Cloudbreak Regulatory News (CDL)

10 Mar 2006 11:14

Cardinal Resources plc10 March 2006 CARDINAL RESOURCES PLC ANNOUNCES UPDATE ON RC FIELD REINSTATEMENT AND WELL SWAP RESERVES INCREASE BY 1.8 MILLION BARRELS OF OIL EQUIVALENT LONDON - Friday, 10th March 2006 Cardinal Resources plc (AIM:CDL) ("Cardinal" or "The Company"), an independentoil and gas production and exploration company operating in Ukraine, todayannounces an update on the Rudivsko-Chernovozavodske (RC) Field reinstatement.Cardinal also announces that it has concluded an agreement for a well swap withits Joint Activity (JAA) partner, Ukrgazvydobuvannya (Ukrgaz), a subsidiary ofNaftogaz Ukraine. Since the end of last year, Cardinal has held intermittent negotiations andgeneral discussions with its Joint Activity partner, Ukrnafta, and its majorshareholders regarding the reinstatement of Cardinal's subsidiary, CarpatskyPetroleum's, net profit interest in the RC Field and in four development wellsdrilled by Ukrnafta. An agreement has not been reached and the Company does notexpect one until after the Ukrainian parliamentary elections on 26th March. Under the new swap agreement with Ukrgaz Cardinal gains increased ownership andoperational control of the Bilousivsko-Chornukhinska (BC) licence area,increasing its working interest in six undeveloped wells previously in JAA #429from 50% to 100%. Cardinal also obtains 50% of one additional workover candidatein the North Yablunivska (NY) licence. In turn, Ukrgaz gains an increasedinterest in four wells, reducing Cardinal's interest in them by 50%. Cardinalacquired the three licences - Dubrivska (DB), Bilousivsko-Chornukhinska (BC) andNorth Yablunivska (NY) - through its acquisition of Rudis Drilling Company(Rudis) in October 2005. The net effect to Cardinal of the swap is that its average working interest inthe wells subject to the swap rises to approximately 76% from 64%, with acorresponding net revenue increase of 16%. As part of the agreement, Cardinaland Ukrgaz will adjust their capital contributions to the JAA accordingly. Afteraccounting adjustments and profit distributions, it is anticipated that the netcost to Cardinal will be a maximum of approximately $400,000. The transaction, which is effective from 30th January 2006, increases Cardinal'stotal proved and probable reserves by 1.8 million barrels of oil equivalent(MMBOE) to 29.3 MMBOE. Taking into account the well swap, Cardinal has identified eleven developmentdrilling locations and seven well workovers in the BC and NY licence areas. The2006 / 2007 development program on the BC and NY licence areas include sevenwell workovers and the initiation of drilling operations on seven of the elevendevelopment locations, with four of those expected to be completed prior toyear-end 2007. The forecasted capital investment to develop these locations is$25 to $42 million, dependant upon the number of wells drilled, the extent ofwestern equipment utilised and the availability of finance, with an anticipated2,500 to 3,000 barrels of oil equivalent per day increase to current netproduction levels by the end of 2007. At present, the BC #13 workover has been completed and is now producingapproximately 50 barrels of condensate per day. Site work on the drillinglocations for the BC #3 and NY #4 development wells has begun. The NY #203workover has begun, and the BC #111 and BC #9 workovers are expected to commenceoperations in the second and third quarters of 2006 respectively. The results ofthe Dubrivska # 2 exploratory well are expected in the second quarter of 2006. "We will continue to deliver on our strategy to add properties that are operatedby Cardinal which offer significant upside to our portfolio," said Chairman andChief Executive Officer Robert J. Bensh. "Our team has the opportunity toenhance our asset base with increased exposure to gas in the Ukraine, whileadding further development drilling opportunities under Cardinal's control." ### For further information please contact: Cardinal Resources Parkgreen CommunicationsKate Spiro Justine Howarth / Victoria Thomas+44 (0) 20 7936 5258 +44 (0) 20 7493 3713kspiro@cardinal-uk.com victoria.thomas@parkgreenmedia.com Notes to Editor Cardinal Resources plcCardinal Resources plc is an independent oil and gas production and explorationcompany with assets in Ukraine. Cardinal is an experienced operator in thecountry focused on expanding its existing operations through the farm-in oracquisition of additional upstream oil and gas assets that can be furtherdeveloped through the application of modern technology and expertise. Cardinal's main assets are: Rudivsko-Chernovozavodske (RC) Field Rudivsko-Chernovozavodske is a large under-developed gas field (1.54 TCForiginal gas in place), located in the Dnieper-Donets basin, 200km east of Kievin the Poltava Oblast. Cardinal has a Joint Activity Agreement (JAA) with asubsidiary of Ukrnafta for production and further development. Bytkiv-Babchenske (Bytkiv) Field Bytkiv-Babchenske is an oil field, located in the Carpathian fold belt, 45kmsouth-west of Ivano-Frankivsk in the Nadvirna Oblast. Cardinal has a 45%interest through UkrCarpatOil, a Joint Venture (JV) with Ukrnafta, to operateand develop the field. Plus the following assets which were acquired as part of the Rudis DrillingCompany transaction in 2005: Bilousivsko-Chornukhinska (BC) Licence Bilousivsko-Chornukhinska is a producing gas-condensate licence in theDnieper-Donets basin, owned and operated by Cardinal. North Yablunivska (NY) Licence North Yablunivska is a producing gas-condensate licence in the Dnieper-Donetsbasin, owned by Cardinal and operated under the JAA. Dubrivska (DB) Licence Cardinal is currently drilling an exploration well as part of the JAA withUkrgazvydobuvannya. 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 a JAA withUkrgazvydobuvannya. 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