In addition, the Group completed the exploration phase of the acquired coalbed methane (CBM) field in the Sanjiao Block in mid-November 2010; the field will commence full production in mid-2011 and is expected to contribute further to the Group.
Sino Oil and Gas Holdings Chief Executive Officer Mr. King Hap Lee remarked: ¡§We will continue to focus on the expansion of our oil and gas business in Erdos Basin. In addition to the traditional business of oil exploitation, we will also actively engage in the exploitation of unconventional natural gas such as shallow gas reserves and CBM.¡¨
In view of the gradual shift of the geological focus to the Erdos Basin of the PRC, and as it is planned to actively engage in the development of new CBM business, the Group disposed of the oilfield assets in the United States in December 2010 for a consideration of HK$150 million, recording a gain on disposal of HK$72.7 million.
Profit attributable to shareholders of the Group amounted to HK$4.6 million (2009: Loss of HK$18.9 million), with an operating profit of HK$12.3 million (2009: Loss of HK$25.6 million).
The Group is currently engaged in a CBM exploration, exploitation and production project in the Sanjiao Block in Erdos Basin in Shanxi and Shaanxi Provinces through Orion Energy International Inc. (¡§Orion¡¨). Orion owns a 70% interest in the CBM project pursuant to a production sharing contract (¡§PSC¡¨) entered into with the Chinese partner, PetroChina Company Limited (¡§PetroChina¡¨, HKEX: 857). The total gross 2P reserve of the Sanjiao Block as per the Competent Person¡¦s Report is 356.6 Bcf.
According to the PRC standards, the proven reserve of CBM of 43.5 billion cubic meters of the Sanjiao Block has been subsequently reviewed and recognized by the Expert Review Group of the State Reserve Committee of the PRC. Accordingly, the Company is in the process of preparing and reporting the overall development project plan of the Sanjiao Project, which is expected to obtain the approval of the National Development and Reform Commission during the year.
As of December 2010, Orion had completed 17 multi-lateral horizontal wells in the Sanjiao Block, with an annual handling capacity of 130 million cubic meters of CBM. The Chinese partner, PetroChina, has established and commenced the operation of a compressed natural gas head station with a daily compression capacity of 30,000 cubic meters. The project is ready to run external trial sales of CBM. The Group expects that CBM production will enter into a formal production phase in the second quarter of 2011, which will bring a contribution to the Group¡¦s revenues.
Both of the Group¡¦s oil fields in the PRC, namely Liuluoyu and Yanjiawan, are located in Erdos Basin, Shaanxi Province, with a production of approximately 6,810 tonnes of crude oil during the year. In addition to the existing oil wells, in view of the geological formation of the blocks and successful gas production in adjacent fields in Erdos Basin, the Group¡¦s technical team has been actively working on the second phase of exploitation of the oil resources on these blocks, as well as the exploration of natural gas in order to enhance the efficiency of the oil fields. The team successfully discovered a high-yield shallow gas reserve in Liuluoyu oil field in October 2010. According to preliminary tests, the daily open flow of each gas well would be more than 10,000 cubic meters. It is conservatively expected that the minimum daily production of each well will be more than 3,000 cubic meters.
In addition, the Group obtained a 15-month operation right of Jinzhuang oil field in May 2010 under an operating agreement. As such, the Group owns a 95% economic interest in the turnover from the production sharing right of Jinzhuang oil field during the operating period. From September to December 2010, crude oil output amounted to approximately 1,680 tonnes.
The Group also discovered a tight gas reserve of industrial value at the underground levels of about 3,200 meters to 2,800 meters at Jinzhuang oil field. According to preliminary tests, the daily open flow of each gas well would be more than 50,000 cubic meters. It is expected that the daily production of each well will be more than 20,000 cubic meters upon stabilization of production. Trial sales of the natural gas output commenced in November 2010, with trial production amounting to approximately 2.3 million cubic meters. The Group expects that the discovery of the tight gas reserve in Jinzhuang oil field will bring promising additional income.
The shallow gas reserve discovered by the Group in Liuluoyu oil field will be a new profit growth point. The Group plans to make further investments in the development of shallow gas reserves in the coming two years, and in the construction of auxiliary ground transportation and distribution facilities. The Group has performed exploration and exploitation of the tight gas reserve in Jinzhuang oil field in early 2011. Trial sale of local natural gas commenced in 2010, and the sale of natural gas from the tight gas reserve will improve the overall operating income. The Group will continue to consolidate the oil and gas exploitation operations in Shaanxi area, optimize the management and technology of the oil and gas assets in Erdos Basin, and enhance the overall synergy effect and production efficiency.
Mr. King added: ¡§With the completion of the acquisition of Orion, the contribution from our CBM business will gradually be reflected in 2011. As Sanjiao Block is one of the best CBM fields in China, we are confident that, upon the commencement of production in the first half of this year, Sanjiao Block will become a large-scale CBM field within the next three years with annual output exceeding 1 billion cubic meters.¡¨
The Government of Shanxi Province has planned three gas pipelines and a liquefied natural gas plant in Sanjiao and its surrounding areas, which were completed and put into operation in succession in early 2011. The CBM produced from Sanjiao Block will be transported primarily through these newly constructed facilities to the central and western parts of Shanxi Province where industrial natural gas consumption is concentrated. The Group believes that the CBM project in Sanjiao Block will be the key driver of growth in the future bringing considerable long-term return on investment to the shareholders.
Financial Highlights| Year ended December 31, | ||
| 2010 | 2009 | |
| HK$ '000 | HK$ '000 | |
| Continuing operations | ||
| Turnover | 29,224 | 15,155 |
| Gross profit/(loss) | 3,203 | (5,086) |
| Profit/(loss) from continuing operations | 12,305 | (25,651) |
| Discontinued operations | ||
| Profit/(loss) from discontinued operations | - | 14,015 |
| Profit/(loss) for the year | 4,684 | (18,925) |
| Earnings/(Loss) per share ¡V Basic | ||
| - From continuing and discontinued operations | HK0.101 cent | HK(0.431) cent |
| - From continuing operations | HK0.101 cent | HK(0.752) cent |
| - From discontinued operations | N/A | HK0.321 cent |
| As at December 31, | ||
| Gearing ratio | 0% | 0% |
| Current ratio | 0.76 | 0.8 |
About Sino Oil and Gas Issued by : Through :
Sino Oil and Gas Holdings Limited (HKEx: 702) is an energy company with a key focus on oil, coalbed methane (CBM) and other conventional natural gas. The Group is committed to building a portfolio of oil and gas assets and operations with an aim to develop into one of the leading independent oil and gas companies in Greater China. The Group currently operates oil and gas fields in Shaanxi and a CBM project in Sanjiao Block in Erdos Basin of China.
Sino Oil and Gas Holdings Limited
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Jenny Lee or Angus Ho
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