Revenue Increases 312% to $5,826,506 and Net Income Increases by 933% to $1,499,495
NEW YORK and SONGYUAN, China, Nov. 15 /Xinhua-PRNewswire-FirstCall/ -- China North East Petroleum Holdings, Limited (OTC Bulletin Board: CNEH), a leading oil producing company in Northern China, announced record financial results for the third quarter of 2007.
Financial Highlights for the three months ended September 30, 2007:
-- Revenue increased 312% to $5,826,506
-- Net Income increased 933% to $1,499,495
-- EPS increased to $0.08 from $0.00
For the nine months ended September, 2007:
-- Revenues increased 210% to $11,804,007
-- Net Income Increased 696% to $3,040,425
-- EPS increased to $0.12 from $0.01
"Our record third quarter financial results illustrate that our business has hit an inflection point," Mr. Hongjun Wang, President of China North East Petroleum commented. "Building on this momentum, we will maximize shareholder value by developing our current oil fields and exploring other opportunities to increase revenue and profit. We are particularly optimistic about the future prospects of our company. One indication of our success is our commitment to further increasing our number of producing wells. With our excellent cash flow, we will continue to drill more wells and place more wells in meaningful production. At the end of the third quarter of 2007 the company had 120 wells in full production. This number is currently at 128 wells and is anticipated to grow to 146 wells in full production during the fourth quarter."
Financial Results
Three Months Ended September 30, 2007 Compared To Three Months Ended September 30, 2006
Revenue for the quarter ended September 30, 2007 was $5,826,506 compared to $1,413,228 for the quarter ended September 30, 2006, an increase of $4,413,278, or 312%. This increase was due to an increase in crude oil production and the price of crude oil. Output of crude oil for the three months ended September 30, 2007 was 10,883 tons compared to 2,638 tons for the same period in 2006. The increase in production was mainly attributable to new wells in production.
Cost of sales. Cost of sales increased by 279% from $769,170 for the three months ended September 30, 2006 to $2,917,310 for the three months ended September 30, 2007. The increase in cost of sales resulted primarily from the increase in production and the payment of oil surcharge. For the three months ended September 30, 2007, the Company paid an oil surcharge of $848,315 to the PRC government as compared to $180,194 paid for the same quarter in 2006. Under a regulation introduced in June 2006, a surcharge of 20% is imposed on the portion of the selling price of crude oil which exceeds $40 per barrel and a surcharge of 40% is imposed on the portion of the selling price of crude oil which exceeds $60 per barrel.
Operating Expenses. Operating expenses increased by 17% from $247,874 for the three months ended September 30, 2006 to $290,216 for the three months ended September 30, 2007. The increase is primarily a result of increase in depreciation of fixed assets resulting from increase in number of oil wells in operation and the increase in professional fees paid to the Company's legal counsel and auditors.
Net Income. Net income increased by 933% from $145,149 for the three months ended September 30, 2006 to $1,499,495 for the three months ended September 30, 2007, primarily as a result of a 312% increase in sales as described above.
Nine Months Ended September 30, 2007 Compared To Nine Months Ended September 30, 2006
Revenues. Revenues for the nine months ended September 30, 2007 were $11,804,007 compared to $3,796,740 for the same period in 2006, an increase of $8,007,267, or 210%. This increase was due to an increase in crude oil production and crude oil price. Our output of crude oil for the nine months ended September 30, 2007 was 23,615 tons compared to 7,725 tons for the same period in 2006. The increase in production was mainly because of the new wells being taken into production.
Cost of sales. Cost of sales increased by 200% from $1,929,639 for the nine months ended September 30, 2006 to $5,779,601 for the nine months ended September 30, 2007. The increase in cost of sales resulted primarily from the increase in production and the payment of oil surcharge. For the nine months ended September 30, 2007, the Company paid an oil surcharge of $1,500,902 to the PRC government while $326,103 was paid to the PRC government for the nine months ended September 30, 2006 as a result of the regulation introduced by the PRC government in June 2006. Under this regulation, a surcharge of 20% is imposed on the portion of the selling price of crude oil which exceeds $40 per barrel and a surcharge of 40% is imposed on the portion of the selling price of crude oil which exceeds $60 per barrel.
Operating Expenses. Operating expenses increased by 12.5% from $821,175 for the nine months ended September 30, 2006 to $924,099 for the same period in 2007. The slight increase is primarily a result of increase in depreciation of fixed assets.
Net Income. Net income increased by 696% from $381,965 for the nine months ended September 30, 2006 to $3,040,425 for the same period in 2007, primarily as a result of a 210% increase in sales as described above.
CHINA NORTH EAST PETROLEUM HOLDINGS LIMITED AND SUBSIDIARIES
Condensed Consolidated Statements of Operations and Comprehensive Income
For the three months and nine months ended September 30, 2007 and 2006
(Unaudited)
Three months ended Nine months ended
30-Sep 30-Sep
Restated Restated
2007 2006 2007 2006
NET SALES $ 5,826,506 $ 1,413,228 $ 11,804,007 $ 3,796,740
COST OF SALES
Production costs 704,568 394,912 1,669,166 895,108
Depreciation of oil
and gas
properties 1,361,732 193,397 2,601,561 704,070
Amortization of
intangible
assets 2,695 667 7,972 4,358
Government oil
surcharge 848,315 180,194 1,500,902 326,103
Total Cost of
Sales 2,917,310 769,170 5,779,601 1,929,639
GROSS PROFIT 2,909,196 644,058 6,024,406 1,867,101
OPERATING
EXPENSES
Selling, general
and administrative
expenses 194,697 193,404 694,103 661,253
Professional fees 26,245 3,000 46,245 36,773
Consulting fees 27,125 27,125 81,375 54,250
Depreciation of
fixed assets 42,609 24,345 117,593 68,899
Gain on disposal
of fixed assets (460) -- (15,217) --
Total Operating
Expenses 290,216 247,874 924,099 821,175
INCOME FROM
OPERATIONS 2,618,980 396,184 5,100,307 1,045,926
OTHER INCOME
(EXPENSE)
Other expense (3,878) (23,050) (3,878) (23,050)
Other income -- 33,991 -- 52,275
Interest
expense (28,186) (11,250) (51,290) (36,914)
Interest expense
on overdue
payables -- (61,674) -- (61,674)
Imputed interest
expense (6,404) (100,446) (139,079) (237,174)
Interest income 615 261 1,105 586
Recovery of deposit
from a supplier
previously written
off 2,515 -- 358,609 --
Total Other Income
(Expense), net (35,338) (162,168) 165,467 (305,951)
NET INCOME
BEFORE TAXES
AND MINORITY
INTERESTS 2,583,642 234,016 5,265,774 739,975
Income tax
expense (885,188) (84,681) (1,825,513) (361,284)
Minority
interests (198,959) (4,186) (399,836) 3,274
NET INCOME 1,499,495 145,149 3,040,425 381,965
OTHER COMPREHENSIVE
INCOME (LOSS)
Foreign currency
translation
gain (loss) 235,873 8 450,633 (8,580)
COMPREHENSIVE
INCOME $ 1,735,368 $ 145,157 $ 3,491,058 $ 373,385
Net income
per
share-
basic and
diluted $ 0.08 $ 0.00 $ 0.12 $ 0.01
Weighted average
number of shares
outstanding during
the period - basic
and diluted 19,224,080 29,224,080 25,780,857 28,929,575
About China North East Petroleum Holdings, Limited
China North East Petroleum Holdings Ltd (OTC Bulletin Board: CNEH) is engaged in the production of crude oil in Northern China. CNEH has a guaranteed arrangement with Jilin Refinery of PetroChina to sell its produced crude oil for use in the China marketplace. The Company currently operates four oilfields with 128 producing wells in Northern China. Further well drilling project has been planned in future.
Safe Harbor Statement
This press release may include certain statements that are not descriptions of historical facts, but are forward-looking statements. Forward- looking statements can be identified by the use of forward-looking terminology such as "will," "believes," "expects," or similar expressions. These forward- looking statements may also include statements about our proposed discussions related to our business or growth strategy, which is subject to change. Such information is based upon expectations of our management that were reasonable when made but may prove to be incorrect. All of such assumptions are inherently subject to uncertainties and contingencies beyond our control and upon assumptions with respect to future business decisions, which are subject to change. We do not undertake to update the forward-looking statements contained in this press release. For a description of the risks and uncertainties that may cause actual results to differ from the forward-looking statements contained in this press release, see our most recent Annual Report filed with the Securities and Exchange Commission (SEC) on Form 10-K, and our subsequent SEC filings. Copies of filings made with the SEC are available through the SEC's electronic data gathering analysis retrieval system (EDGAR) at http://www.sec.gov .
SOURCE China North East Petroleum Holdings, Limited
For further information: Dio Zhang of Chief Financial Officer, +86-43-8216-5055, or cnehmail@gmail.com; Chao Jiang of Director of Finance, +1-212-307-3568, or jiangcneh@gmail.com, China North East Petroleum Holdings, Limited
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