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TRANSCRIPT
Aug 2017
Disclaimer
The information contained in this presentation is intended solely for your personal
reference. In addition, such information contains projections and forward-looking
statements that reflect the Company's current views with respect to future events
and financial performance. These views are based on assumptions subject to
various risks. No assurance can be given that future events will occur, that
projections will be achieved, or that the Company's assumptions are correct.
Actual results may differ materially from those projected. Past track record
cannot be used as guidance for future performances.
2
Company Outlook
Results Overview
Market Environment
International crude oil prices slightly rebounded but still maintained at low levels
Upstream E&P spending has slightly increased over last year
Oversupply remained a challenge for heavy equipment
Oilfield services industry was still facing uncertainties
2017年全球上游油气资本开支显示复苏迹象
Source: Bloomberg, market data as of Aug 8, 2017
Global E&P Spending Expectation
211 234
306344
436
531
437489
595662
694 693
503
368399
461515
569
0
100
200
300
400
500
600
700
800
global E&P spendingUnit:USD Billion
2017年全球上游油气资本开支显示复苏迹象
Oil Prices slightly Rebounded
$49.39
$52.37Low:$27.88$26.21
High$115.06$107.26
USD/ barrel
0
20
40
60
80
100
120
14-01 14-07 15-01 15-07 16-01 16-07 17-01 17-07
WTI期货价格 Brent期货价格
Source: IHS Markit, market data as of Jul 28, 2017
4
5
Business Strategies
• Follow customer demand closely
• Enhance the market shares and utilization rates continuously
• Eye greater international market exposure
• Leverage on integrated business model to satisfy new requirements
• Accelerate technological serialization and industrialization and reduce subcontract
• Reduce CAPEX substantially and maintain robust financial strengths
6
Operating Achievements
COSL actively responded to industrial changes
Source: IHS Markit. Marine support segment peers include Boubon Offshore, Edison Chouest, Gulfmark, etc.
Utilization Rates of Geophysical and Surveying Vessels
Equipment utilization rates increased
Contribution of technology segment increased
Active international exposure of geophysical segment
Stable safety production performance
Reasonable debt structure and stable cash flow
Significant cost control result
COSL 1H 2017
Industrial Average 1H 2017
Utilization Rates of Vessels in 1H2017
0%
30%
60%
90%
COSL Swire Pacific Edison Chouest Seacor Marine GulfMark Tidewater Bourbon
Offshore
Average 1H 2017
COSL Company A Company B Company C Company D Company E Company F
RMB 1H2017 1H2016
Operating Revenue (million) 7,095.9 6,962.6
Operating Profit (Incl. Assets and Goodwill Impairment) (million)
237.5 -8,141.6
Operating Profit (Excl. Assets and Goodwill Impairment) (million)
237.5 -997.9
Net Profit (million) -350.4 -8,399.5
Distribution policy for 2016: 0.05 yuan RMB per share
Cash available²: RMB 7.8billion
Debt-to-capital ratio at 48%; net debt-to-equity at 69.2%
RMB 1H2017 2016
Total Assets (million) 74,191.8 80,544.1
Total Liabilities (million) 39,690.8 45,247.7
Shareholders' Equity (million) 34,501.0 35,296.4
1. All above financial data are from the unaudited financial report prepared by the Company under HKFRS.2. Available cash includes cash equivalents and available-for-sale financial assets.
Financial Performance 1
Remark1: Financial data as of June 30, 2017
7
Segments Performance1
DrillingWell
Services
Marine Support
Geophysical and
Surveying
39%
16%10%
35%
Drilling
Marine Support
Geophysical and
Surveying
Well Services
1H 2017Revenue
contribution
3310.9
1H2016 1H2017
3651.7
3054.9
4041.0
Q1 RevenueQ2 Revenue
Unit:RMB million
Remark 1: The financial data as of June 30, 2017
32 jack-ups
11 semi-subs
3 accommodation rigs
5 module rigs
Logging, drilling and
completion fluids,
directional drilling,
cementing, completion,
well workover, etc.
85 self-owned
utility vessels
34 utility vessels
managed
6 seismic vessels (46
streamers)
7 surveying vessels
1 ocean bottom cable
team
8
Operating Revenue 6,962.6
Operating Revenue 7,095.9
Market Expansion & Client Recognition
美洲12%
Aggressive market expansion
Consolidated COSL's leading position in domestic market
72 new overseas contracts, 2 new markets, 5 new clients in
global market
• CNOOC SES Limited, CNOOC Iraq Limited and other
integrated contracts, extended to 2019
• Breakthrough – the Nexen market and plugging and
abandonment business
High customer satisfaction
HYSY936 HTHP well services was praised by the US energy
company Fieldwood Energy
The“2016 Outstanding Contractor” award by PEMEX
9
Technology Segment
Applicable stratum temperature range for
COCEM Cement Slurry System was
extended to 0℃-260℃
Successfully applied in 1,700m ultra-deep
water wells and 210 ℃ ultra-high
temperature wells
Develop Deep-water & HTHP Markets Stimulation for Old Oilfields D+W System Increases Operation Capacity
Series including PA-UN Acid System, PA-
OS3 Organic Plugging Removal Agent
and Nano-Polymoer Flooding
Modification
Nano-Polymoer Flooding Modification
technology increased average yield for
single well group by nearly 10,000m³
Performed 27 operations, 24 wells were
successful, success rate was 89%
Well pattern operated included vertical wells,
conventional directional wells, high-angle
directional wells, horizontal wells
10
11
Effective Cost Control
Reduced costs effectively
In the first half of 2017, cost represented a decrease of RMB 1billion
Reduced material cost: Strengthened inventory management
Reduced repair and maintenance expenses: More maintenance using
in-house resources
Reduced rental expense
Reduced other operating expense: Suppressed administrative expense
Reduced subcontract expense: Extensively used self-developed
technology, reduced subcontract expense
Lowered Staff cost: Localized overseas hiring, internalized share of
human resources
Refined and classified management risks with
0.046 OSHA incidence rate
Favorable safety culture
Actively engaged in charity work
QHSE and Charity
Excellent OSHA Index
Premium QHSE record helps to achieve operation target
According to OSHA, coefficient 1 is equivalent to one accident per 200,000 man-hours
12
Caption: Charity Work
Caption: Safety Drill
January 2017, COSL won the
“Best Investor Relations”
award of Golden Hong Kong
Stocks Awards February 2017, COSL won the
“Best Corporate Governance”
award in the “2017 China Financial
Market Listed Companies Award
April 2017, COSL won the “Best
Board of Directors of Investor
Relations of China Main Board
Listed Companies” for the
second consecutive year
April 2017, the 2016 annual
report of COSL won the Gold
Award of “Vision Awards”
and many awards from LACP
13
June 2017, COSL won
“Certificate of Excellence in
Investor Relations” from
HKIRA
Awards and Recognitions
Results Overview
Company Outlook
Industry Overview
50%
Oil and gas will still
be an important
part of the energetic
structure
Recovery in oil
prices will drive up
CAPEX
Oil prices expected
to rise gradually
from 2017 to 2020
• Segments synergies and cost advantages maximization
• Prudent financial policy
• 50:50 revenue mix target from domestic and overseasprojects, technology and equipment segments
15
16
Oilfield services companies have to be equipped with global and
integrated operating capacity to meet customers' new needs
New Market Opportunities
Maintain advantage in per barrel cost
Improve the effective production capacity
of “low permeability, old, transboundary
and high viscosity” oilfields
Propose the management requirements
for plugging and abandonment business
HTHP and high-difficulty well operation
Technical reserves for stabilizing and
stimulating production
High-quality and efficient operation
Full IPM services chain, more flexible
business models
More competitive cost structure
Flexible deployment of the global
resources
Operating
Drilling Rig2017
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov DecLocation
Do
mestic
14Jack-ups
1Jack-up(HYSY932)
2Jack-ups(HYSY941/HYSY942)
1Jack-up(HYSY943)
2Jack-ups(Kaixuan/Gift)
1Jack-up(Gulf Driller1)
2Semi-subs(NH2/NH5)
1Semi-sub(Prospector)
1Semi-sub(NH6)
2Semi-subs(NH7/NH9) -
1Semi-sub(HYSY981)
Inte
rnatio
nal
3Jack-ups(Superior/Craft/Hunter)
1Jack-up(HYSY937)
1Jack-up(HYSY936)
1Jack-up(Strike)
1Jack-up(Seeker)
1Semi-sub(Promoter)
1Semi-sub(NH8)
全年合同
17
Rig Operation Status(14th Aug 2017)
Full-year contract coverage
Full-year contract coverage
Full-year contract coverage
Full-year contract coverage
Jack-up Semi-subRemarks: 4 Jack-ups(Force/Boss/Power/Confidence) are in bidding or negotiation processes. Pioneer and Innovator have gained the contract in 2018.Source: Data as of Aug 14, 2017
The Middle East Southeast
Asia The Americas
Africa
The Far East
• Closely follow CNOOC's projects
• Mainly expand high-end drilling and geophysical and surveying business
Europe
Remarks: COSL has obtained
some overseas projects from
CNOOC
18
• Nexen wireline logging
bundled services contract
(2017~2019)
• COSL Pioneer received the letter of award for drilling services from Nexen (2018~)
• COSL Innovator won the drilling services contract (2018~)
• Horizontal well land drilling services contract (2019~)
• Work-over IPM and stimulation services project (2018~)
• NH9 drilling services contract (2018~)
• HTHP Slurry Contract (2019~)
• HYSY937 won the drilling services contract (2018~)
• TCP, DST and wireline logging services contract (2019~)
• Obtained the drilling services contract (2019~)
Contract Status in the Near Future
IPM Synergies New Opportunities
First-class operating
efficiency of equipment
Excellent equipment
management capabilities
Continuously optimizing
equipment structure
Promote serialization and
industrialization of D+W
System
Cooperate with world-class
oilfield services companies
Accelerate the stimulation
experiment ability
Equipment Technology
Proportion of Technology Revenue Increased
2011 2012 2013 2014 2015
35%
2016 1H17
50%
……
Regular
Logging
175℃ ELIS Enhanced Logging Imaging System
Max diameter rotary coring tool
Acoustic and electrical Casing Crossion logging
technology
10,000 feet ultra-deep water, HTHP well operating
capacity and supporting techniques
Deep-water anti-shallow groundwater flow cementing
technology, filled low density cement slurry technology,
Flat Rheology Synthetic-based drilling fluid, etc.
204℃ ESCOOL high-temperature and high-speed
logging system
Continuous negative pressure pulse plug removal, non-
acid plug removal, organic plug removal, etc.
Nanoscale Dispersed Particle Flooding Modification , In-
Situ CO2 Generation Profile control Flooding, etc.
Multi-component thermal fluid huff-puff stimulation
treatment technology
19
HTHP
Deep-water
High-difficulty
Stimulation
Disposal
IPM & Technology Segment
Company Moody's S&P Fitch
Oilfie
ld S
erv
ices
Schlumberger A1 (Stable) AA- (Stable) -
Halliburton Baa1 (Stable) BBB+ (Stable) -
Baker Hughes A3 (Stable) A+ (Stable) -
Weatherford B3 (Neg) B+ (Neg) CCC
COSL Baa1 (Neg) BBB (Stable) A (Stable)
Offsh
ore
drillin
g
Diamond Ba3 (Neg) BB- (Neg) -
Ensco B1 BB -
Noble B2 (Neg) BB- (Neg) BBB-(Stable)
Rowan B2 (Neg) B+ (Stable) -
Transocean B2 (Neg) B+ (Neg) B+ (Neg)
Seadrill Caa2 (Neg) CCC+ (Neg) -
Further on Comparative Advantages
2015 2016 2017 2018 2019 2020
CAPEX
Unit: RMB billion
2015
6.7
2016
3.5-4.5
Remarks: long-term unamortized expenses is not included
2017 2018E
~2.5
Interest and Principal Payment
20
Core Competences
Secure of the core market and
core clients in offshore China
The first-class operational
efficiency and improving
international reputation wins
more market opportunities
Significant cost advantages
enhances the Company's
competitiveness in the
industry downturn
Robust financial strengths
enables the Company to
adopt flexible business
model
Expanding the scale of self-developed
technology applications, boosting the
revenue contributions from the
technology segment
01
02 03
04 05
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