INTERIM REPORT 2014/media/Files/G/Green-Dragon-Gas/reports-presentations/2014-ir.pdfFengcheng GFC 49% GDG 2 26 Panxie East GPX 60% GDG – 12 14 coal holes Baotian Qingshan GGZ 60%

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


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


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


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


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


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


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


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.


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


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


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


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


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.


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


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.


22

NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS12 CONVERTIBLE NOTES

As at Asat


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.


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.


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


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

Documents

INTERIM REPORT 2014/media/Files/G/Green-Dragon-Gas/reports-presentations/2014-ir.pdfFengcheng GFC 49% GDG 2 26 Panxie East GPX 60% GDG – 12 14 coal holes Baotian Qingshan GGZ 60%