SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 6-K
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REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For September 18, 2003
CNOOC Limited
(Translation of registrant's name into English)
-----------------------------------------------------
65th Floor
Bank of China Tower
One Garden Road
Central, Hong Kong
(Address of principal executive offices)
---------------------------------------------
(Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F)
Form 20-F X Form 40-F
--------- ----------
(Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.)
Yes No X
--------- ----------
(If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b): N/A.)
CONTENTS 1
2 Chairman's Statement
4 Key Figures
5 Consolidated Income Statement
6 Consolidated Balance Sheet
7 Statement of Changes in Equity
8 Condensed Consolidated Cash Flow Statement
9 Notes to Interim Financial Statements
30 Independent Review Report
31 Other Information
2003 Interim Report
2 CHAIRMAN'S STATEMENT
During the first half of 2003, the Company experienced strong international
oil price and serious impact of the Severe Acute Respiratory Syndrome (SARS)
in China. Thanks to the collaborative effort of our staff, the Company
maintained its momentum of rapid development with stable increase in
production. Benefiting from the strong international oil price, the Company
saw remarkable growth in oil and gas revenues, and our cost remained
competitive, leading to a significant increase in the net profit. In February
2003, the Company continued to implement its natural gas strategy by
completing the acquisition of equity interests in the Tangguh LNG Project in
Indonesia. In May 2003, the Company took the opportunity of the low interest
rate environment to issue two tranches of 10-year and 30-year guaranteed notes
with a value of US$200 million and US$300 million respectively, optimizing the
Company's capital structure. In addition, we also maintained an active
exploration and development program during the period, marked with a number of
successful discoveries and appraisals. Our oil and gas development projects
also proceeded on schedule.
REVIEW OF OPERATIONS
For the six months ended 30 June 2003, the Company recorded stable production
growth. Our oil and gas production reached 352,780 barrels-of-oil-equivalent
per day, representing an increase of 14.8% over the same period last year. Net
crude oil production reached 307,103 barrels per day, while net natural gas
production totaled 263.2 million cubic feet per day, representing a 15.0% and
10.4% increase over the first half of 2002 respectively. The realized oil
price was US$28.56 per barrel, up 30.9% from last year. The realized natural
gas price was US$2.93 per thousand cubic feet.
Owing to the stable production growth and strong oil price, the Company's oil
and gas sales reached RMB14.18 billion during the first half of this year,
representing a remarkable increase of 47.3% compared to RMB9.63 billion of the
same period last year. Coupled with the revenues from trading and other
activities, the Company achieved a total revenue of RMB17.90 billion,
representing a significant increase of 68.3% from RMB10.64 billion last year.
The reported profit before tax was RMB8.74 billion, up 75.1% from RMB4.99
billion in 2002, and the reported net profit was RMB6.33 billion, representing
a sharp increase of 75.0% compared with RMB3.62 billion in the previous year.
During the period, the basic and diluted earnings per share of the Company
were RMB0.77. According to the Company's dividend policy and considering the
future trend of the oil prices, current cash position and future needs of
investment capital, the Board of Directors has decided to pay out an interim
dividend of HK$0.14 per share and a special interim dividend of HK$0.18 per
share.
During the first half of 2003, the Company recorded seven wildcat discoveries
through its successful exploration activities, including five crude oil
discoveries in the Bohai Bay. These five discoveries include the independent
discoveries of Bozhong 34-1S (discovered and appraised during the period),
Bozhong 34-1 and Bozhong 3-2 fields, and the Caofeidian 11-5 and Penglai 19-9
discoveries made by our PSC partners, demonstrating the enormous potential of
the Bohai Bay. In Eastern South China Sea, we have made two independent gas
discoveries, Liuhua 19-5 and Panyu 35-1, reflecting the successful
explorations in the area. During the period, the appraisal of 5 discoveries
were completed, namely the Jinzhou 25-1S, Bozhong 34-1S, and Panyu 30-1, which
are independent discoveries, Caofeidian 12-1 and Caofeidian 12-1S, which are
discoveries made by our PSC partners. Among the appraisal successes, Panyu
30-1 and the surrounding gas discoveries were the Company's major natural gas
discoveries in the Eastern South China Sea area, showcasing the area's
prospects for explorations and strengthening the Company's dominant position
in the natural gas business in the Pearl River Delta Region.
CNOOC Limited
CHAIRMAN'S STATEMENT 3
The Company continued to focus on the development of oil and gas fields during
the period, with a number of projects proceeding on schedule. Dongfang 1-1,
the Company's largest independent gas field, was expected to be on stream
soon, while the Panyu 4-2/5-1 oilfield would also be on stream in the second
half. In addition, the Caofeidian 11-1/2, Bozhong 25-1 and Xihu Trough
Chunxiao projects were also proceeding on schedule.
The Company is highly committed to health, safety and environmental
protection. During the period, the management succeeded in overcoming the
impact of SARS by implementing a comprehensive health, safety and
environmental system for the Company's operations, and no employees or their
family members fell victim to the epidemic. In addition, the Company achieved
double zero record in both the recordable accident rate and the work hours
lost rate, bringing a huge encouragement for us to continue our persistent
health, safety and environmental policies.
OUTLOOK
In the second half of 2003, maximizing shareholders' return will remain to be
the mission of the management and our staff as a whole. We will also stick to
our development strategy to achieve our production and operations targets for
the year. Our key tasks in the second half of the year include:
- Focus on hitting our oil and gas production targets for the year while
controlling the costs. We will also strive to maintain our current
competitive cost structure.
- Continue our active exploration program in offshore China and optimize
our exploration plans and targets, so as to increase reserves through
maintaining the growth of oil reserves in Bohai Bay and the momentum of gas
explorations in Eastern South China Sea.
- Continue to closely control the progress, costs and quality of our
existing development projects, especially for the Dongfang 1-1 and the Panyu
4-2/5-1 project which will be on stream during the second half of the year,
so as to achieve the Company's development target.
- Health, safety and environment issues will remain our top priorities.
We are deeply committed to the health of our staff and we will achieve a
perfect synergy between the Company and our staff.
Wei Liucheng
Chairman & Chief Executive Officer
Hong Kong, 4 September 2003
2003 Interim Report
4 KEY FIGURES
Six months ended
30 June
2003 2002
-------------------------------------------------------------------------------
Net profit, million RMB 6,334.5 3,618.9
Earnings per share, RMB 0.77 0.44
EBITDE, million RMB(1) 11,344.2 7,481.8
Total Oil and Gas Sales, million RMB 14,184.8 9,628.9
Total Revenue, million RMB 17,904.2 10,640.4
Net Production
Oil, million barrels 55.6 48.4
Gas, billion cubic feet 47.6 43.1
Total, million barrels-of-oil-equivalent 63.9 55.6
Daily Net Production
Oil, barrels 307,103 267,130
Gas, million cubic feet 263.2 238.0
Total, barrels-of-oil-equivalent 352,780 307,334
Note:
(1) EBITDE refers to earnings before interest income, interest expenses,
income tax, depreciation, depletion and amortisation, dismantlement,
exploration expenses and exchange gains & losses.
CNOOC Limited
CONSOLIDATED INCOME STATEMENT 5
For the six months ended 30 June 2003
(All amounts expressed in thousands of Renminbi, except per share data)
Six months ended
30 June
Notes 2003 2002
(unaudited) (unaudited)
---------------------------------------------------------------------------------------------------
REVENUE
Oil and gas sales 4 14,184,773 9,628,871
Marketing revenue 4 3,582,015 794,063
Other income 137,369 217,464
---------- -----------
17,904,157 10,640,398
---------- -----------
EXPENSES
Operating expenses (1,973,851) (1,584,014)
Production taxes (614,669) (420,921)
Exploration expenses (391,732) (634,859)
Depreciation, depletion and amortisation (2,144,369) (1,590,079)
Dismantlement (67,477) (59,810)
Crude oil and product purchases 4 (3,543,138) (772,094)
Selling and administrative expenses (500,809) (358,105)
Others (103,416) (166,711)
---------- -----------
(9,339,461) (5,586,593)
---------- -----------
PROFIT FROM OPERATING ACTIVITIES 8,564,696 5,053,805
Interest income 91,862 79,498
Interest expenses 5 (109,312) (138,213)
Exchange gains/(losses), net 19,553 (146,269)
Investment income 57,067 102,287
Share of profits of an associate 125,208 38,577
Non-operating (loss)/income, net (6,339) 2,417
---------- -----------
PROFIT BEFORE TAX 8,742,735 4,992,102
Tax 6 (2,408,259) (1,373,241)
---------- -----------
NET PROFIT 6,334,476 3,618,861
========== ===========
EARNINGS PER SHARE 7
Basic RMB0.77 RMB0.44
========== ===========
Diluted RMB0.77 RMB0.44
========== ===========
DIVIDENDS 13
Interim dividend declared 1,220,132 958,314
Special interim dividend declared 1,568,741 -
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2,788,873 958,314
========== ===========
2003 Interim Report
6 CONSOLIDATED BALANCE SHEET
30 June 2003
(All amounts expressed in thousands of Renminbi)
30 June 31 December
Notes 2003 2002
(unaudited) (audited)
---------------------------------------------------------------------------------------------------
NON-CURRENT ASSETS
Property, plant and equipment, net 8 39,088,432 36,071,820
Investment in an associate 602,585 537,377
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39,691,017 36,609,197
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CURRENT ASSETS
Accounts receivable, net 9 2,747,591 3,063,266
Inventories and supplies 839,899 848,605
Due from related companies 695,579 453,290
Other current assets 926,603 1,060,955
Short term investments 11,150,763 6,531,278
Time deposits with maturities over three months 1,770,000 4,690,000
Cash and cash equivalents 9,913,274 7,839,114
---------- -----------
28,043,709 24,486,508
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TOTAL ASSETS 67,734,726 61,095,705
========== ===========
NON-CURRENT LIABILITIES
Long term bank loans 902,969 941,093
Long term guaranteed notes 10 8,071,378 4,071,184
Provision for dismantlement 2,283,668 2,239,320
Deferred tax liabilities 5,617,826 6,141,156
---------- -----------
16,875,841 13,392,753
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CURRENT LIABILITIES
Accounts payable 11 2,689,210 2,659,743
Other payables and accrued liabilities 1,771,738 1,712,408
Current portion of long term bank loans 9,404 297,518
Due to related companies 216,187 231,592
Due to the parent company 172,823 270,438
Tax payable 1,711,271 1,962,765
---------- -----------
6,570,633 7,134,464
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CAPITAL AND RESERVES
Issued capital 12 876,978 876,978
Reserves 43,411,274 39,691,510
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44,288,252 40,568,488
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TOTAL EQUITY AND LIABILITIES 67,734,726 61,095,705
========== ===========
CNOOC Limited
STATEMENT OF CHANGES IN EQUITY 7
30 June 2003
(All amounts expressed in thousands of Renminbi)
Issued Cumulative
share Share Revaluation translation Statutory Retained
capital premium reserve reserve reserve earnings Total
-----------------------------------------------------------------------------------------------------------------------------------
Unaudited
Balances at 1 January 2002 876,978 20,761,205 274,671 (5,648) 1,535,360 10,166,097 33,608,663
Net profit for the period - - - - - 3,618,861 3,618,861
Dividends (Note 13) - - - - - (1,306,740) (1,306,740)
Foreign currency translation
differences - - - 1,969 - - 1,969
-------- ----------- -------- ------------ ---------- ------------ ------------
Balances at 30 June 2002 876,978 20,761,205 274,671 (3,679) 1,535,360 12,478,218 35,922,753
======== =========== ======== ============ ========== ============= ============
Unaudited
Balances at 1 January 2003 876,978 20,761,205 274,671 (13,596) 2,232,410 16,436,820 40,568,488
Net profit for the period - - - - - 6,334,476 6,334,476
Dividends (Note 13) - - - - - (2,614,815) (2,614,815)
Foreign currency translation
differences - - - 103 - - 103
-------- ----------- -------- ------------ ---------- ------------ ------------
Balances at 30 June 2003 876,978 20,761,205 274,671 (13,493) 2,232,410 20,156,481 44,288,252
======== =========== ======== ============ ========== ============ ============
2003 Interim Report
8 CONDENSED CONSOLIDATED CASH FLOW STATEMENT
30 June 2003
(All amounts expressed in thousands of Renminbi)
Six months ended
30 June
2003 2002
(unaudited) (unaudited)
-----------------------------------------------------------------------------------------------------
Net cash inflow from operating activities 8,582,401 4,349,312
Net cash used in investing activities (7,399,991) (4,476,833)
----------- ------------
Net cash inflow/(outflow) before financing 1,182,410 (127,521)
Net cash inflow from financing 891,750 1,571,920
----------- ------------
Net increase in cash and cash equivalents 2,074,160 1,444,399
Cash and cash equivalents at beginning of the period 7,839,114 6,393,724
Effect of exchange rate changes - 1,969
----------- ------------
Cash and cash equivalents at end of the period 9,913,274 7,840,092
=========== ============
CNOOC Limited
NOTES TO INTERIM FINANCIAL STATEMENTS 9
(All amounts expressed in Renminbi, except
number of shares and unless otherwise stated)
1. ORGANISATION AND PRINCIPAL ACTIVITIES
CNOOC Limited (the "Company") was incorporated in Hong Kong Special
Administrative Region ("Hong Kong"), the People's Republic of China (the
"PRC") on 20 August 1999 to hold its interests in certain entities whereby
creating a group comprising the Company and its subsidiaries. During the
period ended 30 June 2003, the Company and its subsidiaries (hereinafter
collectively referred to as the "Group") were principally engaged in the
exploration, development, production and sales of crude oil and natural
gas, and other petroleum products.
In the opinion of directors, the ultimate holding company is China
National Offshore Oil Corporation ("CNOOC"), a company established in the
PRC.
As at 30 June 2003, the Company had direct or indirect interests in the
following principal subsidiaries and an associate:
Percentage of
Place and date of equity interest Nominal value of
incorporation/ attributable issued and paid-up
Name of entity establishment to the Group capital Principal activities
-----------------------------------------------------------------------------------------------------------------------------------
Directly-held subsidiaries:
CNOOC China Limited Tianjin, the PRC 100% RMB10 billion Offshore petroleum exploration,
15 September 1999 development, production,
and sales in the PRC
CNOOC International Limited British Virgin Islands 100% US$2 Investment holding
23 August 1999
China Offshore Oil (Singapore) Singapore 100% S$3 million Sales and marketing of
International Pte Ltd. 14 May 1993 petroleum outside the PRC
CNOOC Finance (2002) Limited British Virgin Islands 100% US$1,000 Bond issuance
24 January 2002
CNOOC Finance (2003) Limited British Virgin Islands 100% US$1,000 Bond issuance
2 April 2003
Indirectly-held subsidiaries:
CNOOC Southeast Asia Limited Bermuda 100% US$12,000 Investment holding
16 May 1997
Malacca Petroleum Limited Bermuda 100% US$12,000 Offshore petroleum exploration,
2 November 1995 development and production
in Indonesia
OOGC Malacca Limited Bermuda 100% US$12,000 Offshore petroleum exploration,
2 November 1995 development and production
in Indonesia
2003 Interim Report
10 NOTES TO INTERIM FINANCIAL STATEMENTS
(All amounts expressed in Renminbi, except
number of shares and unless otherwise stated)
1. ORGANISATION AND PRINCIPAL ACTIVITIES (CONTINUED)
Percentage of
Place and date of equity interest Nominal value of
incorporation/ attributable issued and paid-up
Name of entity establishment to the Group capital Principal activities
-----------------------------------------------------------------------------------------------------------------------------------
Indirectly-held subsidiaries (Continued)
OOGC America, Inc. State of Delaware, the 100% US$1,000 Investment holding
United States of America
2 September 1997
CNOOC ONWJ Ltd. Labuan, F.T., Malaysia 100% US$1 Offshore petroleum
27 March 2002 exploration, development
and production in Indonesia
CNOOC SES Ltd. Labuan, F.T., Malaysia 100% US$1 Offshore petroleum
27 March 2002 exploration, development
and production in Indonesia
CNOOC Poleng Ltd. Labuan, F.T., Malaysia 100% US$1 Offshore petroleum
27 March 2002 exploration, development
and production in Indonesia
CNOOC Madura Ltd. Labuan, F.T., Malaysia 100% US$1 Offshore petroleum
27 March 2002 exploration, development
and production in Indonesia
CNOOC Blora Ltd. Labuan, F.T.,Malaysia 100% US$1 Onshore petroleum
27 March 2002 exploration, development
and production in Indonesia
Associate:
Shanghai Petroleum and Natural Shanghai, the PRC 30% RMB900 million Offshore petroleum exploration,
Gas Company Limited 7 September 1992 development, production and
sales in South Yellow Sea
and East China Sea
CNOOC Limited
NOTES TO INTERIM FINANCIAL STATEMENTS 11
(All amounts expressed in Renminbi, except
number of shares and unless otherwise stated)
2. PRINCIPAL ACCOUNTING POLICIES
The accompanying interim financial statements are prepared under the
historical cost convention as modified by the revaluation of land and
buildings and short term investments, and in accordance with Hong Kong
Statement of Standard Accounting Practice ("SSAP") No. 25 "Interim
financial reporting".
The principal accounting policies and basis of presentation used in the
preparation of the interim financial statements are the same as those used
in the annual audited financial statements for the year ended 31 December
2002, except for the changes in accounting policies following the adoption
of the revised SSAP 12 (Revised) "Income Taxes" issued by the Hong Kong
Society of Accountants.
SSAP 12 (Revised) prescribes the basis for accounting for current and
deferred income taxes. The principal impact of the revision of this SSAP
on the consolidated financial statements is that it requires full
provision for deferred taxes under the asset and liability method on all
temporary differences.
There was no significant impact on the Group's financial statements upon
the adoption of SSAP 12 (Revised).
3. ACQUISITION
During the period, the Company acquired from British Petroleum ("BP") an
equivalent of 12.5% stake in the proposed joint venture known as the
Tangguh LNG Project of Indonesia ("Tangguh LNG Project") for approximately
US$275 million through the acquisition of certain interests in production
sharing contracts ("PSCs") which was effective as at 1 January 2003 (the
"Tangguh Acquisition"). The Tangguh LNG Project comprises three PSC areas:
the Berau PSC, the Muturi PSC and the Wiriagar PSC. The Tangguh LNG
Project partners have signed a conditional 25-year Liquefied Natural Gas
("LNG") Supply Contract (the "LNG Supply Contract") to provide up to 2.6
million tonnes per annum of LNG to the Fujian LNG terminal project in the
PRC, beginning in 2007. The Company completed the Tangguh Acquisition on 8
February 2003. CNOOC has an equity interest in the Fujian LNG terminal
project.
In addition, a repurchase agreement (the "Repurchase Agreement") was
entered into whereby put options and call options are granted to the
Company and the sellers, respectively, to sell or to repurchase the
interests in the above-mentioned PSCs. The options are exercisable if:
(1) the LNG Supply Contract is terminated due to the non-satisfaction of
the conditions precedent to the LNG Supply Contract on or before 31
December 2004; or
(2) the LNG Supply Contract is otherwise legally ineffective on or before
31 December 2004.
The exercise prices of the options are determined based on the original
consideration paid plus adjustments stipulated in the Repurchase
Agreement.
The consideration paid of approximately US$275 million (equivalent to
approximately RMB2,276,578,000) has been included in property, plant and
equipment as at 30 June 2003.
2003 Interim Report
12 NOTES TO INTERIM FINANCIAL STATEMENTS
(All amounts expressed in Renminbi, except
number of shares and unless otherwise stated)
4. OIL AND GAS SALES AND MARKETING REVENUE
Oil and gas sales represent the invoiced value of sales of oil and gas
attributable to the interests of the Group, net of royalties and
government share of allocable share oil that are lifted and sold on behalf
of the PRC government. Sales are recognised when the significant risks and
rewards of ownership of oil and gas have been transferred to customers.
Marketing revenues represent the sales of oil purchased from the foreign
partners under the production sharing contracts and revenues from trading
of oil through the Company's subsidiary in Singapore. The costs of the oil
sold are included in the crude oil and product purchases.
5. INTEREST EXPENSES
An amount of approximately RMB44,348,000 (2002: RMB37,806,457) accretion
expense for provision for dismantlement is recognised during the period.
6. TAX
(i) Income tax
The Company and its subsidiaries are subject to income taxes on
an entity basis on profit arising in or derived from the tax
jurisdictions in which they are domiciled and operated. The
Company is not liable for profits tax in Hong Kong as it does
not have any assessable income currently sourced from Hong
Kong.
The Company's subsidiary, CNOOC China Limited, is a wholly
foreign-owned enterprise established in the PRC. It is exempt from
the 3% local surcharge and is subject to an enterprise income tax of
30% under the prevailing tax rules and regulations.
The Company's subsidiary in Singapore, China Offshore Oil (Singapore)
International Pte Ltd., is subject to income tax at rates of 10% and
22%, for its oil trading activities and other income-generating
activities, respectively. The Company's subsidiary owning interests
in oil and gas properties in Indonesia along the Malacca Strait is
subject to corporate and dividend tax at the rate of 44%. The
Company's subsidiaries owning interests in oil and gas properties in
Indonesia acquired from Repsol YPF, S.A. are subject to corporate and
dividend tax at the rate of 43.125% instead of the standard rate of
48% after the application of the Malaysian Tax Treaty as recognised
by the Indonesian tax authorities. All of the Company's other
subsidiaries are not subject to any income taxes in their respective
jurisdictions for the period presented.
(ii) Other taxes
CNOOC China Limited is required to pay the following taxes:
- production taxes equal to 5% of independent production and
production under production sharing contracts; and
- business tax of 3% to 5% on other income.
CNOOC Limited
NOTES TO INTERIM FINANCIAL STATEMENTS 13
(All amounts expressed in Renminbi, except
number of shares and unless otherwise stated)
7. EARNINGS PER SHARE
Six months ended
30 June
2003 2002
(unaudited) (unaudited)
----------------------------------------------------------------------------------------------------------------
Earnings:
Net profit for the period and earnings for the
purpose of basic and diluted earnings per share RMB6,334,476,000 RMB 3,618,861,000
================= ========================
Number of shares:
Weighted average number of ordinary shares
for the purpose of basic earnings per share 8,214,165,655 8,214,165,655
Effect of dilutive potential ordinary shares
under the share option scheme 5,705,152 2,378,206
----------------- ------------------------
Weighted average number of ordinary shares
for the purpose of diluted earnings per share 8,219,870,807 8,216,543,861
================= ========================
Earnings per share - Basic RMB0.77 RMB0.44
================= ========================
- Diluted RMB0.77 RMB0.44
================= ========================
8. PROPERTY, PLANT AND EQUIPMENT, NET
During the period, additions to the Group's property, plant and equipment
amounted to approximately RMB3,656,478,000 (2002: RMB7,457,609,000).
During the period, the Company finalised the purchase price allocation for
the oil and gas properties acquired as a result of the acquisition of the
subsidiaries from Repsol YPF, S.A. in April 2002 and an adjustment of
approximately RMB707 million was made to reduce the fair value of the oil
and gas properties acquired with a corresponding adjustment made to reduce
the deferred tax liabilities.
9. ACCOUNTS RECEIVABLE, NET
The customers are required to make payment within 30 days after the
delivery of oil and gas. As at 30 June 2003 and 31 December 2002,
substantially all of the accounts receivable were aged within six months.
2003 Interim Report
14 NOTES TO INTERIM FINANCIAL STATEMENTS
(All amounts expressed in Renminbi, except
number of shares and unless otherwise stated)
10. LONG TERM GUARANTEED NOTES
On 1 March 2002, CNOOC Finance (2002) Limited, a company incorporated in
the British Virgin Islands on 24 January 2002 and a wholly-owned
subsidiary of the Company, issued US$500,000,000 of principal amount of
6.375% guaranteed notes due in 2012. The obligations of CNOOC Finance
(2002) Limited in respect of the notes are unconditionally and irrevocably
guaranteed by the Company.
On 21 May 2003, CNOOC Finance (2003) Limited, a company incorporated in
the British Virgin Islands on 2 April 2003 and a wholly-owned subsidiary
of the Company, issued US$200,000,000 of principal amount of 4.125%
guaranteed notes due in 2013 and US$300,000,000 of principal amount of
5.500% guaranteed notes due in 2033. The obligations of CNOOC Finance
(2003) Limited in respect of the notes are unconditionally and irrevocably
guaranteed by the Company.
11. ACCOUNTS PAYABLE
As at 30 June 2003 and 31 December 2002, substantially all of the accounts
payable were aged within six months.
12. SHARE CAPTIAL
Issued
Number of shares Share capital share capital
HK$'000 Equivalent of
RMB'000
----------------------------------------------------------------------------------------------------------------
Authorised:
Ordinary shares of HK$0.10 each
As at 30 June 2003 and 31 December 2002 15,000,000,000 1,500,000
--------------------- --------------------
Issued and fully paid:
Ordinary shares of HK$0.10 each
As at 1 January 2002 and
31 December 2002 (audited) 8,214,165,655 821,417 876,978
--------------------- -------------------- ------------
Ordinary shares of HK$0.10 each
As at 30 June 2003 (unaudited) 8,214,165,655 821,417 876,978
--------------------- -------------------- ------------
13. DIVIDENDS
On 27 March 2003, the board of directors proposed a final dividend of
HK$0.15 per share (2002: HK$0.15 per share), totalling HK$1,232,124,848
(equivalent to approximately RMB1,307,407,676) (2002: RMB1,306,739,684)
and a special dividend of HK$0.15 per share, totalling HK$1,232,124,848
(equivalent to approximately RMB1,307,407,676) (2002: Nil) to its
shareholders for the year ended 31 December 2002. The dividend
distribution was approved by the shareholders in the annual general
meeting held on 29 May 2003. Subsequent to 30 June 2003, on 4 September
2003, the board of directors declared an interim dividend of HK$0.14 per
share (2002: HK$0.11 per share), totalling HK$1,149,983,192 (equivalent to
approximately RMB1,220,132,166) (2002: RMB958,314,000) and a special
interim dividend of HK$0.18 per share, totalling HK$1,478,549,818
(equivalent to approximately RMB1,568,741,357) (2002: Nil).
CNOOC Limited
NOTES TO INTERIM FINANCIAL STATEMENTS 15
(All amounts expressed in Renminbi, except
number of shares and unless otherwise stated)
14. SHARE OPTION SCHEME
The Company has adopted share option schemes which provide for the grant
of options to the Company's senior management. Under these share option
schemes, the remuneration committee of the Company's board of directors
will from time to time propose for the board's approval for the recipient
of and the number of shares underlying each option. These schemes provide
for issuance of options exercisable for shares granted under these schemes
as described below not exceeding 10% of the total number of the Company's
outstanding shares, excluding shares issued upon exercise of options
granted under the schemes from time to time.
On 4 February 2001, the Company adopted a pre-global offering share option
scheme (the "Pre-Global Offering Share Option Scheme"). Pursuant to the
Pre-Global Offering Share Option Scheme:
1. options for an aggregate of 4,620,000 shares have been granted;
2. the subscription price per share is HK$5.95; and
3. the period during which an option may be exercised is as follows:
(i) 50% of the shares underlying the option shall vest 18 months after
the date of the grant; and
(ii) 50% of the shares underlying the option shall vest 30 months after
the date of the grant.
The exercise period for options granted under the Pre-Global Offering
Share Option Scheme shall end not later than 10 years from 12 March 2001.
On 4 February 2001, the Company adopted a share option scheme (the "2001
Share Option Scheme") for the purposes of recognising the contribution
that certain individuals had made to the Company and attracting and
retaining the best available personnel to the Company. Pursuant to the
2001 Share Option Scheme:
1. options for an aggregate of 8,820,000 shares have been granted;
2. the subscription price per share is HK$6.16; and
3. the period during which an option may be exercised is as follows:
(i) one-third of the shares underlying the option shall vest on the
first anniversary of the date of the grant;
(ii) one-third of the shares underlying the option shall vest on the
second anniversary of the date of the grant; and
(iii) one-third of the shares underlying the option shall vest on the
third anniversary of the date of the grant.
The exercise period for options granted under the 2001 Share Option Scheme
shall end not later than 10 years from 27 August 2001.
2003 Interim Report
16 NOTES TO INTERIM FINANCIAL STATEMENTS
(All amounts expressed in Renminbi, except
number of shares and unless otherwise stated)
14. SHARE OPTION SCHEME (CONTINUED)
In view of the amendments to the relevant provisions of the Listing Rules
regarding the requirements of share option schemes of a Hong Kong listed
company effective on 1 September 2001, no further options will be granted
under the 2001 Share Option Scheme.
In June 2002, the Company adopted a new share option scheme (the "2002
Share Option Scheme").
Under the 2002 Share Option Scheme, the directors of the Company may, at
their discretion, invite employees, including executive directors, of the
Company or any of its subsidiaries, to take up options to subscribe for
shares in the Company. The maximum aggregate number of shares (including
those that could be subscribed for under the Pre-Global Offering Share
Option Scheme and the 2001 Share Option Scheme) which may be granted shall
not exceed 10% of the total issued share capital of the Company. The
maximum number of shares which may be granted under the 2002 Share Option
Scheme to any individual in any 12-month period up to the next grant of
share options shall not exceed 1% of the total issued share capital of the
Company from time to time.
According to the 2002 Share Option Scheme, the consideration payable by a
participant for the grant of an option will be HK$1.00. The subscription
price of a share payable by a participant upon the exercise of an option
will be determined by the directors at their discretion at the date of
grant, except that such price may not be set below a minimum price which
is the highest of:
1. the nominal value of a share;
2. the average closing price of the shares on The Stock Exchange of Hong
Kong Limited (the "HKSE") as stated in the HKSE's quotation sheet for
the five trading days immediately preceding the date of grant of the
option; and
3. the closing price of the shares on the HKSE as stated in the HKSE's
quotation sheet on the date of grant of the option.
On 24 February 2003, the board of directors approved to grant options in
respect of 8,410,000 shares to the Company's senior management under the
2002 Share Option Scheme. The exercise price for the options is HK$10.54
per share. Options granted under the 2002 Share Option Scheme may be
exercised, in whole or in part, in accordance with the following vesting
schedule:
1. one-third of the shares underlying the option shall vest on the first
anniversary of the date of the grant;
2. one-third of the shares underlying the option shall vest on the second
anniversary of the date of the grant; and
3. one-third of the shares underlying the option shall vest on the third
anniversary of the date of the grant.
The exercise period for options granted under the 2002 Share Option Scheme
shall end not later than 10 years from the date on which the option is
granted.
No options granted under the 2002 Share Option Scheme, the 2001 Share
Option Scheme and the Pre-Global Offering Share Option Scheme had been
exercised since the respective dates of grant and up to the date when the
board of directors approved the financial statements.
CNOOC Limited
NOTES TO INTERIM FINANCIAL STATEMENTS 17
(All amounts expressed in Renminbi, except
number of shares and unless otherwise stated)
15. RELATED PARTY TRANSACTIONS
Companies are considered to be related if one company has the ability,
directly or indirectly, to control the other company or exercise
significant influence over the other company in making financial and
operating decisions. Companies are also considered to be related if they
are subject to common control or common significant influence.
The Group has entered into several agreements with CNOOC and its
affiliates, which govern the provision of materials, utilities and
ancillary services, the provision of technical services, the provision of
research and development services, and various other commercial
arrangements.
(i) Provision of materials, utilities and ancillary services
CNOOC China Limited has entered into materials, utilities and ancillary
services supply agreements with the affiliates of CNOOC. Under these
agreements, the affiliates of CNOOC provide to CNOOC China Limited
various materials, utilities and ancillary services.
The materials, utilities and ancillary services are provided:
- at state-prescribed prices;
- where there is no state-prescribed price, at market prices, including
the local or national market prices or the prices at which CNOOC's
affiliates previously provided the relevant materials, utilities and
ancillary services to independent third parties; or
- where neither of the prices mentioned above is applicable, at the
cost to CNOOC's affiliates of providing the relevant materials,
utilities and services, including the cost of sourcing or purchasing
from third parties, plus a margin of not more than 5% before any
applicable taxes.
(ii) Technical services
CNOOC China Limited has entered into technical service agreements
with certain affiliates of CNOOC. According to the agreements, the
Group uses the technical services including:
- offshore drilling;
- ship tugging, oil tanker transportation and security services;
- well survey, well logging, well cementation and other related
technical services;
- collection of geophysical data, ocean geological prospecting, and
data processing;
- platform fabrication service and maintenance; and
- design, construction, installation and test of offshore and onshore
production facilities.
2003 Interim Report
18 NOTES TO INTERIM FINANCIAL STATEMENTS
(All amounts expressed in Renminbi, except
number of shares and unless otherwise stated)
15. RELATED PARTY TRANSACTIONS (CONTINUED)
(iii) Research and development services
Under the terms of a general research and development services
agreement with CNOOC's subsidiaries, China Offshore Oil
Research Centre (the "Centre"), the Group pays the Centre for a
term of three years from 31 December 2002, with an annual
amount of RMB110,000,000. In addition, the Group also pays the
Centre for research and development for particular projects.
The provision of the services include the following:
- geophysical exploration services;
- seismic data processing;
- comprehensive exploration research services; and
- information technology services.
(iv) Lease and property management services
The Group has entered into lease and property management
agreements with affiliates of CNOOC for the leasing of various
office, warehouse and residential premises. Lease charges are
based on the prevailing market rates.
(v) Sales of crude oil, condensate oil and liquefied petroleum gas
The Group sells crude oil, condensate oil and liquefied
petroleum gas to CNOOC's affiliates which engage in the
downstream petroleum business at the international market
price. For the six months ended 30 June 2003, the total sales
amounted to approximately RMB3,710,034,000 (2002:
RMB1,950,303,340).
CNOOC Limited
NOTES TO INTERIM FINANCIAL STATEMENTS 19
(All amounts expressed in Renminbi, except
number of shares and unless otherwise stated)
15. RELATED PARTY TRANSACTIONS (CONTINUED)
The following is a summary of significant recurring transactions carried
out in the ordinary course of business between the Group and CNOOC and its
affiliates.
Six months ended
30 June
2003 2002
(unaudited) (unaudited)
RMB'000 RMB'000
-------------------------------------------------------------------------------------------------------------------
Materials, utilities and ancillary services 379,123 271,589
Technical services 1,368,109 917,641
Research and development services 65,454 100,544
Lease and property management services 25,798 27,033
----------- ----------
1,838,484 1,316,807
=========== ==========
Included in:
Exploration expenses 195,186 238,229
Operating expenses 421,573 301,740
Selling and administrative expenses 74,889 104,847
=========== ==========
Capitalised under property, plant and equipment 1,146,836 671,991
----------- ----------
1,838,484 1,316,807
During the period, the Group had placed certain deposits with CNOOC
Finance Corporation Limited ("CNOOC Finance"), a subsidiary of CNOOC.
CNOOC Finance is a non-bank finance company supervised by the People's
Bank of China (the "PBOC") and the Company is one of its customers. In
PRC, deposit rate is set by PBOC which is applicable to all financial
institutions. The interest rates offered by CNOOC Finance were the same as
the rates promulgated by the PBOC which were applicable to account
deposits with PRC banks or finance companies and ranged from 1.44% to
1.89% per annum. There were no deposits placed with CNOOC Finance as at 30
June 2003.
During the period, the Company, through its wholly-owned subsidiary, China
Offshore Oil (Singapore) International Pte Ltd., imported oil into the PRC
for trading, using CNOOC's import licence. For the six months ended 30
June 2003, the total sales to third parties through such arrangements
amounted to approximately RMB558 million (2002: Nil). The commission paid
by the third party customers to CNOOC for the period amounted to
approximately RMB3 million (2002: Nil).
2003 Interim Report
20 NOTES TO INTERIM FINANCIAL STATEMENTS
(All amounts expressed in Renminbi, except
number of shares and unless otherwise stated)
16. COMMITMENTS AND CONTINGENCIES
(i) Capital commitments
As at 30 June 2003, the Group had the following capital commitments,
principally for the construction and purchase of oil and gas
properties and equipment:
30 June 31 December
2003 2002
(unaudited) (audited)
RMB'000 RMB'000
--------------------------------------------------------------------------------------------
Contracted for 3,720,910 1,715,173
Authorised, but not contracted for 15,980,575 9,060,722
As at 30 June 2003, the Group had unutilised banking facilities
amounting to approximately RMB32,370,624,000 (2002:
RMB31,646,389,000).
(ii) General research and development commitments
As referred to note 15(iii) to the financial statements, the
remaining commitments for research and development services to
be provided by the Centre as at 30 June 2003 amounted to
approximately RMB275,000,000 (2002: RMB330,000,000).
(iii) Operating lease commitments
Operating lease commitments as at 30 June 2003 amounted to
approximately RMB40,264,000 (2002: RMB50,645,000) and were due
as follows:
30 June 31 December
2003 2002
(unaudited) (audited)
RMB'000 RMB'000
--------------------------------------------------------------------------------------------
Commitments due:
- Within one year 33,990 47,017
- After one year, but within two years 5,255 2,131
- After two year, but within three years 1,019 1,497
----------- -----------
40,264 50,645
=========== ===========
CNOOC Limited
NOTES TO INTERIM FINANCIAL STATEMENTS 21
(All amounts expressed in Renminbi, except
number of shares and unless otherwise stated)
16. COMMITMENTS AND CONTINGENCIES (CONTINUED)
(iv) Commitment to invest in Australia's gas project
On 15 May 2003, the Company entered into an equity sale and
purchase agreement (the "Agreement") with the existing North
West Shelf partners to acquire an interest in the upstream
production and reserves of Australia's North West Shelf
Project (the "NWS Project"). Under the Agreement, the Company
will acquire an interest of approximate 5.3% in the NWS
Project and a 25% stake in the China LNG Joint Venture, a new
joint venture to be established within the NWS Project.
According to the Agreement, the Company has the right to
acquire more interest in the NWS Project should the final
quantity of LNG committed under the LNG supply agreement to
the facilities in Guangdong Province be increased. The total
consideration of the acquisition is US$348 million, subject to
certain conditions, including the LNG supply agreement to
Guangdong becoming unconditional, have been fulfilled. CNOOC
has an equity interest in the Guangdong Province LNG project.
(v) Financial instruments
As at 30 June 2003, the Group had currency swap contracts with a
financial institution for the sale of United States dollars ("US$")
in an exchange for Japanese Yen ("JPY") in order to hedge certain
JPY denominated loan repayments in the future.
The details of the exchange are as follows:
30 June 2003 30 June 2002
Notional Weighted Notional Weighted
contract contractual contract contractual
amount exchange rate amount exchange rate
(JPY '000) (JPY/US$) (JPY '000) (JPY/US$)
----------------------------------------------------------------------------------------------------
Year
2002 - - 135,735 95.00
2003 135,735 95.00 271,470 95.00
2004 271,470 95.00 271,470 95.00
2005 271,470 95.00 271,470 95.00
2006 271,470 95.00 271,470 95.00
2007 271,470 95.00 271,470 95.00
17. SEGMENT INFORMATION
The Group is involved in the upstream operating activities of the
petroleum industry which comprises production sharing contracts with
foreign partners, and independent operations and trading business. These
segments are determined primarily because the senior management makes key
operating decisions and assesses performance of the segments separately.
2003 Interim Report
22 NOTES TO INTERIM FINANCIAL STATEMENTS
(All amounts expressed in Renminbi, except
number of shares and unless otherwise stated)
17. SEGMENT INFORMATION (CONTINUED)
The following tables present revenue and profit information for the
Group's business segments.
Independent Production
operations sharing contracts Trading business Unallocated
Six months ended Six months ended Six months ended Six months ended
30 June 30 June 30 June 30 June
2003 2002 2003 2002 2003 2002 2003 2002
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
------------------------------------------------------------------------------------------------------------------------------
Unaudited
Segment revenue
Sales to external customers:
Oil and gas sales 5,610,606 4,668,458 8,574,167 4,960,413 - - - -
Marketing revenues - - - - 3,582,015 794,063 - -
Other income 5,941 141,736 131,428 71,460 - - - 4,268
--------- --------- --------- --------- --------- ------- --------- ----------
Total 5,616,547 4,810,194 8,705,595 5,031,873 3,582,015 794,063 - 4,268
--------- --------- --------- --------- --------- ------- --------- ----------
Unaudited
Segment results
Net profit 3,576,018 2,239,237 4,913,990 2,605,239 38,877 21,969 (2,194,409) (1,247,584
========= ========= ========= ========= ========= ======== ========== ==========
Consolidated
Six months ended
30 June
2003 2002
RMB'000 RMB'000
----------------------------------------------------------
Unaudited
Segment revenue
Sales to external customers:
Oil and gas sales 14,184,773 9,628,871
Marketing revenues 3,582,015 794,063
Other income 137,369 217,464
----------- ----------
Total 17,904,157 10,640,398
----------- ----------
Unaudited
Segment results
Net profit 6,334,476 3,618,861
=========== ==========
Approximately 68% of the total revenue of the Group is contributed by the
PRC customers. The Group's activities are conducted primarily in the PRC
and Indonesia.
18. ADDITIONAL FINANCIAL INFORMATION
As at 30 June 2003, net current assets and total assets less current
liabilities of the Group amounted to approximately RMB21,473,076,000 and
RMB61,164,093,000 (2002: RMB17,352,044,000 and RMB53,961,241,000),
respectively.
19. SUBSEQUENT EVENTS
Subsequent to 30 June 2003, the Company increased its interest in
Qinhuangdao 32-6, a PSC oilfield in Bohai Bay, from 51% to 75.5% by
acquiring the 24.5% interest of BP China Exploration and Production
Company for a consideration of US$150 million, subject to working capital
adjustments. The acquisition was completed in July 2003.
In addition, the Company also acquired the remaining 49% interest in
Liuhua 11-1, a PSC oilfield in Southeastern China, from BP China
Exploration and Production Company and Kerr-McGee China Petroleum Limited
respectively, for a total consideration of US$40 million, subject to
working capital adjustments. The acquisitions were completed in July
2003.
CNOOC Limited
NOTES TO INTERIM FINANCIAL STATEMENTS 23
(All amounts expressed in Renminbi, except
number of shares and unless otherwise stated)
20. SIGNIFICANT DIFFERENCES BETWEEN HONG KONG GAAP AND U.S. GAAP
The accounting policies adopted by the Group conform to Hong Kong GAAP,
which differ in certain respects from generally accepted accounting
principles in the United States of America ("U.S. GAAP").
(a) Net profit and equity
(i) Revaluation of land and buildings
The Group revalued certain land and buildings on 31 August 1999
and 31 December 2000 and the related revaluation surplus was
recorded on the respective dates. Under Hong Kong GAAP,
revaluation of property, plant and equipment is permitted and
depreciation, depletion and amortisation are based on the
revalued amount. Additional depreciation arising from the
revaluation for the six months ended 30 June 2003 was
approximately RMB4,578,000 (2002: RMB4,578,000). Under U.S.
GAAP, property, plant and equipment are required to be stated
at cost. Accordingly, no additional depreciation, depletion and
amortisation from the revaluation are recognised under U.S.
GAAP.
(ii) Short term investments
According to Hong Kong GAAP, available-for-sale investments in
marketable securities are measured at fair value and related
unrealised holding gains and losses are included in current
period earnings. According to U.S. GAAP, such investments are
also measured at fair value and classified in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 115.
Under U.S. GAAP, related unrealised gains and losses on
available-for-sale securities are excluded from current period
earnings and included in other comprehensive income.
(iii) Impairment of long-lived assets
Under Hong Kong GAAP, impairment charges are recognised when a
long-lived asset's carrying amount exceeds the higher of an
asset's net selling price and value in use, which incorporates
discounting the asset's estimated future cash flows.
Under U.S. GAAP, long-lived assets are assessed for possible
impairment in accordance with SFAS No. 144, "Accounting for the
impairment or disposal of long-lived assets". SFAS No. 144
requires the Group to (a) recognise an impairment loss only if
the carrying amount of a long-lived asset is not recoverable
from its undiscounted cash flows; and (b) measure an impairment
loss as the difference between the carrying amount and fair
value of the asset. SFAS No. 144 requires that a long-lived
asset to be abandoned, exchanged for a similar productive asset,
or distributed to owners in a spin-off be considered as held and
used until it is disposed of.
2003 Interim Report
24 NOTES TO INTERIM FINANCIAL STATEMENTS
(All amounts expressed in Renminbi, except
number of shares and unless otherwise stated)
20. SIGNIFICANT DIFFERENCES BETWEEN HONG KONG GAAP AND U.S. GAAP (CONTINUED)
(a) Net profit and equity (continued)
(iii) Impairment of long-lived assets (continued)
SFAS No. 144 also requires the Group to assess the need for an
impairment of capitalised costs of proved oil and gas
properties and the costs of wells and related equipment and
facilities on a property-by-property basis. If an impairment
is indicated based on undiscounted expected future cash flows,
then an impairment is recognised to the extent that net
capitalised costs exceed the estimated fair value of the
property. Fair value of the property is estimated by the Group
using the present value of future cash flows. The impairment
was determined based on the difference between the carrying
value of the assets and the present value of future cash
flows. It is reasonably possible that a change in reserve or
price estimates could occur in the near term and adversely
impact management's estimate of future cash flows and
consequently the carrying value of properties.
In addition, under Hong Kong GAAP, a subsequent increase in the
recoverable amount of an asset is reversed to the income
statement to the extent that an impairment loss on the same
asset was previously recognised as an expense when the
circumstances and events that led to write-down or write-off
cease to exist. The reversal is reduced by the amount that
would have been recognised as depreciation had the write-off
not occurred. Under U.S. GAAP, an impairment loss establishes a
new cost basis for the impaired asset and the new cost basis
should not be adjusted subsequently other than for further
impairment losses.
For the six months period ended 30 June 2003, there were no
impairment losses recognised under Hong Kong GAAP and U.S. GAAP
and no reversal of the recovery of previous impairment charges
has been recorded under Hong Kong GAAP.
(iv) Stock compensation schemes
As described in note 14 to the interim financial statements, as
at 30 June 2003, the Group had three stock option schemes. The
Group applies Accounting Principles Board Opinion 25 and
related Interpretations in accounting for these stock option
schemes. Accordingly, compensation costs recognised for the
stock option schemes amounted to RMB1,316,000 for the six
months ended 30 June 2003 (2002: RMB1,376,000).
(v) Provision for dismantlement
Hong Kong GAAP requires the provision of dismantlement to be
recorded for a present obligation whether that obligation is
legal or constructive. The associated cost is capitalised and
the liability is discounted and accretion expense is recognised
using the credit-adjusted risk-free interest rate in effect
when the liability is initially recognised.
CNOOC Limited
NOTES TO INTERIM FINANCIAL STATEMENTS 25
(All amounts expressed in Renminbi, except
number of shares and unless otherwise stated)
20. SIGNIFICANT DIFFERENCES BETWEEN HONG KONG GAAP AND U.S. GAAP (CONTINUED)
(a) Net profit and equity (continued)
(v) Provision for dismantlement (continued)
On 15 August 2001, SFAS No. 143 "Accounting for asset
retirement obligation" was released and is effective for the
fiscal years beginning after 15 June 2002. SFAS No. 143
requires that the fair value of a liability for an asset
retirement obligation be recognised in the period in which it
is incurred if a reasonable estimate of fair value can be
made. The associated asset retirement costs are capitalised as
part of the carrying amount of the long-lived assets. Further,
under SFAS No. 143, the liability is discounted and accretion
expense is recognised using the credit-adjusted risk-free
interest rate in effect when the liability is initially
recognised.
The Company adopted SFAS No. 143 on 1 January 2003, which
resulted in an increase in net property of RMB863,093,000, an
increase in the provision for dismantlement of RMB240,077,000
and an increase in deferred income tax liabilities of
RMB186,904,000 to recognise the cumulative effect of
retrospectively applying the new accounting standard.
This adjustment is due to the difference in the method of
accruing for dismantlement costs under SFAS No. 143 compared
with the method required by SFAS No. 19 "Financial accounting
and reporting by oil and gas producing companies", the
accounting standard that the Company has been adopted since its
establishment. Under SFAS No. 19, the dismantlement costs are
accrued on a unit-of-production basis of accounting as the oil
and gas is produced. The SFAS No. 19 method matches the
accruals with the revenues generated from production and
results in most of the costs being accrued early in field life,
when production is at the highest level. Because SFAS No. 143
requires accretion of the liability as a result of the passage
of time using an interest method of allocation, the majority of
the costs will be accrued towards the end of field life, when
production is at the lowest level. The cumulative income
adjustment described above resulted from reversing the higher
liability accumulated under SFAS No. 19 in order to adjust it
to the lower present value amount resulting from transition to
SFAS No. 143. This amount being reversed in transition, which
was previously charged to the income statement under SFAS No.
19, will again be charged to the income statement under SFAS
No. 143 in future years.
2003 Interim Report
26 NOTES TO INTERIM FINANCIAL STATEMENTS
(All amounts expressed in Renminbi, except
number of shares and unless otherwise stated)
20. SIGNIFICANT DIFFERENCES BETWEEN HONG KONG GAAP AND U.S. GAAP (CONTINUED)
(a) Net profit and equity (continued)
(v) Provision for dismantlement (continued)
A summary of the changes in the asset retirement obligation
during the six months ended 30 June 2003 is included in the
table below:
30 June 2003
(unaudited)
RMB'000
--------------------------------------------------------------------------------------------------------------
Asset retirement obligation upon adoption of SFAS No. 143 on
1 January 2003 2,239,320
Accretion expense 44,348
------------
Asset retirement obligation at 30 June 2003 2,283,668
============
The pro forma effects of the application of SFAS No. 143 as if
it had been adopted on 1 January 2002 (rather than 1 January
2003) are presented below:
As reported Pro forma
30 June 2003 30 June 2002
(unaudited) (unaudited)
RMB'000 RMB'000
--------------------------------------------------------------------------------------------------------------
Net income 6,292,242 3,616,605
Net income per share RMB0.77 RMB0.44
CNOOC Limited
NOTES TO INTERIM FINANCIAL STATEMENTS 27
(All amounts expressed in Renminbi, except
number of shares and unless otherwise stated)
20. SIGNIFICANT DIFFERENCES BETWEEN HONG KONG GAAP AND U.S. GAAP (CONTINUED)
(a) Net profit and equity (continued)
The effects on net profit and equity of the above significant
differences between Hong Kong GAAP and U.S. GAAP are summarised
below:
Net profit
Six months ended
30 June
2003 2002
(unaudited) (unaudited)
RMB'000 RMB'000
--------------------------------------------------------------------------------------------------------------------
As reported under Hong Kong GAAP 6,334,476 3,618,861
Impact of U.S. GAAP adjustments:
- Reversal of additional depreciation, depletion and
amortisation charges arising from the revaluation
surplus on land and buildings 4,578 4,578
- Unrealised gains from available-for-sale investments
in marketable securities (55,734) (5,458)
- Realised holding gains from available-for-sale
marketable securities 10,238 -
- Recognition of stock compensation cost (1,316) (1,376)
---------- -----------
Income before cumulative effect of change in
accounting policy for dismantlement liabilities 6,292,242 3,616,605
Cumulative effect of change in accounting policy for
dismantlement liabilities 436,112 -
---------- -----------
Net profit as restated under U.S. GAAP 6,728,354 3,616,605
========== ===========
Net profit per share under U.S. GAAP
- Basic
Before cumulative effect of change in accounting
policy for dismantlement liabilities RMB0.77 RMB0.44
Cumulative effect of change in accounting policy
for dismantlement liabilities RMB0.05 -
---------- -----------
RMB0.82 RMB0.44
========== ===========
- Diluted
Before cumulative effect of change in accounting
policy for dismantlement liabilities RMB0.77 RMB0.44
Cumulative effect of change in accounting policy
for dismantlement liabilities RMB0.05 -
---------- -----------
RMB0.82 RMB0.44
========== ===========
2003 Interim Report
28 NOTES TO INTERIM FINANCIAL STATEMENTS
(All amounts expressed in Renminbi, except
number of shares and unless otherwise stated)
20. SIGNIFICANT DIFFERENCES BETWEEN HONG KONG GAAP AND U.S. GAAP (CONTINUED)
(a) Net profit and equity (continued)
Equity
30 June 31 December
2003 2002
(unaudited) (audited)
RMB'000 RMB'000
------------------------------------------------------------------------------------------------------------------
As reported under Hong Kong GAAP 44,288,252 40,568,488
Impact of U.S. GAAP adjustments:
- Reversal of revaluation surplus on land and buildings (274,671) (274,671)
- Reversal of additional depreciation, depletion and
amortisation charges arising from the revaluation
surplus on land and buildings 30,473 25,895
- Cumulative adjustment for provision for dismantlement liabilities - (436,112)
----------- -----------
As restated under U.S. GAAP 44,044,054 39,883,600
=========== ===========
(b) Comprehensive income
According to SFAS No. 130 "Reporting comprehensive income", it
is required to include a statement of other comprehensive income for
revenues and expenses, gains and losses that under U.S. GAAP, are
included in comprehensive income and excluded from net income.
Six months ended
30 June
2003 2002
(unaudited) (unaudited)
RMB'000 RMB'000
------------------------------------------------------------------------------------------------------------------
Net income under U.S. GAAP 6,728,354 3,616,605
Other comprehensive income:
Foreign currency translation adjustments 103 1,969
Unrealised gains on short term investments 55,734 5,458
Less: Reclassification adjustment for realised gains
included in net income (10,238) -
----------- -----------
6,773,953 3,624,032
=========== ===========
CNOOC Limited
NOTES TO INTERIM FINANCIAL STATEMENTS 29
(All amounts expressed in Renminbi, except
number of shares and unless otherwise stated)
20. SIGNIFICANT DIFFERENCES BETWEEN HONG KONG GAAP AND U.S. GAAP (CONTINUED)
(c) Derivative financial instruments
The Group had a currency swap contract with a financial institution
to sell US$ in exchange for JPY in order to hedge certain JPY
denominated loan repayments in the future. In accordance with SFAS
No. 133 "Accounting for derivatives instruments and hedging
activities", the derivative contract was recorded as "Other payables
and accrued liabilities" in the accompanying consolidated balance
sheet at fair value. For the six months ended 30 June 2003, the
Group recognised related changes in fair value, a gain of
RMB1,500,000 (2002: RMB10,000,000), and included the amount in
"Exchange gains/(losses), net" in the consolidated income statement.
21. APPROVAL OF INTERIM FINANCIAL STATEMENTS
The interim financial statements for the six months ended 30 June 2003
were approved and authorised for issue by the board of directors on 4
September 2003.
2003 Interim Report
30 INDEPENDENT REVIEW REPORT
[COMPNAY LOGO] Ernst & Young
[Chinese Characters Omitted]
To the board of directors
CNOOC Limited (the "Company")
We have been instructed by the Company to review the interim financial report
of the Company and its subsidiaries (collectively as the "Group") for the six
months ended 30 June 2003 set out on pages 5 to 29.
RESPONSIBILITIES OF DIRECTORS AND AUDITORS
The Rules Governing the Listing of Securities on The Stock Exchange of Hong
Kong Limited (the "Listing Rules") require the preparation of an interim
financial report to be in compliance with Statement of Standard Accounting
Practice 25 "Interim financial reporting" issued by the Hong Kong Society of
Accountants and the relevant provisions thereof. The interim financial report
is the responsibility of, and has been approved by, the directors. It is our
responsibility to form an independent conclusion, based on our review, on the
interim financial report 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.
REVIEW WORK PERFORMED
We conducted our review in accordance with Statement of Auditing Standards 700
"Engagements to review interim financial reports" issued by the Hong Kong
Society of Accountants. A review consists principally of making enquiries of
the Group's management and applying analytical procedures to the interim
financial report and based thereon, assessing whether the accounting policies
and presentation have been consistently applied unless otherwise disclosed. A
review excludes audit procedures such as tests of controls and verification of
assets, liabilities and transactions. It is substantially less in scope than
an audit and therefore provides a lower level of assurance than an audit.
Accordingly, we do not express an audit opinion on the interim financial
report.
REVIEW CONCLUSION
On the basis of our review which does not constitute an audit, we are not
aware of any material modifications that should be made to the interim
financial report for the six months ended 30 June 2003.
Ernst & Young
Certified Public Accountants
Hong Kong
4 September 2003
CNOOC Limited
OTHER INFORMATION 31
DIRECTORS' INTERESTS
As at 30 June 2003, the interests of the Directors and the chief executive of
the Company in the equity securities of the Company and its associated
corporations (all within the meaning of Part XV of the Securities and Futures
Ordinance ("SFO")) as recorded in the register required to be kept under
section 352 of the SFO or disclosed in accordance with the Rules Governing the
Listing of Securities on The Stock Exchange of Hong Kong Limited ("the Listing
Rules") were detailed below.
Total Interests
as % of the
Personal Family Corporate Other Total relevant issued
Interests Interests Interest Interests Interests share capital
-----------------------------------------------------------------------------------------------------------------------------------
Shares in the Company
So Chak Kwong 30,000 - - - 30,000 0.00
As at 30 June 2003, the Directors and employees of the Group had the following
personal interests in options to subscribe for shares in the Company granted
under the share option schemes of the Company:
Closing price
No. of shares No. of shares per share
involved in the involved in the immediately
options options before the
outstanding outstanding date on which
at the beginning at the end the options
Name of Grantee of the period of the period Date of Grant were granted Exercise Price
(HK$) (HK$)
-----------------------------------------------------------------------------------------------------------------------------------
Directors:
Wei Liucheng 500,000 500,000 12 March 2001 - 5.95
500,000 500,000 27 Aug 2001 7.30 6.16
- 500,000 24 Feb 2003 10.45 10.54
Fu Chengyu 350,000 350,000 12 March 2001 - 5.95
350,000 350,000 27 Aug 2001 7.30 6.16
- 230,000 24 Feb 2003 10.45 10.54
Jiang Longsheng 280,000 280,000 12 March 2001 - 5.95
230,000 230,000 27 Aug 2001 7.30 6.16
- 230,000 24 Feb 2003 10.45 10.54
Zhou Shouwei 280,000 280,000 12 March 2001 - 5.95
350,000 350,000 27 Aug 2001 7.30 6.16
- 350,000 24 Feb 2003 10.45 10.54
Luo Han 280,000 280,000 12 March 2001 - 5.95
230,000 230,000 27 Aug 2001 7.30 6.16
- 230,000 24 Feb 2003 10.45 10.54
Employees:
Other Employees 2,930,000 2,930,000 12 March 2001 - 5.95
7,160,000 7,160,000 27 Aug 2001 7.30 6.16
- 6,870,000 24 Feb 2003 10.45 10.54
2003 Interim Report
32 OTHER INFORMATION
As at 30 June 2003, no options granted under the share option schemes of the
Company have been exercised.
All the interests stated above represent long positions. As at 30 June 2003,
no short positions were recorded in the Register of Directors' and Chief
Executives' Interests and Short Positions required to be kept under section
352 of the SFO.
Other than those disclosed above, no right to subscribe for equity or debt
securities of the Company has been granted by the Company to, nor have any
such rights been exercised by, any person during the half year ended 30 June
2003.
SUBSTANTIAL INTERESTS IN SHARE CAPITAL
The register maintained by the Company pursuant to the SFO recorded that, as
at 30 June 2003, the following corporations had interests (as defined in the
SFO) in the Company set opposite their respective names:
Ordinary Shares Percentage of Total Issued Shares
----------------------------------------------------------------------------------------------------------
(i) CNOOC (BVI) Limited
("CNOOC (BVI)") 5,800,000,000 70.61%
(ii) Overseas Oil & Gas Corporation,
Limited ("OOGC") 5,800,000,000 70.61%
(iii) China National Offshore
Oil Corporation ("CNOOC") 5,800,000,000 70.61%
CNOOC (BVI) is a wholly-owned subsidiary of OOGC, which is a wholly-owned
subsidiary of CNOOC. Accordingly, CNOOC (BVI)'s interests are recorded as the
interests of OOGC and CNOOC.
All the interests stated above represent long positions. As at 30 June 2003,
no short positions were recorded in the Register of Interests in Shares and
Short Positions required to be kept under section 336 of the SFO.
INFORMATION ON SHARE OPTION SCHEMES
On 4 February 2001, the Company adopted a pre-global offering share option
scheme (the "Pre- Global Offering Share Option Scheme"). Pursuant to the
Pre-Global Offering Share Option Scheme:
1. options for an aggregate of 4,620,000 shares have been granted;
2. the subscription price per share is HK$5.95; and
3. the period during which an option may be exercised is as follows:
(a) 50% of the shares underlying the option shall vest 18 months after
the date of the grant; and
(b) 50% of the shares underlying the option shall vest 30 months after
the date of the grant.
The exercise period for options granted under the Pre-Global Offering Share
Option Scheme shall end not later than 10 years from 12 March 2001.
On 4 February 2001, the Company adopted a share option scheme (the "2001 Share
Option Scheme") for the purposes of recognising the contribution that certain
individuals had made to the Company and attracting and retaining the best
available personnel to the Company. Pursuant to the 2001 Share Option Scheme:
CNOOC Limited
OTHER INFORMATION 33
1. options for an aggregate of 8,820,000 shares have been granted;
2. the subscription price per share is HK$6.16; and
3. the period during which an option may be exercised is as follows:
(a) one-third of the shares underlying the option shall vest on the first
anniversary of the date of the grant;
(b) one-third of the shares underlying the option shall vest on the
second anniversary of the date of the grant; and
(c) one-third of the shares underlying the option shall vest on the third
anniversary of the date of the grant.
The exercise period for options granted under the 2001 Share Option Scheme
shall end not later than 10 years from 27 August 2001.
In view of the amendments to the relevant provisions of the Listing Rules
regarding the requirements of share option schemes of a Hong Kong listed
company effective on 1 September 2001, no further options will be granted
under the 2001 Share Option Scheme.
In June 2002, the Company adopted a new share option scheme (the "2002 Share
Option Scheme").
Under the 2002 Share Option Scheme, the Directors of the Company may, at their
discretion, invite employees, including executive directors, of the Company or
any of its subsidiaries, to take up options to subscribe for shares in the
Company. The maximum aggregate number of shares (including those that could be
subscribed for under the Pre- Global Offering Share Option Scheme and the 2001
Share Option Scheme) which may be granted shall not exceed 10% of the total
issued share capital of the Company. The maximum number of shares which may be
granted under the 2002 Share Option Scheme to any individual in any 12 month
period up to the next grant shall not exceed 1% of the total issued share
capital of the Company from time to time.
According to the 2002 Share Option Scheme, the consideration payable by a
participant for the grant of an option will be HK$1.00. The subscription price
of a share payable by a participant upon the exercise of an option will be
determined by the Directors at their discretion at the date of grant, except
that such price may not be set below a minimum price which is the highest of:
1. the nominal value of a share;
2. the average closing price of the shares on the HKSE as stated in the
HKSE's quotation sheet for the five trading days immediately preceding
the date of grant of the option; and
3. the closing price of the shares on the HKSE as stated in the HKSE's
quotation sheet on the date of grant of the option.
On 24 February 2003, the board of directors approved to grant options in
respect of 8,410,000 shares to the Company's senior management under the 2002
Share Option Scheme. The exercise price for the options is HK$10.54 per share.
Options granted under the 2002 Share Option Scheme may be exercised, in whole
or in part, in accordance with the following vesting schedule:
1. one-third of the shares underlying the option shall vest on the first
anniversary of the date of the grant;
2003 Interim Report
34 OTHER INFORMATION
2. one-third of the shares underlying the option shall vest on the second
anniversary of the date of the grant; and
3. one-third of the shares underlying the option shall vest on the third
anniversary of the date of the grant.
The exercise period for options granted under the 2002 Share Option Scheme
shall end not later than 10 years from the date on which the option is
granted.
The Directors are of the view that calculation of the value of the share
options granted by the Company during the period depends on a number of
variables and can only be made subject to a number of theoretical bases and
speculative assumptions. As such, the value of the share options is not
presented in this report.
AUDIT COMMITTEE
The audit committee has reviewed together with the management the accounting
principles and practices adopted by the Group and discussed the internal
control and financial reporting matters. The interim results for the six
months ended 30 June 2003 are unaudited, but have been reviewed in accordance
with Statement of Auditing Standards 700 "Engagement to review interim
financial reports", issued by the Hong Kong Society of Accountants, by Ernst &
Young. The interim financial report has been reviewed by the audit committee.
PURCHASE, SALE OR REDEMPTION OF THE COMPANY'S LISTED SECURITIES
During the six months ended 30 June 2003, there was no purchase, sale or
redemption by the Company, or any of its subsidiaries, of the Company's listed
securities.
CODE OF BEST PRACTICE
None of the directors is aware of any information that would reasonably
indicate that the Company is not, or was not, for any part of the six months
ended 30 June 2003, in compliance with the Code of Best Practice as set out in
Appendix 14 to the Listing Rules, except that the non-executive Directors of
the Company are not appointed for a specific term but are subject to
retirement by rotation and re-election at the Company's annual general meeting
in accordance with the Company's articles of association.
REGISTER OF MEMBERS
The Register of Members of the Company will be closed from 19 September 2003
(Friday) to 25 September 2003 (Thursday) (both days inclusive) during which no
transfer of shares can be registered. In order to qualify for the interim
dividend and the special interim dividend, all transfers, accompanied by the
relevant share certificates, must be lodged with the Company's registrar, Hong
Kong Registrars Limited, Room 1901-5, 19th Floor, Hopewell Centre, 183 Queen's
Road East, Wanchai, Hong Kong, not later than 4.00 pm on 18 September 2003
(Thursday).
By order of the Board
Cao Yunshi
Company Secretary
Hong Kong, 4 September 2003
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Interim Report may be viewed as
"forward-looking statements" within the meaning of the U.S. Securities Act of
1933, as amended, and the U.S. Securities Exchange Act of 1934, as amended.
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors, which may cause the actual performance, financial condition
or results of operations of the Company to be materially different from any
future performance, financial condition or results of operations implied by
such forward-looking statements. Further information regarding these risks,
uncertainties and other factors is included in the Company's most recent
Annual Report on Form 20-F filed with the U.S. Securities and Exchange
Commission (the "SEC") and in the Company's other filings with the SEC.
CNOOC Limited
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be issued on its behalf
by the undersigned, thereunto duly authorized.
CNOOC Limited
By: /s/ Cao Yunshi
----------------------------
Name: Cao Yunshi
Title: Company Secretary
Dated: September 18, 2003