FTO.L Regulatory News (FTO)

18 May 2012

FORTUNE OIL PLC

("Fortune Oil" or the "Company")

First Quarter 2012 Interim Management Statement

Fortune Oil (LSE: FTO.L) focuses on oil, natural gas and resource supply operations and investments, primarily in China. Fortune Oil is listed on the Main Market of the London Stock Exchange.

Fortune Oil announces its Interim Management Statement for the period 1 January 2012 to date.

Highlights

·; New natural gas supply connections increased by 49.5 per cent to 4,880 in the first quarter (Q1 2011: 3,264). The total number of connected customers is now over 200,000.

·; Two additional lateral wells drilled at the CBM Liulin Block with test production beginning in Q2 2012. Production testing on five vertical wells and three lateral wells with positive initial gas flow rates.

·; Agreement signed with Tianjin Gas to establish a joint venture that will be responsible for the supply of liquefied natural gas ("LNG") to the city of Tianjin.

·; Fortune Oil's joint venture and its associates are the largest shareholder of China Gas Holdings (17.32 per cent as at 17 May 2012).

·; Bluesky jet fuel sales volumes in Q1 2012 increased 18.1 per cent to 704,000 tonnes (Q1 2011: 596,200 tonnes).

·; Maoming Single Point Mooring ("SPM") throughput volume increased 22.5 per cent to 3.14 million tonnes (Q1 2011: 2.56 million tonnes).

·; JORC compliant resource estimate of the Hrazdan mining area confirmed a mineral resource totalling 21.4 million tonnes at an average iron ore grade of 26.7 per cent.

·; Various Joint Venture agreements renegotiated and effective interest in three Armenia iron ore mines increased to 73.34%.

OPERATIONAL OVERVIEW

Natural Gas Business

The fundamental drivers for the natural gas business remain firmly in place, with the demand for natural gas continuing to outstrip supply. The Company has made significant progress on the new natural gas projects which it has announced over the past 18 months and is on track to deliver its growth strategy.

·; In Q1 2012 4,880 new customers were connected which is an increase of 49.5 per cent compared to the same period in 2011 (3,264).

·; Agreement signed with Tianjin Gas to establish a joint venture that will be responsible for the supply of LNG to the city of Tianjin, China's sixth most populous city (population over 12 million).

·; Fortune Oil has become a substantial shareholder, via a joint venture (China Gas Group Ltd) in China Gas Holdings Ltd ("CGH"), the largest independent natural gas company in China in terms of city network, serving gas to over 150 cities. The strategic objectives for this joint venture are to explore the opportunities of combining CGH's strengths with those of Fortune Oil and to grow Fortune Oil's natural gas business in China. As of May 17 2012 the joint venture and its associates held 759,314,000 shares in China Gas Holdings representing 17.32 per cent of CGH total issued shares making the joint venture and its associates the largest shareholder of CGH.

·; Shanxi CUCBM is constructing the wholesale station at Liulin which will collect, compress and dispatch gas collected from the Liulin gas gathering system and supply the gas to Shanxi CUCBM refuelling stations and industrial customers.

·; Sites for the first two permanent LNG ship refuelling stations along the Yangtze river have been identified and Chinese design institutes are progressing the design and approvals prior to the construction of the permanent refuelling facilities.

Continued expansion of gas supply is planned to meet the 12th Five Year Plan target to increase gas usage in China to 8 per cent of the energy mix from the current level of approximately 4 per cent (100 billion cubic meters). Fortune Oil continues to strengthen its position in this core business segment and remains well positioned to benefit from the industry's growth prospects.

Upstream Coal Bed Methane ("CBM")

Fortune Oil continues to make progress at its Liulin CBM operations and the project remains on track for first gas sales in 2012.

·; Contractors have been appointed to progress the construction of the gas gathering system and a Chinese design institute has also been appointed to prepare all of the necessary documentation for submission of the Overall Development Plan a summary of which has been submitted to Fortune Liulin Gas's ("FLG") Chinese government partner China United Coal Bed Methane Corporation ("CUCBM") for NDRC approval in Q2 2012.

·; FLG has drilled two more lateral wells and dewatering is progressing to plan. Production testing is progressing on five vertical wells and three lateral wells. The gas produced from these wells will be used to meet the gas sales agreement with Shanxi CUCBM in 2012.

·; FLG and CUCBM have met their exploration drilling targets for the CBM Liulin Block. The exploration period of the production sharing contract expired in March 2012 and FLG has met and exceeded its obligations under the contract. Negotiations are progressing as expected with CUCBM to extend the exploration period.

Oil Business

The Oil business continues to be a strong cash generator.

·; Bluesky jet fuel sales in Q1 2012 were 704,000 tonnes, representing an increase of 18.1 per cent over the same period in 2011 (596,200 tonnes) underpinned by the continued strong demand for domestic air travel in China.

·; The Maoming SPM volume throughput in Q1 2012 was 3.1 million tonnes of crude oil, representing an increase of 19.2 per cent relative to the same period in 2011 (2.6 million tonnes). Throughput is driven by demand from the Maoming refinery in Guangdong which is itself driven primarily by downstream transportation fuel consumption. The SPM facility continues to operate efficiently and with an accident-free and spill-free record.

·; In Q1 2012, West Zhuhai Terminal's volume throughput decreased by 22.0 per cent to 518,000 tonnes compared to the same period in 2011 (664,000 tonnes) due to lower throughput utilisation by Petrochina. Options to diversify the terminals customer base are currently being evaluated.

Resources Business

Fortune Oil continues to make good progress on the development of the Hrazdan mine.

·; SRK Consulting (UK) completed the reserve certification for the Hrazdan iron ore mine (JORC, Australasia Joint Ore Reserves Committee) and confirmed a mineral resource totaling 21.4 million tonnes at an average iron ore grade of 26.7 per cent.

·; As a result of the mineral resource report planning has commenced to develop a 2.5 million tonnes per annum iron ore concentration plant producing in excess of 500,000 tonnes of concentrate of approximately 66 to 68 per cent iron.

·; Fortune Oil renegotiated various agreements to increase its effective interest in the three Armenian iron ore mining licenses to 73.34 per cent.

Trading Business

In Q1 2012, the total quantity traded of base oils and petrochemicals was 63,000 tonnes compared to 54,500 tonnes for the same period in 2011, an increase of 15.5 per cent. The trading business continued to extend its product offering of refined oil products and petrochemicals for Chinese consumption.

To generate additional low-risk revenue for the trading business, Fortune Oil continues to document trade related transactions in RMB to take advantage of the market arbitrage available in Hong Kong.

FINANCIAL PERFORMANCE

Strong Financial Position

As at 17 May 2012, the Group's balance sheet remains strong. Cash and bank balance exceed the outstanding current bank loan balance and the Group expects to generate positive cash flow from operations.

As announced on 26 April 2012 subject to the shareholders' approval the directors recommend a final dividend of 0.18p per ordinary share (2010: 0.13p per ordinary share) to be paid on 27 June 2012 to ordinary shareholders on the register on 25 May 2012. This is in line with the Board's stated intention to make an annual dividend payment to shareholders.

OUTLOOK

Overall business performance is in line with expectations. The Board remains optimistic with regard to Fortune Oil's prospects, despite the reduction in China's economic growth rate. Although this will slow the growth rate for energy consumption, the Board does not believe it will affect the inevitable move from high carbon/high pollution fuels to natural gas. In addition, the Board believes that the slowing of economic growth will not alter the fact of continuing growth in vehicle ownership and use which continues to drive up demand for transport fuels.

For further details:

Background on Fortune Oil

Fortune Oil is a leading independent energy company engaged in the investment and operations of oil and natural gas supply projects in China. With over 19 years of operating history in China, Fortune Oil has acquired a unique portfolio of high quality oil and natural gas projects across the country and has formed a strong partnership with domestic and international market leaders. Fortune Oil recently started an expansion outside China securing resource projects. Fortune Oil is listed on the Main Market of the London Stock Exchange with its operational headquarters in Hong Kong.