2017 is likely to be a critical year for Green Dragon Gas (LON:GDG) as management works to deliver on several milestones that will enable a step-up in activity levels. We were encouraged by the CNPC approval and submission of the GCZ CBM Block overall development plan (ODP) in April. Execution of supplementary agreements and GSS ODP submission would provide an incremental reserve base for GDG to leverage in order to refinance outstanding bonds and fund further drilling activity. With regard to funding GDG states that it has multiple term sheets for mezzanine and RBL funding on hand. Our base case valuation of 227p/share rises to 237p/share assuming GSS ODP approval this year and GCZ developed in-line with ODP, this is offset by a delay in GSS development relative to previous forecasts.
GCZ ODP submission
On 18 April 2017, GDG announced the approval of GCZ ODP by partner, Consultation Centre of China National Petroleum Corporation (CNPC). for submission to the National Development and Reform Commission (NDRC). To date, 114 wells have been drilled on GCZ and the submitted development plan includes the drilling of an additional 147 production wells over the next two years. Alternatively, GDG may look to finance GCZ capital expenditure through a CNPC cost-carry under the existing PSC.
To read the entire report Please click on the pdf File Below