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Fortune Oil PLC FTO Interim Management Statement



  Fortune Oil PLC (FTO) - Interim Management Statement

RNS Number : 4097R
Fortune Oil PLC
19 November 2012
 



                                                                                                                       

 

19 November 2012

                                       

                               FORTUNE OIL PLC

                       ("Fortune Oil" or the "Company")

                                       

               Third Quarter 2012 Interim Management Statement

                                       

Fortune Oil announces its Interim Management Statement for the period 30  June 
2012 to  date. Unless  stated otherwise  financial disclosures  relate to  the 
third quarter ended 30 September 2012.

 

Highlights

 

·    New natural gas supply connections increased by 89 per cent to 21,557  in 
the third quarter (Q3 2011: 11,427).

 

·    Liulin coal bed methane ("CBM") remains  on track for first gas sales  in 
2013. Construction of the gas gathering system, nodal compression station  and 
the main export  product trunk-line  at the  CBM Liulin  block commenced  with 
construction scheduled for  completion by  mid 2013.  Currently Fortune  Oil's 
best performing well  in the field  has achieved gas  production in excess  of 
12,500m3/day and production  rates are expected  to improve as  the wells  are 
dewatered.

 

·    Licence obtained for  the first liquefied natural  gas ("LNG") dual  fuel 
ship which enables  the ship  to enter  commercial operations  on the  Yangtze 
River.  This is the first approval of this type in China.

 

·    Bluesky jet fuel  sales volumes increased 16  per cent to 780,000  tonnes 
year on year  (Q3 2011:  671,700 tonnes)  with total  jet fuel  sales of  2.19 
million tonnes for the year  to date, an increase of  16 per cent compared  to 
the same period in 2011.

 

·    West Zhuhai Terminal's volume throughput increased 80 per cent to 623,000
tonnes compared  to the  same period  in 2011  (346,000 tonnes).  West  Zhuhai 
throughput volume  up  9 per  cent  and Maoming  SPM  volume up  4  per  cent, 
respectively for the year to date compared to 2011.

 

·    The feasibility study on the  Hrazdan iron ore mine and processing  plant 
has been completed and the regulatory submissions are being finalised for  the 
Armenian approval agencies.

 

OPERATIONAL OVERVIEW

 

Natural Gas Operations

 

The growth of the natural  gas business is still  strong with new natural  gas 
supply connections increased by 89 per cent to 21,557 in the third quarter (Q3
2011: 11,427). Natural gas sales volumes were 112 million cubic meters in  the 
third quarter as a result of the disposal of a throughput pipeline as part  of 
the transactions to establish the Shijiazhuang joint venture.

 

The Company has  made significant  progress on  the new  natural gas  projects 
announced over  the past  18 months  and is  on track  to deliver  its  growth 
strategy:

·    The main  Petrochina natural  gas pipeline to  the city  of Dashiqiao  is 
complete and gas supply commenced. The local gas distribution network has been
installed to key industrial customers in the local economic zone.

·    Shenyang LNG bus refuelling joint  venture company is operating with  two 
mobile refuelling stations for a fleet of twenty LNG buses.  Negotiations  are 
progressing to  supply LNG  to buses  on additional  routes between  Shenyang, 
Liaoyang and Chaoyang.

·    China United Shanxi  CBM Company Limited  has commissioned the  wholesale 
compressed natural gas  ("CNG") station  at the  Liulin CBM  block which  will 
collect, compress and dispatch gas from the Liulin gas gathering system.

·    Fortune Oil  has become a  substantial shareholder, via  a joint  venture 
(China Gas  Group  Ltd)  in  China  Gas  Holdings  Ltd  ("CGH"),  the  largest 
independent natural gas company in China in terms of city network, serving gas
to over  150 cities.  Fortune Oil  is in  discussions with  its joint  venture 
partner to identify opportunities for cooperation between Fortune Oil and  CGH 
in the natural gas sector in China.  As of November 16 2012 the joint  venture 
and its associates hold 836,550,000shares in CGH representing 18.4 per cent of
CGH total issued shares making the joint venture and its associates one of the
largest shareholders of CGH.

 

Yangtze River Vessel - LNG Ship refuelling

 

Fortune Oil has obtained the first approval  of its type in China for its  LNG 
dual fuel  ship following  the  successful completion  of the  river  shipping 
trials and submission of documentation to the Maritime Safety  Administration. 
The license  obtained  for the  first  ship is  the  key step  to  enable  the 
commercial deployment of LNG dual fuel  ships. Fortune Oil is progressing  the 
engineering design for the first two LNG refuelling stations along the Yangtze
River which will enter  operation in 2013 and  2014. Fortune Oil has  received 
regulatory approval  for the  LNG  pier and  LNG  receiving terminal  for  the 
Chongqing LNG refuelling station which is now under construction. The  current 
plan is to build seven LNG stations along the Yangtze River over the next  few 
years.

 

Liulin CBM Operations

 

There continues to be significant progress made at the Liulin CBM block  which 
is on track  for first  gas sales in  2013. The  project is now  in the  final 
stages of appraisal with  production testing in  progress on various  vertical 
and multi-lateral wells drilled by Fortune Liulin Gas ("FLG") and China United
Coal Bed Methane Corporation ("CUCBM") and commercial gas flow rates have been
achieved. FLG is preparing the overall development plan and will seek relevant
government approvals  to enable  full scale  development of  the Liulin  block 
together with CUCBM starting in 2013.

 

·    Production rates from  the field have continued  to improve as the  wells 
are dewatered. Currently the best performing well in the field drilled by  FLG 
has achieved gas  production in  excess of  12,000m3/day and  the total  field 
production  from   FLG  wells   is  currently   approximately   28,000m3/day.  
Additionally  CUCBM   has  drilled   an   inseam  well   currently   producing 
15,000m3/day. As the wells are further dewatered gas flow rates are  projected 
to continue to improve.

 

·    Construction of  the field  gas gathering system,  the nodal  compression 
station and the  main export  product trunk-line  commenced with  construction 
scheduled for completion by mid 2013.

 

·    FLG has  completed two more  vertical wells and  is currently  dewatering 
four horizontal wells. Under the production sharing contract extension FLG has
a ten well commitment under the 6^th exploration period.

 

Oil Sector Operations

 

Bluesky jet  fuel  sales in  Q3  2012  were 780,000  tonnes,  representing  an 
increase of 16 per cent over the same period in 2011 (Q3 2011 671,700 tonnes).
To date for  2012, Bluesky  jet fuel sales  volumes are  2.19 million  tonnes, 
representing an  increase  of  16 per  cent  over  the same  period  in  2011, 
underpinned by the continued strong demand for domestic air travel in China.

 

The Maoming SPM volume throughput in Q3  2012 was 2.3 million tonnes of  crude 
oil, representing  a slight  decrease of  0.3 per  cent relative  to the  same 
period in 2011. To date, Maoming SPM volume throughput was 7.9 million  tonnes 
of crude oil,  representing an increase  of 4  per cent relative  to the  same 
period in 2011. Throughput  is driven by demand  from the Maoming refinery  in 
Guangdong  which  is  driven  primarily  by  downstream  transportation   fuel 
consumption. The discussions  with the Maoming  SPM JV partner  to extend  the 
joint venture contract continue to make good progress.

 

In Q3 2012, West Zhuhai Terminal's volume throughput increased 80 per cent  to 
623,000 tonnes compared to the same  period in 2011 (346,000 tonnes). For  the 
nine months ended 30 September 2012, West Zhuhai Terminal's volume  throughput 
increased by 9 per cent  to 1.76 million tonnes over  the same period in  2011 
(1.62 million tonnes).

 

Resources Business

 

Fortune Oil continues to make progress  on the development of the Hrazdan  and 
Abovyan mines in Armenia:

 

·     Sinosteel Engineering &  Equipment Co Ltd  along with Sinosteel  Maashan 
Institute of  Mining Research  have  completed the  feasibility study  on  the 
Hrazdan iron ore mine including the  preliminary flow sheet, pilot plant  test 
run and the initial process design. This information will be used as the basis
for the final investment decision on Hrazdan which is expected in Q1 2013.

 

·    An Armenian  drilling contractor is  progressing additional  hydrological 
studies required to complete the Environmental Impact Assessment ("EIA") which
is part of the documentation needed  to complete the submission for the  final 
approvals of the Hrazdan  mine and processing plant.  The EIA assesses all  of 
the potential environmental aspects of the mine and process plant  development 
to ensure that these operations will not adversely affect the environment.

 

·     Fortune Oil is actively engaging and has had constructive dialogue  with 
the local  environmental groups  and non-government  organisations to  address 
their concerns in relation to the mining development.

 

·      Fortune  Oil   engaged  SRK   Consulting  to   progress  the   resource 
certification for  the  Abovyan  iron  ore  mine  from  Russian  standards  to 
international standards (JORC, Australasia Joint Ore Reserves Committee) which
is expected to be completed in 2013.

 

Trading Business

 

Year to date  the total quantity  traded of base  oils and petrochemicals  was 
93,000 tonnes  compared to  117,000 tonnes  for  the same  period in  2011,  a 
decrease of 21 per  cent. This decline was  a result of increased  competition 
reducing the  range of  profitable  trading opportunities  in the  near  term. 
However, our  trading business  continues to  extend its  product offering  to 
specific oils and petrochemicals in China.

 

In order to expand our oil  trading business, Fortune Oil has established  two 
domestic oil  companies with  wholesale permits  and will  start domestic  oil 
trading. Fortune Oil  will cooperate with  local oil companies  and will  rent 
shore  tankage  in  Qingdao,  Shandong  province  in  East  China  to   import 
petrochemicals and gasoline purchased from local refineries. This will  enable 
Fortune Oil to grow its petrochemical trading opportunities.

 

FINANCIAL POSITION

 

As at 19 November  2012, the Group had  a cash balance of  £ 77 million. As  a 
result of this, together with the continuous cash inflow from operations,  the 
Board of Fortune Oil  envisages no difficulties in  meeting both current  loan 
repayment obligations and the Company's investment commitments.

 

OUTLOOK

 

Overall business performance is  in line with  the Board's expectations.   The 
Board remains optimistic with regard to Fortune Oil's prospects in view of the
current  economic  backdrop,  the  Company's  financial  strength  and  market 
potential.

 

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

                                   
Pelham Bell Pottinger              

Archie Berens / Emma Jane Edwards Tel:     020 7861 3112

 

 

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  19 
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  Main Market  of 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
 
 
IMSFFUSIUFESELF -0- Nov/19/2012 07:00 GMT
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