News

July 06, 2009

Green Dragon Gas Makes Tangible Progress In Setting Up An Integrated Coal Bed Methane Company In China

Green Dragon Gas’s broker, Evolution Securities, in its latest note on the company says the FY08 results, which have been recently released, should be seen as more about tangible progress in the establishment of a vertically integrated CBM (coal bed methane) supplier and marketer in China and less about the P & L Account. Ordinarily, it would seem cavalier to say don’t worry about the money now it is all going to be all right in the end.

But Green Dragon is in effect a start up company with very large ambitions. Chairman and CEO Randeep Grewal has said he wants the company to be the dominant player in CBM in China and it would take US$1 billion fully to develop the substantial asset base that has been assembled, over a twenty year period. So, at this early stage the fact that the company made a loss of US$27 million in 2008 does not really tell us very much. The key indicator was that GDG reported revenue of US$24.6 million for 2008 compared with zero in 2007. Building an integrated CBM group anywhere is a huge task. The fact is that this is China, where regulation and bureaucracy can make life difficult, means that for Green Dragon to have made measurable progress towards its goal of an integrated company is reassuring.

The company has five core divisions, technical services, upstream, midstream, downstream and CNG manufacturing. In 2008 it raised US$38 million and made a spate of acquisitions. These included PACE (Pacific Asia China Energy), (drilling and upstream), Giant power (gas distribution, midstream), Zhengzhou Nanhai Gas, Zhengzhou Clean Technology and Zhengzhou Clean Petro-Equipment (CNG stations and equipment, downstream.) These purchases were added to other acquisitions already made in 2007 and...