Operations Update

RNS Number : 0999Y

Green Dragon Gas Ltd

21 January 2014

 



21 January 2014

GREEN DRAGON GAS LTD

("Green Dragon" or the "Company")

Operations Update

Annual Gross Production exceeds 7 Bcf, a 304% increase

Green Dragon Gas Ltd. (AIM:GDG), one of the largest independent companies involved in the production and sale of CBM gas in China, is pleased to announce an operations update, following the end of the Fourth Quarter. Green Dragon is a focused upstream (E&P) company, concentrating on its core asset value proposition over six blocks, one in production and five in exploration.

Upstream

·    Total gas production for 2013 (including partially reviewed third party activities) was 7.19 Bcf (0.23 Billion cubic meters), a 304% yoy increase (1.78 Bcf for 2012).

·    Standalone (excluding third party drilled acreage) annualised year end production of 2.9 Bcfpy (227,271 cubic meters/day), representing an 11% increase. 

·    Standalone gas production in Q4 2013 was 722 MMcf (20.4 million cubic meters), representing a 1.5% increase on Q3 2013 (711MMcf /20.1 million cubic meters) and a 42.6% yoy increase over Q4 2012 of 506 MMcf (14.3 million cubic meters).

·    Reviewed production from wells drilled by some of the third parties on the Company's PSC acreage to date exceeds 4.40 Bcf (124.98 million cubic meters) for 2013.  The Company expects to conclude the related net economic benefits from such reviewed acreage within the first quarter of 2014.  

·    As at the end of 2013, the total number of wells consists of:

·      71 LiFaBriC wells across all blocks, a 14.5% yoy increase (62 LiFaBriC wells as of 31 Dec 2012);

·      235 total wells across all blocks inclusive of wells at GCZ (Chengzhuang, included within Shizhuang South PSC) that have been reviewed by the Company; and

·      Approximately 1300  wells pending  review.

·    Of the total number of standalone LiFaBriC wells, 57are at GSS (Shizhuang South). 15 of these are currently in full production and connected to infrastructure, 19 are producing gas but not connected to off take infrastructure and the remainder are either with casing pressure or dewatering ahead of starting production.

·    As planned, a financial audit of the activity undertaken by some of third parties on the Company's licences has commenced. Green Dragon remains in dialogue with the other third parties in order to gain the complete technical and operational data needed to conduct the audit across all of its PSC acreages in full.  

Downstream

·    Total sales for 2013 was 1.53 Bcf (43.56 million cubic meters), a 71.1% yoy increase (898 MMcf / 25.45 million cubic meters for 2012).

·    PNG sales for 2013 amounted to 715MMcf (20.25million cubic meters). Sales of PNG commenced on October 2012. All PNG is from the GSS Block. 

·    CNG sales for the year direct to industrial customers were 282 MMcf(7.99 million cubic meters), a 32.8% yoy decrease (419 MMcf / 11.89 million cubic meters for 2012) over 2012. This was as a result of disruption to road infrastructure at GSS, which impacted the ability to distribute gas to industrial customers. The gas was distributed through PNG. Of the gas sold direct to industrial customers:

o 87% came from GSS production (245 MMcf / 6.94 million cubic meters); and

o 13% came from external parties purchases (37 MMcf / 1.05 million cubic meters).

·    Greka CNG retail stations sales in 2013 of 540 MMcf (15.3 million cubic meters), a 65.2% yoy increase (2012: 327 MMcf / 9.26 million cubic meters). Of this:

o 14.3% came from GSS production block (77 MMcf / 2.19 million cubic meters); and

o 85.7% came from external parties purchases (463 MMcf / 13.11.1 million cubic meters).

·    Greka CNG station sales in Q4 2013 were 152 MMcf (4.32 million cubic meters), a 13% increase on Q3 2013 (134MMcf / 3.82 million cubic meters), a 44.4% yoy increase on Q4 2012 (105MMcf / 2.99 million cubic meters).

·    67.5% of the gas sold by the Company's distribution arm comes from the GSS block, with the remaining 32.5% being acquired from external parties. Gas is acquired from third parties in order to meet the increasing demand. 

·    Of the total gas produced by the Company, 37.3% is sold and the remainder is currently either being sold to Greka Engineering & Technology Ltd. to generate electricity or being temporarily flared (where wells are not tied in). The gas production figures provided above represent total production from all wells drilled, including those wells tied in and contributing to sales volumes and those in the process of being tied in to distribution infrastructure. 

·    All gas sold by the third parties reviewed to date, is sold via PNG.

Randeep S. Grewal, Chairman and Founder of Green Dragon, commented:

"Green Dragon continues to go from strength to strength. We saw overall production grow dramatically during 2013 and far exceeded our initial estimates. With the discovery of drilling and the sale of gas by third parties on our acreage, we elected to hold investment in organic growth to minimums required under the PSC's. We have now recommenced investment in our organic growth and remain confident of achieving our target exit rate for this year of 18Bcf, with corresponding growth in annual production as wells currently drilled are tied into infrastructure and new wells drilled add to gross production.

During the closing days of the quarter, we successfully raised US$35m through a convertible bond, issued to GIC Private Limited, the Government of Singapore sovereign wealth fund. This enabled us to launch the 2014 drilling programme while concurrently concluding the ongoing discussions with third parties over funds owed from the sale of gas off our acreage. The timing of the conclusion of these discussions and collection of monies owed will influence the Company's decisions as to its capital needs and the optimum structure for such a requirement. We note that CBM companies producing less gas and with lesser audited reserves in China have reserve based loans in place which could also be a viable option for us.

Although we are yet to be provided with complete information relating to activities on the Company's PSC acreage, based on what has been reviewed  to date, we expect receivables associated with third party gas sales  activities to significantly contribute to full year results as well as impact future  year forecasts". 

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

Stephen Hill, VP Corporate Communications Green Dragon Gas	[phone]
Dr Azhic Basirov / David Jones Smith & Williamson - Nominated Adviser & Broker	[phone]
Steve Baldwin / Nicholas Harland Macquarie Capital (Europe) Limited - Broker	[phone]
Richard Crichton / Andy Crossley Peel Hunt - Broker	[phone]
James Henderson / Phillip Dennis Pelham Bell Pottinger - Investor Relations	[phone]

 

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