China Tracker - Details for China North East Petroleum (CNEP)

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 China North East Petroleum
 Business Outlook

Recent Chain of Events:
2012-09-24 -- Last SEC Filing
2012-06-21 -- Delisting from NYSE Amex
2012-03-01 -- Trading halted by NYSE Amex
2011-11-09 -- Last Quarterly/Annual Report: Q3/FY2011 ended September 30, 2011

(Source: Trading China, 2012-09-30)

On September 15, 2010, the Company engaged Ernst & Young (China) Advisory Ltd. to assist the Company to comply with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002. More specifically, the Company engaged Ernst &Young to help the Company understand its overall controls environment, as well as key financial accounting procedures, to identify any differences between the Company's internal controls and those required by SEC rules and regulations, and to define areas that needed improvement and the method for implementation of such improvement.

Ernst & Young proceeded in two phases, which took several months. Its work, performed for the Company and its four subsidiaries, included, among other things, the collection and review of data, policies, regulations and procedural documentation, a variety of testing and re-testing, the development of internal control templates for management, the identification of areas of improvement and the issuance of recommendations. Ernst & Young has completed both phases of its work and has concluded its engagement.

Based on the results of the E&Y engagement, the Company has developed an improvement plan for implementation in 2011. The Company believes that the improvement plan substantially improves the quality of its internal controls and is in line with legal and regulatory requirements. The independent auditor for the Company will perform interim internal control tests in the second quarter of 2011.

(Source: 8-K Filing, 2011-05-23)

Drilling services in our Tiancheng production was slower in the first quarter. However, Tiancheng's drilling activity has accelerated since March and is expected to remain strong going forward. As a result of the higher price of oil, PetroChina Jilin has approved the drilling of a large number of new wells in its Jilin oilfield and we are hopeful our drilling services business can benefit from expanded drilling initiatives at PTR as well as among other private oil companies operating in the Jilin oilfield. In fact, earlier this week, our Tiancheng subsidiary signed another contract with PTR to drill another twenty wells. Drilling is scheduled to commence this month and conclude by the end of the year.

We are pleased to have recently closed our Durimu acquisition which has allowed us to secure additional oil reserves, and which will significantly expand our operations and generate better returns on our investment. Our healthy cash flow from operations generated this quarter and expected in future quarters will provide us with adequate resources to further develop oil production activities within the Durimu oilfield. We are excited about the potential of our recent acquisition which further propels NEP into a larger regional oil producing and oilfield services company.

(Source: PR Newswire, 2011-05-10)

China North East Petroleum Holdings responded today to the research report published online on April 13, 2011 by a short seller operating under the pseudonym "Bigfish Research."

(Source: PR Newswire, 2011-04-19)

We are pleased that our fourth quarter oil production output showed signs of sequential improvement after experiencing severe flooding in the third quarter. While the impact of this flooding continued to affect the fourth quarter production output within our four operating oil fields, our production has returned to a normalized rate in the 2011 first quarter. We expect our drilling plan in the Jilin oilfields to grow at a moderate pace going forward as we focus our efforts on the exploration and test work in the Durimu oilfileld, our recently announced acquisition. We believe that the extraction of oil from this oilfield in Inner Mongolia can result in significantly greater output than our existing wells in the Jilin oil field. Upon the exploration and testing phase which is expected to last 12-18 months, we intend to aggressively drill in Durimu while also maintaining current production levels within our four existing oilfields.

Our Durimu acquisition allows us to expand our operations, secure additional oil reserves and generate better returns on our investment. We are excited with the potential of our new acquisition and believe this recent developments provides NEP the opportunity to develop into a larger regional oil producing and oilfield services company designed to meet China's growing domestic energy needs.

(Source: PR Newswire, 2011-03-15)

China North East Petroleum today announced it entered into a binding agreement to acquire Sunite Right Banner Shengyuan Oil and Gas Technology Development Co., an operator with exclusive oilfield exploration and drilling rights to the Durimu oilfield in Inner Mongolia. China North East Petroleum is expected to pay a total consideration of $43.4 million consisting of RMB 70 million (approximately USD$10.6 million) in cash upon closing of the acquisition and 5.8 million shares of NEP restricted common stock in exchange for 100% ownership of Shengyuan. Shengyuan's primary assets include three exploration wells and 24 years of exclusive drilling and exploration rights to a 175 square kilometer oilfield, called Durimu, located in Sunite Right Banner, Inner Mongolia. The Company expects to finance the cash portion of the purchase price agreements from cash on hand. Ralph E. Davis, an independent worldwide petroleum consultant based in Houston, Texas conducted a study of the Durimu oilfield in accordance with generally accepted petroleum engineering and evaluation principles in conformity with SEC definitions and guidelines. The Company expects to close the intended acquisition by the end of its 2011 first quarter.

"This intended acquisition represents an exciting new phase for our company that will better position NEP for accelerated oil production growth and long-term success. We have been evaluating opportunities to expand our operations, secure additional oil reserves and seek better returns on our investment over the past year and believe Shengyuan represents a fantastic opportunity to develop NEP into a much larger independent, regional oil producer and oilfield services company in the coming years. The size of the Durimu oilfield is nearly three times larger than the four oilfields we currently lease in PetroChina's Jilin oilfield and it contains much larger oil extraction and drilling opportunities. For example, Shengyuan achieves greater production yields from its three current exploration wells (approximately 30 barrels each per day during the initial testing period) than the 6-7 average barrels per day for each of our existing wells within our four current oilfields."

(Source: PR Newswire, 2011-01-20)

There are now 292 producing wells within the four oilfields in which we operate, which represents less than half of the total number of wells we believe can be drilled in these four oilfields. We continue to view these four oilfields as viable growth opportunities for our business however, we have decelerated our well drilling plan year-to-date to instead focus on potential acquisition opportunities. We have identified several potential targets and believe that if we are successful with our acquisition efforts, it could result in significant contributions to our overall operations. We remain focused on minimizing our operating expenses and growing our cash position for the time being and look forward to updating our investors on any developments related to our acquisitions opportunities in the near future. As we look at our business in the fourth quarter and beyond, we continue to evaluate opportunities to expand production, increase our scale, drill more wells, and expand into new regions. Through our efforts today, we believe China North East Petroleum can play a larger regional role in China's oil production and services industry in the future.

With respect to our financial disclosure controls and procedures, the management team is actively working to improve the control environment and to implement procedures that will ensure the integrity, accuracy and timeliness of our financial statement preparation process going forward. We have utilized an outside consulting firm with specialized knowledge in financial accounting and specific knowledge of oil industry accounting to assist us with the review and restatement of past financial statements. We have also engaged Ernst & Young (China) Advisory Ltd. to assist us with SOX 404 compliance. Ernst & Young will also provide recommendations to our management for instituting necessary additional controls to enhance the risk management capability of our internal controls over financial reporting. In the third quarter, we also implemented financial reporting training programs for specific staff members, particularly with respect to accounting for non-cash items. We are making the effort to support these endeavors to ensure that our previous reporting delays do not recur.

(Source: PR Newswire, 2010-11-19)

China North East Petroleum Holdings today reported that after making all requisite filings, the Company received notice from NYSE Amex LLC on September 8, 2010 that the Company is again in compliance with NYSE Amex LLC's continued listing requirements. As a result, the Company expects trading of its stock on NYSE Amex to resume on September 9, 2010.

(Source: PR Newswire, 2010-09-08)

In the process of restating its financial reports, the Company discovered certain irregularities regarding certain balance sheet accounts. Immediately after the discovery of the irregularities, the Company engaged John Lees Associates of Hong Kong ("JLA") to conduct an audit of the cash accounts of the Company and its subsidiaries. After rigorous review of all of the transactions that occurred in the Company's cash accounts during 2009, JLA issued a final report on July 10, 2010 which reported that no evidence exists to indicate that funds were misappropriated, stolen or otherwise misused by anyone. Furthermore, the JLA report did not find any material misstatements in the Company's prior financial reports filed with the SEC. In addition, the Company has adopted several internal control and procurement measures to ensure that such irregularities will not happen again.

The Company's management continues to actively work on the expansion of its oil production division through future lease/acquisition of oil fields. At the same time, its Tiancheng drilling service division is expected to continue to secure new contracts to provide drilling services to third parties. The revenue from Tiancheng is expected to finance the future drilling and production of crude oil for the Company's oil production division.

(Source: PR Newswire, 2010-09-07)

AMEX has accepted the Company's request for additional time until August 31, 2010 to regain compliance with AMEX's continued listing standards. The Company expects to file amendments to its quarterly reports on Form 10-Q/A for the first three quarters in 2008 and 2009, the annual report on Form 10-K/A for the year ended December 31, 2008 and its annual report on Form 10-K for the year ended December 31, 2009 by August 31, 2010. In addition, the Company will announce preliminary financial results for the quarters ended March 31, 2010 and June 30, 2010 by August 31, 2010.

(Source: PR Newswire, 2010-08-27)

On July 13, 2010, the Company submitted a request to NYSE Amex LLC for additional time to regain compliance with AMEX's continued listing standards. While the Company has made significant progress in implementing its compliance plan, management has determined that the Company will require additional time to fully implement the plan and has asked AMEX for an additional extension of time until August 31, 2010.

(Source: PR Newswire, 2010-07-15)

On May 25, 2010, the Company received a written notice from NYSE AMEX advising that the Company is not in compliance with AMEX's continuing listing criteria. Specifically, AMEX noted that the Company has not timely filed its annual report on Form 10-K for the fiscal year ended December 31, 2009 and its quarterly report on Form 10-Q for the quarter ended March 31, 2010. In addition, AMEX stated that the Company's failure to file its Reports is a material violation of its listing agreement. AMEX halted trading of the Company's common stock on the same day.

AMEX required that the Company submit a plan of compliance by April 29, 2010 with the action the Company has taken, or will take, to file the 10-K for 2009 and bring the Company into compliance with the listing standards no later than July 14, 2010. As AMEX required, the Company submitted its Plan on April 29, 2010, which the Corporate Compliance Department of AMEX currently is evaluating. As stated in the current notice from AMEX, the Company may supplement its Plan until June 8, 2010. The Company intends to submit such supplement by June 8, 2010.

(Source: PR Newswire, 2010-05-27)

In the wake of our recently announced financial reporting and internal control deficiencies, we are implementing the necessary steps towards improving our internal controls and financial reporting function. We take these issues very seriously and are working aggressively to prevent a reoccurrence of such issues in the future. Global oil prices have rebounded from the low levels experienced in late 2008 and early 2009, and we anticipate that oil prices will remain relatively stable or trend higher in the rest of 2010. Consequently, we will continue to drill new wells and expect that cash flow from operations will be sufficient to allow us to meet all of our growth targets this year. We are on plan to drill approximately 60 wells in 2010, excluding acquisitions, and believe we have the ability to drill more than 320 new wells within our existing fields over the next 3-5 years, excluding any potential benefit we could receive from new oilfield leases which we continue to actively pursue. We remain focused on expanding our market position as a leading oilfield production and services company in northeast China with a continued focus on expanding our revenue and maximizing our profits.

(Source: PR Newswire, 2010-04-16)
Oil & Gas
READ: Score Cards Explained
DETAILS: Safety/Risk Model for CNEP
Current Price:  n/a
F10k Day (2004-09-17): -100.00%$0.80
2009 Close: -100.00%$9.25
2010 Close: -100.00%$5.76
2011 Close: -100.00%$2.05
High (2012-02-22): -100.00%$3.68
Low (2012-10-02): -100.00%$0.20
Market Capitalization: n/a
Total Shares: 31.36 mill
Float: n/a
Avg Volume: n/a
Last Quarter: 2011-03-31
Revenue (MRQ): 21.75 mill
Net Income (MRQ): 6.91 mill
Op. Cash Flow (MRQ): 13.55 mill
all financial data provided without warranty