Contents
2 CHAIRMAN'S STATEMENT
- MANAGEMENT DISCUSSION AND ANALYSIS
- SUPPLEMENTARY INFORMATION
- REPORT ON REVIEW OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS
- CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
24 CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
- CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
- CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
- NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
58 COMPANY DIRECTORY
Introduction
China Oilfield Services Limited (the "Company", the "Group" or "COSL"), listed on Hong Kong Stock Exchange (HK stock code: 2883) and
Shanghai Stock Exchange (Shanghai stock code: 601808), is one of the leading integrated oilfield services providers in the world. Its services cover each phase of oil and gas exploration, development and production.
Financial Highlights
First Half of 2018 | First Half of 2019 | First Half of 2020 | |
RMB million | RMB million | RMB million | |
Revenue | 8,128 | 13,552 | 14,497 |
Profit from operations | -240 | 1,601 | 2,222 |
Profit from operations | |||
(excluding impairment of fixed assets and goodwill) | -117 | 1,601 | 3,066 |
Profit for the period | -363 | 986 | 1,723 |
Profit for the period | |||
(excluding impairment of fixed assets and goodwill) | -240 | 986 | 2,567 |
RMB/share | RMB/share | RMB/share | |
Earnings per share | -0.08 | 0.20 | 0.36 |
China Oilfield Services Limited • Interim Report 2020 | 1 |
Chairman's Statement
Dear Shareholders,
During the first half of 2020, the capital expenditure of oil and gas companies across the globe declined drastically due to the dual shock of the COVID-19 pandemic (hereinafter "Pandemic") and a collapse in oil prices, which brought severe impacts and challenges to the global oilfield service market. Facing such severe situation of a persistent downturn in the industry and the external environment, the Company earnestly implemented its "technical and international development" strategy and pursued operation, planned management and reform tasks, with concrete achievements. In the first half of the year, the Company recorded revenue of RMB14.50 billion, representing an increase of RMB940 million or 7% as compared with the same period of last year. Net profit amounted to RMB1.72 billion representing an increase of RMB740 million or 75% as compared with the same period of last year. On behalf of the board of directors (the "Board"), I would like to express my heartfelt thanks and appreciation to all employees for their dedication, and my sincere gratitude and best wishes to our investors for their continued trust and support.
1. Achieving overall outstanding results and enhancing international operation and management capabilities
In the first half of the year, the Company reformed and enhanced its governance system and capability. In face of the adverse environment, the Company was bold to take action and good at accomplishment, which highlighted its determination in pursuing high quality development. Internationally, the Company initiated a series of pandemic prevention and control measures and endeavoured to ensure normal performance of contracts. It successfully completed offshore jack-up drilling rigs service and semi-submersibles service projects in the Asia Pacific region, and commenced drilling, drilling fluid, well cementing, stimulation and logging operations as scheduled, which earned clients recognition and appreciation. Meanwhile, the Company promptly adjusted its market strategy and continued to focus on core markets. In the first half of the year, new offshore wireline logging services, offshore stimulation equipment and operation service, offshore well cementing engineering service, land work-over service and stimulation package service were secured in the Asia Pacific, Middle East and American markets.
2. Significantly improving speed and quality of technical achievements and remarkably improving quality and enhancing efficiency with technologies
In the first half of the year, the Company focused on promotion of reserve and production and worked on various key technical applications and industrialization research, with significant results. Regarding new technical achievements, the testings of the quadrupole acoustic imaging logging tool while drilling and the high-speed mud pulse generator while drilling; the high temperature logging sea trial operation of the 235℃ super high temperature ESCOOL system in Bohai; and the sea trial of the first domestic underwater release rubber plug system for deep-water well cementing were successful, while breakthrough was made in the new microspheres regulating flooding system, realizing effective combined effects of "regulating-plugging-flooding". Regarding improving quality and enhancing efficiency with technologies, the large scale application of technical products such as high-temperature and high-speed logging system and "two-wide and two-high" seismic acquisition enabled discoveries of offshore oil and gas reserves of over 100 million tonnes in China sea; and continuous successes in the using of high-end technical products such as outline while drilling in Bohai actually helped enhance oilfield development capacity.
3. More scientific and precise governance system and further enhancement of governance capabilities
In 2020, the Company adopted cost reducing and efficiency improving measures with unprecedented efforts, refined cost control direction and measures, maximised lowering expenses of leased drilling rigs and vessels, accelerated industrialization of self-owned technology and equipment, enhanced self-repair capability of vessels, optimised value chain management of low permeability and stimulation technologies, stringently controlled overseas administration expenses and lowered operating and maintenance costs. We also successfully issued senior bonds amounted to US$800 million, with lowest overall cost and highest over-subscription rate for USD bonds ever issued by the Company. The issuance secured the liquidity and security of funds over a certain period and the Company's brand was well recognized by the international capital market.
2 | China Oilfield Services Limited • Interim Report 2020 |
Chairman's Statement (continued)
4. Promoting the development of QHSE management framework and consolidating QHSE management foundation
In the first half of 2020, the Company continued to consolidate QHSE management foundation, deepened the implementation of the "safe production responsibility of all staff", comprehensively promoted the building of the QHSE system, and advanced the informatization of QHSE management. The Company comprehensively implemented Xi Jinping's thought of ecological civilization, formulated plan for implementation of green and low carbon development and fostered a culture of safety with COSL's characteristics. During the period, the Company's overall production safety remained stable, QHSE management steadily improved and the quality of its operation services and products was good, with OSHA recordable incident occurrence rate of 0.094.
Outlook
Looking ahead to the second half of 2020, as the normal of the industry will still be in a downturn generally, we will unswervingly implement our "technical and international development" strategy, ensure rapid progress of major technological projects, adhere to the development direction of providing technical services, maintain production safety, constantly promote QHSE standard at the industry and international levels, enhance overseas independent operation and management capabilities and endeavour to achieve the targets of cost reduction, quality improvement and efficiency enhancement. We will accelerate modernization of the corporate governance system and capability with reforms, allocate resources in line with the national "Seven-Year Action Plan" and make greater contribution to energy security.
Qi Meisheng
Chairman And CEO
26 August 2020
China Oilfield Services Limited • Interim Report 2020 | 3 |
Management Discussion and Analysis
INDUSTRY OVERVIEW
During the first half of 2020, the international crude oil market experienced a drastic decline and a volatile downward adjustment. Uncertain factors such as the Pandemic caused fluctuations in international crude oil prices at the bottom and the pessimistic market sentiment. At the beginning of the year, the Brent crude oil prices dropped from US$60 per barrel to around US$30 per barrel, and then the OPEC+ production reduction agreement supported the increase in oil prices to an extent, but after the unsuccessful supply reduction negotiations, the international oil prices fell rapidly. In May, major oil-producing countries, put aside their differences, reached an historic supply reduction agreement after tough negotiation. International oil prices have bounced back from the ultra-low oil price range and returned to around US$40 per barrel. Compared with 2019, the global oil and gas companies' capital expenditure have dropped significantly, and the oilfield service industry was still in a downturn. The utilization rate of global large-scale equipment hovered at a low level, the basic state of oversupply has not been completely eliminated, and the prices for the oilfield services is still at a historically low level, resulting in greater challenges to the operation of the integrated oilfield service company. According to the information from the third party, due to China's energy security strategy, the domestic oil and gas exploration and development market is still growing.
BUSINESS REVIEW
In the first half of 2020, affected by the Pandemic global outbreak and the sharp fall in oil prices, the international oil service market entered into a new round of industry troughs, with declines in both service price and operation volume. In response to the "Six Stabilities" tasks for combating the Pandemic and recovering the economy, long-term planning within the national energy security strategy, and continued implementation of CNOOC's "Seven-Year Action Plan", domestic operation volume still saw an increase compared with the same period of last year, but the service price was under pressure. The Company recognised the severity of the situation, maintained its confidence, and quickly devised low oil price strategies in response, generating benefits in the areas of reform, management, market, innovation and safety. The Company made remarkable efforts to reduce costs, improve quality and enhance efficiency to confront the challenges brought by low oil prices. During the first half of the year, the operating volume and utilisation rate of the Company's jack-up drilling rigs and vessels, as well as the workload of the technical segment, continued to increase. The Company's revenue was RMB14,496.7 million, representing an increase of RMB944.6 million compared with the same period of last year. Net profit was RMB1,722.6 million, representing an increase of RMB736.2 million compared with the same period of last year.
Drilling Services Segment
Revenue for the drilling services segment in the first half of the year was RMB6,171.0 million, a 37.5% increase compared with RMB4,489.2 million for the same period of last year, and including the receipt of US$188 million settlement income from Equinor Energy AS (hereinafter "Equinor").
In the first half of 2020, due to the impact of Pandemic and low oil prices, the overall day rates of drilling rigs decreased. With the implementation of the "Seven-Year Action Plan" in the PRC, market demand has increased with the advancement of reserves and production. The Company insisted on implementing cost refinement management with a focus on production safety and demonstrating the overseas business' stable performance under low oil prices, achieving constant admirable results. During the first half of the year, the Company coped with the adversity created by the Pandemic, deployed their operators for operations of 4 drilling rigs in Asia. Among them, "China Merchants Hailong 6" launched a three-year drilling service project. "HYSY936" was awarded a 600-day operation contract in America. "COSLBoss" completed the Myanmar drilling project. "NH7" successfully completed sea trials of the PRC's first self-developeddeep-water wellhead system, breaking the blockade of foreign technology in this field.
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Management Discussion and Analysis (continued)
As of the end of June 2020, the Company operated and managed a total of 56 drilling rigs, including 42 jack-up drilling rigs and 14 semi- submersible drilling rigs. Of these, 30 were operating in coastal areas of China and 12 in international regions such as Norway, England, Mexico and Indonesia, while 12 were on standby and 2 were under repair in shipyards. During the first half of the year, operating days for the Company's drilling rigs amounted 7,662, representing an increase of 749 days or 10.8% compared with the same period of last year. The calendar day utilisation rate of drilling rigs was 76.2%, representing a decrease of 0.4 percentage point compared with the same period of last year, due to the decreased operation volume of semi-submersible drilling rigs.
Operation details for the Company's jack-up and semi-submersible drilling rigs during the first half of 2020:
For the six months ended 30 June | |||
Drilling Services | 2020 | 2019 | Change |
Operating days (day) | 7,662 | 6,913 | 10.8% |
Jack-up drilling rigs | 5,985 | 5,177 | 15.6% |
Semi-submersible drilling rigs | 1,677 | 1,736 | (3.4%) |
Available day utilisation rate | 80.7% | 80.0% | Up 0.7 percentage point |
Jack-up drilling rigs | 83.3% | 81.8% | Up 1.5 percentage points |
Semi-submersible drilling rigs | 72.6% | 74.9% | Down 2.3 percentage points |
Calendar day utilisation rate | 76.2% | 76.6% | Down 0.4 percentage point |
Jack-up drilling rigs | 79.8% | 78.9% | Up 0.9 percentage point |
Semi-submersible drilling rigs | 65.8% | 70.4% | Down 4.6 percentage points |
As of 30 June 2020, operating days for the Company's jack-up drilling rigs amounted to 5,985, representing an increase of 808 days compared with the same period of last year. Operating days for semi-submersible drilling rigs amounted to 1,677, representing a decrease of 59 days compared with the same period of last year.
During the first half of 2020, the average daily revenue for the Company's drilling rigs decreased in comparison with the same period of last year due to the impact of price reductions. Details are as follows:
For the six months ended 30 June | |||||
Average daily revenue | Percentage | ||||
(US$10,000 per day) | 2020 | 2019 | Change | change | |
Jack-up drilling rigs | 6.3 | 6.8 | (0.5) | (7.4%) | |
Semi-submersible drilling rigs | 15.3 | 15.1 | 0.2 | 1.3% | |
Subtotal of drilling rigs | 8.2 | 8.7 | (0.5) | (5.7%) | |
Notes: (1) | Average daily revenue = revenue/operating days; | ||||
(2) | US$/RMB exchange rate was 1:7.0795 on 30 June 2020 and 1:6.8747 on 28 June 2019. |
Well Services Segment
The first half of the year saw an increase in the operation volume of main lines in the Company's well services segment. Its overall revenue was RMB6,050.4 million, representing a decrease of 8.7% compared with RMB6,624.2 million for the same period of last year due to the impact of price reductions.
China Oilfield Services Limited • Interim Report 2020 | 5 |
Management Discussion and Analysis (continued)
During the first half of the year, the Company continued to accelerate technological development, focus on major technological needs, increase R&D investment, and strengthen the serialisation and industrialisation of its technological products. As a result, the Company's technical services continued to improve their profitability, acquired a number of scientific research project results, achieved breakthroughs in their application, and received wide customer recognition of its international market expansion. The comparative experiment verification of the quadrupole acoustic imaging logging tool while drilling was successful, and the practical drilling test of the high-speed mud pulse generator while drilling in Xinjiang also showed a remarkable performance. The new oxygen-activated FIT water flow meter, which features excellent data accuracy, was successfully applied in Bohai Sea. Successful experiments of high-temperatureoil-based drilling fluid emulsifiers will realize the localization of all treatment agents for high-temperatureoil-based drilling fluid systems in sight. The successful sea trials of self-developed underwater release rubber plug realized continuous breakthroughs in key technologies in this field. Temperature resistant sand control packers for wells completion achieved a temperature resistance of 350°C and a pressure resistance of 3,000psi. With the quantitative production of deep-water cementing head with its own intellectual property rights, industrialization was realized. The Company was awarded a cementing service contract and a plugging agent project while also acquired logging and cementing service projects in Asian.
Marine Support Services Segment
Compared with the same period of last year, in the first half of 2020, revenue from the Company's marine support services business increased by 6.5% to RMB1,534.3 million, of which RMB541.3 million was revenue from chartered vessels.
In the first half of the year, the Company's marine support services segment performed refined management, explored cost potentials, strengthened safety capacity and equipment management capabilities, and made effective of resources to maintain market demands. The Company hired 2 oilfield support vessels to improve productivity. At the same time, the Company's 2 new 5,000 horsepower LNG power guard supply vessels officially went into operation after their release, which put forward the concept of green development.
As of 30 June 2020, operating days for self-owned vessels of the Company's marine support services business amounted to 15,541, representing an increase of 103 days compared with the same period of last year. The calendar day utilisation rate increased by 2.2 percentage points to 97.0% compared with the same period of last year, boosted by increases of the operation volume and utilisation rate of standby vessels, platform supply vessels, multipurpose vessels and workover support barges. Due to increased domestic market demand for the period, the number of chartered vessels and operation volume also increased, with totalled 9,221 days of operation, representing an increase of 35.5% compared with the same period of last year. Details are in the following table:
For the six months ended 30 June | |||
Percentage | |||
Marine Support Services (self-owned vessels) | 2020 | 2019 | change |
Operating days (day) | 15,541 | 15,438 | 0.7% |
Standby vessels | 6,770 | 6,642 | 1.9% |
AHTS vessels | 4,825 | 4,994 | (3.4%) |
Platform supply vessels | 2,535 | 2,432 | 4.2% |
Multipurpose vessels | 712 | 687 | 3.6% |
Workover support barges | 699 | 683 | 2.3% |
6 | China Oilfield Services Limited • Interim Report 2020 |
Management Discussion and Analysis (continued)
Geophysical Acquisition and Surveying Services Segment
Revenue for the Company's geophysical acquisition and surveying services segment was RMB741.0 million for the first half of the year, representing a decrease of RMB257.5 million or 25.8% compared with the same period of last year. It was mainly due to decreases in revenue from data acquisition and submarine cable businesses during the period.
In the first half of 2020, affected by the Pandemic and low oil prices, the global geophysical industry has suffered substantial impact. The Company coordinated and promoted various tasks, and maintained a stable safety production under the severe situation of the continuous downturn in the industry. The safe, high-quality, efficient operations in Americas and other international service projects have earned frequent praise from customers.
In the first half of the year, the operation volume of domestic and overseas acquisition both decreased. The operation volume of the Company's 2D acquisition business was 9,077 km, a 41.1% decrease compared with the same period of last year. The 3D acquisition business's operation volume was 10,466 km2, a 40.9% decrease compared with the same period of last year. The operation volume of the submarine cable business was 589 km2, representing a decrease of 16.1% compared with the same period of last year. Details are as follows:
For the six months ended 30 June | |||
Percentage | |||
Geophysical Acquisition and Surveying Services | 2020 | 2019 | change |
2D | |||
Acquisition (km) | 9,077 | 15,404 | (41.1%) |
of which: multi-client acquisition (km) | - | 1,350 | (100.0%) |
3D | |||
Acquisition (km2) | 10,466 | 17,718 | (40.9%) |
of which: multi-client acquisition (km2) | 2,918 | 4,189 | (30.3%) |
submarine cable (km2) | 589 | 702 | (16.1%) |
China Oilfield Services Limited • Interim Report 2020 | 7 |
Management Discussion and Analysis (continued)
Financial Review
1. Analysis of condensed consolidated statement of profit or loss
1.1 Revenue
In the first half of 2020, the Company's revenue increased by RMB944.6 million or 7.0% compared with the same period of last year and domestic operation volume still increased. Details of analysis are as follows:
Revenue of each business segment for the first half of 2020:
Unit: RMB million | For the six months ended 30 June | |||
Percentage | ||||
Business segment | 2020 | 2019 | Change | change |
Drilling services | 6,171.0 | 4,489.2 | 1,681.8 | 37.5% |
Well services | 6,050.4 | 6,624.2 | (573.8) | (8.7%) |
Marine support services | 1,534.3 | 1,440.2 | 94.1 | 6.5% |
Geophysical acquisition and surveying services | 741.0 | 998.5 | (257.5) | (25.8%) |
Total | 14,496.7 | 13,552.1 | 944.6 | 7.0% |
- Revenue of drilling services business increased by 37.5% over the same period of last year, mainly due to the increased operation volume of drilling rigs and receipt of US$188 million settlement income from Equinor.
- Revenue of well services business decreased by 8.7% compared with the same period of last year, mainly due to the decreased price of each business line.
- Revenue of marine support services business increased by 6.5% over the same period of last year, mainly due to the increased operation volume of self-owned vessels and chartered vessels during the period.
- Revenue of geophysical acquisition and surveying services business decreased by 25.8% compared with the same period of last year, mainly due to decreased revenue from the data acquisition and submarine cable businesses during the period.
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Management Discussion and Analysis (continued)
1.2 Operating expenses
In the first half of 2020, the Company's operating expenses amounted to RMB12,452.1 million, representing an increase of RMB470.2 million or 3.9% from RMB11,981.9 million for the same period of last year.
The table below breaks down the Company's operating expenses from the first half of 2020:
Unit: RMB million | For the six months ended 30 June | |||
Percentage | ||||
2020 | 2019 | Change | change | |
Depreciation of property, plant and equipment | ||||
and amortisation of intangible assets and | ||||
multiclient library | 2,184.9 | 2,167.2 | 17.7 | 0.8% |
Depreciation of the right-of-use assets | 295.8 | 314.7 | (18.9) | (6.0%) |
Employee compensation costs | 2,486.7 | 2,651.7 | (165.0) | (6.2%) |
Repair and maintenance costs | 125.9 | 171.2 | (45.3) | (26.5%) |
Consumption of supplies, materials, fuel, | ||||
services and others | 2,925.6 | 2,986.9 | (61.3) | (2.1%) |
Subcontracting expenses | 2,356.4 | 2,643.9 | (287.5) | (10.9%) |
Lease expenses | 651.5 | 557.3 | 94.2 | 16.9% |
Impairment of property, plant and equipment | 843.8 | - | 843.8 | 100.0% |
Impairment losses under expected credit | ||||
loss model, net of reversal | (0.9) | (2.5) | 1.6 | (64.0%) |
Other operating expenses | 582.4 | 491.5 | 90.9 | 18.5% |
Total operating expenses | 12,452.1 | 11,981.9 | 470.2 | 3.9% |
Depreciation of property, plant and equipment and amortisation of intangible assets and multiclient library for the period increased by RMB17.7 million compared with the same period of last year.
Depreciation of right-of-use assets for the period decreased by RMB18.9 million compared with the same period of last year.
Employee compensation costs decreased by RMB165.0 million compared with the same period of last year, mainly due to a phased exemption of corporate social insurance premium applicable in the PRC, in response to the Pandemic.
Repair and maintenance costs for the period decreased by RMB45.3 million compared with the same period of last year. This was a consequence of repair projects being delayed due to the Pandemic, and the Company's prompt efforts to reduce costs and improve quality and efficiency for a higher self-repair ratio and lower repair costs.
Consumption of supplies, materials, fuel, services and others for the period decreased by RMB61.3 million compared with the same period of last year.
Subcontracting expenses for the period decreased by RMB287.5 million compared with the same period of last year. This stemmed mainly from the Company's efforts in cost control, its timely response to low oil prices, prompt action to reduce costs, and quality and efficiency enhancements, which effectively reduced the subcontracting expenses.
Lease expenses for the period increased by RMB94.2 million compared with the same period of last year.
China Oilfield Services Limited • Interim Report 2020 | 9 |
Management Discussion and Analysis (continued)
Impairment of property, plant and equipment for the period amounted to RMB843.8 million. Taking the settlement with Equinor into account, the Company recognised an impairment of asset in the first half of the year based on the expected day rates and future cash flow of relevant platforms.
Other operating expenses for the period amounted to RMB582.4 million, which mainly included more than 30 cost subjects including travel expenses, business trip expense, office expenses, expenses for library materials, health, safety and environmental protection expenses, weather guarantee fees, consulting fees, audit fees and so on. A year on year increase of RMB90.9 million was mainly due to an increase of RMB111.6 million in pandemic prevention expenses while other subjects increased or decreased. Of the total other operating expenses, travel expenses amounted to RMB143.4 million; pandemic prevention expenses amounted RMB112.0 million; health, safety and environmental protection expenses amounted to RMB90.6 million and business trip expenses amounted to RMB85.7 million. Transfer fees for other technology research, consulting fees and audit fees and so on, amounted to RMB150.7 million in total.
In 2019, other operating expenses amounted to RMB1,348.7 million, which mainly included more than 30 cost subjects including travel expenses, business trip expense, office expenses, expenses for library materials, health, safety and environmental protection expenses, weather guarantee fees, consulting fees, audit fees and so on, of which travel expenses amounted to RMB405.5 million; health, safety and environmental protection expenses amounted to RMB269.4 million and business trip expenses amounted to RMB153.0 million. Transfer fees for other technology research, consulting fees, audit fees and so on, amounted to RMB520.8 million in total.
The table below shows operating expenses for business segment in the first half of 2020:
Unit: RMB million | For the six months ended 30 June | |||
Percentage | ||||
Business segment | 2020 | 2019 | Change | change |
Drilling services | 5,158.6 | 4,256.5 | 902.1 | 21.2% |
Well services | 5,034.3 | 5,437.9 | (403.6) | (7.4%) |
Marine support services | 1,417.3 | 1,301.9 | 115.4 | 8.9% |
Geophysical acquisition and surveying services | 841.9 | 985.6 | (143.7) | (14.6%) |
Total | 12,452.1 | 11,981.9 | 470.2 | 3.9% |
1.3 Profit/(loss) from operations
Profit from Company operations during the first half of 2020 amounted to RMB2,222.0 million, representing an increase of RMB620.9 million as compared to RMB1,601.1 million from the same period of last year.
The profit from operations for each segment is shown in the table below:
Unit: RMB million | For the six months ended 30 June | ||
Business segment | 2020 | 2019 | Change |
Drilling services | 1,061.1 | 252.4 | 808.7 |
Well services | 1,125.5 | 1,189.7 | (64.2) |
Marine support services | 131.8 | 140.7 | (8.9) |
Geophysical acquisition and surveying services | (96.4) | 18.3 | (114.7) |
Total | 2,222.0 | 1,601.1 | 620.9 |
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Management Discussion and Analysis (continued)
- Financial expenses, net
During the first half of 2020, the Company's net financial expenses were RMB386.5 million, representing a decrease of RMB135.8 million or 26.0% compared with RMB522.3 million for the same period of last year. This was mainly due to finance costs decreasing by RMB113.0 million and increasing by RMB13.8 million in net exchange gain. - Investment income
In the first half of 2020, the Company's investment income amounted to RMB77.5 million, representing a decrease of RMB96.4 million from RMB173.9 million for the same period of last year, mainly due to decreased income from wealth management products. - Gains arising from financial assets at fair value through profit or loss
In the first half of 2020, gains arising from financial assets at fair value were RMB25.5 million, representing an increase of RMB74.9 million from RMB-49.4 million for the same period of last year. This was mainly due to the redemption of liquidity funds and the maturity of wealth management products during last year's period. - Share of profits of joint ventures, net of tax
In the first half of 2020, the Company's share of profits of joint ventures amounted to RMB158.7 million, representing an increase of RMB38.8 million compared with RMB119.9 million for the same period of last year, mainly due to the increased profits of most joint ventures for this period. - Other gains and losses
In the first half of 2020, the other gains and losses was RMB6.4 million, representing a decrease of RMB52.6 million or 89.1% compared with RMB59.0 million for the same period of last year. This was mainly due to the income from lease modifications of RMB74.0 million for the same period of last year. - Income tax expense
In the first half of 2020, the Company's income tax expense was RMB368.1 million, representing a decrease of RMB27.7 million as compared with RMB395.8 million for the same period of last year, mainly due to the parent's decreased profits during the period. - Profit for the period
In the first half of 2020, the Company's profit was RMB1,722.6 million, as compared with RMB986.4 million for the same period of last year. - Basic earnings per share
In the first half of 2020, the Company's basic earnings per share amounted to RMB35.93 cents as compared with basic earnings per share of RMB20.39 cents for the same period of last year.
China Oilfield Services Limited • Interim Report 2020 | 11 |
Management Discussion and Analysis (continued)
2. Analysis of condensed consolidated statement of financial position
As of 30 June 2020, total assets of the Company amounted to RMB81,427.3 million, representing an increase of RMB5,325.5 million or 7.0% as compared with RMB76,101.8 million at the end of 2019. Total liabilities were RMB43,525.8 million, representing an increase of RMB4,334.3 million or 11.1% as compared with RMB39,191.5 million at the end of 2019. Shareholders' equity was RMB37,901.5 million, representing an increase of RMB991.2 million or 2.7% as compared with RMB36,910.3 million at the end of 2019.
An analysis of significant changes in account items on the condensed consolidated statement of financial position is as follows:
Unit: RMB million | 30 June | 31 December | Percentage | |
Item | 2020 | 2019 | change | Reason |
Debt instrument at amortised | 1,000.0 | - | 100.0% | Mainly due to the increase in large deposit |
cost | certificates. | |||
Inventories | 2,142.0 | 1,424.7 | 50.3% | Mainly due to the increase in material reserve. |
Accounts receivable | 13,941.3 | 10,305.5 | 35.3% | Mainly due to the delay in payment by |
operators as affected by price negotiations. | ||||
Receivables at fair value through | 23.0 | 40.6 | (43.3%) | Mainly due to the decrease in bank |
other comprehensive income | acceptances. | |||
Financial assets at fair value | 2,538.3 | 4,511.2 | (43.7%) | Mainly due to the maturity of floating wealth |
through profit or loss | management products. | |||
Contract assets | 99.0 | 262.6 | (62.3%) | Mainly due to the decrease in contract assets |
as a result of confirmation of invoice by | ||||
customers. | ||||
Contract costs (current assets) | 65.9 | - | 100.0% | Mainly due to the increase in mobilisation |
costs. | ||||
Other current assets | 447.9 | 2,577.0 | (82.6%) | Mainly due to the recovery of fixed wealth |
management products at maturity. | ||||
Pledged deposits | 31.3 | 102.2 | (69.4%) | Mainly due to the decrease in pledged deposits |
at the end of the period. | ||||
Cash and cash equivalents | 9,417.1 | 3,363.6 | 180.0% | Mainly due to the impact of bond issuance on |
24 June. | ||||
Tax payable | 205.0 | 612.8 | (66.5%) | Mainly due to the decrease in corporate |
income tax payable and personal income tax | ||||
payable during the period. | ||||
Interest-bearing bank borrowings | 319.0 | 608.9 | (47.6%) | Mainly due to the repayment of the bank |
(current liabilities) | loan of Export-Import Bank of China in the | |||
principal of US$42 million. | ||||
Other current liabilities | 671.0 | 233.0 | 188.0% | The output value-added tax to be recognized |
increased during the period. | ||||
Long term bonds (non-current | 23,722.0 | 17,928.5 | 32.3% | Mainly due to the impact of bond issuance on |
liabilities) | 24 June. | |||
3. Analysis of consolidated statement of cash flows
At the beginning of 2020, the Company held cash and cash equivalents of RMB3,363.6 million. Net cash outflows from operating activities for the period amounted to RMB310.4 million. Net cash inflows from investing activities were RMB2,569.8 million. Net cash inflows from financing activities were RMB3,736.4 million. The impact of foreign exchange fluctuations on cash was an increase of RMB57.7 million. As of 30 June 2020, the Company's cash and cash equivalents amounted to RMB9,417.1 million.
12 | China Oilfield Services Limited • Interim Report 2020 |
Management Discussion and Analysis (continued)
- Cash flows from operating activities
As of 30 June 2020, the Company's net cash outflows from operating activities amounted to RMB310.4 million, as compared with the net cash outflows of RMB1,132.5 million for the same period of last year, mainly due to the receipt of US$188 million settlement income from Equinor. - Cash flows from investing activities
As of 30 June 2020, net cash inflows from the Company's investing activities amounted to RMB2,569.8 million, while net cash inflows from the Company's investing activities amounted to RMB3,988.1 million for the same period of last year. This was mainly due to the cash outflows paid for purchases of property, plant, equipment and other intangible assets decreasing by RMB572.5 million as compared with the same period of last year. Cash outflows paid for purchases of bank wealth management products and debt instrument increased by RMB1,200.0 million as compared with the same period of last year. Cash inflows received from the disposal of investments in bank wealth management products decreased by RMB785.3 million as compared with the same period of last year. Cash inflows from withdrawal of time deposits with maturity over three months decreased by RMB141.5 million as compared with the same period of last year. The total decrease of cash outflows from other investing activities was RMB136.0 million. - Net cash flows from financing activities
As of 30 June 2020, the Company's net cash inflows from financing activities amounted to RMB3,736.4 million, representing an increase of RMB6,300.3 million in cash inflows over the same period of last year. This was mainly due to cash inflows from loan from related parties for the period decreasing by RMB1,017.1 million as compared with the same period of last year; cash inflows from long-term bond issuance increasing by RMB5,613.7 million as compared with the same period of last year; cash outflows from the repayment of bank loans increasing by RMB16.7 million as compared with the same period of last year; cash outflows from the repayment of long- term bonds decreasing by RMB2,000.0 million as compared with the same period of last year; cash outflows from the repayment of lease liability decreasing by RMB36.8 million as compared with the same period of last year; and the increase in cash outflows of other financing activities was RMB316.4 million. - The impact of foreign exchange rate changes on cash during the period was an increase of RMB57.7 million.
4. Capital Expenditure
In the first half of 2020, the Company's capital expenditure was RMB941.6 million, representing a decrease of RMB62.0 million or 6.2% compared with RMB1,003.6 million for the same period of last year.
The capital expenditure of each business segment is shown in the table below:
Unit: RMB million | For the six months ended 30 June | |||
Percentage | ||||
Business segment | 2020 | 2019 | Change | change |
Drilling services | 232.8 | 352.5 | (119.7) | (34.0%) |
Well services | 492.1 | 225.9 | 266.2 | 117.8% |
Marine support services | 156.5 | 245.2 | (88.7) | (36.2%) |
Geophysical acquisition and surveying services | 60.2 | 180.0 | (119.8) | (66.6%) |
Total | 941.6 | 1,003.6 | (62.0) | (6.2%) |
China Oilfield Services Limited • Interim Report 2020 | 13 |
Management Discussion and Analysis (continued)
The drilling services segment's capital expenditure was used mainly for the transformation and renovation of drilling rig equipment. Capital expenditure for the well services segment was mainly used in the construction and purchase of well service equipment relating to the business segment. Capital expenditure for the marine support services segment was used mainly for the construction of oilfield working vessels and standby vessels. The geophysical acquisition and surveying services business's capital expenditure was mainly used in the development of the multi-client database.
5. Major Subsidiaries
China Oilfield Services (BVI) Limited, COSL Norwegian AS ("CNA") and COSL Singapore Limited are major subsidiaries of the Company engaged in drilling and well services and related business.
As of 30 June 2020, China Oilfield Services (BVI) Limited's total assets amounted to RMB3,884.3 million and equity was RMB523.4 million. China Oilfield Services (BVI) Limited realised revenue of RMB835.6 million in the first half of 2020, representing a decrease of RMB605.7 million compared with the same period of last year. The revenue decrease mainly resulted from delayed overseas operations due to the Pandemic and low oil prices. Net profit amounted to RMB-6.9 million, representing a decrease of RMB140.6 million compared with the same period of last year.
As of 30 June 2020, the total assets of CNA amounted to RMB11,123.4 million and equity was RMB-831.3 million. CNA realised operating revenue of RMB2,285.0 million in the first half of 2020, representing an increase of RMB1,251.4 million or 121.1% compared with the same period of last year. The major reason was the receipt of a settlement income of US$188 million from Equinor. Net profit amounted to RMB465.2 million, representing an increase of RMB689.8 million compared with the same period of last year. Taking into account the settlement with Equinor, CNA recognised an asset impairment loss of RMB843.8 million based on the expected day rates and future cash flow of COSLInnovator in the first half of 2020.
As of 30 June 2020, COSL Singapore Limited's total assets amounted to RMB33,508.8 million and equity was RMB-1,160.1 million. COSL Singapore Limited realised revenue of RMB878.6 million in the first half of 2020, representing an increase of RMB43.3 million or 5.2% compared with the same period of last year. Net profit amounted to RMB-540.9 million, representing a decrease in loss of RMB349.8 million compared with the same period of last year. COSL DRILLING STRIKE PTE. LTD. and COSL PROSPECTOR PTE. LTD. are major subsidiaries of COSL Singapore Limited.
As of 30 June 2020, the total assets of COSL DRILLING STRIKE PTE. LTD. amounted to RMB4,302.7 million and equity was RMB-3,065.1 million. COSL DRILLING STRIKE PTE. LTD. realised revenue of RMB113.6 million in the first half of 2020, representing an increase of RMB54.2 million or 91.2% compared with the same period of last year. Net profit amounted to RMB-131.5 million, representing a decrease in loss of RMB119.7 million compared with the same period of last year.
As of 30 June 2020, the total assets of COSL PROSPECTOR PTE. LTD. amounted to RMB9,324.2 million and equity was RMB-4,418.4 million. COSL PROSPECTOR PTE. LTD. realised revenue of RMB263.6 million in the first half of 2020, representing a decrease of RMB19.3 million compared with same period of last year. Net profit amounted to RMB-346.5 million, representing a decrease in loss of RMB274.9 million compared with same period of last year.
PROSPECTS
Looking forward to the second half of 2020, the Pandemic will restrict economic development and energy consumption demand in the short term and the industry will remain in a slow recovery stage for a period of time. As a result, the global economy may remain stagnant. The International Monetary Fund (IMF) estimated in the World Economic Outlook that the global economy will shrink by 4.9% this year, with relatively gloomy prospects for development. The International Energy Agency (IEA) predicts that the average oil price this year will be US$45 per barrel. Many institutions predict that there will still be a significant decline in oil demand compared with the same period of last year. As a result, the scale of the global oilfield service market will decrease. In response to the new "Four Revolutions and One Collaboration" energy security strategy, the major domestic oil companies have formulated the "Seven-Year Action Plan" to increase reserves and production in the PRC. With increasing workload in exploration and exploitation, the Company has been provided with good opportunities for its future development.
14 | China Oilfield Services Limited • Interim Report 2020 |
Supplementary Information
AUDIT COMMITTEE
The audit committee comprises of three independent non-executive directors of the Company. The audit committee has reviewed the accounting principles and practices adopted by the Company as well as the risk management, internal control and financial reporting matters. The unaudited interim financial report for the six months ended 30 June 2020 has been reviewed by the audit committee.
CORPORATE GOVERNANCE CODE
During the six months ended 30 June 2020, the Company has complied with the code provisions of the Corporate Governance Code as set out in Appendix 14 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (hereinafter "Listing Rules").
COMPLIANCE WITH THE MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS OF LISTED ISSUERS
Upon specific enquiry to all directors and supervisors by the Company, the directors and supervisors of the Company have confirmed that they have, for the six months ended 30 June 2020, complied with the Model Code for Securities Transactions by Directors of Listed Issuers (the "Model Code") as set out in Appendix 10 of the Listing Rules. The Company currently has adopted a code of conduct for securities transactions by directors that is stricter than the provisions set out in the Model Code.
PURCHASE, SALE AND REDEMPTION OF OUR LISTED SECURITIES
Neither the Company nor its subsidiaries have purchased, sold or redeemed any of the Company's listed securities during the six months ended 30 June 2020.
DIRECTORS' AND SUPERVISORS' INTERESTS IN CONTRACTS
During the six months ended 30 June 2020, none of the directors and supervisors had any material interest, whether direct or indirect, in any contract that was significant to the Company's business and to which the Company, its controlling shareholder or any of its subsidiaries or fellow subsidiaries was a party.
DIRECTORS', SUPERVISORS'AND SENIOR MANAGEMENT'S INTERESTS AND SHORT POSITIONS IN SHARES
As at 30 June 2020, the interests and short positions of the directors, supervisors and chief executives of the Company in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (the "SFO")) as recorded in the register required to be kept under Section 352 of the SFO, or as otherwise notified to the Company and HKSE pursuant to the Model Code were as follows:
Class of | Number of shares | Approximate percentage of | ||
Name of shareholder | Capacity | shares | in interest (share) | the interests (A) in COSL (%) |
Zheng Yonggang | Beneficial Owner | A Share | 5,200 | 0.0002 |
Save as disclosed above, as at 30 June 2020, none of the directors, supervisors and chief executives of the Company or their respective associates had any other interests or short positions in the Shares, underlying Shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) as recorded in the register required to be kept under Section 352 of the SFO or as otherwise notified to the Company and HKSE pursuant to the Model Code.
China Oilfield Services Limited • Interim Report 2020 | 15 |
Supplementary Information (continued)
INTERESTS AND SHORT POSITIONS IN SHARES OF SUBSTANTIAL SHAREHOLDERS
So far as is known to any Director or chief executive of the Company, as at 30 June 2020, other than the directors or the chief executive of the Company as disclosed above, the following persons had interests or short positions in the H Shares or underlying H Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or which were recorded in the register required to be kept under Section 336 of the SFO or were otherwise notified to the Company and HKSE:
Number of shares | Approximate percentage of | |||
Name of shareholder | Shares held | in interest (share) | the interests (H) in COSL (%) | |
GIC Private Limited | Interest in controlled corporation | 162,300,000 | (L) | 8.96 (L) |
BlackRock, Inc. | Interest in controlled corporation | 146,868,329 | (L) | 8.11 (L) |
3,904,000 (S) | 0.22 (S) | |||
JPMorgan Chase & Co. | Interest in controlled corporation | 127,778,458 | (L) | 7.05(L) |
3,098,316 (S) | 0.17 (S) | |||
85,046,210 (P) | 4.69 (P) | |||
Allianz SE | Interest in controlled corporation | 108,337,000 | (L) | 5.98 (L) |
EARNEST Partners, LLC | Interest in controlled corporation | 92,251,310 | (L) | 5.09 (L) |
Notes:
- "L" means long position
- "S" means short position
- "P" means lending pool
Save as disclosed above, the directors are not aware of any other person who had an interest in the shares of the Company which were recorded in the register required to be keep under Section 336 of the SFO.
DIRECTORS', SUPERVISORS' AND SENIOR MANAGEMENT'S RIGHTS TO ACQUIRE SHARES OR DEBENTURES
At no time during the six months ended 30 June 2020 were rights to acquire benefits by means of acquisition of shares in or debentures of the Company granted to any directors, supervisors and senior management or their respective spouses or minor children, or were any such rights exercised by them; nor was the Company, its holding company, or any of its subsidiaries or fellow subsidiaries a party to any arrangement to enable the directors to acquire such rights in any other body corporate.
EMPLOYEE, REMUNERATION POLICY AND TRAINING PROGRAMME
As at 30 June 2020, the total number of in-service employees of the Company is 14,501. The Company strictly complied with the labor policies and relevant laws and regulations of China and the country where it operates and established a competitive remuneration system and performance appraisal system. The Company established a salary growth mechanism related to economic benefits and labor productivity, adhered to performance-oriented, clear reward and punishment, earnestly increase or reduce income and actively mobilize employee. The Company coordinated and standardized the employee welfare and insurance system and established a supplementary insurance system for enterprises that is compatible with social insurance to fully guarantee the stability of employees. The Company also provided employees with a number of welfare including health check, paid vacation, helping and assisting those with difficulties or major diseases and etc., taking efforts to address the worries of employees, so as to provide reliable and multi-layered protection for employees.
Training programme and development of the Company are closely related to the strategy of Employees' career development of the Company. Based on the five-year development plan, the Company established a dimensional demand-oriented training model with layers and differentiation, which enhanced the training capability, highly promoted the internal teaching team's construction, gradually improved the training system, fulfilled the requirement of the Company's business development and built our core competitiveness.
16 | China Oilfield Services Limited • Interim Report 2020 |
Supplementary Information (continued)
CHANGES IN DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
Changes in Directors
On 28 May 2020, the Company convened the 2019 AGM, at which Mr. Law Hong Ping, Lawrence, an independent non-executive director, resigned for expiration of six years. The AGM considered and approved the appointment of Mr. Lin Boqiang as an independent non- executive director of the Company to fill in the vacancy to be left open by the resignation of Mr. Law Hong Ping, Lawrence for a term of three year starting from the date when the resolution was passed at the AGM and Mr. Lin serves as a member of the audit committee of the Company, a member of the remuneration and assessment committee of the Company and the chairman of the nomination committee of the Company.
On 26 August 2020, the Board received the written resignation from Mr. Cao Shujie, an executive director of the Company, who resigned from the position of executive director of the Company due to position change. His resignation will be effective when new executive director is elected by the shareholders of the Company at the EGM. After resignation, Mr. Cao Shujie will cease to hold any position within the Company. The Board proposes the appointment of Mr. Zhao Shunqiang as an executive director of the Company. The proposed appointment of executive director is subject to the approval of the shareholders of the Company by way of ordinary resolution(s) at the EGM.
Changes in Senior Management
On 7 May 2020, Mr. Liu Yifeng resigned as the deputy party secretary and Chairman of Labor Union of the Company due to the adjustment of his work arrangement with effect from 7 May 2020.
On 8 May 2020, Mr. Yu Guimin resigned as the vice president of the Company due to the adjustment of his work arrangement with effect from 8 May 2020.
On 29 June 2020, the Board received the written resignation from Mr. Cao Shujie in respect of his posts of CEO and President of the Company. The resignation of Mr. Cao Shujie was due to the adjustment of his work arrangement and takes effect on 29 June 2020. After the resignation, Mr. Cao Shujie will remain as an executive director of the Company.
On 29 July 2020, Mr. Xu Yingbo was appointed as the team leader of the discipline inspection commission of the Company with effect from 29 July 2020.
On 29 July 2020, Mr. Lu Tao was appointed as the vice president of the Company with effect from 29 July 2020.
On 26 August 2020, the Board appointed Mr. Qi Meisheng, an executive director, as the chief executive officer of the Company with effect from 26 August 2020. The chief executive officer of the Company is chief executive and reports to the Board.
On 26 August 2020, the Board appointed Mr. Zhao Shunqiang as the president of the Company with effect from 26 August 2020.
PLACING OF H SHARES
On 15 January 2014, the Company completed the placing of an aggregate of 276,272,000 H shares, representing approximately 5.79% of the total number of issued shares (as enlarged by the allotment and issue of the placing shares) and approximately 15.25% of the total number of H shares in issue (as enlarged by the allotment and issue of the placing shares). After the placing, the total number of issued shares of the Company increased from 4,495,320,000 shares to 4,771,592,000 shares. The total number of issued H shares increased from 1,534,852,000 H shares to 1,811,124,000 H shares. For further details, please refer to the Company's announcements dated 7 January 2014 and 15 January 2014, respectively. The net proceeds from the placing amounted to approximately HK$5,819,392,302.91 (after deduction of the commissions and estimated expense) and was used for general corporate purposes. The proceeds from the placing shares would be used according to the agreed use in the placing agreement. Approximately US$401,172.17 was not yet utilized as at 30 June 2020. The above balance of raised funds will continue to be used for general corporate purposes and in a timely manner.
China Oilfield Services Limited • Interim Report 2020 | 17 |
Supplementary Information (continued)
GEARING RATIO
As at 30 June 2020, the net current assets of the Company increased to RMB10,549.4 million compared with RMB3,200.8 million as at 31 December 2019, while the current ratio increased to 1.57 times, compared with 1.16 times as at 31 December 2019.
The Company monitors capital using the gearing ratio, which is net debt divided by the total capital plus net debt. The gearing ratios as at the end of each reporting period were as follows:
30 June 2020 | 31 December 2019 | |
RMB'000 | RMB'000 | |
Interest-bearing bank borrowings | 515,212 | 809,955 |
Trade and other payables | 9,059,868 | 10,284,224 |
Notes payable | 3,327 | 3,467 |
Salary and bonus payables | 1,247,139 | 979,229 |
Loan from a related party | 2,478,494 | 2,443,946 |
Long-term bonds | 27,544,223 | 21,738,653 |
Lease liabilities | 917,579 | 1,145,346 |
Less: Cash and cash equivalents and time deposits with maturity over three months | (9,417,126) | (3,363,589) |
Net debt | 32,348,716 | 34,041,231 |
Equity attributable to owners of the Company | 37,714,375 | 36,734,191 |
Non-controlling interests | 187,122 | 176,086 |
Total Capital | 37,901,497 | 36,910,277 |
Capital and net debt | 70,250,213 | 70,951,508 |
Gearing ratio | 46% | 48% |
PROGRESS OF BUSINESS PLAN
In the first half of 2020, the Company achieved a revenue of RMB14.50 billion and a net profit of RMB1.72 billion. The operating results realized an increase as compared with the same period in 2019. In consideration of the continuous implementation of the "Seven-Year Action Plan" in the PRC, the Company's workload in the third quarter is expected to remain stable. At the same time, due to the global Pandemic, the oil prices fluctuations, market changes, repair plans implemented in the second half of the year and the settlement stage of scientific research projects, the next-stage operating performance of the Company remains uncertain. Through continuous efforts in a number of initiatives such as cost reduction, quality improvement, efficiency enhancement, and cultivation of emerging industry to promote the upgrading of the Company's industrial structure, increase investment in technology research and development, accelerate digital transformation, and expand domestic and foreign markets, the Company will strive to achieve better operating results compared with its counterparts in the industry.
FOREIGN CURRENCY RISK
The Company's operation is affected by the exchange rate fluctuation of RMB against other foreign currencies. If the exchange rate fluctuation is significant, the Company's net profit will be impacted to a certain extent. At the same time, if the exchange rate fluctuation is significant, it will also have an impact on cash receipts and payments including the foreign exchange receipts and payments, the US dollar debt repayment pressure and the cost of purchasing imported equipment of the Company. The management of the Company will continuously monitor such exposure.
CHARGES ON ASSETS
As at 30 June 2020, the Company had no material charges against its assets.
18 | China Oilfield Services Limited • Interim Report 2020 |
Supplementary Information (continued)
MISCELLANEOUS
Civil Action
In December 2016, COSL Offshore Management AS ("COM", a subsidiary of the Company) as a plaintiff filed a Statement of Claim (the "Claim") against Statoil Petroleum AS (hereinafter "Statoil") with Oslo District Court of Norway (the "Court") through WIKBORG, REIN
- CO. ADVOKATFIRMA DA, an international law firm based in Norway, as litigation agent. COM has claimed that Statoil's termination of the contract in respect of the drilling rig of COSLInnovator was unlawful and has claimed the contract to be maintained. If the contract cannot be maintained, COM has claimed that Statoil is obliged to cover COM's loss resulting from the unlawful termination, and the exact amount of damages will be subject to subsequent proceedings. Oslo City Court entered into a judgement on 15 May 2018. The judgement may be appealed by either party within one month following the date of legal notice of the judgement was served. Statoil has changed its corporate name to Equinor Energy AS (hereinafter "Equinor"). On 14 June 2018, Equinor appealed to Borgarting Court of Appeal being the relevant appeal court in Norway. On 14 June 2018, COM has subsequently filed an independent appeal concerning the cancellation for convenience, since COM is of the view that the cancellation for convenience is unlawful and COM should accordingly be entitled to damages for the loss suffered. For details, please refer to relevant announcements published by the Company on the website of Hong Kong Stock Exchange (https://www. hkex.com.hk) and website of the Company (https://www. cosl. com.cn).
In January 2017, COM, a subsidiary of the Company as a plaintiff filed a Statement of Claim (the "Claim") against Statoil with the Court through WIKBORG REIN ADVOKATFIRMA AS, an international law firm based in Norway, as litigation agent. COM is of the view that Statoil shall pay the Claim for cost reimbursement and rate reductions happened in the period of year 2016 in an amount up to the equivalence of US$15,238,596 incurred as a consequence of the drilling rig of COSLPromoter's compliance with requirements of Statoil. For details, please refer to relevant announcements published by the Company on the website of Hong Kong Stock Exchange (https://www. hkex.com.hk) and website of the Company (https://www.cosl.com.cn).
In January 2020, COM and Equinor have signed a settlement agreement regarding the above matters. Equinor agreed to pay COM an amount of US$188 million. Furthermore, COM and Equinor have agreed, as a means of strengthening their cooperation, to enter into a master frame agreement. COM and Equinor had submitted a joint pleading to the Court to request the cases to be lifted with each party covering its own legal costs. For details, please refer to relevant announcements published by the Company on the website of Hong Kong Stock Exchange (https://www.hkex.com.hk) and website of the Company (https://www.cosl.com.cn).
In the first quarter of 2020, Equinor has paid a settlement sum of US$188 million to COM. Strictly according to relevant rules of the accounting standards, the Company performed impairment testing on fixed asset and made provision for the asset impairment. For details, please refer to relevant announcements published by the Company on the website of Hong Kong Stock Exchange (https://www.hkex.com.hk) and website of the Company (https://www.cosl.com.cn).
China Oilfield Services Limited • Interim Report 2020 | 19 |
Supplementary Information (continued)
Issue of the notes
On 24 June 2020, COSL Singapore Capital Ltd., a wholly-owned indirect subsidiary of the Company, respectively issued the US$500,000,000 1.875% guaranteed senior notes due 2025 (hereinafter "2025 Notes") and the US$300,000,000 2.500% guaranteed senior notes due 2030 (hereinafter "2030 Notes"). The two Notes have been approved for listing and trading on the Hong Kong Stock Exchange.
The 2025 Notes will bear interest on their outstanding principal amount from and including 24 June 2020 at the rate of 1.875% per annum, payable semi-annually in arrears on 24 June and 24 December of each year, beginning on 24 December 2020. The maturity date of the 2025 Notes is 24 June 2025. At any time and from time to time prior to the maturity date, the Company may at its option redeem the 2025 Notes, at a pre-determined redemption price.
The 2030 Notes will bear interest on their outstanding principal amount from and including 24 June 2020 at the rate of 2.500% per annum, payable semi-annually in arrears on 24 June and 24 December of each year, beginning on 24 December 2020. The maturity date of the 2030 Notes is 24 June 2030. At any time and from time to time prior to the maturity date, the Company may at its option redeem the 2030 Notes, at a pre-determined redemption price.
For details of the 2025 Notes and the 2030 Notes, please refer to the announcements of the Company dated 17 June 2020 and 19 June 2020, and the notice of listing dated 24 June 2020.
The directors are of the opinion that there have been no material changes to the information published in its annual report for the year ended 31 December 2019, other than those disclosed in this interim report.
DISCLOSURE OF INFORMATION ON THE HKSE'S WEBSITE
All information required by paragraphs 46(1) to 46(6) of Appendix16 of the Listing Rules will be published on the HKSE's website (https://www.hkex.com.hk) and the Company's website (https://www.cosl.com.cn) in due course.
By Order of the Board
China Oilfield Services Limited
Wu Yanyan
Company Secretary
26 August 2020
20 | China Oilfield Services Limited • Interim Report 2020 |
Report on Review of Condensed Consolidated Financial Statements
TO THE BOARD OF DIRECTORS OF CHINA OILFIELD SERVICES LIMITED
Introduction
We have reviewed the condensed consolidated financial statements of China Oilfield Services Limited (the "Company") and its subsidiaries (collectively referred to as the "Group") set out on pages 22 to 57, which comprise the condensed consolidated statement of financial position as of 30 June 2020 and the related condensed consolidated statement of profit or loss, statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the six-month period then ended, and certain explanatory notes. The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited require the preparation of a report on interim financial information to be in compliance with the relevant provisions thereof and Hong Kong Accounting Standard 34 "Interim Financial Reporting" ("HKAS 34") issued by the Hong Kong Institute of Certified Public Accountants. The directors of the Company are responsible for the preparation and presentation of these condensed consolidated financial statements in accordance with HKAS 34. Our responsibility is to express a conclusion on these condensed consolidated financial statements based on our review, and to report our conclusion solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.
Scope of Review
We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Hong Kong Institute of Certified Public Accountants. A review of these condensed consolidated financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated financial statements are not prepared, in all material respects, in accordance with HKAS 34.
Deloitte Touche Tohmatsu
Certified Public Accountants
Hong Kong
26 August 2020
China Oilfield Services Limited Interim Report 2020 | 21 |
Condensed Consolidated Statement of Profit or Loss
For the six months ended 30 June 2020
Six months ended 30 June | |||
2020 | 2019 | ||
Notes | RMB'000 | RMB'000 | |
(Unaudited) | (Unaudited) | ||
REVENUE | 5 | 14,511,357 | 13,562,799 |
Sales surtaxes | (14,694) | (10,687) | |
Revenue, net of sales surtaxes | 14,496,663 | 13,552,112 | |
Other income | 177,394 | 30,860 | |
Depreciation of property, plant and equipment and | (2,184,765) | ||
amortisation of intangible assets and multiclient library | (2,167,184) | ||
Depreciation of right-of-use assets | (295,771) | (314,671) | |
Employee compensation costs | (2,486,712) | (2,651,659) | |
Repair and maintenance costs | (125,896) | (171,158) | |
Consumption of supplies, materials, fuel, services and others | (2,925,623) | (2,986,885) | |
Subcontracting expenses | (2,356,442) | (2,643,858) | |
Lease expenses | (651,477) | (557,253) | |
Other operating expenses | (582,429) | (491,735) | |
Impairment of property, plant and equipment | 10 | (843,830) | - |
Impairment losses under expected credit loss model, net of reversal | 15 | 889 | 2,524 |
Total operating expenses | (12,452,056) | (11,981,879) | |
PROFIT FROM OPERATIONS | 2,222,001 | 1,601,093 | |
Exchange gain, net | 60,502 | 46,731 | |
Finance costs | (477,248) | (590,217) | |
Interest income | 30,213 | 21,190 | |
Investment income | 77,507 | 173,884 | |
Gains/(losses) arising from financial assets at | 25,486 | ||
fair value through profit or loss | (49,441) | ||
Share of profits of joint ventures, net of tax | 158,671 | 119,908 | |
Other gains and losses, net | 6 | (6,444) | 58,974 |
PROFIT BEFORE TAX | 6 | 2,090,688 | 1,382,122 |
Income tax expense | 7 | (368,117) | (395,767) |
PROFIT FOR THE PERIOD | 1,722,571 | 986,355 | |
Attributable to: | 1,714,199 | ||
Owners of the Company | 973,043 | ||
Non-controlling interests | 8,372 | 13,312 | |
1,722,571 | 986,355 | ||
EARNINGS PER SHARE ATTRIBUTABLE TO OWNERS | |||
OF THE COMPANY | 35.93 cents | ||
Basic (RMB) | 9 | 20.39 cents |
22 | China Oilfield Services Limited Interim Report 2020 |
Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the six months ended 30 June 2020
Six months ended 30 June | ||
2020 | 2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Unaudited) | |
PROFIT FOR THE PERIOD | 1,722,571 | 986,355 |
OTHER COMPREHENSIVE INCOME/(EXPENSE) | ||
Items that may be reclassified subsequently to profit or loss: | 54,417 | |
Exchange differences on translation of financial statements of foreign operations | (48,154) | |
Share of other comprehensive income of joint ventures, net of related income tax | 1,885 | 287 |
Income tax (expense)/income relating to items that may be reclassified subsequently | (24,198) | |
to profit or loss | 1,455 | |
32,104 | (46,412) | |
OTHER COMPREHENSIVE INCOME/(EXPENSE) | ||
FOR THE PERIOD, NET OF INCOME TAX | 32,104 | (46,412) |
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD | 1,754,675 | 939,943 |
Attributable to: | 1,743,639 | |
Owners of the Company | 926,175 | |
Non-controlling interests | 11,036 | 13,768 |
1,754,675 | 939,943 |
China Oilfield Services Limited Interim Report 2020 | 23 |
Condensed Consolidated Statement of Financial Position
At 30 June 2020
30 June 2020 | 31 December 2019 | ||
Notes | RMB'000 | RMB'000 | |
(Unaudited) | (Audited) | ||
NON-CURRENT ASSETS | 48,439,002 | ||
Property, plant and equipment | 10 | 50,218,143 | |
Right-of-use assets | 11 | 1,047,220 | 1,200,640 |
Goodwill | 12 | - | - |
Other intangible assets | 59,957 | 62,135 | |
MultiClient library | 13 | 278,699 | 279,726 |
Investments in joint ventures | 1,018,490 | 880,583 | |
Financial assets at fair value through profit or loss | 18 | - | - |
Debt instrument at amortised cost | 19 | 1,000,000 | - |
Contract costs | 17 | 68,445 | 91,500 |
Other non-current assets | 20 | 285,196 | 246,988 |
Deferred tax assets | 113,417 | 92,468 | |
Total non-current assets | 52,310,426 | 53,072,183 | |
CURRENT ASSETS | 2,141,958 | ||
Inventories | 1,424,674 | ||
Prepayments, deposits and other receivables | 377,025 | 397,972 | |
Accounts receivable | 14 | 13,941,323 | 10,305,533 |
Notes receivable | 34,082 | 44,245 | |
Receivables at fair value through other comprehensive income | 23,009 | 40,580 | |
Financial assets at fair value through profit or loss | 18 | 2,538,263 | 4,511,248 |
Contract assets | 16 | 98,975 | 262,594 |
Contract costs | 17 | 65,887 | - |
Other current assets | 20 | 447,885 | 2,577,018 |
Pledged deposits | 31,343 | 102,202 | |
Cash and cash equivalents | 9,417,126 | 3,363,589 | |
Total current assets | 29,116,876 | 23,029,655 | |
CURRENT LIABILITIES | 9,059,868 | ||
Trade and other payables | 21 | 10,284,224 | |
Notes payable | 3,327 | 3,467 | |
Salary and bonus payables | 1,247,139 | 979,229 | |
Tax payable | 205,018 | 612,784 | |
Loan from a related party | 23 | 2,478,494 | 2,443,946 |
Interest-bearing bank borrowings | 24 | 318,987 | 608,906 |
Long term bonds | 25 | 3,822,260 | 3,810,175 |
Lease liabilities | 431,023 | 597,774 | |
Contract liabilities | 22 | 330,421 | 255,306 |
Other current liabilities | 20 | 670,956 | 233,010 |
Total current liabilities | 18,567,493 | 19,828,821 | |
NET CURRENT ASSETS | 10,549,383 | 3,200,834 | |
TOTAL ASSETS LESS CURRENT LIABILITIES | 62,859,809 | 56,273,017 |
24 | China Oilfield Services Limited Interim Report 2020 |
Condensed Consolidated Statement of Financial Position (continued)
At 30 June 2020
30 June 2020 | 31 December 2019 | ||
Notes | RMB'000 | RMB'000 | |
(Unaudited) | (Audited) | ||
NON-CURRENT LIABILITIES | 57,597 | ||
Deferred tax liabilities | 62,655 | ||
Interest-bearing bank borrowings | 24 | 196,225 | 201,049 |
Long term bonds | 25 | 23,721,963 | 17,928,478 |
Lease liabilities | 486,556 | 547,572 | |
Contract liabilities | 22 | 138,529 | 192,745 |
Deferred income | 26 | 331,851 | 401,554 |
Employee benefit liabilities | 25,591 | 28,687 | |
Total non-current liabilities | 24,958,312 | 19,362,740 | |
Net assets | 37,901,497 | 36,910,277 | |
EQUITY | |||
Equity attributable to owners of the Company | 4,771,592 | ||
Issued capital | 27 | 4,771,592 | |
Reserves | 32,942,783 | 31,962,599 | |
37,714,375 | 36,734,191 | ||
Non-controlling interests | 187,122 | 176,086 | |
Total equity | 37,901,497 | 36,910,277 |
Qi Meisheng
Director
China Oilfield Services Limited Interim Report 2020 | 25 |
Condensed Consolidated Statement of Changes in Equity
For the six months ended 30 June 2020
Remeasurement | |||||||||||
Statutory | of defined | Exchange | Proposed | ||||||||
Issued | Capital | reserve | Special | benefit | fluctuation | Retained | final | Non-controlling | |||
capital | reserve | funds | reserve | pension plan | reserve | profits | dividend | Total | interests | Total equity | |
RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
At 1 January 2020 (audited) | 4,771,592 | 12,366,274 | 2,508,656 | - | (16,202) | (92,479) | 16,432,895 | 763,455 | 36,734,191 | 176,086 | 36,910,277 |
Profit for the period | - | - | - | - | - | - | 1,714,199 | - | 1,714,199 | 8,372 | 1,722,571 |
Other comprehensive income | |||||||||||
for the period, net of income | - | - | - | - | - | 29,440 | - | - | 29,440 | 2,664 | 32,104 |
tax | |||||||||||
Total comprehensive income for | - | - | - | - | - | 29,440 | 1,714,199 | - | 1,743,639 | 11,036 | 1,754,675 |
the period | |||||||||||
Appropriation of safety fund | - | - | - | 11,307 | - | - | - | - | 11,307 | - | 11,307 |
Utilisation of safety fund | - | - | - | (11,307) | - | - | - | - | (11,307) | - | (11,307) |
Final 2019 dividend paid (note 8) | - | - | - | - | - | - | - | (763,455) | (763,455) | - | (763,455) |
At 30 June 2020 (unaudited) | 4,771,592 | 12,366,274 | 2,508,656 | - | (16,202) | (63,039) | 18,147,094 | - | 37,714,375 | 187,122 | 37,901,497 |
At 31 December 2018 (audited) | 4,771,592 | 12,366,274 | 2,508,656 | - | (14,823) | (135,658) | 14,699,824 | 334,011 | 34,529,876 | 147,530 | 34,677,406 |
Adjustments | - | - | - | - | - | - | (5,712) | - | (5,712) | - | (5,712) |
At 1 January 2019 | 4,771,592 | 12,366,274 | 2,508,656 | - | (14,823) | (135,658) | 14,694,112 | 334,011 | 34,524,164 | 147,530 | 34,671,694 |
Profit for the period | - | - | - | - | - | - | 973,043 | - | 973,043 | 13,312 | 986,355 |
Other comprehensive (expense)/ | |||||||||||
income for the period, net of | |||||||||||
income tax | - | - | - | - | - | (46,868) | - | - | (46,868) | 456 | (46,412) |
Total comprehensive (expense)/ | |||||||||||
income for the period | - | - | - | - | - | (46,868) | 973,043 | - | 926,175 | 13,768 | 939,943 |
Appropriation of safety fund | - | - | - | 14,149 | - | - | - | - | 14,149 | - | 14,149 |
Utilisation of safety fund | - | - | - | (14,149) | - | - | - | - | (14,149) | - | (14,149) |
Final 2018 dividend paid (note 8) | - | - | - | - | - | - | - | (334,011) | (334,011) | - | (334,011) |
At 30 June 2019 (unaudited) | 4,771,592 | 12,366,274 | 2,508,656 | - | (14,823) | (182,526) | 15,667,155 | - | 35,116,328 | 161,298 | 35,277,626 |
26 | China Oilfield Services Limited Interim Report 2020 |
Condensed Consolidated Statement of Cash Flows
For the six months ended 30 June 2020
Six months ended 30 June | ||
2020 | 2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Unaudited) | |
NET CASH USED IN OPERATING ACTIVITIES | (310,399) | (1,132,517) |
INVESTING ACTIVITIES | ||
Purchases of property, plant and equipment | (867,106) | |
and other intangible assets | (1,439,596) | |
Payments for right-of-use assets | - | (80,000) |
Investment in MultiClient library | (3,256) | (60,113) |
Government grant received | 450 | - |
Purchase of floating and fixed rate investments in corporate wealth | (4,500,000) | |
management products and debt instrument | (3,300,000) | |
Proceeds on disposal/maturity of floating and fixed rate investments | 8,088,889 | |
in corporate wealth management products and liquidity funds | 8,874,178 | |
Proceeds from disposal of property, plant and equipment | 1,318 | 29 |
Withdrawal of time deposits with maturity of over three months | - | 141,523 |
Interest received | 30,213 | 23,084 |
Dividends received from joint ventures | - | 39,535 |
Deposits paid for acquisition of property, plant and equipment | (180,738) | |
and other intangible assets | (210,559) | |
NET CASH FROM INVESTING ACTIVITIES | 2,569,770 | 3,988,081 |
FINANCING ACTIVITIES | - | |
New loan raised from a related party | 1,017,120 | |
Proceeds from issue of long-term bonds | 5,613,680 | - |
Repayment of bank loans | (307,383) | (290,640) |
Repayment of long-term bonds | - | (2,000,000) |
Repayment of lease liabilities | (317,702) | (354,550) |
Dividends paid | (763,455) | (334,011) |
Interest paid | (488,755) | (601,868) |
NET CASH FROM/(USED IN) FINANCING ACTIVITIES | 3,736,385 | (2,563,949) |
NET INCREASE IN CASH AND CASH EQUIVALENTS | 5,995,756 | 291,615 |
CASH AND CASH EQUIVALENTS AT 1 JANUARY | 3,363,589 | 3,169,610 |
Effect of foreign exchange rate changes | 57,781 | 4,325 |
CASH AND CASH EQUIVALENTS AT 30 JUNE, | 9,417,126 | |
represented by cash and cash equivalents | 3,465,550 |
China Oilfield Services Limited Interim Report 2020 | 27 |
Notes to the Condensed Consolidated Financial Statements
For the six months ended 30 June 2020
1. CORPORATE INFORMATION AND PRINCIPAL ACTIVITIES
China Oilfield Services Limited (the "Company") is a limited liability company incorporated in the People's Republic of China (the "PRC"). The registered office of the Company is located at No. 1581, Haichuan Road, Tanggu Ocean Hi-tech Zone, Binhai Hi- tech Development District, Tianjin, the PRC. As part of the reorganisation (the "Reorganisation") of China National Off-shore Oil Corporation ("CNOOC") in preparation for the listing of the Company's shares on The Stock Exchange of Hong Kong Limited (the "HKSE") in 2002, and pursuant to an approval document obtained from the relevant government authority dated 26 September 2002, the Company was restructured into a joint stock limited liability company.
The Company and its subsidiaries (hereinafter collectively referred to as the "Group") are principally engaged in the provision of oilfield services including drilling services, well services, marine support services, and geophysical acquisition and surveying services.
In the opinion of the directors of the Company (the "Directors"), the holding company and the ultimate holding company of the Company is CNOOC, which is a state-owned enterprise ("SOE") incorporated in the PRC. The registration address of CNOOC is No. 25 Chaoyangmenbei Dajie, Dongcheng District, Beijing.
The condensed consolidated financial statements are presented in Renminbi ("RMB"), which is also the functional currency of the Company.
As at 30 June 2020, particulars of the principal subsidiaries of the Company are as follows:
Percentage of equity | ||||||
Place and date of | Issued and fully | attributable to the Group | ||||
incorporation/ | Principal place | paid share capital/ | 30 June | 30 June | ||
Name of entity | registration | of business | paid-in capital | 2020 | 2019 | Principal activities |
COSL Chemicals (Tianjin), | Tianjin, PRC | PRC | RMB20,000,000 | 100% | 100% | Manufacture and |
Ltd. (a) | 7 September 1993 | marketing drilling | ||||
fluids | ||||||
PT. COSL INDO | Indonesia | Indonesia | US Dollar ("US$") | 100% | 100% | Provision of oil & gas |
1 August 2005 | 400,000 | exploration services | ||||
COSL-HongKong Limited | Hong Kong | Hong Kong | Hong Kong Dollar | 100% | 100% | Investment holding |
1 December 2005 | 10,000 | |||||
COSL (Australia) Pty Ltd. | Australia | Australia | Australian Dollar | 100% | 100% | Provision of drilling |
11 January 2006 | 10,000 | services | ||||
COSL Drilling Strike Pte.Ltd. | Singapore | Singapore | Singapore Dollar 2 | 100% | 100% | Provision of drilling |
29 October 2009 | services | |||||
COSL Prospector Pte.Ltd. | Singapore | Singapore | US$189,779,384 | 100% | 100% | Provision of drilling |
27 February 2007 | services | |||||
COSL Mexico S.A.de C.V | Mexico | Mexico | US$8,504,525 | 100% | 100% | Provision of drilling |
26 May 2006 | services | |||||
COSL (Middle East) FZE | United Arab | United Arab | UAE Dirhams | 100% | 100% | Provision of oil & gas |
Emirates | Emirates | 1,000,000 | exploration services | |||
2 July 2006 | ||||||
28 | China Oilfield Services Limited Interim Report 2020 |
Notes to the Condensed Consolidated Financial Statements (continued)
For the six months ended 30 June 2020
1. CORPORATE INFORMATION AND PRINCIPAL ACTIVITIES (continued)
Percentage of equity | ||||||
Place and date of | Issued and fully | attributable to the Group | ||||
incorporation/ | Principal place | paid share capital/ | 30 June | 30 June | ||
Name of entity | registration | of business | paid-in capital | 2020 | 2019 | Principal activities |
COSL Norwegian AS ("CNA") | Norway | Norway | Norwegian Krone | 100% | 100% | Investment holding |
23 June 2008 | ("NOK") | |||||
1,541,328,656 | ||||||
COSL Drilling Pan-Pacific | Malaysia | Malaysia | US$100,000 | 100% | 100% | Management of jack- |
(Labuan) Ltd. | 4 April 2009 | up drilling rigs | ||||
COSL Drilling Pan-Pacific | Singapore | Singapore | US$1,000,000 | 100% | 100% | Management of jack- |
Ltd. | 13 April 2009 | up drilling rigs | ||||
COSL Singapore Capital Ltd. | Singapore | Singapore | Singapore | 100% | 100% | Bond issuance |
29 October 2009 | Dollar 2 | |||||
PT. Samudra Timur Santosa | Indonesia | Indonesia | US$250,000 | 49% | 49% | Provision of marine |
("PT STS")(b) | 27 July 2010 | support services | ||||
COSL Oil-Tech (Singapore) | Singapore | Singapore | US$100,000 | 100% | 100% | Provision of oilfield |
Ltd. | 31 January 2011 | services and related | ||||
activities | ||||||
COSL Finance (BVI) Limited | British Virgin | British Virgin | US$1 | 100% | 100% | Bond issuance |
Islands | Islands | |||||
12 July 2012 | ||||||
COSL Deepwater Technology | Shenzhen, PRC | PRC | RMB | 100% | 100% | Provision of |
Co. Ltd. (a) | 12 September 2013 | 470,000,000 | geophysical and | |||
surveying services | ||||||
COSL Drilling Saudi Ltd. | Saudi Arabia | Saudi Arabia | Saudi Riyal | 96% | 96% | Provision of drilling |
19 April 2016 | 375,000 | services | ||||
COSL Hainan Ltd. (a) | Haikou, PRC | PRC | RMB | 100% | - | Provision of oil & gas |
6 December 2019 | 200,000,000 | exploration services | ||||
- COSL Chemicals (Tianjin), Ltd, COSL Deepwater Technology Co. Ltd and COSL Hainan Ltd. are established in the PRC as limited liability companies.
- In the opinion of the Directors, the Group has control over PT STS as the Group has 100% voting rights on PT STS that gives it the current ability to direct the relevant activities of PT STS. Accordingly, PT STS had been accounted for as a subsidiary and has been consolidated into the Group's condensed consolidated financial statements for the six months ended 30 June 2020 and 2019.
The above table lists the subsidiaries of the Company which, in the opinion of the Directors, principally affected the operating results of the Group for the current interim period or formed a substantial portion of the net assets of the Group. To give details of other subsidiaries would, in the opinion of the Directors, result in particulars of excessive length.
China Oilfield Services Limited Interim Report 2020 | 29 |
Notes to the Condensed Consolidated Financial Statements (continued)
For the six months ended 30 June 2020
1. CORPORATE INFORMATION AND PRINCIPAL ACTIVITIES (continued)
As at 30 June 2020, particulars of the joint ventures of the Group are as follows:
Nominal value of | Place and date of | ||||||
issued ordinary/ | incorporation/ | Percentage of | |||||
registered share | registration and | ||||||
Name | capital | operations | Ownership interest | Voting rights held | Principal activities | ||
2020 | 2019 | 2020 | 2019 | ||||
China Offshore Fugro | US$6,000,000 | Shenzhen, PRC | 50 | 50 | 50 | 50 | Provision of |
GeoSolutions (Shenzhen) | 24 August 1983 | geophysical and | |||||
Company Ltd. | surveying services | ||||||
China France Bohai | US$6,650,000 | Tianjin, PRC | 50 | 50 | 50 | 50 | Provision of logging |
Geoservices Co., Ltd. | 30 November 1983 | services | |||||
China Petroleum Logging- | US$2,000,000 | Shenzhen, PRC | 50 | 50 | 50 | 50 | Provision of logging |
Atlas Cooperation Service | 10 May 1984 | services | |||||
Company | |||||||
China Nanhai Magcobar | RMB4,640,000 | Shenzhen, PRC | 60 | 60 | 50 | 50 | Provision of drilling |
Mud Corporation Ltd. | 25 October 1984 | fluids services | |||||
("Magcobar")(a) | |||||||
CNOOC-OTIS Well | US$2,000,000 | Tianjin, PRC | 50 | 50 | 50 | 50 | Provision of well |
Completion Services Ltd. | 14 April 1993 | completion | |||||
services | |||||||
COSL-Expro Testing Services | US$5,000,000 | Tianjin, PRC | 50 | 50 | 50 | 50 | Provision of well |
(Tianjin) Company Ltd. | 28 February 2007 | testing services | |||||
PBS-COSL Oilfield Services | Brunei Dollar | Brunei | 49 | 49 | 50 | 50 | Provision of drilling |
Company SDN BHD | 100,000 | 20 March 2014 | services | ||||
(''PBS-COSL'')(b) | |||||||
COSL (Malaysia) SDN.BHD. | Ringgit Malaysia | Malaysia | 49 | 49 | 50 | 50 | Provision of drilling |
("COSL Malaysia") (c)(d) | 350,000 | 31 July 2017 | services |
- The Group has 60% of the equity interests in Magcobar, the remaining equity interests of which are held by the other sole investor. Pursuant to the articles of association of Magcobar, more than two-thirds of the voting rights in the board of directors are required for decisions on directing the relevant activities of this entity. The board of directors of Magcobar shall comprise five directors whereby the Company shall appoint three directors and the other sole investor shall appoint two directors. In the opinion of the Directors, the Group does not have control over Magcobar and the investment in this joint arrangement constitutes interest in a joint venture based on the rights and obligations of the parties to this joint arrangement.
- The Group has 49% of the equity interests in PBS-COSL, the remaining equity interests of which are held by the other sole investor. Pursuant to the articles of association of PBS-COSL, the board of directors of PBS-COSL shall comprise four directors whereby both the Company and the other sole investor shall appoint two directors each. Unanimous approvals by the directors of PBS-COSL are required for decisions on directing the relevant activities of PBS-COSL. In the opinion of the Directors, the Group does not have control over PBS-COSL and the investment in this joint arrangement constitutes interest in a joint venture based on the rights and obligations of the parties to this joint arrangement.
30 | China Oilfield Services Limited Interim Report 2020 |
Notes to the Condensed Consolidated Financial Statements (continued)
For the six months ended 30 June 2020
1. CORPORATE INFORMATION AND PRINCIPAL ACTIVITIES (continued)
- The Group has 49% of equity interests in COSL Malaysia, the remaining equity interests of which are held by the other sole investor. Pursuant to the articles of association of COSL Malaysia, majority voting rights are required for decisions on directing the relevant activities of this entity. The board of directors of COSL Malaysia shall comprise five directors whereby the Group shall appoint two directors and the other sole investor shall appoint three directors, while the chairman of COSL Malaysia shall be appointed by the Group and the chairman has the right to veto any major decisions. As a result, unanimous consents by the Group and the other investor are required for decisions on directing the relevant activities of COSL Malaysia. In the opinion of the Directors, the Group does not have control over COSL Malaysia and the investment in this joint arrangement constitutes interest in a joint venture based on the rights and obligations of the parties to this joint arrangement.
- As at 30 June 2020, the Group has yet injected any capital into COSL Malaysia since the capital injection time according to the joint venture agreement has not due yet.
All of the above investments in joint ventures are directly held by the Company except for COSL Malaysia, which is indirectly held through COSL Drilling Pan-Pacific Ltd.
The above joint ventures are accounted for using the equity method in these condensed consolidated financial statements.
2. BASIS OF PREPARATION
The condensed consolidated financial statements for the six months ended 30 June 2020 have been prepared in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting' ' issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA") as well as with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on the HKSE.
The condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements for the year ended 31 December 2019.
3. PRINCIPAL ACCOUNTING POLICIES
The condensed consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments, which are measured at fair values.
Other than changes in accounting policies resulting from application of new and amendments to Hong Kong Financial Reporting Standards ("HKFRSs"), the accounting policies and methods of computation used in the condensed consolidated financial statements for the six months ended 30 June 2020 are the same as those presented in the Group's annual financial statements for the year ended 31 December 2019.
Application of amendments to HKFRSs
In the current interim period, the Group has applied the Amendments to References to the Conceptual Framework in HKFRS Standards and the following amendments to HKFRSs issued by the HKICPA, for the first time, which are mandatorily effective for the annual period beginning on or after 1 January 2020 for the preparation of the Group's condensed consolidated financial statements:
Amendments to HKAS 1 and HKAS 8 | Definition of Material |
Amendments to HKFRS 3 | Definition of a Business |
Amendments to HKFRS 9, HKAS 39 and HKFRS 7 | Interest Rate Benchmark Reform |
In addition, the Group has early applied the Amendment to HKFRS 16 "COVID-19-RelatedRent Concessions "
China Oilfield Services Limited Interim Report 2020 | 31 |
Notes to the Condensed Consolidated Financial Statements (continued)
For the six months ended 30 June 2020
3. PRINCIPAL ACCOUNTING POLICIES (continued)
-
Impacts of application on amendments to HKAS 1 and HKAS 8 "Definition of Material"
The amendments provide a new definition of material that states "information is material if omitting misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity." The amendments also clarify that materiality depends on the nature or magnitude of information, either individually or in combination with other information, in the context of the financial statement taken as a whole.
The application of the amendments in the current period had no impact on the condensed consolidated financial statements. Changes in presentation and disclosures on the application of the amendments, if any, will be reflected on the consolidated financial statements for the year ending 31 December 2020. - Impacts and accounting policies on application of Amendments to HKFRS 3 "Definition of a Business"
-
Accounting policies
Business combinations or asset acquisitions Optional concentration test
Effective from 1 January 2020, the Group can elect to apply an optional concentration test, on a transaction-by-transaction basis, that permits a simplified assessment of whether an acquired set of activities and assets is not a business. The concentration test is met if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. The gross assets under assessment exclude cash and cash equivalents, deferred tax assets, and goodwill resulting from the effects of deferred tax liabilities. If the concentration test is met, the set of activities and assets is determined not to be a business and no further assessment is needed. - Transition and summary of effects
The amendments had no impact on the condensed consolidated financial statements of the Group.
-
Accounting policies
- Impacts and accounting policies on early application of Amendments to HKFRS 16 "COVID-19-RelatedRent Concessions"
-
Accounting policies Leases
COVID-19-Related Rent Concessions
Rent concessions relating to lease contracts that occurred as a direct consequence of the COVID-19 pandemic, the Group has elected to apply the practical expedient not to assess whether the change is a lease modification if all of the following conditions are met: - the change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change;
- any reduction in lease payments affects only payments originally due on or before 30 June 2021;
- and there is no substantive change to other terms and conditions of the lease.
-
Accounting policies Leases
32 | China Oilfield Services Limited Interim Report 2020 |
Notes to the Condensed Consolidated Financial Statements (continued)
For the six months ended 30 June 2020
-
PRINCIPAL ACCOUNTING POLICIES (continued)
3.3 Impacts and accounting policies on early application of Amendments to HKFRS 16 "COVID-19-RelatedRent Concessions" (continued)
3.3.1 Accounting policies (continued)
A lessee applying the practical expedient accounts for changes in lease payments resulting from rent concessions the same way it would account for the changes applying HKFRS 16 "Leases " if the changes were not a lease modification. Forgiveness or waiver of lease payments are accounted for as variable lease payments. The related lease liabilities are adjusted to reflect the amounts forgiven or waived with a corresponding adjustment recognised in the profit or loss in the period in which the event occurs.
3.3.2 Transition and summary of effects
The Group has early applied the amendment in the current interim period. The application has no impact to the opening retained profits at 1 January 2020. During the current interim period, there was no COVID-19-related rent concession occurred and had no impact on the disclosures or the amounts recognised in the interim condensed consolidated financial statements of the Group. - OPERATING SEGMENT INFORMATION
The Group is organised into four business units based on the internal structure and management strategy, which is also the basis of information reported to the Group's chief operating decision maker (i.e. the executive directors of the Company) for the purpose of making strategic decisions.
The Group has four reportable and operating segments as follows:
- the drilling services segment is engaged in the provision of oilfield drilling services;
- the well services segment is engaged in the provision of logging and downhole services, such as drilling fluids, directional drilling, cementing and well completion, the sale of well chemical materials and well workovers, and seismic data processing services;
- the marine support services segment is engaged in the transportation of materials, supplies and personnel to offshore facilities, moving and positioning drilling structures;
- the geophysical acquisition and surveying services segment is engaged in the provision of offshore seismic data collection and marine surveying.
Management monitors the results of the Group's operating segments separately for the purpose of making decisions about resources allocation and performance assessment. Segment performance is evaluated based on reportable segment result, which is a measure of adjusted profit before tax. The adjusted profit before tax is measured consistently with the Group's profit before tax except that interest income, finance costs, exchange gains, net, investment income and gains/(losses) arising from financial assets at fair value through profit or loss ("FVTPL") are excluded from such measurement.
All assets are allocated to reportable segments other than certain cash and cash equivalents (funds managed by the corporate planning and finance department), pledged deposits, certain other receivables, certain other current assets, financial assets at FVTPL, debt instrument at amortised cost and deferred tax assets as these assets are managed on a group basis.
All liabilities are allocated to reportable segments other than loan from a related party, interest-bearing bank borrowings and long term bonds (funds managed by the corporate planning and finance department), tax payable and deferred tax liabilities as these liabilities are managed on a group basis.
China Oilfield Services Limited Interim Report 2020 | 33 |
Notes to the Condensed Consolidated Financial Statements (continued)
For the six months ended 30 June 2020
4. OPERATING SEGMENT INFORMATION (continued)
Intersegment sales and transfers are transacted with reference to the selling prices used for sales made to third parties at the prevailing market prices.
Six months ended 30 June 2020 (Unaudited)
Geophysical | |||||
acquisition | |||||
Marine support | and surveying | ||||
Drilling services | Well services | services | services | Total | |
RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
Revenue: | |||||
Sales to external customers, | 6,171,011 | 6,050,385 | 1,534,262 | 741,005 | 14,496,663 |
net of sale surtaxes | |||||
Sales surtaxes | 2,932 | 9,495 | 1,667 | 600 | 14,694 |
Revenue, before net of | 6,173,943 | 6,059,880 | 1,535,929 | 741,605 | 14,511,357 |
sales surtaxes | |||||
Intersegment sales | 25,820 | 29,729 | 57,630 | 90 | 113,269 |
Segment revenue | 6,199,763 | 6,089,609 | 1,593,559 | 741,695 | 14,624,626 |
Elimination | (25,820) | (29,729) | (57,630) | (90) | (113,269) |
Group revenue | 6,173,943 | 6,059,880 | 1,535,929 | 741,605 | 14,511,357 |
Segment results | 1,060,268 | 1,245,487 | 131,754 | (63,281) | 2,374,228 |
Reconciliation: | 60,502 | ||||
Exchange gain, net | |||||
Finance costs | (477,248) | ||||
Interest income | 30,213 | ||||
Investment income | 77,507 | ||||
Gain arising from financial assets | 25,486 | ||||
at FVTPL | |||||
Profit before tax | 2,090,688 | ||||
Income tax expense | 368,117 | ||||
As at 30 June 2020 (Unaudited) | 42,653,323 | 14,188,396 | 8,167,623 | 5,001,839 | 70,011,181 |
Segment assets | |||||
Unallocated assets | 11,416,121 | ||||
Total assets | 81,427,302 | ||||
Segment liabilities | 4,421,992 | 6,034,814 | 1,347,319 | 921,136 | 12,725,261 |
Unallocated liabilities | 30,800,544 | ||||
Total liabilities | 43,525,805 |
34 | China Oilfield Services Limited Interim Report 2020 |
Notes to the Condensed Consolidated Financial Statements (continued)
For the six months ended 30 June 2020
4. OPERATING SEGMENT INFORMATION (continued)
Six months ended 30 June 2019 (Unaudited)
Geophysical | |||||
acquisition | |||||
Marine support | and surveying | ||||
Drilling services | Well services | services | services | Total | |
RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
Revenue: | |||||
Sales to external customers, | |||||
net of sale surtaxes | 4,489,247 | 6,624,182 | 1,440,229 | 998,454 | 13,552,112 |
Sales surtaxes | 2,645 | 6,371 | 968 | 703 | 10,687 |
Revenue, before net of | |||||
sales surtaxes | 4,491,892 | 6,630,553 | 1,441,197 | 999,157 | 13,562,799 |
Intersegment sales | 92,777 | 35,340 | 71,884 | - | 200,001 |
Segment revenue | 4,584,669 | 6,665,893 | 1,513,081 | 999,157 | 13,762,800 |
Elimination | (92,777) | (35,340) | (71,884) | - | (200,001) |
Group revenue | 4,491,892 | 6,630,553 | 1,441,197 | 999,157 | 13,562,799 |
Segment results | 324,220 | 1,279,934 | 134,376 | 41,445 | 1,779,975 |
Reconciliation: | |||||
Exchange gain, net | 46,731 | ||||
Finance costs | (590,217) | ||||
Interest income | 21,190 | ||||
Investment income | 173,884 | ||||
Loss arising from financial assets | |||||
at FVTPL | (49,441) | ||||
Profit before tax | 1,382,122 | ||||
Income tax expense | 395,767 | ||||
As at 30 June 2019 (Unaudited) | |||||
Segment assets | 45,354,643 | 11,377,887 | 8,380,943 | 4,869,411 | 69,982,884 |
Unallocated assets | 5,440,174 | ||||
Total assets | 75,423,058 | ||||
Segment liabilities | 4,862,530 | 5,388,581 | 1,380,153 | 1,059,079 | 12,690,343 |
Unallocated liabilities | 27,455,089 | ||||
Total liabilities | 40,145,432 |
Geographical information
The Group mainly engages in the provision of drilling services, well services, marine support services and geophysical acquisition and surveying services principally in Mainland China. Activities outside Mainland China are mainly conducted in Indonesia, Mexico and Norway.
In determining the Group's geographical information, revenue is presented below based on the location of operations.
China Oilfield Services Limited Interim Report 2020 | 35 |
Notes to the Condensed Consolidated Financial Statements (continued)
For the six months ended 30 June 2020
4. OPERATING SEGMENT INFORMATION (continued)
Geographical information (continued)
The following table presents revenue information for the Group's geographical areas for six months ended 30 June 2020 and 2019.
International | ||||
Six months ended 30 June 2020 (Unaudited) | Domestic | North Sea | Others | Total |
RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
Segment revenue: | 10,484,349 | 2,083,743 | 1,943,265 | 14,511,357 |
Sales to external customers | ||||
Less: Sales surtaxes | (14,694) | - | - | (14,694) |
Revenue, net of sales surtaxes | 10,469,655 | 2,083,743 | 1,943,265 | 14,496,663 |
International | ||||
Six months ended 30 June 2019 (Unaudited) | Domestic | North Sea | Others | Total |
RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
Segment revenue: | ||||
Sales to external customers | 10,539,580 | 669,837 | 2,353,382 | 13,562,799 |
Less: Sales surtaxes | (10,687) | - | - | (10,687) |
Revenue, net of sales surtaxes | 10,528,893 | 669,837 | 2,353,382 | 13,552,112 |
Information about a major customer
Revenue from transactions with a major customer, CNOOC Limited and its subsidiaries (the "CNOOC Limited Group"), including sales to a group of entities which are known to be under common control of CNOOC Limited, accounted for 72% (six months ended 30 June 2019: 80%) of the total sales of the Group for six months ended 30 June 2020, details of the segments with such revenue are given in note 29(A).
5. REVENUE
Six months ended 30 June
20202019
RMB'000 RMB'000
(Unaudited) (Unaudited)
Revenue from contracts with customers (a) | 14,389,925 | 13,528,360 |
Revenue arising from operating leases | 121,432 | 34,439 |
14,511,357 | 13,562,799 |
36 | China Oilfield Services Limited Interim Report 2020 |
Notes to the Condensed Consolidated Financial Statements (continued)
For the six months ended 30 June 2020
5. REVENUE (continued)
- Disaggregation of revenue from contracts with customers, before net of sales surtaxes for the six month ended 30 June 2020
For the six month ended 30 June 2020 | |||||
Geophysical | |||||
acquisition | |||||
Marine support | and surveying | ||||
Drilling services | Well services | services | services | Total | |
RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
Timing of revenue | |||||
recognition | - | 26,840 | - | 3,399 | 30,239 |
A point in time | |||||
Over time (a) | 6,052,511 | 6,033,040 | 1,535,929 | 738,206 | 14,359,686 |
Total | 6,052,511 | 6,059,880 | 1,535,929 | 741,605 | 14,389,925 |
- Included in revenue from drilling services was a settlement amount of the Group's right under a ceased contract, recognised by the Group upon receipt. During the current interim period, COSL Offshore Management AS ("COM", a subsidiary of the Company) and Equinor Energy AS ("Equinor") reached an out of court settlement and signed a formal settlement agreement regarding the legal suit on the drilling rigs COSLInnovator and COSLPromoter. Equinor paid US$188,000,000, equivalent to approximately RMB1,309,561,000 to COM as a full settlement of the Group's right to revenue under the ceased contract.
The Group's most contracts with customers generally provide for payment on a day rate or operation volume basis. The Group elected to apply the practical expedient by recognising revenue in the amount to which the Group has right to invoice.
Set out below is the reconciliation of the revenue from contracts with customers with the amounts disclosed in the segment information.
For the six month ended 30 June 2020 | |||||
Less: Revenue | Revenue from | ||||
Segment | arising from | contracts with | |||
revenue | operating leases | Eliminations | customers | ||
RMB'000 | RMB'000 | RMB'000 | RMB'000 | ||
Drilling Services | 6,199,763 | (121,432) | (25,820) | 6,052,511 | |
Well Services | 6,089,609 | - | (29,729) | 6,059,880 | |
Marine Support Services | 1,593,559 | - | (57,630) | 1,535,929 | |
Geophysical Acquisition and Surveying Services | 741,695 | - | (90) | 741,605 | |
Revenue from contracts with customers | 14,624,626 | (121,432) | (113,269) | 14,389,925 |
- Disaggregation of revenue from contracts with customers, before net of sales surtaxes for the six month ended 30 June 2019
For the six month ended 30 June 2019 | |||||
Geophysical | |||||
acquisition | |||||
Marine support | and surveying | ||||
Drilling services | Well services | services | services | Total | |
RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
Timing of revenue | |||||
recognition | |||||
A point in time | - | 26,359 | - | 2,166 | 28,525 |
Over time | 4,457,453 | 6,604,194 | 1,441,197 | 996,991 | 13,499,835 |
Total | 4,457,453 | 6,630,553 | 1,441,197 | 999,157 | 13,528,360 |
China Oilfield Services Limited Interim Report 2020 | 37 |
Notes to the Condensed Consolidated Financial Statements (continued)
For the six months ended 30 June 2020
5. REVENUE (continued)
-
Disaggregation of revenue from contracts with customers, before net of sales surtaxes for the six month ended 30 June 2019 (continued)
Set out below is the reconciliation of the revenue from contracts with customers with the amounts disclosed in the segment information.
For the six month ended 30 June 2019 | ||||
Less: Revenue | Revenue from | |||
Segment | arising from | contracts with | ||
revenue | operating leases | Eliminations | customers | |
RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
Drilling Services | 4,584,669 | (34,439) | (92,777) | 4,457,453 |
Well Services | 6,665,893 | - | (35,340) | 6,630,553 |
Marine Support Services | 1,513,081 | - | (71,884) | 1,441,197 |
Geophysical Acquisition and Surveying Services | 999,157 | - | - | 999,157 |
Revenue from contracts with customers | 13,762,800 | (34,439) | (200,001) | 13,528,360 |
6. PROFIT BEFORE TAX
The Group's profit before tax is arrived at after charging/(crediting):
Six months ended 30 June | ||
2020 | 2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Unaudited) | |
Gains arising from lease modifications | (44) | (74,004) |
Losses on disposal of plant and equipment and other intangible assets, net | 6,488 | 15,030 |
Other gains and losses, net | 6,444 | (58,974) |
Lease expenses in respect of land and buildings, berths and equipment (a) | 651,477 | 557,253 |
Income from investments in floating and fix rate corporate wealth management products, | (77,507) | |
liquidity funds and debt instrument | (173,884) | |
Cost of inventories recognised as an expense | 1,952,791 | 1,955,456 |
- Lease expenses in the six month ended 30 June 2020 and 2019 represent short-term leases and variable lease payments not included in the measurement of lease liabilities.
7. INCOME TAX EXPENSE
The Group is subject to income tax on an entity basis on the profit arising in or derived from the tax jurisdictions in which members of the Group are domiciled and operate. The Group is not liable for income tax in Hong Kong as it does not have assessable profits currently sourced from Hong Kong.
Under the Corporate Income Tax Law of the PRC (the "CIT"), the statutory tax rate of the Company, subsidiaries and its key joint ventures in Mainland China is 25%.
According to the High-New Technical Enterprise ("HNTE") certificate renewed by the Company in October 2017, the CIT rate of the Company is 15% for the period from October 2017 to September 2020.
According to the HNTE certificate renewed by the Group's subsidiary COSL Chemicals (Tianjin), Ltd in October 2017, the CIT rate of COSL Chemicals (Tianjin), Ltd is 15% for the period from October 2017 to September 2020.
38 | China Oilfield Services Limited Interim Report 2020 |
Notes to the Condensed Consolidated Financial Statements (continued)
For the six months ended 30 June 2020
7. INCOME TAX EXPENSE (continued)
According to the HNTE certificate renewed by the Group's subsidiary COSL Deepwater Technology Co. Ltd. in December 2019, the CIT rate of COSL Deepwater Technology Co. Ltd is 15% for the period from 2019 to 2021.
List of other corporate income tax rates applicable to the Group's activities:
Six months ended 30 June | |||||
Countries and regions | 2020 | 2019 | |||
Indonesia | 22% | 25% | |||
Mexico | 30% | 30% | |||
Norway | 22% | 22% | |||
The United Kingdom | 19% | 19% | |||
Iraq | Withholding tax based on 7% | Withholding tax based on 7% | |||
of revenue generated in Iraq | of revenue generated in Iraq | ||||
United Arab Emirates | Not subject to any income tax | Not subject to any income tax | |||
Singapore | 17% | 17% | |||
The United States of America | 21% | 21% | |||
Canada | Net federal corporate income tax | Net federal corporate income tax | |||
of 15% and provincial income | of 15% and provincial income | ||||
tax ranging from 10% to 16%, | tax ranging from 10% to 16%, | ||||
depending on the province and | depending on the province and | ||||
the size of the business | the size of the business | ||||
Malaysia | 24% | 24% | |||
Saudi Arabia | 20% | 20% | |||
Myanmar | Withholding tax based on 2.5% | Withholding tax based on 2.5% | |||
of revenue generated in Myanmar | of revenue generated in Myanmar | ||||
Brazil | 34% | 34% | |||
Cameroon | Withholding tax based on 15% | Withholding tax based on 15% | |||
of revenue generated | of revenue generated | ||||
in Cameroon | in Cameroon | ||||
New Zealand | 28% | 28% | |||
An analysis of the Group's provision for tax is as follows: | |||||
Six months ended 30 June | |||||
2020 | 2019 | ||||
RMB'000 | RMB'000 | ||||
(Unaudited) | (Unaudited) | ||||
Overseas income taxes: | 65,746 | ||||
Current | 93,347 | ||||
Deferred | 3,714 | (5,251) | |||
PRC corporate income taxes: | 327,679 | ||||
Current | 422,674 | ||||
Deferred | (29,909) | (183,970) | |||
Under provision in prior year | 887 | 68,967 | |||
Total tax charge for the period | 368,117 | 395,767 |
China Oilfield Services Limited Interim Report 2020 | 39 |
Notes to the Condensed Consolidated Financial Statements (continued)
For the six months ended 30 June 2020
7. INCOME TAX EXPENSE (continued)
A reconciliation of the income tax expense applicable to profit before tax at the statutory rate for Mainland China, where the Company, certain subsidiaries and its key joint ventures are domiciled, to the tax expense at the effective tax rate, and a reconciliation of the applicable rate (i.e., the statutory tax rate) to the effective tax rate, are as follows:
Six months ended 30 June | ||||
2020 | 2019 | |||
RMB'000 | % | RMB'000 | % | |
(Unaudited) | (Unaudited) | |||
Profit before tax | 2,090,688 | 1,382,122 | ||
Tax at the statutory tax rate of 25% | 522,672 | 25.0 | ||
(six months ended 30 June 2019: 25%) | 345,531 | 25.0 | ||
Tax effect as an HNTE | (249,810) | (11.9) | (221,075) | (16.0) |
Tax effect of income not subject to tax | (39,668) | (1.9) | (33,085) | (2.4) |
Tax effect of expense not deductible for tax | 86,254 | 4.1 | 13,310 | 1.0 |
Tax benefit for qualifying research and | (40,427) | (1.9) | ||
development expenses | (34,853) | (2.5) | ||
Effect of non-taxable profit and different tax rates | 183,514 | 8.8 | ||
for overseas subsidiaries | 236,958 | 17.1 | ||
Tax effect of tax losses and deductible temporary | 211,917 | 10.1 | ||
differences unrecognised | 85,721 | 6.2 | ||
Utilisation of tax losses previously not recognised | (342,057) | (16.4) | (6,181) | (0.4) |
Under provision in respect of prior year | 887 | - | 68,967 | 5.0 |
Recognised deductible temporary differences | - | - | ||
previously not recognised | (72,065) | (5.2) | ||
Translation adjustment (a) | (1,435) | (0.1) | 5,123 | 0.4 |
Others | 36,270 | 1.8 | 7,416 | 0.4 |
Total tax charge at the Group's effective tax rate | 368,117 | 17.6 | 395,767 | 28.6 |
- The translation adjustment mainly relates to the tax effect of difference between the profit before tax determined on the tax basis in NOK and that determined on the accounting basis of some group companies in Norway in US dollars, the functional currency of these companies.
8. DIVIDENDS PAID AND PROPOSED
During the current interim period, a final dividend of RMB0.16 per ordinary share of the Company comprising 4,771,592,000 ordinary shares existed as at 31 December 2019 (2019: RMB0.07 per ordinary share of the Company comprising 4,771,592,000 ordinary shares existed as at 31 December 2018) was declared and paid to the owners of the Company. The aggregate amount of the final dividend declared and paid in the current interim period amounted to RMB763,455,000 (2019: RMB334,011,000).
The board of directors has proposed that no dividend will be declared in respect of the current interim period.
40 | China Oilfield Services Limited Interim Report 2020 |
Notes to the Condensed Consolidated Financial Statements (continued)
For the six months ended 30 June 2020
9. EARNINGS PER SHARE ATTRIBUTABLE TO OWNERS OF THE COMPANY
The calculation of the basic earnings per share attributable to owners of the Company is based on the following data:
Six months ended 30 June | ||
2020 | 2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Unaudited) | |
Earnings | ||
Earnings for the purposes of basic earnings per share | 1,714,199 | |
(profit for the period attributable to owners of the Company) | 973,043 | |
Six months ended 30 June | ||
2020 | 2019 | |
(Unaudited) | (Unaudited) | |
Number of shares | 4,771,592,000 | |
Number of ordinary shares for the purpose of basic earnings per share | 4,771,592,000 |
No diluted earnings per share is presented for the six-month periods ended 30 June 2020 and 2019 as the Group had no dilutive potential ordinary shares in issue during those periods.
10. PROPERTY, PLANT AND EQUIPMENT
During the current interim period, the Group acquired certain machinery equipment, vessels and drilling rigs with an aggregate cost amounting to approximately RMB928,087,000 (six months ended 30 June 2019: RMB610,072,000), of which approximately RMB580,365,000 was transferred from construction in progress (six months ended 30 June 2019: RMB223,327,000). Additions of construction in progress amounting to approximately RMB567,669,000 were recognised during the current interim period (six months ended 30 June 2019: RMB526,674,000). Machinery and equipment with an aggregate net carrying amount of RMB10,115,000 (six months ended 30 June 2019: RMB15,059,000) were disposed during the current interim period, resulting in a loss on disposal of RMB6,488,000 (six months ended 30 June 2019: loss on disposal of RMB15,030,000).
Out of the total finance costs incurred, no finance costs (six months ended 30 June 2019: nil) was capitalised in property, plant and equipment in the current interim period.
During the current interim period, in view of the impairment indication arising from the expected day rates and future operating cash flows after the out of court settlement disclosed in note 5(a), the Directors carried out impairment assessment for COSLInnovator based on projected future cash flows and discount rate, and recognised an impairment loss of RMB843,830,000. The impairment losses have been classified under the drilling services segment.
There are no other impairment recognised in current interim period (six months ended 30 June 2019: nil) after the Group's due impairment assessment in the light of the current economic environment in certain markets in which the Group operates as well as slow recovery of oil price.
In the said impairment assessment, the recoverable amount of the relevant assets, each of which was identified as a cash-generating unit within the drilling services segment, has been determined based on the higher of fair value less costs of disposal and value in use.
China Oilfield Services Limited Interim Report 2020 | 41 |
Notes to the Condensed Consolidated Financial Statements (continued)
For the six months ended 30 June 2020
10. PROPERTY, PLANT AND EQUIPMENT (continued)
The fair value less costs of disposal is arrived at on the basis of valuation carried out by an independent property agent. The fair value of relevant assets are determined based on a variety of valuation methods, including income approach and market approach, and the reasonableness of the assumptions and range of estimates indicated by those valuation methods were also considered by the Group. The income approach is by reference to the projected discounted cash flows over the remaining economic life of relevant assets. The market approach is by reference to the value that would be received from selling the asset in an orderly transaction between market participants at the measurement date. The above estimates of fair value required to use significant unobservable inputs representative of a level 3 fair value measurement, including historical contracted sales prices for similar assets, nonbinding quotes from brokers and/or indicative bids, estimated utilization rates, service prices, cost level and capital requirements.
In assessing value in use, the estimated future cash flows are discounted to their present value. The cash flow projection was based on financial budgets covering a five-year period approved by senior management. The cash flow beyond the five-year period is estimated based on the market trend and by reference to the relevant market trend report. The discount rate applied to the cash flow projection is 7.0%-8.6% (six months ended 30 June 2019: 8.0%-8.9%). The discount rate used is a long-termweighted-average cost of capital, which is based on the management's best estimation of the investment returns that market participants would require for the relevant assets. Other key assumptions for the value in use calculations reflect management's judgments and expectation regarding the past performance of the relevant assets, as well as future industry conditions and operations, including estimated utilization rates, day rates, cost level and capital requirements.
11. RIGHT-OF-USE ASSETS
During the current interim period, the Group entered into certain lease agreements and recognised right-of-use assets of RMB140,459,000 (six month ended 30 June 2019: RMB354,553,000) and lease liabilities of RMB82,937,000 (six month ended 30 June 2019: RMB354,553,000) on lease commencement.
12. GOODWILL
Goodwill was generated in the acquisition of COSL Holding AS in 2008, which was combined into CNA by merger during the year ended 31 December 2016 (collectively referred to as the "CNA"), and was allocated to a group of the drilling services cash-generating units under the drilling services segment for impairment testing. The Group impaired the goodwill in full in 2016.
13. MULTICLIENT LIBRARY
MultiClient library | |
RMB'000 | |
Carrying amount at 31 December 2019 (audited) | 279,726 |
Development cost capitalized in the period | 14,594 |
Amortisation provided during the period | (18,316) |
Exchange realignment | 2,695 |
At 30 June 2020 (unaudited) | 278,699 |
At 30 June 2020 (unaudited) | |
Cost | 309,266 |
Accumulated amortisation | (30,567) |
Carrying amount | 278,699 |
The Group has entered into cooperation agreements with Spectrum Geo Inc ("Spectrum") to invest in certain multi-client data projects. These agreements are accounted for as joint operations where the parties have joint control over the projects and have rights to the assets and liabilities of the investment. Costs directly incurred in acquiring, processing and completing multi-client data projects are capitalized to the MultiClient library. As at 30 June 2020, except for certain part of multi-client data projects which had been completed, the remaining part was still in progress.
42 | China Oilfield Services Limited Interim Report 2020 |
Notes to the Condensed Consolidated Financial Statements (continued)
For the six months ended 30 June 2020
14. ACCOUNTS RECEIVABLE
The Group normally allows a credit period of 30 to 45 days to its trade customers in Mainland China and no more than 6 months to 1 year to its trade customers with good trading history in overseas.
The following is an aged analysis of accounts receivable net of allowance for doubtful debts, as at the end of the reporting period, presented based on the invoice dates.
30 June | 31 December | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Audited) | |
Outstanding balances aged: | 12,691,488 | |
Within six months | 9,981,405 | |
Six months to one year | 1,175,260 | 236,393 |
One to two years | 74,575 | 87,646 |
Over two years | - | 89 |
13,941,323 | 10,305,533 |
15. IMPAIRMENT LOSSES UNDER EXPECTED CREDIT LOSS MODEL, NET OF REVERSAL
Six months ended 30 June | ||
2020 | 2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Unaudited) | |
Impairment losses recognised/(reversed) on: | 1,623 | |
Accounts receivable | (3,662) | |
Other receivables | (2,512) | 1,138 |
(889) | (2,524) |
The basis of determining the inputs and assumptions and the estimation techniques used in the condensed consolidated financial statements for the six months ended 30 June 2020 are the same as those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2019.
16. CONTRACT ASSETS
The contract assets represent the Group's right to consideration for drilling services completed and not billed because the rights are conditioned on customers' acceptance of the work. The contract assets are transferred to accounts receivables when the rights become unconditional. The balances are classified as current. The Directors assessed and provided no impairment against the contract assets after due consideration of the customers' credit quality.
China Oilfield Services Limited Interim Report 2020 | 43 |
Notes to the Condensed Consolidated Financial Statements (continued)
For the six months ended 30 June 2020
17. CONTRACT COSTS
30 June | 31 December | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Audited) | |
Mobilisation cost (a) | 134,022 | 89,113 |
Others | 310 | 2,387 |
134,332 | 91,500 | |
Current | 65,887 | - |
Non-current | 68,445 | 91,500 |
134,332 | 91,500 |
- Certain direct and incremental costs incurred for initial mobilization are costs of fulfilling a contract and are recoverable. These recoverable costs are capitalised and amortized ratably to contract expense as services are rendered over the initial term of the related contracts.
18. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
30 June | 31 December | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Audited) | |
Current asset: | 2,538,263 | |
Investments in floating rate corporate wealth management products | 4,511,248 | |
Non-current asset: | - | |
Unlisted equity investment | - | |
2,538,263 | 4,511,248 |
19. DEBT INSTRUMENT AT AMORTISED COST
The balance represents a debt instrument invested by the Group during the current interim period, carrying annual interest of 3.8% and maturing on 27 December 2021. The Group is going to hold the instrument until maturity and therefore measures it at amortised cost.
20. OTHER CURRENT ASSETS/LIABILITIES AND OTHER NON-CURRENT ASSETS
30 June | 31 December | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Audited) | |
Investments in fixed rate corporate wealth management products | - | 2,507,314 |
Value-added tax to be deducted and prepaid | 405,080 | 24,617 |
Value-added tax recoverable | 42,805 | 45,087 |
Other current assets | 447,885 | 2,577,018 |
Output value-added tax to be recognised | (670,956) | (233,010) |
Other current liabilities | (670,956) | (233,010) |
Deposits paid for the acquisition of property, plant and equipment | 180,738 | 128,358 |
Deposits paid for the addition of right-of-use assets | - | 57,522 |
Value-added tax recoverable | 98,929 | 58,205 |
Tax recoverable | 5,529 | 2,903 |
Other non-current assets | 285,196 | 246,988 |
44 | China Oilfield Services Limited Interim Report 2020 |
Notes to the Condensed Consolidated Financial Statements (continued)
For the six months ended 30 June 2020
21. TRADE AND OTHER PAYABLES
The aged analysis of trade payables as at the end of the reporting period, based on the invoice date, is as follows:
30 June | 31 December | ||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
(Unaudited) | (Audited) | ||
Outstanding balances aged: | 8,431,009 | ||
Within one year | 9,462,482 | ||
One to two years | 74,997 | 102,643 | |
Two to three years | 48,134 | 41,300 | |
Over three years | 45,454 | 83,728 | |
8,599,594 | 9,690,153 | ||
22. CONTRACT LIABILITIES | |||
30 June | 31 December | ||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
(Unaudited) | (Audited) | ||
Contract liabilities | |||
Current | 330,421 | 255,306 | |
Non-current | 138,529 | 192,745 | |
468,950 | 448,051 |
The Group's contract liabilities consist of the mobilisation fee, subsidies received from customers related to acquisition of machinery for provision of drilling services and advance from customers relevant to certain operation contracts. The contract liabilities are recognised as revenues on a systematic basis that is consistent with the transfer to the customer of the goods or services to which the liabilities relate.
23. LOAN FROM A RELATED PARTY
During the current interim period, the Group did not obtain any new loans (six months ended 30 June 2019: US$150,000,000, equivalent to approximately RMB1,017,120,000 from a fellow subsidiary to finance CNA's daily operations, which is repayable on demand and carries effective interest rate of LIBOR+0.5% per annum).
24. INTEREST-BEARING BANK BORROWINGS
During the current interim period, the Group repaid bank borrowings of US$42,100,000, equivalent to approximately RMB298,283,000 (six months ended 30 June 2019: US$42,100,000, equivalent to approximately RMB281,540,000) and bank borrowings of RMB9,100,000 (six months ended 30 June 2019: RMB9,100,000).
No bank borrowings obtained during the six months ended 30 June 2020 and 2019, respectively.
The weighted average effective interest rate of bank borrowings for the six months ended 30 June 2020 was 2.93% per annum (six months ended 30 June 2019: 4.65% per annum) and the borrowings are repayable in instalments over a period of 1 to 16 years.
China Oilfield Services Limited Interim Report 2020 | 45 |
Notes to the Condensed Consolidated Financial Statements (continued)
For the six months ended 30 June 2020
25. LONG TERM BONDS
30 June | 31 December | ||
Year of maturity | 2020 | 2019 | |
RMB'000 | RMB'000 | ||
(Unaudited) | (Audited) | ||
Corporate bonds (a) | 2022 | 1,508,400 | 1,542,000 |
2016 Corporate Bonds | 3,009,473 | ||
(Type II of the First Tranche Issue as defined below) (b) | 2026 | 3,070,763 | |
(Type I of the Second Tranche Issue as defined below) (b) | 2021 | 104,062 | 102,493 |
(Type II of the Second Tranche Issue as defined below) (b) | 2021 | 2,965,882 | 2,916,915 |
Senior unsecured USD bonds (c) | 2022 | 7,140,564 | 7,032,189 |
Guaranteed medium term notes | 3,592,060 | ||
First Drawdown Note (d) | 2020 | 3,537,073 | |
Second Drawdown Note (d) | 2025 | 3,591,006 | 3,537,220 |
Guaranteed senior notes | 3,530,799 | ||
2025 Notes (e) | 2025 | - | |
2030 Notes (e) | 2030 | 2,101,977 | - |
27,544,223 | 21,738,653 | ||
Current | 3,822,260 | 3,810,175 | |
Non-current | 23,721,963 | 17,928,478 | |
27,544,223 | 21,738,653 |
- On 18 May 2007, the Group issued 15-year corporate bonds, with a nominal value of RMB100 per bond, amounting to RMB1,500,000,000. The bonds carry effective interest rate of 4.48% per annum (2019: 4.48% per annum), and the redemption or maturity date is 14 May 2022.
- On 26 May 2016, the Group issued its first tranche (the "First Tranche Issue") of domestic corporate bonds ("2016 Corporate Bonds") with an aggregate amount of RMB5,000,000,000. The First Tranche Issue includes two types of bonds. The first type of bonds with a principal amount of RMB2,000,000,000 was repaid on 27 May 2019. The second type of bonds with a principal amount of RMB3,000,000,000 (the "Type II of the First Tranche Issue") carries effective interest rate of 4.12% per annum and the maturity date is 27 May 2026.
On 21 October 2016, the Group issued its second tranche (the "Second Tranche Issue") of 2016 Corporate Bonds with an aggregate amount of RMB5,000,000,000. The Second Tranche Issue includes two types of bonds. The first type of bonds with a principal amount of RMB2,100,000,000 (the "Type I of the Second Tranche Issue") and is repayable on 24 October 2021. The Group has the right to adjust or not to adjust the coupon rate for the fourth and fifth year at the end of the third year on 24 October 2019 by giving a notice to the bondholders. The bondholders have the right to require the Group to redeem the Type I of the Second Tranche Issue at a redemption price equal to 100% of the principal plus accrued and unpaid interest to such redemption date whether the Group chose to adjust the coupon rate or not. The remaining bonds will be subject to the interest rate offered by the Group at the end of the third year until the maturity date. The effective interest rate of the Type I of the Second Tranche Issue is 3.13% per annum. During the year of 2019, RMB1,998,100,000 principal of Type I of the Second Tranche were redeemed as required by the bondholders. According to the market environment, the Group chose not to adjust the coupon rate for the fourth and fifth year, that is, the coupon rate remains at 3.08% in the following interest-bearing years. The remaining Type I of the Second Tranche Issue of RMB101,900,000 will be held until the maturity date on 24 October 2021.
The second type of bonds with a principal amount of RMB2,900,000,000 (the "Type II of the Second Tranche Issue") is repayable on 24 October 2023. The Group has the right to unadjust or adjust the coupon rate for the sixth and seventh year at the end of the fifth year on 24 October 2021 by giving a notice to the bondholders. The bondholders may accordingly at their option to require the Group to redeem the Type II of the Second Tranche Issue at a redemption price equal to 100% of the principal plus accrued and unpaid interest to such redemption date. The remaining bonds will be subject to the interest rate offered by the Group at the end of the fifth year until the maturity date. The effective interest rate of the Type II of the Second Tranche Issue is 3.38% per annum.
46 | China Oilfield Services Limited Interim Report 2020 |
Notes to the Condensed Consolidated Financial Statements (continued)
For the six months ended 30 June 2020
- LONG TERM BONDS (continued)
- On 6 September 2012, COSL Finance (BVI) Limited, a subsidiary of the Company, issued 10-year senior unsecured bonds, with a US$1,000,000,000 principal amount. The redemption or maturity date is 6 September 2022. The effective interest rate of the senior unsecured bonds is 3.38% per annum.
- On 20 July 2015, COSL Singapore Capital Ltd., a wholly-owned subsidiary of the Company, established the Euro medium term note programme (the "EMTN Programme"). Under the EMTN Programme, COSL Singapore Capital Ltd. may issue drawdown notes in tranches up to an aggregate principal amount of US$3,500,000,000.
On 30 July 2015, COSL Singapore Capital Ltd. issued the first tranche of drawdown note under the EMTN Programme with nominal amount of US$500,000,000 (the "First Drawdown Note"). The effective interest rate was 3.61% per annum after taking into consideration of initial transaction costs. The principal of the First Drawdown Note will be repaid on 30 July 2020. On 30 July 2015, COSL Singapore Capital Ltd. issued the second tranche of drawdown note under the EMTN Programme with nominal amount of US$500,000,000 (the "Second Drawdown Note"). The effective interest rate is 4.58% per annum after taking into consideration of initial transaction costs. The principal of the Second Drawdown Note will be repaid on 30 July 2025. - On 24 June 2020, COSL Singapore Capital Ltd., a wholly-owned subsidiary of the Company, issued two tranches of Guaranteed Senior Notes. The Company has unconditionally and irrevocably guaranteed the due and punctual payment of Guaranteed Senior Notes.
The first tranche of the notes (the "2025 Notes") is a 5-year guaranteed senior notes, with a US$500,000,000 principal amount. The redemption or maturity date is 24 June 2025. The effective interest rate of the 2025 Notes is 1.94% per annum.
The second tranche of the notes (the "2030 Notes") is a 10-year guaranteed senior notes, with a US$300,000,000 principal amount. The redemption or maturity date is 24 June 2030. The effective interest rate of the 2030 Notes is 2.62% per annum.
- DEFERRED INCOME
Deferred income consists of the contract value acquired in the process of the acquisition of CNA, government grants, and the difference between proceeds received from loans at a below-market rate granted by a wholly-owned subsidiary of a state-owned bank and the fair value of the loans at initial recognition based on the prevailing market interest rate (the "Others"). The deferred income acquired from contract value are amortised according to the related drilling contract periods and are credited to revenues of the Group. The deferred income received from government and the others are recognised according to the depreciable periods of the related assets and the periods in which the related costs incurred, respectively, and are credited to other income of the Group.
Government | Government | ||||
Contract | grant related | grant related | |||
30 June 2020 | value | to assets | to income | Others | Total |
RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
At 1 January 2019 (audited) | 167,369 | 194,386 | 80,393 | 80,691 | 522,839 |
Additions | - | 2,748 | 87,033 | - | 89,781 |
Credited to profit or loss | (82,602) | (17,301) | (105,065) | (7,922) | (212,890) |
Exchange realignment | 1,824 | - | - | - | 1,824 |
At 31 December 2019 (audited) | 86,591 | 179,833 | 62,361 | 72,769 | 401,554 |
Additions | - | 450 | 29,447 | - | 29,897 |
Credited to profit or loss | (56,473) | (10,187) | (30,668) | (3,173) | (100,501) |
Exchange realignment | 901 | - | - | - | 901 |
At 30 June 2020 (unaudited) | 31,019 | 170,096 | 61,140 | 69,596 | 331,851 |
China Oilfield Services Limited Interim Report 2020 | 47 |
Notes to the Condensed Consolidated Financial Statements (continued)
For the six months ended 30 June 2020
27. ISSUED CAPITAL
30 June | 31 December | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Audited) | |
Registered, issued and fully paid: | 1,811,124 | |
H shares of RMB1.00 each | 1,811,124 | |
A shares of RMB1.00 each | 2,960,468 | 2,960,468 |
4,771,592 | 4,771,592 |
28. CONTINGENCES AND COMMITMENTS
-
Contract performance guarantees
As at 30 June 2020, the Company has issued a contract performance guarantee in respect of certain obligating service agreements entered by the Group's cooperation partner, Oceancare Corporation Sdn Bhd ("OCSB"), in favor of the customer ("the guaranteed party"). The total consideration of the service agreements are US$10,300,000, which is equivalent to approximately RMB72,920,000. Under the guarantee, the Company is required to make good at its own cost all outstanding contractual work for the guaranteed party should OCSB fails to perform under the said service obligations.
The Group has not recognised liabilities for the above guarantee because the Directors consider that the possibility of an outflow of resources embodying economic benefits is remote. - Capital commitments
The Group had the following capital commitments, principally for construction and purchases of property, plant and equipment at the end of the reporting period:
30 June | 31 December | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Audited) | |
Contracted, but not provided for | 1,152,625 | 1,512,276 |
48 | China Oilfield Services Limited Interim Report 2020 |
Notes to the Condensed Consolidated Financial Statements (continued)
For the six months ended 30 June 2020
29. RELATED PARTY TRANSACTIONS
As disclosed in note 1, the Company is a subsidiary of CNOOC, which is a SOE subject to the control of the State Council of the PRC Government. The Group has extensive transactions and relationships with the members of CNOOC. The transactions were made on terms agreed among the parties. The Directors are of the opinion that the transactions with related parties were conducted in the ordinary course of business.
-
Related party transactions and outstanding balances with related parties
In addition to the transactions and balances detailed elsewhere in these condensed consolidated financial statements, the following is a summary of significant transactions carried out between the Group and (i) CNOOC Limited Group; (ii) CNOOC and its subsidiaries, excluding the CNOOC Limited Group (the "CNOOC Group''); (iii) the Group's joint ventures; and (iv) associates invested by CNOOC.
a. Included in revenue
Six months ended 30 June | |||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
(Unaudited) | (Unaudited) | ||
i | CNOOC Limited Group | 3,029,551 | |
Provision of drilling services | 2,779,065 | ||
Provision of well services | 5,466,345 | 5,996,275 | |
Provision of marine support services | 1,407,964 | 1,297,982 | |
Provision of geophysical acquisition and surveying services | 616,817 | 790,908 | |
10,520,677 | 10,864,230 | ||
ii | CNOOC Group | 44,602 | |
Provision of drilling services | 298 | ||
Provision of well services | 46,190 | 7,617 | |
Provision of marine support services | 15,492 | 6,790 | |
Provision of geophysical acquisition and surveying services | 15,092 | 39,767 | |
121,376 | 54,472 | ||
iii | Joint ventures | 16,487 | |
Provision of well services | 14,186 | ||
iv | Associates invested by CNOOC | 1,742 | |
Provision of drilling services | 443 | ||
Provision of well services | 6,608 | 83,833 | |
Provision of marine support services | - | 8,060 | |
8,350 | 92,336 |
China Oilfield Services Limited Interim Report 2020 | 49 |
Notes to the Condensed Consolidated Financial Statements (continued)
For the six months ended 30 June 2020
29. RELATED PARTY TRANSACTIONS (continued)
- Related party transactions and outstanding balances with related parties (continued) b. Included in operating expenses
Six months ended 30 June | |||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
(Unaudited) | (Unaudited) | ||
i | CNOOC Limited Group | 14,253 | |
Materials, utilities and other ancillary services | 23,863 | ||
Transportation services | 74 | - | |
14,327 | 23,863 | ||
Property services | 2,532 | 1,955 | |
16,859 | 25,818 | ||
ii | CNOOC Group | 561,986 | |
Materials, utilities and other ancillary services | 412,123 | ||
Transportation services | 6,915 | 23,448 | |
Leasing of equipment | 60,645 | 89,212 | |
Repair and maintenance services | 4,029 | 3,431 | |
Management services | 735 | 621 | |
634,310 | 528,835 | ||
Property services | 59,141 | 46,723 | |
693,451 | 575,558 | ||
iii | Joint ventures | 119,548 | |
Materials, utilities and other ancillary services | 79,303 | ||
Leasing of equipment | 13,621 | 13,881 | |
133,169 | 93,184 | ||
iv Associates invested by CNOOC | 21,964 | ||
Materials, utilities and other ancillary services | - | ||
Management services | 1,431 | - | |
23,395 | - |
50 | China Oilfield Services Limited Interim Report 2020 |
Notes to the Condensed Consolidated Financial Statements (continued)
For the six months ended 30 June 2020
29. RELATED PARTY TRANSACTIONS (continued)
- Related party transactions and outstanding balances with related parties (continued) c. Included in interest income
Six months ended 30 June | ||
2020 | 2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Unaudited) | |
CNOOC Finance Co., Ltd. ("CNOOC Finance", a subsidiary of CNOOC) | 14,153 | |
Interest income | 10,087 |
Deposits in CNOOC Finance carry interests at the applicable interest rate which is determined with reference to the prevailing bank rates published by the People's Bank of China.
d. Dividend income from joint ventures
Six months ended 30 June | ||
2020 | 2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Unaudited) | |
Dividend income from joint ventures | 23,201 | 92,035 |
- Included in finance costs
During the current interim period, the finance costs on the loan from a related party which has been disclosed in note 23 are US$2,667,000 (six months ended 30 June 2019: US$4,985,000), which is equivalent to approximately RMB18,881,000 (six months ended 30 June 2019: RMB34,277,000).
During the current interim period, the financial costs on the lease liabilities due to related parties are RMB799,000 (six months ended 30 June 2019: RMB2,550,000). - Deposits included in cash and cash equivalents
30 June | 31 December | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Audited) | |
Deposits placed with CNOOC Finance as at the end of the reporting period | 1,183,353 | 1,498,717 |
- During the current interim period, the other income from CNOOC Limited Group in respect of compensation for equipment dropping into wells when rendering services are RMB25,710,000 (six months ended 30 June 2019: RMB20,373,000).
China Oilfield Services Limited Interim Report 2020 | 51 |
Notes to the Condensed Consolidated Financial Statements (continued)
For the six months ended 30 June 2020
29. RELATED PARTY TRANSACTIONS (continued)
- Related party transactions and outstanding balances with related parties (continued) h. Right-of-useassets
The following is addition of right-of-use assets based on lease agreements with related parties:
Six months ended 30 June | ||
2020 | 2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Unaudited) | |
CNOOC Group | - | 3,142 |
Joint ventures | - | 5,728 |
- | 8,870 |
- Contingences and commitments with the related parties
The Group had the following capital commitments with related parties, principally for construction and purchases of property, plant and equipment at the end of the reporting period:
30 June | 31 December | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Audited) | |
Contracted, but not provided for | 41,227 | - |
As at 30 June 2020, the Group has no guarantees granted to related parties. |
- Outstanding balances with related parties Accounts receivable
Included in accounts receivable are amounts due from related parties which arose from the ordinary course of business and are repayable on similar credit terms to those offered to independent third party customers.
30 June | 31 December | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Audited) | |
Due from CNOOC Limited Group | 11,147,802 | 7,679,994 |
Due from CNOOC Group | 176,593 | 71,236 |
Due from joint ventures | 14,359 | 4,617 |
Due from associates invested by CNOOC | 3,248 | 11,356 |
11,342,002 | 7,767,203 |
52 | China Oilfield Services Limited Interim Report 2020 |
Notes to the Condensed Consolidated Financial Statements (continued)
For the six months ended 30 June 2020
29. RELATED PARTY TRANSACTIONS (continued)
- Related party transactions and outstanding balances with related parties (continued)
- Outstanding balances with related parties (continued) Prepayments, deposits and other receivables
30 June | 31 December | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Audited) | |
Due from CNOOC Limited Group | 9,533 | 33,663 |
Due from CNOOC Group | 1,753 | 1,697 |
Due from joint ventures | 7,507 | 15,790 |
Less: Provision for impairment of | 18,793 | 51,150 |
(500) | ||
other receivables | (500) | |
18,293 | 50,650 | |
Dividend receivable | ||
30 June | 31 December | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Audited) | |
Dividend receivable from joint ventures | 23,201 | - |
Other non-current assets | ||
30 June | 31 December | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Audited) | |
Due from CNOOC Group | 1,172 | - |
China Oilfield Services Limited Interim Report 2020 | 53 |
Notes to the Condensed Consolidated Financial Statements (continued)
For the six months ended 30 June 2020
29. RELATED PARTY TRANSACTIONS (continued)
- Related party transactions and outstanding balances with related parties (continued)
- Outstanding balances with related parties (continued) Trade and other payables
30 June | 31 December | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Audited) | |
Due to CNOOC Limited Group | 21,549 | 35,127 |
Due to CNOOC Group | 572,714 | 652,291 |
Due to joint ventures | 107,290 | 203,692 |
Due to associates invested by CNOOC | 8,904 | 19,065 |
710,457 | 910,175 | |
Loan from a related party | ||
30 June | 31 December | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Audited) | |
An unsecured loan due to CNOOC Group (note 23) | 2,478,494 | 2,443,946 |
Contract liabilities | ||
30 June | 31 December | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Audited) | |
Due to the CNOOC Limited Group | - | 3,535 |
Due to the CNOOC Group | 134,852 | 156,915 |
134,852 | 160,450 | |
Lease liabilities | ||
30 June | 31 December | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Audited) | |
Due to the CNOOC Group | 38,907 | 50,578 |
Due to joint ventures | 350 | 2,770 |
39,257 | 53,348 |
54 | China Oilfield Services Limited Interim Report 2020 |
Notes to the Condensed Consolidated Financial Statements (continued)
For the six months ended 30 June 2020
29. RELATED PARTY TRANSACTIONS (continued)
- Related party transactions and outstanding balances with related parties (continued)
-
Outstanding balances with related parties (continued)
The Group and the above related parties are within the CNOOC Group and CNOOC Limited Group and are under common control (except for the joint ventures of the Group and the associates invested by CNOOC) by the same ultimate holding company.
The balances with related parties at 30 June 2020 included in accounts receivables, prepayments, deposits and other receivables, dividend receivable, trade and other payables and contract liabilities of the Group are unsecured, interest-free, and have no fixed terms of repayment. Loan from a related party is charged at LIBOR+0.5% per annum and repayable on demand. Lease liabilities have fixed terms of repayment and are measured at the present value of lease payments that are unpaid using the incremental borrowing rate at the lease commencement date.
The Company entered into several agreements with the CNOOC Group and CNOOC Limited Group which govern the employee benefit arrangements, the provision of materials, utilities and ancillary services, the provision of technical services, the leasing of properties and various other commercial arrangements.
The lease expenses relating to agreements with the CNOOC Group and CNOOC Limited Group in respect of variable lease payments determined by utilisation days and day rates as well as short-term leases are disclosed in note 29(A)b.
The Directors are of the opinion that the above transactions with related parties were conducted in the usual course of business. - Transactions with other SOEs in the PRC
The Group has entered into extensive transactions covering the sales of goods and rendering of services, receipt of construction services of vessels and drilling rigs, purchases of goods, services or property, plant and equipment in the PRC, other than the CNOOC Group and the CNOOC Limited Group, in the normal course of business at terms comparable to those with other non-SOEs. None of these transactions are material related party transactions, individually or collectively, that require separate disclosure.
In addition, the Group has certain of its cash and time deposits and outstanding interest-bearing bank borrowings with certain state-owned banks in the PRC, as summarised below:
-
Outstanding balances with related parties (continued)
30 June | 31 December | |
2020 | 2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Audited) | |
Cash and cash equivalents | 6,066,216 | 536,716 |
6,066,216 | 536,716 | |
Long-term bank loans | 196,225 | 201,049 |
Current portion of long-term bank loans | 318,987 | 608,906 |
515,212 | 809,955 |
China Oilfield Services Limited Interim Report 2020 | 55 |
Notes to the Condensed Consolidated Financial Statements (continued)
For the six months ended 30 June 2020
29. RELATED PARTY TRANSACTIONS (continued)
- Related party transactions and outstanding balances with related parties (continued) k. Transactions with other SOEs in the PRC (continued)
Deposit interest rates and loan interest rates are at the market rates.
Six months ended 30 June | ||
2020 | 2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Unaudited) | |
Finance costs | 9,002 | 24,507 |
(B) Compensation of key management personnel of the Group
Six months ended 30 June | ||
2020 | 2019 | |
RMB'000 | RMB'000 | |
(Unaudited) | (Unaudited) | |
Short-term employee benefits | 2,001 | 2,606 |
Post-employment benefits | 260 | 345 |
Total compensation paid to key management personnel | 2,261 | 2,951 |
30. FINANCIAL INSTRUMENTS
-
Fair value of the Group's financial assets that are measured at fair value on a recurring basis
Some of the Group's financial assets are measured at fair value at the end of each reporting period. The following table gives information about how the fair values of these financial assets are determined (in particular, the valuation technique(s) and inputs used), as well as the level of the fair value hierarchy into which the fair value measurements are categorised (levels 1 to 3) based on the degree to which the inputs to the fair value measurements is observable. - Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active market for identical assets or liabilities;
- Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
- Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).
56 | China Oilfield Services Limited Interim Report 2020 |
Notes to the Condensed Consolidated Financial Statements (continued)
For the six months ended 30 June 2020
30. FINANCIAL INSTRUMENTS (continued)
- Fair value of the Group's financial assets that are measured at fair value on a recurring basis (continued)
Fair value as at | Valuation technique(s) | |||
Financial assets | 30/06/2020 | 31/12/2019 | Fair value hierarchy and key input(s) | |
RMB'000 | RMB'000 | |||
(Unaudited) | (Audited) | |||
Receivables at FVTOCI - notes receivable | 23,009 | 40,580 | Level 2 Discounted cash flow at a discount | |
rate that reflects the credit risk of | ||||
the drawee of notes at the end of | ||||
Financial assets at FVTPL - floating rate | 2,538,263 | the reporting period | ||
4,511,248 | Level 3 Discounted cash flow. Future cash | |||
corporate wealth management products | flows estimated based on | |||
estimated return | ||||
Reconciliation of Level 3 fair value measurements is as follows: | ||||
Financial assets | ||||
at FVTPL | ||||
RMB'000 | ||||
At 31 December 2019 (Audited) | 4,511,248 | |||
Purchase | 3,500,000 | |||
Redemption | (5,500,000) | |||
Change in fair value | 27,015 | |||
At 30 June 2020 (Unaudited) | 2,538,263 |
- Fair value of the Group's financial assets and financial liabilities that are not measured at fair value on a recurring basis
Except as detailed in the following table, the Directors consider that the carrying amounts of financial assets and financial liabilities recognised in the condensed consolidated financial statements approximate to their fair values.
Carrying amounts | Fair values | |||
30 June | 31 December | 30 June | 31 December | |
2020 | 2019 | 2020 | 2019 | |
RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
(Unaudited) | (Audited) | (Unaudited) | (Audited) | |
Financial liabilities | 27,544,223 | 28,211,817 | ||
Long term bonds (note 25) | 21,738,653 | 21,956,603 |
The fair value of long term bonds issued by the Group, with fair value hierarchy of level 2, are determined by reference to the present value valuation technique under income approach and applying prime rate as adjusted to reflect the credit risk of the issuers as key inputs.
31. APPROVAL OF THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
These condensed consolidated financial statements were approved and authorised for issue by the board of directors on 26 August 2020.
China Oilfield Services Limited Interim Report 2020 | 57 |
Company Directory
Headquarters | Legal Counsel | Audit Committee |
No. 201 Haiyou Avenue | PRC | Fong Chung, Mark (Chairman) |
Yanjiao Economic & Technological | JunHe LLP | Wong Kwai Huen, Albert |
Development Zone | 20/F, China Resources Building | Lin Boqiang |
Sanhe City | 8 Jianguomenbei Avenue, Beijing | Remuneration and Assessment |
Hebei Province | Tel: (8610) 8519 1300 | |
People's Republic of China | Fax: (8610) 8519 1350 | Committee |
Tel: (8610) 8452 1685 | Hong Kong | Wong Kwai Huen, Albert (Chairman) |
Fax: (8610) 8452 1325 | Fong Chung, Mark | |
Registration Address | Clifford Chance | Lin Boqiang |
27th Floor, Jardine House | Meng Jun | |
No.1581, Haichuan Road | One Connaught Place | Nomination Committee |
Tanggu Ocean Hi-tech Zone | Hong Kong | |
Binhai Hi-tech Development | Tel: (852) 2825 8888 | Lin Boqiang (Chairman) |
District, Tianjin, | Fax: (852) 2825 8800 | Qi Meisheng |
People's Republic of China | Public Relations Company | Wong Kwai Huen, Albert |
Hong Kong Office | Supervisory Committee | |
Wonderful Sky Financial Group | ||
65/F, Bank of China Tower | 9/F, The Center | Wu Hanming (Chairman) |
1 Garden Road | 99 Queen's Road Central | Cheng Xinsheng |
Central, Hong Kong | Central, Hong Kong | Zhao Bi |
Tel: (852) 2213 2500 | Tel: (852) 2851 1038 | Senior Management |
Fax: (852) 2525 9322 | Fax: (852) 3102 0210 | |
Register | Printer | Qi Meisheng |
Zhao Shunqiang | ||
Computershare Hong Kong | Equity Financial Press Limited | Zheng Yonggang |
Investor Services Limited | 2/F, 100 QRC | Yu Feng |
Shops 1712-1716, 17M Floor | 100 Queen's Road Central | Xu Yingbo |
Hopewell Centre | Central, Hong Kong | Lu Tao |
183 Queen's Road East | Tel: (852) 2526 8330 | Wu Yanyan |
Wanchai, Hong Kong | Fax: (852) 2526 6820 | |
Tel: (852) 2862 8555 | Stock Codes | |
Fax: (852) 2865 0990 | ||
(852) 2529 6087 | Shanghai Stock Exchange: 601808 | |
Auditors | The Stock Exchange of | |
Hong Kong Limited: 2883 | ||
Deloitte Touche Tohmatsu | Board of Directors | |
35/F, One Pacific Place | ||
88 Queensway | Qi Meisheng (Chairman) | |
Hong Kong | Cao Shujie | |
Tel: (852) 2852 1600 | Fong Chung, Mark | |
Fax: (852) 2541 1911 | (Independent Non-Executive Director) | |
Wong Kwai Huen, Albert | ||
(Independent Non-Executive Director) | ||
Lin Boqiang | ||
(Independent Non-Executive Director) | ||
Meng Jun | ||
Zhang Wukui |
58 | China Oilfield Services Limited • Interim Report 2020 |
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COSL - China Oilfield Services Limited published this content on 10 September 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 10 September 2020 09:14:03 UTC