Green Dragon Gas Ltd (LON:GDG) has detailed plans to spin-off its producing Chinese coal bed methane business which will IPO onto the Hong Kong Stock Exchange.
The group’s exploration and appraisal assets will remain within the London-listed vehicle, which will be debt-free post transaction, and will be renamed as G3 Exploration Limited.
Shareholders in Green Dragon will receive a stake in the new company via an in-specie dividend. Meanwhile, new investors in Hong Kong will also take equity with the IPO proceeds used to settle debt obligations.
The producing assets comprise the GCZ and GSS blocks, which together have a total of around 1,400 wells, the company said in a statement on Tuesday.
"As Green Dragon Gas assets evolve from exploration and appraisal into a full cycle production, it is evident that the London market does not value this as highly as CBM production assets listed on the Shenzhen and Hong Kong Exchanges,” said chairman Randeep Grewal.
“With this in mind the board has taken the strategic decision to ring-fence our producing assets by way of a dividend in specie on the HKEX.
“This will simplify the equity proposition for GDG shareholders by ensuring transparency of cash flows from the producing blocks, as they become independently net cash flowing. Furthermore, it will allow shareholders to remain part of a focused exploration and appraisal company by way of the rebranded London listed entity.”
Grewal added: “The Hong Kong YieldCo will offer shareholders stable and predictable cash generation in the world's second largest economy and will be dividend paying from its first day of listing.
“This is a material event in the history of GDG and will ensure value is properly attributed to our producing assets as well as allow the exploration and appraisal business to take advantage of the wealth of international opportunities."