Recon Technology, Ltd. (NASDAQ: RCON), is a company specializes in providing software and on-site services to companies in the petroleum mining and extraction industry in China.
As a start Recon’s deal with PetroChina, which was announced in December the company's shares surged up 70% crossing the $2 a share mark, has started to impact the company in February. On February second Recon revealed that Beijing BHD Petroleum Technology Co., Ltd. ("BHD"), a wholly-owned subsidiary of Recon, received two orders from PetroChina's oilfield companies. The two orders, combined with the first order from December 14th between Recon and PetriChina, are valued at around $800 thousand, or RMB 5.3 million. PetroChina’s Procurement Program is expected to continue place orders for Recon.
Mr. Shenping Yin, Chairman and CEO of Recon, said in a statement, "The Procurement Program, which covers a two year period from October 2015 to September 2017 with expected bids totaling more than RMB 2.9 billion (~US$457 million), provides Recon with an opportunity to boost our furnace business and expand our presence at PetroChina's oilfield companies. We expect to receive more follow-on orders as part of the Procurement Program in coming quarters."
The orders have not yet impacted Recon’s financials, and the recent quarterly report has showed a mixed performance. The company has released an earnings report for the second quarter of the 2016 fiscal year where total revenues were RMB 28.84 million ($4.44 million), an increase of 35.2% from the same period of last fiscal year. Gross profit however decreased by 35% from same period of last fiscal year.
CEO of Recon remains confident that the company’s dealings with PetroChina are essential. In a press release Mr. Shenping said, "Despite continuing macro headwinds and sluggish oil prices, we ended the year of 2015 on a high note with revenues growing 35.2% to the highest level in two years, thanks to strong sales in hardware and service. Entering 2016, our furnace business is on the path to recovery following major bidding contract win and Class A Furnace Supplier qualification with PetroChina in December while our newly acquired QHHY subsidiary starts to make meaningful contribution to both our top line and bottom line. We look forward to a stronger year in 2016."