Cloudbreak Regulatory News (CDL)

30 Sep 2005 14:59

Cardinal Resources plc30 September 2005 CARDINAL RESOURCES PLC TO ACQUIRE THREE OIL AND GAS LICENCES IN UKRAINE $14.8 MILLION TO PURCHASE 9.1 MMBOE OF RESERVES DAILY NET AVERAGE PRODUCTION TO INCREASE FROM 631 BOEPD TO 1131 BOEPD LONDON - Friday, 30th September 2005 Cardinal Resources plc (AIM:CDL), today announces that it has entered into abinding agreement with Hares Group Limited to acquire 100% of Rudis DrillingCompany in Ukraine for $14.8 million. Rudis' assets comprise three oil and gas licences - Dubrivska,Bilousivsko-Chornukhinska and North Yablunivska - and a 50% working interest ina Joint Activity Agreement ("JAA") with Ukrgazvydobuvannya, a subsidiary ofNaftogaz Ukraine, for which Rudis is the operator. All of Rudis' properties arelocated approximately 40 kilometres from Cardinal's existing JAA wells in theRudivsko-Chernovozavodske Field in Eastern Ukraine. Rudis' net profits for the 6months ended 30th June 2005 were $480,000, before exploration costs of $835,000. Cardinal initially plans to drill five development wells and complete fourworkovers in the three licence areas. At present, a well is drilling in theDubrivska licence area. Rudis' current net average daily production is 500 barrels of oil equivalent perday ("boepd".) Cardinal's year to date net average daily production is 631boepd. Cardinal has estimated Rudis' reserves at 9.1 million barrels of oil equivalent("MMBOE"). The reserve estimate is based on the expectation that a 20-yearproduction licence will be granted for each of the licences which currently haveproducing wells on them (Bilousivsko-Chornukhinska and North Yablunivska). Oncethe exploration and pilot commercial development licences expire the company hasno reason to believe that the conditions required for the production licenceswill not be achieved. Exploration Consultants Limited (ECL) has reviewed theassumptions and methodology employed by Cardinal in its reserve evaluation andbelieves them to be sound and reasonable. The transaction is expected toincrease Cardinal's reserves from 18.4 MMBOE to 27.5 MMBOE. To fund the acquisition, Cardinal will issue 21,949,364 of Cardinal OrdinaryShares at a deemed value of 22p per share, equating to 20% of the enlarged sharecapital, and pay $6,000,000 in cash. If the cash component of the considerationis not paid prior to 1st December 2005, Hares has the right to require Cardinalto satisfy any outstanding amount by the issue of additional shares (at a deemedprice of 22p) up to a maximum of a further 9.9% of Cardinal. Any unpaid balancewill attract interest of 1% per month commencing on 1st January 2006 up untilthe date of payment. As a result of this transaction, the Hares Group has the right to appoint anon-executive Director to the Board of Cardinal, who will not receive any feesin respect of such an appointment. If the shareholding in the company fallsbelow 7%, the right to Board representation falls away. The acquisition is expected to close within six weeks. "The acquisition of Rudis represents the initial step in executing on ourstrategy to acquire additional operated oil and gas assets in Ukraine, whereCardinal can apply local knowledge and modern technology to create value forstakeholders," said Robert J. Bensh, Cardinal's Chairman and Chief ExecutiveOfficer. Cardinal Resources plcCardinal Resources plc is an independent oil and gas exploration and productioncompany with assets in Ukraine. Cardinal is an experienced operator withnear-term opportunity to significantly expand existing operations throughfarm-ins or acquisitions of additional oil and gas assets accretive to reservesand production. Hares GroupHares Group has been active in Ukraine since 1992 in various areas includingsteel production and trading, real estate development, industrial engineeringand oil and gas exploration. Its steel activity is held through Hares GroupHoldings GmbH, an Austrian company, and its oil and gas activity is held throughHares Group Limited, a Cyprus company. ### This release may contain certain forward-looking statements. These statementsrelate to future events or future performance and reflect management'sexpectations regarding Cardinal's growth, results of operations, performance andbusiness prospects and opportunities. Such forward-looking statements reflectmanagement's current beliefs, are based on information currently available tomanagement and are based on reasonable assumptions as of this date. Noassurance, however, can be given that the expectations will be achieved. Anumber of factors could cause actual results to differ materially from theprojections, anticipated results or other expectations expressed in thisrelease. While Cardinal makes these forward-looking statements in good faith,neither Cardinal, nor its directors and management, can guarantee that theanticipated future results will be achieved. This information is provided by RNS The company news service from the London Stock Exchange