Orient Petroleum (PINK:OPEI)

Effective March 7, 2011, Mr. Bin Fu resigned as the Registrant’s chief financial officer. The decision by Mr. Fu to resign from his position was not the result of any material disagreement with the Registrant on any matter relating to the Registrant’s operations, policies or practices.

Effective March 7, 2011, the Registrant’s board of directors appointed Mr. Steven Shixian Wang to fill the vacancy created by the resignations of Mr. Fu. Mr. Wang is currently the chief financial officer of China Healthcare Acquisition Corp., to which he was appointed in June 2006. He has also been the president of Superior Pacific Corp. since February 1993. From January 2007 to December 2010, Mr. Wang was the general manager of Zencogen Corp., a development stage biotech company in Ithaca, New York, and the managing director and chief financial officer of Eco Energy Partners, Inc., a development stage clean energy company in California. None of these companies is related to or affiliated with the Registrant. Mr. Wang

Sales from wholesale distribution for the three months ended December 31, 2010 increased by $15.6 million, or 49%, from the same period in 2009 due to increases in sales volume and price.  Sales volume increased from 38,323 metric tons for the three months ended December 31, 2009 to 46,941 metric tons for the same period in 2010, an increase of 8,618 metric tons or 22%.  In addition, average selling price increased by 22% period-over-period.  Sales from wholesale distribution for the nine months ended December 31, 2010 increased by $32 million, or 34%, as compared to the same period in 2009, also due to increases in sales volume and price.  Sales volume increased by 9,774 metric tons or 8%, from 122,130 metric tons for the nine months ended December 31, 2009 to 131,904 metric tons for the same period in 2010.  In addition, average selling price increased by 24% over the same nine month periods. The increased sales volume is attributable to increased vehicle ownerships over the periods reported and our enhanced sales efforts. The increased price is the result of three price hikes effected by the PRC National Development and Reform Commission (“NDRC”) during 2010 in response to rising international crude oil price. The latest price adjustment by NDRC was on December 22, 2010, which raised wholesale guidance price of finished oil by approximately $45 per metric ton.

Sales from retail gas stations for the three months ended December 31, 2010 increased by $4.7 million or 36%, from the same period in 2009, mainly due to increases in sales volume and price.  Sales volume for the three months ended December 31, 2010 increased by 3,309 metric tons, or 25%, to 16,715 metric tons from 13,406 metric tons for the same period in 2009.  In addition, average selling price increased by 9% period-over-period.  Sales from retail gas stations for the nine months ended December 31, 2010 increased by $16 million or 47%, as compared to the same period in 2009, also due to increases in sales volume and price.  Sales volume for the nine months ended December 31, 2010 increased by 11,896 metric tons, or 33%, to 48,357 metric tons from 36,461 metric tons for the same period in 2009.  In addition, average selling price increased by 11% over the same nine month periods. The increased sales volume is attributable to the three new gas stations that we opened during the last three months of 2009. We also had to raise our retail price in response to the NDRC’s price adjustments. The latest price adjustment by NDRC on December 22, 2010 also raised retail price cap of finished oil by approximately $45 per metric ton.

Based on the historical trend of international crude oil price, we can expect our wholesale and retail prices to continue to increase. We also anticipate the NDRC to effectuate another price hike after the Chinese New Year. At the same time, we believe that the NDRC should continue to adjust price gradually as it has done in the past in order to ease consumer sensitivity. In addition, we believe that the trend of rising vehicle ownerships should continue in China. Accordingly, we are hopeful that anticipated price increases should not have any materially adverse effect on our business operations and prospects in the near term.

On September 7, 2010 Orient New Energy became a public entity via a reverse merger transaction.

 Company Snapshot:

The wholesale distribution of finished oil products and the operation of retail gas stations.

Competitive Advantages:

• We were one of the first non-state-owned enterprises to engage in the wholesale distribution of finished oil products in Shaanxi Province. During the past 20 years, we have gradually built up our operational infrastructure, including extensive distribution channels, two oil storage depots and convenient access to strategic railway lines. We also have the relevant licenses to conduct our wholesale distribution business, which are becoming increasingly difficult for new entrants to our industry to obtain.
  
• We have been in the wholesale finished oil business for almost 20 years since the incorporation of our predecessor Xi’an Lianhu Petroleum Chemical Co., Ltd. in 1991. We focus on customer satisfaction and believe that we have consistently provided high quality products and services to our customers. With our business approach to achieve a consistent increase of sales volume while improving our administrative efficiency, we began referring our smaller customers to purchase from our larger customers that we have established long-term relationships with. As a result, our number of wholesale customers has decreased from 448 in fiscal 2008 to 222 in fiscal 2010 while our sales volume has increased over the same period of time.
  
• Stable supply source. Shaanxi Yanchang Petroleum (Group) Co., Ltd. (“Yanchang Group”), one of the four largest crude oil and gas exploration enterprises in China with over 10 million metric tons of refinery capacity, is our largest oil supplier. We also maintain good relationships with other state-owned oil suppliers such as PetroChina and China National Offshore Oil Corporation.
  
• We benefit from our dedicated railway line connecting one of our oil depots to Shaanxi Province’s main railway. We stopped using the railway line for our other depot, however, because the loading capacity at the depot does not meet current requirement of the PRC Ministry of Railways. We are trying to obtain the necessary governmental approval to use the railway line, but we cannot give assurance that such approval will be issued.
  
• We have an aggregate oil depot storage capacity of 18,000 m 3 (approximately 4.8 million gallons). Aside from large upfront capital requirements, new entrants to this industry must also have significant storage capacity to be able to compete, which is a barrier to entry for new competitors.

Post Merger Share Calculation:

• 16,150,658: Pre reverse merger outstanding shares
• 13,250,000: Shares cancelled as part of the Share Exchange
• 27,100,000: Newly issued shares of Common Stock

GeoTeam® best effort calculation of total post reverse merger shares assuming full conversions:  30,000,000

Financial Snapshot:

• Sales from wholesale distribution for the three months ended June 30, 2010 increased to $37.7 million, or 27.4%, from the same period in 2009.
  
• Sales from retail gas stations for the three months ended June 30, 2010 increased to $15.1 million or 54.7%, from the same period in 2009.
  
• Net income from our two business segments for the three months ended June 30, 2010 increased 132.0% to $5.6 million from the three months ended June 30, 2009.

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