Honghua (196.HK) Entered into an Agreement with ASIFL

Exploring Market through Finance Leasing and Value-added Services

HONG KONG — Honghua (Stock Code: 196.HK), a leading global land drilling rig manufacturer, is pleased to announce that its indirect wholly owned subsidiary, Sichuan Honghua, signed the Sale and Purchase Agreement (“Agreement”) with Aerospace Science & Industry Financial Leasing Co., Ltd. (“ASIFL”), a connected person of Honghua, on six sets of top drive drilling systems at a total consideration of RMB 33,220,000. On the same day, Shenzhen Honghua, an indirectly owned subsidiary of Honghua, entered into the Finance Lease Agreement with ASIFL, pursuant to which ASIFL leases the Equipment to Shenzhen Honghua for 5 years at a total consideration of RMB 37,252,527.93.

It is also said that, these Equipments will be eventually be made available,via Honghua, on an operating lease basis to one of the subsidiaries of PetroChina, Sinopec and CNOOC for domestic oil and gas drilling projects.

Honghua believes the sale of the Equipments will generate immediate sales income for the Company in the current financial period. The Finance Lease Agreement will also allow the Group to introduce capital from ASIFL through the platform of Shenzhen Honghua.

Mr Chen Yajun, Chairman of Honghua commented, “These transactions represent an effort of Honghua to establish a new financing channel with ASIFL and raise capital at relatively low cost, in order to expansion in domestic and foreign oil and gas equipment market under fluctuating oil price. The corporation between Honghua and ASIFL comes as a result of the great support from China Aerospace Science and Industry Corporation as Honghua’s major shareholder, as well as a business model innovation between both parties. Base on the success of this transaction, there will be more operating finace leasing corportaions for oil & gas equipments in the future. Enjoying the synergy effect from the alliance, Honghua will capturing more opportunities by offering finance leasing and other value added services at the beginning of oil and gas industry recovery, and create more value for shareholders. “