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China North East Petroleum (NEP) Expands into Oilfield Services, Buying up Tiancheng Drilling

China North East Petroleum Holdings Limited today announced the acquisition of controlling interest in Song Yuan Tiancheng Drilling Engineering Co. Ltd. (Tiancheng), via a $130-million USD purchase.

NEP is a trailblazer in the privatized, crude oil production sector of Northern China, and is the first privately owned oil exploration and production operation to be traded on NYSE Amex. NEP has guaranteed access to Chinese markets for their crude oil due to an arrangement with PetroChina, and currently operates 4 large fields, including China’s largest, a 2,696-acre field with geological reserves estimated to be in excess of 37.4 million barrels.

Tiancheng is the largest PetroChina-licensed private drilling operation in China, with seven operable rigs, a 220-well annual drilling capacity, and employing a staff of 320. NEP’s move will add substantial revenue streams, gaining access to Taincheng’s customer base which consists of two major oil producers as well as PetroChina, its largest client. Tiancheng had $14.7 million revenue ($5.2 net profit) in 2008, and has been well-capitalized since its inception.

This diversification of NEP’s structure allows vertical market expansion, according to NEP President Mr. Hongjun Wang, and will mean increased sales to China’s state-owned oil companies (SOE’s). A greater footing in the sector, through acquisition of Tiancheng’s logistical capacity, translates into better lease opportunities with the SOE’s, and accelerated production while operating efficiency is increased.

Wang went on to say that this expansion makes NEP a major player in China’s Energy and Production industry, and that he would update shareholders in the coming weeks on their progress. Tiancheng’s consistent track record of mid-40% operating margins and mid-30% net margins, its door-opening customer base, and its command of the oilfield services end of the business, makes the strengthened NEP a juggernaut to be reckoned with.

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