Exchange’s Disciplinary Action against CHK Oil Limited (Stock Code: 632) and a Former Director

香港聯合交易所有限公司
(香港交易及結算所有限公司全資附屬公司)
THE STOCK EXCHANGE OF HONG KONG LIMITED
(A wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited)

The Stock Exchange of Hong Kong Limited

CENSURES:

1. CHK Oil Limited (Stock Code: 632); and

IMPOSES A PREJUDICE TO INVESTORS’ INTERESTS STATEMENT¹ and CENSURE against:

2. Mr Yu Jiyuan, former executive director, chief executive officer and chairman.

The Company was found to have breached the Listing Rules for publishing financial results and reports which were materially inaccurate, incomplete and/or misleading. In this connection, Mr Yu Jiyuan was found to have failed to report issues relating to the Company’s material assets including the loss of such assets to the Company’s board of directors, audit committee and auditors for more than two years.

The Company, via a subsidiary, held an exploitation interest in certain oil and gas fields in the United States under leases with a local governmental bureau, which were held by production.  By way of written orders, the bureau required restoration of oil production under some of the leases in June 2022 and, due to a lack of response to such requirements, terminated the leases in November 2022. At the material time, Mr Yu was aware of the written orders and the termination but did not escalate them to the Company’s board of directors, which first became aware of them only in August 2024.

There were multiple occasions on which Mr Yu could and should have reported the written orders and termination to the Company’s board of directors, audit committee and auditors.  However, he did not do so. He allowed the Company to continue booking the relevant leases in its financial statements after he was aware that the leases, which were material assets of the Company, had been terminated and the termination had had a material impact on the financial position of the Company and its subsidiaries. Evidence shows that the failure to exclude the terminated leases from the Company’s balance sheets had caused an overstatement of the total assets by about 65.5% and 58.1% for the years ended 31 December 2022 and 2023 respectively. This shows that the relevant published financial statements were materially inaccurate, incomplete and/or misleading.

Mr Yu was found to have delegated and relied on a staff member of the relevant subsidiary to handle issues relating to the leases and deal with the relevant government personnel. However, he failed to ensure that the staff member was sufficiently competent to handle the matters. After the delegation, he also failed to actively monitor and supervise the staff member by acquiring and maintaining sufficient knowledge of their status and developments.

The Exchange found that Mr Yu had failed to discharge his director’s duties and obligations under the Listing Rules and that the breaches were serious.

The Company and Mr Yu agreed to settle this disciplinary action. They did not contest their respective breaches and accepted the sanctions imposed on them by the Listing Committee.

Note:

1. The Prejudice to Investors’ Interests Statement is a statement that, in the Exchange’s opinion, the occupying of the position of director or senior management of the Company or any of its subsidiaries by Mr Yu may cause prejudice to the interests of investors.

Ends