· 2 annual report 2014 professionalism table of contents 04 - 05 president & ceo’s message...

PROFESSIONALISM - QUALITY 2

A N N U A L R E P O R T 2 0 1 4

PROFESSIONALISMQ U A L I T Y

ANNUAL REPORT 2014 PROFESSIONALISM3 ANNUAL REPORT 20143

The development of 13 years has proved the consistency and appropriateness in PV Drilling’s strategy.


VISIONTo be an internationally reputable and reliable drilling contractor and drilling-related services provider in the oil and gas industry.

MISSIONBecoming a leading regional drilling services provider and drilling contractor, creating great value added for clients by delivering premium services at competitive prices.


Table of Contents

04 - 05 President & CEO’s Message06 - 07 Remarkable Milestones in Establishment and Development (2001 - 2014)08 - 09 Scope of Work 10 - 11 Organizational Structure12 - 15 Performance of Subsidiaries and Associate Companies16 - 18 Introduction of the Board of Directors 19 Introduction of the Supervisory Board 20 - 22 Introduction of the Board of Management23 Introduction of Chief Accountant and Finance Manager24 - 25 Corporate Primary Targets26 - 27 Commitment with the Environment - Society - Community 28 - 29 Risks and Solutions

32 - 35 Report of the Board of Directors 36 - 39 Report of the Supervisory Board 40 - 45 Report of the Board of Management46 Charter Capital / Shareholders’ Structure47 Financial Highlights48 - 59 Analysis of 2014 Business Performance 60 - 61 Corporate Social Responsibility (CSR)62 - 63 Awards and Accolades

66 - 69 Professionalism in Drilling Workforce 70 - 71 Human Resources Training Plan72 - 73 Labour Productivity 74 - 77 Professionalism in Managing Health - Safety - Environment - Quality System (HSEQ)

ENTERPRISE INFORMATION

ACHIEVEMENTS FROM INNOVATION

PROFESSIONALISM


04 - 05 President & CEO’s Message06 - 07 Remarkable Milestones in Establishment and Development (2001 - 2014)08 - 09 Scope of Work 10 - 11 Organizational Structure12 - 15 Performance of Subsidiaries and Associate Companies16 - 18 Introduction of the Board of Directors 19 Introduction of the Supervisory Board 20 - 22 Introduction of the Board of Management23 Introduction of Chief Accountant and Finance Manager24 - 25 Corporate Primary Targets26 - 27 Commitment with the Environment - Society - Community 28 - 29 Risks and Solutions

98 - 101 Oil and Gas Market 2014 and Opportunities in 2015102 - 103 Plan for Implementation of Large Projects in 2015104 - 105 Mid-term and Long-term Development Strategy

108 Report of Factual Findings109 - 110 Consolidated Balance Sheet111 Off Balance Sheet Items112 Consolidated Income Statement113 - 114 Consolidated Cash Flow Statement115 - 158 Notes to the Converted Consolidated Financial Statements159 - 160 General Information of PV Drilling and Subsidiaries

80 - 81 Quality in the Provision of Services 82 - 83 Service Quality by Clients’ Assessment84 - 87 Safe Management and Operation of Drilling Rigs88 - 93 Service Quality Control at Subsidiaries94 - 95 Research and Development

QUALITY

STEADY IN CHALLENGES

CONVERTED CONSOLIDATED FINANCIAL STATEMENTS


President & CEO’s Message

Year 2014 has been a victorious milestone for PV Drilling in all business aspects, yet a year full of turbulences for the oil and gas industry. Despite the pressures from the escalating workload and competitions, PV Drilling has successfully managed its resources and effectively cater for the business demands. The audited statement showed a remarkable net revenue of 20,884 billion VND (approx. 1 billion USD) and profit after tax of 2,419 billion VND, equivalent to a growth of 40% and 28% respectively over those of 2013, and that is definitely the most impressive growth rate of PV Drilling during the last 5 years. Contemplating over these stunning statistics, I have seen the silhouettes of the hard-working spirit of PV Drilling’s professional team, their discipline in strict compliance to the operational and HSE policies to ensure the highest level of safety and efficiency. I could even feel the sheer diligence of all our engineers and staffs from all functions of HSEQ, HR, Finance, Management, Accounting, Marketing, etc. harmoniously connected together to provide the clients with top quality services and expected values. And there, I have seen the enthusiasm and creativeness of our managerial staff in confronting the intense working pressure to timely make comprehensive decisions for all arising matters.

It is beyond word to demonstrate how much I appreciated the enormous contribution of all PV

Drilling’s staff. Thanks to those, the whole fleet has maintained an incredibly outstanding performance record. According to recent statistics, PV DRILLING I has excellently enhanced its Zero Lost Time Incident (LTI) performance up to seven (7) years straight while PV DRILLING II and III are not far behind with five (5) years of Zero-LTI. Our modern Semi-submersible TAD PV DRILLING V also earned 2 years Zero LTI. On the other hand, in 2014, PV Drilling has collaborated with globally reputable partners such as Ensco, Shelf Drilling, Seadrill, UMW, etc. to mobilize up to 8 rigs for the clients. These chartered rigs have greatly fostered the impressive growth of profit from the drilling-related services segment up to 50%. Via many communicative channels, we have regularly updated the status of PV Drilling’s business health to your esteemed Shareholders and Investors on quarterly basis, and also, in reverse, received your valuable in-depth propositions to improve our performance. Taking this occasion, I wish to express my sincerest gratitude to all your contribution for a very successful year 2014 of PV Drilling. The year 2015 has come, bringing along the tough challenges on our path ahead. In fact, the threats started emerging since quarter IV/2014 when the global oil price suddenly jumped out of its stable zone and plunged almost vertically.

DEAR ESTEEMED SHAREHOLDERS, INVESTORS AND STRATEGIC PARTNERS,


From over 100 USD/barrel, the Brent oil is currently on sale for slightly over 50 USD/barrel – the worst downfall of this commodity in the past 5 years. The oil price outlook, thus, have virtually become the main theme on air and triggered hectic discussions among policy planners and experts all over the world. And it is certain that your esteemed Shareholders and Investors are all laying watchful eyes on the behavior of oil price. In the same manner, we also have kept track of the market situation to timely input new data into our business and risk-modeling analysis to measure our exposure to impact.

Then, what will the behavior of black gold look like? What is the prospect for PV Drilling? Those are the primary issues that we have been questioned in the over 50 recent meetings with shareholders and investors.

For the first question, though not in the position of a forecasting body to demonstrate for you the trend of the oil price via complex quantitative models, we, based upon our meticulous analysis, do have a strong belief toward the early recovery of this resource in the upcoming time. It should be noted that the current reality and the downturn of hydrocarbon in 2009 are not similar in nature. The latter was solely the inevitable consequence of the global financial crisis while the current plunge of oil price is rather the solution of a complex equation containing many unpredictable variables including technological alternatives, geopolitical issues, etc. and obviously the supply-demand balance. Therefore, aside our rational optimism, we do add some caution into drafting this year’s business scenarios based on each risk level, and we expect to deliver suitable remedies in short term to consolidate our sustainable development.

Year 2015 shall be undoubtedly the most bustling time for PV Drilling. Firstly, the workload is increasing considerably due to the operation of the new Rig PV DRILLING VI since March 2015. Secondly, we have to exert numerous efforts to execute the short-term solutions to reinforce our competitive edges. The action plans shall include optimizing operational procedures, ensuring service quality on a cost-saving basis, conducting market expansion, as well as searching for potential investment projects.

Besides, we need to consolidate our inner strength via developing the human resource, promoting scientific and technological projects, completing the risk management system, and thereby, getting ourselves ready for the upcoming waves of business opportunities.

In implementing the long-term strategy and the short-term remedial action plans above, we firmly believe that PV Drilling shall continue to thrive sustainably in the long run. As we once successfully held ourselves steadfast against tough adversities in the past with great resilience, we shall demonstrate that same spirit again to overcome the current challenges and achieve our committed business goals. Year 2015 is coming with ample number of projects and business ventures for development, etc. Despite such intense workload, PV Drilling shall exert its utmost efforts, via promoting the professionalism of all staff and the quality of our services, to deliver greater value added for our clients. We shall be fully committed to maintain the development in accordance with the model of sustainability that we have established. At this point, I hope that the answer has been made clear to a certain extent for the second question above relating to the way forward of PV Drilling.

Lastly, may I take this opportunity to extend my deepest appreciation and acknowledgement to the whole-hearted devotion of all PV Drilling’s employees, particularly in this challenging period. On behalf of over 2,100 staff, I would like to express the sincerest gratitude to all the esteemed Shareholders, to PetroVietnam, to our Investors and Strategic Partners for your valuable and unwavering support to PV Drilling. It is your very contribution that plays the key role in our achievement today and generates the momentum to accelerate the sustainable development of PV Drilling.

Yours sincerely,

President & CEO

PHAM TIEN DUNG

ANNUAL REPORT 2014 ENTERPRISE INFORMATION6

Remarkable Milestones in Establishment and Development (2001-2014)

• PV Drilling was founded as a member of Petrovietnam Oil & Gas Group on the foundation of PTSC Offshore’s resources. At the time, there were 3 divisions under PV Drilling: the Drilling Division, Well Services Division and the Oil Spill Response Division;

2001

• Established PVD Logging;

2004

• Registered as a joint stock company in accordance with the Ministry of Industry’s Decision No. 3477/QĐ-BCN;

2005

• PV Drilling shares with ticker code “PVD” was officially listed on the Vietnam Stock Exchange;

• Established PVD Tech and the Joint Venture BJ – PV Drilling;

2006

• Inaugurated of the new offshore jack-up rig, PV DRILLING I, which was the first wholly-owned rig by a Vietnamese company and the land rig, PV DRILLING 11;

• Established PVD Drilling Division (PVD DD), PVD Well Services, PVD Offshore and PVD Training;

2007

• Established PVD – Expro and PVD Tubulars Management;

• Merged PVD Invest into PV Drilling, thereby increasing the total corporate assets to VND 12,000 billion and the charter capital to VND 2,105 billion;

2008

• Received the delivery of the two offshore jack-up rigs: PV DRILLING II and PV DRILLING III;

2009


Remarkable Milestones in Establishment and Development (2001-2014)

• Received the delivery of the TAD rig, PV DRILLING V;

• Established PVD-OSI;

2011

20,884 VND billion

Revenue 152% of plan

3,178

Profit before tax 148% of plan

2,419

Profit after tax147% of plan

3,496

Contribution to the state budget 193% of plan

• All PV Drilling’s rigs operated safely and efficiently without Lost Time Incidents (Zero LTI): + The rig PV DRILLING I achieved 7 consecutive years Zero LTI; + The rig PV DRILLING II and III achieved 5 consecutive years Zero LTI; + The rig PV DRILLING V achieved 2 consecutive years Zero LTI; + The rig PV DRILLING 11 achieved 1 year Zero LTI./.

• Established PVD Invest and PV Drilling – Baker Hughes;

• Signed the Business Cooperation Contract (BCC) to invest in building the advanced technology Semi-Submersible Tender Assist Drilling Rig (TAD - PV DRILLING V) and established PVD Deepwater;

• Collaborated with foreign drilling contractors to timely meet the demands for drilling services in the domestic market;

2010

• Officially converted PVD Tech into a Joint Stock Company;

• Completed the investment holding of 51% of Vietubes’ total charter capital;

2012

• Successfully launched 38 million private placements of shares to PetroVietnam and international financial investment funds to raise capital for investment for the PV DRILLING VI rig;

• Set up the Joint Venture “PV Drilling – FEG” in Singapore;

2013

• 2014 marked a very successful year of PV Drilling with financial performance surpassing the annual plan:

2014

VND billion VND billion VND billion


Scope of Work

PV DRILLING SUPPLIES DRILLING RIGS AND OFFERS TECHNICAL DRILLING-RELATED SERVICES FOR OIL AND GAS EXPLORATION AND PRODUCTION ACTIVITIES WITHIN VIETNAM AND ABROAD.

PV DRILLING I

PV DRILLING 11

PV DRILLING II

PV DRILLING III

PV DRILLING VIPV DRILLING V


• Owns and operates onshore and offshore rigs;

• Drilling tools rental services;

• Mud logging & Geologist Consultants services;

• Tubular running services;

• Wellhead services;

• Oil spill services;

• Inspection, maintenance, refurbishment of OCTG, drilling tools, equipment services;

• Manpower supply;

• Safety and technical training and certification for petroleum industry and other industries;

• Procurement of material, equipment, spare parts for oil & gas industry and other industries;

• Maintenance of industrial equipment: assemble, inspect, repair and maintain production line;

• Casing services as well as design and manufacture equipment and metal works;

• Other technical services in collaboration with foreign partners: cementing and well stimulation services, comprehensive package of service for OCTG, repair and maintenance of OCTG, well testing and early production, directional drilling and survey, MWD, coring, logging, liner hanger, fishing, chemical and drilling mud, drill bits, squeeze formation, well completion and reservoir engineering services;

• Investment Consultation – Project Management and Consultation; Oil & gas technology consultation. R&D in technical and natural science;

• Support services for oil and natural gas production activities including: provide deepwater drilling rigs for exploration and production activities in petroleum industry./.


SUPERVISORY BOARD

SHAREHOLDERS’ ANNUAL GENERAL MEETING

BOARD OF DIRECTORS

BOARD OF MANAGEMENT

Organizational Structure

Legal DivisionInternal Audit Division

Commercial & Investment Division

PV DRILLING- BAKER HUGHES

PVDOFFSHORE

PV DRILLING OVERSEAS

PVD WELL SERVICES

Accounting Division

Business Development & Operations Support Division

PVD TRAINING

PVD DRILLING DIVISION

BJ - PV DRILLING

PVDLOGGING

Finance Division


HSEQ Division HR DivisionProject Management Division

PVDDEEPWATER

PVD TUBULARS MANAGEMENT

Project Admin Office in Algeria, Representative Office in Malaysia

PVD - OSI

Admin DivisionMIS Division

PVD TECH

PVD - EXPRO

PVD INVEST

VIETUBES

AS AT 31 DECEMBER 2014, PV DRILLING AND ALL ITS SUBSIDIARIES HAVE 2,157 EMPLOYEES. THE ORGANIZATIONAL STRUCTURE OF PV DRILLING

INCLUDING THE CORPORATION HEAD OFFICE AND ITS UNITS IS AS FOLLOWS:

2,157 people

Socialist Party Representative Office

ANNUAL REPORT 2014 PROFESSIONALISM12 ANNUAL REPORT 201412 THÔNG TIN DOANH NGHIỆP

Performance of Subsidiaries and Associate Companies

HOLDING COMPANY PVD OFFSHORE PVD LOGGING

13,482 1,126 1,787REVENUE 2014 REVENUE 2014 REVENUE 2014

PROFIT BEFORE TAX 2014 PROFIT BEFORE TAX 2014 PROFIT BEFORE TAX 2014

2,555 243 257

Revenue and Profit before Tax increased 38% yoy and 44%

yoy respectively


yoy respectively


yoy respectively

COREBUSINESS

PVD Drilling Division: Manage and operate the rig fleet of PV Drilling Corporation (PV DRILLING I, II, III & 11) and the leased rigs.

PVD Invest: Supply manpower and qualified technical services for exploration…

Ownership: 100%

COREBUSINESS

Drilling Manpower Supply Service, Inspection, Maintenance and Workshop Service and Oil Spill Response Service…

Charter Capital: VND 130 billionOwnership: 100%

COREBUSINESS

Provide advanced technology services in Drilling Operations for the Oil and Gas Industry including Mud Logging, Slick-line & Cased Hole Logging, Well Testing and Provision of Geological Specialists…


Unit: VND billion Unit: VND billion Unit: VND billion


PVD WELL SERVICES PVD DEEPWATER PVD TECH

1,365 1,630 2,329

321 281 81


yoy respectively

Revenue and Profit before Tax increased 2% yoy and 12% yoy

respectively

Revenue and Profit before tax increased 54% yoy and 19%

yoy respectively

COREBUSINESS

Provide well technical services, tool rental, tubular running, manage pressure drilling, solids control…


COREBUSINESS

Manage and operate the advanced technology Semi-Submersible Tender Assist Drilling Rig (TAD).

Charter Capital: VND 764 billionOwnership rate: 100%

COREBUSINESS

Engineering and manufacturing equipment skid; providing Surface/Subsea wellhead and mudline rental services, providing full range of Conductor services and trading services for oil and gas industry.


REVENUE 2014 REVENUE 2014 REVENUE 2014





THÔNG TIN DOANH NGHIỆP

PVD TRAINING

COREBUSINESS

Training, certification for petroleum, manpower supply and technology and marine safety equipment…


407

25

Revenue and Profit before Tax increased

169% yoy and 20% yoy respectively

PVD OVERSEAS

Charter Capital: USD 51,141,000 Ownership: 80%

In 2014, PVD Overseas did not obtain revenue yet as the rig has just started operation since Quarter 1/2015.

PVD - BAKER HUGHES

COREBUSINESS

Supplying a wide range of services such as directional drilling and logging while drilling, drill bits, electric logging, liner hanger…

Charter Capital: USD 20,000,000Ownership: 51%

2,793

616


respectively

PVD TUBULARSMANAGEMENT

COREBUSINESS

Provision of oil country tubular goods (OCTG) and total tubular management (TTM) services for Oil and Gas Companies.


1,324

81



REVENUE 2014 REVENUE 2014 REVENUE 2014



COREBUSINESS

Investing, operating the modern offshore rig PV DRILLING VI, aiming for potential markets in the region and beyond.



BJ - PV DRILLING PVD - EXPRO VIETUBES PVD - OSI

COREBUSINESS

Provision of coiled tubing service, cementing service, stimulation service, hydraulic fracturing service and fluid filtration services…

COREBUSINESS

Manufacturing, supplying and threading of API and proprietary connectors.





1,079 272 145 53

96 121 32 15


respectively




respectively


respectively

REVENUE 2014 REVENUE 2014 REVENUE 2014 REVENUE 2014

PROFIT BEFORE TAX 2014 PROFIT BEFORE TAX 2014 PROFIT BEFORE TAX 2014 PROFIT BEFORE TAX 2014

Unit: VND billion Unit: VND billion Unit: VND billion Unit: VND billion

COREBUSINESS

Provision of exploration well testing, production well clean-up, subsea test tree & subsea lubricator, surface PVT sampling and bottom hole sampling, sand control at surface for exploration and production and early production services.

COREBUSINESS

Threading, processing, repairing, restoring (including: threading, thread inspection, tubular unclogging, magnetic particle test, pressure test, tubular cleaning and coating) casting tubes, drilling collars, drilling pipes, conducting pipes and accessories for oil and gas industry.


Introduction of the Board of Directors

EducationBachelor of Law;Bachelor of Politics.

Mr. Do Duc Chien Chairman, PV Drilling’s Board of Directors

RESPONSIBLE FOR STRATEGY DIRECTION, STRUCTURE AND INNOVATION

Employment History Apr. 2010 – Present: Chairman of PV Drilling;2009 – 2010: Chairman of Petrosetco;2007 – 2009: Chairman of Petroland ;2007: Deputy Director, Southern Construction Projects Management Committee, PetroVietnam1999 – 2006: Corporate Office Manager, Standing Deputy Secretary, Party Committee Secretary of Petroleum Sector in Ho Chi Minh City. 1988 – 1999: Administration Manager, Material Procurement Manager of Transportation Investment and Development Company 1983 – 1987: Worked at Guard Division, Ministry of Police

Mr. Pham Tien DungMember, PV Drilling’s Board of Directors President & CEO

Mr. Tran Van HoatMember, PV Drilling’s Board of Directors, Vice President

(Refer to page 20, Introduction of the Board of Management for other information)

(Refer to page 21, Introduction of the Board of Management for other information)

GENERALLY DIRECT AND MANAGE THE SUSTAINABLE BUSINESS GROWTH, POLICIES AND BUSINESS OPERATIONS.

RESPONSIBLE FOR MONITORING REGULATIONS AND POLICIES FOR EMPLOYEES, CONTRACTING BIDDING AND SCIENTIFIC RESEARCH


EducationBachelor of Foreign Language: French and English;Engineering of Maritime Economics;Master of Business Administration.

Employment History Dec 2009 – Present: Member, PV Drilling’s Board of Directors;2007 – Present: Manager of Commercial and Investment Division, PV Drilling;2003 – 2007: Deputy Manager of Commerce Department, PV Drilling;2002 – 2003: Commercial Executive, PV Drilling;1998 – 2001: Commercial Executive, PTSC Offshore, a subsidiary of PTSC;1993 – 1997: International Payment Executive, Head Office, Maritime Bank.

Ms. Kieu Thi Hoai MinhMember, PV Drilling’s Board of Directors, Manager of Commercial and Investment Division

EducationBachelor of Economics (University of Finance and Accounting).

Mr. Le Van BeIndependent Member, PV Drilling’s Board of Directors

Employment History 2010 – Present: Independent member, PV Drilling’s Board of Directors;Jan 2010 – Apr 2014: First Vice Chairman, Military Bank;1995 – 2009: General Director, Military Bank;Mar 1993 – 1995: Directly in charge of the Military Bank establishment project, Chief of Advisory Committee of Military Bank’s Board of Management;1990 – 1992: Deputy General Manager of Finance General Division, in charge of bank accounting;1975 – 1989: Assistant at Financial Department, Technology General Division;1970 – 1974: Assistant at Financial Department, Logistics General Division.

RESPONSIBLE FOR FINANCIAL AND ACCOUNTING SUPERVISION

RESPONSIBLE FOR COMMERCE, PLANNING AND INVESTMENT SUPERVISION


EducationBachelor of Banking and Finance;Master of International Economics and Development Economics.

Employment History July 2014 – Present: Independent member, PV Drilling’s Board of Directors;May 2014 – Present: Deputy Manager, Corporate Banking Dept, Vietcombank;Aug 2009 – May 2014: Deputy Manager, Project Funding Department, Vietcombank;Mar 2001 – Aug 2009: Executive Officer, Project Investment Department, Vietcombank.

EducationBachelor of Economics;Master of Business Administration.

Mr. Duong Xuan QuangIndependent Member, PV Drilling’s Board of Directors

Ms. Pham Thi An BinhIndependent Member, PV Drilling’s Board of Directors

Employment History 2010 – Present: Independent member, PV Drilling’s Board of Directors;Oct 2013 – Present: Vice President of PVCombank, Director of PVCombank - Ho Chi Minh City Branch;Jan 2010 – Sep 2013: Director, PVFC Co., Ho Chi Minh City Branch; May 2009 – Dec 2009: Deputy Director, PVFC Co., Ho Chi Minh City Branch; Jan 2009 – Apr 2009: Deputy Director of Finance and Accounting Division, PetroVietnam;2005 – 2008: Manager of Finance and Accounting Department, Cuu Long JOC;2002 – 2005: Deputy Manager of Finance and Accounting Department, Cuu Long JOC;2000 – 2002: Internal Audit Executive, PetroVietnam; 1994 – 2000: Accounting Executive, PetroVietnam.

Introduction of the Board of Directors (Continued)

PROVIDES INDEPENDENT ASSESSMENT OF FINANCIAL AND INVESTMENT EFFICIENCY.

PROVIDES INDEPENDENT ASSESSMENT OF CAPITAL MANAGEMENT EFFICIENCY.


Introduction of the Supervisory Board

EducationBachelor of Economics (Finance and Accounting);Master of International Business Administration.

Employment History 2008 – Present: Chief of Supervisory Board, PV Drilling Chief Accountant, NASOS; 2007 – 2008 : Chief Accountant, NASOS Member of Supervisory Board, PVD Invest;2003 – 2007: Chief Accountant of Drilling Division, PV Drilling;2002 – 2003 : Accountant in Drilling Division, PV Drilling;1989 – 2001: Accountant at Trading, Construction & Investment Co., Ba Ria-Vung Tau.

EducationBachelor of Corporate Finance.

Employment History 2010 - Present: Member of Supervisory Board, PV Drilling;2008 – Present: Manager, Internal Auditing Division, PV Drilling;2007 – 2008: Senior Officer, Internal Auditing Department, PV Drilling;2004 – 2007: Officer at Theodore Alexander Ltd.;2000 – 2004: Officer at Deloitte Vietnam Auditing Co.;1997 – 2000: Officer at PETEC Trading and Investment Co.

EducationBachelor of International Business, Finance Academy under the Government of Russian Federation.

Employment History May 2012 – Present: Member of Supervisory Board, PV Drilling;2005 – Present: Executive, Investment Department, Headquarter, Vietcombank; 2003 – 2005: Executive, Interbank Payment Department, Vietcombank.

Ms. Nguyen Thi ThuyChief of Supervisory Board, PV Drilling

Ms. Pham Bao NgocMember, PV Drilling’s Supervisory Board

Mr. Nguyen Van TuMember, PV Drilling’s Supervisory Board


Introduction of the Board of Management

EducationBachelor of Science (Mechanical Engineering);Bachelor of Art (English).

Employment History Aug 2010 – Present: President & CEO, PV Drilling;2009 – Aug 2010: Vice President & COO, PV Drilling;2005 – 2009: Vice President of PV Drilling, Director of PVD Drilling Division;2002 – 2005: Director of Drilling Services Enterprise, PV Drilling;1992 – 2001: Worked in different multinational corporations in Singapore, Australia, Thailand…Concurrent positions: Member of PV Drilling’s BOD, Chairman of PVD Overseas and PVD - Baker Hughes.

EducationMaster of International Finance and Accounting, Swinburne University, Australia.

Employment History July 2008 – Present: Vice President and CFO, PV Drilling;2007 – June 2008 : CFO and Finance Manager, PV Drilling; 2003 – 2007: Chief Finance Officer, S-Fone;2000 – 2003: Finance Controller, Holcim Joint Venture Vietnam;1998 – 2000: Chief Accountant, FDI VMEP (now SYM);1993 – 1998: Accounting Officer, General accountant, Chief Accountant, FDI VMEP (now SYM).Concurrent positions: Chairman of PVD Deepwater, Vice Chairman of PVD Tubulars Management, Member of BOD of PVD Overseas, PVD - Baker Hughes.

4

3

5 6

2

7

1

2 Ms. HO NGOC YEN PHUONG

Vice President & CFO, PV Drilling

1 Mr. PHAM TIEN DUNG

President & CEO, PV Drilling


EducationBachelor of Science (Drilling Engineering);Master of Business Administration.

Employment History Sep 2010 – Present: Vice President, PV Drilling; May 2011 – Present: Director, PVD Drilling Division;June 2008 – Sep 2010: Vice President, PVEP;2005 – 2008: Director of Operation/Deputy Director, PVEP - Algeria;2003 – 2005: Deputy Manager of Drilling Operation Department/Manager of Drilling Operation Department, PIDC;2001 – 2003: Manager of Hanoi Basin Project/ Amara Project, PIDC;1999 – 2001: Drilling Engineer, Unocal;1996 – 1999: Drilling Engineer, PVSC;1992 – 1996: Worked at PTSC.

Concurrent position: Chairman of PVD Training.

EducationBachelor of Petroleum Engineering;Advanced Petroleum Engineering Certificate from Soviet Union.

Employment History May 2012 – Present: Member of PV Drilling’s BOD; 2006 – Present: Director of Oil Spill Response Services Enterprise (NASOS);2001 – Present: Vice President of PV Drilling;1987 – 2001: Chief Engineer and Rig Manager of Cuu Long Jack-up rig, Vietsovpetro;1983 – 1987: Drilling Engineer, Thai Binh Petroleum I company;Concurrent position: Chairman of the Appraisal Committee for PV Drilling’s Investment.

3 Mr. NGUYEN XUAN CUONG

Vice President, PV Drilling

4 Mr. TRAN VAN HOAT



Introduction of the Board of Management (Continued)

EducationBachelor of Mechanical Engineering.

Employment History Aug 2011 – Present: Vice President of PV Drilling and Chairman of PVD Tech;June 2011 – Aug 2011: Vice President of PV Drilling and Director of PVD Tech;2006 – June 2011 : Director of PVD Tech;2002 – 2006: Deputy Manager and Manager of Technical Department, PV Drilling;1987 – 2002: Mechanical Engineer, Deputy Chief of Electrical and Mechanical Department, Assistant to CEO, Vietsovpetro. Concurrent position: Chairman of BJ – PV Drilling.

EducationBachelor of Marine Engineering, Shipbuilding University, Leningrad, Russia.

Employment History Dec 2009 – Present: Vice President, PV Drilling;2008 – Dec 2009: Manager of Project Management Department, PV Drilling;2003 – 2008: Manager of Import Division, Petechim; 2001 – 2003: Deputy Manager of Oil Transportation Division, Petechim;1994 – 2001: Deputy Manager of Import Division, Petechim; 1987 – 1994: Senior officer in Floating Facilities Department, Petechim. Concurrent position: Member of PVD – Expro’s BOD.

EducationMaster of Petroleum Technology, Exploration and Drilling.

Employment History Nov 2014 – Present: Vice President, PV Drilling;April 2011 – Present: Deputy Director, PVD – Baker Hughes;July 2010 – Mar 2011: Director, PVD – Baker Hughes Establishment Project;June 2008 – June 2010: Chief Drilling Engineer and Drilling Supervisor, Hoang Long – Hoan Vu JOC;Sep 2006 – May 2008: Deputy Manager of Operation Supports and Technology, Deputy Manager, Contract Management Division, PetroVietnam;Feb 1996 – Aug 2006: Drilling Engineer, Exploration & Production Dept, Petroleum Exploration Division, PetroVietnam;Oct 1993 – Jan 1996: Drilling Engineer, PVSC.

5 Mr. VU VAN MINH


7 Mr. DAO NGOC ANH


6 Mr. TRINH VAN VINH



EducationBachelor of Economics, University of Finance and Consultancy;Master of Business Administration.

Employment History 2006 – present: Chief Accountant, PV Drilling;2002 – 2006: Deputy Manager, Accounting - Finance Department, PV Drilling.1998 – 2001: Accountant Executive, PTSC Offshore, a subsidiary of PTSC.

EducationMaster of International Finance and Accounting, Swinburne University, Australia.

Employment History Jan 2009 – present: Manager, Finance Division, PV Drilling;Jan 2008 – Dec 2008: Deputy Manager, Finance Division, PV Drilling;Jun 2006 – Dec 2007: Manager, Accounting – Finance Dept., Kimberly Clark Vietnam Ltd;Jul 2003 – Jun 2006: Manager, Finance Dept., S-Telecom – CDMA Mobile phone Center;Jun 2001 – Jul 2003: Team Leader, Accounting – Finance Group, Holcim Joint Venture Vietnam;Jul 1998 – Jun 2001: Team Leader, Accounting Cost Group, American Standard Vietnam Company;Oct 1995 – Jun 1998: General Accountant, Grand Imperial Saigon Hotel Ltd (Park Hyatt Hotel).

Introduction of Chief Accountant and Finance Manager

Mr. DO DANH RANG

Finance Manager, PV Drilling

Mr. DOAN DAC TUNG

Chief Accountant, PV Drilling


Corporate Primary Targets

1. Reinforcement and Expansion of the Domestic Market Share

Vietnam is widely known as an oil-exporting country in Southeast Asia rich in hydrocarbon resource. The nation has been an active market for E&P activities. It currently requires around 12-14 jack up rigs and 2-3 deepwater rigs per year. Such demand made it a promising country not only for domestic drilling contractors such as PV Drilling but international players as well.

Over the past years, PV Drilling has expanded its rig fleet and increased its operating crew rapidly in the hope to gain a larger market share. At end-2014, seven years since the debut of its very first rig, PV Drilling has owned a modern offshore fleet of four jack-up rigs and one semi-submersible TAD rig, all of which are currently the top choices by operators in Vietnam. Given the rapid growth, PV Drilling’s existing capacity can only serve about 30% of the market demand.

In recent years, PV Drilling has collaborated with its foreign partners to bring many rigs into the local market. At the peak season, it was recorded with over seven vessels of reputable drilling contractors chartered and contracted in partnerships with PV Drilling, lifting the market share of PV Drilling to almost 80%. However, the chartered rigs generated low margins, and because of their first come first serve nature, making it difficult for PV Drilling to schedule a fixed arrangement for clients in the local market.

Therefore, investing in newly-built rigs would be a wise and logical option. PV Drilling is aiming to acquire two to three new jack-up rigs and one deepwater rig in the next five years. In so doing PV Drilling aims to capture 50% of the market with its owned fleet.

2. Penetration into potential markets

Despite changes in global politics and the recent sharp plunge of crude oil price, the fossil fuel remains of global interest, as it has a significant impact to a nation’s development and growth. Thus, it is predicted that the E&P activities will continue to be growing on a larger scale to quench the thirst for black gold in the world and Southeast Asia is no exception.

Given the advantage of its geographical location plus a proven track record, PV Drilling has the necessary capability to enter Southeast Asia and beyond. The expansion has been meticulously prepared over time using marketing and market research, particularly in Malaysia, Indonesia, Myanmar, Brunei, etc. PV Drilling has established joint ventures with partners in several strategic regions to monitor the market and facilitate tender bidding. At the same time, other factors including human resource management, financial management and operations management are strengthened for the international markets.

Given the fulfillment of all prerequisite conditions, PV Drilling’s first move would be to deploy at least, one jack-up rig to the regional market within the next two years. Additionally, the set-up of supporting facilities in Myanmar, Malaysia, Singapore, etc. shall be completed soon to ensure smooth logistical and support services for an efficient drilling operation and effective deployment of other drilling-related services.

Increasing drilling market share in the local market is one of

PV Drilling’s primary targets.


3. Application of scientific research and technology; establishment of the research and development (R&D) center as the premise for promoting R&D activities

In recent years, besides keeping close track of the latest advances in technology developed worldwide, PV Drilling has encouraged the research and development (R&D) activities internally in searching for technical improvement ideas and initiatives. Funding for R&D was also built up rapidly. At present, such activities among PV Drilling’s subsidiaries has showed early signs of success as technology initiatives have been developed and put into practice, for example, solutions in mechanical fabrication, pressure testing equipment, safety check and calibration, auto-feeding mechanism for drillpipe, mudlogging software, etc.Nevertheless, to create more R&D activities with greater impact, PV Drilling aims to push further by establishing its own modern R&D center. The goal is to complete and run the center in an integrated manner and connecting the activities of its subsidiaries thus systematically guiding the development. Such approach is expected to create breakthroughs not only in PV Drilling’s pursuit of scientific research, but soon to improve its service quality and bring greater benefit to the clients as well.

4. Completion of the information technology (IT) system to enhance professionalism and innovation

In the local market, PV Drilling is emerging as one of the first-movers in integrating information technology into the enterprise management. With significant efforts and serious financial investment, PV Drilling has successfully synchronized headquarter’s system with the advanced management tools such as Enterprise Resource Planning (ERP) from Oracle, Inventory Management System (Maximo) from IBM, HSEQ management systems in accordance with the ISO and OHSAS standards, the online drilling crew training

programs and particularly the risk management system in accordance with ISO 31000 and COSO standard.

The aim is to deploy an integrated IT system across the whole corporation and that every staff is trained to use the system to maximize work efficiency. The measure of success of the integrated system is that it will create an open working environment that encourages innovation and creativity, as well as enhances efficiency for the benefit of clients and partners.


Besides improving business operations, increasing revenue and profit growth, PV Drilling is aware and understands the importance of corporate social responsibility (CSR). As a subsidiary of PetroVietnam Group, PV Drilling’s management thoroughly communicated such spirit to the entire staff in order to contribute to the overall success of the Group, which has always been regarded as playing the key role on the economic and social battle front contributing greatly to the prosperity of our country. Moreover, it is an approach for PV Drilling to contribute back to achieve social good in the long run.

At PV Drilling, CSR has long been an integral part of business operations. It is embedded within the vision and mission statements. Management considers the CSR impact for every decision in production, operations, and group activities. Environmental goals

PV Drilling continues to implement measures to minimize adverse impact to the environment. With the expansion of production and operations, drilling rigs operating in offshore waters during inclement weather, PV Drilling has managed to maintain positive results for Health - Safety - Environment - Quality (HSEQ) activities. The most outstanding achievement in 2014 when there was a zero workplace accident. This achievement is attributed to the management system using international standards. Constant improvement takes place in areas specified from building and issuing of management processes, investing human resource training and IT management. The PV Drilling’s Board of Management is aware of the importance of environment toward lives and future of human being. For production activities and services delivered by PV Drilling, the Corporation not only ensures good quality but also has try their best to protect the

environment. Therefore, PV Drilling is committed to the following:

• Compliance with regulatory requirements and other environment protection-related requirements;

• Increasing control and management on environment-related issues to prevent pollution and minimize negative impact through following measures: Optimize energy and water usage, Sewage disposal, Protect natural resources;

• Promoting a culture of using environmental friendly products and encouraging all staff to recycle during the production process;

• Raising awareness of all staff through training about environmental protection.

Disseminating policies to all staff so they can understand and be responsible for protecting the environment. Social Goals

PV Drilling has complied with laws and regulations such as payment of taxes and contribution to the national budget. It has focused on increasing job opportunities. As viewed by the Board of Management, human resource is a top priority and an integral part of its growth strategy to achieve sustainability. It is always concerned and aims to develop a conducive and friendly working environment with policies that encourage employees to cultivate knowledge and develop themselves so that they will have more opportunities for promotion, social development, health improvement, etc. In addition, PV Drilling seeks to protect the rights of workers, narrowing the gap between employees and management, implementing gender equality and prohibit labor enslavement. All these contribute to improve the working conditions for PV Drilling staff and thus benefiting and promoting the social development.

Commitment with the Environment - Society - Community


Commitment with the Environment - Society - Community

Community Goals

PV Drilling has been donating a portion of its profits for social welfare projects as a way to share and contribute to the community wellbeing. The Corporate Union and Youth Union of PV Drilling and staff have earnestly implemented social welfare and poverty alleviation programs. These include healthcare quality enhancement, culture and social education, social justice, human resource management. In the last four years, the CSR budget averaged VND 40 billion per year.

Beside the aim to boost business operation, PV Drilling always

expresses their concerns and shares responsibilities with the community

and the society through CSR activities.

1


The complicated operation of Oil and Gas segment requires intensive investments, effective governance system in both internal and external resources especially the risk management. Acknowledging and understanding that, PV Drilling’s BOD has successfully established a Risk Management strategy that integrated with objectives and strategies of the firm. Managing the key risks has become the determinant factors that contributed to the success of PV Drilling in maintaining and securing the sustainable development, to achieve Vision, Mission and other strategic targets set by Shareholders.

1. Strategic risks

Facing the unpredictable changes of the international market and high competition of other international Oil & Gas companies, Board of Directors has built up an effective business strategy which is the key for the sustainable development of PV Drilling, the consistent growth with the regional economic conditions and overall development strategy of the Petro Vietnam Group. To deal with those challenges, PV Drilling has given solutions as below:

a. Establishing development strategy and goals that are focusing on core operations in providing Drilling Rigs and Drilling related services;

b. Establishing value chain to obtain competitive advantages and added value for clients;

c. Improving the corporate governance, applying principle and international practices in management;

d. Building professional style and image across PV Drilling staffs and creating the professional environment and culture in PV Drilling.

2. Operational risks

Drilling activities always face various types of risk such as blow-out, reservoir damage, lost well-control, fire or natural disasters that result in ending drilling operation, damaging equipment, machinery, causing casualties. At worst, those disasters can lead to oil eruption, explosion that damages the

environment. To prevent and mitigate these risks in drilling activities, PV Drilling’s Board of Directors has set up following procedures:

a. Building the Health Safety Environment Quality Standard that is certified by recognized organizations such as American Petroleum Institutional (API), quality for management ISO 9001:2009, environment ISO 14001, Health and Safety OHSAS 18001…

b. Applying the MAXIMO in management of equipment supply chain for Rigs to ensure the stability and timing responses to the demand of inventory and creating a buffer zone for Drilling Rigs’ Operation;

c. Buying the insurance for employees and assets is always in the top priority and frequently reviewed to minimize consequences of disaster if it happens.

3. Human-resource risks

The high demand for skilled and experienced employees in drilling sector has always become the nature of this industry. Hence, to retain and develop human resources, PV Drilling has applied efficient strategies as bellow:

a. Providing attractive employees benefits scheme to retain the resources;

b. Providing Technical Trainings to work before receiving the Rigs in Vietnam to reduce the time to get familiar with the equipment, safety instructions as well as be updated with the new technology;

c. Developing the competency training matrix for each position.

4. Financial risks

After years of outstanding development, PV Drilling has become the large holding company with many Subsidiaries and Joint Ventures. These expansions have challenged the Board of Directors in managing risks that related to finance, budget and expenses management. As the nature of Oil and Gas Companies, PV Drilling has the high investment in drilling rigs with long-term debt in

Risks and solutions


foreign currency that resulted in financial risk such as: investment capital, liquidity, exchange rate, interest rate and other credit risks… Therefore, it asks for high commitment from the Board of Directors in managing those potential risks. The financial management methods that are currently implied and developed are:

a. Establishing the procedure and system for budget planning through improving Management Accounting systems from subsidiaries to Holding level by using the IT system named ERP Oracle EBMS;

b. Financial management is in accordance with the Financial Management Policy. This is the guideline and standards to centralize the management and determine the key financial indicators;

c. Since 2010, PV Drilling has created the centralized treasury system to manage funding circulated to business units, departments, divisions so as to promptly meet the requirements of operational and business process, cash flow optimism, opportunity costs reduction and to improve the profit from financial activities;

d. Reducing the effects of currency exchange rate fluctuations and changing the base currency of PV Drilling Holding Company to USD.

5. Tax risks

The Vietnamese taxation regulation is in the completing stage with various changes that directly relate to the oil and gas industry in general and PV Drilling in particular. Hence getting updated about the risks in applying new taxation law and the changes of new tax policies always have the high attention from the Board of Directors of PV Drilling. Tax team has been created to study, monitor and update the changes in Tax law to consult the Division, departments and business units for each type of Tax and business services.

6. Compliant risks

PV Drilling has expanded the businesses to many countries in the world such as Singapore, Malaysia,

and Algeria… Hence, the Board of Directors has strictly enforced the compliance with regulations, policies at operating countries. The risks in complying with regulation, laws and internal policies have been the serious concerns of PV Drilling as the company operating in Oil and Gas Sector.

Internal Audit Division with advanced knowledge and experienced team has supported BOD to assessing the compliance matters relating to corporate governance regulations, laws and PV Drilling’s policies. The duties of IA Division include auditing, monitoring the compliance with internal procedures, laws, tax policies and other prevailing regulations... as well as assessing management activities across Subsidiaries.

7. Oil price risks

Since the last quarter of 2014, Oil market has faced the deeply decrease in oil price, especially the new drilling technology that is forming the new trend and having negative impacts on the operation of Energy sector from 2015 afterward.

Identify this matter, PV Drilling’s BOD keeps observing closely the fluctuation in the market and searching, signing the new drilling contracts with suitable time-frame to minimize the risk effects and create the advantages for PV Drilling. Besides, the company is also strengthening and assessing all the internal sources to ensure the effectiveness, executing the cost savings project to achieve financial and business targets to satisfy the Shareholders’ requirements.

In business, opportunities and risks always go together. The company knows how to catch up with opportunities will grow rapidly and knows

how to manage risks will develop sustainably. Therefore, sustainable development is the

target that every company is trying to achieve.


ACHIEVEMENTSFROM INNOVATION

Innovation in business is a key success factor that contributes to

the rise of PV Drilling.

ANNUAL REPORT 2014 ACHIEVEMENTS FROM INNOVATION32

Report of The Board of Directors

I. ASSESSMENTS OF PV DRILLING’S BUSINESS PERFORMANCE IN 2014

In 2014, the global economy has faced various major changes, especially political tensions throughout the world such as: the conflict between the Western and Eastern in Ukraine, the fight against terrorists IS in Middle East, the dispute in South China Sea and East China Sea, etc. These tensions have negative impacts on the global economic recovery.

As for PV Drilling, many difficulties and challenges have emerged since last year such as: fierce competitions between oil and gas companies, a sharp fall in crude oil price since the last several months of 2014 which led to a decline in the day rate of rig operation and other service pricing, etc. Despite all of these difficulties, with best efforts from the Board of Directors and all staff, PV Drilling has achieved great business results surpassing to its plan:

20,884 VND billion

Revenue152% of plan

2,419 VND billion

Profit after Tax147% of plan

3,496 VND billion

Contribution to the State Budget

193% of plan

The above achievements came from the followings:

• PV Drilling’s owned and chartered rigs continued to operate safely with high efficiency;

• Well technical services and other drilling-related services continued to maintain high quality service and captured more market shares;

• Effective and professional operation management and corporate governance;

• Timely and effective supports from PetroVietnam, related government departments, shareholders, organizations, investors, and from more than 2,100 staff at PV Drilling.

Besides, PV Drilling has successfully built on its internal strengths like owning 6 modern drilling rigs, full sets of drilling-related equipment and machinery, talented

and enthusiastic workforce in order to meet and even exceed the demand of many internationally reputable oil and gas companies operating in Vietnam as well as in other countries. All of these internal strengths are the core values of PV Drilling, and all staffs have been working diligently to enhance the competitive advantages and operation’s efficiency of PV Drilling.

II. REMARKS ON THE ACTIVITIES, REMUNERATIONS, AND THE EXPENDITURE OF THE BOARD OF DIRECTORS IN 2014

1. Remarks on the Board of Directors’ activities in 2014:

PV Drilling’s Board of Directors is a united assembly with valuable knowledge, expertise, and management experience that is fair, objective, and passionate about the growth of PV Drilling. The Board of Directors consists of 7 members including the Chairman, 3 members, and 3 independent members.

• The Board of Directors complied with all policies, regulations to ensure that all decisions were fair, transparent, and compliant with the regulations of the Board of Directors, the Charter of PV Drilling, and the Law on Enterprises;

• Each member of the Board of Directors was responsible for a specific area to propose changes in resolutions, decisions, monitor and give directions to the Corporation to implement the resolutions and decisions of the Board of Directors;

• The Board of Directors took its roles and responsibilities seriously and defined its management guidance to propose constructive solutions for a sustainable growth for PV Drilling;

• In 2014, there was a change in the members of the Board of Directors. Ms. Pham Thi An Binh has been appointed to be a member of the Board of Directors to replace Ms. Dinh Thi Thai since July 23, 2014.


No. Name Types of related parties

Beginning shares Ownership balance

Ending shares Ownership balance

Type of transactionsTransaction

dateAmount Per

(%)Amount Per

(%)

1

Deutsche Bank AG Major shareholder

13,685,057 4.97 13,757,117 5.00 Buy 20/01/2014

2 13,757,117 5.00 13,660,537 4.96 Sell 04/03/2014

3 13,705,347 4.98 13,769,337 5.00 Buy 28/05/2014

4 13,769,337 5.00 13,594,627 4.94 Sell 20/06/2014

5 10,169,250 3.36 10,206,620 3.37 Buy 06/08/2014

6 10,206,620 3.37 10,106,370 3.34 Sell 07/08/2014

7 9,828,470 3.24 11,337,278 3.74 Buy 19/09/2014

8

PVCombank

Mr. Duong Xuan Quang, a representative for PVN’s capital, independent member of PVD’s BOD

8,554,040 2.82 4,554,040 1.50 Sell 05/09/2014

94,554,040 1.50 855,404 0.28

Sell: 4,554,050Get Dividend:

855,40403/09/2014

10 Epsom Limited Major shareholder 706,500 0.26 771,150 0.26 Buy 19/09/2014

11

Mutual Fund Elite

(Non-Ucits)Major shareholder

14,139,230 4.67 15,156,230 5.00 Get Dividend: 1,017,000 23/09/2014

1215,156,230 5.00 14,990,230 4.95

Buy: 71,000Sell: 237,000

27/10/2014

13Van Duc Tong PVD’s Vice President

28,606 0.01 26,606 0.01 Sell 21/01/2014

14 34,606 0.01 30,206 0.01 Sell 27/08/2014

15 Nguyen Van Tu Member of PVD’s

Supervisory Board

15,082 0.005 10,082 0.004 Sell 24/02/2014

16 Dao Ngoc Anh PVD’s Vice President 14,912 0.005 11,412 0.005 Sell 25/02/2014

17Pham Thu Hien

A related person of Mr. Pham Tien Dung, PVD's President & CEO

5,562 0.002 1,562 0.001 Sell 02/04/2014

18 Tran Van Hoat PVD’s Vice President 39,703 0.01 29,703 0.01 Sell 16/09/2014

19 Do Danh Rang PVD’s Finance Manager 87,046 0.03 77,046 0.03 Sell 24/09/2014

20Hoang Ngoc Thanh

A related person of Ms. Kieu Thi Hoai Minh, member of PVD’s BOD

1,472 0.00 72 0.00 Sell 30/10/2014

21Le Thi Mai Dung

A related person of Mr. Vu Van Minh, PVD’s Vice President

15,210 0.01 0 0.00 Sell 17/12/2014

2. The transactions of PV Drilling’s related parties in 2014

Contract or Transaction with internal shareholder: In 2014 no transaction has been taken between PV Drilling with members of BOD, BOS, BOM and management team.

3. The execution of the policies of the business administration PV Drilling has been abiding by all policies of the business administration and management of listed companies.

4. Salary/Remuneration, operation expenses and number of shares owned by BOD in 2014

Member Salary/Remuneration

(Unit: VND mil.)

Shares

(Unit: share)

Mr. Do Duc ChienChairman

864 53,055

Mr. Pham Tien DungMember of BOD, President & CEO

848 121,635

Mr. Tran Van HoatMember of BOD, Vice President

709 29,703

Ms. Kieu Thi Hoai MinhMember of BOD, Commercial and Investment Manager

661 21,672

Mr. Le Van BeIndependent member of BOD

171 11,550

Mr Duong Xuan QuangIndependent member of BOD

162 6,728

Ms. Dinh Thi Thai & Ms. Pham Thi An BinhIndependent member of BOD

171

Total 3,586 244,343


Report of The Board of Directors (Continued)

No. Members of BOD TitleNumbers

of attended meetings

Percentage of participation

Note

1 Mr. Do Duc Chien Chairman 4 100%

2 Mr. Pham Tien Dung Member 4 100%

3 Mr. Tran Van Hoat Member 4 100%

4 Ms. Kieu Thi Hoai Minh Member 4 100%

5 Mr. Le Van Be Member 4 100%

6 Mr. Duong Xuan Quang Member 4 100%

7 Ms. Dinh Thi Thai Member 2 100% Resigned in July, 2014

8 Ms. Pham Thi An Binh Member 2 100% Appointed in July, 2014

III. REMARKS ON MEETINGS AND RESOLUTIONS/ DECISIONS OF THE BOARD OF DIRECTORS IN 2014

In 2014, PV Drilling’s Board of Directors maintained regular meetings once every quarter to discuss, exchange, unify and offer timely decisions for the Corporation’s business strategy. All of the meetings were organized in accordance with the Charter of PV Drilling as well as the Law on Enterprise. Members of the Board have been seriously taking these meetings as followed:

Beside the quarterly meetings, the Board of Directors also collects opinions from all members to settle important issues in the form of written documents regarding to investment decisions, human resources development, organizational structures, influential decisions such as appointing key positions, modification and issuance of management regulations and internal policies, specifically:

• As for the planning: The Board of Directors approved 2014’s business strategy that was submitted on the quarterly meeting. The Board also submitted the business plan for 2015 and the long-term growth direction until 2025;

• As for the management: The Board continued to examine the business operation in order to enhance the corporation’s business strategy. In 2014, PV Drilling appointed one new Vice President, completed the capital increases for PVD Overseas and PVD Offshore, and completed capital withdrawal from Petroland;

• As for the business administration: PV Drilling revised and implemented the new version of the regulations regarding to the financial management at the Corporation; the

Charter of PV Drilling and several subsidiaries, and other important regulations;

• As for the investment: Finalizing the settlement of the completed project of “Buying new casing and tubing running equipment,” and continuing to monitor the implementation of the project of building the PV DRILLING VI Rig;

• As for the shareholders’ relation and dividend payouts: PV Drilling successfully organized the Annual General Meeting of Shareholders in 2014 and finalized the 2013’s dividend payout time.

All Resolutions and Decisions of the Board of Directors were made with a firm and unified decision from all or most of the members of the Board on the basis of shareholders’ interest and the sustainable development of the Corporation.

IV. REMARKS ON THE OBSERVATION OF THE PRESIDENT & CEO AND MEMBERS OF THE BOARD OF MANAGEMENT

A general assessment of the Board of Management’s activities in 2014:

• All members of the Board of Management are credentialed, proficient in their appointed fields, and with extensive experience in managing significant projects and large corporations like PV Drilling;

• The President & CEO assigned responsibilities and duties to each Vice President and regularly arranged internal meetings with Vice Presidents to discuss, evaluate the existing performance and provide insights of new projects;

• The Board of Management implemented the operation of the Corporation in accordance with the Resolutions of the Annual General Meeting


of Shareholders, the Board of Directors, and in accordance with the resolutions and policies of the law;

• The Board of Management successfully implemented a modern management system in order to ensure the safety and efficiency of the business operation;

• The Board of Management understood all the advantages as well as the disadvantages of PV Drilling and in turn flexibly managed the operation of the Corporation. At the same time, the Board issued internal documents to guide the business operation;

• The Board of Management has been actively expanding PV Drilling’s services to international markets and gained fruitful results while control business risks from the executive management team and middle-management team.

V. THE OUTLOOK OF THE BOARD OF DIRECTORS’ OPERATION IN 2015

According to economic experts in Vietnam and in many other countries, Vietnamese economy in 2015 will grow faster compared to 2014’s result; however, it still encountered many challenges besides the matter of stabilizing the macro-economic condition, controlling inflation, and maintaining a sustainable and healthy growth rate for the economy. Bad debts and inventory costs have a negative impact on the economic growth. In addition, the steep decline in crude oil price had a negative effect in the government’s budget, and in turn, caused a significant impact on the government’s policies of the macro-economy in the upcoming years.

Year 2015 will be a challenging year for PV Drilling due to the significant drop in crude oil price. It reduces the number of drilling campaigns available and in turn increases the number of idle rigs and drilling-related services companies with fewer customers and less work to provide. As a result, reductions in operational day rate of drilling rigs and drilling-related services are inevitable. Facing all of these difficulties and challenges, the Board of Directors and the Board of Management have actively tailored the business strategic direction and flexible solutions to encounter challenges, for examples:

13,500 1,500 1,950 2,050 VND billion VND billionVND billion VND billion

Revenue Profit after Tax

Profit before Tax

Contribution to State Budget

2. Key Objectives of the Board of Directors in 2015

Continue to maintain services’ quality and enhance our brand-name and reputation;

Operate safely, effectively and efficiently all drilling rigs as well as all equipment and machinery used on rigs or other workshops to ensure PV Drilling’s premium services;

Thoroughly improve the bundled services and other advanced technology services to maximize the efficiency of PV Drilling and to meet customers’ expectations. Rigorously co-operate with other drilling contractors, invest and expand drilling and drilling-related services into the global market;

Actively seek opportunities to invest in modern drilling rigs, advanced equipment and machinery to attract customers once the oil and gas market has recovered and ready to offer services to PetroVietnam’s upcoming drilling campaigns;

Carefully review and provide supports to the restructure of PV Drilling’s subsidiaries;

Examine the regulations, internal policies in order to timely issue and modify them to better fit with the current business operation of PV Drilling;

Advance administration and management of the Corporation to enhance the efficiency while still maintaining the premium quality of services. Continue to implement the Enterprise Resource Planning (ERP). Strictly complying with all policies applied to listed companies;

Constantly invest and develop talented and skilled human resources and management team;

Continue to care and protect shareholders’ rights as well as employees’ incomes, rights, and working environment;

Resolve to overcome all difficulties and challenges of 2015 to achieve the operational goals that were set by the Board of Directors./.

1. 2015 Targets


Report of the Supervisory Board

I. THE PERFORMANCE OF PV DRILLING SUPERVISORY BOARD IN 2014

In 2014, the Supervisory Board operated with :

1. Activities of the Supervisory Board

The Supervisory Board acted in accordance with their functions and duties, which are stipulated under the Enterprise Law, the Regulations of PV Drilling and PV Drilling Supervisory Board’s 2014 Inspection Plan. The Supervisory Board has inspected and supervised activities of PV Drilling and subsidiaries according to the plan approved by the Shareholders’ Annual General Meeting (AGM)/ PetroVietnam. The members of the Supervisory Board has actively carried out their duties, fulfilled their mission and proposed practical suggestions to the proper management of PV Drilling.

The observation of the Supervisory Board focused on the following issues:

MS. NGUYEN THI THUY

MR. NGUYEN VAN TU

MS. PHAM BAO NGOC

Chief of the Supervisory Board

Member

Member

3ACTIVE

MEMBERS

Monitoring the execution of state regulations, the PetroVietnam regulations, the implementation of Resolutions approved by the AGM and PV Drilling’s Board of Directors;

Monitoring the execution of resolutions, decisions, instructions, and internal regulations of PV Drilling;

Observing the use and preservation of capital, efficiency of the business performance of the Corporation;

Monitoring the balance of capital and cash flow management;

Member Salary/Remuneration

(Unit: VND mil.)

Number of

shares

(Unit: share)

Ms. Nguyen Thi ThuyChief of the Supervisory Board

622 36,636

Mr. Nguyen Van TuMember

364 16,590

Ms. Pham Bao NgocMember

99 3,630

Total 1,085 56,856

Monitoring and evaluating the situation of how production and operation has been implemented compared to the plan assigned;

Observing the actual business performance versus plan;

Evaluating the financial statements quarterly, annually.

2. Salary, remuneration and operating expenses of the Supervisory Board

II. REMARKS ON THE SUPERVISORY BOARD’S MEETINGS IN 2014

The Supervisory Board’s activities strictly complied with the operating regulations for Supervisory Board issued by PV Drilling. The implementation for monitoring, inspecting and controlling of the Corporation was carried out according to the 2014’s plan. Quarterly, the Supervisory Board held a meeting to discuss upon the issues of PV Drilling such as approval of the report to be submitted to the AGM, inspecting and controlling plan of the Supervisory Board, financial statements (quarterly/annually), the execution of the regulations, procedures, etc. as well as simultaneously propose practical suggestions to the proper management of PV Drilling.

Major meetings of the Supervisory Board in 2014 are as follows:


Date Meeting Content Meeting Outcome

31/03/2014

- Approval on the activities of the Supervisory Board in 2013;- Approval on the Report of the Supervisory Board on the operating activities in 2013 and planning for 2014 to be submitted to the AGM; - Additional duties for the members of the Supervisory Board.

100% passed by all members of the Supervisory Board.

29/08/2014

- Approval on the activities of the Supervisory Board in Q1 and Q2/2014;- Evaluating the consolidated financial report of PV Drilling for Q1 and Q2/2014;


15/12/2014- Approval on the planning activities of the Supervisory Board in 2015.


During the year, the Supervisory Board also utilized other means of communication such as email, phones in order to carry out the work promptly, continuously and efficiently.

III. RESULTS FROM MONITORING THE OPERATIONAL AND FINANCIAL ACTIVITIES OF PV DRILLING

In general, PV Drilling has abided the Enterprise Law, PV Drilling’s Charter, the Regulations of the Corporation that regulate expense management, financial management, regulations on the procurement and investment and paid special attention to implementing effective cost-saving measures, the results are as follows:

1. Regarding Projects investment and management:

PV Drilling and PVD Overseas has monitored the construction of the new rig PV DRILLING VI at Keppel Fels - Singapore to ensure its delivery as scheduled.

Several key projects of PV Drilling in 2014 such as the procurement of BOP equipment; mounted drive TDS 8SA (TDS) drilling equipment for rigs, drilling arms set, pressure testing equipment, cable control system cable and backup power cable for PV DRILLING V, cable suspension system for Karota... These projects have been executed in accordance with the procurement procedures under the current regulations.

The Corporation regularly monitors and controls the investment portfolio of its subsidiaries to inspect their effectiveness as well as accelerate the progress of investment, in order to avoid spreading investment, focusing on high-tech equipment that brings high profitability, and also avoid investment outside its core business.

2. Regarding the provision of services and business development strategies:

The Corporation operates our owned rigs as well as chartered rigs with high efficiency and safety. The drilling technical services and other supporting services continue to bring high profit with quality always meeting customers’ requirement. Additionally, PV Drilling has always been actively looking for opportunities to enter into regional markets such as Malaysia, Indonesia, Myanmar, Brunei, etc. and preparing to deploy drilling services in these markets.

3. Regarding human resource, training

PV Drilling continues to focus on developing human resources from the management, business development, to rig workforce. The management and training processes comply with the management and training procedures of PV Drilling; the training costs are approved in accordance with the approval matrix. In order to meet the needs of the production and operations, the training programs of the Corporation focus on professional training and safety training that resulted in PV Drilling’s achievements in 2014.


4. Regarding to the financial and accounting activities and financial performance

The Supervisory Board evaluated semi-annual financial statements and 2014 financial statements of PV Drilling as scheduled. Deloitte Vietnam Company Limited has been selected to perform the auditing of PV Drilling’s 2014 financial statements pursuant to the resolutions of the AGM dated 25 April, 2014. Through evaluation, the Supervisory Board has agreed the 2014 financial statements give a true and fair view of the financial position of PV Drilling and in accordance with current laws.

Based on the periodic reports, quarterly reports and annual audited financial statements of PV Drilling in 2014, the Supervisory Board commented that PV Drilling has achieved very good financial results and strong financial position of which:

• Revenue: VND 20,884 billion, 152% of plan;

• Profit before tax: VND 3,178 billion, 148% of plan;

• Profit after tax: VND 2,419 billion, 147% of plan;

PV Drilling has continued to promote the cash centralization and flexible capital management to meet capital requirements for operation and investment.

PV Drilling has continued to maintain its healthy financial status to aim for sustainable development. The operation efficiency of PV Drilling is currently stable thanks to revenue increase, which largely comes from the increased market share of drilling services and expansion of high-tech services provided to customers. In addition, the Corporation

has issued regulations related to costs saving, avoidance of squandering resources, such as to promote R&D activities, innovation, restructuring, utilization of machinery and equipment, reduction of energy consumption, improvement of service quality; abidance by regulations for procurement; staff localization for personal cost saving. In 2014, all PV Drilling subsidiaries, joint ventures got profits.

IV. REMARKS ON THE OBSERVATION OF THE BOARD OF DIRECTORS, CHIEF EXECUTIVE OFFICER AND OTHER MEMBERS OF THE BOARD OF MANAGEMENT OF PV DRILLING:

1. Activities of the Board of Directors:

The Board of Directors (BOD) of PV Drilling has strictly implemented the resolutions of the AGM. The Board of Directors periodically conducted meetings to evaluate the business performance as well make decisions on the strategy and direction so that the Board of Management can execute or send submissions to the BOD for approval.

PV Drilling’s BOD has issued 23 Resolutions/Decisions within 2014. The Resolutions/Decisions of the BOD have been issued in order and compliance with PV Drilling regulations and current laws.

2. Activities of the Board of Management of the Corporation

The Board of Management managed and controlled all activities of the Corporation. They always proactively propose solutions and make recommendations to the Board of Directors for approval.

Report of the Supervisory Board’s (Continued)


V. REMARKS ON THE COORDINATION BETWEEN THE SUPERVISORY BOARD AND THE BOARD OF DIRECTORS, PRESIDENT & CEO

The Board of Directors, the Board of Management of the Corporation have supported and facilitated for the Supervisory Board to carry out their functions. The Board of Directors and President & CEO always respond fully and timely to the Supervisory Board when required.

VI. COMMENTS

In 2014, PV Drilling continued to maintain good management of its resources, as well as effective operation of the owned and chartered rigs. The Corporation continued to focus on the investment in high-tech equipment to meet the market and customers’ requirements.

During the business operation and management, the Board of Directors and the President & CEO have complied with Enterprise Law, operating regulations and financial management regulations of the Corporation, the Resolutions of AGM and BOD. The Board of Directors, President & CEO always try their best to implement and achieved the targets set by the AGM. VII. THE SUPERVISORY BOARD’S 2015 PLAN

In order to carry out the observation pursuant to the Enterprise Law and the Regulations of the Corporation, PV Drilling’s Supervisory Board plan for 2015 is as follows:

To observe the Board of Directors, President & CEO;

1

To supervise the implementation of the Charter, Resolutions of AGM/ BOD, resolutions, decisions, regulations and directions of the PetroVietnam/ PV Drilling;

2

To evaluate the financial statements of the Corporation quarterly, annually;

3

To observe the implementation of the business plan of PV Drilling in 2015;

4

To supervise cash flow management, profit distribution and salary finalization, stock-taking and implementation of norms, and cost saving measures;

5

To observe the implementation of corporate restructuring;

6

To monitor the compliance management of financial and commercial;

7

To prepare periodic observation reports according to the regulations;

8

Other issues.

9


Report of the Board of Management

2014 world economy was full of bright highlights with some hints of darkness. Positive signals came from relatively stable recovery of the US economy in Quarter 3 and 4 of 2014 showing growth rate of 3.5%, and FED’s cessation of quantitative easing (QE). However, Russia’s nearing-recession economy has stemmed from Western sanctions against Russia for its involvement in Ukraine crisis. Ruble has fallen over 40% against USD; while crude oil, which accounts for 50% of Russian’s Federal Budget, has dropped its price lower than USD 60/barrel. European Union (EU) economy has been the most concerned area nearing recession with growth rate of 1.1% in 2014 and negative growth in 2015.

2014 Vietnam’s economy ended on a good note with a clear and evenly recovery of economic growth evidence in most key areas such as: industry, import and export, capital market, stock market, etc.

Vietnam’s GDP growth in 2014 achieved 5.98% compared to 2013, in which Quarter 1, 2, 3 and 4 of 2014 grew 5.06%, 5.34%, 6.07% and 6.96% respectively. Although the mentioned growth rate is not quite high and even lower than the average one of 2005-2010 period, it was still an impressive result compared to other countries in the world. Average consumer price index (CPI) increased 4.09%, equivalent to half the average rate in the past 10 years. Low inflation paved the way to reduce interest rate by 0.5% per annum in March 2014. Rediscount

IN THE CIRCUMSTANCE OF LOW ECONOMIC RECOVERY, PV DRILLING DEMONSTRATED THE SUCCESSFUL DEVELOPING STRATEGY WITH IMPRESSIVE BUSINESS PERFORMANCE. SPECIFICALLY, REVENUE INCREASED 52% AND NET PROFIT HAS BEEN COMPLETED 3 MONTHS EARLIER THAN THE PLAN.

2014 Performance report

interest rate reduced to 4.5% and refinancing interest rate decreased to 6.5%, and stayed still till the end of 2014. Exchange rate remained stable throughout the course of 2014. By year-end, exchange rate rose by 1.4% from the beginning of the year, within the limits regulated by the State Bank of Vietnam.

2014 was also the year when oil contractors proactively expanded their drilling campaign, leading to a dynamic drilling market. Rig day rate also grew 8% compared to the same period in 2013. As a result, PV Drilling increased supply of drilling and drilling-related services.


In addition to 4 owned jack up rigs that have high efficiency and safety, PV Drilling also enhanced cooperation with such drilling contractors as Ensco, Seadrill, UMW and Shell Drilling to provide additional 5-6 jack up rigs, an increase of 50% compared to the average of 3 rigs in 2013. Well technical services were also extended, such as mud logging, tool rental, tubular running, MPD, etc. while such services as manpower, trading and procurement maintained high growth. In 2014, PV Drilling achieved revenue of VND 20,884 billion and net profit of VND 2,419 billion, increasing by 40% and 28% respectively compared to the same period of 2013, exceeding revenue and net profit plan approved by shareholders which are 52% and 47% respectively.

In conclusion, 2014 was the year that the Corporation continued achieving high growth. Compound annual growth rate (CAGR) was over 25% for the period from 2010 to 2014, proving the Board of Management’s right investment and development strategy that focused resources to extend core businesses such as drilling and drilling-related technical services, without investment in other industries. Meanwhile, with people-centered development strategy, PV Drilling has built human resource of more than 2,100 employees that have high qualification and professionalism. This has contributed to providing oil and gas technical services with the best quality, satisfying rising demand and trust of customers.

Thanks to positive impact from drilling market, in addition to safe and efficient operation of owned rigs, significant increase of rigs leased from foreign partners, and comprehensive development of drilling-related services, 2014 closed with revenue of more than VND 20 thousand billion, an increase of 40% compared to the same period last year and 52% over the plan.

By the end of 2014, PV Drilling’s total assets were VND 23,305 billion, increasing by 8% over 2013, mainly thanks to recording of construction-in-progress of PV DRILLING VI rig. Along with the expansion of assets, shareholders’ equity also rose remarkably over the years. Shareholders’ equity marked VND 11,479 billion, an increase of 17% over 2013, in which owners’ contributed capital was VND 3,031 billion, increasing by VND 275 billion or 10% compared to 2013, equivalent to the amount of 2013 stock dividend issued in 2014.

Net profit attributable to the Corporation’s shareholders achieved VND 2,419 billion, increase of 28% over 2013 and 47% over the plan approved by the AGM. This impressive result arose from efficient, constant and safe operation of both PV Drilling’s owned and hired rigs. In addition, well technical and other drilling-related services have increasingly contributed to the Corporation’s profit as the insourcing ratio is rising. With modern equipment and machinery system, qualified and expertised drilling technical crew, PV Drilling is confident to confirm its position as a pioneer of Vietnam drillers.

Earnings per share (EPS) have kept growth pace in the recent years. The fact that growth rate of net profit is higher than percentage increase of share capital has contributed to increasing EPS in 2014 versus 2013. Specifically, 2014 EPS achieved VND 7,987, up 18% compared to the same period of previous year, reflecting that shareholders’ interests increased and PVD stock has strengthen shareholders’ confidence despite unexpected volatility and instability in stock market.

20,884REVENUE

23,305TOTAL ASSETS

2,419NET PROFIT

7,987EPS

VND billion VND billion VND billion VND


2014 was PV Drilling’s most successful year in the past 5 years. PV Drilling achieved positive results thanks to dynamic drilling market in 2014, increased in rigs’ operation, high growth of well technical and drilling-related services.

2015 will be a challenging year for PV Drilling as the oil price has been declining recently, oil and gas services market has been shrinking because oil contractors are stopping or delaying their drilling campaign. This also means that the number of rigs looking for contracts will increase, resulting in higher competition among drilling service providers and lower prices of drilling and drilling-related services. However, as domestic drilling market is expected to stay stable and PV Drilling has not have enough number of rigs to provide for the market, the amount of jobs will also be stable with a reduction of 10% in the drilling day rate. In addition, PV Drilling has a new jack up rig, PV DRILLING VI, which has joined the market since beginning of March 2015 to offset decrease in business performance. The Corporation aims to maximize business results through cost savings and control, high efficient and safe operation maintenance, as well as new opportunity search to have a reasonable investment strategy. PV Drilling will strive for profit of VND 2,000 billion although 2015 business plan declines.

In 2015, PV Drilling utilizes available resources from Science and Technology Fund to boost projects investing in modern technology in order to strengthen its competitiveness and service quality.

Business plan for 2015

PV Drilling’s target in 2015 is to complete important projects to enhance its internal capacity. They are to fully develop risk management system across the Corporation, Maximo min-max system, Asset management system, and ERP Oracle – Phase III that includes such modules as budget control, online management reporting, maximizing the business benefits and shareholder’s values.

2015 is a year that PV Drilling will have to face challenges due to the drop in oil prices that profoundly affect oil and gas companies. Therefore, in such context, the biggest challenge and target of PV Drilling is to maintain drilling and well technical services market share. This can be achieved with great effort from PV Drilling’s management and employees in searching for new opportunities and market expansion within Vietnam and in other Southeast Asian countries.

Report of the Board of Management (Continued)


Solution for 2015

Safe and efficient operation of drilling rigs has always been the top priority

In difficult situations in 2015, PV Drilling will try its best to achieve Zero Lost Time Incident (Zero LTI) and Non-productive Time (NPT) – time which operation is ceased due to errors of technical machinery and equipment. We also strive to maintain operating efficiency over 98% for owned jack up rigs and exceeding 96% for TAD rig, especially utilize all human and equipment resources to efficiently operate PV DRILLING VI, a long leg jack up rigs put into operation since early March 2015, to obtain high operating efficiency, in order to enhance business performance results and PV Drilling’s image and prestige in domestic and regional markets.

Maintain jack up supply market share in Vietnam at 70%-80% and go ahead to foreign markets

PV Drilling continues strategic partnership with reputable drilling contractors in the world to provide hire rigs to oil and gas contractors in Vietnam, maintaining market share at 70% to 80% in Vietnam. The addition of PV DRILLING VI rig in 2015 is a driving force to expand drilling market share and extension of well technical and other related services in such markets as Brunei, Malaysia, and Myanmar.

Furthermore, PV Drilling aim to bring at least one to two more jack up rigs to operate regular overseas in the next 3 years. In the meantime, we complete construction of bases and facilities in Myanmar, Malaysia, Singapore, etc. in order to ensure effective operation support and logistics and lay a foundation to develop other drilling related technical services.

In order to accomplish the goal of expanding market share overseas and preparing for drilling campaigns in mid-2016, PV Drilling is actively bidding PV DRILLING V rig to countries such as Myanmar, Indonesia, Malaysia

Professionalism and quality in human management and training

In 2015, as the Corporation implements “professionalism and quality” orientation, Human resources – Training activities continue to develop using most effective and practical approaches, including the following main points:

Improve KPI implementation system to assess personal performance, apply Balance Scorecard (BSC) model to evaluate subsidiaries’ performance, and adjust benefits and compensation mechanism correspondingly to bring the best work efficiency using available resources of PV Drilling in order to have the best efficiency management.

Boost application of “70-20-10” model that the world has adopted successfully for many years, in which learning and capacity development is acquired 70% from job practices and experience, 20% from self-study and other people such as coaching and sharing from co-workers, feedback from others or observe and learn from others, etc. and 10% from courses and reading. This model enhances efficiency, reduce time and cost compared to traditional models.

More technology application in training like mobile learning, Virtual E-learning in order to increase interactivity and engage students in the process of acquiring new knowledge.

Strengthen management-level staffs training and focus on developing successor, getting prepared for the development and extension of the Corporation’s services in domestic and foreign markets. Training activities ensure PV Drilling to have sufficient managers capable of working in any environment in the region and overseas. Continue to implement solutions to convert the concept of Training into Learning in PV Drilling’s working environment.


70% - JOB EXPERIENCES

20% - FROM PEOPLE

10% - COURSES

Enhance financial management, cost savings and procurement control

In order for financial management to be effective and to support operation to improve business results, especially in PV Drilling’s unfavorable conditions in 2015, PV Drilling will strengthen control of operating expenses, procurement and maintenance expenses, to ensure these expenses to stay within annual budget’s limits approved by the Management; consider saving administrative expenses reasonably, control procurement of equipment and machinery, focus investments in potential service sectors, specially consider appropriate time and evaluate investment values in order to obtain long-term efficiency and add values to the Corporation.

ERP Oracle- Phase III:Intelligent enterprise manage-ment project – Online budgeting.

Business intelligence (BI).Online budgeting.Key performance indicators (KPIs).

Oracle and CitiDirect integration project.

Risk management project.

Expected to complete in Q1/2015.

Classify risks => make accurate, timely and authoritative decisions when dealing with risks that may occur.

Application of science and technology – enhance competitiveness

Along with market share expansion plan, PV Drilling continue to improve competitiveness through application of science and technology, orient the Corporation’s governance towards professionalism and internationalization. Over the years, PV Drilling’s Managements have always given opportunities and inspired employees to propose ideas, projects, science and technology theses to be implemented into operation of drilling rigs, equipment and machinery, raising PV Drilling’s technology level in order to bring the best quality services to clients. The Corporation has established a system of regulations and policies to implement science and technology projects, forming an administrative system including Evaluation Council, Technology Fund Organization. PV Drilling has had many projects that successfully apply science and technology and are approved by Science and Technology Council in terms of standards, namely the project to develop software system to receive and process data for mud logging system; enhance safe operation management through safety training, development of Job Safety Analysis software (JSA), investments into high technology automatic oil and gas equipment, etc. For science and technology projects deployed successfully, PV Drilling always considers its implementation capacity, ensure financial plan for projects, and train employees to master technology, especially collaborate synchronously to apply projects’ results into operation, bringing high technology to increase competitiveness in services supply.

Report of the Board of Management (Continued)

Continue to complete management system on the basis of modern technology


Member Number of shares

(Unit: share)

Mr. Pham Tien DungPresident & CEO, Board of Director’s member

121,635

Mr. Tran Van HoatVice President, Board of Director’s member

29,703

Ms. Ho Ngoc Yen PhuongVice President & CFO

45,980

Mr. Nguyen Xuan Cuong Vice President

45,980

Mr. Dao Ngoc AnhVice President

48,853

Mr. Trinh Van VinhVice President

55,990

Mr. Vu Van Minh Vice President

17,605

Total 365,746

Construct and improve transparency information system

In the booming era of information technology like today, partners, customers, shareholders and investors are always able to access information quickly from mass media for their investment decisions. In 2015, as oil and gas industry suffers great impact from decline in oil price, market price of PV Drilling’s shares are also affected. In this difficult time, PV Drilling continue to focus on enhancing information disclosure team to be more professional, improving information quality in terms of accuracy, rapidness and transparency, in order to increase confidence of current partners, customers, shareholders and investors as well as attract new shareholders, while complying with current regulations on corporate governance and other regulations of state agencies.

PV Drilling has established an investor relations section on website dedicated to shareholders, showing updated information on business performance and financial results. Furthermore, shareholders can send questions in this section to PV Drilling’s Management, then Management can answer promptly, enhancing transparency in investor relations./.

Maximizing business efficiency through saving and cost control, maintaining rigs’

efficiency and safety, and actively seeking new opportunities is main activities that PV Drilling

needs to implement to overcome challenges in 2015.

Number of shares is owned by Board of Management’s members at the end of 31 December 2014


THÀNH QUẢ TỪ SÁNG TẠO

Unit: ShareNumber of common shares issued to public: 303,073,350

Number of common shares in circulation: 303,036,900

Number of restricted common shares (*): 20,152,000

Number of transferable common shares: 282,884,900

Par value (VND/share): VND 10,000

SHARE

SHAREHOLDERS’ STRUCTURE(Updated list of shareholders as of 3 April 2015)

(*): Including shares owned by PetroVietnam, which has been restricted within 3 years since 18 July 2013 (data as of 31 December 2014)

Number of shares RatioDOMESTIC 192,096,754 63.38%PetroVietnam (State shareholder) 152,711,035 50.39%

Other organizations 8,643,644 2.85%

Individuals 30,742,075 10.14%

FOREIGN 110,940,146 36.61%Organization 108,957,290 35.96%

Individual 1,982,856 0.66%

TOTAL 303,036,900 100.00%

CHANGES IN SHARE CAPITAL

TREASURY SHARES

Description Date of Issue Number of sharesInitial Initial Public Offering 28/11/2006 68,000,000

1 Stock dividend and new common share issuance 11/7/2007 9,519,730

2 New common share issuance 7/8/2007 1,340,000

3 New common share issuance 22/08/2007 31,280,000

4 Stock dividend 26/06/2008 22,027,774

5 Merge PVD Invest into PV Drilling 14/10/2009 25,716,285

6 Stock Dividend 8/1/2010 52,624,426

7 Private placement 13/08/2013 38,000,000

8 Issuance of shares by ESOP 15/11/2013 2,000,000

9 Stock Dividend 23/12/2013 25,020,480

10 Stock Dividend 18/09/2014 27,544,655

Total 303,073,350

Unit: shareNumber of treasury shares as of 01/01/2014 270,580 Number of treasury shares in period

Date Description Transaction Price (*)

(-) 14/7/2014 - 18/7/2014 Distribute to employees as a bonus 44,214 270,580

(+) 1/8/2014 - 4/8/2014 Withdraw shares by ESOP 10,000 36,450

Number of treasury shares as of 31/12/2014 36,450

Please refer to chapter Audited financial statements, section Equity for more details of Shareholders’ structure, change in share capital.

(*) Transaction Price is the average price per share

Charter Capital/ Shareholders’ Structure


Financial Highlights

2,000

2012 2013 2014

4,000

6,000

8,000

10,000

12,000

VND BilNon - current liabilitiesCurrent liabilities

2,000

2012 2013 2014

4,000

6,000

8,000

10,000

12,000

VND Bil

53%

42% 38%

58% 62%

47%

ASSETS LIABILITIES NET ASSETSCurrent assets Non - current assets

5,000

2012 2013 2014

10,000

15,000

20,000

25,000

VND Bil

73%63% 59%

37%41%

27%

5,000

2012

11,929

14,867

20,884

2013 2014

10,000

15,000

20,000

25,000

VND Bil REVENUE

vs. Plan

52%

vs.2013

40%

vs. Plan

47%

vs.2013

28%500

2012

1,322

1,883

2,419

2013 2014

1,000

1,500

2,000

2,500

VND Bil PROFIT AFTER TAX

vs.2013

18%2,000

2012

5,621

7,010

6,785

9,868

7,987

11,713

2013 2014

4,000

6,000

8,000

10,000

VND EPS

PROFITABILITY RATIOS LIQUIDITY RATIOS

LEVERAGE RATIOS

2.50

Times

Borrowing to EBITDA

2.00

1.50

1.00

0.50

2012 2013 2014

2.29

1.53

0.99

25.0%

20.0%

15.0%

10.0%

5.0%

2012 2013 2014

7.0%

20.0%22.4% 22.7%

9.3%10.8%

ROE ROA

25.00

Times

Interest coverage

20.00

15.00

10.00

5.00

2012 2013 2014

6.47

11.50

22.38

1.40

1.20

1.00

0.80

0.60

2012 2013 2014

0.83

1.021.15

1.321.18

1.01

Times

CURRENT RATIOQUICK RATIO


Analysis of 2014 Business Performance

“WITH THE ADVANTAGE OF SERVICES’ QUALITY AND PROFESSIONALISM, PV DRILLING HAS BEEN ALWAYS DEVELOPING HIGHLY QUALIFIED HUMAN RESOURCES AND MODERN TECHNOLOGY EQUIPMENT AND MACHINERY TO GRADUALLY AFFIRM ITS POSITION AS A CORPORATION THAT PROVIDE HIGH TECHNICAL SERVICES”

Trading & procurementManpowerWorkshop Oil Spill ResponseWell technicalDrilling

OthersTrading & procurementManpowerWorkshop Oil Spill ResponseWell technicalDrilling

Others

REVENUE PER SERVICE PROFIT BEFORE TAX PER SERVICE

60.9%

19.5%

6.6%

7.9%

2.0%

2.2%0.9%

10%

59.5%

4.2%2.5%

15.1%

0.4%

8.3%

DRILLING SERVICE

Drilling services achieved revenue of VND 12,436 billion and profit before tax of VND 1,936 billion in 2014, increasing 38% and 32% respectively over 2013.

Manpower Trading & procurement

Oil Spill Response

TotalWorkshopWell technical

Drilling

12,436 1,936

621250

210 71 62 293,179

3,1512,078

1,733881 520 86 20,884

Others Manpower Trading & procurement

Oil Spill Response

TotalWorkshopWell technical

Drilling Others

Unit: VND billion


59.5 %

Contribution to Revenue

60.9%

Contribution to Profit before Tax

In 2014, owned rigs were operated safely and efficiently with average operating efficiency exceeding 98%. In particular, all rigs achieved Zero Lost Time Incident (Zero LTI). International Association of Drilling Contractors (IADC) awarded Zero LTI certification for PV DRILLING I for 7 consecutive years, PV DRILLING II and III for 5 consecutive years, tender assist drilling rig PV DRILLING V (TAD) for 2 consecutive years. This is the pride of PV Drilling’s Managements and employees, especially expats, engineers and drilling crews who have been hardworking on offshore rigs in Vietnam.

2014 was also a favorable year for drilling market compared to previous years, as contractors actively extend their drilling campaign, at one point, PV Drilling operated 12 rigs at the same time including owned and hired rigs. Hired rigs made a great contribution to increase in revenue from drilling service in 2014, revenue from hired rigs increased by 80% compared to the same period last year and accounted for over 50% of total drilling revenue (2013: 43%). With the increasing use of hired rigs, connecting small, short campaigns of various customers to a long-term campaign, PV Drilling can strengthen its position and prestige as a pioneer of Vietnam Drillers, although the profit from hired rigs was not quite high.

Along with dynamic market factor, rig day rate also increased by 8% on average compared to 2013, contributing to boost revenue and profit directly from drilling service.

PV Drilling successfully performed Underwater Inspection in lieu of Dry-docking (UWILD) for PV DRILLING II and PV DRILLING V in 2014, with a total time of 15 days for each rig.

In late February 2015, PV Drilling welcomed a new generation jack up rig – PV DRILLING VI – to join the offshore drilling fleet of the Corporation. The participation of the new rig contributed to enhance competitiveness, boost drilling market share expansion and develop well technical service and other drilling-related services.

“At PV Drilling, service quality has always been the critical factors for the Corporation to stand firmly in the current competitive market. Accordingly, we promise to provide customers with services that have competitive price, outstanding quality, and comply strictly with international standards on safety and environment”.

Growth vs. 2013

Revenue Profit before tax

32%

38%


WELL TECHNICAL SERVICE

15.1%

19.5%



PV Drilling has studied technology and understood every customers’ demand, hence, providing bundled services to help customers reduce time and cost, create a close and trustworthy connection with customers in each project. This is the strength point that brought successes to PV Drilling and customers during drilling campaigns over the years.

With positive changes in drilling market shown in increase in the number of wells and demand for jack up rigs, well technical services were in high demand, resulting in strong growth of 50% and 71% in revenue and profit respectively over 2013. In addition to stable operation of core services such as tubular running, mud logging, slickline, MPD, tool rental, technical services, etc., 2014 also witnessed success implementation of new services such as Casing Running Tool internal (CRTi), Filtration, High-technology manufacturing (HTM). In particular, thanks to the supply chain that closely associated drilling services to drilling-related one, in 2014 PV Drilling efficiently completed providing bundled services to ENI in block 105 and block 120, and achieved remarkable success.

PV Drilling has always been improving quality and development of services in order to successfully develop a closed-loop supply chain. There has always been attention and investment into research and development of new services. One of focusses in 2014 was to research, engineer and manufacture hydraulic equipment in Vietnam, enhance internal capacity, and improve localization ratio.

Analysis of 2014 Business Performance (Continued)

With concern that “stopping means getting left behind”, PV Drilling continued to invest into science ideas to innovate and improve services’ operating efficiency. For example, implementation of equipment maintenance management software for mud logging and

Growth vs. 2013


71%

50%


MANPOWER

10.0 %

6.6%



2014 marked the continued growth of manpower service. Thanks to dynamic drilling market, this service supplied manpower to 16 rigs in 2014 (2013: 14 rigs), resulting into VND 2,078 billion of revenue and VND 210 billion of profit before tax in 2014, increase of 20% and 10% respectively compared to the same period of the previous year.

Growth vs. 2013


10%

20%

Always meeting customers’ confidence in quality of manpower service, PV Drilling continued to obtain a great number of manpower contracts in 2014. In addition to maintaining contracts with large customers such as Premier Oil, Cuu Long, Thang Long, VSP, Lam Son, Hoang Long and Hoan Vu, etc. PV Drilling also searched for and entered new contracts with TNK, PVEP Overseas.

PV Drilling’s drilling crews have proven their capability and maturity. PV Drilling provides most of positions on rigs. Understanding that having high quality human resources means a long-term competitive advantage, personnel training and development has been invested heavily, with various training types ranging from basic, advanced and in-depth. Most direct personnel working on drilling rigs must go through and complete required training certificates for safety and profession according to their positions. In addition, PV Drilling’s employees have been always supported and given opportunity to improve their professional knowledge and skills to master technology and manufacturing technique.

slickline has changed the concept of passive repair into active maintenance, limiting breakdown during equipment operation. Application of contingency planning of minimum materials, spare parts was to proactively procure equipment, spare parts, save inventory costs, while ensure sufficient number of equipment and materials for safe and efficient operation.

Furthermore, PV Drilling has focused on building a network of agents, increasing communication with customers in countries in the region such as Thailand, Myanmar, Malaysia, etc. in order to prepare for the future when domestic market shows signs of saturation.

Trading and procurement service obtained VND 1,733 billion of revenue and VND 62 billion of profit before tax in 2014, increase of 53% and 55% respectively over 2013.

TRADING AND PROCUREMENT



Several achievements in 2014 includes supply of conductors to 100% of Vietnam market, pipes to Bien Dong, pipelines to PV Gas, equipment and materials on schedule for such wells as White Rhinoceros, White Lion, Yellow Lion, etc. Profit margin of these equipment and materials supply contracts remained as good as the previous year.

Workshop service has played an important role in closed-loop supply chain of PV Drilling. In 2014, PVD Offshore’s workshop successfully performed Underwater Inspection in lieu of Dry-docking (UWILD) for 2 PV Drilling owned rigs, PV DRILLING II and PV DRILLING V. This was the result from many years of focusing investments into high technology equipment and machinery, training qualified engineers and workers. PV Drilling today is confident to capable of completing hard jobs that require professionalism and high understanding of technique.

Revenue from workshop service was VND 520 billion, rising 56% compared to the previous year. Similar to other services, thanks to increase in number of drilling rigs, demand for repair and inspection for drilling rigs was higher than expected. Engineering and fabrication also had certain successes in 2014, in particular, completion of outstanding projects such as waste heat recovery unit for VSP, water treatment for Cuu Long, flowlines fabrication for Cuu Long and Lam Son. PV Drilling is proud to be considered one of the leading manufacturers providing the best quality in the region by NOV and Halliburton.

Although revenue increased by 56% over 2013, its profit before tax only rose by 10%. Rising cost is one of factors resulting to lower growth in profit than in revenue. Besides the fact that depreciation expenses rose corresponding to increase in investments in equipment and machinery, training expenses also grew as there were more required training course to meet increasing work requirements. In addition, high technology manufacturing (HTM) recently put into operation since late 2013 was quite young and not be able to bring much profits.

WORKSHOP

Growth vs. 2013


10%

56%

Growth vs. 2013


55%53%


OIL SPILL RESPONSE

Although accounting for a small portion (less than 1%) of revenue and profits for the entire Corporation, oil spill response service made a great effort to obtain VND 86 billion of revenue and VND 29 billion of profit before tax in 2014, increasing 16% and 9% respectively compared to 2013. As having been realized since previous years, this service has faced increasingly high competition from outside. Oil and gas contractors tend to save costs and reduce demand for response and stand-by services.

Growth in 2014 revenue and profits was partly from providing oil spill services on sea and on river for traditional customers and partly from salvage of Heung A ship sunk offshore Vung Tau.

INVESTMENT AND PROJECT IMPLEMENTATION STATUS

Great successes in the last 13 years were the result of strategic investment decision and demonstrated the determination in PV Drilling’s developing process. Shortly after equitization in 2006, with approval and support from PetroVietnam, PV Drilling had continuously invested and owned 3 Jack-up rigs, 1 Land rig, 1 Tender assist drilling rig (TAD) and various modern equipment and machinery for oil and gas industry, bringing PV Drilling’s total assets to over VND 23 trillion at the end of 2014, compared to VND 2 trillion at the end of 2006. In 2014, PV Drilling continued to successfully complete investment projects, accounting for 82% of the approved plan.

In 2014, PV Drilling continued to contribute capital into PVD Overseas and cooperate with this joint venture to supervise execution of PV DRILLING VI rig construction contracts at Keppel Fels, ensuring the project to be on schedule and qualified. Investment into PV DRILLING VI was completed in late February 2015, becoming PV Drilling’s sixth owned rigs.

In Decision No. 2396/NQ-DKVN dated 31 October 2014, PetroVietnam approved PV Drilling’s proposal of “Establishment of joint venture in Malaysia to invest and operate 400ft. high technology multifunctional jack up rigs”. PV Drilling is expected to contribute USD 56 million into this joint venture. PV Drilling has been executing establishment of joint venture with partners in Malaysia to research market and strengthen marketing in Southeast Asia. However, PV Drilling’s Management is currently reviewing this investment in order to make it at an appropriate time, meeting market condition and with reasonable investment value to ensure long-term project efficiency and contribute to PV Drilling’s continued sustainable growth in the future.

In addition to large projects mentioned above, in 2014, PV Drilling continued to monitor execution and finalization of investment projects that provide additional equipment and machinery to owned rigs as well as well technical services such as: BOP, top drive system, drill pipe, pressure relief valve testing equipment, cables bridles for PV DRILLING V, wireline 70 feet mast, etc.

Growth vs. 2013


9%

16%


Analysis of 2014 business performance (Continued)

Items Unit 2014 2013 2012 2011 2010Total assets VND billion 23,305 21,492 19,084 18,535 14,640Current assets VND billion 9,452 7,967 5,079 3,915 3,211

Non-current assets VND billion 13,852 13,525 14,005 14,620 11,429Total liabilities VND billion 11,592 11,625 12,066 12,314 9,397Current liabilities VND billion 7,145 6,765 5,691 5,087 3,992Non-current liabilities VND billion 4,447 4,860 6,376 7,227 5,405

Shareholder’s equity incl. minority interest VND billion 11,713 9,868 7,017 6,222 5,243

Current assets Non-current assets

2010 2011 2012 2013 2014

22% 21% 27%37% 41%78% 79% 73%63% 59%

Current assets Non-current assets Total assets

2010 2011 2012 2013 2014

3,211

3,915 5,079 7,967 9,452

11,429

14,620 14,005 13,525 13,852

14,640

18,535 19,08421,492

23,305

CAPITAL STRUCTURE

ASSETS - RESOURCES

Stability of assets and resources ensures balance not only in short term but also in long term and sustainable growth capacity in the future. Traditional principle of financial balance is that fixed assets must be financed by long-term resources. PV Drilling has always applied this principle through selecting an effective structure of borrowing and shareholder’s equity. Accordingly, raising capital from inside through share issuance on private placement, issuance of stock dividends and outside through finance facility agreement brought efficiency and safety in PV Drilling’s financial structure. Liabilities to Equity ratio has declined continuously over the years, weight of liabilities and shareholder’s equity in total resources reached the 50%:50% balance at the end of 2014, reflecting increase in internal capacity while gaining benefits from safely using outside financial resources.

Current assets

674

13,178 9,452 Other short-term assets Fixed assets Current assets

3171,226

4,701

4201,044

3,906

2,5983,208

Other short-term assetsInventories

2014 2013

Trade account receivableCash and cash equivalents

Unit: VND Billion

Unit: VND billion


PV Drilling’s current assets were VND 9,452 billion at the end of 2014, increase of VND 1,485 billion or 18.6% compared to 2013. Business operation activities in 2014 with increase of 40% in revenue over the previous year strongly boosted short-term transactions, resulting in increase of cash and trade receivables/payables in 2014 over 2013. In particular, cash and cash equivalent rose over 23% and receivables increased over 20% compared to 2013, corresponding to increase of payables to suppliers as shown in the current liabilities.

Excellent growth in business results over the years is accompanied by effort to make appropriate adjustment in financial management. In addition to the Corporation’s regulations on effective financial management that requires strict compliance, all subsidiaries have jointly developed and implemented measures to control receivables/payables to meet expanding transaction scale. Although trade receivable balance at the end of 2014 increased by VND 795 billion compared to 2013, average day sale outstanding (DSO) declined remarkably from 68 to 63 days and overdue receivables were only 2% of trade receivables, not much different from previous year.

At the end of 2014, PV Drilling reviewed and revalued materials, spare parts to ensure owned rigs can operate continuously and have replacements if needed. PV Drilling also recorded VND 56 billion of provision for slow moving stock or decline in quality. This practice is necessary to accurately reflect the actual value of assets on the book, providing timely information for the management to come up with effective solutions.

Non-current Assets

At the end of 2014, PV Drilling’s non-current assets were VND 13,852 billion, in which fixed assets accounted for 95%, mainly consisting of 5 owned rigs provided for domestic and foreign markets as well as drilling equipment and machinery. Furthermore, PV DRILLING VI’s investment-in-progress value of over VND 1,400 billion contributed to increase in fixed assets in 2014. The fact that PV DRILLING VI was put into operation since early March 2015 as scheduled will lead to an increase of about VND 3,200 billion to PV Drilling’s total assets at the end of 2015.

RESOURCES

Along with assets’ increase, PV Drilling’s resources also grow strongly over the years. The weight of liabilities and shareholders’ equity in resources was 64%:36% respectively in 2010. This ratio was shifted to 50%:50% in 2014, proving PV Drilling’s reasonable and stable development in the recent period.

2010 2011 2012 2013 2014

9,39712,314 12,066 11,625 11,592

5,243

6,222 7,0179,868

11,713

Equity Liabilities Equity Liabilities

2010 2011 2012 2013 2014

100%

80%

60%

40%

20%64%

66% 63% 54% 50%36%34% 37% 46% 50%

Unit: VND billion



Liabilities

PV Drilling’s total liabilities as at 31 December 2014 were VND 11,592 billion, accounting for 50% of resources, in which short-term and long-term borrowings made up for VND 4,252 billion. Borrowings to equity ratio was 0.37 times, showing that there was still room for PV Drilling to raise capital from borrowings for future investment projects. This is also the lowest cost option in the current period, as domestic and overseas banks need to raise their credit balances.

It is expected that in 2015 PV Drilling will complete disbursing the loan of USD 158.7 million to invest into PV DRILLING VI from syndicated facility agreement with Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank), Vietnam Export Import Commercial Joint Stock Bank (EXIMBANK) and Southeast Asia Commercial Joint Stock Bank (SEABANK). In 2015, borrowings to equity ratio is expected to be 0.48 times.

Trade payables as at 31 December 2014 were 2,872 billion, increasing by 34% over 2013, mainly due to payables to foreign partners who leased rigs to PV Drilling to meet demands from drilling market. Compared to 2013, trade payables rose pretty high corresponding to increasing receivables. PV Drilling ensures a strict control of debts to minimize risks and maintain the best liquidity indicators.

Current liabilitiesNon-current liabilities

2010 2011 2012 2013 2014

42% 41%47%

58% 62%58% 59%

53%

42% 38%

Current liabilities Non-current liabilities Total liabilities

2010 2011 2012 2013 2014

3,000

6,000

9,000

12,000

15,000

3,9925,087

5,6916,765 7,145

5,405

9,397

12,314 12,066 11,625 11,592

7,2276,376

4,860 4,447

Shareholders’ Equity

As at 31 December 2014, PV Drilling’s equity included non-controlling interest of VND 11,713 billion, an increase of 1,845 billion or 19% over 2013, mostly thanks to contribution from shareholders’ undistributed profits and dividend payment. In particular, PV Drilling’s share capital was VND 3,031 billion in 2014, up 10% corresponding to 2013 stock dividend of 10%. Share capital accounted for 26% of total equity, showing PV Drilling’ financial strength accumulated over the years, which secured profitability for shareholders and supported the companies to overcome risks and challenges during operation.

Share premium was VND 2,434 billion at the end of 2014, in which premium from PVD Invest’s merging into PV Drilling was only shown on accounting book and not an actual cash flow. In addition, in order to invest into PV DRILLING VI, PV Drilling issued 38 million share through private

VND billion


placement in 2013 and raise a premium of VND 1,064 billion. According to regulations, this surplus can be only added to share capital 3 years after the project is completed and put into use.

PV Drilling’s equity to resources ratio was 50% in 2014, rising by 4% over 2013. This change is the result of the increase in equity through boosting the undistributed profits, which demonstrated the efficiency in PV Drilling’s investments. This also helped PV Drilling control risks, overcome challenges in the difficult and uncertain economy, become more professional in domestic and regional drilling markets.

Equity Growth rate

2010 2011 2012 2013 2014

2,000

4,000

6,000

8,000

10,000

12,000

5,243 6,222 7,017

9,86811,713

24% 19% 13%

41%

19%

FINANCIAL INDICATORS Unit 2014 2013 2012 2011Total assets VND. Bil 23,305 21,492 19,084 18,535Revenue VND. Bil 20,884 14,867 11,929 9,211Tax expense VND. Bil (638) (298) (250) (157)Profit before tax VND. Bil 3,178 2,291 1,697 1,229Profit after tax VND. Bil 2,419 1,883 1,322 1,067

FINANCIAL RATIOS1. Liquidity ratiosCurrent ratio time 1.32 1.18 0.89 0.90Working capital / Current liabilities time 0.32 0.18 -0.11 -0.23Quick ratio time 1.15 1.02 0.75 0.57Working capital - Inventory VND. Bil 1,082 159 (1,400) (2,175)Current liabilities VND. Bil 7,145 6,765 5,691 5,0872. Financial leverageTotal liabilities / Total assets time 0.50 0.54 0.63 0.66Total liabilities / Equity time 1.01 1.18 1.73 1.993. Operational efficiencyInventory turnover time 14.77 12.59 10.33 10.63Inventory VND. Bil 1,135 916 895 673Revenue / Total assets time 0.90 0.69 0.63 0.504. Profitability ratiosNet profit margin % 11.6% 12.7% 11.1% 11.6%Operating profit / Revenue % 13.5% 14.1% 12.8% 12.7%Return on Equity (ROE) % 22.7% 22.4% 20.0% 18.7%Return on Asset (ROA) % 10.8% 9.3% 7.0% 6.4%

VND Billion



2014 was a remarkably successful year of PV Drilling with revenue of VND 20,884 billion and net profit of VND 2,419 billion, increasing by 40% and 28% respectively compared to 2013. 2014 also witnessed a strong financial year with total assets exceeding USD 1 billion and solid financial indicators, reflecting the company’s sustainable development. Since late Q4/2014, facing complex movements of oil price, the Management has put corporate governance to the top priority. Investment projects have been thoroughly analyzed and strictly controlled through financial ratios’ analysis to ensure profitability, maximize shareholders’ wealth while guaranteeing standards of risks management, borrowing ratio, current/non-current liabilities ratio and liquidity of cash flows.

Current ratio:

Current ratio of 2014 was 1.32 times, improved compared to 2013. In 2014, PV Drilling was increased lease-jack-up rigs from partners, leading to high pressure from receivables and payables. However, PV Drilling’s liquidity was ensured through continual activities by Treasury team. As a result, Cash flows among subsidiaries were coordinated and maintained effectively while working capital was tightly controlled.

Working capital/ Current liabilities:

Working capital/ Current liabilities in 2014 was 0.32 times, higher than 0.18 times in 2013. In addition to tightly and effectively control of working capital among subsidiaries and in each project, 2014 recorded a significant reduction of current liabilities thanks to completed repayment for PV DRILLING I.

Quick ratio:

Effective performance of Economic Order Quantity Model in inventory management continued to bring high value to PV Drilling. Although PV Drilling operated a significant number of rigs and there was an increase in well technical and related services, inventory was effectively managed. Therefore, while revenue skyrocketed, inventory only rose by 17%. Most inventory was stocked for back-to-back trading contracts to ensure timely delivery to customers in the beginning of the following year. Quick ratio achieved 1.15 times in 2014, improved compared to 1.02 times in 2013.

Working capital – Inventory:

In 2014, working capital (excluding inventory) was VND 1,082 billion, up VND 923 billion over the previous year (2013: VND 159 billion). Current assets in late 2014 was VND 9,452 billion, rising by VND 1,485 billion mainly because of fund raised from issuance of 40 million shares through private placement in Q3/2013 for the purpose of investment in drilling rig, equipment and machinery, as well as increased trade receivables thanks to dynamic market. On the other hand, current liabilities and inventory did not make much different in 2014 compared to 2013 thanks to strict control.


Current liabilities:

Completion of repayment for PV DRILLING I and PV DRILLING 11 helped reduce PV Drilling’s current liabilities. In 2014, current liabilities were VND 7,145 billion, up VND 380 billion mainly comprising trade payables. Furthermore, PV DRILLING III’s repayment will also finish in 2015.

Liabilities/Total Assets & Liabilities/Equity: In 2014, liabilities to total assets ratio declined 0.04 times to 0.5 times compared to 2013 and liabilities to equity also achieved significant improvement, reducing 0.17 times compared to 2013. Based on a safe capital structure for investment 70/30, comprising 70% borrowings and 30% equity, PV Drilling ensured repayment plan. In addition, PV Drilling’s long-term loans are all denominated in USD with an interest rate of floating LIBOR rate + margin, approximately 3.5%. Derivatives were also used to minimize risks in interest and raise liquidity for PV Drilling’s cash flows, if needed.

Inventory:

Inventory as at 31 December 2014 was VND 1,135 billion, up 24% compared to 2013. This change was much higher than the increase of inventory in 2013 from 2012. However, inventory management was improved better and better through inventory turnover ratio. Inventory turnover figure in 2014 was 14.8 times compared to 12.6 times in 2013.

Net revenue/total assets:

2014 was a successful year for PV Drilling with revenue of VND 20,884 billion, increase of 40% compared to 2013. Although total assets increased by VND 1,812 billion, PV Drilling’s total assets turnover ratio achieved 0.9 times, up 30% over 2013 thanks to significant increase of revenue.

Operating profit/net revenue and Net profit/revenue:

In 2014, net operating profit/net revenue and net profit/revenue ratios declined 0.6% and 1.1% respectively compared to 2013, mainly because of significant increase in revenue from hired rigs, the number of hired rigs was 6 rigs on average in 2014 compared to 3 rigs in 2013. However, net profit/revenue ratio in 2014 decreased due to low profit margin of hired rigs supply service.

ROE & ROA:

In 2014, PV Drilling safely and efficiently provided the market with 9-10 drilling rigs, including 4 owned rigs and 5-6 hired rigs on average. Thanks to dynamic drilling market, such services as well technical service, manpower, trading and procurement also grew strongly. This contributed to increase of 40% and 28% in PV Drilling’s revenue and profit respectively in 2014 compared to 2013. Accordingly, ROA and ROE continued to stay high. In comparison with 2013, ROA in 2014 was 10.8%, up 1.5% while ROE maintained at over 22%.

An improving financial indicators describes PV Drilling’s strong financial resources and creates a solid base for

sustainable development.


Corporate Social Responsibility (CSR)

At PV Drilling, all union activities towards the community are connected with our business performance, strictly in accordance with the development based on three aspects: business, society and environment. We understand that if only aiming at short-term business goals and overlooking sustainability development ones then the success is going to be just temporary as well, only for the time being. Besides, as above-mentioned, one of the key objectives of the Corporation is “comprehensive development and contribution to the community for a long-term wellness”. We truly hope that our practical activities will contribute to the whole success of PetroVietnam Group, other members of the Group, domestic enterprises for the society and community to be more developed and civilized.

Accordingly, throughout the years since our debut, the management and PV Drilling’s workforce have always cared for the promoting, organizing, and implementing CSR policies. This is our responsibility and momentum for sustainable development, which expresses our deep humanism toward the underprivileged and disadvantaged. As a fact, an enterprise can develop sustainably and promote national development as a whole if only the society is stable, fair, thereby enhancing our competitive advantage in particular as well as of our nation in general on international markets. In acknowledgment of this, during the past few years, the Corporation has implemented CSR policies methodically, efficiently with explicit planning, on the right subject and the right target.

HEADING FOR COMPREHENSIVE DEVELOPMENT AND CONTRIBUTION TO THE COMMUNITY FOR A LONG-TERM WELLNESS.

Perspective of Thai Binh SOS Children’s village


CSR is one of PV Drilling’s traditional conventionalities.

In 2014, the Corporation has disbursed over VND 41 billion to charity, gratitude offer activities, including:

• Built the Unity Houses in the provinces of Lai Chau, Quang Tri, Quang Binh;

• Built Residences for elementary school students in Lung Chinh, Meo Vac, Ha Giang villages;

• Built preschool in Nam Thanh - Yen Thanh - Nghe An villages; B Primary School in Xuan Truong, Nam Dinh towns;

• Built Vietnam SOS Children’s Villages 1st Phase in 2014;

• Scholarships for students at the primary school No. 1 in Bao Ninh, Quang Binh province;

• Supported the Department of Fisheries Resources and Vietnam Coastal Guard under the program “Joining hands for our homeland islands”; support the “Nghia tinh Hoang Sa – Truong Sa” program; give gifts for fishermen and organize moon festival for the children living on Ly Son island district; give scholarships for Vietnamese infant with his mother drowned in the Korea’s Sewol ferry incident; support in funding the construction of clean water pipeline onto the grave of General Vo Nguyen Giap, and many other charitable - gratitude offer activities.

In 2015, PV Drilling is committed to continue to carry out even further CSR activities, so that this can continue to be a beautiful tradition of PV Drilling, and contribute more for sustainable development of the Corporation./.


Awards and Accolades

DURING ITS ESTABLISHMENT AND DEVELOPMENT, PV DRILLING HAS HONORABLY RECEIVED VARIOUS OUTSTANDING AWARDS AND ACCOLADES FROM DOMESTICALLY AND INTERNATIONALLY PRESTIGIOUS ORGANIZATIONS. HEREUNDER ARE SOME OF THE VERY PRESTIGIOUS AWARDS FOR PV DRILLING’S SUPERIOR BUSINESS OPERATION AND MANAGEMENT:

2010• The Excellent Annual Report;• The Golden Cup for “The Prestigious Securities Brand”;• Vietnam Golden Star Award;• The International Associates of Drilling Contractors (IADC) has certified for PV Drilling’s rig fleet

including PV DRILLING I, II AND III for continuous safe operation without Lost Time Incident (Zero LTI) since their debut.

2011• The First Labor Medal was awarded by the President of Socialist Republic of Vietnam;• The Excellent Annual Report;• The IADC has certified for PV Drilling’s rig fleet including PV DRILLING I, II AND III for continuous

safe operation with Zero LTI since their debut.

2012• Honorably received the award “The Best Oil and Gas Drilling Contractor in Asia” by World Finance;• Honorably received the Certificate for using high-tech application by the Ministry of Science

and Technology for the “Semi-submersible Tender Assist Drilling Rig (TAD) Project that serves exploration and production activities in Vietnam’s deep water areas”;

• Top 10 the best Annual Report (No. 3);• Honorably received the certificate of “Information Transparency among Listed Firms over The

Years” by the State Securities Committee;• The IADC has certified for PV Drilling’s rig fleet including PV DRILLING I, II AND III for continuous

safe operation with Zero LTI since their debut.

2013• Honorably received the “Most Admired ASEAN Enterprise for the Category of Growth – Large

Company” Award;• Honorably received “The best Oil and Gas Drilling Contractors in Asia in 2013” Award for the

second time by the World Finance;• Honorably received The Prestigious Brand 2013 by Vietnam Enterprise Institution.


2014• Top 10 Best Annual Report;• Be among Top 50 Vietnamese best listed firms, awarded by the Forbes magazine; • The prize for Prestigious Brand 2014 by the Vietnamese Enterprise Institution;• Be among Top 500 Vietnamese fastest growing firms; Top 500 Vietnamese biggest enterprises

(No. 61) and Top 1,000 enterprises largest contributing to the National Budget (No. 43) certified by Vietnam Report;

• The IADC has certified for PV Drilling’s rig fleet for continuous safe operation with Zero LTI as below: • Rig PV DRILLING I : 7 consecutive years of Zero LTI • Rig PV DRILLING II : 5 consecutive years of Zero LTI • Rig PV DRILLING III : 5 consecutive years of Zero LTI • Rig PV DRILLING V (TAD): 2 consecutive years of Zero LTI

• For Annual Report 2013: • Top 10 the best Annual Report (No. 3); • The award for “The Sustainable Development Report with the highest reliability”

by the State Securities Committee; • The only first place Platinum Award in Energy category worldwide (LACP); • The Silver Award for the “Most improved Annual Report worldwide” (LACP); • The Golden Award for the World’s Best Annual Report in non-English A.R. in Drilling & Well

Service Category (ARC); • The Consolation Award for the Financial Data in Annual Report (ARC);

• The IADC has certified for PV Drilling’s rig fleet including PV DRILLING I, II, III and TAD for continuous safe operation with Zero LTI since their debut.


PROFESSIONALISMBe professional in all business

operation activities and services in order to aim for

PV Drilling’s sustainable development.

ANNUAL REPORT 2014 PROFESSIONALISM66

Professionalism in drilling workforce

To uphold the reputation, “PV Drilling – the Pioneer of Vietnam Drillers”, the practice of professionalism is among the core values that lead PV Drilling to its current success. This practice is vital and required in every aspect of business. However, it is defined and applied differently across different businesses. At one place, professionalism is showed as a neat appearance of an office and its employees; at another place, professionalism is presented in the quality of work and services of a company. So, what is professionalism at PV Drilling? More importantly, what has professionalism brought to PV Drilling?

PV Drilling’s Professionalism – It is Corporate Strategic Planning

A professional corporation needs sound strategies and policies to develop, nurture and preserve the practice of professionalism at workplace.

Since the establishment of PV Drilling on November 26th, 2001, PV Drilling’s executives have dedicated to build a premium quality service company, where the practice of professionalism was placed at the top priority. It was also considered as one of the core values that direct PV Drilling’s sustainable development. Since the beginning, the Quality Management System (QMS) was not only built to get certified but also to control the progress of creating exceptional services to customers.

In order to apply professionalism at workplace, PV Drilling has created HR training and development policies and processes, set up KPT and performance appraisals, policies regarding to compensation and benefit packages for all employees from top management to entry-level associates. Every leader at PV Drilling has to remember by heart three simple but essential concepts: think to inspire, act to deliver, and influence to engage. The management at each level of the Corporation has to monitor and implement all the policies and processes. Whenever problems occur, they have to focus on finding solutions instead of making excuses.

More importantly, PV Drilling has the “Business Code of Conduct” to ensure that all decisions and practices are in accordance to all PV Drilling’s core values. PV Drilling’s Business Code of Conduct will be informed in 2015 (for detail information, refers to PV Drilling’s Report of Sustainable Development).

PV Drilling has actively implemented specialized management systems to build a proper infrastructure to support the professional development of employees and services of the Corporation. Many international partners are surprised to know that PV Drilling has been using the ERP Oracle systems, a financial management system, Maximo, an inventory management system, and SimpleSoft, a training program, for a long time.


PV Drilling’s Professionalism – the Role of each employee

In order to operate the management systems and provide services effectively, each employee at PV Drilling has to be qualified for his/her position. Since PV Drilling offer drilling and drilling-related services that require using advanced technology, all technicians at PV Drilling have to be certified by many international organizations such as IADC, IWCF, OPITO, ABS, etc. Beside these technical certification requirements, PV Drilling has been actively providing trainings for employees frequently in other necessary job-related knowledge and skills to raise employees’ competency level. As a result, the operational effectiveness and efficiency of all PV Drilling’s rigs are always higher compared to outcomes from drilling rigs in the region and from partners.

Although PV Drilling is a Vietnamese company, our employees come from many different countries. From recruitment process, all applicants have to pass PV Drilling’s professional recruitment requirements. From being a State-owned company to a listed one, PV Drilling has never encountered a situation where the Corporation could not find a suitable position for our people. After being recruited, new employees have the chance go through designated training courses according to the training matrix and standard requirements for each position. Moreover, PVD management from team leaders need to meet management requirements specified in PVD Leadership Competence model. Every year, PV Drilling invested a considerable amount for HR training and development to enhance employees’ specialized knowledge, skills, management and leadership competency.

Whoever wears the uniform of PV Drilling is regarded as an ambassador of the Corporation. As a result, in any circumstances or activities, PV Drilling’s staff needs to show their professionalism to support the inner strength, increasing the competitive advantage of the Corporation.


As a technical services provider, employees at PV Drilling show their professionalism through their integrity in the process of supplying premium services to customers. They are responsible for performing the assigned jobs and report the outcomes.

Every employee at PV Drilling has to go through quite a few trainings to conduct professionally at workplace every day. Such trainings include: business communication, operational safety, ideas sharing and defending your point of view, influencing, listening and respecting colleagues, etc. These are some soft skills that each employee at PV Drilling has regularly updated through workshop and at workplace every day from a receptionist to an executive, from an onshore office worker to an offshore technician.

Remarkably, each employee at PV Drilling has to self-learn constantly through different means to acquire and advance knowledge and skills required for his/her job since there is no individually tailored training course for each individual. This is a fundamental supporting factor for individual career development plan so that supervisors and direct managers can monitor and assist their progress.

PV Drilling’s business principle is as simple as “know what you do and do what you know.”

These values have promoted PV Drilling’s friendly and cohesive working environment, which motivates employees to contribute more to the Corporation. With a professional working environment, PV Drilling has attracted numerous qualified applicants, adding to its abundant and competent human resources. Last year, although PV Drilling had only a few vacancies,

Professionalism in Drilling Workforce (Continued)

In 2015, the “Business Code of Conduct” will be publicized and widely applied within the Corporation in order to systemize and unify their behaviors and intensify, consolidate PV Drilling’s values as well.

Honorable ceremony for PV Drilling’s directors with excellent performances


the Corporation was still rated as one of the best recruitment agencies on Vietnamworks (for more information, please look at the video clip “Working at PV Drilling” on PV Drilling website).

Professionalism in the process of providing PV Drilling’s services

With the commitment and mission to provide the safest and highest quality services, creating value added for clients, PV Drilling has realized this commitment and become the Top drilling and drilling-related services provider in Vietnam and received many prestige awards and recognitions in the region.

In order to uphold PV Drilling’s prestigious brand name, beside being equipped with relevant job-related knowledge and skills, each employee has to learn by heart the essence of a service provider, which is customer orientation. Each service unit and each employee at PV Drilling always strives to provide services with highest quality to clients regardless of the contract value. The ability to manage complexity is a requirement for each individual, each service unit at PV Drilling.

Thanks to our remarkable dedication in supplying premium services, the customers have entrusted PV Drilling with contracts of bundled services for many large-scale drilling campaigns over the years.

PV Drilling’s Professional Brand Ambassador

Each employee at PV Drilling not only has to work with high level of professionalism but also present as PV Drilling’s brand ambassador in a professional conduct at any circumstance, especially when working with other businesses, partners, investors, community and society. As a Corporation with substantial contribution to society, PV Drilling’s corporate image often displays a modern and sophisticated style at both self-organized events and community ones. Images of PV Drilling’s activities always blend in the proper and professional touch.

The practice of professionalism has been, is, and will be an internal strength and a competitive advantage of PV Drilling in its vision to become a prestigious drilling and drilling-related services provider in the global market./.


Human resource Training Plan

Our aim to build up and develop a competent, dedicated and committed workforce is one of the core strategies of PV Drilling. The Corporation has always focused investing in training and development plans for our workforce, especially in the planning and development for the successors.

PV Drilling has been investing billions of Vietnam dong for many years to train and develop management team, professionals, engineers and technical workers, who are considered the core workforce of the Corporation. Therefore, our training and development programs are designed to be very diverse from drilling and drilling-related sections to Safety - Quality - Environment, foreign languages, soft skills, business administration training and management, leadership skills. PV Drilling are proud to be highly appreciated by our partners as an outstanding organization in the industry with the professional, high quality and customer-oriented workforce.

In 2014, PV Drilling focused on 3 main points of training and development plan for the workforce, including:

Applications of the model 70:20:10 have generated a breakthrough in the training activities

PV Drilling has taken the first steps to shift from the traditional model of training to the innovative model 70:20:10. This model, which was introduced by Lambardo & Eichiger in 1996, is becoming the common trend of training currently being applied by many modern organizations over the world as well as in the region. This model specifically applies as below: 70% of the competency is accumulated from real life experience; 20% of the competency is learned from co-workers; 10% of the competency is gained from mainstream courses.

Hence, the Corporation has created an environment for our staff to learn and develop through specific circumstances such as:

70% from learning and developing through experience, including:

• Apply the knowledge learned on the job;

• Self-study and self-develop;

• Testing new approaches to old issues;

• Rotate, transfer roles or positions;

• Participate in projects and teamwork, gaining experience while handling difficult and challenging tasks;

• Make more decisions and increase interaction with upper management (through reports, presentations and meetings);

• CSR activities

20% from learning and developing from other people, including:

• Observe, seek for advice, consult and listen to ideas and experience sharing from colleagues, superiors, subordinates;

• Be coached or trained by upper management;

• Receive assessments and feedbacks from customers.

10% of learning and development through courses, including:

• Class-based courses;

• Online courses.

PV Drilling has implemented the model 70:20:10 in 3 steps, applied in order from low to high, starting from learners receiving foundation knowledge from courses (the traditional training model which has been successfully implemented at the Corporation throughout the years); subsequently, learners will be able to develop and enhance their knowledge through

70 : 20 : 10The human resource training model making a significant breakthrough at PV Drilling


sharing practical experience and in-depth knowledge from other colleagues (especially from direct supervisors); finally, they can apply their knowledge and skills in practical work, drawing experience for themselves. In reality, the model 70:20:10 has been achieving certain success in PV Drilling, creating a foundation for PV Drilling to develop into a “learning organization” - an organization with constantly learning culture. Competency – Based Training

PV Drilling has built professional competency models as a basis to determine the matrix of technical and professional training for each position in each service sector of the Corporation. The training matrix system for different positions working on drilling rigs, tubular services, Mud Logging services, Well Testing, Inspectors, and safety officers, etc. has been oriented to train, assess, and develop professionalism for staff working in these fields.

The Corporation is continuing to develop the professional competency models for technical positions and other professionals to achieve standardization in training programs per professionalism and to promote online training.

Focusing on training leadership competency for the management team

Considering the management team the role models to motivate and create a breakthrough and lead to positive changes in the development strategies of PV Drilling,

the Corporation has always placed a high priority in training and competency, leadership development for the management and their successors. PV Drilling leadership competency model has been developed and applied in the Corporation since 2012. So far, the leadership competency development roadmap has been implemented in a systematic way for the management team to be well-prepared with consistent awareness and foundation competency of professional leaders. Combined with Individual Development Plan (IDP) since 2014, each management staff has more effective tools for the planning and implementation of the personal competency development plan as well as development of their successors.

Developing the successors

PV Drilling is highly aware of the importance and the difficulty in discovering talents for the organization. The replacement of existing staff with equivalent qualifications from outside may be much more costly than maintaining and developing existing ones. Therefore, the Corporation focuses on planning to build up the successors in order to provide enough talents for the organization and strengthen its internal power. This is also how the Corporation leveraged the outstanding individuals in the organization to maximize their potential.

The Corporation has been applying an effective successor development model, which has been trained and consulted to the entire senior management team and staff of PV Drilling by Professor, Dr. William Rothwell./.

On the Job Training:Support in training the workforce to demonstrate comprehensive skills and full knowledge, the fastest growth over the corporate ladder, and minimize the situation in which there is a knowledge gap or lack of a certain number of skills.

The successful implementation of personnel training programs will help the Corporation to mitigate the risk of “human capital flight”, to optimize personnel costs especially when the drilling market is becoming more vibrant.


Labor Productivity Over more than 13 years of establishment and development, PV Drilling has become a prestigious drilling contractor not only in Vietnam but also other countries in the region and beyond. In order to achieve the success as of today, the human factor, and closely linked with it, the labor productivity, has always brought great concerns to the management of the Corporation, considering them as the key factors in the development of the Corporation. Besides, the increase in labor productivity is to ensure our competitive advantage with other foreign oil & gas services companies. According to the statistics over the past few years, PV Drilling has quite high growth rate of labor productivity, on all 3 aspects:

In terms of labor productivity measured by revenue, we have always managed to achieve over 17% growth rate in the past 4 years.

Regarding labor productivity measured by Profit before tax, the growth rate in the past 4 years have always been over 25%.

1. Qualifications of workforce:

Average labor productivity measured by revenue

0

2,000

4,000

6,000

8,000

10,000

12,000

2012

6,672

20.60%

2011

5,532

2013

7,829

17.34%

2014

10,060

28.50%

VND

Bill

ion

Average labor productivity measured by Profit before tax

0

20

40

60

80

100

120

140

2012

79

28.58%

2011

62

2013

101

27.11%

2014

126

25.55%

VND

Bill

ion

Average labor productivity measured by Profit after tax

0200400600800

1,0001,200

1,400

2012

739

15.38%

2011

641

2013

992

34.14%

2014

1,148

15.75%

VND

Mill

ion

With the rapid development of science and technology, particularly in the fields of oil and gas drilling, it requires workers in PV Drilling to constantly learn to understand and master high technologies. Since the early days of our establishment, most of the professional and technical positions were often held by expatriates. By now, these expatriates at PV Drilling are gradually dominated and replaced by Vietnamese personnel, thus optimized personnel costs. Besides, labor recruitment also pays significant attention to the search & recruitment of qualified candidates, who have high technical expertise and ability to learn and develop, to work for the Corporation. PV Drilling regularly organize training courses, that enhance professional knowledge and professional skills, conducted by well-known experts in the region, and globally. Every year, each employee at PV Drilling participates in over 2 training sections on average in order to enhance their professional skills.

With a workforce of highly qualified professionals, PV Drilling has always been able to achieve high labor productivity among the Vietnam Oil and Gas Group.

Below are the numbers of training participants in 3 years: 2012, 2013, 2014.

32%

16%

46%

5%1%

Post-graduate qualifications (98 people) Graduate and equivalent qualifications (1,000 people) College Intermediate qualifications (342 people)Qualifications on technical workers and above (695 people)Qualifications on unskilled workers (22 people)

Qualification statistical graph(The entire corporation by Dec 31, 2014)

No. RatioYear

2012 2013 2014

1 Number of training participants

3,994 4,449 5,279

3 Average number of training sessions per participant

2.23 2.34 2.55

For labor productivity measured by the Profit after tax, the growth rate has always been over 15%.

At PV Drilling, labor productivity issues are concerned on 4 aspects:


Average number of training sessions per participant in 3 years: 2012, 2013, 2014.

Number of training participants

0

1,000

2,000

3,000

4,000

5,000

6,000

2013

4,449

2012

3,994

2014

5,279

people

Average number of training sessions per participant

2.00

2.10

2.20

2.30

2.40

2.50

2.60

2013

2.34

2012

2.23

2014

2.55

times

2. Application of technology and innovations to improve labor efficiency

In 2007, PV Drilling had become the first subsidiary of Vietnam Oil and Gas Group to implement and apply ERP Oracle. This is the most advanced management software up until now. In addition, the rig operation and management, which involves high-tech machinery in the mechanical workshop on-shore, is handled with the most advanced softwares. The Corporation also built the software internally to serve certain areas and activities, especially the Maximo application software to be applied in the management and operation of drilling rigs.

In 2012, the Corporation has launched the TAD drilling rig. This is the first supporting semi-submersible drilling rig in Vietnam, which has been recognized by the Ministry of Science and Technology as a high-tech drilling rig,opening up a new path for development in the field of deep-water drilling.

In 2011, the Corporation has formed the Science and Technology Council, encouraging the staff to do technical research, innovation and enhancement. Every year, the Council summarizes and organizes events to honor individuals and teams with outstanding applied scientific research that brings high economic efficiency.

The number of topics, research that were recognized, honored in the past 2 years:

3. The Management capability

PV Drilling is an open and dynamic environment, which attracts highly professional workforce with extensive experience from multinational companies to join and become the core workforce with the capability and enthusiastic dedication to the development of PV Drilling.

Currently, the entire management team of PV Drilling at all levels are those who with high professional standards and good leadership skills and frequently trained to enhance the professional, management and leadership competencies.

4. Remuneration

One of the factors contributing to the increase in labor productivity is the stability of the workforce at PV Drilling. In order to achieve that, the Corporation pays extra attention to the remuneration regime towards the employees to improve their living standards and attract workers with high qualifications.

The Corporation has established an effective procedure to assess the individual productivity, in which individuals set goals and receive bonuses based on the Corporation’s assessment of the fulfillment of the above goals set in each period, each year.

In addition to salaries, bonuses and benefits directly paid to employees; the Corporation is also very attentive to the insurance regime purchased for the entire staffs, particularly:

• Compulsory insurance: the Corporation fully implemented under the provisions of the State regulations and purchased at rather high price;

• Accident, life, health insurance for employees and their dependents.

• Talent retention insurance “PVD Talent Retention” for key staffs, workers with high technical & professional expertise;

• Voluntary pension insurance for all employees throughout the Corporation. /.

The number of topics, research 2013 20141 Innovation 1 62 Scientific research 2 7


Professionalism in Managing Health - Safety - Environment - Quality System (HSEQ)

After 13 years of development, PV Drilling has improved the integrated Health, Safety, Environment and Quality (HSEQ) management system in all processes of production and business operations in compliance with the OHSAS 18001 international standards, ISO 14001 and ISO 9001 consistently from the headquarter of the corporation to the subsidiaries.

Besides, HSEQ management system (MS) of PV Drilling is increasingly professionalized in some of following aspects: 1. Continued improvement of the HSEQ-MS from the headquarter to the subsidiaries

At the Headquarter, HSEQ Division takes responsibility for establishing, issuing policies and procedures of the HSEQ system as well as supervising and monitoring the application and compliance of these policies. HSEQ Division also takes the role of consultant to the Top Management Board in supervision and making decision on orienting the development of the management systems, contributing to the Corporation’s sustainability. At the subsidiaries, HSEQ Departments directly implement the requirements of the management system, providing support to the operational departments to assure the compliance as well as finding the opportunities for improvement in order to ensure the validity and effectiveness of the management systems.

In 2014, PV Drilling had successfully maintained the HSEQ Seminar Program focusing on a variety of topics. The internal quarterly HSEQ workshops have been planned and organized by the HSEQ Division, focusing on such issues, which resulting from the need analysis processes, such as the PVD HSE Operation Procedures; HSEQ-MS continuous improvement; introduction of the new management system standards. Besides, the Seminar Program also consists of workshops to share the HSE management experiences with the oil and gas contractors. To extend this success, in 2015, the contractors as PVEP, JVPC, Vietsovpetro, Bien Dong POC are expected to join PV Drilling in the collaboration HSE Seminar Program to enhance the professional level as well as to improve the efficiency of the HSEQ-MS for each party.

Also resulting from the continuous improvement process is the set of HSE standards exclusively developed for PV Drilling. These standards are expected to be published and implemented at all the subsidiaries.

2. Application of the advanced technology in production and provision of services

Following the Corporation’s strategies, the subsidiaries have been constantly seeking and utilizing the state-of-the art technology and equipment into their production and business activities, especially focusing on the outstanding safety features and the reliability of the equipment. One of such examples is that PVD Well Services has successfully utilized the remote control system in throughout running casing processes from lifting up casing, spinning the connections and running joints in hole. This system is very important because it helps eliminate or minimize risks of incident to personnel working inside the derrick.

The subsidiaries working onshore also apply advanced technology in their production, such as CNC machine, 3D design software... to design and manufacture components to customers. The application of advanced technology helps create a safer working environment for employees, higher quality products as well as enhance the professional image of the Corporation.

3. Proactive in internal HSEQ training and supporting subsidiaries on HSEQ consultancy

With recruitment of experienced staff, HSEQ Division also develops an internal training program to ensure the competency of the team, capable of providing consultancy concerned HSEQ related issues to the Corporation’s subsidiaries.

The year 2014 marked a strong growth in internal training as the online training system was set up providing courses on occupational health - safety - environmental management, making learning a convenient experience for the offshore crews and cost-saving due to the decreasing demand for training abroad. Typical courses such as JSA, PTW, IMIST... were highly appreciated by the practitioners


in the industry, especially its practical aspects.

As usual, the working environment is monitored by a licensed contractor once a year according to the legal requirement. In early 2014, PV Drilling was equipped with a set of monitoring gears to be more active and frequently monitoring the working environment in terms of better controlling the indicators, which could potentially affect the worker’s health such as noise, dust, carbon oxide, carbon dioxide and other toxic substances. With this test kit, it is possible to actively monitor the working conditions at the working sites at the busiest time of the year without disturbing the operation. Though the results have not legally approved, it can be used as an indicator to evaluate the efficiency of the subsidiaries’ HSEQ-MS. On the other hand, the self-monitoring results can also be used by the trained team as the basis for a development of a working environment improvement plan if necessary.

4. Application of the Information Technology in HSEQ activities

Understanding the importance and benefits of the application of Information Technology (IT) in business and production activities, PV Drilling has deployed in multiple IT applications business, including HSEQ activities. The application is tailored and coded to deploy at the subsidiary’s level.

On the drilling rigs, computer software is used to manage the most important activities such as risk assessment, incident investigation, observation cards… A software for management of Job Safety Analysis, which is a pre-defined JSA library with search and job assign functions is currently tested on the whole offshore fleets of PV Drilling.

In the HSE training activities: safety training is logically managed according to the written procedure. Training matrix was defined for each position and personnel on board. The individual training requirements, history and process were managed by simple-Soft application, with the function to alert 3-month before the required certificates should be updated. Based on this notification, the relevant department shall arrange the training needed to ensure that the personnel are legally sufficient for the job.

PV Drilling has completed the integrated management system of Health, Safety, Environment and Quality (HSEQ) in all of the Corporation’s production processes and business activities.


Other activities: In health care, an online software has been developed to support employee to track their health care results, including annual check-up indicators. In order to manage a massive data system to support the work of the HSEQ’s team, an internal portal (HSEQ Database) has also been developed and widely used for storing and sharing data, records, documentations and related information amongst the HSE Group as well as throughout PV Drilling. This system is gradually becoming an indispensable information channel for all the HSEQ management staff.

COPR PVD HO PVD DD PVD DW PVDO PVDLOG PVD TECH PVDI

MAN -HOURS

HSEQ - KPLS

OBJECTIVES - TARGETS

AUDIT/WALKABOUT

INCIDENT/PVD CARD

NON - CONFORMEDSERVICE/PRODUCT

ENV, MANAGEMENT

HSEQ COST

HEALTH ADMINISTRATION

Number of training per employee per year

Other data

LTILTIRTRIR

PVD CARD/PER

Periodical KTS ratioNumber of BNN

Other ratios

HSEQ - MS SAFETY HEALTHPower consumption ratio

per personWater consumption ratio

per personOther ratios

Rig ratesOther ratios

Total HSEQ bonusesONSHOREOFFSHORE

ENV QUALITY AWARD

To be more efficient as well as holistically and consistently managed the HSEQ issues and activities, a project aims to computerize the whole HSEQ-MS activities has been started in 2014, referred to as PV Drilling’s HSEQ-MS Portal, and expected to be completed in 2016. This IT Solution shall be deployed at the Corporation’s level, from the Headquarter to the membered subsidiaries.

Interface of PV Drilling’s HSEQ MS Portal

Professionalism in Managing Health - Safety - Environment - Quality System (HSEQ) (Continued)


PV Drilling’s HSEQ-MS Portal consists of three modules:

Module ACTIVITIES

Module PERFORMANCE

Module PROFILE

Including various sub-modules which are to monitor and control the conformity of entire HSEQ activities according to approved standards, legal and other requirements.

Showing the performance key indicators (KPIs) of the HSEQ-MS at the logging time. These indicators are the calculated outcomes of the managed activities of the 1st module.

Includes 3 functional sub-modules, supporting the activities of the system such as: Exporting Reports as pre-defined forms and requirements; Review of the inquiry and thematic; Document Control as a controlled HSEQ-MS documentation system; and HSEQ Archives as a shared library of HSEQ-related documents. /.

In addition to the Database Portal, PV Drilling has successfully issued an internal quarterly HSEQ Newsletter to promote HSEQ issues amongst the employees. The Newsletters are highly appreciated by the contractors and other companies in the oil and gas industry as it was used as a reference.


QUALITYAt PV Drilling, Service Quality which is regarded as our mission is always

highly concerned.

ANNUAL REPORT 2014 QUALITY80

PV DRILLING – SUPPLY CHAIN OF OILFIELD SERVICES

The upstream segment of the Oil & Gas Business is also known as the exploration and production (E&P) sector because it encompasses activities related to searching, exploring and producing crude oil and natural gas. The upstream segment is all about wells: where to locate them; how deep and how far to drill them; and how to design, construct, operate and manage them to deliver the greatest possible return on investment with the lightest, safest and smallest operational footprint. The companies that focus solely on exploration and production are called Independent Oil Companies (IOCs). Large global Independent Oil Companies are often listed on international stock exchange and also considered early adopters of the more innovative drilling and production technologies. Other industry participants are National Oil Companies (NOCs) owned and managed by governments around the world. Most of the remaining oil & gas reserves in the world are owned by NOCs.

A specific subset of the upstream oil and gas supply chain is the well services contractors (Oilfield Services

Quality in the Provision of Services

Companies, OSCs), a group of companies providing a wide range of specialist services required to complete, test and maintain an oil, gas, water or gas injection well with or without the exception of actually drilling the borehole. This sector of the industry comprises companies of many different sizes, from small ones focusing on high technology solutions to specific down-hole requirements, to large international, multiservice contractors that can provide of all categories of services. The oilfield services and supply companies do not typically produce oil and gas or own its reserves. However, the oil and gas companies could not develop or operate fields profitably without the Oilfield Service Companies’ contributions. At a typical drilling well site, there could be 25-30 different oilfield service companies handling the mechanical, technical and analytic operations needed to successfully complete a well.

PV Drilling, a Corporation providing advanced oil & gas drilling and well services since 2002, is the pioneer in Vietnam to venture into the high technology area of Onshore and Offshore Drilling & Well Services. Through over a decade of development, PV Drilling has become one of the major oilfield drilling & well services companies in Vietnam’s & Region’s Upstream Sector providing high quality services and professional performance to the entire satisfaction of clients. PV Drilling and its united subsidiaries are proud of our strong capability to provide a wide spectrum of drilling and well services to the wells embracing the following activities:

2 WELL DRILLING SUPPORT SERVICESCasing running and cementation equipment and services, directional and steerable drilling equipment and services;

1 WELL DRILLING SERVICEOnshore and offshore rig drilling and work-over services;


With a new and modern drilling rig fleet of 04 new generation jack-up rigs, 01 high classed TAD and 01 VFD typed land rig and a core strength of professional rig management team and skilled & experienced workforce, the drilling services undertakes the most

7

8

9

6

5

4

3

WELL COMPLETION AND PRODUCTION ENHANCEMENT SERVICES

WELL TESTING SERVICES

WELL EVALUATION SERVICES

WELL INTERVENTION SERVICES

Onshore and Offshore Engineering, Construction & Installation Project;

“One Stop” Inspection & Repair Work-shop, OCTG & Tubular Management;

Onshore and Offshore Manpower Supply, Onshore and Offshore Safety Training & Certification;

Tubular, packers, gas lift, electric submersible pumps; and accessories;

Surface and downhole well control equipment and services including trees, surface test equipment including heaters, separators, burners and metering equipment and service;

Logging while drilling and electric logging for reservoir and production flow evaluation;

Electric and slick-line equipment and services, hydraulic work-over equipment and services;

crucial function of PV Drilling’s core business. By integrating into management system with the most advanced management tools e.g. ERP, Oracle, Maximo CMMS, Simple Soft… to ensure a smooth work-flow and prevent overlapped. For many years, PV Drilling has been well-qualified and had in-depth experience and excellent safety records of Zero LTI in the operation, management and execution of all kinds of offshore drilling projects and services, providing economically and technically best solution for the clients.

PV Drilling’s well services subsidiaries are either wholly-owned or joint-stock companies, undertaking different upstream market segments which could cover a nearly completed supply chain of well services. Beside, PV Drilling pro-actively sought and established partnerships and joint ventures with internationally reputable oil and gas service providers e.g. Baker Hughes, Marubeni Itochu, Oil state Industry, Expro, BJ Services, etc. These strategic partnerships/joint ventures have diversified PV Drilling’s scope of high-tech services, provided the access to latest advances in technology and help PV Drilling absorb valuable experience to enhance the service quality and business efficiency.

PV Drilling has considerably expanding its corporate scale during the past years. And currently the whole Corporation with about 2,157 permanent employees, six wholly-owned subsidiaries, two joint-stock companies and seven joint ventures, each of which has performed effectively to keep PV Drilling ahead in the competition. Today, PV Drilling could offer each service separately via its specific member, or as a whole bundled services package, to suit the Client’s needs./.


Service Quality by Clients’ Assessment

In operation, the rig efficiency and the quality of every services performed are the key segments that PV Drilling is striving to meet the escalating requirement of clients. Considering clients as the focal point in its business activity, PV Drilling always takes action to understand clients’ needs thoroughly and benchmark its performance against clients’ criteria to find gap for improvement. In fact, during the course of each service contract, PV Drilling actively seeks for comments and feedback from clients, listen to the valuable input from their direct supervisors to identify any inadequacy and timely mitigate any potential loss to clients.

In 2014, PV Drilling has completed a number of drilling campaigns for many clients such as Cuu Long JOC, Lam Son JOC, Vietsovpetro, and GBRS (Algeria), and the rig fleet has satisfied their expectation and gained their trust in term of operation and HSE compliance. Such outstanding performances have earned clients’ offers of contract term extension for the whole rig fleet. For instance, the rig PV DRILLING I has been extended for 2-year term with Cuu Long JOC from July 2014 to July 2016. The rig PV DRILLING II continues its service for another 3 wells for Lam Son JOC’s drilling campaign until 2nd

Quarter, 2015 and for PVEP’s campaign at Northern Bay afterwards; so does the rig PV DRILLING III to Vietsovpetro until August 2015. The rig PV DRILLING V continues its efficient operational record in Bien Dong POC’s drilling programs. In Algeria, the land rig PV DRILLING 11 has been awarded by GBRS for a new contract with the term of 15-month firm and 12-month option since August 2014. Most importantly, all the offshore drilling rigs have successfully maintained their excellent safety records and were certified Zero Lost Time Incident (LTI) by IADC in

this year. PV Drilling takes great pride on such achievements as this is one of the most important indicators that the clients concern and express appreciation toward PV Drilling’s services.

Besides, the trust and support of our clients are also demonstrated in the remarkable growth of PV Drilling’s advanced well technical services segment in 2014. For instances, Mudlogging and MPD services have surged 57% and 91% respectively over those of 2013. Such achievements are the sweet fruits of PV Drilling’s endeavors in the recent years in improving the service quality, optimizing the operational procedures and pricing schemes, and thus, winning the favor of the clients. With such precious support, PV Drilling shall definitely stand firm in the evasive current of global service providers rushing into Vietnam and Asian markets.

Last year, PV Drilling has conducted an independent assessment program of Energy Point Research in order to quantify clients’ satisfaction to its service performance. The result with average point of 7.75/10, in comparison to other competitors, was, indeed, a very encouraging factor that indicates a relatively good level of satisfaction toward PV Drilling’s services in all respects of quality, operational efficiency, safety and environmental matters.

In overall, the clients’ assessment toward the service of PV Drilling can be put in a concise way as “Professionalism and Quality”.

PROFESSIONALISM & QUALITY

“Proved by clients’

assessment towards PV

Drilling’s services”.


Has been contracted to PVEP POC for 01 year, commencing from March 2015 to serve their exploration drilling campaigns.

PV DRILLING VI

Shall continue its operation in the drilling campaigns of Bien Dong POC until April

2016 and subject to possible extension until early 2017.

PV DRILLING V

Have signed a new contract with GBRS effective from

August 2014 for a duration of 15 months firm and 12 months

optional.

PV DRILLING 11

Has been under contract with Vietsovpetro until August 2015 and is seeking approval for extension of the contract right after that.

PV DRILLING III

Continue its contractual obligations with Lam Son JOC

in the extension for 3 wells, which is expected to complete

in Q2 of 2015.The Rig shall then, be mobilized for the

drilling campaign of PVEP in northern Vietnam.

PV DRILLING II

Has been extended for 2-year term with Cuu Long JOC from July 2014 - July 2016.

PV DRILLING I


Safe Management and Operation of Drilling Rigs

With a vision to enter the global markets with its rig operations, PV Drilling aims for a performance above 98% of efficiency and Zero LTI. This is possible through good resource management to ensure safety, health and environment protection.

HSEQ is always a priority of PV Drilling Management team. Even before starting operations, the Management team has set up the HSEQ System to complement operational processes. It was developed and periodically

reviewed to ensure consistency with current conditions. The System for rig operation acts as a framework for PV Drilling to achieve the safety performance, efficiency and in compliance with industry best practice and existing laws for both onshore and offshore operations.

PV Drilling Management System consists of policies and procedures to comply with industry standards and local legal regulations. There are a set of policies for each of emergency response, drilling / well control, HSEQ, maintenance and marine. These documents are available to staff and easily accessed via the

electronic database for reference and guidance. Hard copies are also available. The objective of the System clearly describes the role and responsibility of individual position and the relationships between these positions. The BOM and BOD are highly committed to support the System. They believe it is essential to maintain a sustainable growth for PV Drilling that would be enhancing service quality, ensuring health and safety and protecting the environment.

The HSEQ Management Systems for drilling operations is an integrated system that complements and complies with OHSAS 18001:2007, on

HSEQ MANAGEMENT SYSTEM (Health, Safety, Environment and Quality System)


HSEQ system for rig operation acts as a framework for the

Corporation to achieve safety performance and efficiency.

standards for occupational health and safety, ISO 9001:2008, on standards for quality management systems and ISO 14001:2008 on environmental management. These systems are periodically reviewed and certified by Det Norske Veritas (DNV).

The global oil and gas exploration and drilling industry has no borders. The industry has different working environments with high levels of risk. Hence, the Corporation must adhere to strict regulations of the host country during the process of drilling and exploration. The drilling contractors and oil companies realized the benefits of recognizing and sharing consistent, complementary approaches into uphold the highest safety standards. “IADC HSE Case” is one of the

requirements for safety which is designed by the owner/operating company, on the criteria of the International Association of Drilling Contractors (IADC) to comply with the provisions of existing laws in the host country and internationally for the rigs managed by the Corporation.

PV Drilling is proud to be the first Vietnamese drilling contractor who has built HSE Case applied to the entire operation of the company’s rigs. Applied to Deepwater drilling since 2012, and then HSE Case has been applied to the drilling Jack Up rigs since 2013.

Management System for all offshore rigs is annually reviewed based on industry requirements/recommendations, internal/external audit findings and any legal requirements or as follow up to

any incident recommendations. PVD always updates and puts to use new safety equipment with greater protection for our personnel. In addition, the Board of Management has encouraged employees to make technical innovation for application in production as well as safety activities. The study of technology applied in safety management has been successful with two projects: Job Safety Analysis (JSA) online database management systems and data management systems. These systems help employees easily access the Management System documents as required.

JSA’s, seen as a breakthrough, help us strictly control the hazards and safety level for each kind of job.


The protection of the environment has always been a priority for PV Drilling. The application of ISO 14001 is an explicit proof for this point of view. All devices on the environmental protection on a PV Drilling rigs are in accordance with international standards. The environmental discharge indicators and measurements are performed periodically with supervision of relevant authorities of the permitted discharge index, effective implementation of hazardous waste management, periodically monitoring and controlling factors which could cause negative environmental impacts.

The operation and management of PV Drilling’s rig fleet has achieved a good level of success, resulting from a combination of factors: safety assets, safety personnel, environmental protection that PV Drilling has been maintaining and improving.

Companies are working to strict legal requirement nowadays, the business is more competitive which leads to the risk-related assets. Therefore, control and asset management through risk management and the opportunity to create value in order to achieve a balance between cost, risk and asset efficiency is an important factor for every business.

The concept of asset management now is more extended not only the tangible assets but also the intangible assets as brand name, its prestige,its position in business environment.

The benefits from the effective management of assets are not only bringing the financial value but also helping to make right decision for investment, reducing financial losses and improving the safety management system, minimizing the impact on the environment and society. These services have been improved, contributing to outcomes, meeting or even exceeding expectation of customers or interested parties. Tangible assets associated with PV Drilling core service are drilling rigs, including offshore rigs and land rig and equipment associated with drilling operations.

PV Drilling has initially set-up (year of 2007) and been running with Maximo Software mainly on Asset Management, Procurement and Inventory Control Modules. Maintenance Activities are scheduled via a Work Plan & Management of Preventive Maintenance (PMs) which is built-up according to Vendors / OEM recommendations and actual operating experiences.

PV Drilling is researching and applying the “Reliability Centered Maintenance” (RCM) which allows a better approach to preventive maintenance. RCM application is using rig equipment data helping achieve asset maintenance goals, including greater safety, longer life and higher equipment availability and reliability, while simultaneously enabling better quality product development with greater cost effectiveness. The RCM goals are to identify for each system and equipment the failure modes and their consequences and to determine the most cost-effective and applicable maintenance technique to minimize the risk and impact of failure (if any).

Adopting new advance technologies and modern management, ISO 55001 has been selected by PV Drilling’s Board of Management and developed a roadmap to apply asset management system in 2015 for tangible assets such as land rig and offshore rigs.

Safe Management and Operation of Drilling Rigs (Continued)

ENVIRONMENTAL PROTECTION COMMITMENT

ASSETS MANAGEMENT


The program consultants are Ausenco Rylson Company and the British Standards Institute (BSI).

The successful application of ISO 55001 will bring practical benefits, making the strategic objectives of PV Drilling into decisions, plans and activities related to the assets, improving efficiency and effectiveness of services, enhancing the reputation and improving the sustainability of company which bring added value to customers.

HR development remains one of the Corporation’s most important strategies in which human resources are considered both the most valuable assets and the center of every business development strategy. Such philosophy has enabled PV Drilling to focus on training and development HR alongside of its business development strategies throughout the development history of the Corporation. As the corporation operates in the highly internationalized environment, the focus on HR training and development of not only enables

the Corporation to achieve better business results but also improves the organizational capabilities in developing progressive management systems which on one hand ensures service quality of international standards and on the other hand creates the foundation for sustainable development as well as improving the competitive advantage of PV Drilling in the future.

In order to assist the systematic and effective training and development, PV Drilling has completed and put into application of the rig workforce training and development system, which has generated positive results since the beginning of 2014. This is a progressive system which combines such various HR independent programs as Succession Planning, CBT program and Performance Appraisal into one integrated system. The system aims at continuously developing the team of competent workforce at any geographical work locations in order to ensure the operation’s stability. In addition, it is also expected to help reduce the human related operational risks, increasing efficiency and

competitiveness of PV Drilling.Apart from HR training and development, PV Drilling has been developing the Program for Rig management training since 2014. The Program is designed to improve the effectiveness of the training and development of the Management team through a systematic training program. The program is expected to help individuals at this level filling the development gaps while preparing themselves for future career requirements. As the Corporation’s fleet of rigs continues to grow, such program will continue to be among the development priorities of PV Drilling./.

Training and Development of the Rig Workforce


Service Quality Control at Subsidiaries

At PVD Drilling Division

As a professional provider of offshore drilling rig and land rig as well as drilling related services, PV Drilling embraces a clearly defined mission and vision to the corporation’s core business.

The Quality Control Management system (QMS) for drilling operations is an integrated system compatible and compliance with the requirements of ISO 9001:2008 standard. This QMS system is certified by DNV and is periodically audited to ensure the compliance.

PV Drilling – Drilling Division aims to build and operate an effective Quality Control Management System which delivers premium services to clients, with the effort to align the concept to every departments and service providers on drilling rigs as well as to maintain the consistency in Drilling Division as a whole.

Excess all customers’ expectation in term of proving drilling rigs and drilling related services is one of the most critical goals that Drilling Division set on the priority consideration. KPI is built for each of the drilling rigs respectively with drilling campaigns in order to evaluate and review the quality of services providing. Client focus appraisals are conducted quarterly for the purpose of monitoring and managing the quality of service up to client’s expectation.

Min/Max model is built based on Rig Operations Management experience as well as consultancy from several trusted equipment suppliers, together with MAXIMO program which utilize resources that improve quality of inventory (spare part) management.

Equipment’s specification is approved and recorded which support the purchasing process to be fully accomplished. Suppliers and vendors are also reviewed annually to create a list of trusted suppliers for further purchases. Besides that,

information on and new technology and safety requirements also be keeping updated in order to ensure the services providing would catch up with the industry trend.

The most critical concern for every drilling campaign is to identify client’s requirement and expectation on the drilling rigs, drilling related services, as well as equipment provided. Therefore it is strictly monitored and managed during the process of services provision.

The Quality Assurance and Quality Control (QA/QC) division gather information which required for data analysis and strategies development to maintain high quality services & equipment provided. Inspection and Audit programs are also conducted regularly as plan with client’s witness.

Developing a human resource with ability to operate the Quality Control Management System is also a great concern that PV Drilling focus on by organizing internal training or in cooperation with external entities. Therefore QA/QC auditor must have proffered knowledge, skill, and experience to manage the system.

On the other hand, improving quality of service is also considered as a key element that enables corporation to provide premium services to clients. The Science and Technology Funds also sponsors for the improvement of features, innovations and researches which provides the access to latest advances in technology and help PV Drilling absorb valuable experience to enhance the service quality and business efficiency.

Each and every of those concerns have been contributing to the process of adding value for clients which has performed effectively to keep PV Drilling ahead in the competition in the oil and gas industry in the local market and ASIA region.


At PVD Offshore

1. Drilling Manpower Supply Services Quality Management

To ensure the quality of Drilling Manpower Supply Services, the Company has adopted the following measures:

• Based on the demands of customers, the Company has built a procedure system in respect of training and developing human resource together with the standards applied for every position offered. Roadmap for personnel training and development are controlled and evaluated periodically to ensure its personnel fully satisfied customer’s requirements before being provided to customers;

• Based on the written feedback from customers, the periodic report from drilling rigs and annual meeting with customers. With regard to the personnel supposedly under customer’s expectation, the Company immediately organizes internal meetings for reviewing personnel performance and implementing corrective measures. Periodically the Company also gathers valuable information regarding the evaluation of performance and quality of services provided to all customers through sending Performance Appraisal Questionnaires to all customers, whereby adjustment and improvement measures thereof could be promptly determined. Through customer satisfaction assessment activities, the Company timely adjusts the indicators, factors not yet meet the expectations;

• Through evaluation of satisfaction from customers the Company provides services and timely adjusted the indicators, factors which do not meet customers’ expectations;

2. Inspection, Maintenance and Workshop Services Quality Management

Quality control and management in workshop center is implemented constantly in all processes, as follows:

• Supervising the entire process of production (inspecting, threading, welding...) complied with on procedure requirements, the technical standards applied by the Company or the customer’s requirements. Daily, QA / QC team also test at least 10% of the completed products to ensure the product quality and record evidence of the examination. This work helped the Company minimize delivering the defect and poor quality product to customers. The causes of problem thereof will be investigated by the Technical and HSE Department for a lesson learned to avoid repeating mistakes. The completion reports which are not yet directly supervised, examined at site by the QA / QC team must be collected for checking and ensuring the accuracy for the next steps. Due to this thorough examination process applied for many years, the Company is getting the trust of customers and the high evaluation rating from its licensors like DNV, API.

• Input materials and commodities checking process also be supervised rigorously to ensure quality and technical requirements.


• For the equipment maintenance, the Company has applied the machinery management software, utilized the latest modern equipment to minimize the tardity in maintenance and calibration thereby ensuring the accuracy and compatibility of every product that the Company supplied.

• As specific characteristic of the heavy industry requires the use of high technology, the standards applied in business and production are continuously updated and upgraded. The updating of standards, new procedures relevant to the services quality for the Company’s existing procedures, guidance and instructions is also one of the key tasks in order to maintain and improve quality of services. The Company’s quality supervisor team regularly revise roadmap for building standards that the Company is applying, thereby proactively adjust processes to conform to the trends of the industry and those of the customers, especially foreign oil and gas companies with the significantly strict requirements on procedures and criteria applied.

3. Oil Spill Response Services Quality Management

Oil Spill Response Services is the traditional service that PVD Offshore has provided over the years. Over many years of building and deploying the quality management system ISO 9001, the service quality of the Company is getting high evaluation of local and foreign customers. One of the key factors to the success of this service is the quality control and management to be deployed to the end users. Details of the quality control process are as follows:

• Controlling quality of oil spill response services through feedbacks from customers, the periodic reports from drilling rig or from the meetings with customers;

• Conducting survey and evaluation of customer’s satisfaction level and timely adjusted the indicators, factors which have not yet achieved customer’s expectations;

• Collecting comments from customers after providing services. The comments of customers are fully analyzed, in order to adjust and set up innovated targets for upgrading the quality of services of the Company;

• Complying with maintenance procedures of the Company, the oil spill response equipment always in ready position, maintenance records for each machine, devices always stored and easily accessed when needed. In fact, the Company has successfully conducted oil and chemicals spill response operations for many customers.

Service Quality Control at Subsidiaries (Continued)

At PV Drilling, service quality is always under strict control in compliance with other supply chains of service provision.


At PVD Logging

At PVD Logging, the quality control is one of vital element of company business. The quality control process starts from the input of recruitment and purchase throughout to the output of the customer satisfaction that periodically collected information. In addition, the quality of material, equipment and services from the suppliers is one of top concerns of company.

• The maintenance management system initially applied to the equipments and systems of Mudlogging Services and Slickline – Wireline Services, changing the technical mindset from repairing passively to periodically preventive maintenance proactively. This key process minimizes the incident to ensure the operation safely and efficiently.

• The Optimize Spare System widely facilities the supply chain of company actively in purchasing of equipment and spare part, saving cost of storage of excess inventory, while ensuring adequate equipment and spare part for operation in safe condition.

• The Internal Audits have conducted constantly twice a year for all operations of functional department to assure the compliance of the standard procedures of the quality management system ISO 9001.

• The internal training of in-house and on-job is instructed by the specialists with 10 to 20 years of experience in the Oil and Gas operation. The training process is tracked and recorded in the competence development system, assured the engineers working on the rigs being capable of meeting the strictest requirements from the clients.

• The establishing strategic relationship with reputable suppliers national and international assure the purchase of material, maintenance of equipment,

At Vietubes

Vietubes has on its own successfully achieved the ISO 9000 Quality Management System Certification since 1997. Vietubes is proud to be one of the first ten companies in Vietnam to achieve this certification and has maintained this certification successfully for many years. All business activities of the Company are in compliance with the Standard Operating Procedures (SOP) of Vietubes and fully meet international standards. All raw material inputs are strictly controlled to existing standards and with full compliance to the required origins. Products are processed under strict manufacturing control and quality procedures throughout the entire production process. The finished products must be inspected by certified Quality Assurance Inspectors before delivery to customers. For the past 20 years, Vietubes has annually machined, fabricated and repaired 10,000 to 20,000 tons of products for customers. The Company is proud that their products always meet the highest standards of quality, safety and reliability of customers.


operational Units. Company evaluates the vendors annually according to several criteria in which quality is one of the decisive criteria for retention of business relationship

Summarizing the monthly appraisal reports of quality services from the client in the years of 2014, Company enjoys 98.6% appraisals rated at good and excellent, including the service of provision of Geologist Consultants achieved 100% at rated good and excellent.

At PVD Deepwater

Deep water drilling service sector is a new and challenging area for PVD Deepwater due to high and complex technology application of TAD Rig which is required of great operating competency. PV DRILLING V is currently operating at Hai Thach – Moc Tinh condensate and gas fields in Nam Con Son basin which is well-known for its adverse weather condition, complicated geological formation and its important role in national and energy security in Vietnam.As a result, the quality management commitment becomes more challenging and currently it is enforced with effective measures by PVD Deepwater Board of Management, namely:

• Applying Enterprise Risk Management (ERM) for fast classification and identification the risks as well preventive and corrective solutions.

• From 2012 to 2013, PVD Deepwater in cooperation with Drilling Division and PV Drilling’s Health – Safety – Environment – Quality (HSEQ) department had built the system of HSEQ procedure in conformity with international standards in order to guide and tightly monitor all onshore and offshore activities. The company also issued the quality management regulations and procedures to standardizing process of monitor Deepwater service. This assists to make quality management into company’s everyday routine activities.

Service Quality Control at Subsidiaries (Continued)


• With the purpose of improving the service quality to meet the expectation of both domestic and oversea customers as well as fulfilling our commitments with Ministry of Science and Technology, PVD Deepwater Board of Management and our staff are making every effort to build the quality management system in accordance with ISO 9001:2008 – ISO 14001:2004 – OHSAS 18001:2007. As a result, the company’s integrated quality management system was granted the certificate of ISO 9001:2008 on 7th June 2013, ISO 14001:2004 and OHSAS 18001:2007 on 29th May 2014 by Det Norske Veritas (Norway). Application of the integrated system enables our company in standardizing quality management in monitoring the whole process of operation and production such as the quality of human resource, quality of service input and output, service performance and the process of evaluation and improvement of the system.

• Our company attaches much importance to training in awareness of our staff the importance and benefit of quality management system. Quality management is company’s priority goal along with business development goal. To achieve that goal, PVD Deepwater has been applying many innovative solutions such as Maximo system for maintenance, Simplesoft for training management and implementing internal audit annually.

• Along with customer care activities via teambuilding and technical workshop to identify customer requirements in various periods, PVD Deepwater also gathers its clients’ feedbacks quarterly in providing best customer service. During contract implementation, the great appreciation and

positive comments from Bien Dong POC is the most accurate prove of our quality service performance.

It is undeniable that thanks to our precise Board of Management guidance and quality management system, PVD Deepwater constantly has been improving its operation competency as well as system and risk management ensuring the best service quality, making the company a reliable contractor of varied clients.

Deep water drilling requires application of high and complex technologies, moreover, it plays an important role in both national security and energy security. It is for this reason, the quality management system shall be strictly implemented in ensuring the highest service performance.


Research and Development

At PVD Offshore

At PVD Logging

New services

PVD Offshore has successfully developed some new services as follows

• Rope Access

• Underwater Inspection In Lieu Of Dry-docking (UWILD)

• Flanges & Well-head Components Fabrication

• Sling Fabrication

Investment projects and technical initiatives

Responding to the creativity - innovation - technological master movement to sustainable development, all employees and workers in the Company have promoted initiatives, technical innovations, improved labor productivity, economic efficiency in the management activities and direct production operations. Specifically, in the last 2014, with the support and permit in use of the Science and Technology Development Funds of PVD Corporation, PVD Offshore has applied the initiatives, technical improvements in order to employ appropriate technology and facilities in the production activities, bringing the highest efficiency in business activities of the Company.

Some remarkable investment projects:

• CNC Lathe Machine;

• Containerized Valve Testing Unit;

• Stationary Multi-Function Inspection System EMI;

• Continuous Rotary Torque Machine;

• CNC Grinding Machine for Drilling Tools.

Some featured technological initiatives, innovation approved by PVD Corporation:

• Modify control box for Hard-banding machine.

• Auto loading / un-loading arm for internal / external pipe cleaning machine.

• HR – Crew Change – Salary Management Software;

Expanding services overseas

Under the guidance of the PVD Corporation, PVD Offshore has been actively approaching the market in areas such as Brunei, Myanmar... as well as working with customers and partners to find out the relevant information supporting the development of services of PVD Offshore in overseas market. Currently, the Company is co-operating with the departments of the PVD Corporation to promote related investment procedures to be able to provide the workshop services in Myanmar soon.

The R&D has been the top concern of company in its goals towards the sustainable development and competitiveness on par with International Companies in the future. With the strategic vision, serious commitment and innovative leadership of the Board of Director, company has successfully introduced to the market the new products of applied research and scientific engineering, are highly appreciated from customers.

• In 2014, The Constant Volume Degaser (CVD), that accompanied with The High Resolution Density Sensor – Coriolis type, launched in 2013, continue to be developed toward more comfortable for the maintenance and more uptime without maintenance. In comparison of the old type Degaser, the CVD consistently shows its capability to work in difficult conditions, assists the gas analysis system provides the higher quality data.


At PVD Well Services

• Another highlight of the R&D activities at PVD Logging in the 2014, was the kick-off the project of software system of acquisition and data processing for the Mudlogging services. The project team completed the first phase simulating the activities of the drilling operations and the mudlogging system respectively. It is expected the system will be completed in late 2015 and launched field test in 2016. The success of the project is a prerequisite for the development of other value-added services accompanied with the standard mud logging services.

• In addition, company developed the system of Routine Maintenance Management of equipment, strategically changing the mindset from unexpected repair becoming the planned maintenance, implement the periodic preventive maintenance.

• In other side, the system of Optimize Spares Management has been applied in the year 2014 aiming to be active in the procurement for replacement, to save cost on inventory while ensuring adequate key equipment and spare part for safe and efficient operations.

The successful projects from the R&D activity in company are the result of the perfect harmonization of three important elements: 1. The active and endurance of qualified young engineers, 2. The enthusiasm and experience of senior experts, and 3. The unlimited support and encouragement in both mental and financial of the Leader in PVD Logging.

In oil and gas drilling activities, service providers have been constantly looking for and introducing technical solutions to optimize drilling efficiency and cost saving for clients, which plays a greatly important role in deciding their competitiveness. Recently, PVD Well Services has thoroughly researched and then successfully introduced CRTi (Casing Running Tool,

internal grip) technology to casing and tubing running services (CTRS) in Vietnam market, presenting a wholly new approach in provision of CTRS and satisfactorily responding to client’s demand for high-tech services.

The CRTi is an advanced generation of casing running tools. It stands out above the conventional equipment in terms of reliability, time efficiency and cost saving. Despite of the presence of various types of casing running tools in the market, PVD Well Services has been convincingly chosen and excitingly introduced the CRTi (a product of a reliable Canadian manufacturer, Volant) to the market thanks to its outstanding properties: simple design, compactness and durability.

The CRTi is designed for casing drilling or running with top drive equipped rigs to enable make up, break out, reciprocate, rotate, fill/circulate, push down, pull, and cement casing and liner strings (if required). The tool is mechanically activated in tension and both rotational directions solely by top drive control using TAWG™ (Torque Activated Wedge Grip) technology. This patented architecture places the control in the driller’s hands, reducing the need for third party support to run casing, i.e. tong, torque turn, and stabbing operators.

Analysis, innovation and improvement to aim for the sustainable development is one of PV Drilling’s targets.


STEADY IN CHALLENGES Challenges in the oil and gas sector are looming in 2015 and PV DRILLING

shall commit to bring stability to the uncertainties.

ANNUAL REPORT 2014 STEADY IN CHALLENGES98

From half end of 2014 to early 2015, WTI crude oil price was forced to take a free fall from its peak at 112 USD/bbl in July 2014 and only decelerated the plunge at the point of 50 USD/bbl by January 2015, approximately 50% loss of value, which is the worst situation such commodity ever faced since the global financial crisis in 2008.

68,000 bbl/day

Average crude oil demand in 2014

1.1 mil bbl/day

Average crude oil demand in 2015

92.4mil bbl/day

Crude oil demand in 2014

(the lowest recorded in the past 5 years)

93.6mil bbl/day

Crude oil demand expected for 2015

In 2014, statistics showed crude oil demand of 92.4 million bbl/day, equivalent to a minor increase of 68,000bbl/day - the lowest recorded in the past 5 years. For 2015, it is foreseen that the macro economy will be better governed and the oil consumption in non-OECD countries and America will increase. Therefore, the overall demand worldwide shall be added up by a slight amount of 1.1 mil bbl/day and reach 93.6 mil bbl/day despite the fair drop in demand from China, Europe, and several members of OECD in Asia Pacific.

There are several key moderators that affect the crude oil price. Among those are the financial health of the global economy, the balance of demand and supply for fossil fuel, and the geopolitical security. With respect to the correlation between crude oil supply and demand, the current need will stay low as a consequence of the world’s poor economic performances and the migration toward other clean and renewable resources such as solar energy and wind power. The sluggish domestic growth in geographic areas like North America, Europe, Japan, China also press the demand further down, while other means of bio-fuel are becoming more favorable. It is also worth noticed that in 2014, for the first time, America became the largest oil producer all over the world thanks to the in-blossom shale gas industry. Since 2008, American-based enterprises have

Oil and Gas Market 2014 and Opportunities in 2015

The current oil price is largely influenced by financial health of global economy, fosil fuel supply & demand balance and even world geopolitical security.


Oil and Gas Market 2014 and Opportunities in 2015

70-90Oil price is expected to rebound increasing in a short time from end of 2015 and soon settle down at about USD 70-90/barrel in

the next 3 - 4 years.

USD/BARREL

increased their oil production by 70%, equivalent to 3.5 million bbl/day. America has always been a large oil importer, but the new technology in shale gas has significantly reduced their import, thus, leading to the redundance in global supply and greatly affected the traditional oil and gas market.

In addition, OPEC – the largest organization controlling 40% of the global oil production, has been resilient in maintaining their daily output. Saudi Arabia and Kuwait, the two giants in OPEC, barely acts to lessen production due to fear of losing their market share to shale gas players of America as well as others in Iran, Russia, etc. Countries in Persian Gulf even amputated part of their profit to offer discount for large Asian purchasers to occupy more space in the playground, which aggravated the price battle among the nations.

In general, the oil and gas companies shall continue to maintain their production in the existing reservoirs. However, the considerable loss of revenue due to low oil price shall trigger the set-up of barrier to limit spending into new exploration ventures. British giant BP has announced a huge cut-back of 1 billion USD for year 2015. In the same manner, Exxon, Petronas, Total, Ludin, Chevron, Santos… also declared their reduction of 20%-30% in expenditure, and simultaneously refrained from kicking off new production projects and cut capital cost.

The outlook of the oil and gas market in 2015 would be a mixture of both bright and dark-colored plashes. The fall of oil price might cause a short-term instability, but on the contrary, shall heat up the frosty state of the global economy, generate momentum to accelerate the recovery, reduce production cost and stimulate good consumption. A significant amount of revenue in oil and gas industry would migrate to other industries and eventually benefit the consumers at the extreme of the supply chain. Such shifting is a natural balancing process and would cease until reaching a certain point. Moreover, despite the emergence of other

sources of energy, the dominance of black gold as the primary fuel, despite its finite and non-renewable character, would still be the most realistic prospect in the next several decades. Additionally, the geopolitical intense among Russia, America and Europe would be dampened sooner or later, and a multi-lateral agreement for cooperation and development among these nations will be something foreseeable for the benefit of all. Consequently, the bounce-back of oil price shall inevitably come and sustain at a certain level in line with the demand of development on worldwide scale. According to the assessment of reputable consulting groups including Moody, Wood Mackenzie, Citi Group, the oil price shall regain the momentum to climb back soon by end of 2015 and sustain at 70-90 usd/bbl in the next 3-4 years.


The market of jack up rigs in 2014

AFFECTED BY THE COMPLEX FLUCTUATION OF OIL PRICE, THE JACK UP RIG MARKET SHALL, BY NO MEANS, AVOID THE CONFRONTATION WITH MANY TOUGH CHALLENGES ON THE WAY AHEAD.

Historical data showed a regular increase in the number of jack-up rigs >300ft. one year after another regardless of the shrinking of global oil price. In quarter I/2009, during the time oil price hit bottom, the drilling market was still hectic with over 300 jack-up rigs contracted for operation. However, the undampened acceleration of rig supply combined with the prolonged redundance in oil production is illustrating a not-so-optimistic picture for all the drilling contractors.

According to IHS’s current report, there will be 83 new rigs delivered by end of 2015 and 57 more to kick in by 2016, which raises the total number of jack-ups >300ft. to 346. In the reverse direction, the forecast for rig demand until 2016 only advises a humble amount of around 225 rigs needed for all the E&P activities worldwide.

As the consequence of the plunge in oil price and the oversupply of rigs in short term, the rig demand and day rate would definitely suffer reduction. The only good news is that most of the new-built rigs are projects invested by speculating bodies, who barely possess even a single idea of how to operate and manage the drilling rigs. These rigs, therefore, could not afford to compete with those built and run by professional drilling contractors.

In the long run, the outdated jack-ups over 30 years old would surely be put to retirement, leaving space for new modern generation of rigs to swiggle and grow. Considering the recovery in oil production and price in long term, it is certain that the demand for rigs will follow the tide to rise and catch up with the requirement for E&P activities.

Respectively to Vietnam market, PetroVietnam reserves an estimation for the period of 2015-2020, in

which the market shall need around 12-14 jack-up rigs <400ft to cope with the planned schedule of drilling 60 – 72 wells per year. The existing rigs of this type in the domestic market, counting all those of Vietsovpetro and PV Drilling, only amounts to a humble number that fit in 50-60% of the gap. Therefore, more rigs would definitely be outsourced in the upcoming time.

Business Plan in 2015

The complex trajectory of the global and domestic economy due to the multi-dimensional impacts, particularly by the volatile fluctuation of global oil price, have initiated caution in the outlook forecast for the year 2015. Having said that, it would mean an extremely challenging task to achieve the targets of Vietnam Oil & Gas Group (PetroVietnam) in general and of PV Drilling in particular.

In accordance with the approved business plan, the drilling rigs of PV Drilling shall continue to render the services under the contracts signed with clients in 2014.

• Jack up PV DRILLING I shall be operated under the contract with Cuu Long JOC with the extended term for 02 years until July 2016;

• The Jack up PV DRILLING II continue its contractual obligations with Lam Son JOC in the extension for 3 wells effective on August 2014. Concurrently, PV Drilling is under the negotiation process for an extension of another 03 wells, which is expected to complete in Q2 of 2015.The Rig shall, then, be mobilized for the drilling campaign of PVEP in the Gulf of Tonkin, northern Vietnam;

• The Jack up PV DRILLING III shall be under contract with Vietsovpetro until August 2015. Currently, Vietsovpetro is seeking approval for extension of the contract for another 01 year;

• The Semi submersible TAD PV DRILLING V shall continue its operation in the drilling campaigns of Bien Dong POC until April 2016 and subject to possible extension until early 2017.

Oil and Gas Market 2014 and Opportunities in 2015 (Continued)


• The Jack up PV DRILLING VI has been contracted to PVEP POC for 01 year, commencing from March 2015 to serve their exploration drilling campaign;

• Meanwhile, Groupment Bir Seba (GBRS) and PV Drilling have signed a new contract effective from 28 August 2014 for provision of the land rig PV DRILLING 11 in Algeria to serve phase 1 of a development program for a duration of 15 months firm and 12 months optional.

Together with the efficient operation of the 06 wholly-owned drilling rigs, PV Drilling shall continue to foster the cooperation with foreign partners such as Atwood, Seadrill, Shelf Drilling, UMW etc. for chartering more drilling rigs, thereby maintaining its leading position and enhancing its market shares for drilling services in Vietnam. Objectives/Strategy in 2015

Dedicated to the Proposition “Professionalism and Quality”, PV Drilling shall continue to maintain its best endeavor to achieve the following targets in 2015:

Operating safely and efficiently the rig fleets owned by PV Drilling; particularly bringing the newly built rig - PV Drilling VI into operation smoothly. In parallel, PV Drilling will actively collaborate with globally-credited drilling contractors to provide drilling rigs for clients in Vietnam;

Reinforcing the scope of drilling services self-performed by PV Drilling as well as promoting new services by investing in technological improvement, infrastructure modernization, and R&D activities in order to strengthen the service quality;

Promoting the application of Risk Management System, preparing remedial solutions to deal with the market volatility and raising the awareness of all Company’s employees about this matter; reinforcing financial management and cost control activities as well as supervision on raw material procurement;

Accelerating the investment in development of facilities to provide service for abroad markets i.e Brunei, Myanmar, Malaysia, etc. particularly completing the construction of the workshop and supply base in Myanmar to provide repair and maintenance service for oil and gas equipment; actively participating in tenders for provision of drilling rigs in the region to deliver at least one jack up rig to the international market. Moreover, PV Drilling shall continue to search for partnership opportunities for investment in newly-built Rig and build up a solid foundation for PV Drilling to realize the mission of overseas expansion./.

PROFESSIONALISMQUALITY

“Professionalism in the workforce - Quality in

Service provision in order to achieve the vision to be an

internationally reputable and reliable drilling and drilling

related services provider in the oil and gas industry.”

Enhancing internal strength by development of high quality labor force, promoting in-depth training activities to ensure the local employees’ competence to handle modern technology application in service performance; Building and cultivating a successive team at the management level;


Plan for Implementation of Large Projects in 2015

The global and domestic economic situation will face many challenges in 2015. The impact of falling oil prices has affected GDP growth of oil exporting countries and Vietnam’s oil export earnings. Due to the decrease in oil price, it will make oil companies to postpone, suspend or reduce their drilling campaigns in order to balance the production. Such change of drilling activities will affect PV Drilling’s business operation and its plans and objectives in 2015.

Under this circumstance, the effectiveness of PV Drilling’s business performance will be secured by the right investment choice. As an oil and gas drilling company, PV Drilling always focus on its main business line through investing in new drilling rigs with state-of-art drilling equipment and advanced technology in order to maintain its competitive advantage, secure development pace and expand market share.

The investment project of newly built jack up rig named PV DRILLING VI, with total capital investment of USD 226,700,000 owned by PVD Overseas, completed on December 2014, 1.05% earlier than scheduled. The unit has been delivered and launched into operation at the end of February 2015 to serve the drilling campaign under the contract signed with PVEP POC on January 07, 2015. With the courage and determination in investment, PV Drilling currently owns and operates an advanced drilling rig fleet, helping PV Drilling in gaining good competitive advantages against foreign drilling contractors in Vietnam and region market.

In 2015, PV Drilling will keep investing in modern, high-tech machinery and equipment, business management software to promote actual business efficiency.

Starting from 2013, PV Drilling has carried out “Investment project of Blowout preventer (BOP) 18-3/4”, 10K, NXT with total capital investment of 4.17 million USD. This BOP equipment is used to control oil and gas wells when being drilled to secure the safeness and continuation of drilling operation. The project is now in progress as scheduled and the equipment will

be delivered in quarter 2 of 2015. This BOP equipment will raise PV Drilling’s flexibility in operation planning. It will also contribute to cost-saving and the highest quality service provided to clients.

Well services with inner strength such as tubular running, mud logging, mechanic inspection services, etc. contribute its measurable revenue and profit to PV Drilling. For the purpose of increasing customer satisfaction and improving its competitive advantage against multinational services companies, PV Drilling is focusing on potential projects with high revenue and profit, especially scientific research projects. PV Drilling will invest in project of “Tubular running equipment” with total capital investment of 7 million USD in 2015. This investment will enhance strength of PV Drilling to satisfy clients’ higher service quality requirement and dominate the market of tubular running services.

With the aim to encourage the investment in scientific and technological research, the project “Designing and developing Mud Logging Software” has been conducted from 2014 with total capital investment of 770,000 USD. The development and application of this software will raise PV Drilling’s flexibility in operating various mud logging stations.

Besides that, PV Drilling also focuses on inspection and workshop services by investing in high-tech CNC turning lathe machines which replaced the old ones. This improves PV Drilling’s strength in the conventional services.

After 13 years of continuous strong growth and breakthrough, PV Drilling feel proud to be recognized as a reputable oil and gas drilling contractor and drilling-related services provider in Vietnam and abroad. The success has been achieved thanks to the development and application of Oracle Enterprise Resources Planning (ERP) phase I and phase II relating to modules of finance, accounting, contract, spare part and inventory, human resource management and so on. PV Drilling will continue the 3rd phase of Oracle ERP focusing on modules of Hyperion Budgeting, Planning and Business


Intelligence with total capital investment of above 18 billion VND in 2015. At present, the ERP project phase II is on schedule. Once completed, the ERP will fully support users to make up-to-date business strategy from top management to all divisions of head office and subsidiaries. The application of Oracle ERP assists effective management and provides Board of Management with useful tools to access role-based information in order to manage the business and formulate finance policies.

In the context of the uncertainties of global economies, building a risk management system has become a crucial task in the strategy of sustainable development. PV Drilling Enterprise Risk Management Project already started on April 04, 2014 in compliance with international standards. The project has been conducting in phase II – Establishing Risk Management Framework for PV Drilling and the progress is on schedule. Phase III of Risk Evaluation and Identification will be completed in 2015 and enterprise risk management tool shall be applied in the whole company. The success of Enterprise Risk Management Project will help with risk identification and prevention as well as contingency action plans in business operation.

In pursuit of long-term development strategy, the penetration into the South East Asia market and other marketplaces in the world becomes PV Drilling’s crucial task. Particularly Malaysia and Myanmar are two potential markets.

PV Drilling is confident with our right investment direction, hereby contribute largely to the Corporation’s business performance.

With the above assertions, PV Drilling has taken initiatives in investment to improve its competency of providing the drilling and drilling-related services in overseas market. PV Drilling is studying and implementing the project of forming a joint venture company in Malaysia to invest and operate the new generation offshore rig. At the same time, PV Drilling is working with its partners to invest and build up mechanical workshop in Myanmar, which has been recently recognized as a new potential market for petroleum exploration and production activities. In the period of domestic economic slowdown, together with ongoing oil price fluctuation, the above said investments will create a lot of new challenges. They are however also opportunities for PV Drilling to penetrate into the regional and world markets and actualize the PV Drilling’s vision of becoming an internationally reputable and reliable drilling contractor./.


According to the development strategy up to 2020, PV Drilling is capable of providing 7 jack-up rigs and several deepwater rigs as soon as the demand increases.

Keen on the vision of the Management Board since early days, PV Drilling has relentlessly strived for its ambitious desire to become the pioneer of Vietnam drillers. Specifically, PV Drilling has set out the following actions plan in its mid-term and long-term strategy:

Continue to reinforce the leading position of PV Drilling in the domestic playground as well as promoting the business development activities in the regional market; build up PV Drilling as an internationally prestigious and reputable brand name in the global oil and gas industry;

Continue to form joint-ventures with global drilling contractors to provide more drilling rigs for the local market in order to maintain the market share and ensure the growth of both revenue and profit. Learn and apply the advanced methods of rig management and operation from these reputable partners;

Strengthen the relationships with existing partners and extend cooperation to other reputable ones who possess cutting edges in advanced technology and premium services. PV Drilling will diversify its scope of drilling services, making improvement in both terms of quantity and quality by reinforcing investment in research and transfer of such technology;

Continue to expand the rig fleet size, especially place more weight on jack up rigs in the development strategy of PV Drilling. To cross the border to international markets, PV Drilling will promote cooperation for investment and acquisition of new-built rigs, concurrently develop the hi-tech services, update with the advanced technologies of the global drilling sector, conduct research for investment in new types of drilling rigs and drilling-related services to cater for the requirement in drilling operation, formation testing, well repair, early production, floating, storage and offloading (FSO) etc. In the view toward 2020, it is possible to increase its fleet capacity up to 7 jack up rigs and a few deep-water drilling rigs subject to market demand;

1

2

3

4

Mid-term and Long-term Development Strategy

5

6

7

Continue to maintain effective operation of the drilling rigs, optimise rig efficiency by optimizing the operation procedures and well executing the maintenance of all facilities; ensure timely logistics services, synchronize the information technology into operation and corporate management. These factors will be the firm premises for overseas expansion;

Establish the research and development center (R&D) to promote creativity, innovation and improvement of the service quality. Join hand with institutions and research centers throughout the country to bring feasible research projects on paper into realistic applications for the oil and gas drilling;

Set top priority for the improvement of the corporate management to create the competitive edges against other international oil and gas service companies. Besides, PV Drilling will upgrade the superstructure and infrastructure to be in line with requirements of the modernized management method, enhance the capacity at all management level to pave the way for the efficient utilization of the available resources;


Develop, manage and utilize efficiently the existing resources; consolidate and develop a strong workforce, set up a professional human resource management system, restructure the compensation and benefit system to make PV Drilling’s offers more attractive to skillful labor force. These action plans shall lay the solid foundation for the development of a harmonious entrepreneurial culture on the basis of dynamic, creative, qualified and professional manpower;

Apart from attracting foreign experts via the compensation and benefit policy, PV Drilling will foster the training activities for in-house young talents to level the competency difference between the local workforce and the expatriates;

PV Drilling’s middle-term and long-term development strategy

is planned on 3 aspects: boosting business performance, sharing

social responsibilities and protecting the environment.

8 10

11

9

Enhance risk management activities in business operation, optimize management and operation procedures, reinforce surveillance on investment projects, conduct sufficient study on new business ventures to ensure seizing the as much opportunities as possible without compromising the sustainable development of PV Drilling; Ensure the performance on HSE matter to be strictly complied with domestic regulations and international standards./.


CONVERTED CONSOLIDATED FINANCIAL STATEMENTS108 Report of Factual Findings

109 - 110 Consolidated Balance Sheet

111 Off Balance Sheet Items

112 Consolidated Income Statement

113 - 114 Consolidated Cash Flow Statement

115 - 158 Notes to the Converted Consolidated Financial Statements

159 - 160 General Information of PV Drilling and Subsidiaries

ANNUAL REPORT 2014 FINANCIAL STATEMENTS 108

To: The Shareholders, the Board of Management and the Board of Directors of Petrovietnam Drilling and Well Services Corporation

We have performed the procedures with respect to conversion into Vietnam Dong (“VND”) of the audited consolidated financial statements for the year ended 31 December 2014 of Petrovietnam Drilling and Well Services Corporation (the “Company”) and its subsidiaries (the “Group”), which were prepared on 25 March 2015, as set out from page 109 to page 158. Our engagement was undertaken in accordance with the agreed-upon procedures with the Group and Vietnamese Standard on Auditing No. 920 “Engagements to Perform Agreed-Upon Procedures Regarding Financial Information”. The procedures were performed as follows:

a. Obtain the Group’s consolidated financial statements which have been converted into VND and prepared by the Group, compare the figures used for conversion with the figures presented in the Group’s audited consolidated financial statements expressed in United States Dollar (“USD”) for the year ended 31 December 2014.

b. Compare the rate of exchange applied for the conversion into VND in accordance with the conversion of financial statements method for consolidation purpose of the holding company of the Group, Petrovietnam Oil and Gas Group (“Petrovietnam”), particularly asset and liability items (including comparative figures) are converted by using the average inter-bank exchange rate at the balance sheet date, income and expense items (including comparative figures) are converted by using the average inter-bank exchange rates for the year and unless exchange rates fluctuated significantly during the year, in which case the exchange rates at the dates of the transactions are used. Foreign exchange differences, if any, are recognized in the “Foreign exchange reserve” account under Owners’ equity section of the consolidated balance sheet.

c. Check arithmetic preciseness of conversion of all amounts into VND.

We report our findings as follows:

a. With respect to item a: Figures used for conversion are in agreement with figures presented in the Group’s audited consolidated financial statements expressed in USD for the year ended 31 December 2014.

b. With respect to item b: Asset and liability items (including comparative figures) were converted by using the average inter-bank exchange rate at the balance sheet date, income and expense items (including comparative figures) were converted by using the average inter-bank exchange rates for the year and unless exchange rates fluctuated significantly during the year, in which case the exchange rates at the dates of the transactions are used. Foreign exchange differences, if any, are recognized in the “Foreign exchange reserve” account under Owners’ equity section of the consolidated balance sheet.

c. With respect to item c: Arithmetic calculation of the converted amounts were accurate and there was no difference between these figures.

We have conducted the procedures with respect to conversion into VND of the Group’s audited consolidated financial statements for the year ended 31 December 2014 in accordance with the Vietnamese Standard on Auditing No. 920 “Engagements to Perform Agreed-Upon Procedures Regarding Financial Information” and reported factual findings at articles a, b, c as above.

Report of Factual FindingsNo. 441 /VN1A-HC-BC

Nguyen Thi Thu SangAuditor Audit Practising Registration Certificate No. 1144-2013-001-1

Nguyen Quang TrungAudit PartnerAudit Practising Registration Certificate No. 0733-2013-001-1For and on behalf of Deloitte Vietnam Company Limited25 March 2015 Ho Chi Minh City, S.R. Vietnam


Consolidated Balance SheetAs at 31 December 2014

FORM B 01-DN/HNUnit: VND

ASSETS Codes Notes 31/12/2014 31/12/2013

A. CURRENT ASSETS (100=110+120+130+140+150)

100

9,452,329,338,024 7,967,393,100,824

I. Cash and cash equivalents 110 5 3,208,194,249,666 2,597,616,954,888 1. Cash 111 984,704,785,158 937,662,892,177 2. Cash equivalents 112 2,223,489,464,508 1,659,954,062,711 II. Short-term financial investments 120 11,937,320,052 20,000,000,000 1. Short-term investments 121 11,937,320,052 20,000,000,000 III. Short-term receivables 130 4,909,187,188,728 4,184,484,001,932 1. Trade accounts receivable 131 4,701,355,311,138 3,906,177,217,068 2. Advances to suppliers 132 116,348,343,762 146,296,755,240 3. Other receivables 135 6 97,675,786,758 136,994,341,536 4. Provision for short-term doubtful debts 139 (6,192,252,930) (4,984,311,912)IV. Inventories 140 7 1,225,805,306,736 1,043,709,154,716 1. Inventories 141 1,282,402,929,810 1,044,738,740,700 2. Provision for devaluation of inventories 149 (56,597,623,074) (1,029,585,984)V. Other short-term assets 150 97,205,272,842 121,582,989,288 1. Short-term prepayments 151 34,004,477,952 65,615,133,588 2. Value added tax deductibles 152 38,010,474,990 33,584,815,440 3. Taxes and other receivables from the State budget 154 - 398,421,840 4. Other short-term assets 158 25,190,319,900 21,984,618,420 B. NON-CURRENT ASSETS (200=220+250+260+269)

200 13,852,431,135,132 13,524,940,028,736

I. Fixed assets 220 13,178,252,340,768 12,482,423,783,508

1.Tangible fixed assets 221 8 11,501,571,050,784 12,313,643,456,964 - Cost 222 16,734,067,799,784 16,483,029,101,292 - Accumulated depreciation 223 (5,232,496,749,000) (4,169,385,644,328) 2. Intangible assets 227 9 200,284,703,502 151,132,321,596 - Cost 228 278,212,078,308 212,779,140,000 - Accumulated amortization 229 (77,927,374,806) (61,646,818,404) 3. Construction in progress 230 10 1,476,396,586,482 17,648,004,948 II. Long-term financial investments 250 633,432,259,494 957,444,305,196 1. Investments in joint ventures 252 11 633,432,259,494 941,665,180,560 2. Other long-term investments 258 - 33,429,317,328 3. Provision for impairment of long-term financial investments

259 - (17,650,192,692)

III. Other long-term assets 260 39,731,507,220 83,564,458,200 1. Long-term prepayments 261 13 13,799,829,396 67,572,869,964 2. Deferred tax assets 262 14 7,946,088,984 - 3. Other long-term assets 268 17,985,588,840 15,991,588,236 IV. Goodwill 269 15 1,015,027,650 1,507,481,832 TOTAL ASSETS (270=100+200) 270 23,304,760,473,156 21,492,333,129,560

The notes set out on pages 115 to 158 are an integral part of these converted consolidated financial statements


Consolidated Balance Sheet (Continued)

As at 31 December 2014


RESOURCES Codes Notes 31/12/2014 31/12/2013

A. LIABILITIES (300=310+330) 300 11,591,663,566,500 11,624,526,500,304 I. Current liabilities 310 7,144,839,435,840 6,764,871,378,948 1. Short-term loans and liabilities 311 16 1,156,633,790,958 1,829,467,935,552 2. Trade accounts payable 312 2,871,778,435,668 2,141,149,091,712 3. Advances from customers 313 25,643,475,834 108,112,607,724 4. Taxes and amounts payable to the State budget 314 17 473,868,255,726 380,619,430,812 5. Payables to employees 315 243,149,783,262 201,193,226,424 6. Accrued expenses 316 18 1,822,880,284,992 1,553,908,178,820 7. Other current payables 319 19 254,269,302,282 312,658,046,964 8. Short-term provisions 320 20 103,602,061,014 101,570,159,292 9. Bonus and welfare funds 323 193,014,046,104 136,192,701,648 II. Long-term liabilities 330 4,446,824,130,660 4,859,655,121,356 1. Other long-term payables 333 12 480,159,918,690 523,046,550,744 2. Long-term loans and liabilities 334 21 3,095,803,185,864 3,783,480,645,048 3. Deferred tax liabilities 335 14 - 103,139,508 4. Unearned revenue 338 - 1,048,308,024 5. Scientific and technological development fund 339 22 870,861,026,106 551,976,478,032 B. EQUITY (400=410) 400 11,478,574,019,202 9,838,241,877,560 I. Owners’ equity 410 23 11,478,574,019,202 9,838,241,877,560 1. Owners' contributed capital 411 3,030,733,500,000 2,755,286,950,000 2. Share premium 412 2,434,086,374,663 2,446,049,927,854 3. Treasury shares 414 (364,500,000) (11,963,553,191) 4. Foreign exchange reserve 416 785,024,506,240 683,185,976,226 5. Investment and development fund 417 971,278,960,699 735,587,990,807 6. Financial reserve fund 418 384,621,651,961 338,229,607,392 7. Retained earnings 420 3,873,193,525,639 2,891,864,978,472 C. NON-CONTROLLING INTEREST 439 24 234,522,887,454 29,564,751,696 TOTAL RESOURCES (440=300+400+439) 440 23,304,760,473,156 21,492,333,129,560



Off Balance Sheet Items

Unit 31/12/2014 31/12/2013 1. Materials, goods held under trust VND 198,380,968 10,675,390,677 2. Foreign currencies Euro (“EUR”) EUR 9,056 6,114 British Pound (“GBP”) GBP 10,152 8,238 Algeria Dinar (“DZD”) DZD 57,432,042 64,744,136 Singapore Dollar (“SGD”) SGD 17,493 19,751

Pham Tien DungPresident25 March 2015

Ho Ngoc Yen PhuongVice President

Doan Dac TungChief Accountant

Tran Kim HoangPreparer



Consolidated Income StatementFor the year ended 31 December 2014


ITEMS Codes Notes 2014 2013

1. Gross revenue from goods sold and services rendered

01 25 20,884,328,724,600 14,866,679,679,275

2. Net revenue from goods sold and services rendered (10=01)

10 20,884,328,724,600 14,866,679,679,275

3. Cost of goods sold and services rendered 11 25 16,762,959,711,047 11,533,399,684,135

4. Gross profit from goods sold and services rendered (20=10-11)

20 4,121,369,013,553 3,333,279,995,140

5. Financial income 21 27 161,286,440,353 98,811,190,240

6. Financial expenses 22 28 291,656,532,291 346,480,174,605

- In which: Interest expense 23 144,676,565,627 222,995,412,065

7. Selling expenses 24 59,201,359,399 45,118,986,390

8. General and administration expenses 25 1,122,822,362,662 945,758,282,965

9. Operating profit (30=20+(21-22)-(24+25))

30 2,808,975,199,554 2,094,733,741,420

10. Other income 31 124,374,138,948 63,296,302,580

11. Other expenses 32 54,710,517,292 88,775,809,575

12. Profit/(loss) from other activities (40=31-32)

40 69,663,621,656 (25,479,506,995)

13. Income from investments in joint ventures 45 299,206,704,142 221,846,289,915

14. Accounting profit before tax (50=30+40+45)

50 3,177,845,525,352 2,291,100,524,340

15. Current corporate income tax expense 51 29 645,872,969,777 291,309,373,575

16. Deferred corporate income tax (income)/expense

52 14 (8,009,908,813) 6,625,885,630

17. Net profit after corporate income tax (60=50-51-52)

60 2,539,982,464,388 1,993,165,265,135

Attributable to:

- Non-controlling interest 61 24 9,816,794,777 8,875,100,160

- The Company’s shareholders 62 2,419,408,948,783 1,883,397,817,529

- BCC interest 63 12 110,756,720,828 100,892,347,446

18. Basic earnings per share 70 30 7,987 6,785







Consolidated Cash Flow StatementFor the year ended 31 December 2014


ITEMS Codes 2014 2013

I. CASH FLOWS FROM OPERATING ACTIVITIES

1. Profit before tax 01 3,177,845,525,352 2,291,100,524,3402. Adjustments for: Depreciation and amortization 02 1,065,820,727,731 1,103,264,409,330 Provisions 03 39,125,785,416 (42,071,290,025) Unrealized foreign exchange loss 04 27,093,074,493 25,780,070,790 Gain from investing activities 05 (387,196,843,705) (284,600,459,735) Interest expense 06 144,676,565,627 222,995,412,065 3. Operating profit before movements in working capital 08 4,067,364,834,914 3,316,468,666,765Changes in receivables 09 (728,099,668,456) (907,067,932,635)Changes in inventories 10 (225,712,046,881) (246,781,696,260)Changes in accounts payable 11 1,041,521,820,991 1,247,223,497,195 Changes in prepaid expenses 12 86,317,401,706 137,788,098,850 Interest paid 13 (153,404,650,937) (279,920,189,265)Corporate income tax paid 14 (562,198,100,532) (295,437,865,810)Other cash outflows 16 (278,934,034,106) (224,064,060,075)Net cash from operating activities 20 3,246,855,556,699 2,748,208,518,765II. CASH FLOWS USED IN INVESTING ACTIVITIES

1. Acquisition, construction of fixed assets and other 21 (284,971,143,050) (235,892,502,555)long-term assets2. Proceeds from sales, disposal of fixed assets 22 3,263,607,935 1,860,284,100 3. Cash outflow for lending, buying debt instruments of 23 (492,258,371,472) (860,000,000,000)other entities4. Cash recovered from lending, selling debt instruments ofother entities

24 510,258,327,670

860,000,000,000

5. Investments in other entities 25 (386,518,616,424) (536,616,970,000)6. Cash recovered from investments in other entities 26 6,341,464,203 3,892,478,956 7. Interest earned, dividends and profits received 27 338,890,814,636 178,590,099,825 Net cash used in investing activities 30 (304,993,916,502) (588,166,609,674)III. CASH FLOWS USED IN FINANCING ACTIVITIES1. Proceeds from receiving capital from owners 31 21,571,980,000 1,463,919,696,000 2. Buying treasury shares 32 (364,500,000) - 3. Proceeds from borrowings 33 171,445,827,781 593,593,879,030 4. Repayment of borrowings 34 (2,003,733,982,575) (2,384,962,785,255)5. Dividends paid 36 (554,195,683,300) (304,820,017,953)Net cash used in financing activities 40 (2,365,276,358,094) (632,269,228,178)Net increase in cash during the year (50=20+30+40) 50 576,585,282,103 1,527,772,680,913Cash and cash equivalents at the beginning of the year 60 2,597,616,954,888 1,067,748,648,852Effects of changes in foreign exchange rates 61 3,050,776,878 11,675,148,288 Foreign exchange rate differences on conversion 62 30,941,235,797 (9,579,523,165)Cash and cash equivalents at the end of the year (70=50+60+61+62)

70 3,208,194,249,666 2,597,616,954,888




Consolidated Cash Flow Statement (Continued)

For the year ended 31 December 2014

Supplemental non-cash disclosures:

Cash outflows for acquisition, construction of fixed assets and other long-term assets during the year excluded an amount of VND 50,109,455,856 (2013: VND 17,859,648,500), representing an addition in fixed assets during the year that have not yet been paid. However, cash outflows for acquisition of fixed assets included an amount of VND 17,859,648,500 (2013: VND 59,775,316,307) representing additions of fixed assets during prior year that were paid in the current year. In addition, cash outflows for acquisition, construction of fixed assets and other long-term assets during the year excluded an amount of VND 1,367,364,781,226, representing value of assets received as at the business combination date with subsidiary PVD Overseas. This transaction does not affect consolidated cash flow, hence it is not presented in above report.

Interest earned, dividends and profits received during the year excluded an amount of VND 71,196,663,252 (2013: VND 116,540,309,015), representing receivables relating to interest income, dividends and declared profits during the year. However, interest earned, dividends and profits received during the year included an amount of VND 95,225,485,310 (2013: VND 62,149,460,664) representing interest income, dividends and declared profits in prior year that were received during the current year. In addition, interest earned, dividends and profits received during the year excluded an amount of VND 22,205,075,315 (2013: VND 7,571,645,190), representing dividends and profits that were collected in form of being offset against payables. This transaction does not affect consolidated cash flow, hence it is not presented in above report.

Proceeds from borrowings received during the year exclude an amount of VND 422,980,000,000 representing loans balance received as at the business combination date with subsidiary PVD Overseas. This transaction does not affect consolidated cash flow, hence it is not presented in above report.

Proceeds from receiving capital from owners excluded an amount of VND 275,446,550,000, representing dividends of 2013 were paid to shareholders in form of shares issuance (2013: VND 250,204,800,000). This transaction does not affect consolidated cash flow, hence it is not presented in above report.







1. GENERAL INFORMATION

Structure of ownership

The Group consisted of Petrovietnam Drilling and Well Service Corporation (the “Company”) and its seven (7) subsidiaries and six (6) joint ventures as follows:

The Company

The Company is a joint stock company established in Vietnam in accordance with the Business Registration Certificate No. 4103004335 dated 15 February 2006 and its ninth amendment dated 30 October 2014 issued by the Department of Planning and Investment (“DPI”) of Ho Chi Minh City. The Company has merged from the equitization of Petrovietnam Drilling and Well Services Company, a wholly-owned subsidiary of Vietnam Oil and Gas Corporation (hereinafter referred to as “Petrovietnam”).

The Company consists of two divisions and an overseas branch as follows:

• The Drilling Division was established in accordance with the Resolution of the Company’s Board of Management dated 9 April 2007 and the Decision No. 1249/QD-PVD issued by the President dated 24 May 2007 changing the Drilling Management Committee into the Drilling Division and in accor-dance with the Business Registration Certificate No. 0302495126-007 dated 16 March 2010 replac-ing the Business Registration Certificate No. 4113028028 issued by DPI of Ho Chi Minh City. The Drilling Division’s registered office is located at 3rd Floor, Sailing Tower, 111A Pasteur Street, District 1, Ho Chi Minh City, S.R Vietnam.

• PVD Drilling Investment Division (“PVD Invest”) was established in accordance with the Decision No. 06/12/QD-HDQT dated 30 December 2009 issued by the Board of Management and the Business Registration Certificate No. 0302495126 dated 18 January 2010, and its amendment dated 19 May 2010 issued by DPI of Ho Chi Minh City. PVD Invest’s office is located at 3rd Floor, Sailing Tower, 111A Pasteur Street, District 1, Ho Chi Minh City, S.R Vietnam.

• Algeria Branch was established in accordance with the Decision No. 13/QD-HDQT dated 02 March 2006 issued by the Board of Management and the Establishment Certificate No. 04/STM-TT.TNNN dated 23 March 2006 issued by the Trade Department of Ho Chi Minh City. The Algeria Branch office is located at Cité Si El, Houas, No. 02, Villa No. 101, Hassi Messaoud, Ouargla, Algeria. Algeria Branch is directly controlled and managed by the Drilling Division.

The number of employees of the Company and its subsidiaries as at 31 December 2014 was 457 and 2,072, respectively (as at 31 December 2013: 434 and 1,724).

The subsidiaries

PVD Offshore Services Company Limited (“PVD Offshore”) was established as a limited liability company under the Business Registration Certificate No. 3500803145 dated 1 September 2009 issued by DPI of Ba Ria - Vung Tau Province and its amendments. PVD Offshore’s registered office is located at 43A, 30/4 Street, Ward 9, Vung Tau City, Ba Ria - Vung Tau Province, S.R. Vietnam. According to Decision No. 358/QD-PVD dated 22 July 2014 issued by the Board of Management, the Group has decided to increase the charter capital of PVD Offshore from VND 80 billion to VND 130 billion. The Company has fully contributed the additional charter capital as at 12 August 2014.

Notes to the Converted Consolidated Financial StatementsThese notes are an integral part of and should be read in conjunction with the accompanying converted consolidated financial statements

FORM B 09-DN/HN



1.GENERAL INFORMATION (continued)

PVD Well Services Company Limited (“PVD Well”) was established as a limited liability company under the Business Registration Certificate No. 4104001468 dated 1 August 2007 issued by DPI of Ho Chi Minh City and its amendments. PVD Well’s registered office is located at Room 13, 12Ath Floor, Vincom Center Building, 47 Ly Tu Trong Street, Ben Nghe Ward, District 1, Ho Chi Minh City, S.R. Vietnam.

Petroleum Well Logging Company Limited (“PVD Logging”) was established as a limited liability company under the Business Registration Certificate No. 4104001513 dated 7 August 2007 issued by DPI of Ho Chi Minh City and its amendments. PVD Logging’s registered office is located at 10th Floor, Sailing Tower, 111A Pasteur Street, District 1, Ho Chi Minh City, S.R. Vietnam.

PVD Trading and Technical Services Joint Stock Company (formerly known as Petroleum Trading and Technical Services Company Limited, “PVD Tech”) has changed legal form from a limited liability company to a joint stock company and commenced its operation as a joint stock company under the Amended Business Registration Certificate No. 0305124602 dated 12 July 2012 issued by DPI of Ho Chi Minh City. PVD Tech’s registered office is located at 8th Floor, Green Power Building, 35 Ton Duc Thang Street, Ben Nghe Ward, District 1, Ho Chi Minh City, S.R. Vietnam.

PVD Technical Training and Certification Joint Stock Company (“PVD Training”), formerly known as Cuu Long Company Limited, is a joint stock company that was established in accordance with Business Registration Certificate No. 3500677518 dated 12 August 2011 issued by DPI of Ba Ria - Vung Tau Province, and its amendments. PVD Training’s registered office is located at Dong Xuyen Industrial Zone, 30/4 Street, Rach Dua Ward, Vung Tau City, Ba Ria - Vung Tau Province, S.R. Vietnam.

PVD Deepwater Drilling Company Limited (“PVD Deepwater”) was established as a limited liability company under the Business Registration Certificate No. 0310139354 dated 14 July 2010 issued by DPI of Ho Chi Minh City and its amendments. PVD Deepwater’s registered office is located at 5th Floor, Sailing Tower, 111A Pasteur Street, District 1, Ho Chi Minh City, S.R. Vietnam. PVD Deepwater was authorised by the Group and its partners in the Business Corporation Contract (“BCC”) including Petrovietnam, Military Joint-Stock Commercial Bank (“MBBank”) and Ocean Joint Stock Commercial Bank (“OceanBank”), to manage and operate the business cooperation project in financing to build the Tender Assist Drilling Rig (“PV Drilling V” or “TAD”). The PV Drilling V’s financial performance and financial position are presented in Note 12.

PV Drilling Overseas Company Private Limited (“PVD Overseas”) was established in Singapore under joint venture contract with Falcon Energy Group Limited and Business Registration No. 201308977C dated 04 April 2013. PVD Overseas’s registered office is located at No. 9 Temasek Boulevard, #31_00 Suntec Tower 2, Singapore. According to Resolution No. 01/02/2014/NQ-HDQT dated 21 February 2014 issued by of the Board of Management, the Company decided to increase the ownership in PVD Overseas from 55% to 80%. In 2014, the Company has implemented necessary procedures for increasing investment in PVD Overseas and PVD Overseas has officially become the Company’s subsidiary (2013: PVD Overseas was a joint venture of the Company).

The Company’s ownership and subsidiaries’ charter capitals with status of the Company’s capital contribution in subsidiaries are presented in Note 15.

Notes to the Converted Consolidated Financial Statements (Continued)

These notes are an integral part of and should be read in conjunction with the accompanying converted consolidated financial statements

FORM B 09-DN/HN


The joint ventures

BJ Services-PV Drilling Joint Venture Company Limited (“BJ-PVD”) was established in Vietnam as a joint venture company under the Investment Certificate No. 492021000003 dated 28 September 2006 issued by the People’s Committee of Ba Ria - Vung Tau Province and its amendments. BJ - PVD’s registered office is located at 65A, 30/4 Street, Thang Nhat Ward, Vung Tau City, Ba Ria - Vung Tau Province, S.R. Vietnam. The total charter capital of BJ-PVD is amount of USD 5 million, in which the Company holds 49% of its ownership.

PV Drilling-Baker Hughes Well Technical Services Joint Venture Company Limited (“PVD-Baker Hughes”) was established in Vietnam under the Investment Certificate No. 411022000556 dated 26 January 2011 issued by the People’s Committee of Ho Chi Minh City and its amendments. PVD-Baker Hughes’s registered office is located at 10th Floor, Sailing Tower, 111A Pasteur Street, District 1, Ho Chi Minh City, S.R. Vietnam. The total charter capital of PVD-Baker Hughes is amount of USD 20 million, equivalent to VND 370,880,000,000, in which the Company holds 51% of its ownership.

PV Drilling Expo International Company Limited (formerly known as PV Drilling Production Testers International Company Limited, “PVD-Expro”) was established as a joint venture company under the Investment Certificate No. 491022000098 dated 25 April 2008 issued by the People’s Committee of Ba Ria - Vung Tau Province and its amendments. PVD-Expro registered office is located at 65A 30/4 Street, Thang Nhat Ward, Vung Tau City, Ba Ria - Vung Tau Province, S.R. Vietnam. The total charter capital is amount of USD 4 million. The Group holds 51% of its ownership.

Vietubes Company Limited (“Vietubes”) was established under the Investment Certificate No. 492022000111 dated 15 February 1995 and its amendment dated 28 May 2012 issued by the Board of Management of Industrial Zone of Ba Ria - Vung Tau Province. The total charter capital is amount of VND 77,297,205,000 equivalent to USD 3,707,300. Vietubes registered office is located at No. 1, Street 11, Dong Xuyen Industrial Zone, Rach Dua Ward, Ba Ria - Vung Tau Province, S.R. Vietnam. The Group holds 51% of Vietubes’ charter capital.

PVD Tech-Oil State Industries Joint Venture Company Limited (“PVD-OSI”) was established in Vietnam as a joint venture company under the Investment Certificate No. 492022000217 dated 24 November 2011 issued by the Board of Management of Industrial Zone of Ba Ria - Vung Tau Province. PVD-OSI registered office is located at Street 11, Phu My Industrial Zone, Tan Thanh District, Ba Ria - Vung Tau Province, S.R. Vietnam. The total charter capital is amount of VND 105,000,000,000 equivalent to USD 5 million. The Group holds 51% of PVD-OSI’s charter capital.

PV Drilling Tubulars Management Company Limited (“PVD Tubulars”) was established as a joint venture company under the Investment Certificate No. 492022000134 dated 7 October 2008 issued by the Board of Management of Industrial Zone of Ba Ria - Vung Tau Province and its amendments. PVD Tubulars’s registered office is located in Phu My 1 Industrial Zone, Tan Thanh District, Ba Ria - Vung Tau Province, S.R. Vietnam. The total charter capital of PVD Tubulars is amount of VND 57,995,000,000, equivalent to USD 3.5 million, in which the Group holds 51% of its ownership.

The Group’s ownership and joint ventures’ charter capitals with status of the Group’s capital contribution in joint ventures are presented in Note 11.



FORM B 09-DN/HN


1.GENERAL INFORMATION (continued)

Principal activities The Group is principally engaged in providing drilling services, well services, wire line logging, oil spill control service, drilling rig, equipment, drilling manpower supply service, investment- management project consulting service, management consulting service, and other related services in the oil and gas industry.

2. ACCOUNTING CONVENTION AND FINANCIAL YEAR

Accounting convention

The consolidated financial statements, expressed in United States Dollar (“USD”), are prepared under the historical cost convention and in accordance with Vietnamese Accounting Standards, accounting regime for enterprises and legal regulations relating to financial reporting.

These accompanying converted consolidated financial statements were converted from the consolidated financial statements expressed in United States Dollar (“USD”) into Vietnam Dong (“VND”) using the following rates: asset and liability items (including comparative figures) were converted by using the average inter-bank exchange rate as at 31 December 2014 21,246 VND/USD (as at 31 Dec 2013: 21,036 VND/USD). Income and expense items (including comparative figures) were converted by using the average exchange rates for the year was 21,149 VND/USD (2013: 20,935 VND/USD), unless exchange rates fluctuated significantly during the year, in that case the exchange rates at the dates of the transactions were used. Foreign exchange differences, if any, are recognized in the “Foreign exchange reserve” account under Owners’ Equity section of the consolidated balance sheet.

The accompanying converted consolidated financial statements are not intended to present the financial position, financial performance and cash flows in accordance with accounting principles and practices generally accepted in countries and jurisdictions other than Vietnam.

Financial year

The Group’s financial year begins on 1 January and ends on 31 December.

3. NEW ACCOUNTING GUIDANCE IN ISSUE NOT YET ADOPTED

On 22 December 2014, the Ministry of Finance issued Circular No. 200/2014/TT-BTC (“Circular 200”) guiding the application of accounting regime for enterprises and Circular No. 202/2014/TT-BTC (Circular 202) guiding the preparation and presentation of consolidated financial statements. These circulars are effective for financial years beginning on or after 1 January 2015. Circular 200 will supersede the regulations for accounting regime promulgated under Decision No. 15/2006/QD-BTC dated 20 March 2006 issued by the Ministry of Finance and Circular No. 244/2009/TT-BTC dated 31 December 2009 issued by the Ministry of Finance. Circular 202 will supersede section XIII in Circular No. 161/2007/TT-BTC dated 31 December 2007 of the Ministry of Finance guiding the preparation and presentation of consolidated financial statements in accordance with Vietnamese Accounting Standard No. 25 “Consolidated Financial Statements and Accounting for Investments in Subsidiaries”.



FORM B 09-DN/HN


The Board of Directors is considering the extent of impact of the adoption of these circulars on the Group’s consolidated financial statements for future accounting periods.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies, which have been adopted by the Group in the preparation of these converted consolidated financial statements, are as follows:

Estimates

The preparation of consolidated financial statements in conformity with Vietnamese Accounting Standards, accounting regime for enterprises and legal regulations relating to financial reporting requires the Board of Directors to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at balance sheet date and the reported amounts of revenues and expenses during the financial year. Although these accounting estimates are based on the Board of Directors’ best knowledge, actual results could differ from those estimates.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and enterprises controlled by the Company (subsidiaries) up to the balance sheet date of each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee enterprise so as to obtain benefits from its activities.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used in line with those used by the Group.

All inter-company transactions and balances between the Group’s enterprises are eliminated on consolidation.

Non-controlling interests (“NCI”) in the net assets of consolidated subsidiaries are identified separately from the Group’s equity therein. NCI consist of the amount of those interests at the date of the original business combination and the minority’s share of changes in equity since the date of the combination. Losses applicable to the minority in excess of the minority’s interest in the subsidiary’s equity are allocated against the interests of the Company except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses.

Business combinations

On acquisition, the assets and liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognized as goodwill. Any deficiency of the cost of acquisition below the fair values of the identifiable net assets acquired is credited to profit and loss in the period of acquisition.

The interest of minority shareholders is initially measured at the minority’s proportion of the net fair value of the assets, liabilities and contingent liabilities recognized.



FORM B 09-DN/HN


4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Interests in joint ventures

A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject to joint control, which is when the strategic financial and operating policy decisions relating to the activities require the unanimous consent of the parties sharing control.

Where a group entity undertakes its activities under joint venture arrangements directly, the Group’s share of jointly controlled assets and any liabilities incurred jointly with other ventures are recognized in the financial statements of the relevant entity and classified according to their nature. Liabilities and expenses incurred directly in respect of interests in jointly controlled assets are accounted for on an accrual basis. Income from the sale or use of the Group’s share of the output of jointly controlled assets, and its share of joint venture expenses, are recognized when it is probable that the economic benefits associated with the transactions will flow to/from the Group and their amount can be measured reliably.

Joint venture arrangements that involve the establishment of a separate entity in which each venture has an interest are referred to as jointly controlled entities. The Group reports its interests in jointly controlled entities using the equity method of accounting.

Joint venture arrangements that involve jointly controlled and possessed assets acquired by joint venture parties and utilized for joint venture purposes are referred to as jointly controlled assets. The Group accounts capital contribution to jointly controlled assets and any liabilities incurred jointly with other ventures at the agreed rate of joint venture arrangements. Liabilities incurred in separate is accounted fully to the Group’s consolidated financial statements.

Goodwill

Goodwill represents the excess of the cost of acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of a subsidiary or jointly controlled entity at the date of acquisition. Goodwill is recognized as an asset and is amortized on the straight-line basis in 10 years.

Goodwill arising on the acquisition of a jointly controlled entity is included within the carrying amount of the jointly controlled entity. Goodwill arising on the acquisition of subsidiaries is presented separately as intangible asset in the consolidated balance sheet.



FORM B 09-DN/HN


Financial instruments

Initial recognition

Financial assets: At the date of initial recognition, financial assets are recognized at cost plus transaction costs that are directly attributable to the acquisition of the financial assets. Financial assets of the Group comprise cash and cash equivalents, trade and other receivables, other investments and deposits.

Financial liabilities: At the date of initial recognition financial liabilities are recognized at cost plus transaction costs that are directly attributable to the issue of the financial liabilities. Financial liabilities of the Group comprise borrowings, trade and other payables and, accrued expenses.

Subsequent measurement after initial recognition

Currently there are no requirements for the re-measurement of the financial instruments after initial recognition.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, demand deposits and short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

Provision for doubtful debts

Provision for doubtful debts is made for receivables that are overdue for six months or more, or when the debtor is in dissolution, in bankruptcy, or is experiencing similar difficulties and so may be unable to repay the debt.

Inventories

Inventories are stated at the lower of cost and net realizable value. Cost comprises direct materials and where applicable, direct labor costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the weighted average method. Net realizable value represents the estimated selling price less all estimated costs to completion and costs to be incurred in marketing, selling and distribution.

The evaluation of necessary provision for inventory obsolescence follows current prevailing accounting regulations which allow provisions to be made for obsolete, damaged, or sub-standard inventories and for those which have costs higher than net realizable values as at the balance sheet date.



FORM B 09-DN/HN



Tangible fixed assets and depreciation

Tangible fixed assets are stated at cost less accumulated depreciation. The cost of purchased tangible fixed assets comprises their purchase price and any directly attributable costs of bringing the assets to their working condition and location for their intended use. The costs of self-constructed or manufactured assets are the actual construction or manufacturing cost plus installation and test running costs. Tangible fixed assets are depreciated using the straight-line method over their estimated useful lives as follows:

Leasing

Leases where substantially all the rewards and risks of ownership of assets remain with the leasing company are accounted for as operating leases

The Group as lessor: Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease.

The Group as lessee: Rentals payable under operating leases are charged to the income statement on a straight-line basis over the term of the relevant lease.

Intangible assets and amortization

Intangible assets represent land use rights, computer software and other intangible assets which is goodwill generated from the State-owned enterprise equitization, stated at cost less accumulated amortisation. Land use rights with indefinite time are not amortized. Land use rights with definite time are amortized on a straight-line basis over term of land use rights. Computer software and other intangible assets are amortized using the straight-line method over their estimated useful lives as five (5) years and ten (10) years, respectively.

Construction in progress

Properties in the course of construction for production, rental or administrative purposes, or for the purposes not yet determined, are carried at cost. Cost includes professional fees, and for qualifying assets, borrowing costs dealt with in accordance with the Group’s accounting policy. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.

YearsBuildings and structures 6 - 50Machinery and equipment 5 - 20Office equipment 3 - 4Motor vehicles 7Others 3 - 7



FORM B 09-DN/HN


Long-term investments

Long-term investments are recognized at cost including directly related expenses in investments. As at balance sheet date, investments are measured at cost less provision for impairment of long-term investments.

Provision for impairment of the Group’s long-term financial investments is made in accordance with current pre-vailing accounting regulations.

Long-term prepayments

Long-term prepayments comprise small tools, spare parts and maintenance expense of drilling rig incurred during the year which is expected to provide future economic benefits to the Group for more than one year. These expenditures are capitalised as long-term prepayments and amortised to profit and loss on a straight-line basis for periods of three (3) years.

In addition, long-term prepayments also comprise of foreign exchange losses during the construction stage of drilling rigs, assets received from Petrovietnam Drilling Investment Corporation previously through the business merging which are amortised to profit and loss on a straight-line basis for five (5) years since the construction is completed (2010).

Accrued expenses

Accrued expenses include accruals for operation of rigs, overhaul cost of fixed assets and other expenses. Accrued expenses reflect the value of the amounts accrued as production costs but not yet actually paid at the balance sheet date. Accrual for overhaul cost of fixed assets are made by the Group for each year based on overhaul cycle every three (3) years and five (5) years in accordance to specific technical requirements to ensure the continual operation of drilling rigs.

Revenue recognition

Revenue from the sale of goods is recognized when all five (5) following conditions are satisfied:

(a) The Group has transferred to the buyer the significant risks and rewards of ownership of the goods;

(b) The Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

(c) The amount of revenue can be measured reliably;

(d) It is probable that the economic benefits associated with the transaction will flow to the Group; and

(e) The costs incurred or to be incurred in respect of the transaction can be measured reliably.



FORM B 09-DN/HN



Revenue of a transaction involving the rendering of services is recognized when the outcome of such transactions can be measured reliably. Where a transaction involving the rendering of services is attributable to several years, revenue is recognized in each year by reference to the percentage of completion of the transaction at the balance sheet date of that year. The outcome of a transaction can be measured reliably when all four (4) following conditions are satisfied:

(a) The amount of revenue can be measured reliably;(b) It is probable that the economic benefits associated with the transaction will flow to the Group;(c) The percentage of completion of the transaction at the balance sheet date can be measured reliably; and(d) The costs incurred for the transaction and the costs to complete the transaction can be measured reliably.

Interest income is recorded on accrual basis on a time basis, by reference to the principal outstanding and at the applicable interest rate.

Dividend income from investments is recognized when the Group’s right to receive payment has been established.

Foreign currencies

The Group applies the method of recording foreign exchange differences in accordance with Vietnamese Accounting Standard No. 10 (VAS 10) “Effects of changes in foreign exchange rates” and Circular No. 179/2012/TT-BTC dated 24 October 2012 issued by the Ministry of Finance providing guidance on recognition, measurement and treatment of foreign exchange differences in enterprises. Accordingly, transactions arising in foreign currencies are translated at exchange rates ruling at the transaction date. The balances of monetary items denominated in foreign currencies as at the balance sheet date are retranslated at the exchange rates on the same date. Exchange differences arising from the translation of these accounts are recognized in the consolidated income statement. Unrealized exchange gains as at the balance sheet date are not treated as part of distributable profit to shareholders.

Foreign exchange differences arising from the translation of monetary assets and liabilities denominated in foreign currencies, including realized and unrealized, during the construction stage of drilling rigs are recorded under the account “Foreign exchange reserve” in the Owners’ Equity section. Once the drilling rigs are put in operation, the accumulated foreign exchange differences will be amortized over five (5) years.

In preparation of the consolidated financial statements, the assets and liabilities of subsidiaries and the overseas branch are translated into reporting currency using exchange rates prevailing on the balance sheet date. Income and expenses are translated using average exchange rates for the year, unless exchange rates fluctuated significantly during that year, in which case the exchange rates at the transaction dates would be used. Exchange differences arising, if any, are accounted for in “Foreign exchange reserve” under the Group’s equity. Such differences will then be charged to the income statement once the subsidiaries and overseas branches are disposed.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the cost of those assets.



FORM B 09-DN/HN


All other borrowing costs are recognized in the consolidated income statement when incurred.

Provisions

Provisions are recognized when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at the Board of Directors’ best estimate of the expenditure required to settle the obligation at the balance sheet date.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years (including loss carried forward, if any) and it further excludes items that are never taxable or deductible.

The Group’s corporate income tax expense is calculated using tax rate that have been affected at the date of preparing the consolidated balance sheet.

Deferred tax is recognized on significant differences between carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using balance sheet liability method. Deferred tax liabilities are generally recognized for all temporary differences and deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilized.

Deferred tax is calculated at the tax rates that are expected to apply in the year when the liability is settled or the asset realized. Deferred tax is charged or credited to profit or loss, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

The determination of the tax currently payable and deferred tax is based on the current interpretation of tax regulations. However, these regulations are subject to periodic variation and their ultimate determination depends on the results of the tax authorities’ examinations.

Other taxes are paid in accordance with the prevailing tax laws in Vietnam.

5. CASH AND CASH EQUIVALENTS

31/12/2014VND

31/12/2013VND

Cash on hand 4,755,577,164 4,368,525,084 Cash in bank 979,949,207,994 933,294,367,093 Cash equivalents 2,223,489,464,508 1,659,954,062,711

3,208,194,249,666 2,597,616,954,888

Cash equivalents represent the time deposits with their terms of three months or less.



FORM B 09-DN/HN


6. OTHER RECEIVABLES

7. INVENTORIES

31/12/2014VND

31/12/2013VND

Other receivables from PVD-Baker Hughes - 1,597,200,372 Interest income receivables 6,334,856,082 14,553,504,168 Dividend receivables from joint ventures 64,861,807,170 102,549,048,516 Other receivables 26,479,123,506 18,294,588,480

97,675,786,758 136,994,341,536

31/12/2014VND

31/12/2013VND

Goods in transit 5,282,095,536 94,663,724,952 Raw materials and consumables 716,463,709,602 574,812,149,904 Tools and supplies 71,748,209,412 2,101,349,148 Work in progress 48,649,728,180 15,856,873,692 Merchandise 351,821,692,272 328,745,096,568 Goods on consignment 88,437,494,808 28,559,546,436

1,282,402,929,810 1,044,738,740,700 Provision for devaluation of inventories (56,597,623,074) (1,029,585,984)

1,225,805,306,736 1,043,709,154,716



FORM B 09-DN/HN


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FOR

M B

09-

DN

/HN


Foreign exchange differences resulted from translation of financial statements of Algeria branch and subsidiaries from cost of assets expressed in Algeria Dinar and Vietnam Dong into United States Dollar and conversion of the Group’s consolidated financial statements from USD to VND.

As disclosed in Note 21, some of the Group’s assets including rigs PV Drilling II, PV Drilling III, PV Drilling V and machineries with the carrying amount of VND 9,657,941,815,962 as at 31 December 2014 (as at 31 December 2013: VND 10,309,338,706,538) are used as collaterals for the Group’s loans.

As at 31 December 2014, the cost of Group’s fixed assets with the amount of VND 279,905,958,150 (as at 31 December 2013: VND 188,747,655,672) which have been fully depreciated but are still in use.

Depreciation of fixed assets in the year included VND 2,289,554,798 of depreciation of fixed assets constructed and purchased from Scientific and Technological Development Fund for the purpose of scientific and technological research and development (2013: nil).

9. INTANGIBLE ASSETS

Landuse rights

VND

Computer software

VNDOthers

VNDTotalVND

COSTAs at 01/01/2014 128,780,667,048 50,282,477,016 33,715,995,936 212,779,140,000 Additions 55,228,033,322 8,077,479,868 - 63,305,513,190 Foreign exchange differences

1,285,590,388 505,251,770 336,582,960 2,127,425,118

As at 31/12/2014 185,294,290,758 58,865,208,654 34,052,578,896 278,212,078,308 ACCUMULATED AMORTISATIONAs at 01/01/2014 12,536,172,804 27,443,018,664 21,667,626,936 61,646,818,404 Charge for the year 3,158,587,373 6,542,355,367 5,916,686,538 15,617,629,278 Foreign exchange differences

135,228,012 284,252,951 243,446,161 662,927,124

As at 31/12/2014 15,829,988,189 34,269,626,982 27,827,755,848 77,927,374,806 NET BOOK VALUEAs at 31/12/2014 169,464,302,569 24,595,581,672 6,224,823,048 200,284,703,502 As at 31/12/2013 116,244,494,244 22,839,458,352 12,048,369,000 151,132,321,596

Foreign exchange differences resulted from translation of financial statement of Algeria branch and subsidiaries from cost of assets expressed in Algeria Dinar and Vietnam Dong into United States Dollar and conversion of the Group’s consolidated financial statements from USD to VND.

8.TANGIBLE FIXED ASSETS (continued)



FORM B 09-DN/HN


10. CONSTRUCTION IN PROGRESS

Details of construction in progress are as follows:

Construction of PV Drilling VI rig is approved with the estimated investment budget to an amount of USD 226.7 million.

11. INVESTMENTS IN JOINT VENTURES

Summarized financial information in respect of the Group’s joint ventures is as follows:

31/12/2014VND

31/12/2013VND

Construction of PV Drilling VI rig 1,415,866,541,268 - Construction of drilling devices 45,022,292,370 - Copyright fee of human resources software 173,707,296 171,990,336 Other construction works 15,334,045,548 17,476,014,612

1,476,396,586,482 17,648,004,948

Name of joint venture

Registered charter capital

USD

Percent of

Interest%

Contributedcharter capital

USD

Cost of Investment31/12/2014

VND31/12/2013

VND

BJ-PVD 5,000,000 49 2,450,000 48,039,113,955 48,039,113,955 PVD-Expro 4,000,000 51 2,040,000 34,238,560,029 34,238,560,029 PVD Tubulars 3,500,000 51 1,785,000 30,515,952,000 30,548,750,000 PVD-Baker Hughes 20,000,000 51 10,200,000 211,753,000,000 211,753,000,000 Vietubes 3,707,300 51 1,890,723 86,637,631,068 86,637,631,068 PVD Overseas - - - - 401,575,170,000 PVD-OSI 5,000,000 51 2,550,000 53,111,400,000 53,111,400,000

The value of investments in joint ventures using the equity method as at balance sheet date was as follows:

31/12/2014 VND

31/12/2013 VND

BJ-PVD 88,242,597,389 70,989,600,192 PVD-Expro 107,664,487,428 65,118,515,700 PVD Tubulars 62,682,647,442 37,549,260,000 PVD-Baker Hughes 216,709,200,000 214,567,200,000 Vietubes 95,100,558,528 94,373,217,792 PVD Overseas - 403,512,552,000 PVD-OSI 63,032,768,707 55,554,834,876

633,432,259,494 941,665,180,560



FORM B 09-DN/HN


As a

t 01

/01/

2014

Cap

ital

cont

ribut

edIn

vest

men

t cl

assifi

catio

nSh

ared

pro

fitG

oodw

ill al

loca

tion

Dec

lare

d pr

ofit

Fore

ign

exch

ange

di

ffere

nces

from

co

nver

sion

As a

t 31

/12/

2014

VND

VND

VND

VND

VND

VND

VND

VND

BJ

PVD

70,9

89,6

00,1

92 -

- 3

6,15

9,90

4,58

1 -

(19,

664,

121,

659)

757

,214

,275

8

8,24

2,59

7,38

9

PVD

Exp

ro65

,118

,515

,700

25,

290,

010,

968

- 4

8,13

5,90

6,51

3 -

(22,

205,

071,

087)

(8,6

74,8

74,6

66)

107

,664

,487

,428

PVD

Tub

ular

s37

,549

,260

,000

- -

31,

716,

584,

277

- -

(6,5

83,1

96,8

35)

62,

682,

647,

442

PVD

Bake

r -H

ughe

s21

4,56

7,20

0,00

0 -

- 1

66,9

35,1

41,9

08

- (1

66,9

35,1

41,9

08)

2,1

42,0

00,0

00

216

,709

,200

,000

Viet

ubes

94,3

73,2

17,7

92 -

- 1

2,68

8,99

0,78

4 (2

,570

,323

,926

) (8

,538

,758

,569

) (8

52,5

67,5

53)

95,

100,

558,

528

PVD

Ove

rsea

s40

3,51

2,55

2,00

041

4,14

5,00

5,25

0 (8

17,6

57,5

57,2

50)

- -

- -

-

PVD

-OSI

55,5

54,8

34,8

76 -

- 7

,865

,989

,868

-

- (3

88,0

56,0

37)

63,

032,

768,

707

941,

665,

180,

560

439,

435,

016,

218

(817

,657

,557

,250

)30

3,50

2,51

7,93

1 (2

,570

,323

,926

)(2

17,3

43,0

93,2

23)

(13,

599,

480,

816)

633,

432,

259,

494

The

mov

emen

t in

inve

stm

ents

in jo

int v

entu

res

durin

g th

e ye

ar w

as a

s fo

llow

s: In

vest

men

t cla

ssific

atio

n re

pres

ents

the

inve

stm

ent i

n th

e jo

int v

entu

re P

VD O

vers

eas

has

beco

me

a su

bsid

iary

of t

he G

roup

in 2

014

as d

iscl

osed

at N

ote

1.

At th

e da

te o

f the

se c

onso

lidat

ed fi

nanc

ial s

tate

men

ts, t

he fi

nanc

ial s

tate

men

ts o

f PVD

-Bak

er H

ughe

s fo

r the

yea

r end

ed 3

1 D

ecem

ber 2

014

have

not

bee

n ap

prov

ed b

y th

e M

embe

rs’ C

ounc

il of t

he jo

int v

entu

re, s

o th

e sh

ared

pro

fit o

f the

Gro

up in

this

join

t ven

ture

hav

e no

t bee

n de

term

ined

cer

tain

ly, th

eref

ore

it ha

s no

t bee

n re

cord

ed y

et.

11. I

NVE

STM

ENTS

IN J

OIN

T VE

NTU

RES

(con

tinue

d)

Not

es to

the

Con

verte

d C

onso

lidat

ed F

inan

cial

Sta

tem

ents

(Con

tinue

d)

Thes

e no

tes a

re a

n int

egra

l par

t of a

nd sh

ould

be re

ad in

con

junct

ion w

ith th

e ac

com

pany

ing

conv

erte

d co

nsoli

date

d fin

ancia

l sta

tem

ents

FOR

M B

09-

DN

/HN


12. BUSINESS CORPORATE CONTRACT - BCC

The Group and its partners in BCC including Petrovietnam, Military Joint Stock Commercial Bank (“MBBank”) and Ocean Joint Stock Commercial Bank (“OceanBank”) have corporated in financing and operating the Tender Assist Drilling Rig project (“TAD” or “PV Drilling V”) for the period of 17 years since 10 September 2009. According to BCC, the Group has been authorised to manage and operate the project as well as accounted for its financial performance as a basic of profit/(loss) sharing to all partners on contribution percentage in BCC.

Percentage of capital contribution of all partners in BCC as follows:

Percentage %Capital contribution of Petrovietnam 23.00 Capital contribution of the Group 62.43 Capital contribution of MBBank 9.71 Capital contribution of OceanBank 4.86

The financial position of the BCC is presented in the converted consolidated financial statements of the Group as follows:

31/12/2014 VND

31/12/2013 VND

Total Assets 3,975,038,627,418 4,293,963,498,959In which: Net book value of PV Drilling V rig 3,239,518,502,053 3,514,306,725,494

Actual capital contribution of partners in BCC including Petrovietnam, MBBank and OceanBank to newly construct and operate TAD was recognized as other long-term payables in the consolidated financial statement. Balances of other long-term payables as at 31 December 2014 and 31 December 2013 were as follows:

31/12/2014 VND

31/12/2013 VND

Petrovietnam 278,173,894,859 278,173,894,859MBBank 133,229,238,748 133,229,238,748OceanBank 68,756,768,760 68,756,768,760Foreign exchange difference from conversion 16,323 42,886,648,377

480,159,918,690 523,046,550,744



FORM B 09-DN/HN


12. BUSINESS CORPORATE CONTRACT - BCC (continued)

The financial performance and profit distribution based on percentage of capital contribution in 2014 and 2013 were as follows:

2014 VND

2013 VND

Net revenue 1,629,815,284,468 1,603,529,962,832Cost of sales 1,131,888,440,625 910,435,010,632General and administrative expenses 112,485,359,207 247,692,312,663Financial expenses 121,774,304,403 144,934,005,298 Financial income 14,300,891,336 4,546,563,976Other profit/(loss) 2,845,837,960 (54,658,162,962)Net income 280,813,909,529 250,357,035,253Adjustment for expenditures not subject to BCC 13,986,968,892 18,187,940,649Net income distributed to BCC parties 294,800,878,421 268,544,975,902

Shared profit as the percentage of contribution The Group 170,057,188,701 149,464,687,807 Other BCC parties: 110,756,720,828 100,892,347,446

Petrovietnam 67,804,202,037 61,765,344,457 MBBank 28,625,196,100 26,075,717,160 OceanBank 14,327,322,691 13,051,285,829



FORM B 09-DN/HN


As at the date of these consolidated financial statements, the operation results for the year ended 31 December 2014 have not yet been audited and finalized by BCC. Therefore, the Group temporarily recognizes and declares operating result to BCC based on percentage of capital contribution.

13. LONG-TERM PREPAYMENTS

31/12/2014 VND

31/12/2013 VND

Foreign exchange losses during construction in progress - 28,088,297,964 Long-term prepayment expenses for PV Drilling II and III - 2,625,944,916 Long-term prepayment expenses for PV Drilling V 4,502,643,534 17,377,124,376 Other long-term prepayments 9,297,185,862 19,481,502,708

13,799,829,396 67,572,869,964

14. DEFERRED CORPORATE INCOME TAX

The followings are the major deferred tax assets and deferred tax payables recognized by the Group, and the movements thereon, during the financial year 2014 and 2013:

Accruals and other provisions

VND

Unrealized foreign exchange difference

VNDTotal VND

As at 01/01/2013 4,830,638,040 1,678,028,648 6,508,666,688 Credit to income statement for the year

(6,214,931,580) (410,954,050) (6,625,885,630)

Foreign exchange differences from conversion

(1,221,564) 15,300,998 14,079,434

As at 31/12/2013 (1,385,515,104) 1,282,375,596 (103,139,508)Charge/(credit) to income statement for the year

8,887,737,879 (877,829,066) 8,009,908,813

Foreign exchange differences from conversion

23,916,215 15,403,465 39,319,680

As at 31/12/2014 7,526,138,989 419,949,995 7,946,088,984



FORM B 09-DN/HN


15. I

NVE

STM

ENTS

IN S

UB

SID

IAR

IES

AN

D G

OO

DW

ILL

Det

ails

of c

harte

r cap

ital c

ontri

butio

n an

d in

vest

men

t val

ue o

f the

Gro

up in

its

subs

idia

ries

as a

t 31

Dec

embe

r 201

4 an

d 31

Dec

embe

r 201

3 w

ere

as fo

llow

s:

Nam

e of

sub

sidi

arie

sR

egis

tere

d ch

arte

r cap

ital

(orig

inal

cur

renc

y)

The

Gro

up’s

ca

pita

l (o

rigin

al c

urre

ncy)

Cos

t of i

nves

tmen

t

Perc

ent o

f in

tere

st %31

/12/

2014

VND

USD

31/1

2/20

13VN

DPV

D O

ffsho

reVN

D 1

30,0

00,0

00,0

00

VN

D 1

30,0

00,0

00,0

00

130,

000,

000,

000

6,74

8,98

0 80

,000

,000

,000

1

00

PVD

Wel

lVN

D 8

0,00

0,00

0,00

0 VN

D 8

0,00

0,00

0,00

0 80

,000

,000

,000

4,

081,

469

80,0

00,0

00,0

00

100

PV

D L

oggi

ngVN

D 8

0,00

0,00

0,00

0 VN

D 8

0,00

0,00

0,00

0 80

,000

,000

,000

4,

236,

959

80,0

00,0

00,0

00

100

PV

D T

ech

VND

200

,000

,000

,000

VN

D 2

00,0

00,0

00,0

00

200,

000,

000,

000

10,3

24,8

05

200,

000,

000,

000

100

PV

D T

rain

ing

VND

28,

958,

670,

000

VND

28,

958,

670,

000

19,7

55,7

53,4

00

1,09

6,06

6 19

,755

,753

,400

5

1.79

PV

D D

eepW

ater

VND

764

,000

,000

,000

VN

D 7

64,0

00,0

00,0

00

764,

000,

000,

000

39,6

92,0

90

764,

000,

000,

000

100

PV

D D

rillin

g O

vers

eas

USD

41,

961,

000

USD

51,

141,

000

886,

570,

084,

800

41,7

28,8

00

- 8

1.60

2,

160,

325,

838,

200

107,

909,

169

1,22

3,75

5,75

3,40

0

As d

iscl

osed

at N

ote

1, in

201

4, P

VD O

vers

eas

has

offic

ially

bec

ome

the

Com

pany

’s s

ubsi

diar

y (2

013:

PVD

Ove

rsea

s w

as a

join

t ven

ture

of t

he C

ompa

ny).

Acco

rdin

g to

Dec

isio

n N

o. 3

58/Q

D-P

VD d

ated

22

July

201

4 is

sued

by

the

Boa

rd o

f Man

agem

ent,

the

Gro

up h

as d

ecid

ed to

incr

ease

the

char

ter

capi

tal o

f PVD

O

ffsho

re fr

om V

ND

80

billio

n to

VN

D 1

30 b

illion

. The

Com

pany

has

fully

con

tribu

ted

the

addi

tiona

l cha

rter c

apita

l as

at 1

2 Au

gust

201

4.

On

12 A

ugus

t 200

7, th

e C

ompa

ny a

cqui

red

51%

inte

rest

of P

VD T

rain

ing,

form

erly

kno

wn

as C

uu L

ong

Com

pany

Lim

ited,

for a

con

side

ratio

n of

VN

D 6

,970

,091

,000

, eq

uiva

lent

to U

SD 3

88,5

01. A

s a

resu

lt, th

e G

roup

reco

gniz

ed g

oodw

ill of

USD

238

,874

(equ

ival

ent t

o VN

D 4

,285

,636

,640

).

Not

es to

the

Con

verte

d C

onso

lidat

ed F

inan

cial

Sta

tem

ents

(Con

tinue

d)

Thes

e no

tes a

re a

n int

egra

l par

t of a

nd sh

ould

be re

ad in

con

junct

ion w

ith th

e ac

com

pany

ing

conv

erte

d co

nsoli

date

d fin

ancia

l sta

tem

ents

FOR

M B

09-

DN

/HN


The movement in goodwill during the year was as follows:

16. SHORT-TERM LOAN AND LIABILITIES

17. TAXES AND AMOUNTS PAYABLE TO THE STATE BUDGET

GoodwillVND

Value of goodwill as at investment phase 4,285,636,640 Foreign exchange differences from conversion 789,480,364 Value of goodwill as at 01/01/2014 and 31/12/2014 5,075,117,004

ACCUMULATED AMORTIZATIONAs at 01/01/2014 3,517,471,632 Charge for the year 505,186,163 Foreign exchange differences from conversion 37,431,559 As at 31/12/2014 4,060,089,354

NET BOOK VALUE OF GOODWILLAs at 31/12/2014 1,015,027,650

As at 31/12/2013 1,507,481,832

31/12/2014VND

31/12/2013VND

Short-term loans 2,578,180,854 118,165,060,008Current portion of long-term loans (Note 21) 1,152,196,776,318 1,711,302,875,544Foreign exchange difference from conversion 1,858,833,786 -

1,156,633,790,958 1,829,467,935,552

31/12/2014 VND

31/12/2013 VND

Value added tax 211,305,683,574 214,422,009,528 Import tax 3,845,526 - Corporate income tax 154,506,265,992 69,312,757,524 Personal income tax 41,085,259,848 52,453,160,820 Others 66,967,200,786 44,431,502,940

473,868,255,726 380,619,430,812



FORM B 09-DN/HN


01/0

1/20

14VN

DAd

ditio

nsVN

DPa

idVN

D

Fore

ign

exch

ange

di

ffere

nces

VN

D31

/12/

2014

VND

Valu

e ad

ded

tax

214,

422,

009,

528

1,29

1,65

4,68

1,61

9 1,

294,

821,

885,

773

50,8

78,2

00

211,

305,

683,

574

Impo

rt/ex

port

dutie

s -

52

,194

,843

,742

52

,200

,290

,824

9,

292,

608

3,8

45,5

26

Cor

pora

te in

com

e ta

x68

,914

,335

,684

64

7,97

6,50

7,15

6 56

2,19

8,10

0,53

2 (1

86,4

76,3

16)

154,

506,

265,

992

Pers

onal

inco

me

tax

52,4

53,1

60,8

20

618,

005,

799,

586

630,

530,

079,

430

1,15

6,37

8,87

2 41

,085

,259

,848

Sp

ecia

l con

sum

ptio

n ta

x -

2,

945,

806

2,94

5,80

6 -

-

Li

cens

e ta

x -

23

,000

,000

23

,000

,000

-

-

O

ther

s44

,431

,502

,940

97

6,14

8,50

6,62

4 95

6,12

5,08

8,00

2 2,

512,

279,

224

66,9

67,2

00,7

86

380,

221,

008,

972

3,58

6,00

6,28

4,53

3 3,

495,

901,

390,

367

3,54

2,35

2,58

8 47

3,86

8,25

5,72

6 In

whi

ch:

Tax

rece

ivabl

es fr

om th

e St

ate

budg

et (3

98,4

21,8

40)

-

Tax

paya

bles

to th

e St

ate

budg

et38

0,61

9,43

0,81

2 47

3,86

8,25

5,72

6

The

oblig

atio

ns to

the

Stat

e bu

dget

dur

ing

the

year

of t

he G

roup

wer

e as

follo

ws:

17. T

AX

ES A

ND

AM

OU

NTS

PAY

AB

LE T

O T

HE

STAT

E B

UD

GET

(con

tinue

d)

Not

es to

the

Con

verte

d C

onso

lidat

ed F

inan

cial

Sta

tem

ents

(Con

tinue

d)

Thes

e no

tes a

re a

n int

egra

l par

t of a

nd sh

ould

be re

ad in

con

junct

ion w

ith th

e ac

com

pany

ing

conv

erte

d co

nsoli

date

d fin

ancia

l sta

tem

ents

FOR

M B

09-

DN

/HN


31/12/2014 VND

31/12/2013 VND

Accrued expenses for the operation of drilling rigs 827,513,003,520 976,915,331,976 Accrued expenses for overhaul of fixed assets 430,592,278,326 208,848,542,364 Accrued expenses related to goods and services supplying 414,018,762,384 250,183,903,716 Accrued interest expenses 31,536,648,822 40,264,734,132 Other expenses 119,219,591,940 77,695,666,632

1,822,880,284,992 1,553,908,178,820

18. ACCURED EXPENSES

19. OTHER CURRENT PAYABLES

21. LONG-TERM LOANS AND LIABILITIES

31/12/2014 VND

31/12/2013 VND

Profit sharing to BCC 215,307,920,070 158,851,229,364 Payables to Petrovietnam - Loan balance of Standard Chartered Bank which was paid on behalf of PVD Deepwater in accordance with BCC contract

- 101,016,533,844

Other payables 38,961,382,212 52,790,283,756 254,269,302,282 312,658,046,964

20. SHORT-TERM PROVISIONS

As at 31 December 2014 and 31 December 2013, short-term provisions represent the provision for salary fund which was created at rate of 17% of salary fund approved for drilling rigs according to the Group’s decision.

31/12/2014 VND

31/12/2013 VND

Long-term loans 4,247,999,962,182 5,494,783,520,592 Current portion of long-term loans (Note 16) (1,152,196,776,318) (1,711,302,875,544)

3,095,803,185,864 3,783,480,645,048

Accrual for overhaul cost of fixed assets are made for each year based on the estimated payables related to periodical overhaul in the future for the Group’s drilling rigs.



FORM B 09-DN/HN


31/12/2014 VND

31/12/2013 VND

Joint Stock Commercial Bank for Foreign Trade of Vietnam ("Vietcombank")

304,452,423,851 588,139,134,542

Joint Stock Commercial Bank for Investment and Development of Vietnam (“BIDV”)

1,750,421,333,142 2,216,947,794,972

HSBC Bank (Vietnam) Limited (“HSBC”) 122,164,500,000 604,785,000,000MBBank and Vietnam Joint Stock Commercial Bank For Industry and Trade ("Vietinbank")

841,239,619,200 984,365,462,772

MBBank and OceanBank 301,057,510,695 350,070,542,436Standard Chartered Bank (“SC Bank”) 505,603,413,021 747,626,451,930Southeast Asia Commercial Joint Stock Bank (“Seabank”) 424,920,000,000 -Foreign exchange differences from conversion (1,858,837,727) 2,849,133,940

4,247,999,962,182 5,494,783,520,592

21. LONG-TERM LOANS AND LIABILITIES (continued)

Details of long term loans are as follows:



FORM B 09-DN/HN


Name of Bank Purpose ofConstruction financing

Interest rate%

Form ofcollaterals

Balance as at31/12/2014

Originalcurrencies

Vietcombank PVDrilling I SIBOR 6 months+margin

Guaranteed by PVN - USD

BIDV – syndicated loan

PVDrilling II 12 months saving deposit + margin

PV Drilling II 76,388,277 USD

BIDV PVDrilling III 12 months saving deposit + margin

Unsecured 6,000,000 USD

HSBC syndicated loan

PVDrilling III LIBOR 3 months + margin

Guaranteed by PVN and PV Drilling III

5,750,000 USD

MBBank & Vietinbank

PVDrilling V SIBOR 6 months + margin

Guaranteed by value of PV Drilling V and revenue from capital contribution in BCC

39,595,200 USD

SC Bank PVDrilling V LIBOR 6 months + margin


7,200,000 USD

MBBank & OceanBank

PVDrilling V LIBOR 6 months + margin


14,081,267 USD

Vietcombank PVDrilling V 12 months saving deposit + margin


10,969,429 USD

SC Bank PVDrilling V LIBOR 6 months + margin


16,493,556 USD

Vietcombank Buying machinery and equipment

12 months saving deposit + margin

Formed assets from project 15,457,802,423 VND

Vietcombank Buying machinery and equipment


Formed assets from project 1,078,984 USD

Vietcombank Investing in new tubulars running tools


Formed assets from project 1,471,095 USD

Seabank PVDrilling VI LIBOR 3 months + margin

PV Drilling VI with equivalent lending rate

20,000,000 USD

Details of loan contracts are as follows:



FORM B 09-DN/HN


31/12/2014 VND

31/12/2013 VND

Within one year 1,152,196,776,318 1,711,302,875,544 In the second year 951,570,840,810 1,141,943,951,028 In the third to fifth year inclusive 1,933,190,366,832 2,148,075,804,756 After five years 211,041,978,222 493,460,889,264

4,247,999,962,182 5,494,783,520,592Less: Amount due for settlement within 12 months(shown under current liabilities) (1,152,196,776,318) (1,711,302,875,544)Amount due for settlement after 12 months 3,095,803,185,864 3,783,480,645,048

22. SCIENTIFIC AND TECHNOLOGICAL DEVELOPMENT FUND

According to the Group’s Charter, the Group appropriates for the Scientific and Technological Development Fund with amount which does not exceed 10% of taxable profit in order to develop scientific and technological activities. Movement in the Scientific and Technological Development Fund during the year was as follows:

2014 VND

2013 VND

Opening balance 551,976,478,032 325,704,431,648 Fund appropriation 318,514,438,540 224,625,921,217 Fund usage (622,340,135) (311,682,819)Depreciation charge to fund (2,289,554,798) - Foreign exchange differences from conversion 3,282,004,467 1,957,807,986 Ending balance 870,861,026,106 551,976,478,032

Ending balance of scientific and technological development fund as at 31 December 2014 included VND 14,052,984,775 of carrying amount of tangible fixed assets constructed and purchased from the fund (Cost of tangible fixed asset was VND 16,342,539,573). As at 31 December 2014, usable closing balance of scientific and technological development fund was VND 856,808,041,331 (equivalent to USD 40,324,936).

21. LONG-TERM LOANS AND LIABILITIES (continued)

Long-term loans are repayable as follows:



FORM B 09-DN/HN


23. OWNERS’ EQUITY

Owners’ contributed capital

According to the tenth amendment of the Business Registration Certificate, the Group’s charter capital as at 31 December 2014 is VND 3,030,733,500,000. The number of shares which has been approved and issued by the Group as follows:

31/12/2014 31/12/2013

Number ofshares

VNDNumber of

sharesVND

Authorized share capital 303,073,350 3,030,733,500,000 275,528,695 2,755,286,950,000 Issued share capitalOrdinary shares 282,921,350 2,829,213,500,000 235,528,695 2,355,286,950,000Ordinary shares subject torestriction of ownership transfer 20,152,000 201,520,000,000 40,000,000 400,000,000,000

303,073,350 3,030,733,500,000 275,528,695 2,755,286,950,000 Treasury sharesOrdinary shares (36,450) (364,500,000) (270,580) (2,705,800,000)

(36,450) (364,500,000) (270,580) (2,705,800,000) Shares currently in circulationOrdinary shares 282,884,900 2,828,849,000,000 235,258,115 2,352,581,150,000Ordinary shares subject torestriction of ownership transfer 20,152,000 201,520,000,000 40,000,000 400,000,000,000

303,036,900 3,030,369,000,000 275,258,115 2,752,581,150,000

Ordinary shares have a par value of VND 10,000. The Group has only one class of ordinary shares which carry no right to fixed dividend. Common shareholders will receive dividends at the time of declaration and be entitled to a voting right for each owned share at the shareholders’ meeting. All shares rank equally with regard to the Group’s residual assets.

Ordinary shares subject to restriction of ownership transfer have a par value of VND 10,000. These ordinary shares subject to restriction of ownership transfer that shareholders have no right to sold the shares within the first 1 year to 3 years since the issued date. As at 31 December 2014, ordinary shares subject to restriction of ownership transfer includes Petrovietnam’s shares which are subject to restriction of ownership transfer within 3 years since 18 July 2013.

Petrovietnam, which is both the founding shareholder and the main shareholder of the Company as at 31 December 2014, currently holds 152,711,035 shares, equivalent to 50.39% of total shares in circulation of the Company (as at 31 December 2013: 138,828,214 shares, equivalent to 50.44%).



FORM B 09-DN/HN


Ow

ner’s

co

ntrib

uted

cap

ital

VND

Shar

e pr

emiu

mVN

DTr

easu

ry s

hare

sVN

DFo

reig

nex

chan

ge

rese

rves

VND

Inve

stm

ent a

ndde

velo

pmen

t fu

ndVN

D

Fina

ncia

l re

serv

e fu

ndVN

D

Ret

aine

d ea

rnin

gsVN

D

Tota

lVN

D

As a

t 01/

01/2

013

2,10

5,08

2,15

0,00

01,

382,

130,

231,

854

(15,

407,

860,

950)

673

,496

,144

,515

5

54,4

69,6

75,7

07

262,

334,

956,

772

2,03

0,03

1,17

3,47

8 6

,992

,136

,471

,376

D

ecla

red

divi

dend

s 2

50,2

04,8

00,0

00

- -

- -

- (5

00,4

42,4

35,0

00)

(250

,237

,635

,000

)

Cap

ital c

ontri

butio

n 4

00,0

00,0

00,0

00

1,06

3,91

9,69

6,00

0 -

- -

- -

1,4

63,9

19,6

96,0

00

Fore

ign

exch

ange

di

ffere

nces

- -

- 9

,689

,831

,711

-

- -

9,6

89,8

31,7

11

Profi

t for

the

year

- -

- -

- -

1,99

3,16

5,26

5,13

5 1

,993

,165

,265

,135

Fu

nds

dist

ribut

ions

- -

- -

184

,562

,622

,859

7

5,89

4,65

0,62

0 (5

21,1

21,5

77,5

35)

(260

,664

,304

,056

)D

istri

butio

ns to

NC

I -

- -

- -

- (8

,875

,100

,160

) (8

,875

,100

,160

)D

istri

butio

ns to

BC

C -

- -

- -

- (1

00,8

92,3

47,4

46)

(100

,892

,347

,446

)B

onus

of t

reas

ury

shar

es -

- 3

,444

,307

,759

-

(3,4

44,3

07,7

59)

- -

- A

s at

31/

12/2

013

2,75

5,28

6,95

0,00

02,

446,

049,

927,

854

(11,

963,

553,

191)

683,

185,

976,

226

735,

587,

990,

807

338,

229,

607,

392

2,89

1,86

4,97

8,47

29,

838,

241,

877,

560

Dec

lare

d di

vide

nds

275

,446

,550

,000

-

- -

- -

(826

,431

,040

,000

)(5

50,9

84,4

90,0

00)

Buy

ing

treas

ury

shar

es -

- (3

64,5

00,0

00)

- -

- -

(364

,500

,000

)Fo

reig

n ex

chan

ge

diffe

renc

es -

- -

101

,838

,530

,014

(9

81,6

68,0

41)

(490

,837

,103

)3,

229,

579,

469

103,

595,

604,

339

Profi

t for

the

year

- -

- -

- -

2,53

9,98

2,46

4,38

8 2,

539,

982,

464,

388

Fund

s di

strib

utio

n -

- -

- 2

36,6

72,6

37,9

33

46,

936,

790,

473

(614

,574

,987

,657

)(3

30,9

65,5

59,2

51)

Dis

tribu

tions

to N

CI

- -

- -

- -

(9,8

16,7

94,7

77)

(9,8

16,7

94,7

77)

Dis

tribu

tions

to B

CC

- -

- -

- -

(110

,756

,720

,828

)(1

10,7

56,7

20,8

28)

Bon

us o

f tre

asur

y sh

ares

- (1

1,96

3,55

3,19

1) 1

1,96

3,55

3,19

1 -

- -

- -

Oth

er d

ecre

ase

- -

- -

- (5

3,90

8,80

1)(3

03,9

53,4

28)

(357

,862

,229

)A

s at

31/

12/2

014

3,03

0,73

3,50

0,00

02,

434,

086,

374,

663

(364

,500

,000

)78

5,02

4,50

6,24

097

1,27

8,96

0,69

938

4,62

1,65

1,96

13,

873,

193,

525,

639

11,4

78,5

74,0

19,2

02

Mov

emen

t in

owne

rs’ e

quity

dur

ing

the

year

was

as

follo

ws:

Not

es to

the

Con

verte

d C

onso

lidat

ed F

inan

cial

Sta

tem

ents

(Con

tinue

d)

Thes

e no

tes a

re a

n int

egra

l par

t of a

nd sh

ould

be re

ad in

con

junct

ion w

ith th

e ac

com

pany

ing

conv

erte

d co

nsoli

date

d fin

ancia

l sta

tem

ents

FOR

M B

09-

DN

/HN


According to Resolution No. 01/2014/NQ-DHCD dated 25 April 2014, the Group declared dividends of 2013 at rate of 30% of its charter capital, in which 20% will be paid in cash and 10% will be paid in shares. As at 31 December 2014, the Group has paid 20% dividends in cash to shareholders with the amount of USD 25,953,108, equivalent to VND 550,984,490,000. The Group also increased its charter capital by USD 12,980,516, equivalent to VND 275,446,550,000 from payment of 10% dividends of 2013 in shares.

In 2014, the Group temporarily appropriated for investment and development fund, bonus and welfare fund, bonus fund for Management and financial reserve fund out of the Group’s profit after tax during the year with the rates of 10%, 12.5%, 1.5% and 5%, respectively, in accordance with the Group’s Charter. The final amounts of such appropriations will be determined and approved by shareholders at the Shareholders’ Annual General Meeting.

According to Resolution No. 01/12/2014/NQ-HDQT dated 18 December 2014, the Group’s Board of Management has approved implementation of buying 2 million treasury shares which is financed by investment and development fund. Expected transaction time is no later than 6 months from the approval date of the Board of Management.

Foreign exchange differences resulted from translation of financial statement of Algeria branch and subsidiaries from cost of assets expressed in Algeria Dinar and Vietnam Dong into United States Dollar and conversion of the Group’s consolidated financial statements from USD to VND.

Details of foreign exchange differences were as follows:

Exchange rate difference from conversion of foreign operation

(Algeria Branch) VND

Exchange rate difference from conversion of subsidiaries’

financial statements VND

TotalVND

As at 01/01/2013 (1,892,121,031) 675,388,265,546 673,496,144,515 Additions (5,452,876,645) 15,142,708,356 9,689,831,711 As at 31/12/2013 (7,344,997,676) 690,530,973,902 683,185,976,226 Additions (12,480,469,029) 114,318,999,043 101,838,530,014 As at 31/12/2014 (19,825,466,705) 804,849,972,945 785,024,506,240

24. NON-CONTROLLING INTEREST

Non-controlling interest (NCI) present the minority shareholders portion in net assets value and the operating result of PVD Training and PVD Overseas.

Interest rate of the NCI in PVD Training and PVD Overseas as at 31 December 2014 was calculated as follows:

PVD Training PVD OverseasVND USD

Charter capital of subsidiaries 28,958,670,000 51,141,000 Including:Distributed capital of the Company 14,996,960,000 41,728,800Distributed capital of the non-controlling shareholders 13,961,710,000 9,412,200Share of the non-controlling interest 48.21% 18.40%



FORM B 09-DN/HN


2014 VND

2013 VND

Profit for the year 20,361,482,395 18,408,276,985 Non-controlling interest in operating result

9,816,794,777 8,875,100,160

31/12/2014 VND

31/12/2013 VND

Total assets 1,719,005,230,024 190,751,077,396 Total liabilities (560,799,003,138) (129,429,348,743)Net assets 1,158,206,226,886 61,321,728,653

Details as follows:

Charter capital 1,115,500,356,000 28,958,670,000 Share premium 312,482,400 312,482,400 Other funds 11,232,634,935 8,178,412,575 Retained earnings 31,160,753,551 23,872,163,678

31/12/2014 VND

31/12/2013 VND

Non-controlling interest 234,522,887,454 29,564,751,696Details as follow:PVD Training Charter capital 13,961,710,000 13,961,710,000 Share premium 150,655,698 150,655,698 Foreign exchanges due to conversion

4,976,385,517 (10,149,041)

Other funds 3,953,158,872 3,953,158,872 Retained earnings 11,509,376,167 11,509,376,167

PVD Overseas Contributed capital 199,971,601,200 -

24. NON-CONTROLLING INTEREST (continued)

NCI in net asset as at 31 December 2014 and 31 December 2013 was as follows:

NCI in operating result for the year ended 31 December 2014 and 31 December 2013:



FORM B 09-DN/HN


25. BUSINESS AND GEOGRAPHICAL SEGMENTS

Business segments

For management purposes, the Group is currently organized into three operating divisions - drilling services, trading and other services. These divisions are the basis on which the Group reports its primary segment information.

Principal activities are as follows:

• Drilling services: providing drilling rigs and drilling services

• Trading: provide material and equipment for drilling activities

• Other services: provide well services, wire line logging, oil spill control service, drilling manpower supply service, investment-management project consulting service, management consulting service and other related services in the oil and gas industry.

Segment information about the Group’s consolidated operations is presented below:



FORM B 09-DN/HN


Dril

ling

serv

ices

Trad

ing

Oth

er s

ervi

ces

Elim

inat

ion

Tota

l

VND

VND

VND

VND

VND

Ass

ets

Segm

ent a

sset

s16

,426

,463

,240

,220

1,36

3,27

5,44

6,38

29,

290,

289,

962,

796

(3,7

75,2

68,1

76,2

42)

23,3

04,7

60,4

73,1

56

Una

lloca

ted

asse

ts-

--

--

Con

solid

ated

ass

ets

23,3

04,7

60,4

73,1

56Li

abili

ties

Segm

ent l

iabi

litie

s8,

009,

713,

956,

130

1,06

8,15

0,19

2,33

0 1,

963,

075,

707,

412

550

,723

,710

,628

11

,591

,663

,566

,500

Una

lloca

ted

liabi

litie

s-

--

--

Con

solid

ated

liab

ilitie

s11

,591

,663

,566

,500

Con

solid

ated

bal

ance

she

etA

s at

31

Dec

embe

r 20

14

Dril

ling

serv

ices

Trad

ing

Oth

er s

ervi

ces

Elim

inat

ion

Tota

lVN

DVN

DVN

DVN

DVN

DA

sset

sSe

gmen

t ass

ets

14,9

90,6

34,9

82,6

801,

366,

671,

034,

164

8,05

0,59

3,67

6,33

2(2

,915

,566

,563

,616

)21

,492

,333

,129

,560

Una

lloca

ted

asse

ts-

--

--

Con

solid

ated

ass

ets

21,4

92,3

33,1

29,5

60Li

abili

ties

Segm

ent l

iabi

litie

s14

,033

,113

,454

,328

1,07

2,14

4,96

7,40

0(1

,889

,643

,369

,900

)(1

,591

,088

,551

,524

)11

,624

,526

,500

,304

Una

lloca

ted

liabi

litie

s-

--

--

Con

solid

ated

liab

ilitie

s11

,624

,526

,500

,304

Con

solid

ated

bal

ance

she

etA

s at

31

Dec

embe

r 20

13

25. B

USI

NES

S A

ND

GEO

GR

AP

HIC

AL

SEG

MEN

TS (c

ontin

ued)

Not

es to

the

Con

verte

d C

onso

lidat

ed F

inan

cial

Sta

tem

ents

(Con

tinue

d)

Thes

e no

tes a

re a

n int

egra

l par

t of a

nd sh

ould

be re

ad in

con

junct

ion w

ith th

e ac

com

pany

ing

conv

erte

d co

nsoli

date

d fin

ancia

l sta

tem

ents

FOR

M B

09-

DN

/HN


Dril

ling

serv

ices

Trad

ing

Oth

er s

ervi

ces

Elim

inat

ion

Tota

lVN

DVN

DVN

DVN

DVN

DG

ross

reve

nue

12,

928,

276,

855,

252

1,7

42,4

33,1

59,8

58

7,4

54,9

90,5

01,5

63

(1,2

41,3

71,7

92,0

73)

20,

884,

328,

724,

600

Net

reve

nue

12,

928,

276,

855,

252

1,7

42,4

33,1

59,8

58

7,4

54,9

90,5

01,5

63

(1,2

41,3

71,7

92,0

73)

20,

884,

328,

724,

600

Cos

t of s

ales

10,

327,

830,

076,

632

1,6

49,7

05,2

21,3

15

5,8

38,3

62,3

16,2

48

(1,0

52,9

37,9

03,1

48)

16,

762,

959,

711,

047

Gro

ss p

rofit

2,6

00,4

46,7

78,6

20

92,

727,

938,

543

1,61

6,62

8,18

5,31

5 (1

88,4

33,8

88,9

25)

4,1

21,3

69,0

13,5

53

Fina

ncia

l inc

ome

31,

200,

125,

697

20,

040,

686,

655

995

,914

,700

,408

(8

85,8

69,0

72,4

07)

161

,286

,440

,353

Fi

nanc

ial e

xpen

ses

187

,299

,075

,883

1

4,19

8,33

8,85

2 9

3,79

3,29

8,26

9 (3

,634

,180

,713

) 2

91,6

56,5

32,2

91

Sellin

g ex

pens

es 1

8,74

6,45

2,45

1 1

,480

,430

,000

3

8,97

4,47

6,94

8 -

5

9,20

1,35

9,39

9 G

ener

al a

nd a

dmin

istra

tion

expe

nses

398

,102

,790

,833

4

0,17

3,20

2,26

8 8

73,5

12,3

25,0

28

(188

,965

,955

,467

) 1

,122

,822

,362

,662

O

pera

ting

profi

t 2

,027

,498

,585

,150

5

6,91

6,65

4,07

8 1,

606,

262,

785,

478

(881

,702

,825

,152

) 2

,808

,975

,199

,554

O

ther

inco

me

50,

562,

986,

902

1,9

13,1

17,3

91

72,

935,

287,

360

(1,0

37,2

52,7

05)

124

,374

,138

,948

O

ther

exp

ense

s 3

,676

,351

,819

2

,492

,642

,289

4

8,54

1,52

3,18

4 -

5

4,71

0,51

7,29

2 Pr

ofit f

rom

oth

er a

ctiv

ities

46,

886,

635,

083

(579

,524

,898

) 2

4,39

3,76

4,17

6 (1

,037

,252

,705

) 6

9,66

3,62

1,65

6 In

com

e fro

m in

vest

men

ts in

join

t ve

ntur

es-

--

- 2

99,2

06,7

04,1

42Ac

coun

ting

profi

t bef

ore

tax

2,07

4,38

5,22

0,23

3 5

6,33

7,12

9,18

0 1,

630,

656,

549,

654

(882

,740

,077

,857

) 3

,177

,845

,525

,352

C

urre

nt c

orpo

rate

inco

me

tax

expe

nse

645

,872

,969

,777

Def

erre

d co

rpor

ate

tax

inco

me

(8,0

09,9

08,8

13)

Net

pro

fit a

fter

cor

pora

te in

com

e ta

x2,

539,

982,

464,

388

Con

solid

ated

inco

me

stat

emen

tFo

r th

e ye

ar e

nded

31

Dec

embe

r 20

14

Not

es to

the

Con

verte

d C

onso

lidat

ed F

inan

cial

Sta

tem

ents

(Con

tinue

d)

Thes

e no

tes a

re a

n int

egra

l par

t of a

nd sh

ould

be re

ad in

con

junct

ion w

ith th

e ac

com

pany

ing

conv

erte

d co

nsoli

date

d fin

ancia

l sta

tem

ents

FOR

M B

09-

DN

/HN


Dril

ling

serv

ices

Trad

ing

Oth

er s

ervi

ces

Elim

inat

ion

Tota

lVN

DVN

DVN

DVN

DVN

DG

ross

reve

nue

9,56

1,71

8,60

6,85

51,

136,

919,

033,

825

5,34

4,99

9,63

6,75

0(1

,176

,957

,598

,155

)14

,866

,679

,679

,275

Net

reve

nue

9,56

1,71

8,60

6,85

51,

136,

919,

033,

825

5,34

4,99

9,63

6,75

0(1

,176

,957

,598

,155

)14

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Con

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the

year

end

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1 D

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2013

Not

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the

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d)

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e no

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l par

t of a

nd sh

ould

be re

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con

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ith th

e ac

com

pany

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conv

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date

d fin

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l sta

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FOR

M B

09-

DN

/HN

25. B

USI

NES

S A

ND

GEO

GR

AP

HIC

AL

SEG

MEN

TS (c

ontin

ued)


Geographical segments

Currently, the Group is mainly operating in Vietnam, the overseas units (Algeria Branch and subsidiary PVD Overseas) assets, revenue and operation result is immaterial (less than 10%) of total assets, revenue and operation result of the Group. Thus, the Board of Directors of the Group decided not to present the Geographical segments.

2014 2013VND VND

Raw materials and consumables 1,511,322,873,025 539,473,135,730Labour 3,849,538,230,630 3,059,271,640,525Depreciation and amortization 1,065,820,727,731 1,103,264,409,330Out-sourced services 8,873,463,723,550 6,315,324,346,685Other expenses 995,132,656,857 439,987,817,555Cost of trading 1,649,705,221,315 1,066,955,603,665

17,944,983,433,108 12,524,276,953,490

26. PRODUCTION COSTS BY NATURE

27. FINANCIAL INCOME

28. FINANCIAL EXPENSES

2014 2013VND VND

Interest income 99,336,387,722 62,175,966,055 Realized foreign exchange gain 61,950,052,631 36,635,224,185

161,286,440,353 98,811,190,240

2014 VND

2013 VND

Interest expense 144,676,565,627 222,995,412,065 Unrealized foreign exchange loss 27,093,074,493 25,780,070,790 Realized foreign exchange loss 111,619,451,985 65,404,833,910 Loss on disposal long-term financial investments 13,460,957,818 - Reversal of provision for impairment of long-term financial investments

(17,745,005,003) -

Other financial expenses 12,551,487,371 32,299,857,840 291,656,532,291 346,480,174,605

Dril

ling

serv

ices

Trad

ing

Oth

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inat

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reve

nue

9,56

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t of s

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fit2,

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260

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579,

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(288

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333,

279,

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140

Fina

ncia

l inc

ome

15,7

17,6

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515,

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et p

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FORM B 09-DN/HN


2014 VND

2013 VND

Profit before tax 3,177,845,525,352 2,291,100,524,340 Adjustment for:Non-assessable income (374,298,560,954) (615,398,812,020)Non-deductible expenses 78,982,061,397 37,678,498,975 Taxable income 2,882,529,025,795 1,713,380,211,295 Corporate income tax expense 586,369,083,954 295,184,664,648 Additional corporate income tax expense of prior years 61,607,423,202 (3,081,634,200)Foreign exchange differences (2,103,537,379) (793,656,873)Current corporate income tax expense 645,872,969,777 291,309,373,575

29. CURRENT CORPORATE INCOME TAX EXPENSE

Applicable Corporate Income Tax (“CIT”) rate is 22% of assessable income of the Group, except for the incentives as follows:

• PVD Training is obliged to pay CIT at the rate of 10% of its assessable income from training over its operating period and 22% of its assessable income from other activities. PVD Training is entitled to CIT exemption for three years (from 2007 to 2009) and reduction of 50% for the following seven years (from 2010 to 2016) for its technical training activities; and exemption for two years (from 2005 to 2006) and reduction of 50% for the following seven years (from 2007 to 2013) for its safety training activities.

• PVD Tech is obliged to pay CIT at the rates ranging from 15% to 22% of its assessable income arising from incentive and other activities. PVD Tech is entitled to a CIT incentive for its project on Design, Manufacturing, Maintaining and Repairing Oil and Gas Structures and Equipment Workshop, as follows:

• For manufacturing activities: CIT is 15% of assessable income for 12 years from the date of the project commencement (2008). PVD Tech is entitled to CIT exemption for three years from the first profit-making year and a reduction of 50% for the following seven years. The first profit-making year was 2009.

• For service activities: the CIT is 20% of assessable income in ten years from the date of the project commencement (2008). PVD Tech is entitled to CIT exemption for two years from the first profit-making year and a reduction of 50% for the following six years. The first profit-making year was 2009.

• PVD Deepwater is obliged to pay CIT at the rate 10% for 15 years from assessable income of PV Drilling V (2011). PVD Deepwater is entitled to CIT exemption for 4 years from the first profit-making year (from 2012 to 2015) and reduction of 50% for the following 9 years (from 2016 to 2024).

In 2014, the Company paid an additional corporate income tax for previous years with the amount of VND 61,607,423,202 including the tax payable to the State Budget related to corporate income tax which was declared by 50% deduction due to first listed on stock market period from 2004 to 2006 for 2012 and 2013. The additional payment was conducted in accordance with Official Letter No. 14041/BTC-TCT dated 03 October 2014 issued by General Department of Taxation.



FORM B 09-DN/HN


The Group’s tax reports are subject to examination by the tax authorities. As the application of tax laws and regulations for many types of transactions is susceptible to varying interpretations, the amounts reported in the converted consolidated financial statements could be changed at a later date upon final determination by the tax authorities.

30. BASIC EARNINGS PER SHARE

The calculation of the basic earnings per share attributable to equity holders of the Group is based on the following data:

2014

2013 (Restated)

VND VNDProfits attributable to the Group’s shareholders 2,419,408,948,783 1,883,397,817,529 Earnings for the purposes of basic earnings per share

2,419,408,948,783 1,883,397,817,529

Weighted average number of ordinary shares 302,913,892 277,569,555 Basic earnings per share 7,987 6,785

For purpose of presenting comparative data to the consolidated financial statements for the year ended 31 December 2014, basic earnings per share for the year ended 31 December 2013 has been restated because the Group issued 27,544,655 shares in August 2014 to pay for 10 % dividend of 2013, the changes compared with previously reported data as follows:

Weighted average number of ordinary shares

Diluted basis earnings per share

(USD)Previously reported amount 250,024,900 7,533 Adjusting for the effect of dividend paid by shares in 2014

27,544,655 (748)

Amount after adjusted 277,569,555 6,785

31. CONTINGENT LIABILITIES Up to the date of these converted consolidated financial statements, the Group has not completed the tax finalization for its branch operation in Algeria applied tax finalization procedure of local country. The tax finalization will be done by the Authorities of Algeria upon the completion of Algeria project and the tax liabilities will be determined at that time. However, the Group’s Board of Directors believes that will be no significant tax liabilities relating to tax finalization for Algeria branch which have to make provision will be incurred.



FORM B 09-DN/HN


32. OPERATING LEASE COMMITMENTS

Lease commitments for office, warehouse and land:

2014 2013VND VND

Minimum lease payments under operating leases recognized in income statement for the year

56,429,063,883 44,536,511,885

31/12/2014 31/12/2013VND VND

Within one year 46,374,196,596 45,227,421,036 In the second to fifth year inclusive 46,527,252,780 59,137,265,676 After five years 34,180,692,276 37,925,005,032

127,082,141,652 142,289,691,744

At the balance sheet date, the Group had outstanding commitments under non-cancelable operating leases, which fall due as follows:

Operating lease commitments represent rental payable by the Company which relate to the lease contracts of office, warehouse and land with the duration over one year.

Lease commitments of drilling rigs for operating:

For the operation purpose, the Group leases drilling rigs and rents out under the form of operating lease. Rental charge is computed based on day rate price and number of actual days of operation of rigs.

33. FINANCIAL INSTRUMENTS

Capital risk management

The Group manages its capital to ensure that the Group will be able to continue as a going concern while maximizing the return to shareholders through the optimization of the debt and equity balance. The capital structure of the Group consists of net debt (borrowings disclosed in Note 16 and 21, offset by cash and cash equivalents) and equity attributable to shareholders of the Company (comprising owners’ contributed capital, share premium, treasury shares, foreign exchange difference, reserves and retained earnings).

Gearing ratio

The gearing ratio of the Group as at the balance sheet date was as follows:



FORM B 09-DN/HN


31/12/2014 VND

31/12/2013 VND

Borrowings 4,252,436,976,822 5,612,948,580,600 Less: Cash and cash equivalents (3,208,194,249,666) (2,597,616,954,888)Net debt 1,044,242,727,156 3,015,331,625,712 Owners' equity 11,478,574,019,202 9,838,241,877,560 Net debt to equity ratio 9% 31%

Significant accounting policies

Details of the significant accounting policies and methods adopted by the Group (including the criteria for recognition, the bases of measurement, and the bases for recognition of income and expenses) for each class of financial asset and financial liability are disclosed in Note 4.

Categories of financial instruments

Carrying amounts31/12/2014 31/12/2013

VND VNDFinancial assetsCash and cash equivalents 3,208,194,249,666 2,597,616,954,888 Trade and other receivables 4,792,838,844,966 4,038,187,246,692

Other investments 11,937,320,052 35,779,122,672 Deposits 23,926,607,820 30,027,963,277 Total 8,036,897,022,504 6,701,611,287,529Financial liabilitiesBorrowings 4,252,436,976,822 5,612,948,580,600 Trade and other payables 2,906,807,990,628 2,453,807,138,676 Accrued expenses 1,822,880,284,992 1,553,908,178,820 Total 8,982,125,252,442 9,620,663,898,096

The Group has not yet assessed fair value of its financial assets and liabilities as at the balance sheet date since there are no comprehensive guidance under Circular 210/2009/TT-BTC issued by the Ministry of Finance on 6 November 2009 (“Circular 210”) and other relevant prevailing regulations to determine fair value of these financial assets and liabilities. While Circular 210 refers to the application of International Financial Reporting Standards (“IFRS”) on presentation and disclosures of financial instruments, it did not adopt the equivalent guidance for the recognition and measurement of financial instruments, including application of fair value, in accordance with IFRS.

Financial risk management objectives

Financial risks include market risk (including foreign currency risk and interest rate risk), credit risk and liquidity risk.



FORM B 09-DN/HN


33. FINANCIAL INSTRUMENTS (continued)

The Group has been hedging these risks exposures by controlling and balancing the cash flows (including foreign currencies cash flows) and closely tracking with market information to have proper hedging instruments.

Market risk

The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates.

Foreign currency risk management

The Group undertakes certain transactions denominated in foreign currencies; consequently, the Group exposures to exchange rate fluctuations arise. However, the Group manages to balance cash inflow and outflow of foreign currencies by negotiating business contracts on the balance basis of foreign currencies from payables and receivables in order to minimize the foreign currency risk.

The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities as at balance sheet date were as follows:

Liabilities Assets31/12/2014 31/12/2013 31/12/2014 31/12/2013

VND VND VND VNDUnited States Dollar (USD)

3,604,366,396,227 4,471,336,630,650 1,412,409,281,242 1,562,834,489,467

Vietnam Dong (VND) (The company)

327,933,209,810 331,097,893,827 4,190,611,515,762 2,391,902,719,408

Algeria Dinar (DZD) 8,857,252,341 17,310,581,845 18,915,301,840 53,341,575,481Singapore Dollar (SGD)

27,248,088,835 13,441,657,219 7,146,287,047 360,294,652

Euro (EUR) 5,286,580,714 5,828,036,801 1,406,293,334 176,696,720Norwegian Krone (“NOK”)

- 74,818,057 - -

Thai Baht (“THB”) 96,417,950 - - - British Pound (GBP) 520,209,879 1,337,941,977 3,304,497,931 247,354,541 Australian Dollar (“AUD”)

86,214,196 617,590,465 52,255,387 -

Foreign currency sensitivity analysis

The Company is mainly exposed to Vietnam Dong and subsidiaries exposed to United States Dollar.

The rate of 2% is the sensitivity rate used when reporting foreign currency risk internally to the Board of Directors and represents the Board of Directors’ assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the year end for a 2% change in foreign currency rates. For a 2% increase/decrease in Vietnam Dong against United States Dollar, the Company’s profit before tax in the year would change as follows:



FORM B 09-DN/HN


31/12/2014 31/12/2013VND VND

Increase/decrease at the Company 77,253,557,916 41,216,087,232Decrease/increase at Subsidiaries 43,839,142,300 58,170,042,824Increase/(decrease) at Consolidation 33,414,415,616 (16,953,955,592)

Base on the similar analysis to other foreign currencies, there was no significant effect to operation business result of the Group.

Interest rate risk management

The Group has significant interest rate risks arising from interest bearing loans which are arranged. The Group is exposed to interest rate risk as the Group borrows funds at both fixed and floating interest rates. The risk is managed by the Group by maintaining an appropriate ratio between fixed and floating rate borrowings.

Interest rate sensitivity

The loan’s sensitivity to interest rate changes was assessed by the Group that may arise at an appropriate level is fluctuation in floating interest bearing loan of higher/lower 30 basis points. Assuming all other variables were held constant and the loan balance at the balance sheet date were the outstanding amount for the next year, if interest rates applicable to floating interest bearing loans had been 30 basis points higher/lower, the Group’s profit before tax would have decreased/ increased by VND 12,732,005,436 (2013: VND 16,484,356,536).

Credit risk

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. The Group assess that there is no any significant credit risk exposure to any counterparty because receiv-ables are from huge customers operating in the oil and gas industry and trusted.

Liquidity risk management

The purpose of liquidity risk management is to ensure the availability of funds to meet present and future financial obligations. Liquidity is also managed by ensuring that the excess of maturing liabilities over maturing assets in any period is kept to manageable levels relative to the amount of funds that the Group believes can generate within that period. The Group policy is to regularly monitor current and expected liquidity requirements to ensure that the Group maintains sufficient reserves of cash, borrowings and adequate committed funding from its owners to meet its liquidity requirements in the short and longer term.

The following tables detail the Group’s remaining contractual maturity for its non-derivative financial assets and financial liabilities with agreed repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial assets including interest that will be earned on those assets, and undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay, if any. The table includes both interest and principal cash flows. The inclusion of information on non-derivative financial assets is necessary in order to understand the Group’s liquidity risk management as the liquidity is managed on a net asset and liability basis.



FORM B 09-DN/HN


31/12/2014Less than 1 year From 1- 5 years Over 5 years Total

VND VND VND VNDFinancial assetsCash and cash equivalents 3,208,194,249,666 - - 3,208,194,249,666Trade and other receivables 4,792,838,844,966 - - 4,792,838,844,966Other investments 11,937,320,052 - - 11,937,320,052Deposits 5,941,018,980 17,985,588,840 - 23,926,607,820

8,018,911,433,664 17,985,588,840 - 8,036,897,022,504Financial liabilitiesBorrowings 1,156,633,790,958 2,808,284,870,898 287,518,314,966 4,252,436,976,822Trade and other payables 2,906,807,990,628 - - 2,906,807,990,628Accrued expenses 1,822,880,284,992 - - 1,822,880,284,992

5,886,322,066,578 2,808,284,870,898 287,518,314,966 8,982,125,252,442

Net liquidity gap 2,132,589,367,086 (2,790,299,282,058) (287,518,314,966) (945,228,229,938)

31/12/2013Less than 1 year From 1- 5 years Over 5 years Total

VND VND VND VNDFinancial assetsCash and cash equivalents 2,597,616,954,888 - - 2,597,616,954,888Trade and other receivables 4,038,187,246,692 - - 4,038,187,246,692Other investments 20,000,000,000 9,979,120,788 5,800,001,884 35,779,122,672Deposits 14,036,375,041 15,991,588,236 - 30,027,963,277

6,669,840,576,621 25,970,709,024 5,800,001,884 6,701,611,287,529Financial liabilitiesBorrowings 1,829,467,935,552 3,290,019,755,784 493,460,889,264 5,612,948,580,600Trade and other payables 2,453,807,138,676 - - 2,453,807,138,676Accrued expenses 1,553,908,178,820 - - 1,553,908,178,820

5,837,183,253,048 3,290,019,755,784 493,460,889,264 9,620,663,898,096

Net liquidity gap 832,657,323,573 (3,264,049,046,760) (487,660,887,380) (2,919,052,610,567)

33. FINANCIAL INSTRUMENTS (continued)



FORM B 09-DN/HN


34. RELATED PARTY TRANSACTIONS AND BALANCES

List of related parties:

Related parties RelationshipPetrovietnam Company’s subsidiaries Company has investment from PetrovietnamPetrovietnam’s Joint Ventures/Joint Operating Companies/Petroleum Sharing Contracts

Company has investment from Petrovietnam

During the year, the Group entered into the following significant transactions with related parties:

2014 2013VND VND

Sales and service providedPetrovietnam Company’s subsidiaries 2,327,895,452,085 1,520,229,002,505Petrovietnam’s Joint Ventures/Joint Operating Companies/Petroleum Sharing Contracts

9,834,464,079,774 2,612,295,908,385

PurchasesPetrovietnam Company’s subsidiaries 190,442,389,959 311,120,268,750Petrovietnam’s Joint Ventures/Joint Operating Companies/Petroleum Sharing Contracts

47,070,209,682 6,061,603,640

Loans from PVcomBankInterest paid - 251,554,960Repayment of principal loan for the year - 29,202,754,875

Remuneration paid to the Group’s Boards of Management and Directors during the year was as follows:

2014 2013VND VND

Salaries 5,466,162,000 5,411,898,000Bonuses 1,526,644,500 1,053,323,000Benefits in kind 315,000,000 306,380,000

7,307,806,500 6,771,601,000



FORM B 09-DN/HN


34. RELATED PARTY TRANSACTIONS AND BALANCES (continued)

Related party balances at the balance sheet date were as follows:

31/12/2014 31/12/2013VND VND

ReceivablesPetrovietnam Company’s subsidiaries 49,176,628,980 721,930,781,664Petrovietnam’s Joint Ventures/Joint Operating Companies/Petroleum Sharing Contracts

2,503,525,903,988 912,676,773,192

PayablesPetrovietnam Company’s subsidiaries 38,140,591,618 51,262,123,536Petrovietnam’s Joint Ventures/Joint Operating Companies/Petroleum Sharing Contracts

176,517,964,726 52,476,973,572

Loan payablesPVcomBank 2,578,180,854 -

Other payablesPetrovietnam 447,235,034,982 476,437,653,516

35. APPROVAL FOR ISSUANCE OF CONVERTED CONSOLIDATED FINANCIAL STATEMENTS

The converted consolidated financial statements for the year ended 31 December 2014 is approved by the Group’s Board of Management for issuance on 25 March 2015.







FORM B 09-DN/HN


PV DRILLING CORPORATION:NameAbbreviated nameStock codeCharter CapitalHead OfficePhoneFaxWebsite Enterprise Registration Certificate and Tax Code: 0302495126

PVD Drilling DivisionAdd.: 3rd Floor, Sailing Tower, 111A Pasteur Str., Ben Nghe Ward, District 1, HCMC, VietnamTel.: (84-8) 39100662

PVD InvestAdd.: 22nd Floor, Green Power Building, 35 Ton Duc Thang Str., Ben Nghe Ward, District 1, HCMC, VietnamTel.: (84-8) 38270728 PVD OffshoreAdd.: 43A Street 30/4, Ward 9, Vung Tau City, Ba Ria Vung Tau Province, VietnamTel.: (84-64) 3590124 PVD LoggingAdd.: 10th Floor, Sailing Tower, 111A Pasteur, Ben Nghe Ward, District 1, HCMC, VietnamTel: (84-8) 39105860 PVD Well ServicesAdd.: Room 13, 12A Floor, Vincom Center, 47 Ly Tu Trong Street, Ben Nghe Ward, District 1, HCMC, VietnamTel: (84-8) 39104365 PVD DeepwaterAdd.: 5th Floor, Sailing Tower, 111A Pasteur Str., Ben Nghe Ward, District 1, HCMC, VietnamTel: (84-8) 35218866

Subsidiaries (100% ownership by PV Drilling):

General Information of PV Drilling Corporation & its subsidiaries

: PetroVietnam Drilling and Well Services Corporation: PV Drilling: PVD: VND 3,030,733,500,000: 4th Floor, 111A Pasteur, Ben Nghe Ward, District 1, HCMC, S.R. Vietnam: (84-8) 39142012: (84-8) 39142021: www.pvdrilling.com.vn

ANNUAL REPORT 2014160

PVD TechAdd.: 8th Floor, Green Power Building, 35 Ton Duc Thang Str., Ben Nghe Ward, District 1, HCMC, VietnamTel.: (84-8) 22205333 PVD TrainingAdd.: Dong Xuyen Industrial Zone, Street 30/4, Rach Dua Ward, Vung Tau City, Ba Ria Vung Tau Province, VietnamTel.: (84-64) 3615 299 BJ -PV DrillingAdd.: 65A, Street 30/4, Thang Nhat Ward, Vung Tau City, Ba Ria Vung Tau Province, VietnamTel.: (84-64) 3838095 PVD - ExproAdd.: 65A, Street 30/4, Thang Nhat Ward, Vung Tau City, VietnamTel.: (84-64) 3597291 PVD Tubulars ManagementAdd.: Unit 1204, 12th Floor, Gemadept Tower, 6 Le Thanh Ton Str., HCMC, VietnamTel.: (84-8) 38257461

PVD Baker HughesAdd.: 10th Floor, Sailing Tower, 111A Pasteur, Ben Nghe Ward, District 1, HCMC, VietnamTel: (84-8) 3821 3732

PVD – OSIAdd.: Street 11, Phu My 1 Industrial Zone, Tan Thanh District, Ba Ria Vung Tau Province, VietnamTel.: (84-64) 3899199

VietubesAdd.: Street 11, Dong Xuyen Industrial Zone, Rach Dua Ward, Ba Ria Vung Tau Province, VietnamTel.: (84-64) 3834664

PVD OverseasAdd.: No. 10, Anson Street, #22-14 International Plaza, Singapore 079903

Joint stock companies and joint ventures:

General Information of PV Drilling Corporation & its subsidiaries (Continued)

4th Floor, Sailing Tower, No. 111A Pasteur Street, Ben Nghe Ward, District 1, Ho Chi Minh City

Tel: +84-8-39 142 012Fax: +84-8-39 142 021 / 39 142 022Web: www.pvdrilling.com.vn

PETROVIETNAM DRILLING& WELL SERVICES CORPORATION

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