Chinas leading independent gas producer March 2015 - - PowerPoint PPT Presentation

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China’s leading independent gas producer

March 2015 www.greendragongas.com LSE: GDG.LN

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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

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Fundamentals in Place for Growth and Cash Flow

Strong China market fundamentals Well Defined Reserves and Known Resources Realized Gas Prices Decoupled From Oil Debt Maturity 2017 Proven In-house Gas Extraction Method 8% Debt to Equity ratio

GDG: Fundamentals in Place for Growth and Cash Flow

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2015: A YEAR OF TRANSFORMATION

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Leading China CBM Independent

Large reserves base

• Largest publicly listed CBM reserves base in China: 1P:148Bcf; 2P: 427Bcf; 3P: 2,290Bcf
• Reserves independently verified by 8 consecutive CPRs
• Six Inland Production Sharing Contracts covering 1,869,599 acres (7,566 km² )
• Ongoing migration to 1P reserves: 17% increase in 2014

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 1,800 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 management team with a track record in Coal Bed Methane
• High quality shareholder base: includes GIC, Aberdeen, Fidelity, Platinum Asset

Management, Chandler Corp

$0.9bn

Market Cap.

427Bcf

2P Reserves

30

Funded LiFaBriC commenced

8

blocks over 1.87mn acres

Market cap as of December 31, 2014

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Randeep S. Grewal | Founder, Chairman & CEO

• Founded Greka Group in 1997 and also acts as Chairman & CEO of several of the Group’s subsidiaries and affiliated companies
• Extensive experience in oil & gas and has also been involved in various JVs, acquisitions, mergers and reorganisations globally
• BSc Mechanical Engineering, Northrup University

David Turnbull | Non-executive Director

• Executive Chairman of Pacific Basin Shipping Limited
• Held senior leadership roles in MNCs such as Swire Group and Cathay Pacific
• MA Economics, Cambridge University

Wayne Roberts | Non-executive Director

• Chartered Chemical Engineer with over 25 years’ experience in the oil & gas industry
• Served with BG Group as Senior Vice President for AMEA, President of BG Southeast Asia & China and Chairman of BG Asia Pacific
• MBA, INSEAD

Gong Da Bing | Non-executive Director

• Over 27 years of international business experience
• Held various senior leadership positions with private international trading firms and was business negotiator for the Beijing Foreign

Trade Bureau

• Masters, Comparative Law, University of Illinois

Stewart M. John OBE , FREng | Non-executive Director

• Over 50 years of aviation industry experience, mostly from British Airways and Cathay Pacific
• Held non-executive director positions with Rolls-Royce Commercial Aero Engines, British Aerospace Aviation Services and others
• Chartered Engineer, Fellow of Royal Academy of Engineering

Reputable and Proven Board of Directors

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Alfred Yan| CFO

• Over 22 years of experience in accounting, auditing and corporate finance
• Previously CFO at China People Gas Holdings and held various positions at Deloitte Touche Tohmatsu, KPMG and BDO
• Fellow member of the HK Institute of Certified Public Accountants and associate member of Chartered Institute of Management

Accountants Mahmood (Mel) Lone | COO

• General Manager and Chief Representative of Greka in China since 2001
• Actively involved in CBM development at Greka and held various positions in the Group
• BA Economics and History, University of Punjab

Elton Dong | GM, Production

• Over 18 years Management experience in CBM industrial
• Over 11 years actively involved in Greka CBM development
• BSc, Xi’an Petroleum University, Majored in Mechanical Design and Manufacturing
• Master degree for Oil and Gas Exploitation, Shandong Petroleum University of China

Zhang Hai Tao | GM, Gas Distribution

• Over 14 years of management experience in natural gas industrials
• Graduate from Anyang University in Marketing Development
• Business Administration from the University of Beijing

Stephen Hill | VP, Corporate Finance

• Over 31 years of Asia experience with extensive fundraising credentials for corporate clients
• Previously Head of Asian Sales at Bear Stearns, Nomura and ING Barings and held several equity sales roles at Jardine Fleming
• BSc Economics, Leicester University and Advanced Management Program, Wharton University

Experienced Senior Management Team

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Upstream Asset Portfolio: 6 PSCs over 8 Blocks

Xinjiang Tibet Qinghai Inner Mongolia Heilongjiang Jilin Liaoning Beijing Hebei Shandong Ningxia Gansu Shanxi Shaanxi Jiangsu Hubei Shanghai Zhejiang Fujian Jiangxi Guizhou Sichuan Yunnan Guangxi Guangdong Hong Kong Anhui Hunan Chongqing Tianjin

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

Henan

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: CUCBM (CNOOC) Operator: GDG 1P/2P/3P: 132.2/369.6/1,296 bcf LiFaBriC/vertical wells: 62/171 Total: 1,491 wells*

GCZ

GDG interest: 47% Partner: PetroChina Operator: PetroChina 1P/2P/3P: 15.6/28.5/45.3 bcf LiFaBriC/vertical wells: 0/0 Total: 104 wells*

GSN

GDG interest: 50% Partner: CUCBM (CNOOC) Operator: CUCBM (CNOOC) 1P/2P/3P: N/A / N/A / 705.7 Bcf LiFaBriC/vertical wells: 2/11 Total: 201 wells*

GQY (A)

GDG interest: 10% Partner: CUCBM (CNOOC) Operator: CUCBM (CNOOC) 1P/2P/3P: N/A LiFaBriC/vertical wells: N/A / NA Total: 9 wells*, 18 coal holes

GQY (B)

GDG interest: 60% Partner: CUCBM (CNOOC) Operator: GDG 2C: 20 Bcf LiFaBriC/vertical wells: 8/39 Total: 57 wells*

GFC

GDG interest: 49% Partner: CUCBM (CNOOC) Operator: GDG 1P/2P/3P: N/A / 26.9 / 239.9 Bcf LiFaBriC/vertical wells: 2/26 Total: 32 wells*

GPX

GDG interest: 60% Partner: CUCBM (CNOOC) Operator: GDG 1P/2P/3P: N/A LiFaBriC wells/ vertical wells: N/A/12 Total: 14 wells*, 14 coal holes

GGZ

GDG interest: 60% Partner: PetroChina Operator: GDG Best Prospective: 442.5 Bcf LiFaBriC wells/vertical wells : 4/26 Total: 30 wells*, 30 coal holes

* Total wells is inclusive of non operated wells Reserves by Netherland, Sewell & Associates, Inc as of Dec 31, 2014

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Reserves Breakdown

1P

GSS Net: 147.8 PV10: US$1,464m GSS Net: 400 PV10: US$3,949m GFC Net: 27 PV10: US$347m GSS Net: 1,344 PV10: US$12,628m GSN Net: 706 PV10: US$5,623m GFC Net: 240 PV10: US$2,930m GQY Net 1C: 6 Net 2C: 20 Net 3C: 33 GQY Low Est: 375 Best Est: 872 High Est : 1,700 GFC Low Est: 72 Best Est: 156 High Est: 539 GPX Low Est: - Best Est: 16 High Est: 404 GGZ Low Est: 24 Best Est: 443 High Est: 990

2P 3P Contingent Prospective Net: 147.8 Bcf PV10: US$1,464m Net: 426.8Bcf PV10: US$4,296m Net: 2,290 Bcf PV10: US$21,181m Net 1C: 6 Bcf Net 2C: 20 Bcf Net 3C: 33 Bcf Low: 471 Bcf Best: 1486 Bcf High: 3,634 Bcf

Source: Netherland, Sewell & Associates, Inc as of December 31, 2014 GCZ Net: 15.6Bcf PV10: $186m GCZ Net:28.5Bcf PV10: $313m GCZ Net: 45.3Bcf PV10: $462m

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Reserve Progression - Value Decoupled from Brent

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(1) Values as of Dec 31st year end (2) CBM wellhead prices Source: Company Data, Netherland, Swell & Associates, Inc. Bloomberg

677 928 1255 1527 1801 1818 2806 4,296 20 40 60 80 100 120 500 1000 1500 2000 2500 3000 3500 4000 4500 5000 2006 2008 2009 2010 2011 2012 2013 2014 US$ US$mn 2P NPV $mn 1P NPV $mn Brent (US$) CBM prices (US$/Boe)

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Focus on production and cash-flow from the GSS block:

• Implement a low-risk, low-cost production drilling programme: 150 new LiFaBriC wells
• Low-cost (US$1.5m/well) targeting of proven reserves in shallow and familiar coals
• Ongoing migration of 3P reserves to 1P/2P through continued drilling and

enhancement of off-take infrastructure

• Committed infrastructurespending by CUCBM (CNOOC) to further enhance gross production

Further development of sales channels to increase average sales price

• Expand distribution capacity of high margin CNG refuelling stations
• Grow sales to industrial customers
• Leverage on additional pipeline capacity from PetroChina, CUCBM (CNOOC) and

Sinopec

Appraisal and development at other blocks

• Significant upside: 10% working interest in GSN sold to CUCBM (CNOOC)for ~$200m
• Bringing partners to co-develop other exploration blocks using benchmarked value
• Ongoing appraisal through minimum capital commitments ~US$ 12m
• Considering alternatives to accelerate the development and monetization of gas

Strategy

2015 A year of transformation

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2P NSAI Production Profile

Production Profile

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Source: Company data, Netherland, Sewell & Associates, Inc as of April 30, 2014, company data

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20 30 40 50 60 70 80 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Bcf

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GSS Evolution to Commerciality

Source: Company data as of December 31, 2014

12 100 200 300 400 500 600 700 800 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Gross Production (MMCF) PV10 (US$) NSAI Audit

GSS Production (MMCF) 3P PV10 2P PV10

Production Phase Vertical

Eureka

R&D Phase LiFaBriC (Lined Faulted Brittle Coals) SRHD (short radius horizontal drilling) MLHD (multilateral horizontal drilling) Cooperation Phase

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Energy consumption per person

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

Strong incentives from the government to promote domestic gas production:

• CBM sales based on market pricing (unregulated)
• Central government subsidy proposed to double from RMB 0.20/m3 (US$0.9/Mcf) to RMB 0.40/m3 (US$1.8/mcf)
• 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

2014E GDP growth rate

China - Solid Fundamentals for Gas Demand Growth

Source: BP Statistical Review, June 2013; IMF World Economic Outlook Database, April 2014

Gas consumption per person

1% 1% 2% 2% 2% 5% 8% 0% 2% 4% 6% 8% Japan Russia U.K Brazil U.S.A India China 0.46 1.37 1.94 3.18 3.73 4.81 7.27 2 4 6 8 India Brazil China U.K Japan Russia USA

0.04 0.1 0.14 0.82 1.22 2.18 2.6

1 2 3 India China Brazil Japan U.K U.S.A Russia

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100 200 300 400

2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012A 2013A 2014E 2015E 2016E 2017E 2018E 2019E 2020E

Billion Cubic Meters

Domestic Production Pipeline Imports China Gas Demand

Domestic supply/ demand gap will keep growing till 2020 if production will not be incentivised China – Russia deal only delivering gas volumes after 2020

Supply 2020 outlook

China may need to import 2.8Tcf of LNG by 2020

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LiFaBriC: Developed for the Geology

Developed for China’s geology

• Geology of faulted anthracite coal formations
• Traditional drilling methods are not adaptable (unlike Australia or the

US)

• GDG «cracked the code» with LiFaBriC

The LiFaBriC (Lined Faulted Brittle Coals) technology

• Adaptation of horizontal drilling methods used for coal seams
• Perfected to allow measurement and logging while drilling
• Involves advance directional drilling / geo-steering techniques
• Able to drill through multiple faults with a single well

Advantages

• Low capex, long well-life…
• ~US$1.5 million per well
• Connection and ramp-up to plateau rate in 6-7 months
• Producing life of 15-20 years
• Environmentally friendly: no expensive and hazardous fraccing

processes or chemicals; small surface footprint ensures less intrusive for existing land owners

• Initial evidence indicates that in certain instances LiFaBriC wells have

positively impacted production from nearby vertical wells

Methane Inseam RB Vertical Fault

SIS Technology

“LiFaBriC” Process LiFaBriC repeatability

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(USD ‘000) June 2014 December 2013 December 2012 Total Assets 1,018.7 983.0 942.6 Convertible notes 46.5 33.4 79.7 Bonds 32.8 30.4 Total Financial Debt 79.3 63.8 79.7 Cash at bank1 60.0 34.6 40.0 Net Debt 19.3 29.1 39.7 Equity (Book Value) 613.0 646.8 660.1 Debt to Equity 8% 6% 8% Debt to Capital 7% 6% 8% Net Asset 613.7 646.0 720.0

GDG financial position

Low leverage and strong net asset base

 Targeting a strong balance sheet and a disciplined approach to leverage  Previous capital expenditures financed primarily via equity and convertible instruments  US$330 million in equity invested in the assets since inception by GDG (excludes partner funding)  Debt to equity ratio of 8% (June 2014)  Minimum capital expenditure commitments of c$12m  $88m Corporate Bond completed  Targeting RBL availability by Q2 2015  No debt maturity until 2017

(1) Includes USD 8m in restricted cash in 1H 2014 (2) Excludes over USD 1 bn of partner funded capex (still pending final audits)

Disciplined approach to Balance Sheet and Leverage

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Corporate Social Responsibility

Commitment to the Environment

• Zero use of harmful chemicals
• Wells powered by clean burning Natural Gas
• Clean water as a by product of production for irrigation
• r consumption
• Use of biodegradable 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

• 150,856 OH&S incident free man hours as of Q4 2014
• In depth HSE policy and continuous training

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Listing on the Main Market of the LSE

Reflects Our Development into a Mature, Successful Gas Producer An Opportunity to Create Further Shareholder Value Increased Liquidity and Profile A Milestone in Our Ongoing Growth Strategy

Listing on the Main Market of the LSE

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Largest China CBM independent

• Proprietary technology - LiFaBriC
• Technology in manufacturing phase
• Based on geo-steered horizontal drilling that suits China’s geology
• Predictable stable output per well with enhanced returns
• Delivers enhanced stable production with little decline
• Implementing a 150-well debt funded drilling programme to the end of 2015 to ramp-up production to 18Bcf
• Committed investment from partners to accelerate production and generate strong cash flow
• Ongoing migration of reserves to 1P: 111% increase in 2014

Investment highlights

Proven extraction methodology Step change in cash generation

• Largest Chinese independent
• Favourable Production Sharing Contracts: Today’s Chinese gas economics on yesterday’s favourable terms
• Hand-picked locations in China’s strong growth gas market
• Five year government plan to increase gas as primary energy source
• Long term off take agreements to multiple end users

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• 7. Appendix

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History and Corporate Milestones

1997 -1999 2000-2002

Technological Breakthrough

• MWD (Measurement

While Drilling) and LWD (Logging While Drilling) facilitate LiFaBriC development

Public Floating on AIM

2003

First License

• GDG commences

Chinese operations

• First PSC signed on

the GFC block

Acquisition of four additional licenses

• Commenced
• perations on the

ground

• Signing of four
• ther licenses

including Shizhuang South

2006 2008

LiFaBriC

2009

Greka Engineering and Technology Dividend

2010

Greka Drilling Dividend

• 8th March demerger of

Greka Drilling

• Addition of 2 CNG

stations in Pindingshan

• Upgrade of

Infrastructure Production Facilities to support 28 new wells of gas production

2011 2012

Landmark Government Ruling

• Chinese Gov’t rules in

favor of Green Dragon

• n validity of PSC

2013

Binding Agreements with CNOOC and PetroChina

2014

Production Ramp-up

• Launch 150 LiFaBriC

drilling program

First Gas

• Gas production

commences at GSS

• Landmark agreements

lead to shareholder participation in over 1,800 wells

• 30th Sept demerger
• f Greka

Engineering

• Zhengzhou Greka

Gas Co Ltd entered into a 20-year agreement with PetroChina Huabei Oilfield

• The Company listed
• n the Alternative

Investment Market (“AIM”) in London on August 17, 2006

• “Lined Faulted

Brittle Coal”

• improved drainage

factor

FTSE 250

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• 1. Refuelling stations
• CNG trucked within 300km
• Eight owned CNG refuelling stations (~2.8 MMcf/d or ~1 Bcf/year)
• Most lucrative: US$18.1/Mcf 2014 avg. price: (6% year on year increase)
• Route for 36% of 2014 GSS sales
• Upcoming capacity increase to 7.8 MMcf/d ~2.8 Bcf/year: doubling capacity at eight existing stations

and adding three larger stations

• 2. Industrial users in the region
• CNG/PNG
• High demand from nearby factories (ceramic, textiles, packaging, tri-generation projects etc.)
• Second most lucrative channel : US$8.4/Mcf 2014 avg. price
• Route for 3% of 2014 GSS sales
• Industrial customers to continue conversion to gas power due to government restrictions on carbon

emissions

• 3. Piped into regional /national gas pipelines
• PNG
• Remaining gas is piped into West-East Pipeline I: 20 year GSA with CNPC
• Lower, but still very favourable pricing: US$7.96/Mcf 2014 avg. price:
• Route for 61% of 2014 GSS sales
• Further capacity, optionality and competitive pricing going forward (existing CUCBM (CNOOC)

pipeline being improvement), new Sinopec pipeline under construction

Sales: Multiple Channels

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