CARDINAL RESOURCES PLC

CARDINAL RESOURCES PLC

May 15, 2006 02:57 ET

Cardinal Resources plc Announces Publication of Reserve Report

LONDON, UK--(CCNMatthews - May 15, 2006) -

Reserves Increase 75% Since IPO to 32.5 MMBOE

PV 12 Up 162% to $105.6 Million

Cardinal Resources plc (AIM: CDL) ("Cardinal" or "The Company"), an independent oil and gas production and exploration company operating in Ukraine, announces that the Company's independent competent person, Scott Pickford Ltd., has today supplied its reserve report for Cardinal, as of 31st December 2005.

Total proved (P1) and probable (P2) reserves for the Company are estimated to be 32.5 million barrels of oil equivalent (MMBOE), of which 85% is natural gas and 62% P1. The year end estimate represents a 75% increase over the reserves stated in the 31st March 2005 Scott Pickford report published at Cardinal's admission on AIM in April 2005. The increase is due to the acquisition of Rudis Drilling Company that Cardinal made in October 2005. The pre-tax present value of the Company's reserves, discounted at 12%, has increased 162% to $105.6 million over the same period due to the inclusion of the Rudis reserves and upward revisions to expected future gas and oil prices in Ukraine. The pre-tax present value discounted at 10% is $124.7 million.



Reserve Data
------------
Detailed tables can be found in the Appendix on page 5

P1 P2 P1 + P2
Property Total MBOE

Rudis 50,818 2,021 10,491 34,118 1,392 7,078 17,569
RC 50,714 754 9,206 29,183 421 5,285 14,491
Bytkiv 530 295 383 44 26 33 416
TOTAL 102,062 3,070 20,080 63,344 1,839 12,396 32,477

Rudis Assets
------------


Reserves for the Rudis properties have been upgraded to 17.6 MMBOE from the 9.1 MMBOE stated at the time of the Rudis Drilling acquisition in October 2005. This is due to Cardinal's initiation of an aggressive work programme to complete seven workovers and initiate drilling operations on seven of eleven identified development locations by year-end 2007 as a result of the well swap with Ukrgazvydobuvannya (Ukrgaz) conducted in January of 2006. Cardinal is in negotiations to hire three locally-sourced Uralmash drilling rigs which it will upgrade using certain modern equipment and supplies. Negotiations are also underway to lease a further Uralmash workover rig. Production at the Rudis properties is anticipated to increase by 2,500 to 3,000 barrels of oil equivalent per day (boepd) by the end of 2007 from 597 boepd at 31st March 2006. The capital investment to develop these locations is forecast to be in the range of $25 to $42 million, dependant upon the number of wells drilled, the extent of modern equipment utilised and the availability of finance.



Rudivsko-Chernovozavodske (RC) Field
------------------------------------


Reserves for the RC Field have been reduced slightly from 16.2 MMBOE to 14.5 MMBOE due to poorer than expected production at Well #117. The delay Cardinal is experiencing in reinstating its net profit interest in the field back up to 45% has also resulted in setbacks in executing the work programme set out at the time of the IPO. The workover on Well #102 has been temporarily suspended and it is expected that, apart from the four wells Ukrnafta is currently drilling outside of the JAA, no further wells will be drilled in the field in 2006.



RC Field Reinstatement
----------------------


Cardinal expects discussions with Ukrnafta and its primary shareholders regarding the reinstatement of its net profit interest in the RC Field back up to 45% and the purchase of shares in four wells currently drilling on the field, will resume after a Parliamentary coalition has been formed in Ukraine. In the meantime, the active work programme on the Rudis assets is expected to produce positive results for the Company and more than compensate for the setbacks at the RC Field.



Bytkiv-Babchenske (Bytkiv) Field
--------------------------------


Effective 1st January 2006 the Ukrainian Government imposed a 59% increase in taxes on oil produced in Ukraine. This coincided with the expiration of Bytkiv's royalty-free status which had previously been granted due to the technical challenges of operating the field. Consequently, the economics for drilling new wells in the Bytkiv Field have diminished significantly. UkrCarpatOil - the Joint Venture (owned 50% by Cardinal) that owns and operates the Bytkiv licence - will therefore focus primarily on low cost, high return workovers, and Scott Pickford has reduced the P1 and P2 reserves in the field. However, Cardinal is currently in discussions with Ukrnafta to decide whether the drilling of well # 1007 will proceed as planned.



Valuation
---------


The Scott Pickford report also provides updated present values for the Company's reserves based on the new reserve data inclusive of the Rudis assets and a more positive outlook for gas and oil prices in Ukraine. The pre-tax net present value of Cardinal's reserves discounted at 12% (PV12) has increased 162% to $105.6 million from $40.3 million at the time of Cardinal's listing on AIM in April 2005. The pre-tax PV10 value is set at $124.7 million and will be the figure Cardinal uses going forward to bring the Company in line with valuations attributed to its peers.



Property PV @ 10% ($ ,000) PV @ 12% ($ ,000)

Rudis 71,983 61,107
RC 50,420 42,336
Bytkiv 2,316 2,173
Total 124,720 105,616


The following price assumptions were made by Scott Pickford in establishing the present values:



Time Period Forecast Average Forecast Average Forecast Average
Gas Price/Mcf Oil Price/Bbl Cond Price/Bbl

2006 $2.60 $53.36 $59.67
2007 $2.67 $54.20 $60.70
2008 to 2020 $3.40 $54.45 $60.98
2021 to 2030 $4.52 $70.19 $78.61


Commenting on the new reserve report, Robert J. Bensh, Chairman and CEO of Cardinal Resources said, "The Scott Pickford report shows what a long way Cardinal has come since the AIM listing in April 2005. The acquisition of Rudis Drilling Company has more than compensated for the setbacks we have experienced in the work programmes on our original assets.

"The new reserve figures show that the Rudis acquisition was made at the price of just $0.85/BOE and we will be conducting a significant amount of development activity on these properties over the next few years to fully exploit their potential. Gas prices have also increased more than our expectations, resulting in the sharp increase in the net present value of our reserves. We plan to continue to create value for our shareholders by executing similar acquisitions at attractive prices that boost both reserves and increase production."



Glossary of Terms

Bbl Barrel of oil
Bcf Billion cubic feet of gas
Boepd Barrels of oil equivalent per day
Mbbls Thousand barrels of oil
Mcf Thousand cubic feet of gas
MMcf Million cubic feet of gas
MBOE Thousand barrels of oil equivalent
MMBOE Million barrels of oil equivalent
P1 (Proved) Those oil or gas reserves considered to have at least
a 90% chance of being recovered (using the Society of
Petroleum Engineers definitions)
P2 (Probable) Those oil or gas reserves considered to have at least
a 50% chance of being recovered (using the Society of
Petroleum Engineers definitions)PV Present value


The classification Standard used for the Scott Pickford report is the Canadian National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities ("NI 51-101") and specifically the definitions and interpretations detailed in the Canadian Oil and Gas Evaluation Handbook (COGEH), Volumes 1 & 2, as endorsed by the Canadian Institute of Mining, Metallurgy and Petroleum (CIM).

Scott Pickford confirms that it has reviewed this press release and finds that the information presented herein has been extracted from its Report in a manner which is not misleading and provides a balanced view of the Report.

Notes to Editor

Cardinal Resources plc

Cardinal Resources plc is an independent oil and gas production and exploration company with assets in Ukraine. Cardinal is an experienced operator in the country focused on expanding its existing operations through the farm-in or acquisition of additional upstream oil and gas assets that can be further developed through the application of modern technology and expertise.

Cardinal's assets are:

Rudivsko-Chernovozavodske (RC) Field

Rudivsko-Chernovozavodske is a large under-developed gas field (1.54 TCF original gas in place), located in the Dnieper-Donets basin, 200km east of Kiev in the Poltava Oblast. Cardinal has a Joint Activity Agreement (JAA) with a subsidiary of Ukrnafta for production and further development.

Bytkiv-Babchenske (Bytkiv) Field

Bytkiv-Babchenske is an oil field, located in the Carpathian fold belt, 45km south-west of Ivano-Frankivsk in the Nadvirna Oblast. Cardinal has a 45% interest through UkrCarpatOil, a Joint Venture (JV) with Ukrnafta, to operate and develop the field.

The following assets were acquired as part of the Rudis Drilling Company transaction in 2005:

Bilousivsko-Chornukhinska (BC) Licence

Bilousivsko-Chornukhinska is a producing gas-condensate licence in the Dnieper-Donets basin, owned and operated by Cardinal.

North Yablunivska (NY) Licence

North Yablunivska is a producing gas-condensate licence in the Dnieper-Donets basin, owned by Cardinal and operated under the JAA #429 with Ukrgazvydobuvannya (Ukrgaz).

Dubrivska (DB) Licence

Cardinal is currently drilling an exploration well as part of the JAA with Ukrgaz.

Ukrgazvydobuvannya JAA #429

Cardinal has a 50% percent interest in three wells in two other fields (Kulickykhin and Bilskie) in the Dnieper-Donets Basin under this JAA with Ukrgaz.

This release may contain certain forward-looking statements. These statements relate to future events or future performance and reflect management's expectations regarding Cardinal's growth, results of operations, performance and business prospects and opportunities. Such forward-looking statements reflect management's current beliefs, are based on information currently available to management and are based on reasonable assumptions as of this date. No assurance, however, can be given that the expectations will be achieved. A number of factors could cause actual results to differ materially from the projections, anticipated results or other expectations expressed in this release. While Cardinal makes these forward-looking statements in good faith, neither Cardinal, nor its directors and management, can guarantee that the anticipated future results will be achieved.

APPENDIX

The following Reserves and Resources tables are formatted to match the guidance note for mining, oil and gas companies as issued by the London Stock Exchange in March 2006.



Summary Table of Assets

Asset Operator Company Status Licence Licence
Net Expiry Area
Interest Date
(%)
------------------------------------------------------------------------
RC PNG 14.91% Production 20/7/2024 192km2

------------------------------------------------------------------------
Bytkiv UkrCarpatOil 45% Production 28/7/2015 176km2
(JV)
------------------------------------------------------------------------
Rudis Licences and JAA #429
------------------------------------------------------------------------
Kulickykhin Rudis 50% Production N/A N/A
#18 & 26 PDP (JAA #
Wells 429)
------------------------------------------------------------------------
Bilskie Rudis 50% Production N/A N/A
#161 PDP Well (JAA #
429)
------------------------------------------------------------------------
North (JAA # 50% in Pilot Exploration 29/11/06 52km2
Yablunivska 429) the PDNP and Production
#201 PDNP Rudis Wells Licence
#203 PDP & &
#300 PDNP Licence 100% in
#4 new well (New New Drill
location Wells) Wells
construction
is underway &
expect to
start in
August 2006
------------------------------------------------------------------------
Dubrivska Rudis 50% Pilot Exploration 29/11/06 40km2
One (JAA # and Production
exploration 429) Licence
well is
currently
being drilled
------------------------------------------------------------------------
Bilousivsko-
Chornukhinska Rudis 100% Pilot Exploration 23/11/06 45km2
#13 PDP & #110 (Licence) and Production
PDP Licence
Chornukhinska
#3 new drill
well is rigged
up and
scheduled to
start in June
2006
------------------------------------------------------------------------


Asset Comments

---------------------------------------------------------
RC Negotiations to restore current 14.91%
net interest to 45% continue
---------------------------------------------------------
Bytkiv Well #1007 scheduled to start Drilling
in August 2006
--------------------------------------------------------
Rudis Licences
and JAA #429
---------------------------------------------------------
Kulickykhin Ukrgaz has the
#18 & 26 PDP Production Licence
Wells
---------------------------------------------------------
Bilskie Ukrgaz has the
#161 PDP Well Production Licence
---------------------------------------------------------
North Licence extension will be applied for-
Yablunivska
#201 PDNP
#203 PDP
#300 PDNP
#4 new well
location
construction
is underway &
expect to
start in
August 2006
---------------------------------------------------------
Dubrivska Licence extension will be applied for-
One
exploration
well is
currently
being drilled
---------------------------------------------------------
Bilousivsko-
Chornukhinska Licence extension will be applied for-
#13 PDP & #110
PDP
Chornukhinska
#3 new drill
well is rigged
up and
scheduled to
start in June
2006


- The licences are in good standing, their work programmes are ongoing and Cardinal has no reason to believe the licence extensions will not be granted as per Ukraine's existing Petroleum Law.

Summary of Reserves and Resources by Status



Oil and Liquids Reserves

Gross (Mbbls)
-----------------------------------------------
Proved Proved & Proved,
Probable Probable &
Possible
-----------------------------------------------
RC 5,057 7,881 Not Calculated
(Condensate)
-----------------------------------------------
Bytkiv (Oil) 656 711 Not Calculated

-----------------------------------------------
Rudis
(Condensate
and Oil) 2,403 3,911 Not Calculated
-----------------------------------------------
Total Oil
and 8,116 12,503
Liquids
-----------------------------------------------


Net Attributable (Mbbls) Operator
-------------------------------------------------------------
Proved Proved & Proved,
Probable Probable &
Possible
-------------------------------------------------------------
RC 754 1,175 Not Calculated PNG
(Condensate)
-------------------------------------------------------------
Bytkiv (Oil) 295 320 Not Calculated UkrCarpatOil
(JV)
-------------------------------------------------------------
Rudis
(Condensate
and Oil) 2,021 3,413 Not Calculated Rudis
-------------------------------------------------------------
Total Oil
and 3,070 4,908
Liquids
-------------------------------------------------------------


Gas Reserves
Gross (Bcf)
---------------------------------------
Proved Proved & Proved,
Probable Probable &
Possible
---------------------------------------
RC 340 536 Not
Calculated
---------------------------------------
Bytkiv 1.178 1.276 Not
Calculated
---------------------------------------
Rudis 59.670 104.032 Not
Calculated
---------------------------------------
Total 400.85 641.31
Gas
---------------------------------------



Net Attributable (Bcf) Operator
---------------------------------------------------
Proved Proved & Proved,
Probable Probable &
Possible
---------------------------------------------------
RC 50.714 79.897 Not PNG
Calculated
---------------------------------------------------
Bytkiv 0.530 0.574 Not UkrCarpatOil
Calculated (JV)
---------------------------------------------------
Rudis 50.818 84.936 Not Rudis
Calculated
---------------------------------------------------
Total 102.06 165.41
Gas
---------------------------------------------------



Oil & Gas - Contingent Resources

Gross Recoverable

---------------------------------------------
Low Best High
Estimate Estimate Estimate
---------------------------------------------
Bytkiv 2,476 2,647 Not
(Oil) Mbbls Mbbls Calculated
---------------------------------------------
Bytkiv 4.258 4.744 Not
(Gas) Bcf Bcf Calculated
---------------------------------------------


Net Attributable Risk Operator
Factor-
---------------------------------------------------------
Low Best High
Estimate Estimate Estimate
---------------------------------------------------------
Bytkiv 1,114 1,191 Not 50% UkrCarpatOil
(Oil) Mbbls Mbbls Calculated (JV)
---------------------------------------------------------
Bytkiv 1.916 2.135 Not 50% UkrCarpatOil
(Gas) Bcf Bcf Calculated (JV)
---------------------------------------------------------


- Risk Factor - This is Scott Pickford's opinion of the probability that these technically recoverable reserves will become economic and be converted from Contingent Resource to Reserves.



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