ODP submission: Green shoots

2017 is likely to be a critical year for Green Dragon Gas (GDG) as management works to deliver on several milestones that will enable a step-up in activity levels. We were encouraged by the CNPC approval and submission of the GCZ CBM Block overall development plan (ODP) in April. Execution of supplementary agreements and GSS ODP submission would provide an incremental reserve base for GDG to leverage in order to refinance outstanding bonds and fund further drilling activity. With regard to funding GDG states that it has multiple term sheets for mezzanine and RBL funding on hand. Our base case valuation of 227p/share rises to 237p/share assuming GSS ODP approval this year and GCZ developed in-line with ODP, this is offset by a delay in GSS development relative to previous forecasts.