Green Dragon Gas (AIM: GDG LN) is a coal bed methane (“CBM”) exploration and production company with eight blocks on six production sharing contracts (“PSCs”) in China. With issues regarding title removed, GDG has direct equity interest in c.1870 wells (including 78 LiFaBriC). In addition to being the largest CBM independent in China, it has trucks, pipelines, and wholesale and retail distribution stations for compressed natural gas (“CNG”). We anticipate a step-change in cash flow and for LiFaBriC drilling to become a manufacturing process. We initiate coverage with a BUY recommendation and TP of 952p.
LiFaBriC wells become a manufacturing process. LiFaBriC methodology, an adaptation of traditional horizontal drilling methods, is mature, offers stable production with little decline, and the interference created by LiFaBriC wells is potentially able to aid de- watering and boost production from proximal vertical wells. All suitable wells are being systematically connected to infrastructure as they de-water. Close partnerships and secure title achieved, ambiguity eliminated. Firm agreements are now in place regarding title. GDG has settled its litigation matter with ConocoPhillips to the mutual satisfaction of both parties. The interests of partners PetroChina, CNPC, CNOOC and CUCBM are now aligned with GDG. The company is now looking to reserve-based lending (“RBL”) to progress a 150 LiFaBriC well drilling programme. GDG’s focus is the migration of its reserves towards 1P. In May 2014 Netherland, Sewell & Associates (“NSAI”) increased net 1P reserves by 113% to 126Bcf (59Bcf in 2012) and net 2P by 22% to 382Bcf (314Bcf in 2012). Move from AIM to LSE Main Market in October 2014. We believe this will enhance liquidity and the company’s profile, whilst potentially reducing share price volatility.
Imminent step-change in cash flow. Currently, GDG holds a 60% interest in producing block GSS (expected to increase to 70% in 2015) with a cost recovery preferential cash flow of 90%. As such, the company will recognise 96% (90% cost recovery plus 60% of the remaining 10%) of revenues arising from production until all historical capex is repaid in full. Given the significant capex spend projected (150 new wells on GSS at an estimated cost of c.US$225m) the 96% preferential cash flows will have a significant impact on GDG’s 2015 financials and beyond. The 2014 Interim results showed encouraging revenue from block GCZ. Net sales of CBM amounted to 2.8Bcf, of which 2.06Bcf was attributable to GCZ and revenue of US$8.4m was recognised.
This has loads to go yet ! Just the start of a run towards £10.00
With only two weeks to go before the move to the main board £££
Investor Chronicle ranked Green Dragon Gas as one of the 20 Best Performer’s Stock in the last 12 months
Suspended today!!
GDG is scheduled to cease trading on AIM and begin trading on the Main Market of the London Stock Exchange on, or around, 27 October 2014. No new Ordinary Shares will be issued. This is a natural upward migration, following a period of corporate and operational development. It will invariably lead to the attraction of a wider pool of investors. On listing on the Main Market. GDG will potentially benefit from greater liquidity and lower share price volatility.
Imminent step-change in cash flow. Currently, GDG holds a 60% interest in producing block GSS (expected to increase to 70% in 2015) with a cost recovery preferential cash flow of 90%. As such, the company will recognise 96% (90% cost recovery plus 60% of the remaining 10%) of revenues arising from production until all historical capex is repaid in full. Given the significant capex spend projected (150 new wells on GSS at an estimated cost of c.US$225m) the 96% preferential cash flows will have a significant impact on GDG’s 2015 financials and beyond. The 2014 Interim results showed encouraging revenue from block GCZ. Net sales of CBM amounted to 2.8Bcf, of which 2.06Bcf was attributable to GCZ and revenue of US$8.4m was recognised. LiFaBriC wells become a manufacturing process. LiFaBriC methodology, an adaptation of traditional horizontal drilling methods, is mature, offers stable production with little decline, and the interference created by LiFaBriC wells is potentially able to aid de-watering and boost production from proximal vertical wells. All suitable wells are being systematically connected to infrastructure as they de-water. Close partnerships and secure title achieved, ambiguity eliminated. Firm agreements are now in place regarding title. GDG has settled its litigation matter with ConocoPhillips to the mutual satisfaction of both parties. The interests of partners PetroChina, CNPC, CNOOC and CUCBM are now aligned with GDG. The company is now looking to reserve-based lending (“RBL”) to progress a 150 LiFaBriC well drilling programme. GDG’s focus is the migration of its reserves towards 1P. In May 2014 Netherland, Sewell & Associates (“NSAI”) increased net 1P reserves by 113% to 126Bcf (59Bcf in 2012) and net 2P by 22% to 382Bcf (314Bcf in 2012). Move from AIM to LSE Main Market in October 2014. We believe this will enhance liquidity and the company’s profile, whilst potentially reducing share price volatility.
Green Dragon Gas (AIM: GDG LN) is a coal bed methane (“CBM”) exploration and production company with eight blocks on six production sharing contracts (“PSCs”) in China. With issues regarding title removed, GDG has direct equity interest in c.1870 wells (including 78 LiFaBriC). In addition to being the largest CBM independent in China, it has trucks, pipelines, and wholesale and retail distribution stations for compressed natural gas (“CNG”). We anticipate a step-change in cash flow and for LiFaBriC drilling to become a manufacturing process. We initiate coverage with a BUY recommendation and TP of 952p.
This is going to fly in the coming weeks !
Great buying opportunity to be had at the moment prior to main board listing.
At least they are not loosing as much cash now which is a positive.
I think that's what is going to happen. The PR machine is getting ready to churn out some great updates leading up to the main board listing. Looking forward to an interesting last quarter.
This will be great in the coming months and years
Why do you think they are short of cash ?
All coming together nicely for next month IMO
Cleaning the dirt off ready for the move !
Thinking that given all that's gone on in the past couple of years there is a great relaunch opportunity when moving to the main board next month. Should be exciting times at last !
Not clear