Shares of both Green Dragon Gas (GDG), and its demerged sister entity Greka Drilling (GDL), were both up by over a fifth after the former revealed that it had reached a agreement with CNOOC, China’s third-largest state-owned oil group, over previous unauthorised drilling on five of Green Dragon’s gas licences.
The deal is linked to a bizarre issue that came to light last October, when Green Dragon revealed that up to 1,500 wells had been drilled on its licences in China without its consent - or even prior knowledge for that matter. The bulk of the drill work (much of which was successful) was carried out by CNOOC subsidiary - China United Coalbed Methane Corp (CUCBM) - on the Shizhuang South licence.
Negotiations have been underway with the aim of delivering a mutually beneficial settlement between Green Dragon and CNOOC. The parties have arrived at an agreement that should result in Green Dragon booking a substantial increase in its reserves, in addition to back-dated revenues from Shizhuang South. CUCBM has also agreed to spend $250m (£150m) improving the infrastructure at Shizhuang South, while another $100m has been earmarked for exploration of the Shizhuang North prospects.
