G3 Exploration Regulatory News (G3E)

23 July 2015

GREEN DRAGON GAS LTD

("Green Dragon" or the "Company")

Operations Update

Green Dragon Gas Ltd. (LSE: GDG), the leading independent gas producer with operations in China, is pleased to announce an operations update for the six months ending 30 June 2015. Green Dragon is implementing a programme to deliver an imminent step change in production and cash generation, maximising value from its strategic location in China's strong growth gas market.

Highlights

· Focus on infrastructure building to enable production and sales from drilled wells

· 30 well LiFaBriC drilling programme on track:

− first phase of drilling vertical wells for eventual LiFaBriC interception near completion

− H2 focus on second phase of drilling remaining LiFaBriC wells

· On-going 12 bcf per year-end exit production target

· Exit rate at end of H1: 10.15 Bcf per year

· Gas pricing unaffected by Chinese market volatility: continuing to benefit from strong market fundamentals

· 5 wells drilled within the exploration blocks in H1 2015 with additional 14 wells planned for H2 2015

· 11 wells successfully drilled and logged in CS#15 in H1 2015

Upstream

· H1 2015 gross production of 4.87 Bcf, an 18% increase compared to H1 2014 (H1 2014: 4.1 Bcf)

- GSS: 1.63Bcf production from GDG operated wells (H1 2014: 1.45Bcf)

1.13Bcf production from CUCBM operated wells (H1 2014: 0.58Bcf)

− GCZ: 2.11Bcf production from Petrochina Company Ltd ("PetroChina") operated wells (H1 2014: 2.07Bcf)

· Production exit rate by end of H1: 10.15 Bcf per year:

− GSS: 6.07 BCF per year

− GCZ: 4.09 Bcf per year

Drilling

· A total of 18 wells drilled in H1 2015, including 1 LiFaBriC and 1 lateral re-completion

Infrastructure

· 8 LiFaBriCs connected to infrastructure in H1 2015

· A total of 67 wells connected, a 14% increase from year end 2014 of 59 wells

Well portfolio overview:

· Total number of wells as of H1 2015:2,111 wells across all blocks

- 375 wells across the GSS Production Block and the GCZ Block

· 88 LiFaBriC wells across all blocks (H1 2014: 78 LiFaBriC wells), of which 34 are in production and connected to infrastructure (H1 2014: 18)

- 348 wells across the Fengcheng ("GFC"), Qinyuan ("GQY"), Shizhuang North ("GSN"), Panxie East ("GPX") and Baotian Qingshan ("GGZ") exploration blocks

- 1,388 legacy CUCBM (CNOOC) wells at GSS

· Status of Green Dragon blocks:

- 396 wells drilled across all blocks

- 375 wells across GSS and GCZ Production Block, of which 83 and 88 are in production and connected to infrastructure respectively

- 135 wells across the Fengcheng ("GFC"), Qinyuan ("GQY"), Shizhuang North ("GSN"), Panxie East ("GPX") and Baotian Qingshan ("GGZ") exploration blocks

Downstream

· Piped Natural Gas (PNG) sales from GSS and GCZ in H1 2015 totaled 2.65Bcf, an increase of 10% compared to H1 2014 (H1 2014: 2.4Bcf), as follows:

- 0. 549Bcf from GDG standalone production at GSS

- 0.102Bcf from CUCBM operated production at GSS

- 2.0Bcf from PetroChina operated production at GCZ

· Compressed Natural Gas (CNG) sales in H1 2015 totaled 0.335 Bcf (H1 2014: 0.309 Bcf), as follows:

- industrial customer sales: 0.53 Bcf (H1 2014: 0.32 Bcf)

- retail station sales: 0.281Bcf, a 5% increase compared to H1 2014 (H1 2014: 0.276 Bcf) 

- 91% was acquired from third parties

- 9 gas stations in operations with total capacity of 5.3 MMcf/day

· Weighted average CNG price in Greka retail stations of 4.23RMB/m3 (US$19.51/Mcf), a 9.3% increase compared to 3.87 RMB/m3 (US$17.82/Mcf) in H1 2014

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

Our focus during the last six months, together with our partners, has been on infrastructure and connecting our wells to the network, which is key to delivering a step-up in our production and cash flows. In parallel, our drilling programme has continued, with a first phase of vertical drilling for eventual LiFaBriC completion phase in the second half of the year. We are continuing to benefit from a strong gas price on the Chinese market, unaffected by the recent market volatility. Furthermore, fundamentals remain in place to ensure that the high demand in the region sustains the long term performance of the gas price in what is one of the world's most buoyant energy markets. We are pleased to reiterate our target of exiting the year at a production rate of 12 bcfpy , and of continuing to deliver strong growth and value for our shareholders from our operations. We are capitalized and fully funded to execute on-schedule our 30 LiFaBriC well drilling programme, and infrastructure will continue to drive our sales to production ratio through 2016, when we expect to have a gas processing capacity of more 50 Bcf per year at our GSS block.

Enquiries:

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

About Green Dragon Gas

Green Dragon Gas is a leading independent gas producer with operations in China and 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. Green Dragon Gas is implementing a 150 well drilling programme to deliver an imminent step change in production and cash generation, maximising value from its strategic locations in China's strong growth gas market.