Cloudbreak Regulatory News (CDL)

11 Aug 2006 18:07

Cardinal Resources plc11 August 2006 CARDINAL RESOURCES PLC PROVIDES SUPPLEMENT TO THE PRESS RELEASE OF 30 JUNE 2006REGARDING FORM NI 51-101F1 LONDON - Friday, 11th August 2006 Cardinal Resources plc (AIM:CDL) ("Cardinal" or "the Company"), an independentoil and gas production and exploration company operating in Ukraine, todayprovides supplementary information to its 30 June 2006 release regarding theForm NI 51-101F1 filed with the Alberta Securities Commission (ASC).Specifically, the following is further explanation of the term "ContingentResources" at the Bytkiv Field in Ukraine as required by the ASC in compliancewith Canadian filing requirements. These Canadian filing requirements date backto when Cardinal's predecessor, Carpatsky Petroleum Inc., was a public companyin Canada. All filings can be accessed electronically at www.sedar.com. The data contained in this release is based on that included in Cardinal's pressrelease dated 15 May 2006 regarding the publication of its reserve report. The Bytkiv Field's net "Proved plus Probable Reserves" reported in the RPSEnergy Canada Ltd. (the Canadian-registered affiliate of Scott Pickford Ltd. andformerly known as ECL Canada) May 2006 Reserve Report are stated as 0.320 MMbblsand 0.574 Bcf with a net present value discounted at 10% of US$1.7 million aftertax (US$2.3 million before tax), using a constant price of US$52.70 per bbl.The Proved plus Probable Reserves, which consist of the existing producing wells(with appropriate decline incorporated), are significantly less than reported inthe 2005 Canadian Reserve Report. Technically, the estimated reserve volumeshave not changed but, as a large portion of the reserves are viewed asuneconomic in the May 2006 Canadian Reserve Report, 1.191 MMbbls and 2.135 Bcfpreviously classified as Proved Plus Probable Reserves are now classified as "Contingent Resources" and consequently have no value assigned to them. In the June 2005 Reserve Report published by ECL Canada, the Bytkiv Field hadnet Proved plus Probable Reserves of 1.57 MMbbls and 2.805 Bcf with a netpresent value discounted at 10% of US$17.04 million after tax (US$23.2 millionbefore tax) using a constant price of US$46.20 per bbl. However, since thattime there have been major increases in government royalties, operating costs,and land rentals. This, together with the increases in drilling costs and therelatively low initial production rates of the wells assumed in the 2006Canadian Reserve Report (86-136 bbls per day per well), means that the drillingof new wells using traditional equipment and practice is not expected to make areasonable return on investment under the price scenario used in the Canadianreport. Therefore, under Canadian regulatory guidelines most of the reserves atBytkiv Field are now classified as Contingent Resources. Cardinal believes that the Bytkiv #1007 low-risk development well scheduled tostart later this year (estimated to cost US$1.8 million) and utilizing moreadvanced drilling and completion practices should result in a higher initialproduction rate that could improve the economics of these Contingent Resources. Once this well is drilled and evaluated, if circumstances warrant, theContingent Resources may be re-classified as Proven plus Probable Reserves withvalues assigned. Background to the Bytkiv Field The Bytkiv Field, located in the Carpathian Basin of Western Ukraine, produceslight oil from the Oligocene Menelite formation at an average depth ofapproximately 7,500 feet. This field is a thrust faulted geologic structureapproximately 20km long and 5km wide that has estimated original in placeresources of approximately 600 MMbbls. Other commercial fields in the trendinclude the Pasichna field 5km to the north and the Dovbushany field 10km to thesouthwest. The Bytkiv Field has been producing since 1951 with cumulativeproduction of more than 53 MMbbls. Cardinal's gross and net interest in thefield is 45%. This interest was obtained through ownership of a 45% interest inUkrCarpatOil Ltd. which is a Ukrainian limited liability company established byJSC Ukrnafta and Carpatsky Petroleum Corporation, the latter of which is asubsidiary of Cardinal. UkrCarpatOil has a 20 year production licence granted on July 28, 1995 thatallows the further development of the field. The field is located entirelywithin the approximately 176 km2 licence area. UkrCarpatOil's operations on thefield are conducted through Ukrnafta's subsidiary Nadvirninaftagaz and aremanaged by a joint committee of representatives from Ukrnafta and Cardinal, witha general manager appointed by both parties. For the year ending December 31, 2005 the joint venture produced 75,518 bbls ofoil and 220,260 Mcf from 12 wells. Approximately 50% of the produced gas isrecycled and used for gas lift. The oil is sold at prices generally comparableto Urals Blend and gas is sold to local end users in Ukraine at a controlledmonthly auction price. At the end of May 2006, Cardinal realized a gas price ofUS$3.84 per Mcf, including VAT, and $51.87 per bbl. Cliff West, Executive Vice President and Chief Operating Officer of Cardinal(MSc Geology from West Virginia University, Professional Geologist licensed inthe State of Texas, Member of the American Association of Petroleum Geologists -Certified Petroleum Geologist # 1563, the Society of Exploration Geophysicists,and the Houston Geological Society) has reviewed the above reserve and resourceinformation and approved its content. Glossary of Terms (Canadian) Bbl(s) Barrel(s) of oil Bcf Billion cubic feet of gas Contingent Resources Those quantities of oil and gas estimated to bepotentially recoverable from known accumulations but not currently economic.Contingent resources include, for example, accumulations for which there iscurrently no viable market. Mcf Thousand cubic feet of gas MMbbls Million barrels of oil Reserves Estimated remaining quantities of oil andnatural gas and related substances anticipated to be recoverable from knownaccumulations, from a given date forward, based on (a) analysis of drilling,geological, geophysical, and engineering data; (b) the use of establishedtechnology; and (c) specified economic conditions, which are generally accepted asbeing reasonable and shall be disclosed. Reserves are classified according tothe degree of certainty associated withthe estimates. Probable reserves Those additional reserves that are less certainto be recovered than proved reserves. It is equally likely that the actualremaining quantities recovered will be greater or less than the sum of theestimated proved plus probable reserves. Proved reserves Those reserves that can be estimated with a highdegree of certainty to be recoverable. It is likely that the actual remainingquantities recovered will exceed the estimated proved reserves. ### For further information please contact: Cardinal Resources Kate Spiro +44 (0) 20 7936 5258 kspiro@cardinal-uk.com Notes to Editor Cardinal Resources plc Cardinal Resources plc is an independent oil and gas company engaged in theacquisition, development, production and exploration of oil and natural gasproperties in Ukraine. Cardinal is an experienced operator in the countryfocused on expanding its existing operations through the farm-in or acquisitionof additional upstream oil and gas assets that can be further developed throughthe application of modern technology and expertise. 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