TIDMFTO
RNS Number : 3682T
Fortune Oil PLC
19 November 2013
19 November 2013
FORTUNE OIL PLC
("Fortune Oil", the "Company" or the "Group")
Q3 2013 Interim Management Statement
Fortune Oil (LSE: FTO.L) focuses primarily on Chinese oil,
natural gas and resource supply operations and investments and is
listed on the London Stock Exchange.
Fortune Oil announces its Interim Management Statement for the
period 30 June 2013 to date. Unless stated otherwise financial
disclosures relate to the third quarter ended 30 September
2013.
Highlights
-- Transfer of Fortune Gas International Holdings Limited
("FGIH") to China Gas Holdings Limited ("CGH") completed.
-- Following completion of the acquisitions approved by
Shareholders at the General Meeting First Level Holdings Ltd. and
Vitol Energy (Bermuda) Ltd. hold 56.9 per cent of the Company.
-- The Group's shareholding in China Gas Holdings through China
Gas Group Limited was 15.26 per cent.
-- Special dividend of 2.36p per share paid to shareholders.
-- FGIH natural gas sales volumes increased 20.4 per cent to
422.1 million cubic metres for the period to the end Q3 (2012:
350.7 million cubic metres).
-- CGH natural gas volume increased 22.7 per cent to 6,824.9
million cubic metres for the year ending 31 March 2013.
-- Bluesky jet fuel sales volumes in Q3 2013 increased 13 per
cent to 884,000 tonnes (Q3 2013: 780,000 tonnes).
-- US$300 million (GBP188 million) loan facility signed to aid future expansion of the group.
-- The Board remains optimistic with regard to Fortune Oil's
prospects, with signs that China's economic growth rate is
accelerating in the second half of 2013.
OPERATIONAL OVERVIEW
Corporate Matters
The Company has completed the transfer of FGIH to CGH and the
two companies' natural gas businesses are in the process of
completing the integration.
Shareholders approved the acquisition of Wilmar International
Limited's interest in the consideration receivable as a result of
the disposal of FGIH. The total consideration was US$60 million
payable to Fortune Dynasty Limited ("FDH") in Ordinary Shares in
Fortune Oil (the "Acquisition").
Shareholders also approved the amendment to the terms of the
loan from FDH to Fortune Oil of US$12 million, such that it was
repaid in Ordinary Shares in Fortune Oil (the "Loan
Settlement").
Fortune Oil obtained from the UK Takeover Panel and from the
independent shareholders of the Company a waiver of the requirement
of Rule 9 of the UK Takeover Code for a general offer to be made
for the Company by persons who, as a result of receiving Ordinary
Shares through the Loan Settlement and completion of the
Acquisition, would own more than 56.9 per cent of the Company's
issued share capital.
China Gas Group, the joint venture company in which the Company
has a 50 per cent interest, owns 732,446,000 CGH shares,
representing 15.26 per cent of CGH total issued shares. As at 18
November 2013 the joint venture and its associates held
1,011,550,000 shares in CGH representing 21.07 per cent of CGH
total issued shares making the joint venture and its associates the
second largest shareholder of CGH (as at 31 October 2013 CGH's
total issued shares 4,801,095,098).
Natural Gas Business
The natural gas business continues to benefit from China's
robust economy and thriving natural gas demand. The Company has
steadily expanded its upstream and midstream operations as well as
its downstream city-gas and refuelling operations. Through our
shareholding and strategic partnership with CGH, the Company is one
of the largest natural gas companies in China supplying gas to 195
cities with a strong platform for future growth. In FY 2013 CGH
supplied over 7 billion cubic metres of natural gas to cities with
an urban population of over 65 million people.
-- FGIH natural gas sales volumes increased 20.5 per cent to 135
million cubic meters in the third quarter (Q3 2012: 112 million
cubic meters). Total Gas sales of 422.1 million cubic metres for
the year to date, an increase of 20.4 per cent compared to the same
period in 2012 (350.7 million cubic metres).
-- FGIH new natural gas supply connections increased by 3 per
cent to 52,489 in Q3 (Q3 2013: 51,170). The total number of
connected customers is now over 300,000.
-- Construction has continued on the first permanent LNG ship
refuelling station on the Yangtze River near Chongqing, having
achieved a major first in China in obtaining the regulatory
approvals for commercial operations. The Company is currently
planning to open three LNG refuelling stations to cover the length
of the Yangtze River.
-- CGH natural gas sales volumes increased 22.67 per cent to
6,824.9 million cubic metres for the financial year ending 31 March
2013. During the same period CGH increased the number of
residential customers by 17.4 per cent to 8.4 million, industrial
customers increased 32.3 per cent to 2,155, and commercial
customers increased 15.2 per cent to 49,895. A further 37 CNG/LNG
stations were also added to the CGH network.
The Chinese government continues to encourage the expansion of
natural gas supply to meet the 12(th) Five Year Plan target to
increase gas usage in China to 8 per cent of the energy mix from
the current level of approximately 5 per cent. On this basis, it is
expected that natural gas supply in China will increase by 20 per
cent per year to surpass 260 billion cubic metres by 2015. Despite
the economic slowdown China natural gas demand in the first half of
2013 rose 13.1 per cent to 81.5 billion cubic metres according to
the National Development and Reform Commission.
Upstream Coal Bed Methane ("CBM")
Fortune Oil continues to make progress at its Liulin CBM
operations and the project remains on track for first commercial
gas sales by the end of the current year.
-- The gas gathering system on the northern area is over 95 per
cent completed and linked to the CNG wholesale station where the
CBM will be dispatched for sale.
-- We have completed the Overall Development Plan ("ODP")
reports for the subsurface, surface and project economics and these
are being reviewed by China United Coalbed Methane Corporation
("CUCBM").
-- Two new wells have been drilled during 2013 and work is in
progress to prepare the well sites for two directional and two
horizontal wells with drilling planned to commence in Q4 2013.
-- FLG currently has five inseam wells on line and together with
the CUCBM wells will produce the gas for dispatch through the gas
gathering system with the aim to commence commercial gas sales next
month.
Oil Business
The Oil business continues to be a strong cash generator for the
Group underpinned by the continued strong demand for domestic air
travel in China.
-- Bluesky jet fuel sales in Q3 2013 were 884,000 tonnes,
representing an increase of 13 per cent over the same period in
2013 (780,000 tonnes), with total jet fuel sales of 2.45 million
tonnes for the year to date, an increase of 12 per cent compared to
the same period in 2012 (2.19 million tonnes).
-- The main commercial arrangements for the replacement
structure for the Maoming Single Point Mooring ("SPM") partnership
have been agreed between Fortune Oil and Sinopec and the two
parties are awaiting final approvals from the regulatory agencies
in the Peoples Republic of China.
-- In Q3 2013, West Zhuhai Terminal's volume throughput
decreased by 18 per cent to 511,000 tonnes compared to the same
period in 2013 (623,000 tonnes) with total throughput of 1.9
million tonnes for the year to date, an increase of 8 per cent
compared to the same period in 2012 (1.76 million tonnes).
Trading Business
The trading business supplies and trades oil and petrochemical
products
-- In the year to date the total quantity of traded base oils
and petrochemicals increased by 20 per cent to approximately
146,261 tonnes compared to 121,570 tonnes for the same period in
2012.
Resources Business
As part of its stated strategy Fortune Oil is pursuing overseas
investment opportunities to capitalise on China's growing demand
for energy and resources. Work on the Armenian iron ore projects
continues to determine whether these assets can be developed
economically.
-- The rail cost continues to be the major issue which is
currently undermining the commercial viability of these projects.
The current tariffs in Georgia and Armenia need to be reduced
significantly to ensure the iron ore concentrate product can be
sold cost competitively.
-- Sinosteel completed the basic engineering design with the
focus on reducing the capital expenditure requirements of the
Hrazdan iron ore beneficiation plant, tailings and waste rock
areas.
FINANCIAL PERFORMANCE
Financial Position
On 18 October 2013, the Company announced the signing of a loan
agreement with various financial institutions arranged by Morgan
Stanley. The facility size is US$300 million (GBP188 million) with
a term of three years and a margin of 2.75 per cent over LIBOR. The
new facility has been used to repay the existing syndicated loan,
and will provide working capital to the Group, and finance new
investment.
The Group's balance sheet remains strong and healthy. Fortune
Oil monitors and maintains a level of cash and cash equivalents
considered adequate by management to finance the Group's operation
and repayment of bank loans and investment commitments for the
foreseeable future.
As a result of the completion of the FGIH transaction, CGH is
treated as an associate to the Group and equity accounting has
therefore been adopted.
On 25 September 2013 shareholders approved an ordinary
resolution to pay a special interim dividend of 2.36p per share.
This dividend was paid to shareholders on 25 October 2013.
MANAGEMENT
The Company announced on 13 November 2013 that Mr. Tee Kiam Poon
has resigned as an Executive Director of the Company to be
effective from 31 December 2013 and he will cease to hold the
office of the Chief Executive of the Company with effect from 1
January 2014. Mr. Tee confirmed that he has no disagreement with
the Board and the Company and there is no matter in relation to his
resignation that needs to be brought to the attention of the
shareholders of the Company.
With the changes in the Group's business structure following the
completion of the CGH transaction, the move of certain management
to manage and monitor activities at CGH and other changes
associated with SPM and Armenia, the Board is considering what
changes are necessary in the structure of its management. A further
announcement on the constitution and structure of the management
team going forward is likely to be made in Q1 2014.
The completion of the CGH transaction has altered the Group's
risk profile with a greater part of its assets no longer being
controlled by the Group and its income and cash flow having a
higher dependence on activities within non-controlled entities. The
Group will be considering its risk assessment and monitoring to
ensure that they adapt to this new situation.
OUTLOOK
Overall business performance is in line with expectations. The
Board remains optimistic with regard to Fortune Oil's prospects,
with signs that China's economic growth rate is accelerating in the
second half of 2013.
For further details:
Fortune Oil PLC
Tee Kiam Poon, Chief Executive Tel: 00 852 2583 3125
Bill Mok, Chief Financial Officer Tel: 00 852 2583 3120
Bell Pottinger
Archie Berens Tel: 07802 442486
Background on Fortune Oil
Fortune Oil is a leading independent energy company engaged in
the investment and operations of oil and natural gas supply
projects in China. With over 20 years of operating history in
China, Fortune Oil has acquired a unique portfolio of high quality
oil and natural gas projects across the country and has formed a
strong partnership with domestic and international market leaders.
Fortune Oil recently started an expansion outside China securing
resource projects. Fortune Oil is listed on the London Stock
Exchange with its operational headquarters in Hong Kong.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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