Brightoil Petroleum (Holdings) Ltd. has announced that gross profit for the six months ended 31 December 2013 rose to HK$893.7 million (approximately US$115.2 million), up from HK$740.7 million (US$95.5 million) the previous year.
Total revenue increased by 71.0% to HK$40,345.9 million (U$5,200 million), compared to HK$23,589.5 million (US$3,040 million) in the corresponding period in 2012.
Commenting on the results,
Dr. SIT Kwong Lam, Chairman & CEO of the Group, said: "We continued to sustain implementation of our strategy to further develop into an integrated international conglomerate. Under the challenging operating environment, we have delivered solid operational results and further strengthened our leading position in the industry. By optimizing the allocation of resources to enhance the synergy of our four core businesses, we will aim to expand our business scale and improve our margins in an effort to further enhance profitability."
Please find below the company's summary of its activities for the six months ended 31 December 2013.
International Trading and Bunkering
For the six months ended 31 December 2013, the Group’s International Trading and Bunkering business unit focused its efforts mainly on building its crude trading relationships across Asia and its trading volumes into China and North Asia. The crude trading team successfully renewed its crude supply arrangement with Chinese major oil companies for another year in the period under review. The ITB team focused its efforts on growing its sales volume across Asia. The business unit also continued to look at costs reduction by extending its tankage subleasing programme to Singapore as well as putting more efforts to speed up overseas office closures.
During the period under review, several shipping companies have begun to post gains in profitability as a result of their aggressive cost controls and measures to manage operating efficiencies. The global bunker demand for second half of 2013 is estimated to be flat at best from the first half of 2013. Under such conditions, the ITB’s total bunker sales volume for the period under review was 18% better than the first half of FY2013.
Going forward, the Group will continue with its strategy to expand its bunkering presence in China by venturing into more Chinese ports. The Group will also look to reduce its dependency on third-party barges, focusing the efforts to move oil onto its own bunker barges to its customers. This will enable the Group to have more control over the quality and quantity of its deliveries. On the crude oil trading front, the Group will look into widening its crude oil sourcing into South America and continue to focus on moving more crude oil into North Asia.
Marine Transportation
The Group’s fleet of five VLCCs was fully utilised during the period under review and was engaged primarily in carrying cargoes into China. This included the Group’s own system cargoes as well as that of third party customers. The utilisation rate and earnings for the Group’s fleet of four Aframaxes improved steadily during the period under review. These vessels have been employed in a mixture of short term time charters, the Group’s own Chinese Fuel Oil trades and serving strategic customers in the spot market.
Oil Storage & Terminal Facilities
The construction of an oil storage facility on Waidiao Island in Zhoushan, with a total capacity of 3.16 million cubic meters, will be completed in two phases. Phases 1 and 2 of the project will have a capacity of 1.94 million and 1.22 million cubic meters, respectively. The facility will be equipped with 13 berths which can accommodate vessels from 1,000 to 300,000 DWT. The Group has commenced construction of Phase 1, and commercial operations are projected to commence around the end of 2014 or first half of 2015. Commercial operations of Phase 2 will take place around the end of 2015 or the first half of 2016.
The construction of the oil storage facility on Changxing Island in Dalian, with a total capacity of 7.19 million cubic meters, is expected to be completed in two phases. The estimated capacity of Phase 1 and 2 will reach up to 3.51 million cubic meters and 3.68 million cubic meters, respectively. The facility will be equipped with 13 berths to accommodate vessels from 1,000 to 300,000 DWT. Completion of the project will be delayed as a result of the Chinese government’s adjustment of its design and requirements for fire and general safety, which extends the review of the project. Land preparation work for the project has been completed. The Group expects approval to be granted for Phase 1 and the completion of construction by the end of 2015. Construction of Phase 2 is projected to be completed by the end of 2016.
Leveraging its strategic geographic location, the storage facilities will generate stable rental income for the Group and will enable synergies with the Group’s ITB business and Marine Transportation business for better economies of scale. They will also contribute significantly to the Group’s operational performance on the whole by enhancing the quality and efficiency of its bunkering and crude trading business.
Upstream Business
The Group’s upstream business accomplished remarkable achievements during the period under review. Daily production of the Xinjiang Tarim Basin Dina 1 Gas Field (“Dina 1 Gas Field”) reached approximately 1 million cubic meters of natural gas and 63 metric tonnes of condensate oil. The Group is looking into developing new wells in the Dina 1 Gas Field to increase production.
Production at the Tuzi Luoke Gas Field (“Tuzi Gas Field”) commenced in December 2013. Upon full production, Dina 1 Gas Field and Tuzi Gas Field are expected to produce 1.3-1.5 billion cubic meters of natural gas, and 25,000-35,000 metric tonnes of condensate oil annually.
In February 2014, the Group announced that it has entered into a stock purchase agreement with Anadarko China Holdings 2 Company Limited, a wholly-owned subsidiary of Anadarko Petroleum Corporation, to acquire participating interest in two oil producing blocks in western Bohai Bay, from which oil and gas is currently produced, at a base purchase price of US$1,075,000,000, subject to certain adjustment specification mechanisms. The acquisition is an important step for the Group in the implementation of its overall strategy to progress into an integrated oil and gas company with sustainable revenue streams. The transaction is expected to be completed later this year pending preferential rights, regulatory approvals and other customary closing conditions. The Group believes the acquisition will materially strengthen its upstream position while complementing other core businesses.
Looking ahead, demand for oil and gas resources in China will remain strong and upward adjustment of the natural gas price is expected to continue in the future. The Group will continue to grow its oil and gas field exploration, exploitation and production business as its key strategic focus, and as an important profit contributor in the coming fiscal year and in the long run.
To consolidate its market leadership, the Group will continue to dedicate its efforts to developing its four main businesses and strengthening the operational foundation of each of its business units. The Group’s upstream gas field exploitation and production business is set to become the key driver of the Group’s growth and profit. Tapping the gradual implementation of the 12th Five-Year Plan, China’s growing demand for natural gas, oil storage and crude oil imports, along with the development of Zhoushan Islands New Area as the centre for large-scale commodity storage, processing, transiting and trading, the political and market environments are expected to support the future growth of the Group’s four main businesses, enabling it to increase returns for its shareholders.
Dr. SIT added: "We made significant progress in our core businesses despite market uncertainties and challenges. Building on the acquisition of participating interest in two oil producing blocks in western Bohai Bay, the Group will achieve synergies with its other businesses and develop a stronger presence in the upstream operations, paving for the Group to further develop into an integrated international conglomerate. We will continue to strengthen the foundation of our business in this area and to enhance our leading position in the industry."
