Jade Gas Teams Up with DWK for Red Lake CBM Project in Mongolia

Jade Gas Holdings Limited announces the signing of a nonbinding term sheet for a significant gas production partnership with China-based Yan’an Drilling Wellking Energy Technology Service Company Limited (DWK) to develop Jade’s Red Lake gas resource (the Partnership).

Jade Gas Holdings recently appointed DWK as its integrated services contractor as part of its strategy to expedite resource development and accelerate the path to gas production. During the well design and planning phase with DWK for the initial four production wells at Red Lake, it became clear that DWK not only grasped the technical requirements but also shared Jade’s perspective on the commercial value of the Red Lake gas field.

An opportunity to expand the engagement emerged, leading the Partnership to aim for the rapid development of the next 20 production wells at Red Lake. This plan is contingent on the successful drilling of the initial four production wells, set to begin soon, and regulatory approval. The agreement will have DWK committing to fund the capital necessary for drilling and commissioning these 20 wells, in exchange for a share of the gas revenue generated from them.

Given DWK's expertise in coal bed methane production wells in the Qinshui Basin, the Company recognizes the parallels between the recent rapid development at Qinshui and Jade's Red Lake project. This similarity is a primary factor fueling DWK's confidence in replicating that success at Red Lake.

Formalizing the Gas Production Partnership offers several potential and significant advantages:

•  Jade would require minimal upfront capital outlay to deliver a substantial number of production wells, leading to meaningful initial revenues.

• Jade would maintain its current role as project operator and retain its ownership stake.

• The partnership provides Jade with a pathway to earlier gas sales and long-term flexibility in funding future development across Red Lake and other permit areas.

• The agreement covers only a small portion of the initial phase of a plan for 175 wells at Red Lake, with subsequent phases subject to approval by MRPAM.

The non-binding terms stipulate that the revenue-sharing arrangement and duration of the Partnership will be established under a binding service and revenue-sharing agreement, which the parties aim to negotiate and finalize before December 1, 2024.

The Red Lake area contains substantial Gross Contingent Resources estimated at 1C / 118 Bcf, 2C / 246 Bcf, and 3C / 305 Bcf, marking the largest Contingent Resources for coal bed methane in Mongolia at the time of assessment. Alongside the imminent launch of the initial 4-well production program, Jade anticipates completing an additional 171 production wells in the subsequent phase of Red Lake development. Partnering with DWK, an experienced integrated services company, is expected to accelerate the development of Red Lake's gas resources. The Partnership with DWK focuses initially on 20 production wells, a subset of the planned 175 wells.

The approval for the additional 171 production wells will be sought as part of the Company's updated Detailed Environmental Impact Assessment (EIA), last approved in 2021.

The DWK Partnership presents a cost-effective and capital-efficient option for advancing the Red Lake gas resource. Crucially, the initial 20 production wells offer the potential to generate significant early revenues, which could support funding for future development in the Red Lake area.