Cadogan has reached agreement with Eni for the acquisition of an interest in the Company's Pokrovskoe and Zagoryanska licenses in the east of Ukraine.
Eni will initially acquire a 30% interest in the Pokrovskoe license, with the option to acquire a further 30% interest in the future. Eni will also acquire a 60% interest in the Zagoryanska license. The initial consideration will comprise 100% funding of a work program of approximately $30 million (excluding VAT), including drilling and seismic re-processing, plus a $38 million payment. Subject to successful results from the above programs and award of production licenses, Eni will pay the Company further amounts of up to $90 million.
The transaction, which is a class one transaction under the UKLA Listing Rules, is subject to Cadogan shareholder and Ukrainian Anti-Monopoly Commission approval. The Company plans to issue a circular to shareholders in May 2011, giving full details of the proposed transaction and convening a general meeting of the Company prior to mid June 2011. Other Conditions Precedent to completion of the deal include satisfactory conclusion of an internal re-structuring within the Company, no material adverse effects between signature of the agreement and completion and all representations and warranties of the Company and Eni being true at completion. It is planned that the transaction will complete on or around June 30, 2011.
The $30 million work program on Pokrovska will be used to fulfill the work obligations on the license and will test the potential of the Upper and Lower Visean intervals which had strong indications of hydrocarbons in wells on the license. The cash proceeds arising from the transaction will be applied to finance any future Zagoryanska work programs and fund development of the Company's other assets. Additional future cash proceeds from successful operational results and the award of production licenses will further strengthen the Company's financial position, enabling it to finance its share of future development activities and to invest in new business opportunities.
Commenting on the proposed transaction Simon Duffy, Chairman, stated, "The announcement of this major transaction signifies a turning point for Cadogan. With Eni as a strategic partner, the Company can more rapidly develop the potential in these licenses and can embark on other significant oil & gas opportunities that are present in Ukraine."
Ian Baron, Chief Executive Officer commented, "The investment by Eni in two of our Ukrainian assets vindicates the Board's view, not only of the value of these particular assets, but also the scale and substance of the opportunity in the country. We strongly believe that Ukraine offers significant opportunity for Cadogan and Eni, which we can develop through combining the expertise of Cadogan's staff with the resources of a major oil company."
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