2017 Operational Update and 2018 Outlook

RNS Number : 3003D

G3 Exploration Limited

30 January 2018

 

30^th January 2018

G3 EXPLORATION LTD.

("G3 Exploration", "G3E" or the "Company") 

2017 Operational Update and 2018 Outlook

G3 Exploration Ltd. (LSE: G3E), an independent specialist in the exploration and development of coal bed methane gas (CBM) with roots in China and a focus on international expansion, is pleased to provide a trading update for the year ended 31 December 2017, as well as an outlook for the year ahead.

Operational highlights

·     Total gross production for the full year 2017 was 10.09 Bcf, a slight decrease in comparison to the same period in 2016 (11.23 Bcf). This is attributed to G3 Exploration's non-operated assets, adjustments made in CNOOC's volume measurement methodology, as well as a modest decline in production at the GCZ Block.

o The GSS Block, which is operated by the GE3 subsidiary, Green Dragon Gas ("GDG"), saw a 10% increase in gross production to 4.47 Bcf for the year ended 2017, compared to 4.08 Bcf, during the same period in 2016.

o The GSS Block, operated by CNOOC, reached total production of 2.63 Bcf in 2017, compared to 3.56 Bcf in 2016.

o Production at GCZ Block, operated by CNPC, was 2.99 Bcf in 2017 compared to 3.58 Bcf in 2016.

·    Total equity gas sales for the GSS operated wells and GCZ CNPC operated wells for the full year of 2017 was 3.31 Bcf compared to 3.41 Bcf during the same period in 2016.

o  GSS equity sales, operated by Greka, increased to 1.94 Bcf compared to 1.88 Bcf the prior year.

o  GSS gross sales, operated by CNOOC, increased to 0.94 Bcf compared to 0.69 Bcf the prior year.

o  GCZ equity sales, operated by CNPC was 1.37 Bcf in 2017 compared to 1.53 Bcf in 2016.

·     Project Code approved for the Overall Development Plan (ODP) from the NDRC on the Shizhuang South Zaoyuan portion of the Main Block (GSS Block) and Chengzhuang Block (GCZ Block).

·     Concluded Supplementary Agreements with CNOOC, which confirms that exploration can commence across Fengcheng (GFC), Qinyuan (GQY) and Panxie East (GPX) Blocks.

·     Materially advanced exploration in Guizhou (GGZ Block) by successfully drilling and completing 12 CBM production wells. G3 Explration has a 60% operating interest, while partner PetroChina has a 40% interest in the block.

2018 operational outlook and targets

·     H1 2018:

o  Monetisation of production assets GSS & GCZ through a Hong Kong IPO.

o  Issue dividend from the Hong Kong listing.

o  Redeem Nordic & GIC Bond.

o  Exploration drilling prioritised at Qinyuan (GQY), Fengcheng (GFC) & Panxie (GPX) Blocks.

o  Establish London headquarters and appoint a strategic leadership team.

·     H2 2018:

o  First gas expected at the GGZ Block in Guizhou Province.

o  First gas expected at the Qinyaun (GQY) Block in Shanxi Province.

o  File ODP for the GGZ Block.

o  Progress exploration at GFC & GPX Blocks and relinquish non-prospective area

o  Consider geographical expansion opportunities outside of China.

Mr. Randeep S. Grewal, Executive Chairman, commented: "We spent most of 2017 concluding seven years of title related matters, which was successfully finalised at the end of the third quarter. Subsequently our focus has been towards monetising our vast acreage. During Q4 2017 we successfully drilled 12 more production wells at our GGZ Block. Furthermore, the Board decision to launch the Hong Kong listing of our commercially producing blocks, GSS and GCZ, provides an optimum result on multiple fronts.

"The Hong Kong listing is envisioned to settle existing debt, provide a dividend to our shareholders and an ideal segregation of a dividend paying production asset portfolio from exploration asset risks. The exploration assets, listed in London, will benefit from the Hong Kong dividends, which will provide capital to fund the continued exploration programmes and further asset distributions as the blocks enter production.

"2018 if off to an exciting start and we expect it to continue as we work to achieve the objectives set out, throughout the year, in our operations, as well as continued value monetisation of our existing assets. In March 2018, it will be 10 years since our first LiFaBriC completed well, GSS008, commenced production, which has produced 1.61 Bcf to-date, and continues to produce at a steady rate. Continued production success is being replicated across our asset portfolio. We anticipate two additional blocks to commence production by yearend."   

Producing assets (GSS & GCZ) as at year end 2017

·     GSS Block

o  130 operated wells are in production, of which 105 wells are connected to sales infrastructure and selling gas.

o  Of the 105 wells selling gas, 57 wells are LiFaBriC completions.

o  46 compressors installed and are connected to the sales gathering system.

o  Successfully tested LiFaBriC re-drill of the lateral portion, and realised commercial gas sales volumes within 90 days.

o  655 CNOOC operated wells currently in production, of which 324 wells are

connected to sales infrastructure and selling gas.

o  55 new wells brought on stream by CNOOC at year end 2017.

·     GCZ Block

o  102 CNPC operated wells currently in production, of which 85 wells are

connected to sales infrastructure and selling gas.

The gross production capacity comparison calculations were impacted in 2017 by a change in CNOOC's measurement methodology in respect of its operated well stock, where flared gas is excluded from capacity statistics.

Exploration

·     The GGZ Block located in Guizhou Province remains the focus of exploration activity. 12 CBM production wells were successfully drilled in three major coal seams; namely Coal Seam 17, 19 and 29. More than 10,000 metres were drilled for these 12 wells and the fastest speed recorded of 431 metres per day of drilling was completed by Greka Drilling Limited. In addition to the current seven production wells on stream, the 12 newly drilled wells will be stimulated and brought online in H2 2018, commencing initial gas sales from the GGZ Block.

·     Regarding the three additional blocks - GFC, GPX and GQY, geological dynamic models were updated, new wells were deployed, geological field surveys were carried out, land leases were acquired with civil work now ongoing to kick-off the 2018 work plan for each block in H1 2018.

Well count summary at 31 Dec 2017 is as follows:

	GSS	GCZ	GSN	GPX	GQY-A	GQY-B	GFC	GGZ	Total
Well count:
Total wells*	1,339	114	201	12	12	47	30	45	1,800
Connected	490	102	-	-	-	-	-	-	592
Wells producing gas for sale:	429	85	-	-	-	-	-	-	514
Of which:
Greka**	105	-	-	-	-	-	-	-	105
CNOOC/CNPC	324	85	-	-	-	-	-	-	409
*LiFaBriC Greka	80	-	3	2	-	7	2	3	97
**LiFaBriC Greka	57	-	-	-	-	-	-	-	57

Glossary of terms
G3E	G3 Exploration
CNOOC	China National Offshore Oil Company
CNPC	China National Petroleum Corp
GSS	Shizhuang South (production block)
GCZ	Chengzhuang (production block)
GGZ	Boatian-Quingshan (exploration block)
PSC	Production Sharing Contract
ODP	Overall Development Plan
BCF	Billion Cubic Feet
USD	United States Dollar
RMB	Chinese Renmimbi

For further information on the Company and its activities, please refer to the website at www.g3-ex.com or contact:

FTI Consulting

Edward Westropp / Kim Camilleri / Elizabeth Burnham / Toby Chidavaenzi

Tel: [phone]

About G3 Exploration Ltd.

An independent specialist in the exploration and development of coal bed methane gas (CBM); G3 Exploration has accumulated a unique wealth of experience through its significant 25 year track record of technology-led exploration and drilling success in CBM, across different geographies.

G3 Exploration's intention is to leverage its expertise, monetise its current 7112km² acreage position in mainland China and widen its asset portfolio into other prospective geographies across  Africa, Europe and Asia, utilising its proprietary knowledge and experience in exploiting CBM resources. Furthermore, G3 Exploration has interests in Green Dragon Gas, which comprises of two producing assets with an acreage of 455km² in Shanxi province, China

G3 Exploration is listed on the main market of the London Stock Exchange (LSE: G3E).

 

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