Sino Gas International Holdings, Inc.

On May 9, 2014, Beijing ZhongRan WeiYe Gas Co., Ltd. (the "Company"), a 100% owned PRC subsidiary of Sino Gas International Holdings, Inc., entered into a loan agreement with Zhongyu (Henan) Energy Holdings Limited (the "Lender") (the "Agreement") pursuant to which the Lender will grant a loan facility (permitting multiple one-year term drawdowns) to the Company in a total amount not exceeding RMB 50,000,000 (approximately USD $8.12 million based on the prevailing spot USD-RMB exchange rate) for the Company to use as working capital (the "Loan") and the Company will pay the Lender an interest on the outstanding loan amount computed at a rate equal to 8% per annum (the interest payment will be made monthly). To secure the Loan, pursuant to the Agreement, the Company will pledge its dividend right attached to the 40% equity interests of the Company in ZhongRan Xiangke Oil and Gas Technology Co., Ltd. (a 40% owned PRC joint venture entity of the Company) to the Lender.

During the three months ended September 30, 2014, net revenues increased 63.2% to $22.6 million as compared to the same period of 2013.Gross profit for the three months ended September 30, 2014 decreased 16.6% to $4.7 million from the same period of 2013. Our operating income for the three months ended September 30, 2014 decreased 127.4% to $1.4 million from the same period of 2013. Net income for the three months ended September 30, 2014 was negative $0.5 million, compared to a net income of $2.0 million during the same period of 2013.

The significant decrease in gross profit and gross margin is mainly attributed to the natural gas pricing reform started in 2014. We are experiencing cost increase in gas purchasing however the adjustment of selling price requires hearing process with local government and re-negotiation of contract terms with industrial users.

Total net revenues for the nine months ended September 30, 2014 increased 30.8% to $55.1 million from the same period in 2013. During the nine months ended September 30, 2014, we connected 40,244 new residential households to our gas distribution network, resulting in total connection fees of 16.3 million. Gas sales during the nine months ended September 30, 2014 were $38.8 million.

Net Fixed Assets including property, plants and equipment as of September 30, 2014 increased $2.2 million to $55.5 million compared to $53.3 million as of December 31, 2013.The table below is a breakdown of our fixed assets at cost: