Wayne FUNG, CFA (852) 3900 0826 waynefung@cmbi.com.hk PLEASE READ THE ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES ON LAST PAGE MORE REPORTS FROM BLOOMBERG: RESP CMBR OR http://www.cmbi.com.hk 1 3 Mar 2025 3 Mar 2025 CMB International Global Markets | Equity Research | Coverage Termination United Energy (467 HK) Termination of Coverage In view of better allocation of resources, we terminate coverage of United Energy. All previous recommendations are no longer valid, as of the date of termination of cove ...

Financial Performance - Revenue for the six months ended June 30, 2024, was HKD 8,439,807, an increase of 35.5% compared to HKD 6,226,137 for the same period in 2023[4] - Gross profit decreased to HKD 1,888,578, down 26% from HKD 2,549,269 year-over-year[4] - Operating profit was HKD 1,501,328, a decline of 38.5% from HKD 2,440,998 in the previous year[4] - Profit before tax was HKD 1,375,268, down 38.6% from HKD 2,239,495 in the same period last year[4] - Net profit for the period was HKD 1,010,270, a decrease of 39.2% compared to HKD 1,663,117 in 2023[4] - Basic earnings per share were HKD 3.90, down from HKD 6.36 in the previous year[4] - Total comprehensive income for the period was HKD 1,011,446, compared to HKD 1,666,891 in the same period last year[5] - The total segment profit for the six months ended June 30, 2024, was HKD 921,006, down from HKD 1,484,834 in the same period of 2023, indicating a decrease of about 38%[20] - The group reported a total comprehensive profit of HKD 1,010,270 for the six months ended June 30, 2024, compared to HKD 1,663,117 for the same period in 2023, indicating a decrease of about 39.3%[20] - The group confirmed an expense of approximately HKD 7,775,000 for the PSU plan for the six months ending June 30, 2024, compared to HKD 6,357,000 in 2023[52] Cash Flow and Liquidity - The net cash generated from operating activities for the six months ended June 30, 2024, was HKD 4,343,781, compared to HKD 2,851,219 for the same period in 2023, representing a significant increase[10] - The total cash and cash equivalents at the end of the period increased to HKD 4,395,540 from HKD 2,702,159 in the previous year, showing a strong liquidity position[10] - The company paid dividends of HKD 242 during the current period, up from HKD 109 in the previous year, indicating a commitment to returning value to shareholders[10] - The company’s cash flow from financing activities showed a net outflow of HKD (353,267), compared to HKD (169,719) in the previous year, indicating increased financial obligations[10] - The group’s total liabilities were approximately HKD 3,647,748,000, with a debt ratio of 13.4% compared to 16.5% on December 31, 2023[98] Assets and Liabilities - Non-current assets increased to HKD 14,749,908 from HKD 14,170,196 at the end of 2023[6] - Current liabilities rose to HKD 10,563,911, up from HKD 8,987,411 at the end of 2023[7] - Total equity increased to HKD 13,812,317 from HKD 12,836,149 at the end of 2023[7] - The group's total assets as of June 30, 2024, amounted to HKD 21,986,313, compared to HKD 21,763,246 as of December 31, 2023, reflecting a slight increase of approximately 1%[19] - The total liabilities for the group as of June 30, 2024, were HKD 10,930,641, up from HKD 7,946,273 as of June 30, 2023, showing an increase of about 37.5%[19] Capital Expenditures and Investments - The company incurred a deposit of HKD (31,581) for the acquisition of a subsidiary, reflecting ongoing expansion efforts[10] - The group purchased property, plant, and equipment totaling approximately HKD 2,934,258,000 for the six months ended June 30, 2024, compared to HKD 3,422,255,000 in 2023, reflecting a decrease of about 14.3%[32] - Capital expenditures for the first half of 2024 were approximately HKD 2,845,238,000, a decrease of 13.0% compared to the previous year[90] Production and Exploration - The average daily production of the company was approximately 171,195 barrels of oil equivalent, an increase of 0.5% from 170,271 barrels of oil equivalent in the same period last year[66] - The company achieved 6 commercial discoveries during the reporting period, with 4 in Pakistan, 1 in Egypt, and 1 in Iraq[66] - The average daily production in Iraq's B9 block was approximately 74,824 barrels of oil equivalent, an increase of 19.1% compared to the same period last year[68] - The company incurred exploration costs of approximately HKD 244,292,000 and development costs of approximately HKD 2,567,422,000 during the reporting period[64] Shareholder Information - The company repurchased a total of 91,054,000 shares as treasury stock for approximately HKD 31,233,000 in June 2024[49] - The group has a significant short position of 2,696,809,090 shares, representing 10.39%[109] - The total shares held by major shareholders include 6,572,483,000 shares (25.33%) by Dongfang Group[113] - The ownership structure indicates that Zhang Hongwei is deemed to have control over 66.23% of the shares through various entities[110] Governance and Compliance - The company has complied with the corporate governance code as per the listing rules, except for the CEO position which remains vacant[117] - The audit committee, consisting of three independent non-executive directors, reviewed the unaudited consolidated financial statements for the six months ending June 30, 2024, and found them satisfactory[119] - The company has established a nomination committee responsible for the nomination of directors and reviewing the board's composition[117] - The company has adopted the standard code for securities transactions by directors and confirmed compliance for the six months ending June 30, 2024[118]

Revenue and Profitability - Revenue for the six months ended June 30, 2024, was HKD 8,439,807, representing a 35.6% increase compared to HKD 6,226,137 in the same period of 2023[2] - Profit for the period was HKD 1,010,270, down 39.3% from HKD 1,663,117 in the previous year[2] - Basic earnings per share fell by 38.7% to HKD 3.90 from HKD 6.36[2] - The company reported a total comprehensive profit of HKD 1,010,270 for the six months ended June 30, 2024, down from HKD 1,663,117 for the same period in 2023, a decline of approximately 39.2%[23] - The company recorded a profit attributable to shareholders of approximately HKD 1,010,276,000, a decrease of 39.3% compared to HKD 1,663,123,000 in the same period last year[70] Production and Exploration - Average daily production in Pakistan decreased by 13.9% to 38,349 barrels of oil equivalent, while production in the Middle East and North Africa increased by 12.1% to 63,949 barrels[2] - The average daily production during the reporting period was approximately 171,195 barrels of oil equivalent, a 0.5% increase from 170,271 barrels of oil equivalent in the previous year[72] - The company achieved six commercial discoveries during the reporting period, with four in Pakistan, one in Egypt, and one in Iraq[72] - The company drilled a total of 23 wells during the reporting period, with 10 in Pakistan and 13 in the Middle East and North Africa[71] - The cumulative production in Pakistan was approximately 9.91 million barrels of oil equivalent, with a cumulative equity production of approximately 6.98 million barrels of oil equivalent[75] Financial Position - Total assets increased by 5.8% to HKD 27,315,492 from HKD 25,829,150[2] - Net assets rose by 7.6% to HKD 13,812,317 compared to HKD 12,836,149 at the end of 2023[2] - The company’s cash and cash equivalents increased to HKD 4,395,540 from HKD 3,327,279[9] - Total trade and other receivables as of June 30, 2024, amounted to HKD 7,811,790,000, a decrease from HKD 8,048,362,000 as of December 31, 2023[38] - The total debt as of June 30, 2024, was approximately HKD 313,611,000, significantly reduced from HKD 2,794,035,000 as of December 31, 2023[116] Expenses and Costs - Gross profit decreased by 25.9% to HKD 1,888,578 from HKD 2,549,269 year-on-year[2] - The financing cost for the six months ended June 30, 2024, totaled HKD 166,094,000, compared to HKD 150,006,000 in 2023, with a weighted average capitalized interest rate of 8.1% in 2024, down from 11.4%-12.0% in 2023[27] - The income tax expense for the six months ended June 30, 2024, was HKD 364,998,000, a decrease from HKD 576,378,000 in 2023[28] - Exploration expenses rose significantly to approximately HKD 92,684,000, compared to HKD 13,157,000 in the same period last year[97] Shareholder Returns and Dividends - The company has approved a special dividend of HKD 0.04 per share for 2024, to be paid on October 21, 2024, with no interim dividend declared for the six months ended June 30, 2024[33] - The company repurchased 91,054,000 shares as treasury stock in June 2024, at a total cost of approximately HKD 31,233,000[53] Governance and Compliance - The company has complied with the corporate governance code, except for the CEO position, which remains vacant[137] - The audit committee reviewed the unaudited consolidated financial statements for the six months ending June 30, 2024, and found them satisfactory[140] - The company has established a nomination committee responsible for board member nominations and diversity policies[138] Future Outlook and Strategy - The average daily production target for 2024 is set between 176,300 and 197,600 barrels of oil equivalent[108] - The company is actively pursuing partnerships with local firms in the Middle East to enhance operational capabilities and reduce costs by 15%[146] - The company plans to publish a detailed interim report in accordance with listing rules, which will be sent to shareholders[143]

Investment Rating - The report downgrades the investment rating of United Energy (467 HK) to HOLD from Buy, with a revised target price of HK$0.30, implying a 2.5x P/E for 2024E [2][3]. Core Views - The share price of United Energy is under pressure due to the uncertain financial condition of its controlling shareholder, Orient Group, which is facing financial difficulties [2][3]. - The earnings forecast for United Energy remains unchanged, but the report indicates a substantial overhang on the stock price for the next 3-6 months due to the financial situation of Orient Finance [2][3]. - The report suggests that a more constructive outlook on United Energy will depend on positive developments at the shareholder level [2][3]. Financial Summary - Revenue is projected to grow from HK$13,591 million in FY23A to HK$15,707 million in FY24E, representing a year-on-year growth of 15.6% [9]. - Adjusted net profit is expected to recover from a loss of HK$1,707.4 million in FY23A to HK$3,151 million in FY24E [9]. - The report highlights a significant increase in daily output from Iraq - Block 9, projected to reach 51.3 thousand barrels of oil equivalent per day in 2024E, up from 38.0 in 2023 [3][9]. Earnings Summary - The earnings summary indicates a net profit of HK$3,151 million for FY24E, with an EPS of 12.05 HK cents, reflecting a year-on-year growth of 9.9% [9]. - The report notes a P/E ratio of 2.3x for FY24E, suggesting that the stock is undervalued compared to its earnings potential [9]. - The gross profit margin is expected to stabilize around 33.0% in FY24E, down from 32.7% in FY23A [9]. Operational Insights - The report provides insights into the operational performance, indicating that the total daily output is expected to increase to 110.1 thousand barrels of oil equivalent per day in 2024E, with a notable decline in output from Pakistan [3]. - Realized crude prices are projected to average US$86 per barrel in 2024E, which is a slight increase from US$79 in 2023 [3][5]. - The lifting cost is expected to remain stable at around US$4.7 per barrel of oil equivalent in 2024E [3]. Share Performance - The report notes a significant decline in share performance, with an absolute drop of 48.3% over the past month and a relative decline of 45.0% [2]. - The share price has fluctuated between HK$0.30 and HK$1.25 over the past 52 weeks, indicating high volatility [2]. Conclusion - The report emphasizes the need for monitoring the financial condition of Orient Finance and its implications for United Energy's stock performance, while also highlighting potential upside risks related to strategic share disposals and buybacks [2][3].

M N 6 May 2024 CMB International Global Markets | Equity Research | Company Update United Energy (467 HK) Expect volume growth to accelerate in 2024E Target Price HK$0.96 We believe the low volume growth in 2023 and the impairment of Iraq assets (Previous TP HK$1.45) have been gradually digested by the market. We slash our 2024E/25E earnings Up/Downside 50.0% forecast by 26%/28% due to lower oil & gas output and higher production cost Current Price HK$0.64 assumptions. On the positive side, we expect the co ...

Revenue and Profit Performance - Revenue for 2023 increased by 26.4% to HKD 13,591,075 thousand compared to HKD 10,753,743 thousand in 2022[6] - Gross profit decreased by 19.5% to HKD 4,439,240 thousand in 2023 from HKD 5,512,983 thousand in 2022[6] - The company's revenue for the year was approximately HKD 13,591,075,000, an increase of 26.4% compared to the previous year's HKD 10,753,743,000, driven by new trading business but offset by lower realized sales prices in exploration and production[30] - The company's gross profit for the year was HKD 4,439,240,000 (gross margin of 32.7%), a decrease of 19.5% compared to the previous year's HKD 5,512,983,000 (gross margin of 51.3%), primarily due to lower average international oil prices and increased depreciation and amortization[37] - Revenue for 2023 increased to 13,591,075 thousand HKD, up from 10,753,743 thousand HKD in 2022, representing a growth of approximately 26.4%[151] - Gross profit for 2023 was 4,439,240 thousand HKD, a decrease from 5,512,983 thousand HKD in 2022, reflecting a decline of approximately 19.5%[151] Production and Reserves - Average daily production in 2023 was 100,407 barrels of oil equivalent per day (boe/d), with a total of 11 commercial discoveries made during the year[11] - Proved and probable (2P) reserves reached approximately 611.6 million barrels of oil equivalent (MMboe) with a reserve-to-production ratio of 16.7[11] - The company's net equity proved reserves at the end of 2023 were 48.4 million barrels of oil equivalent (MMboe), a decrease of 16.0% compared to 57.6 MMboe in 2022[7] - The company's net equity proved and probable reserves at the end of 2023 were 94.0 MMboe, a decrease of 5.5% compared to 99.5 MMboe in 2022[7] - The company achieved 11 commercial discoveries in 2023, with 7 in Pakistan, 3 in Egypt, and 1 in Iraq[18] - The company's average daily production reached 167,826 barrels of oil equivalent (BOE) in 2023, a 1.17% increase from the previous year[20] - In Pakistan, the average daily production was 62,762 BOE, a 9.6% decrease compared to the previous year[21] - In Iraq, the B9 block's average daily production reached 63,320 BOE, a 9.5% increase from the previous year[22] - In Egypt, the average daily production was 16,951 BOE, a 7.8% decrease compared to the previous year[23] - The company's cumulative equity crude oil and condensate sales volume was 23.2 million barrels in 2023, an 8.4% increase year-over-year[25] - The average realized crude oil price was $78.60 per barrel in 2023, an 18.3% decrease from the previous year[25] - The company's cumulative equity natural gas sales volume was 13.0 million BOE in 2023, a 12.8% decrease year-over-year[26] - The average realized natural gas price was $30.88 per BOE in 2023, a 3.5% increase from the previous year[26] - The company's petrochemical product sales volume was 741,605 tons in 2023, with an average realized price of $548.55 per ton[27] - The average daily equity production for the year was approximately 100,407 barrels of oil equivalent (BOE), a slight increase of 0.16% compared to the previous year's 100,245 BOE[28] - The average realized price for oil and gas was USD 61.31 per BOE, a decrease of 11.1% compared to the previous year's USD 68.93 per BOE[28] - The company's net proved reserves as of December 31, 2023, included 15.2 million barrels of crude oil, condensate, and LPG, and 192.5 billion cubic feet of sales gas[60] - The group's average daily production in Pakistan and the Middle East & North Africa was 43,017 and 57,390 barrels of oil equivalent, respectively[61] Financial Performance and Losses - The company recorded a net loss attributable to owners of approximately HK$1,707,385,000 in 2023, compared to a profit of HK$2,601,162,000 in 2022, primarily due to a one-time impairment of reserves of approximately HK$4,185,457,000 (post-tax) and a one-time exploration dry hole write-off of approximately HK$201,156,000 (post-tax)[13] - The company reported a net loss of 1,707,401 thousand HKD in 2023, compared to a net profit of 2,601,146 thousand HKD in 2022[151] - Total comprehensive loss for 2023 was 1,704,458 thousand HKD, compared to a total comprehensive income of 2,611,238 thousand HKD in 2022[154] - The company reported a pre-tax loss of 2,019,941 thousand HKD in 2023, compared to a pre-tax profit of 3,021,096 thousand HKD in 2022[159] - Impairment losses on intangible assets surged to 2,263,951 thousand HKD in 2023 from 609,132 thousand HKD in 2022[159] - Impairment losses on property, plant, and equipment rose to 2,833,566 thousand HKD in 2023 from 219,421 thousand HKD in 2022[159] - The company recognized impairment provisions and write-offs for property, plant, and equipment, as well as intangible assets, totaling approximately HKD 3,420,805,000 and HKD 2,263,951,000 respectively[140] Capital Expenditures and Investments - The company invested approximately HK$6,868,844,000 in capital expenditures for oil exploration, development, and production activities in 2023, completing the drilling of 48 wells, including 20 in Pakistan and 28 in the Middle East and North Africa[13] - The company's target for 2024 is an average daily production range of 176,300 to 197,600 barrels, with an average equity daily production range of 101,600 to 113,500 barrels. The expected capital expenditure is between $880 million and $930 million[12] - Exploration costs for the year ended December 31, 2023, were HKD 368,337,000, with development costs totaling HKD 6,190,149,000[62] - Cash outflow for investment activities increased by 14.7% to approximately HKD 6,543,314,000 in 2023, with capital expenditures rising by 23.7% to HKD 6,669,825,000[44] - Net cash used in investing activities amounted to HK$6,543,314 thousand in 2023, compared to HK$5,706,750 thousand in 2022[160] Clean Energy and Sustainability - The company aims to expand its clean energy portfolio and invest in gigawatt-scale clean energy projects in Europe, the Middle East, North Africa, and Central Asia as part of its long-term decarbonization and sustainability strategy[12] - The company plans to continue exploring new opportunities for clean energy projects in the Middle East, North Africa, and other regions, while also developing its carbon trading business and advancing its roadmap for achieving carbon neutrality[12] Operational Highlights by Region - In Iraq, the B9 block's daily production exceeded 70,000 barrels, and the construction of central processing facilities is progressing rapidly[11] - In Pakistan, the company maintained stable production and operations, ensuring local energy supply[11] - In Egypt, the company expanded exploration areas and improved operational efficiency, maintaining stable overall production[11] - In Pakistan, the company's exploration area increased by 10.7% from 22,433 square kilometers in 2022 to 24,830 square kilometers in 2023, with plans to achieve an average working interest production of 35,500 to 40,900 barrels of oil equivalent per day in 2024[47] - The Middle East and North Africa assets have proven and probable reserves of 517.6 million barrels of oil equivalent, with 96.4% located in Iraq, and the company plans to achieve average working interest production of 55,100 to 59,400 barrels of oil equivalent per day in Iraq and 11,000 to 13,200 barrels of oil equivalent per day in Egypt in 2024[48] Financial Position and Assets - The company's total assets decreased by 5.8% to HKD 25,829,150 thousand in 2023 from HKD 27,419,844 thousand in 2022[6] - Total assets decreased to 14,170,196 thousand HKD in 2023 from 17,414,747 thousand HKD in 2022, a reduction of approximately 18.6%[155] - Current assets increased to 11,658,954 thousand HKD in 2023 from 10,005,097 thousand HKD in 2022, showing a growth of approximately 16.5%[155] - Current liabilities rose to 8,987,411 thousand HKD in 2023 from 7,974,309 thousand HKD in 2022, an increase of approximately 12.7%[155] - The company's net current assets improved to 2,671,543 thousand HKD in 2023 from 2,030,788 thousand HKD in 2022, reflecting a growth of approximately 31.6%[155] - The company's property, plant, and equipment decreased to 11,224,269 thousand HKD in 2023 from 11,739,252 thousand HKD in 2022, a reduction of approximately 4.4%[155] - Intangible assets significantly decreased to 1,619,227 thousand HKD in 2023 from 4,323,573 thousand HKD in 2022, a decline of approximately 62.5%[155] - Non-current liabilities increased to 4,005,590 thousand HKD in 2023 from 3,637,715 thousand HKD in 2022, driven by a significant rise in borrowings to 2,488,001 thousand HKD from 1,586,344 thousand HKD[156] - The company's net asset value decreased to 12,836,149 thousand HKD in 2023 from 15,807,820 thousand HKD in 2022, reflecting a decline in equity[156] - Total equity attributable to the company's owners dropped to 12,830,726 thousand HKD in 2023 from 15,802,040 thousand HKD in 2022, primarily due to a decrease in retained earnings[157] - The company's bank and cash balances as of December 31, 2023, were approximately HKD 3,327,279,000, compared to HKD 3,255,124,000 at the end of 2022[50] - The company's debt ratio was 16.5% as of December 31, 2023, compared to 15.3% at the end of 2022, with a current ratio of 1.30 times, up from 1.25 times at the end of 2022[51] - Total borrowings of the group amounted to approximately HKD 2,794,035,000 as of December 31, 2023, with a weighted average interest rate of 8.33%[52] - The group's property, plant, and equipment, along with other assets, were valued at approximately HKD 4,039,764,000 as of December 31, 2023, serving as collateral for bank financing[52] - The company's distributable reserves as of December 31, 2023, amounted to approximately HKD 7,436,432,000 (December 31, 2022: HKD 8,488,029,000)[127] Cash Flow and Financing - Operating cash inflow for the reporting period was approximately HKD 7,326,562,000, a decrease of 6.4% compared to the previous year's HKD 7,824,906,000, primarily due to lower average international oil prices in 2023[43] - Cash outflow for financing activities was approximately HKD 638,132,000 in 2023, including special dividends of HKD 1,051,597,000, bank loan repayments of HKD 3,074,136,000, and share buybacks of HKD 216,491,000[45] - Net cash used in financing activities was HK$638,132 thousand in 2023, a significant decrease from HK$2,069,864 thousand in 2022[160] - Cash and cash equivalents increased by HK$145,116 thousand in 2023, up from HK$48,292 thousand in 2022[160] - The company raised HK$2,409,251 thousand in borrowings, net of direct transaction costs, in 2023, compared to HK$768,300 thousand in 2022[160] - Repayment of borrowings totaled HK$3,074,136 thousand in 2023, up from HK$1,980,101 thousand in 2022[160] - A customer deposit of HK$1,560,000 thousand was received in 2023, compared to HK$390,000 thousand in 2022[160] - The company repurchased shares worth HK$216,491 thousand in 2023, with no repurchases in 2022[160] - Dividends paid to the company's owners amounted to HK$1,051,597 thousand in both 2023 and 2022[160] - Cash and cash equivalents at the end of 2023 stood at HK$3,327,279 thousand, up from HK$3,169,455 thousand at the end of 2022[160] Corporate Governance and Board Activities - The company's Board of Directors consists of 5 members, including 2 executive directors and 3 independent non-executive directors, with Mr. Zhang Hongwei serving as the Chairman[67] - The Board of Directors held 8 meetings in 2023, with all directors having a 100% attendance rate[71] - All directors attended the 2023 Annual General Meeting, with a 100% attendance rate[72] - The company provides ongoing professional development for directors, including briefings on corporate governance, director responsibilities, and regulatory updates[73] - Directors are required to participate in suitable continuous professional development to enhance their knowledge and skills[73] - The company has adopted the standard code of conduct for directors' securities transactions as per the Listing Rules Appendix C3[65] - The company maintains appropriate insurance coverage for directors and senior officers to protect against legal liabilities arising from the group's business[66] - The Board of Directors is responsible for approving the group's development and business strategies, major investments, financial controls, and significant transactions[70] - The company ensures that at least one-third of the Board consists of independent non-executive directors, with at least one possessing relevant professional qualifications and financial expertise[69] - The company has established a clear division of responsibilities between the Chairman and the CEO, although the CEO position is currently vacant[64] - The audit committee held two meetings in 2023, with 100% attendance from all members (Zhou Shaowei, Shen Feng, and Wang Ying)[79] - The company paid HKD 7,133,000 for audit services and HKD 1,107,000 for non-audit services to its external auditor, RSM[84] - The risk management and internal control department conducted an annual review, implementing stricter procedures, and the board confirmed the system's effectiveness[85] - The remuneration committee held three meetings in 2023 to review and approve the compensation packages for directors and senior management[80] - The nomination committee held two meetings in 2023, focusing on board diversity and re-election of directors[82] - The company secretary, Mr. Kong Likai, completed over 15 hours of professional training in 2023 to update his skills and knowledge[86] - The board ensures compliance with Hong Kong Financial Reporting Standards (HKFRS), which align with International Financial Reporting Standards (IFRS)[75] - The audit committee reviewed external auditor plans, risk management, internal controls, and financial statements, providing recommendations to the board[79] - The remuneration committee considered factors such as comparable company salary levels and the time and responsibilities of directors and senior management when determining compensation[80] - The nomination committee assessed the board's diversity in skills, experience, and perspectives, concluding it aligns with the company's diversity policy[82] Risks and Challenges - The company's financial performance is significantly impacted by fluctuations in international oil and gas prices, which are influenced by supply and demand changes, global economic conditions, and political instability[91] - The company faces risks related to tax and fiscal systems in Pakistan, Egypt, and Iraq, where any changes could increase tax burdens and adversely affect financial performance[92] - Exploration and development activities carry inherent risks of not discovering commercial oil and gas reserves, which could lead to write-offs or impairment charges[93] - Operational risks in exploration, development, and production include health, safety, security, and environmental concerns, which could result in economic losses, operational disruptions, and litigation[94] - Mergers and acquisitions may not succeed due to factors such as external financing availability and discrepancies between key assumptions and actual parameters[95] - The company's operations could be adversely affected by natural disasters, pandemics, or other public health crises, potentially disrupting supply chains and reducing demand for products[97] Shareholder and Equity Information - The company granted 20,600,000 shares to 55 eligible employees under the PSU plan in 2023, with 1,341,036 shares vested due to retirement and 105,608 shares forfeited due to employee departure[109] - The total number of shares granted under the PSU plan since its adoption is 60,147,163, with 82,594,841 shares available for future grants, representing approximately 3.2% of the plan's authorized limit[109] - Zhang Hongwei holds 17,661,944,230 shares (67.82%) of the company's equity through controlled

Financial Performance - For the year ended December 31, 2023, the revenue was HKD 13,591,075, an increase of 26.4% compared to HKD 10,753,743 in 2022[2]. - The gross profit decreased by 19.5% to HKD 4,439,240 from HKD 5,512,983 in the previous year[2]. - The company reported a loss of HKD 1,707,401 for the year, compared to a profit of HKD 2,601,146 in 2022, resulting in a basic loss per share of HKD 6.53[2][5]. - Total revenue from external customers for the year ended December 31, 2023, was HKD 13,591,075, a decrease from HKD 10,753,743 in 2022, representing a decline of approximately 11%[43][45]. - The classified profit for the year 2023 was HKD 3,202,264, down from HKD 3,336,775 in 2022, indicating a decrease of about 4%[47]. - The company reported a comprehensive loss of HKD 1,707,401 for 2023, compared to a profit of HKD 2,601,146 in 2022[47]. - The company reported a loss attributable to equity holders of approximately HKD 1,707,385,000 for the year ended December 31, 2023, compared to a profit of approximately HKD 2,601,162,000 for the previous year, marking a significant turnaround from profit to loss[97]. Assets and Liabilities - Total assets decreased by 5.8% to HKD 25,829,150 from HKD 27,419,844 in 2022[2]. - The net equity of the company decreased by 18.8% to HKD 12,830,726 from HKD 15,802,040 in the previous year[2]. - Total assets decreased from HKD 19,445,535 thousand in 2022 to HKD 16,841,739 thousand in 2023, a decline of approximately 13.2%[9]. - Non-current assets decreased significantly from HKD 17,414,747 thousand in 2022 to HKD 14,170,196 thousand in 2023, representing a reduction of about 18.5%[9]. - Current liabilities increased from HKD 7,974,309 thousand in 2022 to HKD 8,987,411 thousand in 2023, an increase of approximately 12.7%[9]. - The company's net asset value decreased from HKD 15,807,820 thousand in 2022 to HKD 12,836,149 thousand in 2023, a decline of around 18.7%[11]. - Trade and other receivables rose from HKD 6,315,856 thousand in 2022 to HKD 8,048,362 thousand in 2023, an increase of approximately 27.5%[9]. - Inventory decreased from HKD 389,310 thousand in 2022 to HKD 252,570 thousand in 2023, a decline of about 35.1%[9]. - Borrowings increased from HKD 1,885,969 thousand in 2022 to HKD 2,794,035 thousand in 2023, an increase of about 48.1%[9]. - The company's reserves decreased from HKD 15,539,141 thousand in 2022 to HKD 12,570,321 thousand in 2023, a decline of around 19.2%[11]. Production and Exploration - Average daily production in Pakistan decreased by 8.5% to 43,017 BOE/day from 47,029 BOE/day in 2022[2]. - The year-end net proven reserves in Pakistan decreased by 16.0% to 48.4 million BOE from 57.6 million BOE in 2022[2]. - Average daily production in the Middle East and North Africa increased by 7.8% to 57,390 BOE/day from 53,216 BOE/day in 2022[2]. - The year-end net proven reserves in the Middle East and North Africa increased by 14.2% to 119.8 million BOE from 104.9 million BOE in 2022[2]. - The company drilled a total of 48 wells, including 20 in Pakistan and 28 in the Middle East and North Africa[78]. - In 2023, the company achieved 11 commercial discoveries in oil and gas exploration, with 7 in Pakistan, 3 in Egypt, and 1 in Iraq[84]. - The cumulative sales volume of crude oil and condensate was 23.2 million barrels, an increase of 8.4% year-on-year, with an average realized price of $78.60 per barrel, down 18.3%[92]. - The cumulative sales volume of natural gas was 13.0 million barrels of oil equivalent, a decrease of 12.8%, with an average realized price of $30.88 per barrel of oil equivalent, up 3.5%[93]. Financial Management and Strategy - The company aims to maintain a prudent financial policy to optimize processes, improve efficiency, and manage cash flow effectively[83]. - The company plans to actively develop clean and low-carbon energy businesses to achieve synergies with existing core operations[81]. - The company anticipates future large-scale discoveries in new exploration locations and promising technological research areas[79]. - The company established a new energy trading segment for petrochemical product trading, with a sales volume of 741,605 tons and an average realized price of $548.55 per ton[95]. - The company continues to optimize its asset value and production efficiency through process improvements and facility upgrades[85]. Accounting and Compliance - The group has adopted the revised Hong Kong Financial Reporting Standards, specifically HKAS 12, which impacts deferred tax assets and liabilities related to lease transactions[21]. - The management assessed that the impact on the consolidated financial position as of January 1, 2022, December 31, 2022, and December 31, 2023, is not significant due to offsetting conditions being met[22]. - The group has implemented the revised HKAS 12 regarding international tax reform, specifically the Pillar Two rules, which requires immediate application and retrospective application of deferred tax assets and liabilities[23]. - The group has not applied temporary exemptions as it operates in jurisdictions where the Pillar Two legislation has not been enacted[23]. - The accounting policy changes related to the removal of the offset mechanism for mandatory provident fund contributions and long service payments will not have a significant impact on the consolidated financial statements[27]. - The group has not early adopted any of the newly issued or revised standards that are effective for accounting periods beginning on or after January 1, 2024[28]. - The revised HKAS 1 regarding the classification of liabilities as current or non-current will be effective from January 1, 2024[29]. - The group anticipates that the application of the revised standards will not have a significant impact on its financial position and performance[31]. Market and Economic Outlook - The global economy is projected to grow by 3.1% in 2024, with global oil demand expected to increase by 2.2 million barrels per day to an average of 104.4 million barrels per day[115]. - The group's average daily production target for 2024 is set between 176,300 and 197,600 barrels of oil equivalent, with capital expenditures estimated at $880 million to $930 million[115]. - In Pakistan, natural gas demand is expected to rise from approximately 3.56 billion cubic feet per day in 2020 to about 4.24 billion cubic feet per day by 2030, while domestic production is projected to decline significantly[116]. - Average daily production targets for Iraq assets in 2024 are set between 55,100 and 59,400 barrels of oil equivalent, while Egypt's assets are expected to maintain stable production levels[118]. Shareholder Information - The company declared a special dividend of HKD 0.04 per ordinary share for 2023, amounting to HKD 1,051,597,000, consistent with the previous year's special dividend[62]. - The company did not recommend the distribution of a final dividend for the year 2023[113]. - The annual general meeting is scheduled for June 6, 2024, with a suspension of share transfer registration from June 3 to June 6, 2024[138][139]. - The company has adopted a code of conduct for directors' securities transactions and confirmed compliance for the year ended December 31, 2023[140]. - The nomination committee reviewed the board's composition and diversity policy, concluding that the current board structure aligns with the company's business model and diversity objectives[144].

Financial Performance - Revenue for the six months ended June 30, 2023, was HKD 6,226,137, an increase of 3.4% compared to HKD 6,020,796 for the same period in 2022[4] - Gross profit decreased to HKD 2,549,269, down 20.7% from HKD 3,212,342 in the previous year[4] - Operating profit increased to HKD 2,440,998, representing a growth of 27% from HKD 1,923,875 in the prior period[4] - Profit before tax rose to HKD 2,239,495, up 40.1% from HKD 1,598,853 year-on-year[4] - Net profit for the period was HKD 1,663,117, an increase of 10.1% compared to HKD 1,510,239 in the same period last year[4] - Basic earnings per share increased to HKD 6.36, up from HKD 5.77, reflecting a growth of 10.2%[4] - The company reported a total comprehensive income of HKD 1,666,891 for the period, compared to HKD 1,530,136 in the previous year, marking an increase of 8.9%[5] - The group’s total comprehensive income for the period was HKD 1,663,117, compared to HKD 1,510,239 for the same period in 2022, showing an increase of approximately 10.1%[24] - The group’s profit for the six months ended June 30, 2023, was approximately HKD 1,663,123,000, compared to HKD 1,510,248,000 for the same period in 2022, representing an increase of about 10.1%[34] Assets and Liabilities - Total assets as of June 30, 2023, were HKD 20,967,249, an increase from HKD 19,445,535 at the end of 2022[8] - Non-current assets increased to HKD 18,771,901 from HKD 17,414,747, indicating a growth of 7.8%[7] - Current liabilities rose to HKD 9,217,574, compared to HKD 7,974,309 at the end of 2022, reflecting a 15.6% increase[8] - The total assets for the group as of June 30, 2023, amounted to HKD 27,127,058, compared to HKD 23,710,613 as of December 31, 2022, indicating an increase of approximately 14.3%[24] - The total liabilities for the group as of June 30, 2023, were HKD 7,749,508, up from HKD 5,425,145 as of December 31, 2022, reflecting an increase of approximately 42.9%[24] Cash Flow and Investments - Cash generated from operating activities for the six months ended June 30, 2023, was HKD 2,851,219, down from HKD 3,182,024 in 2022, reflecting a decrease of approximately 10.4%[12] - The net cash used in investing activities was HKD (3,163,299) for the six months ended June 30, 2023, compared to HKD (2,593,123) in the previous year, indicating an increase in investment outflows[12] - The company’s capital expenditures for property, plant, and equipment amounted to HKD (3,270,013), up from HKD (2,040,518) in the previous year, reflecting a 60.5% increase[12] - The total capital expenditure for oil exploration, development, and production activities was approximately HKD 3,415,635,000[76] Dividends and Shareholder Information - The company paid dividends of HKD 1,051,597 during the period, consistent with the previous year[12] - The group declared a special dividend of HKD 0.04 per ordinary share for 2023, amounting to HKD 1,051,597,000, while no interim dividend was declared for the same period in 2022[37] - The total issued and paid-up capital remained stable at HKD 262,899,000 as of June 30, 2023, unchanged from December 31, 2022[56] Production and Exploration - The average daily production of oil equivalent from the group's assets in Pakistan is 44,558 barrels as of the reporting period[72] - The average daily production of oil equivalent from the group's assets in the Middle East and North Africa is 57,069 barrels as of the reporting period[72] - The average daily production reached approximately 170,271 barrels of oil equivalent, a 3.0% increase from 165,338 barrels of oil equivalent in the same period last year[79] - The company achieved 6 commercial discoveries during the reporting period, with 3 in Pakistan, 2 in Egypt, and 1 in Iraq[78] - The average operating daily production in Iraq's B9 block increased by 16.2% to approximately 62,839 barrels of oil equivalent[82] Financial Ratios and Costs - The effective tax rate for the reporting period was approximately 25.7%, an increase of 20.2 percentage points from 5.5% in the previous year[106] - The financing costs for the six months ended June 30, 2023, totaled HKD 143,659, a decrease from HKD 167,950 in the same period of 2022, representing a reduction of about 14.5%[29] - The average daily production target for 2023 is set between 165,000 and 179,000 barrels of oil equivalent, with capital expenditures expected to reach USD 990 million to USD 1.05 billion[114] Corporate Governance and Compliance - The company has complied with the corporate governance code as of June 30, 2023, except for the CEO position being vacant[147] - The audit committee, composed of three independent non-executive directors, reviewed the unaudited condensed consolidated financial statements for the six months ended June 30, 2023, and found them satisfactory[151] Employee and Shareholder Information - The group employed a total of 2,256 full-time employees across various regions including Hong Kong, China, Pakistan, Dubai, and other parts of the Middle East and North Africa as of June 30, 2023[128] - The company granted a total of 20,600,000 shares under the Performance Share Unit (PSU) plan to 55 eligible employees for the 2023 plan year[137]

[Financial Highlights](index=1&type=section&id=Financial%20Highlights) This section provides a concise overview of the Group's key financial performance and position for the six months ended June 30, 2023 Financial Highlights for the Six Months Ended June 30, 2023 | Metric | 2023 (HKD thousands) | 2022 (HKD thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 6,226,137 | 6,020,796 | +3.4 | | Gross Profit | 2,549,269 | 3,212,342 | -20.6 | | Profit for the Period | 1,663,117 | 1,510,239 | +10.1 | | Profit Attributable to Owners of the Company | 1,663,123 | 1,510,248 | +10.1 | | Basic Earnings Per Share (HK cents) | 6.36 | 5.77 | +10.2 | | Equity Attributable to Owners of the Company | 16,423,697 | 15,802,040 | +3.9 | | Total Assets | 30,184,823 | 27,419,844 | +10.1 | | Net Assets | 16,429,471 | 15,807,820 | +3.9 | | Average Equity Interest Daily Production (boepd) | 101,627 | 100,107 | +1.5 | | - Pakistan Assets | 44,558 | 48,814 | -8.7 | | - MENA Assets | 57,069 | 51,293 | +11.3 | | - Iraq | 44,845 | 38,449 | +16.6 | | - Egypt | 12,224 | 12,844 | -4.8 | [Condensed Consolidated Financial Statements](index=2&type=section&id=Condensed%20Consolidated%20Financial%20Statements) This section presents the Group's condensed consolidated financial performance, position, and cash flows for the reporting period [Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=2&type=section&id=Condensed%20Consolidated%20Statement%20of%20Profit%20or%20Loss%20and%20Other%20Comprehensive%20Income) For the six months ended June 30, 2023, the Group achieved HKD 6.226 billion in revenue, a 3.4% increase, with profit for the period rising 10.1% to HKD 1.663 billion, despite a 20.6% decline in gross profit Key Data from Condensed Consolidated Statement of Profit or Loss | Metric | 2023 (HKD thousands) | 2022 (HKD thousands) | | :--- | :--- | :--- | | Revenue | 6,226,137 | 6,020,796 | | Cost of Sales | (3,676,868) | (2,808,454) | | Gross Profit | 2,549,269 | 3,212,342 | | Operating Profit | 2,440,998 | 1,923,875 | | Profit Before Tax | 2,239,495 | 1,598,853 | | Income Tax Expense | (576,378) | (88,614) | | Profit for the Period | 1,663,117 | 1,510,239 | | Profit Attributable to Owners of the Company | 1,663,123 | 1,510,248 | | Basic Earnings Per Share (HK cents) | 6.36 | 5.77 | Key Data from Condensed Consolidated Statement of Other Comprehensive Income | Metric | 2023 (HKD thousands) | 2022 (HKD thousands) | | :--- | :--- | :--- | | Profit for the Period | 1,663,117 | 1,510,239 | | Other Comprehensive Income After Tax | 3,774 | 19,897 | | Total Comprehensive Income for the Period | 1,666,891 | 1,530,136 | [Condensed Consolidated Statement of Financial Position](index=4&type=section&id=Condensed%20Consolidated%20Statement%20of%20Financial%20Position) As of June 30, 2023, the Group's total assets increased 10.1% to HKD 30.185 billion, driven by property, plant, and equipment, with net current assets slightly up and net assets reaching HKD 16.429 billion Key Data from Condensed Consolidated Statement of Financial Position | Metric | June 30, 2023 (HKD thousands) | December 31, 2022 (HKD thousands) | | :--- | :--- | :--- | | Non-current Assets | 18,771,901 | 17,414,747 | | Current Assets | 11,412,922 | 10,005,097 | | Current Liabilities | 9,217,574 | 7,974,309 | | Net Current Assets | 2,195,348 | 2,030,788 | | Total Assets Less Current Liabilities | 20,967,249 | 19,445,535 | | Non-current Liabilities | 4,537,778 | 3,637,715 | | Net Assets | 16,429,471 | 15,807,820 | | Equity Attributable to Owners of the Company | 16,423,697 | 15,802,040 | | Total Equity | 16,429,471 | 15,807,820 | [Notes to the Condensed Financial Statements](index=6&type=section&id=Notes%20to%20the%20Condensed%20Financial%20Statements) This section details the accounting policies, fair value measurements, segment information, and other significant financial disclosures supporting the condensed financial statements [Basis of Preparation and Principal Accounting Policies](index=6&type=section&id=Basis%20of%20Preparation%20and%20Principal%20Accounting%20Policies) The condensed financial statements are prepared in accordance with HKAS 34 and Listing Rules, applying consistent accounting policies and methods as the 2022 annual consolidated financial statements - The condensed financial statements are prepared in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting" issued by the Hong Kong Institute of Certified Public Accountants and the applicable disclosure requirements of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited[8](index=8&type=chunk) - The accounting policies and methods of computation used in the preparation of these condensed consolidated financial statements are consistent with those used in the annual consolidated financial statements for the year ended December 31, 2022[8](index=8&type=chunk) [Adoption of New and Revised Hong Kong Financial Reporting Standards](index=6&type=section&id=Adoption%20of%20New%20and%20Revised%20Hong%20Kong%20Financial%20Reporting%20Standards) Effective January 1, 2023, the Group adopted amendments to HKAS 12 regarding deferred tax related to single transactions, with no material impact on the condensed consolidated statement of financial position or opening retained earnings - The Group adopted the amendments to Hong Kong Accounting Standard 12 "Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction" from January 1, 2023, which narrows the scope of the initial recognition exemption to exclude transactions that give rise to equal and offsetting temporary differences, such as leases[9](index=9&type=chunk) - Management assessed that the change had no material impact on the condensed consolidated statement of financial position as at January 1, 2022, December 31, 2022, and June 30, 2023, primarily affecting disclosures related to recognized deferred tax assets and liabilities[9](index=9&type=chunk) [Fair Value Measurement](index=7&type=section&id=Fair%20Value%20Measurement) The Group's financial assets and liabilities are measured at fair value using a three-level hierarchy, with no changes in valuation techniques for Level 1 inputs as of June 30, 2023, and December 31, 2022 - The carrying amounts of the Group's financial assets and financial liabilities approximate their respective fair values[11](index=11&type=chunk) - Fair value measurements are categorized into a three-level hierarchy, where Level 1 inputs are based on quoted prices in active markets, Level 2 on observable inputs, and Level 3 on unobservable inputs[11](index=11&type=chunk) - As of June 30, 2023, and December 31, 2022, recurring fair values of financial assets at fair value through profit or loss were measured using Level 1 inputs, with no changes in valuation techniques[11](index=11&type=chunk) [Segment Information](index=8&type=section&id=Segment%20Information) The Group operates two reportable segments: Exploration and Production, and Trading, with Trading recognized separately due to its growth, showing significant revenue increase to HKD 1.225 billion for the six months ended June 30, 2023 - The Group has identified two reportable segments: Exploration and Production (activities related to crude oil and natural gas exploration and production in Pakistan, the Middle East, and North Africa) and Trading (activities related to petrochemical product trading)[12](index=12&type=chunk) - Due to the continuous growth of the trading business and its increasing resource requirements, the Group has identified the trading business as a separate reportable segment[12](index=12&type=chunk) Segment Revenue and Profit | Metric | Exploration and Production (HKD thousands) | Trading (HKD thousands) | Total (HKD thousands) | | :--- | :--- | :--- | :--- | | **For the six months ended June 30, 2023** | | | | | Revenue from External Customers | 5,000,897 | 1,225,240 | 6,226,137 | | Segment Profit /(Loss) | 1,488,497 | (3,663) | 1,484,834 | | **For the six months ended June 30, 2022** | | | | | Revenue from External Customers | 5,498,374 | 522,422 | 6,020,796 | | Segment Profit /(Loss) | 1,964,297 | (2,078) | 1,962,219 | [Revenue](index=10&type=section&id=Revenue) For the six months ended June 30, 2023, the Group's total revenue was HKD 6.226 billion, primarily from oil and gas sales (HKD 5.001 billion) and petrochemical trading (HKD 1.225 billion), with significant growth in trading revenue offsetting a decline in exploration and production Revenue from Contracts with Customers | Source | 2023 (HKD thousands) | 2022 (HKD thousands) | | :--- | :--- | :--- | | Sales and Production of Crude Oil, Condensate, Natural Gas and LPG | 5,000,897 | 5,498,374 | | Trading of Petrochemical Products | 1,225,240 | 522,422 | | **Total** | **6,226,137** | **6,020,796** | Revenue by Major Geographical Market | Region | 2023 (HKD thousands) | 2022 (HKD thousands) | | :--- | :--- | :--- | | Pakistan | 1,839,627 | 1,483,065 | | Singapore | 984,574 | 717,176 | | Egypt | 567,705 | 779,195 | | Iraq | 2,593,565 | 2,518,938 | | Others (Trading) | 240,666 | 522,422 | | **Total** | **6,226,137** | **6,020,796** | [Finance Costs](index=11&type=section&id=Finance%20Costs) For the six months ended June 30, 2023, total finance costs decreased 14.5% to HKD 144 million, primarily due to lower bank loan interest, with a weighted average capitalization rate for borrowings between 11.4% and 12.0% Breakdown of Finance Costs | Item | 2023 (HKD thousands) | 2022 (HKD thousands) | | :--- | :--- | :--- | | Interest on Bank Loans | 109,889 | 152,794 | | Interest Expense on Lease Liabilities | 15,715 | 9,848 | | Interest on Customer Deposits | 12,815 | - | | Provision - Reversal of Discount | 11,587 | 5,308 | | Total Borrowing Costs | 150,006 | 167,950 | | Amount Capitalized | (6,347) | - | | **Total** | **143,659** | **167,950** | - In 2023, the weighted average capitalization rate per annum for borrowing costs generally ranged from **11.4% to 12.0%**[18](index=18&type=chunk) [Income Tax Expense](index=12&type=section&id=Income%20Tax%20Expense) For the six months ended June 30, 2023, income tax expense significantly increased to HKD 576 million, driven by higher current tax provisions and reduced deferred tax benefits, with taxable profits calculated at varying rates across regions Breakdown of Income Tax Expense | Item | 2023 (HKD thousands) | 2022 (HKD thousands) | | :--- | :--- | :--- | | Current Tax - Overseas Provision for the Period | 604,200 | 485,046 | | Current Tax - Under-provision in Prior Years | 101,085 | 39,524 | | Deferred Tax | (128,907) | (435,956) | | **Total** | **576,378** | **88,614** | - The Group is not required to make provision for profits tax in Austria, Cayman Islands, Bermuda, British Virgin Islands, Jersey, Kuwait, Dubai, Netherlands, United States of America, Republic of Panama, Mauritius, Singapore, or Hong Kong, as no taxable profits arose from or were derived from these jurisdictions for the six months ended June 30, 2023, and 2022[19](index=19&type=chunk) - Income tax in Egypt, Iraq, Pakistan, and China is calculated at rates of **22.5%**, **35%**, **40% to 50%**, and **25%** respectively[20](index=20&type=chunk) [Profit for the Period](index=12&type=section&id=Profit%20for%20the%20Period) Profit for the period is derived after accounting for depreciation, amortization of intangible assets, and impairment losses on investments in associates, noting a significant property, plant, and equipment write-off of HKD 716 million in 2022 not present in 2023 Profit for the Period Adjustment Items | Item | 2023 (HKD thousands) | 2022 (HKD thousands) | | :--- | :--- | :--- | | Interest Income | (21,909) | (4,660) | | Trade Receivables (Reversal of Provision)/Provision | (1,611) | 350,899 | | Impairment Loss on Investments in Associates | 42,754 | 85,800 | | Amortization of Intangible Assets | 177,591 | 211,773 | | Depreciation | 1,750,937 | 1,541,911 | | Write-off of Property, Plant and Equipment | - | 715,614 | [Earnings Per Share](index=13&type=section&id=Earnings%20Per%20Share) For the six months ended June 30, 2023, basic earnings per share attributable to owners of the Company increased to 6.36 HK cents from 5.77 HK cents, with diluted earnings per share being identical due to no potentially dilutive ordinary shares Earnings Per Share Data | Metric | 2023 (HK cents) | 2022 (HK cents) | | :--- | :--- | :--- | | Basic Earnings Per Share | 6.36 | 5.77 | | Diluted Earnings Per Share | 6.36 | 5.77 | - Basic earnings per share attributable to owners of the Company is calculated based on the profit attributable to owners of the Company of approximately **HKD 1,663,123,000** and the weighted average number of ordinary shares outstanding of **26,163,186,786** during the period[22](index=22&type=chunk) - For the six months ended June 30, 2023, there were no potentially dilutive ordinary shares, thus diluted earnings per share is the same as basic earnings per share[23](index=23&type=chunk) [Dividends](index=13&type=section&id=Dividends) The Company declared a special dividend of 4 HK cents per ordinary share in 2023, totaling HKD 1.052 billion, paid after the reporting period, with no interim dividend recommended by the Board for this period Dividend Declaration and Payment | Item | 2023 (HKD thousands) | 2022 (HKD thousands) | | :--- | :--- | :--- | | Special Dividend of 4 HK cents per Ordinary Share Declared for 2023 | 1,051,597 | - | | Special Dividend of 4 HK cents per Ordinary Share Paid for 2022 | - | 1,051,597 | | **Total** | **1,051,597** | **1,051,597** | - After the end of the reporting period, the 2023 special dividend of **4 HK cents** per ordinary share was paid on August 9, 2023[24](index=24&type=chunk) - The directors of the Company do not recommend the payment of any interim dividend for the six months ended June 30, 2023[24](index=24&type=chunk) [Property, Plant and Equipment](index=13&type=section&id=Property%2C%20Plant%20and%20Equipment) For the six months ended June 30, 2023, the Group's purchases of property, plant, and equipment significantly increased to approximately HKD 3.422 billion compared to the prior period Purchases of Property, Plant and Equipment | Item | 2023 (HKD thousands) | 2022 (HKD thousands) | | :--- | :--- | :--- | | Purchases of Property, Plant and Equipment | 3,422,255 | 2,028,673 | [Right-of-use Assets](index=13&type=section&id=Right-of-use%20Assets) In the first half of 2023, the Group entered into new lease agreements, recognizing right-of-use assets and lease liabilities of approximately HKD 92.842 million, primarily for property, plant, equipment, and vehicles - For the six months ended June 30, 2023, the Group entered into several new lease agreements for the use of property, plant and equipment and motor vehicles, with fixed terms ranging from **2 to 5 years**[26](index=26&type=chunk) Newly Recognized Right-of-use Assets and Lease Liabilities | Item | 2023 (HKD thousands) | 2022 (HKD thousands) | | :--- | :--- | :--- | | Newly Recognized Right-of-use Assets and Lease Liabilities | 92,842 | 2,292 | [Investments in Associates / Liabilities Held for Sale](index=14&type=section&id=Investments%20in%20Associates%20%2F%20Liabilities%20Held%20for%20Sale) The Group entered into an agreement to dispose of all shares in Super Success Investments Limited and its subsidiaries, whose primary assets are Pakistan wind power operations, with related assets and liabilities classified as held for sale - The Group's associate and a subsidiary of the Group entered into a sale and purchase agreement with an independent third party for the disposal of all shares in Super Success Investments Limited and its subsidiaries (collectively, the "Disposal Group"), whose primary assets are wind power operations in Pakistan[27](index=27&type=chunk) - In accordance with HKFRS 5, the assets and liabilities related to the Disposal Group have been classified as assets/liabilities held for sale, and this disposal remains subject to approval from various relevant authorities[27](index=27&type=chunk) [Trade and Other Receivables](index=14&type=section&id=Trade%20and%20Other%20Receivables) As of June 30, 2023, total trade and other receivables increased to HKD 8.355 billion from HKD 6.316 billion at year-end 2022, with trade receivables typically on 30-45 day terms and a HKD 195 million provision for potential Pakistan gas sales price adjustments Total Trade and Other Receivables | Item | June 30, 2023 (HKD thousands) | December 31, 2022 (HKD thousands) | | :--- | :--- | :--- | | Trade Receivables | 7,233,558 | 4,918,554 | | Other Receivables | 1,121,226 | 1,397,302 | | **Total** | **8,354,784** | **6,315,856** | Aging Analysis of Trade Receivables | Aging | June 30, 2023 (HKD thousands) | December 31, 2022 (HKD thousands) | | :--- | :--- | :--- | | 0 to 30 Days | 3,208,774 | 2,346,088 | | 31 to 60 Days | 305,662 | 262,016 | | 61 to 90 Days | 1,738,246 | 916,341 | | Over 90 Days | 2,200,295 | 1,618,911 | | **Total** | **7,452,977** | **5,143,356** | - The Group has made a provision of approximately **HKD 195,071,000** for potential price adjustments related to Pakistan gas sales agreements[30](index=30&type=chunk) [Trade and Other Payables](index=16&type=section&id=Trade%20and%20Other%20Payables) As of June 30, 2023, total trade and other payables significantly increased to HKD 7.104 billion from HKD 4.774 billion at year-end 2022, driven by higher trade payables and other payables, including accrued operating and capital expenditures and dividends payable Total Trade and Other Payables | Item | June 30, 2023 (HKD thousands) | December 31, 2022 (HKD thousands) | | :--- | :--- | :--- | | Trade Payables | 1,258,888 | 606,629 | | Other Payables | 5,844,842 | 4,166,901 | | **Total** | **7,103,730** | **4,773,530** | Aging Analysis of Trade Payables | Aging | June 30, 2023 (HKD thousands) | December 31, 2022 (HKD thousands) | | :--- | :--- | :--- | | 0 to 30 Days | 1,079,439 | 449,269 | | 31 to 60 Days | 28,216 | 49,993 | | 61 to 90 Days | 7,850 | 29,638 | | Over 90 Days | 143,383 | 77,729 | | **Total** | **1,258,888** | **606,629** | - Among other payables, accrued operating and capital expenditures amounted to **HKD 2.211 billion**, and dividends payable were **HKD 1.052 billion**[34](index=34&type=chunk) [Borrowings](index=17&type=section&id=Borrowings) As of June 30, 2023, the Group's total secured bank borrowings decreased to HKD 3.016 billion from HKD 3.472 billion at year-end 2022, with a significant reduction in current borrowings offset by an increase in non-current borrowings Borrowings Details | Item | June 30, 2023 (HKD thousands) | December 31, 2022 (HKD thousands) | | :--- | :--- | :--- | | Bank Loans, Secured | 3,015,939 | 3,472,313 | | Current Liabilities | 391,386 | 1,885,969 | | Non-current Liabilities | 2,624,553 | 1,586,344 | [Provisions](index=17&type=section&id=Provisions) As of June 30, 2023, total provisions amounted to HKD 612 million, primarily for decommissioning costs, with amounts reviewed at least annually based on available facts and circumstances Total Provisions | Item | June 30, 2023 (HKD thousands) | December 31, 2022 (HKD thousands) | | :--- | :--- | :--- | | Current Liabilities | 3,564 | 3,564 | | Non-current Liabilities | 608,477 | 620,165 | | **Total** | **612,041** | **623,729** | - Oil and gas exploration and production activities may lead to land subsidence and environmental damage in concession areas, requiring the Group to restore these areas to an acceptable state[38](index=38&type=chunk) - Decommissioning liabilities are determined by discounting expected future expenditures to their present value using a pre-tax rate that reflects the risks specific to the liability[39](index=39&type=chunk) [Share Capital](index=18&type=section&id=Share%20Capital) As of June 30, 2023, the Company's authorized share capital was HKD 600 million, with issued and fully paid share capital of HKD 262.899 million, unchanged from year-end 2022 Share Capital Structure | Item | June 30, 2023 (HKD thousands) | December 31, 2022 (HKD thousands) | | :--- | :--- | :--- | | Authorized Share Capital | 600,000 | 600,000 | | Issued and Fully Paid Share Capital | 262,899 | 262,899 | [Performance Share Unit Scheme](index=19&type=section&id=Performance%20Share%20Unit%20Scheme) The Company adopted the Performance Share Unit (PSU) Scheme on April 1, 2019, to incentivize and retain key talent, recognizing expenses of approximately HKD 6.357 million for the six months ended June 30, 2023, and granting 20.6 million shares to eligible employees on June 27 - The Company adopted the Performance Share Unit Scheme ("PSU Scheme") on April 1, 2019, to incentivize Group employees to drive shareholder value growth, achieve medium-to-long-term performance targets, and attract, motivate, and retain key talent[41](index=41&type=chunk) - For the six months ended June 30, 2023, the Group recognized expenses of approximately **HKD 6,357,000** (2022: HKD 1,580,000) for the PSU Scheme[41](index=41&type=chunk) - On June 27, 2023, the Company granted **20,600,000** shares to eligible employees under the PSU Scheme, which will vest on the third anniversary of the grant date[41](index=41&type=chunk) [Capital Commitments](index=19&type=section&id=Capital%20Commitments) As of June 30, 2023, the Group had contracted but unprovided capital expenditure commitments of HKD 3.265 billion, primarily for property, plant, and equipment, along with uninvested capital commitments to subsidiaries and associates Capital Commitments | Item | June 30, 2023 (HKD thousands) | December 31, 2022 (HKD thousands) | | :--- | :--- | :--- | | Contracted but not provided for: Purchases of Property, Plant and Equipment | - | 7 | | Capital Expenditure Commitments | 3,264,940 | 3,717,682 | | **Total** | **3,264,940** | **3,717,689** | - The Group still has an outstanding registered capital balance of approximately **HKD 95,180,000** (equivalent to approximately RMB 87,754,000) to be injected into its wholly-owned subsidiary, United Energy (Beijing) Co, Ltd, within **20 years** from its establishment date[42](index=42&type=chunk) - United Energy (Beijing) has not yet injected approximately **HKD 21,692,000** (equivalent to approximately RMB 20,000,000) into Oriental Art Co, Ltd, which must be completed on or before June 30, 2045[43](index=43&type=chunk) [Contingent Liabilities](index=20&type=section&id=Contingent%20Liabilities) The Group faces several contingent liabilities, including unlimited corporate guarantees for United Energy Pakistan Limited, a dispute with the Pakistan government over windfall levies (HKD 192 million potential provision), and tax directives from Pakistani tax authorities (HKD 664 million cumulative potential tax) - The Company has issued several unlimited corporate guarantees to the President of the Islamic Republic of Pakistan as beneficiary, providing all necessary financial and other guarantees for United Energy Pakistan Limited[44](index=44&type=chunk) - The Group is in dispute with the Government of Pakistan regarding whether windfall levies should be imposed on crude oil and condensate produced by its subsidiaries, which would require a further provision of approximately **HKD 191,969,000** if implemented on a retrospective basis[44](index=44&type=chunk) - Certain subsidiaries of the Group have received multiple tax directives from the Pakistan tax authorities seeking to reassess tax liabilities for prior years, with a cumulative potential tax amount of approximately **HKD 663,519,000**[44](index=44&type=chunk) [Related Party Transactions](index=21&type=section&id=Related%20Party%20Transactions) The Group engages in related party transactions, including personal guarantees for bank loans by Directors Mr. Zhang Hongwei and Ms. Zhang Meiying, office lease payments to Beijing Dacheng Hotel, property management fees to Oriental Anyi, and wind turbine O&M service income from UEP Wind Power (Private) Limited to UEG Clean Energy DMCC - Mr. Zhang Hongwei and Ms. Zhang Meiying, executive directors of the Company, provided joint personal guarantees for bank loans granted to the Group totaling approximately **HKD 2,426,602,000**[45](index=45&type=chunk) - For the six months ended June 30, 2023, the Group paid approximately **HKD 8,740,000** to Beijing Dacheng Hotel for office property leases[46](index=46&type=chunk) - UEG Clean Energy DMCC received service income of approximately **HKD 21,450,000** from UEP Wind Power (Private) Limited for wind turbine operation and maintenance services[47](index=47&type=chunk) [Comparative Figures and Approval](index=22&type=section&id=Comparative%20Figures%20and%20Approval) Certain comparative figures have been reclassified or extended for current period presentation, and the condensed consolidated financial statements for the six months ended June 30, 2023, were approved for issue by the Board on August 31, 2023 - Certain comparative figures have been reclassified or extended to conform to the current period's presentation[48](index=48&type=chunk) - The condensed consolidated financial statements for the six months ended June 30, 2023, were approved for issue by the Board on August 31, 2023[48](index=48&type=chunk) [Management Discussion and Analysis](index=23&type=section&id=Management%20Discussion%20and%20Analysis) This section details the Group's business operations, exploration and production activities, sales and marketing performance, and financial results, along with the business and market outlook [Business Review](index=23&type=section&id=Business%20Review) As a Hong Kong-listed upstream energy company operating across South Asia, the Middle East, and North Africa, the Group achieved a 10.1% increase in profit attributable to owners despite global economic slowdown and a 25.76% drop in Brent crude prices, investing HKD 3.416 billion in capital expenditure and drilling 26 wells - The Group is one of the large Hong Kong-listed upstream energy companies, with operations spanning South Asia, the Middle East, and North Africa, primarily investing in and operating upstream oil, natural gas, and other energy-related businesses[49](index=49&type=chunk) - In the first half of 2023, global economic growth slowed to **3.0%**, and the average Brent crude oil price was **USD 79.58 per barrel**, a **25.76%** decrease compared to the same period in 2022[49](index=49&type=chunk) Key Financial Data from Business Review | Metric | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Profit Attributable to Owners of the Company | HKD 1,663,123,000 | HKD 1,510,248,000 | | Growth Rate | **+10.1%** | - | | Exploration and Production Capital Expenditure | HKD 3,415,635,000 | - | | Number of Wells Drilled | **26 wells** | - | [Exploration, Development and Production](index=23&type=section&id=Exploration%2C%20Development%20and%20Production) In the first half of 2023, the Group made 6 commercial discoveries, achieving steady growth in average working interest production to 170,271 boepd and average equity interest production to 101,627 boepd, driven by stable existing wells and successful new discoveries - For the six months ended June 30, 2023, the Group made **6 commercial discoveries**, with **3** in Pakistan, **2** in Egypt, and **1** in Iraq[50](index=50&type=chunk) Average Daily Production | Metric | H1 2023 (boepd) | H1 2022 (boepd) | Change (%) | | :--- | :--- | :--- | :--- | | Average Working Interest Daily Production | 170,271 | 165,338 | +3.0 | | Average Equity Interest Daily Production | 101,627 | 100,107 | +1.5 | - Cumulative working interest production and equity interest production increased by **3.0%** and **1.5%** respectively, primarily due to the stability of existing wells and good commercial discoveries from new wells[50](index=50&type=chunk) [Pakistan](index=24&type=section&id=Pakistan) The Group holds interests in nine areas in Pakistan, with average equity interest production from Pakistani assets declining 8.7% to 44,558 boepd in H1 2023, though the oil-to-gas ratio increased by 4 percentage points, and three commercial discoveries are expected to contribute to future reserves and production - As of June 30, 2023, the Group held interests in **nine areas** in Pakistan, divided into **nineteen** oil and gas development concessions[51](index=51&type=chunk) Pakistan Asset Daily Production | Metric | H1 2023 (boepd) | H1 2022 (boepd) | Change (%) | | :--- | :--- | :--- | :--- | | Average Working Interest Daily Production | 65,707 | - | -8.3 | | Average Equity Interest Daily Production | 44,558 | 48,814 | -8.7 | - The oil-to-gas ratio in Pakistan was approximately **21%**, an increase of **4 percentage points** compared to the same period last year, and the three commercial discoveries during the reporting period are expected to contribute to its reserve base and production in the coming years[52](index=52&type=chunk) [Iraq](index=24&type=section&id=Iraq) The Group operates both the B9 Block and Siba Gas Field in Iraq, with average equity interest production from B9 Block increasing 16.2% to 37,704 boepd and Siba Gas Field rising 18.9% to 7,141 boepd in H1 2023, and a commercial discovery in B9 Block is set to boost future reserves and production - The Group holds a **60%** interest and operates the exploration, development, and production service contract for the B9 Block in Iraq[53](index=53&type=chunk) Iraq Asset Daily Production | Asset | Metric | H1 2023 (boepd) | Change (%) | | :--- | :--- | :--- | :--- | | B9 Block | Average Working Interest Daily Production | 62,839 | +16.2 | | | Average Equity Interest Daily Production | 37,704 | +16.2 | | Siba Gas Field | Average Working Interest Daily Production | 23,805 | +18.9 | | | Average Equity Interest Daily Production | 7,141 | +18.9 | - The oil-to-gas ratio for the B9 Block is **100%**, and for the Siba Gas Field, it is approximately **66%**, with a commercial discovery in the B9 Block during the reporting period expected to contribute to its reserve base and production in the coming years[53](index=53&type=chunk) [Egypt](index=24&type=section&id=Egypt) The Group holds interests in five blocks in Egypt, operating most, with average equity interest production from Egyptian assets decreasing 4.8% to 12,224 boepd in H1 2023, and two commercial discoveries expected to contribute to future reserves and production - The Group holds interests in **five blocks** in Egypt, with **100%** interest in the Burg El Arab Block and West Wadi El Natrun Block, and operates all blocks except the East Ras Qattara Block[54](index=54&type=chunk) Egypt Asset Daily Production | Metric | H1 2023 (boepd) | H1 2022 (boepd) | Change (%) | | :--- | :--- | :--- | :--- | | Average Working Interest Daily Production | 17,920 | - | -8.5 | | Average Equity Interest Daily Production | 12,224 | 12,844 | -4.8 | - The oil-to-gas ratio in Egypt is approximately **99%**, and the two commercial discoveries during the reporting period are expected to contribute to its reserve base and production in the coming years[54](index=54&type=chunk) [Sales and Marketing](index=25&type=section&id=Sales%20and%20Marketing) The Group sells crude oil and condensate via international traders at Brent-linked prices, and natural gas through long-term agreements; in H1 2023, cumulative equity sales of crude and condensate grew 8.8% but average realized prices fell 28.5%, while natural gas sales volumes decreased 11.7% but average realized prices rose 5.1% - The Group primarily sells crude oil and condensate produced in Pakistan and Iraq through traders in the international market, with prices benchmarked against Brent crude oil prices[55](index=55&type=chunk) - The Group's natural gas sales prices are based on long-term sales agreements negotiated with customers, with contract terms including a price review mechanism linking natural gas prices to oil prices[56](index=56&type=chunk) [Crude Oil Sales](index=25&type=section&id=Crude%20Oil%20Sales) In H1 2023, the Group's cumulative equity sales of crude oil and condensate reached 11.1 million barrels, an 8.8% increase, but the average realized crude oil price declined 28.5% to USD 74.51 per barrel due to lower Brent oil prices Crude Oil and Condensate Sales Data | Metric | H1 2023 | H1 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Cumulative Equity Sales Volume | **11.1 million barrels** | - | +8.8 | | Average Realized Crude Oil Price | **USD 74.51/barrel** | USD 104.18/barrel | -28.5 | [Natural Gas Sales](index=25&type=section&id=Natural%20Gas%20Sales) In H1 2023, cumulative equity natural gas sales volume decreased 11.7% to 6.8 million boe, yet the average realized natural gas price increased 5.1% to USD 30.91 per boe, primarily due to deferred gas pricing mechanisms Natural Gas Sales Data | Metric | H1 2023 | H1 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Cumulative Equity Natural Gas Sales Volume | **6.8 million boe** | 7.7 million boe | -11.7 | | Average Realized Natural Gas Sales Price | **USD 30.91/boe** | USD 29.40/boe | +5.1 | [Financial Performance](index=26&type=section&id=Financial%20Performance) In H1 2023, profit attributable to equity holders increased 10.1% to HKD 1.663 billion, with revenue up 3.4% despite a 19.5% drop in average realized oil and gas prices, driven by increased trading activities offsetting lower E&P prices, while gross profit declined 20.6% and exploration expenses significantly reduced Key Financial Performance Indicators | Metric | H1 2023 | H1 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Profit Attributable to Equity Holders of the Company | **HKD 1,663,123,000** | HKD 1,510,248,000 | +10.1 | | Average Equity Interest Daily Production | **101,627 boepd** | 100,107 boepd | Slight increase | | Average Realized Oil and Gas Price | **USD 57.89/boe** | USD 71.93/boe | -19.5 | [Revenue](index=26&type=section&id=Revenue) The Group's H1 2023 revenue grew 3.4% to HKD 6.226 billion, primarily driven by a significant increase in trading business, which offset the impact of lower realized sales prices in the exploration and production segment Revenue by Business Segment | Business | 2023 (HKD thousands) | 2022 (HKD thousands) | | :--- | :--- | :--- | | Exploration and Production | 5,000,897 | 5,498,374 | | Trading | 1,225,240 | 522,422 | | **Total** | **6,226,137** | **6,020,796** | - The increase in revenue was primarily due to the increase in trading business during the reporting period, partially offset by the decrease in realized sales prices from the exploration and production business[58](index=58&type=chunk) [Cost of Sales and Services](index=27&type=section&id=Cost%20of%20Sales%20and%20Services) In H1 2023, lifting costs for E&P activities slightly decreased 1.6% to HKD 569 million, with overall lifting cost per boe remaining at USD 4.1, while Pakistan assets saw a 14.6% decrease and MENA assets a 9.8% increase Lifting Costs and Lifting Cost Per Boe | Metric | H1 2023 | H1 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Lifting Costs | **HKD 569,095,000** | HKD 578,326,000 | -1.6 | | Overall Lifting Cost Per Boe | **USD 4.1** | USD 4.1 | Flat | | Pakistan Lifting Cost Per Boe | **USD 3.5** | USD 4.1 | -14.6 | | MENA Lifting Cost Per Boe | **USD 4.5** | USD 4.1 | +9.8 | [Gross Profit](index=27&type=section&id=Gross%20Profit) In H1 2023, the Group's gross profit was HKD 2.549 billion, with a gross margin of 40.9%, a 20.6% decrease from the prior period, primarily due to lower international oil prices and increased depreciation and amortization Gross Profit and Gross Margin | Metric | H1 2023 | H1 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Gross Profit | **HKD 2,549,269,000** | HKD 3,212,342,000 | -20.6 | | Gross Margin | **40.9%** | 53.4% | -12.5 percentage points | - The decrease in gross profit was mainly due to lower average international oil prices in the first half of 2023 compared to the same period last year, as well as increased depreciation and amortization[61](index=61&type=chunk) [Exploration Expenses](index=27&type=section&id=Exploration%20Expenses) In H1 2023, exploration expenses significantly decreased to HKD 13.157 million, primarily for geological and geophysical studies and surface rights, compared to higher expenses in H1 2022 due to dry and abandoned well write-offs Exploration Expenses | Item | H1 2023 (HKD thousands) | H1 2022 (HKD thousands) | | :--- | :--- | :--- | | Exploration Expenses | 13,157 | 721,688 | - Exploration expenses in 2022 included a write-off of approximately **HKD 715,614,000** for dry and abandoned wells[62](index=62&type=chunk) [Administrative Expenses](index=27&type=section&id=Administrative%20Expenses) In H1 2023, the Group's administrative expenses increased to HKD 273 million, representing 4.4% of revenue, an increase from the prior period Administrative Expenses | Item | H1 2023 (HKD thousands) | H1 2022 (HKD thousands) | | :--- | :--- | :--- | | Administrative Expenses | 273,249 | 204,697 | | % of Revenue | **4.4%** | 3.4% | [Finance Costs](index=27&type=section&id=Finance%20Costs) In H1 2023, the Group's finance costs decreased 14.5% to HKD 144 million, primarily due to a lower average borrowing balance, partially offset by an increase in the average borrowing interest rate Finance Costs and Average Borrowing Interest Rate | Metric | H1 2023 | H1 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Finance Costs | **HKD 143,659,000** | HKD 167,950,000 | -14.5 | | Weighted Average Borrowing Interest Rate | **6.68%** | 6.35% | +0.33 percentage points | [Income Tax Expense](index=27&type=section&id=Income%20Tax%20Expense) In H1 2023, the Group's income tax expense significantly increased to HKD 576 million, with the effective tax rate rising 20.2 percentage points to 25.7%, mainly due to higher current tax and reduced deferred tax benefits Income Tax Expense and Effective Tax Rate | Metric | H1 2023 | H1 2022 | Change (percentage points) | | :--- | :--- | :--- | :--- | | Income Tax Expense | **HKD 576,378,000** | HKD 88,614,000 | - | | Current Tax | **HKD 705,285,000** | HKD 524,570,000 | - | | Deferred Tax Benefit | **HKD 128,907,000** | HKD 435,956,000 | - | | Effective Tax Rate | **25.7%** | 5.5% | +20.2 | [Earnings Before Interest, Tax, Depreciation and Amortization](index=28&type=section&id=Earnings%20Before%20Interest%2C%20Tax%2C%20Depreciation%20and%20Amortization) In H1 2023, the Group's EBITDA decreased 8.7% to HKD 4.410 billion, primarily due to a decline in average realized sales prices EBITDA | Item | H1 2023 (HKD thousands) | H1 2022 (HKD thousands) | Change (%) | | :--- | :--- | :--- | :--- | | EBITDA | 4,410,292 | 4,829,722 | -8.7 | - The decrease in EBITDA was primarily due to the decline in average realized sales prices during the reporting period[65](index=65&type=chunk) [Net Cash Generated from Operating Activities](index=28&type=section&id=Net%20Cash%20Generated%20from%20Operating%20Activities) In H1 2023, net cash inflow from operating activities decreased 10.4% to HKD 2.851 billion, primarily due to lower cash flow from oil and gas sales resulting from reduced international oil prices Net Cash Generated from Operating Activities | Item | H1 2023 (HKD thousands) | H1 2022 (HKD thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Net Cash Inflow from Operating Activities | 2,851,219 | 3,182,024 | -10.4 | - The decrease in net cash inflow was primarily due to lower cash flow from oil and gas sales resulting from lower average international oil prices in the first half of 2023 compared to the same period last year[66](index=66&type=chunk) [Net Cash Used in Investing Activities](index=28&type=section&id=Net%20Cash%20Used%20in%20Investing%20Activities) In H1 2023, net cash outflow from investing activities increased 22.0% to HKD 3.163 billion, primarily driven by a significant 60.3% rise in capital expenditure to HKD 3.270 billion Net Cash Used in Investing Activities | Item | H1 2023 (HKD thousands) | H1 2022 (HKD thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Net Cash Outflow from Investing Activities | 3,163,299 | 2,593,123 | +22.0 | | Capital Expenditure | **3,270,013** | - | +60.3 | [Net Cash Used in Financing Activities](index=28&type=section&id=Net%20Cash%20Used%20in%20Financing%20Activities) In H1 2023, net cash outflow from financing activities was HKD 170 million, primarily involving the drawdown of bank and trade finance loans, and repayment of bank loans Net Cash Used in Financing Activities | Item | H1 2023 (HKD thousands) | | :--- | :--- | | Net Cash Outflow from Financing Activities | 169,719 | | Drawdown of Bank Loans | 2,409,251 | | Drawdown of Trade Finance Loans | 390,000 | | Repayment of Bank Loans | (2,851,508) | [Dividends](index=28&type=section&id=Dividends) The Board does not recommend the payment of an interim dividend for the reporting period - The Board does not recommend the payment of an interim dividend for the reporting period[69](index=69&type=chunk) [Business and Market Outlook](index=28&type=section&id=Business%20and%20Market%20Outlook) Global economic growth is projected at 3.0% in 2023, with the oil and gas sector benefiting from high energy prices; the Group targets specific average working and equity interest daily production for 2023, with capital expenditure estimated at USD 990 million to USD 1.05 billion for E&P and engineering projects - The International Monetary Fund projects global economic growth to slow to **3.0%** in 2023[69](index=69&type=chunk) - The oil and gas industry is expected to continue benefiting from higher energy prices[69](index=69&type=chunk) 2023 Business Targets | Metric | 2023 Target | | :--- | :--- | | Average Working Interest Daily Production | **165,000 to 179,000 boe** | | Average Equity Interest Daily Production | **94,700 to 102,400 boe** | | Capital Expenditure | **USD 0.99 to 1.05 billion** | [Pakistan Assets](index=29&type=section&id=Pakistan%20Assets) Pakistan's natural gas demand is projected to grow while domestic production declines, securing the Group's gas sales; the Group plans to expand its exploration acreage and targets average equity interest daily production of 40,500 to 44,500 boepd for 2023 - Pakistan's natural gas demand is projected to increase from approximately **3.56 billion cubic feet per day** in 2020 to approximately **4.24 billion cubic feet per day** in 2030, while domestic production is expected to decline[70](index=70&type=chunk) - The Group acquired an exploration block in 2023, expanding its exploration acreage from **22,433 square kilometers to 24,858 square kilometers**, an increase of approximately **11%**[70](index=70&type=chunk) - For Pakistan assets, the Group plans to achieve an average equity interest daily production of **40,500 to 44,500 boepd** in 2023[70](index=70&type=chunk) [MENA Assets](index=29&type=section&id=MENA%20Assets) MENA assets feature large scale, high development potential, and long reserve life, with 97.5% of 2P reserves in Iraq; the Group plans further development, targeting average working interest daily production of 130,000 boepd for Iraq's B9 Block and specific equity interest daily production for Iraq and Egypt in 2023 - The MENA asset portfolio holds **767.6 million boe** of equity 2P reserves, with **97.5%** located in Iraq[71](index=71&type=chunk) - The average working interest daily production for Iraq's B9 Block is expected to reach **130,000 boepd**, and Iraq's Siba Gas Field is projected to achieve sustainable peak production targets[71](index=71&type=chunk) 2023 MENA Assets Average Equity Interest Daily Production Targets | Asset | 2023 Target (boepd) | | :--- | :--- | | Iraq Assets | **42,700 to 44,900** | | Egypt Assets | **11,500 to 13,000** | [Conclusion](index=29&type=section&id=Conclusion) In H1 2023, United Energy achieved excellent operational and financial performance, and moving forward, the Group is committed to enhancing production, optimizing operations, focusing on its team, and deepening its asset portfolio to create shareholder value - In the first half of 2023, United Energy achieved excellent operational and financial performance, primarily due to high-quality professional management[72](index=72&type=chunk) - The Group will continue to enhance production, optimize operations, focus on its employee team, and deepen its asset portfolio, striving to create value for shareholders[72](index=72&type=chunk) [Liquidity and Financial Resources](index=30&type=section&id=Liquidity%20and%20Financial%20Resources) As of June 30, 2023, the Group maintained a strong financial position with HKD 2.702 billion in cash and bank balances, total borrowings reduced to HKD 3.016 billion at an average interest rate of 8.22%, a debt-to-equity ratio of 11.7%, and a current ratio of 1.24 times, while exploring capital structure optimization opportunities including corporate bond issuance Key Liquidity and Financial Resources Data | Metric | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash and Bank Balances | **HKD 2,702,159,000** | HKD 3,255,124,000 | | Total Borrowings (net of transaction costs) | **HKD 3,015,939,000** | HKD 3,472,313,000 | | Average Interest Rate (Total Borrowings) | **8.22%** | 7.43% | | Debt-to-Equity Ratio | **11.7%** | 15.3% | | Current Ratio | **1.24 times** | 1.25 times | - The Group has been exploring various opportunities to optimize its capital structure, including its debt portfolio, to support both organic and inorganic growth, and will explore opportunities to utilize international debt capital markets, including issuing corporate bonds, within the next **12 months**[75](index=75&type=chunk) [Significant Acquisitions and Disposals](index=30&type=section&id=Significant%20Acquisitions%20and%20Disposals) Aside from the disposal of Super Success Investments Limited and its subsidiaries as disclosed in Note 14 to the condensed consolidated financial statements, the Group and the Company had no other significant acquisitions or disposals during the reporting period - Except for the disclosures in Note 14 to the condensed consolidated financial statements in this announcement, the Group and the Company had no other significant acquisitions and disposals during the reporting period[76](index=76&type=chunk) [Segment Information](index=30&type=section&id=Segment%20Information) Details regarding the Group's segment information are provided in Note 5 to the condensed consolidated financial statements in this announcement - Details regarding the Group's segment information are provided in Note 5 to the condensed consolidated financial statements in this announcement[76](index=76&type=chunk) [Capital Structure](index=30&type=section&id=Capital%20Structure) The Group's capital structure remained unchanged during the reporting period, with 26,289,928,786 issued shares outstanding as of January 1, 2023, and June 30, 2023 - The Group's capital structure remained unchanged during the reporting period[77](index=77&type=chunk) - The number of issued shares of the Company was **26,289,928,786** as of January 1, 2023, and June 30, 2023[77](index=77&type=chunk) [Employees](index=31&type=section&id=Employees) As of June 30, 2023, the Group employed 2,256 full-time staff globally, with remuneration packages, including basic salary, year-end bonuses, medical, and provident fund contributions, regularly reviewed based on individual performance and market practices - As of June 30, 2023, the Group employed a total of **2,256** full-time employees in Hong Kong, China, Pakistan, Dubai, and other Middle East and North Africa regions[78](index=78&type=chunk) - The Group regularly reviews and determines employee remuneration packages, including basic salary, year-end bonuses, medical, and provident fund contributions, with reference to individual employee performance and prevailing market practices[78](index=78&type=chunk) [Contingent Liabilities](index=31&type=section&id=Contingent%20Liabilities) Details regarding the Company's contingent liabilities are provided in Note 22 to the condensed consolidated financial statements in this announcement - Details regarding the Company's contingent liabilities are provided in Note 22 to the condensed consolidated financial statements in this announcement[79](index=79&type=chunk) [Exchange Rate Fluctuation Risk and Related Hedging](index=31&type=section&id=Exchange%20Rate%20Fluctuation%20Risk%20and%20Related%20Hedging) The Group's monetary assets and transactions are primarily denominated in USD and HKD, maintaining relatively stable exchange rates, with minor impact from other currencies like RMB, PKR, IQD, and EGP, thus no financial hedging instruments were used during the period, though exchange rate fluctuations are continuously monitored - The Group's monetary assets and transactions are primarily denominated in **USD** and **HKD**, with relatively stable exchange rates[79](index=79&type=chunk) - Other transaction currencies include **RMB**, **Pakistan Rupee**, **Iraqi Dinar**, and **Egyptian Pound**, where exchange rate impacts are lower[79](index=79&type=chunk) - The Group did not use financial instruments for hedging during the reporting period but will continue to monitor the impact of various currency exchange rate fluctuations and take appropriate actions[79](index=79&type=chunk) [Sufficiency of Public Float](index=31&type=section&id=Sufficiency%20of%20Public%20Float) The Company maintained a sufficient public float throughout the six-month period ended June 30, 2023 - The Company maintained a sufficient public float throughout the six-month period ended June 30, 2023[80](index=80&type=chunk) [Share Option Scheme](index=31&type=section&id=Share%20Option%20Scheme) The Company adopted a Share Option Scheme on May 27, 2016, to incentivize directors, employees, and consultants, authorizing options to subscribe for up to 1,308,572,137 shares, with no options granted, exercised, lapsed, or cancelled during the reporting period - The Company's Share Option Scheme was adopted on May 27, 2016, to provide directors, employees, and consultants with an opportunity to acquire an ownership interest in the Group[80](index=80&type=chunk) - The scheme authorizes the grant of share options to subscribe for up to **1,308,572,137** shares of the Company[80](index=80&type=chunk) - During the reporting period, no share options were granted, exercised, lapsed, or cancelled under the scheme[80](index=80&type=chunk) [Performance Share Unit Scheme](index=32&type=section&id=Performance%20Share%20Unit%20Scheme) On June 27, 2023, the Company granted 20.6 million shares to 55 eligible employees under the PSU Scheme, bringing total shares granted to 60,147,159 as of this announcement date, with 66,594,841 shares remaining available for future grants, representing approximately 2.5% of the scheme limit - On June 27, 2023, the Board approved the grant of a total of **20,600,000** shares of the Company to **55** eligible employees of the Group for the 2023 plan year under the PSU Scheme[82](index=82&type=chunk) - As of the date of this announcement, the total number of shares of the Company granted under the PSU Scheme from its adoption date is **60,147,159** shares across two grants[82](index=82&type=chunk) - The number of shares available for future grants under the scheme is **66,594,841** shares, representing approximately **2.5%** of the scheme limit authorized under the PSU Scheme[82](index=82&type=chunk) [Disclosure of Interests](index=32&type=section&id=Disclosure%20of%20Interests) This section details the interests and short positions of directors and substantial shareholders in the Company's securities [Directors' and Chief Executive's Interests and Short Positions in Shares, Underlying Shares and Debentures of the Company and its Associated Corporations](index=32&type=section&id=Directors'%20and%20Chief%20Executive's%20Interests%20and%20Short%20Positions%20in%20Shares%2C%20Underlying%20Shares%20and%20Debentures%20of%20the%20Company%20and%20its%20Associated%20Corporations) As of June 30, 2023, Directors Mr. Zhang Hongwei and Ms. Zhang Meiying held long and short positions in the Company's shares, with Mr. Zhang holding 66.44% long and 10.26% short through controlled corporations, and Ms. Zhang holding 4.90% long and 3.04% short Directors' Interests and Short Positions in the Company's Securities | Director Name | Nature of Interest | Number of Shares (Long Position) | Number of Shares (Short Position) | Approximate Shareholding % (Long Position) | Approximate Shareholding % (Short Position) | | :--- | :--- | :--- | :--- | :--- | :--- | | Zhang Hongwei | Interest in Controlled Corporations | 17,466,600,230 | 2,696,809,090 | **66.44%** | **10.26%** | | Zhang Meiying | Interest in Controlled Corporations | 1,287,700,000 | 800,000,000 | **4.90%** | **3.04%** | - Mr. Zhang Hongwei is deemed to have an interest in **17,466,600,230** shares, primarily held through companies wholly owned by Wanfu Enterprise Limited and Mingze Oriental Investment Limited[84](index=84&type=chunk) - Ms. Zhang Meiying beneficially owns **1,287,700,000** shares through Ming Shi Group Limited, which she wholly owns[85](index=85&type=chunk) [Substantial Shareholders](index=33&type=section&id=Substantial%20Shareholders) As of June 30, 2023, several entities, including companies controlled by Mr. Zhang Hongwei (e.g., Mingze Oriental Investment Limited, Wanfu Enterprise Limited) and Haitong Securities-related entities, were disclosed as substantial shareholders holding 5% or more equity interest in the Company, excluding directors Substantial Shareholders' Interests and Short Positions | Name | Capacity and Nature of Interest | Number of Shares (Long Position) | Number of Shares (Short Position) | Approximate Shareholding % (Long Position) | Approximate Shareholding % (Short Position) | | :--- | :--- | :--- | :--- | :--- | :--- | | Zhang Hongwei | Interest in Controlled Corporations | 17,466,600,230 | 2,696,809,090 | **66.44%** | **10.26%** | | Mingze Oriental Investment Limited | Interest in Controlled Corporations | 8,029,971,845 | - | **30.54%** | - | | Wanfu Enterprise Limited | Interest in Controlled Corporations | 9,436,628,385 | 2,696,809,090 | **35.89%** | **10.26%** | | United Energy Group Holdings Limited | Beneficial Owner | 5,787,539,821 | 1,287,700,000 | **22.01%** | **4.90%** | | Haitong Securities Co, Ltd | Interest in Controlled Corporations | 3,496,809,090 | 1,409,109,090 | **13.30%** | **5.36%** | - Mingze Oriental Investment Limited and Wanfu Enterprise Limited are wholly owned by Mr. Zhang Hongwei[88](index=88&type=chunk) - Haitong Securities Co, Ltd and its subsidiaries are deemed or taken to be interested in the relevant shares[88](index=88&type=chunk) [Code on Corporate Governance Practices](index=34&type=section&id=Code%20on%20Corporate%20Governance%20Practices) The Company complied with the Corporate Governance Code in Appendix 14 of the Listing Rules during the reporting period, with two exceptions: the CEO position remains vacant, with duties performed by executive directors and management, and independent non-executive directors have no fixed term but retire by rotation every three years, which the Board believes does not compromise accountability or good governance - The Company complied with the code provisions of the Corporate Governance Code set out in Appendix 14 of the Listing Rules for the six months ended June 30, 2023, except that the position of Chief Executive Officer remained vacant and independent non-executive directors did not have a specific term of appointment[90](index=90&type=chunk) - Although the position of Chief Executive Officer remains vacant, the duties of the Company's Chief Executive Officer are performed by the Company's executive directors and management, with major decisions made by the Board, which believes that this structure does not affect the balance of power and accountability between the Chairman and the executive directors[91](index=91&type=chunk) - Although independent non-executive directors do not have a fixed term of appointment, they are required to retire by rotation at least once every three years, and the Board believes that the quality of good corporate governance will not be compromised[91](index=91&type=chunk) [Standard Securities Dealing Code for Directors](index=35&type=section&id=Standard%20Securities%20Dealing%20Code%20for%20Directors) The Company adopted the Standard Securities Dealing Code for Directors as set out in Appendix 10 of the Listing Rules, and all directors confirmed compliance with its required standards for the six months ended June 30, 2023 - The Company has adopted the Standard Securities Dealing Code for Directors as set out in Appendix 10 of the Listing Rules[92](index=92&type=chunk) - Following specific enquiries made to all Directors, each Director confirmed that they had complied with the required standards set out in the Standard Code for the six months ended June 30, 2023[92](index=92&type=chunk) [Audit Committee](index=35&type=section&id=Audit%20Committee) The Audit Committee, comprising three independent non-executive directors, reviewed the unaudited condensed consolidated financial statements for the six months ended June 30, 2023, and discussed accounting principles, risk management, internal controls, and financial reporting with management, finding them satisfactory - The Audit Committee comprises three independent non-executive directors: Mr. Zhou Shaowei, Mr. Shen Feng, and Ms. Wang Ying[93](index=93&type=chunk) - The Audit Committee has reviewed the unaudited condensed consolidated financial statements for the six months ended June 30, 2023, and has discussed with management the accounting principles and practices adopted by the Group, risk management, internal controls, and financial reporting matters, finding them satisfactory[93](index=93&type=chunk) [Purchase, Sale or Redemption of Shares](index=35&type=section&id=Purchase%2C%20Sale%20or%20Redemption%20of%20Shares) For the six months ended June 30, 2023, the Company did not redeem any of its shares, nor did any of its subsidiaries purchase or sell any shares of the Company during the period - For the six months ended June 30, 2023, the Company did not redeem any of its shares during the period, nor did any of its subsidiaries purchase or sell any shares of the Company during the period[94](index=94&type=chunk) [Publication of Interim Report](index=36&type=section&id=Publication%20of%20Interim%20Report) A detailed interim report containing all information required by paragraphs 46(1) to 46(9) of Appendix 16 of the Listing Rules will be dispatched to shareholders and published on the Company's website www.uegl.com.hk and HKEXnews website www.hkexnews.hk in due course - A detailed interim report containing all information required by paragraphs 46(1) to 46(9) of Appendix 16 of the Listing Rules will be dispatched to shareholders and published on the Company's website www.uegl.com.hk and HKEXnews website www.hkexnews.hk in due course[95](index=95&type=chunk) [Glossary and Definitions](index=37&type=section&id=Glossary%20and%20Definitions) This report provides definitions for common general and technical terms to ensure clarity and consistency of content - The report provides definitions for general terms such as "Annual General Meeting", "Board", "China", "Company", "Directors", "Egypt Assets", "Group", "HKD", "Hong Kong", "IMF", "Iraq Assets", "Listing Rules", "Middle East and North Africa", "MENA Assets", "Standard Code", "OPEC", "Pakistan Assets", "PSU Scheme", "SFO", "Stock Exchange", "USD", and others[97](index=97&type=chunk) - The report provides definitions for technical terms such as "1P", "2P", "barrel", "cubic feet/day", "boe", "boepd", "Exploration, Development and Production Service Contract", "Field Development Plan", "Gas Development and Production Service Contract", "LPG", "million barrels/day", "million boe", "Operator", "Production Sharing Contract", "Upstream Business", and others[98](index=98&type=chunk)

Financial Performance - Revenue increased by 44.6% to HKD 10,753,743 thousand in 2022 compared to HKD 7,436,936 thousand in 2021[6] - Gross profit rose by 64.2% to HKD 5,512,983 thousand in 2022 from HKD 3,357,435 thousand in 2021[6] - EBITDA grew by 58.6% to HKD 9,266,023 thousand in 2022 compared to HKD 5,843,458 thousand in 2021[6] - Net profit attributable to the company's owners increased by 30.0% to HKD 2,601,162 thousand in 2022 from HKD 2,000,597 thousand in 2021[6] - Revenue increased by 44.6% year-on-year to HKD 10,753,743,000 in 2022, primarily due to higher realized crude oil prices[28] - Gross profit surged 64.2% year-on-year to HKD 5,512,983,000 in 2022, with a gross margin of 51.3%, up from 45.1% in 2021[34] - Net profit attributable to equity holders rose 30.0% year-on-year to HKD 2,601,162,000 in 2022, driven by high international oil prices and production from Iraqi assets[27] - Revenue for 2022 increased to 10,753,743 thousand HKD, up from 7,436,936 thousand HKD in 2021, representing a significant growth[147] - Gross profit for 2022 rose to 5,512,983 thousand HKD compared to 3,357,435 thousand HKD in 2021[147] - Net profit for 2022 reached 2,601,146 thousand HKD, up from 2,000,577 thousand HKD in 2021[147] - Basic earnings per share increased to 9.94 HK cents in 2022 from 7.63 HK cents in 2021[147] - Total comprehensive income for 2022 was 2,611,238 thousand HKD, compared to 1,986,002 thousand HKD in 2021[148] - Total comprehensive income for the year 2022 was 2,611,254 thousand HKD, compared to 1,986,022 thousand HKD in 2021, a 31.5% increase[153] Production and Reserves - Average daily production in the Middle East and North Africa assets increased by 18.8% to 53,216 barrels of oil equivalent per day in 2022[8] - Proved reserves at the end of 2022 decreased by 2.2% to 57.6 million barrels of oil equivalent in Pakistan assets[7] - Proved and probable reserves in the Middle East and North Africa assets slightly increased by 0.2% to 767.6 million barrels of oil equivalent at the end of 2022[8] - The company completed 29 development wells in the Middle East and North Africa assets in 2022, up from 12 in 2021[8] - Average daily production in 2022 was 165,883 barrels of oil equivalent (BOE), with average equity daily production at 100,245 BOE[11] - The company achieved 12 commercial discoveries, with 9 in Pakistan and 3 in Egypt, and its 2P reserves reached approximately 867.1 million BOE with a reserve-to-production ratio of 23.7[11] - In Iraq's B9 block, daily production exceeded 60,000 barrels in 2022, with a target to reach 100,000 barrels per day in the coming year[11] - The company achieved an average daily production of 165,883 barrels of oil equivalent (BOE) in 2022, a 7.0% increase from 154,984 BOE in 2021[21] - Total cumulative production reached 60.55 million BOE in 2022, up 7.0% from 56.57 million BOE in 2021[21] - The company made 12 commercial discoveries in 2022, with 9 in Pakistan and 3 in Egypt[19] - In Iraq, the B9 block's production increased to 60,000 BOE per day, aiming for 100,000 BOE per day in the coming year[20] - Pakistan's average equity daily production was 47,029 BOE in 2022, a 2.6% decrease from the previous year[22] - Iraq's B9 block achieved an average daily production of 57,845 BOE and an average equity daily production of 34,707 BOE in 2022[23] - Egypt's average daily production was 18,386 BOE, with an average equity daily production of 12,435 BOE in 2022[24] - The company's average daily production in 2022 was 47,029 barrels of oil equivalent (BOE) in Pakistan and 53,216 BOE in the Middle East and North Africa[55] Capital Expenditure and Investments - The company invested approximately HK$5,313,965,000 in capital expenditures for oil exploration, development, and production activities in 2022, completing 61 wells, including 28 in Pakistan and 33 in the Middle East and North Africa[14] - The company plans to achieve an average daily production range of 165,000 to 179,000 BOE and equity daily production of 94,700 to 102,400 BOE in 2023, with a capital expenditure of $990 million to $1.05 billion[12] - The company targets an average working interest production of 94,700 to 102,400 barrels of oil equivalent per day in 2023, with capital expenditures expected to be between USD 990 million and USD 1.05 billion[43] - In Pakistan, the company's exploration area increased by approximately 51% to 22,433 square kilometers in 2022, and it plans to achieve an average working interest production of 40,500 to 44,500 barrels of oil equivalent per day in 2023[44] - The Middle East and North Africa assets have proven and probable reserves of 767.6 million barrels of oil equivalent, with 97.5% located in Iraq, and the company aims for average working interest production of 42,700 to 44,900 barrels of oil equivalent per day in Iraq and 11,500 to 13,000 barrels of oil equivalent per day in Egypt in 2023[45] - Total exploration costs for 2022 were HKD 562,497,000, with HKD 509,303,000 spent in Pakistan and HKD 53,194,000 in the Middle East and North Africa[56] - Total development costs for 2022 were HKD 4,309,041,000, with HKD 402,180,000 spent in Pakistan and HKD 3,906,861,000 in the Middle East and North Africa[56] Financial Position and Cash Flow - The company's total assets grew by 9.5% to HKD 27,419,844 thousand in 2022 from HKD 25,032,350 thousand in 2021[6] - The company's net assets increased by 11.0% to HKD 15,807,820 thousand in 2022 compared to HKD 14,240,280 thousand in 2021[6] - The company's cash and bank balances stood at HKD 3,255,124,000 as of December 31, 2022, reflecting a strong financial position[47] - Total outstanding loans as of December 31, 2022, amounted to approximately HKD 4,022,756,000, with a weighted average interest rate of 7.43%[48][49] - The company's debt-to-asset ratio decreased to 15.3% in 2022 from 19.7% in 2021, with total assets valued at HKD 27,419,844,000[48] - Net cash inflow from operating activities rose by 82.8% to HKD 7,824,906,000 in 2022, primarily due to increased cash flow from oil and gas sales[40] - Net cash outflow for investing activities surged by 128.8% to HKD 5,706,750,000 in 2022, with capital expenditures increasing by 97.6% to HKD 5,392,499,000[41] - Net cash outflow for financing activities was HKD 2,069,864,000 in 2022, mainly due to special dividends of HKD 1,051,597,000 and bank loan repayments of HKD 1,980,101,000[42] - Operating cash flow increased to 7,824,906 thousand HKD in 2022 from 4,280,826 thousand HKD in 2021, reflecting strong cash generation from operations[154] - Net cash used in investing activities was 5,706,750 thousand HKD in 2022, primarily due to the acquisition of property, plant, and equipment amounting to 5,392,499 thousand HKD[155] - Net cash used in financing activities was 2,069,864 thousand HKD in 2022, driven by loan repayments of 1,980,101 thousand HKD and dividend payments of 1,051,597 thousand HKD[155] - Cash and cash equivalents increased by 48,292 thousand HKD in 2022, reaching 3,169,455 thousand HKD at the end of the year[155] Corporate Governance and Compliance - The company has maintained good corporate governance standards and procedures to ensure integrity, transparency, openness, and accountability to shareholders[57] - The company has complied with the corporate governance code provisions in Appendix 14 of the Listing Rules, except for the CEO position being vacant and the absence of specific terms for independent non-executive directors[58] - The Board of Directors consists of five members, including two executive directors and three independent non-executive directors, with one having appropriate professional accounting experience[61] - The Board of Directors held 11 meetings in 2022, with all members attending all meetings[65] - All directors attended the 2022 Annual General Meeting[66] - The company provides induction training for newly appointed directors and encourages continuous professional development for all directors[67] - The company has adopted the standard code regarding directors' securities transactions as per Appendix 10 of the Listing Rules, and all directors confirmed compliance with the code in 2022[59] - The company has appropriate insurance coverage for directors and senior officers to protect against risks arising from the company's business[60] - The Board of Directors is responsible for approving the group's development and business strategies, financial control procedures, major acquisitions and disposals, and other significant transactions[64] - The company ensures that at least one-third of the Board consists of independent non-executive directors, with at least one having relevant professional qualifications and accounting expertise[62] - The company's audit committee held two meetings in 2022, with all members attending both sessions[72] - The company paid HKD 3,640,000 for audit services and HKD 380,000 for interim financial review to its external auditor, RSM Hong Kong[77] - The company's nomination committee held two meetings in 2022, focusing on board member re-election and diversity policy review[75] - The company's remuneration committee held two meetings in 2022 to review and approve the remuneration packages for directors and senior management[73] - The company's financial statements are prepared in accordance with Hong Kong Financial Reporting Standards, which are consistent with International Financial Reporting Standards[69] - The company's board has delegated specific responsibilities to various committees, including audit, remuneration, and nomination committees[70] - The company's audit committee reviewed the external auditor's annual audit plan, audit report, and related matters in 2022[72] - The company's nomination committee assessed the board's diversity in terms of skills, experience, and perspectives to enhance governance standards[75] - The company's remuneration committee considered comparable salary levels and the time commitment of directors and senior management when determining compensation[73] - The company's audit committee evaluated the performance and independence of the external auditor in 2022[72] - The company has established a Risk Management and Internal Control Department to conduct annual reviews of its risk management and internal control systems, ensuring their effectiveness and protecting shareholder interests[78] - The company's Board of Directors is responsible for maintaining an effective risk management and internal control system, which is reviewed annually to ensure operational efficiency and compliance[78] - The company's corporate governance framework includes provisions for shareholders to request extraordinary general meetings and submit written inquiries to the Board of Directors[80] - The company confirmed compliance with the standard code of conduct under the listing rules, with no reported breaches[115] - No reportable connected transactions or continuing connected transactions were conducted during the year[117] - The company's corporate governance practices were in line with the Listing Rules, except for a minor deviation under Code Provision A.4.1[118] Risk Management - The company's financial performance is significantly impacted by oil and gas price fluctuations, which are influenced by supply-demand dynamics, macroeconomic conditions, and geopolitical instability[83] - Operations in Pakistan, Egypt, and Iraq expose the company to risks related to changes in tax and fiscal policies, as well as economic, political, and environmental conditions in these regions[84] - Exploration and development activities carry inherent risks of failing to discover commercially viable oil and gas reserves, which could lead to write-offs or impairment charges[85] - The company faces operational risks in health, safety, security, and environmental compliance, which could result in economic losses, operational disruptions, and legal disputes[86] - Mergers and acquisitions are part of the company's expansion strategy, but they carry risks related to external financing, key assumptions, and parameter discrepancies[87] - The company's operations could be adversely affected by natural disasters, pandemics, or other public health crises, potentially disrupting supply chains, delaying deliveries, and reducing demand[89] Shareholder and Stakeholder Engagement - The company maintains robust communication with shareholders through annual general meetings, reports, notices, and electronic channels to ensure transparency and protect shareholder rights[80] - The company's largest customer accounted for 46.8% of total sales, while the top five customers accounted for 93.8% of total sales[94] - The largest supplier accounted for 23.7% of total procurement, while the top five suppliers accounted for 45.1% of total procurement[94] - The company's social investment projects during the reporting period focused on healthcare, education, and capacity building, benefiting local communities[92] - The company's main operations are located in Pakistan, Egypt, and Iraq, with compliance ensured across multiple jurisdictions including China, Dubai, and Hong Kong[91] Shareholding and Ownership - The company's shareholding structure includes significant stakes held by subsidiaries and affiliated entities, with detailed ownership percentages disclosed[109][110] - Director Zhang Hongwei holds approximately 66.44% of the company's shares through controlled entities, with 30.54% held by He Fu International Limited[105] - Director Zhang Meiying holds approximately 4.90% of the company's shares through controlled entities[105] - He Fu International Limited, controlled by Zhang Hongwei, holds 8,029,971,845 shares, representing 30.54% of the company's total shares[105] - Wan Fu Enterprises Limited, controlled by Zhang Hongwei, holds 9,436,628,385 shares, representing 35.89% of the company's total shares[108] - United Oil & Gas Holdings Limited holds 5,787,539,821 shares, representing 22.01% of the company's total shares[108] - United Energy Holdings Limited holds 3,649,088,564 shares, representing 13.88% of the company's total shares[108] - Haitong Securities Co., Ltd. holds 3,496,809,090 shares, representing 13.30% of the company's total shares[108] - Haitong International Securities Group (Singapore) Pte. Ltd holds 2,087,700,000 shares, representing 7.94% of the company's total shares[108] - The company's Chairman, Mr. Zhang Hongwei, holds a beneficial interest in 17,466,600,230 shares, representing approximately 66.44% of the issued share capital[125] - Ms. Zhang Meiying, an Executive Director, holds a beneficial interest in 1,287,700,000 shares, representing approximately 4.9% of the issued share capital[125] Dividends and Reserves - The company's distributable reserves as of December 31, 2022, amounted to approximately HKD 8,488,029,000, compared to HKD 9,539,626,000 in the previous year[119] - The Board of Directors did not recommend the payment of a final dividend for the year 2022, consistent with the previous year's decision[120] - The company's dividend policy considers factors such as financial performance, shareholder interests, retained earnings, debt-equity ratio, and future expansion plans[120] - Dividends paid in 2022 amounted to 1,051,597 thousand HKD, up from 620,299 thousand HKD in 2021, a 69.5% rise[153] Audit and Financial Reporting - The company's independent auditor, RSM, was reappointed at the AGM held on June 6, 2022, and will be proposed for reappointment at the upcoming AGM[124] - The auditor's report confirmed that the consolidated financial statements for 2022 were prepared in accordance with Hong Kong Financial Reporting Standards (HKFRS)[128] - Key audit matters identified include impairment of property, plant, and equipment, and intangible assets, as well as estimation of oil and gas reserves[130] - The company's operations in Pakistan, the Middle East, and North Africa were subject to specific audit procedures related to asset impairment[131] - The company's property, plant, and equipment (PP&E) and intangible assets related to exploration and production were valued at approximately HKD 11,576,820,000 and HKD 4,306,573,000 respectively as of December 31, 2022[134] - Impairment provisions and write-offs for exploration and production assets amounted to approximately HKD 928,746,000 and HKD 609,132,000 respectively during the year[138] - The impairment assessment was influenced by factors such as increased discount rates, declining oil and gas prices, and reduced production and reserves[136] - Management identified certain oil and gas fields as having no commercial value, leading to impairment provisions or full write-offs[137] - The company's oil and gas reserves estimation involves significant technical uncertainty and subjective assumptions, making it a critical audit matter[141] - The audit process included evaluating the accuracy of write-off calculations and reviewing supporting evidence such as reserve estimates and