China: COSL Well Services Division Hit by Penglai Incident. Seismic Segment Grows

China Oilfield Services Limited today announced its unaudited results for the nine months ended 30 September 2011（“the period”）.

During the period, the Group boosted its operation capacity in large-scale equipments with four 200-ft jack-up rigs, one semi-submersible rig and one 12-streamer seismic vessel commencing operation. Yet competition was still intense in the oilfield services segment amid the continuing challenges to the global economy. The land drilling rigs in Libya suspended their operations due to effects of the civil war outbreak in the country. The Group has upgraded and modified its four module rigs in order to adapt to the more stringent safety and technological requirements in Mexican market. Together with the impact on the well services segment stemmed from suspension of Penglai 19-3 oilfield due to the oil spillage incident, the Group recorded a slight decline in its revenue. Revenue for the nine-month period was RMB13,317.9 million, down 2.3% from RMB13,630.3 million in the last corresponding period. Net profit for the period was RMB3,373.4 million, down 1.6% from RMB3,429.2 million for the last corresponding period. Basic earnings per share were RMB75 cents.

On drilling services, driven by the operation commencement of four 200-ft jack-up platform and one semi-submersible platform , a total of 7,047 operating days were achieved by the Group’s drilling fleets during the nine-month period, up 317 days year on year. Among these, jack-up drilling rigs added a net of 255 operating days, primarily driven by 581 additional operating days achieved by six vessels （COSL921, COSL922, COSL923, COSL924, COSL936 and COSL937）. Yet COSLSeeker and COSLConfidence operated 350 fewer days due to the subdued market conditions. Other drilling rigs operated 24 more days. Semi-submersible rigs, meanwhile, operated 62 more days due to the commencement of operation of COSLPioneer, which added 38 operating days since it commenced operation in August, while the number of days of spent for repair and maintenance by of other vessels decreased by 24 days.

During the period, the Group upgraded and modified its four module rigs for its clients in Gulf of Mexico. These rigs which achieved 724 operating days and achieved a calendar day utilization rate of 66.3%. The six land drilling rigs in the Libya, battered by the civil war there, achieved 444 operating days during the period.

Revenue for the well services segment experienced a decline from the last corresponding period due to unfavorable market conditions and suspension of Penglai 19-3 oilfield due to the oil spillage incident.

 On marine support and transportation services, the Group owned an aggregate of 75 oilfield utility vessels as of 30 September 2011. A total of 19,548 operating days were achieved during the period, down 541 days from the last corresponding period, prompted by the 5 utility vessels returned or written off. As a result standby vessels and AHTS vessels achieved 797 fewer operating days. With the commencement of operation of a new barge in October 2010, the barges achieved 223 more operating days. Meanwhile, PSV vessels and multi-purpose vessels operated 33 more days.

 In geophysical services, the 2D seismic data collection business grew steadily during the period, with operation volume increased 4.9% year on year. For 3D seismic data collection, the Group successfully tapped the strong demand for exploration. Driven by the capacity boosts by the commencement of operation of 12-streamer seismic vessel HYSY720 and the high efficiency of HYSY719, operation volume of 3D seismic data collection increased 7,990 km2, representing a growth of 71.9%. For the data processing services, operation volume of 2D data processing and 3D data processing increased 153.2% and 37.0% respectively.

Mr. Li Yong, CEO and President of the Group, said: “For the first three quarters of 2011, despite facing challenging domestic and international macroeconomic environment, the Group actively responded to changes and adjusted its business strategies in a timely manner. The Group achieved a solid business development with a stable domestic market and expanding overseas markets. As the fourth quarter is a low season for operations in some regions in China, we will further exploit our potential and seize the opportunity to explore new markets. The Group will also implement proper cost control measures and work diligently to meet our full-year performance targets.”

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Source: COSL, October 28, 2011