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AAG EnergyAchieves Production Milestone on CBM Commercialization and Technical Breakthrough for itsTwo China CBM Concessions

Release date: 05-Jul-2016

(Hong Kong, 5 July, 2016) – AAG Energy Holdings Limited(“AAG Energy” or the “Group;” stock code:2686), a leading independent coalbedmethane (CBM) producer in China,announced that the Group has achievednew production milestones at both the Panzhuang and Mabi CBM concessions. Additionally, significant progress has been made in the areas of individual well performance, capital expenditures, and commercial readiness.


CBM production from the Panzhuang concession has exceeded 1.5 million cubic meters per day, an industry-leading achievement. The Panzhuang concession is the most developed CBM concession in China, and remains the first Sino-foreign CBM cooperative project to have obtained Overall Development Plan (ODP) approval from the NDRC,andthe first to have reached designed production capacity for CBM commercialization.


Not only does AAG Energy increase production to cope with the current market environment, but  also resort to reducing capital expenditures. Compared with 2014 and 2015, the current capital expenditure per well at its Panzhuang concession has come down by 29.0% and 13.9% respectively. Drilling speed has also improved by 34% year-on-year.


At the Mabi CBM concession, the CBMgross gas flow rate from the pilot wells has exceeded 100,000m3 per day, an increase of 300% overthe January 2016 average daily production.This production milestone issupported by a significantly improved individual well performanceat Mabi. Recent examples of this include the pilot wells: MB02-C4-50S-02, MB02-A3-67S-01 and MB01-B2-68S-08. These wells show stabilized production rates of 4,359m3/day, 3,917m3/day and 3,614 m3/day respectively. Most importantly, these results have been achieved across the entire geographic area, demonstrating superior results in some areas that had previously underperformed AAG Energy’s expectations.


Same as Panzhuang concession, AAG Energy is also pleased that capital expenditures per well at Mabi CBM concession decreased by 16.3% and 13.9% when compared to 2014 and 2015 respectively.


The area of the Mabi concession is much larger than that of AAG Energy’s operated and commercialized Panzhuang concession, covering 898.2 km2 under the Mabi PSC in partnership with China National Petroleum Corporation (CNPC). To date, all Mabi ODP associated supporting approvals required by the National Development and Reform Commission (NDRC) as pre-conditions for the 1 billion m3 ODP I submission have been secured. AAG Energy and CNPC have been working together to preparethe submission of the application for Mabi ODP I to NDRC.


Mr. Carl Lakey, Co-CEO and COO of AAG Energy, commented,“I am very excited about these two encouraging news. This continued ramp-up in production should enable Panzhuang to soonexceed its ODP - designed annual commercial capacity of 500 million m3, marking yet another significant milestone as well as demonstratingits leading role in China’s CBM development. We havealso achieved remarkable progress at Mabi, a direct resultof our relentless testing and application of innovative CBM development technologies and operational best practicesfor the past several years. The performance improvement in the pilot areareinforces ourconfidence that we are on the right track to commercialize Mabi’s CBM resources. AAG Energy is committedto sustainable development in a socially responsible and environmentally sustainable way, providing superior returns on shareholders’ investment and simultaneously acting in the long-term interests of the environment and society. We will continue our efforts to secure and share even greater benefits wherever we operate.”