TIDMGDL
RNS Number : 7422N
Greka Drilling Limited
07 September 2011
7 September 2011
Greka Drilling Limited
("Greka Drilling" or "the Company")
Interim Results - Revenues More than Double
Greka Drilling Limited (AIM: GDL), the largest independent and
specialised unconventional gas driller in China is pleased to
announce its results for the half year ended 30 June 2011.
CORPORATE HIGHLIGHTS
-- Successful 100% demerger from Green Dragon Gas
-- Admitted to the London Stock Exchange AIM market on 8 March
2011
-- 25 new drilling rigs ordered with an option for an additional
125
OPERATIONAL HIGHLIGHTS
-- Utilization rate increased to 86%
-- 26,435 meters drilled
-- Average revenue per rig: US$1.47m
-- Average days to drill a vertical well: 26 rig running
days
-- Average days to drill a horizontal well: 37 rig running
days
-- Average depth per vertical well: 830 meters
-- Average meterage per horizontal well: 2,861 meters
FINANCIAL HIGHLIGHTS
-- Revenue US$17.1m, a 121% increase over same period last
year
-- Net profit US$0.9m, compared with US$1.0m loss in same period
last year
-- EPS US$0.002, compared with loss per share of US$0.003 in
same period last year
-- Cash on hand of US$38.5m
-- Unused US$12.5m revolving working capital facility
OUTLOOK
-- 25 ordered rigs: 1st rig to arrive on site on schedule in
September with balance of 24 for delivery at rate of 4 rigs per
month on site, beginning November 2011. Committed rig fleet to be
32 with an additional 125 on option
-- Drilling meterage expected to accelerate substantially in
second half and beyond with the arrival of the new rig fleet
-- Rig crew numbers to be reduced as new rigs are more
automated
-- Skilled personnel to increase rapidly by year end
-- Continued evaluation of third party drilling contracts
-- Evaluating acquisitions to expand beyond China
Randeep Grewal, Chairman and Chief Executive of Greka Drilling,
commented:
"China's undisputed vast resource of unconventional gas is the
prize, the attainment of which has been thwarted by the lack of
specific technology and aptitude to commercially extract this
resource. In effect there are today and have been others
previously, many 'gold diggers without the right shovels'.
Converting the resource into reserves and hence revenue involved
the development of the required technology to drill in the very
complex, under-saturated, brittle, and heavily faulted coal beds
with the world's highest gas content.
It took materially longer than we initially anticipated to
unlock the unconventional gas resource potential, but unlock it we
did and now our committed fleet expansion from 7 to 32 rigs makes
us the largest dedicated unconventional gas driller within China
and we have an ambition to be the same across Asia through
continued expansion in the future."
For further information on Greka Drilling (including pictures of
the Company's first new rig), please refer to the Company's website
at www.grekadrilling.com or contact:
Stephen Hill, VP Corporate Communications
Greka Drilling +852 3170 0108
Dr Azhic Basirov / David Jones
Nomad
Smith & Williamson +44 20 7131 4000
Tim Redfern / Anu Tayal / Jamie
Richards
Broker
Evolution Securities +44 20 7071 4312
Paul Connolly / John Dwyer /
Steve Baldwin
Broker
Macquarie Capital (Europe) +44 20 3037 2000
James Henderson / Nick Lambert
/
Rollo Crichton-Stuart
Investor relations
Pelham Bell Pottinger +44 20 7861 3232
Chairman's Statement
This is Greka Drilling's fourth year of operation and the first
year as a public Company following the demerger from Green Dragon
and listing on 8 March of this year. This demerger was designed to
set us apart as a specialised unconventional gas driller capable of
utilizing our drilling methodology for third parties as well as for
Green Dragon. The Company's demerger was additionally intended to
position the Company to capitalize on our first mover advantage and
the growing demand for domestic unconventional gas production in
China. All of which we believe we have successfully achieved in the
first half.
China's undisputed vast resource of unconventional gas is the
prize, the attainment of which has been thwarted by the lack of
specific technology and aptitude to commercially extract this
resource. In effect there are today and have been others
previously, many "gold diggers without the right shovels". Hence,
the value of this resource is far less reliable and predictable due
to a lack of effective ability to convert the resource into
reserves and hence revenue. Green Dragon acknowledged this void
during its "long march" through the development of the required
technology to drill in the very complex, under-saturated, brittle,
and heavily faulted coal beds with the world's highest gas content.
Our mission was to develop a scalable and repeatable methodology
that overcame the geological issues associated with the strata.
It took materially longer than we initially anticipated to
unlock the unconventional gas resource potential due to the
required technology development, but unlock it we did. Green Dragon
initially established its in-house drilling division out of
necessity and, once the technology was mature, its need was to
achieve gas production rather than to own the drilling services
business which accordingly was demerged.
Our committed fleet expansion from 7 to 32 rigs makes us the
largest dedicated unconventional gas driller within China and we
have an ambition to be the same across Asia through continued
expansion in the future.
Operationally, the organization is busy: drilling with all seven
rigs running 24/7; hiring an additional 400 staff to man the
upcoming new rig deliveries, with the first GD75-1 rig going into
service this month and the balance 24 over the coming months;
constructing a new staff complex in the field to accommodate up to
1,500 staff; commencing a stringent training program to ready the
new staff; and concurrently adding the management and
administration capacity required by this growth. It is indeed a
very busy time!
Concurrently, discussions with potential third party customers
have already begun. The majors in China are spending billions on
overseas acquisitions aimed primarily at bringing technologies that
will help in unlocking China's vast unconventional gas resource. As
Greka Drilling is able to provide this acutely needed technology
domestically now, it is unsurprising that unlike any other drilling
contractor, we are experiencing significant demand for our drilling
services from third parties. We expect that as our fleet expands
and capacity becomes available we will selectively offer our
services to this broader clientele. In line with the overall demand
for energy in China, the demand for our services far exceeds our
capacity and I expect this situation to continue for several years
to come.
I look forward to leading the Company in this exciting growth
with our tireless employees and management eager to achieve an ever
higher plateau of operational and financial success. The Company is
achieving this exciting growth profitably with a strong balance
sheet. A discipline we intend to maintain.
Randeep S. Grewal
Chairman
6 September 2011
Condensed Consolidated Statement of Comprehensive Income
Six months Six months Year ended
ended 30 ended 30 31 December
June 2011 June 2010 2010
Note US$'000 US$'000 US$'000
Unaudited Unaudited Audited
Revenue 3 17,076 7,722 24,317
Cost of sales 3 (14,099) (8,016) (19,430)
Gross profit 2,977 (294) 4,887
Foreign exchange
(losses)/gains 117 330 959
Other administrative expenses (2,027) (1,212) (2,829)
Total administrative expenses (1,910) (882) (1,870)
(Loss)/profit from operations 1,067 (1,176) 3,017
Finance income 4 5 2 3
Finance costs 5 (50) (126) (266)
(Loss)/profit before income
tax 1,022 (1,300) 2,754
Income tax 6 (617) 401 (732)
(Loss)/profit for the period
from continuing operations 405 (899) 2,022
Other comprehensive income:
Exchange differences on
translation of foreign 524 (122) 154
operations ______ _______ _______
Total comprehensive
(loss)/income for the period 929 (1,021) 2,176
(Loss)/profit for the period
attributable to:
--Owners of the company 736 (982) 1,826
--Non-controlling interests (331) 83 196
405 (899) 2,022
Total comprehensive
(loss)/income attributable
to:
--Owners of the company 1,269 (835) 2,136
--Non -controlling interests (340) (186) 40
929 (1,021) 2,176
Basic and diluted
(Loss)/profit per share
attributable to equity
holders of the parent (US$) 7 0.002 (0.003) (0.005)
Condensed Consolidated Statement of Financial Position
As at As at As at
30 June 30 June 31 December
2011 2010 2010
US$'000 US$'000 US$'000
Note Unaudited Unaudited Audited
Assets
Non-current assets
Property, plant and equipment 8 17,595 14,963 16,738
Intangible assets 181 147 181
Deferred tax asset 9 241 603 --
18,017 15,713 16,919
Current assets
Inventories 10 5,963 3,433 4,354
Trade and other receivables 11 20,238 770 25,534
Cash and cash equivalents 38,545 641 6,383
64,746 4,844 36,271
Total assets 82,763 20,557 53,190
Liabilities
Current liabilities
Trade and other payables 12 5,592 26,040 54,967
Loans and borrowings 13 1,514 1,178 1,480
Current tax liabilities 1,231 228 436
8,337 27,446 56,883
Total net assets 74,426 (6,889) (3,693)
Capital and reserves
Capital reserve 14 77,190 -- --
Merger reserve (1,533) (1,533) (1,533)
Reserve fund 102 -- 102
Foreign exchange reserve 1,052 182 519
Retained earnings 259 (3,009) (477)
Total equity attributable
to equity
holders of the parent 77,070 (4,360) (1,389)
Non-controlling interests (2,644) (2,529) (2,304)
74,426 (6,889) (3,693)
Condensed Consolidated Statement of Changes in Equity
Equity
attributable
Foreign to equity
Capital Merger Reserve exchange Retained holders of Minority
reserve reserve fund reserve earnings the Company interests Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
-------- -------- -------- --------- --------- ------------- ---------- --------
At 31 December
2009 (1,533) 209 (2,202) (3,526) (2,343) (5,869)
Total
comprehensive
income for
the period (27) (807) (834) (186) (1,020)
-------- -------- -------- --------- --------- ------------- ---------- --------
At 30 June
2010 (1,533) 182 (3,009) (4,360) (2,529) (6,889)
-------- -------- -------- --------- --------- ------------- ---------- --------
At 31 December
2009 (1,533) 209 (2,202) (3,526) (2,343) (5,869)
Total
comprehensive
income for
the period 102 310 1,725 2,137 39 2,176
At 31 December
2010 (1,533) 102 519 (477) (1,389) (2,304) (3,693)
Total
comprehensive
income for
the period 533 736 1,269 (340) 929
New issue of
ordinary
shares 50,000 50,000 50,000
Capital
contribution 27,190 27,190 27,190
-------- -------- -------- --------- --------- ------------- ---------- --------
At 30 June
2011
(unaudited) 77,190 (1,533) 102 1,052 259 77,070 (2,644) 74,426
======== ======== ======== ========= ========= ============= ========== ========
Condensed Consolidated Statement of Cash Flow
Six months Six months Year ended
ended 30 ended 30 31 December
June 2011 June 2010 2010
US$'000 US$'000 US$'000
Unaudited Unaudited Audited
Operating activities:
(Loss)/profit before income
tax 1,022 (1,300) 2,754
Adjustments for:
Depreciation 1,383 866 2,083
Amortization of other intangible
assets 11 8 18
Loss on disposal of property,
plant and
equipment -- -- 491
Finance income (5) (2) (3)
Finance costs 50 126 266
Cash flows before changes in
working capital 2,461 (302) 5,609
Increase in inventories (1,609) (1,286) (2,208)
Increase in other receivables 5,319 27,861 (18,632)
Increase in trade and other
payables (21,728) (27,976) 22,747
Cash generated from operations (15,557) (1,703) 7,516
Income tax payment (617) 401 (5)
Net cash from operating activities (16,174) _ (1,302) 7,511
Investing activities:
Payments for purchase of property,
plant and equipment (2,165) (72) (3,108)
Payments for intangible assets (12) -- (38)
Cash acquired with subsidiary
undertaking -- -- --
Interest received 5 2 3
Net cash used in investing activities (2,172) (70) (3,143)
Financing activities
Proceeds from the issue of share
capital 50,000 -- --
Finance costs paid (50) (126) (266)
Proceeds of short term loan -- -- 1,480
Repayment of short term loan -- -- (1,171)
Net cash (used in)/from financing
activities 49,950 (126) 43
Net (decrease)/increase in cash
and cash
equivalents 31,604 (1,498) 4,411
Cash and cash equivalents at
the beginning
of the period 6,383 2,261 2,261
37,987 763 6,672
Effect of foreign exchange rate
changes 558 (122) (289)
Cash and cash equivalents at
end of period 38,545 641 6,383
Notes to Condensed Interim Financial Statements
1. GENERAL INFORMATION
The consolidated unaudited interim financial information set out
in this report is based on the consolidated financial statements of
Greka Drilling and its subsidiary companies (together referred to
as the "Group"). The condensed consolidated financial information
should be read in conjunction with the annual financial statements
for the year ended 31 December 2010, which have been prepared in
accordance with International Financial Reporting Standards (IFRS
and IFRIC interpretations) issued by the International Accounting
Standards Board except for IAS 34. The financial statements of the
Group for the 6 months ended 30 June 2011 were approved and
authorised for issue by the Audit Committee and the Board on 6
September 2011.
2. ACCOUNTING POLICIES
The condensed financial information for the six months ended 30
June 2011 and 30 June 2010 is unaudited and does not constitute the
Group's statutory financial statements for those periods. The
comparative financial information for the full year ended 31
December 2010 has, however, been derived from the financial
statements for that period which are included in Group's admission
document. The auditors' report on those accounts was
unqualified.
Basis of preparation
After making enquiries, the directors have a reasonable
expectation that the Company and the Group have adequate resources
to continue in operational existence for the foreseeable future.
Accordingly, they continue to adopt the going concern basis in
preparing the half-yearly condensed financial statements.
The financial information is presented in United States dollars
and all values are rounded to the nearest thousand dollars
(US$'000) except when otherwise indicated.
The entities which comprise the Group did not include an overall
holding company and did not form a legal group in the periods
before 8 March 2011. However they have been under common management
and control in those years. The consolidated financial statements
incorporate the financial statements of the Company and entities
controlled by the Company (its subsidiaries). Control is achieved
where the Company has the power to govern the financial and
operating policies of an invested entity so as to obtain benefits
from its activities. The results of subsidiaries acquired or
disposed are included in the consolidated income statement from the
effective date of acquisition or up to the effective date of
disposal, as appropriate.
International Financial Reporting Standards as adopted by the
European Union ("IFRSs") do not provide for the preparation of
combined financial information and accordingly in preparing the
combined financial information certain accounting conventions
commonly used for the preparation of historical financial
information for inclusion in investment circulars as described in
the Annexure to SIR 2000 (Investment Reporting Standard applicable
to public reporting engagements on historical financial
information) issued by the UK Auditing Practices Board have been
applied. The application of these conventions results in the
following material departures from IFRSs. In other respects IFRSs
have been applied.
The combined financial information has been prepared by
aggregating the assets, liabilities, results share capital and
reserves of the relevant entities, after eliminating intercompany
transactions, balances and unrealised gains on transactions between
the combined entities. Consequently it is not meaningful for the
Company to present share capital. Instead "Capital reserve" is
presented which represents the aggregated share capital and share
premiums and capital reserves of the companies making up the
Group.
The combined financial information has been prepared in
accordance with the requirements of the AIM Rules for Companies and
in accordance with this basis of preparation. The basis of
preparation describes how the financial information has been
prepared in accordance with IFRSs except as described above.
Except as described above, the financial information has been
prepared in accordance with IFRSs as adopted by the European Union,
that are effective for accounting periods beginning on or after 1
January 2010. The principal accounting policies adopted in the
preparation of the financial information are set out below. The
policies have been consistently applied to all the years presented,
unless otherwise stated.
The preparation of financial information in conformity with
IFRSs requires the use of certain critical accounting estimates. It
also requires management to exercise its judgment in the process of
applying the Group's accounting policies. The areas involving a
higher degree of judgment or complexity or areas where assumptions
and estimates are significant to the financial information are
disclosed in note 2 to the financial information. Actual results
may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognized in
the period in which the estimate is revised if the revision only
affects that period or in the period of revision and future periods
if the revision affects both current and future periods.
3. REVENUE AND SEGMENTAL INFORMATION
The Group has one reportable segment as set out below. The
operating results are regularly reviewed by the Group's chief
operating decision-makers ("CODMs") that are used to make strategic
decisions.
Drilling services revenue represents the net invoiced value of
contract drilling services provided to one customer. The amounts of
each significant category of revenue recognised during the periods
ended 30 June 2011, 31 December 2010 and 30 June 2010 are as
follows:
Six months Six months Year ended
ended 30 ended 30 31 December
June 2011 June 2010 2010
US$'000 US$'000 US$'000
Unaudited Unaudited Audited
Segment revenue 17,076 7,722 24,317
Cost of sales (14,099) (8,016) (19,430)
Gross profit 2,977 (294) 4,887
4. FINANCE INCOME
Six months Six months Year ended
ended 30 ended 30 31 December
June 2011 June 2010 2010
US$'000 US$'000 US$'000
Unaudited Unaudited Audited
Bank interest 5 2 3
5. FINANCE COSTS
Six months Six months Year ended
ended 30 ended 30 31 December
June 2011 June 2010 2010
US$'000 US$'000 US$'000
Unaudited Unaudited Audited
Interest expense on short
term loans 50 33 70
Interest expense on loans
from a related company -- 93 196
50 126 266
6. TAXATION
Taxation for the Group's operations in the PRC is provided at
the applicable current tax rate of 25% on the estimated assessable
profits for the period.
Six months Six months Year ended
ended 30 ended 30 31 December
June 2011 June 2010 2010
US$'000 US$'000 US$'000
Unaudited Unaudited Audited
Current tax
Charges for current period 328 -- 431
Underprovision in prior
year 289 -- --
Deferred tax -- (401) --
(Credit)/charge for the
period -- -- 301
Total tax (credit)/charge 617 (401) 732
The reasons for the difference between the actual tax charge for
the periods and the standard rate of corporation tax in the Cayman
Islands applied to the (loss)/profit for the periods are as
follows:
Six months Six months Year ended
ended 30 ended 30 31 December
June 2011 June 2010 2010
US$'000 US$'000 US$'000
Unaudited Unaudited Audited
(Loss)/profit before income
tax 1,022 (1,300) 2,754
Expected tax charge based
on the standard rate of
corporation tax in the
Cayman Islands of 0% -- -- --
Effect of:
Different tax rates applied
in overseas jurisdictions 256 (325) 689
Tax effect of revenue
not taxable for tax purposes (21) (59) (233)
Tax effect of expenses
not deductible for tax
purposes 93 (17) 276
Income tax (credit)/charge 328 (401) 732
7. EARNINGS PER SHARE
Six months Six months Year ended
ended 30 ended 30 31 December
June 2011 June 2010 2010
US$'000 US$'000 US$'000
Unaudited Unaudited Audited
Earnings for the purpose
of basic (loss)/profit
per share 736 (982) 1,826
Weighted average number
of ordinary shares 398,245,758 398,245,758 398,245,758
Basic earnings per share is based on the profit after taxation
of US$405,000 (first half 2010: loss for the period, US$899,727)
and the weighted average number of 398,245,758 ordinary shares in
issue during each period.
In accordance with IAS 33 the weighted average number of shares
for prior periods has been adjusted as if the Group reconstruction
occurred at 1 January 2010.
8. PROPERTY, PLANT AND EQUIPMENT
During the period, the Group incurred approximately US$2,165,663
on additions to plant and equipment (30 June 2010 - US$72,220, 31
December 2010 - US$3,108,985).
9. DEFERRED TAXATION
As at As at As at
30 June 30 June 31 December
2011 2010 2010
US$'000 US$'000 US$'000
Unaudited Unaudited Audited
Deferred tax assets
at the beginning of the
year -- -- 301
Additional temporary differences 241 603 --
Reversal of temporary
differences -- -- (301)
At the end of the period 241 603 --
There were no unrecognised deferred tax assets or liabilities in
the period.
10. INVENTORIES
As at As at As at
30 June 30 June 31 December
2011 2010 2010
US$'000 US$'000 US$'000
Unaudited Unaudited Audited
Raw materials and consumables 5,963 2,714 4,025
Work-in-progress -- 719 329
5,963 3,433 4,354
11. TRADE AND OTHER RECEIVABLES
As at As at As at
30 June 30 June 31 December
2011 2010 2010
US$'000 US$'000 US$'000
Unaudited Unaudited Audited
Prepayments 12,490 583 927
Other receivables 242 187 91
Amount due from related
parties 7,506 -- 24,516
20,238 770 25,534
12. TRADE AND OTHER PAYABLES
As at As at As at
30 June 30 June 31 December
2011 2010 2010
US$'000 US$'000 US$'000
Unaudited Unaudited Audited
Trade payables 4,844 2,569 2,677
Other payables 748 511 841
Amount due to related
parties -- 22,960 51,449
5,592 26,040 54,967
13. LOANS AND BORROWINGS
As at As at As at
30 June 30 June 31 December
2011 2010 2010
US$'000 US$'000 US$'000
Unaudited Unaudited Audited
Bank loans - secured 1,514 1,178 1,480
The bank borrowings are fully repayable within eight months of
the end of each reporting period and are secured on the Group's
building situated in Zhengzhou.
14. SHARE CAPITAL AND CAPITAL RESERVE
On 7 February 2011 Greka China Ltd subscribed for one share for
a subscription price of US$50m.
On the same date 398,245,757 shares were transferred to Green
Dragon Gas credited as fully paid. On 8 March 2011 these shares
were distributed by Green Dragon Gas to their shareholders.
On 15 February 2011 the inter group balances owing to Green
Dragon Gas and its subsidiaries amounting to US$27.2m was
capitalized into one share of Greka Technical Services ("GTS"), a
subsidiary. This share was then transferred to the company.
15. RELATED PARTY TRANSACTIONS
Saved as disclosed in notes 11, 12 and 14, there were no other
related party transactions that are required to be disclosed.
Transactions between the Company and its subsidiary undertakings
which are related parties, have been eliminated on consolidation
and are not disclosed in this note.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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