green dragon gas5 Sep 2016 15:47
Green Dragon Gas Ltd. (LSE: GDG), one of the largest independent companies involved in the production and sale of Coalbed Methane ('CBM') gas in China, announces that the Company is in discussions with Nordic Trustee ASA (the "Bond Trustee"), which acts as trustee for the holders (the "Bondholders") of the $88 million senior secured bonds (the "Bonds") issued by Green Dragon Gas Limited and certain key bondholders regarding a request for certain waivers of its financial covenants.
As disclosed in the Company's Financial Statements for the year ended 31 December 2015, the Financial Statements do not include the Group's share of the China National Offshore Oil Corporation ("CNOOC") operated Shizhuang North Block ("GSN") transactions or operated Shizhuang South Block ("GSS") 1,388 wells' revenue, associated costs, resulting margins and EBITDA.
During 2015 CNOOC commissioned two additional gas gathering and sales stations in GSS for a distribution capacity of 22.7 bcf per annum. The sales revenues and volumes associated with the CNOOC operated areas of GSS and GSN, for the period ending 31 December 2015, are currently being audited by independent auditors and will be reported in due course. The audit will cover the sales revenue since inception of the sales (2009-2015), from all the wells operated by CNOOC in the areas under the Framework Agreement between CNOOC and Green Dragon, and the Company will record its share of revenue, costs, resulting margins, and the resulting cash flow. Finally, such revenues and resulting EBITDA were included within the calculations of the covenants on the issue of the Bonds and thus covenant compliance can only be measured under the same principle at each relevant reporting date. Even though the Company, CNOOC and the independent auditor are actively in dialogue to complete the audit, such completion is not wholly within the control of the Company.
The Compliance Certificate related to the year ended 31 December 2015 and provided to the Bond Trustee confirmed that the covenants in the Bond Agreement had been satisfied with the exception of the Interest Coverage Ratio and Leverage Ratio. All payments under the Bond Agreement are current and expected to be so through to maturity.
The first-time audit of the CNOOC sales revenues and volumes is ongoing with the focus being the underlying allocation of production across the different areas of the block and underlying the associated revenue calculation and allocations. A similar allocation exercise informs the allocation of operating costs between and among the areas. The delineation of the GSS block into five areas, with different cost recovery accounts, complicates this allocation process.
In order to allow the Company to resolve completion of the CNOOC audit so that it will be able to give a final and conclusive statement of its results for the year to 31 December 2015, and deliver to the Bond