Cardinal Resources to Acquire Ukraine Exploration Licenses

Cardinal Resources has entered into a binding agreement with Hares Group Limited to acquire 100% of Rudis Drilling Company in Ukraine for $14.8 million.

Rudis' assets comprise three oil and gas licenses -- Dubrivska, Bilousivsko-Chornukhinska and North Yablunivska -- and a 50% working interest in a Joint Activity Agreement ("JAA") with Ukrgazvydobuvannya, a subsidiary of Naftogaz Ukraine, for which Rudis is the operator. All of Rudis' properties are located approximately 40 kilometers from Cardinal's existing JAA wells in the Rudivsko-Chernovozavodske Field in Eastern Ukraine. Rudis' net profits for the 6-months ended June 30, 2005 were $480,000, before exploration costs of $835,000.

Cardinal initially plans to drill five development wells and complete four workovers in the three license areas. At present, a well is drilling in the Dubrivska license area.

Rudis' current net average daily production is 500 barrels of oil equivalent per day ("boepd"). Cardinal's year to date net average daily production is 631 boepd.

Cardinal has estimated Rudis' reserves at 9.1 million barrels of oil equivalent ("MMBOE"). The reserve estimate is based on the expectation that a 20-year production license will be granted for each of the licenses which currently have producing wells on them (Bilousivsko-Chornukhinska and North Yablunivska). Once the exploration and pilot commercial development licenses expire the company has no reason to believe that the conditions required for the production licenses will not be achieved. Exploration Consultants Limited (ECL) has reviewed the assumptions and methodology employed by Cardinal in its reserve evaluation and believes them to be sound and reasonable. The transaction is expected to increase Cardinal's reserves from 18.4 MMBOE to 27.5 MMBOE.

To fund the acquisition, Cardinal will issue 21,949,364 of Cardinal Ordinary Shares at a deemed value of 22p per share, equating to 20% of the enlarged share capital, and pay $6,000,000 in cash. If the cash component of the consideration is not paid prior to 1st December 2005, Hares has the right to require Cardinal to satisfy any outstanding amount by the issue of additional shares (at a deemed price of 22p) up to a maximum of a further 9.9% of Cardinal. Any unpaid balance will attract interest of 1% per month commencing on 1st January 2006 up until the date of payment.

As a result of this transaction, the Hares Group has the right to appoint a non-executive Director to the Board of Cardinal, who will not receive any fees in respect of such an appointment. If the shareholding in the company falls below 7%, the right to Board representation falls away.

The acquisition is expected to close within six weeks.

"The acquisition of Rudis represents the initial step in executing on our strategy to acquire additional operated oil and gas assets in Ukraine, where Cardinal can apply local knowledge and modern technology to create value for stakeholders," said Robert J. Bensh, Cardinal's Chairman and Chief Executive Officer.