China Gas Delivering a Cleaner Energy Mix for China Presented by - - PowerPoint PPT Presentation

China Gas

Delivering a Cleaner Energy Mix for China

Presented by Randeep S. Grewal, Green Dragon Gas

Natural Resources Forum – 23rd February 2016

China Gas: Delivering a balanced and environmentally prudent energy supply

Disclaimer

This presentation does not constitute an invitation to underwrite, subscribe for, or otherwise acquire or dispose of any shares of Green Dragon Gas Ltd. (the “Company”) in any jurisdiction. The Company’s shares have not been and will not be registered under the US Securities Act of 1933 (the “Securities Act”) and may not be offered or sold within the United States absent registration under the Securities Act or an exemption from registration. The information contained in this presentation is given in good faith but no representation or warranty is made in relation to the accuracy

• r completeness of the information, or any oral information provided in connection therewith, or the data it generates and no

responsibility, obligation or liability is or will be accepted by the Company or its affiliates or advisors or by any of their respective officers, employees or agents in relation to it. This presentation contains certain forward looking statements with respect to the financial condition, results, operations and businesses

• f the Company. The statements and forecasts involve risk and uncertainty because they relate to events and depend on

circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward looking statements and forecasts. Past performance is no guide to future performance and persons needing advice should consult an independent financial advisor. This presentation and the information contained in it are confidential and should not be distributed, published or reproduced, in whole or in part, or disclosed by recipients directly or indirectly to any other person.

More than

80%

• f growth in global coal

consumption between 2003- 2013 came from China Every week

4

coal-fired power plants per week commissioned 2015

China’s Energy Challenge

China Gas: Delivering a balanced and environmentally prudent energy supply

China’s Energy Mix

Just 4-5% of China’s energy mix is provided by Natural Gas Government seeking to increase Natural Gas to

• ver 10% of energy mix by 2020

China is already the fastest growing gas market in the world

Gas consumption per person - TOEPY

0.04 0.11 0.17 0.80 0.94 2.12 2.59

• 0.50

1.00 1.50 2.00 2.50 3.00 India China Brazil Japan U.K U.S.A Russia

Energy consumption per person - TOEPY

0.5 1.5 2.2 2.9 3.6 4.7 7.2

• 1.0

2.0 3.0 4.0 5.0 6.0 7.0 8.0 India Brazil China U.K Japan Russia USA

China’s gas consumption per person is only

10%

• f the UK

China Gas: Delivering a balanced and environmentally prudent energy supply

tonnes of oil equivalent tonnes of oil equivalent

STABLE ENERGY POLICIES AIM TO INCREASE NG USE TO 10% BY 2020 ROBUST DOMESTIC GAS PRICES

China’s Political Environment

~US$0.9/Mcf GOVERNMENT SUBSIDY FOR CBM

China Gas: Delivering a balanced and environmentally prudent energy supply

China gas prices holding steady

(1) Values as of Dec 31st year end (2) Company realized price in US$/boe Source: Company Data, Bloomberg

20 40 60 80 100 120 140 160 2006 2007 2008 2010 2011 2012 2014 2015 Brent GDG

China Gas: Delivering a balanced and environmentally prudent energy supply

US$/BBL

Green Dragon Gas Snapshot

(LSE: GDG) Operating exclusively in China for 20 years Leading independent CBM gas producer in China Strong relationships with leading NOCs

$4.0bn

2P Reserves

2037

Drilled Wells

Focused on monetising production and sales in 2016

China Gas: Delivering a balanced and environmentally prudent energy supply

12.12Bcf exit rate in 2015 10th year listed in London

2016 – Driving production capacity and cash flow

2015 12 bcf*

2016 16 bcf*

2.3 million homes 3.1 million homes

*Production capacity

China Gas: Delivering a balanced and environmentally prudent energy supply

Domestic gas prices remain robust China gas a good bet China addressing its energy challenge

Conclusion

China Gas: Delivering a balanced and environmentally prudent energy supply

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China’s leading independent gas producer

www.greendragongas.com LSE: GDG.LN “20 Years of CBM in China”

This presentation does not constitute an invitation to underwrite, subscribe for, or otherwise acquire or dispose of any shares of Green Dragon Gas Ltd. (the “Company”) in any jurisdiction. The Company’s shares have not been and will not be registered under the US Securities Act of 1933 (the “Securities Act”) and may not be offered or sold within the United States absent registration under the Securities Act or an exemption from registration. The information contained in this presentation is given in good faith but no representation or warranty is made in relation to the accuracy or completeness of the information, or any oral information provided in connection therewith, or the data it generates and no responsibility, obligation or liability is or will be accepted by the Company or its affiliates or advisors or by any of their respective officers, employees or agents in relation to it. This presentation contains certain forward looking statements with respect to the financial condition, results, operations and businesses of the Company. The statements and forecasts involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward looking statements and forecasts. Past performance is no guide to future performance and persons needing advice should consult an independent financial advisor. This presentation and the information contained in it are confidential and should not be distributed, published or reproduced, in whole or in part, or disclosed by recipients directly or indirectly to any other person.

Disclaimer

12

GDG – a snapshot

Focus on production and cash flow

• Exceeded 2015 annual production capacity target of 12 bcf
• Investment in infrastructure – converting production potential to sales
• Monetising invested capital to enhance shareholder return
• CNOOC significantly advancing infrastructure build on GSS in line with

commitments

• GCZ providing consistent cash flow following cost recovery by CNPC

2016 – a transformational year

• Build on production success through additional well connections and

infrastructure

• Coal Seam 15 to compound reserve growth and production potential
• Target 16 bcf gross annual production rate
• Significant sales and production increases from existing wells

“…Connections are everything…”

Leading China CBM independent

Large reserves base

• Largest publicly listed CBM reserves base in China: 1P: 173Bcf; 2P: 549Bcf; 3P: 2,379Bcf*
• Reserves independently verified by 10 consecutive CPRs
• Six Inland Production Sharing Contracts covering 1,869,599 acres (7,566 km² )
• Ongoing migration to 1P reserves: 17% increase at Yearend 2015

Integrated operations and strong partners

• Strong, highly capitalised Chinese partners: CUCBM (CNOOC), CNPC and PetroChina
• Proven PSC titles: Protected by Netherlands-PRC Bilateral Investment Treaty
• Equity participation in over 2,000 wells

Centrally located among China’s gas consumers

• Multiple routes to monetise gas: GDG-owned refuelling stations, industrial customers, multiple

gas pipelines, sales via electricity

Experienced leadership and strong corporate profile

• Highly experienced operational management team with a track record in Coal Bed Methane
• High quality shareholder base: includes Aberdeen, Chandler Corp, Fidelity, Platinum Asset,

GIC, Management

8

Blocks

$4.0bn

2P Reserves

2037

Drilled Wells

1.9mn

acres

*YE2015

Upstream asset portfolio: 6 PSCs over 8 Blocks

Qinyuan PSC (GQY PSC) 3,665km2 Baotian- Qingshan PSC (GGZ PSC) 947km2 Fengcheng PSC (GFC PSC) 1,541km2 Shizhuang South PSC (GSS PSC) 388km2 Shizhuang North PSC (GSN PSC) 375km2 Chengzhuang Block (GCZ Block) 67km2 Existing main gas pipelines CNG mother stations Group CBM blocks Capital of province

Panxie East PSC (GPX PSC) 584km2

P Production D Development / Pilot stage EA Exploration & Appraisal P P D EA EA EA EA Both included under Shizhuang South PSC

GSS

GDG interest: 60% Partner: CNOOC Operator: GDG 1P/2P/3P: 153/473/1,379 bcf

GCZ

GDG interest: 47% Partner: PetroChina Operator: PetroChina 1P/2P/3P: 15 /31/ 52 bcf

GSN

GDG interest: 50% Partner: CNOOC Operator: CNOOC 1P/2P/3P: 5 / 18 / 721 bcf

GQY (A)

GDG interest: 10% Partner: CNOOC Operator: CNOOC 1P/2P/3P: N/A

GQY (B)

GDG interest: 60% Partner: CNOOC Operator: GDG 2C: 17 bcf

GFC

GDG interest: 49% Partner: CNOOC Operator: GDG 1P/2P/3P: N/A / 26 / 228 bcf

GPX

GDG interest: 60% Partner: CNOOC Operator: GDG Best Prospective: 16 bcf

GGZ

GDG interest: 60% Partner: PetroChina Operator: GDG Best Prospective: 416 bcf

* Total wells is inclusive of non operated wells Reserves by Netherland, Sewell & Associates, Inc as of December 31, 2015

EA D

1P 2P 3P Contingent Prospective

Reserves Breakdown

GQY Net 1C: 6 Bcf Net 2C: 17 Bcf Net 3C: 32 Bcf GQY Low Est: 320 Bcf Best Est: 800 Bcf High Est: 1,586 Bcf GFC Low Est: 63 Bcf Best Est: 137 Bcf High Est: 477 Bcf GPX Low Est: 0 Bcf Best Est: 16 Bcf High Est: 388 Bcf GGZ Low Est: 20 Bcf Best Est: 416 Bcf High Est: 941 Bcf Net: 173 Bcf PV10: US$1,227m CAPEX: US$114m Net: 549 Bcf PV10: US$4,022m CAPEX: US$353m Net: 2,379 Bcf PV10: US$16,210m CAPEX: US$2,095m Net 1C: 6 Bcf Net 2C: 17 Bcf Net 3C: 32 Bcf Low Est: 404 Bcf Best Est: 1,369 Bcf High Est: 3,392 Bcf

Source: Netherland, Sewell & Associates, Inc as of December 31, 2015

GCZ Net 15 Bcf PV10 US$124m GSS Net 153 Bcf PV10 US$1,068m GSN Net 5 Bcf PV10 US$36m GSS Net 473 Bcf PV10 US$3,344m GFC Net 18 Bcf PV10 US$121m GCZ Net 31 Bcf PV10 US$238m GSN Net 26 Bcf PV10 US$319m GSS Net 1,379 Bcf PV10 US$9,429m GFC Net 228 Bcf PV10 US$2,666m GCZ Net 52 Bcf PV10 US$362m GSN Net 721Bcf PV10 US$3,754m

Reserve Progression

16 27 33 41 43 59 126 148 173 53 121 168 250 263 324 898 1464 1227

1P Progression

1P(Bcf) NPV(US$m) 233 258 261 273 307 313 382 427 549 677 928 1255 1527 1801 1818 2806 4296 4022

2P Progression

2P(Bcf) NPV(US$m) 190621612333260025132508238222902379 3342 9351 12333 12613 12676 16124 21181 16210

3P Progression

3P(Bcf) NPV(US$m)

Source: Netherland, Sewell & Associates, Inc as of December 31, 2015 Net Reserve and Net PV10 values

17

50 100 150 200 250 300 350 400 450 500 2014 2015 0.150 0.152 0.154 0.156 0.158 0.160 0.162 2014 2015

Reserve Report Key Changes

0.1 0.2 0.3 0.4 0.5 0.6 0.7 2014 2015 2P F&D Cost (US$/Mcf) 2P reserves (Bcf) 100 200 300 400 500 600 2014 2015 USDRMB exchange rate 2P Capital Investment Profile (US$mn) Source: Netherland, Sewell & Associates, Inc as of December 31, 2015

Gas sales, robust pricing

China USD $/mcf

CNG Retail 16.0 PNG Wholesale 9.0 GDG weighted avg. realised 9.5 Government subsidy 0.9 LOE 2.0 Indicative margin 8.4

International USD $/mcf *

US – Henry Hub 2.61 UK – NBP 6.57 Australia – AEMO Index 3.58

* Daily average spot price 2015

• Government support through subsidy and VAT concessions
• Competitive LOE – low cost environment
• Strong margins from sales

Taiyuan Yangyuan Changzhi Jiexiu

Shanxi

Ningwu Datong Lishi GSN Yangcheng

Greka Distribution Centre

Shan Jing III Natural Gas Pipeline

Gas sales optionality

Production proximate to major pipeline infrastructure Multiple local sales channels and potential gas customers

1,000 2,000 3,000 4,000 5,000 6,000 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16

Daily gas sales (mcf/day)

Daily Gas Sale (mcf/day) Linear (Daily Gas Sale (mcf/day))

GDG sales progression

Infrastructure Drilling Optimisation New connection

Driving 2016 production: Focus on monetising historical investments

Trend

60 80 100 120 140 160 180 200 220 240 20% 25% 30% 35% 40% 45% 50% Jan 2015 Feb 2015 Mar 2015 Apr 2015 May 2015 Jun 2015 Jul 2015 Aug 2015 Sep 2015 Oct 2015 Nov 2015 Dec 2015 Mmcf Percentage Actual Sales Ratio Total Sales (MMcf)

• c. 27% increase

Monetising production value

2015 Sales to Production Ratio – GSS operated

Source: Company data as of Dec 31, 2015

Continued improvement throughout 2015, building in 2016 Optimising production circuits and pressure balance Active programme of well enhancement & workover

• c. 16% increase

GSS infrastructure build-out

• Annual processing capacity of 22.81 bcf
• Shizhuang and Shizhuang #1 Stations complete on time
• CNOOC constructed pipe network >90% complete
• Ongoing tie-in wells to infrastructure

Station bcf Status

Greka IPF 6.49 Online Guixian station 3.60 Online Shizhuang station 1.48 Online Shizhuang south #1 11.24 Online Online & operating - subtotal 22.81 Shizhuang south #2 10.36 Ongoing Shizhuang south #3 10.12 Ongoing Shizhuang south #4 10.23 Ongoing Total 53.42

Proven technology for China

Source: Company data as of Dec 31, 2015

Consistent performance Repeatedly

Methane Inseam RB Vertical Fault

• Perfected drilling wells across fault in brittle coal
• Natural desorption: higher total well yield
• No fracking or chemicals used in drilling
• Consistent and stable production: no observed decline
• Clean water by-product

20 40 60 80 100 120 140 160 180 200 100 200 300 400 500 600 700 2008 2009 2010 2011 2012 2013 2014 2015 Daily Gas Prd (mcfd) Daily Water Prd (bbl/d)

• 25-

Coal Seam 3 floor contour map in Zaoyuan area

GSS – known and well defined geology

Source: Company data

• Well defined coal seams #3 and #15

• 26-

Subsurface – Coal Seam 15 compounding growth

• 1st LFB drilled in coal seam 15 encountered a 4 metres thick section of coal seam
• Clean vertical intersection and avoiding penetration to adjacent limestone
• Well following standard dewatering progress, connected to infrastructure
• Exhibiting casing pressure - a positive sign of gas desorption

100 meters

Corporate Social Responsibility

Commitment to the Environment

• Zero use of harmful chemicals
• Own gas to generate power for operations
• Clean water as a by product of production for irrigation or

consumption

• Use of biodegradable drilling mud
• No recorded environmental incidents

Commitment to the communities we operate

• Drilling of water wells for local villages
• Maintenance of local infrastructure

Commitment to our people

• Zero lost time incidents in 2015
• In depth HSE policy and continuous training
• Ongoing commitment to safety

Strong China market fundamentals

2037 drilled wells ramping up production

Well defined known reserve base

Proven completion methodology

Multiple routes to market

GDG – fundamentals in place for growth

Appendix

Energy consumption per person

(million people) Growth rate (%) (energy consumption per person – toe) (gas consumption per person - toe)

Supportive Chinese market dynamics

• Largest population in the world
• One of the highest GDP growth rates (2014: 7.3%; projected 6.5% p.a. to 2020)
• Currently very low energy consumption per capita – projected to increase with a rising middle class
• Extremely low proportion of gas in the energy mix – expected to grow to 10% by 2020E with strong support from the government

Population 2014A GDP growth rate

China - Solid Fundamentals for Gas Demand Growth

Source: BP Statistical Review, June 2015; IMF World Economic Outlook Database, April 2015

Gas consumption per person

64 127 143 198 316 1243 1361 500 1000 1500 U.K Japan Russia Brazil U.S.A India China

0.5 1.5 2.2 2.9 3.6 4.7 7.2

• 2.0

4.0 6.0 8.0 India Brazil China U.K Japan Russia USA

0.04 0.11 0.17 0.80 0.94 2.12 2.59

• 1.00

2.00 3.00 India China Brazil Japan U.K U.S.A Russia

0% 1% 2% 3% 3% 7% 7%

0% 2% 4% 6% 8% Brazil Russia U.S.A Japan U.K India China

Natural Gas 10%

Crude Oil 13% Coal 62% Hydro & Nuclear 9% Wind, Solar, Biomas 6%

Natural Gas 4%

Crude Oil 17% Coal 66% Hydro 8%

Government Backing Domestic Supply Growth

China’s 13th Five Year Plan Highlights:

• 13th Five Year Plan due March 2016 expected to continue theme of gas and

clean fuels

• “Energy Revolution" with clean, safe resources and exploring deposits of

natural, shale and coal bed gas

• Clean production to be promoted and green and low carbon industry systems

set up

• Green finance to be promoted and Green Development Fund established
• Increasing gas in the primary energy mix to above 10% (2020)

Strong incentives from the government to promote domestic gas production:

• Elements of CBM sales based on market pricing (unregulated)
• Beneficial tax treatments to include: value-added tax refunds, import tariff

waiver, accelerated depreciation, resource tax exemptions

• Priority treatment of CBM for pipeline and power station access

China’s Primary Energy Share (2014A – 2020F) 2014A

Source: CEIC, NDRC, IEA, Energy Development Strategy Action Plan (2014-2020), BP Statistical Review June 2015

31 2020F

2020F

13.5 China’s development plan

Highlight of the 13th Five-year plan

• Continue to develop wind, solar, biomass, water, geothermal and

nuclear energy

• Grant natural gas exploration rights to more companies and

encourage exploitation of shale and coalbed gases

• Promote green finance
• Establish a Green Development Fund

Governance Technology Education Environment

Production Sharing Contracts

Source: Company data as of June 30, 2015 Note: GDG wells to receive preferential recovery and legacy wells to receive preferential recovery *GDG has the option to increase its participating interest to 70%

CNOOC & CUCBM GDG 49% 60% 50% 60% 51% 50% 40% 10% 90% Block A GCZ Block B 50% 60% 40% 60% 40% 40% PetroChina CNPC

GFC GSS* GSN GQY GPX GGZ

PCCBM 47% 53%

US$79m US$740m US$54m US$92m US$102m US$19m US$27m US$1.1bn