Drilling services provider COSL expects deep-water revenue boost

China Oilfield Services (COSL), the mainland's dominant provider of offshore drilling services, expects more work and a greater contribution from more capital-intensive deep-water jobs will lift revenues this year.

However, the company warned that the subdued outlook for oil prices will constrain the upside for drilling rates.

Chief executive Li Yong said this year's drilling rates with its largest customer, sister firm CNOOC, were flat, while those for some higher-end overseas jobs would see slight increases.

"Overall, rates are stable … some high-end jobs still have minor increases," he said. "However, hikes are increasingly difficult to negotiate as oil producers' outlook on oil price is not optimistic and this will in turn put pressure on rates for services providers."

Investor and public relations manager Helen Wu Yanyan said COSL expected deep-water operations to account for 20 per cent to 25 per cent of this year's total revenues, up from 17 per cent last year, after adding four deep-water rigs that attract higher drilling rates but also higher depreciation expenses since 2012.

CNOOC, which accounted for about 60 per cent of COSL's revenue last year, said on January 20 that it planned to lift its spending on exploration and the development of new wells by 16 per cent to 33 per cent this year, after a 24 per cent rise last year excluding spending by newly acquired Nexen in Canada. This bodes well for demand for COSL's services.