CNPC _HONG KONG_ LIMITED201054201821 by sdfwerte

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									                                                              CNPC (HONG KONG) LIMITED
                                                                          (incorporated in Bermuda with limited liability)




                            C




                                                       G)
                              N
                                  PC                  N
                                       ( H ON G K O
                                                                            (Stock Code: 135)

                                                                      ANNOUNCEMENT
    The Directors are pleased to announce that on 7 July 2006, the Company entered into a letter of intent to enter into a Farm Out Agreement and a Joint
    Operating Agreement with Continental Energy Corporation (OTCBB: CPPXF) and GeoPetro Resources Company (TSX: GEP.S), both of which are
    independent third parties to the Company, relating to the proposed sale and purchase of the CGB2 Shares, representing 70% of the issued share capital of
    Continental-GeoPetro (Bengara II) Ltd and the proposed farm-in and joint development of the oil and gas assets in Bengara-II Block production sharing
    contract area in Indonesia.

FARM OUT AGREEMENT
The Directors are pleased to announce that on 7 July 2006, the Company entered into a letter of intent pursuant to which the Sellers and the Company will enter
into a Farm Out Agreement. It is proposed that under the Farm Out Agreement, Continental will agree to sell 21,000 CGB2 Shares and GeoPetro will agree to sell
14,000 CGB2 Shares to the Company, subject to obtaining all the necessary regulatory, corporate and third party approvals. The Company will pay a purchase
price of US$1.00 per common CGB2 Share in cash in the proportions of US$21,000 to Continental and US$14,000 to GeoPetro, respectively.
After completion of the proposed sale and purchase, it is expected that each of Continental and GeoPetro will retain 18% and 12% equity interest in the capital of
CGB2, respectively.
It is also intended that the Farm Out Agreement will provide that the Company will pay US$5,000,000 as a cash bonus to the Sellers, in the proportions of
US$3,000,000 to Continental and US$2,000,000 to GeoPetro, respectively within fourteen business day of the receipt by CGB2 of the written approval from BP
Migas or other Indonesian authority approving CGB2 as the operator for the exploration and the development of the oil and gas assets in the Bengara-II PSC area
(“Approval”).
THE EARNING OBLIGATION
It is intended that the Company will pay on Closing US$18,700,000 as shareholders loan into an EJA maintained at a major Hong Kong international bank (the
“Earning Obligation”). The funds in the EJA will be for exclusive use to pay for all CGB2 expenditures and costs incurred in exploration, drilling and development
operations on the Bengara-II Assets under work programs and budget approved by BP Migas. CGB2 will utilize all Earning Obligation funds from the EJA and
expend them in accordance with all procurement and tendering procedures and regulations of BPMigas to ensure that all funds are recoverable under the Bengara-
II PSC.
JOINT OPERATING AGREEMENT
A separate Joint Operating Agreement will be entered into between the Sellers and the Company at Closing in respect of the joint management and operation of
the Bengara-II Assets upon the Approval. The Joint Operating Agreement will provide for, amongst others, the following terms and conditions:
•     CGB2 will be used as a corporate joint venture vehicle to manage the Bengara-II Assets.
•     The Company will have the right to appoint 3 directors and Continental and GeoPetro may each appoint one director to the CGB2 board of directors.
•     The Company will advance shareholders loan in the amount of up to US$41,300,000 to CGB2. Such shareholders loan shall be repaid by CGB2 to Company
      in full from the proceeds from the commencement of the commercial oil and gas production in the Bengara-II PSC area together with accumulated interest
      thereon at a rate equivalent to the London interbank offering rate for 90-day funds.
The Company will conduct due diligence in the Bengara-II Assets and CGB2 and will negotiate with the Sellers in good faith the terms of the Farm Out
Agreement and the Joint Operating Agreement. Subject to the satisfaction of the conditions to the Farm Out Agreement, it is expected that closing will occur on or
around 31 July 2006.
This announcement is made pursuant to Rule 13.09 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. Shareholders
are advised to exercise caution when dealing in the shares of the Company.
DEFINITIONS
In this announcement, unless the context requires otherwise, the following terms have the meanings as set out below:
“Bengara-II PSC”                       Bengara-II Production Sharing Contract entered into between CGB2 and Petramina, the state owned oil enterprise of the
                                       Republic of Indonesia on 4 December 1997 in respect of the exclusive authority to conduct petroleum exploration and
                                       production operations within the Bengara-II PSC contract area for up to 30 years
“Bengara-II Assets”                    the oil and gas assets in the Bengara-II area in Indonesia
“CGB2”                                 Continental-GeoPetro (Bengara-II) Ltd, a company incorporated in British Virgin Islands with limited liability, whose shares
                                       are wholly owned by the Sellers
“CGB2 Shares”                          fully paid ordinary common shares of CGB2 with a par value of US$1.00 each
“Company”                              CNPC (Hong Kong) Limited, a company incorporated in Bermuda with limited liability and whose shares are listed on The
                                       Stock Exchange of Hong Kong Limited
“Continental”                          Continental Energy Corporation, a British Columbia company based in Dallas, Texas, an independent third party not connected
                                       with the chief executive, substantial shareholders and Directors of the Company and its subsidiaries or any of their respective
                                       associates
“Directors”                            the director of the Company
“EJA”                                  the earn-in joint bank account in the name of CGB2 set up for the purposes of handling the Earning Obligation
“Farm Out Agreement”                   an agreement to be entered into between the Company and the Sellers relating to the sale and purchase of the CGB2 shares by
                                       the Company from the Sellers


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“GeoPetro”                         GeoPetro Resources Company, a California company based in San Francisco, an independent third party not connected with
                                   the chief executive, substantial shareholders and Directors of the Company and its subsidiaries or any of their respective
                                   associates
“Joint Operating Agreement”        the joint operating agreement to be entered into between the Company and the Sellers relating to the joint operation and the
                                   management of the Bengara-II Assets
“Sellers”                          Continental and GeoPetro
“US$”                              Untied States dollar, the lawful currency of the United States
                                                                                                                            By the Order of the Board
                                                                                                                           CNPC (Hong Kong) Limited
                                                                                                                                   Li Hualin
                                                                                                                             Chief Executive Officer
Hong Kong, 10 July 2006
* For identification only

As at the date of this announcement, the Board of Directors of the Company comprises Mr. Wang Mingcai as the Chairman, Mr. Li Hualin as the Chief Executive
Officer, Mr. Cheng Cheng as Executive Director and Dr. Lau Wah Sum, Mr. Li Kwok Sing Aubrey and Dr. Liu Xiao Feng as Independent Non-Executive Directors.

Please also refer to the published version of this announcement in The Standard.




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