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Cardinal Resources (CDL)

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Wednesday 27 September, 2006

Cardinal Resources

Interim Results

Cardinal Resources plc
27 September 2006


CARDINAL RESOURCES PLC ANNOUNCES 2006 INTERIM RESULTS

LONDON - Wednesday, 27th September 2006

Cardinal Resources plc (AIM:CDL) ('Cardinal' or 'the Company'), an independent
oil and gas production and exploration company operating in Ukraine, today
announces its interim results for the six month period ending 30th June 2006.


Financial highlights for the period:

•         Group turnover, including the Company's share of joint venture 
          turnover at the Bytkiv Field, increased 205% to $5.8 million.

•         Gross profit increased to $3 million from $0.3 million.

•         Cash at bank and in hand at the end of the period totalled $14.8 
          million. A further $14.1 million remains un-drawn from the $38 million 
          Silver Point Capital (SPC) facility.

•         EBITDA improved to a loss of $1 million from a loss of $2.1 million in 
          the same period last year.

•         Loss per ordinary share was $0.035, compared to $0.042 in the same 
          period last year, and $0.093 at 2005 year end.

Operational highlights during the period:

•         Well swap announced in March with joint activity partner, 
          Ukrgazvydobuvannya (Ukrgaz), increased Cardinal's ownership and 
          operational control of the Bilousivsko-Chornukhinska (BC) licence area. 
          Work programme on Rudis assets was subsequently initiated.

•         Exploration well #2 on the Dubrivska (DB) licence reached total depth 
          in March and workovers on wells BC #13 and Bytkiv #506 were 
          successfully completed in January and March, respectively.

•         Highlights of Scott Pickford Ltd's reserve report were published in 
          May, estimating Cardinal's P1 and P2 reserves at 32.5 MMBOE and the 
          pre-tax present value of the Company's reserves, discounted at 10%, at 
          $124.7 million.

•         Average gas realisations for the Company during the period, including 
          VAT, were $3.24/Mcf, an increase of 36% since year end 2005. The price 
          reached a high of $3.55/Mcf in April.

Post reporting period operational highlights:

•         BC well #3A reached total depth in September and is being prepared for 
          testing.

•         Well NY #4 spudded in September.

•         3-D seismic survey commenced on the DB licence in September.

•         Recovery of production of BC well #111 was carried out and, in 
          September, was being tested.


Commenting on today's results, Robert J. Bensh, Chairman and Chief Executive
Officer of Cardinal said, 'During the period Cardinal has made considerable
progress on the Rudis work programme, which has been the key focus of our
activity since the acquisition of these assets in October of last year.  We are
already yielding results and hope to significantly increase production by the
end of 2007 as previously announced.  While the political uncertainty in Ukraine
has somewhat impacted our business, particularly with regards to negotiating the
RC Field reinstatement, we remain committed to resolving this issue.'


For further information please contact:



Cardinal Resources                         Parkgreen Communications
Kate Spiro                                 Justine Howarth / Victoria Thomas
+44 (0) 20 7936 5258                       +44 (0) 20 7493 3713
[email protected]                     [email protected]





CHAIRMAN'S STATEMENT

The first half of 2006 has been an active period for Cardinal. We have initiated
the work programme on the oil and gas fields acquired in the Rudis acquisition,
which we believe, if successful, should be capable of generating substantial
production and cash flow by the end of 2007. I believe we are making steady
progress towards the Company's goal of aggregating an asset base of under-
developed oil and gas properties in Ukraine and comparable regions that we can
develop using modern equipment, technology and the know-how of an experienced
management team. After almost 18 months since the Company's admission to AIM,
reserves and production have increased considerably and an active development
programme is underway to exploit the optimum production potential of reserves in
the ground.


Progress at the RC Field continues to be constrained pending a resolution to
Cardinal's attempt to reinstate its working interest in the field to 45%.
Negotiations with our JAA partner, Ukrnafta, were halted prior to the Ukrainian
parliamentary elections on March 26, 2006 and have yet to resume due to the
extended time it has taken to form a coalition government. Now that a new Prime
Minister is in office I expect some stability to return to the country. Direct
discussions with our partner regarding the reinstatement of the RC Field are
forthcoming, as well as with other influential parties in the country. The Board
is also reviewing all of our options with regards to ensuring a swift resolution
to the reinstatement, including Cardinal's contractual right to initiate
arbitration in Stockholm. We will continue to update the market when
developments occur.


Average production net to the Company in June 2006 was 999 boepd. The decrease
since the end of 2005 is due to wells being worked over and the decline in
production of the two wells on the Kulickykhin Field, which is explained in
further detail below. Average net daily production on the Rudis properties at
the end of the period was 536 boepd versus 672 boepd at the end of December
2005. Net production at the RC and Bytkiv Fields at 30th June was 325 boepd and
138 boepd respectively.


Gas prices have continued to rise during the first half of 2006. Cardinal's
average realisations during the period were $3.24/Mcf - an uplift of 36% since
the end of 2005. With further increases in import prices expected for 2007, I am
optimistic that prices will remain at these higher levels over the next twelve
months.



Financial Review

The 205% increase in Group turnover was partially offset by higher general and
administration costs (G&A) as a result of the amortisation of fees for the SPC
financing in accordance with FRS 4, recruitment costs for operating and
engineering staff in Ukraine, advisory fees and additional staffing and
facilities costs related to the Rudis acquisition. Excluding exploration costs
and non-cash items, such as depreciation, and the application of FRS 4 and FRS
20, G&A totalled $4.0 million, compared with $3.0 million for the same period
last year.


Earnings before interest, taxes, depreciation and amortisation (EBITDA) for the
period was a loss of $1 million, compared to a loss of $2.1 million in 2005,
excluding non-recurring costs.


                                              30 June 2006            30 June 2005             31 December 2005
                                                     $'000                   $'000                        $'000
                                                                          Restated                     Restated
Operating loss                                      (1,895 )                (3,139 )                     (8,348 )
Depreciation/depletion charge                          419                     279                          196
Share of joint venture                                 (16 )                   185                        1,173
Amortisation of finance charges                        506                       -                            -
EBITDA (including non-recurring costs)                (986 )                (2,675 )                     (6,979 )
Non-recurring costs                                      -                     601                        1,976
EBITDA (excluding non-recurring costs)                (986 )                (2,074 )                     (5,003 )





Review of Operations
The work programme on the Rudis properties, on which Cardinal owns the licences
and controls operations, is progressing well. It is our intention, as announced
in March, to complete seven workovers and drill four of seven new wells on the
BC and NY licences by the end of 2007. If the work progresses as planned, we
believe that production could increase by approximately 2,500 to 3,000 boepd by
the end of this period. The uplift in production is dependent upon the gas
gathering facility which is currently under construction on the BC licence and
scheduled to be completed in the second quarter of 2007.



Following the well swap with Ukrgaz announced in March, which provided Cardinal
with increased ownership and operating control of the BC licence, two workovers
have been completed in January and September and one well (BC #3A) reached total
depth in September with indications of the presence of hydrocarbons found in two
zones. The exploratory well on the Dubrivska (DB) licence, which was drilling at
the time of the Rudis acquisition, also reached total depth in March, has been
tested and is now temporarily suspended. One new well is being drilled and a
workover is underway on the NY licence. Workovers also continue at the Bytkiv
Field but, as previously announced in May, the economics for drilling new wells
in the field have diminished significantly.



  • The workover on BC well #13 was successfully completed in January. Gas is 
    flared at this well to permit condensate production. The well will 
    eventually be tied in to Cardinal's gas gathering facility on the BC licence 
    area which is expected to be completed during the second quarter of 2007. 
    The design of the facility is nearly complete, equipment has been sourced 
    and construction has begun. A tie-in point to the main pipeline which runs 
    through the licence has also been identified.


  • The drilling of BC well #3A was completed in early September using a 
    Ukrainian rig hybridised with modern drill bits and mud conditioning 
    equipment.  Two zones (Visean-18 and 20) between 3,000 to 3,150 metres were 
    found which appear to be hydrocarbon-bearing based on log analyses.  These 
    zones are currently being tested to see whether they are capable of 
    commercial production.


  • The exploratory well #2 on the DB licence was completed in March and testing 
    ended in September. A secondary objective in the Visean-19 (V-19) formation 
    was tested with encouraging indications of gas and condensate but with
    water dominating, believed to be from water-bearing sand below the V-19.  A 
    3-D seismic survey is now being carried out to evaluate part of the licence 
    area and determine whether further drilling should take place. The well has 
    been temporarily abandoned pending the results of the 3-D survey which are 
    expected by spring 2007.


  • NY well #4, which is covered by JAA #429 with Ukrgaz, spudded in early 
    September.


  • Equipment is being moved to BC #116A in anticipation of an October 2006 spud 
    date, and the BC #13A, originally scheduled for first quarter 2007, is 
    expected to spud in December 2006.


  • An agreement was made with Ukrgaz in September 2006 to take wells #18 and 
    #26 on the Kulickykhin Field out of JAA #429 and return them 100% to Ukrgaz. 
    Production at these wells has declined significantly since the beginning of 
    the year: July production averaged 42 boepd versus 256 boepd in February. In 
    return, Ukrgaz has verbally agreed to complete the workovers of North 
    Yablunivska (NY) wells #201, #203 and #300 at their expense.


  • Recovery operations on the previously abandoned well #111 on the 
    Bilousivsko-Chornukhinska (BC) licence commenced in late June 2006 and were 
    completed in September. The well is currently being tested.

  • The workover on NY well #203 is currently in progress. When completed it has 
    been verbally agreed with Ukrgaz that the rig will move to work over NY 
    wells #201 and #300 in succession.


  • The workover of Bytkiv well #524 is in progress. The well plan for Bytkiv 
    well #1007 is currently being modified by Ukrnafta but the well is not 
    anticipated to spud before the fourth quarter of 2006. The results of this 
    well are expected to determine whether further drilling will take place on 
    the field or not.



Outlook

I expect activity on the oil and gas fields acquired in the Rudis transaction to
continue to dominate Company news flow between now and the end of the year. In
addition to the well currently drilling on the NY licence, two further wells and
several workovers are expected to commence on the BC and NY licence areas during
the second half of 2006, as well as ongoing construction of the gas gathering
facility. If the work and outcome progress as we plan, the Board believes that
production could increase significantly by the end of 2007 when we will be in a
prime position to take further advantage of the continued increases in gas
prices in Ukraine.




Robert J. Bensh

Chairman and Chief Executive Officer

27th September 2006





Cliff West, Executive Vice President and Chief Operating Officer of Cardinal
(Member of the American Association of Petroleum Geologists - Certified
Petroleum Geologist # 1563) is the qualified person that has reviewed and
approved the technical information within this press announcement.




Glossary of Terms

boepd                 Barrels of oil equivalent per day

Mcf                   Thousand cubic feet of gas

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

                                     ###


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.

Cardinal's main 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 in which Cardinal
holds a 14.9% net profit interest.

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.

Plus the following assets which 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, 100% owned and operated by Cardinal.

North Yablunivska (NY) Licence
North Yablunivska is a producing gas-condensate licence in the Dnieper-Donets
basin, 100% owned by Cardinal and operated under the JAA.  For four wells on the
licence covered by JAA 429, Cardinal's interest is only 50% in each such well.

Dubrivska (DB) Licence
Cardinal has drilled an exploration well as part of the JAA with 
Ukrgazvydobuvannya.

Ukrgazvydobuvannya JAA #429

Cardinal has a 50% percent interest in a JAA with Ukrgazvydobuvannya which
covers certain wells on the NY licence area and one well in the Bilskie field.


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.



Consolidated Profit and Loss Account

for the six months ended 30 June 2006


                                              Six months ended       Six months ended             Year ended
                                                  30 June 2006           30 June 2005       31 December 2005
                                                     Unaudited              Unaudited                Audited
                                                         $'000                  $'000                  $'000
                                   Note                                    (Restated)             (Restated)
Turnover
Group and share of joint venture                         5,818                  1,906                  4,587
Less: share of joint venture                            (1,344  )                (974  )              (1,556  )
turnover
                                                         4,474                    932                  3,031
Cost of sales                                           (1,523  )                (632  )              (1,595  )

Gross profit                                             2,951                    300                  1,436

Costs of admission to AIM                                    -                      -                   (467  )
Reorganisation expenses                                      -                   (601  )              (1,509  )
Other general & administrative                          (4,846  )              (2,838  )              (7,808  )
expenses
Total general & administrative                          (4,846  )              (3,439  )              (9,784  )
expenses

Operating loss                                          (1,895  )               (3,139 )               (8,348 )

Share of operating (losses)/profit                         (16 )                  185                  1,173
of joint venture
Interest receivable                                        381                     54                     96
Interest payable                                        (1,869  )                  (5  )                (221  )

Loss on ordinary activities before                      (3,399  )              (2,905  )              (7,300  )
taxation

Corporation tax                                           (645  )                (134  )                (473  )

Loss on ordinary activities                             (4,044  )              (3,039  )              (7,773  )
transferred to reserves

Loss per ordinary share ($)           2                 (0.035  )              (0.042  )              (0.093  )



There were no recognised gains or losses other than the result for the financial 
period.




Consolidated Balance Sheet
at 30 June 2006


                                                   30 June 2006          30 June 2005       31 December 2005
                                                      Unaudited             Unaudited                Audited
                                                          $'000                 $'000                  $'000
                                     Note                                   (Restated)             (Restated)
Fixed assets
Intangible fixed assets                                   4,082                      -                  1,587
Tangible fixed assets                                    15,269                  2,915                 16,345
                                                         19,351                  2,915                 17,932
Investments
Joint venture
Share of gross assets                                     3,067                  2,168                  2,428
Share of gross liabilities                               (1,378 )               (1,682 )               (1,171 )
                                                          1,689                    486                  1,257
                                                         21,040                  3,401                 19,189
Current assets
Stock                                                         7                      8                    160
Debtors                                                   6,556                  2,227                  1,543
Cash at bank and in hand                                 14,834                 13,034                 23,995
                                                         21,397                 15,269                 25,698

Creditors: amounts falling due                           (3,785 )               (2,843 )               (5,045 )
within one year

Net current assets                                       17,612                 12,426                 20,653

Total assets less current                                38,652                 15,827                 39,842
liabilities

Creditors: amounts falling due        4                 (20,137 )               (1,220 )              (19,233 )
after more than one year

Provision for liabilities and                            (1,016 )                 (144 )                 (897 )
charges
                                                         17,499                 14,463                 19,712
Capital and reserves

Called up share capital                                  42,165                 32,435                 42,165
Share premium account                                     2,968                  3,393                  2,968
Reverse acquisition reserve                              (1,278 )               (1,278 )               (1,278 )
Other reserves                                            3,111                  1,439                  2,117
Profit and loss account                                 (29,467 )              (21,526 )              (26,260 )

Total shareholders' funds             3                  17,499                 14,463                 19,712





Consolidated Cash Flow Statement

for the six months ended 30 June 2006


                                  Six months ended              Six months ended                   Year ended
                                      30 June 2006                  30 June 2005             31 December 2005
                                         Unaudited                     Unaudited                      Audited
                                             $'000                         $'000                        $'000
                                                                       (Restated)                   (Restated)
Net cash outflow from operating             (6,702 )                    (3,459 )                      (6,193 )
activities

Returns on investment and
servicing of finance
Interest received                              381                          54                           96
Interest paid                                    -                         (5  )                        (220 )

Net cash inflow/(outflow) from                 381                          49                          (124 )
returns on investments and
servicing of finance

Taxation                                      (687 )                      (134 )                        (256 )

Capital expenditure and financial
investment
Purchase of intangible fixed                (2,495 )                                                  (1,131 )
assets
Purchase of tangible fixed assets             (652 )                      (577 )                        (380 )

Net cash outflow from capital               (3,147 )                      (577 )                      (1,511 )
expenditure and financial
investment

Acquisitions
Cash paid for purchase of                        -                           -                       (6,000 )
subsidiary undertaking
Net cash from purchase of                        -                           -                          723
subsidiary undertaking

Net cash outflow from                            -                           -                       (5,277 )
acquisitions

Financing
Share option & warrants valuation              183                         136                          288
Silver Point loan advance                        -                           -                       23,900
Costs of loan arrangement                        -                           -                       (4,817 )
Share and warrant issues                       811                       19,843                      20,341
Costs of admission to AIM                        -                      (5,009 )                     (4,541 )

Net cash inflow from financing                 994                       14,970                      35,171

(Decrease)/increase in cash                 (9,161 )                     10,849                      21,810






Notes to the interim statement
for the six months ended 30 June 2006


1.     Accounting policy

This interim statement has been prepared in accordance with the accounting
standards adopted by the Company in its Annual Report and Accounts for 2005,
with the exception that the Company adopted FRS 20 (Share Based Payments) from 1
January 2006 and this required prior period adjustments to the previously
published statements.  This also resulted in an increase in General &
Administrative expenses as set out in the table below.

                                       Six months ended     Six months ended           Year ended
                                           30 June 2006         30 June 2005     31 December 2005
Value of share options/warrants      $'000          183                  136                  288
expensed for the period




2.     Loss per ordinary share


                                             Six months ended        Six months ended            Year ended
                                                 30 June 2006            30 June 2005      31 December 2005
                                                                            (Restated)            (Restated)
Loss for the period                 $'000              (4,044 )               (3,039 )               (7,773 )

Weighted average number of           '000             114,554                 68,654                 83,201
shares

Loss per ordinary share                 $              (0.035 )               (0.044 )               (0.093 )



3.     Reconciliation of movement in shareholders funds


                                                 30 June 2006            30 June 2005        31 December 2005
                                                                           (Restated)               (Restated)
                                                        $'000                   $'000                   $'000
Loss for the period                                    (4,044   )              (3,039  )               (7,773 )
Shares issued                                               -                  19,843                  42,889
Share issue costs                                           -                  (5,008  )               (4,541 )
Warrants issued                                           811                     386                     498
Shares to be issued                                         -                       -                 (14,209 )
Warrants and options expensed                             183                     136                     288
Dividends received                                        837                       -                       -
Other reserves movement                                     -                    (415  )                    -
Net (decrease)/increase in                             (2,213   )              11,903                  17,152
shareholders funds
Opening shareholders funds                             19,712                   2,560                   2,560
Closing shareholders funds                             17,499                  14,463                  19,712



4.   Creditors: amounts falling due after more than one year


                                              30 June 2006           30 June 2005            31 December 2005
                                                     $'000                  $'000
                                                                                                        $'000
Gross bank borrowings one to five years             23,900                      -                      23,900
Interest payable in PIK notes                        1,950                      -                           -
                                                    25,850                      -                      23,900

Less: costs of raising bank borrowings              (4,555 )                    -                      (4,817 )
FRS25 equity portion of loan                        (1,308 )                    -                           -
                                                    19,987                      -                      19,083
Other creditors                                        150                  1,220                         150
                                                    20,137                  1,220                      19,233



5.   The directors do not recommend the payment of a dividend.



6.   The financial information contained in this document does not constitute 
statutory accounts within the meaning of Section 240 of the Companies Act 1985.
The financial information for the year ended 31 December 2005 is extracted from
the audited financial statements for that period on which the auditors gave an
unqualified report, with the exception of the prior period adjustment. A copy of
those financial statements has been filed with the Registrar of Companies.


7.   Copies of this statement will be made available on the Company website at 
www.cardinal-uk.com and will be available, on request, from the Company's 
registered office at Whitefriars House, 6 Carmelite Street, London EC4Y 0BS.





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