|- Gross gas production increased by 63%; Gas sales volume increased by 128%; Net sales revenue was up by 92.2%; |
- After adjusting for one-off and non-recurring items, profit from operations increased 116.8%
HONG KONG, Aug 20, 2015 - (ACN Newswire) - AAG Energy Holdings Limited ("AAG" or the "Group"; stock code: 2686) announced today its unaudited condensed interim results for the six months ended 30 June 2015 ("review period"). During the first half of 2015, the Group's gross gas production increased by 63% to 250.4 million cubic meters ("mmcm") (8.8 billion cubic feet ("bcf") compared with the first half of 2014 ("1H2014"). Gross gas sales volume increased by 128% to 208.4 mmcm (7.4bcf), compared with the 1H2014.
The Group's average realized gas price increased 4% to RMB1.77 per cubic meter. Realized net sales revenue was up by 92.2% to RMB278.7 million from the 1H2014 despite a decrease in the product sharing contract ("PSC") allocation rate from 94% for the 1H2014 to 80% for the 1H2015 due to full recovery of exploration cost at the end of 2014.
Included in 1H2014 results are VAT refund for 2008 to 2013 of RMB45.7 million and non-cash share-based compensation expense of RMB2.7 million; included in 1H2015 results are non-cash share-based compensation expense of RMB 21.2 million and one-time IPO expenses of RMB 18.6 million. VAT refund recorded for the first time in our 1H2014 results included VAT refund for 2008 to 2013 of RMB45.7 million and VAT refund related to the 1H2014 operations of RMB17.9 million. Non-cash share based compensation expenses result from share options issued to management/staff related to the IPO. After excluding (i) VAT refund for the years 2008 to 2013 of RMB45.7 million and IPO-related expenses of RMB2.7 million included in the 1H2014 results; and (ii) one-time IPO expenses of RMB18.6 million and other IPO-related expenses of RMB21.2 million included in 1H2015 results, AAG's normalized profit from operations increased 116.8% to RMB177.2 million and the normalized adjusted EBITDA increased 100% to RMB248.5 million.
Dr. Steve Zou, Chairman and Executive Director of AAG Energy, said: "The year 2015 has opened another exciting new chapter in the Group's history. First, we are very pleased that our business delivered sound results in the first of 2015. Our improved operational performance and robust sales volume was very encouraging. Secondly, the listing of our shares on the Stock Exchange of Hong Kong on June 23rd marks a giant step forward, not only enhancing our corporate governance, but also providing us with sufficient capital to spur our rapid business development in China CBM market. For the 2H2015, we will continue to pursue further development of Panzhuang and development preparation of Mabi. Panzhuang will focus on production enhancement of the current production wells and drilling of new production wells, and Mabi will focus on improving the performance of pilot wells, as well as facilitating the relevant approvals from authorities associated to the Mabi ODP I."
AAG has achieved significant progress towards certain key operational objectives during the 1H2015:
Panzhuang production update
Panzhuang gross production, from all 52 wells in operation, increased by 67% to 241.8 mmcm (8.5bcf) in the 1H2015 compared with the 1H2014. Production in the 1H2015 was 14% higher than the 2H2014. Sales utilization rate improved to 99.4% in the 1H2015, which compares to 92.4% sales utilization rate experienced in the 2H2014 and 73.1% compared to the 1H2014.
Panzhuang drilling and surface facilities
A total of 6 compression uplift projects have been completed year to date in Panzhuang which have combined for incremental gross production uplift of 140,000 m3 (4.9 million cubic feet "mmcf")/day. AAG intends to complete 6 more similar projects in the 2H2015. Drilling in Panzhuang recently concluded for a short change of rigs. The Group has contracted 2 rigs to resume drilling in the end of August, and another 2 rigs to begin drilling in early September. Year to date, 10 horizontal wells have been drilled. By year end, it is expected that the program will have drilled 21 horizontal wells, of which 19 should be in production.
Panzhuang also has 11 vertical pad drilling well ("PDW") type wells which are in the process of being completed and should begin production in the third quarter of 2015.
Mabi pilot program update
In respect of pilot production well testing in northern area of Mabi block, the first well pad comprising of 7 directional- vertical wells has been fractured stimulated and put into operation in May 2015. Among the 7 wells, 2 wells have started to show gas flow. The remaining 5 directional- vertical wells in the pad have been under pumping operations to further lower bottom hole pressure to gas description pressure. Completion continues on 33 existing PDW vertical wells in Mabi. To date, 4 have been completed and have started the de-watering process. The company expects 2 fracturing fleets to move into Mabi during August to resume hydraulic fracturing effects on the remaining 29 wells.
Mabi ODP progress
The submission and approval of the Overall Development Plan ("ODP") is one of the most important key milestone for the commercialization of CBM projects. During the 1H2015, significant progresses have been made on the Mabi ODP I approval, including several key associated approvals which are required by the National Development and Reform Commission of the People's Republic of China ("NDRC"), among others. The Group expects to finalize the Mabi ODP I Report and associated key approvals by the end of the 3Q2015.
Mabi exploration program update
For the drilling of new exploration wells, 3 exploration wells were drilled in the north-western area of Mabi concession. 5 exploration wells have been under drilling based on the annual exploration plan, and AAG expects to collect more geological data from these wells. For reserve upgrade, 4 exploration wells are under production test with the gas rates qualified for further reserve upgrade. Another 7 exploration wells have been under producing operation smoothly.
AAG's full year 2015 plan comprises of 42 single lateral horizontal ("SLH") production wells and 17 exploration wells. In the second half of 2015, 29 SLH wells and 9 exploration wells remain to be drilled.
The NDRC announced in 1H2015 to adjust the non-residential gas price, which include an increase in non-residential legacy gas price by RMB0.04/cubic meter, and a decrease in non-residential incremental gas price by RMB0.44/cubic meter. "We believe this is a positive signal from the government to encourage the unification of the natural gas price in China into a more market driven natural gas pricing system from the previously regulated natural gas pricing system. The adjustment of natural gas price in 1H2015 will also encourage the utilization of natural gas by industry and commercial sector and benefit the upstream development of natural gas and CBM in the long term. In term of gas consumption in non-residential sector, the Henan market we currently supply to relies much more on legacy gas than incremental gas. We have confidence on the introduction of favorable government policies regarding natural gas and are committed to continue our efforts to effectively execute our work plan and achieve the Group's strategic goals, thereby enhancing value for our shareholders." Dr. Zou Concluded.
About AAG Energy Holdings Limited
AAG Energy is the leading independent coalbed methane (CBM) producer in China, focusing on the development and value optimization of unconventional gas resources to supply clean energy to the Chinese economy. AAG Energy's key assets, Panzhuang and Mabi concessions, are located in the southern Qinshui Basin, which contains the largest amount of proven CBM geological reserves in China. The Panzhuang concession is the most commercially advanced Sino-foreign CBM asset in China and is the first Sino-foreign CBM concession in China to have received overall development plan approval, with designed annual production capacity of 500 million m3. The Mabi concession received preliminary ODP approval in November 2013 and Mabi ODP I has a designed annual commercial capacity of 1 billion m3. The proven ability to commercialize CBM, along with a highly regarded management team has attracted support from leading international and Chinese investors including Warburg Pincus, Baring Private Equity Asia, Chinastone and Ping An. For further details, please visit www.aagenergy.com.
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Aug 20, 2015 14:28 HKT/SGT
Source: AAG Energy Holdings Limited
Topic: Press release summary
Sectors: Daily Finance, Energy
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