中国油气控股(00702) - 2020 - 中期财报

Corporate Information 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] - Non-executive Director Mr. Zeng Qingyun was appointed on August 28, 2020[2] - Non-executive Director Mr. Chen Hua resigned on August 28, 2020[2] - Non-executive Director Ms. Chai Lin resigned on June 26, 2020[2] Company Secretary Ms. Yan Xiaohong serves as the Company Secretary. - Ms. Yan Xiaohong serves as the Company Secretary[2] Head Office and Principal Place of Business 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] Registered Office 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] Hong Kong Branch Share Registrar and Transfer Office 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] Principal Share Registrar and Transfer Office 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] Hong Kong Legal Advisor The Hong Kong legal advisor is Li & Partners. - The Hong Kong legal advisor is Li & Partners[4] Bermuda Legal Advisor The Bermuda legal advisor is Conyers Dill & Pearman. - The Bermuda legal advisor is Conyers Dill & Pearman[4] Auditor The auditor is BDO Limited, Hong Kong. - The auditor is BDO Limited, Hong Kong[4] Stock Code The company's stock code is 702. - The company's stock code is 702[4] 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 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] Condensed Consolidated Statement of Financial Position 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][34] Condensed Consolidated Statement of Changes in Equity 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] Condensed Consolidated Statement of Cash Flows 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 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][29] - The company's shares were listed on the Main Board of the Hong Kong Stock Exchange on February 9, 2000[26][29] 2. Basis of Preparation and Going Concern Assumption 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][30] - 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][38] - Convertible notes with a principal amount of HK$1,014 million are due at the end of September 2020, posing significant financial pressure[35][38] - Management is actively negotiating with noteholders to extend the maturity date or assist potential investors in acquiring the convertible notes[35][38] - Three major shareholders and directors of the company have confirmed their commitment to provide continuous and adequate financial support[36][38] 3. Significant Accounting Policies 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] - New and revised Hong Kong Financial Reporting Standards effective for the current period have been adopted[42] 4. Adoption of New and Revised HKFRSs 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] - The Group first adopted amendments to HKFRS 7, 9, and HKAS 39 (Interest Rate Benchmark Reform)[42] - The Group first adopted amendments to HKAS 1 and 8 (Definition of Material)[42] - The adoption of new standards had no material impact on the financial performance and position for the current and prior periods[42] 5. Revenue and Segment Reporting 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$24,193 thousand in government grants. - The Group has four reportable segments: Coal Bed Methane (CBM), Raw Coal and Washed Coal, Oil and Natural Gas Exploitation, and Financial Services[47][48][49] Revenue by Segment | Segment | 2020 Turnover (HK$ 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][62] 6. Other Income 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][67] - Government grants and subsidies mainly consist of recurring subsidies for CBM sales and VAT refunds[66][67] 7. Other Losses, Net 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 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] - Staff costs, including directors' emoluments, decreased by 19.9% from HK$15,372 thousand in 2019 to HK$12,310 thousand in 2020[74] 9. Income Tax Expense 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][77] - PRC subsidiaries are subject to a statutory tax rate of 25%[76][77] 10. Dividend 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][81] 11. Loss Per Share 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][88] - 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][89] 12. Property, Plant and Equipment 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 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][91] - The preferential supplier agreement was fully impaired in 2018[87][91] 14. Trade, Notes and Other Receivables, Deposits and Prepayments 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] - 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] 15. Trade and Other Payables and Accruals 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][103] - Amounts due to shareholders are unsecured, interest-free, and repayable on demand[102][104] 16. Borrowings 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] - Other unsecured borrowings include advances from directors and shareholders of HK$10,000 thousand, bearing interest at an annual rate of 12%[109] 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 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] - The convertible note is secured by issued shares of certain subsidiaries of the company, which hold the CBM operations and financial services segments[114][115] 18. Commitments 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 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][121] - The Group faces potential liabilities related to environmental laws and regulations, and mine land restoration and rehabilitation[119][120][121] - As of June 30, 2020, a provision of HK$11,911 thousand has been made for mine land restoration and rehabilitation[120][121] 20. Material Related Party Transactions 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][124] - 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][124] Management Discussion and Analysis Business Review 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][130] - Raw coal washing business revenue decreased to HK$61,930 thousand, but is expected to rebound in the second half[126][145][150] - Financial services business revenue increased to HK$4,454 thousand[126][147][151] - Interest income within other income primarily derived from refundable deposits for the proposed acquisition of a Canadian oilfield project[132][135] Natural Gas and Oil Exploitation The Group holds a 70% interest in the Sanjiao CBM field in the Ordos Basin, in partnership with PetroChina, with 123 wells completed and a CBM booster dehydration station capacity of 500 thousand cubic meters/day, planned for expansion to 750 thousand cubic meters/day. - The Group holds a 70% interest in the Sanjiao CBM field and has obtained all necessary administrative permits[133][134][136] - As of June 30, 2020, the Sanjiao CBM project completed 123 wells, with 95 in normal dewatering and production, and 101 connected to the gas gathering pipeline network[138][141] - The CBM booster dehydration station has a daily processing capacity of 500 thousand cubic meters, with plans to expand to 750 thousand cubic meters[139][142] Sanjiao CBM Project Performance | Metric | H1 2020 | H1 2019 | YoY Change (%) | | :--- | :--- | :--- | :--- | | CBM Sales (HK$ 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][143] Raw Coal Washing Project Located in Shanxi Province 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][150] - 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][150] - Approximately RMB1.2 million of the 2019 profit guarantee difference has been received, with the remaining portion expected by the end of 2020[146][150] Others (Financial Services) 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][151] - The company aims to strengthen banking relationships, seek financing channels, and provide short-term investment opportunities for the Group's funds[147][151] - This business generated revenue of HK$4,454 thousand during the period[147][151] Financial Review 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][160] - 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][160] - Major shareholders and directors have pledged continuous financial support, expecting a gradual easing of financial pressure[157][161] - The Group does not hedge against foreign exchange fluctuations, managing short-term imbalances through spot foreign exchange transactions[158][162] - As of June 30, 2020, the Group employed approximately 300 staff, with remuneration policies based on market levels and employee performance[159][163] 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][168] - The Group will focus on stable revenue growth and strict cost control to maintain stable profits and consolidate its business foundation[166][169] - The Sanjiao CBM project is expected to continue stable development, enhancing core competitiveness and profitability[166][169] - The Group will maintain a prudent financial management strategy, actively manage debt, improve operational effectiveness and efficiency, and strengthen risk management[167][170] Other Information Directors' Interests in Shares and Underlying Shares 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] - 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] Share Option Scheme 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$2.76 per share, exercisable until December 5, 2021, with no options lapsed, granted, or exercised during the period. - The company's share option scheme was adopted in 2010 and had a ten-year validity period until May 28, 2020[190][191] Outstanding Share Options as of June 30, 2020 | Holder | Number of Outstanding Share Options as of June 30, 2020 | Date of Grant | Exercise Period | Exercise Price Per Share (HK$) | | :--- | :--- | :--- | :--- | :--- | | 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] Substantial Shareholders' and Other Persons' Interests 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][208] - 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][208] - 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][209] - 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] - 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] Purchase, Redemption or Sale of 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. - 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] Audit Committee 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][220] - The Committee reviewed the Group's accounting principles and practices, and discussed audit, internal control, and financial reporting matters, including this interim report[217][220] Corporate Governance 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][221] Code for Securities Transactions by Directors 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][222] - All Directors complied with the Model Code for the six months ended June 30, 2020[219][222] By Order of the Board 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][216][217][223]