AAG Energy Achieves Production Milestone on CBM Commercialization and Technical Breakthrough for its Two China CBM Concessions

JINCHENG, China, July 5, 2016 /PRNewswire/ -- AAG Energy Holdings Limited ("AAG Energy" or the "Group;" stock code: 2686), a leading independent coalbed methane (CBM) producer in China, announced that the Group has achieved new production milestones at both the Panzhuang and Mabi CBM concessions. Additionally, significant progress has been made in the areas of individual well performance, capital expenditures, and commercial readiness.

CBM production from the Panzhuang concession has exceeded 1.5 million cubic meters per day, an industry-leading achievement. The Panzhuang concession is the most developed CBM concession in China, and remains the first Sino-foreign CBM cooperative project to have obtained Overall Development Plan (ODP) approval from the NDRC, and the first to have reached designed production capacity for CBM commercialization.

Not only does AAG Energy increase production to cope with the current market environment, but also resort to reducing capital expenditures. Compared with 2014 and 2015, the current capital expenditure per well at its Panzhuang concession has come down by 29.0% and 13.9% respectively. Drilling speed has also improved by 34% year-on-year.

At the Mabi CBM concession, the CBM gross gas flow rate from the pilot wells has exceeded 100,000 m³ per day, an increase of 300% over the January 2016 average daily production. This production milestone is supported by a significantly improved individual well performance at Mabi. Recent examples of this include the pilot wells: MB02-C4-50S-02, MB02-A3-67S-01 and MB01-B2-68S-08. These wells show stabilized production rates of 4,359 m³/day, 3,917 m³/day and 3,614 m³/day respectively. Most importantly, these results have been achieved across the entire geographic area, demonstrating superior results in some areas that had previously underperformed AAG Energy's expectations.

Same as Panzhuang concession, AAG Energy is also pleased that capital expenditures per well at Mabi CBM concession decreased by 16.3% and 13.9% when compared to 2014 and 2015 respectively.

The area of the Mabi concession is much larger than that of AAG Energy's operated and commercialized Panzhuang concession, covering 898.2 km² under the Mabi PSC in partnership with China National Petroleum Corporation (CNPC). To date, all Mabi ODP associated supporting approvals required by the National Development and Reform Commission (NDRC) as pre-conditions for the 1 billion m³ ODP I submission have been secured. AAG Energy and CNPC have been working together to prepare the submission of the application for Mabi ODP I to NDRC.

Mr. Carl Lakey, Co-CEO and COO of AAG Energy, commented, "I am very excited about these two encouraging news. This continued ramp-up in production should enable Panzhuang to soon exceed its ODP-designed annual commercial capacity of 500 million m³, marking yet another significant milestone as well as demonstrating its leading role in China's CBM development. We have also achieved remarkable progress at Mabi, a direct result of our relentless testing and application of innovative CBM development technologies and operational best practices for the past several years. The performance improvement in the pilot area reinforces our confidence that we are on the right track to commercialize Mabi's CBM resources. AAG Energy is committed to sustainable development in a socially responsible and environmentally sustainable way, providing superior returns on shareholders' investment and simultaneously acting in the long-term interests of the environment and society. We will continue our efforts to secure and share even greater benefits wherever we operate."

About AAG Energy Holdings Limited (stock code: 2686)

AAG Energy is the leading independent coalbed methane (CBM) producer in China, focusing on the development and value optimization of unconventional gas resources to supply clean energy to the Chinese economy. AAG Energy's key assets, Panzhuang and Mabi concessions, are located in the southern Qinshui Basin, which contains the largest amount of proven CBM geological reserves in China. The Panzhuang concession is the most commercially advanced Sino-foreign CBM asset in China and is the first Sino-foreign CBM concession in China to have received overall development plan approval, with designed annual production capacity of 500 million m³. The Mabi concession received preliminary ODP approval in November 2013 and Mabi ODP I has a designed annual commercial capacity of 1 billion m³. The proven ability to commercialize CBM, along with a highly regarded management team has attracted support from leading international and Chinese investors including Warburg Pincus, Baring Private Equity Asia, Chinastone and Ping An. For further details, please visit www.aagenergy.com.

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