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Public company info - Hilong Holding Ltd. , 01623.HK
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Hilong Holding Ltd., 01623.HK - Company Profile
Chairman ZHANG Jun
Share Issued (share) 1,696,000,000
Par Currency Hong Kong Dollar
Par Value 0.1
Industry Petroleum & Gases Equipment & Services
Corporate Profile Business Summary: The Group is principally engaged in manufacturing and distribution of oil and gas drilling equipment and coating materials, and provision of coating, oilfield and offshore engineering services. Performance for the year: Revenue was approximately RMB2,623.0 million, representing a decrease of approximately 28.1% as compared with 2019. Loss for the year was approximately RMB298.7 million, as compared to the profit of the year of RMB188.2 million in 2019. Loss attributable to equity owners of the Company for the year was approximately RMB298.8 million, as compared to the profit attributable to equity owners of RMB176.8 million in 2019. Business Review In 2020, the COVID-19 epidemic continued to rage around the world, resulting in a severe impact on the global economy as well as a sharp drop in crude oil demand and dramatic fluctuation in oil prices. The significantly reduced investment in the global oil and gas industry and the deteriorated market environment posed unprecedented challenges to numerous participants in the global oil and gas industry, including the Company. In addition, the Company was experiencing a debt restructuring in 2020, and has experienced more severe tests than its industry peers. Affected by the combined effects of the above factors, the Company’s performance has declined in 2020. During the reporting period, the Company recorded a total revenue of RMB2,623 million, representing an approximately 28% decrease from the total revenue recorded in 2019. In particular, the performance of oilfield services as well as line pipe technology and services segments has plunged in 2020 due to the impact of overseas epidemic. Despite the impact from external market environment, the Company maintained stable operation in general. On the one hand, the Company stabilized its daily operation by reducing capital expenditures and costs and increasing efficiency. On the other hand, it increased the efforts for market expansion to prepare for future development. Meanwhile, the Company attached great importance to cash flow management, prioritizing the cooperations with customers with greater payment certainty, so that the Company’s operations were less exposed to the impact of external environment. Oilfield equipment manufacturing and services During the reporting period, the oilfield equipment manufacturing and services segment generated a revenue of RMB1,307 million, reflecting a 21% decline compared to that in 2019. Affected by factors such as the epidemic and oil price fluctuations, oil and gas drilling activities have been slashed worldwide. As a consequence, the demand for oilfield equipment within the industry declined, which also affected the relevant business of the Company. However, compared with other large-scale drilling equipment, drill pipe was a daily consumable that requires regular replacement in oil and gas exploration and development activities. In addition, the OCTG coating can effectively extend the service life of the drilling tools and reduce the accident rate, thereby improving drilling efficiency and saving the overall costs for customers. Therefore, the Company’s oilfield equipment business was able to preserve its strength in the general industry downturn. During the reporting period, the three OCTG coating plants in Russia were operated at full capacity. Among them, the newly commissioned plant in Orenburg, which commenced operation in 2019, delivered exceptional performance with revenue growth exceeding 100% in 2020. In the domestic market, although the Company focused on the high-end market, the low-price strategy conducted by some competitors led to the decline of the overall price level across the industry, exerting certain pressure on the profitability of the Company’s domestic OCTG coating business. However, the Company adhered to high-end and customized market positioning, and actively explored new business areas such as applying OCTG coatings in gathering pipes, customized pipes and process piping in refineries. Such efforts have achieved preliminary success in both domestic and overseas markets. Oilfield services During the reporting period, the oilfield services segment recorded a total revenue of RMB684 million, representing a decrease of 47% compared to that in 2019. The global oil and gas industry experienced drastic fluctuations in 2020, and oil companies generally cut down their drilling investment. In particular, the overseas resurgent pandemic situation has caused the governments of many countries to suspend various economic activities for the purpose of epidemic prevention, adding to the difficulty for the oil and gas industry to resume production. Since the Company has years of deep engagement in overseas markets, the oil services business suffered a more significant slump in results compared to other segments of the Company. Facing the pressure of both reduced workload and falling prices, the Company tried its best to control the annual average utilization rate and the price of the rig fleet at acceptable levels, and maintained stable team as well as orderly production and operation. During the reporting period, the Company’s several drilling and workover rigs continued normal operation with satisfactory overall performance, which were highly recognised by customers. While striving to execute existing contracts as scheduled and maintain the prices for existing contracts, the Company tried hard to bid for new opportunities. For example, the Company won the new contract for two drilling rigs with UkrGasVydobuvannya (UGV) in Ukraine, and thereby achieving seamless connection between new and old contracts. In addition, the Company proactively participated in the bidding of turnkey projects and realised stable operation of trading business. The Company also adopted a series of measures to reduce capital expenditures and to achieve higher efficiency with reduced costs. For instance, the Company currently only considers potential projects that can make use of the existing drilling rigs, and temporarily suspends the bidding for projects that require massive initial capital investment. The Company also disposed inefficient drilling rigs to increase cash inflows and optimized supply chain management to reduce procurement costs. Line pipe technology and services During the reporting period, the line pipe technology and services segment recorded a total revenue of RMB254 million, reflecting a decline of 30% compared to the that in 2019. In 2020, due to the impact of the epidemic, the implementation of some overseas pipeline coating projects was suspended, which has imposed certain pressure on the overall performance of the segment. Notwithstanding that, the Company firmly captured its core clients such as Baosteel in anti-corrosion pipeline coating and concrete-weighted coating business, and obtained a number of large-scale projects, including the Hong Kong LNG offshore pipeline project. Meanwhile, the Company achieved a major breakthrough in its cooperation with new customers such as Zhejiang Petroleum & Chemical, and obtained multiple orders including Yushan – Zhenhai transmission pipeline project, with considerable contract amounts. The pipeline inspection services progressed smoothly after the pandemic was brought under control in China in the second half of the year. The Company actively explored the market in Western China. In 2020, the pipeline inspection business won the bid and successfully executed four projects for PetroChina Western Pipeline, and laid a solid foundation for the future development in this regional market. In terms of technology, with improving inspection capabilities, the Company successively started the operation of internal magnetic flux leakage (MFL) inspection devices of multiple sizes in 2020, indicating that the Company succeeded in developing the second-generation electronic system of internal inspection devices and that the Company has completed its advancement towards providing high-end series of self-developed equipment step by step. Offshore engineering services In 2020, the offshore engineering services segment recorded a total revenue of RMB378 million, representing an increase of 7% compared to that in 2019. The segment focused on the offshore engineering services market in China and Southeast Asia, and actively expanded into the field of public infrastructure engineering. Since the establishment of the business, the Company has successfully executed a number of projects and built an outstanding track record as well as competitive advantages. During the reporting period, the offshore engineering segment successfully completed the phase I of the 135-kilometer offshore pipeline construction of the Bangladesh single-point mooring and double pipeline project, the most complicated overseas construction project undertaken by the Company. The Company set a number of high-efficiency construction records while ensuring the quality and safety of the project, which was highly recognised by the customer and other partners. Hilong completed the key parts of the project with only half of the planned time, freeing up more time for HILONG 106 to participate in subsequent market opportunities. At the same time, this segment also made a breakthrough in expanding beyond the oil and gas industry in 2020, securing more diversified business opportunities. The Company provided vessel leasing and operations-related services for the offshore wind power construction project of the Xiamen Branch of CCCC Third Harbor Engineering Co., Ltd. (中交第三航務工程局有限公司廈門 分公司), with a total contract value of RMB233 million for a contract term of 17 months. The project commenced in July 2020 and was a milestone marking the successful entry of the Company’s offshore engineering services into the offshore wind power construction market. Research and development The Company always attaches great importance to investing in technology R&D and the transformation of the R&D results. In 2020, all business segments of the Company have either established new R&D projects or achieved milestone results such as the product optimization and experimental research of 120S and 125S high steel-grade sour service drill pipe products, the research and product optimization of high-strength anti-corrosive drill pipes, the development of an information system for the manufacturing process of drilling products, the development of the powder-based OCTG coating materials applied in ultra-high temperature environment, the research on anti-corrosion coatings on the outer surface of pipes as well as the supporting coating process and equipment, the promotion and application of internal pipeline inspection devices in various sizes, the development of extended functions for the data processing and analysis system of internal pipeline inspection systems, the optimization design of the steel slag concrete-weighted coating of the offshore pipeline, and the research and development of anti-corrosion technology for pipe-in-pipe. The Company will continue to consolidate its technological advantages, adhere to the development strategy of technological innovation, and drive future development with technology. Prospects: In 2021, supported by multiple favorable factors including the effective control of the pandemic in China, the implementation of vaccination in overseas countries and the change of the U.S. president, the international oil prices have stabilized and rebounded, and the global oil and gas industry is expected to gradually recover. In terms of the domestic market, China has entered the third year in implementing the seven-year action plan for the oil and gas industry which spans from 2019 to 2025 and the domestic oil and gas exploration and development activities will remain active. The National Petroleum and Gas Pipe Network Group Co., Ltd. has fully taken over the domestic oil and gas pipeline infrastructure assets and officially commenced in-grid operation in 2020. In the future, it will also promote the construction of major oil and gas pipeline network in a practical manner. The Company, as a domestic and international leader in multiple oil and gas-related sectors, will benefit from the market opportunities arising from the stabilization of the global oil and gas industry and a new round of oil and gas development in China. In terms of the domestic drill pipes market, in line with the country’s increasing exploration of unconventional oil and gas resources such as shale oil and gas and coalbed methane, the Company will also focus on developing and promoting such products. The Company will also adopt differentiated marketing strategies for different customers to further increase market share. In terms of the overseas market, in the Russian market, The Group’s focus will be placed on following up with the core large-scale customers, increasing the efforts on promoting highend drilling products and repairing services, developing new growth impetus and improving profitability. In the Middle Eastern market, The Group will always be committed to developing highend markets, actively following up with the key customers and striving for more orders for high value-added products. For the OCTG coating business, the Company will delve deeper into the potential of the domestic market, keep improving industry penetration and market coverage, as well as explore and develop new demands, such as the application of OCTG coatings to ground gathering pipes and coalbed methane production. In overseas markets, the Company will seize market opportunities in Russia and its surrounding regions. Starting from the R&D of coating materials, the Company will opt for diversification and differentiation to meet the individual needs of customers. In addition, the Company will also actively follow up the orders of the customized pipes such as bend pipes and fittings in the Middle Eastern market and promote the related business such as hardbanding coating services. As oil prices gradually stabilize, the global oil and gas industry will resume investment and production activities, and the oil services industry will also be able to embrace new development opportunities. The Company will increase its market development efforts and seize every market opportunity to ensure and increase the utilization rate of its rig fleet. On the one hand, the Company will be committed to expanding new markets and new customers to achieve breakthroughs as soon as possible in China, Russia and the Middle Eastern markets such as Saudi Arabia and Libya. On the other hand, the Company will focus on strengthening customer stickiness, such as striving for follow-up cooperation opportunities with Shell and other mainstream customers in Oman, one of the overseas advantageous markets of the Company. In addition, the Company will continue developing the technical services business in the oil services segment, and plans to enter the market through the services such as drilling acceleration, well completion and oilfield environmental protection, so as to gradually reduce its dependence on the drilling and workover business. The Company will grasp the major opportunities brought by the market-oriented reform of oil and gas pipeline network operations in China for the line pipe technology and services segment, and leverage on the Company’s advantageous position in the domestic market over the years to focus on exploring the market opportunities brought by the new height in domestic oil and gas pipeline network construction. At the same time, the Company will continue to rely on core customers such as Baosteel to develop overseas business in the new international market environment. The Company is equipped with inspection devices integrated with data analysis system for its internal pipeline inspection service business, which features advanced technology and has now become a high-tech business with high growth. The team has secured a number of orders and potential projects to follow up, and will record considerable growth in 2021. In offshore engineering services, the emphasis will be placed on capturing potential business opportunities from CNOOC’s “seven-year action plan” and the offshore wind power industry. In terms of market regions, the focus will remain on the domestic, Southeast Asian and Middle Eastern markets.

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