Green Dragon Gas Gets The Green Light From China
Edison | Aug 01, 2017 08:50AM ET
Green Dragon Gas (LON:GDG) has announced that the China National Development and Reform Commission has approved a project code for the overall development plan (ODP) on the Greka Shizhuang South (GSS) Zaoyuan portion of the main GSS block, concluding that the ODP does not require an approval process and only requires registration.
We wait for further details on the debt access or project finance that this ODP registration will afford GDG, such that the company can fund an accelerated drilling programme and re-finance maturing debt. Our base case valuation of 227p/share is predicated on GSS/GCZ RBL debt access and a significant step-up in drilling activity in 2018. See our note of 20 February 2017 for valuation scenarios.
GSS Zaoyuan highlights: the GSS Zaoyuan ODP covers an area of 50.7km2 that has incurred total gross investment of $190m to date ($114m net to GDG) and covers the drilling of an additional 42 vertical wells and 47 LiFaBriC wells by 2020, at a total gross investment of c $82m ($49.2m net to GDG). On completion of the development, production capacity is expected to reach 14bcf, including two gas gathering stations and a total of 265 vertical wells and 91 LiFaBriC wells.
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