For the first time since it commenced operating in the coal bed methane (CBM) space in China nearly two decades ago and 10 years since it floated on AIM Green Dragon Gas (GDG:AIM) is finally profitable.

Shares are up 2.3% to 265p as the company announces a modest maiden net profit for 2015 of $82,000 on a 36% increase in annual output to 12.1 billion cubic feet (bcf). The plan is to increase yearly production by a similar amount in 2016 to 16 bcf.

Subsidies for CBM gas in China recently went up by 50% but there has been pressure on prices in its downstream businesses and the company says it will now look to rationalize here.

GReen Dragon pump

This author visited the group’s operations in October 2008 when it was first testing the LifaBric drilling technique which has enabled it to fully tap the potential of its CBM assets. In the interim the company has experienced a number of ups and downs.

These included a dispute with former partner ConocoPhillips (COP:NYSE), battles over the ownership of its asset base and the extraordinary revelation of unsanctioned and initially unnoticed drilling across its acreage.

SHARES has not seen an update on their views today but so far in 2016 Peel Hunt and Cantor Fitzgerald have published extremely bullish price targets on the stock of 700p and 806p respectively. Although the market would likely need to see consistent profitability before rating the stock at anywhere close to these kind of levels.

Issue Date: 27 Apr 2016