China: COSL Posts First Half 2011 Results

China Oilfield Services Limited today announced its interim results for the six months ended 30 June 2011.

Financial Highlights

  •  Revenue reached RMB8,139.2 million
  •  Profit from operations reached RMB2,607.2 million
  •  Net profit reached RMB2,074.5 million
  • Basic earnings per share were RMB46 cents

During the first half of 2011, the world economy experienced challenges after challenges as it recovered slowly. The general economic environment remained rugged. International crude oil prices WTI jittered at high levels. The oilfield service market continued its recovery momentum. Despite the higher demand for high-end drilling platforms, the recovery of the drilling market remained slow. At COSL, its drilling segment saw revenue declined due to market and resources deployment factors. The well service segment experienced a decline in work volume as it failed to operate at full capacity due to difficulties in the market. The geophysical segment saw significant growth in work volume, driven by China’s strong demand for deep water exploration services and additional capacity from the commencement of operation of a 12-streamer geophysical vessel. In summary, during the interim period under review, the Group’s revenue eased 6.7% year on year to RMB8,139.2 million. Profit from operations declined 6.4% year on year to RMB2,607.2 million. Net profit for the period was RMB2,074.5 million, of which profit attributable to owners of the company was RMB2,071.2 million, down by only 4.7% from RMB2,174.2 million for the same period in 2010. Basic earnings per share were RMB46 cents 1H2010: RMB48 cents.

In the Drilling Segment, the two 200-ft jack-up drilling platform that were added last year were towed to operate in the domestic market during the first half. There were two more 200-ft jack-up drilling platform delivered to the Group, After having deployed the two high-end jack-up drilling platforms COSLSeeker and COSLConfidence to operate in overseas markets, the Group continued to deploy 5 more high-end drilling platforms in a move that has established a firm footing for revenue from overseas operations for the second half of the year. Due to adjustments in the Group’s equipment portfolio and redeployment of resources, revenue from the Group’s drilling segment declined during the first half. In addition, in order to meet the more stringent safety standards for operating in Gulf of Mexicao and clients’ higher operating requirements, The Group upgraded and reengineered its 4 module rigs operating there and renewed the service contract for them at higher service fee rates. Driven by the success in the module rigs, the Group was awarded a service contract for a jack up drilling platform from PetroleosMexicanos. This contract expanded the Group’s scale of operation in Gulf of Mexico. At the same time a 12-month service contract was renewed for the accommodation platform COSLRigmar serving clients in North Sea, Europe.

As at 30 June 2011 COSL operated and managed a total of 31 drilling platforms of which 27 are jack-up drilling platfomrs and 4 are semi-submersible drilling platforms and 2 accommodation platforms, 4 module rigs and 6 land drilling rigs. Of these, 10 operated in Bohai China, 5 in China South Sea, 1 in China East Sea, 8 in overseas waters including Indonesia and Australia. The two 200-ft jack-up drilling platforms which had just been delivered were awaiting receipt from the operators. 1 semi-submersible drilling rig which was delivered in 2010 was in the process of applying for a permit to operate in Norway and has commenced operation. There were 4 jack-up drilling rigs under maintenance. Meanwhile, the 2 accommodation platforms were serving clients in North Sea, Europoe. The 4 module rigs were operating in Gulf of Mexico. The 5 land rigs which had originally been serving in Lybia ceased operation amid the civil war there. There was another land rig operating in Xinjiang, China.

During the period, jack-up drilling rigs achieved 3,986 operation days, up 51 days year on year due the addition of 40 days from COSL936 and COSL937 which had just commenced operation in 2010. The two 200-ft drilling rigs COSL921 and COSL922 which had just commenced operation in March this year added another 244 days. Meanwhile, COSLSeeker and COSLConfidence operated 284 fewer days due to difficult market conditions. Other jack-up drilling rigs operated 51 more days in aggregate due to fewer days spent on maintenance. The semi-submersible rigs spent 24 fewer days on maintenance, contributing to the modest increase of 24 days year on year to 501 operation days.

Due to the impact from the fewer operation days achieved by COSLSeeker and COSLConfidence, the whole drilling rig fleet saw its calendar-day utilization rate declined 4 percentage points to 90.6%. The 4 module rigs serving in Gulf of Mexico went through modification works in order to meet the higher technical and safety requirements the clients demanded.. They operated 370 days in aggregate during the first half, translating into a calendar-day utilization rate of 51.1%.

The two accommodation rigs which continued to serve clients in North Sea operated 362 days during the first half, translating into a calendar-day utilization rate of 100.0%. The 6 land rig operated 444 days during the period, down 618 days year on year due to the civil war in Lybia. The Group suspended operation of the 5 land rigs in Lybia in late February, thereby reduced the overall calendar-day utilization rate of land rigs to just 40.9%.

In the Well Services Segment, traditional businesses in the domestic market declined during the first half due to difficult market conditions there. Whereas the Group’s well services business continued to secure its presence in the overseas markets. In Indonesia the Group’s activities cover the full integrated range of well workover, land drilling, well cementing, drilling fluid and logging, etc. At the moment more than half of the revenue from this country is derived from local and overseas clients who are not traditional clients. That means the Group achieved successfully diversification of its clientele there. In addition, the Group signed a number of well cementing services contracts with clients in the Philippines and Papua New Guinea, and achieved breakthroughs in tapping markes in Iraq and Cambodia. On the top of development tranditonal services, the Group placed emphasis on exploring the land coal bed gas market and continued to provide logging services for land coal bed gas clients. While exploring new markets, the Group continued to upgrade its technology standards. The Group’s self-developed deep water well cementing slurry system successfully went through tests on-location, marking the preliminary establishment of its deep water well cementing capability in deep sea drilling. Its self-developed Enhanced Reservoir Characteristic Testers ERCT for coal bed gas drilling is the first modular formation tester in China, making COSL one of the few internatonal companies to possess this technology.

In the Marine Support and Transportation Services Segment, as at 30 June 2011 the Group has 75 utility vessels of various types, 3 oil tankers and 5 chemical carriers. The 75 vessels achieved 13,056 operating days, down 339 days year on year due to the net effect of the 571 fewer operation days achieved year on year prompted by the 5 utility vessels returned or written off in 2010, the 181 additional days from the 1 well maintenance support vessel commenced operation since 2011; and the 51 more operation days from other utility vessels. Operating at full capacity, the Group’s self-owned fleet saw its utilization rate reached 96.5%. The Group achieved an aggregate freight volume of 784,000 tons for its oil tankers for the period, down 17.4% from 949,000 tons for the same period in 2010 due to the lower freight volume of the chartered vessels. The aggregate freight volume for its chemical carriers was 1.098 million tons, up 23.6% from 888,000 tons for the same period in 2010 due to fewer days spent in maintenance.

In the Geophysical Segment, “HYSY720”, the first 12-streamer survey vessel in China delivered during the first half, had started 3D seismic data collection operation in China South Sea in a move that had effectively enhanced the Group’s seismic data collection capability and efficiency in this segment. The Group had arrived at a more appropriate scheme in its equipment deployment with reference to new equipment that came on board and the enhancement in operation capability. It sent HYSY719, Nanhai502 and other vessels to perform serve on data collection operation contracts in overseas waters in winter early this year when China waters were not appropriate for operation.

During the period 2D collection volume declined 1,672 km due to the 5,010 km shortfall as the Group ceased to charter 1 vessel during the period. Operating at full-capacity, the Group’s self-owned fleet achieved 3,338 km more work volume. 3D collection volume rose 4,185 km2 year on year due to the additional 1,533 km2 from the new 12-streamer survey vessel and the additional 1,361 km2 from HYSY719 which operated at full capacity. Other vessels added 1,154 km2 of work volume in aggregate. The offshore bed cable team that commenced operation since April 2010 added 137 km2 of additional work volume. On data processing, the operation volumes of 2D and 3D data processing services increased significantly due to buoyant demand.

COSL CEO and Executive Vice President Mr. Li Yong concluded: “The Group had overcome the negative factors during the first half, achieved steady results and met its preset targets in principle. As it completed the establishment of its footprint in the international high-end drilling platform market and the reengineering and upgrading work for the 4 module rigs, and as COSLPioneer secured it operating permit and major deep water equipment is gradually delivered, the Group is profitability will be further enhanced in the second half of the year.”

1 Chinese yuan = 0.156335 U.S. dollars

Source: COSL, August 24, 2011;

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