GoFintech Quantum Innovation Limited — M&A Activity 2013

Nov 19, 2013

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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NEW TIMES ENERGY CORPORATION LIMITED 新 時 代 能 源 有 限 公 司[*] (Incorporated in Bermuda with limited liability) (Stock Code: 00166)

PROPOSED ACQUISITION OF ASSETS MAJOR TRANSACTION

The Purchaser accepted the Offer on 19 November 2013 (Hong Kong time) for the acquisition of the Participating Interest from the Vendor for a total cash consideration of AR$101,043,645, adjustable with exchange rate variation or, at the option of the Vendor, US$13 million (equivalent to about HK$100,750,000).

The Vendor is not connected with the Company, any directors, chief executive officer or substantial shareholders of the Company or any of its subsidiaries or their respective associates.

The Acquisition constitutes a major transaction of the Company under the Listing Rules which requires the approval of the Shareholders.

A circular giving details of the Acquisition and information required under the Listing Rules, and incorporating a notice of a special general meeting, will be sent to the Shareholders within 15 business days after the date of this announcement.

INTRODUCTION

Reference is made to the announcement of the Company dated 13 September 2013 (the ‘‘Announcement’’) in relation to a potential acquisition of a participating interest in a petroleum and natural gas production field in Argentina. Unless otherwise stated therein, terms and expressions used herein shall have the same meanings as those defined in the Announcement.

The Board is pleased to announce that the Company has accepted the Offer.

• For identification purpose only

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ACCEPTANCE OF OFFER CONTAINED IN THE OFFER LETTERS DATED 9 SEPTEMBER 2013 (AS AMENDED ON 8 OCTOBER 2013, 15 OCTOBER 2013 AND 18 NOVEMBER 2013)

Parties:

Vendor: Pluspetrol Sociedad Anónima Purchaser: High Luck Group Limited, a wholly owned subsidiary of the Company

The Purchaser accepted the Offer on 19 November 2013 (Hong Kong time).

Assets to be acquired:

A 38.15% participating interest in the JV, consisting of the Rights and the Assets attributable to the Vendor as follows:

• . Rights refer to (i) the 38.15% share that the Vendor has in all of the obligations and rights arising from the JV Contract together with all rights, title, interest, fixtures, benefits and privileges of the Vendor attributable to the JV Contract and, through it, to the Concession, (ii) all rights that the Vendor has regarding to JV Ancillary Contracts, (iii) all rights in and to the oil, gas, water and injectors wells located within the Concession, (iv) all rights in and to the property and other fixtures of the Concession used for the operation thereof, or for the production, processing, sale or disposal of hydrocarbons or water produced in the Concession, including but not limited to salt water disposal wells, pipelines, storage systems, facilities compression located within the Concession, and (v) all rights of the Vendor has in and to crude oil, natural gas and other hydrocarbons and minerals and gaseous substances produced in the Concession after Closing (the rights and obligations of the JV partners under the JV Contract is set out in the sub-paragraph headed ‘‘The JV’’ of the paragraph headed ‘‘Information on the Concession and the JV’’ below)

• . Assets refer to the Vendor’s 38.15% interest in the production equipment and facilities required to perform and execute the exploitation of the Concession under the JV. As at 31 December 2012, the JV had total fixed assets amounted to AR$69,972,624 (about HK$110,327,935) and the fixed assets attributable to the Vendor’s 38.15% interest in the JV was about AR$26,694,556 (about HK$42,090,107)

• . The operator role of the JV to be transferred from the Vendor.

The effective date for the Acquisition is 30 June 2013. Hence, the exploitation operating results of the JV attributable to the Rights after the Effective Date accrue to the Purchaser.

The exploitation operating results represent the net profit/loss in each calendar month calculated on the basis of agreed accounting principles. If the exploitation operating results during such period are positive, the Vendor will pay the profit to the Purchaser, and if the results are negative, the Purchaser will pay to the Vendor an amount equal to the loss.

The Vendor shall submit to the Purchaser the exploitation operating results for the period between 1 July 2013 and up to the date of Closing within 15 business days since the last business day from the month in which Closing occurs.

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The Purchaser will also assume and comply with, and indemnify the Vendor from, all liabilities incurred by the Vendor in relation to the Participating Interest in respect of the environmental law of Argentina, except for the following obligations incurred by the Vendor before the Closing:

1. all obligations related to private landowner compensations in the Concession area, accrued during the operation of the Concession area, before the Closing;

2. all labour, pension, social security, union or civil obligations tied to the Employees previous to the Closing; and

3. all payment obligations related to taxes on the Assets and oil royalties corresponding to the Vendor’s share of the production in the Concession before the Closing.

On 14 November 2013, the Palmar Largo Operating Committee decided by majority vote that, subject to the fulfillment of certain conditions, they will designate the Purchaser as operator of the JV. The Company expects to satisfy all conditions prior to Closing.

Employees:

The JV is managed as a self-contained operating unit. The Vendor, in the capacity as the JV’s operator, is responsible to hire employees necessary to carry out the operations of the JV.

Following Closing, the Purchaser will employ all Employees on equal wages and conditions that they are receiving from the Vendor.

Currently, the workforce comprises mostly of Argentine nationals. The average length of service of these employees is 15 years and includes, among others, production and construction staff.

Consideration and payment terms:

The consideration is AR$101,043,645, adjustable with exchange rate variation or, at the option of the Vendor, US$13 million (equivalent to about HK$100,750,000), comprising the Rights price of AR$71,312,476 (about HK$71,105,233) and Assets price of AR$29,731,169 (about HK$29,644,767), and is payable as follow:

1. first deposit of AR$15,545,176 or US$2 million (equivalent to about HK$15,500,000) was paid by the Purchaser on 2 October 2013;

2. second deposit of AR$23,317,764 or US$3 million (equivalent to about HK$23,250,000) is being paid by the Purchaser on 19 November 2013; and

3. the balance of AR$62,180,705 or US$8 million (equivalent to about HK$62,000,000) will be paid at Closing.

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Pursuant to the JV Contract, the other JV partners have the Right of First Refusal to purchase the Participating Interest from the Vendor within 30 days from the date of the Vendor’s notification of the proposed sale to the Purchaser. The Vendor served notice of the Right of First Refusal to other JV partners and no JV partners exercised their Right of First Refusal up to the expiry date. If the Purchaser is not designated as operator of the JV, the Vendor shall refund to the Purchaser all deposits paid.

The consideration was arrived at after arm’s length negotiations. The Rights price is determined with reference to the future estimated crude oil output up to the expiry of the Concession and the local market prices of crude oil. According to an independent assessment performed by a technical expert, Roma Oil and Mining Associates Limited, the total proved reserves attributable to the Vendor’s 38.15% participating interest up to the expiry of the Concession are equivalent to approximately 542,202 barrels of crude oil. Based on the estimated future output, the Rights price per barrel is approximately US$21, representing a discount of 72% to the average unit selling price of crude oil net of royalties for the last two years at approximately US$74 per barrel. The Assets price is determined with reference to the book value of production equipment and facilities attributable to the Vendor’s 38.15% participating interest in the JV.

The Directors consider that the terms of the Acquisition are fair and reasonable and in the interests of the Shareholders as a whole.

Funding:

The first and second deposits were funded from internal resources.

The balance of the purchase price will be funded from internal resources and borrowings.

Conditions of the Acquisition:

Completion of the Acquisition is conditional, inter alia, upon all necessary authorisations, consents or permission to the implementation of the Acquisition have been obtained by the Vendor and the Purchaser respectively.

Completion date:

Prior to year end.

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INFORMATION ON THE CONCESSION AND THE JV

Background

The map below shows the location of the Concession:

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The Concession

The Palmar Largo Block was originally exploited by YPF, which is an enterprise owned by the Federal Government of Argentina, since 1984. In 1992, due to restructuring of YPF, the said exploitation right on Palmar Largo Block was transferred back to the Government of Formosa and Salta Provinces, Argentina. The Federal Government of Argentina then called for the international bidding process and approved YPF to form the JV with approved parties and granted the Concession to YPF.

The Concession was granted to YPF for a term of 25 years from 23 December 1992 to 23 December 2017, extendible for another 10 years up to 23 December 2027 upon the unanimous decision of the JV parties and the approval of the Secretary of Energy and the Governor of each of the relevant province of Argentina through a Decree.

The area granted by the Concession is located in the Northwest Basin in the area called Palmar Largo (Provinces of Formosa and Salta, Argentina) and covers a surface area of approximately 1,382.1 km[2] comprising of two working zones, one located in Formosa with a total surface area of approximately 1,221.1 km[2] and another one located in Salta with total surface area of approximately 161 km[2] . Currently, there are 14 active producing wells within the Concession.

For the six month period ended 30 June 2013, the average daily production was 168 m[3] of crude oil. Concession cumulative production as of to date reaches approximately was 7.4 MMm[3] of crude oil.

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The following table set forth the reserve statement of the Concession as at 30 June 2013:

Proved — Developed — Undeveloped Total proved Probable Possible Total Mean prospective resource (Note 3) — Unrisked	Volume to expiry of Concession Gross volume (100%) Vendor’s interest (38.15%) Vendor’s interest (38.15%) net of royalties to the State (Note 2) (’000m3) (’000m3) (’000m3) 230 88 78 17 6 6 247 94 83 8 3 3 0 0 0 255 97 86 0 0 0	Volume to end of field life Gross volume (100%) Vendor’s interest (38.15%) Vendor’s interest (38.15%) net of royalties to the State (Note 2) (’000m3) (’000m3) (’000m3) 409 156 138 35 13 12 444 170 150 18 7 6 0 0 0 463 176 156 1,746 666 590	Volume to end of field life Gross volume (100%) Vendor’s interest (38.15%) Vendor’s interest (38.15%) net of royalties to the State (Note 2) (’000m3) (’000m3) (’000m3) 409 156 138 35 13 12 444 170 150 18 7 6 0 0 0 463 176 156 1,746 666 590
			150 6 0
			156
			590

Notes:

1. The volume to expiry of Concession and volume to end of field life have been estimated based on the assumptions that the JV will be able to renew the operating lease beyond its current expiry date and will continue to operate the Concession to the end of field life.

2. The crude oil output is subject to a royalty of 11.4% to the Government of Argentina.

3. A total of 1,746,000 m[3] have been assigned as mean prospective resource (unrisked) in the estimated end of field life scenario based on the exploration prospects identified. Prospective resource is only assigned to scenario of end of field life since it is unlikely that exploration prospects will be developed during the current Concession term.

4. The figures are corrected to the nearest thousand.

The JV

The JV was formed in November 1992 as a Temporary Consortium of Enterprises governed by the Companies Act No. 19550 of Argentina with the purpose of exploration, development and exploitation of the Concession. Presently the JV has four members, including YPF, the Vendor and two other independent third parties.

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The JV Contract is for a term of 25 years and can be extended for 10 additional years with the unanimous decision of all parties to the JV Contract and the approval of the Secretary of Energy and the Governor of each of the relevant province of Argentina through a Decree.

Pursuant to the JV Contract, the JV is operated under the supervision of an operative committee which is formed by one principal and one alternate representative of each party to the JV. The JV operator is responsible for conducting the business in accordance with the JV Contract and according to the instructions of the operative committee. The operator has the exclusive duty to conduct the activity of the JV and can use independent contractors and employees. The operator shall have neither profits nor losses because of its duty.

Under the JV Contract, each JV partner pays its pro rata share of the development and operating costs for the development and production activities covered by the Concession with respective to its participating interest, and is entitled to receive its pro rata share of the crude oil and gas produced from the working zones under the Concession, net of its pro rata share of royalties payable to the Government of Argentina.

Financial Overview

The following table set forth the unaudited financial information derived from the Vendor’s 38.15% participating interest in the JV, prepared in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants, for the two years ended 31 December 2011 and 2012 and for the six months ended 30 June 2012 and 2013:

	Net profit	before	Net profit after	Net profit after	Net profit after
Financial Period	taxation		taxation
		(Note)			(Note)
	(AR$’000)	(HK$’000)	(AR$’000)	(HK$’000)
Year ended 31 December 2011	15,955	29,860	10,371		19,409
Year ended 31 December 2012	11,731	19,810	7,625		12,877
Period ended 30 June 2012	3,961	6,947	2,575		4,515
Period ended 30 June 2013	11,941	17,891	7,762		11,629

Note: For the above unaudited financial information, AR$ are converted into HK$ at rates of AR$1.00 = HK$1.87, 1.69, 1.75 and 1.50 for the two years ended 31 December 2011, 2012 and the six months ended 30 June 2012, 2013 respectively for illustrative purpose only.

Fiscal Terms of the Concession

The JV itself is not subject to any income tax. Each JV party is subject to royalties at an effective rate of 11.4% and sales tax at an average rate of 1.6% on their sales and 35% income tax on their profits. Each JV party is also subject to 21% VAT on purchases which is recoverable from the 21% VAT charged on sales.

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Infrastructure

The main infrastructure facilities and equipment used by the JV for the production of crude oil from the Concession include a separation facility, a water treatment plant and a gasoline plant. The daily treatment capacities of the separation facility and water treatment plant are 5,500 m[3] of gross production and 5,000 m[3] of water production respectively. Both current utility factors are 77%. The daily treatment capacity of the gasoline plant is 300 m[3] of gas production and is currently running at an overcharged utility factor of 105%. The Vendor’s 38.15% interest in all these facilities are included as part of the Assets in the Acquisition. The following table set forth the net book values of the major categories of the operating assets:

Fixed assets Crude oil Materials	31 December 2012 (Note) (AR$’000) (HK$’000) 26,695 42,090 653 1,030 300 473 27,648 43,593	30 June 2013 (Note) (AR$’000) (HK$’000) 23,801 33,803 1,058 1,503 317 450 25,176 35,756	30 June 2013 (Note) (AR$’000) (HK$’000) 23,801 33,803 1,058 1,503 317 450 25,176 35,756
			35,756

Note: For the above unaudited financial information, AR$ are converted into HK$ at rates of AR$1.00 = HK$1.58 and 1.42 as at 31 December 2012 and 30 June 2013 respectively for illustrative purpose only.

JV Ancillary Contracts

The Vendor’s 38.15% share of all crude oil production of the JV are sold under a series of framework agreements which contain grade requirements, pricing basis and delivery terms that are customary in the crude oil industry. These framework agreements will be terminated and superseded by new agreements to be signed with the Purchaser after Closing.

REASONS FOR THE ACQUISITION

The Directors consider the Acquisition will bring operational synergy to the Group as well as boost the business performance for enhancement of Shareholders’ value.

Currently, the Group owns approximately 69.25% participating interest in two concessions, namely the Tartagal Oriental concession and Morillo concession, covering a total of 7,065 km[2] and 3,518 km[2] respectively, in Argentina. In view of the proximity of the Concession to our existing concessions, the Acquisition will further strengthen our asset portfolio in Argentina. In addition, since we have already set up our own technical team in Argentina to supervise the operations of our existing concessions, we can deploy our existing human resources to operate the JV relating to the Concession so as to enhance operational cost efficiency.

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More importantly, the Concession has been in operations since 1992. With proven track record results as indicated in the sub-paragraph headed ‘‘Financial Overview’’ in the paragraph headed ‘‘Information on the Concession and the JV’’ above, the Directors expect the Acquisition will give an immediate boost to our business performance, earnings and cashflows, which in turn will enhance the Company’s value for the Shareholders.

CONNECTION BETWEEN THE PARTIES

The Company confirms that, to the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, the Vendor and its ultimate beneficial owner(s) are independent third parties not connected with the Company, any directors, chief executive officer or substantial shareholders of the Company or any of its subsidiaries or their respective associates.

INFORMATION FOR SHAREHOLDERS

The Group is principally engaged in the trading of oil products, exploration of crude oil and oil exploitation and production.

The Vendor is a private company incorporated in Argentina principally engaged in oil and gas exploration and exploitation and energy and natural resources related business.

For the Company, the acquisition is a major transaction under the Listing Rules which requires the approval of the Shareholders. The Group does not have any transaction with the Vendor which is required to be aggregated with the Acquisition under Rule 14.22 of the Listing Rules.

Price Waterhouse & Co. S.R.L., Buenos Aires, Argentina, are the auditors of the JV and the Vendor. In order to expedite the preparation work of a circular of the Company giving details of the Acquisition and information required under the Listing Rules, the Company intends to engage Price Waterhouse & Co. S.R.L. to perform certain factual finding procedures on compilation of the unaudited statements of assets and liabilities and profit and loss statements on the identifiable assets and net income stream of the Participating Interest. However, since Price Waterhouse & Co. S.R.L. is not qualified under the Professional Accountants Ordinance of Hong Kong for appointment as reporting accountant under Rule 4.03 of the Listing Rules, the Company will make an application for waiver from strict compliance of such rule on the basis that Price Waterhouse & Co. S.R.L. complies with the relevant independence requirements and auditing standards required of reporting accountants under the Listing Rules.

In compliance with relevant Listing Rules requirements, the circular (also incorporating a notice of a special general meeting) will be sent to the Shareholders within 15 business days after the date of this announcement.

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DEFINITIONS

• ‘‘Acquisition’’Acquisition’’’’

‘‘Acquisition’’Acquisition’’’’ the proposed acquisition of the Participating Interest ‘‘AR$’’ Argentine Peso(s), the lawful currency of Argentina

• ‘‘Assets’’ the 38.15% interest of the Vendor in the assets of the JV

• ‘‘Board’’ the board of directors of the Company

• ‘‘Closing’’ completion of the Acquisition

• ‘‘Company’’ New Times Energy Corporation Limited, a company incorporated in Bermuda with limited liability, the issued shares of which are listed on the Main Board of the Stock Exchange

• ‘‘Concession’’ the hydrocarbons exploitation rights on the Palmar Largo Block granted to YPF, one of the JV partners, for the exploration, development and exploitation of hydrocarbons for a term of 25 years from 23 December 1992 to 23 December 2017, extendible for another 10 years up to 23 December 2027 upon the unanimous decision of the JV parties and the approval of the Secretary of Energy and the Governor of each of the relevant province through a Decree

• ‘‘Director(s)’’ the director(s) of the Company

• ‘‘Effective Date’’ 30 June 2013

• ‘‘Employees’’

• all of the Vendor’s employees who serve full-time for the benefit of the JV and certain Vendor’s employees who serve part-time for the benefit of the JV

• ‘‘Group’’, ‘‘we’’ or ‘‘our’’ the Company and its subsidiaries

• ‘‘independent third parties’’

• parties who, to the best knowledge, information and belief of the Directors and having made all reasonable enquiries, are independent of the Company and its connected persons (as defined in the Listing Rules)

• ‘‘JV’’

• Palmar Largo UTE, the joint venture formed pursuant to the JV Contract

• ‘‘JV Ancillary Contracts’’

• all contracts formalised by the JV, by the Vendor acting for and on behalf of the JV and/or on behalf of itself but within the JV object

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‘‘JV Contract’’ the joint venture contract that aims at the exploration, development and exploitation of hydrocarbons in the Palmar Largo Block signed on 24 November 1992 between YPF, the Vendor and two independent third parties and as subsequently amended on 21 July 1993, 10 July 1996, 24 September 1999, 20 September 2001, 25 February 2003, 30 May 2006 and 28 April 2010

• ‘‘Listing Rules’’ the Rules Governing the Listing of Securities on the Stock Exchange

• ‘‘Offer Letters’’ the offer letters dated 9 September 2013 (as amended on 8 October 2013, 15 October 2013 and 18 November 2013) from the Vendor to the Purchaser in respect of sale of the Participating Interest

• ‘‘Palmar Largo Block’’ the exploitation area, which exploitation right was granted under the Concession, located in the Provinces of Salta and Formosa, Argentina

• ‘‘Participating Interest’’ the Rights and the Assets

• ‘‘Purchaser’’ High Luck Group Limited, a company incorporated in the British Virgin Islands and a wholly owned subsidiary of the Company

• ‘‘Right of First Refusal’’ the right of first refusal of the other parties to the JV Contract to purchase the Rights

• ‘‘Rights’’ the rights and obligations of the Vendor in the JV to be acquired/assumed under the Acquisition

• ‘‘Shareholder(s)’’ shareholder(s) of the Company

• ‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited

• ‘‘US$’’ United States dollar(s), the lawful currency of the United States of America

• ‘‘VAT’’ value added tax of Argentina

• ‘‘Vendor’’ Pluspetrol Sociedad Anónima

• ‘‘YPF’’ YPF Sociedad Anónima, holder of the Concession

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GLOSSARY OF THE TECHNICAL TERMS

• ‘‘condensate’’

liquid petroleum excluding crude oil and LPG produced at surface by processing or separation of natural gas from gaseous/gas condensate reservoir

• ‘‘crude oil’’

• liquid petroleum, other than condensate and LPG, produced by separation at the surface from a liquid reservoir in its natural state before the same has been refined but after extraction of water and foreign substances

• ‘‘hydrocarbons’’

crude oil, natural gases and liquefied gases in any of the conditions and relationships in which they are connected

• ‘‘km’’

• kilometre(s)

• ‘‘km[2] ’’

• square kilometre(s)

• ‘‘liquefied gases’’

• propane or butane

• ‘‘MMm[3] ’’

• million cubic metres

• ‘‘natural gas’’

• all hydrocarbons which at standard atmospheric conditions of pressure and temperature are in a gaseous phase including non-hydrocarbon gas which is in association with and produced together with such gaseous hydrocarbons

• ‘‘proved reserves’’

proved reserves are those quantities of petroleum which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be commercially recoverable, from a given date forward, from known reservoirs and under defined economic conditions, operating methods, and government regulations

• ‘‘probable reserves’’

• probable reserves are those additional reserves which analysis of geoscience and engineering data indicate are less likely to be recovered than proved reserves but more certain to be recovered than possible reserves

• ‘‘possible reserves’’

possible reserves are those additional reserves which analysis of geoscience and engineering data indicate are less likely to be recoverable than probable reserves

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Unless the context requires otherwise, in this announcement US$ is converted into HK$ and AR$ at the rates of US$1.00=HK$7.75 and US$1.00=AR$7.7726 respectively for illustrative purpose only.

By the order of the Board of New Times Energy Corporation Limited Cheng Kam Chiu, Stewart Chairman

Hong Kong, 19 November 2013

As at the date of this announcement, the Board comprises eight Directors, of whom three are executive Directors, namely Mr. Cheng Kam Chiu, Stewart, Mr. Cheng Ming Kit and Mr. Wong Tai Cheung, Andrew; one non-executive Director namely Mr. Paul Lincoln Heffner; and four independent non-executive Directors, namely Mr. Wong Man Kong, Peter, Mr. Chan Chi Yuen, Mr. Yung Chun Fai, Dickie and Mr. Chiu Wai On.

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