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AAG Energy Holdings Limited Announces Details of Proposed Listing on the Main Board of SEHK

Release date: 10-Jun-2015

Offers 761,400,000 Shares

At an Offer Price Range of HK$3.00 to HK$3.70 per Share


(Hong Kong, 10 Jun 2015) – AAG Energy Holdings Limited (‘AAG Energy’ or the ‘Group’), the leading independent CBM producer in China, announced the details of its proposed listing on the Main Board of The Stock Exchange of Hong Kong Limited (‘SEHK’).


Offering Details

AAG Energy and CDB-CITIC Capital Investment Co., Ltd. intend to offer a total of 761,400,000 shares, of which 90%, are for international offering.  The remaining 10% of the offer shares, or 76,140,000 shares, are for the Hong Kong public offering.  Assuming the offer price is fixed at HK$3.35 per share (being the mid-point of the indicative range of the offer price of HK$3.00 to HK$3.70 per share), the net proceeds from the Global Offering are expected to be approximately HK$2,143.7 million.


The Hong Kong Public Offer begins on 11 Jun 2015 (Thu) and will end at noon on 16 Jun 2015 (Tue).  The final offer price and allotment results are expected to be announced on 22 Jun 2015 (Mon).  Trading of AAG Energy’s shares is expected to commence on the Main Board of SEHK on 23 Jun (Tue) under the stock code 2686.  The shares will be traded in board lots of 1,000 shares.


China International Capital Corporation Hong Kong Securities Limited (‘CICC’) and HSBC Corporate Finance (Hong Kong) Limited are Joint Sponsors.  The Joint Global Coordinators are CICC and The Hongkong and Shanghai Banking Corporation Limited. The Joint Bookrunners are The Hongkong and Shanghai Banking Corporation Limited, CICC and Credit Suisse (Hong Kong) Limited.


Dr. Zou, Chairman and Executive Director of AAG Energy, said, ‘The proposed listing of AAG Energy on the Main Board of SEHK marks a major milestone in the Group’s development. Strategically located in the Qinshui Basin with the largest total net proved and probable CBM reserves in China, AAG Energy is the first, and so far the only, Sino-foreign CBM producer to have secured ODP approval, which we did for the Panzhuang concession. We have a premium resources base with substantial reserves and production, and with the PRC government’s strong support for the development of clean energy, we are optimistic about the Group’s prospects and plan to strengthen our position by leveraging our expertise in the field in addition to our valuable reserves.’


Investment Highlights

Premium portfolio of assets with significant low-risk development potential

AAG Energy’s key assets, the Panzhuang and Mabi concessions, are located in the southern Qinshui Basin in the Shanxi Province which contains the largest proved CBM geological reserves in China.  The Group’s market share in 2013 was the highest (4.5%) among the top foreign CBM players in China.   The Panzhuang concession is the most commercially advanced and is the first and only Sino-foreign CBM asset to have received overall development plan (ODP) approval to commence full-scale commercial development in China.   There are net (proven and probable) reserves of 164.9 bcf and 459.8 bcf at Panzhuang and Mabi concessions, respectively, with a combined total of 624.7 bcf.


Proven technology expertise and strong production ramp-up capability of CBM resources

Ability to employ suitable technologies and production techniques enable the Group to ramp-up production volumes more quickly and achieve lower costs than its competitors.  AAG Energy’s technical know-how and understanding of local geology will help identify commercial development potential, increase production levels at its current assets and better position the Group to compete for additional development opportunities.  The proven ability is illustrated by the increase in gross production volume from 3,585 mmcf in 2012 to 13,254 mmcf in 2014, with a CAGR of 92.3%.  At the same time, the Group’s overall unit net production costs decreased from RMB0.97 per cubic meter in 2012 to RMB0.45 in 2013 and further to RMB0.31 in 2014, which resulted in its net profit margin expansion from negative in 2012 to 28.6% in 2013 and 45.8% in 2014.


Access to established transport infrastructure and large industrial provinces

Both the Panzhuang and Mabi concessions are located close to established gas transportation infrastructure, including inter-provincial gas pipelines as well as LNG and CNG plants linked to AAG Energy’s central gas gathering station, providing AAG Energy convenient access to customers.  The infrastructure connects AAG Energy’s concessions with various regional pipelines such as the Tongyu pipeline which originates in the Panzhuang concession transporting CBM to the Henan Province, which can be further connected via additional pipelines to the Shandong Province.  Shandong and Henan are among the most heavily populated, the largest in GDP and are two of the top energy-consuming provinces in China.  Proximity to these industrial centers enables the Group to enjoy minimal cost to transmit gas to its customers and high netback wellhead prices.


Long-standing partnerships with state-owned CUCBM and PetroChina

CUCBM and PetroChina are the Chinese partners of the Panzhuang and Mabi concessions with whom we enjoy strong and long-term working relationships.   The relationship with the two state-owned enterprises is a key factor in the Group’s future growth and will be strengthened in current and future projects.


Strong management team

The Group’s experienced management team has been actively involved in the CBM/energy resources industry for over 20 years and is enhanced by a local workforce which has contributed to its strong track record of getting Government approvals on CBM projects and full commercial production for the Panzhuang concession.  Dr Zou, Chairman and Executive Director, has 31 years of experience in the Chinese and US energy resources industries and is one of the pioneers of China’s CBM industry.  Mr. Pierce Li, Co-CEO and President of the Group, has a strong track record in government and partner relations, marketing and sales management in CMB business.  And Mr. Carl Lakey, Co-CEO and COO, possesses significant technical and operational expertise in CMB development.


Future Strategies

AAG Energy will strengthen its market position in the CBM industry through the following strategies:


• Continue to grow production and cash flows from operations by developing extensive inventory of low-risk, repeatable, high-return drilling opportunities.

• Enhance the value of assets through efficient development, effective operations processes and production enhancements.

• Continue to migrate reserves through continued development and delineation of assets.

• Expand customer base and target industrial customers to optimize sales prices and secure large and stable orders.

• Further strengthen business collaboration with partners and relationships with regulatory agencies.

• Increase reserves for future growth by acquiring and developing assets and companies through acquisitions and securing additional production sharing contracts in China.


Use of Proceeds

Assuming the offer price is fixed at HK$3.35 per share (being the mid-point of the indicative range of the offer price of HK$3.00 to HK$3.70 per share), net proceeds are estimated to be HK$2,143.7 million and will be used as follows:


Approximate percentage

  • Exploration development of CBM in the Panzhuang and Mabi concessions


  • Expanding operations by acquiring interests in other CBM or other unconventional gas concessions or participating in cooperation or joint venture projects in relation to the exploration and development and processing of CBM or other unconventional gas concessions


  • Funding working capital and general corporate purposes




Financial Performance


For the year ended 31 December


(HK$ million)




YoY change






Operating profit/(loss)





Net profit/(loss)





Operating profit margin




+46.7% pt

Net profit margin




+17.2% pt


About AAG Energy Holdings Limited

AAG Energy is the leading independent CBM producer in China, focusing on the development and value optimization of unconventional gas resources to supply clean energy to the Chinese economy.  AAG Energy’s key assets, Panzhuang and Mabi concessions are located in the southern Qinshui Basin, which contains the largest amount of proved CBM geological reserves of any basin in China.  The Panzhuang concession is the most commercially advanced Sino-foreign CBM asset in China and is the first and only Sino-foreign CBM concession in China to have received overall development plan approval.  The Mabi concession received preliminary ODP approval in November 2013.  The proven ability to commercialize CBM, along with a highly regarded management team has attracted support from leading international and Chinese investors including Warburg Pincus, Baring Private Equity Asia, and Ping An.  For further details, please visit

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