Investor Relations

Operational Update – Five Customers under Contract

29 August 2013

 Greka Drilling Limited

("Greka Drilling" or the “Company")

Operational Update – Five Customers under Contract

Greka Drilling Limited (AIM: GDL), the largest independent and specialised unconventional oil & gas driller in Asia, is pleased to provide an update on rig movements and customers. Currently the Company is contracted by five counterparties, namely  CNPC Huabei Changzhi, CNPC Huabei Jincheng, Sinopec Huadong CBM (BOFA),  Sinopec Huabei Unconventional Oil (Petroking) and Green Dragon Gas (AIM:GDG).

• CNPC Huabei Changzhi (CBM) plans to drill 300 wells in its Anze Block, Shanxi Province. A total of 110 are targeted for this year. As part of this program, the Company has completed two directional wells to date. In addition, an exploration well will be drilled by rig GD75-21 and a horizontal well will be drilled by rig GD75-25. Following the results of these two wells, the Company expects to be awarded additional wells by CNPC Huabei Changzhi as part of their total 70 well program for this year.

• CNPC Huabei Jincheng (CBM) has contracted the Company to drill at its Jincheng Block, Shanxi Province in two locations. The Company successfully completed a LiFaBriC well earlier in the year which is currently on production and being evaluated. Presently, the Company is drilling a four directional well program using GD75-23, of which the second directional is currently being drilled.

• Sinopec Huadong CBM (BOFA) contracted the Company for a one year program to drill 50 wells at Jixian, Shanxi Province.  Sinopec Huadong CBM has a 3,000 well program with 600 wells in total planned for this year. Rig GD75-22, supported by GS685-2, has completed three wells to date and the fourth is currently being drilled. During these test wells, the Company’s performance continued to improve. The TVD for the third well was 1,214.1 m and the MD was 1,291.7 m. This was achieved in 10 days from spud to completion and compares favourably with 19 days for the first well, which had a TVD of 1,225.2 m and MD 1,341.0 m. The Company expects to continue the drilling program and subject to agreement with the client on drilling locations and number of wells, drill the balance of the one year program as planned.

• Sinopec Huabei (Petroking) has planned a 50 well program during the current exploration phase for unconventional oil within the Xunyi Block, Shaanxi. The Company is under contract to drill 100 wells subject to the successful drilling of the first 20 wells across the Sinopec Huabei acreage inclusive of the Xunyi Block.  The Company’s GD75-12 and GD75-14 rigs are currently drilling under this program. Rig GD75-14 has completed one directional well and is currently drilling the second directional well of a seven well program.  Additionally, GD75-12 spud the first horizontal well on 1 August 2013 which is currently being drilled in co-operation with Sinopec engineers.

• Green Dragon Gas, historically the Company’s largest client, reduced its drilling program in the first half of the year pending the favourable conclusion of its title issues.  This resulted in only 24 wells being drilled in the first half of the year.  As its title issues have been resolved, the Company expects Green Dragon Gas’ drilling program to resume in the second half of the year.

Randeep Grewal, Chairman and Chief Executive of Greka Drilling, commented:

“Our objective of diversifying the client base is being well executed with current drilling activities progressing under five different customer contracts. Importantly, each of our drilling teams for their respective customers is delivering successfully drilled wells on or better than budget. Within this diverse customer base, we are drilling CBM vertical, directional, horizontal and LiFaBriC wells as well as directional and horizontal wells in Shale Oil. Client penetration and drilling success in multiple geological formations demonstrates the vast market available to Greka Drilling.

Notwithstanding the positive transition to a diverse client base, our historically predominant client curtailed its drilling program which will negatively impact our first half results. Whilst the success achieved in diversifying away from a single client has been a success, the time taken to fully capitalise on the increased customer base will not be able to offset the effects of losses from the drilling campaign from the first customer.

On a positive note, each of our five clients are satisfied customers with robust drilling backlogs and are in discussions with us to commit rigs in their respective drilling campaigns. I expect we will conclude this year with a well diversified customer base and a healthy backlog for 2014. 

The Company’s clean environmental footprint makes us ideally suited to take advantage of the concerns surrounding pollution through fracking and importantly, the financial need to significantly improve well life and the associated returns for CBM.

We intend to expand our geographical operations from China into India this year and capitalize on the vast drilling demands within unconventional gas and oil which includes CBM and Shale. We continue to talk to customers in China, in Asia as a whole and have recently had discussions with companies in the UK. I hope to be able to update shareholders shortly on India.”

For further information on Greka Drilling, please refer to the website at www.grekadrilling.com or contact: