PetroChina : Discloseable Transaction Announcement

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中國石油天然氣股份有限公司

PETROCHINA COMPANY LIMITED

(a joint stock limited company incorporated in the People's Republic of China with limited liability)

(Stock Code: 857)

DISCLOSEABLE TRANSACTION

DISPOSAL OF 60% EQUITY INTEREST IN BEIJING PIPELINE AND 75% EQUITY INTEREST IN DALIAN LNG BY KUNLUN ENERGY, A NON-WHOLLY OWNED SUBSIDIARY OF THE COMPANY

INTRODUCTION

We refer to (i) the announcements of the Company dated 23 July 2020, 28 September 2020 and 30 September 2020, and (ii) the circular of the Company dated 12 August 2020, in relation to the disposal and external investment concerning the pipeline business and assets to PipeChina by the Group. We also refer to the announcements of Kunlun Energy, a non-wholly-owned subsidiary of the Company, dated 10 December 2019 and 23 July 2020, in relation to the potential disposal of certain pipeline assets to PipeChina by Kunlun Energy.

The Board announces that, on 22 December 2020, Kunlun Energy and PipeChina entered into the Equity Transfer Agreement, pursuant to which Kunlun Energy has conditionally agreed to sell and PipeChina has conditionally agreed to purchase the Target Shares at a base consideration of approximately RMB40,886 million (subject to the adjustments according to the price adjustment mechanism as set out in the Equity Transfer Agreement), which all will be settled in cash by PipeChina. Upon completion of the Transaction, Kunlun Energy will cease to hold any equity interests in the Target Companies.

LISTING RULES IMPLICATIONS

As the highest of the applicable percentage ratio under the Listing Rules in respect of the Previous Disposal is more than 25% but less than 75%, such transactions constitute a major transaction of the Company. The Company has complied with the major transaction requirements under the Listing Rules in respect of the Previous Disposal.

As the Previous Disposal and the Transaction were entered into between the Group and PipeChina within a 12-month period, pursuant to Rule 14.22 of the Listing Rules, these

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transactions shall be aggregated. As the highest of the applicable percentage ratios under the Listing Rules for the aggregated transaction amounts in respect of the Previous Disposal and the Transaction is more than 25% but less than 75%, such transactions do not constitute a very substantial disposal of the Company and therefore the Company is not required to reclassify the Transaction by aggregating it with the Previous Disposal.

As the highest applicable percentage ratios in respect of the Transaction is more than 5% but less than 25%, the Transaction constitutes a discloseable transaction of the Company and is accordingly subject to the reporting and announcement requirements but exempt from the Shareholders' approval under Chapter 14 of the Listing Rules.

Two directors of PipeChina, despatched by the Company, currently serve as the Director and senior management of the Company, respectively, and one of them has served as the senior management of CNPC, the Company's controlling Shareholder. According to the Shanghai Stock Exchange Listing Rules, PipeChina is a related legal person of the Company. As a result, the Transaction constitutes a related party transaction of the Company under the Shanghai Stock Exchange Listing Rules. Besides, as Mr. Huang Yongzhang is a related Director as defined under the Shanghai Stock Exchange Listing Rules, he is required to and did abstain from voting. None of the other Directors is required to abstain from voting. The Transaction does not constitute a material asset reorganization of the Company.

Shareholders, holders of ADSs and potential investors in the Company should note that the Transaction is subject to the satisfaction (or, if applicable, waiver) of certain conditions as disclosed above. Accordingly, there is no assurance that the Transaction will be completed. Shareholders, holders of ADSs and potential investors in the Company should exercise caution when dealing in the shares, ADSs or other securities of the Company.

1. INTRODUCTION

We refer to (i) the announcements of the Company dated 23 July 2020, 28 September 2020 and 30 September 2020, and (ii) the circular of the Company dated 12 August 2020, in relation to the disposal and external investment concerning the pipeline business and assets to PipeChina by the Group. We also refer to the announcements of Kunlun Energy, a non-wholly-owned subsidiary of the Company, dated 10 December 2019 and 23 July 2020, in relation to the potential disposal of certain pipeline assets to PipeChina by Kunlun Energy.

The Board announces that, on 22 December 2020, Kunlun Energy and PipeChina entered into the Equity Transfer Agreement, pursuant to which Kunlun Energy has conditionally agreed to sell and PipeChina has conditionally agreed to purchase the Target Shares at a base consideration of approximately RMB40,886 million (subject to the adjustments according to the price adjustment mechanism as set out in the Equity Transfer Agreement), which all will be settled in cash by PipeChina. Upon completion of the Transaction, Kunlun Energy will cease to hold any equity interests in the Target Companies.

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1. EQUITY TRANSFER AGREEMENT

The principal terms of the Equity Transfer Agreement are set out below:

Date

22 December 2020

Parties

1. the transferor: Kunlun Energy
2. the transferee: PipeChina

Assets to be Disposed of

Kunlun Energy has conditionally agreed to sell and PipeChina has conditionally agreed to purchase the Target Shares (i.e. 60% equity interest in Beijing Pipeline and 75% equity interest in Dalian LNG) under the terms and conditions as set out in the Equity Transfer Agreement.

Consideration and Payment

The consideration of the Transaction was based on the appraised value of the Target Shares (which is approximately RMB40,886 million), and shall be determined with reference to the profit and loss of the Target Companies during the Transition Period and the subsequent adjustment items as agreed under the Equity Transfer Agreement.

The consideration of the Transaction shall be settled by PipeChina in cash and be paid to Kunlun Energy in two installments:

1. The first installment: within 20 days after the Closing Date, PipeChina shall pay to Kunlun Energy in the amount equal to 85% of the appraised value of the Target Shares, together with the interest thereof as calculated at the benchmark interest rate for RMB demand deposits for financial institutions for the period from the next day following the Closing Date (inclusive) to the date on which the payment is credited.
2. The second installment: within 15 Business Days after the completion of the Closing Audit, PipeChina shall pay to Kunlun Energy the remaining part of the consideration of the Transaction (that is, the final consideration of the Transaction less the first installment), together with the interest thereof as calculated at the benchmark interest rate for RMB demand deposits for financial institutions for the period from the next day following the Closing Date (inclusive) to the date on which the payment is credited.

For reasons relating to government approvals which may cause PipeChina to fail to make the payment within the periods described above, the payment terms shall be extended accordingly provided that the extension shall not exceed five Business Days.

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Profit and Loss during the Transition Period and Subsequent Adjustment Items

For the purpose of ascertaining the profit and loss corresponding to the Target Shares during the Transition Period and the subsequent adjustment items, Kunlun Energy and PipeChina shall engage an accounting firm which is approved by both parties and possesses qualifications for securities and futures businesses to conduct the Closing Audit within 60 days after the Closing Date.

Meanwhile, pursuant to the Equity Transfer Agreement and as agreed between Kunlun Energy and PipeChina, all profit or loss corresponding to the Target Shares during the Transition Period shall be enjoyed or borne by Kunlun Energy. As such, any increase or decrease in the net assets of the Target Companies during the Transition Period will be shared or compensated by Kunlun Energy according to its shareholding percentage and PipeChina will increase or reduce the base consideration of the Transaction by the amount equivalent to such increment or decrease. The majority of the profit and loss during the Transition Period will be distributed in the form of dividends of the Target Companies. According to the Equity Transfer Agreement, the distributable profit of the Target Shares in connection with the dividends declared during the Transition Period shall not be included in the consideration of the Transaction.

Conditions Precedent to Closing

The Closing is subject to the fulfilment of the following conditions precedent:

1. the representations, undertakings and warranties made by Kunlun Energy and PipeChina on the execution date of the Equity Transfer Agreement being true, accurate and complete and not misleading, fabricated or omissive in all material aspects as of the Closing Date;
2. Kunlun Energy having approved the transactions contemplated under the Equity Transfer Agreement in accordance with its constitutional documents and regulatory requirements of the relevant regulatory bodies (such as the Stock Exchange);
3. PipeChina having approved the transactions contemplated under the Equity Transfer Agreement in accordance with its constitutional documents;
4. the Target Companies having approved the transactions contemplated under the Equity Transfer Agreement respectively in accordance with their respective constitutional documents;
5. other shareholders of the Target Companies having waived in writing their first refusal right in respect of the Target Shares;
6. a declaration of concentration of business operators in respect of the transactions contemplated under the Equity Transfer Agreement having been filed and approved or no further examination thereon will be required after such filing;
7. the Asset Valuation Reports on the Target Shares having been approved or filed in accordance with the PRC laws and regulations; and

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