Cosl writes down value of its Libyan oil assets
China Oilfield Services (Cosl), the nation's dominant offshore drilling services provider, has written down the value of its Libyan assets by 14 per cent to account for potential impairments due to civil war, citing accounting prudence.
This is despite the fact that the war-torn North African nation accounts for only one per cent of Cosl's revenues, and that there is no evidence as yet that its drilling rigs have been damaged, said chief financial officer Li Feilong.
'We have made the provisions out of accounting prudence, which is a norm in the industry,' said Li.
Cosl wrote down the value of its Libyan assets - previously booked at 300 million yuan (HK$366 million) - by 41.8 million yuan in its first-half accounts, and set aside around 20 million yuan for potential unrecoverable customer receivables.
Since late February it has suspended operations at its five land-based drilling rigs in Libya and brought home 77 workers after violent clashes between protesters and troops loyal to leader Colonel Muammar Gaddafi.
Li said its Libya service equipment was intact, based on reports from local staff guarding them. Its rigs are located in deserts, which Li said seemed little affected by the fighting.
Cosl posted a 4.7 per cent year-on-year fall in net profit in the year's first-half to 2.07 billion yuan; and a 6.7 per cent sales decline to 8.14 billion yuan as a 3.1 per cent fall in average daily drilling rate more than offset a 1.7 per cent rise in rig operating days. Average rig utilisation fell to 94 per cent from 100 per cent.
CLSA head of Asian oil and gas research Simon Powell wrote that the decline, amid higher oil prices and increased spending by resource developers, pointed to a loss in market share.
But Cosl chief executive Li Yong said second-half drilling rates will rebound due to contributions from higher value-added services such as those for deep sea operations. Some rigs redeployed or upgraded in the first-half will start to contribute in the second-half.
First-half work volume was also cut by oil spills and the shut-down of two offshore drilling platforms in northern China at a project operated by US firm ConocoPhillips and 51 per cent-owned by CNOOC which is Cosl's largest oil-producer customer. Cosl chairman Liu Jian said the impact on its revenues would be small.