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Honghua Group Limited Formalized JV Company With Gansu Huateng For Fracturing Equipment

soruce:manager    click:3918    time:2011-12-05

Honghua?Group?Ltd.?(Honghua?or?Company),?together?with?its?subsidiaries?(the?Group)?(Stock?Code:?196.HK),?a?leading?global?land?drilling?rig?manufacturer,?is?pleased?to?announce?today?that?the?Groups?wholly-owned?subsidiary,?Sichuan?Honghua?Petroleum?Equipment?Corporation?Ltd.?(Sichuan?Honghua),?entered?into?a?Joint?Venture?Agreement?(Agreement)?with?Gansu?Huateng?Petroleum?Machinery?Manufacturing?Co.,?Ltd.?(Gansu?Huateng)?on?5?December?2011.

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Pursuant?to?the?Agreement,?Honghua?will?establish?a?wholly-owned?subsidiary?(Project?Company)?in?Gansu?Province,?China?with?a?registered?capital?of?RMB42?million?in?cash.?The?Project?Company?will?acquire?certain?assets?from?Gansu?Huateng?at?a?consideration?of?approximately?RMB39?million.?Thereafter,?Sichuan?Honghua?will?make?a?capital?contribution?of?RMB42?million?in?cash,?and?Gansu?Huateng?will?contribute?its?remaining?assets?worth?approximately?RMB36?million?for?the?formation?of?the?joint?venture?company?(JV?Company).?Upon?completion?of?the?capital?contribution?and?the?formation?of?the?JV?Company,?the?registered?capital?of?the?JV?Company?will?be?RMB120?million,?with?Sichuan?Honghua?and?Gansu?Huateng?holding?70%?and?30%?interest?respectively?of?its?equity.

Fracturing?equipment?is?mainly?used?in?increasing?oil?production?for?mature?oilfields?and?unconventional?gas?exploration?operations.?Following?the?steady?development?of?the?unconventional?gas?exploration?industry?and?surging?demand?for?increasing?mature?oilfield?production?in?China,?it?is?anticipated?that?the?demand?for?fracturing?services?and?related?equipment?will?grow?rapidly.?Currently,?the?fracturing?equipment?industry?is?in?a?rather?slow?pace?of?development?with?a?relatively?low?production?capacity,?which?allows?enormous?room?for?potential?development.?Leveraging?on?the?leading?R&D?and?production?technologies?of?Honghua?and?Gansu?Huateng?in?oil?and?gas?drilling?and?fracturing?equipment,?Honghua?believes?that?the?JV?Company?will?enjoy?strong?competitiveness?and?synergistic?benefits,?and?become?a?leading?enterprise?in?the?fracturing?equipment?market.?

Mr.?Zhang?Mi,?Chairman?of?Honghua?commented,?Following?the?growing?market?demand?for?increasing?oilfield?production?and?unconventional?gas?exploration?and?utilization,?the?demand?for?fracturing?equipment?will?also?increase?correspondingly?and?motivate?the?constant?development?of?the?industry,?bringing?potential?business?opportunities?to?the?JV?Company.?Gansu?Huateng?possesses?leading?oil?fracturing?equipment?production?technologies?and?consolidation?capacity?in?China,?allowing?the?JV?Company?to?cut?procurement?costs?significantly?and?upgrade?its?integrated?competitiveness.?The?cooperation?between?Honghua?and?Gansu?Huateng?will?enhance?the?Groups?unconventional?gas?and?fracturing?equipment?production?chain?and?its?oil?and?gas?equipment?product?structure.?It?will?also?increase?the?in-house?production?rate,?reduce?production?cost?and?bring?strong?synergic?effects.?Leveraging?on?its?strong?research?and?production?capability,?Honghua?will?continue?to?penetrate?the?unconventional?gas?exploration?and?fracturing?equipment?market,?so?as?to?bring?maximum?returns?to?shareholders.

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