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Hanwei Energy Services Provides Corporate Strategy Update and Reports First Quarter Fiscal 2015 Financial and Operational Results

VANCOUVER, BRITISH COLUMBIA -- (Marketwired) -- 08/12/14 -- Hanwei Energy Services Corp. (TSX: HE) ("Hanwei" or the "Company"), today provided its corporate strategy update for the Company going forward and reported its financial results for the three months ending June 30, 2014. All amounts are in Canadian Dollars unless otherwise noted.

Corporate Strategy

Hanwei's corporate strategy is focussed on: (A) maintaining and growing its FRP pipe manufacturing business while, (B) building recurring revenue, oil and gas production from its operating Leduc Lands in Alberta. These two business operations are highly complimentary in that the Company's activities as an oil and gas producer in Canada provide first hand, end user insight and industry relationships applicable to our engineering, manufacturing and client services activities in our FRP pipe manufacturing. In addition, installation, quality control and R&D experience from our China and international installations in our FRP pipe activities are utilized in the Company's planning, maintenance and production activities.

As a leading manufacturer of FRP pipe products and associated engineering services to the oil and gas industry the Company produces a comprehensive line of small, medium and large diameter FRP pipe, fittings, and fixtures as well as custom FRP system solutions. Hanwei FRP pipe products are characterized for their corrosion resistance, scale and paraffin deterrence, low coefficient of friction resistance, low distance pressure-drop, easy installation and long term operating reliability. The Company has provided FRP piping solutions for several thousands of kilometres of piping and a variety of applications including projects in continued operation at 270 bar (3,900 psi) since 2004. The Company's manufacturing plant is audited and endorsed by the American Petroleum Institute ("API") and is certified by them for API Q1, API 15LR, API 15HR, and ISO 9001. The Company maintains stringent cost controls in its FRP pipe business while also maintaining its commitment to quality and long term performance of its pipe products. With this in place the Company's strategic focus in its FRP pipe business is on sales and the management of its customer relationships. The Company has a number of direct sales and distribution relationships and is actively pursuing strategic sales initiatives in its China, Kazakhstan and other international markets. Particular activities are underway in the Company's Canadian market.

As an operator of its own producing oil and gas properties, the Company owns one core area (its "Leduc Lands") consisting of approximately 4,000 acres of mineral and surface rights located approximately 40 km south west of Edmonton, Alberta. Within the Leduc Lands the Company has a 100% working interest in the wells 15-19-49-26W4M, 10-29-49-26W4M, 8-32-49-26W4M, 14-32-49-26W4M and 13-33-49-26W4M and 60% in 11-33-49-26W4M well. The Company's development program aims to enhance its oil and gas production through both work over of existing wells together with new drilling opportunities, as appropriate, in low to medium risk activities with multi-zone potential. These activities are focused on: (a) work over activities to increase gas production; (b) work over activities to increase oil production stimulated with multi-stage fracturing technology ("frac" or "fracing"); and (c) new horizontal oil wells to be stimulated with multi-stage fracturing technology. Hanwei intends to commission and publish its initial Reserve Report for its Leduc Lands during the second quarter of fiscal 2015.

Key Updates

Update on FRP Pipe Sales in Canada

Hanwei was awarded in early August a new $665,000 order, placed by a Canadian client, for the supply of the Company's high pressure, glass reinforced epoxy pipes and fittings. This is the third order that the Company has confirmed in its Canada market, which now total approximately $1.2 million of pipe delivered or ordered over the last twelve months. These Canadian market orders are for the Company's high-pressure 3", 4" and 6" diameter flow line products. Of these Canadian orders Hanwei has approximately 6,000 metres of its high pressure pipe operational in four projects. This includes installations with one of Canada's major oil and gas companies with significant Bakken holdings in southern Saskatchewan.

Update on Oil and Gas Activities

The Company began operations of its Leduc Lands on May 1, 2014 with the exception of its section 33 lands for which the Company began operations on June 1, 2014. On July 2, 2014 the Company announced the completion of its work over of its existing 14-32-49-26W4 gas well. This existing well was perforated over a three-meter interval at a depth of approximately 1,300 meters into the Ellerslie formation at a total work over cost of approximately $100,000. The Company is monitoring the production rates for optimization of production from the currently producing interval and considers the initial improved gas production from this well a significant success. This well continues to produce gas at a daily average rate of 1,000 thousand cubic feet per day (mcfd) on a restricted choke of 19/64th of an inch.

For the period ended June 30, 2014, the Company produced approximately 820 barrels of oil and approximately 15,700 mcf of gas representing in aggregate approximately 3,500 barrels of oil equivalent ("boe") averaging 57 boed. Revenues from the Company's oil and gas production for the period ended June 30, 2014 amounted to $148,000 with average market price of $88.3/bbl for oil and $4.87/mcf of gas.

Update on Private Placement

The Company announced on July 21, 2014 a non-brokered private placement of a maximum of 25,000,000 common shares in the capital of the Company (a "Common Share") at a price of $0.16 per Common Share for gross proceeds of up to $4,000,000. This private placement was revised such that the Company has received conditional approval from the Toronto Stock Exchange ("TSX") for listing up to a maximum of 30,000,000 Common Shares at a price of $0.192 per Common Share for gross proceeds up to $5,760,000 (the "Private Placement") and subject to the closing of the Private Placement on or before September 4, 2014. Proceeds from this Private Placement will be used for ongoing work over and development activities of the Company's oil and gas holdings in its Leduc Lands in Alberta. None of the subscribers to the Private Placement currently hold any Common Shares of the Company and each is an arm's length individual. The Company is in the process of completing the Private Placement in accordance with applicable securities law and final approval of the TSX.

For the three months ending June 30, 2014:

The Company has two reportable segments for its continuing operations: its FRP pipe manufacturing and its oil and gas production. As before noted the pipe segment produces and sells fiberglass reinforced plastic ("FRP") pipe for the oil and gas industry and other infrastructure applications. The oil and gas segment is engaged in the exploration and production of oil and natural gas in Western Canada.

--  Revenues for the three months ended June 30, 2014 totalled some $3.2
    million as compared to $3.8 million for the prior year consisting of
    approximately $3.05 million contributed by the Company's FRP pipe
    manufacturing business and approximately $148,000 contributed by the
    Company's oil and gas production activities (representing a partial
    period since acquisition as before noted for the quarter).

--  EBITDA from continuing operations for the three months ended June 30,
    2014 totaled negative $142,000 as compared to negative $174,000 for the
    prior year. Negative EBITDA of approximately $63,000 was attributed to
    the Company's FRP pipe manufacturing business due to the volume of sales
    against variable and fixed costs for the period. Negative EBITDA of
    approximately $74,000 was contributed by the Company's oil and gas
    production activities (representing a partial period since acquisition
    as before noted for the quarter).

--  The Company generated positive cash flow from operations of
    approximately $751,000 for the period. As of the date of this MD&A the
    Company's FRP pipe sales orders contracted and yet to be delivered were
    $2.4 million. These sales orders are expected to be completed within the
    fiscal year ending March 31, 2015. Of these sales orders, $0.6 million
    or 25% are from customers in the China market with $1.8 million or 75%
    from customers in international markets.

--  The Company had a loss from continuing operations of $1.2 million for
    the three months ended June 30, 2014 equal to that for the same period
    of the prior year. The Company had basic and diluted loss per share from
    continuing operations of $0.02 for the three months ended June 30, 2014
    as compared to basic and diluted loss per share from continuing
    operations of $0.02 for the same period of 2013.

--  As of June 30, 2014, the Company's Net Asset Value per share for its
    continuing operations was $0.46. This included the acquisition cost and
    initial work over capital expenditures of the Company's Leduc Lands of
    approximately $3.0 million offset by a lower translated value of the
    Company's FRP manufacturing assets in China driven by foreign exchange

--  The Company continues to effectively manage its debt facilities. As of
    June 30, 2014 the total principal amount of all bank loans was $5.0

Hanwei will host a conference call to discuss its operational and financial results for the first quarter ended June 30, 2014. Graham Kwan, Executive Vice President and Rick Huang, Chief Financial Officer of Hanwei will host the call. Management invites analysts and investors to participate on the conference call:

Date:                      Wednesday, August 13, 2014
Time:                      1:00 p.m., Eastern Time (10:00 am Pacific Time)
Dial in number:            1-888-572-7025 or 1-719-457-2645

A replay of the conference call will be available on the Company's website www.hanweienergy.com.

About Hanwei Energy Services Corp.

Hanwei Energy Services Corp.'s principal business operations are in two complimentary key segments of the oil and gas industry as both an equipment supplier to the industry (as a leading manufacturer of high pressure, fiberglass reinforced plastic ("FRP") pipe products and associated technologies serving major energy customers in the global energy market) and as an operator of its producing oil and gas mineral rights at its 4,000 acre Leduc Lands in Alberta.

Neither the TSX nor its Regulation Services Provider (as that term is defined in the policies of the TSX) accepts responsibility for the adequacy or accuracy of this release.


Certain information in this press release is forward-looking within the meaning of certain securities laws, and is subject to important risks, uncertainties and assumptions a description of which is set out in the risk factors section of the Company's Annual Information Form dated June 20, 2014 and Management Discussion and Analysis for the year ended March 31, 2014 both of which are filed with Canadian securities regulators and available on SEDAR at www.sedar.com. The forward-looking information in this press release describes the Company's expectations as of the date of this press release.


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