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IDG Energy Investment Announces FY2018 Annual Results

IDG Energy Investment Announces FY2018 Annual Results

Net Profit increased 89.0% to HK$27.4 million

Portfolio along LNG value chain continues to extend


  • The gross revenue from sales in domestic upstream oilfield increased by 36.2% to approximately HK$210.0 million. The gross oil sales volume increased by 9.3% to approximately 390,479 barrels and crude oil production increased 6.8% to approximately 387,513 barrels.

  • Investment income increased by 119.5% to approximately HK$163.3 million, which continued to improve the financial performance of the Company.

  • EBITDA increased significantly by 132.6% to approximately HK$236.6 million. Net profit increased by over 89.0% to approximately HK$27.4 million.

  • The Company set foot in energy investment funds management through entering into a framework agreement with Jereh for cooperation of an energy investment fund, which will further enrich the core business activities and broaden the revenue stream of the Company.

(June 22, 2019 - Hong Kong) IDG Energy Investment Limited (“IDG Energy Investment”or the “Company”, stock code: 650.HK) is pleased to announce the consolidated results of the Company and its subsidiaries for the financial year ended 31 March 2019 (“FY2018”). The Company made significant progress in its financial performance and business development in FY2018.


Financial Highlights

During FY2018, benefiting from recovering of oil prices and the operational improvement, the domestic upstream crude oil asset recorded gross revenue from sales of approximately HK$210.0 million, representing a year-on-year increase of 36.2%. The Company holds 100% equity interest of the portfolio company and the financial figures of the asset are fully consolidated to the Company’s financial statement. 


Financial performance of the Company’s other investment portfolio are reflected in the investment income. In FY2018, the Company’s investment income amounted to HK$163.3 million, representing a significant year-on-year increase of 119.5%. The increase is primarily attributable to return of the investment from the upstream unconventional shale oil and gas assets in the Eagle Ford core region of the U.S.


The Company's EBITDA for FY2018 increased by 132.6% year-on-year to approximately HK$236.6 million.  Net profit increased by over 89.0% to approximately HK$27.4 million.


Business Review

As of 31 March, 2019, the Company has made investments in various energy assets at home and abroad, covering upstream crude oil assets and liquefied natural gas (“LNG”) assets along the value chain.


In FY2018, the Company made further investments along the LNG value chain and had successfully developed a more diversified and balanced investment portfolio through selective investments regarding energy assets at home and abroad. The Company also set foot in energy investment funds management through entering into a framework agreement (the “Framework Agreement” ) with Yantai Jereh Petroleum Service Group Co., Ltd.*(“Jereh”), further enriching the core business activities and broadening the revenue streams of the Company. For invested upstream assets, the Company focused on further improvement of the operational efficiency and rigorous cost-control to enhance the value of the assets.


Summary of key investment portfolios

LNGInvestment along LNG value chain


On 28 July 2017, the Company invested in Jiangxi Jovo Energy Company Limited ( “JOVO” ). JOVO is a company principally engaged in clean energy businesses, including importing, processing and sale of LNG and liquefied petroleum gas (“LPG”) in China. 


According to the information provided by JOVO, JOVO’S operational performance remained robust in 2018 with its sales volume and revenue increased stably as compared to 2017. As for LNG imports, JOVO delivered more than 1 million tons of LNG to end-users which represents another big jump. In September 2018, JOVO filed application for its initial public offering (IPO) in China. The Company strongly believes that JOVO’ s performance is in line with its expectation and the high demand of gas supply in China will keep JOVO growing at a fast speed. Also, being internationally recognized, JOVO is potentially expanding its footprints to Southeast Asia.



GNL Quebec

On 30 November 2017, the Company, through its subsidiary, invested in GNL Quebec, which is developing a state-of-the-art and low-carbon-emission LNG exporting terminal project. The project is one of the largest Canadian LNG export terminals under development with a maximum nameplate liquefaction capacity of up to 11 million tons per annum. On 26 July 2018, the Company made a subsequent investment of US$1 million (equivalent to approximately HK$7,800,000) to support the project’s ongoing development. The Company holds minority interest in GNL Quebec.


GNL Quebec is developing a 750-km natural gas pipeline to connect the Terminal to    TransCanada’ s Canadian Mainline in Eastern Ontario to expand the competitive advantage of the entire project.  The project of the terminal has continued to make positive progress on key milestones to increase momentum and advance towards FID (“Final Investment Decision”).



On 13 June 2018, the Company, through its subsidiary, made the investment for A$28.2 million (equivalent to approximately HK$166.8 million). The Company held a 9.9% equity interest in Liquefied Natural Gas Limited (“LNGL” ASX code: LNG, US stock code: LNGLY) and became its second largest shareholder.


According to the information provided by LNGL, the Magnolia LNG project, located in Lake Charles of Louisiana, the U.S., with planned capacity of 8.8 mmpta, is recognized as one of the most viable greenfield LNG projects in the U.S.. The project has obtained all required permits and approvals from U.S. Federal Energy Regulatory Commission and U.S. Department of Energy. LNGL continued its emphasis on signing long-term offtake contracts for Magnolia LNG project while ensuring that its best-in-class project execution and delivery strategy is fully ready to meet customer needs arising in the LNG market. Most LNG industry participants are bullish on the prospects for execution of new long-term offtake agreements in 2019. Consistent with this thesis, active negotiations for Magnolia LNG capacity continue with focus on Asian and European customers. 


The Company believes that the Magnolia project is very market competitive in terms of pricing. Along with proper execution and delivery strategy, mature regulatory status, and financing plans, the Magnolia LNG project presents buyers with a very attractive commercial opportunity against other projects.


JUSDA Energy

On 25 September 2018, the Company, through one of its wholly-owned subsidiaries, has entered into the JV Agreement with JUSDA and the Management, in relation to the formation of JUSDA Energy, to be engaged in LNG logistics services. The Company made contribution of RMB39.0 million (equivalent to approximately HK$43.9 million to JUSDA Energy pursuant to the JV Agreement and the completion of the investment took place on 21 December 2018. The Company will hold a 39% equity interest upon completion of all equity contribution in JUSDA Energy.


JUSDA Energy will benefit from the extensive network of natural gas resources of the Company, which will give its customers access to LNG resources in the North America and the Asia Pacific Region. JUSDA, as the sole logistics chain management platform designated under Foxconn Technology Group, has a wide container transportation network and strong bargaining power among the industry, which will provide strong support to JUSDA Energy in improving its LNG logistics services and reducing relevant costs.


JUSDA Energy’s business plan has been successfully executed after its formulation, and JUSDA Energy has started to provide stable logistic services to customers. The recent performance of the business volume showed its potential of fast expansion in near future. The Company believes the business model of JUSDA Energy is very competitive


Management of Energy Investment Fund

On 20 November 2018, as a significant step and part of its principal activity of global energy assets investment and management, the Company set foot in energy investment funds management through entering into the Framework Agreement with Jereh, for cooperation on the establishment, operation and management of the Energy Investment Fund. Jereh, listed on the Shenzhen Stock Exchange (Stock code: 002353), is an international group specializing in equipment manufacturing, oil and gas engineering and construction and oilfield technology services. 


The Energy Investment Fund will be primarily focusing on investments along China’ s natural gas value chain as well as other energy-related industries. Pursuant to the Framework Agreement, the expected size of the Fund is RMB3 billion to RMB5 billion, where Jereh, as a cornerstone investor, proposes to make a capital contribution of RMB1 billion.


The establishment of the Energy Investment Fund will allow both parties to explore projects with promising investment returns in energy industries. The Company believes that Jereh’ s in-depth knowledge in energy related industries will help the Fund to maximize returns of investments. And the Company will expand its energy investment fund management, which can zoom in the scale of energy investment and create various type of revenue for the Shareholder.


Investments in Upstream crude oil assets

U.S. Upstream Shale Oil and Gas Assets
The Company had widened its global footprint in the upstream oil assets by successfully completing the investment in Stonehold in September 2017. 


Stonehold holds certain world-class unconventional shale oil and gas assets, covering approximately 23,754 gross acres (9,090 net acres) across Dimmit and La Salle counties in the Eagle Ford region of South Texas of the U.S.. The area of the target assets (the “Target Assets” ) is liquid-rich, and the majority of the reserves are crude oil and natural gas liquid. Based on the information provided by Stonehold, the Target Assets consist of 197 producing wells currently, and the total net production and revenue of the Target Assets for the 2018 were approximately 962,000 boe and US$48.2 million, respectively.


The income generated from the Term Loan in the form of interest income has provided the Company with stable and considerable revenue with an amount of US$13.6 million in FY2018. In addition, the Company believes that any increase in the reserve and valuation of the Target Assets may increase the expected returns for the Shareholders upon disposal of the Target Assets by Stonehold in the future in an amount equivalent to 92.5% of any disposal proceeds which will go to the Company under the Credit Agreement, and the corresponding estimated fair value gain as at 31 March 2019 is US$9.1 million.


Domestic Upstream Oilfield Assets
Benefiting from the recovery of oil prices and the increase in production, the Company's investment in the domestic upstream crude oil assets has made significant progress. The Company drilled 13 wells as planned during FY2018, among which, 12 wells had been completed and had achieved the anticipated target formations with a success rate of 100%. As compared to the same period last year, oil production volume increased by approximately 6.8% to approximately 387,513 barrels; gross and net oil sales volume increased by approximately 9.3% to approximately 390,479 and 312,384 barrels respectively, and gross revenue from sales of crude oil increased by approximately 36.2% to approximately HK$210.0 million.


Mr. LIU Zhihai, President of IDG Energy Investment, commented, “The global LNG market continued to strengthen in 2018 with the delivery volume reaching 319 million tons, an increase of 27 million tons as compared to 2017. Japan remains the world’s largest importer of LNG, followed by China and Korea. China again shows a strong increase in demand for natural gas, which accounted for more than 40 billion cubic metres (BCM) in growth. 


The Company once again emphasized that its strategy focus is on the LNG sector. The Company’s investment strategy is to grasp the huge opportunity arising from China’s growing demand for imported LNG supplied from the North America market, which is rich in low-cost shale gas. While we continue to look for investment opportunities along the LNG value chain, we expect next year will be a good time for the Company to create synergies among its invested companies. 


The Company will continue to, through its investments, supply LNG for the Chinese market. In addition, the Company wishes to expand its investment and replicate its successful business model to regions that are similar to China.”


He also added, “Given the global economic volatility and the risk of oversupply in the market, the Company believes that the oil price will continue to be volatile in 2019. We will continue to implement its hedging strategy when the market is favorable so as to ensure that it can provide cash flow to the investors when oil prices fall, while still be able to benefit from the possible rise in oil prices. “


In terms of fund management, Mr. Liu said that the Company will continue to identify new limited partners to join and the Company expects fundraising activities to be carried out in the 2019 financial year.


“The energy industry has faced an incredibly tumultuous time in recent years, with highly volatile commodity prices and dynamic geopolitical environment. The Company’s investment strategy has allowed the Company to exploit opportunities arising from industry’s distress.  We are of the view that the energy sector, by its very nature, is a favorable choice for the Company to achieve long-term sustainable growth and prosperity.


We believe that the Company is well positioned for rapid development when attractive investment assets become available. The Company will endeavor to present unique investment opportunities for its Shareholders to gain exposure to a diversified, top quality global energy asset portfolio and strive for substantial returns. ” he concluded