Fortune Oil Q1 Gas Sales Rise 7 Percent (China)

Fortune Oil announced its Interim Management Statement for the period 1 January 2011 to date.

Highlights

– New gas supply connections increased by 23% to 3,264 in the first quarter compared to 2,655 in Q1 2010.

– Natural Gas Sales up 7% (vs. Q1 2010) even though volume decreased by 14% (vs. Q1 2010).

– Successfully completed 3 natural gas transactions which will contribute materially to profitability.

– Successfully obtained government approval to progress the Yangtze River dual-fuel technology (LNG/Diesel Fuel) project to the deployment phase.

– Bluesky jet fuel sales revenue up 30% vs. Q1 2010.

– Maoming SPM and West Zhuhai Terminal throughput volume up 11% and 5%, respectively (vs. Q1 2010).

– Maiden dividend payment of 0.13 pence per share to be paid on 24 June 2011.

– Margins in Q1 2011 have remained broadly stable across most business segments.

– Significant funding capacity for new projects backed by Fortune Oil’s net cash position and recently signed term loan of US$180 million.

Natural Gas Operations

Volume of gas sold in Q1 2011 was 130.1 million cubic meters representing a decrease of 14% to Q1 2010 entirely attributed to the sale of Henan Fortune Green Energy Development Co Ltd. However, this decrease in volume did not negatively impact natural gas sales, which increased by 7% from Q1 2010.

This was achieved through operational management redirecting natural gas sales towards more profitable end users. In Q1 2011, connection fees were received from 3,264 new customers representing an increase of 23% from Q1 2010. In line with its growth strategy, Fortune Oil has announced completion of three major natural gas transactions in 2011.

– Liaoning Jianping Fortune Gas Co Ltd has been granted a 30 year pipeline concession to develop the spur pipeline and exclusively supply natural gas to the ceramics industrial park. The Company expects the branch pipeline to be completed in 2012 and supply up to 200 million cubic meters of natural gas per annum (expected to reach full capacity in 2013).

– Liaoning Fortune New Energy Company Limited will supply LNG to up to 6,000 public transit buses in Liaoning province exclusively using the LNG stations operated by the Company. This is the first provincial level pilot project approved by the Ministry of National Transportation and it has also received strong support from the Liaoning Provincial government.

– Shijiazhuang Kunlun Xinao Gas Company will supply natural gas to Shijiazhuang, the capital of Hebei Province, and to 17 other cities within Shijiazhuang Municipal Region. Shijiazhuang has potential connectable customers of 2.4 million using approximately 252-400 million cubic meters of natural gas per year. This does not take into account potential connectable customers and associated natural gas sales volume in the remaining 17 cities of Shijiazhuang Municipal Region.

As outlined in December 2010, Fortune Oil is in the process of restructuring and rationalizing its Natural Gas operations to drive financial performance and increase shareholder value. As part of this process Fortune Oil sold its indirect 51% equity interest in Henan Fortune Green Energy Development Co Ltd to Henan Green Energy Holding Company Ltd, which owned the remaining 49% equity interest. On 31 March 2011 a general meeting was held where the shareholders of Fortune Oil approved this disposal. The funds realized in the amount of RMB 250 million (£24.2 million) will be utilized for further developing the natural gas business.

[mappress]

Source: Fortune Oil, May 19, 2011;