Corporate Presentation Nov 2011
Disclaimer
Disclaimer This presentation is for reference purposes only. This presentation is prepared by Honghua Group Limited (“Honghua” or “the Group”) for business communications and general reference of the Group and shall not constitute in whole or in part any offer to purchase or subscription for shares in Honghua or any of its subsidiaries. The presentation shall not form any basis for any offer or commitment of any person(s) receiving it. Please consult a professional advisor prior to use or reliance on any relevant data. The presentation is an introduction only and shall not form a full description of the business, and current or past performance of the Group. The information and data presented or contained in these materials is subject to change without notice and its accuracy is not guaranteed. No representation or warranty, expressed or implied, is made on this presentation. The Group accepts no liability arising from the use of or reliance on any information (whether financial or other data) presented or contained in this presentation. No one shall in any way modify, copy, publicly display, publish or distribute such materials or otherwise use the materials for any public or commercial purposes without the prior written consent of the Group.
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Contents
1
Who Are We
2
Our Production Capacity
3
Our Advanced Products
4
What Are Our Growth Plans
3
1
Who Are We
4
Company History
10-year Leap Expand
Establish
1997 Established Sichuan Oil Guanghan Honghua Co., Ltd. 1998 Successfully developed the first 7,000 meter mechanical rig in China Restructure 2000 Invented and sold the first DBS rig in China
Develop
Listing
2010 Established Honghua Oil & Gas Engineering Services Ltd. and entered into the oil and gas engineering services 2009 Established Honghua Offshore Oil & Gas Equipment (Jiangsu) Co., Ltd. and entered into the offshore equipment industry
2008.3 Completed IPO listing on the Main Board of HKEx (Stock Code: HK196)
2006 Established Sichuan Honghua Petroleum Equipment Co., Ltd. and completed restructuring 2007 Established Honghua Group Limited, CNOOC and Nabors became strategic investors
2004 Implemented globalization strategies and established US subsidiary 2005 Exported the first “Made-in-China” DBS trailer rig to the US
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Shareholding Structure As of 30 May, 2011
Ally Giant: Controlling shareholder and its affiliates (Management) Nabors: Strategic investor and the largest land drilling rig manufacturer in North America
COOS: Strategic investor; a subsidiary of CNOOC (One of the largest state-owned oil companies and the largest offshore rig manufacturer in the PRC)
6
Company Structure Honghua (HH) Group Limited Overseas subsidiaries 50% Honghua America, LLC
Egyptian Petroleum HH Rig Manufacturing Shareholder Co.
50% Honghua Ukraine Ltd.
100%
100% Honghua Russia Ltd.
80%
Honghua Golden Coast Equipment FZE
100% Honghua Holdings Ltd.
100% Honghua Oil & Gas Engineering Services Ltd.
100% Sichuan Honghua Petroleum Equipment Co., Ltd.
Production base of land rigs and components & parts
85% Honghua International Co., Ltd. International sales and procurement
80%
Offshore equipment production base
80%
Sichuan Honghua Youxin Petroleum Machinery Co., Ltd.
Chengdu Hongtian Electronic Drive Engineering Co., Ltd.
Production base of controlling & heat preservation system
Production base of electronic transmit system
100% Honghua Offshore Oil & Gas Equipment (Jiangsu) Co.,Ltd
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Financial Highlights
(RMB MM)
1.7%
2010
15.4%
9000
16.9%
8000
Revenue
7000
Profit
19.1% 7784
6584
Total Assets 6000
5995
5000
4738
Europe & Central Asia North America Others
2009 3164
3000
2336
2182
1962
1169 464
1000 0
China Middle East South & Southeast Asia
3931
4000
2000
29.3%
17.6%
583
502 32 2005
2006
2007
1878
512
2008
10.5%
1.9%
0.7%
39.6%
12.8%
34.5%
-184 -128 2009 2010
-1000
China Middle East South & Southeast Asia
Europe & Central Asia North America Others
Base on revenue of the Group
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2
Our Production Capacity
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Manufacturing Capacity Honghua’s Production Base in Guanghan： •covers an area of about 666,000 m2 and has more than 2,000 employees •annual production capacity of 120 units of drilling rigs •contains an 80,000 square meter assembly and testing site in which 16 rig units can be assembled at the same time
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Land Drilling Equipment Production BaseSichuan Honghua Petroleum Equipment Co., Ltd.
• Honghua possesses a firstclass workshop specializing in welding, machining, forging and assembly;
• Providing high quality parts such as masts, hoisting system parts, rotation system parts, high & low pressure mud system parts and auxiliary system parts for rigs.
Rig Parts Assembly Workshop
Assembly Workshop
3D Warehouse
CNC Machining Center
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Land Drilling Equipment Production BaseHongtian Electronic Drive Engineering Co., Ltd. • Manufactures and assembles electrical equipment, including: VFD systems, SCR systems, MCC device, drilling motors, well-site circuit and lighting systems, etc. • Covers an area of 63270m2 and has 500 staff and 160 technicians
Motor Experimental Platform 总装调试车间
Cabinet Assembly Plant
总装调试车间 Laser Cutting Machine
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Land Drilling Equipment Production BaseHonghua Youxin Petroleum Machinery Co., Ltd. • covers an area of 99900 m2 and has 800 Staff, • produces mud tanks, solid control equipment, drilling floor tools, mud manifolds and camps, etc.
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Sales and ProcurementHonghua International Co., Ltd. Established Network: • Subsidiaries: 6 • Representative offices: 8
Well-established Global Network Close to our customer and market
Russia Ukraine Kazakhstan Europe Uzbekistan Asia China Azerbaijan Pakistan Egypt India UAE South East Asia Africa Indonesia
North America USA
Venezuela South America
Brazil
Australia
Representative Offices Subsidiary
Office in Sichuan
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Overseas Subsidiaries
Honghua Russia Ltd. • The parts distribution centre in Irkutsk has commenced operations. • Four services points and parts and components warehouses.
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Egyptian Petroleum HH Rig Manufacturing Shareholder Co. • Facilitates services development in Middle-East • Assembly and maintenance centre in free trade zone of Jebel Ali, Dubai will be put in use soon.
Honghua America, LLC • U.S. assembly base has obtained API (4F) and started assembly and refurbishment business for U.S. clients.
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Efficiency and Quality Management
Enhancement in Management • Enhance production progress through ERP • Implement strict cost control • Strengthen supplies and materials management • Reinforce process optimization, maximize utilization of raw materials
Improvement of Quality Control System • API certificate • Det Norske Veritas (DNV) management system certification
• Constantly modify and optimize quality control system • Reduce problems in shipment
Strengthening of Staff Training • Provide training in quality system • Deliver specialized training, such as Action Learning • Provide management enhancement training
• Increase customer satisfaction
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HSE Overview
May, 2011 June, 2010 DNV audited Internal Rectification
Pre-audit
Dec, 2010 To be audit by DNV Manual, Procedure and Practice doc
Initial Audit
DNV audited in Jan. Pending for:
ISO14001:2004 OHSAS18001:2007 Official Audit
Establish a comprehensive safety culture in Honghua 17
3
Our Advanced Products
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Industry Background 2008-2011 WTI Oil Price 160
High oil price drives the international rig activity
140 120 100 80 60 40 20 0 Jan 02, 2008
Jul 02, 2008
Jan 02, 2009
Jul 02, 2009
Jan 02, 2010
Jul 02, 2010
Jan 02, 2011
Source: EIA
International Rig Counts 6,000 5,000
New High of International Rig Count Carrying into 2011
4,000 3,000 2,000 1,000 0 Jan/09
Apr/09
Jul/09
Oct/09
Jan/10
Apr/10
Jul/10
Oct/10
Jan/11
Apr/11
Source: Schlumberger
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Land Drilling Products Diversified range of products and complete drilling equipment solutions
Comprehensive Product Line Mechanical rigs
Diversified Depth
Full Range of New Efficient Components
AC VFD (DBS) rigs
DC SCR rigs
Trailer (TruckMounted) rigs
Depth: 1,000m（500hp）
Top Drives
Mud Pumps
Motors
Arctic/ Desert DC rigs
Offshore Drilling Package
Depth: 9,000m(4,000hp)
Drawworks
Hooks
Swivels
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Major Rig Components
Land Rig Cost Structure
1.4% 6.7%
1.9%
5.5% Raw Materials Labor Cost Contractors
84.5% Depreciation Other Manufacture Cost
Based on 2010 Financial Data
Generally, raw materials for rigs accounted for over 80% of rig cost.
Among raw materials, major components include electric motors system, diesel generator, top drive, solids control system, as well as steel.
1. Crown block 2. Rig mast (derrick) 3. Travelling block 4. Hook 5. Swivel 6. Mud (drilling fluid) line 7. Drawworks 8. Rotary table 9. Control cabin 10. Drill floor 11. Substructure 12. Drill pipe (rod) 13. Blow out preventer (BOP) 14. AC VF drive system 15. Diesel engines 16. Mud pumps 17. Solids control system
Note: This diagram is for illustrative purposes only; it is neither complete nor to scale.
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Renowned Customers
Honghua’s Innovative DBS Drilling Rig In-house design and production of digital variable frequency DBS rig Innovative features applied to our made-in-China rig: • Digital control of major functions
• CNC constant pressure automatic drilling • Dynamic braking
• Touch screen control • Digitalized electronic driller
• Unified lifting of derrick and base • Stepwise skidding rigs
• Program-controlled drilling
automation
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R&D Overview The first manufacturer to apply AC VF technology in drilling rigs in China
• Three R&D institutes dedicated to development in various segments including land drilling products, offshore equipment and production technologies • Over 390 R&D personnel in Chengdu, Guanghan and Shanghai R&D Centres • So far, 117 patent applications accumulated patents filed to the Chinese State Intellectual Property Office. • the R&D results are directly applied to new products
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R&D - Design Capability
New Products
Advantages
Coiled Tubing Rigs (Fig.1)
Occupy less space, suitable for operations in restricted area or offshore platform
1
Enhanced drilling speed and safety for tubing workover and down-hole operation Highly automatic operation to decrease cost by 1/3 to 1/2 compared with conventional rigs 2
Direct Top-drives (Fig.2 &3)
3
Simplified structure, no need for lubrication system, less maintenance points, low fault rate High reliability and long operation life Modularized design with simple and compact structure, 30%~50% lighter in weight.
Planetary Transmission Drawworks (Fig.4)
Safe, reliable and with long service life
Direct-drive Mud Pumps (Fig.5)
Smaller size, light weight, and less noise
Suitable for offshore platform operation
4
5
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R&D-Design Capability
New Products
Advantages
Quintuple Mud Pumps
Automation tools
Jack-up Platform 9000m Drilling Modules
Compact, weight less 5~8t; High output pressure and flow rate; Using two size liners meeting all pressure and flow rate requirements; Running more smoothly; With direct drive motor control, no need shear pin and pulsation damper
Pipe deck crane, Power catwalk, Pipe racking machine, Power mouse hole, etc. Large rig cantilever to meet cluster drilling Highly automatic and intelligentized, extend working efficiency
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R&D-Design Capability
New Products
Fracturing Equipment 6000HP Fracturing Pump
Advantages
Super Single Pipe Rigs
Rack and Pinion Rigs
DBS AC variable frequency system allows flow and pressure stepless adjustment Double pumps for direct input to well head Simple installation and small size
High mobility Small well-site area Short drilling cycle Simple operation
Simple structure Less transport modules Smaller size Rapid transport and installation
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New Development in Electric Systems
Driller’s Cabin and Rig Information system Wellsite Record Drilling Integrated System
Driller Operation Simulation System
Drilling Equipment Remote Controlling System
• All-round development in land drilling, offshore drilling platform and special electric motors • Rise in added value of machines • Strengthening competitiveness in digitallycontrolled rigs via simple operation, training and monitoring to create a stable customer base
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4
What Are Our Growth Plans?
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Strategic Transition Strive to develop diverse product mix Manufacturing of Heavy Duty Equipment
Business integration to create synergies
Development of Oil and Gas Resources
Land
Offshore
Enhance ability for worldwide trade and logistics
Oilfield Engineering Services
Prudently enter the energy exploration segment 30
Business Opportunities in Unconventional Natural Gas Global Natural Gas Development
IEA estimated that global natural gas consumption will rise from 3 trillion cubic meters in 2007 to 4.3 trillion cubic meters in 2030. In 2010, shale gas accounted for 23% of the total production volume of natural gas in the U.S.
Domestic Favorable Factors for Unconventional Gas Development
In China, 12th Five-Year Plan encourages exploration of clean energy, including shale gas and coalbed methane. The planned production of natural gas will reach 260 billion cubic meters with 25% annual growth rate during the FiveYear Plan period. According to preliminary estimation of the U.S., China has shale gas reserves of about 100 trillion cubic meters and coverable reserves of 26 trillion cubic meters. Yet, capital input in shale gas exploration in China is still limited. In early 2011, the PRC Government announced the first-time tender of mining right for shale gas fields. The state-owned Sichuan Provincial Energy Investment Group was established in early 2011 and planned to participate in exploration of gas resources such as shale gas. 31
Business Opportunities in Unconventional Natural Gas Honghua Unconventional Gas Related Business Development
Use of innovative ideas to drive the development of advanced shale gas exploration equipment and solutions. Honghua has intelligent rig designs, strong production capability and the advantage of one-stop shale gas related product development. Products include coiled tubing rigs, super single pipe rigs, 6000HP pressure pumps and flexible water tanks. To search for cooperation opportunities with enterprises in the field of energy exploration and enter into new energy development business by investing in small to medium size energy companies experienced in shale gas exploration.
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New Business: Oil & Gas Engineering Services Oil & Gas Engineering Services • Entry into the first oil and gas engineering services agreement worth about US$10 million in Kazakhstan • Providing an expert engineering team and an in-house designed 7000-meter drilling rig
• Services planned to start in 2011 for a period of about 9 months
Advantages from the New Business • Motivating business diversification, expanding income sources and enhancing synergistic development • Promoting rigs and related products through provision of oil and gas drilling related engineering services 33
Expansion of Oil and Gas Engineering Services
Utilize existing advantages & resources, increase revenue sources
Stretch industry chains, diversify risks
Facilitate equipment industry
Support development in oil and gas energy sector
Advantages
Facility Utilization
Personnel with drilling experience
Offshore drilling service contract
R&D of new product and on-site inspection
Coordination with resource sector, customized services for oil and gas exploration
Small-mid sized oil field turnkey projects
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Offshore Production Base in Jiangsu Qidong
Honghua Offshore Production Base
1.98billion (first stage) 4,000~6,000 staff Annual production of 6 units of drilling platform
Investment
Our experienced expert team : Location Qidong, Jiangsu close to Shanghai
Area 2,000mu
Surrounding Region Equipment manufacturers & Contractors
Length of coastline
• Feng Qi- previously worked in Sembcorp, Singapore • Xiang Yi- previously worked in Yantai Raffles • Guo Peijun- previously worked in COSCO Shipyard Group Co., Ltd. • Zhang Tingzhong- previously worked in Keppel Offshore and Marine,Singapore
1,770 M
• Sha Huizhong- previously worked in Jinhai Heavy Industry Co.Ltd. • Zhu Guofeng - previously worked in Jinhai Heavy Industry co.Ltd. 35
Innovative Offshore Production Base
Simulated Diagram of “ Honghai No.1” Mobile Combined Crane
The world’s largest mobile combined crane with 21,600-ton lifting capacity .
Innovative technology of “land construction of offshore equipment”, which shortens the production cycle of entire rig platform. New technical processes - from generating solutions to integral lifting of jack-up into water and assembly of the semi’s topside and hull structure. One-stop service ranging from drilling packages, electric systems and hull structure designs, fabrication and commissioning. Infrastructure construction has been completed. Subsequent to approval from the Development and Reform Commission of Jiangsu, the construction of production facilities will begin. Assembly & Launch of Rigs Land Construction of Hulls
Simulated Diagram of the Offshore Production Base Progressive Production Line
Technology of construction and launching
Digitalized Production
Plant Production of Outfitting
Production Flow of Offshore Equipment Production
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Innovative Offshore Production Base Honghua No.1Jack-up Rig (HHJ-1) (400’)
Cantilever with large reach of 75 feet high load of 1,180tons; Fully customized as per customer’s requirements; Living quarter (accommodate 110 person) meeting UK HSE; Initial design was approved by ABS.
Honghua No.1 Submersible Rig (HHS-1)(10,000’)
6th generation semi-submersible, DP3 drilling rig; Drill depth to 50,000’ in ultra-deep waters of up to 10,000’;
Dynamic positioning system;
High performance drilling equipment.
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Thank You!
Contact Information: Honghua Group Ltd. Tel: +86 28 8601 5242 Fax: +86 28 8601 3847 Email:
[email protected] Website: www.hh-gltd.com
Address: 99 East Road Information Park, Jinniu District, Chengdu, Sichuan 610036 PRC
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