Main Web Site : http://www.fortune-oil.com/

CBM Partner Web site : http://www.molopo.com.au

IC Write Up : 21st Apr 2006 IC Write Up

Last Major News : 18th Apr 2006 Coal Bed Methane Project

Prelims : 27th Apr 2006 Prelim Results Link

Latest Broker Forecasts : Oriel 7th April 2006 BUY

Prelim Results and Further Updates due around 25th to 27th April 06

ABOUT FORTUNE OIL

For over a decade Fortune Oil PLC has focused on investments and operations in oil & gas infrastructure projects in China and remains one of the few overseas companies operating oil terminals and supplying natural gas in China, all in partnership with the countrys largest oil & gas companies
Fortune Oil PLC is incorporated in England and Wales and is subject to UK Listing Rules and compliance regulations. The largest shareholders are First Level Holdings Limited, Vitol and major Chinese state-owned corporations.

NATURAL GAS :




China will be the world's largest growth market for natural gas as supplies of this clean and economically attractive fuel become more accessible. Fortune Oil's investments in natural gas are principally through Fu Hua, a joint venture with a PetroChina affiliate, which on-sells gas from the pipelines supplying Beijing. In north China Fortune Oil controls and operates distribution pipelines and city gas reticulation systems as well as facilities to produce and transport Compressed Natural Gas (CNG).
Fortune Oil is now one of the leading providers of CNG in Beijing, providing clean fuel for buses, households and factories. In October 2004 Fortune Oil also became the first overseas company to supply LNG (Liquefied Natural Gas) to users in China, delivering LNG by road to the ancient city of Qufu, the home of Chinese philosophy.

OIL TERMINALS :
Maoming SPM

Fortune Oil established the Maoming Single Point Mooring (SPM) in December 1994 to supply crude oil to Sinopecs Maoming refinery, the largest in southern China. The SPM now delivers 10% of Chinas crude oil imports. It allows VLCCs (Very Large Crude Carriers) of up to 280,000 tonnes to moor and deliver crude oil via a 15 km sub-sea pipeline. The SPM is owned and operated by a joint venture company, Maoming King Ming Petroleum Company Limited, and the other main shareholder is Sinopec Maoming Petrochemical Corporation.
The SPM buoy is commonly used throughout the world for loading and unloading liquids but the Maoming SPM remains the only buoy system in China used for importing crude oil. Fortune Oil believes that the SPM concept is a cost-effective solution for importing crude oil into China as many ports are shallow and will become more congested as demand increases. The only alternative to a buoy system in many ports is to dredge channels for large tankers. The SPM has provided significant cost savings to the Maoming refinery through its low operating costs and VLCC capability.

Products Terminals

The oil products market in China is in the process of deregulation and this will allow a larger role for foreign companies in the import and distribution of refined products. Fortune Oil remains one of the few foreign companies with interests in products terminals.
Fortune Oil and Vitol jointly developed the West Zhuhai Oil Products Terminal at the western entrance of the Pearl River Delta. These facilities came on stream in 1998 and comprise 240,000 cubic metres storage and jetties for receiving and distributing refined products. It is one of the few products terminals in south China able to handle 80,000 dwt ocean-going tankers. A controlling stake was sold to PetroChina which uses the terminal for supply of diesel to south China.
In addition Fortune Oil controls a LPG terminal and supply business (Fu Duo), which has 80,000 customers in Zhanjiang city, and owns storage facilities in Shantou. Prior to the restructuring of the China oil industry in the late 1990s, Fortune Oil was also a major participant in the gasoline retail market and in oil trading. We continue to operate two gasoline stations in Beijing but our trading activities are limited to low-risk domestic trading.

Blue Sky Aviation Oil

The South China Bluesky Aviation Oil Company owns and operates the refuelling infrastructure at 15 airports in south China. These include Wuhan, Guilin and the new Guangzhou Baiyun International Airport. Fortune Oil and BP each hold 24.5% of the joint venture and Beijing-based China Aviation Oil Supply Corporation (CAOSC) holds 51%. The consumption of jet fuel in China is rising significantly, particularly at Guangzhou because of pent-up demand in the Pearl River Delta.
The new Guangzhou airport was opened in August 2004. The construction cost was US$2.3 billion and it is almost four times the size of the old airport in downtown Guangzhou. The new airport is capable of handling 25 million passengers and 1 million tonnes of cargo per year and ranks number three for aviation fuel sales in mainland China.

Details of the Proposed Transaction

The total consideration for the Proposed Transaction is US$200 million in cash on completion of the Proposed Transaction and a further US$200 million as Deferred Consideration.

Under the Deferred Consideration, the Company may elect to request China Gas to replace its entitlement to Deferred Consideration in a maximum number of 250,000,000 shares in China Gas, based on a benchmark share price (the "Benchmark Price") referenced to the average China Gas share price for the 30 consecutive trading days prior to the request made by the Company between 1 November 2013 and 31 December 2013. The issue of China Gas shares under the Deferred Consideration is subject to approval of the China Gas board and the listing permission from the Hong Kong Stock Exchange.

To the extent that the maximum number of shares at the Benchmark Price is worth less than US$200 million, any shortfall will be paid by China Gas in cash. In addition, the Deferred Consideration contains an accrued interest element at a 6 per cent. annual interest rate, accruing from the date of completion of the Proposed Transaction up to and including the date of payment of the Deferred Consideration provided that no shares are issued in satisfaction of all or part of the Deferred Consideration.

As part of the Proposed Transaction, the Company has the right to nominate two directors to China Gas' board, including one executive director and the managing director

Kicking myself, why didn't buy when writing post 886!!

When this is sold....what is left...as haven't been following as much lately....

very complicated, as fto is a major holder (about 18%) in CGH and has so many rights and other assets .... I say over 60% will be left.

I'm pricing this at about 18p a share, so will hold March future positions for now.

Nice deal!!!!
Brought the sp right up to the brick wall that is 12.5p in half hour.... :-)
Need to go through this release...
Over 3 million sellers against about 700k buyers and we are still up over 11p?????
This must be good news.......

Rally is being hard sold into..

From another board
serious lnvestor



























From another board:
at the current time Liu Ming Hui is both president and managing director of cghl with
Leung Wing Cheoing being deputy managing director. after this transaction with fto
Liu Ming Hui will step down from managing director and remain president with fto appointing
their director to take over the number two spot in cghl as managing director. i think that
fto with their jv company cgg with Liu Ming Hui have a very satisfactory arrangement together
and that Liu Ming Hui possibly believes that fto management team are first class for the time when he stands down sometime in the future. a possible reverse takeover situation.
all imho of course. s.i
:

FTO has about 9% of CGH, valued at $320mln, plus its Gas business valued $400mln, total valuation for these two assets alone is about three times its current market cap.
Isn't this funny????

Couple of points from the announcement
The Company will compensate China Gas on a dollar for dollar basis where the net profits for the Natural Gas Business for FY2013 are less than HK$200 million (approximately £16.0million) or are less than HK$400 million (approximately £31.9million) in 2014. This compensation agreement is not subject to any cap. The Board expects that the required profit hurdles will be met."
and...."The net proceeds of the initial cash payment on completion of the Proposed Transaction are expected to be approximately US$193.5 million (approximately £120.9 million). These net proceeds are stated after deduction of transaction expenses of approximately US$6.5 million (approximately £4.1 million). Prior to any reinvestment or return to Shareholders, the Proposed Transaction is expected to be dilutive to underlying earnings (1)."
The first is a possible sting in the tail if earnings fall short of expectations. The second suggest a special divi to FTO could be on the cards.

I think the first point will be met as the gas market expansion will only increase as we move forward but it is a clause that needs to be inserted from a legal stand point.
The second point you raise...I too had started to see it like that.....but I am just not sure if we should take it to mean so....
Through this deal we are losing a big chunk of our revenue and profit over last year....
Need to research more.......could be why the sp is having a second thought....

Lets see if the press give this any bullish coverage tomorrow....
I would expect CGH to have a decent pop on this news as they are expanding their hold on city distribution of gas networks...
Which in turn will be good for FTO..... :-)

CGH jumped about 4% initially but fallen in late afternoon, anyway closed 6.05HKD. Average price that FTO paid for 18.4% stake in CGH was less than 4HKD.

Market cap of CGH is over £2.2bln, so FTO's share in the company is valued over £200 mln. FTO sold gas business for $400mln, total value of these two businesses are £450mln.

Currently, FTO market cap is just £218mln while it has many many other assets.... and is profit making and dividend paying co. I wonder why it is so cheap.

From Tempus....Telegraph
On yesterday's deal for FTO

"The market does not trust Fortune Oil. That is the only conclusion to be drawn after yesterday’s $400 m sale of its natural gas business in China, Tempus believes. Why? That asset sale will leave the company with approximately £100m in cash in the bank and a stake in Hong Kong listed China Gas worth another £280m. To those assets one can add several others and yet the company´s market capitalization is now just a little above £200m. The market’s problem is a deep mistrust of a company regarded as exposed to the ups and downs of the Chinese economy. Its fans, such as Malcolm Graham-Wood at VSA Capital, think the shares could be worth 28p, on any reasonable break-up value. Mr Graham-Wood speculates that Fortune could decide to seek a listing in Hong Kong, where the company is better known and appreciated. This would almost certainly lead to a significant upgrade in the valuation. Highly speculative, but an interesting punt Tempus believes."

It does spell out very clearly how under valued FTO really is... :-)
Not so risky looking after all...

The big picture starting to emerge,the opportunities are truly awesome!!

Very light volume so far. Market is clearly steering clear.

No shares available...
No sellers at this level.....

from another board :if you look on china gas holdings site at the other side of the transaction you will see on page
9 a breakdown of the parties interested and the close connections between fto and cghl.

you could ask yourself why sell the gas business and liullin when liullin is just about to
produce and would have a rising production and t/o plus profits.

why when fto are major shareholders in cghl and part of the controlling shareholder group should they wish to have further shares, bought at a higher price.

it could be that : 1 that with the new shares obtained plus the concert party as shewn
that a reverse takeover could be achieved much easier.
2 that that would anyway in a reverse takeover be the first objective the
merging of the gas interests.
3 that would allow cghl the largest private gas company in china to get
a uk listing. easier access to external financiing for projects.
4 that london is becoming an off shore centre for far eastern billionaires etc.

i cannot see that this current deal is the end of the matter rather than the beginning of
something large otherwise it would not make sense at all.

i am going to telephone Piorot, he is such a good detective i am sure he will get to the
answer for me.

China Gas Holdings closed up over 2% @ hk$ 6.120

Not surprised its having a look at the 12p mark!!!
I am surprised it has not fallen back as mush....so far....