Abbr.:CNOOC Engineering Code:600583

Transcription

1 OFFSHORE OIL ENGINEERING CO.,LTD. INTERIM REPORT 2007 Abbr.:CNOOC Engineering Code: August 6, 2007

2 TABLE OF CONTENTS I. Important Note 1 II. Corporate Profile 5 III. Changes in Share Capital and Particulars about Shareholders 9 IV. Directors, Supervisors and Senior Management Members 12 V. Report of the Board of Directors 14 VI. Important Matters 24 VII. Financial Statements (Unaudited) 29 VIII. Documents Available for Inspection 91 I. Important Note 1. The Board of Directors, Board of Supervisors, directors, and supervisors as well as the senior management of the Company hereby confirm that there are not any false representation, misleading statements or important omissions carried in this report, and shall take individual and/or joint responsibilities for the authenticity, accuracy and completeness of the contents herein. 2. Independent Director Mr. Yang Jun did not attend the meeting due to business reasons, and he entrusted Independent Director Mr. Han Chuanmo in written to vote on behalf of him. 3. The Annual Financial Report is unaudited. 4. Chairman Zhou Shouwei, President Jiang Xizhao, Chief Financial Officer Wu Hanming and Finance Manager Xie Hongjun hereby confirm the authenticity and completeness of the financial report in the Interim Report. 2

3 Definition (I) Definition of Projects S/N Project Name Work 1 Bozhong 34-3/5 EPCI Contract Project 2 Penglai 19-3 Project, Phase II 3 4 New works of Panyu 30-1 Gas Field Development Project Liuhua Oilfield FPSO s Overhaul Project 5 Indonesian SES Project Development Project of Eastern Area of Jinzhou 9-3 Oilfield Xijiang 23-1 Oilfield Development Engineering Project South China Sea EPC Project for FPSO s Modules Jinzhou 21-1 Oil Gas Field EPCI Contract Project Bozhong 34-1 Oilfield Development EPCI Contract Project South China Sea Single Point Offshore Installation and FPSO Towage hook-up Project Zhuhai Liquefied Natural Gas Project CNOOC Huizhou Oil Refining EPC23 Mabian Prefecture Crude Oil Depot Project Design, procurement, onshore fabrication, offshore installation and commissioning of two jackets, two sets of modular, two offshore pipelines and two subsea cables Shop design, procurement, fabrication, and offshore installation of two jackets and three sets of modular Detailed design, procurement, onshore fabrication, offshore installation of one jacket, and offshore installation of modular Liuhua Oilfield FPSO s complete overhaul Detailed design, manufacturing design, procurement, fabrication, offshore installation and commissioning of two jackets, two sets of modular, and 134km-offshore pipeline One platform, two offshore pipelines, one subsea composite cable etc. Shop design, procurement, fabrication, and offshore installation and commissioning of one jacket and one set of modular etc. Detailed design, procurement, onshore fabrication/ commissioning of FPSO modules in Wenchang and Xijiang Design, procurement, fabrication, and offshore installation/hook-up/ commissioning of two jackets and two sets of modular etc. Two jackets and two sets of modular etc. Single point offshore installation and FPSO towage hook-up for South China Sea Xijiang Oilfield FPSO and Wenchang Oilfield FPSO Design, procurement and construction of LNG plant Design, procurement and construction of crude oil tank 14 Lisha Wharf Approval Application Design, procurement, construction and commissioning of and Construction Project Lisha Wharf in Dongguan, Guangdong Province 15 Gas Pipeline Engineering of Fujian Detailed design, construction design, procurement, LNG Terminal and Trunkline Project offshore pipeline laying and pressure testing 16 Chunxiao Drill and Module Handling EPCI Contract Project Handling of drills and modules 17 Huizhou 25-3/1 Project One jacket and one set of modular etc. Renovation of single point and central platform, design, 18 procurement, fabrication, installation and commissioning Bohai Sea Oilfield Wind Power of single-point jacket cap, procurement, pre-fabrication Demonstration Project and installation of tower, as well as deign, procurement and laying of offshore cables. 3

4 (II) Glossary 1 WHP: WellHead Platform. 2 EPCI: Engineering Procurement Construction Installation. 3 FPSO: Float Production Storage and Offloading. 4 CACT: An operating company set up by CNOOC Limited, Agip China B.V., Chevron Overseas Petroleum Ltd. and Texaco China B.V. and CNOOC Limited holds 50 percent of the stakes in the company. 5 ERP: Enterprise Resource Planning. 6 SES: South East Sumatra Gas Project. 7 QHSE: Quality, Health, Safety & Environment. 8 LNG: Liquefied Natural Gas. 9 RUP: Riser Utility Platform. 4

5 II Company Profile (I) Company Profile 1. Legal name of the Company: Chinese: 海洋石油工程股份有限公司 Chinese for short: 海油工程 English: OFFSHORE OIL ENGINEERING CO., LTD. English for short: CNOOC Engineering 2. Legal representative of the Company: Zhou Shouwei 3. Secretary of the Board of Directors: Liu Lianju Correspondence address: P.O.Box 616, No.1078 Danjiang Road, Tanggu District, Tianjin City Tel: Fax: Registered address: No Hebei Road, Tanggu District, Tianjin City Office address: No.1078 Danjiang Road, Tanggu District, Tianjin City Postal code: Website of the Company: of the Company: 5. Newspaper designated by the Company for information disclosure: China Securities Journal, Shanghai Securities News Website designated by China Securities Regulatory Commission for publication of annual report: Place where this annual report is deposited: Board Secretariat 6. Stock Exchange for the listing of the Company: Shanghai Stock Exchange Stock name: CNOOC Engineering 5

6 Stock code: Other information: Date of initial registration: April 20, 2000 Registered address of the Company: No.248 Building A, Zhongji Science Park, Huayuan Industry Development Area, Tianjin Hi-Tech Industrial Park Date of registration alternation: January 31, 2007 Registered address after registration alternation: No Hebei Road, Tanggu District, Tianjin City Corporate business license number: Tax registration certificate number: Name of the appointed CPA firm: ShineWing Certified Public Accountants Office address of the CPA firm: Room 818, Beijing Capital Times Square, No.88 West Chang an Avenue, Xicheng District, Beijing 6

7 (II) Major Financial Data and Indicators 1. Major Accounting Data and Financial Indicators in RMB At the end of last year Increase/decrease At the end of the reporting period After Before (%) compared to adjustment adjustment the previous year Total assets 6,219,130, ,056,249, ,023,421, Owner s equity (or shareholder s 3,350,201, ,986,362, ,012,450, equity) Net assets per share* (RMB) Reporting Same period of previous year Increase/decrease period (Jan.-June) After adjustment Before adjustment (%) compared to the previous year Operating profit 423,527, ,409, ,951, Total profit 588,698, ,747, ,837, Net profit 443,039, ,305, ,602, Net profit with deduction of nonrecurring 278,465, ,271, ,013, gains/losses Basic earnings per share* (RMB) Diluted earnings per share (RMB) Return on net assets 减少 0.37 个百分 (%) 点 Cash flows from operating activities, net Cash flows from operating activities per share, net 280,409, ,024, ,024, * Note: the reduction in net assets per share over the end of the previous reporting period and the slow growth in the earnings per share over the same period of the previous year were attributable to the implementation of the profit distribution plan for year 2006 in June 2007, increasing the number of total shares from 792 million to million. 2. Non-recurring Gains/Losses in RMB Non-recurring gains/losses Amount Other non-operating income/expenditure, net 165,170, Effect of income tax -597, Total 164,573,

8 3. Appendix to Income Statement during Reporting Period Profit during the reporting Return on net assets (%) Earnings per share (RMB) period Fully diluted Weighted average Fully diluted Weighted average Net profit attributable to common shareholders of the Company Net profit with deduction of non-recurring gains/losses attributable to common shareholders of the Company Note: the appendix to the income statement is prepared in accordance with relevant provisions in the Rules for the Compilation and Submission of Information Disclosure by Companies That Offer Securities to the Public No. 9: Calculation and Disclosure of Return on Net Assets and Earnings Per Share issued by China Securities Regulatory Commission. 8

9 I. Shares subject to restrictions on sales III. Changes in Share Capital and Particulars about Shareholders i. Change in Equities Unit: Share Before the change Increase/decrease as a result of the change (+,-) After the change Newly Transferred Percentage Percentage Shares issued Bonus shares shares from the Others Subtotal Shares (%) (%) shares surplus reserve 1. State-owned shares 367,199, ,439,854 73,439, ,639, Shares held by state-owned entities 28,505, ,701,107 5,701,107 34,206, Shares held by other domestic investors Incl.: Shares held by domestic legal persons Shares held by domestic natural persons 4. Shares held by foreign investors Incl.: Shares held by foreign legal persons Shares held by foreign natural persons Total shares subject to restrictions on sales 395,704, ,140,961 79,140, ,845, II. Shares not subject to restrictions on sales 1. RMB ordinary shares 396,295, ,259,039 79,259, ,554, Domestically listed foreign shares 3. Overseas listed foreign shares 4. Others Total shares not subject to restrictions 396,295, ,259,039 79,259, ,554, on sales III. Total share 792,000, ,400, ,400, ,400, Approval on Share Changes The 2006 annual general meeting of shareholders was held on 10 April 2007, on which the 2006 Profit Distribution Plan was deliberated and adopted, deciding to allot 2 shares and RMB1 (including tax) per 10 shares respectively as the stock dividend and cash dividend based on the total 792 million shares. This aforesaid plan has been completed by 8 June

10 ii. Particulars about Shareholders 1. Number of Shareholders and Their Holding of Shares Number of shareholders at the end of reporting period Shareholding of top 10 shareholders Name of shareholders China National Offshore Oil Corporation (CNOOC) CNOOC Nanhai West Corporation Harvest Strategic Growth Securities Investment Mixed Fund CCB Principal Unvarying Value Stock Securities Investment Fund FORTIS BANK SA/NV Yinhua Core Value Selected Stock Securities Investment Fund Southern Composition Selected Stock Securities Investment Fund Bank of Communications Schroders Selected Stock Securities Investment Fund Invesco Great Wall Emerging Growth Stock Securities Investment Fund Invesco Great Wall Domestic Demand Growth Open-Ended Securities Investment Fund Nature of shareholders Shareholding percentage (%) Total shares held Change during the reporting period Unit: Shares Shares subject to restrictions on sales State-owned ,159,126 81,359, ,639,126 State-owned legal person ,726,641 13,621,107 34,206,641 Other ,740,014 12,226,876 0 Other ,442,687 10,542,687 0 Overseas legal person ,000,000-1,125,506 0 Other ,627,828 未知 0 Other ,297,631 未知 0 Other ,576,452 未知 0 Other ,000,000-3,000,000 0 Other ,254, , ,381 Shares pledged or locked-up Null Null Unknown Unknown Unknown Unknown Unknown Unknown Unknown Unknown Shareholding of top10 shareholders not subject to restrictions on sales Name of shareholders Shares held not subject to Type of shares restrictions on sales China National Offshore Oil Corporation 47,520,000 RMB ordinary shares CNOOC Nanhai West Corporation 47,520,000 RMB ordinary shares Harvest Strategic Growth Securities Investment RMB ordinary shares 13,740,014 Mixed Fund CCB Principal Unvarying Value Stock Securities RMB ordinary shares 11,442,687 Investment Fund FORTIS BANK SA/NV 10,000,000 RMB ordinary shares Yinhua Core Value Selected Stock Securities RMB ordinary shares 9,627,828 Investment Fund Southern Composition Selected Stock Securities RMB ordinary shares 9,297,631 Investment Fund Bank of Communications Schroders Selected RMB ordinary shares 7,576,452 Stock Securities Investment Fund Invesco Great Wall Emerging Growth Stock RMB ordinary shares 7,000,000 Securities Investment Fund Invesco Great Wall Domestic Demand Growth RMB ordinary shares 5,254,953 Open-Ended Securities Investment Fund Of all the top 10 shareholders not subject to restrictions on sales, Statement on the connected relations of the CNOOC Nanhai West Corporation is the wholly-owned subsidiary shareholders mentioned above or their of China National Offshore Oil Corporation; both the Invesco relationship of concerted action Great Wall Emerging Growth Stock Securities Investment Fund 10

11 and Invesco Great Wall Domestic Demand Growth Open-Ended Securities Investment Fund are under the management of Invesco Great Wall Fund Management Company Limited. The Company is not aware of any connected relations and concerted action among the above-mentioned shareholders. (1) Shares held by the shareholders with 5% or above of total shares have not been pledged or locked-up during the reporting period. (2) Of the shareholders with more than 5% of total shares and all the top 10 shareholders not subject to restrictions on sales, no strategic investor or general legal person participated in the placement of new shares. (3) The shares not subject to restrictions on sales held by the CNOOC and CNOOC Nanhai West Corporation are the shares with circulation right, whose legal limited sales period specified in the share split reform has expired. 2. Shares Held by Top 10 Shareholders Subject to Restrictions on Sales and the Restrictions S/N 1 2 Name of shareholders subject to restrictions on sales China National Offshore Oil Corporation CNOOC Nanhai West Corporation Shares held subject to restrictions on sales 440,639,126 Floating date January 24, ,119,126 January 24, ,206,641 January 24, 2008 Newly- added tradable shares 47,520, ,119,126 34,206,641 Unit: Shares Restrictions Note 1 Note 1: Since the first trading date (i.e. January 24, 2006) after the implementation of the reform plan for non-tradable shares, shares shall not be traded or transferred within 12 months. Upon the expiry of 12 months, the original non-tradable shares shall become tradable in the stock exchange by listing with the proportion of not more than 5% of total shares within 12 months and 10% within 24 months. 3. Changes in the controlling shareholder and actual controller No changes happened to the controlling shareholder and actual controller during the reporting period. 11

12 IV. Directors, Supervisors and Senior Management Members i. Change of Shares Held by Directors, Supervisors and Senior Management Members In the reporting period, directors, supervisors and senior management members hold no shares of the Company. There is no change in shares holding. ii. Employment or Dismissal of Directors, Supervisors and Senior Management Members 1. According to the Company Law and the Articles of Association, the term of office of the 2 nd Board of Directors expired. The proposal on the shift of Board of Directors was deliberated at the 20 th meeting of the 2 nd Board of Directors held on 12 March The meeting agreed to adjust the structure of Board of Directors, and to change the number of directors from 9 to 7, including 3 independent directors. Mr. Zhou Shouwei, Mr. Jiang Xizhao, Mr. Xu Yongchang and Mr. Sun Shuyi were elected the candidates of non-independent directors of the 3 rd Board of Directors according to the nomination of shareholders; Mr. Li Wei an, Mr. Yang Jun and Mr. Han Chuanmo were elected the candidates of independent directors of the 3 rd Board of Directors. The 2006 general meeting of shareholders held on 10 April 2007 deliberated and approved the adjustment on the member number and personnel of the Board of Directors. 2. According to the Company Law and the Articles of Association, the term of office of the 2 nd Board of Directors expired. The 7 th meeting of the 2 nd Board of Supervisors held on 12 March 2007 deliberated the proposal on shift of Board of Supervisors. Mr. Yin Jihong and Mr. Xiao Jianwen were nominated as the candidates of supervisors of shareholder representatives of the 3 rd Board of Supervisors. The 2006 general meeting of shareholders of held on 10 April 2007 elected Mr. Yin Jihong and Mr. Xiao Jianwen as the supervisors of the 3 rd Board of Supervisors. The 3 rd Board of Supervisors was composed by them and Mr. Wang Chaozhu, the supervisor elected by the employees democratically. 3. The 1 st meeting of the 3 rd Board of Directors on 20 April 2007 elected Mr. Zhou Shouwei as the Board Chairman. 4. The 1 st meeting of the 3 rd Board of Supervisors on 20 April 2007 elected Mr. Yin Jihong as the Chairman of the Board of Supervisors. Subsequent Events: In order to adapt to the requirement of production and development of the Company and promote the implementation of great strategic objective of building a specialized and internationalized energy engineering company with sharp international competitiveness, the Company adjusted posts and ranks of the Senior Management through deliberation and approval of the 5 th meeting of the 3 rd Board of Directors held on 6 August , so as to further perfect the structure of Senior Management. According to the adjustment, the President was replaced by the General Manager, while the Executive Vice President and Vice President were replaced by the Vice General Manager. After the adjustment, Mr. Jiang Xizhao, the ex-general Manager of the Company, took office of the President; Mr. Zhou Xuezhong was employed as the Executive Vice President; Mr. Zhang Songfu and Mr. Chen Wenjin, the ex-vice General Mangers of

13 the Company, took the office of Executive Vice President; Mr. Rong Pingsheng and Mr. Li Youcheng were employed as Vice President; Mr. Li Zhigang was employed as Chief Engineer. Mr. Wang Tao, the ex-vice General Manger and Mr. Fang Xiaoming, the ex-chief Engineer resigned. 13

14 V. Report of the Board of Directors i. Analysis on the Overall Operation in the Reporting Period The year 2007 is the second Year of Fundamental Building which witnesses the most concentrated construction projects and investment projects as well as the company s striding forward the objective of being a specialized international energy engineering company with great competitiveness. During the reporting period, the Company improved its operating achievements and market image, made breakthrough in overseas market and midstream and downstream market development, steadily carried out the construction of important equipment and facilities, and further strengthened the essential work and comprehensive competitiveness. 1. Operating achievements hit a new record high and corporate image was enhanced. During the reporting period, the Company achieved an income of RMB2,618 million, representing a year-on-year increase of 31%; and a net profit of RMB443 million, a year-on-year increase of 25.40%. The above-mentioned two indicators are respectively 1.51 times and 3.34 times of those in 2002 when the Company was listed. In addition, the Company was selected at the 3 rd Chinese Top 50 Growth Blue Chip Listed Company of China in the Future Decade, won the prize of top 100 capitalization management of Chinese listed companies, and was appraised as Top 100 in Comprehensive Strengths, Top 100 in Return and Top 100 in Capitalization by China Securities Journal. During the reporting period, the Company joined the Association of Diving Contractors International (ADCI) and International Marine Contractors Association (IMCA), which is conducive to learning development trend of the industry, strengthening communication and cooperation with international peers and enhancing popularity around the world. 2. Breakthrough was made in overseas market development and progress was made in midstream and downstream market development. During the reporting period, relying on overseas operations and new energy industry of China National Offshore Oil Corp, following the principle of giving prominence to the main operations and two wings (deep-water and midstream and downstream/new energy operation) and effective mitigation of risks, the Company strengthened market development and made new breakthrough and progress in the overseas and midstream and downstream market development, thus improved and extended its industrial chain and value chain. New breakthrough was made in overseas market development. In the reporting period, the Company signed a 5-year cooperation agreement with MODEC, which provided stable international market channels, broadened business scope and improved the grade of contracting. At present, the Company is following up and bidding for The Company signed a 5-year cooperation 14 agreement with MODEC

15 over 10 overseas projects. New progress was made in the midstream and downstream market development. During the reporting period, the Company contracted for midstream and downstream projects such as crude oil tank farm and plant area pipeline network of Huizhou Refinery and Donglian/Mabianzhou Wharf, and for the first time undertook construction of natural gas liquefaction project-pearl River Natural Gas Liquefaction Project. The demonstration project of offshore wind power at Bohai Oil Field, the landmark project in the new energy development by China National Offshore Oil Corp., went well, too. 3. Management in various aspects has been improved in accordance with international practices and standards, and competitive strength of the Company has been enhanced. Firstly, the project management capacity was improved remarkably. In the first half of 2007, the Company had 24 projects under construction and the total work load increased by more than 20% over that of Facing the difficulties such as resources shortage and difficulty in organization and coordination, the Companies took several measures, such as strengthening the planning for and proportionality of project operation and specialized management, improving technical and process, and establishing the Design Management Committee for coordinating existing design tasks, thus ensured stable and order operation of various construction projects. The project of resuming production for Liuhua 11-1 oil field, a project of world-class difficulty, includes FPSO in place, towing and major repair of upper facilities, salvage, rehabilitation and prearrangement of 10 damaged anchors, connection of FPSO and 10 anchors, salvage rehabilitation and tie-back of hoses etc. It was unprecedented in the history of international ocean engineering to salvage and rehabilitate damaged anchor and hose. As the EPCI contractor, the Company successfully executed the project, which indicated great improvement in the project management capacity, technical innovation capacity and resources integration capacity of the Company, accumulated techniques, experiences, talents and information channels for deep-water operation and is of great importance for probing into effective deep-water development mode and promoting deep-water and overseas market development. FPSO Connection for Liuhua 11-1 Oil Field Secondly, QHSE management capability was enhanced remarkably. During the reporting period, the Company advocated corporate culture of honesty and good faith and strengthened QHSE management. The Company established monthly meeting system for HSE management of cooperating institutions and quality accident file card. The qualified rate statistical was carried out based Gliding launching of jacket for Dongle on weld bead length and crater quantity and quality instead of based solely on weld bead length. The qualified rate statistical for painting 15

16 dressing and appearance inspection was done as well. The Company compiled annual quality report. According to the statistics, the Company maintained stable achievements in safety management and the first time qualified rate of welding quality came to international advanced level although the total work time increased remarkably. Thirdly, the investment project management capability was strengthened. During the reporting period, Qingdao site, the crane barge for deep-water pipelaying, the shallow-water pipelaying vessel and the 30,000t launching barge were carried out simultaneously and orderly. The execution of such large investment projects not only laid a solid substantial foundation for fulfilling the 11 th Five-Year Plan, but also cultivated project management talents, making preparations for smooth operation of the large-sized equipment and facilities in the future. Fourthly, resources integration capability was notably enhanced. During the reporting period, the Company successfully selected the large-sized core equipment required for execution of projects and invited domestic contractors of great strengths to a coordinating meeting for market development, which laid a foundation for effective acquisition or integration of resources and development of international market. At the same time, by signing strategic agreement for procurement and centralized purchase, the Company stimulated enthusiasm of the manufacturers for competitive bidding, reduced the occupation of funds and inventory, and enhanced the efficiency. Reporting Meeting of Strategic Plan Fifthly, the strategic planning and management capability was enhanced. In order to promote sustainable development, the Company established a specialized institution, and engaged internal experts for the compilation of 10-year strategic plan which involves the largest number of persons and lasting the longest period in the history of the Company. At present, the first draft of the plan has been preliminarily made. Sixthly, the independent innovation ability was improved. The Company for the first time systematically worked out a 10-year strategic plan for technology development, and improved the technology management system. Substantial progress has been made in the construction of ocean engineering technique centre, welding lab & certification centre and integration of production, study and research. The Company hit a fresh record high in application for patents and new records. Three projects including the major project of Underwater Dry-type Pipeline Maintenance System in the 10 th Five-Year 863 Plan were accepted through examination. The achievements have been applied in the detection and reposition of submarine cable of Caofeidian Oil Field at Bohai Sea Gulf and maintenance and first-aid repair of submarine pipeline of Weizhou Oil Field at west of South China Sea. The deep-water pipelaying project of 10 th Five-year 863 Plan is proceeding on schedule. In the meantime, the Company ceaselessly promoted the application of ERP. In the first half of the year, safe operation rates of network and ERP system reached 99.8% and 98%, respectively. 16

17 Seventhly, the scientific and lean management was enhanced significantly. During the reporting period, scientific and lean management of the Company was represented. For instance, for the convenience of monitoring and assessment, the Company divided the work load of projects for the whole year into 156 milestone control points; though sound organization, time for customers clearance of external ship chartering was shortened to 1-2 hour from 3-4 days, representing the effect of scientific and lean management. Onshore Fabrication of PL19-3 Block 4. Various activities for the second Year of Fundamental Building went well and foundation for the long-term development was consolidated. Firstly, the Company compiled and executed the work plan for 2007 and the plan for operation and enforcement of expenses. On such basis, the Company worked out supporting measures for following up and assessment of implementation of the plans. Secondly, the Company established a system that includes administrative management and meets requirements for listed companies and international standards, and for the first time established a system for milestone objective assessment of construction projects, investment projects and scientific and research projects. Thirdly, the Company started to establish standard work flow, operation manual and procedures and special templates, and sort techniques possessed. It also systematically summed up lessons in recent 5 years and added related contents into the procedures, converting the lessons and costs into wealth and competitiveness of the enterprise. Fourthly, the Company strengthened employee training by various means, and enhanced technical communication with overseas companies. The period and coverage of trainings are unprecedented in the history of the Company. Achievements of external training, investigation and communication were shared as well. Fifthly, team building was taken as key of fundamental building of the Company. On the basis of research and investigation, the Detailed Offshore Installation of Xijiang 23-1 Block Rules for Implementation of Management and Building of Offshore Oil Engineering Team and the Work Book for Team Building were compiled. Sixthly, by working out measures for energy saving, breaking down objectives of energy saving, following up implementation of objective and cultivating awareness of energy saving, the Company fulfilled the expected objectives for energy saving. 5. Through implementation of effective evaluation and incentive mechanism, great achievements were made in team building. During the reporting period, the Company initiated appraisal of two-class technical 17

18 experts, established channel for development of technical sequential post and a design team for assessment criteria, and started assessment and promotion of technical sequential personnel. The system for excellent technical personnel employed from society was converted. The evaluation of technician and senior technician were carried out orderly and effectively. The assessment of professional skills of operating teams was improved continuously. A channel for the development of safety management sequence profession was preliminarily established. By taking the measures, enthusiasm of the technical and operating personnel for concentrating on vocational work and improving profession skills was effectively stimulated, which to a certain extent relieved restriction of talents to development of the Company. Various production and operations of the Company were going on steadily although engineering work load went up by a large margin, which indicates the effect of team building. 6. By building up corporate culture, cohesion force was reinforced The Company holds a speech contest on Quality and Safety are of Vital Importance. During the reporting period, focusing on production and targeted at enhancing corporate cohesion force and changing concepts and behaviour modes, the Company advocated human-oriented culture, culture of execution and good faith, and brought the function of corporate culture into full play. By means of resolution meeting and commending virtuous wife, the Company integrated psychological work and production operation. Through joint publicity of corporate culture by the Party and corporate leaders, the initiative of employees was effectively mobilized. In the reporting period, director-general, secretary of the Party committee and deputy secretary of the Party committee gave more than 20 lectures to the employees. The issuance and implementation of 2006 Executive Force Report improved performance awareness and capability of employees. By sending open letters to the employees, the Company stimulated enthusiasm and enhanced cohesion force of the team. The formulation and implementation of Handbook for Ideological and Political Work System indicated that ideological and political work of the Company has entered into a scientific, systematic, standard and routine track. 7. Progress of Panyu 30-1 Project 1 For the commissioning of Panyu 30-1 gas field, Party A decided to advance funds for the construction of jacket for Panyu 30-1 Project. Entrusted by Party A, the Company started construction at Qingdao fabrication yard. At present, fabrication of jacket for the Project is going on smoothly. 2 Accounting process for expenses of Panyu Battle rally for commencement of projects of construction of Jacket for Panyu

19 Project Following the principle of prudence, the Company posted engineering cost of RMB389 million from the Panyu 30-1 EPCI contract project and the disassembling, transportation and storage of project modular since June The Panyu 30-1 jacket fabrication project incurred an engineering cost of RMB98.7 million in the first half year of RMB488 million are reflected in the item of inventories. The Company received RMB409 million of interim payment on Panyu 30-1 EPCI contract project in 2006, and RMB100 million of advances from Party A for Panyu 30-1 jacket fabrication project and RMB96.76 million for disassembling, transportation and storage of Panyu 30-1 project modular. The above amounts totaling RMB606 million are reflected in the item of advances from customers. 3 The causal investigation on partial deformation of underwater part of the jacket for Panyu 30-1 by Party A and the third party jointly designated by Party A and insurance company is under the way. The cause is to be determined. The Company is assisting Party A in the causal investigation. ii. Operation in the Reporting Period 1. Fulfilment of annual operating plan In the reporting period, the Company achieved an operating income of RMB2,618 million and total profit of RMB589 million, representing a year-on-year increase of 31% and 25% respectively. Stable growth was maintained. 2. Changes in major business indicators in the reporting period Items At June 30, 2006 At December 31, / - (%) Accounts receivable 491,832, ,688, % Accounts in advance 233,944, ,768, % Advance from customers 862,583, ,339, % Inventories 1,307,952, ,727, % The other current assets 163,362, ,342, % Construction in progress 1,090,663, ,197, % Total assets 6,219,130, ,056,249, % Sub-total of owner s equity attributable to the parent company 3,350,201, ,986,362, % Items Jan.-June of 2007 Jan.-June of / - (%) Operating income 2,618,024, ,999,781, % Operating cost 2,106,526, ,592,643, % Administrative expense 46,861, ,514, % Return on investment 5,142, Profit before tax 588,698, ,747, % Profit attributable to owners of the parent company, net Net cash flows from operating activities 443,039, ,305, % 280,409, ,024, % 19

20 Cause of changes: (1) Receivables increased by 68.62% over the end of last year, which is mainly due to the increase in settled yet uncollected engineering cost. (2) The increase in the advance payment is mainly due to the growth of advances paid to procure steel products. (3) Advances from customers increased by RMB358 million over last year, which is mainly due to RMB96.76 million for disassembling, transportation and storage of Panyu 30-1 project modular paid by Party A in this period and RMB100 million of advances from Party A for Panyu 30-1 jacket fabrication project. The rest increase was due to settled incompletion payment over the same period of last year. (4) Inventory increased by RMB327 million, which is due to RMB98.7 million of cost for construction of jacket for Panyu 30-1 Project listed in the item of inventory and the increase in completed yet unsettled construction payment for projects such as Penglai 19-3 Phase II and Ledong Gas Field. (5) In the reporting period, the Company passed the attestation of 2006 hi-tech enterprise and was approved by the Tianjin Office of State Administration of Taxation to adopt the policy of enterprise income tax reduction and exemption. The other current assets of RMB163 million in the reporting period is income tax refunded after payment in The Company has received RMB163 million of refund at the beginning of July (6) Constructions in progress increased by RMB363 million over the end of last year, which is mainly due to RMB169 million increase of investment in Qingdao fabrication yard and RMB192 million investment in construction of 30,000t launching barge. (7) Administrative expense increase by RMB24,347,100 compared with the first half of 2006, which is mainly due to RMB11,657,000 increase in administrative expense of CNOOC Engineering (Qingdao) Co., Ltd, RMB5.09 million increase in labour cost of the parent company and RMB1.24 million increase in intangible assets amortization. (8) RMB5.14 million investment income includes RMB2.27 million of income from the new shares purchased in the reporting period and RMB2.87 million dividends from CNOOC Finance Corporation. (9) Non-operating income disclosed in the 2006 interim report was RMB87,900. According to the new accounting standards, refund of income tax paid in last year shall be listed in the item for non-operating income of current period. Therefore, non-operating income in the reporting period was RMB165 million, including RMB163 million of refunded tax payment. The amount in the first half of last year is adjusted accordingly. (10) Net cash flow from operating activities decreased by RMB174 million as a result of increase in settled but unrecovered construction payment for normal construction projects. 3. Distribution of main business by industry By industry/ Revenue from main Cost of main Gross +/- in +/- in cost +/- in gross 20

21 product Offshore engineering industry business (RMB) business (RMB) margin (%) revenue from main business over previous year (%) of main business over previous year (%) margin over previous year (%) 2,618,024, ,106,526, Distribution of main business by region Region Revenue from main business (RMB) +/- in revenue from main business over previous year (%) Tanggu Area 2,420,501, Shenzhen Area 79,746, Qingdao Area 114,185, Huizhou Area 3,591, In the reporting period, no great change took place in profit composition, main operations or its structure and profitability of main operations. 6. In the reporting period, there were no other operations that had great impact on profit. 7. In the reporting period, there was no shareholding company that had over 10% (including 10%) of impact on profit of the Company. 8. Problems and difficulties in operation 1 Deficiency of high-quality talents Although the Company strengthened the introduction and training of key talents, demand for high-quality talents was still dissatisfied. The implementation of talent strategy and cultivation of management, technical and operating teams will be the priority of the Company in the future development. 2 Core equipment resources in short With growth of overseas, deepwater and midstream and downstream operations of the Company, the gap between the core equipment resources of the Company and international advanced level is increasingly apparent. The Company should increase investment and strengthen management to shorten the production cycle of core equipment and to eliminate the restriction of deficiency in core equipment to development of the Company. iii. Work Plan for the Second Half of Prospect for the next half of

22 With rapid and efficient development of CNOOC and implementation of the two-wing development strategy, work load of the Company in the next half of 2007 will continue to increase. Of the 24 construction works in progress in this year, 11 will be put into production this year, of which, 1 was completed in the first half of the year and 10 will be put into production in the second half of the year. Execution of such major investment projects as Qingdao site, deep-water pipelaying crane barge and shallow-water pipelaying vessel and 30,000t launching barge will make the production and construction tasks of the Company much heavier. 2. Measures to be taken (1) To improve project management system, enhance management team building, and improve project management for EPCI contracting. (2) To work out plan for continuously improving QHSE system and strengthen training for safety management personnel so as to improve QHSE management performance. (3) To strengthen specialized management on such operations as design, fabrication, installation, maintenance and test thus achieve continuous enhancement of competitiveness. (4) To complete compilation of 10-year development plan and promote construction of Qingdao site, deep-water pipelaying crane barge, shallow-water pipelaying vessel and 30,000t launching barge so as to improve the sustainable development capability. (5) To accelerate two-wing development strategy and strengthen the development of overseas and midstream and downstream market. (6) To establish effective mechanism for talents introduction, training, screening and incentive, implement the talent strategy, and cultivate management, technical and operating teams of high quality for future development. (7) To strengthen financial management, capital operation, information disclosure and investors relation management so as to enhance the quality of listed company. (8) To strengthen technical development and research management, accelerate construction of R&D carriers such as state-level welding lab and certification centre, striving to make breakthrough in engineering techniques and research fields. (9) To enhance the fundamental building and strengthen foundation for corporate development. 22

23 iv. Investment in the Reporting Period 1. Use of funds raised In the reporting period, the Company did not raise any fund or use fund raised in previous period. 2. Major investment projects supported by non-raised fund 1 Construction of fabrication yard in Qingdao Qingdao site Phase II works will be put into production at the end of Construction of Phase III works started on 18 April. All the works are planned to be put into production in Crane barge for deep-water pipelaying Shipyard for deep-water pipelaying vessel has been determined. At present, basic design has come to close. The equipment purchase contract such as main diesel engine and propeller has been signed. Detailed design and bid evaluation are under way. It is estimated that it will be completed in June Crane barge for shallow-water pipelaying Basic design for shallow-water pipelaying vessel has been completed, and equipment purchase is about to be completed. 30% of detailed design has been completed. Bid evaluation for shipyard is under way. It is expected to be put into production in the first half of ,000t barge The construction contract for 30,000t launching barge was signed on 11 March, and the construction started on 10 April at Qingdao Beihai Shipyard. At present, construction is going on smoothly and in-yard erection of hull is under way. It is expected to be put into production in the first half of Subsequent events: 7,000t crane barge Approved at the 5 th meeting of the 3 rd Board, the Company will purchase a 7,000t crane barge with an expected investment of RMB1,724 million in a view to realizing the objective of building a specialized and internationalized energy engineering company of international competitiveness and improving deep-water operations and core competitiveness. It is estimated that the project will be completed in the first quarter of

24 VI. Important Matters i. Corporate Governance During the reporting period, the Company operated in compliance with laws and regulations issued by China Securities Regulatory Commission (CSRC) and Shanghai Stock Exchange (SSE). The corporate governance is up to requirements of relevant documents issued by CSRC. 1. In order to improve quality of listed company and protect interests of shareholders, according to requirements of CSRC, the Company actively carried out the special program on corporate governance enhancement during the reporting period. The Company conducted self-examination and prepared the Report on Corporate Governance Self-Examination on this basis, which was reviewed and passed at the 4 th meeting of the 3 rd Board of Directors and was disclosed on 11 July. At present, the Company is being subject to appraisals from investors and the public. In order to solicit opinions, the Board of the Company set a special access for appraisals from investors and the public. 2. During the reporting period, the Company actively promoted the setup of special committees under the Board. The Audit Committee and Nomination Committee were established upon approval of the 5 th meeting of the 3 rd Board, and terms of references for the two committees were formulated respectively. Thus, all special committees of the Board as regulated in the Code of Corporate Governance for Listed Companies were established. ii. Implementation of Profit Distribution Plan of the Reporting Period According to the 2006 Profit Distribution Plan passed at the 20 th meeting of the 2 nd Board on 12 March 2007, share dividends of 2 shares and cash bonus of RMB1 (including tax) for each 10 shares would be distributed based on the total of 792 million shares. After the distribution, the total shares of the Company would reach million shares. In the distribution, share dividends of RMB158.4 million and cash bonus of RMB79.2 million were distributed and the undistributed profit was carried forward to the future years for distribution. The above plan was reviewed and approved at 2006 Annual General Meeting of Shareholders on 10 April 2007 and the implementation was finished on 8 June iii. Significant Litigation and Arbitration No significant litigation or arbitration occurred to the Company during the reporting period. iv. Assets Transactions The Company had no acquisition, selling of assets or merging during the reporting period. 24

25 v. Significant Connected Transactions in the Reporting Period 1. Connected transactions arising from purchases/sales of goods and the offering/receiving of labor services (1) The Company provides connected parties with professional production services such as design, construction and installation, and determines contract prices through bidding in accordance with the market principle, and the special service amount provided during reporting period is as follows: Connected party Transaction amount (RMB) Proportion to the total amount of connected transactions (%) CNOOC China Limited 1,764,753, CNOOC Oil Base Group Limited 209,037, CNOOC Refining & Chemical Engineering Co., Ltd. 51,859, CNOOC Gas & Power Limited 44,373, ACT OPERATOR S GROUP 4,094, (2) The subcontract projects completed by connected parties as the subcontractors of the Company are as follows: Connected party Transaction amount (RMB) Proportion to the total amount of connected transactions (%) CNOOC Bohai Corporation 726, CNOOC Nanhai West Corporation 93, China Oilfield Services Limited 80,847, CNOOC Oil Base Group Limited 60,050, Shenzhen China Ocean Petroleum Platform Maintance & Installation Co., Ltd. 75,371, CNOOC Engineering (Qingdao) Co., Ltd. 152,158, (3) In accordance with the connected transaction contracts entered into between the Company and the connected companies, the CNOOC Oil Base Group Limited and China Oilfield Services Limited of China National Offshore Oil Corporation provide such service as transportation, vessel, fuel, water and electricity in the period. See the following for details: Connected party Proportion to the total Content of Transaction amount of connected transaction amount (RMB) transactions (%) CNOOC Bohai Corporation Service fee 1,067, Transportation service 1,745, Water & electricity expense 9,179, China Oilfield Services Limited Vessel service 21,802, CNOOC Oil Base Group Limited Service fee 6,644, Engineering construction 158,305, Transportation service 1,690, Fuel expense 38,753,

26 2. Connected transactions arising from asset and equity transfer No connected transactions arising from asset and equity transfer occurred to the Company in the reporting period. 3. Non-operating receivables & payables and guarantee There were no non-operating receivables & payables or guarantees between the Company and the connected party as at the end of the reporting period. 4. Other major connected transactions (1)Deposits with connected parties At the end of the At the beginning of the Company period period CNOOC Finance Co., Ltd. 66,854, ,637, (2) Interest from deposits with connected parties Company Jan-Jun of 2007 Jan-Jun of 2006 CNOOC Finance Co., Ltd. 1,634, ,167, The interest rate for deposits the Company puts in the connected parties adopts relevant provisions of the People s Bank of China. 3. Investment in connected parties and relevant investment income Company Investment at the end of the period (RMB) Investment income in Jan-Jun of 2007 (RMB) CNOOC Finance Co., Ltd. 25,000, ,869, vi. Significant Contracts and Performance 1. During the reporting period, there was no such significant matters as trusting, contracting and leasing assets from other companies by the Company, or having its assets being trusted, contracting or leased. 2. During the reporting period, no illegal guarantee as regulated in the Z.J.F. [2003] No. 56 of CSRC or previous guarantee matter that continued in the reporting period occurred to the Company. Both the accumulated and current guarantee amount of the Company is zero. 3. The Company did not entrust others to manage its cash assets during the reporting period. vii. Performance of Undertaking Special undertakings made by holders of non-tradable shares in the share split reform and the fulfillment: 26