Annual Reserve Report

RNS Number : 3237R

G3 Exploration Limited

28 February 2019

 

28 February 2019 

G3 EXPLORATION LTD.

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

Annual Reserve Report

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 announce its reserves estimates as at 31 December 2018.

	GDG			G3E
	(Blocks GSS and GCZ)			(Blocks GGZ, GSN,GQY A & B,GFC,GPX)
	Bcf	NPV10 US$M		Bcf	NPV10 US$M
1P	129.1	653.1		5.1	28.6
2P	338.4	1,652.7		70.7	815.7
3P	1,083.3	4,941.9		1,002.3	7,648.5
2C	-	-		667.8	-
BPR	-	-		1,328.5	-
GIIP	3,453.0	-		23,666.8	-
	No of Wells			No of Wells
Wells drilled	1,442			349

Source: Company estimates as of yearend 2018. Average gas price US$8.98/Mcf for producing blocks.

USD/RMB FX Ratio of 6.8.

Note: Net gas reserves and NPV estimates are based on company's participating interest in the blocks.

Note: 5% escalation applied per year to future operating costs, capital costs and sales prices.

Highlights:

·     Total net proved 1P (P90) of 134 Bcf valued at US$ 682M (2017: 98 Bcf)

·     Total net proved + probable (P50) 2P of 409 Bcf valued at US$ 2.5B (2017: 377 Bcf)

·     Total net proved + probable + possible (P10) 3P of 2.1 Tcf valued at US$12.59B (2017: 2.0 Tcf)

·     Best net contingent (2C) resources of 668 Bcf and Best net prospective resources of 1329 Bcf

·     Average wellhead gas price (inclusive of subsidy) of US$8.98/Mcf (RMB 2.16/m³)

The reserves estimates have been prepared by the company's team of engineers on eight coal bed methane exploration and development blocks namely GSS, GCZ, GSN, GQY-A, GQY-B, GGZ, GFC and GPX.

Randeep S. Grewal, Executive Chairman and Founder commented:

"Our large asset base is well accounted for in the released annual reserves report which continues to reinforce the potential of our quality and well positioned asset base in China.

In addition to the US$1.3 billion invested into the two commercially producing GDG gas blocks in partnership with our partners CNOOC and PetroChina, we have a further US$275 million invested into our large exploration portfolio. In accordance with our business plan, we expect to divest our producing blocks and continue to focus on the appraisal of our large exploration acreage. 

Our twenty-two years of consistent dedication to developing CBM in China continues to be strongly supported by Government commitment to this vast domestic clean energy resource. We continue our commitment to working closely with our partners CNOOC, CNPC and PetroChina to conclude our focus on developing the remaining exploration blocks and de-risk the development profile across our vast acreage."

G3 Exploration Ltd; Exploration & Development Assets

Reserve volumes reported as at 31 December 2018 specifically includes Guizhou block (GGZ), Shizhuang North block (GSN) and Qinyuan block (GQY A&B) where the exploration team has made significant progress towards the exploration and development of CBM across the regions. The estimation of reserves and resources reflects the following achievements during 2018:

·     Guizhou block (GGZ) exploration program concluded the Chinese reserve report successfully.

·     12 wells placed online in Shizhuang North block (GSN).

·     400 sq km of 2D Seismic added with an additional 14 wells drilled in Qinyuan block (GQY A&B) for a total of 69 wells drilled.

·     Exploration portfolio of 23.7 TCF of Gas in Place discovered.

Guizhou Province is located in southern China and currently sources the majority of its gas needs by pipeline from other provinces. As such, prices in Guizhou attract a transportation premium to encourage the delivery of gas to the province. It is expected that gas sourced and produced directly in Guizhou will also benefit from this premium as it is a factor in determining city-gate end user pricing, making these assets even more desirable.

Proved reserves estimates	Net	Net Investment (US$M)	PV10 (US$M)
	(Bcf)
Total
Proved 1P (P90)	5.1	2.7	28.6
Proved + probable 2P (P50)	70.7	85.5	815.7
Proved + probable + possible 3P (P10)	1,002.3	498.2	7,648.5
GGZ Block
Proved 1P (P90)	0.5	2.7	6.0
Proved + probable 2P (P50)	28.8	32.1	404.4
Proved + probable + possible 3P (P10)	100.9	117.5	1,412.4
GFC Block
Proved 1P (P90)	-	-	-
Proved + probable 2P (P50)	25.0	53.4	326.2
Proved + probable + possible 3P (P10)	229.2	380.7	3,015.4
GSN Block
Proved 1P (P90)	4.6	-	22.7
Proved + probable 2P (P50)	16.9	-	85.1
Proved + probable + possible 3P (P10)	672.3	-	3,220.7

Best Resources Estimates	Contingent		Prospective
	Net 2C (Bcf)		Net BPR (Bcf)
Total	667.8		1328.5
GGZ Block	635.8		367.6
GFC Block	-		209.1
GQY Block	32.1		736.3
GSN Block	-		-
GPX Block	-		15.4

Green Dragon Gas Ltd; Production Assets

GSS Block and GCZ Block are located in the southern Qinshui Basin, Shanxi Province, China, which is one of the two areas in China where the initial gas in place (GIIP) estimates are over 3,450 Bcf. GDG holds 47% and 60% of the participating interests in the GCZ Block and GSS Block, respectively.

The 2018 reserve report includes all 1,442 wells operated by GDG, CNOOC and PetroChina across these blocks in which the company has varying equity interests.

Average wellhead price used in the reserves evaluation for year 2018 was US$ 8.98/Mcf (5% escalation thereafter) at the production blocks, which is inclusive of Government subsidies.

Proved Reserves Estimates	Net	Net Investment (US$M)	PV10 (US$M)
	(Bcf)
Total
Proved 1P (P90)	129.1	48.9	653.1
Proved + probable 2P (P50)	338.4	141.2	1,652.7
Proved + probable + possible 3P (P10)	1,083.3	630.4	4,941.9
GSS Block
Proved 1P (P90)	114.4	40.8	580.9
Proved + probable 2P (P50)	303.5	119.4	1,495.4
Proved + probable + possible 3P (P10)	1,023.2	588.9	4,686.5
GCZ Block
Proved 1P (P90)	14.7	8.1	72.1
Proved + probable 2P (P50)	34.9	21.8	157.3
Proved + probable + possible 3P (P10)	60.0	41.4	255.4

The company estimates in this announcement have been prepared in accordance with definitions and guidelines set forth in the 2007 Petroleum Resources Management System (PRMS) approved by the Society of Petroleum Engineers. The information in this announcement pertaining to the Company reserves have been reviewed by Hassan Sindhu, the Company's Director of Resources Management, who holds a Petroleum Engineering degree from the China University of Petroleum.

For further information on the Company and its activities, please refer to the website at 

www.g3-ex.com or contact:

FTI Consulting

Ben Brewerton / Genevieve Ryan / Tom Pigott

Tel: [phone]

About G3 Exploration Ltd.

G3E is a leading independent gas producer with operations in China and is listed on the main market of the London Stock Exchange (LSE: G3E). The Company has 409 Bcf of 2P reserves and 2,085 BCF of 3P reserves across eight production blocks covering over 7,566km² of license area in the Shanxi, Jiangxi, Anhui and Guizhou provinces. It holds six Production Sharing Agreements with strong, highly capitalised Chinese partners including CNOOC, CNPC and PetroChina, and has infrastructure in place to support multiple routes to monetise gas production.

The company is committed to an exploration and appraisal focused business plan in coal bed methane development across three geographies concurrently. It has a well-established track record and has demonstrated perseverance in going the distance to monetise shareholder value through three basic principles:

·     Focus on core intellectual aptitude in developing coal bed methane

·     Develop assets in an environmentally and socially prudent manner

·     Protect accreted shareholder value

Glossary of terms:

1P	Proved reserves
2P	Proved plus probable reserves
3P	Proved plus probable plus possible reserves
Bcf	Billions of cubic feet
BPR	Best prospective resources
CBM	Coal bed methane
PV 10	Net present value calculated using a 10% discount rate
ODP	Overall Development Plan
OGIIP	Overall Gas Initially In Place
Original Gas In Place	The total reserves contained in a reservoir. Only a proportion of the gas in place is recoverable (see definition of Reserves below)
PSC	Production Sharing Contract
Reserves	Reserves are those quantities of hydrocarbons anticipated to be commercially recoverable by application of development projects to known accumulations from a given date forward under defined conditions
Tcf	Trillions of cubic feet
USD	United States Dollar
RMB	Renminbi (official currency of the People's Republic of China)

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