Last checked at 26 Feb 2019 07:00
26 February 2019
G3 EXPLORATION LTD.
("G3 Exploration", "G3E" or the "Company")
Dividend in Specie Declaration and Asset Sale Update
G3 Exploration Ltd. (LSE: G3E), an independent specialist in the exploration and development of coal bed methane gas (CBM) with roots in China and a focus on international expansion, confirms details of a Dividend in Specie for the production assets and provides an update on the sale process for those assets.
Dividend in Specie
G3 Exploration shareholders on the register as of the effective date 29 March 2019 will receive a direct interest in Green Dragon Gas ("GDG"), the Company's 100% owned subsidiary which holds its producing assets. The Dividend in Specie will represent 100% of the commercial producing assets and G3 Exploration will retain all its exploration and development assets.
The structure will enable qualifying G3E shareholders to potentially benefit from the free cash flow generated by the producing assets whether via a trade sale or an IPO and separate listing.
All G3E shareholders on the effective date shall receive a GDG share deposited into their crest account holding the G3E shares. Such GDG dividend shall be deposited on or before 28 June, 2019. The dividend on deposit day could be either in the form of cash or shares in GDG, depending on whether any of the producing assets have been monetized by that date.
Monetization of Production Assets
As announced on 30 January, the Company has engaged Citigroup and Credit Suisse to explore possible monetization options for GDG. Through discussions with various parties over recent months it became clear to management that trade sales may provide a better monetization event for shareholders than an IPO and as a result, the Board directed that this option be assessed prior to proceeding with the planned listing of GDG on the Hong Kong Stock Exchange.
As such, sales processes for the producing assets are underway with discussions for the sale of Block GCZ with bids expected from a number of interested parties in March. GCZ has a 1P NPV10 of $72 million and a 2P NPV10 of US$157 million as of yearend 2018. The block has an approved Overall Development Plan in current execution with partner CNPC-PetroChina which is expected to deliver gas sales of 6.35 bcf per year upon completion in 2020.
A separate sales process is also underway for the larger Block GSS which has a 1P NPV10 of US$ 580 million and a 2P NPV10 of US$1.6 billion as of yearend 2018.
In the event that the sales processes do not result in the exit of both producing assets, an IPO on the Hong Kong Stock Exchange for those assets will be commissioned.
Use of Proceeds
The flow of funds from any GDG asset sales will first pay down the c.US$270m debt owed to G3E and thereafter to the shareholders via the Dividend in Specie. G3E shall in turn first use c.US$150m of those receipts to settle its outstanding debt, including to its Nordic Bond holders and Convertible Bond holders.
The c.US$120m of excess funds, less expenses, will be used by G3E to fund working capital and an accelerated exploration and development programme, with a priority on Guizhou Block (GGZ) which should enter production during 2019.
Randeep Grewal, Executive Chairman, commented:
"The approval of the Dividend in Specie, our third since 2006, is a landmark moment for G3 Exploration which will allow us to complete the planned separation of the producing assets from our exploration and development assets. Crucially, it provides a mechanism for us to return the value created within the producing blocks - where over US$1.3 billion has been invested by us with our partners - to our shareholders.
The sales process for the two producing blocks is being managed by Citigroup and Credit Suisse.
As well as potentially returning cash to shareholders, the exits will provide the means to paydown G3E's debt and fund an accelerated exploration and development programme which continues to be our core business and has been the foundation of the business for over twenty years."
The Company has an updated corporate presentation on its website and management will be hosting an investor conference call at 9.30am (UK) on Thursday 28 March 2019.
Please see the dial-in details below:
United Kingdom: +44 203 059 5868
Hong Kong +852 3008 1745
When dialing in, please state the title of the call: "G3 Exploration ‐ Investor Conference Call."
For further information on the Company and its activities, please refer to the website at www.g3-ex.com or contact:
FTI Consulting
Ben Brewerton / Genevieve Ryan / Tom Pigott
Tel: +44 20 3727 1000
Email: g3e@fticonsulting.com
About G3 Exploration Ltd.
G3E is a leading independent gas producer with operations in China and is listed on the main market of the London Stock Exchange (LSE: G3E). The Company has 377 Bcf of 2P reserves and 2,044 BCF of 3P reserves across eight production blocks covering over 7,566km² of license area in the Shanxi, Jiangxi, Anhui and Guizhou provinces. It holds six Production Sharing Agreements with strong, highly capitalised Chinese partners including CNOOC, CNPC and PetroChina, and has infrastructure in place to support multiple routes to monetise gas production.
The company is committed to an exploration and appraisal focused business plan in coal bed methane development across three geographies concurrently. It has a well-established track record and has demonstrated perseverance in going the distance to monetise shareholder value through three basic principles:
· Focus on core intellectual aptitude in developing coal bed methane
· Develop assets in an environmentally and socially prudent manner
· Protect accreted shareholder value