COSL Reports Record Profit for 2006

China Oilfield Services Limited (COSL) has announced its annual results for the year ended 31 December 2006.

The Company's turnover for 2006 was RMB6,364.8 million, representing an increase of RMB1,576.0 million or 32.9% from RMB4,788.8 million last year. The increase was driven by an expansion into overseas markets, rise in service prices and utilization of new equipment. Meanwhile, turnovers of all of its four business segments, namely drilling services, well services, marine support and transportation services as well as geophysical services, grew by 40.6%, 16.0%, 20.2% and 58.1% respectively. Net profit amounted to RMB1,128.2 million, representing an increase of 37.4% from RMB 821.0 million recorded in 2005. The Board of Directors has proposed a final dividend of RMB6.00 cents per share for the year ended December 31, 2006. In 2006, turnover from our drilling business increased by 40.6% over the previous year, reaching RMB3,100.4 million. Overseas business contributed RMB827.4 million, representing 26.7% of the total turnover. Meanwhile, COSL941, China's first 400-feet cantilever jack-up rig commenced operation on 25 June 2006 in Beibu Gulf. Its operation record throughout the year was promising.

As of 31 December 2006, we operated a total of 15 drilling rigs (including 1 leased rig). Of these rigs, 8 were located in the Bohai Bay, China, 4 were located in the South China Sea, 2 were located in offshore Indonesia and 1 at offshore Australia. During the year, we drilled a total of 221 wells, of which 56 were exploration wells and 165 were development wells. Of the wells drilled, 168 were in the Bohai Bay, China, 36 were in South China Sea and 17 were located overseas.

Turnover from well services reached RMB1,352.2 million in 2006, representing an increase of RMB186.9 million or 16.0% from RMB1,165.3 million in 2005. The increase in turnover is mainly attributable to an expansion into overseas market and an increase in operation volume.

Turnover from marine support and transportation services reached RMB1,042.8 million in 2006, representing an increase of RMB175.1 million or 20.2% from RMB867.7 million in 2005. The increase in turnover is mainly attributable to a rise in price and volume of shipping of chemicals.

Turnover from geophysical services reached RMB869.5 million in 2006, representing an increase of RMB319.5 million or 58.1% from RMB550.0 million in 2005. The increase in turnover is mainly attributable to a rise in the volume of overseas 2D seismic data collection, the commencement of operation of 6-streamer COSL718 and the completion of renovation of 4-streamer Binhai 512.

The Integrated Project Management is one of the Company's core strategies. COSL benefited from complete service chain and the superior capacity of its oilfield services equipment to provide comprehensive or bundled integrated service to the clients. The Company entered into 14 integrated contracts in 2006, 1 less than in 2005. Turnover realized from integrated services reached RMB747.8 million, representing 11.7% of the Company's gross revenue.

The Company's gross operating revenue from overseas markets in 2006 amounted to RMB1,104 million, constituting 17.3% of the Company's gross operating revenue, and representing an increase of 151.4% over the RMB439.2 million for the same period last year. Overseas business has extended to 13 countries and regions including Indonesia, Myanmar, Australia, the Philippines, Mexico. In respect of its drilling business, COSL obtained a contract for four module rigs of 7,000 meters from PEMEX in Mexico, which has a domestic rig production rate of 92%, setting many domestic records. The commencement of the project enabled COSL to enter the traditional market of oil service companies in Europe and America, and to acquire a certain share in the Gulf of Mexico market, which has a rich storage of oil and gas. The cementing business, as a relatively more competitive segment of the Company's well services business, will gradually help bring the Company's other competitive businesses to the overseas market.

Mr. Yuan concluded, "COSL will maintain its leading position in the China offshore oilfield services market, and at the same time further strengthen our presence in the South East Asia market and expand further into the regional markets of Mexico, Africa, the Middle East and Russia, in order to generate profits from both domestic and overseas markets. Meanwhile, the Company will create new drive for development through corporate moves such as acquisition and joint ventures. We will also continue to establish our market position in international services and ultimately continue our efforts in maintaining a healthy, safe and environmentally friendly workplace, to maximize value for our shareholders, customers and employees."

COSL is the leading integrated oilfield services provider in the offshore China market. Its services cover each phase of offshore oil and gas exploration, development and production. Its four business segments are drilling services, well services, marine support and transportation services and geophysical services.

As at December 31 2006, COSL operated 15 drilling rigs, including 11 jack-ups and three semi-submersibles while operating one leased jack-up rig. In addition, COSL owns and operates the largest and most diverse fleets in offshore China. It also has a vast array of modern facilities and equipment for logging, drilling fluids, directional drilling, cementing, well completion and well work-over services.

The majority of COSL's business activities are conducted offshore China, with the other activities extending to different regions of the world such as North and South America, the Middle East, offshore Africa and offshore Europe. COSL and its worldwide employees are dedicated to providing premier quality services, while adhering to the highest health, safety and environmental standards. COSL has obtained the ISO 9000 and ISM (International Safety Management) certifications. COSL also plans to obtain certifications under the ISO 14000 environmental management standard as well as the OSHA 18000 occupational health and safety standards.


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