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WWW.CNOOCENGINEERING.COMTo build up an internationally-leading energy engineering company

2014 ANNUAL REPORTOFFSHORE OIL ENGINEERING CO.,LTD.

CO

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2014 AN

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Company Profi leOffshore Oil Engineering Co., Ltd. (hereinafter referred to as COOEC) is a listed company controlled by China National Offshore Oil Corporation. It is renowned as a large-scale general contracting company nationwide integrating offshore oil, natural gas exploitation engineering design, onshore manufacturing and offshore installation, commissioning, maintenance, LNG and refi nery into a whole. Moreover, it is one of the EPCI (design, purchase, construction and installation) contractors with the largest scale and greatest strength in Far East and Southeast Asia. COOEC is headquartered in Binhai New District of Tianjin. COOEC was listed at Shanghai Stock Exchange in February 2002 (with stock name COOEC and stock code 600583).

COOEC has more than 8000 employees, constituting an all-round, multi-level and wide-range general engineering contracting team. Besides, it boasts world-class competencies and international operation procedures and management standards. Designs implemented by COOEC are advanced worldwide. Large-scale offshore engineering manufacturing bases with total area of 3.5 million m2 have been completed in Tanggu of Tianjin Municipality, Qingdao of Shandong Province and Zhuhai of Guangdong Province, realizing the base layout across the country for functional complementation to cover shallow and deepwater engineering and develop the global market. In addition, it possesses a diversifi ed offshore construction fl eet consisting of 20 vessels, including 3000m deepwater pipeline laying and hoisting vessel "Offshore Oil 201", the monoblock hoisting vessel "Blue Whale" with hoisting capacity of 7500t in the world, 50000t semi-submersible self-propelled vessel, 3000m deepwater multi-function underwater engineering vessel, deepwater multi-function installation vessel and deepwater trenching vessel. COOEC ranks top in Asia in terms of offshore installation and pipe laying capacity.

After more than four decades of construction and development, COOEC has built eight major types of capacity, including offshore engineering design, offshore engineering construction, offshore engineering installation, offshore oil and gas fi eld maintenance, underwater engineering inspection and installation, high-end skid-mounted product manufacturing, offshore engineering quality inspection and offshore EPC management. Furthermore, it has developed a series of core technologies, such as 30000t super-large offshore platform design, manufacturing and installation, inspection and repair 300m under water, subsea pipeline repair and old offshore platform demolition. It is also capable of laying subsea pipelines 1500m under water and has successively provided quality services for numerous domestic and overseas owners, such as CNOOC, Confi eld, Shell, Husky, Kerr-McGee, Technip, MODEC, AkerSolutions and FLUOR. Its business has been extended to over 20 countries and regions.

COOEC still focuses on offshore engineering and gives priority to building four major types of capacity to extend global business and deepwater engineering. Greater efforts will be made to promote management, realize scientifi c development, upgrade related equipment to build top-ranking upstream and midstream & downstream engineering capacity, develop COOEC into a world-class energy engineering company and write a chapter of sound and sustainable development.

Engineering design Construction Installation M

aintenance and Commission

Welcome to COOEC

I. The Company's Board of Directors, Board of Supervisors and directors, supervisors and senior managers guarantee the contents of the annual report are true, correct and complete, without false records, misleading statements or major missing, and assume individual and joint legal responsibilities.

II. All directors of the Company attend the board meeting.

III. Shinewing Certified Public Accountants (Special General Partner) has issued a standard audit report without reserved opinions to the Company.

IV. Zhou Xuezhong who is principal of the Company, Chen Yonghong who is principal of accounting and Wang Yajun who is principal of accounting agency (accountant in charge) state: authenticity, correctness and completeness of fi nancial reports in annual reports are secured.

V. The Plan of Profit Distribution or the Plan of Transferring Public Accumulation Fund to be Stock Capital Reviewed by Board of Directors

Upon the audit of Shinewing Certified Public Accountants (Special General Partner), in 2014, the Company rea l izes a net prof i t of RMB 2,690,307,185.95, withdraws 10% legal earned surplus reserve of 269,030,718.60 in addition to undistributed profit of RMB 4,253,398,268.25 at the beginning of the year, and deducts 2013 annual cash dividends of RMB 442,135,480.00 that have been distributed this year. As of the end of 2014, the profit available for distribution to shareholders is RMB 6,232,539,255.60. The balance of capital reserve is RMB 4,245,387,997.87.

Based on actual situation of the Company and considering that the Company is in growth stage and lots of funds are required for follow-up development like construction of Zhuhai site and deepwater vessels, the Company intends to distribute cash dividends of RMB 2.30 (inclusive of tax) for each 10 shares based on total capital stock of 4,421,354,800 shares at the end of 2014, and doesn't distribute dividends of stocks and capital stocks transferred from capital reserve. In current distribution, there are totally cash dividends of 1,016,911,604.00 and the undistributed profi t balance is transferred to be distributed in coming year.

Mr. Chen Su, Mr. Cheng Xinsheng and Mr. Zhu Wuxiang, who are independent directors of the Company, give independent opinions on approving the proposal.

This distribution plan needs to be submitted to shareholders' meeting in 2014 for deliberation.

IV. Risk statement for forward-looking statements

Such forward-looking statements as future plan in the annual report don't constitute the Company's material commitments to investors, so, the investors shall pay attention to investment risks.

VII. Is there the situation relating to non-business funds occupation by the stockholders and their connected parties?

No

VIII. Is there the situation relating to violating decision-making procedures to tender external guarantee?

No

Important Notes

Contents

001 Important Notes

002 COOEC Events in 2014

005 Chairman’s Statement

006 President’s Statement

007 Defi nitions and Hints on Signifi cant Risks

008 Company Profi le

010 Summary of Accounting Data and Financial Indexes

012 Report of the Board of Directors

046 Important Matters

055 Equity Changes and Shareholders

059 Particulars about Preferred Shares

060 Directors, Supervisors, Senior Managers and Employees of the Company

065 Company Governance

071 Internal Control

072 Financial Report

175 List of Documents for Further Reference

002

COOEC Events in 2014COOEC / ANNUAL REPORT 2014

911 8

102 3000m deepwater multi-function

engineering vessel "Offshore Oil 286" was delivered on December 28, 2014.

The fi rst large-scale international EPC project ZAWTIKA of COOEC was offi cially commenced on Tanggu Base on December 24, 2014.

"Blue Whale" successfully completed hoisting of the first module for WASIT Project of Saudi Arabia with the hoisting capacity of 5100t on December 14, 2014.

COOEC completed subsea pipeline inspection of CNOOC Huizhou Refinery on November 15, 2014, breaking the record of inspection for subsea pipeline with the largest diameter nationwide.

COOEC was successfully awarded the contract for WASIT offshore installation project of Saudi Arabia on October 31, 2014, ushering in the cooperation with Saudi Aramc, the largest petroleum producer in the world.

LNG core process module of YAMAL Project at the North Pole of Russia as officially commenced on Qingdao Yard on October 15, 2014.

COOEC Abu Dhabi Subsidiary was opened on September 22, 2014. Lots of CEO and high-level representatives of international petroleum companies and engineering companies attended the opening ceremony.

COOEC was listed among "Top 100 Hangseng A-shares" on September 15, 2014, marking the first entry into Hangseng Index.

Jinzhou 20-2SW platform was fully demolished on August 30, 2014, marking completion of the first offshore oilfield demolition project nationwide.

Deepwater multi-function DP vessel "Offshore Oil 286" sailed to South China Sea for trial voyage on August 15, 2014.

New single-point underwater yoke of Caofeidian 11-1/2 Oilfield was successfully connected with FPSO of "Offshore Oil 112" on August 14, 2014. This is the first operation of underwater yoke FPSO release and reconnection in the world.

COOEC Events in 2014

003

COOEC Events in 2014COOEC / ANNUAL REPORT 2014

1

3

57

2

46

Qingdao Yard signed the process module construction contract for Russian Yamal LNG project with amount of US$ 1.643 billion on July 2, 2014. This is the largest overseas deal of COOEC so far.

Qingdao Yard and Kvaerner established a joint venture on July 2, 2014.

The first underwater robot navigator training system nationwide was completed at COOEC Shenzhen Branch in July 2014.

COOEC took the 245th place among top 500 Chinese enterprises of 2014 released by Fortune China in July 2014, going up by 84 than the ranking in 2013.

Chu Jinyong, renowned as "Frogman" for underwater operations of COOEC, was honored as one of "National Top Ten Ocean Celebrities" on June 7, 2014.

Huizhou 25-8DPP module was successfully connected with the jacket on May 21, 2014, rounding off the first float-over installation using dynamically positioned vessels nationwide on May 21, 2014.

"Offshore Oil 201" successfully laid 6.002km long 14-inch subsea pipeline with cement as counterweight in a single day on May 20, 2014, exceeding 6km for the fi rst time.

COOEC launched 2013 general assembly of shareholders and investor exchange in Zhuhai and organized all investors to visit Zhuhai Deepwater Base on April 23, 2014.

"Offshore Oil 201" completed installation of the deepest underwater baseplate nationwide with the installation depth of 338m on March 26, 2014.

"Offshore Oil 289" the first imported deepwater multi-function installation vessel was offi cially put into operation on March 25, 2014.

Wang Yilin, the President and Secretary of Party Committee of CNOOC, visited frontline staff of COOEC Tanggu Construction Base for greetings on January 22, 2014.

COOEC held the Third Session of the Third Workers and Staff Conference and 2014 Annual Work Conference from January 27 to the morning of January 28, 2014.

Adjustment and development of Phase I of Suizhong 36-1 Oilfi eld and Luda 5-2 Oilfi eld were awarded the national gold prize for excellent quality from 2012 to 2013 in January 2014.

005

Chairman’s StatementCOOEC / ANNUAL REPORT 2014

Chairman’s Statement

All distinguished shareholders and friends,

Here I would like to present you the 2014 annual report of COOEC and show COOEC achievements and developments in this period on behalf of the board of directors.

COOEC has effi ciently implemented related development strategies and got fruitful achievements in 2014

Over the past year, the board of directors has insisted on the modern corporate governance and highlighted the corporate culture of talk and discussion. Meanwhile, all directors have earnestly fulfi lled their responsibilities, ensuring scientifi c and effi cient decisions and helping COOEC for scientifi c and sustainable development.

The board gave top priority to strategic guide, directing COOEC to keep building four major types of capacity. On one hand, greater efforts were made to build EPC capacity in shallow-water engineering sectors to reduce cost and promote competitiveness. On the other hand, related strategies were formulated to speed up the deepwater engineering capacity building and the international market development. With approval from the board, COOEC has purchased three deepwater vessels, including deepwater trenching vessel, greatly enhancing the capacity in deepwater engineering sector. COOEC has made signifi cant progress in international business development.

Based on the building for four major types of capacity in 2014, COOEC has witnessed substantial progress in project management, offshore fl oat-over installation and subsea pipeline laying-out. With increasing total workload and construction diffi culty, COOEC was still very excellent in production safety, energy conservation and environmental protection.

Income, net profi t, total assets and net assets were growing year on year with the net profi t higher than RMB 4 billion and the net asset income ratio of 20%, realizing effi cient and excellent development. The board has proposed notably increasing cash dividends in the 2014 annual profi t allocation plan by allocating cash dividend of RMB 2.3 every 10 shares.

COOEC is more confi dent in face of challenges in 2015

Achievements only prove our efforts in the past. The drastic drop of international oil price in 2015 brings a notable impact on the oil and gas exploitation industry. Now related companies in the industry are under greater business pressure. Under such a circumstance, COOEC management will carefully analyze the current situation, make scientifi c decisions, take measures timely and strive for development amid crisis. At present, operation management and cash fl ow are regular. We will make full use of this to keep promoting comprehensive strength for development of high quality, effi ciency and stability.

COOEC management will make greater effort in market expansion and cost control, fully utilize current strengths in equipment, fund and cost to develop global markets, impose more specifi c and comprehensive control over all costs and work out a long-standing mechanism for specifi c cost management.

The board will keep creating factors for long-time sound development of COOEC and direct COOEC for effective safety management, internal control and deepwater engineering capacity building. Your understanding and support are really needed. COOEC will try to create more values for all shareholders and the society.

Here I express my gratitude to all hardworking workers and staff! I also really appreciate great effort of the management level! Thank you all for your support and help!

Board Chairman

Liu Jian

006

President’s StatementCOOEC / ANNUAL REPORT 2014

We gathered all strengths to advance and got the best ever results with a thankful heart in 2014

In 2014, COOEC management earnestly executed all resolutions of the general assembly of shareholders and the board of directors to seize every opportunity, strive for developing the leading industry, promote the building of four types of major capacity, keep improving management and extending domestic and overseas markets, take comprehensive measures for cost reduction and effi ciency promotion, enhance the deepwater engineering capacity and greatly promote development quality and benefi t.

COOEC has processed 250,000 structural tons of steel, arranged 24,000 vessel-days and laid 296km subsea pipelines in 2014. COOEC has gained business income of RMB 22.031 billion, including the net profit of RMB 4.267 billion belonging to shareholders of the listed company, going up by 8% and 55% year on year.

COOEC has also made great achievement in the global market with overseas deals of RMB 13.179 billion, accounting for 49% of total amount. COOEC stood out in the competition with many famous international energy engineering companies, winning Russian Yamal Project with contract amount more than RMB 10 billion and its fi rst EPCI project Burma Zawtika Project.

COOEC will adapt to the new situation, strive for new strengths and realize innovative development in 2015

With continuous lower international oil price, decreasing investment from domestic and overseas oil companies and less oil fi eld construction in 2015, COOEC will enhance the sense of crisis and responsibility, build up confi dence, promote internal strength and gain new strengths in face of these challenges.

COOEC will fulfi ll the strategy for low cost, establish the long-standing mechanism for cost reduction and effi ciency promotion to keep reducing cost, promoting competitiveness and enhancing the capability of survival and development across oil price cycles and workload cycles. Furthermore, COOEC will try its best to extend the domestic and overseas market, pay more attention to the organic integration between market development and project implementation, make full use of its EPC strength and promote the level of integrated operation. COOEC will promote rationality of resource allocation, strive for optimization and balance of domestic and overseas resources and maximize benefi ts, take performance-price ratio of various resources into full account and provide better services for the company development.

With effective supports from all shareholders and friends, COOEC will surely achieve all annual production and business tasks and objectives in 2015 and keep creating values for all shareholders.

Director and President

Zhou Xuezhong

All distinguished shareholders and friends,

With disclosure of the annual report, please allow me to show my thanks to you all for your consistent trust and support on behalf of COOEC management.

President’s Statement

007

Defi nitions and Hints on Signifi cant RisksCOOEC / ANNUAL REPORT 2014

Defi nitions and Hints on Signifi cant Risks

I. Defi nitionsIn this report, unless otherwise defi ned, the following words shall have meanings set forth as below:

Defi nition of common termsEPCI Referring to Engineering design, Procurement, Construction and Installation for short.LNG Referring to Liquefi ed Natural Gas for short.PAUT Referring to Phased Automatic Ultrasonic Testing for short.

Construction of "Four Capacities" Referring to

Construction of the general contracting capacity focusing on design; construction of offshore installation supported by large-scale equipment; construction of facility maintenance capacity taking submarine pipe maintenance as breakthrough; construction of reinforcement of market status of water fi led and research and capability of deepening deepwater operation.

FPSO Referring to Floating Production Storage and Offl oading for short.

DP fl oating Referring toMaking the vessel to overcome forces of wind, wave and current to it, mooring it at the operating point and further implementing fl oating installation by virtue of the vessel's Dynamic Positioning System.

Design Standardization Referring to

Carrying out the standardization of platform structure of the same production scale in the same area and the standardization of equipment type selection in design stage; reducing specifi cations and types of materials for the same project, improving the universality of materials for different projects and increasing the effi ciency of design and follow-up construction.

Integration of Engineering Design, Procurement and Construction

Referring to

In design stage, optimizing platform manufacturing procedure and achieving effi cient connection of design management, procurement management and construction management in combination with construction demand and procurement progress, further reducing space workload and improving service effi ciency of slideway and site.

Offshore Installation Management Regionalization Referring to

Assigning a principal respectively in domestic and overseas sea areas to take charge of overall coordination for manpower, vessels and other resources, to promote seamless connection of regional resources and improve the effi ciency of commanding, coordination and resources utilization.

II. Hints on Signifi cant RisksThe Company has given a detailed description of relevant risks which may exist; please refer to the risk factors and countermeasures in discussion and analysis on future development of the Company in the Section IV Reports of the Board of Directors.

008

Company Profi leCOOEC / ANNUAL REPORT 2014

Company Profi le

I. Company Information

Chinese title of the Company OFFSHORE OIL ENGINEERING Co.,LTD.Short for Chinese title of the Company COOECEnglish title of the Company OFFSHORE OIL ENGINEERING Co.,LTD.Short for English title of the Company COOECLegal representative of the Company Zhou Xuezhong

II. Person to Contact and Contact Way

Secretary of the Board of DirectorsName Liu LianjuAddress No.199 Haibin 15 Road, Tianjin Port Free Trade ZoneTelephone number 022-59898808Fax 022-59898800E-mail [email protected]

III. Basic Introduction

Registered address Apartment 202-F105, 2/F, Skirt Building, Ligang Plaza, No.82, West Road 2, Tianjin Port Free Trade Zone

Postcode of registered address 300308Business address No.199 Haibin 15 Road, Tianjin Port Free Trade ZonePostcode of business address 300461Internet website http://www.cnoocengineering.comE-mail [email protected]

IV. Information Disclosure and Preparation Place

Title of the newspaper designated by COOEC for information disclosure China Securities Journal, Shanghai Security News

Website designated by China's Securities Regulatory Commission (CSRC) for publishing annual report www.sse.com.cn

Annual report preparation place Board Secretariat

V. Profi le of Stock

Profi le of StockStock types Stock listing exchange Stock abbreviation Stock codeA-share Shanghai Stock Exchange COOEC 600583Bonds Shanghai Stock Exchange 07 COOEC bonds 122001

009

Company Profi leCOOEC / ANNUAL REPORT 2014

VI. Registration Change during Report Period of the Company

(I) Basic Information

Date of registration September 26, 2014

Address of registration Apartment 202-F105, 2/F, Skirt Building, Ligang Plaza, No. 82, West Road 2, Tianjin Port Free Trade Zone

Registration number of business license for the legal entity 120000000001439

Tax registration certifi cate number 120118722950227Organization code 72295022-7

(II) Index on Query Relating to First Registration of the Company

For fi rst registration of the Company, see basic information of the Company in the annual report 2001 for details.

(III) Change of Primary Business since Listing of the Company

The Company is a large-scale engineering general contracting company which integrates design of offshore oil and natural gas development engineering, land manufacturing and offshore installation, debugging, maintenance and LNG engineering, which is the only one at home. It is also one of the biggest general contractors for EPCI (engineering design, procurement, construction and installation) of offshore oil engineering in the Asian-Pacifi c region. Since its listing, it dedicates itself to the development of primary business which has no change.

(IV) Previous Changes of Controlling Shareholders since Listing of the Company

(1) On February 5, 2002, the Company was listed in Shanghai Stock Exchange, five initiators and shareholders are China Offshore Oil Platform Fabrication Company, China Offshore Oil Marine Engineering Company, China Offshore Oil Development and Engineering, China Offshore Oil Nanhai West Corporation and China Offshore Oil Bohai Corporation whose shareholding percentages were 36.44%, 32.37%, 16.34%, 14.26% and 0.59% respectively. The fi ve initiators don’t have control right over the Company. They are jointly under the control of their parent company China National Offshore Oil Corporation (hereinafter referred to as “CNOOC”).

(2) On September 28, 2003, by means of agreement without payment, the actual controller of the Company CNOOC was transferred with shares totaling 159,233,800 shares held by China Offshore Oil Platform Fabrication Company, China Offshore Oil Marine Engineering Company and China Offshore Oil Development and Engineering, which accounted for 57.91% of shares of the Company at then. CNOOC became controlling shareholder of the Company. The formality of share transfer was gone through on February 13, 2004.

Dominant stockholder of the Company is always the CNOOC never changed.

VII. Other Information

Name of appointed CPA fi rm (in China)

Name ShineWing Certifi ed Public Accountants (Special General Partner)

Business address 9/F, Block A, Fuhua Mansion, No. 8, Chaoyangmen Beidajie, Dongcheng District, Beijing

Signed by CPA Li Xiaoying, Jiang Xijun

Sponsor responsible for continuous supervision during report period

Name China International Capital Corporation Limited (CICC)

Business address 27/F and 28/F, Guomao Mansion, No. 1, Jianguomenwai Avenue, Chaoyang District, Beijing

Name of signing sponsor's representative Qi Fei and Yao Xudong

Duration of continuous supervision From October 10, 2013 to December 31, 2014

010

Summary of Accounting Data and Financial IndexesCOOEC / ANNUAL REPORT 2014

Summary of Accounting Data and Financial IndexesI. Major Accounting Data and Financial Indexes of COOEC in the Past Three Years at the End of Report Period

(I) Major Accounting Data

Unit: Yuan Currency: RMB

Major accounting data 2014 2013

Increase and decrease current

than that of last year (%)

2012

Operating income 22,031,375,176.07 20,339,217,872.94 8.32 12,383,035,585.69Net profi t attributable to shareholders of the listed company

4,266,871,108.08 2,744,236,835.63 55.48 848,147,479.87

Net profi t attributable to shareholders of listed company after non-recurring profi t and loss are deducted

3,962,660,702.59 2,441,915,218.53 62.28 738,494,632.70

Net cash fl ows from operating activities 4,351,011,301.05 3,369,123,685.03 29.14 1,799,433,104.78

End of 2014 End of 2013

No increase and decrease at this end


End of 2012

Net asset attributable to shareholders of the listed company

20,557,302,176.30 16,582,817,233.04 23.97 10,241,517,211.57

Total assets 31,147,771,147.06 28,104,208,569.42 10.83 20,367,512,670.91

(II) Primary fi nancial indexes

Primary fi nancial indexes 2014 2013

Increase and decrease current


2012

Basic earnings per share (EPS) (Yuan/share) 0.97 0.69 41 0.22

Diluted EPS (Yuan/share) 0.97 0.69 41 0.22Basic EPS after deducting non-recurring gains and losses (Yuan/share)

0.90 0.61 48 0.19

Return on weighted average net assets (%) 22.80 22.51 Up 0.29 percentage

points 8.60

Return on weighted average net assets after deducting non-recurring gains and losses (%)

21.17 20.28 Increase by 0.89 percentage points 7.77

011

Summary of Accounting Data and Financial IndexesCOOEC / ANNUAL REPORT 2014

II. Items and Amount of Non-recurring Gains/Losses√ Applicable□ Inapplicable


Items of non-recurring profi ts / losses Amount of 2014 Amount of 2013 Amount of 2012Gains and losses on disposal of non-current assets 37,607,996.97 76,437,139.52 46,314,409.21Government subsidies recorded in current gains or losses, excluding government subsidies closely related to normal operations, in line with national policy, and according to certain standards or quantitative quotas

245,507,726.26 135,424,644.28 93,443,187.25

Gains and losses on assets invested or managed by others entrusted 162,517,984.08 28,112,290.40 0In addition to effective hedging business relating to normal operating activities of the Company, variable loss and profi t of fair value generated from held transaction fi nancial assets and transaction fi nancial assets as well as investment income gained from disposal of transaction fi nancial assets, trading fi nancial liabilities and available-for-sale fi nancial assets

-89,828,896.00 88,259,449.33 5,041,104.75

Other non-operating income and expenditure in addition to all items above 5,509,202.13 27,132,682.58 2,480,316.74

Other profi ts and losses in conformity with defi nition of non-recurring profi t and loss 0 0 0

Effect on minority interest -1,178,161.10 -820,616.09 -942,655.07Effect on income tax -55,925,446.85 -52,223,972.92 -36,683,515.71Total 304,210,405.49 302,321,617.10 109,652,847.17

III. Items Metered through Fair ValueUnit: 10,000 Yuan Currency: RMB

Project name: Opening balance Ending balance Current change Amount of effect on current profi t

Financial assets available for sale-Lanpec Technologies' shares 25,551.68 28,017.04 2,465.36 138.13

Financial assets calculated based on fair value with their change included in current P/L-forward sales contract of Ichthys and Gorgon

3,413.35 214.74 -3,198.60 -1,221.07

Financial liabilities calculated based on fair value with their change included in current P/L-forward sales contract of Yamal

0 -7,899.94 -7,899.94 -7,899.94

Total 28,965.03 20,331.84 -8,633.18 -8,982.88

012

Report of the Board of DirectorsCOOEC / ANNUAL REPORT 2014

Report of the Board of DirectorsI. Discussion and Analysis on Operation During Report Period of the Company by the Board of DirectorsYear 2014 refers to in signifi cant year when the Company stood severe tests.

The Company has achieved encouraging economic benefi ts while keeping increase on workload in this year. Sales revenue and net profi ts keep rising, especially the net profi ts which reach up to 4 billion for the fi rst time and keep growing in 4 consecutive years; compound annual growth rate is 167%.

Above mentioned achievements are got in the context of international oil price drops sharply and economic growth decrease rapidly, thus being so estimable. During report period, the Company targets on construction of world-leading or international excellent engineering company, focuses on the construction of four abilities, the overseas market development and the cost decreasing and benefit increasing, and strengthens quality management and control, thus significantly improving economic performance and comprehensive ability, and further enhancing EPCI ability, deepwater and underwater engineering ability, international market development ability, equipment strength, technological innovation-driven productivity, and cost control ability; therefore, series of new industries and business growths are formed regarding underwater engineering, module construction and skid equipment manufacturing etc.

010101010101010100101010101010101010101010101010101010101010101010101010101010100101010101010110101010000101001010101101010111111111010011101110 2222222222222222222222222222222222222222222222222222222222

construction and skid equipment manufacturing etc.

013


(I) Analysis of primary business

1. Change Analysis on Items Relating to Income Statement and Cash Flow Statement


Item Amount in Current Period

Amount in the Same Period of

Last YearChange ratio (%)

Operating income 22,031,375,176.07 20,339,217,872.94 8.32Operating costs 14,967,060,880.21 15,564,075,058.03 -3.84Sales expenses 11,172,435.93 2,653,394.54 321.06Management expenses 1,506,432,793.73 1,156,513,595.61 30.26Financial expenses 117,339,130.54 186,036,035.96 -36.93Net cash fl ows from operating activities 4,351,011,301.05 3,369,123,685.03 29.14Net cash fl ow from investment activities -638,594,194.85 -5,412,419,815.78 InapplicableNet cash fl ow from fi nancing activities -2,209,492,295.36 2,808,665,717.74 -178.67R&D expenditure 1,188,091,147.61 845,410,887.98 40.53Assets impairment loss 160,082,827.89 14,014,765.48 1,042.24Income from changes in fair value -110,985,447.00 32,095,680.75 -445.80Non-operating income 296,047,893.01 177,675,985.77 66.62Income tax expense 840,663,171.96 504,959,469.12 66.48

2. Income

(1) Analysis on Factors Driving Changes of Business Income

In the report period, it realized operating income of RMB 22 billion, at a year-on-year increase rate of 8%. Income growth is mainly attributed to the following factors: fi rst, market connect amount rises rapidly to provide support to income growth; second, equipment strength, technology level, project management ability and EPCI ability are greatly improved through construction of four abilities in successive years, to guarantee completion of high-quality project as scheduled; third, production and onshore/offshore operation efficiency are improved through constant resource integration, management optimization and application of new technologies, to ensure all projects operate safely as scheduled and operation revenue increases accordingly in 2014.

Offshore installation of oilfield in Weizhou

Successful completion of Liwan 3-1 Project for the first domestic large deepwater gasfield

Qinhuangdao Dragging Shipment of Module of 32-6 Project

014


In the report period, the Company totally operated 30 offshore oil and gas filed development projects and 5 land LNG construction projects, thereof for the offshore projects, 15 are distributed in the Bohai Sea, 7 in South China Sea, 3 in East China Sea, and the rest 9 are overseas projects. Enping Oil Fields, Qinghuangdao 32-6 and other 13 projects are completed successively.

Progress of key projects in the report period:

No. Project name Actual progress

1 Russia yamal Project 1%2 Kenli 10-4 EPCI Project 1%3 Penglai 19-9 Oilfi eld Comprehensive Adjustment Project 1%4 Myanmar Zawtika Project 11%5 Norway NyhamaNA Project 28%6 Indonesia BD Project 29%7 Shell Brunei BSP Project 57%8 Jinzhou 25-1/25-1 south oil and gas fi eld phase II development project 62%9 BZ 28-34 Project 76%10 Kenli 10-1 Project 85%11 Australia Ichthys LNG modular construction project 93%12 Enping Oilfi eld Group 100%13 Qinhuangdao 32-6 Project 100%14 Saudi Arabia WASIT Project 100%

In terms of design, the Company conducted design for 19 EPCI general contracting projects in total, input 2,330,000 man-hours and achieved a year-on-year increase of 5%.

In terms of construction, it completed processing of 250,000 structure tons steels, at an increase rate of 9%, finished construction of 16 jackets and 19 supports successively, which strikes a new record.

015


20142013

222 233

Designed man-hour(10,000 thousand)

Year-on-year Changes of Main Work Load Indicators

TimeDesigned man-

hour (10,000 thousand)

Processing load of steels (10,000 structure tons)

Investment per vessel per day

(10,000)

Subsea pipeline laying (km)

2014 233 25 2.4 2962013 222 23 2.7 627Year-on-year growth or decrease 5% 9% -11% -53%

In terms of installation, input 24,000 vessels per day, and completed offshore installation of 28 jackets and 27 supports and 296km subsea pipeline laying.

20142013

23 25

Processing load of steels(10,000 structure tons)

20142013

2.42.7

Investment per vessel per day (10,000)

20142013

296

627

Subsea pipeline laying (km)

016

(2) Order analysis

During report period, amount of new orders reached up to RMB 27,026,000,000, including RMB 13,847,000,000 of domestic orders mainly in Bohai Sea and East China Sea, and RMB 13,179,000,000 of overseas orders mainly in Russia, Burma, Indonesia, Brunei, Saudi Arabia and Africa etc.

About 29% of RMB 27,026,000,000 from new orders signed has been completed; total amount in the orders signed in the previous years which are in progress is about RMB 36,000,000,000with 97% completed. Up to December 31, 2014, total amount in the orders that have been signed but not completed yet of the Company is about RMB 20.3 billion.

017

(3) Information of Major Sales Clients

Total of sales of 5 top clients (RMB 10,000) 2,141,783.49 Ratio in total sales (%) 97.22

Module of the second batch for ICHTHYS Project was completed and delivered

018


3 Cost

(1) Cost Analysis Form

Unit: RMB 100 million

By industry

By industry Cost composition Items

Current amount

Ratio of cost in the current

period in total cost (%)

Amount in the same period of last year

Ratio of cost in the same period

of last year in total cost (%)

Ratio of change of the amount in current period compared with the same

period of last year (%)

Offshore oil and natural gas development engineering

Materials 31.71 21.19 33.31 21.40 -4.80Labor 14.77 9.87 14.37 9.23 2.78Depreciation and amortization 10.38 6.94 9.42 6.05 10.19

Fuel 8.73 5.83 7.98 5.13 9.40Engineering expense 84.08 56.18 90.56 58.19 -7.16Total 149.67 100.00 155.64 100.00 -3.84

According to industry features, engineering expense accounts for high proportion of the cost, mainly including land construction sub-contracting expense and vessel sub-contracting expense etc.. Company completes some works by sub-contracting integration of external resources. The detailed composition of cost is shown as follows:

Unit: RMB 100 million

Cost composition Items

Cost composition items

Current amount

Ratio of cost in the current

period in total cost (%)

Amount in the same period of last year

Ratio of cost in the same period

of last year in total cost (%)

Ratio of change of the amount in current period compared with the same

period of last year (%)

Engineering expense

Land construction subcontracting expense

43.00 28.73 48.24 30.99 -10.86

Vessel subcontracting expense 32.10 21.45 31.52 20.25 1.84

Vessel berthing expense, port surcharges, etc.

8.98 6.00 10.80 6.94 -16.85

Total 84.08 56.18 90.56 58.19 -7.16

(2) Adopting comprehensive measures to decrease cost

The Company sticks to low cost strategy, implements comprehensive cost decreasing and benefi t increasing measure, and takes continuously reducing cost as the key point to constantly enhance core competitiveness. In 2014, the Company kept operating cost dropping instead of rising with workload increasing, construction complexity increasing and income scale increasing, which indicates that achievements have been got in terms of cost reducing.

a Make reasonable arrangement for offshore construction resource through regional management on vessels to realize no standby vessel in Bohai Sea area, which greatly lowers offshore operation cost and increases benefi ts.

b Through scientifi c management and elaborate control, the Company conducted offshore installation operation under the most favorable climate conditions, thus reducing effects of climate condition on offshore construction.

c The Company widely applied offshore fl oating installation technology to greatly improve offshore operation effi ciency.

d Through constant optimization of procurement management, the Company improved procurement effi ciency to support effi cient engineering project operating.

(3) Information of major suppliers

Total of sales of 5 top clients (RMB 10,000.00) 141,077.81 Ratio in total sales (%) 32.62

019


4. Expenses

(1) Selling expenses is RMB 11,172,400 with a year-on-year increase of RMB8, 519,000 at an increase rate of 321.06%. It’s mainly because the Company put major efforts on expanding its international market, bringing higher selling expenses.

(2) Management expense is RMB 1.506 billion, with a year-on-year increase of RMB 350 million at an increase rate of 30.26%, which are mainly caused by increase of R&D expense by RMB 343 million at an increase rate of 40.61%. Excluding the R & D expenses, the handling expenses remained basically the same.

(3) Financial expense is RMB 117 million with a year-on-year decrease of RMB 69 million at a decrease rate of 36.93%. Main reason: On one hand, the yuan-dollar exchange rate fell from 6.0969 at the beginning of the year to 6.1190 at the end of period in the fi rst half year, exchange net loss had a year-on-year decrease of RMB 36 million; on the other hand, interest-bearing liabilities had a year-on-year decrease, net interest expense decreased by RMB 32 million.

5. Loss from asset devaluation, income from change of fair value, non-operating income and income tax expense

(1) Loss from asset devaluation is RMB 160 million, with a year-on-year increase of RMB 146 million at a increase rate of 1042.24%. According to assessment result from third party assets assessment company, COOEC (Qingdao) Co., Ltd., offered provision for impairment loss of RMB155 million for dock.

(2) Variable loss and profit in fair value is RMB -111 million with a decrease of RMB 143 million at an decrease rate of 445.80%. It is mainly because the subsidiary COOEC (Qingdao) Co., Ltd. signed Agreement of Future Foreign Exchange Settlement for ICHTHYS Project with Standard Chartered Bank (China). On the one hand, as fi nished foreign exchange settlement and sale were confi rmed as investment income, former confi rmed P/L of changes in fair value rolled out; on the other hand, exchange settlement rate of unsettled parts agreed in the Contract differs from forward exchange settlement rate predicated at the end of this term, which results in fl oating profi t and loss leading to loss from fair value change.

(3) Non-operating income is RMB 296 million with an increase of RMB 118 million at an increase rate of 66.62%, which is mainly attributed to government subsidies increasing by RMB 110 million than last year; “Offshore Oil 699” ship has been completed and ship wreckage has been sold, non-operating income is confi rmed to be RMB 28 million.

(4) Income tax expense is RMB 841 million with an increase of RMB 336 million at an increase rate of 66.48%. It’s mainly because that the current profi t rose sharply from a year earlier, causing increase in income tax.

Offshore installation for phase II of Weizhou 12-2 11-4N Oilfield Exploitation Project

020


021


6. R&D expenditure

(1) R&D Expenditure Statement

Unit: 10,000 Yuan

Expensing R&D expenditure in current period 118,809.11Capitalized R&D expenditure in current period 0.00Total R&D expenditure 118,809.11Ratio of total R&D expenditure in net assets (%) 5.78Ratio of total R&D expenditure in operating income (%) 5.39

(2) Statement

During report period, the Company continuously strengthens on R&D investment and increases scientifi c research projects, with R&D expenditure amounting to RMB 1.188 billion at a year-on-year increase rate of 41%. In 2014, the Company launched more than 90 large-scale scientifi c research projects which lead to more than 70 scientifi c innovation achievements, and make breakthrough in “underwater production system design, manufacturing, testing and installation technology”, “DP fl oating installation technology”, “single point mooring testing system R&D”, and “ underwater welding and key inspection technology”. Relevant technology achievements only helped the Company complete heavy production and operating tasks through the year, played an important role in improving operation effi ciency and lowering cost, and made great contribution to technology advance and industry upgrading of the Company.

7. Cash fl ow

(1) The net cash infl ow from operating activities is RMB 4.351 billion, with a year-on-year increase of RMB 982million at an increase rate of 29.14%. It is mainly because the Company had a rapid increase on income scale and collected payment timely.

(2) Net cash fl ow from investment activities is RMB - 639 million with a year-on-year decrease of RMB 4.774 billion. It is mainly because that the Company bought bank fi nancial products of RMB 4.071 billion, and net recovery from fi nancial products reached RMB 1.071 billion; cash received from investment income reached RMB 197 million; received compensation on “Offshore Oil 699” ship about RMB 215 million; fi xed asset investment expenditure used for construction of Zhuhai deep-water base and vessels reached RMB 2.177 billion with an year-on-year increase of RMB 661 million, thus greatly lowering net cash outfl ow.

(3) The net cash fl ow from fi nancing activities is RMB -2.209 billion, with a year-on-year decrease of RMB 5.018 billion. The Company raises funds with net amount of RMB 3.471 billion by issuing stocks in September of last year, which makes the net cash infl ow from fi nancing activities increase accordingly in last year. The Company paid off the RMB 1.48 billion loan of Export-Import Bank, and RMB 12.5 million mortgage loan of Hong Kong Branch of Bank of China; the Company distributed RMB 442 million of cash dividends among 2013 distributed profi ts, which has an increased of RMB 330 million; subsidiary COOEC Subsea Technology Co., Ltd. paid RMB 106 million for fi nancing leasing of "Offshore Oil 289" multi-function deepwater installation ship, thus greatly lowering net cash infl ow compared with last year.

Module construction for Qinhuangdao Oilfield

022


8. Others

Progress description of development strategies and operation plans

In 2014, the Company focused on construction of four abilities as specifi ed, emphasizing development of primary business, improving core competitiveness, and combining the strategic goal to build a fi rst-class international energy engineering with engineering projects under construction. Over one year, EPCI ability and overall operation ability are signifi cantly enhanced, deepwater operation ability is improved, breakthrough is made in international mark development, and the sales income, net profi t and market connect amount are overfulfi lled, all of which laid a solid foundation for sustainable development of the Company.

023


(1) Many first achievements are got in production operation and technology fi eld.

The Company got overseas orders over RMB 10 billion, being the first echelon of LNG core business; the Company won EPCI of large project (Burma Zawtika project), implemented and completed single-point maintenance project in Caofeidian, successfully repaired and restored the fi rst domestic underwater dry cabin cracked in Lufeng jacket project, executed highly diffi cult transverse 10 thousand tons loading of modules with the vessel, dynamic positioning lifting operation, dynamic positioning fl oating operation and low-level fl oating operation, and make breakthrough on offshore installation technology and ability; new “Offshore Oil 289” ship purchased by the Company implemented deepwater pilling operation in Enping Project; daily pipe laying speed of “Offshore Oil 201” ship reached up to 6km for the fi rst time; old offshore full oilfi eld platform was dismounted, and new market was developed; 150 thousand-ton FPSO long-distance towing was completed from Dalian to Enping, and FPSO overall connection was completed; design of tension leg platform (TLP) for deepwater oil and gas fi eld in Liuhua has been completed; PAUT (Phased Array Ultrasonic Testing) of new NDT technology is widely applied, thus greatly improved inspection effi cient and quality; Tianjin LNG storage tank EPC project was successfully completed to make the Company become the fi rst one having EPCI competence in full-capacity LNG low-temperature storage tank with capacity 30 thousand m3.

Site of Tianjin LNG Project

Pilling operation by "Offshore Oil 289" ship - deepwater multifunction installation vessel

Pipe laying by "Offshore Oil 201" - 3000m deepwater pipeline laying and hoisting vessel

024


(2) Operation ability and effi ciency were continuously improved

Floating operation ability reached to world-leading level. The Company made clustering innovation on key floating installation technology, and implemented 5 major fl oating operation projects with 10 thousand-ton loading of modules with “Offshore Oil 201” ship and 50-ton semi-submersible self-propelled ship. Huizhou 25-8 modules installation for Enping Oil Fields break the world record on dynamic positioning fl oating; Qinghuangdao 32-6 modules of 13,000 tons break the Bohai Sea’s record; the problem of fl oating installation in ultra-shallow water of 9 meters was overcome during Jinzhou 9-3 support installation; Kenli 3-2 support fl oating installation was the fi rst one implemented in winter, marking that the Company is competent in fl oating installation under all weather conditions; passive fl oating traction lifting technology was fi rstly adopted for offshore platform in Lufeng Project, which break the world record of largest low-level fl oating platform.

It actively promotes “five-oriented” management to achieve synergy, which greatly improved operation efficiency. The Company gradually realized seamless connection, intensive management and resource sharing between all links including design, procurement, construction, offshore installation, etc. of the aforementioned works, which further released synergy effect. Construction period of Qinghuangdao 32-6 module project was 10.5 months, which set the record of the shortest onshore construction period of 10 thousand-ton block; in April 2014, the Company completed offshore loading of 11 structures within 1 month; 9 lifting operations were completed in 6 days in Xijiang 24-3 offshore installation project; “Blue Whale” ship completed installation of 5 modules within 1 week, which set the record of the highest operation and construction effi ciency of similar projects. Five 152 km-long subsea pipelines with different diameter were completed within 51 days by “Offshore Oil 201” ship, and daily pipe-laying speed broke through 6 km, thus breaking the laying speed record of daily offshore pipe laying. Advancement of fl oating technology and loading technology, and improvement of tools and equipment also played an important role in improving operation effi ciency.

(3) The Company strives to develop international market and has made a historical breakthrough.

In 2014, the Company obtained domestic orders of RMB 27 billion in total at an increase rate of 36%, made signifi cant achievements on international market development, signed order of Russia Yamal Project (RMB 10.1 billion), Burma Zawtika Project (RMB 2.2 billion), offshore installation project of Shell in Brunei (RMB 600 million), Saudi Arabia WASIT Project (RMB 260 million) and etc.; EPCI ability and overall strength of the Company are well recognized by international market.

According to actual demands on development of international market, the Company well organized and optimized management framework of overseas constituent companies, integrated overseas resource and improved business ability. The Company constantly improve overseas layout, and set branches in Australia, Abu Dhabi and Canada, so as to speed up market development. The Company continued to deepen international cooperation, and strengthen cooperation with international oil company and engineering company based on advantages on site, vessels and cost, so as to complement each other’s advantages and work together to win international market. The Company with Kvaerner created a join venture of deepwater design and procurement company, and is steadily promoting international cooperation on Zhuhai deepwater base.

Meanwhile, the Company constantly makes good of customer management system, deepens and enlarges communication with core customers, visits customers for many times and invites foreign owners or partners to visit the Company, and successively expands market channels.

Offshore float-over installation of Huizhou 25-8 module Offshore float-over installation of Qinhuangdao 32-6 module

025


Offshore installation of BP24-2 jacket for Enping Project

Offshore float-over installation of Kenli module Offshore float-over installation of Lufeng module

026


(4) Set up necessary deepwater equipment, speed up promoting deepwater strategy, and rapidly improve ability of deepwater and underwater projects.

Deepwater operation vessel pattern is formed initially. During report period, three new vessels are equipped to improve overall strength of vessel fl eet. The fi rst deepwater multi-purpose installation vessel “Offshore Oil 289” has been put into operation in the first quarter of 2014, and has implemented many offshore operation projects. Multi-purpose deepwater engineering vessel “Offshore Oil 286” has been delivered by the end of the year, being the fi rst 3000m deepwater engineering vessel integrated with functions of lifting, pipe laying, anchoring and saturation diving support etc., and being capable of world-leading class deepwater and underwater engineering operation. Multi-purpose deepwater trenching engineering vessel “Offshore Oil 291” is delivered by the end of the year, bringing the fi rst large anchoring and safe operation vessel introduced from overseas, which can satisfy engineering demands from deepwater trenching operation in East China Sea and South China Sea, and anchorage installation, thus greatly improved service ability and market competitiveness of the Company.

Construction of Zhuhai deepwater base speeds up as schedule. Phase I of Zhuhai deepwater manufacture base construction project has been completed in November 2014, thus the base has the construction capacity of 40,000 tons modules, and 4 modules are constructed in the year. Phase II is carried out orderly at a progress of 30%, and is estimated to complete by the end of 2015.

Overall ability of deepwater and underwater operation is improved substantially. Based on actual operation in the several underwater system projects including Panyu, Lufeng, Liuhua, etc., the Company basically mastered design, manufacture and test technology of underwater connection system. The Company successfully completed 338 deepwater operation, which is the deepest installation underwater; the Company satisfactorily repaired and restored the fi rst domestic underwater dry cabin cracked, and replaced single-point anchoring system with FPSO in place and without interruption; the fi rst domestic jaw-type underwater connectors has passed sea trial; R&D of domestic underwater positioning system has been completed successfully; underwater robot completed 1500m operation underwater, and is able to install fl exible hose and umbilical cable underwater; R&D of deepwater tension leg platform (TLP) for South China Sea has been started, which marks that deepwater platform design has stepped into substantial implementation stage.

Newly delivered multifunction underwater engineering vessel "Off-shore Oil 291"

027


(5) Series of new business growth points are set up successively to extend the business link.

Through efforts over years, the Company has initially developed new businesses such as underwater engineering business, module construction business, high-level skid products manufacturing business, LNG business, electrical products manufacturing business, and waste offshore platform dismounting business, which extends existing business and resource, and completes business system, strengthens market service ability and enlarges development space.

Underwater engineering business accounts for a growing proportion. Shenzhen COOEC Subsea Technology Co., Ltd., specialized in underwater operation meets a rapid growth on revenue and profi ts recently, realized sales revenue from RMB 620 million in 2010 to RMB 3.74 billion in 2014, and net profi ts from RMB 100 million from 2010 to RMB 530 million in 2014.

Impacts of module construction are distributed in a wider range. During report period, the Company implemented multiple international module construction projects such as Ichthys and Yamal, and are well recognized by international energy companies in terms of management and technology level in the fi eld of large module construction. Russia Yamal Project is the fi rst time where LNG’s core technology modules are manufactured in China; implementation of this project will greatly improve the Company’s popularity in the fi eld of module construction and high-level manufacturing.

High-level skid equipment business develops fast. In 2014, subordinated special equipment company finished 13 orders of skid equipment, its manufacturing ability and service level are recognized by the industry, and it has been awarded with “Excellent Manufacturer and Contractor” Prize by the Owner Technip, which is the fi rst time the Technip issues such prize to domestic manufacturer. Skid equipment business is expanding from pressure vessel, manifold, air compressor and other traditional products to large fuel-fi red reciprocating gas compressor units, compact-type cyclone air fl oating equipment, high-effi ciency oil-water separation facility, deepwater and underwater production facility, LNG vaporizer and pile leg coupler for large-module fl oating installation, and water products with high added-value and high-technology.

LNG core ability construction has achieved some effects. During report period, LNG engineering technology center to comprehensively implement research, production and operation etc. of LNG. Tianjin LNG storage tank EPCI Phase I has been completed in advance, while Guangxi LNG project is under construction.

Electrical manufacturing for marine engineering has a good start. Presently, electrical products such as LV panel/cabinet, MV panel/cabinet electrical and central control system researched and developed by the Company have been launched to the market step by step, and thus forming self-owned brand.

(6) Strengthen core competitiveness and improve development quality through scientifi c achievements

Master core technology is constant goal of the Company. In order to further strengthen technology-driven productivity to convert technology advantage into the advantage of cost, quality and effi ciency, the Company focuses on key technology affecting industry competitiveness, actively promotes conversion of technical achievements, thus realizing positive interaction between production operation and technical progress.

The Company has achieved good results on scientifi c research projects. in 2014, the Company conducted 91 large scientifi c research projects, including 16 national subjects, achieved more than 70 technical innovations, 65 authorized invention patent and 17 provincial and ministerial-level science and technology awards; the Company pays much attention to “design, manufacturing and installation technology of underwater production system”, “installation technology of dynamic positioning floating”, “research and development of single-point anchoring testing system”, “design, construction and installation technology research of tension leg platform”, “key technology research of underwater welding and inspection”, and “automatic production control system for marine oil and gas fi eld” and etc., and have obtained great achievements.

The Company promotes conversion of technical achievements and lowers production cost. Dynamic positioning fl oating technology is fi rstly applied in the Company, which breaks through the monopolization of foreign technologies, shortens offshore construction period and reduces operation of tug boat and other auxiliary vessels; the Company developed a new steel pile rolling loading technology, and by which it directly saved RMB 8.8 million of fl oating crane cost in steel pile rolling loading of Huizhou 25-8; application of the largest domestically made traction equipment —— 750 tons pulling jack provides much convenience for loading of large structures; accurate 4 million-ton weighing system fi lled the gap in the fi eld of large-scale and high accuracy weighting system, and has completed 17 projects totally, saved cost more than RMB 70 million; pipe-laying effi ciency of “Offshore Oil 201” is increased by 3% with the new gas manifold developed.

028


(II) Analysis on operations of industries, products or areas

1. Statement of Primary Business by Industries and Products

Unit: 10,000 Yuan Currency: RMBPrimary business conditions by industry

By industry Operating income

Operating costs

Operating profi t

margin (%)

Increase and decrease of

operating revenue over that of last

year (%)


operating cost over that of

last year (%)


operating profi t margin over that

of last year (%)Offshore engineering industry 2,080,142.12 1,385,440.03 33.40 5.61 -7.55 Up 9.49

percentage pointsNon project of Offshore engineering industry 117,243.49 109,032.39 7.00 101.85 99.64 Up 1.03

percentage points

2. Conditions of primary business areas

Unit: 100 million Yuan Currency: RMB

Area Operating income Increase and decrease of operating revenue over that of last year (%)

Inland 208.5 10Bohai Sea 97.1 19South China Sea 73.5 -10East China Sea 36.2 92Midstream and downstream 1.7 -77

Abroad 11.8 -15Total 220.3 8

(III) Balance analysis

1. Balance Analysis Statement

Unit: Yuan

Project nameAmount at the end of current

period

Ratio of the amount at the end of current period in total

assets (%)

Amount at the end of last period

Ratio of the amount at the end of

last period in total assets

(%)

Change ratio of the amount at the end of current period

compared with that at the end of last

period (%)Currency capital 3,281,826,338.76 10.54 1,779,511,011.24 6.33 84.42Financial assets calculated based on fair value with their change included in current P/L

2,147,424.00 0.01 34,133,463.00 0.12 -93.71

Accounts receivable 5,843,029,130.23 18.76 4,334,437,118.49 15.42 34.80Advance payments 246,103,857.01 0.79 576,329,848.56 2.05 -57.30Interest receivable 10,393,778.04 0.03 16,831,742.46 0.06 -38.25Inventory 1,108,847,744.04 3.56 1,715,611,771.37 6.10 -35.37Disposal of fi xed assets 0 0.00 288,331,886.31 1.03 -100.00Development expenditure 0 0.00 1,302,000.00 0.00 -100.00Deferred income tax assets 161,636,457.30 0.52 89,662,945.02 0.32 80.27Financial liabilities calculated based on fair value with their change included in current P/L

78,999,408.00 0.25 0 0 Inapplicable

Employee compensation payable 411,511,471.58 1.32 263,869,377.09 0.94 55.95

Taxes payable 819,754,828.52 2.63 581,029,885.42 2.07 41.09Non-current liability due within one year 85,118,481.32 0.27 1,480,000,000.00 5.27 -94.25

Other current liabilities 40,149,946.85 0.13 5,601,944.78 0.02 616.71

029


Project nameAmount at the end of current

period

Ratio of the amount at the end of current period in total

assets (%)

Amount at the end of last period

Ratio of the amount at the end of

last period in total assets

(%)

Change ratio of the amount at the end of current period

compared with that at the end of last

period (%)Long-term loan 56,172,420.00 0.18 132,180,792.00 0.47 -57.50Deferred income tax liabilities 35,246,299.64 0.11 70,303,722.93 0.25 -49.87

Special reserve 518,372,258.69 1.66 378,638,182.08 1.35 36.90Surplus reserves 1,073,777,168.50 3.45 804,746,449.90 2.86 33.43Undistributed profi t 10,109,425,654.81 32.46 6,553,720,745.33 23.32 54.25Minority stockholders' interest 14,462,978.64 0.05 10,218,679.77 0.04 41.53

Description of change in item

(1) Compared with last year, the monetary capital increased RMB1.502 billion, at an increase rate of 84.42%, which is mainly because of continuous increase of income scale and collected payment timely, and cash fl ow is suffi cient; while fi nancial products reduced RMB 1.071billion for end of the year, making monetary capital increased correspondingly.

(2) Financial assets calculated based on fair value with their change included in current P/L reduced RMB 0.032 billion from the end of last year by 93.71%, which mainly results from change of fair value incurred from forward sales contract signed between the Company’s subsidiary COOEC (Qingdao) Co., Ltd. and Standard Chartered Bank.

(3) Compared to the end of last year, the accounts receivable increase by RMB 1.509 billion at an increase rate of 34.80%. The main reason is that increase of work load of this year compared with that of last year makes an increase in income scale, engineering accounts receivable that have not reached payment milestone but have settled as the revenue increase greatly compared with the end of last year.

(4) Prepayment reduced RMB 0.330 billion from the end of last year by 57.30%. The main reason is that fi nance lease of deep water multi-function installation vessel, “offshore oil 289”, made by Shenzhen COOEC Subsea Technology Co., Ltd. Turn into fi xed asset this year and the prepayment of vessels trunk into fi xed assets.

(5) Interest receivable reduced by RMB 6.438 million from the end of last year, which mainly because of the change in fair value between the interests of the bank fi nancial products purchased by the company accrue and received interests of part of the fi nancial products are due.

(6) Storage reduced RMB 607million from the end of last year by 35.37%, which mainly because of the increased payment that reaches terms of settlement this year, leading to corresponding reduce in ending balance of the storage.

(7) Disposal of fixed assets is zero, reduced RMB 0.288 billion form the end of last year by 100%, which mainly because insurance claim for “Offshore Oil 699” ship has been completed, and the company has offset its disposal of fi xed assets.

(8) Development expenditure is zero, reduced RMB 1.302 million from the end of last year by 100.00% It’s mainly because that equipment and machinery developed under the scientifi c research task “Research on marine engineering underwater welding and key inspection technologies” undertaken by the Company failed to fully meet the requirements of practical engineering application, were not conditioned to be converted to fi xed assets and were taken as expenses in the current period.

(9) Deferred income tax assets increased RMB 72 million from the end of the year by 80.27%, which mainly because of RMB 81 million deferred income tax caused by temporary costs on account based on accrual system from the end of this year.

(10) Financial assets calculated based on fair value with their change included in current P/L increased RMB 79 million, which mainly because of the change in fair value of forward sale and purchase contract between the subsidiary, COOEC (Qingdao) Co., Ltd, and Standard Chartered Bank.

(11) Employee compensation payable increased RMB 148 million for the end of last year, which mainly because of increase of employee’s bonus in accrual but not released this year.

(12) Taxes payable increase by RMB 0.239 billion from the end of last year, which mainly because of a quick increase in profi t scale and the enterprise income tax.

(13) Non-current liability due within one year reduced 1.395billion from the end of the year by 94.25%, which mainly due to the company paid RMB 1.480 billion of matured loan of the Export and Import Bank in the current period; on the other hand, fi nance lease of deep water multi-function installation vessel,” offshore oil 289”, made by Shenzhen COOEC Subsea Technology Co., Ltd., RMB 0.108 billion payable fi nance leasing outlay listed will due in a year.

(14) Other current liabilities increased by 0.035 billion from the end of last year by 616.71%, other current liabilities is deferred income expected to be carried over within a year, which mainly are return of site supporting facilities fee(RMB 0.036 billion) of Zhuhai Corporation.

(15) Long-term loan reduced RMB 76 million from the end of last year by 57.50%, which mainly because of Hong Kong subsidiary paid $12.5 million mortgage loan to Hong Kong branch of Bank of China, making long term loan reduced correspondingly.

030


(16) Compared to the end of last year, the deferred income tax liabilities decrease by RMB 35 million at a decrease rate of 49.87%. It is mainly because the 32 million of deferred income tax liabilities generated from depreciation of “Lanjiang” vessel is adjusted at one time in the current period, making deferred income tax liabilities at end of the period decreased correspondingly

(17) Compared to the end of last year, the special reserve increases by RMB 140 million at an increase rate of 36.90%. It’s mainly because that the Company extracts safe production costs as 1.5% of the total package income of petroleum projects. Unused safe production costs made ending balance of special reserves increase.

(18) Surplus reserves increased RMB 269 million from the end of the year at a rate of 33.43%, which mainly due to RMB 269 million that withdraw from legal earned surplus reserves of 10% the net profi t of parent company.

(19) Undistributed profi t increased by RMB 3.556 billion from the end of last year, by 54.25%. Net current profi t belonging to the shareholders of the parent company increased in this period, making undistributed profi t increased.

(20) Interest belonging to minority shareholders increased RMB 4.2443 million from the end of last year, at a rate of 41.53%, which mainly because of net assets expansion of Ketai Co., Ltd. and A.E.S. Destructive & Non-destructive Testing Ltd., our company holds 70% and 90% of the equities of them, respectively.

Analysis on core competitivenessAs a State team in offshore engineering, the Company is a large-scale engineering general contracting company which integrates design of offshore oil and natural gas development engineering, land manufacturing and offshore installation, debugging, maintenance and LNG engineering, which is the only one at home. It is an engineering design unit at national category A, and construction enterprise at national level I. The company owns two world level manufacture base in Qingdao and Zhuhai, as well as a strong offshore installation vessel team which composed of more than 20 deepwater and shallow water engineering vessels In recent years, The company insist on developing its major courses, centered on “ from shallow water to deep water”, “from home to abroad, continuously strengthen “four abilities construction( construction of the general contracting capacity focusing on design; construction of offshore installation supported by large-scale equipment; construction of facility maintenance capacity taking submarine pipe maintenance as breakthrough; construction of reinforcement of market status of water fi led and research and capability of deepening deepwater operation), overall contracting capacity and deepwater ability promotes very quickly, continuous increase in overseas business and international competition edge, striding forward the goal of “construction of an energy engineering company of international level.

High EPCI general contracting capacity.Based on years of development and accumulation, the Company has possessed a complete set of mature technology, equipment and capacity system for design, construction, installation and maintenance of offshore oil and gas fi eld development within water depth of 300 m. Through success in implementing Liwan 3-1 deepwater gas fi eld project in the South China Sea, the Company achieved great leap in general contracting capacity of design, construction and installation from 10,000 tons to 30,000 tons and subsea pipe-laying capacity within water depth from 300 m to 1,500 mm, thus accumulating valuable experience in developing deepwater oil and gas resources for China.

Rich experience in engineering project management.The Company owns more than 120 engineering project managers with quality certifi cation and operates more than 30 large and medium-scale offshore engineering projects annually in recent years, thus accumulating rich experience in offshore engineering project management.

High detail design capacity.The Company has more than 1,300 designers, providing professional service to feasibility study, concept design, FEED, detail design, processing design, installation design, etc. Its design technology and capacity for developing different oil and gas fi elds whose water is less than 300 meters deep have reached the advanced design level in the world, and it is positively making technology reserve for deepwater. At the same time, in the past two years, the Company achieved technological advances and breakthroughs in deepwater design like deepwater subsea pipe-laying, deepwater jacket design, underwater production facilities, etc. and has applied them in production. Presently it is striving to make technological breakthroughs in design of deepwater fl oating platform system, deepwater subsea pipes and risers, underwater system and other deepwater products. It started design and research of deepwater tension leg platform (hereinafter referred to as TLP) in South China sea, and design of deepwater platform is to be implemented substantially.

30,000-ton extra-large structure constructing capacity.In the areas such as Tanggu and Qingdao, the Company has had constructed manufacturing sites with area more than 1.4 million

031


2. Statement on changes of measurement properties of measurement assets and major assets in fair value

Unit: 10,000 Yuan

Item Beginning amount

Profi t and loss of changes of fair value in

current period

Accumulative changes of fair value recorded

into equities

Accrued impairment

in current period

Closing amount

Financial assetsIncluding: 1. Financial assets calculated on the basis of fair value and with their changes recorded into profi t and loss in current period

3,413.35 -3,198.60 214.74

Including: derivative fi nancial assets 3,413.35 -3,198.60 214.742. Financial assets available for sales 25,551.68 0 19,774.86 28,017.04

Total 28,965.03 -3198.60 19,774.86 0.00 28,231.78

Qingdao Yard

square meters, with annual processing and manufacturing capacity over 200,000 steel structure tons. It has the constructing capacity for ocean structures such as 30,000-ton extra-large jacket, supports, etc. as well as for large-scale modules and kids. Now it is constructing Deepwater Ocean Engineering Equipment Manufacturing Base in Zhuhai with area of about 2.07 million square meters and will complete the construction of the base for construction and assembly of large-scale fl oating facilities of deepwater engineering and the base for assembly and test of underwater engineering facilities, which will quicken the capacity for constructing deepwater ocean engineering structures.

A deepwater operation fl eet is formed. The Company owns “Offshore Oil 201”, which is the fi rst deepwater pipe-laying crane vessel in the world and has a 3,000-m deepwater pipe-laying capacity, 4,000-ton heavy hoisting capacity and dynamic positioning capacity at level III at the same time, as well as 20 engineering vessels inclusive of “Blue Whale” which is a 7,500-ton crane vessel and 50,000-ton semi-submersible self-propelled vessel; multi-functional underwater vessels that can reach 3,000 meters operating water depth, multi-functional deepwater installation vessels ,deep trench vessels, besides, it has the capacity for offshore transportation and installation of 30,000-ton extra-large ocean structures, possesses multiple installation technologies like hoisting, DP fl oating installation, moored fl oating installation, offshore launching, etc. The single jacket and support installed by it reach as heavy as 32,000 tons and the subsea pipelines laid by it are as deep as 1,409 meters, and the laying speed of submarine pipeline of each vessel broke 6 km/day.

Comprehensive underwater engineering ability was established. In recent years, the company has made a quick development in deepwater and underwater engineering ability, building an array of underwater engineering equipment, implementing dozens of underwater engineering projects. The company has a 3,000m deepwater operation fl eets and 8 sets of 3,000-m underwater robots, thus the capacity of installation of underwater structure and mooring in 3000m depth. It has already completed manufacture and installation of underwater cross under pipe of 300m depth, submarine pipeline terminal, submarine pipeline end manifold, deepwater connector and underwater connections, therefore, with the ability of laying and installation of fl exible hose of 500-m depth, umbilical cable, and the biggest operation depth of the underwater robots reached 1,500m.

New 3000m deepwater multifunction underwater engineering vessel delivered at the end of 2014

032


(V) Investment analysis

1. General analysis on foreign equity investment

(1) Securities investment

Description of securities investment

Inapplicable.

(2) Stock equity of other listed company held

Unit: 10,000 Yuan

Stock Code

Name of security

Initial investment

cost

Ratio to stock equity

of the Company

(%)

Book value at

end of the period

Profi t and loss in the

report period

Change in owner's

equity in the report

period

Accounting items

Source of shares

601798 Lanpec Technologies 4,752.50 6.49 28,017.04 138.13 994.10

Financial assets available for

sale

Investment in original issue

stockTotal 4,752.50 / 28,017.04 138.13 994.10 / /

The Company invested RMB 12,958,400 in allotment of shares of Lanpec Technologies in January 2014 and got 2,281,400 shares of Lanpec Technologies. After allotment of shares, the shares of Lanpec Technologies held by the Company amount to 23,021,400, with shareholding ratio of 6.49%.

(3) Equity held of shares of unlisted fi nancial enterprise

Inapplicable.

(4) Information of sales and purchase of stocks of other listed companies

Inapplicable.Offshore welding

033


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Yes

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034


Nam

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No

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Aug

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2015

Gua

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746.

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Yes

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035


(2) Other entrusted fi nancing and investment on derivative products

Type of investment Capital source Contracting

partyInvestment shares

Investment horizon

Product type

Estimated income

Investment profi t and

loss

Get involved

in lawsuit or not

GORGON project forward foreign exchange settlement

Engineering project collections from the Owner CHEVRON AUSTRALIA PTY LTD

Standard Chartered

Bank (China)

Total amount of USD 166,525,500

2

Forward foreign exchange settlement

Inapplicable. RMB 494,200 No

ICHTHYS project forward foreign exchange settlement

Engineering project collections from the Owner JKC ICHTHYS LNG Joint Venture

Standard Chartered

Bank (China)


3


Inapplicable. RMB 19,280,800 No

Forward foreign exchange settlement of Yamal project is

from engineering project payment of Owner YAMGAZ REFERRED TO AS CONTRACTOR company

Standard Chartered

Bank (China)


3


Inapplicable. Inapplicable. No

Other entrusted fi nancing and investment on derivative products

1. Due to completion of GORGON project, forward foreign exchange settlement has fi nished at end of the fi rst quarter of 2014.

2. Forward foreign exchange settlement of ICHTHYS project will be fi nished in September, 2015.

3. It is estimated that the forward foreign exchange settlement of YAMAL project will begin in Jun, 2015 and no profi t and loss data in 2014.

4. Purpose of project forward foreign exchange settlement: to avoid risks in exchange rate between US dollar and RMB, forward foreign exchange settlement shall be conducted by the company to make the exchange risk of project controllable.

Offshore jacket installation

036


3. Use of the raised funds

(1) General use of the raised funds

√ Applicable□ Inapplicable

Unit: 10,000 Yuan Currency: RMB

Year of raise

Method of raise

Net amount of raised funds

Total amount of used raised

funds this year

Total amount of raised funds that

has been used

Total amount of unused raised

funds

Purpose and usage of unused raised funds

2013 Private placement 347,149.62 49,807.70 130,808.15 228,418.28

RMB 2 billion has been used for purchasing principal-guaranteed bank fi nancial products and the rest is deposited in the special account for raised funds.

Total / 347,149.62 49,807.70 130,808.15 228,418.28 /

General utilization of the raised funds Utilization of the raised funds shall comply with laws and regulations and meet the actual need in the project.

Note: Total amount of raised funds is RMB 3.5 billion, and the net amount of raised funds is RMB 3,471,496,200 with issue expenses deducted. Total amount of unused raised funds 2,284,182,800 include fi nancing benefi t and interests

(2) Utilization of the raised funds in committed projects



Name of committed project

Whether to

change the

project

Planned investment

of raised funds

Planned investment

of raised funds in this year

Actual accumulative investment of raised funds

Whether to meet design

schedule

Project progress

Estimated income

Income generated

Whether to meet

the expected

income

Description of schedule and income not reached

Description of change

reason and raised

funds change

procedure

Zhuhai deepwater offshore engineering equipment manufacturing base project

No 347,149.62 49,807.70 130,808.15 Yes

Phase I of the project

has been completed

in 2014. Project

schedule of Phase

II is 31%.

After-tax internal rate of return

is 9.3% according

to feasibility

study report.

Net income of Zhuhai

Corporation is RMB

2,470,900 in this year.

Yes - No change

Total / 347,149.62 49,807.70 130,808.15 / / / / / / /

Use of the raised funds in committed projects Use of the raised funds shall comply with laws and regulations and meet the actual need in the fi nanced project.

(3) Use of the raised funds in committed projects for other purposes

□ Applicable√ Inapplicable

037


4. Analysis on major subsidiaries and joint stock companies

(1) Fundamental conditions of share controlled branch company incorporated to consolidated statement in report period are as follows:

No. Company nameRegistered

Capital (RMB ten thousand)

Main business and productsTotal assets

(RMB ten thousand)

Net assets (RMB ten thousand)

Net profi t (RMB ten thousand)

Shareholding ratio

1 COOEC Subsea Technology Co., Ltd. 120,537.96

Technical services, subsea pipe maintenance and other services for offshore oil underwater engineering

430,036.83 280,647.12 52,839.80 100%

2 COOEC (Qingdao) Co., Ltd. 300,000.00

Construction, installation, design and maintenance, etc. of offshore oil and gas engineering

692,389.91 504,295.13 72,265.43 100%

3 COOEC (Zhuhai) Co., Ltd. 395,000.00

Construction, installation, design and maintenance, etc. of offshore oil and gas engineering

527,898.78 393,811.87 247.09 100%

4 COOEC International Engineering Co., Ltd 6,000.00 Construction general contract and

specialized contract 6,715.40 3,957.03 270.09 100%

5 COOEC Indonesia Co., Ltd. 77.45 Oil-gas fi eld development and repair

service business 3,779.58 -82.82 -123.15 100%

6 COOEC Nigeria Co., Ltd. 54.88

Contract, design, installation, repair and relevant business of offshore oil-gas development engineering

65.27 40.03 - 100%

7A.E.S. Destructive & Non-destructive Testing Ltd.

114.57 Nondestructive testing and welding experiments 1,249.61 1,020.92 7.15 90%

8 Blue Ocean International Co., Ltd. 669.81

Overall contract of design, purchase, construction and installation of offshore oil engineering

599.66 599.66 126.39 100%

9 Ketai Co., Ltd. 956.87Overall contract of design, purchase, construction and installation of offshore oil engineering

1,791.41 1,621.46 368.26 70%

10Beijing Gaotai Deep-sea Technologies Co., Ltd.

63.71 Consulting services for deep-sea engineering 6,679.55 2,920.41 1,296.33 70%

11 COOEC International Co., Ltd. 37.80

Project overall contract and design, construction and installation, etc. of oil-gas development engineering

149,346.19 22,397.76 10,640.64 100%

12 COOEC Canada Co., Ltd. 1,055.10 Design, procurement, construction and

installation of offshore oil engineering 1,055.10 1,055.10 - 100%

13 COOEC (Australia) Co., Ltd. 554.22

Overall contract of design, purchase, construction and installation of offshore oil engineering

474.99 474.99 -68.41 100%

Note: Owning to business development needs of the Company, name of its original subsidiary “COOEC (Hong Kong) Co., Ltd.” has been changed to “COOEC International Engineering Co. Ltd” in July of 2014.

a Operations of COOEC (Qingdao) Co., Ltd.: in 2014, the Qingdao subsidiary developed land construction of 14 large-scale projects including ICHTHYS, Nyhamna project, Enping Oilfield Group, Kenli 10-1, etc. focusing on “constructing offshore engineering assembly site with international competitiveness” and development orientation of “large scale, high end and internationalization”. Strictly follow standards of security and quality, Qingdao subsidiary strengthened the control over project operation, construction capacity and management level, and kept a continuous and stable business income of RMB 4.521 billion with a business profi t of RMB 0.837 billion and net profi t of RMB 0.723 billion.

b Operations of Shenzhen COOEC Subsea Technology Co., Ltd.: in recent years, domestic underwater business of offshore engineering developed rapidly, the Shenzhen subsidiary grasps the opportunity and acquires core equipment including underwater engineering support vessels and underwater robots and made contribution of 1 billion to Shenzhen subsidiary, its total assets and net assets improved substantially. During report period, the off-shore oil vessel 289, vessel 291 have delivered to Shenzhen subsidiary, underwater robots increased to 16 sets which basically build up a complete equipment system of underwater robots and sharply strengthened the work capacity and kept a fast growth in achievements continuously. 17 underwater projects have been conducted by Shenzhen subsidiary in 2014 which achieved a business income of RMB 3.741 billion, business profi t of 0.574 billion and net profi t of 0.528 billion, at an year-on-year increase rate of 43% and 61% respectively.

c Thanks to the increased investment of 1.9 billion completed by Zhuhai subsidiary in November, 2014, the overall asset and net asset of COOEC (Zhuhai) Co, Ltd has been respectively increased RMB 2.136 billion and RMB 1.902 billion with the increase rate of 68% and 93%, see Additional Investment with Raised Funds for Subsidiary published by the company (Temporary 2014-034). In this year, Zhuhai subsidiary has realized the earnings as the land works of phase I has been put into use and undertaken projects.

038


(2) Conditions of the Company’s shareholding enterprises in report period are as follows:

Company name

Registered Capital

(RMB ten thousand)

Registration date Business scope

Actual invested

capital (RMB Ten thousand)

Shareholding ratio

CNOOC Finance Co., Ltd. 400,000 June, 2002 Taking deposit, loan, fi nancial

leasing, etc. of member organizations 7,067.14 1.77%

Gansu Lanke Petrochemical Equipment Co., Ltd.

35,452 December, 2008

Oil drilling machineries, refi ning chemical equipment, offshore and desert oil equipment and engineering, and refi ning chemical, etc.

4,752.50 6.49%

Kvearner and COOEC (Qingdao) Engineering Technology Co., Ltd.

USD 3.3 million April, 2014

Oil and gas development engineering technical services, undertaking domestic and overseas oil and gas development engineering design and technical consulting services, etc.

812.58 40.00%

5. Projects not fi nanced by raised funds


Unit: A hundred million Yuan Currency: RMB

Project name Project amount Project progressPlanned investment

of raised funds in this year

Accumulative amount actually

investedMultifunction underwater engineering ship "Offshore Oil 286" 11.62 It has been delivered

by the end of 2014 4.47 10.15

Multifunction underwater engineering ship "off-shore oil 291" 14.17 It has been delivered

by the end of 2014 11.02 11.02

Total 25.79 / 15.49 21.17

Horizontal shipping of 10000t module

039


II. Discussion and Analysis on Operation During Report Period of the Company by the Board of Directors

(I) Competition and development tendency

1. Macroeconomic environment

(1) Construction of sea power and development of marine economy has always been the national strategy.

A major deployment of constructing sea power was made on the 18th CPC National Congress and the Third Plenary Session of the 18th Central Committee of the CPC. China lays stress on improving offshore resources development capacity to make offshore industry become supporting industry of the national economy, developing marine science and technology and making breakthroughs in deepwater and other marine high-technology fi eld. Exploration of oil and gas resources plays a major role in developing marine economy, and a series of deployments on building marine power and developing marine economy have been carried out by our government and shall provide important opportunities and policy support to a long term development in off-shore oil industry and off-shore engineering industry. The Company has been dedicated to serve for the development of national off-shore oil and gas which has a prosperous future.

(2) Drops of oil price shall not change the continuous need of oil and gas resources in the fast development in society and economy of China.

As the second largest economy, China has a continuous need in oil and gas for the fast development. The lasting drops of oil price shall not change the need of oil and gas of China Relevant research of institutes shows that the rate of China’s external dependence on oil was nearly 60% in 2014. So it is urgent to explore internal oil and gas resources especially in off-shore. China owns 3 million km2 marine territory and 18,000 km coastline, and is rich in oil and gas and other resources in water areas such as the Bohai Sea, the East China Sea, the South China Sea, etc. Based on relevant estimation, oil and gas reserves in the South China Sea exceed 20 billion tons and are comparable to the Persian Gulf, and most of oil and 70% of gas resources are in deepwater area which requires an urgent upgrading in capacity and technology and acceleration on exploration

(3) Take full advantage of the opportunity “Belt and Road” and the advantage of the company to accelerate the steps of internationalization.

“Belt And Road” is a great strategy for realization of the great rejuvenation of our country which is a joint undertaking for countries along the line and gains universal approval and support. Equipment, technology and construction of offshore engineering are surely one of the fi elds of “Belt And Road” in which maximum value can be easily achieved. There are almost 60 countries along “Belt And Road” and most of them are emerging and developing economies which have a total population of 4.4 billion and GDP of 21 trillion dollars and separately takes 63% and 29% of the global value. In most countries along the line, their industry still at the primary stage and economy is highly depend on resources and have great need in infrastructure on exploration and development of off-shore gas and oil.

Recent development in international market of the company has been totally in accordance with the strategy of “Belt And Road”, branches in Indonesia, Australia, Singapore, Saudi Arabia and Abu Dhabi were set up, projects are under construction in Indonesia, Myanmar, Brunei, Australia, Middle East, Russia and North European. The Company shall grasp every opportunity to explore the market along the line to reach a joint win.

2. Industry market environment

In a middle-long term, the development of oil and gas still plays an important and fundamental role in global economy, in particular the off-shore oil and gas development which still has large development potential for China has an urgent requirement on ocean development and there is much to explore in vast deep-water zone of South sea, which lays a solid foundation and provides a prosperous future to the company.

In short term, the company is facing a complicated marketing environment with sharp-drops of oil price, intensifying fl uctuation of rate and serious geopolitical risk in some places.

Sharply drops happened in international oil price from the second half of 2014 which adversely affect oil and gas industry with increasing costs and shrinking profi ts and projects under construction have to be delayed to cut the investment and reduce risks. Oil price may remain downward in the coming period of time and it causes prevailing hesitations in the industry and seriously affects the businesses especially on marginal oilfi eld development with low profi ts, oil sands development and deep-see development with large investment and high risks.

3. Discussion over the general picture and development of current marine engineering market of the world.

(1) General picture

Currently, most of the project contractors in off-shore development are enterprises from western world who monopolize

040


the market in development and design of marine engineering equipment, general contract, supply and installation of vital supporting facilities, installation of sub-sea production system and deep water pipe laying, with development and construction on deepwater platform of high technology as the focal point, they possess a great number of crucial technologies of design and patents. In Asia, South Korea, Singapore and China are the main manufactures of marine engineering equipment and lead the development of mid-low marine engineering equipment and is approaching the high-end by undertaking manufacturing of drilling platform, drilling vessel, FPSO and auxiliary vessels from western countries With the promotion on manufacturing and labor quality, China started to become the major manufacturer of marine engineering equipment.

(2) Development tendency of the future marine engineering projects

Deep water has become the focal region for oil and gas production and the development tends to deep and Ultra deepwater, the size and weight of marine platform is also trends the large scale with the discoveries of major oil and gas field, development on marine engineering technology and requirement in work capacity and security; and the joint cooperation will become more and more close to realize a mutual-complementation.

4. Comparative advantages of the Company

(1) The Company has been accumulating experiences on development of the Owner in off-shore engineering for many years.

The Company is the only national general contractor for large marine oil project who has been working on marine project for over 40 years and possesses the advanced capacity in development and construction in shallow water region within 300m and conventional oil fi eld, and plays a leading role in national development of marine oil and gas with an accelerating paces towards deepwater region.

(2) Low cost

The oil price drop enables international companies concern more about lowering the costs and more apt to choose the company who accept lower price and capable of meeting the requirement on quality and security. The Company has cost advantages on manufacturing, labor and duration of the projects and accumulated a lot of international experiences which enable the company participating the development and competition of the international market in a better way.

(3) Strong equipment capacity

Equipment is a vital factor in oil and gas development. The Company has advanced facilities, manufacturing resources in a large scale with world competitiveness and vessels of different types most of which are the latest ones with advanced techniques, those factors are what international engineering companies lacked of; therefore promote a powerful combination and mutual complementation between the Company and international enterprises.

(II) Development strategies of the company

Development strategies of the company in 2015-2020:

Keep focusing on the development of major business, consolidate the role in national market and strengthen the core competence in international market comprehensively through the enforcement of “four abilities”; further upgrading industry structure on the basis of shallow water zone and facing deep water zone, subsea and LNG projects to transfer business into regions with high value-added products.

Shallow water region: Strengthening the capacity of general contracting and technology content of EPCI, reducing the costs and build up a differentiation advantage between technology and management in the maintenance, rush repair, underwater project, detection of subsea pipeline and management in life cycle management of oil gas fi eld. Speed up the paces in exploring international market while strengthening national market.

Deep water: The EPCI capacity on deepwater projects and research and manufacturing capacity on high-end deepwater product should be basically set up to ensure a dominating role in national market on deepwater projects. Striving to develop major equipment in deepwater to build up an engineering team with fi ne equipment and qualifi ed techniques, increasing investment and introducing top-talents from the international market and having further cooperation with transnational corporations to realize a leapfrog development in capacity building on deep water projects.

(III) Business Plan

1. Work contents and business plan

Since the change of outer environment and fl uctuation of oil price are hard to control, we can achieve a continuous and health development only through laying solid foundation in basic skill, exploring national and oversea market and promoting techniques in management and technologies to cut our costs and build up core competence. In good industry environment of recent years, the Company has kept vigilant in peace time and markedly strengthens the competence and risk resistance by

041


deepening the construction of “four abilities”, exploring international market, reducing costs and increasing benefi ts.

Though a continuous development, indexes on total assets, net assets and net profi ts have kept an increasing trend.

Workload on land construction in 2015 will keep a high-level and daily number of vessels to offshore operation will decrease due to procedures in sea installation and construction. Over 20 projects shall be sequentially constructed in the whole year, of which Bohai area project takes a large part and number of oversea projects is in increase, 2 other forecast projects may get started in this year.

For the low price-running of oil market continues in 2015, national and international oil companies are cutting their investment and projects. Manufacturing and operation of the company remains unpredictable in 2015 due to severe conditions and it may cause revenue decrease. The Company shall firm the determination in developing the Owner and facing the challenges. On one side, we shall strengthen capacity construction and optimize project management to cut costs and increase benefi ts and further improve the quality and effi ciency; on the other side, we shall take full use of our advantages and proactively explore market both national and international on the basis of managing well current ones to promote the developing momentum. Keep the ratio of costs in business income under 82% and the three expenditures (expense on selling, management and fi nancial) should account for 8% and below of business income. If international oil price and market conditions become better in the second half of the year, status of the Company will be better.

2. Main work

(1) Further extend oversea market

In 2015, the Company shall continue the extend towards oversea market to achieve a better performance. There are 23 major tracking projects of the Company and the key exploring areas remain in Middle east, Southeast Asia and etc. and market in Africa, Canada, Russian, Mexico bay and North European shall be further explored. The Company shall focus on developing capacity in general contracting service, large-scale sites and vessels and striving to broaden the coverage of off-shore installation; solidifying the business relationship with current partners and big oil company to enter the high-end market.

(2) Deepening the construction of “quality effi ciency year” and building cost advantage through technological innovation and continuous enforcement on cost decreasing and effect increasing.

We shall continue the low cost strategy and push forward a comprehensive optimization on manufacturing and construction, broaden the space of cost decreasing and effect increasing from EPCI industry value chain to build up a long-effect mechanism and strengthen the capacity of survival and development through-the-cycle. Furthermore, costs shall be cut with the assistance of technology innovation to make a stronger competence, including optimization in design project, technical reform in equipment and new theory, innovation and usage in new process, comprehensive promotion on capacity in design, land construction, off-shore installation, maintenance and deepwater project to push forward the development of new business and promote effi ciency and lower cost in maximum degree.

(3) Taking full control over quality management to guarantee a health development.

Taking safe production as the fi rst consideration and highlighting management on safety and quality promoting the safety awareness of crew by adopting effective measures, tightening up the management on operation site and review on off-shore construction plan to make ensure a safe and orderly operation.

(4) Pushing forward the construction of “four abilities”, especially on deepwater.

Preliminary design of deepwater platform shall be carried out in steady and the capacity of deepwater design will be greatly improved through project construction. Carrying out procurement of saturation diving support vessel to reinforce the fl eet power. To improve operation level of vessels and quality of deepwater crews through practical operation in deepwater and deepwater projects so as to strengthen the deepwater work capacity.

(5) Deepen general reform by accelerating the reform on mixed ownership of Zhuhai deepwater base

Choosing competitive partners to cooperate with and accelerating the upgrading on deepwater technology and exploring deepwater market to further develop comprehensive abilities in deepwater operation of the Company.

(IV) The capital needs of the company to maintain current businesses and complete projects under construction.

The Company plan to invest 2.457 billion in 2015 to mainly construct the manufacturing base of equipment of Zhuhai deepwater off-shore engineering and the large-scale facilities in deepwater operation as vessels and etc.

Funding sources for project under construction are mainly from net cash infl ow of operation activities and non-public offering of the raised funds. The Company shall cut cost of capital to ensure capital security and meet the operation needs through strengthen capital management, accelerate capital turnover and full usage of fi nancial instruments.

042


(V) Potential risks.

1. Risks caused by wide fl uctuation of oil price.

Unpredictable oil price. The sustained low oil price will negatively affect the industry of oil and gas exploration and development with less investment and fi ercer competition.

Countermeasures: To practice our techniques and unswervingly push forward the construction of “four abilities”, promoting management standard and technical capacity to further reduce comprehensive cost and strengthen competence for a long-lasting development of the Company.

2. Risks brought by international operation

For the short-time participation in international market, capacity on operation management remains relatively weak and international talents are insuffi cient, execution control system is yet to complete and policies, marine environment, remote resource allocation of different kinds in different countries can bring risks in operation of international projects.

Countermeasures: fi rst, research on public relations management and policy need to be strengthened to keep up with the industry trends of international market and actively avoid all kinds of policy risks; second, operation risks in oversea operation need to be analyzed scientifically to perfect management system on oversea operation; third, risk has to be controlled by strengthening ability and means of risk control and promote the application of global man power, property and material resources.

3. Risks brought by factors as natural disaster and bad weather.

Unpredictable natural disaster and severe weather like typhoon may causes negative effects and unpredictable risks to manufacturing and operation of the company.

Countermeasures: security management has long been regarded as the top priority in the Company and close attention has always been paid to keep close attention to severe weather as typhoon for tracking and preparation, emergency shall be prevented earlier, tracked closely and reported timely, and starts the emergency response to cut losses at the lowest level.

4. Operation risks in deepwater project

China’s off-shore oil development is going deeper and deeper but techniques, management and operation on deepwater object are relatively weak and risks still exist during the operation of deep water projects.

Countermeasures: increasing investment in research, developing techniques in reserves and construction of deepwater equipment, accumulating experiences on techniques of deepwater project, management and operation through practical operation and external cooperation to gradually strengthen operation ability in oil and gas development and push forward deepwater strategy.

5. Risks in exchange rate fl uctuation

The operational fi nancing currency is RMB, so rate fl uctuation may affect project operation with the expansion of oversea business and increase in foreign exchange income of the Company.

Countermeasures: the Company shall enhance ability of response to exchange rate fl uctuation through measures of taking exchange rate risks into cost control when in contract price offering, taking hedging in import and export into consideration and using fi nancial instruments in forward settlement.

III Statement on “Non-standard Audit Report” of certifi ed public accountants from Board of Directors.

(I) Statement on “Non-standard Audit Report” of certifi ed public accountants from the Board of Directors and the Board of Supervisors

□Applicable√ Inapplicable

(II) Analyzing statement towards reasons and effects caused by method changes in accounting policies, accounting estimate or accounting by Board of Directors.


In October 28, 2014, the 6th Meeting of the 5th Board of directors was held in Beijing and passed The Bill on Accounting Policy Change. It is agreed that the Company can make the following accounting policy changes according to nine accounting standards for business enterprises that are revised or issued by Ministry of Finance in 2014, including Accounting Standards for Enterprises

043


- Basic Standards, Accounting Standard for Business Enterprises No. 2 - Long-term Equity Investments, Accounting Standards for Enterprises No. 30 – Presentation of Financial Statements, etc., and retrospect and adjust related items and amount.

1. Adjust fi nancial accounting policies for long-term equity investments;

2. Modify presentation of fi nancial statements.

Specifi c Information of Accounting Policy Change and Impact on the Company

1. Long-term equity investment

The Company adjusted fi nancial accounting policies for long-term equity investment according to provisions in the revised Accounting Standard for Business Enterprises No. 2 - Long-term Equity Investments: calculating equity investment with control and significant impact and joint venture equity investment with joint control into long-term equity investment; accounting equity investment that has no control, joint control or signifi cant impact and is unable to be measured reliably without offer or fair value in the active market confirmation and measurement criteria of financial instruments, and retrospecting and adjusting relevant previous subjects.

Specifi c adjustment includes: retrospecting and adjusting investment of RMB 70,671,400 (shareholding ratio of 1.77%) for CNOOC Finance Co., Ltd. in long-term equity investment accounting as “fi nancial assets available for sale”.

Balance sheet item December 31, 2013 Reclassifi cation adjustment

December 31, 2013 (through retroactive

adjustment)Long-term equity investment 70,671,378.00 -70,671,378.00 0Financial assets available for sale 255,516,800.00 70,671,378.00 326,188,178.00

2. Presentation of fi nancial statements

The Company modified presentation items of financial statements according to standards and application guidelines of Accounting Standards for Enterprises No. 30 - Presentation of Financial Statements.

(1) Add “Not to be reclassified into other comprehensive income of profit and loss” and “To be reclassified into other comprehensive income of profi t and loss” in profi t statement for presentation.

(2) Add “Other comprehensive income” to balance sheet, , and retrospect and adjust “capital reserve” and “translation reserve”; represent “deferred income” separately, present the deferred income calculated in other non-current liabilities in the item, and make retroactive adjustment.

Balance sheet item December 31, 2013 Reclassifi cation adjustment

December 31, 2013 (through retroactive

adjustment)Capital reserves 4,435,747,819.44 -187,807,613.33 4,247,940,206.11Converted difference in foreign currency statements -11,390,763.71 11,390,763.71Other composite incomes 176,416,849.62 176,416,849.62Deferred income 1,199,893,348.45 1,199,893,348.45Other non-current liability 1,199,893,348.45 -1,199,893,348.45

(3) The accounting policy changes and retroactive adjustment items and amount have no signifi cant impact on the Company’s total assets, net assets, net profi ts, cash fl ow, etc., or fi nancial statement.

The independent director presented independent opinions on the accounting policy changes. Refer to Announcement of the Company on Accounting Policy Changes and Opinions of the Company’s Independent Directors disclosed by the Company on website of Shanghai Stock Exchange www.sse.com.cn on October 30, 2014 for details.

(III) Analysis on reasons and effects of correction of early error by Board of Directors.


044


IV. Program on Profi t Distribution or Capital Stocks Transferred from Capital Reserve

(I) Formulation, implementation and adjustment of cash bonus policy

According to requirement in Notice of Implementation on Relevant Affairs of Cash Bonus in listed Companies of China Securities Regulatory Commission in 2012 and actual operation of the Company, related terms in Corporate Article and Rule of Procedure for General Meeting of Shareholders have been revised and fundamental principles, specifi c distribution policy, procedures and mechanism of review decision and implementation involved in profi ts distribution have been further clarifi ed, also formulated Return Plan of Shareholders in The Coming Three Years (2012-2014) in considering the profi tability, develop plan in operation, return of shareholders, social capital costs and external fi nancing environment, etc.

No further adjustment on cash bonus policy has been made by the Company in 2014

Distribution policies in Corporate Article are:

1. Basic principles of profi t distribution of the Company

(1) In taking fully consideration of the shareholder’s return and without violating rules of cash bonus in Corporate Article, profi ts of shareholder shall be distributed according to stipulated ratio of net profi ts of which belongs to parent company in consolidated statement of the year.

(2) Distributing policies remains continuously stable and given consideration of the long-term interests of the Company and whole benefi ts of shareholders and continuous development.

(3) Cash bonus is the preferential method adopted for profi ts distribution.

2. Concrete policies on profi ts distribution

(1) Profi ts distribution method

Methods for profi ts distribution are: cash, stock, cash and stock or other means allowed in laws and regulations, the medium - term profi t distribution is also feasible.

(2) Requirements and ratios of cash bonus

Except for special occasion and the financing can guarantees continuous operation and long-term development of the Company and the un-distributed profits of the year is positive without violating distribution stipulations of Corporate Articles, cash bonus shall be adopted for distribution and shall account no less than 10% of the net profi ts belonged to parent company’s shareholders in consolidated fi nancial statement. Accumulated profi ts distributed in cash bonus in the latest three years shall account no less than 30% of average distributable profi ts of the three years.

Special occasions:

a The amount in major external investment or large cash expenditure in the future twelve months (except for fund-raising projects) reaches or over 30% of the latest net assets of the Company; investment or cash expenditure include possible external investment, acquisition of assets, external debt payment or equipment procurement, etc.;

b Standard Audit report without reserved opinions to the Annual Financial Report of the Company. Has not been issued by audit agency.

(3) Requirement to distribution of stock dividend

Preliminary distribution plan of stock dividend can be put forward when the Company running well and the stock price and equity size are regarded mismatched by board of directors; when distribution of stock dividend benefits the whole shareholders and meet the above conditions towards cash bonus.

3. Review process of profi t distribution scheme of the Company

(1) Profi t distribution scheme of the Company is proposed and prepared by management layer of the Company in combination with provisions of corporate articles, profi ts and fund demand plan which will be submitted to Board of Directors of the Company for review. Board of Directors of the Company discusses reasonability of profi t distribution scheme completely. After special resolution is formed, it shall be submitted to general meeting of shareholders for review.

When the Company reviews detailed cash bonus scheme, it shall listen to minority shareholders’ opinions and demands. It shall listen to minority shareholders’ opinions at general meeting of shareholders as well as communicating with shareholders, especially minority shareholders, by shareholders’ hotline, fax, etc. to reply to problems concerned by minority shareholders.

045


(2) In case the Company fails to determine profi t distribution scheme of the year complying with existing cash bonus policy limited by special conditions stated above in Provision 2, there is no need for Board of Directors to specially explain detailed reasons for cash bonus, purpose of corporate retained earnings, expected investment income, etc. After independent directors shows their opinions, it shall be submitted to general meeting of shareholders for review and disclosed in media specifi ed by the Company. When profi t distribution scheme of the year is submitted to general meeting of shareholders for review, it shall be agreed by more than 2/3 of shareholders participating in general meeting of shareholders.

(3) Decision-making process of profi t distribution policy adjustment or modifi cation of the Company

In case corporate production management is significantly impacted by war, natural disaster, etc. or change of corporate external business environment or the Company’s own state of operation changes greatly, the Company can adjust or modify cash bonus policy determined in the article if necessary after detailed demonstration. Board of Directors discusses reasonability of profi t distribution policy completely. After independent directors show their opinions, special resolution is formed, and then it shall be submitted to general meeting of shareholders for review. During review of general meeting of shareholders, it shall be agreed by more than 2/3 of shareholders participating in general meeting of shareholders.

4. Implementation of profi t distribution scheme of the Company

After general meeting of shareholders of the Company makes resolutions on profi t distribution scheme, Board of Directors shall complete distributed matters of dividends (or stocks) within two months after holding of general meeting of shareholders.

(II) In case it is gained during report period and undistributed profi t of the parent company is positive but no plan for cash dividend distribution is proposed, the Company shall disclose the detailed reasons and purpose and use plan of undistributed profi ts.


(III) Profit distribution scheme or plan and capital reserve capitalizing scheme or plan of the Company during the last three years (including report period)

Unit: RMB 10,000 Currency: RMB

The year of dividend distribution

No. of presented

bonus every 10 shares (share)

No. of dividend every 10 shares

(including tax)

No. of newly-added shares

every 10 transferred

shares (share)

Amount of cash bonus

(including tax)

Net profi ts belonging to the shareholder of listed company

in consolidated statements of bonus

year

Proportion to the net profi ts belonging

to the shareholder of listed company

in consolidated statements (%)

2014 0 2.30 0 101,691.16 426,687.11 23.832013 0 1.00 0 44,213.55 274,423.68 16.112012 0 0.30 0 11,668.32 84,814.75 13.76

V. Work of implementing social responsibility positively

(I) Work of implementing social responsibility.

Refer to Social Responsibility Report on COOEC in 2014 disclosed at www.sse.com.cn, website of Shanghai Stock Exchange, on the same day.

(II) The environmental description of listed companies and their branches that belong to main polluted industry trades according to stipulation of national department of environmental protection.

Inapplicable.

046

Important MattersCOOEC / ANNUAL REPORT 2014

Important Matters

I. Important matters litigated, arbitrated or widely questioned by media□ Applicable√Inapplicable

II. Fund occupation or progress of debt paying off during report period□Applicable√Inapplicable

III. Bankruptcy or reorganization occurred to the CompanyInapplicable.

IV. Asset transaction and enterprise merger□Applicable√Inapplicable

V. Corporate Stock Incentive Compensation and Impact□ Applicable√Inapplicable

047


VI. Signifi cant Connected transaction√ Applicable□ Inapplicable

(I) Connected transaction related to daily operation

1. Matters undisclosed by Interim Announcement


Connected transactions

Connected relation

Type of connected

transaction

Content of connected transaction

Pricing principle of connected transaction

Connected transactions price


amount

Proportion to the total amount of connected

transactions (%)

Clearing form of connected transaction

China National Offshore Oil Corporation

Parent company

Providing labor

service

The Group provides specialized service design, installation, construction etc.

Determine contract price by public tender or negotiation tendering based on market principle.

610,325.47 610,325.47 -

Normal Clearing according to the contract agreement

CNOOCHolding subsidiary company

Providing labor

service



19,086,852,173.91 19,086,852,173.91 86.63


CNOOC Energy Technology & Services Limited

Wholly owned subsidiary company of parent company

Providing labor

service


In accordance with the connected transaction contracts signed between the Group and the connected parties, determine contract price by public tender or negotiation tendering based on market principle.

317,248,970.03 317,248,970.03 1.44


CNOOC Gas & Power Group


Providing labor

service



167,617,363.35 167,617,363.35 0.76


CNOOC Research Institutes


Providing labor

service



41,897,520.55 41,897,520.55 0.19


CNOOC Oil & Gas Development & Utilization Company


Providing labor

service



16,319,852.46 16,319,852.46 0.07


CNOOC Oil & Petrochemicals Co., Ltd.


Providing labor

service



2,858,242.00 2,858,242.00 0.01


048



Connected relation

Type of connected

transaction





amount


transactions (%)


Changzhou Paint & Coatings Industry Research Institute

Brother companies of the Group

Providing labor

service



452,830.19 452,830.19 0.002


China National Offshore Oil Corporation (CNOOC)

Parent company

Accepting labor

service

The service for the Group including subcontracting, transportation, vessel, fuel and hydroelectricity Etc.


815,400.00 815,400.00 0.01




Accepting labor

service



1,690,682,524.42 1,690,682,524.42 11.30


China Oilfi eld Services Ltd.

Holding subsidiary company

Accepting labor

service



268,600,464.26 268,600,464.26 1.79


China Offshore Oil Bohai Corporation


Accepting labor

service



44,717,748.29 44,717,748.29 0.30


CNOOC Oil & Petrochemicals Co., Ltd.


Accepting labor

service



10,403,944.62 10,403,944.62 0.07


China Offshore Oil Service (Hong Kong) Co., Ltd.


Accepting labor

service



9,091,943.56 9,091,943.56 0.06


Sea Industrial International Co., Limited


Accepting labor

service



5,228,243.45 5,228,243.45 0.03


049



Connected relation

Type of connected

transaction





amount


transactions (%)


Changzhou Paint & Coatings Industry Research Institute

OthersAccepting

labor service



3,095,191.39 3,095,191.39 0.02


China Offshore Oil Nanhai West Corporation


Accepting labor

service



1,231,566.34 1,231,566.34 0.01


CNCCC International Tendering Co., Ltd.

OthersAccepting

labor service



674,916.40 674,916.40 -


China Offshore Oil Nanhai East Corporation


Accepting labor

service



313,583.24 313,583.24 -


China Offshore Oil Donghai Corporation


Accepting labor

service



247,829.00 247,829.00 -




Accepting labor

service



98,748.00 98,748.00 -


Total / / 21,669,059,380.93 102.69 /Details of large sales returns Inapplicable.

The necessity, persistence, option and the cause of the trade for the connected parties (not other market parties)

(1) Main content of connected transactionsThe Company is one of the largest EPCI overall contract companies of offshore oil engineering in Asia. It mainly provides professional technical services for the oil exploitation of China Sea area. There are comparatively many connected transactions in offshore engineering services between the Company and connected parties such as CNOOC. For instance, the Company provides EPCI overall contract professional service for connected company, and the connected company provides engineering subcontract transportation, vessel, fuel, water and electricity for the Company.(2) Price and fairness of connected transactionsThese connected transactions provide long-term stable market for the Company and serve as an integrated part for the Company's development. The contract price for connected transaction is determined by public tender. In addition, the Company signed long-term service agreement with the connected party to ensure the fairness of connected transaction price, which refl ects principles of equity, fairness, and openness and helps to develop main business of the Company and maximize the interests of shareholders.(3) Continuity of connected transactionsIt is proved by facts that these connected transactions are necessary, and in the foreseeable future, connected transactions between the Company and connected companies will continue with the rapid development of CNOOC industry.

050



Connected relation

Type of connected

transaction





amount


transactions (%)


Impacts of connected transactions on dependency of listed company Unaffected dependency of the company

Dependency on relevant party and solutions of the company (if any)

The Company is continuously increasing the development of international market and reducing proportion of connected transaction by increasing income of overseas market. In addition, the Company insists on and enhances the connected transaction principles of equity, fairness and openness, to maintain the benefi t of all shareholders, especially that of medium and small shareholders.

Connected transactions None

(II) Connected transaction from assets acquisition and selling

Inapplicable.

(III) Major connected transaction of joint external investment

Inapplicable.

VII. Signifi cant Contracts and Performance

(I) Collocation, contract and lease


1. Collocation

There is no collocation in the Company in the report period.

2. Contract

There is no contract in the Company in the report period.

3. Lease

Unit: 10,000 Currency: USD

Lessor's name

Lessee’s name

Lease asset

Amount of lease

asset

Starting date of lease

End date of lease

Lease income

Determination basis for lease

income

Lease income’s impact on the

Company


or not

Tianjin Zhaoyin Heavy Equipment Leasing Co., Ltd.

Shenzhen COOEC Subsea Technology Co., Ltd.

A deepwater multi-function installation vessel

14,922.50 January. 7, 2014

January. 7, 2020

Internal rate of return

17.63%

Feasibility study report of

the Project

Increase corporate

profi tNo

(II) Guarantee


Unit: 100,000,000 Currency: USD

The Company's external guarantee (excluding that to its subsidiaries)Total guarantee accrual in the report period (excluding that to its subsidiaries) 0Total guarantee balance by end of the report period (A) (excluding that to its subsidiaries) 0The Company’s guarantee to subsidiary companyTotal guarantee accrual to subsidiary company during report period 5.845Total guarantee balance to subsidiary company by end of the report period (B) 11.893

051


Total guarantee amount of the Company (including guarantee to subsidiary company)Total guarantee amount (A + B) 11.893Proportion (%) of total guarantee amount net asset of the Company 35.42Wherein:The guarantee amount for the shareholders, actual controller and the connected parties (C) 0Directly or indirectly provide the amount of debt guarantee for the asset-liability ratio for guaranteed objects is more than 70% (D) 0

Amount with total guarantee amount more than 50% of net asset 0The above three guarantees aggregate amount (C+D+E) 0Undue guarantee may take related discharge duty InapplicableGuarantee

(1) Approved by the 33th Meeting of the 3rd Board of Directors held on July 28, 2010, the Company issued guarantee letter of parent company to the contract owner (Chevron Australian Ltd.) of process module construction of liquefi ed natural gas (LNG) factory of Gorgon project for subsidiary CNOOC Qingdao Co., Ltd. (hereinafter referred to as “Qingdao Co., Ltd.”); guarantee amount is USD 180 million. and guarantee period is from the issue date to December 18, 2015. Commitments as above have been reviewed and approved in the second interim meeting of shareholders of the year held on August 16, 2010. (see resolution announcement and guarantee announcement of Board of Directors and resolution announcement of general meeting of shareholders published in China Securities Journal and Shanghai Securities News on July 30, 2010 and August 17, 2010).

(2) As is approved by the 13th Meeting of the 4th Board of Directors held on April 24, 2012, the Company provides guarantee with JKC being the beneficiary’s parent company for Qingdao Co., Ltd. as well as letter of commitment of the bank guarantee that Qingdao Co., Ltd. opened in the Standard Chartered Bank for JKC. The maximum compensation liability of the above two guarantees is 100% of the contract amount, viz. USD 305.4 million. And guarantee period is from the issue date to May 2, 2019. Commitments as above have been reviewed and approved by the general meeting of shareholders of the year 2011 held on May 11, 2012. (See resolution announcement and guarantee announcement of Board of Directors and resolution announcement of general meeting of shareholders published in China Securities Journal and Shanghai Securities News on April 26, 2012 and May 12, 2012).

(3) As is reviewed and approved by the 20th Meeting of the 4th Board of Directors of the Company held on August 28, 2013, the Company provides guarantee for lease of a deepwater multi-function installation vessel by Shenzhen COOEC Subsea Technology Co., Ltd., the subsidiary company of the Company, from Tianjin Zhaoyin Heavy Equipment Leasing Co., Ltd. in the mode of fi nancial leasing. The Warrantee is Shenzhen COOEC Subsea Technology Co., Ltd.; the Creditor is Tianjin Zhaoyin Heavy Equipment Leasing Co., Ltd.; and the amount guaranteed is USD 119,360,000. The guarantee duration lasts from the date (January 7, 2014) when Financial Leasing Contract becomes valid to two years later after contract date (January 7, 2022). The above guarantee shall not be submitted to general meeting of shareholders of the Company for approval. (Refer to Announcement of Guarantee Provided for Financial Leasing of Subsidiary Company published on China Securities Journal and Shanghai Securities News on August 30, 2013)

(4) As is approved by the 3rd Meeting of the 5th Board of Directors held on April 25, 2014, the Company provides guarantee for Qingdao Co., Ltd based on Nyhamna project and BSP project undertaken by Qingdao Co., Ltd. The guaranteed persons are respectively Norway KVAERNER (general contractor of Nyhamna project) and Brunei-based Shell Oil Company (owner of BSP project). The contract of Nyhamna Project is unit price contract, and its estimated contract amount is USD 11 million; according to the contract, the maximum claim payment is 10% of the contract amount. The contract of BSP Project is unit price contract, and its estimated contract amount is USD 46 million; according to the contract, the maximum claim payment is USD 8.25 million; the guarantee period is from the issue date to March 31, 2018. The above guarantee does not have to be submitted to the general meeting of shareholders of the Company for approval. (Refer to Announcement of Guarantee Provided for Subsidiary Company published on China Securities Journal and Shanghai Securities News on April 29, 2014)

(5) As is approved by the 4th Meeting of the 5th Board of Directors held on July 23, 2014, the Company provides parent company guarantee for Qingdao Co., Ltd based on Russia Yamal project undertaken by Qingdao Co., Ltd. The guaranteed person is Yamgaz SNC Company (general contractor of Yamal project). The guarantee amount is 35% of the total contract amount (about USD 575.1 million), thereof the maximum accumulated liability is 25% and the maximum defer penalty is 10%, And guarantee period is from the issue date to September 23, 2021. The above guarantee have been reviewed and approved by the general meeting of shareholders of the Company. (Refer to Announcement of Guarantee Provided for Financial Leasing of Subsidiary Company published on China Securities Journal and Shanghai Securities News on July 25, 2014)

052


(III) Other signifi cant contracts

Signifi cant contracts and corresponding performances

Unit: RMB 10,000 Currency: RMB

Payer Content of contract Contract amountAccumulative

payment amount by the end of 2014

CNOOC Deepwater Development Co., Ltd. Contract of offshore oil engineering 566,285.93 552,992.29CNOOC Contract of offshore oil engineering 760,597.86 613,602.61

CHEVRON AUSTRALIA PTY LTD Contract of liquefi ed natural gas for Australia Gorgon project USD 269,060,000 USD 269,060,000

JKC ICHTHYS LNG Joint Venture Contract of liquefi ed natural gas for Australia ICHTHYS project USD 269,609,000 USD 268,153,300

YAMGAZ REFERRED TO AS CONTRACTOR

Contract of liquefi ed natural gas for Russia yamal Project USD 1,643,000,000 USD 15,114,400

PTTEP INTERNATIONAL LIMITED Contract of offshore oil engineering for Burma Zawtika project USD 367,143,800 0

All of the above mentioned transactions are daily manufacturing and operating business of the Company. Gatherings for Burma Zawtika project from the beginning of 2015.

VIII. Performance of the Commitment√ Applicable□ Inapplicable

(I) Commitment of listed company, shareholder holding stocks more than 5%, controlling shareholder and actual controller during report period or lasting to report period

Commitment background

Commitment type

Committed by Commitment content

Date and duration of commitment

With implementation

duration or not?

Implemented timely or

strictly or not?

Commitment related to initial public offering

Solve horizontal competition


During existence of the Company, CNOOC and controlled legal person thereof shall not conduct any business the same as or similar to business scope of the Company now or in the future and shall not hold activities in any way which might reduce the Company's benefi ts.

Date of commitment: Date of commitment: August 15, 2001, duration: existence of the Company.

No Yes

Commitment related to refi nancing

Restricted stocks


Lockup period of 372,340,600 non-public offering of shares subscribed by CNOOC is 36 months.

From 10/10/2013 to 10/9/2016

Yes Yes

(II) Corporate assets or the profi t forecast of project, and the report period is still in the profi t forecast period, to make an explanation for assets or if the project meet profi t forecast by the company

Inapplicable.

053


IX. Engagement and Decruitment of Accounting FirmsUnit: RMB 10,000 Currency: RMB

Whether change the accounting fi rms: NoOriginally engage Presently engage

Name of domestic accounting fi rms ShineWing Certifi ed Public Accountants (Special General Partner)

Reward of domestic accounting fi rms 175Audit term of domestic accounting fi rms 9

Name RewardAccounting fi rm responsible for internal control and audit

ShineWing Certifi ed Public Accountants (Special General Partner) 45

X. Punishment and Rectifi cation to Listed Company and Its Director, Supervisor, Senior Manager, Shareholder Holding Stocks More Than 5%, Actual Controller and PurchaserIn the report period, there was no inspection, administrative punishment or criticism from CSRC, or denouncement from SSE occurred to the Company, the Board of Directors, directors, shareholder holding stocks more than 5% and actual controller.

XI. Convertible debenture bonds□ Applicable√ Inapplicable

XII. Impact of new accounting standard on consolidated fi nancial statement1. Impact of change in long-term equity investment standard on combined fi nancial statement (I)


Name of invested unit

Basic trading information

Stockholders’ equity attributable to the

parent company as of January 1, 2013

December 31, 2013

Long-term equity investment

Financial assets available for sale

(+/-)

Stockholders’ equity attributable

to the parent company (+/-)

CNOOC Finance Co., Ltd.

The Company bought 1.77% of its shares with RMB 70,671,400

-70,671,378.00 +70,671,378.00

Total / -70,671,378.00 +70,671,378.00

Notes for impact of change in long-term equity investment standard on consolidated fi nancial statement (I):

(1) The Company invested in CNOOC Finance Co., Ltd. and bought 1.77% of its shares with RMB 70,671,400. As this investment is recategorized according to the above accounting standard, long-term equity investment is adjusted into fi nancial assets available for sale.

(2) Executing the above accounting standard has impact only on the amount of fi nancial assets available for sale and long-term equity investment instead of net profi t and net asset in the Company’s either 2013 or current combined fi nancial statement.

There is no impact on capital reserve, retained income and any other item in the combined fi nancial statement.

2. Impact of other changes in the standard

The Company modified presentation items of financial statements according to standards and application guidelines of Accounting Standards for Enterprises No. 30 - Presentation of Financial Statements.

054


(1) Add the “Net of tax for other comprehensive incomes” and “The net of tax for other comprehensive incomes attributable to minority stockholders” to Net of tax of other composite incomes, listed as the detailed items.

Profi t statement item 2013 Increased amount to be disclosed

As of 2013(through

retroactive adjustment)

Net of tax of other composite incomes 6,284,293.19 6,284,293.19Net of tax for other comprehensive incomes 6,429,882.56 6,429,882.56(I) Not to be reclassifi ed into other comprehensive income

of profi t and loss -

1. Re-compute the set net debt of benefi ts plan or change in net assets.

2. Shares cannot be reclassifi ed into other comprehensive income of profi t and loss under the equity law

(II) To be reclassifi ed into other comprehensive income of profi t and loss 6,429,882.56 6,429,882.56

1. Shares to be reclassifi ed into other comprehensive income of profi t and loss under the equity law

2. Change of fair value recognized in profi ts or losses of available-for-sale fi nancial assets 10,111,113.33 10,111,113.33

3. Held-to-maturity fi nancial investment reclassifi ed as available for sale investments profi t and loss account

4. The effective portion of hedging profi ts and losses for cash fl ow

5. Translation differences of foreign currency fi nancial statements -3,681,230.77 -3,681,230.77

6. OthersThe net of tax for other comprehensive incomes attributable to minority stockholders -145,589.37 -145,589.37

(2) Add “Other comprehensive income” to balance sheet, , and retrospect and adjust “capital reserve” and “translation reserve”; represent “deferred income” separately, present the deferred income calculated in other non-current liabilities in the item, and make retroactive adjustment.

Balance sheet item December 31, 2013

Reclassifi cation adjustment

As of December 31, 2013(through

retroactive adjustment)

Capital reserves 4,435,747,819.44 -187,807,613.33 4,247,940,206.11Converted difference in foreign currency statements -11,390,763.71 11,390,763.71Other composite incomes 176,416,849.62 176,416,849.62Deferred income 1,199,893,348.45 1,199,893,348.45Other non-current liability 1,199,893,348.45 -1,199,893,348.45

(3) The accounting policy changes and retroactive adjustment items and amount have no signifi cant impact on the Company’s total assets, net assets, net profi ts, cash fl ow, etc.

XIII. Illustration of other Signifi cant Matters□ Applicable√ Inapplicable

055

Equity Changes and ShareholdersCOOEC / ANNUAL REPORT 2014

Equity Changes and Shareholders

I. Change in Equities

(I) List of Change in Share Capital

1. List of change in share capital

In the reporting period, total shares of the Company and no changes in share structure

2. Description of change in share capital

List of no unchanged share capital

3. Impact of stock changes on return, net asset, and other fi nancial indexes for each stock in the most recent year and recent term (If any)

Inapplicable.

4. Other matters of the Company consider it necessary or the securities regulators required disclosures.

None

(II) Change in shares subject to the restrictions on sales

Unit: share

Name of shareholders

Shares subject to the restrictions on sales at the

beginning of the year

Shares released from

restrictions on sales in this

year

Shares subject to the restrictions on sales increased

in this year

Shares subject to the

restrictions on sales at the end

of the year

Restriction reasons

Date of release

from the restrictions


372,340,600 0 0 372,340,600 Lockup of non-public offering

October. 10, 2016

E Fund Management Co., Ltd. 68,389,000 68,389,000 0 0 Lockup of non-

public offeringOctober. 10,

2014ICBC Credit Suisse Asset Management Co.,Ltd

22,796,300 22,796,300 0 0 Lockup of non-public offering

October. 10, 2014

First State Cinda Fund Management Co. Ltd. 22,796,300 22,796,300 0 0 Lockup of non-


2014New China Life Insurance Company Ltd.

22,796,300 22,796,300 0 0 Lockup of non-public offering

October. 10, 2014

Pacifi c Asset Management Co., Ltd. 22,796,300 22,796,300 0 0 Lockup of non-


2014Total 531,914,800 159,574,200 0 372,340,600 / /

II. Securities Issuance and Listed Situation

(I) Previous securities issuance in the past three years by the end of report period

Unit: share Currency: RMB

Types of shares and its derivative securities Date of issue Issue price (or

rate) Number issued Listing date Permissive listed trading capacity

Types of ordinary sharesNon-public offering September 27, 2013 6.58 Yuan 531,914,800 October 9, 2013 531,914,800

056


(II) Total shares of the Company and changes in share structure, corporate asset and liability structure

The 2014 annual general capital was always 4,421,354,800, has not changed, has no impacts on the corporate assets and liabilities structure

III. Shareholder and Actual Controller

(I) Total shareholders:

Total number(account)of shareholders by the end of report period 170,751Total number(account)of shareholders at the 5th trading date prior to disclosure of annual report 185,586Total number(account)of preferred shareholders with voting right restored by the end of report period

No preferred stock, inapplicable

Total number(account)of shareholders with voting right restored at the 5th trading date prior to disclosure of annual report Inapplicable

(II) Table of top ten shareholders, top ten fl oating shareholders (or shareholders not subject to restriction on sales) by the end of report period

Unit: share

Share Holding of Top Ten Shareholders

Name of shareholder(full name)

Increase and

decrease within report period

Amount of holding

shares by the end of period

Percentage (%)

Number of held shares

subject to the

restrictions on sales

Pledge or freezing

conditions Nature of shareholderState

of shares

Quantity

China National Offshore Oil Corporation 0 2,270,113,454 51.34 372,340,600 None 0 State

China Offshore Oil Nanhai West Corporation 0 294,215,908 6.65 0 None 0 State law

HRNational Social Securities Fund 101 13,369,951 13,369,951 0.30 0 None 0 UnknownChina Offshore Oil Bohai Corporation 0 12,223,847 0.28 0 None 0 State-owned

legal-personFirst State Cinda Fund - China Everbright Bank - SDIC Finance Co., Ltd.

-10,000 11,388,150 0.26 0 None 0 Unknown

Bank of China Limited-Shanghai and Shenzhen 300 index of exchange-traded securities investment funds Harvest Fund

160,231 9,675,479 0.22 0 Freeze 69,300 Unknown

Hong Yuan Securities Co.,Ltd. 9,458,759 9,543,559 0.22 0 None 0 UnknownQiu Meiping 8,120,000 8,120,000 0.18 0 None 0 UnknownIndustrial and Commercial Bank of China Limited-Shanghai and Shenzhen 300 index of exchange-traded securities investment funds for Huatai-PineBridge Fund

2,455,783 7,470,858 0.17 0 None 0 Unknown

China Construction Bank-Leading growth Securities Investment Funds for Cinda,Australian silverfund

0 6,838,890 0.15 0 None 0 Unknown

057


Share Holding of Top Ten Shareholders Not Subject to Restriction on Sales

Name of shareholder

Amount of held circulating shares

not subject to restriction on

sales

Types and number of shares

Types Quantity

China National Offshore Oil Corporation 1,897,772,854 RMB ordinary shares 1,897,772,854

China Offshore Oil Nanhai West Corporation 294,215,908 RMB ordinary shares 294,215,908

National Social Securities Fund 101 13,369,951 RMB ordinary shares 13,369,951

China Offshore Oil Bohai Corporation 12,223,847 RMB ordinary shares 12,223,847

First State Cinda Fund - China Everbright Bank - SDIC Finance Co., Ltd. 11,388,150 RMB ordinary

shares 11,388,150

Bank of China Limited-Shanghai and Shenzhen 300 index of exchange-traded securities investment funds for Harvest Fund 9,675,479 RMB ordinary

shares 9,675,479

Hong Yuan Securities Co.,Ltd. 9,543,559 RMB ordinary shares 9,543,559

Qiu Meiping 8,120,000 RMB ordinary shares 8,120,000

Industrial and Commercial Bank of China Limited-Shanghai and Shenzhen 300 index of exchange-traded securities investment funds for Huatai-PineBridge Fund

7,470,858 RMB ordinary shares 7,470,858

China Construction Bank-Leading growth Securities Investment Funds for Cinda,Australian silverfund 6,838,890 RMB ordinary

shares 6,838,890

Particulars about connected relation or concerted action among the shareholders mentioned above

Among the top 10 shareholders, CNOOC Nanhai West Corporation and CNOOC Bohai Oil Corporation as wholly-owned subsidiaries of CNOOC, and it is unknown that whether there is connected relation or concerted action among other shareholders.

Particulars about preferred shareholder with voting right recovered and the amount of share held Inapplicable

Number of shares held by top 10 shareholders subject to restrictions on sales and the restrictions

Unit: share

No. Name of shareholder subject to restrictions on sales

Number of held shares subject to the restrictions on sales

Particulars about listing of shares subject to restrictions on sales

RestrictionsTrading date Newly-added

tradeable shares

1 China National Offshore Oil Corporation 372,340,600 October. 10,

2016 0

Restricted shares shall not be transferred within 36 months after being listed.

Particulars about connected relation or concerted action among the shareholders mentioned above

Inapplicable.

058


IV. Particulars about controlling shareholder and actual controller

(I) Legal person

1. Legal person


Name China National Offshore Oil CorporationUnit leader or legal representative Wang YilinDate of establishment 2/15/1982Organization code 100001043Registered Capital 9,493,161.40

Main operating businesses

aAllowed operating items: offshore oil production (gas), drilling, geophysical exploration, well logging, logging, borehole operation, storage, etc.; wholesale of gasoline, kerosene and diesel. bGeneral operating items: organization of exploration, development, production and sale of petroleum and natural gas, refi ning of petroleum, processing and utilization of petroleum and chemicals and natural gas, sale and storage of products, development and utilization of liquefied natural gas, transport of petroleum and natural gas by pipeline and pipe network, development, development and sale of fertilizer and chemical products and relevant businesses, provision of services for exploration and exploitation of petroleum, natural gas and other geological mining products, EPC, technology research, technology consulting, technical service and technology transfer related to exploration, development and production of petroleum and natural gas, import of crude oil and product oil, compensation trade and intermediary trade; undetaking sino-foreign joint venture; cooperative production; international bidding of mechanical and electrical products; production, sales of wind energy, biomass energy, aquo-complex, coal chemical industry, solar energy, etc. and relevant services.

Future development strategyDevelopment principle of “cooperation, steadiness and differentiation” shall be followed to achieve the strategic target of building first-class energy company comprehensively and internationally.

Equity of other domestic and foreign listed companies holding and sharing stocks during report period

During report period, other domestic and overseas listed companies held by CNOOC are: CNOOC China Oilfi eld Services Ltd.,China Blue Chemical Ltd. and Shandong Haihua Co., Ltd.

Other Presentation None

(II) Block diagram of property right and controlling relations between the Company and its controlling shareholder(actual controller)

059

Particulars about Preferred SharesCOOEC / ANNUAL REPORT 2014

Particulars about Preferred Shares

The Company has no preferred stock items during the report period.

060

Directors, Supervisors, Senior Managers and Employees of the CompanyCOOEC / ANNUAL REPORT 2014

Directors, Supervisors, Senior Managers and Employees of the CompanyI. Particulars about Shareholding Change and Remuneration

(I) Shareholding Change and Remuneration of Incumbent or Outgoing Directors, Supervisors and Senior Managers in the Report Period

Unit: share

Name Title(Note) Gender Age Starting date of term of offi ce

Ending date of term of offi ce

Shares held at the beginning

of the year

Shares held at the end

of the year

Increase and

decrease of stocks

in the year

Reasons of

increase and

decrease

Total pre-tax remuneration

payable received from the Company

during the reporting period

(RMB10,000)

Salary conditions of its

shareholders' unit during the

reporting period (RMB10,000)

Liu Jian Chairman Male 56 December 2, 2010 0 0 0 0 0

Zhou Xuezhong

Director and president Male 57 December 2,

2010 221,300 221,300 0 63.67 0

Meng Jun Director Male 54 January 10, 2014 30,180 30,180 0 0 51.64

Yang YunDirector and Executive vice-president

Male 50 April 23, 2014 100,000 100,000 0 59.25 0

Chen Su Independent director Male 57 December 02,

2010 0 0 0 12.8 0

Cheng Xinsheng

Independent director Male 51 December 02,

2010 0 0 0 12.8 0

Zhu Wuxiang

Independent director Male 49 January 10,

2014 0 0 0 12.8 0

Wei Junchao

Chairman of the Board of Supervisors

Male 57 April 23, 2014 0 0 0 0 67.54

Zhao Yanbo Supervisor Female 44 April 23, 2014 0 0 0 0 36.94

Rao Shicai Supervisor Male 46 September 16, 2013 0 0 0 44.59 0

Wang Tao Executive vice-president Male 48 March 14, 2014 57,200 57,200 0 56.06 0

Li Youcheng

Vice-president Male 52 August 06, 2007 60,000 60,000 0 51.82 0

Li Zhigang Chief Engineer Male 49 August 06, 2007 40,000 40,000 0 51.33 0

Cheng Yonghong

Chief Financial Offi cer

Male 41 August 29, 2012 60,000 60,000 0 44.90 0

Liu LianjuSecretary of the Board of Directors

Male 49 April 10, 2007 30,000 30,000 0 35.94 0

Feng Jingxin

Former chairman of the Board of Supervisors

Male 51 September 16, 2013

April 23, 2014 0 0 0 0 51.00

Zhang Xianghua

Former supervisor Male 38 September 16,

2013April 23,

2014 0 0 0 0 30.05

Total / / / / / 598,680 598,680 0 / 445.96 237.17

061


Name Main working experience for the most recent 5 years

Liu Jian

Executive Vice-President of CNOOC from October 2005 to March 2009; General Manager Assistant of CNOOC from November 2006 to March 2009; General Manager Assistant of CNOOC as well as vice-chairman of the Board and Chief Executive Offi cer of China Oilfi eld Services Ltd. from March 2009 to May 2010; Deputy General Manager of CNOOC and Chairman of the Board of China Oilfi eld Services Ltd. from May 2010 to now. From May 2010, Chairman of the Board of COOEC from December 2010.

Zhou Xuezhong From August 2007 to October 2010, Executive Vice-president of COOEC. From October 2010 to present, President of COOEC From December 2010 to present, director of COOEC.

Meng Jun From April 2007 to present, Deputy General Manager of Financial Department of CNOOC; and director of COOEC from January 2014.

Yang Yun

From June 2007 to July 2009, Deputy General Manager of CNOOC (China) Shenzhen Branch; from July 2009 to May 2011, Deputy General Manager of CNOOC (China) Shenzhen Branch, Vice President of COOEC from May 2011 to present, executive vice-president of COOEC; from April 2014, as company director.

Chen SuSecretary of Party Committee of Law Institute of the Chinese Academy of Social Sciences as well as International Law Institute, and deputy director of Law Institute and that of International Law Institute from December 2005 to present. Now also independent director of the Company.

Cheng Xinsheng Professor and doctoral supervisor in Department of Accounting of School of Economics / School of Commerce, Nankai University from March, 2005 to present. Now also independent director of the Company.

Zhu Wuxiang From December 2002 to present, professor of finance in Tsinghua University School of Economics and Management, PhD supervisor. Now also independent director of the Company.

Wei Junchao October 2004 to December 2013, Director of the General Office of CNOOC; Chairman of Board of Supervisors of CNOOC from December 2013. Chairman of Board of Supervisors of the Company.

Zhao Yanbo From August 2003 to February 2012, senior auditor of Audit department of CNOOC; full-time supervisors of CNOOC from March 2012. Supervisor of the Company.

Rao Shicai From September 2007 to March 2014, General Manager of Human Resources Department of COOEC From August 2011 to present, staff supervisor of the Company.

Wang Tao

From March 2002 to August 2007, Executive Vice-president of COOEC From April 2008 to February 2012, General Manager of Production and Safety Management Department of CNOOC Gas & Power Group and General Manager of Beipasi Natural Gas Liquefaction Project Group of CNOOC successively; and Vice-president of COOEC from March 2012 to March 2014. Since March 2014, Executive Vice-President of the Company.

Li Youcheng From August 2007 to present, vice President of COOEC.Li Zhigang From August 2007 to present, Chief Engineer of COOEC.

Cheng Yonghong

General Manager of Fund Management Department of China BlueChemical Ltd. by September 2009; General Manager of Financial Management Department of China BlueChemical Ltd. from October 2009 to July 2012;Chief Financial Offi cer of COOEC at present.

Liu LianjuSecretary to the Board of Directors of COOEC from February 2001 to present; and General Manager of Bond Department from March 2005 to December 2010; since December 2010, General Manager of Board Secretary Offi ce.

Other Presentation

1. The original outside director Sun Shuyi resigned the title on March 14,2014,see details as Announcement for resignation of directors disclosed on March 18,2014 and relevant sections of the 2013 annual report of the company.

2. The original director Xu Changyong and the original independent director Xu ShuaiJun are no longer as the the director by the Board of Directors General on January 10,2014,see details as the relevant sections of the 2013 annual report of the company.

3. The original executive vice-president Zhang Songfu resigned the title in March 2014 due to the retirement age,see details as the relevant sections of the 2013 annual report of the company.

(II) Remuneration of the Directors, Supervisors and Senior Management during reporting time


062


II. Posts of Outgoing Directors, Supervisors and Senior Managers

(I) Posts Held at the Shareholder Entity


Name of staff Name of shareholder entity Position at shareholder entityStarting

date of term of offi ce

Ending date of term of

offi ceLiu Jian China National Offshore Oil Corporation Vice-president 2010.05 To present

Meng Jun China National Offshore Oil Corporation Vice General Manager of Financial Department 2007.04 To present

Wei Junchao China National Offshore Oil Corporation Chairman of the Board of Supervisors 2013.12 To presentZhao Yanbo China National Offshore Oil Corporation Full-time supervisor 2012.03 To presentFeng Jingxin China National Offshore Oil Corporation Chairman of the Board of Supervisors 2013.05 UnknownZhang Xianghua China National Offshore Oil Corporation Full-time supervisor 2013.02 Unknown

(II) Posts Held at the other Entities


Name of staff Name of other entity Position at other units Starting date of

term of offi ceEnding date of term of offi ce

Liu Jian China Oilfi eld Services Ltd. Chairman 2010 To present

Chen Su Chinese Academy of Social Sciences

Secretary of Party Committee of Law Institute of as well as International Law Institute, and deputy director of Law Institute and that of International Law Institute

2005 To present

Cheng Xinsheng Nankai UniversityProfessor and doctoral supervisor in Department of Accounting of School of Economics / School of Commerce

2005 To present

Zhu Wuxiang Tsinghua University Professor of fi nance in Tsinghua University School of Economics and Management, PhD supervisor. 2002 To present

III. Remuneration of the Directors, Supervisors and Senior Management

Process of decision-making for remuneration of directors, supervisors and senior management

Establish the remuneration standards according to the responsibility and complexity of the post as well as the work performance and achievement, and by sticking to the principle of stabilizing personnel and combining the incentive and restriction.

Basis of decision-making for remuneration of directors, supervisors and senior management

Refer to the remuneration of senior management of the trade.

Payable amount of remuneration of directors, supervisors and senior management

1. Subsidy for directorsThe subsidy for independent outside director and each of the three independent directors of the Company is RMB 128,000 Yuan (before tax) per year. Travel expenses for participating in the general meeting of shareholders and the Board meeting and other expenses required for exercising their powers in accordance with the Articles of Association can be reimbursed by the Company.2. Directors and supervisors who do not receive their remunerations and subsidies from the Company include Mr. Liu Jian, Mr. Meng Jun, Mr. Wei Junchao, Ms.Zhao Yanbo. Above mentioned directors and supervisors would receive their remunerations and subsidies from CNOOC, the fi rst largest shareholder entity of the Company.

Total remunerations actually gained by all directors, supervisors and senior managers by the end of report period

is RMB 6,831,300.

063


IV. Turnover of Directors, Supervisors and Senior Managers

Name Position Change Reasons of change

Meng Jun Director Election According to corporate requirements on management and development

Yang Yun Director Election According to corporate requirements on management and development

Xu Yongchang Former director Outgoing Transition of Board of Directors

Zhu Wuxiang Independent director Election According to corporate requirements on management and development

Xu Shuaijun Former independent director Outgoing Transition of Board of DirectorsSun Shuyi Former outside director Outgoing According to relevant state provisions,

Wei Junchao Chairman of the Board of Supervisors Election According to corporate requirements on management and development

Zhao Yanbo Supervisor Election According to corporate requirements on management and development

Feng Jingxin Former chairman of the Board of Supervisors Outgoing turnover of positionZhang Xianghua Former supervisor Outgoing turnover of position

Wang Tao Executive vice-president Recruitment According to corporate requirements on management and development

Zhang Songfu Former executive vice-president Outgoing Retired

V. Core technical team or key technical personnel in the CompanyDuring report period, core technical team or key technical personnel in the Company does not change at all.

VI. Staff in parent company and main subsidiary companies

(I) Particulars about employees

No. of in-service employees at parent company 5,376No. of in-service employees at main subsidiary companies 2,903Total No. of in-service employees 8,279Number of retired employees whose payment was bore by parent company and main subsidiary companies 0

Specialty componentCategory of specialty component Number of specialty componentProduction personnel 3,230Management personnel 601Technical personnel 3,177Financial personnel 104Project management 1,167Total 8,279

Education backgroundClassifi cation by educational background No. of peopleMaster and above 874Undergraduate 3,568Junior college 1,455Secondary school and below 2,382Total 8,279

064


(II) Remuneration policy

The Company formulates an overall remuneration and welfare system according to management and development strategy and economic benefi ts. Remuneration system shall be improved regularly to ensure reasonable system and effective implementation. Staff’s remuneration and welfare level shall be properly adjusted according to management efficiency of the Company and change of local living standard and price index. Distribution system of benefit bonus is strictly connected with performance assessment result of the Company to motivate the sense of responsibility and awareness of crisis of staff.

The company issues a Measures for the Management of Employee Performance Appraisal and relevant specifi cations to optimize employee performance appraisal system during the report period, and sets personal performance indicators in accordance with position responsibility and annual work settings, so that each level (enterprise-department-employee) of the company change comprehend the performance and pressure, and takes in fully consideration the characteristics of technique, management and operation team, implement pointed assessment on key performance, realizing differentiation of performance appraisal. The company implements a strict performance assessment, aiming at motivating and stimulating employee’s enthusiasm, initiative and creativity, strengthening their sense of duty and belonging, combining personal performance with development of the enterprise tightly.

Combining the reality of the company, establish a reasonable efficiency reward system for at-sea installation, motivate and encourage employees to refresh the records for at-sea installation. Make appropriate adjustment on salary and welfare treatment for those employees work overseas, strengthen the stability of employees, try our best to build a talent team that can satisfy the demand of building a international level energy company.

(III) Training plan

There is training and reeducation mechanism for the staff. Training plan corresponding to all staff is formulated based on staff growth and corporate demand which has been implemented in detail. The company established a training and management system to make the training is effective, and strengthen guidance, inspection, and management on training, making sure that work at each levels and department can be carried out in line with the training requirements orderly as planned, ensuring promptness, pertinence and effi ciency of the training.

2,371 times of trainings have been carried out during report period, with 71.3 h in total and 86.2 h per capita. Trains mainly cover safety, technology, management, production, fi nance, and other relevant business knowledge as well as English, sailor and other working skills. Taking the situation into consideration, a combined internal and external training are adopted for the training of the employees, thus effectively enhance quality and ability, performance of employees, safeguarding the healthy development and smooth implementation of strategic targets.

(IV) Statistical diagram for specialty component

(V) Statistical diagram for education background

3,230

8,279

3,177

104

601

1,167

Total

Projectmanagement

Managementpersonnel

Financialpersonnel

Technicalpersonnel

Productionpersonnel

Total

school andbelow

Junior collegeSecondary

Undergraduate

Master andabove 874

8,279

3,568

1,455

2,382

065

Company GovernanceCOOEC / ANNUAL REPORT 2014

Company Governance

I. Description on Corporate Governance and Registration and Management of Staff with Inside Information, etc.The Company establishes standardized corporate governance structure and forms scientific and effective assignment of responsibilities and balance mechanism meeting requirements of Company Law, Securities Law, Code of Corporate Governance for Listed Companies in China, Rules Governing the Listing of Stocks on Shanghai Stock Exchange, etc., and supervision requirements of China Securities Regulatory Committee, Shanghai Stock Exchange, etc. General meeting of shareholders enjoys all rights specifi ed by laws, regulations and Articles of Association, exerts decision-making rights to guideline for management, fi nancing, investment, profi t distribution and other signifi cant matters of the Company legally; Board of Directors is responsible for general meeting of shareholders, and enjoys implementation rights to resolutions of general meeting of shareholders and operating decision rights specified; Board of Directors shall be responsible for general meeting of shareholders and inspect and supervise implementation, etc. of corporate fi nancial staff and senior managers; and management layer is responsible for organizing and implementing resolutions of general meeting of shareholders and Board of Directors and being in charge of daily operation and management of the Company. The actual governance of the Company shall comply with requirements in the Company Law of the People’s Republic of China and relevant regulations of CSRC.

(I) Establishment and soundness of corporate governance system

The Company formulates Corporate Article, Rule of Procedure for General Meeting of Shareholders, Rule of Procedure for Board of Directors, Rule of Procedure for Board of Supervisors, Description of President’s Work, System of Independent Directors, Management System of Information Disclosure and Investor Relations, Investment Management System and other standardized documents for corporate governance and forms systematical framework of corporate governance based on Company Law, Securities Law, Guide for Charter of Listed Companies, and relevant documents and requirements of securities regulatory administrations.

2014, the company made an amendment towards Implementing Rules of Audit Committee of Board of Directors as per latest supervision requirements and actual situation, formulated an Internal System of Accountability, further improved the frame of governance, playing an active role in enhancing the governance of the company. On the basis of the business scope, “research, development, manufacturing and sales of instrument automation products” will be added, and corespondent amendment made to Articles of Association.

(II) About general meeting of shareholders

The Company complies with Company Law, Securities Law, Rules Governing the Listing of Stocks and Rules of Procedure for General Meeting of Shareholders and meet relevant requirements during meeting convening, holding, meeting bill, meeting procedure, meeting resolution, information disclosure, etc. to ensure all shareholders, especially minority shareholders, can exert their own legal rights and enjoy equal positions. The Company has invited the lawyer to participate in all general meetings of shareholders to confi rm and witness holding procedures and audited events of the meeting and identifi cation of participants and provide legal opinion ensuring legal and effi cient general meeting of shareholders.

066


In 2014, three general meetings of shareholders were held by the Company in January, April and September. Bills such as profi t distribution scheme, transition and election of Board of Supervisors, work reports of Board of Directors, further employment of fi nancial and internal control audit institutions of the Company were examined and approved, give security to those branches that undertake overseas projects, etc. to main the shareholders’ legal rights practically.

(III) About the Board of Directors

1. Composition of Board of Directors

The Company, strictly following the selecting and engaging procedures stipulated in the Articles of Association, selects and engages directors with the legal quorum and member constitution. The Board of Directors is composed of seven people, including three independent directors and the number of independent directors occupies more than one-third of total number of Board of Directors.

During report period, the Board of Directors implemented a general election, the Board of Shareholders elected Mr. Liu Jian, Mr. Zhou Xuezhong, Mr.Meng Jun, Mr.Yang Yun, Mr. Chen Su, Mr. Cheng Xinsheng, Mr. Zhu Wuxiang as members of the 5th Board of Directors,of which, Mr. Liu Jian was elected as chairman of the Board, and Mr. Chen Su, Mr. Cheng Xinsheng, Mr. Zhu Wuxiang were independent directors. Provisions in laws and regulations are met in relevant general election.

2. About the performance of the Board of Directors.

The Board of Directors pay special attention to decision made upon group discussion, value the impact of independent directors. each directors shall fulfi ll their responsibly honestly and diligently. All the bills in board meeting and reporting matters are made through group discussion of Board of Directors, therefore guaranteed all the important matters in the company are made after discussion of Board of Directors, maintaining overall interests of the Shareholders.

In 2014, Board of Directors of the Company stuck to the principle of democratic centralism, strengthened the concept of standardized and legal operation, insisted on collective research and decision, exerted the functions of all special committees under Board of Directors and improved the level of democratic decision-making and scientific decision. Seven general meetings of shareholders were held by the Company in January, March, April, July, August, October and December, during which business performance, fi nance budget, profi t distribution scheme, capital expenditure plan, guarantee and deepwater vessels procurement for branches were reviewed and discussed, specific requirements on the following matters were proposed: enhancement of operation by law, company governance, strategic development direction, construction of “four big abilities”, investment in key equipments, overseas market development, execution of international projects, optimizing of overseas framework, ability to master economic situation, fi nance management, risk management and control, information revealing, investor relationship. The company would report to the Board of Directors the decision and the tracking execution conditions of decisions made by Boards of Directors.

The Boards of Directors pay high attention to communication with capital market, chairman of the Board and other members went to attend the annual performance presentation in Zhu Hai, and communicate with investors on questions they interested in:development strategy and trend of the company, significant changes in overall strength, development of international market and construction of deep water construction

3. Sub-committee under the Board of Directors.

There are four special committees under Board of Directors, namely strategy committee, audit committee, remuneration and assessment committee and nomination committee. Except for strategy committee, the other three special committees are held by independent directors. Some professional matters shall be reviewed and approved by special committee meetings fi rst before submitted to Board of Directors for review, which greatly the speciality and scientifi city of Board of Directors’ decisions.

4. Examination and approval authority division of Board of Directors and management level

Articles of Incorporation made a very clear division on responsibility of Board of Directors and management level, which keep consistency with the requirements in Corporation Law and Securities Law ( for more details, please log in our company’s website for Articles of Incorporation).

What’s more, division on investment decision-making of Board of Directors and management level are specifi ed in special system of the company: Equity investment shall be under approval of Board of Directors( beyond a certain amount shall be decided by Boards of Shareholders), other capital investment(less than ￥100,000,000) may be approved by management level.

(IV) About Board of Supervisors

The composition of Board of Supervisors conforms to the law’s requirements, three supervisors in all, two are supervisors for shareholders, one is employee’s representative supervisor, and some supervisors have professional knowledge and work experience in terms of accounting, auditing, human resources management, etc.. And the supervisors can perform their duties in accordance with Articles of Association and the Rules of Procedure for General Meeting of Board of Supervisors, supervise

067


production and operation management and internal control of the Company and regularly conduct investigation and research on the Company and propose suggestions for improvement, so they gave full play to their supervision function and protected the legal rights and interests of the Company and its shareholders.

During report period, Transition selection of Board of Directors shall be conducted according to Company Law and Articles of Association. At the Annual Meeting of Shareholders in 2013 held on April 23, 2014, Mr. Wei Junchao and Ms. Zhao Yanbo were selected as shareholder’s supervisor of the 5th Board of Supervisors of the Company. Both of them and staff’s supervisor, Rao Shicai, elected at joint meeting of staff representatives combined the 5th Board of Supervisors of the Company.

Board of Supervisors held 4 meetings in the year. Supervisors participated in general meeting of shareholders and all meetings of directors, reviewed regular report, fi nancial statement, profi t distribution scheme, usage of raised money etc., and provided review opinion in writing to regular report prepared by Board of Directors. All supervisors shall fulfi ll their own responsibilities carefully and pay high attention to supervision of legal operation, fi nance, and responsibility implementation of Board of Directors and senior managers of the Company, etc.

The Board of Directors often attend senior manager conference, effectively supervise the group decision made by the management level, major issues in decision making, appointment or dismissal of important cadres in important positions and management of usage of large amount of money, The party’s education practice of mass line, oppose formalism, bureaucracy, hedonism and enjoy of luxuries.

(V) About management layer and senior managers

There is 1 president, several executive vice-president sand vice-presidents, 1 chief engineer, 1 chief financial officer and 1 secretary to Board of Directors in the Company with steady and progressive managers. According to relevant regulations of Company Law and Articles of Association, the Company formulated Description of President’s Work, etc. Assignment of businesses among senior managers were explicit with clear rights and liabilities. Board of Directors and Board of Supervisors could supervise and control senior managers effectively.

During report period, management layer of the Company and all senior managers were devoted to their own duties, worked hard, implemented all resolutions and development strategy of general meeting of shareholders and Board of Directors carefully, and improved “four abilities” greatly. General contracting capacity,work capacity and deepwater capacity of the Company were improved greatly,so is the core competitive edge. The management layer guide all the employees, taking “quality effi ciency year activities as an opportunity, try their best to increase income while reducing expenditure, continuously improving production and operation management, enhancing technique innovation, and strict to low cost strategy, making production cost under effective control; each projects run safely and steadily as planned, with high quality; the overall effi ciency of the work improved promptly and gained a good profi t; income scale, net profi t, market connect amount reached a new high, a breakthrough also made in international market development.

(VI) About the relationship between controlling shareholders and listed Company

Controlling shareholder and in-service staff of the Company carried out work according to requirement of “separation of fi ve parts” on personnel, asset, fi nance, institutions and business. Board of Directors, Board of Supervisors and internal institutions could operate independently. By formulating a series of rules and regulations like fi nancial management system, the Company has established and improved the fi nancial and accounting systems and realized its independent accounting, that is, controlling shareholders puts no fingers in the financial or accounting activities of the Company. There are neither the phenomena that controlling shareholders converted the funds of the Company to their own use or caused the damage to the rights and interests of the Company or other shareholders, nor the situation that the Company provided guarantee for controlling shareholders or its connected parties,

068


(VII) About the relationship between information disclosure and investors

The Company formulated and implemented Management system of Information Disclosure and implemented information disclosure truly, exactly, completely and timely in strict accordance with Company Law, Securities Law, Rules Governing the Listing of Stocks of Shanghai Stock Exchange, etc.

During report period, direct information disclosure business for Shanghai Stock Exchange was performed seriously by the Company. Under the guide of regulations and compilation related to information disclosure of listed companies, the Company completed the preparation and disclosure of 4 periodic reports and 37 interim notices, without releasing the announcement relating to rectification, thus performing the obligation of legal information disclosure well. Carry out voluntary disclosure through enterprise portals, released nearly 70 news of the company, timely feedback to investors the dynamic conditions of the company.

Boards of Directors and management level pay high attention to communication with capital market and investors. In the year of 2014, through several on-site performance presentation, tel-conference after release of periodical report, Investment seminar held by organizations, special communication meeting of Hong Kong and Shanghai, online interaction of exchanges, the company strengthened the efforts in communicate with 347 investors and fl oating shareholders, received 99 person in 70 agencies at home and broad for on-site market survey, the communication efforts creates a new recored and provide more convenience for capital market to know our company. The company gained a reward--- The Most Respected Listed Company 100, evaluated by SAC,

(VIII ) Registration management of insiders

Confi dential System for Personnel with Inside Information is reviewed and approved by the 21st Meeting of the Third Session of Company Board Meeting, and amended by 3rd and 10th Meeting of the Four Session of Company Board Meeting. For more details of the latest Confi dential System for Personnel with Inside Information, please see the document released on December, 2011, on the website of Shanghai Stock Exchange.

During report period, the company continuously strengthen control and confi dentiality of inside information; the Company sticks to the principle of prevention fi rst, handles with all confi dential events crudely, shortens informed scope and conducts registration of staff with Confi dential System for Personnel with Inside Information strictly. Staff with inside information shall be registered at Board of Directors, Board of Supervisors, meeting of managers, etc. prior to disclosure of regular report. Important information shall be registered timely and archived as per requirements. Strictly control submission of unrevealing fi nancial information to the outside, issue a Reminder Letter on Confi dential Obligations for Inside information to outside users, remind that above mentioned agency and relevant handling personnel has already registered as staff with inside information.

II. Brief Introduction to the General Meeting of Shareholders

Session Date Name of meeting bill Resolution

Index of query on specifi ed website

where the resolution is published

Disclosure date of

published resolution

The 1st Provisional General Meeting of Shareholders for Year 2014

January. 10, 2014

Transit Election Bill of Board of Directors, About Improvement of Subsidy of Outside and Independent Directors

All bills are passed by

voting

Website of Shanghai Stock Exchange

January. 13, 2014

2013 Annual General Meeting of Shareholders

April 23, 2014

Report on Board of Directors' Work in 2013, Report on Board of Supervisors' Work in 2013, Report on Financial Statements in 2013, Annual Report and Abstract in 2013, Profi t Distribution Scheme in 2013 and Proposal of Further Employment of Corporate Financial and Internal Control Auditing Institutions in 2014, Bill on Transit Election of Boards of Supervisors, Proposal on Assigning Mr.Yang Yun as directors.


voting


April 23, 2014

The 2nd Provisional General Meeting of Shareholders for Year 2014

September 16, 2013

The Bill on Providing Guarantee for the Holding Subsidiary Company - COOEC (Qingdao) Co., Ltd to Undertake Russia Yamal Project; Proposal to Increase Business Scope of the Company, The Bill on Amendment of Articles of Association and Authorized Board of Directors Manage Business Registration


voting


September 17, 2014

Refer to resolution announcement of general meeting of shareholders published on website of Shanghai Stock Exchange for the detail of bill and resolution of general meeting of shareholders.

069


III. Responsibilities Fulfi llment of Directors(I) Directors’ participation in Board of Directors and general meeting of shareholders

Name of the director

Whether or not the

independent director

Attendance to Board of Directors

Attendance to general meeting of

shareholdersNumber of Board meeting

requiring attendance this year

Number of attendances

in person

Number of attendances in the manner of

communications

Number of attendances

by entrustment

Number of

absence

Whether continually

not attended the meeting in person

twice or not

Times participating

in general meeting of

shareholders

Liu Jian No 7 7 1 0 0 No 1Zhou Xuezhong No 7 7 1 0 0 No 3

Yang Yun No 5 3 0 2 0 No 0Meng Jun No 7 7 1 0 0 No 3Chen Su Yes 7 6 1 1 0 No 0Cheng Xinsheng Yes 7 7 1 0 0 No 0

Zhu Wuxiang Yes 7 5 1 2 0 No 0

Number of meetings held in the year 7Among which: number of on-site meetings 6Number of meetings held in the manner of communications 1Number of meetings held on site in combination with communications 0

(II) Objection against relevant issues of the Company put forward by independent directors

During reporting period, the independent directors held no objection against the proposals made by Board of Directors and other proposals not made by the Board of Directors of the Company.

IV. Important Opinions and Suggestions Proposed by Special Committee Directly Under Board of Directors While Implementing Responsibilities during Report PeriodDuring report period, special committee directly under Board of Directors shall carefully fulfi ll their duties and implement their own responsibilities fairly and transparently according to relevant work systems.

070


(I) Implementation of audit committee

Audit committee of Boards of Directors held 4 meetings during report period, carefully audit 4 periodical report, financial situation, internal control evaluation report , annual audit work, further employment audit agency, change effects of accounting standards and other 9 bills, published a clear opinion, in addition, about great increase in development fees in management, subject accounting of newly set sales expenditure, evaluation standards of internal controlled defects; how to determine and check and reform of internal defects, as well as specifi c operations of evaluation, service quality of Shine Wing Certifi ed Public Accountants, cash fl ow of the company, fi nance condition, usage of raised money, development process of development fees, operation conditions of each business sector, the audit committee would have a suffi cient communication and discussion with the management layer.

Before the annual meeting of Board of Directors, Audit committee and Shine Wing Certifi ed Public Accountants made a private conversation, and fully understand the scope of fi nance audit and internal audit, advice letter and specifi ed contents of compilation view of management advice, independence of the audit report and other situations.

Audit committee proposes specifi c suggestions and reasonable advice for corporate management and development:

1. A detailed statistical table shall be provided by internal control departments of specifi c items of internal control defects, abstract expression shall be deduced, and detailed information shall be provided in control and operation of important internal control link, such as procurement.

2. Pay attention to the situation where connected income occupies largely, broaden international market vigorously and try to lower proportion of connected income.

3. pay attention to change in cash fl ow, guarantee a stable and healthy development of the company.

4. Strengthen motivation and assessment for personnel, and improve staff’s work motivation and competitiveness.

5. Strengthen management and cost control of the project, pay attention to operation risks of overseas project.

(II) Implementation of nomination committee

During report period, Nomination Committee held a on-site meeting, all 5 members attended the meeting, audit and approve The Proposal to Appoint Mr.Wang Tao as Deputy Executive, agreed to submit the bill to 2nd meeting of Board of Directors for auditing. The committee regarded the nominator meet all the relevant provisions of Corporation Law and Articles of Association, his qualification is legal and meet the qualification of senior managers in listed company, agreed to submit the nominator to Boards of Directors for auditing, making sure that the nomination work is in compliance with law and regulations.

V. Description of risk of the Company discovered by Board of SupervisorsDuring report period in 2014, Board of Supervisors supervises and examines corporate decision-making process, operation pursuant to law, financial condition, internal control, etc. according to relevant laws and regulations, Attend all the general meetings of shareholders and meetings of the Board of Directors to carry out supervision over the convening and voting procedures of the meetings, and actively participated in the work meetings of the Management and the monthly production meeting to keep track on the production and operation of the Company. They also reviewed the quarterly, semi-annual and annual reports and accountants’ reports published by Shine Wing Certifi ed Public Accountants (special ordinary partnership), put forth their reviewing opinions, and communicated with CFO and manager of the Financial Management Department, so as to be well informed of the basic fi nancial status of the Company. Board of Supervisors regards that decision-making procedures of Board of Directors of the Company proved legal. Effective internal control system was established. Directors and managers of the Company could perform their own duties diligently and responsibly. All work was carried out in strict accordance with laws, regulations and Articles of Association. No behavior affecting corporate benefi ts or investors’ benefi ts was found during duty implementation.

VI. Description of Uncertainty of Independency and Independent Business Capacity on Business, Personnel, Asset, Institution, Finance, etc. between the Company and Controlling ShareholderThe Company owns independent and integrated businesses, self-operating and developing capabilities, and is fully independent of the largest shareholder in terms of businesses, personnel, assets, departments and finance, etc. They can make decisions independently, operate it by themselves, enjoy the benefits, suffer from losses and bear corresponding liabilities and risks individually.

VII. Evaluation system to Senior Managers, and Establishment and Implementation of Incentive Mechanism during Report PeriodDuring report period, the Company carries out the assessment towards the senior managers in accordance with their working performance and the completion of annual objectives and plans.

071

Internal ControlCOOEC / ANNUAL REPORT 2014

Internal Control

I. Responsibility Statement for Internal Control and Establishment of Internal Control SystemResponsibility Statement for Internal Control: as required by the Internal Control System of the company, established a sound and effective internal control, evaluating its effi ciency, and it is the Board of Director’s responsibility to disclosing internal control evaluation report. Board of Supervisors shall supervise the construction of Board of Directors and implementation of internal control. The Manager lever is responsible for organize and lead daily operation of internal control of the enterprise The Board of Directors, board of supervisors, and directors, supervisors and senior managers of the Company guarantee that there are no false representation, misleading statement or material misstatement in this report, and they are also jointly and severally liable for the authenticity, accuracy and integrity of the report content.

Conclusion evaluation of internal control: According to recognized situation of key defects of internal control in fi nance report, on report date of internal control evaluation, there exist no internal control key defects in the fi nancial report. Boards of Directors regards that the company has ready kept a effective finance report internal control in all aspects as per normative system of internal control of the company and relevant provisions. According to recognized situation of key defects of internal control in non-fi nancial report, on report date of internal control evaluation, the company found no internal control key defects in the fi nancial report. From the started day of internal control evaluation report to releasing of the internal evaluation, no factors that affect effi ciency of internal control evaluation appeared.

Refer to Internal Control Evaluation Report on COOEC in 2014 disclosed at www.sse.com.cn, website of Shanghai Stock Exchange.

Whether to disclose the internal control self-evaluation report: Yes.

II. Description of relevant situations of internal control and audit reportShinewing Certifi ed Public Accountant (special ordinary partnership) audited internal control of the Company in 2014, provided standardized Internal Control Audit Report without remained opinions and believed the Company complied with effective internal control of fi nancial report on all important aspects according to Guidelines for Enterprise Internal Control and relevant regulations.

Refer to Report on Internal Control disclosed at www.sse.com.cn, website of Shanghai Stock Exchange.

Whether to disclose the internal control audit report: Yes.

III. Accountability System for Significant Mistakes of Annual Report and Description of Relevant ImplementationThe company established Accountability System for Signifi cant Mistakes of Annual Report Information Disclosure. Relevant regulations to responsibilities for signifi cant mistakes of annual report information disclosure. As is required by regulation, in case information is disclosed illegally due to breach of duty by relevant staff which brings serious effects and losses to the Company, the responsible person shall be sermoned, warned or demoted with the most severe punishment of dismissal. It is reasonable to ask proper compensation from it.

By the end of reporting period, there are no serious errors in information disclosure of annual report.

1. Correction to signifi cant accounting errors during report period

There is no correction to signifi cant accounting errors during report period

2. Supplement to missed signifi cant information during report period

There is no missed signifi cant information during report period.

3. Correction of performance notice during report period

There is no correction of performance notice during report period

072

Financial ReportCOOEC / ANNUAL REPORT 2014

Financial ReportAudit Report

XYZH/2014A7011-1

To the shareholders of COOEC:

We have audited the accompanying consolidated and parent company’s fi nancial statements of COOEC (Hereinafter referred to as the COOEC), including the balance sheet of merger on December 31, 2014 and parent company, the profi t statement of merger and parent company, cash fl ow statement of merger and parent company, and statement of changes in equity and notes to fi nancial statement of merger and parent company in 2014.

I. Responsibility of management for fi nancial statements

Management layer of COOEC is responsible for preparation and fair presentation fi nancial statements, including the following contents: (1) prepare fi nancial report according to Accounting Criteria for Enterprises and realize its refl ection of fair presentation; and (2) design, implement and maintain necessary internal control to avoid signifi cant misstatement due to fraud or mistake.

II. Responsibility of certifi ed public accountants

Our responsibility is to give audit opinions on fi nancial statements based on the audit work. We have executed the audit work in accordance with the provisions of China’s Independent Auditing Standards. According to the Auditing Standards for the Chinese Certified Public Accountants, we shall plan and implement the audits in full compliance with code of ethics, so as to obtain reasonable assurance about whether the fi nancial statements are free of material misstatement.

The audit work involves the implementation of audit procedures to obtain audit evidence about the amount and disclosure of fi nancial statements. The selection of audit procedures depends on the judgment of certifi ed public accountants, including the assessment of risk of material misstatement caused by fraud or error. During the risk evaluation, certifi ed public accountant takes the internal control relating to the preparation of fi nancial statements and fair presentation into consideration, so as to work out appropriate audit procedures. An audit also includes an assessment of the accounting policies adopted and signifi cant accounting estimates made by the management, as well as an evaluation on the overall presentation of the fi nancial statements.

We believe that the audit evidence we obtained is suffi cient and appropriate, providing basis for giving audit opinions.

III. Audit opinion

In our opinion, all significant aspects of the financial statements of COOEC have been prepared based on the accounting standards of business enterprises and present fairly the fi nancial position of merger and parent company as of December 31, 2014, and the operating result and cash fl ows of merger and parent company in 2014.

Shinewing Certifi ed Public Accountants (Special General Partner)

Chinese Certifi ed Public Accountant: Li Xiaoying

Chinese Certifi ed Public Accountant: Jiang Xijun

Beijing, China March 12, 2015

073


Consolidated Balance SheetDecember 31, 2014

Preparation Unit: COOEC Unit: Yuan Currency: RMBItem Notes Ending balance Opening balanceCurrent assets:

Currency capital V. 1 3,281,826,338.76 1,779,511,011.24Settlement reservesLending fundsFinancial assets calculated based on fair value with their change included in current P/L V. 2 2,147,424.00 34,133,463.00

Derivative fi nancial assetsNotes receivableAccounts receivable V. 3 5,843,029,130.23 4,334,437,118.49Advance payments V. 4 246,103,857.01 576,329,848.56Premiums receivableReinsurance accounts receivableProvision of cession receivableInterest receivable V. 5 10,393,778.04 16,831,742.46Dividends receivableOther receivables V. 6 238,704,773.87 289,431,346.22Redemptory monetary capital for saleInventory V. 7 1,108,847,744.04 1,715,611,771.37Incur debts divided for saleNon-current assets due within one yearOther current assets V. 8 3,087,069,830.58 4,092,138,442.33

Total current assets 13,818,122,876.53 12,838,424,743.67Non-current assets:

Issued entrusted loans and monies advancedFinancial assets available for sale V. 9 350,841,816.00 326,188,178.00Held-to-maturity investmentLong-term receivablesLong-term equity investment V. 10Investment real estate V. 11 255,930,283.78 268,745,266.19Fixed assets V. 12 12,972,403,808.13 10,965,248,589.57Construction in progress V. 13 1,720,532,434.02 1,357,271,549.58Engineering materialsDisposal of fi xed assets V. 14 288,331,886.31Productive biological assetsOil and gas assetsIntangible assets V. 15 1,802,744,632.55 1,903,996,342.98Development expenditure V. 16 1,302,000.00Business reputation V. 17 13,075,057.26 13,075,057.26Long-term deferred expense V. 18 52,483,781.49 51,962,010.84Deferred income tax assets V. 19 161,636,457.30 89,662,945.02Other non-current assets

074


Preparation Unit: COOEC Unit: Yuan Currency: RMBItem Notes Ending balance Opening balance

Total non-current assets 17,329,648,270.53 15,265,783,825.75Total assets 31,147,771,147.06 28,104,208,569.42

Current liabilities:Short-term loanLoans from the Central BankDeposits from customers and interbankFunds borrowedFinancial liabilities calculated based on fair value with their change included in current P/L 78,999,408.00

Financial LiabilitiesNotes payableAccounts payable V. 21 5,001,495,668.63 5,632,792,798.85Advance receipts V. 22 1,020,399,165.89 790,533,176.92Financial assets sold for repurchaseHandling charges and commission payableEmployee compensation payable V. 23 411,511,471.58 263,869,377.09Taxes payable V. 24 819,754,828.52 581,029,885.42Interest payable V. 25 10,327,484.37 12,224,277.98Dividends payableOther payables V. 26 79,096,290.43 111,448,858.82Reinsurance accounts payableInsurance contract reservesReceivings from vicariously traded securitiesReceivings from vicariously sold securitiesIncur debts divided for saleNon-current liability due within one year V. 27 85,118,481.32 1,480,000,000.00Other current liabilities V. 28 40,149,946.85 5,601,944.78

Total current liabilities 7,546,852,745.59 8,877,500,319.86Non-current liabilities:

Long-term loan V. 29 56,172,420.00 132,180,792.00Bonds payable V. 30 1,195,656,088.68 1,194,325,407.84Including: preferred stock

Perpetual Capital SecuritiesLong-term payables V. 31 556,490,998.73Employee compensation payable for long-termSpecial accounts payable V. 32 35,353,174.74 36,969,065.53Estimated liabilitiesDeferred income V. 33 1,150,234,264.74 1,199,893,348.45Deferred income tax liabilities V. 19 35,246,299.64 70,303,722.93Other non-current liability

Total non-current liabilities 3,029,153,246.53 2,633,672,336.75Total liabilities 10,576,005,992.12 11,511,172,656.61


075


Preparation Unit: COOEC Unit: Yuan Currency: RMBItem Notes Ending balance Opening balanceOwner’s equity:

Capital stock V. 34 4,421,354,800.00 4,421,354,800.00Other equity instrumentsIncluding: preferred stock

Perpetual Capital SecuritiesCapital reserves V. 35 4,247,940,206.11 4,247,940,206.11Less: treasury stockOther composite incomes V. 36 186,432,088.19 176,416,849.62Special reserve V. 37 518,372,258.69 378,638,182.08Surplus reserves V. 38 1,073,777,168.50 804,746,449.90Generic risk reserveUndistributed profi t V. 39 10,109,425,654.81 6,553,720,745.33Total owners' equity attributable to the parent company 20,557,302,176.30 16,582,817,233.04Minority stockholders' interest 14,462,978.64 10,218,679.77

Total owners' equity 20,571,765,154.94 16,593,035,912.81Total liabilities and owners' equity 31,147,771,147.06 28,104,208,569.42

Legal representative: Zhou Xuezhong Person in charge of accounting affairs: Chen YonghongPerson in charge of accounting department: Wang Yajun


076


Balance Sheet of Parent CompanyDecember 31, 2014

Preparation Unit: COOEC Unit: Yuan Currency: RMBItem Notes Ending balance Opening balanceCurrent assets:

Currency capital 1,688,534,860.42 719,502,498.68Financial assets calculated based on fair value with their change included in current P/LDerivative fi nancial assetsNotes receivableAccounts receivable XIV. 1 5,773,282,018.62 4,230,699,579.67Advance payments 123,305,493.18 221,367,751.61Interest receivable 307,094.64 13,309,139.72Dividends receivableOther receivables XIV. 2 1,207,347,758.93 1,556,093,371.32Inventory 704,556,964.77 1,693,892,003.27Incur debts divided for saleNon-current assets due within one yearOther current assets 1,000,000,000.00 3,371,000,000.00

Total current assets 10,497,334,190.56 11,805,864,344.27Non-current assets:

Financial assets available for sale 350,841,816.00 326,188,178.00Held-to-maturity investmentLong-term receivablesLong-term equity investment XIV. 3 8,126,208,599.93 5,220,666,399.93Investment real estate 255,930,283.78 268,745,266.19Fixed assets 7,416,374,911.42 6,893,555,695.93Construction in progress 60,878,940.89 651,494,843.53Engineering materialsDisposal of fi xed assetsProductive biological assetsOil and gas assetsIntangible assets 30,934,721.51 27,165,382.67Development expenditure 1,302,000.00Business reputationLong-term deferred expense 49,374,677.75 50,709,128.50Deferred income tax assets 103,050,043.90 28,924,127.64Other non-current assets

Total non-current assets 16,393,593,995.18 13,468,751,022.39Total assets 26,890,928,185.74 25,274,615,366.66

Current liabilities:Short-term loanFinancial liabilities calculated based on fair value with their change included in current P/LFinancial LiabilitiesNotes payable

077


Balance Sheet of Parent CompanyDecember 31, 2014

Preparation Unit: COOEC Unit: Yuan Currency: RMBItem Notes Ending balance Opening balance

Accounts payable 7,219,806,201.63 6,663,526,505.20Advance receipts 655,702,892.19 763,843,840.10Employee compensation payable 289,735,032.39 189,628,727.73Taxes payable 615,657,266.67 424,107,945.97Interest payable 10,193,666.67 11,920,333.37Dividends payableOther payables 70,706,478.98 87,253,933.81Incur debts divided for saleNon-current liability due within one year 1,480,000,000.00Other current liabilities 1,174,323.53 1,174,323.53

Total current liabilities 8,862,975,862.06 9,621,455,609.71Non-current liabilities:

Long-term loanBonds payable 1,195,656,088.68 1,194,325,407.84Including: preferred stockPerpetual Capital SecuritiesLong-term payablesEmployee compensation payable for long-termSpecial accounts payable 35,353,174.74 36,969,065.53Estimated liabilitiesDeferred income 126,852,809.99 137,866,468.90Deferred income tax liabilities 34,924,186.04 65,183,703.48Other non-current liability

Total non-current liabilities 1,392,786,259.45 1,434,344,645.75Total liabilities 10,255,762,121.51 11,055,800,255.46

Owner’s equity:Capital stock 4,421,354,800.00 4,421,354,800.00Other equity instrumentsIncluding: preferred stockPerpetual Capital SecuritiesCapital reserves 4,245,387,997.87 4,245,387,997.87Less: treasury stockOther composite incomes 197,969,621.70 188,090,671.01Special reserve 473,779,782.45 315,479,486.06Surplus reserves 1,064,134,606.61 795,103,888.01Undistributed profi t 6,232,539,255.60 4,253,398,268.25

Total owners' equity 16,635,166,064.23 14,218,815,111.20Total liabilities and owners' equity 26,890,928,185.74 25,274,615,366.66


078


Consolidated Profi t StatementJanuary to December 2014

Preparation Unit: COOEC Unit: Yuan Currency: RMB

Item NotesThe amount

incurred in current period

The amount incurred in last

periodI. Gross operating income 22,031,375,176.07 20,339,217,872.94

Including: operating income V. 40 22,031,375,176.07 20,339,217,872.94Interest incomeEarned premiumHandling charges and commission income

II. Gross operating cost 17,278,528,100.53 17,437,753,869.66Including: operating costs V. 40 14,967,060,880.21 15,564,075,058.03

Interest expensesHandling charges and commission expenseSurrender valueNet amount of compensation payoutNet amount of reserves for reinsurance contractPolicyholder dividendsExpenses for reinsurance acceptedBusiness taxes and surcharges V. 41 516,440,032.23 514,461,020.04Sales expenses V. 42 11,172,435.93 2,653,394.54Management expenses V. 43 1,506,432,793.73 1,156,513,595.61Financial expenses V. 44 117,339,130.54 186,036,035.96Assets impairment loss V. 45 160,082,827.89 14,014,765.48

Plus: income from changes in fair value (loss is marked by "-") V. 46 -110,985,447.00 32,095,680.75Investment income (loss is marked by "-") V. 47 182,048,668.62 153,052,182.61Including: investment income from Associates and Joint VentureInvestment income

-8,125,788.00

Exchange gain (loss is marked by "-")III. Operation profi t (loss is marked by "-") 4,823,910,297.16 3,086,611,866.64

Plus: Non-operating income V. 48 296,047,893.01 177,675,985.77Including: disposal income on non-current liability 43,271,595.33 14,543,372.07

Less: non-operating expenses V. 49 7,422,967.65 7,281,660.63Including: loss from disposal of non-current assets 5,663,598.36 6,706,373.79

IV. Total Profi t (total loss is marked by "-") 5,112,535,222.52 3,257,006,191.78Less: income tax expense V. 50 840,663,171.96 504,959,469.12

V. Net profi ts (net loss is marked by "-") 4,271,872,050.56 2,752,046,722.66Net profi t attributable to holding company 4,266,871,108.08 2,744,236,835.63Profi t and loss of minority stockholders 5,000,942.48 7,809,887.03

079


Consolidated Profi t StatementJanuary to December 2014





periodVI. Net of tax of other composite incomes V. 51 10,032,902.76 6,284,293.19

Net of tax for other comprehensive incomes 10,015,238.57 6,429,882.56(I) Not to be reclassifi ed into other comprehensive income of profi t and loss

1. Re-compute the set net debt of benefi ts plan or change in net assets.2. Shares cannot be reclassifi ed into other comprehensive income of profi t and loss under the equity law


1. Shares to be reclassifi ed into other comprehensive income of profi t and loss under the equity law2. Change of fair value recognized in profi ts or losses of available-for-sale fi nancial assets 9,940,993.10 10,111,113.33

3. Held-to-maturity fi nancial investment reclassifi ed as available for sale investments profi t and loss account4. The effective portion of hedging profi ts and losses for cash fl ow5. Translation differences of foreign currency fi nancial statements 74,245.47 -3,681,230.77

6. OthersThe net of tax for other comprehensive incomes attributable to minority stockholders 17,664.19 -145,589.37

VII. Total consolidated Income 4,281,904,953.32 2,758,331,015.85Total consolidated income attributable to holding company 4,276,886,346.65 2,750,666,718.19Total consolidated income attributable to minority shareholder 5,018,606.67 7,664,297.66

VIII. Earnings per share:(I) Basic earnings per share (EPS) (Yuan/share) 0.97 0.69(II) Diluted EPS (Yuan/share) 0.97 0.69

Business combination under common control in the current and last period.


080


Profi t Statement of Parent CompanyJanuary to December 2014





periodI. Operating income XIV. 4 19,572,757,757.85 18,097,746,958.59

Less: operating costs XIV. 4 15,160,370,977.55 14,885,364,182.71Business taxes and surcharges 405,789,047.96 360,636,236.72Sales expenses 1,764,761.59Management expenses 970,409,029.08 720,186,071.58Financial expenses 77,362,473.01 128,064,236.68Assets impairment loss 2,756,167.74 16,087,331.78

Plus: income from changes in fair value (loss is marked by "-")Investment income (loss is marked by "-") XIV. 5 140,546,692.34 202,317,962.21Including: investment income from Associates and Joint Venture

II. Business Profi t (loss is marked by "-") 3,094,851,993.26 2,189,726,861.33Plus: Non-operating income 171,859,691.78 126,556,183.85

Including: disposal income on non-current liability 14,853,580.16 14,541,225.97Less: non-operating expenses 6,610,818.63 6,253,429.27

Including: loss from disposal of non-current assets 5,198,821.51 6,189,140.35III. Total profi t (total loss is marked by "-") 3,260,100,866.41 2,310,029,615.91

Less: income tax expense 569,793,680.46 389,139,416.38IV. Net profi ts (net loss is marked by "-") 2,690,307,185.95 1,920,890,199.53V. Net of tax of other composite incomes 9,878,950.69 10,386,022.21

(I) Not to be reclassifi ed into other comprehensive income of profi t and loss

1. Re-compute the set net debt of benefi ts plan or change in net assets.2. Shares cannot be reclassifi ed into other comprehensive income of profi t and loss under the equity law


1. Shares to be reclassifi ed into other comprehensive income of profi t and loss under the equity law2. Change of fair value recognized in profi ts or losses of available-for-sale fi nancial assets 9,940,993.10 10,111,113.33

3. Held-to-maturity fi nancial investment reclassifi ed as available for sale investments profi t and loss account4. The effective portion of hedging profi ts and losses for cash fl ow5. Translation differences of foreign currency fi nancial statements -62,042.41 274,908.88

6. OthersVI. Total comprehensive income 2,700,186,136.64 1,931,276,221.74VII. Earnings per share

(I) Basic earnings per share (EPS) (Yuan/share)(II) Diluted EPS (Yuan/share)


081


Consolidated Cash Flow StatementJanuary to December 2014





periodI. Cash Flows from Operating Activities:

Cash received from sale of goods or provisions of services 21,387,281,056.72 17,576,394,428.13Net increases from customer's deposit and Deposit from other banksNet increases from borrowing from the Central BankNet increases from borrowing funds to other fi nancial institutionsCash received form premium of original insurance contractNet cash received from reinsurance businessNet cash received from policyholder deposit and investmentNet increase on fi nancial assets calculated based on fair value with their change included in current P/LInterests, handling charges and commission receivedNet increases received from borrowing fundsNet increases received from counter purchase of business fundsRefund of tax and fare received 680,593,494.53 354,557,580.84Other cash received relating to operating activities V. 52 248,594,740.62 220,206,966.57

Sub-total of cash infl ows from operating activities 22,316,469,291.87 18,151,158,975.54Cash paid for purchasing goods and accepting labor services 14,761,465,900.92 11,915,279,135.73Net increases from customer lending and advancesNet increases from deposits in the Central Bank and deposits of the same trade or businessCash paid for claim payments of original insurance contractCash paid for the interests, handling charges and commissionCash paid for policy dividendCash paid to and on behalf of employees 1,581,110,297.20 1,610,881,542.17Payments for various taxes 1,339,678,433.35 887,731,222.23Other cash paid relating to operating activities V. 52 283,203,359.35 368,143,390.38

Sub-total of cash outfl ows from operating activities 17,965,457,990.82 14,782,035,290.51Net cash fl ows from operating activities 4,351,011,301.05 3,369,123,685.03

082






periodII. Cash fl ows from investment activities:

Cash received from disposal of investments 10,371,000,000.00 2,242,198,554.56Cash received from returns on investments 197,107,021.04 30,875,507.57Net cash received from disposal of fi xed assets, intangible assets and other long-term assets 41,365,333.14 39,868,843.14

Net cash received from disposing subsidiaries and other business units 44,218,203.45 51,987,554.56

Other cashes received relating to investment activities V. 52 215,048,633.60 9,825,454.39Sub-total of cash infl ows from investment activities 10,868,739,191.23 2,374,755,914.22

Cash paid to acquire fi xed assets, intangible assets and other long-term assets 2,176,784,802.08 1,516,175,730.00

Cash paid to acquire investments 9,321,084,140.00 6,271,000,000.00Net increase in hypothecated loanNet cash used for acquiring subsidiaries and other business unitsOther cashes paid relating to investment activities V. 52 9,464,444.00

Sub-total of cash outfl ows from investment activities 11,507,333,386.08 7,787,175,730.00Net cash fl ow from investment activities -638,594,194.85 -5,412,419,815.78

III. Cash fl ows from fi nancing activities:Cash received from absorbing investment 3,471,496,197.45Including: Cash received from increase in minority interest by subsidiaryCash received from borrowings 900,000,000.00 544,954,000.00Cash received from issuing debenturesOther cash received relating to fi nancing activities

Sub-total of cash infl ows from fi nancing activities 900,000,000.00 4,016,450,197.45Cash paid for settling debts 2,456,008,372.00 646,533,792.00Cash paid for distribution of dividends, profi ts and repayment of interests 566,501,473.56 287,932,397.36

Including: Cash paid for distribution of dividends or profi t or reimbursing interests by subsidiary 774,307.80 27,182,798.06

Other cashes paid relating to fi nancing activities V. 52 86,982,449.80 273,318,290.35Sub-total of cash outfl ows from fi nancing activities 3,109,492,295.36 1,207,784,479.71

Net cash fl ow from fi nancing activities -2,209,492,295.36 2,808,665,717.74IV. Effect of Exchange Rate Changes on Cash and Cash Equivalents -609,483.32 -20,298,285.85

V. Net increase in Cash and Cash Equivalents 1,502,315,327.52 745,071,301.14Plus: Balance of Cash and cash equivalents at the beginning of the period 1,779,511,011.24 1,034,439,710.10

VI. Balance of Cash and cash equivalents at the end of the period 3,281,826,338.76 1,779,511,011.24


Consolidated Cash Flow StatementJanuary to December 2014

083


Cash Flow Statement of Parent CompanyJanuary to December 2014





periodI. Cash Flows from Operating Activities:

Cash received from sale of goods or provisions of services 18,800,589,304.09 14,976,364,141.50Refund of tax and fare received 314,668,521.61 143,699,010.26Other cash received relating to operating activities 111,557,043.85 109,237,416.26

Sub-total of cash infl ows from operating activities 19,226,814,869.55 15,229,300,568.02Cash paid for purchasing goods and accepting labor services 13,748,571,515.76 11,547,045,952.62Cash paid to and on behalf of employees 1,091,896,119.31 993,817,895.77Payments for various taxes 935,566,797.64 465,402,982.37Other cash paid relating to operating activities 181,665,078.78 140,478,133.97

Sub-total of cash outfl ows from operating activities 15,957,699,511.49 13,146,744,964.73Net cash fl ows from operating activities 3,269,115,358.06 2,082,555,603.29

II. Cash fl ows from investment activities:Cash received from disposal of investments 8,941,510,170.89 2,511,859,531.83Cash received from returns on investments 151,751,739.24 94,085,321.26Net cash received from disposal of fi xed assets, intangible assets and other long-term assets 22,849,753.27 39,859,543.99

Net cash received from disposing subsidiaries and other business units 44,218,203.45 225,228,158.14

Other cashes received relating to investment activities 30,237,457.08Sub-total of cash infl ows from investment activities 9,190,567,323.93 2,871,032,555.22

Cash paid to acquire fi xed assets, intangible assets and other long-term assets 334,575,575.46 551,272,938.03

Cash paid to acquire investments 9,118,500,552.00 7,541,000,000.00Net cash used for acquiring subsidiaries and other business unitsOther cashes paid relating to investment activities 9,464,444.00

Sub-total of cash outfl ows from investment activities 9,462,540,571.46 8,092,272,938.03Net cash fl ow from investment activities -271,973,247.53 -5,221,240,382.81

III. Cash fl ows from fi nancing activities:Cash received from absorbing investment 3,471,496,197.45Cash received from borrowings 900,000,000.00Other cash received relating to fi nancing activities

Sub-total of cash infl ows from fi nancing activities 900,000,000.00 3,471,496,197.45Cash paid for settling debts 2,380,000,000.00 113,778,000.00Cash paid for distribution of dividends, profi ts and repayment of interests 544,359,480.00 250,182,309.03

Other cashes paid relating to fi nancing activitiesSub-total of cash outfl ows from fi nancing activities 2,924,359,480.00 363,960,309.03

Net cash fl ow from fi nancing activities -2,024,359,480.00 3,107,535,888.42IV. Effect of Exchange Rate Changes on Cash and Cash Equivalents -3,750,268.79 -2,079,980.49

V. Net increase in Cash and Cash Equivalents 969,032,361.74 -33,228,871.59Plus: Balance of Cash and cash equivalents at the beginning of the period 719,502,498.68 752,731,370.27

VI. Balance of Cash and cash equivalents at the end of the period 1,688,534,860.42 719,502,498.68


084


Consolidated statement of changes in owner’s equityJanuary to December 2014

Preparation Unit: COOEC

Item

Current periodEquity attributable to Parent Company Minority shareholders' equity

Capital stock

Other equity instruments

Capital reserves

Decreased treasury

stockStock

Storageshare

Preferred sharesshare

Perpetual liability Others

I. Balance at end of last year 4,421,354,800.00 4,247,940,206.11Plus: Accounting policy change

Corrections of prior period errorsBusiness combination under common controlOthers

II. Opening balance of beginning of this year 4,421,354,800.00 4,247,940,206.11

III. Increase/decrease change of the year (decrease is marked by "-")

(I) Total comprehensive income(II) Capital invested and decreased by the owner

1. Shareholders' common share2. Invested capital from other equity instruments3. Fund paid for shares held recorded into the owners’ equity4. Others

(III) Profi t distribution1. Appropriated surplus reserves2. Appropriated general risk preparation3. Distribution to owners (or shareholders)4. Others

(IV) Internal transfer of owner's equity1. Capital reserves transferred to capital (or share capital)2. Surplus reserves transferred to capital(or share capital)3. Loss covered by surplus reserves4. Others

(V) Special reserve1. Draw in current period2. Use in current period

(VI) OthersIV. Closing balance of current period 4,421,354,800.00 4,247,940,206.11

085



Minority stockholders'

interest

Total owner’s equityOther

composite incomes

Special reserve

Surplus accumulation

fundReserves

Generic risk

reserveSeverity of Risk

Undistributed profi t

176,416,849.62 378,638,182.08 804,746,449.90 6,553,720,745.33 10,218,679.77 16,593,035,912.81

176,416,849.62 378,638,182.08 804,746,449.90 6,553,720,745.33 10,218,679.77 16,593,035,912.81

10,015,238.57 139,734,076.61 269,030,718.60 3,555,704,909.48 4,244,298.87 3,978,729,242.13

10,015,238.57 4,266,871,108.08 5,018,606.67 4,281,904,953.32

269,030,718.60 -711,166,198.60 -774,307.80 -442,909,787.80269,030,718.60 -269,030,718.60

-442,135,480.00 -774,307.80 -442,909,787.80

139,734,076.61 139,734,076.61317,533,091.99 317,533,091.99

-177,799,015.38 -177,799,015.38

186,432,088.19 518,372,258.69 1,073,777,168.50 10,109,425,654.81 14,462,978.64 20,571,765,154.94

086


Preparation Unit: COOECLast period

Equity attributable to Parent Company Minority shareholders’ equity

Item Capital stock


Capital reserves

Decreased treasury

stockStock

Storageshare

Preferred shares


I. Balance at end of last year 3,889,440,000.00 1,465,628,508.99Plus: Accounting policy change -177,696,500.00

Corrections of prior period errorsBusiness combination under common controlOthers

II. Opening balance of beginning of this year 3,889,440,000.00 1,287,932,008.99

III. Increase/decrease change of the year (decrease is marked by "-") 531,914,800.00 2,960,008,197.12

(I) Total comprehensive income(II) Capital invested and decreased by the owner 531,914,800.00 2,960,008,197.12

1. Shareholders' common share 531,914,800.00 2,939,581,397.452. Invested capital from other equity instruments3. Fund paid for shares held recorded into the owners’ equity4. Others 20,426,799.67

(III) Profi t distribution1. Appropriated surplus reserves2. Appropriated general risk preparation3. Distribution to owners (or shareholders)4. Others

(IV) Internal transfer of owner's equity1. Capital reserves transferred to capital (or share capital)2. Surplus reserves transferred to capital(or share capital)3. Loss covered by surplus reserves4. Others




Consolidated statement of changes in owner’s equityJanuary to December 2014

087



Other composite

incomesSpecial reserve

Surplus accumulation

fundReserves

Generic risk

reserveUndistributed

profi t OthersMinority

stockholders' interest

Total owner’s equity

163,244,675.92 612,657,429.95 4,118,256,129.65 -7,709,532.94 67,935,959.55 10,309,453,171.12169,986,967.06 7,709,532,94

169,986,967.06 163,244,675.92 612,657,429.95 4,118,256,129.65 67,935,959.55 10,309,453,171.12

6,429,882.56 215,393,506.16 192,089,019.95 2,435,464,615.68 -57,717,279.78 6,283,582,741.69

6,429,882.56 2,744,236,835.63 7,664,297,66 2,758,331,015.85

3,491,922,997.12

3,471,496,197.45

20,426,79967192,089,019.95 -308,772,219.95 -21,273,131.06 -137,956,331.06192,089,019.95 -192,089,019.95

-116,683,200.00 -21,273,131.06 -137,956,331.06

215,604,700.25 -267,029.76 215,337,670.49284,512,131.61 634,390.61 285,146,522.22-68,907,431.36 -901,420.37 -69,808,851.73

-211,194.09 -43,841,416.62 -44,052,610.71176,416,849.62 378,638,182.08 804,746,449.90 6,553,720,745.33 10,218,679.77 16,593,035,912.81

088


Statement of changes in equity of the Owners of parent companyJanuary to December 2014


Item

Current period

Capital stock


Capital reservesPreferred shares


I. Balance at end of last year 4,421,354,800.00 4,245,387,997.87Plus: Accounting policy change

Corrections of prior period errorsOthers

II. Opening balance of beginning of this year 4,421,354,800.00 4,245,387,997.87III. Increase/decrease change of the year (decrease is marked by "-")

(I) Total comprehensive income(II) Capital invested and decreased by the owner

1. Shareholders' common share2. Invested capital from other equity instruments3. Fund paid for shares held recorded into the owners’ equity4. Others

(III) Profi t distribution1. Appropriated surplus reserves2. Distribution to owners (or shareholders)3. Others

(IV) Internal transfer of owner's equity1. Capital reserves transferred to capital (or share capital)2. Surplus reserves transferred to capital (or stock capital)3. Loss covered by surplus reserves4. Others



089



Decreased treasury stock

StockStorage

share

Other composite incomes Special reserve Surplus reserves Undistributed

profi tTotal owners'

equity

188,090,671.01 315,479,486.06 795,103,888.01 4,253,398,268.25 14,218,815,111.20

188,090,671.01 315,479,486.06 795,103,888.01 4,253,398,268.25 14,218,815,111.20

9,878,950.69 158,300,296.39 269,030,718.60 1,979,140,987.35 2,416,350,953.03

9,878,950.69 2,690,307,185.95 2,700,186,136.64

269,030,718.60 -711,166,198.60 -442,135,480.00269,030,718.60 -269,030,718.60

-442,135,480.00 -442,135,480.00

158,300,296.39 158,300,296.39286,408,094.18 286,408,094.18

-128,107,797.79 -128,107,797.79

197,969,621.70 473,779,782.45 1,064,134,606.61 6,232,539,255.60 16,635,166,064.23

090



Item

Last period

Capital stock


Capital reservesPreferred sharese


I. Balance at end of last year 3,889,440,000.00 1,463,076,300.75Plus: Accounting policy change -177,696,500.00

Corrections of prior period errorsOthers

II. Opening balance of beginning of this year 3,889,440,000.00 1,285,379,800.75III. Increase/decrease change of the year (decrease is marked by "-") 531,914,800.00 2,960,008,197.12

(I) Total comprehensive income(II) Capital invested and decreased by the owner 531,914,800.00 2,960,008,197.12

1. Shareholders' common share 531,914,800.00 2,939,581,397.452. Invested capital from other equity instruments3. Fund paid for shares held recorded into the owners’ equity4. Others 20,426,799.67

(III) Profi t distribution1. Appropriated surplus reserves2. Distribution to owners (or shareholders)3. Others

(IV) Internal transfer of owner's equity1. Capital reserves transferred to capital (or share capital)2. Surplus reserves transferred to capital (or share capital)3. Loss covered by surplus reserves4. Others




Statement of changes in equity of the Owners of parent companyJanuary to December 2014

091



Decreased treasury stock

StockStorage

share

Other composite incomes Special reserve Surplus reserves Undistributed

profi t Others Total owners' equity

123,789,691.25 603,014,868.06 2,641,280,288.67 8,148.80 8,720,609,297.53177,704,648.80 -8,148.80

177,704,648.80 123,789,691.25 603,014,868.06 2,641,280,288.67 8,720,609,297.53

10,386,022.21 191,689,794.81 192,089,019.95 1,612,117,979.58 5,498,205,813.67

10,386,022.21 1,920,890,199.53 1,931,276,221.743,491,922,997.123,471,496,197.45

20,426,799.67192,089,019.95 -308,772,219.95 -116,683,200.00192,089,019.95 -192,089,019.95

-116,683,200.00 -116,683,200.00

191,689,794.81 191,689,794.81249,588,884.26 249,588,884.26-57,899,089.45 -57,899,089.45

188,090,671.01 315,479,486.06 795,103,888.01 4,253,398,268.25 14,218,815,111.20

092


Financial Notes

I. Basic Information of the Company1. Profi le of the Company(1) Establishment: COOEC (hereinafter referred to as “the Company” or “Company”, collectively called “the Group” when

containing subsidiaries) is a joint stock company with limited liabilities jointly promoted by CNOOC Design Company (the “Design Company”), CNOOC Platform Manufacturing Company (the “Platform Company”), CNOOC Maritime Engineering Company (the “Maritime Engineering Company”), CNOOC Bohai Corporation (the Bohai Corporation”) and CNOOC Nanhai West Corporation (the “West Corporation”). The Design Company, the Platform Company and the Maritime Engineering Company, as the major initiators, converted all of their operating assets relating to offshore engineering design, construction, offshore installation and offshore pipeline laying into the state-owned corporate shares based on the appraisal value; Bohai Company contributed the land use right of 3,632.26 square meters based on the appraisal value; and West Company contributed 4,000 tons slideway and the land use right of 3,864.00 square meters based on the appraisal value. The Company was formally registered with Tianjin Administration for Industry & Commerce on April 20, 2000 with a registered capital of RMB 170 million, and obtained the Business License for Legal Person.

(2) Business scope of the company: EPCI contract; design of oil and gas (offshore oil engineering, manufacturing and maintenance of oil machinery, pipeline transportation engineering, oil and gas processing engineering, oil and gas chemical engineering and comprehensive utilization of oil and gas) and construction engineering; construction of various offshore oil construction engineering and other offshore engineering; fabrication and installation of various steel structures and grid structure engineering; manufacturing of pressure vessels; export of the self-made products and technologies; import of raw and auxiliary materials, instruments, meters, mechanical equipment, parts, accessories and technologies necessary to the production of the Company; processing of imported materials, processing of supplied materials, processing of supplied samples, assembling of supplied components and compensation trade; external management and cooperation (contracting of the overseas offshore oil projects and domestic international bidding; contracting of the survey, consultation, design and supervision of the above overseas projects; export of equipment and materials necessary to the above overseas projects; labor service for above overseas projects); domestic coastal transportation of general cargo; international route transportation of merchandise; and leasing of self-owned house; sales of steel, pipes, cables, valves, instruments, meters and hardware and electrical equipment (Special provisions shall prevail provided the state has promulgated special provisions on operation of the above items).

(3) Initial public offering: upon the approval (ZZJHFZ [2002] No. 2) of China Securities Regulatory Commission (CSRC), the Company offered 80 million shares to the public on January 21, 2002; And listed the shares on Shanghai Stock Exchange on February 5, 2002 after relevant funds were paid (code: 600583). The Company completed the procedures of alteration registration on July 9, 2002, with the number of the Business License for Legal Person being 1200001000326 after alteration and the registered capital being RMB 250 million.

(4) Capital increases after Initial Public Offering1) This Company approved the Plan of Increasing Share Capital with Capital Reserves at the fi rst interim general meeting

of shareholders in 2003, deciding to issue additional 1 share for each 10 shares with the capital reserves based on the total of RMB 250 million shares. Upon the completion of the above plan, total shares of the Company reached RMB 275 million, including RMB 88 million tradable shares. The Company fi nished the procedures of industry & commerce alteration registration on January 12, 2004, with registered capital of RMB 275 million after the alteration;

2) The Company approved the Plan of Increasing Share Capital with Capital Reserves and Undistributed Profi ts at the general meeting of shareholders in 2003, deciding to issue 1 additional share for each 10 shares ( 275 million shares in total) to the shareholders with the capital reserves and distribute 1 dividend share for each 10 shares ( 27.5 million shares in total) to the shareholders based on the total of 27.5 million shares, which increased the share capital by RMB 55 million shares aggregately. The Company fi nished the procedures of industry & commerce alteration registration on October 27, 2004, with registered capital of RMB 330 million after the alteration.

3) The Company approved the 2004 Profi t Distribution Plan and the Plan of Converting Capital Reserve to Share Capital for 2004 at the general meeting of shareholders in 2004, deciding to distribute share dividend of 1 share for each 10 shares to the shareholders with the undistributed profi t ( 33 million shares in total) and issue 1 additional share for each 10 shares to the shareholders with the capital reserves (33 million shares in total) based on the total of 330 million shares, which increased the share capital by RMB 66 million shares aggregately. The Company fi nished the procedures of industry & commerce alteration registration on July 15, 2005, with registered capital of RMB 396 million after the alteration.

4) The Company approved the 2005 Profi t Distribution Plan and the Plan of Converting Capital Reserve to Share Capital for 2005 at the general meeting of shareholders in 2005, deciding to distribute share dividend of 7 share for each 10 shares to the shareholders with the undistributed profi t (277.2 million shares in total) and issue 3 additional share for each 10 shares to the shareholders with the capital reserves 118.8 million shares in total) based on the total of 396 million

093


Financial Notes

shares, Which increased the share capital by RMB 396 million shares aggregately. The Company fi nished the procedures of industry & commerce alteration registration on January 31, 2007, with registered capital of 792 million after the alteration.

5) The Company approved the 2006 Profi t Distribution Plan at the general meeting of shareholders in 2006, deciding to distribute share dividends of 2 shares for each 10 shares to the shareholders with the undistributed profi t (158.4 million shares in total) to the shareholders based on the total of 792 million shares. The Company fi nished the procedures of industry & commerce alteration registration on September 6, 2007, with registered capital of RMB 950.4 million after the alteration.

6) The Company approved the 2007 Profi t Distribution Plan at the general meeting of shareholders in 2007, deciding to distribute share dividends of 5 shares for each 10 shares to the shareholders with the undistributed profi t ( 475.2 million shares in total) and issue 5 additional share for each 10 shares to the shareholders with the capital reserve (475.2 million shares in total) based on the total of RMB 950.4 million shares, Which increased the share capital by 950.4 million shares aggregately. The Company fi nished the procedures of industry & commerce alteration registration on July 31, 2008, with registered capital of RMB 1,900.80 million after the alteration.

7) Approved in CSRC Permit [2008] No.1091, this Company issued 260 million ordinary shares (A share) by means of non-public offering of stocks to 8 specifi c investors including China National Offshore Oil Corporation. After the raised funds were in place, the Company handled the procedures for A Share registration and restrictions on sales of the shares in China Securities Depository and Clearing Co., Ltd. Shanghai Branch on December 29, 2008, and completed the registration of alteration on industry and commerce on February 16, 2009. The registered capital of the Company after the alteration is RMB 2,160.8 million.

8) The Company approved the 2008 Profi t Distribution Plan at the general meeting of shareholders in 2008, deciding to distribute share dividends of 1 shares for each 10 shares to the shareholders with the undistributed profi t (216.08 million shares in total) and issue 4 additional share for each 10 shares to the shareholders with the capital reserve (864.32 million shares in total) based on the total of 2.1608 billion shares, Which increased the share capital by 1.0804 billion shares aggregately. The Company finished the procedures of industry & commerce alteration registration on December 31, 2009, with registered capital of RMB 3241.2 million after the alteration.

9) The Company approved the 2009 Plan of Increasing Share Capital with Reserves at the general meeting of shareholders in 2009, deciding to issue 2 additional share for each 10 shares to the shareholders with the capital reserve (648.24 million shares in total) based on the total of 3.2412 billion shares, which increased the share capital by 648.24 million shares aggregately. The registered capital of Company is RMB 3,889.44 million after modifi cation.

10) Approved in CSRC Permit [2013] No.1180, this Company issued 531,914,800 ordinary shares (A share) by means of non-public offering of stocks to 6 specifi c investors including China National Offshore Oil Corporation. After the raised funds were in place, the Company handled the procedures for A Share registration and restrictions on sales of the shares in China Securities Depository and Clearing Co., Ltd. Shanghai Branch on October 09, 2013, and completed the registration of alteration on industry and commerce on October 14, 2013. The registered capital of the Company after the alteration is RMB 4,421,354,800. The registered capital of the Company is RMB 4,421,354,800 by the end of 2014. Registration No. of corporate business license is 120000000001439, the registered address is Apartment 202-F105, 2F, Skirt Building, Ligang Plaza, No. 82, 2nd West Road, Tianjin Airport Economic Zone, and the legal representative is Zhou Xuezhong.

(5) Equity Change to the Initiators1) On September 28, 2003, by means of agreement without payment, the actual controller of the Company CNOOC was

transferred with shares totaling 159,233,800 shares held by China Offshore Oil Platform Fabrication Company, China Offshore Oil Marine Engineering Company and China Offshore Oil Development and Engineering, which accounted for 57.91% of shares of the Company at then. CNOOC became controlling shareholder of the Company. The formality of share transfer was gone through on February 13, 2004. The CNOOC Platform Manufacturing Company, CNOOC Maritime Engineering Company and CNOOC Design Company no longer held the Company’s shares.

2) According to the non-tradable share reform plan approved by the Offi cial Replies to Relevant Issues of non-tradable Share Reform of COOEC (G.Z.Ch.Q.[2006] No.2) issued by the State-owned Assets Supervision and Administration Commission of the State Council and approved at the shareholders’ meeting on non-tradable share reform held on January 16, 2006, holders of non-tradable shares of the Group should pay a consideration of 2.4 shares for each 10 shares to the holders of tradable shares registered with Shanghai Branch of China Securities Depository and Clearing Corporation Limited as of January 20, 2006, involving total payment of 30,412,800 shares by the holders of non-tradable shares. After the consideration was paid, China National Offshore Oil Corporation, CNOOC Bohai Corporation and CNOOC Nanhai West Corporation, holders of non-tradable shares of the Group, hold 203,399,600 shares, 1,414,800 shares and 34,052,800 shares respectively in the Group, representing a ratio of 51.36%, 0.36% and 8.60% respectively.

094


Financial Notes

On the fi rst trading day after the non-tradable share reform is executed, all non-tradable shares held by the holders of the Group obtained the rights of circulation.

3) Approved in CSRC Permit [2008] No.1091, this Company issued 260 million ordinary shares (A share) by means of non-public offering of stocks to 8 specifi c investors including China National Offshore Oil Corporation. After the raised funds were in place, the Group handled the procedures for A Share registration and restrictions on sales of the shares in China Securities Depository and Clearing Co., Ltd on December 29, 2008. After the directional add-issuance this time, CNOOC, China Offshore Oil Nanhai West Corporation and China Offshore Oil Bohai Corporation would hold 1,054,318,252 shares, 163,453,282 shares and 6,791,026 shares respectively, accounting for 48.79%, 7.56% and 0.32% respectively.

4) Approved in CSRC Permit [2013] No.1180, the Company issued 531,914,800 ordinary shares (A share) by means of non-public offering of stocks to 6 specifi c investors including China National Offshore Oil Corporation. After the raised funds were in place, the Company handled the procedures for A Share registration and restrictions on sales of the shares in China Securities Depository and Clearing Co., Ltd. on October 9, 2013. After the directional add-issuance this time, CNOOC, China Offshore Oil Nanhai West Corporation and China Offshore Oil Bohai Corporation would hold 2,270,113,454 shares, 294,215,908 shares and 12,223,847 shares respectively, accounting for 51.34%, 6.65% and 0.28% respectively.

2. Consolidated Financial Statement ScopeConsolidated fi nancial statements of the Group include 14 companies, such as Offshore Petroleum Engineering (Qingdao) Co., Ltd, Shenzhen COOEC Subsea Technology Co., Ltd., COOEC (Zhuhai) Co., Ltd. Comparing with last year, due to increased investment in COOEC (Australia) Co., Ltd., as well as in COOEC International Co., Ltd., the COOEC (Canada) Co., Ltd.,is established this year.See related details of note “VI Change of the Consolidated Scope” and “VII Equity of Other Agents”

II. Basis for Preparing Financial Statement1. Preparation basis

Financial statement of the Group is prepared based on sustainable operation, according to actual transaction and events, Accounting Criteria for Enterprises issued by Ministry of Finance and relevant regulations and accounting policy and accounting estimation stated in “Preparation Methods of Key Accounting Policies, Accounting Estimation “

2. Constant operationSince the reporting period, the Group has continued operation ability, at least 12 months, without affecting the continued operation ability of a major event.

III. Signifi cant accounting policy and accounting estimate1. Statement of Obeying the Enterprise Accounting Standards

The fi nancial statement prepared by the Company is in accordance with the requirement of accounting standards for business enterprises, and actually refl ects the fi nancial condition, business performance, cash fl ows, changes in shareholders’ equity and other relevant information of the Company and the Group.

2. Accounting periodThe company’s fi scal year is from January1, to December 31.

3. Operating cycleThe operating time of the Group is 12 months.

4. Recording currencyThe Company and its domestic subsidiaries, Shenzhen COOEC Subsea Technology Co., Ltd., COOEC (Qingdao) Co., Ltd., COOEC International Co., Ltd., COOEC (Zhuhai) Co., Ltd. and Beijing Gaotai Deep-sea Technology Co., Ltd. all adopt RMB as recording currency.The Company’s overseas subsidiaries: COOEC Co., Ltd., COOEC (Indonesia) Co., Ltd., COOEC (Nigeria) Co., Ltd.,COOEC (Australia) Co., Ltd., Blue Ocean International Co., Ltd. and its controlling shareholder, Ketai Co., Ltd., all adopt USD as recording currency; and A.E.S. Destructive And Non-destructive Testing Limited adopt sHKD as recording currency. The prepared foreign currency fi nancial statement is converted into RMB.

5. Accounting treatment of company combination under the consistent or inconsistent control.As for the enterprise combination under the same control, the assets and liabilities of the combining party obtained from enterprise combination are calculated as book value of the combined party at combination date, difference between acquired net assets book value and paid book value of combination consideration; adjust capital reserve; adjust retained earnings when

095


Financial Notes

capital reserve is insuffi cient to be reducedIdentifi able assets and liabilities and contingent liabilities for the purchased party acquired from the company combination under the consistent control shall be valued by fair value, at the combination date. The fair value of cash and non-cash assets, merger costs ,the issuance of equity securities at the acquisition date, as well as the overall fee in a business combination (through multiple transactions to realize business combination in stages and all the individual costs are the acquisition costs). Recognize the difference that combination cost exceeds the identifi able net assets fair value of acquiree acquired in the combination as good will; if combination cost is less than identifi able net assets fair, fi rstly check the fair value of all the t identifi able assets, debt or the fair value with liability during the combination and check the fair value of non-cash assets of combined consideration and the issued equity securities. After checking, if combination cost is less than identifi able net assets fair value of acquiree acquired in the combination, count the difference into the current on-operating income.

6. Preparation method for merging fi nancial statementsThe Group brings the subsidiaries and structured subject into merging fi nancial statement scope.Conduct necessary adjustment to financial statements of subsidiaries according to the accounting policy and accounting period of the Company when preparing the consolidated fi nancial statement if the accounting policy and accounting period of the subsidiary are inconsistent with those of the Company.All the significant internal transaction, balance and unrealized profits within the consolidation scope, shall be offset in making statement. Owner’s equity of subsidiary does not belong to the parent company’s share and net profi t or loss for the current period, other consolidated income and total consolidated income belonging to minority shareholders ‘ interests will respectively be illustrated in the consolidated fi nancial statements of “minority shareholders ‘ equity, and their loss and income, as well as other consolidated income attributable to minority shareholders and total consolidated income attributable to minority shareholders”.The business performance and cash flows of subsidiary company from the company combination under the consistent control shall be added into the combined financial statements at the beginning of the current merging. When preparing the comparative consolidated fi nancial statements, related items in the fi nancial statements of the previous year should be adjusted , and the reporting entity has been there since the ultimate controlling party begins to control point.The business performance and cash flows of subsidiary company from the company combination under the inconsistent control shall be added into the combined fi nancial statements at the beginning of the current merging. When preparing the consolidated fi nancial statements, adjust the subsidiary’s fi nancial statements on basis of the fair value of all identifi able assets, liabilities and contingent liabilities ascertained on the purchasing date.

7. Standard-setting for cash and cash equivalentIn cash fl ow statement of the Group, cash refers to reserve of cash and bank deposit held which could be used for paying at any time; Cash equivalent refers to short-term (shall not exceed 3 months), strong fl oating, prone to convert to known amounts of cash and little risk on change of value.

8. Foreign currency transaction and conversion of foreign currency statement(1) Foreign currency transaction

In foreign currency transaction of the Group, all currency would be converted into RMB according to the exchange rate released by People’s Bank of China on the last working day in last month at the time of transaction. On the date of balance sheet, the monetary foreign currency items would be converted into RMB based on the spot exchange rate of the balance sheet date, and the resulted conversion difference would be directly included in the P/L of the period, except that the exchange difference generated by the borrowed special foreign currency loans for purchase, construction or production meeting the conditions of capitalization should be treated according to the principle of capitalization. The non-monetary foreign currency items which are calculated based on the fair value would be converted into RMB as per the spot exchange rate of the date when the fair value is determined, and the conversion difference resulted would be directly included as fair value change into the P/L of the period. The non-monetary foreign currency items which are calculated based on the historical costs will also be converted into RMB as per the spot exchange rate of the date of transaction, with the amount in RMB remaining unchanged.

(2) Conversion of foreign currency fi nancial statementThe assets and liabilities on foreign currency balance sheet would be converted into RMB as per the spot exchange rate on balance sheet date, the shareholder’s equity items excluding “undistributed profi t” would be converted as per the spot exchange rate on the date of incurring. Translation reserve from above conversion is listed in other comprehensive income item. The conversion difference in Foreign Currency Statements generated by the above conversions would be shown as individual item under shareholders’ equity. Foreign-currency cash fl ow would be converted as per similar spot exchange rate on the cash fl ow date, and the effect of exchange rate change on cash will be shown as individual item in the Cash Flow Statement.

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Financial Notes

9. Transaction instrumentWhen the Group becomes one party of the fi nancial instrument contract, identify one fi nancial asset or fi nancial liabilities.

(1) Financial assets1) Classifi cation, identifi cation and measuring methods of fi nancial assets

The Group classifi es fi nancial assets according to investment purpose and economic nature: fi nancial assets measured with fair value and accounted its change into current profit and loss, held-to-maturity investment, receivables, and fi nancial assets available for sale.

The fi nancial assets which would be calculated based on fair value with their change included in current P/L may include the tradable fi nancial assets and fi nancial assets which would be calculated based on fair value with their change. The Group will classify the financial assets that meet one of the following conditions as transaction financial assets: the purpose of acquire the fi nancial assets is to sell out in a short time; part of recognizable fi nancial tools in centralized management and there is objective evidence suggesting that the company will manage the portfolio in the method of quick-return; as a derivative instrument, however, is designed derivative instruments of effective hedging instruments, or as derivative instruments except for the derivative instruments for fi nancial guarantee contract without quotation in the active market and the fair value can not be relied on investment-related equity instruments and shall be settled by delivery of an equity instrument derivatives. The Group will designate the fi nancial instruments satisfying any of the following requirements as Financial assets calculated based on fair value with their change included in current P/L when they are initially confi rmed: this designation can eliminate or obviously diminish the related gains and losses due to the different measurement basis of the fi nancial instrument; the formal written documents of company’s risk management or investment strategy has specifi ed the fi nancial instrument should be managed and assessed on basis of fair value and then reported to the critical administers; the hybrid instruments one or more of embedded derivatives, unless the embedded derivative brings no signifi cant change to cash fl ows of the hybrid instrument or the embedded derivative obviously should not be separated from the relevant hybrid instruments, including the hybrid instrument that need separating but unable to separate when acquired or at the subsequent balance sheet date make separately measured embedded derivative. As for this type of fi nancial assets, adopt fair value for the subsequent measurement Its change credited to current profi t and loss would be credited to changeable profi t and loss of fair value; the interest or cash bonus acquired during asset holding shall be verifi ed as investment income; in the process of disposal, the difference between its fair value and initial recorded amount is verifi ed as profi t and loss on investment, with changeable profi t and loss of fair value adjusted.Held-to-maturity investment: the non-derivative fi nancial assets with fi xed due date, fi xed or defi nite recoverable amount. For it, the Group display clear intention and capability to support it to due date. Held-to-maturity investment using the effective interest method, the loss or profi ts produced by amortization or impairment, and termination of recognition are recorded in current gains or losses.Receivables refer to the non-derivative financial assets no quoted price in active market but has fixed or definite recoverable amount. It should be measured with effective interest method and subsequent measurement should be carried out according to the amortized cost. And the gain and loss produced by amortization or depreciation or termination of recognition all should be counted into current profi t and loss.Financial assets available for sale refer to non-derivative marketable fi nancial asset designated at initial stage and other unassertive financial assets. Such assets, including investment in debt instrument which are not quoted in an active market and hose fair value can not be reliably measured as well as derivative fi nancial assets connected with the equity instruments and settled by delivery of an equity instrument; and as for fi nancial instrument with active market quotations or without market quotations but fair value can be reliably measured at fair value, changes in fair value recognized in other comprehensive income, shall adopt subsequent measurement; except the exchange profi ts and losses formed from impairment losses and foreign currency monetary fi nancial assets, change in fair value of fi nancial assets available for sale is directly included into shareholders’ equity. When the fi nancial assets are derecognized, accumulated change in fair value which was originally directly included into equity are transferred to current profi ts and losses. Interests calculated according to the effective interest method during the period of holding investment in debt instruments available for sale and the cash dividends announced to be released by the investee relevant to investment in equity available for sale are recorded into current profi ts and losses as income from investment.

2) Confi rmation basis and measurement methods of fi nancial asset transferWhere fi nancial assets satisfy any of the following requirements, the recognition of it shall be terminated: ① Where the contractual rights for collecting the cash fl ow of the said fi nancial asset are terminated; ② Where the said fi nancial asset has been transferred and nearly all risks and remunerations of the ownership of the fi nancial assets have been transferred to the transferee; ③ Where the said fi nancial asset has been transferred, but the Company does not transfer or retain nearly all risks and remunerations of the ownership of the fi nancial assets, and has given up control over the fi nancial assets.

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Financial Notes

Where the Company does not transfer or retain almost all risks and rewards of fi nancial assets ownership and does not give up control of fi nancial assets, it recognizes relevant fi nancial assets in accordance with the degree of fi nancial assets transferred via continuous involvement and correspondingly recognizes relevant liabilities.When overall transfer of fi nancial assets satisfy conditions for termination of recognition, the difference between the book value of the fi nancial assets transferred and the sum of consideration received from the transfer and the accumulated amount of change in fair value originally included into other composite income are recorded into current profi ts and losses.When partial transfer of financial assets satisfy conditions for termination of recognition, the overall book value of transferred fi nancial assets between terminated recognition and non-terminated recognition is respectively amortized according to corresponding fair value. The difference between the sum of consideration received due to transfer and the accumulated amount of change in fair value to be amortized to originally included other composite income whose recognition is terminated and the aforesaid book value amortized is included into current profi ts and losses.

3) Test Method and Accounting Treatment Method of Financial Assets ImpairmentExcept the fi nancial assets which are measured at fair value and whose changes are included into current profi ts and losses, the Group checks the book value of its other fi nancial assets on the balance sheet date and accrues provision for impairment when there are objective evidences showing impairment of a certain fi nancial asset.For equity instrument available for sale of the Group, the fair value which is verifi ed based on the closing price of the equity instrument and quantity of stock keeping on December 31 shows a decrease of or exceeding over 50% compared with the fair value of the equity instrument at purchasing plus the cost verifi ed by transaction cost; or if the continuous declining time up to balance sheet date has reached or exceeded 12 months, the Group would confi rm the cumulative withdrawable depreciation reserves according to the difference between cost and year-end fair value.In the event of impairment of fi nancial assets measured at amortized cost, provision for impairment is accrued according to the difference between the present value of expected future cash fl ow (excluding the future credit loss not happened yet) and book value. Where there is objective evidence indicating that the value of the financial assets has been restored and objectively relevant to matters happened subsequent to the recognition of the losses, the impairment losses recognized previously are reversed and included in current profi ts and losses.In the event of impairment in fi nancial assets available for sale, the accumulative losses which are directly included into shareholders’ equity and which are formed due to decline in the fair value are reversed and included into impairment losses. For investment in debt instrument whose impairment losses have been recognized, where there is objective evidence indicating that the subsequent fair value has risen and is objectively relevant to matters happened subsequent to the recognition of the losses, the impairment losses recognized previously are reversed and included into current profi ts and losses. For investment in debt instrument whose impairment losses have been recognized, the rising of subsequent fair value is directly included into shareholders’ equity.

(2) Financial Liabilities1) Classifi cation, certifi cation basis and measurement methods of fi nancial liabilities

The fi nancial liabilities of the Group are classifi ed into fi nancial liabilities which would be calculated based on fair value with their change included in current P/L when they are initially confi rmed, and other fi nancial liabilities.The fi nancial liabilities measured by the fair value and the changes include transaction fi nancial assets and fi nancial liabilities be calculated based on fair value with their change included in current P/L when they are initially confi rmed.; the Group will classify the fi nancial liabilities as transaction fi nancial assets if it meet one of the following conditions: the purpose to take on the fi nancial liabilities is to is to sell out in a short time; and there is objective evidence to show that the company shall manage the portfolio in a method of quick-return, however, is designed derivative instruments of effective hedging instruments, or as derivative instruments except for the derivative instruments for financial guarantee contract without quotation in the active market and the fair value can not be relied on investment-related equity instruments and shall be settled by delivery of an equity instrument derivatives. The Group will designate the fi nancial liabilities satisfying any of the following requirements as Financial assets calculated based on fair value with their change included in current P/L when they are initially confirmed: this designation can eliminate or obviously diminish the related gains and losses due to the different measurement basis of the fi nancial instrument ; the formal written documents of company’s risk management or investment strategy has specifi ed the fi nancial instrument should be managed and assessed on basis of fair value and then reported to the critical administers; the hybrid instruments one or more of embedded derivatives , unless the embedded derivative brings no signifi cant change to cash fl ows of the hybrid instrument or the embedded derivative obviously should not be separated from the relevant hybrid instruments.; including the hybrid instrument that need separating but unable to separate when acquired or at the subsequent balance sheet date make separately measured. embedded derivative. Subsequent measurement of such fi nancial liabilities will be based on fair value, and the gains and losses resulted from the changes on fair value, and the dividend and interest

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Financial Notes

expenses related to such fi nancial liabilities would be included in current P/L.Subsequent measurement of other fi nancial liabilities will be conducted by using the effective interest method, based on amortized costs.

2) Termination confi rmation condition of fi nancial liabilitiesWhen the current obligations of fi nancial liabilities have been discharged in whole or in part, recognition of fi nancial liabilities or obligations discharged shall be terminated. The Company and the creditors sign agreement to take on new ways to replace the existing fi nancial liabilities with the new fi nancial liabilities and the two contract terms are different in essence, stop the recognition of the current fi nancial liabilities and verify the new fi nancial liabilities. The Company has made substantial revisions to all or part of contract terms of the existing fi nancial liability, stops recognition of the existing fi nancial liability or part of it, and at the same time verifi es as a new fi nancial liability after confi rmation. The difference between the book value of the part whose recognition has been terminated and the consideration paid shall be included into current profi ts and losses.

(3) Method for the Recognition of the Fair Value of Financial Assets and Financial LiabilitiesThe Group values the fair value of fi nancial assets and fi nancial liabilities in the main market, if there is no major market, value the fair value of fi nancial assets and fi nancial liabilities with most benefi cial price for the market and adopt evaluation techniques with much available data and other information support that is applicable at that time. Inputs used by the fair value measurement are divided into three levels. The fi rst level inputs is the unadjusted quotes of same assets or liabilities in active market on the measuring day; the second level inputs are the direct or indirect visible inputs of related materials or liabilities except for the fi rst level inputs; the third level inputs is invisible inputs of related materials or liabilities The Group gives priority of using the fi rst-level inputs and takes the third-level inputs as the last. The hierarchy of fair value measurement results is decided by the lowest level of input that is of great signifi cance of the overall fair value measurement.

10. Receivables

(1) Receivables of signifi cant amount of individual fi nancial assets and provision of individual bad debt

Adjustment basis or amount standard of important individual fi nancial assets

A receivable with individual amount more than RMB 10 million is an important receivable.

Preparation methods of signifi cant individual fi nancial assets and provision for bad debts

Provision for reserve for bad debts according to the difference of future cash fl ow less than book value.

(2) Other receivables consolidated based on credit risk feature and with provision for bad debts

Other provision method with combined provision for bad debt reserves according to the credit risk characteristics(accounting age analysis method, percentage balance method, and other methods).

Combination of accounting age Provision for bad debts with accounting age analysis methodCombination of connected parties No provision for bad debtsCombination of imprest-fund and deposit No provision for bad debts

In the combination, the bad debt reserves by aging analysis method


Accounting age Provision proportion for receivables (%) Provision proportion for other receivables (%)≤ 1 year 0 01-2 years 30 302-3 years 60 60> 3 years 100 100

In the combination, the accounts receivable with provision for bad debt reserves by percentage balance method


In the combination, the other accounts receivable with provision for bad debt reserves by other methods


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Financial Notes

(3) Receivables of insignifi cant individual amount but provision for individual bad debts

Reasons of provision for individual bad debts Receivables whose individual amount is not signifi cant and the provision for bad debts by combination cannot refl ect its risk characteristics

Provision method of preparation for bad debts

Provision for reserve for bad debts according to the difference of future cash fl ow less than book value.

11. Inventory

The inventories of the Group involve materials preparation and engineering constructions that have terminated but not settled.

The Group adopts perpetual inventory system and the inventories would be credited to account according to actual cost. Received or distributed inventories would verify their cost by weighted average method. Low cost consumables and packaging materials are amortized by one-time amortization method.

Final inventories are presented at the lower of cost and net realizable value. As for the causes like inventories are destroyed, all or part of the inventors are outdated or sale price is lower than cost, estimate the unrecoverable part of its cost, and make provision for inventory falling price reserves. Provision for decline in the value of commodity stocks and bulk raw materials can be measured as per the difference of individual inventory item higher than its net realizable value; the provision for decline in the value of other raw or auxiliary materials which are numerous with lower unit price can be measured by category.

Project construction refl ects the cumulative incurred cost of the contract under construction and the debit balance between the cumulative verifi ed gross profi t and cumulative settled amount. (If there is credit balance, show it in accounts received in advance to refl ect the amount of the project with progress unfi nished and settlement handled).


The Group’s long-term equity investments are primarily invested for subsidiaries, associates and joint ventures.

The Group’s adjustment basis for joint control is in accordance with all participants or participants in the combination of collective control arrangements, and the policy of arranging the related activities must be agreed by the participants that collectively control the arrangement of the activities.

The Group owns the voting shares of investees for above 20% (inclusive) and lower than 50% directly or indirectly through subsidiaries under such case, there will be no signifi cant infl uence. The facts and situation assessment, such as owning the voting shares of investee for lower than 20%, making comprehensive consideration about deploying representatives to the board of the investee or the similar authorities, participating in making decision about the fi nance and business policy of investees, conducting important trade with the investees, deploying the administrators to the investee or providing critical technical materials to the investee, will make a signifi cant infl uence on the investee.

The Company formed and controlled by the investee is the Company’s subsidiaries Long-term equity investment obtained through combination of enterprises under consolidated control is used as the initial investment cost of long-term equity investment on the combing date according to amount of share book value of net assets in the consolidated financial statements The share book value of net assets for the combined party is negative on the combing date, the long-term equity investment cost is determined as zero.

For long-term equity investment obtained through combination of enterprises, the combined cost is used as the initial investment cost.

Apart from the above-mentioned long-term equity investment which is obtained via combination of enterprises, long-term equity investment obtained by paid cash is used as investment cost according to paid purchase amount; Long-term equity investment obtained by issuing equity securities is used as investment cost according to fair value of issued equity securities. Long-term equity investment from the investor is used as investment cost according to value agreed by the investment contract or agreement; long-term equity investment from the investors is used as the investment cost according to the value agreed by investment contract or agreement;

The Group adopts costing method for accounting of investment for subsidiary companies, and Equity method is adopted for accounting of investment of joint enterprises and jointly run businesses.

Subsequent measurement adopts long-term equity investment amounted by costing method, when the additional investment is made, according to the fair value for the subsequent investment cost and the book value for the long-term investment cost of related increased transactions costs The dividends or profi ts declared to distribute by the invested entity, according to the amount held as investment income in the current period.

100


Financial Notes

The subsequent measurement adopts the long-term investment amounted by equity law, with the changes in the investee owners’ equity to increase or decrease the book value of the long-term investment accordingly During the confi rmation of the net P/L of the investees, based on the fair value of the assets that can be identifi ed by the investees at the time of receiving the investment and according to the accounting policies and accounting period of the Group, the Group shall adjust and then confi rm the net profi ts of investees after offsetting the P/L of internal transactions between the associated enterprises and JV enterprises and calculating the part attributive to the investors as per the proportion of shareholding.

When handling long-term equity investment, the difference between book value and actual obtained price is credited into current investment profi ts. Part of long-term equity investment using equity accounting method which is credited into the ownership equity are converted into current investment profi ts because other changes of owner equity outside of the net profi ts and losses of investees are credited into owner equity.

Lost joint control or signifi cant impact of the invested entity due to disposal of partial equity investment, After disposing of residual equity can be amounted as fi nancial assets available for sale, The difference between the fair value and the book value on the date of the loss joint control or signifi cant impact of the residual equity reckon in the current profi t and loss. The recognized comprehensive income accounted by equity method for the original equity investments, to carry on a accounting treatment for direct disposal of the relevant assets invested entity or basis of same liabilities at the time of termination using the equity method.

Lost control of the invested entity due to disposal of partial equity investment, the residual equity is able to take joint control and significant impact of the invested entity after disposing, convert to amounted by equity law, the difference between disposal of share book value and the disposal of consideration reckon in the investment profi t, and adjust the residual equity amounted by equity law from the acquisition; the residual equity can not take joint control or significant impact of the invested entity, convert to accounting treatment of fi nancial assets available for sale according to the relevant regulation, the difference between disposal of share book value and the disposal of consideration reckon in the investment profi t, the difference between fair value and book value of the residual equity reckon in the current profi t and loss on the date of loss control.

As for all transactions with step equity disposition to loss of control interest which is not belong to “package deal”, the Group would accounting for each transactions respectively. The Group would regard them as one transaction which belong to “package deal” of disposing subsidiary and losing control power for accounting treatment, however, the difference between the disposal price for each transactions and the disposed equity corresponding to the book value for long-term equity investment before the loss of control recognized as the other comprehensive incomes, then transfer to the current profi ts and losses for loss of control at the time of it.

13. Investment real estate

(1) If to use the cost measurement model:

Depreciation or Amortization methods

The investment real estate of the group is mainly the buildings that have been leased.

The investment real estate of the Group is regarded as the entry value based on the cost, and the cost of outsourcing investment real estate includes purchase cost, relevant taxes and dues and other expenses directly belonged to the asset; the cost of a self-built investment real estate consists of the necessary expenses for building the asset to the hoped condition for use.

The Group applies cost model in the subsequent measurement of investment real estate and adopts composite life method to withdraw depreciation or amortization according to the expected service life and net salvage value ratio. The expected service life, net salvage value ratio and annual depreciation (amortization) rate of investment real estate are as follows:

Category Depreciation period (Year) Expected net salvage value rate Annual depreciation rateHouses and buildings 20-30 5%-10% 3%-4.75%

When the use of investment real estate is changed into self-use, from the day of change, the investment real estate shall be converted to fi xed asset or intangible asset. When the use of self-use real estate is changed into earning rent or gaining capital, from the day of change, the fi xed asset or intangible asset shall be converted to investment real estate. When there is conversion, the book value before the conversion will be regarded as the entry value after the conversion.

When the investment real estate is disposed or is required to drop out of use permanently, and no economic interest is expected to get from the disposal, stop affi rming the investment real estate. The disposal consideration of the investment real estate of sell, transfer, scrap or damage is included in the current profi t and loss after deduction of its book value and relevant taxes and dues.

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Financial Notes

14. Fixed assets

(1) Recognition conditions

Fixed assets of the Group refer to tangible assets which are held for producing commodity, providing labor, lease or operation and management and whose service life is more than a fi scal year.

The fi xed assets include houses and buildings, machinery equipment, transportation equipment and electronic equipment. Fixed assets are measured initially according to actual cost when they are obtained. Cost of fi xed assets bought includes relevant tax expense such as purchase price, import tariff and other disbursement which is incurred and can be allocated to the assets for enabling fi xed assets before reaching the anticipated usable status. Cost for self-built fi xed assets consists of required disbursement incurred before the assets building this item reach the anticipated usable state. Invested fi xed assets from the investor are used as account value according to value agreed by investment contract or agreement. But the unfair value agreed by contract or agreement will be credited into account by fair value. Fixed assets leased by fi nancing lease is used as account value according to the lower one of fair value of lease assets and present value of minimum lease payment on beginning date of lease.

Subsequent expenditure related to the fi xed assets mainly includes expenditure for overhaul of fi xed assets, expenditure for replacement and innovation, which are all in conformity with the conditions of fi xed assets are credited into cost of fi xed assets. For the replaced parts, terminate confi rmation of its book value; for those in nonconformity with the conditions for recognizing fi xed assets, include them in current profi t/loss when they are incurred.

(2) Depreciation methods

Category Depreciation methods Depreciation period (Year)

Residual ratio (%)

Annual depreciation rate (%)

Houses and buildings Composite life method 20-30 5-10 3-4.75Machinery equipment Composite life method 5-10 5-10 9-19Transportation equipment Composite life method 5-15 5-10 6-19Electronic equipment Composite life method 5-10 5-10 9-19

(3) Basis of recognition for fi xed assets acquired under fi nancial leases, valuation and depreciation methods

fi xed assets acquired under fi nancial leases uses the depreciation of owned fi xed assets consistent policy for depreciation of owned fi xed assets. Can be reasonably recognized to obtain ownership of the leased asset when the lease expires, leased fi xed assets will be depreciated in its expected operating life; otherwise, fi xed assets will be depreciated in the shorter period of leasehold and its expected operating life.

15. Construction in progress

Measurement of costs of construction in progress is made based on actual incurred cost. Self-operated construction engineering is measured as direct materials, direct salaries and direct engineering expense. Contracted project is measured according to payable engineering price. The cost of equipment installation project should be measured according to the incurred expenditure such as value of installed equipment and installation and trial operation fee. Cost for construction in progress also includes loan expense and exchange profi t / loss which should be capitalized.

From the date when construction in progress reaches expected useful state, according to engineering budget, construction price and actual engineering cost, fi xed assets are turned around by estimated value and depreciated from the next month. The difference of original value of fi xed assets is adjusted after procedures of settlement for work completion are completed.

16. Borrowing expenses

Borrowing expenses include interest on borrowings, amortization of discount or premium, auxiliary costs and foreign currency exchange differences occurred due to borrowing in foreign currency. When capital expenditure has occurred, the borrowing expenses has occurred and the purchasing or construction activities which may be necessary to reach use or sales state have begun, the Group will capitalize the borrowing expenses which meet the condition of asset capitalization; if the assets which the purchasing or construction activities meeting the condition of asset capitalization reach to the use and sales status, the Group will stop the capitalization of borrowing expenses. Other borrowing expenses will be confi rmed as costs at the time of occurrence.

After deducting the interest income from the unused borrowing capitals deposited in the bank or the amount of investment income from temporary investment, the interest of special borrowing funds actually incurred in the current period will be capitalized. For general borrowing, the capitalized amount will be determined by multiplying the weighted average assets expenses of the part of accumulated assets expenses exceeding the special borrowing by capitalization rate. Capitalization

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Financial Notes

rate is determined by the weighted average interest rate of general borrowings.

The assets complying with the capitalization condition refer to the fi xed assets, investment real estate, inventories and other assets which need quite a long time (usually more than one year) of purchasing or construction activities to reach use or sales status.

If the halt of the purchasing or construction activities which meet the condition of asset capitalization occur and last for 3 continuous months, the Group will suspend the capitalization of borrowing expenses until the purchase or production of assets starts again.

17. Intangible assets

(1) Valuation method, service life, impairment test

Intangible assets of the Group include land using right, software and other intangible assets, whose actual costs will be measured on the basis of actual costs when they are obtained, wherein actual cost of purchased intangible assets is determined according to actual paid fund and relevant other expense. Actual cost of intangible assets from investors is determined according to value agreed by investment contract or agreement. But if value agreed by contract or agreement is not fair, actual cost is determined by fair value.

Land use right of this Group is amortized averagely according to transfer term from transfer date. Software and other intangible assets of this Group according to expected use term. The shortest benefi cial years provided by the contract and validity year stipulated by law among the three are amortized averagely by period. Amortized amount is credited into cost of relevant assets and current profi t/loss of its benefi cial object.

At the end of each year, the Group reviews the expected service life and amortization method of intangible assets having limited service life. If changes occur, it will be treated as changes in accounting estimates. Expected service life of intangible assets whose service life is not defined is reviewed during each accounting period. If evidence proves service life of intangible assets is limited, its service life is estimated and amortization is made during expected service life.

(2) Internal research and development expenditures accounting policies

According to its character and whether there is big uncertainty on the form of intangible assets fi nally, the expenditure on inner R&D project of the Group is divided into expenditure in research stage and the development stage. Expenditure in research stage is calculated into the current profi ts and losses from the starting; the expenditure in the development stage which can satisfy the following conditions can be determined as intangible assets:

1) Complete the intangible assets to make it available for use or sale with feasibility on technique;

2) Has the intention to complete the intangible assets to use or sell;

3) Utilize the products existing market produced by the intangible assets or the existing market belonging to the intangible assets itself;

4) There are suffi cient techniques, fi nance source and other resource support for completing the development of intangible assets, and the capability to use or sell the intangible assets;

5) The expenditure belonging to the development stage of the intangible assets can be accounted reliably.

The development expenditure which cannot satisfy the above conditions should be accounted into the current profi ts and losses from the starting; the development expenditure which has been accounted into profi ts and losses formerly cannot be determined as assets later. The development expenditure which has been capitalized is listed as the Development Expenditure on the debt sheet, and it will be transformed into intangible assets since the day when it has been up to the state in commission.

18. Long-term asset impairment

The Group inspects the items of long-term equity investment, investment real state, fi xed assets, construction in progress, intangible assets identifi ed by expected service life on each balance sheet date. When the impairment evidence exists, the Group will test for asset impairment. As for commercial reputation and intangible assets without fi xed service life, whether the impairment evidence exists, the Group shall test the impairment at the end of fi nancial year. If it is diffi cult to test the recoverable amount of one single item of asset, it shall be test on the group or combination which that item belongs to.

After impairment test, if its book value exceeds its recoverable amount, that difference shall be listed as impairment. As far as above impairment is determined, it shall not be withdrawn. The recoverable amount of asset is the higher one between the fair value of assets deducting the net value of asset disposal and present value of expected future cash fl ow.

19. Long-term unamortized expenses

The long-term deferred expenditure of the Group refers to the improvement expense of leasing fi xed assets which has been

103


Financial Notes

paid and shall be undertaken in current period or future periods with the amortization period above 1 year (not including). These expenditures are averagely amortized during benefi t period. If the long-term deferred expenditure cannot benefi t the future accounting period, the amortized value which hasn’t been amortized of this time should be converted to current loss and profi t.

20. Employee salary

(1) Accounting treatment methods for short-term salary

The short-term salary including mainly staff salary, bonus, allowances and subsidies, employee services and benefi ts etc., the accounting period for the employee services, recognize the actual short-term salary as liabilities, and reckon in the current profi t and loss or the relevant assets costs as the benefi ciary.

(2) The accounting treatment method for the post-employment benefi ts

the post-employment benefi ts is the payment of basic pension defi ned contribution plans. According to the balance sheet date, in exchange for sinking fund to separate subject of provided services for workers recognizes as the liabilities during the accounting period, and reckon in the current profi t and loss or the relevant assets costs as the benefi ciary.

(3) The accounting treatment method for the termination benefi ts

The Group shall count the unpaid employee salary as liability and include into related property cost and expense according to the target benefi ciaries of services provided by the employee during the accounting period of the employee working. The compensation paid for relieving the work relationship with employee shall be counted into current profi t and loss.

21. Estimated liabilities

The Group will count it as liability when the business related to external security, commercial acceptance bill, pending litigation or arbitration, product quality warranty, etc. which meets the following conditions at the same time: this obligation is the current obligation of the Group; the performance of this obligation may lead to economic interest outfl ow; the amount of this obligation can be calculated reliably.

Anticipation liabilities in accordance with best estimate of expenditure of current obligations will be calculated for initial measurement, and comprehensively considered on the risk of contingent item, uncertainty, time value of currency and other factors. If the time value of currency has signifi cant impact, the Group shall determine the best estimate through the relevant discounted future cash outfl ow. The Group will review book value of anticipation liabilities on the balance sheet date, and adjust the book value to refl ect the best current estimate if any change occurs.

22. Stock payment

The trade for exchanging for the service provided by the staff is paid by the stock payment settled based on equity, and it shall be calculated according to the fair value on the grant date of granting equity instrument to the staff. When the amount of the fair value can only be exercisable after it completes the service in the wait period or reaches the regulated achievements, it can be calculated into the relevant cost or expense according to straight-line method to add the capital reserve correspondingly in the wait period on the basis of the optimal estimation of the equity instrument quantity of exercisable right.

The stock payment settled based on cash shall be calculated according to the fair value of the liabilities determined based on the share or other equity instruments borne by the group. If the exercisable right is implemented immediately after it’s granted, the fair value for bearing the liabilities on the grant date can be calculated into the relevant cost or expense to add the capital reserve correspondingly; if the exercisable right is implemented after the service in the wait period is completed or the regulated achievements are reached, the service acquired in the period can be calculated into the relevant cost or expense to adjust the liabilities correspondingly on each balance sheet date in the wait period based on the optimal estimation of the condition of exercisable right and according to the fair value amount of the liabilities borne by the group.

Recalculate the fair value of the liabilities on each balance sheet date before relevant liabilities settlement and on the settlement date, and the change shall be recorded in the current profi t and loss.

All costs for cancelled equity instruments are granted during the waiting period(excluding the unsatisfi ed vesting conditions is cancelled),as accelerated vesting means the all satisfi ed vesting conditions for payment plan of residual equity during the waiting period,the recognized current residual of cancelled equity instruments are granted during the waiting period.

23. Incomes

The income of the Group mainly includes income of construction contract, income of providing services, income of merchandising and income of remising assets use right. The confi rmation principles of income are as follows;

(1) The Group confirms the realization of service income when the general income and cost of service can be calculated reliably, the economic interests related to service may flow into the Group, and the completion progress of service can

104


Financial Notes

be determined reliably. On balance sheet date, if the outcome of rendering service transaction can be estimated reliably, recognize the related service revenue as the percentage of completion which is counted as the proportion of incurred cost in the total estimated cost; if the outcome of service transaction cannot be estimated reliably and the incurred service cost can be compensated as predicted, recognize the rendering service income as the incurred and compensable cost and carry forward the incurred cost; if the outcome of service transaction cannot be estimated and all the incurred service cost cannot be compensated as predicted, count the incurred service cost into current profi t and loss with the rendering service income not recognized.

(2) The Group confirms the realization merchandising income when the Group has transferred the main risk and reward of property in the goods to purchaser, and neither remained the continuous management right usually related to ownership nor conducted effective control on the sold goods; the sum of income can be calculated reliably, related economic interests may fl ow into the enterprise, and related cost that have occurred or will occur can be calculated reliably.

(3) The Group recognizes the realization of income of remising right of assets when economic interests related to transaction may fl ow into the Group, and the sum of the income can be calculated reliably.

Construction contract

The Group recognizes contract income and expenditure as the percentage of completion on balance sheet date when the contract overall income can be calculated reliably, the economic interests related to contract may fl ow into the Group, and the actual incurred cost can be distinguished explicitly and calculated reliably, When completion percentage is adopted, the contract completion progress will be determined based on the proportion of actually incurred contract cost in expected total contract cost.

If the contract cost can be recovered and the contract income can be determined according to the actual recoverable contract cost, the contract cost is counted as expenditure during its incurred period when the outcome of construction contract cannot be estimated reliably; if the contract cost cannot be recovered, it shall be recognized as expenditure immediately with income not recognized.

The Group inspects the construction contract at the end of the term. If the estimated overall cost of construction cost surpasses estimated overall contract income, make the loss provision and count the expected loss as current expense.

24. Government subsidies

(1) The criterion and accounting treatment method for government subsidy related to assets

Government subsidies refer to the monetary assets or non-monetary assets acquired by the Group from the government without consideration. Government subsidies will be confi rmed when the Group can satisfy all its attached conditions and can receive.

If the government subsidies are monetary assets, the calculation will be in accordance with the actual amount received; for subsidies offered at fi xed standard, or when there is concrete evidence indicating relevant conditions in fi nancial support policy can be satisfi ed and fi nancial support fund is expected to be received, the calculation will be in accordance with the amount receivable; if the government subsidies are non-monetary assets, the calculation will be in accordance with the fair value; if no reliable fair value is available, the calculation will be in accordance with the nominal amount (RMB 1).

Government subsidy related to assets refers to that which is obtained by the Group and used for construction or the long-term assets of government subsidies formed by other ways. Government subsidies related to assets will be recognized as deferred income and counted into current profi t and loss averagely within the service life of relevant assets.

(2) The criterion and accounting treatment method for government subsidy related to assets

The government subsidy related to income means the government subsidy excluding the government subsidy related to assets. If the subsidy object is not specified in government document, the Group will judge based on above-mentioned principles.

Government subsidies related to income used for compensating the related expenditure or loss during the period will be recognized as deferred income and counted into current profi t and loss in the period of confi rming relevant costs; subsides used for compensating incurred expenditure or loss will be directly counted into current profi t and loss.

25. Deferred income tax assets/Deferred income tax liabilities

The Group calculates and recognizes the deferred income tax assets and deferred income tax liabilities according to the difference (temporary difference) between the tax basis of assets and liabilities and its book value. As for the deductible loss and tax credits that can be deducted annually according to tax law, recognize the corresponding deferred income tax assets. The temporary differences made by initial recognition for goodwill, relevant deferred income tax liabilities as unrecognized. The temporary differences between assets and liabilities without impacts both on accounting profi t and taxable income (or

105


Financial Notes

deductible loss) made by initial recognition in the non-consolidated transactions, relevant deferred income tax assets and liabilities as unrecognized. On balance sheet date, calculate deferred income tax assets and deferred income tax liabilities according to applicable tax rate during the period of taking the assets back and paying the liabilities off as predicted.

The group is likely to acquire the deductible temporary differences for deduction, deductible loss and taxable income are limited to the amount of tax deduction in the future, recognize the deferred income tax assets.

26. Lease

(1) The accounting treatment method for the operating lease

Operating lease refers to the leases except for fi nancial lease. The Group as lessee counts the rent of each period during the leasing term into related assets or current profi t and loss by straight line method and the Group as lessor recognizes the rent of each period during the leasing term as income by straight line method.

(2) The accounting treatment method for the fi nance lease

Financial leasing refers to the lease that actually transfers the whole risks and reward related to assets ownership. The Group as lessee sets the lower one between the fair value on the lease commencement day and the present value of the minimum lease payment as the entry value of fi xed assets under fi nancing leases, regards the minimum lease payment as the entry value of long term account payable and records the difference as unrecognized fi nancing fees.

27. Other signifi cant accounting policy and accounting estimate

When preparing the fi nancial statement, the managers of the Group need to apply estimation and assumption which may have effect on the application of accounting policy and the amount of asset, liabilities, income and cost. The practical situation may be different from the estimation. So the managers of the Group will continuously estimate the critical assumption involved in the estimation and the judge of uncertain factors. The infl uence of accounting estimate change is affi rmed in the change period and future.

The following accounting estimate and critical assumption may cause the major risks in the signifi cant adjustment of asset and liabilities book value in the future.

(1) Construction contract

The income of various construction contracts are affirmed according to completion percentage method (the budget of contract cost shall be estimated by the managers). The Group regards the direct expense in completing the construction contract and administration expense of the production unit as the estimated total cost, and the incomes including the signed contract, change, claim, reward, etc. as the estimated total income. Due to the professional quality of construction contract, the date of contract signing and the date of the project completion generally belong to two different accounting period. During the implementation of the contract, the managers of the Group will recheck the estimated total income, estimated total cost, completion progress and the incurred cost of various contracts at regular intervals. If there is any situation that the contract income, contract cost and completion degree may be changed, it shall be revised. The revise may lead to the increase or decrease of the estimated income or cost, and it will be refl ected in the profi t statement during the revise. Meanwhile, the managers of the Group will also conduct devaluation testing on the construction contract. If the estimated total cost exceeds the estimated total income, the anticipated loss of the contract will occur. Thus the full amount of relevant contract loss shall be prepared to be withdrawn, and it shall be recognized as the loss from asset devaluation in the period.

(2) Service life period of fi xed assets and intangible assets

The Group shall recheck the anticipated service life of the fi xed assets and intangible assets at the end of every year. The anticipated service life is determined by the managers based on the similar historical experience, the estimate generally applied in the industry and the updating of anticipated technology. When the previous estimate changes signifi cantly, the depreciation expense and amortization expense in the future shall be adjusted correspondingly.

(3) Impairment of receivables

The Group calculates the receivables on the balance sheet date according to the amortized cost and estimates whether there is impairment. If there is depreciation, the specifi c amount of the impairment loss shall be estimated. The objective evidence of impairment includes the matters like the interpretable data displaying the anticipated sharp decrease in future cash fl ow of individual or consolidated receivables, the interpretable data displaying the major negativity of the fi nancial situation of the debtor in individual or combined receivables, etc. If there is any evidence to prove that the receivables have been restored, and that it’s objectively connected with the matters happening after the confi rmation of the loss, the original impairment loss that has been confi rmed shall be returned.

(4) Raw material impairment

The Group estimates the net realizable value of the stock regularly and confirms the raw material impairment loss of

106


Financial Notes

the balance between the inventory cost and net realizable value. The Group considers whether the raw materials have corresponding construction contract when estimating the net realizable value of the raw material:

1) In terms of the raw materials without corresponding construction contracts, the net realizable value can be determined on the basis of the anticipated selling price of the similar materials deducting the selling expenses and relevant taxes and dues. When the actual price or cost is different from what has been anticipated before, the managers will adjust the relevant net realizable value. The result estimated based on the existing experience is somewhat different from the actual result, which may cause the adjustment of the book value of raw materials. As a result, the amount of money for raw material falling price reserves may be changed due to the above reasons. The adjustment of raw material falling price reserves will affect the profi t and loss of the change period.

2) In terms of the raw materials with corresponding construction contracts, the Company will include the test in the loss preparation test of construction contract instead of conducting impairment test separately.

(5) Income tax

As the Company and the subsidiaries are distributed in several provinces of China and in several countries, they need to pay the enterprise income tax in their local places. During withdrawing of enterprise income tax, as some matters concerning the enterprise income tax are still not confi rmed by the responsible tax authority, the estimate and judgment shall be made according to the existing tax laws and some other relevant policies. In case that the fi nal tax result of relevant matters is different from the amount that has been confi rmed, the balance may infl uence the income tax in the period.

The estimate of deferred income tax assets needs to estimate the taxable income of each year in future and the available tax rate; and the realization of deferred income tax assets depends on whether the subsidiaries have the possibility to acquire enough taxable income in future. The change of future tax rate and the reversal of temporary differences may also affect the income tax expense (income) and deferred income taxes. The change of the above estimates may lead to the major adjustment of the deferred income taxes.

28. Other signifi cant accounting policy and change of accounting estimate

(1) Signifi cant change of accounting policy


The content and reason for change of accounting policy approval procedure

Notes(report items infl uenced by the signifi cant impact name and amount)

Accounting standards for enterprises No.2-Long-term equity investment newly issued or revised in 2014 by the ministry of fi nance and series accounting standards, during the compilation of 2014 annual fi nancial statement, the Group executed the relevant accounting standards, and according to the relevant provisions of cohesion for accounting treatment. By December 31 2014,the Group use the newly issued accounting standard for the fi nancial statement, comparative fi nancial statement is reclassifi ed according to the disclose methods of the annual fi nancial statement.

It has been reviewed and approved by the 6th Meeting of the 5th Board of Directors of the Company held on October 28,2014.

The accounting policy changes and retroactive adjustment items and amount have no signifi cant impact on the Company’s total assets, net assets, net profi ts, cash fl ow, etc.

Others:

The comparative data is reclassifi ed as follows:

Statement itemsDecember 31, 2013

Before adjustment Adjusted amount After adjustmentLong-term equity investment 70,671,378.00 -70,671,378.00 -Financial assets available for sale 255,516,800.00 70,671,378.00 326,188,178.00Capital reserves 4,435,747,819.44 -187,807,613.33 4,247,940,206.11Converted difference in foreign currency statements -11,390,763.71 11,390,763.71 -Other composite incomes - 176,416,849.62 176,416,849.62Other non-current liability 1,199,893,348.45 -1,199,893,348.45 -Deferred income - 1,199,893,348.45 1,199,893,348.45

107


Financial Notes

(Continued)

Statement itemsJanuary 1, 2013

Before adjustment Adjusted amount After adjustmentLong-term equity investment 70,671,378.00 -70,671,378.00 -Financial assets available for sale 276,762,000.00 70,671,378.00 347,433,378.00Capital reserves 1,465,628,508.99 -177,696,500.00 1,287,932,008.99Converted difference in foreign currency statements -7,709,532.94 7,709,532.94 -Other composite incomes - 169,986,967.06 169,986,967.06Other non-current liability 1,182,739,809.11 -1,182,739,809.11 -Deferred income - 1,182,739,809.11 1,182,739,809.11

(2) Changes of signifi cant accounting estimate


29. Miscellaneous

Business reputation

Goodwill refers to the difference of equity investment cost or the combination cost of enterprises not under the same control exceeding the fair value which is entitled or obtained due to enterprise combination recognizable net assets by investees and acquiree and obtained at the issued date or acquisition date.

Goodwill relevant to subsidiaries is separately presented in the consolidated fi nancial statements. Goodwill relevant to joint venture and cooperative venture is included in the book value of long-term equity investment.

IV. Taxes1. Key tax and tax rate

Tax categories Tax base Tax rate

VAT The amount of VAT tax payable is the balance after current output tax deducting current input tax. 17%

Business tax The business tax on the construction business of the Company and its domestic subsidiaries and the construction business of other offshore engineering is subject to 3%

3% of the operating income.If the construction project is subcontracted to other entities, the Company will adopt the balance after deducting the subcontract costs to other entities from the total price and non-contract price as the basis for paying the business tax.

Urban maintenance and construction tax

Use valued-added tax payable, business tax and tax amount for the exempted valued-added tax reviewed and approved by the state tax bureau as tax base 7%

Enterprise income tax Due to the subject of taxation for different corporate income tax rate, the relevant situations see the following content 25%

Educational additional tax


Local educational additional fee


With the subject of taxation for different corporate income tax rate, disclosure statement

Name of subject of taxation Income Tax RatesAnnouncement of COOEC 15%COOEC (Qingdao) Co., Ltd., 15%COOEC(Zhuhai) Co., Ltd. 25%Shenzhen COOEC Subsea Technology Co., Ltd. 15%COOEC International Engineering Co., Ltd 25%Beijing Gaotai Deep-sea Technologies Co., Ltd. 15%

108


Financial Notes

2. Tax preference

(1) In April 2013, the COOEC was jointly identifi ed as a high-tech enterprise by Tianjin Science and Technology Committee, Tianjin Finance Bureau, Tianjin Municipal Offi ce of SAT, and Tianjin Local Taxation Offi ce. And it obtained the Certifi cate of Hi-tech Enterprise with No. of GR201212000101 and validity of 3 years (2012-2014).

(2) In April 2013, COOEC (Qingdao) Co., LTD was jointly identified as a high-tech enterprise by the Qingdao Municipal Science and Technology Bureau, Qingdao Municipal Bureau of Finance, Qingdao Municipal Offi ce of SAT, and Qingdao Local Taxation Offi ce. And it obtained the Certifi cate of Hi-tech Enterprise with No. of GR201237100128 and validity of 3 years (2012-2014).

(3) In April 2014, Shenzhen COOEC Subsea Technology Co., Ltd. was jointly identifi ed as a high-tech enterprise by Shenzhen Technological Trade and Informatization Committee, Shenzhen Financial Committee, Shenzhen Municipal Offi ce of SAT, and Shenzhen Local Taxation Bureau. And it obtained the Certifi cate of Hi-tech Enterprise with No. of GR201144200789 and validity of 3 years (2014-2016).

(4) In September 2014, Beijing Gaotai Deep Sea Technology Co., Ltd. was jointly identifi ed as a high-tech enterprise by Beijing Science and Technology Committee, Beijing Finance Bureau, Beijing Municipal Offi ce of SAT, and Beijing Local Taxation Offi ce, and obtained the Certifi cate of Hi-tech Enterprise with No. of GR201311000403 and validity of 3 years (2013-2015).

3. Miscellaneous

VAT

(1) The Company and its subsidiaries adopts value added tax with output tax rate of 17% in the commodity sales revenue; and the amount of tax payable is the balance after current output tax deducting current input tax.

(2) The method of “tax exemption, offset and reimbursement” is adopted during the sales of originating offshore engineering structure products for the offshore oil and gas exploitation enterprises by the Company and its subsidiary COOEC (Qingdao) Co., Ltd., COOEC (Zhuhai) Co.,Ltd.,according to Notice of the Ministry of Finance and the State Administration of Taxation on VAT and Consumption Tax Policies for Exported Goods and Labor Services (C.SH. [2012] No. 39).

(3) According to Replies of the State Administration of Taxation on Relevant Matters Concerning Charging Value Added Tax and Implementing Tax Exemption, Offset and Reimbursement on COOEC (G.SH. [2004] No.1043), value added tax shall be charged for the revenue earned from providing of self-produced products and rendering of value added tax service, and business tax shall be charged for the revenue earned from construction service provided the Company has specifi ed, in the EPC contract or subcontract, the price for construction service and that for providing of self-produced products and rendering of value added tax service. The Company would implement the Replies from January 1, 2004 and its subsidiary COOEC (Qingdao) Co., Ltd. would implement the Replies from March 2005 (the founding time).

(4) According to the notifi cation of C.SH. [2011] No.111, the unit and individual that provides the service of transportation industry and some modern service industry (hereinafter referred to as taxable service) in the People’s Republic of China (hereinafter referred to as China) are regarded as added-value tax payer. The taxpayer provides the taxable service and shall pay the added-value tax according to the document, with no business tax paid. On the basis of 17% standard rate and 13% low rate of the existing added-value tax, two types of low rate of 11% and 6% are added, and the notifi cation took effect on January 1, 2012. On July 31, 2012, upon the approval of the Sate Council, Ministry of Finance and the State Administration of Taxation released Finance and Tax [2012] No.71 Notice on the Pilot Work of Levying Value-Added Tax in Lieu of Business Tax in the Transportation Industry and Some Modern Service Industries in Beijing and Other Seven Provinces and Cities. According to the above notifi cation, Beijing has completed the transition between the old and new tax system on September 1, 2012. Therefore, relevant regulations of “Change and Add of Business Tax” would be applicable to the service income of Offshore International Engineering Co., Ltd. within the consolidation scope of the Group and the design income of Beijing Gaotai Deep Sea Technology Co., Ltd. in paying the added-value tax by tax rate of 6% from September 2012.

(5) As stated above, according to Notice on the Pilot Work of Levying Value-Added Tax in Lieu of Business Tax in the Transportation Industry and Some Modern Service Industries in Beijing and Other Seven Provinces and Cities, relevant regulations of “Change and Add of Business Tax” would be applicable to the design income and the modern service income of the Company from December 2012, with the tax rate of 6%.

(6) On May 24, 2013, upon the approval of the State Council, the State Administration of Taxation released Finance and Tax [2013] No.37 Notice on the Tax Policies for Implementing across the Country the Pilot Program of Levying Value-Added Tax in Lieu of Business Tax on the Transportation Industry and Some Modern Service Industries. According to the Notice, relevant regulations of “Change and Add of Business Tax” would be applicable to the subsidiary COOEC (Qingdao) Co., Ltd. from August 1, 2013.

Other taxes are calculated and paid in accordance with relevant tax provisions of the country.

109


Financial Notes

The taxes of overseas holding subsidiaries of the Company are calculated and paid in accordance with relevant tax provisions of the places where such subsidiaries are located.

V. Notes to Items of Consolidated Financial Statement1. Currency capital


Item Ending balance Opening balanceCash on hand 45,527.53 37,833.87Bank deposits 3,281,780,811.23 1,779,471,837.84Other monetary capital - 1,339.53Total 3,281,826,338.76 1,779,511,011.24

Including: total amount of the deposit abroad 169,555,103.68 117,871,649.46

2. Financial assets calculated based on fair value with their change included in current P/L


Item Ending balance Opening balanceTransaction fi nancial assets 2,147,424.00 34,133,463.00Including:Debt instruments investment

Equity instrument investmentDerivative fi nancial assets 2,147,424.00 34,133,463.00Others

Appointed as fi nancial assets calculated based on fair value with their change included in current P/LIncluding:Debt instruments investment

Equity instrument investmentOthers

Total 2,147,424.00 34,133,463.00

Others:

The remaining sum of derivatives fi nancial assets at the end of year is the change in fair value of ICHTHYS project related to forward sale and purchase contract between

The subsidiary, COOEC (Qingdao) Co., Ltd, and Standard Chartered Bank.

3. Receivables

(1) Disclosures for type of accounts receivable


Category

Ending balanceBook balance Bad debt reserves

Book valueAmount Percentage

(%) AmountProvision

proportion (%)

Signifi cant unit amount with single provision for bad debt reserves 5,800,226,686.91 99.10 5,800,226,686.91

110


Financial Notes

Category



(%) AmountProvision

proportion (%)

Accounts receivable with consolidated provision for bad debt reserves according to the credit risk characteristics

52,769,959.26 0.90 9,967,515.94 42,802,443.32

Receivables with less signifi cant unit amount and single provision for bad debtsTotal 5,852,996,646.17 / 9,967,515.94 / 5,843,029,130.23

Category

Opening balanceBook balance Bad debt reserves

Book valueAmount

Proportion of shareholding

(%)Amount

Provision proportion

(%)Signifi cant unit amount with single provision for bad debt reserves 4,264,507,751.14 98.26 4,264,507,751.14

Accounts receivable with consolidated provision for bad debt reserves according to the credit risk characteristics

75,464,987.48 1.74 5,535,620.13 69,929,367.35


Accounts receivable with signifi cant unit amount and single provision for bad debt reserves at the end of the period


Accounts receivable(By unit)

Ending balanceAccounts

receivableBad debt reserves


Reasons of provision

CNOOC 4,379,359,766.54 - - _ _Newfi eld China LDC, NCL 731,254,421.66 - - _ _CNOOC Gas & Power Group 213,127,890.77 - - _ _SAIPEMS. p.A 155,908,242.09 - - _ _CNOOC Energy Technology & Services Limited 115,852,633.77 - - _ _TECHNIPSAUDIARABIA Ltd 47,716,017.53 - - _ _SNAMPROGETTI 36,983,918.45 - - _ _DOCKWISESHIPPING B.V. 34,621,630.28 - - _ _Huade Petrochemical Co., Ltd.Daya Bay Huizhou 31,654,382.26 - - _ _CNOOC Research Institutes 28,430,000.00 - - _ _HuskyOil(Madura)Ltd. 14,807,165.93 - - _ _CNOOC Oil & Gas Development & Utilization Company 10,510,617.63 - - _ _Total 5,800,226,686.91 - / /

In the combination, the accounts receivable with provision for bad debt reserves by aging analysis method


111


Financial Notes


Accounting ageEnding balance

Accounts receivable Bad debt reserves Provision proportion< 1 yearOf which: subentry within 1 yearText:1 24,896,383.36 -Text:1Subtotal within year 24,896,383.36 -One to two year 3,037,683.75 911,305.12 30Two to three year 8,350,178.35 5,010,107.02 60> 3 years 4,046,103.80 4,046,103.80 100Total 40,330,349.26 9,967,515.94

Receivable with provision for bad debts by percentage of receivables in the combination:


(2) Provision for withdrawn or retaken bad debt reserves

Amount of bad debt reserves of this period is RMB 4,431, 895.81; amount of withdrawn or retaken bad debt reserves of this period is zero.

The Group has no accounts receivable with full provision for bad debt reserves or with greater proportion, but it was fully withdrawn or retaken or with greater proportion in the current year.

(3) Receivables canceled actually after verifi cation in current period


Item Amount written offAccounts receivable written off actually 0

(4) Accounts receivable of the top fi ve party of ending balance owed by the imputation of arrears collection.

Unit name Balance at the end of the year Accounting age

Proportion to the total number of

receivables balance at the end of the

year (%)

Bad debt reserves of the ending balance

of this year

CNPC 4,382,105,468.96 Note 1 74.87 -Newfi eld China LDC, NCL 731,254,421.66 < 1 year 12.49 -CNOOC Gas & Power Group 213,559,607.45 Note 2 3.65 -SAIPEMS. pA 155,908,242.09 < 1 year 2.66 -CNOOC Energy Technology & Services Limited 120,634,357.67 Note 3 2.06 -

Total 5,603,462,097.83 _ _ 95.73 -

Note 1: Year end balance of current account between the Group and CNOOC is RMB 4,373,005,468.96 within one year and RMB 9,100,000.00 for 1-2 years.

Note 2: Year end balance of current account between the Group and CNOOC Gas & Power Group is RMB 208,261,607.45 within one year and RMB 5,298,000.00 for 1-2 years.

Note 3: Year end balance of current account between the Group and CNOOC Energy Technology & Services Limited is RMB 119,094,357.67 within one year and RMB 1,540,000.00 for 1-2 years.

112


Financial Notes

4. Advance payments

(1) Prepayment is listed by the accounting age


Accounting ageEnding balance Opening balance

Amount Percentage (%) Amount Percentage (%)

< 1 year 235,242,188.32 95.59 558,741,011.65 96.94

One to two year 10,861,668.69 4.41 13,655,007.22 2.37

Two to three year - - 790,945.01 0.14

> 3 years - - 3,142,884.68 0.55

Total 246,103,857.01 100.00 576,329,848.56 100.00

(2) Accounts receivable of the top fi ve party of ending balance owed by the imputation of arrears collection.

Unit name Balance at the end of the year Accounting age

Proportion of the total number of account balance at the end of the

year (%)Qingdao Jing Bao Steel Processing and Distribution Company 37,853,400.71 < 1 year 15.38Scheuerle Fahrzeugfabrik GmbH 34,181,468.62 < 1 year 13.89TOP-KYLIN(HONG KONG)TRADING CO. 32,482,113.98 Note 13.20Marubeni-Itochu Tubulars Asia Pte Ltd 21,032,581.70 < 1 year 8.55Arcelor International Steel Trading (Shanghai)Co.,Ltd 18,085,347.03 < 1 year 7.35Total 143,634,912.04 ____ 58.37

Note: In prepayment balance made by the Group to TOP-KYLIN(HONGKONG)TRADINGCO at the end of year, the amount within 1 year is RMB 29,562,864.10 and that of 1-2 years is RMB 2,919,249.88.

5. Interest receivable

(1) Classifi cation of interest receivable


Item Ending balance Opening balanceTime DepositsEntrusted loansBond InvestmentInterest of bank fi nancial products 9,899,178.04 16,831,742.46Deposit Interest 494,600.00 -Total 10,393,778.04 16,831,742.46

Others:

Note: Interest receivable of the Group at the end of year refers to the interests of the bank fi nancial products purchased by the COOEC (Zhuhai) Co., Ltd.

113


Financial Notes

6. Other receivables

(1) Type of other accounts receivable


Category



(%) AmountProvision

proportion (%)

Other accounts receivable with signifi cant unit amount and single provision for bad debt reserves

202,283,500.67 84.45 - - 202,283,500.67

Other accounts receivable with combined provision for bad debt reserves according to the credit risk characteristics

37,237,581.14 15.55 816,307.94 __ 36,421,273.20

Signifi cant unit amount but with single provision for bad debt reservesTotal 239,521,081.81 / 816,307.94 / 238,704,773.87

Category



(%) AmountProvision

proportion (%)

Other accounts receivable with signifi cant unit amount and single provision for bad debt reserves

262,090,039.30 90.18 - - 262,090,039.30

Other accounts receivable with combined provision for bad debt reserves according to the credit risk characteristics

28,545,198.45 9.82 1,203,891.53 __ 27,341,306.92

Signifi cant unit amount but with single provision for bad debt reservesTotal 290,635,237.75 / 1,203,891.53 / 289,431,346.22

Other accounts receivable with signifi cant unit amount and single provision for bad debt reserves at the end of the period



Other receivables (per unit)Ending balance

Other receivables

Bad debt reserves



Tianjin Zhaoyin Heavy Equipment Leasing Co., Ltd. 72,512,393.60 - - --Tianjin Municipal Offi ce of SAT, Offshore Oil Taxation Branch Bureau 45,504,889.63 - - --

Qingdao Municipal Offi ce of SAT in Development Zone 38,485,608.26 - - --Zhuhai Municipal Offi ce of SAT 32,624,759.18 - - --China Ping An Insurance Co., Ltd. 13,155,850.00 - - --otal 202,283,500.67 - / /

In the combination, the other accounts receivable with provision for bad debt reserves by aging analysis method


114


Financial Notes



Other receivables

Bad debt reserves


< 1 yearOf which: subentry within 1 year< 1 year 2,365,693.85 - -

Subtotal within year 2,365,693.85 - -One to two year 140,768.53 42,230.56 30.00Two to three year 123,515.00 74,109.54 60.00> 3 years 699,967.84 699,967.84 100.00Three to four yearsFour to Five years> 5 yearsTotal 3,329,946.12 816,307.94



In the combination, the other accounts receivable with provision for bad debt reserves by other methods:


(2) Provision for withdrawn or retaken bad debt reserves

The amount for prevision for bad debts withdrawn in current period is RMB 0, and that reclaimed or turned back in current period is RMB 387,583.59.

The Group has no other accounts receivable with full provision for bad debt reserves or with greater proportion, but it was fully withdrawn or retaken or with greater proportion in the current year.

(3) Other receivables canceled actually after verifi cation in current period


Item Amount written offOther accounts receivable written off actually 0

(4) Classifi cation of other accounts receivable by nature

Nature of fund Ending balanceBook balance at beginning of the

periodRefunding export taxes 116,615,257.07 88,851,796.60Deposit, Imprest-fund and Margin 106,331,146.67 193,969,027.40Insurance claim payment 13,155,850.00 -Advance money 3,418,828.07 7,814,413.75Total 239,521,081.81 290,635,237.75

115


Financial Notes

(5) Other accounts receivable of the top fi ve party of ending balance owed by the imputation of arrears collection.


Unit name Nature of accounts

Ending balance

Accounting age

Proportion of the total number of other accounts receivable balance at the

end of the year.

Bad debt reserves of the ending balance

of this periodTianjin Zhaoyin Heavy Equipment Leasing Co., Ltd.

Premium for lease 72,512,393.60 1-2 years 30.27 -

Tianjin Municipal Offi ce of SAT, Offshore Oil Taxation Branch Bureau

Refunding export taxes 45,504,889.63 < 1 year 19.00 -

Qingdao Municipal Offi ce of SAT in Development Zone


Zhuhai Municipal Offi ce of SAT Refunding export taxes 32,624,759.18 < 1 year 13.62 -

China Ping An Insurance Co., Ltd.

Insurance Section 13,155,850.00 < 1 year 5.49 -

Total / 202,283,500.67 / 84.45 -

(6) Accounts receivable involving government subsidies:

None

(7) Confi rmation of other accounts receivable is terminated for the transfer of fi nancial assets:

None

(8) Transferring other accounts receivable and constantly interfering in forming amount of asset and debt:

None

7. Inventory

(1) Type of inventories


ItemEnding balance Opening balance

Book balance Falling price reserves Book value Book balance Falling price

reserves Book value

Raw materialsWork-in-processCommodity StocksRevolving MaterialsConsumable biological assetsAsset settled not completed in construction contract at end of periodProject construction 421,141,447.65 - 421,141,447.65 1,177,591,343.00 38,299,112.30 1,139,292,230.70Common steel products 137,579,282.69 10,954,230.41 126,625,052.28 148,308,804.85 9,705,376.86 138,603,427.99Imported materials 24,878,495.10 - 24,878,495.10 7,687,011.68 - 7,687,011.68Electrical engineering materials 24,171,573.01 - 24,171,573.01 6,896,663.47 - 6,896,663.47

Other materials 512,031,176.00 - 512,031,176.00 423,132,437.53 - 423,132,437.53Total 1,119,801,974.45 10,954,230.41 1,108,847,744.04 1,763,616,260.53 48,004,489.16 1,715,611,771.37

116


Financial Notes

(2) Inventory falling price reserves


Item Opening balance

Added amount of this period

Current decrease in this period Ending

balanceAccrual Others Retaken or

Write-off Others

Raw materialsWork-in-processCommodity StocksRevolving MaterialsConsumable biological assetsAsset settled not completed in construction contract at end of periodProject construction 38,299,112.30 38,299,112.30Project material preparation 9,705,376.86 1,363,400.78 114,547.23 10,954,230.41Total 48,004,489.16 1,363,400.78 38,413,659.53 10,954,230.41

(3) Asset settled not completed in construction contract at end of period:


Item BalanceAccumulated cost incurred 2,456,255,053.04Accumulated confi rmed gross profi t 468,252,246.34Anticipated loss of the contract -

Settle amount 2,503,365,851.73Asset settled not completed in construction contract at end of period 421,141,447.65

8. Other current assets


Item Ending balance Opening balanceAdvance payment of enterprise income tax 182,263.96 286,056.31Offset against VAT input tax 86,887,566.62 20,852,386.02Bank fi nancial products 3,000,000,000.00 4,071,000,000.00Total 3,087,069,830.58 4,092,138,442.33

9. Financial assets available for sales

(1) Financial assets available for sales



Book balance Depreciation reserves Book value Book balance Depreciation

reserves Book value

Debt instrument available for saleEquity instrument available for sale

117


Financial Notes

Calculated based on fair value 280,170,438.00 - 280,170,438.00 255,516,800.00 - 255,516,800.00

Calculated based on cost 70,671,378.00 - 70,671,378.00 70,671,378.00 - 70,671,378.00

Total 350,841,816.00 - 350,841,816.00 326,188,178.00 - 326,188,178.00

(2) Financial assets available for sales calculated based on fair value by the end of period


Asset classifi cation available for sale Rights and interests available for sale Tools

Debt available for sale Tools Total

Cost of equity instrument 47,525,018.67 47,525,018.67Fair value 280,170,438.00 280,170,438.00Cumulative changed amount of fair value credited into other consolidated income 197,748,606.43 197,748,606.43

Impairment amount withdrawn

(3) Financial assets available for sales calculated based on cost by the end of period


Book balance Depreciation reserves Shareholding ratio of

invested unit (%)

Cash dividend of this current

Beginning of the period

Current increase

Current decrease

End of the period

Beginning of the

period

Current increase

Current decrease

End of the

periodCNOOC Finance Co., Ltd.

70,671,378.00 70,671,378.00 1.77 6,499,921.54

Total 70,671,378.00 70,671,378.00 / 6,499,921.54

Other instruction

Financial assets available for sale of the Group at the end of year needs no withdrawing of depreciation reserves.




Opening balance

Variation in this period

Ending balance

Ending balance of

depreciation reserves

Additional investment

Negative investment

Confi rmed profi t and

loss on investment

under equity method

Other composite

incomes adjustment

Other equity

variation

Announcement to release cash

dividends or benefi t issue

Provision for impairment

lossOthers

I. Cooperative enterprise

SubtotalII. Joint venturesKvearner and COOEC (Qingdao) Engineering Technology Co., Ltd.

8,125,788.00 -8,125,788.00

Subtotal 8,125,788.00 -8,125,788.00Total 8,125,788.00 -8,125,788.00

118


Financial Notes

11. Investment real estate

Investment property measurement mode

(1) Investment property in cost measurement mode



Item Houses and buildings Land-use right Construction in

progress Total

I. Original book value1. Opening balance 284,643,459.61 284,643,459.612. Added amount of this period

(1) Outsourcing(2) Inventory/ fi xed asset/ transferred

from construction in progress(3) Added combination of enterprise

3. Current decrease in this period(1) Disposal(2) Other transfer-out

4. Ending balance 284,643,459.61 284,643,459.61II Accumulated depreciation and amortization

1. Opening balance 15,898,193.42 15,898,193.422. Added amount of this period 12,814,982.41 12,814,982.41

(1) Accrue or amortization 12,814,982.41 12,814,982.413. Current decrease in this period

(1) Disposal(2) Other transfer-out

4. Ending balance 28,713,175.83 28,713,175.83III. Depreciation reserves

1. Opening balance2. Added amount of this period

(1) Accrue3. Current decrease in this period

(1) Disposal(2) Other transfer-out

4. Ending balanceIV. Book value

1. Book value at end of the period 255,930,283.78 255,930,283.782. Book value at beginning of the period 268,745,266.19 268,745,266.19

119


Financial Notes

12. Fixed assets

(1) Condition of fi xed assets


Item Housings and buildings

Machinery equipment Transport facility Electronic

equipment Total

I. Original book value1. Opening balance 3,314,031,827.28 2,596,101,449.77 9,739,467,783.00 164,155,927.71 15,813,756,987.762. Added amount of

this period 921,655,799.97 338,671,724.73 1,947,519,048.97 18,914,155.89 3,226,760,729.56

(1) Procurement 1,275,396.69 90,845,492.10 -13,360,612.18 9,795,753.41 88,556,030.02(2) Transferred from

construction in progress

920,380,403.28 247,826,232.63 1,960,879,661.15 9,118,402.48 3,138,204,699.54

(3) Added combination of enterprise

3. Current decrease in this period 45,238,092.75 70,132,843.31 10,662,368.99 126,033,305.05

(1) Disposal or scrapping 45,238,092.75 70,132,843.31 10,662,368.99 126,033,305.05

4. Ending balance 4,235,687,627.25 2,889,535,081.75 11,616,853,988.66 172,407,714.61 18,914,484,412.27II. Accumulated depreciation

1. Opening balance 746,878,070.96 1,380,759,729.72 2,613,297,915.33 96,752,331.32 4,837,688,047.332. Added amount of

this period 146,644,307.32 233,132,547.29 652,465,595.45 18,955,927.75 1,051,198,377.81

(1) Accrue 146,641,945.21 233,115,437.79 650,892,633.36 18,955,549.26 1,049,605,565.62(2) Converted

difference in foreign currency statements

2,362.11 17,109.50 1,572,962.09 378.49 1,592,812.19

3. Current decrease in this period 38,449,337.47 64,420,426.07 9,431,412.56 112,301,176.10

(1) Disposal or scrapping 38,449,337.47 64,420,426.07 9,431,412.56 112,301,176.10

4. Ending balance 893,522,378.28 1,575,442,939.54 3,201,343,084.71 106,276,846.51 5,776,585,249.04III. Depreciation reserves

1. Opening balance 10,820,350.86 10,820,350.862. Added amount of

this period 154,675,004.24 154,675,004.24

(1) Accrue 154,675,004.24 154,675,004.24

3. Current decrease in this period(1) Disposal or

scrapping

4. Ending balance 154,675,004.24 10,820,350.86 165,495,355.10IV. Book value

1. Book value at end of the period 3,187,490,244.73 1,303,271,791.35 8,415,510,903.95 66,130,868.10 12,972,403,808.13

2. Book value at beginning of the period

2,567,153,756.32 1,204,521,369.19 7,126,169,867.67 67,403,596.39 10,965,248,589.57

120


Financial Notes

(2) Fixed asset condition by fi nancial lease


Item Original book value

Accumulated depreciation

Depreciation reserves Book value

Transportation equipment 942,337,466.60 42,405,186.00 - 899,932,280.60Total 942,337,466.60 42,405,186.00 - 899,932,280.60

(3) Fixed assets by operating lease


ItemBook value at

beginning of the period

Transportation equipment 697,818,042.90Total 697,818,042.90

(4) Fixed assets not completed the property title

Item Book valueReasons for not

completed the property title

Integrated warehouse 1/3- period I 36,617,610.03 In progressDanjiang Road production technology building 29,583,432.22 In progressAir compression station and distribution substation 20,362,868.37 In progressSite period II renovation project 10,576,847.50 In progressFeed water booster pump station 9,118,388.32 In progressGas gasifi cation station 6,958,866.97 In progressLiquid oxygen, carbon dioxide gas station 4,667,896.35 In progressOil change database 2,914,456.31 In progressDoorkeeper in offi ce area -period I 1,666,431.95 In progress1-5# doorkeeper-period I 1,328,659.41 In progress12# rest room 185,066.72 In progress

Others:

Its subsidiary COOEC Co., Ltd. borrowed long-term loan of USD 50.2 million from BANK OF CHINA (HONG KONG) UMITED with Boat HYSY699 and Boat HYSY697 as the mortgage. Up to December 31, 2014, it had repaid USD 41.02 million with a residual amount of USD 9.18 million. Original value of HYSY697 is RMB 229,092,978.06 and its accumulated depreciation is RMB 72,754,471.88, so the net value is RMB 156,338,506.18.

121


Financial Notes

13. Construction in progress

(1) Condition of construction in progress



Book balance Depreciation reserves Book value Book balance Depreciation

reserves Book value

HYSY291 1,101,788,871.67 - 1,101,788,871.67 - - -Deepwater Foundation Construction Project Phase II

286,513,934.77 - 286,513,934.77 - - -

Phase I of Deepwater Foundation Construction Project

159,631,968.34 - 159,631,968.34 653,163,314.77 - 653,163,314.77

Equipment Purchase 47,534,017.33 - 47,534,017.33 6,085,526.97 - 6,085,526.97Production technology building construction project

44,354,328.61 - 44,354,328.61 4,700.00 - 4,700.00

Vessel Workshop Construction Project 23,706,885.25 - 23,706,885.25 6,429,876.00 - 6,429,876.00

HYSY278 cruising power promotion 5,659,740.00 - 5,659,740.00 - - -

109 vessel rod 5,250,000.00 - 5,250,000.00 - - -Promotion for Lanjiang vessel power generation diesel engine control system and engine room monitor and control system

4,920,000.00 - 4,920,000.00 - - -

Management and control workshop expansion project 3,944,708.65 - 3,944,708.65 - - -

Overall budgeting system deepening application and promotion project-hyperion budgeting system

3,740,237.47 3,740,237.47 3,204,917.47 3,204,917.47

Semi-submersible pipe-laying crane vessel 3,697,826.19 - 3,697,826.19 - - -

Pipe ditching (DP) project vessel construction project 2,926,245.80 - 2,926,245.80 1,720,000.00 - 1,720,000.00

Construction project management information system

2,026,114.34 - 2,026,114.34 39,219.00 - 39,219.00

Multifunction underwater engineering vessel - - - 567,467,131.72 - 567,467,131.72

8 winch procurement project of installation company - - - 45,409,836.00 - 45,409,836.00

Offi ce and Living Area - - - 35,709,402.06 - 35,709,402.06Jet Grouting Trencher - - - 19,456,812.26 - 19,456,812.26Phase II of Chiwan Field Construction Project - - - 3,831,524.00 - 3,831,524.00

Others 24,837,555.60 - 24,837,555.60 14,749,289.33 - 14,749,289.33Total 1,720,532,434.02 - 1,720,532,434.02 1,357,271,549.58 - 1,357,271,549.58

122


Financial Notes

(2) Changes in major construction projects of current period

Project name Budget Opening balance Added amount of this period

Transferred fi xed assets

amount in this period

HYSY291 1,417,000,000.00 - 1,101,788,871.67 -Deepwater Foundation Construction Project Phase II 1,890,700,000.00 - 286,513,934.77 -

Phase I of Deepwater Foundation Construction Project 1,873,373,312.44 653,163,314.77 432,022,380.43 925,522,703.83

Equipment Purchase 6,085,526.97 158,447,780.87 116,091,222.16Production technology building construction project 185,180,000.00 4,700.00 44,349,628.61 -

Vessel Workshop Construction Project 55,794,400.00 6,429,876.00 17,277,009.25 -HYSY278 cruising power promotion 5,667,740.00 - 5,659,740.00 -109 vessel rod 5,500,000.00 - 5,250,000.00 -Promotion for Lanjiang vessel power generation diesel engine control system and engine room monitor and control system

5,200,000.00 - 4,920,000.00 -

Management and control workshop expansion project 5,000,000.00 - 3,944,708.65 -

Overall budgeting system deepening application and promotion project-hyperion budgeting system

4,000,000.00 3,204,917.47 535,320.00 -

Semi-submersible pipe-laying crane vessel 10,280,000.00 - 3,697,826.19 -Pipe ditching (DP) project vessel construction project 350,000,000.00 1,720,000.00 1,206,245.80 -

Construction project management information system 5,000,000.00 39,219.00 1,986,895.34 -

Multifunction underwater engineering vessel 1,162,053,000.00 567,467,131.72 447,427,175.84 1,014,894,307.56

8 winch procurement project of installation company 49,500,000.00 45,409,836.00 2,324,328.67 47,734,164.67

Offi ce and Living Area 40,660,000.00 35,709,402.06 9,005,583.83 44,714,985.89Jet Grouting Trencher 20,680,000.00 19,456,812.26 457,052.06 19,913,864.32Phase II of Chiwan Field Construction Project 4,970,000.00 3,831,524.00 1,708,090.00 5,539,614.00

Others 14,749,289.33 39,360,707.68 21,456,370.51Total 7,090,558,452.44 1,357,271,549.58 2,567,883,279.66 2,195,867,232.94

Note 1: The ending balance of Phase II of Deepwater Foundation Construction Project is RMB 286,513,934.77 and the total amount accrued is RMB 286,513,934.77, including RMB 124,151,464.50 paid by raised fund and RMB 162,362,470.27 paid by self-raised fund.

Note 2: The ending balance of Phase I of Deepwater Foundation Construction Project is RMB 159,631,968.34; fi xed asset transfer in last phase is RMB 400,069,143.34; fi xed asset transfer in this phase is RMB 925,522,703.83 and the total amount accrued is RMB 1,485,254,838.54 by the end of this year, including RMB 1,183,930,035.61 paid by raised fund and RMB 301,324,802.93 paid by self-raised fund.

123


Financial Notes

Other amount

decrease in this period

Ending balance

Proportion of project

accumulative investment in

budget (%)

Project schedule

Accumulated amount

of interest capitalization

Including: amount

of interest capitalization in this period

Interest capitalization

ratio in this period (%)

Capital source

- 1,101,788,871.67 77.76 100 Self-fi nancing fund

- 286,513,934.77 15.15 31.28 Note 1

31,023.03 159,631,968.34 79.28 100 Note 2

908,068.35 47,534,017.33 Self-fi nancing fund

- 44,354,328.61 23.95 28 Self-fi nancing fund

- 23,706,885.25 42.49 100 Self-fi nancing fund- 5,659,740.00 99.86 100 Self-fi nancing fund- 5,250,000.00 95.45 89 Self-fi nancing fund




- 3,697,826.19 35.97 __ Self-fi nancing fund



- - 87.34 100 4,276,883.41 Self-fi nancing fund

- - 96.43 100 Self-fi nancing fund

- - 109.97 100 Self-fi nancing fund- - 96.3 100 Self-fi nancing fund

- - 111.46 100 Self-fi nancing fund

7,816,070.90 24,837,555.60 Self-fi nancing fund8,755,162.28 1,720,532,434.02 / / 4,276,883.41 / /

124


Financial Notes

14. Disposal of fi xed assets


Item Ending balance Opening balanceDisposal of HYSY 699 - 288,331,886.31Total - 288,331,886.31

Other instruction:

HYSY699 vessel has been cleaned in 2014, by December 31, 2014, Our Group has received insurance claims payment of HYSY699 vessel USD 36,542,900; reduced sinking loss and total cost of HYSY699 vessel 3491.21, balance USD 1,630,800 as been included in non-operating income. The residual value of the recovered “Offshore Oil 699” vessel still belongs to the Group. Generated disposal earnings USD 2,993,500 will be reckoned in the current yield.

15. Intangible assets

(1) Condition of intangible assets


Item Land-use right Patent right

Non-patented technology Software Total

I. Original book value1. Opening balance 2,008,045,504.38 92,278,592.12 2,100,324,096.502. Added amount of this period -69,788,924.36 13,486,343.95 -56,302,580.41

(1) Procurement -69,788,924.36 13,486,343.95 -56,302,580.41(2) Internal R&D(3) Added combination of enterprise

3. Current decrease in this period(1) Disposal

4. Ending balance 1,938,256,580.02 105,764,936.07 2,044,021,516.09II. Accumulated amortization

1. Opening balance 118,236,091.99 78,091,661.53 196,327,753.522. Added amount of this period 36,380,810.75 8,568,319.27 44,949,130.02

(1) Accrue 36,380,810.75 8,568,319.27 44,949,130.023. Current decrease in this period

(1) Disposal

4. Ending balance 154,616,902.74 86,659,980.80 241,276,883.54III. Depreciation reserves

1. Opening balance2. Added amount of this period

(1) Accrue

3. Current decrease in this period(1) Disposal

4. Ending balance

125


Financial Notes

Item Land-use right Patent right

Non-patented technology Software Total

IV. Book value1. Book value at end of the period 1,783,639,677.28 19,104,955.27 1,802,744,632.552. Book value at beginning of the

period 1,889,809,412.39 14,186,930.59 1,903,996,342.98

Intangible asset formed balance by internal R&D takes up 0% of the phase-end book value of intangible assets.

(2) Condition of land use right not completed the property title:

Item Book value Reasons for not completed the property titleCOOEC (Qingdao) Co., Ltd. 232,853,225.62 In progress

16. Development expenditure



Added amount of this period Current decrease in this period

Ending balanceInternal

development expenditure

OthersConfi rmed

as intangible assets

Transferred current profi t

and lossUnderwater welding equipment 1,302,000.00 1,302,000.00 0Total 1,302,000.00 1,302,000.00 0

17. Business reputation

(1) Original book value of business reputation


Name of invested unit or items to form goodwill

Opening balance

Added amount of this period Current decreaseEnding balanceFormed by combination

of enterprise Handling

A.E.S. Destructive & Non-destructive Testing Ltd. 13,075,057.26 13,075,057.26

Total 13,075,057.26 13,075,057.26

(2) Depreciation reserves for business reputation

The goodwill of the Group was composed by means of the M&A of 90% equities from A.E.S. DESTRUCTIVE & NON-DESTRUCTIVE TESTING LTD. other than under the same control in 2009, and in the year end, there wasn’t any sign for the decrease of the goodwill.

18. Long-term deferred expense


Item Opening balance Added amount of this period

Current amortization

amount

Other amount decrease Ending balance

Parking place rental fee 50,709,128.50 - 1,334,450.75 - 49,374,677.75Improved expenditure of rented fi xed assets 1,252,882.34 2,727,826.63 871,605.23 - 3,109,103.74

Total 51,962,010.84 2,727,826.63 2,206,055.98 - 52,483,781.49

126


Financial Notes

19. Deferred income tax assets/Deferred income tax liabilities

(1) None-offset deferred income tax assets


Item

Ending balance Opening balanceDeductible temporary difference

Deferred income tax assets

Deductible temporary difference

Deferred income tax assets

Assets depreciation reserve 175,627,675.63 26,344,151.36 54,373,011.12 8,155,951.68Internal unrealized profi t 10,426,168.60 1,563,925.29 254,228,773.13 38,134,315.97Deductible loss 560,528.27 84,079.24 30,104,331.24 7,526,082.81Deferred income 253,321,366.95 37,998,205.04 229,146,154.43 34,375,923.16Employee compensation payable 7,890,884.93 1,773,363.55 1,876,574.84 469,143.71Termination benefi ts 2,612,958.77 391,943.82 2,612,958.77 391,943.82Transactional fi nancial liabilities 78,999,408.00 11,849,911.20 - -Amortization of intangible assets 1,981,609.06 297,241.36 2,265,356.60 339,803.49Depreciation of fi xed assets - - 1,798,535.85 269,780.38Not-invoiced costs on account 542,224,242.92 81,333,636.44 - -Total 1,073,644,843.13 161,636,457.30 576,405,695.98 89,662,945.02

(2) None-offset deferred income tax liability

Item

Ending balance Opening balanceTaxable

temporary difference

Deferred income tax liabilities

Taxable temporary difference

Deferred income tax liabilities

Business combination under different common controlFair value change of available-for-sale fi nancial assets value-added evaluation. 232,645,419.33 34,896,812.90 220,950,133.33 33,142,520.00

Depreciation of fi xed assets 182,487.60 27,373.14 213,607,889.86 32,041,183.48Transaction fi nancial assets 2,147,424.00 322,113.60 34,133,463.00 5,120,019.45Total 234,975,330.93 35,246,299.64 468,691,486.19 70,303,722.93

20. Financial liabilities calculated based on fair value with their change included in current P/L


Item Ending balance Opening balanceTransactional fi nancial liabilities 78,999,408.00Wherein: issued Traded bond

Financial Liabilities 78,999,408.00Others

Designed as fi nancial liability calculated based on fair value with their change included in current P/LTotal 78,999,408.00

Others:

The remaining sum of derivatives fi nancial liability at the end of year is the change in fair value of YAMAL project related to forward sale and purchase contract between the subsidiary, COOEC (Qingdao) Co., Ltd, and Standard Chartered Bank.

127


Financial Notes

21. Accounts payable

(1) Presentation of accounts payable


Item Ending balance Opening balanceEngineering project and material collections 5,001,495,668.63 5,632,792,798.85Total 5,001,495,668.63 5,632,792,798.85

(2) Major payables with accounting age over 1 year


Item Ending balanceReasons for

arrear or carry down

Shenzhen Chiwan Sembawang Engineering Co., Ltd. 179,685,457.27 Uncompleted project

Shanghai Salvage Company 40,425,568.22 Uncompleted labor service

Jiangsu Rongsheng Heavy Industries Co., Ltd. 34,366,372.79 Uncompleted labor service

Tianjin TEDA Bluewhale Offshore Engineering Technology Co., Ltd. 22,408,672.61 Uncompleted project

Tianjin, ZhongTie Jianye, Group Co., Ltd. 17,490,000.00 Uncompleted project

Total 294,376,070.89 /

22. Advance receipts

(1) Presentation of advance receipts


Item Ending balance Opening balanceEngineering project collections 1,018,233,102.96 789,417,213.98Others 2,166,062.93 1,115,962.94Total 1,020,399,165.89 790,533,176.92

(2) Condition of project settled not completed in construction contract at end of period:


Item AmountAccumulated cost incurred 5,340,399,775.54Accumulated confi rmed gross profi t 660,352,125.75Anticipated loss of the contract

Settle amount 7,018,985,004.25Project settled not completed in construction contract at end of period 1,018,233,102.96

128


Financial Notes

23. Employee compensation payable

(1) Presentation of employee compensation payable:



Current decrease Ending balance

I. Short-term compensation 261,185,330.18 1,448,588,238.58 1,300,964,630.85 408,808,937.91II. Defi ned contribution plans for welfare after dimission 71,088.14 196,558,874.58 196,540,387.82 89,574.90

III. Dismission welfare 2,612,958.77 171,436.46 171,436.46 2,612,958.77IV. Other welfares to expire within one year

Total 263,869,377.09 1,645,318,549.62 1,497,676,455.13 411,511,471.58

(2) List of short-term salary




I. Salary, bonus, allowance, subsidy 253,935,988.41 1,083,858,555.48 943,242,610.08 394,551,933.81II. Employee welfare 167,000.00 45,061,995.04 45,228,995.04 -III. Social insurance fee 40,591.22 118,681,921.79 118,673,407.25 49,105.76Inc.: Medical insurance premiums 35,183.37 81,547,286.78 81,539,768.48 42,701.67

Industrial injury insurance 4,189.89 7,447,271.07 7,447,006.56 4,454.40Birth insurance premium 1,217.96 6,976,959.97 6,976,228.24 1,949.69Supplementary medical insurance - 22,710,403.97 22,710,403.97 -

IV. Legal reserves of housing acquisition 26,990.02 109,948,601.76 109,959,547.30 16,044.48V. Labor union expenditure and personnel education fund 7,012,254.67 37,710,633.91 30,531,914.72 14,190,973.86

VI. Short-term compensated absencesVII. Short-term profi ts sharing planNon-monetary welfare 880 48,950,317.76 48,950,317.76 880Others 1,625.86 4,376,212.84 4,377,838.70 -Total 261,185,330.18 1,448,588,238.58 1,300,964,630.85 408,808,937.91

(3) List of defi ned contribution plans



1. Primary endowment insurance 60,467.20 159,764,492.97 159,745,382.37 79,577.802. Unemployment insurance expense 4,026.94 14,783,450.97 14,783,783.81 3,694.103. Enterprise annuity 6,594.00 22,010,930.64 22,011,221.64 6,303.00Total 71,088.14 196,558,874.58 196,540,387.82 89,574.90

129


Financial Notes

24. Taxes payable


Item Ending balance Opening balanceVAT 32,916,427.33 26,258,082.15Consumption taxBusiness tax 227,666,556.17 196,052,882.07Enterprise income tax 436,569,807.11 260,140,877.83Individual income tax 5,268,007.86 2,304,657.52Urban maintenance and construction tax 57,994,080.69 46,823,835.47Local educational additional fee 16,820,830.76 13,592,090.59Educational additional tax 25,159,071.09 20,370,947.58Anti-fl ood fees 8,058,932.60 6,824,626.03Real estate tax 5,938,237.00 6,345,815.84Stamp tax 3,038,438.47 1,873,653.49Tenure tax 200,883.00 319,153.00Others 123,556.44 123,263.85Total 819,754,828.52 581,029,885.42

25. Interest payable


Item Ending balance Opening balanceLong-term loan interest on installment and interest chargesEnterprise bond interestShort-term interest payablePreferred stock\perpetual bond interest of fi nancial liabilitiesBond interest 10,193,666.67 10,193,666.67Interest of long-term loans 133,817.70 2,030,611.31Total 10,327,484.37 12,224,277.98

Interest of major overdue payment:

Interest of major overdue payment of the Group this year.

26. Other payables

(1) Other payables listed by nature of payment


Item Ending balance Opening balanceAppropriate funds for scientifi c research 42,063,553.38 80,489,629.94Suspense credits 37,032,737.05 30,959,228.88Total 79,096,290.43 111,448,858.82

130


Financial Notes

(2) Other major payables with accounting age over 1 year

Item Ending balanceReasons for

arrear or carry down

Appropriate funds for scientifi c research 33,863,553.38 Uncompleted project

Total 33,863,553.38 /

27. Non-current liability due within one year


Item Ending balance Opening balanceLong-term loans expired within one year 1,480,000,000.00Bonds payable expired within one yearLong-term payables within one year 85,118,481.32

Total 85,118,481.32 1,480,000,000.00

Long-term payables within one year are the long-term payables expired within the next year of Shenzhen COOEC Underwater Technology Co., Ltd., the subsidiary of COOEC.

28. Other current liabilities


Item Ending balance Opening balanceShort-term bond payableGovernment subsidies 40,149,946.85 5,601,944.78Total 40,149,946.85 5,601,944.78

Others:

(1) Item of government subsidy

Item of government subsidy

Balance at the beginning of the

year

Subsidy increase of

this year

Non-operating income of this

yearOther changes Balance at the

end of the year

Related to assets/

incomeScientifi c research appropriation for signifi cant national projects

3,883,819.78 - 3,883,819.78 2,454,724.89 2,454,724.89 Related to income

Return of site supporting facilities fee

1,365,125.00 - 1,365,125.00 37,342,221.96 37,342,221.96 Related to assets

Deed tax return of offi ce building in bonded area

353,000.00 - 353,000.00 353,000.00 353,000.00 Related to assets

Total 5,601,944.78 - 5,601,944.78 40,149,946.85 40,149,946.85 _ _

(2) Other current liabilities of the Group is deferred income within one year; other changes are to carry government subsidies carried to gain or losses in deferred income to this item.

131


Financial Notes

29. Long-term loan

(1) Long-term loan type


Item Ending balance Opening balanceMortgage loanMortgage loan 56,172,420.00 132,180,792.00Guaranteed loanCredit loanTotal 56,172,420.00 132,180,792.00

30. Bond payable

(1) Bond payable


Item Ending balance Opening balance07 COOEC bonds 1,195,656,088.68 1,194,325,407.84Total 1,195,656,088.68 1,194,325,407.84

(2) Increase and decrease of bond payable: (excluding preferred stock\perpetual bond and other financial tools divided as fi nancial liabilities)


Name of bond Face value Date of

issue

Term of

bond

IssueAmount

Opening balance

Current period

issue

Interest accrued by face

value

Amortization of premium

Pay off in

current period

Ending balance

07 COOEC bonds

120,000.00 11/9/2007 10 120,000.00 119,432.54 - 6,924.00 133.07 119,565.61

Total / / / 120,000.00 119,432.54 - 6,924.00 133.07 119,565.61

Others:

Approved by CSRC in ZH.J.F.X.Z [2007] No.383 Writ, the Company issued the 2007 COOEC bonds with total face value of RMB 1.2 billion to the public from November 9, 2007 to November 13, 2007, and raised RMB 1.2 billion of funds. After deducting the issuance expenses of RMB 12.38 million, the actual funds entering the accounts amount to RMB 1.18762 billion till November 14, 2007. The term of the bond is 10 years, from November 9, 2007 to November 8, 2017. The coupon rate is 5.77%, which will remain unchanged during the term. The annual interest of bonds will be calculated on the basis of single interest instead of compound interest, and no additional interest will occur in case of overdue status. The interest will be paid once a year and the principals will be returned once for all upon maturity. The last interest will be paid together with the cash-in principals. The Bank of China Limited will authorize its Tianjin Branch to provide irrevocable joint responsibility of guarantee for the Company’s bonds.

132


Financial Notes

31. Long-term payable

Long-term payables listed by nature of payment:


Item Opening balance Ending balanceFinance lease outlay 556,490,998.73 -

Others:

Long-term payable is for fi nance lease by Shenzhen COOEC Subsea Technology Co., Ltd., Ltd., subsidiary corporation of COOEC from Tianjin Zhaoyin Heavy Equipment Leasing Co., Ltd..

32. Long-term payable



Added amount of this period

Current decrease

Ending balance Causes

Appropriation of scientifi c research funds for 863 Project

36,969,065.53 - 1,615,890.79 35,353,174.74Appropriation of scientifi c

research funds for 863 Project in former years

Total 36,969,065.53 - 1,615,890.79 35,353,174.74 /

33. Deferred income



Current decrease Ending balance Causes

Government subsidies 1,199,893,348.45 190,398,111.36 240,057,195.07 1,150,234,264.74 Government subsidies

Total 1,199,893,348.45 190,398,111.36 240,057,195.07 1,150,234,264.74 /

Deferred income of the Group involve the return of site supporting facilities fees received by its subsidiaries COOEC (Zhuhai) Co., Ltd. and COOEC (Qingdao) Co., Ltd., scientifi c research appropriation for signifi cant project received by the Company and subsidiaries from the country, etc.

Projects involving government subsidies:


Liabilities items Opening balanceNewly-added

subsidy amount in this period

Current non-operating

incomeOther changes Ending balance

Related to assets/

incomeReturn of site supporting facilities fee

1,032,490,310.20 -11,189,135.88 28,645,424.27 37,342,221.96 955,313,528.09 Related to assets

Scientifi c research appropriation for signifi cant national projects

161,137,288.25 201,587,247.24 80,301,813.95 93,414,734.89 189,007,986.65 Related to income

Deed tax return of offi ce building in bonded area

6,265,750.00 - - 353,000.00 5,912,750.00 Related to assets

Total 1,199,893,348.45 190,398,111.36 108,947,238.22 131,109,956.85 1,150,234,264.74 /

Other changes in government subsidy of this year refer to the amount transferred to cooperating organization or scientifi c research appropriation with profit and loss brought forward within 1 year, including the amount of RMB 90,960,010.00 transferred to cooperating organization and RMB 40,149,946.85 carried forward to other current liabilities at the end of year.

133


Financial Notes

34. Capital stock


Opening balanceThis variation (+, -)

Ending balanceNewly issued shares

Bonus shares

Transferred shares from the surplus reserve Others Subtotal

Total shares 4,421,354,800.00 4,421,354,800.00

35. Capital reserves




Capital premium (share capital premium) 4,229,620,443.55 - - 4,229,620,443.55Other capital reserve 18,319,762.56 - - 18,319,762.56Total 4,247,940,206.11 4,247,940,206.11

36. Other comprehensive incomes



The amount incurred in current period

Ending balance

Pre-capital premium

amount of this period

Minus: amount

calculated into other delayed consolidated income and

then converted into current

profi t and loss

Less: income tax

expense

Attributable to parent

company after tax

Attributable to minority

stockholders after tax

I. Not to be reclassifi ed into other comprehensive income of profi t and lossWherein: re-compute the set net debt of benefi ts plan and change in net assets.

Shares cannot be reclassifi ed into other comprehensive income of profi t and loss under the equity law

II. To be reclassifi ed into other comprehensive income of profi t and loss

176,416,849.62 11,787,195.66 - 1,754,292.90 10,015,238.57 17,664.19 186,432,088.19

Wherein: shares to be reclassifi ed into other comprehensive income of profi t and loss under the equity law

Change of fair value recognized in profi ts or losses of available-for-sale fi nancial assets

187,807,613.33 11,695,286.00 - 1,754,292.90 9,940,993.10 - 197,748,606.43

134


Financial Notes



Ending balance

Pre-capital premium

amount of this period

Minus: amount

calculated into other delayed consolidated income and

then converted into current

profi t and loss

Less: income tax

expense

Attributable to parent

company after tax

Attributable to minority

stockholders after tax

Held-to-maturity fi nancial investment reclassifi ed as available for sale investments profi t and loss accountThe effective portion of hedging profi ts and losses for cash fl owTranslation differences of foreign currency fi nancial statements

-11,390,763.71 91,909.66 - - 74,245.47 17,664.19 -11,316,518.24

Other composite incomes sum 176,416,849.62 11,787,195.66 - 1,754,292.90 10,015,238.57 17,664.19 186,432,088.19

37. Special reserve




Safe production assurance 378,638,182.08 317,533,091.99 177,799,015.38 518,372,258.69Total 378,638,182.08 317,533,091.99 177,799,015.38 518,372,258.69

Other description includes condition and causes of variation:

The period-end amount of special reserve increased by 36.90% compared with that at the beginning of period, and it is mainly because that according to the regulations of Administrative Measures of Withdrawing and Using Safety Production Expenses of Enterprise, the Group has not used up the safety production management fee extracted according to 1.5% of EPC income of petroleum engineering.

38. Surplus reserves




Legal surplus reserves 715,600,581.49 269,030,718.60 - 984,631,300.09Other surplus reserves 89,145,868.41 - - 89,145,868.41Reserve fundsEnterprise development fundOthersTotal 804,746,449.90 269,030,718.60 - 1,073,777,168.50

Surplus reserves description includes condition and causes of variation:

Surplus reserves for end of year increase by RMB 269,030,718.60 compared with beginning of year, which are legal surplus reserves of accrual in this year.

135


Financial Notes

39. Undistributed profi t


Item Current period Last periodUndistributed profi t in former part period of adjustment 6,553,720,745.33 4,118,256,129.65Total undistributed profi t at beginning of adjustment (increase +, decrease -)Undistributed profi t at beginning of later period of adjustment 6,553,720,745.33 4,118,256,129.65Plus: Net profi t attributable to holding company in this period 4,266,871,108.08 2,744,236,835.63Minus: withdrawal legal surplus 269,030,718.60 192,089,019.95

Appropriated other surplus reservesAppropriated general risk preparationCommon stock dividends payable 442,135,480.00 116,683,200.00Common stock dividends that converted to capital stock

Undistributed profi t at end of period 10,109,425,654.81 6,553,720,745.33

Undistributed profi t detail at beginning of later period of adjustment:

1. Retroactive adjustment shall be made according to Accounting Standards and related new regulations, and undistributed profi t at beginning of infl uence period is RMB 0.

2. Due to alteration of accounting policy, undistributed profi t at beginning of infl uence period is RMB 0.

40. Operating income and operating costs


ItemThe amount incurred in current period The amount incurred in last period

Income Cost Income CostPrimary business 21,973,856,144.44 14,944,724,242.77 20,277,694,532.53 15,532,626,276.06Other business 57,519,031.63 22,336,637.44 61,523,340.41 31,448,781.97Total 22,031,375,176.07 14,967,060,880.21 20,339,217,872.94 15,564,075,058.03

(1) Main business - according to type of products

Name of productAmount of this year Amount of last year

Operating income Operating income1. Revenue from offshore engineering EPCI contract project 18,836,964,797.69 18,622,101,959.162. Revenue from offshore engineering Non-EPCI contract project 1,964,456,401.09 1,074,752,017.24Wherein:

Revenue from onshore construction 132,716,307.43 5,933,985.59Revenue from offshore installation and subsea pipe-laying 964,504,121.79 535,225,575.80Engineering design income 183,968,771.80 158,423,630.81Maintenance service income 683,267,200.07 375,168,825.04

3. Income not from ocean engineering projects 1,172,434,945.66 580,840,556.13Total 21,973,856,144.44 20,277,694,532.53

136


Financial Notes

(2) Top 5 clients’ operating income

Name of client Operating income

Proportion of total operating

income (%)CNOOC 19,135,438,025.27 86.86Newfi eld China LDC, NCL 947,278,051.30 4.30JKC ICHTHYS LNG Joint Venture 850,252,508.41 3.86CNOOC Energy Technology & Services Limited 317,248,970.03 1.44CNOOC Gas & Power Group 167,617,363.35 0.76Total 21,417,834,918.36 97.22

41. Business taxes and surcharges


ItemThe amount incurred in

current period


periodConsumption taxBusiness tax 343,277,789.65 347,696,255.85Urban maintenance and construction tax 98,389,971.78 93,773,376.77Educational additional tax 42,170,431.60 40,262,541.78Resource taxLocal educational additional fee 28,143,816.59 26,651,014.45Others 4,458,022.61 6,077,831.19Total 516,440,032.23 514,461,020.04

42. Sales expenses



current period


periodExhibition fee 4,096,655.63 -Employee salary 2,733,844.43 1,829,177.49Publicity expenses 2,639,170.14 -Travel expense 724,609.45 309,346.37Advertising expense 262,404.65 -Business entertainment 159,650.60 359,211.44Offi ce, water, electricity and communication expenses 111,366.02 -Depreciation cost and amortization of intangible assets 10,904.73 8,542.75Others 433,830.28 147,116.49Total 11,172,435.93 2,653,394.54

137


Financial Notes

43. Management expenses



current period


periodR&D expenditure 1,188,091,147.61 844,976,887.98Employee salary 134,202,596.72 132,914,816.31Tax 52,907,221.72 43,220,163.05Depreciation cost and amortization of intangible assets 34,195,848.08 33,118,666.99Offi ce, water, electricity and communication expenses 15,565,563.87 17,891,393.42Property management and forestation expense 15,245,355.00 13,754,620.62Auditing and consulting expense 11,413,116.69 8,722,110.77Travel expense 10,607,218.00 8,982,140.91Transportation expense 10,284,022.91 10,853,010.70Rental charge 5,894,215.94 6,773,688.00Others 28,026,487.19 35,306,096.86Total 1,506,432,793.73 1,156,513,595.61

44. Financial expenses



current period


periodInterest expenses 123,025,572.99 143,748,150.02Minus: Interest return 24,992,133.51 13,787,584.06Plus: exchange net loss 9,977,375.15 46,404,957.74Plus: Other expenses 9,328,315.91 9,670,512.26Total 117,339,130.54 186,036,035.96

138


Financial Notes

45. Assets impairment loss



current period


periodI. Bad debt loss 4,044,422.87 -5,505,358.21II. Loss of inventory devaluation 1,363,400.78 8,699,772.83III. Impairment loss of fi nancial assets available for saleIV. Impairment loss of held-to-maturity investmentV. Impairment loss of value of long-term equity investmentVI. Impairment loss of investment real estateVII. Fixed assets impairment loss 154,675,004.24 10,820,350.86VIII. Impairment loss of Impairment loss of engineering materialIX. Impairment loss of project under constructionX. Impairment loss of productive biological assetXI. Impairment loss of oil and gas assetXII. Impairment loss of intangible assetXIII. Goodwill impairment lossXIV. OthersTotal 160,082,827.89 14,014,765.48

Others:

Asset impairment loss of our Group in this year increases by RMB 146,068,062.41, mainly caused by dock assessment of impairment RMB 154,675,004.24 of COOEC (Qingdao) Co., Ltd., subsidiary corporation of our company.

46. Income from changes in fair value


Causes for fair value variationThe amount incurred in

current period


periodFinancial assets calculated based on fair value with their change included in current P/LWherein: Income from changes in fair value generated by derivative fi nancial instruments.Financial liabilities calculated based on fair value with their change included in current P/LInvestment real estate calculated based on fair valueTransaction fi nancial assets -31,986,039.00 32,095,680.75Transactional fi nancial liabilities -78,999,408.00 -Total -110,985,447.00 32,095,680.75

139


Financial Notes

47. Investment income



current period


periodInvestment income of long-term equity accounted by equity method -8,125,788.00 -Investment income during disposing long-term equity investment - 68,600,141.24Investment income of fi nancial assets calculated based on fair value with their change included in current P/L during holding period.Investment income disposal of fi nancial assets calculated based on fair value with their change included in current P/L during holding period. 19,775,267.00 18,119,103.41

Held-to-maturity investment income during holding periodInvestment income gained by available-for-sale fi nancial assets etc. 7,881,205.54 1,627,782.39Investment income during disposing available-for-sale fi nancial assets - 36,592,865.17After losing control power, residual equity is calculated based on investment income gained from bank fi nancial products regenerated from fair value.Investment income from bank fi nancial products 162,517,984.08 28,112,290.40

Total 182,048,668.62 153,052,182.61

48. Non-operating income



current period


period

Amount calculated into extraordinary profi t and loss of the current

periodDisposal income sum on non-current liability 43,271,595.33 14,543,372.07 43,271,595.33Including: Disposal income on fi xed assets 43,271,595.33 14,543,372.07 43,271,595.33

Disposal income on intangible assetsDebt restructuring gainsNon-monetary assets exchange gainsAccepting donationsGovernment subsidies 245,507,726.26 135,424,644.28 245,507,726.26Disposal of waste and old materials - 46,788.03 -Others 7,268,571.42 27,661,181.39 7,268,571.42Total 296,047,893.01 177,675,985.77 296,047,893.01

140


Financial Notes

Government subsidies calculated into current profi t and loss


Item of government subsidyThe amount incurred in

current period

The amount incurred in last period

Related to assets/income

Consumption tax return 124,176,951.06 67,579,362.14Notice on Returning Taxpayers All or the Consumption Tax Collected in Self-use Oil Products to the Oil (Gas) Field Enterprise Finance and Tax [2011] No.7

Scientifi c research appropriation for signifi cant national projects 84,185,633.73 52,113,646.17 Ministry of Finance of the PRC

Return of site supporting facilities fee 28,645,424.23 2,427,775.81 Gaolan Port Area Management Committee of Zhuhai

Return of enterprise income tax 5,362,967.96 1,714,548.11 Legal withholding exemption at source of non-resident enterprise

Return of site supporting facilities fee 1,365,125.04 1,365,125.04 Financial Bureau of Qingdao High-tech Industrial

Development ZoneAppropriation of scientifi c research funds for 863 Project 1,055,890.79 7,558,687.01 Ministry of Finance of the PRC

Deed tax return of offi ce building in bonded area 353,000.00 353,000.00 Bureau of Finance of Tianjin Port Free Trade Zone

Technology research expense of equipment corrosion protection for 725 Institute oceanographic engineering of China

141,509.43 -Key technology application research project for equipment corrosion protection of oceanographic engineering

Fund for industrial upgrading - 2,160,000.00 Laoshan District Financial Bureau of Qingdao CityOthers 221,224.02 152,500.00 _ _Total 245,507,726.26 135,424,644.28 /

49. Non-operating expense


ItemThe amount



period

Amount calculated into extraordinary

profi t and loss of the current period

Disposal loss on non-current assets sum 5,663,598.36 6,706,373.79 5,663,598.36Including: Disposal loss on fi xed assets 5,663,598.36 6,706,373.79 5,663,598.36Disposal losses on intangible assetsDebt restructuring lossesNon-monetary assets exchange lossesForeign donation 150,000.00 150,000.00 150,000.00Others 1,609,369.29 425,286.84 1,609,369.29Total 7,422,967.65 7,281,660.63 7,422,967.65

141


Financial Notes

50. Income tax expense

(1) Expense Table of Income Tax



current period


periodIncome tax expense of current period 949,448,400.43 478,081,228.97Deferred income tax expense -108,785,228.47 26,878,240.15Total 840,663,171.96 504,959,469.12

(2) Accounting profi t and income tax expense adjustment process:


current periodTotal profi ts 5,112,535,222.52Income tax expense calculated according to legal/applicable tax rate 766,880,283.38Infl uence of different tax rate application of subsidiary corporation -13,561,398.26Adjustment for infl uence of income tax in former period -8,144,268.09Infl uence for non-taxable income -7,161,356.06Infl uence for cost, expense and losses that can not be deductible 108,623,744.31Infl uence for deductible losses of unconfi rmed deferred income taxes in early period of usageDeductible temporary difference or Infl uence for deductible losses of unconfi rmed deferred income taxes in this periodDividend income -1,372,368.63R&D expenditure plus the deduction -4,601,464.69Income tax expense 840,663,171.96

51. Other comprehensive incomes

For details see related contents of “V. 36 Other Comprehensive Incomes” in the Annex.

52. Items of cash fl ow statement

(1) Other cashes received in connection with business activities:



current period


periodAllocation for scientifi c research 110,627,237.24 75,532,816.69Customs margin 82,140,000.00Land funds returned by Finance Bureau 25,246,800.00 -Interest income 24,992,133.51 11,003,588.96Return of advance payment for house purchase in Qingdao - 53,280,000.00Others 5,588,569.87 80,390,560.92Total 248,594,740.62 220,206,966.57

142


Financial Notes

(2) Other cashes paid in connection with business activities:



current period


periodProperty management and forestation expense 59,856,342.37 52,494,510.43Property insurance 47,577,726.72 45,178,547.17Transportation expense 37,597,597.55 39,433,185.51Travel expense 28,732,188.06 24,108,323.32Healthy, safety and environmental protection fees 18,948,354.42 10,281,050.39Offi ce expense 15,676,929.89 11,095,401.09Auditing and consulting expense 11,413,116.69 14,837,872.10Commission charge 9,667,563.85 7,625,278.52Publicity and advertising expense 6,998,230.42 7,136,237.15Rental charge 5,109,275.05 6,429,860.98Meal fee 4,728,784.55 7,551,693.19Meeting expense 3,837,400.87 7,664,383.68R&D expense 3,195,632.37 8,144,101.47Article of consumption and repair charge 2,392,499.29 5,657,192.35Customs margin - 82,140,000.00Others 27,471,717.25 38,365,753.03Total 283,203,359.35 368,143,390.38

(3) Other cashes received in connection with investment



current period


periodIndemnity for boat HYSY699 215,048,633.60 9,825,454.39Total 215,048,633.60 9,825,454.39

(4) Other cashes paid in connection with investment



current period


periodHYSY699 salvage charges 9,464,444.00 -Total 9,464,444.00 -

(5) Other cashes paid in connection with fi nancing activities



current period


periodFinance lease outlay 86,982,449.80 273,056,582.05Others - 261,708.30Total 86,982,449.80 273,318,290.35

143


Financial Notes

53. Supplementary data to cash fl ow statement

(1) Supplementary data to cash fl ow statement


Supplementary Data Current amount Last term amount1. Adjust the net profi t into business cash fl ow:

Net profi t 4,271,872,050.56 2,752,046,722.66Plus: Assets depreciation reserve 160,082,827.89 14,014,765.48

Depreciation of fi xed assets, depreciation of oil and gas assets and depreciation of productive biological assets 1,051,198,377.81 937,854,950.82

Amortization of intangible assets 44,949,130.02 41,818,566.58Amortization of long-term unamortized expenses 2,206,055.98 1,653,557.21Loss on disposal of fi xed assets, intangible assets and other long-term assets (List earnings with “-”) -37,607,996.97 -12,054,286.63

Loss on retirement of fi xed assets (List earnings with “-”) - 4,217,288.35Loss from fair value change (List earnings with “-”) 110,985,447.00 -32,095,680.75Financial expense (List earnings with “-”) 123,153,423.29 143,748,150.02Investment loss (List earnings with “-”) -182,048,668.62 -153,052,182.61Decrease of deferred tax assets (List increase with “-”) -71,973,512.28 67,186,327.67Increase of deferred income tax liabilities (List decrease with “-”) -36,811,716.19 -40,308,087.52Inventory decrease (List increase with “-”) 605,400,626.55 -280,446,593.71Decrease of business receivables (List increase with “-”) -1,379,547,179.51 -2,568,705,416.16Increase of business receivables (List decrease with “-”) -323,662,546.89 2,480,498,411.34Others 12,814,982.41 12,747,192.28Net cash fl ows from operating activities 4,351,011,301.05 3,369,123,685.03

2. Investment and fi nancing events excluding cash deposit and withdrawal:Conversion of debt into capitalConvertible debenture due within one yearFixed assets acquired under fi nance leases

3. Net amount variations of cash and cash equivalent:Closing cash balance 3,281,826,338.76 1,779,511,011.24Minus: Opening cash balance 1,779,511,011.24 1,034,439,710.10Plus: Closing balance of cash equivalentMinus: Opening balance of cash equivalentNet increase of cash and cash equivalent 1,502,315,327.52 745,071,301.14

(2) Net cash received for disposal of subsidiaries in current period

AmountThe cash or cash equivalent received by the subsidiaries shall be disposed in current period.Decrease: the cash and cash equivalent held by subsidiaries on the day losing controlIncrease: the cash or cash equivalent received in current period by the disposing subsidiaries in previous period 44,218,203.45

Net cash received from disposing subsidiaries 44,218,203.45

144


Financial Notes

(3) Composition of cash and cash equivalent


Item Ending balance Opening balanceI. Cash 3,281,826,338.76 1,779,511,011.24

Including: Cash on hand 45,527.53 37,833.87Bank deposits payable anytime 3,281,780,811.23 1,779,471,837.84Other monetary funds payable anytime - 1,339.53Deposits and required reserve in the central bankDeposits in other banksInter-bank borrowing

II. Cash equivalentIncluding: Bond investment maturing within three months

III. Balance of cash and cash equivalents at the end of the period 3,281,826,338.76 1,779,511,011.24Including: Cash and cash equivalent in limited use for the parent company or subsidiaries of the Group

54. Note to items in statement of retained earnings

Specify the name, adjustment amount and other matters of “other” items with ending balance in last year adjusted:

The group performs retroactive adjustment for amount in the beginning of 2013 in “other” items of statement of retained earnings, shifts the translation reserve into “other comprehensive income” item totally from “other” items, with the amount of RMB 7,709,532.94.

55. Assets with the ownership or right of use limited


ItemBook value at

beginning of the period

Limiting reason

Currency capitalNotes receivableInventory

Fixed assets 156,338,506.18 Offshore Oil 697 mortgage loan

Intangible assetsTotal 156,338,506.18 /

56. Foreign currency monetary items

(1) Foreign currency monetary items:

Unit: Yuan

ItemForeign currency balance at end of

the periodExchange rate

RMB balance converted at end

of the periodCurrency capital 976,508,086.36Including: USD 156,314,860.31 6.119 956,490,630.24

EUR 1,255.54 7.4556 9,360.80HKD 29,819.96 0.78887 23,524.07

145


Financial Notes

ItemForeign currency balance at end of

the periodExchange rate

RMB balance converted at end

of the periodAUD 166,400.87 5.0174 834,899.73IDR 495,222,782.49 0.0005 247,611.39SAR 4,993,632.79 1.6285 8,132,131.00UAE Dirham 130,836.75 1.6733 218,929.13Canadian dollar 2,000,000.00 5.2755 10,551,000.00

Accounts receivableIncluding: USD

EUR 363,970.00 7.4556 2,713,614.73HKDRMBRMB

Long-term loansIncluding: USD

EURHKDRMBRMB

Other receivables 95,779.42Including: USD 15,652.79 6.119 95,779.42Accounts payable 99,372,723.56Including: USD 15,991,747.69 6.119 97,853,504.12

Pound 53,811.78 9.5437 513,563.48IDR 408,476,098.00 0.0005 204,238.05AUD 159,727.73 5.0174 801,417.91

Other payables 489,520.00Including: USD 80,000.00 6.119 489,520.00Deposit received 70,857,652.86Including: USD 11,579,940.00 6.119 70,857,652.86Prepayment 89,118,192.04Including: USD 13,796,574.46 6.119 84,421,239.12

EUR 629,989.93 7.4556 4,696,952.92Non-current liability due within one year 85,118,481.32Including: USD 13,910,521.54 6.1190 85,118,481.32Long-term payables 556,490,998.73Including: USD 90,944,762.01 6.1190 556,490,998.73

146


Financial Notes

(2) Specifi cation for business entity overseas, including the disclosure of the main business location overseas, recording currency and selection basis for the important business entity overseas as well as the reason for the change of recording currency.


No. Company name Main business location Recording currency

Selection basis for recording currency

1 Blue Ocean International Co., Ltd. British Virgin Islands USD The operating business is mainly priced and settled with the currency.

2 Ketai Co., Ltd. Houston USD The operating business is mainly priced and settled with the currency.

3 COOEC International Co., Ltd. Hong Kong USD The operating business is mainly priced and settled with the currency.

4 A.E.S. Destructive & Non-destructive Testing Ltd. Hong Kong HKD The operating business is mainly

priced and settled with the currency.

5 COOEC Indonesia Co., Ltd. Indonesia USD The operating business is mainly priced and settled with the currency.

6 COOEC Nigeria Co., Ltd. Nigeria USD The operating business is mainly priced and settled with the currency.

7 COOEC (Australia) Co., Ltd. Australia USD The operating business is mainly priced and settled with the currency.

8 COOEC Canada Co., Ltd. Canadian dollar 加元The operating business is mainly priced and settled with the currency.

VI. Change of contract scope1. Change of consolidation scope by other reasons

Specify the change of consolidation scope and other related situation caused by other reasons (such as new establishment of subsidiaries and liquidation of subsidiaries).

The subsidiary of the Company COOEC invests and sets the wholly-owned subsidiary COOEC Canada Co., Ltd. and will list it into the consolidation scope in current year.

The Company invests and sets the wholly-owned subsidiary COOEC (Australia) Co., Ltd. and will list it into the consolidation scope in current year.

VII. Equities in other subjects1. Equities in subsidiaries

(1) Composition of enterprise group

Subsidiary name

Main business locationGround

Registration place Business nature

Shareholding proportion (%) Gaining

methodDirect Indirect

A.E.S. Destructive & Non-destructive Testing Ltd. Hong Kong Hong Kong Detection 90 -

Subsidiaries obtained

through business combination not under the same

controlCOOEC (Qingdao) Co., Ltd. Qingdao Qingdao Project contracting 99 1 EstablishedCOOEC Subsea Technology Co., Ltd. Shenzhen Shenzhen Engineering contracting

and labor service 100 - Established

147


Financial Notes

Subsidiary name

Main business locationGround

Registration place Business nature

Shareholding proportion (%) Gaining

methodDirect Indirect

COOEC Indonesia Co., Ltd. Indonesia Indonesia Project contracting 95 5 EstablishedCOOEC Nigeria Co., Ltd. Nigeria Nigeria Project contracting 95 5 EstablishedCOOEC International Co., Ltd. Hong Kong Hong Kong Project contracting 100 - Established

COOEC International Engineering Co., Ltd Beijing Beijing Project contracting 100 - Established

Blue Ocean International Co., Ltd.

British Virgin Islands

British Virgin Islands Project contracting 100 - Established

COOEC (Zhuhai) Co., Ltd. Zhuhai Zhuhai Project contracting 100 - Established

COOEC (Australia) Co., Ltd. Australia Australia Engineering contracting and labor service 100 - Established

Ketai Co., Ltd. Houston Houston Engineering contracting and labor service 70 - Established

Beijing Gaotai Deep-sea Technologies Co., Ltd. Beijing Beijing Labor service 70 - Established

COOEC Canada Co., Ltd. Canadian dollar

Canadian dollar

Engineering contracting and labor service 100 - Established

(2) Important non-wholly-owned subsidiaries


Subsidiary name

Shareholding ratio for minority

shareholders

P/L attributable to minority

shareholders in current period

Dividends declared to distribute for minority

stockholders in current period

Balance of minority

stockholders' equities at end of

the periodA.E.S. Destructive & Non-destructive Testing Ltd. 10% 7,151.01 - 1,020,924.53

Ketai Co., Ltd. 30% 1,104,793.89 774,307.80 4,680,824.09Beijing Gaotai Deep-sea Technologies Co., Ltd. 30% 3,888,997.58 - 8,761,230.01

(3) Main fi nancial information of important non-wholly-owned subsidiaries


Subsidiary nameEnding balance

Current assets

Non-current assets Total assets Current

liabilitiesNon-current

liabilitiesTotal

liabilitiesA.E.S. Destructive & Non-destructive Testing Ltd.

10,708,827.59 1,787,223.94 12,496,051.53 2,286,806.20 - 2,286,806.20

Ketai Co., Ltd. 16,561,476.62 1,352,619.14 17,914,095.76 1,699,448.78 - 1,699,448.78Beijing Gaotai Deep-sea Technologies Co., Ltd. 65,708,951.07 1,086,502.78 66,795,453.85 33,713,202.26 3,878,151.55 37,591,353.81

148


Financial Notes

Subsidiary nameOpening balance

Current assets

Non-current assets Total assets Current

liabilitiesNon-current

liabilitiesTotal

liabilitiesA.E.S. Destructive & Non-destructive Testing Ltd.

10,244,155.69 1,964,465.21 12,208,620.90 2,104,499.16 - 2,104,499.16

Ketai Co., Ltd. 16,396,267.15 1,647,780.76 18,044,047.91 2,980,907.38 - 2,980,907.38Beijing Gaotai Deep-sea Technologies Co., Ltd. 45,443,529.34 1,738,031.71 47,181,561.05 29,291,666.11 1,649,120.15 30,940,786.26

Subsidiary name


Operating income Net profi t

Total comprehensive

income

Cash fl ow of business

activitiesA.E.S. Destructive & Non-destructive Testing Ltd. 13,354,607.36 71,510.08 105,123.59 115,481.63

Ketai Co., Ltd. 22,395,481.18 3,682,646.31 3,732,532.45 -8,990,033.80Beijing Gaotai Deep-sea Technologies Co., Ltd. 41,313,092.96 12,963,325.25 12,963,325.25 11,662,939.17

Subsidiary name


Operating income Net profi t

Total comprehensive

income

Cash fl ow of business

activitiesA.E.S. Destructive & Non-destructive Testing Ltd. 15,931,710.45 1,262,973.22 965,416.36 1,598,854.12

Ketai Co., Ltd. 18,753,633.03 5,806,358.03 5,423,224.75 7,224,100.70Beijing Gaotai Deep-sea Technologies Co., Ltd. 42,923,497.93 10,499,958.50 10,499,958.50 8,992,164.42

2. Equities in cooperative enterprises or associated enterprises

(1) Important cooperative enterprises or associated enterprises


Name of the cooperative enterprises or associated enterprises

Main business location

Registration place

Business nature

Shareholding proportion (%)

Accounting arrangement method for investment for cooperative enterprises or associated enterprises

Direct Indirect


Qingdao Qingdao

Design and technical

consultation services

40 -Perform subsequent measurement based on equity method

149


Financial Notes

(2) Main fi nancial information of important cooperative enterprises



Ending balance/the amount incurred in

current period

Opening balance/ the amount incurred

in last periodKvearner and

COOEC (Qingdao) Engineering

Technology Co., Ltd.

Kvearner and COOEC (Qingdao)

Engineering Technology Co., Ltd.

Current assets 11,764,724.08Including: cash and cash equivalent 6,546,619.00

Non-current assets 8,566,150.06Total assets 20,330,874.14Current liabilities 26,737,068.07Non-current liabilities -Total liabilities 26,737,068.07Minority stockholders' interest -Stockholders' equity attributable to the parent company -Net assets share calculated based on shareholding proportion -2,562,477.57Adjusting events--Business reputation--Profi t unrealized in internal transaction--OthersBook value for equity investment of cooperative enterprises -Fair valve for equity investment of cooperative enterprises with public offer

Operating income 4,479,237.68Financial expenses -1,680,475.84Income tax expenseNet profi t -26,720,663.93Net profi t for discontinuing operationOther composite incomesTotal comprehensive income -26,720,663.93

Dividend received from cooperative enterprises in current year -

150


Financial Notes

(3) Excess defi cit incurred in cooperative enterprises or associated enterprises


Name of the cooperative enterprises or associated enterprises

Accumulated unrealised pre-

period loss

Unrealised loss (net profi t shared in current period)


Accumulated unrealised loss

at end of current period

Kvearner and COOEC (Qingdao) Engineering Technology Co., Ltd. - 2,562,477.57 2,562,477.57

VIII. Risks in connection to fi nancial instrumentsThe main fi nancial instruments of the Group includes loan, receivables, payables, transaction fi nancial assets and trading fi nancial liabilities. For details of all fi nancial instruments see Annex V. The risks in connection to the fi nancial instruments and the risk management policies adopted by the Group for reducing those risks are as follows. Managers of the Group shall manage and supervisory control the risk exposure to ensure to control the risks within limited scope.

1. Management objective and policies for all risks

The objective for the Group on risk management is to gain an appropriate balance between risk and earnings, minimize the adverse impact of risks on business performance of the Group and realize benefi t maximization for shareholders and other equity investors. In consideration of above risk management objective, the basic risk management strategy of the Group is determining and analyzing all risks of our Group, establishing appropriate risk bottom line, implementing risk management and monitoring all risks timely and reliably to control the risk within limited scope.

(1) Market risk

1) Exchange rate risk

The main business of the Group is located within Chinese territory and is settled in RMB; however, FX risk exists still for foreign currency assets and liabilities confi rmed by the Group as well as foreign currency exchange in the future. The FX risk of the Group is mainly related to US dollar. On December 31, 2014, the foreign currency fi nancial assets and foreign currency fi nancial liabilities held by the Group were shown as follows. The FX risk incurred for the assets and liabilities of USD balance may have impact on the business performance of the Group.

Item Amount at the end of the year

Amount at the beginning of the

yearCurrency capital-USD 156,314,860.31 77,201,713.14Receivable-USD - 7,434,446.53Other receivables-USD 15,652.79 166,602.55Accounts payable-USD 15,991,747.69 22,776,797.77Other payables-USD 80,000.00 104,209.55Deposit received-USD 11,579,940.00 -Prepayment-USD 13,796,574.46 -Long-term payables-USD 90,944,762.01 -Non-current liability due within one year-USD 13,910,521.54 -

The Group pays close attention to the impact of exchange rate change on us and emphasizes on the study of exchange rate risk management policy and strategy. To avoid exchange rate risk, the Group has signed several long-term foreign exchange contracts with banks. The fair value of the long-term foreign exchange contract confirmed as derivative fi nancial instruments on December 31, 2014 is RMB -76,851,984.00. The change of the fair value of derivative fi nancial instruments has been included into profi t and loss (for details see related contents of “V. 2 (1)” and “V. 20” of the Annex). Meanwhile, with the constant development of our group on international market and in case of uncontrolled risks for our group as appreciation of the RMB, our group shall adjust the sale policy to reduce the risk aroused.

151


Financial Notes

2) IRR

The IRR of the Group is generated from bank load and long-term payables as well as other interest-bearing debts. The fi nancial liability with fl oating interest rate enables our group to face cash fl ow interest rate risk, and the fi nancial liability with fi xed rate makes our group to encounter fair value interest rate risk. The Group shall decide the relative proportion of fi xed rate and fl oating interest rate contracts according to current market environment. On December 31, 2014, the interest-bearing debts of the Group were mainly the fl oating interest rate loan contract priced in RMB and USD with the total amount of RMB 697,781,900.05 (RMB 132,180,792.00 on December 31, 2013), and also the fi xed rate contract with the amount of RMB 1,195,656,088.68 (RMB 2,674,325,407.84 on December 31, 2013).

The risk of fair value change for fi nancial instruments of the Group caused by interest rate change is mainly related to fi xed rate bank loan. For fi xed rate loan, the Group is aimed to keeping the fi xed rate during rising of interest rates, so as to reserve the advantages of fi xed rate loan, and performing refi nancing appropriately during decreasing of interest rate, so as to eliminate the impact of adverse fair value change of fi xed rate loan for the Group caused by interest rate change.

The risk of cash fl ow change for fi nancial instruments of the Group caused by interest rate change is mainly related to fl oating interest rate bank loan. The policy of the group is aimed to keeping the fl oating interest rate of the loans, so as to eliminate the fair value risk caused by interest rate change.

3) Price risk

The Group provides design, building and marine installation services for offshore oil-gas field development and supporting engineering based on market price, and, therefore, will be affected by the price fl uctuation.

(2) Credit risk

On December 31, 2014, the maximum credit risk exposure that may cause fi nancial loss of our group was mainly from the loss of fi nancial assets of our group caused by failure of obligation performance by the other party of the Contract and the fi nancial guarantee undertaken by the Group, including:

The carrying amount of fi nancial assets that has been confi rmed in consolidated balance sheet. For fi nancial instruments metered by fair value, the book value refl ects the risk exposure, but not the maximum risk exposure; the maximum risk exposure will change with the change of fair value in the future.

To reduce the credit risk, the Group sets special department to determine credit lines and conduct credit approval as well as execute other monitoring procedures, so as to ensure to take necessary measures to recycle stale claim. In addition, the Group reviews the recycle of each single account payable on each balance sheet date, so as to ensure suffi cient provisions for bad debts for the funds cannot be reclaimed. Therefore, management layer of our group considers that the credit risk undertaken has reduced greatly.

The working fund of the Group is stored in banks with high credit rating, so the credit risk of working fund is low relatively.

The Group adopts necessary policies to ensure good credit record for all trade debtors. Besides top fi ve amount of payables, the Group has no major centralized credit risks.

The total amount of top fi ve receivables is: RMB 5,603,462,097.83.

152


Financial Notes

(3) Liquidity risk

Liquidity risk refers to the risk that the fi nancial obligation of the Group is failed to be performed before expiring date. The method for liquidity risk management of the Group is to ensure enough fi nancial liquidity to perform the matured debts without causing unacceptable loss or damage to enterprise reputation. The Group analyzes the liability structure and duration regularly to ensure abundant funds. Management layer of the Group will monitor the use of bank loans and ensure the use is in compliance with the borrowing agreements and meanwhile conduct fi nancing consultation with fi nancing institution, so as to ensure certain credit line and reduce liquidity risk.

The fi nancial assets and fi nancial liability held by the Group are analyzed according to the expiring date of the undiscounted residual contract obligations:

Amount on December 31, 2014:

Item Within 1 year 1-2 year (s) 2-5 years TotalFinancial assetsCurrency capital 3,281,826,338.76 - - 3,281,826,338.76Transaction fi nancial assets 2,147,424.00 - - 2,147,424.00Accounts receivable 5,843,029,130.23 - - 5,843,029,130.23Prepayment 246,103,857.01 - - 246,103,857.01Interest receivable 10,393,778.04 - - 10,393,778.04Other receivables 238,704,773.87 - - 238,704,773.87Other current assets 3,087,069,830.58 - - 3,087,069,830.58Financial assets available for sale 350,841,816.00 - - 350,841,816.00Financial LiabilitiesTransactional fi nancial liabilities 5,294,462.00 37,316,765.00 36,388,181.00 78,999,408.00Accounts payable 5,001,495,668.63 - - 5,001,495,668.63Advance receipts 1,020,399,165.89 - - 1,020,399,165.89Employee compensation payable 411,511,471.58 - - 411,511,471.58Other payables 79,096,290.43 - - 79,096,290.43Interest payable 10,327,484.37 - - 10,327,484.37Non-current liability due within one year 85,118,481.32 - - 85,118,481.32Other current liabilities 40,149,946.85 - - 40,149,946.85Long-term loan 56,172,420.00 - - 56,172,420.00Bonds payable 1,409,317.73 1,492,601.62 1,192,754,169.33 1,195,656,088.68Long-term payables - 88,269,680.48 468,221,318.25 556,490,998.73

153


Financial Notes

2. Sensitivity analysis

Sensitivity analysis technology is used by the Group to analyze the rationality for risk variable and possible impact of potential change on current P/L or owner’s equity. Risk variable always occurs not in isolation, and the dependency between variables will have a great effect on the fi nal infl uence amount with a risk variable changed, so the following are performed supposing that the each variable is changed independently.

(1) Sensitivity analysis for FX risk

Supposing for FX risk sensitivity analysis: all hedges of net investment in an overseas operation and cash fl ow hedge are highly effective.

Based on the supposing above, the impact of the possible reasonable change for exchange rate on current P/L and entities is as follows:

Item Exchange rate change2014

Impact on net profi t

Impact on the owner’s equity

All foreign currencies The exchange rate to RMB increased by 5% 3,309,471.26 3,309,471.26All foreign currencies The exchange rate to RMB reduces by 5%. -3,309,471.26 -3,309,471.26

(2) Sensitivity analysis for IRR

Sensitivity analysis for IRR is based on the supposing as follows:

The change of market interest rate may affect the interest income or expenses of variable interest rate fi nancial instruments;

For the fi xed rate fi nancial instrument metered with fair value, the change of market interest rate will affect only the interest income or expenses.

The change of fair value of derivative fi nancial instruments and other fi nancial assets and liabilities shall be calculated via discount cash fl ow method with the market interest rate on balance sheet date.

Based on the supposing above, the impact of the possible reasonable change for exchange rate on current P/L and entities with other variables unchanged is as follows:

Item Change of exchange rate

2014 2013Impact on net

profi tImpact on the

owner’s equityImpact on net

profi tImpact on the

owner’s equityLoan with fl oating interest rate

Increase by 100 percentage points -6,015,404.78 -6,015,404.78 -1,321,807.92 -1,321,807.92

Loan with fl oating interest rate

Decrease by 100 percentage points 6,015,404.78 6,015,404.78 1,321,807.92 1,321,807.92

154


Financial Notes

IX. Disclosure of fair value1. Fair value at end of the period of assets and liabilities metered by fair value


Item

Fair value at the end of the periodMetering of

the fi rst layer fair value

Metering of the second

layer fair value

Metering of the third layer

fair valueTotal

I. Metering of the continuous fair value(I) Financial assets calculated based on fair value with their change included in current P/L 2,147,424.00 - - 2,147,424.00

1. Transaction fi nancial assets 2,147,424.00 - - 2,147,424.00(1) Debt instrument investment - - - -(2) Equity instrument investment - - - -(3) Derivative fi nancial assets 2,147,424.00 - - 2,147,424.00

2. Financial assets designated to be calculated based on fair value with their change included in current P/L(1) Debt instrument investment(2) Equity instrument investment

(II) Financial assets available for sale 280,170,438.00 - - 280,170,438.00(1) Debt instrument investment - - -(2) Equity instrument investment 280,170,438.00 - - 280,170,438.00(3) Others

(III) Investment real estate1. Right to use for lands for rent2. Buildings leased3. Use to right for lands held and prepared for

transfer after value-adding(IV) Biological assets

1. Consumable biological assets2. Productive biological assetsTotal assets calculated continuously by fair value 282,317,862.00 - - 282,317,862.00

(V) Trading fi nancial liabilities 78,999,408.00 - - 78,999,408.00Wherein: issued Traded bond

Financial Liabilities 78,999,408.00 - - 78,999,408.00Others

(VI) Financial liabilities designated to be calculated based on fair value with their change included in current P/L

Total assets calculated continuously by fair value 78,999,408.00 - - 78,999,408.00II. Metering of the non-continuous fair value

(I) Assets held for saleNon-continuous total assets calculated by fair value Total assetsNon-continuous total assets calculated by fair value Total liabilities

155


Financial Notes

2. Basis for determining of the continuous and non-continuous project market price metered by the fi rst layer of fair value

The transaction financial assets and trading financial liabilities of the Group are the future foreign exchange settlement contract signed by the subsidiary of the COOEC (Qingdao) Co., Ltd. and Standard Chartered Bank. The forward exchange rate of the contract is provided by the counter party Standard Chartered Bank, and our Group will determine the fair value of the contract based on the forward exchange rate as well as the change amount of fair value.

The fi nancial assets available for sale metering by fair value of the Group are the stock of listed company held, and the fair value of the assets shall be determined based on the closing price of the stock at end of the year.

X. Related Party and Connected Transactions1. Profi le of parent company of the enterprise

Parent company name Registration place Business nature Registered

Capital

Shareholding proportion of

parent company to the enterprise

(%)

Proportion of voting rights of

parent company to the enterprise

(%)

China National Offshore Oil Corporation Beijing

Petroleum prospecting, development,

production and processing

RMB 94,931,614,000 51.34 58.28

Description of parent company of the enterprise

China National Offshore Oil Corporation (hereinafter referred to as CNOOC for short) holds the stock rights of 6.65% and 0.28% respectively via the wholly-owned subsidiary CNOOC Nanhai West Corporation and CNOOC Bohai Corporation, so the proportion for voting rights is 58.28%.

The fi nal controlling party of the enterprise is China National Offshore Oil Corporation.

2. Profi le of subsidiaries of the enterprise

For details of the subsidiaries of the enterprise see related contents in “Composition of Enterprise Group” in “VII” of the Annex.

3. Profi le of cooperative enterprises or associated enterprises of the enterprise

For details of the important cooperative enterprises or associated enterprises of the enterprise see related contents of “Important Associated Enterprises” in “VII” of the Annex.

156


Financial Notes

4. Profi le of other related parties

Name of other related parties Relationship between other related parties and the enterpriseChina Offshore Oil Bohai Corporation Wholly owned subsidiary company of parent companyChina Offshore Oil Nanhai West Corporation Wholly owned subsidiary company of parent companyCNOOC Holding subsidiary of parent companyChina Oilfi eld Services Ltd. Holding subsidiary of parent companyCNOOC Finance Co., Ltd. Holding subsidiary of parent companyChina Offshore Oil Nanhai East Corporation Wholly owned subsidiary company of parent companyChina Offshore Oil Donghai Corporation Wholly owned subsidiary company of parent companySea Industrial International Co., Limited Wholly owned subsidiary company of parent companyCNOOC Oil & Gas Development & Utilization Company Wholly owned subsidiary company of parent companyCNOOC Gas & Power Group Wholly owned subsidiary company of parent companyCNOOC Energy Technology & Services Limited Wholly owned subsidiary company of parent companyCNOOC Oil & Petrochemicals Co., Ltd. Wholly owned subsidiary company of parent companyChina Offshore Oil Service (Hong Kong) Co., Ltd. Wholly owned subsidiary company of parent companyChina National Chemical Construction Corporation Wholly owned subsidiary company of parent companyCNOOC Research Institutes Wholly owned subsidiary company of parent companyCNOOC Petrochemicals Import & Export Co., Ltd. Wholly owned subsidiary company of parent companyCNOOC Marketing Co., Ltd. Wholly owned subsidiary company of parent companyCNOOC New Energy Investment Co., Ltd. Wholly owned subsidiary company of parent companyCNOOC Changzhou Paint & Coatings Industry Research Institute Co., Ltd. Subsidiaries of shareholders

Huizhou National Oil Reserve Base Co., Ltd. Subsidiaries of shareholdersChina BlueChemical Ltd. Holding subsidiary of parent companyCNCCC International Tendering Co., Ltd. Subsidiaries of shareholders

5. Connected transactions

(1) Connected transactions for purchasing and selling commodities and providing and accepting labor service

Table for Purchasing Commodities and Accepting Labor Service


Related party Content of connected transaction



China National Offshore Oil Corporation (CNOOC)

Purchasing commodities/accepting labor service 815,400.00 938,525.00


Purchasing commodities/accepting labor service 1,690,682,524.42 1,304,529,949.44

China Oilfi eld Services Ltd. Purchasing commodities/accepting labor service 268,600,464.26 268,933,489.11

China Offshore Oil Bohai Corporation Purchasing commodities/accepting labor service 44,717,748.29 43,513,191.37

CNOOC Oil & Petrochemicals Co., Ltd. Purchasing commodities/accepting labor service 10,403,944.62 1,796,300.00

China Offshore Oil Service (Hong Kong) Co., Ltd.

Purchasing commodities/accepting labor service 9,091,943.56 11,240,017.27

Sea Industrial International Co., Limited Purchasing commodities/accepting labor service 5,228,243.45 5,538,655.59

157


Financial Notes




CNOOC Changzhou Paint & Coatings Industry Research Institute Co., Ltd.

Purchasing commodities/accepting labor service 3,095,191.39 -

China Offshore Oil Nanhai West Corporation Purchasing commodities/accepting labor service 1,231,566.34 161,420.00

CNCCC International Tendering Co., Ltd. Purchasing commodities/accepting labor service 674,916.40 564,084.00

China Offshore Oil Nanhai East Corporation Purchasing commodities/accepting labor service 313,583.24 300,275.49

China Offshore Oil Donghai Corporation Purchasing commodities/accepting labor service 247,829.00 247,829.00

CNOOC Gas & Power Group Purchasing commodities/accepting labor service 98,748.00 2,369,952.00

CNOOC Research Institutes Purchasing commodities/accepting labor service 2,556,501.81

China National Chemical Construction Corporation

Purchasing commodities/accepting labor service 1,277,317.51

Table for Selling Commodities/Providing Labor Services





China National Offshore Oil Corporation Selling commodities/providing labor services 610,325.47 678,636.79

CNOOC Selling commodities/providing labor services 19,086,852,173.91 16,452,141,463.46


Selling commodities/providing labor services 317,248,970.03 258,922,714.96

CNOOC Gas & Power Group Selling commodities/providing labor services 167,617,363.35 224,735,450.12

CNOOC Research Institutes Selling commodities/providing labor services 41,897,520.55 99,176,855.99


Selling commodities/providing labor services 16,319,852.46 6,499,423.66

CNOOC Oil & Petrochemicals Co., Ltd. Selling commodities/providing labor services 2,858,242.00 24,744,687.48

CNOOC Changzhou Paint & Coatings Industry Research Institute Co., Ltd.

Selling commodities/providing labor services 452,830.19 -

CNOOC Petrochemicals Import & Export Co., Ltd.

Selling commodities/providing labor services - 91,525,222.00

Huizhou National Oil Reserve Base Co., Ltd. Selling commodities/providing labor services - 20,900,000.00

CNOOC Marketing Co., Ltd. Selling commodities/providing labor services 18,291,545.00

China Oilfi eld Services Ltd. Selling commodities/providing labor services - 1,908,182.58

China BlueChemical Ltd. Selling commodities/providing labor services - 1,792,452.78

CNOOC New Energy Investment Co., Ltd. Selling commodities/providing labor services - 135,850.92

158


Financial Notes

Description for connected transactions for purchasing and selling commodities and providing and accepting labor service.

Connected transactions for purchasing and selling commodities and providing and accepting labor service: determine contract price via public tender or negotiation tendering based on market principle in accordance with the connected transaction contracts signed between the Group and the connected parties. CNOOC Bohai Corporation, China Oilfield Services Limited and CNOOC Energy Development Co., Ltd of CNOOC and their subsidiaries provide such services as engineering subcontracting, transportation, vessel, fuel, water and electricity for the Group in the year. The Group shall provide the related parties with production and technical services in relation to design, installation, building and other disciplines.

(2) Related lease

The Company is the lessor:


Name of the leasee Type of leasing assetLease income confi rmed in

current period

Lease income confi rmed in last

periodCNOOC Houses and buildings 48,585,851.36 49,671,352.26CNOOC Energy Technology & Services Limited Houses and buildings - 127,080.00

(3) Salary of key management personnel


Item The amount incurred in current period The amount incurred in last periodSalary of key management personnel 445.96 482.07

(4) Other connected transactions

1) Interest income on deposit of related parties

Type and name of related party

This year The last year

Amount

Proportion to the total amount

of similar transactions (%)

Amount



Other enterprises controlled by the same controlling shareholder and the fi nal controlling partyCNOOC Finance Co., Ltd. 10,684,307.27 42.75 8,489,552.90 61.57Total 10,684,307.27 42.75 8,489,552.90 61.57

2) Interest expense on loan of related party

Type and name of connected party

This year The last year

Amount



Amount


of connected transactions (%)

Other enterprises controlled by the same controlling shareholder and fi nal controlling partyCNOOC Finance Co., Ltd. 1,558,666.67 1.27 9,596,447.74 6.38Total 1,558,666.67 1.27 9,596,447.74 6.38

Note: Loan rate of the Group in connected unit is in conformity to the relevant provisions of People’s Bank of China.

159


Financial Notes

3) Investment incomes gained by related party

Type and name of connected party

This year The last Year

Amount



Amount



Other enterprises controlled by the same controlling shareholder and fi nal controlling partyCNOOC Finance Co., Ltd. 6,499,921.54 3.57 175,982.39 0.11Kvearner and COOEC (Qingdao) Engineering Technology Co., Ltd. -8,125,788.00 -4.46 - -

CNOOC Oil & Petrochemicals Co., Ltd. - - 68,600,141.24 44.82

Total -1,625,866.46 -0.89 68,776,123.63 44.93

6. Receivables and payables of related parties

(1) Receivables


Project name Related partyEnding balance Opening balance

Book balance Provision for bad debts Book balance Provision for bad

debtsAccounts receivable CNOOC 4,382,105,468.96 - 3,657,900,252.25 -

Accounts receivable

CNOOC Gas & Power Group 213,559,607.45 - 45,695,092.70 -

Accounts receivable


120,634,357.67 - 11,701,144.30 -

Accounts receivable

CNOOC Research Institutes 28,430,000.00 - 28,429,500.00 -

Accounts receivable


10,510,617.63 - 1,708,888.68 -

Accounts receivable

CNOOC Oil & Petrochemicals Co., Ltd. 4,480,467.00 - 43,770,824.31 -

Other receivables CNOOC 88,881.95 - - -

Other receivables

CNOOC Oil & Petrochemicals Co., Ltd. - - 5,369,531.13 -

160


Financial Notes

(2) Payables


Project name Related party Book balance at end of the period

Book balance at beginning of the

periodAccounts payable CNOOC Energy Technology & Services Limited 392,983,348.45 272,005,124.27Accounts payable China Oilfi eld Services Ltd. 13,179,896.27 28,735,511.05Accounts payable China Offshore Oil Service (Hong Kong) Co., Ltd. 7,072,709.18Accounts payable China Offshore Oil Bohai Corporation 7,394,085.34Accounts payable CNOOC Oil & Petrochemicals Co., Ltd. 6,299,635.99Accounts payable CNOOC Research Institutes 2,515,166.11Accounts payable CNOOC Gas & Power Group 493,740.00 394,992.00Accounts payable CNOOC Nanhai West Corporation 171,976.76 -Accounts payable China Offshore Oil Donghai Corporation 123,914.50 -Accounts payable Sea Industrial International Co., Limited - 57,000.00Accounts payable China National Chemical Construction Corporation - 15,000.00Other payables China National Offshore Oil Corporation 113,449.00 -Other payables CNOOC Energy Technology & Services Limited 413,456.00 1,184,395.12Other payables China National Chemical Construction Corporation 103,608.25 103,608.25Advance receipts CNOOC 653,966,353.60 741,921,453.99Advance receipts CNOOC Energy Technology & Services Limited - 27,095,609.80

7. Others

Balance of related parties’ deposits

Related party (Item) Amount at the end of the year

Amount at the beginning of the

yearOther enterprises controlled by the same controlling shareholder and fi nal controlling partyCNOOC Finance Co., Ltd. 1,453,956,449.61 502,924,123.89Total 1,453,956,449.61 502,924,123.89

XI. Commitments and contingencies1. Commitments

External commitments, property and amount on balance sheet date.

1) Up to December 31, 2014, the large construction contract of the Group that has been signed but not paid:

Project name Contract amount Paid UnpaidDeepwater Foundation Construction Project ¥1,677,550,879.20 ¥1,125,855,100.98 ¥551,695,778.22

Deepwater pipe-laying vessel¥971,443,228.30 ¥937,076,855.51 ¥34,366,372.79

€39,211,767.43 €38,189,116.47 €1,022,650.96$1,109,094.52 $801,218.71 $307,875.81

Multifunction underwater engineering vessel ¥763,101,014.00 ¥381,532,800.00 ¥381,568,214.00Offi ce building in bonded area ¥228,836,852.06 ¥208,957,091.42 ¥19,879,760.64

161


Financial Notes

2) Lease contracts which are signed and being fulfi lled or in preparation and their fi nancial impact

Up to December 31, 2014 (T), the amount to be borne by the Group in the following periods for the irrevocable fi nance lease of a deepwater multifunction installation ship conducted by the Company and its subsidiary Shenzhen COOEC Subsea Technology Co., Ltd. is as follows:

Period Finance leaseT+1 year $17,626,866.60T+2 years $17,626,866.60T+3 years $17,626,866.60After T+3 years $65,093,733.09Total $117,974,332.89

Except the aforesaid commitments, the Group had no other major commitment by December 31, 2014.

2. Contingencies

(1) Important contingencies on balance sheet date

Providing guarantee for subsidiary

1) COOEC (Qingdao) Co., Ltd. (hereinafter referred to as Qingdao Company), a subsidiary of the Company, entered into a process module construction project contract for the Gorgon LNG Factory with Chevron Australia on April 13, 2010. The initial amount of the contract was USD 180 million. According to the requirements of the contract, the Company, as the parent company of Qingdao Company, shall provide parent company guarantee subsequent to signing of the contract. The Company will unconditionally and irrevocably pledge the fi rst independent payment guarantee, rather than warranty, to owner and its successors and assignees, on Qingdao Company’s full and faithful performance of each term, provision, condition, obligation, and agreement to be exercised, implemented, performed, and complied by Qingdao Company. The guarantee matter was adopted via the resolution at the second temporary General Meeting of Shareholders of 2010 on August 16, 2010. Up to December 31, 2014, the responsibility of guarantee had not been dismissed.

2) COOEC (Qingdao) Co., Ltd., a subsidiary of the Company, signed the contract of ICHTHYS Project with JKC Company in 2012, with the contract amount of USD 305.4 million. In light of the contract requirements, the Company, as the parent company of Qingdao Company, shall provide parent company guarantee with the maximum compensation liability of 100% contract amount. As the main responsible person instead of mere guarantee, the Company shall irrevocably, unconditionally and independently guarantee all the responsibilities and obligations of Qingdao Company under the contract of ICHTHYS Project to JKC Company. If Qingdao Company violates any responsibility or obligation, the Company shall fulfi ll the responsibilities and obligations by itself or take measures to assume relevant responsibilities and obligations; in case of fi nancial responsibilities, the Company shall pay for it or bear the payables in 14 work days after receiving the claim from JKC. Under no circumstances can the Company remove, reduce, change or weaken the responsibilities. Guarantee period: from the date when the Letter of Guarantee is issued to May 2, 2019.

Meanwhile, according to the regulations of the Contract for ICHTHYS Project, Qingdao Company shall provide bank guarantee to JKC, including performance guarantee and quality guarantee. The amount in performance guarantee is 10% of the contract amount, namely USD 30.54 million, and the guarantee period is from January 31, 2012 to May 2, 2015; the mount in quality guarantee is 5% of the contract amount, namely USD 15.27 million, and the guarantee period is from May 2, 2015 to May 2, 2019. According to the requirements of the bank issuing the guarantee - Standard Chartered Bank, the company shall provide the letter of commitment of the above-mentioned bank guarantee for Qingdao Company, with the guarantee period synchronous with bank guarantee period.

3) Shenzhen COOEC Subsea Technology Co., Ltd. (hereinafter referred to as Shenzhen Company), a subsidiary of the Company, signed ship financing lease contract with Tianjin Zhaoyin Heavy Equipment Leasing Co., Ltd. on August 13, 2013 to lease a South China Sea deepwater multifunction installation ship. The purchase price of the ship was USD 149,225,000, with notional principal of USD 119.36 million. In light of the contract requirements, the Company signed guarantee agreement with Tianjin Zhaoyin Heavy Equipment Leasing Co., Ltd. on August 28, 2013 to guarantee the above-mentioned transactions, with guarantee amount of USD 119.36 million. The Company provides the joint liability assurance for all debts of the warrantee, Shenzhen Company. The guarantee duration lasts from the date when Financial Leasing Contract becomes valid to two years later after contract date.

162


Financial Notes

4) COOEC (Qingdao) Co., Ltd., a subsidiary of the Company, signed a unit price contract for Nyhamna Project with Norway-based KVAERNER Company on October 30, 2013. The contract amount was estimated as USD 11 million. According to the requirements of the contract, the Company, as the parent company of Qingdao Company, shall provide parent company guarantee subsequent to signing of the contract. According to the contract, the maximum compensation liability is 10% (about USD 1.1 million) of the contract amount. As the responsible principal, the Company provides joint liability warrandice for Qingdao Company. In case Qingdao Company violates responsibility stipulated by the contract, the Company shall implement or take necessary measures to bear relevant responsibilities. The guarantee was passed by the Third Session of the Fifth Board on April 25, 2014, with a guarantee period from the issue date to October 30, 2017.

5) COOEC (Qingdao) Co., Ltd., a subsidiary of the Company, signed a unit price contract for BSP Project with Brunei-based Shell Oil Company on December 16, 2013. The contract amount was estimated as USD 46 million. In light of the contract requirements, the Company, as the parent company of Qingdao Company, shall provide parent company guarantee with the maximum compensation liability of USD 8.25 million. As the responsible principal, the Company provides joint liability warrandice for Qingdao Company. In case Qingdao Company violates responsibility stipulated by the contract, the Company shall implement or take necessary measures to bear relevant responsibilities. The guarantee was passed by the Third Session of the Fifth Board on April 25, 2014, with a guarantee period from the issue date to March 31, 2018.

6) COOEC (Qingdao) Co., Ltd., a subsidiary of the Company, signed a Module Fabrication Work Package1 (hereinafter referred to as “MWP1” process module construction contract with the general contractor Yamgaz SNC Company of Russia-based Yamal LNG project in the beginning of July, 2014, with the contract amount of USD 1,643 million, about RMB 10,109 million converted based on the exchange rate of 1:6.1528 on June 30, 2014. According to the contract requirements, the Company, as the parent company of Qingdao Company, shall provide parent company guarantee. According to contract requirements, the guarantee amount is 35% of the total contract amount (about USD 575.1 million), thereof the maximum accumulated liability is 25% and the maximum defer penalty is 10%, The guarantee was passed by the Third Session of the Fifth Board on July 23, 2014, with a guarantee period from the issue date to September 23, 2021.

(2) The important contingencies not required to be disclosed shall be explained as well:

Except the aforesaid contingencies, the Group had no other major contingencies up to December 31, 2014.

XII. Events after the Balance Sheet Date1. Profi t distribution


Profi t or dividend to be distributed Cash dividend of RMB 2.30 is distributed for each 10 shares, and totally RMB 1.017 billion is distributed.

Profi t or dividend to be distributed after review and approval.

Cash dividend of RMB 2.30 is distributed for each 10 shares, and totally RMB 1.017 billion are distributed.

2. Explanation to events after the Balance Sheet Date

Apart from the disclosure matters of the above-mentioned post balance sheet event, the group has no other major post balance sheet event.

163


Financial Notes

XIII. Notes to main items of fi nancial statements of the parent company1. Receivables

(1) Classifi cation of receivables:


Types


Book valueAmount


(%)Amount

AccrualProportion of shareholding

(%)Receivables with signifi cant single amount and independent provision for bad debts

5,744,322,496.80 99.40 - - 5,744,322,496.80

Receivables combined based on credit risk features and with provision for bad debts

34,742,763.45 0.60 5,783,241.63 - 28,959,521.82


Types


Book valueAmount


(%)Amount


(%)Receivables with signifi cant single amount and independent provision for bad debts

4,184,490,158.50 98.83 - - 4,184,490,158.50

Receivables combined based on credit risk features and with provision for bad debts

49,643,274.47 1.17 3,433,853.30 46,209,421.17


164


Financial Notes

Receivables with signifi cant unit amount and single provision for bad debts at end of period



Receivables (per unit)Ending balance

Accounts receivable

Bad debt reserves



CNOOC 4,141,604,930.66Newfi eld China LDC, NCL 731,254,421.66Shenzhen COOEC Subsea Technology Co., Ltd. 272,038,842.57

CNOOC Gas & Power Group 213,127,890.77CNOOC Energy Technology & Services Limited 115,852,633.77

TECHNIP SAUDIARABIA Ltd 47,716,017.53COOEC (Qingdao) Co., Ltd. 40,104,472.88COOEC International Co., Ltd. 35,600,000.00DOCKWISE SHIPPING B. V. 34,621,630.28Huade Petrochemical Co., Ltd.Daya Bay Huizhou 31,654,382.26

SAIPEM S.p.A 29,554,583.09CNOOC Research Institutes 28,430,000.00PT.COOECIndonesia 12,252,073.70CNOOC Oil & Gas Development & Utilization Company 10,510,617.63

Total 5,744,322,496.80 / /

Receivable with provision for bad debts by aging analysis method in combination:




Accounts receivable

Bad debt reserves


< 1 year 15,253,240.05 - -Of which: subentry within 1 yearSubtotal within year 15,253,240.05 - -One to two year 1,139,793.59 341,938.07 30Two to three year 6,191,434.59 3,714,860.76 60> 3 years 1,726,442.80 1,726,442.80 100Three to four yearsFour to Five years> 5 yearsTotal 24,310,911.03 5,783,241.63



165


Financial Notes

(2) Provision for bad debts withdrawn, reclaimed or turned back in current period:

The amount for prevision for bad debts withdrawn in current period is RMB 2,349,388.33, and that reclaimed or turned back in current period is RMB 0.

(3) Receivables canceled actually after verifi cation in current period


Item Amount written offAccounts receivable written off actually 0

(4) Receivables gathered based on debt party with top fi ve balance at end of the period:

Unit name Relation with the Company Amount Accounting age

Proportion accounting for

the total amount of receivable (%)

Balance for prevision for bad

debts at end of the year

CNOOCControlled by the same controlling shareholder

4,141,604,930.66 < 1 year 71.67 -

Newfi eld China LDC, NCL Non-related party 731,254,421.66 < 1 year 12.65 -


Subsidiary 273,215,579.26 Note 1 4.73 -


Controlled by the same controlling shareholder

213,127,890.77 Note 2 3.69 -


Controlled by the same controlling shareholder

115,852,633.77 < 1 year 2.00 -

Total 5,475,055,456.12 ___ 94.74 -

Note 1: In the amount of receivables of Shenzhen COOEC Subsea Technology Co., Ltd., the amount within 1 year is RMB 7,545,482.78, that during 1-2 year (s) is RMB 209,391,821.43, and that above 3 years is RMB 56,278,275.05.

Note 2: In the amount of receivables of CNOOC Gas & Power Group., the amount within 1 year is RMB 207,829,890.77 and that during 1-2 year (s) is RMB 5,298,000.00.

166


Financial Notes

2. Other receivables

(1) Classifi cation of other receivables:


Category



(%) AmountProvision

proportion (%)

Other receivables with signifi cant unit amount and independent provision for bad debts

1,172,626,498.82 97.09 - - 1,172,626,498.82

Other receivables combined based on credit risk feature and with provision for bad debts

35,179,617.40 2.91 458,357.29 34,721,260.11

Other receivables with less signifi cant unit amount and independent provision for bad debtsTotal 1,207,806,116.22 / 458,357.29 / 1,207,347,758.93

Category



(%) AmountProvision

proportion (%)

Other receivables with signifi cant unit amount and independent provision for bad debts

1,540,332,964.94 98.98 - - 1,540,332,964.94

Other receivables combined based on credit risk feature and with provision for bad debts

15,811,984.26 1.02 51,577.88 15,760,406.38

Other receivables with less signifi cant unit amount and independent provision for bad debtsTotal 1,556,144,949.20 / 51,577.88 / 1,556,093,371.32

Other receivables with signifi cant unit amount and single provision for bad debts at end of the period



Other receivables (per unit)Ending balance

Other receivables

Bad debt reserves



COOEC International Co., Ltd. 1,127,121,609.19 - - --Tianjin Municipal Offi ce of SAT, Offshore Oil Taxation Branch Bureau 45,504,889.63 - - --

Total 1,172,626,498.82 - / /

Receivable with provision for bad debts by aging analysis method in combination:


167


Financial Notes



Other receivables

Bad debt reserves


< 1 year 11,160.00 - -Of which: subentry within 1 yearSubtotal within year 11,160.00 - -One to two year 81,426.00 24,427.80 30.00Two to three year 1,400.70 840.42 60.00> 3 years 433,089.07 433,089.07 100.00Three to four yearsFour to Five years> 5 yearsTotal 527,075.77 458,357.29



(2) Provision for bad debts withdrawn, reclaimed or turned back in current period:

The amount for prevision for bad debts withdrawn in current period is RMB 406,779.41, and that reclaimed or turned back in current period is RMB 0.

(3) Other receivables canceled actually after verifi cation in current period


Item Amount written offOther accounts receivable written off actually 0

(4) Classifi cation of other receivables by fund property

Nature of fund Book balance at end of the period

Book balance at beginning of the

periodLoan and interest 1,127,121,609.19 1,469,389,700.46Refunding export taxes 45,504,889.63 52,357,415.38Pretty cash, security deposit and cash deposit 16,532,989.14 27,883,856.35Advance money 18,646,628.26 6,513,977.01Total 1,207,806,116.22 1,556,144,949.20

168


Financial Notes

(5) Other receivables gathered based on debt party with top fi ve balance at end of the period:


Unit name Nature of accounts Ending balance Accounting

age

Proportion of other receivables

accounting for the total balance

at end of the period (%)

Bad debt reserves of the

ending balance of this period

COOEC International Engineering Co., Ltd. Loan and interest 1,127,121,609.19 1-3 years 93.32 -

Tianjin Municipal Offi ce of SAT, Offshore Oil Taxation Branch Bureau


COOEC (Qingdao) Co., Ltd. Advance money 8,544,942.94 < 1 year 0.71 -COOEC International Engineering Co., Ltd Advance money 6,071,585.06 < 1 year 0.50 -

Shenzhen COOEC Subsea Technology Co., Ltd. Advance money 2,346,409.15 < 1 year 0.19 -

Total / 1,189,589,435.97 / 98.49 -



Item

Ending balance Opening balance

Book balanceDecreased

treasury stock

Book value Book balanceDecreased

treasury stock

Book value

Investment for subsidiaries 8,126,208,599.93 - 8,126,208,599.93 5,220,666,399.93 - 5,220,666,399.93

Investment for associated companies and cooperative companiesTotal 8,126,208,599.93 - 8,126,208,599.93 5,220,666,399.93 - 5,220,666,399.93

(1) Investment for subsidiaries


Name of invested unit Opening balance Added amount of this period

Current period

Decrease in this

year

Ending balance

Current period

accrual depreciation

reserves

Ending balance of


COOEC (Zhuhai) Co., Ltd., 2,050,000,000.00 1,900,000,000.00 - 3,950,000,000.00 - -

COOEC (Qingdao) Co., Ltd., 2,970,000,000.00 - - 2,970,000,000.00 - -


112,238,470.00 1,000,000,000.00 - 1,112,238,470.00 - -

169


Financial Notes

Name of invested unit Opening balance Added amount of this period

Current period

Decrease in this

year

Ending balance

Current period

accrual depreciation

reserves

Ending balance of


COOEC International Engineering Co., Ltd 60,000,000.00 - - 60,000,000.00 - -

A.E.S. Destructive & Non-destructive Testing Ltd.

20,094,612.53 - - 20,094,612.53 - -

Blue Ocean International Co., Ltd. 6,698,104.00 - - 6,698,104.00 - -

COOEC (Australia) Co., Ltd. 5,542,200.00 - 5,542,200.00 - -

COOEC Indonesia Co., Ltd. 735,803.50 - - 735,803.50 - -

COOEC Nigeria Co., Ltd. 521,374.90 - - 521,374.90 - -

COOEC International Engineering Co., Ltd. 378,035.00 - - 378,035.00 - -

Total 5,220,666,399.93 2,905,542,200.00 - 8,126,208,599.93 - -

4. Operating income and operating costs:


ItemThe amount incurred in current period The amount incurred in last period

Income Cost Income CostPrimary business 19,509,673,618.12 15,130,030,869.10 18,031,876,620.73 14,854,587,028.43Other business 63,084,139.73 30,340,108.45 65,870,337.86 30,777,154.28Total 19,572,757,757.85 15,160,370,977.55 18,097,746,958.59 14,885,364,182.71

(1) Main business - according to type of products

Name of product Amount of this year Amount of last year1. Revenue from offshore engineering EPCI contract project 18,339,621,864.32 16,652,292,629.492. Revenue from offshore engineering Non-EPCI contract project 941,919,309.88 1,374,507,634.51Wherein:Revenue from onshore construction 74,763,475.77 10,088,024.95Revenue from offshore installation and subsea pipe-laying 357,391,836.43 770,847,148.74Engineering design income 122,979,352.09 155,610,227.32Maintenance service income 386,784,645.59 437,962,233.503. Income not from ocean engineering projects 228,132,443.92 5,076,356.73Total 19,509,673,618.12 18,031,876,620.73

170


Financial Notes

(2) Top 5 clients’ operating income

Name of client Operating income

Proportion accounting for total

operating income (%)

CNOOC 18,249,415,943.35 93.24CNOOC Energy Technology & Services Limited 314,016,162.13 1.60CNOOC Gas & Power Group 167,617,363.35 0.86CNOOC Research Institutes 41,897,520.55 0.21COOEC International Co., Ltd. 35,600,000.00 0.18Total 18,808,546,989.38 96.09

5. Investment income


ItemThe amount



periodInvestment income of long-term equity accounted by cost method 1,267,918.63 50,074,202.69Investment income of long-term equity accounted by equity methodInvestment income during disposing long-term equity investment 2,104,092.82 85,273,868.77Investment income for fi nancial assets calculated based on fair value with their change included in current P/LInvestment income for fi nancial assets with disposal calculated based on fair value with their change included in current P/LHeld-to-maturity investment income during holding periodInvestment income for fi nancial assets available for sale during holding period 7,881,205.54 1,627,782.39

Investment income during disposing available-for-sale fi nancial assets - 36,592,865.17Gains by metering residual stick rights by fair value after losing of control rightsInvestment income from bank fi nancial products 129,293,475.35 24,589,687.66Investment returns from issuing of entrusted loans - 4,159,555.53Total 140,546,692.34 202,317,962.21

171


Financial Notes

XIV. Supplementary Data1. Statement of non-recurring gains and losses in the current period


Item Amount RemarksGains and losses on disposal of non-current assets 37,607,996.97Government subsidies examined beyond the authority, or without formally approved document with tax returns and exemption included in current P/L (except the government subsidies closely related to enterprise business and enjoyed in the unifi ed standard quota or fi xed amount of the state)Government grants accounted in current profi t and loss (closely related to business events, excluding government grants enjoyed in quota or fi xed amount as per unifi ed national standard

245,507,726.26

Tax for the use of funds which is charged from non-fi nancial enterprises and recorded in current current gains or lossesRevenues generated by the fair value of net assets identifi able by investee enjoyed by enterprise when its investment cost in subsidiary, associate and cooperative companies is less than investment returns.Non-monetary assets exchange gains and lossesGains and losses on assets invested or managed by others entrusted 162,517,984.08Various assets depreciation preparation accrued due to force majeure such as natural disasterDepreciation reservesDebt restructuring gains and lossesCorporate restructuring expenses, such as expenditure for staffi ng, integration expenses, etc.P/L exceeding fair value generated from the transaction with unfair transaction priceCurrent net P/L generated from enterprise merger under the same control from the beginning of subsidiary to the merger dayGains and losses unrelated to normal business activities or generated from eventsIn addition to effective hedging business relating to normal operating activities of the Company, variable loss and profi t of fair value generated from held transaction fi nancial assets and trading fi nancial liabilities as well as investment income gained from disposal of transaction fi nancial assets, trading fi nancial liabilities and available-for-sale fi nancial assets

-89,828,896.00

Reversal of receivables impairment undergoing independent impairment testGains and losses from foreign entrusted loansP/L generated from variable fair value of investment property and measured subsequently with fair value modelImpact from one-off adjustment on current P/L according to the requirements of laws and regulations in terms of taxation and accountingCustody fee income from entrusted managementOther non-operating income and expenditure in addition to all items above 5,509,202.13Other profi ts and losses in conformity with defi nition of non-recurring profi t and loss 0Effect on income tax -55,925,446.85Effect on minority interest -1,178,161.10Total 304,210,405.49

172


Financial Notes

2. Net assets income ratio and earnings per share

Profi t in the reporting periodAverage weighted net assets Income

ratio (%)

Earnings per shareBasic earnings per

shareDiluted earnings per

shareNet profi t attributable to common stockholders of the Company 22.80 0.97 0.97

Net profi ts attributable to common stockholders of the company after non-recurring profi t and loss are deducted

21.17 0.90 0.90

3. Relevant supplement data for accounting policy change


The Company changes related accounting policies and performs retroactive restatement for comparative fi nancial statements in accordance with 8 accounting standards issued by Ministry of Finance in 2014 including Accounting Standards for Enterprises No.2 - Long-term Equity Investments; the consolidated balance sheet on January 1 and December 31, 2013 after restatement is as follows:


Item January 1, 2013 December 31, 2013 December 31, 2014Current assets:

Currency capital 1,034,439,710.10 1,779,511,011.24 3,281,826,338.76Settlement reservesLending fundsFinancial assets calculated by fair value with their change included in current P/L 2,229,781.50 34,133,463.00 2,147,424.00

Derivative fi nancial assetsNotes receivable 13,196,000.00 - -Accounts receivable 2,215,166,227.75 4,334,437,118.49 5,843,029,130.23Advance payments 296,879,025.74 576,329,848.56 246,103,857.01Premiums receivableReinsurance accounts receivableProvision of cession receivableInterest receivable - 16,831,742.46 10,393,778.04Dividends receivableOther receivables 152,169,161.68 289,431,346.22 238,704,773.87Redemptory monetary capital for saleInventory 1,443,864,950.49 1,715,611,771.37 1,108,847,744.04Incur debts divided for saleNon-current assets due within one yearOther current assets 15,365.53 4,092,138,442.33 3,087,069,830.58

Total current assets 5,157,960,222.79 12,838,424,743.67 13,818,122,876.53Non-current assets:

Issued entrusted loans and monies advancedFinancial assets available for sale 347,433,378.00 326,188,178.00 350,841,816.00Held-to-maturity investmentLong-term receivables

173


Financial Notes

Item January 1, 2013 December 31, 2013 December 31, 2014Long-term equity investmentInvestment real estate 280,722,923.83 268,745,266.19Fixed assets 8,357,898,982.38 10,965,248,589.57 12,972,403,808.13Construction in progress 3,673,066,885.07 1,357,271,549.58 1,720,532,434.02Engineering materialsDisposal of fi xed assets 307,216,685.64 288,331,886.31 -Productive biological assetsOil and gas assetsIntangible assets 2,004,008,796.45 1,903,996,342.98 1,802,744,632.55Development expenditure 6,817,550.00 1,302,000.00 -Business reputation 13,075,057.26 13,075,057.26 13,075,057.26Long-term deferred expense 52,922,872.79 51,962,010.84 52,483,781.49Deferred income tax assets 166,389,316.70 89,662,945.02 161,636,457.30Other non-current assets

Total non-current assets 15,209,552,448.12 15,265,783,825.75 17,329,648,270.53Total assets 20,367,512,670.91 28,104,208,569.42 31,147,771,147.06

Current liabilities:Short-term loan 100,000,000.00 - -Loans from the Central BankDeposits from customers and interbankFunds borrowedFinancial liabilities calculated by fair value with their change included in current P/L - - 78,999,408.00

Financial liabilities calculated based on fair value with their change included in current P/LFinancial LiabilitiesNotes payableAccounts payable 3,327,026,830.14 5,632,792,798.85 5,001,495,668.63Advance receipts 1,289,080,582.10 790,533,176.92 1,020,399,165.89Financial assets sold for repurchaseHandling charges and commission payableEmployee compensation payable 257,798,374.45 263,869,377.09 411,511,471.58Taxes payable 433,462,753.63 581,029,885.42 819,754,828.52Interest payable 13,251,098.23 12,224,277.98 10,327,484.37Dividends payable 6,161,237.40 - -Other payables 137,468,679.74 111,448,858.82 79,096,290.43Reinsurance accounts payableInsurance contract reservesReceivings from vicariously traded securitiesReceivings from vicariously sold securitiesIncur debts divided for saleNon-current liability due within one year - 1,480,000,000.00 85,118,481.32Other current liabilities 6,264,676.70 5,601,944.78 40,149,946.85

174


Financial Notes

Item January 1, 2013 December 31, 2013 December 31, 2014Total current liabilities 5,570,514,232.39 8,877,500,319.86 7,546,852,745.59

Non-current liabilities:Long-term loan 1,931,720,272.59 132,I80,792.00 56,172,420.00Loan bonds payable 1,193,068,976.04 1,194,325,407.84 1,195,656,088.68Including: preferred stockPerpetual Capital SecuritiesLong-term payables 556,490,998.73Employee compensation payable for long-termSpecial accounts payable 43,314,752.54 36,969,065.53 35,353,174.74Estimated liabilitiesDeferred income 1,182,739,809.11 1,199,893,348.45 1,150,234,264.74Deferred income tax liabilities 136,701,457.12 70,303,722.93 35,246,299.64Other non-current liability

Total non-current liabilities 4,487,545,267.40 2,633,672,356.75 3,029,153,246.53Total liabilities 10,058,059,499.79 11,511,172,656.61 10,576,005,992.12

Owner’s equity:Capital stock 3,889,440,000.00 4,421,354,800.00 4,421,354,800.00Other equity instrumentsIncluding: preferred stockPerpetual Capital SecuritiesCapital reserves 1,287,932,008.99 4,247,940,206.11 4,247,940,206.11Less: treasury stockOther composite incomes 169,986,967.06 176,416,849.62 186,432,088.19Special reserve 163,244,675.92 378,638,182.08 518,372,258.69Surplus reserves 612,657,429.95 804,746,449.90 1,073,777,168.50Generic risk reserveUndistributed profi t 4,118,256,129.65 6,553,720,745.33 10,109,425,654.81Total owners' equity attributable to the parent company 10,241,517,211.57 16,582,817,233.04 20,557,302,176.30

Minority stockholders' interest 67,935,959.55 10,218,679.77 14,462,978.64Total owners' equity 10,309,453,171.12 16,593,035,912.81 20,571,765,154.94

Total liabilities and owners' equity 20,367,512,670.91 28,104,208,569.42 31,147,771,147.06

175

List of Documents for Further ReferenceCOOEC / ANNUAL REPORT 2014

List of Documents for Further Reference


Accounting statements signed and stamped by the legal representative, the person in charge of accounting and the person in charge of accounting department.


Original copy of auditing report stamped by accounting fi rm and signed and stamped by certifi ed public accountants.


Original copy of all documents and announcements disclosed on newspaper appointed by China Securities Regulatory Commission in the reporting period.

Board Chairman: Liu Jian

Date of Approval by Board of Directors: March 12, 2015

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2014 ANNUAL REPORTOFFSHORE OIL ENGINEERING CO.,LTD.

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