China Petrotech Launches IPO At S$0.34 Per Share - First Company From Xi'an To Launch IPO

BackMay 31, 2004

Singapore, 31 May 2004 - China Petrotech Holdings Limited ("Petrotech"), a provider of technological solutions and services for the upstream activities of the People's Republic of China ("PRC") oil and gas industry, has today registered its prospectus with the Monetary Authority of Singapore. Petrotech will launch its initial public offering ("IPO") of 62 million shares at S$0.34 per share on 31 May 2004. Petrotech will be listed on the Main Board of the Singapore Exchange Securities Trading Limited ("SGX-ST").

Said Mr Chan Shut Li, William, Executive Chairman of Petrotech: "This IPO marks a new milestone in our corporate history and signifies that we are about to embark on our next phase of growth. Although we are a young company, we have come a long way and we are gearing up to scale greater heights with our newly acquired listed status. With our experienced management team, we are confident that we will be able to expand our presence in the PRC oil and gas industry. "

The Offer

The offer of 62 million shares comprises 49 million new shares and 13 million vendor shares. The offer represents approximately 25% of Petrotech's enlarged share capital. Of this, 5 million shares will be offered by way of public offer and the remaining 57 million shares to be offered by way of placement.

At S$0.34 per share, Petrotech is priced at a price earnings ratio of 10.5 times, based on its net earnings per share for the financial year ended 31 December 2003 ("FY2003").

Use Of Proceeds

Petrotech intends to use the estimated net proceeds of S$14.5 million from its IPO as follows:

- approximately S$6.2 million to fund the expansion of its research and development capabilities, including the establishment of a research and development centre and acquisition of proprietary rights from the third party researchers to facilitate development of new IT solutions;

- approximately S$2.1 million to fund the production of IT equipment which can be integrated with its software solutions;

- approximately S$4.1 million to fund the potential acquisition of and/or investments in complementary businesses where the opportunities arise, failing which the funds will be used for its working capital requirements;

- approximately S$2.0 million to set up additional sales and marketing offices in the PRC; and

- the balance for general corporate and working capital requirements.

About China Petrotech Holdings Limited

Petrotech offers diverse and integrated IT solutions to oil and gas companies in the PRC, with a focus on the exploration (onshore and offshore), development and production of oil and gas. Petrotech's IT solutions and services include the design and development of standardised software solutions, software customisation, and customers' support services such as software maintenance and upgrading services. Its standardised software solutions can be categorised into data collection and transmission systems, data management systems and data application systems.

Familiarity with PRC Oil and Gas Industry

The Group's familiarity with and strong understanding of the oil and gas exploration, development and production processes in the PRC enables the Group to identify local technological trends and needs of its PRC customers. The Directors believe that the Group's localised content and its competitive pricing will provide the Group with a competitive advantage.

Strong Emphasis in Research and Development Capabilities

The Group's research and development team is instrumental in adopting leading technologies to develop IT solutions that meet the changing needs of the PRC oil and gas industry.

Said Ms Zhao Ying, Chief Executive Officer of Petrotech: "We have built up a strong foundation and expertise in the exploration, development and production of oil and gas. This enables us to easily identify the local technological trends and needs of our PRC customers. We can therefore meet the changing demands of our customers. We will also collaborate with consultants from renowned educational institutions in the PRC to tap their expertise and experience."

Recognition by Industry Leaders in the PRC

The Group's major customers today include the PetroChina Group, Sinopec Group and CNOOC Group , which are the leading oil and gas companies in the PRC. The Group's credibility has been enhanced by the issue of joint directives by CNPC and PetroChina requiring all their exploration teams to use one of the Group's software solutions to comply with its standard operating procedure.

"Bottom-Up" Approach to Secure Customers

Commented Mr William Chan: "Our strategy is to focus on developing effective IT solutions at the basic level of data collection, followed by the intermediate level of data management and the advanced level of data application. We believe that by establishing our presence from the ground up, we will build up a following for our IT solutions and help to lay the foundation for the promotion of our intermediate and advanced levels of IT solutions to customers."
Added Ms Zhao Ying: "This gives us an edge over our competitors as our customers have been using our IT solutions for data collection with compatible solutions for data management and application and have established confidence in our IT solutions."

Strong Post-Sales Support

Petrotech remains committed to providing quality post-sales support by maintaining regular post-sales interaction with its customers and timely response to enquiries, troubleshooting assistance and free software maintenance and upgrading services. The Group's policy is to respond to its customers' requests for on-site consultation within a period of 24 hours in any location within the PRC.

Prospects And Future Plans

On the Group's prospects, Mr William Chan said: "We are confident that with the strong economic growth, the demand and consumption of oil in the PRC will increase in the near future. In order to meet the increased demand, we expect to see a higher level of oil exploration, development and production activities, as well as the acquisition of overseas oil reserves by major domestic oil companies. Thus, we are expanding our range of IT solutions and our scope of services to include technical support services and consulting services."

To meet the growing demand for energy and to address environmental issues, the PRC government is developing its gas industry. The PRC government is in the process of constructing the extensive West-to-East pipeline, connecting the gas fields in the PRC's sparsely populated regions to the urban markets in the eastern regions.

Added Ms Zhao Ying: "With the various developments going on, we expect activities in the exploration, development and production of oil and gas industry to increase. We also noticed an increase in companies using IT solutions to help control exploration, development costs and increase production efficiency. In view of these trends, we plan to establish more sales offices to expand our market coverage in the PRC. We also intend to establish a research and development centre and manufacture equipment that can be integrated with our software solutions."


For the financial year ended 31 December 2003 ("FY2003"), the Group recorded revenue of RMB41.7 million, a 176.2% increase from the RMB15.1 million recorded in FY2002 as a result of strong demand for its software solutions. The Group's net profit also increased by more than three-fold from RMB6.3 million in FY2002 to RMB30.1 million in FY2003.

The issue will close on 7 June 2004. Trading for the shares is expected to commence on 9 June 2004.

Anyone who wishes to subscribe for the shares will need to make an application in the manner set out in the prospectus. Copies of the prospectus can be obtained on request, subject to availability, during office hours from Kim Eng Capital Pte. Ltd., members of the Association of Banks in Singapore, members of the SGX-ST and the SGX-ST website: