interim report 2014/media/files/g/green-dragon-gas/reports-presentations/2014-ir.pdffengcheng gfc...
TRANSCRIPT
INTERIM REPORT 2014
01
HIGHLIGHTS
CHAIRMAN’S STATEMENT
CONDENSED CONSOLIDATED STATEMENTOF COMPREHENSIVE INCOME
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
NOTES TO CONDENSED INTERIMFINANCIAL STATEMENTS
DIRECTORS COMPANY SECRETARYAND ADVISORS
CONTENT
02
06
08
09
11
12
14
28
HIGHLIGHTS
Interim Report 2014GREEN DRAGON GAS
02
FINANCIAL HIGHLIGHTS• Revenueincreased123%toUS$15.5million(US$6.9millioninH12013)
• Grossprofitincreased55%toUS$5.4million(US$3.5millioninH12013)
• CashofUS$52.0millionat30June2014(US$34.6millionat31December2013)
• CapitalexpendituredecreasedtoUS$7.8million(US$20.9millioninH12013)
• Netlossfromcontinuingoperationsdecreased12.3%toUS$7.26million(netlossfromcontinuingoperationsofUS$8.28
millioninH12013)
• NoncashappraisalimpairmentofUS$65.4millioninrelationtoderivativefinancialinstrument(seecommentbelow)
OPERATIONAL HIGHLIGHTS• Grossgasproductionwas4.1Bcfforthefirsthalfof2014,up206%(1.34BcfinH12013)
• Approximately30%ofexistingGreenDragonwellsareconnectedtopipelineandtransmissioninfrastructure
• AllChengzhuang(“GCZ”)wellsareconnectedtoinfrastructure
• Approximately40%oftheGSSwellsoperatedbyChinaNationalOffshoreOilCorporation(“CNOOC”)/ChinaUnitedCoalbed
MethaneCorporationLtd.(“CUCBM”)drilledwellsarecurrentlyconnectedtoinfrastructureandaredewatering
• Atotalof1,869wellsdrilledtodateacrossGreenDragonblocks,ofwhich78areLiFaBriC
• JointManagementMeetings(“JMC”)withpartnersonblocksproceedingwell
Upstream• Grossgasproductionforthefirsthalfof2014was4.1Bcf(116.3millioncubicmeters)anincreaseof206%overthefirst
halfof2013of1.34Bcf(38millioncubicmeters)andalreadyequivalentto84.3%of2013fullyearproductionof4.86Bcf
(138millioncubicmeters)
o GSSproductionoperatedbyGreenDragonof1.45Bcf(41.0millioncubicmeters)
o GSSproductionoperatedbyCUCBMwas0.58Bcf(16.5millioncubicmeters)
o GCZproductionoperatedbyPetrochinaCompanyLtd(“PetroChina”)was2.07Bcf(58.5millioncubicmeters)
03
DEFINITIONS1P Provedreserves2P Provedplusprobablereserves3P Provedplusprobablepluspossible
reservesBcf billionsofcubicfeetCBM CoalbedmethaneCNG compressednaturalgasMcf thousandsofcubicfeetMPa megapascal
NPV10 netpresentvaluecalculatedusinga10%discountrate
PSC productionsharingcontractReserves reservesarethosequantitiesof
hydrocarbonsanticipatedtobecommerciallyrecoverablebyapplicationofdevelopmentprojectstoknownaccumulationsfromagivendateforwardunderdefinedconditions
Tcf trillionsofcubicfeet
• Atotalof1,560squarekilometresof2Dseismicdatahasnowbeenacquired
acrosstheblockstodate,consistingof:
o GSS:288.72sqkm
o GSN:226.68sqkm
o GQY:633.65sqkm
o GFC:335.33sqkm
o GGZ:76sqkm
• StatusofGreenDragonblocks:
o 1,869wellsdrilledacrossallblocks
o 1,580wellsacrossGSSProductionBlock(inclusiveofGCZ)
o 289wellswereacrosstheexplorationblocksFengcheng(“GFC”),Qinyuan(“GQY”), Shizhuang North (“GSN”), Panxie East (“GPX”) and Baotian
Qingshan(“GGZ”)
o atotalof78LiFaBriCwellsacrossallblocks
Wells GDG Partner Block PSC Interest Operator LiFaBriC Vertical Activity
ShizhuangSouth GSS 60% GDG 62 171 1,243
(CUCBM/
CNOOC)
Chengzhuang GSS 47% Petrochina 0 0 104
ShizhuangNorth GSN 50% CUCBM 2 11 117
QinyuanA GQY 10% CUCBM – 8 9CUCBM
18coal
holes
QinyuanB GQY 60% GDG 8 39 10
Fengcheng GFC 49% GDG 2 26
PanxieEast GPX 60% GDG – 12 14coal
holes
BaotianQingshan GGZ 60% GDG 4 26 30coal
holes
HIGHLIGHTS
Interim Report 2014GREEN DRAGON GAS
04
CostRecoveryBalances:ThebindingagreementsannouncedbyGreenDragonmakereferencetocostrecoverybalances
byblock.Acceleratedrecoveryapplies towellsdrilledbefore8July2013.Thecost recoverybalancesshownbelowasof
December 31, 2013 have been audited, the balance of the cost recoveries are subject to independent auditswhich are
expectedtoconcludebyyearend:
o GSS(GreenDragon): US$174m
o GGZ(GreenDragon): US$23m
o GCZ(Petrochina): US$28m
o GFC(GreenDragon): US$24m
o GSN(GreenDragon): US$8m
o GQY(GreenDragon): US$40m
o GPX(GreenDragon): US$8m
Downstream (GSS and GCZ)• PipedNaturalGas(PNG)salesfromGSSgasinH12014totaled443.49MMcf,anincreaseof14.4%comparedtoH12013
(387.6MMcf)
• CompressedNaturalGas(CNG)salestotaled309.1MMcfandconsistedof:
o Industrialcustomersales:32.14MMcf
o Retailstationsales:n Increased9.6%to276.96MMcffromH12013252.56MMcf
• 2.61%camefromGSSblockproduction(7.23MMcf)
• 97.39%wasacquiredfromthirdparties(269.73MMcf)
•WeightedaverageCNGpriceinGrekaretailstationsincreasedfrom3.6RMB/m3(US$16.6/Mcf)to3.8RMB/m3(US$17.6/
Mcf),a6.08%increase.
• Itisexpectedthatallproducingwellswillbeconnectedtoinfrastructurebytheendof2015andthosedrilledandoperated
byCNOOC/CUCBMwillbefinancedfromanexpectedcapitalspendaspartoftheFrameworkagreement
Other Operations• Continuedexcellentsafetyrecordwithwellsandinfrastructurepassingarecentcountylevelsafetybureauinspection
• Salestoindustrialcustomersweresuspendedduringtheperiodunderreviewwhilethegovernmentconcludednewpermit
policies
Events after the period and Outlook• SettlementofmatterwithConocoPhillipstothemutualsatisfactionofbothparties–withGreenDragonpayingatotalof
US$40millioninfinalsettlement
• CooperationAgreementwithChinaNationalPetroleumCorporation(“CNPC”)inrespectofGCZfurtherevidenceofcontinued
cooperationbetweenGreenDragonanditspartnerstomaximizethevalueoftheCompany’sassets
05
Highlights
Financial Treatment of Warrants and associated Fair Value Charge• It’snon-cash
• ItarisesfromanIFRStechnicalaccountingtreatment
• Theinstrumentwillbeextinguishedbyyearend
• Continuedappreciationofthesharepricehasincreasedthefairvaluechargesinceyearend.
DetailThederivativeliabilityofUS$86mandthefairvaluechangeofUS$65m(reportedinH1-14)andUS$13m(reportedinH2
13)referstothe13.7mwarrantsthatwereissuedtoChandlerCorporationandassociatedwiththeUS$35mbondraisedin
June2013.
Thewarrantsareexercisableat£1.97pershareinDecember2014toobtain13.7mordinarysharesinGDG.The£1.97share
pricewas6%higherthantheprevailingsharepricewhenthewarrantwasissued,andsoattheoutsetexercisingthewarrants
would have costmore than the shareswereworth, howeverwith the share price appreciating, the exercise price is now
considerablylowerthanthecurrentshareprice.
Underspecific IFRSaccounting rules, thewarrantsare required tobecarriedat fairvalue,withchanges in the fairvalue
recognized in the income statement. Thismeans that the income statement is charged with the increasing value of the
warrants,whichisprimarilyduetotheincreasingvalueoftheGDGshareprice.
Onexercise,thewarrantswillresultintheissueofequity(sharecapitalandsharepremium)equaltotherelevantGDGshare
priceat thatdate.Theonlycashflow impact toGDG is the receiptofcashonexerciseof£27m(USD43.4mat today’s
exchangerate)whichwillbereflectedintheaccountsattherelevantUS$rateatthatdate.
Thereisnocashoutflow,despitetheincomestatementcharges.
Thefactthattheyareheldatfairvalueandrecognizedintheincomestatementisitselftheresultofatechnicalpointwithin
IFRSrules.
AsthewarrantshaveaGBPexerciseprice,technicallythecompanyreceivesavariableamountofUSdollarcashforissuinga
fixednumberofwarrants.ThevariabilityintheUSdollarvalueofcashreceivedisduetoexchangeratefluctuationsbetween
June2013andtheexercisedate.
Asaderivative,wearerequiredbyIFRStoholdtheliabilityatfairvalueandrecordanymovementsinourincomestatement.
ThefairvalueatanypointintimeiscalculatedusingaBlack-ScholesmodelandisafunctionoftheGroup’sshareprice,the
exerciseprice,anestimateofvolatilityintheGroup’ssharepriceanddiscountrates.However,inGDG’scasethekeydriverof
theincreaseinthefairvalueisthestronggrowthintheGroup’sshareprice.
Atgrantdatesharepricewas£1.86andthewarrantswereissuedata6%premiumof£1.97.Thesharepriceincreasedto
£2.75at31December2013andthenfurtherto£5.62at30June2014.Asaresult,thefairvalueofthewarranthasincreased
significantly,andhenceweseeachargeinthebackendoftheprioryear,andintheseinterimaccounts.
CHAIRMAN’S STATEMENT
Interim Report 2014GREEN DRAGON GAS
06
ThisyearsofarhasbeentransformationalforGreenDragonGas.Whilewehavealwayshadtheconfidenceinourtitle
andtechnicalachievementstoproducelargecommercialvolumesofprolificCBMintheworld’smostcommercially
lucrativegasmarket–China,weareproudtohavebeenprovenrightbythemanyacknowledgementswithinthe
materialagreementsconcludedthisyear.GreenDragontransformsfromaonesidedconvictiontoanaccepted
Chineseunconventionalgasproducerthathasdemonstrateditssuccessacrosstheboard.Thefocusinthefirsthalf
wastocementandconcludealloutstandingissuesthathadcloudedanddistractedtheCompanyoverthelastfour
years,infull.Weachievedthisobjectiveandindeedexceededourexpectations
WeareworkingcloselywithourpartnersPetroChina,CNPC,CNOOCandCUCBMtoconnectover1800wellsdrilled
andsystematicallyconnectthemtothegassalesinfra-structureastheydewater.TheapproximateUSD1billion
ofdeployedcapitalacrossallthesevenblocksisdestinedtoyieldshareholderreturnsintheyearstocome.Green
Dragonshareholdersareparticipatinginequityrelativetotheproductionsharingcontractpercentagethatisattributed
totheCompany.Insimplerwords,theCompanyhasbeencarriedintheentiredevelopmentthathastakenplace
withoutanydiscountorreductiontotheshareholdersequity.Thisisatremendousoutcomeforallshareholders.
Asaresultoftheaccomplishmentsthisyear,GreenDragonisnowasimpleE&Pcompanywithexclusivegasonly
operationsinChina,afocusedexecutionplan,thegroupcontinuesitsmigrationfromanexplorationcompanyto
productionwithclosepartnershipsandsecuredtitle.
TheCompanysawsignificantincreasesingrossproduction,gassalesandrevenuesduringtheperiodcomparisons
demonstratingthecommercialeffectsofthesuccessfulexecutionintheyear.Thecommercialeffectsofthesignificant
capitaldeployedwillberealizedintheyearstocomewhenallthewellsdrilledhavede-wateredandareconnectedto
thesalepipelines.
TheCompanycontinueditsconservativeinvestmentincapitalexpenditure,inaccordancewiththetermsofitsPSCs.
Assuch,duringtheperiodunderreview,twoadditionalLiFaBriCwellsweredrilledbringingthetotalnumberto78
acrossallblocks.Allofthegroundworkforaconcerteddiscretionaryrampupofactivityisnowinplace.Drilling
locationshavebeensecured,landleasesacquired,pipelineandconnectionsplannedandtheCompanycanexecute
inveryshortorder.
Totalsalesinclusiveofshareofcumulativegassoldamountedto2.8Bcf,ofwhich2.06Bcfwasattributableto
theGCZBlockand750MMcfwasattributabletotheGSSMainBlock.2.61%ofthegassoldbytheCompany’s
distributionarmcomesfromtheGSSblock,withtheremaining97.39%beingacquiredfromexternalparties.Gas
isacquiredfromthirdpartiesinordertomeettheincreasingdemandandovertimewillbecompoundedbygas
producedfromGreenDragon’sassets.
07
Chairman’s statement
PipedNaturalGas(PNG)salesduringtheperiodamountedto2.5Bcf.PNG
SalesarefromGCZandGSSanddelivergasthoughtheWestEastPipeline
infrastructure.GSSSalesaremadeunderthe20yearagreemententered
intoinJune2011withPetroChina.
TheCompanyalsosellsCompressedNaturalGas(CNG)forvehicleuse
throughitsseriesofCompany-ownedCNGretailstationslocatedinand
arounditslicenseareas.SalesofCNGthroughtheseoutletsamountedto
277MMcf,representinga9.6%increaseonthesameperiodayearearlier.
Furthermore,notwithstandingourconfidenceintheonlylitigationmatter,
wemaintainedthemomentumofeliminatingambiguitysurroundingthe
CompanyandelectedtosettlethematterwithConocoratherthancontinue
thelitigation.Asaresult,therearenofurtherdoubtsandimportantly
distractions.
Inclosing,weappreciatetherelentlesspassionatecommitmentthatthe
coremanagementandemployeeshavedemonstratedthroughalongperiod
ofuncertainty.Iacknowledgetheirdifficultiesandfrustrationsawaitingthe
commitmentstoproceedwiththerobustgrowth.Thefavorableconclusions
areparticularlyrewardingtotheseemployeesthathavebeenproventohave
beencorrectontitle,correctontechnologyandcorrectonthebusiness
plan.Wearecollectivelyexcitedaboutourimmediate,mediumtermand
longtermprospects.
Randeep S. GrewalChairman
Interim Report 2014GREEN DRAGON GAS
08
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMESix months ended 30 June 2014
Restated Six months Sixmonths Yearended ended ended 31December 30 June 2014 30June2013 2013 Notes US$’000 US$’000 US$’000 unaudited unaudited audited
Continuing operationsRevenue 3 15,483 6,932 62,181Costofsales (10,089) (3,450) (40,322)
Grossprofit 5,394 3,482 21,859Sellinganddistributioncosts (680) (983) (1,616)Administrativeexpenses (11,974) (10,778) (29,524)
Lossfromoperations (7,260) (8,279) (9,281)Otherincome 14 8,552 155 310Changeinfairvalueoffinancialderivative 13 (65,382) – (13,271)Financecosts (5,133) (9,104) (12,513)
Lossbeforeincometax (69,223) (17,228) (34,755)Incometax(charge)/credit 4 (44) 145 507
Lossfortheperiodfromcontinuingoperations (69,267) (17,083) (34,248)Discontinued operationsProfitfortheperiodfrom discontinuedoperations 18 – 26,465 33,425
(Loss)/profit for the period (69,267) 9,382 (823)Other comprehensive (loss)/incomeExchangedifferencesarisingon translationofforeignoperations (1,499) 11,280 19,604
Total comprehensive (loss)/income for the period (70,766) 20,662 18,781
(Loss)/profit for the period attributable to:Ownersofthecompany (69,267) 9,382 (823)Non-controllinginterests – – –
(69,267) 9,382 (823)
Total comprehensive (loss)/income attributable to:Ownersofthecompany (70,766) 20,662 18,781Non-controllinginterests – – –
(70,766) 20,662 18,781
Basic and diluted (loss)/earning per share attributable to owners of the Parent (US$) 5 (0.504) 0.069 (0.006)
Fromcontinuingoperations(US$) (0.504) (0.125) (0.251)Fromdiscontinuedoperations(US$) – 0.194 0.245
# TheGrouphasrestateditsresultsforthesixmonthsended30June2013tocorrectforforeignexchangetranslationmovementsarising
onGasExplorationandAppraisalAssets.SeeNote2forfurtherdetails.
09
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAt 30 June 2014
As at Asat 30 June 31December 2014 2013 Notes US$’000 US$’000 unaudited audited
AssetsNon-current assetsProperty,plantandequipment 7 34,170 28,232Gasexplorationandappraisalassets 8 903,484 902,537Otherintangibleassets 3,541 3,821Paymentforleaseholdlandheldfor ownuseunderoperatingleases 46 217Taxrecoverable 157 –Deferredtaxasset 1,809 1,954
943,207 936,761
Current assetsInventories 324 86Tradeandotherreceivables 9 15,221 11,542Cashandcashequivalents 51,972 34,642Restrictedcashandcashequivalents 14 8,000 –
75,517 46,270
Total assets 1,018,724 983,031
LiabilitiesCurrent liabilitiesDerivativefinancialliability 13 85,792 20,410Bonds 13 32,821 30,390Tradeandotherpayables 10 24,794 25,623Provisions 14 40,000 49,537Currenttaxliabilities – 7
183,407 125,967
Non-current liabilitiesConvertiblenotes 12 46,549 33,383Otherfinancialliabilities 11 13,000 13,000Deferredtaxliability 162,715 163,876
222,264 210,259
Total liabilities 405,671 336,226
Net Assets 613,053 646,805
Interim Report 2014GREEN DRAGON GAS
10
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAt 30 June 2014
As at Asat
30 June 31December
2014 2013
Notes US$’000 US$’000
unaudited audited
Capital and reservesSharecapital 15 14 14
Sharepremium 15 716,031 681,031
Convertiblenoteequityreserve 15 3,760 1,746
Sharebasedpaymentreserve 15 12,743 12,743
Otherreserve 15 19 30
Foreignexchangereserve 15 64,087 65,575
Retaineddeficit 15 (183,601) (114,334)
Total equity 613,053 646,805
11
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITYSix months ended 30 June 2014
Equity Convertible Share based Capital and Foreign attributable Non- Share Share note equity payment surplus Other exchange Retained to owners of controlling capital premium reserve reserve reserve reserves reserve deficit the Parent interests Total US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
At1January2013 14 703,917 9,198 12,743 1,325 391 45,971 (113,511) 660,048 18 660,066 Lossfortheperiod – – – – – – – 9,382 9,382 – 9,382 Exchangedifferences ontranslatingforeign operations – – – – – 28 11,252 – 11,280 – 11,280
Totalcomprehensiveincome fortheperiod – – – – – 28 11,252 9,382 20,662 – 20,662DisposalofJCE andsubsidiaries – – – – (1,325) (338) – – (1,663) (18) (1,681)Transfertosharepremium – 9,198 (9,198) – – – – – – – –
At30June2013 14 713,115 – 12,743 – 81 57,223 (104,129) 679,047 – 679,047
At1January2014 14 681,031 1,746 12,743 – 30 65,575 (114,334) 646,805 – 646,805 Lossfortheperiod – – – – – – – (69,267) (69,267) – (69,267) Exchangedifferences ontranslatingforeign operations – – – – – (11) (1,488) – (1,499) – (1,499)
Totalcomprehensiveexpense fortheperiod – – – – – (11) (1,488) (69,267) (70,766) – (70,766)Conversionofconvertiblenotes – 35,000 (1,746) – – – – – 33,254 – 33,254Issueofconvertiblenote – – 3,760 – – – – – 3,760 – 3,760
At30June2014(unaudited) 14 716,031 3,760 12,743 – 19 64,087 (183,601) 613,053 – 613,053
Interim Report 2014GREEN DRAGON GAS
12
CONSOLIDATED STATEMENT OF CASH FLOWSSix months ended 30 June 2014
Six months Sixmonths Yearended
ended ended 31December
30 June 2014 30June2013 2013
US$’000 US$’000 US$’000
Notes unaudited unaudited audited
Operating activities(Loss)/profitaftertax (69,267) 9,382 (823)
Adjustments for:Depreciation 5,721 1,297 12,194
Amortisationofleaseholdlandheldfor
ownuseunderoperatingleases 171 54 117
Amortisationforintangibleassets 356 1,204 1,474
Impairmentofintangibleassets – – 325
GainondisposalofJCE&subsidiaries – (28,292) (33,544)
Lossondisposalofproperty,plantandequipment – – 1,150
Financeincome (2) (212) (25)
Changeinfairvalueofderivative 65,382 – 13,271
Overprovisionoflitigationpayable (6,937) – –
Litigationinterestandpenalties – 6,912 6,937
Taxationforcontinuingoperations 44 (145) (507)
Taxationfordiscontinuedoperations – (62) 436
Financecosts 5,133 9,104 12,513
Cash movements before changes in working capital 601 (758) 13,518
Movementininventory (238) (2,456) 267
Movementintradeandotherreceivables (3,679) 4,243 (9,078)
Movementintradeandotherpayables (352) (1,685) 19,877
Net cash (used in)/generated from operations (3,668) (656) 24,584
Incometax (133) (627) (597)
Net cash (used in)/generated from operating activities (3,801) (1,283) 23,987
13
Six months Sixmonths Yearended
ended ended 31December
30 June 2014 30June2013 2013
US$’000 US$’000 US$’000
Notes unaudited unaudited audited
Investing activitiesPaymentsforpurchaseof
property,plantandequipment – (964) (12,325)
Paymentsforintangibleassets
–gasstationlicense – – (392)
Paymentsforleaseholdlandheldfor
ownuseunderoperatingleases – – (155)
InterestinGCZ (12,288) – (25,504)
Paymentsforexplorationactivities (7,831) (20,961) (32,385)
Disposalofasubsidiary,netofcashdisposed 18 – 59,367 60,201
Cashdisposedduetodemergerofsubsidiaries – – (3,576)
Movementinrestrictedcash (8,000) – –
Interestreceived 2 212 25
Net cash (used in)/generated from investing activities (28,117) 37,654 (14,111)
Financing activitiesCashpaidtoredeemconvertiblenotes – (84,200) (84,200)
Cashreceivedfromissuingconvertiblenotes 50,000 – 35,000
Cashreceivedfromissuingbonds – 35,000 35,000
Otherinterestpaid (2,522) (4,047) (5,409)
Net cash generated from/(used in) financing activities 47,478 (53,247) (19,609)
Netincrease/(decrease)incash
andcashequivalents 15,560 (16,876) (9,733)
Cashandcashequivalents
atbeginningofperiod 34,642 39,971 39,971
50,202 23,095 30,238
Effectofforeignexchangeratechanges 1,770 1,319 4,404
Cash and cash equivalents at the end of period 51,972 24,414 34,642
Interim Report 2014GREEN DRAGON GAS
14
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS1 GENERAL INFORMATION
Thecondensedfinancialinformationforthesixmonthsended30June2014and30June2013isunauditedanddoes
notconstituteasetofstatutoryfinancialstatements.Theconsolidatedunauditedinterimfinancial informationsetout
inthisreportisbasedontheconsolidatedfinancialstatementsofGreenDragonGasLtd.anditssubsidiarycompanies
(togetherreferredtoasthe“Group”).Thecondensedconsolidatedfinancialinformationshouldbereadinconjunction
withtheannualfinancialstatementsfortheyearended31December2013,whichhavebeenpreparedinaccordance
withIFRSsasadoptedbytheEuropeanUnion.Thecomparativefinancialinformationforthefullyearended31December
2013isnottheGroup’sfullannualaccountsforthatperiodbuthasbeenderivedfromtheannualfinancialstatements
forthatperiod.Theauditors’reportonthoseaccountswasunqualifiedanddidnotincludereferencestoanymattersto
whichtheauditorsdrewattentionbywayofemphasiswithoutqualifyingtheirreport.
2 ACCOUNTING POLICIESThese accountshavebeenprepared in accordancewith the accountingpolicies that are expected to be applied in
theReportandAccountsofGreenDragonGasLtd. for theyearending31December2014andareconsistentwith
InternationalFinancialReportingStandardsadoptedforuseintheEuropeanUnion,withtheexceptionofIAS34,“Interim
FinancialReporting”.TheannualfinancialstatementsofGreenDragonGasLtd.arepreparedinaccordancewithIFRSs
asadoptedbytheEuropeanUnion.
Basis of preparationAftermakingenquiries, thedirectorshaveareasonableexpectationthat theCompanyandtheGrouphaveadequate
resourcestocontinueinoperationalexistencefortheforeseeablefuture.Accordingly,theycontinuetoadoptthegoing
concernbasisinpreparingthehalf-yearlycondensedfinancialstatements.
TheinterimfinancialstatementsarepresentedinUnitedStatesDollarsandallvaluesareroundedtothenearestthousand
dollars(US$’000)exceptwhenotherwiseindicated.
TheconsolidatedinterimfinancialstatementsincorporatethefinancialstatementsoftheCompanyandentitiescontrolled
bytheCompany(itssubsidiaries).Control isachievedwheretheCompanyhasthepowertogovernthefinancialand
operatingpoliciesofaninvestedentitysoastoobtainbenefitsfromitsactivities.Theresultsofsubsidiariesacquiredor
disposedareincludedintheconsolidatedincomestatementfromtheeffectivedateofacquisitionoruptotheeffective
dateofdisposal,asappropriate.
Prior period adjustmentThecarryingvalueofthe30June2013explorationassetshasbeenrestatedtoreflecttheimpactofretranslatingthefair
valueupliftoninitialacquisitionwhichwasattributabletocompanieswithafunctionalcurrencyofRMBintoUSdollars,
beingthepresentationalcurrencyoftheGroup,asrequiredbyIFRS.Noretranslationofthebalancehadtakenplace
previously.
Critical accounting estimates and judgmentsTheestimatesandassumptionsthathaveasignificantriskorcauseamaterialadjustmenttothecarryingamountsof
assetsandliabilitieswithintheperiodareasfollows.
15
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS2 ACCOUNTING POLICIES (Continued)
Critical accounting estimates and judgments (Continued)Depreciation of the gas production assets
Theproperty,plantandequipmentassociatedwithGCZhasbeendepreciatedonaunitsofproductionbasis.Judgment
wasrequiredindeterminingthereservesusedinthiscalculationandtheGroupconsiders2Preservestobecapableof
extractionusingtheassetsandthereforeanappropriateestimateoftheasset’slife.Itisnotedthatsignificant3Preserves
havebeenestimatedtoexistandsuchreserveswouldsignificantlyextendtheestimateusefullife.However,3Preserves
arenotincludeduntilsuchtimeastheyaretransferredto2PreservesaspartoftheGroup’sindependentreservesaudit.
Impairment reviews
Exploration and appraisal costs are assessed for indicators of impairment. The assessment by the Board requires
judgmentandisdependentuponanassessmentoftherightstotheGroup’sassetsandrenewalofsuchrights,expected
levelsofexpenditure,interpretationofexplorationandappraisalactivityintheyearandfutureintentions.Noimpairment
indicatorswerenoted.Theseassessmentsareinherentlyjudgmentalandrequireestimationandthereforemaychange
overtimeresultinginsignificantchargestoprofitorloss.
TheGrouptestsitsproperty,plantandequipmentassets,whichincludeoilandgasdevelopmentandproductionassets
forimpairmentwhencircumstancessuggestthatthecarryingamountmayexceeditsrecoverablevalue..Thisassessment
involvesjudgmentastothelevelofreservesthatarecapableofbeingextractedcommerciallyandwhicharetechnically
viablewithreferencetotheGroup’sindependentcompetentperson’sreport,estimatesoffuturegasprices,operating
costs,capital expenditurenecessary toextract those reservesand thediscount rate tobeapplied to such revenues
andcostsforthepurposeofderivingarecoverablevalue.TheGroupusesproven(1P)andprobable(2P)reservesin
suchimpairmenttests.TheimpairmenttestsontheGroup’sproducinggasdevelopmentandproductionassetswere
performedbasedontheGCZblocktowhichtheyrelated.
Fair values of convertible notes
The fair valueof the liabilitycomponenton initial recognition is thepresentvalueof thestreamof futurecashflows
(includingbothcouponpaymentsandredemption)discountedatthemarketrateofinterestthatwouldhavebeenapplied
toaninstrumentofcomparablecreditratingwithsubstantiallythesamecashflows,onthesameterms,butwithoutthe
conversionoption.Thedeterminationofthemarketinterestrateforsuchdebtisjudgmental.Refertonote12.
Valuation of derivatives and warrants
TheGroupdeterminedthevalueofderivativesandwarrants(atinceptionandatyearend)usingvaluationtechniques.
Thosetechniquesaresignificantlyaffectedbytheassumptionsused, includingsharepricevolatilities,discountrates,
probabilitiesofwarrantexerciseorredemption,andassumptionsregardingthebehaviorofpartiessubjecttocontractual
arrangements.Inthatregard,fairvaluesbasedonestimatescannotalwaysbesubstantiatedbycomparisontoindependent
markets.Theassumptionsusedaredetailedinnote13.
Accounting for framework agreement with CUCBM
Refertonote19fordetailsoftheCUCBMFrameworkAgreement.Asat30June2014,theGrouphasnotrecordedany
adjustmentstothefinancialstatementsinrelationtotheFrameworkAgreementsignedwithCUCBM,asdiscussionsare
ongoingregardingfinalizationofthehistoricfinancialdataoftherelevantblocksandIFRSrecognitioncriteriaarenot
consideredtobemet.
Interim Report 2014GREEN DRAGON GAS
16
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS3 REVENUE AND SEGMENTAL INFORMATION
TheGroup’sreportablesegmentsareassetoutbelow.Theoperatingresultsofeachofthesesegmentsareregularly
reviewedbytheGroup’schiefoperatingdecisionmakerinordertomakedecisionsabouttheallocationofresourcesand
assesstheirperformance.
DuringtheperiodrevenueofUS$8,404,000(30June2013:Nil;31December2013:$48,179,000)wasrecognisedby
theSaleofCBMgassegmentinrespectof1customerrepresenting10%ormoreoftheGroup’stotalrevenueforthe
period.
For the period ended 30 June 2014 – unaudited
Sale of Retailing gas CBM gas station sales Corporate Sub-total Eliminations Consolidated US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
Segmentrevenue:Salestoexternal customers 8,404 7,079 – 15,483 – 15,483Inter-segmentsales 2,827 – – 2,827 (2,827) –
11,231 7,079 – 18,310 (2,827) 15,483
Depreciation 5,372 320 29 5,721 – 5,721
Amortisation – 356 – 356 – 356
Lossfromcontinuing operations (1,485) (1,350) (4,425) (7,260) – (7,260)
Otherincome 1,613 – 6,939 8,552 – 8,552
Overprovisionof litigationpayable – – 6,937 6,937 – 6,937
Changeinfairvalue derivative – – (65,382) (65,382) – (65,382)
Financecosts – (71) (5,062) (5,133) – (5,133)
Incometax(charge)/credit (127) 83 – (44) – (44)
Profit/(loss)fortheperiod 1 (1,338) (67,930) (69,267) – (69,267)
Assets 907,616 14,725 725,294 1,647,635 (628,911) 1,018,724
Liabilities 179,829 3,041 384,749 567,619 (161,948) 405,671
17
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS3 REVENUE AND SEGMENTAL INFORMATION (Continued)
Fortheyearended31December2013–audited
Saleof Retailinggas
CBMgas stationsales Corporate Sub-total Eliminations Consolidated
US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
Segmentrevenue:
Salestoexternal
customers 48,179 14,002 – 62,181 – 62,181
Inter-segmentsales 7,664 – – 7,664 (7,664) –
55,843 14,002 – 69,845 (7,664) 62,181
Depreciation 10,093 571 63 10,727 – 10,727
Amortisation – 830 – 830 – 830
Litigationinterest
andpenalties – – (6,937) (6,937) – (6,937)
Profit/(loss)from
continuingoperations 12,193 (3,074) (18,400) (9,281) – (9,281)
Otherincome 2 283 25 310 – 310
Changeinfairvalue
derivative – – (13,271) (13,271) – (13,271)
Financecosts – – (12,513) (12,513) – (12,513)
Incometaxcredit 332 175 – 507 – 507
Profit/(loss)fortheyear
fromcontinuing
operations 12,527 (2,616) (44,159) (34,248) – (34,248)
Assets 928,308 16,890 697,388 1,642,586 (659,555) 983,031
Liabilities 191,496 5,535 311,849 508,880 (172,654) 336,226
Interim Report 2014GREEN DRAGON GAS
18
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS3 REVENUE AND SEGMENTAL INFORMATION (Continued)
Fortheperiodended30June2013–unaudited
Saleof Retailinggas
CBMgas stationsales Corporate Sub-total Eliminations Consolidated
US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
Segmentrevenue:
Salestoexternal
customers – 6,932 – 6,932 – 6,932
Inter-segmentsales 3,482 – – 3,482 (3,482) –
3,482 6,932 – 10,414 (3,482) 6,932
Depreciation – 263 35 298 – 298
Amortisation – 357 – 357 – 357
Litigationinterest
andpenalties – – (6,912) (6,912) – (6,912)
Profit/(loss)from
continuingoperations 268 (1,028) (7,519) (8,279) – (8,279)
Otherincome 1 140 14 155 – 155
Financecosts – – (9,104) (9,104) – (9,104)
Incometax
(charge)/credit (66) 211 – 145 – 145
Profit/(loss)fortheperiod
fromcontinuing
operations 203 (677) (16,609) (17,083) – (17,083)
Assets 810,532 20,393 697,468 1,528,393 (570,161) 958,232
Liabilities 179,467 5,213 530,448 715,128 (435,943) 279,185
Therevenue,resultsandcashflowsofthediscontinuedoperationshavebeenpreviouslydisclosedinthe30June2013
interimresultsandthe31December2013annualreport.
19
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS4 TAX
TaxationfortheGroup’soperationsinthePeople’sRepublicofChina(“PRC”)isapplicableatthecurrenttaxrateof25%
ontheestimatedassessableprofitsfortheperiod.
5 (LOSS)/EARNINGS PER SHARE Six months Sixmonths Yearended
ended ended 31December
30 June 2014 30June2013 2013
US$’000 US$’000 US$’000
unaudited unaudited audited
(Loss)/earningsfortheperiodattributable
toownersoftheParentarisingfrom:
–Continuingoperations (69,267) (17,083) (34,248)
–Discontinuedoperations – 26,465 33,425
Weightedaveragenumberofordinaryshares
forthebasic(loss)/earningspershare
thatisapplicable 137,439,134 136,540,711 136,540,711
(Loss)/earningpershareisbasedonthe(loss)/earningsattributabletoordinaryequityholdersoftheCompanyofdivided
bytheweightedaverageofordinarysharesinissueduringthecorrespondingperiod.
Duetothelossarisingoncontinuingoperationsduringtheperiodended30June2014,30June2013andfortheyear
ended31December2013,thedilutedlosspershareisconsideredtobethesameasthebasiclosspershare.Potential
ordinarysharesarisingfromwarrantsandconvertiblebondshavebeenexcludedfromthecalculationaboveastheyare
consideredtobeanti-dilutive.
6 DIVIDENDSThedirectorsdonotrecommendthepaymentofan interimdividendduringtheperiodended30June2014.On30
September2013,theCompanycompletedtheproposeddemergerofitsengineeringbusinessbymeansofadividend
in specie of shares in Greka Engineering & Technology Ltd (“Greka Engineering” or “GET”) to Green Dragon Gas
shareholders.Thetransactionresultedinareductioninsharepremiumandotherreservesandde-recognitionofthe
assetsandliabilitiesofGETduringtheyearended31December2013.
7 PROPERTY, PLANT AND EQUIPMENTDuringtheperiod,theGroupincurrednoadditionstootherproperty,plantandequipment(30June2013US$964,000;
31December2013US$20,065,000)andUS$12,288,000onadditionstotheGroup’sinterestinGCZblockassets(30
June2013Nil;31December2013US$25,504,000)aspartofthefinalagreementwithCNPC.
Interim Report 2014GREEN DRAGON GAS
20
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS8 GAS EXPLORATION AND APPRAISAL ASSETS
Restated US$’000
Cost
At1January2013 813,262
Additions 40,049
Revenueadjustment (7,664)
ReversalofPSCpartnercontributions 42,600
Transfertoproperty,plantandequipment (5,506)
Exchangedifferences 19,796
At31December2013–audited 902,537
Additions 10,658
Revenueadjustment (2,827)
ReversalofPSCpartnercontributions (2,600)
Exchangedifferences (4,284)
At30June2014 903,484
Net book value
At30June2014–unaudited 903,484
At31December2013–audited 902,537
At1January2013 813,262
RevenuesofUS$2.8m(31December2013:US$7.7m)arisingonblocksincludedinexplorationandappraisalassets
representspre-commercialproductionpilotgasproductionand isconsideredto formpartofcontinuedevaluationof
theGroup’sassets.Assuch,anamountequal tothemarginonsuchrevenuesisdeductedfromtheexplorationand
evaluationassetexpenditureintheperiod.
TheUS$2.6mreversalintheperiodisduetothesettlementofthelitigationwithConocoPhillips.PleaserefertoNote14
forfurtherdetails.
21
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS9 TRADE AND OTHER RECEIVABLES
As at Asat
30 June 2014 31December2013
US$’000 US$’000
unaudited audited
Tradereceivables 1,471 1,401
Otherreceivables 8,116 8,334
Amountduefromrelatedparties 5,634 1,807
15,221 11,542
10 TRADE AND OTHER PAYABLES As at Asat
30 June 2014 31December2013
US$’000 US$’000
unaudited audited
Tradepayables 8,571 8,906
Otherpayables 7,268 7,306
Amountsduetorelatedparties 8,955 9,411
24,794 25,623
11 OTHER FINANCIAL LIABILITIESTheamountpayablerepresentsamountspayabletoChinaUnitedCoalbedMethaneCo.Ltd.,which isaparty tothe
PSCs, in relation to exploration costs incurred on the properties. These amounts are only payable from revenue on
productionfromtheShizhuangSouthProperty.
Interim Report 2014GREEN DRAGON GAS
22
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS12 CONVERTIBLE NOTES
As at Asat
30 June 2014 31December2013
US$’000 US$’000
unaudited audited
Broughtforwardfromprioryear 33,383 79,751
Additionalfinancechargeonearlyredemptionofconvertiblenotes – 4,449
Conversionofconvertiblenote (33,383) –
Issueofconvertiblenotes 46,240 33,119
Accruedinterest 309 264
Repaymentsofconvertiblenotesandinterest – (84,200)
46,549 33,383
Asat30June2014,theCompanyhadone(31December2013:one)convertiblenoteinissue.
Convertible loan note issued 2014(a) US$50 million 7% coupon convertible note due 2017
On 2 June 2014 (“Issue Date”), the Company issued a three year convertible note having a face value of
US$50,000,000withamaturitydateof1June2017(“MaturityDate”).Thenotebearsinterestat7%perannum,
payableonasemi-annualbasis.AttheMaturityDate,thetotalsumof100%oftheoutstandingprincipalamount
oftheconvertiblenoteandtheaccruedinterestshallbecomepayable,unlesspreviouslyconvertedorredeemed.
TheconvertiblenotecanbeconvertedintoordinarysharesoftheCompanyatthenoteholder’soptionatanytime
priortotheMaturityDateatUS$9.34pershare.
(b) Accounting for convertible notes
Oninitialrecognition,thefairvalueoftheliabilitycomponentoftheconvertibleloannotewasdeterminedusing
theprevailingmarketinterestrateofsimilardebtswithoutconversionoption.Fornotesissuedduringtheperiod
ended30June2014, therateconsideredtobecomparablewas10%.The loansaresubsequentlycarriedat
amortisedcost.
Theequityelementarisingfromtheconversionoptionsoftheirconvertiblenotes,beingtheresidualvalueatinitial
recognition,ispresentedintheequityheading“convertiblenoteequityreserve”.
23
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS12 CONVERTIBLE NOTES (Continued)
Convertible loan note issued 2013 and converted 2014(a) US$35 million 7% coupon convertible note due 2015
On11December2013(“IssueDate”),theCompanyissuedatwoyearconvertiblenotehavingafacevalueof
US$35,000,000withamaturitydateof16December2015(“MaturityDate”).Thenoteboreinterestat7%per
annum,payableonasemi-annualbasis.AttheMaturityDate,thetotalsumof100%oftheoutstandingprincipal
amountoftheconvertiblenoteandtheaccruedinterestwouldhavebecomepayable,unlesspreviouslyconverted
orredeemed.
TheconvertiblenotecouldbeconvertedintoordinarysharesoftheCompanyatthenoteholder’soptionatany
timefrom11December2013tothe14dayspriortotheMaturityDateatUS$6.06pershare.
On3June2014,thisconvertiblenotewasconvertedinto5,775,578ordinarysharesoftheCompanyatUS$6.06
pershare.
Historic Convertible loan notes repaid in prior periodsAsdisclosedinthe31December2013annualreport,theGrouphadtwoUS$50million7%couponconvertiblenotes
duein2015.Bothofthesewererepaidinfullon7June2013andextinguishedatnilgainorloss.
13 BONDS AND DERIVATIVE FINANCIAL INSTRUMENTOn3June2013,theCompanyissuedan18monthbondofUS$35,000,000withamaturitydateof3December2014
(“MaturityDate”).ThebondholdermaynotifytheCompanytoextendtheoriginalmaturitydatetoadatefallingnotlater
thantwelvemonthsaftertheoriginalmaturitydate.Thebondbearsinterestat7%perannum,payablesemi-annually.At
theMaturityDate,thebondswillberedeemedattheirprincipalamount,unlesspurchasedandcancelledorredeemed.
TheCompany issued13,756,000warrantsat thesamedate to thebondholderunderaseparatewarrantagreement
withanexercisepricefixedatGBP1.97216,whichcanbeexercisedintheexerciseperiodupto3December2014.The
holderisentitledtorequirerepurchaseofthewarrantsatanytimeduringthe30-dayperiodprecedingtheexercisedate
of3December2014ataUSDollaramountequaltotheaggregateinterestpayableonthePrincipalamount,equivalentto
US$2.54perwarrant,atanannualisedinterestrateof15%fromthedateofissue,representingaputoption.
Thebondwasinitiallyrecordedatfairvalueandissubsequentlycarriedatamortisedcost.
Thefairvalueofthewarrantsandtheputoptionhavebeencalculatedasatthedateofinceptionusingvaluationmodels.
Thefairvalueoftheinstrumentswasconsideredtorepresentatransactioncostofthebondandtheinceptionvalueof
US$7,142,000hasbeensetoffagainsttheprincipalamountofthebondofUS$35mandisthereafteramortisedaspart
oftheeffectiveinterestratechargetothematuritydate.Thewarrantsandputoptionhavebeenclassifiedasderivative
financialliabilitiesandwerefairvaluedat30June2014and31December2013withchangesinthefairvaluerecorded
inprofitandloss.Novalueisattributabletotheputoptionatperiodendastheprobabilityofredemptionisconsidered
tobenil.
Interim Report 2014GREEN DRAGON GAS
24
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS13 BONDS AND DERIVATIVE FINANCIAL INSTRUMENT (Continued)
Thefairvalueofthewarrantsof$85,792,000hasbeendeterminedusingaBlackScholespricingmodel.Thefairvalue
changeintheperiodis$65,382,000.Thekeyinputsusedare:
At inception Period end
Shareprice £1.85 £5.62
Exerciseprice £1.97 £1.97
Expectedvolatility 36% 36%
Riskfreerate 2.60% 2.60%
Expecteddividendyield N/A N/A
14 PROVISIONSAsdisclosedpreviouslyinthe31December2013annualreport,theGrouphadlitigationintheperiodwithConocoPhillips
ChinaInc(“COPC”)arisingfromafarm-outagreement.COPChadpaidUS$42.6milliontotheGroupunderthefarm-out
agreement.On8November2010,theGroupterminatedthefarm-outagreementasCOPChadnotmadetherequired
paymentsunderthefundingarrangements.COPCdisputedthepaymentsanddemandedfullrepaymentoftheUS$42.6
million.
ThedisputewassubjecttoarbitrationinSingaporeandon10July2013,thearbitrationtribunalruledinCOPC’sfavour
withanawardofUS$42.6millionplusfeesandinterestofapproximatelyUS$6.9millionagainsttheGroup.
WhilsttheGrouphadlodgedanappealagainstthedecision,asat31December2013Managementexercisedjudgment
andaprovisionofthefullamountwasmadeinthefinancialstatementswithUS$42.6msetoffagainstexplorationassets
whilstfees,interestandpenaltiesofUS$6.9wereshownintheincomestatement,representingtheestimatedfinancial
effect.Duringtheperiod,theGrouppaid$8masasecuritydepositandthishasbeenclassifiedasrestrictedcashin
thestatementoffinancialposition.On14August2014,theGroupenteredintoafullandfinalsettlementagreementwith
COPCandpaidUS$40milliontoCOPCtosettlethiscaseon15August2014.
The settlement is considered to be an adjusting event under IAS 10 and therefore provision has been reduced by
US$9.5mtoUS$40millioninthestatementoffinancialposition.Theamountsetoffagainstexplorationassetshasbeen
reducedbyUS$2.6mandpreviouslyrecognizedfeesandinterestofUS$6.9mhasbeenreversedandshownwithinother
incomeintheconsolidatedstatementofcomprehensiveincome.
25
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS15 SHARE CAPITAL AND RESERVES
Authorised Issued and fully paid Number Number of shares US$ of shares US$
At1January2013,30June2013
and31December2013ordinarysharesof
US$0.0001each 500,000,000 50,000 136,540,711 13,654
Issueofnewsharesbyconversionof
convertiblenoteon3June2014 – – 5,775,578 578
At30June2014,ordinarysharesof
US$0.0001each 500,000,000 50,000 142,316,289 14,232
Nature and purpose of reserves(i) Share premium
Theamountrelatestosubscriptionfororissueofsharesinexcessofnominalvalue.Theapplicationoftheshare
premiumaccountisgovernedbytheCompaniesLawoftheCaymanIslands.Thearticlesofassociationofthe
CompanyprohibitdistributiontoequityholdersoftheCompanythroughthesharepremium.
(ii) Convertible note equity reserve
Theamount represents thevalueof theunexercisedequitycomponentof theconvertiblenote issuedby the
CompanyrecognisedinaccordancewiththeGroup’saccountingpolicy.
(iii) Share based payment reserve
Theamountrelatestothefairvalueoftheshareoptionsthathavebeenexpensedthroughtheincomestatement
lessamounts,ifany,thathavebeentransferredtotheretainedearnings/deficituponexercise.
(iv) Other reserve
InaccordancewiththeregulationsoftheStateAdministrationofWorkSafety,theGroup’sshareofsubsidiariesand
JCEshasacommitmenttoprovidereserveforenhancementofsafetyproductionenvironmentandimprovement
offacilities(“WorkSafetyCost”).Inprioryears,theworksafetyexpendituresarerecognizedonlywhenacquiring
thefixedassetsorincurringotherworksafetyexpenditures.
(v) Foreign exchange reserve
Theamountrepresentsgains/lossesarisingfromthetranslationofthefinancialstatementsofforeignoperationthe
functionalcurrencyofwhichisdifferentfromthepresentationcurrencyoftheGroup.
(vi) Retained deficit
Theamountrepresentscumulativenetgainsandlossesrecognisedinconsolidatedprofitorlosslessanyamounts
reflecteddirectlyinotherreserves.
Interim Report 2014GREEN DRAGON GAS
26
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS16 RELATED PARTY TRANSACTIONS
Savedasdisclosed innotes9,10,11and13, therewerenootherrelatedparty transactions thatarerequired tobe
disclosed.Transactionsbetween thecompanyand its subsidiaryundertakings,whichare relatedparties,havebeen
eliminatedonconsolidationandarenotdisclosedinthisnote.TherelatedpartytransactionsoftheGroupduringthe
periodincludethefollowing
• Amounts due from related parties of US$5,634,000 (31 December 2013: $1,807,000) are from companies
thataresubsidiariesofGrekaDrillingLtd.andGrekaEngineering&TechnologyLtd.whicharecompaniesunder
commonmanagementandcontrol.TheGrouphascontractswithbothcompaniesregardingdrillingservicesand
gasprocessingrespectively.
• AmountsofUS$8,955,000(31December2013:$1,465,000)areduetoCNPC,whichisapartytotheproduction
sharingcontractsontheactivitiesofexploration,developmentandproductionofcoalbedmethane,inrespect
ofexplorationcostsincurred.ThisamountistobesettledbyfuturerevenueonproductionfromtheChengzhung
BlockinthePRC.Thebalanceisunsecuredandinterest-free.
• TheholderoftheGroup’sbondsandwarrantsdetailedinnote13,ChandlerGroup,isconsideredtorepresenta
relatedpartybyvirtueofits18%shareholdingandwarrantswhichconferpotentialrightstoafurther10%ofthe
Group’ssharecapital.
17 EVENTS AFTER REPORTING DATE(a) Agreement signed with PetroChina
InAugust2014,theGroupenteredintoabindingagreementwithPetroChinaregardingitsPSCsinGCZblockin
China.TheCooperationAgreementreaffirmsGreenDragon’s47%interestintheGCZBlockandsecuresfuture
cashflowsfromthe104wellsdrilledontheGCZblock,whichhavebeenproducingsince3March2010.
UnderthetermsoftheCooperationAgreement,whichendson31March2033,CNPCandChinaUnitedCoalbed
MethaneCorporationLtd.(“CUCBM”)willtransfertheirrightsandobligationsunderthePSCrelatingtotheGCZ
BlocktoPetrochina.TheparticipatinginterestsofthepartiesintheGCZBlockwillbePetroChina,53%andGreen
Dragon,47%.PetroChinawillbetheoperatoroftheGCZBlock.
Thepartieshaveagreed thatPetroChinashall, inaccordancewith thecost recoverymechanismof thePSC,
recoverinfullallunrecoveredexplorationcosts,developmentcosts,operatingcostsanddeemedinterestfrom
theeffectivedateofthePSC,whichhavebeenaudited,beforeGreenDragonrecoversitsunrecoveredexploration
costsandreceivesitsallocationunderthePSC.GasproductionandsalesfromtheGCZBlockcommencedon
3March2010.
(b) Settlement of dispute with ConocoPhillipsInAugust2014,theGroupsuccessfullynegotiatedafullandfinalsettlementagreementwithCOPC.Pleaserefer
tonote14fordetails.
27
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS18 DISCONTINUED OPERATIONS
On3June2013,theCompanyenteredintoasaleandpurchaseagreementforthesaleoftheCompany’s29.11%effective
interestinBeijingHuayouUnitedGasDevelopmentCo.,Ltd(“BHY”)andits100%interestinGiantPowerInternational
InvestmentLimited (“GPI”).Further to this, on30September2013, the shareholdersapproved thedemergerof the
Group’sengineeringbusinessbymeansofadividendinspecieofsharesinGrekaEngineering&TechnologyLtd(“Greka
Engineering”or“GET”)toGreenDragonGasshareholders.
Detailsoftheassets,liabilitiesandanyresultinggains/lossesondisposalhavepreviouslybeendisclosedinthe30June
2013interimaccountsand31December2013annualreport.
19 BINDING AGREEMENT WITH CHINA UNITED COALBED METHANE CORPORATION (“CUCBM”)DuringtheperiodthecompanyenteredintoabindingagreementwithCUCBM,asubsidiaryofChinaNationalOffshore
OilCorporation.Asaresultoftheagreement,boththeGroupandCUCBMaretoworktogetherinordertomaximizethe
valuewithinthePSCswhichcontinueinfullforceandeffect.Theagreementsecuresinterestandrevenueshareofthe
approximately1600wellsdrilledbyCUCBMinlinewiththePSCs.CUCBMiscommittedtoinvestafurtherofUS$100min
returnforanadditional10%workinginterestinGSN(thisisinadditiontoanestimatedUS$100millioninvestedtodate).
ThePSCexplorationtermsareextendedforafurther2years.Atthisstage,thereisnoimpactoftheagreementonthe30
June2014financialstatementsasdiscussionswithCUCBMregardingfinalizationofrelevantfinancialdataareongoing.
DIRECTORS, COMPANY SECRETARY AND ADVISORS
Interim Report 2014GREEN DRAGON GAS
28
DIRECTORSRandeep S. GrewalExecutive Director, Chairman and CEO
David TurnbullNon-Executive Director
Wayne RobertsNon-Executive Director
Stewart John, OBENon-Executive Director
Gong Da BingNon-Executive Director
LEGAL ADVISORSAs to Chinese LawGuantaoLawFirm17/F,Tower2,YingtaiCenter,NO.28,FinanceStreet,XichengDistrict,Beijing100140,PRChina
As to Cayman Islands & BVI LawTraversThorpAlberga1205ATheCentrium60WyndhamStreetCentralHongKong
As to English LawFreshfieldsBruckhausDeringerLLP65FleetStreet,LondonEC4Y1HSUnitedKingdom
REGISTERED OFFICEInternational Corporation Services Ltd.POBox472HarbourPlace2ndFloor103SouthChurchStreetGeorgeTownGrandCaymanKY1-1106CaymanIslands
COMPANY SECRETARYInternationalCorporationServicesLtd.
NOMINATED ADVISOR AND CO-BROKERSmith&WilliamsonCorporateFinanceLimited25MoorgateLondonEC2R6AY
CO-BROKERSMacquarie Capital (Europe) LimitedRopemakerPlace28RopemakerStreetLondonEC2Y9HD
Peel HuntMoorHouse120LondonWallLondonEC2Y5ET
AUDITORSBDO LLP55BakerStreetLondonW1U7EU