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24 Aug 2009 07:00
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24Β AugustΒ 2009
GREEN DRAGON GAS LTD.
("Green Dragon" or the "Company")
CONOCOPHILLIPSΒ ENTERSΒ INTOΒ JOINT VENTURE WITH GREKA
Green Dragon Gas Ltd (AIM: GDG), the Chinese vertically integrated gas business, announces a farm out agreement between its wholly owned subsidiary Greka Energy (International) BV ("Greka") and ConocoPhillips (NYSE:COP).
Under the terms of theΒ farm out agreement,Β ConocoPhillipsΒ will make an initial payment of $20Β millionΒ to Greka and will also fund up to a total of $30 million of the capital expenditures. ConocoPhillipsΒ can elect to continue with a second phase of development and pay $120 million toΒ acquireΒ 50%Β of Greka'sΒ interest in threeΒ of itsΒ sixΒ ChineseΒ Coal Bed Methane Production Sharing ContractsΒ ("PSC").Β Under the terms of the agreement,Β the accrued cost recoveryΒ and GrekaΒ costs carried by ConocoPhillipsΒ will be solelyΒ forΒ the benefit of Greka.Β GrekaΒ will continue to be the operator of the blocks while ConocoPhillipsΒ will appoint personnel to the projects and enhance the PSC development scale and efficiencyΒ throughΒ their extensive CBM experience.
The joint venture entails several options. In the initial phase, which will expire by year end 2010, ConocoPhillips will make an initial payment of US$20 million to Greka towards costs incurred to date and will fund up to a total of US$30 million of the capital expenditures towards the development of surface-to-inseam wells at the Shizhuang South, Shizhuang North and Qinyuan PSCs. In the event that ConocoPhillips elects not to proceed with the farm-out, all funds invested by ConocoPhillips will accrue to the benefit GREKA. Upon ConocoPhillips decision to continue with acquiring 50% of Greka's interest in the three PSCs, the agreement (which will require approval from the Chinese authorities) provides for further payments of up to US$120 million, including carrying Greka's obligations under the PSCs. In addition, ConocoPhillips has an option until mid-2011 to evaluate participating in the Company's midstream and downstream businesses.
Goldman Sachs advised the Company on the transaction which was identified within the strategic options assignment initiated in the first quarter.
Mr. Randeep S. Grewal, Chairman & CEO, commented:
"ItΒ has beenΒ exactly three years since we listed on the AIM market and this agreement with ConocoPhillipsΒ is an important validation of the Company's continued success. ConocoPhillips isΒ aΒ significantΒ producer of CBM with substantial production experience which we believe will add value in monetizing our large resource expeditiously.Β ConocoPhillipsΒ acceptance of GrekaΒ as operator further validates the capability ofΒ ourΒ operating team andΒ itsΒ achievements toΒ date."
"The ConocoPhillipsΒ agreement coincides withΒ theΒ Overall Development Plan approvalΒ which we expect to receive this quarterΒ on our most advanced Shizhuang SouthΒ block. The ODP has been extensively vetted and will provide relevant guidance to expedite the ODPs on the Company's other five blocks."
For further information on the Company and its activities, please refer to the website at
www.greendragongas.com or contact:
|
Stephen Hill ViceΒ President,Β Corporate Communications Green Dragon Gas Β |
+852 3710 0168 |
|
Dr Azhic Basirov /Β David Jones Nomad & Broker, Smith & Williamson Β |
+44 20 7131 4000 |
|
Tim Redfern Broker, Evolution Securities Β |
+44 20 7071 4300 |
|
Tim Thompson / Christian Goodbody Investor Relations, Buchanan Β |
+44 20 7466 5000 |
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