TAIYUAN CITY, China, Dec. 2, 2010 /PRNewswire-Asia/ -- Longwei Petroleum Investment Holding Ltd. (NYSE Amex: 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 annual contracts with two new customers for its Gujiao petroleum storage facility representing sales of 19,000 metric tons of petroleum products. The Company estimates that the contracts will be worth approximately $20.1 million based on current pricing levels.
"We are very pleased with the progress and sales development of our Gujiao facility. We are on track with our plan and expect continued strong operating results for our current fiscal year," stated Mr. Cai Yongjun, Chairman and CEO of Longwei. "We will continue to add new customers, and the recent diesel shortage experienced in the region has benefited our business because we hold long-term supply contracts with our refinery partners that guarantee availability. In addition, we are looking for other strategic opportunities with a similar payback period to the Gujiao facility to support the strong demand for petroleum products from both the industrial and consumer markets. As the leading private petroleum supplier in our region, we believe we are well-positioned to take advantage of opportunities as they present themselves."
In order to meet China's energy-saving targets for its 11th Five-Year Plan (2006 – 2010), some municipal governments are cutting off electricity supplies to reduce emissions. The electricity rationing measures have caused a surge in demand for electrical power from diesel generators, creating a widespread shortage of diesel fuel. Some experts, including Dr. Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University, do not expect the shortage to improve before the end of 2010, as many businesses are still using diesel to generate power for their operations, and say that power-cutting policies by local governments must be retracted in order for the situation to be resolved.
"We have an opportunity to capitalize on our sixteen-year relationships with our refinery partners to ensure consistent supply for our customers," stated Michael Toups, CFO of Longwei. "We currently maintain an approximately 30-day supply of inventory on-hand and have supplier advance balances with our refinery partners that represent an additional 60-day supply. This allows us to ensure consistent supply and react quickly to purchase product based on the timing of PRC pricing level adjustments."
Under the 2009 pricing mechanism established by the National Development and Reform Commission (NDRC), China's economic policy planner, domestic refined oil prices are adjusted when the moving average of a basket of international crude (Brent, Dubai and Cinta) changes more than 4 percent over a period of 22 working days.
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, storage 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 120,000 metric tons located at storage facilities in Taiyuan and Gujiao, Shanxi. The Company's Taiyuan and Gujiao facilities can store 50,000 metric tons and 70,000 metric tons, respectively. The Company is 1 of 3 licensed intermediaries in Taiyuan and the sole licensed intermediary in Gujiao that operates its own large scale storage tanks. 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 coal mining operations, power supply customers, large-scale gas stations and small, independent gas stations. The Company also earns revenue under an agency fee 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 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.
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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.
