HONG KONG, Sept. 27 /PRNewswire-Asia/ -- Oil and gas company Sino Oil and Gas Holdings Limited ("Sino Oil and Gas Holdings", HKEx: 702) today dispatched a circular to its shareholders in respect of its proposed acquisition of the entire issued share capital of Orion Energy International Inc. ("Orion") at an aggregate price of HK$2,340 million.
Upon completion of the acquisition, the total assets of Sino Oil and Gas Holdings would increase to HK$2,205.20 million from HK$603.48 million.
Sino Oil and Gas Holdings Executive Director Dr. Dai Xiaobing remarked: "Looking to the future, the enlarged group will continue to identify high-quality oil and gas acquisition targets in the Ordos Basin, with a view to further enhancing shareholders' investment value. We are confident of the enlarged group's future developments, and expect to attain a more efficient operational scale as the various acquisitions are completed. The commencements of the new projects will support the enlarged group's long-term profitability."
Pursuant to a production sharing contract, Orion is entitled to a 70% interest in the joint exploration, development, production and sale of coalbed methane ("CBM") or CBM products extracted from the contract area which covers a total of 461.74 square kilometres located at Sanjiao Block in the Ordos Basin of Shanxi and Shaanxi Provinces in the PRC. The PRC partner of the project is currently PetroChina Company Limited ("PetroChina", HKEx: 857).
Upon submission of the overall development program to and approval by the National Development and Reform Commission ("NDRC"), the project will enter the development phase.
Orion has entered into a letter of intent with a local enterprise possessing downstream customers for the supply of the CBM from the contract area. The local enterprise owns the Linyuan Pipeline from Linxian to Baode to Yuanping in Shanxi Province, which mainly supplies CBM to local industrial customers and can also connect to the West to East main pipeline for distribution of CBM to other provinces.
An extended section of the Linyuan Pipeline, namely the LinBao Line, connecting to the Sanjiao Block will be constructed. When the LinBao Line construction is completed, the pipeline is expected to have a capacity of not less than 96.7 million cubic feet per day, or 1 billion cubic metres per year. In the first year of production from the contract area, some 100 million cubic metres of CBM gas is expected to be supplied via the pipeline. Based on the development plan to drill 150-180 wells in the next three years, the supply is anticipated to increase to 500-800 million cubic metres per year in the third year. Subject to approval by NDRC, Orion is of the opinion that the estimate of the annual supply capacity is achievable.
Under the terms of the letter of intent, the sale price of CBM to be supplied to the local enterprise in the first year was preliminarily agreed at RMB1.50 per cubic metre and the sale price would be adjusted annually by reference to the market situation thereafter. The term of supply is preliminarily determined as twenty years.
Apart from supplying via the provincial pipeline, Orion will also consider transporting and selling CBM as compressed natural gas or liquefied natural gas through other distribution channels. PetroChina has completed the construction of a gas compression plant in the vicinity of the contract area with a daily capacity of 30,000 cubic metres, which is favourable for the sales rollout of the project.
The acquisition is subject to the approval of the shareholders at a special general meeting to be held on October 13, 2010.
Dr. Dai continued: "The acquisition represents the first transaction by a Hong Kong listed company prepared and processed in accordance with the revised Chapter 18 of the Listing Rules of the Stock Exchange of Hong Kong. We are glad to have fully complied with the stringent requirements set out for the protection of investor interests."
To view or download the full announcement, please click on the following link: http://www.hkexnews.hk/listedco/listconews/sehk/20100926/LTN20100926019.pdf
About Sino Oil and Gas Holdings
Sino Oil and Gas Holdings Limited (HKEx: 702) is an energy company with a key focus on oil and gas. The Group is committed to building a portfolio of oil and gas assets and operations with an aim to develop into one of the leading independent oil and gas companies in Greater China. The Group currently operates oil and gas fields in the PRC and the US.
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