G3 Exploration Regulatory News (G3E)

26 Sep 2007 08:19

Green Dragon Gas Ltd26 September 2007 GREEN DRAGON GAS LTD. ("Green Dragon" or "the Company") Interim Results for the six months ended 30 June 2007 Green Dragon Gas Ltd (AIM: GDG), the Chinese coal bed methane business, todayannounces its unaudited interim results for the six months ended 30 June 2007. Highlights: * Record drilling plan of 80 wells launched to complement the 69 wells across five diversified blocks successfully drilled in 2006 * Raised US$50million from an institution through the issue of a zero coupon convertible note, providing funding for 2007 capital expenditure and the acquisition of Kesi * Launched downstream distribution business in Beijing through the acquisition of 49% of Kesi for US$27.1 million in cash * Industry specialist, Netherland Sewell & Associates ("NSAI"), issued a Competent Persons Report ("CPR") confirming 18 TCF of gas in place across the Company's five blocks * 3P reserves of US$4.6 billion dollars * Net assets of US$438 million, including cash of US$65 million, and a loss after tax of US$1.5 million Commenting on the results, Randeep S. Grewal, Chairman and Chief Executive ofGreen Dragon, stated: "In the year following the Company's admission to AIM, it has experiencedsignificant growth. The Company received an injection of approximately US$75million through capital raised on admission and over the year which has provideda strong balance sheet. This has facilitated the acquisition of a downstreambusiness in Beijing and allowed the Company to commence an ambitious drillingprogramme comprising 80 wells across all five blocks. "This growth has been made possible by the Green Dragon's skilled personnelwhose existing expertise have been complemented by specific training in CBM,focusing on the Company's specific blocks and coal seams. I look forward tokeeping you updated on the progress of Green Dragon as we look to conclude ourcurrent projects and prepare for future growth." For further information on the Company and its activities, please refer to thewebsite at www.greendragongas.com or contact: Randeep S. Grewal Betty Cheung Green Dragon Gas +852 3710 0168 Dr Azhic Basirov/ David JonesNominated Adviser & BrokerSmith & Williamson Corporate Finance Limited+44 20 7131 4000 Tim Thompson / Nick MelsonInvestor RelationsBuchanan Communications+44 20 7466 5000 Chairman's Statement Following the successful conclusion of the 2006 drilling plan, in May 2007 GreenDragon concluded a US$50 million fundraising through a zero coupon convertiblenote. The strengthened balance sheet positioned the Company to conclude theacquisition of a 49 per cent. interest in Kesi Hengrun (Beijing) Technology Co,Ltd ("Kesi"), a strategic downstream distribution business. The acquisitionresulted in Green Dragon becoming one of the few foreign companies participatingin Beijing city gas distribution being supplied by the CNPC pipeline. Thisacquisition was in accordance with the Company's strategy of being a "verticallyintegrated clean gas supplier in China". With the capital on hand, the Company launched an ambitious drilling programmeof 80 wells across all five blocks. The operational team attained commitmentsfrom 12 drilling contractors to drill the wells using 25 rigs. Wells inShizhuang South were spudded on 26 July 2007 and in Fengcheng on 3 August 2007,while Qinyuan and Shizhuang North are now scheduled to spud on 26 September andPanxie on 30 September. The Company's operations personnel have demonstrated their ability tosuccessfully manage the growth to date and the team is expanding to sustainGreen Dragon's anticipated growth. As well as increasing headcount, theoperations team held a CBM training seminar in Beijing to expand on theirskills, focusing on the Company's coal seams across the blocks. The trainingalso included a field trip to Australia to see other companies' successful CBMoperations. A Competent Persons Report from industry specialist, Netherland Sewell &Associates ('NSAI"), certified gas-in-place of 18 trillion cubic feet (509billion cubic meters) in the Company's five blocks, with a 3P valuation ofUS$4.6 billion for the 2 TCF net reserves. Resources of two of the five blocks,Qinyuan and Panxie, were characterised as Prospective Resources and thus provideincremental resource growth potential. The continued drilling programme thisyear, coupled with the dewatering of the coal seams from the currently producingwells, ought to provide a reserve progression across the blocks. There has been a significant increase in companies participating in CBM projectsthroughout China this year. It has become well established that the CBM is aviable resource for the much needed energy to fuel China's continued growth. Therecent abundance of the new entrants validates Green Dragon's early entry in tothis potentially lucrative market. While many challenges have been addressedover the years, more will arise as the industry evolves. I am pleased to lead ateam that has a demonstrated track record of sustaining the Company's growth,steering it through such evolutions. I look forward to providing shareholders with timely updates on the Company'scontinued growth. Randeep S. GrewalChairman and Chief Executive26 September 2007 Unaudited UnauditedCondensed Consolidated Income Statement 6 months to Period toFor the six months ended 30 June 2007 30 June 30 June 2007 2006 US$000 US$000 Revenue - -Cost of sales - - --------- ---------Gross profit - - Administrative expenses (1,133) (558)Investment revenues 611 -Finance costs (1,050) (152) --------- ---------Loss before taxation (1,572) (710)Taxation 79 1 --------- ---------Net loss for the period (1,493) (709) --------- --------- Loss per share Basic ($) (0.01521) (0.00787) --------- ---------Diluted($) N/A N/A --------- ---------Dividend per share Nil Nil --------- --------- All amounts above relate to continued operations. Condensed Consolidated Balance Sheet Unaudited Audited30 June 2007 At At 30 June 31 December 2007 2006 US$000 US$000AssetsNon-current assetsProperty, plant and equipment 267 83Gas exploration and appraisal assets 595,878 592,365Unlisted investment 27,122 -Deferred tax assets 384 296 ------- --------Total non-current assets 623,651 592,744 ------- --------Current assetsTrade and other receivables 489 1,686Cash and cash equivalents 65,021 19,031 ------- --------Total current assets 65,510 20,717 ------- --------Total Assets 689,161 613,461 ------- --------LiabilitiesCurrent liabilitiesTrade and other payables 29,886 3,986 ------- --------Total current liabilities 29,886 3,986 ------- --------Non-current liabilitiesConvertible notes 46,739 -Loan notes due to shareholder 20,296 19,875Deferred tax liability 139,225 139,225Other financial liabilities 14,149 13,779 ------- --------Total non-current liabilities 220,409 172,879 ------- --------Total liabilities 250,295 176,865 ------- --------NET ASSETS 438,866 436,596 ------- --------Capital and reserves attributable to equity holders of the companyShare capital 9 9Share Premium 440,737 440,737Convertible debt option reserve 3,794 -Foreign exchange reserve (76) (45)Accumulated losses (5,598) (4,105) -------- --------TOTAL EQUITY 438,866 436,596 -------- -------- Condensed Consolidated Statement of Changes in EquityFor the six months ended 30 June 2007 Foreign Convertible Share Share exchange Debt option Accumulated capital premium reserve reserve Losses Total US$000 US$000 US$000 US$000 US$000 US$000 Shares - - - - - -allotted on date ofincorporation Shares issuedon purchase of100% interestin Alexi HoldingsLimited on 8 9 415,769 - - 415,778April 2006 Loss for theperiod - - - - (709) (709) ------- ------- ------- ------- ------- -------Balance at 30June 2006 9 415,769 - - (709) 415,069 ------- ------- ------- ------- ------- -------Shareplacement onadmission toLondon AIMMarket - 25,094 - - - 25,094 Share issuecosts - (126) - - - (126) Foreign exchange ontranslationof foreign - (45) - - (45)operations Loss for theperiod - - - - (3,396) (3,396) ------- ------- ------- ------- ------- -------Balance at 9 440,737 (45) - (4,105) 436,59631 December 2007 ------- ------- ------- ------- ------- -------Shares issuedpursuant toagreements toacquire 49%equity interest inKesi Hengrun(Beijing) TechnologyCo, Ltd - 24,875 - - - 24,875 Issue of$50,000,000notes withconvertibleoptions on 1June 2007 - - - 3,794 - 3,794 Sharesrepurchasedand cancelledon 29 June 2007 - (24,875) - - - (24,875)Foreign exchange ontranslationof foreign - - (31) - - (31)operations Loss for theperiod - - - - (1,493) (1,493) ------- ------- ------- ------- ------- -------Balance at 30June 2007 9 440,737 (76) 3,794 (5,598) 438,866 ------- ------- ------- ------- ------- ------- Unaudited UnauditedCondensed Consolidated Cash Flow Statement Period to Period toFor the six months ended 30 June 2007 30 June 30 June 2007 2006 US$000 US$000Cash flow from operating activitiesLoss for the period (1,493) (709)Adjustments for:Tax credit (79) (1)Finance costs 1,050 152Finance income (611) - --------- --------Operating loss before changes in working capital andprovisions (1,133) (558)Increase in receivables (9) (9)Increase in payables 90 484Increase in provision for liabilities and charges 3 3 --------- ---------Net cash generated by operating activities (1,049) (80) --------- ---------Investing activitiesPayments for exploration activities (2,751) (118)Payments for Property, plant and equipment (181) -Cash held in subsidiary companies at the date ofacquisition - 132Interest received 611 - --------- ---------Net cash flow from investing activities (2,321) 14 --------- ---------Financing activitiesProceeds from loan notes - 615Proceeds from convertible notes 50,000 - --------- ---------Net cash flow from financing activities 50,000 615 --------- --------- Increase in cash 46,630 549Cash and cash equivalents at the beginning of theperiod 19,031 -Effect of changes in foreign exchange (640) (28) --------- ---------Cash and cash equivalents at the end of the period 65,021 521 --------- --------- Notes to Condensed Interim Financial Statements 1 Accounting policies Basis of presentation The interim financial information has been prepared using policies based onInternational Financial Reporting Standards (IFRS and IFRIC interpretations)issued by the International Accounting Standards Board (ISAB). These accountshave not been audited The financial information has been prepared using theaccounting policies as applied in the Group's statutory financial statements forthe year ended 31 December 2006. The financial information for the period 1 January 2007 to 30 June 2007 isunaudited. In the opinion of the Directors, the financial information for theperiod fairly presents the financial position and results from operations andcash flows for the period, and conforms with generally accepted accountingprinciples consistently applied. The accounts incorporate comparative figuresfor the interim period 28 March 2006 to 30 June 2006. 2 Loss per share Loss per ordinary share has been calculated using the weighted average number ofshares in issue during the six month period to 30 June 2007 and from 28 March2006 to 30 June 2006. The weighted average number of equity shares in issue forthe periods are 98,137,835 and 90,000,000 respectively. The diluted loss per share for both periods ended was not presented as theconvertible notes outstanding would result in a decrease in loss per share. 3 Gas exploration and appraisal assets Unaudited Audited At At 30 June 31 December 2007 2006 US$000 US$000CostBrought forward/ On incorporation 592,365 -Acquisitions - 587,075Additions 2,751 4950Foreign exchange difference 762 340 ------- ------- 595,878 592,365 ------- -------AmortisationBrought forward/ On incorporation - -Amortisation for the period - - ------- ------- - - ------- -------Net book value 595,878 592,365 ------- ------- 4 Unlisted Investment Unlisted investment of US$27,122,000 represents the Group's investment in 49% ofthe equity interests of Kesi Hengrun (Beijing) Technology Co, Ltd. ("Kesi"). Asat 30 June 2007, directors and key management were yet to be appointed. As theGroup was not in the position to exercise significant influence on theoperations and financial strategy of Kesi, the investment was still carried atcost, less impairment if any, and equity accounting was not yet applicable. 5 Trade and other payables Unaudited Audited At At 30 June 31 December 2007 2006 US$000 US$000 Trade payables 3,908 3,986Other payables 25,978 - ------- ------ 29,886 3,986 ------- ------ Included in other payables balance as of 30 June 2007 was US$25,978,000 payablefor 3,685,167 shares repurchased and cancelled on 29 June 2007. The amount waspaid, subsequently, on 5 July 2007. 6 Convertible notes On 1 June 2007, the Company issued convertible notes having a face value ofUS$50,000,000 and a maturity date of 30 May 2009 ("Maturity Date"). The notesbear interest at 0% per annum. At any time on or after the Maturity Date, the total sum of 118% of theoutstanding principal amount of the convertible note shall become payable,unless previously converted or redeemed in accordance with these conditions. As the value of the convertible notes is dependent on assumptions andinformation in deriving their Fair Value, the following factors have been takeninto consideration: As at Issue DateShare price of the Company US$6.08Expected volatility 22%Risk free rate 4.92%Borrowing rate/effective interest rate of the Company 13%Life of the convertible note 2 yearsExpiration of the convertible note 31 May 2009Expected ordinary dividend yield Nil 7 Copies of announcement The Company's Interim Report and copies of this announcement will be availableon the Company's website at www.greendragongas.com and from the offices of theCompany's nominated adviser, Smith & Williamson Corporate Finance Limited, at 25Moorgate, London, EC2R 6AY, United Kingdom. This information is provided by RNS The company news service from the London Stock Exchange