中石化油服(01033) - 2022 - 中期财报

Cover and Important Notice Important Notice The company's board of directors, supervisory board, and senior management ensure the truthfulness, accuracy, and completeness of this semi-annual report, free from false statements or material omissions, with no interim cash dividends or capital reserve conversions to share capital resolved for the reporting period - Company management guarantees the truthfulness, accuracy, and completeness of this semi-annual report and assumes corresponding legal responsibilities[4] - The Board of Directors resolved not to distribute interim cash dividends for the year ended December 31, 2022, nor to convert capital reserves into share capital[4] - Financial reports prepared under China Accounting Standards for Business Enterprises are unaudited, while those prepared under International Financial Reporting Standards have been reviewed by BDO Limited, Hong Kong[4] Definitions - This section defines specific terms used in the report, such as company abbreviations, controlling shareholders, business terms (e.g., drilling, completion, CCUS), and regulatory bodies, providing a foundation for understanding the report's content[14] Company Profile and Key Financial Indicators Company Information Sinopec Oilfield Service Corporation ("Sinopec Oilfield Service") is a company listed on the Shanghai Stock Exchange (A-share: 600871) and the Hong Kong Stock Exchange (H-share: 1033), with Mr Chen Xikun as its legal representative - The company is an A+H share listed company, with A-share abbreviation “Sinopec Oilfield Service” and H-share abbreviation “Sinopec Oilfield Service”[15][17] Key Financial Indicators In the first half of 2022, the company's operating revenue increased by 5.0% year-on-year, but net profit attributable to shareholders significantly decreased by 45.7% primarily due to a 91.1% increase in R&D expenses, while net cash flow from operating activities turned negative, decreasing by 249.9%, with total assets and net assets showing slight growth compared to the end of last year Key Accounting Data (Under China Accounting Standards for Business Enterprises) | Indicator | Current Period (RMB thousand yuan) | Prior Period (RMB thousand yuan) | Year-on-year Change (%) | | :--- | :--- | :--- | :--- | | Operating Revenue | 33,148,652 | 31,570,061 | 5.0% | | Net Profit Attributable to Listed Company Shareholders | 200,268 | 368,558 | -45.7% | | Net Cash Flow from Operating Activities | -537,926 | 358,861 | -249.9% | | Basic Earnings Per Share (RMB/share) | 0.011 | 0.019 | -42.1% | | Weighted Average Return on Net Assets | 2.88% | 5.34% | Decrease 2.46 percentage points | Key Accounting Data (Under International Financial Reporting Standards) | Indicator | Current Period (RMB thousand yuan) | Prior Period (RMB thousand yuan) | Year-on-year Change (%) | | :--- | :--- | :--- | :--- | | Profit Attributable to Equity Holders of the Company | 555,642 | 694,246 | -20.0% | | Net Cash Flow from Operating Activities | -537,926 | 358,861 | -249.9% | | Basic and Diluted Earnings Per Share (RMB) | 0.029 | 0.037 | -19.9% | - The difference in net profit calculated under China Accounting Standards for Business Enterprises and International Financial Reporting Standards primarily stems from different accounting treatments for safety production fees (special reserves); under international standards, net profit for the first half of 2022 was RMB 556 million, higher than the RMB 200 million under China standards[22][23] Management Discussion and Analysis Operating Performance and Business Review In the first half of 2022, the company capitalized on rising oil prices, achieving a 5.0% year-on-year increase in operating revenue to RMB 33.15 billion, but net profit attributable to shareholders declined by 45.7% to RMB 200 million due to a 91.1% increase in R&D expenses from intensified key technology research, while new contract value reached RMB 52.9 billion, up 20.8% year-on-year, marking the best performance since the "13th Five-Year Plan" period, with particularly strong growth in domestic external and overseas markets 2022 H1 Performance Overview (Under China Accounting Standards for Business Enterprises) | Indicator | Amount (RMB thousand yuan) | Year-on-year Growth Rate (%) | | :--- | :--- | :--- | | Operating Revenue | 33,148,652 | 5.0% | | Net Profit Attributable to Parent Company | 200,268 | -45.7% | | Net Cash Flow from Operating Activities | -537,926 | -249.9% | - The decline in net profit was primarily due to the company's focus on technological leadership and increased R&D investment, with R&D expenses growing by 91.1% year-on-year in the first half[30] 2022 H1 New Contract Value | Market Category | New Contract Value (RMB billion yuan) | Year-on-year Growth Rate (%) | | :--- | :--- | :--- | | Total | 52.9 | 20.8% | | Sinopec Group Market | 31.63 | 16.5% | | Domestic External Market | 9.45 | 21.5% | | Overseas Market | 11.82 | 33.3% | Geophysical Services - Geophysical services main business revenue was RMB 1.51 billion, a year-on-year decrease of 16.0%[32] Drilling Services - Drilling services main business revenue was RMB 16.64 billion, a year-on-year increase of 5.9%, with the average utilization rate of drilling rigs increasing by 6.5 percentage points to 90.1% year-on-year[33] Logging Services - Logging services main business revenue was RMB 1.20 billion, a year-on-year increase of 4.5%[34] Downhole Special Operations Services - Downhole special operations services main business revenue was RMB 4.29 billion, a year-on-year increase of 8.9%[34] Engineering Construction Services - Engineering construction services main business revenue was RMB 8.33 billion, a year-on-year increase of 5.8%, with new contract value significantly growing by 60.2% to RMB 23.16 billion year-on-year[36] International Business - International business main revenue was RMB 5.65 billion, a year-on-year increase of 29.7%, accounting for 17.3% of total main business revenue[37] Technology R&D, Internal Reform, and Capital Expenditure - Technology R&D: In the first half, 300 new construction records were set, progress was made in key technology research such as the Type I rotary steerable system, and the commercialization of scientific and technological achievements reached RMB 1.39 billion[38] - Internal Reform: Promoted integrated resource optimization, established project management departments for the Southwest region, and accelerated the construction of a project-based management system[39] - Capital Expenditure: Capital expenditure in the first half was RMB 1.01 billion, a year-on-year increase of RMB 590 million, primarily for updating and purchasing equipment such as drilling rigs, fracturing skids, and rotary steerable instruments[40] Financial Position Analysis The company provided a detailed analysis of its key operating data, asset and liability status, and segment performance for the first half of 2022, noting significant increases in management and R&D expenses by 35.8% and 91.1% respectively, a 30.9% decrease in financial expenses due to reduced exchange losses, growth in contract assets and prepayments, and increases in short-term borrowings and notes payable, with overseas business revenue growing by 29.7%, significantly outpacing domestic growth of 1.1% Analysis of Key Operating Data Changes Changes and Reasons for Key Operating Data | Item | Current Period (RMB thousand yuan) | Prior Period (RMB thousand yuan) | Change Rate (%) | Reason for Change | | :--- | :--- | :--- | :--- | :--- | | Operating Revenue | 33,148,652 | 31,570,061 | 5.0% | Increase in workload | | Operating Cost | 30,727,547 | 29,584,206 | 3.9% | Costs increased proportionally with revenue | | Administrative Expenses | 1,092,018 | 803,949 | 35.8% | Strengthened budget control and balanced labor costs | | Financial Expenses | 281,888 | 408,182 | -30.9% | Decrease in net exchange losses | | R&D Expenses | 666,919 | 349,034 | 91.1% | Increased investment in key technology research | | Net Cash Flow from Operating Activities | -537,926 | 358,861 | -249.9% | Increased payments to suppliers | Analysis of Assets and Liabilities - As of the end of the reporting period, the company's total assets were RMB 65.67 billion, and total liabilities were RMB 58.25 billion, with major asset changes including a 20.6% increase in contract assets and a 107.8% increase in prepayments, while major liability changes included a 46.9% increase in lease liabilities[44] - Overseas assets reached RMB 18.30 billion, accounting for 27.9% of total assets, generating RMB 5.71 billion in operating revenue and RMB 260 million in net profit in the first half[46] Analysis of Major Holding and Participating Companies Operating Performance of Major Subsidiaries (RMB thousand yuan) | Company Name | Operating Revenue | Operating Profit | Net Profit | | :--- | :--- | :--- | :--- | | Sinopec Petroleum Engineering Construction Co, Ltd | 8,561,630 | 126,304 | 120,384 | | Sinopec Shengli Petroleum Engineering Co, Ltd | 6,572,566 | 67,375 | 40,583 | | Sinopec Zhongyuan Petroleum Engineering Co, Ltd | 4,979,161 | 47,418 | 5,766 | | Sinopec Geophysics Co, Ltd | 2,332,234 | 178,771 | 132,581 | | Sinopec Petroleum Engineering Geophysical Co, Ltd | 1,464,049 | -78,267 | -89,081 | Analysis of Main Business Segments Main Business by Industry (2022 H1) | Industry Segment | Main Business Revenue (RMB thousand yuan) | Gross Profit Margin (%) | Revenue Year-on-year Change (%) | | :--- | :--- | :--- | :--- | | Drilling | 16,635,798 | 7.1% | 5.9% | | Engineering Construction | 8,326,149 | 7.6% | 5.8% | | Downhole Special Operations | 4,292,870 | 6.5% | 8.9% | | Geophysics | 1,512,225 | 0.6% | -16.0% | | Logging | 1,202,466 | 18.7% | 4.5% | Main Business by Region (2022 H1) | Region | Operating Revenue (RMB thousand yuan) | Revenue Year-on-year Change (%) | | :--- | :--- | :--- | | Mainland China | 27,076,511 | 1.1% | | Hong Kong, Macao, Taiwan & Overseas | 5,650,053 | 29.7% | H2 Outlook and Operating Plan The company anticipates a continued recovery in the oilfield services industry in the second half of 2022, despite persistent market competition, with domestic and international oil and gas exploration and development investment expected to rebound driven by high oil prices and national energy security strategies, planning RMB 21.1 billion in new contracts for H2, targeting RMB 74 billion for the full year, while continuing to focus on market expansion, technological innovation, internal reform, and cost management, alongside RMB 3.49 billion in capital expenditure to enhance service capabilities - Market Outlook: The oilfield services industry is expected to continue its recovery in the second half, but faces challenges such as the global pandemic, uncertain economic prospects, and stricter demands from oil companies regarding costs, technology, safety, and environmental protection[51] - Operating Plan: New contract value for the second half is planned at RMB 21.1 billion, including RMB 3.6 billion from domestic external markets and RMB 3.2 billion from overseas markets, with a full-year target of RMB 74 billion[52] - Technology R&D: In the second half, the company will accelerate research on key technologies for deep and ultra-deep oil and gas engineering and shale oil and gas development, aiming to finalize the design and achieve mass production of the Type I rotary steerable system as soon as possible[60] - Capital Expenditure: Capital expenditure for the second half is planned at RMB 3.49 billion, primarily to ensure urgent production needs, enhance technical service capabilities, and upgrade equipment with safety and environmental risks[62] Risk Analysis The company faces key risks including market competition due to persistent oversupply and increased energy market volatility, health, safety, and environmental (HSE) risks inherent in oilfield operations and stricter environmental regulations, overseas operational risks involving geopolitical, economic, regulatory, and pandemic uncertainties, and exchange rate risks from US dollar-denominated debt and multi-currency transactions - Market Competition Risk: The oilfield services market faces oversupply, severe energy market fluctuations, and stricter demands from oil and gas companies regarding costs, technology, safety, and environmental protection[64] - Health, Safety, and Environmental (HSE) Risk: Oilfield service operations may lead to casualties, property damage, and environmental harm, with environmental regulations becoming increasingly stringent[65] - Overseas Operational Risk: Faces multiple risks including geopolitical, economic, policy and regulatory changes, contract breaches, and pandemics[66] - Exchange Rate Risk: Due to holding US dollar-denominated debt and multi-currency transactions, fluctuations in the RMB exchange rate may impact the company's operating costs[67] Liquidity and Capital Resources (Based on IFRS) As of June 30, 2022, under International Financial Reporting Standards, the company's total assets increased by 2.5% from the beginning of the year to RMB 65.67 billion, total liabilities increased by 1.9% to RMB 58.25 billion, and the asset-liability ratio slightly decreased from 89.3% to 88.7%, while cash flow from operating activities shifted from a net inflow of RMB 360 million in the prior period to a net outflow of RMB 540 million, primarily due to increased payments to suppliers, and net cash inflow from financing activities significantly increased due to higher loan volumes Changes in Financial Position (RMB thousand yuan) | Item | June 30, 2022 | December 31, 2021 | Change Amount | | :--- | :--- | :--- | :--- | | Total Assets | 65,671,526 | 64,052,447 | 1,619,079 | | Total Liabilities | 58,254,367 | 57,190,930 | 1,063,437 | | Total Equity Attributable to Shareholders | 7,417,159 | 6,861,517 | 555,642 | | Asset-Liability Ratio | 88.7% | 89.3% | -0.6 ppt | Key Cash Flow Statement Items (RMB thousand yuan) | Item | 2022 H1 | 2021 H1 | | :--- | :--- | :--- | | Net Cash from Operating Activities | (537,926) | 358,861 | | Net Cash Used in Investing Activities | (492,591) | (390,632) | | Net Cash from Financing Activities | 305,843 | 9,267 | - As of June 30, 2022, the Group's total borrowings were RMB 19.99 billion, with short-term borrowings accounting for RMB 18.44 billion, and the capital-to-debt ratio slightly increased to 72.1% from 71.6% at the beginning of the year[71][72] Corporate Governance Overview of Corporate Governance During the reporting period, the company continuously improved its corporate governance structure, complied with domestic and international regulatory requirements, and ensured the standardized operation of its general meeting of shareholders, board of directors, and supervisory board, establishing a new Board Nomination Committee and revising multiple internal governance policies in accordance with the latest regulatory requirements, holding 3 general meetings, 3 board meetings, and 3 supervisory board meetings, with its corporate governance practices conforming to CSRC requirements and complying with the HKEX Corporate Governance Code - During the reporting period, the company's corporate governance structure was improved, a new Board Nomination Committee was established, and multiple policies such as the "Nomination Committee Work Rules" and "General Manager Work Rules" were revised[73] - The company complied with Appendix 14 "Corporate Governance Code" and Appendix 10 "Model Code" of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited[80][81] Changes in Directors, Supervisors, and Senior Management During the reporting period, Mr Ma Xiang resigned as Chairman of the Supervisory Board due to age, Mr Wang Jun was elected as Supervisor and Chairman of the Supervisory Board by the general meeting of shareholders and supervisory board, and Mr Zhang Jiankuo resigned as Deputy General Manager due to work relocation Changes in Senior Management | Name | Position Held | Change Type | Reason for Change | | :--- | :--- | :--- | :--- | | Ma Xiang | Chairman of Supervisory Board, Supervisor | Resignation | Personal age reason | | Wang Jun | Supervisor, Chairman of Supervisory Board | Election | Election by General Meeting of Shareholders and Supervisory Board | | Zhang Jiankuo | Deputy General Manager | Resignation | Personal work relocation | Environmental and Social Responsibility Environmental Protection and Carbon Reduction The company adheres to a green and low-carbon development philosophy, effectively operates its HSE management system, strictly enforces environmental regulations, ensures compliant disposal of pollutants such as exhaust gas, wastewater, and solid waste, and strengthens energy efficiency management, while actively promoting the application of clean energy like electricity and natural gas for carbon reduction, with grid-powered drilling rigs completing 51% of domestic total footage in the first half, replacing 150,000 tons of diesel, and enhancing monthly inventory management of greenhouse gas emissions - The company effectively operates its HSE management system, entrusting qualified service providers with the disposal of hazardous waste; as of June 30, 2022, 969,000 tons of general solid waste and 571 cubic meters of hazardous waste were compliantly disposed of[83][84] - The company strengthened energy efficiency management, with comprehensive energy consumption per RMB 10,000 of industrial output value decreasing by 12.78% year-on-year as of June 30, 2022[84] - In terms of carbon reduction, the company vigorously promoted the application of clean energy; in the first half, drilling footage completed by grid-powered drilling rigs accounted for 51% of total domestic footage, replacing 150,000 tons of diesel and saving 156,000 tons of standard coal[86] Significant Matters Commitments and Litigation/Arbitration During the reporting period, controlling shareholder Sinopec Group strictly fulfilled its commitments regarding avoiding horizontal competition, regulating related party transactions, and maintaining the listed company's independence, with no significant new lawsuits for the company, but two important arbitration cases are ongoing: the judicial reorganization of an indirectly controlled Brazilian subsidiary is still in progress, and while an indirectly wholly-owned subsidiary received a favorable ruling in the Ecuador I-L-Y oilfield project arbitration for approximately USD 64 million plus interest, the counterparty has filed an application for annulment, creating uncertainty regarding enforcement - Controlling shareholder Sinopec Group did not breach its commitments made during the major asset restructuring regarding avoiding horizontal competition, regulating related party transactions, and maintaining the listed company's independence during the reporting period[88] - The judicial reorganization of the Brazilian subsidiary is still ongoing, with some labor and supplier lawsuits remaining unresolved due to the COVID-19 pandemic, leading to automatic procedural extensions[92] - The Ecuador I-L-Y oilfield project arbitration resulted in a favorable ruling, requiring the counterparty to pay approximately USD 64 million plus interest, but the counterparty has applied to the Chilean court to annul the arbitration award, creating uncertainty regarding enforcement[94] Significant Related Party Transactions The company's daily operations involve substantial related party transactions with controlling shareholder Sinopec Group and its associates, with purchases of raw materials and equipment totaling RMB 5.29 billion in the first half of 2022, accounting for 45.0% of similar transactions, and provision of engineering services generating RMB 20.76 billion in revenue, representing 63.6% of similar transactions, while also maintaining close financial ties with related parties, with total funds obtained from related parties amounting to RMB 24.11 billion at period-end Major Daily Operating Related Party Transactions (2022 H1) | Related Party Transaction Content | Related Party | Transaction Amount (RMB thousand yuan) | % of Similar Transactions | | :--- | :--- | :--- | :--- | | Purchase of Raw Materials, Equipment | Sinopec Group and its Associates | 5,291,028 | 45.0% | | Provision of Engineering Services | Sinopec Group and its Associates | 20,762,266 | 63.6% | | Obtaining Loans | Sinopec Group and its Subsidiaries | 12,154,500 | 100.0% | | Repayment of Loans | Sinopec Group and its Subsidiaries | 11,380,482 | 99.7% | - At period-end, the company's receivables from related parties (Sinopec Group and its subsidiaries) totaled approximately RMB 10.03 billion, and payables to related parties (including borrowings) totaled approximately RMB 24.11 billion, indicating a strong financial reliance on the controlling shareholder[99] Significant Contracts and Guarantees During the reporting period, the company provided guarantees for its wholly-owned subsidiaries and joint ventures to meet international market expansion and daily operational needs, with total guarantees amounting to RMB 29.83 billion as of the end of the reporting period, representing 402.2% of the company's net assets, including a performance guarantee of up to USD 275 million for its joint venture, DS Company in Mexico Summary of External Guarantees | Item | Amount (RMB thousand yuan) | | :--- | :--- | | Total Guarantee Balance for Subsidiaries at Period-end (B) | 27,989,017 | | Total Guarantees (A+B) | 29,834,316 | | Total Guarantees as % of Company's Net Assets | 402.2% | - The company provided a performance guarantee for its joint venture, DS Company in Mexico, regarding the "Production Sharing Contract," with a maximum joint and several liability not exceeding USD 275 million[104] Share Changes and Shareholder Information Share Capital Structure and Shareholder Information During the reporting period, the company's total share capital and share capital structure remained unchanged, with a total of 133,672 shareholders as of June 30, 2022, and controlling shareholder Sinopec Group directly and indirectly holding a combined 70.18% of the company's shares, while the top ten shareholders also included HKSCC Nominees Limited (holding 28.46% of H-shares) and CITIC Limited (holding 3.25% of A-shares) - As of June 30, 2022, the company had a total of 133,672 shareholders, including 133,336 A-share shareholders and 336 H-share registered shareholders[107] Top Three Shareholders' Shareholding | Shareholder Name | Shareholding Percentage (%) | Share Type | | :--- | :--- | :--- | | Sinopec Group (Direct and Indirect) | 70.18% | A-share + H-share | | HKSCC Nominees Limited | 28.46% | H-share | | CITIC Limited | 3.25% | A-share | Shareholding of Directors, Supervisors, and Senior Management As of the end of the reporting period, among the company's directors, supervisors, and senior management, only Deputy General Manager Mr Sun Bingxiang directly held 50,300 A-shares, while some current and former directors, supervisors, and senior management indirectly held company shares through the "Qixin Co-win Plan," which held 11,574,427 A-shares at the end of the reporting period - Except for Deputy General Manager Mr Sun Bingxiang, who holds 50,300 A-shares, other directors, supervisors, and senior management do not directly hold company shares[114] - Some of the company's directors, supervisors, and core management personnel hold company shares through the "Qixin Co-win Plan," which was unlocked in January 2021, and as of the end of the reporting period, half of the shares had been reduced, with 11,574,427 A-shares remaining[115] Financial Report Financial Report under China Accounting Standards for Business Enterprises This section contains the company's unaudited semi-annual consolidated and parent company financial statements for 2022, prepared under China Accounting Standards for Business Enterprises, including the balance sheet, income statement, cash flow statement, statement of changes in owners' equity, and detailed notes to the financial statements, showing total assets of RMB 65.67 billion, total liabilities of RMB 58.25 billion, and total owners' equity attributable to the parent company of RMB 7.42 billion as of June 30, 2022 Consolidated Balance Sheet Summary (June 30, 2022) | Item | Amount (RMB thousand yuan) | | :--- | :--- | | Total Assets | 65,671,526 | | Total Liabilities | 58,254,367 | | Total Equity Attributable to Parent Company Owners | 7,417,159 | Consolidated Income Statement Summary (Jan-Jun 2022) | Item | Amount (RMB thousand yuan) | | :--- | :--- | | Total Operating Revenue | 33,148,652 | | Total Operating Costs | 32,917,223 | | Total Profit | 377,377 | | Net Profit | 200,268 | Financial Report under International Financial Reporting Standards This section presents the condensed consolidated interim financial information reviewed by BDO Limited, Hong Kong, prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting," with the review conclusion indicating no material aspects were found not to be prepared in accordance with the standard, and the statements show a profit before tax of RMB 733 million and profit for the period of RMB 556 million for the six months ended June 30, 2022 - This interim financial information has been reviewed by BDO Limited, Hong Kong, in accordance with International Standard on Review Engagements 2410, with the review conclusion indicating no material issues were found[430][431] Condensed Consolidated Statement of Profit or Loss Summary (Jan-Jun 2022) | Item | Amount (RMB thousand yuan) | | :--- | :--- | | Operating Revenue | 33,148,652 | | Gross Profit | 2,654,272 | | Profit Before Tax | 732,751 | | Profit for the Period | 555,642 | Catalogue of Documents for Reference - This section lists documents available for inspection by shareholders and regulatory bodies, including the signed semi-annual report, original financial reports, the "Articles of Association," and all publicly disclosed documents during the reporting period[512]