Friday, March 29, 2024
 
Columnist
Martin Hennecke
 
HOIFU ENERGY
HKEx Stock Code : 00007 
 
Corporate Profile
The principal activitiesare the provision of financial services and oil and gas exploration and production. The financial services include stockbroking, futures and options broking, mutual funds and insurance-linked investment plans and products broking, securities margin financing and provision of corporate finance advisory services. The oil and gas exploration and production are developed through the wholly owned subsidiary, KT Energy.

Business Review - For the year ended December 31, 2012

OIL AND GAS BUSINESS

On 17 December 2012, the Group entered in to an agreement (the ¡§Acquisition¡¨) to acquire the entire share capital of China Oil Resources Company Limited and its subsidiary (the ¡§Target Group¡¨) which is principally engaged in the operating of exploration and exploitation of oil and gas in Tunisia. Through PetroAsian Tunisia, the Target Group has 78.03% Participating Interests and 81.03% Paying Interests in the Ksar Hadada Permit, which was granted by the Government of Tunisia in relation to the operating interests in the exploration and exploitation of oil and gas in five identified oil prospects with a total area of approximately 2,252 square kilometers in Ksar Hadada, which lies onshore in southeast Tunisia.

Pursuant to the production sharing contract dated 20 December 2003 (¡§PSC¡¨) in relation to the exploration and exploitation of oil and gas in the area under the Ksar Hadada Permit, the Group, among other PSC operators, is entitled to recover up to 45% of the oil production and 55% of the gas production for their expenditures per annum. Depending on the rate of oil and gas production, the PSC contractors will share the remaining oil and gas according to the sharing ratios in the range of 17.5% to 40% for the profit oil and in the range of 20% to 45% for the profit gas as set out in the PSC.

In view of the increasing global demand on oil and gas and the fact that the area under Sud Remada permit in Tunisia, the structure of which is adjacent to the area under the Ksar Hadada Permit and operated by Chinook Energy Inc. (stock code: CKE), a company listed on Toronto Stock Exchange, has current gross production of approximately 4,000 barrels of oil per day in average as announced by Chinook Energy Inc. on 1 November 2012 at its website (www.chinookenergyinc.com) and the SEDAR website (www.sedar.com), the Directors are optimistic about the development of the area under the Ksar Hadada Permit and consider that the Acquisition shall bring along a synergy effect with the Group's existing business and enhance the future oil and gas reserves, which will further promote the economic growth potential of the Group. The Acquisition will be completed on 2 April 2013.

SECURITIES, FUTURES AND OPTIONS BROKERAGE BUSINESS

During the period under review, revenue for the Group's securities, futures and options broking business, as well as the underwriting commission, which accounted for 62.6% of total revenue was HK$11,886,000 (2011: HK$19,772,000). The division performance was weak on the stagnant market for the most period of the year on poor global economy outlook and poor investment confidence.

ADVISORY FOR FINANCIAL MANAGEMENT

Despite a significant decrease in funds raising activities and funds raised by IPO in Hong Kong stock market, our corporate finance business performed admirably and made further contribution to the Group's revenue. During the period, the division recorded a revenue of HK$4,780,000, an decrease of 43% when compared with HK8,380,000 recorded for the corresponding period last year (12 months ended 31 December 2011). During the year under review, the division had succeeded in securing mandates of mergers and acquisitions and regular engagements on financial advisory of listed companies. The above mentioned performance was rooted in the Group's conservative development policy in providing financial management and advisory services. The division's mature and premium services have kept the clients' loyalty and continued attracting new business.

SECURITIES MARGIN FINANCING

During the period under review, interest income generated from securities margin loan portfolio was HK$2,246,000 (2011: HK$2,717,000). As overseas environment remains volatile, investors tended to cut their overnight position to avoid risk for the most period of the year. The investment activities tended to be speculative in short term nature.

Business Outlook - For the year ended December 31, 2012

OIL AND GAS BUSINESS

The Egypt oil and gas exploration business is developed through our wholly owned subsidiary, KTE.

The Group has drilled three wells in Block 2 and has found high level of gas and existence of crude oil in the southern part of the block. All the financial obligations required under the eight-year concession agreement were met but the Group is obliged to drill four more wells by September 2014. Given the continual unrest in Egypt, the Group has decided to withhold further investment in Egypt but will choose an appropriate time to further invest.

ADVISORY FOR FINANCIAL MANAGEMENT

In respect of corporate finance, while maintaining the stable growth of business from our existing clients, the division shall actively devote effort in rainmaking to enlarge the client base. The division believes that balancing the investor interests and commercial viability would still require the conservative policy in the coming years. The division shall continue enhancing our capability in soliciting and undertaking projects of various scales. Although the global economic and financial environment were exceptionally volatile mainly due to the lack luster rebound in US economic growth and the on-going European debt crisis, the Government of the HKSAR has actively advocated RMB related products and the mainland Chinese economy is still in growth pattern. The division is watching closely on the development of new financial business in both Hong Kong and mainland China, in order to secure emerging opportunities.

Financial management and advisory division turned slower as investment markets remained still unstable. Riskier products like equity linked funds had poor market response whilst the fixed return products including bonds and high yield foreign currency registered more popular acceptance.

Source: Hoifu Energy (00007) Annual Results Announcement
Chairman Hui Chi Ming Issued Capital (shares) 1,457M
Par Value HKD 0.1 Market Capitalisation (HKD) 1,938M
 
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