Sino Gas - Quarterly Activities Report
Sino Gas & Energy $SEH released its March quarterly report. During the quarter, the JV partners approved a US$45m capex program for 2016. US$4.9m (net) in gas sales was received by SEH during the quarter. On the exploration front, LXDG-08 tested at 2.7MMscf/d, the highest production test to date. Also during the quarter, 2P Reserves increased by 23% to 552bcf.
2016 work program commenced - The JV partners have approved a capex budget of US$45 million. Four rigs are currently drilling exploration/appraisal wells on Linxing (East) before moving to development drilling on Linxing (West). Twenty-one wells planned including five exploration wells on Linxing (East) with the remainder being pilot development wells.
US$ 10.1 million cash for Linxing gas sales received by Joint Venture - Payment for gas sales up to late February 2016 received by Joint Venture (US$4.9 million net to Sino Gas), representing 85% of total gas sales proceeds to end February. Future sales proceeds from Linxing PSC will be received monthly. Discussions on the remaining 15% from Sanjiaobei PSC continue.
Further exploration success on Linxing (East) - LXDG-08 well tested at 2.7 MMscf/d the highest Company recorded production test from a vertical/deviated well. LXDG-08 was outside the 31 December 2015 Reserve Area. Significant net pay found in LXDG-09 and LXDG-12 with testing planned for 2Q 2016.
23% increase in net 2P Reserves to 552 bcf(1) - Year End 2015 Reserves increase driven by 16% positive revision to existing Reserves on Sanjiaobei and Linxing (West) and the first Reserves bookings on Linxing (East).
China gas macro update - China approved the 13th Five Year Plan in March, which continues to prioritise the development of cleaner energy sources such as natural gas. In each of the three months since the November 2015 price reduction, the NEA has reported year-on-year natural gas demand growth of 18 -44%.
FINANCIAL & CORPORATE
- 31 March 2016 Sino Gas cash balance of US$59 million
- Average gross production of 6.3 MMscf/d and gross revenue during quarter of US$3.2 million
- Capex spend of US$3.8 million gross in Q1 n Sino Gas paid Joint Venture cash calls of US$1.9 million
- Macquarie debt facility - Agreement to defer repayment of US$1.5 million due 31 March 2016 to 31 December 2016.
Sino Gas’ Managing Director, Glenn Corrie said: “We had a strong start to the year achieving a number of crucial milestones, which positions us to unlock the full value of our assets. The receipt of outstanding gas sales proceeds from the Linxing PSC was an important milestone and clears the path for us to advance towards full -field development. The 23% addition to net 2P reserves and outstanding exploration and appraisal results from Linxing (East) provide further confirmation of the scale and quality of our resource base.
The fundamentals of a growing gas market remain intact with very strong gas demand growth observed during the quarter, spurred by a revision to China natural gas prices in November 2015. Our priorities for 2016 are to finalise payment for gas sold from the Sanjiaobei PSC, ramp-up production to installed capacity of 25 MMscf/d over the year and secure CRR approvals for Linxing (West) and Sanjiaobei.”
(1) Refer to Reserves & Resources statement on page 8 for additional disclosure.