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Green Dragon Gas - Capital Network: Upgrades in Reserves Estimates

Published: 15:57 27 Feb 2017 GMT

On 27 February 2017, Green Dragon Gas (GDG.LON) published reserves estimates as at 31 December 2016 up vs. 2015, representing the 11th consecutive increase in both 1P and 2P reserves. Updated NPV10 values also show an increase y-o-y. We keep our earnings estimates unchanged as a result whilst our risked valuation changes only marginally, up to 226p from 215p previously, after including the 2P reserves of the GGZ licence.

Executive summary

We forecast increasing gas sales from $32.7m in 2015 to$40.1m in 2018, a 7% CAGR, with CBM sales increasing from $15.1m to $29.1m respectively, a 24% CAGR, on the back of our estimates of production increases. We forecast the resulting Free cash flow to increase from $-24.9m in 2015 and $1.1m achieved in 1H16, to $8.1m in 2018 (Figure 2).

However, cash reserves continue to decline due to financing costs. We estimate that covering financing costs would require an additional production of c.3BCF p.a. based on our estimate of operating cash flow contribution in 2016.

What's in the report?

Financial results and forecasts
Growth drivers
Management
Market conditions
Milestones & inflection points
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