New Times Energy Corporation Limited (“New Times Energy” or “the Company”, together with its subsidiaries, the “Group”, HKSE stock code: 166) is pleased to announce that it has entered into a Memorandum of Understanding (the “MOU”) on December 24, 2012, to acquire 10% of the entire issued share capital of Rich Joint Group Limited (“Rich Joint”) at a total consideration of approximately HK$142 million.
SynPetro Engineering Technology Company Limited (“SynPetro”) is a wholly owned subsidiary of Rich Joint and owns various self-developed specialized equipments focused on EOR (Enhanced Oil Recovery) Operations. Its core business focuses on providing EOR technologies for wells with low production performance and to sell extracted oil at contract price to Liaohe Oilfield. SynPetro has currently obtained related service contracts from Liaohe Oilfield.
Liaohe Oilfield, a state-owned enterprise, is engaged in the exploitation, development and sales of oil and gas. It is the seventh largest oil field in China and its current annual crude oil production amounts to over 10 million tonnes, while natural gas production amounts to 1.7 billion cubic meters. With decades of history in the exploitation business, Liaohe Oilfield currently focuses on the development of new wells, therefore various shut-in wells exist due to low production efficiency. With its advanced technology in enhancing oil extraction, in addition to its effort and trial for more than two years, SynPetro has successfully entered into service contracts with Liaohe Oilfield and expects to accelerate production in the near future. In addition, SynPetro has committed to a two-year profit guarantee, which will provide steady income streams to the Group in the next two years.
The total consideration will be settled by cash and issue of convertible bond. Among which, HK$20 million will be paid by cash, while the remaining HK$122 million will be settled by the issue of convertible bond. In addition, according to the MOU, the Vendor is ensured to a profit guarantee which the audited consolidated profit before taxation and extraordinary items of Rich Joint for each of two years ending December 31, 2013, and December 31, 2014, will not be less than RMB125 million.
Commenting on the MOU, Mr. Stewart Cheng, Chairman and Executive Director of New Times Energy, said, “The engagement in EOR upstream business has marked a significant development for New Times Energy in 2012. This acquisition illustrates that privately owned enterprises also have the opportunities to participate in energy exploitation business led by state-owned enterprises. With such technologies to enhance oil extraction, New Times Energy has officially entered into the EOR upstream oil business in China. The Group will effectively utilize SynPetro’s well-built R&D Team, actively seek for alternative technologies applicable to the oilfield, and will promote and apply related technologies to other oilfield projects. New Times Energy believes that the EOR business will bring definite income to the Group next year and will gradually become one of the Group’s major income sources.”