G3 Exploration Regulatory News (G3E)

29 Nov 2006 10:31

Green Dragon Gas Ltd29 November 2006 29 November 2006 GREEN DRAGON GAS LTD. ("Green Dragon" or the "Company") TWELVE RIGS DRILLING SUCCESSFULLY AND ADDITIONAL ADVISER APPOINTED Green Dragon Gas Ltd (AIM:GDG), the Chinese coal bed methane business, todayannounces the continued drilling successes of its coal bed methane ("CBM")production wells with twelve rigs concurrently spread over its five blocks inCentral China. Ten wells have been successfully drilled through the targetedcoal seams so far and an additional twenty eight wells are expected to bedrilled in this phase. Shizhuang South, Shanxi ("GSS") covers an area of 455 sqkm, 2,640 BCF of gas inplace of which 48.5 BCF is classified as P1 and 413.3 BCF is classified as P2reserves. (Source: Scott Pickford Competent Person's Report - August 2006) It isthe most advanced of the Company's blocks and has produced 16,158,061 cubicmeters of gas to date from its pilot vertical wells, drilled several years ago.Three drilling rigs are currently drilling vertical wells identified as GSS004,GSS012 and GSS015 and an additional three wells will be drilled thereafter. Fourwells have been completed with the target coal seam No.3 successfully drilled ineach of the wells, confirming approximately 6m thickness in each. Newlycompleted wells GSS001 and GSS002 were put on dewatering production and showedcasing pressure of 0.16 and 0.13 mpa, respectively, within days of being placedon dewatering production. All wells in this drilling phase are being connectedto the Company's existing gas gathering system and the Zayoan compressor stationfor gas sale during and after dewatering. Under a farmout agreement signed by the Company with China United Coal BedMethane ("CUCBM") for a 67 sqkm section of the GSS block, the two pinnatehorizontal wells continue to successfully dewater and produce gas. Well DS01-1was drilled into coal seam No. 3 for a total displacement of 5,506 metres andhas current gas production of over 7,500 cubic metres per day and waterproduction of 20 cubic metres per day. Well DS02-1 was drilled into coal seamNo. 15 for a total displacement of 1,198 metres into the coal seam and has waterproduction of 17 cubic metres per day as it is dewatering. Both wells are pilottest wells for pinnate horizontal well cost efficiency and performance testingand have a cumulative gas and water production of 1,360,732 cubic metres and7,900 cubic metres, respectively. Shizhuang North, Shanxi ("GSN") covers an area of 375 sq km, 2,660 BCF of gas inplace of which 648.2 BCF in P3 reserves is contiguous to GSS with similargeological conditions. (Source: Scott Pickford Competent Person's Report -August 2006). Of the planned five well pilot programme, well GSN001 has beendrilled successfully confirming target coal seam No. 3 of 4.6 metres. Two rigsare currently being deployed to drill wells GSN003 and GSN004 concurrently, andare expected to be deployed to drill an additional two wells thereafter. Qinyuan, Shanxi ("GQY") covers an area of 3,665 sq km, 8,580 BCF of gas in placeis the largest block by acreage. (Source: Scott Pickford Competent Person'sReport - August 2006) Three rigs are currently drilling wells GQY008, GQY009 andGQY010 concurrently while wells GQY001 and GQY006 have been drilled already. TheCompany is currently drilling ten CBM production wells and has concluded itsengineering works on an additional twenty exploratory wells throughout the blockin accordance with its current plan. The Company expects to award drillingcontracts for the additional twenty exploratory well programme prior to yearend. Fengcheng, Jianxi ("GFC") covers an area of 1,541 sq km, 1,566 BCF of gas inplace with 536 BCF in P2 reserves. (Source: Scott Pickford Competent Person'sReport - August 2006) Wells GFC002 and GFC003 have successfully drilled throughcoal seam B4 while two rigs are currently being deployed to drill wells GFC004and GFC008 concurrently. The Company is drilling eight wells in the currentdrilling programme to complement the two wells drilled last year which willconsolidate into a central gathering system targeted for construction next year. Panxie, Anhui ("GPX") covers an area of 584 sq km, 1,110 BCF of gas in place(Source: Scott Pickford Competent Person's Report - August 2006). Two rigs areconcurrently being deployed to drill wells GPX002 and GPX005 while well GPX001has been drilled successfully with the target coal seam No. 13 confirmed to bejust over 700 metres deep with a 3 metre thickness. The Company has engineered afive well pilot to be completed by the current year end which will form thebasis of the drilling programme for 2007. The Company further announces that the Board of Directors approved $6.50 a shareas the exercise price for its employee and directors share option scheme asreserved for in the Company's admission document. The share option price is 8%above the closing price on 27 November 2006 and 17% above the price on admissionto trading on AIM. The Company intends to adopt the share option scheme whichwill require several years of a vesting period and provide these options todirectors and key employees. The Company is also pleased to announce that it has appointed Fox-Davies CapitalLimited as a financial adviser and co-broker with immediate effect. SmithWilliamson Corporate Finance Limited continues as the Company's nominatedadviser, financial adviser and broker. Company Chairman and CEO, Mr. Randeep S. Grewal, commented, "The success of ourdrilling programme to date confirms the capability and skill of our China basedmanagement team. The team has successfully deployed and is managing twelve rigsin five separate basins over a very short period of time demonstrating thecapacity to expand and grow to meet the Company's objectives. "Guanxi, dedication and team work are key attributes to this success for which Icommend our employees working through the grueling Shanxi winter weather in aneffort to conclude the drilling program on schedule. Each of our wells drilledhave met or exceeded our expectations. "Considerable productive progress has been made on the Company's strategicbusiness plan to be vertically integrated." For further information on the Company and its activities, please refer to thewebsite at www.greendragongas.com or contact: Randeep S. GrewalChairman and Chief ExecutiveBetty CheungGreen Dragon Gas Ltd.+852 2166 8686 Tim Thompson / Nick MelsonBuchanan Communications020 7466 5000 Dr Azhic Basirov/ David JonesSmith & Williamson Corporate Finance Limited020 7131 4000 Daniel Fox-DaviesFox-Davies Capital Limited020 7936 5200 This information is provided by RNS The company news service from the London Stock Exchange