Kunlun Energy : Announcements and Notices - Continuing Connected Transactions

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KUNLUN ENERGY COMPANY LIMITED

(incorporated in Bermuda with limited liability)

昆 侖 能 源 有 限 公 司

(Stock Code: 00135.HK) CONTINUING CONNECTED TRANSACTIONS INTRODUCTION

The Group and CNPC entered into (i) the Xinjiang Contract and the Liaohe Contract (together the "PSAs") in 1996 and 1997 respectively, and (ii) the Master Agreement in 2003, which was subsequently amended and supplemented pursuant to the First Supplemental Agreement in 2006, the Second Supplemental Agreement in 2009, the Third Supplemental Agreement in 2010, the Fourth Supplemental Agreement in 2011 and the Fifth Supplemental Agreement in 2014.

Under the PSAs, the Group procures from the CNPC Group on a continuing basis certain services and assistance such as personnel training, leasing of warehouses and terminal facilities and utilisation of transportation and communication facilities. The term of the Xinjiang Contract runs from 1 September 1996 and has been expired on 31 August 2016. The term of the Liaohe Contract runs 20 years from the date of commencement of commercial production and will expire on 31 December 2023.

The Master Agreement provides a framework for the Group to procure a range of products and services from the CNPC Group in relation to its oil exploration and production projects. The Master Agreement was amended by the First Supplemental Agreement in 2006, by the Second Supplemental Agreement in 2009, by the Third Supplemental Agreement in 2010, by the Fourth Supplemental Agreement in 2011 and by the Fifth Supplemental Agreement in 2014. Pursuant to the Master Agreement, the range of products and services to be procured from the CNPC Group to the Group and vice versa include oil and gas products, general products and services, financial services and rental services. The Master Agreement, as extended by the Fifth Supplemental Agreement, will expire on 31 December 2017.

In view of the anticipated expiration of the terms of the Master Agreement on 31 December 2017, the Company and CNPC entered the New Master Agreement on 29 November 2017 for the purpose of renewing the Continuing Connected Transactions contemplated thereunder the Master Agreement. Pursuant to the New Master Agreement and Liaohe Contract, members of the CNPC Group and members of the Group shall enter into individual implementation agreements in respect of each type of products or services setting out detailed terms and conditions for providing such products and services. The pricing shall always be subject to the New Master Agreement and Liaohe Contract and the payment terms, including the credit period and the settlement method, will be specified in each individual implementation agreement.

REQUIREMENTS OF THE LISTING RULES

As at the date of this announcement, CNPC, the ultimate controlling shareholder of the Company, was deemed to be interested in 4,985,734,133 Shares, representing approximately 61.76% of the issued share capital of the Company. To the best of the Directors' knowledge, CNPC is entitled to control all voting rights in respect of its Shares as at the date of this announcement, and is a controlling shareholder and a connected person to the Company. CNPC is a connected person of the Company and accordingly the Continuing Connected Transactions under the Liaohe Contract and the New Master Agreement constitute continuing connected transactions of the Company.

As the applicable percentage ratios based on the Proposed Annual Caps for the Continuing Connected Transactions under Categories (a), (b), (c) and (d) are greater than 5%, the entering into of the New Master Agreement and the transactions contemplated thereunder, the Continuing Connected Transactions under Categories (a), (b), (c) and (d) and the Proposed Annual Caps for the Continuing Connected Transactions under Categories (a), (b),

(c) and (d) for each of the three years ending 31 December 2020 are subject to reporting, annual review, announcement and Independent Shareholders' approval requirements.

In addition, as all of the percentage ratios applicable to the financial services contemplated under Category (b) of the Continuing Connected Transactions are less than 5%, such financial services are exempt from the reporting, announcement and Shareholders' approval requirements under Chapter 14 of the Listing Rules.

None of the Directors has a material interest in the entering into of the New Master Agreement and the transactions contemplated thereunder, the Continuing Connected Transactions and the Proposed Annual Caps for the Continuing Connected Transactions.

Details of the Continuing Connected Transactions have been and will be included in the annual report and accounts of the Company in accordance with Listing Rules 14A.71 and 14A.72. In the event that the Liaohe Contract or the New Master Agreement are renewed or the terms thereof are materially varied, the Company will re-comply with the reporting, announcement and Independent Shareholders' approval pursuant to Listing Rules 14A.35 to 14A.60.

For the purpose of the SGM, an Independent Board Committee comprising all the independent non-executive Directors has been established to advise the Independent Shareholders, among other things, the entering into of the New Master Agreement and the transactions contemplated thereunder, the Continuing Connected Transactions under Categories (a), (b), (c) and (d) and the Proposed Annual Caps for the Continuing Connected Transactions under Categories (a), (b), (c) and (d) for each of the three years ending 31 December 2020. First Shanghai has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

At the SGM, CNPC and its associates (including PetroChina) are required to abstain from voting on the resolutions in connection with the entering into of the New Master Agreement and the transactions contemplated thereunder, the Continuing Connected Transactions under Categories (a), (b), (c) and (d) and the Proposed Annual Caps for each relevant type of the Continuing Connected Transactions under Categories (a), (b), (c) and (d) for each of the three years ending 31 December 2020.

A circular containing, amongst other things, (i) further details of the New Master Agreement, the Continuing Connected Transactions and the Proposed Annual Caps; (ii) a letter from the Independent Board Committee; (iii) a letter from First Shanghai; and (iv) the notice of the SGM, will be despatched by the Company to the Shareholders as soon as practicable.

INTRODUCTION

The Group and CNPC entered into (i) the Xinjiang Contract and the Liaohe Contract (together the "PSAs") in 1996 and 1997 respectively, and (ii) the Master Agreement in 2003, which was subsequently amended and supplemented pursuant to the First Supplemental Agreement in 2006, the Second Supplemental Agreement in 2009, the Third Supplemental Agreement in 2010, the Fourth Supplemental Agreement in 2011 and the Fifth Supplemental Agreement in 2014.

Under the PSAs, the Group procures from the CNPC Group on a continuing basis certain services and assistance such as personnel training, leasing of warehouses and terminal facilities and utilisation of transportation and communication facilities. The term of the Xinjiang Contract runs from 1 September 1996 and has been expired on 31 August 2016. The term of the Liaohe Contract runs 20 years from the date of commencement of commercial production and will expire on 31 December 2023.

The Master Agreement provides a framework for the Group to procure a range of products and services from the CNPC Group in relation to its oil exploration and production projects. The Master Agreement was amended by the First Supplemental Agreement in 2006, by the Second Supplemental Agreement in 2009, by the Third Supplemental Agreement in 2010, by the Fourth Supplemental Agreement in 2011 and by the Fifth Supplemental Agreement in 2014. Pursuant to the Master Agreement, the range of products and services to be procured from the CNPC Group to the Group and vice versa include oil and gas products, general products and services, financial services and rental services. The Master Agreement, as extended by the Fifth Supplemental Agreement, will expire on 31 December 2017.

In view of the anticipated expiration of the terms of the Master Agreement on 31 December 2017, the Company and CNPC entered the New Master Agreement on 29 November 2017 for the purpose of renewing the Continuing Connected Transactions contemplated thereunder the Master Agreement. Pursuant to the New Master Agreement and Liaohe Contract, members of the CNPC Group and members of the Group shall enter into individual implementation agreements in respect of each type of products or services setting out detailed terms and conditions for providing such products and services. The pricing shall always be subject to the New Master Agreement and Liaohe Contract and the payment terms, including the credit period and the settlement method, will be specified in each individual implementation agreement.

For further details of the New Master Agreement and Liaohe Contract, please refer to the section headed "Continuing Connected Transactions" below.