Longwei Petroleum Announces Financial Results for Second Quarter Fiscal 2012

TAIYUAN CITY, China, February 9, 2012 /PRNewswire-Asia-FirstCall/ -- 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 its financial results for the three and six months ended December 31, 2011.

Second Quarter Fiscal Year 2012 Financial Highlights: (Year-over-Year, 3-Month Results)

• Revenues increased 5.2% to $126.4 million, compared with $120.2 million.

• Income Before Taxes increased 34.5% to $20.6 million, compared with $15.3 million.

• GAAP Net Income Attributable to Common Shareholders increased 58.7% to $15.2 million, compared with $9.5 million.

• Basic and Diluted Earnings per Share ("EPS") increased to $0.15 per share for the three months ended December 31, 2011, compared to $0.10 per Basic EPS and $0.09 per Diluted EPS for the three months ended December 31, 2010.

• The Company's Taiyuan and Gujiao fuel storage facilities contributed revenues of $64.8 million and $56.3 million, respectively. Agency fees contributed $5.3 million to revenues.

• Stockholders' Equity increased $37.5 million to $299.2 million, compared with $261.7 million.

Six Months Fiscal Year 2012 Financial Highlights: (Year-over-Year, 6-Month Results)

• Revenues increased 4.9% to $245.0 million, compared with $233.5 million.

• Income Before Taxes increased 72.0% to $43.8 million, compared with $25.4 million.

• GAAP Net Income Attributable to Common Shareholders increased to $33.0 million, compared with $14.3 million.

• Basic EPS increased to $0.33 per share and Diluted EPS to $0.32 per share, compared to $0.15 per Basic EPS and $0.14 per Diluted EPS for the six months ended December 31, 2010.

• The Company's Taiyuan and Gujiao fuel storage facilities contributed revenues of $123.1 million and $111.1 million, respectively. Agency fees contributed $10.8 million to revenues.

"We delivered another quarter of solid operating results, highlighted by a 130% increase in net income year-over-year for the six months ended December 31, 2011," stated Mr. Cai Yongjun, Chairman and CEO of Longwei. "Given the demand for petroleum products in China, we expect revenue and earnings growth to increase as we enter the second half of our fiscal year. The Huajie Petroleum asset purchase, once completed, will provide an additional catalyst for potential growth by nearly doubling our storage capacity and expanding our footprint in central China. We believe our strong market position and proven business model will result in long-term sales and earnings growth."

"Our sales increased by $7.8 million or 6.5% between the first and second quarters of 2012, while our sales volume increased 9.7% during this period. During this timeframe we experienced some pressure on our margins from the impact of the increasing international price of crude oil and the retail price decrease implemented by the PRC in October 2011," stated Michael Toups, Chief Financial Officer of Longwei. "We pay market prices to our refinery suppliers and carefully manage our inventory levels to adjust to pricing fluctuations. During this timeframe we had volatility in both sales price and costs as the PRC tried to control the retail price of petroleum to cool inflation."

The cost basis of finished petroleum products fluctuates during the year due to the pricing mechanism in place in the PRC. The retail price of finished petroleum products is established by a PRC regulatory body, the National Development and Reform Commission ("NDRC"), under a formula based on the movement of international prices (a weighted basket of crude oil prices including Brent, Dubai and Cinta crudes), over a look-back period of 22 working days and generally resets when the weighted basket increases or decreases by 4%. The NDRC adjusts domestic finished oil prices by modifying the retail price of gasoline and diesel in all provinces, which has an upstream pricing effect over the wholesale price of finished oil products. The Company attempts to manage its costs by utilizing its storage capacity to adjust inventory levels based on the anticipated movement of industry pricing to take advantage of pricing, supply and demand fluctuations within the marketplace.

At December 31, 2011, the Company held more inventory "on-hand" to take advantage of additional product purchases during a period of fluctuating prices. During this time, the Company also increased its advances to suppliers to lock in pricing based on uncertainty associated with the international crude oil price fluctuations from tensions in the Middle East. The Company is continuously working to optimize its inventory turnover, which expands sales capacity based on increased inventory movement. In times of anticipated rising prices, the Company tries to lock in pricing and increase inventory on-hand prior to the PRC pricing mechanism adjusting the set retail price upwards. Longwei's supplier advance balance with refineries also allows the Company to lock in supply so that it can react quickly to purchases based on the timing of the PRC pricing level adjustments.

On February 8, 2012, the NDRC announced its first retail price increase since April 2011. The retail price of gasoline and diesel was increased by 300 yuan (approximately $48 USD) per metric ton.

"Given that China's inflation appears to be confirmed on a downward trend, we expect that policy makers will feel more comfortable allowing upward fuel price adjustments," wrote Soozhana Choi, Head of Asian Commodities Research at Deutsche Bank AG, in a report released on February 1, 2012. The government controls fuel costs to curb inflation, which cooled to a 15-month low of 4.1% in December 2011 (Bloomberg News, February 2, 2012).

"China may raise retail gasoline and diesel prices 15% in five separate increases to about $4.10 a gallon this year," Gordon Kwan, Head of Energy Research at Mirae Asset Securities Ltd. in Hong Kong, said in a December report.

2012 Financial Outlook

Based on forecasted volume improvement and expected price increases, the Company maintains its current guidance for fiscal 2012. The Company anticipates revenues of approximately $576 million with net income of approximately $78 million (adjusted net of non-cash warrant derivative liability expense) for the fiscal year ending June 30, 2012. The Company will update its fiscal 2012 guidance to reflect its purchase of the assets of Huajie Petroleum Co., Ltd. once the asset purchase is closed and online.

The assets of Huajie Petroleum Co., Ltd. include commercial licenses, land use rights for 98 acres of land, 100,000-tonnage fuel tanks with accessory facilities and equipment, a special transportation railway line, and a 3,000-square-meter office building. To date Longwei has paid a RMB 550 million (approximately $86.5 million USD) deposit toward the total purchase price of RMB 700 million (approximately $110.1 million USD).

"The Energy Information Administration projects that China's oil-product demand will grow 4.3% this year to reach 9.9 million barrels per day," stated Mr. Toups. "Rising car ownership and industrialization in the PRC continue to drive energy demand growth, creating an ideal climate for us to acquire new customers. The Huajie Petroleum asset purchase remains an important element in our expansion plans, and we are working to finalize the transaction as soon as possible."

Conference Call and Webcast

Management will host a conference call to discuss these financial results on Friday, February 10, 2012 at 10:30 a.m. EST (7:30 a.m. PST).

To participate in the call, please dial (888) 500-6948, or (719) 325-2315 for international calls, approximately 10 minutes prior to the scheduled start time. Interested parties can also listen via a live Internet webcast, which can be found via the Company's website at http://www.longweipetroleum.com, or alternately at http://ViaVid.net.

A replay of the call will be available for two weeks from 1:30 p.m. EST on February 10, 2012, until 11:59 p.m. EST on February 24, 2012. The number for the replay is (877) 870-5176, or (858) 384-5517 for international calls; the passcode for the replay is 3411565. In addition, a recording of the call will be available via the Company's website at http://www.longweipetroleum.com for one year.

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 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.

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.