Hilong seeks to expand oil and gas service sales in Asia
Hilong hopes to reduce oil price risk after talks on service sales in Asia
Hilong Holding, an oil and gas drilling equipment maker and service provider on the mainland, is in talks with potential customers in Asia on the provision of offshore pipeline-laying services as it diversifies further to reduce the risk from oil price volatility.
The Shanghai-based maker of drill pipes expects the talks to yield some contracts in the next two years.
"Contribution from the offshore engineering business will be a good supplement this year as our existing business faces challenges from the sharp fall in oil prices," chief strategy officer Amy Zhang Shuman told the , adding the talks with potential clients in Thailand, Malaysia, Indonesia and Taiwan were "in-depth".
Last year, the firm bought an oil and gas pipe laying vessel for about one billion yuan (HK$1.3 billion) and won its first order worth 550 million yuan from China Oilfield Services Ltd, the sister firm of the country's dominant offshore oil and gas producer CNOOC. The job is expected to be completed by August and will be Hilong's primary revenue growth driver this year.
Zhang said additional pipe-laying work under talks with COSL would likely see revenue from the firm exceed 600 million yuan this year. It had 1.7 million yuan in revenue from this business last year, compared with total revenue of 2.58 billion yuan.
With oil price sinking to six-year lows, substantial capital spending cuts by oil and gas firms the world over have seen China's equipment and drilling services firms post sharp profit falls or losses as work volume and service rates fell.
Hilong fared better, with underlying net profit last year falling 15 per cent from 2013 to 353 million yuan, excluding one-off accounting gains and losses, Sanford Bernstein senior analyst Neil Beveridge said in a note.
"We are less exposed to oil price volatility because drill pipes and coating services are more like consumables, which you will need whether oil prices are high or low," Zhang said. "It's like you will avoid buying the fridge or television when times are bad, but you won't cut your consumption of tissues and rice much."
Hilong is forecast to see revenue grow 18.4 per cent this year to three billion yuan and net profit rise 4.4 per cent to 415 million yuan, according to the average estimate of nine analysts surveyed by Thomson Reuters.
