G3 Exploration Ltd (LON:G3E)

G3 Exploration Ltd (LON:G3E)


Share Price
37.50 p
Change
0 (0.00 %)
Market Cap
£58.53 m
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G3 Exploration Ltd

G3 Exploration is the largest company involved in the production of Coal Bed Methane gas and its distribution and sale in China. Our focus in on ramping-up production and cash-flows, as well as delivering value for our shareholders from our eight operational blocks strategically located for China’s growing energy market.

EPIC: G3E
Market: LSE:G3E
FRA:G3J
52-week High/Low: 50.000p / 29.200p
Sector: Oil & Gas
Market Cap: £58.53 m
Website: www.g3-ex.com
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Big Picture – A Deep Dive Examination of G3 Exploration Ltd


G3 Exploration Ltd Snapshot

STRATEGY

VISION

Our Vision is to be a leading upstream domestic gas producer maximising shareholder returns through our balanced growth strategy.

OUR STRENGTHS

First Mover advantage
Integrated across the gas value chain in key regions in China
Audited Reserves 2P US$ 4.3bn 3P US$ 21.2bn
Highly entrepreneurial and experienced management team
Proximity to major gas pipeline with access to high volume markets
Access to proprietary drilling techniques

 

EXPLORATION

WE GENERATE
OUR GAS SUPPLY FROM
8 LICENCE BLOCKS
OVER
1.87MN ACRES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXPLORATION AND PRODUCTION

Together with our partners, CNOOC, CUCBM, CNPC, and Petrochina we are focusing on ramping up production and delivering value from our operations using our LiFaBriC proprietary methodology. Based on geo-steered horizontal drilling developed for China’s geology, LiFaBriC delivers predictable stable output per well with enhanced returns and little decline. Our intensive drilling programme, together with committed investment from partners, is targeted at accelerating production and generating strong cash flows in what is one of the world’s most buoyant energy markets.

In parallel, Green Dragon Gas has had a strong track record of delivering year-on-year reserve volume and valuation growth at our licences, as independently verified by consecutive Competent Person Reports since 2006.

 

EXTRACTION METHODOLOGY

The LiFaBriC (Lined Faulted Brittle Coals) completion methodology was developed specifically for China’s geology of faulted anthracite coal formations, where traditional drilling methods used in Australia or the US are not adaptable. LiFaBriC has allowed GDG to “crack the code” of Coal Bed Methane production in China. GSS 008, the first well to be drilled using the methodology, completed seven years of continuous gas production in 2015, with no decline in production rates.

LiFaBriC is an adaptation of horizontal drilling methods used for coal seams, perfected to allow measurement and logging while drilling. It involves advance directional drilling and geo-steering techniques which enable it to drill through multiple faults with a single well, maximising subsurface in-seam exposure.

The advantages of using LiFaBriC for China’s geology are multiple, including greater subsurface in-seam exposure, which increases the drainage area permeability over time. The economics of the method are very attractive, not least as it leads to increased peak rates and stable production rate, with a slower decline and a longer well life. In addition, the U-shaped structure allows ease of workovers and flushing. The environmentally friendly methodology doesn’t use expensive or hazardous fraccing processes or chemicals, and its small surface footprint makes it less intrusive for existing land owners.

 

PRODUCTION & EXPLORATION BLOCKS

Green Dragon Gas’ assets consist of seven blocks across six Inland Production Sharing Contracts covering 7,566 km2, the largest publicly listed CBM reserves base in China.

 

SHIZHUANG SOUTH BLOCK (GSS)

Location: covers an area of 375 km2 in the south eastern part of the Qinshui basin, in the Shanxi Province, 60 km from the dedicated Duanshi-Boai gas pipeline

Status: the Group’s most advanced Block, with exploration by CUCBM commencing in 1997, and commercial production in October 2008

Geology: The block is part of the wider, 30,000 km2 Qinshui basin, a large-scale CBM area which features coal formations at average depths ranging from 636m to 640m approximately. There are two major coal seams present throughout the GSS as well as the GCZ blocks, Coal Seams 3 and 15.

Operator: GDG and CUCBM

Ownership: GDG 60% (to be increased to 70% on option exercise); 40% CUCBM

Drilling: 1,491wells drilled to date: 68 exploration, 874 online, 544 gas producing

Investment: US$518m of capital has been deployed by CNOOC (CUCBM) to date, with additional spending towards offtake infrastructure; 329km of seismic

Route to market: gas is carried to the market using CNG transport trucks and the West-East Pipeline

 

CHENGZHUANG BLOCK (GCZ)

Location: covers an area of 67 km2 adjacent to the GSS block in the south eastern part of the Qinshui basin, in the Shanxi Province

Status: one of GDG’s key areas of production and focus, part of the Shizhuang South PSC together with GSS

Geology: Also part of the Qinshui basin, Coal Seams 3 and 15 are also present at the asset.

Operator: CNPC; in addition, CUCBM would be solely responsible for developing and operating coal
Seam number 3

Ownership: 47% GDG, 53% CNPC

Drilling: 104 wells producing 4.16Bcf pa

Route to market: The gas is carried to market using the West-East Pipeline.

 

 

SHIZHUANG NORTH BLOCK (GSN)

Location: The 375km2 Shizhuang North Block lies on the eastern part of the Qinshui basin, in close proximity to the GSS Block.

Status: At an exploration stage; with Group as well as CUCBM investment ongoing. The continuation of Coal Seams 3 and 15 and its proximity to the GSS Block make GSN an extension of its more advanced neighbouring block. 10% of GDG’s participating interest was sold to CUCBM for US$200m carry, reflecting the potential of the block.

Geology: The structure of the block is similar to Shizhuang, with CBM in coal formations at depths of 914m to 1,006m, and overall seam thickness averages approximately five meters. Coal Seams 3 and 15 continue from the Shizhuang South Block north into the Shizhuang North Block.

Operator: CUCBM

Ownership: 50% GDG, 50% CUCBM

Drilling: 201 wells drilled to date by GDG and CUCBM, of which 106 are exploration, 27 are online, and 3 are gas producing.

Investment: US$100m invested by CUCBM, with an additional US$100m commitment in development capital; 227 km of seismic have been completed at the block to date.

Route to Market: The West-East and theYulin-Jinan pipelines are in in close proximity to the Block, which is also strategically located for potential gas markets in Zhengzhou and Henan provinces. The former alone has more than 30 CNG stations, with further demand from industrial bases in Taiyuan, Linfen and Changzhi.

 

QINYUAN BLOCK (GQY)

Location: The 3,665 km2 Qinyuan Block consists of contracted area and is located 185 km from Taiyuan in Shanxi province and roughly 30 km northwest of the Shizhuang North Block.

Status: The block is sub-divided in two equal areas, A and B, with with each operator responsible for all exploration expenditure for their area. Given its rich resources, the Qinyuan Block will be one of the Group’s key long-term areas of focus.

Geology: Positioned on the western edge of the Qinshui Basin, the 3,665 km2 Qinyuan Block is considerably larger than the Group’s other blocks. . Coal seams 3, 15 and 16 outcrop on the western edge of the Block, and are the primary targets for CBM exploration and development.

Operator:

Area A: CUCBM
Area B: GDG

Ownership:

Area A: 90% CUCBM, 10% GDG
Area B: GDG 60%, CUCBM 40%

Drilling:

Area A: 5 exploration wells
Area B: 17 exploration wells, with 4 online

Investment: 634km of seismic have been completed at the asset to date, with investment in exploration by both GDG and CUCBM.

Route to Market: The Qinyuan Block has the same potential options for gas commercialisation as the Shizhuang South Block, with additional access to the East-West pipeline via a connection 50 km from the block, and on-site access to trunk-line well-side gathering stations.

 

FENGCHENG BLOCK (GFC)

Location: The block consists of 1,541 km2 of contracted area, intersecting several active coal mining operations 74 km from Nanchang, the in Jiangxi province.

Status: The Fengcheng Block is the Group’s second most advanced Block, having responded extremely positively to horizontal drilling and further development expected using LiFaBriC technology.

Geology: CBM in this area is in coal formations at average depths from 716m to 882m, and approximately 3.5m in thickness, with Coal Seams B and C the two main coal packages present in the Pingle Depression located in the Fengcheng Block.

Operator: GDG

Ownership: 49% GDG, 51% CUCBM

Drilling: a total of 66 wells have been drilled across GFC and GPS blocks by GDG and CUCBM

Investment: Investment by the Group and CUCBM in exploration and development, including conducting four gas desorption tests to determine the gas content of the coal and to define the CBM reserves and resources. CUCBM has drilled 4 production wells, which are subject to the Framework agreement between the companies.

Route to Market: The Block is strategically located close to the West-East Pipeline II, and in close proximity to industrial zones, including Nanchang, Xinyu and Fuzhou. There is also a proposal to construct a natural gas power plant and CNG station in Nanchang, 20km away.

 

PANXIE EAST BLOCK (GPX)

Location: The Panxie East Block is a 584 km2 contracted area located approximately 90 km from Hefei, in the Anhui province.

Status: The block is at an early exploration stage, with ongoing investment from the Group and its partner, CUCBM.

Geology: Located within the Huainan Basin, Panxie East contains three coal seams suitable for CBM exploration and production, 13-1, 11-2, and 8, at average depths ranging from 1,336 m to 1,446 m.

Operator: GDG

Ownership: 60% GDG, 40% CUCBM

Drilling: a total of 66 wells have been drilled across GFC and GPS blocks by GDG and CUCBM

Investment: GDG is progressing with exploration drilling at the block, as well as the collection of extensive data from the local coalmine bureau, with production drilling and dewatering also in progress from CUCBM.

Route to Market: The Panxie East Block has the benefit of being close to the West-East Pipeline I, which would enable gas to be transported downstream to provinces and cities such as Jiangsu, Zhejiang and Shanghai. The Block is also located in close proximity to potential gas markets in Nanjing and Taizhou.

 

BAOTIAN-QINGSHAN BLOCK (‘‘GGZ’’)

Location: The 947 km2 Baotian-Qingshan Block is located 316 km from Guiyang, in the Guizhou province.

Status: The Block is at a preliminary exploration stage. Data from approximately 400 coal exploration core holes acquired from the Geological Bureau of Guizhou Province, as well as seismic information are being used alongside exploration drilling and gas desorption tests to determine the gas content.

Geology: The Block is located in the Qingshan Syncline, with Coal Seams 17, 19 and 29, CBM in this area at depths of 636m-731m.

Operator: GDG

Ownership: GDG 60%, CNPC 40%

Drilling: Data from approximately 400 coal exploration core holes acquired from the Geological Bureau of Guizhou Province, as well as seismic information are being used alongside exploration drilling and gas desorption tests to determine the gas content.

Investment: Exploration at the block is at its preliminary stage, with investment to date of US$23.4m, including drilling.

Route to Market: The Block is closely located to Sino-Burmese Pipeline, and has the potential to connect to West-East Pipeline II, which is under construction. The Group expects significant gas demand in Kunming.

 

TRANSPORTATION FLEET

We believe a fully-integrated company will create further synergies within our existing business, enhancing our ability to capture opportunities created by the ongoing growth in the demand for natural gas in China. To realize these mid-stream synergies, we have established our own logistics operations in the form of a self-owned transportation fleet to bring our CBM production to delivery points for distribution in Henan. We own 5 trucks and 10 trailers, and have a daily delivery capacity of 3MMcf per day.

 

RETAIL CNG STATIONS

Compressed natural gas (CNG) is a lower-carbon transport fuel which can be used as an alternative to petrol and diesel. Our CNG station sites are complementary to our operations in the Shizhuang South (GSS) coal bed methane production block in Shanxi, as well as to our distribution centre in Henan.

Our network of CNG stations is growing, from their current location within a 250km radius of our facilities in Shanxi and from our Zhengzhou midstream operations. Secured gas supplies from the GSS Block use self-manufactured gas dispensers for high gas-filling speeds. The use CNG for motor vehicles is facilitated through an inexpensive conversion which allows the use of both petrol and CNG. CNG gas sales in our retail network are continuing to show a very strong growth profile.

RANDEEP GREWAL

CHAIRMAN AND CEO

Year of appointment 
2006

Skills and experience
Mr. Grewal has extensive experience in the oil and gas industry and is the founder of the Greka Group of Companies.

From April 1997 to September 1997, Mr. Grewal served as Chairman and Chief Executive Officer for Horizontal Ventures, Inc., an oil and gas horizontal drilling technology company that became a subsidiary of Greka in September 1997. From 1993 to 1996, Mr. Grewal was Corporate Vice President for the Rada Group with principal responsibility for its global expansion and diversification to a commercial organisation from its defence roots and operations. He has also been involved in various joint ventures, acquisitions, mergers and reorganisations since 1986 in the United States, Europe and the Far East with a range of businesses.

External appointments
Chairman and CEO, Greka Group of companies
Chairman and CEO, Grewal Family Office

Qualifications
BSc Mechanical Engineering, Northrop University

Board Committees
Remuneration Committee and Nomination Committee (Chair)

 

WAYNE ROBERTS

NON-EXECUTIVE DIRECTOR

Year of appointment 
2012

Skills and experience
Mr. Roberts was VP Exploration and Production for Africa at Galp Energia until 2015. Prior to that, he spent 12 years with BG Group in several senior roles, including serving as Senior Vice President for Asia, Middle-East and Africa, with responsibility for growth assets, business development and all commercial activities in that geography.

Earlier, he was based in Singapore as President of BG Southeast Asia & China and Chairman of BG Asia Pacific. In these roles, he had responsibility for BG’s E&P, power and LNG businesses in Thailand, Malaysia, Singapore, China and the Philippines. His earlier career also involved several international assignments in asset management of M&A, and corporate finance with both BG Group and ARCO.

External appointments
Senior Vice President, Corporate Development and M&A, OMV

Qualifications
Chartered Chemical Engineer
MBA, INSEAD France

Board Committees
Audit Committee and Nomination Committee

 

GONG DA BING

NON-EXECUTIVE DIRECTOR

Year of appointment
2006

Skills and experience
Madam Gong has 27 years of international business experience.

From 1992 to 1999, she was Managing Director of the Chinese office of Frontanic Co, a private international trading organisation. From 1989 to 1992, she was the Chief Representative in China of Koor Trade Limited. From 1978 to 1989, she was the manager for joint venture operations and import and export business for Machinery & Equipment Import & Export Corporation. From 1975 to 1978, she was a business negotiator for the Beijing Foreign Trade Bureau, Department of Machinery Import & Export.

External appointments
None

Qualifications
English, Beijing Second Foreign Language University
Masters Comparative Law, University of Illinois

Board Committees
Remuneration Committee (Chair) and Nomination Committee

 

BRYAN SMART

NON-EXECUTIVE DIRECTOR

Year of appointment
2018

Skills and experience
Bryan Smart has over 40 years' experience in finance both in professional and commercial roles at various organisations including Deloitte and Mercedes Benz UK where he served as Chief Financial Officer. Furthermore. Mr. Smart has also served on the Board of Brunel University, and is currently.

External appointments
Non-Executive Director at AB Dynamics plc
Non-Executive Director at NQ Minerals plc
Non-Executive Director at Greka Drilling
Trustee of Brooklands Museum

Qualifications
Chartered Accountant

Board Committees
Audit Committee (chair) and Remuneration Committee

 

ZHAO LI GUO

NON-EXECUTIVE DIRECTOR

Year of appointment
2018

Skills and experience
Zhao Li Guo was the General Counsel of China National Offshore Oil Company (CNOOC) from 2008, and CNOOC Limited from 2009 to June 2015. Mr. Zhao joined CNOOC in 1983 and has served in multiple positions, including the Head of Contract Division from 1993 to1997, Deputy General Manager of Contract & Legal Department from 1998 to 2000 and General Manager of Legal Department from 2001 to 2009.

Furthermore, Mr. Zhao was the Director and Board Secretary of CNOOC & Shell Petrochemicals Co Ltd. from 2001 to 2012. Mr. Zhao was also the arbitrator of China International Economic & Trade Arbitration Commission from 2005 to 2015 and a member of China Maritime Arbitration Commission from 2010 to 2015, the Arbitrator of China Maritime Arbitration Commission from 2017.

External appointments
None

Qualifications
Law degree
PRC lawyer qualification
Corporate counsel qualification
Professor-level senior economist

Board Committees
Audit Committee

 

MANAGEMENT TEAM

 

 

 

Major Shareholders

As of 30th June 2018

 

SHAREHOLDER SHARES % OF SHARES
GDGH Ltd* 87,169,631 55.85%
Mandolin Capital Pte Ltd 36,031,759 23.09%
Standard Life Aberdeen Plc  8,641,851 5.54%
Fidelity Worldwide Investment 6,570,373 4.21%
GIC Asset Management 5,775,578 3.70%
Platinum Asset Management 4,203,051 2.69%
Sloane Robinson LLP 2,072,291 1.33%
Morgan Stanley Wealth Management 1,064,066 0.68%
Deutsche Asset Management (Asia) Ltd 655,613 0.41%
Guaranty Finance Investors LLC 542,523 0.35%

 

ZHENGZHOU – OPERATIONAL HEAD QUARTERS

28th Floor, Landmark Plaza, No. 1 Business Outer Ring Road, Central Business District, Zhengzhou 450000, Henan Province, PRC
T - 86 371 6013 3388
F - 86 371 6030 0088
[email protected]

 

BEIJING

40F Capital Mansion, Xinyuan South Rd, Chaoyang District, Beijing 100004,PRC
T - 86 10 8486 3020
F - 86 10 8486 4720
[email protected]

 

JINCHENG

9th Floor, Imperial Crown Hotel Building, Cross of Hong Xing Street and Lan Hua Road, Development Zone, Jincheng 048000 , Shanxi Province, PRC
T - 86 356 2698 666
F - 86 356 2698 668

 

INVESTOR CONTACTS

Submit your request for information to:

INVESTOR RELATIONS

[email protected]

FTI CONSULTING

Ben Brewerton / Genevieve Ryan / Tom Pigott
Email: [email protected]
Tel: +44 20 3727 1000

 

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