HBOil JSC (MSE:HBO), a profitable and growing refined petroleum products recycling and processing company that is listed on the Mongolian Stock Exchange, is pleased to announce that it has executed an agreement to acquire 100% of Ninox Hydrocarbons (L) Berhad (“NHLB”).

 

     "NHLB" is a private Malaysian company which holds 20% of the share capital of KOEC International, Inc. (“KOECII”) and the remaining 80% of the share capital of KOECII, is held by the Joint Venture partner of NHLB; Korea Oil Exploration Corporation (“KOEC”), which is the national oil company of the Democratic People’s Republic of Korea (“DPRK” or “North Korea”).

 

     On October 29th, 2012, KOEC and NHLB agreed to form KOECII for the primary purpose of exploration, development, and production of hydrocarbons on all of “onshore” DPRK [120,540 square kilometers, and to potentially refurbish the Sungri Oil Refinery on the East Coast of DPRK; including the right to import crude oil into Rason Special Economic Zone for processing, and the export of the refined petroleum products therefrom. Onshore North Korea has seven geological basins, three of which have proven working petroleum systems.

 

     The Sungri Oil Refinery (“SOR”) in the Special Economic Zone of Rason City, in northeastern corner of DPRK, has refining capacity of two million tons per annum and is connected into the Russian Railways system. Subject to certain repairs and refurbishments, SOR may resume full operations within 6 to 12 months. HBOil intends to supply crude oil to SOR based on a processing contract as to be negotiated, and take deliveries of the resultant refined products in Mongolia.

 

     Additionally, HBOil has entered into an Option Agreement to acquire 51% of the share capital of Blacktip Energy, Inc. (“BEI”) a British Virgin Islands corporation, which owns 100% of the shares in the capital of Korex Ltd. (“Korex”). Korex was granted in May 2010, a Production Sharing Contract covering the entire Korean East Sea of DPRK. The geological succession of the Korean East Sea relates to the opening history of Japan, as such, it is on trend with Sakhalin; one of the most prolific hydrocarbons provinces, not only in Russia, but also in the world. Over 60 fields have been discovered offshore Sakhalin Islands, mainly at depths of 25m and 75m, containing an estimated 45 Billion BOE. Korex has focused its exploration efforts in the Gulf of East Sea, which is the area that encompasses the shallow water portion of the Korean East Sea; sharing similarity in water depths and other attributes, with the Sakhalin oil and gas discoveries.

 

     HBOil is currently studying the potential to expand its oil product processing and manufacturing business into DPRK and believes that there is an opportunity in treating waste oil in DPRK by using technology similar to HBOil’s operating plant in Ulaanbaatar, Mongolia.
HBOil believes that this transaction will be the first acquisition of a foreign legal entity by a Mongolian company listed on the Mongolian Stock Exchange, and the first Mongolian oil company to become engaged in both upstream and downstream segments of the petroleum industry overseas.

 

     Quote from the CEO of HBoil, Mr. Khudree: “The North Korean acquisitions reflect the close partnership and longstanding relations between Mongolia and DPRK. We are excited to pursue commercial oil ventures across Asia, and are hopeful that our corporate development strategy may also contribute to the strengthening of Mongolia’s energy security.”

     HBOil JSC was established on December 13th, 2000 and became a public company after its listing at MSE in 2007. Used oil recycling is the main operation of the company. The company uses fully automated factory based on VSEP technology, which is an environmentally friendly leading modern technology. The main products of the company include base oil, hydraulic fluid and factory oil. 

 

Public Relations Department

MONGOLIAN STOCK EXCHANGE