中石化石油工程技术服务股份有限公司 -...

SINOPEC OILFIELD SERVICE CORPORATION

中石化石油工程技术服务股份有限公司SINOPEC OILFIELD SERVICE CORPORATION

2019 Annual Results Presentation

March, 2020


Disclaimer

⚫ The information contained in this document has not been independently verified. No representation or warranty

expressed or implied is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or

correctness of such information or opinions contained herein. The information contained in this document should be

considered in the context of the circumstances prevailing at the time, is subject to change without notice and has not

been, and will not be, updated solely to reflect material developments which may occur after the date of the

presentation. It is not the Company’s intention to provide, and you may not rely on these materials as providing, a

complete or comprehensive analysis of the Company, or its financial or trading position or prospects. Neither of the

Company nor any of its affiliates, advisers or representatives shall have any liability whatsoever (in negligence or

otherwise) for any loss howsoever arising from any use of this document or its contents or otherwise arising in

connection with this document.

⚫ This document contains statements that reflect the Company’s current beliefs and expectations about the future as of

the respective dates indicated herein. These forward-looking statements are based on a number of assumptions about

the Company’s operations and factors beyond the Company’s control and are subject to significant risks and

uncertainties, and accordingly, actual results may differ materially from those described in these forward-looking

statements. The Company undertakes no obligation to update these forward-looking statements for any events or

developments including the occurrence of unanticipated events that occur subsequent to such dates.

⚫ This document does not constitute, in whole or in part, an offer for subscription or for sale or invitation to purchase or

subscribe for any shares of Sinopec Corp., Sinopec Oilfield Service Corporation and related companies on any

exchanges. No part of this document shall form the basis of or be relied upon in connection with any contract or

commitment whatsoever.

Section 1: Operations in 2019

Section 2: Financials in 2019

Section 3: 2020 Outlook

Table of Contents

Section 1: Operations in 2019

SINOPEC OILFIELD SERVICE CORPORATION 4

Overview

• Fuling Shale Gas: the first successful commercial shale gas project outside North America

• Puguang Gas Field: the largest marine-facies high-sulphur gas field in China

• Shengli Oil Field: one of the largest oilfield with complex reservoir in China

• Tahe Oil Field: marine carbonate reservoir

• Yuanba Gas Field: the deepest marine-facies reservoir in China

• North Ordos Oil and Gas Field: the first horizontal well demonstration area in China

• Shunbei Oil and Gas Field: the deepest oil and gas field in Asia (Generally Over 8,000m )

国家优质工程金质奖

Geophysics Drilling Engineering Logging and Mud Logging Downhole Operation Engineering Construction

Strong R&D Capability

• 74 professor-level researchers

• 1,558 senior researchers

• 3,428 research, design, laboratory and

• development staff

• 3 research institutes

• 3 design companies

• 46 professional technical institutes

FirstPrize

National Science and Technology Progress

Award 2017

High-Efficiency Exploration and

Development in Fuling Large-scale

Marine Shale Gas Field

National Science and Technology ProgressAward 2012&2013

Technologies for safe and efficient

development of extra-large ultra-deep high

acid gas fields & industrial applications

Special Prize

Rich Experiences

国家优质工程金质奖

• Geophysics: 69 sets of seismic equipment, 175 sets of vibroseis, 324,800 collector• Drilling: 692 onshore drilling rigs, of which 294 capable for 7000m+ depth drilling, and 14

offshore drilling platforms

• Logging: 135 image logging systems, 464 sets of comprehensive logging instrument• Downhole operation: 148 sets of type-2500 and type-3000 fracturing vehicles, 119 sets of

workover rigs with power higher than 750 HP, 6 offshore operation platforms

Advanced Equipment


-10,590

142 914

-14,000

-9,000

-4,000

1,000

2017 2018 2019

Overall Operation

54.1

71.3

64.3

20

30

40

50

60

70

80

90

100

2017 2018 2019

5

( USD/Barrel )

Annual Average Brent Oil Price

Net Profit of 2019 (ASBE)

( RMB Million )

Operating Revenue of 2019

( RMB Million )

0

20,000

40,000

60,000

80,000

2017 2018 2019

48,594

58,409

69,870


736

869

999

2017 2018 2019

15.0%

20,683 24,309

27,804

2017 2018 2019

14.4%

666 747

931

2017 2018 2019

24.6%

22,155

30,279

18,903

2017 2018 2019

-37.6%

13,686 13,44114,103

2017 2018 2019

11,900

14,500

17,100

2017 2018 2019

17.9%

6

5,144

5,954

6,876

2017 2018 2019

15.5%

4.9%

2D Seismic（Km） 3D Seismic（Km2）

Geophysics Drilling Engineering

Drilling Footage（10,000 m）

Logging & Mud Logging

Standard Meter for Logging（10,000 m）

Mud Logging Footage（10,000 m）

Downhole Operation（Well Times）

Downhole Operation

Completed Contract（RMB Million）

Engineering Construction

Performance by Segments


市场开拓

7

⚫ Overseas Market➢ Middle East：Singed new wellbore contracts valued USD

1.17 billion in Saudi Arabia, 2 rigs enter gas well servicemarket, 6 drilling rigs obtained unconventional business firsttime, and signed S84 3D geophysical exploration projectscontracts valued USD 176 million and MIP pipeline projectof USD 265 million. In Kuwait, entered the field of deep welldrilling and workover, comprehensive logging, and drillingbit services, and signed 2 deep well workover rigs and 7logging teams service projects

➢ South America：In Ecuador, signed contracts with WAYRAfor 41 wells drilling projects, with total contract valued ofUSD 98 million , Cumulative new contract value of USD 180million

➢ Africa and Others：In Algeria, signed 3 geophysical dataacquisition projects of USD 140 million

⚫ Domestic Sinopec Market

➢ Provided service in key capacityconstruction projects such asWeirong shale gas, Fuling shalegas, Shunbei oil & gas field, tightgas in Ordos, gas field in westSichuan and mature oil field ineastern China

➢ Won contracts in Qingdao-Nanjing gas pipeline project,valued 4 billion RMB

➢ Promoted the cooperativedevelopment of difficult-to-develop reserves, and increasedcrude production by about118,000 tons

⚫ Domestic non-Sinopec Market

➢ Gathered to CNPC, CNOOC and

other high-quality market, 55

rigs entered the PetroChina

southwest shale gas market.

➢ Made steady process in oil and

gas exploration market of China

Geological Survey Bureau and

Chinese Academy of Geological

Sciences

30,300

37,100 38,400

New Contracts Value

2017 2018 2019

Domestic SINOPEC Market

( RMB Million )

10,600 11,700

14,500

New Contracts Value

2017 2018 2019年

Domestic Non-SINOPEC Market

( RMB Million )

917 1413

1680

457

228

291

237

374

224

290

200180

2017 2018 2019

Middle East Africa Americas Others

1,901

2,2152,375

Overseas New Contracts Value

( USD Million )


Project Management

Downsizing Organization

Optimized team structure, and guidedadministration units to grassroots front-line units. Market-based and project-based employment methods were usedto supplement the frontline.

Integrated and cut 25 auxiliary grassroots units;

◼ Coordinated over 9,000 staffs transfers at all levels,effectively alleviating the contradiction of staff mismatch

◼ Redeployed 6 drilling rigs

Personnel in 3 tiers of administration units decreased by 10.4% YoY

Project Management

Asset Allocation and Leasing Center

Human Resources Allocation Center

Performance Incentives

Formed the project coordinationteams for western, northern andsouthwestern areas.

Increased the performance wagesproportion from 40% to 50%

Single-well/single-project evaluation+ linked evaluation mechanism

Deepening Reform


科技研发

9

◼ Patents: applied for 711 news patents home and abroad, 351 granted in 2019

◼ Set up 2 R&D centers (Shengli and Zhongyuan) and 10 technology centers (

Drilling well, MWD ect.)

◼ Successfully tested the self-developed drilling RSS and made breakthroughprogress

◼ Applied the jointly developed 185 ℃ high temperature MWD successfully inShunbei industrial zone

◼ New network imaging logging system, wideband acceleration detector, andnode seismic acquisition instrument reached the international advancedlevel

Improving R&D

System

Tackling key

Technology

Transformation

Of Scientific

Achievement

◼ Signed contracts with Saudi Aramco for hydrogen sulfide detection, coiledtubing and wellsite construction, and launched industrialization plan for theautomation of drilling rig strings

◼ Ecuador’s ILY project and Mexico’s EBANO comprehensive reservoirservice projects progressed steadily

Patents &

Awards

Section 2: Financials in 2019


62,089 60,905 62,069

-2,101

5,778 6,764

-20000

0

20000

40000

60000

80000

100000

2017 2018 2019

Total Assets Net Assets

-10,590

142 914

-21.8%

0.2% 1.3%

-25%

-20%

-15%

-10%

-5%

0%

5%

-12,000

-10,000

-8,000

-6,000

-4,000

-2,000

0

2,000

2017 2018 2019

Net Profit Net Profit Margin (Right Axis)

405

-2,940

1,377

-4000

-3000

-2000

-1000

0

1000

2000

2017 2018 2019

11

Main Financial Indicators

Operating Revenue Net Profit & MarginRMB Million

Operating Cash FlowRMB Million

Total Assets & Net AssetsRMB Million

28,370 37,221 40,490

7,238

8,048

16,400 12,986

13,140

12,980

0

20,000

40,000

60,000

80,000

2017 2018 2019

Domestic inside SINOPEC Domestic outside SINOPEC Overseas

26.7%

14.9%

58.4%

48,594

58,409

22.5%

63.7%

13.8%

69,870

18.6%

57.9%

23.5%

RMB Million


50,541 52,616

63,238

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Operating Cost

2017 2018 2019

-2,497

5,089 6,174

-5.14%

8.71%

8.84%

-10%

-5%

0%

5%

10%

-4,000

-2,000

0

2,000

4,000

6,000

8,000

2017 2018 2019

Gross Profit Gross Margin (Right axis)

1,412 1,186

8,872 9,570

0

5,000

10,000

15,000

2018 2019

Inventory Contract Assets

4.6%16,973 15,630

11,996

0

5,000

10,000

15,000

20,000

Accounts Receivable

2017 2018 2019

23.3% 10,284 10,756

12

20.2%

Operating CostRMB Million

Accounts Receivable

RMB Million

Profitability , Receivables and Inventory

Inventory & Contract Assets

RMB Million

RMB MillionGross Profit & Margin


五大业务板块收入和毛利分析

Operating Revenue

3,9805,132

4,220

2017 2018 2019

Gross Profit Margin%of Total Revenue

24,719 29,88336,488

2017 2018 2019

(RMB Million)

94%

6%

48%

52%

96%

4%

89%

11%

77%

23%

5.6%

7.7%

5.1%

0%

5%

10%

2017 2018 2019

-7.2%

8.6%

9.2%

-10%

-5%

0%

5%

10%

15%

2017 2018 2019

-14.0%

1.9%

20.8%

-20%

-10%

0%

10%

20%

30%

2017 2018 2019

-7.9%

9.6%5.7%

-10%

-5%

0%

5%

10%

15%

2017 2018 2019

-5.5%

8.9%6.3%

-10%

-5%

0%

5%

10%

2017 2018 2019

1,811 2,0062,503

2017 2018 2019

4,189 5,6447,657

2017 2018 2019

11,852 13,13316,382

2017 2018 2019

-333

541 440

2017 2018 2019

-1,788

2,581 3,346

2017 2018 2019

-651

1,173 1,039

2017 2018 2019

Gross Profit

Geophysics

Drilling

Logging and Mud Logging

Engineering Construction

Downhole Operation

225

394

216

2017 2018 2019

-253

38

520

2017 2018 2019

13

（RMB Million）


Solvency

Structure of Assets and Liabilities

103.4%90.5%

89.1%

29.1% 31.4%35.6%

115.7%

74.6% 76.2%

0%

20%

40%

60%

80%

100%

120%

140%

2017 2018 2019

Debt to Assets Ratio

Interest Bearing Debt to Asset Ratio

Debt to Equity Ratio

Credit Facility from Financial Institutions

(Unit: RMB Billion)

21.2

8.8

22.3

Credit Line for loan from Sinopec Finance and SinopecCentury BrightBill and Guarantee line from Sinopec FinancialInstitutionsComprehensive Credit Line from Banks (Not for Loan)

Total：52.3

14


Costs Reduction in 2019

◼ The costs reduction in 2019 was 623 million yuan,

104% of the annual target

Capital Expenditure in 2019

◼ The 2019 CAPEX was 2.866 billion yuan,

mainly used for international market

development and equipment updating

740

1,520

2,866

2017 2018 2019

15

（Unit: RMB million)

Downtime

Costs

61%

Organization

Operating Costs

14%

External

Lease Costs

8%

Consumable

Materials Costs

5%

Other Productive

Consumption Costs

12%

Cost Reduction and Capital Expenditure

Section 3: 2020 Outlook


Industry Outlook

2020-2021 Brent Oil Price Outlook CAPEX Forecast for Major Upstream Companies

（Resource： reports from respective agencies）

11.6

15.5

20.6

13.4

9.3

25.2

33.9

11.9 13.6

16.8

20.2

13.4

9.3

31.5

34.2

12.0

2020 2021

（Unit： Billion USD）

⚫ The recovery of the world economy will slow down and world oil price is expected to fluctuate in the largerange

⚫ China’s economy will face an increased downward pressure, but the basic trend of long-term improvementand rigid growth in oil and gas demand will not change

⚫ Driven by the security of national energy strategy, the three major domestic oil companies are expected tocontinue to increase investment in upstream exploration and development. Oil companies have morestringent requirements for more qualified and efficient oil service business to increase production and reducecosts.

Ch

an

ges

in t

he o

il

serv

ice i

nd

ust

ry

（Unit：USD/barrel）

（Resource：Morgan Stanley）

17

2020 2021

http://www.google.co.uk/imgres?imgurl=http://www.businesscommand.co.uk/uploads/bp_logo_823200753158am.jpg&imgrefurl=http://www.businesscommand.co.uk/blog/07/01/2011/bp-oil-disaster-explained/&usg=__rncFfjMLOsl8T7OAJ3jdAANk1Hg=&h=602&w=960&sz=38&hl=en&start=1&zoom=1&tbnid=5eeDBLSSV7SExM:&tbnh=93&tbnw=148&ei=ZRtVTbrQD-qShAevrKHRDA&prev=/images?q=BP+logo&hl=en&safe=active&sa=N&gbv=2&tbs=isch:1&itbs=1


30,279

18,90317,700

2018 2019 2020

869999 1001

2018 2019 2020

0.2%

-6.4%

13,441 14,103

23,780

2018 2019 2020

68.6%

747

931 935

2018 2019 2020

24,30927,804 28,000

2018 2019 2020

14,500

17,100

15,000

2018 2019 2020

18

5,954

6,876 6,960

2018 2019 2020

1.2%-12.3%

Work Volume in 2020

Geophysics Drilling Engineering

2D Seismic（Km） 3D Seismic（Km2） Drilling Footage（10,000 m）

Logging & Mud Logging

Standard Meter for Logging（10,000 m）

Mud Logging Footage（10,000 m）

Downhole Operation（Well Times）

Completed Contract（RMB Million）

Downhole Operation Engineering Construction

0.7% 0.4%


Domestic Sinopec Market

DomesticNon-Sinopec Market

Overseas Market

371 384

396

2018 2019 2020

New Contract Value（100 million yuan）

22.123.7

22

2018 2019 2020

New Contract Value（100 million USD）

19

Market Development

117

145130

2018 2019 2020

New Contract Value（100 million yuan）

⚫ Provide quality services for oil exploration inTarim Basin, Eastern Fault, Jungar Basin andnatural gas exploration in Sichuan Basin andOrdos Basin

⚫ Provide efficient services in key industrialareas such as Shunbei ultra-deep oil andgas fields, Southwest natural gas, Ordostight oil and gas and deep shale gas insouthern Sichuan

⚫ Focus on the development of key pipelineprojects such as Qingdao-Nanjing,Qianjiang-Zhongyuan, Longkou-Linyi-Puyang , West line of Ordos-Anping-Cangzhou and Suyu external pipelineproject

⚫ Consolidate existing high-quality marketsof CNPC and CNOOC, and pay closeattention to the capacity construction ofkey areas such as PetroChina's southernSichuan shale gas, Tarim and Karamay, aswell as major exploration and developmentprojects such as CNOOC Bohai Bay, BeibuGulf, and South Yellow Sea project

⚫ Continuously strengthen strategiccooperation with key clients such as ChinaGeological Survey Bureau and YanchangGroup

⚫ Keep an eye on the national oil and gaspipeline market, and closely follow keycentral and local government gas, waterconservancy, and municipal projects

⚫ Consolidate and expand key markets such asSaudi Arabia, Kuwait, Ecuador, and Mexico

⚫ keep an eye on reservoir integrated serviceprojects in Ecuador, Kuwait, and Mexico

⚫ Taking the drilling business as the“Pioneer“ to introduce logging, cementingand completion, directional wells, drillingfluids, coiled tubing, fracturing and otherbusinesses to oversea high-end market

⚫ Focus on the engineering constructionmarkets in Saudi Arabia, Kenya, and Thailand.


Deepening Reform and Fine Management

20

◼ Focus on the development of core mainbusinesses, promote geophysicalexploration, strengthen wellbore business,and optimize engineering construction

◼ Enhance the development of high value-added technical service business

◼ Coordinate the development of emergingbusinesses

◼ Improve the project manager system,implement market-based remuneration,contract management and professionaldevelopment

◼ Further increase the personnel proportionfrom main business

Optimize resource integration

Optimize HR structure

◼ Optimize the market resources, establishand improve the market-oriented resourceallocation mechanism

◼ Optimize materials and equipmentresources through lease centers, andpromote unified management in key areas

◼ Optimize human resources and take HR asthe deployment center

◼ Optimize engineering technologyresources to establish and improvetechnology sharing mechanism

Optimize organization structure

◼ Integrate logging companies with smallscales and weak profitability

◼ Optimize and integrate related units inthe same area in the engineeringconstruction segment

◼ Promote internal integration of therelated geophysics branches

Optimize business structure


Improve eight

integrated

support

technologies

Continuously improve 8 sets of integrated technologies, includingintegrated shale gas, acid gas, deep oil and gas reservoirs, shallowsea oil and gas reservoirs, tight oil and gas reservoirs, coalbedmethane, E&P of mature oilfields in the East China, and geothermalresources development and utilization projects

Improve R&D System

Improve the construction of four R&D platforms continuously,cultivate offshore engineering technology centers, and promotethe constructions of key laboratories such as MWD, wellboreworking fluids, high temperature and high pressure oil and gastesting

Focus on core technologies

Accelerate the transformation

of results

Accelerate the promotion of RSS, new SINOLOG900 networkimage logging system, node seismic acquisition system, and theintegration of electrical control of long-distance pipelines andcomplex oil reservoir integrated technology

Focus on core technologies, break the technical bottlenecks,meet technical needs under complex working conditions such asultra-deep, high temperature/pressure, and small boreholes, andimprove core competitiveness

Enhancing Technology Innovation


Q&A

http://ssc.sinopec.com

Investors Relations

Tel：+86 10 5996 5998Fax：+86 10 5996 5997Mailbox：[email protected]

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