FTO.L Regulatory News (FTO)

26 FEBRUARY 2014

FORTUNE OIL PLC

("Fortune Oil", "the Company" or together with its subsidiaries "the Group")

Second Interim Report for the twelve months ended 31 December 2013

Fortune Oil develops and operates oil and gas supply and infrastructure projects in China. Fortune Oil is quoted on the Main Market of the London Stock Exchange and has its headquarters in Hong Kong.

FINANCIAL HIGHLIGHTS

§ Group revenues including share of jointly controlled entities and associates increased by 16 per cent to £856.6 million (2012: £739.4 million).

§ Net profit from all operations attributable to owners of the parent increased 948 per cent to £164.1 million (2012: £15.7 million). This takes account of other gains and losses of the Group of £141.2 million, comprising a net gain of £76.1 million in respect of the Group's investment in China Gas Holdings Limited ("CGH") prior to CGH becoming an associate and a gain of £100.9 million on disposal of Fortune Gas Investment Holdings Limited ("FGIH"); partially offset by the non-cash impairment loss of £35.8 million with respect to the full carrying value of the assets in the Armenian iron ore project.

§ Basic earnings per share was 8.00p (2012: 0.82p). Basic earnings per share, excluding other gains and losses of the Group including share of jointly controlled entities, was 0.79p (2012: 0.58p).

§ Net assets further increased to £334.5 million as at 31 December 2013 (2012: £246.8 million).

§ Following completion of the acquisitions approved by Shareholders at the General Meeting in September 2013, First Level Holdings Limited and Vitol Energy (Bermuda) Limited together hold 56.9 per cent of the Company.

§ Special dividend of 2.36p per share paid to shareholders in October 2013.

§ US$300 million (£188 million) loan facility signed to aid future expansion of the Group of which US$180 million (£113 million) remain undrawn.

§ China Gas Group Limited ("CGG"), the joint venture company in which the Group has a 50 per cent interest, owns 732,446,000 CGH shares, representing 14.68 per cent of CGH total issued shares as at 31 December 2013. As at 26 February 2014, the Group and CGG together held 916,565,463 shares in CGH representing 18.36 per cent of CGH's total issued shares of 4,991,748,561, as per CGH's latest public information posted on 4 February 2014.

OPERATIONAL HIGHLIGHTS

§ The Group has completed the transfer of FGIH to CGH and the two companies' natural gas businesses are in the process of being integrated.

§ Bluesky continues to perform well. The Group's share of net profit increased 13.8 per cent to £13.1 million for 2013 (2012: £11.5 million), with a 13.4 per cent increase in sales volumes to 3.4 million tonnes (2012: 3.0 million tonnes), driven by the continued increase in domestic and international air travel demand.

§ The Group has entered into a new 20 year joint venture agreement with Sinopec in respect of the Maoming SPM ("SPM"). Under the new shareholding structure, the shareholding interest in the SPM by the Group is 33 per cent and accordingly, it will not hold a controlling equity stake in the joint venture. The scope of the joint venture has been expanded with the potential development of a new pipeline and buoy system.

§ West Zhuhai Products Terminal throughput and storage volumes were up 7.8 per cent to approximately 2.6 million tonnes (2012: approximately 2.5 million tonnes) and profit contribution to the Group increased to £1.1 million (2012: £0.8 million), a 44 per cent increase due to increased utilisation of the terminal by PetroChina.

Mr Qian Benyuan, Chairman of Fortune Oil, commented:

"Fortune Oil continues to strengthen its position in the Chinese natural gas industry through our strategic investment in China Gas Holdings Limited. The oil business continues to make good progress. The Bluesky aviation fuel business is well positioned to participate in the anticipated continued growth in air travel in China and we have renewed and expanded the Maoming Single Point Mooring cooperation with Sinopec. We expect demand for oil and oil based products in China to continue to remain strong and the Board is excited by the medium term growth prospects for our oil business".

ENQUIRIES:

FORTUNE OIL PLC

 ("Fortune Oil", "the Company" or together with its subsidiaries "the Group")

Second Interim Report for the twelve months ended 31 December 2013

CHIEF EXECUTIVE'S REVIEW

FINANCIAL HIGHLIGHTS

§ Group revenues including share of jointly controlled entities and associates increased by 16 per cent to £856.6 million (2012: £739.4 million).

§ Net profit from all operations attributable to owners of the parent increased 948 per cent to £164.1 million (2012: £15.7 million). This takes account of other gains and losses of the Group of £141.2 million, comprising a net gain of £76.1 million in respect of the Group's investment in China Gas Holdings Limited ("CGH") prior to CGH becoming an associate and a gain of £100.9 million on disposal of Fortune Gas Investment Holdings Limited ("FGIH"); partially offset by the non-cash impairment loss of £35.8 million with respect to the full carrying value of the assets in the Armenian iron ore project.

§ Basic earnings per share was 8.00p (2012: 0.82p). Basic earnings per share, excluding other gains and losses of the Group including share of jointly controlled entities, was 0.79p (2012: 0.58p).

§ Net assets further increased to £334.5 million as at 31 December 2013 (2012: £246.8 million).

§ Following completion of the acquisitions approved by Shareholders at the General Meeting in September 2013, First Level Holdings Limited and Vitol Energy (Bermuda) Limited together hold 56.9 per cent of the Company.

§ Special dividend of 2.36p per share paid to shareholders in October 2013.

§ US$300 million (£188 million) loan facility signed to aid future expansion of the Group of which US$180 million (£113 million) remain undrawn.

§ China Gas Group Limited ("CGG"), the joint venture company in which the Group has a 50 per cent interest, owns 732,446,000 CGH shares, representing 14.68 per cent of CGH total issued shares as at 31 December 2013. As at 26 February 2014, the Group and CGG together held 916,565,463 shares in CGH representing 18.36 per cent of CGH's total issued shares of 4,991,748,561, as per CGH's latest public information posted on 4 February 2014.

CORPORATE MATTERS

§ The Company has completed the transfer of FGIH to CGH (the "FGIH Transaction") and the two companies' natural gas businesses are in the process of being integrated. The FGIH Transaction was completed in August 2013 and results are reported including the trading results of FGIH for the period prior to this date and excluding its trading for the period after this date.

§ Following shareholders' approval, the Group completed the acquisition of Wilmar International Limited's interest in the consideration receivable as a result of the disposal of FGIH. The total consideration was US$60 million (£39.1 million) payable to Fortune Dynasty Holdings Limited ("FDH") in ordinary shares in Fortune Oil. FDH is a joint venture company owned 55 per cent by First Level Holdings Limited (controlled by Mr Daniel Chiu) and 45 per cent by Vitol Energy (Bermuda) Limited, a major shareholder of the Company.

§ Pursuant to the Share Purchase Agreement ("SPA") by which Fortune Oil sold its FGIH business to CGH the Group elected to receive the Deferred Consideration of US$200 million by way of 184,119,463 new shares in CGH.

§ The Company has changed its financial year-end date from 31 December to 31 March, accordingly the Company's statutory accounts will be in respect of the 15 months to 31 March 2014. The change is to align the Company's financial year-end with CGH to facilitate the preparation of the Company's consolidated financial statements.

OPERATIONAL HIGHLIGHTS

Natural Gas Business

§ For the period up to completion of the FGIH sale in August 2013 the natural gas business operating profit contribution to Fortune Oil was £11.4 million.

§ For the period post completion of the FGIH Transaction, CGH contributed £79.3 million to the Group's operating profit through its share of profit from jointly controlled entities and associates. The operating profit includes a reclassification to the income statement of £76.1 million representing the net gain in fair value of CGG's investment in CGH previously recognised in equity up to the date when CGH became an associate. The Group has pro-rated CGH's six months net profit in order to compute the share of results in associate/jointly controlled entities to the Group for the four months ended 31 December 2013 (please refer to "Revenue and Expenditure" under the "Financial Review" for details).

§ Sales volumes of natural gas was 330 million cubic metres in the period up to completion of the FGIH Transaction.

§ As at 30 September 2013 CGH reported that it had secured 208 city gas projects with exclusive concession rights, 11 long distance natural gas pipeline projects, 1 natural gas development project, 2 coal bed methane ("CBM") projects, 98 liquefied petroleum gas ("LPG") distribution projects and had completed the construction of 224 compressed/liquefied natural gas refilling stations for vehicles.

§ As at 30 September 2013, CGH had 2,407 industrial customers, 54,497 commercial customers and nearly 10 million residential users with the connectable city populations covered by CGH gas projects increasing to 70 million.

§ During the six month period to the 30 September 2013 CGH sold a total of 3.5 billion cubic metres of natural gas, an increase of 14.6 per cent over the same period of the previous year.

§ Construction is being progressed for the first permanent LNG ship refuelling station on the Yangtze River near Chongqing and agreement has been reached with several ship operators to commence conversion of their ships to operate with LNG dual fuel technology in commercial operations.

§ The gas gathering system on the northern area of the Luilin CBM block was completed and linked to the CNG wholesale station where the CBM will be dispatched for sale.

Oil Business

§ Bluesky continues to perform well. The Group's share of net profit increased 13.8 per cent to £13.1 million for 2013 (2012: £11.5 million), with a 13.4 per cent increase in sales volumes to 3.4 million tonnes (2012: 3.0 million tonnes), driven by the continued increase in domestic and international air travel demand.

§ The Group has entered into a new 20 year joint venture agreement with Sinopec in respect of the Maoming SPM ("SPM"). Under the new shareholding structure, the shareholding interest in the SPM by the Group is 33 per cent and accordingly, it will not hold a controlling equity stake in the joint venture. The scope of the new joint venture has been expanded with the potential development of a new pipeline and buoy system. Although the SPM continues to operate, the results from the previous venture, which was treated as a subsidiary of the Group, are presented as discontinued operations during this period. Management expects that the Group will start recognising its share of results in the Maoming SPM business when the new joint venture becomes effective in Q1 2014.

§ West Zhuhai Products Terminal throughput and storage volumes were up 7.8 per cent to approximately 2.6 million tonnes (2012: approximately 2.5 million tonnes) and profit contribution to the Group increased to £1.1 million (2012: £0.8 million), a 44 per cent increase due to increased utilisation of the terminal by PetroChina.

§ The Group has obtained a license allowing it to supply and trade diesel in China, a first for a foreign company.

Resources

§ The Group continues to determine whether the Armenian iron ore assets could be developed economically. The rail costs continued to be the major issue which was undermining the commercial viability of these projects. Furthermore, projections of the long term iron ore price appear to be softening due to the slowdown in economic growth globally, particularly in China. As a consequence, the Group has recognised a non-cash impairment loss of £35.8 million with respect to the full carrying value of the assets in the Armenian iron ore project.

There were no lost time incidents recorded in any of the Group's operations during the period.

OUTLOOK

China's 2013 economic growth slowed to 7.7 per cent, the weakest in 14 years, and China's Cabinet has warned that the growth model based on exports and investment is running out of steam with the economy also challenged by the increasing risks of local government debt, the financial sector and overcapacity.

In line with the slowing of the Chinese economy, growth in energy demand was subdued and slowed from 10.0 per cent in 3Q to 7.7 per cent in Q4. China's oil demand averaged 9.95 million barrels per day in 2013 which was only 3 per cent higher than 2012 whilst crude oil imports in 2013 totalled 271 million tonnes, 4.1 per cent higher than 2012.

China diesel demand was almost flat compared to 2012 (up only 0.2 per cent year on year), but petrol demand remained strong, up 10.2 per cent up year on year underpinned by the robust transport demand and strong passenger vehicle sales.

Demand for aviation fuels in China also continued to remain strong in 2013. According to the International Air Transportation Association ("IATA") air traffic grew 11.7 per cent in 2013 compared to 2012, the strongest in any global market. Capacity also grew by 12.2 per cent in 2013 with the load factor of 80.3 per cent.

China's natural gas demand continues to remain strong and increased by 12.9 per cent year on year, to 169 billion cubic metres ("bcm") in 2013 making China the third largest gas consumer in the world. Gas demand equates to 5.9 per cent of China's primary energy consumption and still remains low relative to the OECD average where gas demand equates to 26.1 per cent of primary energy consumption demonstrating significant growth potential for natural gas in China. China continues to increase domestic gas production to mitigate growing gas imports which exceeded 30 per cent in 2013 for the first time. In 2013 China domestic gas production increased 12 per cent to 120.9 bcm according to the Ministry of Land and Resources.

During 2013 China introduced long-awaited natural gas price reforms which now enables natural gas price to track international crude oil prices more closely. Although this will incentivise domestic gas supply including CBM there are some concerns that the rise of 15 per cent for natural gas at the city gate will cause a slowdown in the rapid growth in gas demand. Following the gas price increases China has also had to raise the electricity tariff from gas-fired power plants to resolve the conflict between rising gas prices and low on-grid prices for gas based power.

Overall, it appears likely that even though the Chinese economy is expected to grow at a more subdued pace in future, China will continue to provide significant growth opportunities in both the oil and gas markets from which the Company can benefit.

The Armenia iron ore development is still under evaluation and, as with all our projects, we are continuing to assess the project's economic viability. However, the Group will not make any material investment in the development of the project unless there is an economically viable investment case. This is particularly important as projections of the long term iron ore price appear to be softening due to the slowdown in economic growth globally, particularly in China.

I have been working for Fortune Oil since 1999 and it gives me tremendous pleasure to have been given this opportunity to manage a company with such potential, working in one of the most dynamic energy markets in the world. Fortune Oil is well placed to continue to grow in China with a strong set of assets and strategic investments, established partnerships with major companies, and a dedicated and committed working team of employees.

The Board is pleased with the medium term growth prospects for the Group in both the oil and gas sectors in China. Fortune Oil continues to strengthen its position in the Chinese natural gas industry through our investment in CGH and will see further expansion of its customer base as natural gas availability increases whilst our Oil businesses are also well placed to take advantage of the continued expansion of China's oil demand.

TIAN Jun

Acting Chief Executive

26 February 2014

BUSINESS REVIEW

CHINESE ENERGY MARKET

The second half of 2013 has seen a continued deceleration in China's economic growth. China gross domestic product ("GDP") growth for 2013 was 7.7 per cent, the lowest for 14 years but still above the government target of 7.5 per cent set at the beginning of the year and the five-year plan annual growth target of 7 per cent between 2011 and 2015.

On 15 November 2013, China announced new social and economic policies promoting a greater reliance on market forces and inviting private-sector participation and foreign competition in industries long previously controlled by the central government. China is planning to accept a slower growth pace than previously if this will allow for a more sustainable, consumer-driven expansion of its economy.

In line with the slowdown in economic growth, energy demand growth in China has also slowed. Oil demand was only 3 per cent higher than in 2012, averaging 9.95 million barrels per day in 2013. Chinese domestic oil production was only 1.1 per cent higher in 2013 compared to 2012 and totalled 208.3 million tonnes. Crude oil imports in 2013 totalled 271.1 million tonnes, 4.1 per cent higher than 2012 and total refining throughput reached 480.4 million tonnes, which was 3.3 per cent higher than in 2012.

China continues to have tremendous oil demand growth potential as demonstrated by the 15.7 per cent increase in passenger car sales in 2013 as Chinese consumers bought 17.93 million new cars. China's passenger car population however is still very low at 85 vehicles per 1,000 people compared to other major economies (USA 797 per 1,000 people, Brazil 259 per 1,000 people).

Similarly for the aviation sector the IATA Airline Industry Forecast 2013-2017 predicts that routes within or connected to China will be the single largest driver of growth, accounting for 24% of new passengers during the forecast period projecting for China 227.4 million additional passengers, 195 million domestic and 32.4 million international passengers suggesting a positive outlook for Bluesky.

China's gas demand continues to remain strong and in 2013 demand for natural gas rose 12.9 per cent year on year to 169 bcm, according to China National Petroleum Corp.'s ("CNPC") Economic and Technology Research Institute, accounting for 5.9 per cent of China's primary energy consumption. Natural gas imports increased to 38 million tonnes (53 bcm), up 25 per cent on 2012 (30.5 million tonnes) accounting for over 30 per cent of China gas supply. Pipeline deliveries surged 20 per cent year on year hitting a new record of 1.85 million tonnes and LNG imports climbed 33 per cent to 2.43 million tonnes in December 2013. Turkmenistan delivered the most gas pipeline imports to China (17.7 million tonnes) followed by LNG from Qatar (6.8 million tonnes).

To mitigate growing imports of natural gas China continues to press for increased domestic gas production from both conventional and unconventional gas sources. In 2013 China produced 120.9 bcm of natural gas, 117.7 bcm from conventional fields, 3 bcm from surface-level CBM, and 200 million cubic metres of shale gas according to the Ministry of Land and Resources.

China continues to develop the network to support the growth in natural gas demand. In October 2013 the China Myanmar gas pipeline went in to operation with a transmission capacity of 12 bcm per annum. CNPC supplied the first gas via West - East Pipeline II to Hong Kong in December 2013. Across China in 2013 an additional 5,700 km of gas pipelines was installed which is the third consecutive year that more than 5,000 km of gas pipelines have been installed bringing the total pipeline network to around 60,000 km with an annual transmission capacity of 120 bcm. Despite the increased supply options, China is still facing gas shortfalls in the high demand winter period and in the in 2013 there was a shortfall of 22 bcm in gas supply.

The growing problem of pollution in many cities in China is driving the central government to accelerate the substitution of coal with natural gas. The expectation is that the Chinese Government will continue to provide incentives to encourage the investment needed to increase natural gas production and infrastructure to supply the gas to reduce coal consumption particularly in the major cities.

CORPORATE MATTERS

The Group completed the transfer of FGIH to CGH in August 2013 and the two companies' natural gas businesses are in the process of completing the integration.

Following obtaining shareholders approval in September 2013, the Group completed the acquisition of Wilmar International Limited's interest in the consideration receivable as a result of the disposal of FGIH. The total consideration was US$60 million payable to Fortune Dynasty Holdings Limited ("FDH") in ordinary shares in Fortune Oil (the "Acquisition"). FDH is a joint venture company owned 55 per cent by First Level Holdings Limited (controlled by Mr Daniel Chiu) and 45 per cent by Vitol Energy (Bermuda) Limited, a major shareholder of the Company.

Shareholders also approved the amendment to the terms of the loan from FDH to Fortune Oil of US$12 million (£7.5 million), such that it was repaid in Ordinary Shares in Fortune Oil (the "Loan Settlement").

Fortune Oil obtained from the UK Takeover Panel and from the independent shareholders of the Company a waiver of the requirement of Rule 9 of the UK Takeover Code for a general offer to be made for the Company by persons who, as a result of receiving ordinary shares through the Loan Settlement and completion of the Acquisition, now own 56.9 per cent of the Company's issued share capital.

Pursuant to the Share Purchase Agreement ("SPA") dated 16 December 2012 as supplemented by the Deed of Assignment and Novation dated 6 August 2013, by which the Group sold FGIH to CGH the Company announced on the 27 November 2013 that it had elected to receive the Deferred Consideration of US$200 million (£127.8 million) by way of CGH issuing new shares in accordance with the terms of the SPA. The listing permission from the Hong Kong Stock Exchange having been obtained the 184,119,463 new shares in CGH have been issued to the Group. The number of CGH Shares was calculated based on the benchmark share price (the 30-day average closing price) of HK$8.421 per CGH share.

CGG, the joint venture company in which the Group has a 50 per cent interest, owns 732,446,000 CGH shares, representing 14.68 per cent of CGH total issued shares as at 31 December 2013. As at 26 February 2014, the Group and CGG together held 916,565,463 shares in CGH representing 18.36 per cent of CGH's total issued shares of 4,991,748,561, as per CGH's latest public information posted on 4 February 2014. As a result of the level of shareholding and the right to appoint two directors to the Board of CGH, CGH is accounted for as an associated company.

As part of the terms of the SPA, Ms Li Ching has been appointed as an executive director of CGH with effect from 10 January 2014. Ms Li's responsibilities include overseeing the Group's interests in CGH encompassing the FGIH city gas and piped gas businesses, LNG ship and CBM developments and operations. Together with Mr Liu Minghui being the managing director, the Group has strengthened its involvement and influence in CGH.

The Company has changed its financial year-end date from 31 December to 31 March starting from the financial year of 2014. The change is to align the Company's financial year-end with CGH to facilitate the preparation of the Company's consolidated financial statements. The Company's statutory accounts for the fifteen months from 1 January 2013 to 31 March 2014 will be published by the end of July 2014. As a result payment of the Company's normal annual dividend will be deferred three months to November 2014 but will be related to a fifteen months period.

As a result of the FGIH Transaction and the change of status of the SPM joint venture, the Company was no longer able to maintain a Premium Listing on the London Stock Exchange but became a standard listed company, with effect from 20 March 2013. The Company remains committed to maintain the high standards of corporate governance and reporting standards as when the Company was a Premium Listed company. We will continue to evaluate options such that Fortune Oil's listing status meets the best interests of the Company and its shareholders.

NATURAL GAS

The Company's strategic intent is to participate in the Chinese natural gas market through a long term strategic investment in CGH, one of the largest natural gas companies in China.

Pre-completion of the FGIH sale to CGH, the revenue of the natural gas business, including the share of jointly controlled entities, was £58.4 million, the operating profit was £11.4 million, and the natural gas sales volume increased to 330 million cubic meters as operations at the new projects came on stream.

Post completion of the FGIH sale to CGH the revenue to the Group from the natural gas businesses of CGH accounted for as the share of jointly controlled entities and associates was £46.2 million and the operating profit was £79.3 million (including a reclassification to the income statement of the net gain of £76.1 million in fair value of CGG's investment in CGH, previously recognised in equity up to the date of when CGH became an associate). Management believe the FGIH business within CGH is on target to meet the profit guarantee of HK$200 million (£16 million) for 2013 as set out in the SPA. In addition to the profit guarantee for 2013, the Group will also compensate CGH on a dollar for dollar basis if the net profits for the Natural Gas Business are less than HK$400 million (£32 million) in 2014, but management believe no allowance needs to be made in this regard at this moment.

As at 30 September 2013 CGH reported it had secured 208 city gas projects with exclusive concession rights an increase of 27 compared to the same period in 2012. CGH operates 11 long distance natural gas pipeline projects with the total length of the intermediate and main gas pipelines now reaching over 44,000 km an increase of 26.7 per cent.

As at 30 September 2013, the number of residential users of CGH was approximately 10 million, an increase of 23 per cent compared to September 2012 with the connectable city populations covered by CGH gas projects increasing 7.7 per cent to 70 million. CGH connected 226 industrial customers as well as 3,485 commercial customers over the six month period to September 2013 bringing the total number of industrial customers to 2,407, and commercial customers reached 54,497.

During the six month period to the 30 September 2013 CGH sold a total of 3.5 bcm of natural gas, an increase of 14.6 per cent over the same period of the previous year. The majority of the natural gas, 2.4 bcm, is supplied to industrial users such as petrochemicals, ceramics, building materials, metallurgy and glass where margins are typically higher than for gas supplied to the residential sector. CGH annual dividend for 2013 was HK8.48 cents per share and an interim dividend of HK2.2 cents per share for the six month period ended 30 September 2013.

CGH continues to expand its network of natural gas vehicle refuelling stations and as of the 30 September 2013 operated 224 compressed natural gas ("CNG"), liquefied natural gas ("LNG") or combined CNG/LNG ("L-CNG") stations. The use of LNG as a fuel in the marine sector has tremendous growth potential and CGH has continued FGIH's development of infrastructure to supply LNG as a fuel to ships on the Yangtze River. The sites for the first three permanent LNG ship refuelling stations have been identified. Construction is in progress on the station near Chongqing which will be operational in 2014. The initial design work is also being progressed for the second station near the Three Gorges Dam and the third location near Nanjing. These are the first of a number of stations being planned along the Yangtze River. Agreement has been reached with leading shipping companies to start converting a number of their ships to run on LNG dual fuel technology. The Group has established a new technical centre in Wuhan which will be responsible for developing and implementing the LNG dual fuel technology.

Within CGH, the Fortune Liulin Gas Company ("FLG") continues to make progress at its Liulin CBM operations and the project is on track for first commercial gas sales in 2014 following the completion of the gas gathering system. FLG drilled two additional wells in the northern section of the Liulin block and has in total five inseam wells on production testing.

Total field production from the FLG horizontal wells has exceeded 70,000 cubic metres per day with the most successful well to-date producing up to 20,000 cubic metres per day, a rate which exceeds all previous wells drilled by FLG. Until the gas gathering system is in place, the bottom hole pressure and gas flow rates are being managed to avoid unnecessary flaring of gas. Including the gas production from the China United Coalbed Methane Corporation ("CUCBM") wells, the total gas field production from the Liulin block has exceeded 100,000 cubic metres per day.

Chinese Reserve Certification has now been obtained across the Liulin block for all of the main coal seams that contain gas. An additional Chinese reserve certification of 16.3 bcm gas reserves were obtained for seams 3, 4 and 5 in the southern part of the Liulin block and for seams 8 and 9 for the whole Liulin block. The total gas in place for the whole Liulin block (seams 3, 4, 5, 8 and 9) is therefore estimated by the Chinese approval agencies to be 21.8 bcm. The Chinese Reserves Certification is a requirement of the Overall Development Plan ("ODP") approval process.

FLG has completed the ODP reports for the subsurface, surface and project economics and these are being reviewed by CUCBM. FLG currently has five inseam wells on line and together with the CUCBM wells will produce the gas for dispatch through the gas gathering system with the aim to commence commercial gas sales in 2014.

OIL BUSINESS

Aviation Refuelling (South China Bluesky Aviation Oil Company)

In 2013, Bluesky's sales of jet fuel continued to increase, rising by 13 per cent to 3.4 million tonnes compared to 3.0 million tonnes in 2012. Joint venture revenues increased to £2,288 million (2012: £2,021 million). Bluesky achieved a net profit of £53.4 million in 2013 (2012: £47.2 million) with the Group's share of £13.1 million an increase of 14 per cent compared to 2012 (£11.5 million). Although there was a reduction in profit contribution in the first half of 2013 as a result of inventory stock losses due to the reduction in aviation fuel prices during the period this turned around in the second half of the year. Bluesky is committed to keeping sufficient storage to supply jet fuel at each of its airports for approximately two weeks to ensure that operations remain uninterrupted. With a stabilised government pricing policy, stable crude oil prices and increasing demand for passenger and cargo traffic, we expect Bluesky's sales volumes and profit to continue to remain robust.

Maoming Single Point Mooring

The Group has entered into a new 20 year joint venture agreement with Sinopec in respect to the Maoming SPM. Under the new shareholding structure, the shareholding interest in the SPM by the Group is 33 per cent and accordingly, it will not hold a controlling equity stake in the joint venture. The scope of the new joint venture has been expanded with the potential development of a new pipeline and buoy system. Since the joint venture contract expired in February 2013 the Maoming SPM business has been deconsolidated and the net amount expected to be recovered on dissolution of the joint venture has been recognised within "Trade and other receivables" on the balance sheet as at 31 December 2013.

The SPM facility continues to operate efficiently and with an accident-free and spill-free record. In the first 6 weeks of 2013, prior to the expiration of the joint venture agreement, Maoming SPM handled 7 tankers delivering a total of 1.1 million tonnes of crude oil.

Financial results up until the date of contract expiry are presented as discontinued operations and the Group will not include the financial or operating performance post the joint venture expiration date in its results until the new joint venture agreement is in place and effective. The new joint venture is expected to be an associate to the Group, and equity accounting should be adopted once the joint venture becomes effective in Q1 2014. 

Products Terminal and Supply

The performance of the West Zhuhai Products Jetty and Storage Terminal (South China Petroleum Company) improved during 2013 with increased utilisation. Throughput and storage volumes increased by 7.8 per cent in 2013 to approximately 2.6 million tonnes (2012: approximately 2.5 million tonnes) with company revenues of £8.3 million (2012: £7.2 million). The profit contribution to the Group increased 44.3 per cent to £1.1 million compared to £0.8 million in 2012.

This terminal continues to play an important role for PetroChina given its strategic position in the downstream business in Southern China. Options to diversify the terminal's customer base continue to be evaluated.

TRADING BUSINESS

The Trading Business continues to focus on oil and petrochemicals products with turnover for the period has increased to £182.4 million (2012: £123.4 million). Profits from operations amounted to £1.2 million in 2013 (2012: £1.0 million). In 2013 the total quantity of base oils and petrochemicals increased by 68.8 per cent to approximately 265,000 tonnes compared to 157,000 tonnes in the same period in 2012.

The trading business continues to explore options for the expansion of the types of products that it trades. The Group obtained one of the first licences issued in China to enable the supply and trading of diesel and other refined products.

RESOURCES

Work on the Armenian iron ore projects continues to determine whether these assets can be developed economically. The rail freight cost continues to be the major issue which is currently undermining the commercial viability of these projects. Furthermore, projections of the long terms iron ore price appear to be softening due to the slowdown in the economy growth globally, particularly in China. As a consequence, the Group has recognised a non-cash impairment loss of £35.8 million with respect to the full carrying value of the assets in the Armenian iron ore project.

The Group will not make any material investment in the development of this project unless there is an economically viable investment case. Nevertheless the Group will continue to evaluate options to improve the economics of these assets and is working with the Armenian authorities and the Armenian and Georgian rail companies to determine if this is possible. The Group is also in discussions with customers in the neighbouring countries since transport costs will be reduced significantly if the iron ore concentrate product can be sold to local steel producers avoiding the need to export overseas.

FINANCIAL REVIEW

Change of Financial Year-End Date

In order to facilitate the preparation of the Company's consolidated financial statements, Fortune Oil has aligned its financial year-end with China Gas Holdings Limited's ("CGH") year-end of 31 March, starting from the financial period to 31 March 2014.

Following the change of the financial year-end date, the Company has announced and published its unaudited interim results for the period 31 December 2013. The Company will announce and publish its statutory accounts for the fifteen months from 1 January 2013 to 31 March 2014 by the end of July 2014.

Disposal Group Held for Sale and Discontinued Operations

Following the decision to dispose of the Group's natural gas business to CGH (the "FGIH Transaction"), it has been classified in the consolidated financial position as held for sale starting at 31 December 2012 until completion of its disposal in August 2013 and in addition the Maoming SPM business is in dissolution following the expiration of the joint venture contract in February 2013. Consequently, the results of the Group's natural gas business and the Maoming SPM business are presented as discontinued operations in the consolidated income statement and cash flow statement for the twelve months ended 31 December 2013, and the results for the in 2012 have also been presented on the same basis.

In order to provide a more comprehensive review of all of the Group's operations, on a basis comparable with that provided to shareholders in previous periods, the discussion of financial results below relates to continuing operations and discontinued operations combined. The consolidated income statement distinguishes the results of discontinued operations from those of continuing operations.

Accounting Treatments

Disposal of natural gas business

Upon the completion of the FGIH Transaction in August 2013 ("Completion"), the Group derecognised the assets and associated liabilities of natural gas business, which were held for sale in the balance sheet, derecognised the carrying amount of the non-controlling interests, recognised the fair value of the consideration received, reclassify to the income statement cumulative foreign currency translation adjustments and recognised the resulting difference as a gain on disposal of the natural gas business (see "Other Gains and Losses" below for detail) in profit or loss attributable to the parent.

The result of the natural gas business has been consolidated into the Group's accounts until Completion, which was also the date that FGIH and its sub-group has ceased to be subsidiaries of the Group. Please refer to "Natural Gas" in note 3 to the accounts for detail.

Investment in CGH

As a result of having significant influence through exercisable nomination rights of the managing director and an additional executive director in CGH granted at the FGIH Transaction together with the CGH shares hold directly or indirectly by Fortune Oil, CGH has been treated as an associate of the Group and equity accounting has been adopted since Completion.

The investment in CGH is divided into two layers: (i) direct holding by wholly owned subsidiaries of the Company; and (ii) indirect holding by China Gas Group Limited ("CGG"), a jointly controlled entity between the Group and Mr Liu Minghui. The accounting treatments in these layers are discussed as follows:

Treatments in the Group's wholly owned subsidiaries

Following Completion, the Group has applied equity accounting by recognising CGH's net profit according to the Group's shareholding percentage into the income statement. (See the summary in "Profit contribution from investment in CGH" under "Revenue and Expenditure" below for details).

As at 31 December 2013, Fortune Oil directly holds 184,119,463 CGH shares via Fortune Oil PRC Holdings Limited and First Marvel Limited, both of which are wholly owned subsidiaries of the Company. Since CGH is an associate of the Group, and thus accounted for under the equity method, the market value of the investment in CGH is no longer directly reflected in the Group's balance sheet, however, any decrease in CGH's share price, which is significant and prolonged, is objective evidence of impairment which will be charged to income statement directly.

Treatments in CGG

Following Completion, CGG has also applied equity accounting by recognising CGH's net profit according to CGG's shareholding percentage into the income statement. CGG's income statement has also realised a gain in fair value of CGG's investment in CGH, previously recognised in equity up to, the date when CGH became an associate, which was disclosed separately as "Other Gains and Losses" under the "Share of results of Jointly Controlled Entities", and accrued administrative expenses and finance costs to compute its net profit. Since Fortune Oil has a 50 per cent shareholding in CGG, therefore the Group treats CGG as its jointly controlled entity and shares 50 per cent of CGG's net profit by adopting equity accounting to the Group. In terms of cash flow, cash received from dividend declared by CGH has partially off-set the finance costs and other administrative expenses incurred by CGG. (See the summary in "Profit contribution from investment in CGH" under "Revenue and Expenditure" below for details)

As at 31 December 2013, CGG holds 732,446,000 CGH shares, representing 14.7 per cent of CGH's total issued share capital. As discussed above, since CGH is an associate to CGG and CGG is a jointly controlled entity to the Group, and thus accounted for under the equity method, the market value of the investment in CGH is no longer directly reflected in the Group's balance sheet, however, any decrease in CGH's share price, which is significant and prolonged, is objective evidence of impairment which will be charged to income statement of CGG directly.

Maoming SPM business

Since the expiration of the joint venture contract of Maoming King Ming Petroleum Company Limited in February 2013, the net amount expected to be recovered on dissolution of the joint venture of £0.8 million has been included in the "Trade and other receivables". Although the SPM facility continues to operate, the Group has not recognised the results of the Maoming SPM business since the expiration.

During 2013, Fortune Oil entered into a new joint venture agreement with Sinopec in respect of the Maoming SPM business. Under the new shareholding structure, the Group's shareholding interest in the Maoming SPM business is 33%. Accordingly, Fortune Oil will not hold a controlling equity stake in the joint venture. Yet, due to its significant influence, the Group will treat this new joint venture an associate and therefore, equity accounting will be adopted. Management expects that the Group should start recognising the share of results in Maoming SPM business in the first quarter of 2014 when the new joint venture becomes effective.

Revenue and Expenditure

Revenue from all operations including the Group's share of jointly controlled entities increased by 16 per cent to £856.6 million for the twelve months ended 31 December 2013 from £739.4 million for the same period in 2012. This was largely driven by the inclusion of the share in CGH's revenue since Completion, the growth in the Group's aviation refuelling business and trading business, netting off the sharp decrease in the Maoming SPM business, due to the fact that no revenue has been included from the time of the expiry of the previous joint venture agreement in February 2013, and the exclusion of revenue from the natural gas business following Completion. Group revenue from all operations excluding jointly controlled entities has also increased to £233.1 million for the twelve months ended 31 December 2013 from £214.6 million for the same period in 2012.

Operating profit from all operations combined, before the share of other gains from jointly controlled entities of the Group (see below for discussion), slightly decreased to £27.5 million for the twelve months ended 31 December 2013, compared with £28.5 million for the same period in 2012, decrease of 4 per cent. The decrease was mainly due to the effect of the exclusion of the result of the Maoming SPM business from the time of expiry of the joint venture agreement and exclusion of result of natural gas business after Completion, netting off by the profit contribution from the aviation refuelling business and the including of share of CGH's result since Completion.

The net profit from all operations attributable to owners of the parent was £164.1 million for the twelve months ended 31 December 2013, an increase of 948 per cent compared with £15.7 million for the same period in 2012. Basic earnings per share from all operations increased to 8.00 pence for the twelve months ended 31 December 2013, compared with 0.82 pence for the same period in 2012. The increase is mainly due to the combined effect of the inclusion amount in "Other Gains and Losses" from subsidiaries and jointly controlled entities of the Group (discussed below), the increase in profit contribution from aviation refuelling business, inclusion of share of results of CGH since Completion, netting off the sharp decrease in the Maoming SPM business and the exclusion of natural gas business after Completion.

Net profit from continuing operations was £158.0 million for the twelve months ended 31 December 2013, an increase of 3,240 per cent compared with £4.7 million for the same period in 2012. Basic earnings per share from continuing operations increased to 7.70 pence for the twelve months ended 31 December 2013, compared with 0.25 pence for the same period in 2012. This is mainly due to the inclusion of a significant amount in "Other gains and losses" (discussed below), the increase in profit contribution from aviation refuelling business, and the inclusion of share of results of CGH since Completion.

Profits contribution from investment in CGH

CGH became an associate of the Group in August 2013, with equity accounting being adopted from 1 September 2013. In November 2013, CGH announced its unaudited half year results for the period ended 30 September 2013. Since CGH is a listed company in Hong Kong, due to sensitive information reasons, instead of applying unpublished CGH's figures, the Group has pro-rated CGH's six months net profit in order to compute the share of results in associate/jointly controlled entity to the Group for the four months ended 31 December 2013. As discussed above, the Company has changed its financial year-end date to 31 March in order to align that with CGH, so that the actual result of CGH can be obtained and used in the future financial statements. The share of results of jointly controlled entities and associates has also been adjusted to reflect the fair value of CGH's assets and liabilities as at Completion. These fair values have been provisionally estimated, and will be finalised during the twelve months following Completion, as permitted under IFRS.

Based on the accounting treatments discussed above, the profit contribution from investment in CGH for the twelve months ended 31 December 2013 can be summarised in the following table:

Other Gains and Losses

Other gains and losses of the Group including share of jointly controlled entities were £141.2 million for the twelve months ended 31 December 2013. Since the Armenian Iron Ore project impairment loss (see below for discussion) is shared with the third parties' non-controlling interests in the various companies, its effect on net profits attributable to owners of the parent is reduced. As a result the "Other Gains and Losses" has a net impact of £147.9 million on the net profit from all operations attributable to owners of the parent for the twelve months ended 31 December 2013.

Other gains and losses of the Group including share of jointly controlled entities represent the combined effect of (i) the gain on disposal of the Group's natural gas business; (ii) the share of the gain in fair value of CGG's investment in CGH reclassified to the income statement on the date when CGH became an associate (being part of the share of results of jointly controlled entities); partially offset by (iii) the impairment of the assets on the Armenian iron ore project. Further detail is as follows:

Gain on disposal of the Group's natural gas business

As at the date of the completion of FGIH Transaction, a net gain of £100.9 million on disposal of FGIH and its sub-group (the "FGIH Group") has been realised. The net gain was the result of the consideration of the FGIH Transaction, less the combined effect of the shareholder's equity of the FGIH Group as at the completion date and those related costs and expenses of the FGIH Transaction.

Gain in fair value of CGG's investment in CGH reclassified to the income statement on the date when CGH became an associate

Following the completion of the FGIH Transaction, CGH became an associate. As a result, CGG recognised the mark-to-market revaluation gain on CGH shares as at that date in its income statement, and consequently, part of the net gain in fair value of available-for-sale investments in jointly controlled entities previously recognised in "Other reserve" in the Group's balance sheet has been recognised in the Group's income statement on the date when CGH became an associate. However, the gain generated by CGH shares transferred from Fortune Max Holdings Limited, a private company controlled and beneficially owned by Mr Daniel Chiu, to CGG at acquisition in April 2013 has not been reclassified to the income statement due to its being capital in nature. The total gains in fair value changes of CGH shares reclassified to the Group's income statement for the period ended 31 December 2013 were £76.1 million, which has been shown under the "Share of Results of Jointly Controlled Entities - Other Gains".

Impairment on Armenian Iron Ore Project

At the end of December 2013, the Group completed an extensive assessment of the Armenian iron ore project, which indicated that the iron ore assets may not be developed economically. As a consequence, the Group recognised an impairment loss of £35.8 million (including the non-controlling shareholders' share of the loss of £6.7 million) with respect to the full carrying value of the assets in the Armenian iron ore project. The impairment has been taken as a the result of the increased transportation costs to move the iron ore concentrate from Armenia to potential buyers and the softening of the long term iron ore prices predicted for when the Armenian iron ore assets could enter commercial operations.

The Group will not make any material investment in the development of this project unless there is an economically viable investment case. Nevertheless, the Group will continue to evaluate options to improve the economics of the Armenian iron ore assets and is working with the Armenian authorities and railway companies to determine if this is possible.

Other gain in 2012

The other gain of £4.6 million in 2012 arose from the disposal of the Group's available-for-sale investments in respect of shares held in CGH in February 2012. The shares were held by a wholly owned subsidiary and were sold to CGG.

Other Comprehensive Loss/Income

Other comprehensive loss was £1.1 million for the twelve months ended 31 December 2013, compared with other comprehensive income of £32.6 million for the same period in 2012. This is mainly due to exchange gains arising on translation of foreign operations of the Group of £5.6 million; the share of net gain in fair value of available-for-sale investments in jointly controlled entity of £69.3 million; and the cumulative gains in fair value of CGG's investment in CGH being reclassified to the income statement on the date when CGH became an associate of £76.1 million.

The other comprehensive income in the same period of 2012 is mainly due to the share of the net gain of £40.3 million in fair value of available-for-sale investments in respect of CGH shares held by CGG, less the combined effect of exchange differences arising on the translation of foreign operations of the Group and the sale of its investments in respect of CGH shares to CGG during 2012.

Capital Expenditure and Investment to Jointly Controlled Entities

During the period, the Group invested £10.8 million as capital expenditure, which mainly consisted of the expansion of gas pipeline networks, construction of LNG/CNG refuelling stations, and additions to exploration and evaluation assets in respect of the iron ore mining licence in Armenia. The Group has also increased its loan to CGG by £22.8 million in 2013.

Financial Position

The net assets of the Group as at 31 December 2013 were £334.5 million, compared with £246.8 million as at 31 December 2012. Investments in jointly controlled entities of the Group at 31 December 2013 were £229.2 million, compared with £135.5 million as at 31 December 2012. The increase was mainly the combined result of the net gain in fair value changes of CGH shares (disclosed within the "Other Gains and Losses"), deducting the dividend received from CGH, inclusion of the share of CGH's results, and subtracting the administrative expenses and finance costs in CGG.

Upon Completion of FGIH Transaction, the assets and associated liabilities of natural gas business were eliminated against the consideration received from CGH before recognising as a gain on disposal in the consolidated income statement. The consideration received was partly settled in cash and partly in CGH shares, which has been included as "Investments in Associates".

The intangible assets of the Group as at 31 December 2013 were £0.4 million, compared with £38.5 million as at 31 December 2012. The decrease was mainly due to the impairment on the Armenian iron ore project discussed in "Other Gains and Losses" above.

The net borrowing position as at 31 December 2013 was £11.6 million compared with £61.1 million (after excluding a net cash of £13.1 million in the natural gas business) as at 31 December 2012. With a cash balance of £69.2 million as at 31 December 2013, together with the undrawn syndicated loan facility of £113 million (US$180 million) and the expected positive cash flow generated from operation, the Group envisages no difficulties in meeting both current loan repayment obligations and investment commitments.

As a result of consideration received from the FGIH Transaction and the net gain in the fair value changes in CGH shares held by the Group, the net gearing ratio (after deduction of cash) for the Group decreased to 3.5 per cent as at 31 December 2013 against 24.7 per cent as of 31 December 2012.

Ordinary Shares and Share Premium

In October 2013, an aggregate of 599,639,580 new ordinary shares of 1 pence each (the "New Ordinary Shares") have been allotted and issued to Fortune Dynasty Holdings Limited ("FDH"), The New Ordinary Shares are issued at a price of 7.81 pence each. FDH is a private company owned by First Level Holdings Limited and Vitol Energy (Bermuda) Limited, two of the major shareholders of the Company. The New Ordinary Shares consisted of: i) 500,266,580 ordinary shares issued in connection with the acquisition of Wilmar International Limited's interest in the consideration receivable as a result of the FGIH Transaction; and ii) 99,373,000 ordinary shares issued in connection with a loan settlement to FDH of US$12 million (£7.5 million).

The New Ordinary Shares have, therefore, increased the share capital and share premium of the Company by 1 pence each and 6.81 pence each, respectively.

Financial Costs and Tax

Finance expenses for the Group from all operations (excluding share of jointly controlled entities and associates) were £5.3 million in the twelve months ended 31 December 2013, compared with £6.1 million in the same period of 2012, mainly due to the decrease in the weighted average Group borrowing throughout the year and the exclusion of finance expenses in the Group's natural gas business after the completion of FGIH Transaction.

The Group's total tax charge in the twelve months ended 31 December 2013 from all operations (excluding share of jointly controlled entities and associates) was £4.6 million (same period of 2012: £8.2 million) representing an effective tax rate of 19.6 per cent (after excluding non-taxable capital gains and losses of £141.2 million), compared with 29 per cent in the same period of 2012. The decrease in effective tax rate was mainly the result of the exclusion of income tax charge in the Group's natural gas business after the completion of the FGIH Transaction.

Foreign Exchange

The revenues and expenses of the Group are mainly denominated in China's renminbi (RMB). The remaining expenses are denominated either in pound sterling (£) or in Hong Kong dollars (HK$), which is pegged to the US dollar, or in US dollars (US$). On average for the twelve months ended 31 December 2013, the RMB appreciated against the US$ by 2.6 per cent and the pound sterling depreciated by 1.6 per cent against the US$, hence there was an overall 4.2 per cent depreciation of the pound sterling against the RMB. This currency movement has had the effect of increasing our profits as measured in pound sterling.

The assets and liabilities of the Group are also primarily denominated in RMB, with our Armenian investment being denominated in US$. The remaining balance, which represents a small proportion of the assets and liabilities, are denominated in pound sterling and HK$. As at 31 December 2013, the closing pounds sterling depreciated against the RMB 0.7 per cent, however, it appreciated against US$ by 2.0 per cent.

The Group does not have a policy to hedge currency risk and therefore any changes in the RMB/£ exchange rate are likely to affect the Groups' results which are presented in pounds sterling.

Capital Structure

Most of the Group's investments and expenses take place in the People's Republic of China (the "PRC") and are held through Fortune Oil PRC Holdings Limited, a wholly owned subsidiary of the Company incorporated in Hong Kong. To facilitate inter-company restructuring, most of the investments in China are held through subsidiary Hong Kong registered companies. The Group's interests in Armenia are held through a separate investment structure. The Group's UK operations consist only of local representation as a direct expense to the Company.

Refinancing

In October 2013, Fortune Oil PRC Holdings Limited signed a US$300 million (£188 million) loan agreement. The facility is denominated in US$ with a term of three years and a margin of 2.75 per cent over LIBOR. The facility is guaranteed by Fortune Oil PLC and secured by share charges over its various Hong Kong subsidiaries.

The purpose of this is to maximise the borrowing capacity and to lock in low-cost financing at current levels before the liquidity has been tightened in the loan market. This new facility, which has been partly used to repay the outstanding balance under the previous syndicated loan of US$180 million (£113 million) signed in April 2011, will provide the Group with working capital, and finance new investment.

Dividend

Although it is not generally the Company's policy to pay ordinary interim dividends, a special interim dividend of 2.36 pence per ordinary share was paid to shareholders on 25 October 2013 as a result of the completion of the FGIH Transaction.

A final dividend of 0.16 pence per ordinary share was paid to shareholders on 15 August 2013, in respect of 2012 financial year.

PRINCIPAL RISK AND UNCERTAINTIES

Our business is supplying China with energy and resources, principally oil and natural gas. There are a number of potential risks and uncertainties which could have a material impact on the Group's performance over the remaining three months of the financial year and could cause actual results to different materially from expected and historical results.

As a result of the completion of the FGIH Transaction, the risks referred to below are the additional risks which are considered by the Group to be material:

The Group does not have control of all of its investments

A significant proportion of the Group's business is conducted through associate or jointly controlled entities and in certain of these operations, the Group does not have board control or control of day-to-day operations. The Group is therefore dependent upon the decision making processes and internal controls put in place by its investment partners and operated by the staff of the associates or jointly controlled entities. If incorrect business decisions are taken or, through lack of overriding internal controls, assets and/or revenues may be lost, then the value of and income and dividends received from such associates and jointly controlled entities may be materially reduced. The Group seeks involvement in these decision making processes, using its rights to appoint directors and/or managers, monitoring the results of internal controls and using its rights to access trading information to reduce the risk associated with such non-controlled entities.

The Group's Financial Conditions or Results of Operations are affected by those of CGH

The Group effectively owns approximately 11.0% of CGH which operates in more than 200 city piped gas projects in the PRC. As at the 31 December 2013, the investment in CGH represents 56.4% of the Group's total assets, hence its financial conditions and results of operations may be affected by the share price performance (which may lead to impairment testing on "Investments in Associates"), the issuance of new CGH shares (that the dilution effect may have impact on the Group's profit from operations, for example the reduction in share of profit from CGH, which is based on the shareholding percentage), the sustainability of dividend pay-out ratio, the financial performance (which would have direct impact on the Group's profit from operations), and the financial position of CGH.

Except for the abovementioned additional risk factors, there is no other changes since the date of Annual Report 2012, where the principal risks and uncertainties, their effects and our management strategy are detailed on pages 24 and 25 of that report.

The principal risks and uncertainties facing the Group's operations include: concentration risks, pricing risks, regulatory and relationships risks, health, safety and environment risks, attraction and retention of key employees, development risks, uninsured risks and investment risks.

GOING CONCERN STATEMENT

The Group's business activities and associated opportunities and risks are set out above in the "Business Review" and "Principal Risks and Uncertainties". The financial position of the Group, its cash flows and liquidity position is described in the Financial Review. In the management of liquidity risk, the Group monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance the Group's operation and mitigate the effects of fluctuations in cash flows. The Group expects to meet its capital expenditure requirements from medium term loan facilities and the cash consideration from CGH for the FGIH Transaction.

The current economic conditions may create uncertainty over:

§ The level of demand for the Group's products and services

§ International exchange rates that affect commodity prices and hence the Group's revenues in China as denominated in US dollars or pound sterling

§ The availability of bank or equity finance in the foreseeable future

§ Counterparty credit risk

As at 31 December 2013, the Group had a cash balance of £69.2 million and a net borrowing position of £11.6 million. With the undrawn syndicated loan facility of £113 million (US$180 million) and the expected positive cash flow generated from operation, the Group's current forecasts and projections, adjusting for reasonably possible changes in trading conditions, show that the Group will be able to repay the interest and principal payments in a timely manner and in accordance with loan agreements and to operate within the required covenants.

The Directors believe that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, Fortune Oil continues to adopt the going concern basis in preparing the half year report and accounts.

RESPONSIBILITY STATEMENT PURSUANT TO DTR 4.2

On 2 December 2013, Dr Tian Jun has been appointed as an Executive Director of the Company. On 31 December 2013, Mr Tee Kiam Poon has resigned as an Executive Director of the Company.

Save as the above mentioned, the names and functions of the Directors of Fortune Oil are listed in the Company's Annual Report for 2012. We confirm that, to the best of each person's knowledge:

1. The condensed set of financial statements, which have been prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit of the Group, or the undertakings included in the consolidation as a whole as required by DTR 4.2.4R;

2. The interim management report for the twelve months ended 31 December 2013 includes a fair review of important events that have occurred during the first twelve months of the financial year, and their impact on these twelve months financial report and a description of the principal risks and uncertainties for the remaining three months of the financial year in accordance with DTR 4.2.7R; and

3. The interim management report includes a fair review of disclosures of related party transactions that have taken place in the first twelve months of the financial year and that have materially affected the financial position or the performance of the Group during that period and any changes in the related party transactions described in the last annual report that could have a material effect on the financial position or performance of the Group in the first twelve months of the current financial year in accordance with DTR 4.2.8R.

These interim results have not been audited and nor reviewed.

By order of the Board

TIAN Jun

Acting Chief Executive

FORTUNE OIL PLC

Second Interim Report

Consolidated Income Statement for the period ended 31 December 2013

FORTUNE OIL PLC

Second Interim Report

Consolidated Statement of Comprehensive Income for the period ended 31 December 2013

These components of other comprehensive income have been presented net of related tax effects.

FORTUNE OIL PLC

Second Interim Report

Consolidated Statement of Financial Position at 31 December 2013

FORTUNE OIL PLC

Second Interim Report

Consolidated Statement of Financial Position at 31 December 2013 (cont.)

FORTUNE OIL PLC

Second Interim Report

Consolidated Cash Flow Statement for the period ended 31 December 2013

FORTUNE OIL PL

Second Interim Report

Consolidated Statement of Changes in Equity for the period ended 31 December 2013

FORTUNE OIL PLC

Notes to the condensed set of financial statements

Twelve months ended 31 December 2013

1. Basis of preparation

The condensed financial statements have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting, as adopted by the European Union.

The Company has changed its financial year-end date from 31 December to 31 March. Accordingly, the Company's statutory accounts will be in respect of the 15 months to 31 March 2014. The change is to align the Company's financial year-end with China Gas Holdings Limited ("CGH") to facilitate the efficiency of preparation of the Company's consolidated financial statements and accounts.

Following the decision to dispose of the Group's shareholding in Fortune Gas Investment Holdings Limited ("FGIH") and its sub-group to CGH (the "FGIH Transaction"), it has been classified in the consolidated financial position as held for sale starting at 31 December 2012 until completion of its disposal in August 2013 and in addition the Maoming SPM business is in dissolution following the expiration of the joint venture contract in February 2013. Consequently, the results of the Group's natural gas business and the Maoming SPM business are presented as discontinued operations in the consolidated income statement and cash flow statement for the twelve months ended 31 December 2013, and the results for the same period of 2012 have also been presented on the same basis.

The financial information for the twelve months ended 31 December 2013 was neither audited nor reviewed by the auditors. The information for the year ended 31 December 2012 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditor's report on these accounts was not qualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying the report and did not contain statements under section 498(2) or (3) of the Companies Act 2006.

The Directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of no less than twelve months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the condensed financial statements. Detail of the factors that which have been taken into account in assessing the Group's going concern status are set out on page 20 of the going concern statement.

2. Significant accounting policies

The condensed financial statements have been prepared under the historical cost convention, except for the revaluation of certain properties and financial instruments.

The same accounting policies, presentation and methods of computation have been followed in these condensed financial statements as were applied in the preparation of the Group's financial statements for the year ended 31 December 2012, with the following exceptions. In the current year, the Group has applied, for the first time, the following new and revised Standards and Interpretations, which are effective for the Group's financial year beginning 1 January 2013, but have not had any significant impact on the financial statements for the 12 months to 31 December 2013.

IFRS 1 (amended) Government loans

IFRS 7 (amended) Disclosures: Offseting financial assets and financial liabilities

IFRS 13 Fair value measurement

IAS 19 (revised) Employee benefits

Annual improvements to IFRS 2009-2011 cycle (various standards)

3. Segmental Reporting

The Group has adopted IFRS 8 Operating Segments to identify eight operating segments on the basis of internal reports about components of the Group which are reviewed regularly by the chief operating decision maker in order to allocate resources to the segment and to assess its performance.

The Group has classified the operating divisions and the reportable segments under IFRS 8 as "Investment in CGH", "Natural Gas", "Single point mooring facility", "Aviation refuelling", "Trading", "Products terminal", "Resources" and "Others".

Information regarding these segments is presented below.

(a) Operating segments

(a) Operating segments (cont.)

(b) Analysis of group revenue

(c) Analysis of profit from operations from Investment in CGH

The investment in CGH is divided into two layers: (i) direct holding by wholly owned subsidiaries of the Company; and (ii) indirect holding by China Gas Group Limited ("CGG"), a jointly controlled entity between the Group and Mr Liu Minghui.

4. Other gains, net