TIDMG3E
RNS Number : 5596W
G3 Exploration Limited
18 April 2019
18 April 2019
G3 Exploration LTD.
("G3E", "G3 Exploration" or the "Company")
Audited Annual Results for the Year Ended 31 December 2018
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 full year ended 31 December
2018.
Financial Highlights
-- Reported revenue includes assets held for sale within Green Dragon Gas (GDG).
-- Revenue of US$28.6m (2017: US$25.7m) an 11% increase on 2017
mainly attributed to a slight increase in average gas selling
prices.
-- EBITDA of GDG of US$ 16.3m (2017: US$15.2 m) at a constant margin.
-- Cash generated from group total operating activities during
the year of US$3.4m (2017: US$17.5m).
-- Net loss for the year of US$9.1m (2017: net loss of
US$24.6m), a 170% improvement mainly attributed to the profit for
the year from discontinued operations.
Operational Highlights
-- China National Petroleum Corporation (CNPC) approved the
Overall Development Plan on GCZ producing block.
-- Total gross sales of 5.66 Bcf compared to 5.72 Bcf, a marginal decline.
-- GSS gross sales of 3.39 Bcf compared to 2.88 Bcf, an 18%
increase mainly due to the increase in CNOOC operated wells.
-- GCZ, which is operated by CNPC, had gross sales of 2.27 Bcf
(2017: 2.84 Bcf), a 20% decline on the previous period reflecting
the absence of new wells in the year.
2019 OUTLOOK
Recapitalize balance sheet and drive development program for G3
Exploration
-- Conclude evolution to exploration and development business
with the completion of the GDG dividend.
-- Repay two bond creditors from the GDG sales proceeds.
-- Deliver first gas in Guizhou Block (GGZ).
The Company's audited Report and Accounts for the Full Year
Ended 31 December 2018 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
Ben Brewerton/Genevieve Ryan/Tom Pigott
Tel: +44 20 3727 1000
CHAIRMAN'S STATEMENT
The year started with several challenges and ended with
constructive conclusions that are being currently implemented.
Of the decisions taken, that to transform the business into an
exploration and appraisal company was the most significant in
providing a clear direction to the group; it focuses G3E on its
specialty and takes us back to our roots and strengths.
Having brought two fields into viable commercial production we
believe that producing fields are better operated by significantly
larger enterprises which are specialist in doing so. As such, we
engaged Citibank and Credit Suisse to explore possible monetization
options for our producing assets. This process is on-going and is
expected to conclude with trade sales for the GDG assets, enabling
G3 Exploration shareholders to receive our third dividend in specie
through the distribution of the proceeds. The fall-back of
proceeding with a Hong Kong listing remains an option.
On completion of the dividend in specie of GDG, the Group's
receivable from GDG of US$341 million is expected to be paid in
full. G3 Exploration shall in turn use these receipts to settle its
outstanding debt, including to its Nordic Bond holders and
Convertible Bond holders, and to fund ongoing working capital and
an accelerated exploration and development programme in its
remaining exploration blocks.
After our monetization plan is concluded, G3 Exploration expects
to be debt free with six exploration blocks and an exciting future
ahead. We believe we can add material shareholder value in
capitalizing on our decades of technical aptitude in appraising
Coal Bed Methane assets for development. G3 Exploration
shareholders can expect to benefit from a monetization event on a
recurring basis as we progress other assets through the appraisals
stage. The most advanced of these, the Guizhou exploration block
(GGZ), is expected to commence test gas sales this year.
Our Jincheng, Shanxi based team has worked closely with
CNPC-PetroChina on progressing the GCZ production block to further
development. The block continued its commercial gas sales while the
collaborative Joint Operating Team concluded its Overall
Development Plan. The plan approved by NDRC in September, commits
to the drilling of 147 wells by yearend 2019 with a collective
US$54 million investment divided according to the partners'
participating interests in the Block. GCZ's expected gas production
following this ODP execution is 6 BCFPY which will counter the
current decline curve as no wells have been drilled on the block
since 2010.
The GSS block met its objective of increasing gas sales from the
460 gas sales wells. The CNOOC-CUBCM team increased with gas sales
well from 324 to 354 of the total 1,128 wells drilled which
resulted in a yearend exit rate of 2.25 BCFPY. This was
complemented by our own operated wells which maintained a 2.19
BCFPY exit gas sales rate. This provides for GSS attaining an
annual gas sales rate of 3.39 BCFPY exiting the year. We expect gas
sales to continue increasing as the balance of the drilled wells
are placed on line and from the resulting de-watering of the basin
which will assist gas flow.
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. Our exploration team has been
re-structured to efficiently progress each of these assets onto
development and have been diligently concluding programs which
could be executed following recapitalization.
In addition to our CNOOC & CNPC partnership on the two
producing blocks, we continued to progress our CNPC partnership in
the Guizhou (GGZ) exploration block. This gas block is a focused
and prioritized asset which is expected to have Chinese reserves
certified in 2019. Furthermore, we expect to commence test gas
sales this year so as to progress the asset into development.
We are very appreciative of the continuous support extended by
our Bondholders who continuously acknowledge the Company's
accomplishments with our Chinese partners. The Bondholders have
been very cooperative and constructive in supporting the Company to
conclude its re-capitalization plan which would fundamentally
include payment to the debt holders in full and facilitate
continued growth in capex.
We have a well-established track record and demonstrated
perseverance in going the distance to monetize shareholder value
through core basic principles:
o Focus on core intellectual aptitude in developing Coal Bed
Methane gas
o Develop assets in an environmentally and socially prudent
manner
o Protect accreted shareholder value
Emerging markets have been a challenge for many pioneers and we
have certainly had ours. 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-two year journey so far.
I look forward to the upcoming years where we expect to monetize
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 the Board for
guiding the company through its evolution into an exciting CBM
exploration and development globally-focused business.
Randeep S. Grewal
Founder & Chairman
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 signi cant 25 year track record of
technology-led exploration and drilling success in CBM, across di
erent geographies.
G3 Exploration's intention is to leverage its expertise,
monetise its current 7112km(2) 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 455km(2) in Shanxi
province, China.
G3 Exploration is listed on the main market of the London Stock
Exchange (LSE: G3E).
STRATEGIC REPORT
UPSTREAM
The upstream operational focus for 2018 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.
ASSETS HELD FOR SALE
GREEN DRAGON GAS - Producing Assets (GSS & GCZ)
Financial
-- Balance sheet movement owing to Dividend in Specie of $341
million to sell the GDG assets at their Net Equity Amount.
-- Revenue of $25.5m with EBITDA of $16.3m are contributed by upstream producing blocks.
DIVID IN SPECIE
Shizhuang South (GSS)
G3E: 60% (op) 2018 2017 +/-
CNOOC: 40%
388 km(2)
Net, Bcf Net, Bcf
1P 77.2 77.5 (0.30%)
2P 274.6 275.5 (0.36%)
Location: Shanxi Province
Our primary focus in our operated GSS area in 2018 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 2018, the number of producing LiFaBriC wells is 58 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 106 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 51 compressors have been installed
resulting in an improvement in the sales to production ratio at
year-end 2018. The compression project will continue into 2019.
In 2018, 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 2019. Approval of ODP is expected to widen
available funding opportunities.
Chengzhuang (GCZ)
G3E: 47% 2018 2017 +/-
CNPC: 53% (op)
67km(2)
Net, Bcf Net, Bcf
1P 13.9 14.0 (0.19%)
2P 31.0 31.1 (0.28%)
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.
On 7 September 2018, NDRC has approved the ODP, consistent with
its policy to accelerate CBM development in China, boost green
energy supply, and improve coal mine safety production and to
reduce CO2 emissions. This final NDRC approval facilitates the
permits for the Company and its partner to further develop the
acreage.
GCZ ODP highlights
-- The ODP area of 33 km(2) has 294 Bcf of gas in place with
estimates of recoverable proved reserves of 176 Bcf.
-- 114 wells have been drilled on the acreage of which 86 wells are selling gas.
-- The development plan includes the drilling of an additional 147 production wells.
-- Acreage contains coal seam #3 & #15 gas bearing reservoirs.
-- Gross production capacity from the ODP is estimated to be 180
million cubic meters per year (6.35 Bcf per year).
-- The total development cost for GCZ is expected to be c. US$54
million over the next two years starting from fourth quarter 2018.
Each party is expected to invest according to its participating
interest in the Block, and work towards the completion of the work
program by yearend 2019.
-- GCZ is a commercial gas producing block which has been
profitable since September 2015 and continues to be so.
The GCZ Block is jointly operated by CNPC and the Company
through a joint management team based in Jincheng, Shanxi. In
addition to the above, NDRC approval has emphasized on
strengthening the health, safety and environment (HSE) management
systems to fulfil the objective of no accidents and zero pollution
to the environment. Regarding HSE, the Company has since inception,
along with its Chinese partners, been committed to working to the
highest standards of HSE in all of its operations. Our teams have
diligently been committed to safety at all times with zero lost
time incidents recorded year-on-year.
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
in 2017. 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 in
2017 will be brought online in H2 2019, commencing initial test gas
sales from the GGZ Block.
On the three additional blocks - GFC, GPX and GQY, geological
dynamic models will be updated, well deployment and geological
field surveys will be carried out, land leases were acquired with
civil work now ongoing to kick-off the 2019 work plan for each
block in 2019.
Shizhuang North (GSN)
GDG: 50% 2018 2017 +/-
CNOOC: 50% (op)
375 km(2)
Net, Bcf Net, Bcf
1P 4.7 4.5 4.95%
2P 16.3 16.3 (0.03%)
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 that 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) 2018 2017 +/-
CNPC: 40%
870 km(2)
Net, Bcf Net, Bcf
Unrisked prospective resources, best estimate 339 494 (31%)
Location: Guizhou Province
The GGZ Block continued to be a major area of exploration focus
in 2018, with well performance testing continued through 2017 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 2017 and 2018 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 2019. Submission of the CRR is an important
exploration milestone and a precursor to the ODP in 2019.
In 2017, 12 CBM production wells were successfully drilled in
three major coal seams and were brought on line; 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 2019.
PSC Location Area G3E share Unrisked prospective
(province) km(2) (op) resource - best
estimate
Net, Bcf
GQY A 10%
GQY B 60%
-------- ----------- ----------------------
GQY Total Shanxi 3,665 70% 682
GFC Jiangxi 1,541 49% 196
GPX Anhui 584 60% 15
REVIEW OF OPERATIONS
RESERVES MIGRATION
The Group updated its estimates of gas reserves and resources at
31 December 2018 for each of the eight blocks that it is
participant to. 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. This includes all 1,800 wells
operated by G3E, CNOOC, CNPC and PetroChina across all blocks in
which the Group has an equity interest.
The summary reserves report at 31 December 2018 (2017 report
updated for depletion through production), 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$M
1P 91.2 425.4 5.4 32.5
2P 305.7 1,416.6 68.5 826.1
3P 1,120.9 4,997.8 912.2 7,209.0
2C - - 596.0 -
The summary reserves report at 31 December 2017, with associated
NPV 10 valuations, is below:
GDG G3E
(Blocks GSS and GCZ) (Blocks GGZ, GSN, GQY
A & B,GFC,GPX)
Bcf NPV10 US$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 prepared by Hassan Sindhu, the Company's petroleum engineer
who holds a Bachelor of Science degree from the China University of
Petroleum.
Main assumptions supporting the NPV10:
1. Applicable well-head gas price (before subsidies) of
US$7.1/Mcf in GSS and US$7.5/Mcf in GCZ (2018), increasing to
US$8.2/Mcf in GSS and US$8.7/Mcf in GCZ (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.
REVIEW OF OPERATIONS
PNG
PNG sales are made directly into the national transmission
network at GCZ on a volume-metered basis. The Group sells PNG gas
at GSS under contract at US$7.3 per Mcf and invoices directly for
sales to Shanxi Greka CBM Integrated Utilization Co., Ltd. Sales at
GCZ are managed by our partner, CNPC, with our share of 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 the Group in 2018 amounted to 2.84 Bcf
(2017: 3.21 Bcf). PNG sales from the Group's operated property on
GSS were 1.75 Bcf in 2018 (2017: 1.36 Bcf). PNG sales from the GCZ
were 1.10 Bcf in 2018 (2017: 1.35 Bcf). Gross PNG sales from CNOOC
operated wells amounted to 1.64 Bcf (2017: 0.94 Bcf).
FINANCIAL REVIEW
Income statement - Discontinued Operations
During the year, all revenue generating assets of the Group are
still 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 from continuing operations, and the results of
operations of discontinued operations are presented in non-current
assets held-for-sale and discontinued operation.
Total revenue increased by 11.3% in 2018 to US$28.6 million
(2017: US$25.7 million) mainly attributable to an approximate 20%
decrease in sales volume of GCZ operated by CNPC, 10% decrease in
sales volume of GSS operated by GDG, and revenue generated from
downstream business, with a slight increase in average selling
prices.
Sales volumes by channel in 2018 compared to 2017 were as
follows:
2018 2017
Bcf Bcf
PNG 2.8 2.7
CNG 0.1 0.5
PNG sales volumes from our operated GSS area were 10% lower in
2018 than in 2017. Our share of sales volumes (47%) from GCZ was
20% lower than in 2017 reflecting the relative maturity of the GCZ
area. The Group and CNPC have planned to drill 147 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.
Subsidy revenue has decreased compared to 2017 as a result of
the sales volume decrease. Subsidies are calculated at a flat rate
based on sales volumes and hence are presented as a component of
revenue.
Cost of sales has decreased by 19% in 2018 to US$13.3 million
(2017: US$16.4million), as a result of the group's cost saving
policy successfully implemented.
G&A cost has decreased by 27% to US$2.4 million (2017:
US$3.3 million), as a result of the group's cost saving policy
successfully implemented.
Income statement - Continuing Operations
Other administrative costs of US$2.4 million (2017: US$4.1
million), as a result of the group's cost saving policy
successfully implemented.
Liquidity and capital resources
The Group closed the year with US$0.3 million (2017: US$1.3
million) of cash on hand and US$1.0 million (2017: US$1.0 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$3.4 million (2017: US$17.6 million) was
generated from operations with US$6.1 million (2017: US$16.7
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
convertible note 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. In 2017, the
company reached agreement with the note holder to extend the period
during which the put option is exercisable to 20 November 2018. In
2019, the company reached agreement with the note holder to extend
the period during which the put option is exercisable to 20
November 2019. At 31 December 2018, the Company had one (2017: one)
convertible note in issue. 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.
Interest in the amount of $14.1 million (2017: US$11.5 million)
accrued during the year of which $nil million (2017: US$4.4
million) interest was paid in respect of the US$88.0 million bond
entered in late 2014 and carrying a coupon of 10% (2017:10%) and an
additional 5% on overdue amounts, and the convertible bond taken
out in late 2014, with principal of US$50.0 million and a coupon of
10% (2017:10%), both of which will be repaid after dividends in
specie by GDG.
Asset additions
Total additions to upstream CBM assets in 2018 amounted to
US$12.2 million (2017: US$13.2 million).
Since 2017, due to the GSS and GCZ blocks being actively pursued
for a divesture, the assets appropriately have been classified as
held for sale.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended Year ended
31 December 2018 31 December 2017
Notes US$'000 US$'000
Continuing operations
Revenue 2 - -
Cost of sales - -
------------------- -------------------
Gross profit - -
Other Income 19 13
Selling and distribution costs - -
Administrative expenses (2,446) (4,144)
------------------- -------------------
Loss from operations (2,427) (4,131)
Finance income 1,189 4,457
Finance costs (19,759) (17,426)
------------------- -------------------
Loss before income tax (20,997) (17,100)
Income tax credit 48 46
------------------- -------------------
Loss for the year from continuing operations (20,949) (17,054)
Discontinued operations
Profit/(Loss) for the year from discontinued operations 3 10,248 (7,522)
Gain from Disposal 3 1,545 -
Other comprehensive income
Items that will or may be reclassified to profit or loss:
Exchange gains arising on translation of discontinued foreign 67 -
operations
------------------- -------------------
Loss for the year attributable to owners of the company (9,089) (24,576)
Items which may be reclassified to profit and loss:
Exchange differences on translation foreign operations (27,844) 57,328
Total comprehensive (loss)/income for the year attributable to
owners of the company (36,933) 32,752
------------------- -------------------
Basic and diluted loss per share (US$) of continuing operations 4 (0.134) (0.109)
Basic and diluted earnings/(loss) per share (US$) of discontinued
operations 4 0.076 (0.048)
Basic and diluted loss per share (US$) 4 (0.058) (0.158)
------------------- -------------------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Notes As at As at
31 December 31 December
2018 2017
US$'000 US$'000
Assets
Non-current assets
Property, plant and equipment 23 33
Gas exploration and appraisal
assets 579,112 617,900
Long-term prepaid expenses - 299
Deferred tax asset 348 317
579,483 618,549
-------------- --------------
Current assets
Trade and other receivables 10,387 8,167
Restricted cash 1,000 1,000
Cash and cash equivalents 305 1,347
-------------- --------------
11,692 10,514
Assets of disposal group
classified as held-for-sale 3 389,506 380,133
-------------- --------------
401,198 390,647
Total assets 980,681 1,009,196
-------------- --------------
Notes As at As at
31 December 31 December
2018 2017
US$'000 US$'000
Liabilities
Current liabilities
Trade and other payables 7,783 10,198
Convertible notes 58,739 53,132
Bonds 110, 083 95,932
176,605 159,262
Liabilities of disposal group
classified as held-for-sale 3 48,308 50,548
224,913 209,810
Non-current liabilities
Deferred tax liability 118,641 124,137
Share buyback option liability 2,280 3,469
-------------- --------------
120,921 127,606
-------------- --------------
Total liabilities 345,834 337,416
-------------- --------------
Total net assets 634,847 671,780
============== ==============
Capital and reserves
Share capital 16 16
Share premium 808,981 808,981
Share redemption reserve (8,255) (8,255)
Convertible note equity reserve 2,851 2,851
Foreign exchange reserve 10,537 38,381
Retained deficit (179,283) (170,194)
-------------- --------------
Total equity attributable to
owners of the parent 634,847 671,780
============== ==============
Total equity 634,847 671,780
-------------- --------------
The financial statements were authorised and approved by the
Board on 17 April 2019 and signed on their behalf by
Mr. Randeep S. Grewal
Director
CONSOLIDATED STATEMENT OF CASH FLOWS
Notes Year ended Year ended
31 December 2018 31 December 2017
US$'000 US$'000
Cash flows used in continuing operating activities
Loss after tax (20,949) (17,054)
Adjustments for:
Depreciation 10 22
Amortisation of intangible assets - -
Loss on disposal of plant, properties and equipment - -
Other income and finance income (1,189) (4,457)
Finance costs 19,759 17,426
Accelerated finance charge - -
Taxation (48) (46)
Cash generated from operating activities before changes in working
capital (2,417) (4,153)
Movement in inventory - -
Movement in trade and other receivables (2,221) 4,690
Movement in trade and other payables (2,412) 5,258
------------------- -------------------
Net cash generated from operations (7,050) 5,795
Net cash generated from continuing operating activities (7,050) 5,795
Net cash generated from discontinued operating activities 3 10,426 11,731
Net cash generated from operating activities 3,376 17,526
------------------- -------------------
Notes Year ended Year ended
31 December 2018 31 December 2017
US$'000 US$'000
Investing activities
Payments for purchase of property, plant and equipment - -
Proceed from disposal of property, plant and equipment - -
Proceed from disposal of discontinued operation - -
Payments for exploration activities 2,963) (6,259)
Interest received - 4
Refund of deposit received from Petro China - 1,000
Net cash used in continuing investing activities (2,963) (5,255)
Net cash used in discontinued investing activities 3 (3,118) (12,192)
------------------- -------------------
Net cash used in investing activities (6,081) (17,447)
------------------- -------------------
Financing activities
Interest paid - (4,400)
Payment received from investing in discontinued operations - -
Repayment of Loans and borrowings - -
Net cash used in continuing financing activities - (4,400)
Net cash used in discontinued financing activities 3 - -
------------------- -------------------
Net cash used in financing activities - (4,400)
------------------- -------------------
Net decrease in cash and cash equivalents (2,705) (4,321)
Cash and cash equivalents at beginning of year 3,175 7,324
------------------- -------------------
470 3,003
Effect of foreign exchange rate changes 21 172
------------------- -------------------
Cash and cash equivalents at the end of year 491 3,175
------------------- -------------------
Attributable to continuing activities 305 1,347
Attributable to discontinued activities 3 186 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 31 December 2018 are two
specific instruments;
The Company has a convertible loan note liability of $58.7
million, which is due for repayment on 31 December 2020. On the
14th of November 2018 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 2019, and would require
early repayment of the whole amount due no earlier than 20 November
2019. The option to require early repayment is at the note holder's
sole discretion.
The Company has a bond liability of $110 million, which was due
for repayment in November 2017. The bond has not been repaid, and
the due date has passed. The Bond Trustee representing a majority
of the outstanding bond, are in ongoing discussions with the
Company regarding amongst other things negotiating the repayment of
the outstanding bond amount. Furthermore, the Bond Trustee has been
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.
The Company also has other payables due to third parties of
approximately $12.9 million (2017: $15 million), due immediately.
The Company is managing these payables through continuing
negotiation with suppliers.
The Company also has certain capital expenditure requirements in
some of its exploration blocks during the exploration period.
In considering the appropriateness of the going concern basis,
the Board gave consideration to the following:
Subsequent to the balance sheet date, the Company has declared a
dividend in-specie for its discontinued upstream operation, Green
Dragon Gas (GDG). G3E shareholders on the register as of the
effective date 29 March 2019 will receive a direct interest in
GDG.
GDG has engaged certain banks to explore possible monetization
options for GDG through trade sales. Currently, sales processes for
the producing assets in GDG are underway with discussions for the
sale of block GCZ with bids expected from a number of interested
parties. A separate sales process is also underway for block
GSS.
On completion of the dividend in-specie of GDG, the Group will
have a receivable from GDG of $341 million. Proceeds from the
monetization of GDG will be used to settle the debts due to the
Group in due course. G3E shall in turn use those receipts to settle
its outstanding debt, including to its Nordic Bond holders and
Convertible Bond holders, and to fund working capital and an
accelerated exploration and development programme in the
blocks.
The Company's major shareholder and CEO, Randeep S. Grewal, has
confirmed that he will provide sufficient financial support in
respect to other current payables of $12.9 million, prior to the
expected trade sales, if required.
The Directors have informed the Bondholder Trustee of the
Company's intention to raise financing through the trade sales of
GDG, and to use the proceeds to repay the $110 million bond. The
Company notes that discussions continue with the bondholders. To
date the Company is not aware of any immediate intention of the
Bond Trustee to take action to recover amounts due. On the basis of
the above, the Company does not expect the bondholders to put the
bond into default before additional funding is received. However,
the bondholders have given no written assertions that they will not
put the bond into default.
The Company is not aware of any immediate intention of the note
holder to exercise its early redemption option. However, the note
holder has given no written assertions that they will not exercise
its early redemption option.
The Company expects to use the proceeds from the trade sales to
repay all of 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.
However, as at the date of this report, there were no binding
trade sales agreements in place. Therefore, there can be no
certainty that the trade sales will be successful, there can also
be no certainty that no default notice will be issued in respect of
the $110 million bond, and there can also be no certainty that no
early repayment notice will be issued in respect of the convertible
loan note.
Notwithstanding the confidence that the Board has, the
Directors, in accordance with Financial Reporting Council guidance
in this area, conclude that at this time there is material
uncertainty that such finance can be procured and failure to do so
might cast significant doubt upon the Group's ability to continue
as a going concern and that the Group may therefore be unable to
realise their assets and discharge their liabilities in the normal
course of business. These Financial Statements do not include the
adjustments that would result if the Group was unable to continue
as a going concern.
2 Revenue and segment information
The Group's reportable segments are as set out below. The
operating results of each of these segments are regularly reviewed
by the Group's chief operating decision-makers in order to make
decisions about the allocation of resources and assess the
performance of each segment.
The assets and liabilities relating to the carve-out of the
producing blocks (GSS & GCZ) of Greka Energy (International)
B.V., a 100% wholly-owned subsidiary of the Company, have been
presented as held for sale following the board decision to spin off
the assets of GSS & GCZ blocks. As the carve out of the GDG
assets is coming to its final stage, GDG has been classified as
held for sale asset.
The financial statements did not include the Group's share of
CNOOC operated GSS 1,128 wells' revenue, associated costs and
resulting margins. The sales revenues and volumes associated with
the CNOOC operated areas of GSS and GSN will be subject to future
audits.
The Group has two (2017: two) customers which account for more
than 50% of its revenue for the year.
For the year ended 31 December 2018
Upstream Upstream Downstream Corporate Sub-total Eliminations Consolidated
continuing discontinued discontinued
operations operations operation
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Segment
revenue:
Sales to
external
customers - 25,508 3,108 - 28,616 (28,616) -
Inter-segment - - - - - -
sales
----------------
- 25,508 3,108 - 28,616 (28,616) -
---------------- ------------ -------------- -------------- ----------- ----------- -------------- --------------
Depreciation - (6,513) (330) (10) (6,853) 6,843 (10)
Amortisation - - - - - - -
Impairment - - - - - - -
Profit/(loss)
from
operation - 9,799 (1,178) (2,427) 6,194 (8,621) (2,427)
Finance income - - 1 1,189 1,190 (1) 1,189
Finance cost - 2 4 (19,759) (19,753) (6) (19,759)
Income tax 48 1,627 (7) - 1,669 (1,620) 48
Profit/(Loss)
for the year 48 11,428 (1,180) (20,997) (10,700) (10,248) (20,949)
============ ============== ============== =========== =========== ============== ==============
Assets 109,985 389,506 - 481,190 980,681 (389,506) 591,175
Liabilities 118,846 48,308 - 178,680 345,834 (48,308) 297,526
PPE additions - - - - - - -
Gas
exploration
additions 1,650 10,525 - - 12,175 (10,525) 1,650
============ ============== ============== =========== =========== ============== ==============
For the year ended 31 December 2017
Upstream Upstream Downstream Corporate Sub-total Eliminations Consolidated
continuing discontinued discontinued
operations operations operations
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Segment revenue:
Sales to
external
customers - 14,618 11,039 - 25,657 (25,657) -
Inter-segment
sales - 12,500 646 - 13,146 (13,146) -
- 27,118 11,685 - 38,803 (38,803) -
============ ============== ============== =========== =========== ============== ==============
Depreciation - (7,623) (1,524) (22) (9,169) 9,147 (22)
Amortisation - - 1,066 - 1,066 (1,066) -
Impairment - - (13,095) - (13,095) 13,095 -
Profit/(loss)
from
operation - 7,577 (18,195) (4,131) (14,749) 10,618 (4,131)
Finance income 12 1 2 4,445 4,460 (3) 4,457
Finance cost - - 580 (17,426) (16,846) (580) (17,426)
Income tax 46 2,347 166 - 2,559 (2,513) 46
Profit/(Loss)
for the year 58 9,925 (17,447) (17,112) (24,576) (7,522) (17,054)
============ ============== ============== =========== =========== ============== ==============
Assets 127,550 377,513 2,619 501,513 1,009,194 (380,133) 629,062
Liabilities 132,296 47,928 2,619 154,570 337,413 (50,548) 286,865
PPE additions - - 162 3 165 (161) 4
Gas
exploration
additions 9,261 3,970 - - 13,231 (3,970) 9,261
============ ============== ============== =========== =========== ============== ==============
3 Non-Current Assets Held-For-Sale And Discontinued Operation
The assets and liabilities relating to the carve-out of the
producing blocks (GSS & GCZ) of Greka Energy (International)
B.V., a 100% wholly-owned subsidiary of the Company, have been
presented as held for sale following the board decision to monetise
GDG with a declaration of dividend in-specie. Management expects
GSS & GCZ blocks to be sold within the next 12 months.
(a) Assets of disposal group classified as held-for-sale
Note As at As at As at
31 December 2018 31 December 2018 31 December 2018
Upstream Downstream Subtotal
Group Group
US$'000 US$'000 US$'000
Property, plant and equipment 132,947 - 132,947
Gas exploration and appraisal
assets 236,601 - 236,601
Other intangible assets - - -
Long term prepaid expenses - - -
Deferred tax asset 5,742 - 5,742
Inventories - - -
Trade and other receivables 14,030 - 14,030
Cash and cash equivalents 186 - 186
------------------- ------------------- -------------------
389,506 - 389,506
=================== =================== ===================
Note As at As at As at
31 December 31 December 31 December
2017 2017 2017
Upstream Downstream Subtotal
group group
US$'000 US$'000 US$'000
Property, plant and equipment 141,445 - 141,445
Gas exploration and appraisal
assets 223,713 - 223,713
Other intangible assets - - -
Long term prepaid expenses - 579 579
Deferred tax asset 4,268 - 4,268
Inventories - - -
Trade and other receivables 7,478 822 8,300
Cash and cash equivalents 609 1,219 1,828
-------------- -------------- --------------
377,513 2,620 380,133
============== ============== ==============
(b) Liabilities of disposal group classified as held-for-sale
Note As at As at As at
31 December 31 December 31 December
2018 2018 2018
Upstream Downstream Subtotal
Group Group
US$'000 US$'000 US$'000
Trade and other payables (19,188) - (19,188)
Deferred tax liabilities (29,120) - (29,120)
Current tax liabilities - - -
-------------- -------------- --------------
(48,308) - (48,308)
============== ============== ==============
Note As at As at As at
31 December 31 December 31 December
2017 2017 2017
Upstream Downstream Subtotal
group group
US$'000 US$'000 US$'000
Trade and other payables (19,061) (3,340) (22,401)
Deferred tax liabilities (28,806) (145) (28,951)
Current tax liabilities (61) 865 804
-------------- -------------- --------------
(47,928) (2,620) (50,548)
============== ============== ==============
(c) Analysis of the results of discontinued operations is as follows:
Note Year ended Year ended Year ended
31 December 2018 31 December 2018 31 December 2018
Upstream Downstream Subtotal
US$'000 US$'000 US$'000
Revenue: 25,508 3,108 28,616
------------------- ------------------- -------------------
Profit/(loss) from operation 9,799 (1,178) 8,621
Finance income - 1 1
Finance cost 2 4 6
Income tax 1,627 (7) 1,620
------------------- ------------------- -------------------
Gain/(Loss )after tax of discontinued operations
attributable to owners of the company 11,428 (1,180) 10,248
=================== =================== ===================
As at As at As at
31 December 31 December 31 December
2017 2017 2017
Note Upstream Downstream Subtotal
group group
US$'000 US$'000 US$'000
Revenue: 14,618 11,039 25,657
-------------- -------------- --------------
Profit/(loss) from operation 7,577 (18,195) (10,618)
Finance income 1 2 3
Finance cost - 580 580
Income tax 2,347 166 2,513
-------------- -------------- --------------
Gain/(Loss )after tax of
discontinued operations
attributable to owners of
the company 9,925 (17,447) (7,522)
============== ============== ==============
(d) Cash flow from (used in) discontinued operations:
Note Year ended Year ended Year ended
31 December 2018 31 December 2018 31 December 2018
Upstream Downstream Subtotal
US$'000 US$'000 US$'000
Net cash generated in operating activities 10,426 (160) 10,266
Net cash generated from investing activities (3,118) - (3,118)
Net cash generated from financing - - -
activities
------------------- ------------------- --------------------
Net cash inflow/(outflow) 7,308 (160) 7,148
=================== =================== ====================
As at As at As at
31 December 31 December 31 December
2017 2017 2017
US$'000 US$'000 US$'000
Upstream Downstream Subtotal
group group
Net cash used in operating
activities 16,514 (4,783) 11,731
Net cash generated from investing
activities (12,045) (147) (12,192)
Net cash generated from financing
activities - - -
-------------- -------------- ---------------
Net cash inflow/(outflow) 4,469 (4,930) (461)
============== ============== ===============
(e) Profit/(loss) on disposal of operations during the year:
On 31 December 2018, the Group sold its 100% interest in Greka
Gas Distribution Ltd. Greka Gas Distribution Ltd was classified as
held for sale at 31st December 2017. The post-tax gain on disposal
of discontinued operations was determined as follows:
Note Year ended
31 December
2018
US$'000
Cash consideration received or receivable 365
Creditors assumed -
Other Consideration received -
--------------
Total Consideration received 365
--------------
Cash disposed of -
Net cash inflow on disposal of discontinued operation -
--------------
Net assets disposed(other than cash):
Property, plant and equipment -
Intangibles (456)
Trade and other receivables (536)
Other financial assets (438)
Trade and other payables 3,720
Other tax assets (1,110)
--------------
1,180
--------------
Pre-tax gain on disposal of discontinued operation 1,545
Related tax expense -
--------------
Gain on disposal of discontinued operation 1,545
==============
The downstream business was sold to a related party, Gremex
Ltd.
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
2018 2017
US$000 US$000
Loss for the year attributable to owners of the
Company used in
basic and diluted loss per share (9,156) (24,576)
Loss for the year attributable to owners of the
Company
used in basic and diluted loss per share - continuing
operations (20,949) (17,054)
Earnings/(Loss) for the year attributable to
owners of the Company
used in basic and diluted loss per share - discontinued
operations 11,793 (7,522)
Year Ended Year Ended
31 December 31 December
2018 2017 Number
Number
Weighted average number of Ordinary Shares for
basic and
diluted earnings per share 156,072,289 156,072,289
Year Ended Year Ended
31 December 31 December
2018 2017
Basic and diluted loss per share (US$) (0.058) (0.158)
Basic and diluted loss per share (US$)-continuing
operations (0.134) (0.109)
Basic and diluted (loss)/earnings per share (US$)-discontinued
operations 0.076 (0.048)
(Loss)/earnings per share is based on the (loss)/earnings
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 (loss)/earnings 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.
5 Dividends
The Directors do not propose the payment of cash dividends until
the Group is in production and generating revenue and profit.
6 Subsequent events
Subsequent to the balance sheet date, the Company has declared a
dividend in-specie for its discontinued upstream operation, Green
Dragon Gas (GDG). G3E shareholders on the register as of the
effective date 29 March 2019 will receive a direct interest in GDG,
the Company's 100% owned subsidiary which holds its producing
assets. The Dividend in Specie will represent 100% of the
commercial producing assets and G3 Exploration will retain all its
exploration and development assets. All G3E shareholders on the
effective date shall receive a GDG share deposited into their crest
account holding the G3E shares. Such GDG dividend shall be
deposited on or before 28 June 2019. The dividend on deposit day
could be either in the form of cash or shares in GDG, depending on
whether any of the producing assets have been monetized by that
date.
Except as disclosed in the above, there is no other subsequent
event after the balance sheet date which requires disclosure in the
financial statements.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR MMGMDMNLGLZZ
(END) Dow Jones Newswires
April 18, 2019 02:00 ET (06:00 GMT)
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