Green Dragon Gas - Turnaround in Production Performance
​Green Dragon Gas (GDG) published FY16 results on April 27th. We are encouraged by the 5.6% production increase y-o-y, which although 8% lower than our expectation, demonstrates the positive impact of the improved compression at the wellhead in the GSS block. We believe that the drilling of 147 new wells in GCZ, following the recent approval of the ODP by the Chinese authorities, will participate in a turnaround in production performance. We are also pleased by the lower operating costs achieved compared to our forecasts. However, these results are negatively impacted by a very poor performance of the retail business. We view the imminent disposal of the retail operation as positive, as it will bring cash proceeds, eliminate a source of significant losses and provide more transparency into the CBM. We are encouraged by the focus on strengthening the balance sheet by refinancing the debt, selling non-core assets.
Green Dragon Gas is an investment holding company. Through its subsidiaries, Co. is engaged in the exploration, development and production of coal bed methane in the People's Republic of China (PRC). The coal bed methane operations in the PRC are conducted through production sharing arrangements with China United Coal Bed Methane Corporation Ltd. As of Dec 31 2012, Co. conducted its businesses through these segments: sales of coal bed methane gas; transportation; pipelined gas distribution; gas stations sales; gas filling equipment sales; and corporate. As of the same date, Co. had net proved reserves of 59.00 billion cubic feet of coal bed methane.
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