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 April 4, 2003
CNOOC Limited
(Translation of registrant's name into English)
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65th Floor
Bank of China Tower
One Garden Road
Central, Hong Kong
(Address of principal executive offices)
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(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
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(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
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(If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b): N/A.)
CNOOC Limited
[GRAPHIC OMITTED]
CNOOC LIMITED
[CHINESE CHARACTERS OMITTED]
(Incorporated in Hong Kong with limited liability)
2002 ANNUAL RESULTS ANNOUNCEMENT
CHAIRMAN'S STATEMENT
The performance of a company depends a great deal on the CEO and his or her
executive team. Instead of the usual display of achievements and grand plans,
I would like to share with you, our shareholders, my management philosophy and
some general principles that guide my decisions and determine the outcomes of
the company's operation.
I trust people and believe in the basic decency of most people. But I do not
have illusions about the imperfection of humanity. I, therefore, believe that
sound governance helps reduce risks.
I have further strengthened my board by introducing two new faces, Dr. Courtis
and Dr Schurtenberger. Whilst the two outgoing board members rendered
invaluable services, I am confident that Dr. Courtis's insight into the global
economy and Dr. Schurtenberger's insight into global politic dynamics are
valuable additions that will enhance the management further. I also propose to
maintain and further strengthen my International Advisory Board ("IAB") and I
am happy to report that Mr. Peter Sutherland, a non-executive Chairman of BP
plc and ex-Director General of WTO organization and Professor Cornelius
Herkstroter, a retired Chairman of Royal Dutch/Shell plc have joined the IAB.
I believe that a good CEO works to ensure his or her company can succeed
without him or her, a commonplace CEO is only concerned about current
performance and a terrible CEO is prepared to promote good current performance
at the expense of future performance. There are three things that I spend most
of my time on: people, management system and business opportunities.
People
I spend a great deal of time on the issue of people. I am not shy about
putting talented people in positions of responsibility and authority. The
company continues to sponsor formal and informal training opportunities for
high potential executives and managers, including the highly regarded and
expensive Sloan Fellows program. Whilst this means my executives and I may
have to shoulder extra work and responsibilities, we are all committed to
grooming future leaders.
Management System
We made significant progress during the year in tightening internal controls
and real time management reporting. I want to ensure that a comprehensive
management system is in place that will not only provide management with the
necessary authority to do their jobs but will also reduce the risks of
whimsical decision making. While nobody can fully eliminate moral hazards, a
sound control system and a responsive reporting system will minimize the
risks.
Business Opportunities
We are horizontally expanding the natural gas business and vertically
expanding into other E&P basins. Both strategies are meant to lengthen the
company's growth horizon and position the company for an even brighter future.
We have to be able to find and extract oil and gas from more basins. Producing
in offshore China is highly profitable and we certainly have an advantage
there. Some suggest we should focus exclusively on where we are. Whilst I
graciously welcome suggestions, I can only agree to the first half. "Focus" is
something that affords us the current yield, for offshore China productions
are profitable, and its exploration risk is low. However, "exclusive focus" is
a curse to the company's future. Nature places a finite amount of oil and gas
reserves in any one place. We, therefore, have to explore more than one place
to garnish a chance to overcome nature's constrain. We cannot afford to give
up this valuable strategic option.
This is an area where I do not agree with those who propose the "single focus"
approach. Risk here is asymmetrical to investors and managers. Investors
looking for current yield have market liquidity as the last defense so if a
strategy maximizing the current yield at the expense of future gain begins to
show its inevitable results they can leave. Other stakeholders do not have
this luxury nor have such a short term outlook. We have to ensure the
sustainability of the company and the best time to start is now, when we don't
have to.
We made some very sensible acquisitions during the year. Even with a
compelling strategic rationale, sound results are the outcome of prudent and
shrewd execution. We took advantage of available opportunities in all three
situations and were able to maximize value for our shareholders and other
stakeholders.
China's natural gas demand is projected to grow substantially over the next
decade. We have regulatory, market access and resource advantages in tapping
this emerging business. It makes business sense to expand this part of the
business. The expansion is expected to generate sustainable, incremental and
sound returns. A combination of government support and business acumen has
allowed us to establish a leadership position in China's coastal LNG market.
We will leverage on this hard earned position to further enhance value to the
company and its shareholders.
I am not a futurist so I have to report the current state of the business.
While this report will give you details on operating results, I am
highlighting some notable achievements during the year. The company recorded
the highest production growth in its history. Firm oil prices and
well-controlled costs have resulted in very strong earnings. The Board has
authorized a special dividend to shareholders given the spectacular results
and expected strong oil prices near term. It is my belief that shareholders of
exploration and production companies, such as ours, should benefit from oil
price rises and this special dividend is to reward our shareholders who have
already earned a good equity return during the year.
I am both confident and humble. I am confident because I am convinced that the
company is on the right track, because we have managed to create a sound
exploration and production platform, because we have a solid team, because we
have the support of our staff, partners and advisors, and last but not the
least because we have the continued support of our shareholders. I am humble
because the future always takes its own course and that requires constant
vigilance and a willingness to change, because a conviction and a sound idea
alone do not guarantee success in a competitive world.
May we plan for the best but be prepared for the worst.
WEI Liucheng
Chairman and Chief Executive Officer
Hong Kong, 27 March 2003
CONSOLIDATED INCOME STATEMENT (AUDITED)
Year ended 31 December 2002
(All amounts expressed in thousands of Renminbi, except per share data)
Notes 2002 2001
REVENUE
Oil and gas sales 5 23,779,294 17,560,788
Marketing revenues 6 2,377,469 2,537,032
Other income 217,052 721,737
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26,373,815 20,819,557
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EXPENSES
Operating expenses (3,775,334) (2,329,130)
Production taxes (1,023,049) (883,768)
Exploration expenses (1,318,323) (1,039,297)
Depreciation, depletion and amortisation 7 (4,019,532) (2,566,920)
Dismantlement (126,139) (90,367)
Impairment losses related to property, plant and --
equipment (99,675)
Crude oil and product purchases 6 (2,326,338) (2,453,312)
Selling and administrative expenses 8 (1,006,540) (615,389)
Other (30,866) (517,876)
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(13,626,121) (10,595,734)
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PROFIT FROM OPERATING ACTIVITIES 12,747,694 10,223,823
Interest income 7 147,870 317,706
Interest expenses 9 (294,792) (116,634)
Exchange (loss)/gain, net (113,814) 235,409
Investment income 7 193,277 220,650
Share of profit of an associate 165,387 89,963
Non-operating (loss)/income, net (71,379) 34,941
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PROFIT BEFORE TAX 12,774,243 11,005,858
Tax (3,541,416) (3,048,227)
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NET PROFIT FROM ORDINARY ACTIVITIES
ATTRIBUTABLE TO SHAREHOLDERS 9,232,827 7,957,631
============ ===========
DIVIDENDS 1,306,740 --
Final 958,314 871,194
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Interim 2,265,054 871,194
============ ===========
EARNINGS PER SHARE
Basic RMB 1.12 RMB 1.00
============ ===========
Diluted RMB 1.12 RMB 1.00
============ ===========
DIVIDEND PER SHARE
Final RMB 0.16 N/A
============ ===========
Interim RMB 0.12 RMB 0.11
Notes:
(All amounts expressed in thousands of Renminbi, except otherwise stated)
1. Organisation and principal activities
CNOOC Limited (the "Company") was incorporated in the Hong Kong
Special Administrative Region ("Hong Kong"), the People's Republic of
China (the "PRC") on 20 August, 1999 to hold the interests in certain
entities whereby creating a group comprising the Company and its
subsidiaries. During the year, 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, natural gas and other petroleum.
In the opinion of directors, the ultimate holding company is China
National Offshore Oil Corporation ("CNOOC"), a company established in
the PRC.
2. Principal accounting policies
The audited financial statements of the Group are prepared in
conformity with generally accepted accounting principles in Hong Kong
("Hong Kong GAAP").
3. Change in Accounting Policy
During the year, the Group changed its method of accounting for the
provision for dismantlement to comply with SSAP 28 "Provisions,
contingent liabilities and contingent assets". SSAP 28 requires a
provision 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 an accretion expense
is recognised using the credit-adjusted risk-free interest rate in
effect when the liability is initially recognised.
The effect of this change in accounting policy was to increase
retained earnings and property, plant and equipment, as at 1 January
2002 by RMB298,156,268 and RMB736,848,177, respectively, and to
increase the provision for dismantlement and deferred tax liabilities
as at 1 January 2002 by RMB310,910,651 and RMB127,781,258,
respectively. No adjustment was made to the prior year amounts as the
impact on the financial statements for the year ended 31 December
2001 was not material.
4. Production sharing contracts
PRC
For production sharing contracts in the PRC, the foreign party to the
contracts ("foreign partners") are normally required to bear all
exploration costs during the exploration period and such exploration
costs can be recovered according to the production sharing formula
after commercial discoveries are made and production begins.
After the initial exploration stage, the development and operating
costs are funded by the Group and the foreign partners according to
their respective participating interest.
The Group has the option to take a participating interest as mutually
agreed by both participants in a production sharing contract and may
exercise such option after the foreign partners have independently
undertaken all the exploration risks and costs and made viable
commercial discoveries.
After the Group exercises its option to take a participating interest
in a production sharing contract, the Group accounts for the oil and
gas properties using the "proportional method" under which the Group
recognises its share of development costs, revenues and expenses from
such operations based on its participating interest in the production
sharing contract. The Group does not account for either the
exploration costs incurred by its foreign partners or the foreign
partners share of development costs and revenues and expenses from
such operations.
Part of the annual gross production of oil and gas in the PRC is
distributed to the PRC government as settlement of royalties which
are payable pursuant to a sliding scale. The Group and the foreign
partners also pay a production tax to the tax bureau at a
pre-determined rate. In addition, there is a pre-agreed portion of
oil and gas designated to recover all exploration costs, development
costs, operating costs incurred and related interests according to
the participating interests between the Group and the foreign
partners. Any remaining oil after the foregoing priority allocations
is first distributed to the PRC government as share oil on a
pre-determined ratio pursuant to a sliding scale, and then
distributed to the Group and the foreign partners based on their
respective participating interests. As the government share is not
included in the Group's interest in the annual production, the net
sales of the Group do not include the sales revenue of the government
share oil.
The foreign partners have the right either to take possession of
their allocable remainder oil for sale in the international market,
or to negotiate with the Group to sell their allocable remainder oil
to the Group for resale in the PRC market.
Overseas
The Group and the other partners to the production sharing contracts
in Indonesia are required to bear all exploration, development and
operating costs according to their respective participating
interests. Exploration, development and operating costs which qualify
for recovery can be recovered according to the production sharing
formula after commercial discoveries are made and production begins.
The Group's net interest in the production sharing contracts in
Indonesia consists of its participating interest in the properties
covered under the relevant production sharing contracts, less oil and
gas distributed to the Indonesian government and the domestic market
obligation.
5. Oil and gas sales
2002 2001
Gross sales 26,086,646 19,663,251
Royalties (464,113) (283,014)
PRC government share oil (1,843,239) (1,819,449)
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23,779,294 17,560,788
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6. Marketing Profit
2002 2001
Marketing revenues 2,377,469 2,537,032
Crude oil and product purchases (2,326,338) (2,453,312)
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51,131 83,720
============= ============
7. Profit from Operating Activities
The Group's profit from operating activities is arrived at after (crediting)/charging:
2002 2001
Crediting:
Interest income on bank deposits (147,870) (317,706)
Interest (52,739) (21,344)
Dividends (76,633) (123,213)
Realised gains on investments (26,940) (32,297)
Unrealised gains on investments (36,965) (43,796)
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Short-term investment income (193,277) (220,650)
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Recovery of doubtful accounts -- (4,966)
Charging:
Auditors' remuneration 4,500 7,452
Staff costs
- Wages, salaries and allowances* 390,376 675,440
- Labor costs paid to contractors* 660,029 --
- Provision for staff and workers' bonus and welfare funds -- 40,000
- Pension scheme contributions 7,042 6,392
Depreciation, depletion and amortisation 4,032,970 2,602,799
Less: Amount included in inventory (13,438) (35,879)
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4,019,532 2,566,920
=============== ===========
Operating lease rentals 54,157 63,260
Loss on disposal of property, plant and equipment 85,202 51,333
Repairs and maintenance 521,561 457,414
Research and development costs 167,354 160,349
=============== ===========
* Wages, salaries and allowances of RMB675,440,000 in 2001 included the labor
costs paid to contractors.
8. Selling and Administrative Expenses
2002 2001
Salary and staff benefits 390,376 228,782
Utility and office expenses 100,502 89,462
Recovery of doubtful accounts -- (4,966)
Transportation and entertainment 64,319 64,923
Rentals and maintenance 75,738 121,483
Selling expenses 38,548 38,069
Other 337,057 77,636
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1,006,540 615,389
=============== ===========
9. Interest Expense
2002 2001
Interest on bank loans which are:
- wholly repayable within five years 177,156 219,045
- not wholly repayable within five years -- 81,634
Interest expense to the parent company -- 8,415
Interest on long-term guaranteed notes 215,028 --
Other borrowing costs 12,426 6,510
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Total interest 404,610 315,604
Less: Amount capitalised in property, plant and
equipment (187,714) (198,970)
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216,896 116,634
Other finance costs:
Increase in discounted amount of provisions arising
from the passage of time 77,896 --
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294,792 116,634
MANAGEMENT DISCUSSION & ANALYSIS
Outlook
The global political situation remains turbulent in 2003, and investors are
further cautious given the shadow of war in the Middle East, making a strong
global economic growth become merely a wish. Although the international oil
price level in the long-term is dependant on the fundamentals of the global
economy, political and economic outbursts will definitely impact the oil
price, resulting in adverse effects on the Company's development. However, as
the Company mainly operates in countries in Asia Pacific, such as China and
Indonesia, the political stability and economic dynamism within the region
will provide the necessary opportunities for the Company to gear up its
development. Meanwhile, the management will continue to remain highly alert to
the Company's business environment, and will face the difficulties on the
grounds of prudence and progressiveness.
After the historic production growth in 2002, the Company will consolidate and
strengthen its management in 2003 to prepare for further expansions in the
future. We will focus on growing our production on a low-cost basis, and
adding quality reserves through explorations and opportunistic acquisitions.
As a crucial component in the Company's continual growth, natural gas projects
will continue to play an important role in the Company's future development.
In 2003, two oil and gas fields in coastal China will commence production,
allowing the Company to achieve its pre-set production target.
Given that the Company's balanced asset portfolios, progressive and
enthusiastic management team, prudent financial policies and healthy financial
position have already laid a solid foundation for our production and
development, the management expresses optimism over the business prospects in
2003.
Consolidated Net Profit
Our consolidated net income after tax was Rmb 9,232.8 million (US$1,115.1
million) in 2002, an increase of Rmb 1,275.2 million (US$154.0 million), or
16.0%, from Rmb 7,957.6 million in 2001.
Revenue
Our oil and gas sales for the year 2002 were Rmb 23,779.3 million (US$2,871.9
million), an increase of Rmb 6,218.5 million (US$751.0 million), or 35.4%,
from Rmb 17,560.8 million in the year 2001. The increase primarily reflects
the rise in our production level, as well as the increase in global crude oil
prices during 2002. Of the increase in oil and gas sales, Rmb 5,417.0 million
(US$654.2 million) was attributable to our increased production volume, while
Rmb 801.5 million (US$96.8 million) was attributable to the rise in crude oil
prices. In 2002, as a result of the commencement of production in our new oil
and gas properties as well as our successful acquisition of overseas oil and
gas properties, our production volume increased significantly compared to
2001. Our net production level in 2002 increased by 33% compared to the same
period last year, one of the highest growth years in our history. The net
crude oil and condensate production volume per day was 298,625 barrels in
2002, compared to 228,874 barrels in 2001, an increase of 69,751 barrels, or
30.5%. Our Indonesian oil and gas operations accounted for 15% of our increase
in production volume. Production volume increases offshore China primarily
resulted from the commencement of operations in our new oil and gas
properties, including new platforms in Suizhong 36-1 (Phase II), Qinhuangdao
32-6, Wenchang 13-1 and Wenchang 13-2. Our daily average production for
natural gas in 2002 was 272.6 million cubic feet, an increase of 77.6 cubic
feet, or 39.8%, from 195.0 million cubic feet in 2001. The increase was
primarily attributable to our Indonesian operations. Our crude oil sales
prices are determined in accordance with international crude oil prices. The
average realized price for our crude oil was US$24.35 per barrel in 2002, an
increase of US$1.01, or 4.3%, compared to US$23.34 per barrel in 2001. The
average realized price of natural gas was US$2.98 per thousand cubic feet in
2002, a decrease of US$0.10, or 3.2%, from US$3.08 per thousand cubic feet in
2001. The decrease was due to the lower natural gas price of our Indonesian
properties relative to prices in China.
Our marketing revenues in 2002 were Rmb 2,377.5 million (US$287.1 million), a
decrease of Rmb 159.5 million (US$19.3 million), or 6.3%, from Rmb 2,537.0
million in 2001.
Our other income, reported on a net basis in 2002, was Rmb 217.1 million
(US$26.2 million) and consisted primarily of project management and handling
fees. This was at a similar level to 2001. In
2001, our other income on a net basis was Rmb 203.8 million, which was derived
from our other income of Rmb 721.7 million less corresponding costs of Rmb
517.9 million in other expenses.
EXPENSES
Operating expenses
Our operating expenses were Rmb 3,775.3 million (US$456.0 million) in 2002, an
increase of Rmb 1,446.2 million (US$174.7 million), or 62.1%, from Rmb 2,329.1
million in 2001. The increase primarily resulted from operating expenses in
connection with the Indonesian oil and gas properties and the commencement of
operations in new properties offshore China. The operating expenses for the
Indonesian oil and gas properties were Rmb 1,237.8 million (US$149.5 million)
in 2002. On a unit of production basis, operating expenses were Rmb 30.3
(US$3.66) per BOE in 2002, which were higher than operating expenses of Rmb
24.9 (US$3.01) per BOE in 2001. The increase was largely attributable to the
higher operating expenses on a unit of production basis for the Indonesian oil
and gas properties, resulting from the different fiscal regime applicable to
Indonesia. Our operating expenses excluding Indonesia in 2002 were Rmb 23.6
(US$2.85) per BOE.
Production taxes
Our production taxes for the year 2002 were Rmb 1,023.0 million (US$123.6
million), an increase of 15.8%, or Rmb 139.2 million (US$16.8 million) from
Rmb 883.8 million in 2001. The increase was due to increase in oil and gas
sales in 2002.
Exploration costs
Our exploration costs for the year 2002 were Rmb 1,318.3 million (US$159.2
million), an increase of Rmb 279.0 million (US$33.7 million), or 26.8%, from
Rmb 1,039.3 million in 2001. The increase primarily resulted from a higher
volume of exploration activities.
Depreciation, depletion and amortisation expenses
Our depreciation, depletion and amortisation expenses for 2002 were Rmb
4,019.5 million (US$485.4 million), an increase of Rmb 1,452.6 million
(US$175.4 million), or 56.6%, from Rmb 2,566.9 million in 2001. On a unit of
production basis, depreciation, depletion and amortisation expenses for the
year 2002 were Rmb 32.3 (US$3.90) per BOE, an increase of 17.5% compared to
Rmb 27.5 (US$3.32) per BOE in 2001. The primary reason for the increase was
the newly acquired Indonesian oil and gas properties, and the commencement of
production at new oil and gas properties offshore China.
Dismantlement
Our dismantlement costs for the year 2002 was Rmb 126.1 million (US$15.2
million), an increase of Rmb 35.7 million (US$4.3 million), or 39.5%, from Rmb
90.4 million in 2001. The increase was primarily due to an upward revision of
the estimated dismantlement costs and the commencement of production at new
oil and gas properties offshore China.
Impairment losses
There were no impairment losses related to oil and gas properties in 2002.
Crude oil and product purchase
Our crude oil and product purchases for the year 2002 were Rmb 2,326.3 million
(US$281.0 million), a decrease of Rmb 127.0 million (US$15.3 million), or
5.2%, from Rmb 2,453.3 million in 2001. We handle crude oil sales in China for
our foreign partners. Upon their request, we purchase their share of crude oil
for resale in China, since we are one of the only three companies authorised
to market and sell crude oil in the PRC. We do not have control over our
foreign partners' decisions regarding the sale of their share of production,
and therefore have no control over the volume that we may be asked to handle
in any particular period.
Selling and administrative expenses
Our selling and administrative expenses for the year 2002 were Rmb 1,006.5
million (US$121.6 million), an increase of Rmb 391.1 million (US$47.2
million), or 63.6%, from Rmb 615.4 million in 2001. On a unit of production
basis, selling and administrative expenses were Rmb 8.1 (US$0.98) per BOE in
2002, an increase of 22.7% from Rmb 6.6 (US$0.80) per BOE in 2001. The primary
reason for the increase was the Rmb 272.1 million (US$32.9 million) selling
and administrative expenses incurred in connection with the acquisition of
Indonesian oil and gas properties and the commencement of production at the
new oil and gas properties offshore China. Our selling and administrative
expenses excluding Indonesia in 2002 were Rmb 6.82 (US$0.82) per BOE.
Net interest expense/income
Our net interest expense for 2002 was Rmb 146.9 million (US$17.7 million), an
increase of Rmb 348.0 million (US$42.0 million) from a net interest income of
Rmb 201.1 million in 2001. This increase was primarily due to interest expense
associated with US$500 million long-term guaranteed notes in 2002, which led
to an increase in interest expense of Rmb 135.0 million (US$17.5 million)
record in the income statement. Further, the net interest expenses recognised
under SSAP 28, which we adopted in 2002, relating to provision for
dismantlement was Rmb 77.9 million (US$9.4 million).
Exchange Gain/Loss, net
Our exchange loss for 2002 was Rmb 113.8 million (US$13.7 million) compared
with an exchange gain of Rmb 235.4 million in 2001. The decrease was partly
attributable to exchange rate fluctuations related to our yen-denominated
loans in 2002. On 27 December, 2002, we prepaid a sum of JPY 21,162 million in
yen-denominated loans, after which our outstanding yen-denominated loans were
JPY 1,357 million. Since the outstanding amount of our yen-denominated loans
is hedged using foreign currency swaps, we do not expect similar exchange
gains or losses in the future.
Investment Income
Our investment income for 2002 was Rmb 193.3 million (US$23.3 million), a
decrease of Rmb 27.4 million (US$3.3 million) or 12.4% from Rmb 220.7 million
in 2001. The decrease was primarily due to a decline in short-term interest
rates in 2002.
Share of profit of an associate
Our share of profit of an associate for the year 2002 was Rmb 165.4 million
(US$20.0 million), an increase of Rmb 75.4 million (US$9.1 million), or 83.8%,
from Rmb 90.0 million in 2001. This item reflected our share of profit
generated by Shanghai Petroleum and Natural Gas Company Limited, our
associated company. This company experienced a decrease in its amortisation
cost resulting from an increase in exploitable reserves.
Non-operating loss/gain, net
Our non-operating loss for the year 2002 was Rmb 71.4 million (US$8.6
million), a decrease of Rmb 106.3 million (US$12.8 million) from non-operating
profit of Rmb 34.9 million in 2001, primarily due to the losses incurred in
the disposal of certain assets in 2002.
Tax
Our taxation for the year 2002 was Rmb 3,541.4 million (US$427.7 million), an
increase of Rmb 493.2 million (US$59.6 million) or 16.2% from Rmb 3,048.2
million in 2001. The primary reason for the increase was the increase in
profit before tax. The effective tax rate for both 2002 and 2001 was 27.7%.
Cash generated from operations
Cash generated from operations in 2002 amounted to Rmb 17,262.0 million
(US$2,084.8 million), an increase of Rmb 3,237.0 million (US$390.9. million),
or 23.1%, from Rmb 14,025.0 million in 2001. In addition to an increase in
profit before tax of Rmb 1,768.4 million (US$213.6 million), the increase in
cash generated from operations was also due in part to an increase in net
interest expenses of Rmb 348.0 million (US$42.0 million), an increase in net
exchange loss of Rmb 375.1 million (US$45.3 million), an increase in
depreciation, depletion and amortisation expenses of Rmb 1,452.6 million
(US$175.4 million), an increase in dismantlement costs of Rmb 35.7 million
(US$4.3 million) and a decrease in short-term investment income and
amortisation of premium of long-term guaranteed notes of Rmb 33.5 million
(US$4.0 million).
The increase was partially offset by our share income of an associate Rmb 75.4
million (US$9.1 million) growth, a decrease in provision for impairment of
property, plant and equipment of Rmb 99.7 million (US$12.0 million) and a
decrease in loss on disposals and write off of property, plant and equipment
of Rmb 19.0 million (US$2.3 million).
In addition, operating cash flow was adversely affected by an increase in
current liabilities from operating activities of Rmb 500.8 million (US$60.5
million), and a simultaneous increase in current assets excluding cash and
bank balances of Rmb 504.7 million (US$61.0 million).
Capital Expenditures and Investments
In line with our use of the successful efforts method of accounting, total
capital expenditures and investments primarily include successful exploration
and development expenditures. Total capital expenditures were Rmb 11,566.9
million (US$1,397.0 million) in 2002, an increase of Rmb 7,224.3 million
(US$872.5 million), or 166.4%, from Rmb 4,342.6 million in 2001. The capital
expenditure in 2002 included Rmb 585.6 million (US$70.7 million) for
capitalised exploration activities, Rmb 6,247.1 million (US$754.5 million) for
development activities, and Rmb 4,734.2 million (US$571.8 million) for
acquiring Indonesian oil and gas properties. Our development expenditures in
2002 related principally to the development of Suizhong 36-1 (Phase II),
Qinhuangdao 32-6, Wenchang 13-1, Wenchang 13-2, Penglai 19-3 and Panyu
4-2/5-1.
Financing Activities
We had net cash outflows from financing activities of Rmb 1,428.1 million
(US$172.5 million) in 2002, resulting primarily from our repayment of Rmb
3,367.3 million (US$406.7 million) in bank loans and dividend distributions of
Rmb 2,265.1 million (US$273.6 million). This cash outflow was offset by cash
inflow of Rmb 4,059.3 million (US$490.3 million) resulting from our March 2002
offering of US$500 million in 6.375% guaranteed notes due 2012.
The following table summarises the maturities of our long-term debt
outstanding as of 31 December, 2002.
Debt maturities principal only
Original currency Total Rmb Total USD
Due by 31 December, US$ JPY Rmb equivalents equivalents
(in millions, except percentages)
2003 31.4 271.5 18.9 297.5 35.9
2004-2006 100.0 814.4 38.4 922.4 111.4
2007-2008 -- 271.5 -- 18.7 2.3
2009 and beyond 500.0 -- -- 4,140.0 500.0
Total 631.4 1,357.4 57.3 5,378.6 649.6
Percentage of total debt 97.2% 1.7% 1.1% 100.0% 100.0%
Market Risks
Our market risk exposures primarily consists of fluctuations in oil and gas
prices, exchange rates and interest rates.
Commodity price risk: We are exposed to fluctuations in prices of crude oil
and natural gas, which are commodities whose prices are determined by
reference to international market prices. International oil and gas prices are
volatile and this volatility has a significant effect on our net sales and net
income. We do not hedge market risk resulting from fluctuations in oil and gas
prices.
Currency risk: Our foreign exchange exposure gives rise to market risk
associated with exchange rate movements.
Substantially all of our oil and gas sales are denominated in Renminbi and
U.S. dollars. In the last nine years, the PRC government's policy of
maintaining a stable exchange rate and China's ample foreign reserves have
contributed to the stable of the Renminbi. Our domestic oil and gas prices are
quoted in U.S. dollars based on international U.S. dollar oil prices we are
therefore naturally able to offset Renminbi exchange rate risk. Our major
foreign currency risk arises from our Japanese yen-denominated loans. We
manage our yen-denominated loans in response to market changes.
In early 2002, the yen depreciated sharply against the U.S. dollar. At the
time, a majority of our yen-denominated loans was still outstanding. However,
because we and our auditors at that time, Arthur Andersen, were concerned
about US GAAP FAS 133's disclosure risk in respect of structured swaps, we
missed an opportunity to take advantage of the depreciation in the yen. In
December 2002, we prepaid JPY 21,162 million in yen-denominated loans.
Currently, since the outstanding amount of our yen loans is hedged against
foreign currency swaps, we do not expect similar exchange gains or losses in
the future.
Interest rate risk: On 1 January, 2002, our floating rate foreign currency
debt was US$142.3 million. On 31 December, 2002, that figure had fallen to
US$31.4 million, accounting for 4.9% of total foreign currency denominated
debt. On 1 January, 2002, our fixed rate foreign currency debt was US$311.0
million. As a result of our offering of US$500 million guaranteed notes in
2002, our fixed rate foreign currency debt rose to US$603.0 million by 31
December, 2002, accounting for 93.8% of our total foreign currency denominated
debt. On 3 January, 2003, we repaid our outstanding floating rate foreign
currency debt. Therefore all of our foreign currency debt is fixed rate debt.
We think our projects can afford the interest expenses despite the market
interest rate dropped obviously in last year.
Significant Investments
We had a strategy to make strategic investments in related natural gas
business. In September 2002, we entered into an agreement with BP to acquire a
12.5% interest in the Tangguh LNG Project in Indonesia for approximately
US$275 million. In October 2002, we entered into an agreement with the North
West Shelf Venture partners to acquire an interest of up to 5.56% in the
Australian North West Shelf Gas Project titles and to assume a 25% interest in
a LNG joint venture to be established. The acquisition of the interest in the
Tangguh Project was completed in February 2003 and effective as of 1 January
2003. In March 2003, we entered into an agreement with BG International
Limited to acquire an 8.33% interest in the North Caspian Sea Project in
Kazakhstan for US$615 million, subject to certain adjustments. Completion of
the acquisition is subject to the satisfaction of a number of conditions
including the waiver of certain pre-emption rights by the existing partners
and receipt of govermental approvals.
Material Acquisitions
During the financial year ended December 31, 2002, we acquired nine
subsidiaries of Repsol YPF, S.A. which held a portfolio of operated and
non-operated interests in oil and gas production sharing and technical
assistance contracts in contract areas located offshore and onshore Indonesia.
The aggregate consideration for the acquisition was a net cash consideration
of US$566 million after adjustments.
Employees
We have 2,047 employees at the end of 2002. With a view to ensuring that our
compensation packages are competitive in the industry and our employees are
motivated to perform well in their jobs, we have adopted a flexible and
efficient human resources policy.
We have adopted three stock option schemes for our senior management since 4
February 2001 and granted options under each of the schemes. In 2002, we have
improved our human resources management system by establishing through the
Internet an employee performance evaluation system and a recruitment system.
We focused on customized and effective training for our employees and
conducted 388 training courses in various areas in 2002, which were attended
by more than 8,482 people.
SUPPLEMENTAL INFORMATION FOR NORTH AMERICAN SHAREHOLDERS
Effects on net profit and net equity of differences between Hong Kong GAAP and
US GAAP are summarized below:
(All amounts expressed in thousands of Renminbi, except per share data)
Net profit
2002 2001
As reported under Hong Kong GAAP 9,232,827 7,957,631
Impact of US GAAP adjustments:
- Reversal of additional depreciation, depletion and
amortisation arising from the revaluation surplus on land
and buildings 9,156 9,156
- Unrealised holding gains from available-for-sale marketable
securities (36,965) (43,796)
- Realised holding gains from available-for-sale
marketable securities 26,940 --
- Additional dismantlement based on unit-of-production
method (197,079) --
- Impact of income tax 59,124 --
- Recognition of stock compensation cost (5,632) (2,755)
------------ -------------
As restated under US GAAP 9,088,371 7,920,236
============ =============
Net income per share under US GAAP
- Basic RMB 1.11 RMB 1.00
============ =============
- Diluted RMB 1.11 RMB 1.00
============ =============
Net equity
2002 2001
As reported under Hong Kong GAAP 40,568,488 33,310,506
Impact of US GAAP adjustments:
- Reversal of revaluation surplus on land and buildings (274,671) (274,671)
- Reversal of additional accumulated depreciation, depletion and
amortisation charges arising from the revaluation surplus on land
and buildings 25,895 16,739
- Cumulative adjustment for provision for dismantlement (436,112) --
------------- -------------
As restated under US GAAP 39,883,600 33,052,574
============= =============
(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 is based on the revalued
amount. Additional depreciation arising from the revaluation for the
year ended 31 December 2002 was approximately RMB9,156,000 (2001:
RMB9,156,000). Under US GAAP, property, plant and equipment is
required to be stated at cost. Accordingly, no additional
depreciation, depletion and amortisation from the revaluation is
recognised under US 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 US GAAP, such investments are also measured at
fair value and classified in accordance with Statement of Financial
Accounting Standards ("SFAS") No.115. Under US GAAP, related
unrealised gains and losses on available-for-sale securities are
excluded from current period earnings and included in other
comprehensive income.
(iii) Provision for dismantlement
HK GAAP require 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. However, under US GAAP, the provisions of dismantlement
are provided on a unit-of-production basis over field lives, there is
no corresponding tangible fixed asset.
DIVIDENDS
The Board of Directors recommends the payment of a final dividend of HK$0.15
per share for the year ended 31 December 2002 and a special cash dividend of
HK$0.15 per share to shareholders whose names appear on the Register of
Members of the Company on 29 May 2003. These, together with the interim
dividend of HK$0.11 per share, give a total of HK$0.41 per share for the year.
The proposed dividends are expected to be paid on 30 May 2003 following the
approval at the Annual General Meeting of the Company.
PURCHASE, DISPOSAL AND REDEMPTION OF THE COMPANY'S LISTED SECURITIES
The Company and its subsidiaries did not purchase, dispose of or redeem any of
the listed securities of the Company during the year.
CLOSURE OF REGISTER OF MEMBERS
The Register of Members will be closed from 23 May 2003 (Friday) to 29 May
2003 (Thursday) (both dates inclusive). In order to qualify for the dividends,
all transfers, accompanied by the relevant share certificates, must be lodged
with the Company's share registrar, Hong Kong Registrars Limited, at Rooms
1901-5, 19th Floor, Hopewell Centre, 183 Queen's Road East, Wanchai, Hong
Kong, not later than 4:00 p.m. on 22 May 2003 (Thursday).
FORWARD-LOOKING STATEMENTS
Certain statements contained in this announcement may be viewed as
"forward-looking statements" within the meaning of Section 27A of the U.S.
Securities Act of 1933, as amended, and Section 21E of 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 in Form 20-F filed with
the U.S. Securities and Exchange Commission (the "SEC") and the Company's
other filings with the SEC.
PUBLICATION OF ANNUAL RESULTS ON THE INTERNET WEBSITE OF THE STOCK EXCHANGE OF
HONG KONG LIMITED
All the information required by paragraphs 45(1) to 45(3) of Appendix 16 to
the Rules Governing the Listing of Securities on The Stock Exchange of Hong
Kong Limited will be published on the website of the Stock Exchange in due
course.
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: April 4, 2003