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G3 Exploration Ltd

Green Dragon Gas - Capital Network: Turnaround in Production Performance

Green Dragon Gas (GDG.LON) 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.

Executive summary

We reckon that concluding the debt refinancing, swapping USD for RMB debt and redeeming the Nordic bond would be value accretive. However, we would like more detail from management on the impact of a potential listing in Hong Kong.

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Price: £0.36

Market: LSE
Market Cap: £56.34 m
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Capital Network's Lionel Therond on Green Dragon Gas Ltd

Lionel Therond, analyst at Capital Network discusses Green Dragon Gas' plans to list its production subsidiary on the Hong Kong Stock Exchange as a dividend in specie.

on 12/15/2017

3 min read