Cadogan to focus on western Ukraine prospects as production falls

Cadogan Petroleum (CAD LN) said on May 17 that it will focus production on its shallow natural gas prospects in western Ukraine after disappointing exploration results on its Zagoryanska and Pokrovskoe licenses in eastern Ukraine. As a apart of new strategy, the company expects to re-enter the Borynya-3 well with its Bitlyanska exploration license in June, while the re-entry of two wells on its Monastyretska license is currently underway. In addition, Cadogan said it’s currently defining the area for its first shale gas exploration well in the Lviv basin.

The company’s net cash as of May 17 stood at USD 66.8 mln (a USD 0.4 mln decrease since April 24). 

Roman Dmytrenko: Considering that the company’s operations at its Pokrovskoe licence are currently suspended and its Zag-3 well produced gas at an insignificant rate, we estimate the company’s current production at 139 boepd, compared to 228 boepd in 2012.

We note that apart from a very general announcement of plans to focus on western Ukraine, the May 17 statement sheds very little light on the company’s current and future developments. We believe this lack of transparency is one of the major reasons why Cadogan is currently valued by the market at a 24% discount to its net cash, as of May 17.