G3 Exploration Regulatory News (G3E)

11 Jul 2008 10:18



11 July 2008

GREEN DRAGON GAS LTD.

("Green Dragon" or the "Company")

Acquisition of Pacific Asia China Energy Inc Completed

Green Dragon Gas Ltd. (AIM: GDG), the Chinese coal bed methane business, is pleased to announce that it has completed the previously announced acquisition of Pacific Asia China Energy Inc. (TSX: PCE) ("Pace") on 10 July, 2008. 

The British Columbia Supreme Court has issued a final order approving the plan of arrangement under section 288 of the British Corporations Act (British Columbia) under which the Company, through its wholly-owned direct subsidiary, Greka China Ltd., acquired all of Pace's outstanding shares at a price of CDN$0.35 per share (the "Transaction"). The total value of the Transaction is approximately CDN $32.4 million and was paid in cash and in full to the Pace shareholders at closing yesterday.

Pace brings to the Company an additional Production Sharing Contract ("PSC") covering a 946 sq km block with an estimated "most likely case" of 5.2 TCF of discovered coal bed methane (CBM) in place (Sproule International of Calgary (2005)) in Guizhou province with CUCBM. A 3-well, vertical pilot program was completed in late 2007 near the Zhongyi village, located in the south-west part of the Guizhou project area. In early 2008, two seams were successfully fractured, resulting in an immediate flow of gas to surface. The total coal thickness in the two seams ranges from 8.5 to 13.0 metres.

Additionally, Pace has a 50 per cent interest in a joint venture drilling service company with exclusive rights to utilize Mitchell Drilling's (www.mitchelldrilling.com) Dymaxion horizontal drilling technology in China for de-gassing coal mines and exploiting CBM. Mitchell Drilling is one of Australia's established CBM drilling contractors with a specialization in horizontal drilling.

Additionally, the Pace-Mitchell joint venture adds two rigs to the fleet of five ordered by Greka Technical Services. All seven rigs were manufactured by Schramm, providing common standard and equipment within all the rigs while enhancing the capability to drill horizontal wells. 

Randeep Grewal, Chairman and CEO of Green Dragon commented; "The completion of this timely acquisition provides the Company with two specialized CBM drilling rigs, the rights to the Dymaxion® drilling surface-to-inseam technique and an additional CBM block. This acquisition is especially pleasing as the first successful Dymaxion® well drilled on Greka's Shizuang South block by Mitchell Drilling is performing better than we expected."

"The acquisition further provides us with a complementary set of assets to the Company's current operations. The additional 946 sq km CBM block in Guizhou confirms the Company's strategy to focus on inner provinces versus the coastal regions where liquefied natural gas could be viable. Our view is that compressed natural gas will be the preferred fuel source for these inner provinces and liquefied natural gas for coastal provinces as an alternative to high cost petrol. Furthermore, this acquisition increases our PSC acreage to 7,566 sq km making Green Dragon the largest foreign CBM operator in China and potentially over 23 TCF (trillion cubic feet) of gas in place." Mr Grewal added.

For further information on the Company and its activities, please refer to the website at www.greendragongas.com or contact: