G3 Exploration Regulatory News (G3E)

23 September 2013

GREEN DRAGON GAS LTD

("Green Dragon" or "the Company")

Interim results for the six months ended 30 June 2013

Green Dragon Gas Ltd (AIM: GDG), one of the largest independent companies involved in the production of CBM gas in China, is pleased to announce its unaudited interim results for the six months ended 30 June 2013.

FINANCIAL HIGHLIGHTS

· Revenue of US$6.9m (US$3.5m in H1 2012), a 98% increase

· Net profit of US$9.4m, including gain from disposal (loss of US$10.5m in H1 2012)

· Raised US$100m through:

o Sale of non-core assets for US$65m

o Issue of US$35m bond with warrants

· Increased balance sheet strength through early repayment in full with interest of all outstanding Convertible Bonds (US$85.3m)

· E&P capex of US$21.0m (US$34.3m in H1 2012)

· Cash of US$20.7m (US$40.0m at 31 December 2012)

· 1P reserves increased 37% and 2P reserves increased 2%

OPERATIONAL HIGHLIGHTS

Upstream

· Gas production in H1 2013 was 1.34 Bcf (37.8 million cubic meters), a 59% year on year increase

· Quarter on quarter growth of 8.3% achieved in Q2 2013 with production of 697MMcf (19.8 million cubic meters) compared with 644MMcf (18.3 million cubic meters) in Q1 2013

· 3 LiFaBriC wells accepted at the Company's production block in Shizhuang South (GSS) and 4 LiFaBriC wells accepted at the Company's five exploration blocks

· The total number of LiFaBriC wells across all blocks now stands at 67, a 66% increase on a year earlier

· Re-issue of exploration permits by the Central Government

Downstream

· PNG (Piped Natural Gas) sales were 218MMcf (6.18 million cubic meters) in Q2 2013, a 29% increase on the Q1 2013 (169 MMcf / 4.8 million cubic meters)

· CNG station sales were 129 MMcf (3.676 million cubic meters) in Q2 2013, a 7% increase on Q1 2013 sales (121 MMcf / 3.441 million cubic meters) / a 71% increase over Q2 2012 (76 MMcf / 2.152 million cubic meters)

· A total of 8 retail CNG stations completed, 6 of which were in operation compared with 5 a year earlier

Greka Engineering and Technology Ltd (GET)

· Effective 1 January 2013, GET assumed the gas processing, transmission and power generation functions at the Integrated Production Facility (IPF). These activities are conducted on a per cubic meter delivered basis under a long term contract

· GET continued to build its infrastructure by adding 2km of gas gathering pipeline in the first half. A total of 33km of well gas gathering pipelines are installed at GSS and operated by GET

· GET added 14 additional third party customers for its various products during the 1H 2013, a 21% increase over the year end of 2012 and now has 90 external customers

· Demerger of GET aimed at maximizing potential of this business and shareholder value

OUTLOOK

· GET dividend in specie planned for 30 September 2013

· Conclude financing for capex to execute the 18Bcf annual gas production exit target for 2014

· Continue reserve progression and production within all six CBM blocks with specific attention to GSS

Commenting, Randeep S. Grewal, Chairman and CEO of Green Dragon Gas, said:

"The significant increase in revenue is a reflection of many years hard work and the Company's successfully transformation from exploration to production, revenues and cashflows. It is also a function of our successful strategy of streamlining the business to focus increasingly on pure upstream operations.

In view of the significant funds spent over the last decade across our six blocks, we have been committed to protecting the shareholders interest in our entitlements within our bi-lateral PSC's, which form the material assets of the Company. As confirmed by us repeatedly, our six PSC's continue in full force and effect.Questions raised over the Company's title to its PSC's have been an unwelcome distraction for both management and investors over the last few years. It has also had a significant impact on the Company's valuation which dropped by approximately US$1 billion and remains well below the levels seen prior to these concerns arising, despite significant operational progress having been made in that time.

We welcome and look forward to refocusing our efforts on growing the business to our targeted 18Bcfpy gas production and market attention returning to the significant value we believe is inherent within the business."

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

Note

Mcf means thousands of cubic feet; MMcf means millions of cubic feet; Bcf means billions of cubic feet.

CHAIRMAN'S STATEMENT

Introduction

The first half of the year has been characterized by a series of achievements that puts GDG in a strong position to continue to grow its production, revenues and profit in the years ahead. The question marks that have been raised over the validity of the PSC's over the last few years has been an unwelcome distraction and we look forward to refocusing our efforts on growing and monetizing our production. We have set ourselves a target annual rate of production for the end of 2014 of 18Bcf. While there remains some way to go to achieve this, it is simply a function of drilling a sufficient number of LiFaBriC wells and we continue to see this as quite achievable.

Demerger of GET & Sale of Non-Core Operations

We announced a few days ago the timing of the GET dividend in specie. This represents the completion of the demerger of that company from Green Dragon. It will be our second dividend in specie since our listing six years ago and is a reflection of the Company's successful strategy of demerging non-core businesses, with the aim of GDG becoming a far more streamlined and efficient business, focused purely on its core upstream operation. Similar to the Greka Drilling dividend, which created an independently successful operating enterprise while providing an opportunity to many shareholders to monetize their returns at their discretion, we expect GET will mirror this success, both operationally and in creating shareholder value.

During the period we successfully sold the non-core gas pipeline interests for US$65m, at a respectable 14% IRR return, creating a US$28.3m profit. These comprised the Company's 29% interest in the Beijing Huayou United Development Co and its 100% interest in Giant Power International Investment Limited; which included the Company's interests in the wholesale gas distribution pipeline network in the Beijing Development Area and two wholesale gas stations in Anhui and Henan.

These disposals follow changes that have taken place in the China gas industry over the last five years, which has eroded the potential of achieving gas swaps across markets and thus the ownership merits of our pipeline interests. The changes include the Chinese Government segregating the country's gas infra-structure among various entities such as Petrochina, Kunlun Gas, Sinopec, CNPC and many provincial enterprises.

Operations

Upstream

Over the course of the first half, gas production increased by 59% to 1.34Bcf. This increase was as a result of an increased number of wells coming onstream and achieving target production levels.

During the period we drilled an additional 5 LiFaBriC wells across all Blocks. The total drilled now stands at 67, a 66% increase from this time last year. As indicated above, while the PSC entitlement issues remained outstanding, we took a prudent approach to investing additional shareholder funds, which included reducing the pace of our drilling programme. We have previously outlined the need for 200 LiFaBriC wells to achieve our near term target production of 18Bcfpy. Drilling these wells is something Greka Drilling has perfected over many years and we remain confident that, once contracted, it not only has the capacity but also the ability to be able to deliver on this programme in a timely fashion.

Downstream

Piped Natural Gas (PNG) sales during Q2 where 218 MMcf, representing a 29% increase over Q1 this year. PNG sales started on a controlled basis, while the Company's pipeline connecting the GSS block to the West East Pipeline was brought into service. Sales are made under the 20 year agreement entered into in June 2011 with PetroChina.

The Company also sells Compressed Natural Gas (CNG) for vehicle use through its series of Company-owned CNG retail stations located in and around its licence areas. In Q2, sales of CNG through these outlets amounted to 129MMcf, representing a 7% increase on Q1 and a 70% increase over the same period last year. This increase in sales is primarily due to the number of operating CNG stations increasing to 6 from 5 a year ago and the expansion of our fleet of distribution trucks.. The Company hopes to be able to bring an additional three stations into operation during the remainder of this year.

GET

From 1 January 2013, GET assumed control of the Company's gas processing, transmission compression and power generation functions under a long term contact, on a per cubic meter delivered basis.

During the period, GET added a further 2km of gas gathering pipeline, bringing the total network on the GSS block to 33km. This network gathers the gas from the various producing wells and transports it to the IPF on the block, where it is processed for ongoing transport and sale and power generation.

Financials

During the first half, revenue from continuing operations increased 98% to US$6.9m (US$3.5m: H1 2012). This increase is a reflection of the corresponding increase in gas production and sales as outlined above. The Company also recorded a record net profit for the period of US$9.4m; this number includes a profit of US$28.3m on the disposal of non-core operations, with the operating loss having increased to US$8.3m (US6.7m: H1 2012).

E&P capex during the period was US$21m, a significant reduction over the US$34m during the same period in 2012. This reduction was primarily as a result of the more prudent approach taken by the Company to investing shareholder money while the licence issue remained.

As previously outlined, the arbitration tribunal relating to funds paid to the Company by Liberia registered ConocoPhillips China Inc (COPC) in relation to a farm-in deal entered into in 2009, awarded COPC US$42.6m plus costs. The appeal filed focuses on the natural injustice and lack of due process by the tribunal. The appeal is scheduled to be heard in the second half of November. While the original decision was clearly disappointing, it has reduced the uncertainty around this contingent liability, again allowing the management team to refocus on driving the core business forward.

Finally, during the period, we also significantly strengthened our balance sheet, raising a total over US$65m from the disposal of non-core assets, as mentioned above, and successfully issuing $US35m of bonds and warrants. US$85.3m of these funds was used to repay in full the outstanding convertible bonds; as at 30 June, the Company had cash of US$20.7m.

Outlook

Following the dividends of Greka Drilling, Greka Engineering and the sales of the various gas pipeline interests, Green Dragon efficiently becomes an Exploration & Production company within its niche in China CBM. Over the last sixteen years of pursuing CBM development in China, the sub-surface geological challenges pulled us into developing Greka Drilling. Following this success, and along the path to gas production, we were forced to develop Greka Engineering so as to enable the commercial gas being sold at market prices. Both businesses are unique and market leaders within their niches, however neither creates incremental shareholder value to Green Dragon by ownership. Being a pioneer, we were required to create both but both have very different business objectives when compared to a focused E&P company. Similarly, the significant market options available to us as a gas producer eliminated the necessity to own pipeline interest and thus facilitated a lucrative divesture at a respectable return.

I look forward to reporting on the progress Green Dragon continues to make as a pioneering E&P company exclusively within the China CBM niche focused on achieving 18 Bcfpy of gas production in the short term.

Randeep S. Grewal

Founder & Chairman

Condensed Consolidated Statement of Comprehensive Income

Six months ended 30 June 2013

Condensed Consolidated Statement of Financial Position

At 30 June 2013

Condensed Consolidated Statement of Changes in Equity

Six months ended 30 June 2013

Consolidated Statement of Cash Flows

Six months ended 30 June 2013

Notes to Condensed Interim Financial Statements

1 GENERAL INFORMATION

The condensed financial information for the six months ended 30 June 2013 and 30 June 2012 is unaudited and un-reviewed and does not constitute statutory financial statements. The consolidated unaudited interim financial information set out in this report is based on the consolidated financial statements of Green Dragon Gas Ltd. and its subsidiary companies (together referred to as the 'Group'). The condensed consolidated financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2012, which have been prepared in accordance with IFRSs as adopted by the European Union. The comparative financial information for the full year ended 31 December 2012 is not the Group's full annual accounts for that period but has been derived from the annual financial statements for that period. The auditors' report on those accounts was unqualified and did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report.

2 ACCOUNTING POLICIES

These accounts have been prepared in accordance with the accounting policies that are expected to be applied in the Report and Accounts of Green Dragon Gas Ltd. for the year ending 31 December 2013 and are consistent with International Financial Reporting Standards adopted for use in the European Union, with the exception of IAS 34, "Interim Financial Reporting". The annual financial statements of Green Dragon Gas Ltd. are prepared in accordance with IFRSs as adopted by the European Union.

Basis of preparation

After making enquiries, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the half-yearly condensed financial statements.

The interim financial statements are presented in United States Dollars and all values are rounded to the nearest thousand dollars (US$'000) except when otherwise indicated.

The consolidated interim financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an invested entity so as to obtain benefits from its activities. The results of subsidiaries acquired or disposed are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

The Company has sufficient working capital to fund its overheads and capital programme for the next 12 months. The Company has a liability of approximately $50m arising from the findings of arbitration in connection to its dispute with a former farm in partner. The Company has lodged an appeal and the counterparty are not currently able to enforce the award. The Directors remain confident the appeal will be successful but have prudently recorded a liability. The Company does not currently have the liquid funds to settle this litigation should it fall due in the short term. A number of funding transactions are at an advanced state which if concluded would provide the necessary funds to settle the dispute if required. However, there can be no guarantee any of these transactions will conclude and they require the occurrence of events outside of the Directors' control.

As a consequence, in the event the Company losses its appeal and should further funding not be available the Company may not be able to realize its assets and discharge its liabilities in the normal course of business. These conditions indicate the existence of an uncertainty which may cast doubt about the Company's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Company was unable to continue as a going concern.

3 REVENUE AND SEGMENTAL INFORMATION

For the six months ended 30 June 2013

The Group has six reportable segments as set out below. The operating results of each of these segments are regularly reviewed by the Group's chief operating decision makers in order to make decisions about the allocation of resources and assess their performance.

During the period revenue of US$16,462,000 (30 June 2012 - US$26,665,000) was recognised by the Pipelined Gas Distribution segment in respect of customers representing 10% or more of the Group's total revenue for the period.

For the six months ended 30 June 2013

For the six months ended 30 June 2012

 For the year ended 31 December 2012

4 TAX

Taxation for the Group's operations in the People's Republic of China ("PRC") is provided at the applicable current tax rate of 25% on the estimated assessable profits for the period.

5 EARNINGS / (LOSS) PER SHARE

Earnings / (loss) per share is based on the loss attributable to ordinary equity holders of the Company of divided by the weighted average of ordinary shares in issue during the corresponding period.

Due to the loss arising during the period ended 30 June 2012 and year ended 31 December 2012, the diluted loss per share is considered to be the same as the basic loss per share. 12,823,261 potential ordinary shares during the period ended 30 June 2012 and 12,823,261 potential ordinary shares during the year ended 31 December 2012 have therefore been excluded from the above calculations.

6 DIVIDEND

The directors do not recommend the payment of an interim dividend (2012: Nil).

7 PROPERTY, PLANT AND EQUIPMENT

During the period, the Group incurred approximately US$964,000 on additions to property, plant and equipment (30 June 2012 US$506,000; 31 December 2012 US$8,820,000).

8  LOAN RECEIVABLE

The loan receivable is denominated in United State dollars. The loan receivable bear interest at a rate of 8% per annum.

9 TRADE AND OTHER RECEIVABLES