China Oil and Gas : DISCLOSEABLE TRANSACTION -ACQUISITION OF 100% EQUITY INTEREST IN AN OIL AND GAS PRODUCING COMPANY IN CANADA

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

(Stock Code: 603)

The Board is pleased to announce that the Purchaser, an indirect wholly-owned subsidiary of the Company, and the Target Company entered into the Arrangement Agreement on 19 June
2014 (Canada time, after the trading hours of the Stock Exchange), pursuant to which the Purchaser and the Target Company agreed to implement the Arrangement according to the terms and conditions of the Arrangement to acquire 100% equity interest in the Target Company from the Existing Shareholders at the consideration of C$235.5 million (approximately HK$1,678.1 million).
As the applicable percentage ratios for the Acquisition exceed 5% but are less than 25%, the Acquisition constitutes a discloseable transaction for the Company, and is subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules.
The Board is pleased to announce that the Purchaser, an indirect wholly-owned subsidiary of the Company, and the Target Company entered into the Arrangement Agreement on 19 June
2014 (Canada time, after the trading hours of the Stock Exchange), pursuant to which the Purchaser and the Target Company agreed to implement the Arrangement according to the terms and conditions of the Arrangement Agreement to acquire 100% equity interest in the Target Company from the Existing Shareholders.

- 1 -

To the best knowledge, information and belief of the Directors, having made all reasonable enquiries, each of the Target Company and the Existing Shareholders is an Independent Third Party.

Immediately preceding the Acquisition, the Existing Shareholders in aggregate hold 100% of equity interest outstanding in the Target Company. Pursuant to the Arrangement Agreement, the Purchaser shall acquire 100% equity interest in the Target Company from the Existing Shareholders. Upon completion of the Acquisition, the Purchaser will hold 100% equity interest in the Target Company, and the Target Company will become an indirect wholly- owned subsidiary of the Company.

The Target Company is a Canadian oil and gas producer focused on the highly economic Cardium light oil resource play. The Target Company holds interests in 181 gross sections (c.469 square kilometers) of land (50% undeveloped) including 139 gross sections (c.360 square kilometers) with Cardium rights with operations in west central Alberta, Canada.
In addition, the Target Company owns and operates approximately 200 km of oil and gas gathering systems, including 13 oil batteries with a combined capacity of approximately
1,500 m3 per day and 9 gas compressors with approximately 0.5 million m3 per day of combined capacity. These facilities are connected to 28 third party gas processing plants with a processing capacity of over 85 million m3 per day.

As at 11 February 2014, the Target Company had a total of 195 oil and gas production wells.

- 2 -

The technical data of the Target Company are as follows:

According to the Arrangement Agreement, the total consideration for the acquisition of the Target Company Shares is C$235.5 million (approximately HK$1,678.1 million), which will be paid in cash by the Purchaser.
The purchase consideration was determined after arm's length negotiation between the Purchaser and the Existing Shareholders with reference to numerous factors, including the assets and cash flows of the Target Company, the current production rate, reserves estimates and value of the Target Company and the operating status of the Target Company. The Directors are of the view that the consideration is fair and reasonable and is in the interest of the Company and the Shareholders as a whole.

The consideration of the Acquisition shall be paid out of the internal resources of the Group.

Upon signing of the Arrangement Agreement, the Target Company will continue to operate in the ordinary course of business, with the Purchaser having a right of approval over those expenditure items not contemplated in the Target Company's 2014 budget plan which was approved by its board of directors and reviewed as reasonable by the Company.

Completion of the Acquisition shall be subject to customary conditions precedent (which may by waived, in whole or in part, by the mutual consent of each of the Parties) including but not limited to:
1. Approval by written resolutions or shareholder resolution of the Existing Shareholders and the Final Order are obtained; and
2. Approval of Competition Act.

- 3 -

The audited financial information of the Target Company for the three financial years ended
31 December are as follows:

(C$' million) 2011 2012 2013

Petroleum and natural gas 50.5 55.3 74.7
Royalties (6.4) (6.8) (8.3) Interest and other income 0.0 - -

Growth 10% 37%

Unrealized gain/(loss) on risk
management contracts 0.0 (0.0) (0.2)

Operating 8.5 9.7 11.7
General and administrative 2.2 2.1 2.7
Stock based compensation 0.2 0.1 0.0
Depletion, depreciation and accretion 18.3 21.0 24.1
Interest 1.1 1.2 1.1

Future 3.6 3.6 6.7
Current - - -

Growth 6% 86%

(C$' million) 2011 2012 2013

Note: financial reports prepared in accordance with Canadian Accounting Standards, audited by KPMG

- 4 -

Information of the Group

The Group is principally engaged in natural gas investment and energy related business, and has invested and set up 106 gas projects in 13 different provinces and one autonomous region in China and holds 61 city-gas exclusive concession rights.

Information of the Target Company

The Target Company is a Canadian oil and gas producer focused on the highly economic Cardium light oil resource play. The Target Company holds interests in 181 gross sections (c.469 square kilometers) of land (50% undeveloped) including 139 gross sections (c.360 square kilometers) with Cardium rights and operations in west central Alberta, Canada.
In addition, the Target Company owns and operates approximately 200 km of oil and gas gathering systems, including 13 oil batteries with a combined capacity of approximately
1,500 m3 per day and 9 gas compressors with approximately 0.5 million m3 per day of combined capacity. These facilities are connected to 28 third party gas processing plants with a processing capacity of over 85 million m3 per day.
The average daily production of the Target Company was 4,244 barrels of oil equivalent (67% is light oil and NGLs, 33% is natural gas) and it achieved an average Operating Netback of C$51.5 per barrel of oil equivalent in the first quarter of 2014. According to the reserve report prepared by GLJ Petroleum Consultants and dated as of 31 December 2013, the Target Company has Proved reserves of approximately 16.2 million barrels of oil equivalent (60% is light oil and NGLs, 40% is natural gas) and Proved plus Probable reserves of approximately 22.0 million barrels of oil equivalent (60% is light oil and NGLs, 40% is natural gas).
As at 11 February 2014, the Target Company had a total of 195 oil and gas producing wells. The Target Company is also carrying on sells crude oil, NGLs and natural gas businesses. SENIOR MANAGEMENT OF THE TARGET COMPANY
The Target Company has a well-respected and highly experienced management team who has committed to stay with the Group for at least two years or more to continue to develop and grow the Target Company's oil and gas resources business. Their biographies are as follows:

Mr. Aidan Walsh, P.Eng., MBA, ICD.D - President and CEO

Mr. Walsh is a professional engineer with 37 years of oil and gas experience. He has a Bachelor of Engineering (Mechanical) degree from Memorial University of Newfoundland and a Masters of Business Administration degree from the University of Calgary.

- 5 -

Mr. Troy Brazzoni, P. Geol. - Executive Vice President Geology

Mr. Brazzoni is a professional geologist with 29 years of oil and gas experience. He graduated with a Bachelor of Science degree in Geology from the University of Calgary.

Mr. Scott Dyck, CA - Vice President Finance and Chief Financial Officer

Mr. Dyck is a charted accountant with 25 years of experience in financial management and accounting in the oil and gas industry. He graduated with a degree in Commerce from the University of Calgary.

Mr. Don Finley, P.Eng - Vice President Operations

Mr. Finley is a professional engineer with 31 years of oil and gas experience in production, well operations and exploitation. He graduated with a degree in Chemical Engineering from the University of Waterloo.

Mr. Terry Johnson, Vice President Land

Mr. Johnson is a professional landman with 23 years of experience in the oil and gas industry. He graduated with a Bachelor of Commerce degree from the University of Calgary.

Mr. Neil Bosch, P.Eng. - Vice President Engineering & Corporate Development

Mr. Bosch is a professional engineer with 16 years of oil and gas experience in production operations & asset evaluations. He has a Bachelor of Science degree in Chemical Engineering from the University of Calgary.

Mr. Dell Pohlman, P. Geol. - Exploration Manager

Mr. Pohlman is a professional geologist with 32 years of oil and gas experience. He graduated with a Bachelor of Science degree in Geology from the University of Waterloo.

The Group is principally engaged in natural gas distribution and energy related businesses in China. Its operations include natural gas distribution networks, pipeline design and construction, as well as transportation, distribution and sales of compressed and liquefied natural gas.
The Group aims to become a competitive international energy company with vertically integrated business structure. It has been seeking suitable business opportunities in the energy sector related to the Group's principal business operations, and is particularly drawn by Canada's stable political environment, vast oil and natural gas resources and an established energy sector. The Target Company possesses quality producing oil and gas assets, a very experienced and proven management team, strong cash flow and profitability with considerable potential for growth. The Directors believe that through the acquisition of the Target Company, the Group could enter the upstream industry and therefore lift the Company's image as an international energy company with a diversified geographic and business portfolio, which further helps to reduce concentration risk, improve earnings and enhance shareholder value.

- 6 -

Currently, there is a big gap in the natural gas prices between Canada and China, and therefore, there is significant profit potential to export natural gas from Canada to China in the future. A number of the world's major energy companies have proposed the construction of multiple LNG export terminals in the western British Columbia, Canada, with a total design capacity of more than 7 billion cubic feet per day, creating great opportunities for the future development of the Canadian upstream energy companies. The Directors are of the view that the present move into the Canadian upstream oil and gas sector allows the Group to be best positioned for the future energy exports from Canada into China, and therefore breakthrough the bottleneck of the existing supply shortage and create significant synergies with the existing natural gas distribution business in China, which is highly beneficial to the Group's long-term development.
The Company engaged a number of professional advisors and consultants in assessing the feasibility of this Acquisition including D&M for the technical due diligence and audit work of GLJ reserve report, and BLG as Canadian legal counsel and for the corporate and title due diligence. BNP Paribas acted as the exclusive Financial Advisor to the Company.
The Board is confidence that the Acquisition can bring a new income stream to the Group and enhance the profitability of the Group. The Directors (including the independent non- executive Directors) are of the view that the terms and conditions of the Arrangement Agreement are fair and reasonable and are in the interests of the Company and the Shareholders as a whole.

As the applicable percentage ratios for the Acquisition exceed 5% but are less than 25%, the Acquisition constitutes a discloseable transaction for the Company, and is subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules.

In this announcement, unless the context otherwise requires, the following terms shall have the following meanings:

- 7 -

- 8 -

"HK$" Hong Kong Dollars, the lawful currency of Hong Kong
"Hong Kong" Hong Kong Special Administrative Region of China
"Independent Third Party" a third party independent of the Company and its connected person(s)
"Listing Rules" the Rules Governing the Listing of Securities on the
Stock Exchange
"NGLs" Natural Gas Liquids
"Operating Netback" The gross margin associated with the production and sale of crude oil, NGL and natural gas, and is calculated as revenues less royalties and operating costs on a barrel of oil equivalent basis
"Purchaser" COG Acquisition Co, a company incorporated in Canada with limited liabilities and an indirect wholly- owned subsidiary of the Company
"section" 1 section equivalent to 1 square mile or 2.59 square kilometer
"Shareholder(s)" the holder(s) of the ordinary shares of HK$0.01 in the share capital of the Company
"Stock Exchange" The Stock Exchange of Hong Kong Limited
"Target Company" Baccalieu Energy Inc., a company incorporated in
Canada with limited liabilities
"Target Company Shares" the common shares in the capital of the Target Company
"%" per cent
By Order of the Board

Chairman

Hong Kong, 20 June 2014

As at the date of this announcement, the Board comprises four executive Directors, namely Mr. Xu Tie-liang (Chairman and Chief Executive Officer), Mr. Zhu Yuan, Ms. Guan Yijun and Mr. Cheung Shing; and three independent non-executive Directors, namely Mr. Li Yunlong, Mr. Shi Xun-zhi and Mr. Wang Guangtian.

* for identification purposes only

- 9 -

distributed by