联合能源集团(00467) - 2023 - 中期业绩

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