Proactive Investors - Run By Investors For Investors

Green Dragon hails asset quality as reserves rise again

At the end of 2015 estimated 1P or proved reserves, were 173Bcf, a 17% rise

-- adds comment, share price --

China-focused gas group Green Dragon (LON:GDG) has increased its two highest categories of commercially recoverable reserves for a tenth year running.

At the end of 2015 estimated 1P or proved reserves, were 173bn cubic feet (Bcf), a 17% rise,  while 2P reserves (proved and probable) jumped 29% to 549 Bcf.

3P, which includes possible reserves, rose 4% to 2,379 Bcf. Across of its blocks Green Dragon has total gas in place of 25.6 trillion cubic feet.

Randeep Grewal, chairman, said the consistency of this reserves migration highlighted the world class nature of the acreage held by Green Dragon. Consultant Netherland Sewell and Associates (NSAI) carried out the assessment.

While the amounts rose, the value of the reserves dipped slightly due to the decline in the value of the Chinese renminbi and a reduction in capital expenditure plans.

Using a 10% discount, their estimated value is now US$1.22bn (US$1.46bn) for the 1P category, US$4bn (US$4.3bn) for the 2P category and US$16.2bn (US$21.2bn) for the 3P category.

Development spending for the 1P, 2P and 3P prospects has been reduced by 32%, 20% and 12% respectively.

The company added it now has 1P reserves in three blocks: Chengzhuang (GCZ); Shizhuang South (GSS) and Shizhuang North (GSN) and 2P reserves in another, Fengcheng (GFC).

"I am particularly pleased that the reported 1P progression for 2015 includes the migration of initial reserve volumes for Coal Seam 15 (CS15) on both the GSS and GCZ blocks where, together with our partners, we have made significant investment in infrastructure in recent years, " Grewal said.

“The migration to 1P on CS15 in these blocks represents a significant step forward in demonstrating the prospective potential of this coal seam.

“CS15 is present within our four Shanxi blocks, namely GCZ, GSS, GSN and GQY.

"In addition to the success on CS15, the notable pace of reserve migration on GSN - following the 2014 sale of a 10% interest to CNOOC in return for a USD $200 million carry - clearly demonstrates the value proposition across our acreage in China."

NSAI’s report included all 2,037 wells operated by Green Dragon, CNOOC and PetroChina across all seven blocks in which the company has varying equity interests.

Prices at year-end used in the reserves evaluation were USD $11.5/Mcf at the production block, inclusive of government subsidies.

Grewal added: “2016 will be the best year financially Green Dragon has ever had".

“This is just the beginning of the hockey stick we can now see going forward.”

Green Dragon is bright spot in a dark commodity cycle, he said, explaining that China has been consistent in ensuring gas prices are passed through to the domestic producers.

“If did not drill another well our production, revenue, cashflow, EBITDA, would consistently compound based on the wells we have already.”

Shares rose 1.3% to 270p.

View full G3E profile View Profile

G3 Exploration Limited Timeline

Related Articles

Offshore oil operations
April 03 2018
United is growing its oil and gas business through relatively low-risk assets in Europe, meanwhile, big-bang exploration offshore Jamaica could prove to be a game changer
April 16 2018
"Our annual independent updated reserves report reinforces the potential of our quality and well positioned asset base in China,” said chairman Randeep Grewal
Pulse Oil President Drew Cadenhead and Pulse Oil CEO Garth Johnson
May 08 2018
Investors see future windfall as the firm employs modern oil recovery methods to try to unlock oil trapped in two Nisku reefs in Bigoray.

No investment advice

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable or advisable for any specific person. You further understand that none of the information providers or their affiliates will advise you personally concerning the nature, potential, advisability, value or suitability of any particular security, portfolio of securities, transaction, investment strategy, or other matter.

You understand that the Site may contain opinions from time to time with regard to securities mentioned in other products, including company related products, and that those opinions may be different from those obtained by using another product related to the Company. You understand and agree that contributors may write about securities in which they or their firms have a position, and that they may trade such securities for their own account. In cases where the position is held at the time of publication and such position is known to the Company, appropriate disclosure is made. However, you understand and agree that at the time of any transaction that you make, one or more contributors may have a position in the securities written about. You understand that price and other data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that neither such data nor such calculations are guaranteed by these sources, the Company, the information providers or any other person or entity, and may not be complete or accurate.

From time to time, reference may be made in our marketing materials to prior articles and opinions we have published. These references may be selective, may reference only a portion of an article or recommendation, and are likely not to be current. As markets change continuously, previously published information and data may not be current and should not be relied upon.

© Proactive Investors 2018

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use