Friday, March 29, 2024
 
Columnist
Martin Hennecke
 
ANTON OILFIELD
HKEx Stock Code : 03337 
 
Corporate Profile
The Group provides oil and gas field development technical services, and tubular services covering the entire life cycle of oil and gas field development, including drilling, well completion and oil production.

Business Review - For the year ended December 31, 2012

In 2012, the Group further accelerated the pace of growth. The Group's total revenue amounted to RMB2,004.6 million, representing an increase of RMB745.7 million, or 59.2%, from RMB1,258.9 million in 2011. The high growth was attributable to the Company's well-prepared planning and the robust market demand in the Year.

In 2012, the Group's operating profit reached RMB398.0 million, an increase of RMB223.1 million, or 127.6%, from RMB174.9 million in 2011. Net profit stood at RMB317.7 million, an increase of RMB226.0 million, or 246.5% from RMB91.7 million in 2011. Profit attributable to equity holders of the Company amounted to RMB302.6 million, an increase of RMB225.3 million, or 291.5%, from RMB77.3 million in 2011. Net profit margin rose to 15.8% from 7.3% in the previous year, representing a growth of 8.5 percentage points. This was because the proportion of cost of sales in total revenue was further reduced due to the Group's increased use of in-house products and services, and lower procurement costs attained from strategic suppliers through merchandizing in a larger volume from these suppliers.

In 2012, the Group's capital efficiency was fully enhanced. As at 31 December 2012, the number of average accounts receivable turnover days stood at 134, a significant decline of 44 days from that in the previous year; the number of average inventory turnover days reached 124, a drop of 7 days from that in 2011; and the average accounts payable turnover days was 149, an increase of 47 days from that in the previous year. The capital efficiency was further enhanced because the Group strengthened the management of settlement in the sales process, while the Group also incorporated the accounts receivables day target as a key performance indicator and it is aligned with a corresponding reward and penalty system to motivate the fulfillment of such target. In the meantime, the Group strengthened the inventory management with specific measures to manage overdue inventory. In the management of accounts payables, the Group established strategic suppliers to achieve better payment terms.

In 2012, market demands exceeded expectation. The Group promoted its growth through forging strategic partnership with its clients to ensure a substainable relationship. In China, as oil companies stepped up E&P activities in conventional and tight gas to commit more production capacity in natural gas, the Group seized the market opportunities and, targeting natural gas development, established strategic partnerships with clients in the Erdos Basin, Tarim Basin, Sichuan Basin and Songliao Basin. Overseas, in view of the needs of the Chinese investors, the Group forged long-term partnership in the Al-Ahdab project and the Halfaya project in Iraq.

In the Year, the contribution from the core business ˇX oil and gas field development technical services (including drilling technology, well completion and down hole operations clusters) ˇX continued to post a significant growth, up by 60.1%, while the supplementary business ˇX tubular services ˇX also saw a strong growth, up by 50.0%. The original three signature services ˇX multistage fracking, coiled tubing and directional drilling services ˇX led the growth with an aggregate revenue amounted to RMB830.9 million, up by 36.7% compared to last year, accounting for 41.4% of the Group's total revenue for the Year. In particular, as a result of the accelerated development of tight gas, the revenue of the multistage fracking service registered a remarkable revenue growth of 51.9%, reaching RMB163.1 million, with 139 jobs completed in the Year. In the meantime, the new services made a successful entry in the market, generating a revenue of RMB163.1 million, accounting for 8.1% of the Group's total revenue. As a new service, the oil-based drilling fluid had established a sustainable and stable market for the high-end use in the Tarim Basin while the pressure pumping service also opened up the market upon the completion of its service capacity for the massive use in the Erdos Basin.

In retrospect over the Year, the Group's stellar performance detailed above was attributable to the successful implementation of its business strategy. In market development, the Group increased presence in strategic regional markets and launched technical services with competitive value propositions, strengthened its influence in the market through the forging of strategic partnership, so as to effectively seize the opportunities arising from the development of China's domestic natural gas business and expanded investments made by Chinese companies overseas. In product development, the Group started the process of a strategic transition towards an integrated service model. Over the last two years, it established its integrated-service department, consolidated service competences in drilling technology, well completion, down-hole operation as well as oil production services and bolstered such regular services as pressure pumping, making the successful shift towards the integrated-services model with regular services driven by technical services targeting the high-end markets from a sole focus on services for high-end markets and unlocking the vast market potential. In human resources, the Group consistently adhered to its ˇ§Talents Firstˇ¨ philosophy. It started the campus recruitments as early as in 2007 to attract, develop and retain young professionals so as to diversify the Group's talent pool, besides hiring industry-leading talents with international experience to drive development of the new businesses. As the enormous potential of the industry began to unfold, the Group was able to leverage its human resources capital to capture market opportunities. In general management, the Group places a primary focus on performing the operation and management based on its strategic priorities to align various strategic resource allocation with business operations. In the meantime, a corresponding performance-based evaluation mechanism was adopted to ensure that strategic targets are delivered. The success of these strategies contributed not only to the Group's outstanding performance in 2012, but also well positioned the Group for its sustainability and continued creation of value for its shareholders.

Business Outlook - For the year ended December 31, 2012

Looking ahead into 2013, the Group expects accelerated growth in demand in the major markets under its current service coverage. In China, the Chinese government has re-affirmed its commitment to promoting natural gas development through the official release of the 12th Five-Year Plan for the gas industry and 2013 will prove critical in achieving the specific goals formulated by the authorities. To realize the defined target, the government is believed to make escalated efforts in speeding up various reforms in the natural gas industry and introduce additional opening-up initiatives allowing more investment entities to participate in the development. Aside from the continued drive in tapping conventional resources, a particular focus will be placed on exploring and developing the unconventional natural gas, signaling a remarkable increase in the E&P activities made by major oil and gas companies in the country's key onshore basins including the Tarim, Erdos and Sichuan Basins. Overseas, the Group foresees an accelerated move by Chinese investors to deploy strategic resources on a global scale, and as a number of their projects acquired previously entered into the phase of production commencement or capacity extensions, there will be a robust growth in demand for oilfield services. The Middle East and South America, in particular, will remain as an attractive destination for Chinese investors to develop energy resources.

In view of the market development trends, the Group will stay committed to serving the natural gas market in China while placing a particular emphasis on providing services for projects associated with the development of unconventional resources, including shale gas. At the same time, it would seek to establish strategic partnerships with state-owned oilfield service companies to which the Group's service offerings are a strong addition, so as to effectively explore the full market potential and facilitate the Group's drive in further consolidating its market leadership in the Tarim Basin, Erdos Basin and Sichuan Basin. In the overseas market, the Group will stick to the ˇ§follow-upˇ¨ strategy, strengthen its foothold in the existing markets, expand service offerings based on clients' requirements and further increase the business volume in the Middle East. In consideration of the active investment up-trend in South America, the Group will seek to make a further stride in expanding its business in South America where it has gained a breakthrough. In addition, the Group will look to start cooperation with national oil companies based abroad to further expand its client base.

In 2013, the Group will maintain its product strategy that emphasized on growing the oil and gas field development technical services while independently developing the tubular services. In oil and gas field development, the Group will ramp up and further enhance its regular-service capacity according to the market demand characteristics, and comprehensively push ahead with the shift towards the integrated-service model with regular services driven by technical services targeting high-end markets from a sole focus on services for high-end markets. This strategy in particular involves providing stimulation services to address client's challenges when facing output constraints, and providing integrated services to address clients' challenges in drilling engineering and efficiency enhancement. More specifically, in the drilling technology cluster, the Group will grow the turnkey drilling business through the addition of land rigs, the Group will also view the IPM joint venture company with Schlumberger as a marketing platform to acquire more large amount integrated service contracts to promote its integrated turnkey business, while broadening the application of oil-based drilling fluid service in extended regions and markets and apply directional drilling to the regular service market; in the well completion cluster, strengthen the buildup of in-house capacity in well-completion tools in an all-round manner; in the downhole operation cluster, continue to invest in pressure pumping and coiled tubing capacity and promote the self-developed new materials and chemical products. In the meantime, the Group will invest in the leasing resources and vigorously develop the leasing business in the tubular services cluster. On top of that, the oil and gas development department will also actively participate in the evaluation of low-yield blocks, aiming to propel the development of its integrated services. The Group has put more resources in Anton Research Institute to emphasize its role to promote business development from a technology-driven point of view. The new institute will interface with investors in shale gas and, from a geological and reservoir analysis perspective, provide professional support and services with regard to the reservoir evaluation issues in the early E&P stage of shale gas and advise them on the development strategy in a bid to promote the development of shale gas.

In human resources development, the Group will actively acquire industry-leading talents with international experience in core areas as well as strengthen talent identification and training for the management pipeline; and at the same time recruit graduates on a massive scale and turn them into onsite engineers after short-term trainings so as to provide a solid backup for the Group's site operations, and establish a long-term human resources strategic framework to support its sustainable business growth.

In general management, the Group continues to be committed to acheiving better corporate governance. In this regard, the Group announced the addition of the executive vice-president of Schlumberger as a non-executive director of the Board to make a step forward with its corporate governance pratice. In the meantime, as a commitment to strengthening its QHSE management, the Group has formed a QHSE committee in the Board with the newly-joined non-executive director from Schlumberger to be the chairman of the committee, serving to bring the world's leading standards in QHSE to the Group. In informatization, the Group is making full efforts to build up the informatization system through working with an IT service provider, Atos Origin, with good knowledge of the international oilfield service companies' best practice, to support its long-term growth.

In terms of financial strategy, the Group aims to maintain a fast growth in revenue and stable profitability, while sustaining the enhancement of capital efficiency. The Group will realize such objectives through developing new products and services, exploring new markets and making intensified efforts in cost controls and efficiency enhancement. At the same time, the Group will utilize different debt financing channels including MTN issuance, supply chain financing and financial leasing to provide adequate sources of capital for the Group's business development.

In conclusion, in anticipation of robust demands from both the domestic and overseas markets, the Group will precisely position clients' needs and subsequently make timely addition of its service offerings as guided by its long-term strategy, so as to provide one-stop technical service solutions that effectively suit the clients' demand. In the meantime, the Group will further enhance its soft power by prioritizing the talent pool buildup, corporate culture and informatization, to cement a concrete foundation towards becoming a leading global oilfield service company with a strong foothold in China.

Source: Anton Oilfield (03337) Annual Results Announcement
Chairman Luo Lin Issued Capital (shares) 2,156M
Par Value HKD 0.1 Market Capitalisation (HKD) 11,752M
 
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