Petro king Oilfield Services : Announcements and Notices - (I) MAJOR AND CONNECTED TRANSACTION IN RELATION TO THE DISPOSAL AND DEEMED DISPOSAL OF EQUITY INTERESTS IN SUBSIDIARIES; AND (II) DISCLOSEABLE AND CONNECTED TRANSACTIONS

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PETRO-KING OILFIELD SERVICES LIMITED

百勤油田服務有限公司

(Incorporated in the British Virgin Islands with limited liability)

(Stock Code: 2178)

1. MAJOR AND CONNECTED TRANSACTION IN RELATION TO THE DISPOSAL AND DEEMED DISPOSAL OF

EQUITY INTERESTS IN SUBSIDIARIES; AND

1. DISCLOSEABLE AND CONNECTED TRANSACTIONS

Financial adviser to Petro-king Oilfield Services Limited

SOMERLEY CAPITAL LIMITED

Independent Financial Adviser to the Independent Board Committee and

the Independent Shareholders

1. MAJOR AND CONNECTED TRANSACTION IN RELATION TO THE DISPOSAL AND DEEMED DISPOSAL OF EQUITY INTERESTS IN SUBSIDIARIES

(A) The Star Petrotech Disposal

On 13 November 2020 (after trading hours of the Stock Exchange), Sheraton Investment (as vendor) and Petro-king Huizhou (as purchaser) entered into the Star Petrotech SPA, pursuant to which Sheraton Investment conditionally agreed to sell, and Petro-king Huizhou conditionally agreed to purchase, the entire issued shares in Star Petrotech at a consideration of US$6.58 million (equivalent to approximately HK$51.0 million). Upon completion of the Star Petrotech Disposal, Star Petrotech will become a subsidiary of Petro-king Huizhou.

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(B) The Capital Increases

On 13 November 2020 (after trading hours of the Stock Exchange), Petro-king Huizhou entered into eight Capital Increase Agreements with its existing shareholders and the Subscribers, pursuant to which the Subscribers conditionally agreed to make a total capital contribution of RMB41 million (equivalent to approximately HK$48.0 million) to Petro-king Huizhou.

(C) The Petro-king Huizhou Connected Disposal

On 13 November 2020 (after trading hours of the Stock Exchange), (i) Petro-king Shenzhen (as vendor) and (ii) Mr. Wang and his associates (as purchasers) entered into the Petro-king Huizhou SPA, pursuant to which Petro-king Shenzhen conditionally agreed to sell, and Mr. Wang and his associates conditionally agreed to purchase, an aggregate of 14.6199% equity interest in Petro-king Huizhou for an aggregate consideration of RMB25 million (equivalent to approxiametly HK$29.2 million) following completion of the Star Petrotech Disposal and the Capital Increases.

Immediately following completion of the Capital Increases and the Petro-king Huizhou Connected Disposal, the equity interest of the Company in Petro-king Huizhou will be reduced to approximately 38.60%. Following completion of the Transactions, both Petro-king Huizhou and Star Petrotech will cease to be subsidiaries of the Company.

Under the Transactions, it is expected that the Group will receive net cash proceeds in the aggregate amount of approximately RMB65.4 million (equivalent to approximately HK$76.5 million). The Group intends to apply the proceeds for the repayment of its debts and for general working capital purposes.

Listing Rules implications

The Star Petrotech Disposal, the Petro-king Huizhou Connected Disposal, the Capital Increases and the Previous Capital Increase are aggregated as a single transaction pursuant to Rules 14.22 and 14.23 of the Listing Rules as these transactions are entered into within a 12-month period and involve the disposal of the Group's equity interest in Petro-king Huizhou and its then subsidiaries (including Star Petrotech). As one or more of the applicable percentage ratios in respect of the disposal and deemed disposal of Petro-king Huizhou and its then subsidiaries (including Star Petrotech) are more than 25% but all of them are less than 75%, on an aggregate basis, the transactions constitute a major transaction of the Company and are therefore subject to the reporting, announcement, circular and shareholder's approval requirements under Chapter 14 of the Listing Rules.

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Given that Mr. Wang is the chairman of the Company and an executive Director, and through his controlled corporation, is deemed to be interested in approximately 28.32% shareholding of the Company as at the date of this announcement, Mr. Wang and his associates are connected persons of the Company. As one or more of the applicable percentage ratios of the Petro-king Huizhou Connected Disposal are more than 5%, the Petro-king Huizhou Connected Disposal is subject to reporting, announcement, circular (including independent financial advice) and independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.

(II) DISCLOSEABLE AND CONNECTED TRANSACTIONS

On 13 November 2020 (after trading hours of the Stock Exchange), the Group entered into two loan facility agreements with Petro-king Huizhou and Star Petrotech, pursuant to which the Group shall make available credit facilities in the aggregate principal amounts of up to RMB15 million (equivalent to approximately HK$17.5 million) and US$3.5 million (equivalent to approximately HK$27.1 million) to Petro-king Huizhou and Star Petrotech respectively.

Listing Rules implications

Mr. Wang and his associates, being connected persons of the Company at the issuer level, will be entitled to exercise or control the exercise of 10% or more of the voting power at any general meeting of Petro-king Huizhou upon completion of the Transactions. Therefore, both Petro-king Huizhou and its then subsidiaries (including Star Petrotech) will be commonly held entities falling within the meaning of Rule 14A.27 of the Listing Rules. The provision of the Loan Facilities by the Group to Petro-king Huizhou and Star Petrotech constitute connected transactions of the Company pursuant to Rule 14A.26 of the Listing Rules.

As one or more of the applicable percentage ratios in respect of the provision of the Loan Facilities by the Group to Petro-king Huizhou and Star Petrotech are more than 5% but all of them are less than 25%, on an aggregate basis, the Loan Facilities are subject to reporting, announcement, circular (including independent financial advice) and independent Shareholders' approval requirements under Chapter 14A of the Listing Rules. As one or more of the applicable percentage ratios in respect of the provision of the Loan Facilities by the Group to Petro-king Huizhou and Star Petrotech are more than 5% but all of them are less than 25%, the Loan Facilities also constitute discloseable transactions of the Company, and is subject to reporting and announcement requirements under Chapter 14 of the Listing Rules.

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General

A circular containing, among other things, further particulars of the Transactions, a letter from the Independent Board Committee, a letter from the Independent Financial Adviser, valuation reports of Petro-king Huizhou and Star Petrotech, other information as required under the Listing Rules, and the notice of EGM to consider and, if thought fit, to approve the resolutions relating to the Transactions will be despatched to the Shareholders on or before 31 December 2020, which is more than 15 business days after the publication of this announcement, so as to allow sufficient time for the preparation and finalisation of the relevant information for inclusion in the circular.

Completion of the Transactions is subject to the approval from the Independent Shareholders at the EGM and the fulfilment of the various conditions precedent as set out under the section headed "PRINCIPAL TERMS OF THE TRANSACTIONS" in this announcement. Accordingly, the Transactions may or may not proceed. Shareholders and potential investors are therefore advised to exercise caution when dealing in the securities of the Company.

INTRODUCTION

The Board wishes to announce that on 13 November 2020 (after trading hours of the Stock Exchange), the Group has entered into certain agreements with various parties in relation to the Transactions. Completion of the Transactions will be conditional upon the fulfilment (or, as appropriate, waiver) of all the conditions precedent under the relevant agreements. The Transactions would have an effect of the Group disposing of its manufacturing business in relation to oilfield and gas field related products, which are currently carried on by Petro-king Huizhou and Star Petrotech.

Immediately following completion of the Star Petrotech Disposal and the Capital Increases (but before completion of the Petro-king Huizhou Connected Disposal), Star Petrotech will become a wholly-owned subsidiary of Petro-king Huizhou, and the equity interest of the Company in Petro-king Huizhou will be decreased from approximately 70.00% to approximately 53.22%. Immediately following completion of the Petro-king Huizhou Connected Disposal, the equity interest of the Company in Petro-king Huizhou will be further reduced to approximately 38.60%. Following completion of the Transactions, both Petro-king Huizhou and Star Petrotech will cease to be subsidiaries of the Company.

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