Sino Australia Prospectus

Important Information: This is an important document that should
be read in its entirety. If you do not understand any component of

this prospectus you should consult your professional advisors.
ACN 159 714 397
REPLACEMENT
PROSPECTUS
For the issue of 24 million Ordinary Shares at an offer price

of $0.50 each to raise a total of $12 million with the ability
to raise an additional $8 million in oversubscriptions.
One attaching option to be issued for no additional
consideration for every 2 shares issued.
The options have an exercise price of $0.75 and expire
after 3 years from the date of listing.
ASX reserved code: SAO
Lead Manager
D2MX Pty Ltd (D2MX)
ABN 98 113 959 596
AFSL 297950
IMPORTANT INFORMATION
Offer The Offer contained in this
Prospectus is an invitation by Sino
Australia Oil and Gas Limited to apply
for fully paid ordinary shares in the
Company.
Lodgement and listingThis
Replacement Prospectus is dated
26 April 2013 and a copy was lodged
with ASIC on that date. The Company
will apply within seven days after
the date of this Prospectus to ASX
for admission of the Company to the
official list of ASX and quotation of
its Shares on ASX. Neither ASIC nor
ASX takes any responsibility for the
content of this Prospectus or for the
merits of the investment to which
this Prospectus relates.
Expiry date No Offer Shares will
be offered on the basis of this
Prospectus later than the Expiry Date.
Note to Applicants The information
in this Prospectus is not financial
product advice and does not take
into account your investment
objectives, financial situation or
particular needs.
It is important that you read this
Prospectus carefully and in its
entirety before deciding whether to
invest in the Company. In particular,
you should consider the risk factors
that could affect the Companys
business, financial condition and
results of operations. You should
carefully consider these risks in light
of your personal circumstances
(including financial and tax issues)
and seek professional guidance
from your accountant, stockbroker
or other professional adviser before
deciding whether to invest. Risk
factors that should be considered by
prospective investors are set out in
Section 7.
No offering where offering would
be illegal The offer of Offer Shares
under this Prospectus does not
constitute a public offer in any
jurisdiction outside Australia. This
Prospectus does not constitute an
offer or invitation in any place in
which, or to any person to whom, it
would not be lawful to make such
an offer or invitation. No action has
been taken to register or qualify
the Offer Shares or the Offer, or to
permit otherwise a public offering
of the Offer Shares in any jurisdiction
outside Australia. This Prospectus
has been prepared for publication
in Australia. The distribution of this
Prospectus outside Australia may
be restricted by law and persons
who come into possession of this
Prospectus outside Australia should
seek advice on and observe any such
restrictions. Any failure to comply
with such restrictions may constitute
a violation of applicable securities
laws. For details of selling restrictions
that apply to the Offer Shares in
certain jurisdictions outside of
Australia, please refer to Section 3.15
for further information.
Disclaimer No person is authorised
to give any information or to make
any representation in connection

with the Offer described in this
Prospectus which is not contained in
this Prospectus. You should rely only
on information in this Prospectus.
Except as required by law, and only
to the extent so required, neither
the Company nor any other person
warrants or guarantees the future
performance of the Company, or
any return on any investment made
pursuant to this Prospectus. Risk
factors are set out in Section 7. These
and other factors could cause actual
results to differ materially from those
expressed in any forward looking
statement made by, or on behalf of,
the Company.
Exposure period The Corporations
Act prohibits the Company from
processing Applications in the
seven day period after the date
of lodgement of this Prospectus
(Exposure Period) with ASIC. The
Exposure Period may be extended
by ASIC by up to a further seven
days. The purpose of the Exposure
Period is to enable the Prospectus to
be examined by market participants
prior to the raising
of funds. Applications received
during the Exposure Period will
not be processed until after the
expiry of the Exposure Period.
No preference will be conferred
on any Applications received
during the Exposure Period.
During the Exposure Period, this
Prospectus will be made generally
available to Australian residents,
without the Application Forms,
at the Companys website,
www.sinoaustoil.com and
www.d2mx.com.au
Obtaining a copy of this
Prospectus A paper copy of
the Prospectus is available free of
charge to any person in Australia
by calling the Offer Information Line
on 1800 627 886 (Australia Only)
or + 613 9617 0688 (For Overseas
Only) between 8:30am and 5:00pm
Australian Eastern Standard Time
Monday to Friday. This Prospectus
is also available in electronic form
at www.sinoaustoil.com. This
Prospectus is only available in
electronic form to Australian
residents accessing the website from
Australia. Persons who access the
electronic version of this Prospectus
should ensure that they download
and read the entire Prospectus.
Applications for Offer Shares may
only be made on the Application
Form attached to or accompanying
this Prospectus. The Corporations Act
prohibits any person from passing
the Application Form on to another
person unless it is attached to, or
accompanied by, a hard copy of
this Prospectus or the complete
and unaltered electronic version
of this Prospectus.
Defined terms and
abbreviations Certain terms and
abbreviations used in this Prospectus
are defined in the Glossary at Section
13. Unless otherwise stated or
implied, references to times in
this Prospectus are to Australian
Eastern Standard Time.

Amounts All financial amounts
contained in this Prospectus are
expressed in Australian currency
unless otherwise stated. Any
discrepancies between totals and
sums and components in tables
contained in this Prospectus are
due to rounding.
CNY: AUD
Average
Spot
FY2009
0.1872
0.1638
FY2010
0.1607
0.1488
FY2011
0.1497
0.1544
FY2012
0.1528
0.1526
Forecast
FY2013
0.1530
0.1530
Photographs and
diagrams Photographs and
diagrams in this Prospectus do
not necessarily depict assets or
equipment owned or used by the
Company. Diagrams used in this
Prospectus are illustrative only and
may not be drawn to scale. Unless
otherwise stated, all data contained
in charts, graphs and tables is based
on information available at the date
of this Prospectus.
Privacy By completing an
Application Form, you are providing
personal information to the Company
through the Share Registry, which
is contracted by the Company to
manage Applications. The Company
and the Share Registry, on the
Companys behalf, collect, hold and
use that personal information to
process your Application, service
your needs as an investor, provide
facilities and services that you
request and carry out appropriate
administration. The Company and tax
laws require some of the information
to be collected. If you do not provide
the information requested, your
Application may not be able to be
processed efficiently, if at all. The
Company and the Share Registry may
disclose your personal information for
purposes related to your investment
to their agents and service providers
or as otherwise authorised under
the Privacy Act 1988 (Cth). You may
request access to your personal
information held by or on behalf
of the Company. You can request
access to your personal information
or obtain further information about
the Companys privacy practices by
contacting the Share Registry or the
Company. The Company aims to
ensure that the personal information
it retains about you is accurate,
complete and up-to-date. Please
contact the Company or the Share
Registry if any of the details you have
provided change. In accordance with
the requirements of the Corporations
Act, information on the Share register
will be accessible by members of
the public.
Do not rely on forward-looking

statements This Prospectus
contains forward-looking statements
which are identified by words such
as may, could, believes, estimates,
expects, aims, intends and other
similar words that involve risks and
uncertainties. These statements are
based on an assessment of present
economic and operating conditions,
and on a number of assumptions
regarding future events and actions
that, at the date of this Prospectus,
are expected to take place. Such
forward-looking statements are not
guarantees of future performance
and involve known and unknown
risks, uncertainties, assumptions and
other important factors, many of
which are beyond the control of the
Company. The Company cannot and
does not give any assurance that the
results, performance or achievements
expressed or implied by the forwardlooking statements contained in this
Prospectus will actually occur and
investors are cautioned not to place
undue reliance on these forwardlooking statements. Forward-looking
statements should be read in
conjunction with the risk factors set
out in Section 7, the assumptions
contained in the financial information
set out in Section 9 and other
information in this Prospectus.
Statement of past performance
This Prospectus includes information
regarding the past performance of the
Company. Investors should be aware
that past performance should not
be relied upon as being indicative of
future performance.
Summary of changes to
prospectus dated 28th February
2013 2 additional Key Risks have
been added to Chapter 1.4: covering
new investors Ability to affect the
Companys direction and Lack of
liquidity post listing.
Amendments have been made to
the Chairmans letter to add further
focus on risks.
Further information relating to
Material Contracts in Chapter 11.8
has been added incorporating a
description as to the nature of the
client contracts for services.
Full details of the 2 patents held by
the Company have been added to
Chapter 4.5 including information
relating to the Chinese Government
website covering Intellectual
Property rights.
A more detailed description of
the corporate structure of each
of the companies involved in the
Sino Group has been included in
Chapter 4.7 including ownership,
directorships and tax regime
information.
Further clarification of financial
issues has been supplied by
Grant Thornton.
Contents
Investment highlights
Key risks
Key financial information
Chairmans letter
1. Key questions and answers
2. Investment highlights
12
3. Offer details
13
4. The Company
20
5. Directors, senior management and corporate governance
25
6. Industry overview
29
7. Risks of investing
34
8. Financial information
39
9. Investigating Accountants Report
53
10. Taxation Report
62
11. Additional information
68
12. Summary of relevant Chinese laws and regulations
75
13. Glossary
79
Application form
81
Corporate Directory
Inside back cover
Key dates
Date of this Prospectus
26 April 2013
Offer opens
29 April 2013
Offer closes (applications must be received by this time)
5.00 PM AEST 5 July 2013
Settlement of the Offer
15 July 2013
Allotment of Shares under Offer
17 July 2013
Expected completion of despatch of Holding Statements
19 July 2013
Latest date Shares expected to commence trading on ASX
26 July 2013
2 ) Sino Australia Oil and Gas Limited ) Prospectus
Key risks
Rapid growth in revenue and NPAT in burgeoning

Chinese oil and gas industry.
The Companys provision of services is project based

and determined through individual client service
contracts.
Oil recovery industry in China is growing rapidly

leading to significant growth opportunities in the
services industry.
Over 95% of forecast revenue for FY 2013 has
been contracted.
Radial Hydraulic Jet Drilling (RHD) is a highly
versatile technology with a range of applications
with efficient Enhanced Oil Recovery method to
optimise production in oil and gas wells.
Sino Australia has two current patents to operate its
enhanced oil and gas recovery Technology (RHD),
presently operating in China. Following successful
listing the patent protection will be expanded
internationally and the business operations
introduced outside of China to other oil and gas
producers.
Industry experienced and qualified management
team.
Excellent Chinese government contacts and
relationships.
One attaching tradeable option will be issued for no
additional consideration for every two shares issued.
The options have an exercise price of $0.75 and
expire after 3 years from the date of listing.
Pursuant to the terms of Unsecured Redeemable
Convertible Notes dated 27 February 2013, 14 Note
holders have subscribed for notes convertible to
ordinary shares in Sino (Australia) in the sum of
approximately $3.1 million in accordance with their
terms and this offer document.
All contracts presently are with either State Owned

Enterprises (SOEs) such as China National Petroleum
Corporation or PetroChina Company Limited or their
subsidiaries which control all oil and gas production
in the Peoples Republic of China (PRC). 75% of the
Companys revenue comes from a contract with
one SOE.
The Companys operations are vulnerable to a
significant downturn in the Chinese economy where
demand for oil and gas is reduced as the Chinese
economy is dependent on economic growth and
macroeconomic trends.
The Companys future depends, in part, on the
continued contributions of its executive management
team which is small and its key management and
technical personnel, each of whom would be difficult
to replace without succession planning.
The Company and its technology are new and do
not have a long trading history. Whilst its growth has
been rapid is still in its early formative years. Refer to
industry report in Chapter 6.
The Company is subject to the tax regimes of both
China and Australia.
The Company utilises financed drilling rigs to
provide a significant portion of its services. It is
intended to reduce the reliance on these outside
sourced drilling rigs on the successful listing of the
Company on the ASX.
The Companys business is located and conducted in
China, such that its operations will be subject to any
risk of political and economic instability in China.
The Companys success depends upon its ability to
deliver high quality services to its customers at an
acceptable cost.
The weather conditions in Northern China where
the majority of contracts are held presently can
be severe in the height of winter which may affect
productivity during these severe cold snaps.

Summary of the Historical and Forecast Statement of Comprehensive Income
$000
Audited
Audited
Unaudited
Forecast
FY2010
FY2011
FY2012
FY2013
Revenue
7,820
9,181
23,609
28,796
EBITDA
2,758
4,130
9,279
15,302
35.3%
45.0%
39.3%
53.1%
EBITDA as a % of revenue
Depreciation
EBIT
EBIT as a % of revenue
Net interest (expense) / received
NPBT
Income tax expense
NPAT
(93)
(533)
(424)
(1,078)
2,665
3,597
8,855
14,224
34.1%
39.2%
37.5%
49.4%
(37)
(159)
12
2,628
3,601
8,696
14,236
(150)
(190)
(626)
(576)
2,478
3,411
8,070
13,660
The historical statement of comprehensive income has been extracted from the audited financial statements of Zhaodong Huaying Oil Drilling Services Co., Ltd for the
financial years, FY2010 and FY2011 and the unaudited management accounts for FY2012.
Refer to Section 8.9 for the Directors commentary on the material movement in the statements of financial position between 30 June
2012 and 31 December 2012.
Reviewed and pro forma balance sheet at 30 June 2012 and the unaudited and pro
forma balance sheet at 31 December 2012 (please refer to Section 8.1 for Directors
commentary regarding the 31 December 2012 pro forma balance sheet)
As at
30 June 2012
$000
Current assets
Cash and cash equivalents
Trade and other receivables
Other assets
Total current assets
Non current assets
Plant and equipment
Total non current assets
Reviewed
Pro forma
minimum
subscription
As at
31 December
Pro forma
2012
maximum
subscription
Unaudited
Pro forma
minimum
subscription
Pro forma
maximum
subscription
744
11,376
18,851
516
11,148
18,623
8,291
8,291
8,291
12,299
12,299
12,299
79
79
79
3,031
3,031
3,031
9,114
19,746
27,221
15,846
26,478
33,953
6,001
6,001
6,001
5,966
5,966
5,966
6,001
6,001
6,001
5,966
5,966
5,966
15,115
25,747
33,222
21,812
32,444
39,919
Trade and other payables
1,247
1,247
1,247
2,724
2,724
2,724
Related party payables
3,311
3,311
3,311
4,409
4,409
4,409
159
159
159
4,717
4,717
4,717
7,133
7,133
7,133
10,398
21,030
28,505
14,679
25,311
32,786
Share capital
747
12,019
19,468
747
12,019
19,468
FCTR
153
153
153
(27)
(27)
(27)
Total assets
Current liabilities
Current tax payable

Total current liabilities
Net assets
Equity
Retained earnings
Total equity
9,498
8,858
8,884
13,959
13,319
13,345
10,398
21,030
28,505
14,679
25,311
32,786
Summary historical and forecast cash flow

FY2010
FY2011
FY2012
FY2013
Actual
Actual
Actual
Forecast
EBITDA
2,758
4,130
9,279
15,302
(Increase)/ decrease in trade debtors
(3,834)
(2,342)
(4,008)
3,252
Increase/ (decrease) in trade and other creditors
(260)
315
1,477
(347)
(Increase)/ decrease in other assets/ (liabilities)
3,074
(1,843)
(3,912)
(70)
Income tax paid
(150)
(190)
(131)
(576)
1,588
70
2,705
17,561
(2,079)
(11)
(1,905)
(12,426)
(2,079)
(11)
(1,905)
(12,426)
Net interest received/ (paid)
(160)
12
Proceeds from the convertible notes
3,114
Proceeds from the capital raising
726
8,886
Payment of the share issue costs
(493)
(1,017)
Net cash flows from financing activities
728
(653)
10,995
Net increase in cash held
237
63
147
16,130
82
295
372
516
FX movements
(24)
14
(3)
58
Cash at the end of the year
295
372
516
16,704
$000
Cash flow from operating activities
Net cash flows from operating activities

Cash flows from investing activities
Purchase of plant and equipment
Net cash from investing activities
Cash flows from financing activities
Cash at the beginning of the year
Chairmans letter
Dear Investors,
On behalf of the Directors of Sino Australia Oil and Gas Limited I have great pleasure in presenting this
Prospectus and inviting you to subscribe for new Shares in our Company.
Our Company provides oilfield technology services in
Enhanced Oil and Gas Recovery, or EOR, for oil and gas
exploration companies in China using our own unique patented
technology. Since the establishment of our operating Company
in December 2009 we have experienced rapid growth with
forecast revenue of over AUD$28 million in 2013.
The Companys present operations are focused in the Daqing
Oilfield in the north of China, which is known as the oil capital
of China, producing more than 10 billion barrels of oil since
production started in 1960.
We provide our patented, proven and cost-effective EOR drilling
technology to this industry improving our clients, oil and gas
field owners recovery efficiency in both their asset performance
and longevity of their resource assets. The Company owns two
patents, known as sidetrack drilling techniques:
1) Radial Hydraulic Jet Drilling;
2) Status Monitoring Device for Radial Drilling System (HRM).
Both techniques are used as Enhanced Oil and Gas Recovery
(EOR) technologies in production enhancement, primarily in
existing oil fields. The technology increases flow rates from
existing productive oil horizons and allows for access to new
productive horizons within existing wells.
Application of our patented technology enables increased oil and
gas production from both new and old wells. The EOR technology
provides a significant improvement in recoveries compared to
use of the traditional perforating technology process.
In recent years, global energy demand has grown rapidly. The
U.S. Department of Energy predicts that global energy demand
will continue to rise significantly. Although there are other
alternative energy sources, oil and gas will continue to be the
most important energy sources in the near term.
Our plans are to significantly increase availability of equipment

and technical expertise in the China market and then further
expand this technology into foreign markets. Our initial
target markets are in Australasia with a strategy to enhance
oil production in these regions though the licensing and
deployment of our technology. Our Company has chosen to be
listed on the Australian Securities Exchange because Australia
is one of Asias largest energy forums, and Australia has rich oil,
gas, and mineral resources. We envisage this initiative assisting
us in providing a solid foundation for the Company in our drive
towards a great international business model for Sino Australia.
The Board believes that listing will provide a strong financial
development platform to establish the EOR technological
advantage for Sino Australia Oil and Gas Limited.
Investments contain inherent risks. Sino Australia presently
conducts all of its business in China, its contracts are with
subsidiaries of State-owned enterprises and are executed
sometimes in severe weather conditions which can delay
projects, which can effect progress contract payments that
could impact on lease payments of equipment. New investors
should be aware that they are unlikely to significantly affect
the Companys direction by exercising their voting rights in the
usual manner due to the relatively small number of new shares
on issue.
I invite you to read this prospectus carefully, and before you
make an investment decision, please carefully read the risks of
investment in Section 7 of this prospectus.
Together with my fellow Directors we commend the Offer to
you and look forward to welcoming you to this exciting growth
opportunity.
Yours sincerely,
Sino Australias EOR technology has application to the majority

of all oil and gas wells in China.
While we are expanding our service offering in China, we are
now also developing sales and service strategies outside China
utilising not only our technology but also our price advantage
to drive our business.
Mr Shao Tianpeng
Executive Chairman
Sino Australia Oil and Gas Limited
1. Key questions and answers

The table below sets out some key questions and answers in relation to the Offer. This section should be read in conjunction with the
remainder of the information contained in this Prospectus.
1.1
Introduction
Question
Summary answer
Where to
find more
information
Who is issuing this

Prospectus?
Section 4
Who are Sino

Australia Oil and
Gas Limited?
Sino Australia Oil and Gas Limited (SAO) is the Australian holding company of a Chinese Sections 4 and 6
operating company providing enhanced oil recovery services to the oil and gas industry
in China.
1.2
ACN 159 714 397
Key features of business model

Where to
find more
information
Question
Summary answer
How will Sino

Australia generate
revenue?
Section 4
SAO forecasts to generate revenue by continuing to obtain project based service
contracts to provide technologically advanced enhanced oil and gas recovery (EOR)
drilling services to companies operating in oil fields in China. These EOR services are
largely provided at present to State Owned Enterprises (SOEs) or their subsidiaries
which operate in both new and established oil fields in China. SAO provides its patented
technology, which provides better recoveries of oil than traditional methods to both
new and old oil wells.
SAO is focused on maintaining and growing its strong position in the rapidly expanding Section 4
What are Sino
oil and gas industry in China by delivering superior measurable recoveries of oil and gas
Australias key
business strategies? to new and existing clients in the China market, which are state-owned enterprises who
control the oil and gas industries.
The next most important strategy is SAOs international growth plans deploying its
technology initially into the Australasian markets followed by other oil and gas markets
throughout the world either through the licensing of its technology or through
operating provisions of equipment and expertise.
1.3
Capital structure and funding

Where to
find more
information
Question
Summary answer
Will the Company

be adequately
funded after
Completion of the
Offer?
The Directors are of the opinion that the Company will have sufficient working capital to Section 3.3
carry out its stated strategy and objectives on completion of its listing on the ASX.
SAO expects to fund its growth and operations from the proceeds of the Offer and the
How does Sino
Australia expect to revenues generated from its business activities.
fund its operations?
Section 4
Capital structure
Section 3
If all New Shares are issued then the total number of Shares on issue at listing will be
234,077,517 and there will be 36.2 million unissued options including directors options.
1.4
Key Risks
Where to
find more
information
Question
Summary answer
Are there risks of

the Offer?
As with any investment in the Australian stock market, an investment in the Company
has a number of risks.
Managing rapid
growth
The Company plans to grow substantially and increase its market penetration in its
Section 7
current market. This will require the successful capital raising in this prospectus for the
purchase of additional specialised plant and equipment, continuing to grow the contract
base with new customers and the expenditure on business development external to the
existing China market place all of which have inherent risks.
Chinese economy
downturn
The Companys operations are vulnerable to any significant downturn in the Chinese
economy (oil and gas demand) as the Chinese economy is dependent on economic
growth and macroeconomic trends.
Sections 6
and 7
Increased
competition
The market in which the Company sells its services is competitive; however, SAO
unique technology provides the Company significant differentiator-enabling margins
to be maintained.
Sections 6
and 7
Sino Australia Oil and Gas Limited rely on obtaining customer contracts from
Reliance on other
Government Owned Companies on a project by project basis. SAO is limited by its
companies and
financed equipment need to ensure high levels of quality control and availability of specialized plant and
Section 7
Section 4
equipment being sourced in a timely manner. The Company utilises some owned
equipment but has been reliant upon financed drilling rigs to provide a portion of its
services. The Companys success depends upon its ability to deliver high quality services
to its customers at an acceptable cost in a timely manner.
Reliance on
experienced
management
Section 5
The Companys future depends, in part, on the continued contributions of its executive
management team and other key management and technical personnel, each of whom
could be difficult to replace without the development of succession planning and the
current SAO relationship with Earth Sciences College of North East Petroleum University. This
commitment to an ongoing intellectual property and technology development provides an
advantage to the Company while developing access to qualified industry personnel.
Brand recognition
and integrity
The Sino Australia trading name is to become of extreme importance in the

development of the Companys international trading strategy.
Sections 4
and 11
Intellectual
property
Various risks are associated with the protection of the Companys intellectual property
rights and proprietary technology, including:
Section 4.5
and 7.11
a) reliance on patent laws and restrictions to protect the Companys intellectual

property rights;
b) the risk that the Companys patents may be challenged by third parties, or that other
parties may independently develop similar or competing technology or design
around any patents issued to the Company;
c) potential difficulties in obtaining third party licenses which may be required to
develop new products and product enhancements on commercially reasonable
terms;
d) risk of becoming subject to litigation as a result of an alleged infringement of
others intellectual property rights causing the Company to incur significant costs,
regardless of the outcome, and if the Company is unsuccessful, subjecting the
Company to significant liability for damages and invalidation of proprietary rights;
e) the Company may also initiate action against third parties for infringement of its
proprietary rights which could easily result in costly litigation; and
f ) potential for misappropriation of the Companys intellectual property, particularly in
countries where laws may not protect the Companys proprietary rights as fully as in
other jurisdictions such as Australia.
1.
Key questions and answers
Where to
find more
information
Question
Summary answer
Ability to affect
the Companys
direction
Due to the number of shares on issue in the Company, new investors who subscribe
Section 7
under the Prospectus will hold a relatively small portion of ownership of the
Company.New investors should be aware that they are unlikely to be able to significantly
affect the Companys direction by exercising their voting rights in the usual manner.
Lack of liquidity
post listing
The Company currently has 193,170,400 shares on issue at the date of the
Prospectus. The Offer Oversubscription may result in up to another 40,000,000 shares
being issued with a minimum 24,000,000 shares to be issued. In percentage terms, the
Offer and Oversubscription will comprise 17.1% of the Companys ordinary shares on
issue and the minimum offer only will comprise 11%.
Section 7
New investors of the Company should note that liquidity post-listing may be constrained
given a significant portion of the Companys existing shares will be placed in escrow.
1.5
Key Strengths
Where to
find more
information
Question
Summary answer
Significant
opportunities in a
growing industry
Chinese demand for domestic oil and gas exceeds supply. Large State Owned
Section 6
Enterprises like CNPC and Sinopec have increased their expenditure on Enhanced oil and
gas Recovery services.
Patented RHD
technology
SAO holds 2 patents for Enhanced Oil Recovery. The technology can be applied to the
majority of oil and gas wells in China. This technology can be licensed and deployed in
the Chinese and foreign oil and gas markets at any time.
Rapid growth
SAO has experienced rapid growth in revenue. The Company achieved sales growth of
over 17% in FY2011. Over 95% of FY 2013 forecast revenue has been contracted.
Strong business
team
SAOs operating and senior management and staff have many years experience in the oil
and gas industry in China.
Good relations
with government
The Oil and Gas industries in China are government-controlled. SOAs existing clients are
all State Owned Enterprises. SAO maintains a good relationship with both Central and
Provincial Governments in order to maintain its strong industry position.
1.6
Section 6
Directors and key management

Where to
find more
information
Question
Summary answer
Who are the

directors of the
Australian Listed
Company?
The Directors are Executive Chairman Shao Tianpeng, Independent Directors Wayne
Johnson and Andrew Faulkner who also holds the position of company secretary.
Section 5
Who are the

key operational
managers of the
100% owned
subsidiaries?
Yuan Zhanhua is General Manager, Yin Xianfeng is CFO, Shao Tianxiang is Marketing
Manager, Wu Jiayi is Chief Engineer and Sun Tiesen is Chief Geologist.
Section 5
1.7
Significant interests of key people and related party transactions
Question
Who are the

Companys key
Shareholders and
what will their
interests be on
Completion of the
Offer?
Where to
find more
information
Summary answer
Shareholder and company
Number of Shares
Shao Tianpeng
Sections 5
and 11
135,644,255
Kaitong Industry Co Ltd
19,007,967
Pengfu Development Co Ltd
19,297,723
Green Peace Holdings Co Ltd
19,220,455
Will Mr Shao
Tianpeng control
the Company after
Completion of the
Offer?
Sections 5
Mr Shao Tianpeng will control 53.1 % of the shares of the Company after completion
and 11
of the offer if the minimum is raised and 48.5 % of the shares of the Company if the
maximum is raised. He is the founder, CEO and Managing Director of the Company. Mr
Shao is contracted to perform executive management services to the Company for a
three-year period and has a non-compete agreement with the Company. Yuan Zhanhua
and Chen Jian and will also be substantial shareholders and Mr Yuan and Mr Chen hold
management contracts with the Company and have voluntary escrow of their interests
in the Company.
What are the

Directors current
holdings in Sino
Australia and its key
Shareholders?
Mr Shao Tianpeng a Director holds 135,644,255 shares.
What escrow
restrictions
apply to the key
Shareholders
Shares?
Mr Shao Tianpeng has entered into a voluntary escrow arrangement for 24 months. Mr Section 11
Yuan Zhanhua and Mr Chen Jian have entered into voluntary escrow agreements for a
period of 12 months for half of their shares and 18 months for the balance of their shares.
Green Peace has entered into a voluntary escrow agreement for a period of 12 months.
What significant
benefits and
interests are
payable to
Directors and other
persons connected
with Sino Australia
or the Offer?
All Directors will receive directors fees. Mr Shao Tianpeng is entitled to remuneration for his Section 11
role as CEO. Mr Yuan Zhanhua is entitled to remuneration for his role as General Manager.
Ms Yin Xianfeng is entitled to a salary as CFO. Mercury Consulting in Australia has a contract
with the Company to supply Investor Relations and Public Relations services. Andrew
Faulkner, a principal of Pitcher Partners SA Pty Ltd who are providers of taxation and
accounting services to the Company, has a contract to supply company secretarial services.
Section 11
Pengfu Development Co Ltd a key shareholder holds 19,297,723 shares.

Kaitong Industry Co Ltd a key shareholder holds 19,007,967 shares.
Green Peace Holdings Co Ltd a key shareholder holds 19,220,455 shares.
Mr. Wayne Johnson is a director of SAO and the Executive Chairman of the MDS Financial
Group Limited the owner of D2MX Pty Limited, the lead managers to the prospectus.
Advisers and other service providers are entitled to fees for services.
1.
Key questions and answers
1.8
Key terms and conditions of the Offer

Where to
find more
information
Question
Summary answer
What is Sino
Australias
corporate
structure?
Sino Australia Oil and Gas Limited incorporated on 31 July 2012, and is the ultimate
holding company of Zhaodong Huaying Oil Drilling Technology Service Company
Limited and the businesses of the Sino Australia Group, all located in Heilongjiang
Province, Peoples Republic of China pursuant to the Share Transfer Agreement dated 27
February 2013.
Refer to Sections
4.2 and 11.8 of
this Prospectus
for further details
of the corporate
structure and
material contracts
What is being
offered under this
Prospectus?
Up to 40 million Offer Shares. All shares being offered under this Prospectus will rank
equally with each other and will also rank equally with Existing Shares.
Section 3.1
Are any Options

being offered?
One attaching option will be issued for no additional consideration for every 2 shares
Section 3.2
issued. The options have an exercise price of $0.75 and expire after 3 years from the date
of listing.
What is the
Offer Price?
The Offer Price is $0.50 per Offer Share.
Section 3.1
Applications must be for a minimum of 4,000 Offer Shares ($2,000). Applications in

What is the
excess of the minimum must be in multiples of 1,000 Offer Shares ($500).
minimum
investment amount
under the Offer?
Sections 3.4
What are the

expected proceeds
of the Offer?
Total proceeds of the Offer will be a minimum of $12,000,000 and a maximum of

$20,000,000.
Section 3.1
Types of offer
Public Retail Offer means offers to individual investors who are not qualified as
institutional or sophisticated investors according to the Corporations Act.
Sections 3.6
and 3.7
Broker Offer means an offer to Broker Firm Applicants who have received a firm
allocation from their Broker.
Institutional Offer means offers to certain institutional investors that D2MX will send an
invitation to apply.
What is the purpose The proceeds of the Offer will be used in :

of the Offer?
Acquisition of specialised plant and equipment, for the purpose of increasing
Section 3.3
production capacity and the margins on services offered by abolishing financing

costs thereby increasing the Companys gross profit margin.

Research and development of additional and new higher quality services.
Modernising and upgrading existing technical equipment.
Development of international markets for EOR services.
What are
the taxation
implications of
investing in the
Company?
The taxation implications of investing in the Company will depend on an investors

See Section 10
individual circumstance. Applicants should obtain their own tax advice prior to applying
for Shares
How can I
obtain further
information?
By speaking to your accountant, lawyer, stockbroker or other professional advisor. If you

require assistance or require additional copies of the Prospectus, you should contact
D2MX on 1800 627 886 or Security Transfer Registrars Pty Ltd on + 61 8 9315 2333.
Sections 3.21
11
Where to
find more
information
Question
Summary answer
Exchange rate
All currency units are expressed in Australian Dollars unless stated otherwise. Where the
actual costs or expenses incurred or fees charged were in China or paid in Renminbi we
have used the following conversion rates:
CNY: AUD
Average
Spot
FY2009
0.1872
0.1638
FY2010
0.1607
0.1488
FY2011
0.1497
0.1544
FY2012
0.1528
0.1526
Forecast FY2013
0.1530
0.1530
Section 8
Refer to Section 8 for discussion of exchange rates used to convert detailed financial
information from Chinese Renminbi to AUD.
Contact details
For further contact details, see the Corporate Directory at the back of this Prospectus
Corporate
directory
2. Investment highlights
High-growth technologically advanced and
well-connected Enhanced Oil and Gas Recovery
Company operating in the oil capital of China.
Access to the rapidly growing oil and gas industries

in China with demand outstripping supply.
High profit to revenue margins.
Strong experienced management team with low

staff to revenue ratios.
Access to the growth opportunities of China, the

worlds second largest economy with international
licensing and operating expansion opportunity.
Access to personnel and enhanced intellectual

property development through the Oil and Gas
University of Daqing.
Strong relationships with State Owned Enterprises,

which control the oil and gas industries in China,
with the majority of staff and management being ex
SOE employees.
Plans to expand to international markets leveraging

a low cost base and international demand for EOR
as demand for energy commodities oil and gas
continues to grow globally.
Over 95% of forecast revenue for 2013 contracted.
13
3. Offer details
3.1
Description of the Offer
3.4
This Prospectus invites subscriptions for 24,000,000 Shares at

an issue price of $0.50 per share to raise $12,000,000. A further
16,000,000 Shares may be issued as oversubscriptions at the
issue price of $0.50 per share, to raise an additional $8,000,000.
All Shares issued pursuant to this Prospectus will be issued as
Fully Paid Ordinary Shares and will rank equally in all respects
with the Shares already on issue. The rights attaching to the
Shares are summarised in Section 11.9.
The Offer includes the following types:
Minimum Subscription
The minimum subscription under the Offer is $12,000,000

from the issue of Shares under this Prospectus, comprising of
proceeds of conversion of the Convertible Notes of $3,113,820
and a balance of $8,886,180 from other subscriptions under this
Prospectus.
3.5
Over Subscription
The Company reserves the right to accept over subscriptions

of up to $8,000,000 through the issue of a further 16,000,000
Shares at an issue price of $0.50 per Share. The maximum
amount, which may be raised under this Prospectus, is therefore
$20,000,000 by the issue of a maximum of 40,000,000 shares.
Public Retail Offer means offers to individual investors

of Australia and New Zealand who are not qualified as
institutional investors according to the Corporations Act.
Broker Offer means an offer to Broker Firm Applicants

who have received a firm allocation from their Broker.
The Offer is not underwritten.
Institutional Offer means offers to certain institutional

investors D2MX will send invitation to join.
3.6
If all New Shares are issued then the total number of Shares
on issue at listing will be234,077,517.
Pursuant to the terms of Unsecured Redeemable Convertible
Notes dated 27 February 2013, 14 Note holders have subscribed
for notes convertible to ordinary shares in Sino (Australia) in
the sum of approximately $3.1 million in accordance with their
terms and this offer document.
3.2
Options
Public Retail Offer
Who can apply?

A resident of Australia who is not qualified as an institutional
investor according to the Corporations Act of Australia.
How to apply for Share under the Public Retail Offer?
Completing and returning the Public Retail Offer Application
Form with accompanying payment to the Share Registry.
Application Forms must be received by the Share Registry by
5:00 pm on the closing date.
Minimum application amount
One attaching option will be issued for no additional

consideration for every 2 shares issued. The options have an
exercise price of $0.75 and expire after 3 years from the date
of listing.
Applications under the Public Retail Offer must be for a

minimum of 4,000 shares and in multiples of 1,000 shares
thereafter.
Guaranteed amount
3.3
Proposed Use of Proceeds
It is intended that the funds raised from the Offer will be used
as follows:
Use of proceeds
Minimum
subscription
Maximum
subscription
$12,000,000
$20,000,000
Acquisition of equipment
$5,305,000
$15,915,000
Offering cost
$1,512,000
$2,037,000
Working capital
$ 5,183,000
$2,048,000
$12,000,000
$20,000,000
Item
Capital raised
Total
Following the completion of the Offer, the Directors believe the

Company will have sufficient working capital to carry out its
stated objectives.
There is no guaranteed allocation of shares. It is the Companys

intention that subject to over subscriptions it will allot a
minimum number of 4,000 shares to each Applicant eligible
under the Public Retail Offer, whether they are eligible under
one or more categories.
Address for return of Application Forms and Application Fund
Applications submitted via post must be mailed to:
Sino Australia Oil and Gas Limited IPO
C-/Security Transfer Registrars Pty Limited
PO Box 535 Applecross
Western Australia 6953
For hand delivery:
Sino Australia International Oil and Gas LimitedIPO
C-/Security Transfer Registrars Pty Limited
770 Canning Highway
Applecross
3.
Offer details
How to obtain a copy of the Prospectus and Application Form

Prospectus is available for downloading from:

www.mdsfinancial.com.au; or
www.d2mx.com.au
To request a hard copy Prospectus, please call the Lead

Manager, D2MX, on:

1800 627 886 (Australia only); or
+ 613 9617 0688 (for overseas only); or
email to corporate@d2mx.com.au
3.7
Applications for Shares
Applications must be for a minimum of 4, 000 shares ($2,000.00)

and thereafter in multiples of $500.00 and can only be made by
completing the Application Form attached to this Prospectus.
The Company in conjunction with the Sponsoring Broker,
reserves the right to reject any Application or to allocate any
investor fewer shares than the number for which they applied.
Applicants should return their completed Application Forms to

D2MX or Security Transfer Registrars Pty Ltd by no later than 5.00
pm on the Closing Date. All Applications must be received by
the Share Registrar before 5.00 pm on the Closing Date unless
the timing is varied.
Detailed instructions on how to complete paper Application
Forms are set out on the reverse of those forms. You are not
required to sign the Application Form. The Company reserves
the right to reject any Application (including where the
Application has not been correctly completed) or to allocate
any investor fewer Shares than the number for which they
applied, or vary the dates and times off the Offer without prior
notice and independently of other parts of the Offer. Where
Applications are rejected or fewer Shares are allotted than
applied for, surplus Application Monies will be refunded. No
interest will be paid on any Application Monies refunded.
To request a hard copy Prospectus, please call the Lead Manager,
D2MX, on 1800 627 886 (Australia Only) or + 613 9617 0688 (For
Overseas Only), or email to corporate@d2mx.com.au
3.9
3.8
How to Apply
Applications under the Offer may be made, and will only be

accepted, in one of the following forms:
On the relevant Application Form accompanying this Prospectus;
or on a paper copy of the relevant electronic Application Form
which accompanies the electronic version of the Prospectus,
both of which can be found at and can be downloaded from
www.sinoaustoil.com or www.d2mx.com.au or Security Transfer
Registrars Pty Ltd at registrar@securitytransfer.com.au or from
the Lead Manager at either 1800 627 886 (Australia Only)
or + 613 9617 0688 (For Overseas Only) or via email at
corporate@d2mx.com.au
Paper Application Forms, whether accompanying a paper
copy of the Prospectus or which have been downloaded
must be accompanied by a personal cheque or a bank draft
payable in Australian dollars, drawn on an Australian branch
of an Australian registered bank for an amount equal to the
number of Shares for which you wish to apply multiplied by
the Application Price of $0.50 per Share. Cheques or bank drafts
should be made payable to Sino Australia Oil and Gas Limited Share Application Account and crossed Not Negotiable.
Applicants should ensure that cleared funds are available at the
time the Application is lodged, as dishonoured cheques will
result in the Application being rejected.
Pro Forma Capital Structure
The proposed capital structure of Sino Australia Oil and Gas

Limited is set out below to reflect the issues and paid capital
structure of the Company assuming the Offer is subscribed at
$12,000,000 and $20,000,000 respectively.
Minimum
subscription
Maximum
subscription
$0.50
$0.50
193,170,400
193,170,400
6,534,758
6,534,758
17,772,359
33,772,359
600,000
600,000
Pro Forma number of Shares

on issue following the Offer
218,077,517
234,077,517
Gross proceeds of the Offer
$12,000,000
$20,000,000
Fully diluted pro forma

capital structure
246,231,075
270,231,075
Offer Price per Share

Existing shares
Shares issued from conversion
of the redeemable convertible
notes
Shares being offered under
this Prospectus
Shares issued to the Lead
Manager upon Listing
15
Option summary
Minimum
Maximum
Exercise subscription subscription
price
Pro forma
Pro forma
$
No.
No.
Existing options
Options issued
attaching to the
redeemable
convertible notes(1)
$0.75
3,267,379
3,267,379
Options issued
attaching to the Offer(2)
$0.75
8,886,180
16,886,180
Options issued
to Directors(3)
$0.75
16,000,000
16,000,000
28,153,558
36,153,558
Pro forma options

on issue
(1) One attaching option will be issued for no additional consideration for every
two shares issued from the conversion of the redeemable convertible notes
in accordance with their terms and this offer document. The options have an
exercise price of $0.75 and expire after 3 years from the date of listing.
(2) One attaching option will also be issued for no additional consideration
for every two shares issued as a consequence of the Offer (excluding the
redeemable convertible notes). The options have an exercise price of $0.75
and expire after 3 years from the date of listing.
(3) 16 million options will be issued to the Directors of the Company in
consideration for future services to be performed. The options are escrowed
for a period of 24 months and expire after 48 months after issue and have
an exercise price of $0.75.
The holders of Shares in the Company prior to this Offer are

as follows:
Number
of Shares
135,644,255
70.22
Pengfu Development Co Ltd
19,297,723
9.99
Kaitong Industry Co Ltd
19,007,967
9.84
Green Peace Holdings Co Ltd
19,220,455
9.95
193,170,400
100.00
Mr Shao Tianpeng
Total
NB: Shares are rounded down to the nearest single number.
3.10
Allotment and Allocation of

Shares
Subject to the minimum subscription under the offer being

reached and ASX granting conditional approval for the
Company to be admitted to the Official List, allotment of
shares offered under this prospectus will take place as soon as
practicable after the Closing Date.
The Directors will determine the allocation of all the shares in

their sole discretion. The Directors reserve the right to reject
any application or to allocate any applicant fewer shares than
the number for which they applied. Where the number of
shares issued is less than the number applied for, or where no
allotment is made, surplus application monies will be refunded
without any interest to the Applicant as soon as practicable after
the Closing Date.
3.11
Condition Precedent
The Offer made under this Prospectus and the issue of Shares
pursuant to this Prospectus are subject to and conditional upon
the minimum subscription of $12,000,000. If the condition set
out above is not satisfied on or before the day immediately
preceding the proposed allotment date of Shares under the
Offer, the Issue will not proceed and no Shares will be allotted
pursuant to this Prospectus.
3.12
Shareholders
Name
Pending the allotment and issue of shares or payment of

refunds pursuant to this prospectus, all application monies
will be held by the Company in trust for the applicants in a
separate bank account as required by the Corporations Act. The
Company, however, will be entitled to retain all interest that
accrues on the bank account and each applicant waives the
right to claim interest.
ASX Listing
Within seven (7) days after the date of this Prospectus

application will be made to the ASX for the Company to be
admitted to the Official List and for the Shares offered by this
Prospectus to be granted Quotation. If approval for Quotation
is not granted within 3months after the date of this Prospectus,
the Company will not allot or issue any Offer Shares pursuant
to the Offer and will repay all Application Monies without any
interest as soon as practicable. The fact that the ASX may admit
the Company to its Official List is not to be taken in any way as
an indication of the merits of the Company or the Shares offered
pursuant to this Prospectus.
ASX takes no responsibility for this Prospectus or the investment
to which it relates. Admission to the official list of ASX and
quotation of the Offer Shares on ASX are not to be taken as an
endorsement by ASX of the Company.
3.13
CHESS
The Company will apply to participate in the Clearing House

Electronic Sub-register System (CHESS), operated by ASX
Settlement and Transfer Corporation Pty Ltd (ASTC) a wholly owned
subsidiary of the ASX, in accordance with the ASX Listing Rules and
the ASTC Settlement Rules. Under this system, the Company will
not issue certificates to investors. Instead, Shareholders will receive a
statement of their holdings in the Company.
3.
Offer details
If an investor is broker sponsored, ASTC will send them a CHESS

statement. The CHESS statement will set out the number of
Shares allotted to the investor under the Prospectus, give details
of the Shareholders Holder Identification Number (HIN) and
provide the participant an identification number of the sponsor.
Alternatively, if an investor is registered on the issuer sponsored subregister, the statement will be dispatched by the Share Registrar and
will contain the number of Shares allotted under the Prospectus
and the Shareholders Security Holder Reference Number (SRN).
A CHESS statement or issuer sponsored statement will
routinely be sent to Shareholders at the end of any calendar
month during which the balance of their holding changes.
A Shareholder may request a statement at any other time.
However, a charge may be made for additional statements.
3.14
Overseas Investors
This Prospectus does not constitute an offer or invitation in

any place in which, or to any person to whom, it would not be
lawful to make such an offer or invitation. The distribution of this
Prospectus (including an electronic copy) in jurisdictions outside
Australia may be restricted by law. If you come into possession
of this Prospectus in a jurisdiction outside Australia, you should
seek advice on and observe any such restrictions. Any failure
to comply with such restrictions may constitute a violation of
applicable securities laws.
Any failure to comply with such restrictions may constitute a
violation of applicable securities laws. Lodgement of a duly
completed Application Form will be taken by the Company as
to constitute a representation that there has been no breach of
such laws.
No action has been taken to register or qualify the Shares, or the
Offer, or otherwise to permit a public offering of the Shares, in
any jurisdiction outside Australia.
The Offer pursuant to an electronic Prospectus is only available
to persons receiving an electronic version of this Prospectus
within Australia.
However, subject to restrictions outlined below, Sino Australia
and the lead managers reserve the right to offer New Shares
to wholesale investors within the meaning defined in the
Corporations Act Section 761G in the following jurisdictions,
where to do so would not be in breach of the securities law
requirements of the relevant jurisdiction.
Singapore
This Prospectus has not been and will not be lodged with
and registered by the Monetary Authority of Singapore as a
prospectus under the Securities and Futures Act, Section 289
of Singapore (SFA) and the New Shares will be offered in
Singapore pursuant to exemptions invoked under Subdivision
4, Division 1 of Part XIII of the SFA, in particular section 274
and section 275, of the SFA. Accordingly, this Prospectus and
any other offering document or material in connection with

the offer of the New Shares may not be issued, circulated or
distributed in Singapore, nor may any of the New Shares be
offered or sold, or be made the subject of an invitation for
subscription or purchase, whether directly or indirectly, to
persons in Singapore other than (i) an institutional investor
under section 274 of the SFA, (ii) a relevant person pursuant to
section 275(1) of the SEA, (iii) any person pursuant to an offer
referred to in section 275(1A) of the SFA, or (iv) pursuant to
and in accordance with the conditions of any other applicable
provision of the SFA.
Where the New Shares are subscribed or purchased by (i) an
institutional investor pursuant to section 274 of the SFA, (ii) a
relevant person pursuant to section 275(1) of the SFA, or (iii)
any person pursuant to an offer referred to in section 275(1A)
of the SFA, such New Shares shall not be sold within a period of
six months from the date of the initial acquisition to any person
other than an institutional investor under section 274 of the SFA,
to a relevant person as defined in section 275(2) of the SEA, or to
any person pursuant to an offer referred to in section 275(1A) of
the SEA, and in accordance with the conditions of the SFA.
Where the New Shares are subscribed or purchased under
section 275 of the SFA by a relevant person which is: (a) a
corporation (which is not an accredited investor) the sole
business of which is to hold investments and the entire share
capital of which is owned by one or more individuals, each of
whom is an accredited investor; or (b) a trust (where the trustee
is not an accredited investor) whose sole purpose is to hold
investments and each beneficiary is an accredited investor,
securities of that corporation or the beneficiaries rights and
interest in that trust shall not be transferred within six months
after that corporation or that trust has acquired the New Shares
under section 275 of the SFA unless (i) that transfer: (a) is made
only to an institutional investor under section 274 of the SEA
or to a relevant person as defined in section 275(2) of the SFA;
or (b) arises from an offer referred to in section 275(1 A) of the
SEA, (ii) no consideration is or will be given for the transfer; or (iii)
the transfer is by operation of law, and in accordance with the
conditions of the SFA.
New Zealand
The Offer is being made in New Zealand pursuant to the
Securities Act (Australian Issuers) Exemption Notice 2002.
Although the Registrar of Companies in New Zealand has
received a copy of the Prospectus, the Prospectus has not been
registered in New Zealand under New Zealand law and it may
not contain all the information that a New Zealand registered
prospectus is required to contain. The shares are not intended to
be listed in the New Zealand Stock Exchange and New Zealand
resident investors may not have access to the information
concerning the Company in the same way as investors have in
relation to an issuer listed on the New Zealand Stock Exchange.
New Zealand investors should satisfy themselves as to the
tax implications if investing in equity securities and should be
aware that investing in the Shares may carry with it a currency
exchange risk.
17
The Company will, within 5 working days of receiving a request

of an offeree for a copy of the Prospectus, without fee, send,
or cause to be sent, to that person a copy of the Prospectus,
copies of any documents that, under the laws of Australia,
must accompany any copy of the Prospectus sent to any
person to whom the offer is made in Australia and a copy
of any document lodged with ASIC that is referred to in the
Prospectus which is taken to be included in the Prospectus
under section 712 of the Corporations Act. In respect of any
dispute concerning the contract for the issue of the Shares, the
Company agrees to submit to the non-exclusive jurisdiction
of the New Zealand courts. New Zealand investors should be
aware that notwithstanding the foregoing, the contract in
respect of the Shares may not always be enforceable in New
Zealand Courts and the Company may not be subject in all
respects to New Zealand law.
ii) in other circumstances which do not result in the document

being a prospectus as defined under the Companies
Ordinance or which do not constitute an offer to the public
within the meaning of the Companies Ordinance.
Unless permitted by the securities laws of Hong Kong, no
person may issue or have in its possession for issue, whether in
Hong Kong or elsewhere, any other invitation, advertisement or
document relating to shares in the Company, which is directed
at, or the contents of which are likely to be accessed or read by
the public of Hong Kong (except if permitted to do so under
the securities laws of Hong Kong) other than with respect to
shares in the Company which are intended to be disposed of
only to persons outside Hong Kong or only to professional
investors as defined in the SF0 or as otherwise permitted under
the Seventeenth Schedule of the Companies Ordinance and any
other applicable sections under the SF0.
Peoples Republic of China

The information in this document does not constitute a public
offer of the New Shares, whether by way of sale or subscription,
in the Peoples Republic of China (excluding, for purposes of this
paragraph, Hong Kong Special Administrative Region, Macau
Special Administrative Region and Taiwan). The New Shares may
not be offered or sold directly or indirectly in the PRC to legal
or natural persons other than directly to qualified domestic
institutional investors
Hong Kong
The contents of this Prospectus have not been reviewed by any
regulatory authority in Hong Kong. You are advised to exercise
caution in relation to the offer. If you are in doubt about any of
the contents of this document, you should obtain independent
professional advice.
This Prospectus has not, and will not be registered as a
prospectus under the Companies Ordinance (Chapter 32 of the
Laws of Hong Kong) (the Companies Ordinance) and it has not
been authorised for registration by the Securities and Futures
Commission in Hong Kong and, accordingly, this Prospectus
must not be issued to the public (i) offering shares of the
Company to the public for subscription or purchase for cash or
(ii) inviting offers by the public to subscribe for or purchase for
cash or other consideration any shares in or debentures of the
Company.
The Company has not offered or sold and will not offer or sell
in Hong Kong, by means of any document, any of the Shares
other than:
i) to professional investors as defined in the Securities and
Futures Ordinance (the SF0) (Chapter 571 of the Laws of
Hong Kong) and any rules under the SF0 or as otherwise
permitted under the Seventeenth Schedule of the
Companies Ordinance; or
3.15
Privacy Act
The Company collects information about each Applicant

from the Application Form for the purposes of processing the
Application and, if the Application is successful, to administer
the Applicants Shareholding in the Company.
By submitting an Application Form, each Applicant agrees that
the Company may use the information in the Application Form
for the purposes set out in this privacy disclosure statement and
may disclose it for those purposes to the Share Registrar the
Companys related bodies corporate, agents, contractors and
third party service providers (including mailing houses), the ASX,
the ASIC and other regulatory authorities.
If an Applicant becomes a Shareholder of the Company, the
Corporations Act required the Company to include information
about the Shareholder (name, address and details of the Shares
held) in its public register. This information must remain in the
register even if that person ceases to be a Shareholder of the
Company. Information contained in the Companys register
is also used to facilitate distribution payments and corporate
communications (including the Companys financial results,
annual reports and other information that the Company may
wish to communicate to its Shareholders) and compliance by
the Company with legal and regulatory requirements.
If you do not provide the information required on the
Application Form, the Company may not be able to accept of
process your Application.
3.
3.16
Offer details
Taxation
3.19
Enquiries
The Australian taxation consequences of any investment in

Shares will depend upon the investors particular circumstances.
Grant Thornton Australia Limited has prepared a Taxation Report
in Section 10 of this Prospectus as a general guide for Australian
investors contemplating investing in the Company. It is an
obligation of investors to make their own enquiries concerning
the taxation consequences of an investment in the Company
as the tax consequences that apply to an investor may differ
from the general comments provided in the Taxation Report. If
you are in doubt as to the course of action you should take, you
should consult your professional advisors.
This document is important and should be read in its entirety.

Persons who are in any doubt as to the course of action to be
followed should consult their stockbroker, lawyer, accountant or
other professional advisor without delay.
3.17
Who can apply?
Restricted Securities
Mr Shao Tianpeng
(personal capacity)
24 months
Green Peace Holding

Limited
12 months
Mr Yuan Zhanhua
(Pengfu Development
Co., Ltd)
12 months for half the

shares and 18 months
for half the shares
Mr Chen Jian (Kaitong

Industry Co., Ltd)
12 months for half the

shares and 18 months
for half the shares
Public Retail Offer
How to apply for Share under the Public Retail Offer?

Completing and returning the Public Retail Offer Application
Form with accompanying payment to the Share Registry.
Application Fund must be received by the Share Registry by 5:00
pm on the closing date.
The following shareholders and companies have entered into

Voluntary Escrow Agreements with the Company whereby
they have agreed not to sell their Shares for the periods set
out below:
Period
3.20
A resident of Australia who is not qualified as an institutional

investor according to the Corporations Act of Australia.
As a condition of admitting the Company to the Official

List, certain Shares held prior to the date of this Prospectus
may be classified by ASX as restricted securities. The effect
of this is that the restricted securities cannot be dealt with
for a period specified by the ASX in the agreements which
these Shareholders will have to enter into. Details of such
restricted securities will be released to the market prior to
commencement of trading in the Shares.
Shareholder and
company
Questions relating to the completion of the Application Form

can be directed to the Share Registrar on 1300 666 437 (within
Australia) or +61 2 8280 7778 (outside Australia) or +61 (0) 8
9315 2333 Monday - Friday between 8:00am and 5:00pm WST.
Number
of Shares
70.22%
9.95%
Minimum application amount

Applications under the Public Retail Offer must be for a
minimum of 4,000 shares and in multiples of 1,000 shares
thereafter.
Guaranteed amount
There is no guaranteed allocation of shares. It is the Companys
intention that subject to over subscriptions it will allot a
minimum number of 4,000 shares to each Applicant eligible
under the Public Retail Offer, whether they are eligible under
one or more categories.
Address for return of Application Forms
9.99%
9.84%
Additional details of the agreements are set out in Section 11.
Applications submitted via post must be mailed to:

Sino Australia Oil and Gas Limited IPO
C-/ Sino Australia Oil and Gas Limited IPO
C-/Security Transfer Registrars Pty Ltd
PO Box 535 Applecross
For hand delivery:
3.18
Dividend Policy
The Directors favour a strong dividends policy for its

shareholders. It is likely that, at least in the short term, the
Company will not pay a dividend as the Company intends to
expand its business by the purchase of specialized equipment
to generate increased revenues and margins. The extent, timing
and payment of dividends in the future will be determined by
the Directors based on a number of factors including earnings
and financial performance and the position of the Company.
Sino Australia International Oil and Gas LimitedIPO

C-/Security Transfer Registrars Pty Ltd
770 Canning Highway
Applecross
19
Closing date of the Public Retail Offer
Important note
5.00pm on 5 July 2013.
Sino Australia Oil and Gas Limited incorporated on 31 July

2012, the Company issuing this Prospectus, is the holding
company of Zhaodong Huaying Oil Drilling Service Company
and the businesses of the Sino Group, all currently located in
Heilongjiang Province, in the Peoples Republic of China upon
allotment of the Offer Shares pursuant to the Share Transfer
Agreement dated 27 February 2013. Refer to Sections 4.7 and
11.8 of this Prospectus for further details of the Corporate
Structure and Material Contracts.
Applications and Application fund must be received by the

Share Registry by no later than 5.00pm on 5 July 2013, unless
the Company elects to close the Offer or any part of it early,
extend the Offer or any part of it, or to accept late Application
either generally or in particular cases. The Offer or any part
of it may be closed at any earlier date and time, without
notice. Applicants are therefore encouraged to submit their
Applications as early as possible.
How to obtain a copy of the Prospectus and Application Form
Prospectus is available for download from:

www.mdsfinancial.com.au; or
www.d2mx.com.au
To request a hard copy Prospectus, please call the Lead

Manager, D2MX, on:

1800 627 886 (Australia only); or
+ 613 9617 0688 (for overseas only); or
email to corporate@d2mx.com.au
4. The Company
Overview
Sino Australia Oil and Gas Limited (SAO) is an integrated
technical service company providing Enhanced Oil Recovery
(EOR) services for oil and gas wells.
The Company was founded in the Peoples Republic of China in
December 2009 as Zhaodong Huaying Drilling Company. The
Companys current services are focused in the Daqing Oilfield
in the north of China, which is also known as the oil capital
of China, producing more than 10 billion barrels of oil since
production started in 1960.
Sino Australia Oil is a network member of the Daqing Oilfield
service market and a network enterprise member of Petrochina
(industry qualification certified).
A traditional vertical well drain range can be only 120 feet

around wellbore. A radial hydraulic jet treated well has a drain
range of up to 300 feet, which can significantly extend the
drainage halo and materially increase production.
Radial Hydraulic Jet Drilling is a highly cost-effective Enhanced
Oil Recovery method with the capability to potentially triple the
standard oil well drainage halo.
There is a short construction cycle associated with Radial
Hydraulic Jet Drilling, and there is no impact on the reservoir.
Key advantages of Radial Hydraulic Jet Drilling:
Coal
bed
Sino Australia Oil provides patented, proven and cost-effective

EOR drilling technology. The Company owns two patented
sidetrack drilling techniques:
1) Radial Hydraulic Jet Drilling; and
Clay
shale
2) Status Monitoring Device for Radial Drilling System (HRM).

Both techniques are used as Enhanced Oil Recovery (EOR)
technologies in production enhancement, primarily in existing
oil fields. The technology increases flow rates from existing
productive oil horizons and allows for access to new productive
horizons within existing wells.
The worlds large oil companies are increasing their
expenditures on EOR technology services, particularly given
the increase in global energy consumption, and diminishing oil
and gas resources. In fact, as petroleum in China now faces an
imbalance of domestic supply and rising demand, companies
such as Petro China and Sinopec are continuing to increase their
spend on EOR services.
Sino Australia Oil is strongly leveraged to the huge potential in
the Chinese oil and gas market, where the oil services market is
worth approximately 200 billion RMB and growing by 15% per
annum.
Further, the Company is seeking to enter the Australasian oil and
gas market and introduce its proven patented technologies to
these markets through both licensing and operations to existing
oil and gas companies.
Sandstone
Applicable
layers
Argillaceous
siltstone
Oil
extraction
The technique
effectively resolves
any formation
damage near the well
and increases the
total drainage area.
It enhances the flow
conductivity and
limits the increase
in water-cut.
Carbonatite
Short
construction
cycle and
low cost
No
harm to
reservoir
This technique takes

2-3 days to complete
the drilling of 4 wells
and 6-8 days to
complete the entire
construction project.
This is only about
one-third of the
traditional sidetrack
drilling cycle and
at a much lower
capital cost.
The technique
does not require
drilling mud and
does not cause
any material
damage to the
productive
formation.
Radial Hydraulic Jet Drilling

Radial Hydraulic Jet Drilling is an advanced development of the
common Radial Drilling technique. It is a patented technique
which can increase the production from existing oil and gas
wells that have a low, and declining, daily output.
The basic principle of Radial Hydraulic Jet Drilling is:

1) initially cutting a hole through the casing within the oil
horizon;
2) utilising a high pressure water jet through a soft tube with
an injector head to break through the oil-bearing horizon;
and
3) repeating the process in several more holes at different
levels in various directions.
21
4.1
History and Development
The Zhaodong Huaying Drilling Company, (Huaying), a wholly

owned subsidiary of Sino Australia Oil and Gas Limited, was
founded in December 2009. Huaying is an integrated technical
service company based on oilfield drilling technology and
petroleum exploitation. Huaying provides enhanced oil recovery
(EOR) services and underground work consultations for oil drilling
enterprises. The Company is a network member of the Daqing
Oilfield services market. It is also one of the network enterprises
of Petrochina, and has passed the qualification certificate in the
industry which enables the Company to exploit local oilfields.
In the past two years, 90% of the Companys income has come
from the Daqing Oilfield where the Company has one set of selfowned equipment and 5 unit sets of financed equipment which
allows for an annual turnover of 100 wells.
SAOs vision is to extend its business to oil regions in Xinjiang
and Liahoe where there is currently an underlying demand for
these services.
Huaying has achieved NOV Quality System Certification,
Occupational Health and Safety System, Environmental
Management System Certification.
Since its establishment in September 2009 the Company has
upgraded equipment and processes through in-house research
and development. As a result, the increase in efficiency of
operations has provided significant competitive advantages.
In order to further enhance the Companys core
competitiveness, and to strengthen and improve the market
share of the Companys technical services, the Company has
also introduced the independently developed Radial Hydraulic
Jet Drilling Technology to the market.
This has been done through introduction of the technology to
existing customers and other industry-related businesses.
4.2
Range of Services
Huayings operations are focused in the Daqing Oilfield where the

Company provides two enhanced oil recovery patented services:
1) Radial Hydraulic Jet Drilling (RHD); and
2) Status Monitoring Devices for Radial Drilling Systems (HRM).
These techniques can be used to enhance the production
capacities of old oil wells and in particular provide increased
recovery rates by comparison with traditional drilling methods.
Contracts are entered directly with individual operating
entities based on customer requirements. Contracts are fixed
costs in nature with agreed volume of services to be provided
(number of wells drilled or maintained) in line with customer
requirements at an agreed price per well drilled or maintained.
The typical contract service period is of 12 months duration.
Invoicing and payment is divided between the signing of
contract for service and by successful inspection by the

customer on completion. Government contracts are typically
paid in full annually at calendar year end.
Note, financing agreements are charged based on the number
of wells to be drilled, typically being RMB 230,000 per well (each
well being 4 holes tax inclusive), with a deposit of RMB 96, 000
being paid on signing of the contract for service.
4.3
Production process
Technique summary
a)
Background
The Radial Hydraulic Jet Drilling technique was developed and

is utilised in pollution zones around most oil and gas wells. The
original Radial Drilling technique was developed as early as the
1970s, but the cost of this technology was very high.
Companies in China have been researching and developing
this technique since 2002 and Radial Drilling is now well
understood and widely used. RHD is a refinement of the original
Radial Drilling technique which further enhances recovery. SAO
controls and owns the patented techniques of this advanced
technology service.
b)
Radial Hydraulic Jet Drilling Technique
The Radial Hydraulic Jet Drilling (RHJD) technique is a

development of the common Radial Drilling technique. It is
a patented technique which can increase the production of
existing oil and gas wells, which have low or declining daily
outputs. Abandoned oil wells with 20% recovery constraints
may also be enabled to resume production as this technology
enables more oil and gas resources to be accessed.
Figure 2: Radial Hydraulic Jet Drill
4.
The Company
Figure 3: Diagram showing how the technique works
Producing
reservoir
Depleted
compartment
Bypassed
compartment
Incompletely
drained
compartment
Depleted
compartment
New infill
reservoir
Uncapped reservoir
compartment
Depleted
compartment
Depleted
zone
Depleted zone
Uncapped
reservoir
compartment
This technology expands the accessible area of oil and gas reserves that can be mined. The usual drain range of traditional vertical
wells is only 120 feet around the wellbore. The range of radial wells shown above is around 300 feet. This increased range can extend
the control area and increase the amount of oil and gas that can be mined which increases the productivity of these oil wells.
4.4
Lateral Hydraulic Drilling
China has a large number of aging and underdeveloped wells. Enhanced oil recovery technologies such as Lateral Hydraulic Drilling
(LHD) can be widely used in most of the vertical oil wells in China.
Radial Hydraullic jet drillng is another technique that can be used to increase the production of existing oil and gas wells with a low
production output as it enables oil reserves to be accessed around the existing well, not just directly underneath it, as shown above.
4.5
Intellectual Property Rights
Zhaodong Huaying Oil Drilling Service Company (PRC) received published patent notification for Radial Hydraulic Jet Drilling
Technology and Radial Drilling System Working Status Monitoring Device on 18 January 2012 and 28 March 2012 respectively. Both
patents were granted by the Intellectual Property Office of the Peoples Republic of China and are to be registered including any
enhancements in other countries of
the world.
These patents differentiate and protect the Company as they provide the Company the exclusive rights to utilize the technology both
in its existing operations and in the future.
Both the Australian and Chinese lawyers conducted due diligence on the patents held by the Company and were satisfied that the
patents were appropriately granted to the Company and afford the full legal safeguards available to the Company under Chinese
Law. At present the Company conducts all its business in China. If after undertaking appropriate planning procedures incorporating
a formal due diligence process the Company decides in the future to expand its business to other countries the Company will as part
of that due diligence process undertake a full review of patent laws in the countries in which it proposes to undertake business and
may enter into appropriate patent protection procedures. At this stage no such planning has taken place and the Company has no
information relating to such procedures timeframes or cost of registering or enforcing patents in countries outside of China.
23
According to the copies of patents provided from Zhaodong, the Company has two inventive patents. This information was confirmed
from the State Intellectual Property Office of PRCs official website (http://www.sipo.gov.cn/).
Radial drilling system working condition monitoring devices
Application number
201110303222.7
Application date
Name of patent
Radial drilling system working condition monitoring devices
Public (Announcement)
number
CN102383780A
Main classification codes
E21B47/00(2012.01)I
Classification codes
E21B47/00(2012.01)I;E21B47/09(2012.01)I;E21B47/12(2012.01)I
Patentee
Zhaodong Huaying Oilfield Drilling Technology Service Co.,Ltd
Address
Room 340, Building 1, Science and Technology Industrial Park (Incubator Area), Daqing City,
Heilongjiang Province
Inventor
Wu Jiayi, Shao Tianxiang, Wang Wei
Application number
201110259648.7
Name of patent
Radial hydropower spray drilling technology
number
CN102312655A
Main classification codes
E21B7/18(2006.01)I
Classification Codes
E21B7/18(2006.01)I;E21B7/04(2006.01)I
Patentee
Zhaodong Huaying Oilfield Drilling Technology Service Co.,Ltd
Address
Room 340, Building 1, Science and Technology Industrial Park (Incubator Area), Daqing City,
Inventor
Wu Jiayi, Shao Tianxiang, Wang Wei
date
Application date
date
October 8, 2011
March 21, 2012
Sep 2, 2011
Jan 11, 2012
Figure 4: Summary of oil fields in China
Yumen Oil Field

Daqing Oil Field
Karamay Oil Field
Jilin Oil Field

Liaohe River Oil Field
Tarim Oil Field
North China Oil Field

Shengli Oil Field
Qinghai Oil Field
Area South of
Yellow River
Oil Field
Jianghan Oil Field
Sichuan Oil Field
The South of China

Sea Oil Field
4.
4.6
The Company
Environmental Law
The operations of the Company are regulated by Chinese

Environmental Laws. However the ultimate responsibility
for ensuring compliance with relevant regulations including
environmental laws rests with the customer receiving
the service.
4.7
Corporate Structure
The diagram below illustrates the corporate structure of the

Sino Australia Group.
Sino Australia
Oil and Gas Ltd
(Australia)
100%
Lishida
Development
(HK) Limited
Hong Kong
100%
Daqing Huao
Shengfeng Oil Field
Technology
Limited Company
100%
Zhaodong
Hua Ying Oil
Drilling Service
Company (PRC)
Zhaodong holds the two current patents
Details of corporate structure

Sino Australia Oil and Gas owns 100% of Lishida Development
(HK) Limited Hong Kong, which in turn owns 100% of Daqing
Huao Shengfeng Oil Field Technology Limited Company, which
in turn owns 100% of Zhaodong HuaYing Oil Drilling Service
Company (PRC), which is the operating company of the group.
The sole director of Lishida is SAOG, which is allowed under
Hong Kong Law. Daqing Huaos sole director and legal
representative is Ma Liang, because this company is a Wholly
Foreign Owned Enterprise PRC citizens are precluded from
directorship and direct legal representation. Ma Liangs role
in the Group is limited to being a nominee director of Daqing
Huao. Ma Liang does not have a familial relationship to any
director of any company in the Group and does not have any
financial or other interest (e.g. employment) in any company in
the Group. The Chairman and Managing Director of Zhaodong
HuaYing Oil Drilling Service Company is Mr Tianpeng Shao, who
is likewise the Chairman and Managing Director of SAOG.
Lishida Development (HK) Limited Hong Kong is subject to
Hong Kong taxation law, Daqing Huao Shengfeng Oil Field
Technology Limited Company and Zhaodong HuaYing Oil
Drilling Service Company are subject to PRC taxation law.
Lishida Development (HK) Limited Hong Kong has 10,000 fully
paid ordinary shares on issue. Daqing Huao Shengfeng Oil
Field Technology Limited Company has registered capital of
HK$30,000,000. Zhaodong HuaYing Oil Drilling Service Company
has registered capital of RMB 5,020,000.
25
5. Directors, senior management

and corporate governance
5.1
Board of Directors
The Companys Board of Directors is entrusted with the responsibility of the overall management and governance of the Company.
Mr Shao Tianpeng
Executive Director and Chairman
Mr Wayne Johnson
Non-Executive Director
Mr Shao graduated from Harbin Building

Institute with a Major in Civil Engineering
in 1989.
Mr Johnson has over 25 years business

and financial transaction experience
gained in Australia, New Zealand, Asia
and North America. His experiences range
from founding and managing a number
of businesses from start-up through
to public listings. He has also been
responsible for a number of large business
trade sales in the telecommunication
industry and resource sectors to
multinational buyers, was a founding
director of The Cube Financial Group a
licensed diversified ASX stock trading
and corporate advisory business which
merged and is known as ASX listed MDS
Financial Group Limited where he is the
Executive Chairman and Director. (MDS is
the 100% owner of ASX participant D2MX
who is the lead manager to this offering.)
He worked in a factory environment

and as a salesperson for 6 years before
entering the oil and gas industry in a
management role. He then worked as
General Manager for Daqing Zhongguan
Science and Technology Co., Ltd
and 6 years as General Manager for
Daqing Yinkun Decoration Engineering
Company.
Mr Shao was appointed in November
2009 to his current position of Executive
Chairman and Managing Director of
Zhaodong Huaying Oil Drilling Technology
Services Co, Ltd. which is the Chinese
operating entity and wholly owned
subsidiary of SAO.
Mr Shao is 41 years of age and resides
in China.
Mr Johnson provides SAO with a

wealth of experience in merger and
acquisitions, corporate advisory, public
listing compliance and general business
development. Mr. Johnson owns
Noblemen Ventures, his privately owned
boutique corporate advisory investment
firm headquartered in Sydney. He
provides services as a professional
director to public companies. As well
as being a Director of MDS Financial
Group Ltd he is also the Non Executive
Chairman of ASX listed Cape Range
Limited and until recently a nonexecutive director of GBM Gold Limited
and Non executive Chairman of SmartPay
Limited an NZX listed company.
Mr Johnson is 50 years of age and resides
in Sydney.
Mr Andrew Faulkner
Non-Executive Director,
Company Secretary
and Public Officer
Mr Faulkner holds a Bachelor of Business
(Accounting) from the University of
South Australia is a Member of the
Institute of Chartered Accountants
and a Registered Company Auditor.
He has more than 20 years experience
in public practice and is a registered
company auditor.
Mr Faulkner is the Senior Audit Partner
for Pitcher Partners in Adelaide and is
well experienced dealing with Chinese
companies with interests in Australia;
he spends significant time in China.
Mr Faulkner has a commitment and
attention to detail which brings an added
layer of comfort to his due diligence
reporting, business valuations, system
reporting and internal audit services.
Mr Faulkner is 48 years of age and resides
in Adelaide.
5.2
Senior Management
Yuan Zhanhua
General Manager Zhaodong Huaying Oil Drilling
Service Company
Mr Yuan has been working in the oil and gas industry in China
for 35 years. He commenced as a Transport Battalion Instructor
in the 3rd Oil Plant in 1977, was Deputy Manager in the Labor
Service Company of 3rd Oil Plant, Deputy Manager in 2nd
Mine of Labor Service Company of 3rd Oil Plant, Manager in
Engineering Company of 3rd Oil Plant, Deputy Director in Oil
Plant and General Manager of Li Da Company, General Manager
in Jiu Long Company of Daqing Oilfield Co., Ltd and Party
Secretary in New Century Industrial Company of Daqing Oilfield
Co., Ltd.
His experience is engineering and operational based with
extensive experience in man management.
Yin Xianfeng
Group Chief Financial Officer
Mrs Yin has a PhD degree from CEIBS (Chinese European
International Business School), MBS degree from Massey
University, Auckland, New Zealand, Management postgraduate
certificate from Peking University, and a Bachelor degree in
Engineering (major in Industrial Electrical Automation) from
Heilongjiang Technology Institute, China.
Mrs Yin Founded Shanghai Fortunehao Investment and
Management Limited which is a corporate advisory business
providing a full range of financial advisory and management
consulting services to China based businesses looking to
expand their operational range offshore.
Before founding Shanghai Fortunehao, Mrs Yin had accumulated
11 years of management and capital market experience in a
range of diversified international companies. Prior to that, Mrs
Yin had another 8 years of experience as a senior manager in
the New Zealand transport industry and had 2 years experience
with a Shenzhen based Hong Kong listed company.
Wu Jiayi
Chief Engineer
Mr Wu graduated from Daqing Drilling Work-study College in
1967 as a petroleum engineer.
Upon graduation he worked for 2 years as a Geological Team
Worker in Daqing Drilling Headquarters then for 4 years in
Daqing Drilling 3248 Team. He then worked for 7 years as a
Geological Technician of Daqing Exploration Headquarters.
Between 1980 and 1985 he worked as a Geologist in the
Geological Team of 1st Branch of Daqing Drilling Company.
Between 1986 and 1999 he was Deputy Manager in Daqing
Geological Logging Company. Since 1999 Mr Wu has operated
as an independent consultant and provides technical and
operational engineering guidance and support to the Company.
Sun Tiesen
Chief Geologist
Mr Sun is a qualified Geologist with over 50 years experience in
oil field production.
Between 1961 and 1964 he was a Technician in the Dynamic
Laboratory of Daqing Oilfield Exploration and Development
Institute. He then spent 3 years as a Technician in Daqing
Battle Agency Oilfield Underground General Staff. Between
1970 and 1983 he was a Technician in 4th Oil Plant then spent
3 years participating in the preparatory work of Longhupao
Development Experimental Zone around Daqing.
He then worked as General Geologist in 9th Oil Plant for 10 years
and in his role with the Company his experiences combined
with geological knowledge and skill enables the Company to
quickly quantify client opportunities and feasibilities.
5.3
Employees
Sino Australia (PRC) employs approximately 80 full time

employees. Each employee enters into a formal written contract.
Shao Tianxiang
Marketing and Sales Manager
5.4
Corporate Governance
Mr Shao is the brother of the SAO Executive Chairman and

Managing Director Mr Shao Tianfeng. Tianxiang graduated from
Harbin University of Commerce with a Major in Computerized
Accounting in 1996. He worked in middle management in China
Life Insurance Company for 6 years then as General Manager in
Daqing Yinkun Decoration Engineering Company for 7 years. He
has worked as head of marketing and sales since the Companys
inception and is responsible for customer relations, promotions
and sales revenue targets.
The Board is dedicated to maximising performance and generating

appropriate levels of Shareholder value and financial return.
Background
In conducting business within these objectives, the Board is

concerned to ensure that the Company is properly managed
to protect and enhance Shareholder interests, and that the
Company, its Directors, officers and employees operate in
an appropriate environment. The Board is committed to
principles of best practice in Corporate Governance and is
ultimately responsible to the shareholders of the Company;
Corporate Governance Principles and Recommendations with
2010 Amendments, 2nd Edition, ASX Corporate Governance
Council. The Board seeks, where appropriate, to adopt without
modification, the ASX Corporate Governance Principles and
Recommendations.
27
Board Committees
5) superannuation arrangements;
The board has established an Audit and Risk Management

Committee and a Remuneration and Nomination Committee.
The charters for each of these committees are available on the
Companys website www.sinoaustoil.com.au.
6) the remuneration framework for directors; and
Audit and Risk Management Committee
Set out below are summaries of the corporate governance

documents of the Company which are available on the
Companys website at www.sinoaustoil.com.au
The board has adopted an Audit and Risk Management

Committee Charter. This charter comprehensively outlines the
composition, meeting requirements, authority, reporting, duties
and responsibilities of the committee.
The committee must have a majority of independent directors
and include at least 2 non executive directors. The chairperson
also must be independent and cannot be the chairperson of the
board. The committee is to meet at least four times a year.
The current members of the committee are: Mr Andrew
Faulkner (Chair) and Mr Wayne Johnson.
The primary objectives of the Committee are to ensure:

effective management of financial and other material

business risks;
reliable management and financial reporting, including

accounts;
compliance with laws and regulations; and
maintenance of an independent, effective and efficient audit.
7) remuneration by gender.
Corporate governance documents of the Company
Summary of Board Charter

The Boards Charter sets out the functions, authority and
responsibilities for the Board. The Charter states the Boards
primary role is to represent and serve shareholders interests by
appraising the Companys strategies, policies, and performance.
The document also explains the relationship between the Board
and management.
Summary of Code of Conduct

The purpose of the Code of Conduct is to outline the Companys
philosophy and corporate values. The code is a framework for
conducting business and is applicable to all employees in the
Company including its subsidiary.
The code directs personnel relating to how to act in the case of
a conflict of interest, business hospitality, issues in the workplace
and media. No personnel at the Company or its subsidiary are to
offer or accept bribes. The code also deals with diversity in the
workplace and social and environmental awareness.
Nomination and Remuneration Committee

The board has adopted a Nomination and Remuneration
Committee Charter. This document sets out the committees
responsibilities, composition, access to resources and issues to
consider in nomination and deciding remuneration for executive
directors and senior executives and non executive directors.
The committee must have a majority of independent directors
and include at least 2 non executive directors.
The current members of the committee are: Mr Andrew
Faulkner (Chair) and Mr Wayne Johnson.
It is the responsibility of the Committee to review and make
recommendations to the board on:
1) procedures for the selection and recommendation of
candidates suitable for appointment to the Board;
Summary of Share Trading Policy

The Share Trading Policy reinforces the legal prohibitions of dealing
in the Companys securities by Directors, Officers and employees
when these people are in possession of inside information. The
policy restricts trading to certain window periods or in accordance
with permission obtained under the policy. The policy also sets out
the process for reporting breaches of this policy.
Summary of Continuous Disclosure Policy

The focus of the Continuous Disclosure Policy is compliance
with the disclosure requirements of the Corporations Act
2001(Cth) and the ASX listing Rules. The policy has been
adopted to establish procedures and protocols to ensure
that Directors and management are aware of and fulfil their
obligation in relation to the timely disclosure of information.
2) appointment, evaluation and removal of the Chief Executive

Officer, Board members and senior executives;
Summary of Shareholder Communication Policy
3) the Companys remuneration, recruitment, retention and

termination policies and procedures for senior executives;
This policy promotes effective communication with

shareholders by setting out the information to be disclosed to
shareholders and the manner in which it is to be released.
4) senior executives remuneration and incentives;
Corporate governance
Set out below is the If Not, Why Not report of the Board. Where the Companys Corporate Governance practices follow a
recommendation, the Board has made appropriate statements reporting on the adoption of the recommendation. Where, after due
consideration, the Companys corporate governance practices currently depart from a recommendation, the Board has disclosed the
reason for the adoption of an alternative practice. Reasons to depart from the recommendations reflect the Companys size, nature
and scope.
Recommendation
Comment
1.2
Companies should disclose

The Board is charged with the responsibility of reviewing and evaluating senior
the process for evaluating the
management. This will take place in informal meetings, at least once a year. The evaluation
performance of senior executives of the CEO will be supervised closely by the Principal Independent Director.
4.2
The audit committee should be

structured so that it: (a) consists
only of non-executive directors;
(b) consists of a majority of
independent directors; (c) is
chaired by an independent chair,
who is not chair of the board; (d)
has at least
3 members.
Given the size and makeup of the Board the 2 Independent Directors comprise the Audit
Committee with Andrew Faulkner as Chair. In accordance with Clause 2 of the Audit and
Risk Management Committee Charter, the Committee will be structured so that it consists
of a majority of independent directors, and is not chaired by the Chair of the Board, and
has at least three members. When an additional Independent Director is appointed to the
Board they will be appointed to the Audit Committee to ensure the Committee comprises
no less than 3 members.
8.2
The remuneration committee

should be structure so that
it: (a) consists of a majority of
independent directors; (b) is
chaired by an independent chair;
(c) has at least three members.
Given the size and makeup of the Board the 2 Independent Directors comprise the
Remuneration Committee with Andrew Faulkner as Chair. In accordance with Clause 2 of
the Remuneration Committee Charter, the Committee will be structured so that it consists
of a majority of independent directors, and is not chaired by the Chair of the Board, and
has at least three members. When an additional Independent Director is appointed to the
Board they will be appointed to the Remuneration Committee to ensure the Committee
comprises no less than 3 members.
29
6. Industry overview
China is currently undergoing three energy intensive

transformations which accounts for the increased oil demand.
These transformations include industrialisation, driven by heavy
industries like steel and petrochemicals; urbanisation; driven by
a large, disadvantaged rural population and motorisation which
is a consequence of increased car usage. China has accounted
for nearly three quarters of world energy demand growth in
recent years.
The Industry
Since economic reform policies were introduced in China in
the late 1970s, Chinas energy industry has experienced rapid
growth. This growth has made substantial contributions to the
sustained growth of Chinas national economy. China is now
the worlds second-largest energy producer and consumer.
Although oil production is not the dominant source of domestic
energy supply, sustainability is high on the governments list of
priorities as it has become ever more challenging to ensure a
reliable and adequate supply of oil to China. This has prompted
the Government to promote research and development in
securing a stable supply of oil.
Chinas reliance on oil

Over the past two decades, oil consumption in China has
increased steeply. It reached 396 million tons in 2008, quadruple
the 1978 level. As a consequence of economic growth and
development, China has become the second largest oil user
worldwide. A countrys demand for energy tends to reflect
the size of its economy. With Chinas economy being listed as
the second largest in the world, with nominal GDP reaching
US$4401.6 billion at the end of 2008, its primary energy
consumption has reflected this trend. Domestic supplies of oil
increased slowly between 1990 and 2008 from 138.3 to 197.8

million tons. However, Chinas oil consumption has grown
rapidly from 114.9 to 396 million tons in that same period. As
a consequence of this, China became a net importer of oil in
1993, where oil import dependency grew from 7.5% to 50%.
During the period of 1990 2007, there was a massive increase
in industry and an expansion in transport. This has impacted
the demand for oil greatly and will continue to do so as China is
currently experiencing a period of motorisation, whereby there
are increased sales and purchases of motor vehicles.
China Has Become a Net Importer of Oil

Figure 1: Oil importers of the world
Source: http://www.eia.gov/countries/cab.cfm?fips=CH
Top ten net oil importers, 2010*
Million barrels per day
9.6
United States
4.8
China
4.3
Japan
Germany
2.3
India
2.3
South Korea
2.2
France
1.7
Spain
1.4
Italy
1.3
Taiwan
0.9
Estimates of production and consumption. Does not include stock build.

Source: EIA Short-Term Energy Outlook (April 2011)
Consequent upon Chinas reluctance to rely solely on imported

oil, its energy security is largely focused on maintaining reliable
supplies rather than focusing on oil prices.
Figure 2: Chinas net imports
Chinas oil production and consumption, 1980-2000
5.0
4.5
4.0
Million barrels per day
The global demand for oil has grown rapidly in past decades.
This increase in demand has mainly come from developing
nations including China. The rapid expansion of Chinas
economy has lead to an increased demand for oil which in turn
has caused an increase in imports as oil production and supply
have decreased. Since 1993Chinas import dependency has
increased rapidly. This has led Chinese policymakers to adopt
tertiary oil recovery technologies to enhance oil production
to secure its energy supply. The increase in Chinas demand
for oil and the decrease in supply have led to developments
in Enhanced Oil Recovery (EOR) technologies, which are
used to enhance production from mature oil wells that have
surpassed their production peaks. According to the 2012 BP
Statistical Review, China again recorded the largest increase
in oil consumption of 5.5% compared to the 1.2% increase
of OECD countries. However, this rate was below the 10 year
average. This can be attributable to decreases in oil production
from giant oilfields. Oilfields such as Daqing and Huabei are
considered to be some of the most important giant oilfields
in China. Collectively they are responsible for 70% of Chinas
oil production and are largely responsible for the exponential
growth of Chinese oil production since the 1960s. Although
other methods of renewable energy are available, the demand
for oil will likely remain high.
3.5
3.0
Production
2.5
Net imports
2.0
1.5
Consumption
1.0
0.5
0.0
80
82
84
86
88
90
92
94
96
98
00
Note: Production includes crude oil, natural gas liquids and refinery gain.
6.
Industry overview
The diagram below illustrates the net imports of Chinas oil

production and consumption. Although China imports a
majority of its oil it is able to sustain economic development
through relying on its own energy resources, largely coal.
However, the aging of Chinese oil wells poses insecurities
for policy makers. China views its energy security from the
perspective of maintaining a sustainable oil supply.
Figure 3: Chinas net imports of energy sources
Natural gas 3%
Nuclear 1%
Hydroelectric 6%
Other renewables 0.2%
Industry growth has led to an increase

in oil demand
China has witnessed a profound increase in economic
development and as such, is now regarded as one of the fastest
growing great world economies. Chinas appetite for energy is
extreme and as the BP report in 2009 suggests, China accounted
for nearly three quarters of the worlds energy demand growth
in recent years. Although oil has not traditionally taken up
a dominant position in Chinas fuel mix; China has become
increasingly reliant on oil production to sustain the growth in
demand for transportation and private automobile usage and
the growth in light and heavy industry.
Motorisation - More people are Buying

and Using Cars
Oil 19%
Coal 71%
According to the White Paper Report issued in December

2007, Chinas energy resources are widely scattered causing
uneven distribution. Oil is mostly found in the eastern, central
and western regions of the coast in geographically complex
conditions that require advanced and expensive technologies.
Poor infrastructure is causing the government to invest in
creating a safe and sufficient energy supply. Fundamental
scientific research has led to high achievements relating to
energy innovation and has promoted development techniques
in geologically complicated regions which enable increased oil
recovery ratios in those oilfields.
Chinas Strategy and Goals in Relation to

Oil Technology
The 11th Five Year Plan (2006-2010) sought to stabilise energy
consumption, with the 12th Five Year Plan (2011-2015) aiming to
increase the accountability of non-fossil fuel usage.
Historically, China has relied on domestic energy sources to
develop its economy and its self-sufficiency has been above
90% which is higher than the majority of developed countries.
China will continue to rely on domestic sources of energy. To
maintain this, China will continue to implement the policy
of simultaneous development of oil and gas. It will tap into
the potential of major oil-producing areas, aim to improve
stabilisation of yields and increase the recovery ratio and slow
down the yield decreasing trends in maturing oilfields. Further,
China will expedite the construction of oil and gas pipeline
networks to support growing facilities.
As a result of Chinas economic development and growth in

the transportation sector, the demand for gasoline, diesel and
other types of fuel have increased by over 15% in the past
years. The July 2012 Industrial Production Operation report
conducted by the National Bureau of Statistics of China showed
that 40 industries within 41 had continued annual growth. The
manufacture of automobiles has grown to 9.8% per annum from
approximately 3.9% per annum in 2011.
From 1980 to 2002, highways in China doubled in length, freight
traffic quadrupled and passenger traffic increased substantially.
From 1990 2007 the use of oil in China has changed with a
visible reduction in industry demand and to an expansion in
transport demand. With rising incomes, Chinas motor vehicle
production and private vehicle ownership also grew rapidly.
Vehicle ownership grew from 5.5 million car owners to 43.6
million car owners in 2007 because of economic growth, the
lower cost of vehicles and the desire of Chinese people to
own motorized vehicles as a means of transport. The growth
in economic development has made owning a car more
affordable for individuals. The increase in car ownership can
also be attributed to Chinas pro-auto policy introduced in
1994 which designated the automobile industry as a pillar of
economic development and officially promoted the ownership
of motor vehicles. Chinas entry into the WTO also triggered a
price war among domestic auto manufacturers at the beginning
of 2002 which made cars even more affordable. Finally, there has
also been a huge increase in logistical development in China
causing an increase in the demand for freight vehicles which is
also attributable to economic development.
The relationship between economic growth and an increase in
transport energy has been almost linear for the last 30 years. This
is true for China where its transport energy demand has grown
10.4 times, equivalent to the 11 fold growth in GDP from 1978
to 2005. Chinas total final energy use in regards to transport has
expanded from 5.2% to 10.4%, yet this is substantially smaller
compared to the rest of the world being around 27.5% which
can be attributed to Maos national spatial planning in the 1950s
where factories were built in areas that had little infrastructure.
31
Transport is regarded as a captive market for oil as there are no current substitutes for oil. The key forces driving Chinas transport
oil demand can be said to include the growth of road transport, the dieselization of rail transport, as many trains were fuelled by
ineffective and polluting coal, and an increase in domestic air travel. It is estimated that road transport has accounted for 80% of the
overall growth in transport energy use since 2005, and this rapid expansion has led to a massive increase in demand for oil.
Heavy Industry - Factories are producing more and are using more energy
Industry is the largest energy and oil consumer in China as industrialization has been embraced as a means towards economic
development. The transfer from rural labor to more economically efficient industrial labor has led to increased economic growth
and increased incomes. Oil consumption in the industrial sector has accounted for 42.1% of total end use oil demand. Chinas heavy
industry has grown because of urbanization, which results in the construction of buildings and facilities that require industrial materials
such as steel and cement. Second, the governments pro-auto policy, aims to increase highway development further, relying on heavy
industrial material. Lastly, is the development of light industry which relies on the machinery, equipment and raw materials that heavy
industry supplies. The National Bureau of Statics of Chinas 2012 July Industry Production Report shows the manufacture of general
machinery has increased to 6.5%, which shows the reliance on heavy industry materials from other industries.
The heavy industry in China however, has not hugely affected oil demand. Oil demand for heavy industry declined from 59.2% in
1990 to 42.1% in 2007, although the share in energy demand generally has increased to 71.1%. This decline can be attributed to the
fact that many industrial industries, such as textiles do not need to rely on oil to function because of the availability of other energy
sources. The demand for oil in the heavy industry sector remained at around 17% from 1990 2007, while the demand for oil in other
industries, such as households and transport grew massively. The decline in industry oil demand is because oil plays a less important
role in their fuel mix. For example, the energy consumption of the ferrous metals industry grew by 18.1% annually from 2003-2007,
but its oil consumption fell by 6.2% because of electrification and expanded use of gaseous fuels.
Other industries that have impacted oil demand in china

Other industries that have impacted oil demand to a lesser extent include the household and domestic sector, whose fuel mix has
evolved from biomass fuels (wood and coal) to oil and gas due to its availability and increased incomes. Air transportation has also
increased the demand for oil derived fuels. From 1990 to 2007, the number of Chinas domestic air routes increased from 385 to 1216.
The amount of air passengers increased from 15 766 million to 217 331 million.
Daqing Oil Field

Figure 4: Map of Daqing oilfield
Russia
Kazakhstan
Daqing
Mongolia
Jilin
Uzbekistan
Turkmenistan
Kyrgyzstan
Liaohe
Tarim Basin
Tajikistan
Dadang
Changqing
PEOPLES REPUBLIC
OF CHINA
Afghanistan
Iran
Pakistan
Nepal
Republic
of Korea
Shengli
Japan
Zhongyuan
Jiangsu
OFFSHORE
OIL FIELDS
Bhutan
Bangladesh
India
North
Korea
Myanmar
Chinese
Taipei
Vietnam
Laos
Hainan
Thailand
Cambodia
Philippines
6.
Industry overview
Historical Production
The Daqing oilfield is one of the largest oilfields in the world. It
has maintained a stable yield of more than 50 million tons of
oil per annum since 1976 where it was at its peak. Throughout
the 1960s and 1970s, Daqing accounted for an average of
75% of Chinas oil production, making a significant impact on
Chinas oil industry. Since then, it has gradually declined from a
peak of 78.7% in 1964 to 22.7% in 2007. The production of the
oilfield can be divided into three phases. The first, (1961-1975)
saw a continuous increase in newly discovered reserves and oil
production and newly discovered reserves increased faster than
oil production. The second phase (1976-1991), saw the annual
discoveries of new reserves decline and were at a lower rate
than oil production and the final phase (1992- current) shows
again that reserve discoveries have declined as has production
each year, and recoverable reserves continue to decline rapidly.
Investment scale of Chinas oilfield

services industry from 2009 to 2011
Source: National Bureau of Statistics, Research Center Finishing
Investment scale of Chinas oilfield services industry
from 2009 to 2011
Figure 5: Oil production in Daqing

Source: http://www.econbrowser.com/archives/2007/11/the_
challenge_o.html
The scale of investment (10 million Yuan)
380
Chinas Daqing
Annual oil production (in 000 barrels per day)
To maintain oil security, Chinas National Oil Companies (NCOs)

are investing in Enhanced Oil Recovery (EOR) techniques, which
are a tertiary oil extraction method to increase production in
Chinas mature oilfields. The diagram below shows the increase
of investment into Chinas oil services industry. China National
Petrol Company (CNPC) is increasingly utilizing natural gas
supplies from the Daqing field for reinjection purposes to help
EOR projects which will hopefully sustain the future oil output
in Daqing. Daqing is currently in the late stage of high water-cut
development and tertiary recovery methods must be used in
order to maintain production.
1200
1000
800
600
400
360
348
350
340
330
320
322
310
300
290
200
374
370
2009
2010
2011
0
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
Current Production
Since 1997 however, production at Daqing has declined at a
rate of 2.9% per annum, however it is still accountable for nearly
25% of Chinas oil production. To sustain the productivity levels
in Daqing, China National Petroleum Corporation (CNPC) put
forward the objective of establishing a centurial oilfield which
was to make the field an important oil and gas base for china
through to 2060, by which it would have been exploited for 100
years. However, based on forecasts by Tang et al and Hook et al
there is little that can be done to prevent the eventual decline
of oil production in Daqing. Establishing a long term plan for
Daqing is essential to ensure that it remains a productive asset
for China, yet despite recent investments made in Daqing, it is
inevitable that future oil production in Daqing is going to decline.
Potential enhanced oil recovery market

85% of Chinas oil production capacity is located onshore,
primarily in mature oilfields. In 2008, China was the 5th largest
oil producer in the world. As such, Chinas NCOs are investing in
EOR technology to maintain a reliable oil supply. The diagram
below shows the market scale for the oil field technical service
market. Future domestic oil production in China will face many
challenges in the coming years due to the rapid increase in
oil demand and slow oil production rates. The dependence
on giant oilfields such as Daqing will make it difficult to offset
decreasing production rates.
33
The oil field technical service market

scale from 2011 to 2015
Source: Research Center Finishing
Market size of Oilfield technology services

(100 million Yuan)
The oilfield technical service market scale from 2011 to 2015
3500
2863.9
3000
2500
2365.1
3150
2620.8
2142.66
2000
1500
1000
500
0
2011
2012
2013
2014
2015
Key Players in the Enhanced Oil Recovery

(EOR) Market
China National Petroleum Company (CNPC) and Sinopec are the
primary market for EOR technologies as they are the largest oil
and gas developers in China. These companies seek to maintain
production and slow the rate of decline of major oilfields.
Douglas Westwood research has found that EOR production
has increased from 0.67 million barrels per day to over 0.8
million barrels per day in 2010. Further, EOR output has been
driven by an accompanying growth in expenditure relating to
EOR technologies. In 2000, Enhanced Oil Recovery production
reached over 10 million tons for the first time and has continued
to increase.
Lateral Hydraulic Drilling

China has a large number of aging and underdeveloped wells.
Enhanced oil recovery technologies such as Lateral Hydraulic
Drilling (LHD) can be widely used in most of the vertical oil wells
in China.
Radial Hydraullic jet drillng is another technique that can be
used to increase the production of existing oil and gas wells with
a low production output as it enables oil reserves to be accessed
around the existing well, not just directly underneath it.
7. Risks of investing
This section outlines the risks associated with investing in
Sino Australia, which have the potential to impact on the
performance and value of the shares. Applicants need to
consider these factors and consult their stockbroker, accountant,
lawyer, or other professional advisor before deciding whether to
apply for new shares.
There are a range of specific risks associated with the Companys
business in China, which are largely beyond the control of the
Company and its Directors.
The following, which is not exhaustive, identifies some of the
major risks associated with an investment in the Company, of
which potential investors need to be aware, before making a
decision on whether or not to invest in the Company.
7.1
ASX and share price variations
Listing on the ASX involves an increase in accounting, legal and

other professional advice to meet reporting requirements. This
translates to increased costs to the Company.
Prospective investors need to understand that the shares in Sino
Australia may rise or fall in relation to the offer price. There is no
guarantee in respect or profitability, dividends, return of capital
or the price at which the shares may trade on the ASX.
Prospective investors should recognise that due to factors such
as; general economic outlook, movements in interest or inflation
rates, currency fluctuations, commodity prices, investor confidence
and other factors, fluctuation in the share price may result.
7.2
Share Market Conditions
Share market conditions may be affected by many international

and domestic factors, including, but not limited to:
a) economic conditions and general economic outlook,
including inflation rates and interest rates;
b) changes in Australian and international stock markets;
c) government policy changes, including taxation, monetary
policies and legislation;
These factors may cause fluctuations in the prices of listed

securities quoted on the ASX, including the Company.
Regardless of the Companys performance, share market
fluctuations may materially and adversely affect the market
price of the Shares.
No guarantee can be given that trading prices and volumes
of any securities will be sustained. The Company, neither
the Directors nor any other person guarantees the market
performance of the Company.
7.3
Australian and Foreign

Government Political Factors
Changes to the law in regard to property, the environment,

superannuation, taxation and the regulation of trade practices,
both in Australian and foreign jurisdictions may affect the
operations of Sino Australia.
Additionally, other political factors such as changes in
Government Policy, may adversely affect economies, financial
markets and investments generally in Australia or foreign
jurisdictions.
7.4
Economic Factors
Factors such as inflation, currency fluctuations, interest rates,

supply and demand and industrial disruption have an impact on
operating costs, commodity prices and stock market processes.
These factors, both domestically and internationally may affect
the performance of the Company.
Changes in the general economic climate in which the
Company operates may adversely affect the operating and
financial performance of the Company.
Factors such as inflation, currency fluctuations, interest rates,
industrial disruption and economic growth may impact on
future operations and earnings. These factors are beyond the
control of the Company. No assurance can be given that general
economic factors will not affect the Company. Indeed, these
factors may affect the Companys future profitability and the
market price of its Shares.
d) interest rates and inflation rates;

e) currency fluctuations;
f ) perception of investors towards particular market sectors;
g) the demand for and supply of capital; and
h) war, terrorism or other hostilities.
No assurances can be given as to the growth experienced by

the Chinese economy. A future economic downturn in China or
in other regions where the Company operates may materially
and adversely affect the operating and financial performance of
the Company.
35
7.5
Government Policy, Legislation

and Regulation
7.8
Dependence on Key Personnel
The introduction of new legislation or amendments to existing

legislation and regulations by governments, and the decisions
of courts and tribunals, may adversely impact on the assets,
operations and the financial performance of the Company and
its securities.
The Companys future depends, in part, on the continued

contributions of its executive management team and other key
management and technical personnel, each of whom would
be difficult to replace. The loss of service from these or other
executive officers or key personnel or the inability to continue
to attract qualified personnel may have a material adverse effect
on the Companys business.
Political changes or change to monetary and fiscal policies,

import regulations and tariffs, taxation, methods of taxation and
currency exchange could affect the profitability of the Company
and adversely affect the return to Shareholders.
7.9
Any adverse changes in political and regulatory conditions in

China, or countries where the Company sources or exports its
services could affect the Companys prospects.
7.6
Risk of international operations

generally
International purchases, sales and operations are subject to a

number of risks, including:
a) potential difficulties in enforcing agreements (including
joint venture agreements) and collecting receivables
through foreign local systems;
b) potential difficulties in protecting intellectual property;
c) increases in costs for transportation and shipping; and
d) Restrictive governmental actions, such as the imposition of
trade quotas, tariffs and other taxes.
In addition to the General Risks listed above there are a range of
specific risks associated with Sino Australia and its involvement
in the Oil and Gas Industry in China. The following list of specific
risk factors ought not to be taken as exhaustive. The risk factors
referred to in this Section, and others not specifically referred to,
may in the future materially affect the financial performance
of the Company and the value of the Shares offered under
this Prospectus.
7.7
Expansion/Business Plan
Sino Australia plans to grow substantially and increase its market

share. The Companys ability to do so is dependent on:

obtaining more contracts for provision of its services;
ensuring strong profit margins by controlling expenditure;
reducing reliance upon financed equipment; and
responding to competition in the market.
Sino Australia has conducted significant research on the

planned expansion.
The failure of the Company to manage the key growth drivers
may adversely impact the performance of the Company.
Operating Risks
The Companys success depends upon its ability to deliver

high quality services to its customers at an acceptable cost.
Operating in the oil and gas industry, the Company constantly
encounters quality, volume and cost concerns. While the
Companys management team is confident these concerns
can be mitigated, these factors have the ability to cause
considerable strain on service capabilities and customer
relations. If the Company does not maintain its high standard
of services, there is a real chance that the Companys operating
results will not meet current and future expectations. Further
the Company is presently partly reliant upon the leasing of
drilling equipment from third parties which has an inherent risk
if the third parties fail to supply the drilling rigs for any reason.
7.10
Tax Risks
The Company is subject to the tax regimes of China and

Australia as the Taxation Report prepared by Grant Thornton
sets out in Section 11. However, more generally, changes in the
tax laws and regulations or their interpretation and application
could adversely affect the tax liabilities of the Company.
7.11
Intellectual Property Rights
The Sino Australia patented technology is of extreme

importance in the Companys ability to trade. Various risks
associated with protection of the Companys intellectual
property rights and proprietary technology includes:
a) p
otential for misappropriation of the Companys intellectual
property, particularly in countries where the laws may not
protect the Companys proprietary rights as fully as in other
jurisdictions such as Australia;
b) r isk of becoming subject to litigation as a result of an
alleged infringement of others intellectual property rights
causing the Company to incur significant costs, regardless
of the outcome, and if the Company is unsuccessful,
subjecting the Company to significant liability for damages
and invalidation of proprietary rights; and
c) T he Company may also initiate action against third parties
for infringement of its proprietary rights which could result
in costly litigation.
7.
7.12
Risks of investing
Country Risk
The Companys business is conducted and located in China,

such that its operations will be subject to:
a) the risk of political and economic instability in China;
b) the possible imposition of restrictive trade regulations and
tariffs;
c) reduced protection for intellectual property rights under
Chinese law;
d) reduced legal protection and remedies under Chinese
commercial laws;
e) risks of foreign exchange currency fluctuations; and
f ) Unexpected changes in regulatory requirements (such
as those relating to taxation, import and export tariffs,
environmental obligations and other matters).
The majority of the Companys customers are located
throughout China. Presence in the market exposes it to certain
risks, including, but not limited to the following:
a) its ability to comply with customs, import and export and
other trade compliance regulations;
b) difficulties in establishing and enforcing its intellectual
property rights;
c) tariffs and other trade barriers;
7.15
Unforeseen expenditure risk
Expenditure may need to be incurred which has not been taken

into account in the preparation of this Prospectus. Although
the Company is not aware of any such additional expenditure
requirements, if such expenditure is subsequently incurred, this
may adversely affect the expenditure proposals of the Company.
7.16
Strategic investment risks

and management of growth
The growth of the Company through either acquisitions or

organic growth initiatives carries with it a number of risks.
Acquisitions could result in losses for the Company based on
the assessment of acquisition opportunities, the retention of
staff and clients and the integration of new businesses. Organic
growth initiatives could result in losses for the Company if
operating expenditure or capital expenditure does not result
in the anticipated increase in sales or profits for the Company.
There can be no assurance that acquisitions and other growth
initiatives will achieve required returns on investment.
The Companys business plan involves the possibility of the
Company making acquisitions of other companies. Any
potential future transactions would be accompanied by risks.
There can be no guarantee that any new acquisition will provide
returns to Shareholders, or that any opportunity for acquisitions
will eventuate.
d) political, legal and economic instability in foreign markets;

e) difficulties in staffing and management;
f ) language and cultural barriers;
g) longer payment cycles;
h) greater difficulty in accounts receivable collection;
i) currency fluctuations; and
j) Potential adverse tax consequences.
7.13
Regulation of Activities
While significant amounts of regulation currently applies to

the Companys activities (as well as other laws applicable to
businesses generally), it is possible that new specific laws will
be introduced in China, Australia or any overseas country which
may have a material adverse effect on the Companys business.
7.14
Shortage of Funding
The funds raised by the Offer will be used to carry out work on
the Companys projects as detailed in this Prospectus. If the
Company incurs unexpected costs or is unable to generate
sufficient operating income, further funding may be required.
Any additional financing through share issues may dilute
shareholdings acquired under this Prospectus. Debt financing
may not be available to support the scope and extent of
proposed developments. If available, it may impose restrictions
on operating activities or anticipated expansion of the
Companys operations.
7.17
Adverse changes in interest rates

and borrowing terms
The Company borrows money to assist in financing its

operations, exposing it to increases in interest costs if interest
rates rise. Increases in interest rates may also affect consumer
sentiment and business confidence, potentially leading to
decreased demand in the Companys markets. Accordingly, an
increase in interest rates may have a material adverse impact to
funding/cash flow to meet capital expenditure requirements.
7.18
Environmental Regulation
The Companys future growth and development is subject to

Chinese laws and regulations regarding environmental matters,
including the discharge of any hazardous wastes or materials.
Although the Company contracts these risks to its clients a
potential liability risk exists.
The Company may incur liabilities for damages, clean-up
costs, or penalties, in the event of unintended discharge from
construction or operation of its facilities. Any such liability may
adversely affect the Companys financial performance.
The Company is, and intends to operate in an environmentally
responsible manner, in accordance with applicable laws and
accepted industrial practices.
37
7.19
Adverse changes in foreign

exchange rates
The Companys businesses will largely operate in China with

some export sales, and plans to open sales channels into
Australia in the short term thereby exposing it to adverse
movements in foreign exchange rates, most particularly in
relation to the translation of financial results into Australian
dollars and the potential movement of funds between countries
for purposes such as paying dividends, repaying debt, acquiring
new businesses and/or supporting the capital needs of the
Companys business. The proportion of the Companys sales
and profits generated in China may change in the future based
on relative sales performance, growth initiatives and business
acquisitions, and hence the Companys relative exposure to
different foreign exchange rates may change in the future.
The Companys costs and expenses are denominated in
Renminbi. Accordingly, the depreciation and/or appreciation
of Renminbi relative to Australian currency would result in a
translation loss or gain on consolidation which is taken directly
to shareholder equity. In addition, the reporting currency of
the Companys financial reports is denominated in Australian
currency. Any depreciation of Renminbi relative to Australian
currency may result in lower than anticipated revenue, profit
and earnings.
7.20
Product Liability Risk
As with all services, despite regulatory approvals, there is no

assurance that unforeseen adverse events or service delivery
problems will not arise. Failures could result from the quality of
components used, or problems processing and recovering the
oil and gas. As with the majority of Chinese service companies
the Company does not hold a level of product liability insurance
since at present it only provides an oil and gas recovery service
which is inherently difficult and protracted.
7.21
Service delivery Risk
The Companys services must meet regulatory requirements

which are subject to continual review, including inspections, by
the relevant regulatory authorities. Failure by the Company to
continuously comply with applicable regulatory requirements
or failure to take satisfactory action in response to an adverse
inspection could result in enforcement actions, such as
shutdowns of, or restrictions on, service delivery operations,
delay in the approval of services or other enforcement actions.
7.22
Trade Secrets
In addition to its patent activities, the Company also relies on

its trade secrets. The protective measures that the Company
employs may not always be sufficient to protect its trade
secrets including patented IP. This could erode the Companys
competitive advantage. The Company cannot be certain that
others will not independently develop the same or similar
technologies on their own, or gain access to trade secrets or

disclose such technology, or that the Company will otherwise
be able to meaningfully protect its trade secrets and unpatented
know-how, or that the Company will otherwise be able to
meaningfully protect its trade secrets and unpatented knowhow and keep them secret.
7.23
Contractual Risks
The Company operates, and will continue to operate, through

a series of contractual relationships with clients/customers.
The Companys existing business model does not necessarily
incorporate repeat customer business, but rather is reliant upon
revenue being generated from individual project contracts. All
contracts, including those entered into by the Company, carry
a risk that the respective parties will not adequately or fully
comply with their respective contractual rights and obligations,
or that these contractual relationships may be terminated. In
certain instances, it may be costly for the Company to enforce its
contractual rights.
7.24
Retention of Key Business
Although the Company is pursuing a diversification strategy,

existing sales are reliant on companies associated with
or subsidiaries of the Beijing Government or Provincial
Governments of China. The Company has a contract with
one SOE, which presently represents circa 75% of its annual
revenues in 2013. The failure of the Company to maintain these
key accounts would adversely and materially impact upon the
performance of the Company.
7.25
Changes to input costs and

supply chain
The Company is exposed to risks relating to the costs and

certainty of supply of critical inputs of specialised equipment for
its Radial Hydraulic Jet Drilling activities and interruption of the
service delivery due to equipment failure or labour issues. These
risks could affect the Companys ability to complete customer
orders and control costs, either of which could have an adverse
impact on the Companys financial performance.
7.26
Credit risk
The Company could be adversely impacted if one or more

major customers were to default on payment for services
rendered by the Company. In such situations the Company
would generally have delivered finished services to customers
prior to default becoming evident, which could make recovery
of costs associated with the work undertaken and services
supplied difficult.
7.
7.27
Risks of investing
Weather and Climate changes
The Company performs its business services outside and not

typically under any cover, the conditions of winter in China can
be harsh and can affect access to well sites and the movement
of equipment, and may risk the workflow plans of the Company
adversely affecting revenue that can be billed to customers.
7.28
Ability to affect the Companys

direction
Due to the number of shares on issue in the Company, new

investors who subscribe under the Prospectus will hold a
relatively small portion of ownership of the Company.New
investors should be aware that they are unlikely to be able to
significantly affect the Companys direction by exercising their
voting rights in the usual manner.
7.29
Lack of Liquidity Post Listing
The Company currently has 193,170,400 shares on issue at the

date of the Prospectus. The Offer Oversubscription may result in
up to another 40,000,000 shares being on issue with a minimum
24,000,000 shares to be issued. In percentage terms, the Offer and
Oversubscription will comprise 17.1% of the Companys ordinary
shares on issue and the minimum Offer will comprise 11%.
New investors of the Company should note that liquidity postlisting may be constrained given a significant portion of the
Companys existing shares will be placed in escrow.
7.30
Summary
This investment is in a technology based service business,

which has had two successful profitable years; it is a speculative
investment with a strategy to become a growth company for
investors in the future. The Company has achieved profitable
results for the last 2 financial years. The Directors and any party
associated with the preparation of this Prospectus warrants
that to the extent that statements in this Prospectus constitute
forward looking statements, these statements involve known
and unknown risks, uncertainties and other factors that may
cause the Companys or the industrys actual results, levels
of activity, performance or achievements to be materially
different from any future results, levels of activity, performance
or achievements expressed or implied by these forward
looking statements. Although the Company believes that the
expectations reflected in the forward looking statements are
reasonable, it cannot guarantee future results, levels of activity,
performance or achievements and the Company does not
assume responsibility for the accuracy and completeness of the
statements.
39
8. Financial information
8.1
Introduction
This section contains a summary of the historical, pro forma

and forecast financial information of the Group (together the
Financial Information).
The Historical Financial Information comprises the:

consolidated statement of comprehensive income of the

Group for the 3 years ending 31 December 2012 (refer to
section 8.3);
consolidated cash flow statement of the Group for the 3

years ending 31 December 2012 (refer to section 8.6); and
consolidated historical statement of financial position of the

Group as at 30 June 2012 (refer to section 8.9).
The Historical Pro Forma Financial Information comprises the:

consolidated historical pro forma statement of financial

position of the Group as at 30 June 2012 and at 31
December 2012 (please refer to the Directors statement
on the 31 December 2012 pro forma statement of financial
position, below) (refer to section 8.9).
The Groups Pro Forma Historical Consolidated Statement

of Financial Position assumes completion of the proposed
transactions outlined in Section 8.10.
The Forecast Financial Information comprises the:

forecast consolidated statement of comprehensive income

of the Group for the year ended 31 December 2013 (refer to
section 8.3); and
forecast consolidated cash flow statement of the Group for

the year ended 31 December 2013 (refer to section 8.6).
Also summarised in this section are:

the basis of preparation of the Financial Information (see

section 8.2); and
the Directors best estimate assumptions underlying the

Forecast Financial Information (see section 8.4).
The Directors of the Group are responsible for the inclusion

of the Financial Information in this Prospectus. The Financial
Information has been reviewed by Grant Thornton Corporate
Finance Pty Limited (with the exception of the 31 December
2012 pro forma statement of financial position, as to which
please refer to the immediately following paragraph) whose
Investigating Accountants Report is contained in section 9.
Directors statement on the 31 December 2012 pro

forma statement of financial position
The amounts shown in the 31 December 2012 pro forma
consolidated statement of financial position are not audited
or reviewed, nor prepared from audited or reviewed financial
statements for the six months ended 31 December 2012.

Notwithstanding this, the Directors have reviewed the amounts
shown in the 31 December 2012 pro forma consolidated
statement of financial position, made such inquiries as they
considered prudent and reasonable, and believe these amounts
to be true and accurate and not misleading or deceptive.
The information set out in this Section and the Groups selected
Financial Information should be read together with:

managements discussion and analysis set out in section

8.3.1;
the risk factors described in section 7;
the use of proceeds and the Offer described in section 3;
the indicative capital structure described in section 3;
the Investigating Accountants Report on the Financial

Information set out in section 9; and
the other information contained in this Prospectus.
In addition, potential investors should be aware that past

performance is not an indication of future performance.
8.2
Basis of preparation, presentation

and source of the Financial
Information
The Financial Information included in this section has been

prepared and presented in accordance with the recognition and
measurement principles prescribed in Australian Accounting
Standards and other mandatory professional reporting
requirements in Australia, except where otherwise disclosed in
this section.
The Historical Financial Information for the two and a half years
ended 30 June 2012 has been extracted from the audited/
reviewed special purpose financial statements of Zhaodong
Huaying Oil Drilling Services Co., Ltd (the operating company
of the Group), which were prepared in AUD and in accordance
with AIFRS. The financial statements were audited and reviewed
respectively by the Groups auditors (Grant Thornton Audit Pty
Ltd) who issued unqualified audit and review opinions.
The Historical Financial Information for the six months ended
31 December 2012 has been extracted from the unaudited
management accounts of Zhaodong neither of which have
been reviewed.
All financial information presented in this section is stated in
AUD unless otherwise indicated.
The Financial Information is presented in an abbreviated form
and does not contain all of the disclosures provided in an annual
report prepared in accordance with the Corporations Act.
8.
Financial information
Preparation of the Forecast Financial Information

The Directors believe they have prepared the Forecast Financial Information with due care and attention and consider all best
estimate assumptions when taken as a whole to be reasonable at the time of preparing this Prospectus. The Forecast Financial
Information has been prepared on the basis of numerous assumptions, including the key best estimate assumptions set out in section
8.4. This information is intended to assist investors in assessing the reasonableness and likelihood of the assumptions occurring and is
not intended to be a representation that the assumptions will occur.
The Forecast Financial Information is based on the forecast results of the Group for FY2013.
The Forecast Financial Information assumes that the incremental costs of the Group operating as a listed company are incurred from
1 March 2013 onwards whilst the tax expense reflects the expected ongoing tax profile of the Group in accordance with the local
Chinese tax legislation.
Investors should be aware that the timing of actual events and the magnitude of their impact might differ from that assumed in
preparing the Forecast Financial Information and that this may have a materially positive or negative effect on the Groups actual
financial performance or financial position. Investors are advised to review the key best estimate assumptions set out in section 8.4, in
conjunction with the sensitivity analysis set out in section 8.5, the risk factors set out in section 7 and other information set out in this
Prospectus.
8.3
Financial performance
The table below provides a summary of the historical consolidated financial performance of the Group for the financial years, FY2010,
FY2011 and FY2012, together with the forecast financial performance of the Group for the financial year, FY2013.
Summary of the Historical and Forecast Statement of Comprehensive Income

Audited
Audited
Unaudited
Forecast
FY2010
FY2011
FY2012
FY2013
Revenue
7,820
9,181
23,609
28,796
EBITDA
2,758
4,130
9,279
15,302
35.3%
45.0%
39.3%
53.1%
(93)
(533)
(424)
(1,078)
2,665
3,597
8,855
14,224
34.1%
39.2%
37.5%
49.4%
(37)
(159)
12
2,628
3,601
8,696
14,236
(150)
(190)
(626)
(576)
2,478
3,411
8,070
13,660
$000
EBITDA as a % of revenue
Depreciation
EBIT
EBIT as a % of revenue
Net interest (expense) / received
NPBT
Income tax expense
NPAT
41
8.3.1
Management discussion and analysis
The financial performance of Sino Australia Oil is subject to many variables. Many of these variables are outside of the Groups control
and are set out below under the general assumptions. Sino Australia Oil has structured its business so as to limit the effect of such
variables where possible. Refer to the risk factors described in Section 7.
All revenue and costs (with the exception of the public company costs) are transacted in RMB.
A summary of the mix of revenue over the Historical and Forecast Period has been set out below:
$000
Contracted drilling services
Contracted well maintenance
Total revenue
Actual
Actual
Actual
Forecast
FY2010
FY2011
FY2012
FY2013
7,105
8,977
23,114
27,768
715
204
495
1,028
7,820
9,181
23,609
28,796
Contracted revenue
The forecast for FY2013 assumes revenue will increase by 22%, in FY2013, approximately 100% of Sino Australia Oil revenues have
been contracted with customers for services to be performed relating to both well maintenance and contract drilling.
Service volumes and pricing arrangements are negotiated with each individual customer as part of an agreement. These agreements
with clients are characterised as contracts, in light of the fact that they:

are based over a fixed term;
are fixed price in nature;
include performance criteria; and
are considered maintenance operating expenditure by clients as opposed to discretionary capital expenditure programs.
A summary of key revenue metrics is set out below:

Actual
Actual
Actual
Forecast
FY2010
FY2011
FY2012
FY2013
Wells drilled
141
90
250
286
Wells maintained
372
375
250
400
50
100
92
97
Number of contracted:
Average revenue per contracted:

Wells drilled ($000)
Wells maintained ($000)
The forecast revenues in FY2013 are supported by an increase in the average price for wells drilled from $92,000 in FY2012 to $97,000
in FY2013. This is also the case for pricing for well maintenance services provided from $2,000 in FY2012 to $3,000 in FY2013, both of
which are in line with current contracts on hand.
8.
Seasonality
Revenues are project based and therefore the only seasonality effect on revenues, relates to the colder months of the calendar year,
being November through to January which tend to reduce productivity and consequently revenue.
A summary of key cost metrics are set out below:
Actual
Actual
Actual
Forecast
FY2010
FY2011
FY2012
FY2013
Equipment rental cost
4,103
3,891
8,339
6,737
% of revenue
52.5%
42.4%
35.3%
23.4%
395
385
923
960
5.1%
4.2%
3.9%
3.3%
126
92
269
362
1.6%
1.0%
1.1%
1.3%
Repairs and maintenance
1,162
1,208
% of revenue
4.9%
4.2%
276
508
1,325
1,679
3.5%
5.5%
5.6%
5.8%
91.4%
85.7%
52.9%
55.3%
8.6%
14.3%
47.1%
44.7%
No. of owned rigs

Employee costs
% of revenue
Fuel
% of revenue
Sales taxes
% of revenue
Fixed overhead cost %
Variable overhead cost %
Equipment rental costs
The highest cost for the business relates to the rental of drilling rigs required to perform the RDT procedures.
The Group currently operates seven rigs in total, one of which is owned and a maximum of six hired. Hire expenditure is forecast to
reduce from July 2013 onwards as two hired rigs are supplemented for owned rigs. The capital expenditure associated with these new
rigs will be funded via operating cash flows and amounts to $10.9 million.
Employee costs
Due to operations being primarily based in China, wages and salaries of field and administration do not form a large part of
expenditure incurred, comparative to an Australian domiciled business, with the average salary per employee equating to less
than $10,000 in FY2012. The increase in FY2012 employee costs relates to the large expansion in operations. Sino Australia had
approximately 92 employees at the date of this Prospectus which is expected to remain consistent over FY2013.
Fuel costs
Fuel as a % of revenue has remained relatively consistent over the Historical Period and expected to be relatively similar over the
Forecast Period after adjusting for cost inflation.
Repairs and maintenance costs
R&M is expected to be incurred as Sino Australia Oil increases the number of self owned rigs throughout the Forecast Period plus
increases due to cost inflation.
Sales and other taxes
Sales and other taxes include non refundable taxes incurred such as sales tax (3% to 5% of revenue), urban construction tax (0.25% of
revenue) and education taxes (0.25% of revenue).
43
Year ended 31 December 2011 compared to the year

ended 31 December 2010
Revenue
The growth in revenue over this period has been generated from
an increase in the value of contracts awarded in FY2011. This is
due to oil companies taking advantage of the patented radial
hydraulic jet drilling technology to increase production from
new and existing oil and gas wells with low or declining flow
rates. Although the number of contracts has decreased from
FY2010 to FY2011, the growth in revenues is attributed to large
contract, amounting to $8.2 million, with Central Asia Petroleum
(a new customer in FY2011) for the provision of RDT services.
Costs of services provided have remained relatively consistent
with the prior period (in absolute dollar terms) leading to an
increase in gross margins in FY2011. This was primarily due
to more favourable pricing being achieved as a result of the
Central Asia contract.
EBITDA
The growth in FY2012 EBITDA was impacted by the increase in
overheads from FY2011 by $2.2 million as a result of operational
expansion, marketing and the $0.5 million portion of offer costs
involved with the listing.
Revenue
The Group is forecast to achieve sales growth of 22% in FY2013
due to continued contracted demand. Contracted wells to be
drilled for FY2013 amounts to 286 with a further 66 contracted
wells to be drilled being carried over from FY2012.
The increase in the gross margin in FY2013 is expected to be
realised through reduced equipment rental expenditure from
the planned purchases of two addition drilling rigs in July 2013.
EBITDA
EBITDA
The increase in EBITDA to $4.1 million in FY2011 is in line with

the increase in gross margins, with overhead expenditure
remaining relatively consistent from FY2010 to FY2011 (with
only a 4.6% increase being recorded).
Costs of $0.6 million are expected to be incurred as a

consequence of being a listed Company and have been
factored into the Forecast Period, from 1 March 2013 onwards.
Other overhead expenditure has increased by $0.2 million in
FY2013 from FY2012, largely as a result of cost inflation at 4%.
Depreciation
Depreciation has increased by $93,000 from FY2010 to FY2011
as a result of additional capital asset additions in FY2011 and
timing of purchases in FY2010.
The forecast increase in EBITDA to $15.3 million in FY2013 is in

line with the increase in gross margin percentage.
Depreciation
An impairment expense of $0.3 million was recognised in

FY2011, following the results of a third party valuation obtained
by Sino Australia Oil.
Depreciation is forecast to increase by $0.6 million in the

Forecast Period in line with the expected drilling rig purchases
in July 2013.

8.4
Revenue
The continued growth in revenue is due to an increase in
the number of contracts in FY2012 with new customers, and
continued work with Central Asia. Notable new contracted
customers in FY2012 included:

PetroChina (Jilin): $5.5 million; and
Jilin Oil Field XinMin: $2.7 million.
Forecast assumptions
The Forecast Financial Information is based on the Directors

best estimate assumptions for the financial year, FY2013. The
assumptions used to prepare the forecast are as follows:
Specific assumptions
In preparing the forecast, the Directors have applied the
following specific business assumptions for the Forecast Period:
Revenue
An increase in the gross margin was realised in FY2012

through reduced equipment rental expenditure, subsequent
to purchasing its first drilling rig in May 2012. However, part of
this saving was offset by an increase in employment costs due
to operational growth and repairs and maintenance associated
with the owned drilling rig.
Operating capacity
Operating capacity of Sino Australia Oil will increase over FY2013
with the purchase of two additional drill rigs planned in July
2013, to supplement the existing sole owned drilling rig and
maximum of 6 leased drilling rigs.
Approximately 100% of FY2013 revenues have already been
contracted.
8.
Costs
The Group will not make any material acquisitions or

disposals of major assets other than forecast.
There will be no material adverse changes or formal

amendments to any other material contract, agreement or
arrangement relating to the Group.
Parties to all material contracts, agreements or

arrangements will continue to comply with the terms and
conditions of those arrangements in place at the date of
this Prospectus.
All key management personnel will remain with the

business.
There will be no material industrial, contractual, or political

disruptions which impact on the Group or adversely affect
the ability of the Group to function normally in the ordinary
course of business.
There will be no material changes in statutory, legal, tax or

regulatory requirements that would materially affect the
Groups operating or financial performance.
The accounting policies of the Group which are in place

at the date of this Prospectus will remain in force and not
materially change.
Accounting Standards which the Group is required by law

and/or best practice to adopt will not materially change.
The Group will not be a party to any significant litigation.
There will be no changes in climatic conditions in the

regions in which the Groups operates that will have a
material adverse effect on the Groups operating or financial
performance other than forecast.
FY2013 forecast cost assumptions include:

additional equipment rental cost savings of $0.44 million

per month from July 2013 based on the planned purchase
of two additional drilling rigs which are expected to begin
operating in July 2013. The cost savings are based on the
capacity of drilling equipment at six wells per month; and
a 4% increase on other key FY2012 direct costs incurred
such as repairs and maintenance and employment costs
(with the labour force forecast to remain consistent with
FY2012); and
all overhead expenditure comprises a 4% increase from FY2012
onwards aside from offer costs and listed company costs.
Depreciation
FY2013 forecast depreciation assumptions include:

January to June 2013 based on FY2012 actuals. Additional

capital expenditure has not been forecast over this period;
and
July to December 2013 depreciation is based on FY2012
actuals and adjusted to take into account the depreciation
from the additional two drilling rigs to be purchased with an
expected operation commencement date of July 2013.
Income tax
FY2013 forecast income tax expense has been forecast at 2% of
sales revenue with the tax amount to be payable at the time of
invoice being issued by the local tax office.
Income tax forecast is in line with income tax rates applicable to
Sino Australia Oil based on written confirmation received from
the Chinese provincial tax office.
The business will continue to be funded by operational cash flows.
Working capital requirements of the Group will continue to be
funded by operational cash flows during the Forecast Period,
with total working capital requirements being estimated based
on cash flow forecasts. Interest rates applicable to surplus cash
are not expected to increase materially during the Forecast
Period from the interest rates applicable at the date of this
Prospectus.
General assumptions

There will be no significant adverse changes to the

competitive environment in which the Group operates.
General economic conditions remain stable.
There will be no material change to any major competitor

to the Group.
8.5
Sensitivity analysis
The forecast results are based on the assumptions noted above

and are sensitive to changes in those assumptions. The impacts
of movements in the key assumptions have been calculated
to demonstrate the financial impact on EBITDA arising from
changes in the specified variables for FY2013. Additional
disclosure has been made to show the illustrative impact of
variations in the key assumptions on an annual basis. For this
purpose the FY2013 full year forecast has been used to derive
the impact of changes in
key variables.
Decrease of RMB against AUD by 10%

Gross margin has remained consistent with that of the base case
scenario. The variation in the table below assumes that all other
assumptions in the forecast are held constant.
Variation in assumption
Decrease of RMB against AUD by 10%
Variation in EBITDA +/($1.5 million)
45
Increase equipment rental costs by 25%

EBITDA has been sensitised based on the key details of current rental agreements with key suppliers, Beijing Oushengwen and Daqing
Huafu and drilling services to be provided expiring at various time periods in FY2013.
The variations in the table below assume that all other assumptions in the forecast are held constant.
Variation in EBITDA +/-
Increase equipment rental costs by 25%
($1.5 million)
Delay of additional drilling rig purchases until after FY2013

All other variables remain constant except for the removal of cost savings expected from the planned purchase of two additional
drilling rigs in July 2013.
Variation in EBITDA +/-
Delay of additional drilling rig purchases until after FY2013
8.6
($2.7 million)
Overview of cash flows
Provided in the table below is a summary of the historical cash flows of the Group for the three years ended 31 December 2012 plus
the forecast for the year ended 31 December 2013.
Summary Historical and Forecast Statement of Cash Flows

Audited
Audited
Actual
Forecast
FY2010
FY2011
FY2012
FY2013
2,758
4,130
9,279
15,302
(4,094)
(2,027)
(2,531)
2,905
Movement in other assets and liabilities
3,074
(1,843)
(3,912)
(70)
Income tax paid
(150)
(190)
(131)
(576)
1,588
70
2,705
17,561
(2,079)
(11)
(1,905)
(12,426)
(2,079)
(11)
(1,905)
(12,426)
3,114
726
8,886
Payment of cash share issue costs
(493)
(1,017)
Net interest received / (paid)
(160)
12
Net cash inflow from financing activities
728
(653)
10,995
Net increase in cash held
237
63
147
16,130
FX translation movements
(24)
14
(3)
58
82
295
372
516
295
372
516
16,704
$000
CASH FLOWS FROM OPERATING ACTIVITIES
EBITDA
Movement in working capital
Net cash inflow from operating activities

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of plant and equipment
Net cash outflow from investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the convertible notes
Proceeds from capital raisings
Cash and cash equivalents at the beginning of the period

Cash and cash equivalents at the end of the period
8.
8.6.1
Commentary on cash flows
The Groups capital expenditure is budgeted on an annual basis in accordance with strategic planning, which normally has a two
to three year outlook for major projects. All major capital expenditure needs to be approved by the Board prior to entering into
any capital commitments, regardless of whether that expenditure has been budgeted. In determining whether to approve capital
expenditure the Board has regard to available funds and the overall returns expected to be generated from that expenditure.
Projects are generally assessed against a return on investment criteria of 20 percent and/or a payback of investment in a 3 to 5 year period.
The increase in drilling equipment capex from FY2011 to FY2012 was due to the purchase of a drilling machine from a related party,
Guisen Shao for $4.7 million. The amount is repayable in instalments over a 3 year period commencing in July 2012.
Total plant and equipment capex is forecast to increase to $12.4 million in FY2013 due to the planned purchases of two additional
drilling rigs in July 2013 for a total consideration of $10.9 million, which will be funded from operating cash flows and the Unsecured
Redeemable Convertible Notes dated 27 February 2013 as disclosed in Section 11.8.
8.7
Description of financing facilities
The Group has no bank financing facilities, having historically utilised related party balances when required. Additionally, the Group
has no off balance sheet financing arrangements.
8.8
Dividend policy
The extent, timing and payment of dividends will be determined by the Directors based on a number of factors including earnings
and the financial performance and position of the Group. The Group has a track record of profitability and the Directors intend to pay
dividends to the extent that earnings and cash permit the payment of dividends without compromising the Groups business objectives.
47
8.9
Financial position
The table below sets out a summary of the historical and pro forma consolidated financial position of the Group.
Summary Historical and Pro Forma Consolidated Statement of Financial Position as at 30 June 2012
(reviewed) and 31 December 2012 (unaudited)
As at
30 June
2012
As at
30 June
2012
As at
As at
As at
30 June
As at 31 December 31 December
2012 31 December
2012
2012
2012
Pro forma
Pro forma
Pro forma
maximum Unaudited(2)
minimum
maximum
Note
Reviewed(1)
Pro forma
minimum
744
11,376
18,851
516
11,148
18,623
8,291
8,291
8,291
12,299
12,299
12,299
79
79
79
3,031
3,031
3,031
9,114
19,746
27,221
15,846
26,478
33,953
Plant and equipment
6,001
6,001
6,001
5,966
5,966
5,966
TOTAL NON CURRENT ASSETS
6,001
6,001
6,001
5,966
5,966
5,966
15,115
25,747
33,222
21,812
32,444
39,919
Trade and other payables
1,247
1,247
1,247
2,724
2,724
2,724
Related party payables
3,311
3,311
3,311
4,409
4,409
4,409
159
159
159
TOTAL CURRENT LIABILITIES
4,717
4,717
4,717
7,133
7,133
7,133
TOTAL LIABILITIES
4,717
4,717
4,717
7,133
7,133
7,133
10,398
21,030
28,505
14,679
25,311
32,786
747
12,019
19,468
747
12,019
19,468
153
153
153
(27)
(27)
(27)
9,498
8,858
8,884
13,959
13,319
13,345
10,398
21,030
28,505
14,679
25,311
32,786
$000
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Other assets
TOTAL CURRENT ASSETS
NON CURRENT ASSETS
TOTAL ASSETS
LIABILITIES
CURRENT LIABILITIES
Tax liabilities
NET ASSETS
EQUITY
Issued capital
Reserves
Retained earnings
TOTAL EQUITY
(1) The historical consolidated statement of financial position has been extracted from the reviewed financial statements at 30 June 2012 of Zhaodong Huaying Oil
Drilling Services Co., Ltd.
(2) The historical consolidated statement of financial position has been extracted from the unaudited management accounts at 31 December 2012 of Zhaodong Huaying
Oil Drilling Services Co., Ltd.
(3) The historical consolidated statement of financial position as at 30 June 2012 reflects the pro forma adjustments, the application of the funds from the Offer less the
costs associated with the Offer as set out below.
8.
Management discussion and analysis on the

movements between the 30 June 2012 and
31 December 2012 statement of financial position
NPAT after tax for the six months ended 31 December 2012 was
$4.5 million, compared to $3.6 million in the six months ended
30 June 2012.
Other assets comprise prepayments to suppliers with the $3
million balance at 31 December 2012 relating to a deposit
on the purchase of two drill rigs in FY2013. No pro forma
adjustment has been reflected for this prepayment as the new
rigs will be purchased from existing cash reserves and operating
cash flows, as opposed to the Offer proceeds.
The increases in the working capital balances comprising trade
and other receivables and trade and other payables, between
30 June 2012 and 31 December 2012, is largely a consequence
of a strong July September quarter. Due to the length of
the debtors collection days, much of this increased financial
performance is still included within the 31 December 2012
balances. In addition, in the October November quarter,
the Company undertook significant rig maintenance which
increased trade creditors due to the timing of the payments.
Other taxes included in the trade and other payables at
31 December 2012 which also increased due to timing of
the payment of outstanding amounts.
8.10
Pro forma adjustments
The following transactions and events contemplated in this

Prospectus, which are to take place on or before the completion
of the Offer, referred to as the Pro Forma Adjustments, are
presented as if they, together with the Offer, had occurred on or
before 30 June 2012.
With the exception of the pro forma adjustments noted below,
no material transactions have occurred between 30 June 2012
and the date of this Prospectus which the Directors consider
require disclosure.
Subsequent events
1) Redeemable convertible notes with a face value of $3.1
million and an issue price of $0.50 were issued on 27
February 2013. Each note held has been converted to an
ordinary share on IPO, amounting to 6,227,641 ordinary
shares being issued. One attaching option will be issued for
no additional consideration for every two shares issued. The
options have an exercise price of $0.75 and expire after 3
years from the date of listing.
2) Accrued interest on the redeemable convertible notes at
15% p.a. has been capitalised and converted to ordinary
shares. One ordinary share will be issued for every $0.50
of accrued but unpaid interest on the notes, and amounts
to 307,117 ordinary shares on conversion. The interest has
been accrued for 3 months consistent with the Prospectus
offer period. One attaching option will be issued for no
additional consideration for every two shares issued. The

options have an exercise price of $0.75 and expire after 3
years from the date of listing.
Pro forma transactions

Minimum subscription
3) The issue of 24,000,000 fully paid ordinary shares at $0.50
each, amounting to $12 million (including the proceeds
of conversion of the redeemable convertible notes). One
attaching option will be issued for no additional consideration
for every two shares issued. The options have an exercise
price of $0.75 and expire after 3 years from the date of listing;
4) Expenses associated with the offer (including advisory,
legal, accounting and administrative fees as well as
printing, advertising and other expenses), estimated to be
$1.5 million. An amount of $0.9 million has been charged
against issued capital and $0.6 million against retained
earnings. At 30 June 2012, approximately $0.14 million of
the Offer costs had already been paid;
5) The issue of 600,000 fully paid ordinary shares for nil
consideration to the Lead Manager for brokerage services
performed. The shares issued to the Lead Manager will be
escrowed for a period of 2 years from the date of listing
in accordance with the terms and conditions of the Sino
Australia escrow agreement (refer to Section 11); and
6) The issue of 16 million options to the Directors of the
Company in consideration for services performed. The
options are escrowed for a period of 24 months, have a 48
month life from listing and have an exercise price of $0.75
Maximum subscription
1) The issue of 40,000,000 fully paid ordinary shares at $0.50
each, amounting to $20 million (including the proceeds
of conversion of the redeemable convertible notes). One
attaching option will be issued for no additional consideration
for every two shares issued. The options have an exercise
price of $0.75 and expire after 3 years from the date of listing;
2) Expenses associated with the offer (including advisory,
legal, accounting and administrative fees as well as printing,
advertising and other expenses), estimated to be $2 million.
An amount of $1.4 million has been charged against issued
capital and $0.6 million against retained earnings. At 30
June 2012, approximately $0.14 million of the Offer costs
had already been paid;
3) The issue of 600,000 fully paid ordinary shares for nil
consideration to the Lead Manager for brokerage services
performed. The shares issued to the Lead Manager will be
escrowed for a period of 2 years from the date of listing
in accordance with the terms and conditions of the Sino
Australia escrow agreement (refer to Section 11); and
4) The issue of 16 million options to the Directors of the
Company in consideration for services performed. The
options are escrowed for a period of 24 months, have a 48
month life from listing and have an exercise price of $0.75.
49
8.11
Notes to the historical pro forma consolidated statement of financial position
Note 1 Cash and cash equivalents

The reviewed pro forma cash and cash equivalents reflecting the proceeds from the Offer and payment of the costs of the Offer are
set out below:
Pro forma
adjustment
Cash and cash equivalents at 30 June 2012
Pro forma
minimum
Pro forma
maximum
$000
$000
744
744
3,114
3,114
3,858
3,858
Subsequent event:
Issue of the redeemable convertible notes
8.10.1
Pro forma transactions:

Proceeds from shares issued under the Offer
8.10.3
8,886
16,886
Payment of Offer costs
8.10.4
(1,368)
(1,893)
11,376
18,851
Pro forma cash and cash equivalents
Note 2 Issued capital

The reviewed pro forma issued capital reflects the issue of shares under the Offer, shares issued to the Lead Manager and the
capitalisation of Offer costs directly attributable to the Offer is set out below:
Pro forma
adjustment
Issued capital at 30 June 2012
Pro forma
minimum
Pro forma
maximum
$000
$000
747
747
3,267
3,267
4,014
4,014
Subsequent event:
Conversion of the redeemable convertible notes
8.10.1 and 8.10.2
Pro forma transactions:

Proceeds from shares issued under the Offer
8.10.3
8,886
16,886
Capital raising costs payable under the Offer
8.10.4
(881)
(1,432)
12,019
19,468
Pro forma
minimum
Pro forma
maximum
No. of shares
No. of shares
193,170,400
193,170,400
6,534,758
6,534,758
199,705,158
199,705,158
Pro forma issued capital
Pro forma
adjustment
Pro forma number of shares issued at 30 June 2012
Subsequent event:
Conversion of the redeemable convertible notes
8.10.1 and 8.10.2
Pro forma transaction:

Shares issued under the Offer
8.10.3
17,772,359
33,772,359
Shares issued to the Lead Manager
8.10.5
600,000
600,000
218,077,517
234,077,517
Pro forma adjusted number of shares issued
8.
Note 3 Retained earnings

The reviewed pro forma retained earnings reflect the expensing of certain Offer costs as a consequence of the Offer is set out below:
Pro forma
adjustment
Retained earnings at 30 June 2012
Pro forma
minimum
Pro forma
maximum
$000
$000
9,498
9,498
(154)
(154)
9,344
9,344
(486)
(460)
8,858
8,884
Pro forma
minimum
Pro forma
maximum
3,267,379
3,267,379
3,267,379
3,267,379
Subsequent event:
Accrued interest on the redeemable convertible notes
8.10.2

Costs expensed under the Offer
8.10.4
Pro forma retained earnings
Note 4 Options
The reviewed pro forma options issued as a consequence of the Offer is set out below:
Pro forma
adjustment No. of options No. of options
Number of options at 30 June 2012
Subsequent event:
Options issued attaching to the redeemable convertible notes
8.10.1 and 8.10.2

Options issued under the Offer
8.10.3
8,886,180
16,886,180
Options issued to Directors
8.10.6
16,000,000
16,000,000
28,153,558
36,153,558
Pro forma number of options

One attaching option will be issued for no additional consideration for every two shares issued from the conversion of the
redeemable convertible notes. The options have an exercise price of $0.75 and expire after 3 years from the date of listing.
One attaching option will be issued for no additional consideration for every two shares issued as a consequence of the Offer. The
options have an exercise price of $0.75 and expire after 3 years from the date of listing.
16 million options will be issued to the Directors of the Company in consideration for future services to be performed, and will
vest over this period. Accordingly, no pro forma adjustment is required for the fair value of these options at 30 June 2012. The
options are escrowed for a period of 24 months and expire after 48 months after issue and have an exercise price of $0.75.
51
8.12
Notes to the Historical and

Forecast Financial Information
Basis of preparation
The preparation of the historical and forecast financial
information is in conformity with AGAAP and requires
management to make judgements, estimates and assumptions
that affect the application of policies and reported amounts of
assets and liabilities, income and expenses. The estimates and
associated assumptions are based on historical experience and
various other factors that are believed to be reasonable under
the circumstances, the results of which form the basis of making
the judgements about carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results
may differ from these estimates. These accounting policies have
been consistently applied by the Group.
There have been no new Australian Accounting Standards and
Australian Accounting Interpretations issued or amended which
are materially applicable to the Group but are not yet effective.
Accounting policies
Basis of preparation
The historical and forecast financial information has been
prepared in accordance with the measurement and recognition
requirements of Australian Accounting Standards, Australian
Accounting Interpretation, other authoritative pronouncements
of the Australian Accounting Standards Board and the
Corporations Act.
Historical cost convention
The historical and forecast financial information has been
prepared on an accruals basis and is based on historical costs,
modified where applicable by the measurement at fair value
of selected non-current assets, financial assets and financial
liabilities.
Critical accounting estimates
The preparation of the historical and forecast financial
information is in conformity with Australian Accounting
Standards and requires the use of certain critical accounting
estimates. It also requires management to exercise its
judgement in the process of applying the Groups accounting
policies.
a)
Income tax
The income tax expense (revenue) for the year comprises

current income tax expense (income).
Current tax
Current income tax expense charged to the profit or loss is
the tax payable on taxable income calculated using applicable
income tax rates enacted, or substantially enacted, as at
reporting date. Due to the fact that the Groups revenues

relate purely to the provision of services, income tax expense
is determined as a percentage of revenue, which is in
accordance to the requirements of the local taxation authority
in Heilongjiang Province, China. Current tax liabilities (assets)
are therefore measured at the amounts expected to be paid to
(recovered from) the relevant taxation authority.
Current tax assets and liabilities are offset where a legally
enforceable right of set-off exists and it is intended that net
settlement or simultaneous realisation and settlement of the
respective asset and liability will occur.
b)
Property, plant and equipment
Each class of property, plant and equipment is carried at cost or

fair value less, where applicable, any accumulated depreciation
and impairment losses.
Property, plant and equipment are measured at cost less
depreciation and impairment losses.
The cost of fixed assets constructed within the Group includes
the cost of materials, direct labour, borrowing costs and an
appropriate proportion of fixed and variable overheads.
Subsequent costs are included in the assets carrying amount
or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item
will flow to the Group and the cost of the item can be measured
reliably. All other repairs and maintenance are charged to the
statement of comprehensive income during the financial period
in which they are incurred.
Increases in the carrying amount arising on revaluation are
credited to a revaluation surplus in equity. Decrease that
offset previous increase of the same asset are charged against
fair value reserves directly in equity; all other decreases are
charged to the statement of comprehensive income. Each
year the difference between depreciation based on the revalued carrying amount of asset charged to the statement of
comprehensive income and depreciation based on the assets
original cost is transferred from the revaluation surplus to retain
earnings.
Any accumulated depreciation at the date of revaluation is
eliminated against the gross carrying amount of the asset and
the net amount is restated to the re-valued amount of the asset.
Depreciation
The depreciable amount of all fixed assets including building
and capitalised leased assets, but excluding freehold land, is
depreciated on a straight line basis over their useful lives to the
Group commencing from the time the asset is held ready for
use. Leased assets are depreciated over the shorter of either the
unexpired period of the lease or the estimated useful lives of
the assets.
8.
The depreciation rates used for each class of depreciable

assets are:
Class of fixed asset
d)
Depreciation rate
Drilling equipment
10%
Motor vehicle
10%
Office equipment
20%
The assets residual values and useful lives are reviewed, and
adjusted if appropriate, at each reporting period date.
An assets carrying amount is written down immediately to its
recoverable amount if the assets carrying amount is greater
than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing
proceeds with the carrying amount. These gains or losses are
included in the statement of comprehensive income.
When re-valued assets are sold, amounts included in the
revaluation reserve relating to that asset are transferred to
retained earnings.
c)
Revenue
Revenue is measured at the fair value of the consideration

received or receivable after taking into account any trade
discounts and volume rebates allowed. Any consideration
deferred is treated as the provision of finance and is discounted
at a rate of interest that is generally accepted in the market
for similar arrangements. The difference between the amount
initially recognised and the amount ultimately received is
interest revenue.
Revenue relating to the provision of services is determined
with reference to the stage of completion of the transaction
at reporting date and where the outcome of the contract can
be estimated reliably. Stage of completion is determined with
reference to the services performed to date as a percentage of
total anticipated services to be performed. Where the outcome
cannot be estimated reliably, revenue is recognised only to the
extent that related expenditure is recoverable.
Interest revenue is accrued on a time basis, by reference to
the principal outstanding and at the effective interest rate
applicable, which is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial
asset to that assets net carrying amount.
Value Added Tax (VAT)
Under the taxation laws in the Republic of China, revenues

generated by companies providing high technology services
are exempt from VAT. Therefore revenues generated by the
Group are not subject to VAT. Due to this reason, VAT paid for
expenses and capital purchases are not recoverable from the
local taxation office.
Revenues, expenses and assets are recognised net of the
amount of VAT, except where the amount of VAT incurred
is not recoverable from the Local Taxation Office. In these
circumstances, the VAT is recognised as part of the cost of
acquisition of the asset or as part of an item of the expense.
Receivables and payables in the statement of financial position
are shown inclusive of VAT.
e)
Foreign currency transactions and balances
Functional and presentation currency

The functional currency is measured using the currency of
the primary economic environment in which that entity
operates, which is Chinese renminbi. The consolidated financial
information in this section has been translated and presented in
Australian dollars.
Group companies
The financial results and position of foreign operations whose
functional currency is different from the presentation currency
has been translated as follows:

assets and liabilities are translated at year end exchange

rates prevailing at that reporting date;
income and expenses are translated at average exchange

rates for the period, where this approximates the rate at the
transaction date; and
retained earnings are translated at the exchange rates

prevailing at the date of the transaction.
Exchange differences arising on translation of foreign operations

are transferred directly to the foreign currency translation
reserve in the statement of financial position.
53
9. Investigating Accountants Report
Board of Directors
Room 340, Lot 1
Industry Development Zone Daqing
CHINA, 163318
28 February 2013
Level 17, 383 Kent Street

Sydney NSW 2000
Locked Bag Q800
QVB Post Office
Sydney NSW 1230
T +61 2 8297 2400
F +61 2 9299 4445
E info.nsw@au.gt.com
W www.grantthornton.com.au
Dear Directors,
INVESTIGATING ACCOUNTANTS REPORT ON THE HISTORICAL AND
FORECAST FINANCIAL INFORMATION
1.
Introduction
We have prepared this Investigating Accountants Report (the Report) on the historical
and forecast financial information of Sino Australia Oil and Gas Limited (Sino Australia
Oil) for inclusion in the Prospectus (the Prospectus) to be dated on or about 28
February 2013, and to be issued by Sino Australia Oil, in respect of the listing of Sino
Australia Oil securities on the Australian Securities Exchange (ASX) (the ASX listing).
Grant Thornton Corporate Finance Pty Limited (Grant Thornton Corporate Finance)
holds an Australian Financial Services Licence (AFS Licence Number 247140).
Expressions defined in the Prospectus have the same meaning in this Report.
2.
Scope
Grant Thornton Corporate Finance has been requested to prepare this Report to cover the
following financial information:
Historical Financial Information
The historical financial information, as set out in Sections 8.3, 8.6 and 8.9 of the
Prospectus comprises:
Sino Australia Oils historical consolidated statement of comprehensive income for

the financial years ended, 31 December 2010 and 31 December 2011 and 31
December 2012; and
Grant Thornton Corporate Finance Pty Ltd ABN 59 003 265 987
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389
Holder of Australian Financial Services Licence No. 247140
Grant Thornton Australia Limited is a member firm within Grant Thornton International Ltd. Grant Thornton International Ltd and the member firms are not a worldwide partnership. Grant Thornton
Australia Limited, together with its subsidiaries and related entities, delivers its services independently in Australia.
Liability limited by a scheme approved under Professional Standards Legislation
9.
Investigating Accountants Report
Sino Australia Oils historical consolidated statement of cash flows for the financial
years ended, 31 December 2010 and 31 December 2011 and 31 December 2012;
and
Sino Australia Oils historical consolidated statement of financial position as at 30

June 2012.
(Hereafter the Historical Financial Information).

The Historical Financial Information for the financial years ended, 31 December 2010, 31
December 2011 and the six month financial period ended 30 June 2012 has been extracted
from the audited/reviewed special purpose financial statements of of Zhaodong, the
operating entity of the Sino Australia Oil group of companies. The financial statements were
audited and reviewed respectively by the Companys auditors (Grant Thornton Audit Pty
Ltd) who issued unqualified audit and review opinions
The Historical Financial Information for the financial year ended 31 December 2012 has
been extracted from the unaudited management accounts of Zhaodong.
Pro forma Financial Information
The pro forma financial information, as set out in Section 8.9 of the Prospectus comprises
Sino Australia Oils pro forma historical consolidated statement of financial position as at 30
June 2012.
(Hereafter the Pro Forma Financial Information).
Sino Australia Oils Pro Forma Historical Consolidated Statement of Financial Position
assumes completion of the proposed transactions outlined in Section 8.10 of the
Prospectus and includes the pro forma adjustments disclosed in the Prospectus (the Pro
Forma Transactions).
The forecast financial information, as set out in Sections 8.3 and 8.6 of the Prospectus
comprises:
Sino Australia Oils forecast consolidated statement of comprehensive income for

the financial year ended 31 December 2013; and
Sino Australia Oils forecast consolidated statement of cash flows for the financial
year ended 31 December 2013.
(Hereafter the Forecast Financial Information).

The Historical Financial Information, the Pro Forma Financial Information and the
Forecast Financial Information are collectively referred to as the Financial Information.
55
The Financial Information is presented in an abbreviated form insofar as it does not include
all of the presentation and disclosures required by Australian Accounting Standards and
other mandatory professional reporting requirements applicable to general purpose financial
reports.
3.
Directors Responsibility for the Financial Information
4.
Our Responsibility on the Financial Information
a.
Historical and Pro Forma Financial Information
The Directors of Sino Australia Oil have prepared and are responsible for the preparation
and presentation of the Financial Information. The Directors are also responsible for the
determination of the Pro Forma Transactions set out in Section 8.10 of the Prospectus, the
compilation process (in the case of the Historical and Pro Forma Financial Information) and
for the determination of the best estimate assumptions as set out in Section 8.4 of the
Prospectus (in the case of the Forecast Financial Information).
Our responsibility is to express a conclusion on the Financial Information based on our
review, as set out below.
We have conducted an independent review of the Historical and Pro Forma Financial
Information in order to state whether on the basis of the procedures described, anything has
come to our attention that would cause us to believe that:
The Historical Financial Information does not present fairly:
Sino Australia Oils historical consolidated statement of financial position

as at 30 June 2012;
Sino Australia Oils historical consolidated statement of comprehensive

income for the financial years ended, 31 December 2010, 31 December
2011 and 31 December 2012; and
Sino Australia Oils historical consolidated statement of cash flows for the
financial years ended, 31 December 2010, 31 December 2011 and 31
December 2012,
in accordance with the measurement and recognition requirements (but not all of the
presentation and disclosure requirements) of applicable Accounting Standards and other
mandatory professional reporting requirements in Australia;
The Pro Forma Transactions do not provide a reasonable basis for the Pro Forma
Financial Information;
The Pro Forma Financial Information has not been prepared on the basis of the
transactions set out in Section 8.10 of the Prospectus; and
The Pro Forma Financial Information does not present fairly Sino Australia Oils
pro forma historical consolidated statement of financial position as at 30 June 2012,
9.
mandatory professional reporting requirements in Australia as if the Pro Forma
Transactions set out in Section 8.10 of the Prospectus had occurred at 30 June 2012.
b.
We have conducted an independent review of the Forecast Financial Information in order

to state whether on the basis of the procedures described, anything has come to our
attention that would cause us to believe that:
The Directors best estimate assumptions do not provide a reasonable basis for the
preparation of the Forecast Financial Information;
The Forecast Financial Information was not prepared on the basis of the best
estimate assumptions;
The Forecast Financial Information does not present fairly:
Sino Australia Oils forecast consolidated statement of comprehensive

income for the financial year ended 31 December 2013; and
Sino Australia Oils forecast consolidated statement of cash flows for the
financial year ended 31 December 2013,
in accordance with the recognition and measurement requirements (but not all of the
mandatory professional reporting requirements in Australia as if the best estimate
assumptions as set out above had occurred at the respective dates in the Prospectus.
The Forecast Financial Information has been prepared by the Directors to provide investors
with a guide to Sino Australia Oils potential future financial performance based upon the
achievement of certain economic, operating, developmental and trading assumptions about
future events and actions that have not yet occurred and may not necessarily occur. There is
a considerable degree of subjective judgement involved in the preparation of the Forecast
Financial Information. Actual results may vary materially from this Forecast Financial
Information and the variation may be materially positive or negative. Accordingly, investors
should have regard to the Risk Factors set out in Section 7 of the Prospectus and Sensitivity
Analysis set out in Section 8.5 of the Prospectus.
Our independent review of the Financial Information has been conducted in accordance
with Australian Auditing and Assurance Standards applicable to review engagements. Our
procedures consist of reading of relevant Board minutes, reading of relevant contracts and
other legal documents, inquiries of management personnel and the directors of Sino
Australia Oil, and analytical and other procedures applied to Sino Australia Oils accounting
records. These procedures do not provide all the evidence that would be required in an
audit, thus the level of assurance provided is less than that given in an audit. We have not
performed an audit and, accordingly, we do not express an audit opinion on the Financial
Information.
57
5.
a.
Review Conclusion on the Financial Information

Historical and Pro Forma Financial Information
Based on our independent review, which is not an audit, nothing has come to our attention
which causes us to believe that:
The Historical Financial Information does not present fairly:
Sino Australia Oils historical consolidated statement of financial position

as at 30 June 2012;
Sino Australia Oils historical consolidated statement of comprehensive

income for the financial years ended, 31 December 2010, 31 December
2011 and 31 December 2012; and
Sino Australia Oils historical consolidated statement of cash flows for the
financial years ended, 31 December 2010, 31 December 2011 and 31
December 2012,
mandatory professional reporting requirements in Australia;
The Pro Forma Transactions do not provide a reasonable basis for the Pro Forma
Financial Information;
The Pro Forma Financial Information has not been prepared on the basis of the
transactions set out in Section 8.10 of the Prospectus;
The Pro Forma Financial Information does not present fairly Sino Australia Oils
pro forma historical consolidated statement of financial position as at 30 June 2012,
mandatory professional reporting requirements in Australia as if the Pro Forma
Transactions set out in Section 8.10 of the Prospectus had occurred at 30 June 2012.
9.
b.
Based on our review of the Forecast Financial Information, which is not an audit, and based
on an investigation of the reasonableness of the Directors best estimate assumptions giving
rise to the Prospective Financial Information, nothing has come to our attention which
causes us to believe that:
The Directors best estimate assumptions do not provide a reasonable basis for the
preparation of the Forecast Financial Information;
The Forecast Financial Information was not prepared on the basis of the best
estimate assumptions;
The Forecast Financial Information does not present fairly:
Sino Australia Oils forecast consolidated statement of comprehensive

income for the financial year ended 31 December 2013; and
Sino Australia Oils forecast consolidated statement of cash flows for the
financial year ended 31 December 2013,
in accordance with the recognition and measurement requirements (but not all of the
mandatory professional reporting requirements in Australia.
The best estimate assumptions, set out in Section 8.4 of the Prospectus, are subject to
significant uncertainties and contingencies often outside the control of Sino Australia Oil
and the Directors. If events do not occur as assumed, actual results achieved and
distributions provided by Sino Australia Oil may vary significantly from the Forecast
Financial Information. Accordingly, we do not confirm or guarantee the achievement of the
Forecast Financial Information, as future events, by their very nature, are not capable of
independent substantiation.
We disclaim any assumption of responsibility for any reliance on this Report or on the
Financial Information to which this Report relates for any purposes other than the purpose
for which it was prepared. This Report should be read in conjunction with the Prospectus.
59
6.
Independence or Disclosure of Interest
Grant Thornton Corporate Finance does not have any pecuniary interests that could
reasonably be regarded as being capable of affecting its ability to give an unbiased
conclusion in this matter. Grant Thornton Audit Pty Limited provides audit services to Sino
Australia Oil, and Grant Thornton Corporate Finance will receive a professional fee for the
preparation of this Report.
Yours faithfully
GRANT THORNTON CORPORATE FINANCE PTY LTD
NEIL COOKE
Partner
SIMON GRAY
Partner Audit & Assurance
9.
Appendix A (Financial Services Guide)
This Financial Services Guide is dated 28 February 2013.

Sydney NSW 2000
Locked Bag Q800
QVB Post Office
Sydney NSW 1230
T +61 2 8297 2400
F +61 2 9299 4445
E info.nsw@au.gt.com
1. About us
Grant Thornton Corporate Finance Pty Ltd (ABN 59 003 265 987, Australian Financial
Services Licence no 247140) (Grant Thornton Corporate Finance) has been engaged by
Sino Australia Oil and Gas Limited (Sino Australia Oil) to provide a report in the form of
an Investigating Accountants Report for inclusion in a Prospectus dated on or about 28
February 2013 (the Prospectus) relating to the offer of shares in the Company. You have
not engaged us directly but have been provided with a copy of the report as a retail client
because of your connection to the matters set out in the report.
2. This Financial Services Guide
This Financial Services Guide (FSG) is designed to assist retail clients in their use of any
general financial product advice contained in the report. This FSG contains information
about Grant Thornton Corporate Finance generally, the financial services we are licensed to
provide, the remuneration we may receive in connection with the preparation of the report,
and how complaints against us will be dealt with.
3. Financial services we are licensed to provide
Our Australian financial services licence allows us to provide a broad range of services,
including providing financial product advice in relation to various financial products such as
securities and superannuation and deal in a financial product by applying for, acquiring,
varying or disposing of a financial product on behalf of another person in respect of
securities and superannuation products.
4. General financial product advice
The report contains only general financial product advice. It was prepared without taking
into account your personal objectives, financial situation or needs. You should consider
your own objectives, financial situation and needs when assessing the suitability of the
report to your situation. You may wish to obtain personal financial product advice from the
holder of an Australian Financial Services Licence to assist you in this assessment.
Grant Thornton Corporate Finance Pty Ltd ABN 59 003 265 987
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389
Holder of Australian Financial Services Licence No. 247140
61
5. Fees, commissions and other benefits we may receive
Grant Thornton Corporate Finance charges fees to produce reports, including this report.
These fees are negotiated and agreed with the entity who engages Grant Thornton
Corporate Finance to provide a report. Fees are charged on an hourly basis or as a fixed
amount depending on the terms of the agreement with the person who engages us. In the
preparation of this report our fees are charged on a fixed basis. Partners, Directors or
employees of Grant Thornton Corporate Finance, Grant Thornton Australia Ltd, or other
associated entities, may receive dividends, salary or wages from Grant Thornton Australia
Ltd.
6. Associations with issuers of financial products
Grant Thornton Corporate Finance and its authorised representatives, employees and
associates may from time to time have relationships with the issuers of financial products.
For example, Grant Thornton Australia Ltd or its associated entities may be the auditor of,
or provide financial services to the issuer of a financial product and Grant Thornton
Corporate Finance may provide financial services to the issuer of a financial product in the
ordinary course of its business. Grant Thornton Audit Pty Ltd is the auditor of the
Company.
7. Complaints
Grant Thornton Corporate Finance has an internal complaint handling mechanism and is a
member of the Financial Ombudsman Service (membership no. 11800). All complaints
must be in writing and addressed to the Head of Corporate Finance at Grant Thornton
Corporate Finance. We will endeavour to resolve all complaints within 30 days of receiving
the complaint. If the complaint has not been satisfactorily dealt with, the complaint can be
referred to the Financial Ombudsman Service who can be contacted at:
PO Box 579 Collins Street West
Melbourne, VIC 8007
Telephone: 1800 335 405
Grant Thornton Corporate Finance is only responsible for this report and FSG. Grant
Thornton Corporate Finance will not respond in any way that might involve any provision
of financial product advice to any retail investor.
8. Contact Details
Grant Thornton Corporate Finance can be contacted by sending a letter to the following
address:
Head of Corporate Finance
Grant Thornton Corporate Finance Pty Ltd
Sydney, NSW, 2000
10. Taxation Report
The Directors
Sino Australia Oil and Gas Ltd
Level 14, 96-100 King William Street
ADELAIDE SA 5000
28 February 2013
PRIVATE AND CONFIDENTIAL
Level 1,
67 Greenhill Rd
Wayville SA 5034
GPO Box 1270
Adelaide SA 5001
T 61 8 8372 6666
F 61 8 8372 6677
E info.sa@au.gt.com
Dear Sirs
TAXATION REPORT
SINO AUSTRALIA OIL AND GAS LTD
Introduction
At the request of the Directors of Sino Australia Oil and Gas Ltd, this Taxation
Report has been prepared for inclusion in a Prospectus to be dated on or about 28
February 2013 relating to the offer for subscription of up to 40,000,000 ordinary
shares at an offer price of $0.50 each and up to 20,000,000 listed options (issued on
a 2 for 1 basis to subscribing shareholders) exercisable at $0.75, to raise a total of
$20,000,000.
Taxation Implications
This Report considers the Australian taxation implications for Australian resident
investors of an investment in ordinary shares issued at $0.50 each in Sino Australia
Oil and Gas Ltd.
The tax implications for shareholders in Sino Australia Oil and Gas Ltd relate to
the receipt of dividends and potential gains on disposal of the shares.
General
We are advised that Sino Australia Oil and Gas Ltd is incorporated in Australia and
owns directly and indirectly a number of subsidiaries located in jurisdictions outside
Australia.
Grant Thornton Australia Limited ABN 41 127 556 389


Our Ref: DMH\TP\MG H:\ADMWORD\Forever\Audit\Consent Letters\Sino Australia Oil and Gas Ltd taxation report_Consent to be Named.docx
63
Scope
The intention of this opinion is to provide a general understanding of the
Australian taxation implications for shareholders in Sino Australia Oil and Gas Ltd.
This report only covers the taxation implications for residents of Australia and their
Australian taxation obligations.
This report provides a general outline for shareholders who hold their shares and
options as an investor, rather than as a trader, and are therefore subject to the
Capital Gains Tax (CGT) legislation under the Income Tax Assessment Act 1997
(ITAA 1997).
This report is based on Australian income tax legislation and established
interpretations of that legislation at the date of this report however, it is not
intended to be an authoritative or complete statement of the law applicable to the
particular circumstances of every investor.
This report does not purport to provide advice to any particular investor, as the
taxation position of each investor may vary depending on the specific
circumstances of the investor. Investors should obtain professional advice relevant
to their specific circumstances.
Disclaimer
To persons receiving this document in Australia:
The information contained in this document does not constitute financial product
advice within the meaning of the Corporations Act 2001 (Cth) (Corporations Act).
Grant Thornton Australia Ltd is not licensed to provide financial product advice
under the Corporations Act.
To the extent that this document contains any information about a financial
product within the meaning of the Corporations Act, taxation is only one of the
matters that must be considered when making a decision about the relevant
financial product.
This material has been prepared for general circulation and does not take into
account the objectives, financial situation or needs of any recipient. Accordingly,
any recipient should, before acting on this material, consider taking advice from a
person who is licensed to provide financial product advice under the Corporations
Act.
Any recipient should, before acting on this material, also consider the
appropriateness of this material having regard to their objectives, financial situation
and needs and consider obtaining independent financial advice.
10.
Taxation Report
Taxation Treatment of Dividends

The capital raising of Sino Australia Oil and Gas Ltd involves the issue of shares
which will be an equity interest for Australian tax purposes. To the extent
dividends are paid by Sino Australia Oil and Gas Ltd, the level of franking of such
dividends will depend on the level of franking credits generated and available to
Sino Australia Oil and Gas Ltd.
Generally, dividends received by an Australian resident company from
shareholdings of at least 10% in a foreign resident company will be not assessable
in Australia and, accordingly will not generate franking credits.
Accordingly, Sino Australia Oil and Gas Ltd, which we understand is planning to
pay dividends, is not likely to be subject to any Australian tax that will allow it to
generate franking credits. It is not envisaged that dividends will be franked in the
immediate future.
Furthermore, based on the information contained in the prospectus, the directors
are of the opinion there will be no activities that would give rise to attribution of
income under the Controlled Foreign Company (CFC) provisions.
The following comments are applicable to dividends from ordinary shares. The tax
treatment will vary depending on the nature of the entity owning the ordinary
shares:
5.1
Individual Investors
The calculation of an individual's assessable income will depend on whether
the dividend from Sino Australia Oil and Gas Ltd is franked.
An individual receiving a dividend that is unfranked will include the amount
of the dividend in the individual's assessable income, with tax being paid at
the individual's marginal rate of tax.
In the event that the dividend is fully or partly franked, the individual's
assessable income is grossed up to include the franking credit attaching to the
dividend. The individual should be entitled to a tax offset equal to the
amount of the franking credit included in the individuals assessable income.
Where an individual's marginal rate of tax is greater than 30%, further tax
will be payable on the grossed up dividend.
Where the individual's rate of tax is less than 30%, a tax offset is available to
reduce tax payable on other income or alternatively results in a refund of the
excess franking credits.
Depending on the personal circumstances of the individual, additional
Medicare Levy might be payable as result of receiving the dividends.
65
5.2
Company Investors
The taxation treatment of a company investor is similar to the taxation
treatment of individuals.
A company investor receiving an unfranked dividend will pay tax at the
corporate tax rate, currently 30%.
Where dividends are franked, the company investor will include in the
assessable income the amount of dividend received and the amount of any
franking credits attached to that dividend. The company tax rate of 30% is
then applied to the grossed up dividend.
A tax offset will arise equivalent to the franking credit. In the event the
dividend is fully franked, a company investor will pay no further tax on the
dividend.
Company investors will include in their franking account the franking credit
attached to the dividend received.
Company investors that have tax losses and receive franked dividends can
convert any excess franking offsets to current year losses.
In limited circumstances, certain corporate entities (for example, exempt
institutions and life insurance companies), may be entitled to receive a refund
of the franking credit where they satisfy Division 67 of the ITAA 1997.
These entities should seek professional advice in respect of their particular
circumstances.
In all other cases, a company investor cannot receive a refund of franking
credits.
5.3
Complying Superannuation Funds

Complying Superannuation Funds are assessable on the dividend and gross
up the franked dividend in the same way as individuals and companies.
The rate of tax payable by complying superannuation entities is 15% on the
grossed up amount. The franking credit is available to offset tax payable on
other income of the complying superannuation entity or alternatively results
in a refund of the excess franking credits.
5.4
Anti Avoidance Measures

Numerous anti avoidance measures are contained in taxation legislation to
target dividend streaming and franking credit trading.
Depending on the availability of franking credits generated by Sino Australia
Oil and Gas Ltd, dividends paid on the new shares will be franked equally
across all ordinary shares.
10.
Taxation Report
Providing the securities are held 'at risk' for a period of 45 days, it is not
considered that any of the anti-avoidance measures will have application to
the dividends paid on the ordinary shares.
6
Taxation Treatment of Disposal of Equity Interests

The ordinary shares and options will be listed on the Australian Stock Exchange
and can be sold separately.
6.1
Sale of Ordinary Shares

Disposal of the ordinary shares will constitute a Capital Gains Tax (CGT)
event.
A capital gain will arise where the disposal proceeds are greater than the cost
of acquisition of the shares.
Where the new shares acquired in the initial capital raising are retained for
more than twelve months, individuals and complying superannuation funds
might be entitled to a discount of the capital gain of 50% for individuals and
33 1/3% for complying superannuation funds when the shares are disposed.
Company taxpayers will receive no discount and will pay tax at 30% on any
net capital gain.
6.2
Sale of Options
Disposal of the listed option (other than by being exercised) will constitute a
Capital Gains Tax (CGT) event.
A capital gain will arise where the disposal proceeds are greater than the cost
of acquisition of the option.
Where the listed options acquired in the initial capital raising are retained for
more than twelve months, individuals and complying superannuation funds
might be entitled to a discount of the capital gain of 50% for individuals and
33 1/3% for complying superannuation funds when the options are disposed
(other than by being exercised).
Company taxpayers will receive no discount and will pay tax at 30% on any
net capital gain.
Taxation Treatment of Exercise of Listed Options

Ordinarily, exercise of a listed option will constitute a Capital Gains Tax (CGT)
event; however any capital gain or loss arising on exercise of the listed option
should be disregarded.
The first element of the cost base of the ordinary share acquired on exercising the
listed option will be equal to the amount paid to acquire the ordinary share, ie the
options exercise price plus the cost of acquisition of the option.
67
Quotation of Tax File Number

Sino Australia Oil and Gas Ltd cannot insist that investors in the Sino Australia Oil
and Gas Ltd ordinary shares provide their Tax File Number (TFN) or Australian
Business Number (ABN). However, if investors choose not to provide to it their
TFN or ABN, Sino Australia Oil and Gas Ltd is required by tax legislation to
withhold 46.5% of the unfranked part of any dividend.
Goods & Services Tax (GST)

The GST implications for investors are dependent on the specific GST position of
the investor. However, the acquisition, holding and disposal of shares in Australia
are input taxed supplies for GST purposes.
There should therefore be no GST impacts for an investor not registered or
required to be registered for GST as there is no GST on the acquisition or disposal
of shares.
Yours faithfully
GRANT THORNTON AUSTRALIA LIMITED
David Hawkes
Partner - Taxation Services
email: david.hawkes@au.gt.com
11. Additional information

11.1
Incorporation
Remuneration of Directors
The Company was incorporated as a public company in

Australia on 31 July 2012.
11.2
Tax Status and Financial Year
The Companys Australian income (if any) will be taxed in

Australia as a public company at the prevailing corporate tax
rate of 30%. The financial year of the Company will end on 31
December annually. Investors are asked to refer to Section 8 and
the Taxation Report in Section 10 for a detailed discussion on
taxation.
11.3
Litigation
The Directors are not aware of any legal proceedings which

have been threatened or commenced against the Company.
11.4
Disclosure of Directors
Relevant Interests
Directors are entitled to remuneration out of the funds of

the Company but the remuneration of the Non Executive
Directors may not exceed in any year the amount fixed by
the Company in a general meeting for that purpose. The
aggregate remuneration of the Non Executive Directors has
been fixed at a maximum of $250,000 per annum (allowing the
appointment of future directors) to be apportioned among the
Non Executive Directors in such manner as they determine. Each
Non Executive Director will receive the Directors fee pursuant
to their respective Engagement Letters. These amounts are
summarised in the table below. Directors are also entitled to be
paid reasonable travelling, accommodation and other expenses
incurred in consequence of their attendance at Board meetings
and otherwise in the execution of their duties as Directors.
Non Executive
Director
Annual
remuneration
Shares
issued
Options
issued
Wayne Johnson*
$48,000
Nil
5, 000, 000
Andrew Faulkner
$48,000
Nil
5, 000, 000
Interest of Directors
Except as disclosed in this Prospectus, no Director (whether
individually or in consequence of a Directors association with
any company or firm or in any material contract entered into by
the Company) has now, or has had, in the 2 year period ending
on the date of this Prospectus, any interest in:

the formation or promotion of the Company; or
property acquired or proposed to be acquired by the

Company in connection with its formation or promotion or
the Offer of the Shares; or
the Offer of the Shares.
Except as disclosed in this prospectus, no amounts of any kind

(whether in cash, Shares, options or otherwise) have been paid
or given or agreed to be paid or given to any Director or to any
company or firm with which a Director is associated to induce
him or her to become, or to qualify as, a Director, or otherwise
for services rendered by him or her or any company or firm
with which the Director is associated in connection with
the formation or promotion of the Company or the Offer
of the Shares.
In consideration of Mr Johnsons services to the Board of the Company,

the Company has granted Mr Johnsons option to a Nominee; Baroda Hill
Investments Limited (NZ Company Number 628076) of Level 14 Forsyth Barr
House, Cnr Lambton Quay 7 Johnston Street, Wellington, New Zealand.
Executive
Director
Mr Tianpeng Shao
Annual
remuneration
Shares
issued
Options
issued
$48,000 135,644,255
6, 000, 000
NB: The shares issued to Mr Tianpeng Shao were not issued as part of his
employment as a Director of the Company.
Director Options
Director Options are non-trading vested options where the
strike price $0.75 cents expiring on four years after the date
of official quotation of the shares in Sino Australia Oil and Gas
Limited by ASX Limited, representing services and commitment
to the Company.
Indemnity, Insurance and Access Deed

The Company has entered into an Indemnity, Insurance and
Access Deed with each Director.
Pursuant to the Deed:
Holdings of Directors
Director
Number of
Shares
Number of
Options
Mr Tianpeng Shao
135,146,255
6, 000, 000
The Director is indemnified by the Company against any liability

incurred in that capacity as an officer of the Company to the
maximum extent permitted by law subject to certain exclusions.
Mr Wayne Johnson
or Related nominee
nil
5, 000, 000
The Company must keep a complete set of company

documents until the later of:
Andrew Faulkner
nil
5, 000, 000
the date which is seven (7) years after the Director ceases to
be an officer of the Company; or
69
the date after a final judgment or order has been made in

relation to any hearing, conference, enquiry or investigation
in which the Director is involved as a party, witness or
otherwise because the Director is or was an officer of the
Company (Relevant Proceedings).
The Director has the right to inspect and copy a company

document in connection with Relevant Proceedings during the
period referred to above.
Subject to the next sentence, the Company must maintain
an insurance policy insuring the Director against liability as a
Director and officer of the Company while the Director is an
officer of the Company and until the later of:

the date which is seven (7) years after the Director ceases to
be an officer of the Company; or
the date any Relevant Proceedings commenced before the

date referred to above have been finally resolved.
Shanghai Fortunehao Investment Management Co., Ltd. has

acted as the Chinese Financial Advisors to the Company in
relation to the Offer. In respect of this work, the Company has
agreed to pay Shanghai Fortunehao Investment Management
Co., Ltd. AUD $46,000 for these services up to the date of this
Prospectus and additionally issue Green Peace Holdings Co Ltd
19,220,455 ordinary shares in Sino Australia Oil and Gas Limited.
Fox Tucker Lawyers (FTL) have acted as the Australian Legal
Advisors to the Company in relation to the Offer, and in that
capacity and otherwise assisting the Company with the
preparation of this Prospectus, FTL have been involved in
undertaking certain due diligence enquiries in relation to legal
matters and providing legal advice to the Company in relation
to the Offer. In respect of this work, the Company has agreed
to pay FTL between $191,000 and $205,000 (including GST) for
these services up to the date of this Prospectus.
The Deed is governed by the laws of Australia.
MDS Financial Group Limited subsidiary D2MX Pty Ltd (D2MX)

has acted as sponsoring broker to the Offer. On completion
of the Offer, the Company estimates that it will pay brokerage
commission of up to 6.5% on the funds raised (exclusive of
GST and disbursements) in respect of this work on minimum
subscription being up to $780,000, and up to $1,300,000 on
maximum subscription.
11.5
D2MX will also be entitled to a success fee of 600,000 fully paid

shares in the IPO listing (escrowed for a period of 2 years).
The Company may cease to maintain the insurance policy if the

Company reasonably determines that the type of coverage is no
longer available.
Interests of Named Persons
Except as disclosed in this Prospectus, no expert, promoter

or any other person named in this Prospectus as performing
a function in a professional advisory or other capacity in
connection with the preparation or distribution of the
Prospectus, nor any firm in which any of those persons is or was
a partner, nor any company in which any of those persons is or
was associated with, has now, or has had, in the 2 year period
ending on the date of this Prospectus, any interest in:

the formation or promotion of the Company; or
property acquired or proposed to be acquired by the

Company in connection with its formation or promotion or
the Offer under this Prospectus; or
the Offer under this Prospectus.
Except as disclosed in this Prospectus, no amounts of any kind

(whether in cash, Shares, options or otherwise) have been paid
or given or agreed to be paid or given to any expert, promoter
or any other person named in this Prospectus as performing
a function in a professional advisory or other capacity in
connection with the preparation or distribution of this
Prospectus, or to any firm in which any of those persons is or
was a partner or to any company in which any of those persons
is or was associated with, for services rendered by that person in
connection with the formation or promotion of the Company or
the Offer under this Prospectus.
D2MX were also paid a monthly Retainer Fee of $7, 500 per
month plus GST up until the listing date.
Grant Thornton Corporate Finance Pty Ltd has acted as
Investigating Accountants in relation to the Offer. As
investigating accountants, Grant Thornton Corporate Finance
Pty Ltd have been involved in undertaking due diligence in
relation to financial matters and preparing pro forma financial
accounts, and have prepared the Investigating Accountants
Report which has been included in this Prospectus. In respect
of all this work the Company has agreed to pay Grant Thornton
Corporate Finance Pty Ltd a total of $20,000 for these services.
Grant Thornton Audit Pty Ltd is the auditor to the Company.
They have audited the 2010, 2011 and half year 2012 financial
accounts of Zhaodong Huaying for the purpose of this
prospectus and have been paid $95,000 for these services.
Grant Thornton Corporate Finance Pty Ltd has reviewed the
Companys financial forecasts for the purpose of this prospectus.
For these services Grant Thornton Corporate Finance Pty Ltd has
been paid a total of $60,000.
Grant Thornton Australia Ltd as the author of the Taxation
Report has acted to provide the Taxation Report which has
been included in this Prospectus. In respect of this work, the
Company has agreed to pay Grant Thornton Australia Ltd a total
of $5,000 for these services.
11.
Additional information
Jiahua Law Firm have acted as Chinese Legal Advisors to

the Company on China Law in relation to the Offer, and in
that capacity and otherwise assisting the Company with the
preparation of this Prospectus. Jiahua Law Firm have been
involved in undertaking certain due diligence enquiries in
relation to legal matters and the provision of a summary of the
Chinese legal system in Section 13. In respect of this work, the
Company has agreed to pay Jiahua Law Firm $61,000 for these
services up to the date of this Prospectus.
The Company has engaged Mercury Consulting as Investor
Relations providers in relation to the listing process. The
Company has paid Mercury Consulting $42,000 for these
services.
IRM have been retained to prepare an English website for the
Company given its operations are in China. The Company has
paid the sum of $7,000 for these services.
Security Transfer Registrars Pty Ltd has agreed to provide
share registry services to the Company in accordance with the
Engagement Letter dated 18/9/12.
11.6
Expenses of the Offer
Actual and estimated expenses connected with the Offer are

payable by the Company assuming minimum subscription of
$12million and a maximum subscription of $20 million. The
expenses are as follows:
Minimum
subscription
Maximum
subscription
$12,000,000
$20,000,000
$45,000
$45,000
Brokerage and commissions
$780,000
$1,300,000
Australian legal fees
$191,000
$191,000
Chinese legal fees
$61,000
$61,000
Investigating Accountant fees
$20,000
$20,000
Taxation report
$ 5,000
$5,000
Audit fees
$95,000
$95,000
Forecast review
$60,000
$60,000
Investor relations
$42,000
$42,000
$7,000
$7,000
$46,000
$46,000
$120,000
$125,000
Printing
$20,000
$20,000
Share registry costs
$20,000
$20,000
$1,512,000
$2,037,000
Expenses
Financial advisory and
management fees
Website development
Chinese financial adviser
ASX listing fees
Total
11.7
Consents
Each of the parties referred to in this Section 11.7:

a) does not make, or purport to make, any statement in this
Prospectus or on which a statement made in the Prospectus
is based, other than as specified in this Section 11.7; and
b) to the maximum extent permitted by law, expressly
disclaims and takes no responsibility for any part of this
Prospectus other than a reference to its name and a
statement included in this Prospectus with the consent of
that party as specified in this Section 11.7.
Shanghai Fortunehao Investment Management Co., Ltd. has
given its written consent to be named as the Chinese Financial
Advisors to the Company and has not withdrawn such consent
prior to lodgement of this Prospectus with ASIC.
Fox Tucker Lawyers has given its written consent to be named
as the Australian Legal Advisors to the Company and has not
withdrawn such consent prior to lodgement of this Prospectus
with ASIC.
D2MX has given and at the time of lodgement of this
Prospectus, has not withdrawn its consent to be named as Lead
Manager to the offer of securities under this Prospectus, in the
form and context in which it is named. D2MX was involved in
the preparation of some parts of this Prospectus and in that
capacity authorised the issue of this Prospectus. D2MX makes
no express or implied representation or warranty in relation
to the Company, this Prospectus or the offer. To the maximum
extent permitted by law, D2MX expressly disclaims and takes
no responsibility for any material in, or omission from, this
Prospectus other than the reference to its name.
Grant Thornton Audit Pty Limited has given their written
consent to the inclusion in Section 9 of this Prospectus of their
Financial Information and to all statements referring to those
reports in the form and context in which they appear and
have not withdrawn such consent before lodgement of this
Prospectus with ASIC.
Grant Thornton Corporate Finance Pty Ltd has given their
written consent to the inclusion in Sections 10 and 11 of this
Prospectus of their Investigating Accountants Report and
Taxation Report respectively and to all statements referring to
those reports in the form and context in which they appear and
have not withdrawn such consent before lodgement of this
Jiahua Law Firm has given their written consent to be named
as the Chinese Legal Advisors to the Company on China Law
and has not withdrawn such consent before lodgement of this
71
Security Transfer Registrars Pty Ltd has given and, as at the date
hereof, has not withdrawn its written consent to be named as
Share Registrar in the form and context in which it is named.
Security Transfer Registrars Pty Ltd has had no involvement in
the preparation of any part of this Prospectus other than being
named as Share Registrar to the Company. Security Transfer
Registrars Pty Ltd has not authorised or caused the issue of, and
expressly disclaims and takes no responsibility for, any part of
this Prospectus.
Furthermore, each of the following has consented in writing to
being named in the Prospectus in the capacity as noted below
and has not withdrawn such consent prior to the lodgement of
this Prospectus with ASIC:

Shanghai Fortunehao Investment Management Co., Ltd. as

the Chinese Financial Advisors to the Company;
Fox Tucker Lawyers as the Australian Legal Advisors to the

Company;
D2MX as Lead Manager;
Grant Thornton Audit Pty Limited as Auditors;
Grant Thornton Corporate Finance Pty Ltd for the

Investigating Accountants Report and the Taxation Report
respectively;
Jiahua Law Firm as the Chinese Legal Advisors to the

Company; and
Security Transfer Registrars Pty Ltd as the Share Registrar.
Copies of the consents to the issue of this Prospectus are

available for inspection, without charge, at the registered office
of the Company.
11.8
Material Contracts
The Directors believe that certain agreements are material

contracts such that investors will want to have particulars of
them when making an assessment to apply for shares. Set out
below is a brief summary of the material contracts which have
been entered into by Sino Australia Oil and Gas Limited or any
of its subsidiaries, which may be relevant and of interest to a
potential investor.
a) Under a Voluntary Escrow Agreement dated 27 February
2013 entered into between Mr Shao Tianpeng and the
Company, Mr Shao agreed to escrow his securities for 24
months from the date the Company is admitted to the
Official List.
b) Under a Voluntary Escrow Agreement dated 22 February
2013 entered into between Mr Yuan Zhanhua and the
Company, Mr Yuan and his company Pengfu Development
Co., Ltd agreed to escrow half of his securities for 12 months
and half of his securities for 18 months from the date the
Company is admitted to the Official List.
c) Under a Voluntary Escrow Agreement dated 22 February

2013 entered into between Mr Chen Jian and the Company,
Mr Chen and his company Kaitong Industry Co., Ltd agreed
to escrow half of his securities for 12 months and half of
his securities for 18 months from the date the Company is
admitted to the Official List.
d) Under a Voluntary Escrow Agreement dated 22 February
2013 entered into between Ms Yin Xianfeng and the
Company, Ms Yin and her company Green Peace Holding
Limited agreed to escrow her securities for 12 months from
the date the Company is admitted to the Official List.
e) Under an Executive Service Agreement dated 27 February
2013 entered into between Mr Shao Tianpeng and the
Company, Mr Shao is appointed as Executive Chairman and
Managing Director of the Company, with effect from the
date on which the Shares are admitted to the Official List
(Listing Date). The agreement has a term of 5 five years from
the Listing Date, unless terminated earlier in accordance
with the agreement. Mr Shaos base remuneration is
$156,000 for the first year and will be reviewed by the Board
on an annual basis thereafter. The Executive Chairman and
Managing Director will be based in Heilongjiang Province
in China.
f ) Under a Share Transfer Agreement dated 7 August 2012
entered into between Angela Min Wu and the Company,
Angela Min Wu agreed to sell her shares in Lishida
Development Company Ltd to the Company in order
for Lishida to become a wholly owned subsidiary of the
Company. SAO holds 10,000 fully paid shares in Lishida
which represents 100% of its issued share capital.
g) Central Asia Oil Co., Ltd
On 10 May 2011, Zhaodong signed a Radial hydraulic
injection technology service contract with Central Asia
Oil Co., Ltd, stipulating that Zhaodong should provide
technical guidance, related equipment and test tools in the
processing of 145 wells to Central Asia. The service term of
the contract was from 10 May 2011 to 30 April 2013 at a
price of RMB 545,000 per well (tax included) (AUD$83,079),
the total price being RMB 79,025,000 for 145 wells.
h) Daqing Oilfield Limited Company
On 9 March 2012, Zhaodong signed an oil well downhole
construction contract numbered DQYT-0502002-2012YTGC-18 with Daqing Oilfield Limited Company. This
contract stipulates that Zhaodong should provide Pump
overhaul services to No.2 oil production plant of Daqing
Oilfield Limited Company. A total of 100 wells are covered
by the contract at a cost per well of RMB 15,500. The total
fees equate to RMB 1,550,000. Daqing Oilfield Company Ltd
is a subsidiary of Petro China.
11.
i) Nature of the contracts

Each contract is between the 100% wholly owned subsidiary of Sino Australia and either State-owned enterprises (SOEs) or their
wholly owned subsidiaries. Therefore, all contracts are in effect with the Beijing National Government and are considered binding
under PRC Law.
One year after work is completed the last 10% of the total contract price is paid. 90% of the total contract price is paid on a
progressive basis during the year as the work is performed. Accordingly, Zhaodong takes the risk on the contract only to the
extent of the retention component of 10% and only to the extent of the delay in payment of that specific component is at the
end of the 12 months.
The contracts listed below are carried over from the 2012 calendar year for two reasons; (1) the provision of the contract services
is carried out over an extended period of time which can take up to one year which means that contracts entered into during
2012 can still be undertaken in 2013, and (2) Zhaodong has until now operated on a calendar financial year from 1 January to 31
December. Please note delays may occur in performance of contracts due to extreme weather conditions as noted in the risks
section of the prospectus see Chapter 7 Risks.
Below is a complete list of each of the Companys clients for the calendar year 2012:
No. Name of client
Product type
Contract period (completion date)
Radial hydraulic
The contract signed in May 2010, 2012

completion on schedule
Central Asia Oil Co., Ltd
Daqing Oilfield Limited Company2nd Oil production plant
Pump checking
March 9, 2012--March 9, 2013
Daqing Toutai Oil Field

Development Co., Ltd
Radial hydraulic
May 11, 2012--May 11, 2013
Daqing Oilfield Limited Company10th Oil Production Plant
Radial hydraulic
June 7, 2012--June 7, 2013
Daqing Oilfield Limited Company8th Oil Production Plant
Radial hydraulic
June 21, 2012--June 21, 2013
Songyuan City Ningjiang District Small

Oilfield Development Company
Radial hydraulic
April 10, 2012--December 20, 2012
Daqing Oilfield Limited Company3rd Oil Production Plant
Pump checking
July 1, 2012--December 30, 2012
Xinmin Oil Production Plant
Radial hydraulic
June 27, 2012--December 30, 2013
Jilin Oilfield Company Limited

Hong Gang Oil Production Plant
Radial hydraulic
July 2, 2012--July 2, 2013
10
CNPC - Jilin Oilfield Company Branch
Radial hydraulic
July 24, 2012--July 24, 2013
11
Jilin Oilfield Company Limited

Tian Qian Oil Production Plant
Radial hydraulic
July 28, 2012--July 28, 2013
China Oil Group Company

Daqing Branch
Pump checking
Songyuan City Ningjiang

District Small Oilfield
Development Company
Radial hydraulic
14
SongYuan City Yuqiao Oil

and Gas Development Co., Ltd
Radial hydraulic
August 7, 2012--December 7, 2014
15
Daqing Oil Production

Engineering Research Institute
Radial hydraulic
China Oil Group Company

Daqing Branch
Radial hydraulic
12
13
16
Quantity of well
37
100
15
15
20
10
50
30
20
60
15

400
August 10, 2012--June 10, 2014
60
150
120
August 13, 2012--June 13, 2014
50
Summary
Total Amount for radial hydraulic (RMB)
Total Amount for pump checking (RMB)
TOTAL
351,755,000
9,100,000
360,865,000
73
j) Convertible Notes
Pursuant to the terms of an Unsecured Redeemable
Convertible Notes dated 27 February 2013 14 Note
holders have subscribed for $3.1 million of shares at $0.50
convertible on the listing date into shares in Sino Australia.
k) Office Lease Contract
The Company has entered into a lease agreement with
Daqing Gaoxin Technology Co Ltd for rental of office
premises covering the period 20 June 2012 to 19 June 2013
with a rental of $19,000 p.a.
l) Daqing Huafu Petroleum Limited lease of drilling
equipment
The Company has entered into a contract for lease of
drilling equipment from Daqing Huafu Petroleum Ltd
covering the period 1 January 2013 to 1 January 2014.
m) Beijing Oushengwen - lease of drilling equipment
The Company has entered into a contract for lease of
drilling equipment from Beijing Oushengwen Ltd covering
the period 17 May 2012 to 17 May 2013.
n) Contract between Company and Guisen Shao
On 21 May 2012, the Company purchased drilling
equipment designed for Radial Hydraulic Jet Drilling with a
total value of RMB 30,431,450 from a related party, Guisen
Shao (father of the Executive Chairman). The related party
purchased the equipment from an external third party
for a consideration of RMB 30,000,000. The payment to
the related party for the purchase will be settled in three
separate instalments over the 2012 to 2014 financial
periods. RMB 10 million has been paid in 2012 and the
remaining balance will be settled in 2013 and 2014
respectively.
The total loan amount was RMB30.4 million to be repaid in
RMB10 million instalments between FY2012 and FY2013
and remaining balance to be repaid in FY2014. RMB20.4
million ($3.2 million) is outstanding at 30 June 2012.
Repayment of the 2013 instalment has been factored into
the forecast and is expected to be from operating cash
flows.
11.9
Rights Attaching to Shares
The Shares to be issued under this Prospectus will rank equally

with the fully paid ordinary Shares in the Company. The
rights and liabilities attaching to all Shares are set out in the
Companys Constitution, and, in certain circumstances, are
regulated by the Corporations Act, the ASX Listing Rules, the
ASTC Settlement Rules and general law.
The following is a summary of the more significant rights of the
holders of Ordinary Shares of the Company. This summary is not
exhaustive nor does it constitute a definitive statement of the
rights and liabilities of Companys Members. The summary assumes
that the Company is admitted to the Official List of the ASX.
a) General meeting
Each member is entitled to receive notice of and except in certain
circumstances, to attend and vote at general meetings of the
Company and to receive all financial statements, notices, and
other documents required to be sent to members under the
Companys Constitution, the Corporations Act or the Listing Rules.
b) Voting
Subject to any rights or restrictions for the time being attached
to any class or classes of shares whether by the terms of their
issue, the Constitution, the Corporations Act or the ASX Listing
Rules, at a general meeting of the Company every holder of fully
paid ordinary shares present in person or by proxy, lawyer or
representative has one vote on a show of hands and on a poll
has one vote for each fully paid share held. A person who holds
an ordinary share which is not fully paid is entitled, on a poll, to
a fraction of a vote equal to the proportion which the amount
paid bears to the total issue price of the share.
Where there are two or more joint holders of the share and
more than one of them is present at a meeting and tenders
a vote in respect of the share (whether in person or by proxy
or lawyer), the Company will count only the vote cast by
the member whose name appears before the other in the
Companys register of members.
c)
Issues of further Shares
The Directors may, on behalf of the Company, issue shares or

other securities to any person on the terms, with such preferred
or deferred or other special rights, obligations or restrictions,
and at the times that the Directors may determine. However, the
Directors must act in accordance with the restrictions imposed
by the Companys Constitution, the ASX Listing Rules, the
Corporations Law and any rights for the time being attached to
the Shares in special classes of shares.
d) Variation of rights
At present, the Company has on issue one class of shares only,
namely ordinary Shares. The rights attached to the Shares in any
class may be altered only by a special resolution of the Company
and a special resolution passed at a separate meeting of the
holders of the issued Shares of the affected class, or with the
written consent of the holders of at least three quarters of the
issued Shares of the affected class.
e)
Transfer of Shares
Subject to the Companys Constitution, the Corporations Act,

the ASTC Settlement Rules and the ASX Listing Rules, ordinary
Shares are freely transferable.
The Shares may be transferred by a proper transfer effected in
accordance with ASTC Settlement Rules, by any other method of
transferring or dealing introduced by the ASX and as otherwise
permitted by the Corporations Act or by a written instrument of
transfer in any usual form or in any other form approved by the
Directors that is permitted by the Corporations Act. The Company
11.
may decline to register a transfer of Shares in the circumstances

described in the Companys Constitution and where permitted
to do so under the ASX Listing Rules. The Directors must decline
to register a transfer of Shares when required by law by the ASX
Listing Rules or by the ASTC Settlement Rules.
f)
Partly paid Shares
The Directors may, subject to compliance with the Companys

Constitution, the Corporations Act and the ASX Listing Rules,
issue partly paid Shares upon which amounts are or may
become payable at a future time in satisfaction of all or part of
the unpaid issue price.
g) Dividends
Subject to any special terms and conditions of issue of Shares,
the profits of the Company which the Board from time to
time determines to distribute by way of dividend are divisible
amongst the members in proportion to the amounts paid up
on the Shares held by them. The Directors may authorise the
payment to the members of such interim dividends as appear
to the Directors to be justified by the Companys profits and for
that purpose may declare such interim dividends.
h) Winding up
If the Company is wound up at any time, the liquidator may
divide, among all or any of the contributories (as defined by
the Corporations Act) as the liquidator thinks fit, any part of the
assets of the Company. In so dividing, the liquidator may give
any class of Shares special or preferential treatment or exclude
any class altogether or in part.
If the Company has issued preference shares, those Shares
carry a right in a winding up to payment in cash in priority to
all other classes of Shares of the amount paid (or agreed to be
considered as paid) on each of the preference Shares and the
amount (if any) equal to any accrued but unpaid dividends
referrable to those Shares.
i) Dividends plan
The Directors may establish, maintain, suspend or terminate
dividend plans under which (among other things) a member
may elect that dividends payable by the Company be reinvested
by way of subscription for Shares in the Company or a member
may elect to forego any dividends that may be payable on all or
some of the Shares held by that member and to receive instead
some other entitlement, including the issue of Shares.
j) Directors
11.10 Electronic Prospectus

Pursuant to Class Order 00/44, ASIC has exempted compliance
with certain provisions of the Corporations Act to allow
distribution of an electronic prospectus on the basis of a
paper prospectus lodged with ASIC and the issue of securities
in response to an electronic application form subject to
compliance with certain provisions.
If you have received this Prospectus as an electronic prospectus
please ensure that you have received the entire Prospectus
accompanied by the Application Form. If you have not, please
email registrar@securitytransfer.com.au and the Company will send
to you, for free, either a hard copy or a further electronic copy of the
Prospectus or both. The Prospectus is also available in electronic
form on www.d2mx.com.au or www.mdsfinancial.com.au
The Company reserves the right not to accept an Application
Form from a person if it has reason to believe that when that
person was given access to the electronic Application Form,
it was not provided together with the Prospectus and any
relevant supplementary or replacement prospectus or any of
those documents were incomplete or altered. In such case, the
Application Monies received will be dealt with in accordance
with Section 722 of the Corporations Act.
11.11 Directors Responsibility Statement

and Consent
The Directors state that they have made all reasonable enquiries
and on that basis have reasonable grounds to believe that
any statements by the Directors in this Prospectus are not
misleading or deceptive and that with respect to any other
statements made in this Prospectus by persons other than
Directors, the Directors have made reasonable enquiries and
on that basis have reasonable grounds to believe that persons
making those other statements were competent to make such
statements and each of those persons have given their consent
to the issue of this Prospectus and have not withdrawn that
consent, before lodgement of this Prospectus with ASIC, or to
the Directors knowledge, before any issue of Shares pursuant
to this Prospectus. The Prospectus is prepared on the basis that
certain matters may be reasonably expected to be known to
likely investors or their professional advisors.
Each Director of the Company has consented in writing to the
lodgement of the Prospectus with ASIC and has not withdrawn
that consent.
Signed for and on behalf of Sino Australia
The Companys Constitution states that the minimum number

of Directors is three.
k)
Powers of the Board
The Directors have power to manage the business of the

Company and may exercise that power to the exclusion of the
members, except as otherwise required by the Corporations
Act, any other law, the ASX Listing Rules or the Companys
Constitution.
Shao Tianpeng
Chairman
75
12. Summary of relevant Chinese laws

and regulations
Summary of Relevant Chinese Laws and
Regulations
This section sets out summaries of certain aspects of Chinese
Laws and Regulations, which are relevant to the PRC Companies
operation and business.
Chinese Legal System

The PRC legal system is based on the PRC Constitution and
consists of written laws, administrative regulations and
directives. Decided cases do not constitute binding precedents.
The National Peoples Congress of China (the NPC) and
Standing Committee of NPC (the SCNPC) are empowered by
the PRC Constitution to exercise the legislative power of the
state to amend the PRC Constitution and to enact and amend
laws.
The State Council of China (the State Council) is the supreme
authority of state administration and has the power to enact
administrative rules and regulations. The ministries and
committees under the State Council are also vested with the
power to issue orders, directives and regulations.
At the regional level, the standing committees of the peoples
congresses of provinces and municipalities may enact local rules
and regulations and the peoples governments may promulgate
administrative rules and directives applicable to their own
administrative areas. Rules, regulations or directives may be
enacted or issued at the provincial or municipal level.
Judicial System
The Peoples Courts are the judicial organs of PRC and comprise
of the local peoples courts, military courts and other special
courts. The local peoples courts are divided into three levels
namely, the basic peoples courts, intermediate peoples courts
and high peoples courts.
A foreign individual or foreign enterprise is accorded the same
litigation rights and obligations as a citizen or legal person of
the PRC. If any party of a civil action refuses to comply with a
judgment or order made by a peoples court or an award made
by an arbitration commission in the PRC, the aggrieved party
may apply to the peoples court with jurisdiction to enforce the
judgment, order or award.
A party seeking to enforce a judgment or order of a peoples
court against another party who or whose property is not within
the PRC may apply to a foreign court with jurisdiction over
the case for recognition and enforcement of such judgment
or order. A foreign judgment or ruling may also be recognized
and enforced according to PRC enforcement procedures
by the peoples courts in accordance with the principle of
reciprocity or if there exists an international or bilateral treaty
with or acceded to by the foreign country that provides for
such recognition and enforcement, unless the peoples court
considers that the recognition or enforcement of the judgment

or ruling will violate fundamental legal principles of the PRC or
its sovereignty, security or social or public interest.
Arbitration
Under the Arbitration Law of the PRC, an arbitral award is final
and binding on the parties and if a party fails to comply with an
award, the other party to the award may apply to the peoples
court for enforcement.
A party seeking to enforce an arbitral award of a foreign affairs
arbitration commission of the PRC against another party who
or whose property is not within the PRC may apply to a foreign
court with jurisdiction over the case for enforcement. Similarly,
an arbitral award made by a foreign arbitration commission may
be recognized and enforced by the PRC courts in accordance
with the principles of reciprocity or any international treaty
concluded or acceded to by the PRC.
Land Ownership
Under the PRC Constitution, the ownership of all urban land in
PRC is hold by the state. Individual, companies and other entities
can acquire the land use rights (Granted Land Use Rights) for a
fixed period of up to 70 years by consideration. Article 3 of the
Land Grant Regulations provides for foreign as well as Chinese
entities or individuals to acquire Granted Land Use Rights for the
purposes of development, use and operation. Article 11 of the
Land Grant Regulations provides that maximum term of land
use for residential purposes is 70 years, 50 years for industrial,
and 40 years for commercial, tourist and entertainment use.
The Granted Land Use Rights can be acquired through means
of agreement, tendering and auction. The grantees are required
to enter into a land use rights grant contract (Land Grant
Contract) with the local land administration authorities.
Real property refers to buildings and structures on the land
subject to the restriction of land ownership and duration of
the land use. Private ownership (by individuals and corporate
entities) of real property is allowed in PRC evidenced by an
ownership certificate.
Real property can be transferred, leased and charged in
accordance with relevant PRC laws and regulations.
Establishment, Operation and

Management of Wholly Foreign-Owned
Enterprises (WFOEs)
The establishment, operation and management of corporate
entities in the PRC are governed by the Company Law of the
PRC (Company Law) which was promulgated by SCNPC on 29
December, 1993 and became effective on 1 July, 1994. It was
subsequently amended on 25 December, 2005 respectively.
The Company Law provides for the establishment, corporate
12.
Summary of relevant Chinese laws and regulations
structure and corporate management of companies, and also

applies to Foreign Invested Enterprises (FIEs). Given that there
are other laws and regulations on FIEs applicable, such laws and
regulations shall apply.
The establishment and approval procedures, registered capital
requirement, foreign exchange, accounting practices, taxation
and labor matters of WFOEs are governed by The Wholly Owned
Enterprise Law of the PRC (Wholly Owned Enterprise Law).
It was promulgated on 12 April, 1986 and amended on 31
October, 2000, and its implementary rules were promulgated on
12 December, 1990 and amended on 12 April, 2001.
Investment in PRC by foreign individuals or foreign owned
enterprises is also governed by the Catalogue of Guidance
of Industries for Foreign Investment (the Catalogue). The
Catalogue was promulgated on 28 June 1995 and was revised
in 1997, 2002 and 2004. The currently effective Catalogue was
promulgated by the Ministry of Commerce of PRC (MOC)
and the National Development and Reform Commission of
PRC (NDRC) on 31 October, 2007. The Catalogue classifies
industries into three following three categories (1) encouraged;
(2) restricted; (3) prohibited.
Foreign investors are permitted to invest in industries not
in the restricted or prohibited categories. Certain aspects of
industries in the restricted category may be limited to equity or
contractual joint ventures, whereby the controlling shareholders
shall be Chinese shareholder. Foreign investors shall not invest
in industries in the prohibited category. Foreign investment
projects with a total investment amount of US$ 100 million
or more in the encouraged category, or US$ 50 million in the
restricted category, are subject to approval by NDRC while other
foreign investment projects are only subject to approval by
provincial government authorities.
Foreign Exchange
The principal law governing foreign currency exchange in PRC is
the Foreign Exchange Administration Rules (Foreign Exchange
Rules). It was enacted by the State Council on 29 January, 1996,
implemented on 1 April, 1996, and amended on 14 January,
1997 and 1 August, 2008 respectively. Pursuant to the Foreign
Exchange Rules, Renminbi is generally freely convertible for
payments of current account items, such as trade and service
related foreign exchange transactions and dividend payments,
but not freely convertible for capital account items such as
capital transfer, direct investment, investment in securities,
derivative services or loan unless prior approval of SAFE is
obtained.
Dividend Distribution
Before the promulgation of the Enterprise Income Tax Law (Tax
Law) of the PRC, the principal regulation governing distribution
of dividends paid by PRC WFOEs include:
a) PRC Company Law;
b) PRC Wholly Foreign Owned Enterprise Law; and

c) Implementing Rules of PRC Wholly Foreign Owned
Enterprise Law.
Under these laws and regulations, WFOEs in the PRC may
pay dividends only from profits accumulated after tax, if any,
determined in accordance with Chinese accounting standards
and regulations. In addition, such enterprises are required to
set aside at least 10% of their after tax profits each year, if any,
to fund certain reserve funds. No net assets other than the
profits accumulated after tax can be distributed in the form of
dividends. Dividends paid to the foreign investors are exempted
from withholding tax. However, this provision has been revoked
by the Tax Law. Tax Law prescribes a standard withholding
tax rate of 20% on dividends and other PRC sourced passive
income of non-resident enterprise. However, the Implementing
Regulation of the Enterprise Income Tax Law of the PRC reduced
the rate from 20% to 10%, effective from 1 January, 2008.
Pursuant to the agreement between the PRC and the Hong
Kong Special Administration Region for Avoidance of Double
taxation and Tax Evasion on Income signed on 21 August,
2006, where a Hong Kong enterprise holds at least 25% of
shareholding of a PRC enterprise, the withholding tax in respect
to the payment of dividends by such PRC enterprise to such
Hong Kong enterprise is 5%. Otherwise, the withholding tax rate
is 10% for the relevant dividends.
Taxation
1)
Income taxation
Pursuant to the Enterprise Income Tax Law of PRC and the

Implementing Rules, which become effective on 1 January,
2008, tax payers are divided into resident enterprises and nonresident enterprises.
A resident enterprise refers to an enterprise that is established
inside PRC, or which is established under the law of a foreign
country (region) but whose actual institution if management is
inside PRC. A resident enterprise shall pay the enterprise income
tax on its incomes derived from both inside and outside PRC at
the rate of 25%.
A non-resident enterprise refers to an enterprise established
under the law of a foreign country (region), whose actual
institution of management is not inside PRC but which has
offices or establishments inside PRC, or which does not have any
offices or establishments inside PRC but has incomes sourced in
PRC. A non-resident enterprise having offices or establishments
inside PRC shall pay the enterprise income tax at the rate of 25%
on its incomes derived from PRC as well as on incomes derived
from outside PRC but which has real connection with the above
offices or establishments. A non-resident enterprise have no
offices or establishment inside PRC, or whose incomes have no
actual connection to its institution or establishment inside PRC
shall pay enterprise income tax on the incomes derived from
PRC at the rate of 10%.
77
2) Value Added Tax (VAT)

The State Council promulgated Provisional Regulations on Value
Added Tax of PRC on 13 December, 1993 and amended it on
5 November, 2008. Pursuant to the Provisional VAT Regulation
and its implementary rules, entities and individuals engaged in
the sale of goods, supply of processing, repair and replacement
services, and import of goods in PRC are taxpayers of VAT and
shall pay VAT at the rate of 17% unless otherwise stipulated.
Labour and Social Insurance

On 5 July, 1994 the SCNPC promulgated The Labor Law of the
PRC, which became effective on 1 January, 1995, and Labor
Contract Law of the PRC on 29 June, 2007, which became
effective on 1 January, 2008. Pursuant to the above laws, a
written labor contract shall be concluded within one month
from the date when the employee commences working.
Otherwise, the employer shall pay twice of the monthly wage.
Labor contract is divided into two types, namely labor contract
with fixed term and labor contract without fixed term. Where
the employee has already worked for the employer for 10 years
consecutively or the labor contract is to be renewed after two fixed
term labor contracts which have been concluded consecutively, a
labor contract without fixed term shall be concluded.
The Promotion of Employment Law of the PRC, promulgated
by SCNPC on 30 August, 2007and effective on 1 January, 2008,
provides that no employee can be discriminated in employment
by reason of ethical group, race, gender, or religion belief. The
employer should neither refuse, nor request higher conditions
for, the employment of any woman, merely because such
gender and no provision limiting any woman employee in
marriage and child bearing is allowed in the labor contract. The
employer should not refuse the employment of a person just
because of such person being an infection pathogen carrier,
unless otherwise stated by laws and regulations.
Pursuant to the Provisional Regulations Concerning the Levy
of Social Insurance Fees promulgated and implemented on 22
January, 1999 by the State Council, the Provisional Measures
Concerning the Maternity Insurance of Enterprise Employees
promulgated on 14 December, 1994 and implemented on
1 January, 1995 by former Ministry of Labor, the Regulation
Concerning the Administration of Housing Fund promulgated
and implemented on 3 April, 1999 and amended on 24 March,
2002 by the State Council, the Regulation on Occupational
Injury Insurance promulgated on 27 April, 2003 by the State
Council and implemented on 1 January, 2004, the employer
shall pay pension insurance fund, basic medical insurance fund,
unemployment insurance fund, occupation insurance fund,
maternity insurance fund and housing fund for the employees.
Product Quality and Protection of the

Rights and Interests of Consumers
In accordance with the Product Quality Law of the PRC
promulgated by SCNPC and came into force on 1 September,
1993 and subsequently amended on 8 July, 2000, manufacturers
shall establish proper internal product quality management
system. The quality of services shall pass standard examinations.
The State institutes a system for certifying quality system of
enterprises according to the internationally accepted quality
management standards. Enterprises may voluntarily apply for
certification of their quality systems. The qualified enterprises
shall be issued with certificates for the quality systems. The
State also institutes a system for certifying the quality of
services referring to the internationally advanced product
quality standards and technical requirements. Enterprises may
voluntarily apply for certification of the quality of their services.
The qualified enterprises shall be issued with certificates for
quality of services and are allowed to use quality certification
marks on the services or on the packages of the services.
Manufacturers shall be responsible for the quality of services
they produce.
In addition, in accordance with the Protection of the Rights and
Interests of Consumers Law of the PRC promulgated by SCNPC
and came into force on 1 January, 1994, the rights of consumers
in respect of safety of person and property in purchasing or
using commodities and receiving services shall be protected.
Consumers whose legitimate rights and interests are infringed
upon in their purchasing or using commodities and receiving
services may demand compensation from the sellers and/or
suppliers of the services concerned. Consumers or other victims
suffering personal injuries or property damage resulting from
defects of commodities may demand compensations either
from the sellers or from the manufacturers. The Administration
for Industry and Commerce is authorized to impose penalties on
these supplies of the services, manufacturers and sellers aforesaid.
Circular Economy Law

The Circular Economy Law of the PRC came into force on
1 January, 2009. The law is formulated for the purposes of
promoting the development of the circular economy, improving
the resource utilisation efficiency, protecting and improving the
environment and realising sustainable development.
The development of a circular economy shall be propelled by
the government, led by the market, effected by enterprises
and participated in bythe public. The State shall work out
industrial policies in accordance with the requirements for the
development of a circular economy. The peoples governments
at or above the county level shall cover the development of
circular economy when working out their national economic
and social development plans and annual plans. The State
encourages and supports the research, development and
promotion of science and technology relating to circular
economy, and encourages the publicity and education of
circular economy, the popularization of scientific knowledge
12.
Summary of relevant Chinese laws and regulations
about and international cooperation in the development of

circular economy. The peoples governments at or above the
county level shall set up an objective responsibility system
for the development of circular economy and take such
measures as planning, finance, investment and government
procurement to promote the development of circular
economy. The State Council and the peoples governments
of the provinces, autonomous regions and municipalities
directly under the Central Government shall set up funds
specially for the development of circular economy so as to
support the research and development of the science and
technology relating to circular economy, the demonstration and
promotion of technologies and services of circular economy,
the implementation of important circular economy projects and
information services for the development of circular economy.
The specific measures shall be formulated by the public
finance department under the State Council together with the
administrative department of circular economy development
and other competent departments under the State Council.
The State Council and the peoples governments of provinces,
autonomous regions and municipalities directly under the
Central Government as well as their relevant departments
shall incorporate the independent innovation research,
application demonstration and industrialization of key science
and technology projects on circular economy in national or
provincial science and technology development plans and
hi-tech industrial development plans, and appropriate certain
fiscal capital for support. The state shall give tax preferences for
industrial activities conducive to promoting circular economy,
and encourage the import of technologies, equipment and
services that may save energy, water and materials through
measures including taxation, and restrict export of services
with high energy-consumption and heavy pollution during
production. Specific measures shall be formulated by the
administrations of finance and taxation under the State Council.
Where any enterprise uses or produces any technology, process,
equipment or product listed in the catalogue of encouraged
clean production and resource comprehensive utilisation by the
State, it may enjoy tax preferences in accordance with relevant
provisions of the State. When formulating and implementing
investment plans, general administrations for developing
circular economy under the peoples governments at or above
county level shall incorporate the projects that may save energy,
water, land and materials and use resources comprehensively
into the major investment area. Where any project meets
national industrial policies that may save energy, water, land
and materials and use resources comprehensively, financial
institutions shall give them credit support such as preferential
loans and provide relevant financial services actively. The State
shall implement a government procurement policy conductive
to developing circular economy. Where any procurement
uses fiscal capital, services and reproduced services that
may save energy, water and materials and be conducive to
environment protection shall be purchased preferentially.
The peoples governments at or above county level and their
relevant departments shall commend and reward entities and
individuals that make outstanding contributions to circular
economic management, scientific and technological research

as well as product development, demonstration and promotion.
Enterprises and public institutions shall commend and reward
teams and individuals that make outstanding contributions to
circular economy development.
Environmental Protection
The Environment Protection Law of the PRC which was
promulgated and effective on 26 December, 1989 provides that:
a) any entity that discharges pollutants must establish
environment protection rules and adopt effective measures
to control or properly treat waste gas, waste water, waste
residues, dust, malodorous gases, radioactive substances,
noise, vibration and electromagnetic radiation and other
hazards it produces;
b) any entity that discharges pollutants must report to
and register with the relevant environment protection
authorities; and
c) any entity that discharges pollutants in excess of the
prescribed national or local standards must pay a fee
therefore.
Violation of the Environment Protection Law of the PRC may
result in fines, suspension of operation, closedown or even
criminal liabilities.
SHANGHAI JIAHUA LAW FIRM
79
13. Glossary
In this Prospectus, unless the context otherwise requires:
A$ and $ and AUD means Australian dollars, unless otherwise
stated.
Directors mean directors of Sino Australia unless the context

indicates otherwise.
D2MX means the D2MX Pty Ltd ABN 98 113 959 596, AFSL
297950, the Lead Manager.
AEST means Australian Eastern Standard time.

EBIT means Earnings before Interest and Tax.
Applicant means a person who submits an Application.
Application means a valid application to subscribe for Shares.
EBITDA means Earnings before Interest, Tax, Depreciation and

Amortisation.
Application Form means the application form contained in this

Prospectus or a copy of the application form contained in this
Prospectus or a direct derivative of the application form which is
contained in this Prospectus.
Email means an electronic mail service that allows users to send

and receive messages via the Internet.
Application Monies means $ 2,000.00 being the amount

payable in respect of each Share under the Offer.
Existing Shares means shares in the Company on issue at the

date of the Offer and the shares required to be issued under the
Share Transfer Agreement dated 27 February 2013.
ASIC or Commission means Australian Securities and

Investments Commission.
ASTC means ASX Settlement and Transfer Corporation Pty Ltd
(ACN 008 504 532).
ASX means ASX Limited (ACN 008 624 691).
Board of Directors and Board mean Board of Directors of Sino
Australia unless the context indicates otherwise.
Business means enhanced oil recovery by use of patented
technology by Sino Australia.
Business Day means a day on which the trading banks are
open in Australia.
EOR means Enhanced Oil and Gas Recovery.
Sino Australia means Sino Australia Oil and Gas Limited.

FY means Financial Year ending on 30 June on the year stated.
GST has the meaning given to it in A New Tax System (Goods
and Services Tax) Act 1999 (Cth).
HIN means the holder identification number (for CHESS).
Huaying means Zhaodong Huaying Drilling Company, a
wholly-owned subsidiary of Sino Australia Oil and Gas Limited.
Investigating Accountant means Grant Thornton Corporate
Finance Pty Ltd.
Issue means the issue of Shares pursuant to this Prospectus.
BVI means the British Virgin Islands.

CHESS means ASX Clearing House Electronic Subregistry
System.
Issuer Sponsored means securities issued by an issuer that are

held in uncertificated form without the holder entering into
a sponsorship agreement with a broker or without the holder
being admitted as an institutional participant in CHESS.
CNOOC means China National Offshore Oil Corporation.

Latest Practicable Date means 29 May 2013.
CNPC means China National Petroleum Corporation.
Listing Rules means listing rules of the ASX.
Closing Date means the date on which the Offer closes.
Company or Sino Australia means Sino Australia Oil and Gas
Limited and where applicable includes its subsidiaries.
Completion of the Offer means the allotment of all the Shares
offered under this Prospectus.
Offer means the invitation to apply for Shares pursuant to this

Prospectus.
Offer Period means the period commencing on the Opening
Date and ending on the Closing Date.
Offer Price means $0.50 per Offer Share.
Corporations Act means the Corporations Act 2001 of Australia.

Offer Shares means Shares offered by the Company as
described in this Prospectus.
13. Glossary
Official List means the Official List of the ASX.

Opening Date means the date immediately following the
expiry of the exposure period referred to in Section 2 of this
Prospectus.
% or percent means percentage.
PRC means the Peoples Republic of China, excluding Taiwan,
Hong Kong SAR and Macau PRC for the purpose of this
Prospectus.
Proper SCH Transfer has the same meaning given in the
Corporations Act.
Prospectus means this disclosure document.
Quotation means quotation of the Shares on the Official List.
Renminbi or RMB means the legal currency of China.
RHD means Radial Hydraulic Jet Drilling, which is an Enhanced
Oil Recovery method to optimise production in oil and gas wells.
SCH Business Rules means the SCH Business Rules issued by ASX
Settlement and Transfer Corporation Pty Ltd (ACN 008 504 532).
Section means a section in this Prospectus.
Share means a fully paid ordinary share in the capital of Sino
Australia.
Shareholders mean the holder of Shares in Sino Australia.
Share Registry means Security Transfer Registrars Pty Ltd or any
other share registry that the Company appoints to maintain the
register of Shares.
Sino Group means Sino Australia Sino Australia Oil and Gas
Limited, Lishida Development (HK) Limited, Daqing Huao
Shengfeng Oil Field Technology Limited Company, Zhaodong
HuaYing Oil Drilling Service Company.
Sinopec means China Petroleum and Chemical Corporation.
Specialised plant and equipment means equipment used in
enhanced oil recovery.
SRN means Security Holder Reference Number.
Subsidiaries means the same as that term is defined under
Sections 9 and 46 of the Corporations Act.
The New Tax Law means the Chinese Income Tax Law which
came into effect on 1 January 2008.
WST means Western Standard Time.
APPLICATION FORM
THIS DOCUMENT IS IMPORTANT. IF YOU ARE IN DOUBT AS TO HOW TO DEAL WITH IT, PLEASE CONTACT YOUR STOCK BROKER OR LICENSED PROFESSIONAL ADVISOR.
SHARE REGISTRY:
Security Transfer Registrars Pty Ltd
All Correspondence to:
PO BOX 535, APPLECROSS WA 6953
770 Canning Highway, APPLECROSS WA 6153
T: +61 8 9315 2333 F: +61 8 9315 2233
E: registrar@securitytransfer.com.au
W: www.securitytransfer.com.au
BROKER STAMP
SINO AUSTRALIA OIL AND GAS LIMITED

ACN: 159 714 397
Broker Code
Advisor Code
PLEASE READ CAREFULLY ALL INSTRUCTIONS ON THE REVERSE OF THIS FORM
No shares will be issued pursuant to the Replacement Prospectus later than 31 March 2014.
Before completing this Application Form you should read the accompanying Prospectus and the instructions overleaf. Please print using BLOCK LETTERS.
I/We apply for:
I/We lodge full application of monies of:
Shares at AUD $0.50 per share

or such lesser number of Shares which may be allocated to me/us by their Directors.
A$
Full Name of Applicant / Company

Title (e.g.: Dr, Mrs) Given Name(s) or Company Name
Joint Applicant #2
Joint Applicant #3
Account Designation (e.g.: THE SMITH SUPER FUND A/C)
<
>
Postal Address
Unit
Street Number
Street Name or PO BOX
/
Suburb/Town/City
State
Postcode
Country Name (if not Australia)
CHESS HIN (where applicable)

If an incorrect CHESS HIN has been provided (e.g.: incorrect number, registration details do not
match those registered) any securities issued will be held on the Issuer Sponsored subregister.
X
Contact Name
Contact Number
Email Address
@
Tax File Number / Australian Business Number
Tax File Number of Security Holder #2 (Joint Holdings Only)
Declaration and Statements:

(1) I/We declare that all details and statements made by me/us are complete and accurate.
(2) I/We agree to be bound by the Terms & Conditions set out in the Prospectus and by the Constitution of the Company.
(3) I/We authorise the Company to complete and execute any documentation necessary to effect the issue of Securities to me/us.
(4) I/We have received personally a copy of the Prospectus accompanied by or attached to this Application form, or a copy of the
Application Form or a direct derivative of the Application Form before applying for the Securities.
(5) I/We acknowledge that the Company will send me/us a paper copy of the Prospectus and any Supplementary Prospectus (if applicable)
free of charge if I/we request so during the currency of the Prospectus.
(6) I/We acknowledge that returning the Application Form with the application monies will constitute my/our offer to subscribe for Securities in the
Company and that no notice of acceptance of the application will be provided.
9407477907
REGISTRY DATE STAMP
E & O.E.
TO MEET THE REQUIREMENTS OF THE CORPORATIONS ACT, THIS FORM MUST NOT BE HANDED TO ANY PERSON
UNLESS IT IS ATTACHED TO OR ACCOMPANIED BY THE PROSPECTUS DATED 3 APRIL 2013 AND ANY RELEVANT SUPPLEMENTARY PROSPECTUS.
This Application Form relates to the Offer of Fully Paid Shares in SINO AUSTRALIA OIL AND GAS LIMITED pursuant to the Replacement Prospectus dated 26 April 2013.
APPLICATION FORMS
Please complete all parts of the Application Form using BLOCK LETTERS. Use correct forms of registrable name (see below). Applications using the wrong form of name may be
rejected. Current CHESS participants should complete their name and address in the same format as they are presently registered in the CHESS system.
Insert the number of Shares you wish to apply for. The application must be for a minimum of 4,000 Shares and thereafter in multiples of 2,000 Shares. The applicant(s) agree(s)
upon and subject to the terms of the Prospectus to take any number of Shares equal to or less than the number of Shares indicated on the Application Form that may be allotted to the
applicants pursuant to the Prospectus and declare(s) that all details of statements made are complete and accurate.
No notice of acceptance of the application will be provided by the Company prior to the allotment of Shares. Applicants agree to be bound upon acceptance by the Company of the
application.
Please provide us with a telephone contact number (including the person responsible in the case of an application by a company) so that we can contact you promptly if there is a
query in your Application Form. If your Application Form is not completed correctly, it may still be treated as valid. There is no requirement to sign the Application Form. The
Company's decision as to whether to treat your application as valid, and how to construe, amend or complete it shall be final.
PAYMENT
Monies should be deposited to the following bank account using the applicants name as reference. Payment by electronic transfer to ACCOUNT NAME: Sino Australia Oil and
Gas Limited BANK: HSBC BSB: 342-011 ACCOUNT: 475068002 SWIFT CODE: HKBAAU2S All cheques should be made payable to SINO AUSTRALIA OIL AND GAS LIMITED
and drawn on an Australian bank and expressed in Australian currency and crossed "Not Negotiable". Cheques or bank drafts drawn on overseas banks in Australian or any foreign
currency will NOT be accepted. Any such cheques will be returned and the acceptance deemed to be invalid.
Sufficient cleared funds should be held in your account as your acceptance may be rejected if your cheque is dishonoured. Do not forward cash as receipts will not be issued.
LODGING OF APPLICATIONS
Completed Application Forms and cheques must be:
Posted to:
C/- Security Transfer Registrars Pty Ltd
PO Box 535
APPLECROSS WA 6953
OR
Delivered to:
770 Canning Highway
APPLECROSS WA 6153
Applications must be received by no later than 5pm AEST on the Closing Date 5 July 2013 which may be changed immediately after the Opening Date at any time and at
the discretion of the Company.
CHESS HIN/BROKER SPONSORED APPLICANTS
The Company intends to become an Issuer Sponsored participant in the ASX CHESS System. This enables a holder to receive a statement of holding rather than a certificate. If you
are a CHESS participant (or are sponsored by a CHESS participant) and you wish to hold shares allotted to you under this Application on the CHESS subregister, enter your CHESS
HIN. Otherwise, leave this box blank and your Shares will automatically be Issuer Sponsored on allotment.
TAX FILE NUMBERS
The collection of tax file number ("TFN") information is authorised and the tax laws and the Privacy Act strictly regulate its use and disclosure. Please note that it is not against the law
not to provide your TFN or claim an exemption, however, if you do not provide your TFN or claim an exemption, you should be aware that tax will be taken out of any unfranked
dividend distribution at the maximum tax rate.
If you are completing the application with one or more joint applicants, and you do not wish to disclose your TFN or claim an exemption, a separate form may be obtained from the
Australian Taxation Office to be used by you to provide this information to the Company. Certain persons are exempt from providing a TFN. For further information, please contact
your taxation adviser or any Taxation Office.
CORRECT FORM OF REGISTRABLE TITLE
Note that only legal entities are allowed to hold securities. Applications must be in the name(s) of a natural person(s), companies or other legal entities acceptable to SINO
AUSTRALIA OIL & GAS COMPANY. At least one full given name and the surname are required for each natural person. The name of the beneficiary or any other non-registrable
name may be included by way of an account designation if completed exactly as described in the example of the correct forms of registrable names below:
TYPE OF INVESTOR
CORRECT
INCORRECT
Individual
Mr John Alfred Smith
J A Smith
Use given names in full, not initials.
Company
Use the company's full title, not abbreviations.
ABC Pty Ltd
ABC P/L or ABC Co
Joint Holdings
Use full and complete names.
Mr Peter Robert Williams &

Ms Louise Susan Williams
Peter Robert &

Louise S Williams
Trusts
Use trustee(s) personal name(s), Do not use the name of the trust.
Mrs Susan Jane Smith

<Sue Smith Family A/C>
Sue Smith Family Trust
Deceased Estates
Use the executor(s) personal name(s).
Ms Jane Mary Smith &

Mr Frank William Smith
<Estate John Smith A/C>
Estate of Late John Smith

or
John Smith Deceased
Minor (a person under the age of 18)

Use the name of a responsible adult with an appropriate designation.

<Peter Smith A/C>
Master Peter Smith
Partnerships
Use the partners' personal names. Do not use the name of the partnership.
Mr John Robert Smith &

Mr Michael John Smith
<John Smith and Son A/C>
John Smith and Son
Jane Smith Pty Ltd

<JSuper Fund A/C>
Jane Smith Pty Ltd Superannuation Fund
Superannuation Funds
Use the name of the trustee(s) of the super fund.
PRIVACY STATEMENT Personal information is collected on this form by Security Transfer Registrars Pty Ltd as the registrar for securities issuers for the purpose of maintaining registers of securityholders, facilitating distribution payments and
other corporate actions and communications. Your personal details may be disclosed to related bodies corporate, to external service providers such as mail and print providers, or as otherwise required or permitted by law. If you would like details of
your personal information held by Security Transfer Registrars Pty Ltd or you would like to correct information that is inaccurate please contact them on the address on this form.
6279477901
APPLICATION FORM
THIS DOCUMENT IS IMPORTANT. IF YOU ARE IN DOUBT AS TO HOW TO DEAL WITH IT, PLEASE CONTACT YOUR STOCK BROKER OR LICENSED PROFESSIONAL ADVISOR.
SHARE REGISTRY:
All Correspondence to:
PO BOX 535, APPLECROSS WA 6953
770 Canning Highway, APPLECROSS WA 6153
T: +61 8 9315 2333 F: +61 8 9315 2233
E: registrar@securitytransfer.com.au
W: www.securitytransfer.com.au
BROKER STAMP

ACN: 159 714 397
Broker Code
Advisor Code
PLEASE READ CAREFULLY ALL INSTRUCTIONS ON THE REVERSE OF THIS FORM
No shares will be issued pursuant to the Replacement Prospectus later than 31 March 2014.
Before completing this Application Form you should read the accompanying Prospectus and the instructions overleaf. Please print using BLOCK LETTERS.
I/We apply for:
I/We lodge full application of monies of:
Shares at AUD $0.50 per share

or such lesser number of Shares which may be allocated to me/us by their Directors.
A$
Full Name of Applicant / Company

Joint Applicant #2
Joint Applicant #3
Account Designation (e.g.: THE SMITH SUPER FUND A/C)
<
>
Postal Address
Unit
Street Number
Street Name or PO BOX
/
Suburb/Town/City
State
Postcode
Country Name (if not Australia)
CHESS HIN (where applicable)

If an incorrect CHESS HIN has been provided (e.g.: incorrect number, registration details do not
match those registered) any securities issued will be held on the Issuer Sponsored subregister.
X
Contact Name
Contact Number
Email Address
@
Tax File Number / Australian Business Number
Tax File Number of Security Holder #2 (Joint Holdings Only)
Declaration and Statements:

(1) I/We declare that all details and statements made by me/us are complete and accurate.
(2) I/We agree to be bound by the Terms & Conditions set out in the Prospectus and by the Constitution of the Company.
(3) I/We authorise the Company to complete and execute any documentation necessary to effect the issue of Securities to me/us.
(4) I/We have received personally a copy of the Prospectus accompanied by or attached to this Application form, or a copy of the
Application Form or a direct derivative of the Application Form before applying for the Securities.
(5) I/We acknowledge that the Company will send me/us a paper copy of the Prospectus and any Supplementary Prospectus (if applicable)
free of charge if I/we request so during the currency of the Prospectus.
(6) I/We acknowledge that returning the Application Form with the application monies will constitute my/our offer to subscribe for Securities in the
Company and that no notice of acceptance of the application will be provided.
9407477907
REGISTRY DATE STAMP
E & O.E.
TO MEET THE REQUIREMENTS OF THE CORPORATIONS ACT, THIS FORM MUST NOT BE HANDED TO ANY PERSON
UNLESS IT IS ATTACHED TO OR ACCOMPANIED BY THE PROSPECTUS DATED 3 APRIL 2013 AND ANY RELEVANT SUPPLEMENTARY PROSPECTUS.
This Application Form relates to the Offer of Fully Paid Shares in SINO AUSTRALIA OIL AND GAS LIMITED pursuant to the Replacement Prospectus dated 26 April 2013.
APPLICATION FORMS
Please complete all parts of the Application Form using BLOCK LETTERS. Use correct forms of registrable name (see below). Applications using the wrong form of name may be
rejected. Current CHESS participants should complete their name and address in the same format as they are presently registered in the CHESS system.
Insert the number of Shares you wish to apply for. The application must be for a minimum of 4,000 Shares and thereafter in multiples of 2,000 Shares. The applicant(s) agree(s)
upon and subject to the terms of the Prospectus to take any number of Shares equal to or less than the number of Shares indicated on the Application Form that may be allotted to the
applicants pursuant to the Prospectus and declare(s) that all details of statements made are complete and accurate.
No notice of acceptance of the application will be provided by the Company prior to the allotment of Shares. Applicants agree to be bound upon acceptance by the Company of the
application.
Please provide us with a telephone contact number (including the person responsible in the case of an application by a company) so that we can contact you promptly if there is a
query in your Application Form. If your Application Form is not completed correctly, it may still be treated as valid. There is no requirement to sign the Application Form. The
Company's decision as to whether to treat your application as valid, and how to construe, amend or complete it shall be final.
PAYMENT
Monies should be deposited to the following bank account using the applicants name as reference. Payment by electronic transfer to ACCOUNT NAME: Sino Australia Oil and
Gas Limited BANK: HSBC BSB: 342-011 ACCOUNT: 475068002 SWIFT CODE: HKBAAU2S All cheques should be made payable to SINO AUSTRALIA OIL AND GAS LIMITED
and drawn on an Australian bank and expressed in Australian currency and crossed "Not Negotiable". Cheques or bank drafts drawn on overseas banks in Australian or any foreign
currency will NOT be accepted. Any such cheques will be returned and the acceptance deemed to be invalid.
Sufficient cleared funds should be held in your account as your acceptance may be rejected if your cheque is dishonoured. Do not forward cash as receipts will not be issued.
LODGING OF APPLICATIONS
Completed Application Forms and cheques must be:
Posted to:
PO Box 535
APPLECROSS WA 6953
OR
Delivered to:
770 Canning Highway
APPLECROSS WA 6153
Applications must be received by no later than 5pm AEST on the Closing Date 5 July 2013 which may be changed immediately after the Opening Date at any time and at
the discretion of the Company.
CHESS HIN/BROKER SPONSORED APPLICANTS
The Company intends to become an Issuer Sponsored participant in the ASX CHESS System. This enables a holder to receive a statement of holding rather than a certificate. If you
are a CHESS participant (or are sponsored by a CHESS participant) and you wish to hold shares allotted to you under this Application on the CHESS subregister, enter your CHESS
HIN. Otherwise, leave this box blank and your Shares will automatically be Issuer Sponsored on allotment.
TAX FILE NUMBERS
The collection of tax file number ("TFN") information is authorised and the tax laws and the Privacy Act strictly regulate its use and disclosure. Please note that it is not against the law
not to provide your TFN or claim an exemption, however, if you do not provide your TFN or claim an exemption, you should be aware that tax will be taken out of any unfranked
dividend distribution at the maximum tax rate.
If you are completing the application with one or more joint applicants, and you do not wish to disclose your TFN or claim an exemption, a separate form may be obtained from the
Australian Taxation Office to be used by you to provide this information to the Company. Certain persons are exempt from providing a TFN. For further information, please contact
your taxation adviser or any Taxation Office.
CORRECT FORM OF REGISTRABLE TITLE
Note that only legal entities are allowed to hold securities. Applications must be in the name(s) of a natural person(s), companies or other legal entities acceptable to SINO
AUSTRALIA OIL & GAS COMPANY. At least one full given name and the surname are required for each natural person. The name of the beneficiary or any other non-registrable
name may be included by way of an account designation if completed exactly as described in the example of the correct forms of registrable names below:
TYPE OF INVESTOR
CORRECT
INCORRECT
Individual
J A Smith
Use given names in full, not initials.
Company
Use the company's full title, not abbreviations.
ABC Pty Ltd
ABC P/L or ABC Co
Joint Holdings
Use full and complete names.
Mr Peter Robert Williams &

Ms Louise Susan Williams
Peter Robert &

Louise S Williams
Trusts
Use trustee(s) personal name(s), Do not use the name of the trust.
Mrs Susan Jane Smith

<Sue Smith Family A/C>
Sue Smith Family Trust
Deceased Estates
Use the executor(s) personal name(s).
Ms Jane Mary Smith &

Mr Frank William Smith
<Estate John Smith A/C>
Estate of Late John Smith

or
John Smith Deceased
Minor (a person under the age of 18)

Use the name of a responsible adult with an appropriate designation.

<Peter Smith A/C>
Master Peter Smith
Partnerships
Use the partners' personal names. Do not use the name of the partnership.
Mr John Robert Smith &

Mr Michael John Smith
<John Smith and Son A/C>
John Smith and Son
Jane Smith Pty Ltd

<JSuper Fund A/C>
Jane Smith Pty Ltd Superannuation Fund
Superannuation Funds
Use the name of the trustee(s) of the super fund.
PRIVACY STATEMENT Personal information is collected on this form by Security Transfer Registrars Pty Ltd as the registrar for securities issuers for the purpose of maintaining registers of securityholders, facilitating distribution payments and
other corporate actions and communications. Your personal details may be disclosed to related bodies corporate, to external service providers such as mail and print providers, or as otherwise required or permitted by law. If you would like details of
your personal information held by Security Transfer Registrars Pty Ltd or you would like to correct information that is inaccurate please contact them on the address on this form.
6279477901
Corporate Directory
Directors
Registered and Principal Office
Mr. Tianpeng Shao

Executive Chairman
C/- Pitcher Partners

160 Greenhill Road
Parkside, South Australia 5063
Mr Wayne Johnson
Mr Andrew Faulkner
Company Secretary and Public Officer

Mr Andrew Faulkner
Australian Legal Advisor

Fox Tucker Lawyers
Level 14, 100 King William Street
Adelaide, South Australia 5000
Investigating Accountant
Grant Thornton Corporate Finance Pty Ltd
Level 1, 67 Greenhill Road
Wayville, South Australia 5034
Tax Advisor
Grant Thornton Australia Ltd
Lead Manager
D2MX Pty Ltd
Level 37, Rialto South Tower
525 Collins Street
Melbourne , Victoria 3000
PO Box 274, Collins Street West
Melbourne, Victoria 8007
Chinese Legal Advisor

Jiahua Law Firm
19th Floor, Building C
Zhongjin International Plaza
375 Caoxi Road
North Shanghai, China 20030
Share Registrar
770 Canning Highway
Applecross, Western Australia 6153
Chinese Corporate Advisor

Shanghai Fortunehao Investment Management Co., Ltd.
B-11, 18F, No. 488, Middle Yin Cheng Rd.
Lujiazui, Pudong
Shanghai, China 200120
Auditor
Grant Thornton Audit Pty Limited
ACN 159 714 397

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Important Information: This is an important document that should

be read in its entirety. If you do not understand any component of

ACN 159 714 397

For the issue of 24 million Ordinary Shares at an offer price

any representation in connection

Eastern Standard Time.

Do not rely on forward-looking

Key financial information

1. Key questions and answers

5. Directors, senior management and corporate governance

9. Investigating Accountants Report

10. Taxation Report

11. Additional information

12. Summary of relevant Chinese laws and regulations

Inside back cover

Offer closes (applications must be received by this time)

5.00 PM AEST 5 July 2013

Settlement of the Offer

Allotment of Shares under Offer

Expected completion of despatch of Holding Statements

Latest date Shares expected to commence trading on ASX

2 ) Sino Australia Oil and Gas Limited ) Prospectus

Rapid growth in revenue and NPAT in burgeoning

The Companys provision of services is project based

Oil recovery industry in China is growing rapidly

All contracts presently are with either State Owned

Key financial information

Trade and other payables

Related party payables

Current tax payable

4 ) Sino Australia Oil and Gas Limited ) Prospectus

Key financial information

Summary historical and forecast cash flow

(Increase)/ decrease in trade debtors

Increase/ (decrease) in trade and other creditors

(Increase)/ decrease in other assets/ (liabilities)

Income tax paid

Net interest received/ (paid)

Proceeds from the convertible notes

Proceeds from the capital raising

Payment of the share issue costs

Net cash flows from financing activities

Net increase in cash held

Cash at the end of the year

Net cash flows from operating activities

Cash at the beginning of the year

Our plans are to significantly increase availability of equipment

Sino Australias EOR technology has application to the majority

6 ) Sino Australia Oil and Gas Limited ) Prospectus

1. Key questions and answers

Who is issuing this

Sino Australia Oil and Gas Limited

Who are Sino

ACN 159 714 397

Key features of business model

How will Sino

Capital structure and funding

Will the Company

Are there risks of

The Sino Australia trading name is to become of extreme importance in the

a) reliance on patent laws and restrictions to protect the Companys intellectual

8 ) Sino Australia Oil and Gas Limited ) Prospectus

Key questions and answers

Directors and key management

Key financial information

1. Key questions and answers

5. Directors, senior management and corporate governance

9. Investigating Accountants Report

10. Taxation Report

11. Additional information

12. Summary of relevant Chinese laws and regulations