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Investor Relations

Interim Results 2015

Interim Results 2015

21 September 2015

Greka Drilling Limited (AIM: GDL), the largest independent and specialised unconventional gas driller in Asia, is pleased to announce its unaudited results for the six months ended 30 June 2015.

FINANCIAL HIGHLIGHTS

  • Revenue increased 33% to US$11.9 million (H1 2014: US$8.9 million)
  • US$6.0 million of cash on hand as at 30 June 2015 (US$4.8 million restricted)(US$8.0 million (US$6.3 million restricted) as at 31 December 2014)
  • US$6.2 million bank loans as at 30 June 2015 (US$11.9 million as at 31 December 2014)
  • Loss of US$4.8 million (H1 2014: loss of US$4.0 million)

OPERATIONAL HIGHLIGHTS

  • 28 wells drilled in first half of 2015 versus 19 in the same period in 2014, a 47% increase
  • 19 wells drilled in China, of which 2 were laterals and 17 were verticals and directionals
  • 9 vertical and directional wells drilled in India
  • 26,367 metres drilled, versus 21,159 metres in the same period in 2014, a 25% increase
  • Fastest Vertical well was drilled to a total depth (“TD”) of 652 metres in 9.9 days (spud to completion).
  • Fastest Directional well was drilled to TD of 848 metres in 6.7 days (spud to completion).
  • LiFaBriC well intersection rate of 100%
  • 20,721 man-hours of training were conducted for Company staff in China and India during H1 2015, a 137% increase over H1 2014
  • Maintained our zero Lost Time Incident Rate

Mr. Randeep S. Grewal, Chairman and Chief Executive of Greka Drilling Limited, commented:

“While there were delays in mobilisation for our key clients in the first few months of 2015, the Green Dragon Gas 30-well LiFaBriC contract is now in full swing and we continue to expect this drilling campaign to be completed by year-end.  As a result we still anticipate that the full year results for 2015 will be an improvement on those for 2014. The global E&P sector has seen a material reduction in drilling campaigns over the last year as operators struggle to fund their field developments and all service sector companies have felt the impact of such reductions.  Our current focus areas of India and China have not been immune to this, for example we have seen a decrease in the drilling budgets for Chinese state-owned oil & gas companies.  However, it is also evident that more funds are now being committed for the 2016 drilling campaigns than in 2015 for a number of Chinese and Indian CBM operators, in India because of a government drive to push CBM and in China because of the sustained high gas prices and demand growth relative to the rest of the world. We remain bullish about the opportunities for Greka Drilling as the leading independent driller for unconventional gas in Asia.”

For further information on Greka Drilling, please refer to our website at www.grekadrilling.com or contact:

Rollo Crichton-Stuart  

Investor Relations

Bell Pottinger

+44 203 772 2589

Dr Azhic Basirov / David Jones/ Ben Jeynes

Nominated Adviser

Smith & Williamson

+44 20 7131 4000

James Felix 

Broker

Arden Partners

+44 20 76 14 5900

Mark Taylor

Broker

Panmure Gordon (UK) Limited

+44 20 7886 2500

  

CHAIRMAN’S STATEMENT

As anticipated, the first six months of 2015 saw a significant increase in the number of wells drilled, with an almost 50% rise compared to the same period in 2014.  This increase is in distinct contrast to the contraction that has been seen for almost every other drilling company in the oil & gas industry.  It reflects the number of opportunities that lie within the unconventional gas sector in Asia and the ability of Greka Drilling to capitalise on them.

We continued to drill in India for Essar Oil Limited, for whom we drilled an additional 9 vertical and directional wells. This drilling campaign has been suspended, but there remains a stated intent from Essar to drill a pilot LiFaBriC so as to evaluate the application of horizontal wells in their CBM reservoirs.  The Indian coal bed methane industry is still at an early stage with daily production of only 1 million m³/day, which is only 10% of the daily CBM production in China.  This could double over the next few years under plans announced in June 2015 by the Government of India to better exploit the country’s CBM reserves, including significant reserves held by state-owned ONGC.

To date there are no commercially producing horizontal wells in India.  Typically in emerging CBM resource areas the initial production wells are verticals but gradually horizontal wells such as LiFaBriC are deployed as they are more cost effective and have a lower environmental impact; we saw this in China and Australia and we expect to see the same in India.  Our rig fleet is the most efficient for CBM drilling in India and we are currently training our Indian crews in China in anticipation of increasing demand for horizontal wells in the region.  We are well-positioned for the upturn, when it materialises, but we are reducing our field costs in the interim.

The LiFaBriC drilling campaign in China for Green Dragon Gas commenced in June. The later than planned mobilisation exacerbated our losses in the first half of the year though we expect the 30 LiFaBriC well contract to be completed before year-end as budgeted.  We have been particularly pleased by the continuing innovation in our China operations in 2015.  For example, we are increasingly drilling multiple wells from the same drilling pad, in some cases re-drilling older wells to enhance production; and we recently intersected a LiFaBriC lateral into a directional production well at a 1,500 metre measured depth, which demonstrates our exceptional steering ability. In the first half of 2015 we continued to drill for third parties including the drilling of lateral wells for PetroChina and we anticipate new third party contracts later in the year.

While other drilling and E&P service companies are downsizing in response to the lower oil price, Greka Drilling is expanding its team: we see significant opportunities in the medium and long term within our niche of unconventional gas and look forward to capitalising upon them during this downturn in commodity prices.  

I look forward to updating our shareholders on the growth of Greka Drilling.

Randeep S. Grewal

Chairman

21 September, 2015