COSL, the leading integrated oilfield services provider in the offshore China market, has announced its annual results for the year ended December 31, 2008.
In 2008, the Group continued its positive and rapid pace of development and, achieved record results with revenue reaching RMB12,142.9 million, representing an increase of RMB3,134.9 million or 34.8% from RMB9,008.0 million for the same period in the previous year, of which RMB2,212.3 million was attributable to increases in service fees, growth in work volume derived from expansion into new markets and addition of new facilities. The newly acquired Awilco Offshore ASA (renamed as COSL Drilling Europe AS, “CDE”) made its first-ever contribution of a quarterly income of RMB912.7 million. Earnings per share were RMB69.01 cents, up 27.2% from the previous RMB54.24 cents. The Board of Directors has recommended payment of a final dividend of RMB14 cents per share. Since the Group did not pay any interim dividend payment for the six months ended 30 June 2008, total payout for the year remains at RMB14 cents per share (2007: RMB12 cents).
Commenting on the results for the year, Mr. Fu Chengyu, Chairman and non-executive director of the Group, said, "In 2008, the world economy slipped into a downturn in light of the outbreak of the global financial crisis. The contagion has extended to the oilfield services industry. As the largest integrated oilfield services provider in offshore China, COSL concluded its acquisition into CDE in September, on the top of its ongoing pursuit of organic development, and accelerated its pace of expansion into international markets. The four major segments, namely drilling services, well services, marine support and transportation services and geophysical service, achieved encouraging performances during the year with revenues reaching record highs. Overseas businesses also enjoyed a strong growth momentum and had expanded to cover an aggregate of 20 countries and regions."
In the drilling segment, COSL operated a total of 19 jack-up drilling rigs and achieved 4,556 operation days, up 328 days from the previous year, equivalent to a calendar day utilization rate of 91.1%; 3 semi-submersible drilling rigs achieved 1,098 operation days, up 18 days from the previous year, equivalent to a a calendar day utilization rate of 100%, representing an increase of 1.4 percentage points from the previous year; accommodation platforms achieved 184 operation days, equivalent to a 100% calendar day utilization rate. In 2008, due to an increase number of in maintenance days for jack-up drilling rigs, the average calendar day utilization rate of drilling rigs owned by COSL dropped 4.9 percentage points to 92.1%.
In terms of service fees, in 2008 the average day rate of drilling rigs (including CDE) was about USD129,000/day (USD/RMB conversion rate was 1:6.8346 on 28 December 2008), which represented a 41.6% increase from about USD91,000/day from the previous year (USD/RMB conversion rate was 1:7.3046 on 28 December 2007). Of this, the average day rate for jack-up rigs (including CDE) was about USD116,000/day, which represented a 47.9% increase from about USD78,000/day for the previous year, and the average day rate for semi-submersible rigs was USD179,000/day, which represented a 25.7% increase from USD142,000/day of the previous year.
In the well services segment, thanks to rising demand for services, COSL achieved a solid progress in its overseas businesses: it won a directional drilling project technical services contract to provide services for 34 geothermal wells in the Philippines; it introduced its self-developed logging system ELIS in South East Asia, providing cable logging services in the region; it had also launched open-hole cable logging, perforation, drilling fluids and cementing services to clients in Indonesia.
In the marine support and transportation services segment, during the year COSL's own utility vessels operated a total of 23,626 days, down 603 days or 2.5% from the previous year because there was one vessel in each of the months of January and November being disbanded from the fleet as they reached the end of their useful lives. The new vessels replacing them commenced operations in later months of the year (2 in September, 2 in November and 4 in December) and thus contributed less to total operation volume for 2008. The average available day utilization rate COSL's vessels was 99.3%, representing a decline of 0.3 percentage point from the previous year.
The calendar day utilization rate was 94.8%, down 0.1 percentage point from the previous year. The five accommodation platforms the Group operated on long-term leases from a joint venture achieved 1,742 operation days during the year, up 1,100 days from the previous year. In addition, the Group leased 6 vessels from third-party owners to generate additional services to meet market demand. They operated an aggregate of 590 days.
In the geophysical services segment, demand in Chinese waters remained strong in 2008. The Group's 8-streamer seismic vessel COSL719 commenced operation on March 22, 2008 and performed well throughout the year, achieving 3D seismic data collection volume aggregating 3,113 sq.km. In overseas markets, COSL718 achieved 3D seismic data collection volume aggregating 2,302 sq.km. on a voyage to South East Asia during winter months. Binhai517, in its first voyage to the Arctic Ocean, achieved for clients 2D seismic data collection volume aggregating 7,074 km. While serving primarily the domestic market in China, the Group's data processing business won 3D data processing contracts from Australia, and completed processing volume aggregating 990 sq.km.
On overseas business expansion, COSL's businesses already spanned across 20 countries and regions around the world by the end of 2008. Income generated overseas operations, reached a record high of RMB3,043.4 million, up RMB1,398.4 million or 85.0% from RMB1,645.0 million in 2007. The contribution of overseas income to the Group's total increased to 25.1% from 18.3% in 2007.
Mr. Fu concluded, "Looking forward into 2009, the world economy is set to experience a downturn in response to the global financial crisis. Nonetheless the demand for energy in China will to continue to grow. CNOOC Limited, as a major client of COSL, has forecasted that its capital expenditure for 2009 will reach of US $6.8 billion in 2009, up 19% from 2008. In light of the difficulties and challenges in 2009, COSL will continue to expand its production capacities, enhance its service capabilities and competitiveness in the marketplace. Nonetheless we remain vigilant on the macroeconomic landscape and industry dynamics in 2009. Oil prices, when staying at low levels for a prolonged period of time, will inhibit investment plans of oil companies and service prices of oilfield service providers, intensifying competition among participants and in turn inflicting pressure on service prices.
"We shall also take an initiative to optimize our capital structure and strive to enhance our return on equity through increasing deployment of external resources. We shall continue to expand into overseas markets leveraging our leading position in the domestic market. We shall speed up our migration into a true global company and integration with newly acquired units. We shall step up our brand building efforts and create better value for our shareholders. We are committed to shoulder our social responsibilities and contribute more to the society. We strive to maximize return for our shareholders, customers, employees and business partners."
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