(MENAFN- ProactiveInvestors - UK) Green Dragon Gas(LON:GDG) is China-focused and specialises in extracting gas locked into the huge coal beds the run underneath the country.
It has interests in seven producing and exploration blocks and its partnered by two heavyweights of China's resources sector inCNOOCand PetroChina.
GGZ latest off the block
The next development, its third, will seemingly be the Baotian-Qingshan (GGZ) block in Guizhou Provincem, which has just shifted from exploration to development status.
The block is a 60/40 joint venture between Green Dragon and PetroChina.
Seven coal seams are considered prospective for a coal bed methane development with Total gas-in-place estimated to be 4.55trn cubic feet.
Green Dragon added it has applied for approval of the Chinese Reserve Report (CRR) from the Ministry of Land Resources, which is a precursor to approval of the overall developmentplan (ODP) and expected to come thorugh in 2017.
Randeep Grewal, Green Dragon's chairman, said the GGZwas an exciting prospect as it contained multiple prospective coal seams and is located in Southern China, which has historically been short on gas production.
Progressing with the CRR and ODP accordingly during 2017 could be achieved without distracting from its two existing commercial assets in GSS and GCZ within the Shanxi block, he added.
Reserves jump
In total, Green Dragon and its partners have drilled around 2,037 wells across its acreage but this still may have only scratched the surface of the potential.
An audit at the end of 2015 by consultant Netherland Sewell and Associates (NSAI) showed increases in both the two highest categories of reserves, or 1P and 2P in the jargon.
Reserves, unlike resources, are where the commercial benefits of the gas being extracted have also been proven.
At the end of 2015 estimated 1P (proved) reserves were 173Bcf, a 17% rise, while 2P reserves(proved and probable) jumped 29% to 549Bcf.
3P, which includes possible reserves, rose 4% to 2,379 Bcf.
Across all of its blocks Green Dragon hastotal gas in place of 25.6Tcf
Sales rising
In July, Green Dragon reported sales from its GSS field rose at their peak by 18% to 6mln cubic feet per day.
Total sales volumes rose by 62% from a year earlier and by 43% over the second half of 2015.
Green Dragon said its efforts in the first six months had been to increase recoveries by lowering wellhead gas pressure through the addition of new compression equipment.
Randeep Grewal, chairman, said the focus on compression and production infrastructure would continue through the end of 2016 and into 2017.
Output at the end of 2015 was running at 12.1bcf and this run rate is scheduled to rise to 16bcf by the end of 2016.
Green Dragon eventually wants production capacity to rise to 53bcf.
2015 sees maiden profit
Green Dragon posted its first annual profit in 2015 as gas production continued to ramp up.
Net profit was US$82,000 compared to a loss of almost US$36mln a year ago.Totalrevenues rose to 6% US$37.7mln (US$35.5mln) including subsidies.
A farm-out of assets and debt and equity finance to fund further development and enhance trading liquidity was under consideration.
Green Dragon finished 2015 with cash of US$26.9mln.
China keen to boost use of gas
According to Grewal, China is a bright spot in a dark commodity cycle as it has been consistent in ensuring gas prices are passed through to the domestic producers.
China is acting to cut pollution and reduce its reliance on coal, which currently accounts for 70% of power generation, by switching to alternative fuels including natural gas.
Natural gas use is currently low in China compared with many developed economies in the West, but the country is actively seeking to increase the proportion of gas within its energy mix from 4-5% to 10% by 2020.
'If did not drill another well our production, revenue, cashflow, EBITDA, would consistently compound based on the wells we have already.'
-- updates forGGZ block ---
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