SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
The Securities Exchange Act of 1934
For the month of December, 2006
CHINA PETROLEUM & CHEMICAL CORPORATION
A6, Huixindong Street,
Chaoyang District Beijing, 100029
People's Republic of China
Tel: (8610) 6499-0060
(Indicate by check mark whether the registrant files or will file
annual reports under cover of Form 20-F or Form 40-F.)
Form 20-F X Form 40-F
--------- ---------
(Indicate by check mark whether the registrant by furnishing the
information contained in this form is also thereby furnishing the information
to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act
of 1934. )
Yes No T X
--------- ---------
(If "Yes" is marked, indicate below the file number assigned to
registrant in connection with Rule 12g3-2(b): 82-__________. )
N/A
This Form 6-K consists of:
The announcement on connected transaction of China Petroleum & Chemical
Corporation (the "Registrant"), made by the Registrant in English on December
6, 2006.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
China Petroleum & Chemical Corporation
By: /s/ Chen Ge
-------
Name: Chen Ge
Title: Secretary to the Board of Directors
Date: December 7, 2006
The Stock Exchange of Hong Kong Limited takes no responsibility for the
contents of this announcement, makes no representation as to its accuracy or
completeness and expressly disclaims any liability whatsoever for any loss
howsoever arising from or in reliance upon the whole or any part of the
contents of this announcement.
[GRAPHIC OMITTED]
(a joint stock limited company incorporated in the People's Republic of China
with limited liability)
(Stock Code: 0386)
ANNOUNCEMENT ON CONNECTED TRANSACTION
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Acquisition Agreement
The Board announces that on 6 December 2006, Sinopec Corp. and Shengli
Administrative Bureau entered into the Acquisition Agreement, pursuant to which
Sinopec Corp. has agreed to conditionally acquire the Target Assets owned by
Shengli Administrative Bureau. The consideration for the Acquisition is RMB3.5
billion (approximately HK$3.46535 billion) and Sinopec Corp. will use its own
internal resources to pay the consideration.
Connected Transaction
Sinopec Group Company is the controlling shareholder of Sinopec Corp. As the
Target Assets are owned by Shengli Administrative Bureau, a subsidiary of
Sinopec Group Company, the acquisition of the Target Assets constitutes a
connected transaction of Sinopec Corp. As each of the percentage ratio(s) (as
defined in Rule 14.07 of the Listing Rules of the Hong Kong Stock Exchange)
applicable to the Acquisition is less than 2.5%, the Acquisition is subject to
the reporting and announcement requirements set out in Rules 14A.45 and 14A.47
of the Listing Rules and exempted from the independent shareholders' approval
requirement under Rule 14A.48 of the Listing Rules.
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I SPECIAL NOTICE
1 SUMMARY OF KEY INFORMATION
(1) Transaction Details
The 6th Meeting of the third session of the Board was held on 6 December
2006 at which the "Proposal Concerning the Acquisition of the Oil
Production Assets Owned by Shengli Administrative Bureau of Sinopec Group
Company" was considered and approved. According to the above proposal,
Sinopec Corp. will acquire the Target Assets owned by Shengli
Administrative Bureau, a subsidiary of Sinopec Group Company. Based on
the Assets Valuation Report(s), the total appraised value of the net
assets of the Target Assets is RMB3.4997 billion (approximately
HK$3.46504 billion) as at the Valuation Date (including 64.73%
shareholding of Dongsheng of RMB2.594 billion (approximately HK$2.568
billion), 100% equity interest of the Development Centre of RMB0.729
billion (approximately HK$0.722 billion), 52% shareholding of Zhongsheng
of RMB0.1 billion (approximately HK$0.099billion) and Shangda Assets of
RMB 75.9 million(approximately HK$ 75 million). Taking into account of
the appraised value of the net assets of the Target Assets, the parties
1
agreed that the consideration for the Target Assets should be RMB3.5
billion (approximately HK$3.465 billion).
The Board has considered and approved the Acquisition Agreement which was
entered into by Sinopec Corp. and Shengli Administrative Bureau.
(2) Connected persons abstained from voting
Sinopec Group Company is the controlling shareholder of Sinopec Corp. and
the Target Assets proposed to be acquired by Sinopec Corp. are owned by
Shengli Administrative Bureau, a subsidiary of Sinopec Group Company.
Accordingly, the Acquisition of the Target Assets by Sinopec Corp. from
Shengli Administrative Bureau constitutes a connected transaction between
Sinopec Corp. and Sinopec Group Company.
All the directors of Sinopec Corp. who participated in the voting
(including the independent non-executive directors) have approved the
Acquisition and they are of the view that the terms of the Acquisition
are based on normal commercial terms and the Acquisition is part of the
ordinary course of business of Sinopec Corp., the consideration for the
Acquisition and the terms of the Acquisition Agreements are also fair and
reasonable and are in the interests of Sinopec Corp. and its shareholders
as a whole. Mr. Chen Tonghai and Mr. Zhou Yuan, being connected persons,
abstained from voting at the Board meeting where the proposed Acquisition
was considered and voted by the Board.
(3) Effects on Sinopec Corp.
The Target Companies are all engaged in the business of production of
crude oil in marginal and low-yield reserves. After several years of
operations, the Target Companies have developed certain scale of
production business and possessed substantial technologies and experience
in this field. By acquiring the Target Assets, the upstream production
capability and the overall competitiveness of Sinopec Corp. will be
further strengthened.
Through the Acquisition, Sinopec Shengli Branch Company will centralize
the management of the crude oil production business of the Target
Companies and the administrative systems of Sinopec Shengli Branch
Company will be streamlined and strengthened, meanwhile, competition in
respect of the upstream business between Sinopec Corp. and Shengli
Administrative Bureau will be reduced.
Through the Acquisition, the synergy of investment, management and
purchasing between Sinopec Shengli Branch Company and the Target
Companies will be achieved and production efficiency will be enhanced
accordingly.
Through the Acquisition, the number of connected transactions relating to
purchase and sales of crude oil between Sinopec Corp. and Shengli
Administrative Bureau will be reduced.
(4) Issues Requiring the Attention of Investors
1. All the financial figures including the financial figures contained in
the balance sheet and income statement below relating to the Acquisition
were prepared in accordance with the PRC Accounting Rules and
Regulations.
2. The Acquisition requires the approval of the SASAC concerning the grant
of exemption from
2
performing the procedures for the public trading of property rights. The
Assets Valuation Reports will also be required to be filed with the
SASAC. Additionally, the Acquisition will only be completed after all the
other condition precedents set out in the related agreements of the
Acquisition have been satisfied.
II SUMMARY OF THE CONNECTED TRANSACTION
1. Main Contents of this Connected Transaction
Sinopec Corp. and Shengli Administrative Bureau entered into the
Acquisition Agreement on 6 December 2006.
Sinopec Corp. will acquire the Target Assets from Shengli Administrative
Bureau, a subsidiary of Sinopec Group Company, pursuant to the
Acquisition Agreement, including 64.73% shareholding of Dongsheng, 100%
equity interests of Development Center, 52% shareholding of Zhongsheng
and Shengda Assets.
According to the appraisal conducted by Beijing Zhongsheng Appraisal Co.,
Ltd, an entity possessing the qualification for engaging in the
securities business within China and a third party independent of the
Company and connected persons of the Company,, the total of the appraised
value of the net assets of the Target Assets is RMB3.4997 billion
(approximately HK$3.46504 billion).
Taking into account of the appraised value of the net assets of the
Target Assets, the parties agreed that the consideration for the Target
Assets should be RMB3.5 billion (approximately HK$3.46535 billion).
The shareholding structure prior to the Acquisition
[GRAPHIC OMITTED]
3
The shareholding structure immediately after the Acquisition:
[GRAPHIC OMITTED]
*(1) Apart from the shareholders set out above, the remaining shareholders of
Dongsheng are as follows:
Number of
Shares held
by the Shareholding
Name of the shareholder shareholder percentage
ShanDong DongYing Petrochemical Group Corporation 35,000,000 6.66%
([GRAPHIC OMITTED])
Guohua Energy Investment Company Limited 30,000,000 5.71%
([GRAPHIC OMITTED])
Shandong International Investment Industrial Company Limited 25,000,000 4.76%
([GRAPHIC OMITTED])
Shandong Petroleum and Gas Company Limited 20,000,000 3.81%
([GRAPHIC OMITTED])
Shengli Oilfields Huabin Industrial Company 15,758,005 3%
([GRAPHIC OMITTED])
Shandong Shida Technology Group Company Limited 13,638,271 2.6%
([GRAPHIC OMITTED])
Shengli Oilfields Xingda Petroleum Technology Industrial 13,638,271 2.6%
& Trade Company Limited ([GRAPHIC OMITTED]
The Labor Union of Dongsheng 10,000,000 1.9%
([GRAPHIC OMITTED])
State-owned Assets Operation Company Limited of 5,950,000 1.13%
Dongying District, Dongying City ([GRAPHIC OMITTED])
Beijing Ke Sheng Bo Da Technology Company Limited 5,000,000 0.95%
[GRAPHIC OMITTED])
4
Shandong Shengli Tonghai Group Company Limited 4,092,814 0.78%
[GRAPHIC OMITTED])
Shengli Oilfields Shengda Industrial Company 4,092,814 0.78%
([GRAPHIC OMITTED])
The Finance Bureau of Dongying City ([GRAPHIC OMITTED]) 3,209,601 0.61%
Total 35.28%
*(2) Apart from the shareholders set out above, the remaining shareholders of
Zhongsheng are as follows:
Contribution Shareholding
Name of the shareholder (RMB yuan) percentage
Shengli Oilfields Zhongsheng Industrial Company Limited 20,002,500 40%
([GRAPHIC OMITTED])
Shengli Oilfields Xingda Petroleum Technology Industrial 4,016,500 8%
& Trade Company Limited ([GRAPHIC OMITTED])
Total 24,019,000 48%
The remaining shareholders of Dongsheng and Zhongsheng set out above are
third parties independent of the Company and the connected person of the
Company. Sinopec Corp. currently has no plan or intention to purchase any
equity interest from the remaining shareholders of Dongsheng and
Zhongsheng set out above.
2. Connected Relationship
The Target Assets to be acquired by Sinopec Corp. are owned by Shengli
Administrative Bureau, a subsidiary of Sinopec Group Company, and Sinopec
Corp. entered into the Acquisition Agreement with Shengli Administrative
Bureau. Sinopec Group Company is the controlling shareholder of Sinopec
Corp., pursuant to the Listing Rules of the Shanghai Stock Exchange and
the Listing Rules of The Hong Kong Stock Exchange, Sinopec Group Company
(and its subsidiaries) are connected persons to Sinopec Corp. and,
therefore, the Acquisition constitutes a connected transaction of Sinopec
Corp. As each of the percentage ratio(s) (as defined in Rule 14.07 of the
Listing Rules of the Hong Kong Stock Exchange) applicable to this
Acquisition is less than 2.5%, the Acquisition is subject to the
reporting and announcement requirements set out in Rules 14A.45 and
14A.47 of the Listing Rules of The Hong Kong Stock Exchange and is
exempted from the independent shareholders' approval requirement under
Rule 14A.48 of the Listing Rules of the Hong Kong Stock Exchange.
3. Information on the Review and Approval of the Connected Transaction
This Connected Transaction was considered and approved at the 6th meeting
of the third session of the Board. The independent directors gave their
independent opinions in relation to this Connected Transaction at the
meeting as set out in Part VIII under the heading "Opinion of the
Independent Non-Executive Directors". All the connected directors
abstained from considering and voting and all the non-connected
directors, including the independent non-executive directors, approved
this Connected Transaction unanimously.
Given that the percentage ratios (as defined in Rule 14.07 of the Listing
Rules of the Hong
5
Kong Stock Exchange) applicable to the Acquisition are below 2.5%, the
Acquisition is not subject to the approval of the independent
shareholders of Sinopec Corp. and the Acquisition Agreement will come
into effect upon the obtaining of the approval from the Board.
4. Approval to be obtained and other Issues
The Acquisition requires the approval of the SASAC concerning the grant
of exemption from performing the procedures for the public trading of
property rights. The Assets Valuation Reports will also be required to be
filed with the SASAC. Additionally, the Acquisition will only be
completed after all the other condition precedents set out in the related
agreements of the Acquisition have been satisfied.
III INTRODUCTION OF THE PARTIES OF THIS CONNECTED TRANSACTION
1. Sinopec Corp.
Sinopec Corp. is a Chinese company currently listed in Hong Kong, New
York, London and Shanghai, and is an integrated energy and chemical
company with upstream, midstream and downstream operations. The principal
operations of Sinopec Corp. and its subsidiaries include:
(1) Exploring for and developing, producing and trading of crude oil
and natural gas;
(2) Processing crude oil into refined oil products, producing refined
oil products and trading, transporting, distributing and marketing
refined oil products; and
(3) Producing, distributing and trading of petrochemical products.
2. Information on Shengli Administrative Bureau
Shengli Administrative Bureau is a subsidiary of Sinopec Group Company
registered with the Administration for Industry and Commerce of Dongying
City with a registered capital of RMB 11,376.14 million, its legal
address is No.258, Jinan Road, Dongying District, Dongying City.
The business scope of Shengli Administrative Bureau is as follows: the
exploitation and utilization of oil, gas and paragenetic minerals,
resources exploration, drilling and well-measuring; construction and
installation; mechanical maintenance; transportation; water and
electricity supply; communications; processing and sale of chemical
products; contract for the overseas and domestic bidding-invitation
projects of this industry, provision of production and labor services.
IV Information on the Target Assets
1 General Information on the Target Assets
The Target Assets to be acquired and sold are all the oil fields
production assets owned by Shengli Administrative Bureau, including
64.73% shareholding of Dongsheng, 100% equity interests of the
Development Center, 52% shareholding of Zhongsheng and the Shengda
Assets. The book value of the net assets of the Target Assets is RMB
2.089 billion (approximately HK$2.068 billion), and the appraised value
of the net assets of the Target
6
Assets is RMB 3.4997 billion (approximately HK$3.46504 billion). The
difference between book and appraised net assets value of RMB 1.411
billion is mainly due to the increment in the evaluation made to the oil
wells. Since the time span for the construction of the oil wells was
relatively long, the costs of construction of oil wells during the early
stage were comparatively low. Meanwhile, straight-line method was adopted
for the calculation of depreciation of oil wells and as the depreciation
period was relative short, the net book value of some of the oil wells
have been reduced to zero. However, as all the oil wells of the Target
Assets still possess certain production capability, the appraised value
of the Target Assets exceeded their net book value.
However, no royalty right within the scope of oil production areas of the
relevant oil fields is attached to the Target Assets as such royalty
rights are owned by Sinopec Corp.. The Target Companies and Shengli
Administrative Bureau respectively conducted crude oil production
business within the scope of oil production areas mentioned above based
on the cooperative relationship between them and Sinopec Corp. The Target
Companies and Shengli Administrative Bureau own the relevant oil
production facilities. Among which, the Target Companies own 1,308 oil
wells located at the oil production areas of 114 oil fields together with
the crude oil production equipments, crude oil storage depots and oil
transportation pipelines complementary to the oil wells. Shengda Assets
are the assets owned by Shengli Administrative Bureau which consists of
27 oil wells located at the oil production areas of 4 oil fields together
with the crude oil production equipments, oil transportation pipelines
and other relevant assets complementary to the oil wells.
Beijing Zhongzheng Appraisal Co., Ltd., an entity possessing the
qualification for engaging in the securities businesses within China and
a third party independent of the Company and connected persons of the
Company, conducted appraisal to the above assets and issued the
respective Assets Valuation Reports in relation to such assets. The
Assets Valuation Reports need to be filed with the SASAC.
According to the Asset Valuation Reports, the appraisal results of the
Target Assets to be acquired were as follows:
Unit: Thousand RMB
Total Assets Total Liabilities Net Assets
Dongsheng 6,183,196.03 2,174,971.76 4,008,224.27
Development Centre 1,549,928.82 820,834.15 729,094.67
Zhongsheng 264,597.79 71,588.60 193,009.19
Shengda Assets 75,904.47 0 75,904.47
7
2. Specific Information on each of the Target Assets
(1) 64.73% shareholding of Dongsheng
(a) General Information of Dongsheng
As a stock company with limited liability registered and established in
Dongying City, Shandong Province of China, Dongsheng holds the Business
License for an Enterprise Legal Person with the registration number of
3700001807999 approved and issued by the Administration for Industry and
Commerce of Shandong Province. The total issued shares are 525,527,800
and its registered capital is RMB 525,527,800. Its legal address is
No.260 Xisi Road, Dongying District of Dongying City. Shengli
Administrative Bureau holds 340,147,975 issued shares of Dongsheng,
representing 64.73% of the total issued shares.
The business scope of Dongsheng is: the exploration and development of
petroleum and gas within the scope of areas authorized by Shengli
Administrative Bureau; the sales of the drilling and mining equipments
and the provision of related technological services; sales of electronic
instruments and electronic mechanical products.
Dongsheng is principally engaged in the business of production of crude
oil with its current production areas located at 84 oil production areas
of Shengli Oilfields. Dongsheng now owns 1,023 oil wells.
(b) Financial Status
According to the consolidated financial statements of the year 2004, 2005
and the six months ended 30 June 2006 of Dongsheng prepared under the PRC
Accounting Rules and Regulations and audited by Beijing Tin Wha CPAs, an
entity possessing the qualification for engaging in the securities
businesses within China and a third party independent of the Company and
connected persons of the Company, the major financial indicators of
Dongsheng during the above periods were as follows:
Balance Sheet Unit: Thousand RMB
Item 30 June 31 December 31 December
2006 2005 2004
Total assets 4,292,237.32 3,183,704.27 2,706,804.82
Total current liabilities 1,465,726.12 855,549.28 1,025,362.96
Total non-current liabilities 0 0 0
Total liabilities 1,465,726.12 855,549.28 1,025,362.96
Minority interests 584,826.66 487,173.11 295,651.11
Shareholders' funds 2,241,684.54 1,840,981.88 1,385,790.74
Total liabilities and shareholders' funds 4,292,237.32 3,183,704.27 2,706,804.82
8
Income Statement Unit: Thousand RMB
Item For the six For the year For the year
months ended 30 ended 31 ended 31
June of 2006 December 2005 December 2004
Income from principal operations 1,457,171.22 1,868,649.00 1,303,750.53
Profit before taxation and minority interests*(1) 1,056,208.66 1,094,635.51 688,161.36
Net profit*(2) 552,307.59 547,814.50 364,246.34
Net profit before non-operating profits/losses 445,725.56 552,426.54 362,780.29
Note:
*(1) the profit before taxation and minority interests attributable to
64.73% shareholding of Dongsheng for the two financial years ended
31 December 2005 and 2004 were RMB 708.50 million and 445.41
million; and
*(2) the net profit attributable to 64.73% shareholding of Dongsheng for
the two financial years ended 31 December 2005 and 2004 were RMB
354.57 million and RMB 235.76 million.
Based on the Asset Valuation Report on Equity Transfer Project of
Dongsheng (No. 117-1 Zhong-zheng-ping-bao-zi [2006] ) issued by Beijing
Zhongzheng Appraisal Co., Ltd., an entity possessing the qualification
for engaging in the securities businesses within China and a third party
independent of the Company and connected persons of the Company, by
adopting the replacement cost valuation method, the appraisal results of
the assets mentioned above as at the Valuation Date are as follows:
Unit: Thousand RMB
Book The
Value after The Appraised The Increment/ Rate of
Item Book Value Adjustment Value Decrease Amount Increment %
Fixed assets 562,608.12 562,608.12 829,149.42 266,541.30 47.38
Total assets 4,416,656.30 4,416,656.30 6,183,196.03 1,766,539.73 40.00
Total liabilities 2,174,971.76 2,174,971.76 2,174,971.76 0 0
Net assets 2,241,684.54 2,241,684.54 4,008,224.27 1,766,539.73 78.80
In respect of the Acquisition, the appraised value of 64.73% shareholding
of Dongsheng is RMB2.594 billion (approximately HK$2.569 billion).
9
(2) 100% Equity Interests of the Development Centre
(a) General Information of the Development Centre
As a state-owned enterprise registered and established in Dongying City,
Shandong Province of China, the Development Centre holds the Business
License for an Enterprise Legal Person with the registration number of
3705001804655 approved and issued by the Administration for Industry and
Commerce of Shandong Province. The registered capital is RMB 100,000,000
and the legal address is No.12 Yingshi Street, Dongying District of
Dongying City. The Development Centre is a subsidiary wholly owned by
Shengli Administrative Bureau.
The business scope of the Development Centre is: the exploration of and
production in marginal reserves and the high-cost crude oil area
(operation with a licence).
The Development Centre is principally engaged in the business of
production of crude oil with its current production areas located at 23
oil production areas of China Shandong Shengli Oil Field. The Development
Centre now owns 244 oil wells.
(b) Financial Status
According to the financial statements of the year 2004, 2005 and the six
months ended 30 June 2006 of Dongsheng prepared under the PRC Accounting
Rules and Regulations and audited by Beijing Tin Wha CPAs, an entity
possessing the qualification for engaging in the securities businesses
within China and a third party independent of the Company and connected
persons of the Company, the major financial indicators of the Development
Centre during the above periods were as follows:
Balance Sheet Unit: Thousand RMB
Item 30 June 2006 31 December 2005 31 December 2004
Total assets 1,334,276.50 982,579.47 275,496.85
Total current liabilities 820,834.15 700,548.15 151,800.95
Total non-current liabilities 0.00 0.00 0.00
Total liabilities 820,834.15 700,548.15 151,800.95
Shareholders' funds 513,442.35 282,031.32 123,695.90
Total liabilities and shareholders' funds 1,334,276.50 982,579.47 275,496.85
10
Income Statement Unit: Thousand RMB
Item For the six For the year For the year
months ended 30 ended 31 ended 31
June of 2006 December 2005 December 2004
Income of principal operations 707,301.14 587,547.77 128,799.17
Profit before taxation and minority interests 344,712.66 236,797.63 35,548.80
Net profit 230,216.76 158,335.42 23,689.93
Net profit before non-operating profits/losses 229,926.85 158,308.97 23,433.56
Based on the Asset Valuation Report on Equity Transfer Project of the
Development Centre (No.117-2 Zhong-zheng-ping-bao-zi [2006])issued by
Beijing Zhongzheng Appraisal Co., Ltd., an entity possessing the
qualification for engaging in the securities businesses within China and
a third party independent of the Company and connected persons of the
Company, by adopting the replacement cost valuation method, the appraisal
results of the assets as mentioned above at the Valuation Date were as
follows:
Unit: Thousand RMB
Book Value The Appraised The Increment/ The Rate of
Item Book Value after Adjustment Value Decrease Amount Increment %
Fixed assets 1,138,837.71 1,138,837.71 1,350,031.74 211,194.03 18.54
Total assets 1,334,276.50 1,334,276.50 1,549,928.82 215,652.32 16.16
Total liabilities 820,834.15 820,834.15 820,834.15 0.00 0.00
Net assets 513,442.35 513,442.35 729,094.67 215,652.32 42.00
In respect of the Acquisition, the appraised value of 100% equity
interest of the Development Centre is RMB0.729 billion (approximately
HK$0.722 billion).
(3) 52% shareholding of Zhongsheng
(a) General Information of Zhongsheng
As a limited liability company registered and established in Dongying
City, Shandong Province of China, Zhongsheng holds the Business License
for an Enterprise Legal Person with the registration number of
3705001804109 approved and issued by the Administration for Industry and
Commerce of Dongying City. The registered capital of Zhongsheng is RMB 50
million and its legal address is Zhongduan, Beiyi Road, Dongying District
of Dongying City. Shengli Administrative Bureau holds 52% shareholding in
Zhongsheng.
11
The business scope of Zhongsheng is: production in marginal reserves and
oil wells at remote areas[GRAPHIC OMITTED][GRAPHIC OMITTED]consultation
and transfer of petroleum technology development; sale of petroleum
mechanical and electrical products (other than cars), oil, gas and
chemical products (other than dangerous products).
Zhongsheng is principally engaged in the business of production of crude
oil, with its current production areas located at six (6) oil production
areas of Shengli Oilfields. Zhongsheng currently owns forty one (41 ) oil
wells.
(b) Financial Status
According to the financial statements of the year 2004, 2005 and the six
months ended 30 June 2006 of Dongsheng prepared under the PRC Accounting
Rules and Regulations and audited by Beijing Tin Wha CPAs, an entity
possessing the qualification for engaging in the securities businesses
within China and a third party independent of the Company and connected
persons of the Company,, the major financial indicators of Zhongsheng
during the above periods were as follows:
Balance Sheet Unit: Thousand RMB
Item 30 June 2006 31 December 2005 31 December 2004
Total assets 195,514.51 161,439.60 97,330.05
Total current liabilities 71,588.60 43,863.32 11,203.63
Total non-current liabilities 0.00 0.00 0.00
Total liabilities 71,588.60 43,863.32 11,203.63
Shareholders' funds 123,925.91 117,576.27 86,126.42
Total liabilities and shareholders' funds 195,514.51 161,439.60 97,330.05
Income Statement Unit: Thousand RMB
For the six For the year For the year
months ended 30 ended 31 ended 31
Item June of 2006 December 2005 December 2004
Income from principal operations 80,144.43 117,780.60 77,168.68
Profit before taxation and minority interests*(1) 56,097.23 71,501.92 43,420.15
Net profit*(2) 36,349.64 43,997.88 27,222.25
Net profit before non-operating profits/losses 31,558.27 43,649.98 26,853.12
12
*Note:
(1) the profit before taxation and minority interests attributable to
52% shareholding of Dongsheng for the two financial years ended 31
December 2005 and 2004 were RMB 37.18 million and 22.58 million;
and
(2) the net profit attributable to 52% shareholding of Dongsheng for
the two financial years ended 31 December 2005 and 2004 were RMB
22.88 million and RMB 14.16 million.
Based on the Asset Valuation Report on Equity Transfer Project of
Zhongsheng (No.117-3 Zhong-zheng-ping-bao-zi [2006]) issued by Beijing
Zhongzheng Appraisal Co., Ltd., an entity possessing the qualification
for engaging in the securities businesses within China and a third party
independent of the Company and connected persons of the Company, by
adopting the replacement cost valuation method, the appraisal results of
the assets mentioned above at the Valuation Date were as follows:
Unit: Thousand RMB
The
Book The Increase/ The Rate of
Value after Appraised Decrease Increment
Item Book Value Adjustment Value Amount %
Fixed assets 54,365.66 54,365.66 123,448.93 69,083.28 127.07
Total assets 195,514.51 195,514.51 264,597.79 69,083.28 35.33
Total liabilities 71,588.60 71,588.60 71,588.60 0 0
Net assets 123,925.91 123,925.91 193,009.19 69,083.28 55.75
In respect of the Acquisition, the appraised value of 52% shareholding of
Zhongsheng is RMB0.100 billion (approximately HK$0.099billion).
(4) Shengda Assets
(a) General Information of Shengda
Shengda Assets include 28 oil wells located at the oil production areas
of 5 oil fields together with the crude oil production equipments, oil
transportation pipelines and other relevant assets complementary to the
oil wells, which are owned by Shengli Administrative Bureau.
(b) Result of Asset Valuation
Based on the Asset Valuation Report on Transfer of Shengda Assets Project
of Shengda (No. 117-4 Zhong-zheng-ping-bao-zi [2006]) issued by Beijing
Zhongzheng Appraisal Co., Ltd., an entity possessing the qualification
for engaging in the securities businesses within China and a third party
independent of the Company and connected persons of the Company,, the
book value of the net assets of Shengda Assets as at the Valuation Date
is RMB59.8 million (approximately HK$59.2 million). By adopting the
replacement cost valuation method, the appraisal result of the net assets
of the above assets at the Valuation Date was RMB 75.9 million
(approximately HK$ 75.2 million), which represents an increment of 26.93%
above the book value.
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The Directors confirm that based on the information available to Sinopec
Corp., there has been no material adverse change on the financial
position of the Target Assets since the Valuation Date.
V THE MAJOR TERMS OF THE ACQUISITION AGREEMENT
1. Date: 6 December 2006
2. Parties to the Agreement:
The Purchaser : Sinopec Corp.
The Seller : Shengli Administrative Bureau
3. Pricing Policy and Consideration
The consideration for the acquisition was determined by reference to the
appraisal result concluded from the Assets Valuation Reports. The
consideration for the Acquisition was negotiated and determined by the
parties on the arm's length basis based on the factors including
potential profit capability of the Target Assets, the quality of the
Target Assets, the potential development of the Target Assets and the
industry they belong to.
Sinopec Corp. will use its own internal resources to pay for the
consideration of approximately RMB3.5 billion (approximately HK$3.46535
billion).
Any profits or losses incurred in connection with the Target Assets
during the period from the Valuation Date to the Date of Completion shall
belong to or be borne by (as the case may be) Shengli Administrative
Bureau whilst any profits or losses incurred in connection with the
Target Assets after the Date of Completion will belong to or be borne by
Sinopec Corp..
4. Method of Payment
Sinopec Corp. and Shengli Administrative Bureau agree that Sinopec shall
make a one-off payment in full of the consideration pursuant to the
Acquisition Agreement to Shengli Administrative Bureau within 20 working
days after the Date of Completion.
5. Completion and the Date of Completion
(1) Completion
Shengli Administrative Bureau shall transfer the ownership of the Target
Assets to Sinopec Corp. and deliver the documents relating to the
ownership of the Target Assets, including the ownership certificates,
government approvals, personnel information and other legal documents
such as agreements or information that reflect the status of the Target
Assets, to Sinopec Corp. on the Date of Completion. Shengli
Administrative Bureau shall carry out the necessary legal procedures to
enable Sinopec Corp. to own and control the Target Assets. Sinopec Corp.
shall bear the liabilities within the scope of the Target Assets from the
Date of Completion.
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(2) Date of Completion
Both parties to the Acquisition Agreement agree that the Date of
Completion shall take place on 31 December 2006 or some other date as
agreed by both parties in writing.
6. Other Major Terms of the Acquisition Agreement
(1) Conditions of the Acquisition Agreement Coming into Effect:
(a) The Acquisition Agreement having been executed by the legal
representatives of both parties or other authorized representatives
of both parties.
(b) Each party having completed its internal approval procedures for
the transfer of the Target Assets and has obtained all the
corresponding written approval documents.
(2) Condition Precedents for Completion of Acquisition of Target Assets:
The acquisition of the Target Assets will only be satisfied and completed
upon each of all the following conditions having been satisfied or
waived:
(a) the Acquisition agreement becoming effective;
(b) the Asset Valuation Reports of the Target Assets having been filed
with the SASAC;
(c) the approval of the SASAC concerning the grant of exemption from
performing the procedures for the public trading of the property
rights having been obtained;
(d) there having been no breach occurred under the Acquisition
Agreement or no evidence was found to prove any breach under the
Acquisition Agreement would occur;
(e) the consent, authorization and approval of the third parties
connected with the implementation of this Acquisition having been
obtained (Sinopec is entitled to waive this condition precedent);
(f) no material adverse changes having occurred in terms of the assets,
financial status, business operation and prospects of the Target
Companies involved in this Acquisition prior to the Date of
Completion.
VI REASONS FOR THE ACQUSITION AND AND EFFECT OF THE CONNECTED TRANSACTION ON
SINOPEC CORP.
1. The Target Companies are all engaged in the business of production
of crude oil in marginal and low-yield reserves and they have
developed certain scale of production business and possess
substantial production technologies after their development for
several years. By acquiring the Target Assets (including the Target
Companies) at the time when the price of oil is higher, the
upstream production capability and the overall competitiveness of
Sinopec Corp. will be strengthened.
2. Through the Acquisition, Sinopec Shengli Branch Company will
centralize the management of the crude oil production business of
the Target Companies and the administrative systems of Sinopec
Shengli Branch Company will be streamlined and
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strengthened, meanwhile, competition in respect of the upstream
business between Sinopec Corp. and Shengli Administrative Bureau
will be reduced.
3. Through the Acquisition, the coordination of investment, management
and purchasing between Sinopec Shengli Branch Company and the
Target Companies will be achieved and production efficiency will be
enhanced accordingly.
4. Through the Acquisition, the number of connected transactions
relating to sale and purchase of crude oil between Sinopec Corp.
and Shengli Administrative Bureau will be reduced.
VII OTHER ARRANGEMENTS IN RELATION TO THIS ACQUISITION
In respect of the arrangement of personnel involved in the Acquisition,
both parties confirm that the labor relationship and the social insurance
relationship (including but not limited to the pension and the medical
insurance) of all of the registered employees (including the management
and ordinary staff) involved in the Target Assets of this Acquisition
shall be taken over by Sinopec Corp..
VIII OPINION OF THE INDEPENDENT NON-EXECUTIVE DIRECTORS
The independent non-executive directors of Sinopec Corp. are of the view
that the Acquisition was conducted on normal commercial terms in the
ordinary course of business of Sinopec Corp., the consideration for the
Acquisition and other terms of the Acquisition Agreements are fair and
reasonable to Sinopec Corp. and all the shareholders of Sinopec Corp. as
a whole. The terms of the Acquisition are based on normal commercial
terms and the Acquisition is part of the ordinary course of business of
Sinopec Corp., the consideration for the Acquisition and the terms of the
Acquisition Agreements are also fair and reasonable and in the interests
of Sinopec Corp. and its shareholders as a whole. Mr. Chen Tonghai and
Mr. Zhou Yuan, being connected persons, abstained from voting at the
Board meeting where the proposed Acquisition was considered and voted by
the Board. The voting procedures complied with the relevant domestic and
overseas laws, regulations and regulatory documents and the Articles of
Association of Sinopec Corp.
IX LIST OF DOCUMENTS FOR INSPECTION
The following documents will be available for inspection during normal
working hours at the registered address of Sinopec from the date of this
announcement:
(a) the resolutions of the 6th meeting of the third se ssion of the
Board of Sinopec Corp. (including the opinion of independent
non-executive directors)
(b) the Acquisition Agreement
(c) the Audited Report of Target Assets(3 copies)
(d) the Valuation Report of Target assets(4 copies)
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X DEFINITIONS
Names Definitions
Acquisition Agreement the "Agreement Concerning the Acquisition of the Oilfield
Production Assets" dated 6 December 2006 entered into by and
between Sinopec Corp. and Shengli Administrative Bureau
Acquisition the acquisition of the Target Assets to be carried out by Sinopec
Corp. in accordance with the Acquisition Agreement, which
constitutes a connected transaction of Sinopec Corp. under the
Listing Rules of the Hong Kong Stock Exchange (the "Connected
Transaction")
Assets Valuation Report(s) The valuation reports issued by the Beijing
Zhongsheng Appraisal Co., Ltd, an entity possessing the
qualification for engaging in the securities business within
China, based on its appraisal of the Target Assets as at the
Valuation Date
Board the Board of Directors of Sinopec Corp.
Business Day a day not being a Saturday, Sunday or any other day on which
banks in the PRC are required by applicable laws or authorized to
be closed for business
CSRC China Securities Regulatory Commission
Date of Completion 31 December 2006 or such other date as Sinopec Corp. and Shengli
Administrative Bureau agree otherwise in writing
Development Center Petroleum Development Center of Shengli Petroleum Administrative
Bureau ([GRAPHIC OMITTED])
Directors the directors of Sinopec Corp.
Dongsheng Shengli Oilfield Dongsheng Jinggong Petroleum Development Stock
Limited Company ([GRAPHIC OMITTED])
HK$ The lawful currency of Hong Kong Special Administrative Region of
the People's Republic China with the exchange rate of HK$1.00
equivalent to approximately RMB1.01, however, it does not mean
that RMB can be converted into Hong Kong dollar at such rate; and
vice versa
Hong Kong Stock Exchange The Stock Exchange of Hong Kong Limited
Listing Rules of the Hong Kong Stock Rules Governing the Listing of Securities on The Stock Exchange
Exchange of Hong Kong Limited
Listing Rules of the Shanghai Stock Rules Governing the Listing of Stock on the Shanghai Stock
Exchange Exchange ([GRAPHIC OMITTED])
Payment Date within 20 working days after the Date of Completion
RMB the lawful currency of the People's Republic of China
SASAC the PRC State-owned Assets Supervision and Administration
Commission of the State Council
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Shanghai Stock Exchange The Shanghai Stock Exchange
Shengda Assets the oil wells and related oil production assets located in China
Shandong Shengli Oilfields which are originally owned by Shengda
and currently held by Shengli Administrative Bureau
Shengda Shengda Group Oil and Gas Company ([GRAPHIC OMITTED]), an
internal organization of Shengli Petroleum Administrative Bureau
without a legal person status
Shengli Oilfields China Shandong Shengli Oilfields ([GRAPHIC OMITTED])
Shengli Administrative Bureau Shengli Petroleum Administrative Bureau of Sinopec Group Company
([GRAPHIC OMITTED])
Sinopec Group Company China Petrochemical Corporation ([GRAPHIC OMITTED]), the
controlling shareholder of Sinopec Corp.
Sinopec Shengli Branch Company Sinopec Shengli Oilfields Branch Company ([GRAPHIC OMITTED]), a
branch company of Sinopec Corp.
Target Assets The oil production assets owned by Shengli Petroleum
Administrative Bureau, a subsidiary of Sinopec Group Company
(including 64.73% shareholding of Dongsheng, 100% equity
interests of the Development Center Administrative Bureau, 52%
shareholding of Zhongsheng and Shengda Assets)
Target Companies Dongsheng, the Development Center and Zhongsheng
Sinopec Corp. China Petroleum & Chemical Corporation ([GRAPHIC OMITTED])
Valuation Date 30 June 2006
Zhongsheng Shengli Oilfield Zhongsheng Petroleum Development Co., Ltd
([GRAPHIC OMITTED])
For and on behalf of the Board of Directors
China Petroleum & Chemical Corporation
Chen Ge
Secretary to the Board of Directors
Beijing, PRC, 6 December 2006
As at the date of this announcement, the executive directors of Sinopec Corp.
are Messrs. Wang Tianpu, Zhang Jianhua, Wang Zhigang, Dai Houliang; the
non-executive directors are Messrs. Chen Tonghai, Zhou Yuan, Fan Yifei and Yao
Zhongmin; the independent non-executive directors are Messrs. Shi Wanpeng, Liu
Zhongli and Li Deshui.
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