Sino Gas International Holdings, Inc. Announces First Quarter 2007 Results

BEIJING, May 15 /Xinhua-PRNewswire-FirstCall/ -- Sino Gas International Holdings, Inc. (OTC:SGAS.OB) (BULLETIN BOARD: SGAS.OB)  ("Sino Gas" or the "Company"), a leading developer of natural gas distribution systems in small- and medium- sized cities, as well as a distributor of natural gas to residential, commercial and industrial customers in China, today reported financial results for the first quarter ended on March 31, 2007.

  First Quarter 2007 Highlights
 -- Revenue reached $2.4 million, up 272% from the first quarter of 2006;
 -- Gross profits reached $0.6 million, up 336% from the first quarter of
    2006;
 -- Operating income totaled $103,025, up 822% from the first quarter of
    2006;
 -- Net income rose to $115,383, up 1043% from $10,092 in the first quarter
    of 2006 ;
 -- Sales of natural gas totaled 6.2 million m3, up 162% from the first
    quarter of 2006;
 -- Number of new households connected in the first quarter of 2007 was
    2,250  up 1790 households from the first quarter of 2006.



"Our first quarter result was greatly enhanced by the fact that we have completed the acquisition of Chenguang and picked up the pace in the development of new projects using the net proceeds from our private financing transactions", commented Mr. Yu-Chuan Liu, President and CEO of the Company. "Going forward in 2007, we remain confident in our business plan and the opportunities ahead for growing our business profitably."

First Quarter 2007 Results

Revenues for the three months ended March 31, 2007 increased 272% over the same period in 2006 to $2.4 million, driven by connection fees from 2,250 new households as well as a substantial increase in natural gas sales to 6.2 million cubic meters, up 162% over the same period in 2006. Connection fees accounted for 25% of revenues this quarter, with natural gas sales accounting for the balance.

Gross profit for the three months ended March 31, 2007 increased 336% from the same period last year to $600,597, or 25% of revenues compared to $137,909, or 21% of revenues in the first quarter of 2006. This increase in gross profit and margin resulted from the overall increase in net sales. Gross margin in the quarter was down relative to the average obtained over the twelve months ended December 31, 2006 due to the composition of revenues in the quarter being skewed towards natural gas sales, which attract much lower margins than connection fees.

Selling, general and administrative expenses in the first quarter of 2007 were up 293% to $497,572 or 20% of revenue, versus 126,733 or 19% of revenue, in the comparable period last year. The increase in operating expenses in the quarter relative to the same period last year was in line with the overall growth in net revenues.

Operating income for the three months ending March 31, 2007 increased 822% to $103,025, or 4% of sales, compared to $11,176 or 2% of sales for the same period of 2006.

Net income during the quarter increased 1043% year-over-year to $115,383, up from $10,092 in the first quarter of 2006.

Financial Condition

At March 31, 2007, the Company had $2.3 million in total cash and short- term investments, $1.1 million in working capital, and no debt. Cash flow from operations for first quarter 2007 totaled $3.5 million, up from $0.6 million in the same period last year. Capital expenditures totaled $4.7 million for the quarter. Shareholders' equity stood at $25.7 million, compared to $12.6 million the end of the first quarter in 2006.

Business Outlook

The Company believes that the natural gas market is at a very early stage of its development, representing only 3% China's current energy consumption, compared to a world average of 24%. The Chinese government is actively encouraging the development of the natural gas industry in order to take advantage of China's substantial gas reserves, while diversifying energy sources and improving the environment. As a result, industry analysts forecast 270 cities in China to be supplied by natural gas in 2010, compared to 140 in 2005.

"We remain confident we have the right strategy and management team to take our business to the next level. We plan to continue to focus on acquiring small- and mid-sized cities through internal development or acquisitions while further penetrating our existing markets. We expect both connection fees and the percentage of connection fees to sales to increase," added Mr. Liu. "And we expect to add 30,000-40,000 new household users and two industrial users as well as to sell a total of 21 million m3 of natural gas during the year, which we estimate will drive net income growth of 30% in 2007, compared to 2006."

Recent Events

In January 2007, the Company entered into a stock purchase agreement to acquire all the capital stock of Beijing Chenguang Gas Co., Ltd., a privately held natural gas distribution business in Beijing, China for approximately $3.35 million in cash. This transaction included the exclusive concession rights to operate seven gas distribution systems and added 25,202 residential customers and four industrial projects to Sino Gas's distribution system. This transaction was completed on 18th of February 2007.

About Sino Gas

The Company, through its indirectly wholly-owned subsidiary, Beijing Zhong Ran Wei Ye Gas Co., Ltd. ("Beijing Gas"), and the subsidiaries of Beijing Gas, is a leading developer of natural gas distribution systems in small- and medium-sized cities in China, as well as a distributor of natural gas to residential, commercial and industrial customers in China. The company owns and operates 23 natural gas distribution systems serving approximately 63,000 residential and eight commercial and industrial customers. Facilities include approximately 700 kilometers ("km") of pipeline and delivery networks with a designed daily capacity of approximately 70,000 cubic meters of natural gas ("m3"). The company is currently constructing four additional natural gas distribution systems and is planning two more natural gas distribution systems. Beijing Gas Company owns and operates natural gas distribution systems primarily in Hebei, Jiangsu and Anhui, Shandong Provinces. For further information, visit the Company's website at http://www.sino-gas.com/ .

Safe Harbor Statement

This announcement contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact in this announcement are forward-looking statements, including but not limited to, the Company's ability to raise additional capital to finance the Company's activities; the effectiveness, profitability, and the marketability of its products; legal and regulatory risks associated with the share exchange; the future trading of the common stock of the Company; the ability of the Company to operate as a public company; the period of time for which its current liquidity will enable the Company to fund its operations; the Company's ability to protect its proprietary information; general economic and business conditions; the volatility of the Company's operating results and financial condition; the Company's ability to attract or retain qualified senior management personnel and research and development staff; and other risks detailed in the Company's filings with the Securities and Exchange Commission. These forward-looking statements involve known and unknown risks and uncertainties and are based on current expectations, assumptions, estimates and projections about the companies and the industry. The Company undertakes no obligation to update forward-looking statements to reflect subsequent occurring events or circumstances, or to changes in its expectations, except as may be required by law. Although the Company believes that the expectations expressed in these forward looking statements are reasonable, they cannot assure you that their expectations will turn out to be correct, and investors are cautioned that actual results may differ materially from the anticipated results.

All information in this release is as of May 15, 2007. The Company undertakes no duty to update any forward-looking statements to conform the release to actual results or changes in its circumstances or expectations after the date of this release.

The financial information stated above and in the tables below has been abstracted from the Company's Form 10-K, filed with the SEC on May 15, 2007, and should be read in conjunction with the information provided therein.

                      -- FINANCIAL TABLES FOLLOW --


          Sino Gas International Holdings, Inc. AND SUBSIDIARIES
               CONSOLIDATED CONDENSED STATEMENTS OF INCOME
                               (US Dollars)

                            Three Months Ended         Fiscal Year Ended
                                   31-Mar                 December 31
                              2007         2006         2006         2005
                            Unaudited   Unaudited
  Net revenues            $ 2,438,227  $  655,092  $10,870,718  $10,907,289
  Cost of revenues         (1,837,630)   (517,183)  (4,389,142)  (4,132,391)
  Gross profit            $   600,597  $  137,909  $ 6,481,576  $ 6,774,898

  Selling and marketing
   expenses                   (56,198)    (10,154)     (95,779)     (99,768)
  General and
   administrative expenses   (441,374)   (116,579)  (1,155,849)    (874,181)
  Total Operating Expense    (497,572)   (126,733)  (1,319,316)    (973,949)
  Income from continuing
   operations             $   103,025  $   11,176  $ 5,229,948  $ 5,800,949


  Finance costs, net           (5,370)        (86)     (78,237)      (2,486)
  Other income                 36,088          --      438,186      437,750
  Other expenses               (1,495)         --         (856)      (1,865)
  Income before taxation  $   132,248  $   11,090  $ 5,589,041  $ 6,234,348
  Income tax                  (16,865)       (998)    (423,284)    (531,915)

  Net income              $   115,383  $   10,092  $ 5,165,757  $ 5,702,433

  Net income per share,
  Basic                         0.008       0.001         0.36          0.4
  Diluted                       0.004       0.001         0.32          0.4


  Weighted average shares
   outstanding of common
   stock,

  Basic                    14,730,597  14,361,646   14,471,980   14,361,646
  Diluted                  28,724,652  14,361,646   16,085,778   14,361,646


          Sino Gas International Holdings, Inc. AND SUBSIDIARIES
             CONSOLIDATED CONDENSED BALANCE SHEET ON MARCH 31
                         (US Dollars - Unaudited)

                                              2007              2006
  Current assets
  Cash and cash equivalents                $   2,345,164      $    937,436
  Notes receivable                                64,592                --
  Accounts receivable                          5,529,115         5,898,898
  Advances to suppliers                          572,455           364,131
  Prepaid expenses                                99,378            24,790
  Other receivables                            1,910,158           704,623
  Total current assets                     $  10,520,862      $  7,929,878
     Long term assets
     Investments in equity securities          3,310,647         2,437,844
     Plant and equipment, net                 13,890,374         3,219,033
     Construction in progress                  5,973,513         3,223,493
     Intangible assets                           630,040           432,072
     Goodwill                                    875,754                --
  TOTAL ASSETS                             $  35,201,190      $ 17,242,320
  Current liabilities
     Accounts payable                      $   3,744,612      $  2,979,506
     Other payables                            2,693,084         1,392,388
     Unearned revenue                             16,879           175,093
     Accrued liabilities                       1,048,150            87,423
     Acquisition payable                       1,937,759                --
  Total current liabilities                $   9,440,484      $  4,634,410
  TOTAL LIABILITIES                        $   9,440,484      $  4,634,410
  Minority interest                               64,592                --
  STOCKHOLDERS' EQUITY
  Preferred stock A US$0.001 par value;
   20,000,000 authorized; nil and nil
   issued and outstanding as of March
   31, 2007 and 2006 respectively                     --
  Preferred stock B US$0.001 par value;
   5,000,000 authorized; 3,795,571 and
   nil issued and outstanding as of
   March 31, 2007 and 2006 respectively    $       3,796
  Common stock US$0.001 par value;
   250,000,000 authorized; 14,920,344
   and 14,361,646 issued and
   outstanding as of March 31, 2007 and
   2006                                           14,920            14,362
  Additional paid-in-capital                  12,069,176         4,812,650
  Statutory reserves                           2,025,022         1,219,720
  Retained earnings                           10,584,954         6,321,886
  Accumulated other comprehensive
   income                                        998,246           239,292
                                           $  25,696,114      $ 12,607,910
  TOTAL LIABILITIES AND STOCKHOLDERS'
   EQUITY                                  $  35,201,190      $ 17,242,320


                  SINO GAS INTERNATIONAL HOLDINGS, INC.

                  CONSOLIDATED STATEMENTS OF CASH FLOWS
            FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006
                          (Stated in US Dollars)

                                                  2007              2006
  Cash flows from operating activities
     Net income
                                           $     115,383      $     10,092

  Depreciation and amortization                   38,844            32,966
  Equity in investments                         (371,618)            5,534
      Decrease in accounts and other
       receivables                               310,419         1,600,187
      Increase/(decrease) in accounts
       and other payables                      3,394,913        (1,055,844)
     Net cash provided by operating
      activities
                                           $   3,487,941          $592,935

  Cash flows from investing activities
  Purchase of plant and equipment             (3,320,688)          (51,317)
  Pledge deposits                              3,124,541                --
  Payment for the construction in
   progress                                   (1,345,436)         (151,996)
  Payment of cost of intangible assets          (172,210)            5,193
  Acquisition of subsidiaries                   (930,801)               --
  Net cash used in investing activities
                                           $  (2,644,594)     $   (198,120)

  Cash flows from financing activities
  Repayment of bank borrowings                (2,430,445)               --
  Net cash used in financing activities
                                           $  (2,430,445)     $         --

  Net in cash and cash equivalents
   sourced/(used)                             (1,587,098)          394,815
  Effect of foreign currency
   translation on cash and
  cash equivalents                               293,589           (28,573)
  Cash and cash equivalents - beginning
   of year                                     3,638,673           571,194
  Cash and cash equivalents - end of
   year
                                           $   2,345,164      $    937,436



  For more information, please contact:

  Sino Gas International Holdings, Inc.
   Ms. Fang Chen, Chief Financial Officer
   Tel:   [phone](China)
   Email: 

  CCG Elite Investor Relations

   Crocker Coulson, President
   Phone: [phone](New York)
   Email: 

   Ed Job, CFA
   Tel:   [phone](New York)
   Email: 

DATASOURCE: Sino Gas International Holdings, Inc.



CONTACT:  Ms. Fang Chen, Chief Financial Officer of Sino Gas

International Holdings, Inc., [phone], or ; or CCG

Elite Investor Relations - Crocker Coulson, President, [phone] (New

York), or , or Ed Job, CFA, [phone] (New

York), or , both for SGAS 



Web Site:  http://www.sino-gas.com/ 

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