Green Dragon Gas Inks Deal with CNOOC's Unit CUCBM for 5 PSCs in China
Green Dragon Gas Ltd. (GDG), one of the largest independent companies involved in the production and sale of coalbed methane (CBM) gas in China, announced Wednesday that it has entered into a binding agreement with China United Coalbed Methane Corporation (CUCBM), a subsidiary of China National Offshore Oil Corporation (CNOOC), regarding five of its Production Sharing Contracts (PSCs) in China.
- Interests of GDG and CUCBM now aligned with both companies to work together in order to maximize the value within the PSCs which continue in full force and effect
- Secures interest and revenue share of the approximately 1,600 wells drilled by CUCBM in line with PSCs
- CUCBM committed to invest a further $100 million into GSN in return for an additional 10 percent working interest (in addition to an estimated $100 million invested to date)
- CUCBM committed to ongoing cooperation with GDG with full information sharing across wells drilled on PSCs and all local assistance
- PSC exploration terms extended for a further 2 years
- GDG expects $250 million additional GSS infrastructure investment from CUCBM
Randeep S. Grewal, founder and chairman of Green Dragon Gas, commented:
"This agreement substantially de-risks the Company's assets, paving the way for us to rapidly build on existing production and sales and to fully realize the market potential for our gas in China. The agreement also allows the Company to open a cooperative and positive chapter in relations with CNOOC and CUCBM. We now have a well-capitalized, supportive partner committed to developing our vast acreage and producing the substantial multi-trillion cubic feet gas resource with us over the next 20 years. While our GSS block is already in commercial and profitable production, we expect GSN to follow shortly. GDG can now look forward to the continued successful execution of our business plan as the pioneering CBM developer in China.
Nine months of continuous negotiations has resulted in a historic and materially accretive conclusion to the Company and its shareholders and opens a very rewarding chapter. Green Dragon has delivered on its commitment to protect Shareholder value and rights. Throughout the negotiations this objective was adhered to and successfully delivered.
The Company has a direct equity interest in over 1,800 drilled wells. The equity interest varies between 47 percent-70 percent and the total invested capital exceeds $1 billion. We have indeed migrated from an exploration company to a production company with a substantial proven reserve and a large acreage to develop. We expect to participate in cash flows from 2013 onwards from existing legacy wells and continue a robust development plan with our cooperative partner CNOOC and CUCBM.
Given the extent of the drilling already undertaken over the last two years, which had not been accounted for in our previous reserve audits, as previously estimated by our in-house engineers, we would expect to see a significant migration of reserves. Following the audit of our reserves, we will focus on our 150 LiFaBriC well drilling program at GSS, which will be drilled by Greka Drilling.
Finally, we thank all the Shareholders and employees who have supported the Company since inception. The Company has always been very consistent and clear of its bi-lateral treaty protected PSCs right, title and interest and are pleased to conclude this matter amicably in finality."
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