China North East Petroleum Reports First Quarter 2008 Financial Results
Thu May 15, 8:30 AMHARBIN, China and NEW YORK, May 15 /Xinhua-PRNewswire-FirstCall/ -- China North East Petroleum Holdings Limited (the "Company") (OTC Bulletin Board: CNEH.OB), an oil producing company in Northern China, today announced consolidated financial results for the first quarter ended March 31, 2008.
Total sales for the first quarter were $10.8 million, a 476% increase compared to $1.9 million over the same period last year. The increase in revenues was a result of increased oil production and higher oil prices. Crude oil production for the first quarter increased 259% to 15,691 tons (115,800 barrels) from 4,367 tons (22,561 barrels) for the first quarter ended March 31, 2007. On a sequential basis, crude oil production increased 3,057 tons (22,561 barrels), or 24%, compared to the quarter ended December 31, 2007.
Gross profit in the first quarter was $6.0 million, a 506% increase over $994 thousand in the same period last year. First quarter gross margin increased 270 basis points to 55.6% compared to 52.9% in the year ago period primarily due to the higher price of oil.
Operating income increased significantly to $5.6 million, or 51.8% of sales, compared to $695 thousand, or 37.0% of sales in the same period of the prior year.
Net income for the first quarter increased significantly to $3.3 million, or $0.17 per diluted share, versus $287 thousand, or $0.01 per diluted share, in the first quarter of 2007.
Mr. Hongjun Wang, President of China North East Petroleum commented, "The first quarter of 2008 was a strong start to the fiscal year. Our record sales results continue to benefit from a combination of increased oil output as well as higher oil prices, both of which resulted in record profit for our business. We are making excellent progress expanding the size and scale of our business and our continuous cycle of drilling wells, maximizing production from our wells, and distributing our product to PetroChina Jilin (PTR) generated very strong cash flow and profits for our business in the first quarter.
All of our revenues are currently derived from four oilfields within the Qian'an oilfield in the Jilin province, a proven oil-bearing area with significant oil deposits. Our firmly established twenty-year contract with PTR is a significant advantage that allows us to extract oil from Qian'an and exclusively sell our produced crude oil back to PTR. This partner is providing greater opportunities for better capitalized oil producers and our success thus far enhances our chances of attracting additional oil assets and leases in the Jilin province.
We now have 157 wells in production as of the end of the first quarter and expect this number to grow on a quarterly basis as we progress through the year. Our increased cash position provides us with greater flexibility to not only drill new wells this year, but also allows us to further develop oil extraction technologies and selectively pursue acquisition opportunities.
2008 is shaping up to be a promising year for CNEH. The momentum in our business remains strong and we have a healthy balance of growth initiatives that can further expand our revenue and earnings performance in the current year and beyond," concluded Wang.
ABOUT CHINA NORTH EAST PETROLEUM
China North East Petroleum Holdings Ltd. is engaged in the production of crude oil in Northern China. The Company has a guaranteed arrangement with the Jilin Refinery of PetroChina to sell its produced crude oil for use in the China marketplace. The Company currently operates four oilfields in Northern China.
Statements in this press release which are not historical data are forward-looking statements which involve known and unknown risks, uncertainties or other factors not under the company's control, which may cause actual results, performance or achievements of the company to be materially different from the results, performance or other expectations implied by these forward-looking statements. These factors include, but are not limited to, those detailed in the company's periodic filings with the Securities and Exchange Commission.
(Financial Tables on the Following Pages)
CHINA NORTH EAST PETROLEUM HOLDINGS LIMITED AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
March 31, December 31,
2008 2007
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 12,734,345 $ 74,638
Accounts receivable, net 5,981,125 4,852,633
Prepaid expenses and other
current assets 682,928 398,046
Current portion of deferred
financing costs, net 296,557 --
Value added tax recoverable -- 651,905
Total Current Assets 19,694,955 5,977,222
PROPERTY AND EQUIPMENT
Oil and gas properties, net 42,616,236 40,345,008
Fixed assets, net 1,046,714 885,474
Oil and gas properties under
construction 1,127,198 2,550,058
Total Property and Equipment 44,790,148 43,780,540
LAND USE RIGHTS, NET 44,045 45,076
LONG-TERM DEFERRED FINANCING
COSTS, NET 864,959 --
TOTAL ASSETS $ 65,394,107 $ 49,802,838
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 7,732,748 $ 6,580,930
Current portion of secured
debenture, net of discount 737,342 --
Other payables and accrued
liabilities 1,561,934 1,020,980
Due to related parties 14,241 28,036
Note payable 284,811 273,444
Income tax and other taxes
payable 5,001,942 2,687,449
Due to a stockholder 131,387 123,105
Total Current Liabilities 15,464,405 10,713,944
LONG-TERM LIABILITIES
Accounts payable 8,665,641 15,467,661
Secured debenture, net of
discount 6,636,074 --
Deferred tax payable 475,445 543,100
Due to a related party 1,579,572 3,118,085
Total Long-term Liabilities 17,356,732 19,128,846
TOTAL LIABILITIES 32,821,137 29,842,790
COMMITMENTS AND CONTINGENCIES -- --
MINORITY INTERESTS 1,646,440 1,124,964
STOCKHOLDERS' EQUITY
Common stock, $0.001 par
value, 150,000,000 shares
authorized, 19,224,080 shares
issued and outstanding 19,224 19,224
Additional paid-in capital 19,177,327 11,361,579
Deferred stock compensation -- (27,125)
Retained earnings
Unappropriated 8,511,921 5,200,907
Appropriated 916,263 916,263
Accumulated other
comprehensive income 2,301,795 1,364,236
Total Stockholders' Equity 30,926,530 18,835,084
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 65,394,107 $ 49,802,838
CHINA NORTH EAST PETROLEUM HOLDINGS LIMITED AND SUBSIDIARIES
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
Three months ended March 31,
2008 2007
NET SALES $ 10,823,974 $ 1,879,947
COST OF SALES
Production costs 712,305 336,790
Depreciation of oil and gas properties 1,874,692 389,227
Amortization of land use rights 2,842 2,624
Government oil surcharge 2,211,320 157,131
Total Cost of Sales 4,801,159 885,772
GROSS PROFIT 6,022,815 994,175
OPERATING EXPENSES
Selling, general and administrative
expenses 257,594 220,265
Professional fees 57,512 16,000
Consulting fees 51,875 27,125
Depreciation of fixed assets 52,232 36,027
Total Operating Expenses 419,213 299,417
INCOME FROM OPERATIONS 5,603,602 694,758
OTHER INCOME (EXPENSE)
Other expense (2,311) --
Interest expense (119,697) (10,591)
Amortization of deferred financing costs (24,713) --
Amortization of discount on debenture (162,268) --
Imputed interest expenses (26,896) (131,846)
Interest income 4,042 248
Total Other Expense, net (331,843) (142,189)
NET INCOME BEFORE TAXES AND MINORITY INTERESTS 5,271,759 552,569
Income tax expense (1,439,269) (221,407)
Minority interests (521,476) (43,799)
NET INCOME 3,311,014 287,363
OTHER COMPREHENSIVE INCOME
Foreign currency translation gain 937,559 87,251
COMPREHENSIVE INCOME $ 4,248,573 $ 374,614
Net income per share
- basic $ 0.17 $ 0.01
- diluted $ 0.17 $ 0.01
Weighted average number of shares
outstanding during the period
- basic 19,224,080 29,224,080
- diluted 20,418,420 29,224,080
CHINA NORTH EAST PETROLEUM HOLDINGS LIMITED AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
For the three months ended March 31, 2008 and 2007 (Unaudited)
2008 2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,311,014 $ 287,363
Adjusted to reconcile net income
to cash provided by operating
activities:
Depreciation of oil and gas
properties 1,874,692 389,227
Depreciation of fixed assets 52,232 36,027
Amortization of land use rights 2,842 2,624
Amortization of deferred
financing costs 24,713 --
Amortization of discount on
debenture 162,268 --
Minority interests 521,476 43,799
Stocks issued for services 27,125 27,125
Imputed interest expenses 26,896 131,846
Changes in operating assets and
liabilities
(Increase) decrease in:
Accounts receivable (1,128,492) 358,931
Prepaid expenses and other
current assets (284,882) (28,390)
Due from related parties -- (49,836)
Value added tax recoverable 651,905 58,901
Deferred charges (1,186,229) --
Increase (decrease) in:
Accounts payable (5,650,202) 490,089
Other payables and accrued
liabilities 540,954 2,296
Income tax and other tax payable 2,314,493 462,572
Deferred tax payable (67,655) --
Net cash provided by operating
activities 1,193,150 2,212,574
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of oil and gas
properties (748,820) (2,742,832)
Purchase of fixed assets (174,005) (123,925)
Additions to oil and gas
properties under construction (211,709) --
Net cash used in investing
activities (1,134,534) (2,866,757)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of
secured debenture 15,000,000 --
Decrease in other loans payable -- (25,612)
Increase in amount due to a
stockholder 8,282 89,193
(Decrease) increase in amounts
due to related parties (1,552,308) 1,170,121
Net cash provided by financing
activities 13,455,974 1,233,702
EFFECT OF EXCHANGE RATE ON CASH (854,883) (67,207)
NET INCREASE IN CASH AND CASH
EQUIVALENTS 12,659,707 512,312
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 74,638 13,746
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 12,734,345 $ 526,058
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Income tax expense $ 1,283,180 $ 60,462
Interest expense $ 11,204 $ 10,591
SOURCE China North East Petroleum Holdings Limited
