Full Year Results Year ended 31 March 2016

25 July 2016

 

Great Eastern Energy Corporation Limited

("Great Eastern" or "the Company")

 

Full Year Results Year ended 31 March 2016

Great Eastern Energy Corporation Limited (LSE: GEEC), the fully integrated, leading Indian Coal Bed Methane (CBM) Company, is pleased to announce its Preliminary Results for the 12 months ended 31 March 2016.

Highlights:

Operational and Corporate: optimisation strategy continues to deliver

 

·      FY 2016 production increased 15% to 14.79 mmscfd (FY15: 12.81 mmscfd)  

 

·      Production: July 2016 - 16.51 mmscfd; November 2015 - 15.26 mmscfd

 

·      Rate of production growth has increased from an average of 0.05 mmscfd per month (end July 2015 to November 2015) to an average of 0.16 mmscfd per month (end November 2015 to July 2016), thereby showing a 212% increase in the growth rate

 

·      FY 2016 average sales 8.60 mmscfd (FY15: 10.23 mmscfd) 

 

	FY 2016	FY 2015
Average Price (Rs./scm)	21.32	21.43
Average Price ($/mmbtu)*	10.26	11.04

*Pricing is based in Rs.

 

·     A significant inventory of wells: total of 156 wells have been drilled, are continuing to be dewatered and further optimised. This provides a substantial base for production growth

 

·     150 wells have been fracced which are currently producing and / or dewatering

 

            ·     The Company has engaged Advanced Resources International, Inc. (ARI) to update the
            Competent Persons Report (CPR) and work is under progress. ARI has in the interim
            reconfirmed the Original Gas-In-Place (OGIP) number as 2.62 TCF. The Company will make a
            further announcement once the updated CPR is finalised

 

Financials:

As previously announced lower revenue, EBITDA, and cash generation reflect the continued operational issues at one of the Company's largest customer's plants which is now expected to be fully resolved by September 2016. In the interim a minimum guaranteed offtake quantity has been in put in place since mid-November 2015 and is being adhered to.

Due to this, the adverse impact on revenue and pre-tax cash generation is $8.70m and $7.99m respectively.

In line with best industry practice, since no further drilling program was undertaken, the Company has adopted a new accounting method by charging majority of the expenses and interest to the Income Statement which were earlier being capitalised.

If the Company had adopted the new accounting method in FY 2015, then expenses amounting to $2.98m and interest amounting to $5.74m, which were capitalised, would have been charged to the Income Statement.

In FY 2016, expenses amounting to $2.86m and interest amounting to $4.95m that would have been capitalised under the old accounting method, have now been charged to the Income Statement under the new accounting method.

Expenses moved to the Income Statement under the new accounting method:

      

	FY 2015 (if adopted)	FY 2016
Expenses	$2.98m	$2.86m
Interest	$5.74m	$4.95m
TOTAL	$8.72m	$7.81m

      

	As at 31 March 2015	As at 31 March 2015	As at 31 March 2016	As at 31 March 2016
	Audited	As per new accounting method	Audited	As per old accounting method
Revenue	$37.46m	$37.46m	$29.40m	$29.40m
EBITDA	$24.80m	$21.82m	$14.67m	$17.53m
Cash Generation (pre-tax)	$20.10m	$11.38m	$3.78m	$11.59m
PBT pre MTM / DTE *	$16.83m	$8.11m	$(1.92)m	$5.89m
PAT pre MTM / DTE *	$16.17m	$8.11m	$(1.92)m	$5.89m
PAT pre MTM *	$11.62m	$3.56m	$(0.45)	$7.36m
PAT post MTM / DTE *	$11.35m	$3.29m	$(2.62)m	$5.19m
Net Debt	$93.67m		$92.64m
Debt : Equity Ratio	1.08		1.09

 

The Indian rupee depreciated by 7.05% over the year (Rs. 61.15 / $ to Rs. 65.46 / $).

    

* MTM (Mark to Market) is on account of the restatement of the foreign currency loans and derivatives

 

DTE (Deferred Tax Expense) is on account of difference in depreciation rates used for financial accounts and tax accounts and other expenses like exchange fluctuation / MTM

 

Outlook: confident for the future

·      Decisive action taken to maximise production at Raniganj (South) block providing results and setting the scene for further upside

 

 

	July 2016	November 2015
Dewatering wells	37	39
Producing / Dewatering wells	113	111
Total	150	150

 

·      144 further wells planned to be drilled on the Raniganj (South) block which will take total wells on the Raniganj (South) Block to 300

 

·      Operational strategy in place to continue to maximise production from existing wells and to continue to pursue sales opportunities in the highly industrialised region of Asansol-Raniganj-Durgapur through our own dedicated pipeline network

 

·      Improved political and economic environment in India provides a positive demand outlook

 

  Prashant Modi, Managing Director & CEO of Great Eastern, said:

 

"We are continuing to make strong progress with our strategic goals of further optimising well production, planning second phases of drilling on the Raniganj (South) block and identifying new reserves, whilst maintaining our strong balance sheet. Our underlying consistent performance during the period and favourable market conditions gives us confidence for the future."

 

About the Company

The Company is a fully integrated gas production, development and exploration company in India, providing gas to the growing industrial region of West Bengal. Gas is being produced (Coal-Bed Methane gas) from the Raniganj (South) license area, which covers 210 sq. km, with 2.62 TCF of Gas-in-Place. 

 

The Company's second asset is the Mannargudi license situated in the state of Tamil Nadu in India, which covers an area of 667 sq. km and 0.98 TCF Gas-in-Place.

 

For further information please visit www.geecl.com

 

For further information please contact:

 

Great Eastern Energy

Yogendra Kr. Modi                              Executive Chairman               +44 (0)20 7614 5917

Prashant Modi                                     Managing Director & CEO

 

Arden Partners

James Felix                                                                                         +44 (0)20 7614 5900

Patrick Caulfield                                                                                               

 

Camarco                                                                                              

Ginny Pulbrook                                                                                    +44 (0)20 3757 4992

Billy Clegg

Georgia Mann

 

Chairman's Statement

Operational update: Reserves, Drilling & Production delivering results

 

During the year we continued to make strong progress delivering our optimisation strategy. Production in FY 2016 was 14.79 mmscfd, an increase 15% from 12.81 mmscfd in FY 2015, and 11.70 mmscfd in FY 2014. In July 2016, 16.51 mmscfd was achieved, a further rise of 29% from FY 2015.

 

Rate of production growth has increased from an average of 0.05 mmscfd per month (end July 2015 to November 2015) to an average of 0.16 mmscfd per month (end November 2015 to July 2016), thereby showing a 212% increase in the growth rate.

 

The average sales price was as follows:

 

	FY 2016	FY 2015
Average Price (Rs./scm)	21.32	21.43
Average Price ($/mmbtu)*	10.26	11.04

* Pricing is based in Rs.

 

We continue to make progress in production and sales ramp-up. A total of 156 wells (150 wells producing / dewatering) have now been drilled at our Raniganj (South) block, which with planned dewatering and optimisation measures provides a substantial base for production growth.

 

Reserves

 

As announced in June 2015, the independent reserve engineers, Advance Resources International, Inc., increased the Recovery factor to 55% from 30%, in the low estimate and the Original-Gas-In-Place (OGIP) to 2.62 TCF (from 2.44 TCF), an increase of 7.38%. Since we listed in 2005, the OGIP has increased substantially from 1.39 TCF at that time.

 

The Company has engaged Advanced Resources International, Inc. (ARI) to update the Competent Persons Report (CPR) and work is under progress. ARI has in the interim reconfirmed the OGIP number as 2.62 TCF. The Company will make a further announcement once the updated CPR is finalised. 

 

Sales, Marketing, & Distribution

 

The Company has 42.91mmscfd of gas under contract / MOU.

 

Great Eastern is well placed to supply gas in and around the highly industrialised region of Asansol-Raniganj-Durgapur through its own dedicated pipeline network.

 

Mannargudi CBM Block

 

The Company's second asset Mannargudi license is situated in the state of Tamil Nadu, southern India and covers an area of 667 sq. km with 0.98 TCF Gas-in-Place.

The Company has received Environment Clearance and is awaiting for approval from the State Government of Tamil Nadu. The current minimum work programme consists of 30 pilot production wells and 50 core holes. The block is currently under Arbitration with the Government.

 

Financials

 

As previously announced lower revenue, EBITDA, and cash generation reflect the continued operational issues at one of the Company's largest customer's plants which is now expected to be fully resolved by September 2016. In the interim a minimum guaranteed offtake quantity has been in put in place since mid-November 2015 and is being adhered to.

Due to this, the adverse impact on revenue and pre-tax cash generation is $8.70m and $7.99m respectively.

In line with best industry practice, since no further drilling program was undertaken, the Company has adopted a new accounting method by charging majority of the expenses and interest to the Income Statement which were earlier being capitalised.

 

If the Company had adopted the new accounting method in FY 2015, then expenses amounting to $2.98m and interest amounting to $5.74m, which were capitalised, would have been charged to the Income Statement.

In FY 2016, expenses amounting to $2.86m and interest amounting to $4.95m that would have been capitalised under the old accounting method, have now been charged to the Income Statement under the new accounting method.

Expenses moved to the Income Statement under the new accounting method:

	FY 2015 (if adopted)	FY 2016
Expenses	$2.98m	$2.86m
Interest	$5.74m	$4.95m
TOTAL	$8.72m	$7.81m

 

  

The supply and demand dynamic for Indian gas, and the pricing environment, remains attractive and the Board is confident that it is likely to remain so for the foreseeable future.

 

CSR

 

Great Eastern has contributed towards improving the environment in this area with the use of clean energy. We have been conducting medical camps, blood donation camps, and community health initiatives, covering even the remotest part of our operational area in a planned manner, which has been widely appreciated. We have been able to positively impact the living standards in our operational area by building motorable and all weather access roads from villages. This has made commuting easier by removing drudgery and saving time for the villagers, who can now take their produce to the local market on time, thus enhancing the livelihood opportunities in the area.

 

Great Eastern views itself as an integral part of the community in which it works, with the business designed to not only create value for the Company but also to make a positive contribution to the sustainable development of the local area.

 

I would like to thank our management team and all personnel for their on-going contribution to our continuing success.

 

Indian Economy

The Indian economy continues to show strong growth potential while a number of major economies are slowing down

·    The Indian economy is growing at around 7.6%. India showed improvement in World Bank's "Ease of Doing Business" Ranking, rising by four places

 

·     After three years of drought-like situation, monsoon this year appears to be normal. As of now (July first week), monsoon covered entire India. Normal monsoon helps create better demand in rural areas

 

·     Coupled with hike in pay of government employees under the Pay Commission, these should give a push to overall demand and capacity utilisation

 

·     Investment should thus get a leg up, with Reserve Bank continuing with a growth friendly policy framework

 

·     Muted inflation behaviour - both wholesale (0.79%) and retail (5.76%) - provide policy scope for a low-interest regime

 

·     Relative stability in India has attracted huge increase in FDI inflows. It is estimated at around $51 billion this year

 

·     Both fiscal deficit (3.5%) and current account deficit (1.4%) are at comfortably low levels. Low CAD should provide cushion against any adverse developments in the global economy post-Brexit

 

·     Foreign exchange reserves at around $360 billion; a further firewall for India from global headwinds

 

·     Reflecting the economy's underlying strength, the Indian rupee has shown resilience in the face of global currency market upheavals

 

·     There are however concerns about overall fiscal deficit (centre and states together). With elections in states, deficit tends to rise. Implementation of Pay Commission award in states should additionally put pressure on state finances, particularly those going through elections

 

Outlook

During FY 2016, the Company has consistently and successfully delivered on its optimisation programme and continues to drive future growth through increasing the production at the Raniganj (South) Block. Despite the short term impact of customer issues, the Board is confident that the Company will perform well in the year ahead.

 

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