A Coal Bed Methane Exploration Leader February 2019 Disclaime - - PowerPoint PPT Presentation

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February 2019 A Coal Bed Methane Exploration Leader

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This presentation does not constitute an invitation to underwrite, subscribe for, or otherwise acquire or dispose of any shares of G3 Exploration Ltd. (the “Company”) in any jurisdiction. The Company’s shares have not been and will not be registered under the US Securities Act of 1933 (the “Securities Act”) and may not be offered or sold within the United States absent registration under the Securities Act or an exemption from registration. The information contained in this presentation is given in good faith but no representation or warranty is made in relation to the accuracy or completeness of the information, or any oral information provided in connection therewith, or the data it generates and no responsibility, obligation or liability is or will be accepted by the Company or its affiliates or advisors or by any of their respective officers, employees or agents in relation to it. This presentation contains certain forward looking statements with respect to the financial condition, results, operations and businesses of the Company. The statements and forecasts involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward looking statements and forecasts. Past performance is no guide to future performance and persons needing advice should consult an independent financial advisor. This presentation and the information contained in it are confidential and should not be distributed, published or reproduced, in whole or in part, or disclosed by recipients directly or indirectly to any other person.

Disclaime aimer

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Overview Operational highlights 2019 outlook Appendix

Table of contents

• 3-

STRICTLY CONFIDENTIAL & PROPRIETARY SUBJECT TO CONFIDENTIALITY AGREEMENTS

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• Two producing assets selling gas at high margins, including government subsidies which highlights

their support for increased production

• Large acreage, with substantial gas reserves, located inland and well positioned to serve the main

manufacturing and population centres of the world’s largest energy consumer

• Attractive PSCs, protected by Holland-PRC bilateral treaty, providing gas, mainly to large SOEs on

long-term GSAs, at prices insulated from international markets

High margin gas production in China Well established

• perations

positioned for growth Strengthened corporate and

• perational

management

• Drilling and completion techniques tailored to deal with the brittle coal and faulted geology of China -

LiFaBriC

• Gas production to increase significantly with further development drilling and by implementing well-

completion upgrades and production optimisation of existing well stock

• Sales ramp up supported by enhanced well-to-market infrastructure and increased processing

capacity

• Highly experienced operational team with strong industry track record
• Strong corporate management team with solid energy sector expertise
• High quality shareholder base including Aberdeen, Clermont, Fidelity, GDGH, GIC and Platinum

Asset Management

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Summary

STRICTLY CONFIDENTIAL & PROPRIETARY SUBJECT TO CONFIDENTIALITY AGREEMENTS

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Overview – 2018 Operational Achievements

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STRICTLY CONFIDENTIAL & PROPRIETARY SUBJECT TO CONFIDENTIALITY AGREEMENTS Source: Company

• 1. IPF: Integrated Production Facility (Gas Mother Stations in GSS and GCZ block)

Total exit gas sales of 6.38 Bcf from producing assets GSS & GCZ drilled wells 1442, online wells 1117, infrastructure connected wells 1039 GSS infrastructure build on schedule; 243 new wells online, 459 new wells connected to infrastructure 80% CNOOC drilled wells online, 93% CNOOC online wells connected to infrastructure 4 IPF1 operational ; 1 in test run, 3 under construction 61 wellhead compressors; GSS 51 units, GCZ 10 units 35 upstream production workovers performed on operated wells GCZ ODP approved; implementation Q1 2019

Exploration – G3E Production – GDG

Guizhou block exploration program ongoing; 6 wells online, Chinese reserve report successfully submitted Jiangxi and Anhui exploration blocks development potential re-assessed with high prospective acreage identified Exploration activities continued on non-operated areas; 12 wells producing in Shizhuang North, 400sqkm of seismic and an additional 14 wells drilled in Qinyuan block

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Assets in Commercial Chinese CBM Basins

Blocks’ s’ su summary Geographi hic l locat ation GSS

• Grek

eka I Inter erest est: 60%1

• Part

rtner: : CNOOC

• Opera

rator: r: Greka

• Total:

l: W Wells lls 1,328 wells2 GCZ GCZ

• Grek

eka I Inter erest est: 47%

• Part

rtner: : PetroChina

• Opera

rator: r: PetroChina

• Total W

l Wells lls: 114 wells2 GSN

• Grek

eka I Inter erest est: 50%

• Part

rtner: : CNOOC

• Opera

rator: r: CNOOC

• Total W

l Wells lls: 192 wells2 GQY (B)

• Greka Interest: 60%
• Partner: CNOOC
• Operator: Greka
• Total Wells: 37 wells2

GF GFC

• Grek

eka I Inter erest est: 49%

• Part

rtner: : CNOOC

• Opera

rator: r: Greka

• Total W

l Wells lls: 31 wells2 GPX PX

• Grek

eka I Inter erest est: 60%

• Part

rtner: : CNOOC

• Opera

rator: r: Greka

• Total W

l Wells lls: 12 wells2 GGZ GZ

• Grek

eka I Inter erest est: 60%

• Part

rtner: : PetroChina

• Opera

rator: r: Greka

• Total W

l Wells lls: 45wells2

Capital of Province Group Coalbed Methane Blocks P D EA Production Development/Pilot Stage Exploration and Appraisal Xinjiang Tibet Qinghai Gansu Ningxia Sichuan Yunnan Guangxi Guangdong Hong Kong Fujian Zhejiang Shanghai Jiangsu Shandong Tianjin Beijing Liaoning Inner Mongolia Jilin Heilongjiang Hainan Chongqing Hubei Shaanxi Hunan Henan Guizhou Anhui Shanxi Jiangxi Baotian- Qingshan Block (GGZ) 947km2 Qinyuan Block (GQY A&B) 3,665km2 Shizhuang North Block (GSN) 375km2 Shizhuang South Block (GSS) 388km2 Chengzhuang Block (GCZ) 67km2 Panxie East Block (GPX) 584km2 Fengcheng Block (GFC) 1,541km2

P P EA EA D

GQY ( Y (A)

• Grek

eka I Inter erest est: 10%

• Part

rtner: : CNOOC

• Opera

rator: r: CNOOC

• Total W

l Wells lls: 32 wells2

Notes: 1. Can be increased to 70% on option exercise 2. Includes non-operated wells Gr Green Dr Dragon Ga Gas G3 E Explo loration

STRICTLY CONFIDENTIAL & PROPRIETARY SUBJECT TO CONFIDENTIALITY AGREEMENTS

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D EA

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GFC Net: 25 PV10: US$326m GSN Net: 672 PV10: US$3,221m GFC Net: 229 PV10: US$3,015m

GQY Net 2C: 32 GQY Best Est: 736 GFC Best Est: 209 GPX Best Est: 15 GGZ Best Est: 368

Net: 5Bcf PV10: US$29m Capex: USD3m Net: 71 Bcf PV10: US$816m Capex: USD86m Net: 1,002 Bcf PV10: US$7,648m Capex: USD498m Net 2C: 668 Bcf Best: 1,328 Bcf

GSN Net: 17 PV10: US$85m GGZ Net: 29 PV10: US$4204m GGZ Net: 101 PV10: US$1,412m

GGZ Net 2C: 636

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Source: Company estimates as of yearend 2018. Note: Net gas reserves and NPV estimates are based on company's participating interest in the blocks. Note: 5% escalation applied per year to future operating costs, capital costs and sales prices.

G3E – Six Exploration blocks - 2P US$816 million

GGZ Net: 1 PV10: US$6m

Contingent Prospective 1P 2P 3P

GSN Net: 4.6 PV10: US$23m

G3E net 2P reserves of 71 bcf with PV10 value of US$816 million

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GDG – Two Production blocks - 2P US$1.6 billion

3P

GSS Net: 303 PV10: US$1,495m

GSS Net: 1,023 PV10: US$4,686m

GSS Net: 114 PV10: US$581m

GCZ Net: 60 Bcf PV10: US$255m

GCZ Net: 15 Bcf PV10: US$72m

GCZ Net: 35 Bcf PV10: US$157m

1P Net: 129 Bcf PV10: US$653m Capex: USD49m Net: 338 Bcf PV10: US$1,653m Capex: USD141m Net: 1,083 Bcf PV10: US$4,942m Capex: USD630m 2P

GDG n net 2 2P re reserves of

• f 338

38 bcf w f with P h PV10 v valu lue of

• f US$1

$1.6 6 billio ion

Source: Company estimates as of yearend 2018. Average gas price US$8.98/Mcf for producing blocks. USD/RMB FX Ratio of 6.8. Note: Net gas reserves and NPV estimates are based on company's participating interest in the blocks. Note: 5% escalation applied per year to future operating costs, capital costs and sales prices.

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Overview Operational highlights 2019 outlook Appendix

Table of contents

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STRICTLY CONFIDENTIAL & PROPRIETARY SUBJECT TO CONFIDENTIALITY AGREEMENTS

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Guizhou Block Moving Towards First Gas

• 10-

Source: Company estimates as of 31st December 2018

STRICTLY CONFIDENTIAL & PROPRIETARY SUBJECT TO CONFIDENTIALITY AGREEMENTS 3,264 1,130 1,141 1,179 762 775 884 1,066 840 380 360 552 290 300 380 400 100 200 300 400 500 600 700 800 900

• 500

1,000 1,500 2,000 2,500 3,000 3,500 BQ 19 BQ18E BQ16 D1 BQ1D1 BQ2 BQ17 BQ16E BQ16 D1 Peak production ( m3/day) Casing pressure (Kpa)

De-risked 7 major coal seams 8 wells realized commercial gas rates 3P reserves $ 1,412 million First Sales in 2019

Location Guizhou Province PSC Area 947 km2 G3E Working Interest 60% (operator) Chinese Partner PetroChina PSC Expiry 2035 GIIP 6,041 Bcf Wells Drilled 45 + 585 (slim holes) Major Coal Seams Seven major coal seams Wells Produced 15 wells 1P (net volume/PV10) 1 bcf / $6 million 2P (net volume/PV10) 29 bcf / $404 million 3P (net volume/PV10) 101 bcf / $1,412 million Chinese Reserves Report Submitted to PCCBM

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Source: Company estimates as of 31st December 2018

STRICTLY CONFIDENTIAL & PROPRIETARY SUBJECT TO CONFIDENTIALITY AGREEMENTS

GDG – Producing Assets Located in Prolific Qinshui Basin

GS GSS B Block GCZ GCZ B Block Location Shanxi Province Shanxi Province PSC Area 388 km2 67 km2 G3E Working Interest 60% (operator)* 47% Chinese Partner CNOOC PetroChina GIIP 3,155 Bcf 297 Bcf Equity Wells 1,328 114 Major Coal Seams Two major coal seams Two major coal seams 1P (net volume/PV10) 114 bcf / $581 million 15 bcf / $72 million 2P (net volume/PV10) 303 bcf / $1,495 million 35 bcf / $157 million 3P (net volume/PV10) 1,023 bcf / $4,686 million 60 bcf / $255 million

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GDG – 1442 Wells Drilled, 93% of CNOOC Online Wells Connected to Sales Channels

STRICTLY CONFIDENTIAL & PROPRIETARY SUBJECT TO CONFIDENTIALITY AGREEMENTS

GSS Greka

• Gas sales increment from existing

wells

• Application of continuous

compression at wellheads

• 51 compressors available, 47

installed to the sales gathering system

• One mother station operational

GSS CNOOC

• Infrastructure construction and

pipeline connections ahead of schedule

• Two mother stations operational
• 80% of drilled wells are online
• 93% of online wells are connected to

sales channels CNPC

• 10 wellhead compressors running to

reduce wellhead pressures

• Targeting coal seam 15 to increase

sales volumes from existing wells

• ODP implementation in progress

Total Wells CNOOC Operated

1,128 230 838 354 60 18 70 112 106 200 898 130

Pending completion Pending completion Online Online Infrastructure Connected Sales Wells Sales Wells

5 25 89 84 114 89

Pending completion Online Sales Wells

1,442

GDG Operated CNPC Operated Infrastructure Connected Infrastructure Connected

Source: Company data as of 31st December 2018

Dewatering and will be connected to sales infrastructure Dewatering and will be connected to sales infrastructure Dewatering and will be connected to sales infrastructure

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Monthly Sales Volumes

Source: Company data as of 31st December 2018

143 162 156 175 161 162 160 171 174 164 169 145 125 126 139 152 152 157 153 156 149 147 149 140

105 105 105 105 105 105 105 105 105 105 105 105 106 106 106 106 106 106 106 106 106 106 106 106

20 40 60 80 100 120 20 40 60 80 100 120 140 160 180 200 220

Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18

GDG Sales (Mmcf) GDG Gas Selling Wells 65 60 68 59 73 81 83 90 90 95 87 85 95 91 101 109 126 135 148 154 154 171 177 184

324 324 324 324 324 324 324 330 330 330 330 330 330 330 330 330 330 330 354 354 354 354 354 354

100 150 200 250 300 350 20 40 60 80 100 120 140 160 180 200

Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18

CNOOC Sales (Mmcf) CNOOC Gas Selling Wells 249 229 251 244 250 239 246 239 224 231 219 218 211 184 206 195 203 190 190 186 181 180 172 172

85 85 85 85 85 85 85 85 85 85 85 85 85 85 85 85 85 85 85 85 85 84 84 84

50 55 60 65 70 75 80 85 20 40 60 80 100 120 140 160 180 200 220 240 260 280

Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18

CNPC Sales (Mmcf) CNPC Gas Selling Wells 457 451 474 478 485 482 489 499 489 490 475 448 431 401 447 457 482 482 491 496 484 498 498 496

514 514 514 514 514 514 514 520 520 520 520 520 521 521 521 521 521 521 545 545 545 544 544 544

200 250 300 350 400 450 500 550 20 40 60 80 100 120 140 160 180 200 220 240 260 280 300 320 340 360 380 400 420 440 460 480 500 520 540 560 580 600 620 640 660 680 700

Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18

Consolidated Sales (Mmcf) Gas Selling Wells

GDG – Gas Sales Track Record

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GDG – GCZ ODP Approved by NDRC

Source: Company

Block area; 67 km², ODP covers; 33 km² GIIP; 297 Bcf, EUR; 176 Bcf 114 wells drilled, 84 online selling gas wells, 10 compressors installed Drill additional 147 production wells in 2019/2020 Total future development cost; c. US$55 million, CNPC and Company to invest according to participating interest 12 well sites civil construction work completed to start the future drilling operations GCZ is a commercial gas producing block which has been profitable since September 2015 and continues to be so Block is jointly operated by CNPC and the Company through a Joint Management Team based in Jincheng, Shanxi Well sites civil work Well sites civil work Production wells workover HSE inspection Production site HSE inspection

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Focus on infrastructure built and connections

• f existing well stock to sales channels

Source: Company data as of 31st December 2018 IPF: 3 online, 1 test run, 3 in construction

Online IPF

• Three mother stations (IPF)
• perational, one in test run
• 112 Greka wells connected to

sales channels

• 838 CNOOC wells connected to

sales channels

• Total of seven IPFs to be
• perational by yearend 2019/2020
• Infrastructure construction

progress is monitored through quarterly arranged JMC

Wells need infrastructure connections Test run IPF In construction IPF

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GSS GDG Well GSS Greka IPF GSS Greka Compressor

GSS Block – Field Operations

GSS GDG Wellhead

Source: Company

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GSS IPF - 2 GSS IPF - 3 GSS IPF - 4 GCZ IPF - 1

GDG – Infrastructure Build: Last Milestone

Source: Company

Operational Operational Operational Operational

SLIDE 18

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GSS IPF - 8

Satellite image Land lease acquired, civil work in progress

GSS IPF - 6

Satellite image Land lease acquired, civil work in progress

GSS IPF - 7

Satellite image Land lease in progress

GSS IPF - 5

IPF completed, under test run

GDG – Infrastructure Built: Last Milestone

Source: Company

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Overview Operational highlights 2019 outlook Appendix

Table of contents

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STRICTLY CONFIDENTIAL & PROPRIETARY SUBJECT TO CONFIDENTIALITY AGREEMENTS

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2019 Outlook

• 20-

STRICTLY CONFIDENTIAL & PROPRIETARY SUBJECT TO CONFIDENTIALITY AGREEMENTS

• Repay two bonds from debt and equity issuance in Green Dragon Gas
• Conclude evolution to exploration and development business
• Finalise Dividend in Specie for producing assets
• First gas in Guizhou block
• Expand into an additional geography
• Infrastructure focus to monetize invested capital
• Implement GCZ ODP
• Increase gas sales
• Conclude infill drilling program in current developed area
• Attain approval for GSS Zaoyuan ODP

Exploration – G3E Production – GDG

Source: Company

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Dividend in Specie

• 21-

STRICTLY CONFIDENTIAL & PROPRIETARY SUBJECT TO CONFIDENTIALITY AGREEMENTS

• All G3E shareholders as of 29 March 2019 will receive dividend.
• The Dividend in Specie represents a 100% of the commercial producing assets.
• G3E will retain all its exploration and development assets.
• G3E shareholders to benefit from the monetization of producing assets.
• Dividend to be paid on or before 28 June 2019, either in the form of cash or shares in GDG.

Source: Company

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Overview Operational highlights 2019 outlook Appendix

Table of contents

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STRICTLY CONFIDENTIAL & PROPRIETARY SUBJECT TO CONFIDENTIALITY AGREEMENTS

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Fir irst L Lic icense First G t Gas Gas production commences at GSS Greka commences Chinese operations First PSC signed on the GFC block Ac Acqu quisit ition o

• f four

addi dditional licenses Commenced operations

• n the ground

Signing of four other licenses including Shizhuang South Pu Public F c Floating o

• n AIM

The Company listed on the Alternative Investment Market in London on August 17, 2006. Technolo logical l Breakthrough MWD (Measurement While Drilling) and LWD (Logging While Drilling) facilitate LiFaBriC development Signed an agreement with Conoco Philips LiF iFaBriC iC Lined Faulted Brittle Coal Improved drainage factor Greka D Dril illin ing Div ivid idend 8th March demerger of Greka Drilling Addition of 2 CNG stations in Pindingshan Upgrade of Infrastructure Production Facilities Land ndmark Governm nment nt R Ruling ng Chinese Government rules in favor of Green Dragon on validity of PSC Greka E Engine neering ng and Techno nology D Dividend nd 30th Sept demerger of Greka Engineering Zhengzhou Greka Gas Co Ltd entered into a 20-year agreement with PetroChina Huabei Oilfield Bin indin ing Ag Agreements w wit ith CN CNOOC a C and d PetroCh China Landmark agreements lead to shareholder participation in 1,791 wells FTSE 250 250 Found undation f for S Success Strengthening cooperation with Chinese Partners GCZ ODP Approved Continuous compression at GSS along with CNOOC infrastructure built

1997- 1999 2000 - 2002 2008 2009 2003 2006 2012 2013 2014 2015 2018

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History and Corporate Milestones

STRICTLY CONFIDENTIAL & PROPRIETARY SUBJECT TO CONFIDENTIALITY AGREEMENTS

Source: Company

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Government Objectives

• Increase CBM consumption to 10% of energy mix by 2020
• Increase investment in CBM development, adding 420 BCM by 2020 to national proved

reserves

• Increase production to 24 BCM in 2020, an increase of 33% from 2015
• Decrease colliery gas incidents by 15% by 2020

Benefits to G3 Exploration

• Blocks named priority CBM Blocks/“The Key Projects”
• Increased investment certainty - support actions with special funds for CBM projects
• Continued support in increased subsidy expected
• Relaxed VAT rules on imported CBM equipments

Source: NEA

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Impact of 13th Five Year Plan on G3 Exploration

STRICTLY CONFIDENTIAL & PROPRIETARY SUBJECT TO CONFIDENTIALITY AGREEMENTS

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• Conventional gas prices have historically been tightly regulated by the

NDRC, which set a base price for different onshore fields and pipelines based on types of end users supplied − In recent years, the NDRC has undertaken a number of reforms to raise the legacy base price of natural gas in order to encourage its greater production and general adaptation

• Unconventional gas prices (including CBM) are unregulated2 and are

driven by demand and supply trends in the respective regional markets with reference to prevailing natural gas prices − Each province sets prices for natural gas within its territory based on the NDRC guidance − The retail CNG pricing follows the city-gate pricing levels set by the Central Government

Supportive Pricing and Regulatory Environment

• 25-

China City Gate Gas Prices1 ($/Mcf) China Gas Prices and Market Structure

10.6 8.1 9.8 10.1 8.8 9.3 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Shanghai Xinjiang Inner Mongolia Jilin Beijing Sichuan Hubei GCZ GSS

The process of market and series of 2010-15 price reforms, combined with increasing demand for gas, have substantially increased average realised gas prices received by gas producers in China post 2015

GSS and GCZ Blocks Contract Pricing (2018)

RMB/m3 $/MCF Area Contract Price Subsidy Received Price Contract Price Subsidy Received Price GSS 1.70 0.40 2.10 7.52 1.77 9.30 GCZ 1.81 0.40 2.21 8.01 1.77 9.78

• GDG’s prices are under long-term GSAs with Greka Integrated Production
• Ltd. and CNPC for GSS and GCZ blocks, respectively, and include

subsidies issued by the MOFC3 and the Shanxi provincial government

Sources: 1. IHS Energy, China's Energy Statistical Yearbooks, updated August 2016. 2. Except when combined with conventional domestic or imported pipeline gas after pipeline transport. 3. Ministry of Commerce, People’s Republic of China.

Inclusive of VAT

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Strong China Gas Fundamentals

• 26-

Gas Share of China’s Total Primary Energy Mix The Energy Strategy Targets

Growing energy demand and heightened interest for clean energy sources are driving the growth in China’s natural gas industry

Gas Demand Factors Gas Supply Factors

• Gas share of China’s 2018 total energy mix has grown consistently since 2005

(from 2.4% to 8.0%)1 Urbanisation Growth in manufacturing Industries Coal-to-Gas switch Gas-to-Power switch Electricity for electric vehicles Steam assisted gravity drainage LNG & CNG powered vehicles Small loads LNG market development Gas market liberalisation

• The Energy Strategy will encourage the removal and/or reduction of non-market
• bstacles to the growth of Gas’ share in China’s energy mix, and consequently

will further enhance demand for Gas to 2030

8% 0% 15% 0%

2018 2030

Gas share of the primary energy mix

• Lack of both domestic supplies and the infrastructure to move bulk supplies of

gas cheaply into and within China.

• China experienced acute gas shortage in the winter of 2018 when demand for

domestic and household gas led to supplies being withheld from industrial users Conventional production Unconventional production (CBM, CMM, Coal-to-Gas) Net pipeline imports LNG import

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Sources: 1. China’s National Bureau of Statistics.

2x