COSL Announces Audited Results for 2014

Source: 3/30/2015, Location: Asia

China Oilfield Services Limited(COSL), announced its audited results for year ended 31 December 2014.

International oil prices had been volatile in 2014. They jittered at high levels during the first half. Sentiments headed south in the second half with the two benchmark prices plunged in excess of 45% for the whole year. This inflicted substantial pressure on oilfield service rates around the world and initiated slides in utilization rates of equipment of different kinds. Despite facing the industry downturn, COSL achieved a record high revenue at RMB32,993.2 million, up 20.6% year on year. Operating profit of the Group reached RMB8,425.9 million, up 10.2% from the preceding year. Net profit was RMB7,520.2 million, up 11.8% from the preceding year. Basic earnings per share were RMB1.57. The Board of Directors of the Company recommended payment of a final dividend of RMB0.48 per share (tax inclusive).

In the drilling segment, by end-2014 the Group operated and managed 44 drilling rigs (including 33 jack-up drilling rigs and 11 semi-submersible drilling rigs), 2 accommodation rigs and 5 module rigs.

As far as equipment is concerned, COSL adjusted its fleet structure by adopting more flexible chartering. It chartered 3 jack-up drilling rigs in 2014. With the jack-up drilling rigs COSLGift, COSLHunter commenced operation, the newly chartered jack-up drilling rigs HYSY932, Gulf Drifter I, Kai Xuan I, and the four drilling rigs newly added in 2013 and operated for the whole year, including NH9 and COSLPromoter, the Group achieved 13,898 operating days during the year, up 1,211 days year on year.

Of these, jack-up drilling rigs added 727 days year on year while semi-submersible rigs added 484 days. Due to more days spent on maintenance and standby, the calendar-day utilization rate of the drilling rigs declined 3.8 percentage points to 91.8%. The two accommodation rigs continued to achieve 571 operating days in Norwegian North Sea. Due to maintenance and standby the available-day and calendar-day utilization rates declined to 84.3% and 78.2%, respectively.

In the well service segment, the Group’s well service business developed rapidly in 2014 with significant growth in operation volume driven by the synergy derived from the improving technical capabilities and momentum from the drilling operations, with significant growth in results.

In 2014, the Group continued to strengthen its research and development efforts, putting emphases on tackling technical difficulties relating to thick oil exploration in the Bohai Bay, exploration at low-borehole, low permeability, high temperature and high pressure oil fields.

It had also made a list of technology accomplishments. COSL’s self-developed rotary steerable systems and logging while drilling systems accomplished a successful offshore operation, making the Group the first company in China in possession of full intellectual property rights to the two technologies of rotary steerable systems and logging while drilling systems and commercial application capability.

With introduction of logging technologies into earlier stages of deep-water services, the Group also achieved major breakthroughs in on-location application of deep-water drilling fluids and well cementing, gained practical operation experience at a depth of 1,500 meters and in possession of technical service capabilities at a depth of 2,500 meters. Its self-developed Enhanced Logging Imaging System broke through technical gridlocks in the key areas of 3D acoustic waves, 2D nuclear magnetic resonance, array lateral logging and electrical imaging for oil-based mud.

The relevant technical standards reached on par with international advanced levels. In performing deep-water operations in 2014, the Group achieved fully-fledged breakthroughs in the deep-water territory with a its long list of new technologies including its self-developed ELIS system and high-end logging equipment, deep-water drilling fluid and well cementing mud system, etc. In the marine support and transportation segment, in 2014 COSL’s marine transportation business continue to secure its leadership position in the domestic market in China and persisted in safe production and development of the deep-water market. In addition, to adjust its fleet structure further, the Group added 3 support vessels during the year. In 2014 the Group’s charted vessels achieved 17,183 operating days, up 2,887 days year on year.

The calendar-day utilization rate of the Group’s support vessels remained steady at 93.6% in 2014. Its self-owned fleet achieved 23,971 operating days, up 55 days year on year, primarily driven by the 3 support vessels added which filled the vacuum left by the 5 support vessels in retired in 2013. The 2 support vessels that commenced operation in the second half of 2013 had been in operation for the whole year of 2014.

The Group adhered to the development logic of “more professional and more superior” and proactively retired from the chemicals transportation business during the year and disposed of the relevant assets. It completed disposals of two chemicals carriers and completed disposal of the last two chemicals carriers in January 2015.

In the geophysical and surveying services segment, while the work volume remained stable during the first half of 2014, the segment was hit hard by the reductions in surveying expenditure by major oil companies in wake of the sharp corrections in oil prices in the second half. The Group adjusted timely its business strategy and upgraded the quality and standards of its services, seeking to reduce costs by enhancing efficiency.

At the same time, the Group capitalized on its stable domestic clientele to secure its surveying work volume in the core offshore China market. It attempted to expand into both the domestic market and the international market with more competitive service rates and more flexible business models, thereby achieved a win-win situation with clients with its detailed cost control and high quality services. Due to the difficult geophysical market environment, the Groups 2-D data collection volume declined 18.4% in 2014 while 3-D data collection volume remained stable. Both 2-D and 3-D data processing volumes declined, by 28.3% and 27.1%, respectively. The Group’s surveying business experienced a decline in work volume in 2014 due to the difficult external market environment.

For international businesses, COSL received a number of new projects in 2014. COSLSuperior successfully entered the market in Qatar, and completed the 3D data collection operation project in Australia with external resources; HYSY981 has won a project in Southeast Asia by tender and started the operation at the beginning of 2015. Some of the drilling rigs successfully secured new contracts. COSLRigmar was awarded a contract in Denmark. A number of rigs including COSLCraft accomplished contract renewals. Rigs including COSLHunter accomplished contract renewals at higher rates.

Furthermore, the Group perfected the internationalization layout for its four major segments. It completed construction the Singapore base. This base is home to talent training, research and development and logistics functions, etc. It is set to provide effective operation and technical support to the Group’s businesses in the Asia Pacific region.

Mr. Li Yong, CEO and President of COSL, said: “In 2014, despite oil prices experienced substantial volatility, the Group adjusted timely its strategy and proactively expanded its international businesses. It secured its positions in both the domestic and international markets and maintained growth for its results. Looking ahead, 2015 is undoubtedly a year of challenges. However, the Group is capable of maintaining its market share in offshore China and achieve base-case operating performance.

The Group has been exhibiting first-class operating efficiency and rising international reputation in recent years, a track record that opens the Group’s door to more opportunities in the international markets. Maintaining its leading advantage on costs, the Group will be able to exhibit strong international competitiveness against a backdrop of industry down-cycle. These, when coupled with its sound financial fundamentals, will allow the Group to adopt more flexible business models in exploring more markets. The Group is confident about meeting the challenges for the industry in the years ahead and maintaining steady development.”

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