Primeline Energy Holdings Inc.: Loyz Merger Update and Q1 Results

HONG KONG, CHINA--(Marketwired - Aug. 17, 2015) -

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Primeline Energy Holdings Inc. ("Primeline" or the "Company") (TSX VENTURE:PEH) announces that it has agreed with Loyz Energy Limited ("Loyz") to extend the date for entry into definitive, binding agreements with Loyz for the proposed merger between Primeline and Loyz announced on June 9, 2015 from August 31, 2015 to September 30, 2015 in order to allow due diligence and negotiations of the binding documentation to continue.

Primeline announces that it has filed its interim unaudited financial statements for the quarter ended June 30, 2015 and related management discussion and analysis. Copies of these documents may be obtained at www.SEDAR.com under Primeline's profile or on Primeline's website at www.pehi.com.

Period results impacted by lower off take

Primeline's results for the quarter were impacted by a very significant decline in off take volumes by Zhejiang Gas versus the prior quarter. Revenues from oil and gas sales fell from RMB 68,588,041 (CAD$13,709,382) in the quarter ended March 31, 2015 to RMB 6,078,216 (CAD$1,214,914). The Company's results for the period were for a loss of RMB 27,210,855 (CAD$5,438,907) compared to the loss of RMB 1,705,590 for the same quarter last year.

Cash position remains strong

As of June 30, 2015, Primeline held cash resources of RMB 184,069,524 (CAD$36,791,830) of which RMB 112,500,000 (CAD$22,486,508) is held in a long-term bank deposit account (the "Debt Service Reserve Account") classified as a non-current asset, and owed amounts. There was no debt repayment obligation during this quarter.

Short term market oversupply

The substantial build out of long distance pipeline infrastructure and LNG terminals along the East Coast of China, coupled with the general slowdown of the Chinese economy and the dramatic drops in oil prices seen since late 2014, have led to an oversupply of gas in the region. The main suppliers to the East China gas market lowered prices and this led to reduced demand for LS36-1's gas and pressure from Zhejiang Gas for a price adjustment to reflect such substantive market changes. Primeline does not believe there are contractual grounds for any adjustment of the base price and has resisted this request for a swift price adjustment. CNOOC China Limited ("CNOOC China") and Primeline are also working hard to agree to a long-term price adjustment mechanism as stipulated in the Gas Sale Contract. Zhejiang Gas cannot unilaterally change the terms of the Gas Sale Contract.

2015 outlook may see take or pay obligation from Zhejiang Gas

CNOOC China and Primeline requested that Zhejiang Gas ensure that the 2015 annual volume of gas for off take by Zhejiang Gas is in line with the annual "take-or-pay" volume of 195 million cubic metre (mcm) for 2015 subject to and in accordance with the Gas Sale Contract. CNOOC China and Primeline anticipate full collection of amounts owing associated with sales or the 'take or pay' contractual arrangement.

CNOOC Gas and Power, which has the same ultimate holding company as CNOOC China, is the 30% shareholder of Zhejiang Gas. CNOOC China holds a 51% participating interest in the LS36-1 gas field and is the Operator under the Petroleum Contract for Block 25/34 and sells the LS36-1 gas on behalf of both CNOOC China and Primeline to Zhejiang Gas. Primeline has requested CNOOC China to negotiate with Zhejiang Gas on an arm's length basis to ensure that the contract is performed in its entirety.

Medium term growth potential remains attractive

Primeline regards the lower volumes in Q1 as a short-term issue. Longer-term fundamentals remain positive given the secular prospects of the Chinese gas market even in the context of the widely reported lower economic growth in the country in the short term. Gas in the total energy mix is only 5% in China and 3% in Zhejiang Province, compared with an international level of 25%. With the further development of regional and local gas grids, Primeline believes gas consumption will continue to expand in China, particularly in East China, and current surplus capacity will be quickly absorbed by the anticipated growth.

Exploration imminent to expand reserves and cash flow

In addition, exploration work for the 2 well programme on Block 33/07 is proceeding well and the site survey for the drilling location commenced on August 4, 2015 and is on-going. The turnkey drilling contractor COSL estimates that the commencement of the first well will be in mid-September 2015.

About Primeline Energy Holdings Inc.

Primeline is an exploration and production company focusing exclusively on China natural resources to become a major supplier of gas and oil to the East China market. Primeline has a 100% Contractor's interest in, and is the operator of, the petroleum contract with CNOOC for Block 33/07 (5,877sq km) and a 49% interest in the producing LS36-1 gas field in Block 25/34, together with CNOOC (51% interest and acting as Operator. Both blocks are located in the East China Sea. LS36-1 has been in production since July 2014. Shares of Primeline are listed for trading on the TSX Venture Exchange under the symbol PEH.

ON BEHALF OF PRIMELINE ENERGY HOLDINGS INC.

Ming Wang, Chief Executive Officer

Please visit the Company's website at www.pehi.com. Should you wish to receive Company news via email, please email nadine@chfir.com and specify "Primeline Energy" in the subject line.

Forward-Looking Statements

Some of the statements in this news release contain forward-looking information, which involves inherent risk and uncertainty affecting the business of Primeline. Although these statements are based on assumptions management believes to be reasonable, actual results may vary from those anticipated in such statements. If Zhejiang Gas does not honour the Gas Sale Contract fully, secures a lower price for gas sold thereunder or does not comply with the take or pay payment obligations, the Company's revenues or cash flow may be lower than anticipated and there may be a serious consequent adverse effect on the Company's debt repayment obligations under the Syndicate Facility. Exploration for oil and gas is subject to the inherent risk that it will not result in a commercial discovery

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.