Longwei CFO Responds to Investor Concerns in Recent Interview

In his classic tome Security Analysis, the esteemed Benjamin Graham stated that “the market is a voting machine, whereon countless individuals register choices which are the product partly of reason and partly of emotion.”  The current reason and emotion exhibited by investors in Longwei Petroleum Investment Holding Ltd. (Amex: LPH) appears to be driven by an irrational fear of potential dilution related to its recently announced acquisition of Haujie Petroleum Co., Ltd., a subsidiary of Shangxi Jiangtong Chemicals Co., Ltd.

Of course we all know markets don’t like uncertainty, and the details of the future financing remain to be determined.  But are things really that uncertain?  What’s the worst-case scenario?  

Let’s take a hypothetical look at what could be classified as the worst case – we’ll assume an all-equity-based deal using the maximum from the shelf registration in December 2010, raising $50 million to complete the acquisition.   We’ll even assume the Company does the financing at a discount to the extremely depressed current share price.  And we’ll even go a step further and assume the Company pays the remaining balance of $36.5 million by issuing equity to the acquired entity – at a discount as well.

With the above assumptions in mind, our hypothetical transaction would add roughly 60 million shares to the Company – taking the current shares outstanding to approximately 160 million.  Seems pretty scary, doesn’t it?

Not really.  Not if you look at the bigger picture.  The Company is on track to produce $70 million in net income for this fiscal year ending in June.  Under this worst-case share structure, that would equate to nearly $0.44 per share in earnings.  Using what would be considered, in less fear-driven environments, a conservative P/E multiple of 8x earnings, that would give us a price of over $3.50 for the current fiscal year. 

Looking to fiscal 2012, with the new facility anticipated to contribute $300 million in revenues and $40 million in net income for the year, we really uncover how irrational the market is acting.  The Company expects to generate $125 million in net income for the coming fiscal year, or $0.78 per share using our hypothetical all-equity deal parameters.  With the same P/E multiple of 8x earnings, for a company that will have grown its net profits by more than 50%, we would now have a price target of over $6 per share, for a current potential return of more than 300%.

So we have a worst-case, all-equity scenario and still have greater than 300% return potential.  What are some of the other options that make the above hypothetical structure unlikely?  Some of these options can fulfill the full payment of the transaction; others can be used in combination without any equity issuance:

1. The Company can use cash from the exercise of warrants outstanding; it can even lower the exercise price on out-of-the money warrants to raise further cash now.
2. Insiders can sell shares and loan the Company money to complete the transaction, or they can transfer shares to Shangxi as payment.
3. The Company can borrow the money or issue convertible debt.
4. The Company could make similar-sized payments to its initial cash outlay over the next several quarters and have the transaction fully paid in barely more than a year.

These are just a few of the non-equity options at the Company’s disposal.  Even partial use of any of the above ideas would result in a substantial increase to the hypothetical EPS forecast stated above – resulting in a dramatic increase to the return potential of the stock in the coming fiscal year.

Let’s not forget, companies go public to access the capital markets.  How well they put that capital to work is the differentiating factor.  In Longwei’s case they have proven they can do so successfully, building long-term shareholder value; now they are simply repeating what has already worked. 

Bottom line, China’s demand for fuel continues to grow.  Major oil and gas producers like PetroChina (NYSE: PTR) and China Petroleum & Chemical (NYSE: SNP) continue to post strong double-digit revenue and earnings growth.  Longwei Petroleum’s business model places it right between these producers and the insatiable consumer demand for energy.

Disclosure: The subject security is a client of RedChip Companies, Inc. RedChip Companies, Inc., employees and affiliates may have positions and affect transactions in the securities or options of the issuers mentioned herein. For full financial disclosures for all RedChip clients, please visit http://www.redchip.com/disclosures.asp?src=rcv.

This past Monday, March 14, Longwei Petroleum Investment Holding Ltd. (Amex: LPH) announced that it has entered into a letter of intent to acquire a fuel storage depot in northern Shanxi Province with a 100,000 metric ton storage capacity. Longwei paid a roughly $20 million deposit at the signing of the letter of intent toward the full price of $106.5 million. The Company expects the facility to contribute approximately $300 million to revenues and $40 million to net income during the fiscal year ending June 30, 2012.

The acquisition of Haujie Petroleum would include land use rights for 98 acres of land, 100,000 tonnage fuel tanks with accessory facilities and equipment, a special transportation railway line, and a 3,000-square-meter office building. LPH intends to use its cash on hand, bank and other financing, and working capital assets to finance the acquisition. At December 31, 2010 the Company had $182 million in working capital assets. Longwei’s CEO commented that “the acquisition of Haujie Petroleum almost doubles our current storage capacity to a total of 220,000 metric tons and solidifies our footprint in the region.”

Total revenues and net income for the fiscal year ending June 30, 2012, including the newly acquired Haujie facility, are expected to be approximately $925 million and $125 million, respectively, not counting the effects of warrant derivative liability expenses.

The full press release from Longwei is available HERE.

Disclosure:  The subject security is a client of RedChip Companies, Inc.  RedChip Companies, Inc., employees and affiliates may have positions and affect transactions in the securities or options of the issuers mentioned herein. For full financial disclosures for all RedChip clients, please visit http://www.redchip.com/disclosures.asp?src=rcv.

Longwei Petroleum Investment Holding Ltd., one of the largest distributors of finished petroleum products in Shanxi Province, China, beat both its top- and bottom-line guidance for the year, generating sales of $343.2 million (up 74% year-over-year) and net income of $50.2 million (up 130% year-over-year). On the company’s September 30th conference call its CFO, Michael Toups, provided insight on the Company’s key competitive advantages, new developments during the year, and management’s strategy and outlook moving forward.  Here are a few highlights from the earnings call:

Longwei has the largest storage capacity of any private enterprise in Shanxi Province. Its 120,000 metric tons of capacity are equivalent to 880,000 barrels of oil or 40 million gallons of gasoline. Storage capacity is a major competitive advantage for Longwei, as the upfront capital outlay to set up the storage infrastructure often proves prohibitive for smaller rivals and new entrants into the market.

The company can turn over its inventory quickly, providing flexibility to market and price changes. Longwei turns its inventory approximately every 30 days, giving it a great deal of flexibility to respond to market conditions and pricing changes. At June 30, the end of its fiscal year, the Company had about 14.8 million gallons of products in inventory, or just over a third of its total capacity, giving it significant excess capacity, or running room, for further growth.

Its official 120,000 capacity figure doesn’t even include a 40,000-ton, fully functional tar storage tank at the Company’s newest facility. According to Mr. Toups, the official 120,000-ton capacity figure doesn’t even include a 40,000-ton, fully functional tar storage tank at the Company’s Gujiao facility. Management doesn’t usually include this asset in its stated capacity figure because it has thus far played a minor role in the Company’s business, but tar is a saleable product and Toups suggested that it could soon grow as part of the sales mix and begin making a material contribution to revenues.

Longwei has acquired all 13 of the identified industrial customers near its 70,000-ton Gujiao facility. The company had previously identified 13 potential customers (mostly large industrial operations) in the region surrounding its Gujiao storage depot. Last quarter, the company had established relationships with and was supplying nine of them.  As of the end of the June fiscal year, the Company was increasing its supply to the existing customers and had captured all four remaining clients; it was also targeting several new, large industrial firms that had just begun operations in the area. Longwei is clearly developing a dominant position in the local market for finished petroleum products.

The Company’s growth is closely tied to industrial growth and private automobile usage growth in China. Industrial customers have jumped from 45% to 55% of Longwei’s revenues over the past year on strong industrial expansion in Shanxi, and Mr. Toups commented that “you can’t help but drive a quarter of a mile there without seeing a construction crane and new operations going up on a daily basis.” China became the world’s largest new car market last year, but the automobile market in China is likely still in a very early growth stage, as per capita vehicle usage is still only about 130 per 1,000 people, compared with 765 motor vehicles per 1,000 people in the United States.

The Company projects $500 million in revenues for fiscal 2011, a 46% increase over this past year, and $73 million in adjusted net income, a 45% increase from $50.2 million GAAP net income in 2010.

To paraphrase an old saying, Longwei has stuck to “doing one thing and doing it well.” Its straightforward business model has allowed it to concentrate on becoming the dominant player in an attractive industry, and as a result the Company’s future looks bright as well.  Management’s bullish projections for fiscal 2011, the 18-month expected payback period for the Gujiao facility, and the stock’s low valuation (5-6x trailing P/E, P/B under 1.5x) all make a strong case for Longwei’s attractiveness as a potential investment.

Disclosure:  Longwei Petroleum Investment Holding, Ltd. is a client of RedChip Companies, Inc.  RedChip Companies, Inc., employees and affiliates may have positions and affect transactions in the securities or options of the issuers mentioned herein. For full financial disclosures for all RedChip clients, please visit http://www.redchip.com/disclosures.asp?src=rcv.

Sowani wrote in the report:

“Longwei’s 1QFY10 performance was better than expected and the top line will further strengthen as the new Gujiao facility becomes fully operational. Management is expecting an additional $40 million in revenue and $6 million in net profit in FY10 which we believe is attainable given the vast customer base available in Gujiao. With strong macro-economic indicators of the Chinese economy and the Gujiao facility development nearing completion, we expect Longwei to strengthen its current market position and aggressively pursue additional market share in Shanxi Province.”

Longwei’s revenue for the year ended June 30, 2009 was $196.8 million, a year-over-year increase of 36.9%. Net income for the year ended June 30, 2009, excluding one-time items, was $26.5 million, a year-over-year increase of 28%.

Jim Crane, CFO of Longwei, recently presented at RedChip’s China Equities Conference in Shanghai on December 8th.  During the presentation, Crane stated that Longwei’s new 70,000-metric-ton capacity oil depot facility in Gujiao, located about 30 miles from their existing storage facility in Taiyuan, is expected to be fully operational on or near January 1, 2010. The facility is already delivering on small orders.

Crane noted that Longwei is uniquely positioned as one of only three private, fully licensed oil distributors in Shanxi Province who has significant storage capacity and the only one in Gujiao — a key competitive advantage. Though Gujiao is geographically close to Taiyuan City, the customer base in Gujiao will consist of mostly coal plants, while the Taiyuan facility serves mostly gas stations.

Crane also stated that of the 11-13 key customers identified for the Gujiao facility, Longwei has preliminary contracts signed with six. These agreements are an indication of how much product the customers will buy throughout the year, though Crane says they are difficult to valuate because of the fluctuations in gasoline and diesel prices. (Gas prices determine the value of their current inventory and their revenues.) On November 10th, China’s National Development and Reform Commission mandated an increase on the retail prices of gasoline and diesel by CNY480 (US$70.28) per metric ton, which means the average price for #90 gasoline and #0 diesel increase 0.36 and 0.41 yuan per liter, about 6%-7%, respectively. Good news for Longwei.

To receive a complimentary copy of the RedChip Visibility Research Report for Longwei, please visit:
http://www.redchip.com/about/aboutmain.asp?pg=vr&rid=206

Disclosure:  Longwei Petroleum Investment Holding, Ltd. is a client of RedChip Companies, Inc.  RedChip Companies, Inc., employees and affiliates may have positions and affect transactions in the securities or options of the issuers mentioned herein. For full financial disclosures for all RedChip clients, please visit http://www.redchip.com/disclosures.asp?src=rcv.

Longwei Petroleum Investment Holding Ltd. (OTCBB:LPIH)

Oil tank construction at Longwei Gujiao Oil Depot

Longwei’s oil and diesel sales remains strong in the heavy-industry region of Shanxi. Revenues for the three months ending March 31, 2009 were $49.7 million, an increase of almost $17.25 million, or approximately 53% as compared to the same period in 2008. Net income for the quarter ended March 31, 2009, was up 32% to $6.7 million, with net margin of 13.4%. Since January 2009, Longwei’s stock has appreciated 423%, moving from $0.22 to $1.15 at market close on June 10, 2009.

That Longwei is located in Shanxi is no coincidence. For centuries in China, Shanxi Province was the center of trade and wealth, and to call someone a “Shanxi Merchant” was basically to call them a wealthy person. Pingyao, an ancient city in the province and a UNESCO World Heritage site, was an early financial center and the site of China’s first bank, Rishengchang Exchange Shop. Additionally, Shanxi contains 260 billion metric tons of coal deposits, which is about one-third of China’s total known reserves.

Construction at Gujiao Oil Depot, Shanxi Province, China

Longwei’s future looks bright, especially given China’s astronomical growth in the last thirty years. It is estimated by the International Energy Agency that China will be burning about 16.5 million barrels of oil per day by 2030, and purchasing 13.1 million barrels. Demand has already massively outstripped supply as the Chinese energy infrastructure continues to grow; the distribution of goods is limited by constraints on fuel resources, and construction cannot always progress on time for the same reason. However, Longwei’s ownership of its own railway system surmounts some of the aforementioned obstacles facing its competitors.

Construction on the railway line at the Longwei Gujiao Oil Depot.

Glen recognizes Longwei as “one of the leading diesel, gasoline, fuel oil and solvent oil distributors/wholesalers in Taiyuan City, China.” Indeed, Longwei has the largest storage facility for their fuel products among non-government owned companies in China’s Shanxi province. This allows them to buy fuel in bulk at large discounts and also allows the company to service and deliver fuel to large customers quickly and efficiently.

 Shanxi Province, where Longwei operates, is a fast-growing industrial center experiencing double-digit growth in the past several years. Shanxi Province has no oil fields or oil refineries and thus provides a unique market space for fuel oil and petroleum products.  Longwei’s state-of-the-art fuel storage facility in the province consists of 14 storage tanks providing a total capacity of 50,000 metric tons. The facility also has its own railroad for the delivery of their fuel products to customers.

Longwei’s service network covers the central region of Shanxi Province, leaving the undersupplied northern and southern regions open for increased sales. In fact, Longwei is planning an expansion into another heavily industralized area, Gujiao City, in southern Shanxi Province where the company is building a 70,000 metric ton fuel storage facility and oil depot. Upon completion, the new facility will double Longwei’s storage capacity and is expected to increase revenues and earnings over the next 36 months.

Production and distribution of energy is one of China’s greatest challenges. Longwei is meeting that challenge and earning exceptional profits along the way. To learn more about Longwei Petroleum click here.

Longwei Petroleum Investment Holding Ltd. is a client of RedChip Companies, Inc. and of RedChip Visibility, a division of RedChip Companies. RedChip Companies, Inc., employees and affiliates may have positions and affect transactions in the securities or options of the issuers mentioned herein. Please read RedChip’s full financial disclosure available at http://www.redchip.com/disclosures.asp?src=rcv or via the Disclosures link on this blog. None of the profiles issued by RedChip Companies, Inc., constitutes a recommendation for any investor to purchase or sell any particular security or that any security is suitable for any investor. Any investor should determine whether a particular security is suitable based on the investor’s objectives, other securities holdings, financial situation needs, and tax status. All materials are subject to change without notice.

Longwei Petroleum Investment Holding Ltd. (OTC BB: LPIH)

 See LPIH’s Corporate filings to view financial statements and charts.  

Third Quarter Ended March 31, 2009

Revenues for the three months ended March 31, 2009, were $49.720 million, an increase of $17.241 million, or approximately 53.1% as compared $32.479 million for the same period in 2008. This increase was the result of stronger overall demand for petroleum products. Diesel sales were $23.056 million or approximately 10.986 million gallons, an increase of $4.918 million and approximately 3.983 million gallons, in the three months ended March 31, 2009, compared to $18.138 million, or approximately 7.003 million gallons for same period in 2008. Gasoline sales were $21.736 million or approximately 8.739 million gallons, an increase of $13.129 million, or approximately 152.5%, and an increase of 5.269 million gallons, compared to gasoline sales of $8.607 million or approximately 3.470 million gallons for the same period in 2008. This increase was mainly the result of greater purchases by our existing customers, primarily power supply companies, due to the continued growth of Shanxi Province.

Gross profit margin was 19.5% for the three months ended March 31, 2009, compared to 30.3% for the same period in 2008. The decrease was the result of the gross margins on diesel which were approximately 12.1% for the quarter ended March 31, 2009 compared to 24.3% in the quarter ended March 31, 2008. Gross margins on gasoline were approximately 16.0% in the quarter ended March 31, 2009 compared to 22.4% for the same quarter in 2008, decreasing by approximately 6.4%. The decrease of diesel and gasoline margins was the result of the company locking in fuel prices where diesel prices decreased. It is expected that gross margins will improve in the near future. The National Development and Reform Commission of China announced on March 24, 2009 that the retail prices of gasoline and diesel oil would be increased 290 RMB (US$42.43) per ton, or 5.3 percent; and 180 RMB (US$26.34) per ton, or 3.7 percent, respectively, as of March 25, 2009. Longwei’s current fuel inventory is 25,980 metric tons. With the estimated 4 to 5 percent increase on the prices of diesel and gasoline made by the Chinese government, management expects gross profits will be 5 percent higher for the fourth quarter of fiscal 2009.

Net income for the quarter ended March 31, 2009 was $6.662 million, or $0.09 per share, an increase of $1.598 million or approximately 31.6% as compared to $5.064 million, or $0.07, for the quarter ended March 31, 2008. This was primarily due to the increase in sales of petroleum products, especially to power supply companies in the Shanxi Province during the quarter.

Net income margin for the quarter ended March 31, 2009 was approximately 13.4% compared to approximately 15.6% for the quarter ended March 31, 2008. This decrease was largely the result of lower profit margins on gasoline products, as described above.

Mr. Cai Yongjun, CEO of Longwei Petroleum Investment Holding, said: “We are very pleased with our revenue and earnings growth for the third quarter. The Shanxi Province in China, where we operate, continues to see increasing demand for oil products to support the mining and transportation activities in this heavily industrialized area. Shanxi power plants supply Beijing with 30 percent of its electricity, and overall China’s energy demand growth is projected to remain 4 to 5 percent annually through 2015. We continue to capitalize on the opportunities to meet the growing demand for fuel in the region.”

Nine Months Ended March 31, 2009

Revenues for the nine months ended March 31, 2009 were $147.84 million, an increase of $39.14 million or approximately 36% as compared to $108.697 million for the same period in 2008. This increase was the result of stronger overall demand for petroleum products. Diesel sales were $75.608 million or approximately 29.098 million gallons, an increase of $18.288 million and an increase of approximately 4.941 million gallons, in the nine-month period ended March 31, 2009, compared to $57.320 million or approximately 24.157 million gallons for the nine months ended March 31, 2008. Gasoline sales were $59.972 million or approximately 22.006 million gallons, an increase of $28.931 million or approximately 131.5% increase and an increase of 8.407 million gallons, compared to gasoline sales of $31.041 million or approximately 13.599 million gallons for the nine months ended March 31, 2008. This increase was mainly the result of greater purchases by our existing customers, primarily power supply companies, due to the continued growth of Shanxi Province. The population in China in general has become wealthier; as a result, the demand for petroleum has increased and the economy in Shanxi Province where the Company’s major customers are continuing to experience growth. Management expects growth for the fiscal year 2009 to remain strong due to (i) continued strong growth in the China economy, (ii) a continued improvement in the wealth of its citizens, and (iii) business strategy of increasing storage for our products, including the Company’s plans to add 70,000 metric tons of storage capacity in Guijiao City in Shanxi Province.

Our gross profit margin was 21.1% for the nine months ended March 31, 2009, compared to 29.0% for the nine months ended March 31, 2008. The decrease was the result of the gross margins on diesel were approximately 14.1% for the nine months ended March 31, 2009 compared to 24.6% in nine months ended March 31, 2008. The gross margins on gasoline were approximately 19.3% in the nine months period ended March 31, 2009 compared to 19.0% for the same quarter in 2008, improving slightly. The decrease of diesel margins was the result of the Company locking in fuel prices where diesel prices decreased. As mentioned above due to the recent increase in petroleum products we expect are gross margins to improve in the fourth quarter.

Net income in the nine-month period ended March 31, 2009 was $20.912 million, or $0.27, an increase of $2.778 million or approximately 15.3% as compared to $18.134 million, or $0.25, for the nine-month period ended March 31, 2008. This was primarily due to the increase in sales of petroleum products especially to power supply companies in the Shanxi Province during the period.

Longwei’s primary customers are large-scale gas stations, which represent 60% of the Company’s sales. These gas stations, which purchase diesel and gasoline from Longwei, are located in Taiyuan City in the Shanxi Province of China. Longwei’s second largest group of customers are the coal plants and power supply companies that use the Company’s fuel oil for heat and power, along with its solvents, which comprise 30% of Longwei’s business. Longwei’s third largest customers are the small independent gas stations. These stations purchase gasoline and diesel from Longwei and represent 10% of total sales.

About Longwei Petroleum Investment Holding Limited
Longwei Petroleum Investment Holding Limited purchases diesel, gasoline, fuel oil and kerosene from various suppliers. As an intermediary, the company seeks to earn profits by buying diesel, gasoline, fuel oil and kerosene at competitive prices and selling them to other wholesalers. In addition, Longwei also earns revenues by acting as a purchase agent where they charge an agency fee — a fee which is charged to wholesalers who do not have a license to purchase directly from refineries. Further, the company owns a gas station located on its property where it generates additional profit and revenue. All of our operating facilities are located in Taiyuan City, China.

For further information on Longwei Petroleum Investment Holding Limited, please visit the company’s website at http://www.longweipetroleum.com. You may register to receive Longwei Petroleum Investment Holding Limited’s future press releases or request to be added to the Company’s distribution list by contacting Dave Gentry.

Forward-looking statements:
The above news release contains forward-looking statements. The statements contained in this press release that are not statements of historical fact, including but not limited to, statements identified by the use of terms such as “anticipate,” “appear,” “believe,” “could,” “estimate,” “expect,” “hope,” “indicate,” “intend,” “likely,” “may,” “might,” “plan,” “potential,” “project,” “seek,” “should,” “will,” “would,” and other variations or negative expressions of these terms, including statements related to expected market trends and the subject Company’s performance, are all “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and involve a number of risks and uncertainties. These statements are based on assumptions that management believes are reasonable based on currently available information, and include statements regarding the intent, belief or current expectations of the Company and its management. The actual results of the future events described in the forward-looking statements in this document could differ materially from those stated in the forward-looking statements due to numerous factors. Recipients of this document are cautioned to consider these risks and uncertainties and to not place undue reliance on these forward-looking statements. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performances and are subject to a wide range of business risks, external factors and uncertainties. Actual results may differ materially from those indicated by such forward-looking statements. The Company expressly disclaims any obligation or undertaking to update or revise any forward-looking statement contained herein to reflect any change in the company’s expectations with regard thereto or any change in events, conditions or circumstances upon which any statement is based.

China is currently on track to be the largest consumer of energy by 2010.  There is a wealth of opportunity in investing in Chinese energy companies as the booming population and phenomenal economic growth creates a strong demand for energy solutions. Three Chinese energy stocks, each specializing in different areas (solar, coal, and petroleum) are Worldwide Energy and Manufacturing USA, Inc. (WEMU), L&L International Holdings, Inc. (LLFH), and Longwei Petroleum Investment Holding Ltd.  (LPIH).

Worldwide Energy and Manufacturing USA, Inc. (OTCBB: WEMU)

Worldwide Energy and Manufacturing is a 15-year-old engineering-oriented firm specializing in photovoltaic (PV) panel, mechanical, electronics and fiber optic products manufacturing. Under the brand name of “AMERISOLAR,” WEMU’s solar modules provide electric power for residential, commercial, industrial and public utility applications. The solar division of WEMU is rapidly becoming a major player in the photovoltaic industry where light energy is converted into clean, reliable and affordable power. View the full research report for WEMU at http://www.redchip.com/visibility/investor.asp?symbol=WEMU

L&L International Holdings, Inc. (OTCBB: LLFH)

L&L has reported five consecutive years of profitability and is forecasting triple-digit revenue and earnings growth for fiscal 2009 and fiscal 2010. The Company is trading at 7x earnings (ttm) in a sector that trades on average 29x (ttm); therefore, fair market value for this stock is potentially $8.12, representing a potential upside of 300% for investors. L&L’s family roots in China and business experience uniquely affords it opportunities to identify suitable mining acquisition targets that can be acquired at low cost while leveraging Chinese government energy policy. In 2006, Chinese coal demand surpassed the national coal supply. China is now a net importer of coal and has restricted the export of high-grade coal. View more on LLFH at http://www.redchip.com/visibility/investor.asp?symbol=LLFH

Longwei Petroleum: (OTCBB: LPIH)

Longwei Petroleum is a fuel distributor in the Shanxi Province in China, operating since 1995. It is one of the few companies that holds a Level I License, allowing it to purchase fuel directly from the refineries at a discount. Longwei distributes to gas stations and power plants. They have the largest fuel storage capacity, 50,000 metric tons, of all the private companies in the province. It also has its own rail system. A simple operation, Longwei buys fuel at a discount and sells it at a profit. View the full research report for LPIH at http://www.redchip.com/visibility/investor.asp?symbol=LPIH

We have met management, examined the facilities, and checked the books of these energy companies.  We like what we see.  We expect big things from these companies.  The Smart Money will invest now before Wall Street does. http://www.redchip.com/

Mr. Cai Yongjun, chief executive officer of Longwei, commented on the agreement: ‘We are extremely pleased to announce the execution of this contract, as it serves to expand our revenue channels. We expect the relationship to grow and are excited to work with this significant Rail Transport Company.’

According to the ’2008-2010 Chinese Oil Product Market Analysis and Investment Consulting Report’ published by China Industries Research Reports online, demand for petroleum remains relatively strong in China due to continued economic growth even amid the current world economic climate. China has the largest petroleum consumption growth rate, currently at over 30%. China’s petroleum consumption in U.S. dollars was 5.33% of the world consumption in 1997, and it increased to 8.48% of the world consumption in 2006. Professionals of China National Petroleum Corporation predicted that the demand for petroleum in China will be 0.268 billion tons in 2010 and 0.305 billion tons in 2020.

The Shanxi Province is one of the largest energy providers and transport cities in China. Last year, the highway freight volume was ranked fifth in the entire country. Shanxi has 4,692 gas stations, about 4 million cars, and a number of large-scale industrial enterprises and power plants that keep demand for coal, electricity, gas, and oil high.

About Longwei Petroleum Investment Holding Ltd.

Longwei is one of leading diesel, gasoline, fuel oil and solvent oil distributors/wholesalers in Taiyuan City, Shanxi Province, P.R. China. Longwei sells products mainly to large-scale gas stations, coal plants and power supply companies, and on a slighter scale to small, independent gas stations. The Company engages its business through its subsidiary, Longwei Trading, located in Taiyuan City, Shanxi Province. Longwei owns one state-of- the-art fuel storage facility at Taiyuan City, Shanxi Province, P.R. China. The facility includes 14 storage tanks with a total capacity of 50,000 metric tons and has ISO9000 certification.

About Taiyuan Coal Gasification Group Rail Transport Company

Rail Transport Company is responsible for all railway transportation operations, railway sector co-ordination of factories, mined raw materials and products transportation in Shanxi Province which are owned by Taiyuan Coal Gasification Group. The Company services Shanxi Coal Preparation Plant, Shanxi Coking Plant, Dier Coking Plant, Shanxi Gasworks and such companies through Yijing Station, which belongs to North Railway Station. Taiyuan also provides rail transportation in the Gujiao mining area. It services Lu Mine and Ja Mine for train transportation through Chendi Station.

Forward-Looking Statements

Certain statements contained herein constitute ‘forward-looking statements’ within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations, estimates and projections about Longwei’s industry, management’s beliefs and certain assumptions made by management. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Because such statements involve risks and uncertainties, the actual results and performance of the Company may differ materially from the results expressed or implied by such forward-looking statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Longwei’s operations are conducted in the PRC and, accordingly, are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political and social conditions in the PRC and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation. Other potential risks and uncertainties include but are not limited to the ability to procure, properly price, retain and successfully complete projects, and changes in products and competition. Unless otherwise required by law, the Company also disclaims any obligation to update its view of any such risks or uncertainties or to announce publicly the result of any revisions to the forward-looking statements made here. Readers should review carefully reports or documents the Company files periodically with the Securities and Exchange Commission.

For more information, please contact:

Media Contact:
John Ballard
Tel: +1-303-885-5501
Email: johnballard@revealsystems.net

Investor Relations:
Dave Gentry
RedChip Companies, Inc.
Tel: 1-800-733-2447, Ext. 104
Email: info@redchip.com

SOURCE Longwei Petroleum Investment Holding Ltd.