Mr Terence Kong, Executive Director, Genesis Energy said: "Our improved performance was mainly attributable to strengthened management and control of the existing mid and downstream crude oil transportation and natural gas pipelined network business in Xinjiang, the PRC. While we seek to consolidate and limit our exposure from existing operations, we will sustain growth momentum by exploring business opportunities further upstream in oil and gas exploitation and extraction projects overseas and in the PRC."
The Group's 80%-owned oil pipeline business ("Xingmei") located in Xinjiang has a maximum annual transportation capacity of 3.5 million tonnes. Following the settlement of the Group's litigation with this project's joint venture partner, China Petroleum and Chemical Corporation ("CPCC"), a new transportation agreement was entered into with CPCC in December 2005 to ensure a stable source of revenue and cash flow to the Group.
The 72%-held natural gas pipeline network project ("Lejion Gas") also recorded improvement in its performance in 2006 on the back of improved sales of natural gas at refilling stations.
During the year, the two existing business segments of oil transportation and gas pipelined network contributed 66% and 34% of the Group's total turnover respectively.
Mr Kong added: "Our goal is to achieve a turnaround in 2008 through a restructuring of existing assets and upstream acquisitions. We will also continue to improve our cash flow conditions by giving priority to profitable upstream oil and gas projects that secure immediate cash inflow for the Group. We will actively consider alternative financing plans with a view to expediting the pace of upstream business development, and to minimize finance costs."
The Group's upstream expansion initiatives began in the latter half of 2006 with the signing of an agreement in January 2007 to acquire the exploitation rights together with the ownership title in the Grassy Trails oil field for a total consideration of US$6 million (approximately HK$51,348,000). Grassy Trails is located in Utah, well situated on the split north plunge of the San Rafael Swell which is a large catchment area from two rich petroleum systems. The 6,268-acre Grassy Trails has yielded 600,000 barrels of golden-colored, light, sweet crude oil since its discovery in 1962. An independent appraiser estimated a recoverable reserve of crude oil of about 1.1 million barrels for Grassy Trails.
Oil exploitation works will commence immediately at Grassy Trails following the expected completion of the acquisition in the second quarter of 2007. Apart from this project, the Group is also actively leveraging its advantageous position in the PRC to increase investments in the country's oil fields. Such investments will enable the Group to benefit from the PRC's preferential policy to encourage private-sector participation in oil field exploitations.
In February 2007, the Group announced a non-legally binding memorandum of understanding for a possible investment which shall involve the acquisition of the entire equity interest in an oil and gas field in Jilin, the PRC. It is an exploitation project in Qian An Oilfield which encompasses a total area of approximately 15 sq km, with over 70 existing wells and the expected recovery of approximately 2.93 million tonnes, or approximately 21.38 million barrels, of crude oil.
Further in March 2007, the Group entered into a non-legally binding letter of intent for a possible investment in oil and gas projects in Liberia. The possible investment shall involve cooperation with state-owned National Oil Company of Liberia ("NOCAL") in conducting exploitation and development works both onshore and offshore.
The Group announced the establishment of a technical advisory committee comprising members of world renowned experts in oil and geology. The committee will work with the Group's management to drive further development in upstream oil and gas operations.
As at December 31, 2006, the Group had net assets of RMB104.10 million (December 31, 2005: RMB141.3 million), with total assets amounting to RMB627.7 million (December 31, 2005: RMB656.1 million). The gearing ratio based on total assets was 65.5% (December 31, 2005: 71.1%). As at the year end date, the Group had net cash of RMB51.3 million (December 31, 2005: RMB3.4 million).
Financial Highlights| Year ended December 31, | ||
| 2006 | 2005 | |
| RMB '000 | RMB '000 | |
| Turnover | 72,200 | 68,266 |
 Oil transportation |
44,710 | 44,990 |
| Natural gas pipelined network |
27,490 | 23,243 |
| Loss from operations | (70.373) | (237,895) |
| Net (loss) attributable to shareholders | (85,187) | (262,955) |
| Basic (loss) per Share (RMB cents) | (2.00) | N/A |
| Diluted (loss) per Share (RMB cents) | (2.62) | (8.67) |
About Genesis Energy Issued by : Through :
Genesis Energy Holdings Limited (702) is an energy company with focus on oil and gas exploitation and operations. The company is currently finalizing a number of investments in existing oil and gas fields and greenfield projects in the United States, China and Liberia. Downstream, the company is engaged in crude oil transportation and pipelined gas businesses.
Genesis Energy Holdings Limited
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Jenny Lee or Angus Ho
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