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China Natural Gas Announces Year End 2012 Financial Results

         China Natural Gas Announces Year End 2012 Financial Results

- 2012 Revenue Increases 17.0% Y o Y to $145.3 Million

- 2012 Gross Profit Increases 2.7% Y o Y to $49.5 Million

PR Newswire

NEW YORK, April 1, 2013

NEW YORK, April 1, 2013 /PRNewswire/ -- China Natural Gas, Inc. ("China
Natural Gas" or the "Company") (PINK: CHNG), a leading provider of compressed
natural gas (CNG) for vehicular fuel and pipeline natural gas for industrial,
commercial and residential use in Xi'an, China, today announced its financial
results for the year ended December 31, 2012.

Fiscal year 2012 Results

Revenue for the year ended December 31, 2012 increased 17.0% to $145.3 million
from $124.2 million for the year ended December 31, 2011, primarily
attributable to the increase of revenue from LNG, which started in July 2011,
and we operated LNG plant for the whole year of 2012. Sales of natural gas
grew approximately 24.6% year-over-year to $132.3 million, from $106.2 million
for the year ended December 31, 2011, mainly due to our LNG business. Gasoline
revenue for the year ended December 31, 2012 decreased 53.6% to $2.8 million,
from $6.0 million in the prior year's period, because of the closure of two
gasoline fueling stations during the fourth quarter of 2011 and one gasoline
fueling stations during the fourth quarter of 2012 due to the low gross margin
of gasoline. Installation and services revenue decreased 15.0% year-over-year
to $10.2 million, from $12.0 million a year ago. For the year ended December
31, 2012, sales of natural gas, gasoline, and installation and other services
contributed 91.0%, 1.9%, and 7.1% of total revenue, respectively.

Gross profit for the year ended December 31, 2012 expanded 2.7% to $49.5
million, from $48.2 million in the same period of 2011, the increase in gross
profit was primarily attributable to the increase in revenue from LNG, offset
by the decrease in natural gas revenue from our fueling stations. Gross margin
for the year ended December 31, 2012 was 34.1%, compared to 38.8% a year ago,
primarily due to the current lower gross margin level of our LNG business, as
compared to the gross margins of those business lines making greatest
contribution to revenue.

In total, operating expenses for the year ended December 31, 2012 increased by
approximately $2.4 million to $29.7 million, from $27.4 million in the same
period of 2011. The increase in operating expenses primarily due to the
increase of transportation expense and depreciation mainly associated with our
LNG business, which started in July 2011.

Operating income for the year ended December 31, 2012 was $19.8 million, a
decrease of 5.0% year-over-year, from $20.9 million in the same period of
2011.

During the year ended December 31, 2012, the Company recognized $4 of non-cash
gain from the change in the fair value of warrants, compared to $252,062 in
the same period of 2011. Income tax expense was $3.2 million at an effective
tax rate of 22.6%, as compared to an effective tax rate of 24.0% for the year
ended December 31, 2011. Net income for the year ended December 31, 2012
decreased 27.7% to $11.0 million, or $0.52 per diluted share, from $15.3
million, or $0.71 per diluted share, for the year ended December 31, 2011,
primarily due to the loss of $4,0 million on disposal of five fueling stations
during the third quarter of 2012.

Excluding the impact of the non-cash expenses (see "About Non-GAAP Financial
Measures" below), adjusted net income was $11.0 million, versus $15.3 million
for the year ended December 31, 2011. For year ended December 31, 2012,
adjusted earnings per diluted share was $0.51, versus $0.70 per diluted share
for the year ended December 31, 2011.

Mr. Shuwen Kang, CEO of China Natural Gas, commented, "We are very pleased
with our strong growth and profitability for the year ended December 31, 2012.
During this year, we increased our number of pipeline customers to 122,020 and
we have expanded into liquefied natural gas ("LNG") business. We continued to
see higher sales volumes resulting from the increasing number of hybrid
vehicle fleet and municipal vehicles in the city of Xi'an, which utilize
compressed natural gas as a cleaner, cheaper and more efficient fuel
alternative. We believe our strong performance in 2012 demonstrated the
long-term market potentials for our CNG gas stations as well as our LNG
business, piped natural gas and installation services for residential,
commercial and industrial customers."

Financial Highlights for the Fiscal Year 2012:

  oRevenue increased by 17.0% to $145.3 million, primarily attributable to
    the realization of revenue from LNG, which started in July 2011;
  oGross profit increased by 2.7% to $49.5 million;
  oNon-GAAP net income of $11.0 million, or $0.51 per diluted share.

Balance Sheet

As of December 31, 2012, the Company had cash and cash equivalents of $10.9
million, compared with $9.6 million as of December 31, 2011.

Mr. Kang concluded, "We remain optimistic about the market growth and
potentials for natural gas usage in the developing Shaanxi, Henan and Hubei
provinces. In future, we will focus on sales to fleet fueling vehicles and
fueling boat. We are confident that our strong balance sheet, our current
infrastructure, technical expertise and strategic LNG expansions will help
sustain our steady growth and profitability.

We also continue to remain optimistic about the long-term opportunities in the
LNG market as China aims to increase natural gas usage. On July 16, 2011, we
completed most of the construction of Phase I of the LNG plant and began
commercial production and sale of LNG. The launch of the LNG plant is an
important part of our integration strategies, which include strategic plans to
develop our own network of LNG fueling stations in Shaanxi, Henan and Hubei
Provinces."

About China Natural Gas, Inc.

China Natural Gas (http://www.naturalgaschina.com) transports and sells
natural gas to vehicular fueling terminals, as well as commercial, industrial
and residential customers through its distribution networks in China's
Shaanxi, Henan and Hubei Provinces. The Company owns approximately 120 km of
high-pressure pipelines and operates 20 CNG fueling stations in Shaanxi
Province, 10 CNG fuelling stations in Henan Province and 1 CNG fueling station
in Hubei Province. China Natural Gas' five primary business lines include: (1)
the distribution and sale of CNG through Company-owned CNG fueling stations
for hybrid (natural gas/gasoline) powered vehicles; (2) the installation,
distribution and sale of piped natural gas to residential, commercial and
industrial customers through Company-owned pipelines; (3) production and sales
of LNG through our LNG production facility in Jingbian County, Shaanxi
Province; (4) the distribution and sale of gasoline through Company-owned CNG
fueling stations for hybrid (natural gas/gasoline) powered vehicles; and (5)
the conversion of gasoline-fueled vehicles to hybrid (natural gas/gasoline)
powered vehicles through its auto conversion division.

About Non-GAAP Financial Measures

This press release contains non-GAAP financial measures for earnings that
exclude the effect of non-cash non-operating expense related to the Senior
Notes issued in January and March 2008 as well as change in fair market value
of the Company's outstanding warrants. China Natural Gas' management uses
those non-GAAP financial measures when it internally evaluates the performance
of business and makes operating decisions, including internal budgeting and
performance measurement. China Natural Gas believes that providing the non-
GAAP measures is useful to investors for a number of reasons. The non-GAAP
measures provide a consistent basis for investors to understand China Natural
Gas' financial performance in comparison to historical periods, and it allows
investors to evaluate China Natural Gas' performance using the same
methodology and information as that used by China Natural Gas' management.
However, investors need to be aware that non-GAAP measures are subject to
inherent limitations because they do not include all of the expenses included
under GAAP and they involve the exercise of judgment of which charges are
excluded from the non-GAAP financial measure.

The Company has provided a reconciliation table of the non-GAAP measure to the
equivalent GAAP measure.

 CHINA NATURAL GAS, INC. AND SUBSIDIARIES
 RECONCILIATION OF GAAP TO NON-GAAP MEASURES
 FOR THE YEAR ENDED DECEMBER 31, 2012 AND 2011
                                                      For the year ended
                                                      December 31
                                                      2012        2011
 GAAP Net Income                                      11,037,267  15,261,932
 Add:
              Amortization of discount on senior      -           -
              notes
              Amortization of deferred offering       -           -
              costs
              Change in fair value of warrants        (4)         (252,062)
 Non-GAAP Net Income                                  11,037,263  15,009,870
 (Excludes all non-cash items)
 Weighted average shares outstanding
              Basic                                   21,458,654  21,418,389
              Diluted                                 21,458,654  21,418,389
 GAAP Basic EPS                                       0.51        0.71
 Add:
              Amortization of discount on senior      0.0000      0.0000
              notes
              Amortization of deferred offering       0.0000      0.0000
              costs
              Change in fair value of warrants        0.0000      (0.0118)
 Non-GAAP Basic EPS                                   0.51        0.70
 GAAP Diluted EPS                                     0.51        0.71
 Add:
              Amortization of discount on senior      0.0000      0.0000
              notes
              Amortization of deferred offering       0.0000      0.0000
              costs
              Change in fair value of warrants        0.0000      (0.0118)
 Non-GAAP Diluted EPS                                 0.51        0.70



SAFE HARBOR: FORWARD-LOOKING STATEMENTS

This press release includes statements that may constitute forward-looking
statements made pursuant to the safe harbor provision of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements can
be identified by terminology such as "will," "expects," "anticipates,"
"future," "intends," "plans," "believes," "estimates" and similar statements.
For example, statements about the future plans and goals of the JV with CNPC
and its prospects are forward looking and subject to risks. China Natural Gas,
Inc. may also make written or oral forward-looking statements in its periodic
reports to the U.S. Securities and Exchange Commission on forms 10-K, 10-Q and
8-K, in its annual report to shareholders, in press releases and other written
materials and in oral statements made by its officers, directors or employees
to fourth parties. Statements that are not historical facts, including
statements about the Company's beliefs and expectations, are forward-looking
statements. Forward-looking statements involve inherent risks and
uncertainties that could cause actual results to differ materially from the
forward-looking statements. A number of important factors could cause actual
results to differ materially from those contained in any forward-looking
statement. Potential risks and uncertainties include, but are not limited to,
risks outlined in the Company's filings with the U.S. Securities and Exchange
Commission, including its registration statements on Forms S-1 and S-3, in
each case as amended. The Company does not undertake any obligation to update
any forward-looking statement, except as required under applicable law.

This release is not an offer of securities for sale in the United States.
Securities may not be offered or sold in the United States absent registration
or an exemption from registration. Any public offering of securities to be
made in the United States will be made by means of a prospectus that may be
obtained from the issuer or selling security holder and that will contain
detailed information about the company and management, as well as financial
statements.

CHINA NATURAL GAS, INC.  AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2012 and 2011
(Stated in US Dollars)
                                                                                                                  As of December 31,
                                                                                                                  2012            2011
ASSETS
CURRENT ASSETS:
Cash and cash equivalents                                                                                         $ 10,857,456    $ 9,622,883
Accounts receivable, net                                                                                            2,148,379       2,997,845
Other receivables, net                                                                                              458,605         540,646
Employee advances                                                                                                   399,031         285,270
Inventories                                                                                                         2,473,933       1,938,754
Advances to suppliers                                                                                               4,869,606       4,540,139
Prepaid expense and other current assets                                                                            3,541,431       4,470,687
Total current assets                                                                                                24,748,441      24,396,224
Investment in unconsolidated joint ventures                                                                         1,587,000       1,574,000
Property and equipment, net                                                                                         179,515,563     174,097,754
Construction in progress                                                                                            53,393,933      45,882,320
Deferred financing cost, net                                                                                        -               517,334
Goodwill                                                                                                            839,806         629,729
Other intangible assets                                                                                             21,400,924      18,910,244
Prepaid expenses and other assets                                                                                   7,015,142       10,976,203
TOTAL ASSETS                                                                                                      $ 288,500,809   $ 276,983,808
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Senior notes- current maturities                                                                                  $ 38,352,498    $ 9,671,682
Current portion of bank loan payable                                                                                4,761,000       4,722,000
Redeemable liabilities - warrants                                                                                   17,500,000      -
Accounts payable and accrued liabilities                                                                            6,756,278       7,694,423
Other payable - related party                                                                                       1,616,429       787,000
Short-term borrowing - related party                                                                                2,679,945       1,359,945
Unearned revenue                                                                                                    3,663,570       4,280,594
Accrued interest                                                                                                    1,936,584       1,029,431
Taxes payable                                                                                                       2,232,546       2,626,271
Total current liabilities                                                                                           79,498,850      32,171,346
LONG-TERM LIABILITIES:
Senior notes, net of current portion                                                                                -               25,791,151
Bank loan payable, net of current portion                                                                           4,761,000       9,444,000
Borrowings - related party                                                                                          -               1,320,000
Warrants liability                                                                                                  -               17,500,000
Total long-term liabilities                                                                                         4,761,000       54,055,151
Total liabilities                                                                                                 $ 84,259,850    $ 86,226,497
STOCKHOLDERS' EQUITY:
Preferred stock, par value $0.0001 per share, 5,000,000 authorized, none issued and outstanding                   $ -             $ -
Common stock, par value $0.0001 per share, 45,000,000 authorized, 21,458,654 issued and outstanding at December     2,145           2,145
31, 2012 and 2011
Additional paid-in capital                                                                                          83,501,637      82,909,485
Accumulated other comprehensive income                                                                              21,276,931      19,817,493
Statutory reserves                                                                                                  11,818,087      10,124,710
Retained earnings                                                                                                   87,410,615      77,903,478
Noncontrolling interests                                                                                            231,544         -
Total stockholders' equity                                                                                          204,240,959     190,757,311
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                                        $ 288,500,809   $ 276,983,808



CHINA NATURAL GAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2012 and 2011
(Stated in US Dollars)
                                   YearsEndedDecember31,
                                   2012            2011
Revenue
Natural gas                        $ 132,255,499   $ 106,178,398
Gasoline                             2,782,062       5,998,022
Installation and other               10,243,727      12,045,106
                                     145,281,288     124,221,526
Cost of revenue
Natural gas                          88,790,622      65,062,505
Gasoline                             2,626,569       5,756,960
Installation and other               4,327,203       5,183,985
                                     95,744,394      76,003,450
Gross profit                         49,536,894      48,218,076
Operating expenses
Selling                              22,266,885      17,377,703
General and administrative           7,456,049       9,984,565
                                     29,722,934      27,362,268
Income from operations               19,813,960      20,855,808
Non-operating income (expense):
Interest income                      68,472          42,290
Interest expense                     (1,248,842)     (771,916)
Loss on disposal of fixed assets     (4,020,260)     -
Other income (expense), net          144,464         126,100
Change in fair value of warrants     4               252,062
Foreign currency exchange loss       (499,575)       (430,723)
                                     (5,555,737)     (782,187)
Income before income tax             14,258,223      20,073,621
Provision for income tax             3,220,954       4,811,689
Net income                           11,037,269      15,261,932
Less: Loss (income)
attributable to                      (163,245)       -
noncontrolling interests
Net income attributable to           11,200,514      15,261,932
China Natural Gas, Inc.
Other comprehensive
income
Foreign currency translation gain    1,459,438       4,150,348
Comprehensive income               $ 12,659,952    $ 19,412,280
Weighted average
shares outstanding
Basic                                21,458,654      21,418,389
Diluted                              21,458,654      21,418,389
Earnings per share
Basic                              $ 0.52          $ 0.71
Diluted                            $ 0.52          $ 0.71



CHINA NATURAL GAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
As of December 31, 2012 and 2011
(Stated in US Dollars)
                                                                             FortheYearsendedDecember31,
                                                                             2012                 2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                                     11,037,269           15,261,932
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization                                                  14,025,863           9,600,518
Provision for (recovery of) doubtful accounts                                  197,942              110,166
Loss (Gain) on disposal of equipment                                           4,020,260            (3,385)
Stock-based compensation                                                       592,152              627,660
Change in fair value of warrants                                               (4)                  (252,062)
Change in assets and liabilities:
Accounts receivable                                                            992,933              (1,201,079)
Other receivables                                                              (194,338)            (339,941)
Employee advances                                                              (111,449)            27,679
Inventories    (146,105)            (860,723)
Advances to suppliers                                                          (846,886)            (2,729,776)
Prepaid expense and other current assets                                       1,407,530            (133,968)
Accounts payable and accrued liabilities                                       (1,136,395)          2,064,383
Unearned revenue                                                               (651,968)            1,787,063
Accrued interest                                                               907,153              382,903
Taxes payable                                                                  (415,154)            137,886
Net cash provided by operating activities                                      29,678,803           24,479,256
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for acquisition of property and equipment                              (4,780,369)          (7,314,640)
Proceeds from sales of property and equipment                                  2,852,712            16,990
Additions to construction in progress                                          (14,604,880)         (11,769,752)
Prepayment on long-term assets                                                 (1,164,454)          (1,169,313)
Payment for acquisition of business                                            (656,593)            (976,500)
Payment for intangible assets                                                  (1,813,996)          (189,843)
Net cash used in investing activities                                          (20,167,580)         (21,403,058)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options                                        -                    670,075
Proceeds from short-term borrowing and other payable,                          -                    3,454,945
related parties
Repayment of long -term debt                                                   (4,758,000)          (4,650,000)
Repayment of senior notes                                                      (3,333,334)          (3,333,334)
Net cash (used in) provided by financing activities                            (8,091,334)          (3,858,314)
Effect of exchange rate changes on cash and cash                               (185,316)            358,750
equivalents
NET INCREASE (DECREASE) IN CASH & CASH                                         1,234,573            (423,366)
EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF                                        9,622,883            10,046,249
YEAR
CASH AND CASH EQUIVALENTS, END OF YEAR                                       $ 10,857,456         $ 9,622,883
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid, net of capitalized interest                                   $ 941,966            $ 742,224
Income taxes paid                                                            $ 3,422,353          $ 4,683,774
Non-cash transactions for investing and financing
activities:
Construction material transferred to construction in progress                $ 67,100             $ 7,396,787
Construction in progress transferred to property and                         $ 19,393,132         $ 94,607,146
equipment
Construction in progress transferred to intangible assets                    $ -                  $ 11,676,342
Advances to suppliers transferred to construction in                         $ -                  $ 7,652,350
progress
Other assets transferred to construction in progress                           2,754,075            3,070,647
Capitalized interest - amortization of discount of notes                     $ 6,107,601          $ 4,203,896
payable and issuance costs

For more information, please contact:
China Natural Gas, Inc.
Chaoyang Qiao, CFO
Phone: +86-29-8832-3325 x903
Cell: +86-137-0918-2877
Email: qiaochaoyang@naturalgaschina.com
Jackie Shi
Investor Relations Director
Phone: +86-29-8832-3325 x922
Cell: +86-139-9287-9998
Email: yjshi@naturalgaschina.com

SOURCE China Natural Gas, Inc.

Website: http://www.naturalgaschina.com
Website:
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