Final Results for the Year ended 31 December 2017

RNS Number : 5763Q

G3 Exploration Limited

07 June 2018

 

7 June 2018

G3 EXPLORATION LTD.

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

Final Results for the Year ended 31 December 2017

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, today announces its annual results for the year ended 31 December 2017.

Financial highlights

·	Revenue of US$25.7 million including revenue from discontinued downstream operations classified as assets held for sale (2016: US$29.1 million).
·	Upstream producing business generated EBITDA of US$15.2 million (2016: US$19.9 million) at a constant margin.
·	Cash generated from the Company's complete operating activities during the year totalled US$17.5 million (2016: US$8.5 million).
·	Net loss for the year of US$24.6 million (2016: US$12.1 million), 53% attributable to the discontinued downstream business, which is fully impaired (US$13.1 million) and classified as held for sale, 12% due to increase in depreciation and 13% for the reduction in revenue.
·	GCZ equity sales, operated by CNPC were 1.37 Bcf in 2017 compared to 1.53 Bcf in 2016, a 10% decline curve in the field where no new wells were drilled in the year.
·	The Group's continuing revenue generating assets are held for sale in the Company's subsidiary, Green Dragon Gas ("GDG"), until the planned spin out, by way of dividend in specie, is complete.

Operational highlights

·	Concluded Supplementary Agreements with CNOOC/CUCBM on six natural gas blocks, confirming ownership structure and revenue split.
·	Received Overall Development Plan ("ODP") Project Code from the National Development and Reform Commission ("NDRC") on the GSS Block, South Zaoyuan portion and GCZ Block.
·	Carried out advanced exploration work in the GGZ Block, including successfully drilling and completing 12 CBM production wells.
·	G3E Blocks GCZ, GSS, GSN and GGZ were specifically identified by the Chinese Central Government as priority CBM projects within the 13th Five Years Plan.

GSS block:

Ø Gas sales increased by 3% to 1.94 Bcf (2016: 1.88 Bcf) at the GDG operated GSS Block

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

Ø 655 CNOOC operated cost recovery wells were put on production, of which 324 wells are connected to sales infrastructure and selling natural gas. CNOOC sales of 0.94 Bcf (2016: 0.69 Bcf).

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

Ø 46 compressors installed and connected to the sales gathering system.

GCZ block:

Ø Net gas sales of 1.37 Bcf of PNG (2016: 1.53 Bcf).

Ø 102 CNPC operated wells in production, of which 85 wells connected to sales infrastructure and selling gas.

Ø Implementation of ODP in progress, resulting in the drilling of an additional 147 wells, commencing in H2 2018.

2018 outlook

·      Complete the spin out of GDG by way of dividend in specie and recapitalise balance sheets; driving new opportunities for G3E. G3E will retain a minimum of 25% of GDG post distribution, enabling continuous dividend participation.

G3E outlook:

Ø As at year end 2017, combined 1P and 2P reserves totalled 75.7 Bcf, with a NPV10 of US$913.1 million. (Netherland Sewell)

Ø Repay and refinance existing creditors from debt and equity issuance in GDG.

Ø Conclude evolution to exploration and appraisal business.

Ø Reach first gas at GGZ Block

Ø Expand our CBM portfolio internationally

GDG outlook:

Ø As at year end 2017, combined 1P and 2P reserves totalled 398.1 Bcf, with a NPV10 of US$1.979 billion. (Netherland Sewell)

Ø Infrastructure focus to monetise invested capital.

Ø Work alongside partner CNOOC on GSS Block for the connection of 1,139 existing drilled wells to sales infrastructure.

Ø Increase gas sales volumes on GSS Block from GDG existing producing wells through better compression management infrastructure.

Ø Execute GSS LiFaBriC drilling programme to further increase sales volumes.

Ø Commence GCZ ODP to drill 147 wells through year end 2019.

Mr. Randeep S. Grewal, Founder & Chairman, commented:

"The year ended with rewarding conclusions, as we finalised the long overdue agreements with our partner CNOOC, which were executed in September 2017. These Supplementary Agreements confirmed all the Company's rights, title and interest across our PSC Area. Since the signing of the agreements, we have been working closely with our partners to rapidly advance the producing wells, focusing on monetising natural gas sales; which commenced in H2 2017.

"Our producing GCZ Block (partner CNPC) continued its commercial natural gas sales while the collaborative Joint Operating Team concluded its ODP. The plan approved by CNPC in October 2017, commits the drilling of an additional 147 wells by year end 2019 and gross capex of US$54 million. The expected natural gas production following this ODP execution forecasts production at the GCZ Block to be 6 Bcf per year. 

"Exploration assets at the GGZ Block were boosted by a successful 12 well drilling programme at the end of 2017. The natural gas block in partnership with PetroChina is a focused asset, which is expected to have reserves certified in 2018 and commence test natural gas sales by H2 2018.

"Overall 2017 was a significant year, in which we matured the business into a position from which we can now move ahead in spinning out, by way of the dividend in specie, the Company's producing assets into a Hong Kong listed vehicle. G3E, as a more defined exploration and appraisal vehicle, will allow us to continue to leverage our well-positioned asset base and grow value in the energy transition in China and internationally.

"Together with the Board, we remain confident in the prospects of our business and I look forward to updating the market as to our strategic progress, as the year unfolds."

G3E exploration assets

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 in these 12 wells with the fastest speed recorded of 431 metres per day of drilling accomplished by Greka Drilling Limited. In addition to the current seven production wells on stream, these 12 newly drilled wells will be stimulated and brought online in H2 2018, commencing initial test natural gas sales from the GGZ Block.

On additional blocks, GFC, GPX, GQY-A, and GQY-B, geological dynamic models were updated, well deployment and 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 H2 2018.

Total well count

Well count summary for all CBM blocks at 31 December 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

 Total reserves migration:

·     Total net proved 1P (P90) reserves of 96.7 Bcf valued at US$474 million (2016: 184.4 Bcf)

·     Total net proved + probable (P50) 2P reserves of 377.1 Bcf valued at US$2.42 billion (2016: 558.6 Bcf)

·     Total net proved + probable + possible (P10) 3P reserves of 2,044.4 Bcf valued at US$12.75 billion (2016: 2,386.3 Bcf)

·     Best net contingent (2C) resources of 762.2 Bcf and best net prospective resources of 1,542.8 Bcf

·     Average wellhead gas price (inclusive of subsidy) of US$9.38/Mcf (RMB 2.15/m³) for production blocks

·     Reserve migration includes first-time booking of proved 1P (P90) reserves volumes on G3E's GGZ block totalling 5.2 Bcf, valued at US$33.7 million for all G3E exploration blocks.

Ahead of the dividend in specie, all assets are retained in the G3E corporate group but are reported below on a segmented basis.

	GDG		G3E
	(Blocks GSS and GCZ)		(Blocks GGZ, GSN, GQY A & B, GFC and GPX)
	Bcf	NPV10 US$M	Bcf	NPV10 US$M
1P	91.5	440.5	5.2	33.7
2P	306.6	1539.2	70.5	879.4
3P	1124.6	5223.1	919.8	7526.7
2C	-	-	762.2	-

Source: Netherland Sewell and Associates Inc. (NSAI) as of year-end 2017.

The estimates of reserves have been provided by independent reserve engineers Netherland Sewell and Associates Inc. (NSAI) on eight CBM exploration and development blocks namely GSS, GCZ, GSN, GQY-A, GQY-B, GGZ, GFC and GPX.

Discontinued: Downstream

·     Net gas sales to CNG industrial customers increased by 29% to 0.18 Bcf (2016: 0.14 Bcf).

·     Total CNG station sales of 0.25 Bcf (2016: 0.36 Bcf), priced at US$14.9 per Mcf.

·     Conservative reserve of US$13.1 million for downstream operations.

Glossary of terms
G3E    GDG	G3 Exploration Green Dragon Gas
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   Mcf	Overall Development Plan Thousand cubic feet
BCF	Billion Cubic Feet
USD	United States Dollar
RMB	Chinese Renmimbi

The Company's audited Report and Accounts for the Year Ended 31 December 2017 will be available at the Company's website www.g3-ex.com.  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

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).

CHAIRMAN STATEMENT

The year started with several challenges and ended with rewarding conclusions. These favourable conclusions allow the Company to move forward after being forced into stagnation for almost eight years.

Over the course of eight years, we have maintained our operations while focusing on concluding material Supplementary Agreements with our partner CNOOC/CUCBM. While foundational agreements were executed after five years of negotiations in June 2014, the related financial audits of the deployed capital for cost recovery were concluded within the agreements executed in September 2017. These Supplementary Agreements drew a line under the challenges which the Company has endured since 2010 and confirmed all our rights, title and interest across our PSC Area.

We are indeed pleased with the outcome embedded in the Supplementary Agreement. Since the signing of the agreements, the parties are working closely together to rapidly advance the producing wells and we are focused on monetising the natural gas sales within the GSS commercial producing block.

In addition to the GSS producing block, the CNOOC/CUCBM partnership spreads across five exploration blocks namely; GSN, GFC, GPX, GQY-A and GQY-B. The concluded Supplementary Agreements also favourably included a collaborative execution plan on each one of these blocks. Our exploration team has been re-structured to efficiently progress each of these assets onto development. 

Our producing GCZ Block with CNPC continued its commercial natural gas sales while the collaborative Joint Operating Team concluded its Overall Development Plan ("ODP"). The plan approved by CNPC in October 2017 commits the drilling of 147 wells by year end 2019 and investing a collective US$54 million. The expected natural gas production following this ODP execution forecasts production in GCZ to be 6 Bcf per year, which will counter the current decline curve as no new wells have been drilled on the block since 2010.

In addition to our CNOOC & CNPC partnership on the two producing blocks, we continued to progress our PetroChina partnership in the GGZ exploration block. GGZ was favourably boosted with a successful twelve well drilling programme at the end of 2017. This natural gas block is a focused and prioritised asset which is expected to have Chinese reserves certified in 2018, following the NSAI reserve certification this year. Furthermore, we expect to commence test gas sales this year in order to progress the asset into development.

We are very appreciative of the constructive agreements reached with our Bond holders who acknowledged the Company's accomplishments with our Chinese partners. The Bond holders were very cooperative in extending the debt maturities allowing the company to launch a re-capitalisation plan which would fundamentally include payment to the debt holders in full and facilitate continued growth capex. We are currently focused on such refinancing.

In accordance with the shareholders decision in December 2017, the producing assets within our subsidiary Green Dragon Gas ("GDG") will be distributed to shareholders through a dividend in specie. G3E will retain a minimum of 25% of GDG post distribution, enabling continuous anticipated dividend participation. Our execution plan is to raise a minimum of US$175 million, in a combination of debt and equity issuance over GDG to facilitate the dividend in specie. We expect to conclude such in the second half of 2018.

Following a successful Hong Kong listing of GDG, G3E emerges debt free with six exploration blocks and an exciting future. It has a well-established track record and demonstrated perseverance in going the distance to monetise shareholder value through basic principles:

o  Focus on core intellectual aptitude in developing Coal Bed Methane ("CBM")

o  Develop assets in an environmentally and socially prudent manner

o  Protect accreted shareholder value

Notwithstanding, our core principles have guided us through these challenges and we look forward to delivering material value to our shareholders and employees who have persevered through our twenty-one-year journey so far.

I look forward to the upcoming years where we expect to monetise value in our producing assets, develop our exploration assets and search for incremental geographies where our deep knowledge in CBM is of accretive value.

We thank our employees' relentless hard work and commitment, and our Board for guiding the Company through its evolution into an exciting CBM exploration and development focused business. We look forward to the year ahead and achieving continued success.

Randeep S. Grewal

Founder & Chairman

STRATEGIC REPORT

UPSTREAM

The upstream operational focus for 2017 was on the further development and optimisation of production and gathering infrastructure in the GSS Block. The current focus on infrastructure reflects the Group's commitment to deliver value from investments through increased production and sales volumes.

In 2017, the Group continued its exploration programme focused on the GGZ licence areas. This programme saw significant drilling progress on the GGZ Block as it moves toward submission of the Chinese Reserves Report (CRR). In addition, 2017 was marked by the initial bookings of both 2P and 3P reserves volumes on the GGZ Block. The migration of resources to reserves reflects the development work undertaken during the year where nine wells are now on production with six of those wells having reached commercial production levels. Guizhou is an important asset to the Group and an exciting prospect as it located in a market that is characterised by higher end user gas prices. 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 the premium is a factor in determining city‐gate end user pricing.

A significant exploration milestone was reached on GSS where the Group booked 1P and 2P reserve volumes in respect of the deeper and technically challenging Coal Seam 15. This seam is present in all of the Group's Shanxi Province Licence areas. Our success on Coal Seam 15 in GSS was matched by that of our partner in the GCZ licence area, where CNPC successfully completed an initial well in the seam recording commercial volumes of gas production. These successes raise the tangible prospect of future gas production from multiple seams in both GSS and GCZ.

The decrease on reserve report s is due to the changes in unit cost and unit price, as well as a change in estimate from Netherland, Sewell & Associate Inc (NSAI), our external gas valuation experts.

ASSETS HELD FOR SALE

GREEN DRAGON GAS - Producing Assets (GSS & GCZ)

Financial

• Balance sheet movement to Dividend in Specie of $329.6 million.

• Revenue of $27.1m with EBITDA of $ 15.2m (56%) are contributed by upstream producing blocks.

DIVIDEND IN SPECIE

Shizhuang South (GSS)

G3E: 60% (op)
CNOOC: 40%		2017			32016
388 km2		Net, bcf			Net, bcf	+/-
1P		77.5			166	-53%
2P		275.5			457	-40%
Location: Shanxi Province

Our primary focus in our operated GSS area in 2017 was the continued development of infrastructure to deliver gas volumes from investments already made. The infrastructure programme is aimed at increasing the number of well connections and making specific enhancements to surface production facilities to optimise the recovery of gas.

Up to 2017, the number of producing LiFaBriC wells is 57 at the year end. This brings the total number of wells connected to infrastructure and producing gas for sale in the GDG operated area of the block to 105 from a total stock of 130 wells.

As part of the infrastructure programme we have also continued a compression upgrade project for the gathering system since 2015. The compression project is focused on realising the full production potential of the connected wells and improving the sales to production ratio by optimising gas flow and pressures across the gathering network. A total of 46 compressors have been installed resulting in an improvement in the sales to production ratio at year-end compared to year-end 2017. The compression project will continue into 2018.

In 2017, our partner, CNOOC, completed the construction and commissioning of two additional gathering stations in the GSS Block. This increases the total gas processing capacity at GSS to 22.7 Bcf per annum.

In addition to supporting the GSS development activities, the installation of further pipeline and processing infrastructure across GSS is important for the development of the contiguous GSN Block situated directly north of GSS.

Coal Seam 15

Coal Seam 15 lies deeper than Coal Seam 3, at approximately 890 metres below the surface. Where Coal Seam 3 is capped by non-permeable shale rock, Coal Seam 15 is situated directly beneath a significant water-bearing limestone cap. In 2015, we successfully drilled the GSS 036-R well into Coal Seam 15. The well is the first LiFaBriC well drilled into the seam. The 036-R well encountered a four-metre thick section of coal and was successfully completed with no penetration of the limestone cap. Intersecting the limestone while drilling could cause water ingress into the coal section of the well, significantly hampering gas recovery. GSS 036-R is currently showing well head casing pressure consistent with gas desorption. Applying in-house drilling experience and proprietary technologies, we were able to successfully navigate in the lateral portion of the well, avoiding the limestone layer. This is a key success in terms of the future development of Coal Seam 15.

The successful drilling result in Coal Seam 15 is an important step in the development of GSS and brings forward the prospect of developing this seam concurrently with Coal Seam 3. Significant production infrastructure already exists across the GSS Block and it is expected that this will reduce the full cycle development cost of Coal Seam 15.

We continued to strengthen our relationships with our partner CNOOC, the establishment of the Joint Operations Team (JOT) collocated in the Jincheng field office. The team comprises technical and financial representatives of both parties. The JOT is focused on the joint development of operations in the GSS Block. Together with our partner we intend to seek Overall Development Plan (ODP) approval in 2018. Approval of ODP is expected to widen available debt funding opportunities.

Chengzhuang (GCZ)

G3E: 47%
CNPC: 53% (op)	2017	2016
67 km2	Net, Bcf	Net, Bcf	+/-
1P	14	14	0%
2P	31	29	7%
Location: Shanxi Province

GCZ is the smallest of our acreage, positions at 67 km² and has been on production for the longest period. In 2015 CNPC successfully drilled an initial lateral well into Coal Seam 15 and after routine de-watering; the well is now producing gas at commercial rates. This is an important milestone on the route to full development of the GCZ Block, as all required infrastructure is already in place. Using the same infrastructure in a Coal Seam 15 development scenario will result in significant capex efficiencies.

We continue to work together with CNPC through the GCZ Joint Operations Team, focusing on potential infill drilling in Coal Seam 3 and the continued exploitation of Coal Seam 15.

In April 2017, the GCZ Block Overall Development Plan was approved by the Consultation Center of China National Petroleum Corporation of CNPC and the Joint Management Committee for submission for further approval to National Development and Reform Committee of the State Council.

G3E - EXPLORATION ASSETS

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 in these 12 wells with the fastest speed recorded of 431 metres per day of drilling accomplished by Greka Drilling Limited. In addition to the current seven production wells on stream, these 12 newly drilled wells will be stimulated and brought online in H2 2018, commencing initial test gas sales from the GGZ Block.

On the three additional blocks - GFC, GPX and GQY, geological dynamic models were updated, well deployment and 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 H2 2018.

Shizhuang North (GSN)

GDG: 50%
CNOOC: 50% (op)	2017	2016
375 km2	Net, bcf	Net, bcf	+/-
1P	4.5	5	-10%
2P	16	18	-11%
Location: Shanxi Province

GSN is an important block for the Group given its geographic position relative to GSS. Coal Seams 3 and 15, present in GSN, are a continuous extension of the same coal seams in GSS. The nature and behaviour of Coal Seam 3 has been well defined through the extensive exploration and development work undertaken by the Group and its partner on GSS, experience which can be transferred to the development of GSN.

In addition, the pipelines and production facilities in place at GSS can be used to evacuate gas for sale from the GSN Block. The GSN area is currently being developed by CNOOC under the terms of the 2014 Framework Agreement and 2017 supplementary agreement (SA) where we exchanged a 10% interest for an additional US$100 million investment commitment from CNOOC.

Boatian-Quingshan (GGZ)

G3E: 60% (op)
CNPC: 40%			2017
870 km2			Net, bcf
Unrisked prospective resources, best estimate			494
Location: Guizhou Province

The GGZ Block was a major area of exploration focus in 2017, with well performance testing continued through 2016 as part of the reserve compilation process with 9 wells currently on production. Six of these 9 wells have reached commercial rates of production which fulfil the per‐well commercial production requirement for reserve certification. The objective of the exploration work undertaken in 2016 was to better define and understand the coal resource in place. Exploration wells were targeted to give sufficient well coverage and production data over the seam in preparation for the submission of the Chinese Reserve Report (CRR) in 2017. Submission of the CRR is an important exploration milestone and a precursor to the ODP in 2018.

During the year, 12 CBM production wells were successfully drilled in three major coal seams; namely Coal Seam 17, 19 and 29.

While still at a relatively early stage, the Group sees significant potential in GGZ, which forms an important part of our strategy to develop the exploration portfolio into fully producing assets. This is building a tangible route to further long-term organic growth.

Other Exploration

The other exploration areas have been re-evaluated during the year, and work plans on exploration have been established for implementation in 2018.             

				Unrisked
				prospective
				resource
			G3E	- best
	Location		share	estimate
PSC	(province)	Area km2	(op)	Net, bcf
GQY A	Shanxi	3,665	10%	817
GQY B			60%
GFC	Jiangxi	1,541	49%	214
GPX	Anhui	584	60%	17

REVIEW OF OPERATIONS

RESERVES MIGRATION

The Group updated its estimates of gas reserves and resources at 31 December 2017 for each of the eight blocks that it is participant to. The estimates of reserves and resources have been provided by Netherland and Sewell and Associates Inc., an independent reservoir engineering firm. The estimates of reserves and resources have been prepared in accordance with definitions and guidelines set out in the 2007 Petroleum Resources Management System (PRMS) approved by the Society of Petroleum Engineers. The report includes all 1,800 wells operated by G3E, CNOOC, CNPC and PetroChina across all blocks in which the Group has an equity interest.

Highlights from the reserves report include:

•          Net 1P reserves decrease of 48% to 96 bcf (2016 184cf)

•          Net 2P reserves decrease of 33% to 377 bcf (2016 559cf)

•          Net 3P reserves decrease of 14% to 2,044 bcf (2016 2,386 bcf)

The results of the reserve report represent significant decrease in 1P and 2P reserve volumes; it is due to the changes in unit cost and unit price, and changes in estimate from NSAI.  This report includes the initial booking of reserves volumes on the GGZ Block.

The summary reserves report at 31 December 2017, with associated NPV 10 valuations, is below:

	GDG			G3E
	(Blocks GSS and GCZ)			(Blocks GGZ, GSN, GQY A & B,GFC,GPX)
	Bcf	NPV10 US$M		Bcf	NPV10 US$M
1P	91.5	440.5		5.2	33.7
2P	306.6	1,539.2		70.5	879.4
3P	1,124.6	5,223.1		919.8	7,526.7
2C	-	-		762.2	-

The estimates in the reserve report 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 G3 Exploration's China reserves have been reviewed by Hassan Sindhu, the Company's petroleum engineer who holds a Bachelor of Science degree from the China University of Petroleum.

Main NSAI assumptions behind the NPV10:

1.    Applicable well-head gas price (before subsidies) of US$7.4/Mcf in GSS and US$7.9/Mcf in GCZ, increasing to US$10.0/Mcf (2021), and escalated 5% p.a. 

2.    Operating costs relating to direct lease and field level costs - US$1,870 per well per month and US$0.329/Mcf of gas produced (no corporate G&A included) in GCZ; and $1,040 per well per month and US$1.275/Mcf of gas produced (no corporate G&A included) in GSS and escalated 5% p.a. from 2019

DISCONTINUED: DOWNSTREAM

The downstream assets of gas stations and gas transportations are classified as held for sale. The group had made decision to sell the downstream assets and focus on upstream business. There are offers provided from various parties, but none of them have concluded by the 2017 year end.

According to local news and government policies, all gas powered buses and taxis will be fully replaced by electrical model at the year end 2020, starting from 2018. Nearly 95% of gas sales volume from Greka's gas stations are contributed by local public transports (taxis, buses), therefore, it has an adverse impact to the value of the downstream assets. As a result, the Group has decided to provide full impairment of downstream asset. Any gain on disposal will be recognised when the disposal is concluded.

The downstream operations of the Group are conducted by our Gas Distribution division, which is responsible for the management of the Group's downstream assets and all downstream sales and marketing activities. The distribution division also purchases third-party gas to complement sales of own production volumes from the Group's retail gas station network. Gross sales in 2017, including our 47% share of GCZ sales, were 3.46 bcf (2016: 3.73 bcf) of which 1.84 bcf (2016: 1.88 bcf) represented sales of GSS production and 0.14 bcf (2016: 0.32 bcf) representing retail sales made from market purchases of gas for sales.

The primary sales routes for the distribution division are:

•          pipeline natural gas (PNG)

•          compressed natural gas (CNG) for retail and industrial use

•          sales for power generation

The Group's production operations are in close proximity to major pipeline infrastructure. PNG sales from GSS and GCZ are directly produced into the East-West pipeline. In addition, a number of customers operate in the area around the GSS processing facility and the CNPC processing facility at GCZ. The downstream has been classified as held for sale, as the group plans to focus on the upstream business.

PNG

PNG sales are made directly into the national transmission network at both GSS and GCZ on a volume metered basis. The Group sells PNG gas at GSS under contract at US$10.4 per Mcf and invoices directly for sales. Sales at GCZ are managed by our partner, CNPC, with our share gross revenue distributed under normal joint operating procedures. There are de-minimis delivery quantities in the sales contracts in place for either GSS or GCZ.

Total PNG sales for 2017 amounted to 3.21bcf (2016: 3.41 bcf) representing 93% of gross production (2016: 91%). PNG sales from the Group's operated property on GSS were 1.36 bcf (2016: 1.47 bcf) representing a decrease of 7% over 2016.

CNG

Bulk CNG sales are made to customers directly at our GSS IPF, which includes CNG compression and loading facilities. Total bulk CNG sales for 2017 amounted to 0.18 bcf (2016: 0.14 bcf).

Retail CNG sales are made from our own network of retail gas stations located in Henan Province and proximate to Zhengzhou. Customers comprise fleet users and mass market private customers. The Group currently owns seven retail gas stations, , which have been classified as held for sale.

CBM pricing is increasing during 2017, retail CNG continues to provide the highest margins of our available sales channels for equity gas.

Total retail CNG sales for 2017 amounted to 0.25 bcf (2016: 0.31 bcf). Of the total 2017 retail sales volume, 0.11 bcf (2016: 0.04 bcf) was sourced from equity production.

Sales for power generation

The distribution division also sells gas to Greka Technology and Manufacturing Limited (GTM), a related company under common control that operates and maintains the IPF facility and production infrastructure. Sales of gas for in-field power generation comprised 15 % (2016: 13%) of total sales from the Group's operated property on GSS.

FINANCIAL REVIEW

Income statement - Discontinued Operations

During the year, all cash generating units of the Group have been classified as held for sale, their results are classified as gains or losses from discontinued operations. Therefore, there is no revenue and cost of sales in the consolidated statement of comprehensive income, and the results of operations of discontinued operations are presented in non-current assets held-for-sale and discontinued operation (note 11 to the financial statements).

Total revenue decreased by 12% in 2017 to US$25.7 million (2016: US$29.1 million) mainly attributable to an approximate 10% decrease in sales volume of GCZ operated by CNPC, and 4% decrease in sales volume of GSS operated by Greka. However, the total selling prices are stable year-on-year with 2016. And the selling price increased considerably from 2018 onwards.

Sales volumes by channel in 2017 compared to 2016 were as follows:

	2017	2016
	bcf	bcf
PNG	2.7	3.0
CNG - Industrial	0.2	0.1
CNG - Retail	0.3	0.3
Power	0.3	0.2

PNG sales volumes from our operated GSS area were 10% lower in 2017 than in 2016, because the group purposely made more sales to industrial customers for higher margin. Our share of sales volumes (47%) from GCZ was 10% lower than in 2016 reflecting the relative maturity of the GCZ area, it is a natural decline. The Group and CNPC have planned to drill more than 100 wells in the next two years. The sales price per m3 achieved on GCZ is higher than that on GSS due to the higher compression ratio of sales-gas that means it can be directly injected into the main east-west gas pipeline. This modest price differential results in a decrease in total sales revenue with the effect of currency exchange.

CNG retail sales volumes in 2017 was relatively stable as compared to 2016.

Subsidy revenue has decreased compared to 2016 as a result of the sales volume decreased. Subsidies are calculated at a flat rate based on sales volumes and hence are presented as a component of revenue.

Cost of sales has increased by 9 % in 2017 to US$17.8 million (2016: US$16.4 million). Production processing and associated power cost are variable in nature, with other costs being relatively fixed in nature. As a result of changes in the reserves estimated in 2017, depreciation charge of the gas assets during the year has increased accordingly; this has resulted in a higher cost of sales in 2017.

Selling and distribution costs were US$1.0 million (2016: US$1.0 million) and relate wholly to the retailing gas station sales segment. Selling and distribution costs comprise the costs associated with the operation of the CNG retail stations. The underlying costs are consistent year-on-year with seven stations in operation in both periods.

Income statement - continuing operations

Other administrative costs of US$4.1 million (2016: US$4.9 million) have decreased due to the cost saving policy manifests in the current year.

Liquidity and capital resources

The Group closed the year with US$3.2 million (2016: US$7.3million) of cash on hand and US$1.0 million (2016: US$2.0 million) of restricted cash related to a performance bond given to Petro-China in relation to the Group's exploration activities on the GGZ Block.

During the year, US$17.6 million (2016: US$8.5 million) was generated from operations with US$16.7 million (2016: US$10.5 million) invested in the exploration and production acreage. The decrease in investment in exploration and production acreage is largely due to longer than expected conclusion of the supplementary agreements, before which the parities were refrained from capital investment in the blocks.

In December 2016, the group reached an agreement with the holder, GIC, to extend the maturity of the US$50 million convertible bond. Under the agreement, the Bond remains unsecured, has a revised coupon of 10% and a maturity date extended to 31 December 2020 (subject to a one-time redemption option exercisable by GIC on the current maturity). On 23 June 2017 an extension to the note holder's one-time early redemption option was agreed with the note holder such that at any time up to 27 October 2017, the note holder could require the Company to repay the whole amount of the loan note immediately. The option to require early repayment is at the note holder's sole discretion. At final maturity of the Bond, GIC has the right to require the Company to purchase its conversion shares at a price based on the 90 day VWAP calculated as of 31 December 2020 and to be settled prior to 30 April 2021. During the year, the company reached agreement with the note holder to extend the period during which the put option is exercisable to 20 November 2018.

The Company has an $88.0 million bond which is due for repayment on November 2017. The bond contains a number of financial covenants that are measured by reference to EBITDA and calculated at each reporting date. As announced on 5 June 2017, the Bondholder waived the covenants up to 30 June 2017. 

The cash used for debt service in 2017 was $4.4 million (2016: US$12.3) which reflects the interest paid in respect of the US$88.0 million bond entered in late 2014 and carrying a coupon of 10% (2016:10%), and the convertible bond taken out in late 2014, with principal of US$50.0 million and a coupon of 10% (2016:7%), both of which will be repaid after dividends in specie by GDG.

Asset additions

Total additions to upstream CBM assets in 2017 amounted to US$13.2 million (2016: US$15.2 million). 

In 2017, due to the GSS and GCZ blocks being actively pursued for a spin off exercise, the assets are recognised as held for sale.

 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

		Year ended  31 December 2017	Year ended 31 December 2016 Restated*
	Notes	US$'000	US$'000
Continuing operations
Revenue	4	-	-
Cost of sales		-	-
Gross profit		-	-
Other Income		13	13
Selling and distribution costs		-	-
Administrative expenses		(4,144)	(4,969)
Loss from operations	5	(4,131)	(4,956)
Finance income	6	4,457	347
Finance costs	7	(17,426)	(16,879)
Loss before income tax		(17,100)	(21,488)
Income tax credit	10	46	50
Loss for the year from continuing operations		(17,054)	(21,438)
Discontinued operations
(Loss)/profit for the year from discontinued operations	11	(7,522)	9,386
Loss for the year attributable to owners of the company		(24,576)	(12,052)
Other comprehensive expense net of tax: Items which may be reclassified to profit and loss: -      Exchange differences on translation foreign operations		57,328	(40,963)
Total comprehensive income/(Loss) for the year attributable to owners of the company		32,752	(53,015)
Basic and diluted loss per share (US$) of Continuing operations	12	(0.109)	(0.138)
Basic and diluted loss per share (US$) of discontinuing operations	12	(0.048)	0.061
Basic and diluted loss per share (US$)	12	(0.158)	(0.077)

*  Certain amounts shown here do not correspond to the 2016 financial statements and reflect adjustments made in respect to assets held for sale, refer to Note 11.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

		Notes	As at 31 December 2017	As at 31 December 2016
			US$'000	US$'000
Assets
Non-current assets
Property, plant and equipment		13	33	272,583
Gas exploration and appraisal assets		14	617,900	1,034,117
Other intangible assets		15	-	2,210
Non current prepaid expenses			299	192
Deferred tax asset		16	317	2,079
			618,549	1,311,181
Current assets
Inventories		17	-	94
Trade and other receivables		18	8,167	22,911
Restricted cash		26	1,000	2,000
Cash and cash equivalents		19	1,347	7,324
			10,514	32,329
Assets of disposal group classified as held-for-sale		11	380,133	-
			390,647	32,329
Total assets			1,009,196	1,343,510

		Notes	As at 31 December 2017	As at 31 December 2016
			US$'000	US$'000
Liabilities
Current liabilities
Trade and other payables		20	10,198	13,883
Convertible notes		21	53,132	47,347
Bonds		22	95,932	88,795
Current tax liabilities			-	-
			159,262	150,025
Liabilities of disposal group classified as held-for-sale		11	50,548	-
			209,810	150,025
Non-current liabilities
CUCBM provision		26,31	-	401,702
Deferred tax liability		16	124,137	144,831
Share buyback option liability		21	3,469	7,924
			127,606	554,457
Total liabilities			337,416	704,482
Total net assets			671,780	639,028
Capital and reserves
Share capital		23	16	16
Share premium		24	808,981	808,981
Share redemption reserve		24	(8,255)	(8,255)
Convertible note equity reserve		24	2,851	2,851
Share-based payment reserve		24	-	-
Foreign exchange reserve		24	38,381	(18,947)
Retained deficit		24	(170,194)	(145,618)
Total equity attributable to owners of the parent			671,780	639,028
Total equity			671,780	639,028

The financial statements were authorised and approved by the Board on 05 June 2018 and signed on their behalf by

Mr. Randeep S. Grewal

Director

CONSOLIDATED STATEMENT OF CASH FLOWS

	Notes	Year ended 31 December 2017	Year ended 31 December 2016
		US$'000	US$'000
Cash flows used in continuing operating activities
Loss after tax		(17,054)	(12,052)
Adjustments for:
Depreciation	13	22	5,154
Amortisation of intangible assets	15	-	723
Loss on disposal of plant, properties and equipment	5	-	4
Other income and finance income	6	(4,457)	(356)
Finance costs	7	17,426	16,691
Accelerated finance charge	21	-	516
Taxation	10	(46)	(216)
Cash generated from operating activities before changes in working capital		(4,153)	10,464
Movement in inventory		-	15
Movement in trade and other receivables		4,690	(427)
Movement in trade and other payables		5,258	(1,530)
Net cash generated from operations		5,795	8,522
Income Tax paid		-	(33)
Net cash generated from continuing operating activities		5,795	8,489
Net cash generated from discontinued operating activities	11	11,731	-
Net cash generated from operating activities		17,526	8,489

	Notes	Year ended 31 December 2017	Year ended  31 December 2016
		US$'000	US$'000
Investing activities
Payments for purchase of property, plant and equipment	13	-	(4,709)
Proceed from disposal of property, plant and equipment		-	748
Payments for exploration activities	14	(6,259)	(10,468)
Interest received		4	25
Refund of deposit received from Petro China		1,000	-
Net cash used in continuing investing activities		(5,255)	-
Net cash used in discontinued investing activities	11	(12,192)	-
Net cash used in investing activities		(17,447)	(14,404)
Financing activities
Interest paid		(4,400)	(12,300)
Net cash used in continuing financing activities		(4,400)	-
Net cash used in discontinued financing activities	11	-	-
Net cash used in financing activities		(4,400)	(12,300)
Net decrease in cash and cash equivalents		(4,321)	(18,215)
Cash and cash equivalents at beginning of year		7,324	26,866
		3,003	8,651
Effect of foreign exchange rate changes		172	(1,327)
Cash and cash equivalents at the end of year		3,175	7,324
Attributable to continuing activities	19	1,347	-
Attributable to discontinued activities	11	1,828	-

NOTES FORMING PART OF THE FINANCIAL STATEMENTS

1.     Going concern

These financial statements have been prepared on a going concern basis.

Included in current liabilities as at the 31 December 2017 are two specific instruments;

The Company has a $50.0 million convertible loan note which is due for repayment on 31 December 2020. On the 23 October 2017 an extension to the one-time early redemption option was agreed with the note holder such that it is now exercisable at any time up to 20 November 2018, and would require early repayment of the whole amount due no earlier than 20 November 2018. The option to require early repayment is at the note holder's sole discretion. Further details of the terms of the instrument are included in notes 21.

The Company has an $88.0 million bond which was due for repayment in November 2017, prior to which the Company entered into a non-binding Term Sheet with a certain bondholder which among matters, extends the maturity to November 2018. The bond has not been repaid to date. On 22 December 2017 the Bond Trustee reported that it was instructed by one or more bondholders representing a majority of the outstanding bond that they were in discussions with the Company regarding amongst other things an amendment to the bond agreement. Further the Bond Trustee was instructed by those majority Bondholders not to take any action to recover amounts due and, until further notice, and as long as no conflicting instruction is received, they will not declare the bond to be in default or demand immediate payment. Further details of the terms of the instrument are included in note 22.

The company also has other payables due to third parties of approximately $15 million, due immediately. The company is managing these payables.

In considering the appropriateness of the going concern basis, the Board gave consideration to the following:

The Company is currently in negotiation with institutions in order to re-finance the $88.0 million bond, the $50.0 million convertible loan note and settle all other liabilities and fund commitments. The Company has received a draft term sheet and the Company expects that the institution will complete its appropriate due diligence process and confirm debt financing in due course.

The Company plans to distribute to its shareholders through a dividend in specie, its producing assets (blocks GSS and GCZ) into a new Hong Kong listed company, Green Dragon Gas (GDG) and at the same time raise sufficient cash from new debt and equity to repay all of the Company's existing debt. The remaining development and exploration blocks are planned to stay in G3E, which in turn will remain listed in London. The Hong Kong listing and concurrent equity raise is subject to approval from the Hong Kong Stock Exchange (HKEX).

The Company's major shareholder has provided conformation that it will provide sufficient financial support in respect of other current payables if found necessary.

The Directors have informed the Bondholder Trustee of the Company's intention to raise financing through the issue of debt or equity from the Hong Kong listing and to use the new financing to repay the $88 million bond. The Company notes that discussions continue and a major bondholder has also signed a non-binding draft agreement to defer the due date to November 2018. To date the Company is not aware of any immediate intention of the Bond Trustee to take action to recover amounts due, or of any bondholder who may act to put the bond into default. On the basis of the above, the Company does not expect the Bond Trustee to put the bond into default before additional funding is received.

The Company is confident that the $50.0 million noteholder will continue to support the Company as it acts to refinance the bond, such that the noteholder will not be motivated to act on their early redemption option available until 20 November 2018.  The noteholder has not given any written assertions that they will not exercise their early redemption option.

The Company expects to use the proceeds from the Hong Kong listing and the new debt finance to repay the Company's debts. Based on the above, the Company expects to be able to meet its liabilities as they fall due for a period not less than one year.

As at the date of this report, there were no binding debt re-financing agreements in place, the HKEX have not yet approved the Hong Kong Listing and investors have not committed to provide equity financing Therefore there can be no certainty that re-financing will be successful. There can also be no certainty that the $50 million noteholder will continue to support the Company and not exercise their right to early redemption, or that no default notice will be issued in respect of the $88 million bond.

Notwithstanding the confidence that the Board has, the Directors, in accordance with Financial Reporting Council guidance in this area, conclude that at this time there is material uncertainty that such finance can be procured and failure to do so might cast significant doubt upon the Group's ability to continue as a going concern and that the Group may therefore be unable to realise their assets and discharge their liabilities in the normal course of business. These Financial Statements do not include the adjustments that would result if the Group was unable to continue as a going concern. 

2.     Revenue and segment information

The Group's reportable segments are as set out below. The operating results of each of these segments are regularly reviewed by the Group's chief operating decision-makers in order to make decisions about the allocation of resources and assess the performance of each segment.

During the year, the downstream business of G3E was classified as held for sale. Due to recent news which disclosed that all taxis and buses which are currently fuelled by gas will be replaced by electrical vehicles by the year of 2020, and this is the main business of the downstream assets, the Group decided to dispose the downstream assets.

The assets and liabilities relating to the carve-out of the producing blocks (GSS & GCZ) of Greka Energy (International) B.V., a 100% wholly-owned subsidiary of the Company, have been presented as held for sale following the board decision to spin off the assets of GSS & GCZ blocks. As the carve out of the GDG assets is coming to its final stage, GDG has been classified as held for sale asset.

The financial statements of 2017 and 2016 did not include the Group's share of CNOOC GSN transactions or operated GSS 1,388 wells' revenue, associated costs and resulting margins. The sales revenues and volumes associated with the CNOOC operated areas of GSS and GSN will be subject to future audits.

The accounting policies of these segments are in line with those described in note 2.

For the year ended 31 December 2017

	Upstream continuing operations	Upstream discontinued operations	Downstream discontinued operation	Corporate	Sub-total	Eliminations	Consolidated
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Segment revenue:
Sales to external customers	-	14,618*	11,039	-	25,657	(25,657)	-
Inter-segment sales	-	12,500	646	-	13,146	(13,146)	-
	-	27,118	11,685	-	38,803	(38,803)	-
Depreciation	-	(7,623)	(1,524)	(22)	(9,169)	9,147	(22)
Amortisation	-	-	1,066	-	1,066	(1,066)	-
Impairment	-	-	(13,095)	-	(13,095)	13,095	-
Profit/(loss) from operation	-	7,577	(18,195)	(4,131)	(14,749)	10,618	(4,131)
Finance income	12	1	2	4,445	4,460	(3)	4,457
Finance cost	-	-	580	(17,426)	(16,846)	(580)	(17,426)
Income tax	46	2,347	166	-	2,559	(2,513)	46
Profit/(Loss) for the year	58	9,925	(17,447)	(17,112)	(24,576)	(7,522)	(17,054)
Assets	127,550	377,513	2,619	501,513	1,009,194	(380,133)	629,062
Liabilities	132,296	47,928	2,619	154,570	337,413	(50,548)	286,865
PPE additions	-	-	162	3	165	(161)	4
Gas exploration additions	9,261	3,970	-	-	13,231	(3,970)	9,261

* The contracted price at which the GSS gas is sold to the downstream operations is $10.4/Mcf.

For the year ended 31 December 2016

	Upstream continuing operations	Upstream discontinued operations	Downstream discontinued operations	Corporate	Sub-total	Eliminations	Consolidated
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Segment revenue:
Sales to external customers	-	16,418	12,725	-	29,143	(29,143)	-
Inter-segment sales	-	12,395	-	-	12,395	(12,395)	-
	-	28,813	12,725	-	41,538	(41,358)	-
Depreciation	-	(3,390)	(1,742)	(22)	(5,154)	5,132	(22)
Amortisation	-	-	(723)	-	(723)	723	-
Impairment	-	-	-	-	-	-	-
Profit/(loss) from operation	-	16,428	(6,889)	(4,956)	4,583	(9,539)	(4,956)
Finance income	1	-	9	346	356	(9)	347
Finance cost	-	8	(336)	(16,879)	(17,207)	328	(16,879)
Income tax	50	-	166	-	216	(166)	50
Profit/(Loss) for the year	51	16,436	(7,050)	(21,489)	(12,052)	(9,386)	(21,438)
Assets	43,460	1,369,545	37,637	759,973	2,210,615	(867,105)	1,343,510
Liabilities	47,945	849,077	61,382	535,390	1,493,794	(789,312)	704,482
PPE additions	-	21,864	2,706	-	24,570	-	24,570
Gas exploration additions	27,416	20,267	-	-	47,683	-	47,683

3.     Non-current assets held for sale and discontinued operation

The assets and liabilities relating to the carve-out of the producing blocks (GSS & GCZ) of Greka Energy (International) B.V., a 100% wholly-owned subsidiary of the Company, have been presented as held for sale following the board decision to launch GSS & GCZ blocks IPO listing in the Hong Kong Stock Exchange. Management expects GSS & GCZ blocks to be sold within the next 12 months.

The assets and liabilities relating to Greka Gas Distribution Ltd, a 100% wholly-owned subsidiary of the Company, have been presented as held for sale following the announcement made to sell Greka Gas Distribution Ltd in the PRC. Management expects Greka Gas Distribution Ltd to be sold within the next 12 months.

 (a)  Assets of disposal group classified as held-for-sale

	Note	As at 31 December 2017	As at 31 December 2017	As at 31 December 2017
		Upstream group	Downstream group	Subtotal
		US$'000	US$'000	US$'000
Property, plant and equipment	13	141,445	-	141,445
Gas exploration and appraisal assets	14	223,713	-	223,713
Other intangible assets	15	-	-	-
Long term prepaid expenses		-	579	579
Deferred tax asset	16	4,268	-	4,268
Inventories	17	-	-	-
Trade and other receivables		7,478	822	8,300
Cash and cash equivalents		609	1,219	1,828
		377,513	2,620	380,133

 (b)  Liabilities of disposal group classified as held-for-sale

	Note	As at 31 December 2017	As at 31 December 2017	As at 31 December 2017
		Upstream group	Downstream group	Subtotal
		US$'000	US$'000	US$'000
Trade and other payables		(19,061)	(3,340)	(22,401)
Deferred tax liabilities	16	(28,806)	(145)	(28,951)
Current tax liabilities		(61)	865	804
		(47,928)	(2,620)	(50,548)

(c)   Analysis of the results of discontinued operations is as follows:

		As at 31 December 2017	As at 31 December 2017	As at 31 December 2017
	Note	Upstream group	Downstream group	Subtotal
		US$'000	US$'000	US$'000
Revenue:	4	14,618	11,039	25,657
Profit/(loss) from operation	4	7,577	(18,195)	(10,618)
Finance income	4	1	2	3
Finance cost	4	-	580	580
Income tax	4	2,347	166	2,513
Gain/(Loss )after tax of discontinued operations attributable to owners of the company	4	9,925	(17,447)	(7,522)

		Year ended 31 December 2016	Year ended 31 December 2016	As at 31 December 2017
	Note	Upstream group	Downstream group	Subtotal
		US$'000	US$'000	US$'000
Revenue	4	16,418	12,725	29,143
Profit/(loss) from operation	4	16,428	(6,889)	9,539
Finance income	4	-	9	9
Finance cost	4	8	(336)	(328)
Income tax	4	-	166	166
Gain/(Loss )after tax of discontinued operations attributable to owners of the company		16,436	(7,050)	9,386

(d)  Cash flow from (used in) discontinued operations:

		As at 31 December 2017	As at 31 December 2017	As at 31 December 2017
		US$'000	US$'000	US$'000
		Upstream group	Downstream group	Subtotal
Net cash used in operating activities		16,514	(4,783)	11,731
Net cash generated from investing activities		(12,045)	(147)	(12,192)
Net cash generated from financing activities		-	-	-
Net cash inflow/(outflow)		4,469	(4,930)	(461)

		As at 31 December 2016	As at 31 December 2016	As at 31 December 2016
		US$'000	US$'000	US$'000
		Upstream group	Downstream group	Subtotal
Net cash used in operating activities		7,978	(1,205)	6,773
Net cash generated from investing activities		(9,944)	(121)	(10,066)
Net cash generated from financing activities		-	-	-
Net cash inflow/(outflow)		(1,966)	(1,326)	(3,292)

4     Earnings and loss per share

The calculation of basic and diluted loss per share attributable to owners of the Company is based on the following data:

	Year ended	Year ended
	31 December	31 December
	2017	2016
	US$'000	US$'000
		*Restated
Loss for the year attributable to owners of the Company used in basic and	(24,576)	(12,052)
diluted loss per share
Loss for the year attributable to owners of the Company used in basic and
diluted loss per share -continuing operations	(17,054)	(21,438)
Loss for the year attributable to owners of the Company used in basic and
diluted loss per share -discontinued operations	(7,522)	9,386
	Year ended	Year ended
	31 December	31 December
	2017	2016
	Number	Number
Weighted average number of Ordinary Shares for basic and
diluted earnings per share	156,072,289	156,072,289
	Year ended	Year ended
	31 December	31 December
	2017	2016
Basic and diluted loss per share (US$)	(0.158)	(0.077)
Basic and diluted loss per share (US$)-continuing operations	(0.109)	(0.138)
Basic and diluted (loss)/earnings per share (US$)-discontinued operations	(0.048)	(0.061)

Loss per share is based on the loss attributable to ordinary equity holders of the Company of divided by the weighted average of ordinary shares in issue during the corresponding period.

No separate calculation of diluted profit/(loss) per share has been presented as, at the date of this financial information, no options, warrants or other instruments that could have a dilutive effect on the share capital of the Company were outstanding.

There have been no other transactions involving Ordinary Shares or potential Ordinary Shares between the reporting date and the date of approval of these financial statements.

 

END

 

 

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