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2019 Net Profit Surges 71.30% to RMB707 million

Release date: 27-Mar-2020

(Hong Kong, March 27, 2020) – AAG Energy Holdings Limited (“AAG Energy” or the “Company”; HKEX stock code: 2686), a leading international energy company in the field of Coal Bed Methane (CBM) exploration and production in China, together with its subsidiaries, collectively the (“Group”), has announced its annual results, with net profit increasing by 71.30% to RMB707 million, for the year ended 31 December, 2019 (“the review year”). 
 
In 2019, revenue and other income (including government subsidy and VAT refund) increased by 19.89% to RMB1.508 billion, up by 19.89% year-on-year (“YoY”), mainly generating from the increases in both the realized average selling price and the net sales volume as a result of the increased production in Panzhuang concession. EBITDA for the year increased by 45.52% to RMB1.175 billion, while net profit increased significantly by 71.30% to RMB707 million. Earnings per share increased by 75% to RMB0.21. In view of the strong operational and financial performance, the Board recommends a final full year dividends of RMB0.1061 per share (equivalent to approximately HKD0.1163 per share) for the year ended 31 December 2019  
 
In the review year, the Group’s gross production increased by 16.07% to 931 million cubic meters (“MMCM”) (32.8 billion cubic feet (“bcf”)). Panzhuang concession’s gross production of CBM increased by 21.78% YoY to 859 MMCM (30.3 bcf) and Mabi concession’s gross production of CBM amounted to 72 MMCM (2.5 bcf)). As of 2019, the average production reached 2.55 MMCM per day, up 15.91% YoY. 
 
The realized average selling price per cubic meter in respect of Panzhuang concession grew by 1.20% YoY to RMB1.69, and the realized average selling price per cubic meter in respect of Mabi concession maintained at RMB1.39 YoY. 
 
AAG Energy has achieved considerable progress towards its key operational objectives during the review year: 
 
Panzhuang concession – Sustained and stable growth in production capacity and amount of new drilled wells reached historical high

  • The gross production reached 859 MMCM (30.3 bcf), which was 6.11% higher than the original target, up 21.78% YoY
  • The average daily gas production was 2.35 MMCM, up 21.76% YoY
  • By the end of 2019, there were a total of 305 wells in production, including 81 pad drilling well (“PDW”), 49 multi-lateral drilling wells (“MLD”) and 175 single lateral horizontal well (“SLH”) 
  • Amount of new drilled wells reached historical high at a total of 99 wells (of which 71 were SLHs and 28 were PDWs), an increase of 36 wells YoY 
  • Average drilling time for each SLH was just 15.40 days, representing an improvement of 6.84% in the drilling efficiency compared to that of the 2018

 

Mabi concession – Stable production capacity performance to build foundation for commercial production 

  • The gross production of Mabi concession reached 72 MMCM (2.5 bcf), which was 0.90% higher than the original target
  • The average daily gas production was 0.197 MMCM
  • Have drilled a total of 27 wells (of which 5 were SLHs and 22 were PDWs)
  • By the end of 2019, there were a total of 183 wells in production, including 172 PDWs, 1 MLD and 10 SLHs
  • Mabi project’s resources evaluation has improved through the principle of favorable region selection, coupled with 3D seismic interpretation and application of other new technologies, the implementation of the overall development plan of Mabi’s southern area has been optimized. Following the formation of new development mode for sweet spots prioritized and combination of multiple well types, the feasibility of Mabi concession has been enhanced through precise determination and strengthened management and control. Meanwhile, the focus of Mabi concession was exploiting of potential from existing wells. Through various small and micro innovative measures, a significant reduction in comprehensive decline rate of well reserve has been achieved with improved operating reliability and stronger investment returns. 

 
Facing the outbreak of novel coronavirus (COVID-19) at the beginning of the year, the Group had promptly adopted scientifically effective preventable protection measures, thus no epidemic or suspected case were found and production work remained normal. Upon the end of the epidemic, the Group will adjust working plan by targeting certain aspects and accelerate communication with surroundings important customer to achieve “efficiency stimulation” by “sales stimulation” and “production stimulation”. Through the strategies of “three kinds of stimulation” and core measures deployment, we are confident in minimize potential losses from the outbreak. 
 
Furthermore, according to the Supplementary Notice on the Interim Administrative Measures for Special Funds for the Development of Renewable Energy (Cai Jian [2019] No. 298) announced in June last year, from 2019, compensation of excess coefficient will be granted for the increased volume produced during the heating season based on the principle of “compensating for the increased volume” for the realization of “compensating for the increased volume in winter”. Given the Group’s momentum forecast for CBM utilization and winter production in 2020, such policies will provide positive impacts to the Group. 
 
Meanwhile, 2020 is the last year for China’s “13th Five-Year” plan. In 2019, China’s natural gas import volume ranked the first of the globe with domestic consumption over total energy consumption accounted for less than 10% of the expected target of the “13th Five-Year” plan. Therefore, more efforts were made on domestic natural gas exploration while encouraging increased reserve and production. To safeguard the safety of China’s energy, etc. is still the main direction for energy reform policy in the future. On the other hand, the Group expected that the domestic natural gas market will occur a periodical and partial over-supply phenomenon in 2020, coupled with the price drop of international oil and gas, the price of domestic natural gas will drop accordingly. Therefore, 2020 will be a year full of opportunities and challenges for AAG Energy. 
 
The Group will continue its investments as follows:

Panzhuang concession – Continue to explore the concession potential to drive new heights in production 
The year plan includes the planned completion of pre-drilling works of 19 well sites, drilling works of 88 new wells, the purchase of pumping equipment and production of new wells and the execution of related ancillary surface facilities engineering. With the scheduled project implementation and government approval associated, the anticipated gross production of Panzhuang concession is 945 MMCM (33.4 bcf). Due to the frequent coal mining activities in the surrounding coal mines in Panzhuang concession, the Group will continue to strengthen communication and cooperation with surrounding coal mines, improve mutual guarantees agreements and continue to seek new development and cooperation channels. 
 
Mabi concession – Start the first stage of commercial development

The Group will focus on the ODP approved area, which locates in the southern part of Mabi, and will select applicable types of wells and technologies with reference to the underground geological features to prioritize well deployment in the Sweet Zone and optimize the project implementation plan to secure a guaranteed investment return rate. The Group planned to implement 63 drilling wells in southern part of Mabi and 2 drilling wells in northern part of Mabi, focus on the development and construction in the No. 2 gas gathering station region. The Group estimated that the gross production of Mabi concession is expected to be 72 MMCM (2.5 bcf). 

 
Looking ahead, AAG Energy is highly confident in focusing on uncertainty and coping with it, as well as continuously committing to cost reduction and efficiency enhancement to deliver promising operating results. Meanwhile, we will continue to enhance technological innovation, thereby laying a solid foundation for the stable production and development of Panzhuang concession and the large–scale development for Mabi concession. Besides, we will base on our groundbreaking technological advantages to identify new development opportunities mainly in China’s market as planned to expand our business, so as to provide more clients and relevant communities with clean energy and create higher return for our shareholders. 
 

  • Press Contact

    Jiayi Wu, Joint Company Secretary's Assistant, +86 1592-859-9449, jiayi.wu@aagenergy.com