China: COSL Reports Annual Results 2011

China Oilfield Services Limited announced its annual results for the year ended 31 December 2011.

Despite faced with challenges arising from domestic and global markets in 2011, the Group adopted a market oriented approach to optimize allocation of resources and strategies for marketing of its services. COSL reinforced its presence in the domestic market in China while continuing its expansion into overseas markets. The Group’s revenue reached RMB18,426.1 million for year 2011, up 4.9% from the previous year. Profit from operations for the year was RMB4,982.8 million, down 4.2% from the previous year. Profit attributable to shareholders reached RMB4,039.5 million, down 2.1% from the previous year. Basic earnings per share were RMB90 cents（2010: RMB92 cents）. The Board of Directors has resolved to recommend a final dividend payment of RMB18 cents per share.

During the year, the Group achieved steady growth in revenue, mainly attributable to commencement of operation of new equipment, including 2 jack-up drilling platforms, 1 semi-submersible drilling platform COSLPioneer, a 12-streamer geophysical vessel HYSY720, etc., and the revival of the geophysical industry. Factors attributable to the decline in profit from operations were mostly objective in nature: inadequate work volume made part of the large-scale equipment fail to operated at full capacity; commencement of operation of some new equipment and pre-launch investments in new business jacked up employee compensation, repair and maintenance costs, material consumption, and subcontracting expenditure, etc.

In the Drilling Segment, as at the end of 2011, COSL operated and managed a total of 33 drilling platforms （of which 27 are jack-up drilling platforms and 6 are semi-submersible drilling platforms）, 2 accommodation platforms, 4 module rigs and 8 land drilling rigs.

The drilling services market remained highly competitive in 2011. Apart from striving to secure its leading position in domestic drilling market, the Group proactively expanded into overseas drilling markets, achieving steady growth in the drilling segment. During the year, jack-up drilling platforms achieved 8,692 operation days, up 759 days year on year due to the addition of 73 days from COSL936 and COSL937 which commenced operation in 2010, the addition of 612 days from COSL921 and COSL922 which commenced operation in March 2011, and the addition of another 297 days from COSL923 and COSL924, which had just commenced operation. Meanwhile, COSLSeeker and COSLConfidence operated 330 fewer days due to the Group’s coordination of its operating systems. Other drilling platforms operated 107 more days due to fewer days spent on maintenance. With COSLPioneer added to the fleet, semi-submersible platforms achieved 1,178 operation days, up 175 days year on year. The overall calendar-day utilization rate of the drilling fleet was 93.7% for the year. The 4 module rigs serving in Gulf of Mexico went through modification works in order to better serve the customers. They operated 1,064 days in aggregate in 2011, translating into a calendar-day utilization rate of 72.9%. The 6 land rigs operated 444 days for the year, down 1,683 days year on year due to the civil war in Libya. The Group suspended operation of the 5 land rigs in Libya since late February 2011, thereby reduced the overall calendar-day utilization rate of land rigs to 20.3%.

In terms of service fees, the average day rate of drilling platforms was about USD132,000/day, slightly up 2.3% from USD129,000 in the previous year.

As at the end of 2011, the Group had 13 drilling platforms operating in Bohai China, 5 in China South Sea, 1 in China East Sea, 12 in overseas waters including Indonesia, Norway and Australia, 2 in pre-operational preparation. Meanwhile, 2 accommodation platforms were continuing their services for clients in North Sea, Europe. For drilling rigs, 4 module rigs were operating in Gulf of Mexico, 5 land rigs which had originally been serving in Libya ceased operation amid the civil war, 3 other land rigs were in preparation for overseas operations.

In the Well Services Segment, the Group strived to maintain its presences in overseas markets. The Group successfully renewed the contract for the Papua New Guinea project and the three 1-year cementing service contracts with The Energy Development Corporation of the Philippines. Moreover, the Group also completed its first output enhancement operation for an oilfield production in East Java Province, Indonesia in a move that helped establish a firm footing for the Group’s expansion in the oilfield output enhancement business in Indonesia.

The Group has been proactively promoting its self-developed cable high-end logging equipment, including Enhanced Reservoir Characteristic Tester （ERCT）, The Crossline Dipole Array Acoustic Logging Tool （EXDT）, Magnetic Resonance Tool for Logging, Rotary Sidewall Coring System, etc. In addition, the Group also made a foray into its development in the area of new energy. Following the success in providing logging services for CBM Australia in 2010, the Group won a number of service contracts from China CBM, Far East Energy Corporation and Petro AP in this area.

In the Marine Support and Transportation Services Segment, the utility vessels fleet achieved 25,650 operating days, down 1,119 days year on year due to the net effect of the 1,136 fewer operation days achieved year on year prompted by the 7 utility vessels returned or written off in 2010, 255 additional days from the 4 well maintenance support vessels; and the 238 fewer operating days from maintenance of other utility vessels.

Through reasonable allocation of external resources, the Group’s marine support and transportation services segment realized a turnover of RMB2,533.8 million, representing an increase of 8.0 year on year.

In the Geophysical Segment, both of the Group’s seismic data collection and processing businesses recorded growth of different magnitude. Among which, 2D collection volume increased 3,339 km to 27,808 km due to the 2 vessels which were under maintenance since early 2010 were operating in full capacity in 2011. The operation volume of 3D collection services increased by 10,166 km2 year on year to 23,174 km2, mainly attributable to operation commencement of the 12-streamer geophysical vessel, HYSY720 during the year, which brought about 6,840 km2 of additional operation volume. HYSY718 and HYSY719 achieved 2,463 km2 more operation volume as they had been able to time the market appropriately and achieved better operating efficiency making use of their better configurations. 2D and 3D data processing, driven by the revival in the market, also recorded stable growth year on year.

Engineering Survey Service achieved an encouraging operation volume for the year. Revenue of engineering survey service amounted to RMB423.6 million, representing a year-on-year growth of 36.5%.

For International Businesses, the Group’s overseas earnings hit a record high again in 2011, reaching RMB5,173.5 million, up 20.0% year on year, contributing to 28.1% of the Group’s revenue.

For the drilling segment, upon reallocation of a number of high-end drilling platforms to perform services in overseas markets, the Group currently has a total of 12 drilling platforms operating in international markets, establishing a footing to capture the rapid growth in revenue from overseas markets. Of these, the Group won a service contract for 1 jack-up drilling platform from PEMEX of Mexico. Semi-submersible drilling platform COSLPioneer, has commenced operation in North Sea since second half of 2011. The contract with NH6 project in Australia has been renewed smoothly, ensuring adequate operation volume for this new platform in 2012.

The Group also provided integrated well services for a well in Cambodia. For the geophysical and engineering survey service segment, in addition to providing services to customers in Papua New Guinea, Indonesia, the Group made a major breakthrough in Myanmar as it won a 3D seismic data collection services contract from PTT. For the well services segment, the Indonesia market sustained healthy growth during the year. Apart from carrying out logging project in the United Arab Emirates, the geothermal well project and the well cementing contract were renewed in Papua New Guinea. The Group also expanded into Iraq and provided offshore cementing services in Mexico. In a nutshell, the Group’s overseas has become more diversified and occupied higher positions in the league.

COSL Chairman Mr. Liu Jian said: “The Group had successfully gone through hurdles arising from the uncertain market conditions and complex operating environments. Moreover, COSL achieved steady results and met our projections. During the year, the Group has further enhanced its standards of management and continued to strengthen its equipment capability to build a stronger foundation to capture development opportunities in the future. In the year 2012, COSL will continue its strategies in exploring new markets and strengthen its management, focusing on opportunities in deep water operations and extraction of unconventional gas sources to maximize returns for shareholders.”

COSL Group CEO and President Mr. Li Yong said: “In the year of 2012, we plan to tap demand in our new businesses to ensure high utilization of our large-scale equipment and our leadership positions in each of the business segments. Moreover, we will proactively promote the rapid development of our international businesses. We will increase the scale of revenue from overseas operations while continue to grow our presence in our existing markets. Concurrently, the Group will enhance the safety management for our deepwater operations, conclude and perfect relevant safety systems for deepwater operations. We shall optimize and tighten our control on costs and optimize our management, enhance our risk management and internal control to safeguard the Group’s steady development.”

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Subsea World News Staff , March 25, 2012;  Image: COSL