Greka Drilling Regulatory News (GDL)

21 April 2016

Greka Drilling Limited

("Greka Drilling" or the "Company")

Annual results for the year ended December 2015

Greka Drilling Limited (AIM: GDL), the largest independent and specialised unconventional oil & gas driller in Asia, is pleased to announce annual results for the year ended 31 December 2015.

HIGHLIGHTS

OPERATIONAL HIGHLIGHTS:

· There were 3 principal contracted counterparties: Green Dragon Gas Ltd and PetroChina Huabei in China, and Essar Oil Limited in India.

· 62 wells drilled in 2015, a 38% increase over the 45 wells drilled in 2014.

· A total of 76,690 metres drilled in 2015, a 31% increase over 2014 (58,520 metres).

FINANCIAL HIGHLIGHTS:

· Annual revenues in 2015 increased to US$29.9m (2014: US$24.4m).

· Loss before tax widened to US$7.5m (2014: loss of US$5.3m) principally due to foreign exchange loss due to US$ appreciation against RMB. Foreign exchange losses in 2015 were US$3.6m (2014: US$0.8m).

· Earnings before Interest, Tax, Depreciation and Amortisation ("EBITDA") in 2015 was US$2.4m (2014: US$1.9m).

· Gross margin of 20%, compared with 26% in the same period last year.

· Year-end cash and bank deposits of US$2.4m including restricted cash (2014: US$8.0m).

· Following the period end, a US$5 million debt facility was secured on 31 March 2016.

DRILLING HIGHLIGHTS:

· Drilling efficiency improved significantly: in December 2015 we drilled 2,277 metres per rig per month in China, compared with 1,890 metres per rig per month in December 2014.

· The average drilling time for LiFaBriC lateral wells from spud to completion was 32.3 days in 2015 compared with 37.0 days in 2014.

· The longest LiFaBriC section in 2015, surface to intersection, was 1,760m measured depth ("MD") (compared to 1,600m in 2014).

· The longest horizontal well in 2015, surface to target, was 1,928 metres MD for a third party client in China.

· We completed LiFaBriC wells intersecting into directional wells in China at a measured depth of 1,500 metres, which is technically more demanding than intersecting a vertical well.

· We successfully drilled an experimental LiFaBriC well into coal seam 15 in Qinshui Basin, thereby opening up a new resource access for our client Green Dragon Gas.

· The deepest directional well we drilled in 2015 had a 1,311 metres true vertical depth ("TVD") and a 1,429 metres MD.

· Strong HSE focus, no Lost Time Injuries occurred in 2015.

Randeep S. Grewal, Chairman & CEO of Greka Drilling, commented:

"In 2015 we accomplished a 23% increase in revenues despite the challenging environment faced by the global drilling industry due to the rapid collapse in the commodity prices. However our earnings were adversely impacted by foreign exchange losses and by our ongoing investment in India, where we have the only fleet of modern CBM-tailored rigs and we are at the forefront of developments in the CBM industry. We are delighted that Essar Oil Limited recently remobilised two of our rigs in India for drilling in the Raniganj block, which vindicates our commitment to the India market.

In response to limited drilling opportunities in the first half of 2016, we have been taking steps to reduce the fixed cost elements of our business and we are delighted to have procured a US$5 million working capital facility, as announced on 31 March 2016. We are encouraged by the increasing attention in the CBM markets on the benefits of lateral wells, where Greka Drilling is a pioneer with our LiFaBriC technology, and for which we anticipate significant business when the drilling market recovers."

For further information on Greka Drilling, please refer to the Company's website at www.grekadrilling.com or contact:

CHAIRMAN'S STATEMENT

The past year has seen one of the most drastic downturns in living memory for the global oil and gas industry. Notwithstanding these market conditions, Greka Drilling was able to increase the number of wells drilled by 38% in 2015 because of our captive core clients and focus on China and India. The uncertainty over pricing and returns has delayed investment decisions by operators across the industry and surplus rig capacity has built up in most markets.

In China the business had a delayed start to the 30 well LiFaBriC contract with Green Dragon Gas Ltd ("Green Dragon Gas") and it is anticipated that the remaining 16 wells under this contract will be drilled in the second half of 2016. Beyond this particular contract, we have worked closely with Green Dragon Gas to assess historic well performance and have identified a number of re-drill opportunities in areas where heavy faulting may have constrained production rates. Chinese coals are typically faulted and brittle such that well bores can soon become plugged with particles, thus reducing flowrates: our knowledge of the local faulting structure enables us to re-enter the well efficiently and quickly, with the low in-seam drilling time reducing the risk of such plugging. These re-drill wells should enable Green Dragon Gas to augment production rates from these wells with a lower drilling time.

Our experience continues to validate the advantages of the LiFaBriC completion methodology. The first LiFaBriC well drilled, GSS-008 in Qinshui Basin, recently completed 8 straight years of continuous and sustained gas production. To date the well has produced a cumulative 1.28 bcf, it continues to produce 618 mcf/d (17,400 m³/d) and has yet to show any decline in production, whereas all non-LiFaBriC lateral well designs in China have shown declining flowrates within the first three years of production. The Company is immensely proud of this achievement and highlights the benefits of our methodology.

We continue to seek third party drilling opportunities, particularly for PetroChina Huabei, a leading state-owned developer of coal bed methane in China and for whom we can use our directional expertise and specialist rigs to drill lateral wells. Since the oil price collapse we have seen significant over-capacity develop in the drilling markets in China, with an associated drop in standards from drilling companies as they seek to compete on price for vertical and directional drilling. We will not reduce our standards of safety and environmental protection or drill loss-making wells, and instead we are reducing our overhead costs and parking rigs where necessary. The Government of China remains supportive of the coal bed methane industry and we see an increasing focus on drilling lateral wells and as such, we continue to be positive about the medium and long term prospects in China.

In India we drilled an additional 9 vertical and directional wells last year in the Raniganj East Block, West Bengal for Essar Oil Limited. Coal bed methane from this block is the primary feedstock for a newly constructed urea plant, which will require a steady gas supply for many years to come. Essar Oil Limited has re-contracted Greka Drilling to provide drilling services in Raniganj and we are pleased to have been able to announce on 20 April 2016 that a mobilisation order for two of our GD75 rigs to be engaged has now been received.

India has significant resources of shallow onshore gas, particularly coal bed methane, and there is a clear desire from the Government to develop this clean energy source. The development of this energy source has to date been delayed by a pricing policy that has kept wellhead gas prices below the import parity price, such that major resource holders have been reluctant to invest. However, this is now changing with the Government recently introducing new pricing policies to encourage both onshore and offshore gas developments, and state-owned coal bed methane resource holders have announced major investment plans. Greka Drilling has the best quality and safest coal bed methane rigs in India and we expect our rigs to be more fully utilised in the second half of 2016.

While Greka Drilling was able to drill 31% more metres in 2015 than in 2014 this was still below our planned metrage based on the contracts with Essar Oil Limited and Green Dragon Gas, due to adjustments in our clients' development schedules. The Company's losses widened in 2015 reflecting the appreciation of the US dollar against the RMB over the year in respect of payables. Our Earnings Before Interest, Tax, Depreciation and Amortisation ("EBITDA") remained positive in 2015 as in all previous years.

In March 2016 we secured a US$5 million loan financing for working capital purposes. This loan will provide flexibility and support for the balance sheet in the current market downturn. As new investment re-emerges in the gas industry we will seek out drilling opportunities in new markets such as Australia and Europe; but our current focus, at least for the first half of 2016, is to reduce expenditures and prepare for the eventual upturn in our markets. Our current operational focus on China and India, with more flexibility in operating costs and localised pricing, coupled with the new loan facility, leaves us better positioned than most of our global peers and provides the best opportunities for shareholder value.

Randeep S. Grewal

Chairman and Chief Executive Officer

21 April, 2016

Consolidated Statement of Comprehensive Income

Consolidated Statement of Financial Position

Consolidated Statement of Changes in Equity

The following describes the nature and purpose of each reserve within owners' equity.

Share capital: Amount subscribed for share capital at nominal value.

Share premium: Amount subscribed for share capital in excess of nominal value.

Invested capital: Amount represents the difference between the nominal value of the Company's share of the paid-up capital of the subsidiaries acquired and the Company's cost of acquisition of the subsidiaries under common control.

Reserve fund: The rules and regulations of the People's Republic of China require that one tenth of profits as determined in accordance with China Accounting Standards for Business Enterprises in each period be reserved for making good previous years' losses, expanding business, or for bonus issues, provided that the balance after such issue is not less than 25% of the registered capital. The amount is non-distributable.

Foreign exchange reserve: Foreign exchange differences arising on translating the financial statements of foreign operations into the reporting currency.

Retained (deficit)/earnings: Cumulative net gains and losses recognised in profit or loss.

Consolidated Statement of Cash Flows

Notes Forming Part of the Financial Statements

1 GENERAL

Greka Drilling Limited (the "Company") was incorporated in the Cayman Islands on 1 February 2011 under the Companies Law (2010 Revision) of the Cayman Islands. The registered office and principal place of business of the Company are located at PO Box 472, Harbour Place 2nd Floor, 103 South Church Street, George Town, Grand Cayman KY1-1106, Cayman Islands and 29th Floor, Landmark Plaza, No. 1 Business Outer Ring Road, Central Business District, Henan Province, Zhengzhou 450000, PRC respectively.

The Company was established as an investment holding company for a group of companies whose principal activities consist of the provision of coal bed methane drilling services in China and India. The Company and its subsidiaries are hereinafter collectively referred to as the "Group".

The financial statements are presented in United States dollars which is same as the functional currency of the Company. The functional currencies of the subsidiaries are Renminbi (RMB) for China and Rupee for India.

2 PRINCIPAL ACCOUNTING POLICIES

The financial statements have been prepared in accordance with IFRS as adopted by the European Union, that are effective for accounting periods beginning on or after 1 January 2014. The principal accounting policies adopted in the preparation of the consolidated financial statements are set out in the Group's full annual report and accounts for the year ended 31 December 2015.

3 REVENUE AND SEGMENT INFORMATION

The Group determines its operating segment based on the reports reviewed by the chief operating decision-makers ("CODMs") that are used to make strategic decisions.

The Group reports its operations as two reportable segments: the provision of contract drilling services in the PRC and India. The division of contract drilling operations into two reportable segments is attributable to how the CODMs manage the business.

The accounting policies of the reportable segments are the same as those described in the summary of principal accounting policies. We evaluate the performance of our operating segments based on revenues from external customers and segmental profits.

Drilling services revenue and management services revenue represent the net invoiced value of contracted drilling services and management services provided to two major customers, one in the PRC (who is a related party) and the other in India, from which the entire Indian segment revenue of $4,230,000 is generated. The rest of the revenue in PRC is derived from other customers from each of whom less than 10% of total revenue is derived in 2015 and 2014.

For the Year Ended 31 December 2015

For the Year Ended 31 December 2014

As at 31 December 2015

As at 31 December 2014

4 LOSS FROM OPERATIONS

Loss from operations is stated after charging:

5 FINANCE INCOME

6 FINANCE COSTS

7 STAFF COSTS

8 EARNINGS PER SHARE

The calculation of the basic and diluted earnings per share attributable to the owners of the Company is based on the following data:

There were no potentially dilutive instruments issued in 2015 and 2014. Potentially dilutive instruments (warrants) have been issued post year end, however this has no impact on the diluted EPS given the Group has made a loss for the year.

9 TAXATION

The reasons for the difference between the actual tax charge for the years and the standard rate of corporation tax in the PRC applied to the (loss)/profit for the year are as follows:

Taxation for the Group's operations in the PRC is provided at the applicable current tax rate of 25% on the estimated assessable profits for the year. Taxation for operations in India is taxed at 4.326% of gross revenue.

10 TRADE AND OTHER RECEIVABLES

The fair values of trade and other receivables approximate their respective carrying amounts at the end of each reporting period due to their short maturities. There is no allowance for impairment of receivables.

The ageing analysis of trade receivables prepared based on allowed credit terms that are past due but not impaired as of the end of the reporting period is set out below. The debtors are not considered to be impaired given post year end receipts.

11. CASH AND BANK BALANCES

* The restricted bank balance represents deposits placed in financial institutions to secure bills payable of an equivalent amount related to trade payables of US$ 2.4m.

12 TRADE AND OTHER PAYABLES

Trade and other payables are expected to be settled within one year. The fair values approximate their respective carrying amounts at the end of each reporting period due to their short maturities.

13 LOANS AND BORROWINGS

The banks loans are all secured. The detailed information regarding loan maturity dates and interest rates are below:

Loans due to SPD Bank, CITIC Bank and Ping An Bank have been repaid post year end.

14 PROVISIONS

The provision in the year relates to a lawsuit initiated against the Group by a contractor in China. Whilst the Group is appealing the lawsuit decision and continues to negotiate with the contractor, a provision has been prudently recognised for the full amount.

15 SUBSEQUENT EVENTS

On 31 March 2016, Greka Drilling Limited (the "Company") secured US$5 million in loan financing from Guaranty Finance Investors LLC ("GFI"), the proceeds of which it expects to use for working capital purposes. The loan, on which interest is payable at the rate of 7% per annum, is repayable on 31 March 2019 and is unsecured (although first priority would be granted to the GFI loan if the Company created any security over its drilling rigs in relation to other indebtedness).

As part of the financing, the Company has issued GFI with warrants to subscribe for 35,000,000 new ordinary shares in the Company at an exercise price of 5p per share, representing a premium of 43% to the Company's closing share price on 29 March 2016. The warrants are exercisable at any time between 1 April 2017 and 31 March 2019. At any time after 31 March 2017 the Company may elect to prepay the loan, provided that the amount repaid (including interest paid previously) would provide GFI with a total annual return of 25%; such prepayment would be deemed to have redeemed the warrants in lieu of issuing new shares.

16 PUBLICATION OF NON-STATUTORY ACCOUNTS

The financial information for the years ended 31 December 2015 and 31 December 2014 set out in this Announcement does not constitute the Group's statutory financial information but is extracted from the Company's audited financial statements for those years. The auditors have reported on the full financial information for both periods and their reports were unqualified and did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their reports.

17 ANNUAL REPORT

The Company's Annual Report and copies of this announcement will be available on the Company's website at www.grekadrilling.com and from the office of the Company's Nominated Adviser, Smith & Williamson Corporate Finance Limited at 25 Moorgate, London EC2R 6AY, United Kingdom.