Supplement to Form N1 51-101
Cardinal Resources plc
11 August 2006
CARDINAL RESOURCES PLC PROVIDES SUPPLEMENT TO THE PRESS RELEASE OF 30 JUNE 2006
REGARDING FORM NI 51-101F1
LONDON - Friday, 11th August 2006
Cardinal Resources plc (AIM:CDL) ('Cardinal' or 'the Company'), an independent
oil and gas production and exploration company operating in Ukraine, today
provides supplementary information to its 30 June 2006 release regarding the
Form NI 51-101F1 filed with the Alberta Securities Commission (ASC).
Specifically, the following is further explanation of the term 'Contingent
Resources' at the Bytkiv Field in Ukraine as required by the ASC in compliance
with Canadian filing requirements. These Canadian filing requirements date back
to when Cardinal's predecessor, Carpatsky Petroleum Inc., was a public company
in 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 press
release dated 15 May 2006 regarding the publication of its reserve report.
The Bytkiv Field's net 'Proved plus Probable Reserves' reported in the RPS
Energy Canada Ltd. (the Canadian-registered affiliate of Scott Pickford Ltd. and
formerly known as ECL Canada) May 2006 Reserve Report are stated as 0.320 MMbbls
and 0.574 Bcf with a net present value discounted at 10% of US$1.7 million after
tax (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 in
the 2005 Canadian Reserve Report. Technically, the estimated reserve volumes
have not changed but, as a large portion of the reserves are viewed as
uneconomic in the May 2006 Canadian Reserve Report, 1.191 MMbbls and 2.135 Bcf
previously 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 had
net Proved plus Probable Reserves of 1.57 MMbbls and 2.805 Bcf with a net
present value discounted at 10% of US$17.04 million after tax (US$23.2 million
before tax) using a constant price of US$46.20 per bbl. However, since that
time there have been major increases in government royalties, operating costs,
and land rentals. This, together with the increases in drilling costs and the
relatively low initial production rates of the wells assumed in the 2006
Canadian Reserve Report (86-136 bbls per day per well), means that the drilling
of new wells using traditional equipment and practice is not expected to make a
reasonable return on investment under the price scenario used in the Canadian
report. Therefore, under Canadian regulatory guidelines most of the reserves at
Bytkiv Field are now classified as Contingent Resources.
Cardinal believes that the Bytkiv #1007 low-risk development well scheduled to
start later this year (estimated to cost US$1.8 million) and utilizing more
advanced drilling and completion practices should result in a higher initial
production rate that could improve the economics of these Contingent Resources.
Once this well is drilled and evaluated, if circumstances warrant, the
Contingent Resources may be re-classified as Proven plus Probable Reserves with
values assigned.
Background to the Bytkiv Field
The Bytkiv Field, located in the Carpathian Basin of Western Ukraine, produces
light oil from the Oligocene Menelite formation at an average depth of
approximately 7,500 feet. This field is a thrust faulted geologic structure
approximately 20km long and 5km wide that has estimated original in place
resources of approximately 600 MMbbls. Other commercial fields in the trend
include the Pasichna field 5km to the north and the Dovbushany field 10km to the
southwest. The Bytkiv Field has been producing since 1951 with cumulative
production of more than 53 MMbbls. Cardinal's gross and net interest in the
field is 45%. This interest was obtained through ownership of a 45% interest in
UkrCarpatOil Ltd. which is a Ukrainian limited liability company established by
JSC Ukrnafta and Carpatsky Petroleum Corporation, the latter of which is a
subsidiary of Cardinal.
UkrCarpatOil has a 20 year production licence granted on July 28, 1995 that
allows the further development of the field. The field is located entirely
within the approximately 176 km2 licence area. UkrCarpatOil's operations on the
field are conducted through Ukrnafta's subsidiary Nadvirninaftagaz and are
managed by a joint committee of representatives from Ukrnafta and Cardinal, with
a general manager appointed by both parties.
For the year ending December 31, 2005 the joint venture produced 75,518 bbls of
oil and 220,260 Mcf from 12 wells. Approximately 50% of the produced gas is
recycled and used for gas lift. The oil is sold at prices generally comparable
to Urals Blend and gas is sold to local end users in Ukraine at a controlled
monthly auction price. At the end of May 2006, Cardinal realized a gas price of
US$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 in
the 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 resource
information 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 be
potentially recoverable from known accumulations but not currently economic.
Contingent resources include, for example, accumulations for which there is
currently no viable market.
Mcf Thousand cubic feet of gas
MMbbls Million barrels of oil
Reserves Estimated remaining quantities of oil and
natural gas and related substances anticipated to be recoverable from known
accumulations, from a given date forward, based on (a) analysis of drilling,
geological, geophysical, and engineering data; (b) the use of established
technology; and (c) specified economic conditions, which are generally accepted
asbeing reasonable and shall be disclosed. Reserves are classified according to
the degree of certainty associated withthe estimates.
Probable reserves Those additional reserves that are less certain
to be recovered than proved reserves. It is equally likely that the actual
remaining quantities recovered will be greater or less than the sum of the
estimated proved plus probable reserves.
Proved reserves Those reserves that can be estimated with a high
degree of certainty to be recoverable. It is likely that the actual remaining
quantities recovered will exceed the estimated proved reserves.
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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 the
acquisition, development, production and exploration of oil and natural gas
properties 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.
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.
This information is provided by RNS
The company news service from the London Stock Exchange