Contents

2 CHAIRMAN'S STATEMENT

  1. MANAGEMENT DISCUSSION AND ANALYSIS
  1. SUPPLEMENTARY INFORMATION
  1. REPORT ON REVIEW OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  2. CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS
  3. CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

24 CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

  1. CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
  2. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
  3. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

58 COMPANY DIRECTORY

Introduction

China Oilfield Services Limited (the "Company", the "Group" or "COSL"), listed on Hong Kong Stock Exchange (HK stock code: 2883) and

Shanghai Stock Exchange (Shanghai stock code: 601808), is one of the leading integrated oilfield services providers in the world. Its services cover each phase of oil and gas exploration, development and production.

Financial Highlights

First Half of 2018

First Half of 2019

First Half of 2020

RMB million

RMB million

RMB million

Revenue

8,128

13,552

14,497

Profit from operations

-240

1,601

2,222

Profit from operations

(excluding impairment of fixed assets and goodwill)

-117

1,601

3,066

Profit for the period

-363

986

1,723

Profit for the period

(excluding impairment of fixed assets and goodwill)

-240

986

2,567

RMB/share

RMB/share

RMB/share

Earnings per share

-0.08

0.20

0.36

China Oilfield Services Limited • Interim Report 2020

1

Chairman's Statement

Dear Shareholders,

During the first half of 2020, the capital expenditure of oil and gas companies across the globe declined drastically due to the dual shock of the COVID-19 pandemic (hereinafter "Pandemic") and a collapse in oil prices, which brought severe impacts and challenges to the global oilfield service market. Facing such severe situation of a persistent downturn in the industry and the external environment, the Company earnestly implemented its "technical and international development" strategy and pursued operation, planned management and reform tasks, with concrete achievements. In the first half of the year, the Company recorded revenue of RMB14.50 billion, representing an increase of RMB940 million or 7% as compared with the same period of last year. Net profit amounted to RMB1.72 billion representing an increase of RMB740 million or 75% as compared with the same period of last year. On behalf of the board of directors (the "Board"), I would like to express my heartfelt thanks and appreciation to all employees for their dedication, and my sincere gratitude and best wishes to our investors for their continued trust and support.

1. Achieving overall outstanding results and enhancing international operation and management capabilities

In the first half of the year, the Company reformed and enhanced its governance system and capability. In face of the adverse environment, the Company was bold to take action and good at accomplishment, which highlighted its determination in pursuing high quality development. Internationally, the Company initiated a series of pandemic prevention and control measures and endeavoured to ensure normal performance of contracts. It successfully completed offshore jack-up drilling rigs service and semi-submersibles service projects in the Asia Pacific region, and commenced drilling, drilling fluid, well cementing, stimulation and logging operations as scheduled, which earned clients recognition and appreciation. Meanwhile, the Company promptly adjusted its market strategy and continued to focus on core markets. In the first half of the year, new offshore wireline logging services, offshore stimulation equipment and operation service, offshore well cementing engineering service, land work-over service and stimulation package service were secured in the Asia Pacific, Middle East and American markets.

2. Significantly improving speed and quality of technical achievements and remarkably improving quality and enhancing efficiency with technologies

In the first half of the year, the Company focused on promotion of reserve and production and worked on various key technical applications and industrialization research, with significant results. Regarding new technical achievements, the testings of the quadrupole acoustic imaging logging tool while drilling and the high-speed mud pulse generator while drilling; the high temperature logging sea trial operation of the 235℃ super high temperature ESCOOL system in Bohai; and the sea trial of the first domestic underwater release rubber plug system for deep-water well cementing were successful, while breakthrough was made in the new microspheres regulating flooding system, realizing effective combined effects of "regulating-plugging-flooding". Regarding improving quality and enhancing efficiency with technologies, the large scale application of technical products such as high-temperature and high-speed logging system and "two-wide and two-high" seismic acquisition enabled discoveries of offshore oil and gas reserves of over 100 million tonnes in China sea; and continuous successes in the using of high-end technical products such as outline while drilling in Bohai actually helped enhance oilfield development capacity.

3. More scientific and precise governance system and further enhancement of governance capabilities

In 2020, the Company adopted cost reducing and efficiency improving measures with unprecedented efforts, refined cost control direction and measures, maximised lowering expenses of leased drilling rigs and vessels, accelerated industrialization of self-owned technology and equipment, enhanced self-repair capability of vessels, optimised value chain management of low permeability and stimulation technologies, stringently controlled overseas administration expenses and lowered operating and maintenance costs. We also successfully issued senior bonds amounted to US$800 million, with lowest overall cost and highest over-subscription rate for USD bonds ever issued by the Company. The issuance secured the liquidity and security of funds over a certain period and the Company's brand was well recognized by the international capital market.

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China Oilfield Services Limited • Interim Report 2020

Chairman's Statement (continued)

4. Promoting the development of QHSE management framework and consolidating QHSE management foundation

In the first half of 2020, the Company continued to consolidate QHSE management foundation, deepened the implementation of the "safe production responsibility of all staff", comprehensively promoted the building of the QHSE system, and advanced the informatization of QHSE management. The Company comprehensively implemented Xi Jinping's thought of ecological civilization, formulated plan for implementation of green and low carbon development and fostered a culture of safety with COSL's characteristics. During the period, the Company's overall production safety remained stable, QHSE management steadily improved and the quality of its operation services and products was good, with OSHA recordable incident occurrence rate of 0.094.

Outlook

Looking ahead to the second half of 2020, as the normal of the industry will still be in a downturn generally, we will unswervingly implement our "technical and international development" strategy, ensure rapid progress of major technological projects, adhere to the development direction of providing technical services, maintain production safety, constantly promote QHSE standard at the industry and international levels, enhance overseas independent operation and management capabilities and endeavour to achieve the targets of cost reduction, quality improvement and efficiency enhancement. We will accelerate modernization of the corporate governance system and capability with reforms, allocate resources in line with the national "Seven-Year Action Plan" and make greater contribution to energy security.

Qi Meisheng

Chairman And CEO

26 August 2020

China Oilfield Services Limited • Interim Report 2020

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Management Discussion and Analysis

INDUSTRY OVERVIEW

During the first half of 2020, the international crude oil market experienced a drastic decline and a volatile downward adjustment. Uncertain factors such as the Pandemic caused fluctuations in international crude oil prices at the bottom and the pessimistic market sentiment. At the beginning of the year, the Brent crude oil prices dropped from US$60 per barrel to around US$30 per barrel, and then the OPEC+ production reduction agreement supported the increase in oil prices to an extent, but after the unsuccessful supply reduction negotiations, the international oil prices fell rapidly. In May, major oil-producing countries, put aside their differences, reached an historic supply reduction agreement after tough negotiation. International oil prices have bounced back from the ultra-low oil price range and returned to around US$40 per barrel. Compared with 2019, the global oil and gas companies' capital expenditure have dropped significantly, and the oilfield service industry was still in a downturn. The utilization rate of global large-scale equipment hovered at a low level, the basic state of oversupply has not been completely eliminated, and the prices for the oilfield services is still at a historically low level, resulting in greater challenges to the operation of the integrated oilfield service company. According to the information from the third party, due to China's energy security strategy, the domestic oil and gas exploration and development market is still growing.

BUSINESS REVIEW

In the first half of 2020, affected by the Pandemic global outbreak and the sharp fall in oil prices, the international oil service market entered into a new round of industry troughs, with declines in both service price and operation volume. In response to the "Six Stabilities" tasks for combating the Pandemic and recovering the economy, long-term planning within the national energy security strategy, and continued implementation of CNOOC's "Seven-Year Action Plan", domestic operation volume still saw an increase compared with the same period of last year, but the service price was under pressure. The Company recognised the severity of the situation, maintained its confidence, and quickly devised low oil price strategies in response, generating benefits in the areas of reform, management, market, innovation and safety. The Company made remarkable efforts to reduce costs, improve quality and enhance efficiency to confront the challenges brought by low oil prices. During the first half of the year, the operating volume and utilisation rate of the Company's jack-up drilling rigs and vessels, as well as the workload of the technical segment, continued to increase. The Company's revenue was RMB14,496.7 million, representing an increase of RMB944.6 million compared with the same period of last year. Net profit was RMB1,722.6 million, representing an increase of RMB736.2 million compared with the same period of last year.

Drilling Services Segment

Revenue for the drilling services segment in the first half of the year was RMB6,171.0 million, a 37.5% increase compared with RMB4,489.2 million for the same period of last year, and including the receipt of US$188 million settlement income from Equinor Energy AS (hereinafter "Equinor").

In the first half of 2020, due to the impact of Pandemic and low oil prices, the overall day rates of drilling rigs decreased. With the implementation of the "Seven-Year Action Plan" in the PRC, market demand has increased with the advancement of reserves and production. The Company insisted on implementing cost refinement management with a focus on production safety and demonstrating the overseas business' stable performance under low oil prices, achieving constant admirable results. During the first half of the year, the Company coped with the adversity created by the Pandemic, deployed their operators for operations of 4 drilling rigs in Asia. Among them, "China Merchants Hailong 6" launched a three-year drilling service project. "HYSY936" was awarded a 600-day operation contract in America. "COSLBoss" completed the Myanmar drilling project. "NH7" successfully completed sea trials of the PRC's first self-developeddeep-water wellhead system, breaking the blockade of foreign technology in this field.

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China Oilfield Services Limited • Interim Report 2020

Management Discussion and Analysis (continued)

As of the end of June 2020, the Company operated and managed a total of 56 drilling rigs, including 42 jack-up drilling rigs and 14 semi- submersible drilling rigs. Of these, 30 were operating in coastal areas of China and 12 in international regions such as Norway, England, Mexico and Indonesia, while 12 were on standby and 2 were under repair in shipyards. During the first half of the year, operating days for the Company's drilling rigs amounted 7,662, representing an increase of 749 days or 10.8% compared with the same period of last year. The calendar day utilisation rate of drilling rigs was 76.2%, representing a decrease of 0.4 percentage point compared with the same period of last year, due to the decreased operation volume of semi-submersible drilling rigs.

Operation details for the Company's jack-up and semi-submersible drilling rigs during the first half of 2020:

For the six months ended 30 June

Drilling Services

2020

2019

Change

Operating days (day)

7,662

6,913

10.8%

Jack-up drilling rigs

5,985

5,177

15.6%

Semi-submersible drilling rigs

1,677

1,736

(3.4%)

Available day utilisation rate

80.7%

80.0%

Up 0.7 percentage point

Jack-up drilling rigs

83.3%

81.8%

Up 1.5 percentage points

Semi-submersible drilling rigs

72.6%

74.9%

Down 2.3 percentage points

Calendar day utilisation rate

76.2%

76.6%

Down 0.4 percentage point

Jack-up drilling rigs

79.8%

78.9%

Up 0.9 percentage point

Semi-submersible drilling rigs

65.8%

70.4%

Down 4.6 percentage points

As of 30 June 2020, operating days for the Company's jack-up drilling rigs amounted to 5,985, representing an increase of 808 days compared with the same period of last year. Operating days for semi-submersible drilling rigs amounted to 1,677, representing a decrease of 59 days compared with the same period of last year.

During the first half of 2020, the average daily revenue for the Company's drilling rigs decreased in comparison with the same period of last year due to the impact of price reductions. Details are as follows:

For the six months ended 30 June

Average daily revenue

Percentage

(US$10,000 per day)

2020

2019

Change

change

Jack-up drilling rigs

6.3

6.8

(0.5)

(7.4%)

Semi-submersible drilling rigs

15.3

15.1

0.2

1.3%

Subtotal of drilling rigs

8.2

8.7

(0.5)

(5.7%)

Notes: (1)

Average daily revenue = revenue/operating days;

(2)

US$/RMB exchange rate was 1:7.0795 on 30 June 2020 and 1:6.8747 on 28 June 2019.

Well Services Segment

The first half of the year saw an increase in the operation volume of main lines in the Company's well services segment. Its overall revenue was RMB6,050.4 million, representing a decrease of 8.7% compared with RMB6,624.2 million for the same period of last year due to the impact of price reductions.

China Oilfield Services Limited • Interim Report 2020

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Management Discussion and Analysis (continued)

During the first half of the year, the Company continued to accelerate technological development, focus on major technological needs, increase R&D investment, and strengthen the serialisation and industrialisation of its technological products. As a result, the Company's technical services continued to improve their profitability, acquired a number of scientific research project results, achieved breakthroughs in their application, and received wide customer recognition of its international market expansion. The comparative experiment verification of the quadrupole acoustic imaging logging tool while drilling was successful, and the practical drilling test of the high-speed mud pulse generator while drilling in Xinjiang also showed a remarkable performance. The new oxygen-activated FIT water flow meter, which features excellent data accuracy, was successfully applied in Bohai Sea. Successful experiments of high-temperatureoil-based drilling fluid emulsifiers will realize the localization of all treatment agents for high-temperatureoil-based drilling fluid systems in sight. The successful sea trials of self-developed underwater release rubber plug realized continuous breakthroughs in key technologies in this field. Temperature resistant sand control packers for wells completion achieved a temperature resistance of 350°C and a pressure resistance of 3,000psi. With the quantitative production of deep-water cementing head with its own intellectual property rights, industrialization was realized. The Company was awarded a cementing service contract and a plugging agent project while also acquired logging and cementing service projects in Asian.

Marine Support Services Segment

Compared with the same period of last year, in the first half of 2020, revenue from the Company's marine support services business increased by 6.5% to RMB1,534.3 million, of which RMB541.3 million was revenue from chartered vessels.

In the first half of the year, the Company's marine support services segment performed refined management, explored cost potentials, strengthened safety capacity and equipment management capabilities, and made effective of resources to maintain market demands. The Company hired 2 oilfield support vessels to improve productivity. At the same time, the Company's 2 new 5,000 horsepower LNG power guard supply vessels officially went into operation after their release, which put forward the concept of green development.

As of 30 June 2020, operating days for self-owned vessels of the Company's marine support services business amounted to 15,541, representing an increase of 103 days compared with the same period of last year. The calendar day utilisation rate increased by 2.2 percentage points to 97.0% compared with the same period of last year, boosted by increases of the operation volume and utilisation rate of standby vessels, platform supply vessels, multipurpose vessels and workover support barges. Due to increased domestic market demand for the period, the number of chartered vessels and operation volume also increased, with totalled 9,221 days of operation, representing an increase of 35.5% compared with the same period of last year. Details are in the following table:

For the six months ended 30 June

Percentage

Marine Support Services (self-owned vessels)

2020

2019

change

Operating days (day)

15,541

15,438

0.7%

Standby vessels

6,770

6,642

1.9%

AHTS vessels

4,825

4,994

(3.4%)

Platform supply vessels

2,535

2,432

4.2%

Multipurpose vessels

712

687

3.6%

Workover support barges

699

683

2.3%

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China Oilfield Services Limited • Interim Report 2020

Management Discussion and Analysis (continued)

Geophysical Acquisition and Surveying Services Segment

Revenue for the Company's geophysical acquisition and surveying services segment was RMB741.0 million for the first half of the year, representing a decrease of RMB257.5 million or 25.8% compared with the same period of last year. It was mainly due to decreases in revenue from data acquisition and submarine cable businesses during the period.

In the first half of 2020, affected by the Pandemic and low oil prices, the global geophysical industry has suffered substantial impact. The Company coordinated and promoted various tasks, and maintained a stable safety production under the severe situation of the continuous downturn in the industry. The safe, high-quality, efficient operations in Americas and other international service projects have earned frequent praise from customers.

In the first half of the year, the operation volume of domestic and overseas acquisition both decreased. The operation volume of the Company's 2D acquisition business was 9,077 km, a 41.1% decrease compared with the same period of last year. The 3D acquisition business's operation volume was 10,466 km2, a 40.9% decrease compared with the same period of last year. The operation volume of the submarine cable business was 589 km2, representing a decrease of 16.1% compared with the same period of last year. Details are as follows:

For the six months ended 30 June

Percentage

Geophysical Acquisition and Surveying Services

2020

2019

change

2D

Acquisition (km)

9,077

15,404

(41.1%)

of which: multi-client acquisition (km)

-

1,350

(100.0%)

3D

Acquisition (km2)

10,466

17,718

(40.9%)

of which: multi-client acquisition (km2)

2,918

4,189

(30.3%)

submarine cable (km2)

589

702

(16.1%)

China Oilfield Services Limited • Interim Report 2020

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Management Discussion and Analysis (continued)

Financial Review

1. Analysis of condensed consolidated statement of profit or loss

1.1 Revenue

In the first half of 2020, the Company's revenue increased by RMB944.6 million or 7.0% compared with the same period of last year and domestic operation volume still increased. Details of analysis are as follows:

Revenue of each business segment for the first half of 2020:

Unit: RMB million

For the six months ended 30 June

Percentage

Business segment

2020

2019

Change

change

Drilling services

6,171.0

4,489.2

1,681.8

37.5%

Well services

6,050.4

6,624.2

(573.8)

(8.7%)

Marine support services

1,534.3

1,440.2

94.1

6.5%

Geophysical acquisition and surveying services

741.0

998.5

(257.5)

(25.8%)

Total

14,496.7

13,552.1

944.6

7.0%

  • Revenue of drilling services business increased by 37.5% over the same period of last year, mainly due to the increased operation volume of drilling rigs and receipt of US$188 million settlement income from Equinor.
  • Revenue of well services business decreased by 8.7% compared with the same period of last year, mainly due to the decreased price of each business line.
  • Revenue of marine support services business increased by 6.5% over the same period of last year, mainly due to the increased operation volume of self-owned vessels and chartered vessels during the period.
  • Revenue of geophysical acquisition and surveying services business decreased by 25.8% compared with the same period of last year, mainly due to decreased revenue from the data acquisition and submarine cable businesses during the period.

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China Oilfield Services Limited • Interim Report 2020

Management Discussion and Analysis (continued)

1.2 Operating expenses

In the first half of 2020, the Company's operating expenses amounted to RMB12,452.1 million, representing an increase of RMB470.2 million or 3.9% from RMB11,981.9 million for the same period of last year.

The table below breaks down the Company's operating expenses from the first half of 2020:

Unit: RMB million

For the six months ended 30 June

Percentage

2020

2019

Change

change

Depreciation of property, plant and equipment

and amortisation of intangible assets and

multiclient library

2,184.9

2,167.2

17.7

0.8%

Depreciation of the right-of-use assets

295.8

314.7

(18.9)

(6.0%)

Employee compensation costs

2,486.7

2,651.7

(165.0)

(6.2%)

Repair and maintenance costs

125.9

171.2

(45.3)

(26.5%)

Consumption of supplies, materials, fuel,

services and others

2,925.6

2,986.9

(61.3)

(2.1%)

Subcontracting expenses

2,356.4

2,643.9

(287.5)

(10.9%)

Lease expenses

651.5

557.3

94.2

16.9%

Impairment of property, plant and equipment

843.8

-

843.8

100.0%

Impairment losses under expected credit

loss model, net of reversal

(0.9)

(2.5)

1.6

(64.0%)

Other operating expenses

582.4

491.5

90.9

18.5%

Total operating expenses

12,452.1

11,981.9

470.2

3.9%

Depreciation of property, plant and equipment and amortisation of intangible assets and multiclient library for the period increased by RMB17.7 million compared with the same period of last year.

Depreciation of right-of-use assets for the period decreased by RMB18.9 million compared with the same period of last year.

Employee compensation costs decreased by RMB165.0 million compared with the same period of last year, mainly due to a phased exemption of corporate social insurance premium applicable in the PRC, in response to the Pandemic.

Repair and maintenance costs for the period decreased by RMB45.3 million compared with the same period of last year. This was a consequence of repair projects being delayed due to the Pandemic, and the Company's prompt efforts to reduce costs and improve quality and efficiency for a higher self-repair ratio and lower repair costs.

Consumption of supplies, materials, fuel, services and others for the period decreased by RMB61.3 million compared with the same period of last year.

Subcontracting expenses for the period decreased by RMB287.5 million compared with the same period of last year. This stemmed mainly from the Company's efforts in cost control, its timely response to low oil prices, prompt action to reduce costs, and quality and efficiency enhancements, which effectively reduced the subcontracting expenses.

Lease expenses for the period increased by RMB94.2 million compared with the same period of last year.

China Oilfield Services Limited • Interim Report 2020

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Management Discussion and Analysis (continued)

Impairment of property, plant and equipment for the period amounted to RMB843.8 million. Taking the settlement with Equinor into account, the Company recognised an impairment of asset in the first half of the year based on the expected day rates and future cash flow of relevant platforms.

Other operating expenses for the period amounted to RMB582.4 million, which mainly included more than 30 cost subjects including travel expenses, business trip expense, office expenses, expenses for library materials, health, safety and environmental protection expenses, weather guarantee fees, consulting fees, audit fees and so on. A year on year increase of RMB90.9 million was mainly due to an increase of RMB111.6 million in pandemic prevention expenses while other subjects increased or decreased. Of the total other operating expenses, travel expenses amounted to RMB143.4 million; pandemic prevention expenses amounted RMB112.0 million; health, safety and environmental protection expenses amounted to RMB90.6 million and business trip expenses amounted to RMB85.7 million. Transfer fees for other technology research, consulting fees and audit fees and so on, amounted to RMB150.7 million in total.

In 2019, other operating expenses amounted to RMB1,348.7 million, which mainly included more than 30 cost subjects including travel expenses, business trip expense, office expenses, expenses for library materials, health, safety and environmental protection expenses, weather guarantee fees, consulting fees, audit fees and so on, of which travel expenses amounted to RMB405.5 million; health, safety and environmental protection expenses amounted to RMB269.4 million and business trip expenses amounted to RMB153.0 million. Transfer fees for other technology research, consulting fees, audit fees and so on, amounted to RMB520.8 million in total.

The table below shows operating expenses for business segment in the first half of 2020:

Unit: RMB million

For the six months ended 30 June

Percentage

Business segment

2020

2019

Change

change

Drilling services

5,158.6

4,256.5

902.1

21.2%

Well services

5,034.3

5,437.9

(403.6)

(7.4%)

Marine support services

1,417.3

1,301.9

115.4

8.9%

Geophysical acquisition and surveying services

841.9

985.6

(143.7)

(14.6%)

Total

12,452.1

11,981.9

470.2

3.9%

1.3 Profit/(loss) from operations

Profit from Company operations during the first half of 2020 amounted to RMB2,222.0 million, representing an increase of RMB620.9 million as compared to RMB1,601.1 million from the same period of last year.

The profit from operations for each segment is shown in the table below:

Unit: RMB million

For the six months ended 30 June

Business segment

2020

2019

Change

Drilling services

1,061.1

252.4

808.7

Well services

1,125.5

1,189.7

(64.2)

Marine support services

131.8

140.7

(8.9)

Geophysical acquisition and surveying services

(96.4)

18.3

(114.7)

Total

2,222.0

1,601.1

620.9

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China Oilfield Services Limited • Interim Report 2020

Management Discussion and Analysis (continued)

  1. Financial expenses, net
    During the first half of 2020, the Company's net financial expenses were RMB386.5 million, representing a decrease of RMB135.8 million or 26.0% compared with RMB522.3 million for the same period of last year. This was mainly due to finance costs decreasing by RMB113.0 million and increasing by RMB13.8 million in net exchange gain.
  2. Investment income
    In the first half of 2020, the Company's investment income amounted to RMB77.5 million, representing a decrease of RMB96.4 million from RMB173.9 million for the same period of last year, mainly due to decreased income from wealth management products.
  3. Gains arising from financial assets at fair value through profit or loss
    In the first half of 2020, gains arising from financial assets at fair value were RMB25.5 million, representing an increase of RMB74.9 million from RMB-49.4 million for the same period of last year. This was mainly due to the redemption of liquidity funds and the maturity of wealth management products during last year's period.
  4. Share of profits of joint ventures, net of tax
    In the first half of 2020, the Company's share of profits of joint ventures amounted to RMB158.7 million, representing an increase of RMB38.8 million compared with RMB119.9 million for the same period of last year, mainly due to the increased profits of most joint ventures for this period.
  5. Other gains and losses
    In the first half of 2020, the other gains and losses was RMB6.4 million, representing a decrease of RMB52.6 million or 89.1% compared with RMB59.0 million for the same period of last year. This was mainly due to the income from lease modifications of RMB74.0 million for the same period of last year.
  6. Income tax expense
    In the first half of 2020, the Company's income tax expense was RMB368.1 million, representing a decrease of RMB27.7 million as compared with RMB395.8 million for the same period of last year, mainly due to the parent's decreased profits during the period.
  7. Profit for the period
    In the first half of 2020, the Company's profit was RMB1,722.6 million, as compared with RMB986.4 million for the same period of last year.
  8. Basic earnings per share
    In the first half of 2020, the Company's basic earnings per share amounted to RMB35.93 cents as compared with basic earnings per share of RMB20.39 cents for the same period of last year.

China Oilfield Services Limited • Interim Report 2020

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Management Discussion and Analysis (continued)

2. Analysis of condensed consolidated statement of financial position

As of 30 June 2020, total assets of the Company amounted to RMB81,427.3 million, representing an increase of RMB5,325.5 million or 7.0% as compared with RMB76,101.8 million at the end of 2019. Total liabilities were RMB43,525.8 million, representing an increase of RMB4,334.3 million or 11.1% as compared with RMB39,191.5 million at the end of 2019. Shareholders' equity was RMB37,901.5 million, representing an increase of RMB991.2 million or 2.7% as compared with RMB36,910.3 million at the end of 2019.

An analysis of significant changes in account items on the condensed consolidated statement of financial position is as follows:

Unit: RMB million

30 June

31 December

Percentage

Item

2020

2019

change

Reason

Debt instrument at amortised

1,000.0

-

100.0%

Mainly due to the increase in large deposit

cost

certificates.

Inventories

2,142.0

1,424.7

50.3%

Mainly due to the increase in material reserve.

Accounts receivable

13,941.3

10,305.5

35.3%

Mainly due to the delay in payment by

operators as affected by price negotiations.

Receivables at fair value through

23.0

40.6

(43.3%)

Mainly due to the decrease in bank

other comprehensive income

acceptances.

Financial assets at fair value

2,538.3

4,511.2

(43.7%)

Mainly due to the maturity of floating wealth

through profit or loss

management products.

Contract assets

99.0

262.6

(62.3%)

Mainly due to the decrease in contract assets

as a result of confirmation of invoice by

customers.

Contract costs (current assets)

65.9

-

100.0%

Mainly due to the increase in mobilisation

costs.

Other current assets

447.9

2,577.0

(82.6%)

Mainly due to the recovery of fixed wealth

management products at maturity.

Pledged deposits

31.3

102.2

(69.4%)

Mainly due to the decrease in pledged deposits

at the end of the period.

Cash and cash equivalents

9,417.1

3,363.6

180.0%

Mainly due to the impact of bond issuance on

24 June.

Tax payable

205.0

612.8

(66.5%)

Mainly due to the decrease in corporate

income tax payable and personal income tax

payable during the period.

Interest-bearing bank borrowings

319.0

608.9

(47.6%)

Mainly due to the repayment of the bank

(current liabilities)

loan of Export-Import Bank of China in the

principal of US$42 million.

Other current liabilities

671.0

233.0

188.0%

The output value-added tax to be recognized

increased during the period.

Long term bonds (non-current

23,722.0

17,928.5

32.3%

Mainly due to the impact of bond issuance on

liabilities)

24 June.

3. Analysis of consolidated statement of cash flows

At the beginning of 2020, the Company held cash and cash equivalents of RMB3,363.6 million. Net cash outflows from operating activities for the period amounted to RMB310.4 million. Net cash inflows from investing activities were RMB2,569.8 million. Net cash inflows from financing activities were RMB3,736.4 million. The impact of foreign exchange fluctuations on cash was an increase of RMB57.7 million. As of 30 June 2020, the Company's cash and cash equivalents amounted to RMB9,417.1 million.

12

China Oilfield Services Limited • Interim Report 2020

Management Discussion and Analysis (continued)

  1. Cash flows from operating activities
    As of 30 June 2020, the Company's net cash outflows from operating activities amounted to RMB310.4 million, as compared with the net cash outflows of RMB1,132.5 million for the same period of last year, mainly due to the receipt of US$188 million settlement income from Equinor.
  2. Cash flows from investing activities
    As of 30 June 2020, net cash inflows from the Company's investing activities amounted to RMB2,569.8 million, while net cash inflows from the Company's investing activities amounted to RMB3,988.1 million for the same period of last year. This was mainly due to the cash outflows paid for purchases of property, plant, equipment and other intangible assets decreasing by RMB572.5 million as compared with the same period of last year. Cash outflows paid for purchases of bank wealth management products and debt instrument increased by RMB1,200.0 million as compared with the same period of last year. Cash inflows received from the disposal of investments in bank wealth management products decreased by RMB785.3 million as compared with the same period of last year. Cash inflows from withdrawal of time deposits with maturity over three months decreased by RMB141.5 million as compared with the same period of last year. The total decrease of cash outflows from other investing activities was RMB136.0 million.
  3. Net cash flows from financing activities
    As of 30 June 2020, the Company's net cash inflows from financing activities amounted to RMB3,736.4 million, representing an increase of RMB6,300.3 million in cash inflows over the same period of last year. This was mainly due to cash inflows from loan from related parties for the period decreasing by RMB1,017.1 million as compared with the same period of last year; cash inflows from long-term bond issuance increasing by RMB5,613.7 million as compared with the same period of last year; cash outflows from the repayment of bank loans increasing by RMB16.7 million as compared with the same period of last year; cash outflows from the repayment of long- term bonds decreasing by RMB2,000.0 million as compared with the same period of last year; cash outflows from the repayment of lease liability decreasing by RMB36.8 million as compared with the same period of last year; and the increase in cash outflows of other financing activities was RMB316.4 million.
  4. The impact of foreign exchange rate changes on cash during the period was an increase of RMB57.7 million.

4. Capital Expenditure

In the first half of 2020, the Company's capital expenditure was RMB941.6 million, representing a decrease of RMB62.0 million or 6.2% compared with RMB1,003.6 million for the same period of last year.

The capital expenditure of each business segment is shown in the table below:

Unit: RMB million

For the six months ended 30 June

Percentage

Business segment

2020

2019

Change

change

Drilling services

232.8

352.5

(119.7)

(34.0%)

Well services

492.1

225.9

266.2

117.8%

Marine support services

156.5

245.2

(88.7)

(36.2%)

Geophysical acquisition and surveying services

60.2

180.0

(119.8)

(66.6%)

Total

941.6

1,003.6

(62.0)

(6.2%)

China Oilfield Services Limited • Interim Report 2020

13

Management Discussion and Analysis (continued)

The drilling services segment's capital expenditure was used mainly for the transformation and renovation of drilling rig equipment. Capital expenditure for the well services segment was mainly used in the construction and purchase of well service equipment relating to the business segment. Capital expenditure for the marine support services segment was used mainly for the construction of oilfield working vessels and standby vessels. The geophysical acquisition and surveying services business's capital expenditure was mainly used in the development of the multi-client database.

5. Major Subsidiaries

China Oilfield Services (BVI) Limited, COSL Norwegian AS ("CNA") and COSL Singapore Limited are major subsidiaries of the Company engaged in drilling and well services and related business.

As of 30 June 2020, China Oilfield Services (BVI) Limited's total assets amounted to RMB3,884.3 million and equity was RMB523.4 million. China Oilfield Services (BVI) Limited realised revenue of RMB835.6 million in the first half of 2020, representing a decrease of RMB605.7 million compared with the same period of last year. The revenue decrease mainly resulted from delayed overseas operations due to the Pandemic and low oil prices. Net profit amounted to RMB-6.9 million, representing a decrease of RMB140.6 million compared with the same period of last year.

As of 30 June 2020, the total assets of CNA amounted to RMB11,123.4 million and equity was RMB-831.3 million. CNA realised operating revenue of RMB2,285.0 million in the first half of 2020, representing an increase of RMB1,251.4 million or 121.1% compared with the same period of last year. The major reason was the receipt of a settlement income of US$188 million from Equinor. Net profit amounted to RMB465.2 million, representing an increase of RMB689.8 million compared with the same period of last year. Taking into account the settlement with Equinor, CNA recognised an asset impairment loss of RMB843.8 million based on the expected day rates and future cash flow of COSLInnovator in the first half of 2020.

As of 30 June 2020, COSL Singapore Limited's total assets amounted to RMB33,508.8 million and equity was RMB-1,160.1 million. COSL Singapore Limited realised revenue of RMB878.6 million in the first half of 2020, representing an increase of RMB43.3 million or 5.2% compared with the same period of last year. Net profit amounted to RMB-540.9 million, representing a decrease in loss of RMB349.8 million compared with the same period of last year. COSL DRILLING STRIKE PTE. LTD. and COSL PROSPECTOR PTE. LTD. are major subsidiaries of COSL Singapore Limited.

As of 30 June 2020, the total assets of COSL DRILLING STRIKE PTE. LTD. amounted to RMB4,302.7 million and equity was RMB-3,065.1 million. COSL DRILLING STRIKE PTE. LTD. realised revenue of RMB113.6 million in the first half of 2020, representing an increase of RMB54.2 million or 91.2% compared with the same period of last year. Net profit amounted to RMB-131.5 million, representing a decrease in loss of RMB119.7 million compared with the same period of last year.

As of 30 June 2020, the total assets of COSL PROSPECTOR PTE. LTD. amounted to RMB9,324.2 million and equity was RMB-4,418.4 million. COSL PROSPECTOR PTE. LTD. realised revenue of RMB263.6 million in the first half of 2020, representing a decrease of RMB19.3 million compared with same period of last year. Net profit amounted to RMB-346.5 million, representing a decrease in loss of RMB274.9 million compared with same period of last year.

PROSPECTS

Looking forward to the second half of 2020, the Pandemic will restrict economic development and energy consumption demand in the short term and the industry will remain in a slow recovery stage for a period of time. As a result, the global economy may remain stagnant. The International Monetary Fund (IMF) estimated in the World Economic Outlook that the global economy will shrink by 4.9% this year, with relatively gloomy prospects for development. The International Energy Agency (IEA) predicts that the average oil price this year will be US$45 per barrel. Many institutions predict that there will still be a significant decline in oil demand compared with the same period of last year. As a result, the scale of the global oilfield service market will decrease. In response to the new "Four Revolutions and One Collaboration" energy security strategy, the major domestic oil companies have formulated the "Seven-Year Action Plan" to increase reserves and production in the PRC. With increasing workload in exploration and exploitation, the Company has been provided with good opportunities for its future development.

14

China Oilfield Services Limited • Interim Report 2020

Supplementary Information

AUDIT COMMITTEE

The audit committee comprises of three independent non-executive directors of the Company. The audit committee has reviewed the accounting principles and practices adopted by the Company as well as the risk management, internal control and financial reporting matters. The unaudited interim financial report for the six months ended 30 June 2020 has been reviewed by the audit committee.

CORPORATE GOVERNANCE CODE

During the six months ended 30 June 2020, the Company has complied with the code provisions of the Corporate Governance Code as set out in Appendix 14 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (hereinafter "Listing Rules").

COMPLIANCE WITH THE MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS OF LISTED ISSUERS

Upon specific enquiry to all directors and supervisors by the Company, the directors and supervisors of the Company have confirmed that they have, for the six months ended 30 June 2020, complied with the Model Code for Securities Transactions by Directors of Listed Issuers (the "Model Code") as set out in Appendix 10 of the Listing Rules. The Company currently has adopted a code of conduct for securities transactions by directors that is stricter than the provisions set out in the Model Code.

PURCHASE, SALE AND REDEMPTION OF OUR LISTED SECURITIES

Neither the Company nor its subsidiaries have purchased, sold or redeemed any of the Company's listed securities during the six months ended 30 June 2020.

DIRECTORS' AND SUPERVISORS' INTERESTS IN CONTRACTS

During the six months ended 30 June 2020, none of the directors and supervisors had any material interest, whether direct or indirect, in any contract that was significant to the Company's business and to which the Company, its controlling shareholder or any of its subsidiaries or fellow subsidiaries was a party.

DIRECTORS', SUPERVISORS'AND SENIOR MANAGEMENT'S INTERESTS AND SHORT POSITIONS IN SHARES

As at 30 June 2020, the interests and short positions of the directors, supervisors and chief executives of the Company in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (the "SFO")) as recorded in the register required to be kept under Section 352 of the SFO, or as otherwise notified to the Company and HKSE pursuant to the Model Code were as follows:

Class of

Number of shares

Approximate percentage of

Name of shareholder

Capacity

shares

in interest (share)

the interests (A) in COSL (%)

Zheng Yonggang

Beneficial Owner

A Share

5,200

0.0002

Save as disclosed above, as at 30 June 2020, none of the directors, supervisors and chief executives of the Company or their respective associates had any other interests or short positions in the Shares, underlying Shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) as recorded in the register required to be kept under Section 352 of the SFO or as otherwise notified to the Company and HKSE pursuant to the Model Code.

China Oilfield Services Limited • Interim Report 2020

15

Supplementary Information (continued)

INTERESTS AND SHORT POSITIONS IN SHARES OF SUBSTANTIAL SHAREHOLDERS

So far as is known to any Director or chief executive of the Company, as at 30 June 2020, other than the directors or the chief executive of the Company as disclosed above, the following persons had interests or short positions in the H Shares or underlying H Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or which were recorded in the register required to be kept under Section 336 of the SFO or were otherwise notified to the Company and HKSE:

Number of shares

Approximate percentage of

Name of shareholder

Shares held

in interest (share)

the interests (H) in COSL (%)

GIC Private Limited

Interest in controlled corporation

162,300,000

(L)

8.96 (L)

BlackRock, Inc.

Interest in controlled corporation

146,868,329

(L)

8.11 (L)

3,904,000 (S)

0.22 (S)

JPMorgan Chase & Co.

Interest in controlled corporation

127,778,458

(L)

7.05(L)

3,098,316 (S)

0.17 (S)

85,046,210 (P)

4.69 (P)

Allianz SE

Interest in controlled corporation

108,337,000

(L)

5.98 (L)

EARNEST Partners, LLC

Interest in controlled corporation

92,251,310

(L)

5.09 (L)

Notes:

  1. "L" means long position
  2. "S" means short position
  3. "P" means lending pool

Save as disclosed above, the directors are not aware of any other person who had an interest in the shares of the Company which were recorded in the register required to be keep under Section 336 of the SFO.

DIRECTORS', SUPERVISORS' AND SENIOR MANAGEMENT'S RIGHTS TO ACQUIRE SHARES OR DEBENTURES

At no time during the six months ended 30 June 2020 were rights to acquire benefits by means of acquisition of shares in or debentures of the Company granted to any directors, supervisors and senior management or their respective spouses or minor children, or were any such rights exercised by them; nor was the Company, its holding company, or any of its subsidiaries or fellow subsidiaries a party to any arrangement to enable the directors to acquire such rights in any other body corporate.

EMPLOYEE, REMUNERATION POLICY AND TRAINING PROGRAMME

As at 30 June 2020, the total number of in-service employees of the Company is 14,501. The Company strictly complied with the labor policies and relevant laws and regulations of China and the country where it operates and established a competitive remuneration system and performance appraisal system. The Company established a salary growth mechanism related to economic benefits and labor productivity, adhered to performance-oriented, clear reward and punishment, earnestly increase or reduce income and actively mobilize employee. The Company coordinated and standardized the employee welfare and insurance system and established a supplementary insurance system for enterprises that is compatible with social insurance to fully guarantee the stability of employees. The Company also provided employees with a number of welfare including health check, paid vacation, helping and assisting those with difficulties or major diseases and etc., taking efforts to address the worries of employees, so as to provide reliable and multi-layered protection for employees.

Training programme and development of the Company are closely related to the strategy of Employees' career development of the Company. Based on the five-year development plan, the Company established a dimensional demand-oriented training model with layers and differentiation, which enhanced the training capability, highly promoted the internal teaching team's construction, gradually improved the training system, fulfilled the requirement of the Company's business development and built our core competitiveness.

16

China Oilfield Services Limited • Interim Report 2020

Supplementary Information (continued)

CHANGES IN DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

Changes in Directors

On 28 May 2020, the Company convened the 2019 AGM, at which Mr. Law Hong Ping, Lawrence, an independent non-executive director, resigned for expiration of six years. The AGM considered and approved the appointment of Mr. Lin Boqiang as an independent non- executive director of the Company to fill in the vacancy to be left open by the resignation of Mr. Law Hong Ping, Lawrence for a term of three year starting from the date when the resolution was passed at the AGM and Mr. Lin serves as a member of the audit committee of the Company, a member of the remuneration and assessment committee of the Company and the chairman of the nomination committee of the Company.

On 26 August 2020, the Board received the written resignation from Mr. Cao Shujie, an executive director of the Company, who resigned from the position of executive director of the Company due to position change. His resignation will be effective when new executive director is elected by the shareholders of the Company at the EGM. After resignation, Mr. Cao Shujie will cease to hold any position within the Company. The Board proposes the appointment of Mr. Zhao Shunqiang as an executive director of the Company. The proposed appointment of executive director is subject to the approval of the shareholders of the Company by way of ordinary resolution(s) at the EGM.

Changes in Senior Management

On 7 May 2020, Mr. Liu Yifeng resigned as the deputy party secretary and Chairman of Labor Union of the Company due to the adjustment of his work arrangement with effect from 7 May 2020.

On 8 May 2020, Mr. Yu Guimin resigned as the vice president of the Company due to the adjustment of his work arrangement with effect from 8 May 2020.

On 29 June 2020, the Board received the written resignation from Mr. Cao Shujie in respect of his posts of CEO and President of the Company. The resignation of Mr. Cao Shujie was due to the adjustment of his work arrangement and takes effect on 29 June 2020. After the resignation, Mr. Cao Shujie will remain as an executive director of the Company.

On 29 July 2020, Mr. Xu Yingbo was appointed as the team leader of the discipline inspection commission of the Company with effect from 29 July 2020.

On 29 July 2020, Mr. Lu Tao was appointed as the vice president of the Company with effect from 29 July 2020.

On 26 August 2020, the Board appointed Mr. Qi Meisheng, an executive director, as the chief executive officer of the Company with effect from 26 August 2020. The chief executive officer of the Company is chief executive and reports to the Board.

On 26 August 2020, the Board appointed Mr. Zhao Shunqiang as the president of the Company with effect from 26 August 2020.

PLACING OF H SHARES

On 15 January 2014, the Company completed the placing of an aggregate of 276,272,000 H shares, representing approximately 5.79% of the total number of issued shares (as enlarged by the allotment and issue of the placing shares) and approximately 15.25% of the total number of H shares in issue (as enlarged by the allotment and issue of the placing shares). After the placing, the total number of issued shares of the Company increased from 4,495,320,000 shares to 4,771,592,000 shares. The total number of issued H shares increased from 1,534,852,000 H shares to 1,811,124,000 H shares. For further details, please refer to the Company's announcements dated 7 January 2014 and 15 January 2014, respectively. The net proceeds from the placing amounted to approximately HK$5,819,392,302.91 (after deduction of the commissions and estimated expense) and was used for general corporate purposes. The proceeds from the placing shares would be used according to the agreed use in the placing agreement. Approximately US$401,172.17 was not yet utilized as at 30 June 2020. The above balance of raised funds will continue to be used for general corporate purposes and in a timely manner.

China Oilfield Services Limited • Interim Report 2020

17

Supplementary Information (continued)

GEARING RATIO

As at 30 June 2020, the net current assets of the Company increased to RMB10,549.4 million compared with RMB3,200.8 million as at 31 December 2019, while the current ratio increased to 1.57 times, compared with 1.16 times as at 31 December 2019.

The Company monitors capital using the gearing ratio, which is net debt divided by the total capital plus net debt. The gearing ratios as at the end of each reporting period were as follows:

30 June 2020

31 December 2019

RMB'000

RMB'000

Interest-bearing bank borrowings

515,212

809,955

Trade and other payables

9,059,868

10,284,224

Notes payable

3,327

3,467

Salary and bonus payables

1,247,139

979,229

Loan from a related party

2,478,494

2,443,946

Long-term bonds

27,544,223

21,738,653

Lease liabilities

917,579

1,145,346

Less: Cash and cash equivalents and time deposits with maturity over three months

(9,417,126)

(3,363,589)

Net debt

32,348,716

34,041,231

Equity attributable to owners of the Company

37,714,375

36,734,191

Non-controlling interests

187,122

176,086

Total Capital

37,901,497

36,910,277

Capital and net debt

70,250,213

70,951,508

Gearing ratio

46%

48%

PROGRESS OF BUSINESS PLAN

In the first half of 2020, the Company achieved a revenue of RMB14.50 billion and a net profit of RMB1.72 billion. The operating results realized an increase as compared with the same period in 2019. In consideration of the continuous implementation of the "Seven-Year Action Plan" in the PRC, the Company's workload in the third quarter is expected to remain stable. At the same time, due to the global Pandemic, the oil prices fluctuations, market changes, repair plans implemented in the second half of the year and the settlement stage of scientific research projects, the next-stage operating performance of the Company remains uncertain. Through continuous efforts in a number of initiatives such as cost reduction, quality improvement, efficiency enhancement, and cultivation of emerging industry to promote the upgrading of the Company's industrial structure, increase investment in technology research and development, accelerate digital transformation, and expand domestic and foreign markets, the Company will strive to achieve better operating results compared with its counterparts in the industry.

FOREIGN CURRENCY RISK

The Company's operation is affected by the exchange rate fluctuation of RMB against other foreign currencies. If the exchange rate fluctuation is significant, the Company's net profit will be impacted to a certain extent. At the same time, if the exchange rate fluctuation is significant, it will also have an impact on cash receipts and payments including the foreign exchange receipts and payments, the US dollar debt repayment pressure and the cost of purchasing imported equipment of the Company. The management of the Company will continuously monitor such exposure.

CHARGES ON ASSETS

As at 30 June 2020, the Company had no material charges against its assets.

18

China Oilfield Services Limited • Interim Report 2020

Supplementary Information (continued)

MISCELLANEOUS

Civil Action

In December 2016, COSL Offshore Management AS ("COM", a subsidiary of the Company) as a plaintiff filed a Statement of Claim (the "Claim") against Statoil Petroleum AS (hereinafter "Statoil") with Oslo District Court of Norway (the "Court") through WIKBORG, REIN

  • CO. ADVOKATFIRMA DA, an international law firm based in Norway, as litigation agent. COM has claimed that Statoil's termination of the contract in respect of the drilling rig of COSLInnovator was unlawful and has claimed the contract to be maintained. If the contract cannot be maintained, COM has claimed that Statoil is obliged to cover COM's loss resulting from the unlawful termination, and the exact amount of damages will be subject to subsequent proceedings. Oslo City Court entered into a judgement on 15 May 2018. The judgement may be appealed by either party within one month following the date of legal notice of the judgement was served. Statoil has changed its corporate name to Equinor Energy AS (hereinafter "Equinor"). On 14 June 2018, Equinor appealed to Borgarting Court of Appeal being the relevant appeal court in Norway. On 14 June 2018, COM has subsequently filed an independent appeal concerning the cancellation for convenience, since COM is of the view that the cancellation for convenience is unlawful and COM should accordingly be entitled to damages for the loss suffered. For details, please refer to relevant announcements published by the Company on the website of Hong Kong Stock Exchange (https://www. hkex.com.hk) and website of the Company (https://www. cosl. com.cn).

In January 2017, COM, a subsidiary of the Company as a plaintiff filed a Statement of Claim (the "Claim") against Statoil with the Court through WIKBORG REIN ADVOKATFIRMA AS, an international law firm based in Norway, as litigation agent. COM is of the view that Statoil shall pay the Claim for cost reimbursement and rate reductions happened in the period of year 2016 in an amount up to the equivalence of US$15,238,596 incurred as a consequence of the drilling rig of COSLPromoter's compliance with requirements of Statoil. For details, please refer to relevant announcements published by the Company on the website of Hong Kong Stock Exchange (https://www. hkex.com.hk) and website of the Company (https://www.cosl.com.cn).

In January 2020, COM and Equinor have signed a settlement agreement regarding the above matters. Equinor agreed to pay COM an amount of US$188 million. Furthermore, COM and Equinor have agreed, as a means of strengthening their cooperation, to enter into a master frame agreement. COM and Equinor had submitted a joint pleading to the Court to request the cases to be lifted with each party covering its own legal costs. For details, please refer to relevant announcements published by the Company on the website of Hong Kong Stock Exchange (https://www.hkex.com.hk) and website of the Company (https://www.cosl.com.cn).

In the first quarter of 2020, Equinor has paid a settlement sum of US$188 million to COM. Strictly according to relevant rules of the accounting standards, the Company performed impairment testing on fixed asset and made provision for the asset impairment. For details, please refer to relevant announcements published by the Company on the website of Hong Kong Stock Exchange (https://www.hkex.com.hk) and website of the Company (https://www.cosl.com.cn).

China Oilfield Services Limited • Interim Report 2020

19

Supplementary Information (continued)

Issue of the notes

On 24 June 2020, COSL Singapore Capital Ltd., a wholly-owned indirect subsidiary of the Company, respectively issued the US$500,000,000 1.875% guaranteed senior notes due 2025 (hereinafter "2025 Notes") and the US$300,000,000 2.500% guaranteed senior notes due 2030 (hereinafter "2030 Notes"). The two Notes have been approved for listing and trading on the Hong Kong Stock Exchange.

The 2025 Notes will bear interest on their outstanding principal amount from and including 24 June 2020 at the rate of 1.875% per annum, payable semi-annually in arrears on 24 June and 24 December of each year, beginning on 24 December 2020. The maturity date of the 2025 Notes is 24 June 2025. At any time and from time to time prior to the maturity date, the Company may at its option redeem the 2025 Notes, at a pre-determined redemption price.

The 2030 Notes will bear interest on their outstanding principal amount from and including 24 June 2020 at the rate of 2.500% per annum, payable semi-annually in arrears on 24 June and 24 December of each year, beginning on 24 December 2020. The maturity date of the 2030 Notes is 24 June 2030. At any time and from time to time prior to the maturity date, the Company may at its option redeem the 2030 Notes, at a pre-determined redemption price.

For details of the 2025 Notes and the 2030 Notes, please refer to the announcements of the Company dated 17 June 2020 and 19 June 2020, and the notice of listing dated 24 June 2020.

The directors are of the opinion that there have been no material changes to the information published in its annual report for the year ended 31 December 2019, other than those disclosed in this interim report.

DISCLOSURE OF INFORMATION ON THE HKSE'S WEBSITE

All information required by paragraphs 46(1) to 46(6) of Appendix16 of the Listing Rules will be published on the HKSE's website (https://www.hkex.com.hk) and the Company's website (https://www.cosl.com.cn) in due course.

By Order of the Board

China Oilfield Services Limited

Wu Yanyan

Company Secretary

26 August 2020

20

China Oilfield Services Limited • Interim Report 2020

Report on Review of Condensed Consolidated Financial Statements

TO THE BOARD OF DIRECTORS OF CHINA OILFIELD SERVICES LIMITED

Introduction

We have reviewed the condensed consolidated financial statements of China Oilfield Services Limited (the "Company") and its subsidiaries (collectively referred to as the "Group") set out on pages 22 to 57, which comprise the condensed consolidated statement of financial position as of 30 June 2020 and the related condensed consolidated statement of profit or loss, statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the six-month period then ended, and certain explanatory notes. The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited require the preparation of a report on interim financial information to be in compliance with the relevant provisions thereof and Hong Kong Accounting Standard 34 "Interim Financial Reporting" ("HKAS 34") issued by the Hong Kong Institute of Certified Public Accountants. The directors of the Company are responsible for the preparation and presentation of these condensed consolidated financial statements in accordance with HKAS 34. Our responsibility is to express a conclusion on these condensed consolidated financial statements based on our review, and to report our conclusion solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

Scope of Review

We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Hong Kong Institute of Certified Public Accountants. A review of these condensed consolidated financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated financial statements are not prepared, in all material respects, in accordance with HKAS 34.

Deloitte Touche Tohmatsu

Certified Public Accountants

Hong Kong

26 August 2020

China Oilfield Services Limited Interim Report 2020

21

Condensed Consolidated Statement of Profit or Loss

For the six months ended 30 June 2020

Six months ended 30 June

2020

2019

Notes

RMB'000

RMB'000

(Unaudited)

(Unaudited)

REVENUE

5

14,511,357

13,562,799

Sales surtaxes

(14,694)

(10,687)

Revenue, net of sales surtaxes

14,496,663

13,552,112

Other income

177,394

30,860

Depreciation of property, plant and equipment and

(2,184,765)

amortisation of intangible assets and multiclient library

(2,167,184)

Depreciation of right-of-use assets

(295,771)

(314,671)

Employee compensation costs

(2,486,712)

(2,651,659)

Repair and maintenance costs

(125,896)

(171,158)

Consumption of supplies, materials, fuel, services and others

(2,925,623)

(2,986,885)

Subcontracting expenses

(2,356,442)

(2,643,858)

Lease expenses

(651,477)

(557,253)

Other operating expenses

(582,429)

(491,735)

Impairment of property, plant and equipment

10

(843,830)

-

Impairment losses under expected credit loss model, net of reversal

15

889

2,524

Total operating expenses

(12,452,056)

(11,981,879)

PROFIT FROM OPERATIONS

2,222,001

1,601,093

Exchange gain, net

60,502

46,731

Finance costs

(477,248)

(590,217)

Interest income

30,213

21,190

Investment income

77,507

173,884

Gains/(losses) arising from financial assets at

25,486

fair value through profit or loss

(49,441)

Share of profits of joint ventures, net of tax

158,671

119,908

Other gains and losses, net

6

(6,444)

58,974

PROFIT BEFORE TAX

6

2,090,688

1,382,122

Income tax expense

7

(368,117)

(395,767)

PROFIT FOR THE PERIOD

1,722,571

986,355

Attributable to:

1,714,199

Owners of the Company

973,043

Non-controlling interests

8,372

13,312

1,722,571

986,355

EARNINGS PER SHARE ATTRIBUTABLE TO OWNERS

OF THE COMPANY

35.93 cents

Basic (RMB)

9

20.39 cents

22

China Oilfield Services Limited Interim Report 2020

Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income

For the six months ended 30 June 2020

Six months ended 30 June

2020

2019

RMB'000

RMB'000

(Unaudited)

(Unaudited)

PROFIT FOR THE PERIOD

1,722,571

986,355

OTHER COMPREHENSIVE INCOME/(EXPENSE)

Items that may be reclassified subsequently to profit or loss:

54,417

Exchange differences on translation of financial statements of foreign operations

(48,154)

Share of other comprehensive income of joint ventures, net of related income tax

1,885

287

Income tax (expense)/income relating to items that may be reclassified subsequently

(24,198)

to profit or loss

1,455

32,104

(46,412)

OTHER COMPREHENSIVE INCOME/(EXPENSE)

FOR THE PERIOD, NET OF INCOME TAX

32,104

(46,412)

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD

1,754,675

939,943

Attributable to:

1,743,639

Owners of the Company

926,175

Non-controlling interests

11,036

13,768

1,754,675

939,943

China Oilfield Services Limited Interim Report 2020

23

Condensed Consolidated Statement of Financial Position

At 30 June 2020

30 June 2020

31 December 2019

Notes

RMB'000

RMB'000

(Unaudited)

(Audited)

NON-CURRENT ASSETS

48,439,002

Property, plant and equipment

10

50,218,143

Right-of-use assets

11

1,047,220

1,200,640

Goodwill

12

-

-

Other intangible assets

59,957

62,135

MultiClient library

13

278,699

279,726

Investments in joint ventures

1,018,490

880,583

Financial assets at fair value through profit or loss

18

-

-

Debt instrument at amortised cost

19

1,000,000

-

Contract costs

17

68,445

91,500

Other non-current assets

20

285,196

246,988

Deferred tax assets

113,417

92,468

Total non-current assets

52,310,426

53,072,183

CURRENT ASSETS

2,141,958

Inventories

1,424,674

Prepayments, deposits and other receivables

377,025

397,972

Accounts receivable

14

13,941,323

10,305,533

Notes receivable

34,082

44,245

Receivables at fair value through other comprehensive income

23,009

40,580

Financial assets at fair value through profit or loss

18

2,538,263

4,511,248

Contract assets

16

98,975

262,594

Contract costs

17

65,887

-

Other current assets

20

447,885

2,577,018

Pledged deposits

31,343

102,202

Cash and cash equivalents

9,417,126

3,363,589

Total current assets

29,116,876

23,029,655

CURRENT LIABILITIES

9,059,868

Trade and other payables

21

10,284,224

Notes payable

3,327

3,467

Salary and bonus payables

1,247,139

979,229

Tax payable

205,018

612,784

Loan from a related party

23

2,478,494

2,443,946

Interest-bearing bank borrowings

24

318,987

608,906

Long term bonds

25

3,822,260

3,810,175

Lease liabilities

431,023

597,774

Contract liabilities

22

330,421

255,306

Other current liabilities

20

670,956

233,010

Total current liabilities

18,567,493

19,828,821

NET CURRENT ASSETS

10,549,383

3,200,834

TOTAL ASSETS LESS CURRENT LIABILITIES

62,859,809

56,273,017

24

China Oilfield Services Limited Interim Report 2020

Condensed Consolidated Statement of Financial Position (continued)

At 30 June 2020

30 June 2020

31 December 2019

Notes

RMB'000

RMB'000

(Unaudited)

(Audited)

NON-CURRENT LIABILITIES

57,597

Deferred tax liabilities

62,655

Interest-bearing bank borrowings

24

196,225

201,049

Long term bonds

25

23,721,963

17,928,478

Lease liabilities

486,556

547,572

Contract liabilities

22

138,529

192,745

Deferred income

26

331,851

401,554

Employee benefit liabilities

25,591

28,687

Total non-current liabilities

24,958,312

19,362,740

Net assets

37,901,497

36,910,277

EQUITY

Equity attributable to owners of the Company

4,771,592

Issued capital

27

4,771,592

Reserves

32,942,783

31,962,599

37,714,375

36,734,191

Non-controlling interests

187,122

176,086

Total equity

37,901,497

36,910,277

Qi Meisheng

Director

China Oilfield Services Limited Interim Report 2020

25

Condensed Consolidated Statement of Changes in Equity

For the six months ended 30 June 2020

Remeasurement

Statutory

of defined

Exchange

Proposed

Issued

Capital

reserve

Special

benefit

fluctuation

Retained

final

Non-controlling

capital

reserve

funds

reserve

pension plan

reserve

profits

dividend

Total

interests

Total equity

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

At 1 January 2020 (audited)

4,771,592

12,366,274

2,508,656

-

(16,202)

(92,479)

16,432,895

763,455

36,734,191

176,086

36,910,277

Profit for the period

-

-

-

-

-

-

1,714,199

-

1,714,199

8,372

1,722,571

Other comprehensive income

for the period, net of income

-

-

-

-

-

29,440

-

-

29,440

2,664

32,104

tax

Total comprehensive income for

-

-

-

-

-

29,440

1,714,199

-

1,743,639

11,036

1,754,675

the period

Appropriation of safety fund

-

-

-

11,307

-

-

-

-

11,307

-

11,307

Utilisation of safety fund

-

-

-

(11,307)

-

-

-

-

(11,307)

-

(11,307)

Final 2019 dividend paid (note 8)

-

-

-

-

-

-

-

(763,455)

(763,455)

-

(763,455)

At 30 June 2020 (unaudited)

4,771,592

12,366,274

2,508,656

-

(16,202)

(63,039)

18,147,094

-

37,714,375

187,122

37,901,497

At 31 December 2018 (audited)

4,771,592

12,366,274

2,508,656

-

(14,823)

(135,658)

14,699,824

334,011

34,529,876

147,530

34,677,406

Adjustments

-

-

-

-

-

-

(5,712)

-

(5,712)

-

(5,712)

At 1 January 2019

4,771,592

12,366,274

2,508,656

-

(14,823)

(135,658)

14,694,112

334,011

34,524,164

147,530

34,671,694

Profit for the period

-

-

-

-

-

-

973,043

-

973,043

13,312

986,355

Other comprehensive (expense)/

income for the period, net of

income tax

-

-

-

-

-

(46,868)

-

-

(46,868)

456

(46,412)

Total comprehensive (expense)/

income for the period

-

-

-

-

-

(46,868)

973,043

-

926,175

13,768

939,943

Appropriation of safety fund

-

-

-

14,149

-

-

-

-

14,149

-

14,149

Utilisation of safety fund

-

-

-

(14,149)

-

-

-

-

(14,149)

-

(14,149)

Final 2018 dividend paid (note 8)

-

-

-

-

-

-

-

(334,011)

(334,011)

-

(334,011)

At 30 June 2019 (unaudited)

4,771,592

12,366,274

2,508,656

-

(14,823)

(182,526)

15,667,155

-

35,116,328

161,298

35,277,626

26

China Oilfield Services Limited Interim Report 2020

Condensed Consolidated Statement of Cash Flows

For the six months ended 30 June 2020

Six months ended 30 June

2020

2019

RMB'000

RMB'000

(Unaudited)

(Unaudited)

NET CASH USED IN OPERATING ACTIVITIES

(310,399)

(1,132,517)

INVESTING ACTIVITIES

Purchases of property, plant and equipment

(867,106)

and other intangible assets

(1,439,596)

Payments for right-of-use assets

-

(80,000)

Investment in MultiClient library

(3,256)

(60,113)

Government grant received

450

-

Purchase of floating and fixed rate investments in corporate wealth

(4,500,000)

management products and debt instrument

(3,300,000)

Proceeds on disposal/maturity of floating and fixed rate investments

8,088,889

in corporate wealth management products and liquidity funds

8,874,178

Proceeds from disposal of property, plant and equipment

1,318

29

Withdrawal of time deposits with maturity of over three months

-

141,523

Interest received

30,213

23,084

Dividends received from joint ventures

-

39,535

Deposits paid for acquisition of property, plant and equipment

(180,738)

and other intangible assets

(210,559)

NET CASH FROM INVESTING ACTIVITIES

2,569,770

3,988,081

FINANCING ACTIVITIES

-

New loan raised from a related party

1,017,120

Proceeds from issue of long-term bonds

5,613,680

-

Repayment of bank loans

(307,383)

(290,640)

Repayment of long-term bonds

-

(2,000,000)

Repayment of lease liabilities

(317,702)

(354,550)

Dividends paid

(763,455)

(334,011)

Interest paid

(488,755)

(601,868)

NET CASH FROM/(USED IN) FINANCING ACTIVITIES

3,736,385

(2,563,949)

NET INCREASE IN CASH AND CASH EQUIVALENTS

5,995,756

291,615

CASH AND CASH EQUIVALENTS AT 1 JANUARY

3,363,589

3,169,610

Effect of foreign exchange rate changes

57,781

4,325

CASH AND CASH EQUIVALENTS AT 30 JUNE,

9,417,126

represented by cash and cash equivalents

3,465,550

China Oilfield Services Limited Interim Report 2020

27

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30 June 2020

1. CORPORATE INFORMATION AND PRINCIPAL ACTIVITIES

China Oilfield Services Limited (the "Company") is a limited liability company incorporated in the People's Republic of China (the "PRC"). The registered office of the Company is located at No. 1581, Haichuan Road, Tanggu Ocean Hi-tech Zone, Binhai Hi- tech Development District, Tianjin, the PRC. As part of the reorganisation (the "Reorganisation") of China National Off-shore Oil Corporation ("CNOOC") in preparation for the listing of the Company's shares on The Stock Exchange of Hong Kong Limited (the "HKSE") in 2002, and pursuant to an approval document obtained from the relevant government authority dated 26 September 2002, the Company was restructured into a joint stock limited liability company.

The Company and its subsidiaries (hereinafter collectively referred to as the "Group") are principally engaged in the provision of oilfield services including drilling services, well services, marine support services, and geophysical acquisition and surveying services.

In the opinion of the directors of the Company (the "Directors"), the holding company and the ultimate holding company of the Company is CNOOC, which is a state-owned enterprise ("SOE") incorporated in the PRC. The registration address of CNOOC is No. 25 Chaoyangmenbei Dajie, Dongcheng District, Beijing.

The condensed consolidated financial statements are presented in Renminbi ("RMB"), which is also the functional currency of the Company.

As at 30 June 2020, particulars of the principal subsidiaries of the Company are as follows:

Percentage of equity

Place and date of

Issued and fully

attributable to the Group

incorporation/

Principal place

paid share capital/

30 June

30 June

Name of entity

registration

of business

paid-in capital

2020

2019

Principal activities

COSL Chemicals (Tianjin),

Tianjin, PRC

PRC

RMB20,000,000

100%

100%

Manufacture and

Ltd. (a)

7 September 1993

marketing drilling

fluids

PT. COSL INDO

Indonesia

Indonesia

US Dollar ("US$")

100%

100%

Provision of oil & gas

1 August 2005

400,000

exploration services

COSL-HongKong Limited

Hong Kong

Hong Kong

Hong Kong Dollar

100%

100%

Investment holding

1 December 2005

10,000

COSL (Australia) Pty Ltd.

Australia

Australia

Australian Dollar

100%

100%

Provision of drilling

11 January 2006

10,000

services

COSL Drilling Strike Pte.Ltd.

Singapore

Singapore

Singapore Dollar 2

100%

100%

Provision of drilling

29 October 2009

services

COSL Prospector Pte.Ltd.

Singapore

Singapore

US$189,779,384

100%

100%

Provision of drilling

27 February 2007

services

COSL Mexico S.A.de C.V

Mexico

Mexico

US$8,504,525

100%

100%

Provision of drilling

26 May 2006

services

COSL (Middle East) FZE

United Arab

United Arab

UAE Dirhams

100%

100%

Provision of oil & gas

Emirates

Emirates

1,000,000

exploration services

2 July 2006

28

China Oilfield Services Limited Interim Report 2020

Notes to the Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

1. CORPORATE INFORMATION AND PRINCIPAL ACTIVITIES (continued)

Percentage of equity

Place and date of

Issued and fully

attributable to the Group

incorporation/

Principal place

paid share capital/

30 June

30 June

Name of entity

registration

of business

paid-in capital

2020

2019

Principal activities

COSL Norwegian AS ("CNA")

Norway

Norway

Norwegian Krone

100%

100%

Investment holding

23 June 2008

("NOK")

1,541,328,656

COSL Drilling Pan-Pacific

Malaysia

Malaysia

US$100,000

100%

100%

Management of jack-

(Labuan) Ltd.

4 April 2009

up drilling rigs

COSL Drilling Pan-Pacific

Singapore

Singapore

US$1,000,000

100%

100%

Management of jack-

Ltd.

13 April 2009

up drilling rigs

COSL Singapore Capital Ltd.

Singapore

Singapore

Singapore

100%

100%

Bond issuance

29 October 2009

Dollar 2

PT. Samudra Timur Santosa

Indonesia

Indonesia

US$250,000

49%

49%

Provision of marine

("PT STS")(b)

27 July 2010

support services

COSL Oil-Tech (Singapore)

Singapore

Singapore

US$100,000

100%

100%

Provision of oilfield

Ltd.

31 January 2011

services and related

activities

COSL Finance (BVI) Limited

British Virgin

British Virgin

US$1

100%

100%

Bond issuance

Islands

Islands

12 July 2012

COSL Deepwater Technology

Shenzhen, PRC

PRC

RMB

100%

100%

Provision of

Co. Ltd. (a)

12 September 2013

470,000,000

geophysical and

surveying services

COSL Drilling Saudi Ltd.

Saudi Arabia

Saudi Arabia

Saudi Riyal

96%

96%

Provision of drilling

19 April 2016

375,000

services

COSL Hainan Ltd. (a)

Haikou, PRC

PRC

RMB

100%

-

Provision of oil & gas

6 December 2019

200,000,000

exploration services

  1. COSL Chemicals (Tianjin), Ltd, COSL Deepwater Technology Co. Ltd and COSL Hainan Ltd. are established in the PRC as limited liability companies.
  2. In the opinion of the Directors, the Group has control over PT STS as the Group has 100% voting rights on PT STS that gives it the current ability to direct the relevant activities of PT STS. Accordingly, PT STS had been accounted for as a subsidiary and has been consolidated into the Group's condensed consolidated financial statements for the six months ended 30 June 2020 and 2019.

The above table lists the subsidiaries of the Company which, in the opinion of the Directors, principally affected the operating results of the Group for the current interim period or formed a substantial portion of the net assets of the Group. To give details of other subsidiaries would, in the opinion of the Directors, result in particulars of excessive length.

China Oilfield Services Limited Interim Report 2020

29

Notes to the Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

1. CORPORATE INFORMATION AND PRINCIPAL ACTIVITIES (continued)

As at 30 June 2020, particulars of the joint ventures of the Group are as follows:

Nominal value of

Place and date of

issued ordinary/

incorporation/

Percentage of

registered share

registration and

Name

capital

operations

Ownership interest

Voting rights held

Principal activities

2020

2019

2020

2019

China Offshore Fugro

US$6,000,000

Shenzhen, PRC

50

50

50

50

Provision of

GeoSolutions (Shenzhen)

24 August 1983

geophysical and

Company Ltd.

surveying services

China France Bohai

US$6,650,000

Tianjin, PRC

50

50

50

50

Provision of logging

Geoservices Co., Ltd.

30 November 1983

services

China Petroleum Logging-

US$2,000,000

Shenzhen, PRC

50

50

50

50

Provision of logging

Atlas Cooperation Service

10 May 1984

services

Company

China Nanhai Magcobar

RMB4,640,000

Shenzhen, PRC

60

60

50

50

Provision of drilling

Mud Corporation Ltd.

25 October 1984

fluids services

("Magcobar")(a)

CNOOC-OTIS Well

US$2,000,000

Tianjin, PRC

50

50

50

50

Provision of well

Completion Services Ltd.

14 April 1993

completion

services

COSL-Expro Testing Services

US$5,000,000

Tianjin, PRC

50

50

50

50

Provision of well

(Tianjin) Company Ltd.

28 February 2007

testing services

PBS-COSL Oilfield Services

Brunei Dollar

Brunei

49

49

50

50

Provision of drilling

Company SDN BHD

100,000

20 March 2014

services

(''PBS-COSL'')(b)

COSL (Malaysia) SDN.BHD.

Ringgit Malaysia

Malaysia

49

49

50

50

Provision of drilling

("COSL Malaysia") (c)(d)

350,000

31 July 2017

services

  1. The Group has 60% of the equity interests in Magcobar, the remaining equity interests of which are held by the other sole investor. Pursuant to the articles of association of Magcobar, more than two-thirds of the voting rights in the board of directors are required for decisions on directing the relevant activities of this entity. The board of directors of Magcobar shall comprise five directors whereby the Company shall appoint three directors and the other sole investor shall appoint two directors. In the opinion of the Directors, the Group does not have control over Magcobar and the investment in this joint arrangement constitutes interest in a joint venture based on the rights and obligations of the parties to this joint arrangement.
  2. The Group has 49% of the equity interests in PBS-COSL, the remaining equity interests of which are held by the other sole investor. Pursuant to the articles of association of PBS-COSL, the board of directors of PBS-COSL shall comprise four directors whereby both the Company and the other sole investor shall appoint two directors each. Unanimous approvals by the directors of PBS-COSL are required for decisions on directing the relevant activities of PBS-COSL. In the opinion of the Directors, the Group does not have control over PBS-COSL and the investment in this joint arrangement constitutes interest in a joint venture based on the rights and obligations of the parties to this joint arrangement.

30

China Oilfield Services Limited Interim Report 2020

Notes to the Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

1. CORPORATE INFORMATION AND PRINCIPAL ACTIVITIES (continued)

  1. The Group has 49% of equity interests in COSL Malaysia, the remaining equity interests of which are held by the other sole investor. Pursuant to the articles of association of COSL Malaysia, majority voting rights are required for decisions on directing the relevant activities of this entity. The board of directors of COSL Malaysia shall comprise five directors whereby the Group shall appoint two directors and the other sole investor shall appoint three directors, while the chairman of COSL Malaysia shall be appointed by the Group and the chairman has the right to veto any major decisions. As a result, unanimous consents by the Group and the other investor are required for decisions on directing the relevant activities of COSL Malaysia. In the opinion of the Directors, the Group does not have control over COSL Malaysia and the investment in this joint arrangement constitutes interest in a joint venture based on the rights and obligations of the parties to this joint arrangement.
  2. As at 30 June 2020, the Group has yet injected any capital into COSL Malaysia since the capital injection time according to the joint venture agreement has not due yet.

All of the above investments in joint ventures are directly held by the Company except for COSL Malaysia, which is indirectly held through COSL Drilling Pan-Pacific Ltd.

The above joint ventures are accounted for using the equity method in these condensed consolidated financial statements.

2. BASIS OF PREPARATION

The condensed consolidated financial statements for the six months ended 30 June 2020 have been prepared in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting' ' issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA") as well as with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on the HKSE.

The condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements for the year ended 31 December 2019.

3. PRINCIPAL ACCOUNTING POLICIES

The condensed consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments, which are measured at fair values.

Other than changes in accounting policies resulting from application of new and amendments to Hong Kong Financial Reporting Standards ("HKFRSs"), the accounting policies and methods of computation used in the condensed consolidated financial statements for the six months ended 30 June 2020 are the same as those presented in the Group's annual financial statements for the year ended 31 December 2019.

Application of amendments to HKFRSs

In the current interim period, the Group has applied the Amendments to References to the Conceptual Framework in HKFRS Standards and the following amendments to HKFRSs issued by the HKICPA, for the first time, which are mandatorily effective for the annual period beginning on or after 1 January 2020 for the preparation of the Group's condensed consolidated financial statements:

Amendments to HKAS 1 and HKAS 8

Definition of Material

Amendments to HKFRS 3

Definition of a Business

Amendments to HKFRS 9, HKAS 39 and HKFRS 7

Interest Rate Benchmark Reform

In addition, the Group has early applied the Amendment to HKFRS 16 "COVID-19-RelatedRent Concessions "

China Oilfield Services Limited Interim Report 2020

31

Notes to the Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

3. PRINCIPAL ACCOUNTING POLICIES (continued)

  1. Impacts of application on amendments to HKAS 1 and HKAS 8 "Definition of Material"
    The amendments provide a new definition of material that states "information is material if omitting misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity." The amendments also clarify that materiality depends on the nature or magnitude of information, either individually or in combination with other information, in the context of the financial statement taken as a whole.
    The application of the amendments in the current period had no impact on the condensed consolidated financial statements. Changes in presentation and disclosures on the application of the amendments, if any, will be reflected on the consolidated financial statements for the year ending 31 December 2020.
  2. Impacts and accounting policies on application of Amendments to HKFRS 3 "Definition of a Business"
    1. Accounting policies
      Business combinations or asset acquisitions Optional concentration test
      Effective from 1 January 2020, the Group can elect to apply an optional concentration test, on a transaction-by-transaction basis, that permits a simplified assessment of whether an acquired set of activities and assets is not a business. The concentration test is met if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. The gross assets under assessment exclude cash and cash equivalents, deferred tax assets, and goodwill resulting from the effects of deferred tax liabilities. If the concentration test is met, the set of activities and assets is determined not to be a business and no further assessment is needed.
    2. Transition and summary of effects
      The amendments had no impact on the condensed consolidated financial statements of the Group.
  4. Impacts and accounting policies on early application of Amendments to HKFRS 16 "COVID-19-RelatedRent Concessions"
    1. Accounting policies Leases
      COVID-19-Related Rent Concessions
      Rent concessions relating to lease contracts that occurred as a direct consequence of the COVID-19 pandemic, the Group has elected to apply the practical expedient not to assess whether the change is a lease modification if all of the following conditions are met:
      • the change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change;
      • any reduction in lease payments affects only payments originally due on or before 30 June 2021;
      • and there is no substantive change to other terms and conditions of the lease.

32

China Oilfield Services Limited Interim Report 2020

Notes to the Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

  1. PRINCIPAL ACCOUNTING POLICIES (continued)
    3.3 Impacts and accounting policies on early application of Amendments to HKFRS 16 "COVID-19-RelatedRent Concessions" (continued)
    3.3.1 Accounting policies (continued)
    A lessee applying the practical expedient accounts for changes in lease payments resulting from rent concessions the same way it would account for the changes applying HKFRS 16 "Leases " if the changes were not a lease modification. Forgiveness or waiver of lease payments are accounted for as variable lease payments. The related lease liabilities are adjusted to reflect the amounts forgiven or waived with a corresponding adjustment recognised in the profit or loss in the period in which the event occurs.
    3.3.2 Transition and summary of effects
    The Group has early applied the amendment in the current interim period. The application has no impact to the opening retained profits at 1 January 2020. During the current interim period, there was no COVID-19-related rent concession occurred and had no impact on the disclosures or the amounts recognised in the interim condensed consolidated financial statements of the Group.
  2. OPERATING SEGMENT INFORMATION

The Group is organised into four business units based on the internal structure and management strategy, which is also the basis of information reported to the Group's chief operating decision maker (i.e. the executive directors of the Company) for the purpose of making strategic decisions.

The Group has four reportable and operating segments as follows:

  1. the drilling services segment is engaged in the provision of oilfield drilling services;
  2. the well services segment is engaged in the provision of logging and downhole services, such as drilling fluids, directional drilling, cementing and well completion, the sale of well chemical materials and well workovers, and seismic data processing services;
  3. the marine support services segment is engaged in the transportation of materials, supplies and personnel to offshore facilities, moving and positioning drilling structures;
  4. the geophysical acquisition and surveying services segment is engaged in the provision of offshore seismic data collection and marine surveying.

Management monitors the results of the Group's operating segments separately for the purpose of making decisions about resources allocation and performance assessment. Segment performance is evaluated based on reportable segment result, which is a measure of adjusted profit before tax. The adjusted profit before tax is measured consistently with the Group's profit before tax except that interest income, finance costs, exchange gains, net, investment income and gains/(losses) arising from financial assets at fair value through profit or loss ("FVTPL") are excluded from such measurement.

All assets are allocated to reportable segments other than certain cash and cash equivalents (funds managed by the corporate planning and finance department), pledged deposits, certain other receivables, certain other current assets, financial assets at FVTPL, debt instrument at amortised cost and deferred tax assets as these assets are managed on a group basis.

All liabilities are allocated to reportable segments other than loan from a related party, interest-bearing bank borrowings and long term bonds (funds managed by the corporate planning and finance department), tax payable and deferred tax liabilities as these liabilities are managed on a group basis.

China Oilfield Services Limited Interim Report 2020

33

Notes to the Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

4. OPERATING SEGMENT INFORMATION (continued)

Intersegment sales and transfers are transacted with reference to the selling prices used for sales made to third parties at the prevailing market prices.

Six months ended 30 June 2020 (Unaudited)

Geophysical

acquisition

Marine support

and surveying

Drilling services

Well services

services

services

Total

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

Revenue:

Sales to external customers,

6,171,011

6,050,385

1,534,262

741,005

14,496,663

net of sale surtaxes

Sales surtaxes

2,932

9,495

1,667

600

14,694

Revenue, before net of

6,173,943

6,059,880

1,535,929

741,605

14,511,357

sales surtaxes

Intersegment sales

25,820

29,729

57,630

90

113,269

Segment revenue

6,199,763

6,089,609

1,593,559

741,695

14,624,626

Elimination

(25,820)

(29,729)

(57,630)

(90)

(113,269)

Group revenue

6,173,943

6,059,880

1,535,929

741,605

14,511,357

Segment results

1,060,268

1,245,487

131,754

(63,281)

2,374,228

Reconciliation:

60,502

Exchange gain, net

Finance costs

(477,248)

Interest income

30,213

Investment income

77,507

Gain arising from financial assets

25,486

at FVTPL

Profit before tax

2,090,688

Income tax expense

368,117

As at 30 June 2020 (Unaudited)

42,653,323

14,188,396

8,167,623

5,001,839

70,011,181

Segment assets

Unallocated assets

11,416,121

Total assets

81,427,302

Segment liabilities

4,421,992

6,034,814

1,347,319

921,136

12,725,261

Unallocated liabilities

30,800,544

Total liabilities

43,525,805

34

China Oilfield Services Limited Interim Report 2020

Notes to the Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

4. OPERATING SEGMENT INFORMATION (continued)

Six months ended 30 June 2019 (Unaudited)

Geophysical

acquisition

Marine support

and surveying

Drilling services

Well services

services

services

Total

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

Revenue:

Sales to external customers,

net of sale surtaxes

4,489,247

6,624,182

1,440,229

998,454

13,552,112

Sales surtaxes

2,645

6,371

968

703

10,687

Revenue, before net of

sales surtaxes

4,491,892

6,630,553

1,441,197

999,157

13,562,799

Intersegment sales

92,777

35,340

71,884

-

200,001

Segment revenue

4,584,669

6,665,893

1,513,081

999,157

13,762,800

Elimination

(92,777)

(35,340)

(71,884)

-

(200,001)

Group revenue

4,491,892

6,630,553

1,441,197

999,157

13,562,799

Segment results

324,220

1,279,934

134,376

41,445

1,779,975

Reconciliation:

Exchange gain, net

46,731

Finance costs

(590,217)

Interest income

21,190

Investment income

173,884

Loss arising from financial assets

at FVTPL

(49,441)

Profit before tax

1,382,122

Income tax expense

395,767

As at 30 June 2019 (Unaudited)

Segment assets

45,354,643

11,377,887

8,380,943

4,869,411

69,982,884

Unallocated assets

5,440,174

Total assets

75,423,058

Segment liabilities

4,862,530

5,388,581

1,380,153

1,059,079

12,690,343

Unallocated liabilities

27,455,089

Total liabilities

40,145,432

Geographical information

The Group mainly engages in the provision of drilling services, well services, marine support services and geophysical acquisition and surveying services principally in Mainland China. Activities outside Mainland China are mainly conducted in Indonesia, Mexico and Norway.

In determining the Group's geographical information, revenue is presented below based on the location of operations.

China Oilfield Services Limited Interim Report 2020

35

Notes to the Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

4. OPERATING SEGMENT INFORMATION (continued)

Geographical information (continued)

The following table presents revenue information for the Group's geographical areas for six months ended 30 June 2020 and 2019.

International

Six months ended 30 June 2020 (Unaudited)

Domestic

North Sea

Others

Total

RMB'000

RMB'000

RMB'000

RMB'000

Segment revenue:

10,484,349

2,083,743

1,943,265

14,511,357

Sales to external customers

Less: Sales surtaxes

(14,694)

-

-

(14,694)

Revenue, net of sales surtaxes

10,469,655

2,083,743

1,943,265

14,496,663

International

Six months ended 30 June 2019 (Unaudited)

Domestic

North Sea

Others

Total

RMB'000

RMB'000

RMB'000

RMB'000

Segment revenue:

Sales to external customers

10,539,580

669,837

2,353,382

13,562,799

Less: Sales surtaxes

(10,687)

-

-

(10,687)

Revenue, net of sales surtaxes

10,528,893

669,837

2,353,382

13,552,112

Information about a major customer

Revenue from transactions with a major customer, CNOOC Limited and its subsidiaries (the "CNOOC Limited Group"), including sales to a group of entities which are known to be under common control of CNOOC Limited, accounted for 72% (six months ended 30 June 2019: 80%) of the total sales of the Group for six months ended 30 June 2020, details of the segments with such revenue are given in note 29(A).

5. REVENUE

Six months ended 30 June

20202019

RMB'000 RMB'000

(Unaudited) (Unaudited)

Revenue from contracts with customers (a)

14,389,925

13,528,360

Revenue arising from operating leases

121,432

34,439

14,511,357

13,562,799

36

China Oilfield Services Limited Interim Report 2020

Notes to the Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

5. REVENUE (continued)

  1. Disaggregation of revenue from contracts with customers, before net of sales surtaxes for the six month ended 30 June 2020

For the six month ended 30 June 2020

Geophysical

acquisition

Marine support

and surveying

Drilling services

Well services

services

services

Total

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

Timing of revenue

recognition

-

26,840

-

3,399

30,239

A point in time

Over time (a)

6,052,511

6,033,040

1,535,929

738,206

14,359,686

Total

6,052,511

6,059,880

1,535,929

741,605

14,389,925

  1. Included in revenue from drilling services was a settlement amount of the Group's right under a ceased contract, recognised by the Group upon receipt. During the current interim period, COSL Offshore Management AS ("COM", a subsidiary of the Company) and Equinor Energy AS ("Equinor") reached an out of court settlement and signed a formal settlement agreement regarding the legal suit on the drilling rigs COSLInnovator and COSLPromoter. Equinor paid US$188,000,000, equivalent to approximately RMB1,309,561,000 to COM as a full settlement of the Group's right to revenue under the ceased contract.

The Group's most contracts with customers generally provide for payment on a day rate or operation volume basis. The Group elected to apply the practical expedient by recognising revenue in the amount to which the Group has right to invoice.

Set out below is the reconciliation of the revenue from contracts with customers with the amounts disclosed in the segment information.

For the six month ended 30 June 2020

Less: Revenue

Revenue from

Segment

arising from

contracts with

revenue

operating leases

Eliminations

customers

RMB'000

RMB'000

RMB'000

RMB'000

Drilling Services

6,199,763

(121,432)

(25,820)

6,052,511

Well Services

6,089,609

-

(29,729)

6,059,880

Marine Support Services

1,593,559

-

(57,630)

1,535,929

Geophysical Acquisition and Surveying Services

741,695

-

(90)

741,605

Revenue from contracts with customers

14,624,626

(121,432)

(113,269)

14,389,925

  1. Disaggregation of revenue from contracts with customers, before net of sales surtaxes for the six month ended 30 June 2019

For the six month ended 30 June 2019

Geophysical

acquisition

Marine support

and surveying

Drilling services

Well services

services

services

Total

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

Timing of revenue

recognition

A point in time

-

26,359

-

2,166

28,525

Over time

4,457,453

6,604,194

1,441,197

996,991

13,499,835

Total

4,457,453

6,630,553

1,441,197

999,157

13,528,360

China Oilfield Services Limited Interim Report 2020

37

Notes to the Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

5. REVENUE (continued)

  1. Disaggregation of revenue from contracts with customers, before net of sales surtaxes for the six month ended 30 June 2019 (continued)
    Set out below is the reconciliation of the revenue from contracts with customers with the amounts disclosed in the segment information.

For the six month ended 30 June 2019

Less: Revenue

Revenue from

Segment

arising from

contracts with

revenue

operating leases

Eliminations

customers

RMB'000

RMB'000

RMB'000

RMB'000

Drilling Services

4,584,669

(34,439)

(92,777)

4,457,453

Well Services

6,665,893

-

(35,340)

6,630,553

Marine Support Services

1,513,081

-

(71,884)

1,441,197

Geophysical Acquisition and Surveying Services

999,157

-

-

999,157

Revenue from contracts with customers

13,762,800

(34,439)

(200,001)

13,528,360

6. PROFIT BEFORE TAX

The Group's profit before tax is arrived at after charging/(crediting):

Six months ended 30 June

2020

2019

RMB'000

RMB'000

(Unaudited)

(Unaudited)

Gains arising from lease modifications

(44)

(74,004)

Losses on disposal of plant and equipment and other intangible assets, net

6,488

15,030

Other gains and losses, net

6,444

(58,974)

Lease expenses in respect of land and buildings, berths and equipment (a)

651,477

557,253

Income from investments in floating and fix rate corporate wealth management products,

(77,507)

liquidity funds and debt instrument

(173,884)

Cost of inventories recognised as an expense

1,952,791

1,955,456

  1. Lease expenses in the six month ended 30 June 2020 and 2019 represent short-term leases and variable lease payments not included in the measurement of lease liabilities.

7. INCOME TAX EXPENSE

The Group is subject to income tax on an entity basis on the profit arising in or derived from the tax jurisdictions in which members of the Group are domiciled and operate. The Group is not liable for income tax in Hong Kong as it does not have assessable profits currently sourced from Hong Kong.

Under the Corporate Income Tax Law of the PRC (the "CIT"), the statutory tax rate of the Company, subsidiaries and its key joint ventures in Mainland China is 25%.

According to the High-New Technical Enterprise ("HNTE") certificate renewed by the Company in October 2017, the CIT rate of the Company is 15% for the period from October 2017 to September 2020.

According to the HNTE certificate renewed by the Group's subsidiary COSL Chemicals (Tianjin), Ltd in October 2017, the CIT rate of COSL Chemicals (Tianjin), Ltd is 15% for the period from October 2017 to September 2020.

38

China Oilfield Services Limited Interim Report 2020

Notes to the Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

7. INCOME TAX EXPENSE (continued)

According to the HNTE certificate renewed by the Group's subsidiary COSL Deepwater Technology Co. Ltd. in December 2019, the CIT rate of COSL Deepwater Technology Co. Ltd is 15% for the period from 2019 to 2021.

List of other corporate income tax rates applicable to the Group's activities:

Six months ended 30 June

Countries and regions

2020

2019

Indonesia

22%

25%

Mexico

30%

30%

Norway

22%

22%

The United Kingdom

19%

19%

Iraq

Withholding tax based on 7%

Withholding tax based on 7%

of revenue generated in Iraq

of revenue generated in Iraq

United Arab Emirates

Not subject to any income tax

Not subject to any income tax

Singapore

17%

17%

The United States of America

21%

21%

Canada

Net federal corporate income tax

Net federal corporate income tax

of 15% and provincial income

of 15% and provincial income

tax ranging from 10% to 16%,

tax ranging from 10% to 16%,

depending on the province and

depending on the province and

the size of the business

the size of the business

Malaysia

24%

24%

Saudi Arabia

20%

20%

Myanmar

Withholding tax based on 2.5%

Withholding tax based on 2.5%

of revenue generated in Myanmar

of revenue generated in Myanmar

Brazil

34%

34%

Cameroon

Withholding tax based on 15%

Withholding tax based on 15%

of revenue generated

of revenue generated

in Cameroon

in Cameroon

New Zealand

28%

28%

An analysis of the Group's provision for tax is as follows:

Six months ended 30 June

2020

2019

RMB'000

RMB'000

(Unaudited)

(Unaudited)

Overseas income taxes:

65,746

Current

93,347

Deferred

3,714

(5,251)

PRC corporate income taxes:

327,679

Current

422,674

Deferred

(29,909)

(183,970)

Under provision in prior year

887

68,967

Total tax charge for the period

368,117

395,767

China Oilfield Services Limited Interim Report 2020

39

Notes to the Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

7. INCOME TAX EXPENSE (continued)

A reconciliation of the income tax expense applicable to profit before tax at the statutory rate for Mainland China, where the Company, certain subsidiaries and its key joint ventures are domiciled, to the tax expense at the effective tax rate, and a reconciliation of the applicable rate (i.e., the statutory tax rate) to the effective tax rate, are as follows:

Six months ended 30 June

2020

2019

RMB'000

%

RMB'000

%

(Unaudited)

(Unaudited)

Profit before tax

2,090,688

1,382,122

Tax at the statutory tax rate of 25%

522,672

25.0

(six months ended 30 June 2019: 25%)

345,531

25.0

Tax effect as an HNTE

(249,810)

(11.9)

(221,075)

(16.0)

Tax effect of income not subject to tax

(39,668)

(1.9)

(33,085)

(2.4)

Tax effect of expense not deductible for tax

86,254

4.1

13,310

1.0

Tax benefit for qualifying research and

(40,427)

(1.9)

development expenses

(34,853)

(2.5)

Effect of non-taxable profit and different tax rates

183,514

8.8

for overseas subsidiaries

236,958

17.1

Tax effect of tax losses and deductible temporary

211,917

10.1

differences unrecognised

85,721

6.2

Utilisation of tax losses previously not recognised

(342,057)

(16.4)

(6,181)

(0.4)

Under provision in respect of prior year

887

-

68,967

5.0

Recognised deductible temporary differences

-

-

previously not recognised

(72,065)

(5.2)

Translation adjustment (a)

(1,435)

(0.1)

5,123

0.4

Others

36,270

1.8

7,416

0.4

Total tax charge at the Group's effective tax rate

368,117

17.6

395,767

28.6

  1. The translation adjustment mainly relates to the tax effect of difference between the profit before tax determined on the tax basis in NOK and that determined on the accounting basis of some group companies in Norway in US dollars, the functional currency of these companies.

8. DIVIDENDS PAID AND PROPOSED

During the current interim period, a final dividend of RMB0.16 per ordinary share of the Company comprising 4,771,592,000 ordinary shares existed as at 31 December 2019 (2019: RMB0.07 per ordinary share of the Company comprising 4,771,592,000 ordinary shares existed as at 31 December 2018) was declared and paid to the owners of the Company. The aggregate amount of the final dividend declared and paid in the current interim period amounted to RMB763,455,000 (2019: RMB334,011,000).

The board of directors has proposed that no dividend will be declared in respect of the current interim period.

40

China Oilfield Services Limited Interim Report 2020

Notes to the Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

9. EARNINGS PER SHARE ATTRIBUTABLE TO OWNERS OF THE COMPANY

The calculation of the basic earnings per share attributable to owners of the Company is based on the following data:

Six months ended 30 June

2020

2019

RMB'000

RMB'000

(Unaudited)

(Unaudited)

Earnings

Earnings for the purposes of basic earnings per share

1,714,199

(profit for the period attributable to owners of the Company)

973,043

Six months ended 30 June

2020

2019

(Unaudited)

(Unaudited)

Number of shares

4,771,592,000

Number of ordinary shares for the purpose of basic earnings per share

4,771,592,000

No diluted earnings per share is presented for the six-month periods ended 30 June 2020 and 2019 as the Group had no dilutive potential ordinary shares in issue during those periods.

10. PROPERTY, PLANT AND EQUIPMENT

During the current interim period, the Group acquired certain machinery equipment, vessels and drilling rigs with an aggregate cost amounting to approximately RMB928,087,000 (six months ended 30 June 2019: RMB610,072,000), of which approximately RMB580,365,000 was transferred from construction in progress (six months ended 30 June 2019: RMB223,327,000). Additions of construction in progress amounting to approximately RMB567,669,000 were recognised during the current interim period (six months ended 30 June 2019: RMB526,674,000). Machinery and equipment with an aggregate net carrying amount of RMB10,115,000 (six months ended 30 June 2019: RMB15,059,000) were disposed during the current interim period, resulting in a loss on disposal of RMB6,488,000 (six months ended 30 June 2019: loss on disposal of RMB15,030,000).

Out of the total finance costs incurred, no finance costs (six months ended 30 June 2019: nil) was capitalised in property, plant and equipment in the current interim period.

During the current interim period, in view of the impairment indication arising from the expected day rates and future operating cash flows after the out of court settlement disclosed in note 5(a), the Directors carried out impairment assessment for COSLInnovator based on projected future cash flows and discount rate, and recognised an impairment loss of RMB843,830,000. The impairment losses have been classified under the drilling services segment.

There are no other impairment recognised in current interim period (six months ended 30 June 2019: nil) after the Group's due impairment assessment in the light of the current economic environment in certain markets in which the Group operates as well as slow recovery of oil price.

In the said impairment assessment, the recoverable amount of the relevant assets, each of which was identified as a cash-generating unit within the drilling services segment, has been determined based on the higher of fair value less costs of disposal and value in use.

China Oilfield Services Limited Interim Report 2020

41

Notes to the Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

10. PROPERTY, PLANT AND EQUIPMENT (continued)

The fair value less costs of disposal is arrived at on the basis of valuation carried out by an independent property agent. The fair value of relevant assets are determined based on a variety of valuation methods, including income approach and market approach, and the reasonableness of the assumptions and range of estimates indicated by those valuation methods were also considered by the Group. The income approach is by reference to the projected discounted cash flows over the remaining economic life of relevant assets. The market approach is by reference to the value that would be received from selling the asset in an orderly transaction between market participants at the measurement date. The above estimates of fair value required to use significant unobservable inputs representative of a level 3 fair value measurement, including historical contracted sales prices for similar assets, nonbinding quotes from brokers and/or indicative bids, estimated utilization rates, service prices, cost level and capital requirements.

In assessing value in use, the estimated future cash flows are discounted to their present value. The cash flow projection was based on financial budgets covering a five-year period approved by senior management. The cash flow beyond the five-year period is estimated based on the market trend and by reference to the relevant market trend report. The discount rate applied to the cash flow projection is 7.0%-8.6% (six months ended 30 June 2019: 8.0%-8.9%). The discount rate used is a long-termweighted-average cost of capital, which is based on the management's best estimation of the investment returns that market participants would require for the relevant assets. Other key assumptions for the value in use calculations reflect management's judgments and expectation regarding the past performance of the relevant assets, as well as future industry conditions and operations, including estimated utilization rates, day rates, cost level and capital requirements.

11. RIGHT-OF-USE ASSETS

During the current interim period, the Group entered into certain lease agreements and recognised right-of-use assets of RMB140,459,000 (six month ended 30 June 2019: RMB354,553,000) and lease liabilities of RMB82,937,000 (six month ended 30 June 2019: RMB354,553,000) on lease commencement.

12. GOODWILL

Goodwill was generated in the acquisition of COSL Holding AS in 2008, which was combined into CNA by merger during the year ended 31 December 2016 (collectively referred to as the "CNA"), and was allocated to a group of the drilling services cash-generating units under the drilling services segment for impairment testing. The Group impaired the goodwill in full in 2016.

13. MULTICLIENT LIBRARY

MultiClient library

RMB'000

Carrying amount at 31 December 2019 (audited)

279,726

Development cost capitalized in the period

14,594

Amortisation provided during the period

(18,316)

Exchange realignment

2,695

At 30 June 2020 (unaudited)

278,699

At 30 June 2020 (unaudited)

Cost

309,266

Accumulated amortisation

(30,567)

Carrying amount

278,699

The Group has entered into cooperation agreements with Spectrum Geo Inc ("Spectrum") to invest in certain multi-client data projects. These agreements are accounted for as joint operations where the parties have joint control over the projects and have rights to the assets and liabilities of the investment. Costs directly incurred in acquiring, processing and completing multi-client data projects are capitalized to the MultiClient library. As at 30 June 2020, except for certain part of multi-client data projects which had been completed, the remaining part was still in progress.

42

China Oilfield Services Limited Interim Report 2020

Notes to the Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

14. ACCOUNTS RECEIVABLE

The Group normally allows a credit period of 30 to 45 days to its trade customers in Mainland China and no more than 6 months to 1 year to its trade customers with good trading history in overseas.

The following is an aged analysis of accounts receivable net of allowance for doubtful debts, as at the end of the reporting period, presented based on the invoice dates.

30 June

31 December

2020

2019

RMB'000

RMB'000

(Unaudited)

(Audited)

Outstanding balances aged:

12,691,488

Within six months

9,981,405

Six months to one year

1,175,260

236,393

One to two years

74,575

87,646

Over two years

-

89

13,941,323

10,305,533

15. IMPAIRMENT LOSSES UNDER EXPECTED CREDIT LOSS MODEL, NET OF REVERSAL

Six months ended 30 June

2020

2019

RMB'000

RMB'000

(Unaudited)

(Unaudited)

Impairment losses recognised/(reversed) on:

1,623

Accounts receivable

(3,662)

Other receivables

(2,512)

1,138

(889)

(2,524)

The basis of determining the inputs and assumptions and the estimation techniques used in the condensed consolidated financial statements for the six months ended 30 June 2020 are the same as those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2019.

16. CONTRACT ASSETS

The contract assets represent the Group's right to consideration for drilling services completed and not billed because the rights are conditioned on customers' acceptance of the work. The contract assets are transferred to accounts receivables when the rights become unconditional. The balances are classified as current. The Directors assessed and provided no impairment against the contract assets after due consideration of the customers' credit quality.

China Oilfield Services Limited Interim Report 2020

43

Notes to the Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

17. CONTRACT COSTS

30 June

31 December

2020

2019

RMB'000

RMB'000

(Unaudited)

(Audited)

Mobilisation cost (a)

134,022

89,113

Others

310

2,387

134,332

91,500

Current

65,887

-

Non-current

68,445

91,500

134,332

91,500

  1. Certain direct and incremental costs incurred for initial mobilization are costs of fulfilling a contract and are recoverable. These recoverable costs are capitalised and amortized ratably to contract expense as services are rendered over the initial term of the related contracts.

18. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

30 June

31 December

2020

2019

RMB'000

RMB'000

(Unaudited)

(Audited)

Current asset:

2,538,263

Investments in floating rate corporate wealth management products

4,511,248

Non-current asset:

-

Unlisted equity investment

-

2,538,263

4,511,248

19. DEBT INSTRUMENT AT AMORTISED COST

The balance represents a debt instrument invested by the Group during the current interim period, carrying annual interest of 3.8% and maturing on 27 December 2021. The Group is going to hold the instrument until maturity and therefore measures it at amortised cost.

20. OTHER CURRENT ASSETS/LIABILITIES AND OTHER NON-CURRENT ASSETS

30 June

31 December

2020

2019

RMB'000

RMB'000

(Unaudited)

(Audited)

Investments in fixed rate corporate wealth management products

-

2,507,314

Value-added tax to be deducted and prepaid

405,080

24,617

Value-added tax recoverable

42,805

45,087

Other current assets

447,885

2,577,018

Output value-added tax to be recognised

(670,956)

(233,010)

Other current liabilities

(670,956)

(233,010)

Deposits paid for the acquisition of property, plant and equipment

180,738

128,358

Deposits paid for the addition of right-of-use assets

-

57,522

Value-added tax recoverable

98,929

58,205

Tax recoverable

5,529

2,903

Other non-current assets

285,196

246,988

44

China Oilfield Services Limited Interim Report 2020

Notes to the Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

21. TRADE AND OTHER PAYABLES

The aged analysis of trade payables as at the end of the reporting period, based on the invoice date, is as follows:

30 June

31 December

2020

2019

RMB'000

RMB'000

(Unaudited)

(Audited)

Outstanding balances aged:

8,431,009

Within one year

9,462,482

One to two years

74,997

102,643

Two to three years

48,134

41,300

Over three years

45,454

83,728

8,599,594

9,690,153

22. CONTRACT LIABILITIES

30 June

31 December

2020

2019

RMB'000

RMB'000

(Unaudited)

(Audited)

Contract liabilities

Current

330,421

255,306

Non-current

138,529

192,745

468,950

448,051

The Group's contract liabilities consist of the mobilisation fee, subsidies received from customers related to acquisition of machinery for provision of drilling services and advance from customers relevant to certain operation contracts. The contract liabilities are recognised as revenues on a systematic basis that is consistent with the transfer to the customer of the goods or services to which the liabilities relate.

23. LOAN FROM A RELATED PARTY

During the current interim period, the Group did not obtain any new loans (six months ended 30 June 2019: US$150,000,000, equivalent to approximately RMB1,017,120,000 from a fellow subsidiary to finance CNA's daily operations, which is repayable on demand and carries effective interest rate of LIBOR+0.5% per annum).

24. INTEREST-BEARING BANK BORROWINGS

During the current interim period, the Group repaid bank borrowings of US$42,100,000, equivalent to approximately RMB298,283,000 (six months ended 30 June 2019: US$42,100,000, equivalent to approximately RMB281,540,000) and bank borrowings of RMB9,100,000 (six months ended 30 June 2019: RMB9,100,000).

No bank borrowings obtained during the six months ended 30 June 2020 and 2019, respectively.

The weighted average effective interest rate of bank borrowings for the six months ended 30 June 2020 was 2.93% per annum (six months ended 30 June 2019: 4.65% per annum) and the borrowings are repayable in instalments over a period of 1 to 16 years.

China Oilfield Services Limited Interim Report 2020

45

Notes to the Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

25. LONG TERM BONDS

30 June

31 December

Year of maturity

2020

2019

RMB'000

RMB'000

(Unaudited)

(Audited)

Corporate bonds (a)

2022

1,508,400

1,542,000

2016 Corporate Bonds

3,009,473

(Type II of the First Tranche Issue as defined below) (b)

2026

3,070,763

(Type I of the Second Tranche Issue as defined below) (b)

2021

104,062

102,493

(Type II of the Second Tranche Issue as defined below) (b)

2021

2,965,882

2,916,915

Senior unsecured USD bonds (c)

2022

7,140,564

7,032,189

Guaranteed medium term notes

3,592,060

First Drawdown Note (d)

2020

3,537,073

Second Drawdown Note (d)

2025

3,591,006

3,537,220

Guaranteed senior notes

3,530,799

2025 Notes (e)

2025

-

2030 Notes (e)

2030

2,101,977

-

27,544,223

21,738,653

Current

3,822,260

3,810,175

Non-current

23,721,963

17,928,478

27,544,223

21,738,653

  1. On 18 May 2007, the Group issued 15-year corporate bonds, with a nominal value of RMB100 per bond, amounting to RMB1,500,000,000. The bonds carry effective interest rate of 4.48% per annum (2019: 4.48% per annum), and the redemption or maturity date is 14 May 2022.
  2. On 26 May 2016, the Group issued its first tranche (the "First Tranche Issue") of domestic corporate bonds ("2016 Corporate Bonds") with an aggregate amount of RMB5,000,000,000. The First Tranche Issue includes two types of bonds. The first type of bonds with a principal amount of RMB2,000,000,000 was repaid on 27 May 2019. The second type of bonds with a principal amount of RMB3,000,000,000 (the "Type II of the First Tranche Issue") carries effective interest rate of 4.12% per annum and the maturity date is 27 May 2026.
    On 21 October 2016, the Group issued its second tranche (the "Second Tranche Issue") of 2016 Corporate Bonds with an aggregate amount of RMB5,000,000,000. The Second Tranche Issue includes two types of bonds. The first type of bonds with a principal amount of RMB2,100,000,000 (the "Type I of the Second Tranche Issue") and is repayable on 24 October 2021. The Group has the right to adjust or not to adjust the coupon rate for the fourth and fifth year at the end of the third year on 24 October 2019 by giving a notice to the bondholders. The bondholders have the right to require the Group to redeem the Type I of the Second Tranche Issue at a redemption price equal to 100% of the principal plus accrued and unpaid interest to such redemption date whether the Group chose to adjust the coupon rate or not. The remaining bonds will be subject to the interest rate offered by the Group at the end of the third year until the maturity date. The effective interest rate of the Type I of the Second Tranche Issue is 3.13% per annum. During the year of 2019, RMB1,998,100,000 principal of Type I of the Second Tranche were redeemed as required by the bondholders. According to the market environment, the Group chose not to adjust the coupon rate for the fourth and fifth year, that is, the coupon rate remains at 3.08% in the following interest-bearing years. The remaining Type I of the Second Tranche Issue of RMB101,900,000 will be held until the maturity date on 24 October 2021.
    The second type of bonds with a principal amount of RMB2,900,000,000 (the "Type II of the Second Tranche Issue") is repayable on 24 October 2023. The Group has the right to unadjust or adjust the coupon rate for the sixth and seventh year at the end of the fifth year on 24 October 2021 by giving a notice to the bondholders. The bondholders may accordingly at their option to require the Group to redeem the Type II of the Second Tranche Issue at a redemption price equal to 100% of the principal plus accrued and unpaid interest to such redemption date. The remaining bonds will be subject to the interest rate offered by the Group at the end of the fifth year until the maturity date. The effective interest rate of the Type II of the Second Tranche Issue is 3.38% per annum.

46

China Oilfield Services Limited Interim Report 2020

Notes to the Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

  1. LONG TERM BONDS (continued)
    1. On 6 September 2012, COSL Finance (BVI) Limited, a subsidiary of the Company, issued 10-year senior unsecured bonds, with a US$1,000,000,000 principal amount. The redemption or maturity date is 6 September 2022. The effective interest rate of the senior unsecured bonds is 3.38% per annum.
    2. On 20 July 2015, COSL Singapore Capital Ltd., a wholly-owned subsidiary of the Company, established the Euro medium term note programme (the "EMTN Programme"). Under the EMTN Programme, COSL Singapore Capital Ltd. may issue drawdown notes in tranches up to an aggregate principal amount of US$3,500,000,000.
      On 30 July 2015, COSL Singapore Capital Ltd. issued the first tranche of drawdown note under the EMTN Programme with nominal amount of US$500,000,000 (the "First Drawdown Note"). The effective interest rate was 3.61% per annum after taking into consideration of initial transaction costs. The principal of the First Drawdown Note will be repaid on 30 July 2020. On 30 July 2015, COSL Singapore Capital Ltd. issued the second tranche of drawdown note under the EMTN Programme with nominal amount of US$500,000,000 (the "Second Drawdown Note"). The effective interest rate is 4.58% per annum after taking into consideration of initial transaction costs. The principal of the Second Drawdown Note will be repaid on 30 July 2025.
    3. On 24 June 2020, COSL Singapore Capital Ltd., a wholly-owned subsidiary of the Company, issued two tranches of Guaranteed Senior Notes. The Company has unconditionally and irrevocably guaranteed the due and punctual payment of Guaranteed Senior Notes.
      The first tranche of the notes (the "2025 Notes") is a 5-year guaranteed senior notes, with a US$500,000,000 principal amount. The redemption or maturity date is 24 June 2025. The effective interest rate of the 2025 Notes is 1.94% per annum.
      The second tranche of the notes (the "2030 Notes") is a 10-year guaranteed senior notes, with a US$300,000,000 principal amount. The redemption or maturity date is 24 June 2030. The effective interest rate of the 2030 Notes is 2.62% per annum.
  3. DEFERRED INCOME

Deferred income consists of the contract value acquired in the process of the acquisition of CNA, government grants, and the difference between proceeds received from loans at a below-market rate granted by a wholly-owned subsidiary of a state-owned bank and the fair value of the loans at initial recognition based on the prevailing market interest rate (the "Others"). The deferred income acquired from contract value are amortised according to the related drilling contract periods and are credited to revenues of the Group. The deferred income received from government and the others are recognised according to the depreciable periods of the related assets and the periods in which the related costs incurred, respectively, and are credited to other income of the Group.

Government

Government

Contract

grant related

grant related

30 June 2020

value

to assets

to income

Others

Total

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

At 1 January 2019 (audited)

167,369

194,386

80,393

80,691

522,839

Additions

-

2,748

87,033

-

89,781

Credited to profit or loss

(82,602)

(17,301)

(105,065)

(7,922)

(212,890)

Exchange realignment

1,824

-

-

-

1,824

At 31 December 2019 (audited)

86,591

179,833

62,361

72,769

401,554

Additions

-

450

29,447

-

29,897

Credited to profit or loss

(56,473)

(10,187)

(30,668)

(3,173)

(100,501)

Exchange realignment

901

-

-

-

901

At 30 June 2020 (unaudited)

31,019

170,096

61,140

69,596

331,851

China Oilfield Services Limited Interim Report 2020

47

Notes to the Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

27. ISSUED CAPITAL

30 June

31 December

2020

2019

RMB'000

RMB'000

(Unaudited)

(Audited)

Registered, issued and fully paid:

1,811,124

H shares of RMB1.00 each

1,811,124

A shares of RMB1.00 each

2,960,468

2,960,468

4,771,592

4,771,592

28. CONTINGENCES AND COMMITMENTS

  1. Contract performance guarantees
    As at 30 June 2020, the Company has issued a contract performance guarantee in respect of certain obligating service agreements entered by the Group's cooperation partner, Oceancare Corporation Sdn Bhd ("OCSB"), in favor of the customer ("the guaranteed party"). The total consideration of the service agreements are US$10,300,000, which is equivalent to approximately RMB72,920,000. Under the guarantee, the Company is required to make good at its own cost all outstanding contractual work for the guaranteed party should OCSB fails to perform under the said service obligations.
    The Group has not recognised liabilities for the above guarantee because the Directors consider that the possibility of an outflow of resources embodying economic benefits is remote.
  2. Capital commitments
    The Group had the following capital commitments, principally for construction and purchases of property, plant and equipment at the end of the reporting period:

30 June

31 December

2020

2019

RMB'000

RMB'000

(Unaudited)

(Audited)

Contracted, but not provided for

1,152,625

1,512,276

48

China Oilfield Services Limited Interim Report 2020

Notes to the Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

29. RELATED PARTY TRANSACTIONS

As disclosed in note 1, the Company is a subsidiary of CNOOC, which is a SOE subject to the control of the State Council of the PRC Government. The Group has extensive transactions and relationships with the members of CNOOC. The transactions were made on terms agreed among the parties. The Directors are of the opinion that the transactions with related parties were conducted in the ordinary course of business.

  1. Related party transactions and outstanding balances with related parties
    In addition to the transactions and balances detailed elsewhere in these condensed consolidated financial statements, the following is a summary of significant transactions carried out between the Group and (i) CNOOC Limited Group; (ii) CNOOC and its subsidiaries, excluding the CNOOC Limited Group (the "CNOOC Group''); (iii) the Group's joint ventures; and (iv) associates invested by CNOOC.
    a. Included in revenue

Six months ended 30 June

2020

2019

RMB'000

RMB'000

(Unaudited)

(Unaudited)

i

CNOOC Limited Group

3,029,551

Provision of drilling services

2,779,065

Provision of well services

5,466,345

5,996,275

Provision of marine support services

1,407,964

1,297,982

Provision of geophysical acquisition and surveying services

616,817

790,908

10,520,677

10,864,230

ii

CNOOC Group

44,602

Provision of drilling services

298

Provision of well services

46,190

7,617

Provision of marine support services

15,492

6,790

Provision of geophysical acquisition and surveying services

15,092

39,767

121,376

54,472

iii

Joint ventures

16,487

Provision of well services

14,186

iv

Associates invested by CNOOC

1,742

Provision of drilling services

443

Provision of well services

6,608

83,833

Provision of marine support services

-

8,060

8,350

92,336

China Oilfield Services Limited Interim Report 2020

49

Notes to the Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

29. RELATED PARTY TRANSACTIONS (continued)

  1. Related party transactions and outstanding balances with related parties (continued) b. Included in operating expenses

Six months ended 30 June

2020

2019

RMB'000

RMB'000

(Unaudited)

(Unaudited)

i

CNOOC Limited Group

14,253

Materials, utilities and other ancillary services

23,863

Transportation services

74

-

14,327

23,863

Property services

2,532

1,955

16,859

25,818

ii

CNOOC Group

561,986

Materials, utilities and other ancillary services

412,123

Transportation services

6,915

23,448

Leasing of equipment

60,645

89,212

Repair and maintenance services

4,029

3,431

Management services

735

621

634,310

528,835

Property services

59,141

46,723

693,451

575,558

iii

Joint ventures

119,548

Materials, utilities and other ancillary services

79,303

Leasing of equipment

13,621

13,881

133,169

93,184

iv Associates invested by CNOOC

21,964

Materials, utilities and other ancillary services

-

Management services

1,431

-

23,395

-

50

China Oilfield Services Limited Interim Report 2020

Notes to the Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

29. RELATED PARTY TRANSACTIONS (continued)

  1. Related party transactions and outstanding balances with related parties (continued) c. Included in interest income

Six months ended 30 June

2020

2019

RMB'000

RMB'000

(Unaudited)

(Unaudited)

CNOOC Finance Co., Ltd. ("CNOOC Finance", a subsidiary of CNOOC)

14,153

Interest income

10,087

Deposits in CNOOC Finance carry interests at the applicable interest rate which is determined with reference to the prevailing bank rates published by the People's Bank of China.

d. Dividend income from joint ventures

Six months ended 30 June

2020

2019

RMB'000

RMB'000

(Unaudited)

(Unaudited)

Dividend income from joint ventures

23,201

92,035

  1. Included in finance costs
    During the current interim period, the finance costs on the loan from a related party which has been disclosed in note 23 are US$2,667,000 (six months ended 30 June 2019: US$4,985,000), which is equivalent to approximately RMB18,881,000 (six months ended 30 June 2019: RMB34,277,000).
    During the current interim period, the financial costs on the lease liabilities due to related parties are RMB799,000 (six months ended 30 June 2019: RMB2,550,000).
  2. Deposits included in cash and cash equivalents

30 June

31 December

2020

2019

RMB'000

RMB'000

(Unaudited)

(Audited)

Deposits placed with CNOOC Finance as at the end of the reporting period

1,183,353

1,498,717

  1. During the current interim period, the other income from CNOOC Limited Group in respect of compensation for equipment dropping into wells when rendering services are RMB25,710,000 (six months ended 30 June 2019: RMB20,373,000).

China Oilfield Services Limited Interim Report 2020

51

Notes to the Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

29. RELATED PARTY TRANSACTIONS (continued)

  1. Related party transactions and outstanding balances with related parties (continued) h. Right-of-useassets

  2. The following is addition of right-of-use assets based on lease agreements with related parties:

Six months ended 30 June

2020

2019

RMB'000

RMB'000

(Unaudited)

(Unaudited)

CNOOC Group

-

3,142

Joint ventures

-

5,728

-

8,870

  1. Contingences and commitments with the related parties
    The Group had the following capital commitments with related parties, principally for construction and purchases of property, plant and equipment at the end of the reporting period:

30 June

31 December

2020

2019

RMB'000

RMB'000

(Unaudited)

(Audited)

Contracted, but not provided for

41,227

-

As at 30 June 2020, the Group has no guarantees granted to related parties.

  1. Outstanding balances with related parties Accounts receivable
    Included in accounts receivable are amounts due from related parties which arose from the ordinary course of business and are repayable on similar credit terms to those offered to independent third party customers.

30 June

31 December

2020

2019

RMB'000

RMB'000

(Unaudited)

(Audited)

Due from CNOOC Limited Group

11,147,802

7,679,994

Due from CNOOC Group

176,593

71,236

Due from joint ventures

14,359

4,617

Due from associates invested by CNOOC

3,248

11,356

11,342,002

7,767,203

52

China Oilfield Services Limited Interim Report 2020

Notes to the Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

29. RELATED PARTY TRANSACTIONS (continued)

  1. Related party transactions and outstanding balances with related parties (continued)
    1. Outstanding balances with related parties (continued) Prepayments, deposits and other receivables

30 June

31 December

2020

2019

RMB'000

RMB'000

(Unaudited)

(Audited)

Due from CNOOC Limited Group

9,533

33,663

Due from CNOOC Group

1,753

1,697

Due from joint ventures

7,507

15,790

Less: Provision for impairment of

18,793

51,150

(500)

other receivables

(500)

18,293

50,650

Dividend receivable

30 June

31 December

2020

2019

RMB'000

RMB'000

(Unaudited)

(Audited)

Dividend receivable from joint ventures

23,201

-

Other non-current assets

30 June

31 December

2020

2019

RMB'000

RMB'000

(Unaudited)

(Audited)

Due from CNOOC Group

1,172

-

China Oilfield Services Limited Interim Report 2020

53

Notes to the Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

29. RELATED PARTY TRANSACTIONS (continued)

  1. Related party transactions and outstanding balances with related parties (continued)
    1. Outstanding balances with related parties (continued) Trade and other payables

30 June

31 December

2020

2019

RMB'000

RMB'000

(Unaudited)

(Audited)

Due to CNOOC Limited Group

21,549

35,127

Due to CNOOC Group

572,714

652,291

Due to joint ventures

107,290

203,692

Due to associates invested by CNOOC

8,904

19,065

710,457

910,175

Loan from a related party

30 June

31 December

2020

2019

RMB'000

RMB'000

(Unaudited)

(Audited)

An unsecured loan due to CNOOC Group (note 23)

2,478,494

2,443,946

Contract liabilities

30 June

31 December

2020

2019

RMB'000

RMB'000

(Unaudited)

(Audited)

Due to the CNOOC Limited Group

-

3,535

Due to the CNOOC Group

134,852

156,915

134,852

160,450

Lease liabilities

30 June

31 December

2020

2019

RMB'000

RMB'000

(Unaudited)

(Audited)

Due to the CNOOC Group

38,907

50,578

Due to joint ventures

350

2,770

39,257

53,348

54

China Oilfield Services Limited Interim Report 2020

Notes to the Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

29. RELATED PARTY TRANSACTIONS (continued)

  1. Related party transactions and outstanding balances with related parties (continued)
    1. Outstanding balances with related parties (continued)
      The Group and the above related parties are within the CNOOC Group and CNOOC Limited Group and are under common control (except for the joint ventures of the Group and the associates invested by CNOOC) by the same ultimate holding company.
      The balances with related parties at 30 June 2020 included in accounts receivables, prepayments, deposits and other receivables, dividend receivable, trade and other payables and contract liabilities of the Group are unsecured, interest-free, and have no fixed terms of repayment. Loan from a related party is charged at LIBOR+0.5% per annum and repayable on demand. Lease liabilities have fixed terms of repayment and are measured at the present value of lease payments that are unpaid using the incremental borrowing rate at the lease commencement date.
      The Company entered into several agreements with the CNOOC Group and CNOOC Limited Group which govern the employee benefit arrangements, the provision of materials, utilities and ancillary services, the provision of technical services, the leasing of properties and various other commercial arrangements.
      The lease expenses relating to agreements with the CNOOC Group and CNOOC Limited Group in respect of variable lease payments determined by utilisation days and day rates as well as short-term leases are disclosed in note 29(A)b.
      The Directors are of the opinion that the above transactions with related parties were conducted in the usual course of business.
    2. Transactions with other SOEs in the PRC
      The Group has entered into extensive transactions covering the sales of goods and rendering of services, receipt of construction services of vessels and drilling rigs, purchases of goods, services or property, plant and equipment in the PRC, other than the CNOOC Group and the CNOOC Limited Group, in the normal course of business at terms comparable to those with other non-SOEs. None of these transactions are material related party transactions, individually or collectively, that require separate disclosure.
      In addition, the Group has certain of its cash and time deposits and outstanding interest-bearing bank borrowings with certain state-owned banks in the PRC, as summarised below:

30 June

31 December

2020

2019

RMB'000

RMB'000

(Unaudited)

(Audited)

Cash and cash equivalents

6,066,216

536,716

6,066,216

536,716

Long-term bank loans

196,225

201,049

Current portion of long-term bank loans

318,987

608,906

515,212

809,955

China Oilfield Services Limited Interim Report 2020

55

Notes to the Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

29. RELATED PARTY TRANSACTIONS (continued)

  1. Related party transactions and outstanding balances with related parties (continued) k. Transactions with other SOEs in the PRC (continued)

  2. Deposit interest rates and loan interest rates are at the market rates.

Six months ended 30 June

2020

2019

RMB'000

RMB'000

(Unaudited)

(Unaudited)

Finance costs

9,002

24,507

(B) Compensation of key management personnel of the Group

Six months ended 30 June

2020

2019

RMB'000

RMB'000

(Unaudited)

(Unaudited)

Short-term employee benefits

2,001

2,606

Post-employment benefits

260

345

Total compensation paid to key management personnel

2,261

2,951

30. FINANCIAL INSTRUMENTS

  1. Fair value of the Group's financial assets that are measured at fair value on a recurring basis
    Some of the Group's financial assets are measured at fair value at the end of each reporting period. The following table gives information about how the fair values of these financial assets are determined (in particular, the valuation technique(s) and inputs used), as well as the level of the fair value hierarchy into which the fair value measurements are categorised (levels 1 to 3) based on the degree to which the inputs to the fair value measurements is observable.
    • Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active market for identical assets or liabilities;
    • Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
    • Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

56

China Oilfield Services Limited Interim Report 2020

Notes to the Condensed Consolidated Financial Statements (continued)

For the six months ended 30 June 2020

30. FINANCIAL INSTRUMENTS (continued)

  1. Fair value of the Group's financial assets that are measured at fair value on a recurring basis (continued)

Fair value as at

Valuation technique(s)

Financial assets

30/06/2020

31/12/2019

Fair value hierarchy and key input(s)

RMB'000

RMB'000

(Unaudited)

(Audited)

Receivables at FVTOCI - notes receivable

23,009

40,580

Level 2 Discounted cash flow at a discount

rate that reflects the credit risk of

the drawee of notes at the end of

Financial assets at FVTPL - floating rate

2,538,263

the reporting period

4,511,248

Level 3 Discounted cash flow. Future cash

corporate wealth management products

flows estimated based on

estimated return

Reconciliation of Level 3 fair value measurements is as follows:

Financial assets

at FVTPL

RMB'000

At 31 December 2019 (Audited)

4,511,248

Purchase

3,500,000

Redemption

(5,500,000)

Change in fair value

27,015

At 30 June 2020 (Unaudited)

2,538,263

  1. Fair value of the Group's financial assets and financial liabilities that are not measured at fair value on a recurring basis
    Except as detailed in the following table, the Directors consider that the carrying amounts of financial assets and financial liabilities recognised in the condensed consolidated financial statements approximate to their fair values.

Carrying amounts

Fair values

30 June

31 December

30 June

31 December

2020

2019

2020

2019

RMB'000

RMB'000

RMB'000

RMB'000

(Unaudited)

(Audited)

(Unaudited)

(Audited)

Financial liabilities

27,544,223

28,211,817

Long term bonds (note 25)

21,738,653

21,956,603

The fair value of long term bonds issued by the Group, with fair value hierarchy of level 2, are determined by reference to the present value valuation technique under income approach and applying prime rate as adjusted to reflect the credit risk of the issuers as key inputs.

31. APPROVAL OF THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

These condensed consolidated financial statements were approved and authorised for issue by the board of directors on 26 August 2020.

China Oilfield Services Limited Interim Report 2020

57

Company Directory

Headquarters

Legal Counsel

Audit Committee

No. 201 Haiyou Avenue

PRC

Fong Chung, Mark (Chairman)

Yanjiao Economic & Technological

JunHe LLP

Wong Kwai Huen, Albert

Development Zone

20/F, China Resources Building

Lin Boqiang

Sanhe City

8 Jianguomenbei Avenue, Beijing

Remuneration and Assessment

Hebei Province

Tel: (8610) 8519 1300

People's Republic of China

Fax: (8610) 8519 1350

Committee

Tel: (8610) 8452 1685

Hong Kong

Wong Kwai Huen, Albert (Chairman)

Fax: (8610) 8452 1325

Fong Chung, Mark

Registration Address

Clifford Chance

Lin Boqiang

27th Floor, Jardine House

Meng Jun

No.1581, Haichuan Road

One Connaught Place

Nomination Committee

Tanggu Ocean Hi-tech Zone

Hong Kong

Binhai Hi-tech Development

Tel: (852) 2825 8888

Lin Boqiang (Chairman)

District, Tianjin,

Fax: (852) 2825 8800

Qi Meisheng

People's Republic of China

Public Relations Company

Wong Kwai Huen, Albert

Hong Kong Office

Supervisory Committee

Wonderful Sky Financial Group

65/F, Bank of China Tower

9/F, The Center

Wu Hanming (Chairman)

1 Garden Road

99 Queen's Road Central

Cheng Xinsheng

Central, Hong Kong

Central, Hong Kong

Zhao Bi

Tel: (852) 2213 2500

Tel: (852) 2851 1038

Senior Management

Fax: (852) 2525 9322

Fax: (852) 3102 0210

Register

Printer

Qi Meisheng

Zhao Shunqiang

Computershare Hong Kong

Equity Financial Press Limited

Zheng Yonggang

Investor Services Limited

2/F, 100 QRC

Yu Feng

Shops 1712-1716, 17M Floor

100 Queen's Road Central

Xu Yingbo

Hopewell Centre

Central, Hong Kong

Lu Tao

183 Queen's Road East

Tel: (852) 2526 8330

Wu Yanyan

Wanchai, Hong Kong

Fax: (852) 2526 6820

Tel: (852) 2862 8555

Stock Codes

Fax: (852) 2865 0990

(852) 2529 6087

Shanghai Stock Exchange: 601808

Auditors

The Stock Exchange of

Hong Kong Limited: 2883

Deloitte Touche Tohmatsu

Board of Directors

35/F, One Pacific Place

88 Queensway

Qi Meisheng (Chairman)

Hong Kong

Cao Shujie

Tel: (852) 2852 1600

Fong Chung, Mark

Fax: (852) 2541 1911

(Independent Non-Executive Director)

Wong Kwai Huen, Albert

(Independent Non-Executive Director)

Lin Boqiang

(Independent Non-Executive Director)

Meng Jun

Zhang Wukui

58

China Oilfield Services Limited • Interim Report 2020

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COSL - China Oilfield Services Limited published this content on 10 September 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 10 September 2020 09:14:03 UTC