SOURCE: CARDINAL RESOURCES PLC

May 15, 2006 02:05 ET

Cardinal Resources plc Announces Publication of Reserve Report

Reserves Increase 75% Since IPO to 32.5 MMBOE

PV 12 Up 162% to $105.6 Million

LONDON -- (MARKET WIRE) -- May 15, 2006 -- 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.


                      This information is provided by RNS
            The company news service from the London Stock Exchange

Contact Information

  • For further information please contact:

    Cardinal Resources
    Kate Spiro
    +44 (0) 20 7936 5258
    Email Contact

    Parkgreen Communications
    Justine Howarth / Victoria Thomas
    +44 (0) 20 7493 3713
    Email Contact