-- Total FY08 Crude Oil Production Expected to Increase 133% to 623,000 Barrels from FY07 --
-- FY08 Revenue Expected to Increase 217% to $62 Million --
-- FY08 EBITDA Expected to Increase 224% to $41 Million, or $1.70 per Fully Diluted Share --
-- FY08 Net Income Expected to Increase 190%-200% to $14.5-$15.0 Million --
-- FY08 Fully Diluted EPS Expected to Increase 195%-200% to $0.62-$0.65 --
HARBIN, China and NEW YORK, Sept. 16 /Xinhua-PRNewswire-FirstCall/ -- China North East Petroleum Holdings, Limited (OTC Bulletin Board: CNEH) (‘CNEH’), a leading oil producing company in Northern China, today announced its expected oil production and financial forecast for 2008.
Based on its approved oil extraction contracts with PetroChina Jilin (PTR), which allow the Company to operate four separate oilfields within the Jilin Qian’an Oilfield, total crude oil production in 2008 is expected to total approximately 623,000 barrels and the anticipated number of oil producing wells is expected to total approximately 240 wells by year-end 2008. This is a 133% increase from 267,516 barrels produced in 2007, when the company finished the year with 157 wells.
Based on the Company’s results through the first eight and a half months of 2008, its drilling schedule for the remainder of 2008, and the current per-barrel price of oil received from PTR, the Company estimates 2008 revenue growth of approximately 217% to $62 million, net income growth of 190%-200% to $14.5-$15.0 million, and fully diluted earnings per share growth of 195%-200% to $0.62-$0.65, compared to the 2007 fiscal year. The fully diluted EPS estimate range is based on a share count of approximately 24.0 million shares and assumes the exercise of all outstanding Company warrants.
The Company anticipates full year 2008 EBITDA of approximately $41.0 million, or $1.70 per fully diluted share, a 223% increase compared to $12.7 million in 2007.
By the end of June, the Company produced a total of 250,057 barrels of crude oil and operated a total of 188 producing wells. In the second half of 2008, the Company estimates that it will produce a total of approximately 373,000 barrels of crude oil and drill 52 new wells.
Mr. Hongjun Wang, President of China North East Petroleum commented, “Our 2008 production forecast, including our anticipated results for the fiscal second half, highlight the strength and sound execution of our overall drilling operations. We expect our revenue, profitability and cash position to accelerate in the second half as we further develop our oilfields in Jilin province, which are estimated to contain geological reserves in excess of 75 million barrels of oil. Further, our prospects for ongoing revenue and earnings growth remains strong even if the price of oil trends downward as our production costs on a percentage basis are expected to move lower as we drill more wells and achieve greater economies of scale. Additionally, the oil surcharge the Company pays to the Chinese government is directly proportional to the price of oil. As a result, lower surcharges help to offset the impact of lower oil prices on overall performance.
The drilling schedule we have in place further allows us to strengthen our revenue performance and maximize our profitability in the back half of 2008 and beyond. We have sufficient cash on hand and our fully diluted EBITDA per share estimate of $1.70 by year end highlights our strong operating cash flow and provides us with important resources to finance drilling expansion and contemplate the acquisition of additional oil properties. Our strong performance is expected to continue beyond 2008 as we expect to add significant production growth in 2009 in addition to our expected exit run rate at the end of the current year. The fundamentals of our business are very solid and we expect our production momentum to continue well into the future,” concluded Wang.
Oil Pricing
The Company’s 2008 projected estimates for the remaining 3.5 months of 2008 are based on payments from PTR priced at $85 per barrel. Please note that CNEH’s sole customer, PTR pays the Company a price per barrel which is calculated on a monthly basis, and is based upon a lagged, daily price per barrel average for a relatively heavy, sour grade of crude oil that trades in Singapore. This daily price index is one of a large number of crude oil price indices maintained by Platts, an international commodity and trading company. The grade of oil for which the company is paid typically trades at a discount to West Texas or London Brent crude.
About China North East Petroleum
China North East Petroleum Holdings Ltd. is engaged in the production of crude oil in Northern China. The Company has a guaranteed arrangement with the Jilin Refinery of PetroChina to sell its produced crude oil for use in the China marketplace. The Company currently operates four oilfields in Northern China.
Statements in this press release which are not historical data are forward-looking statements which involve known and unknown risks, uncertainties or other factors not under the company’s control, which may cause actual results, performance or achievements of the company to be materially different from the results, performance or other expectations implied by these forward-looking statements. These factors include, but are not limited to, those detailed in the company’s periodic filings with the Securities and Exchange Commission.
