Hanwei Energy Services Reports First Quarter Fiscal 2016 Financial and Operational Results

VANCOUVER, BRITISH COLUMBIA -- (Marketwired) -- 08/04/15 -- Hanwei Energy Services Corp. (TSX: HE) ("Hanwei" or the "Company"), today reported its financial results for the three months ended June 30, 2015. All amounts are in Canadian Dollars unless otherwise noted.

The Company has two reportable segments for its continuing operations: its FRP pipe manufacturing and its oil and gas production. The pipe segment produces and sells fiberglass reinforced plastic ("FRP") pipe for the oil and gas industry and other infrastructure applications. The oil and gas segment is engaged in the exploration and production of oil and natural gas in Western Canada.

For the three months ended June 30, 2015:

--  Total revenues were some $1.7 million as compared to $3.2 million for
    same period of the prior year with both segments of the Company impacted
    by the downturn in the oil and gas industry.

--  FRP pipe sales totalled $1.0 million as compared to $3.0 million for the
    same periods of the prior year. The decrease of $2.0 million (or 67%)
    was primarily due to the reduction in oil and gas commodity prices
    negatively impacting the overall oil and gas industry with numerous
    projects placed on hold or delayed.

    --  For the Chinese market sales were $0.9 million as compared to $1.1
        million for the same period of the prior year.

    --  For the Kazakhstan market sales were $57,000 as compared to $1.4
        million for the same period of the prior year.

    --  For the Canada market sales were $47,000 as compared to $0.5 million
        for the same period of the prior year.

--  Oil and gas production revenues net of royalties amounted to $0.7
    million as compared to $0.2 million for the same period of the prior
    year. The increase in revenues from the oil and gas business was driven
    by the Company's 13-33-49-26W4 Nisku horizontal well that was completed
    in October 2014 and the new 13-4-49-26W4 Nisku horizontal well which was
    put on test production following the lifting of the seasonal, spring
    Alberta road bans on May 14th, 2015.

--  EBITDA from continuing operations totalled some negative $0.5 million as
    compared to negative EBITDA of $0.1 million for the same period of the
    prior year.

    --  Negative EBITDA was primarily driven by corporate expenses and
        losses from the FRP pipe segment.

    --  The Company's oil and gas business delivered positive EBITDA of $0.1
        million for the three months ended June 30, 2015.

--  The Company had a loss from continuing operations of $1.5 million as
    compared to a loss from continuing operations of $1.2 million for the
    same period of the prior year. The increase in loss from continuing
    operations was primarily due to the aforementioned reduction in FRP pipe
    sales.

--  As of June 30, 2015 the Company had:

    --  A cash balance (inclusive of short term investments) of $9.5 million

    --  A Net Asset Value per share for its continuing operations of $0.21
        (on total shares outstanding of approximately 194.2 million)

    --  A total principal amount of all bank loans of $7.1 million
        representing a 23% debt to equity ratio (total bank debt divided by
        total shareholders' equity) as compared to 32% as at March 31, 2015.

--  The Company continues to increase its activities and revenues in Canada.
    Canadian revenues as a percentage of total revenues increased to 40% for
    the three months ended June 30, 2015 as compared to 20% for the same
    period of the prior year. This was primarily driven by the increase in
    revenues from the Company's oil and gas production and operations in
    Alberta.

Update on FRP Pipe Sales in Canada

Hanwei has approximately 34,000 metres of its high pressure line pipe operational in Canada that was installed over the last eighteen months.

--  The Company recently confirmed installations of its FRP line pipe
    products from available inventory in Canada with three significant
    Alberta operators.

--  The Company was recently approved as a qualified vendor with an
    additional and fourth Alberta operator.

--  The Company confirmed a first order for its down hole tubing products to
    be utilized as a pilot project to a Canadian operator to improve its
    operating efficiencies. This is the first order of the Company's down
    hole tubing products to Canada complementing and in addition to its
    previous line pipe orders. This 2,000 PSI, 60 mm diameter, down hole
    tubing order has been successfully installed and additional down hole
    tubing orders are anticipated from this Canadian operator.

Update on Oil and Gas Activities in Canada

During the three months ended June 30, 2015, the Company had four gross wells producing. From these:

--  The Company generated revenues net of royalties of $0.7 million and net
    back of $0.4 million.

--  The Company's netback was $23.47 per boe (or an operating netback margin
    of 57.6%) for the three months ended June 30, 2015 on an average sales
    price of $40.73 per boe.

--  The Company produced approximately 167 barrels of oil equivalent per day
    (boed) for a total of 15,189 boe, including 70 boe/d of oil for a total
    of 6,464 barrels, 437 mcf/d of gas per day for a total of 39,824 mcf,
    and 24 boe/d of liquids for a total of 2,145 boe. The majority of the
    Company's oil production was from its existing 13-33-49-26W4 Nisku
    horizontal well that was fracked in August 2014.

--  A new Nisku horizontal well 13-4-49-26W4 was drilled in March 2015 which
    was put on test production following the lifting of the seasonal, spring
    Alberta road bans on May 14th, 2015. The Company has not yet placed this
    well on full production and has undertaken only initial test operations
    utilizing a temporary pump jack. This will be replaced with a higher
    volume permanent pump jack together with flow line tie back to the
    Company's main production battery. The flow line tie back will utilize
    the Company's 4" diameter, 1,500 PSI, FRP pipe. The Company will report
    its production results upon completion of these capital works and
    stabilized operations of this new well.

--  The Company is considering a minimal development program within 2015
    that may include a water disposal well and certain facility upgrades
    that aim to reduce operating costs and improve efficiencies. A limited
    number of new wells may be considered by the Company. The cost for the
    aforementioned capital works program is currently being reviewed.

Hanwei will host a conference call to discuss its operational and financial results for the first quarter ended June 30, 2015. Graham Kwan, Executive Vice President and Rick Huang, Chief Financial Officer of Hanwei will host the call. Management invites analysts and investors to participate on the conference call:

Date: Thursday, August 6, 2015

Time: 1:00 p.m., Eastern Time (10:00 am Pacific Time)

Dial in number: 1-888-329-8893 or 1-719-325-2144

A replay of the conference call will be available on the Company's website www.hanweienergy.com.

About Hanwei Energy Services Corp.

Hanwei Energy Services Corp.'s principal business operations are in two complementary key segments of the oil and gas industry as both an equipment supplier to the industry (as a leading manufacturer of high pressure, fiberglass reinforced plastic ("FRP") pipe products and associated technologies serving major energy customers in the global energy market) and as an operator of its producing oil and gas mineral rights at its Leduc Lands in Alberta.

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

FORWARD-LOOKING INFORMATION AND NON-GAAP MEASURES

Certain information in this press release is forward-looking within the meaning of certain securities laws, and is subject to important risks, uncertainties and assumptions a description of which is set out in the risk factors section of the Company's Annual Information Form dated June 17, 2015 and Management Discussion and Analysis for the year ended March 31, 2015 both of which are filed with Canadian securities regulators and available on SEDAR at www.sedar.com. The forward-looking information in this press release describes the Company's expectations as of the date of this press release.

THE FORWARD-LOOKING INFORMATION CONTAINED IN THIS PRESS RELEASE PRESENTS THE EXPECTATIONS OF THE COMPANY AS OF THE DATE OF THIS PRESS RELEASE AND, ACCORDINGLY, IS SUBJECT TO CHANGE AFTER SUCH DATE. READERS SHOULD NOT PLACE UNDUE IMPORTANCE ON FORWARD-LOOKING INFORMATION AND SHOULD NOT RELY UPON THIS INFORMATION AS OF ANY OTHER DATE. WHILE THE COMPANY MAY ELECT TO, THE COMPANY DOES NOT UNDERTAKE TO UPDATE THIS INFORMATION AT ANY PARTICULAR TIME, EXCEPT AS REQUIRED BY APPLICABLE SECURITIES LEGISLATION.

Contacts:
Hanwei Energy Services Corp.
Graham Kwan
Executive VP, Strategic Development and Corporate Affairs
604-685-2239
[email protected]

Hanwei Energy Services Corp.
Yucai (Rick) Huang
604-685-2239
[email protected]
www.hanweienergy.com

Source: Hanwei Energy Services Corp.

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