Sino Oil buys Jinzhuang oil and gas exploitation project for CNY188mn

The target group to provide all technical services and consultancy, including oil and gas well drilling and other exploitation engineering work.

Oil and gas company Sino Oil and Gas Holdings Limited (“Sino Oil”) announces that on 3 November 2011 a conditional agreement was entered into for the proposed acquisition of an oil and natural gas exploitation project located at southeast Erdos Basin, Ganquan County of Shaanxi Province, the PRC (“Jinzhuang Block”) for an aggregate consideration of RMB188 million.

The target group holds a contractual right to provide all technical services and consultancy, including oil and gas well drilling and other exploitation engineering work, in relation to the oil and gas project for an area of approximately 62 sq km in Jinzhuang Block. Under a co-operation agreement, the target group is entitled to share and receive 95% of the income generated from the sales of oil exploited, according to a Sino Oil report.

The aggregate consideration of RMB188 million, which shall be payable in cash by phases, was determined with reference to an independent reserve report which indicates an economic reserve of oil in Jinzhuang Block of 4.16 million tonnes and the oil and gas market in China. The consideration is intended to be funded by internal resources.

Sino Oil and Gas Holdings Executive Director and Chief Executive Officer Mr. King Hap Lee said: “The acquisition is a good opportunity for us to complement our existing portfolio of oil blocks in the PRC. It is expected that after completion, the target group can generate satisfactory revenue and profits to the Group. We are optimistic about the sales of oil and gas in future. The acquisition is consistent with the Company’s strategy of focusing its investment and development in upstream oil and gas business in the PRC.”

“There has been initial discovery of gas reserve in the Jinzhuang Block. We remain cautiously optimistic about the feasibility of discovering gas reserves of industrial value in our oil fields in Ordos Basin,” added Mr. King.