Half Yearly Report

RNS Number : 3376Z
Green Dragon Gas Ltd
21 September 2009
 



21 September 2009


GREEN DRAGON GAS LTD.

('Green Dragon' or 'the Company')



Interim Results for the six months ended 30 June 2009


Green Dragon Gas Ltd (AIM: GDG), the Chinese coal bed methane business, today announces its unaudited interim results for the six months ended 30 June 2009.


Highlights:


·                    
A 787% increase in revenue to US$18.7 million (2008: US2.4 million)
 
·                     13.8% increase in gas sales to 5 billion cubic feet (143.8 million cubic metres)
downstream business unit
 
·                     157% increase in average gas produced per day at Shizhuang South ('GSS') CBM block
 
·                     Post tax loss down 10% from US12.3 million to US$11.0 million resulting in an increase
in EPS to US$(0.096) from US$(0.134)
 
·                     Net assets of US$521.2 million, including current assets of US$17.8 million
 
·                     Gas-in Place of 25.5 TCF. 3P of 2.16 TCF with a PV10 of US$7.2 Billion.
 
·                     US$9.6 million raised in a rights issue to shareholders in March 2009
 
·                     290% increase in the Surface-to-Inseam meters drilled in the coal seams
 
·                     35% improvement in drilling productivity
 
·                     In August 2009, announcement of a joint venture with ConocoPhillips on three CBM
blocks
 
·                     US$11.1 million of the remaining $50 million zero coupon convertible debt was repaid in full and the convertible note cancelled in September 2009
 

Commenting on the results, Randeep S. Grewal, Chairman and Chief Executive of Green Dragon, stated:


'17 August 2009 marked the third anniversary of our admission to AIM and we are delighted that the Company continues to grow at a steady pace. Our revenue has increased approximately eight-fold, demonstrative of the Company's growth which currently comes predominately from our downstream business. All business segments continue to grow organically although the downstream revenue is expected to dominate revenues for the next couple of years. As upstream CBM sales come on line in 2010, the higher profit margins generated by these sales will add further value to the Group's profitability in 2011 and beyond.'


'The upstream drilling team marked its first year anniversary with productivity improvements to our seven full time drilling rigs committed for the fourth quarter. Two of the seven rigs are dedicated to drill surface-to-inseam wells that are materially more cost effective for the Company.'


'Importantly, we concluded a joint venture agreement in August 2009 with ConocoPhillips ('COP') following a seven month due diligence process ('the Joint Venture')COP is one of the largest CBM producers in the world and I have great expectations for our Joint Venture. Their hands-on knowledge of monetizing a large resource is timely and will be beneficial as we start commercial gas sales at GSS next year. The mutually developed and agreed $30 million drilling programme has commenced in our Shanxi blocks and we expect to see results prior to this year end. This Joint Venture is expected to increase shareholder value and validates of our reserve base scale and potential,' concluded Mr. Grewal.  

 

For further information on the Company and its activities, please refer to the website at www.greendragongas.com or contact:


Stephen Hill / Betty Cheung : Green Dragon Gas  

+852 3710 0168

 

 

Dr Azhic Basirov/ David Jones : Nominated Adviser & Broker /Smith & Williamson Corporate Finance Limited

+44 20 7131 4000

 

 

Tim Redfern : Nominated Broker / Evolution Securities

+44 20 7071 4300

 

 

Tim Thompson / Christian Goodbody : Investor Relations / Buchanan Communications

+44 20 7466 5000

 

 

  CHAIRMANS STATEMENT

17 August 2009 marked the third anniversary of our admission to AIM and we are delighted that the Company continues to grow at a steady pace. Our revenue has increased approximately eight-fold, demonstrative of the Company's growth which currently comes predominately from our downstream business. All business segments continue to grow organically although the downstream revenue is expected to dominate revenues for the next couple of years. As upstream CBM sales come on line in 2010, the higher profit margins generated by these sales will add further value to the Group's consolidated profitability in 2011 and beyond.


The Company continues to expand each of its focused areas:


Technical Services. Greka Technical Services (GTS) upstream drilling team marked its first year anniversary with productivity improvements and a solid drilling plan for the seven full time drilling rigs for the fourth quarter of 2009. Two of the seven rigs are dedicated to drill surface-to-inseam wells that are materially more cost effective for the Company. The percentage of productive coal seam metres drilled as compared to the total metres drilled has increased from 13in 2008 to 48in 2009; a 35% improvement driven by a higher surface-to-inseam drilling meters ratio as compared to vertical wells which is more efficient. The new business segment is now in a position to expand further next year. The management team is planning its next phase of hiring additional crews and providing the necessary training.


Upstream. The Company continues its 2009 drilling programme across all six blocks, encompassing 7,566 sq km, with estimates in excess of 25TCF gas in place. The Shizhuang South block ('GSS') has been the area of concentration so far this year with a significant increase in the inseam metres drilled compared with our previous management target. We have already drilled over 5,000 metres in coal, so far, and expect to exceed this number before the end of the year. The COP joint drilling programme further enhanced and expanded our objectives for this year which we anticipate being reflected in our year end reserve report. As production from the SIS wells has exceeded our expectations, our employees are focused on confirming the infrastructure requirements in order to convert gas production into sales. While 7.5 km of pipeline has been built and the power plant expanded, additional pipelines and compression will be required to monetize the forecasted production by year end.  


Midstream. The Giant Power International ('GPI') acquisition strategically established us within the midstream sector in ZhengzhouHenan ('ZPH') and WuhuAnhui ('APH'). Both distribution centres have long term supply contracts from the CNPC west-east pipeline and a sales market that far exceeds current supply. Both distribution centres are profitable and accretive to the Company's earnings potential, with ZPH paying cash dividends to the Group for the 2008 full year. As ZPH and APH are regulated by the Chinese government, their profitability is assured and will continue in the future. Gross gas sales from GPI was 1.15 billion cubic feet (32.6 million cubic metres). ZPH initiated its plan to expand further into the downstream Compressed Natural Gas ('CNG') retail business in order to enhance its profitability. GPI received its first cash dividend, which was successfully expatiated from China to the parent, Green Dragon Gas.  


Downstream. As the second major pipeline gas distributor in the Beijing metropolitan area, Beijing Huayou continues to grow its gas sales in the Beijing Development Area. The company sold over 5 billion cubic feet (143.8 million cubic metres) in the first half of 2009, a 13.8% increase over the same period last year. Additionally, the company successfully expanded its operations into Qihe in Shandong province. The division provides the majority of our revenue and will remain the main contributor in the short to mid term.


Technology & Manufacturing. Our information systems team continues its focus on developing a proprietary Supervisory and Control Data Acquisition ('SCADA') system for the Company's substantial operations. While the upstream well head and downstream CNG retail pilot systems have been working seamlessly, the group is now focused on expanding the technology to the drilling rigs and thereafter the transportation fleet to digitize the company's entire operation. The continued expansion of the gas industry provides an ideal environment for the increase in sales of our CNG dispensers which we are currently manufacturing in Zhengzhou.  


Our mission to be a vertically integrated gas supplier providing optimum shareholder returns through the execution of an environmentally progressive niche business plan in China is materialising. The significant increase in revenues from our downstream business was complemented by the Joint Venture with ConocoPhillips to expedite the monetisation of our large Upstream gas resources. Growth drivers are in place, our employees' undeterred conviction to execute the growth maintains momentum and the leadership team is committed to the Group's ongoing performance. I look forward to providing further updates to Shareholders in due course, demonstrating the rapid expansion of Green Dragon Gas in its inner China focused niche gas business.

  

Randeep S. Grewal

Chairman & CEO

18 September 2009

 

 Condensed Consolidated Statement of Comprehensive Income

Six months ended 30 June 2009


 

 

Six months

Six months

Year

 

 

ended 30

ended 30

ended 31 

 

 

June 2009

June 2008

December  2008

 

Notes

US$'000

US$'000

US$'000

 

 

unaudited

unaudited

audited

Revenue

3

18,723

2,379

24,649

Cost of sales

 

(16,102)

(2,319)

(21,073)

Gross profit

 

2,621

60

3,576

Distribution costs

 

(862)

(81)

(763)

Share-based payments expense

4

(2,884)

(3,821)

(7,921)

Other administrative expenses

 

(7,342)

(3,088)

(9,282)

Total administrative expenses

 

(10,226)

(6,909)

(17,203)

Loss from operations

 

(8,467)

(6,930)

(14,390)

Other gains and losses

 

-

-

(930)

Finance income

5

1,524

730

929

Finance costs

 

(3,944)

(6,787)

(13,189)

Loss before income tax

 

(10,887)

(12,987)

(27,580)

Income tax

6

170

90

(339)

Loss for the period

 

(10,717)

(12,897)

(27,919)

Other comprehensive income

 

 

 

 

Exchange differences arising on

 

 

 

 

translation of foreign operations

 

(320)

571

(294)

Total comprehensive income

 

 

 

 

for the period

 

(11,037)

(12,326)

(28,213)

Loss for the period attributable to:

 

 

 

 

Equity holders of the parent

 

(10,303)

(12,865)

(27,072)

Non-controlling interests

 

(414)

(32)

(847)

 

 

(10,717)

(12,897)

(27,919)


Total comprehensive income

 

 

 

 

attributable to:

 

 

 

 

Equity holders of the parent

 

(10,757)

(12,317)

(27,366)

Non-controlling interests

 

(280)

(9)

(847)

 

 

(11,037)

 (12,326)

(28,213)


Basic and diluted

 

 

 

 

Loss per share attributable to equity holders of the parent (US$)

7

(0.096)

(0.134)

(0.269)



 


Condensed Consolidated Statement of Financial Position

At 30 June 2009


 

 

As at

As at

As at

 

 

30 June 2009

30 June 2008

 31 December 2008

 

Notes

US$'000

US$'000

US$'000

 

 

Unaudited

unaudited

audited

Assets

 

 

 

 

Non-current assets

 

 

 

 

Property, plant and equipment

9

70,129

56,028

72,065

Gas exploration and appraisal assets

 

646,634

606,337

643,589

Other intangible assets

 

22,774

-

23,999

Payment for lease hold land held for own use under operating leases

 

301

-

233

Available for sale investment

 

-

429

-

Deferred tax asset

 

752

609

687

Other financial assets

 

-

5,383

-

 

 

740,590

668,786

740,573

Current assets

 

 

 

 

Inventories

 

3,514

-

2,378

Trade and other receivables

10

5,590

7,780

3,196

Cash and cash equivalents

 

8,698

72,940

12,830

 

 

 

 

 

 

 

17,802

80,720

18,404

 

 

 

 

 

Total Assets

 

758,392

749,506

758,977


Liabilities

 

 

 

 

Current Liabilities

 

 

 

 

Trade and other payables

11

22,292

18,386

22,237

Convertible notes

12

11,324

-

49,912

Derivative financial liability

 

-

-

1,500

Current tax liabilities

 

676

-

1,075

 

 

34,292

18,386

74,724

Non-current liabilities

 

 

 

 

Convertible notes

 

38,789

83,197

-

Deferred tax liability

 

151,100

139,225

151,515

Other financial liabilities

13

13,000

13,000

13,000

 

 

202,889

235,422

164,515

Total liabilities

 

237,181

253,808

239,239

Total net assets

 

521,211

495,698

519,738

 

 

 

 

 

Equity

 

 

 

 

Share capital

14

11

10

11

Share premium

 

529,702

477,525

520,076

Convertible note equity reserve

 

15,333

20,831

15,333

Share based payments reserve

 

9,073

3,821

6,189

Capital reserve

 

94

-

84

Foreign exchange reserve

 

(1,002)

294

(548)

Retained deficit

 

(50,408)

(25,804)

(40,095)

 

 

 

 

 

Total equity attributable

 

 

 

 

to equity holders of the Parent

 

502,803

476,677

501,050

Non-controlling interests

 

18,408

19,021

18,688

Total Equity

 

521,211

495,698

519,738


 

Condensed Consolidated Statement of Changes in Equity

Six months ended 30 June 2009



 
 
Share capital
Share premium
Convertible note equity reserve
Share based payment reserve
Capital reserve
Foreign exchange reserve
Retained deficit
Attributable to equity holders of the parent
Non-controlling interests
Total
 
Notes
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
Balance At 1 January 2008
 
9
440,737
20,831
-
-
(254)
(12,939)
448,384
-
448,384
Loss for the period
 
-
-
-
-
-
-
(12,865)
(12,865)
(32)
(12,897)
Exchange differences on translation of financial statements of foreign operations
 
-
-
-
-
-
548
-
548
23
571
Total comprehensive income for the period
 
-
-
-
-
-
548
(12,865)
(12,317)
(9)
(12,326)
Placement of new shares (net of issue costs US$943,000)
 
1
36,788
-
-
-
-
-
36,789
-
36,789
Share-based payments
 
-
-
-
3,821
-
-
-
3,821
-
3,821
Recognition of Jointly controlled entity
 
-
-
-
-
-
-
-
-
19,030
19,030
Balance at 30 June 2008 
 and 1 July 2008 (unaudited)
 
10
477,525
20,831
3,821
-
294
(25,804)
476,677
19,021
495,698
Loss for the period
 
-
-
-
-
-
-
(14,207)
(14,207)
(815)
(15,022)
Exchange differences on translation of financial statements of foreign operations
 
-
-
-
-
-
(842)
-
(842)
(23)
(865)
Total comprehensive income and for the period
 
-
-
-
-
-
(842)
(14,207)
(15,049)
(838)
(15,887)
Issue of new shares by conversion of convertible note
 
1
42,551
(5,498)
-
-
-
-
37,054
-
37,054
Share-based payments
 
-
-
-
2,368
-
-
-
2,368
-
2,368
Transfer to capital Reserve
 
-
-
-
-
84
-
(84)
-
-
-
Share of reserves of jointly
 controlled entities
 
-
-
-
-
-
-
-
-
505
505
Balance at 31 December 2008  and 1 January 2009 (audited)
 
11
520,076
15,333
6,189
84
(548)
(40,095)
501,050
18,688
519,738
Loss for the period
 
-
-
-
-
-
-
(10,303)
(10,303)
(414)
(10,717)
Exchange differences on translation of financial statements of foreign operations
 
-
-
-
-
-
(454)
-
(454)
134
(320)
Total comprehensive income for the period
 
-
-
-
-
-
(454)
(10,303)
(10,757)
(280)
(11,037)
Right Issue of new shares
14
-
9,626
-
-
-
-
-
9,626
-
9,626
Share-based payments
4
-
-
-
2,884
-
-
-
2,884
-
2,884
Transfer to capital Reserve
 
-
-
-
-
10
-
(10)
-
-
-
Balance at 30 June 2009 (unaudited)
 
11
529,702
15,333
9,073
94
(1,002)
(50,408)
502,803
18,408
521,211

  Condensed Consolidated Statement of Cash Flows


Six months ended 30 June 2009


 

 

Six months

Six months

Year ended

 

 

ended 30

Ended 30

31 December

 

 

June 2009

June 2008

2008

 

Notes

US$'000

US$'000

US$'000

 

 

unaudited

unaudited

audited

Operating activities

 

 

 

 

Loss before income tax

 

(10,887)

(12,987)

(27,580)

Adjustments for:

 

 

 

 

Depreciation

9

2,508

78

2,611

Amortisation of leasehold land held

 

 

 

 

for own use under operating leases

 

12

-

16

Amortisation for intangible assets

 

1,225

-

457

Share based payment expenses

4

2,884

3,821

6,189

Loss on disposal of property,

 

 

 

 

plant and equipment

 

-

-

2

Change in fair value of

 

 

 

 

financial derivative

5

(1,500)

-

1,500

Loss in fair value of

 

 

 

 

  convertible notes

 

-

-

732

Finance income

 

(24)

(730)

(929)

Finance costs

 

3,944

6,766

10,957

Accrued compensation

 

-

-

927

Movements in foreign exchange

 

(320)

531

(242)

 

 

 

 

 

Operating loss before changes

 

 

 

 

  in working capital and provisions

 

(2,158)

(2,521)

(5,360)

Increase in inventory

 

(1,136)

-

(974)

(Increase)/decrease in trade and

 

 

 

 

 other receivables

 

(2,722)

(4,483)

2,600

Increase in trade and other payables

 

55

3,362

3,139

Net cash used in operating activities

 

(5,961)

(3,642)

(595)

Income tax (paid)/credit received

 

(709)

-

430

Net cash used in operating activities

 

(6,670)

(3,642)

(165)


Investing activities

 

 

 

 

Interest received

 

24

730

929

Payments for exploration activities

 

(3,031)

(7,076)

(12,086)

Purchases of property

 

 

 

 

  plant and equipment

 

(586)

(2,102)

(13,486)

Payments for leasehold land held

 

 

 

 

  for own use under operating leases

 

(80)

-

(131)

Cash held in jointly controlled entity

 

 

 

 

  at the date of acquisition

 

-

704

-

Cash paid in respect of acquisition

 

 

 

 

  of subsidiary companies

 

-

(5,383)

(48,684)

Net cash used in investing activities

 

(3,673)

(13,127)

(73,458)

 

 

 

 

 

Financing activities

 

 

 

 

Repayments of borrowings

 

-

(1,410)

(3,684)

Proceeds on issue of shares

 

9,626

36,789

36,789

Repayment of convertible note

 

 

 

 

 and interest

 

(2,590)

-

(737)

Other finance costs paid

 

(825) 

-

(245)

Net cash from financing activities

 

6,211

35,379

32,123

 

 

 

 

 

Net (decrease)/increase in

 

 

 

 

cash and cash equivalents

 

(4,132)

18,610

(41,500)

Cash and cash equivalents

 

 

 

 

at beginning of period


12,830

54,330

54,330

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

at end of period

 

8,698

72,940

12,830


 

Notes to Condensed Interim Financial Statements


    GENERAL INFORMATION

The condensed financial information for the six months ended 30 June 2009 and 30 June 2008 is unaudited and does not constitute statutory financial statements. The comparative financial information for the full year ended 31 December 2008 is not the Company's full statutory accounts for that period. The auditors' report on those accounts was unqualified and did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report.


2     ACCOUNTING POLICIES

The annual financial statements of Green Dragon Gas Ltd. are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements has been prepared in accordance with IAS 34, 'Interim Financial Reporting' as adopted by the European Union.


Basis of preparation

After making enquiries, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the half-yearly condensed financial statements. 


The same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements as applied in the Group's latest annual audited financial statements, except as described below.


Changes in accounting policies

In the current financial year, the Group has adopted IAS 1, 'Presentation of Financial Statements' (Revised), IFRS 8, 'Operating Segments' and the amendment to IFRS 2, 'Share-based payments: vesting conditions and cancellations'. 


IAS 1 Presentation of Financial Statements (Revised) includes the requirement to present a Statement of Changes in Equity as a primary statement and introduces the possibility of either a single Statement of Comprehensive Income (combining the Income Statement and a Statement of Comprehensive Income) or to retain the Income Statement with a supplementary Statement of Comprehensive Income. The first option has been adopted by the Group. As this standard is concerned with presentation only it does not have any impact on the results or net assets of the Group.

  

IFRS 8, Operating Segments requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Chief Executive Officer ('CEO'). By contrast IAS 14, 'Segmental Reporting' required business and geographical segments to be identified on a risks and rewards approach. The business segmental reporting bases used by the Company in previous years are those which are reported to the CEO, so the changes to the segmental reporting for 2009 are in respect of the additional disclosure only. Comparatives have been restated. 


Amendment to IFRS 2, 'Share-based payments: vesting conditions and cancellations' results in an immediate acceleration of the IFRS 2 expense that would otherwise have been recognised in future periods should an employee decide to stop contributing to the savings plan. Management has concluded that so far there has been no impact on the results of the Group as a result of this amendment.


3     REVENUE AND SEGMENTAL INFORMATION
       
For the six months ended 30 June 2009


 

Sales of CBM gas 

Well Drilling 

 Pipelined gas distribution 

Gas station sales 

Gas filling equipment sales 

Elimination/ unallocated 

Consolidated 

 

 US$'000 

 US$'000 

 US$'000 

 US$'000 

 US$'000 

 US$'000 

 US$'000 

 

 unaudited 

 unaudited 

 unaudited 

 unaudited 

 unaudited 

 unaudited 

 unaudited 

Segment revenue

 

 

 

 

 

 

 

  Sale to external customers

75

 -  

14,383 

3,961 

291 

13 

18,723 

 Inter-segment 
sales

-  

3,687 

-

-

-

(3,687)

-  

 

75 

3,687 

14,383 

3,961 

291 

(3,674)

18,723 

 

 

 

 

 

 

 

 

Depreciation

936 

1,459 

92 

2,508 

 

 

 

 

 

 

 

 

Profit/(Loss) before taxation

(261)

(1,492)

638 

811 

(189)

(10,393)

(10,887)

 

 

 

 

 

 

 

 

Assets

650,519 

34,304 

55,550 

4,320 

1,063 

12,636 

758,392 

 

 

 

 

 

 

 

 

Liabilities

210,041 

10,674 

 12,825 

2,300 

722 

619 

237,181 


  

For the six months ended 30 June 2008

 

Sales of CBM gas 

Well Drilling 

 Pipelined gas distribution 

Gas station sales 

Gas filling equipment sales 

Elimination/ unallocated 

Consolidated 

 

 US$'000 

 US$'000 

 US$'000 

 US$'000 

 US$'000 

 US$'000 

 US$'000 

 

 unaudited 

 unaudited 

 unaudited 

 unaudited 

 unaudited 

 unaudited 

 unaudited 

Segment revenue

 

 

 

 

 

 

 

   Sale to external customers

7

 -  

2,372

-

-

-

2,379

  Inter-segment sales

-  

-

-

-

-

-

-

 

7

-

2,372

-

-

-

2,379

 

 

 

 

 


 

 

 Depreciation

24

42

-

-

4

78

 

 

 

 

 

 

 

 

 Profit/(Loss) before  
 taxation

(391)

(472)

(78)

-

-

(12,046)

(12,987)

 

 

 

 

 

 

 

 

Assets

647,248

14,622

57,283

-

-

30,353

749,506

 

 

 

 

 

 

 

 

Liabilities

191,174

1,219

12,847

-

-

48,568

253,808


For the year ended 31 December 2008

 

Sales of CBM gas 

Well Drilling 

 Pipelined gas distribution 

Gas station sales 

Gas filling equipment sales 

Elimination/ unallocated 

Consolidated 

 

 US$'000 

 US$'000 

 US$'000 

 US$'000 

 US$'000 

 US$'000 

 US$'000 

 

 audited 

 audited 

 audited 

 audited 

 audited 

 audited 

 audited 

Segment revenue

 

 

 

 

 

 

 

   Sale to external customers

33

 -  

19,188 

4,059

1,369

-

24,649

  Inter-segment sales

-  

2,856

-

-

-

(2,856)

-  

 

33 

2,856

19,188

4,059

1,369

(2,856)

24,649

 

 

 

 

 

 

 

 

Depreciation

44

477

1,816

78

43

153

2,611

 

 

 

 

 

 

 

 

Profit/(Loss) before taxation

(745)

(2,348)

1,136

(243)

241

(25,621)

(27,580)

 

 

 

 

 

 

 

 

Assets

658,916

28,813

54,438

3,379

1,577

11,854

758,977

 

 

 

 

 

 

 

 

Liabilities

200,039

14,101

9,242

1,032

1,035

13,790

239,239


The Group is principally engaged in exploration, development and production of coal bed methane in the PRC, which is regarded as one geographical segment.

  4  SHARE BASED PAYMENT EXPENSES

Share based payment expenses represented the fair value of the options at the date of grant charged to the income statement over the vesting period with a corresponding increase in the 'share based payment reserve' within equity. 


No share options were exercised during the 6 months ended 30 June 2009. No new share options were granted during the 6 months ended 30 June 2009.


5     FINANCE INCOME

Finance income for the period included a credit of change in fair value of derivative financial liability of US$1,500,000. (30 June 2008 - Nil, 31 December 2008 finance expenses of US$1,500,000).


6     TAX

Taxation for the Group's operations in the PRC is provided at the applicable current tax rate of 25% on the estimated assessable profits for the year. 


Pursuant to the PRC Corporate Income Tax Law passed by the Tenth National People's Congress on 16 March 2007, the Corporate Income Tax rates for almost all enterprises established in the PRC are subject to a unified rate of 25%.


7      LOSS PER SHARE

 

Six months

Six months

Year ended

 

ended 30

ended 30

31 December

 

June 2009

June 2008

2008

 

US$'000

US$'000

US$'000

 

unaudited

unaudited

audited

Numerator - earnings

 

 

 

Earnings for the purpose of

 

 

 

basic Loss per Share

(10,303)

(12,865)

(27,072)

 

 

 

 

Denominator - number of shares

 

 

 

Weighted average number of

 

 

 

  ordinary shares

107,616,285

95,682,512

100,781,021



Loss per share is based on the loss attributable to ordinary equity holders of the Company of divided by the weighted average of ordinary shares in issue during the corresponding period. 


Due to the loss arising during the periods the diluted loss per share is considered to be the same as the basic loss per share.


  8     DIVIDEND

       The directors do not recommend the payment of an interim dividend (2008: Nil).


9      PROPERTY, PLANT AND EQUIPMENT

 During the period, the Group incurred approximately US$586,000 on additions to plant and equipment (30 June 
 2008 - US$2,102,000, 31 December 2008 - US$13,486,000).

 

10    TRADE AND OTHER RECEIVABLES


 
 
As at
As at
As at
 
 
30 June 2009
30 June 2008
31 December 2008
 
 
US$'000
US$'000
US$'000
 
 
unaudited
unaudited
audited
Trade receivables
 
3,815
49
1,360
Other financial assets
 
-
6,371
-
Other current assets
 
1,775
1,360
1,836
 
 
5,590
7,780
3,196
 
11  TRADE AND OTHER PAYABLES

 
 
As at
As at
As at
 
 
30 June 2009
30 June 2008
31 December 2008
 
 
US$'000
US$'000
US$'000
 
 
unaudited
unaudited
audited
Trade payables
 
5,896
7,022
6,355
Other current liabilities
 
13,168
11,364
12,351
Amounts due to related parties
 
3,228
-
3,531
 
 
22,292
18,386
22,237
 
 

12   CONVERTIBLE NOTES

The company repaid the remaining outstanding principal and accrued interest of the US$50 million zero coupon convertible note due in 2009, in August 2009.


13   OTHER FINANCIAL LIABILITY

The amount payable represents amount payable to China United Coalbed Methane Co., Ltd., which is a party to the production sharing contracts, in relation to exploration costs incurred on the properties. These amounts are only payable from revenue on production from the Shizhuang South Property.

  

14   SHARE CAPITAL


 

Authorised

Issued and fully paid

 

Number

 

Number

 


of shares

US$

of shares

US$

At 1 January 2008

 

 

 

 

Ordinary shares of

 

 

 

 

  US$0.0001 each

500,000,000

50,000

50,000 94,513

9,451

Placement of 4,728,356

 

 

 

  new shares at

 

 

 

 

  US$7.98 each

 

 

 

 

  on 16 May 2008

-

-

4,728,356

473

At 30 June 2008

 

 

 

 

Ordinary shares of

 

 

 

 

  US$0.0001 each

500,000,000

50,000

99,241,769

9,924

Issue of new shares by

 

 

 

 

conversion of convertible

 

 

 

 

note on 2 July 2008

-

-

6,654,676

665

At 31 Dec 2008

 

 

 

 

Ordinary shares of

 

 

 

 

  US$0.0001 each

500,000,000

50,000

105,896,445

10,589

Right issue of 2,615,891 shares

 

 

 

 

  at US$3.68 on 4 March 2009

-

-

2,615,891

262

At 30 June 2009

500,000,000

50,000

108,512,336

10,851


  

15    EVENTS AFTER BALANCE SHEET DAY
       (
a)    Farm out agreement signed with ConocoPhillips

In August 2009, a farm out agreement was entered into between the Group's wholly owned subsidiary Greka Energy (International) BV ('Greka') and ConocoPhillips (NYSE:COP). Under the terms of the farm out agreement, ConocoPhillips will make an initial payment of $20 million to Greka and will also fund up to a total of $30 million of the capital expenditures. ConocoPhillips can elect to continue with a second phase of development and pay $120 million to acquire 50% of Greka's interest in three of its six Chinese Coal Bed Methane Production Sharing Contracts ('PSC'). Under the terms of the agreement, the accrued cost recovery and Greka costs carried by ConocoPhillips will be solely for the benefit of Greka. Greka will continue to be the operator of the blocks while ConocoPhillips will appoint personnel to the projects and enhance the PSC development scale and efficiency through their extensive CBM experience.


The joint venture entails several options. In the initial phase, which will expire by year end 2010, ConocoPhillips has made an initial payment of US$20 million to Greka towards costs incurred to date and will fund up to a total of US$30 million of the capital expenditures towards the development of surface-to-inseam wells at the Shizhuang South, Shizhuang North and Qinyuan PSCs. In the event that ConocoPhillips elects not to proceed with the farm-out, all funds invested by ConocoPhillips will accrue to the benefit Greka. Upon ConocoPhillips decision to continue with acquiring 50% of Greka's interest in the three PSCs, the agreement (which will require approval from the Chinese authorities) provides for further payments of up to US$120 million, including carrying Greka's obligations under the PSCs. In addition, ConocoPhillips has an option until mid-2011 to evaluate participating in the Company's midstream and downstream businesses.


      (b)      Repayment of US$50 million zero coupon convertible note due 2009
            The company repaid the remaining outstanding principal and accrued interest of the US$50 million zero
            coupon convertible note due in 2009, in August 2009.


16        RELATED PARTY TRANSACTIONS

     There were no related party transactions required to be disclosed. Transactions between the company and its 
     subsidiary undertakings, which are related parties, have been eliminated on consolidation and are not
     disclosed in this note.


17        CONTINGENT LIABILITIES

     The Group had no significant contingent liabilities as at 30 June 2009 (30 June 2008 - Nil, 31 December 2008 -
     Nil).



This information is provided by RNS
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