SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of March 2005
PETROCHINA COMPANY LIMITED
16 ANDELU, DONGCHENG DISTRICT
BEIJING, THE PEOPLE'S REPUBLIC OF CHINA, 100011
(Address of Principal Executive Offices)
(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 X
--- ---
(If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82- _______)
PetroChina Company Limited (the "Registrant") is furnishing, under the
cover of Form 6-K, the Registrant's announcement with respect to the
Registrant's related party transactions.
This announcement contains "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These forward-looking statements
are, by their nature, subject to significant risks and uncertainties.
These forward-looking statements reflect the Registrant's current views
with respect to future events and are not a guarantee of future performance.
Actual results may differ materially from information contained in these
forward-looking statements as a result of a number of factors, including,
without limitation:
o fluctuations in crude oil and natural gas prices;
o failure to achieve continued exploration success;
o failure or delay in achieving production from development projects;
o change in demand for competing fuels in the target market;
o continued availability of capital and financing;
o general economic, market and business conditions;
o changes in policies, laws or regulations of the People's Republic of
China and other jurisdictions in which the Registrant and its
subsidiaries conduct business; and
o other factors beyond the Registrant's control.
We do not intend to update or otherwise revise the forward-looking
statements in this announcement, whether as a result of new information, future
events or otherwise. Because of these risks, uncertainties and assumptions, the
forward-looking events and circumstances discussed in this announcement might
not occur in the way we expect, or at all.
You should not place undue reliance on any of these forward-looking
statements.
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 of the contents of this announcement.
[COMPANY LOGO]
[CHINESE CHARACTERS]
PETROCHINA COMPANY LIMITED
(a joint stock limited company incorporated in the People's Republic of China
with limited liability)
(STOCK CODE: 857)
CONNECTED TRANSACTIONS
The Board wishes to announce that the Company has, on 28 March 2005, entered
into the Acquisition Agreement with CNPC. According to the Acquisition
Agreement, the Company has acquired the Refinery and Petrochemical Businesses
from CNPC for which the Company would pay a cash consideration of RMB9.14
million (approximately HK$8.54 million).
CNPC is the controlling shareholder of the Company holding 90% of the issued
share capital of the Company. As defined under the Listing Rules, CNPC is a
connected person of the Company and the Asset Acquisition (including the Land
Use Rights Leasing Arrangement) constitute connected transactions of the
Company.
Given that the percentage ratios involved in the Asset Acquisition (including
the Land Use Rights Leasing Arrangement) are more than 0.1% but less than 2.5%
for the Group, the Asset Acquisition (including the Land Use Rights Leasing
Arrangement) is only subject to reporting and announcement requirement and is
exempted from the independent shareholders' approval requirement under Rule
14A.32 of the Listing Rules.
ACQUISITION AGREEMENT DATED 28 MARCH 2005
PARTIES
Vendor: CPNC
Purchaser: the Company
THE ASSET ACQUISITION
Subject to the satisfaction of certain conditions precedent under the
Acquisition Agreement, the Company will acquire the Refinery and Petrochemical
Businesses, which include both assets and liabilities. The major assets of the
Refinery and Petrochemical Businesses to be acquired by the Company principally
consist of refinery and petrochemical production facilities, 27 pieces of
granted land (occupying approximately 1.39 million square meters in total) and
buildings thereon, as well as certain ancillary assets (including 18 petrol
stations, two liquefied natural gas depots, movables, intangible assets,
long-term investments and deferred assets).
CONSIDERATION
The Asset Acquisition (including the Land Use Rights Leasing Arrangement) was
negotiated and entered into on an arm's length basis and on normal commercial
terms. A cash consideration of RMB9.14 million (approximately HK$8.54 million)
would be payable by the Company to CNPC at completion of the Asset Acquisition.
The above consideration was determined on the basis of the results of a
valuation report prepared by an independent valuer using the replacement cost
method, which was filed with and approved by the SASAC of the PRC and based on
the valuation reference date of 30 June 2004. According to the valuation report,
as at 30 June 2004 the aggregate value of the total assets to be acquired by the
Company pursuant to the Asset Acquisition was RMB1,891.59 million (approximately
HK$1,767.84 million) (out of which approximately RMB9.75 million (approximately
HK$9.11 million) assets of the primary and secondary school shall be transferred
to the local government as required under the applicable government policies at
the same time with the Asset Acquisition), the aggregate value of liabilities of
the Refinery and Petrochemical Businesses was RMB1,872.70 million (approximately
HK$1,750.18 million), and the aggregate net asset value was RMB9.14 million
(approximately HK$8.54 million).
After adjustments according to the IFRS, as at 30 June 2004 the aggregate value
of the total asset value of the Refinery and Petrochemical Businesses was
RMB1,777.62 million (approximately HK$1,661.33 million), the aggregate value of
the related liabilities was RMB1,872.74 million (approximately HK$1,750.22
million), and the aggregate value of net liabilities was RMB95.12 million
(approximately HK$88.90 million). Accordingly, after adjustments pursuant to the
IFRS, the consideration of the Asset Acquisition is that the Company would pay a
cash consideration of RMB9.14 million (approximately HK$8.54 million) and assume
liabilities in the aggregate amount of RMB95.12 million (approximately HK$88.90
million) in relation to the Refinery and Petrochemical Businesses. There is no
outstanding capital commitment remains to be fulfilled by CNPC in respect of the
Refinery and Petrochemical Businesses and the Company will not assume any such
commitments as a result of the Asset Acquisition.
For the purposes of the Listings Rules, the consideration for the Asset
Acquisition was based on the above net liabilities as adjusted according to
IFRS. The difference between the aggregate net asset value as valued by the
independent valuer and the aggregate value of the net liabilities as adjusted
according to the IFRS is due to the requirement under IFRS that transactions
between enterprises under common control
shall be valued at their historical cost, which has resulted in the granted land
use rights to be acquired by the Company pursuant to the Asset Acquisition not
being able to be recognized at their appraised value under IFRS. The granted
land use rights held by Dayuan and Qingyang were previously booked at relatively
low historical costs of approximately RMB39 million (approximately HK$36.45
million) which do not reflect their current fair market value of approximately
RMB172.23 million (approximately HK$160.96 million). Accordingly, the current
valuation prepared by the independent valuer is a reflection of the current fair
market value of the Asset Acquisition.
China Enterprise Appraisal Company Limited, Beijing ([CHINESE CHARACTERS]) is
the independent valuer and Shenzhen Nanfang Minhe Certified Public Accountants
([CHINESE CHARACTERS]), a local accounting firm in Beijing is the auditors for
the Asset Acquisition.
CONDITIONS PRECEDENTS FOR THE COMPLETION OF THE ASSET ACQUISITION:
The completion of the Asset Acquisition is subject to the satisfaction of
certain conditions precedent, including:
(a) the Company having completed due diligence review on the business
conditions of the Refinery and Petrochemical Businesses;
(b) the Company having completed the procedures and requirements in connection
with the Asset Acquisition stipulated by the regulatory authorities of its
place of listing;
(c) CNPC having obtained the consents of the relevant creditors and other third
parties in connection with the Asset Acquisition;
(d) there having been no material adverse change to the business operations and
technical performance of Dayuan and Qingyang; and
(e) the representations, warranties and undertakings given by CNPC in relation
to the Asset Acquisition being true, accurate, complete and valid as at the
date of completion of the Asset Acquisition.
COMPLETION OF THE ASSET ACQUISITION
The Asset Acquisition shall be completed on the date of 1 April 2005 or the date
on which the above conditions precedents have been satisfied, whichever is the
later. As of the date of this announcement, all the above conditions have been
fulfilled and completion of the Asset Acquisition shall take place on 1 April
2005.
LAND USE RIGHTS LEASING ARRANGEMENT
It is a term in the Acquisition Agreement that after completion of the Asset
Acquisition, CNPC will lease the 28 pieces of allocated land owned by CNPC with
a total gross floor area of 1,658,400 square meters, which was not included as
part of the Asset Acquisition, to the Company in connection with the operation
of the Refinery and Petrochemical Businesses for an initial period commencing
from the
completion of the Asset Acquisition and up to 31 December 2005 for a total
consideration of RMB 2.45 million, payable in cash by the Company to CNPC within
10 working days from the effective date of the Acquisition Agreement. CNPC shall
pay all taxes and other statutory expenses in connection with the lease of such
allocated land.
The percentage ratios calculated based on the annual consideration for the Land
Use Rights Leasing Arrangement would be less than 0.1% and thus the Land Use
Rights Leasing Arrangement by itself is exempted from the disclosure obligations
under the connected transaction requirements under Rule 14A.31(2) of the Listing
Rules. It is expected that after the initial period of up to 31 December 2005,
the Company will enter into a new leasing agreement with CNPC covering the
leases in relation to the Land Use Rights Leasing Contract together with the
leasing of the allocated land in connection with the Refinery and Petrochemical
Businesses. The Company will comply with the relevant requirements under the
Listing Rules in connection with such continuing leasing arrangements with CNPC.
REASONS FOR THE ASSET ACQUISITION
The market for refined petroleum and natural gas-related products is a
competitive and fairly active one in the PRC. As an integrated oil company with
a core focus on upstream businesses, one of the Company's established strategies
is to develop its refinery and petrochemical businesses.
The Board believes that despite the current difficult operating conditions faced
by Dayuan and Qingyang, for the two financial years ended 31 December 2003, the
aggregate losses both before and after taxation and extraordinary items
attributable to the Refinery and Petrochemical Businesses were RMB171.18 million
(approximately HK$159.98 million) and RMB407.75 million (approximately HK$381.07
million). For the financial year ended 31 December 2004, the aggregate losses
both before and after taxation and extraordinary items attributable to the
Refinery and Petrochemical Businesses were RMB148.86 million (approximately
HK$139.12 million). Dayuan and Qingyang respectively accounts for an average of
63.00% and 5.94% of the local provincial market for refined oil and
petrochemical products and an average of 75.00% and 8.50% of the local
provincial retail market. The Refinery and Petrochemical Businesses mainly
consist of refinery and petrochemical production facilities, petrol stations and
liquefied natural gas depots and a stable clientele.
The Board believes that the operating losses sustained by Dayuan and Qingyang in
the past two financial years were primarily due to a number of factors,
including: (i) relatively large provisions for impairment of assets; (ii)
relatively high operating costs which were attributable to a shortage of crude
oil supply, and therefore low utilization rates of the relevant refinery and
petrochemical production facilities; (iii) relatively high financing costs owing
to a shortage of funds and a relatively high level of debts; (iv) relatively
large number of labour involved resulting an increase in the cost of production;
and (v) technologies deployed in the production of refinery and petrochemical
products falling behind those currently deployed in the market, and hence
resulted in a low productivity in high value-added products and the losses.
The Board believes that the profitability of the Refinery and Petrochemical
Businesses can be significantly improved and better prospects for profits may be
created through the following measures: (i) strengthening the resources
allocation thereby ensuring a stable supply of crude oil; (ii) refinancing the
existing debts; (iii) reducing operating costs by reorganisation of the
management structure and reducing labour cost; (iv) continuing restructuring of
the operation; and (v) improving technology in the production of high value
added products. It is expected that the increase in the Group's proportion of
refinery and petrochemical businesses can provide room for an increase in gross
margin and lead to an increase in the Company's total sales income. The Asset
Acquisition will further improve the Company's refinery and petrochemical
businesses portfolio and increase its market share in the north-western region
of China and enhance its overall resistance to risks.
RELATIONSHIP BETWEEN THE PARTIES AND CONNECTED TRANSACTION
CNPC is the controlling shareholder of the Company holding 90% of the issued
share capital of the Company. CNPC is engaged in crude oil and natural gas
exploration and production business activities outside the PRC and limited
petrochemical production and retail of refined oil products. As defined under
the Listing Rules, CNPC is a connected person of the Company. Accordingly, the
Asset Acquisition (including the Land Use Rights Leasing Arrangement)
constitutes a connected transaction of the Company. Given the percentage ratios
involved in the Asset Acquisition (including the Land Use Rights Leasing
Arrangement) are more than 0.1% but less than 2.5% for the Group, the Company is
only subject to reporting and announcement requirement and is exempted from the
independent shareholders' approval requirement under Rule 14A.32 of the Listing
Rules.
The Board (including the independent non-executive directors) considers that the
terms and conditions of the Acquisition Agreement are on normal commercial terms
and are fair and reasonable and in the interests of the shareholders of Company
as a whole.
INFORMATION REGARDING THE GROUP
BUSINESS OF THE GROUP
The Group is principally engaged in petroleum and natural gas-related
activities, including:
(a) the exploration, development, production and sale of crude oil and natural
gas;
(b) the refining, transportation, storage and marketing of crude oil and
petroleum products;
(c) the production and sale of basic petrochemical products, derivative
chemical products and other petrochemical products; and
(d) the transmission of natural gas and crude oil, and the sale of natural gas.
THE DIRECTORS OF THE COMPANY
As at the date of this announcement, the Board comprises Mr. Chen Geng as the
Chairman; Mr. Jiang Jiemin and Mr. Ren Chuanjun as Vice Chairmen; Mr. Su Shulin,
Mr. Duan Wende and Mr. Wang Fucheng as executive directors; Mr. Zheng Hu, Mr.
Zhou Jiping, Mr. Gong Huazhang and Mr. Zou Haifeng as non-executive directors;
and Mr. Chee-Chen Tung, Mr. Liu Hongru and Mr. Franco Bernabe as independent
non-executive directors.
TERMS USED IN THIS ANNOUNCEMENT
In this announcement, unless otherwise defined, the following terms shall have
the following meanings:
"Acquisition Agreement" the acquisition agreement dated 28 March 2005 entered into between the
Company and CNPC in respect of the transfer of the assets, as more
particularly described in the paragraph headed "Acquisition Agreement
dated 28 March 2005" in this announcement
"Asset Acquisition" the acquisition of the Refinery and Petrochemical Businesses from CNPC
by the Company as contemplated under the Acquisition Agreement
"Board" the Board of Directors of the Company, including the independent
non-executive directors
"CNPC" [CHINESE CHARACTERS] (China National Petroleum Corporation), a
state-owned enterprise incorporated under the laws of the PRC and the
controlling shareholder of the Company
"Company" PetroChina Company Limited, a joint stock limited company incorporated
in the PRC under the Company Law of the PRC, and listed on the Main
Board of The Stock Exchange of Hong Kong Limited with American
depositoary shares listed on the New York Stock Exchange
"Dayuan" [CHINESE CHARACTERS] (Ningxia Dayuan Refinery and Petrochemical
Company Limited), located in the Ningxia Autonomous Region, the PRC,
and is a wholly owned subsidiary of CNPC
"Group" the Company and its subsidiaries
"HK$" Hong Kong dollars, the lawful currency of Hong Kong Special
Administrative Region, PRC
"IFRS" International Financial Reporting Standards
"Land Use Rights Leasing the land use rights leasing arrangement for the allocated land as more
Arrangement" particularly described in the paragraph headed "Land Use Rights Leasing
Arrangement"
"Land Use Rights Leasing the land use rights leasing contract entered into between the Company
Contract" and CNPC dated 10 March 2000 for the lease of a total of 42,476
parcels of land in connection with the operations and businesses of the
Company covering an aggregate area of approximately 1,145 million
square meters located throughout PRC for a term of 50 years at an
annual fee of RMB 2 billion which was disclosed in the announcement of
the Company dated 27 September 2002 in relation to its application to
the Stock Exchange for a renewal of the wavier for strict compliance
with the continuing connected transaction requirements under the
Listing Rules; and Stock Exchange had, amongst others, granted a waiver
from strict compliance with the disclosure obligations under the
Listing Rules in connection with such land use rights leasing contract
for the period from 1 January 2003 to 31 December 2005 subject to
certain conditions as set out in such waiver
"Listing Rules" the Rules Governing the Listing of Securities on the Stock Exchange
"PRC" the People's Republic of China
"Qingyang" [CHINESE CHARACTERS] (Qingyang Ningxia Dayuan Refinery and
Petrochemical Company Limited), located in Gangsu Province, the PRC,
and is a wholly owned subsidiary of CNPC
"Refinery and the petroleum and natural gas-related refinery and petrochemical
Petrochemical Businesses" businesses respectively owned by Dayuan and Qianyang, which include
both assets and liabilities
"RMB" Renminbi, the lawful currency of the PRC
"SASAC" the State-owned Assets Supervision Administration Commission of the
State Council
"Stock Exchange" The Stock Exchange of Hong Kong Limited
In this announcement, except as otherwise indicated, RMB has been translated
into HK$ at the rate of HK$1 = RMB 1.07 for reference purpose only.
By order of the Board
PETROCHINA COMPANY LIMITED
LI HUAIQI
Secretary to the Board
30 March 2005
Beijing, the PRC
Please also refer to the published version of this announcement in the South
China Morning Post
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.
PetroChina Company Limited
Dated: March 31, 2005 By: /s/ Li Huaiqi
----------------------------------
Name: Li Huaiqi
Title: Company Secretary