中国油气控股(00702) - 2021 - 中期财报

Corporate Information 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 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] - The Company Secretary is Ms. Yim Siu Hung[5] Registered and Principal Offices 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] - 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] - The Hong Kong Share Registrar is Computershare Hong Kong Investor Services Limited[5] Advisors and Auditor 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] - The Bermuda Legal Advisor is Conyers Dill & Pearman[7] - The Auditor is BDO Limited, Hong Kong[7] Interim Results 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 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] - Finance costs increased by 20.1% year-on-year, further exacerbating the loss[9] Condensed Consolidated Statement of Financial Position 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] - Both total assets and net assets decreased, reflecting challenges in the Group's financial position[25][33] Condensed Consolidated Statement of Changes in Equity 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] - Exchange reserves increased by HKD 25,401 thousand due to other comprehensive income, partially offsetting the impact of the loss on equity[37] Condensed Consolidated Statement of Cash Flows 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] - Net cash used in investing activities significantly decreased, primarily due to substantial investment expenditures in 2020[40] Notes to the Condensed Consolidated Financial Statements 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 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][47] - 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][54] - 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][54] - Management is actively negotiating with noteholders to explore the possibility of acquiring the convertible notes or extending their maturity date[51][54] - 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][54] Significant Accounting Policies and Adoption of New and Revised HKFRSs 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][59] - 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] - The application of new and revised HKFRSs had no significant impact on the Group's financial performance and position[62] Revenue and Segment Reporting 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] 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] - Unallocated liabilities primarily include borrowings from shareholders and directors, financial liabilities at fair value through profit or loss, corporate bonds, and convertible notes[77] Other Income and Other Losses, Net 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][81] - 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] Loss Before Income Tax Expense 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] - Interest on borrowings significantly increased by 135.80%, indicating a rise in the Group's borrowing costs[85] - Staff costs (including directors' emoluments) amounted to HKD 12,295 thousand, remaining largely consistent with the prior period[85] Income Tax Expense and Dividend 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][88] - Chinese subsidiaries are subject to a statutory tax rate of 25%[87][88] 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][92] Loss Per Share 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] - 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] Property, Plant and Equipment and Intangible Assets 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] - The preferential supplier agreements have been fully provided for impairment loss[95] Trade, Notes and Other Receivables, Deposits and Prepayments 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] - An impairment loss of HKD 109,752 thousand was recognized for other receivables for the six months ended June 30, 2021[101] - 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] Trade and Other Payables and Accruals 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] - Default interest on convertible notes significantly increased by 153.21%, being a major contributor to the growth in other payables[105] Borrowings and Convertible Note 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] - 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][120] Commitments and Contingent Liabilities 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][123] - 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][123] Material Related Party Transactions 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] - 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] Management Discussion and Analysis 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 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][135] - 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][136] - 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][148] - 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][137] - 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][143] Capital Expenditure 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 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][161] - 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][161] - 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][161] - The Group primarily manages currency risk by buying and selling foreign currencies at spot exchange rates to address short-term imbalances[159][162] Employees and Remuneration Policies 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][163] - Remuneration policies are primarily determined by prevailing market remuneration levels and the performance of the respective companies and individual employees[160][163] 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][168] - 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][169] - The Group will maintain a prudent financial management strategy and actively manage its debt[167][170] - 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][170] Other Information 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 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] - 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][184] Share Option Scheme 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][194] 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][196] Substantial Shareholders' and Other Persons' Interests 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][210] - 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][212] - 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][218] Purchase, Redemption or Sale of Listed Securities 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][219] Audit Committee 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][220] - The Audit Committee reviewed accounting principles, internal controls, and financial reporting matters, and also reviewed this interim report[217][220] Corporate Governance 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] - 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] - 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] Code for Securities Transactions by Directors 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] - 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]