Longwei Petroleum Provides Shareholder Update
Company extends warrant expiration from October 29, 2012 to November 29, 2012 due to stock market closure and request of warrant holders
TAIYUAN CITY, China, Oct. 30, 2012 /PRNewswire/ -- Longwei Petroleum Investment Holding Ltd. (NYSE MKT: LPH) ("Longwei" or the "Company"), an energy company engaged in the storage and distribution of finished petroleum products in the People's Republic of China ("PRC"), announced it has extended the expiration date of its October 29, 2009 financing warrants (the "Warrants") by one month from October 29, 2012 to November 29, 2012 to account for the NYSE closure on the original expiration date.
Longwei previously completed a private placement financing, principally with institutional investors, on October 29, 2009, for approximately $14.8 million to provide inventory financing for its then newly acquired Gujiao facility. At the time of the financing, the Company issued a total of 14.8 million Warrants exercisable at $2.255 per share. These investors have subsequently exercised approximately 3.6 million Warrants, and a total of 11.2 million Warrants are currently outstanding. The Warrants were originally issued with a three-year term and were registered to be exercised "for cash" under the Company's Form S-3 Registration Statement effective February 18, 2011.
On September 26, 2012, the Company completed the purchase of the Huajie assets, a fuel storage depot in northern Shanxi Province with a 100,000-metric-ton storage capacity, for a total acquisition price of approximately $110.6 million. "We were pleased to have closed on the Huajie asset purchase using our own cash resources without dilution to our shareholders, and as of October 11, 2012, we are now operational at the facility," said Cai Yongjun, Chairman and Chief Executive Officer of Longwei. "We expect meaningful revenue contribution from Huajie beginning in the second half of our fiscal year ending June 30, 2013 as we ramp up our operations and sales efforts. Based on our experience during the Gujiao ramp-up phase during 2010, we are confident we can develop this new market quickly."
Management has forecasted strong demand for its products from customers in the region and recently announced signed sales agreements with nine major regional industrial companies for its Huajie facility. As a result, the Company has received strong institutional investor interest in its business activities. The Company has also had ongoing dialog with its Warrant holders regarding the exercise of the Warrants based on the recent upward trend in the stock price. Because all of the U.S. stock markets were closed on both October 29, 2012 and today due to the influence of Hurricane Sandy (the first back-to-back shutdown for weather since 1888, according to Bloomberg), many Warrant holders, including several large institutions, contacted management prior to the Warrants' expiration and expressed frustration and discontent for not being able to exercise their warrants on the established expiration date.
"We understand the disappointment of our long-term institutional shareholders for not being able to exercise their Warrants at a time when the Company is climbing to a fair valuation," said Mr. Cai. "We appreciate the patience of all of our shareholders as we have gone through a difficult period for all U.S.-listed Chinese companies. We think it is in the best interest of the Company and all of our shareholders to grant the short-term, one-month extension of the Warrants. At this time, our thoughts go out to those affected by the storm."
After considering the situation thoroughly and consulting with the Company's legal counsel, the board of directors authorized this decision in the best interest of the Company and its shareholders. The Warrants have been extended under the same terms and conditions until November 29, 2012.
"We believe the Warrant proceeds, if exercised, will be beneficial to the Company as a means to grow our Huajie inventory level more quickly. Based on our inventory turnover and profit margin, we view this as a potentially accretive event for our shareholders," said Michael Toups, Chief Financial Officer of Longwei. "Our trading price has been hovering around the Warrant strike price of $2.255 for the past week. Since the Warrants are close to being 'in-the-money,' we believe a short-term extension, given the unforeseen circumstances, actually reflects favorably on our confidence in the future stock price to trade higher than the current level."
The Company recently reported revenues of US $510.6 million and net income of US $65.1 million for the fiscal year ended June 30, 2012. At the June 30, 2012 fiscal year-end, the Company reported total assets of US $342.3 million and a book value per share of $3.31.
Longwei expects year-over-year revenue growth of approximately 26.6% to $646.3 million, and net income growth of approximately 24.2% to $77.6 million, adjusted for the warrant derivative liability, for the fiscal year ending June 30, 2013. The growth is driven primarily by the ramp-up of the Huajie facility and organic growth at the Company's two existing facilities.
About Longwei Petroleum Investment Holding Limited
Longwei Petroleum Investment Holding Limited is an energy company engaged in the storage and distribution of finished petroleum products in the People's Republic of China. The Company's oil and gas operations consist of transporting, storing and selling finished petroleum products, entirely in the PRC. The Company's headquarters are located in Taiyuan City, Shanxi Province. The Company has a storage capacity for its products of 220,000 metric tons located at three storage facilities within Shanxi: Taiyuan, Gujiao and Huajie, which have an individual storage capacity of approximately 50,000 metric tons ("mt"), 70,000mt, and 100,000mt, respectively. The Company has the necessary licenses to operate and sell petroleum products not only in Shanxi, but throughout the entire PRC. The Company's storage tanks have the largest storage capacity of any non-government operated entity in Shanxi.
The Company seeks to earn profits by selling its products at competitive prices with timely delivery to transportation companies, coal mining operations, power supply customers, large-scale gas stations and small, independent gas stations. The Company also earns revenue from agency fees by acting as a purchasing agent for other intermediaries in Shanxi, and through limited sales of diesel and gasoline at two retail gas stations, each located at the Company's Taiyuan and Gujiao facilities. The Company seeks to continue to expand its customer base and distribution platform through the utilization of its large storage capacity, which allows the Company the flexibility to take advantage of pricing, supply and demand fluctuations in the marketplace.
Longwei was recently named to the Forbes list of "Asia's 200 Best Under a Billion" from a universe of 15,000 companies. Forbes ranked the companies based on sales growth, earnings growth and return on equity in the past 12 months and over three years. As was reported, Longwei's three-year track record is 45% sales growth, 28% earnings per share growth and 28% return on equity. The Forbes article can be found at: http://www.forbes.com/sites/christinasettimi/2012/07/25/asias-200-best-under-a-billion
For further information on Longwei Petroleum Investment Holding Limited, please visit http://www.longweipetroleum.com. You may register to receive Longwei Petroleum Investment Holding Limited's future press releases or request to be added to the Company's distribution list by contacting Dave Gentry at firstname.lastname@example.org.
Certain statements contained herein constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations, estimates and projections about Longwei's industry, management's beliefs and certain assumptions made by management. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Because such statements involve risks and uncertainties, the actual results and performance of the Company may differ materially from the results expressed or implied by such forward-looking statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Longwei's operations are conducted in the PRC and, accordingly, are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company's results may be adversely affected by changes in the political and social conditions in the PRC and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation. Other potential risks and uncertainties include but are not limited to the ability to procure, properly price, retain and successfully complete projects, and changes in products and competition. Unless otherwise required by law, the Company also disclaims any obligation to update its view of any such risks or uncertainties or to announce publicly the result of any revisions to the forward-looking statements made here. Readers should review carefully reports or documents the Company files periodically with the Securities and Exchange Commission.
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SOURCE Longwei Petroleum Investment Holding Ltd.