香港交易及結算所有限公司及香 港聯合交易所有限公司對本公佈的內容概不負責，對其準確性或完整性 亦不發表任何聲明，並明確表示，概不就因本公佈全部或任何部份內容而產生或因倚賴該等內容而引致 的任何損失承擔任何責任。 (於百慕達註冊成立之有限公司) (股份代號：702) 截至2022年12月31日止年度 之經審核全年業績公佈 經審核全年業績 中國油氣控股有限公司(「本公司」)董事會(「董事會」)宣佈，本公司及其附屬公司(統稱 「本集團」)截至2022年12月31日止年度之經審核綜合業績連同去年度之比較數字如下： 綜合全面收益表 截至2022年12月31日止年度 (以港元計算) 2022 2021 附註 千港元 千港元 營業額 3 & 10 543,080 394,236 直接成本 (375,247) (332,753) 毛利 167,833 61,483 其他收入 4 24,720 49,480 其他虧損淨額 5 (386,691) (225,165) 按攤銷成本計量之財務資產之 已確認預期信貸虧損淨額 3,623 (344,853) ...

Financial Performance - The total amount of receivables as of 2021 was RMB 30,142,000, compared to RMB 88,884,000 in 2020, indicating a significant decrease of approximately 66%[9] - The company provided loans totaling RMB 37,070,000 to an oil and gas operation, which has since been sold, down from RMB 44,024,000 in 2020[9] - A loan of RMB 21,000,000 was issued to a mining company, which was also sold, reflecting a decrease from RMB 24,651,000 in 2020[9] - The company has a net receivable amount of RMB 30,006,000 after accounting for impairment losses of RMB 136,000[9] - The company has faced cash flow challenges, leading to the sale of receivables to alleviate immediate financial pressures[8] Business Operations - The financial services business primarily targets the oil and gas industry, public hospitals, and major state-owned or private enterprises[3] - The company has established a five-year loan agreement with a private enterprise in China, with the loan amount secured by 80% equity in a company holding oil exploration rights[6] - The company has implemented a comprehensive due diligence process for potential borrowers, including KYC procedures and financial assessments[4] - The company is actively monitoring loan performance and assessing credit risks through regular client interactions and financial reviews[5] - The company’s financial services operations are regulated by local financial authorities in Shaanxi Province, China[3] Governance - The board of directors includes two executive directors, Dr. Dai Xiaobing and Mr. Wen Zihun, along with four non-executive directors and three independent non-executive directors[10]

Financial Performance - Revenue for the six months ended June 30, 2022, was HK$258,285,000, representing a 101.9% increase from HK$128,140,000 in the same period of 2021[8]. - Gross profit for the same period was HK$62,876,000, up 55.6% from HK$40,387,000 in 2021[8]. - Loss for the period was HK$95,370,000, a significant improvement compared to a loss of HK$219,185,000 in the prior year, reflecting a 56.5% reduction in losses[8]. - Total comprehensive income for the period was HK$(206,719,000), compared to HK$(193,690,000) in 2021, indicating a slight increase in overall losses[14]. - Basic and diluted loss per share was HK$(2.81), an improvement from HK$(6.56) in the previous year[14]. - The company reported a loss for the period of HK$93,846,000 for the first half of 2022[30]. - The accumulated losses as of June 30, 2022, were HK$283,358,000, compared to HK$171,736,000 at June 30, 2021[30]. - The total comprehensive income for the period ended June 30, 2022, was a loss of HK$204,817,000, compared to a loss of HK$194,005,000 in the previous year[30]. - The profit before income tax expense for the period was HK$51,608, compared to a loss of HK$220,009 in the previous year, indicating a substantial turnaround[65]. - The company reported a profit for the period of HK$51,608, contrasting with a loss of HK$219,185 for the same period in 2021[65]. Expenses and Costs - Direct costs increased to HK$195,409,000, up from HK$87,753,000, reflecting a 122.3% rise[8]. - Selling and distribution expenses were HK$7,072,000, slightly higher than HK$6,874,000 in 2021, indicating a 2.9% increase[8]. - Administrative expenses decreased to HK$16,133,000 from HK$20,270,000, showing a 20.1% reduction[8]. - Other income decreased significantly to HK$429,000 from HK$30,414,000, a decline of 98.6%[8]. - Finance costs rose to HK$132,907,000 from HK$121,329,000, marking a 9.5% increase[8]. - The cost of inventories sold recognized as expenses surged to HK$117,234,000, compared to HK$40,783,000 in the prior year, indicating a significant increase in operational costs[1]. - Depreciation on property, plant, and equipment rose to HK$27,956,000 from HK$13,888,000, reflecting increased asset utilization or investment[1]. - Employee costs, including directors' remuneration, decreased slightly to HK$11,910,000 from HK$12,295,000 year-over-year[1]. Assets and Liabilities - Total non-current assets increased to HK$5,019,869, up from HK$4,767,267, representing a growth of approximately 5.3%[18]. - Current assets rose to HK$210,072 from HK$151,891, marking an increase of about 38.2%[18]. - Total assets decreased slightly to HK$5,171,760 from HK$4,977,339, reflecting a decline of approximately 3.9%[18]. - Total current liabilities increased to HK$2,454,739 from HK$2,428,366, which is an increase of about 1.1%[23]. - Net current liabilities improved to HK$2,244,667 from HK$2,276,475, indicating a reduction of approximately 1.4%[23]. - Total non-current liabilities decreased to HK$805,112 from HK$819,187, showing a decline of about 1.7%[23]. - Total equity attributable to owners of the Company decreased to HK$1,705,860 from HK$1,910,677, representing a decline of approximately 10.7%[23]. - Cash and cash equivalents increased significantly to HK$47,616 from HK$13,800, reflecting a growth of about 245.5%[18]. - Inventories rose to HK$30,770 from HK$13,323, indicating an increase of approximately 130.8%[18]. - Loans receivable increased to HK$20,817 from HK$15,618, marking a growth of about 33.9%[18]. - As of June 30, 2022, total borrowings amounted to HK$834,333,000, an increase of 4.2% from HK$797,959,000 as of December 31, 2021[125]. - The non-current portion of borrowings as of June 30, 2022, was HK$478,313,000, down from HK$501,050,000[125]. Cash Flow - For the six months ended June 30, 2022, the net cash generated from operating activities was HK$54,336,000, a decrease from HK$58,349,000 in the same period of 2021[30]. - The net cash used in investing activities for the same period was HK$85,436,000, significantly higher than HK$4,273,000 in 2021[30]. - The net cash generated from financing activities was HK$33,032,000 in the first half of 2022, contrasting with a net cash used of HK$38,069,000 in the same period of 2021[30]. Business Segments and Operations - The Group operates four reportable segments: coalbed methane, raw and cleaned coal, oil and gas exploitation, and financial services[54]. - The revenue from the Sanjiao CBM Project was approximately HK$133,593,000, up approximately 69% from HK$79,043,000 in the prior year[151]. - The raw coal washing project in Shanxi Province generated revenue of approximately HK$118,003,000, an increase from HK$44,987,000 in the previous interim period[156]. - EBITDA for the Sanjiao CBM Project was approximately HK$93,265,000, reflecting a 53% increase from HK$60,938,000 in the prior year[143]. - The gas sale-to-production rate for the Sanjiao CBM Project was approximately 97%, stable compared to 96% in the previous interim period[143]. - As of June 30, 2022, the Sanjiao CBM Project had completed a total of 170 wells, with 143 wells in the normal dewatering and gas producing stage[150]. Financial Strategy and Outlook - The Group's overall financial condition is expected to gradually improve as it explores various financing options and debt restructuring plans[41]. - Management is exploring various options to mitigate financial pressure, including additional financing and negotiations with creditors[174]. - The Group aims to maintain a prudent financial strategy and proactive debt management while focusing on the development of the Sanjiao CBM Project[174]. - The Group anticipates receiving the remaining balance of the shortfall of the guaranteed profit for the years 2020 and 2021 before the end of 2022[157]. - The Group expects stronger demand for natural gas in the second half of 2022 as the economy recovers from the COVID-19 pandemic[172]. Legal and Compliance Issues - A winding-up petition was filed against the Company on August 17, 2022, related to an alleged unpaid amount of approximately HK$10,216,000 concerning corporate bonds[140]. - The company has taken legal actions against the vendor for the refund of deposits and settlement of related interest receivables[115]. Shareholder Information - Sino Oil and Gas Resources Investments Limited (SOGRI) owns 85,119,500 shares and has a short position of 70,800,000 shares[195]. - Dr. Dai Xiaobing beneficially owns 73,384,500 shares and has a short position of 66,724,500 shares[196]. - The company issued convertible bonds with an aggregate principal amount of US$130,000,000 on September 29, 2016[199]. - Based on the conversion price of HK$0.168 per share, a maximum of 6,012,500,000 shares may be allotted and issued upon exercise of the conversion rights[199]. - As of June 30, 2022, no other directors or chief executives had any interests or short positions in the shares of the company[200].

Financial Performance - For the year ended December 31, 2021, the company reported a revenue of HK$325,371,000, a decrease of 31.8% from HK$476,614,000 in 2020[20] - The loss for the year was HK$182,879,000, compared to a loss of HK$227,642,000 in 2020, indicating an improvement of 19.6%[20] - The loss attributable to owners of the company was HK$184,117,000 in 2021, compared to HK$230,952,000 in 2020, showing a reduction of 20.3%[20] - The Group reported a net loss of approximately HK$786.23 million for the fiscal year 2021, compared to a net loss of HK$182.88 million in 2020, primarily due to losses on the disposal of receivables and impairment losses on oil and gas exploration assets[42][46] - The finance cost for the year was approximately HK$242.50 million, compared to HK$209.62 million in 2020, indicating increased financial pressure on the Group[44][46] - The Group's net current liabilities stood at approximately HK$2.27 billion, reflecting ongoing financial challenges and heavy borrowing[31][32] - The Group's net assets as of December 31, 2021, were approximately HK$1,924 million, a decrease from HK$2,685 million in 2020, while total assets were approximately HK$5,172 million, down from HK$5,631 million[71] - The gearing ratio based on total assets increased to approximately 41.6% as of December 31, 2021, compared to 37.9% in 2020[71] Production and Sales - Total gas production in 2021 was approximately 128.06 million cubic meters, while gas sales were approximately 127.03 million cubic meters, achieving a sale-to-production rate of 99.2%[23] - The average sale-to-production rate for CBM in 2021 was 99.2%, indicating efficient operations in gas sales[23] - CBM sales revenue reached approximately HK$168.97 million in 2021, compared to HK$109.92 million in 2020, indicating a growth of about 53.6% year-over-year[53] - The production volume of CBM was approximately 128.06 million cubic meters in 2021, an increase from 101.75 million cubic meters in 2020, representing a growth of approximately 25.8%[53] - The sales volume of CBM was approximately 127.03 million cubic meters in 2021, compared to 96.37 million cubic meters in 2020, resulting in a gas sale-to-production rate of approximately 99.2%[53] Project Development - The company aims to accelerate the construction of the CBM industrial base in Sanjiao to meet the increasing demand for natural gas in China, projected to reach 395 bcm in 2022, up 7% from 2021[27] - The Group plans to accelerate the development of its Sanjiao coalbed methane project to contribute to clean energy supply and enhance safety and efficiency in coal mining operations[29] - The Group plans to drill an additional 25 to 30 multilateral horizontal wells in the CBM project to achieve a production capacity of 500 million cubic meters over the next 2-3 years[84] - The Sanjiao CBM Project recorded EBITDA of approximately HK$117.17 million in 2021, up from HK$71.24 million in 2020, reflecting a significant increase in profitability[53] - The total capital expenditure for the Sanjiao CBM Project was approximately HK$241.3 million in 2021, down from HK$307 million in 2020[65] Financial Strategy and Challenges - Sino Oil and Gas Holdings Limited is in active discussions with potential investor China Finance Development Group Co. Ltd. regarding investment opportunities to optimize its financial structure[31][32] - The Group is exploring various financing options and debt restructuring to strengthen liquidity and improve its overall financial position[74] - The Group aims to introduce suitable investors to address financial difficulties and seize opportunities for oil and gas development, including potential mergers and acquisitions[85] - The Group's financial pressure is expected to gradually ease, supported by the growth of the coalbed methane operation in Shanxi[74] Corporate Governance - The company is committed to maintaining high standards of corporate governance and compliance through its experienced management team[116] - The company held three board meetings during the year, which is one less than the required four meetings as per the Corporate Governance Code[125] - The Board consists of two executive directors, four non-executive directors, and three independent non-executive directors as of December 31, 2021[134] - The company complied with all code provisions of the Corporate Governance Code except for A.1.1, A.2.1, and E.1.2[125] - The Company has received annual confirmations of independence from all independent non-executive directors, complying with the Listing Rules[146] Management and Board Composition - Dr. Dai Xiaobing serves as both Chairman and Chief Executive Officer, which the Board believes ensures consistent leadership and effective strategy implementation[126] - The independent non-executive directors bring a wealth of experience from various sectors, including finance, law, and geology, contributing to the company's governance[112] - The Company provides comprehensive induction packages for new directors to ensure awareness of their responsibilities[153] - The Board has established three committees: Audit Committee, Remuneration Committee, and Nomination Committee, each with distinct responsibilities[170] - The Audit Committee consists of three Independent Non-Executive Directors (INEDs) and is responsible for reviewing the completeness, accuracy, and fairness of the company's financial statements[175]

[Corporate Information](index=2&type=section&id=Corporate%20Information) This section provides an overview of the company's key corporate details, including its board of directors, registered offices, and external advisors [Directors and Company Secretary](index=2&type=section&id=Directors%20and%20Company%20Secretary) This section lists the board members of China Oil and Gas Holdings Limited, including executive, non-executive, and independent non-executive directors, along with the company secretary's name and position - The Board comprises executive directors including Dr. Dai Xiaobing (Chairman and CEO) and Mr. Wen Zixun, non-executive directors including Mr. Jing Harry and Mr. Huang Shaowu, and independent non-executive directors including Professor Wong Lung Tak Patrick and Dr. Wang Yanbin[5](index=5&type=chunk) - The Company Secretary is Ms. Yim Siu Hung[5](index=5&type=chunk) [Registered and Principal Offices](index=2&type=section&id=Registered%20and%20Principal%20Offices) This section provides the company's registered office address in Bermuda, its head office and principal place of business in Hong Kong, and information on its Hong Kong and principal share registrars - The Company's registered office is located at Clarendon House, 2 Church Street, Hamilton HM11, Bermuda[5](index=5&type=chunk) - The head office and principal place of business in Hong Kong is Unit 3710, 37th Floor, Hong Kong Business Centre, 188 Connaught Road West, Hong Kong[5](index=5&type=chunk) - The Hong Kong Share Registrar is Computershare Hong Kong Investor Services Limited[5](index=5&type=chunk) [Advisors and Auditor](index=3&type=section&id=Advisors%20and%20Auditor) This section lists the names and addresses of the company's Hong Kong legal advisor, Bermuda legal advisor, and auditor - The Hong Kong Legal Advisor is Li, Kwok & Law[7](index=7&type=chunk) - The Bermuda Legal Advisor is Conyers Dill & Pearman[7](index=7&type=chunk) - The Auditor is BDO Limited, Hong Kong[7](index=7&type=chunk) [Interim Results](index=4&type=section&id=Interim%20Results) This section presents the condensed consolidated financial statements, including comprehensive income, financial position, changes in equity, and cash flows for the interim period [Condensed Consolidated Statement of Comprehensive Income](index=4&type=section&id=Condensed%20Consolidated%20Statement%20of%20Comprehensive%20Income) For the six months ended June 30, 2021, the Group's turnover increased to **HKD 128,140 thousand**, but a significant rise in other net losses and finance costs led to a substantial expansion of loss for the period to **HKD 219,185 thousand** Condensed Consolidated Statement of Comprehensive Income Key Data (For the six months ended June 30) | Metric | 2021 (HKD thousands) | 2020 (HKD thousands) | Change (HKD thousands) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Turnover | 128,140 | 118,884 | 9,256 | 7.8% | | Gross profit | 40,387 | 21,905 | 18,482 | 84.4% | | Other income | 30,414 | 39,513 | (9,099) | -23.0% | | Other losses, net | (142,347) | (4) | (142,343) | -3558575.0% | | Operating profit/(loss) | (98,690) | 33,251 | (131,941) | -396.8% | | Finance costs | (121,329) | (100,982) | (20,347) | 20.1% | | Loss before income tax expense | (220,009) | (67,721) | (152,288) | -224.9% | | Loss for the period | (219,185) | (67,072) | (152,113) | -226.8% | | Basic and diluted loss per share (HK cents) | (6.56) | (2.02) | (4.54) | -224.8% | - Other net losses surged from **HKD 4 thousand** in 2020 to **HKD 142,347 thousand** in 2021, significantly contributing to the expanded loss for the period[9](index=9&type=chunk) - Finance costs increased by **20.1%** year-on-year, further exacerbating the loss[9](index=9&type=chunk) [Condensed Consolidated Statement of Financial Position](index=6&type=section&id=Condensed%20Consolidated%20Statement%20of%20Financial%20Position) As of June 30, 2021, the Group's total assets slightly decreased, while net current liabilities significantly increased to **HKD 1,609,539 thousand**, primarily due to convertible notes and increased trade and other payables, indicating heightened liquidity pressure Condensed Consolidated Statement of Financial Position Key Data (As of June 30) | Metric | June 30, 2021 (HKD thousands) | December 31, 2020 (HKD thousands) | Change (HKD thousands) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total non-current assets | 4,925,428 | 4,932,638 | (7,210) | -0.15% | | Total current assets | 586,984 | 698,490 | (111,506) | -15.96% | | Total assets | 5,512,412 | 5,631,128 | (118,716) | -2.11% | | Total current liabilities | (2,196,523) | (2,030,044) | (166,479) | 8.20% | | Net current liabilities | (1,609,539) | (1,331,554) | (277,985) | 20.88% | | Total non-current liabilities | (824,153) | (915,658) | 91,505 | -10.00% | | Net assets | 2,491,736 | 2,685,426 | (193,690) | -7.21% | | Total equity | 2,491,736 | 2,685,426 | (193,690) | -7.21% | - Net current liabilities increased by **20.88%** from **HKD 1,331,554 thousand** on December 31, 2020, to **HKD 1,609,539 thousand** on June 30, 2021, mainly due to increased borrowings and trade and other payables[33](index=33&type=chunk) - Both total assets and net assets decreased, reflecting challenges in the Group's financial position[25](index=25&type=chunk)[33](index=33&type=chunk) [Condensed Consolidated Statement of Changes in Equity](index=8&type=section&id=Condensed%20Consolidated%20Statement%20of%20Changes%20in%20Equity) For the six months ended June 30, 2021, equity attributable to owners of the Company decreased from **HKD 2,674,738 thousand** at the beginning of the period to **HKD 2,480,733 thousand** due to a loss for the period of **HKD 219,406 thousand**, with total equity decreasing accordingly Condensed Consolidated Statement of Changes in Equity Key Data (For the six months ended June 30) | Metric | January 1, 2021 (HKD thousands) | June 30, 2021 (HKD thousands) | Change (HKD thousands) | | :--- | :--- | :--- | :--- | | Equity attributable to owners of the Company | 2,674,738 | 2,480,733 | (194,005) | | Non-controlling interests | 10,688 | 11,003 | 315 | | Total equity | 2,685,426 | 2,491,736 | (193,690) | | Loss/(profit) for the period (attributable to owners of the Company) | (219,406) | - | - | | Other comprehensive income (attributable to owners of the Company) | - | 25,401 | - | - The loss for the period of **HKD 219,406 thousand** was the primary factor contributing to the decrease in equity attributable to owners of the Company[37](index=37&type=chunk) - Exchange reserves increased by **HKD 25,401 thousand** due to other comprehensive income, partially offsetting the impact of the loss on equity[37](index=37&type=chunk) [Condensed Consolidated Statement of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) For the six months ended June 30, 2021, the Group generated **HKD 58,349 thousand** net cash from operating activities, but net cash used in financing activities was **HKD 38,069 thousand**, resulting in a net increase in cash and cash equivalents of **HKD 16,007 thousand**, with cash and bank balances at period-end of **HKD 68,875 thousand** Condensed Consolidated Statement of Cash Flows Key Data (For the six months ended June 30) | Metric | 2021 (HKD thousands) | 2020 (HKD thousands) | Change (HKD thousands) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net cash generated from operating activities | 58,349 | 56,963 | 1,386 | 2.43% | | Net cash used in investing activities | (4,273) | (119,323) | 115,050 | -96.42% | | Net cash (used in)/generated from financing activities | (38,069) | 178,191 | (216,260) | -121.36% | | Net increase in cash and cash equivalents | 16,007 | 115,831 | (99,824) | -86.18% | | Cash and cash equivalents at June 30 | 68,875 | 119,207 | (50,332) | -42.22% | - Operating cash flow maintained stable growth, but financing activities shifted from a net cash inflow to a net outflow, indicating a tightening financing environment[40](index=40&type=chunk) - Net cash used in investing activities significantly decreased, primarily due to substantial investment expenditures in 2020[40](index=40&type=chunk) [Notes to the Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) This section details the accounting policies, segment reporting, and specific financial items, providing context for the condensed consolidated financial statements [Basis of Preparation and Going Concern Assumption](index=10&type=section&id=Basis%20of%20Preparation%20and%20Going%20Concern%20Assumption) This interim financial report, prepared under HKAS 34 and reviewed by the Audit Committee, shows net current liabilities of **HKD 1,609,539 thousand** as of June 30, 2021, primarily due to maturing convertible notes of **HKD 1,014,000 thousand**, raising significant going concern doubts; however, management is actively negotiating with noteholders and has secured financial support commitments from shareholders, leading the Directors to deem the going concern basis appropriate - This interim financial report is unaudited but has been reviewed by the Company's Audit Committee[44](index=44&type=chunk)[47](index=47&type=chunk) - As of June 30, 2021, the Group reported net current liabilities of **HKD 1,609,539 thousand**, raising significant doubts about its ability to continue as a going concern[50](index=50&type=chunk)[54](index=54&type=chunk) - The primary financial pressure stems from convertible notes with a principal amount of **HKD 1,014,000 thousand** that matured at the end of September 2020[51](index=51&type=chunk)[54](index=54&type=chunk) - Management is actively negotiating with noteholders to explore the possibility of acquiring the convertible notes or extending their maturity date[51](index=51&type=chunk)[54](index=54&type=chunk) - Two funders (a shareholder and director, and a former shareholder and former director) have confirmed their commitment to provide sufficient financial support to ensure the Group has adequate working capital[52](index=52&type=chunk)[54](index=54&type=chunk) [Significant Accounting Policies and Adoption of New and Revised HKFRSs](index=12&type=section&id=Significant%20Accounting%20Policies%20and%20Adoption%20of%20New%20and%20Revised%20HKFRSs) This interim financial report applies the same accounting policies as the 2020 annual financial statements and has adopted new and revised HKFRSs issued by the HKICPA, with no significant impact on current or prior period financial performance or position - This interim financial report adopts the same accounting policies as those used in the 2020 annual financial statements[58](index=58&type=chunk)[59](index=59&type=chunk) - The Group has initially adopted amendments to HKAS 39, HKFRS 4, HKFRS 7, HKFRS 9, and HKFRS 16, as well as amendments to HKFRS 16[62](index=62&type=chunk) - The application of new and revised HKFRSs had no significant impact on the Group's financial performance and position[62](index=62&type=chunk) [Revenue and Segment Reporting](index=13&type=section&id=Revenue%20and%20Segment%20Reporting) The Group operates four reportable segments: coalbed methane, raw and washed coal, oil and gas exploration, and financial services; for the six months ended June 30, 2021, coalbed methane revenue significantly increased while raw and washed coal revenue decreased, with unallocated results primarily comprising Hong Kong head office staff costs, short-term lease expenses, and professional fees - The Group has four reportable segments: coalbed methane, raw and washed coal, oil and gas exploration, and financial services[65](index=65&type=chunk) Segment Turnover (For the six months ended June 30) | Segment | 2021 (HKD thousands) | 2020 (HKD thousands) | Change (HKD thousands) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Coalbed methane | 79,043 | 52,500 | 26,543 | 50.56% | | Raw and washed coal | 44,987 | 61,930 | (16,943) | -27.36% | | Oil and gas exploration | – | – | – | - | | Financial services | 4,110 | 4,454 | (344) | -7.72% | | Total | 128,140 | 118,884 | 9,256 | 7.8% | Segment Results (For the six months ended June 30) | Segment | 2021 (HKD thousands) | 2020 (HKD thousands) | Change (HKD thousands) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Coalbed methane | 38,257 | 28,469 | 9,788 | 34.38% | | Raw and washed coal | 235 | 1,841 | (1,606) | -87.23% | | Oil and gas exploration | 10,276 | 9,681 | 595 | 6.15% | | Financial services | (1,190) | 2,127 | (3,317) | -155.95% | | Unallocated | (4,268) | (8,904) | 4,636 | -52.07% | | Total segment results | 43,310 | 33,214 | 10,096 | 30.39% | - Coalbed methane segment results include government grants and subsidies of **HKD 15,148 thousand** (2020: **HKD 24,193 thousand**)[77](index=77&type=chunk) - Unallocated liabilities primarily include borrowings from shareholders and directors, financial liabilities at fair value through profit or loss, corporate bonds, and convertible notes[77](index=77&type=chunk) [Other Income and Other Losses, Net](index=17&type=section&id=Other%20Income%20and%20Other%20Losses%2C%20Net) Other income primarily comprises interest income and government grants, with a decrease in government subsidies; other net losses significantly increased due to fair value changes of financial assets at fair value through profit or loss, loss on disposal of loan receivables, and impairment loss on other receivables Other Income (For the six months ended June 30) | Item | 2021 (HKD thousands) | 2020 (HKD thousands) | Change (HKD thousands) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total interest income from financial assets at amortised cost | 14,866 | 14,287 | 579 | 4.05% | | Government grants and subsidies | 15,148 | 24,193 | (9,045) | -37.39% | | Others | 400 | 1,033 | (633) | -61.28% | | Total | 30,414 | 39,513 | (9,099) | -23.03% | Other Losses, Net (For the six months ended June 30) | Item | 2021 (HKD thousands) | 2020 (HKD thousands) | Change (HKD thousands) | | :--- | :--- | :--- | :--- | | Fair value changes of financial assets at fair value through profit or loss | (24,316) | – | (24,316) | | Loss on disposal of loan receivables | (7,932) | – | (7,932) | | Impairment loss on other receivables | (109,752) | – | (109,752) | | Net exchange loss | (347) | (41) | (306) | | Total | (142,347) | (4) | (142,343) | - Government grants and subsidies primarily consist of recurring subsidies for coalbed methane sales and value-added tax refunds[80](index=80&type=chunk)[81](index=81&type=chunk) - Impairment loss on other receivables of **HKD 109,752 thousand** was the main reason for the significant increase in other net losses for the period[82](index=82&type=chunk) [Loss Before Income Tax Expense](index=18&type=section&id=Loss%20Before%20Income%20Tax%20Expense) Loss before income tax expense was primarily impacted by a significant increase in finance costs, particularly interest expenses on convertible notes, while staff costs and depreciation and amortization remained relatively stable Finance Costs (For the six months ended June 30) | Item | 2021 (HKD thousands) | 2020 (HKD thousands) | Change (HKD thousands) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Interest on corporate bonds | 15,889 | 16,317 | (428) | -2.62% | | Interest on borrowings | 20,391 | 8,648 | 11,743 | 135.80% | | Interest expense on convertible notes | 95,145 | 71,969 | 23,176 | 32.20% | | Less: Interest capitalised into qualifying assets | (16,125) | (2,500) | (13,625) | 545.00% | | Other finance costs | 5,671 | 5,686 | (15) | -0.26% | | Total | 121,329 | 100,982 | 20,347 | 20.15% | - Interest expense on convertible notes increased by **32.20%** from **HKD 71,969 thousand** in 2020 to **HKD 95,145 thousand** in 2021[85](index=85&type=chunk) - Interest on borrowings significantly increased by **135.80%**, indicating a rise in the Group's borrowing costs[85](index=85&type=chunk) - Staff costs (including directors' emoluments) amounted to **HKD 12,295 thousand**, remaining largely consistent with the prior period[85](index=85&type=chunk) [Income Tax Expense and Dividend](index=19&type=section&id=Income%20Tax%20Expense%20and%20Dividend) The Group made no provision for Hong Kong profits tax due to estimated tax losses offsetting assessable profits, while Chinese subsidiaries are subject to a **25%** statutory tax rate; the negative income tax expense for the period was primarily due to changes in deferred tax liabilities, and no dividends were declared or proposed by the Board - No provision for Hong Kong profits tax was made due to estimated tax losses available to offset assessable profits[87](index=87&type=chunk)[88](index=88&type=chunk) - Chinese subsidiaries are subject to a statutory tax rate of **25%**[87](index=87&type=chunk)[88](index=88&type=chunk) Income Tax Expense (For the six months ended June 30) | Item | 2021 (HKD thousands) | 2020 (HKD thousands) | | :--- | :--- | :--- | | Current income tax – PRC Enterprise Income Tax | 64 | 169 | | Deferred tax for the period | (888) | (818) | | Income tax expense | (824) | (649) | - The Directors did not declare or propose any dividend for the six months ended June 30, 2021[91](index=91&type=chunk)[92](index=92&type=chunk) [Loss Per Share](index=20&type=section&id=Loss%20Per%20Share) For the six months ended June 30, 2021, basic loss per share significantly widened to **6.56 HK cents** from **2.02 HK cents** in the prior period; diluted loss per share was the same as basic loss per share due to the anti-dilutive effect of share options and convertible notes Loss Per Share (For the six months ended June 30) | Metric | 2021 (HK cents) | 2020 (HK cents) | Change (HK cents) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Basic and diluted loss per share | (6.56) | (2.02) | (4.54) | -224.75% | - Basic loss per share is calculated based on the loss attributable to owners of the Company of **HKD 219,406 thousand** and the weighted average number of ordinary shares in issue of **3,345,439 thousand** shares[95](index=95&type=chunk) - Diluted loss per share is the same as basic loss per share because the share options and convertible notes had an anti-dilutive effect[95](index=95&type=chunk) [Property, Plant and Equipment and Intangible Assets](index=20&type=section&id=Property%2C%20Plant%20and%20Equipment%20and%20Intangible%20Assets) During the period, the Group's capital expenditure on property, plant and equipment significantly increased, primarily for the Sanjiao Coalbed Methane Project; intangible assets mainly comprise operating rights for coalbed methane projects and preferential supplier agreements for raw and washed coal projects, with the latter fully impaired Property, Plant and Equipment Capital Expenditure (For the six months ended June 30) | Item | 2021 (HKD thousands) | 2020 (HKD thousands) | Change (HKD thousands) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Cost of capital expenditure | 32,346 | 2,897 | 29,449 | 1016.53% | | Capitalised interest cost | 16,055 | 2,046 | 14,009 | 684.70% | - Intangible assets primarily consist of operating rights for coalbed methane projects in China and preferential supplier agreements for raw and washed coal projects[95](index=95&type=chunk) - The preferential supplier agreements have been fully provided for impairment loss[95](index=95&type=chunk) [Trade, Notes and Other Receivables, Deposits and Prepayments](index=21&type=section&id=Trade%2C%20Notes%20and%20Other%20Receivables%2C%20Deposits%20and%20Prepayments) As of June 30, 2021, net trade receivables significantly decreased, while other receivables increased due to short-term investment redemption receivables and related interest, loan disposal receivables, and subsidiary disposal consideration; an impairment loss of **HKD 109,752 thousand** was recognized for other receivables during the period Trade, Notes and Other Receivables, Deposits and Prepayments (As of June 30) | Item | June 30, 2021 (HKD thousands) | December 31, 2020 (HKD thousands) | Change (HKD thousands) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net trade receivables | 28,657 | 78,644 | (49,987) | -63.56% | | Notes receivable | 6,848 | 8,324 | (1,476) | -17.73% | | Net other receivables | 75,323 | 108,440 | (33,117) | -30.54% | | Net other deposits | 340,146 | 324,486 | 15,660 | 4.83% | | Prepayments | 3,592 | 7,362 | (3,770) | -51.21% | | Total current assets | 454,738 | 527,428 | (72,690) | -13.78% | - Other receivables primarily include receivables from short-term investment redemptions and related interest of **HKD 110,092 thousand**, receivables from disposal of loan receivables of **HKD 48,673 thousand**, and consideration receivable from disposal of a subsidiary of **HKD 24,000 thousand**[101](index=101&type=chunk) - An impairment loss of **HKD 109,752 thousand** was recognized for other receivables for the six months ended June 30, 2021[101](index=101&type=chunk) - Other deposits primarily include a refundable deposit of **HKD 247,680 thousand** for a potential acquisition of an oilfield project in Alberta, Canada, and related interest receivable of **HKD 115,278 thousand**, with the deposit bearing interest at **8.5%** per annum[101](index=101&type=chunk) [Trade and Other Payables and Accruals](index=23&type=section&id=Trade%20and%20Other%20Payables%20and%20Accruals) As of June 30, 2021, trade payables decreased, but other payables and accruals significantly increased, primarily due to a substantial rise in exploration costs payable for oil and gas assets and default interest on convertible notes Trade and Other Payables and Accruals (As of June 30) | Item | June 30, 2021 (HKD thousands) | December 31, 2020 (HKD thousands) | Change (HKD thousands) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Trade payables | 22,235 | 41,243 | (19,008) | -46.09% | | Other payables and accruals | 551,125 | 468,807 | 82,318 | 17.56% | | Amount due to a shareholder | 21,200 | 21,871 | (671) | -3.07% | | Total | 594,560 | 531,921 | 62,639 | 11.78% | - Other payables primarily include exploration costs payable for oil and gas assets of approximately **HKD 289,733 thousand** (2020: **HKD 246,393 thousand**) and default interest on convertible notes of **HKD 157,246 thousand** (2020: **HKD 62,101 thousand**)[105](index=105&type=chunk) - Default interest on convertible notes significantly increased by **153.21%**, being a major contributor to the growth in other payables[105](index=105&type=chunk) [Borrowings and Convertible Note](index=24&type=section&id=Borrowings%20and%20Convertible%20Note) As of June 30, 2021, the Group's total borrowings slightly increased, with a significant rise in borrowings due within one year; borrowing types include secured bank loans, other secured/unsecured loans, and unsecured corporate bonds, while convertible notes are secured by issued shares of holding companies of certain subsidiaries Borrowings Composition (As of June 30) | Item | June 30, 2021 (HKD thousands) | December 31, 2020 (HKD thousands) | Change (HKD thousands) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Secured bank borrowings | 6,948 | 8,883 | (1,935) | -21.78% | | Other secured borrowings | 309,015 | 290,432 | 18,583 | 6.40% | | Other unsecured borrowings | 6,297 | 14,344 | (8,047) | -56.09% | | Unsecured corporate bonds | 467,330 | 467,809 | (479) | -0.10% | | Total borrowings | 789,590 | 781,468 | 8,122 | 1.04% | Borrowings Repayment Period (As of June 30) | Repayment period | June 30, 2021 (HKD thousands) | December 31, 2020 (HKD thousands) | Change (HKD thousands) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Repayable on demand or within one year | 232,422 | 130,140 | 102,282 | 78.60% | | More than one year, but not more than two years | 183,797 | 211,924 | (28,127) | -13.27% | | More than two years, but not more than five years | 373,371 | 436,404 | (63,033) | -14.44% | | More than five years | – | 3,000 | (3,000) | -100.00% | - Borrowings due within one year significantly increased by **78.60%**, intensifying liquidity pressure[109](index=109&type=chunk) - The convertible notes are secured by issued shares of holding companies of certain subsidiaries of the Company, which are holding companies for the financial services business and coalbed methane business[118](index=118&type=chunk)[120](index=120&type=chunk) [Commitments and Contingent Liabilities](index=25&type=section&id=Commitments%20and%20Contingent%20Liabilities) The Group has capital commitments for the Sanjiao Coalbed Methane Project; contingent liabilities primarily relate to environmental regulations for oil exploration in China and provisions for land restoration and rehabilitation after coalbed methane extraction Capital Commitments (As of June 30) | Item | June 30, 2021 (HKD thousands) | December 31, 2020 (HKD thousands) | | :--- | :--- | :--- | | Commitments for Sanjiao Product Sharing Contract | 168,629 | 167,179 | - The impact of China's environmental laws and regulations on oil exploration operations cannot be reasonably estimated at present and could be significant[121](index=121&type=chunk)[123](index=123&type=chunk) - As of June 30, 2021, a provision of **HKD 17,008 thousand** has been made for land restoration and rehabilitation costs for coalbed methane mining areas[122](index=122&type=chunk)[123](index=123&type=chunk) [Material Related Party Transactions](index=26&type=section&id=Material%20Related%20Party%20Transactions) Key management personnel emoluments decreased during the period; the Group paid rent and related utility expenses to an associate with the same major shareholder and has amounts payable to the associate Key Management Personnel Emoluments (For the six months ended June 30) | Item | 2021 (HKD thousands) | 2020 (HKD thousands) | Change (HKD thousands) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Short-term employee benefits | 4,621 | 7,579 | (2,958) | -39.03% | - The Group paid rent and related utility expenses of **HKD 842 thousand** to an associate with the same major shareholder[129](index=129&type=chunk) - As of June 30, 2021, the amount due to the associate was approximately **HKD 2,443 thousand**, which is unsecured, interest-free, and repayable on demand[129](index=129&type=chunk) [Management Discussion and Analysis](index=27&type=section&id=Management%20Discussion%20and%20Analysis) This section provides an overview of the Group's business performance, capital expenditures, financial position, and future outlook, including employee and remuneration policies [Business Review](index=27&type=section&id=Business%20Review) For the six months ended June 30, 2021, the Group's total turnover grew by **7.8%**, primarily driven by a **50.5%** increase in Sanjiao Coalbed Methane Project sales; however, net loss significantly widened due to finance costs and impairment provisions for other receivables, while raw coal washing and financial services revenues slightly decreased Major Business Revenue (For the six months ended June 30) | Business | 2021 (HKD thousands) | 2020 (HKD thousands) | Change (HKD thousands) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Sanjiao Coalbed Methane sales | 79,043 | 52,500 | 26,543 | 50.56% | | Raw coal washing business revenue | 44,987 | 61,930 | (16,943) | -27.36% | | Shaanxi financial services business revenue | 4,110 | 4,454 | (344) | -7.72% | | Total turnover | 128,140 | 118,884 | 9,256 | 7.8% | - The Group recorded a net loss of approximately **HKD 219,185 thousand** (2020 interim: net loss of **HKD 67,072 thousand**), primarily due to finance costs of approximately **HKD 121,329 thousand** and impairment provision for other receivables of approximately **HKD 109,752 thousand**[132](index=132&type=chunk)[135](index=135&type=chunk) - The Sanjiao Coalbed Methane Project's EBITDA was approximately **HKD 60,938 thousand**, a **14.5%** year-on-year increase, with a production-to-sales ratio of approximately **96%**[133](index=133&type=chunk)[136](index=136&type=chunk) - Coalbed methane production and sales volumes were approximately **61.9 million cubic meters** and **59.65 million cubic meters** respectively, both showing year-on-year growth[145](index=145&type=chunk)[148](index=148&type=chunk) - Interest income within other income primarily originated from a refundable deposit of **CAD 40,000,000** for a proposed acquisition project in Alberta, Canada[134](index=134&type=chunk)[137](index=137&type=chunk) - The Sanjiao Coalbed Methane Project has completed **156** wells, with **130** in normal drainage, **125** connected to the gas gathering pipeline network, and a daily processing capacity of **0.5 million cubic meters**[141](index=141&type=chunk)[143](index=143&type=chunk) [Capital Expenditure](index=30&type=section&id=Capital%20Expenditure) For the period ended June 30, 2021, capitalized expenditure for the Sanjiao Coalbed Methane Project was approximately **HKD 48,400 thousand**, primarily allocated to construction in progress for drilling and ground engineering, and capitalized finance costs Sanjiao Coalbed Methane Project Capitalized Expenditure (For the period ended June 30) | Item | Amount (HKD thousands) | | :--- | :--- | | Total capitalized expenditure | 48,400 | | Construction in progress expenditure for drilling and ground engineering | 32,345 | | Capitalized finance costs | 16,055 | [Financial Review](index=30&type=section&id=Financial%20Review) As of June 30, 2021, the Group's net assets and total assets both decreased; total borrowings, including the liability component of convertible notes, were approximately **HKD 2,142,000 thousand**, with a gearing ratio of **38.9%**; the current ratio declined to **0.27**, and net current liabilities were approximately **HKD 1,609,000 thousand**, primarily impacted by maturing convertible notes; the Group is actively negotiating debt issues and considering other financing and debt restructuring options to improve liquidity Financial Position Key Indicators (As of June 30) | Metric | June 30, 2021 | December 31, 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Net assets | 2,491,000 HKD thousands | 2,685,000 HKD thousands | -7.2% | | Total assets | 5,512,000 HKD thousands | 5,631,000 HKD thousands | -2.1% | | Total borrowings (including liability component of convertible notes) | 2,142,000 HKD thousands | 2,134,000 HKD thousands | 0.38% | | Gearing ratio (by total assets) | 38.9% | 37.9% | 1.0 percentage points | | Current ratio | 0.27 | 0.34 | -20.59% | | Net current liabilities | 1,609,000 HKD thousands | 1,331,554 HKD thousands | 20.84% | - Net current liabilities were approximately **HKD 1,609,000 thousand**, primarily due to convertible notes with a principal amount of **USD 130 million** (approximately **HKD 1,014,000 thousand**) that matured at the end of September 2020, posing significant financial pressure[158](index=158&type=chunk)[161](index=161&type=chunk) - The Group is actively coordinating discussions between potential investors and noteholders regarding debt issues, exploring the possibility of acquiring the convertible notes and/or further extending their maturity date[158](index=158&type=chunk)[161](index=161&type=chunk) - The Group will consider other feasible financing options and debt restructuring plans, which are expected to strengthen liquidity and gradually improve the overall financial position[158](index=158&type=chunk)[161](index=161&type=chunk) - The Group primarily manages currency risk by buying and selling foreign currencies at spot exchange rates to address short-term imbalances[159](index=159&type=chunk)[162](index=162&type=chunk) [Employees and Remuneration Policies](index=31&type=section&id=Employees%20and%20Remuneration%20Policies) As of June 30, 2021, the Group employed approximately **300** staff; remuneration policies are determined based on prevailing market levels and the performance of individual companies and employees - As of June 30, 2021, the Group had approximately **300** employees[160](index=160&type=chunk)[163](index=163&type=chunk) - Remuneration policies are primarily determined by prevailing market remuneration levels and the performance of the respective companies and individual employees[160](index=160&type=chunk)[163](index=163&type=chunk) [Prospects](index=32&type=section&id=Prospects) Despite COVID-19 challenges, China's natural gas industry continues steady development with significant contributions from coalbed methane production; the Group will focus on developing the Sanjiao Coalbed Methane Project to enhance core competitiveness, maintain prudent financial strategies, and actively manage debt to improve efficiency and ensure shareholder returns - In 2020, China's natural gas production reached **192.5 billion cubic meters**, a **9.8%** year-on-year increase, with coalbed methane production contributing **6.5 billion cubic meters**, demonstrating significant contribution[165](index=165&type=chunk)[168](index=168&type=chunk) - The Group will focus on the mid-to-long-term development of the Sanjiao Coalbed Methane Project, gradually enhancing its core competitiveness and expecting further improvement in profitability[166](index=166&type=chunk)[169](index=169&type=chunk) - The Group will maintain a prudent financial management strategy and actively manage its debt[167](index=167&type=chunk)[170](index=170&type=chunk) - The Group will continue to focus on strengthening its market share in the coalbed methane industry value chain, improving efficiency through cost savings and optimized operations to ensure reasonable returns for shareholders[167](index=167&type=chunk)[170](index=170&type=chunk) [Other Information](index=33&type=section&id=Other%20Information) This section covers directors' and substantial shareholders' interests, share option schemes, securities transactions, audit committee review, and corporate governance practices [Directors' Interests in Shares and Underlying Shares](index=33&type=section&id=Directors'%20Interests%20in%20Shares%20and%20Underlying%20Shares) As of June 30, 2021, several directors held long positions in the Company's shares, underlying shares, and share options; notably, Dr. Dai Xiaobing held substantial shares and underlying shares through beneficial ownership and controlled corporate interests, along with share options, while other directors held smaller interests Directors' Interests in Shares and Underlying Shares (As of June 30) | Name of Director | Nature of Interest | Number of Shares/Underlying Shares in the Company held | Percentage of issued shares | | :--- | :--- | :--- | :--- | | Dr. Dai Xiaobing | Shares (Long Position) | 158,504,000 | 4.74% | | Dr. Dai Xiaobing | Shares (Short Position) | 137,524,500 | 4.11% | | Dr. Dai Xiaobing | Underlying Shares (Long Position) | 6,012,500,000 | 179.72% | | Dr. Dai Xiaobing | Share Options (Long Position) | 3,600,000 | 0.11% | | Mr. Wen Zixun | Shares (Long Position) | 3,366,000 | 0.10% | | Mr. Wen Zixun | Share Options (Long Position) | 3,600,000 | 0.11% | | Mr. Jing Harry | Share Options (Long Position) | 3,600,000 | 0.11% | | Professor Wong Lung Tak Patrick | Share Options (Long Position) | 300,000 | 0.01% | | Dr. Wang Yanbin | Share Options (Long Position) | 300,000 | 0.01% | - Dr. Dai Xiaobing held shares and short positions through China Oil and Gas Resources Investment Limited (SOGRI), his wholly-owned company, and is deemed to have interests and short positions in such shares[180](index=180&type=chunk) - The convertible bonds grant the bondholder an interest in **6,012,500,000** underlying shares, while the put and call option deeds grant SOGR and Dr. Dai Xiaobing interests in the same number of underlying shares, and grant the bondholder short positions in the same number of underlying shares[182](index=182&type=chunk)[184](index=184&type=chunk) [Share Option Scheme](index=36&type=section&id=Share%20Option%20Scheme) The Company's share option scheme was adopted in 2010 for a ten-year term; as of June 30, 2021, directors and employees held share options granted under the scheme, but no options were granted or exercised during the period - The share option scheme became effective on May 28, 2010, for a period of ten years, in compliance with Chapter 17 of the Listing Rules[192](index=192&type=chunk)[194](index=194&type=chunk) Directors' and Employees' Share Option Holdings (As of June 30) | Name | Outstanding at January 1, 2021 | Lapsed during the period | Outstanding at June 30, 2021 | Exercise price per share (HKD) | | :--- | :--- | :--- | :--- | :--- | | Dai Xiaobing | 3,600,000 | – | 3,600,000 | 2.76 | | Wen Zixun | 3,600,000 | – | 3,600,000 | 2.76 | | Jing Harry | 3,600,000 | – | 3,600,000 | 2.76 | | Wong Lung Tak Patrick | 300,000 | – | 300,000 | 2.76 | | Wang Yanbin | 300,000 | – | 300,000 | 2.76 | | Employees | 29,800,000 | 4,900,000 | 24,900,000 | 2.76 | | Total | 41,200,000 | 4,900,000 | 36,300,000 | - | - No share options were granted or exercised during the period, but **4,900,000** employee share options lapsed[195](index=195&type=chunk)[196](index=196&type=chunk) [Substantial Shareholders' and Other Persons' Interests](index=37&type=section&id=Substantial%20Shareholders'%20and%20Other%20Persons'%20Interests) As of June 30, 2021, Bright Reach Investment Limited, Mr. Lai Chun Lam, and Mr. Zhang Richun were substantial shareholders; Crescent Spring Investment Holdings Limited, as a convertible bondholder, held significant interests and short positions in underlying shares, along with a security interest in the Company's shares, while China Oil and Gas Resources Limited also held substantial interests in underlying shares Substantial Shareholders' and Other Persons' Interests (As of June 30) | Name | Nature of Interest | Number of Shares/Underlying Shares held | Percentage of issued shares | | :--- | :--- | :--- | :--- | | Bright Reach Investment Limited | Shares (Long Position) | 719,763,500 | 21.51% | | Bright Reach Investment Limited | Shares (Short Position) | 702,000,000 | 20.98% | | Lai Chun Lam | Shares (Long Position) | 398,000,000 | 11.90% | | Zhang Richun | Shares (Long Position) | 398,000,000 | 11.90% | | Zhuo Kun | Shares (Long Position) | 232,530,000 | 6.95% | | Crescent Spring Investment Holdings Limited | Underlying Shares (Long Position) | 6,012,500,000 | 179.72% | | Crescent Spring Investment Holdings Limited | Shares (Security Interest) | 137,932,000 | 4.12% | | Crescent Spring Investment Holdings Limited | Underlying Shares (Short Position) | 6,012,500,000 | 179.72% | | China Oil and Gas Resources Limited | Underlying Shares (Long Position) | 6,012,500,000 | 179.72% | | Cathay Rong IV Limited | Shares (Security Interest) | 702,000,000 | 20.98% | - Crescent Spring Investment Holdings Limited held convertible bonds with a principal amount of **USD 130,000,000**, convertible into up to **6,012,500,000** shares at **HKD 0.168** per share[206](index=206&type=chunk)[210](index=210&type=chunk) - Crescent Spring Investment Holdings Limited is a wholly-owned subsidiary of China Huarong Overseas Investment Holding Co., Ltd., ultimately controlled by China Huarong Asset Management Co., Ltd[209](index=209&type=chunk)[212](index=212&type=chunk) - Cathay Rong IV Limited is a wholly-owned subsidiary of China Huarong Macao (Hong Kong) Investment Holding Co., Ltd., also ultimately controlled by China Huarong Asset Management Co., Ltd[214](index=214&type=chunk)[218](index=218&type=chunk) [Purchase, Redemption or Sale of Listed Securities](index=40&type=section&id=Purchase%2C%20Redemption%20or%20Sale%20of%20Listed%20Securities) For the six months ended June 30, 2021, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities - Neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities[216](index=216&type=chunk)[219](index=219&type=chunk) [Audit Committee](index=40&type=section&id=Audit%20Committee) The Audit Committee reviewed the Group's accounting principles and practices with management, discussing audit, internal control, and financial reporting matters, including this interim report - The Audit Committee comprises Professor Wong Lung Tak Patrick, Dr. Wang Yanbin, and Dr. Dang Wei Hua[217](index=217&type=chunk)[220](index=220&type=chunk) - The Audit Committee reviewed accounting principles, internal controls, and financial reporting matters, and also reviewed this interim report[217](index=217&type=chunk)[220](index=220&type=chunk) [Corporate Governance](index=41&type=section&id=Corporate%20Governance) For the six months ended June 30, 2021, the Company complied with most provisions of the Corporate Governance Code, with two exceptions: the roles of Chairman and Chief Executive Officer were held by the same individual, and the Chairman was unable to attend the Annual General Meeting - The Company complied with all code provisions of the Corporate Governance Code, except for code provisions A.2.1 and E.1.2[222](index=222&type=chunk) - Exceptions include the roles of Chairman and Chief Executive Officer being combined and held by Dr. Dai Xiaobing, which the Board believes ensures consistent leadership[222](index=222&type=chunk) - Another exception was that Chairman Dr. Dai Xiaobing was unable to attend the Annual General Meeting on June 11, 2021, due to other business commitments, with Executive Director Mr. Wen Zixun presiding[222](index=222&type=chunk) [Code for Securities Transactions by Directors](index=41&type=section&id=Code%20for%20Securities%20Transactions%20by%20Directors) The Company has adopted the Model Code set out in Appendix 10 of the Listing Rules as its code of conduct for directors' securities transactions; for the six months ended June 30, 2021, all directors complied with this Model Code - The Company adopted the Model Code set out in Appendix 10 of the Listing Rules as its code of conduct for directors' securities transactions[222](index=222&type=chunk) - For the six months ended June 30, 2021, all Directors complied with the required standards for securities dealings by Directors as set out in the Model Code[222](index=222&type=chunk)

Financial Performance - For the year ended December 31, 2020, the revenue from continuing operations was HK$325,371,000, a decrease of 31.8% compared to HK$476,614,000 in 2019[11]. - The loss for the year attributable to owners of the company from continuing operations was HK$184,117,000, compared to a loss of HK$227,642,000 in 2019[11]. - The company reported a loss before income tax expense of HK$181,070,000 for continuing operations in 2020[11]. - The Group recorded a net loss of approximately HK$182,879,000 for the financial year 2020, a significant reduction of nearly 20% compared to the net loss of HK$227,642,000 in 2019[53]. - The Group's turnover for the year was approximately HK$325,371,000, a decrease from HK$476,614,000 in 2019, reflecting a decline due to the COVID-19 pandemic[52]. - EBITDA for the Group was recorded at approximately HK$82.8 million for the year[36]. - EBITDA for the Group was approximately HK$82,874,000, down from HK$98,152,000 in 2019[53]. - The Sanjiao CBM Project recorded EBITDA of approximately HK$71,235,000, compared to HK$87,918,000 in 2019[65]. - The Group's administrative expenses decreased by approximately 11.7% in 2020, contributing to a narrowing of losses by nearly 20% year-over-year[36]. Production and Sales - Total gas production in 2020 was approximately 101.75 million cubic meters, while gas sales were approximately 96.37 million cubic meters[15]. - The average sale-to-production rate for coalbed methane (CBM) in 2020 was 94.7%[16]. - The sales mix for CBM in 2020 consisted of 11.85% residential piped sales and 88.15% industrial piped sales[17]. - The production volume of CBM was approximately 101.75 million cubic meters, slightly down from 103.22 million cubic meters in 2019[65]. - The gas sale-to-production rate for the Sanjiao CBM Project was approximately 94.7%, down from 97.7% in 2019[65]. - CBM sales revenue for the Sanjiao CBM Project amounted to approximately HK$109,918,000, a decrease from HK$120,900,000 in 2019[65]. - Sales from the Sanjiao CBM Project amounted to approximately HK$109,918,000, down from HK$120,900,000 in 2019, reflecting a decline of 9.1%[48]. - Revenue from the raw coal washing project in Shanxi Province was approximately HK$207,660,000, a decrease of 40.6% from HK$350,353,000 in 2019[48]. Assets and Liabilities - As of December 31, 2020, non-current assets totaled HK$4,932,638,000, an increase from HK$4,404,156,000 in 2019[15]. - The net assets attributable to owners of the company were HK$2,674,738,000 as of December 31, 2020, compared to HK$2,638,185,000 in 2019[15]. - The total liabilities as of December 31, 2020, included non-current liabilities of HK$915,658,000, an increase from HK$574,673,000 in 2019[15]. - External borrowings, including the liability component of convertible notes, were approximately HK$2,134,368,000, up from HK$1,710,000,000 in 2019, with a gearing ratio of 37.9%[86]. Strategic Plans and Development - The company plans to continue focusing on gas production and sales expansion in the upcoming years[12]. - The Group plans to accelerate the development of the Sanjiao CBM Project to achieve a production capacity of 500 million cubic meters within the next 2-3 years[36]. - The Group is actively seeking merger and acquisition opportunities in oil and gas projects in North America and China[26]. - The Group is considering various financing options and debt restructuring to enhance liquidity, with expectations of gradual financial improvement[95]. - The Group is committed to enhancing shareholder value through strategic investments and operational improvements[120]. Governance and Management - The Company has complied with all code provisions in the Corporate Governance Code throughout the year ended December 31, 2020, except for the separation of roles of Chairman and CEO[145]. - The Board is committed to maintaining high standards of corporate governance to enhance shareholder value[144]. - The Company has established specific responsibilities for three committees: Audit Committee, Remuneration Committee, and Nomination Committee[158]. - The Audit Committee consists of three INEDs and is chaired by Professor Wong Lung Tak Patrick, assisting the Board in financial reporting and corporate control[183]. - The Company has a clear delegation of day-to-day operations to divisional management with established guidelines[158]. - The Company provides continuous professional development for Directors, including training on corporate governance and regulatory developments[167]. - The Company maintains an insurance policy to indemnify Directors and senior executives against losses arising from their duties[175]. Market and Economic Context - China's GDP increased by 2.3% in 2020 compared to 2019, showing economic recovery post-COVID-19[106]. - The Group anticipates strong demand for clean energy, particularly natural gas, as part of China's plan to reduce carbon emissions by 18% during the "14th Five-Year Plan"[106].

Corporate Information [Directors](index=2&type=section&id=Directors) The Board of Directors saw the appointment of Ms. Cai Yanling and Mr. Zeng Qingyun as non-executive directors, while Mr. Chen Hua and Ms. Chai Lin resigned. - Non-executive Director Ms. Cai Yanling was appointed on **June 26, 2020**[2](index=2&type=chunk) - Non-executive Director Mr. Zeng Qingyun was appointed on **August 28, 2020**[2](index=2&type=chunk) - Non-executive Director Mr. Chen Hua resigned on **August 28, 2020**[2](index=2&type=chunk) - Non-executive Director Ms. Chai Lin resigned on **June 26, 2020**[2](index=2&type=chunk) [Company Secretary](index=2&type=section&id=Company%20Secretary) Ms. Yan Xiaohong serves as the Company Secretary. - Ms. Yan Xiaohong serves as the Company Secretary[2](index=2&type=chunk) [Head Office and Principal Place of Business](index=2&type=section&id=Head%20Office%20and%20Principal%20Place%20of%20Business) The company's head office and principal place of business are located on the 44th floor of Convention Plaza Office Tower, 1 Harbour Road, Wanchai, Hong Kong. - The company's head office and principal place of business are located on the 44th floor of Convention Plaza Office Tower, 1 Harbour Road, Wanchai, Hong Kong[2](index=2&type=chunk) [Registered Office](index=2&type=section&id=Registered%20Office) The company's registered office is situated at Clarendon House, 2 Church Street, Hamilton HM11, Bermuda. - The company's registered office is situated at Clarendon House, 2 Church Street, Hamilton HM11, Bermuda[2](index=2&type=chunk) [Hong Kong Branch Share Registrar and Transfer Office](index=2&type=section&id=Hong%20Kong%20Branch%20Share%20Registrar%20and%20Transfer%20Office) The Hong Kong Branch Share Registrar and Transfer Office is Computershare Hong Kong Investor Services Limited. - The Hong Kong Branch Share Registrar and Transfer Office is Computershare Hong Kong Investor Services Limited[2](index=2&type=chunk) [Principal Share Registrar and Transfer Office](index=3&type=section&id=Principal%20Share%20Registrar%20and%20Transfer%20Office) The Principal Share Registrar and Transfer Office is MUFG Fund Services (Bermuda) Limited. - The Principal Share Registrar and Transfer Office is MUFG Fund Services (Bermuda) Limited[4](index=4&type=chunk) [Hong Kong Legal Advisor](index=3&type=section&id=Hong%20Kong%20Legal%20Advisor) The Hong Kong legal advisor is Li & Partners. - The Hong Kong legal advisor is Li & Partners[4](index=4&type=chunk) [Bermuda Legal Advisor](index=3&type=section&id=Bermuda%20Legal%20Advisor) The Bermuda legal advisor is Conyers Dill & Pearman. - The Bermuda legal advisor is Conyers Dill & Pearman[4](index=4&type=chunk) [Auditor](index=3&type=section&id=Auditor) The auditor is BDO Limited, Hong Kong. - The auditor is BDO Limited, Hong Kong[4](index=4&type=chunk) [Stock Code](index=3&type=section&id=Stock%20Code) The company's stock code is 702. - The company's stock code is **702**[4](index=4&type=chunk) [Website](index=3&type=section&id=Website) The company's website is www.sino-oilgas.hk. - The company's website is **www.sino-oilgas.hk**[4](index=4&type=chunk) Interim Results [Condensed Consolidated Statement of Comprehensive Income](index=4&type=section&id=Condensed%20Consolidated%20Statement%20of%20Comprehensive%20Income) For the six months ended June 30, 2020, the Group reported total revenue of **HK$118,884 thousand**, a **24.7% year-on-year decrease**, with a net loss of **HK$67,072 thousand** and basic and diluted loss per share of **HK$2.02 cents**. | Metric | 2020 (HK$ Thousand) | 2019 (HK$ Thousand) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Turnover | 118,884 | 157,807 | -24.7% | | Gross Profit | 21,905 | 24,055 | -8.9% | | Other Income | 39,513 | 39,821 | -0.8% | | Operating Profit | 33,251 | 27,154 | +22.4% | | Finance Costs | (100,982) | (92,146) | +9.6% | | Loss Before Income Tax Expense | (67,721) | (65,093) | +4.0% | | Loss for the Period | (67,072) | (67,057) | +0.02% | | Loss Attributable to Owners of the Company | (67,577) | (69,462) | -2.7% | | Basic and Diluted Loss Per Share (HK Cents) | (2.02) | (2.08) | -2.9% | - Total comprehensive income for the period was **(HK$128,362 thousand)**, a narrowing from **(HK$132,974 thousand)** in the prior year[10](index=10&type=chunk) [Condensed Consolidated Statement of Financial Position](index=6&type=section&id=Condensed%20Consolidated%20Statement%20of%20Financial%20Position) As of June 30, 2020, total assets slightly increased to **HK$4,993,105 thousand**, but net current liabilities remained high at **HK$975,598 thousand**, indicating significant going concern uncertainty, with a notable increase in non-current borrowings. | Metric | June 30, 2020 (HK$ Thousand) | December 31, 2019 (HK$ Thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Total Non-current Assets | 4,269,955 | 4,404,156 | -3.0% | | Total Current Assets | 723,150 | 572,406 | +26.3% | | Total Assets | 4,993,105 | 4,976,562 | +0.3% | | Total Current Liabilities | (1,698,748) | (1,754,872) | -3.2% | | Net Current Liabilities | (975,598) | (1,182,466) | -17.5% | | Total Non-current Liabilities | (775,702) | (574,673) | +35.0% | | Net Assets | 2,518,655 | 2,647,017 | -4.9% | | Borrowings (Non-current Portion) | (605,013) | (417,136) | +45.0% | - As of June 30, 2020, the Group's net current liabilities amounted to **HK$975,598 thousand**, raising significant doubts about its ability to continue as a going concern[17](index=17&type=chunk)[34](index=34&type=chunk) [Condensed Consolidated Statement of Changes in Equity](index=8&type=section&id=Condensed%20Consolidated%20Statement%20of%20Changes%20in%20Equity) For the six months ended June 30, 2020, total equity attributable to owners decreased from **HK$2,638,185 thousand** to **HK$2,509,492 thousand**, primarily due to the period's loss and negative impact from other comprehensive income. | Metric | June 30, 2020 (HK$ Thousand) | January 1, 2020 (HK$ Thousand) | Change (HK$ Thousand) | | :--- | :--- | :--- | :--- | | Equity Attributable to Owners of the Company | 2,509,492 | 2,638,185 | (128,693) | | Non-controlling Interests | 9,163 | 8,832 | 331 | | Total Equity | 2,518,655 | 2,647,017 | (128,362) | - The loss for the period was **HK$67,577 thousand**, and other comprehensive income was **(HK$61,116 thousand)**, resulting in a total comprehensive income attributable to owners of the company of **(HK$128,693 thousand)**[21](index=21&type=chunk) [Condensed Consolidated Statement of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) For the six months ended June 30, 2020, net cash from operating activities increased, but net cash outflow from investing activities significantly rose, while financing activities saw a substantial reversal to net inflow, resulting in a net increase of **HK$115,831 thousand** in cash and cash equivalents. | Metric | 2020 (HK$ Thousand) | 2019 (HK$ Thousand) | Change (HK$ Thousand) | | :--- | :--- | :--- | :--- | | Net Cash Generated from Operating Activities | 56,963 | 37,913 | +19,050 | | Net Cash (Used in) / Generated from Investing Activities | (119,323) | 9,470 | (128,793) | | Net Cash Generated from / (Used in) Financing Activities | 178,191 | (62,955) | +241,146 | | Net Increase / (Decrease) in Cash and Cash Equivalents | 115,831 | (15,572) | +131,403 | | Cash and Cash Equivalents at June 30 | 119,207 | 16,287 | +102,920 | Notes to the Condensed Consolidated Financial Statements [1. General Information](index=10&type=section&id=Note%201%20General) The company was incorporated in Bermuda on **November 2, 1999**, and listed on the Main Board of the Hong Kong Stock Exchange on **February 9, 2000**. - The company was incorporated in Bermuda on **November 2, 1999**[26](index=26&type=chunk)[29](index=29&type=chunk) - The company's shares were listed on the Main Board of the Hong Kong Stock Exchange on **February 9, 2000**[26](index=26&type=chunk)[29](index=29&type=chunk) [2. Basis of Preparation and Going Concern Assumption](index=10&type=section&id=Note%202%20Basis%20of%20Preparation%20and%20Going%20Concern%20Assumption) The interim financial report is prepared under HKFRS 34 and HKEX Listing Rules; the Group's **HK$975,598 thousand** net current liabilities and **HK$1,014 million** convertible notes due in September 2020 raise significant going concern doubts, but management is negotiating and has secured financial support from major shareholders. - The interim financial report is prepared in accordance with the Listing Rules of the Hong Kong Stock Exchange and Hong Kong Accounting Standard 34 issued by the Hong Kong Institute of Certified Public Accountants[27](index=27&type=chunk)[30](index=30&type=chunk) - As of June 30, 2020, the Group had net current liabilities of **HK$975,598 thousand**, which raises significant doubts about its ability to continue as a going concern[34](index=34&type=chunk)[38](index=38&type=chunk) - Convertible notes with a principal amount of **HK$1,014 million** are due at the end of September 2020, posing significant financial pressure[35](index=35&type=chunk)[38](index=38&type=chunk) - Management is actively negotiating with noteholders to extend the maturity date or assist potential investors in acquiring the convertible notes[35](index=35&type=chunk)[38](index=38&type=chunk) - Three major shareholders and directors of the company have confirmed their commitment to provide continuous and adequate financial support[36](index=36&type=chunk)[38](index=38&type=chunk) [3. Significant Accounting Policies](index=12&type=section&id=Note%203%20Significant%20Accounting%20Policies) This interim financial report adopts the same accounting policies as the 2019 annual financial statements, incorporating new and revised HKFRSs effective for the current period. - This interim financial report adopts the same accounting policies as the 2019 annual financial statements[42](index=42&type=chunk) - New and revised Hong Kong Financial Reporting Standards effective for the current period have been adopted[42](index=42&type=chunk) [4. Adoption of New and Revised HKFRSs](index=12&type=section&id=Note%204%20Adoption%20of%20New%20and%20Revised%20HKFRSs) The Group adopted several new and revised HKFRSs, including amendments to HKFRS 3, HKFRS 7, 9, HKAS 39, HKAS 1, and 8, which had no material impact on financial performance or position. - The Group first adopted amendments to **HKFRS 3** (Definition of a Business)[42](index=42&type=chunk) - The Group first adopted amendments to **HKFRS 7, 9, and HKAS 39** (Interest Rate Benchmark Reform)[42](index=42&type=chunk) - The Group first adopted amendments to **HKAS 1 and 8** (Definition of Material)[42](index=42&type=chunk) - The adoption of new standards had no material impact on the financial performance and position for the current and prior periods[42](index=42&type=chunk) [5. Revenue and Segment Reporting](index=13&type=section&id=Note%205%20Revenue%20and%20Segment%20Reporting) The Group operates four reportable segments: CBM, raw and washed coal, oil and gas exploitation, and financial services; for the six months ended June 30, 2020, CBM and coal revenues decreased, while financial services revenue grew, with CBM segment results including **HK$24,193 thousand** in government grants. - The Group has four reportable segments: Coal Bed Methane (CBM), Raw Coal and Washed Coal, Oil and Natural Gas Exploitation, and Financial Services[47](index=47&type=chunk)[48](index=48&type=chunk)[49](index=49&type=chunk) Revenue by Segment | Segment | 2020 Turnover (HK$ Thousand) | 2019 Turnover (HK$ Thousand) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Coal Bed Methane | 52,500 | 58,185 | -9.8% | | Raw Coal and Washed Coal | 61,930 | 73,980 | -16.3% | | Oil and Natural Gas Exploitation | – | – | N/A | | Financial Services | 4,454 | 25,642 | -82.6% | | Total | 118,884 | 157,807 | -24.7% | Segment Results | Segment | 2020 Segment Results (HK$ Thousand) | 2019 Segment Results (HK$ Thousand) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Coal Bed Methane | 28,469 | 18,858 | +51.0% | | Raw Coal and Washed Coal | 1,841 | 12,326 | -85.1% | | Oil and Natural Gas Exploitation | 9,681 | 9,816 | -1.4% | | Financial Services | 2,127 | 590 | +260.5% | | Unallocated | (8,904) | (14,682) | -39.4% | | Total | 33,214 | 26,908 | +23.4% | - The CBM segment results include government grants and subsidies of **HK$24,193 thousand** (2019: HK$24,454 thousand)[60](index=60&type=chunk)[62](index=62&type=chunk) [6. Other Income](index=16&type=section&id=Note%206%20Other%20Income) For the six months ended June 30, 2020, total other income was **HK$39,513 thousand**, primarily comprising interest income from financial assets at amortized cost and government grants. Other Income Breakdown | Category | 2020 (HK$ Thousand) | 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Interest income from bank deposits | 10 | 8 | | Interest income from short-term investments | 4,589 | 4,792 | | Other interest income | 9,688 | 10,287 | | **Total interest income from financial assets at amortized cost** | **14,287** | **15,087** | | Government grants and subsidies | 24,193 | 24,454 | | Others | 1,033 | 280 | | **Total** | **39,513** | **39,821** | - Other interest income primarily arises from interest on refundable deposits for the acquisition of a Canadian oilfield project[66](index=66&type=chunk)[67](index=67&type=chunk) - Government grants and subsidies mainly consist of recurring subsidies for CBM sales and VAT refunds[66](index=66&type=chunk)[67](index=67&type=chunk) [7. Other Losses, Net](index=17&type=section&id=Note%207%20Other%20Losses,%20Net) For the six months ended June 30, 2020, the Group recorded a net other loss of **HK$4 thousand**, mainly due to net exchange losses, partially offset by fair value changes in financial liabilities at fair value through profit or loss. Other Losses, Net Breakdown | Category | 2020 (HK$ Thousand) | 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Fair value changes of financial liabilities at fair value through profit or loss | 37 | 246 | | Net exchange losses | (41) | (301) | | **Total** | **(4)** | **(55)** | [8. Loss Before Income Tax Expense](index=17&type=section&id=Note%208%20Loss%20Before%20Income%20Tax%20Expense) For the six months ended June 30, 2020, loss before income tax expense was **HK$67,721 thousand**, primarily influenced by finance costs, particularly accrued interest on convertible notes, and operating expenses like staff costs and depreciation. Components of Loss Before Income Tax Expense | Category | 2020 (HK$ Thousand) | 2019 (HK$ Thousand) | | :--- | :--- | :--- | | **a) Finance Costs** | | | | Interest on corporate bonds | 16,317 | 17,058 | | Interest on borrowings | 8,648 | 3,538 | | Accrued interest on convertible notes | 71,969 | 62,319 | | Interest on lease liabilities | 400 | 954 | | Others | 462 | 13 | | Less: Interest capitalized into qualifying assets | (2,500) | (2,250) | | Amortization of corporate bond transaction costs | 5,686 | 6,097 | | **Total Finance Costs** | **100,982** | **92,146** | | **b) Staff Costs** | | | | Salaries, wages and other benefits | 11,955 | 15,001 | | Contributions to defined contribution retirement plans | 355 | 371 | | **Total Staff Costs** | **12,310** | **15,372** | | **c) Other Items** | | | | Cost of inventories sold recognized as expense | 56,254 | 57,489 | | Depreciation of property, plant and equipment | 16,627 | 17,409 | | Depreciation of right-of-use assets | 2,919 | 3,045 | | Amortization of intangible assets | 8,255 | 9,279 | - Accrued interest on convertible notes was the largest component of finance costs, amounting to **HK$71,969 thousand** in 2020, an increase of **15.5%** from 2019[71](index=71&type=chunk) - Staff costs, including directors' emoluments, decreased by **19.9%** from **HK$15,372 thousand** in 2019 to **HK$12,310 thousand** in 2020[74](index=74&type=chunk) [9. Income Tax Expense](index=19&type=section&id=Note%209%20Income%20Tax%20Expense) For the six months ended June 30, 2020, the Group recorded an income tax expense of **(HK$649 thousand)**, mainly due to deferred tax income offsetting PRC enterprise income tax, with no Hong Kong profits tax provision due to estimated tax losses. Income Tax Expense Breakdown | Category | 2020 (HK$ Thousand) | 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Current income tax - PRC Enterprise Income Tax | 169 | 1,964 | | Deferred tax for the period | (818) | – | | **Income Tax Expense** | **(649)** | **1,964** | - No provision for Hong Kong profits tax was made due to estimated tax losses available to offset assessable profits[76](index=76&type=chunk)[77](index=77&type=chunk) - PRC subsidiaries are subject to a statutory tax rate of **25%**[76](index=76&type=chunk)[77](index=77&type=chunk) [10. Dividend](index=19&type=section&id=Note%2010%20Dividend) For the six months ended June 30, 2020, the Directors did not declare or propose any dividends. - For the six months ended June 30, 2020, the Directors did not declare or propose any dividends[80](index=80&type=chunk)[81](index=81&type=chunk) [11. Loss Per Share](index=20&type=section&id=Note%2011%20Loss%20Per%20Share) For the six months ended June 30, 2020, basic and diluted loss per share were both **HK$2.02 cents**, a slight improvement from **HK$2.08 cents** in the prior year, with diluted loss per share being the same due to anti-dilutive effects of share options and convertible notes. Loss Per Share | Metric | 2020 (HK Cents) | 2019 (HK Cents) | | :--- | :--- | :--- | | Basic and Diluted Loss Per Share | (2.02) | (2.08) | - Basic loss per share is calculated based on the loss attributable to owners of the company of **HK$67,577 thousand** and the weighted average number of ordinary shares in issue of **3,345,439 thousand** shares[84](index=84&type=chunk)[88](index=88&type=chunk) - Diluted loss per share is the same as basic loss per share due to the anti-dilutive effect of share options and convertible notes[85](index=85&type=chunk)[89](index=89&type=chunk) [12. Property, Plant and Equipment](index=20&type=section&id=Note%2012%20Property,%20Plant%20and%20Equipment) For the six months ended June 30, 2020, the Group's capital expenditure on property, plant, and equipment was **HK$2,897 thousand**, with capitalized interest costs of **HK$2,046 thousand**, both lower than the prior year. Capital Expenditure on Property, Plant and Equipment | Metric | 2020 (HK$ Thousand) | 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Cost of capital expenditure | 2,897 | 11,786 | | Capitalized interest costs | 2,046 | 1,726 | [13. Intangible Assets](index=20&type=section&id=Note%2013%20Intangible%20Assets) Intangible assets primarily include operating rights for China's CBM projects and preferential supplier agreements for raw and washed coal projects, with the latter fully impaired in 2018. - Intangible assets primarily consist of operating rights for China's CBM projects and preferential supplier agreements for raw and washed coal projects[87](index=87&type=chunk)[91](index=91&type=chunk) - The preferential supplier agreement was fully impaired in **2018**[87](index=87&type=chunk)[91](index=91&type=chunk) [14. Trade, Notes and Other Receivables, Deposits and Prepayments](index=21&type=section&id=Note%2014%20Trade,%20Notes%20and%20Other%20Receivables,%20Deposits%20and%20Prepayments) As of June 30, 2020, the Group's total current trade, notes, and other receivables, deposits, and prepayments were **HK$446,004 thousand**, a slight decrease from year-end 2019, with other deposits mainly related to the potential acquisition of a Canadian oilfield project. Trade, Notes and Other Receivables, Deposits and Prepayments | Category | June 30, 2020 (HK$ Thousand) | December 31, 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Non-current deposits and prepayments | 29,477 | 44,152 | | Current trade receivables (net of impairment) | 22,039 | 28,996 | | Notes receivable | 13,213 | 5,761 | | Other receivables (net of impairment) | 62,815 | 60,976 | | Other deposits (net of impairment) | 302,271 | 309,018 | | Prepayments | 45,494 | 51,648 | | **Total Current Assets** | **446,004** | **456,571** | - Other deposits primarily include a deposit of **HK$227,668 thousand** for the potential acquisition of a Canadian oilfield project and related interest receivable of **HK$86,614 thousand**, with an annual interest rate of **8.5%**[97](index=97&type=chunk) - There was no change in expected credit loss allowance for trade receivables, other receivables, and other deposits for the six months ended June 30, 2020[97](index=97&type=chunk) [15. Trade and Other Payables and Accruals](index=23&type=section&id=Note%2015%20Trade%20and%20Other%20Payables%20and%20Accruals) As of June 30, 2020, the Group's total trade and other payables and accruals significantly decreased to **HK$303,583 thousand** from **HK$445,918 thousand** at year-end 2019, primarily due to a reduction in other payables and accruals. Trade and Other Payables and Accruals | Category | June 30, 2020 (HK$ Thousand) | December 31, 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Trade payables | 17,937 | 11,385 | | Other payables and accruals | 235,193 | 403,515 | | Receipts in advance | 36,083 | 16,648 | | Amounts due to shareholders | 14,370 | 14,370 | | **Total** | **303,583** | **445,918** | - Other payables primarily include exploration costs payable for oil and gas assets and related interest of approximately **HK$109,506 thousand**[102](index=102&type=chunk)[103](index=103&type=chunk) - Amounts due to shareholders are unsecured, interest-free, and repayable on demand[102](index=102&type=chunk)[104](index=104&type=chunk) [16. Borrowings](index=24&type=section&id=Note%2016%20Borrowings) As of June 30, 2020, total Group borrowings significantly increased to **HK$715,249 thousand** from **HK$511,610 thousand** at year-end 2019, driven by a notable rise in secured bank borrowings and the non-current portion of borrowings. Borrowings Breakdown | Category | June 30, 2020 (HK$ Thousand) | December 31, 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Secured bank borrowings | 229,756 | 2,797 | | Other unsecured borrowings | 20,970 | 44,677 | | Unsecured corporate bonds | 464,523 | 464,136 | | **Total Borrowings** | **715,249** | **511,610** | | Due within one year | 110,236 | 94,474 | | Non-current portion | 605,013 | 417,136 | - Secured borrowings are collateralized by the Group's oil and gas assets with a carrying amount of **HK$496,977 thousand** and receivables generated from the CBM segment[109](index=109&type=chunk) - Other unsecured borrowings include advances from directors and shareholders of **HK$10,000 thousand**, bearing interest at an annual rate of **12%**[109](index=109&type=chunk) Effective Interest Rate Range for Borrowings | Borrowing Type | Effective Interest Rate Range as of June 30, 2020 | | :--- | :--- | | Secured bank borrowings | 6.53% – 11% | | Other unsecured borrowings | 12% – 30% | | Unsecured corporate bonds | 5% – 8% | [17. Convertible Note](index=25&type=section&id=Note%2017%20Convertible%20Note) As of June 30, 2020, the total convertible note amounted to **HK$1,270,782 thousand**, with the liability component at **HK$1,270,773 thousand**; its maturity date was conditionally extended to **September 29, 2020**, and secured by shares in certain subsidiaries. Convertible Note Breakdown | Category | June 30, 2020 (HK$ Thousand) | December 31, 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Liability component | 1,270,773 | 1,198,804 | | Derivative component | 9 | 46 | | **Total** | **1,270,782** | **1,198,850** | - The maturity date of the convertible note was conditionally agreed to be extended to **September 29, 2020**, in March 2020, and approved by shareholders on **June 11, 2020**[114](index=114&type=chunk) - The convertible note is secured by issued shares of certain subsidiaries of the company, which hold the CBM operations and financial services segments[114](index=114&type=chunk)[115](index=115&type=chunk) [18. Commitments](index=25&type=section&id=Note%2018%20Commitments) As of June 30, 2020, the Group's capital commitments for the Sanjiao CBM project were **HK$18,056 thousand**, remaining largely consistent with year-end 2019. Commitments | Category | June 30, 2020 (HK$ Thousand) | December 31, 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Commitments for Sanjiao CBM project | 18,056 | 18,412 | [19. Contingent Liabilities](index=26&type=section&id=Note%2019%20Contingent%20Liabilities) The Group operates oil exploitation and CBM exploration, development, and production in China, facing potential liabilities related to environmental regulations and mine land restoration and rehabilitation, with a provision of **HK$11,911 thousand** made as of June 30, 2020. - The Group operates oil exploitation and CBM resource exploration, development, and production businesses in China[119](index=119&type=chunk)[121](index=121&type=chunk) - The Group faces potential liabilities related to environmental laws and regulations, and mine land restoration and rehabilitation[119](index=119&type=chunk)[120](index=120&type=chunk)[121](index=121&type=chunk) - As of June 30, 2020, a provision of **HK$11,911 thousand** has been made for mine land restoration and rehabilitation[120](index=120&type=chunk)[121](index=121&type=chunk) [20. Material Related Party Transactions](index=26&type=section&id=Note%2020%20Material%20Related%20Party%20Transactions) For the six months ended June 30, 2020, key management personnel remuneration was **HK$7,579 thousand**; the Group paid **HK$842 thousand** in rent and utilities to a related company with common major shareholders, with **HK$1,313 thousand** payable to this company, unsecured, interest-free, and repayable on demand. Key Management Personnel Remuneration | Category | 2020 (HK$ Thousand) | 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Short-term employee benefits (key management personnel remuneration) | 7,579 | 7,417 | - The Group paid rent and related utility expenses of **HK$842 thousand** to a related company with the same major shareholders[122](index=122&type=chunk)[124](index=124&type=chunk) - As of June 30, 2020, approximately **HK$1,313 thousand** was payable to this related company, which is unsecured, interest-free, and repayable on demand[122](index=122&type=chunk)[124](index=124&type=chunk) Management Discussion and Analysis [Business Review](index=27&type=section&id=Business%20Review) For the six months ended June 30, 2020, total Group revenue decreased by **24.7%** to **HK$118,884 thousand** due to the COVID-19 pandemic, yet EBITDA increased by **2%** to **HK$58,143 thousand** due to effective cost control, with net loss remaining stable, and the Sanjiao CBM project showing stable development and **15.3% EBITDA growth**. Key Financial Metrics | Metric | 2020 (HK$ Thousand) | 2019 (HK$ Thousand) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Total Turnover | 118,884 | 157,807 | -24.7% | | Administrative Expenses | (23,654) | (32,642) | -27.5% | | EBITDA | 58,143 | 56,786 | +2.4% | | Net Loss | (67,072) | (67,057) | +0.02% | - The Sanjiao CBM project's EBITDA grew by **15.3%** to **HK$53,234 thousand**, maintaining a production-to-sales ratio of **97%**[128](index=128&type=chunk)[130](index=130&type=chunk) - Raw coal washing business revenue decreased to **HK$61,930 thousand**, but is expected to rebound in the second half[126](index=126&type=chunk)[145](index=145&type=chunk)[150](index=150&type=chunk) - Financial services business revenue increased to **HK$4,454 thousand**[126](index=126&type=chunk)[147](index=147&type=chunk)[151](index=151&type=chunk) - Interest income within other income primarily derived from refundable deposits for the proposed acquisition of a Canadian oilfield project[132](index=132&type=chunk)[135](index=135&type=chunk) [Natural Gas and Oil Exploitation](index=28&type=section&id=Natural%20Gas%20and%20Oil%20Exploitation) The Group holds a **70% interest** in the Sanjiao CBM field in the Ordos Basin, in partnership with PetroChina, with **123 wells completed** and a CBM booster dehydration station capacity of **500 thousand cubic meters/day**, planned for expansion to **750 thousand cubic meters/day**. - The Group holds a **70% interest** in the Sanjiao CBM field and has obtained all necessary administrative permits[133](index=133&type=chunk)[134](index=134&type=chunk)[136](index=136&type=chunk) - As of June 30, 2020, the Sanjiao CBM project completed **123 wells**, with **95** in normal dewatering and production, and **101** connected to the gas gathering pipeline network[138](index=138&type=chunk)[141](index=141&type=chunk) - The CBM booster dehydration station has a daily processing capacity of **500 thousand cubic meters**, with plans to expand to **750 thousand cubic meters**[139](index=139&type=chunk)[142](index=142&type=chunk) Sanjiao CBM Project Performance | Metric | H1 2020 | H1 2019 | YoY Change (%) | | :--- | :--- | :--- | :--- | | CBM Sales (HK$ Thousand) | 52,500 | 58,185 | -9.8% | | CBM Production (Million cubic meters) | 47.78 | 51.29 | -6.8% | | CBM Sales Volume (Million cubic meters) | 46.34 | 49.76 | -6.9% | | Production-to-Sales Ratio | 97% | 97% | 0% | | Industrial Sales Proportion | 79.9% | 82.6% | -2.7% | | Residential Sales Proportion | 20.1% | 17.4% | +2.7% | - The Sanjiao CBM project's EBITDA was **HK$53,234 thousand**, representing a **15.3%** year-on-year increase[140](index=140&type=chunk)[143](index=143&type=chunk) [Raw Coal Washing Project Located in Shanxi Province](index=30&type=section&id=Raw%20Coal%20Washing%20Project%20Located%20in%20Shanxi%20Province) The Group holds a **75% interest** in the Shanxi Qinshui Basin raw coal washing project, which saw revenue decline to **HK$61,930 thousand** due to the pandemic but is expected to recover in the second half, with partial profit guarantee differences for 2019 already received. - The Group holds a **75% interest** in the raw coal washing project in the Qinshui Basin, Shanxi Province[145](index=145&type=chunk)[150](index=150&type=chunk) - Revenue for the period decreased to **HK$61,930 thousand** due to the pandemic, but turnover is expected to rebound in the second half[145](index=145&type=chunk)[150](index=150&type=chunk) - Approximately **RMB1.2 million** of the 2019 profit guarantee difference has been received, with the remaining portion expected by the end of 2020[146](index=146&type=chunk)[150](index=150&type=chunk) [Others (Financial Services)](index=30&type=section&id=Others) The Group established Shaanxi Zhaoyin Financial Leasing Co., Ltd. at the end of 2016 to enhance banking relationships, seek financing, and provide short-term investment opportunities for Group funds, generating **HK$4,454 thousand** in revenue during the period. - The Group established Shaanxi Zhaoyin Financial Leasing Co., Ltd., a wholly-owned subsidiary, at the end of **2016**[147](index=147&type=chunk)[151](index=151&type=chunk) - The company aims to strengthen banking relationships, seek financing channels, and provide short-term investment opportunities for the Group's funds[147](index=147&type=chunk)[151](index=151&type=chunk) - This business generated revenue of **HK$4,454 thousand** during the period[147](index=147&type=chunk)[151](index=151&type=chunk) [Financial Review](index=30&type=section&id=Financial%20Review) As of June 30, 2020, the Group's net assets were **HK$2,519 million**, total assets **HK$4,993 million**, total borrowings (including convertible note liability) **HK$1,986 million**, with a debt-to-asset ratio of **39.78%** and current ratio of **0.43**; the Group secured a **RMB300 million** loan facility, and management is actively addressing the **HK$1,014 million** convertible note due in September. Key Financial Position Metrics | Metric | June 30, 2020 | December 31, 2019 | Change | | :--- | :--- | :--- | :--- | | Net Assets | HK$2,519 million | HK$2,647 million | -4.8% | | Total Assets | HK$4,993 million | HK$4,977 million | +0.3% | | Total Borrowings (incl. convertible note liability) | HK$1,986 million | HK$1,710 million | +16.1% | | Debt-to-Asset Ratio | 39.78% | 34.36% | +5.42% | | Current Ratio | 0.43 | 0.33 | +0.10 | - In April 2020, the Group secured a **RMB300 million** five-year loan facility from Kunlun Trust, with **RMB200 million** already drawn at an annual interest rate of **11%** for the Sanjiao CBM project development[155](index=155&type=chunk)[160](index=160&type=chunk) - Facing **HK$1,014 million** convertible notes due at the end of September, management is actively negotiating with noteholders for maturity extension or introducing potential investors[156](index=156&type=chunk)[160](index=160&type=chunk) - Major shareholders and directors have pledged continuous financial support, expecting a gradual easing of financial pressure[157](index=157&type=chunk)[161](index=161&type=chunk) - The Group does not hedge against foreign exchange fluctuations, managing short-term imbalances through spot foreign exchange transactions[158](index=158&type=chunk)[162](index=162&type=chunk) - As of June 30, 2020, the Group employed approximately **300** staff, with remuneration policies based on market levels and employee performance[159](index=159&type=chunk)[163](index=163&type=chunk) [Prospects](index=32&type=section&id=Prospects) Despite global economic challenges, China's economic recovery and robust natural gas demand offer promising prospects; the Group will focus on stable revenue growth, strict cost control, and prudent financial management, including active debt management, to enhance operational efficiency and ensure shareholder returns. - China's economy is recovering ahead of others, with natural gas apparent consumption growing by **5.74%** year-on-year, indicating broad industry prospects[165](index=165&type=chunk)[168](index=168&type=chunk) - The Group will focus on stable revenue growth and strict cost control to maintain stable profits and consolidate its business foundation[166](index=166&type=chunk)[169](index=169&type=chunk) - The Sanjiao CBM project is expected to continue stable development, enhancing core competitiveness and profitability[166](index=166&type=chunk)[169](index=169&type=chunk) - The Group will maintain a prudent financial management strategy, actively manage debt, improve operational effectiveness and efficiency, and strengthen risk management[167](index=167&type=chunk)[170](index=170&type=chunk) Other Information [Directors' Interests in Shares and Underlying Shares](index=33&type=section&id=Directors'%20Interests%20in%20Shares%20and%20Underlying%20Shares) As of June 30, 2020, Directors and the Chief Executive held interests in the company's shares and underlying shares, with Dr. Dai Xiaobing holding **4.74% long position** and **4.11% short position** in shares, and **179.72% long position** in underlying shares. Directors' Interests in Shares and Underlying Shares | Director Name | Type of Interest | Nature of Interest | Number of Shares/Underlying Shares | % of Issued Shares | | :--- | :--- | :--- | :--- | :--- | | Dai Xiaobing | Long Position in Shares | Beneficial Owner/Controlled Corporation | 158,504,000 | 4.74% | | Dai Xiaobing | Short Position in Shares | Beneficial Owner/Controlled Corporation | 137,524,500 | 4.11% | | Dai Xiaobing | Long Position in Underlying Shares | Controlled Corporation | 6,012,500,000 | 179.72% | | Dai Xiaobing | Long Position in Share Options | Beneficial Owner | 3,600,000 | 0.11% | | Jing Hali | Long Position in Shares | Beneficial Owner | 1,400,000 | 0.04% | | Jing Hali | Long Position in Share Options | Beneficial Owner | 3,600,000 | 0.11% | | Wen Zixun | Long Position in Shares | Beneficial Owner | 3,366,000 | 0.10% | | Wen Zixun | Long Position in Share Options | Beneficial Owner | 3,600,000 | 0.11% | | Chen Hua | Long Position in Underlying Shares | Controlled Corporation | 76,897,179 | 2.30% | | Wong Lung Tak | Long Position in Share Options | Beneficial Owner | 300,000 | 0.01% | | Wang Yanbin | Long Position in Share Options | Beneficial Owner | 300,000 | 0.01% | - Dr. Dai Xiaobing holds interests in shares and underlying shares through SOGRI, which is wholly owned by him[180](index=180&type=chunk) - Mr. Chen Hua holds interests in underlying shares through a wholly-owned subsidiary of Kingkey Group Company Limited, in which he holds a **90% interest**[183](index=183&type=chunk) [Share Option Scheme](index=36&type=section&id=Share%20Option%20Scheme) The company's share option scheme, adopted in 2010, expired on **May 28, 2020**; as of June 30, 2020, Directors and employees held **41,200,000 outstanding options** with an exercise price of **HK$2.76** per share, exercisable until **December 5, 2021**, with no options lapsed, granted, or exercised during the period. - The company's share option scheme was adopted in **2010** and had a ten-year validity period until **May 28, 2020**[190](index=190&type=chunk)[191](index=191&type=chunk) Outstanding Share Options as of June 30, 2020 | Holder | Number of Outstanding Share Options as of June 30, 2020 | Date of Grant | Exercise Period | Exercise Price Per Share (HK$) | | :--- | :--- | :--- | :--- | :--- | | Dai Xiaobing | 3,600,000 | December 6, 2011 | December 6, 2011 – December 5, 2021 | 2.76 | | Jing Hali | 3,600,000 | December 6, 2011 | December 6, 2011 – December 5, 2021 | 2.76 | | Wen Zixun | 3,600,000 | December 6, 2011 | December 6, 2011 – December 5, 2021 | 2.76 | | Wong Lung Tak | 300,000 | December 6, 2011 | December 6, 2011 – December 5, 2021 | 2.76 | | Wang Yanbin | 300,000 | December 6, 2011 | December 6, 2011 – December 5, 2021 | 2.76 | | Employees | 29,800,000 | December 6, 2011 | December 6, 2011 – December 5, 2021 | 2.76 | | **Total** | **41,200,000** | | | | - No share options lapsed, were granted, or exercised during the period[195](index=195&type=chunk) [Substantial Shareholders' and Other Persons' Interests](index=37&type=section&id=Substantial%20Shareholders'%20and%20Other%20Persons'%20Interests) As of June 30, 2020, Bright Victory Investments Limited held **21.51% long** and **20.98% short positions** in shares; Lai Junlin and Zhang Richun each held **11.90% long positions**; Crescent Spring Investment Holdings Limited held **179.72% long** and **short positions** in underlying shares via convertible bonds. Substantial Shareholders' and Other Persons' Interests | Name | Type of Interest | Nature of Interest | Number of Shares/Underlying Shares | % of Issued Shares | | :--- | :--- | :--- | :--- | :--- | | Bright Victory Investments Limited | Long Position in Shares | Beneficial Owner | 719,763,500 | 21.51% | | Bright Victory Investments Limited | Short Position in Shares | Beneficial Owner | 702,000,000 | 20.98% | | Lai Junlin | Long Position in Shares | Beneficial Owner | 398,000,000 | 11.90% | | Zhang Richun | Long Position in Shares | Beneficial Owner | 398,000,000 | 11.90% | | Zhuo Kun | Long Position in Shares | Beneficial Owner | 259,280,000 | 7.75% | | Crescent Spring Investment Holdings Limited | Long Position in Underlying Shares | Beneficial Owner | 6,012,500,000 | 179.72% | | Crescent Spring Investment Holdings Limited | Long Position in Shares | Guaranteed Interest | 137,932,000 | 4.12% | | Crescent Spring Investment Holdings Limited | Short Position in Underlying Shares | Beneficial Owner | 6,012,500,000 | 179.72% | | China Oil and Gas Resources Limited | Long Position in Underlying Shares | Beneficial Owner | 6,012,500,000 | 179.72% | | Cathay Rong IV Limited | Long Position in Shares | Guaranteed Interest | 702,000,000 | 20.98% | - Bright Victory Investments Limited is wholly owned by Mr. Chen Jiajun, son of non-executive Director Mr. Chen Hua[205](index=205&type=chunk)[208](index=208&type=chunk) - Crescent Spring Investment Holdings Limited holds convertible bonds with a total principal amount of **US$130,000,000**, convertible into a maximum of **6,012,500,000 shares** at a conversion price of **HK$0.168** per share[206](index=206&type=chunk)[208](index=208&type=chunk) - Crescent Spring Investment Holdings Limited and China Oil and Gas Resources Limited (wholly owned by Dr. Dai Xiaobing) entered into put and call option deeds, resulting in both parties holding interests and short positions in the underlying shares[207](index=207&type=chunk)[209](index=209&type=chunk) - Crescent Spring Investment Holdings Limited is wholly owned by China Huarong Overseas Investment Holdings Co., Ltd., which is ultimately controlled by China Huarong Asset Management Co., Ltd[212](index=212&type=chunk) - Cathay Rong IV Limited is wholly owned by China Huarong Macau (Hong Kong) Investment Holdings Co., Ltd., which is ultimately controlled by China Huarong Asset Management Co., Ltd[212](index=212&type=chunk) [Purchase, Redemption or Sale of Listed Securities](index=40&type=section&id=Purchase,%20Redemption%20or%20Sale%20of%20Listed%20Securities) For the six months ended June 30, 2020, neither the company nor its subsidiaries purchased, sold, or redeemed any of the company's listed securities. - For the six months ended June 30, 2020, neither the company nor its subsidiaries purchased, sold, or redeemed any of the company's listed securities[212](index=212&type=chunk) [Audit Committee](index=41&type=section&id=Audit%20Committee) The Audit Committee, comprising Professor Wong Lung Tak, Dr. Wang Yanbin, and Dr. Dang Weihua, reviewed the Group's accounting principles, practices, and discussed audit, internal control, and financial reporting matters, including this interim report. - The Audit Committee comprises Professor Wong Lung Tak, Dr. Wang Yanbin, and Dr. Dang Weihua[217](index=217&type=chunk)[220](index=220&type=chunk) - The Committee reviewed the Group's accounting principles and practices, and discussed audit, internal control, and financial reporting matters, including this interim report[217](index=217&type=chunk)[220](index=220&type=chunk) [Corporate Governance](index=41&type=section&id=Corporate%20Governance) For the six months ended June 30, 2020, the company fully complied with all code provisions of the Corporate Governance Code set out in Appendix 14 of the Listing Rules. - The company complied with all code provisions of the Corporate Governance Code set out in Appendix 14 of the Listing Rules for the six months ended June 30, 2020[218](index=218&type=chunk)[221](index=221&type=chunk) [Code for Securities Transactions by Directors](index=41&type=section&id=Code%20for%20Securities%20Transactions%20by%20Directors) The company adopted the Model Code for Securities Transactions by Directors of Listed Issuers, as set out in Appendix 10 of the Listing Rules, and all Directors complied with it for the six months ended June 30, 2020. - The company adopted the Model Code for Securities Transactions by Directors of Listed Issuers, as set out in Appendix 10 of the Listing Rules, as its code of conduct for directors' securities transactions[219](index=219&type=chunk)[222](index=222&type=chunk) - All Directors complied with the Model Code for the six months ended June 30, 2020[219](index=219&type=chunk)[222](index=222&type=chunk) [By Order of the Board](index=41&type=section&id=By%20Order%20of%20the%20Board) This interim report was issued by the Board of Directors, represented by Chairman Dr. Dai Xiaobing, on **August 28, 2020**. - This interim report was issued by the Board of Directors, represented by Chairman Dr. Dai Xiaobing, on **August 28, 2020**[215](index=215&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk)[223](index=223&type=chunk)

(Incorporated in Bermuda with limited liability) (於百慕達註冊成立之有限公司) Stock Code 股份代號: 702 Annual Report 2019 年報 Contents CORPORATE INFORMATION FIVE YEAR FINANCIAL SUMMARY BUSINESS STRUCTURE CORPORATE STATEMENT CHAIRMAN'S STATEMENT MANAGEMENT DISCUSSION AND ANALYSIS DIRECTORS AND SENIOR MANAGEMENT PROFILES CORPORATE GOVERNANCE REPORT REPORT OF THE DIRECTORS INDEPENDENT AUDITOR'S REPORT CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONSOLIDATED STATEMENT OF CHANGES IN ...

Revenue and Profitability - Revenue for the six months ended June 30, 2019, was HK$157,807,000, a decrease of 50.2% compared to HK$314,790,000 in the same period of 2018[9] - Gross profit increased to HK$24,055,000, up 57.3% from HK$15,302,000 in the previous year[9] - Loss for the period was HK$67,057,000, a significant improvement from a loss of HK$164,603,000 in the same period of 2018, representing a reduction of 59.3%[9] - Total comprehensive income for the period was HK$132,974,000, compared to HK$267,576,000 in 2018, indicating a decrease of 50.3%[12] - Basic and diluted loss per share was HK$2.08, compared to HK$8.87 in the previous year, showing an improvement[12] - The total comprehensive income for the period ended June 30, 2019, was a loss of HK$135,115,000, compared to a loss of HK$269,503,000 in the same period of 2018[26] - The company reported a significant increase in inventories, which rose to HK$35,210 from HK$11,950, marking a growth of approximately 194%[16] - The company reported a loss of HK$102,404,000 attributed to unallocated expenses for the period[77] - The Group recorded a net loss of approximately HK$67,057,000, a significant reduction of about 59% from the net loss of HK$164,603,000 in the same period last year[168] Expenses and Costs - Other income for the period was HK$39,821,000, slightly down from HK$42,796,000 in 2018, a decrease of 6.9%[9] - Administrative expenses decreased to HK$32,642,000 from HK$39,728,000, reflecting a reduction of 17.8%[9] - Finance costs were HK$92,146,000, down 41.7% from HK$158,261,000 in the previous year[9] - Employee costs increased to HK$15,001,000 for the six months ended June 30, 2019, compared to HK$13,320,000 for the same period in 2018, reflecting a growth of 12.6%[98] - Total capital expenditure on property, plant, and equipment was HK$11,786,000 for the six months ended June 30, 2019, down from HK$13,190,000 in the same period of 2018, indicating a decrease of 10.7%[111] Assets and Liabilities - Total assets as of June 30, 2019, amounted to HK$4,974,132, an increase from HK$4,962,872 as of December 31, 2018[16] - Non-current assets totaled HK$4,425,634, slightly down from HK$4,441,642 at the end of 2018[16] - Current assets increased to HK$548,498 from HK$521,230, reflecting a growth of approximately 5.2%[16] - Total current liabilities rose to HK$1,610,514, compared to HK$1,473,224 at the end of 2018, indicating an increase of about 9.3%[20] - Net current liabilities stood at HK$1,062,016, up from HK$951,994, showing a deterioration in liquidity[20] - Total non-current liabilities were HK$487,986, slightly higher than HK$481,042 reported at the end of 2018[20] - Net assets decreased to HK$2,875,632 from HK$3,008,606, reflecting a decline of approximately 4.4%[20] - As of June 30, 2019, total equity stood at HK$2,875,632,000, reflecting a decrease from HK$3,066,315,000 as of June 30, 2018[26] - The Group's total receivables, including trade and other receivables, amounted to HK$411,894,000 as of June 30, 2019, compared to HK$365,106,000 as of December 31, 2018, an increase of 12.9%[119] Cash Flow and Financing - For the six months ended June 30, 2019, the net cash generated from operating activities was HK$42,705,000, compared to HK$2,577,000 in the same period of 2018, representing a significant increase[27] - The net cash generated before financing activities for the same period was HK$47,383,000, up from HK$1,312,000 in 2018[27] - The net cash used in financing activities for the six months ended June 30, 2019, was HK$62,955,000, compared to a net cash generated of HK$37,381,000 in the same period of 2018[27] - The company experienced a foreign exchange rate change impact of HK$5,090,000 on cash and cash equivalents during the first half of 2019[27] - Total borrowings as of June 30, 2019, were HK$484,387,000, compared to HK$477,123,000 as of December 31, 2018[133] - The effective interest rates on secured borrowings ranged from 5% to 12%, while unsecured borrowings ranged from 18% to 24% as of June 30, 2019[136] Segment Performance - For the six months ended June 30, 2019, total revenue was HK$157,807,000, with contributions from coalbed methane (HK$58,185,000), raw and cleaned coal (HK$73,980,000), and financial services (HK$25,642,000) [77] - Segment profit before income tax expense was HK$15,485,000 for coalbed methane, HK$11,584,000 for raw and cleaned coal, and HK$9,816,000 for oil and gas exploitation, resulting in a total profit before tax of HK$65,093,000 [77] - The financial services segment did not report any sales or trading transactions with other segments, indicating a focus on external revenue generation [73] - The company operates four reportable segments: coalbed methane, raw and cleaned coal, oil and gas exploitation, and financial services, each requiring distinct business strategies [72] Regulatory and Accounting Changes - The company has applied HKFRS 16 from January 1, 2019, using the modified retrospective approach, which does not restate comparative information[12] - The company has adopted HKFRS 16 starting January 1, 2019, impacting the financial reporting of lease liabilities[18] - The adoption of HKFRS 16 resulted in the recognition of right-of-use assets amounting to HK$18,227,000 as of January 1, 2019[52] - Lease liabilities recognized under HKFRS 16 totaled HK$14,312,000 as of January 1, 2019, reflecting the present value of future lease payments[59] - The transition to HKFRS 16 led to a reclassification of lease expenses from operating lease expenses to depreciation and finance costs[65] Future Outlook and Strategic Initiatives - The board is focused on improving operational efficiency and reducing costs to enhance profitability in future periods[8] - The Group faces financial pressure from convertible notes amounting to HK$1,014,000,000 due in September 2019, with management actively discussing options to amend terms or negotiate with potential investors[36] - Major shareholders and directors have confirmed their commitment to provide ongoing financial support to the Group during financial difficulties, ensuring sufficient working capital for the next twelve months[41] - The company is actively seeking quality investment opportunities in overseas upstream businesses, specifically targeting oil and gas fields in Alberta, Canada[200] - A possible acquisition of 51% equity interests in urban gas pipeline infrastructure companies in Guizhou is under due diligence[198]

Financial Performance - Revenue from continuing operations for the year ended December 31, 2018, was HK$427,867,000, a decrease from HK$497,935,000 in 2017, representing a decline of approximately 14%[13] - The loss before income tax expense for continuing operations was HK$382,926,000 for 2018, compared to a loss of HK$158,026,000 in 2017, indicating a significant increase in losses[13] - The total loss for the year attributable to owners of the company was HK$385,885,000, compared to a loss of HK$159,561,000 in the previous year, reflecting a year-over-year increase of approximately 142%[13] - Basic and diluted loss per share for the year was HK$15.64, worsening from HK$9.55 in 2017[13] - The company reported a profit from discontinued operations of HK$5,509,000, which contributed positively amidst the overall losses[13] - The income tax expense for the year was HK$2,959,000, which is a reduction from HK$6,112,000 in 2017, indicating a decrease in tax liabilities[13] - The Group recorded a net loss of approximately HK$385,885,000 for the financial year 2018, compared to a net loss of HK$159,561,000 in 2017, mainly due to high finance costs and impairment losses[45] - Finance costs incurred during the year were approximately HK$324,547,000, with cash flow-affecting finance costs at approximately HK$110,084,000[46] Operational Highlights - In 2018, total gas production was approximately 97.42 million cubic meters, while gas sales reached 78.10 million cubic meters[16] - Pipeline gas sales accounted for 100% of total gas sales in 2018[16] - The sales mix for coalbed methane in 2018 was 14.7% for residential piped sales and 85.3% for industrial piped sales[18] - The Group holds a 70% interest in the Sanjiao CBM Block through a production sharing contract with PetroChina as a partner[21] - The Group aims to enhance production capacity and maintain steady growth through the Sanjiao CBM Project[31] - The operational phase of the Sanjiao CBM Project has commenced, contributing to improved cash flow and enhancing the company's asset-liability position[92] - The production and sales of CBM were approximately 97.42 million cubic meters and 78.10 million cubic meters respectively, resulting in a gas sale-to-production rate of nearly 80%[60][62] Strategic Initiatives - The company has been focusing on restructuring its operations to improve financial performance and reduce losses in the upcoming fiscal year[12] - Future outlook includes potential market expansion strategies and the introduction of new technologies to enhance operational efficiency[12] - The management is exploring opportunities for mergers and acquisitions to strengthen its market position and diversify its portfolio[12] - The Group is actively seeking merger and acquisition opportunities in the oil and gas sector in North America and China[21] - The Group is exploring investment opportunities in overseas upstream businesses, specifically oil and gas fields in Alberta, Canada[71] - The Group aims to assess the feasibility of diversified business development to enhance sustainability and stability of returns for shareholders[112] Market Conditions - The natural gas market in China is projected to see rapid growth until 2040, driven by government initiatives for environmental protection[25] - The Shanxi Government's policies, such as "Gasification for Shanxi," are expected to significantly boost the coalbed methane industry[25] - In 2018, China's natural gas consumption increased by 17.7%, indicating a flourishing market and a favorable environment for the Group's operations[106] - The International Energy Agency projects that China will become the largest importer of LNG in 2019, with net imports expected to approach European Union levels by 2040[106] Financial Position - As of December 31, 2018, the company's external borrowings, including convertible notes, amounted to approximately HK$1,595 million as of December 31, 2018, down from HK$1,772 million in 2017[83] - The gearing ratio based on total assets was approximately 32.14% as of December 31, 2018, compared to 32.75% in the previous year[83] - The Group's net current liabilities included a convertible note with a principal amount of HK$1,014 million due in September 2019, creating significant financial pressure[96] - The Company is exploring various options to settle the convertible note, including full or partial conversion, amending terms to extend maturity, and seeking medium to long-term financing from financial institutions[96] Corporate Governance - The Board of Directors is committed to high standards of corporate governance, ensuring transparency and accountability to enhance shareholder value[155] - The Company complied with all provisions of the Corporate Governance Code throughout the year ended December 31, 2018[156] - The Audit Committee is responsible for monitoring financial matters and approving major capital expenditures[169] - The Company has established clear guidelines for divisional management regarding their authority and responsibilities[169] - The roles of Chairman and Chief Executive Officer are separated, with Dr. Dai Xiaobing as Chairman and Mr. King Hap Lee as CEO, ensuring a balance of power[189] Management and Personnel - The Group employed approximately 332 employees as of December 31, 2018, with remuneration policies based on market levels and individual performance[104] - The management team has extensive experience in government relations and financial management, contributing to the Group's operational efficiency[120] - The Company encourages continuous professional development for all Directors and senior management to enhance their knowledge and skills[177] - The Company provides monthly updates to all Directors to keep them informed of the Company's circumstances, enabling informed decision-making[183]