Changfeng Energy Inc. ("Changfeng" or the "Company") (TSX VENTURE:CFY), a
natural gas utility in China, today reported its unaudited interim consolidated
financial results for the second quarter ended June 30, 2012. All figures are in
Canadian dollars unless otherwise stated. The unaudited interim consolidated
financial statements and Management Discussion and Analysis can be downloaded
from www.SEDAR.com or from the Company's website at www.changfengenergy.com. 


Summary of Q2 2012 Consolidated Financial Results



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(in thousands in                                                            
 $Cdn) except                                                               
 percentages and     Q2     Q2      Change   %     YTD    YTD    Change   % 
                                                                            
per share data     2012   2011                    2012   2011               
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Revenue           7,122  6,776         346   5% 14,487 13,310     1,177   9%
Gross profit      3,421  1,830       1,591  87%  7,323  5,364     1,959  37%
EBITDA            2,130    552       1,578 286%  4,217  2,776     1,441  52%
Net income (loss)   826   (300)      1,126 375%  1,652    810       842 104%
Adjusted net                                                                
 income (loss)                                                              
 (Note a)           193   (300)        493 164%  1,019    810       208  26%
Basic and diluted                                                           
 EPS              0.013 (0.005)      0.018 360%  0.025  0.012     0.013 108%
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Note: (a) The adjusted net income excludes a one-time government grant of   
$722,535 and associated income tax provision of $90,000.                    



Financial Results

Revenue 

Revenue for Q2-2012 was $7.1 million, an increase of $0.3 million, or 5%, from
$6.8 million for Q2-2011. Revenue for the six months ended June 30, 2012 was
$14.5 million, an increase of $1.2 million, or 9%, from $13.3 million for the
same period in 2011. Sales growth during the quarter and YTD were driven
primarily by continued gas volume growth of 109% in Q2'12 and 119% YTD, from the
CNG refueling retail station, and 7% appreciation of the Chinese RMB against the
Canadian dollar, partially offset by a slight decrease of 11% in Q2-2012 and 3%
YTD, in the piped gas sales from the Company's Sanya operation primarily due to
limited gas sources.


Other operating income 

During the quarter, the Company received a $0.7 million government subsidy from
the municipal government of Sanya City, Hainan Province, to partially compensate
the Company for high purchase costs of additional volume of Other Gas purchased
at market-based prices in 2011 to satisfy customer demand in Sanya Region. Going
forward, the municipal government has indicated that it plans to implement a
long-term budget process (the "Budget Process") to address the ongoing gas
shortage issue in Sanya Region. The Budget Process, based on the Company's
actual purchase cost of additional Other Gas, is intended to provide (i) an
annual government subsidy to partially compensate the Company for the loss, if
any, on the gas sales to its residential customers, and this subsidy will be
included in the municipal government annual fiscal budget; and (ii) periodical
sales price adjustments for its commercial customers enabling the sales prices
to reflect interaction between supply and demand.


Gross profit 

Gross profit for Q2-2012 increased by $1.6 million (or 87%) and for the six
months ended June 30, 2012 increased by $2.0 million (or 37%), compared to the
same periods in 2011. Gross profit as a percentage of sales for the second
quarter and YTD of 2012 increased accordingly by 21% to 48% and by 11% to 51%,
compared to 27% and 40%, respectively, for the same periods of 2011. CNG
refueling retail station gross margins year-over-year improved 8% due primarily
to lower operating costs resulting from gas volume increases. Piped gas gross
margins year-over-year improved 27% reflecting a reduced volume of Other Gas
purchased at market-based prices. Pipeline connection fee margins year-over-year
improved 23% which varied with the timing of obtaining large value pipeline gas
connection contracts.


Operating expenses 

General and administrative expenses for Q2-2012 increased by $0.4 million (or
32%) to $1.5 million and for the six months ended June 30, 2012 increased by
$0.5 million (or 25%) to $2.7 million, compared to the same periods in 2011. The
increase was attributable to general expenses including employee salary and
benefits as a result of a high inflation rate in China and sales increases.
General and administrative expenses as a percentage of sales for the second
quarter and YTD of 2012 increased accordingly by 4% to 21% and by 2% to 19%,
compared to 17% and 17%, respectively, for the same periods of 2011.


Travel and business development expenses for Q2-2012 increased by $0.5 million
(or 87%) to $1.0 million and for the six months ended June 30, 2012 increased by
$0.8 million (or 61%) to $2.1 million, compared to the same periods of 2011. The
increase was attributable to the travel and business development activities in
mainland China and a $0.2 million one-time sponsorship fee for a
provincial-level table tennis tournament. The majority of the travel and
business development expenses do not relate to the Company's business in Sanya
City or the CNG retail station but instead relate to projects under
consideration or development in mainland China.


EBITDA 

Earnings before interest, tax, depreciation and amortization ("EBITDA") as
defined in the Management Discussion and Analysis for Q2-2012 increased by $1.6
million, or 286%, to $2.1 million and for the six months ended June 30,2012
increased by $1.4 million, or 52%, to $4.2 million, compared to the same periods
in 2011. The increase was attributable primarily to the improved gross margin
and a $0.7 million government grant, partially offset by the higher operating
expenses.


Net income (loss) 

The net income for Q2-2012 was $0.8 million or $0.013 per share compared to net
loss of $0.3 million or $0.005 per share for the same period in 2011, primarily
due to the reasons stated above. The net income for the six months ended June
30, 2012 was $1.7 million, or $0.025 per share compared to $0.8 million or
$0.012 per share for the same period of 2011. The adjusted earnings for this
quarter, excluding $0.7 million one-time government grant, was $0.2 million or
$0.003 per share, compared to net loss of $0.3 million in the same period of
2011. 


Financial position 

Cash and cash equivalents increased by $0.9 million to $6.0 million at June 30,
2012 from $5.1 million at December 31, 2011, primarily from cash provided by
operating activities of $4.2 million, offset by cash used for capital
expenditure of $2.7 million and $0.5 million of principal repayment on the bank
term loan. 


Working capital deficit as at June 30, 2012 was $10.8 million, relatively
constant when compared to $10.7 million as at December 31, 2011.  


The adjusted working capital as defined in the Management Discussion and
Analysis was $4.2 million as at June 30, 2012, compared to $2.4 million as at
December 31, 2012. 


Business Updates 

Xiangdong project, Xiangdong District, Pingxiang City, Jiangxi Province 

The Company continues to accelerate the first phase of construction at Xiangdong
project. During the first half of the year, the Company completed construction
of 7km main pipelines in the Park. The construction of the citygate is underway.
However, the construction work was delayed due to unseasonal weather in this
region. For the second half of the year, the Company will continue with its
first phase of construction plan, which is expected to be completed by late
2012, and thereupon will commence supplying gas to the ceramic manufacturers in
the Park. 


The Company also made various efforts in coordinating the approved quota gas,
and applying for an alternative source of gas for the upcoming commencement of
gas supply before the interprovincial sub-pipeline linking to the Petro-China's
Second West-East Pipeline is accessible for this region. 


Sanya Operation, Sanya City, Hainan Province 

During the quarter, the Company commenced the first phase of construction of the
Gas & Electricity Exchange Program (the "Program") as previously announced on
February 22, 2012. The total investment related to the first phase of
construction is estimated to be approximately RMB 6.8 million ($1.1 million),
which will be funded by internal cash flow. Upon completion of the first phase
of construction, the Program will enable the Company to acquire approximately 5
million m3 (177 million ft3) of natural gas annually until 2015. The
construction was rescheduled to be completed by late 2012 due to a modification
of the engineering design as requested by the other party of the Program. 


In addition, other progress has been made in addressing the ongoing gas shortage
and high purchase prices for Other Gas in the Sanya Region. Based on the Budget
Process as stated above, the Company's proposal to raise the sales prices to its
commercial customers is pending the final approval by the Hainan Provincial
Pricing Bureau. 


Subsequent to the quarter end, the Company prepaid $641,600(RMB 4,000,000) for
the purchase of additional volume of natural gas (over quota) in amount of 4
million m3 (141 million ft3) for a total purchase cost of $1,914,107(RMB
11,933,333), which will be fully delivered and consumed before December 31,
2012. This additional volume of gas is reallocated from a gas quota originally
belonging to a local gas-fired power plant. The purchased price for the
additional gas is favorable when compared to what the Company currently pays for
Other Gas in the form of LNG/CNG. 


Proposed Joint Venture for a Pipeline Project, Guangdong Province 

As previously announced on March 29, 2012, the proposed joint venture is still
under development. An arm's length pipeline project research firm is finalizing
the project feasibility study. The establishment of the proposed joint venture
will be subject to satisfaction of the feasibility study and approval from the
head office of PetroChina. 


"Our performance in this quarter continues to demonstrate the long-term
sustainability of our business model with a reliable and stable operating cash
flow, while a growth was recorded. We are pleased to advance our business
development plan by developing our projects as scheduled and optimize our
operating cash flow from our current operations." stated Mr. Huajun Lin,
Chairman and CEO, "We continue working with local government to address the gas
issue in our Sanya operation, and diligently move forward the proposed pipeline
project in Guangdong Province and the natural gas liquid processing project in
Xiangtan City with our partners."


About Changfeng Energy Inc.

Changfeng Energy Inc., is a local natural gas distribution company ("LDC" or
natural gas utility) with operations located throughout the southern part of
People's Republic of China. The Company serves industrial, commercial and
residential customers, providing them with natural gas for heating purposes and
fuel for transportation. The Company has developed a significant natural gas
pipeline network as well as urban gas delivery networks, stations, substations
and gas pressure regulating stations in Sanya City & Haitang Bay. Through its
network of pipelines, the Company provides safe and reliable delivery of natural
gas to both homes and businesses. The Company is headquartered in Toronto,
Ontario and its shares trade on the Toronto Venture Exchange under the trading
symbol "CFY". For more information, please visit the Company website at
www.changfengenergy.com


Forward-Looking Statements 

Information set forth in this news release may involve forward-looking
statements under applicable securities laws. The forward-looking statements
contained herein are expressly qualified in their entirety by this cautionary
statement. The forward-looking statements included in this document are made as
of the date of this document and the Company disclaims any intention or
obligation to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise, except as expressly
required by applicable securities legislation. Although Management believes that
the expectations represented in such forward-looking statements are reasonable,
there can be no assurance that such expectations will prove to be correct. This
news release does not constitute an offer to sell or solicitation of an offer to
buy any of the securities described herein and accordingly undue reliance should
not be put on such.
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