TIDMGDG
RNS Number : 2543R
Green Dragon Gas Ltd
20 September 2017
20 September 2017
GREEN DRAGON GAS LTD.
('Green Dragon', 'GDG' or the 'Company')
CNOOC Accelerates Green Dragon's Asset Development via
Supplementary Agreements
Green Dragon Gas Ltd. (LSE: GDG), one of the largest independent
companies involved in the production and sale of coal bed methane
(CBM) gas in China, is very pleased to announce that it has
finalised a Memorandum of Understanding on five Production Sharing
Contracts (PSC) and two Supplementary Agreements with China United
Coalbed Methane Corporation (CUCBM), a subsidiary of China National
Offshore Oil Corporation (CNOOC), for Shizhuang South (GSS) and
Shizhuang North (GSN) Blocks.
After eight years of administration, these agreements confirm
GDG and CUCBM are firmly aligned and committed to maximising the
value within the PSCs, with the prioritisation of gas sales being
progressed forthwith.
The conclusion of these agreements resolves any uncertainty
related to the historic drilling on the GSS and GSN Blocks with
GDG's interests in the 1,139 wells on the GSS Block and 188 wells
on the GSN Block drilled by CUCBM, at a confirmed direct investment
of US$459.89 million, now agreed.
Highlights
-- GSS Block, GDG reverts to its 70% interest in all 1,139
carried wells, while concurrently retaining its interest and
operatorship in the 200 non-carried wells
-- Completed independent audit for all the five PSC's on CUCBM's
work programme and wells for 2007-2014 period resulting in
US$941.01 million of cost recovery booked into the Joint Account.
CUCBM investment of US$623.88 million and GDG investment of
US$317.13 million, including:
n CUCBM confirmed direct investment of US$475.03 million and GDG
US$229.58 million
n Deemed Interest for CUCBM of US$107.56 million and GDG of
US$68.72 million, which will continue to accrue at 9% compound
interest and booked at year end until all cost is recovered
n Overhead amount for CUCBM is US$41.29 million and GDG US$18.84
million
-- CUCBM to invest US$100 million in GSN PSC by 30 March 2019,
GDG will be fully carried for CUCBM to earn its additional 10%
interest in the PSC resulting in an equal 50-50 participation
Mr. Randeep S. Grewal, Founder & Chairman of Green Dragon
Gas commented:
"We are very pleased with the amicable conclusion of these
Supplementary Agreements. This material milestone concludes eight
years of discussions and commences a committed close cooperation
between the parties to unlock the lucrative monetisation of the GSS
and GSN Blocks. The joint cooperation will now fully focus on gas
sales and achieving returns from the combined investment made by
CUCBM and GDG. It will be the first time in eight years that the
parties can focus on gas sales in the field rather than the
administration of the PSC's. We are pleased to have a similar close
cooperation with CUCBM as we do with CNPC on the GCZ Block.
"Furthermore, we expect to focus on concluding the GSS Zaoyuan
ODP prior to year-end with CNOOC for which we have the Project Code
from the government already in place. Upon such conclusion, the
Zaoyuan ODP will embark on the commercial gas sales in Area 3 and
Area 4. We expect to collectively conclude an additional ODP for
Area 5 in 2018, of which the process is well under way.
"GDG continues to conclude material objectives for the year.
With these agreements finalised, the balance sheet ambiguity has
been eliminated, as we prioritise monetisation across our vast
acreage. We are committed to keeping the market informed and will
provide an update on progress in the near term."
Memorandum of Understanding
1. GDG's standby cost of US$11.61 million incurred from 1
January 2010 to 30 June 2013 in five Blocks, namely Panxie East
(GPX), Fengcheng (GFC), Shizhuang South (GSS), Shizhuang North
(GSN) and Qinyuan (GQY), booked into the Joint Account
2. The overhead of GSN, GQY, GPX, and GFC prior to 14 April 2016
shall follow the regulation of the PSC. The overhead rate for GSS
shall be 10% from 1 January 2007 to 31 December 2013 and 5% from 1
January 2014 to 31 December 2016
3. GDG has an option to increase its participating interest in
the GSS Block from 60% to 70% by investing two installments of
US$6.5 million, one prior to 31 December 2017, and the second prior
to 31 December 2018. Increasing interest in the Block will
encompass CUCBM's legacy wells, which were drilled prior to 31 July
2014, following cost recovery
GSS Supplementary Agreement
1. The GSS PSC area of 388 km(2) is demarcated into five
sections with varying interests between parties, as follows:
i) Area 1: 149 km(2) - GDG to operate CS3 and CS15 exploration
area, 43 CUCBM wells to be transferred to GDG operatorship. GDG to
bring 20 wells to production in Area 1 at a cost of US$670,000
prior to 14 April 2019
ii) Area 2: 60 km(2) - GDG to operate CS 15 wells and CUCBM has
exclusivity in CS3
iii) Area 3: 20 km(2) - GDG to operate, while CUCBM to continue
to operate the legacy wells in commercial production and included
within Zaoyuan ODP
iv) Area 4: 30 km(2) - GDG to operate, in commercial production
and included within Zaoyuan ODP
v) Area 5: 128 km(2) - CUCBM to operate and complete
infrastructure for gas sales, complete ODP, and Joint Operating
Team on all non-legacy wells. GDG has the option to connect its
wells to CUCBM built infrastructure
2. Legacy wells investments to be recovered by both parties on
an accelerated basis. 90% of gross profit to be distributed to the
cost recovery instead of 70% as per PSC. Remaining 10% to be
distributed between the participating interest of 60% GDG and 40%
CUCBM
3. Parties to establish a Joint Gas Sales Agreement with cash
disbursements to each party within ten days of monthly revenue
receipts
GSN Supplementary Agreement
1. GSN PSC area of 324.9 km(2) (50 km(2) entrusted to a State Demonstration Project)
2. The exploration period extended to 14 April 2019. CUCBM, as
operator, is due to bring 10 wells to production at an exploration
expenditure of approximately US$2.4 million
3. Parties to establish a Joint Gas Sales Agreement with cash
disbursements to each party within ten days of monthly revenue
receipts
* Exchange rate used in conversion of RMB-USD is 6.50.
For further information on the Company and its activities,
please refer to the website at www.greendragongas.com or
contact:
FTI Consulting
Edward Westropp / Kim Camilleri / Elizabeth Burnham / Ntobeko
Chidavaenzi
Tel: +44 20 3727 1000
About Green Dragon Gas
Green Dragon Gas is a leading independent gas producer with
operations in China and is listed on the main market of the London
Stock Exchange (LSE: GDG). The Company has 559 Bcf of 2P reserves
and 2,386 Bcf of 3P reserves across eight production blocks
covering over 7,566 km(2) of license area in the Shanxi, Jiangxi,
Anhui and Guizhou provinces. It holds six Production Sharing
Agreements with strong, highly capitalised Chinese partners
including CUCBM (CNOOC), CNPC and PetroChina, and has
infrastructure in place to support multiple routes to monetise gas
production.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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