Oilfield Services & Equipment Sector

11/13 1/14 3/14 5/14 7/14 9/14 Equity Research Energy Nov 11, 214 Oilfield Services & Equipment Sector Neutral (Maintained) Weak sentiment to last longer than expected Shrinking margin and higher depreciation hurting earnings OFSE plays tumbled ~3% during Sep-Oct amid concerns about a weak earnings outlook due to a drop in outsourcing from national oil companies (NOCs) as well as project delays. We have received updates from the OFSE companies under our coverage and lowered our earnings forecasts accordingly. Our forecasts for OFSE names indicate an overall weaker EBIT margin for 214-16 on intense competition in the domestic market. Companies that have been running aggressive capex plans during 212-13 should see a more severe earnings drop due to escalating depreciation charges (like Anton and Petro-king). Wallace Cheng SFC CE No. AKX251 wallacecheng@gfgroup.com.hk +852 3719 149 GF Securities (Hong Kong) Brokerage Limited 29-3/F, Li Po Chun Chambers 189 Des Voeux Road Central Hong Kong Downside risk for 214 earnings forecasts remains It is inevitable that there will be a setback in earnings growth at OFSE companies this year. Our forecasts should reflect the most feasible amount of revenue that each company will book during 214. Following Anton, we believe Petro-king is also likely to post a profit warning given our expectation for a 49% YoY decline in net profit. Stripping out one-off items, Hilong s core net profit in 214 should be 5% lower than in 213. Overall, we do not see much upside risk for 214 earnings forecasts due to a limited operation period. In contrast, we believe there is more downside risk as we cannot rule out the risk that NOCs will delay remaining contracts. Our earnings forecasts are lower than consensus Overall, our forecasts for our five OFSE names are more conservative than consensus, especially for Anton and Petro-king. We believe the difference is due to: 1) our expectation for a weaker margin recovery in 2H14; 2) our more conservative outlook for 2H14 revenue booking. 215 revenue visibility is poor at the moment given the lack of information on future NOC biddings. We are cautious on margins despite the outlook for more biddings. Sector performance 12 11 1 9 8 7 6 MSCI-China OFSE Sector Hilong is our top pick We only recommend seeking trading opportunities in OFSE names for the remaining two months of the year given expected weak sentiment and uncertainty in 215 orders. Hilong is our top pick during this time. We expect the company to post better 2H14 drill pipe orders on strong replacement demand, while its lack of exposure to the Chinese oilfield servicing market means we are not too concerned about the outlook for its earnings. Trading at 7.3x/6.x 215/16 P/E, it is still undemanding. We suggest caution on Anton and Petro-king, for which we believe this is more downside risk in earnings consensus for 214/15. 5 Sector share prices 1M % Chg YTD % Chg Anton (29.8) (65.) Hilong (15.8) (59.) PetroKing.9 (43.9) SPT (12.6) (47.5) Honghua (12.9) (42.9) Average (14.) (51.7) Peer comparison Ticker Company Price Rating Target price 213 214E 215E 214E 214E (HK$) (HK$) P/E P/E P/E ROE (%) P/B 1623 HK Hilong 2.78 Buy 3.25 1.4 8.3 7.3 16.3 2.4 1251 HK SPT 2.39 Buy 3.8 1.2 1.2 8.5 15. 1.8 3337 HK Anton 1.52 Underperform 1.52 41.2 2.1 14.4 7.3 2.6 2178 HK PetroKing 2.29 Hold 2.27 24.3 16.1 12.6 6.8 1. 196 HK Honghua 1.52 Hold 1.64 7.3 7.3 6.8 12..9 Average 18.7 12.4 9.9 11.5 1.7 Sources: Bloomberg, GF Securities

Jan/14 Feb/14 Mar/14 Apr/14 May/14 Jun/14 Jul/14 Aug/14 Sep/14 Oct/14 Sector report Nov 11, 214 Figure 1: Year-to-date sector performance 14 Sector Avg. MSCI China SPT Anton PetroKing Hilong Honghua 12 1 8 6 4 2 Sources: Bloomberg, GF Securities Figure 2: Our forecasts vs consensus Revenue Net profit Currency 214E 215E 216E 214E 215E 216E Consensus SPT Rmb m 2,941 3,665 4,498 334 459 555 Anton Rmb m 2,685 3,17 3,716 136 25 354 Hilong Rmb m 2,783 3,316 3,671 433 526 69 Honghua Rmb m 9,319 1,637 12,243 58 663 766 PetroKing HK$ m 1,64 1,262 1,575 142 187 222 Our forecast SPT Rmb m 2,791 3,291 3,926 31 36 432 Anton Rmb m 2,545 3,176 3,667 64 132 184 Hilong Rmb m 2,749 3,267 3,81 436 495 64 Honghua Rmb m 9,43 1,476 11,37 533 59 661 PetroKing HK$ m 1,5 1,222 1,499 12 154 197 Derivation SPT -5% -1% -13% -1% -22% -22% Anton -5% % -1% -53% -47% -48% Hilong -1% -1% 4% 1% -6% -1% Honghua 1% -2% -7% -8% -11% -14% PetroKing -6% -3% -5% -28% -18% -11% Sources: Bloomberg, GF Securities Page 2

Sector report Nov 11, 214 Figure 3: 214 Revenue growth comparison 2 Figure 4: 214 Net profit growth comparison 5 15 1 5 16.1 12.1 16.8 25 (25).2 26.4 (.9) (48.2) (5).5 (5.2) (5) (75) (83.5) (1) SPT Anton Hilong Honghua PetroKing (1) SPT Anton Hilong Honghua PetroKing Sources: Company data, GF Securities (*) PetroKing s numbers are in HK$ Figure 5: EBIT margin comparison Figure 6: 214 free cashflow comparison 3 25 2 15 1 5 SPT Anton Hilong Honghua PetroKing 212 213 214E 215E 216E 1 (1) (2) (3) (4) (5) (6) (7) (8) (9) (1,) 5 14 (349) (373) (968) SPT Anton Hilong Honghua PetroKing Sources: Company data, GF Securities (*) PetroKing s numbers are in HK$ Figure 7: ROE comparison 2 16 SPT Hilong PetroKing Anton Honghua 12 8 4 212 213 214E 215E 216E Sources: Company data, GF Securities Page 3

Sector report Nov 11, 214 Figure 8: Peer comparisons Revenue growth (%) Currency 212 213 214E 215E 216E SPT Rmb m 37.9 31.9 16.1 17.9 19.3 Anton Rmb m 59.2 26.4.5 24.8 15.4 Hilong Rmb m 23.5 8.3 12.1 18.9 16.6 Honghua Rmb m 45.4 58.8 16.8 11.4 8.5 PetroKing HK$ m 581. (27.) (5.2) 21.6 22.6 Average 149.4 19.7 8.1 18.9 16.5 Net profit growth (%) Currency 212 213 214E 215E 216E SPT Rmb m 36.2 21.3.2 19.5 19.9 Anton Rmb m 32. 24.8 (83.5) 15.4 39.7 Hilong Rmb m 14.2 (.1) 26.4 13.6 22.1 Honghua Rmb m 222.5 (.8) (.9) 1.7 12.2 PetroKing HK$ m 93.1 17.2 (48.2) 51. 28. Average 133.6 12.5-21.2 4. 24.4 EBIT Margin (%) 212 213 214E 215E 216E SPT 19.9 17.2 15.1 15.1 14.9 Anton 19.9 22.6 1.2 1.2 1.8 Hilong 21.1 2.6 22.5 22.9 23.1 Honghua 13.3 1.5 9.2 9.5 9.4 PetroKing 12.4 24.5 14.9 18.7 19.2 Average 17.3 19.1 14.4 15.3 15.5 Free cash flow Currency 212 213 214E 215E 216E SPT Rmb m (176) 119 5 18 156 Anton Rmb m 117 (438) (349) (288) (37) Hilong Rmb m (24) (285) (968) (13) 82 Honghua Rmb m (598) (1,51) 14 312 446 PetroKing HK$ m (28) (617) (373) (74) (18) Net gearing (%) 212 213 214E 215E 216E SPT NC NC NC NC NC Anton NC 25.2 46.9 57.9 57.7 Hilong 19.6 22.3 52.8 5.9 46.3 Honghua 12.9 59.9 34.1 28.5 21.6 PetroKing 2.6 NC 6.9 1.2 11.1 ROE (%) 212 213 214E 215E 216E SPT 15.2 16.4 14.6 15.3 15.9 Anton 15.3 16.8 2.9 5.6 7.4 Hilong 15. 12. 13.4 13.6 14.6 Honghua 12.2 11.3 1.4 1.6 1.9 PetroKing 15.9 9. 4.5 6.5 7.7 Average 14.7 13.1 9.2 1.3 11.3 Sources: Bloomberg, GF Securities Page 4

Equity Research Energy Nov 11, 214 Hilong (1623 HK) Buy (Maintained) Target price: HK$3.25 Wallace Cheng SFC CE No. AKX251 wallacecheng@gfgroup.com.hk +852 3719 149 GF Securities (Hong Kong) Brokerage Limited 29-3/F, Li Po Chun Chambers 189 Des Voeux Road Central Hong Kong Positive findings should alleviate market concerns; time to Buy Better sales orders for drill pipes Positive findings from our recent update from Hilong should clear some concerns on the stock. First, Hilong has received strong orders for drill pipes totaling 2kt in 2H14, with overseas orders for the product slightly higher than those from the domestic market. This is actually better than our original forecast of only 18kt. Non-API standard pipes are expected to remain at 3% of total sales volume. Management believes replacement demand for drill pipes remains intact due to their short life span. As a result, drill pipes sales should be less vulnerable amid a weak crude price. We therefore believe the market has been too concerned about a potential slump in drill pipe sales for Hilong. Concern about Hilong s oilfield services overdone There is also concern about PetroChina s and Sinopec s plan in domestic oilfield servicing, namely, improving efficiency, trimming outsourcing and taking a bigger market share. We believe this is also a major reason for Hilong s recent sell-off, yet this is unjustified. Hilong has no contract with PetroChina or Sinopec, or within China. The recent drilling contract from Petromanas/Shell in Albania demonstrated Hilong s strength in the overseas market. We still forecast 11% YoY growth in Hilong s oil servicing segment in 214 and 215. Recovery in line pipe technology segment The company s line pipe technology segment is also showing more signs of recovery, driven by: 1) strong demand from the domestic market following the slowdown in 1H14; 2) the overall utilization rate improvement in OCTG coating in 2H14 after the technology upgrade in 1H14, as well as its new plant commencing operation and seeing smooth progress. Looking ahead to 215-16, construction of West-to-East pipeline Phase 3 and the Russia-China pipeline are likely to support volume growth in line pipe coating. However, we tune down our revenue forecast for CRA + CWC to Rmb1m (from Rmb12m) due to slower order growth in CWC. Stock performance 8 7 6 5 4 3 2 1 Apr-11 Apr-12 Apr-13 Apr-14 Key data HK$ Nov 1 close (HK$) 2.78 Shares in issue (m) 1,63 Major shareholder Zhang Jun (62%) Market cap (HK$ bn) 4.5 3M avg. vol. (m) 5.6 52W high/low (HK$) 7.1 / 2.38 First offshore contract still not yet finalized There has been a long wait for Hilong s first offshore pipe-laying contract to be signed. Management explained that the delay was mainly due to extra time spent on the legal issues of the contract. It also revealed that the first contract is likely to have a value of Rmb2m and a 5-day working period. In light of the delay, we have trimmed our revenue forecast for its offshore segment from Rmb92m/36m to Rmb31m/211m in 214/15. Good Buying opportunity We cut our 214/15/16 net profit forecasts by 7%/11%/9% to factor in the previously mentioned forecast changes. Our revenue growth forecasts for 214/15 are now 12%/19% YoY. We forecast a rise in core earnings of 4%/14% in 214/15 to Rmb436m/495m. The recent sell-off has put Hilong at an attractive valuation of 8.3x/7.3x 214/15E P/E. We believe most of the negatives should now be factored in and that there is now a good opportunity to accumulate. In view of the recent de-rating of the whole sector, we have changed our valuation benchmark to 8.5x forward P/E, -.5 SD compared to its historical average. We lower our target price to HK$3.25 (from HK$5.26), but maintain our Buy rating. Stock valuation Turnover (Rmb m) Net profit (Rmb m) EPS (Rmb) EPS YoY (%) P/E BPS (Rmb) P/B ROE (%) 212 2,264 345.212 14.2 1.4 1.3 1.7 16.3 213 2,452 345.211 -.1 1.4 1.63 1.4 13. 214E 2,749 436.267 26.4 8.3 1.83 1.2 14.6 215E 3,267 495.33 13.6 7.3 2.6 1.1 14.8 216E 3,81 64.371 22.1 6. 2.34.9 15.9 Sources: Company data, GF Securities (HK) Research Note: Calculated based on diluted shares.

Company report Nov 11, 214 Figure 1: Financial statements Income Statement Balance Sheet Year end Dec (RMB m) 212 213 214E 215E 216E Year end Dec (RMB m) 212 213 214E 215E 216E Oilfield equip manufacturing 1,212 951 1,32 1,42 1,577 Cash and cash equivalents 44 391 517 475 259 Line pipe tech and sevices 435 629 399 549 683 Inventories 586 738 774 93 1,35 Oilfield services 618 873 999 1,15 1,234 Trade and other receivables 1,385 1,534 1,732 2,41 2,359 Offshore services 31 211 316 Other current assets 83 131 131 131 131 Turnover 2,264 2,452 2,749 3,267 3,81 Total current assets 2,458 2,794 3,154 3,549 3,785 YoY (%) 23.5 8.3 12.1 18.9 16.6 Property, plant & equipment 1,254 1,614 2,858 3,121 3,49 Cost of sales (1,369) (1,464) (1,711) (2,21) (2,347) Lease prepayments 86 95 95 95 95 Gross profit 895 988 1,37 1,246 1,463 Intangible assets 71 73 73 73 73 YoY (%) 19.2 1.4 5. 2.1 17.4 Other non-current assets 171 231 232 233 234 Total non-current assets 1,582 2,13 3,258 3,521 3,81 Other income and expenses (15) (98) 14 14 14 Selling and distribution costs (117) (16) (119) (141) (165) Total assets 4,4 4,87 6,411 7,71 7,595 Administrative expenses (286) (28) (313) (373) (434) Operating profit 478 54 62 747 878 Short-term borrowings 646 654 5 6 5 YoY (%) 13.3 5.6 22.9 2.5 17.6 Trade and other payables 583 661 694 831 977 Other current liabilities 62 8 17 38 63 Net finance costs (72) (63) (17) (113) (14) Total current liabilities 1,291 1,324 1,211 1,469 1,541 Share of profit of asso. & jce 1 1 1 1 1 Pre-tax profit 47 442 514 635 775 Long-term borrowings 293 57 1,857 1,857 1,87 Growth (%) 11.4 8.8 16.1 23.6 22.1 Other non-current liabilities 15 13 13 13 13 Total non-current liabilities 443 61 1,961 1,961 1,911 Income tax expense (45) (72) (45) (13) (126) After tax profit 361 371 468 532 65 Total liabilities 1,735 1,934 3,172 3,429 3,451 YoY (%) 13. 2.5 26.4 13.6 22.1 Share capital 134 142 142 142 142 Minority interest (16) (26) (33) (37) (45) Reserves 1,984 2,513 2,846 3,211 3,668 Net profit 345 345 436 495 64 Equity attri. to shareholders 2,118 2,655 2,988 3,353 3,81 YoY (%) 14.2 -.1 26.4 13.6 22.1 Minority interests 188 218 251 288 333 EPS(RMB).212.211.267.33.371 Total equity 2,35 2,874 3,239 3,641 4,144 YoY (%) 14.2 -.1 26.4 13.6 22.1 BPS (RMB) 1.3 1.63 1.83 2.6 2.34 YoY (%) 13.8 25.4 12.5 12.2 13.6 Cash Flow Statement Financial Ratio Year end Dec (Rmb m) 212 213 214E 215E 216E 212 213 214E 215E 216E Pre-tax profit 47 442 514 635 775 Gross margin (%) 39.5 4.3 37.7 38.1 38.4 Tax paid (39) (15) (36) (82) (11) EBIT margin (%) 21.1 2.6 22.5 22.9 23.1 Dep'n and amortization 16 136 164 187 212 Net margin (%) 15.2 14.1 15.8 15.1 15.9 Change in working capital (186) (3) (21) (31) (34) ROA (%) 8.5 7.2 6.8 7. 8. Others 65 46 (1) (1) (1) ROE (%) 15. 12. 13.4 13.6 14.6 Operating cash flow 353 174 44 437 582 Net gearing (%) 19.6 22.3 52.8 5.9 46.3 Interest coverage (x) 6.7 8. 5.8 6.6 8.5 CAPEX (377) (459) (1,48) (45) (5) Current ratio 1.2 1.5 2.7 2.4 2.5 Others 81 (42) Investing cash flow (296) (51) (1,48) (45) (5) Change in borrowings 149 431 1,197 1 (15) Dividend paid (89) (99) (13) (13) (147) Others (39) (1) Financing cash flow 21 323 1,94 (3) (297) FX change (9) Net change in cash 78 (13) 126 (42) (215) Sources: Company data, GF Securities Page 6

Equity Research Energy Nov 11, 214 SPT Energy (1251 HK) Buy (Maintained) Target price: HK$2.87 Wallace Cheng SFC CE No. AKX251 wallacecheng@gfgroup.com.hk +852 3719 149 GF Securities (Hong Kong) Brokerage Limited 29-3/F, Li Po Chun Chambers 189 Des Voeux Road Central Hong Kong A tough battle to maintain growth Short-term troubles Our latest update from management gave us a clearer view on the challenging environment for non-soe oilfield servicing (OFS) companies. Outsourcing to private players is shrinking and companies are finding it tough to obtain new servicing contracts. Nevertheless, management believes PetroChina and Sinopec, who have stated aggressive plans to improve operating efficiency and enlarge market share in China, also face difficulties in cutting off private companies in a short period. Resources are unlikely to be able to be reallocated within NOCs. Moreover, leading private OFS companies such as SPT have sound track records in terms of operation and niche technologies in specific areas. Conservatively estimate 1% YoY growth for 214 bottom line We estimate SPT currently has a total contract value of Rmb2.8bn signed for whole-year 214. Under normal circumstances, SPT has typically completed all signed contracts (plus some new contracts) each year in 4Q. That means in normal years, an estimated Rmb2.9-3.bn is reasonable for SPT. However, given the current abnormal situation, we have conservatively revised down our 214/15 revenue forecasts from Rmb3.bn/3.8bn to Rmb2.8bn/3.1bn, and lowered our 214/15 net profit forecasts by 9%/32%. Our bear case scenario assumes 5% of total contracts are delayed in 214 and just Rmb3.bn revenue in 215, resulting in net profit 7.3%/7.2% lower than our base case net profit for 214/15. Our bull case revenue is +3%/+15% higher than our base case for 214/15 while earnings are 4%/21% above our base earnings for 214/15. TP cut to HK$2.87 We have applied different P/E multiples to derive fair values for each case: 1) 8.6x 215E P/E for our bear case, which is historical average forward P/E minus 1 SD; 2) 11x 215E P/E for our base case, which is historical average forward P/E minus.5 SD; 3) 13.8x 215E P/E for our bull case, which is historical average forward P/E. We have not applied the trough P/E multiple of ~5x P/E to our bear case as SPT s track record of stable earnings growths since listing in Dec 211 deserves a slight premium. We cut our target price to HK$2.87 (from HK$5.34). We maintain our Buy rating on SPT. Stock performance 7 6 5 4 3 2 1 Key data HK$ Dec-11 Jul-12 Feb-13 Sep-13 Apr-14 Nov 1 close (HK$) 2.39 Shares in issue (m) 1,617 Major shareholder Wang Guoqiang (47%) Market cap (HK$ bn) 3.9 3M avg. vol. (m) 6.7 52W high/low (HK$) 5.91 /2/37 Seek trading opportunities before uncertainty is removed Given the current sentiment in the oil servicing sector and uncertainty in the industry, we understand that investors do not have a strong appetite for private oil servicing companies, even with strong earnings track records and management guidelines. The ~4% slump in SPT s share price since Sep was the result of earnings forecast cuts for 214/15, and magnified by the sector derating triggered by the deteriorated outlook for private oil servicing companies and the slump in the crude price. We believe crude oil price rebound could be a catalyst for private OFS plays before uncertainty in the industry landscape for private OFS companies is removed. We suggest investors look for trading opportunities only with SPT, especially when its share price comes close to our bear case fair value of HK$2.8. Stock valuation Turnover Net profit EPS EPS YoY P/E BPS P/B Yield ROE (Rmb m) (Rmb m) (Rmb) (%) (Rmb) (%) (%) 212 1,822 248.153 12.5 12.4 1. 1.9 2. 2.9 213 2,43 3.186 21.3 1.2 1.1 1.7 2.5 15.7 214E 2,791 31.186.2 1.2 1.2 1.5 2.5 16.8 215E 3,124 335.27 11.2 9.2 1.4 1.4 2.8 15. 216E 3,734 44.25 2.5 7.6 1.6 1.2 3.4 14.8 Sources: Company data, GF Securities (HK) Research Note: Calculated based on diluted shares.

12/11 2/12 4/12 6/12 8/12 1/12 12/12 2/13 4/13 6/13 8/13 1/13 12/13 2/14 4/14 6/14 8/14 1/14 12/11 2/12 4/12 6/12 8/12 1/12 12/12 2/13 4/13 6/13 8/13 1/13 12/13 2/14 4/14 6/14 8/14 1/14 Company report Nov 11, 214 Figure 1: HoH breakdown by segment (Rmb m) 1H12 2H12 1H13 2H13 1H14 2H14E Revenue Drilling 178 481 341 613 43 658 Well completion 179 352 269 38 344 529 Reservoir 233 399 26 539 31 547 Total revenue 59 1,231 87 1,533 1,57 1,734 EBITDA Drilling 46 145 89 158 11 165 Well completion 46 99 73 93 89 136 Reservoir 83 132 81 164 91 159 Total EBITDA 175 375 243 416 281 46 EBITDA margin by segment Drilling 25.9% 3.1% 26.1% 25.8% 25.% 25.% Well completion 25.6% 28.% 27.1% 24.6% 26.% 25.8% Reservoir 35.7% 33.1% 31.2% 3.4% 29.3% 29.% Overall EBITDA margin 29.6% 3.5% 27.9% 27.1% 26.6% 26.5% Sources: Company data, GF Securities Figure 2: Scenario analysis FY-end Dec 214E 215E 214E 215E 214E 215E Turnover (Rmb m) 2,651 2,968 2,791 3,124 2,875 3,592 Chg (%) 1.3 11.9 16.1 11.9 19.6 25. Net profit (Rmb m) 279 311 31 335 314 47 Chg (%) -7.1 11.3.2 11.2 4.6 29.4 EPS (Rmb).173.192.186.27.194.252 Chg (%) -7.1 11.3.2 11.2 4.6 29.4 P/E Multiple applied Target price 2.8 2.87 4.37 Sources: GF Securities Bear case Base case Bull case 8.6 11. 13.8 Figure 3: Forward P/E band Figure 4: Forward P/B band 25 2 +2SD +1SD 4. 3.5 3. +2SD +1SD 15 2.5 Mean 2. Mean 1 1.5 5-1SD -2SD 1..5. -1SD -2SD Sources: Bloomberg, GF Securities Page 8

Company report Nov 11, 214 Figure 5: Financial statements Income Statement Balance Sheet Year end Dec (HK$ m) 212 213 214E 215E 216E Year end Dec (HK$ m) 212 213 214E 215E 216E Drilling 659 954 1,62 1,154 1,368 Cash and cash equivalents 659 636 732 842 842 Well completion 532 65 873 986 1,17 Inventories 315 485 641 712 854 Reservoir Services 631 799 856 984 1,196 Trade and other receivables 1,118 1,362 1,592 1,782 2,13 Total Revenue 1,822 2,43 2,791 3,124 3,734 Restricted cash 14 25 25 25 25 YoY (%) 37.9 31.9 16.1 11.9 19.5 Total current assets 2,16 2,58 2,99 3,361 3,851 Drilling 191 247 265 283 328 Property, plant and 277 373 537 613 672 Well completion 144 166 226 25 291 Land use right 24 23 23 23 23 Reservoir Services 215 245 249 281 334 Prepaid lease payments 21 4 4 4 4 Total segment EBITDA 55 659 74 813 953 Other non-current assets 67 18 18 18 18 YoY (%) 37.6 19.7 12.4 9.8 17.2 Total non-current assets 389 544 79 785 844 Dep & Amort. (57) (71) (86) (124) (141) Total assets 2,495 3,52 3,699 4,146 4,695 EBITDA 493 588 655 69 812 Short-term borrowings 197 19 38 348 298 Corporate overhead & others (131) (174) (232) (225) (262) Trade and other payables 488 869 1,148 1,275 1,53 Operating profit 362 414 422 465 55 Other current liabilities 31 55 67 8 96 YoY (%) 31.4 14.4 2. 1.1 18.3 Total current liabilities 715 1,114 1,523 1,73 1,923 Net finance costs (23) (25) (31) (3) (26) Long-term borrowings 126 85 9 9 9 Pre-tax profit 339 389 391 435 524 Other non-current liabilities 26 22 22 22 22 YoY (%) 29.7 14.8.5 11.2 2.5 Total non-current liabilities 151 17 112 112 112 Income tax expense (84) (81) (82) (91) (11) Total liabilities 867 1,221 1,635 1,815 2,35 After tax profit 255 38 39 344 414 Share capital 1 1 1 1 1 Minority interest (7) (8) (8) (9) (11) Reserves 1,581 1,783 2,8 2,266 2,584 Net profit 248 3 31 335 44 Equity attri. to shareholders 1,582 1,784 2,9 2,267 2,585 YoY (%) 36.2 21.3.2 11.2 2.5 Minority interests 47 47 55 64 75 Total equity 1,628 1,831 2,64 2,331 2,66 Cash Flow Statement Financial Ratio Year end Dec (HK$ m) 212 213 214E 215E 216E 212 213 214E 215E 216E Pre-tax profit 339 389 391 435 524 EBITDA margin (%) 27.1 24.5 23.5 22.1 21.8 Tax paid (98) (7) (71) (78) (95) EBIT margin (%) 19.9 17.2 15.1 14.9 14.7 Dep'n and amortization 57 68 86 124 141 Net margin (%) 13.6 12.5 1.8 1.7 1.8 Change in working capital (389) (195) (17) (134) (235) ROA (%) 9.9 9.8 8.1 8.1 8.6 Others 33 6 ROE (%) 15.2 16.4 14.6 14.4 15.2 Operating cash flow (58) 253 3 346 336 Net gearing (%) NC NC NC NC NC Interest coverage (x) 15.9 16.8 13.6 15.5 21.2 Capital expenditure (118) (134) (25) (2) (2) Current ratio 2.9 2.3 2. 2. 2. Others (25) (19) Cash from investing (143) (155) (25) (2) (2) Proceed from share issuance 447 Change in borrowings 13 (49) 123 4 (5) Dividend paid (13) (61) (77) (77) (85) Others 23 Cash from financing 559 (116) 47 (37) (135) FX change (1) (5) Net change in cash 357 (23) 96 11 Sources: Company data, GF Securities Page 9

Equity Research Energy Nov 11, 214 Honghua Group (196 HK) Hold (Initiation) Target price: HK$1.64 Wallace Cheng SFC CE No. AKX251 wallacecheng@gfgroup.com.hk +852 3719 149 GF Securities (Hong Kong) Brokerage Limited 29-3/F, Li Po Chun Chambers 189 Des Voeux Road Central Hong Kong Execution uncertainties remain; initiate at Hold Breakthrough in offshore segment in 214, but uncertainty remains 214 was a year of breakthrough for Honghua s offshore segment as the company received its first offshore rig order from Orion in Aug. Together with orders for offshore drilling packages and oil/chemical tankers, a total of US$576m in revenue is set to be booked in from 214-16. Despite the great start in 214, a long production cycle (24 months+) and an expected shallow learning curve in offshore equipment/machinery lead us to be conservative on Honghua s offshore development. We expect its offshore segment to contribute just <5% of total revenue in 215/16. Mixed views on other segments We conservatively forecast land rigs will see moderate sales volume growth of 2-3 units in 215/16 as upstream players may be more conservative with capex following the recent slump in crude oil prices, and given our expectation on Honghua for modest order growth from shale gas development in China. However, we forecast better revenue growth (+42% YoY) in its parts and components segment in 214 as Honghua started to increase trading sales. Yet, the thin margin in trading sales is likely to limit margin improvement in this segment. Meanwhile, its oil servicing segment was hampered by a low utilization rate in China, resulting in a gross loss of Rmb3m in 1H14. We expect a recovery from 2H14 onwards on a better utilization rate, but do not see the segment s gross margin returning to the >2% level seen in 213. Net profit to remain flat in 214 We estimate net profit will decline by 1% YoY in 214 on a weaker gross margin of 22.6% vs 23.7% in 213 and higher opex. We expect stable overall gross margins in 215/16, so our forecasted 9%/12% net profit growth will be mainly driven by revenue growth. We also believe capex is likely to peak in 214 as Honghua has completed most of the infrastructure in its offshore segment. We expect net gearing will drop from 34% to 22% during 214-16. Stock performance 5. HK$ 4. 3. 2. 1.. Nov-9 Nov-11 Nov-13 Initiate at Hold We derive our target price of HK$1.64/share based on a blend of fair values: 1) 7.5x 215E P/E; 2).75x 215E P/B, representing a low-cycle valuation of historical average forward P/E and P/B minus.5sd. Honghua s current valuation is relatively low compared to its valuation range over the past three years. Our major concerns for Honghua in next two years are: 1) execution in its offshore segment following two years of rapid development; 2) whether we will see a recovery in its oil service segment; 3) its ability to capture more land rig contracts from emerging markets such as Russia and the Middle East. We believe our target price is justified based on the aforementioned concerns, and we initiate our coverage with a Hold rating. Downside risks 1) slower-than-expected land rig sales volume; 2) lower margins in its land rig and oil servicing segments due to intense competition; 3) lower-than-expected revenue recognition in its offshore segment. Key data Nov 1 close (HK$) 1.52 Shares in issue (m) 3,241 Major shareholder Zhang Mi (48.2%) Market cap (HK$ bn) 4.9 3M avg. vol. (m) 12.1 52W high/low (HK$) 3.2 /1.43 Stock valuation Turnover Net profit EPS EPS YoY P/E BPS P/B ROE (Rmb m) (Rmb m) (Rmb) (%) (Rmb) (%) 212 5,68 529.164 214 7.4 1.38.9 25.5 213 8,47 538.166 1 7.3 1.47.8 22. 214E 9,43 533.164-1 7.3 1.56.8 21.2 215E 1,476 59.178 9 6.8 1.69.7 23. 216E 11,37 661.2 12 6. 1.84.7 24.2 Sources: Company data, GF Securities (HK) Research Note: Calculated based on diluted shares.

Company report Nov 11, 214 Figure 1: Offshore segment revenue and gross profit (Rmb m) Figure 2: Offshore segment revenue mix 1% Oil/chemical Tankers TIGER 3 & 4 Semi-sub drilling rig (Orion) Others 8% 54% 31% 4% 6% 4% 2% % 38% 13% 3% 8% 25% 31% 3% 214E 215E 216E Sources: Honghua, GF Securities Figure 3: Lang rig sales volume (units) Figure 4: Land rig ASP (Rmb m/unit) 1 9 8 7 6 Digitally-controlled Rig Conventional Rigs 69 7 72 75 12 1 8 75 Digitally-controlled Rig Conventional Rigs 87 9 9 79 5 4 3 43 6 4 39 43 4 4 4 2 1 13 5 5 5 5 2 212 213 214E 215E 216E 212 213 214E 215E 216E Sources: Honghua, GF Securities Figure 5: Overall gross profit and gross margin (Rmb m)/(%) Figure 6: Overall revenue and net profit (Rmb m) 3, 2,5 2, 34.5% Gross profit Gross margin 22.3% 23.7% 22.6% 22.3% 35% 3% 25% 12, 1, 8, Revenue 8,47 Net profit 1,476 9,43 11,37 1,5 1, 1,747 1,95 2,128 2,336 2,535 2% 15% 1% 6, 4, 5,68 5 5% 2, 529 538 533 59 661 212 213 214E 215E 216E % 212 213 214E 215E 216E Sources: Honghua, GF Securities Page 11

1/11 7/11 1/12 7/12 1/13 7/13 1/14 7/14 12/1 4/11 8/11 12/11 4/12 8/12 12/12 4/13 8/13 12/13 4/14 8/14 Company report Nov 11, 214 Figure 11: Forward P/E band Figure 12: Forward P/B band 2 2.5 +2SD 16 2. +2 SD 12 +1SD 1.5 +1 SD 8 Mean 1. Mean 4-1SD.5-1 SD -2SD. -2 SD Sources: Bloomberg, GF Securities Figure 13: Financial statements Income Statement Balance Sheet Year end Dec (HK$ m) 212 213 214E 215E 216E Year end Dec (HK$ m) 212 213 214E 215E 216E Land drilling rigs 3,751 5,665 6,281 6,642 6,978 Cash and cash equivalents 984 1,275 1,444 1,1 1,169 Rigs parts and componetns 989 1,777 2,525 2,963 3,41 Inventories 2,731 2,81 3,189 3,569 3,873 O&G engineering services 172 49 388 427 47 Trade and other receivables 2,16 3,961 4,637 5,166 5,67 Offshore modules and parts 157 197 28 444 512 Other current assets 797 1,643 1,651 1,657 1,662 Turnover 5,68 8,47 9,43 1,476 11,37 Total current assets 6,618 9,681 1,921 11,492 12,311 YoY (%) 45.4 58.8 16.8 11.4 8.5 Property, plant & equipment 1,142 2,148 2,56 2,657 2,739 COGS (3,321) (6,142) (7,275) (8,141) (8,836) Land use right 33 362 355 349 342 Gross profit 1,747 1,95 2,128 2,336 2,535 Intangible assets 22 214 179 144 11 YoY (%) 8.1 9.1 11.7 9.8 8.5 Other non-current assets 1,581 1,825 1,817 1,89 1,81 Total non-current assets 3,228 4,548 4,911 4,959 4,992 Other revenue 63 176 78 81 83 Other net income/(loss) 2 7 (25) Total assets 9,846 14,229 15,832 16,451 17,33 Selling expenses (554) (524) (75) (744) (87) General and administrative (527) (596) (658) (733) (796) Short-term borrowings 1,246 3,274 2,544 2,289 2,129 Other operating expenses (6) (121) 47 52 57 Trade and other payables 3,112 4,241 5,82 5,687 6,173 EBIT 673 848 864 992 1,71 Other current liabilities 16 247 283 322 359 Total current liabilities 4,517 7,762 7,99 8,299 8,661 Net finance costs 29 (139) (144) (195) (184) Share of profit from jce/asso. 8 (8) (8) (8) (8) Long-term borrowings 738 1,458 2,496 2,244 2,194 Pre-tax profit 79 71 712 789 879 Other non-current liabilities 2 51 51 51 51 Total non-current liabilities 74 1,59 2,547 2,295 2,245 Income tax expense (168) (126) (142) (158) (171) After tax profit 542 575 57 631 78 Total liabilities 5,257 9,27 1,456 1,594 1,95 Minority interest (12) (38) (37) (41) (46) Share capital 3 31 31 31 31 Net profit 529 538 533 59 661 Reserves 4,156 4,463 4,843 5,282 5,777 YoY (%) 215.2 1.5 -.9 1.7 12.2 Equity attri. to shareholders 4,456 4,763 5,144 5,583 6,78 Minority interests 133 195 233 274 32 Total equity 4,589 4,959 5,377 5,857 6,398 Cash Flow Statement Financial Ratio Year end Dec (HK$ m) 212 213 214E 215E 216E 212 213 214E 215E 216E Pre-tax profit 79 71 712 789 879 Gross margin (%) 34.5 23.7 22.6 22.3 22.3 Tax paid (14) (165) (114) (142) (154) EBIT margin (%) 13.3 1.5 9.2 9.5 9.4 Dep'n and amortization 148 241 379 444 459 Net margin (%) 1.4 6.7 5.7 5.6 5.8 Change in working capital (1,222) (1,295) (222) (287) (246) ROA (%) 5.4 3.8 3.4 3.6 3.8 Others (4) 193 8 8 8 ROE (%) 11.9 11.3 1.4 1.6 1.9 Cash from operations (58) (324) 764 812 946 Net gearing (%) 12.9 59.9 34.1 28.5 21.6 Interest coverage (x) -23. 6.1 6. 5.1 5.8 Capital expenditure (9) (1,177) (75) (5) (5) Current ratio 1.5 1.2 1.4 1.4 1.4 Others (127) (513) Cash from investing (217) (169) (75) (5) (5) Change in borrowings 1,13 2,748 38 (56) (211) Dividend paid (15) (15) (152) (151) (167) Others (143) (285) Cash from financing 855 2313 156 (657) (377) FX change 2 (9) Net change in cash 132 29 17 (345) 69 Sources: Company data, GF Securities Page 12

Equity Research Energy Nov 11, 214 Petro-king (2178 HK) Hold (Initiation) Target price: HK$2.27 Wallace Cheng SFC CE No. AKX251 wallacecheng@gfgroup.com.hk +852 3719 149 GF Securities (Hong Kong) Brokerage Limited 29-3/F, Li Po Chun Chambers 189 Des Voeux Road Central Hong Kong Stock performance 7. 6. 5. 4. 3. 2. 1. HK$. Mar-13 Aug-13 Jan-14 Jun-14 Struggling for a recovery; initiate at Hold Slight recovery in 3Q14 after huge setback in 1H14 Petro-king was hit severely in 214, largely due to the slowdown in the domestic oilfield services market in 214. Revenue from northern China and north-west China dropped 42%/38% YoY in 1H14 due to the slowdown in demand in Ordos and a drop in ASP/well. In addition, revenue from PDVSA, Venezuela s national oil company, shrank by a significant 72% YoY in 1H14 on slow receivables collection. Coupled with higher labor costs and depreciation, Petro-king saw an 81% YoY drop in 1H14 net profit. There was a slight recovery in the domestic market in 3Q14 in terms of the number of jobs completed. Also, drilling services in Iraq started to make a contribution during the period. We estimate the number of jobs completed in 4Q14 will be similar to 3Q14, yet revenue/well in the domestic market is expected to remain on a downtrend on a HoH basis. Uncertainties remains for PDVSA Collection of receivables from PDVSA remains a major concern after receivables from PDVSA led to a sharp increase in turnover days to 32 days by the end of 213. Repayment progress is still slow, amounting to HK$11m at end-3q14 compared to the estimated HK$4m outstanding receivables. Receivables issues have also significantly affected Petro-king s revenue as a screen pipe order of around HK$1m from PDVSA was postponed during 1H14. Our understanding is that Petro-king will ship this order only when more receivables are collected. Net profit hit in 214 We estimate net profit will drop by 49% in 214 to HK$12m due to the slowdown in the domestic market and more stringent control of its business with PDVSA. We forecast revenue to drop slightly by 5% YoY, and expect EBIT margin to shrink to 14.9% in 214 from 24.5% in 213 dragged down by higher depreciation costs amid low utilization in its oil servicing segments. We forecast 51%/28% net profit growth in 215/16 on the back of the better outlook for revenue growth from Iraq, as well as an increase in production enhancement demand from Sichuan. Initiate at Hold Petro-king s share price has been resilient since Sep, compared to the average 3-4% share price slump for peers. Our 214/15 revenue and net profit forecasts are 7.3%/4.2% and 32.1%/2.3% lower than consensus. The difference is mainly due to our more conservative estimate for the recovery in domestic operations during 2H14. Trading at 16.1x/1.x 215E P/E & P/B, we believe downside risk in earnings has not been fully factored in. We apply a lower benchmark for historical average forward P/E and P/B compared to peers, i.e. historical mean -1.5 SD, to reflect the greater downside risk for earnings. Our target price of HK$2.27 is derived from a blend of 17x 215E P/E and.97x 215E P/B. We initiate our coverage of Petro-king with a Hold rating. Key data Nov 1 close (HK$) 2.29 Shares in issue (m) 1,8 Major shareholder Lee & Leung Family (31.5%) Market cap (HK$ bn) 2.5 3M avg. vol. (m) 2.1 52W high/low (HK$) 5.2 / 2.7 Stock valuation Turnover Net profit EPS EPS YoY P/E BPS P/B ROE (HK$ m) (HK$ m) (HK$) (%) (HK$) (%) 212 1,63 168.157 93 14.6 1. 2.3 15.9 213 1,63 197.184 17 12.4 2.1 1.1 9. 214E 1,5 12.94-49 24.3 2.1 1.1 4.5 215E 1,222 154.142 51 16.1 2.2 1. 6.5 216E 1,499 197.182 28 12.6 2.4 1. 7.7 Sources: Company data, GF Securities (HK) Research Note: Calculated based on diluted shares.

Company report Nov 11, 214 Figure 1: Revenue mix Figure 2: Segmental EBIT margin trend 1,6 1,4 1,2 1, 8 Oilfield project services Consultancy services Tools and equipment 1% 8% 6% Oilfield project services Consultancy services Tools and equipment 6 4% 4 2 2% 212 213 214E 215E 216E % 212 213 214E 215E 216E Sources: Company data Figure 3: Sales breakdown of oilfield project service segment (HK$) 1, 8 6 4 Drilling Well completion Production enhancement Figure 4: Revenue and gross profit for its solar farm segment (HK$ m) 2, 1,5 1, 1,453 Revenue 1,6 Net profit 1,5 1,222 1,499 2 5 168 197 12 154 197 212 213 214E 215E 216E 212 213 214E 215E 216E Sources: Company data, GF Securities Figure 5: Cash Conversion cycle (days) Figure 6: Capex (HK$ m) 4 212 213 214E 215E 216E (1) (1) 3 (141) (141) (2) (2) (3) 2 391 36 32 3 (4) 1 147 (5) (6) 212 213 214E 215E 216E (7) (65) Sources: Company data, GF Securities Page 14

3/13 5/13 7/13 9/13 11/13 1/14 3/14 5/14 7/14 9/14 3/13 5/13 7/13 9/13 11/13 1/14 3/14 5/14 7/14 9/14 Company report Nov 11, 214 Figure 7: Forward P/E band Figure 8: Forward P/B band 5. 3.2 45. +2 SD 2.8 +2 SD 4. 35. +1 SD 2.4 2. +1 SD 3. Mean 1.6 Mean 25. 2. -1 SD 1.2.8-1 SD 15..4-2 SD Sources: Bloomberg, GF Securities Figure 9: Financial statements Income Statement Balance Sheet Year end Dec (HK$ m) 212 213 214E 215E 216E Year end Dec (HK$ m) 212 213 214E 215E 216E Oilfield project services 922 739 656 82 1,34 Cash and cash equivalents 137 345 186 296 35 Consultancy services 5 41 114 12 126 Inventories 163 299 38 328 363 Tools and equipment 86 281 235 282 339 Trade and other receivables 756 1,151 1,73 1,228 1,55 Discontinued operations 395 Restricted cash 35 161 161 161 161 Turnover 1,453 1,6 1,5 1,222 1,499 Total current assets 1,91 1,955 1,727 2,12 2,335 YoY% Property, plant & equipment 157 293 95 1,42 1,69 Oilfield project services 328 428 29 385 496 Intangible assets 572 57 568 566 564 Consultancy services 27 23 76 79 82 Other non-current assets 13 3 3 3 3 Tools and equipment 63 68 27 33 4 Total non-current assets 742 894 1,54 1,638 1,663 Discontinued operations 21 Net unallocated expense (258) (26) (243) (269) (33) Short-term borrowings 199 233 4 5 55 EBIT 18 26 15 229 288 Trade and other payables 497 353 49 475 579 YoY% Other current liabilities 34 23 25 29 34 Total current liabilities 73 69 834 1,4 1,163 Net finance costs (7) () (15) (25) (28) Share of profit of jce/asso () Long-term borrowings 1 2 2 Disposal gain 48 Other non-current liabilities 12 15 15 15 15 Pre-tax profit 22 259 135 24 261 Total non-current liabilities 12 15 115 215 215 Income tax expense (46) (49) (25) (38) (49) Share capital 672 1,635 1,635 1,635 1,635 Minority interest (6) (14) (8) (12) (15) Reserves 381 556 65 743 917 Net profit 168 197 12 154 197 Equity attri. to shareholders 1,53 2,191 2,239 2,378 2,551 YoY (%) Minority interests 38 35 42 54 69 Total equity 1,91 2,226 2,282 2,432 2,62 Cash Flow Statement Financial Ratio Year end Dec (HK$ m) 212 213 214E 215E 216E 212 213 214E 215E 216E Pre-tax profit 22 259 135 24 261 EBITDA margin (%) 13.8 27.1 18.9 24.1 24.2 Tax paid (35) (57) (23) (35) (44) EBIT margin (%) 12.4 24.5 14.9 18.7 19.2 Dep'n and amortization 2 28 4 65 75 Net margin (%) 11.5 18.5 1.1 12.6 13.1 Change in working capital (46) (584) 125 (19) (29) ROA (%) 9.2 6.9 3.1 4.2 4.9 Others (29) (3) ROE (%) 15.9 9. 4.5 6.5 7.7 Cash from operations 131 (357) 277 126 82 Net gearing (%) 2.6 NC 6.9 1.2 11.1 Interest coverage (x) 24.4 163.4 1. 9.1 1.5 Capital expenditure (141) (141) (65) (2) (1) Current ratio 1.5 3.2 2.1 2. 2. Others (18) (119) Cash from investing (159) (26) (65) (2) (1) Proceed from share issuance 963 Change in borrowings 95 4 267 2 5 Dividend paid (12) (53) (15) (23) Others (3) (58) Cash from financing 92 825 213 185 27 FX change () Net change in cash 64 29 (16) 11 9 Sources: Company data, GF Securities Page 15

Equity Research Energy Nov 11, 214 Anton Oilfield Services (3337 HK) Underperform (Maintained) Target price: HK$1.52 Wallace Cheng SFC CE No. AKX251 wallacecheng@gfgroup.com.hk +852 3719 149 GF Securities (Hong Kong) Brokerage Limited 29-3/F, Li Po Chun Chambers 189 Des Voeux Road Central Hong Kong Stock performance 8 7 6 5 4 3 2 1 HK$ Oct-9 Oct-1 Oct-11 Oct-12 Oct-13 Production module should support revenue growth in 215 Update on production module Anton announced progress on its newly launched production module and backlog for this new business: 1) an entry permit was granted for three workover rigs in South Xinjiang on Oct 31, following the first entry permit gained for one workover rig in Apr this year; 2.) an Rmb114m workover service contract was won in bidding from a client in East Xinjiang with 15 sets of workover equipment to be provided by the client and managed by Anton. Working nature and revenue estimates for the production module: 1) Production Operation Service: a light-asset service based on a long-term oilfield production service contract. Major servicing area: Middle East and African markets. Apart from the Rmb14m (out of the Rmb27m total backlog) expected to be executable in 215, we also added in ~Rmb4m in revenue from ad hoc working contracts. 2. Workover service: covers business of well workover, profile correction and water control. Major servicing area: North-west China. Current backlog in 215 amounts to Rmb15m, including the Rmb114m contract in East Xinjiang. 3. Reservoir production technical service: aims to increase recovery rate, dynamic monitoring and evaluation of reservoirs, etc. Management expects the initial setting to be complete in 215. We expect Anton to book less than Rmb1m revenue from this service in 215. Positive on revenue growth amid some concerns on margin We view this move as neutral to positive for Anton. We believe Anton s production module development should bring stability to revenue growth, given its focus on long-term production service contracts and regular repairs. We believe national oil companies still need help from private companies, especially their niche in certain services and project management, in order to improve project efficiency. However, our concerns surrounding Anton s production module are mainly connected to: 1) gross margin of workover services, as we expect this to be lower than the average for the downhole operation segment; 2) overall labor cost control, as the company expects to add 6 engineers in the next three years. Slight increase in earnings forecasts; maintain Underperform We lift our 214/15/16 net profit forecasts by 2%/9%/9% to factor in our adjustment in revenue mix and the higher contribution from the production module services. We stick to our low-cycle valuation benchmark of 1.1x P/B and lift our target price to HK$1.52 (from HK$1.46). We maintain our Underperform rating. Key data Nov 1 close (HK$) 1.52 Shares in issue (m) 2,194 Major shareholder Luo Lin (32.97%) Market cap (HK$ bn) 3.3 3M avg. vol. (m) 9.7 52W high/low (HK$) 6.2 / 1.5 Stock valuation Turnover (HK$ m) Net profit (HK$ m) EPS (HK$) EPS YoY (%) P/E BPS (HK$) P/B ROE (%) 212 2,5 33.14 32. 8.5.92 1.3 15.3 213 2,534 383.18 24.8 6.8 1.6 1.1 16.8 214E 2,545 64.3-83.5 41.4 1.2 1.2 2.9 215E 3,176 132.6 15.4 2.2 1.7 1.1 5.6 216E 3,667 184.8 39.7 14.4 1.13 1.1 7.4 Sources: Company data, GF Securities (HK) Research Note: Calculated based on diluted shares.

Company report Nov 11, 214 Figure 2: Financial statements Income Statement Balance Sheet Year end Dec (HK$ m) 212 213 214E 215E 216E Year end Dec (HK$ m) 212 213 214E 215E 216E Down-hole operation 857 1,82 1,34 1,316 1,538 Cash and cash equivalents 523 1,77 1,15 529 485 Well completion 458 548 624 682 747 Inventories 487 541 577 737 855 Drilling technology 433 589 62 857 996 Trade and other receivables 1,188 1,524 1,482 1,86 2,35 Tubular services 257 315 267 321 385 Restricted cash 16 32 32 32 32 Total Revenue 2,5 2,534 2,545 3,176 3,667 Total current assets 2,214 3,867 3,197 3,14 3,47 YoY (%) 59.2 26.4.5 24.8 15.4 Property, plant & equipment 955 1,62 2,159 2,5 2,7 Down-hole operation 471 588 559 671 769 Land use right 29 22 22 22 22 Well completion 146 198 175 191 29 Intangible assets 371 375 36 344 329 Drilling technology 18 137 13 18 29 Other non-current assets 24 12 97 99 14 Tubular services 15 15 123 144 169 Total non-current assets 1,379 2,11 2,638 2,965 3,155 Total segment EBITDA 83 1,72 986 1,187 1,357 YoY (%) 82.7 29.1-7.9 2.3 14.4 Total assets 3,593 5,968 5,835 6,69 6,562 Dep & Amort. (89) (123) (192) (259) (3) Short-term borrowings 192 396 2 23 265 Corporate overhead & others (343) (377) (535) (63) (66) Trade and other payables 948 1,153 1,262 1,637 1,931 Operating profit 398 572 26 324 397 Other current liabilities 69 59 66 75 86 YoY (%) 127.6 43.8-54.6 24.7 22.5 Total current liabilities 1,29 1,68 1,528 1,942 2,282 Net finance costs (31) (73) (151) (141) (143) Long-term bond 299 1,983 1,983 1,684 1,684 Share of profit of jce/asso (1) (5) 2 5 Other non-current liabilities 4 2 2 2 2 Pre-tax profit 367 49 14 185 258 Total non-current liabilities 33 1,984 1,984 1,686 1,686 YoY (%) 226.5 33.3-78.8 78. 39.7 Total liabilities 1,512 3,593 3,513 3,627 3,968 Income tax expense (5) (87) (36) (46) (65) After tax profit 318 43 68 139 194 Share capital 21 23 23 23 23 Reserves 1,771 2,8 2,24 2,136 2,278 Minority interest (15) (21) (3) (7) (1) Equity attri. to shareholders 1,972 2,283 2,227 2,339 2,481 Net profit 33 383 64 132 184 Minority interests 19 93 96 13 113 YoY (%) 291.2 26.4-83.2 15.4 39.7 Total equity 2,81 2,375 2,323 2,442 2,594 EPS(RMB).14.18.3.6.8 BPS (RMB).92 1.6 1.2 1.7 1.13 YoY (%) 32. 24.8-83.5 15.4 39.7 YoY (%) 16.5 14.3-3.8 5. 6.1 Cash Flow Statement Financial Ratio Year end Dec (HK$ m) 212 213 214E 215E 216E 212 213 214E 215E 216E Pre-tax profit 367 49 14 185 258 EBITDA margin (%) 22.7 24.2 2.2 19.4 19.2 Tax paid (49) (71) (3) (38) (53) EBIT margin (%) 19.9 22.6 1.2 1.2 1.8 Dep'n and amortization 95 14 28 275 316 Net margin (%) 15.1 15.1 2.5 4.2 5. Change in working capital (138) (27) 114 (18) (53) ROA (%) 8.4 6.4 1.1 2.2 2.8 Others 75 27 5 (2) (5) ROE (%) 15.3 16.8 2.9 5.6 7.4 Cash from operations 35 378 41 312 463 Net gearing (%) NC 25.2 46.9 57.9 57.7 Interest coverage (x) 13. 7.9 1.7 2.3 2.8 Capital expenditure (232) (817) (75) (6) (5) Current ratio 1.8 2.4 2.1 1.6 1.5 Others (41) 8 Cash from investing (273) (89) (75) (6) (5) Proceed from LT bond 299 1,683 Change in borrowings (276) 124 (196) (269) 35 Dividend paid (47) (113) (12) (2) (41) Others 13 1 Cash from financing (11) 1,695 (316) (289) (7) FX change (4) (18) Net change in cash 61 1,246 (665) (577) (44) Sources: Company data, GF Securities Page 17

Company report Nov 11, 214 Rating definitions Benchmark: Hong Kong Hang Seng Index Time horizon: 12 months Company ratings Buy Stock expected to outperform benchmark by more than 15% Accumulate Stock expected to outperform benchmark by more than 5% but not more than 15% Hold Expected stock relative performance ranges between -5% and 5% Underperform Stock expected to underperform benchmark by more than 5% Sector ratings Positive Sector expected to outperform benchmark by more than 1% Neutral Expected sector relative performance ranges between -1% and 1% Cautious Sector expected to underperform benchmark by more than 1% Analyst Certification The research analyst(s) primarily responsible for the content of this research report, in whole or in part, certifies that with respect to the company or relevant securities that the analyst(s) covered in this report: (1) all of the views expressed accurately reflect his or her personal views on the company or relevant securities mentioned herein; and (2) no part of his or her remuneration was, is, or will be, directly or indirectly, in connection with his or her specific recommendations or views expressed in this research report. Disclosure of Interests (1) The proprietary trading division of GF Securities (Hong Kong) Brokerage Limited ( GF Securities (Hong Kong) ) and/or its affiliated or associated companies do not hold any shares of the securities mentioned in this research report. (2) GF Securities (Hong Kong) and/or its affiliated or associated companies did not have any investment banking relationships with the companies mentioned in this research report in the past 12 months. (3) All of the views expressed in this research report accurately reflect the independent views of the analyst(s). Neither the analyst(s) preparing this report nor his/her associate(s) serves as an officer of the companies mentioned in this report, or has any financial interests in or holds any shares of the securities mentioned in this report. Disclaimer This report is prepared by GF Securities (Hong Kong). 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The recipients should be aware of relevant disclosures of interests (if any) when reading this report. Copyright GF Securities (Hong Kong) Brokerage Limited. Without the prior written consent obtained from GF Securities (Hong Kong) Brokerage Limited, any part of the materials contained herein should not (i) in any forms be copied or reproduced or (ii) be re-disseminated. GF Securities (Hong Kong) Brokerage Limited. All rights reserved. 29-3/F, Li Po Chun Chambers, 189 Des Voeux Road Central, Hong Kong Tel: +852 3719 1111 Fax: +852 297 6176 Website: http://www.gfgroup.com.hk Page 18