China North East Petroleum boosts Q2 sales by 144% on new oil services division
Oil producer and oilfield services company China North East Petroleum Holdings (NYSE Amex: NEP) has reported revenues of $27.7 million for the three months ending June 30, 2010 - an increase of 144% from the prior year period due to an increase in sales generated by its new contract oil drilling entity, Tiancheng.
The company had profits of $25.0 million, or $0.81 per diluted share for the second quarter.
No new oil wells were drilled in the company's oilfields during the period, bringing the total number of producing wells to 289.
As a result, total oil production was 198,776 barrels, an 11% decrease from 223,059 barrels in the prior year second quarter period.
Gross profit, however, increased 128.4% to $16.9 million, or 60.9% of revenue, from $7.4 million, or 65.0% of revenue, in the second quarter of 2009, benefiting from rising oil prices.
"The decline in oil production levels were primarily a result of a natural decline in oil production among existing wells, no new wells drilled in the first half of the year due to severe weather conditions in Northern China, and the company's capital expenditure plan to allocate cash reserves for potential oil field lease/acquisition in the near future," said the company in a statement.
"Despite the decline in volume of oil produced, the company benefited from rising oil prices and recorded revenue of $32.0 million from total production of 426,402 barrels of crude oil in the first half of 2010 compared to oil production revenue of $20.3 million and 445,150 barrels of crude oil produced in the prior year period."
In the first six months of 2010, Tiancheng secured contracts to drill 111 wells for PetroChina and other private oil companies for a total drilling depth of 173,237 meters, resulting in revenue of $24.6 million for the first half of 2010.
The revenue from Tiacheng is expected to finance the future drilling and production of crude oil for the company`s oil production division, it said.
As of June 30, 2010, the company had $46.5 million in cash. Total assets were $139.4 million and total liabilities were $36.4 million.
China North East Petroleum currently operates four oilfields in Northern China. The company also recently added an oil service subsidiary through its acquisition of Song Yuan Tiancheng Drilling Engineering Co. Ltd.
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