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SNEN Sinoenergy Corporation Announces First Quarter 2007 Results

QINGDAO, China, May 21, 2007 /Xinhua-PRNewswire-FirstCall via COMTEX/ --
Sinoenergy Corporation (SNEN), a manufacturer of compressed natural gas (CNG)
vehicle and gas station equipment and a designer, developer and operator of CNG
filling stations in China, today announced its financial results for the first
quarter ended March 31, 2007.

First Quarter 2007 Highlights
-- Revenues increased 5% from the first quarter of 2006 to a record
quarterly revenues of $2.6 million
-- Gross profit was $1.0 million, compared to $1.1 million in the first
quarter of 2006
-- Operating income was $413,000 million, a decrease of 42% from $714,000
in the first quarter of 2006
-- Net income increased to $350,000, or $0.02 per fully diluted share, as
a result of a tax holiday in 2007



First Quarter 2007 Results

Net revenue was $2.6 million for the quarter ended March 31, 2007, up 5% from
$2.5 million in the first quarter of 2006. The modest growth in year over year
revenues was due to a restructuring of the Company's non-standard pressure
container manufacturing subsidiary, Yuhan, to focus on design, manufacture and
installation of high value-added components that are closely related with storage
and transportation of compressed natural gas. As a result, revenue from this
segment declined from $1.17 million in the first quarter of 2006, to $783,000 in
the first quarter of 2007. The decrease in non-standard pressure container
business was offset by increased revenue from CNG station facilities and
construction segment, which increased about 38% in the first quarter of 2007 from
the first quarter of 2006. In addition, Sinoenergy did not provide technical
services for CNG station design and construction for other operators in the first
quarter of 2007, as the Company is now focused on its own network of CNG filling
stations.

Gross profit for the quarter was $1.0 million, a modest decrease from $1.1
million in the first quarter of 2006. Gross margin was 39.4% in the 2007 quarter,
down from 44% in the same period last year. This decline was attributable to the
reduction in revenues from CNG filling station design and construction services,
which enjoys a higher gross margin than sales of CNG equipment. In addition,
during the first quarter of 2007, the Company purchased raw materials for its CNG
equipment business that in the past had been provided by its customers, which
also contributed to lower margins.

Operating expenses in the March 2007 quarter were $622,000, up 59% from $390,000
in the first quarter of 2006. This increase was primarily due to general and
administrative expenses relating to our new CNG station operating segment, which
did not generate any revenue in the first quarter of 2007, and higher
professional fees resulting from our status as a public company in the United
States.

Operating income was $413,000, or 15.7% of revenue, a decrease from $714,000, or
28.6% of revenue, in the first quarter of 2006 due to the factors stated above.

Net income was $350,000, or $0.02 per share (basic and diluted), compared to a
net income of $336,000, or $0.02 per share (basic and diluted), in the first
quarter of 2006.

"As of today, we have 16 out of a planned initial 30 CNG filling stations under
construction and expect to have our first stations in operation by August of 2007
in Wuhan and Pingdingshan," said Mr. Bo Huang, CEO of Sinoenergy Corporation. "We
are also very pleased to note that the company recently signed an intention
agreement with Sinopec to obtain additional 200 million cubic meters of natural
gas annual supply, which will generate $60 million net revenue with $10 million
net income from natural gas process and whole sale business. And the 200 million
cubic meters of natural gas supply can be used downstream by 70-80 CNG
substations either for substations operated by Sinoenergy or substations owned by
third parties by the year 2009."

Financial Condition

At March 31, 2006, Sinoenergy had approximately $2.5 million in cash and working
capital was about $ 6.1 million. The Company utilized cash of $4.0 million for
its operations during the first quarter of 2007, primarily due to a $5.2 million
of receivables and $4.4 million advance payment to suppliers for CNG station
equipment purchased by the Company and its subsidiaries to build the CNG filling
stations. The Company funded the negative cash flow from operations from the sale
of common stock upon exercise of warrants issued in our June 2006 private
placement. During the first quarter of 2007, Sinoenergy received $5.8 million
from the exercise of warrants and from April 1, 2007 through May 16, 2007, the
Company received an additional $5.5 million, for a total of $11.3 million in net
proceeds from the exercise of warrants. The net proceeds strengthen Sinoenergy's
balance sheet and provides the Company with the necessary funds to finance the
build out of 30 CNG stations during 2007.

Total liabilities, including short term bank loans and operating payables, stood
at $12.8 million. Stockholders' equity totaled $ 22.3 million at March 31, 2007
compared to $16.0 million at the end of 2006.

Significant Subsequent Events

On April 9, 2007, the Company granted options to purchase 1,118,000 shares of
common stock to 36 employees, including senior officers and key staff members.

On April 30, 2007, we received a $2,585,000 short-term loan from Bank of
Communication Qingdao 1st Branch (Qingdao Communication Bank) to fund our CNG
filing station business. The loan bears the standard interest rate of China
People Bank, which was 6.39% at March 31, 2007, and will be adjusted accordingly.

On May 16, 2007, Sinoenergy signed intention agreement with Sinopec to secure the
supply of 200 million cubic meter of natural gas per year to Hubei Gather Energy
Gas Co., Ltd, a 55% owned Sinoenergy subsidiary, to supply CNG vehicle using for
20 years once the Sichuan-shanghai gas pipelines starts operations. The
construction of Sichuan-Shanghai natural gas pipeline is expected to be completed
at the end of 2008 and a final agreement between Sinoenergy and Sinopec is
expected to be signed then.

In the first quarter of 2007, the Company started the construction of 16 CNG
filing stations in Wuhan and Pingdingshan City and expects to start to build an
additional 14 CNG filing stations within the next two months in Hunan, Anhui,
Zhejiang and Henan provinces to provide services in the central and eastern China
regions.

Business Outlook

The Company believes the demand for natural gas over the next several years will
experience strong growth, driven by expanded CNG distribution pipelines serving
central and eastern China, Chinese government support for CNG as a clean-burning,
domestically produced energy source for vehicles, and the strong economic
advantage of using CNG to power taxis and buses. Sinoenergy is strategically
positioned in five of China's fastest growing provinces and plans to rapidly
expand its network of owned and operated CNG fillings stations.

For the full year 2007, the Company continues to expect to achieve revenues of
$30-32 million and operating income of $9-10 million.

"We continue to be very excited by the growth opportunities presented by the CNG
vehicle market in China. With the proceeds from the exercise of our warrants that
we have received to date, anticipated bank financing, and cash from operations,
we believe we have the financial resources to execute our planned construction of
30 CNG filling stations in 2007. Based on our current construction timeline, we
expect to begin seeing revenues during the third quarter of 2007 with a
meaningful contribution in the fourth quarter," remarked Mr. Deng Tianzhou,
chairman of Sinoenergy Corporation.

"We are also very pleased with the development of our CNG vehicle conversion kit
business, and would expect to ship 5,000 kits in the second quarter out of a
targeted 15,000 kits of 2007. And we also expect to see strong sales of our CNG
truck trailers, CNG deposit systems, and improved shipments of our non standard
pressure containers. Based on these factors, we would expect net revenue for the
second quarter to be about $6 million to $7 million with net income of $1.5
million to $ 2 million."

Conference Call

The Company will host a conference call at 10:00 a.m. Eastern Time on Monday, May
21, 2007 to discuss results for the first quarter result. Joining Mr. Tianzhou
Deng, Chairman, will be Mr. Bo Huang, CEO and Ms. Laby Wu, CFO.

To participate in the conference call, please dial the following number five to
ten minutes prior to the scheduled conference call time: (888) 481- 7939.
International callers should dial [phone]. The passcode for the call is
491 575 72.

If you are unable to participate in the call at this time, a replay will be
available on Monday, May 21 at 12:00 am EDT, through Monday, May 28 at 12:00 am
EDT. To access the replay, dial [phone]. International callers should dial
[phone]. The conference passcode is 106 683 52.

This conference call will be broadcast live over the Internet and can be accessed
by all interested parties by clicking on
http://phx.corporate-ir.net/playerlink.zhtml?c=205975&s=wm&e=1561577 . Please
access the link at least fifteen minutes prior to the start of the call to
register, download, and install any necessary audio software. For those unable to
participate during the live broadcast, a 90 day replay will be available shortly
after the call by accessing the same link.

About Sinoenergy

Sinoenergy is a manufacturer of compressed natural gas (CNG) vehicle and gas
station equipment as well as a designer, developer and operator of CNG stations
in China. In addition to its CNG related products, the Company also manufactures
a wide variety of pressure containers for use in different industries, including
the design and manufacture of various types of pressure containers in the
petroleum and chemical industries, the metallurgy and electricity generation
industries and the food and brewery industries.

Forward-Looking Statements

The information contained herein includes forward-looking statements. These
statements relate to future events or to our future financial performance, and
involve known and unknown risks, uncertainties and other factors that may cause
our actual results, levels of activity, performance, or achievements to be
materially different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements. You should
not place undue reliance on forward-looking statements since they involve known
and unknown risks, uncertainties and other factors which are, in some cases,
beyond our control and which could, and likely will, materially affect actual
results, levels of activity, performance or achievements. Any forward-looking
statements reflect our current views with respect to future events and is subject
to these and other risks, uncertainties and assumptions relating to our
operations, results of operations, growth strategy and liquidity. We assume no
obligation to publicly update or revise these forward-looking statements for any
reason, or to update the reasons actual results could differ materially from
those anticipated in these forward-looking statements, even if new information
becomes available in the future.

-- FINANCIAL TABLES FOLLOW --


Sinoenergy Corporation and Subsidiaries
Consolidated Balance Sheets
(In thousands of United States dollars)

March 31,December31,
20072006
ASSETSUnauditedAudited
CURRENT ASSETS
Cash2,493588
Accounts receivable(net)
- Related party646594
- Third party2,4573,777
Other receivables
- Related party6,4701,220
- Third party1,3081,176
Deposits and prepayments-Third party4,7603,187
Deferred expenses--4
Inventories829937
TOTAL CURRENT ASSETS18,96311,483

LONG TERM ASSETS
Long term investment390--
Property, plant and equipment (net)3,6293,556
Intangible assets12,04412,114
Goodwill676676
Long term deferred tax asset44
TOTAL ASSETS35,70627,833
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short term bank loan3,8793,160
Accounts payable
- Related party452452
- Third party370211
Other payables
- Related party4,8784,073
- Third party1,1372,359
Accrued expenses238176
Warranty accrual4640
Advances from customers1,823701
Income taxes payable77
TOTAL CURRENT LIABILITIES12,83011,179

Minority interests619614

STOCKHOLDERS' EQUITY
Common stock-$.001 Par Value; Issued
and Outstanding - 21,386,115 shares
at March 31, 2007, 14,636,472 shares
at December 31, 20062115
Series A convertible preferred
Stock - $0.001 Par Value - 5,357,765
shares at March 31, 2007, 5,692,307
shares at December 31, 200656
Additional paid-in capital15,7779,935
Capital surplus2020
Statutory surplus reserve fund1,1401,140
Retained earnings4,9264,576
Accumulated other comprehensive income368348
Total stockholders' equity22,25716,040
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY35,70627,833



Sinoenergy Corporation and Subsidiaries
Consolidated Statements of Operations (Unaudited)
(In thousands of United States dollars except per-share information)


Three Months Ended
March 31,
20072006
(Restated)

NET REVENUE2,6262,500

COST OF REVENUE-1,591-1,396

GROSS PROFIT1,0351,104

OPERATING EXPENSES
Selling expenses4064
General and administrative expenses582326

TOTAL OPERATING EXPENSES622390

INCOME(LOSS) FROM OPERATIONS413714

OTHER INCOME(EXPENSES)
Other non-operating income12
Interest expense-55-42
Other expenses-4-3
OTHER INCOME (LOSS) NET-58-43

INCOME (LOSS) BEFORE INCOME TAXES355671
Income tax--313
INCOME BEFORE MINORITY INTEREST355358
Minority interest-5-22
NET INCOME350336
Other comprehensive income
Foreign currency translation adjustments20--
COMPREHENSIVE INCOME370336
Earnings Per Share -Basic0.020.02
Weighted Average Shares Outstanding- Basic17,56114,216
Earnings Per Share-Diluted0.020.02
Weighted Average Shares Outstanding- Diluted23,15514,216



Sinoenergy Corporation and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
(In thousands of United States dollars)

For the Three Months ended
March 31,
20072006
(Restated)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income350336
Cost of stock option granted10--
Minority interest522
Depreciation10073
Amortization of intangible assets7074
Provision for doubtful debts125--
Changes in operating assets and liabilities:
Decrease/(Increase) in accounts receivable1,275-1,781
(Increase) in other receivables, deposits
and prepayments-7,081-150
Decrease in inventories108-223
Increase in accounts payable159881
Increase in accrued expenses685
(Increase)/decrease in deferred expenses--2
(Decrease)/increase in advances from
customers1,121-334
(Decrease)/Increase in other payables-288446
(Decrease)/increase in income tax payable--492

Net cash provided by operating activities-3,978-157

CASH FLOWS FROM INVESTING ACTIVITES
Payment for purchase of property, plant and
equipment-173-65
Payment for purchase of land use right----
Other investment payment-517

Net cash used in investing activities-690-65

CASH FLOWS FROM FINANCING ACTIVITES
Cash received from bank loan718--
Cash received from warrants exercise5,836--

Net cash provided in financing activities6,554--

Effect of changes in exchange rate19--

Net increase in cash1,905-222
Cash at beginning of the year588334

Cash at end of the year2,493112
Supplementary Cash flow disclosure:
Interest Paid5542
Tax Paid----



For more information, please contact:

Sinoenergy Corporation
Ms. Laby Wu, CFO
Tel:[phone]
Email: [e-mail]

CCG Elite Investor Relations Inc.
Mr. Crocker Coulson, President
Tel:[phone] (New York)
Email: [e-mail]



SOURCE Sinoenergy Corporation
Ms. Laby Wu, CFO of Sinoenergy Corporation, [phone], or [e-mail]; or
Mr. Crocker Coulson, President of CCG Elite Investor Relations Inc., [phone],
or [e-mail]

http://phx.corporate-


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