Three parties, PMC, the North China Petroleum Management Bureau and Shanxi Fenglei Machinery Manufacturing Co., Ltd. have agreed upon the establishment of a drill pipe and tubing pipe manufacturing company in Hebei Province of China. The deal was closed on May 18, 2005. The new company, named Huayou Yiji (Hebei) Petroleum Pipe Co., Ltd. has total investment of 115 million Yuan (approximately 1600 million Yen). The investment ratio is 70% by North China Petroleum Management Bureau, 25% by PMC and the rest 5% by Shanxi Fenglei Machinery Manufacturing Co., Ltd.

As a result of our PMC’s capital contribution, our relationship with Chinese petroleum companies are improved. Therefore, an increase in profitability, and acquisition of product distribution channels and procurement channels are expected in the near future.