Share Name Share Symbol Market Type Share ISIN Share Description
Cardinal Resources LSE:CDL London Ordinary Share GB00B03XK508 ORD 20P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  +0.00p +0.00% 7.00p 0.00p 0.00p - - - 0 06:30:09
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Unknown - - - - 8.02

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26/5/201314:39Cardinal Resources3,738
24/11/200811:13cardinal bankrupt by year end 2006.5

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xenawarriorprincess: Well tolstoi, I'm afraid I can't agree. I don't know what we will be left with, but I'm sure it won't be zilch and will be more than we've got at the moment - that is 3p on J.P Jenkins. There may be share dilutions, hopefully not too many, but I think that present shareholders will be left with a decent proportion of the "new Cardinal" in due course and that it will be worth having, or at least worth more than 3p. I'm not under any illusion that Cardinal any longer holds the promise it once had in Ukraine, with potential for big reserves and production, and a possible shareprice north of 100p, but then that was what we (or rather I) thought would happen in the years following 2006/7. Ukraine, and indeed the world is suddenly a very different place to the heady days of only 18 months ago. All oil companies have been trashed over the last 12 months, JKX is now 129p and Regal 38p, both lower than only a few days ago and a fraction of what they were only 6 months ago. Even if Cardinal had remained on the market and in Ukraine the share price may not have been significantly above the 3p it is at present, the main difference would have been that they would have been tradable over the last 12 months and people could have exited. The present worldwide correction may yet have some considerable way to go before it plays out - are we in the final capitulation of the markets, or is this merely yet another leg down and we are yet to get close to the bottom? I suspect the final capitulation is yet to come, people are still taking note of the bad news, and there seems much more bad news to come. But the world is likely to be quite different in another 12/18 months or so. The Dow will have bottomed, whether it be at 7300, 6400 or 5400, or even lower who knows, but I'm quite sure a recovery will have begun. Nor do I believe that this is the end of Pax Americana. The US Industrial Giant, built on cheap oil, will re-assert itself, but China's "economic miracle" burdened by vast overcapacity and dictatorship will have evaporated, Russia will have been shown to be a paper tiger and the Arabs (and Iran) will have had a nasty dose of much lower oil prices. Whilst oil will not return anytime soon to the days of $100/barrel the world (particularly the US) will still need oil and the price will stabilise, quite where I don't know but I would guess around $60-$70/barrel. What does all this mean for Cardinal? Condor should be producing a minimum of 140bpd by now, and 200bpd, (possibly much more) by the end of the year and by the beginning of 2009 be earnings positive EBITDA. Cardinal has 55% of that and can take that up to 73% within the next couple of years at a relatively modest cost. Part of the problem is that Rob Bensh, for whatever reason, isn't giving much information away. But I cannot believe that the $10M invested in Colombia, the $25M being invested in Oklahoma and the $18M he wants this year for investment will gain us a nil return. Oil shares seem to be assuming that oil prices will keep falling, and quite a few oil companies are valued at less than their cash balances. But oil prices will stabilise, and once the markets begin to recognise that the world is not, after all, returning to some sort of stone age, will begin to recover again. Oil and investment in it will become, if not exactly fashionable again, then at least acceptable. And then Cardinal will return to the market - at what price, well I don't know, but I think that each share we presently hold will be worth more than 3p. Regards, Xena
xenawarriorprincess: DB, My guesstimate would be not before 12 months. That isn't based on anything specific - more really "how long would it take - and then double it". These things always take longer than expected at first. Also Cardinal will have the ability to make an offer to buy back shares, (at about 2.6p) if it so wishes, from sometime around the beginning of July - if it was going to relist soon it probably wouldn't bother doing that. As for the CDL/Condor amalgamation - I'm not sure how that would work either. There will no doubt be dozens of factors involved. I am concerned however by the possibility of dilution at a low share price. At present we have 6.75% of Condor - but Rob Bensh presumably is in a fairly strong bargaining position, and if he is successful with Condor may lead to rewards for Cardinal. That is based on my belief that an outright failure for Cardinal (ie. if it never recovered) would haunt Rob Bensh's career forever, and having devoted 8 years to Cardinal he simply cannot walk away from such a failure and act as if it never happened. We should get the Annual Report soon and that may give us more information, and we have been promised a website relaunch this month, although I'm not holding my breath for the latter. Writz, We are listed on J.P Jenkins at 3p, although the price hasn't changed for over a month. J.P Jenkins is the share equivalent of intensive care following a near death experience, but it is possible to trade them and their value can appreciate. Jason McKay in his resume said that Canaguaro Investors were a small team intending to work on 1-2 deals per year, but had only the manpower to concentrate on one deal at a time. Canaguaro Consortium/Condor was the 2007 deal so logic would imply that a similar 2008 deal could be in the offing. Cardinal Hunton is a purely Cardinal enterprise so would fall outside the Condor/Canaguaro 'envelope'. But quite how Canaguaro Investors is related to the Canaguaro Consortium and how they are each related to Condor Exploration Inc. is not clear. Are the former both contained within the Condor Exploration Inc organisation, or are they subsidiaries, or shareholders, or do Investors merely provide funding from outside etc. However, no doubt if Rob Bensh is successful on the present project(s) more funding will be made available. There are still far more questions than answers at the moment - even basic things like, how much cash have we got? But overall I'm still fairly optimistic, whilst appreciating that we're at 3p. The mysterious Nak Nadra 'link' is still on the Cardinal website, Canaguaro looks fairly decent, and I'm trying to find recent production figures for all of that. The contrast between Cardinal pre-Disposal and post-Disposal is really quite amazing. Gone are the interviews, the presentations, the conference speeches and sponsorships - now we have almost complete silence, with just the odd name or hint of progress mentioned from time to time. Rob Bensh has shown in Ukraine that he can acquire and develop very valuable assets, his difficulty has been hanging onto them. Hopefully, with Cardinal/Condor/Canaguaro he will show that he has overcome the latter problem. IMHO etc. Xena
bb44: 1. Re-Listing/Shares Purchase 1.1 The cessation of the listing of the Company's ordinary shares on AIM occurred on Monday 26 November 2007. Is it the Company's intention to apply for re-listing as soon as the necessary requirements are fulfilled? It is the Company's intention to seek an admission or listing for its ordinary shares on AIM and/or another recognized stock exchange following completion of the disposal (the "Disposal") of the Company's Ukrainian oil and gas assets, as described in the circular to shareholders dated 27 November 2007 (the "Circular"), subject to approval of the investing strategy (the "Investing Strategy") set out in the Circular at the extraordinary general meeting of the Company convened pursuant to the notice contained in the Circular for 13 December 2007 and otherwise at the appropriate time. Prior to such an admission or listing taking place, shareholders of Cardinal ("Shareholders") should be aware that the Company is not bound to comply with the rules of the AIM exchange (the "AIM Rules") or the rules of any other stock exchange, in particular, in publishing information for the benefit of Shareholders. However, it is the Company's intention, as far as is reasonably practicable in the interim period, to seek to keep Shareholders advised of new developments in the Company's business by disclosing material information to Shareholders as if it were still bound by Rules 11 and 17 of the AIM Rules. 1.2 Are discussions continuing with a potential nominated adviser ("NOMAD"), and how quickly might these be concluded? Subject to, and following completion of the Disposal, the Company will engage in discussions with potential NOMADs. Until the outcome of the Disposal is determined, the Company does not consider it appropriate to pursue discussions regarding the appointment of a NOMAD. 1.3 How quickly can the Company shares be readmitted to trading on AIM? The Company's admission to AIM was cancelled on 26 November 2007. Any re-admission to AIM will require the Company to apply for admission to AIM as a new applicant. The Company will provide further information on its plans in due course. The Company expects to address this issue if the Investing Strategy is approved by Shareholders. 1.4 If Shareholders want to sell their shares, will this be possible and what is the approximate value per share? Following completion of the Disposal, the Company's board (the "Board") intends, subject to the Company's ability to comply with applicable laws, to consider an offer to acquire shares of the Company from the Shareholders desiring to sell their holdings, out of the residual proceeds available to the Company described in the Circular, at the implied liquidation value per share. Assuming that the Shareholders approve the Investing Strategy and subject to potential adjustments as set out in the Circular under the heading "Share Purchases," the implied liquidation value is expected to be approximately 2.6p per share (before liquidation costs). If the Investing Strategy is not approved by the Shareholders and subject to potential adjustments as set out in the Circular under the heading "Share Purchases" the implied liquidation value available for distribution is expected to be approximately 1.4p per share (before liquidation costs). The mechanics of this proposal, including the extent of distributable profits of the Company (including those resulting from the Disposal) out of which the Company may acquire shares from Shareholders, will be determined and information regarding that process will be made available to Shareholders in due course. 1.5 How long would it take before we get money back for our shares if the Shareholders didn't go along with the new Investing Strategy? If the Shareholders do not approve the Investing Strategy, cash could not be made available by means of a distribution on winding up of the Company earlier than six months from completion of the Disposal due to the fact that, for six months following completion of the Disposal, the Company will be subject to contingent liabilities associated with warranties given under the agreement governing the Disposal. This liability is capped at US$10 million (save for liability in respect of warranties relating to capacity and title which is capped at the total consideration paid for the Disposal) but the contingent nature of the liability will require the Company to maintain assets through this period. In practice, it will take some time beyond the six month warranty period for the Company to prepare, approve and effect any distribution in compliance with applicable law and regulation. In this event, further information on any proposals for returning cash to Shareholders will be made available in due course. If the Shareholders do not approve the Investing Strategy, the residual proceeds available to the Company from the Disposal will be significantly reduced as a result of various compromises reached with the parties involved in the transaction not being available in such circumstances. 2. Transaction 2.1 From where does Cardinal expect to acquire the gas beginning in February 2008 to deliver gas or to repay to Kuwait Energy Company K.S.C.C. ("KEC") the money which is presently being advanced by KEC to Cardinal under forward gas sale contracts? Assuming closing of the Disposal, the obligations under the forward gas sale agreements are netted against the sale proceeds. In the event that the Disposal does not close, the gas will be delivered from production realized by the Company from the BC#3 well currently producing and any other gas or liquids production resulting from additional wells that will be tied into the gas gathering and separation facility and commissioned in coming months with capital provided by KEC pursuant to the existing forward gas sales transactions between the Company and KEC. However, any delivery of gas and repayments of sale proceeds if the Disposal does not proceed will be subject to intercreditor arrangements entered into between Cardinal, Silver Point Capital LLC ("Silver Point") and KEC. 2.2 Can Cardinal keep the gas in storage, or does it form part of the sale agreement? The gas in storage is part of the assets which are being acquired by KEC and the value of that gas is reflected in the US$71 million consideration received by the Company for those assets. 2.3 Are the Board and Management satisfied with the deal? Prior to entering into the Disposal, the Company sought unsuccessfully, for a number of weeks, equity funding to meet its liquidity requirements. Therefore, in the circumstances, the sale of the Company's interests in Ukraine is the only viable option available to the Company other than an administration/insolvency procedure which, due to the nature of the business environment in Ukraine and the Company's licenses and the joint activity agreements ("JAAs"), could potentially result in significant impairment of the value of the assets. This factor, along with the additional costs and possible delays that would result as a consequence of an administration/insolvency process would, in the Board's view, prevent the Company from realising sufficient proceeds to settle all amounts due to creditors in full and would not permit any distribution to Shareholders. Therefore, it is the view of the Board that the proposed transaction presents the best option available to the Company and the Shareholders for the preservation of value for Shareholders. 2.4 Can I ask specifically how the major Shareholder Hares Group has dealt with this news? They sold you the Rudis asset and now seem to have lost out on their investment. Hares Group, like all the other Shareholders, is disappointed that developments in Ukraine with respect to JAA assets that have led to the proposed Disposal and, if approved by Shareholders, the concomitant exit of the Company from Ukraine. The Company's difficulties began when, in January 2007, Ukraine's government adopted a new decree to the state budget, Decree 31, obliging all state-owned gas producers and all independent oil & gas companies that hold JAAs with the state-owned gas producers to sell their gas exclusively to the state-owned oil & gas company, NAK Naftogaz Ukrainy, at a fixed rate of approximately US$ 1.63 per mcf (including VAT). As a result of the new Decree and the consequent inability of the Company to sell gas at an economically viable price, approximately 117,000 boe of the Company's share of JAA gas produced from both the RC Field and the BC Field JAA 429 was placed in storage in the first half of 2007. Revenueswere reduced by approximately US$3.2 million for the six months of the year due to this event. As a result, the Company has been and continues to be hampered by severe liquidity constraints. However, Hares is supportive of efforts to preserve value for Shareholders through the Disposal and the Investing Strategy going forward. . 2.5 It seems as if this issue has had impact only on Cardinal. How do other companies operating in Ukraine sell their gas produced through JAA or joint venture ("JV")? No company operating through a JAA or JV with a state-owned entity has been able to sell its own portion of its gas at an appropriate market price. To date and so far as the Company is aware, all attempts to conclude unilateral direct marketing arrangements and sale of gas at non-regulated prices pursuant to favourable court decisions obtained by other independent oil & gas companies permitting sale of gas at non-regulated prices have been blocked by the Ukrainian government. 2.6 Why could Cardinal not effect the RC-reinstatement? The Company has a contractual right through its JAA agreement with Ukrnafta until 3 March 2023 to a working interest ("WI") for the wells developed in the RC Field based on the parties' cumulative contributions to the costs of the JAA's annual work programs. The Company also has a contractual right to a net profit interest ("NPI") of 90% of the WI. The JAA provided for an initial WI for Cardinal Ukraine of 50% and an NPI of 45%. However, due to historical under-funding, Cardinal Ukraine's WI and NPI have, effective 27 August 2003, reduced to 16.6% and 14.9%, respectively. The Company has the right to increase its WI and NPI (the "RC re-instatement") by contributions to the future work program under the JAA and, subject to agreement with Ukrnafta, by payment of a negotiated amount either directly to Ukrnafta or of its under-funded capital commitments to the JAA. This would require paying US$14 million to restore its lost NPI (from 14.91% to 45%) and US$11 million to meet in under-funded commitments. In the autumn of 2005, the Company was called upon to demonstrate that it had sufficient funds to finance the RC re-instatement. In December 2005, after exploring all available financing alternatives, the Company issued PIK Notes to Silver Point which made available funding for the RC re-instatement. However, in the spring of 2006, elections were held in Ukraine and the country was without a functioning government for six months, as the three major political parties fought for control of the Parliament. This created a significant power vacuum in the country where shifts in the power balance occurred daily and uncertainty over political appointments affected the governmental decision making process in Ukraine and at Ukrnafta in particular. These numerous changes have hampered and further delayed the Company's ability to consummate the RC re-instatement. In December 2006, the Company re-stated its aim to achieve the RC re-instatement within the next 6 to 12 months and has continued to press for consummation of the RC re-instatement by exploring all legal avenues available to the Company. Ukrnafta continues to drill at the RC Field's properties, which are covered by the JAA with Ukrnafta, which the Board considers to be in breach of the JAA. The Company has not been allowed to contribute any capital to these efforts and receives no production or profit allocation from these wells. Negotiations between Cardinal and Ukrnafta have been ongoing for months. There have been no indications of Ukrnafta pulling out of the JAA agreement with Cardinal. However, the situation is complicated by the ongoing re-shuffle at the top of Ukrnafta's parent company, Naftogaz Ukrainy. The state-controlled entity's future is under intense discussion in the Ukrainian Parliament. Recently as the Company concluded that the current approach to reaching an agreement had been unsuccessful, the Company has pursued the matter through arbitration. Resolution of the arbitration proceedings is likely to take at least 2 years. 2.7 How did the Company spend the funds obtained through the Silver Point financing? Due to the RC re-instatement dispute Cardinal's actual trading results were negatively impacted. In particular, actual production and cash flow under-performed working capital report projections outlined in the Company's admission document relating to its admission to AIM. To enhance value to the Shareholders and to strengthen and diversify the asset portfolio of the Company the management acquired Rudis Drilling Company in October 2005. This acquisition provided the Company with immediate production capacity and significant development potential on 100% owned and operated assets for a total purchase price of US$ 14.8 million. In particular the acquisition involved US$72 million of PV-10 value and reserves of 17.6 million boe, an increase of 75% over the Company's IPO level. The Company needed immediate access to capital in connection with the Rudis acquisition to: pay the deferred cash portion of the Rudis acquisition; accelerate the work program on the three Rudis license areas; demonstrate to Ukrnafta cash resources for the RC re-instatement; and pay fees and expenses of the transaction and meet related working capital requirements. The Company met with multiple prospective investors to access further capital. At that time, the nominal value of the Company's ordinary shares was 20p and its market share price was less than 20p and the Company was effectively prohibited from raising equity capital without undergoing a capital restructuring. Even if the Company had reduced the nominal value of its shares, the required placement was expected to have been at a significant discount to the market share price of around 10p per share and would have been highly dilutive of existing shares. To raise the needed capital, it was necessary for Cardinal to enter into a hybrid debt/equity arrangement with Silver Point in December 2005. Silver Point loaned to Cardinal the sum of US$ 38 million and, as part of the agreement in relation to this debt facility, warrants were granted to Silver Point providing for the issue of Company shares on exercise at a premium to the then prevailing market share price of Cardinal. In December 2006, the financing with Silver Point was restructured, the existing facility was increased by US$ 17.5 million and further warrants were issued to Silver Point as part of these arrangements. At the time of the Rudis transaction and also in December 2006, the Silver Point package was the best available source of capital. 2.8 What if Shareholders don't approve the proposed transaction? In the event that the approval of Shareholders is not obtained, the Company will have no option, in the absence of another offer for its assets or shares, other than to implement an administration or insolvency procedure that would be unlikely to provide any return to Shareholders. 2.9 Would the Shareholders be better off if the Company goes into administration? The Company does not believe so. In administration the administrator would manage the business for benefit of the creditors of the Company. In administration, Silver Point would, as holder of fixed and floating charges over the assets of the Company and its subsidiaries, be in a very strong position to exercise its priority right of payment from proceeds of asset sales that would take place in administration. Together with the fact that the amount of the obligation to Silver Point would continue to grow at default interest rates and uncertainty about the possible value impact of administration on the Company's licenses and JAAs, the Board believe that the likelihood of realizing residual value for the Company for the benefit of the Shareholders in these circumstances would be remote. It should be further noted that the Board has been advised that KEC would have no interest in making an offer for the Company if it were placed into administration or any other insolvency procedure and the prospects of a timely sale of assets in administration is therefore uncertain. 3. Post-Transaction 3.1 What will be the expenses of the Company following the Disposal and prior to any acquisitions being made? Following a transition period during which certain changes to the Company's staffing and fixed overhead costs will be effected, it is believed, subject to negotiations with Condor Exploration. Inc ("Condor"), that the operating costs of the Company should be restricted to the basic financial reporting costs, Directors' fees and other essential operating expenses with the majority of overheads borne by Condor. Should the Investing Strategy be approved by the Shareholders it is expected that the continuing payments to Cardinal pursuant to the Condor Services Agreement (as described in the Circular) (the "Condor Services Agreement") should cover most if not all of these expenses. 3.2 Would it be possible for the Company to buy-back an interest in the Ukrainian assets once the investment climate in Ukraine improves? The Company intends to focus on transactions in three regions: Central and Eastern Europe; southwestern United States and Central and South America. As a term of the Disposal, the Company has certain restrictions placed upon it with respect to its entering into transactions in Ukraine for a two year period following the closing of the Disposal, but believes that it has ample opportunity to develop value for Shareholders by pursuing opportunities in these other regions. 3.3 Where will Cardinal's Head Office be located? No decision has been made at this time; the objective of the Board going forward is to give the Company and the Shareholders exposure to high impact projects that hold the potential for restoring considerable value for Shareholders. A key to doing this is to operate the business efficiently in 2008 and beyond, given its geographic focus, and the head office location will be chosen accordingly. 3.4 Will the 30 June 2007 interim financial results be published? Why has publication been delayed? The Company prepared interim financials in both UK GAAP and IFRS, as required, for publication on or before 30 September 2007, as prescribed by AIM. The accounts were prepared with the assistance of the Company's auditors, Grant Thornton ("GT"), and reviewed by them on completion. The interim financial results were completed and ready for release before the deadline, but the release was blocked by the Company's then serving Nomad who questioned the going concern statement accompanying the accounts, in spite of it having been approved by GT. The Nomad subsequently resigned, leaving the Company unable to release the interim statement. Following the Company's de-listing, the Company is preparing to post the interim financial results on its website and expects to do so shortly. 3.5 As the Company's only material asset will be a 6.75% interest in Condor, when will we find out more information concerning Condor and its assets? It is expected that more information about Condor, its work program, assets and financial profile will be made available in the coming weeks through announcements made on the Company's website. 3.6 How many staff does the Company need to employ who are familiar with Condor and what are the geographical locations of the companies it will invest in? The core operating team going forward will consist of Robert Bensh, Charles Green and Cliff West who has considerable experience in each of the targeted geographic locations (South West United States, Central and South America and Central and Eastern Europe). Robert Bensh acts as a director of Condor pursuant to the Condor Services Agreement. 3.7 Will the Company increase its percentage holding in Condor, and if so, by approximately how much? The Company is currently in discussions with the independent directors and major shareholders of Condor with respect to reallocating expenses to Condor resulting in minimal ongoing expenses being borne by the Company. This is seen as an interim step while the Company's independent directors continue discussions with Condor's independent directors and major investors regarding an increase in the Company's interest in Condor or other transaction between the two businesses.
xenawarriorprincess: As everyone knows I've always been bullish on Cardinal. Do I always get it right? Of course not! But I am still bullish on Cardinal despite its recent precipitous fall. Am I concerned at seeing my capital whittled away day by day? Absolutely! But you can look at Cardinal in two ways - Either It is a company with 800bpd production, of which it can only sell about 150bpd. It is saddled with expensive administrative costs, hardly any income and very large debts (especially now in relation to its capitalization), those debts needing to be repaid within a little over 7 months. It has a gas plant which costs and is not yet online and may (for all we know) never come online. Or You have an £8M market cap company, producing 800bpd, within a few weeks will be producing an extra 1,000bpd, and by the end of the quarter will be producing 2,200bpd. By the turn of the year government price caps should come off the 650bpd being put into storage and Cardinal will then get market prices for the full 2,200bpd, plus the 650bpd which has been placed in storage over the last year. Market prices should also be about 30% higher next year than they are now. Of course the reality may lie somewhere between the two. One can speculate about the reason for the recent significant share price fall. Maybe a largish shareholder is getting out to cover other losses elsewhere, hedgefunds are apparently liquidating good assets to cover losses elsewhere; maybe the GGF is in trouble and someone knows about it; maybe MM's are seeking cheap shares prior to news about the GGF commissioning; maybe it is as a result of Bensh doing the rounds regarding a fundraising (as a result of the credit crunch maybe new funds are not available at the moment); maybe it is as a result of some of the gas in storage being sold off without Cardinals approval; or maybe none of the above. But as snaptastic says Cardinal is not about to run out of cash to run the company prior to next July, and they don't have to clear off the SPC loan until next March, although they would no doubt want that issue resolved prior to then. So I don't see an immediate cash crisis stalking Cardinal - if anything as a result of the Condor deal they will have quite a bit more cash over the next year than the market expected at the beginning of the month. And to clear things up a bit re snaps post 2225 - it is only the JAA production that is subject to the price caps and storage problem. None of the gas flowing into the GGF is subject to any storage/price caps and can immediately be sold at market prices. In any event only about 80% of the 800 bpd production from the JAA's is put into storage ie about 666bpd of gas, the remaining 134bpd is oil/condensate can still be sold at market prices. The latest accounts show the breakdown in the income of the 800bpd between gas/condensate/oil. So even under the present government restrictions once Cardinal gets the GGF up and running at say 1,400bpd, they will actually be able to sell 1,534bpd gas/oil/condensate at market prices, and only the 666bpd gas from the JAA's will be put in storage. So one of the most crucial things is the GGF. There have been no RNS updates since 8th May 2007, although we know from the website presentation in early July that it was completed on 26th June. RB told me on 26th July that gas flowed from #3A into the plant on 26th July, which was infact a few days ahead of the original commissioning schedule. Gas was due to flow from #13 into the GGF the following week. I'm expecting that if everything else was on schedule we should get an update this month. RB also said that at 2,200bpd at current market prices CDL breaks even, and at 3,000bpd it is fully self funding. Of course with gas prices expected to rise by about 25% next year, then in 2008 CDL should be self funding at very roughly around the 2,250bpd level, and break even goes down to somewhere around 1,650ish bpd. Tolstoi - the actual figures given in that 'mistaken' update was 42.9Mb and NPV of $204M (so I'm not sure where you got 60Mb from) but having spoken to Cardinal the only 'mistake' with those figures is that they should not have been put out for public consumption. And before anyone asks, yes I have been topping up, as I regard these as a steal at this price. I used the same tactics with JKX and RPT, when they also looked like no hopers. In any event I've e-mailed RB tonight, just to see when we may expect the next update. Ukraine is not for widows and orphans, as always, DYOR. For your information, I am sleeping in a trench in my back garden tonight with my tin helmet at the ready for tomorrows onslaught - just in case ;-) Best wishes, Xena
xenawarriorprincess: DB, This is what Cardinal said about the rights issue/fundraising in the RNS of 2nd July 2007. "In recent months, Cardinal has been attempting to conclude a package of financing measures that would, in the opinion of its Directors, make it attractive for investors to provide additional equity finance either by way of institutional private placement or underwritten rights issue. ........ This is a critical time for the Company because sales at free market prices of gas delivered via the new Gas gathering and separation facility being commissioned are expected to commence in forthcoming weeks. In an attempt to respond to previously stated shareholder concerns the proposed financing package still being negotiated includes a reduction in the large number of shareholder warrants outstanding in return for the issue of equity... a reduction in the coupon on the Payment In Kind Notes first issued on 23 December 2005, and an issue of equity by way of rights or placing to be determined following consultation with Cardinal's largest shareholders to obtain support which would be required at an Extraordinary General Meeting ("EGM") (the 'Medium Term Financing Package"). In order to facilitate a future equity offering and provide for flexibility in pricing, the Company intends to seek approval of shareholders at an EGM for a Capital Reorganisation which, if approved by both shareholders and the Courts, would reduce the nominal value of its ordinary shares to 1p. It is Cardinal's present intention so far as is practicable, to obtain an underwriter or underwriters to an equity issue and for all current Cardinal shareholders wishing to participate in any equity offering to be offered the opportunity to subscribe for additional shares as part of this equity placement or rights issue." So I guess at the present time it isn't clear whether it will be a private placing or a rights issue, or what the terms will be. It also isn't clear how much is intended to be raised or at what price - maybe even Cardinal don't know this at the present time. Both JKX and Regal in the past have gone for private share issues in order to obtain a private Ukrainian shareholder base - JKX raised funds with this, Regal simply did it to settle a dispute over ownership of its gas fields, swapping equity for an uncontested share of its fields. Cardinal is in a somewhat different position to either of these as it not only maybe requires influence, but is also very short of cash. Rights issues are not necessarily a bad thing, they can often be good for the share price, it depends on the circumstances, however in Cardinals case they are somewhat vulnerable, and of course wouldn't be raising any funds if they didn't have to. Tolstoi, It is clear from the RNS that Cardinal is intending to deal with the warrants issue (in whole or part, most likely part) at the same time as the fund raising, and get a reduction on the interest payable. Whether SPC will play ball and what the terms of any swap will be is another matter. But the money actually owed to SPC will be dealt with separately. It is interesting that Cardinal seem to have accepted some of the criticisms made by QVT earlier in the year. Maybe, perversly the low share price could actually help Cardinal in negotiations with SPC as many of their warrants are at 27p, and with a share price of 10p, they are way underwater. The flipside is that a low share price makes it difficult to raise a significant amount of funding without diluting existing shareholders. Maybe a two stage process, deal with the warrants and interest, get an increased share price and then raise funds may be one solution. Or maybe I'm just dreaming. Also whenever Alfa do their share price forecasts they always have to do this on a fully diluted basis and take account of the warrants. The shares presently in issue are about 114M, with all the warrants being exercised this results in about 286M shares. The effect of the warrants is to more than halve any share price forecast by the broker. Obviously a significant reduction in the number of warrants would substantially raise their share price forecasts - after taking account of the placing/rights issue. You wrote "Is cardinal seriously trying to raise $50 million+ to cover the SPC loan and have a little bit of pocket money left?" The answer from publicly available documents is obviously "No!" On the money owed to SPC this is what Cardinal said in the same RNS "In addition, the Group had borrowings from Silverpoint Capital ("SPC") of $41.4million at 31 December 2006, which are at present due for repayment in March 2008. The Group is currently in negotiations with SPC to re-finance the borrowings such that the $41.4 million will not be due for repayment until at least 30 June 2008." So it is clear that they are hoping to deal with a) the warrants, interest and medium term fund raising b) longer term funding of the $41M as separate issues, although I've no doubt that there is some linkage. To digress slightly, the $5M from Hares is short term funding, the rights issue/placing medium term funding, and the repayment of $41M or so due to SPC is the long term funding issue. Cardinal said that the onerous terms it had to agree to with SPC were forced on it as it was effectively an oil explorer and not a significant producer. The implication is that once it is a significant producer it would be able to get a much better long term deal elsewhere. Hopefully it will be able to do this early next year. The key to all this is production and income. The key to that is the GGF. Get that producing and Cardinal will pull this off. I expect an RNS to that effect later this month. All IMHO, DYOR etc. Xena
xenawarriorprincess: bb44, Agreed on any number of valuations CDL is cheap compared with its peers. We all know there are some difficulties, RC field, JAA gas sales etc, but the upside once the GGF is completed - likely within a few days - is considerable. There is an interesting discussion on Fool Hallucigenia makes some interesting points, in particular "Muscovite. There have already been doubts expressed about the intentions of someone who comes onto bulletin boards with no past history and suddenly posts a series of obsessively negative posts about just one particular company. While you raise some good points, I hope you can appreciate why people might be sceptical, in particular when some of your points have already proven to be no more than FUD. And you've been posting at a particularly interesting time in Cardinal's history, when a) their final results are due within a week. b) they're probably more vulnerable to a takeover than at any point in their history, given the promised quadrupling of production in the next few months (if you believe Bensh, I appreciate this is not a given :-)) and the fact that there are some funds with massive stakes that can't be sold in the market but who need an exit route after the failure of the EGM." From my own experience it must have taken Muscovite many hours to construct his latest missive (6 pages of quite detailed points) and I simply cannot accept his explanation that being the City type he is he just happens to have a load of spare time on his hands and therefore whiles away the hours posting on CDL. He also lets slip that he has detailed knowledge of discussions and arguments at the EGM (was he there?), and appears on the face of it to have considerable knowledge of the FSU oil and gas industry and drilling techniques. Interestingly he also says about BC3A "5) Shut in production: Cardinal said that well BC 3A is an old soviet well. This is not true. Well BC 3A is a newly drilled well drilled in 65 days using a modernized Ukrainian rig. It had a production rate of 675 boepd. That is a good rate and means that the BC field is a good gas (condensate?) producing field. Wells 13, 111, 110, 9, 17 and 7 are the existing wells and are workover candidates. " suggesting that BC3A may indicate a find more valuable than CDL has admitted to formally, although hints of reserves up 50% by year end may allude to this. This well has always puzzled me a little. Successful drilling of BC3A warranted a separate RNS (but CDL says it doesn't comment on individual wells), production at 675bpd was about 3x the expected average, and although condensate was shown at the V18 level it was not tested, and initial production will only take place from the V20 level. Anyway the main point of this post is Hallucigenia's point b). Maybe if some funds want an exit eg QVT (who shot their bolt at the EGM) others may be negotiating to take their stake. A low share price, with little sign of a rise would assist any interested buyer. This would apply to other major stakes which were bought, possibly on a short term basis, around the 18-20p mark. Also, if a bid were made for the company, then all Silver Points warrants automatically kick in. But most are only exercisable at 27p. Whilst not being much of a financial whizz myself, it seems to me that if a bid were made below 27p then there would not be much point in Silver Point converting the warrants into shares as they would get a negative return on them. Thus any bidder would only have to pay for the shares presently in issue, plus shares converted from warrants at 20p, and others exercisable around that price and not the shedloads Silver Point has at 27p. Result CDL not only acquired on the cheap, but for the cost of far fewer shares than might otherwise be the case. It seems to me that potentially there are parties who would be interested in keeping CDL's share price as low as possible for as long as possible. In any event, an interesting week ahead, and no doubt all will be revealed very soon! Regards, Xena
xenawarriorprincess: I agree Cardinal are a great investment at this price and the company has enormous potential. As bb44 says there are many things all going in Cardinals favour. I'm heavily invested and will buy more as and when I can. I originally bought in October, on a 12 month view, and have been buying ever since. The drilling and workover news as well as the GGF completion schedule shows that Cardinal can deliver the goods. However despite the good news this is Ukraine, and one of the reasons Cardinals shares are so cheap are that Cardinal are based in Ukraine and appear to be in some (hopefully temporary) financial difficulties. As mentioned in the RNS there are problems with selling Cardinals share of production from the JAA's. It turns out this affects 80% of Cardinals present production, which is a lot. Whilst the production is being put in storage no $ are being received for it. The effect of this is that unless the issue is resolved by 30th June CDL will have had almost no income at all in the first half. This is clearly impacting already on the Silver Point facility. The $38M has been used up and CDL must now be needing to dip into the $14M reserved for the RC reinstatment. Even then drilling later in the year may be affected due to cash shortages - presumably CDL are not willing to spend money on long lead items given the shortage of cash. This makes the successful completion of the present workovers and GGF even more important as it will give CDL the cashflow which it hasn't got at the moment. Other problems could potentially arise - for instance if the RC reinstatement came up for grabs CDL may not have the cash to proceed, having used up some of the money on working capital, also Silver Point may require CDL to pay back to them the part of the $14M used first from the GGF cashflow and this may be the reason that continued delay in JAA income will affect future production. One plus however from delayed gas sales is that CDL may be able to take advantage of higher gas prices, as the general price of gas seems to be continually increasing. I don't want to appear downbeat, however I feel that this explains the lack of price movement reaction to an otherwise good announcement - and one has to be realistic. The JJA matter could also be successfully resolved at any time - which I'm sure would substantially boost the share price. From my previous holdings in JKX and to an extent with Regal I know it all (should) come good in the end, but it is sometimes a bit frustrating getting there. I will continue to hold (and buy), in 12 months time 17p will seem like a steal, and everyone will wonder how it could have ever been so cheap! Regards, Xena
xenawarriorprincess: KT, EGM details here: But don't agree about your analysis about the share price. I think it will be the other way around - up if QVT lose, probably evens if they win. The reason for evens if they win is that no one knows exactly what they are going to do if they do win - and they have certainly never given any idea what their programme is to be, just loads of slagging off the present management. I suspect the market will wait and see what they propose to do before moving the shareprice either up or down in the event they do win. If they lose there are several possibilities - They could walk away and start unloading shares - unlikely I feel as CDL are likely to be higher in 12 months than lower, QVT think in purely financial terms, and they will follow the profits; even if they did start unloading I suspect there will be enough institutional buyers willing to snap them up. They could sit tight, and just wait for another opportunity to do Bensh in, unlikely also as I suspect there is a fairly short time frame for QVT to act. They could launch a full bid, say 50% up from todays price, depending on how much value they feel they can extract from the company in the medium/long term, what their real plans are in that part of the world (and they haven't told us that, either) and how CDL fits in with those plans. Of course the die is cast already, the proxies have to be in today, and although people (and institutions) can vote in person at the EGM only shares registered by last Friday will count, so there is unlikely to be a flurry of buying tomorrow as these shares will not count towards the vote. One thing that has surprised me over the last week or two is the lack of significant buying through the market, but the share price has remained strong. Looking at how the voting may go gives a clue to this CDL 2%(Directors)+19%(Hares)+9%(Ospraie)+3%(Torch)+3%(East Capital) = 36% QVT 18% - and that so far as we are aware is it. The Directors and Hares have already disclosed how they will vote. Ospraie bought off Concord which has a Cardinal director on the board, Bensh used to work for Torch, East Capital are disclosed in the latest CDL report, even though they have a non disclosable interest. Providence 4% - not known, I had originally thought they were with QVT, but for various reasons I think they actually support CDL. So CDL need to get another 10%-14%, QVT 32% (or 28% if they do get support from Providence. As for us lot, well those voting are probably another 5-10%+ of the register. I've accumulated quite a few of these over the last 6 months or so (so of course I have an interest), and I advised CDL I was going to vote against the resolutions. I was chased quite a bit by MacKenzie partners, phone calls, e-mails etc, offering any help I required to make sure my brokers were on top of things, that is until about 2 weeks ago when the phone calls, e-mails etc stopped. (Not that I'm bothered on that score as I'm sure they've got more important things to do). The inference I gleaned from this (rightly or wrongly) is that around 2 weeks ago CDL knew they were pretty much home and dry on this one and they would defeat the resolutions. I suspect that this news has filtered out to the market over the last week and that is the real reason for the recent strength in the share price. That said I don't think that is necessarily the last we will have heard from QVT. Or maybe a certain poster who magically appeared on our thread, and disappeared just as suddenly (and obviously was paid by the word). Looking forward to next week! Regards, Xena
dysnomia: KENFRED!!!! READ THE BASICS! its all right there: QVT invested in Cardinal shares with knowledge of all material terms of the Silver Point financing QVT has no credible basis to question the terms of Cardinal's Silver Point financing, as this financing preceded QVT's investment in the company. All material terms of the first Silver Point financing were disclosed in Cardinal's regulatory announcements dated 1 December 2005 and 23 December 2005, as required by the AIM Rules for Companies. The QVT letter acknowledges the existence of the December 2005 announcements when it says that "Even those terms disclosed at the time were cause for serious alarm". This did not stop QVT from purchasing shares. QVT initially notified Cardinal of an investment in January 2006 (at 8.05% of Cardinal's issued ordinary share capital in the name Deutsche Bank AG) and this purchase was announced by Cardinal on 25 January 2006. Further purchase notifications were made as QVT added to its investment and these were followed by Cardinal announcements on 2 February 2006 (holding increased to 14.31%), 4 October 2006 (holding increased to 15.40% and notified in the name QVT for the first time), 30 October 2006 (holding increased to 16.18%) and finally on 17 November 2006 (holding increased to 17.59%). As stated in its Circular to shareholders of 14 February 2006, the Board of Cardinal chose to finance the Company's business with the issue of PIK notes because conventional bank debt was not yet available and conventional equity simply could not have been issued at a price approaching the IPO placing price. The subscription price of the warrants attached to the PIK Notes represented a significant premium to the share price at the time and, consequently, were less costly to the Company and its shareholders than any equity issue that would have been possible at a further substantially discounted price. The terms of the Silver Point financing have been fully disclosed in accordance with the AIM Rules for Companies All material terms of the Silver Point financing agreements have been disclosed in accordance with the AIM Rules for Companies. QVT has requested disclosure under the regulatory regime in the United States which does not apply to AIM companies such as Cardinal. Cardinal responds to two specific allegations made by QVT. Dividend restrictions: The Silver Point financing restricts the payment of dividends but this is not material for the following reasons. • Cardinal clearly states in its Admission Document: "The nature and status of the Group's business means that it is unlikely that the directors will recommend a dividend in the early years following Admission." • Small and mid-cap oil and gas companies invest cash flow entirely in development growth, not dividend distributions. Of the 97 AIM quoted Exploration and Production ("E&P") companies at 31 December 2006, none had reported that they were paying dividends for the interim or final periods ended prior to that date. • The Companies Act precludes payment of dividends except from distributable reserves. Cardinal has no reserves from which to pay dividends legally. Silver Point voting rights at subsidiary level: Silver Point has a minority voting right in the Company's subsidiary, Cardinal Resources Finance, by virtue of a single share which it holds in that company. Subsidiary company voting rights consistent with loan covenants are not material. Silver Point's minority voting rights do not provide any further rights of commercial significance to Silver Point which it does not already have by virtue of the customary covenants contained in the PIK Note financing documents. As such, Cardinal did not consider the Silver Point voting rights to be material for the purposes of disclosure in a regulatory announcement and this conclusion has been confirmed by the company's legal advisers. In any case, such matters are set out in Cardinal Resources Finance's articles of association, which were duly filed at Companies House following closing of the financing in December 2005. There is no "poison pill" or other bar to a takeover Contrary to QVT's claim, there is no hidden 'poison pill'. Unlike in the United States, 'poison pills' are not allowed in the United Kingdom. Cardinal believes that shareholders would benefit from industry consolidation and management is open-minded as to whether Cardinal should be the consolidator or consolidated. Cardinal has four non-executive Directors as well as two executive Directors. One Director was appointed at the request of the largest shareholder. The warrants and options that Directors hold are all at exercise prices equal to or in excess of the Admission price. The interests of the Cardinal Board are aligned with those of shareholders. Ultimately, it is shareholders that should, and will, decide on significant consolidation opportunities. Cardinal has not been sold to Silver Point. If Cardinal is sold, all shareholders will benefit from any upside QVT's analysis assumes full vesting of the most recent Silver Point warrants and prior termination of the other existing 46 million options and warrants which do not belong to Silver Point; which may or may not happen. On a fully diluted basis, Silver Point has warrants over 42.9% of the Company, assuming full vesting of the most recent warrants, as explained in the Company's press release dated 22 December 2006, and not over 50%, as claimed by QVT. The Directors will not sell the Company without securing an appropriate price that they can recommend to shareholders. Nabarro Wells & Co. Limited has been appointed to assist the Company in considering strategic alternatives to maximise shareholder value. The cost of the EGM vote called by QVT is an unnecessary expense and the task is a distraction from the objective of maximising shareholder value. The Board believes that any change in the management structure of Cardinal at this critical point as the Company executes its strategy would be detrimental to the business and to shareholder value. The PIK Notes, issued as part of the Silver Point financing structure, are a form of debt that introduces financial leverage to Cardinal whereby, if Cardinal reaches its objectives, any "upside" to shareholders should be accentuated because debt is repaid at a fixed amount. All the Silver Point warrants were priced at a significant premium Silver Point is able to exercise many of its warrants at 27.5p, which represents a significant premium to the share price at the time of issue, and, consequently, was less dilutive to the Company's shareholders than any equity issue which would only have been possible at a significantly discounted price. QVT has also ignored the fact that the Company would receive the additional benefit of the subscription proceeds of £30.2 million from the exercise of Silver Point warrants, at no additional cost. The AIM placing was not intended to raise funds for the RC re-instatement or the Rudis acquisition QVT implies that the working capital raised on flotation should have covered both subsequent acquisitions and the workover of assets acquired through such acquisitions. This is an error because the acquisition of Rudis was not made until September 2005 and could not have been predicted at the point of flotation. The Rudis acquisition cost $14.8 million, of which $6 million was settled in cash by Cardinal in order to minimise further issue of shares to the vendor, Hares Group. There was also a commitment, subject to the availability of finance, to an extensive development drilling programme. In December 2006, Cardinal announced an increase in the PIK Note facility to, inter alia, accelerate the work programme on the Rudis licence areas, on which Cardinal owns the licences 100% and controls operations. The expected increase in net production from the Rudis assets, as set out in the Cardinal Circular dated 14 February 2007, would not be achievable without development funding provided by the PIK Note finance. The acquisition of Rudis has also added significantly to Cardinal's reserves and is the main source of increases in net production in 2007. The acquisition has also diversified the Company's assets, reducing its dependence on interests controlled by Cardinal's JAA partner. These facts are all set out in Cardinal's public documents and announcements. Of the $55 million in PIK Notes raised in 2005 and 2006, $14.1 million remains committed to the RC re-instatement and is undrawn. There has never been any plan to disenfranchise Cardinal shareholders In December 2005, Cardinal announced its intention, subject to shareholder and regulatory consent, to replace the warrants in Cardinal Resources Finance with warrants in Cardinal Resources plc when the original Bridge PIK Notes were refinanced. The original Bridge PIK Notes were restated and extended as announced in December 2006 but on different terms to those contemplated in December 2005. If shareholder approval is obtained before 31 July 2007 for the warrants in Cardinal Resources Finance to be replaced by warrants in Cardinal Resources plc, interest savings of 5% or more will accrue to Cardinal shareholders. Refinancing should be easier once Cardinal is beyond the pre-profit workover stage Despite earlier statements by QVT seeking to assist Cardinal in refinancing the PIK Notes and discussions with QVT's advisers regarding the possibility of a Rights Issue, no formal proposal has been made by QVT in this regard. Via its advisers, QVT has been asked to support a Rights Issue by providing some of the underwriting required to help make such a Rights Issue a success. QVT has declined. The second Silver Point financing has accelerated the Rudis workovers Cardinal disclosed at the time that it had become necessary to amend and restate the terms of the Silver Point financing because it had not yet been able to consummate the RC re-instatement, as originally envisaged. The previous covenants had been drafted on the assumption that the RC re-instatement would proceed. With respect to the December 2006 restated financing, the Directors stated that they were of the view that failure to access additional finance to continue the drilling programme would prevent the Company from executing its business plan which would damage shareholder value. The Directors were also concerned that, if the revised Bridge PIK Note financing transaction had not been entered into or if covenant waivers were not granted, this could have resulted in the Company not being able to meet its financial obligations as they fell due. The Directors stated that they were satisfied that the overall terms of the additional Silver Point financing were fair and reasonable as far as shareholders were concerned. QVT does not appear to understand the main parties involved in the RC re- instatement in Ukraine The RC re-instatement remains a priority. Cardinal's JAA partner Ukrnafta has previously acknowledged that this right to the RC re-instatement exists under the RC Field JAA. However, as explained in Cardinal's Circular dated 14 February 2007, implementation has been hampered by upheavals in the political situation in Ukraine. It is apparent from QVT's references to the Cardinal letter published in the Washington Times, that they do not understand the parties involved in Ukraine. That letter is clearly addressed to the Prime Minister of Ukraine, Viktor Yanukovich. Cardinal's joint venture partner is not an 'oligarch' and Cardinal has not criticised their own partner, Ukrnafta. Mr Effimoff does not appear to have any direct experience in Ukraine Mr Effimoff's CV, as described in the QVT letter, does not mention any relevant experience in Ukraine or any experience at board level of an AIM quoted company. Mr Effimoff has been invited to meet the board of Cardinal but no such meeting has taken place. Cardinal is unaware whether Mr Effimoff has ever been to Ukraine or served on the Board of an AIM quoted company. Conversely, Cardinal's Chairman and Chief Executive, Robert J. Bensh, has 12 years' experience in the oil and gas industry including over 7 years' experience in Ukraine where he has developed important business relationships. Mr Bensh has an extensive knowledge of the Country's economic, operational and political landscape and is regularly consulted by experts on energy for his knowledge of Ukraine. Mr Bensh was appointed to restructure and refinance the predecessor business to Cardinal, called Carpatsky, in December 1999. Following de-listing from TSXV in June 2003, Mr Bensh completed the task successfully with agreement to re-organisation and a private placement of Cardinal shares in April 2004. Cardinal was admitted to trading on AIM in April 2005 and Mr Bensh's achievements in the period to IPO are set out more fully on page 23 of the Admission Document. On admission to AIM, Mr Bensh waived his rights to approximately $386,000 of back salary and expenses personally incurred on behalf of Cardinal (comprising 50 per cent. of the amount owed to him under his employment agreement at the closing of the Company's private placement in 2004). Mr Bensh has demonstrated great perseverance and dedication to the cause of shareholder value at Cardinal. On admission to AIM, the former shareholders of Carpatsky ("Carpatsky shareholders") held 44.3 per cent. of Cardinal's ordinary share capital. Most Carpatsky shareholders will have experienced a significant uplift in value of their shares during Mr Bensh's tenure. Mr Bensh is supported by a strong and loyal team of geologists, operational engineers and technical engineers, including Ukrainian native speakers, in senior management positions. The Board believes that any change in the management structure of Cardinal at this critical point would be detrimental to the business and to shareholder value. Cardinal's Directors believe that its current G&A costs per BOE of reserves compares well with its peer group of AIM-quoted companies reporting P2 reserves. Cardinal's Directors believe that its current G&A costs per BOE of reserves compares well with its peer group of AIM-quoted companies reporting P2 reserves. On 6 February 2007, Cardinal announced G&A cost savings of $1.5 million to $2.0 million. This commitment does not include the exceptional costs of the EGM called for by QVT. QVT has been invited to visit Cardinal's operations and premises. The offer has been rejected. A visitor to the Company would see that the majority of the Company's employees are based in Ukraine, including the Chief Executive, Chief Operator Officer, Country Manager and 28 other professionals and support-staff. Cardinal's London office comprises 1,800 square feet and 7 employees to maintain financial and management accounting, tax, in-house legal, compliance, corporate finance and investor relation activities appropriate to an AIM quoted company. A UK office is common market practice amongst AIM quoted E&P companies; over 7O% of AIM quoted E&P companies have a UK office, mostly London-based. Cardinal's Houston office is a small space costing $2,000 per month with one full time employee who performs reservoir engineering economic analysis and handles tax and statutory compliance for Cardinal's wholly owned US subsidiary (which owns the RC and Bytkiv assets). Cardinal has a defined strategy for growth On 22 December 2006 Cardinal stated that its Directors believe that shareholder value will be maximised through achievement of two key objectives: 1. Completion of the Rudis workovers and drilling programme together with the tie in of the new and renewed wells to the new gas facility and existing Ukrainian pipeline; and 2. the RC re-instatement. On 13 February 2007, Cardinal announced that it expects net production to increase from approximately 800 BOEPD in December 2006 to a run rate of approximately 3,000 BOEPD by the end of 2007 (on the bases and assumptions set out in the note 6, below). On 14 February 2007, Cardinal stated that the Directors consider that refinancing on improved terms should become easier to achieve once the Company is beyond the present pre-profit workover stage. Cardinal is an experienced operator in Ukraine with a regularly stated intention to focus 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.
xenawarriorprincess: Never a dull moment in Ukrainian oil and gas circles! I would assume that QVT have done their homework and are confident that they will get the resolution to oust Bensh passed at the EGM. As QVT have around 18% they must be confident that they can get support from elsewhere, and may even increase their shareholding further prior to the EGM. Is it by an ordinary majority or does it need to be a special resolution, I'm not sure? Even if the vote is by ordinary resolution they need another 32%. This document at the last page gives details of other major shareholdings - Hares who have 19% must be onside, even though they have appointed a Director themselves. Hares of course sold the Rudis field to CDL for some cash but mainly shares at I think around 27p, a lot of good that has done them. The timing is also interesting. This is taken from the RNS 23rd December 2005 announcing the Silver Point finance deal "Cardinal has the right to redeem the notes in full after one year, subject to an early redemption fee, unless refinanced by Silver Point or its affiliates." Presumably the EGM will be to either get rid of the whole board (with the possible exception of the Hares representative), or just get rid of Bensh and then QVT expect the rest of the board will resign in protest, and either way QVT will get its people appointed to run the company. The EGM needs 3 weeks notice, so it should be held just prior to 22nd December 2006 in order for the Silver Point deal to be refinanced with funds from QVT or its associates. QVT has some $5Bn under management, so no problems there. Hey Presto! A potential 33% of CDL is no longer in the hands of Silver Point and the share price rises accordingly. Central costs are also cut as most of the Directors will have gone. Is that the end game or is there more to come? I don't know, but CDL must make a very tempting target for two other LSE listed companies. One may struggle to arrange an outright takeover, but the other would have no problem. Zengas has noted "QVT admitted it may be best to explore a business combination with other exploration companies in the region to benefit from synergies, greater local influence, and reduced central costs..." - well JKX with its contacts, cash and experience fits perfectly. They have never hidden their desire to seek suitable takeover candidates. JKX at present prices could easily buy CDL outright for cash, but QVT may be playing a cleverer game. JKX has reserves of about 56Mb and production of about 13,000boepd. CDL, even without the increased RC field stake has about 32Mb and by end 2007 should have production of about 4,500boepd. JKX is valued at £500M, CDL at about £14M. Why not sell CDL to JKX in return for a substantial JKX shareholding? The equivalent of £100M would be cheap and well worth it to JKX. JKX could then use its contacts to reinstate the RC field and further enhance value. To be fair to present CDL management they haven't done a bad job (apart from the share price of course!), and I'm sure left to its own devices the share price would be a multiple of its present value by the end of 2007 in any event. More reason, if anything for QVT to jump now rather than later. All IMHO, DYOR etc...... Regards, Xena
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