G3 Exploration Regulatory News (G3E)

8 Dec 2009 07:01



8 December 2009

GREEN DRAGON GAS LTD.

("Green Dragon" or "the Company")

US$75 million Raised for Growth Capital and Repayment of All Debt 

Green Dragon Gas (AIM:GDG), the Chinese vertically integrated gas business, announces that it has paid approximately US$55 million to redeem in full the only remaining outstanding convertible bond and simultaneously issued shares to BlackRock at a price of US$6.25 per share. The redeemed bond's conversion price was equivalent to the placing price of the new shares. The Company issued 12 million new shares raising US$75 million which has been received.

Application will be made for the 12 million new shares to be admitted to trading on AIM and it is anticipated that dealings will commence on 11 December 2009.

The Company is now debt free. The net proceeds of the equity raise after repayment of the bond will be used to place orders on new equipment, execute agreements with engineering firms to permit and build vital infrastructure to handle vastly increased levels of gas production at Shizhuang South block ("GSS"). As a result of the technological breakthroughs associated with horizontal drilling, production volume has exceeded expectations through the successful deployment of the Surface to Inseam ("SIS") proprietary Dymaxion technology.

GSS continues to demonstrate increasing gas production as the on line wells de-water. 49 of the 58 wells drilled in the Zaoyuan within the GSS block area are currently on line.  The normalized (unrestricted) production at the Zaoyuan station has exceeded 2,000,000 cubic meters per month (70,600,000 cubic feet per month), a material increase over the same period last year. Gas production continues to rise as the water table is reduced and rising casing pressures in the wells further confirm this progress. The casing pressures have risen as an alternative to flaring the increased gas production while the distribution infrastructure is enhanced and built.

The successful deployment of the SIS wells drilled in the GSS block have demonstrated their efficiency with our first well (GSS008), online for 626 days, having produced 3,279,948 cubic meters (115,782,157 cubic feet) in total to date and currently producing steadily at 8,500 cubic meters per day (300,000 cubic feet). This significantly exceeds our initial expectations. Another example is GSS010, drilled in 16 days, and on production for 102 days, is now producing 7,900 cubic meters a day (278,870 cubic feet). Other wells drilled have similar results. 

The drilling and production success of the SIS wells are clearly a significant catalyst to developing this large resource more rapidly. We have so far drilled five SIS wells in our

GSS block with six laterals. We expect to drill five fewer vertical wells for each SIS horizontal well drilled. This again exceeds our expectations. 

Mr. Randeep Grewal, Chairman and CEO commented:

"We are delighted that BlackRock, one of the world's largest money managers and energy investors, has now become Green Dragon Gas's second largest shareholder. This equity purchase was made following a recent visit to our facilities by the portfolio manager's team member. This transaction with BlackRock within months of the recent Conoco Phillips transaction puts the Company on a path to conclude its decision on a move to a main board.

"The equity placement allowed us to pay off all the convertible debt at the same price, balancing the dilution, while providing important growth capital. The Company's success in the GSS drilling program has resulted in production levels surpassing our infrastructure resulting in either rising casing pressures on the wells or a necessity to flare the production. In view of the current capital on hand, we are in position to immediately commit to permitting the infrastructure enhancements and construction so as to begin our commercial sales by mid 2010.

"The SIS wells have been a game changer for GSS's development and commercialization. We continue to develop our engineering teams to complement the technologies that we now have proven effective in our coal seams.

"A great ending for 2009 and looking forward to another exciting growth year in 2010," concluded Mr. Grewal.

The information contained in this announcement has been reviewed by Elton Dong, Chief Engineer and Vice General Manager Production, Bachelor of Science at Xi'an Petroleum Institute

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