26th Sep 2005 07:00
Cardinal Resources plc26 September 2005 CARDINAL RESOURCES PLC 2005 Interim Report Unaudited Interim Results for the six months ended 30th June 2005 Highlights: • Successful initiation of work programme • Two workovers completed, two in progress and eighteen pending • One drilling location prepared and second location being prepared for new wells • 15%+ increase in Ukraine gas prices since admission to AIM - significantly higher than expected • Turnover increased 24% to $1.91 million • Ongoing political developments in Ukraine should have positive implications for Cardinal • Loss per ordinary share was $0.042 For further information, please contact: Cardinal Resources PLC Charles C. GreenVice Chairman and Chief Financial Officer+44 20 7936 5254 Kate SpiroInvestor and Public Relations+44 20 7936 5258 Chairman's Statement Dear Shareholder, I am pleased to present the first set of interim figures since CardinalResources plc's admission to the Alternative Investment Market of the LondonStock Exchange in April 2005. These figures cover the six months ended 30th June2005 and represent the period of project development in the run-up to flotationwhich has been fully described in our AIM admission document. While there is a limited amount that we can add to the comprehensive informationcontained in that document, I would like to take this opportunity to review thedevelopment projects currently underway and provide updates where appropriate. Before turning to discussion of the financial accounts and operations, I firstwant to address the political situation in Ukraine. President Yushchenko'sdecision earlier this month to dismiss his government confirms his commitment tobuilding a team that will fight corruption, encourage and attract westerninvestment, and work for the people of Ukraine rather than for self interests. In the long-term I believe this move has positive implications for Cardinal andunderscores the fact that Ukraine is moving along the path of political andeconomic change. Progress has also been made with regards to the reform of the Ukrainian energysector and the liberalization of gas prices. Gazprom, Russia's state-run gascompany, has announced that it has set the 2006 starting price for natural gasfor Ukraine at approximately $5.00/Mscf - more than two and a half times thecurrent gas price in September 2005. This month the Russian and Ukrainian headsof Industry and Energy also met to discuss tariffs for the transportation of gasand oil through Ukrainian territory in 2006. After the negotiations, theUkrainian minister for the first time announced that Ukraine is ready to "workout the formula" of switching to European prices for gas starting in the NewYear. The final price is still subject to further negotiations but I view bothannouncements as very encouraging for Cardinal's ongoing business development inUkraine. Mindful of the political ramifications for any increase in energyprices, I nevertheless believe these factors set the stage for upward movementsin the domestic gas price in Ukraine over the short term. FINANCIAL REVIEW Total revenues (Group and share of joint venture) for the six month periodincreased 24% to $1.91 million (2004: $1.54 million), supported by the strongpricing environment. Cardinal's operating loss was $3.00 million (2004: $3.05million) which is in-line with the company's expectations during this flotationand initial development phase. Offset somewhat by the one time Carpatsky Petroleum Corporation reorganisationcosts, total General and Administration expenses decreased by 3%. Following the successful IPO in April, Cardinal's cash position at 30th Juneremains strong, up $10.8 million over the same six month period last year, witha cash balance of $13 million. OPERATING REVIEW Cardinal's current operations are in Ukraine where it holds interests in twofields - the Rudivsko-Chernovozavodske ("RC") field and the Bytkiv-Babchenske("Bytkiv") field. As at December 31st 2004 the company had total net reserves of18.4 MMBOE (110.6 Mscfe) and net daily average production for the year to June30th was 631 boepd. The development programme that was set out at the time of Cardinal's admissionto AIM is progressing. Rudivsko-Chernovozavodske ("RC") Field Under Cardinal's JAA with Ukrnafta in the RC field, six wells were in productionat 30th June. The workover program, as planned at the time of the AIM listing,was initiated at the end of June. One workover has already been completed, oneis currently in progress and a further two workovers are expected to becompleted by the end of the year. Ukrnafta is currently in discussions withCardinal to evaluate workovers on six other wells not included within the JAAand that were not contemplated in the AIM admission document. Bytkiv-Babchenske ("Bytkiv") Field Cardinal holds a 45% net profit interest in the Bytkiv field through its JointVenture, UkrCarpatOil, with Ukrnafta. Twelve wells were producing at 30th June.One well has been worked over and one further well is currently in the processof being worked over. Drilling of at least one well is expected to commencebefore year-end and a further ten workovers are scheduled to be completed by theend of 2006. A Progressive Capacity (PC) pump has been tested at one well with encouragingresults but requires further evaluation. Meanwhile, the well has been returnedto production, utilizing gas lift with slightly higher than original productionrates. UkrCarpatOil has ordered additional pumps for its other producing wells,to be delivered to the field by the end of September. The new pumps are expectedto reduce downtime and, together with re-perforating and stimulations, increaseproduction rates. 2005 OUTLOOK The year so far has been an exciting time for Cardinal. Our debut on the AIMmarket and the initiation of our work programme were both key milestones in ourdevelopment. The year ahead will remain busy as we ramp up the developmentprogramme in the RC and Bytkiv fields. We have many workovers to perform and newwells to drill. Production is expected to decline in the short term asproduction is temporarily suspended on wells subject to workover. The impact ofthe work programme will start to flow through in our 2006 results. Furthermore,we continue to seek and identify acquisition opportunities in Ukraine to add tothe company's reserve base. Over the next six to twelve months I believe that we will continue to seedevelopments in Ukraine which will support Cardinal's growth. We are in theunique position of being able to participate in the consolidation of the oil andgas sector while also taking advantage of increasing Ukrainian gas prices andthe ongoing development of the domestic economy. Robert BenshChairman 22nd September 2005 Kiev, Ukraine Consolidated Profit and Loss Accountfor the six months ended 30th June 2005 Six months ended Six months ended Year ended 30 June 2005 30 June 2004 31 December 2004 Unaudited Unaudited Audited $'000 $'000 $'000 Turnover Group and share of joint venture 1,906 1,540 3,024Less: share of jointventure turnover (974) (474) (1,429) ----------- ----------- ------------ 932 1,066 1,595Cost of sales (632) (703) (1,220) ----------- ----------- ------------Gross profit 300 363 375 Reorganisation Expenses (601) - (698)Other General &Administrative Expenses (2,702) (3,410) (5,464) ----------- ----------- ------------Total General &Administrative Expenses (3,303) (3,410) (6,162) ----------- ----------- ------------Operating loss (3,003) (3,047) (5,787) Share of operating(losses)/profit of joint venture 185 189 (167)Interest receivable 54 11 45Interest payable (5) (75) 495 ----------- ----------- ------------Loss on ordinaryactivities before taxation (2,769) (2,922) (5,414) Tax on loss on ordinaryactivities (134) (82) (179) ----------- ----------- ------------Loss on ordinary activities transferred to Reserves (2,903) (3,004) (5,593) Loss per ordinary share ($)1 0.042 0.064 0.110 There were no recognised gains or losses other than the result for the financialperiod. Consolidated Balance Sheetsat 30th June 2005 30 June 2005 30 June 2004 31 December 2004 Unaudited Unaudited Audited $'000 $'000 $'000 Fixed AssetsTangible fixed assets 2,915 2,900 2,604 ----------- ----------- ------------ InvestmentsJoint VenturesShare of gross assets 2,168 1,864 1,881Share of gross liabilities (1,682) (1,169) (1,580) ----------- ----------- ------------ 486 695 301 ----------- ----------- ------------ 3,401 3,595 2,905 ----------- ----------- ------------ Current AssetsStock 8 17 15Debtors 2,227 492 3,453Cash at bank and in hand 13,034 4,627 2,185 ----------- ----------- ------------ 15,269 5,136 5,653 Creditors: amounts fallingdue within one year (2,843) (2,477) (4,634) Net current assets/(liabilities) 12,426 2,659 1,019 ----------- ----------- ------------ Total assets less currentliabilities 15,827 6,254 3,924Creditors: amounts fallingdue within one year (1,220) (1,220) (1,220)Provision for liabilities andcharges (144) (179) (144) ----------- ----------- ------------ 14,463 4,855 2,560 =========== =========== ============ Capital and Reserves Called up share capital 32,435 5,825 5,825Share Premium account 3,393 960 960Reverse Acquisition Reserve (1,278) (1,278) (1,278)Shares to be issued - 14,209 14,209Other reserves 1,303 1,128 1,331Profit and loss account (21,390) (15,989) (18,487) =========== =========== ============ Total shareholders' funds 14,463 4,855 2,560 =========== =========== ============ Consolidated Cash Flow Statementsfor the six months ended 30th June 2005 Six months ended Six months ended Year ended 30 June 2005 30 June 2004 31 December 2004 Unaudited Unaudited Audited $'000 $'000 $'000 ----------- ----------- ------------Net cash outflow fromoperating activities (3,323) (4,990) (7,064) ----------- ----------- ------------ Returns on investment and servicing of financeInterest received 54 11 45Interest paid (5) (75) (146) ----------- ----------- ------------Net cash (outflow)/inflowfrom returns on investments and servicing of finance 49 (64) (101) ----------- ----------- ------------Taxation (134) (82) (179) Capital expenditurePayments to acquire tangible fixed assets (577) (97) (156) ----------- ----------- ------------Net cash outflow fromcapital expenditure and financial investment (577) (97) (156) ----------- ----------- ------------AcquisitionsNet cash from purchase of subsidiary undertakings - 9,500 9,500 ----------- ----------- ------------Net cash inflow fromacquisitions - 9,500 9,500 FinancingRepayment of borrowings - - (175)Receipts from share issue 19,843Share issue costs (5,009) - - ----------- ----------- ------------Net cash outflow fromfinancing 14,834 - (175) ----------- ----------- ------------ Increase in cash 10,849 4,267 1,825 =========== =========== ============ Notes to the Interim Statementfor the six months ended 30th June 2005 1. Loss per ordinary share Six months ended Six months ended Year ended 30 June 2005 30 June 2004 31 December 2004 Loss for the $'000 2,903 3,004 5,593period Weighted average number of shares '000 68,654 46,997 50,837 Loss per share $ 0.042 0.064 0.110 2. The directors do not recommend the payment of a dividend. 3. The financial information contained in this document does not constitutestatutory accounts within the meaning of Section 240 of the Companies Act 1985.The financial information for the year ended 31 December 2004 is extracted fromthe audited financial statements for that period on which the auditors gave anunqualified report. A copy of those financial statements has been filed with theRegistrar of Companies. 4. This statement will be available on our website www.cardinal-uk.com or fromthe company's registered office at Whitefriars House, 6 Carmelite Street, LondonEC4Y 0BS. Company Directors Robert J Bensh (Chairman and CEO) Charles C Green (Vice Chairman and CFO) Jonathan C R Morley-Kirk (Non-executive Director) David F Phillips (Non-executive Director) Marcus J G Stanton (Non-executive Director) Company Secretary William S Hayes Registered Office Whitefriars House 6 Carmelite Street London EC4Y 0BS Registered in England & Wales No. 5049975 Advisers Nominated Adviser Nabarro Wells & Co. Limited Saddlers House, Gutter Lane London EC2V 6HS Broker Fox-Davies Capital Limited Whitefriars House 6 Carmelite Street London EC4Y 0BS Bankers Barclays Bank plc 54 Lombard Street London EC3V 9EX Auditors Grant Thornton UK LLP Grant Thornton House, Melton Street London NW1 2EP Solicitors McCarthy Tetrault 5 Old Bailey London EC4M 7BA Solicitors in Ukraine Salans Business Centre Panorama 20 Velyka Zhytomyrska Street 01025 Kiev Registrar Computershare Investor Services PLC P O Box 82, Bridgwater Road Bristol BS99 7NH This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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