committee Composition): Given the size of the Board, the Audit Committee does not totally
consist of independent Non-Executive Directors. Ms Lilia Jolibois, Independent Non-Executive Director, chairs the
Audit Committee whilst Mr Jacques Mahaux, Non-Executive Director, is a member of the Audit Committee.
> Provision 32 (Remuneration Committee Composition): Given the size of the Board, the Remuneration Committee
does not totally consist of independent Non-Executive Directors. The Remuneration Committee consists of Mr
Michel Meeùs, Ms. Lilia Jolibois, Mr Jacques Mahaux and Mr Gilbert Lehmann.
Board leadership and Company purpose
The Board provides leadership and oversight, and its role is to ensure the long-term success of the Company by
implementing the Company’s strategy and business plan, overseeing its affairs, and providing constructive challenge
to management as they do this. In addition to this, the Board oversees financial matters, governance, internal controls
and risk management. The purpose of the Board is to:
> monitor Group activities to see that sustainable value is being created;
> evaluate business strategies and monitor their implementation;
> monitor and review the performance of management;
> provide accountability to shareholders through appropriate reporting and regulatory compliance;
> understand and ensure the management of operational business and financial risks to which the Group is exposed;
and
> ensure that the financial controls and systems of risk management are robust and defensible!
The Board comprises a Non-Independent Non-Executive Chairman, 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 16.
The formal schedule of matters reserved for the Board’s decision is available on the Company’s website.
The Board recognises the importance of building strong relationships with stakeholders and understanding their views
in order to help the Company deliver its strategy and promote the development of the business over the long term.
The Board is committed to having effective engagement with its stakeholders. Our section 172 statement can be found
on pages 25 and 26 which summarises the Board’s engagement with the Company’s main stakeholders and some
examples of how their views have been taken into account in the Board’s decision-making.
OVERVIEW
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REPORT
CORPORATE
GOVERNANCE
REMUNERATION
REPORT
FINANCIAL
STATEMENTS GLOSSARY
SHAREHOLDER
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Cadogan Energy Solutions plc Annual financial report 2022www.cadoganenergysolutions.com
The Company seeks to ensure that it always acts lawfully, ethically and with integrity. The Company has in place the
following policies which the Board reviews periodically:
> Code of Business Conduct and Ethics
> Anti-Bribery Policy
> Share Dealing Code
> Disclosure Policy
> Health, Safety and Environmental policies.
The Company has procedures in place for managing conflicts of interest. Should a Director become aware that they,
or any of their connected parties, have an interest in an existing or proposed transaction with the Company, its
subsidiaries or any matters to be discussed at meetings, they are required to formally notify the Board in writing or
at the next Board meeting. In accordance with the Companies Act 2006 and the Company’s Articles of Association,
the Board may authorise any potential or actual conflict of interest that may otherwise involve any of the Directors
breaching his or her duty to avoid conflicts of interest. All potential and actual conflicts approved by the Board are
recorded in register of conflicts, which is reviewed by the Board at each Board meeting.
Directors’ declarations of interests is a regular Board agenda item. A register of Directors’ interests (including any
actual or potential conflicts of interest) is maintained and reviewed regularly to ensure all details are kept up to date.
Authorisation is sought prior to a Director taking on a new appointment or if any new conflicts or potential conflicts
arise. New Directors are required to declare any conflicts, or potential conflicts, of interest to the Board at the first
Board meeting after his or her appointment. The Board believes that the procedures established to deal with conflicts
of interest are operating effectively.
Division of responsibilities
The Directors possess a wide range of skills, knowledge and experience relevant to the strategy of the Company,
including financial, legal, governance, regulatory and industry experience as well as the ability to provide constructive
challenge to the views and actions of executive management in meeting agreed strategic goals and objectives.
The roles and responsibilities of the Chairman and Chief Executive Officer are separate with a clear and formal division
of each individual’s responsibilities, which has been agreed and documented by the Board.
The Non-Executive Directors bring an independent view to the Board’s discussions and the development of its strategy.
Their range of experience ensures that management’s performance in achieving the business goals are challenged
appropriately. Two Non-Executive Directors, Ms Lilia Jolibois and Mr Gilbert Lehmann, are considered by the Board to
be independent. Mr Gilbert Lehmann, Senior Independent Non-Executive Director, has served on the Board for longer
than 9 years since his appointment, the Board is of the view that he retains his independent judgment and continues to
make a valuable contribution to the Board.
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
judgment and free from relationships or circumstances that could affect their judgment.
The Board has access to the advice of the company secretary.
Composition, succession and evaluation
The Company has established a nomination committee which leads the process for Board appointments by identifying
and nominating candidates for the approval of the Board to fill Board vacancies and making recommendations to the
Board on the Board’s composition and balance. The Company’s Nomination Committee Report can be found on page 31.
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 2023
Annual General Meeting due to be held on 23 June 2023.
All Directors continue to be effective and have sufficient time available to perform their duties. The letters of
appointment for the Non-Executive Directors are available for review at the Registered Office and prior to the
Annual General Meeting. Each of the Non-Executive Directors independently ensures that they update their skills and
knowledge sufficiently to enable them to fulfil their duties appropriately.
The Chairman, in conjunction with the Company Secretary, plans the programme for the Board during the year. While
no formal structured continuing professional development program has been established for the Non-Executive
Directors, every effort is made to ensure that they are fully briefed before Board meetings on the Company’s business.
The agenda for Board and Committee meetings are considered by the relevant Chairman and issued with supporting
papers during the week preceding the meeting. For each Board meeting, the Directors receive a Board pack including
management accounts, briefing papers on commercial and operational matters and major capital projects including
acquisitions. The Board also receives briefings from key management on specific issues.
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Cadogan Energy Solutions plc Annual financial report 2022 www.cadoganenergysolutions.com
Audit, risk and internal control
The Board has delegated certain responsibilities to its committees including its audit committee. The Company’s Audit
Committee Report can be found on pages 27 to 28.
The role of the Audit Committee is to monitor the integrity of the Company’s financial reporting, to review the
Company’s internal control and risk management systems and to oversee the relationship with the Group’s external
auditors. The Audit Committee focuses particularly on compliance with legal requirements, accounting standards and
the rules of the Financial Services Authority. The Audit Committee will meet at least three times a year with further
meetings that are determined by the committee. Any member of the committee or the external auditors may request
any additional meetings they consider necessary.
The Directors are responsible for the Group’s system of internal control and for maintaining and reviewing its
effectiveness. The Group’s systems and controls are designed to safeguard the Group’s assets and to ensure the
reliability of information used both within the business and for publication. The Board has delegated responsibility for
the monitoring and review of the Group’s internal controls to the Audit Committee.
Systems are designed to manage, rather than eliminate the risk of failure to achieve business objectives and can
provide only reasonable, and not absolute assurance against material misstatement or loss.
The key features of the Group’s internal control and risk management systems that ensure the accuracy and reliability
of financial reporting include clearly defined lines of accountability and delegation of authority, policies and procedures
that cover financial planning and reporting, preparing consolidated financial statements, capital expenditure, project
governance and information security.
The key features of the internal control systems, which operated during 2022 and up to the date of signing the
Financial Statements, are documented in the Group’s Corporate Governance Policy Manual and Finance Manual. These
manuals and policies have been circulated and adopted throughout the Group throughout the period.
Day-to-day responsibility for the management and operations of the business has been delegated to the Chief
Executive Officer and senior management. Certain specific administrative functions are controlled centrally. Taxation
and treasury functions report to the Group Director of Finance who reports directly to the Chief Executive Officer.
The legal function for Ukraine’s related assets and activities is managed by the General Counsel, who reports to the
General Director of Cadogan Ukraine. The Health, Safety and Environment functions report to the Chairman of the HSE
Committee, the HSE Committee Report can be found on pages 29 and 30. 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.
A summary of the principal risks facing the Company and the mitigating actions in place are contained on pages 10 to
13 of the annual report.
The Company’s going concern is contained on page 19 of the annual report.
Further information on the work undertaken by the Committee during the year can be found on pages 27 to 28 of the
annual report.
Remuneration
The Board has established a Remuneration Committee and the Company’s Remuneration Committee Report can be
found on pages 33 to 47 of the annual report.
The role of the Remuneration Committee is to determine and agree with the Board the broad policy for the
remuneration of executives and Senior Managers as designated, as well as for setting the specific remuneration
packages, including pension rights and any compensation payments of all Executive Directors and the Chairman. The
Company’s remuneration policies and practices are designed to support its long-term strategy and promote the long-
term sustainable success of the Company.
Corporate Governance Statement continued
This Corporate Governance Statement forms part of the Report of Directors
OVERVIEW
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
REMUNERATION
REPORT
FINANCIAL
STATEMENTS GLOSSARY
SHAREHOLDER
INFORMATION
25
Cadogan Energy Solutions plc Annual financial report 2022www.cadoganenergysolutions.com
Attendance at meetings
Six Board meetings took place during 2022. 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
6 2 –* 1
No. Attended:
M Meeùs 6 N/A – 1
F Khallouf 6 N/A N/A N/A
L Jolibois 6 2 – 1
G Lehmann 6 N/A – 1
J Mahaux 6 2 – 1
* There was no meeting of the Nomination Committee held during 2022.
Responsibilities and membership of Board Committees
The Board has agreed written terms of reference for the Nomination Committee, Remuneration Committee, Audit
Committee and HSE committee. The terms of reference for the Board Committees are published on the Company’s
website, www.cadoganenergysolutions.com, and are also available from the Company Secretary at the Registered
Office. A review of the Committees including their membership and activities of all Board Committees is provided on
pages 27 to 31.
Relations with shareholders
The Chairman and Executive Directors of the Company have a regular dialogue with analysts and substantial
shareholders. The outcome of these discussions is reported to the Board at quarterly meetings and discussed in detail.
Mr Lehmann, as the Senior Independent Director, is available to meet with shareholders who have questions that they
feel would be inappropriate to raise via the Chairman or Executive Directors.
The Annual General Meeting is used as an opportunity to communicate with all shareholders. In addition, financial
results are posted on the Company’s website, www.cadoganenergysolutions.com, as soon as they are announced. The
Notice of the Annual General Meeting is also contained on the Company’s website, www.cadoganenergysolutions.com.
It is intended that the Chairmen of the Nomination, Audit and Remuneration Committees will be present
at the Annual General Meeting. The results of all resolutions will be published on the Company’s website,
www.cadoganenergysolutions.com.
Directors’ section 172 statement
The disclosure describes how the Directors have regard to the matters set out in section 172(1)(a) to (f) and forms the
Directors’ statement required under section 414CZA of The Companies Act 2006. 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 recognise that this is
a key element to be competitive and to maintain our licence to operate.
Further details of how the Directors have regard to the issues, factors and stakeholders considered relevant in
complying with S 172 (1) (a)-(f), the methods used to engage with stakeholders and the effect on the Group’s decision
making can be found throughout the annual report and in particular page 25 (which outlines how the Company
engages with its stakeholders), pages 14 to 15 (which contains Cadogan’s corporate responsibility statement) pages
19 to 21 (which contains the Company’s report on greenhouse gas emissions) and page 25 (which outlines the ways in
which the Company engages with its shareholders).
26
Cadogan Energy Solutions plc Annual financial report 2022 www.cadoganenergysolutions.com
The Group has implemented an integrated HSE management system aiming to ensure a safe and environmentally
friendly culture in the organisation (pages 14 to 15). 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 6, 19).
When assessing the Proger Loan, the Directors carefully considered the issues and decisions with their impact on the
Group and all its stakeholders (pages 6, 10 to 13).
The Board has a formal schedule of matters specifically reserved for its decision, including approval of acquisitions and
disposals, major capital projects, financial results, Board appointments, dividend recommendations, material contracts
and Group strategy. For each Board meeting, the Directors receive a Board pack including management accounts,
briefing papers on commercial and operational matters and major capital projects including acquisitions. The Board
also receives briefings from key management on specific issues.
In particular, as a consequence of the invasion of Ukraine by Russia in February 2022 and the war situation prevailing
in Ukraine, the Board discussed the current situation and its consequences on the security of the employees, the
organisation of the operations in Ukraine and the potential impacts on its human, financial and operational assets.
The Group has been able to implement immediately emergency procedures with safety and protection measures
communicated to all employees and put in place for every location. Specific measures have been put in place for the
operations on site to ensure the human, the industrial and the environmental safety. The Group is monitoring the
situation daily and taking appropriate action to ensure the safety and essential needs of its employees.
Corporate Governance Statement continued
This Corporate Governance Statement forms part of the Report of Directors
OVERVIEW
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
REMUNERATION
REPORT
FINANCIAL
STATEMENTS GLOSSARY
SHAREHOLDER
INFORMATION
27
Cadogan Energy Solutions plc Annual financial report 2022www.cadoganenergysolutions.com
Board Committee Reports
Audit Committee Report
The Audit Committee is appointed by the Board, on the recommendation of the Nomination Committee, from the
Non-Executive Directors of the Group. The Audit Committee’s terms of reference are reviewed 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.cadoganenergysolutions.com, and are also available from the Company
Secretary at the Registered Office. Two members constitute a quorum.
Responsibilities
> To monitor the integrity of the annual and interim financial statements, the accompanying reports to shareholders,
and announcements regarding the Group’s results;
> To review and monitor the effectiveness and integrity of the Group’s financial reporting and internal financial controls;
> To review the effectiveness of the process for identifying, assessing and reporting all significant business risks and the
management of those risks by the Group;
> To oversee the Group’s relations with the external auditor and to make recommendations to the Board, for approval
by shareholders, on the appointment and removal of the external auditor;
> To consider whether an internal audit function is appropriate to enable the Audit Committee to meet its objectives;
and
> To review the Group’s arrangements by which staff of the Group may, in confidence, raise concerns about possible
improprieties in matters of financial reporting or other matters.
Governance
Ms Jolibois 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 2022 external audit plan;
> discussing the results of the audit including the auditor’s views on material accounting issues and key judgments
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 judgments, estimates and underlying assumptions; and
> assessed whether the financial statements are fair, balanced and understandable.
28
Cadogan Energy Solutions plc Annual financial report 2022 www.cadoganenergysolutions.com
Going concern
After making enquiries and considering the uncertainties described on pages 10 to 13, 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 10 to 13 and in note 27 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.
A breakdown of the non-audit fees is disclosed in note 11 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
27 April 2023
Board Committee Reports continued
OVERVIEW
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
REMUNERATION
REPORT
FINANCIAL
STATEMENTS GLOSSARY
SHAREHOLDER
INFORMATION
29
Cadogan Energy Solutions plc Annual financial report 2022www.cadoganenergysolutions.com
Health, Safety and Environment Committee Report
The Health, Safety and Environment Committee (the ”HSE Committee”) is appointed by the Board, on the
recommendation of the Nomination Committee. The HSE Committee’s terms of reference are reviewed annually by
the Committee and any changes are then referred to the Board for approval. The terms of reference of the Committee
are published on the Company’s website, www.cadoganenergysolutions.com, and are also available from the Company
Secretary at the Registered Office. Two members constitute a quorum, one of whom must be a Director.
Governance
The Committee is chaired by Mr Andrey Bilyi (Cadogan Ukraine General Director) as acting Head of the HSE Committee
and its other member is Ms Snizhana Buryak (HSE Manager). The CEO attends meetings of the HSE Committee as
necessary. During 2022, the HSE Committee held four meetings to monitor the HSE risks and activities across the
business, following which actions were identified for the continuous improvement of the various processes and the
mitigation of risk.
Responsibilities
> To regularly maintain and implement the continuous improvement of the HSE Management System with the aim of
improving the Company’s performances;
> To manage and mitigate the risks of personnel infection with Covid-19 virus. Work out respective administrative and
healthcare measures to provide safe working conditions for the employees. Prevent the spread of Covid-19 as well
as ensuring staff reasonable vaccination level.
> 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;
30
Cadogan Energy Solutions plc Annual financial report 2022 www.cadoganenergysolutions.com
> Interaction with contractors, authorities, local communities and other stakeholders were discussed among other
HSE activities;
> Compliance to ISO 14001 and ISO 45001 has been proved by the authorised third-party auditor. Also the Company
had its entire data calculation process as well as emissions measurement system re-validated by a different
independent third party;
> 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.
Board Committee Reports continued
OVERVIEW
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
REMUNERATION
REPORT
FINANCIAL
STATEMENTS GLOSSARY
SHAREHOLDER
INFORMATION
31
Cadogan Energy Solutions plc Annual financial report 2022www.cadoganenergysolutions.com
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.cadoganenergysolutions.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, ethnicity, age, sex, disability, educational and professional backgrounds, etc.) on the Board and, in the light
of this evaluation, prepare a description of the role and capabilities required for a particular appointment; and
> In identifying suitable candidates, the Nomination Committee shall use open advertising or the services of external
advisers to facilitate the search and consider candidates from a wide range of backgrounds on merit, ensuring that
appointees have enough time available to devote to the position.
The Nomination Committee shall also make recommendations to the Board concerning:
> Formulating plans for succession for both Executive and Non-Executive Directors and in particular for the key roles
of Chairman and Chief Executive Officer;
> Membership of the Audit and Remuneration Committees, in consultation with the Chairmen of those committees;
> The reappointment of any Non-Executive Director at the conclusion of their specified term of office, having given
due regard to their performance and ability to continue to contribute to the Board in the light of the knowledge,
skills and experience required; and
> The re-election by shareholders of any Director having due regard to their performance and ability to continue to
contribute to the Board in the light of the knowledge, skills and experience required.
Any matters relating to the continuation in office of any Director at any time including the suspension or termination
of service of an Executive Director as an employee of the Company subject to the provisions of the law and their
service contract.
Michel Meeùs
Nomination Committee Chairman
27 April 2022
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Cadogan Energy Solutions plc Annual financial report 2022 www.cadoganenergysolutions.com
Remuneration Committee
Statement from the Chairman
I am pleased to present the Annual Report on Remuneration for the year ended 31 December 2022.
Cadogan’s Remuneration Policy was approved as proposed by the shareholders at the Annual General Meeting of
June 25, 2021 and is attached at the end of the Annual Report on Remuneration. The Remuneration Committee is not
proposing to make any changes to the existing Policy; however, in line with industry best practice and the three-year
Policy cycle the Company will be seeking shareholder approval at this year’s AGM.
The key elements of the Remuneration Policy are:
> A better long-term alignment of the executives’ remuneration with the interests of the shareholders;
> A material reduction in the maximum remuneration level for the Executive Directors, both in terms of annual bonus
and of long-term incentive (performance share plan);
> The payment of at least 50% of the Annual Bonus in shares with the remaining 50% to be paid in cash or shares at
the discretion of the Remuneration Committee. Shares will be priced for this award based on their market value at
closing on the Business Day prior to the Subscription Date;
> The introduction of claw-back and malus provisions on both bonuses and share awards; and
> The expectation that the Executive Directors build a substantial shareholding position in the Company through
their mandate.
Michel Meeùs
Chairman of the Remuneration Committee
27 April 2023
Board Committee Reports continued
OVERVIEW
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
REMUNERATION
REPORT
FINANCIAL
STATEMENTS GLOSSARY
SHAREHOLDER
INFORMATION
33
Cadogan Energy Solutions plc Annual financial report 2022www.cadoganenergysolutions.com
Remuneration Committee Report
The Remuneration Committee is committed to principles of accountability and transparency to ensure that
remuneration arrangements demonstrate a clear link between reward and performance.
Governance
The Remuneration Committee is appointed by the Board from the Non-Executive Directors of the Company. The
Remuneration Committee’s terms of reference are reviewed annually by the Remuneration Committee and any
changes are then referred to the Board for approval. The terms of reference of the Remuneration Committee are
published on the Company’s website, www.cadoganenergysolutions.com, and are also available from the Company
Secretary at the Registered Office.
The Remuneration Committee consists of Mr Michel 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.
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.
Annual Report on Remuneration 2022
34
Cadogan Energy Solutions plc Annual financial report 2022 www.cadoganenergysolutions.com
Single total figure of remuneration for Executive and Non-Executive Directors (audited)
$
Salary and fees
$
Taxable benefit
1
$
Contributions to
pension schemes
$
Annual bonus
$
Total
Executive Director 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021
F Khallouf 479,720 519,926 29,486 30,173 75,035 78,619 –
–
584,241 628,717
Non-Executive Directors
M Meeùs 89,000 89,000 – - - - - - 89,000 89,000
L Jolibois 48,000 48,000 - - - - - - 48,000 48,000
J Mahaux 43,000 43,000 - - - - - - 43,000 43,000
G Lehmann 38,000 38,000 - - - - - - 38,000 38,000
$
Total Fixed Remuneration
$
Total Variable Remuneration
2022 2021 2022 2021
Executive Director 584,241 628,717 – –
Non-Executive Directors 218,000 218,000 – –
Notes to the table
Mr Fady Khallouf
Mr Khallouf was appointed as Chief Executive Officer on 15 November 2019. Mr Khallouf’s salary is €440,000 per annum.
KPIs
The CEO is subject to a performance-related bonus scheme built around a scorecard with a set of challenging KPIs
aligned with the Company strategy. Given the current situation in Ukraine and any potential future difficulties for the
Company, Mr Fady Khallouf had requested that any annual performance-related bonus to be considered and paid by
the Remuneration Committee during 2023, in respect of the financial year ended 31 December 2022, be waived.
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 January 2020 with
effect from 15 November 2019. The fees are as follows: the Chairman’s fee at $89,000 and the fee for acting as a
Non-Executive Director at $38,000 with an additional $10,000 for acting as Chairman of the Audit Committee and an
additional $5,000 for a committee membership.
Scheme interests awarded during the financial year (audited)
There were no scheme interests awarded during the year.
Payments to past Directors (audited)
In 2022 there were no payments to past directors.
Payments for loss of office (audited)
No notice period was either worked or paid.
Annual Report on Remuneration 2022
continued
1 Taxable benefits include insurance provided to the executive and leased car.
OVERVIEW
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
REMUNERATION
REPORT
FINANCIAL
STATEMENTS GLOSSARY
SHAREHOLDER
INFORMATION
35
Cadogan Energy Solutions plc Annual financial report 2022www.cadoganenergysolutions.com
Directors’ interests in shares (audited)
The beneficial interests of the Directors in office as at 31 December 2022 and their connected persons in the Ordinary
shares of the Company at 31 December 2022 are set out below.
Shares as at 31 December 2022 2021
Michel Meeùs 26,000,000 26,000,000
Fady Khallouf 10,425,455 10,425,455
Gilbert Lehmann – –
Lilia Jolibois – –
Jacques Mahaux – –
There were no changes in the Directors' shareholding at 31 December 2022 compared to 31 December 2021.
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.
0
50
100
150
200
250
01/01/2009
30/06/2009
31/12/2009
30/06/2010
31/12/2010
30/06/2012
31/12/2012
30/06/2011
31/12/2011
30/06/2013
31/12/2013
30/06/2014
30/06/2015
30/06/2017
31/12/2014
31/12/2015
31/12/2017
30/06/2016
31/12/2016
FTSE All Share Oil & Gas
Cadogan Petroleum plc
31/12/2021
31/12/2021
31/12/2022
31/12/2022
31/12/2020
30/06/2020
30/06/2018
31/12/2018
30/06/2019
31/12/2019
36
Cadogan Energy Solutions plc Annual financial report 2022 www.cadoganenergysolutions.com
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
1
15,987 243,132 – – – 691,528
2016 487,080 15,353 210,504
2
– – – 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
3
– – – 1,033,143
2020 517, 3 89 59,294 – – 58,300 – 634,983
2021 535,999 30,173 – – 78,619 – 644,791
2022 479,720 29,486 – – 75,035 – 584,241
1 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.
2 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.
3 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.
In 2022, the Remuneration Committee, after consultation with the CEO, have decided to postpone any variable
performance related bonus for year ended 2022 given the impact of Covid-19 and volatility in oil and gas prices.
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
payout against
maximum
opportunity %
2022 Mr Khallouf 584,241 –
2021 Mr Khallouf 628,717 –
2020 Mr Khallouf 634,983 –
2019 Mr Khallouf
1
444,465 –
Mr Michelotti 588,678 10
2018 Mr Michelotti 76 3, 374 32
2017 Mr Michelotti 651,553 12
2016 Mr Michelotti 712,937 22
2
2015 Mr Michelotti 502,021 27
3
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
4
–
2011 Mr Michelotti
5
273,201 –
Mr Barron 395,984 –
2010 Mr Barron 547,067 –
2009 Mr Barron
6
707,085 67
Annual Report on Remuneration 2022
continued
1 Includes a welcome bonus for Mr Khallouf equivalent in value of 5,500,000 ordinary shares based on share’s price of £0.0525.
2 Mr Michelotti undertook to use the entire bonus to buy company’s share at market price in order to leave the Company cash neutral.
3 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.
4 $280,298 paid as fees, pension and loss of office.
5 From 1 August 2011.
6 From 19 March 2009.
OVERVIEW
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CORPORATE
GOVERNANCE
REMUNERATION
REPORT
FINANCIAL
STATEMENTS GLOSSARY
SHAREHOLDER
INFORMATION
37
Cadogan Energy Solutions plc Annual financial report 2022www.cadoganenergysolutions.com
Percentage change in the remuneration of the Chief Executive
The following table shows the percentage change in the remuneration of the Chief Executive in 2022 and 2021
compared to that of all employees within the Group.
2022
$’000
2021
$’000
Average
Change %
Base salary CEO 480 536 (8%)
All employees
7
1,897 1,978 (4%)
Taxable benefits CEO 104 108 (3%)
All employees 125 126 (1%)
Annual Bonus CEO – – –
All employees – – –
Total CEO 584 628 (7%)
All employees 2,022 2,104 (4%)
In 2022 none of the Directors participated in long-term incentives.
In 2022 there was no increase in Executive and Non-Executive Directors' salary in base currency. The difference in pay
represents the change in exchange rate between the base currency and USD as a reporting currency.
Percentage change in Non-Executive Director remuneration
Michel Meeùs All employees
2022
$’000
2021
$’000
% change
2022 – 2021
% change
2022 – 2021
Base salary/fees 89,000 89,000 – (4%)
Taxable benefits (including pensions) – – – (1%)
Annual bonus – – – –
Total 89,000 89,000 – (4%)
Lilia Jolibois All employees
2022
$’000
2021
$’000
% change
2022 – 2021
% change
2022 – 2021
Base salary/fees 48,000 48,000 – (4%)
Taxable benefits (including pensions) – – – (1%)
Annual bonus – – – –
Total 48,000 48,000 – (4%)
Jacques Mahaux All employees
2022
$’000
2021
$’000
% change
2022 – 2021
% change
2022 – 2021
Base salary/fees 43,000 43,000 – (4%)
Taxable benefits (including pensions) – – – (1%)
Annual bonus – – – –
Total 43,000 43,000 – (4%)
Gilbert Lehmann All employees
2022
$’000
2021
$’000
% change
2022 – 2021
% change
2022 – 2021
Base salary/fees 38,000 38,000 – (4%)
Taxable benefits (including pensions) – – – (1%)
Annual bonus – – – –
Total 38,000 38,000 – (4%)
7 All employees mean all employees of the Group, including CEO and other Directors (note 12, page 70).
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Cadogan Energy Solutions plc Annual financial report 2022 www.cadoganenergysolutions.com
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 2021 and 31 December 2022.
2022
$’000
2021
$’000
Year-on-year
change, %
All-employee remuneration 2,022 2, 104 (4%)
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 25 June
2021 and remains unchanged. The Remuneration Policy can be found on the Group’s website and at pages 39 to 47 of
this Annual Report on Remuneration. The votes cast by proxy is as follows:
Directors’ Remuneration Policy Number of votes % of votes cast
For 100,135,172 82.19
Against 21,693,116 17.81
Total votes cast 121,828,288 100.00
Number of votes withheld 0
The Directors’ Annual Report on Remuneration is approved by shareholders at each Annual General Meeting.
A summary of the votes cast by proxy in 2022 and 2021 were as follows:
2022 2021
Director’s Annual Report on Remuneration Number of votes % of votes cast Number of votes % of votes cast
For 83,255,878 91.89 100,135,172 82.19
Against 7,348,465 8.11 21,693,116 17.81
Total votes cast 90,604,343 121,828,288 100.00
Number of votes withheld 5,234 –
Implementation of Remuneration Policy in 2022
The performance related elements of remuneration remain unchanged and will be built around a scorecard with a set
of KPIs aligned with the Group strategy. The Remuneration Policy can be found on the Group’s website and at pages 39
to 47 of this Annual Report on Remuneration.
Approval
The Directors’ Annual Report on Remuneration was approved by the Board on 27 April 2023 and signed on its behalf by:
Michel Meeùs
Chairman
27 April 2023
Annual Report on Remuneration 2022
continued
OVERVIEW
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REPORT
CORPORATE
GOVERNANCE
REMUNERATION
REPORT
FINANCIAL
STATEMENTS GLOSSARY
SHAREHOLDER
INFORMATION
39
Cadogan Energy Solutions plc Annual financial report 2022www.cadoganenergysolutions.com
Directors’ Remuneration Policy
Introduction
This Directors’ Remuneration Policy (the “Policy”) contains the information required to be set out as the directors’
remuneration policy for the purposes of The Large and Medium-sized Companies and Groups (Accounts and Reports)
(Amendment) Regulations 2013.
The Policy was approved by shareholders at the 2021 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
1
.
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.
1 Please note that the salary of the CEO for 2022 remain at €440,000.
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Cadogan Energy Solutions plc Annual financial report 2022 www.cadoganenergysolutions.com
Component
Purpose and
link to strategy
Maximum
opportunity Operation and 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.
Annual Report on Remuneration 2022
continued
OVERVIEW
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
REMUNERATION
REPORT
FINANCIAL
STATEMENTS GLOSSARY
SHAREHOLDER
INFORMATION
41
Cadogan Energy Solutions plc Annual financial report 2022www.cadoganenergysolutions.com
Component
Purpose and
link to strategy
Maximum
opportunity Operation and performance measures
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 three
years and, for Directors, the PSP awards have a further
holding period of two 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.
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Cadogan Energy Solutions plc Annual financial report 2022 www.cadoganenergysolutions.com
Component
Purpose and
link to strategy
Maximum
opportunity Operation and performance measures
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.
Annual Report on Remuneration 2022
continued
OVERVIEW
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REPORT
CORPORATE
GOVERNANCE
REMUNERATION
REPORT
FINANCIAL
STATEMENTS GLOSSARY
SHAREHOLDER
INFORMATION
43
Cadogan Energy Solutions plc Annual financial report 2022www.cadoganenergysolutions.com
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 judgment 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.
2022 Annual bonus scorecard measures for Executive Director
40% weighting 50% weighting
Operational performance, such as production, sales,
geographical diversification, and starting new projects.
Company financial performance, including cash targets and
profit targets.
10% weighting
Indicators of health and safety to promote the effective risk
management of the Company.
(b) Share Plans
The Remuneration Committee will make the vesting of a Plan award conditional upon the satisfaction of stretching
but realistic performance conditions. These conditions are meant to achieve a long-term alignment of the executives’
remuneration with the interest of the shareholders.
EBITDA growth, increase of P1 reserves (in millions boe), and changes to the free cash-flow are the key KPIs to be used
by the Remuneration Committee and will be measured over time periods of three financial years. The performance
measures are chosen to align the performance of participants with the attainment of financial performance
targets over the vesting period of the award. The targets are set by the Remuneration Committee by reference to
the Company's strategy and business plan and the results achieved at the time of the vest are determined by the
Remuneration Committee.
Under the PSP plan rules, the Board may vary a performance target where it considers that any performance target to
which an award is subject is no longer a true or fair measure of the participant's performance, provided that the Board
must act fairly and reasonably and that the new performance target is materially no more difficult and no less difficult
to satisfy than the original performance target.
Malus and clawback (applicable to bonuses and share awards)
The Remuneration Committee has the discretion to reduce the bonus before payment or require the Executive Director
to pay back shares or a cash amount in the event of material financial misstatement of the Company or fraud or material
misconduct on the part of the executive. The amount that may be clawed back on any such event is limited to the value
of the bonus, taking into account the cash paid and the shares delivered to the executive, taking the value of the shares
at the time of the clawback, less any income tax or employee social security contributions paid on the bonuses.
Share ownership guidelines for 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.
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Cadogan Energy Solutions plc Annual financial report 2022 www.cadoganenergysolutions.com
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.
Annual Report on Remuneration 2022
continued
OVERVIEW
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
REMUNERATION
REPORT
FINANCIAL
STATEMENTS GLOSSARY
SHAREHOLDER
INFORMATION
45
Cadogan Energy Solutions plc Annual financial report 2022www.cadoganenergysolutions.com
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.
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Cadogan Energy Solutions plc Annual financial report 2022 www.cadoganenergysolutions.com
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 twelve months following
termination of the agreement. Details of employment agreements in place as at the date of this report are set out
below:
Director Current agreement start date Notice period
F Khallouf 15 November 2019 Six months
Directors' employment agreements are available for inspection at the Company's registered office in London.
Non-Executive Directors' letters of appointment
This section contains the key terms of the appointments of Non-Executive Directors that could impact on their
remuneration.
Typically, the Non-Executive Directors are appointed by letter of appointment for an initial term of three years which
may be extended. All Non-Executive Directors are subject to annual re-election by the Company's shareholders and
their appointments may be terminated earlier with one month's prior written notice (or with immediate effect, in the
case of specific serious circumstances such as fraud or dishonesty). On termination of appointment, Non-Executive
Directors are usually only entitled to accrued fees as at the date of termination together with reimbursement of
any expenses properly incurred prior to that date and the Company has no obligation to pay further compensation
when the appointment terminates. Non-Executive Directors' letters of appointment are available for inspection at the
Company's registered office in London.
Non-Executive Director Current agreement start date Term
Michel Meeùs 25 June 2021 Two years
Lilia Jolibois 24 June 2022 Two years
Jacques Mahaux 24 June 2022 Two years
Gilbert Lehmann 25 June 2021 Two years
Annual Report on Remuneration 2022
continued
OVERVIEW
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
REMUNERATION
REPORT
FINANCIAL
STATEMENTS GLOSSARY
SHAREHOLDER
INFORMATION
47
Cadogan Energy Solutions plc Annual financial report 2022www.cadoganenergysolutions.com
Illustration of the Remuneration Policy
The bar chart below show the levels of remuneration that the CEO could earn over the coming year under the Policy.
CEO: minimum and maximum remuneration
0
1,000
2,000
3,000
500
1,500
2,500
3,500
1,000 EUR
Share
incentive
plan
Annual
bonus
Base
salary
Current policy
New policy
Minimum
remuneration
Maximum
remuneration
“On-target”
remuneration
Notes:
I. The remuneration for an “on-target” scenario is purely illustrative as actual remuneration will depend on how challenging the target is for the
relevant year as well as on the financial conditions of the Company
II. The maximum award under the share incentive plan is 200% which can increase up to 300% (400% in the old policy) in exceptional
circumstances
The bar chart shows future possible maximum remuneration.
Pension entitlements were provided in 2022.
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.
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Cadogan Energy Solutions plc Annual financial report 2022 www.cadoganenergysolutions.com
Statement of Directors’ Responsibilities in respect of the Annual Report and the Financial Statements
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with
applicable law and regulation.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors
have prepared the Group and Company financial statements in accordance with UK-adopted international accounting
standards. In preparing the Company and Group’s financial statements, IAS Regulation requires that Directors:
> properly select and apply accounting policies;
> make judgments and accounting estimates that are reasonable and prudent;
> present information, including accounting policies, in a manner that provides relevant, reliable, comparable and
understandable information;
> state whether applicable UK-adopted international accounting standards have been followed, subject to any
material departures disclosed and explained in the financial statements;
> provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable
users to understand the impact of particular transactions, other events and conditions on the Company’s and
Group’s financial position and financial performance; and
> make an assessment of the Company’s and Group’s ability to continue as a going concern, prepare the financial
statements on the going concern basis unless it is inappropriate to presume that the Company and Group will
continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
Company and Group’s transactions and disclose with reasonable accuracy at any time the financial position of the
Company and Group and enable them to ensure that the financial statements comply with the Companies Act 2006.
They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities. Under applicable law and regulations, the Directors are
also responsible for preparing a Strategic Report, Report of the Directors, Annual Report on Remuneration, Directors’
Remuneration Policy and Corporate Governance Statement that comply with that law and those regulations. The
Directors are responsible for the maintenance and integrity of the corporate and financial information and statements
included on the Company’s website, www.cadoganenergysolutions.com. Legislation in the United Kingdom governing
the preparation and dissemination of the financial statements may differ from legislation in other jurisdictions. The
Directors' responsibility also extends to the ongoing integrity of the financial statements contained therein.
Responsibility Statement of the Directors in respect of the Annual Report
We confirm to the best of our knowledge:
i. the financial statements, prepared in accordance with International Financial Reporting Standards in conformity
with the requirements of the Companies Act 2006, give a true and fair view of the assets, liabilities, financial
position and profit or loss of the Company and the undertakings included in the consolidation as a whole; and
ii. 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
iii. 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
27 April 2023
Statement of Directors’ Responsibilities
OVERVIEW
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
REMUNERATION
REPORT
FINANCIAL
STATEMENTS GLOSSARY
SHAREHOLDER
INFORMATION
49
Cadogan Energy Solutions plc Annual financial report 2022www.cadoganenergysolutions.com
Qualified opinion
We have audited the financial statements of Cadogan Energy Solutions Plc (the Company) and its subsidiaries (the
Group) for the year ended 31 December 2022 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, the notes to the consolidated financial statements and the notes to the
company financial statements, including significant accounting policies. The financial reporting framework that has
been applied in their preparation is applicable law and UK adopted international accounting standards and, as regards
the Parent Company financial statements, as applied in accordance with the provisions of the Companies Act 2006.
In our opinion, except for the effect of the matter described in the Basis for qualified opinion paragraph below:
> the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as
at 31 December 2022 and of the Group’s loss for the year then ended;
> the Group financial statements have been properly prepared in accordance with UK adopted international
accounting standards;
> the Parent Company financial statements have been properly prepared in accordance with UK adopted international
accounting standards and as applied in accordance with the provisions of the Companies Act 2006; and
> the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for qualified opinion
In February 2019, the Group advanced a €13,385,000 loan to Proger Managers & Partners Srl (“PMP”), a privately
owned Italian company whose only asset is a 72.92% interest in Proger Ingegneria Srl (“Proger Ingegneria”), a
privately owned company which itself held a 67.91% participating interest in Proger S.P.A (“Proger”) at the date of the
loan was advanced.
The loan carries an entitlement to interest at a rate of 5.5% per year, payable at maturity (which is 24 months after the
execution date of February 2019 and assuming that the call option described below was not exercised). The principal
of the loan is secured by a pledge over PMP’s current participating interest in Proger Ingegneria Srl, up to a maximum
guaranteed amount of €13,385,000.
Through the Agreement, the Group was granted a call option to acquire, at its sole discretion, a 33% participating
interest in Proger Ingegneria; the exercise of the option would have given Cadogan, through Cadogan Petroleum
Holdings BV, an indirect 25% interest in Proger. The call option was granted at no additional cost and could be
exercised at any time between the 6th and 24th months following the execution date of the loan agreement.
The call option was not exercised within the relevant timeframe (February 2021) and consequently in accordance
with the loan agreement the principal amount and any accrued interest became repayable in full. At that date the
Group reclassified the asset from a financial asset held at fair value through profit and loss to a financial asset held at
amortised cost.
In March 2021, PMP requested arbitration to have the loan agreement recognised as an equity investment contract.
In July 2022, the Arbitra Camera in Rome decided to reject the main claim of PMP to recognise the loan as an equity
investment.
As part of our risk assessment we considered the recoverability of the loan note (page 78, note 27) to be a key audit
matter, and in respect of this matter we:
> made enquiries of management and the Audit Committee regarding the structure of the transaction and the latest
status of legal proceedings;
> obtained and reviewed the original loan documents including the call option agreement;
> obtained loan working papers and reviewed the accounting entries;
> met with management to obtain an understanding of their assessment of the recoverable amount of the loan and
why management believes no impairment of the carrying value of the loan note is required;
> discussed with management their understanding of the process of assessing recoverability of the loan note;
> requested and received information from Cadogan legal advisors on the current legal status and legal proceedings;
> based on available information to us we critically assessed the ability of the counterparty to repay the amounts
due; and
> reviewed the disclosures in relation to financial instruments including the accounting policy, critical judgments and
estimates and financial instrument disclosures.
Independent Auditor’s Report to the Members
of Cadogan Energy Solutions plc
(formerly Cadogan Petroleum plc)
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Cadogan Energy Solutions plc Annual financial report 2022 www.cadoganenergysolutions.com
Based on the procedures performed above we were unable to obtain sufficient, appropriate audit evidence regarding
the recoverability of the loan note, and accordingly we were also unable to obtain sufficient appropriate audit evidence
to enable us to conclude whether the carrying value of the loan note is materially accurate.
In addition, the predecessor auditor was not able to obtain sufficient, appropriate audit evidence as to whether the
carrying value of the loan note was materially accurate as at 31 December 2021 and as a result the audit opinion for the
year ended 31 December 2021 was also qualified in respect of this issue. Consequently, we were unable to determine
what impact this may have on the loss of the Group for the year ended 31 December 2022.
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the audit
of the financial statements section of our report. We are independent of the Group in accordance with the ethical
requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard
as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with
these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our qualified opinion. Our audit opinion is consistent with the additional report to the audit committee.
Our approach to the audit
We tailored the scope of our audit to ensure we performed sufficient work to be able to express an opinion on the
financial statements as a whole, taking into account the structure of the Group and the Company, its environment,
including the Group’s system of internal control, and assessing the risks of material misstatement in the financial
statements. We also addressed the risk of management override of internal controls, including assessing whether there
was evidence of bias by the Directors that may have represented a risk of material misstatement.
The significant majority of the Group’s operations are located in the Ukraine and account for 100% of the Group’s
revenue. We instructed a component audit team in the Ukraine to perform a full scope audit of the Ukrainian sub-
group. In our assessment the group comprises five significant components together with the Ukrainian sub-group. The
audit of the Ukrainian sub-group was performed by Crowe Erfolg in the Ukraine under the supervision and direction
of the Group audit engagement team, as described in more detail below. The remaining significant components of the
Group namely Cadogan Energy Solutions Plc, Cadogan Petroleum Holdings Limited, Cadogan Petroleum Holdings B.V.,
and Zagoryanska Petroleum B.V. were audited by the Group audit engagement team.
Our involvement with the component auditors
As part of our supervision and direction of the component audit team, we determined the level of involvement needed
in order to be able to conclude whether sufficient appropriate audit evidence has been obtained in respect of the
Ukraine sub-group as a basis for our opinion on the Group financial statements as a whole. Our involvement with the
component auditors included the following:
> We issued detailed Group reporting instructions to the component auditor, which included the significant areas to be
covered by the audit (including areas that were considered to be key audit matters as detailed below) and set out the
information required to be reported to the Group audit team.
> Due to the travel restrictions resulting from the ongoing war in the Ukraine, the Group audit engagement partner
and senior members of the Group audit engagement team were unable to visit the Ukraine to meet with component
management and the component audit team during the audit. Accordingly, we performed a remote review of the
component audit files in the Ukraine using appropriate technologies and held regular calls and video conferences with
component management during the audit.
> The Group audit team performed reviews of relevant working papers and undertook additional procedures where
necessary in respect of the significant risk areas that represented Key Audit Matters for the group.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy,
the allocation of resources in the audit; and directing the efforts of the 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.
Independent Auditor’s Report to the Members
of Cadogan Energy Solutions plc continued
OVERVIEW
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
REMUNERATION
REPORT
FINANCIAL
STATEMENTS GLOSSARY
SHAREHOLDER
INFORMATION
51
Cadogan Energy Solutions plc Annual financial report 2022www.cadoganenergysolutions.com
In addition to the matter described in the basis for qualified opinion section, we have determined the matters
described below to be the key audit matters to be communicated in our report.
Key Audit Matters How our scope addressed this matter
Valuation of development and production assets
Refer to page 64 (Accounting policy) and 73 (note 17
Property, plant and equipment).
As at 31 December 2022 the Group held development
and production assets with a carrying value of $6.4m
(2021: $9.3m).
Management has performed an impairment review of
development and production assets and concluded that
no impairment is required.
The assessment of the recoverable value of the
development and production assets required judgments
and estimates by management regarding the inputs
applied in the models including future oil and gas prices,
production and reserves, operating and development
costs and discount rates.
The carrying value of the Group’s development and
production assets were therefore considered to be a key
audit matter.
> We critically assessed management’s impairment
assessment which was based on the value in use
model (ViU).
> We challenged the key judgments and estimates
made by management, including forecast oil prices,
production levels.
> We critically assessed management’s assumptions in
estimating the discount rates.
> We held discussions with operational management
to evaluate the basis for forecast decreases 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 performed sensitivity analysis on the impairment
models to establish the impact of possible changes of
key assumptions.
Based on our work performed we consider there is no
material difference between the carrying value of these
assets and their recoverable amounts.
Our application of materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for
materiality. These, together with qualitative considerations, helped us to determine the scope of our audit, the nature,
timing and extent of our audit procedures, both individually and in aggregate on the financial statements as a whole.
Based on our professional judgment, we determined materiality for the financial statements as follows:
The Group The Company
Overall group materiality $725,000 $400,000
Basis for determining
materiality
2.0% of total assets 2.0% of total assets restricted to
$400,000
Rationale for the
benchmark applied
When determining materiality, we determine an appropriate percentage of our chosen
benchmark, with the choice of an appropriate benchmark as our starting point. We
determined that an asset based measure of materiality is appropriate as the Group and
the Company holds significant cash and loan balances and its principal activity is the
exploration and development of oil and gas assets. As a result we concluded that the
asset base is a key financial metric for users of financial statements.
Performance materiality $362,500 $200,000
Basis for determining
performance materiality
We use performance materiality to reduce to an appropriately low level the probability
that the aggregate of uncorrected and undetected misstatements exceeds overall
materiality. Specifically, we use performance materiality in determining the scope
of our audit and the nature and extent of our testing of account balances, classes of
transactions and disclosures, for example in determining sample sizes.
Our performance materiality was 50% of overall materiality, amounting to £362,500)
for the Group financial statements and $200,000 for the Company financial statements.
When considering the level at which to set performance materiality, we considered
a number of factors, including the risk assessment and aggregation risk, and the
effectiveness of controls and our knowledge of the business.
We agreed with the Board and Audit Committee that we would report to them misstatements identified during the
audit greater than 5% of overall materiality. We also agreed to report differences below this threshold that, in our view,
warranted reporting on qualitative grounds.
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Cadogan Energy Solutions plc Annual financial report 2022 www.cadoganenergysolutions.com
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting
in the preparation of the financial statements is appropriate. Our evaluation of the Directors’ assessment of the Group’s
and the Parent Company’s ability to continue to adopt the going concern basis of accounting included:
> Review of management’s going concern assessment paper and the cash flow forecast prepared by management
and approved by the Board.
> We critically assessed the going concern paper and the forecast taking into account key assumptions and various
scenarios prepared by management and the impact they would have on the Group’s ability to continue operating on
going concern basis.
> We performed sensitivity assessments over the key assumptions in the forecast to assess the impact of severe
unlikely downside scenarios, and extending these beyond the twelve months from the date of approval these
financial statements to assess the Group’s ability to continue as a going concern.
> As part of our sensitivity assessment of the forecast and scenario forecast for the period to April 2024 we critically
assessed the level of headroom available and the assumptions including, potential geopolitical impacts, 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.
> We reviewed the adequacy of the disclosures in the financial statements in respect of going concern against the
requirements of UK-adopted international accounting standards.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions
that, individually or collectively, may cast significant doubt on the Group’s and Parent Company's ability to continue as a
going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant
sections of this report.
Emphasis of Matter
We draw attention to Note 3 (b) on pages 60 and 61 to the financial statements which describes the uncertainty related to
the outcome of the ongoing war in Ukraine. The Group have included various scenarios that take into account the ongoing
war in its cash flow projections. However, due to the unpredictable outcome, length, scale and extent of the conflict its
impact on the Group and the Company cannot be predicted with any certainty. Our opinion is not modified in respect of
this matter.
Other information
The other information comprises the information included in the annual report, other than the financial statements
and our auditor’s report thereon. The Directors are responsible for the other information contained within the annual
report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial statements or our
knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we are required to determine whether there is a material
misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is
a material misstatement of this other information, we are required to report that fact.
As described in the basis for qualified opinion section of our report, our audit opinion is qualified because we were unable
to obtain sufficient appropriate audit evidence in respect of certain loan receivables. We have concluded that where the
other information refers to these receivables or to related balances or classes of transactions it may also be materially
misstated for the same reason.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with
the Companies Act 2006.
Except for the possible effect of the matter described in the basis for the qualified opinion section of our report, in our
opinion, based on the work undertaken in the course of the audit:
> the information given in the Strategic report and the Directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
> the Strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements.
Independent Auditor’s Report to the Members
of Cadogan Energy Solutions plc continued
OVERVIEW
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
REMUNERATION
REPORT
FINANCIAL
STATEMENTS GLOSSARY
SHAREHOLDER
INFORMATION
53
Cadogan Energy Solutions plc Annual financial report 2022www.cadoganenergysolutions.com
Matters on which we are required to report by exception
Except for the possible effect of the matter described in the basis for the qualified opinion section of our report, in the
light of the knowledge and understanding of the Group and the Parent Company and its environment obtained in the
course of the audit, we have not identified material misstatements in the Strategic report or the Directors’ report.
In respect solely of the limitation on our work relating to certain loan receivables, described above:
> we have not received all the information and explanations we require for our audit; and
> we were unable to determine whether adequate accounting records have been kept by the Parent Company.
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you
if, in our opinion:
> returns adequate for our audit have not been received from branches not visited by us; or
> the Parent Company financial statements and the part of the Directors’ remuneration report to be audited are not
in agreement with the accounting records and returns; or
> certain disclosures of Directors’ remuneration specified by law are not made; or
> a corporate governance statement has not been prepared by the Parent Company.
Responsibilities of Directors
As explained more fully in the statement of directors’ responsibilities set out on page 48, the Directors are responsible
for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such
internal control as the Directors determine is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the Directors either intend to liquidate the Group or the Parent Company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
A further description of our responsibilities is available on the FRC’s website at www.frc.org.uk/auditorsresponsibilities
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line
with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The
extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.
The objectives of our audit in respect of fraud, are; to identify and assess the risks of material misstatement of the
financial statements due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of material
misstatement due to fraud, through designing and implementing appropriate responses to those assessed risks; and
to respond appropriately to instances of fraud or suspected fraud identified during the audit. However, the primary
responsibility for the prevention and detection of fraud rests with both management and those charged with governance
of the Company.
Based on our understanding of the Group and its operations, we identified the principal risks of non-compliance with
laws and regulations related to the UK and Ukrainian tax legislation, employment and health and safety regulations,
licensing regulations and we considered the extent to which non-compliance might have a material effect on the financial
statements. We also considered those laws and regulations that have a direct impact on the financial statements such as
the Companies Act 2006 and Listing Rules.
> We obtained an understanding of how the Group and Company complies with these requirements by discussions with
management and those charged with governance;
> Based on this understanding, we designed specific appropriate audit procedures to identify instances of non-
compliance with laws and regulations. This included making enquiries of management and those charged with
governance and obtaining additional corroborative evidence as required;
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Cadogan Energy Solutions plc Annual financial report 2022 www.cadoganenergysolutions.com
> We inquired of management and those charged with governance as to any known instances of non-compliance or
suspected non-compliance with laws and regulations;
> We held calls and discussions with external legal advisers representing the Group to enquire about known non-
compliance with laws and regulations;
> We performed a review of external press releases;
> We assessed the risk of material misstatement of the financial statements, including the risk of material
misstatement due to fraud and how it might occur, by holding discussions with management and those charged
with governance;
> We challenged assumptions and judgments made by management in relation to the estimates made in respect of
development and production assets; and
> Identifying and testing journal entries, in particular any journal entries posted with unusual account combinations,
and unusual users.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances
of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the
financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not
detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional
misrepresentations, or through collusion.
Other matters which we are required to address
We were appointed by the Board of Directors on 17 February 2023 to audit the financial statements for the period ended
31 December 2022. Our total uninterrupted period of engagement is 1 year, covering the period ended 31 December 2022
to 28 April 2023.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the Parent Company
and we remain independent of the Group and the Parent Company in conducting our audit.
Our audit opinion is consistent with the additional report to the audit committee.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken for no purpose other than to draw to the attention of the
company’s members those matters which we are required to include in an auditor’s report addressed to them. To the
fullest extent permitted by law, we do not accept or assume responsibility to any party other than the company and
company’s members as a body, for our work, for this report, or for the opinions we have formed.
Matthew Banton
(Senior Statutory Auditor)
For and on behalf of
Moore Kingston Smith LLP
Statutory Auditor
6th Floor
9 Appold Street
London
EC2A 2AP
27 April 2023
Independent Auditor’s Report to the Members
of Cadogan Energy Solutions plc continued
OVERVIEW
STRATEGIC
REPORT
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GOVERNANCE
REMUNERATION
REPORT
FINANCIAL
STATEMENTS GLOSSARY
SHAREHOLDER
INFORMATION
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Notes
2022
$’000
2021
$’000
CONTINUING OPERATIONS
Revenue 6 8, 472 8,793
Cost of sales 7 (5 ,553 ) (6, 372 )
Gross profit 2,919 2 , 421
Administrative expenses 8 (3 , 441 ) (3 , 712 )
Impairment of gas and oil assets 16 (269 ) (2,4 74 )
Impairment of other assets 9 (27 ) (994 )
Reversal of impairment of other assets 9 20 20
Other operating expenses, net 10 (3 ) (18 )
Net foreign exchange (losses)/gain (1 , 131 ) (1 ,591 )
Operating loss (1 , 932 ) (6 ,348 )
Finance income, net 13 3 72 1,250
Loss before tax (1 , 560 ) (5 , 098 )
Taxation 14 – –
Loss for the year (1 , 560 ) (5 , 098 )
Attributable to:
Owners of the Company (1 ,562 ) (5 ,070 )
Non-controlling interest 2 (28 )
(1 , 560 ) (5 , 098 )
Loss per Ordinary share cents cents
Basic and diluted 15 (0 .6 2 . 1
Consolidated Income Statement
For the year ended 31 December 2022
The notes on pages 60 to 81 form an integral part of these financial statements.
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Consolidated Statement of Comprehensive Income
For the year ended 31 December 2022
2022
$’000
2021
$’000
Loss for the year (1 , 560 ) (5 , 098 )
Other comprehensive (loss)/profit
Items that may be reclassified subsequently to profit or loss:
Unrealised currency translation differences (3 ,287 ) 466
Other comprehensive (loss)/profit (3 ,287 ) 466
Total comprehensive (loss)/profit for the year (4 ,847 ) (4 , 632 )
Attributable to:
Owners of the Company (4 ,849 ) (4 , 604 )
Non-controlling interest 2 (28 )
(4 ,847 ) (4 , 632 )
The notes on pages 60 to 81 form an integral part of these financial statements.
OVERVIEW
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
REMUNERATION
REPORT
FINANCIAL
STATEMENTS GLOSSARY
SHAREHOLDER
INFORMATION
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Notes
2022
$’000
2021
$’000
ASSETS
Non-current assets
Intangible exploration and evaluation assets 16 – –
Property, plant and equipment 17 6, 633 9 ,598
Right-of-use assets 23 108 200
Deferred tax asset 22 319 431
Current assets
Inventories 19 295 177
Trade and other receivables 20 318 218
Loan receivable at amortised cost 27 15, 825 16,724
Cash 21 13, 934 15, 011
Total assets 37 , 432 42,359
LIABILITIES
Non-current liabilities
Long-term lease liability 23 (28 ) (104 )
Provisions 25 (261 ) (300 )
(289 ) (404 )
Current liabilities
Trade and other payables 24 (1 , 401 ) (1 , 479 )
Short-term lease liability 23 (79 ) (102 )
Current provisions 25 (136 ) –
(1 , 616 ) (1 ,581 )
Total liabilities (1 , 905 ) (1,985 )
NET ASSETS 35,527 40,374
EQUITY
Share capital 26 13,8 32 13, 832
Share premium 514 514
Retained earnings 184,331 185,893
Cumulative translation reserves (164 , 9 76 ) (161,689 )
Other reserves 1, 589 1 , 589
Equity attributable to owners of the Company 35,290 40,139
Non-controlling interest 237 235
TOTAL EQUITY 35 ,527 40,3 74
Fady Khallouf
Chief Executive Officer
27 April 2023
Consolidated Balance Sheet
As at 31 December 2022
The notes on pages 60 to 81 form an integral part of these financial statements.
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Notes
2022
$’000
2021
$’000
Operating loss (1, 932 ) (6, 348 )
Adjustments for:
Depreciation and depletion of property, plant and equipment 17,23 76 4 8 89
Impairment of oil and gas assets 16 26 9 2,4 74
(Reversal of impairment)/impairment of inventories 9 (20 ) 994
Impairment of receivables 9 16 –
Impairment/(reversal of impairment) of VAT recoverable 9 11 (21 )
Effect of foreign exchange rate changes 1 , 131 1,591
Operating cash inflow/(outflow) before movements in working capital 239 (421 )
(Increase)/decrease in inventories (155 ) 1,049
(Increase)/decrease in receivables (946 ) 1,526
(Increase)/decrease in payables (197 ) (28 )
Cash generated by operations (1 , 0 59 ) 2,126
Interest received 185 68
Net cash (outflow)/inflow from operating activities (8 74 ) 2,194
Investing activities
Purchases of property, plant and equipment (93 ) (150 )
Purchases of intangible exploration and evaluation assets – (9 )
Interest received 97 8
Net cash used in investing activities 4 (151 )
Net (decrease)/increase in cash (870 ) 2, 043
Effect of foreign exchange rate changes (207 ) (285 )
Cash at beginning of year 15 , 011 13,253
Cash at end of year 13,934 15, 011
Consolidated Cash Flow Statement
For the year ended 31 December 2022
The notes on pages 60 to 81 form an integral part of these financial statements.
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GOVERNANCE
REMUNERATION
REPORT
FINANCIAL
STATEMENTS GLOSSARY
SHAREHOLDER
INFORMATION
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Share
capital
$’000
Share
premium
account
$’000
Retained
earnings
$’000
Cumulative
translation
reserves
$’000
Other
reserves
$’000
Equity
attributable to
owners of the
Company
$’000
Non-
controlling
interest
$’000
Total
$’000
As at 1 January 2021 13 ,832 514 190, 963 (162, 155 ) 1, 589
Net loss for the year – – (5 ,070 ) – –
(5 , 0 70 )
(28 ) (5 , 0 98 )
Other comprehensive loss – – – 466 – 466 – 466
Total comprehensive loss
for the year – – (5 , 070 ) 466 – (4 ,604 ) (28 ) (4 ,632 )
As at 1 January 2022 13,832 514 185,893 (161,689 ) 1, 589 40 , 1 39 235 40,374
Net loss for the year – – (1 ,562 ) – – (1 ,562 ) 2 (1 , 560 )
Other comprehensive loss – – – (3 ,287 ) – (3 ,287 ) – (3 ,287 )
Total comprehensive loss for
the year – – (1, 562 ) (3 ,287 ) – (4 ,849 ) 2 (4 ,847 )
As at 31 December 2022 13,832 514 184,331 (164 , 9 76 ) 1, 589 35,290 237 35,527
Consolidated Statement of Changes in Equity
For the year ended 31 December 2022
The notes on pages 60 to 81 form an integral part of these financial statements.
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3. Significant accounting policies continued
(b) Going concern continued
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3. Significant accounting policies continued
Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2022
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3. Significant accounting policies continued
(f) Foreign currencies continued
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3. Significant accounting policies continued
(i) Intangible exploration and evaluation assets continued
Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2022
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3. Significant accounting policies continued
(j) Development and production assets continued
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3. Significant accounting policies continued
Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2022
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4. Critical accounting judgments and key sources of estimation uncertainty continued
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5. Segment information continued
Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2022
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9. Reversal of impairment/(impairment) of other assets continued
Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2022
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REPORT
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STATEMENTS GLOSSARY
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REPORT
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STATEMENTS GLOSSARY
SHAREHOLDER
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16. Intangible exploration and evaluation assets continued
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17. Property, plant and equipment continued
Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2022
OVERVIEW
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REPORT
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20. Trade and other receivables continued
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Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2022
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REPORT
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STATEMENTS GLOSSARY
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27. Financial instruments
continued
Notes to the Consolidated
Financial Statements continued
For the year ended 31 December 2022
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Company Balance Sheet
As at 31 December 2022
Notes
2022
$’000
2021
$’000
ASSETS
Non-current assets
Receivables from subsidiaries 34 35,918 36,769
35,918 36,769
Current assets
Trade and other receivables 34 – 3
Cash 34 2,391 3,857
2,391 3,860
Total assets 38,309 40,629
LIABILITIES
Current liabilities
Trade and other payables 35 (337) (255)
(337) (255)
Total liabilities (337) (255)
Net assets 37,972 40,374
EQUITY
Share capital 36 13,832 13,832
Share premium 514 514
Retained earnings
1
132,345 134,74 7
Cumulative translation reserves 37 (108,719) (108,719)
Total equity 37,972 40,374
As permitted by section 408 of the Act, the Company has elected not to present its profit and loss account for the year.
The 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 27 April 2023.
They were signed on its behalf by:
Fady Khallouf
Chief Executive Officer
27 April 2023
1 Included in retained earnings, loss for the financial year ended 31 December 2022 was $2.4 million (2021: profit $3.7 million).
The notes on pages 85 to 87 form part of these financial statements.
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The notes on pages 85 to 87 form part of these financial statements.
Company Cash Flow Statement
For the year ended 31 December 2022
2022
$’000
2021
$’000
Operating activities
Loss for the year (2,402) (3,74 6 )
Adjustments for:
Interest received (4) –
Impairment of receivables from subsidiaries – 665
Effect of foreign exchange rate changes 1,053 1,451
Movement in provisions (11) 58
Operating cash flows before movements in working capital (1,364) (1,572)
Decrease/(increase) in receivables 2 (4)
Increase/(decrease) in payables 99 (38)
Cash used in operations (1,263) (1,614)
Income taxes paid – –
Net cash outflow from operating activities (1,263) (1,614)
Investing activities
Interest received 4 –
Net cash used in investing activities 4 –
Net decrease in cash (1,259) (1,614)
Effect of foreign exchange rate changes (207) (288)
Cash at beginning of year 3,857 5,759
Cash at end of year 2,391 3,857
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Company Statement of Changes in Equity
For the year ended 31 December 2022
Share
capital
$’000
Share
premium
account
$’000
Retained
earnings
$’000
Other
reserve
$’000
Cumulative
translation
reserves
$’000
Total
$’000
As at 1 January 2021 13,832 514 138,493 – (108,719) 44,120
Net loss for the year – – (3,74 6) – – (3,746 )
Total comprehensive loss for
the year – – (3,74 6) – – (3,746 )
Issue of ordinary shares – – – – – –
As at 1 January 2022 13,832 514 134,747 – (108,719) 40,374
Net income for the year – – (2,402) – – (2,402)
Total comprehensive income for
the year – – (2,402) – – (2,402)
As at 31 December 2022 13,832 514 132,345 – (108,719) 37,972
The notes on pages 85 to 87 form part of these financial statements.
OVERVIEW
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GOVERNANCE
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Notes to the Company Financial Statements
For the year ended 31 December 2022
31. 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
Financial Reporting Standards (“IFRSs”) adopted by the UK.
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 Energy Solutions plc reports a loss for the financial year ended 31 December 2022 of $2.4 million (2021:
loss $3.7 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 judgment 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 judgment 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.
32. Auditor’s remuneration
The auditor’s remuneration for audit and other services is disclosed in note 11 to the Consolidated Financial Statements.
33. Investments
The Company’s subsidiaries are disclosed in note 18 to the Consolidated Financial Statements. The investments in
subsidiaries are all stated at cost less any provision for impairment.
34. 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.
Receivables from subsidiaries
At the balance sheet date gross amounts receivable from the fellow Group companies were $349.1 million (2021:
$350 million). The Company did not recognise additional expected credit loss provisions in relation to receivables
from subsidiaries in 2022 (2021: $0.7 million). The accumulated provision on receivables at 31 December 2022
was $313.2 million (2021: $312.2 million). The carrying value of the receivables from the fellow Group companies at
31 December 2022 was $35.9 million (2021: $36.8 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.
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35. Financial liabilities
Trade and other payables
2022
$’000
2021
$’000
Accruals 141 1 74
Unused vacation provision 85 63
Amounts owing to Directors 82 –
Trade creditors 29 18
337 255
Trade payables principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit
period taken for trade purchases is 29 days (2021: 30 days).
Unused vacation provision of $85 thousand accrued for CEO of the Company (2021: $63 thousand).
The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
No interest is charged on balances outstanding.
36. Share capital
The Company’s share capital is disclosed in note 26 to the Consolidated Financial Statements.
37. 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.
38. 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 27 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
2022
$’000
2021
$’000
Financial assets – measured at amortised cost
Cash 2,391 3,857
Amounts due from subsidiaries 35,918 36,769
38,309 40,626
Financial liabilities – measured at amortised cost
Trade creditors (196) (81)
(196) (81)
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.
Notes to the Company
Financial Statements continued
For the year ended 31 December 2022
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38. Financial instruments continued
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate
liquidity risk management framework for the management of the 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 Dollar and Euro, mitigating the exchange risk
between the US Dollar and Euro and monetary liability in the US Dollar. More information on the foreign exchange risk
and foreign currency risk management is disclosed in note 27 to the Consolidated Financial Statements.
39. 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:
2022
$’000
2021
$’000
Cadogan Petroleum Holdings Limited 35,918 36,769
35,918 36,769
Refer to note 34 for details on the Company’s receivables due from subsidiaries.
The remuneration of the Directors, who are the key management personnel of the Group, is set out below in aggregate
for each of the categories specified in IAS 24 Related Party Disclosures. In 2022 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 2022 on pages 33 to 38.
Purchase of services Amounts owing
2022
$’000
2021
$’000
2022
$’000
2021
$’000
Directors’ remuneration 693 754 83 –
Social contribution on Directors’ remuneration 72 126 – –
The total remuneration of the highest paid Director was $0.5 million in the year (2021: $0.6 million).
40. Events after the balance sheet date
Events after the balance sheet date are disclosed in note 30 to the Consolidated Financial Statements.
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IFRSs International Financial Reporting Standards
JAA Joint activity agreement
UAH Ukrainian hryvnia
GBP Great Britain pounds
$ United States dollars
bbl Barrel
boe Barrel of oil equivalent
mmboe Million barrels of oil equivalent
mboe Thousand barrels of oil equivalent
mboepd Thousand barrels of oil equivalent per day
boepd Barrels of oil equivalent per day
bcf Billion cubic feet
mmcm Million cubic metres
mcm Thousand cubic metres
Reserves Those quantities of petroleum anticipated to be commercially recoverable by application
of development projects to known accumulations from a given date forward under
defined conditions. Reserves include proved, probable and possible reserve categories
Proved Reserves Those additional Reserves which analysis of geoscience and engineering data can be
estimated with reasonable certainty to be commercially recoverable, from a given date
forward, from reservoirs and under defined economic conditions, operating methods and
government regulations
Probable Reserves Those additional Reserves which analysis of geoscience and engineering data indicate
are less likely to be recovered than proved Resources but more certain to be recovered
than possible Reserves
Possible Reserves Those additional Reserves which analysis of geoscience and engineering data indicate
are less likely to be recoverable than probable Reserves
Contingent Resources Those quantities of petroleum estimated, as of a given date, to be potentially recoverable
from known accumulations by application of development projects, but which are not
currently considered to be commercially recoverable due to one or more contingencies
Prospective Resources Those quantities of petroleum which are estimated as of a given date to be potentially
recoverable from undiscovered accumulations
P1 Proved Reserves
P2 Probable Reserves
P3 Possible Reserves
1P Proved Reserves
2P Proved plus Probable Reserves
3P Proved plus Probable plus Possible Reserves
Workover The process of performing major maintenance or remedial treatment of an existing oil or
gas well
E&E/E&P Exploration and Evaluation/Exploration and Production
LT I Lost time incidents
Glossary
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INFORMATION
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Cadogan Energy Solutions plc Annual financial report 2022www.cadoganenergysolutions.com
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: 0371 664 0300. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the
United Kingdom will be charged at the applicable international rate. Lines are open between 09:00 and 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.cadoganenergysolutions.com or that of the London Stock exchange www.prices.londonstockexchange.com.
Unsolicited mail
As the Company’s share register is, by law, open to public inspection, shareholders may receive unsolicited mail
from organisations that use it as a mailing list. To reduce the amount of unsolicited mail you receive, contact:
The Mailing Preference Service, FREEPOST 22, London W1E 7EZ.
Telephone: 0845 703 4599. Website: www.mpsonline.org.uk.
Financial calendar 2022/2023
Annual General Meeting June 2023
Half Yearly results announced September 2022
Annual results announced April 2023
Investor relations
Enquiries to: info@cadoganpetroleum.com
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: info@cadoganpetroleum.com
Telephone: +38 044 594 58 70
Fax: +38 044 594 58 71
www.cadoganenergysolutions.com
Shareholder Information
Notes
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Cadogan Energy Solutions plc Annual financial report 2022 www.cadoganenergysolutions.com
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Cadogan Energy Solutions plc Annual financial report 2022
OVERVIEW
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
REMUNERATION
REPORT
FINANCIAL
STATEMENTS GLOSSARY
SHAREHOLDER
INFORMATION
www.cadoganenergysolutions.com
Notes
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Cadogan Energy Solutions plc Annual financial report 2022 www.cadoganenergysolutions.com
Investor relations
Enquiries to: info@cadoganpetroleum.com
Registered office
Shakespeare Martineau LLP
6th Floor, 60 Gracechurch Street, London EC3V 0HR
Company number
Registered in England and Wales no. 5718406
Ukraine
48/50A Zhylyanska Street
Business Center “Prime”, 8th Floor
01033 Kyiv
Ukraine
Email: info@cadoganpetroleum.com
Tel: +38 044 594 58 70
Fax: +38 044 594 58 71
www.cadoganenergysolutions.com