0 2003 results announcement march 23, 2004 china oilfield services limited
TRANSCRIPT
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2003 Results Announcement2003 Results Announcement
March 23, 2004March 23, 2004
China Oilfield Services LimitedChina Oilfield Services Limited
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OverviewOverview
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Summary HighlightsSummary Highlights
Strong financial performance
Total revenues of RMB3.1 bn, 12.3% yoy growth
Net Income of RMB466 mm, 32% yoy growth
57 exploration and 139 development wells drilled
Fleet expansion
Construction of a 400-feet jackup rig in bidding stage
5 new vessels added to vessel fleet
Strong financial performance
Total revenues of RMB3.1 bn, 12.3% yoy growth
Net Income of RMB466 mm, 32% yoy growth
57 exploration and 139 development wells drilled
Fleet expansion
Construction of a 400-feet jackup rig in bidding stage
5 new vessels added to vessel fleet
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Summary Financial ResultsSummary Financial Results
(RMB mm)(RMB mm) 2002 2003 % Change
Revenues 2,726 3,062 12.3%
Operating Expenses 2,247 2,524 12.3%
EBITDA 1,072 1,208 12.7%
EBIT 483 550 13.8%
Net Income 354 466 31.5%
EBITDA Margin 39.3% 39.5%
EBIT Margin 17.7% 18.0%
Net Margin 13.0% 15.2%
EPS (RMB cents) 12.84 11.66
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Revenues of drilling and geophysical segment grew more than 20% respectively in 2003
Higher drilling rig day rates and higher jackup utilization
Higher job volume for 3D seismic data collection
Continuous growth of marine support and transportation segment
Growth by SegmentsGrowth by Segments
2003 Revenue by Segment2003 Revenue by Segment99-03 Revenue CAGR of 16.5%99-03 Revenue CAGR of 16.5%2002-2003
Growth
Drilling Marine Support & TransportationWell Services Geophysical
20%
5%
23%
644906 985
1,282413
607 595672
673
358
428 477603
632387
475
3,062
1,064
247
237 308
2,726
2,3662,178
1,662
0
800
1,600
2,400
3,200
1999 2000 2001 2002 2003
(RM
B m
m) Drilling
41%
Geophysical16%
Well Services
22%
Marine Support &
Transportation 21%
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Cost BreakdownCost Breakdown
Operating ExpensesOperating Expenses SG&A and Others
Higher provision for bad debt
Depreciation Asset re-valuation before IPO Addition of 5 new vessels and other equipment
Consumption of supplies and others Increase in business volume for drilling and
geophysical segments
553
462 513
836924
199
594
153172
62
122182
0
500
1,000
1,500
2,000
2,500
2002 2003
(1) Includes other operating expenses, provision for impairment of long term investments and provision for impairment of property, plant and equipment
(1) Includes other operating expenses, provision for impairment of long term investments and provision for impairment of property, plant and equipment
Depreciation of property, plant and equipment
Repair and maintenance costs
Consumption of supplies, materials, fuel, services and othersEmployee compensation costs Operating lease expenses
Other SG&A and others (1)
(RMB mm)(RMB mm)
13%
11%
8%
11%
98%
9%
Employee compensation Mainly due to increase in business volume
Repair and maintenance Increased repair and maintenance of drilling rigs
Operating lease expenses More lease of equipment for well services Lease of more convoy vessels for geophysical
services
2,247
2,524
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PRC Tax Rate and Tax RefundPRC Tax Rate and Tax Refund
Normal PRC corporate tax rate of 33%
COSL was registered in Sept 2002 at Tianjin Tanggu Marine Hi-New Tech Development Zone, and qualified as an “Advanced Technology Enterprise” with preferential tax treatment
We have applied to qualify for this corporate income tax incentive program for fiscal year 2003
For conservativeness reason, 2003 income tax provisions were made based on 33% corporate tax rate
Normal PRC corporate tax rate of 33%
COSL was registered in Sept 2002 at Tianjin Tanggu Marine Hi-New Tech Development Zone, and qualified as an “Advanced Technology Enterprise” with preferential tax treatment
We have applied to qualify for this corporate income tax incentive program for fiscal year 2003
For conservativeness reason, 2003 income tax provisions were made based on 33% corporate tax rate
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Capital Expenditure - Actual vs. BudgetCapital Expenditure - Actual vs. Budget
Capital ExpenditureCapital Expenditure
Drilling Marine Support & TransportationWell Services Geophysical
1,2561,450
1,600
0
400
800
1,200
1,600
2003A Capex 2003A Contracted 2003 Budget
(RM
B m
m)
% of budget ~80% ~90%
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Capital ExpendituresCapital Expenditures
Marine Support & Transportation and Well Services segments Marine Support & Transportation and Well Services segments accounted for the majority of capital expenditures in 2003accounted for the majority of capital expenditures in 2003
Capital ExpendituresCapital Expenditures
630
222
366
38
410
664
925764
1,256
0
300
600
900
1,200
1,500
1,800
1999 2000 2001 2002 2003(R
MB
mm
)
Drilling Well Services
Marine Support & Transportation
Geophysical
Drilling:
Of the total RMB222 mm, ~RMB80 mm was spent on maintenance and upgrade of BH7 and NH5
Well services:
Of the total RMB366 mm, ~RMB125 mm was spent on the purchase of logging and directional drilling equipment
Marine support & transportation
Mainly for vessel construction
Geophysical:
Mainly for equipment purchase, maintenance and upgrades
Drilling:
Of the total RMB222 mm, ~RMB80 mm was spent on maintenance and upgrade of BH7 and NH5
Well services:
Of the total RMB366 mm, ~RMB125 mm was spent on the purchase of logging and directional drilling equipment
Marine support & transportation
Mainly for vessel construction
Geophysical:
Mainly for equipment purchase, maintenance and upgrades
(1)
(1) Incl. cash payment of RMB1,114 mm and committed letter of credit of RMB142 mm
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Strong Balance SheetStrong Balance Sheet
RMB MM 2002 % 2003 %
Cash and Cash Equivalents 2,632 33% 2,199 27%Accounts Receivable 525 7% 568 7%Other Current Assets 343 4% 488 6%PP&E 4,317 54% 4,827 59%JV's & Others 141 2% 149 2%Total Assets 7,958 100% 8,231 100%
Short-term Loan 0 0% 0 0%Trade Payables and Other Payables 275 3% 286 3%Other Current Liabilites 335 4% 259 3%
Long-term Loan 0 0% 0 0%Deferred Tax Liability 567 7% 541 7%Long-term Payable to CNOOC 600 8% 600 7%Total Liabilites 1,777 22% 1,686 20%
Shareholders' Equity 6,181 78% 6,545 80%Total Liabilities and Shareholders' Equity 7,958 100% 8,231 100%
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DividendDividend
Board of Directors proposed a year-end dividend of RMB2.27 cents per share
Subject to annual general meeting to approve
2003 annual dividend of RMB3.5 cents per share (incl. RMB1.23 cents special interim dividend and RMB2.27 cents year-end dividend per share)
30% payout of 2003 annual net income
1.3%(1) dividend yield
Consistent with dividend policy
Board of Directors proposed a year-end dividend of RMB2.27 cents per share
Subject to annual general meeting to approve
2003 annual dividend of RMB3.5 cents per share (incl. RMB1.23 cents special interim dividend and RMB2.27 cents year-end dividend per share)
30% payout of 2003 annual net income
1.3%(1) dividend yield
Consistent with dividend policy
(1) Based on closing share price of HK$2.625 as of Mar.19, 2004
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Segment AnalysisSegment Analysis
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A. DrillingA. Drilling
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Well Workover Trends
Summary Drilling ActivitySummary Drilling Activity
Number of development wells drilled in 2003 doubled that of 2002Number of development wells drilled in 2003 doubled that of 2002
34 25 27
57
31
161
117 134 66
139
57
240
20
40
60
80
100
120
140
160
180
200
1998 1999 2000 2001 2002 2003
Wel
ls D
rille
d
Exploration wells Development wells
Summary Drilling ActivitySummary Drilling Activity
3,572
4,820
6,600
0
1000
2000
3000
4000
5000
6000
7000
2001 2002 20030
100
200
300
400
500
600
700
800
900
Well workovers Production wells
Days
Total Production
Wells
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Utilization and Day RatesUtilization and Day Rates
Source: COSL, ODC (utilization based on days available)
60%
70%
80%
90%
100%
1999 2000 2001 2002 2003
15
20
25
30
35
Ja
ck
up
WT
I (US
$/bb
l)Uti
lizat
ion
0%
25%
50%
75%
100%
1999 2000 2001 2002 2003
15
20
25
30
35
Se
mi
WT
I (US
$/bb
l)Uti
lizat
ion
COSL Global WTI
Utilization RatesUtilization Rates
Source: COSL, ODC (Jackup day rates for 300’ rigs)
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
1999 2000 2001 2002 2003
Jack
up
0
20,000
40,000
60,000
80,000
100,000
120,000
1999 2000 2001 2002 2003
Sem
i
(US$/day)
Comparative Day RatesComparative Day Rates
GOMCOSL West Africa SE Asia
Strong domestic demand and international deployment continue to drive up average day rates
Jackup utilization continued to surpass international peers; semi-submersible utilization was lower in 2003, but expected to improve in 2004
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Segment Financial PerformanceSegment Financial Performance
Drilling TurnoverDrilling Turnover
800
1,000
1,200
2002 2003
(RM
B m
n)
YoY growth = 21%
Note: 2003 drilling revenue includes all well workover revenues
1,064
1,283
Operating Profit and MarginOperating Profit and Margin
267 279
25%22%
0
100
200
300
400
500
2002 20030%
10%
20%
30%
40%
50%
Operating Profit Operating Margin
(RM
B m
m)
Op
erating
Pro
fit Marg
in
YoY Op. Profit growth
= 5%
Higher day rates and utilization of jackup rigs drove segment revenue growth Operating profit increased 5% yoy while margin decreased partially due to lower
semi-submersible utilization rate
Higher day rates and utilization of jackup rigs drove segment revenue growth Operating profit increased 5% yoy while margin decreased partially due to lower
semi-submersible utilization rate
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B. Well ServicesB. Well Services
18
239
179
133
7249
213
113
54
121
172
0
100
200
300
Logging
Fluid
Cemen
ting
Directio
nal Dril
ling
Others
(RM
B m
n)
2002 2003
Business Unit ContributionBusiness Unit Contribution
Well Services Revenue BreakdownWell Services Revenue Breakdown Well Services Job BreakdownWell Services Job Breakdown
536
219
108 93
433
162 139217
0
100
200
300
400
500
600
Logging
Fluid
Cemen
ting
Directio
nal Dril
ling
(No
. of
Job
s)
2002 2003
Significant growth of directional drilling business due to large number of development wells offshore China and deployment of one more LWD system
Operating challenges for other well services business units
Change of exploration strategy of E&P companies reduced the number of logging trips required
Lack of high margin HTHP wells lowered cementing revenues despite higher business volume
Significant growth of directional drilling business due to large number of development wells offshore China and deployment of one more LWD system
Operating challenges for other well services business units
Change of exploration strategy of E&P companies reduced the number of logging trips required
Lack of high margin HTHP wells lowered cementing revenues despite higher business volume
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Segment Financial Performance Segment Financial Performance
673672
0
200
400
600
800
2002 2003
(RM
B m
n)
Well Services RevenuesWell Services Revenues Operating Profit and MarginOperating Profit and Margin
92111
14%
16%
0
30
60
90
120
2002 20030%
5%
10%
15%
20%
Operating Profit Operating Margin(R
MB
mm
)
Op
erating
Pro
fit Marg
in
YoY Op. Profit
growth = 20%
Despite total well services revenue being flat at RM673 million in 2003, we achieved 20% yoy increase in operating profit and improved margin thanks to effective cost management
Despite total well services revenue being flat at RM673 million in 2003, we achieved 20% yoy increase in operating profit and improved margin thanks to effective cost management
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C. Marine Support and TransportationC. Marine Support and Transportation
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16 16 16 17
2325 26
30
773 7
456
6
566
6
0
10
20
30
40
50
60
70
2000 2001 2002 2003
AHTS Vessels PSV VesselsStandby Vessels Utility VesselsOil Tankers
Fleet Growth and Capacity ExpansionFleet Growth and Capacity Expansion
5,358 5,251 5,333
7,4698,717 9,513
2,3591,397 2,358
1,5981,791
1,894
18,80318,11716,118
0
5,000
10,000
15,000
20,000
2001 2002 2003
AHTS Vessels PSV Vessels
Standby Vessels Utility Vessels
Fleet GrowthFleet Growth Operating DaysOperating Days
60 60 63
54
One utility vessel and one oil tanker were disposed in 2003 One AHTS and four standby vessels commenced service
Continuous capacity expansion to meet increasing demandContinuous capacity expansion to meet increasing demand
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Higher and More Stable Utilization Compared to Global PeersHigher and More Stable Utilization Compared to Global Peers
Note: Trico Marine and Seacor Smit calculate their respective utilization rates based on calendar day utilization methodology; Tidewater and Gulfmark calculate their respective utilization rates based on availability utilization methodology. Tidewater, Seacor Smit, and Gulfmark 03 utilization rate is the average for the 9 months ended Sep 30, 2003
Calendar Day Utilization RateCalendar Day Utilization Rate
50%
60%
70%
80%
90%
100%
97 98 99 00 01 02 03
Trico Marine Seacor Smit COSL
Availability Utilization RateAvailability Utilization Rate
50%
60%
70%
80%
90%
100%
97 98 99 00 01 02 03
Tidewater Gulfmark COSL
Constantly higher than peer and more stable vessel utilization due to Constantly higher than peer and more stable vessel utilization due to strong demand in offshore Chinastrong demand in offshore China
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Segment Financial PerformanceSegment Financial Performance
Revenue growth driven by higher day rates and number of operating days
Lower operating profit margin mainly due to higher depreciation as a result of IPO revaluation and additional depreciation from new vessels in service
Revenue growth driven by higher day rates and number of operating days
Lower operating profit margin mainly due to higher depreciation as a result of IPO revaluation and additional depreciation from new vessels in service
RevenuesRevenues
632
603
540
560
580
600
620
640
660
680
700
2002 2003
(RM
B m
m)
YoY growth =
4.9%
Operating Profit and MarginOperating Profit and Margin
112 79
19%
13%
0
100
200
300
400
500
2002 20030%
10%
20%
30%
40%
50%
Operating Profit Operating Margin(R
MB
mm
)
Op
erating
Pro
fit Marg
in
YoY Op. Profit growth = -29%
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D. GeophysicalD. Geophysical
25
Seismic CollectionSeismic Collection
2D Seismic Collection2D Seismic Collection
22,318 19,081
26,10427,656
0
10,000
20,000
30,000
40,000
50,000
2002 2003
Offshore Overseas
(km)
3D Seismic Collection3D Seismic Collection
2,339
1,875
0
500
1,000
1,500
2,000
2,500
2002 2003
(km2)
Overseas 2D seismic collection volume increased by 6%
NH 502 in West Africa and BH 512 at Gulf of Mexico for 2D seismic collection
25% increase in 3D seismic collection volume and higher price
Overseas 2D seismic collection volume increased by 6%
NH 502 in West Africa and BH 512 at Gulf of Mexico for 2D seismic collection
25% increase in 3D seismic collection volume and higher price
48,422 46,737
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Geophysical Revenues Geophysical Revenues
387
475
0
50
100
150
200
250
300
350
400
450
500
2002 2003
(RM
B m
n)
Geophysical RevenuesGeophysical Revenues
YoY growth =
23%
Operating Profit and MarginOperating Profit and Margin
12
813%
17%
0
40
80
120
160
200
2002 20030%
10%
20%
30%
40%
50%
Operating Profit Operating Margin(R
MB
mm
)
Op
erating
Pro
fit Marg
in
YoY Op. Profit
growth = 575%
Geophysical revenues yoy growth of 23% mainly driven by strong demand for 3D seismic data collection services offshore China
Increased business volume and operating efficiency significantly improved operating profit and margins
Geophysical revenues yoy growth of 23% mainly driven by strong demand for 3D seismic data collection services offshore China
Increased business volume and operating efficiency significantly improved operating profit and margins
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Integrated Project Management (“IPM”)Integrated Project Management (“IPM”)
Total of 9 IPM projects contracted in 2003, accounting for 14% of 2003 total turnover
Integration facilitates the margin and growth of non-drilling segments
Total of 9 IPM projects contracted in 2003, accounting for 14% of 2003 total turnover
Integration facilitates the margin and growth of non-drilling segments
IPM Revenue ContributionIPM Revenue Contribution
251
437
0
100
200
300
400
500
2002 2003(R
MB
mm
)
YoY Revenue
growth = 74%
ShippingShipping DrillingDrilling
Well ServicesWell ServicesDrillingDrilling
Turnkey Drilling: Drilling & Well ServicesTurnkey Drilling: Drilling & Well Services
Well Srvce.Well Srvce.DrillingDrillingGeophy.Geophy. ShippingShipping
DrillingDrilling Well ServicesWell ServicesShippingShipping
IPM ProgramsIPM Programs
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2004 Outlook2004 Outlook
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Robust Drilling Activities ExpectedRobust Drilling Activities Expected
Source: Company
Eastern South China Sea
Bohai Bay
East China Sea
Western South China Sea
Characteristics of Development WellsCharacteristics of Development Wells
Subject to development schedules rather than exploration uncertainties
Number of wells required varies by region – greater in Bohai Bay
Development well programs typically lead to more stable and predictable demand for various oilfield services
2004E
60 - 70
1997 1998 1999 2000 2001 2002
26 34 25 27 24
56 31
161
117 134 66
57
139
57
2003
180+
~250
30
Planned Capital ExpendituresPlanned Capital Expenditures
Drilling:
Construction of a 400-feet jackup rig
Current drilling fleet upgrade and maintenance
Well services:
Technology upgrade through internal R&D and external equipment purchase
Marine support & transportation
Construction of 11 vessels
Geophysical:
Construction of a new survey vessel
Current fleet upgrade
Drilling:
Construction of a 400-feet jackup rig
Current drilling fleet upgrade and maintenance
Well services:
Technology upgrade through internal R&D and external equipment purchase
Marine support & transportation
Construction of 11 vessels
Geophysical:
Construction of a new survey vessel
Current fleet upgrade
2004 Planned Capital Expenditures2004 Planned Capital Expenditures
Drilling 54%
Well services
18%
Marine Support & Trans.
20%
Geo-physical services
8%
Total = RMB1.7 bn
2004 Capex program will focus on capacity expansion to meet 2004 Capex program will focus on capacity expansion to meet growing offshore China demandgrowing offshore China demand
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THANK YOU
www.cosl.com.cn
THANK YOU
www.cosl.com.cn