Cadogan Says Court to Hear Appeal on Ukraine Licenses

By Ben Farey

Nov. 19 (Bloomberg) -- Cadogan Petroleum Plc, a British oil and gas producer operating in Ukraine, said an appeal over two disputed exploration licenses will be heard by a court in Kharkiv.

``Cadogan has been informed that appeals have been lodged with the Kharkiv Administrative Appeals Court in relation to the licenses, though it has yet to receive written confirmation or information as to the substance of such appeals,'' the London- based company said today in a statement.

Cadogan's Pirkovskoe and Zagoryanksa permits were withdrawn by Ukraine's environment ministry in July following a decision by the Poltava Regional Court. In September, two courts ruled that the annulment was unlawful and invalid, and last month the ministry agreed to recognize Cadogan's ``exclusive right'' to the licenses, the company said Oct. 16.

``We remain confident that we will be able to defend our rights to our licenses in any renewed challenge,'' Chief Executive Officer Mark Tolley said in today's statement.

Cadogan lost 11 percent to 66 pence in London trading as of 12:50 p.m. local time, valuing the company at 152.5 million pounds ($230 million).

Commercial production from the fields, set to start early next year, will boost gas supplies in the former Soviet state, which relies on imports of the fuel from Russia and Central Asia. Ukraine consumed 64.6 billion cubic meters of gas last year, about the same as China, according to BP Plc's Statistical Review of World Energy. It produced 19 billion cubic meters of the fuel.

Production `On Track'

``Our operational plans are materially on track,'' Cadogan said. ``However, in light of the current economic and financial markets backdrop we are taking steps to manage our cash resources and cost base'' and are reviewing development plans.

Ukraine is in negotiations with OAO Gazprom, Russia's gas export monopoly, on a price for gas supplies next year. Ukraine currently pays $179.50 for 1,000 cubic meters of the fuel, a price Russia is seeking to increase to European market levels.

Cadogan has asked U.K. auditor Gaffney Cline & Associates Ltd. to reassess its gas deposits, with a view to ``converting contingent resources to reserves'' following recent drilling and testing. The explorer expects a report from the auditor next year.

The company said it has 93 million pounds of cash on its balance sheet, according to today's statement.

To contact the reporter on this story: Ben Farey in London at bfarey@bloomberg.net