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Longwei Petroleum Completes $110.6 Million Purchase of Huajie Petroleum Assets

2012-09-27 20:00
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TAIYUAN, China, September 27, 2012 /PRNewswire-FirstCall/ -- Longwei Petroleum Investment Holding Ltd. (NYSE MKT: LPH) ("Longwei" or the "Company"), an energy company engaged in the storage and distribution of finished petroleum products in the People's Republic of China ("PRC"), today announced that it has finalized the US $110.6 million purchase of the assets of Huajie Petroleum Co., Ltd. ("Huajie"), a fuel storage depot in northern Shanxi Province with a 100,000-metric-ton storage capacity.

Longwei has acquired the assets of Huajie for a total purchase price of RMB 700 million (approximately US $110.6 million). The Company has made a final payment of RMB 150 million (approximately US $23.7 million) to the seller and released the previously paid deposit of RMB 550 million (approximately US $86.9 million) to complete the purchase.

"Closing on the Huajie facility allows us to increase our regional presence and attract new customers," said Cai Yongjun, Chairman and Chief Executive Officer of Longwei. "We are pleased to have closed on the Huajie asset purchase using our own cash resources without dilution to our shareholders."

The Huajie assets are located in Xingyuan Township, Fanshi County (south of the main train station) in northern Shanxi Province, PRC. The assets include fuel storage tanks with a 100,000-metric-ton capacity with accessory facilities and equipment, delivery and distribution platforms, including a dedicated rail spur, and a vehicle loading and unloading station. The purchase also includes a 3,000-square-meter office building and land use rights for 98 acres of land adjacent to the main regional rail line. The new facility is in a growing industrial and mining region, approximately 200 kilometers north of Taiyuan.

Longwei engaged a third-party, independent valuation firm for an appraisal of the fair market value of the assets acquired. The independent valuation firm provided its report with a detailed list of assets acquired and a valuation of approximately RMB 730 million (approximately $115.3 million). The Company was previously able to lock in the purchase price of RMB 700 million for Huajie based on the large deposit advanced.

"The Company has recently completed three major milestones as promised to our shareholders," said Michael Toups, Chief Financial Officer of Longwei. "We have successfully completed the reconciliation of our PRC tax filings to our SEC filings showing no material difference in our reported numbers, completed our annual 10-K filing on-time with record revenues and net income, and completed the Huajie asset purchase with no dilution to our shareholders. We believe management has proven we remain committed to building long-term value for our shareholders."

Mr. Cai stated, "This acquisition nearly doubles our storage capacity to a total of 220,000 metric tons and extends our reach into the fast-growing industrial area of northern Shanxi Province. Our distribution model has proven successful, and we will continue to build upon our strong foundation."

"With the addition of the Huajie facility, we have strengthened our lead as the largest non-state-owned fuel storage and distribution business in the province and are better positioned to capitalize on the demand for petroleum products in our regional market. We are confident we can quickly ramp up sales at the Huajie facility based on relationships we have established in the area over the past 18 months," stated Mr. Toups.

The Company recently reported revenues of US $510.6 million and net income of US $65.1 million for the fiscal year ended June 30, 2012. At the June 30, 2012 fiscal year-end, the Company reported total assets of US $342.3 million and a book value per share of $3.31.

Longwei has posted a video of the Huajie facility to its corporate website at http://www.longweipetroleum.com/operations/storage-operations. Photos and videos of the three facilities can be seen on the "Operations" section of the website.

About Shanxi Province, PRC

The Company's operations are concentrated in the central PRC, primarily Shanxi Province. Shanxi is the leading coal-producing region in the PRC. The region is mountainous and has no oil reserves, pipelines or refineries within the province. Therefore, petroleum products have to be brought in from outside of the province via rail or truck, either from refineries in the neighboring provinces or from the relatively more numerous refineries in the coastal provinces of the northeast PRC. Consequently, wholesale distributors are required to commit significant resources to transportation, logistics and storage. The province is dependent on the timely delivery of petroleum products to support its growing industrial and consumer base.

Taiyuan (the capital city of Shanxi Province) and the outlying area have a population of approximately 5 million people. Shanxi Province has a population of approximately 34 million people and is surrounded by large populated provinces, including the PRC capital city of Beijing, which represent a total combined population base of greater than 300 million people. Taiyuan is approximately 500 km southwest of Beijing.

The GDP growth rate for Shanxi during 2011 was 13%, according to the China Daily, March 13, 2012, and it is expected to outpace the general economic growth in the PRC for 2012. The provincial government has estimated the fixed asset investment in Shanxi to be RMB 5 trillion (approximately $790 billion) over the next five years, according to the China Daily, September 13, 2011. The provincial government also recently announced an additional RMB 1 trillion (approximately $158 billion) in local development projects as part of the region's industrial stimulus plan, according to China Securities News, August 23, 2012. The Company believes its locations within Shanxi Province are advantageous to the growth of its business model.

About Longwei Petroleum Investment Holding Limited

Longwei Petroleum Investment Holding Limited is an energy company engaged in the storage and distribution of finished petroleum products in the People's Republic of China. The Company's oil and gas operations consist of transporting, storing and selling finished petroleum products, entirely in the PRC. The Company's headquarters are located in Taiyuan City, Shanxi Province. The Company has a storage capacity for its products of 220,000 metric tons located at three storage facilities within Shanxi: Taiyuan, Gujiao and Huajie, which have an individual storage capacity of approximately 50,000 metric tons ("mt"), 70,000mt, and 100,000mt, respectively. The Company has the necessary licenses to operate and sell petroleum products not only in Shanxi, but throughout the entire PRC. The Company's storage tanks have the largest storage capacity of any non-government operated entity in Shanxi.

The Company seeks to earn profits by selling its products at competitive prices with timely delivery to transportation companies, coal mining operations, power supply customers, large-scale gas stations and small, independent gas stations. The Company also earns revenue from agency fees by acting as a purchasing agent for other intermediaries in Shanxi, and through limited sales of diesel and gasoline at two retail gas stations, each located at the Company's Taiyuan and Gujiao facilities. The Company seeks to continue to expand its customer base and distribution platform through the utilization of its large storage capacity, which allows the Company the flexibility to take advantage of pricing, supply and demand fluctuations in the marketplace.

Longwei was recently named to the Forbes list of "Asia's 200 Best Under a Billion" from a universe of 15,000 companies. Forbes ranked the companies based on sales growth, earnings growth and return on equity in the past 12 months and over three years. As was reported, Longwei's three-year track record is 45% sales growth, 28% earnings per share growth and 28% return on equity. The Forbes article can be found at: http://www.forbes.com/sites/christinasettimi/2012/07/25/asias-200-best-under-a-billion

For further information on Longwei Petroleum Investment Holding Limited, please visit http://www.longweipetroleum.com. You may register to receive Longwei Petroleum Investment Holding Limited's future press releases or request to be added to the Company's distribution list by contacting Dave Gentry at info@redchip.com.

Forward-Looking Statements

Certain statements contained herein constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations, estimates and projections about Longwei's industry, management's beliefs and certain assumptions made by management. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Because such statements involve risks and uncertainties, the actual results and performance of the Company may differ materially from the results expressed or implied by such forward-looking statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Longwei's operations are conducted in the PRC and, accordingly, are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company's results may be adversely affected by changes in the political and social conditions in the PRC and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation. Other potential risks and uncertainties include but are not limited to the ability to procure, properly price, retain and successfully complete projects, and changes in products and competition. Unless otherwise required by law, the Company also disclaims any obligation to update its view of any such risks or uncertainties or to announce publicly the result of any revisions to the forward-looking statements made here. Readers should review carefully reports or documents the Company files periodically with the Securities and Exchange Commission.

Contact:

At the Company:

Michael Toups, Chief Financial Officer
U.S. Office +1 727-641-1357
mtoups@longweipetroleum.com
http://www.longweipetroleum.com

Investor Relations:

Mike Bowdoin
RedChip Companies, Inc.
Tel: +1-800-733-2447, Ext. 110
Email: mike@redchip.com
Web: http://www.redchip.com

Source: Longwei Petroleum Investment Holding Ltd.
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