Greka Drilling Regulatory News (GDL)

30 September 2013

Greka Drilling Limited

("Greka Drilling" or "the Company")

Interim Results

Greka Drilling Limited (AIM: GDL), the largest independent and specialized unconventional gas driller in China, is pleased to announce its results for the half year ended 30 June 2013.

FINANCIAL HIGHLIGHTS

· Revenue of US$14.4m (H1 2012: US$28.3m)

·Loss of US$2.4m (H1 2012: profit of US$0.7m)

OPERATIONAL HIGHLIGHTS

·36,347 meters drilled, compared to 57,997 meters drilled in the same period 2012; the experience gained in the area allowed the Company to drill LiFaBriC wells with fewer branches reducing meterage

· Vertical wells averaged 25 drilling days versus 37 days in the same period in 2012

· Horizontal wells averaged 87 drilling days (radius bend and lateral section)

·Directional wells averaged 20 days; deepest well 1,076m Measured Depth ("MD")

·LiFaBriC wells averaged 61 days improving on previous Company guidance of 90 days. Longest and deepest LiFaBriC well drilled: 1,917m MD and 1,040m True Vertical Depth

·9,286 man-hours of employee training

·Significant stand-by and down time due to customer transition

CUSTOMER OVERVIEW

·Green Dragon Gas, historically the largest client, curtailed its drilling program in the first half of the year until the favorable conclusion of its title issues. These have now been resolved and the Company has recommitted itself to reaching its production targets of 18bcf.

·CNPC Huabei Changzhi (CBM) has planned to drill 300 wells in its Anze Block, Shanxi Province. A total of 110 are targeted for this year. Of this program, the Company has completed two directional wells till date. In addition, an exploration well will be drilled by rig GD75-21 and a Horizontal well will be drilled by rig GD75-25. Following the results of these two wells, the Company expects to be awarded an additional 70 wells planned by CNPC Huabei Changzhi from their total program for this year.

·CNPC Huabei Jincheng (CBM) has contracted the Company to drill at its Jincheng Block, Shanxi Province in two locations. The Company successfully completed a LiFaBriC well earlier in the year which is currently on production and being evaluated. Presently, the Company is drilling a four directional well program using GD75-23, of which the second directional is currently being drilled.

·Sinopec Huadong CBM (BOFA) contracted the Company for one year program to drill 50 wells at Jixian, Shanxi Province. Sinopec Huadong CBM has a 3,000 well program with 600 wells in total planned for this year. Rig GD75-22, supported by Rig GS685-2, has completed three wells till date and the fourth is being currently drilled. During these test wells, the Company's performance continued to improve. The TVD for the third well was 1,214 m and the MD was 1,292 m. This was achieved in 10 days from spud to completion and compares with 19 days for the first, with a TVD of 1,225 m and MD 1,341 m. The Company expects to continue the drilling program and, subject to agreement with the client on drilling locations, drill the balance of the one year program as planned.

·Sinopec Huabei (Petroking) has planned for a 50 well program during the current exploration phase for unconventional oil within the Xunyi Block, Shaanxi. The Company is under contract to drill 100 wells subject to successful drilling of the first 20 drilled across the Sinopec Huabei acreage inclusive of the Xunyi Block. The Company¡¯s GD75-12 and GD75-14 are currently drilling under this program. Rig GD75-14 has completed one directional well and is currently drilling the second directional well of a seven well program. Additionally, GD75-12 spud the first Horizontal Well on 1st August which is currently being drilled in co-operation with Sinopec engineers.

Randeep Grewal, Chairman and Chief Executive of Greka Drilling, commented:

"Our objective of diversifying the client base was well executed with current drilling activities progressing under five different customer contracts.

Notwithstanding the positive transition to a diverse client base, our historically predominant client, Green Dragon Gas, curtailed its drilling program. This negatively impacted our first half results but we are pleased that they have re-engaged in their programme, using Greka Drilling as their drilling partner. Whilst the success achieved in diversifying away from a single client has been a success, the time taken to fully capitalize on the increased customer base did not offset the effects of losses from the drilling campaign from the first customer. We expect to continue into 2014 with this diversified client base and a strong backlog."

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

CHAIRMAN'S STATEMENT

This year will be remembered as a year of transition and growth for the Company towards its independence from its predecessor parent Green Dragon. The transition, as with most, requires managing the related collateral issues which is precisely what the business did during the first half and will continue to during the course of rest of this year.

The Company did very well in penetrating the Chinese E&P market and is quickly being acknowledged as a viable drilling contractor with an environmentally progressive, and technologically advanced efficient drilling service. Our rigs are currently on China National Petroleum Corporation, Sinopec and Petrochina blocks which are the three largest on-shore E&P companies in China. Within this diverse customer base, we are drilling Coal Bed Methane vertical, directional, horizontal and LiFaBriC wells as well as directional and horizontal wells in Shale Oil & Gas. These clients have continuous large drilling campaigns across their various assets and thus the initial acceptance of Greka Drilling this year on a trial basis presents the foundation for significant growth potential in the years to come.

Our transition from a single client, Green Dragon, onto a broader client base and varied geologies is complete. The technical aptitude and competency of the Company's staff and equipment has been proved.

Notwithstanding the positive transition to a broader client base, our historically predominant client curtailed its drilling program which negatively impacted our first half results. In essence, the single client exposure crystallized and whilst we have gained new clients, the scale of the new business was not sufficient to offset the fall in Green Dragon's drilling

We expect the trial and exploration activities for our new clients to continue rest of this year as they did during the first half. We expect to enter 2014 with a significant backlog with all our five clients which is expected to be diversified in geology, geography and drilling service. We look forward to such diversification to mitigate concentration risk and achieve a higher utilization rate from our drilling rigs next year than in this transitional year.

Randeep S. Grewal

Chairman

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONSOLIDATED STATEMENT OF CASH FLOWS

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

1. GENERAL INFORMATION

The consolidated unaudited interim financial information set out in this report is based on the consolidated financial statements of Greka Drilling and its subsidiary companies (together referred to as the "Group"). The consolidated financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2012, which have been prepared in accordance with International Financial Reporting Standards (IFRS and IFRIC interpretations) issued by the International Accounting Standards Board except for IAS 34. The consolidated financial statements of the Group for the 6 months ended 30 June 2013 were approved and authorized for issue by the Audit Committee and the Board on 29 September 2013.

2. ACCOUNTING POLICIES

The consolidated financial information for the six months ended 30 June 2013 and 30 June 2012 is unaudited and does not constitute the Group¡¯s statutory financial statements for those periods. The consolidated financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2012, which have been prepared in accordance with IFRSs as adopted by the European Union. The Group have changed the estimate of the useful economic life of certain assets from a fixed period to an activity day basis. All other accounting policies and estimates are consistent with the annual financial statements for the year ended 31 December 2012.

Basis of preparation

After making enquiries, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the half-yearly consolidated financial statements.

The consolidated financial information is presented in United States dollars and all values are rounded to the nearest thousand dollars (US$'000) except when otherwise indicated.

The consolidated financial information has been prepared in accordance with the requirements of the AIM Rules for Companies and in accordance with this basis of preparation. The basis of preparation describes how the financial information has been prepared in accordance with IFRSs except as described above.

Except as described above, the consolidated financial information has been prepared in accordance with IFRSs as adopted by the European Union, that are effective for accounting periods beginning on or after 1 January 2012. The principal accounting policies adopted in the preparation of the financial information are set out below. The policies have been consistently applied to all the years presented, unless otherwise stated.

The preparation of consolidated financial information in conformity with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group¡¯s accounting policies. The areas involving a higher degree of judgment or complexity or areas where assumptions and estimates are significant to the financial information are disclosed in note 2 to the financial information. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision only affects that period or in the period of revision and future periods if the revision affects both current and future periods.

3. REVENUE AND SEGMENTAL INFORMATION

The Group has one reportable segment as set out below. The operating results are regularly reviewed by the Group¡¯s chief operating decision-makers (¡°CODMs¡±) that are used to make strategic decisions.

Drilling services revenue represents the net invoiced value of contract drilling services provided to one customer. The amounts of each significant category of revenue recognized during the periods ended 30 June 2013, 31 December 2012 and 30 June 2012 are as follows:

4. FINANCE INCOME

5. FINANCE COSTS

6. TAXATION

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 period.

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

7. EARNINGS PER SHARE

Basic earnings per share is based on the loss for the period US$2,364,055 (first half 2012: profit for the period, US$670,649) and the weighted average number of 398,245,758 ordinary shares in issue during each period.

In accordance with IAS 33 the weighted average number of shares for prior periods has been adjusted as if the Group reconstruction occurred at 1 January 2010.

8. PROPERTY, PLANT AND EQUIPMENT

During the period, the Group incurred approximately US$209,000 on additions to plant and equipment (30 June 2012- US$51,661,809, 31 December 2012 - US$57,096,000).

9. DEFERRED TAXATION

There were no unrecognized deferred tax assets or liabilities in the period.

10. INVENTORIES

11. TRADE AND OTHER RECEIVABLES

12. CASH AND CASH EQUIVALENTS

The restrict cash and cash equivalents: During the period, the Group has US$7.2m restrict cash and cash equivalent, of which, US$1.4m deposit for Acceptance of Draft and US$5.8m deposit for bank loan.(Dec 31,2012-US$977 deposit for Acceptance of Draft).

13. TRADE AND OTHER PAYABLES

14. LOANS AND BORROWINGS

15. NOTES PAYABLE

The Company issued US$1,436,058 bank notes with 6-months period to suppliers for purchasing drilling equipment with same money security.

16. RELATED PARTY TRANSACTIONS

Save as disclosed in notes 11 and 13, there were no other related party transactions that are required to be disclosed. Transactions between the Company and its subsidiary undertakings which are related parties, have been eliminated on consolidation and are not disclosed in this note.