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SINOPEC OILFIELD SERVICE CORPORATION
SSC
SSC
中石化石油工程技术服务股份有限公司SINOPEC OILFIELD SERVICE CORPORATION
March,2018
2017 Annual Results Presentation
SINOPEC OILFIELD SERVICE CORPORATION
SSCDisclaimer
1
The information contained in this document has not been independently verified. No representation or warranty
expressed or implied is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or
correctness of such information or opinions contained herein. The information contained in this document should be
considered in the context of the circumstances prevailing at the time, is subject to change without notice and has not
been, and will not be, updated solely to reflect material developments which may occur after the date of the
presentation. It is not the Company’s intention to provide, and you may not rely on these materials as providing, a
complete or comprehensive analysis of the Company, or its financial or trading position or prospects. Neither of the
Company nor any of its affiliates, advisers or representatives shall have any liability whatsoever (in negligence or
otherwise) for any loss howsoever arising from any use of this document or its contents or otherwise arising in
connection with this document.
This document contains statements that reflect the Company’s current beliefs and expectations about the future as of
the respective dates indicated herein. These forward-looking statements are based on a number of assumptions about
the Company’s operations and factors beyond the Company’s control and are subject to significant risks and
uncertainties, and accordingly, actual results may differ materially from those described in these forward-looking
statements. The Company undertakes no obligation to update these forward-looking statements for any events or
developments including the occurrence of unanticipated events that occur subsequent to such dates.
This document does not constitute, in whole or in part, an offer for subscription or for sale or invitation to purchase or
subscribe for any shares of Sinopec Corp., Sinopec Oilfield Service Corporation and related companies on any
exchanges. No part of this document shall form the basis of or be relied upon in connection with any contract or
commitment whatsoever.
Section 1: Operations in 2017
Section 2: Financials in 2017
Section 3: 2018 Outlook
Table of Contents
Section 1: Operations in 2017
SINOPEC OILFIELD SERVICE CORPORATION
SSC
4
Overview
国家优质工程金质奖
Geophysics Drilling Engineering Logging and Mud Logging Downhole Operation Engineering Construction
Advanced Equipment• Geophysics: 78 sets of seismic acquisition equipment, 189 sets of vibroseis, 35,388 full digital seismic 3C
geophones
• Drilling: 678 onshore drilling rigs,of which 257 for wells at depth of more than 7,000 meters and 14 offshore
drilling platforms
• Logging: 127 image logging systems, 142 rapid logging platforms, 401 sets of comprehensive logging
instrument
• Downhole operation: 150 sets of type-2500 and type-3000 fracturing assembly, 52 sets of workover rigs with
power higher than 750 HP, 6 offshore operation platforms
Strong R&D capability
• 2 members of the Chinese Academy of Engineering
• 73 professor-level researchers and nearly
• 1,600 senior researchers
• 3,500 research, design, laboratory and development staff
• 3 research institutes
• 3 design companies
• 51 various professional
technical institutes
Special Prize
National Science and Technology ProgressAward 2012&2013
Golden Prize of the
National Quality
EngineeringTechnologies for safe and efficient
development of extra-large ultra-
deep high acid gas fields &
industrial applications
Sichuan-East China
Gas Transmission
Pipeline Project
Rich Experiences• Fuling Shale Gas: the first successful commercial shale gas project outside North America
• Puguang Gas Field: the largest marine-facies high-sulphur gas field in China
• Exploration and Development of Multiple Reservoirs in Shengli: the second largest oilfield in
China
• Tahe Oil Field: large oil field with1.2 billion-ton reserve
• Yuanba Gas Field: the deepest marine-facies reservoir in China
• North Ordos Oil and Gas Field: the first horizontal well construction demonstration area in China
SINOPEC OILFIELD SERVICE CORPORATION
SSC
24
-16,115
-10,583
-18000
-14000
-10000
-6000
-2000
2000
2015 2016 2017
Overall Operation
5
52.343.6
54.1
20
30
40
50
60
70
80
90
100
2015 2016 2017
RMB Million54,700
32,200 31,300
0
10,000
20,000
30,000
40,000
50,000
60,000
2015 2016 2017
49%
15%
36%
55%
18%
27%
37,502
22,550 28,370
8,939
7,362 7,130
13,908
13,012 12,986
0
20,000
40,000
60,000
80,000
2015 2016 2017
Domestic Inside SINOPEC Domestic Outside SINOPEC Overseas
60,349
30%
17%
53%
42,92448,486
27%
58%
15%
62%
15%
23%
Average Price of Brent Oil Operating Revenue of 2017
USD/Barrel RMB Million
RMB Million
Net Profit of 2017 (ASBE)SINOPEC E&P CAPEX
SINOPEC OILFIELD SERVICE CORPORATION
SSC
Drilling Footage(10,000 m)
23,360
15,870
20,683
0
5,000
10,000
15,000
20,000
25,000
2015 2016 2017
810
551
736
0
200
400
600
800
1,000
2015 2016 2017
14,541
12,641 13,686
0
5,000
10,000
15,000
20,000
2015 2016 2017
43,728
14,172
22,155
0
10,000
20,000
30,000
40,000
50,000
2015 2016 2017
Performance by Segments
Geophysics Drilling Engineering
Logging & Mud Logging Downhole Operation Engineering Construction
Completed Contract(RMB Million)
Downhole Operation(Well Times)
6
Mud Logging Footage(10,000 m)
Standard Meter for Logging(10,000 m)
2D Seismic(Km) 3D Seismic(Km2)
33.6%
30.3% 905
531
666
0
200
400
600
800
1000
2015 2016 2017
25.4%
5,409
4,396
5,144
0
1,000
2,000
3,000
4,000
5,000
6,000
2015 2016 2017
17.0% 14,600
12,100 11,900
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
2015 2016 2017
1.7%
56.3%
8.3%
SINOPEC OILFIELD SERVICE CORPORATION
SSC
7
Market Expansion
➢ Overseas market : New contracts valued USD 1.9 billion, completedcontracts valued USD 2. 02 billion and backlog contracts valued USD 4.47billion
Middle East : Signed (renewed) contracts of 19 drilling rigs (USD 470million) in Saudi Arabia; obtained qualifications from Saudi Aramco for gaswells, coiled tubing and mechanical repairs service; obtained KJO offshoredrilling rigs and comprehensive service qualifications; Signed contract of26 drilling and workover rigs (USD 200 million) and contract of loggingservice of 5+1 years (USD 26 million) in Kuwait
South America : 35 wells for ITT Turnkey Drilling Project (USD 150 million)in Ecuador
Africa : Signed contract of 2 offshore drilling projects (USD 150 million) inNigeria; won four bids for geophysical exploration projects (USD 71.81million) in Algeria; Entered Congo’s logging market for the first time.
Other Overseas Markets : Signed the First Phase of No.5 Natural GasPipeline Project in Thailand (USD 196 million) and Geothermal PowerGeneration Drilling Project in Turkey (USD 84.61 million)
➢ Inside Sinopec: Serviced in ultra-deep oil & gas field in Shunbei,natural gas field in Southwest and tight gas field in Ordos;Constructed Wen-23 gas storage project and First Phase ofXinjiang-Guangdong-Zhejiang Pipeline Project (3.16 billion yuan);Developed 15 blocks of difficult-to-produce reservoir, drilled 23wells and repaired 54 long-term shutdown wells in Shengli Oilfield
➢ Outside Sinopec: Completed geological survey of shale gas inwestern Hubei (200 million yuan); Provided vessel services in EastChina Sea Oilfield (660 million yuan); Awarded the Rizhao-JingboOil Products Pipeline Project (2.63 billion yuan) and National OilReserve Construction Project (900 million yuan)
➢ Emerging Business: New contract value of emerging businessincluding underground pipe network detection, land rightconfirmation and marine surveying and mapping amounted to 108million yuan, an increase of 31% year-on-year; new contracts forenergy conservation and environmental protection services such assolid waste disposal and soil remediation amounted to 169 millionyuan, an increase of 133% year-on-year
1227
558 493
1068
607 438
917
457 237
0
500
1000
1500
Middle East Africa Americas2015 2016 2017
USD Million
1265
422262
1292
322 260
1183
365 333
0
500
1000
1500
Middle East Africa Americas2015 2016 2017
21,200
9,000
30,300
10,600
0
10,000
20,000
30,000
40,000
Inside Sinopec Outside Sinopec
2016 2017
RMB Million
22,500
7,800
26,400
7,200
0
10,000
20,000
30,000
40,000
Inside Sinopec Outside Sinopec
2016 2017
RMB Million
New Contracts Value Completed Contracts Value
New Contracts Value
Completed Contracts ValueUSD Million
Overseas MarketDomestic Market
SINOPEC OILFIELD SERVICE CORPORATION
SSC
➢ Diverted surplus staff through multiple channels,
encouraged employees to undertake external businesses
and provide labor services, and accumulatively reduced
4,000 staff
Deepening Reform
8
➢ Reduced operating units to 80, compared to 97 in 2014
➢ Cut administrative offices and departments directly under
operating units by 19%, from 996 to 806
➢ Consolidated headquarters departments from 17 to 12,
reduced by 30%
➢ Cut 179 professional crews
➢ Phased out 267 sets of old drilling rigs and other
equipment with 2.123 billion yuan write-down
2113 19781799
0
500
1000
1500
2000
2500
2015 2016 2017
Number of Crews
106.288.6 84.6
50
100
150
2015 2016 2017
Total Number of Staff
➢ Integrated auxiliary services and established professional
teams
➢ Established contracting operating mechanism. Motivated
employees to start a business, innovate and create profit
➢ Reduced 63 grassroot units of auxiliary services and 48
grassroot units applied contracting mechanism
Thousand Person
Reducing Excess Capacity
Downsizing Organization Integrating Auxiliary Services
Diverting Surplus Staff
SINOPEC OILFIELD SERVICE CORPORATION
SSCTapping Potential and Enhancing Efficiency
Cost Reduction in 2017
Cost Reduction of
1.51 Billion Yuan
231
344
363
217
183
72 97
Organization Operating Production Operating
Procurement Labor Output
Administrative & Sales Outsourcing
Maintenance
RMB Million
9
4,070
1,340
740
0
1,000
2,000
3,000
4,000
5,000
2015 2016 2017
RMB Million
Capital Expenditure
SINOPEC OILFIELD SERVICE CORPORATION
SSCTechnology R&D
10
Patents:494 new patents applications filed, 322 patents granted
Scientific Rewards :High-Efficiency Exploration and Development in Fuling Large-
scale Marine Shale Gas Field won the first class prize of National Science and
Technology Progress Award. National 863 program Radar Imaging Log Prototype
Development passed acceptance
Strengthened Technology Innovation
Ultra-Deep Drilling
Unconventional Oil and Gas
Geophysical Technology
➢ Refreshed the record of deepest well in Asia by ShunbeiAppraisal-1 well (8430m) and Appraisal-2 well (8433m) insuccession
➢ Improved shale gas engineering technology to support thecapacity construction and peripheral deep layer exploration inFuling shale gas field
➢ Strived to make technological breakthrough in leak-proof andplugging in tight oil and gas reservoirs in Ordos, one-shotplugging success rate reached 92%
➢ Single point high-density 3D seismic technology realizedindustrialized application in eastern matured region; andsophisticated mountain seismic exploration integratedtechnology was widely applied overseas
Offshore Drilling➢ Made significant breakthrough in drilling and coring of gas
hydrate offshore. Completed the world’s first sidetracking in24 ”riser in the South China Sea
Section 2: Financials in 2017
SINOPEC OILFIELD SERVICE CORPORATION
SSCMain Financial Indicators
12
Operating Cash Flow Total Assets and Net Assets
85,30874,493
61,943
24,637
8,442
-2,097-20000
0
20000
40000
60000
80000
100000
2015 2016 2017
Total Assets Net Assets
RMB MillionOperating Revenue
49%
15%
36%
55%
18%
27%24
-16,115 -10,583
0.04%
-37.54%
-21.83%
-40%
-30%
-20%
-10%
0%
10%
-20,000
-15,000
-10,000
-5,000
0
5,000
2015 2016 2017
Net Profit Net Profit Margin(Right Axle)
Net Profit & Margin
0
20,000
40,000
60,000
80,000
2015 2016 2017
Domestic Inside Sinopec Domestic Outside Sinopec
Overseas
60,349
30%
17%
53%
42,92448,486
27%
58%
15%
62%
15%
23%
2,576
-3,907
419
-4000
-2000
0
2000
4000
2015 2016 2017
RMB Million
RMB Million
RMB Million
SINOPEC OILFIELD SERVICE CORPORATION
SSC
13
Operating Revenue
5,2853,606 3,980
2015 2016 2017
Gross Profit Margin% of Total Revenue
Geophysics
Drilling
Loggingand
Mud Logging
DownholeOperation
EngineeringConstruction
28,56119,369
24,719
2015 2016 2017
RMB Million
92%
8%
48%
52%
96%
4%
91%
9%
75%
25%
8.3%
-16.7%
5.6%
-20%
-10%
0%
10%
2015 2016 2017
8.4%
-28.3%-7.2%
-40%
-20%
0%
20%
2015 2016 2017
16.1%
-33.4%-14.0%
-40%
-20%
0%
20%
2015 2016 2017
11.7%
-23.5%
-7.9%
-30%
-20%
-10%
0%
10%
20%
2015 2016 2017
7.6%
-24.9%
-5.6%
-30%
-20%
-10%
0%
10%
2015 2016 2017
2,4461,538 1,811
2015 2016 2017
6,916
3,868 4,189
2015 2016 2017
15,379 12,827 11,741
2015 2016 2017
436
-603
225
2015 2016 2017
808
-908
-333
2015 2016 2017
393
-514
-253
2015 2016 2017
2,383
-5,472
-1,788
2015 2016 2017
1,170
-3199
-652
2015 2016 2017
Gross Profit
Financials of 5 Business Segments
SINOPEC OILFIELD SERVICE CORPORATION
SSCProfitability and Analysis of A/R and Inventory
14
Gross Profit & MarginRMB Million
Operating Cost
53,988 53,037 50,431
0
10,000
20,000
30,000
40,000
50,000
60,000
Major Business Cost
2015 2016 2017
4.9%
5,780
-10,592
-2,490
9.58%
-24.68%
-5.14%
-30%
-20%
-10%
0%
10%
20%
-15,000
-10,000
-5,000
0
5,000
10,000
2015 2016 2017
Gross Profit Gross Profit Margin(Right Axle)
14,769
9,318 7,803
0
5000
10000
15000
20000
Inventory
2015 2016 2017
16%
27,121 23,908
16,962
0
5000
10000
15000
20000
25000
30000
Accounts Receivable
2015 2016 2017
29%
Changes in Accounts Receivable Changes in Inventory
RMB Million
RMB Million RMB Million
SINOPEC OILFIELD SERVICE CORPORATION
SSCAnalysis of Solvency
15
71.0%
88.7%
103.4%
15.0%24.3%
29.2%
30.5%
64.9%
115.6%
0%
20%
40%
60%
80%
100%
120%
140%
2015 2016 2017
Debt to Asset Ratio
Interest Bearing Debt to Asset Ratio
Debt to Equity Ratio
18,740
11,305
Credit Facility for Loan from Sinopec Financial Institutions
Comprehensive Credit Facility from Banks (Not for Loan)
RMB Million
Structure of Assets and Liabilities Credit Facility from Financial Institutions
SINOPEC OILFIELD SERVICE CORPORATION
SSC
4,751
1,000
201
Used
Temporary Supplement of Working Capital
Unused
16
No
n-P
ub
lic Pla
cem
en
tin
Jan
uary
20
18
RMB MillionUse
of P
revio
us
Pro
ceed
s
Non-Public Placement
Sinopec Group1,503,568,702 shares
Qixingongying Scheme23,148,854 shares
Sinopec Group Qixingongying Scheme
Subscription of A-Shares
Sinopec Century Bright2,595,786,987 shares
China Structural Reform Fund 719,174,495 shares
Sinopec Century Bright China Structural Reform Fund
Subscription of H-Share
➢ Issued 1.527 billion A-shares, raising 4 billion yuan. Sinopec Group subscribed for 3.94 billion yuan, and QixingongyingScheme subscribed for 60 million yuan, subscription price was 2.62 RMB/share
➢ Issued 3.314 billion H-shares, raising HKD 4.47 billion. Sinopec Century Bright subscribed for HKD 3.5 billion, ChinaStructural Reform Fund subscribed for HKD 970 million, subscription price was 1.35 HKD/ share
➢ Shareholding of Sinopec Group increased from 65.22% to 70.18%
98%
2%
78%
22%
Raised funds of 50.91 million yuan used in 2017
Section 3: 2018 Outlook
SINOPEC OILFIELD SERVICE CORPORATION
SSCIndustry Outlook
18
Brent Crude Oil outlook
17.3
24.0
13.7
16.0
9.4
4.8
15.8
25.0
19.0
13.5
11.0
7.4
2017 2018
USD Billion
➢ World economic recovery will continue to accelerate. Global crude oil market will be rebalancing.
It is expected that the international oil price will rise with fluctuations
➢ E&P CAPEX of both domestic and overseas oil companies will continue to rebound, which will
lead to continued recovery of oilfield service
➢ Despite the gradual pick-up of international oil prices, low oil price scenario is still the biggest
challenge faced by the oilfield service industry. Market competition will remain fierce
6562
5762
70
62
49
69
HSBC DB Citi DNB
2018 2019
USD/Barrel
Changes in Oilfield Service
Industry
Predicted CAPEX of Major Upstream Enterprises
Source: Deutsche Bank Research, Bloomberg, March 8th 2018 Source: Company’s Information, Deutsche Bank Research, March 8th 2018
SINOPEC OILFIELD SERVICE CORPORATION
SSC
4396
5,144 5,500
0
1000
2000
3000
4000
5000
6000
2016 2017 2018
531
666 750
0
200
400
600
800
2016 2017 2018
15,870
20,683
23,500
0
5,000
10,000
15,000
20,000
25,000
2016 2017 2018
551
736 850
0
200
400
600
800
1000
2016 2017 2018
12,641 13,686 14,520
0
5,000
10,000
15,000
20,000
2016 2017 2018
14,172
22,155
16,200
0
5,000
10,000
15,000
20,000
25,000
2016 2017 2018
Work Volume Plan in 2018
Geophysics Drilling
Logging & Mud Logging Downhole Operation Engineering Construction
Drilling Footage(10,000 m)
Completed Contract(RMB Million)
Downhole Operation(Well Times)
19
Mud Logging Footage(10,000 m)
Standard Meter for Logging(10,000 m)
2D Seismic(Km) 3D Seismic(Km2)
12,100 11,900
14,000
0
5,000
10,000
15,000
2016 2017 2018
SINOPEC OILFIELD SERVICE CORPORATION
SSC
20
Market Development
Do
mestic
Insid
e S
ino
pec
Do
mestic
Ou
tside S
ino
pec
Overse
as
➢ Planned new contracts value of 33.2 billion yuan
➢ Service for ultra-deep oil & gas field in Shunbei, natural gas field in Southwest and tight gas field in Ordos
➢ Construction of Wen-23 gas storage, Xinjiang-Guangdong-Zhejiang Pipeline, Rizhao-Puyang-Luoyang crude oil
pipeline, Ordos-Anping-Cangzhou gas pipeline and other key projects
➢ Capacity construction of Fuling shale gas and new cooperation models in Weiyuan, Yongchuan and other areas
➢ Promoting cooperation model for developing difficult-to-produce reservoir in Shengli Oilfield, building new
capacity of 400,000 ton/year and repairing 700 long-term shutdown wells
➢ Planned new contracts value of 10 billion yuan
➢ Deepening strategic cooperation and consolidating CNPC market
➢ Expanding shale gas market in Southwest, BP shale gas cooperation block and local shale gas blocks
➢ Promoting integrated reservoir services and consolidating China Geological Survey market
➢ Intensifying marketing efforts on energy conservation and environmental protection, geographical surveying
and mapping, pipeline MRO to foster new market growth drivers
➢ Unifying management of overseas operations, integrating and optimizing resources, and planned new contracts
value of USD 2.2 billion
➢ Expanding high value-added businesses such as integrated oilfield services, cementing, logging and mud
logging, energy conservation and environmental protection
➢ Saudi Arabia: Developing Saudi Aramco market of well drilling, turnkey drilling projects, cementing, drilling mud
and other new businesses, resuming geophysics and engineering construction
➢ Kuwait: Providing integrated services, deep well drilling and logging, cementing
➢ Kazakhstan: Focusing on SIPC, CNPC and KazMunaiGas
SINOPEC OILFIELD SERVICE CORPORATION
SSC
21
➢ Promote the institutional construction centering project management. Improve project profitability through stringent project management and process control
➢ Strengthen subcontracting management, reduce outsourcing expenses ➢ Strengthen full-caliber and full-process cost control, achieve annual cost reduction target of 3.1 billion yuan.➢ Promote sharing of information, capital, technology, equipment, etc. Improve overall management efficiency
Actively Promote Fine Management
➢ In accordance with market demand, dynamically adjust and optimize team and equipment scale and resources allocation, and significantly reduce crew idling rate and expenses
➢ Streamline management level and organization, clearly define positioning and responsibilities at each level. Promote more dynamics and robust mechanism
➢ Complete resettlement of surplus personnel and plan to reduce 3500 staff
Promote Market-oriented Management and Operation
➢ In accordance with professionalization and specialization, optimize and reinforce core business of well drilling,geophysics, engineering construction, offshore engineering. Integrate the similar-business subsidiaries unitsby specialization and regions. Develop specialized services by competitive advantages. Improve resourcesallocation
➢ Boost transformational development and vigorously promote energy conservation and environmentalprotection, geographical surveying and mapping, and pipeline MRO. Foster new growth drivers
➢ Promote contracting of auxiliary (general) business, and strengthen auxiliary professional team and newbusiness development
Optimize and Reinforce Main Business
Deepening Reform and Fine Management
SINOPEC OILFIELD SERVICE CORPORATION
SSCEnhancing Technology Innovation
22
Continuously improve the R&D system and accelerate the construction of technology centers
Foster featured core technology and promote transformation
➢ R&D in RSS drilling, HTHP storage logging tools, node seismometer➢ Promote the automation of drilling rigs, the application of broadband acceleration
detectors, the construction of large-diameter high-grade long-distance pipelines,and the commercialization of mid-deep water and ocean engineering designtechnologies
➢ Speed up the development of energy conservation and environmental protection technologies such as solid waste disposal, soil remediation, pipeline MRO, CCUS(carbon capture, utilization and storage)
➢ One-trip drilling technology in long horizontal section of deep shale gas➢ Safe and efficient drilling technology for extra-deep well in Shunbei, Xinjiang➢ ROP-raising technology for difficult-to-drill complex formation in western Sichuan➢ Leak-proof and plugging technology for complex formation in Hangjinqi, Ordos
SINOPEC Research Institute of Petroleum Engineering
Shengli R&D center, Zhongyuan R&D center, Geophysics R&D center,
Oil and Gas Test Tech Center, Acid Oil and Gas Field Tech Center, E&C
Design and Innovation Center
Focus on key projects and accelerate the application of R&D results
SINOPEC OILFIELD SERVICE CORPORATION
SSCQ&A
23
http://ssc.sinopec.com
Investors Relationship
Tel:+86 10 5996 5998Fax:+86 10 5996 5997
Mailbox:[email protected]