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[Interpreted] Distinguished leaders, investors and analysts, good afternoon. Thank you for joining us today for the China Oilfield Services Limited, COSL First Quarter Earnings Conference Call. COSL is one of the world's largest integrated oilfield-service providers. Our services span every stage of oil and gas exploration, development, and production. Our operations are categorized into 4 segments: geophysical and engineering exploration, drilling services, well services and marine support services.

By leveraging our integrated capabilities, we provide clients with full life-cycle oilfield solutions. We remain highly responsive to evolving trends in the international oil and gas market while steadfastly prioritizing technological innovation as our leading strategic driver. We continue to refine our lean cost-control measures and actively promote the synergy between domestic and international markets, the so-called dual circulation strategy.

We are committed to translating our premium equipment and technical prowess into a leading market position, striving to deliver robust performance to reward our shareholders and society at large. Please allow me to introduce the members of our management today joining us, Mr. Qie Ji, our Chief Financial Officer. Today's conference will consist of 2 parts. First, our CFO, Mr. Qie Ji, will provide an overview of the company's performance for the first quarter of 2026, and then this will be followed by a Q&A session. I will now turn the floor over to our CFO, Mr. Qie.

[Foreign Language]

[Interpreted] Thank you, Mr. Qie, for the presentation. We will now proceed to the Q&A session. To allow more investors the opportunity to participate, please limit yourselves to no more than two questions. Before asking your question, please state your name and the company's relation. Please note that [indiscernible] interpretation will be provided throughout the Q&A session. We kindly ask you to [indiscernible] after each question to allow time for interpreter. [Operator Instructions]

[Interpreted] So I am [indiscernible] Everbright Securities. I have 2 questions, starting by the first question. As we can observe that with China's national strategy of ensuring national energy security, COSL has seen increased production output as well as reserves, in particular, with remarkable achievements in the deepwater area and South China Sea. We have also seen that you have increased the utilization of your semi-sub platform in deepwater area in Q1.

So the first question concerns, can you give us a guide on the day rate forecast and operational volume of your deepwater platform throughout the year? So that's the first part of the first question. And the second part is, how do you see your competitiveness against international oil service giants?

And the second question is we have observed that oil prices have been skyrocketing since beginning of March and have remained at high level, in particular, given the high oil prices and given the current geopolitical conflict, China's national energy security becomes all the more important. Me and a lot of other investors all agree that Chinese government will do more in safeguarding its national energy security.

So the question is, how do you see the status quo of your operational volume? And do you have any forecast for your operational volume down the road as well as CapEx forecast? Do you feel the same as I have just introduced, in particular, how is your order reflecting such a new situation?

[Interpreted] So you have touched upon 2 questions. One more concerning the macro side and other more about our forecast. I'll try to answer both of the questions briefly. So firstly, on the whole, our deepwater semi-sub platforms have been doing quite well for the first quarter of this year, mostly benefiting from our overseas operations, especially operations in Brazil, south part of Brazil, which have seen obvious -- clearly improved operational days because that platform was not became operational until September last year.

As for the Chinese business, our semi-sub platform's operational days or operational volume have maintained relatively stable as new prices become executed. While to be honest, some of the semi-sub platforms, the price have increased slightly. This offset the slight decrease of the actual operational days of our semi-sub, which maintained the overall increase of our drilling platform services.

As for the full year cost because we are waiting for the whole year cost, from our clients, we maintain dynamic conversations with them, hoping to satisfy their requirements of resources in either against the geopolitical situation in the Middle East or in the new era of the 15th Five-year plan period.

As for the second question, I think that we still need to investigate and analyze how things change regarding the oil prices and regarding the Middle East situation because we were seeing spot prices as high as more than $110 or $120 and even higher. And at one time, WTI was even higher than Brent. However, over the past couple of days, we do see spot went down to about $80 plus.

So such volatility has already become something that we can barely make any forecast about. I still believe that oil and gas suppliers will make sustainable and rational judgment on their part. As for domestic China situation, CNOOC is working to become a leading supplier contributing to oil and gas production increase in China domestic.

And we have also seen that their crude output for Q1 increased and they contributed a large part of the output increase of crude oil coming from China. So again, to align with the first question, we will keep observing CapEx adjustment and whole year forecast adjustment made by CNOOC, and we will provide resources to provide guarantee to their request.

[Interpreted] Lawrence from BOCI, Bank of China International. I also have 2 questions. The first question is that I've seen that in the first quarter of your finance expenses, there was a large part of exchange losses. So can you walk us through to what extent or how large such losses and why there was such a loss? And secondly, I would like you to walk us through the income and profit performance of the first quarter.

[Interpreted] Okay. Thank you very much for asking the questions. Regarding your first question about our finance costs, indeed, in Q1 2026, we have seen exchange losses to the amount of around CNY 300 million, CNY 303 million to be more specific, which is CNY 208 million higher than the same period last year, mainly because of the accounting denomination currency that we use, and we have business dealings with overseas subsidiaries and the balance contributing to such number that you have seen.

It's not necessarily a result of our increased business scale overseas. However, as we keep dealing with our overseas intermediaries, the balance and the number will always be there. To elaborate further on this question, we are very much aware of either exchange profits or losses as a result of the situation that I just introduced and how it affects or even disturbance the operating performance of the company, we are even bothered by that.

So we are currently examining and looking at some possible solutions to take measures at the right time, we choose the timing to take measures for the purpose of closing any influence on the normal operation of the company as a result of such FX exposure arising from accounting treatment. Measures include, but not limited to, adjusting the functional currency that we use in bookkeeping.

And then when it comes to a specific breakdown of our revenue and profitability, on the whole, things are better than expectation in terms of segment breakdown. For our drilling service, domestic and overseas revenue, operating margin, and operating profit, all 3 are better compared with the same period last year. In terms of the well services, domestic and overseas, with especially overseas revenue performed better than expectation. Operating profit margin reached around 18%, 1-8-percent and both domestic and overseas well service revenue and profit have increased year-on-year.

As for geophysical and vessel service, both performed stable. And to add one more thing about the operating profit. So for the first quarter of this year, operating profit of COSL reached CNY 1.53 billion, an increase of 22% year-on-year. Both domestic and overseas have increased 20% year-on-year, which means that the company's normal operations have been rather good, excluding or aside from whatever impact that we suffer from the exchange losses.

[Interpreted] Yan Bei Na From CICC. I have 2 questions. The first question is about your jackup because I've noticed that your jackup platforms utilization days in Q1 of this year went down a little bit because of some scheduled repair and maintenance scheme. So the question is, after the maintenance and repair complete, do you see their utilization days increase in Q2 compared with this quarter?

And my second question is about your business in the Middle East because we do see some pause in the operation of some contractors in the Middle East in March. However, starting from mid-April, a lot of contractors have recovered their operations. So I wonder how that will impact your Middle East operation.

[Interpreted] So to firstly answer your first question. Indeed, in Q1, our jackups repair days have increased significantly compared with the same period last year. Such repair has already been planned for by the company. And you will find that throughout the year of this year, there will be more repair days -- scheduled repair days of our platforms compared with previous years.

And for Q1, mostly such repairs are concentrated in our jackup platforms domestic, and our semi-subs repair have maintained stable. But you will also find that whatever impact the increased repair days of our platforms has on our company's revenue has already been offset by the high day rate of China domestic jackups and semi-subs and the execution of the high day rate in Norway and increased part contribution by Brazil.

There is one more thing I want to add for the first question because there is a part about our repair plan for Q2. Such plan will be very much aligned with the operational plan of our clients. So that's about the first question. As for the second question, the situation in the Middle East, the war occurred or took place in the Middle East on the 20th of February. So in Q1, the situation didn't impact us in a major way.

However, we do gradually start to feel such impact starting from mid or late March. Specifically, our jackup and semi-subs in Saudi Arabia and Kuwait maintain operational and keep charging. However, the land rigs in Iraq have been affected by the decreased output in Iraq and such impact is already being felt.

Then regarding your question about the Middle East changing situation, we basically will take 2 measures in response. One is to try to scale up our businesses in the Middle East. Let me give you some examples. We have recently secured a long-term large value contract for our well service in that region. And also, we have secured a turnkey or EPC contract for our drilling service in Iraq.

In addition to that, given our global landscape, leveraging such advantage as a global player, we try to have opportunities in ASEAN as well as in America as an EPC contractor. We already see progress in both fronts. The increased business, we hope, can hopefully offset the impact as a result of Middle East.

And on the other hand, we keep a close eye on the Middle East situation and make plans so that we are always ready when our clients are ready to resume their operations in that region. In another -- thirdly, we will seek opportunities as maximum as we can try to replace some of the players.

[Interpreted] From Guosen Securities. My question is, I noticed that a couple of days ago, COSL announced a cooperation framework agreement with a player in Kazakhstan because when it comes to the Middle Asia, COSL is a new player. Middle East -- Middle Asia features new in your global landscape. So can you walk us through the overall market of oilfield services in the Middle Asia or specific in Kazakhstan? And I would appreciate it very much if you can give us more details on how -- when do you expect the cooperation become more of a substantiality.

[Interpreted] Thank you for the question. Due to the limitation of my professional knowledge, I can only share with you to the best of my knowledge for COSL and for CNOOC, Middle Asia or Central Asia has been an area that we have left for a long time and the reentry into this place is something of significance.

So not long ago, the Chair of the Board, Mr. Zhao, went personally to Kazakhstan to sign the cooperation framework agreement that you have just mentioned, which will add a very promising point to the global landscape of COSL. So we did have conducted some preliminary investigation into the basic oil reserve situation of that country, and we find that mostly the reserves are in the mudflat area and very much prone to extremely cold weather.

So the plan will mostly request efforts by our colleagues from the cementing business area, directional drilling, LWD and the colleagues specializing in other areas to work together. We are currently having discussions on doing some -- on creating operational plans for some test wells. As more of the details of such plans are coming out, we will be happy to share with all of you more details.

[Interpreted] From Bank of America. I have 2 questions. So for the first question, I would like to pursue further on the exchange losses because we know that exchange profits or losses, only transactional differences are recorded in your profit. As for translational differences, such differences are recorded in your OCI. So I wonder whether the appreciation of RMB has affected your dollar-denominated contracts already signed.

And also, I would like to ask because you mentioned that your semi-sub platform day rates have increased. So may I ask whether such increase is observed in domestic China? Or is it because you have made adjustment of your day rate because of the RMB appreciation trend that you expect will continue down the road? And one more part of the question is if RMB keeps appreciating, whether exchange losses will keep being recorded in your profit in the future? And my second question is regarding your well service; can you walk us through it more?

[Interpreted] So to answer the question, let me give you a very simple example using specific numbers so that you understand it more easily. Let's assume that the parent company, transmits USD 100,000 to its overseas subsidiary, so the USD 100,000 is reflected on the balance sheet of the parent company at RMB 700,000 if the exchange rate is RMB 7.

In an extreme situation, if the exchange rate goes to RMB 6, which means on the balance sheet of the parent company, the RMB 700,000 becomes RMB 600,000 and the RMB 100,000 is naturally recorded as the exchange loss. For the overseas subsidiary because the RMB 100,000 is not -- USD 100,000 does not change because everything is priced in U.S. dollars. In doing balance sheet consolidation, USD 100,000 can be balanced out, but the RMB 100,000 as a result of exchange loss is recorded as finance expense.

So if, say, RMB keeps appreciating against the U.S. dollar, the exchange loss that you will find on our balance sheet will expand as a result of the example that I just mentioned. So we are working on taking different measures, trying to narrow the USD 100,000 exposure, taking different means, for example, including narrowing it from USD 100,000 to USD 10,000 in order to minimize the impact.

But if you take a look at a longer timeframe, throughout the 14th Five-year plan period in between the 2 years of '21, '22, there was 1 year a major exchange profit and the next year, a major exchange loss. But the overall impact on the company's balance sheet throughout the 14th Five-year plan period was CNY 40 million, 4-0-million.

As for the second part of your first question, you have actually raised 3 questions. So the second part of your first question regarding the semi-subs, on the whole day rate of our semi-subs for this year did not change in any major way. However, there was indeed one semi-sub in domestic China, the day rate has increased significantly in Q1, and its utilization rate reached almost 100%, which greatly contributing to the revenue increase of our semi-sub. As for overseas semi-sub platforms, because we have signed long-term fixed rate contracts with the clients, therefore, didn't -- there wasn't any major change.

As for the well-service business segment, in Q1, the revenue was CNY 6.07 billion, an increase of 5% year-on-year, mainly benefiting from the integration trend of our overseas business, which is growing very fast. In Q1, net margin was CNY 1.11 billion, an increase of 18% year-on-year. Both domestic and overseas have increased, especially overseas net margin has increased.

As for the well service margin rate, in Q1, the margin rate was 18.2%, an increase of 2 percentage points year-on-year. Domestic margin rate exceeded 20%, becoming a main contributor of our profit margin increase in Q1, mainly because last year, there were certain one-off factors reducing our margin and such factors becoming absent this year contributed to the margin increase. Going forward, we will continue to work harder in securing new contracts for our well-services.

As mentioned, despite the worst in the Middle East, we still managed to secure one high-value long-term contract for cementing service. I believe that the impact -- for all the impact, there will be such impact is only short term. As you can see, we still have 4 well-leader drill lock systems operating simultaneously in Iraq, which will help us to gain increasing market recognition and help us accelerate our business scale up in Middle East.

[Interpreted] In the interest of time, this will be the last investor.

[Interpreted] From Changjiang Securities, the question is about your shareholder return plan for the 15th Five-year plan period. Do you have any plan to increase your dividend payout to the shareholders?

[Interpreted] Thank you very much for the question. Giving back to investors or investor return, it is fair to say it's a purpose and the center of focus of all the business and operational activities of the company. As you can see, the increased EPS is a reflection of the 20% net margin increase of the net profit attributable to the shareholders, which is a testament to the fact that we respect and give back to shareholders.

So for the -- throughout the 14th Five-year plan period, you noticed that our revenue or our turnover increased from CNY 30 billion to CNY 40 billion and to CNY 50 billion, exceeding CNY 50 billion. We are still making plans and adjusting plans for the 15th Five-year plan period. But the hope is in the next 5 years, our revenue can achieve another milestone increase as we have seen before.

As for the dividend payout, we, of course, hope to fully share our growth with shareholders. This is very much dependent on the business growth of the company and strong cash flow situation of the company. And on the whole, the payout ratio, we hope the payout ratio shall be stable with the increase.

[Interpreted] Thank you for the questions, and thanks to Mr. Qie and the management team for their detailed insights. We would also like to express our sincere gratitude to everyone for your ongoing interest in and support for COSL. Due to time constraints, this earnings conference call is now drawing to a close. If you have any further questions, please feel free to reach out to our IR department any time. This concludes our conference call for today. Thank you all and have a nice day.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Good morning, investors and analysts. Welcome to the 2025 Annual Results Announcement of China Oilfield Services Limited. On behalf of the company, I would like to thank you all for taking the time to attend.

First, allow me to introduce the representatives from the Board of Directors and Management attending this event. They are Mr. Zhao Shunqiang, Chairman and CEO; Ms. Chiu Lai Kuen Susanna, Independent Nonexecutive Director; Mr. Sun Weizhou, Executive Vice President and Board Secretary; Mr. Qie Ji, CFO.

China Oilfield Services is one of the world's largest integrated oilfield service providers, boasting a comprehensive service chain and a robust fleet of offshore oilfield service equipment as well as a well-established R&D system and service support system. The company focuses on 5 key development strategies: technology-driven, cost leadership, integration, internationalization and regional development. During the 14th 5-year plan period, the company has achieved continuous breakthroughs in key core technologies, significantly enhanced the profitability of its large-scale equipment and continuously strengthened its core competitiveness in oilfield services. The company remains committed to reestablishing its cost advantage and strengthening its cost control capabilities. It is dedicated to deepening its expertise in the marine energy resources sector, firmly upholding the philosophy of creating value for clients. COSL excels at integrating its operations into clients' value chains to generate added value, thereby enhancing clients' investment efficiency and returns.

Today's event is divided into 2 parts. First, Mr. Qie Ji, CFO, will present the 2025 annual results and the company's future development outlook, followed by a Q&A session. We now invite Mr. Qie to take the floor.

[Foreign Language].

Thank you, Mr. Qie. We will now move on to the Q&A session. [Operator Instructions] The consecutive interpreter will provide interpretation between Chinese and English for both questions and answers. Please allow sufficient time for the interpreter. Thank you.

My question is about the Middle East. Right now, we are in the middle of Middle East conflict. So I would like to know how much impact or what kind of impact has that been on your Technology segment and on your Drilling segment? And before the conflict in the Middle East, how many rigs or platforms were operating in the Middle East? And how many of them have been suspended because of the conflict?

Let me talk about our current operation and equipment being used in the Middle East. So we are now in basically 3 countries in the Middle East. First of all, in Iraq, we have 23 equipment for maintenance and also operations. And then in Saudi Arabia, we have 3 jack-up rigs or platforms; in Kuwait, 2 jack-up platforms.

Regarding our 5 jack-up rigs or platforms, there has been no impact on their operations. That means that there is no suspension or no termination of the operation of this equipment. As regards in the landlord site, well, they are still making arrangement in relation to the work and operations, and they are also continuing their payments of fees as well. However, in Iraq, in relation to the repair and maintenance machines and equipment, because in Iraq, basically, the business is integrated business. And so there has been 3 equipment and machines being affected by the integrated equipment suspension.

So first of all, my question is, under the current situation about geopolitics, well, how do you see the oil price trend in the year 2026? And also, I would like to know, in these circumstances, so what will be some adjustments or changes to your development plan?

I believe that the question or issue about oil price is a big issue. And in fact, we are not an expert in this area, but I can still share a couple of points in my opinion. So first of all, in relation to the demand and supply situation, right now, there is still an excess capacity, whereas demand is relatively weaker and softer. Under the influence of geopolitics, there is an imbalance or a lack of balance between demand and supply on a regional basis. And that has led to the volatility or changes in the oil price. But then the overall trend is not really changing. In the future, we are still cautiously optimistic, and we are not going to change our internationalization strategy as a result. And we believe that we will continue to benefit from the insights and experience that we have already accumulated from the previous 5-year plan period.

Despite all the geopolitical changes and also fluctuations, so actually, this year, because of that oil price has been affected. So right now, we are in the process of war. We don't know how long this war will last, and we don't know how intense or how severe this war is going to turn out. But then, of course, no country would like to see a war happening. We believe that this war may not really take a very, very long time, but we actually can't tell when it is going to end. So definitely, our internationalization strategy as a whole will stay. But the trend of our internationalization will be subject to some impact, especially during the short term. But in the long term, the direction is going to remain the same.

My question is about the drilling rigs. Actually, we have seen that there is an increase in profitability. So I want to understand the reasons behind the profitability growth. And regarding the domestic as well as overseas profit in this segment, how much is the relative contribution from domestic and overseas business? And in the future, in the coming 1 year, what kind of breakthroughs can we expect in this particular business segment?

Before I answer your question, I would like to share with you 3 big trends. First of all, we have seen acceleration of our internationalization strategy. So this is reflected quite clearly, if you refer to our revenue, our profit and also our management work and efficiency. And the second trend is that the increase in production within our country is continuing. So we have already completed the previous 7-year action plan, and very soon, we are going to see the coming 10-year plan, which is a new one. And we can see that there is strengthening of domestic supply and expansion. And the third trend is that during the 14th 5-year plan period, our company has been increasing utilization of large-scale equipment. And in fact, in the year 2025, all large-scale equipment have been put into use.

In the year 2025, there were 2 M&A projects. The first one is between ADS and Shell, and the second one is Transocean and another company. So in relation to the rig and platform operation, we can see that the overall integrated capability and also bargaining power for the larger companies have increased. So it is getting more and more difficult for the smaller companies to survive well.

So for the large contractors and companies, we can see that the profit margin is rising. However, for the smaller contractors, many of their rigs and platforms have been suspended. So during the 15th 5-year plan period in relation to large-scale equipment, we believe that it is in a tight balance situation. So we will put in more effort to acquire or integrate with the equipment of the smaller contractors.

So in the future, we believe that the oil companies will see quite a lot of difficulties in relation to technical development resources as well as spatial development. So they really need the more competent contractors with more capabilities and expertise to be able to deliver professional and expert services to them.

The first question is about the Marine Support segment in relation to the vessels. So all along, it has been based on market -- marketized pricing mechanism. So is there going to be any change to this pricing mechanism? And what will be the trend in the daily rates?

The next question is, under the current situation and concern regarding energy security, many big oil companies, including CNOOC, is expanding the work in terms of exploration. So when it comes to offshore oil fields, in the coming few years, how much will be your CapEx?

And then the third question is, given the decline in your gearing ratio, in the future, are you going to increase dividend payout?

So in fact, the questions that you have asked have touched upon the pain points in our operation. Regarding the pricing of vessels, this has been an old issue that has been dwelling for 10-odd years. Well, basically, this is a matter which both parties have to reach an agreement. During the 15th 5-year plan period, we have changed our strategies. And we are of the view that it is better to put higher requirements on ourselves than to making requests with other parties.

So first of all, given the current tight condition between demand and supply of resources, what we need to do is to change the structure. So we want to change customer base structure and also the structure of market revenue. We need to also make sure that we can achieve precise asset and resource allocation, and then we have to continue our internationalization strategy. So these are some strategies and measures to tackle this issue.

So we are using the certainty of our own work to solve the uncertainty condition in terms of pricing. And then we are also expanding our fleet. We keep on making adjustments to our overall structure, hoping that demand can be used to determine pricing relatively more. So in the future, we can anticipate that the energy autonomy will be a more and more important strategy and policy of our country.

So every year, when it comes to consumption of oil, it amounted to 750 million to 760 million tonnes, of which 500 million tonnes are imported. So this is the current situation.

Let me answer your third question concerning optimization of our debt and liabilities. Basically, we now see 3 major opportunities. First of all, there is a swap in terms of our total existing debt because some of our debts are going to expire. And then the second point is that there is right now a gradual decline in terms of the high interest rates of U.S. dollar. And for RMB, interest rate is relatively lower. So there is a difference -- an interest rate differential. And then thirdly, in terms of the currency mix, in the past, basically, it is mainly about expenses overseas. Because there were some M&As overseas, so foreign currencies were used for these transactions. And right now, actually, domestic expenses account for a bigger percentage. So that is also the third opportunity in relation to optimization of debt.

So actually, starting from 2024, we have been making plans and preparation for debt optimization, because in June to July 2025, there was the expiry of USD 1 billion debt. And then actually in mid-March, we had already issued a RMB 5 billion debt at 1.95% interest rate for a tenure of 3 years. So overall speaking, we have decreased the scale of our debt, and financing cost is also coming down. So what we have to do is that we need to continue to reduce the scale of our debt and optimize the structure.

During the 15th 5-year plan period, we are going to increase our investment into equipment. And we want to make sure that our gearing ratio will maintain stable and sustainable. So in terms of our debt and liabilities, we will make long term -- we are going to make arrangements by considering our overall long-term development. Regarding dividend, we have to consider the operational needs of our company, the company's future cash position in making decision. And then we also want to make sure that we can seize future development opportunities. But then if you look at our dividend payout in 2025, in fact, it is in a very good position.

So my first question is concerning exchange rate gain and loss. So in the second half of the year, there was quite a large impact arising from that. So what are the reasons behind? My second question is about your Technology segment. So in terms of the profit from this segment, so its share has been quite big all along. And last year, in the first half of the year, there was some change to that trend. Is there going to be -- or was there some improvement in the second half of the year? And in 2026, how much will be the profit margin?

During the 14th 5-year plan period, we have been continuously increasing our R&D expenses, and we have strengthened our R&D system as well. If you look at our R&D expenses every year, for example, in 2021, the amount was RMB 1.6 billion. And last year, it had already risen to RMB 2.2 billion. So it accounted for 4% of our total revenue.

And in fact, the input/output ratio in relation to our R&D expenses and investment has been increasing. In 2021, it was RMB 1 to RMB 2.5. In 2025, it was RMB 1 to RMB 3.1. Technology coverage in 2021, it was 59%. In 2025, 86%. So we are strengthening the overall strength of our Technology segment. In the 14th 5-year plan period, our revenue strength and also the contribution into total revenue and profit is also big and increasing. In 2025, from the Technology segment, it accounted for 55% of revenue and 72% of profit.

For overseas business, during the 14th 5-year plan, the strength of our Technology segment has also been enhanced. So the contribution to both revenue and profit has risen. In 2021, it accounted for 14% of total overseas revenue, and in 2025, 24%. So if we look at the operating profit margin of the segment in 2025, it was 16%. We are better than other peers in the industry, even though there is some slight decline on a year-on-year basis. However, we also need to exclude the nonoperating gains and losses. So for actually most of the segments, we saw very stable, even slight increased trend with only the exception of the cementing segment.

So at the end of last year, we won a contract with our Shenzi with a Thai petrol company. So the total contract value was USD 8 million. So this shows that our self-researched and developed technology has won international recognition. This is because of our R&D investment over the years as well as the work that we have done to strengthen our overall R&D system.

Recently, perhaps you are also aware that we have also won a contract from the Kuwait National Petroleum Company. Total contract value was actually RMB 400 million in terms of contract value. So you can see that we have achieved breakthrough in different regions and also different countries with our Technology segment. Our Technology segment is such that our value has been released on a continuous basis and our strength has been improving. We have won more and more recognition from customers. In the future, with our 1+2+N market layout of our company, right now, in terms of our overseas business, we are in the 5 major continents in 13 countries, and we have 120 operation sites. So in terms of both profitability and also revenue and shareholder return, we are seeing future improvements.

So in 2025, actually, we have seen fluctuations and volatility in the exchange rate of RMB. Last year, at the beginning of last year, it was in the range of around RMB 7.1. And then in April, it became RMB 7.4. Towards the end of the year, it was at RMB 6.8, RMB 6.9 roughly. So all these fluctuations have caused much impact to our exchange rate loss or gains.

During the 14th 5-year plan period, for our exchange rate loss, it was relatively flat. In the year 2022 to 2023, in fact, there was a year when there was a big exchange rate gain, but then there was also another year with a big exchange rate loss. For our country, it is actually trying its best to maintain a reasonable range in relation to exchange rate fluctuations. And in the short run, we believe that there are challenges in terms of exchange rate gain or loss. But then in the long run, we are going to put in more effort to strengthen management of our exchange rate loss and gain and also enhance the position, overall speaking.

There's only limited time, so I can only briefly give some explanation to the technical dimension of this question. So on one hand, within Mainland China, the expenses are mainly in RMB. But then when it comes to overseas business and also external payment, the usual habit is for USD to be used. So that's why we will be subject to impact from the fluctuations and volatility.

So just now we answered a question about debt structure optimization. So last year, we increased our RMB debt and we used it to repay some of the high interest rate USD debt. As a result, the interest rate has come down because of this swap. Well, for USD debt, the interest rate was 4% and we changed that into RMB debt at an interest rate of 2%. So there is this interest rate differential. But then at the same time, there is also depreciation in interest rates. So these 2 movements are offsetting each other.

I have 2 questions. The first question is concerning your rig platforms. Utilization rate has been high. And then we know that there is a tight demand and supply situation concerning the semisubmersible rigs. So do you have any plan to build new semisubmersible rigs?

My second question is related to the Technology segment. So we understand from the market that there is overseas development plan for this particular business segment. And now that there is the war and conflict in the Middle East region, so will this plan about achieving breakthrough in the Middle East be affected?

So first of all, in relation to large-scale equipment, during the 14th 5-year plan, we have seen a rapid development stage. And then we believe that in the 15th 5-year plan, it would be in a tight balance or tight equilibrium position. So we are actually expediting our development and also R&D in this regard, hoping to achieve low-cost construction and highly efficient construction as well. So our principle is one of productization. So we are going to capitalize on our self-developed design, our own R&D, our self-construction in our platform and rig construction work. So we will make sure that we can come up with our own design and own research and development.

And we believe that there are a few characteristics of the rigs and platforms that we develop and construct, namely that they are reliable, they are highly efficient, intensive and also there would be a high degree of integration. So we believe that we are able to make quite a lot of improvement in such a way that all such equipment construction work can be replicated and can be further promoted, so that they would be enough to support our future development for the coming 5-year plan period.

So let me comment on our Technology segment. During the 14th 5-year plan period, we have seen changes in the overseas market. First of all, in terms of regions, we have newly added Uganda, Kuwait, Brazil, Canada and Thailand. And then in terms of customers that we serve, we have also acquired new customers, including Kuwait National Petrol, customers in Saudi Arabia, in France and also in the U.S. As I mentioned earlier, we are operating in the 5 major continents in 13 countries, and we have 120 operation sites. So we have already diversified our market and also our customer mix. This is also a good testimony that our technology and our management is well recognized by our customers. We are even better able to withstand and control risk.

During the 14th 5-year plan period, especially at the beginning of that period, we have already established our 5 major strategies, of which the strategy about being technology-driven and also the strategy of integration have helped us enhance our overall competitiveness, especially in our overseas market and overseas development. So these 2 strategies have already accounted for 40% to 50% of our revenue in the 14th 5-year plan period. For these 2 strategies, integration and technology-driven, we have also diversified our businesses. And as a result, we have enhanced our overall competitiveness, and we are able to balance out market risk as well.

So we are of the view that the war is going to be temporary in nature and also it is rather local in nature. And we will keep on diversifying our market as well as our customer base. Our direction of technology development is already very clear. Competitiveness is improving. With the market foundation, technology foundation and management foundation that we have already built, we believe that our future development is going to get better and better.

The first question is about the optimization of structure. So just now, we heard from your answers that especially for overseas business, there is now industrial integration. And during the 15th 5-year plan period, you are going to increase your equipment resources. So regarding this increase in equipment resources, I would like to know how you are going to do it. Are you going to consider new equipment resources within China or the mature equipment resources, or are you going to consider overseas M&A? I think this is related to the structure optimization between domestic and overseas that you have been talking about.

And my next question is that your current business model is already different from your old past business model. You have already got the long-term agreement in place in the North Sea area, and the daily fee rates are sort of fixed. And is there any mechanism for the passing on of the oil price increase back to, for example, the oil companies and other companies, because in the past, costs have been controllable. But now that there has been a big surge in oil price, is there any way that you can pass on such oil price increase impact?

During the 14th 5-year plan period, as we are increasing our large-scale equipment resources, basically, there are 4 methods for us to do that: leasing, self-construction, transfer, and purchase or acquisition. So right now, we are increasing our development in our internationalization strategy. And as mentioned earlier, the large-scale equipment capability within China is also rising. So earlier, I mentioned the tight balance between resource demand and supply.

So we have already commented on the self-construction of equipment. And for the buy or purchase strategy, we will consider that when we see resources with high value for money. And for leasing, it has to be left for a later stage, because right now, we believe that we are going to increase our self-owned vessel fleet in order to support our future development and growth.

As regards to the price, pass-through mechanism for North Sea, if such mechanism can be put in place, it is good. But then right now, we believe that our customers also encounter much difficulty. We have got the long-term agreement signed for the North Sea region. It is actually because of the energy management system, we are able to lower cost for the operators. And at the same time, we can enhance efficiency. So it is actually a win-win situation for both the operators as well as ourselves. So this is also one of our key competitiveness when we operate in this particular segment.

Last year was the final year of the 14th 5-year plan period, and this year, we will see the start of the 15th 5-year plan period. During the 14th 5-year plan period, our integrated overall capability, our innovation capability and our management capabilities have improved significantly. And we have the confidence that we will be developed into a global energy resources and technology company. So we have a lot of courage and confidence in achieving this goal.

During the 15th 5-year plan, we have actually got 4 main points in relation to our overall development. First of all, even though there has been some changes in our strategy, but then we have already consolidated and solidified many of our development strategies. So our future development is going to be centered around all these established strategies. So even though there is a lot of uncertainty in our development environment, but we will still be firmly adhering to our strategy.

Secondly, we will rely on the drive from our technology and equipment products and services to continue our business development. The third point is that there would be some solidification and changes in our development methods and approaches. In the past, we focused a lot on the major elements input. And this is going to be changed into a knowledge-based approach. And then finally, we will deepen our reform. Many of our reform initiatives started in the 14th 5-year plan period. And in the 15th 5-year plan period, we are going to refine them.

So under the leadership of our Board of Directors, we believe that we will see many friendly customers with very close relationship. We will be focusing on our core strategies and business segments. We will also center around our efficiency improvement and value improvement. So with all these, we believe that we can gradually develop ourselves into a first-rate global energy technology management company.

Thank you all for spending time with us today.

Thank you for all the questions and answers. Thank you, investors, friends for attending COSL's 2025 annual results announcement today. The company will continue to maintain communication with you through various channels. Today's session is now concluded. Should any investors wish to engage in further dialogue, please feel free to contact our IR team. We look forward to seeing you again next time. Thank you.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

[Interpreted] Dear ladies and gentlemen, investors, and analysts, good afternoon. Thank you all for joining the 2025 Third Quarter Earnings Call of China Oilfield Services Limited today.

COSL, guided by the goal of building a world-class energy service company with Chinese characteristics continuously optimizes resource allocation and enhances the efficiency of capital operation. It focuses on 5 major development strategies: technology-driven, cost-oriented, integration, internationalization and regional development.

The company is committed to optimizing the structure of large-scale equipment, continuously improving profitability, constantly breaking through and perfecting key core technologies and enhancing the core competitiveness of oilfield services.

In the face of a complex and volatile external environment, the company adheres to the goal of world-class standards, deepens and broadened strategic planning and intensifies and refines the implementation of strategies.

It promotes the coordinated development of production and operation as well as reform and development in an all-rounded way. Overall, the company presents a high-quality and sustainable development trend.

Please allow me to introduce Mr. Qie Ji, the Chief Financial Officer of the company. Today's press conference is divided into 2 parts. First, Mr. Ji will lead us to understand the company's performance in the third quarter of 2025. Afterwards, we will open a question-and-answer session.

Now, allow me to give the floor to Mr. Ji.

[Foreign Language]

[Interpreted] Thank you for the management's introduction. Now we will proceed to the Q&A session to give more investors the opportunity to ask questions. [Operator Instructions]

We'll now invite the first person to raise questions who is Wang Yiming from [ Merrill Lynch ].

[Interpreted] First of all, I would like to congratulate the company for achieving very good results for the third quarter of the year. I have 2 questions.

First of all, I have heard some news about certain drilling rigs, which will restart their operations. And I have heard that would involve 6 projects in total. Has the company heard such news?

And if that is the case, if certain projects are about to be recommissioned, is it going to have a positive impact on your daily rate and also utilization rate overall?

My second question is about the effective tax rate being reduced in the third quarter. I would like to understand the reasons behind that. And do you have any forward-looking projections into the fourth quarter? Or what is your projection for the next year concerning effective tax rate?

[Interpreted] Allow me to first address the first question, which is relevant to the development in Middle East. Actually, beginning from the month of August, we have started receiving some news about certain activities, but to date, we do not have any well-established demand coming from that region.

What we need to focus on at the moment is to ensure the high level of efficiency of our operations and at the same time, make effective dynamic adjustments to the use of our equipment in the global front so as to optimize the utilization of our equipment instead of just focusing on one single region.

Now allow me to switch over to your second question and share some figures with you. This year, overall speaking, the effective tax rate has returned to a normal level. Previously, it was between 19% and just below 20%.

And now if we look at the level for the third quarter, it is slightly over 20%. So by comparing the figures from the third quarter to the previous time period, I would not say there are any major fluctuations.

So if you look at the figures for Q1 to Q3, which was around 28% in the year 2024 and compare that level with the level we see this year, yes, you may say there is a rather substantial change.

So what are the main reasons behind such a reduction in the effective tax rate? Well, I can offer some of my own thinking and analysis. I believe the major reason is in relation to what happened to the operations in Norway.

We have enjoyed very good performance there with very high level of daily rate and also the level of losses have been substantially reduced. At the same time, there was no increase in the profit tax, which is a very good news.

So if you look at such situation, I can say that towards the -- if you compare the first 3 quarters of last year and that is caused by the operations or special situation in Saudi Arabia. So I would not say that these are generalized trends, but rather, I think such change or movements have been caused by certain special events or special activities instead.

So combining the 2 examples I have just given you, the impact would be a drive down of about 5 points. So if you look at the actual level, 28% to 29%, dropping to around 20%, that is a drop of 8 to 9 points.

So looking ahead into the fourth quarter and also the full year, I would say that such elements would continue to play a role. And since our effective tax rate has already returned to the normal level, I can tell you I do not expect any substantial changes.

[Interpreted] Let's introduce the next questioner, which is [Technical Difficulty]

[Interpreted] I actually want to ask about your well services segment. In the first half, I have examined the figures for the profit situation.

So I would like to ask, can you explain why in the third quarter the profit trend has shown such a direction? What do you expect the future profit margin to be looking ahead into the final quarter of the year? And also, what is the projection for the full year?

[Interpreted] Allow me to first answer your first question. Well, I should say in relation to our well services segment, if you look at what has happened in the past 3 years, I should say that we have seen very good improvement in terms of our scale of operations and also the quality of our operations.

And actually, I should say that we have already entered a phase of rapid development. So focusing on this year, we have seen the drop in oil prices and that has caused a lowering of investment sentiment in the upstream.

Overall investment reduction is about 6%. So to us and particularly to the well services segment, I think this trend will continue.

So when we talk about the technical segment, we need to understand that it is still well supported by the huge amount of workload available on the domestic front. So while we see a slight decrease of 3% comparing the first quarter to the third quarter, we can say such a mild drop is still outperforming the global trend or the global situation.

So when we talk about the drop in the domestic front, it is still well under control. And for the overseas performance, we do see a mild decline in our profit level. But still, our margin is standing at a relatively high level, which is more than 16%. So basically, we are doing quite well compared to our peers.

And we see that from Q1 to Q3, there was a drop of 3% to 4%, but it is, comparatively speaking, better than the global situation and also some of the other major players in the market. For example, we can see that [ Halliburton ] has also suffered a decline of their performance by 53 point odd percent and Baker Hughes dropped by 5% and other peers are also suffering. So you can draw a comparison here and see we are actually doing quite well.

So looking ahead into the future, when it comes to the well services segment, our future expectation is that we will expand our overseas operations. In particular, we will focus our efforts on the technical front.

We will enhance our collaboration with the IOC and AOC. And with our sophisticated technologies and very outstanding equipment offering, we believe we can expand our market share and improve our profitability.

Yes, we will continue to see fluctuations in the market. And yes, competition will continue to be fierce. And at the same time, we see a reduction in the sentiment of investment, but we will strive to improve ourselves and maintain all the operational indexes at a high level.

[Interpreted] Let's invite the next questioner from [ BAC ].

[Foreign Language]

[Foreign Language]

[Interpreted] I have 2 questions. First of all, I can see the revenue coming down in Q3, but the gross margin has gone up. Can you please explain why?

Second question, if you look at the fourth quarter last year, the trend was a rising revenue, but a substantially dropping profit margin. So is that going to be the trend this year? What are your expectations?

[Interpreted] At the moment, if you look at the progress we are making with our revenue, yes, we do see a mild decline, but that is well within our expectation. And when it comes to the gross margin level, certain activities or elements have created impact on us, especially in the third quarter, but the impact is not going to be as substantial as last year.

So I would say, together with some savings we have made on the portion of our financial expenses, I think things are well under control.

[Interpreted] So if we are to look ahead into the fourth quarter, that means we are examining the situation for the full year. I would say this is a usual trend that happens in the well services industry.

In the second half of the year, the revenue level would normally be affected by poor weather. But because of the speeding up of account settling in the final quarter, we expect a slight increase for our revenue level.

In relation to our cost factor, because of certain salary and wages limitations stipulated by the state, the cost going into salaries would take up a rather big portion of our overall cost. And all along, our company has been doing well this balancing act involving our different cost elements.

So at the moment, I can tell you we are still confident that the company will maintain a very good growth momentum.

[Interpreted] Let's invite the next questioner, which is Yan Bei Na.

[Interpreted] I have 2 questions in total. The first one is concerning the fees you have collected and any changes in such trend for the first half comparing it with the second half. Do you have any major fluctuations that you can share with us on this front?

And secondly, it is about [ South Sea #8 ]. Concerning this vessel, I think it is supposed to be heading directly to Brazil in the first half of this year. So what is happening to the latest operations of this vessel? What is happening, especially considering the political upheaval in Brazil? Is it affecting our operations and services?

[Interpreted] So allow me to answer your first question, which is the systemic charges and fees. I would say this is a new development trend in Mainland China. And if you look at the performance on this front, comparing what happened last year, which was only a single digit, it has already increased to about 50% or so this year.

So in relation to what will happen in the future, we will maintain such a big portion. It really depends on the actual situation on the site of our operations. Well, I would like to share a few points.

First of all, concerning such fees or rates, they do not create any big impact on our technical segment. The extent is only about a few hundreds of millions.

Secondly, the impact on the shorter term on our profit level is also quite small. So what we'll be doing is to optimize our raw materials combination to reduce our cost. And actually we have achieved very good results on this front for the first 3 quarters of this year.

So when it comes to the actual extent of such endeavors, it really depends on what is happening to our raw materials. We will need to continuously do our homework and do further development and make necessary timely adjustments. And sometimes when there are changes to the raw material side, we may need to make adjustments for about a year or so.

So let me move on to your second question, which is about South Sea #8. The vessel is now currently in the stage of being inspected by the Brazilian party.

So at this moment, there is no operation for this vessel. And the overall adjustment project will be completed once the inspection team is ready to collaborate with us on the adjustment front.

[Interpreted] Let's invite the next questioner from Macquarie.

[Interpreted] I have 2 questions. The first question is about the drilling services segment. I have heard that in the second quarter, there are actually no real operations in the Northern Sea. So can you please update us on what is happening? Is there some sort of saturation happening there?

And my second question is about your finance cost. I can see some obvious improvement this year. So what is your plan for your USD debt? And also considering the recent depreciation of renminbi, what is the outlook for next year?

[Interpreted] Concerning the drilling services segment, what happened in Norway in the second and third quarter, I think various vessels have gone under certain repair work. And overall speaking, such repair work is normal repair.

We are well within our plan. So whether the repair activities have gone up or come down, everything is well inside our plan.

I can give you some examples. For example, our Innovator in the second quarter is going through some repair work. And also the other vessel [ Protector ], there's a short period of repair in September.

So for the fourth quarter, I would say all 4 vessels will go into normal operations. So you can see, if compare the second quarter and the third quarter in relation to the fees, you may say that the performance in Q3 is much better compared to Q2.

In relation to the second question, from the first quarter all the way into the third quarter, we have made substantial saving in terms of our finance cost because we have been actively managing our debt and optimizing our debt. For example, between June and July, we have repaid USD 1 billion debt and we have also repaid other high interest-bearing debt.

So in relation to our overseas market changes, we will continue to keep a close eye on that. And at the moment, we are making arrangements to swap out high-cost debt.

Whether renminbi is appreciating or depreciating, its impact on our profit, well, I should say that there are real fluctuations involved. But based on the control mechanism of the state, a certain level or range of fluctuation is permitted.

So we will make our best effort in managing exchange rate risk so that they will not create any major impact on our operations.

So in relation to the well services segment, we are going to repay this mature debt of up to CNY 3 billion next year. By that time, we will decide with more details in relation to repayment of all the debt.

And we will have the purpose or ultimate objective of optimizing our financial scale and also reducing our finance cost. We are swapping out the high interest debt for lower interest debt.

So the benefit in the longer term from that front should be sufficient to offset anything on the depreciation side for the short-term currency changes.

[Interpreted] Thank you very much for the previous questions and our management's answers. Due to time constraints, we are now going to bring in the final question from Changjiang Securities.

[Interpreted] I only have 1 question, which is in relation to the well services segment. I can see that our peers have higher level of revenue.

So I would like to ask for a breakdown in relation to our revenue comparing domestic operations with overseas operations. And can you tell me something about the future trends concerning such split? And what will be the regions or areas of your focus looking ahead?

[Interpreted] Thank you very much for that one question, but it's actually a very rich question. So I will do my best to answer that.

In relation to the well services segment, first of all, I would like to share a number of characteristics about this segment with you. It is focused on the domestic front.

I think the portion here is over 80%, while the overseas operations, the scale, it is about 5 billion. Concerning profitability, it is around 16% to 17%. And overall speaking, profitability is stronger on the domestic front compared to the international operations.

Secondly, I would like to talk about our current arrangement and development. In relation to our well services segment, I think our future growth will be focused on the overseas operations and also on the technical front.

I believe we will expand further and solidify our market share in Southeast Asia and also increase our level of competitiveness in the Middle East market. We have already seen some real results inside Middle East.

I also want to add some personal sharing. If you look at the first 9 months, our locked overseas contract in relation to technical contracts, there's a growth of 47% and our bundled services have improved by 255% and we have also 36% of new contracts signed.

So if you look at the total sum or overall quality and also our ability of risk aversion, I can tell you we are making improvements on all fronts.

Thank you. That's the end of my answer.

[Interpreted] Thank you all for your questions and the detailed answers from our management. We appreciate your attention and support for the company.

Due to time constraints, this call is coming to an end. If you have any further questions, please contact us at any time. This concludes our meeting. Thank you.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]