Green Dragon (L:GDG) is tantalisingly close to realising a step change 6 January 2016 in production that would move it from a resource play to an established producer. Against a robust macro backdrop largely insulated from oil market volatility, we expect GDG to move profits into the black in 2016 as production increases beyond the 12bcf pa 2015 exit rate. Ongoing buildout of 53bcf pa of gas processing capacity at GSS should remove any capacity constraints in 2016/17. The coming months are also critical for the extensive 3P reserve base, with completion of the ongoing evaluation of Coal Seam #15. If successful, this could start to move 3P reserves into 1P/2P and lead to a development decision that would transform our RENAV from the current 679p/share. GDG is funded through end 2015; however, we estimate more than $100m will be required in 2016, climbing to $300- 450m over 2017-19 to facilitate the company’s next push in production.
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