DISCLAIMER

Our parent, Shandong Xinchao Energy Corp. Ltd. (“Xinchao Energy”), is a Chinese oil and natural gas company listed on the Shanghai Stock Exchange (the “SSE”). Xinchao Energy is subject to the laws, rules and regulations of the People’s Republic of China and the SSE, including certain periodic disclosure requirements. In connection with these disclosure requirements, earlier today Xinchao Energy issued its audited financial statements, the accompanying notes thereto and the auditor’s report thereon for the year ended December 31, 2018 (the “Xinchao Financials”). To provide access to financial information disclosed by Xinchao Energy, we have obtained this English translation of the Xinchao Financials.

While our business comprises substantially all of Xinchao Energy’s assets, the financial information released by Xinchao Energy in the Xinchao Financials includes financial results attributable to assets and operations other than those of our business. Additionally, the Xinchao Financials may not be comparable to our financial information for a variety of factors, including differences in presentation currency and accounting standards and principles. Our management did not participate in the preparation or review of the Xinchao Financials. As a result, we caution you against undue reliance on the Xinchao Financials, and we do not accept or assume responsibility for such information by means of providing access to a translated version. The as-filed Xinchao Financials are available in the Chinese language at http://www.sse.com.cn/ and you should refer to the Chinese language version as the definitive Xinchao Financials.

Stock Code: 600777 Stock Abbreviation: Xinchao Energy

Shandong Xinchao Energy Corporation Limited

2019’s Q1 Report 1、 Important Notes 1.1 The Board of Directors and the Supervisors Committee of the Company and its directors, supervisors

and senior management warrant that the information contained in this report is truthful, accurate and complete and there are no false presentations or misleading statements contained in, or material omissions from, this report, and that they assume severally and jointly legal liability.

1.2 All Directors have attended the meeting of Board and deliberated 2019’s Q1 report 1.3 The 2019’S Q1 Report is unaudited 2 General information of the Company 2.1 Important Data (Expressed in RMB yuan otherwise indicated)

2019/3/31 2018/12/31 Changes(%)

Total Assets 25,441,955,167.01 24,748,383,173.19 2.8

Net Assets attributed to Shareholders

of Xinchao Energy14,381,579,226.57 14,820,921,791.17 -2.96

2019 Q1 2018 Q1 Changes(%)

Net cash flows from operating

activites509,551,285.23 624,518,160.55 -18.41

2019 Q1 2018 Q1 Changes(%)

Revenue 1,265,799,678.01 966,491,317.18 30.97

Net profit -162,804,460.09 85,105,003.96 -291.3

Net profit excluding nonrecurring

gain or loss-163,053,294.04 83,975,396.33 -294.17

Weighted Average Return of Net Assets

（%）-1.1 0.63 -1.73 percentage point

Basic earnings per share -0.0239 0.0125 -291.2

Diluted earnings per share -0.0239 0.0125 -291.2

Items Q1 of 2019 DescriptionsOther non-operating income or

expenses 324,514.81

Impact on Income Tax -75,680.86

合计 248,833.95

2.2 Holdings of the top ten shareholders

Name of shareholder (Full name)

Shares held at the end of the period

Percentage (%)

Number of shares subject to restrictions on sales

Pledged or locked-up shares Shareholder Nature Shares

Status Number of shares

Ningbo Guojin Sunshine Equity Investment Center LP

434,343,434 6.39 434,343,434 Unknown Unknown

Ningbo Jitong Equity Investment Partnership LP 402,962,962 5.93 402,962,962 Unknown Unknown

Shenzhen Jinzhi Changsheng Investment Co., Ltd.

391,560,352 5.76 391,560,352 Pledge 391,430,500 Others

Beijing Zhongjin Junhe Venture Capital Center LP 374,579,124 5.51 374,579,124 Pledge 374,579,124 Unknown

Shanghai Dongjun Huizun Investment Management Center LP

282,828,282 4.16 282,828,282 Unknown Unknown

Shenzhen Jinzhi Changshun Investment and Development Co., Ltd.

274,757,575 4.04 0 Pledge 274,757,575 Others

Dongying Huiguang Investment Partnership LP 259,259,259 3.81 259,259,259 Unknown Unknown

Guohua Life Insurance Co., Ltd. - Chuantong No. 2 249,023,569 3.66 249,023,569 Unknown Unknown

Shanghai Jingbao Investment Management Center LP

199,259,259 2.93 199,259,259 Unknown Unknown

Beijing Zhongjin Tonghe Venture Capital Center LP 168,350,168 2.48 168,350,168 Unknown Unknown

Holdings of the top ten shareholders not subject to trading moratorium

Name of shareholder Number of tradable shares held not subject to restrictions on sales

Type and number of shares

Category Number of shares

Shenzhen Jinzhi Changshun Investment and Development Co., Ltd. 274,757,575 RMB-denominated

ordinary shares 274,757,575

Beijing Longde Kaiyuan Venture Investment Center LP 141,188,958 RMB-denominated

ordinary shares 141,188,958

Beijing Longde Changqing Venture Capital Investment LP 100,849,256 RMB-denominated

ordinary shares 100,849,256

Ningbo Zhongying Huayuan Equity Investment LP 100,849,256 RMB-denominated

ordinary shares 100,849,256

Ningbo Qikun Equity Investment LP 80,679,404 RMB-denominated ordinary shares 80,679,404

Ningbo Qishun Equity Investment LP 80,679,404 RMB-denominated ordinary shares 80,679,404

Shanghai Zhenghong Guangyi Equity Investment LP 73,179,404 RMB-denominated

ordinary shares 73,179,404

Ningbo Shanjian Equity Investment LP 70,425,388 RMB-denominated ordinary shares 70,425,388

Ningbo Junxiang Equity Investment LP 60,509,551 RMB-denominated ordinary shares 60,509,551

Ningbo Junjie Equity Investment LP 53,484,000 RMB-denominated ordinary shares 53,484,000

Connected relation or concerted action among the aforesaid shareholders

Among the top ten shareholders, Jinzhi Changsheng and Jinzhi Changshun are persons acting in concert; Zhongjin Junhe and Zhongjin Tonghe are persons acting in concert; Guojin Sunshine authorizes the voting rights of all its shares in the Company to Jinzhi Changsheng. Among the top ten shareholders not subject to restrictions on sales, Longde Kaiyuan and Longde Changqing are persons acting in concert; the Company is not aware of whether there are any related party relationships among the other top ten shareholders not subject to restrictions on sales, or whether they are persons acting in concert.

3 Important Matters

3.1 Explanations for material changes of financial data

Cash and cash equivalents are up 72.25% from the beginning of the year, mainly due to the increase of revolver credit facility withdrawn in the current period, which leads to the increase of reserve fund at the end of current period. The Trading financial assets (presented as financial assets measured at fair value through profit or loss at the beginning of 2019) are down 91.81% from the beginning of the year, because the fair value (anticipated profit) of hedging contracts expiring within a year has fallen since the beginning of the year. Accounts receivables increase by 36.36% from the beginning of the year, mainly due to the sales volume increase of the current period. Other non-current assets are down 40.83% from the beginning of the year, mainly because the fair value (or anticipated profit) of hedging contracts maturing a year later is removed to other non-current liabilities (anticipated loss). Trading financial liabilities (presented as Financial liabilities measured at fair value through profit or loss) increase by 547.24% from the beginning of the year, mainly because the fair value (anticipated loss) of hedging contracts maturing within a year has risen since the beginning of the year. Advances from customers increase by 52.82% from the beginning of the year because the increase of sales from the Chinese subsidiary company. Other non-current liabilities increase from the beginning of the year because the fair value, (anticipated loss) of hedging contracts that mature a year later has increased since the beginning of the year. Payroll payable decrease by 52.14% from the beginning of the year, mainly because the accrual employee compensation of previous year has been paid in the current period. The tax payable is 678.82% higher than that at the beginning of the year, mainly due to the increase of production and sales volume, which leads to the increase of related taxes. Long-term loans increase by 81.52% from the beginning of the year as more revolver credit facility withdrawn in the current period.

Long-term payroll payable decreases by 32.32% from the beginning of the year due to the long-term incentives have been moved to payroll payable and will be paid within a year. Other comprehensive income decreases by 58.17% from the beginning of the year, because the exchange rate at this period end is lower than that at the previous year end.

The revenues increase by 30.97% year on year, mainly because of factors including: increase of production and sales volume, the changes of oil and gas price and the exchange rate;

The cost of sales increase by 47.38% year on year, mainly due to the increase of production costs and the impact of exchange rate.

The taxes and surcharges increase by 38.57% year on year, mainly because the increase of production and sales volume and the impact of exchange rate.

G&A expenses increase by 36.33% year on year, mainly because the labor cost increases and the impact of exchange rate.

Financial expenses increase by 98.68% year on year, mainly because the term loan was repaid and terminated in previous year, and relative fee was charged, the capitalized cost was expensed during previous year.

Asset impairments (negative) increase by 91.3%, mainly due to writing-off of the provision for bad debts.

The investment income drops by 100% year on year, because there is no more RMB short investment in this period.

The gain or loss on the changes in fair value increases by 2068.44% year on year, due to the fair value of hedging contracts (anticipated profit or loss) changes dramatically from the previous year end to the current period end. The anticipated loss doesn’t affect the company's current cash flow

Non-operating income increases year on year due to the revenue increase from waste disposal.

The income tax expense decreased by 254.64% from the previous year, mainly because the fair value change of hedging contracts generates loss in this period.

The net profit decreased by 291.30% compared with the same period last year, mainly due to the decline in fair value of hedging contracts during the reporting period

The net cash flow generated by operating activities decreased by 18.41% compared with the same period of last year, mainly due to the increase of cash payment in operating activities in the reporting period compared with the same period of last year

The net cash flow generated by investment activities increased by 21.90% over the same period of last year, mainly due to the decrease of cash paid by investment activities in the reporting period compared with that in the previous period.

The net cash flow generated by financing activities was significantly reduced by 0.97% compared with the same period of last year, with little change from the previous period. 3.2 Progress on Litigations

For the litigation cases referring to previous announcement No.2018-067; No.2018-062 No.2018-066; No.2018-070; No.2018-091; No.2018-100; No.2019-016; No.2018-079 No.2018-107; No.2018-131 and No.2019-002, there is no update at this report. The company will timely disclose the progress on above cases.

4: Attachments 4.1 Financial statements, expressed in RMB yuan otherwise indicated 4.1.1 Consolidated Balance Sheet for 2019/03/31 4.1.2 Balance Sheet for 2019/03/31 4.1.3 Consolidated Income Statement 4.1.4 Income statement 4.1.5 Consolidated Statement of Cash flow 4.1.6 Statement of Cash flow

4.1.1

Items 31-March-2019 31-December-2018Current assets

Cash & Cash equivallent 761,041,947.67 441,833,041.97

Trading financial assets 29,443,703.39

Financial assets measured at fair value through profit or loss 359,551,758.04

Bills receivables and accounts receivables 730,122,800.78 535,433,935.67

Including: Bills receivables

Accounts receivables 730,122,800.78 535,433,935.67

Prepayments 207,763,858.08 212,474,738.70

Other receivables 604,574,198.40 575,740,451.36

Including: Interest receivables 1,185,034.48

Dividend receivables

Inventory 27,761,430.05 28,324,917.46

Other current assets 20,854,911.16 20,881,462.43

Total current assets 2,381,562,849.53 2,174,240,305.63Non-Current Assets

Assets classified as held for sale 12,900,000.00

Other equity instruments 12,900,000.00

Fixed assets 864,728,291.96 891,793,478.98

Oil and gas properties 21,880,869,544.55 21,271,156,097.15

Intangible assets 16,201,847.93 13,797,264.87

Long-term prepaid expenses 151,077,472.04 157,002,394.75

Other non-current assets 134,615,161.00 227,493,631.81

Total non-current assets 23,060,392,317.48 22,574,142,867.56

Total assets 25,441,955,167.01 24,748,383,173.19

Current liabilitiesTrading financial liabilities 236,255,378.69

Financial liabilities measured at fair value through profit or loss 36,502,224.32

Bills payables and accounts payables 1,202,042,273.96 1,121,823,530.35

Advances from customers 42,943,808.00 28,100,000.00

Payroll and employee benefits payable 71,622,958.10 149,649,254.73

Taxes payable 21,240,992.16 2,727,338.77

Other payables 1,158,798,651.13 1,323,950,450.89

Including: Interest payables 178,134,299.58

Total current liabilities 2,732,904,062.04 2,662,752,799.06Non-current liabilities

Long-term loans 2,659,732,500.00 1,465,293,200.00

Bonds payable 4,713,450,000.00 4,804,240,000.00

Long-term payroll and employee benefits payable 26,835,819.04 39,650,233.32

Provision 186,362,730.10 181,057,791.77

Deferred tax liabilities 723,801,019.30 774,467,357.87

Other non-current liabilities 17,289,809.96

Total non-current liabilities 8,327,471,878.40 7,264,708,582.96

Total liabilities 11,060,375,940.44 9,927,461,382.02

Shareholder's equity Share capital 6,800,495,825.00 6,800,495,825.00

Capital reserve 6,657,258,578.19 6,657,258,578.19

Other comprehensive income 198,829,512.21 475,367,616.72

Surplus reserve 92,923,435.81 92,923,435.81

Retained earnings 632,071,875.36 794,876,335.45

Equity attributable to owners of the parent 14,381,579,226.57 14,820,921,791.17

Non-controlling interests Total shareholders’ equity 14,381,579,226.57 14,820,921,791.17

Total liabilities and shareholder's equity 25,441,955,167.01 24,748,383,173.19

4.1.2

Items 2019/3/31 2018/3/31

Current assets

Cash & Cash equivallent 29,792,008.39 29,690,806.05

Prepayments 74,910.00

Other receivables 426,037,599.65 426,010,006.49

Other current assets 17,626,808.73 17,626,808.73

Total current assets 473,531,326.77 473,327,621.27

Financial asset held for sale 400,000.00

Long-term equity investment 11,916,650,827.92 11,916,650,827.92

Other equity instruments 400,000.00

Fixed assets 741,795.14 777,706.28

Intangible assets 557,142.58 562,058.39

Other non-current assets 11,906,800.00 11,906,800.00

Total non-current assets 11,930,256,565.64 11,930,297,392.59

Total assets 12,403,787,892.41 12,403,625,013.86

Current liabilities

Advances from customers 700,000.00 700,000.00

Payroll and employee benefits payable 268,162.44 794,918.51

Taxes payable 38,577.41 87,287.74

Other payables 16,922,932.16 13,049,521.37

Total current liabilities 17,929,672.01 14,631,727.62

Total liabilities 17,929,672.01 14,631,727.62

Shareholder's equity

Share capital 6,800,495,825.00 6,800,495,825.00

Capital reserve 6,657,204,139.08 6,657,204,139.08

Surplus reserve 92,923,435.81 92,923,435.81

Retained earnings -1,164,765,179.49 -1,161,630,113.65

Total shareholders’ equity 12,385,858,220.40 12,388,993,286.24

Total liabilities and shareholder's equity 12,403,787,892.41 12,403,625,013.86

4.1.3

ITEMS Q1 OF 2019 Q1 OF 2018

Revenue 1,265,799,678.01 966,491,317.18

Including：Operating Revenue 1,265,799,678.01 966,491,317.18

Cost of Sales 839,942,854.11 827,076,377.08

Including：Operating Cost 659,921,067.20 447,756,869.70

Taxes and Surcharges 77,992,102.93 56,283,364.60

G&A Expenses 98,878,386.51 72,530,941.28

Financial Expensese 3,301,897.47 250,583,924.29

Indcluding：interests expense 7,477,816.70

interest income 2,968,898.66 4,301,143.04

Assets impairment loss -150,600.00 -78,722.79

Investment income 1,033,424.66

Gain or loss on the changes in fair value -629,840,999.63 -29,045,856.89

Gain or loss from disposal of non-current assets 124,463.95

Operating Profit -203,984,175.73 111,526,971.82

Add: Non-operating incme 421,520.37

Less: Non-operating expenses 97,005.56 2,143.55

Profit before tax -203,659,660.92 111,524,828.27

Less:income tax expense -40,855,200.83 26,419,824.31

Net profit -162,804,460.09 85,105,003.96

1.Net profit from continuing operations -162,804,460.09 85,105,003.96

1.Net profit attribute to owners of parent company -162,804,460.09 85,105,003.96

Other comprehensive income -276,538,104.51 -421,986,554.86

Other comprehensive income attributable to owners of parent company -276,538,104.51 -421,986,554.86

Other comprehensive income that may be reclassified to profit or

loss-276,538,104.51 -421,986,554.86

8.Exchange differences on translation of foreign -276,538,104.51 -421,986,554.86

Total of comprehensive income -439,342,564.60 -336,881,550.90

Total of comprehensive income attributable to parent company -439,342,564.60 -336,881,550.90

Basic earnings per share -0.0239 0.0125

Deluted earnings per share -0.0239 0.0125

4.1.4

ITEMS Q1 OF 2019 Q1 OF 2018

Revenue

Taxes and Surcharge 7,908.00 25,912.46

G&A Expenses 3,221,312.09 4,144,030.39

Financial Expensese -94,154.25 4,111,993.98

Indcluding：interests expense 7,477,816.70

interest income 96,918.23 3,372,804.09

Assets impairment loss -78,722.79

investment income 1,033,424.66

Operating Profit -3,135,065.84 -7,169,789.38

Add: Non-operating incme

Less: Non-operating expenses 2,143.55

Profit before tax -3,135,065.84 -7,171,932.93

Less:income tax expense

Net profit -3,135,065.84 -7,171,932.93

1.Net profit from continuing operations -3,135,065.84 -7,171,932.93

Total of Comprehensive Income -3,135,065.84 -7,171,932.93

4.1.5

Items 2019年第一季度 2018年第一季度

Cash flows from operating activities

Cash receipts from the sale of goods and the render 1,033,206,765.81 935,093,411.76

Other cash receipts relating to operating activities 199,566,515.72 47,264,947.72

Total cash inflows from operating activities 1,232,773,281.53 982,358,359.48

cash payments from goods and services 310,863,490.76 131,819,651.84

Cash payments to and on behalf of employees 106,870,791.92 114,167,013.04

Payments of all types of taxes and surcharges 25,364,787.33 14,847,271.77

Other cash payments relating to operating activities 280,122,926.29 97,006,262.28

Total cash outflows from operating activities 723,221,996.30 357,840,198.93

Net cash flows from operating activities 509,551,285.23 624,518,160.55

二、投资活动产生的现金流量：

Cash receipts from returns on investments 1,033,424.66

Net cash receipts from disposal of subsidiaries 341,135.31

Other cash receipts relating to investing activities 200,000,000.00

Total cash inflows from investing activities 341,135.31 201,033,424.66

Cash payments to acquire fixed assets, intangible assets and other long term assets 1,231,920,623.14 1,677,921,524.87

Other cash payments relating to investing activities 100,000,000.00

Total cash outflows from investing activities 1,231,920,623.14 1,777,921,524.87

Net cash flows from investing activities -1,231,579,487.83 -1,576,888,100.21

三、筹资活动产生的现金流量：

Cash received from borrowings 1,217,629,050.00 841,227,333.33

Cash received in issuing bonds 4,421,993,333.33

Total cash inflows from financing activities 1,217,629,050.00 5,263,220,666.66

cash repayments for debts 4,093,502,400.00

cash payments for distribution of dividents or profit 197,509,637.12 139,579,856.53

including: Profitand dividends paid to non-controlling shareholders of subsidiaries

Total cash outflows from financing activities 197,509,637.12 4,233,082,256.53

Net cash flows from financing activities 1,020,119,412.88 1,030,138,410.13

Effect of exchange rate changes on cash -5,432,577.91 -4,654,671.74

Net increase in cash and cash equivalents 292,658,632.37 73,113,798.73

Add: Cash and cash equivalents at beginning of year 438,597,763.57 947,477,959.57

CASH AND CASH EQUIVALENTS AT END OF YEAR 731,256,395.94 1,020,591,758.30

4.1.6

Items Q1 OF 2019 Q1 OF 2018

Cash flows from operating activities

Other cash receipts relating to operating activities 3,958,369.04 20,564,685.17

Total cash inflows from operating activities 3,958,369.04 20,564,685.17

Cash payments to and on behalf of employees 1,450,987.53 1,940,574.99

Payments of all types of taxes and surcharges 10,990.66 4,144,467.18

Other cash payments relating to operating activities 2,492,103.57 22,283,676.67

Total cash outflows from operating activities 3,954,081.76 28,368,718.84

Net cash flows from operating activities 4,287.28 -7,804,033.67

Cash flows from investing activities

Cash receipts from returns on investments 1,033,424.66

Other cash receipts relating to investing activities 200,000,000.00

Total cash inflows from investing activities 201,033,424.66

Other cash payments relating to investing activities 100,000,000.00

Total cash outflows from investing activities 100,000,000.00

Net cash flows from investing activities 101,033,424.66

Cash flow from financing activities

Cash received from borrowings 20,000,000.00

Total cash inflows from financing activities 20,000,000.00

cash payments for distribution of dividents or profit 7,477,816.70

Total cash outflows from financing activities 7,477,816.70

Net cash flows from financing activities 12,522,183.30

Net increase in cash and cash equivalents 4,287.28 105,751,574.29

add: beginning bank balance 2,169.38 792,301,951.92

Ending bank banlance 6,456.66 898,053,526.21