G3 Exploration Regulatory News (G3E)

3 February 2016

GREEN DRAGON GAS LTD.

("Green Dragon" or the "Company")

Operations Update and 2016 Outlook

Green Dragon Gas Ltd. (LSE: GDG), one of the largest independent companies involved in the production and sale of CBM gas in China, is pleased to announce an operations update for the year ended 31 December 2015.

Green Dragon, together with its partners, is currently implementing a significant infrastructure programme aimed at increasing gas processing and sales capacity from its existing drilled wells. The programme focuses on existing drilled well connections across the commercial acreage to drive monetisation of the Company's portfolio.

Green Dragon has also issued its outlook for the coming year with a gross production capacity target of 16 bcf per annum for 2016 year-end, a 33% increase on 2015. This increase is expected to significantly further enhance the Company's cash flow generation, which will result in both the delivery of its maiden bottom-line profit and enable capital investment to generate further growth.

The Company also anticipates a continued robust and consistent gas pricing environment in China during the course of the coming year.

Operational highlights

· End of year gross annual production capacity of 12.12 bcf per annum exceeded 2015 target of 12.0 bcf per annum

· Focused on existing infrastructure in place to increase both production and sales volume in 2H 2015

· Annual gas processing capacity at GSS increased by 79% to 22.7 bcf per annum following the completion of a further two processing facilities by China National Offshore Oil Corporation ('CNOOC')

· First LiFaBric well drilled in Coal Seam 15 and successfully completed. The well, placed on production late in 2015, is currently dewatering normally and exhibiting casing pressure consistent with gas desorption.

· Achieved PNG and CNG sales prices of USD $9/mcf and USD $16/mcf respectively to give gross weighted average realised gas sales price of USD $10/mcf (2014: USD $10/mcf)

· Started receiving gross sales revenues from GCZ commercial block following full cost recovery by China National Petroleum Corporation ('CNPC')

2016 operational outlook

· 2016 year-end annual gross production capacity target of 16 bcf per annum, a 33% increase versus 2015

· Continued focus on production volume, existing drilled well connections and gas sales

· CNOOC to further progress infrastructure build on GSS toward ultimate 53bcf annual processing and sales capacity through 2017

Randeep S. Grewal, Chairman and Founder of Green Dragon, commented:

"I am delighted with the significant progress that was made in 2015. We have seen a strong increase in production, infrastructure capacity and sales. We have further cemented our relationships with all of our partners and together have made substantial progress on the development of our exploration and production areas. At GSS, the aggressive build out of the gathering network and the associated gas processing capacity to 23 bcf per annum by our partner, CNOOC, means there are no capacity constraints on our current or planned production. Further processing capacity is scheduled to come on line progressively over the next 12-24 months, in line with production growth, to reach the ultimate targeted gas sales capacity of 53 bcf per annum. Our focus now shifts to compression and gas gathering lines so as to monetise the installed capacity.

"Our performance in 2015 is contrarian to the energy industry at large. Against a backdrop of unprecedented economic and political turmoil in the traditional energy markets and near record low oil prices, we expect to see our performance further enhanced in 2016 in terms of production, sales, profitability and cash flow, as gas pricing remains robust and consistent in China with some of the highest margins seen anywhere in the world. In addition, the gas industry in China enjoys the continued support of the Central Government to more than double the proportion of natural gas consumed as part of a cleaner and more balanced fuel mix.

"2016 is Green Dragon's tenth anniversary as a listed company and we expect it to be our best operational and financial performance since inception twenty years ago."

Upstream

Production

· Continued focus on sales to production ratio and monetising existing production potential through a significant compression and production optimisation programme underway at GSS

· Gross production across all licence areas increased by 24% to 10.3 bcf (2014: 8.2 bcf)

· Gas sales volume growth of 39% at GDG operated wells to 1.42 bcf

· Of 1,702 wells drilled across all licence areas, 666 were producing gas for sale at year end 2015

· Increase of 27 LiFaBric wells connected to sales infrastructure, a total of 46 LiFaBric wells selling in GSS commercial block

Exploration and Development

· Significant exploration campaign on GGZ block for CRR submission scheduled for mid-2016

· The first LiFaBric well drilled and completed in Coal Seam 15 encountered a 4m thick section of the seam and was successfully completed without penetration of the limestone cap rock which is a material water bearing strata. Technical drilling success to be replicated for wider application.

· 10 exploration wells successfully drilled across all blocks

Infrastructure

· Successful completion of Shizhuang Station and Shizhuang South #1 Station on time by CNOOC adding 10 bcf of annual gas processing and sales capacity in GSS

· Three further gathering stations to be constructed with total annual gas processing capacity of c.30 bcf for completion during 2017

· On the GSS GDG-operated block a further 35 wells (2015 target: 22) connected to infrastructure and producing gas for sale, giving a total of 94 of 123 wells on sales at year-end.

· Gathering line network substantially complete in drilled portion of GSS block.

· GDG to assume operatorship on 46 CNOOC drilled wells of which 21 are planned to be put on production during 2016

Downstream

· GDG equity gas 2015 sales mix split was 95% PNG and 5% CNG (2014: 99% PNG; 1% CNG)

· CNG equity gas sales of 0.2 bcf comprising 76% to industrial customers and 24% through retail gas stations

· Wellhead gas prices for PNG stable throughout 2015 ranging from USD $8 to USD $11/mcf

· Retail gas pricing (pump price) reduced by USD $3/mcf to USD $16/mcf following Q4 price guidance by NDRC

· Gross weighted average realised sales price achieved of USD $10/mcf (2014: USD $10/mcf)

Health and safety

· No lost time incidents in 2015

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

Instinctif Partners

David Simonson / George Yeomans

Tel: +44 20 7457 2020

Citigroup

Tom Reid / Luke Spells

Tel: +44 20 7986 4000

Peel Hunt

Richard Crichton / Ross Allister

Tel: +44 20 7418 8900

About Green Dragon Gas

Green Dragon Gas is a leading independent gas producer with operations in China and is listed on the main market of the London Stock Exchange (LSE: GDG). The Company has 380Bcf of 2P reserves and 2,418bcf of 3P reserves across eight production blocks covering over 7,566km² of licence area in the Shanxi, Jiangxi, Anhui and Guizhou provinces. It holds six Production Sharing Agreements with strong, highly capitalised Chinese partners including CUCBM (CNOOC), CNPC and PetroChina, and has infrastructure in place to support multiple routes to monetise gas production.

Glossary

Mcf: Thousand cubic feet

Bcf: Billion cubic feet

PNG: Pipeline natural gas

CNG: Compressed natural gas

NDRC: National Development and Reform Commission

CRR: Comprehensive Reserves Report

END