29th May 2007 07:02
Green Dragon Gas Ltd29 May 2007 For Immediate Release 29 May 2007 GREEN DRAGON GAS LTD. ("Green Dragon" or "the Company") Announcement of Financial Results for the period ended 31 December 2006. Green Dragon Gas Ltd (AIM:GDG), the Chinese coal bed methane business, todayannounces its annual financial results for the period ended 31 December 2006. YEAR 2006 HIGHLIGHTS •Successful listing. The Company listed on AIM in August 2006, to become, at the time of listing, the largest Chinese business listed on AIM by market capitalization. •Record wells drilled. 47 wells were successfully drilled on the Company's acreage through the target coal seams. The Company and its joint venture partner deployed 25 rigs at the peak of the drilling operation to drill the wells across all its blocks, providing a well diversified resource growth. •Resource growth and validation. Netherland Sewell & Associates, a highly regarded industry specialist, estimated the Gas In Place to be 18 trillion cubic feet (tcf) with Proven + Probable + Possible (3P) reserves net to Green Dragon of 2 tcf having a PV10 value of US$4.7 billion. •Overall Development Plan (ODP). The Company cooperated with its joint venture partner CUCBM and PetroChina subsidiary CPPEI to develop one of China's first Coal Bed Methane (CBM) ODPs which, upon governmental approval, will initiate the large-scale development and production phase of the Shizhuang South PSC. YEAR 2007 OBJECTIVES •Resource progression to 1P, 2P & 3P. Commenced pilot testing of the gas resource for the wells drilled during 2006. Enhance resources by implementing the planned drilling of up to 80 wells to complement the accomplishments in 2006. •Overall Development Plan Approval. The Company plans to attain ODP approval for Shizhuang South from the pertinent authorities, to facilitate commercial development of its most advanced block. The ODP approval would also start the cost recovery period. •Gas Sales. The Company aims to start gas sales from Shizhuang South pilot development wells and begin its revenue stream. Continue empahasis on attaining an open market price for its gas as the Chinese domestic gas market continues to evolve. •Second Overall Development Plan. The Company plans to develop the ODP for the Fengcheng block. This ODP will accommodate the active coal mining activities planned by several coal companies in the future and establish a cooperative path towards the resources. •Financing Growth. The Company's discretionary growth plan will require us to evaluate financing alternatives in 2007 in the form of secured debt, structured debt and/or equity. Evaluate several options available to the Company, implement a capital raising in the latter half of the year. Commenting on the results, Randeep Grewal, Chairman of Green Dragon Gas, said: "I am delighted with Green Dragon's progress this year- we have commenced anaggressive growth strategy that we expect to maintain for several years to come.Diligent hard work by our employees in the field has yielded successful drillingresults which have been reviewed and analyzed independently by industryspecialist Netherland Sewell & Associates.. This successful execution resulted in a significant increase in the resourcescertification and related valuation since the previous report a year ago, andvalidated our views of the Company's potential. These results provideconfirmation of a solid world class resource as our foundation and provide apath towards commercially to achieve Green Profits from our strategic businessplan." For further information on the Company and its activities, please refer to thewebsite at www.greendragongas.com or contact: Randeep GrewalChairman and Chief Executive, Green Dragon Gas Ltd.+852 3710 0168 Tim Thompson/ Nick Melson/ Susanna GaleBuchanan Communications+ 44 (0)20 7466 5000 Dr Azhic Basirov/ David JonesSmith & Williamson Corporate Finance Limited+44 (0)20 7131 4000 Chairman's Statement It is my pleasure to present Green Dragon Gas's maiden set of results sincelisting on AIM in August 2006. Green Dragon Gas, headquartered in Hong Kong, wasincorporated in March 2006 as a parent holding company of Grecogas Ltd, renamedto "Greka China Ltd" ("Greka") on 9 January 2007, which has pioneered the CoalBed Methane (CBM) industry in China since 1997. The listing of Green Dragonmarked an important milestone in the Company's vision to capitalize on itsdecade long niche experience and execute a growth driven business strategy tobecome an integrated green gas supplier in China based on its vast clean energyresource - CBM. Greka executed its first Production Sharing Contract (PSC) in 1999 alongsidefour other major energy companies namely, Texaco, Phillips, Arco and Enron.While each of these companies either merged or dissolved and their interestswere likewise reduced, transferred, modified or liquidated, Greka is the onlycompany that has consistently been investing, participating and understandingthe CBM potential in China from the outset. In recent years, the Chinese need for clean energy has seen several companiessigning new PSCs with the objective of participating in this growth drivenmarket. The abundance of these recent additions validates and confirms thegrowth potential of this niche industry and concurrently helps expand thevendors and service industry options available to the Group. However, the lackof experience, both in the industry and the Chinese market itself, of someparticipants may result in some short term setbacks due to unrealisticexpectations from this developing market. Unlike the recent entrants, Green Dragon has been a consistent, continuous andmethodical developer of the significant resource base in China. The optimalvalues of its clean gas interests requires the Company to consider an executionstrategy that can be successfully implemented with compounding returns over thePSC term of thirty years which pays attention to the traditions in China.Management has spent considerable time in developing a growth driven businessstrategy unique to Green Dragon that capitalizes on the experience of itsmanagement, employees and Board, all of whom are either Chinese or have a strongbackground in China. The year 2006 was an important milestone in the Company's progression. Itsexploration activities and resulting resource confirmations, through asuccessful drilling program, were validated through a Competent Persons Report(CPR) prepared by Netherland Sewell & Associates, Inc. (NSAI). The resourcevalidation in the CPR is probably the most relevant and important milestone forGreen Dragon as it continues its path to gas production and commerciality, as itendorses the Company's strategic growth plan. In the process of updating theCPR, published with the AIM listing last year by Scott Pickford, and analyzingthe successful drilling program and continued gas price increases, NSAI hascalculated a gas-in-place ("GIP") of 18 TCF for Green Dragon's blocks. This GIPplaces Green Dragon as one of the largest independent gas resource holders inChina. GREEN DRAGON GAS'S PATH TO GREEN PROFITS The business strategy of Green Dragon is to provide its shareholders compoundingreturns while concurrently enhancing the environment through a five pointbusiness plan: 1) Extract pure methane from coal - degassing coals for safer mining 2) Utilize extracted methane for operations - reduce diesel and coal consumption 3) Sell produced methane for power, heat, fuel - reduce emissions from industry 4) Sell methane as Compressed Natural Gas (CNG) fuel - reduce emissions from transportation 5) Carbon Dioxide sequestration - reduce CO2 emissions from coal mines At this stage in the Company's development, the Board does not believe it iscommercially viable to recommend the commencement of dividend payments. COMPETENT PERSONS REPORT SUMMARY Block Shizhuang Shizhuang Qinyuan Fengcheng Panxie TOTAL South North East GIP (BCF) 2,949 2,772 7,397 3,851 1,147 18,116 1P Net BCF 16.3 0 0 0 0 16 PV10 52.8 0 0 0 0 US$53MM2P Net BCF 205.2 0 0 28 0 233 PV10 571.8 0 0 105.6 0 US$677MM3P Net BCF 900.7 755.3 0 250.3 0 1,906 PV10 2,155.9 1,731.5 0 674.9 0 US$4,562MM Prospective Low Estimate 0 0 87.8 122.9 0 211 Best Estimate 0 0 1,084.5 225.9 0 1,310 High Estimate 0 0 2,562.1 873.7 472.1 3,908 Area km2 455 375 3,665 1,541 58 6,620 km2 A world class asset and a well thought out business strategy must becomplemented by the most important intangible asset - employees. Green Dragon isfortunate to have some of the hardest working employees committed to the longterm success of the Company. As the Chairman and shareholder, I would like tothank the employees' loyalty, hard work and commitment which are the cornerstoneto the Company's success to date and the foundation for growth in the yearsahead. The employees' commitment and a well-seasoned and experienced Boardideally position the Company for sustainable growth in 2007 and years beyond We have a focused objective in 2007 with a clear strategy. The employees,management and the Board are eager to continue the progression from explorationto development and look forward to the years of production and commerciality. Randeep S.GrewalChairman and Chief Executive28 May 2007 Consolidated Income Statement for the period ended 31 December 2006 Period from 28 March 2006 to 31 December, 2006 US$000 Revenue 1Cost of sales (1) ---------Gross profit - Administrative expenses Initial public offering costs (2,519)Administrative expenses (1,811)Foreign exchange gain 392 -------Total administrative expenses (3,938) ---------Loss from operations ( 3,938) Finance income 392Finance costs (671) ---------Loss before taxation (4,217) Tax expense 112 ---------Loss for the period attributable to equity holders of theparent (4,105) ---------Loss per shareBasic and diluted ($) (0.045) --------- All activities relate to continuing activities. Consolidated Balance Sheet As At 31 December 2006 2006 US$000AssetsNon-current assetsProperty, plant and equipment 83Gas exploration and appraisal assets 592,365Deferred tax assets 296 ---------Total non-current assets 592,744 ---------Current assetsTrade and other receivables 1,686Cash and cash equivalents 19,031 ---------Total current assets 20,717 ---------Total Assets 613,461 Liabilities Current liabilitiesTrade and other payables 3,986 Total current liabilities 3,986 ---------Non-current liabilitiesLoan notes payable 19,875Deferred tax liability 139,225Other financial liabilities 13,779 ---------Total non-current liabilities 172,879 ---------Total liabilities 176,865 ---------NET ASSETS 436,596 --------- Capital and reserves attributable to equity holders of thecompanyShare capital 9Share premium 440,737Foreign exchange reserve (45)Retained earnings (4,105) ---------TOTAL EQUITY 436,596 --------- Consolidated Cash Flow Statement for the period ended 31 December 2006 Period from 28 March 2006 to 31 December 2006 US$000Operating activitiesNet loss from ordinary activities (4,105)Adjustments for:Finance costs 671Finance income (392)Share issue costs 2,519Foreign exchange gain (392)Tax credit (112) ---------Operating loss before changes in working capital andprovisions (1,811) Increase in trade and other receivables (1,432)Increase in payables 315 ---------Cash generated from operations (2,928) Tax refund received 3 ---------Net cash generated by operating activities (2,925) ---------Investing activitiesPayment for purchase of fixed assets (83)Payments for exploration activities (1,547)Cash held in subsidiary companies at the date ofacquisition (See note 22) 130Interest received 392 --------- (1,108) ---------Financing activitiesProceeds from the issue of share capital 25,094Share issue costs (2,645)Proceeds from loan notes 615 --------- 23,064 ---------Increase in cash and cash equivalents 19,031Cash and cash equivalents at 28 March 2006 - ---------Cash and cash equivalents at 31 December 2006 19,031 --------- Notes forming part of the financial statements for the period ended 31 December2006 1. Basis of presentation Green Dragon Gas Ltd (the "Company") is a company incorporated in Cayman Island.These financial statements have been prepared under the historical costconvention and in accordance with International Financial Reporting Standards(IFRSs and IFRIC interpretations) issued by the International AccountingStandards Board (IASB). The consolidated financial statements have been preparedunder the historical cost convention. 2. Publication of non-statutory accounts The consolidated balance sheet as at 3l December 2006 and the consolidatedprofit and loss account and consolidated cash flow statement for the period thenended have been extracted from the group's 2006 statutory financial statementsupon which the auditor's opinion is unqualified. 3. Copies of announcement The Company's Annual Report and copies of this announcement will be available onthe Company's website at www.greendragongas.com and from the offices of theCompany's nominated adiviser, Smith & Williamson Corporate Finance Limited at 25Moorgate, London, EC2R 6AY, United Kingdom. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
G3 Exploration