NEWS China Daqing M & H Petroleum Inc. (OTCQB: CHDP) (the "Company" or "China Daqing"), engaged in the extraction and sale of crude oil, resale of oil drilling equipment and accessories, and oilfield underground technology services, today announced that it will add 30 new wells in 2012.
China Daqing plans to start drilling the new wells in the Miao 14 Oilfield blocks in Jilin Province, China, in February, with the expectation that the installations will be completed in May 2012. Per an agreement with China's largest crude oil supplier, PetroChina, China Daqing has the right to explore, develop and produce oil at the Miao 14 Oilfield blocks—which have proven oil reserves totaling 5.35 million tons—until 2022. In return, China Daqing sells all of the crude oil it extracts to PetroChina. With the addition of the new wells, China Daqing looks to maintain its recent growth in overall sales, gross profit and net income by boosting its supply to PetroChina.
When comparing last quarter to the same period in 2010, China Daqing's sales of crude oil to PetroChina rose 48 percent, from $4.70 million up to $6.96 million, due in part to the production of 30 new wells and reengineering 19 of its existing wells to enhance productivity in 2010. With the addition of 30 more wells in 2012, China Daqing will have a total 151 wells. The Company's management team projects that each of the new wells will produce roughly 3 tons of oil a day.
Linan Gong, China Daqing's Chief Executive Officer, commented, "With the launch of the new wells, we are confident that we will experience additional, immediate gains in revenues. Industry and commerce in China are both faring well, and by expanding our oil operations, we believe that we will be in a better position to provide energy to help drive progress in the nation. We share geological data with PetroChina, which we anticipate will facilitate the output of the new wells, and we are looking to appoint experts from PetroChina to enhance the operational efficiency of the wells. Moreover, we are optimistic that our strong cash flows will enable us to fund the installations and operations of the new wells internally. Developing our oil operations is our utmost priority, and as we head into 2012, we will continue to make every effort to cultivate this aspect of our business."
About China Daqing M & H Petroleum Inc.
China Daqing is engaged in the development of oil wells and extraction of oil from the Miao 14 oilfield blocks located in Song Yuan City, Jilin Province, China. Miao 14 covers 19.8 square kilometers, of which 15.6 square kilometers are oil-bearing areas. The Company operates in three segments: extraction and sale of crude oil, subleasing of oil fields and resale of oil drilling equipment and accessories and oilfield underground technology services. China Daqing's Subrental business segment is engaged in the subleasing of Miao 14 and its drilling equipment and materials to Daqing Haihang Oil Field Development Company. As of September 30, 2010, China Daqing had a total of 121 wells. During the fiscal year ended September 30, 2010, China Daqing developed 30 new oil wells and also converted 19 existing wells to injection wells, upping its total oil wells to 96, and injection wells to 25. China Daqing sells all the crude oil the Company extracts to PetroChina Jilin Oilfield Company, which is a subsidiary of PetroChina Group, the largest crude oil supplier in China.