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China Natural Gas Inc. Reports Operating Results (10-Q/A)

October 01, 2010 | About:
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10qk

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China Natural Gas Inc. (CHNG) filed Amended Quarterly Report for the period ended 2010-06-30.

China Natural Gas Inc. has a market cap of $125.6 million; its shares were traded at around $5.92 with a P/E ratio of 6.2 and P/S ratio of 1.5.

Highlight of Business Operations:

On October 24, 2006, our variable interest entity XXNGC, formed a wholly-owned subsidiary, SJLNG, for the purpose of constructing a LNG facility to be located in Jingbian, Shaanxi province. We planned to invest approximately $81 million to construct this facility, with approximately $60 million in phase I construction and installations, $8 million in capitalized interest and $13 million associated with phase II and III of the plant. The construction is funded through the sale of senior notes to Abax and our September 2009 equity financing, as well as cash flows from operations. The LNG plant is under test run currently. The test run is expected to be completed by third quarter 2010. Once test run is completed, the plant is expected to have a processing capacity of 500,000 cubic meters per day, or approximately 150 million cubic meters on an annual basis.

We had total revenues of $21,135,599 and $20,742,520 for the three months ended June 30, 2010 and 2009 respectively and revenues of $40,502,422 and $39,270,186 for the six months ended June 30, 2010 and 2009. We had net income of $4,560,503 and $3,862,756 for the three months ended June 30, 2010 and 2009 respectively and net income of $8,555,773 and $8,064,379 for the six months ended June 30, 2010 and 2009 respectively.

Natural Gas from Fueling Stations. Natural gas revenue from our fueling stations increased by 2.9% or $438,981 to $15,490,300 during the three months ended June 30, 2010, from $15,051,319 during the three months ended June 30, 2009, and contributed to 73.3% of our total revenue, which was the largest among our four major business lines. During the three months ended June 30, 2010, we sold 42,955,867 cubic meters of compressed natural gas, compared to 41,152,513 cubic meters during the three months ended June 30, 2009 through our fueling stations. In terms of average station sales value and volume, in the three months ended June 30, 2010, we sold approximately $387,257 and 1,073,897 cubic meters of compressed natural gas per station, compared to approximately $430,038 and 1,175,786 cubic meters in the three months ended June 30, 2009. Unit selling price remained stable at $0.34 (RMB2.34) and $0.42 (RMB2.83) net of VAT in Shaanxi and Henan province, respectively, or $0.37 (RMB 2.49) on an average basis.

Gasoline. Revenue from gasoline sales increased by 24.5 % or $400,824, to $2,033,840 during the three months ended June 30, 2010 from $1,633,016 during the three months ended June 30, 2009, and contributed 9.6% to our total revenue. The gasoline revenue increase was due to 31.7% increase of unit sales price from $ 0.60 (RMB4.11) per liter in the three months ended June 30, 2009 to $0.79 (RMB 5.36) per liter in the three months ended June 30, 2010, mainly attributable to the increase of international oil price, partially offset by the sales volume decrease of 4.5% from 2,707,531 liters to 2,567,364 liters.

Natural Gas from Fueling Stations. Cost of revenue of our natural gas for our fueling stations increased by 11.7%, or $823,927, to $7,847,102 during the three months ended June 30, 2010, as compared to $7,023,175 during the three months ended June 30, 2009. Procurement price for natural gas remained stable at $0.16 (RMB 1.12) in Shaanxi since 2008. In Henan Province, the Company started to use coal bed methane (‘CBM ) as an alternative to regular natural gas to supply its fueling station in July 2008. The price for CBM is historically at a discount compared with natural gas, as a result the average cost of fueling station revenue in Henan decreased from $0.22 (RMB 1.55) to $0.14 (RMB 1.0) in July 2008. However, due to uncertainty in the production capacity of CBM as a byproduct of coal mines as well as the increasing demand of both CBM and natural gas, average cost of fueling station revenue in Henan increased to $0.19 (RMB 1.30) in June 2009 and $0.23 (RMB 1.58) in second quarter of 2010. The cost, however, is still significantly below the retail price at $0.42 (RMB 2.83) in Henan Province.

Gasoline. Cost of our gasoline revenue increased by 24.9% or $380,542, to $1,910,294 during the three months ended June 30, 2010, from $1,529,752 for the three months ended June 30, 2009. The increase of cost of gasoline revenue was due to the effect of the increase of average unit cost from $0.56 (RMB 3.85) per liter during the three months ended June 30, 2009 to $0.74 (RMB 5.06) per liter during the three months ended June 30, 2010 mainly attributable to the increase of international oil price, partially offset by the decrease in sales volume.

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