Offshore Oil Engineering Co., Ltd. Semiannual Report of 2015

Transcription

1 Company code: Company name: COOEC Offshore Oil Engineering Co., Ltd. Semiannual Report of 2015 Important Notes I. The Company's Board of Directors, Board of Supervisors and directors, supervisors and senior managers guarantee the contents of the semiannual report are true, correct and complete, without false records, misleading statements or major omissions, and bear joint and several liabilities. II. All directors of the Company attend the board meeting. III. The semiannual report hasn't been audited. IV. Zhou Xuezhong who is principal of the Company, Chen Yonghong who is principal of accounting and Wang Yajun who is principal of accounting agency (accountant in charge) state: authenticity, accuracy and integrity of financial statements in semiannual reports are secured. V. The Plan of Profit Distribution or the Plan of Transferring Public Accumulation Fund to be Stock Capital Reviewed by Board of Directors Inapplicable. VI. Risk statement for forward-looking statements Such forward-looking statements as future plan in the semiannual report don't constitute the Company's material commitments to investors, so, the investors shall pay attention to investment risks. VII. Is there the situation relating to non-business funds occupation by the stockholders and their related parties? No VIII. Is there the situation relating to violating decision-making procedures to tender external guarantee? No 1 / 164

2 Table of Contents Section I Paraphrase... 3 Section II Company Profile... 4 Section III Summary of Accounting Data and Financial Indexes... 5 Section IV Report of the Board of Directors... 7 Section V Important Matters Section VI Equity Changes and Shareholders Section VII Particulars about Preferred Shares Section VIII Information on Directors, Supervisors and Senior Managers Section IX Financial Statement Section X List of Documents for Further Reference / 164

3 Section I Paraphrase In this report, unless otherwise defined, the following words shall have meanings set forth as below: Definition of common terms EPCI Referring to English Abbr. of Engineering design, Procurement, Construction and Installation. FPSO Referring to Floating Production Storage and Offloading for short. LNG Referring to Liquefied Natural Gas for short. Construction of "Four Capacities" Referring to Construction of the general contracting capacity core design; construction of offshore installation supported by large-scale equipment; construction of facility maintenance capacity which taking submarine pipe maintenance as breakthrough; acceleration of deepwater ability construction based on conventional water filed market. 3 / 164

4 I. Company Information Chinese title of the Company Short for Chinese title of the Company English title of the Company Short for English title of the Company Legal representative of the Company II. Contact and Contact Information Name Address Section II Company Profile Offshore Oil Engineering Co., Ltd. COOEC OFFSHORE OIL ENGINEERING CO., LTD. COOEC Zhou Xuezhong Liu Lianju Telephone number Fax III. Basic Introduction Registered address Postcode of registered address Office address Postcode of office address Internet website Secretary of the Board of Directors No. 199 Haibin 15 Road, Tianjin Port Free Trade Zone Apartment 202-F105, 2/F, Skirt Building, Ligang Plaza, No. 82, West Road 2, Tianjin Port Free Trade Zone No. 199 Haibin 15 Road, Tianjin Port Free Trade Zone IV. Introduction to Information Disclosure and Place of Preparation Title of the newspaper designated by COOEC for information disclosure Website designated by China's Securities Regulatory Commission (CSRC) for publishing semiannual report Semiannual report preparation place V. Profile of Stock A-share Bonds China Securities Journal, Shanghai Security News Board Secretariat Stock types Stock listing exchange Stock abbreviation Stock code Shanghai Stock Exchange Shanghai Stock Exchange VI. Registration Change during the Report None COOEC COOEC bonds / 164

5 Section III Summary of Accounting Data and Financial Indexes I. Major Accounting Data and Financial Indexes (I) Major accounting data Major accounting data This report period (January to June) Same period last year Increase and decrease of current period compared with that of last year (%) Operating income 6,935,023, ,790,123, Net profit attributable to shareholders of the listed company Net profit attributable to shareholders of listed company after non-recurring profit and loss are deducted 1,555,638, ,730,823, ,363,081, ,585,692, Net cash flows from operating activities 1,583,684, ,573,632, Net asset attributable to shareholders of the listed company At end of the report period At end of last year Increase or decrease at end of the report period compared with the end of last year (%) 21,172,955, ,557,302, Total assets 29,249,183, ,147,771, (II) Primary financial indexes Primary financial indexes Basic earnings per share (EPS) (Yuan/share) This report period (January to June) Same period last year Increase and decrease of current period compared with that of last year (%) Diluted EPS (Yuan/share) Basic EPS after deducting non-recurring gains and losses (Yuan/share) Return on weighted average net assets (%) Return on weighted average net assets after deducting non-recurring gains and losses (%) Down 2.57 percentage points Down 2.69 percentage points II. Differences of domestic and foreign accounting data under accounting standard Applicable Inapplicable 5 / 164

6 III. Items and amount of non-recurring gains/losses Applicable Inapplicable Items of non-recurring profits / losses Amount Gains and losses on disposal of non-current assets 20,010, Government subsidies recorded in current gains or losses, excluding government subsidies closely related to normal operations which in line with national policy and according to certain standards or quantitative quotas 63,682, Gains and losses on assets invested or managed by others entrusted 62,467, In addition to effective hedging business relating to normal operating activities of the Company, variable loss and profit of fair value generated from held trading financial assets and trading financial liabilities as well as investment income gained from disposal of trading financial assets, trading financial liabilities and available-for-sale financial assets 86,611, Other non-operating income and expenditure in addition to all items above 2,385, Other profits and losses in conformity with definition of non-recurring profit and loss 0 Effect on minority interest 90, Effect on income tax -42,690, Total 192,557, / 164

7 Section IV Report of the Board of Directors I. Discussion and Analysis on Operation during Report Period of the Company by the Board of Directors In first half of 2015, global economic recovery was in a weak trend with increasing uncertainties, and domestic economy entered into a "new normal state" of rapid growth changing into moderate and rapid growth. Affected by slowing increase in global economy and continuing excess of oil & gas supply, price of global crude oil remained low and investment of global oil & gas industry reduced obviously, which imposed certain influence on development and operation of oil & gas engineering industry. Facing such challenges, the Company always gives priority to safety production and project quality, thus ensuring steady and orderly implementation of all domestic projects under construction and large international project such as Russia Yamal, Myanmar Zawtika and Australia Ichthys. While steadily promoting production and construction project, the Company strove to exploit international market and won the bid of Brazil FPSO Project during the report period, marking its first entering into South America market. On the other hand, the Company enhanced cost control and carried out in-depth cost control and saving via such comprehensive measures as fine management, procurement optimization and technical innovation, to roundly decrease cost and increase benefit and acquire positive achievements. The Company achieved operating income of RMB billion in the first half year, including net profit of RMB billion. In the first half year, the Company's stock was selected as sample stock of "SSE 50" index and won the honor of "Top Ten Main Listed Companies with Good Value in China in 2014" sponsored by Securities Times, China Fund and New Fortune, and the honor of "Top 100 Listed Companies Most Respected by Investors in 2014" sponsored by China's Listed Companies Association, Securities Association of China and other units. (I) Analysis of Primary Business 1. Change Analysis on Items Relating to Financial Statement Item Amount in Current Period Amount in the Same Period of Last Year Change Ratio (%) Operating income 6,935,023, ,790,123, Operating costs 4,882,561, ,171,446, Sales expenses 3,641, ,025, Management expenses 313,627, ,258, Financial expenses 45,683, ,552, Net cash flows from operating activities Net cash flow from investment activities 1,583,684, ,573,632, ,497, ,448,422, Net cash flow from financing activities -1,663,448, ,013,712, Inapplicable R&D expenditure 189,649, ,943, Net profits of shareholders of the parent company 1,555,638, ,730,823, Description of reasons for operating income change: operating income of the report period is RMB 7 / 164

8 6.935 billion, showing a year-on-year decrease of 29.16%. It is mainly because the overall work quantities decreased to certain extent, among which finished steel processing quantity of onshore construction decreased by 46% compared with that of last year, and operation ship-day of offshore installation decreased by 31%. Description of reasons for operating cost change: the operating cost is RMB billion, showing a year-on-year decrease of 31.92%. It is mainly because that the incurred cost decreased along with work quantities, and the company continuously implemented comprehensive cost decreasing & benefit increasing measures and regarded cost decreasing as the key of improving core competitiveness, with the cost well controlled. Description of reasons for sales expense: sales expense is RMB 3,641,600, showing a year-on-year increase of 20.38%. It is mainly because that the Company made great effort in exploiting international market, resulting in sales expenses increase. Description of reasons for management cost change: management cost is RMB 314 million, showing a year-on-year decrease of 25.02%. It is mainly due to decreasing of research and development expenditures. Description of reasons for financial expense change: financial expense is RMB 45,683,300, showing a year-on-year decrease of 14.69%. It is mainly because that the Company repaid the mortgage loan of Hong Kong Subsidiary and Shenzhen Subsidiary repurchased "Offshore Oil 289" of financial leasing, hence decreased liability with interest and net interest expense. Description of reasons for net cash flow change incurred by operating activities: net cash flow incurred by operating activities is RMB billion, showing a year-on-year increase of 0.64%. It is mainly because that the Company realized stable collection and steady cash flow in operating activities in the first half year. Description of reasons for net cash flow change incurred by investment activities: net cash flow incurred by investment is RMB 580 million, showing a year-on-year decrease of 868 million, viz. decreased 59.92%. It is mainly because that (1) the Company and Offshore Oil Engineering (Zhuhai) Co., Ltd. received net return on investment of RMB 1.3 billion from bank financial products, while that of last year was RMB 1.8 billion; (2) cash of RMB billion was used to purchase fixed assets, intangible assets and other long-term assets in this period, showing a year-on-year increase of RMB 465 million. Description of reasons for net cash flow change incurred by financing activities: net cash flow incurred by financing is RMB billion, showing a year-on-year decrease of 350 million. Net cash flow incurred by financing activities in this period mainly covers (1) Hong Kong Subsidiary repaid mortgage loan of USD 9.18 million, viz. RMB 56 million; (2) Shenzhen Subsidiary paid the 5th rent of RMB 27 million for "Offshore Oil 289" of financial leasing, and repurchased expenditure of that ship, RMB 560 million; (3) the Company implemented annual profit distribution of 2014 in this period, totally RMB billion cash dividends distributed. However, net cash flow incurred by financing activities in same period of last year mainly covers repayment of due bank loan for import & export, RMB 1.48 billion, and implementation of 2013 annual profit distribution, viz. cash dividends of RMB 442 million. As a result, net cash flow of this period shows a year-on-year decrease. Description of reasons for R&D expenditure change: R&D expenditure is RMB 190 million, showing a year-on-year decrease of 33%. It is mainly because that the Company properly decreased the budget expenditure for scientific projects in combination with overall income decrease in 2015, and some engineering and industrialized R&D projects got project approval mostly in June in combination with the operation conditions of project, while actual input will mainly come in next half year. Therefore, R&D expenditure in first half year is not so much. Description of reasons for net profit assigned to shareholders of the parent company is RMB billion, showing a year-on-year decrease of 10%. The income scale decreased along with work quantities. However, the amplitude of net profit decrease is obviously smaller than income mainly attributed to continuous enhancement of project management and cost control, which leads to positive achievements. 2. Others (1) Progress description of operation plans 1) Engineering projects operation was safe and orderly with continuous ability enhancement of international projects 8 / 164

9 In the first half year, the Company operated 26 engineering projects simultaneously, and completed 6 projects including Kenli 10-1, Lufeng 7-2 and Jinzhou 9-3. It also completed onshore construction of 6 jackets and 15 modules. It carried out offshore installation of 6 jackets and 24 modules and 18 km submarine pipeline laying. Kenli 10-1 Project and Lvda 10-1 Project witnessed advanced mechanical completion 45 days and 13 days ahead respectively. Bozhong Project saved more than 20 ship-days, i.e. cost saving of about RMB 50 million. Injury incident frequency and recordable events remained low, with favorable safe management level maintained. Progress of key projects in first half year: S.N. Project name Actual progress 1 Brazil FPSO Module Project 0.2% 2 Russia Yamal Project 9% 3 Penglai 19-9 Oilfield Comprehensive Adjustment Project 12% 4 Bozhong 13-1 Oilfield Decompression and Production Increase Project 12% 5 Offshore Module Installation for Phase II of Weizhou N Exploitation Project 6 Enping 23-1 Oilfields Development Project 26% 7 Myanmar Zawtika Project 42% 8 Indonesia BD Project 50% 9 Kenli 10-4 Project 60% 10 Phase II Development Project of Jinzhou 25-1/25-1 South Oil and Gas Field 90% 11 Shell Brunei BSP Project 91% 12 Norway NyhamaNA Project 99% 13 Kenli 10-1 Project 100% 14 Bozhong Project 100% 15 Jinzhou 9-3 Project 100% Statistics on main work quantities: In terms of design took 1.02 million man-hours. In terms of construction, processing of t steels was completed. In terms of installation took 8500 ship-days. Overseas large project increased obviously and offshore installation stepped toward the world. Compared with same period of last year, such large international projects as Russia Yamal, Myanmar Zawtika and Brazil FPSO were increased in report period, and totally 7 overseas projects including Australia Ichthys and Norway Nyhamna were operated. Ichthys Project had module construction completed as planned and is now under batch shipment. Nearly RMB 20 million cost was saved for the project by optimizing construction mode and shipment scheme. Now the 12 modules of TRAIN1 of Yamal Project are in progress, involving the prefabrication and final assembly of 169 decks. Myanmar Zawtika Project has realized zero accident of 1 million man-hours. "Blue Whale" carried out offshore installation of BSP Project in Brunei waters. 2) New progresses were made in international market development with acceleration of internationalized operation 20% 9 / 164

10 In the report period, the Company received orders totaling about RMB billion, among which domestic order accounted for RMB billion, while overseas order, RMB billion, including 6 international projects like Brazil FPSO and leasing of "Offshore Oil 698". 1 Opened Brazil market for the first time and made new breakthrough in FPSO market Under the situation of depressed overall international oil & gas industry, the Company entered into Brazil market for the first time by actively strengthening market development and seizing the opportunities In this May, the Company signed FPSO contract with the subsidiary of Petrobras in respect of providing partial design and module construction as well as all integration and commissioning works for two FPSOs. Successful implementation of the project will be beneficial for the Company to enhance business connection with Brazil partner and lay a solid foundation for cooperation in deepwater market and FPSO general contracting in future. 2Further deepened the cooperation with existing clients and international peers, continuously seeking for new cooperation opportunities Cooperation with Shell was further strengthened. In the report period, Qingdao Subsidiary successfully got HSE Management Green Certification of Shell and became one of the mere green contractors of Shell in the world. Meanwhile, both parties are actively discussing new cooperation fields and projects. It continued enhancing exchange and cooperation with such international energy companies as Petrobras., Petroleos Mexicanos, TOTAL and Exxon Mobil Corporation, and further promoted competitive advantage of low cost EPC and offshore installation resources of the Company. It attached importance to cooperation with national medium and small energy companies along the line of "One Belt and One Road", and provided overseas medium and small energy companies with financing and EPC services by relying on the implementation of "One Belt and One Road" strategy and utilizing EPC ability and expertises of the Company. 3Further perfected overseas layout In first half year, the Company actively promoted the establishment of Brunei Branch, Thailand Subsidiary and Brazil Subsidiary based on actual needs of business development. It now owns 11 overseas companies, with standing body set in Australia, Indonesia, Saudi Arabia, Nigeria, Canada, Hong Kong, Houston, etc. At present, it is planning to establish project operation center in Mexico, Brazil, Thailand, Katar and Singapore. At that time, it will finish the layout of five regional markets, viz. Southeast Asia, Middle East, Australia, Africa and Europe & America and cover all major offshore oil & gas producing areas in the world, hence accelerating market development of relevant areas. 3) Important results were achieved in Zhuhai field by introducing cooperator, with continuous promotion of deepwater strategy 1 Joint venture of Fluor Corporation was introduced for Zhuhai field In order to better put forward the construction of Zhuhai field, promote internationalized operation ability and deepwater ability and better expand international market jointly, the Company introduced Fluor Corporation to found a joint venture for construction, management and operation for Zhuhai field. As one of the tycoons in international ocean engineering industry, Fluor owns rich experiences in internationalized project operation and mature market channel and can well unite with the Company for better advantage complement. For specific details, please refer to Announcement on Resolutions of Board of Directors disclosed by the Company on the same day of semiannual report and other relevant announcements. Phase I Project of Zhuhai field was completed in last June. By the end of the report period, nearly 70% of Phase II project is finished. 2Two ships with the world's advanced deepwater operating ability were put into service At the beginning of March, 3,000 m dynamic positioning (DP) deepwater multifunction underwater working ship "Offshore Oil 286" and deepwater trenching multifunction ship "Offshore Oil 291" with the world's advanced operating ability invested and constructed by the Company were put into service. Till then, the Company possessed a deepwater fleet comprised of 3,000 m deepwater pipe laying crane ship "Offshore Oil 201", deepwater multifunction installation ship "Offshore Oil 289", 50,000 t semi-submersible self-propelled ship "Offshore Oil 278" and other world advanced ships, marking that deep underwater construction equipment ability of China has reached world advanced level and the Company is capable of deep sea large production platform hoisting, precise underwater structures installation and submarine pipelines and cables laying. 10 / 164

11 4) "Quality and Benefit Year" construction was deepened with cost decreasing & benefit increasing measures in full implementation 1 Cost control was refined, with long-term cost decreasing & benefit increasing mechanism gradually formed Favorable cost control and cost decreasing & benefit increasing measures are the key of responding to industrial low ebb during efficient operation of production project. The Company attached high importance and set about from minute details to implement comprehensive measures of quality improving, cost reduction and benefit increasing. For example, promoting negotiated procurement to decrease the cost, optimizing design and construction schemes, carrying out precise ship resource allocation, reducing standby & modifying tools and equipment, maintaining some ship equipment by itself, realizing domestication of marine spare parts, enhancing concrete measures of warehouse spare parts utilization and recycling of engineering remains, to constantly decrease cost and obtain favorable economic benefits. In first half year, 26 large design optimizations were carried out for engineering projects of the Company, with economic benefit of RMB 33 million created. For automatic welding spare parts of submarine pipeline, the inventory resource was fully used to save more than RMB ten million material cost. In a shipment project, the cup support was recycled to save imported steel cost of RMB 14 million. Such examples can be found everywhere, reflecting that Company's fine requirements on cost control. 2Scientific drive effect was continuously released in production and operation The Company continued active application of offshore floating installation technology to greatly improve offshore operation efficiency and save ship-day. The Company innovated submarine pipeline protection technology to save over 100 million engineering cost. It implemented 300 m underwater flexible pipe laying and recycling sea test independently for the first time, breaking the international monopoly. It preliminarily mastered pipe rolling technology and completed offshore test for reel installation system of road slope project in the north of South China Sea for the first time. Efficient T-type sacrificial anode was first applied in engineering project for demonstration in replacement of traditional anode. Engineering prototype of underwater testing equipment was developed for the first time to expand underwater engineering work. (2) Others Development outlook 1) The Company is still confronted with good policy environment for development 1 Construction of sea power and development of marine economy has always been the national strategy. A major deployment of constructing sea power was made on the 18th CPC National Congress and the Third Plenary Session of the 18th Central Committee of the CPC. China lays stress on improving offshore resources development capacity to make offshore industry become supporting industry of the national economy, developing marine science and technology and making breakthroughs in deepwater and other marine high-technology field. Exploration of oil and gas resources plays a major role in developing marine economy, and a series of deployments on building marine power and developing marine economy have been carried out by our government and shall provide important opportunities and policy support to a long term development in off-shore oil industry and off-shore engineering industry. 2 Ocean engineering equipment is a national strategic emerging industry and also the important contents of "China Manufacturing 2025" In recent years, China incorporates ocean engineering equipment industry into strategic emerging industry as a part of high-end equipment manufacturing, and releases relevant preferential policies for support. As the unique large offshore oil engineering general contracting company, the Company has been engaged in ocean engineering for nearly 40 years and owns ocean engineering ships and offshore oil & gas production platforms at ocean engineering equipment level, which will be beneficial for its industry future development. 11 / 164

12 Manufacturing industry is the foundation of a country. To cope with the new round of scientific revolution and industrial reform, "China Manufacturing 2025" proposed by China is a significant strategic task and policy measure of accelerating transformation, upgrading and quality & efficiency improvement of manufacturing industry based on China's actual need of transforming economic development mode, centered on such key links as innovation driving, intelligent transformation, foundation strengthening, green development and people orientation, and regarding advanced manufacturing and high-end equipment as the key fields, with the target of being listed as powerful manufacturing country by Ocean engineering industry is an important item of "China Manufacturing 2025". At present, the Company has compiled a preliminary plan of implementing "China Manufacturing 2025" policy, to promote high-end manufacturing level of the Company with focus on top-level promotion, scientific driving, equipment reserve, talent structuring and capital operation. 3 Take full advantage of the opportunity "One Belt and One Road" and the advantage of the company to accelerate the steps of internationalization. The Company actively implements the national "One Belt and One Road" strategy and exploit market along the line. It sets up branches in Thailand, Brunei, Indonesia, Australia, Singapore, Saudi Arabia and Abu Dhabi, with projects being under construction in Myanmar, Indonesia, Brunei, Australia, Middle East, Russia and North European. The Company will continue taking advantage of "One Belt and One Road" strategy to explore the market along the line to reach a win-win cooperation. 2) Set a firm confidence for steady development facing the industrial challenge incurred by low oil price Since the second half of 2014, international crude oil price has been low, which brings great challenge to global oil & gas industry. Relevant international organizations predicted international oil price may keep low for longer time. Same as a cycle in economic development, there is a rule in industry development as well. Difficulty always exists, and challenge is the only touchstone. The Company cannot control the change of external environment and oil price fluctuation, but it can set firm confidence to face the challenge, well practice the basic skills, stick to "four capabilities" construction and international market exploitation, take hold of the basic development direction, work hard in cost control and technical level improvement and create its own core competitiveness, to realize long-term sustainable development. 3) Key works arrangement for second half of 2015 In the second half year, the Company plans to operate 16 engineering projects which including Enping 23-1 oilfields development, Kenli 10-4 and Russia Yamal. It will strictly carry out safety management, always give priority to safety work and well perform the following works while ensuring safe operation of all engineering projects as planned: 1 Continue exploiting international market, effectively perform cost control and improve the development ability of adapting to low oil price Facing industrial difficulty, the Company must increase the income and save cost by effectively increasing income and reducing expenditure. In recent years, through "four capabilities" construction, the Company formed its deepwater ship of advanced operating ability, and promoted shallow-water engineering development capability from 10,000 ton class to 30,000 ton class, with international brand effect quickly promoted and cost control ability of EPC project obviously enhanced, thus providing forceful support for international market exploitation. Next, the Company will promote the advantage of 12 / 164

13 low-cost EPC to more large international petroleum companies, to vigorously exploit overseas market and promote the proportion of international business. 2 Better decrease cost and increase benefit via management innovation and scientific innovation Implement such effective measures as "guaranteeing construction by design and procurement" and "guaranteeing offshore work by onshore construction" to further realize seamless connection, intensive management and resource sharing of main production links. Request high benefits from procurement and subcontracting management, accelerate construction of procurement center and put it into operation by 2015, realize whole-process closed -loop management of procurement, constantly expand the scope of centralized and negotiated procurement, make full use of market mechanism and scale effect, and improve overall bargaining power. Request high benefits from scientific drive, and try to make achievements in subsea production system design, marginal oil field development of Bohai and Thailand, large module design and construction integration technology, large LNG storage tank and liquification technology, to contribute more value into cost decreasing and benefit increasing. 3 Well perform the current international projects and promote internationalized operation level Currently, the Company is carrying out large international projects such as Russia Yamal, Myanmar Zawtika and Brazil FPSO, with Australia Ichthys, Shell BSP and Nyhamna Project implemented simultaneously. The Company will effectively control the project quality and progress in strict accordance with contract, and get familiar with international standard, improvement management, experience accumulation and achievements creating by execution of these projects, esp. speeding up in quality internationalized business, management and technical talents cultivation, and promoting brand image and value of the Company, thus laying a good foundation for wider international cooperation and enhancement of international development and further international development.. 4 Continue pushing forward "four capabilities" construction and keep core competitiveness and steady operating ability promotion As the long-term development policy of the Company, strengthening of "four capabilities" construction must be sticked to for long time. In the second half year, the Company will promote the founding of joint venture for Zhuhai deepwater base and accelerate close cooperation between both parties in terms of international project operation, deepwater technology and international market joint exploitation. It will steadily promote the operation of "Offshore Oil 201", "Offshore Oil 286", etc., cultivate high quality deepwater teams and give effective play to ship performance, to further enhance comprehensive offshore operating ability and efficiency. It will also carry out preliminary design of TLP deepwater platform steadily and greatly improve the capacity of deepwater design through project implementation. (II) Analysis on operations of industries, products or areas 1. Statement of primary business by industries and products Unit: 10,000 Yuan Currency: RMB Primary business conditions by industry Increase Increase Increase By industry Operating income Operating costs Gross profit rate (%) and decrease of operating and decrease of operating and decrease of gross profit revenue cost over rate over over that of that of last that of last 13 / 164

14 last year (%) year (%) year (%) Offshore engineering industry Non project of Offshore engineering industry 572, , Increase by 5.58 percentage points 117, , Increase by 2.01 percentage points Statement of primary business by industries and products Increase amplitude of income from non ocean engineering project is large mainly along with gradual implementation of some large international modular onshore construction projects; income from non ocean engineering project increases rapidly, most of which is contributed by ICHTHYS Project and YAMAL Project. 2. Conditions of primary business areas Unit: 100 million Yuan Currency: RMB Area Operating income Increase and decrease of operating revenue over that of last year (%) Inland Bohai Sea South China Sea East China Sea Others Abroad Total Conditions of primary business areas Affected by declining overall work quantities in various sea areas, main business income decreases in varying degrees. However, the proportion of overseas income rises quickly and takes up nearly 1/3 of main business income mainly due to large work quantities of international projects during report period. (III) Analysis on core competitiveness As a State team in offshore engineering, the Company is a large-scale engineering general contracting company which integrates design of offshore oil and natural gas development engineering, land manufacturing and offshore installation, commissioning, maintenance and LNG engineering, which is the only one in China and is one of the biggiest offshore oil engineering EPCI (Engineering, Procurement, Construction, installation) overall contractor in Asia-Pecific. It is an engineering design unit at national Grade A, and construction enterprise at national level I. The company owns two world level manufacture base in Qingdao and Zhuhai, as well as a strong offshore installation vessel team which 14 / 164

15 composed of more than 20 deepwater and shallow water engineering vessels. In recent years, the Company insists on developing its major courses, focuses on "from shallow water to deep water", "from home to abroad" to continuously strengthen "four capabilities" construction (construction of the general contracting capacity focusing on design; construction of offshore installation supported by large-scale equipment; construction of facility maintenance capacity taking submarine pipe maintenance as breakthrough; construction of reinforcement of market status of water filed and research and capability of deepening deepwater operation), quickly improves overall contracting capacity and deepwater ability and further embodies its low cost advantage, with continuous increase in overseas business and international competitiveness, thus striding forward the goal of "constructing a world-leading energy engineering company". High EPCI general contracting capacity. Based on years of development and accumulation, the Company has possessed a complete set of mature technology, equipment and capacity system for design, construction, installation and maintenance of offshore oil and gas field development within water depth of 300 m. Through success in implementing Liwan 3-1 deepwater gas field project in the South China Sea, the Company achieved great leap in general contracting capacity of design, construction and installation from 10,000 tons to 30,000 tons and subsea pipe-laying capacity within water depth from 300 m to 1,500 mm, thus accumulating valuable experience in developing deepwater oil and gas resources. Rich experience in engineering project management. The Company owns more than 120 engineering project managers with quality certifications and operates more than 30 large and medium-scale offshore engineering projects annually in recent years, thus accumulated rich experience in offshore engineering project management. High detail design capacity. The Company has more than 1,300 designers, providing professional service to feasibility study, concept design, FEED, detail design, processing design, installation design, etc. Its design technology and capacity for developing different oil and gas fields whose water is less than 300 meters deep have reached the advanced design level in the world, and it is positively making technology reserve for deepwater. At the same time, in the past two years, the Company achieved technological advances and breakthroughs in deepwater design like deepwater subsea pipe-laying, deepwater jacket design, underwater production facilities, etc. and has applied them in production. Presently it is striving to make technological breakthroughs in design of deepwater floating platform system, deepwater subsea pipes and risers, underwater system and other deepwater products. It started design and research of deepwater tension leg platform (hereinafter referred to as TLP)in South China sea, and design of deepwater platform is to be implemented substantially 15 / 164

16 30,000-ton extra-large marine structure constructing capacity. In the areas such as Tanggu and Qingdao, the Company has had constructed manufacturing sites with area more than 1.4 million square meters, with annual processing and manufacturing capacity over 200,000 tons steel structure. It has the constructing capacity for ocean structures such as 30,000-ton extra-large jacket, supports, etc. as well as for large-scale modules and skids. Now it is Qingdao Yard constructing Deepwater Ocean Engineering Equipment Manufacturing Base in Zhuhai with area of about 2.07 million square meters and will complete the construction of the base for construction and assembly of large-scale floating facilities of deepwater engineering and the base for assembly and test of underwater engineering facilities, which will quicken the capacity for constructing deepwater ocean engineering structures. Modular construction capacity of global competitiveness. In recent years, the Company contracted a batch of large international LNG modular construction projects depending on its strong onshore construction resources and capacity, and implemented Australia Gorgon LNG and Ichthys LNG modular construction projects, with project price of over USD 0.26 billion. Currently, the Company is carrying out Russia Yamal LNG modular construction project with contract price of USD billion. This project is the first core process module construction of LNG modular plant in China, which embodies the approval of the Company's modular construction ability by large international oil & gas suppliers. A deepwater operation fleet is formed. The Company owns "Offshore Oil 201", which is the first deepwater pipe-laying crane vessel in the world and has a 3,000-m deepwater pipe-laying capacity, 4,000-ton heavy hoisting capacity and dynamic positioning capacity at level III at the same time, as well as 20 engineering vessels inclusive of "Blue Whale" which is a 7,500-ton crane vessel and 50,000-ton semi-submersible self-propelled vessel; multi-functional underwater vessels that can reach 3,000 meters operating water depth, multi-functional deepwater installation vessels,deep trench vessels, besides, it has the capacity for offshore transportation and installation of 30,000-ton extra-large ocean structures, possesses multiple installation technologies like hoisting, DP floating installation, moored floating installation, offshore launching, etc. The single jacket and support installed by it reach as heavy as 32,000 tons, and the subsea pipelines laid by it are as deep as 1,409 meters, and the laying speed of submarine pipeline of each vessels broke previous record 6 km/day. Comprehensive underwater engineering ability was established from scratch. In recent years, the Company has made a quick development in deepwater and underwater engineering ability, building an array of underwater engineering equipment, implementing dozens of underwater engineering projects. The Company has 3,000-m deepwater operation fleets and 8 sets of 3,000-m underwater robots, thus the capacity of installation of underwater structure and mooring in 3000-m depth. It has already completed manufacture and installation of underwater cross under pipe of 300-m depth, submarine pipeline terminal, submarine pipeline end manifold, deepwater connector and underwater connections, therefore, with the ability of laying and installation of flexible hose of 500-m depth, umbilical cable, and the biggest operation depth of the underwater robots reached 1,500m. 16 / 164

17 (IV) Investment analysis 1. General analysis on foreign equity investment (1) Securities investment Applicable Inapplicable (2) Stock equity of other listed company held Applicable Inapplicable Unit: RMB 10,000 Stock Code : Name of security Initial investm ent cost Sharehol ding proportion at the beginning of period (%) Sharehol ding proportion at the end of period (%) Book value at end of the period Profit and loss in the report period Chan ge in owner 's equity in the report period Account ing items Source of shares 6017 Lanpec 3, ,249. 8,642. 1,969. Financia Investm 98 Technolo l assets ent in gies availabl original e for issue sale stock Total 3,668.4 / / 29,249. 8,642. 1,969. / / The Company reduced the holding-shares of Lanpec Technologies by 5,251,400 shares in second quarter of 2015, with an average price of RMB After reduction, the Company still held million shares and the shareholding proportion is 5.01%. (3) Equity held of shares of financial enterprise Applicable Inapplicable 17 / 164

18 2. Entrusted financing & investment and its derivative products of non-financial companies (1) Entrusted financing situation Applicable Inapplicable Name of partner Zhuhai Port Branch of Bank of China Zhuhai Branch of Bank of Communica tions Zhuhai Branch of Bank of Communica tions Type of entrusted financing products Income-guar anteed financial products Income-guar anteed financial products Income-guar anteed financial products Amoun t of entrust ed financi ng 30, , , Start date of entrus ted financi ng Nove mber 24, 2014 Nove mber 27, 2014 Nove mber 27, 2014 End date of entrus ted financi ng Febru ary 24, 2015 Augus t 21, 2015 May 22, 2015 Reward determinatio n way Guaranteed income Guaranteed income Guaranteed income Estim ated incom e Amoun t of actuall y recove red princip al 30, , Actu al inco me Passin g legal proced ures or not Unit: 10,000 Yuan Currency: RMB Amou nt of provisi on for impair ment loss Conne cted transac tions or not Get invol ved in laws uit or not Sourc e of funds, which are raised funds or not Yes 0 No No Funds raised throug h privat e place ment Yes 0 No No Funds raised throug h privat e place ment Yes 0 No No Funds raised throug h privat e 18 / 164

19 place ment Zhuhai Branch of Bank of Communica tions Income-guar anteed financial products 120, Nove mber 27, 2014 Nove mber 23, 2015 Guaranteed income 6, , Yes 0 No No Funds raised throug h privat e place ment Zhuhai Branch of Bank of Communica tions Income-guar anteed financial products 20, March 4, 2015 June 2, 2015 Guaranteed income , Yes 0 No No Funds raised throug h privat e place ment Zhuhai Branch of Bank of Communica tions Income-guar anteed financial products 30, June 5, 2015 Augus t 31, 2015 Guaranteed income Yes 0 No No Funds raised throug h privat e place ment Beijing Chongwen men Branch of China Merchants Bank Principal-gua ranteed bank financial products 50, Dece mber 29, 2014 Febru ary 6, 2015 Principal-gua ranteed + floating income 50, Yes 0 No No Owne d fund Branch of EverbrightB ounded Principal-gua ranteed bank financial 50, Dece mber 29, Janua ry 28, Principal-gua ranteed + floating 50, Yes 0 No No Owne d fund 19 / 164

20 Bank products income Beijing Chongwen men Branch of China Merchants Bank Principal-gua ranteed bank financial products 50, Febru ary 16, 2015 March 20, 2015 Principal-gua ranteed + floating income 50, Yes 0 No No Owne d fund Beijing Chongwen men Branch of China Merchants Bank Principal-gua ranteed bank financial products 50, Febru ary 16, 2015 April 24, 2015 Principal-gua ranteed + floating income 50, Yes 0 No No Owne d fund Beijing Branch of Standard Chartered Bank Income-guar anteed financial products 50, April 28, 2015 June 2, 2015 Guaranteed income , Yes 0 No No Owne d fund Total / 500, / / / 8, , , / 0 / / / Accumulated amount of overdue uncollected principal and earnings (RMB) 0 (2) Entrusted loans Applicable Inapplicable (3) Other entrusted financing & investment and its derivative products Applicable Inapplicable Type of investment Capital source Contracting party Investment shares Investment horizon Product type Estimated income Investment profit and loss ICHTHYS Engineering Standard Total amount 3 years Forward Inapplicable. RMB No Get involved in lawsuit or not 20 / 164

21 project forward foreign exchange settlement Forward foreign exchange settlement of Yamal project is project collections from the Owner JKC ICHTHYS LNG Joint Venture Engineering project payment from the Owner YAMGAZ SNC Chartered Bank (China) Standard Chartered Bank (China) of USD 150,000,000 Total amount of USD 800,670,000 foreign exchange settlement 3 years Forward foreign exchange settlement Inapplicable. 2,945,700 RMB 116,200 Other entrusted financing & investment and its derivative products 1. Long-term exchange settlement of ICHTHYS Project is expected to be finished in September 2015, and that of YAMAL Project will be formally started in June Purpose of project forward foreign exchange settlement: to avoid risks in exchange rate between US dollar and RMB, forward foreign exchange settlement shall be conducted by the company to make the exchange risk of project controllable. 3. Use of the raised funds (1) General use of the raised funds Applicable Inapplicable Unit: 10,000 Yuan Currency: RMB Year of raise Method of raise Raised funds Total Total amount of used raised funds in this report period Total amount of accumulated used raised funds Total amount of unused raised funds No Purpose and direction of unused raised funds 2013 Private placement 347, , , , RMB 1.7 billion has been used for purchasing principal-guaranteed bank financial products and the rest is deposited in the special account for raised funds. Total / 347, , , , / General utilization of the raised funds Use of the raised funds shall comply with laws and regulations and meet the actual need in the financed project. 21 / 164

22 Note: Total amount of raised funds is RMB 3.5 billion, and the net amount of raised funds is RMB 3,471,496,200 with issue expenses deducted. Total amount RMB 1,940,470,100 of unused raised funds include financing benefit and interests (2) Utilization of the raised funds in committed projects Applicable Inapplicable Unit: 10,000 Yuan Currency: RMB Name of committed project Zhuhai deepwater offshore engineering equipment manufacturi ng base project Wheth er to change the project Total / Planned investme nt of raised funds No 347, , Planned investme nt of raised funds in this report period 35, , Actual accumulati ve investment of raised funds Whethe r meet with the designe d schedul e Project progress 166, Yes By the end of report period, Phase I project has been complete d in last year and Phase II project has been finished by 69% till now. Estimate d income After-tax internal rate of return is 9.3% accordin g to feasibilit y study report. 166, / / / Income generate d Net income of Zhuhai company is RMB 24,010,70 0 during this report period. Whethe r meet the expecte d income Descriptio n of schedule and income not reached Descriptio n of change reason and raised funds change procedur e Yes - No change / / / / Use of the raised funds in Refer to Special Report on Fund Deposit and Using of the Company Raised in First Half Year of / 164

23 committed projects disclosed by the Company on the same day of this report. (3) Use of the raised funds in committed projects for other purposes Applicable Inapplicable 4. Analysis on major subsidiaries and joint stock companies S.N. Company name Register capital (unit: RMB ten thousand Yuan) Main business and products Total assets (RMB 10 thousand) Net assets Net profit (RMB 10 thousand) (RMB 10 thousand) Shareholding ratio 1 COOEC Subsea Technology Co., Ltd. 120, Technical services, subsea pipe maintenance and other services for offshore oil underwater engineering 339, , , % 2 Offshore Oil Engineering (Qingdao) Co., Ltd. 300, Construction, installation, design and maintenance, etc. of offshore oil and gas engineering 693, , , % 3 Offshore Oil Engineering (Zhuhai) Co., Ltd. 395, Construction, installation, design and maintenance of offshore oil-gas engineering 555, , , % 4 COOEC International Engineering 6, Construction general contract and specialized 6, , % 23 / 164