Hong Kong Stock Exchange: Disciplinary action taken against former CFO and company secretary of CHK OIL (00632)

On 6 October, the Hong Kong Stock Exchange announced that it had issued a statement of prejudice to investors' interests and a censure against Mr. Li Zhaobin, former chief financial officer and company secretary of CHK OIL Limited (00632). Mr. Li was found to have seriously and manifestly failed to discharge the duties and responsibilities owed as chief financial officer and company secretary, thereby causing CHK OIL (the Company) to materially misstate its annual results for the year ended 31 December 2023, which in turn caused the Company to breach Rule 2.13(2) of the Listing Rules. The Company and its subsidiaries (the Group) are principally engaged in the extraction and trading of oil and natural gas. The Group holds extraction rights over certain oil and gas fields in the United States pursuant to leases granted by a local US government department. In November 2022, the government department terminated some of those leases (the Termination Event), and the assets involved accounted for approximately 40% of the Group's total assets in 2022. Mr. Li had known of the Termination Event at least as early as January 2024, when he was copied on an email sent by a US employee that mentioned the Termination Event. Mr. Li claimed that, in order to discharge his duties, he forwarded the email to a director of the Company. However, as stated in the email, the employee had tried to contact the director regarding the termination matter and other urgent matters, but had been unable to reach him and had received no reply. Despite the obvious significance of the Termination Event, Mr. Li: failed to take action to understand the specific circumstances of the Termination Event; failed to report the Termination Event to the board of directors, the audit committee or the Company's auditors; even though the auditors, in the course of auditing the Company's 2023 financial statements, indicated that they had encountered difficulties in verifying the ownership of the oil wells under the leases, Mr. Li remained silent on the matter; and when preparing the Company's 2023 consolidated financial statements, continued to treat the terminated leases as assets of the Group, and procured or allowed the Company to publish its 2023 annual results and annual report without disclosing the Termination Event or reflecting its impact. The board of directors learned of the Termination Event in August 2024. On 27 September 2024, the Company announced the restatement of its 2023 annual results, disclosing that it had failed to remove the terminated leases from the published balance sheet, resulting in the Group's total assets as at 31 December 2023 being overstated by 58.1%. Accordingly, the Company's 2023 annual results and annual report were materially inaccurate, incomplete and misleading, in breach of Rule 2.13(2) of the Listing Rules. The Hong Kong Stock Exchange ruled that, under Rule 2A.10B(3) of the Listing Rules, Mr. Li is liable for the Company's breach of the Listing Rules. The Exchange considers that Mr. Li's serving as a director or member of senior management of the Company or any of its subsidiaries may prejudice the interests of investors.