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AAG EnergyInterim Net Profit Up 21.98% to RMB 381 million
Gross Production Up 31.94% to 617 MMCM
Gross Sales Volume Up 30.06% to 589 MMCM

Release date: 27-Aug-2021

(Hong Kong, 27 August 2021) – AAG Energy Holdings Limited (“AAG Energy” or the “Company”) (HKEX stock code: 2686), a leading international energy company in the field of Coalbed Methane (CBM) exploration and production in China, together with its subsidiaries, collectively the (“Group”), announced its interim results for the six months ended 30 June 2021 (the “Period”) with net profit increased by 21.98%year-on-year to RMB381 million. The increase was satisfactory. 

 

In the first half of 2021, efficient and effective prevention and control measures against the COVID-19 pandemic, coupled with active promotion of vaccination in the PRC, presented the Group with a favorable development environment for it to carry out stable and sustainable production and operation. The Chinese economy also rebounded strongly, resulting in an increase in gas demand of industries. The importance of natural gas as a clean energy source has again captured the spotlight with the country adopting the “dual-carbon” goal and at the increase in pressure to protect the environment. In addition, the relatively tight supply of coal boosted market demand for natural gas. The Group’s revenue and other income (including governmentsubsidy and VAT refund) for the Period increased by 33.15% to RMB839 million as compared with 1H2020. Net profit increased by 21.98% to RMB381 million. EBITDA increased by 33.22% to RMB683 million. Earnings per share increased by 21.74% to RMB0.112.

 

The gross production of the Group in the Period recorded a year-on-year (YoY) growth of 31.94% to 617 million cubic meters (“MMCM”) (21.8 billion cubic feet (“bcf”)), including the Panzhang concession’s gross production up 30.10% YoY to 569 MMCM (20.1 bcf) and the Mabi concession’s gross production up 58.23% YoY to 48 MMCM (being 1.7 bcf).

 

The gross sales volume of the Group in 1H2021 increased by 30.06% YoY to 589 MMCM (20.8 bcf), among which,the realized average selling price (“ASP”) of output of the Panzhuang concession increased by 11.56% YoY to RMB1.64per cubic meter (2020: RMB 1.47), and of the Mabi concession was RMB1.39 per cubic meter (2020: RMB 1.39), which remained the same against the same period last year.

 

In the Period, the Group made progress with certain key business objectives as follows:

 

Panzhuang concession—accelerated production growth and completed high quality drilling tasks

  • Gross production increased by 30.10% to 569 MMCM (20.1 bcf)
  • Daily average production increased by 30.82% to 3.1410 MMCM (110.92 million cubic feet (“mmcf”))
  • As at 30 June 2021, 452 wells were in production, including 49 multilateral drilling wells (“MLD”), 272 single lateral horizontal wells (“SLH”) and 131 pad drilling wells (“PDW”)
  • A total of 33 wells were drilled, of which 17 were SLHs and 16 were PDWs 
  • 15 PDWs were fractured and 28 wells was put into production
  • Average drilling time for each SLH shortened by 21% year-on-year to 15 days, and average drilling cost for each SLH was maintained at RMB2.54 million, representing a decrease of approximately 10%against the same period of last year
  • Average drilling time for each PDW was 5.82 days only, representing a 2% decrease as compared with 5.94 days in the same period of last year, and average drilling cost for each PDW was maintained at RMB0.80 million, representing a decrease of approximately 9% relative to the last corresponding period
  • Surface facilities included 6 gas gathering stations, 18 valve banks, 52 compressors, 67.1km of trunk lines and 123 km of well-to-well pipelines, with primary compression capacity reaching 4.30 MMCM per day and secondary compression capacity reaching 1.20 MMCM per day

 

Mabi Concession — Accelerated investment and development and strived to ramp up  CBM production

  • Gross production increased by 58.23% year-on-year to 48.34 MMCM (1.7 bcf)
  • Daily average production increased by 59.08% to 0.2671 MMCM (9.43 mmcf)
  • As at 30 June 2021, 270 wells were in production, including 1 MLD, 48 SLHs and 221 PDWs
  • A total of 88 wells were drilled, of which 15 were SLHs and 73 were PDWs, representing a year-on-year increase of 340% and exceeded the total of 65 wells drilled in 2020
  • 26 new wells were fractured

 

According to the Government Work Report made by Premier Li Keqiang and the Outline of the 14th Five-Year Plan (2021-2025) for National Economic and Social Development and Vision 2035 of the People’s Republic of China passed at the Fourth Session of the 13th National People’s Congress on 5 March 2021, China has mapped out plans for capping carbon emissions and achieving carbon neutrality. Moreover, according to the 14th Five-Year Plan for Development of China’s Natural Gas Industry Against the Background of Carbon Neutrality, which wascompiled by experts from the PetroChina Planning and Engineering Institute, the natural gas market in China will remain in the stable growth period in the next 15 years. Natural gas consumption will peak at 650.0 billion cubic meters in 2035. During the 14th Five-Year Plan period, the natural gas market will continue to grow, with market demand expected to reach 450.0 billion cubic meters in 2025. With a clear strategic plan guiding, the Group will step up investment in and development of its concessions, continuously expand market share. Itwillalso further strengthen the establishment of strong CBM transmission and distribution capabilities and industrial ecological chain, by continuing to seek promising investment targets beneficial to the Group’s business development. Currently, certain projects have entered into detailed negotiation stage. The Group will also promote value-based cooperation with partners, jointly enhance all parties’ability to respond to market changes, plus further optimize costs and maintain growth in production and net profit, thereby lay a solid foundation for high-quality and rapid development of the Group in the medium to long run.

 

On 3 June 2021, the Shanxi Provincial Government issued the Approval Procedures for Coal-Formed Gas Exploration Projects in Shanxi Province. According to the characteristics of coal-formed gas projects, the policy divides the coal-formed gas exploitation cycle into four stages, namely mining rights acquisition, exploration, development and production, and relinquishment. With the approval procedures optimized, approval time has been substantially shortened, helpful for speeding up CBM exploration and development by the Group.

 

As such, the Group will continue to make the following investment in 2021:

 

Panzhuang concession — Continuously explore concession potential

  • In the second half of 2021, the Panzhuang concession will continue to press forward with drilling work of the remaining 32 wells, purchase pumping equipment, kick off production of new wells and construct related ancillary surface facilities following the full-year work plan. The completed wells in the second half of 2021 will begin to gradually contribute to production in 2022.

 

Mabi concession — Expedite production capacity construction

  • In the second half of 2021, based on the consensus between the domestic and foreign parties of the Mabi concession to hasten exploitation of resources and enhanceinvestment efficiency, the Group will speed up development activities in the southern part of the Mabi concession. In addition to completing drilling work of 134 wells according to the annual plan, it will drill an additional 50 wells, taking the total to 184 for the year, so as to increase the number of wells fractured and in production. Furthermore, it will commence in good time integration of evaluation, development and production of projects in the northern area of the Mabi concession. It plans to complete drilling work of six new wells to achieve the workload required for evaluation. 
  • With high-quality investment management, the Group will press ahead with drilling work, fracturing and production that exceed expectation, evidencing its confidence in concession development results. Moreover, to realize sales simultaneously as new production volume is added at the Mabi concession, construction of valve bank stations and export pipelines in the concession will be completed in the second half year. It is expected that new wells drilled and fractured in 2021 will start to contribute to production in the first half of 2022.

 

Looking ahead,as a leading international energy company in the field of CBM exploration and production in China, AAG is confident of increasing output while lowering production costs continuously hence delivering more promising operating results. Meanwhile, the Group will continue to enhance innovation of technologies and management, thereby lay a solid foundation for stable production and the development of existing wells in the Panzhuang concession and for improving development technologies of the Mabi concession, equipping it for breakthroughs. AAG will also seek new development opportunities in China and other markets as planned to expand business, so as to provide more clients and relevant communities with clean energy and while creating higher returns for shareholders.

  • Press Contact

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