The Board of Cadogan has approved a 2011 work programme aimed at increasing production from the Company's existing assets three-fold, by the end of the 2011 financial year, from the current level of approximately 450 barrels of oil equivalent per day (BOEPD). The approved budgeted capital expenditure for this programme is $9.6 million (£6.1 million) for 2011.

The Board has also considered a contingent budget for 2011 of up to a further $21.7 million (£13.8 million), the spending of which will be dependent on the success of current drilling activity and the projects included in the approved budget. The objective of implementing this latter work programme is a five-fold increase in production, by the end of the 2011 financial year, from existing levels.

Success of the approved and contingent work programmes is also expected to enable transfer of resources to reserves, resulting in an anticipated doubling in the 3P reserve base from the current level of 7.7 million barrels of oil equivalent by the end of the financial year 2011.

In addition to the targeted increase in production and reserves, as a result of this work the Company will: • improve its sub-surface understanding of its existing licences to permit future operations to be developed through a programme of seismic activity and technical studies; • continue its risk management strategy and seek to farm-out interests in high cost exploration programmes; and • focus on new venture opportunities in Ukraine and elsewhere to diversify its risks.

Operations Drilling at the Pokrovskoe 1 well continues as planned towards a structural closure in the Lower Visean V26 horizon, identified on 3D seismic. In the event that the well is a successful discovery, the Company expects to enter the testing phase early in 2011. Current drilling depth is 5,400 metres and the proposed target depth is around 5,800 metres.

Drilling and testing on the three development well programme on the Debeslavetska field is continuing and the results will be announced in the new year. There are no further updates to give on any of the Company's other fields or wells since the publication of the Interim Management Statement on 19 November 2010.

Corporate and Financial The sale and purchase agreement with NSJC Nadra Ukraine (Nadra) to acquire the Zagoryanska 3 well and four additional wells, for a total outlay of $3.2 million (£2.0 million), of which $1.0 million (£0.6 million) has been paid, has now been executed. As a consequence the indirect challenges to the Company's licences at Pirkrovskoe and Zagoryanksa have now been withdrawn from the Ukraine court by Nadra. Evaluation of certain aspects of the newly acquired wells has been included in both the approved and contingent budgets described above.

The parliament of Ukraine has recently approved the raising of royalties on gas sales by 18.5%. It is anticipated that these increases will be implemented from 1 January 2011. The Company, alongside other producers in Ukraine, will lobby the government to minimise the impact of the royalty changes through an increase in the approved gas price. The announcement of this is expected early in the new year.

Global Process Systems has confirmed to the Company that the $6.5 million, currently due under the settlement agreement entered into with them, will be paid by the end of the 2010 financial year. A further $30 million is due in several payments across 2011.

There have been no other developments in the action in the High Court of England and Wales against certain of its former officers and various related parties.

Cadogan's cash balance at the date of this announcement is £24.7 million ($38.7 million).

Tags: Cadogan Petroleum plc