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Brightoil Petroleum (Holdings) Ltd. has announced the acquisition of two bunker barges as part of its expansion strategy.

A statement by the company has been provided below.

Source: Brightoil Petroleum (Holdings) Ltd.

On 14 August 2014, Subsidiary 639 entered into the First MOA with Zhejiang Brightoil Shipping, pursuant to which Zhejiang Brightoil Shipping has agreed to sell, and Subsidiary 639 has agreed to purchase Vessel 639 for a total cash consideration of US$9,000,000 (equivalent approximately to HK$ 69,750,000).

On 14 August 2014, Subsidiary 666 entered into the Second MOA with Shenzhen Brightoil Shipping, pursuant to which Shenzhen Brightoil Shipping has agreed to sell, and Subsidiary 666 has agreed to purchase Vessel 666 for a total cash consideration of US$9,000,000 (equivalent approximately to HK$69,750,000).

Both Zhejiang Brightoil Shipping and Shenzhen Brightoil Shipping are connected persons of the Company under the Listing Rules. As such, the entering into the First MOA and the Second MOA with Zhejiang Brightoil Shipping and Shenzhen Brightoil Shipping respectively constitutes connected transactions for the Company.

As the applicable percentage ratios in respect of the aggregated transactions contemplated under the First MOA and the Second MOA exceed 0.1% but are less than 5%, such aggregated transactions are subject to the reporting and announcement requirements but are exempt from independent shareholders’ approval requirement under Chapter 14A of the Listing Rules.

Introduction

On 14 August 2014, Subsidiary 639 entered into the First MOA with Zhejiang Brightoil Shipping, pursuant to which Zhejiang Brightoil Shipping has agreed to sell, and Subsidiary 639 has agreed to purchase Vessel 639 for a total cash consideration of US$9,000,000 (equivalent approximately to HK$69,750,000).

On 14 August 2014, Subsidiary 666 entered into the Second MOA with Shenzhen Brightoil Shipping, pursuant to which Shenzhen Brightoil Shipping has agreed to sell, and Subsidiary 666 has agreed to purchase Vessel 666 for a total cash consideration of US$9,000,000 (equivalent approximately to HK$69,750,000).

Vessel 639 and Vessel 666 are both built by Haidong Shipyard, and both vessels are presently at Haidong Shipyard where final preparatory steps for delivery to Zhejiang Brightoil Shipping and Shenzheng Brightoil Shipping are being undertaken.

Both Zhejiang Brightoil Shipping and Shenzhen Brightoil Shipping are ultimately and beneficially controlled by Dr. Sit, who is an executive Director, the chairman of the Company and a controlling Shareholder indirectly interested in approximately 74.83% of the issued share capital of the Company as at the date of this announcement. Zhejiang Brightoil Shipping and Shenzhen Brightoil Shipping are therefore connected persons of the Company under the Listing Rules. As such, the entering into the First MOA and the Second MOA with Zhejiang Brightoil Shipping and Shenzhen Brightoil Shipping respectively constitutes connected transactions for the Company.

The first MOA and the second MOA

The First MOA and the Second MOA are legally binding, of broadly similar terms and conditions in the form as per the Norwegian Shipbrokers' Association's Memorandum of Agreement for sale and purchase of ships (adopted by The Baltic and International Maritime Council (BIMCO) in 1956).

1. First MOA dated 14 August 2014

1.1 Parties
Zhejiang Brightoil Shipping as seller
Subsidiary 639 as buyer

1.2 Asset to be acquired
Vessel 639

1.3 Consideration
US$9,000,000 (equivalent approximately to HK$69,750,000 ), which shall be payable in full to Zhejiang Brightoil Shipping within 30 days of the delivery of Vessel 639, subject to the satisfactory documentary closing.

The consideration is determined after arm's length negotiation between the parties with reference to a third party valuation report dated 14 August 2014, with an open market value of US$10,000,000 (equivalent approximately to HK$77,500,000)of Vessel 639. It is intended that payment of the consideration of Vessel 639 will be satisfied entirely in cash by way of bank loans and internal funds.

1.4 Completion and delivery
Pursuant to the First MOA, the delivery of Vessel 639 is expected to take place on 2 September 2014 in the PRC or such other place as the parties may mutually agree. The cancellation date for completion (the last day available for completion) is 30 September 2014.

2. Second MOA dated 14 August 2014

2.1 Parties
Shenzhen Brightoil Shipping as seller
Subsidiary 666 as buyer

2.2 Asset to be acquired
Vessel 666

2.3 Consideration
US$9,000,000 (equivalent approximately to HK$69,750,000), which shall be payable in full to Shenzhen Brightoil Shipping within 30 days of the delivery of Vessel 666, subject to the satisfactory documentary closing.

The consideration is determined after arm's length negotiation between the parties with reference to a third party valuation report dated 14 August 2014, with an open market value of US$10,000,000 (equivalent approximately to HK$77,500,000)of Vessel 666.

It is intended that payment of the consideration of Vessel 666 will be satisfied entirely in cash by way of bank loans and internal funds.

2.4 Completion and delivery
Pursuant to the Second MOA, the delivery of Vessel 666 is expected to take place on 2 September 2014 in the PRC or such other place as the parties may mutually agree. The cancellation date for completion (the last date available for completion) is 30 September 2014.

Reasons for and benefits of the transaction

Having established itself as one of the leading suppliers of marine bunkers in Singapore, the Group considers that the purchase of these two bunker barges will (i) enhance the competitive strength in the bunkering business of the Group by expanding the operating fleet, (ii) bring in additional revenue to the Group through increased marine bunker sales volumes.

The entering into the First MOA and the Second MOA is not expected to have a material impact on the Group's asset/liabilities ratio and liquidity.

The Directors (including the independent non-executive Directors) are of the view that the terms of the First MOA and the Second MOA were determined after arm’s length negotiations, and are on normal commercial terms in the ordinary and usual course of business of the Group, which are fair and reasonable and in the interests of the Group and its Shareholders as a whole.

Dr. Sit has a material interest in the transaction contemplated under each of the First MOA and the Second MOA, and therefore has abstained from voting in the relevant board resolution.

General information

Information on the Group

The Group is principally engaged in exploration, exploitation and production of oil and gas fields, international trading and bunkering, marine transportation as well as oil storage and terminal facilities businesses.

Information on Shenzhen Brightoil Shipping

Shenzhen Brightoil Shipping is a limited liability company established under the laws of the People's Republic of China and beneficially owned by Dr. Sit. Shenzhen Brightoil Shipping engages in the business of providing marine transportation services for hazardous cargo , whole sale of petroleum products, ship management (technical and commercial), ship repair, ship maintenance and related services in the People's Republic of China.

Information on Zhejiang Brightoil Shipping

Zhejiang Brightoil Shippingis a limited liability company established under the laws of the People's Republic of China and beneficially owned by Dr. Sit. Zhejiang Brightoil Shipping engages in the business of providing marine transportation services in the coastal waters of the People's Republic of China and the middle and lower section of the Yangtze river for general cargo as well as petroleum products.

Information on Subsidiary 639

Subsidiary 639 is a limited liability company incorporated in Singapore and a wholly owned subsidiary of the Company. Subsidiary 639 engages in the ownership of vessel in Singapore.

Information on Subsidiary 666

Subsidiary 666 is a limited liability company incorporated in Singapore and a wholly owned subsidiary of the Company. Subsidiary 666 engages in the ownership of vessel in Singapore.

Supplemental announcement

The Company would like to supplement that the construction cost of Zhejiang Brightoil Shipping for Vessel 639 and Shenzhen Brightoil Shipping for Vessel 666, was RMB 55,752,761.99 (equivalent approximately to HK$69.98 million) and RMB 55,779,924.37 (equivalent approximately to HK$ 70.02 million) respectively.

Translation of amounts in RMB$ into HK$ has been made at the rate of RMB$=HK$1.2553 in this announcement for illustration purpose only. No representation is made that any amount in HK$ has been, could have been or may be converted at such rate or at all.