[Fl] Good morning, investors and analysts, and welcome to this 2022 interim results presentation of COSL. Today's meeting is held in the form of live video conference and teleconference. Thank you so much for your participation. [Fl] First of all, please allow me to introduce the participants from this board of directors and management today attending this conference. They are Mr. Zhao Shunqiang, Chairman and CEO, Ms. Zhao Lijuan, Independent Non-Executive Director, Ms. Zheng Xiaojie, Chief Financial Officer, and I myself am Sun Weizhou, Secretary of the Board of Directors of the company. [Fl] This presentation will be divided into two parts. First, Madam Zheng Xiaojie, Chief Financial Officer, will introduce this interim operating results of 2022, and then we will have the Q&A session. Next, let's welcome Madam Zheng Xiaojie, Chief Financial Officer, to introduce the presentation of the performance. Let's welcome Madam Zhen. Good morning, ladies and gentlemen. Welcome you to attend COSL 2022 Interim Results Announcement Conference. Before the formal introduction, I would like to remind you to pay attention to the disclaimer on the materials of this conference on this page. Today's presentation will be divided into two parts. First is 2022 interim results review. Second is our future prospects. In the first half of 2022, the global demand for crude oil continued to recover, and the international oil price gradually reduced amid the shock. The global upstream exploration and production capital expenditure continued to grow, and the oilfield service industry gradually recovered. The activity of managing oilfield service sectors has improved to varying degrees, especially the strong growth for drilling and well completion business. The utilization rate of global drilling rigs continues to improve, and the situation of equipment supply gradually improves. In the first half of the year, the company actively coordinated the epidemic prevention control and production operation, refined the implementation of cost reduction, quality improvement, and efficiency improvement, and fully promoted research and the development of key core technologies and the transformation of achievements. During the period, the company's revenue was CNY 15.19 billion, and profit for the period was CNY 1.19 billion. The company has always focused on the needs of core customers, seized the development opportunities of the industry, and continuously improved the core competitiveness of the technology sector. In terms of exploration, focused on deep water and deep layer, built an integrated exploration technology ecology, and effectively supported the efficient discovery of offshore oil and gas reserves. In terms of development, the operation skill of self-owned core technology and the system stability has been further improved. In the first half of the year, the company obtained 40 invention patents with the increase of 80% year-on-year. Scientific and technological innovation continues to make breakthroughs, and ultra-high temperature and high-pressure logging technology and equipment support oil and gas exploration and production. High-resolution acoustic imaging and high-temperature electric large-diameter coring instruments have reached the international advanced level. The company has always taken self-reliance in science and technology as a strategy base point, but accelerated the implementation of the technology-driven strategy, constantly optimized the science, technology, and innovation ecology. Accelerated the effort to tackling key core technologies, and continue to promote the development of overseas markets with self-development technologies. In the first half of the year, the company closely followed the development trends of the industry. Through continuous improvement of management level, the quality and quantity of equipment reached a new high, and more than 240 large-scale equipment, more than 180 sets of drilling and workover rigs. The 900 sets of core technology equipment were operated and managed safely and efficiently. We coordinated 3 drilling rigs and 6 offshore LNG vessels, and expanded 17 series of Xuanji systems. In terms of cost control, the company actively implemented the cost leadership strategy, and continued to do a better job in fine cost management through scientific and technological innovation, equipment efficiency creation, materials control, and other measures. We realized the accumulated cost reduction of CNY 420 million. The company established an integrated and a new energy business division to promote the transformation of integrated service to strategy. Operations complexity of integrated projects has been significantly improved. The company contracted the service integration project in eight fields amounting to cementing, directional well, logging, and preparation, which marked the breakthrough of the company's integrated technical service in Mexico onshore oil field. In the first half of 2022, over 140 new site overseas contracts, representing an increase of 180% over the same period last year. The total amount of newly signed overseas contracts was about $1.7 billion, representing an increase of 724% over the same period last year. The company's great breakthrough in the high-end market marks the rapid improvement of the company's international brand image. The company firmly grasped the recent trends of the industry, continuously optimized the overseas layout, deeply cultivated regional markets, and obtained a number of large-scale, long-term, and high-value contracts. In the second part, let's look forward to the company's development prospects in the second half of 2022 and the next few years. Driven by high oil prices and increase in production for oil and gas, the overall scale of global exploration and production investment will be significantly increased. The oilfield service market is expected to further expand, where service fees will be gradually raised. The company will continue to enhance its equipment strengthening, keep promoting scientific and technological innovation, and build up integrated service capabilities for the whole oilfield lifecycle oriented toward customer demand. The company will gradually develop into a world-class energy service company with Chinese characteristics. Under the guidance of the new five strategies of technology-driven cost leadership, integration, internationalization, and regional development. The company will continue to adhere to technology-driven strategy and the core is to increase scientific research inputs to promote key technology research, improve the company's competitiveness in both China's oil and gas reserves and production, and ensure energy security. In the second half of the year, the company's key projects accelerated the efforts to core technologies and improved the profit contribution of the technology segment. The company will focus on deep water, deep well, ultra-deep, high pressure, high temperature, heavy oil integration and other industry needs, and proceed to new technology-driven strategies. The company will continue to focus on the value management of whole life cycle and go out to promote the value of large equipment through scientific allocation of large equipment resources, strengthening the evaluation and monitoring of the effectiveness of large scale equipment, establishing an exit mechanism for the transformation of old equipment, and a continued optimization of equipment structure. In terms of green and low-carbon development, we will continue to promote industry transformation and upgrading, and help the company develop in a high-quality, quality development. We will actively develop the CCUS industry to realize the double value added for efficient development of new energy and traditional oil and gas fields from an integrated service capacity for offshore wind power and keep a differentiated layout for hydrogen energy and hydrates, mainly in technology. Facing the new changes in the industry situation, the company will continue to refine cost control, accelerate the construction of a systematic structure and long-term cost reduction mechanism, and form advantages for cost leadership. The company will continue to improve cost leadership level, boost the market expansion ability, strengthen the cost leadership advantages, optimize the cost and expense structure, and improve long-term cost reduction mechanism. The company will adhere to the needs of customers, accelerate the integration of geological engineering, geophysical exploration, drilling, and completion, and the disposal engineering. Fully release the efficiency of integrated cost reduction, innovate technology and management modes, and actively provide low-cost comprehensive solutions to all companies. In overseas market, we will continue to give play to the company's competitive advantages in the industry, and take Iraq, Indonesia, Mexico, and other overseas regions as representative to continuously stabilize overseas traditional customers. Constantly develop new customers, gradually give play to the scale effects of overseas markets, and achieve the goal of expanding overseas revenue scale. We will continue to promote the regional development strategy, adhere to the domestic and international markets, and domestic circulation plays the principal role. Relying on favorable domestic policies, the company has always focused on increasing reserves and production, and continues to improve its leading position in the domestic market. Overseas development will select key customers based on regional characteristics, focus on customer needs, adopt different strategies in different regions, and gradually realize regional scale development. The offshore market of China is the company's current core market, and CNOOC Limited is the company's core customer in the offshore of China. We will further expand project cooperation with core customers and closely track the potential workload of new blocks of CNOOC Limited. The company will seize the development opportunities of industry, enrich the service content of domestic market, adapt to the changes of the new global energy pattern, and steadily increase the income scale of the domestic market. The company always adheres to the concept of safety first, fulfills social responsibility, and actively participates in public welfare, and builds safety control activities with customers. The company continues to do a good job in production and management, and normalize epidemic prevention and control, and strictly adhere to the bottom line of zero infection. Based on the company's unique integration advantages, stable financial structure, high quality, and efficient operation team. Under the guidance of technology-driven cost leadership, integration, internationalization, and regional development, five development strategies, COSL will create more valuable returns for shareholders, customers, and all parties. Thanks again to all the shareholders and investors present for your support and understanding of COSL. Now we are happy to take your questions. Thanks. [Fl] Thank you, Madam Chong. Now let's go to the Q&A session. In order to give more investors chances to ask questions, please ask no more than two questions per person. Please also let us know your company and name before asking questions. We will have the interpreter to translate all the questions and answers from English to Chinese and Chinese to English. Please leave enough time for the translators to translate. Thank you so much. Now I will give the floor to the host of the conference call to host the session. [Fl] [Fl] Thank you so much for the question. I have two questions. The first one is if we look at the peak of the last cycle until now, the whole industry has already experienced a long-term adjustment. I have already seen this leverage ratio of the company continue to decrease, and it has already dropped to around 30% compared with the peak time of last period, or compared with our counterparts in this industry, it's all quite low. I'm wondering about this dividend payout. I want to know that considering such good cash flow of the company, do we plan to increase our dividend payout ratio to reward long-term shareholders as a repayment for their long-term support? The second question is about the planning of the technology. I know that CNOOC and COSL, no matter for this offshore shale gas or non-conventional development or the planning of this technology or the onshore one, we all have made our own breakthrough and development. I want to know that what are the differences of our, for example, technology, the service model of all these? [Fl] Thank you so much for the question. Indeed, because of the recovery of the industry, the cash flow of the company has been constantly up over time. According to the charter of the company, we indeed have to give the shareholders the dividend payout ratio no less than 20% of our net profit this year. Since 2002, our dividend payout ratio is definitely above 30%, especially since 2002 we have got listed on H shares, our total payout of the dividend has already amounted to CNY 12.89 billion, and I have to say that because of the investors and shareholders long-term support, we have made this a sound and healthy performance and development. We will still carry out this dividend payout to thank and repay the support of our shareholders and investors. [Fl] I want to answer the second question. After this period of the low oil product price in the previous cycle, indeed have been good performance and good picking up of the industry and leading to a lot of changes of the oil industry. The trend is more and more obvious. First thing is the diversification of the customer, which has led to the diversification of the needs except for the traditional ones. We all have seen this diversification of this non-traditional demands coming up. Even for traditional oil companies, there are emerging range of diversified new demands. From land development to offshore development is the increasing difficulty of the development and exploration. It also requires a more demanding technology and different service models. COSL, we also have enhanced the synergy of different parts and functionalities within our customers. No matter is our own service or our own business or just traditional business, they are all picking up. We also have seen this trend of diversification coming within our own company. For the company, I have to say that no matter for this working method, the operation method, the oilfield technology, the development technology, we all have a different diversification to satisfy the diversified needs and to support the whole development of the trend. We all have to say that the trend of this changing and more diversified industry is more and more visible and obvious, which requires our own service model to be more flexible as well, to prepare for better profitability in the future. [Fl] Thank you so much for the question. I would like to say I have two questions. The first one is for the oilfield service industry, it is picking up and recovering rapidly. I know that we are going to re-sign the framework agreement for three years continuing for this year. What about this daily fee? How do the leaders feel about the daily fee? Can it be improved? The second thing is the number of idle jackup rig platforms in shipyards have dropped significantly and the speed is really fast. Basically for the jackup rig, we mainly maintain that by leasing model. How long does the company think it can last just by leasing? [Fl] Oh, I would like to try to answer the two questions. The first one is every year this time we are going to renew this framework agreement with CNOOC for the next round, and this year it is going to be discussed for the future 2-3 years. We will say that the CNOOC investment and the willingness to develop will definitely guarantee the development of COSL and provide solid demand for COSL. Under such circumstances our business, our service, our price will definitely be able to match the demand caused by CNOOC. For the daily fee, COSL will definitely use our increasing equipment and our ever-developed technology to try to get a better daily fee. With this rising difficulty of development and exploration of CNOOC, they also require a better service and equipment and support from COSL. I have to say that for a lot of the utilization and the technology, especially the later stage of the oilfield service, like the reservoir rate increase and also this acquisition rates of the improvements, it all requires our support to have the synergy with CNOOC. We also hope that through this joint effort and the better results and optimization, we could also transfer this to other international overseas markets. Our current plan is CNOOC is where we would train our large scale platforms and use our large scale platforms and equipment as well as test and improve our cutting edge technology. For the daily fee, it's not our priority when we discuss the framework agreement with CNOOC. However, I know this is definitely a focus and priority for the investors, and we will try our best to have a better daily fee to also lower the cost and improve the profitability of our. [Fl] I have something to add that for one project recently we have used this integrated management. We have included our cutting edge rig, our completion rig and for all the different technologies have all been integrated into oil fields. I have to say that the overall results are good. [Fl] For the second question, indeed we have seen this demand and the supply of jackup rig is on the decline and we have already felt that. For this oil exploration and development, the recovering and the picking up of the market is very obvious. However, I think this kind of recovery is still different region by region. In certain regions, for example, in Middle East, the recovery rate is quite good. However, for other regions it's not that obvious. For example, like the Gulf of Mexico. For other different parts, there are regional clashes and conflicts. It has influenced the demand for fossil fuel and also because of the replacement with the new energy also has caused some negative impact. I think the decline of the jackup rig is very obvious. I have to say that for this picking up of the industry, we are still quite positive but in a cautious way. [Fl] I would like to thank the question opportunity. I have two questions. The first question is the current utilization rate and the daily fee of the offshore platform, especially for the ones with as we discussed before, and the prospect of the H2 this year and next year. The second thing is the growth of international business in H2. Which region would have a faster growth? The overall overseas follow-up outlook would be how? Thank you. [Fl] Thank you so much. I want to say that overall this offshore rig utilization rate is still quite low compared with our overall fleet number. It is about 70%-75% and the demand is on the rise. Currently, the domestic utilization rate is about 85% and is still on the rise. I have to say the low utilization rate is also partly attributed to our newly signed contracts, and we are still preparing for some contracts and some are under adaptability preparation. This kind of low utilization rate is also to prepare better development and better profitability later. [Fl] I would like to answer the second question. Our overseas orders are on the quick increase recently. Some parts like Middle East and Iraq, these orders are booming and the trend of diversification is more obvious. I have to say that we also have a better demand and the improvement of this high quality services and equipment there. The second one is for APAC. Except for just the main oil industries, companies and players, we are also expanding to the non-major one as well. Overall this overseas markets are definitely booming. [Fl] Thank you so much for giving me this opportunity to pose a question. I have two questions. The first one is about our oilfield technology aspect. I want to know what is the progress of our revenue and profitability and what are the major tools and what are about the transformation rate of all those tools for our main business. The second one is for the profit outlook of the whole year. Thank you. [Fl] I would like to answer the first question. For H1 this year for oilfield technology, our business is definitely booming, and we can also see the demand is also on the rise domestically in China with more work orders and demand for this oilfield industry. For three aspects of completion, cementing, and the slurry, we have all seen very good growth. This has all increased at least 30% regarding our revenue, and the profitability is also very positive. For some high-end cutting-edge equipments and technology, we have already utilized some domestication technology and localized equipment. It has made our 30% of our high-end equipment localized now. It also made better contributes to our overall development. [Fl] For the second question, for this year, whole year round, I have to say that generally speaking, it's the large steel equipment and devices with booming demand for that. And also for different oilfield services and for this large steel equipment, we are also demonstrating to different customers and clients. For our performance, we are still quite confident with a promising outlook. And there are also some pressure that I think is very obvious for COSL, especially the rising cost of a lot of our bulk commodities and resources. Although the price increase has slowed down, but it's still on the upward trend. And the second one is we have to consider that with the Chinese government paying more attention to people's health, employment, and the quality of their lives. People pay more attention to their own interests and rights. The labor cost is definitely on the rise. These are the two aspects that we have to overcome, especially with the rising positive trend of the industry. This is what we have to compensate and mitigate the cost rising for us. [Fl] Well, thank you so much for the leadership for this opportunity to me to raise questions. I have two questions. The first one is I have got the news from the media saying that recently we have got three jackup rigs with long-term contract with Saudi Arabia and the daily rate also from the media saying that we have this 20%-30% increase compared with the average of the daily fee. When will we start the working of the three high-end jackup rigs? What about the profitability of these three different lines? The next part I would say is in Iraq and other Asian areas, have we got any new orders, especially about drilling or well services? The second question is for Well Services. We have already got a record low profitability as low as this 2018 low point, and you also have mentioned it's because of the rise of raw material of different bulk commodities and the rising labor costs. In H2, how do we predict the profitability? I have to say that 80% of this service is serving this brother company of ours, CNOOC, and with this high oil price status quo, CNOOC profitability is really high. Can we just shift this part of the cost increase to CNOOC? [Fl] Overall, we have to say that the overseas markets this year is developing very fast, especially in Middle East. We have newly signed the three contracts with Saudi Arabia about jackup rigs, and daily fee compared with the bottom of the market indeed having a quite big optimization. We hope to control the cost and improve the profitability to better return investors and our capital markets. For other different regions, except for this, new leasing of equipment and devices, we mainly use this integration of the projects as the main way of participating in the markets. For example, we help them to boost their capacity and production, for example, using our well services, the completion of the well, sand prevention, fracturing. Indeed, we use all these integrated technology and methods to boost our service and revenue making. With this integrated project, we are also bringing our devices and technologies to Iraq. This is our participation and our team and our footprint in this market. [Fl] [Fl] [Fl] For the answering of the previous question, for Well Services industry indeed the profitability has been compromised and negatively impacted because of the rise of the bulk commodities and this labor cost, and it is indeed lower than before. On the other hand, you have to know that recently we have invested more in our R&D for this Well Services, and we have invested more money and give it higher priority. Recently we have also reviewed our technology system, so we have increased our typical technologies and made it in a higher number. The second thing you asked whether we can just transfer this cost increase to CNOOC because they have higher profitability. You have to know that although we are brother companies, we are two independent companies, and for CNOOC, they are mainly doing this upstream exploration and development. For us, we are mainly doing this oilfield and well services. When we discuss with them, we could say that, "Okay, we have a higher cost. Can you increase the price for that?" They could also say that, "A large demand of your business comes from ours. So what about you give us a discount?" These are the questions that we will propose to each other during negotiation. Normally you have to know that in this whole industry for the upstream, exploration and development companies globally, they have all got a very good profitability this year nationwide or worldwide. Mr. has also just said that for Well Services, our profitability was maintained similar with the same level of last year, trying to compensate the increase of the cost. [Fl] I have two questions. The first question is, from the perspective of the whole industry, how does COSL view the future oil price? What is the trend for that? The second thing is we really have paid a lot of attention to this overseas market of COSL. How do you think Uganda's project would contribute to this profit? [Fl] It is really hard and sensitive for me to answer your question about the oil price prospects. I would only say that I would use my personal experiences and my own ideas to answer you this. [Fl] Generally speaking, the oil price increase of this round is mainly due to, in the past few years, we have seen this oil price plunge and the development and investment of this industry is not sufficient. With not enough development, not enough exploration, with too small scale of that it has led to this current price increase. [Fl] With the price increase, this round of oil company investment exploration is mainly on this low-cost conventional investment. The deep water investment is still quite scarce. [Fl] Generally speaking, from the overall domestic oil companies and international oil companies, we have to say that the capacity is still quite abundant. That is to say that the situation of supply bigger than demand is still unchanged. 现在的油价处在高位，大部分原因是处于地缘政治的因素，局部地区冲突的因素造成了供给和需求的紧平衡。 This round of skyrocketed oil price should be attributed to the geopolitical conflict. It has led to this tension for the demand and supply. 那么这种紧平衡呢，我们觉得会持续一段时间，两三年我们是认为是能够持续的。那不排除对这个全球经济一旦走向低谷，出现短时间的供给过剩。但是我们觉得因为现在各个国家呀，对经济管理的能力越来越增强，是吧？一旦经济进入低谷呢，很快各个国家的政府采取挽救经济的措施也是比较及时、比较到位的。那么我们想在短期内，在一定时间内，像这种紧平衡状态不会打破，可能短期内会有一定的波动。 We're expecting the next 2-3 years this tension between supply and demand will not be broken, but we will not exclude this short period of surplus of supply because of the economic depression. However, recently different countries are having a tighter control and the proper management of the economy. When they see that of this economic cycle, they will immediately take timely and appropriate measures to correct that. However, I still would say that in the short period of time, such tension will not be easily broken. [Fl] For this Uganda project, we cooperate with our partner CNOOC, and currently our negotiations are all based on the schedule that at the end of this year, we will have the working of that started. I hope that after this being started in H2 next year or the end of next year, we will have this normal process of the report and we could see the profitability from this Uganda project. [Fl] COSL has already used our different channels online and offline to collect the feedback and questions and inquiries from different sources. From the previous interactions, we have already seen this full response and the current reflection of that. I would like to thank you one more time for your participation in this 2022 interim results presentation of COSL. COSL will continue to communicate with investors and friends in various ways. This is the end of today's communication. Thank you.