13th Feb 2007 07:01
Cardinal Resources plc13 February 2007 LONDON - 13, February 2007 Cardinal Resources plc (AIM: CDL) ("Cardinal" or "the Company"), an independentoil and gas production and exploration company operating in Ukraine, todayprovides an update on development drilling operations and production. PRODUCTION PROFILE The Company expects net production to increase from approximately 800 BOEPD inDecember 2006 to a run rate of approximately 3,000 BOEPD by the end of 2007. The table set out below summarises the Company's expected production profile forthe second half of 2007 and is based on the following assumptions: • current production rates of approximately 800 BOEPD from existing producing wells continue at the same rate; and,• successful completion of Cardinal's new gas processing plant and tie-in to existing Ukrainian pipelines. In addition, this is based upon: • expected production rates from wells ready to tie-in; (see Note i); and,• the current drilling programme continuing to progress according to plan. (see Note ii) Projected Net Production Rate (31/12/07) BOEPD (000's)---------------------------------------- ------------December 2006 run rate 0.8Ready to tie-in 1.4Wells drilling / To be drilled 0.8---------------------------------------- ------------Expected December 2007 run rate 3.0 At present, the Company has three workover and 9 development locationsidentified for drilling immediately in the Bilousivsko-Chornukhinska (BC) andNorth Yablunivska (NY) licence areas which Cardinal owns and operates with a100% working interest. In addition, Cardinal is conducting two 3-D seismicsurveys covering a total of 100 km sq on the BC and NY licence areas. TheCompany anticipates that the current seismic programme together with thepreviously acquired Dubrivska (DB) 25 km sq 3-D seismic survey willsubstantially increase the quality of known locations and increase theprobability of an additional 10-16 drilling locations. JAA GAS SALES In January 2007, a resolution of The Cabinet of Ministers of Ukraine amended anexisting regulation on fixed pricing of gas sales by Naftogaz, Ukrnafta, and NakNadra that extended the scope of the regulation to potentially include JointActivity Agreements with those entities. Cardinal has been informed twice by theMinistry of Fuel and Energy that its net portion of JAA production will not beaffected. The Company is still seeking clarification on the actualimplementation of this resolution and, as a precaution, has elected with itspartner Ukrnafta to transfer all JAA associated gas production to storage. Atpresent this represents approximately 20% of Cardinal's oil and gas productionby volume. Cardinal expects no material impact or re-classification of reserves reported inits 15 May 2006 reserve report, although the net present value of reserves couldbe affected if fixed prices were to be applied. Sales, profits and cash flowcould be adversely affected if sales are not resumed or stocks remain unsold atfree market prices before the current quarter's profit distribution becomes due. Cardinal will continue to concentrate its present development efforts andcurrent production increase programme on licences that it owns 100% andoperates. LICENCES EXTENDED ON BC, NY AND DB The Bilousivsko-Chornukhinska (BC), North Yablunivska (NY), and Dubrivska (DB)Exploration and Pilot Production licences were extended for a five year periodfrom November 2006 until November 2011. Cardinal operates and owns a 100%interest in the BC, NY and the DB licences. Four wells in the NY license areaare covered by the Joint Activity Agreement (JAA) #429 with Ukraz and Cardinalhas a 50% interest in these wells. BILOUSIVSKO-CHORNUKHINSKA (BC) LICENCE AREA In October 2006 Cardinal announced the completion of the Bilousivsko #3A well.The well flow-tested at a calculated rate of 4.05 million cubic feet of gas perday ("MMcfg/d") on a 9mm choke, or 675 barrels of oil equivalent per day(BOEPD). The BC #3A well is ready to be tied into the BC gas gathering andseparation facility upon its completion. Construction activities on the gas gathering and separation facility continueand the commencement of operations is expected during the second quarter of2007, as originally projected. The well design for the Bilousivsko #13A well has been completed andpreparations for drilling are due to start upon finalisation of landallocations, expected in this quarter. The Company expects to have suitableequipment in place in the second half of 2007. With the installation of plunger lift equipment on the BC #110, #111 and #13wells, the workovers will be successfully completed and ready to tie into thegas gathering and separation facility on its completion. The installation ofplunger lift equipment for the #13 and #111 wells is underway and will becompleted by mid March 2007. The Company is awaiting delivery of the equipmentfor the #110 well which is expected within the next two months. The workover of BC wells #7, #17, and #9 are in the final planning stage withoutstanding land use agreements expected to clear in the first quarter of 2007,and will be completed sequentially as the two workover rigs complete the plungerlift installations. The planned drilling programme on the BC #116A well will be resumed after thecompletion of interpretation of the 3-D seismic survey over approximately 65 kmsq of the BC licence area. The survey is scheduled to begin in April 2007 withthe field work and processing completed in four months. The results of thesurvey will improve both the delineation of reservoirs associated with existingplanned locations, including the #116A, and aid the identification of additionalpotential drilling locations in the licence area. NORTH YABLUNIVSKA (NY) LICENCE AREA The NY #4 well is suspended at 1,800 meters inside casing. The well now awaitscompletion of a 35 km sq 3-D seismic survey over the NY licence area. The 3-Dsurvey will confirm the bottom hole location for the #4 well, further delineatesix existing 2P locations and likely identify additional potential drillinglocations. The survey is expected to commence in the second half of 2007 andtake approximately four months to complete. The workover on the NY #203 well isin process within JAA #429. DUBRIVSKA (DB) LICENCE A 25 km sq 3-D seismic survey, which was completed in the fourth quarter, hasalready identified one side track opportunity and two additional potential welllocations in the area. Drilling operations are expected to begin in 2008. RC REINSTATEMENT Cardinal, through a subsidiary, currently holds a 14.9% interest in theRudivsko-Chernovozavodske ("RC") Field pursuant to a Joint Activity Agreement(the "RC Field JAA") with JSC UkrnaftaUkrnafta. Cardinal is seeking to increasethat interest back up to 45% by increasing its investment in the Joint Activityof the RC Field and settling the capital expenditure account under the RC FieldJAA (the "RC reinstatement"). This RC reinstatement would bring the Company backcloser to the original 50/50 investment balance between the parties in the JointActivity. Ukrnafta has previously acknowledged that this right to RC reinstatement existsunder the RC Field JAA, and Cardinal has been pursuing its right to undertakesuch RC reinstatement, and has access to the additional capital necessary tofund such reinstatement. However, implementation of the RC reinstatement hasbeen hampered by upheavals in the political situation in Ukraine, and by variousshifts in position on this issue within Ukranafta. Cardinal continues to press for consummation of the RC reinstatement, and isexploring all legal avenues available to the Company to ensure that itscontractual right to implement such RC reinstatement is respected. Cliff West, Executive Vice President and Chief Operating Officer of Cardinal(Member of the American Association of Petroleum Geologists - CertifiedPetroleum Geologist # 1563) is the qualified person that has reviewed andapproved the technical information within this press announcement. Notes to production profile expectation: Production estimates are based upon the assessment of: Note i: recent test results of wells ready to tie into production; andNote ii: historic records of test results from the early 1980's for workoverwells drilling and or to be drilled. A number of factors, such as technical difficulties in completion and or tie-incould cause actual production to differ materially from current expectations. Glossary of Terms BOEPD Barrels of oil equivalent per dayMMcfg/d Million cubic feet of gas per dayMMboe Million barrels of oil equivalent For further information please contact: Cardinal Resources BrunswickCharles Green / Natalia Egorova Paul Scott+44 (0) 20 7936 5250 +44 (0) 20 7404 [email protected] [email protected] Nominated AdviserNabarro Wells & Co. LimitedJohn Wilkes / Marc Cramsie+44 (0) 20 7710 [email protected] Notes to Editor Cardinal Resources plc Cardinal 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. This release may contain forward-looking statements. These statements relate tofuture events or future performance and reflect management's expectationsregarding Cardinal's growth, results of operations, performance and businessprospects 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 ExchangeRelated Shares:
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